Derivative Financial Instruments

9 Months Ended

Oct. 01, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Hasbro uses foreign currency forward contracts and foreign exchange 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 and television and film production costs (see note 7), 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 expenses and other cross-border transactions, primarily for the remainder of 2023, and into 2024.

At October 1, 2023, September 25, 2022 and December 25, 2022, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows:


	October 1, 2023 (1)			September 25, 2022			December 25, 2022
Hedged transaction	Notional Amount		Fair Value	Notional Amount		Fair Value	Notional Amount		Fair Value
Inventory purchases	$	194.4	3.4	$	144.7	12.6	$	166.3	(2.7)
Sales	113.4		0.8	101.9		5.2	99.2		1.2
Production financing and other	70.5		(0.9)	106.7		7.2	116.8		1.5
Total	$	378.3	3.3	$	353.3	25.0	$	382.3	—

(1) Includes certain cash flow hedges attributable to the non-core eOne Film and TV business, which were reclassified to Assets held for sale and Liabilities held for sale at October 1, 2023. See note 15 for additional information.

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 October 1, 2023, September 25, 2022 and December 25, 2022 as follows:


	October 1, 2023 (1)		September 25, 2022		December 25, 2022
Prepaid expenses and other current assets
Unrealized gains	$	5.9	$	24.5	$	4.3
Unrealized losses	(2.0)		(1.2)		(1.8)
Net unrealized gains	$	3.9	$	23.3	$	2.5

Other assets
Unrealized gains	$	1.5	$	1.9	$	0.3
Unrealized losses	(0.1)		(0.1)		—
Net unrealized gains	$	1.4	$	1.8	$	0.3

Accrued liabilities
Unrealized gains	$	0.4	$	0.9	$	1.6
Unrealized losses	(2.4)		(1.0)		(4.4)
Net unrealized losses	$	(2.0)	$	(0.1)	$	(2.8)

(1) Includes certain balances attributable to the non-core eOne Film and TV business which were reclassified to Assets held for sale and Liabilities held for sale at October 1, 2023. See note 15 for additional information.

Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings (loss) to net earnings for the quarters and nine months ended October 1, 2023 and September 25, 2022 as follows:


	Quarter Ended				Nine Months Ended
	October 1, 2023		September 25, 2022		October 1, 2023		September 25, 2022
Statements of Operations Classification
Cost of sales	$	(1.8)	$	5.9	$	(0.5)	8.5
Net revenues	0.1		1.0		0.2		0.8
Other	(1.2)		(0.2)		(1.7)		(0.9)
Net realized (losses) gains	$	(2.9)	$	6.7	$	(2.0)	8.4

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 October 1, 2023, September 25, 2022 and December 25, 2022 the total notional amounts of the Company's undesignated derivative instruments were $807.5 million, $601.3 million and $765.6 million, respectively.

At October 1, 2023, September 25, 2022 and December 25, 2022, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows:


	October 1, 2023		September 25, 2022		December 25, 2022
Prepaid expenses and other current assets
Unrealized gains	$	10.7	$	19.6	$	10.9
Unrealized losses	(7.7)		(6.0)		(5.9)
Net unrealized gains	$	3.0	$	13.6	$	5.0

Accrued liabilities

Unrealized losses	(0.1)		(0.2)		—
Net unrealized losses	$	(0.1)	$	(0.2)	$	—






Total unrealized gains, net	$	2.9	$	13.4	$	5.0

The Company recorded net gains of $15.1 million and $26.4 million on these instruments to other (income) expense, net for the quarter and nine months ended October 1, 2023, respectively, and net gains of $28.7 million and $49.2 million for the quarter and nine months ended September 25, 2022, 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 10).