Derivative Financial Instruments

12 Months Ended

Dec. 28, 2014

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, during the fourth quarter of 2013 and first half of 2014 Hasbro used 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 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 during 2012. 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 2015 and 2016.

At December 28, 2014 and December 29, 2013, 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:

	2014						2013
Hedged transaction	Notional Amount			Fair Value			Notional Amount		Fair Value
Inventory purchases		$	863,232		69,049			577,138		(7,493	)
Intercompany royalty transaction			-		-			4,948		(2,774	)
Sales			139,946		829			171,393		(1,965	)
Other			51,213		(1,008	)		46,563		302
Total		$	1,054,391		68,870			800,042		(11,930	)

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 28, 2014 and December 29, 2013 as follows:

	2014			2013
Prepaid expenses and other current assets
Unrealized gains	$	46,594			1,088
Unrealized losses		(11,508	)		(702	)
Net unrealized gain	$	35,086			386
Other assets
Unrealized gains	$	34,234			-
Unrealized losses		(172	)		-
Net unrealized gain	$	34,062			-
Accrued liabilities
Unrealized gains	$	447			3,425
Unrealized losses		(725	)		(13,671	)
Net unrealized loss	$	(278	)		(10,246	)
Other liabilities
Unrealized gains	$	-			-
Unrealized losses		-			(2,070	)
Net unrealized loss	$	-			(2,070	)

 Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings to net earnings for the years ended December 28, 2014, December 29, 2013 and December 30, 2012 as follows:

	2014			2013			2012
Consolidated Statements of Operations Classification
Cost of sales	$	973			1,523			9,644
Royalties		(2,028	)		(1,096	)		1,845
Sales		(3,741	)		3,585			(2,633	)
Net realized (losses) gains	$	(4,796	)		4,012			8,856

      In addition, net gains (losses) of $62, $164 and $(94) were reclassified to earnings as a result of hedge ineffectiveness in 2014, 2013 and 2012, respectively.

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 were 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. During the first quarter of 2014, the notional amounts of the Company's forward-starting interest rate swap agreements were increased to $500,000. The instruments were settled on the date of the issuance of the related debt in May 2014 and a deferred loss of $33,306 was recorded to AOCE and is being amortized to interest expense over the life of the debt using the effective interest rate method. For the year ended December 28, 2014, the Company reclassified $1,156 from other comprehensive earnings to net earnings related to these contracts which is included in interest expense.

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 28, 2014 and December 29, 2013, the total notional amount of the Company's undesignated derivative instruments was $294,571 and $294,888, respectively.

At December 28, 2014 and December 29, 2013, the fair value of the Company's undesignated derivative financial instruments are recorded in the consolidated balance sheets as follows:

	2014			2013
Other assets
Unrealized gains	$	-			1,069
Unrealized losses		-			-
Net unrealized gain	$	-			1,069
Accrued liabilities
Unrealized gains	$	1,733			478
Unrealized losses		(4,046	)		(492	)
Net unrealized loss		(2,313	)		(14	)
Total unrealized gain (loss)	$	(2,313	)		1,055

The Company recorded net losses of $32,106, $8,791 and $2,067 on these instruments to other (income) expense, net for 2014, 2013 and 2012, 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.