Fair Value Measurements

3 Months Ended

Mar. 31, 2014

Fair Value Measurements

13. Fair Value Measurements

The following table presents information about Mattel’s assets and liabilities measured and reported in the financial statements at fair value and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. The three levels of the fair value hierarchy are as follows:

• Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

• Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

• Level 3 – Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Mattel’s financial assets and liabilities measured and reported at fair value on a recurring basis include the following:

	March 31, 2014
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Foreign currency forward exchange contracts (a)	$	—	$	6,710	$	—	$	6,710
Auction rate security (b)		—		—		29,988		29,988
Total assets	$	—	$	6,710	$	29,988	$	36,698
Liabilities:
Foreign currency forward exchange contracts (a)	$	—	$	18,227	$	—	$	18,227
	March 31, 2013
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Foreign currency forward exchange contracts (a)	$	—	$	10,868	$	—	$	10,868
Auction rate security (b)		—		—		21,504		21,504
Total assets	$	—	$	10,868	$	21,504	$	32,372
Liabilities:
Foreign currency forward exchange contracts (a)	$	—	$	4,904	$	—	$	4,904
	December 31, 2013
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Foreign currency forward exchange contracts (a)	$	—	$	2,310	$	—	$	2,310
Auction rate security (b)		—		—		28,895		28,895
Total assets	$	—	$	2,310	$	28,895	$	31,205
Liabilities:
Foreign currency forward exchange contracts (a)	$	—	$	14,613	$	—	$	14,613

(a) The fair value of the foreign currency forward exchange contracts is based on dealer quotes of market forward rates and reflects the amount that Mattel would receive or pay at their maturity dates for contracts involving the same notional amounts, currencies, and maturity dates.

(b) The fair value of the auction rate security is estimated using a discounted cash flow model based on (i) estimated interest rates, timing, and amount of cash flows, (ii) credit spreads, recovery rates, and credit quality of the underlying securities, (iii) illiquidity considerations, and (iv) market correlation.

The following table presents information about Mattel’s auction rate security measured and reported at fair value on a recurring basis using significant Level 3 inputs:

	Level 3
	(In thousands)
Balance at December 31, 2013	$	28,895
Unrealized gain		1,093
Balance at March 31, 2014	$	29,988

Other Financial Instruments

Mattel’s financial instruments include cash and equivalents, accounts receivable and payable, short-term borrowings, and accrued liabilities. The fair values of these instruments approximate their carrying values because of their short-term nature and are classified as Level 2 within the fair value hierarchy.

The estimated fair value of Mattel’s long-term debt, including the current portion, was $1.66 billion (compared to a carrying value of $1.60 billion) as of March 31, 2014, $1.77 billion (compared to a carrying value of $1.65 billion) as of March 31, 2013, and $1.62 billion (compared to a carrying value of $1.60 billion) as of December 31, 2013. The estimated fair values have been calculated based on broker quotes or rates for the same or similar instruments and are classified as Level 2 within the fair value hierarchy.