Derivative Financial Instruments

12 Months Ended

Dec. 25, 2011

Derivative Financial Instruments [Abstract]

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 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 and 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.

The Company also has warrants to purchase common stock of an unrelated company that constitute and are accounted for as derivatives. For additional information related to these warrants see note 12. In addition, the Company is also party to several interest rate swap agreements to adjust the amount of long-term debt subject to fixed interest rates. For additional information related to these interest rate swaps see note 9.

Cash Flow Hedges

Hasbro 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 and other cross-border transactions in 2012 and 2013.

At December 25, 2011 and December 26, 2010, the notional amounts and fair values of assets (liabilities) for the Company’s foreign currency forward contracts designated as cash flow hedging instruments were as follows:

	2011		2010
	---------------		---------------
Hedged transaction	Notional Amount	Fair Value	Notional Amount	Fair Value
----------------------------	-------------	-----------	-----------	----------
Inventory purchases	$379,688	7,974	593,953	11,074
Intercompany royalty transactions Other	117,192      29,517	2,126       (360)	179,308    17,047	5,344       533
	------------	----------	------------	----------
Total	$526,397	9,740	790,308	16,951
	=======	======	=======	======

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 sheet at December 25, 2011 and December 26, 2010 as follows:

	2011	2010
	--------------	-------------
Prepaid expenses and other current assets
-----------------------------------------------------------
Unrealized gains	$    11,965	24,710
Unrealized losses	(4,187)	(9,229)
	------------	------------
Net unrealized gain	7,778	15,481
	------------	------------
Other assets
---------------------
Unrealized gains	2,113	4,403
Unrealized losses	(92)	(2,933)
	------------	------------
Net unrealized gain	2,021	1,470
	------------	------------
Total asset derivatives	$      9,799	16,951
	=======	=======
Accrued liabilities
-----------------------------------------------------------
Unrealized gains	$           12	-
Unrealized losses	(50)	-
	------------	------------
Net unrealized loss	(38)	-
	------------	------------
Other liabilities
-------------------------------------
Unrealized gains	-	-
Unrealized losses	(21)	-
	------------	------------
Net unrealized loss	(21)	-
	------------	------------
Total liability derivatives	$          (59) =======	-   =======

During the years ended December 25, 2011, December 26, 2010 and December 27, 2009, the Company reclassified net (losses) gains from AOCE to net earnings of $(2,936), $17,780 and $21,240, respectively. Of the amount reclassified in 2011, 2010 and 2009, $(6,158), $13,249 and $17,173 were reclassified to cost of sales and $2,895, $4,663 and $4,785 were reclassified to royalty expense, respectively. In addition, $436 was reclassified to net revenues in 2011. Net losses of $(109), $(132) and $(718) were reclassified to earnings as a result of hedge ineffectiveness in 2011, 2010 and 2009, respectively.  Other (income) expense for the year ended December 25, 2011 includes a loss of approximately $3,700 related to certain derivatives which no longer qualified for hedge accounting.

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 December 25, 2011 and December 26, 2010, the total notional amount of the Company’s undesignated derivative instruments was $218,122 and $89,191, respectively.

At December 25, 2011 and December 26, 2010, the fair value of the Company’s undesignated derivative financial instruments are recorded in the consolidated balance sheet as follows:

	2011	2010
	-------------------	-------------------
Prepaid expenses and other current assets
-----------------------------------------------------------
Unrealized gains	$              -	27
Unrealized losses	-	(827)
	------------	------------
Net unrealized loss	$              -	(800)
	------------	------------
Accrued liabilities
-----------------------------------------------------------
Unrealized gains	$           41	-
Unrealized losses	(786)	-
	------------	------------
Net unrealized loss	(745)	-
	------------	------------
Other liabilities
-------------------------------------
Unrealized gains	-	-
Unrealized losses	(1,104)	-
	------------	------------
Net unrealized loss	(1,104)	-
	------------	------------
Total unrealized loss, net	$     (1,849)       =======	(800)        =======

The Company recorded net gains of $9,098, $4,827, and $6,580 on these instruments to other (income) expense, net for 2011, 2010 and 2009, 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 2, 9 and 12.