Derivative Financial Instruments

12 Months Ended

Dec. 25, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Hasbro uses foreign currency forward and option 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, television and film production cost and production financing facilities (see note 11) as well as 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

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, certain production financing loans and other cross-border transactions, primarily in years 2023 and to a lesser extent, 2024.

At December 25, 2022 and December 26, 2021, the notional amounts and fair values of the Company’s foreign currency forward and option contracts designated as cash flow hedging instruments were as follows:


	2022			2021
(In millions)	Notional Amount		Fair Value	Notional Amount	Fair Value
Hedged transaction
Inventory purchases	$	166.3	(2.7)	199.1	10.4
Sales	99.2		1.2	104.5	(1.9)
Production financing and other	116.8		1.5	217.0	2.3
Total	$	382.3	—	520.6	10.8

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 December 25, 2022 and December 26, 2021 as follows:


(In millions)	2022		2021
Prepaid expenses and other current assets
Unrealized gains	$	4.3	13.8
Unrealized losses	(1.8)		(3.1)
Net unrealized gains	$	2.5	10.7
Other assets
Unrealized gains	$	0.3	0.2
Unrealized losses	—		—
Net unrealized gains	$	0.3	0.2
Accrued liabilities
Unrealized gains	$	1.6	—
Unrealized losses	(4.4)		(0.1)
Net unrealized losses	$	(2.8)	(0.1)

Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the years ended December 25, 2022, December 26, 2021 and December 27, 2020 as follows:


(In millions)	2022		2021	2020
Consolidated Statements of Operations Classification
Cost of sales	$	17.3	(4.7)	21.2
Net revenues	2.3		1.0	2.9
Other	(0.9)		2.0	1.2
Net realized (losses) gains	$	18.7	(1.7)	25.3

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. Additionally, to manage transactional exposure to fair value movements on certain monetary assets and liabilities denominated in foreign currencies, the Company has implemented a balance sheet hedging program. The Company does not use hedge accounting for these contracts as changes in the fair values of these contracts are offset by changes in the fair value of the balance sheet items. As of December 25, 2022 and

December 26, 2021, the total notional amounts of the Company’s undesignated derivative instruments were $765.6 million and $632.0 million, respectively.

At December 25, 2022 and December 26, 2021, the fair value of the Company’s undesignated derivative financial instruments are recorded in the consolidated balance sheets as follows:


(In millions)	2022		2021
Prepaid expenses and other current assets
Unrealized gains	$	10.9	—
Unrealized losses	(5.9)		—
Net unrealized gains	$	5.0	—

Accrued liabilities
Unrealized gains	$	—	3.5
Unrealized losses	—		(6.0)
Net unrealized losses	$	—	(2.5)
Total unrealized (losses) gains, net	$	5.0	(2.5)

The Company recorded net gains (losses) of $42.1 million, $4.6 million and $(27.7) million on these instruments to other (income) expense, net for 2022, 2021 and 2020, 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 instruments relate.

For additional information related to the Company’s derivative financial instruments see notes 4 and 14.