Financial Instruments

6 Months Ended

Jul. 01, 2012

Financial Instruments (Thousands of Dollars) [Abstract]

Financial Instruments

(4) Financial Instruments

Hasbro’s financial instruments include cash and cash equivalents, accounts receivable, short-term borrowings, accounts payable and certain accrued liabilities. At July 1, 2012, June 26, 2011 and December 25, 2011, the carrying cost of these instruments approximated their fair value. The Company’s financial instruments at July 1, 2012, June 26, 2011 and December 25, 2011 also include certain assets and liabilities measured at fair value (see Notes 6 and 8) as well as long-term borrowings. The carrying costs and fair values of the Company’s long-term borrowings as of July 1, 2012, June 26, 2011 and December 25, 2011 are as follows:

	July 1, 2012		June 26, 2011		Dec. 25, 2011
	--------------------		--------------------		----------------------------
	Carrying Cost	Fair Value	Carrying Cost	Fair Value	Carrying Cost	Fair Value
	-------	------	-------	------	-------	------
6.35% Notes Due 2040	$  500,000	582,250	500,000	523,650	500,000	540,850
6.125% Notes Due 2014	439,662	460,020	443,136	469,625	440,977	462,868
6.30% Notes Due 2017	350,000	400,015	350,000	399,420	350,000	400,400
6.60% Debentures    Due 2028	109,895	123,038	109,895	115,675	109,895	120,148
	-------------	-------------	-------------	-----------	-------------	-----------
Total long-term debt	$1,399,557	1,565,323	1,403,031	1,508,370	1,400,872	1,524,266
	=======	=======	=======	=======	=======	=======

The carrying cost of the 6.125% Notes Due 2014 includes principal amounts of $425,000 as well as fair value adjustments of $14,662, $18,136, and $15,977 at July 1, 2012, June 26, 2011 and December 25, 2011, respectively, related to interest rate swaps.  All other carrying costs represent principal amounts.  Total principal amount of long-term debt at July 1, 2012, June 26, 2011 and December 25, 2011 was $1,384,895.

The fair values of the Company’s long-term debt are considered Level 3 fair values (see Note 6 for further discussion of the fair value hierarchy) and are measured using the discounted future cash flows method. In addition to the debt terms, the valuation methodology includes an assumption of a discount rate that approximates the current yield on a similar debt security. This assumption is considered an unobservable input in that it reflects the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement.

The Company is party to a series of interest rate swap agreements which effectively adjust the interest rates on a portion of the Company’s long-term debt from fixed to variable. The interest rate swaps are matched with a portion of the 6.125% Notes Due 2014 and accounted for as fair value hedges of those notes. The interest rate swaps have a total notional amount of $400,000 with maturities in 2014 which match the maturity date of the related notes. In each of the contracts, the Company receives payments based upon a fixed interest rate of 6.125%, which matches the interest rate of the notes being hedged, and makes payments based upon a floating rate based on Libor. These contracts are designated and effective as hedges of the change in the fair value of the associated debt. At July 1, 2012, June 26, 2011 and December 25, 2011, the fair values of these contracts were $14,662, $18,136, and $15,977, respectively, which are recorded in other assets with a corresponding fair value adjustment to increase long-term debt. The Company recorded losses of $1,385 and $1,315 for the quarter and six months ended July 1, 2012, respectively and gains of $6,336 and $5,350 for the quarter and six months ended June 26, 2011, respectively, on these instruments in other (income) expense, net relating to the change in fair value of such derivatives, wholly offsetting losses from the change in fair value of the associated long-term debt, also included in other (income) expense.