Derivative Instruments

6 Months Ended

Jun. 30, 2019

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 ("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 does not use hedge accounting for these contracts, and as such, changes in fair value are recorded in the period of change in the consolidated statements of operations. As of June 30, 2019, June 30, 2018, and December 31, 2018, Mattel held foreign currency forward exchange contracts with notional amounts of $1.06 billion, $992.8 million, and $962.1 million, respectively.

The following tables present Mattel's derivative assets and liabilities:

	Derivative Assets
	Fair Value						Balance Sheet Classification
	June 30, 2019		June 30, 2018		December 31, 2018
	(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	$	13,620	$	7,321	$	12,122	Prepaid expenses and  other current assets
Foreign currency forward exchange contracts	2,573		2,041		1,613		Other noncurrent assets
Total derivatives designated as hedging instruments	$	16,193	$	9,362	$	13,735
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	$	929	$	1,418	$	2,357	Prepaid expenses and other current assets
	$	17,122	$	10,780	$	16,092
	Derivative Liabilities
	Fair Value						Balance Sheet Classification
	June 30, 2019		June 30, 2018		December 31, 2018
	(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	$	949	$	6,535	$	954	Accrued liabilities
Foreign currency forward exchange contracts	363		195		185		Other noncurrent liabilities
Total derivatives designated as hedging instruments	$	1,312	$	6,730	$	1,139
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	$	467	$	630	$	1,771	Accrued liabilities
	$	1,779	$	7,360	$	2,910

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
	June 30, 2019				June 30, 2018					Statements of Operations Classification
	Amount of Gain Recognized in OCI		Amount of Gain Reclassified from Accumulated OCI to Statement of Operations		Amount of Gain 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	$	3,254	$	2,492	$	17,652	$	(4,786	)	Cost of sales
	For the Six Months Ended
	June 30, 2019				June 30, 2018					Statements of Operations Classification
	Amount of Gain Recognized in OCI		Amount of Gain Reclassified from Accumulated OCI to Statement of Operations		Amount of Gain 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	$	9,072	$	3,251	$	12,333	$	(9,217	)	Cost of sales

The net gains of $2.5 million and $3.3 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three and six months ended June 30, 2019, respectively, and the net losses of $4.8 million and $9.2 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three and six months ended June 30, 2018, respectively, are offset by the changes in cash flows associated with the underlying hedged transactions.

	Amount of Gain (Loss) Recognized in the Statements of Operations					Statements of Operations Classification
	For the Three Months Ended
	June 30, 2019		June 30, 2018
	(In thousands)
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	$	4,366	$	(31,552	)	Other non-operating (income) expense, net
Foreign currency forward exchange contracts	—		(248		)	Cost of sales
	$	4,366	$	(31,800	)
	Amount of Gain (Loss) Recognized in the Statements of Operations					Statements of Operations Classification
	For the Six Months Ended
	June 30, 2019		June 30, 2018
	(In thousands)
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	$	3,868	$	(16,864	)	Other non-operating (income) expense, net
Foreign currency forward exchange contracts	—		(248		)	Cost of sales
	$	3,868	$	(17,112	)

The net gains of $4.4 million and $3.9 million recognized in the consolidated statements of operations for the three and six months ended June 30, 2019, respectively, and the net losses of $31.8 million and $17.1 million recognized in the consolidated statements of operations for the three and six months ended June 30, 2018, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances.