Derivative Financial Instruments

12 Months Ended

Dec. 28, 2014

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. Further, during the first quarter of 2014, Hasbro used forward-starting interest rate swap agreements to hedge anticipated interest payments. All contracts 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.

Cash Flow Hedges

The Company 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 2015 through 2019.

At March 29, 2015, March 30, 2014 and December 28, 2014, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows:

	March 29, 2015					March 30, 2014					December 28, 2014
Hedged transaction	Notional Amount		Fair Value			Notional Amount		Fair Value			Notional Amount		Fair Value
Inventory purchases	$	912,376		135,512			609,689		(6,966	)		863,232		69,049
Sales		232,643		(6,769	)		161,760		(1,155	)		139,946		829
Intercompany royalty transaction		-		-			2,812		(2,403	)		-		-
Other		84,518		(2,766	)		51,243		(637	)		51,213		(1,008	)
Total	$	1,229,537		125,977			825,504		(11,161	)		1,054,391		68,870

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 March 29, 2015, March 30, 2014 and December 28, 2014 as follows:

	March 29, 2015			March 30, 2014			December 28, 2014
Prepaid expenses and other current assets
Unrealized gains	$	74,219			999			46,594
Unrealized losses		(10,253	)		(647	)		(11,508	)
Net unrealized gain	$	63,966			352			35,086
Other assets
Unrealized gains	$	66,438			-			34,234
Unrealized losses		(914	)		-			(172	)
Net unrealized gains	$	65,524			-			34,062
Accrued liabilities
Unrealized gains	$	3,149			4,597			447
Unrealized losses		(6,662	)		(13,946	)		(725	)
Net unrealized loss	$	(3,513	)		(9,349	)		(278	)
Other liabilities
Unrealized gains	$	-			256			-
Unrealized losses		-			(2,420	)		-
Net unrealized loss	$	-			(2,164	)		-

Net gains (losses) on foreign currency cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the quarters ended March 29, 2015 and March 30, 2014 as follows:

	Quarter Ended
	March 29, 2015			March 30, 2014
Statements of Operations Classification
Cost of sales	$	10,063			(1,019	)
Royalties		43			(350	)
Net revenues		(1,354	)		(159	)
Net realized gains (losses)	$	8,752			(1,528	)

In addition, net gains of $65 were reclassified to earnings as a result of hedge ineffectiveness for the quarter ended March 30, 2014.  There were no reclassifications as a result hedge ineffectiveness during the first quarter of 2015.

During the first quarter of 2014, the Company held forward-starting interest rate swap agreements to hedge the variability of the anticipated underlying U.S. Treasury interest rate associated with the expected issuance of long-term debt to repay the 6.125% Notes Due 2014 with a principal amount of $425,000. These derivative instruments were designated and effective as cash flow hedges. At March 30, 2014, the total notional amount of these contracts was $500,000. The instruments were settled on the date of the issuance of the related debt and the related deferred loss is being amortized to interest expense over the life of the debt using the effective interest rate method. For the quarter ended March 29, 2015, the Company reclassified losses of $450 related to these contracts from other comprehensive earnings (loss) to interest expense.

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 fluctuations. Due to the nature of the derivative contracts involved, the Company does not use hedge accounting for these contracts.  At March 29, 2015, March 30, 2014 and December 28, 2014 the total notional amounts of the Company's undesignated derivative instruments were $119,395, $158,827 and $294,571, respectively.

At March 29, 2015, March 30, 2014 and December 28, 2014, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:

	March 29, 2015			March 30, 2014			December 28, 2014
Prepaid expenses and other current assets
Unrealized gains	$	1,088			1,218			-
Unrealized losses		(28	)		(421	)		-
Net unrealized gain		1,060			797			-
Other assets
Unrealized gains		-			163			-
Unrealized losses		-			(1	)		-
Net unrealized gain		-			162			-
Accrued liabilities
Unrealized gains		-			-			1,733
Unrealized losses		-			-			(4,046	)
Net unrealized loss		-			-			(2,313	)
Total unrealized gain, net	$	1,060			959			(2,313	)

The Company recorded net (gains) losses of $(10,071) and $4,117 on these instruments to other (income) expense, net for the quarters ended March 29, 2015 and March 30, 2014, 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.