This excerpt taken from the HAS 10-K filed Mar 9, 2005.
(8) Long-Term Debt
Components of long-term debt are as follows:
Included in current portion is $250,000 of Senior Convertible Debentures due 2021. Although the contractual maturity date of these notes is 2021, the holders of these debentures may, at their option, put the notes back to the Company in December 2005. Because of this put feature, these notes have been classified as current as of December 26, 2004. Any notes that are not put back to the Company will be subsequently reclassified to long-term debt. The provisions of this convertible debenture are further discussed below.
The schedule of contractual maturities of long-term debt for the next five years and thereafter is as follows:
During 2004, the Company repurchased an aggregate of $55,658 in principal amount of long-term debt, comprised of $19,105 in principal amount of 6.60% Debentures due 2028, $10,908 in principal amount of 6.15% Notes due 2008, and $25,645 in principal amount of 5.60% Notes due 2005. The Company recorded a loss on repurchase of $1,277, which is included in other expense, net in the accompanying consolidated statements of operations.
During 2003, the Company repurchased or repaid $200,288 in principal amount of 7.95% Notes due March 2003.
In November 2003, the Company initiated a tender offer, whereby $167,257 of aggregate principal amount of 8.50% Notes due 2006 previously issued by the Company were repurchased. In connection with this tender offer, the Company recorded a loss on the extinguishment of debt in the amount of $20,342, which is included in other expense, net in the accompanying consolidated statements of operations.
The Company is a party to interest rate swap agreements in order to adjust the amount of total debt that is subject to fixed interest rates. The interest rate swaps are matched with specific long-term debt obligations and accounted for as fair value hedges of those debt obligations. At December 26, 2004, these interest rate swaps had a total notional amount of $150,000 with maturities between 2005 and 2008. In each of the contracts, the Company receives payments based upon a fixed interest rate that matches the interest rate of the debt being hedged and makes payments based upon a floating rate based on Libor. These contracts are designated and effective as hedges of the change in the fair value of the associated debt. At December 26, 2004, these contracts had a fair value of $4,624, with $3,981 included in other assets, and the other $643 included in prepaid expenses and other current assets, with corresponding fair value adjustments to increase long-term debt and current portion of long-term debt, respectively.
The Company currently has $250,000 outstanding in principal amount of contingent convertible debentures due 2021. These debentures bear interest at 2.75%, which could be subject to an upward adjustment commencing in December 2005 depending on the price of the Company's stock. If the closing price of the Company's stock exceeds $23.76 for at least 20 trading days, within the 30 consecutive trading day period ending on the last trading day of the calendar quarter, the holders have the right to convert the notes to shares of the Company's common stock at the initial conversion price of $21.60 in the next calendar quarter. This contingent conversion feature was not met during 2004. The holders of these debentures may put the notes back to Hasbro in December 2005, December 2011 and December 2016. At these times, the purchase price may be paid in cash, shares of common stock or a combination of the two, at the discretion of the Company. The Company's current intent is to settle in cash any puts exercised.