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Derivative Instruments | 9 Months Ended
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Sep. 30, 2014
Derivative Instruments |
12. | 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 September 30, 2014, September 30, 2013, and December 31, 2013, Mattel held foreign currency forward exchange contracts with notional amounts of approximately $1.11 billion, $1.46 billion, and $1.55 billion, respectively. The following table presents Mattel’s derivative assets and liabilities:
|  | Asset Derivatives |
|  | Balance Sheet Classification |  |  | Fair Value |
|  |  |  |  | September 30, 2014 |  |  | September 30, 2013 |  |  | December 31, 2013 |
|  |  |  |  |  |  |  | (In thousands) |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward exchange contracts |  |  | Prepaid expenses and other current assets |  |  | $ | 31,908 |  |  | $ | 1,146 |  |  | $ | 415 |
Foreign currency forward exchange contracts |  |  | Other noncurrent assets |  |  |  | 1,829 |  |  |  | — |  |  |  | — |
Total derivatives designated as hedging instruments |  |  |  |  |  | $ | 33,737 |  |  | $ | 1,146 |  |  | $ | 415 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward exchange contracts |  |  | Prepaid expenses and other current assets |  |  | $ | 165 |  |  | $ | 2,224 |  |  | $ | 1,895 |
Total |  |  |  |  |  | $ | 33,902 |  |  | $ | 3,370 |  |  | $ | 2,310 |
|  | Liability Derivatives |
|  | Balance Sheet Classification |  |  | Fair Value |
|  |  |  |  | September 30, 2014 |  |  | September 30, 2013 |  |  | December 31, 2013 |
|  |  |  |  |  |  |  | (In thousands) |  |  |  |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward exchange contracts |  |  | Accrued liabilities |  |  | $ | 5,697 |  |  | $ | 13,171 |  |  | $ | 12,432 |
Foreign currency forward exchange contracts |  |  | Other noncurrent liabilities |  |  |  | 395 |  |  |  | 1,234 |  |  |  | 470 |
Total derivatives designated as hedging instruments |  |  |  |  |  | $ | 6,092 |  |  | $ | 14,405 |  |  | $ | 12,902 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward exchange contracts |  |  | Accrued liabilities |  |  | $ | 6,504 |  |  | $ | 703 |  |  | $ | 1,711 |
Total |  |  |  |  |  | $ | 12,596 |  |  | $ | 15,108 |  |  | $ | 14,613 |
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, 2014 |  |  | For the Three Months Ended September 30, 2013 |  |  | Statements of Operations Classification
|  | Amount of Gain (Loss) Recognized in OCI |  |  | Amount of Gain (Loss) Reclassified from Accumulated OCI to Statements of Operations |  |  | Amount of Gain (Loss) Recognized in OCI |  |  | Amount of Gain (Loss) Reclassified from Accumulated OCI to Statements of Operations |  |
|  | (In thousands) |  |  |
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward exchange contracts |  | $ | 19,745 |  |  | $ | (3,328 | ) |  | $ | (10,614 | ) |  | $ | (321 | ) |  | Cost of sales
|  | For the Nine Months Ended September 30, 2014 |  |  | For the Nine Months Ended September 30, 2013 |  |  | Statements of Operations Classification
|  | Amount of Gain (Loss) Recognized in OCI |  |  | Amount of Gain (Loss) Reclassified from Accumulated OCI to Statements of Operations |  |  | Amount of Gain (Loss) Recognized in OCI |  |  | Amount of Gain (Loss) Reclassified from Accumulated OCI to Statements of Operations |  |
|  | (In thousands) |  |  |
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward exchange contracts |  | $ | 15,437 |  |  | $ | (8,925 | ) |  | $ | (3,348 | ) |  | $ | 482 |  |  | Cost of sales
The net losses of $3.3 million and $8.9 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three and nine months ended September 30, 2014, respectively, and the net loss of $0.3 million and net gain of $0.5 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three and nine months ended September 30, 2013, 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 September 30, 2014 |  |  | For the Three Months Ended September 30, 2013 |  |
|  | (In thousands) |  |  |
Derivatives not designated as hedging instruments |  |  |
Foreign currency forward exchange contracts |  | $ | (26,632 | ) |  | $ | 27,911 |  |  | Non-operating income/expense
Foreign currency forward exchange contracts |  |  | 292 |  |  |  | (3,775 | ) |  | Cost of sales
Total |  | $ | (26,340 | ) |  | $ | 24,136 |  |  |
|  | Amount of Gain (Loss) Recognized in the Statements of Operations |  |  | Statements of Operations Classification
|  | For the Nine Months Ended September 30, 2014 |  |  | For the Nine Months Ended September 30, 2013 |  |
|  | (In thousands) |  |  |
Derivatives not designated as hedging instruments |  |  |
Foreign currency forward exchange contracts |  | $ | (16,863 | ) |  | $ | 10,590 |  |  | Non-operating income/expense
Foreign currency forward exchange contracts |  |  | 978 |  |  |  | (3,744 | ) |  | Cost of sales
Total |  | $ | (15,885 | ) |  | $ | 6,846 |  |  |
The net losses of $26.3 million and $15.9 million recognized in the consolidated statements of operations for the three and nine months ended September 30, 2014, respectively, and the net gains of $24.1 million and $6.8 million recognized in the consolidated statements of operations for the three and nine months ended September 30, 2013, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5618551-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708775-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624181-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624163-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708773-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624177-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579245-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579240-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41641-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624171-113959 + Details
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