Derivative Financial Instruments

3 Months Ended

Jun. 30, 2013

Derivative Financial Instruments (Thousands of Dollars) [Abstract]

Derivative Financial Instruments

(8) Derivative Financial Instruments

Hasbro uses foreign currency forward contracts to mitigate the impact of currency rate fluctuations on firmly committed and projected future foreign currency transactions. These over-the-counter contracts, which hedge future currency requirements related to purchases of inventory, product sales and other cross-border transactions not denominated in the functional currency of the business unit, are primarily denominated in United States and Hong Kong dollars, and Euros and are entered into with a number of counterparties, all of which are major financial institutions. The Company believes that a default by a single counterparty would not have a material adverse effect on the financial condition of the Company. Hasbro does not enter into derivative financial instruments for speculative purposes.

The Company also has warrants to purchase common stock of an unrelated company that constitute and are accounted for as derivatives. For additional information related to these warrants see Note 6.

Cash Flow Hedges

Hasbro uses foreign currency forward contracts to reduce the impact of currency rate fluctuations on firmly committed and projected future foreign currency transactions. All of the Company's designated foreign currency forward contracts are considered to be cash flow hedges. These instruments hedge a portion of the Company's currency requirements associated with anticipated inventory purchases, product sales and other cross-border transactions in 2013 and 2014.

At June 30, 2013, July 1, 2012 and December 30, 2012, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows.

	June 30, 2013					July 1, 2012					December 30, 2012
Hedged transaction	Notional Amount		Fair Value			Notional Amount		Fair Value			Notional Amount		Fair Value
Inventory purchases	$	342,616		8,295			374,658		13,387			397,770		(2,638	)
Intercompany royalty   transactions		118,116		2,154			126,276		4,272			131,693		(1,168	)
Sales		112,278		4,193			85,693		(2,840	)		92,761		2,458
Other		25,102		(349	)		18,131		19			2,420		(45	)
Total	$	598,112		14,293			604,758		14,838			624,644		(1,393	)

The Company has a master agreement with each of its counterparties that allows for the netting of outstanding forward contracts. The fair values of the Company's foreign currency forward contracts designated as cash flow hedges are recorded in the consolidated balance sheets at June 30, 2013, July 1, 2012 and December 30, 2012 as follows:

	June 30, 2013			July 1, 2012			Dec. 30, 2012
Prepaid expenses and other current assets
Unrealized gains	$	13,907			14,113			2,802
Unrealized losses		(1,540	)		(4,250	)		(1,073	)
Net unrealized gain		12,367			9,863			1,729
Other assets
Unrealized gains		1,926			5,066			12
Unrealized losses		-			(70	)		-
Net unrealized gain		1,926			4,996			12
Total asset derivatives	$	14,293			14,859			1,741
Accrued liabilities
Unrealized gains	$	1			3			1,466
Unrealized losses		(1	)		(18	)		(4,245	)
Net unrealized loss		-			(15	)		(2,779	)
Other liabilities
Unrealized gains		-			-			20
Unrealized losses		-			(6	)		(375	)
Net unrealized loss		-			(6	)		(355	)
Total liability derivatives	$	-			(21	)		(3,134	)

Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings to net earnings for the quarter and six-month periods ended June 30, 2013 and July 1, 2012 as follows:

	Quarter Ended						Six Months Ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Statements of Operations Classification
Cost of sales	$	(306	)		1,675			36			2,941
Royalties		97			864			(44	)		1,006
Sales		1,060			(644	)		1,535			(643	)
Net realized gains	$	851			1,895			1,527			3,304

In addition, net losses of $67 and $68 were reclassified to earnings as a result of hedge ineffectiveness for the quarter and six-month periods ended June 30, 2013, respectively, and net gains of $16 and $14 were reclassified to earnings as a result of hedge ineffectiveness for the quarter and six-month periods ended July 1, 2012, respectively.

Undesignated Hedges

The Company also enters into foreign currency forward contracts to minimize the impact of changes in the fair value of intercompany loans due to foreign currency changes. Due to the nature of the derivative contracts involved, the Company does not use hedge accounting for these contracts.  At June 30, 2013, July 1, 2012 and December 30, 2012 the total notional amounts of the Company's undesignated derivative instruments were $150,810, $65,109 and $189,217, respectively.

At June 30, 2013, July 1, 2012 and December 30, 2012, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:

	June 30, 2013			July 1, 2012			Dec. 30, 2012
Prepaid expenses and other current assets
Unrealized gains	$	1,625			720			-
Unrealized losses		(18	)		(522	)		-
Net unrealized gain		1,607			198			-
Accrued liabilities
Unrealized gains		-			-			469
Unrealized losses		-			-			(796	)
Net unrealized loss		-			-			(327	)
Other liabilities
Net unrealized loss		(1,235	)		(744	)		-
Total unrealized gain (loss), net	$	372			(546	)		(327	)

The Company recorded net gains of $3,197 and $90 on these instruments to other (income) expense, net for the quarter and six-month periods ended June 30, 2013, respectively, and $(646) and $1,468 on these instruments to other (income) expense, net for the quarter and six-month periods ended July 1, 2012, respectively, relating to the change in fair value of such derivatives, substantially offsetting gains and losses from the change in fair value of intercompany loans to which the contracts relate.

For additional information related to the Company's derivative financial instruments see Notes 4 and 6.