Derivative Financial Instruments

12 Months Ended

Dec. 29, 2013

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

(16)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. Further, Hasbro uses forward-starting interest rate swap agreements to hedge anticipated interest payments. 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.

The Company also had warrants to purchase common stock of an unrelated company that constitute and were accounted for as derivatives. For additional information related to these warrants see note 12. In addition, the Company was also party to several interest rate swap agreements to adjust the amount of long-term debt subject to fixed interest rates which were terminated in the prior year. 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 2014 and 2015.

At December 29, 2013 and December 30, 2012, 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:

	2013						2012
Hedged transaction	Notional Amount			Fair Value			Notional Amount		Fair Value
Inventory purchases		$	577,138		(7,493	)		397,770		(2,638	)
Intercompany royalty transaction			4,948		(2,774	)		131,693		(1,168	)
Sales			171,393		(1,965	)		92,761		2,458
Other			46,563		302			2,420		(45	)
Total		$	800,042		(11,930	)		624,644		(1,393	)

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 29, 2013 and December 30, 2012 as follows:

	2013			2012
Prepaid expenses and other current assets
Unrealized gains	$	1,088			2,802
Unrealized losses		(702	)		(1,073	)
Net unrealized gain	$	386			1,729
Other assets
Unrealized gains	$	-			12
Unrealized losses		-			-
Net unrealized gain	$	-			12
Accrued liabilities
Unrealized gains	$	3,425			1,466
Unrealized losses		(13,671	)		(4,245	)
Net unrealized loss	$	(10,246	)		(2,779	)
Other liabilities
Unrealized gains	$	-			20
Unrealized losses		(2,070	)		(375	)
Net unrealized loss	$	(2,070	)		(355	)

 Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings to net earnings for the years ended December 29, 2013, December 30, 2012 and December 25, 2011 as follows:

	2013			2012			2011
Consolidated Statements of Operations Classification
Cost of sales	$	1,523			9,644			(6,158	)
Royalties		(1,096	)		1,845			2,895
Sales		3,585			(2,633	)		436
Net realized gains	$	4,012			8,856			(2,827	)

In addition, net losses of $, $(94) and $(109) were reclassified to earnings as a result of hedge ineffectiveness in 2013, 2012 and 2011, respectively.  Other (income) expense for the year ended December 25, 2011 also included a loss of approximately $3,700 related to certain derivatives which no longer qualified for hedge accounting.

During the fourth quarter of 2013, the Company entered into forward-starting interest rate swap agreements with total notional value of $300,000 to hedge the variability of the anticipated underlying U.S. Treasury interest rate associated with the expected issuance of long-term debt to refinance the 6.125% Notes Due 2014 with a principal of $425,000. These derivative instruments are designated and effective as cash flow hedges. An unrealized gain of $3,172 related to these instruments was recorded to prepaid expenses and other current assets at December 29, 2013.

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 29, 2013 and December 30, 2012, the total notional amount of the Company's undesignated derivative instruments was $294,888 and $189,217, respectively.

At December 29, 2013 and December 30, 2012, the fair value of the Company's undesignated derivative financial instruments are recorded in the consolidated balance sheets as follows:

	2013			2012
Other assets
Unrealized gains	$	1,069			-
Unrealized losses		-			-
Net unrealized gain	$	1,069			-
Accrued liabilities
Unrealized gains	$	478			469
Unrealized losses		(492	)		(796	)
Net unrealized loss		(14	)		(327	)
Total unrealized gain (loss)	$	1,055			(327	)

The Company recorded net losses (gains) of $8,791, $2,067 and $(9,098) on these instruments to other (income) expense, net for 2013, 2012 and 2011, 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.