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 December 31, 2018 and 2017, Mattel held foreign currency forward exchange contracts with notional amounts of $962.1 million and $987.7 million, respectively.

The following table presents Mattel’s derivative assets and liabilities:



	Derivative Assets
	Balance Sheet Classification	Fair Value
		December 31, 2018		December 31, 2017
		(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	$	12,122	$	2,175
Foreign currency forward exchange contracts	Other noncurrent assets	1,613		115
Total derivatives designated as hedging instruments		$	13,735	$	2,290
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	$	2,357	$	5,514
Total		$	16,092	$	7,804

	Derivative Liabilities
	Balance Sheet Classification	Fair Value
		December 31, 2018		December 31, 2017
		(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	Accrued liabilities	$	954	$	15,970
Foreign currency forward exchange contracts	Other noncurrent liabilities	185		3,159
Total derivatives designated as hedging instruments		$	1,139	$	19,129
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	Accrued liabilities	$	1,771	$	191
Total		$	2,910	$	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:



	Derivatives Designated As Hedging Instruments								Consolidated Statements of Operations Classification
	For the Year Ended
	December 31, 2018			December 31, 2017			December 31, 2016
	(In thousands)
Foreign currency forward exchange contracts:
Amount of gains (losses) recognized in OCI	$	24,082		$	(55,377	)	$	18,733
Amount of (losses) gains reclassified from accumulated OCI to the consolidated statements of operations	(8,427		)	(16,810		)	16,627		Cost of sales

The net (losses) gains of $(8.4) million, $(16.8) million, and $16.6 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations during 2018, 2017, and 2016, respectively, are offset by the changes in cash flows associated with the underlying hedged transactions.



	Derivatives Not Designated As Hedging Instruments								Consolidated Statements of Operations Classification
	For the Year Ended
	December 31, 2018			December 31, 2017		December 31, 2016
	(In thousands)
Amount of (loss) gain recognized in the consolidated statements of operations:
Foreign currency forward exchange contracts	$	(23,109	)	$	70,200	$	(11,056	)	Other non-operating expense, net
Foreign currency forward exchange contracts	(244		)	511		1,631			Cost of sales
Total	$	(23,353	)	$	70,711	$	(9,425	)

The net (losses) gains of $(23.4) million, $70.7 million, and $(9.4) million recognized in the consolidated statements of operations during 2018, 2017, and 2016, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances.