PART I. FINANCIAL INFORMATION

Item 1.ITEM 1: Financial Statements

See accompanying condensed notes to consolidated financial statements.

See accompanying condensed notes to consolidated financial statements.

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

(1)   In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of AprilJuly 2, 2006 and March 27,June 26, 2005, and the results of its operations and cash flows for the periods then ended in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Actual results could differ from those estimates.

The quartersix months ended AprilJuly 2, 2006 is a fourteentwenty-seven week period while the quartersix months ended March 27,June 26, 2005 is a twenty-six week period. The quarters ended July 2, 2006 and June 26, 2005 were both thirteen week period.periods.  

The results of operations for the quarter ended AprilJuly 2, 2006 are not necessarily indicative of results to be expected for the full year.

These condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and disclosures normally included in the financial statements prepared in accordance with U.S.  GAAP have been condensed or omitted pursuant to such rules and regulations.  The Company filed audited financial statements for the year ended December 25, 2005 in its annual report on Form 10-K, which includes all such information and disclosures, and accordingly, should be read in conjunction with the financial information included herein.  

The Company's accounting policies are the same as those described in Note 1 to the Company's consolidated financial statements for the fiscal year ended December 25, 2005 with the exception of the accounting for stock-based compensation. Effective December 26, 2005, the first day of fiscal 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), which amends Statement of Financial Accounting Standards No. 123, as amended by No. 148, and Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows". The Company adopted SFAS 123R under the modified prospective basis as defined in the statement. In 2006 the Company is recording stock option expense based on all unvested stock options as of the adoption date as well as all future stock-based compensation awards.awards granted subsequent to the adoption date. See footnote 4 for further information related to the adopt ionadoption of this statement.

Substantially all of the Company's inventories consist of finished goods.

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

(2)   Net lossEarnings per share data for the fiscal quarters and six months ended AprilJuly 2, 2006 and March 27,June 26, 2005 were computed as follows:

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

Certain warrants containing a put feature that may be settled in cash or common stock are required to be accounted for as a liability at fair value. The Company is required to assess if these warrants, classified as a liability, have a more dilutive impact on earnings per share when treated as an equity contract. SinceFor the Companyquarters and six months ended July 2, 2006 and June 26, 2005, the warrants had a net loss in the first quarters of 2006 and 2005, these warrants, were not included in the calculation of dilutedmore dilutive impact on earnings per share because to include them would have been antidilutive. Had these warrants been included in 2006,assuming they could have resulted inwere treated as an additional 5,277 shares being included inequity contract. Accordingly, for the diluted earnings per share calculation with a correspondingfor these periods, the numerator includes an adjustment to add backearnings to exclude the income included therein related expense of $3,330 to reported net earnings.the fair market value adjustment and the denominator includes an adjustment to include the shares issuable under contract.

SinceFor the Company had a net loss inquarter and six months ended July 2, 2006 and the first quarters of 2006 andsix months ended June 26, 2005, the effect of the Company's contingent convertible debt was antidilutive for the first quarters of 2006 and 2005.antidilutive. Had the Company not had net losses in these periods,effect of the convertible debt been dilutive, 11,574 shares would have been included in dilutive shares for each of the periods and interest expense, net of tax, of $2,131 for the six months ended July 2, 2006 and June 26, 2005 and $1,066 for the quarter ended July 2, 2006 would have been added back to net earnings to calculate earnings per share. For the quarter ended June 26, 2005, the effect of the contingent convertible debt was dilutive and, accordingly, adjustments have been made to the net earnings and dilutive shares.

Options and warrants to acquire shares totaling 21,2637,824 at AprilJuly 2, 2006 and 21,7067,887 at March 27,June 26, 2005, were excluded from the calculation of diluted earnings per share because to include them would have been antidilutive. Of the options

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and warrants to acquire shares totaling 21,263 at April 2, 2006 and 21,706 at March 27, 2005, 18,342 and 16,614 of these, respectively, would have been included in the calculation of diluted earnings per share had the Company not had a net loss in the first quarters of 2006 and 2005. Assuming that these options and warrants were included, under the treasury stock method, they would have resulted in an additional 2,167 and 2,296 shares being included in the diluted earnings per share calculation for the quarters ended April 2, 2006 and March 27, 2005, respectively.Shares Except Per Share Data)
(Unaudited)

(3)  At AprilJuly 2, 2006, the Company has invested $147,675$72,625 in auction rate securities, which are recorded as short-term investments on the consolidated balance sheet. These securities are being accounted for as an available-for-sale security and are reflected at par value, which reflectsapproximates fair value.

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

(4)  Hasbro has various stock incentive plans for employees and for non-employee members of the Board of Directors (collectively, the "plans") and has reserved 24,56823,914 shares of its common stock for issuance upon exercise of options and the grant of other awards granted or to be granted under the plans. These options generally vest in equal annual amounts over three to five years. The plans provide that options be granted at exercise prices not less than fair market value on the date the option is granted and options are adjusted for such changes as stock splits and stock dividends. Generally, options are exercisable for periods of no more than ten years after date of grant. Certain of the plans permit the granting of awards in the form of stock options, stock appreciation rights, stock awards and cash awards in addition to options. Upon exercise in the case of stock options or grant in the case of restricted stoc k,stock, shares are issued out of available treasury shares. Additionally, the Company has reserved 17,450 shares of its common stock for issuance upon exercise of outstanding warrants.

The Company on occasion will issue restricted stock and grant deferred restricted stock units to certain key employees. In the first quarter of 2006, the Company issued restricted stock of 20 shares. These shares or units are nontransferable and subject to forfeiture for periods prescribed by the Company.  These awards are valued at the market value at the date of grant and are subsequently amortized over the periods during which the restrictions lapse, generally 3 years.  Amortization of unearned compensation expense relating to the outstanding restricted stock and deferred restricted stock units of $42was $46 and $33 was recorded$13 in the first quarters ofended July 2, 2006 and June 26, 2005, respectively, and $88 and $46 for the six months ended July 2, 2006 and June 26, 2005, respectively.

Prior to fiscal 2006, Hasbro used the intrinsic-value method of accounting for stock options granted to employees and non-employee members of the Board of Directors. Effective December 26, 2005, the first day of fiscal 2006, the Company adopted SFAS 123R under the modified prospective transition method as defined in the statement. Under this adoption method, the Company is recording stock option expense in 2006 based on all unvested stock options as of the adoption date and any stock option awards made subsequent to the adoption date. Stock-based compensation is recognized on a straight-line basis over the requisite service period of the award. In accordance with the modified prospective transition method, the Company's consolidated financial statements for prior years have not been restated to reflect, and do not include, the impact of SFAS 123R. Compensation expense related to stock options recognized under SFASSF AS 123R for the three m onthsquarter and six months ended AprilJuly 2, 2006 was $6,220$3,754 and $9,974, respectively, and was recorded as follows:

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

Pro forma information for the firstsecond quarter ofand six months ended June 26, 2005 regarding net earnings as required by SFAS No. 123, “Accounting for Stock-Based Compensation” determined as if the Company had accounted for its stock options under the fair value method is as follows:

Information with respect to stock options for the quarter ended April 2, 2006 is as follows:

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

Information with respect to stock options for the six months ended July 2, 2006 is as follows:

The Company uses the Black-Scholes valuation model in determining fair value of stock-based awards. The weighted average fair value of options granted in the first quarter of 2006 and the fiscal year 2005 were $5.15 and $5.41, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the first quarter ofsix months ended July 2, 2006 and the fiscal year 2005, respectively: risk-free interest rates of 4.58% and 3.84%; expected dividend yields of 2.20% and 1.75% and expected volatility of approximately 29% in both periods.  Expected volatility was based on a combination of historical and implied volatility of publicly traded stock options. The weighted average assumptions used for expected option lives were approximately 5 years in both periods which was based on the vesting period and contractual term of the option as well as employee exercise history.

The intrinsic value, which represents the difference between the fair market value on the date of exercise and the exercise price of the option, of the 8171,014 options exercised induring the first quarter ofsix months ended July 2, 2006 was $4,399.$5,510.

In addition to the above, the Company currently has 17,450 warrants outstanding and exercisable at AprilJuly 2, 2006, which have a weighted average exercise price, weighted average remaining life and intrinsic value at AprilJuly 2, 2006 of $20.11, 12.1111.96 years, and $30,707,$2,410, respectively.

At AprilJuly 2, 2006, the amount of total unrecognized compensation cost related to stock options is $21,181$17,214 and the weighted average period over which this will be expensed is 11.2810.08 months. At AprilJuly 2, 2006, the amount of total unrecognized compensation cost related to restricted stock is $409$364 and the weighted average period over which this will be expensed is 18.0116.87 months.

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

In May 2006, the Company granted 52 shares of common stock to its non-employee members of its Board of Directors, of which the receipt of 43 shares have been deferred to the date upon which the respective director ceases to be a member of the Company's Board of Directors. This award was valued at the market value at the date of grant and vested upon grant. Compensation cost of $990 was recorded in connection with this grant.

(5)   Other comprehensive lossearnings (loss) for the quartersquarter and six months ended AprilJuly 2, 2006 and March 27,June 26, 2005 consist of the following:

Reclassification adjustments from other comprehensive lossearnings to net lossearnings of $(316)$2,687 and $2,216$2,371 for the quartersquarter and six months ended AprilJuly 2, 2006 includes an impairment charge of $2,629 relating to an other than temporary decrease in the value of the Company's investment in Infogrames SA common stock. The remainder of the reclassification adjustments for the quarter and March 27,six months ended July 2, 2006 as well as the reclassification adjustments for the quarter and six months ended June 26, 2005 respectively, represent net (gains) losses on cash flow hedging derivatives for which the related transaction has impacted earnings and was reflected in cost of sales.  TheseThe losses on cash flow hedging derivatives for the quarter and six months ended July 2, 2006 include gains on cash flows reclassified to earnings as the result of hedge ineffectiveness of $3. The losses on cash flow hedging derivatives for the quarter and six mo nths ended June 26, 2005 include gains on cash flows reclassified to earnings as the result of hedge ineffectiveness of $31. There were no reclassifications to earnings as a result of hedge ineffectiveness in the first quarter of 2006.$23 and $54, respectively. The Company expects the remaining deferred gainsloss, net of tax, on derivative hedging instruments at AprilJuly 2, 2006 of $2,946$77 in accumulated other comprehensive earnings to be reclassified to earnings within the next twelve months.

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

(6)   The following table presents the components of the net periodic cost of the Company's defined benefit pension and other postretirement plans for the quarters and six months ended AprilJuly 2, 2006 and March 27, 2005.  June 26, 2005 are as follows:

In

During the first quartertwo quarters of fiscal 2006 the Company has made cash contributions to its pension plans of approximately $31,800, which are included in other operating activities on the Company's consolidated statement of cash flows.$36,900. The Company expects to contribute approximately $8,200$3,100 during the remainder of fiscal 2006.

HASBRO, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)

(Unaudited)

(7)   Hasbro is a worldwide leader in children’s and family leisure time and entertainment products and services, including the development, manufacture and marketing of games and toys ranging from traditional to high-tech. In 2006 the Company restructured its business by combining the U.S. Toys and Games operations, previously reported as separate segments, with the Canadian and Mexican operations, previously managed as part of the International segment, into one segment, the North American segment. The International segment is now comprised of operations in the European, Asia Pacific and Latin American regions. The Company's manufacturing facilities in East Longmeadow, Massachusetts and Waterford, Ireland, which were previously included in the Games and International segment, respectively, along with the Company's Far East sourcing operations, are now managed as part of the Global OperationsOp erations segment.

The North American segment includes the development, marketing and selling of boys' action figures, vehicles and playsets, girls' toys, electronic toys and games, plush products, preschool toys and infant products, electronic interactive products, tween electronic products, toy-related specialty products, traditional board games and puzzles, DVD- based games, fiction books, and trading card and role-playing games within the United States, Canada and Mexico. Within the International segment, the Company develops, markets and sells both toy and certain game products in non-North American markets, primarily the European, Asia Pacific, and Latin American regions. The Global Operations segment is responsible for manufacturing and sourcing finished product for the majority of the Company's segments. The Company also has another segment that licenses out certain toy and game properties.

Segment performance is measured at the operating profit level. Included in Corporate and eliminations are certain corporate expenses, the elimination of intersegment transactions and certain assets benefiting more than one segment. Intersegment sales and transfers are reflected in management reports at amounts approximating cost. Certain shared costs are allocated to segments based upon foreign exchange rates fixed at the beginning of the year, with adjustment to actual foreign exchange rates included in Corporate and eliminations.

HASBRO, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

2005 segment data has been restated to reflect the 2006 segment structure. In 2006 the Company adopted SFAS 123R, which requires the Company to record expense related to stock options in its consolidated financial statements. Consistent with management's approach in evaluating segment results, 2005 segment operating profit (loss) has been adjusted to include stock-based compensation as disclosed under SFAS 123. The amount of 2005 stock option expense is subtracted from the total segment operating profit (loss) in order to reconcile to the operating profit (loss) in the consolidated financial statements.

With the exception of the treatment of stock-based compensation expense for 2005 management financial statements, the accounting policies of the segments are the same as those referenced in Note 1.

Results shown for the quarter and six months are not necessarily representative of those which may be expected for the full year 2006 nor were those of the comparable 2005 first quarterperiods representative of those actually experienced for the full year 2005. Similarly, such results are not necessarily those which would be achieved were each segment an unaffiliated business enterprise.

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

Information by segment and a reconciliation to reported amounts for the quartersquarter and six months ended AprilJuly 2, 2006 and March 27,June 26, 2005 isare as follows:follows.

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)

(Thousands of Dollars and Shares Except Per Share Data)

(Unaudited)

(a)  The Global Operations segment derives substantially all of its revenues and thus its operating results from intersegment activities.

(b)  Certain intangible assets, primarily goodwill, which benefit operating segments are reflected as Corporate assets for segment reporting purposes. These amounts have been allocated to the reporting unit which benefits from their use. In addition, allocations of certain expenses related to these assets to the individual operating segments are done prior to the start of the year based on budgeted amounts. Any differences between actual and budgeted amounts are reflected in the Corporate segment.

(c)  As noted in footnote 4, on December 26, 2005, the first day of fiscal 2006, the Company adopted SFAS 123R using the modified prospective method. Under this method, the Company recorded expense related to stock option compensation in 2006 related to unvested options as of that date as well as grants made in 2006. The Company did not restate any of the prior years. The Companyyears but has restatedadjusted the operating profit (loss) of each of its segments for the first quarter ofand six months ended June 26, 2005 to reflect stock compensation for that periodthose periods based on the Company's 2005 pro forma disclosure under SFAS 123. TheAs such, the above amount represents the reversalremoval of the amount included in the segment disclosures to reconcile to the 2005 reported consolidated operating profit for the quarter and six months ended March 27,June 26, 2005. The $5,574$5,242 of 2005 pro forma stock option expense for the quarter was allocated to the segments as follows: $3,729$3,507 to North America, $1,042$981 to Inte rnational, $429International, $403 to Global Operations and $374$351 to Other Segment.

(c)  Certain intangible assets, primarily goodwill, which benefit operating segments are reflected The $10,816 of 2005 pro forma stock option expense for the six months was allocated as Corporate assets for segment reporting purposes.  These amounts have been allocatedfollows: $7,236 to the reporting unit which benefits from their use.  In addition, allocations of certain expenses relatedNorth America, $2,023 to these assetsInternational, $832 to the individual operating segments are done priorGlobal Operations and $725 to the start of the year based on budgeted amounts.  Any difference between actual and budgeted amounts are reflected in the Corporate segment.

Other Segment.

The following table presents consolidated net revenues by class of principal products for the quarters and six month periods ended AprilJuly 2, 2006 and March 27,June 26, 2005. Certain 2005 amounts have been reclassified to conform to the current periodyear presentation.

HASBRO, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements (continued)
(Thousands of Dollars and Shares Except Per Share Data)
(Unaudited)

(8)In July 2006, the Company's Board of Directors authorized the repurchase of an additional $350,000 in common stock. The Board of Directors had previously authorized the repurchase of $350,000 of common stock in May of 2005. At July 2, 2006, the total cost of repurchases under this authorization, including commissions, totaled $334,270. Purchases of the Company's common stock under these authorizations may be made from time to time, subject to market conditions and may be made in 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 which are repurchased will depend on a number of factors, including the price of the Company's common stock.

(9)In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"), which applies to all tax positions accounted for under Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes".  FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition of such tax positions, classification, interest and penalties, accounting in interim periods and disclosure. FIN 48 is applicable to the Company as of January 1, 2007, the first day of fiscal 2007. The Company is in the process of evaluating FIN 48 and the potential effect it will have on its financial position and results of operations .

ItemITEM 2.  Management's Discussion and Analysis of Financial Condition

and Results of Operations.Operations

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations

(Thousands (Thousands of Dollars Except Per Share Data)

EXECUTIVE SUMMARY

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

The Company earns revenue and generates cash through the sale of a variety of toy and game products. The Company sells these products both within the United States and in a number of international markets. While many of the Company's products are based on brands the Company owns or controls, the Company also offers products which are licensed from outside inventors. TheIn addition, the Company also licenses rights to produce products based on movie, television, music and other family entertainment properties, such as STAR WARS.

In January 2006 the Company announced that it had simplified and integrated its operating segment structure in order to better focus on consumer demands, better anticipate the needs of its retail customers, provide a more integrated toy and game marketing plan, place a greater company-wide focus on its core brands and thereby improve its overall business.  The Company’s North American toy and games business is now managed under common leadership, providing a combined focus on developing, marketing, and selling products in the U.S., Canada and Mexico.  The International segment consists of the Company’s European, Asia Pacific and Latin American marketing operations. The Company’s world-wide manufacturing and product sourcing operations are managed through its Global Operations segment. The Hasbro Properties Group continues to be responsible for the world-wide licensing of the Company's intellectualin tellectual properties a ndand works closely with the North American and International segments on the development and outlicensingout-licensing of the Company's brands.

The Company’s focus remains on growing core owned and controlled brands, developing new and innovative products which respond to market insights, and optimizing efficiencies within the Company to reduce costs, increase operating profits and strengthen its balance sheet.  While the Company has sought to achieve a more sustainable revenue base by developing and maintaining its core brands and avoiding reliance on licensed entertainment properties, the Companyit continues to opportunistically enter into or leverage existing strategic licenses which complement its brands and leverage its key strengths.

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 have been successful for the Company 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.  These brands may also be further extended by pairing a licensed concept with a core-brand.core brand. By focusing on core brands, the Company is working to build a more consistent revenue stream and basis for future growth.

HASBRO, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial

Condition and Results of Operations (continued)

(Thousands of Dollars Except Per Share Data)

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 and insights. Innovative electronic products include items such as I-DOG, VIDEONOW XP, ZOOMBOX and an enhanced, interactive FURBY. 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.

With the theatrical release of Lucasfilm's STAR WARS EPISODE III: REVENGE OF THE SITH in May 2005, and the subsequent holiday season DVD release, sales of product related to the Company’s strategic STAR WARS license were a significant contributor to 2005 revenues and have continued to be strong in the first quartertwo quarters of 2006.  Pairing this key licensed property with the Company's ability to design and produce action figures, role playing toys, and games, as well as theits ability to launch an integrated marketing campaign to promote the product globally, was the key to this line's success. While sales of product related to this license performed well in the first quartertwo quarters of 2006, they were lower than the first quartertwo quarters of 2005 and are expected to decrease inbe lower for the full year 2006 than 2005 since there is no movie release in 2006.

While the Company's strategy has continued to focus on growing its core brands and developing innovative, new products, the Companyit will continue to evaluate and enter into arrangements to license properties when the Company believes it is economically attractive. In the first quarter of 2006, the Company announced that it had entered into a license with Marvel Entertainment, Inc. and Marvel Characters, Inc. (collectively "Marvel") to produce toys and games based on Marvel’s portfolio of characters.  While gross profits of theatrical entertainment-based products are generally higher than many of the Company's other products, sales from these products also incur royalty expenses payable to the licensor. Such royalties reduce the impact of these higher gross margins. In certain instances, such as with Lucasfilm's STAR WARS, the Company may also incur amortization expense on property right basedright-based assets acquireda cquired from the licensor of such properties, further impacting profit made on these items.products.

The Company's strategy in the last several years has also involved reducing fixed costs and increasing operating margins. With a strong balance sheet, and having achieved its desireda debt to capitalization ratio of between 25-30%, the Company will continue to evaluate acquisitions which may complement its current product offerings or allow it entry into an area which is adjacent to and complementary to the toy and game business. Additionally, in July 2006, the Company has a remaining share repurchase authorization from itsCompany's Board of Directors (the "Board') authorized the repurchase of $208,293 at Aprilan additional $350,000 in common stock. The Board had previously authorized $350,000 in May 2005 for the repurchase of common stock, of which the total cost of repurchases through July 2, 2006.2006, including commissions, totaled $334,270. The Company intends to continue repurchasing shares under this remaining authorization subject to market 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)

SUMMARY

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

The relationship between various components of the results of operations, stated as a percent of net revenues, is illustrated below for the firstfiscal quarters ofand six months ended July 2, 2006 and June 26, 2005.