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Derivative Instruments
 12 Months Ended
Dec. 31, 2014
Derivative Instruments

Note 9—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, 2014 and 2013, Mattel held foreign currency forward exchange contracts with notional amounts of $1.19 billion and $1.55 billion, respectively.

 

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

 

     Derivative Assets  
     Balance Sheet Classification    Fair Value  
          December 31,
2014		      December 31,
2013		  
          (In thousands)  

Derivatives designated as hedging instruments:

         

Foreign currency forward exchange contracts

    Prepaid expenses and other
current assets		    $         31,982       $ 415   

Foreign currency forward exchange contracts

    Other noncurrent assets      1,443         —   
     

 

 

     

 

 

  

Total derivatives designated as hedging instruments

       $ 33,425       $ 415   
     

 

 

     

 

 

  

Derivatives not designated as hedging instruments:

         

Foreign currency forward exchange contracts

    Prepaid expenses and other
current assets		    $ 318       $ 1,895   
     

 

 

     

 

 

  

Total

       $ 33,743       $         2,310   
     

 

 

     

 

 

  
     Derivative Liabilities  
     Balance Sheet Classification    Fair Value  
          December 31,
2014		      December 31,
2013		  
          (In thousands)  

Derivatives designated as hedging instruments:

         

Foreign currency forward exchange contracts

    Accrued liabilities    $ 2,408       $ 12,432   

Foreign currency forward exchange contracts

    Other noncurrent liabilities      36         470   
     

 

 

     

 

 

  

Total derivatives designated as hedging instruments

       $ 2,444       $ 12,902   
     

 

 

     

 

 

  

Derivatives not designated as hedging instruments:

         

Foreign currency forward exchange contracts

    Accrued liabilities    $ 10,954       $ 1,711   
     

 

 

     

 

 

  

Total

       $ 13,398       $ 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:

 

     Derivatives Designated As
Hedging Instruments		      Statements of
Operations
Classification
     For the  Year
2014		     For the  Year
2013		     For the  Year
2012		     
     (In thousands)       

Foreign currency forward exchange contracts:

          

Amount of gain (loss) recognized in OCI

    $ 39,931      $ (13,103 )    $ 2,734      

Amount of gain (loss) reclassified from accumulated OCI to statements of operations

      (883 )      (4,897 )      29,933       Cost of sales

 

The net (losses) gains of $(0.9) million, $(4.9) million, and $29.9 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations during 2014, 2013, and 2012, respectively, are offset by the changes in cash flows associated with the underlying hedged transactions.

 

     Derivatives Not Designated As
Hedging Instruments		    

Statements of Operations
Classification
     For the  Year
2014		     For the  Year
2013		     For the  Year
2012		    
     (In thousands)      

Amount of gain (loss) recognized in the statements of operations:

         

Foreign currency forward exchange contracts

    $ (31,485)      $ 17,975      $ 6,317      Non-operating income/expense

Foreign currency forward exchange contracts

      732        (4,455 )      (910 )    Cost of sales
  

 

 

    

 

 

    

 

 

    

Total

    $ (30,753 )    $  13,520      $    5,407     
  

 

 

    

 

 

    

 

 

    

The net (losses) gains of $(30.8) million, $13.5 million, and $5.4 million recognized in the consolidated statements of operations during 2014, 2013, and 2012, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances.