Derivative Financial Instruments

12 Months Ended

Dec. 25, 2016

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. 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

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 years 2017 through 2021.

At December 25, 2016 and December 27, 2015, 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:

	2016				2015
Hedged transaction	Notional		Fair		Notional		Fair
	Amount		Value		Amount		Value
Inventory purchases	$	945,728		60,520		1,380,488		108,521
Sales		290,181		9,775		97,350		803
Royalties and Other		198,849		1,633		54,360		(1,886)
Total	$	1,434,758		71,928		1,532,198		107,438

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, 2016 and December 27, 2015 as follows:

	2016		2015
Prepaid expenses and other current assets
Unrealized gains	$	34,265		78,910
Unrealized losses		(2,075)		(5,932)
Net unrealized gain	$	32,190		72,978
Other assets
Unrealized gains	$	51,839		35,366
Unrealized losses		(792)		(710)
Net unrealized gain	$	51,047		34,656
Accrued liabilities
Unrealized gains	$	8,481		—
Unrealized losses		(19,790)		—
Net unrealized loss	$	(11,309)		—
Other liabilities
Unrealized gains	$	—		241
Unrealized losses		—		(437)
Net unrealized loss	$	—		(196)

Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings to net earnings for the years ended December 25, 2016, December 27, 2015 and December 28, 2014 as follows:

	2016		2015		2014
Consolidated Statements of Operations Classification
Cost of sales	$	57,786		66,378		973
Sales		7,467		(9,219)		(3,741)
Royalties and other		(5,776)		(566)		(2,028)
Net realized gains (losses)	$	59,477		56,593		(4,796)

In addition, net gains of $400, $1,169 and $62 were reclassified to earnings as a result of hedge ineffectiveness in 2016, 2015 and 2014, respectively.

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, 2016 and December 27, 2015, the total notional amount of the Company’s undesignated derivative instruments was $268,308and $341,389, respectively.

At December 25, 2016 and December 27, 2015, the fair value of the Company’s undesignated derivative financial instruments are recorded in the consolidated balance sheets as follows:

	2016		2015
Prepaid expenses and other assets
Unrealized gains	$	5,854		-
Unrealized losses		(1,197)		-
Net unrealized gain	$	4,657		-
Accrued liabilities
Unrealized gains	$	-		416
Unrealized losses		-		(1,460)
Net unrealized loss	$	-		(1,044)
Total unrealized gain (losses)	$	4,657		(1,044)

The Company recorded net gains (losses) of $32,524, $48,489 and $(32,106)on these instruments to other (income) expense, net for 2016, 2015 and 2014, 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 2and 12.