Hasbro 2014 Annual Report Download - page 106

HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)
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.
(17) Commitments and Contingencies
Hasbro had unused open letters of credit and related instruments of approximately $167,117 and $209,398 at
December 28, 2014 and December 29, 2013, respectively. Included in the amounts for 2014 and 2013 were
$146,410 and $187,130, respectively, of bonds related to tax assessments in Mexico which were settled in
December 2014. See note 10 for additional discussion.
The Company enters into license agreements with inventors, designers and others for the use of intellectual
properties in its products. Certain of these agreements contain provisions for the payment of guaranteed or
minimum royalty amounts. Under terms of existing agreements as of December 28, 2014, Hasbro may, provided
the other party meets their contractual commitment, be required to pay amounts as follows: 2015: $17,238; 2016:
$37,387; 2017: $57,209; 2018: $55,959; 2019: $52,209; and thereafter: $25,570. At December 28, 2014, the
Company had $230,840 of prepaid royalties, $132,146 of which are included in prepaid expenses and other
current assets and $98,694 of which are included in other assets.
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