Derivative Financial Instruments | 9 Months Ended |
Sep. 29, 2013 |
Derivative Financial Instruments (Thousands of Dollars) [Abstract] | ' |
Derivative Financial Instruments | ' |
HASBRO, INC. AND SUBSIDIARIES |
Condensed Notes to Consolidated Financial Statements (continued) |
(Thousands of Dollars and Shares Except Per Share Data) |
(Unaudited) |
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(8) Derivative Financial Instruments |
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The Company 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 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. |
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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 6. |
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Cash Flow Hedges |
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The Company 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, product sales and other cross-border transactions in 2013 and 2014. |
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At September 29, 2013, September 30, 2012 and December 30, 2012, the notional amounts and fair values of the Company's foreign currency forward contracts designated as cash flow hedging instruments were as follows. |
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| | 29-Sep-13 | | | 30-Sep-12 | | | 30-Dec-12 | |
| | Notional Amount | | | Fair | | | Notional | | | Fair | | | Notional | | | Fair | |
Hedged transaction | Value | Amount | Value | Amount | Value |
Inventory purchases | | $ | 525,911 | | | | (6,114 | ) | | | 431,666 | | | | 4,569 | | | | 397,770 | | | | (2,638 | ) |
Intercompany royalty transactions | | | 174,974 | | | | (2,258 | ) | | | 156,358 | | | | 1,297 | | | | 131,693 | | | | (1,168 | ) |
Sales | | | 232,709 | | | | 497 | | | | 152,763 | | | | (2,925 | ) | | | 92,761 | | | | 2,458 | |
Other | | | 27,148 | | | | 1,000 | | | | 9,956 | | | | 273 | | | | 2,420 | | | | (45 | ) |
Total | | $ | 960,742 | | | | (6,875 | ) | | | 750,743 | | | | 3,214 | | | | 624,644 | | | | (1,393 | ) |
HASBRO, INC. AND SUBSIDIARIES |
Condensed Notes to Consolidated Financial Statements (continued) |
(Thousands of Dollars and Shares Except Per Share Data) |
(Unaudited) |
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 September 29, 2013, September 30, 2012 and December 30, 2012 as follows: |
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| | 29-Sep-13 | | | 30-Sep-12 | | | 30-Dec-12 | | | | | | | | | | | | | |
Prepaid expenses and other current assets | | | | | | | | | | | | | | | | | | | | | |
Unrealized gains | | $ | 2,923 | | | | 5,677 | | | | 2,802 | | | | | | | | | | | | | |
Unrealized losses | | | (1,572 | ) | | | (2,692 | ) | | | (1,073 | ) | | | | | | | | | | | | |
Net unrealized gain | | $ | 1,351 | | | | 2,985 | | | | 1,729 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other assets | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized gains | | $ | 109 | | | | 2,448 | | | | 12 | | | | | | | | | | | | | |
Unrealized losses | | | (11 | ) | | | (360 | ) | | | - | | | | | | | | | | | | | |
Net unrealized gain | | $ | 98 | | | | 2,088 | | | | 12 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Accrued liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized gains | | $ | 3,023 | | | | 2,816 | | | | 1,466 | | | | | | | | | | | | | |
Unrealized losses | | | (8,652 | ) | | | (4,617 | ) | | | (4,245 | ) | | | | | | | | | | | | |
Net unrealized loss | | $ | (5,629 | ) | | | (1,801 | ) | | | (2,779 | ) | | | | | | | | | | | | |
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Other liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized gains | | $ | 191 | | | | 104 | | | | 20 | | | | | | | | | | | | | |
Unrealized losses | | | (2,886 | ) | | | (162 | ) | | | (375 | ) | | | | | | | | | | | | |
Net unrealized loss | | $ | (2,695 | ) | | | (58 | ) | | | (355 | ) | | | | | | | | | | | | |
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Net gains (losses) on cash flow hedging activities have been reclassified from other comprehensive earnings to net earnings for the quarter and nine-month periods ended September 29, 2013 and September 30, 2012 as follows: |
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| | Quarter Ended | | | Nine Months Ended | | | | | | | | | |
| | 29-Sep-13 | | | 30-Sep-12 | | | 29-Sep-13 | | | 30-Sep-12 | | | | | | | | | |
Statements of Operations Classification | | | | | | | | | | | | | | | | | | | | |
Cost of sales | | $ | 1,614 | | | | 3,431 | | | | 1,650 | | | | 6,372 | | | | | | | | | |
Royalties | | | (303 | ) | | | 824 | | | | (347 | ) | | | 1,830 | | | | | | | | | |
Sales | | | 2,906 | | | | (2,178 | ) | | | 4,441 | | | | (2,821 | ) | | | | | | | | |
Net realized gains | | $ | 4,217 | | | | 2,077 | | | | 5,744 | | | | 5,381 | | | | | | | | | |
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In addition, net gains of $233 and $165 were reclassified to earnings as a result of hedge ineffectiveness for the quarter and nine-month periods ended September 29, 2013, respectively, and net gains of $47 and $61 were reclassified to earnings as a result of hedge ineffectiveness for the quarter and nine-month periods ended September 30, 2012, respectively. |
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HASBRO, INC. AND SUBSIDIARIES |
Condensed Notes to Consolidated Financial Statements (continued) |
(Thousands of Dollars and Shares Except Per Share Data) |
(Unaudited) |
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Undesignated Hedges |
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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. Due to the nature of the derivative contracts involved, the Company does not use hedge accounting for these contracts. Â At September 29, 2013, September 30, 2012 and December 30, 2012 the total notional amounts of the Company's undesignated derivative instruments were $257,325, $184,555 and $189,217, respectively. |
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At September 29, 2013, September 30, 2012 and December 30, 2012, the fair values of the Company's undesignated derivative financial instruments were recorded in the consolidated balance sheets as follows: |
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| | 29-Sep-13 | | | 30-Sep-12 | | | 30-Dec-12 | | | | | | | | | | | | | |
Prepaid expenses and other current assets | | | | | | | | | | | | | | | | | | | | | |
Unrealized gains | | $ | 1,761 | | | | 1,119 | | | | - | | | | | | | | | | | | | |
Unrealized losses | | | (1,107 | ) | | | (504 | ) | | | - | | | | | | | | | | | | | |
Net unrealized gain | | | 654 | | | | 615 | | | | - | | | | | | | | | | | | | |
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Other assets | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized gains | | | 298 | | | | - | | | | - | | | | | | | | | | | | | |
Unrealized losses | | | (80 | ) | | | - | | | | - | | | | | | | | | | | | | |
Net unrealized gain | | | 218 | | | | - | | | | - | | | | | | | | | | | | | |
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Accrued liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized gains | | | - | | | | - | | | | 469 | | | | | | | | | | | | | |
Unrealized losses | | | - | | | | - | | | | (796 | ) | | | | | | | | | | | | |
Net unrealized gain | | | - | | | | - | | | | (327 | ) | | | | | | | | | | | | |
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Other liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized gains | | | - | | | | 74 | | | | - | | | | | | | | | | | | | |
Unrealized losses | | | - | | | | (527 | ) | | | - | | | | | | | | | | | | | |
Net unrealized loss | | | - | | | | (453 | ) | | | - | | | | | | | | | | | | | |
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Total unrealized gain (loss), net | | $ | 872 | | | | 162 | | | | (327 | ) | | | | | | | | | | | | |
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The Company recorded net gains (losses) of $2,467 and $2,557 on these instruments to other (income) expense, net for the quarter and nine-month periods ended September 29, 2013, respectively, and $(726) and $(2,194) on these instruments to other (income) expense, net for the quarter and nine-month periods ended September 30, 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 contracts relate. |
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For additional information related to the Company's derivative financial instruments see Notes 4 and 6. |
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HASBRO, INC. AND SUBSIDIARIES |
Condensed Notes to Consolidated Financial Statements (continued) |
(Thousands of Dollars and Shares Except Per Share Data) |
(Unaudited) |