Derivative Financial Instruments

3 Months Ended

Mar. 31, 2019

Derivative Financial Instruments (Thousands of Dollars) [Abstract]

(9) 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 2019 through 2022.

At March 31, 2019, April 1, 2018 and December 30, 2018, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows:

	March 31, 2019				April 1, 2018				December 30, 2018
	Notional		Fair		Notional		Fair		Notional		Fair
Hedged transaction	Amount		Value		Amount		Value		Amount		Value
Inventory purchases	$	486,999		21,649		718,925		(31,453)		468,305		15,089
Sales		263,221		8,358		375,441		7,323		298,194		11,232
Royalties and Other		26,422		190		178,896		(11,602)		26,341		(304)
Total	$	776,642		30,197		1,273,262		(35,732)		792,840		26,017

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 31, 2019, April 1, 2018 and December 30, 2018 as follows:

	March 31,		April 1,		December 30,
	2019		2018		2018
Prepaid expenses and other current assets
Unrealized gains	$	22,737		458		21,718
Unrealized losses		(2,008)		(405)		(972)
Net unrealized gains	$	20,729		53		20,746

Other assets
Unrealized gains	$	9,752		5,996		6,173
Unrealized losses		(239)		(3,089)		(843)
Net unrealized gains	$	9,513		2,907		5,330

Accrued liabilities
Unrealized gains	$	-		8,218		77
Unrealized losses		(45)		(30,826)		(136)
Net unrealized losses	$	(45)		(22,608)		(59)

Other liabilities
Unrealized gains	$	-		2,846		-
Unrealized losses		-		(18,930)		-
Net unrealized losses	$	-		(16,084)		-

Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the quarters ended March 31, 2019 and April 1, 2018 as follows:

	Quarter Ended
	March 31,		April 1,
	2019		2018
Statements of Operations Classification
Cost of sales	$	2,614		(3,891)
Net revenues		878		332
Other		118		(1,423)
Net realized gains (losses)	$	3,610		(4,982)

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. The Company does not use hedge accounting for these contracts as changes in the fair values of these contracts are substantially offset by changes in the fair value of the intercompany loans. As of March 31, 2019, April 1, 2018 and December 30, 2018 the total notional amounts of the Company's undesignated derivative instruments were $293,326, $132,945 and $452,773, respectively.

At March 31, 2019, April 1, 2018 and December 30, 2018, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:

	March 31,		April 1,		December 30,
	2019		2018		2018
Prepaid expenses and other current assets
Unrealized gains	$	2,391		-		-
Unrealized losses		(337)		-		-
Net unrealized gains	$	2,054		-		-

Accrued liabilities
Unrealized gains	$	-		383		1,269
Unrealized losses		-		(1,119)		(2,820)
Net unrealized losses		-		(736)		(1,551)


Total unrealized gains (losses), net	$	2,054		(736)		(1,551)

The Company recorded net gains (losses) of $4,809 and $(6,700) on these instruments to other income, net for the quarters ended March 31, 2019 and April 1, 2018, 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 5 and 7.