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Derivative Instruments
9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Derivative Instruments
Mattel seeks to mitigate its exposure to foreign currency transaction risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts. Mattel uses foreign currency forward exchange contracts as cash flow hedges primarily to hedge its purchases and sales of inventory denominated in foreign currencies. These contracts generally have maturity dates of up to 18 months. These derivative instruments have been designated as effective cash flow hedges, whereby the unsettled hedges are reported in Mattel’s consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in other comprehensive income (loss) ("OCI"). Realized gains and losses for these contracts are recorded in the consolidated statements of operations in the period in which the inventory is sold to customers. Additionally, Mattel uses foreign currency forward exchange contracts to hedge intercompany loans and advances denominated in foreign currencies. Due to the short-term nature of the contracts involved, Mattel has not designated these contracts as hedging instruments, and, as such, changes in fair value are recorded in the period of change in the consolidated statements of operations. As of September 30, 2018September 30, 2017, and December 31, 2017, Mattel held foreign currency forward exchange contracts with notional amounts of $936.8 million, $2.46 billion, and $987.7 million, respectively.
The following tables present Mattel’s derivative assets and liabilities:
 
Derivative Assets
 
Balance Sheet Classification
 
Fair Value
 
 
 
September 30,
2018
 
September 30,
2017
 
December 31,
2017
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency forward exchange contracts
Prepaid expenses and other
current assets
 
$
7,399

 
$
1,951

 
$
2,175

Foreign currency forward exchange contracts
Other noncurrent assets
 
1,758

 
764

 
115

Total derivatives designated as hedging instruments
 
 
$
9,157

 
$
2,715

 
$
2,290

 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency forward exchange contracts
Prepaid expenses and other
current assets
 
$
619

 
$
1,369

 
$
5,514

Total

 
$
9,776

 
$
4,084

 
$
7,804

 
 
 
 
 
 
 
 
 
Derivative Liabilities
 
Balance Sheet Classification
 
Fair Value
 
 
 
September 30,
2018
 
September 30,
2017
 
December 31,
2017
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency forward exchange contracts
Accrued liabilities
 
$
5,219

 
$
21,624

 
$
15,970

Foreign currency forward exchange contracts
Other noncurrent liabilities
 
68

 
7,206

 
3,159

Total derivatives designated as hedging instruments
 
 
$
5,287

 
$
28,830

 
$
19,129

 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 

 

 

Foreign currency forward exchange contracts
Accrued liabilities
 
$
4,505

 
$
1,047

 
$
191

Total
 
 
$
9,792

 
$
29,877

 
$
19,320


The following tables present the classification and amount of gains and losses, net of tax, from derivatives reported in the consolidated statements of operations:
 
For the Three Months Ended
 
 
 
September 30, 2018
 
September 30, 2017
 
Statements of
Operations
Classification
 
Amount of Gain Recognized in OCI
 
Amount of (Loss) Reclassified from Accumulated OCI to Statement of Operations
 
Amount of (Loss) Recognized in OCI
 
Amount of (Loss) Reclassified from Accumulated OCI to Statement of Operations
 
 
(In thousands)
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
Foreign currency forward exchange contracts
$
3,215

 
$
(787
)
 
$
(24,009
)
 
$
(9,241
)
 
Cost of sales
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended
 
 
 
September 30, 2018
 
September 30, 2017
 
Statements of
Operations
Classification
 
Amount of Gain Recognized in OCI
 
Amount of (Loss) Reclassified from Accumulated OCI to Statement of Operations
 
Amount of (Loss) Recognized in OCI
 
Amount of (Loss) Reclassified from Accumulated OCI to Statement of Operations
 
 
(In thousands)
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
Foreign currency forward exchange contracts
$
15,548

 
$
(10,004
)
 
$
(63,999
)
 
$
(6,648
)
 
Cost of sales

The net losses of $0.8 million and $10.0 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three and nine months ended September 30, 2018, respectively, and the net losses of $9.2 million and $6.6 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three and nine months ended September 30, 2017, respectively, are offset by the changes in cash flows associated with the underlying hedged transactions.
 
Amount of (Loss) Gain Recognized in the Statements of Operations
 
Statements of Operations
Classification
 
For the Three Months Ended
 
 
September 30,
2018
 
September 30,
2017
 
 
(In thousands)
 
 
Derivatives not designated as hedging instruments
 
Foreign currency forward exchange contracts
$
(2,332
)
 
$
13,624

 
Other non-operating expense, net
Foreign currency forward exchange contracts
15

 
9

 
Cost of sales
Total
$
(2,317
)
 
$
13,633

 
 
 
 
 
 
 
 
 
Amount of (Loss) Gain Recognized in the Statements of Operations
 
Statements of Operations
Classification
 
For the Nine Months Ended
 
 
September 30,
2018
 
September 30,
2017
 
 
(In thousands)
 
 
Derivatives not designated as hedging instruments
 
Foreign currency forward exchange contracts
$
(19,196
)
 
$
64,582

 
Other non-operating expense, net
Foreign currency forward exchange contracts
(233
)
 
511

 
Cost of sales
Total
$
(19,429
)
 
$
65,093

 
 

The net losses of $2.3 million and $19.4 million recognized in the consolidated statements of operations for the three and nine months ended September 30, 2018, respectively, and the net gains of $13.6 million and $65.1 million recognized in the consolidated statements of operations for the three and nine months ended September 30, 2017, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances.