Hasbro 2015 Annual Report Download - page 64

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resolution of these uncertain tax positions and as such, does not know the ultimate amount or timing of
payments related to this liability.
• The Company expects to make contributions totaling approximately $3.6 million related to its unfunded
U.S. and other International pension plans in 2016.
• At December 27, 2015, the Company had letters of credit and related instruments of approximately $24.5
million.
The Company believes that cash from operations and funds available through its commercial paper program
or lines of credit will allow the Company to meet these and other obligations described above.
Financial Risk Management
The Company is exposed to market risks attributable to fluctuations in foreign currency exchange rates
primarily as the result of sourcing products priced in U.S. dollars and Hong Kong dollars while marketing and
selling those products in more than twenty currencies. Results of operations may be affected primarily by
changes in the value of the U.S. dollar, Hong Kong dollar, Euro, British pound sterling, Canadian dollar,
Brazilian real, Russian ruble and Mexican peso and, to a lesser extent, other currencies in Latin American and
Asia Pacific countries.
To manage this exposure, the Company has hedged a portion of its forecasted foreign currency transactions
using foreign exchange forward contracts. The Company estimates that a hypothetical immediate 10%
depreciation of the U.S. dollar against all foreign currencies included in these foreign exchange forward contracts
could result in an approximate $124.6 million decrease in the fair value of these instruments. A decrease in the
fair value of these instruments would be substantially offset by decreases in the value of the forecasted foreign
currency transactions.
The Company is also exposed to foreign currency risk with respect to its net cash and cash equivalents or
short-term borrowing positions in currencies other than the U.S. dollar. The Company believes, however, that the
on-going risk on the net exposure should not be material to its financial condition. In addition, the Company’s
revenues and costs have been and will likely continue to be affected by changes in foreign currency rates. A
significant change in foreign exchange rates can materially impact the Company’s revenues and earnings due to
translation of foreign-denominated revenues and expenses. The Company does not hedge against translation
impacts of foreign exchange. From time to time, affiliates of the Company may make or receive intercompany
loans in currencies other than their functional currency. The Company manages this exposure at the time the loan
is made by using foreign exchange contracts.
The Company reflects all derivatives at their fair value as an asset or liability on the consolidated balance
sheets. The Company does not speculate in foreign currency exchange contracts. At December 27, 2015, these
contracts had net unrealized gains of $106.4 million, of which $73.0 million are recorded in prepaid expenses and
other current assets, $34.7 million are recorded in other assets, ($1.1) million are recorded in accrued liabilities
and ($0.2) million are recorded to other liabilities. Included in accumulated other comprehensive earnings at
December 27, 2015 are deferred gains of $98.7 million, net of tax, related to these derivatives.
At December 27, 2015, the Company had fixed rate long-term debt of $1,559.9 million. Of this long-term
debt, $600.0 million represents the aggregate issuance of long-term debt in May 2014 which consists of $300.0
million of 3.15% Notes Due 2021 and $300.0 million of 5.10% Notes Due 2044. Prior to the May 2014 debt
issuance, the Company entered into forward-starting interest rate swap agreements with a total notional value of
$500.0 million to hedge the anticipated underlying U.S. Treasury interest rate. These interest rate swaps were
matched with this debt issuance and were designated and effective as hedges of the change in future interest
payments. At the date of issuance, the Company terminated these swap agreements and their fair value at the date
of issuance was recorded in accumulated other comprehensive loss and is being amortized through the
consolidated statements of operations using an effective interest rate method over the life of the related debt.
Included in accumulated other comprehensive loss at December 27, 2015 are deferred losses, net of tax, of $19.4
million related to these derivatives.
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