ITEM 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations

 (Thousands of Dollars Except Per Share Data)

EXECUTIVE SUMMARY

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The Company earns revenue and generates cash through the sale of a variety of toy and game products both within the United States and in international markets. Most of the Company's products are either internally developed or licensed from outside inventors. In addition to products based on its own core brands, the Company also offers internally developed products tied to licensed movie and television based entertainment and other licensed properties.

The Company's principal business strategies focus on:

·

Growing its core brands,

·

Developing new and innovative toy and game products, and

·

Increasing operating margins by optimizing efficiencies within the Company.

Management views the Company's principal product opportunities as falling into three general categories: core brands, innovative new products and licensed entertainment-based products. Although licensed sales in 2005 represent a significant portion of net revenues due to the theatrical release of STAR WARS EPISODE III: REVENGE OF THE SITH, in the past four years the Company has actively sought to reduce its reliance on products based on theatrical properties and to achieve more consistent performance by focusing greater resources on the development and growth of its core brands and on developing innovative products. The Company intends to continue to offer products based on licensed entertainment properties when it believes it is economically beneficial.  

The Company's core brands represent Company-owned or Company–controlled brands, such as G.I. JOE, TRANSFORMERS, MY LITTLE PONY, MONOPOLY, MAGIC: THE GATHERING, PLAYSKOOL and TONKA, which the Company views as presenting potential to be successful over the long term. The Company has a large portfolio of owned and controlled brands, which can be introduced in new formats and platforms over time.  While the volatility of consumer preferences and the high level of competition in the toy and game industry make it challenging to maintain the long-term success of product lines, by focusing on its core brands the Company is working to build a more consistent revenue stream and basis for future growth.

In addition to its focus on core brands, the Company’s strategy also involves trying to meet ever changing consumer preferences by identifying and offering innovative products based on market opportunities. In 2004 innovative products such as VIDEONOW COLOR were significant contributors to revenue for the Company. Product offerings for 2005 include the reintroduction of LITTLEST PET SHOP, FURBY, CHAT NOW and I-DOG as well as a variety of plug and play games.  The Company believes its strategy of focusing on the development of its core brands and continuing to identify innovative new products will help to prevent the Company from being dependent on the success of any one product line.

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

While the Company's strategy focuses on growing its core brands and the development of innovative, new products, the Company continues to evaluate and enter into arrangements to license movie and television entertainment-based properties when the Company believes it is economically beneficial. In 2005 the STAR WARS license has been a significant contributor to the Company's net revenues, driven by the May 19, 2005 release of STAR WARS EPISODE III: REVENGE OF THE SITH .   Major theatrical entertainment-based licenses in 2004 included DREAMWORKS' SHREK II, DISNEY'S THE INCREDIBLES, and LUCASFILM'S STAR WARS. While gross profits for products related to STAR WARS EPISODE III: REVENGE OF THE SITH are generally higher, the increased gross margin is largely offset by royalty expenses incurred on these sales, as well as amortization expense of related property rights.   

In recent years the Company has also focused on reducing its fixed costs and increasing its operating margins. As part of this continuous process, in 2004, the Company reassessed the development process in its U.S. Toys segment, moving a greater amount of product development outside of the U.S., resulting in a streamlining of its U.S. Toys workforce.  While the Company has made significant progress in this area over the last few years, it will continue to review its operations in order to determine areas where greater efficiency can be achieved.

The Company's recent strategy has also focused on achieving and maintaining a debt-to-capitalization ratio, defined as total debt, both short-term and long-term, as a percentage of total equity plus total debt, of 25-30%. From 2001 through 2004, as part of this strategy, the Company has repurchased or repaid approximately $547,000 in principal amount of long-term debt, primarily using cash from operations.  The Company believes that the reduction in its debt-to-capitalization ratio has further strengthened its balance sheet and improved its liquidity by decreasing cash requirements to service outstanding debt, thereby increasing the ability of the Company to obtain additional financing should the need to do so arise.  At September 25, 2005, the Company’s debt-to-capitalization ratio was approximately 27%, which compared to approximately 30% at September 26, 2004 and 28% at December 26, 2004. Due to the seasonal nature of the business, the Company's debt-to-capitalization ratio normally peaks at the end of the third quarter, when its working capital requirements are greatest. It is the Company's intent to maintain its debt-to-capitalization ratio within the above stated target range.

The Company has also taken some additional initiatives to increase shareholder value. In the first quarter of 2005 the Company increased its quarterly dividend from $0.06 per share to $0.09 per share. In addition, in May 2005, the Company announced the authorization by its Board of Directors to repurchase up to $350 million in common stock. Purchases under this plan are discretionary and the Company may suspend or discontinue the plan at any time. In the second and third quarters of 2005, the Company repurchased an aggregate of 1,528,300 shares at an average price of $20.76 under this authorization.

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

Consolidation in the toy and game industry and associated retail uncertainty has continued into 2005, and includes the recently completed sale of one of the Company's largest customers, Toys 'R Us.  The Company's remaining customer base continues to become more concentrated. The Company's top three customers, Wal-Mart Stores, Inc., Toys 'R Us, Inc. and Target Corporation, accounted for approximately 46% of full year net revenues in 2004. These same three customers accounted for approximately 21%, 13%, and 12%, respectively, of net revenues for the nine months ended September 25, 2005, and 19%, 15%, and 10%, respectively, of net revenues for the nine months ended September 26, 2004.  The consolidation of customers may provide certain benefits to the Company, such as potentially more efficient product distribution and other decreased costs of sales and distribution, including potential efficiencies related to SKU reductions. However, this consolidation also creates additional risks to the Company's business associated with a major customer having financial difficulties or reducing its business with the Company. In addition, increased customer concentration may decrease the prices the Company is able to obtain for some of its products. The Company believes that its strategy of seeking to produce sought after products, which provide value to both consumers and the Company's customers, will help protect the Company from any negative impact resulting from an environment of increasing retail consolidation.

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

RESULTS OF OPERATIONS
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Net earnings for the quarter and nine months ended September 25, 2005 were $92,063 and $117,804, respectively, compared with net earnings of $88,687 and $114,058 for the respective periods of 2004. Basic earnings per share for the quarter and nine months ended September 25, 2005 were $0.51 and $0.66 compared with basic earnings per share of $0.50 and $0.65 for the respective periods in 2004.

Diluted earnings per share were $0.47 and $0.61 for the quarter and nine months ended September 25, 2005, compared with diluted earnings per share of $0.43 and $0.52 for the respective periods in 2004. The 2004 earnings per share amounts have been restated due to the required adoption of EITF 04-08 in the fourth quarter of 2004.

Consolidated net revenues for the quarter ended September 25, 2005 increased 4% to $988,052 compared with $947,312 for the quarter ended September 26, 2004. For the nine months ended September 25, 2005, consolidated net revenues were $2,015,384 compared to $1,937,992 for the nine months ended September 26, 2004, an increase of 4%. For the quarter and nine months ended September 25, 2005, revenues were positively impacted by currency translation of approximately $5,900 and $22,000, respectively. Operating profit for the quarter ended September 25, 2005 was $128,278 compared to $122,040 in the third quarter of 2004. Operating profit for the 2005 nine-month period was $156,938 compared to an operating profit of $159,441 for the nine-month period of 2004.  Most of the Company's revenues and operating earnings are derived from its three principal segments: U.S. Toys, Games and International. The following table presents net revenues and operating profit data for the Company's three principal segments for the quarter and nine months ending September 25, 2005 and September 26, 2004.  

U.S. TOYS
U.S. Toys segment net revenues for the quarter ended September 25, 2005 increased 6% to $393,112 from $369,703 for the quarter ended September 26, 2004.  Net revenues for the nine months ended September 25, 2005 increased 12% to $768,925 from $689,254 for the nine months ended September 26, 2004.

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

 (Thousands of Dollars Except Per Share Data)

The increase for the quarter and nine months was primarily due to increased shipments of STAR WARS products as a result of the theatrical release of STAR WAR EPISODE III: REVENGE OF THE SITH.  In addition, revenues were also positively impacted by sales of LITTLEST PET SHOP and the reintroduction of FURBY, as well as increased sales of NERF products. These increases were partially offset by decreased sales of VIDEONOW, FURREAL FRIENDS, BOOHBAH and BEYBLADE products. Revenues for the nine months ended September 25, 2005 were also negatively impacted by decreased sales of certain licensed products, primarily SHREK and POKEMON products, as well as decreased sales of PLAYSKOOL and G.I. JOE products.

The U.S. Toys segment had an operating profit of $33,967 for the quarter ended September 25, 2005 compared to an operating profit of $20,848 for the quarter ended September 26, 2004. For the nine months ended September 25, 2005, the U.S. Toys segment had an operating profit of $56,527 compared to an operating profit of $14,892 for the nine months ended September 26, 2004.

This increase in operating profit for the quarter primarily related to decreased advertising expense as well as increased gross profit. Increased gross profit was the result of the higher net revenues as well as a change in product mix, due to the increased sales of STAR WARS products which carry a higher gross margin. Advertising decreased due to the sales mix, as a greater percentage of current year sales were STAR WARS products, which do not require as much advertising as core brands. Increased royalties and amortization expense for the quarter as a result of the increased STAR WARS sales were partially offset by decreased royalty expense on other licensed products, including SHREK, DISNEY and BEYBLADE products. The increased operating profit for the nine-month period was the result of increased gross profit, which was partially offset by increased royalties and amortization, driven by the increased sales of STAR WARS products.

GAMES
Games segment net revenues increased by 7% to $252,927 for the quarter ended September 25, 2005 from $236,501 for the quarter ended September 26, 2004. Net revenues for the nine months ended September 25, 2005 decreased 6% to $494,863 from $525,701 for the nine months ended September 26, 2004. The increase for the quarter is due in part to increased sales of plug and play games such as STAR WARS LIGHT SABER, MX DIRT REBEL, DREAMLIFE and WILD ADVENTURE MINI-GOLF. The increase was also due to increased sales of board games including CANDY LAND and MONOPOLY, which partially offset decreased sales of TRIVIAL PURSUIT games. The decrease for the nine-month period primarily relates to lower revenues from trading card games, including sales of MAGIC: THE GATHERING and DUEL MASTERS products, as well as the decreased sales of TRIVIAL PURSUIT games.  These decreases have been partially offset by the increased sales of plug and play games.

Games segment operating profit decreased slightly to $45,477 for the quarter ended September 25, 2005 from $46,418 for the quarter ended September 26, 2004. Operating profit for the nine months ended September 25, 2005 decreased to $60,125 from $94,713 for the nine months ended September 26, 2004. Increased gross margin for the quarter was offset by higher shipping costs. The decrease in operating margin for the nine-month period was principally the result of decreased gross profit as the result of the decline in sales, as well as changes in product mix. Trading cards sales, which have a higher gross margin than traditional board games and electronic games, have declined in the nine months ended September 25, 2005 and have been partially offset by higher sales of electronic games, which have lower gross margins than traditional board games or trading card games.

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

INTERNATIONAL
International segment net revenues remained consistent with the prior year revenues with a slight increase to $333,052 for the quarter ended September 25, 2005 from $331,554 for the quarter ended September 26, 2004. Net revenues for the nine months ended September 25, 2005 increased 4% to $721,179 from $691,480 for the nine months ended September 26, 2004. For the quarter and nine months ended September 25, 2005, International segment net revenues were positively impacted by currency translation of approximately $4,700 and $20,500, respectively, as the result of the weaker U.S. dollar. Excluding the favorable impact of foreign exchange, the decrease in local currency revenue for the quarter was primarily the result of decreases in BEYBLADE, VIDEONOW, DUEL MASTERS, FURREAL FRIENDS and ACTION MAN products, offsetting increased sales of STAR WARS products, the introduction of B'DAMAN and the reintroduction of FURBY products. The increase for the nine month period represents increased shipments of STAR WARS, FURBY, LITTLEST PET SHOP and B'DAMAN products partly offset by decreased sales of BEYBLADE, MAGIC: THE GATHERING, FURREAL FRIENDS, and ACTION MAN products, as well as decreases in other licensed products, primarily SHREK and DISNEY products.

The International segment had an operating profit of $44,993 for the quarter ended September 25, 2005, compared to an operating profit of $48,766 for the quarter ended September 26, 2004. Operating profit for the nine months ended September 25, 2005 decreased to $40,824 from $41,490 for the nine months ended September 26, 2004. Although revenues were positively impacted by the weaker U.S. dollar, as noted above, operating expenses were also impacted, with a resulting net favorable translation impact to International operating profit of approximately $700 for the quarter and an unfavorable translation impact of $400 for the nine months ended September 25, 2005.  Absent the impact of foreign exchange rates, the decline in operating profit for the quarter was the result of higher royalty and amortization expense as a result of increased sales of STAR WARS products, which offset increased gross margins from higher revenues. The slight decrease in the nine-month period was the result of higher royalty, amortization and advertising expense offsetting increased gross margins from the higher revenues.

GROSS PROFIT
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The Company's gross profit margin decreased to 55.0% for the quarter ended September 25, 2005 from 55.3% for the quarter ended September 26, 2004 while gross margin for the nine months ended September 25, 2005 increased to 58.5% from 57.8% in the comparable period of 2004. The decrease for the quarter reflects a change in product mix as increased sales of electronic toys and games, which have higher product costs, caused a decrease in overall gross margin. The decrease from this was partially offset by increased sales of STAR WARS products, which carry a higher gross margin.  Gross profit margin for the nine months ended September 25, 2005 was also adversely effected by decreased sales of trading card games, which carry a high gross margin. Although the STAR WARS products carry a higher gross margin, the increased gross margin is largely offset by higher royalty and amortization expense associated with these products. The Company aggressively monitors its levels of inventory, attempting to avoid unnecessary expenditures of cash and potential charges related to obsolescence. The Company's failure to accurately predict and respond to consumer demand could result in overproduction of less popular items, which could result in higher obsolescence costs, causing a reduction in gross profit.

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

 (Thousands of Dollars Except Per Share Data)

While estimates of future costs are included in the Company's pricing of its products, other factors, including foreign currency exchange rate fluctuations or a continued significant increase in the price of commodities such as oil based plastic resins, paper and cardboard, could have a negative impact on the Company's gross margins.

For the quarter and nine-month period, amortization expense increased in dollars and as a percentage of net revenues. Amortization expense of $28,167, or 2.9% of net revenues in the third quarter of 2005, compared with $16,888 or 1.8% of net revenues in the third quarter of 2004.  For the nine months ended September 25, 2005, amortization expense was $79,852, or 4.0% of net revenues compared with $47,881, or 2.5% of net revenues for the nine months ended September 26, 2004. A portion of amortization expense relates to licensing rights and is based on expected sales of products related to those licensing rights. The increase in 2005 is primarily due to increased amortization of STAR WARS property rights due to the increased sales of STAR WARS products in 2005.

Royalty expense for the quarter ended September 25, 2005 increased to $66,539, or 6.7% of net revenues from $65,087, or 6.9% of net revenues in the third quarter of 2004.  Royalty expense for the nine months ended September 25, 2005 increased to $158,206, or 7.8% of net revenues from $131,747, or 6.8% of net revenues for the nine months ended September 26, 2004. The increase in royalty expense in dollars was primarily due to increased sales of STAR WARS products. For the quarter, this increase was partially offset by decreased sales of other licensed products, including BEYBLADE, SHREK and DISNEY products.

Research and product development expenses for the quarter ended September 25, 2005 remained consistent with the prior year at $39,387, or 4.0% of net revenues from $39,257 or 4.1% of net revenues for the quarter ended September 26, 2004. These expenses decreased slightly to $106,942 or 5.3% of net revenues for the nine months ended September 25, 2005 from $108,636 or 5.6% of net revenues for the nine months ended September 26, 2004. The decrease as a percentage of revenues is primarily due to the Company’s realignment of its product development in the fourth quarter of 2004 which resulted in a greater amount of U.S. Toys product development being moved outside of the U.S. and which resulted in a streamlining of the U.S. Toys workforce. Investment in research and product development costs is an important component to the Company's strategy to grow core brands and to create new and innovative toy and game products.
 

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

For the quarter, advertising expense decreased to $118,845 or 12.0% of net revenues in 2005 from $129,403 or 13.7% of net revenues in 2004. For the nine months ended September 25, 2005, advertising expense decreased to $238,009 or 11.8% of net revenues from $243,751 or 12.6% of net revenues for the nine months ended September 26, 2004.  The decrease in advertising in the quarter and nine-month periods was due to increased sales of STAR WARS products in 2005, which do not require the amount of advertising as the Company's internally developed products. The Company continues to focus on marketing as a means to increase and sustain awareness of its core brands, as well as to introduce new products.

For the quarter ended September 25, 2005, the Company's selling, distribution and administration expenses increased to $162,061 or 16.4% of net revenues from $151,179 or 16.0% for the quarter ended September 26, 2004.  For the nine months ended September 25, 2005, these expenses increased in dollars to $439,921 from $429,005 in 2004, but decreased as a percentage of net revenues to 21.8% of net revenues in 2005, compared to 22.1% of net revenues in 2004. The increase in dollars for the quarter primarily reflects increased warehousing costs as well as increased bonus accruals based on the Company's performance.

NONOPERATING (INCOME) EXPENSE
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Interest expense for the third quarter of 2005 was $7,816 compared with $8,257 in the third quarter of 2004. For the nine months ended September 25, 2005, interest expense decreased to $23,196 from $24,488 in 2004. For the quarter and nine months ended September 25, 2005, decreases resulting from lower levels of debt were partially offset by increased interest expense as the result of higher interest rates. The decrease in interest expense as the result of lower levels of debt reflects the Company's strategy to reduce its long-term debt. In November 2005, the Company has $71,970 of 5.6% long-term debt coming due which it intends to repay using cash from operations.  

Other (income) expense, net, amounted to $(5,864) for the third quarter of 2005, which compares to ($5,513) for the quarter ended September 26, 2004.  For the nine-month periods, other (income) expense, net was $(22,049) in 2005 compared to $(15,606) in 2004. The increase in each of the periods for 2005 is due to higher interest and dividend income as the result of the higher balances of invested cash. The nine-month period in 2005 also includes interest income of $4,140 related to an IRS tax settlement.

Other income for the third quarter and nine months ended September 25, 2005 includes non-cash income of $570 and $1,330, respectively, related to the decrease in the fair value of certain warrants required to be classified as a liability. These amounts compare to non-cash income of $5,150 and $15,370 for the quarter and nine months ended September 26,2004, respectively. These warrants are required to be adjusted to their fair value each quarter through earnings.  The fair value of these warrants is primarily affected by the Company's stock price, but is also affected by the Company's stock price volatility, dividends, and the risk-free interest rates. Assuming the Company's stock volatility, dividend payments, and the risk-free interest rates remain constant, the fair value of the warrants would increase and the Company would recognize a charge to earnings if the price of the Company's stock increases.

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

If the price of the Company's stock decreases and the Company's stock volatility, dividend payments, and the risk-free interest rates remain constant, the fair value of the warrants will decrease and the Company will recognize income. Based on a hypothetical increase in the Company's stock price to $21.00 per share at September 25, 2005 from its actual price of $20.27 per share on that date, the Company would have recognized a non-cash charge to earnings of approximately $4,450 and $3,700, rather than non-cash income of $570 and $1,330, for the quarter and nine months ended September 25, 2005, respectively, to adjust the warrants to their fair value.

INCOME TAXES
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Income tax expense as a percentage of pretax earnings in the third quarter of 2005 was 27.1%, and for the nine months was 24.4%, compared to 25.7% and 24.2% in the comparable periods of 2004.

Income tax expense for the nine months ended September 25, 2005 has been reduced by approximately $4 million due to an Internal Revenue Service examination of tax years ended in December 2001 completed in the second quarter of 2005.

Absent the effect of the adjustment of certain warrants to their fair value as described above, which has no tax effect, and, in the case of the nine months tax rate, absent the $4 million tax adjustment described above, both the 2005 third quarter tax rate and the nine months tax rate would have been 27.2%.

The income tax rate for the full year 2004 was 24.6% and, excluding the effect of the adjustment of the above warrants to their fair value, would have been 25.9%. The increase to 27.2% for the first nine months of 2005 from 25.9% for the full year 2004 is primarily due to the expected increase in operating profits in jurisdictions with higher tax rates.

OTHER INFORMATION
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Typically, due to the seasonal nature of its business, the Company expects the second half of the year and within that half, the fourth quarter, to be more significant to its overall business for the full year. The Company expects that this concentration will continue, particularly as more of its business shifts to customers with order patterns concentrated in the second half of the year. Although this concentration will not be as pronounced in 2005 as other years due to the volume of STAR WARS products sold in the first half in connection with the theatrical release of STAR WARS EPISODE III: REVENGE OF THE SITH in May of 2005, the Company still expects a significant amount of its sales to occur in the second half and within that half, the fourth quarter. In 2005, as a result of a change in customer buying patterns, the Company expects an increasing concentration of sales in its Games segment in the second half, and in particular, the fourth quarter. The concentration of sales in the second half of the year and, specifically, the fourth quarter increases the risk of (a) underproduction of popular items, (b) overproduction of less popular items, and (c) failure to achieve tight and compressed shipping schedules. The business of the Company is characterized by customer order patterns which vary from year to year largely because of differences in the degree of consumer acceptance of a product line, product availability, marketing strategies, inventory levels, policies of retailers and differences in overall economic conditions.

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

The strategy of larger mass market retailers has been to maintain lower inventories throughout the year and purchase a greater percentage of product within or close to the fourth quarter holiday consumer selling season, which includes Christmas. Quick response inventory management practices now being used result in more orders being placed for immediate delivery and fewer orders being placed well in advance of shipment.  Consequently, unshipped orders on any date in a given year are not necessarily indicative of future sales. At September 25, 2005 and September 26, 2004, the Company's unshipped orders were approximately $461,000 and $491,000, respectively. To the extent that retailers do not sell as much of their year-end inventory purchases during the holiday selling season as they had anticipated, their demand for additional product earlier in the following fiscal year may be curtailed, thus negatively impacting the Company's revenues. In addition, the bankruptcy, restructuring, or other lack of success of one of the Company's significant retailers could negatively impact the Company's future revenues.

Hasbro uses the intrinsic-value method of accounting for stock options granted to employees. As required by the Company's existing stock plans, stock options are granted at, or above, the fair market value of the Company's stock, and, accordingly, no compensation expense is recognized for these grants in the consolidated statement of operations. The Company records compensation expense related to other stock-based awards, such as restricted stock grants, over the period the award vests, typically three years. On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), which amends SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS 95 “Statement of Cash Flows”.  SFAS No. 123(R) requires companies to measure all employee stock-based compensation awards using a fair value method and record such expense in its consolidated financial statements.  In addition, the adoption of SFAS No. 123(R) requires additional accounting and disclosure related to the income tax and cash flow effects resulting from share-based payment arrangements.  In April 2005, the Securities and Exchange Commission delayed the implementation of SFAS 123(R) until the first fiscal year beginning after June 15, 2005.  SFAS No. 123(R) will be effective for the Company as of December 26, 2005, the first day of the 2006 fiscal year. The Company may adopt SFAS 123(R) on a retrospective basis, which requires restatement of prior year financial statements or a prospective basis, which requires only recording amounts in fiscal periods subsequent to adoption.  The Company has not yet determined the method of adoption of SFAS No. 123(R). Based on the current options outstanding, the Company's 2006 pretax expense for those options is expected to be between $16,000 and $17,000. This amount may increase if any options are granted in 2006.

On October 22, 2004, the American Jobs Creation Act of 2004 (the "Act") was signed into law.  The Act creates a one-time incentive for U.S. corporations to repatriate undistributed earnings from their international subsidiaries by providing an 85% dividends-received deduction for certain international earnings.  The deduction is available to corporations during the tax year that includes October 22, 2004 or in the immediately subsequent tax year. The Company is in the process of evaluating whether it will repatriate international earnings under the provisions of the Act. The Company expects to complete its evaluation of the effects of the repatriation provision during the fourth quarter. The range of possible amounts the Company is considering for repatriation under this provision is between zero and $500,000.  The related potential range of income tax under the law as currently written is between zero and approximately $40,000.

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

On September 9, 2005, the Company purchased the assets and assumed certain liabilities of Wrebbit Inc., a Montreal-based developer and manufacturer of innovative puzzles. The purchase price, subject to adjustment, was $14,109. Based on a preliminary allocation of the purchase price, property rights related to acquired product lines of approximately $11,500 were recorded in connection with this acquisition. No goodwill was recorded as a result of this acquisition.

LIQUIDITY AND CAPITAL RESOURCES
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The Company has historically generated a significant amount of cash from operations. The Company funds its operations and liquidity needs primarily through cash flows from operations, as well as utilizing, when needed, proceeds from its accounts receivable securitization program and borrowings under its secured and unsecured credit facilities. During the remainder of 2005 and 2006, the Company expects to continue to fund its working capital needs primarily through operations and, when needed, using proceeds from the accounts receivable securitization program and borrowings under its available lines of credit.  Unforeseen circumstances in the toy or game industry, such as softness in the retail environment or unanticipated changes in consumer preferences could result in a significant decline in revenues and operating results of the Company, which could result in the Company being in non-compliance with covenants under its revolving credit facility and/or receivable securitization program. Non-compliance with its debt covenants could result in the Company being unable to utilize borrowings under its revolving credit facility and other bank lines, a circumstance which potentially could occur when operating shortfalls would most likely require supplementary borrowings to enable the Company to continue to fund its operations.  Also, non-compliance with covenants under its accounts receivable securitization program could result in the Company being unable to utilize this program. In addition, a significant deterioration in the business of a major U.S. customer could result in a decrease in eligible accounts receivable that would prevent the Company from being able to fully utilize its receivables securitization program.  The Company has been and expects to be in compliance with its borrowing and securitization financial covenants during 2005.

Because of this seasonality in cash flow, management believes that on an interim basis, rather than discussing only its cash flows, a better understanding of its liquidity and capital resources can be obtained through a discussion of the various balance sheet categories as well. Also, as several of the major categories, including cash and cash equivalents, accounts receivable, inventories and short-term borrowings, fluctuate significantly from quarter to quarter, again due to the seasonality of its business, management believes that a comparison to the comparable period in the prior year is generally more meaningful than a comparison to the prior quarter or prior year-end.

Cash flows utilized by operating activities were $4,564 for the nine months ended September 25, 2005 compared to $93,739 for the nine months ended September 26, 2004. Although net earnings for the nine months ended September 25, 2005 of $117,804 were consistent with net earnings $114,058 for the respective period in 2004, operating expenses in 2005 included an increased amount of non-cash expenses, such as amortization expense and utilization of prepaid royalties, which resulted in a decrease in cash utilized by operations in 2005. Partially offsetting the utilization of previously paid amounts was a $35,000 advance royalty payment made in connection with the release of STAR WARS EPISODE III: REVENGE OF THE SITH. Accounts receivable were $681,469 at September 25, 2005 compared to $697,430 at September 26, 2004. This decrease is primarily due to improved collections in the third quarter of 2005 as well as increased utilization of the securitization facility. Days sales outstanding decreased to 62 days from 66 days in 2004.  

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

Prepaid expenses were $99,386 at September 25, 2005 compared to $147,985 at September 26, 2004. The decrease largely resulted from the utilization of prepaid royalties, primarily STAR WARS royalties. Inventories increased to $330,779 at September 25, 2005 from $317,120 at September 26, 2004 in anticipation of higher sales in the fourth quarter of 2005.  Accounts payable and accrued expenses increased slightly to $828,775 at September 25, 2005 from $824,296 at September 26, 2004. Increased accrued income taxes as the result of increased earnings in jurisdictions with higher rates were mostly offset by decreased accrued royalties reflecting decreases in sales of BEYBLADE and SHREK products.

Collectively, property, plant and equipment and other assets decreased $50,991 from the comparable period in the prior year. The decrease is partially due to the sale of the Company's manufacturing facility in Spain in the second quarter of 2005. The decrease in other intangibles to $635,166 at September 25, 2005 from $664,452 at September 26, 2004 reflects amortization, including increased amortization of the STAR WARS property rights as the result of increased sales of related products.  The effect of amortization was partially offset by the Company's reacquiring of its digital gaming rights for all of its owned or controlled properties that it had originally licensed to Infogrames Entertainment SA in connection with the sale of its interactive business in December 2000. The Company paid $65,000 in cash to reacquire these rights, which were recorded to other intangibles. Also, as noted above, the Company acquired the net assets of Wrebbit, Inc. in September 2005, which resulted in $11,500 of property rights being recorded. The increase in other long-term assets was the result of a royalty advance in the second quarter of 2005 of $35,000 in connection with the theatrical release of STAR WARS EPISODE III: REVENGE OF THE SITH. This advance was recorded to other long-term assets and was offset by reclassifications to prepaid expenses as the result of the higher utilization of these royalties resulting from the theatrical release.

In May 2005 the Company's Board of Directors authorized the repurchase of up to $350 million in common stock. Purchases of the Company's common stock may be made from time to time, subject to market conditions and may be on the open market or through privately negotiated transactions. The Company has no obligation to repurchase shares under the authorization and the timing, actual number, and value of shares that are repurchased will depend on a number of factors, including the price of the Company's common stock. This authorization replaces all prior authorizations. In the third quarter of 2005 and the nine months ended September 25, 2005, the Company repurchased 1,168,300 and 1,528,300 shares, respectively, at an average price of $20.89 and $20.76, respectively. The total cost of these repurchases, including transaction costs, was $24,436 and $31,777, respectively.

Net borrowings (short-term borrowings, current portion of long-term debt, and long-term debt less cash and cash equivalents) decreased to $44,644 at September 25, 2005 from $345,034 at September 26, 2004. This reflects an increase in cash of $265,410 reflecting the Company's ability to generate cash from operations. In addition, the Company utilized the proceeds from the sale of certain facilities, primarily its former manufacturing facility in Spain, to repay associated long-term debt in the amount of $21,242.

HASBRO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

The Company has an amended and restated credit agreement, which provides it with an unsecured revolving credit facility of $350,000, maturing in March 2007.  During the first quarter of 2005, the Company entered into an amendment of its bank agreement, which reduced the interest rate margin and commitment fees on certain borrowings, eliminated the provisions that, under some circumstances, provided lenders with security interests in certain of the Company's assets, and eliminated the $100,000 step down of available funds  ($50,000 in both March and November 2005).  The amendment also increased the Company's flexibility to raise dividends and repurchase common stock, provided it maintains a debt to capitalization ratio at or below 30%, and increased the Company's acquisition capacity from $100,000 to $400,000 per annum, cumulative.  Under the credit agreement, the Company is not required to maintain compensating balances. The agreement also contains certain restrictive covenants setting forth minimum coverage requirements, maximum leverage, and a number of other limitations, including restrictions with respect to capital expenditures and investments. The Company was in compliance with all covenants as of and for the nine months ended September 25, 2005. The Company had no borrowings outstanding under its committed revolving credit facility at September 25, 2005.  The Company also has other uncommitted lines from various banks, of which approximately $33,186 was utilized at September 25, 2005.  Amounts available and unused under the committed line at September 25, 2005 were approximately $345,607.  The Company believes that funds provided by operations and amounts available for borrowing from time to time under these lines of credit are adequate to meet its needs in the remainder of 2005 and 2006.

The Company is party to a three-year receivable securitization program, expiring in December 2006. Under this program, the Company sells, on an ongoing basis, substantially all of its U.S. trade accounts receivable to a bankruptcy remote special purpose entity, Hasbro Receivables Funding, LLC ("HRF"). HRF is consolidated with the Company for financial reporting purposes. The securitization program then allows HRF to sell, on a revolving basis, an undivided interest of up to $250,000 in the eligible receivables it holds to certain bank conduits.  The program provides the Company with a cost-effective source of working capital and short-term financing. Based on the amount of eligible accounts receivable as of September 25, 2005, the Company had availability under this program to sell approximately $157,051, all of which was utilized.

The Company had letters of credit of approximately $23,725 and purchase commitments of $210,677 outstanding at September 25, 2005. Other contractual obligations and commercial commitments, as detailed in the Company's annual report on Form 10-K for the year ended December 26, 2004, did not materially change outside of payments made in the normal course of business with the exception of the repayment of the Spain long-term debt of $21,242 described above.

The Company has outstanding $250,000 in principal amount of senior convertible debentures due 2021.  The senior convertible debentures bear interest at 2.75%, subject to an upward adjustment in the rate, with the total rate not to exceed 11%, commencing in December 2005 should the price of the Company's stock trade at or below $9.72 per share for 20 of 30 trading days preceding the fifth day prior to an interest payment date. This contingent interest feature represents a derivative instrument that is recorded on the balance sheet at its fair value, with changes in fair value recognized in the statement of operations.  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, or upon other specified events, the debentures will be convertible at an initial conversion price of $21.60 in the next calendar quarter. This contingent conversion feature was not met in the third quarter of 2005.  

  HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

The holders of these debentures may put the notes back to Hasbro in December 2005, December 2011 and December 2016 at the original principal amount.  At that time, the purchase price may be paid in cash, shares of common stock or a combination of the two, at the Company's discretion.  While the Company's current intent is to settle in cash any puts exercised, there can be no guarantee that the Company will have the funds necessary to settle this obligation in cash.  Due to this put option, these debentures are classified on the Company’s balance sheet in the current portion of long-term debt.  Subsequent to December 1, 2005, any notes that the holders have not elected to put back to the Company will be reclassified to long-term debt.

The Company believes that cash from operations, including the securitization facility, and, if necessary, its line of credit, will allow the Company to meet these and other obligations listed. It is the Company's intent to continue to assess the desirability of using available cash from operations to reduce its outstanding long-term debt, as market conditions and the Company's revolving credit agreement and other sources of financing allow.  

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

-------------------------------------------------------------------------------------------------

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.  As such, management is required to make certain estimates, judgments and assumptions that it believes are reasonable based on the information available.  These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented.  The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating the Company's reported financial results include sales allowances, inventory valuation, recoverability of goodwill and intangible assets, recoverability of royalty advances and commitments and pension costs and obligations.  

Sales allowances for customer promotions, discounts and returns are recorded as a reduction of revenue when the related revenue is recognized.  Revenue from product sales is recognized upon passing of title to the customer, generally at the time of shipment.  Revenue from product sales, less related sales allowances, is added to royalty revenue and reflected as net revenues in the consolidated statements of operations.  The Company routinely commits to promotional sales allowance programs with customers. These allowances primarily relate to fixed programs, which the customer earns based on purchases of Company products during the year. Discounts are recorded as a reduction of related revenue at the time of sale.  While many of the allowances are based on fixed amounts, certain of the allowances, such as the returns allowance, are based on market data, historical trends and information from customers and are therefore subject to estimation.

Inventory is valued at the lower of cost or market.  Based upon a consideration of quantities on hand, actual and projected sales volume, anticipated product selling prices and product lines planned to be discontinued, slow-moving and obsolete inventory is written down to its net realizable value.  Failure to accurately predict and respond to consumer demand could result in the Company underproducing popular items or overproducing less popular items.  Management estimates are monitored on a quarterly basis and a further adjustment to reduce inventory to its net realizable value is recorded, as an increase to cost of sales, when deemed necessary under the lower of cost or market standard.  

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

Goodwill and other intangible assets deemed to have indefinite lives are tested for impairment at least annually. If an event occurs or circumstances change that indicate that the carrying value may not be recoverable, the Company will perform an interim test at that time. The impairment test begins by allocating goodwill and intangible assets to applicable reporting units.  Goodwill is then tested using a two-step process that begins with an estimation of the fair value of the reporting unit using an income approach, which looks to the present value of expected future cash flows. The first step is a screen for potential impairment while the second step measures the amount of impairment if there is an indication from the first step that one exists. Intangible assets with indefinite lives are tested for impairment by comparing their carrying value to their estimated fair value, which is also calculated using an income approach. The Company's annual impairment test was performed in the fourth quarter of 2004 and no impairment was indicated.  At September 25, 2005, the Company has goodwill and intangible assets with indefinite lives of $543,310 recorded on the balance sheet.

Intangible assets, other than those with indefinite lives, are reviewed for indications of impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Recoverability of the value of these intangible assets is measured by a comparison of the assets' carrying value to the estimated future undiscounted cash flows the asset is expected to generate.  If such assets were considered to be impaired, the impairment would be measured by the amount by which the carrying value of the asset exceeds its fair value based on estimated future discounted cash flows.  The estimation of future cash flows requires significant judgments and estimates with respect to future revenues related to the respective asset and the future cash outlays related to those revenues.  Actual revenues and related cash flows or changes in anticipated revenues and related cash flows could result in a change in this assessment and result in an impairment charge.  The estimation of discounted cash flows also requires the selection of an appropriate discount rate.  The use of different assumptions would increase or decrease estimated discounted cash flows and could increase or decrease the related impairment charge.  Intangible assets covered under this policy were $555,027 at September 25, 2005. During the third quarter and nine months ended September 25, 2005, there were no impairment charges related to these intangible assets.

The recoverability of royalty advances and contractual obligations with respect to minimum guaranteed royalties is assessed by comparing the remaining minimum guaranty to the estimated future sales forecasts and related cash flow projections to be derived from the related product.  If sales forecasts and related cash flows from the particular product do not support the recoverability of the remaining minimum guaranty or, if the Company decides to discontinue a product line with royalty advances or commitments, a charge to royalty expense to write-off the remaining minimum guaranty is required.  The preparation of revenue forecasts and related cash flows for these products requires judgments and estimates.  Actual revenues and related cash flows or changes in the assessment of anticipated revenues and cash flows related to these products could result in a change to the assessment of recoverability of remaining minimum guaranteed royalties.  At September 25, 2005, the Company had $151,046 of prepaid royalties, $49,955 of which are included in prepaid expenses and other current assets and $101,091, which are included in other assets.

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

The Company, except for certain international subsidiaries, has pension plans covering substantially all of its full-time employees. Pension expense is based on actuarial computations of current and future benefits using estimates for expected return on assets, expected compensation increases, and applicable discount rates. The estimates for the Company's domestic plans are established for the upcoming year at the Company's measurement date of September 30. The Company estimates expected return on assets using a weighted average rate based on historical market data for the investment classes of assets held by the plan, the allocation of plan assets among those investment classes, and the current economic environment. Based on this information, the Company's estimate of expected return on plan assets for its domestic plans is 8.75% for 2005, which is the same estimate used in 2004. A decrease in the estimate used for expected return on plan assets would increase pension expense, while an increase in this estimate would decrease pension expense.

For the Company's domestic plans, a decrease of 1% in the 2004 estimate of expected return on plan assets would have increased 2004 annual pension expense by approximately $1,700.  Expected compensation increases are estimated using a combination of historical compensation increases with expected compensation increases in the Company's long-term business forecasts. Based on this analysis, the Company's estimate of expected long-term compensation increases for its domestic plans is 4.0% in 2005, which is the same estimate used in 2004.  Increases in estimated compensation increases would result in higher pension expense while decreases would lower pension expense. Discount rates are selected based upon rates of return at the measurement date on high quality corporate bond investments currently available and expected to be available during the period to maturity of the pension benefits. Based on this long-term corporate bond yield at September 30, 2004, the Company's measurement date for its pension assets and liabilities, the Company selected a discount rate for its domestic plans of 5.75% for its 2005 expense.  Pension expense for the Company's domestic plans in 2004 was based on a discount rate of 6.0%.  A decrease in the discount rate would result in greater pension expense while an increase in the discount rate would decrease pension expense. For the Company's domestic plans, a decrease of 1% in the Company's 2004 discount rate would have increased 2004 annual pension expense and the projected benefit obligation by approximately $3,180 and $34,300, respectively. In accordance with Statement of Financial Accounting Standards No. 87, "Employers Accounting for Pensions", actual results that differ from the actuarial assumptions are accumulated and, if outside a certain corridor, amortized over future periods and, therefore generally affect recognized expense and the recorded obligation in future periods.  Assets in the plan are valued on the basis of their fair market value on the measurement date.  

FINANCIAL RISK MANAGEMENT

--------------------------------------------------

The Company is exposed to market risks attributable to fluctuations in foreign currency exchange rates, primarily resulting from sourcing products priced in U.S. dollars, Hong Kong dollars and Euros while marketing those products in more than twenty currencies. Results of operations are more likely to be affected by changes in the value of the U.S. dollar, Hong Kong dollar, Euro, British pound, Canadian dollar and Mexican peso and, to a lesser extent, currencies in Latin American and Asia Pacific countries.

To manage this exposure, the Company has hedged a portion of its estimated foreign currency transactions using forward foreign exchange contracts and purchased foreign currency options.

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

The Company is also exposed to foreign currency risk with respect to its net cash and cash equivalents or short-term borrowing positions in currencies other than the U.S. dollar. The Company believes, however, that the on-going risk on the net exposure should not be material to its financial condition. In addition, the Company's revenues and costs have been, and will likely continue to be, affected by changes in foreign currency rates. From time to time, affiliates of the Company may make or receive intercompany loans in currencies other than their functional currency.  The Company manages this exposure at the time the loan is made by using foreign exchange contracts.  Other than as set forth above, the Company does not hedge foreign currency exposures.  The Company reflects all derivatives at their fair value as an asset or liability on the balance sheet.   The Company does not speculate in foreign currency exchange contracts.

At September 25, 2005, the Company had fixed rate long-term debt, including current portions and excluding fair value adjustments, of $599,700.  Also at September 25, 2005, the Company had fixed-for-floating interest rate swaps with notional amounts of $150,000.  The interest rate swaps are designed to adjust the amount 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 long-term debt.  At September 25, 2005, these contracts had a fair value of $1,589, with $1,493 included in other assets, and the remaining $96 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.

FORWARD-LOOKING STATEMENTS AND

FACTORS THAT MAY AFFECT FUTURE RESULTS

------------------------------------------------------------------------------

This Quarterly Report on Form 10-Q contains “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, concerning management's expectations, goals, objectives, and similar matters. These statements may be identified by the use of forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "intend," "look forward," "may," "planned," "potential," "should," "will," and "would" or any variations of words with similar meanings, and include statements regarding the Company's strategy, expected product releases, revenues and earnings. These forward-looking statements are inherently subject to known and unknown risks and uncertainties. The Company's actual results or experience may differ materially from those expected or anticipated in the forward-looking statements. Specific factors that might cause such a difference include, but are not limited to:

·

the Company's ability to manufacture, source and ship new and continuing products in a timely manner and customers' and consumers' acceptance of those products at prices that will be sufficient to profitably recover development, manufacturing, marketing, royalty and other costs of products;

·

economic and public health conditions, including factors which impact the retail market and retail demand or the Company's ability to manufacture and deliver products, higher fuel and commodity prices, higher transportation costs and potential transportation delays, currency fluctuations, government regulation and other conditions in the various markets in which the Company operates throughout the world;

·

the concentration of the Company's customers;

·

the Company's ability to generate sales during the fourth quarter, particularly during the relatively brief holiday season, which is the period in which the Company derives a substantial portion of its revenues;

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

·

the inventory policies of retailers, including the concentration of the Company's revenues in the second half and fourth quarter of the year, together with the increased reliance by retailers on quick response inventory management techniques, which increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve tight and compressed shipping schedules;

·

work stoppages, slowdowns or strikes, which may impact the Company's ability to manufacture or deliver product;

·

concentration of manufacturing of many of the Company's products in the People's Republic of China and the associated impact to the Company of health conditions and other factors affecting social and economic activity in China or affecting the movement of people and products into and out of China, including, without limitation, the impact of tariffs or other trade restrictions being imposed upon goods manufactured in China and the impact of foreign currency exchange rates related to the Yuan;

·

an adverse change in purchasing policies or the bankruptcy or other lack of success of one or more of the Company's significant retailers comprising its relatively concentrated retail customer base, which could negatively impact the Company's revenues, operating margins, or bad debt exposure;

·

the impact of competition on revenues, margins and other aspects of the Company's business, including the ability to secure, maintain and renew popular licenses and the ability to attract and retain employees in a competitive environment;

·

the risk that anticipated benefits of acquisitions may not occur or be delayed or reduced in their realization;

·

the risk that the market appeal of the Company's licensed products will be less than expected or that the sales revenue generated by those products will be insufficient to cover the minimum guaranteed royalties;

·

the Company's ability to obtain and enforce intellectual property rights both in the United States and other worldwide territories;

·

the risk that any litigation or arbitration disputes or regulatory investigations could entail significant expense and result in significant fines or other harm to the Company's business;

·

the Company's ability to obtain external financing on terms acceptable to it in order to meet working capital needs;

·

the Company's ability to generate sufficient available cash flow to service its outstanding debt;

·

restrictions that the Company is subject to under its credit agreement;

·

unforeseen circumstances, such as severe softness in or collapse of the retail environment that may result in a significant decline in revenues and operating results of the Company, thereby causing the Company to be in non-compliance with its debt covenants and the Company being unable to utilize borrowings under its revolving credit facility, a circumstance likely to occur when operating shortfalls would result in the Company being in the greatest need of such supplementary borrowings;

·

market conditions, third party actions or approvals, the impact of competition and other factors that could delay or increase the cost of implementation of the Company's consolidation programs, or alter the Company's actions and reduce actual results;

·

the risk that the Company may be subject to governmental sanctions for failure to comply with applicable regulations or to product liability suits relating to products it manufactures and distributes;

·

the risk that the Company's reported goodwill may become impaired, requiring the Company to take a charge against its income;

·

other risks and uncertainties as are or may be detailed from time to time in the Company's public announcements and filings with the SEC, such as filings on Forms 8-K, 10-Q and 10-K.

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

The Company undertakes no obligation to revise the forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect events or circumstances occurring after the date of the filing of this report.