| HASBRO INC Item 1A Risk Factors Forward-Looking Information and Risk Factors that May Affect Future Results From time to time, including in this Annual Report on Form 10-K and in our annual report to shareholders, we publish “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 |
| These “forward-looking statements” may relate to such matters as anticipated financial performance, business prospects, technological developments, new products, the timing of entertainment releases, marketing and promotional efforts, research and development activities, liquidity, and similar matters |
| Forward-looking statements are inherently subject to risks and uncertainties |
| The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements |
| These statements may be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “intend,” “looking forward,” “may,” “planned,” “potential,” “should,” “will” and “would” or any variations of words with similar meanings |
| We note that a variety of factors could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed or anticipated in our forward-looking statements |
| The factors listed below are illustrative and other risks and uncertainties may arise as are or may be detailed from time to time in our public announcements and our filings with the Securities and Exchange Commission, such as on Forms 8-K, 10-Q and 10-K We undertake no obligation to make any revisions to the forward-looking statements contained in this Annual Report on Form 10-K or in our annual report to shareholders to reflect events or circumstances occurring after the date of the filing of this report |
| Unless otherwise specifically indicated, all dollar or share amounts herein are expressed in thousands of dollars or shares, except for per share amounts |
| 8 _________________________________________________________________ [48]Table of Contents 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 |
| The family entertainment business is a fashion industry |
| Our success is critically dependent upon the consumer appeal of our products, principally games and toys |
| Our failure to successfully anticipate, identify and react to children’s interests and the preferences in family entertainment could significantly lower sales of our products and harm our profitability |
| A decline in the popularity of our existing products and product lines, or the failure of our new products and product lines to achieve and sustain market acceptance, could significantly lower our sales and operating margins, which would harm our profitability, business and financial condition |
| In our industry, it is important to identify and offer what are considered to be the “hot” toys and games on children’s wish lists |
| Our continued success will depend on our ability to develop, market and sell popular toys, games and children’s electronic products which are sought after by both children and their parents |
| We seek to achieve and maintain market popularity for our products through the redesign and extension of our existing family entertainment properties in ways that capture consumer interest and imagination and remain relevant in today’s world, and by developing, introducing and gaining customer interest for new family entertainment products |
| This process involves anticipating and extending successful play patterns and identifying entertainment concepts and properties that appeal to children’s imaginations |
| However, consumer preferences with respect to family entertainment are continuously changing and are difficult to anticipate |
| Individual family entertainment products and properties generally, and high technology products in particular, often have short consumer life cycles |
| Not only must we address rapidly changing consumer tastes and interests but we face competitors who are also constantly monitoring consumer tastes, seeking ideas which will appeal to consumers and introducing new products that compete with our products for consumer purchasing |
| In addition to existing competitors, the barriers to entry for new participants in the family entertainment industry are low |
| New participants with a popular product idea or property can gain access to consumers and become a significant source of competition for our products |
| The challenge of developing and offering products that are sought after by children is compounded by the trend of children “getting older younger” |
| By this we mean that children are losing interest in traditional toys at younger ages and, as a result, at younger and younger ages, our products compete with the offerings of video game suppliers, consumer electronics companies and other businesses outside of the traditional toy and game industry |
| In addition to designing and developing products based on our own brands, we seek to fulfill consumer preferences and interests by producing products based on popular entertainment properties developed by other parties and licensed to us |
| The success of entertainment properties released theatrically for which we have a license, such as STAR WARS related products, can significantly affect our revenues |
| If we produce a line of products based on a movie or television series, the success of the movie or series has a critical impact on the level of consumer interest in the associated products we are offering |
| In addition, competition in our industry for access to entertainment properties can lessen our ability to secure, maintain, and renew popular licenses to entertainment products on beneficial terms, if at all, and to attract and retain the talented employees necessary to design, develop and market successful products based on these properties |
| The loss of ownership rights granted pursuant to any of our licensing agreements could harm our business and competitive position |
| There is no guarantee that: 1) Any of our current products or product lines will continue to be popular; 2) Any property for which we have a significant license will achieve or sustain popularity; 3) Any new products or product lines we introduce will be considered interesting to consumers and achieve an adequate market acceptance; 9 _________________________________________________________________ [49]Table of Contents 4) Any new product’s life cycle will be sufficient to permit us to profitably recover development, manufacturing, marketing, royalties (including royalty advances and guarantees) and other costs of producing and selling the product; or 5) We will be able to manufacture, source and ship new or continuing products in a timely basis to meet constantly changing consumer demands, a risk that is heightened by our customers’ compressed shipping schedules and the seasonality of our business |
| In developing new products and product lines, we have anticipated dates for the associated product introductions |
| When we state that we will introduce, or anticipate introducing, a particular product or product line at a certain time in the future those expectations are based on completing the associated development and implementation work in accordance with our currently anticipated development schedule |
| Unforeseen delays or difficulties in the development process, or significant increases in the planned cost of development, may cause the introduction date for products to be later than anticipated or, in some situations, may cause a product introduction to be discontinued |
| Similarly, the success of our products is often dependent on the timelines and effectiveness of related advertising and media efforts |
| Television programming, movie and DVD releases, comic book releases, and other media efforts are often critical in generating interest in our products |
| Not only our efforts, but the efforts of third parties, heavily impact the launch dates and success of these media efforts |
| When we say that products or brands will be supported by certain media releases, those statements are based on our current plans and expectations |
| Unforeseen factors may delay these media releases or even lead to their cancellation |
| Any delay or cancellation of planned product development work, introductions, or media support may decrease the number of products we sell and harm 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 |
| Sales of our family entertainment products at retail are extremely seasonal, with a majority of retail sales occurring during the period from September through December in anticipation of the holiday season, including Christmas |
| This seasonality is increasing, as large retailers become more efficient in their control of inventory levels through quick response inventory management techniques |
| These customers are timing their orders so that they are being filled by suppliers, such as us, closer to the time of purchase by consumers |
| For toys, games and other family entertainment products which we produce a majority of retail sales occur in the fourth quarter, close to the holiday season |
| As a consequence, the majority of our sales to our customers occur in the period from September through December, as our customers do not want to maintain large on-hand inventories throughout the year to meet consumer demand |
| While these techniques reduce a retailer’s investment in inventory, they increase pressure on suppliers like us to fill orders promptly and thereby shift a significant portion of inventory risk and carrying costs to the supplier |
| The limited inventory carried by retailers may also reduce or delay retail sales, resulting in lower revenues for us |
| If we or our customers determine that one of our products is more popular at retail than was originally anticipated, we may not have sufficient time to produce and ship enough additional product to fully capture consumer interest in the product |
| Additionally, the logistics of supplying more and more product within shorter time periods increases the risk that we will fail to achieve tight and compressed shipping schedules, which also may reduce our sales and harm our financial performance |
| This seasonal pattern requires significant use of working capital, mainly to manufacture or acquire inventory during the portion of the year prior to the holiday season, and requires accurate forecasting of demand for products during the holiday season in order to avoid losing potential sales of popular products or producing excess inventory of products that are less popular with consumers |
| Our failure to accurately predict and respond to consumer demand, resulting in our underproducing popular items and/or overproducing less popular items, would reduce our total sales and harm our results of operations |
| In addition, as a result of the seasonal nature of our business, we would be significantly and adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events, such as a terrorist attack or economic shock, that harm the retail environment or consumer buying patterns during our key selling season, or by events, such 10 _________________________________________________________________ [50]Table of Contents as strikes or port delays, that interfere with the shipment of goods, particularly from the Far East, during the months leading up to the holiday purchasing season |
| 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 depend upon a relatively small retail customer base to sell the majority of our products |
| For the fiscal year ended December 25, 2005, Wal-Mart Stores, Inc, Toys ‘R Us, Inc, and Target Corporation accounted for approximately 24prca, 12prca and 12prca, respectively, of our consolidated net revenues and our five largest customers, including Wal-Mart, Toys ‘R Us and Target, in the aggregate accounted for approximately 53prca of our consolidated net revenues |
| While the consolidation of our customer base may provide certain benefits to us, such as potentially more efficient product distribution and other decreased costs of sales and distribution, this consolidation also means that if one or more of our major customers were to experience difficulties in fulfilling their obligations to us, cease doing business with us, significantly reduce the amount of their purchases from us or return substantial amounts of our products, it could harm our business, financial condition and results of operations |
| Increased concentration among our customers could also negatively impact our ability to negotiate higher sales prices for our products and could result in lower gross margins than would otherwise be obtained if there were less consolidation among our customers |
| In addition, the bankruptcy or other lack of success of one or more of our significant retail customers could negatively impact our revenues and bad debt expense |
| 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 |
| An important part of our business involves obtaining licenses to produce products based on various theatrical releases, such as STAR WARS movies |
| The license agreements we enter to obtain these rights usually require us to pay minimum royalty guarantees that may be substantial, and in some cases may be greater than what we are ultimately able to recoup from actual sales, which could result in write-offs of such amounts that would harm our results of operations |
| At December 25, 2005, we had dlra126cmam515 of prepaid royalties, dlra37cmam107 of which are included in prepaid expenses and other current assets and dlra89cmam408 of which are included in other assets |
| Under the terms of existing contracts as of December 25, 2005, we are required to pay future minimum guaranteed royalties and other licensing fees totaling approximately dlra66cmam770 |
| Acquiring or renewing licenses may require the payment of minimum guaranteed royalties that we consider to be too high to be profitable, which may result in losing licenses we currently hold when they become available for renewal, or missing business opportunities for new licenses |
| As a licensee, we have no guaranty that a particular brand will translate into successful toy or game products |
| In addition to contracts existing as of the end of our 2005 fiscal year, in January 2006, we entered into a license arrangement with Marvel Entertainment, Inc, and its subsidiary Marvel Characters, Inc |
| This license arrangement, which grants us the right to produce certain products based on Marvel’s characters for five years for retail sales beginning in 2007, requires us to make guaranteed minimum payments in the amount of up to dlra205cmam000 |
| There is no guarantee that we will sell enough licensed merchandise under the agreement to earn-out the dlra205cmam000 in guaranteed payments and make a profit |
| We anticipate that the shorter theatrical duration for movie releases will make it increasingly difficult for us to sell licensed products based on entertainment properties and may lead our customers to reduce their demand for these products in order to minimize inventory risk |
| Furthermore, there can be no assurance that a successful brand will continue to be successful or maintain a high level of sales in the future |
| In the event that we are not able to acquire or maintain advantageous licenses, our revenues and profits may be harmed |
| 11 _________________________________________________________________ [51]Table of Contents Our substantial sales and manufacturing operations outside the United States subject us to risks associated with international operations |
| We operate facilities and sell products in numerous countries outside the United States |
| For the year ended December 25, 2005, our net revenues from international customers comprised approximately 40prca of our total consolidated net revenues |
| We expect our sales to international customers to continue to account for a significant portion of our revenues |
| Additionally, we utilize third-party manufacturers located principally in the Far East and we have a manufacturing facility in Ireland |
| These sales and manufacturing operations are subject to the risks associated with international operations, including: 1) Currency conversion risks and currency fluctuations; 2) Limitations, including taxes, on the repatriation of earnings; 3) Political instability, civil unrest and economic instability; 4) Greater difficulty enforcing intellectual property rights and weaker laws protecting such rights; 5) Complications in complying with laws in varying jurisdictions and changes in governmental policies; 6) Natural disasters and the greater difficulty and expense in recovering therefrom; 7) Transportation delays and interruptions; and 8) The imposition of tariffs |
| Our reliance on external sources of manufacturing can be shifted, over a period of time, to alternative sources of supply, should such changes be necessary |
| However, if we were prevented from obtaining products or components for a material portion of our product line due to political, labor or other factors beyond our control, our operations would be disrupted while alternative sources of products were secured |
| In particular, as the majority of our toy products, in addition to certain other products, are manufactured in the People’s Republic of China, health conditions and other factors affecting social and economic activity in China and affecting the movement of people and products into and from China to our major markets, including North America and Europe, could have a significant negative impact on our operations |
| Factors that could negatively affect our business include a potential revaluation of the Chinese yuan, which may result in an increase in the cost of producing products in China, or increases in labor costs and difficulties in moving products manufactured in the Far East through the ports on the western coast of North America |
| Also, the imposition of trade sanctions by the United States or the European Union against a class of products imported by us from, or the loss of “normal trade relations” status with, the People’s Republic of China, could significantly increase our cost of products imported into the United States or Europe and harm our business |
| Because of the importance of our international sales and international sourcing of manufacturing to our business, our financial condition and results of operations could be significantly harmed if any of the risks described above were to occur |
| 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 |
| As children have grown “older younger” and have become interested in more and more sophisticated and adult products, such as videogames and consumer electronics, at younger and younger ages, we have needed to work even harder to keep our products relevant for these consumers |
| One initiative we have been pursuing to capture the interest of older children is to offer innovative children’s electronic toys and games |
| Examples of such products in the last few years include VIDEONOW, CHATNOW, MISSION PAINTBALL and I-DOG These products, if successful, can be an effective way for us to connect with tween consumers and increase 12 _________________________________________________________________ [52]Table of Contents sales |
| However, children’s electronics, in addition to the risks associated with our other family entertainment products, also face certain additional risks |
| Our costs for producing electronic products tend to be higher than for many of our other more traditional products, such as board games and action figures |
| The ability to reflect higher costs in higher prices is constrained by heavy competition in consumer electronics |
| As a consequence, our margins on the sales of electronic products tend to be lower than for more traditional products |
| In addition, the pace of change in product offerings and consumer tastes in the electronics area is potentially even greater than for our other products |
| This pace of change means that the window in which a product can achieve and maintain consumer interest may be even shorter |
| 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 |
| Economic and public health conditions, including factors that impact the strength of the retail market and retail demand, or our ability to manufacture and deliver products, can have a significant impact on our business |
| The success of our family entertainment products is dependant on consumer purchasing of those products |
| Consumers may not purchase our products because the products do not capture consumer interest and imagination |
| But consumer spending on our products can also be harmed by factors that negatively impact consumer’s budgets generally, and which are not due to our product offerings |
| Significant increases in the costs of other products which are required by consumers, such as gasoline and home heating fuels, may reduce household spending on entertainment products we offer |
| In addition, rising fuel and raw material prices, for components such as resin, or increased transportation costs, may increase our costs for producing and transporting our products, which in turn may reduce our margins and harm our business |
| In addition, general economic conditions and employment levels can impact demand for our products |
| Economic conditions were significantly harmed by the September 11, 2001 terrorist attacks and could be similarly affected by any future attacks |
| Economic conditions may also be negatively impacted by wars and other conflicts, increases in critical commodity prices, or the prospect of such events |
| Such a weakened economic and business climate, as well as consumer uncertainty created by such a climate, could harm our sales and profitability |
| Other conditions, such as the unavailability of electrical components, may impede our ability to manufacture, source and ship new and continuing products on a timely basis |
| Additional factors outside of our control could delay or increase the cost of implementing our business initiatives and product plans or alter our actions and reduce actual results |
| For example, work stoppages, slowdowns or strikes, or the occurrence or threat of wars or other conflicts, could impact our ability to manufacture or deliver product, resulting in increased costs and/or lost sales for our products |
| 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 |
| Our intellectual property, including our license agreements and other agreements that establish our ownership rights and maintain the confidentiality of our intellectual property, are of great value |
| We rely on a combination of trade secret, copyright, trademark, patent and other proprietary rights laws to protect our rights to valuable intellectual property related to our brands |
| From time to time, third parties have challenged, and may in the future try to challenge, our ownership of our intellectual property |
| In addition, our business is subject to the risk of third parties counterfeiting our products or infringing on our intellectual property rights |
| We may need to resort to litigation to protect our intellectual property rights, which could result in substantial costs and diversion of resources |
| Our failure to protect our intellectual property rights could harm our business and competitive position |
| Much of our intellectual property has been internally developed and has no carrying value on our balance sheet |
| As of December 25, 2005, we had approximately dlra609cmam678 of acquired product and licensing rights included in other assets on our balance sheet |
| Declines in the profitability of the acquired brands or licensed products may impact our ability to recover the carrying value of the related assets and 13 _________________________________________________________________ [53]Table of Contents could result in an impairment charge |
| Reduction in our net income caused by impairment charges could harm our financial results |
| We may not realize the anticipated benefits of future acquisitions or those benefits may be delayed or reduced in their realization |
| Although we have not made any major acquisitions in the last few years, acquisitions have been a significant part of our historical growth and have enabled us to further broaden and diversify our product offerings |
| In making acquisitions, we target companies that we believe offer attractive family entertainment products |
| However, we cannot be certain that the products of companies we may acquire in the future will achieve or maintain popularity with consumers |
| In some cases, we expect that the integration of the product lines of the companies that we acquire into our operations will create production, marketing and other operating synergies which will produce greater revenue growth and profitability and, where applicable, cost savings, operating efficiencies and other advantages |
| However, we cannot be certain that these synergies, efficiencies and cost savings will be realized |
| Even if achieved, these benefits may be delayed or reduced in their realization |
| In other cases, we acquire companies that we believe have strong and creative management, in which case we plan to operate them autonomously rather than fully integrating them into our operations |
| We cannot be certain that the key talented individuals at these companies will continue to work for us after the acquisition or that they will continue to develop popular and profitable products or services |
| From time to time, we are involved in litigation, arbitration or regulatory matters where the outcome is uncertain and which could entail significant expense |
| As is the case with many large multinational corporations, we are subject from time to time to regulatory investigations, litigation and arbitration disputes |
| Because the outcome of litigation, arbitration and regulatory investigations is inherently difficult to predict, it is possible that the outcome of any of these matters could entail significant expense for us and harm our business |
| 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 |
| Due to the seasonal nature of our business, in order to meet our working capital needs, particularly those in the third and fourth quarters, we rely on our revolving credit facility and our other credit facilities for working capital |
| We currently have an amended and restated revolving credit agreement, which provides for a dlra350cmam000 revolving credit facility |
| The credit agreement contains certain restrictive covenants setting forth minimum cash flow and coverage requirements, and a number of other limitations, including restrictions on capital expenditures, investments, acquisitions, share repurchases, incurrence of indebtedness and dividend payments |
| These restrictive covenants may limit our future actions, and financial, operating and strategic flexibility |
| In addition, our financial covenants were set at the time we entered into our credit facility |
| Our performance and financial condition may not meet our original expectations, causing us to fail to meet such financial covenants |
| If we were unable to meet our financial covenants, or if we failed to comply with other covenants in our credit facility, we could face significant negative consequences, including loss of the ability to raise capital under these facilities to fund our operations |
| As an additional source of working capital and liquidity, we currently have a dlra250cmam000 accounts receivable securitization program |
| Under this program, we sell on an ongoing basis, substantially all of our US dollar denominated trade accounts receivable to a bankruptcy remote special purpose entity |
| Under this facility, the special purpose entity is able to sell, on a revolving basis, undivided ownership interests in the eligible receivables to bank conduits |
| During the term of the facility, we must maintain certain performance ratios |
| If we fail to maintain these ratios, we could be prevented from accessing this cost-effective source of working capital and short-term financing |
| We believe that our cash flow from operations, together with our cash on hand and access to existing credit facilities and our accounts receivable securitization facility, are adequate for current and planned needs 14 _________________________________________________________________ [54]Table of Contents in 2006 |
| However, our actual experience may differ from these expectations |
| Factors that may lead to a difference include, but are not limited to, the matters discussed herein, as well as future events that might have the effect of reducing our available cash balance, such as unexpected material operating losses or increased capital or other expenditures, as well as increases in inventory or accounts receivable that are ineligible for sale under our securitization facility, or future events that may reduce or eliminate the availability of external financial resources |
| We also may choose to finance our capital needs, from time to time, through the issuance of debt securities |
| Our ability to issue such securities on satisfactory terms, if at all, will depend on the state of our business and financial condition, any ratings issued by major credit rating agencies, market interest rates, and the overall condition of the financial and credit markets at the time of the offering |
| The condition of the credit markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future |
| Variations in these factors could make it difficult for us to sell debt securities or require us to offer higher interest rates in order to sell new debt securities |
| The failure to receive financing on desirable terms, or at all, could damage our ability to support our future operations or capital needs or engage in other business activities |
| As of December 25, 2005, we had approximately dlra527dtta7 million of total principal amount of indebtedness outstanding |
| If we are unable to generate sufficient available cash flow to service our outstanding debt we would need to refinance such debt or face default |
| There is no guarantee that we would be able to refinance debt on favorable terms, or at all |
| This total indebtedness includes dlra249cmam996 in aggregate principal amount of 2dtta75prca senior convertible debentures that we issued in 2001 |
| On December 1, 2011 and December 1, 2016, and upon the occurrence of certain fundamental corporate changes, holders of the 2dtta75prca senior convertible debentures may require us to purchase their debentures |
| At that time, the purchase price may be paid in cash, shares of common stock or a combination of the two, at our discretion, provided that we will pay accrued and unpaid interest in cash |
| We may not have sufficient cash at that time to make the required repurchases and may be required to settle in shares of common stock |
| We previously issued warrants that provide the holder with an option through January 2008 to sell all of these warrants to us for a price to be paid, at our election, of either dlra100cmam000 in cash or dlra110cmam000 in our common stock, such stock being valued at the time of the exercise of the option |
| Should we be required to settle these warrants under this option, we believe that we will have adequate funds to settle in cash if necessary |
| However, we may not have sufficient funds at that time to make the required payment and may be required to settle the warrants in stock |
| 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 |
| As a manufacturer of consumer products, we are subject to significant government regulations under The Consumer Products Safety Act, The Federal Hazardous Substances Act, and The Flammable Fabrics Act |
| In addition, certain of our products are subject to regulation by the Food and Drug Administration |
| While we take all the steps we believe are necessary to comply with these acts, there can be no assurance that we will be in compliance in the future |
| Failure to comply could result in sanctions which could have a negative impact on our business, financial condition and results of operations |
| In addition to government regulation, products that have been or may be developed by us may expose us to potential liability from personal injury or property damage claims by the users of such products |
| There can be no assurance that a claim will not be brought against us in the future |
| While we currently maintain product liability insurance coverage in amounts we believe sufficient for our business risks, we may not be able to maintain such coverage or such coverage may not be adequate to cover all potential claims |
| Moreover, even if we maintain sufficient insurance coverage, any successful claim could significantly harm our business, financial condition and results of operations |
| As a large, multinational corporation, we are subject to a host of governmental regulations throughout the world, including antitrust, customs and tax requirements, anti-boycott regulations and the Foreign Corrupt 15 _________________________________________________________________ [55]Table of Contents Practices Act |
| Our failure to successfully comply with any such legal requirements could subject us to monetary liabilities and other sanctions that could harm our business and financial condition |
| We have a material amount of goodwill which, if it becomes impaired, would result in a reduction in our net income |
| Goodwill is the amount by which the cost of an acquisition accounted for using the purchase method exceeds the fair value of the net assets we acquire |
| Current accounting standards require that goodwill no longer be amortized but instead be periodically evaluated for impairment based on the fair value of the reporting unit |
| At December 25, 2005, approximately dlra467cmam061 or 14dtta1prca, of our total assets represented goodwill |
| Declines in our profitability may impact the fair value of our reporting units, which could result in a further write-down of our goodwill |
| Reductions in our net income caused by the write-down of goodwill could harm our results of operations |