Derivative Financial Instruments

3 Months Ended

Mar. 27, 2016

Derivative Financial Instruments (Thousands of Dollars) [Abstract]

Derivative Financial Instruments

(10) 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. 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 2016 through 2020.

At March 27, 2016, March 29, 2015 and December 27,2015, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows:

	March 27, 2016				March 29, 2015				December 27, 2015
	Notional		Fair		Notional		Fair		Notional		Fair
Hedged transaction	Amount		Value		Amount		Value		Amount		Value
Inventory purchases	$	1,277,977		69,748		912,376		135,512		1,380,488		108,521
Sales		82,072		258		232,643		(6,769)		97,350		803
Royalties and Other		270,207		(4,077)		84,518		(2,766)		54,360		(1,886)
Total	$	1,630,256		65,929		1,229,537		125,977		1,532,198		107,438

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 27, 2016, March 29, 2015 and December 27,2015 as follows:

	March 27,		March 29,		December 27,
	2016		2015		2015
Prepaid expenses and other current assets
Unrealized gains	$	53,774		74,219		78,910
Unrealized losses		(6,890)		(10,253)		(5,932)
Net unrealized gain	$	46,884		63,966		72,978
Other assets
Unrealized gains	$	26,454		66,438		35,366
Unrealized losses		(3,618)		(914)		(710)
Net unrealized gains	$	22,836		65,524		34,656
Accrued liabilities
Unrealized gains	$	1,900		3,149		-
Unrealized losses		(3,086)		(6,662)		-
Net unrealized loss	$	(1,186)		(3,513)		-
Other liabilities
Unrealized gains	$	1,349		-		241
Unrealized losses		(3,954)		-		(437)
Net unrealized loss	$	(2,605)		-		(196)

Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the quarters endedMarch 27, 2016 and March 29, 2015as follows:

	Quarter Ended
	March 27,		March 29,
	2016		2015
Statements of Operations Classification
Cost of sales	$	15,698		10,063
Sales		98		(1,354)
Royalties and Other		7		43
Net realized gains	$	15,803		8,752

In addition, gains of $3,957 were reclassified to earnings as a result of hedge ineffectiveness for the quarter ended March 27, 2016. There were no reclassifications as a result of hedge ineffectiveness during the first quarter of 2015.

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 27, 2016, March 29, 2015 and December 27,2015 the total notional amounts of the Company's undesignated derivative instruments were $88,862, $119,395 and $341,389, respectively.

At March 27, 2016, March 29, 2015 and December 27,2015, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:

	March 27,		March 29,		December 27,
	2016		2015		2015
Prepaid expenses and other current assets
Unrealized gains	$	-		1,088		-
Unrealized losses		-		(28)		-
Net unrealized gain		-		1,060		-
Accrued liabilities
Unrealized gains		321		-		416
Unrealized losses		(462)		-		(1,460)
Net unrealized loss		(141)		-		(1,044)
Total unrealized gain (loss), net	$	(141)		1,060		(1,044)

The Company recorded net gains of $3,255 and $10,071 on these instruments to other (income) expense, net for the quarters ended March 27, 2016 and March 29, 2015, 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.