46080--2/22/2006--HASBRO

related topics

{customer, product, revenue}

{product, market, service}

{capital, credit, financial}

{product, liability, claim}

{competitive, industry, competition}

{financial, litigation, operation}

{operation, international, foreign}

{property, intellectual, protect}

{cost, operation, labor}

{condition, economic, financial}

{operation, natural, condition}

Volatility of consumer preferences, combined with the high level of competition and low barriers to entry in the family entertainment industry make it difficult to maintain the long-term success of existing product lines or consistently introduce successful new products. In addition, an inability to develop and introduce planned new products and product lines in a timely manner may damage our business. Our business is seasonal and therefore our annual operating results will depend, in large part, on our sales during the relatively brief holiday season. Further, this seasonality is increasing, as large retailers become more efficient in their control of inventory levels through quick response inventory management techniques. The continuing consolidation of our retail customer base means that economic difficulties or changes in the purchasing policies of our major customers could have a significant impact on us. We may not realize the full benefit of our licenses if the licensed material has less market appeal than expected or if sales revenue from the licensed products is not sufficient to earn out the minimum guaranteed royalties. Our substantial sales and manufacturing operations outside the United States subject us to risks associated with international operations. Part of our strategy for remaining relevant to older children is to offer innovative children s toy and game electronic products. The margins on many of these products are lower than more traditional toys and games and such products may have a shorter lifespan than more traditional toys and games. As a result, increasing sales of children s toy and game electronic products may lower our overall operating margins and produce more volatility in our business. Market conditions, including commodity and fuel prices, public health conditions and other third party conduct could negatively impact our margins and our other business initiatives. Our business is dependent on intellectual property rights and we may not be able to protect such rights successfully. In addition, we have a material amount of acquired product rights which, if impaired, would result in a reduction of our income. We may not realize the anticipated benefits of future acquisitions or those benefits may be delayed or reduced in their realization. From time to time, we are involved in litigation, arbitration or regulatory matters where the outcome is uncertain and which could entail significant expense. We rely on external financing, including our credit facilities and accounts receivable securitization facility, to fund our operations. If we were unable to obtain or service such financing, or if the restrictions imposed by such financing were too burdensome, our business would be harmed. As a manufacturer of consumer products and a large multinational corporation, we are subject to various government regulations, violation of which could subject us to sanctions. In addition, we could be the subject of future product liability suits, which could harm our business.

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46080--2/22/2006--HASBRO_INC