Hasbro (HAS)

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)

RESULTS OF OPERATIONS
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The quarters ended March 30, 2008 and April 1, 2007 were both thirteen week periods. Net earnings for the first quarter of 2008 were $37,470, compared to $32,890 for the first quarter of 2007. Basic and diluted earnings per share for the first quarter of 2008 were $0.26 and $0.25, respectively, compared to basic and diluted earnings per share in the first quarter of 2007 of $0.20 and $0.19, respectively.

Consolidated net revenues for the quarter ended March 30, 2008 increased 13% to $704,220 compared to $625,267 for the quarter ended April 1, 2007. Consolidated net revenues were positively impacted by foreign currency translation in the amount of $25,400 as the result of the weaker U.S. dollar in 2008. Operating profit for the quarter ended March 30, 2008 was $61,253 compared to $53,727 for the quarter ended April 1, 2007.

In January 2008 the Company acquired Cranium, Inc. (“Cranium”). The results of operations for the first quarter of 2008 include the operations of Cranium from the acquisition closing date of January 25, 2008.

Most of the Company's revenues and operating profit are derived from its two principal segments: the U.S. and Canada segment and the International segment, which are discussed in detail below. The following table presents net revenues and operating profit data for the Company's two principal segments for the first quarter of fiscal years 2008 and 2007.

U.S. AND CANADA SEGMENT
The U.S. and Canada segment’s net revenues for the quarter ended March 30, 2008 increased 6% to $428,522 from $406,076 for the quarter ended April 1, 2007. The increase was primarily due to higher revenues in the boys’ toys category driven by increased sales of TRANSFORMERS products and, to a lesser extent, increased sales of STAR WARS products, partially offset by decreased sales of MARVEL products. The increase in revenues was also due to increased sales in the girls’ toys category primarily as the result of higher sales of LITTLEST PET SHOP products as well as increased revenues in the games and puzzles category driven primarily by board games and, to a lesser extent, the impact of Cranium. These increases were partly offset by decreases in the tweens and preschool categories as a result of lower sales of I-DOG and PLAYSKOOL products, respectively.

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)

At September 30, 2007, the Company had fixed rate long-term debt, including current portions and excluding fair value adjustments, of $844,815. Also at September 30, 2007, the Company had fixed-for-floating interest rate swaps with notional amounts of $75,000. The interest rate swaps are designed to adjust a portion of the Company's debt subject to a fixed interest rate. The interest rate swaps are matched with specific long-term debt issues and are designated and effective as hedges of the change in the fair value of the associated debt. Changes in fair value of these contracts are wholly offset in earnings by changes in the fair value of the related long-term debt. At September 30, 2007, these contracts had a fair value of $108, which was included in other current assets, with a corresponding fair value adjustment to increase the current portion of long-term debt.

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars and Shares Except Per Share Data)

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)