Hasbro 2012 Annual Report Download - page 90

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HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
(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 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 of an unrelated company that constitute and are
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. 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
2013 and 2014.
At December 30, 2012 and December 25, 2011, 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:
2012 2011
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Hedged transaction
Inventory purchases .............................. $397,770 (2,638) 379,688 7,974
Intercompany royalty transactions ................... 131,693 (1,168) 117,192 2,126
Sales .......................................... 92,761 2,458 — —
Other .......................................... 2,420 (45) 29,517 (360)
Total .......................................... $624,644 (1,393) 526,397 9,740
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