Hasbro 2009 Annual Report Download - page 88

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In addition, Hasbro leases certain facilities which, as a result of restructurings, are no longer in use.
Future costs relating to such facilities were accrued as a component of the original restructuring charge and
are not included in minimum rental amounts above.
(15) 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, Euros and United Kingdom pound sterling 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 that qualify as derivatives. For additional
information related to these warrants see note 11. In addition, during the fourth quarter of 2009, the Company
entered into 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 8.
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 2010 and 2011.
At December 27, 2009, the notional amounts and fair values of the Company’s foreign currency forward
contracts designated as cash flow hedging instruments were as follows:
Hedged Transaction Notional Amount Fair Value
Inventory purchases ....................................... $380,661 16,715
Intercompany royalty transactions ............................ 135,921 7,007
Other ................................................. 30,268 230
Total .................................................. $546,850 23,952
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 27, 2009 as follows:
Prepaid expenses and other current assets
Unrealized gains ....................................................... $12,142
Unrealized losses ....................................................... (1,899)
Net unrealized gain ..................................................... 10,243
Other assets
Unrealized gains ....................................................... 13,709
Total ................................................................ $23,952
78
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)