Equity Method Investment

9 Months Ended

Sep. 28, 2014

Equity Method Investment [Abstract]

Equity Method Investment

(10) Equity Method Investment

The Company owns an interest in a joint venture, Hub Television Networks, LLC (the "Network"), with Discovery Communications, Inc. ("Discovery"). The Network was established to create a cable television network in the United States dedicated to high-quality children's and family entertainment. On September 23, 2014, the Company and Discovery amended their relationship with respect to the Network. Prior to the amendments each of the Company and Discovery owned a 50% equity interest in the Network. Pursuant to these amendments Discovery has increased its equity interest in the Network to 60%, and the Company retains a 40% equity interest in the Network. The change in equity interests was accomplished partly through a redemption of interests owned by the Company and partly through the purchase of interests by Discovery from the Company. In connection with this reduction in its equity ownership the Company was paid a cash purchase price of $64,400 by Discovery.In connection with amendments, the Company and Discovery also entered into an option agreement related to the Company's remaining 40% ownership in the Network and also modified the terms of a license agreement between the Company and the Network.  As a result of the reduction in the Company's ownership in the Network, the Company also received a benefit from a reduction in amounts due to Discovery under an existing tax sharing agreement. In connection with the restructuring of the Company's investment in the Network, the quarter and nine-month periods ended September 28, 2014 include a net expense of $11,566, primarily related to a charge resulting from an option agreement and the Company's share of severance charges recognized by the Network, partially offset by a gain from the reduction of amounts due to Discovery under a tax sharing agreement.

The Company and Discovery entered into an option agreement that allows either Discovery to call or Hasbro to put the Company's remaining 40%, exercisable during the one-year period following December 31, 2021.  The exercise price of the option agreement is 80% of the then fair market value of the Network, subject to a fair market value floor.  The Company recorded a charge in other expense, net for the third quarter and nine months of 2014, related to the fair market value of the option agreement totaling $25,590.  This amount is included as a component of other liabilities as of September 28, 2014.

During the quarter and nine months ended September 28, 2014, the Company's share in the earnings of the Network, excluding the amounts included in the charge described above, were $1,892 and $5,491, respectively, compared to losses of $91 and $1,024 for the quarter and nine months ended September 29, 2013. As of September 28, 2014, September 29, 2013 and December 29, 2013, the Company's investment in the Network totaled $258,295, $329,722 and $321,876, respectively. The Company monitors the valuation of its investment in the Network primarily based on a discounted cash flow model. The underlying cash flows are based on long-term financial plans for the Network, which include projections for growth in revenues and profitability. Should the Network not achieve its profitability and growth targets, the carrying value of the Company's investment may become impaired.