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Fair Value Measurements
 9 Months Ended
Sep. 30, 2015
Fair Value Measurements
13. Fair Value Measurements

The following table presents information about Mattel’s assets and liabilities measured and reported in the financial statements at fair value and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. The three levels of the fair value hierarchy are as follows:

 

  •   Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

 

  •   Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

 

  •   Level 3 – Valuations based on inputs that are unobservable, supported by little or no market activity, and that are significant to the fair value of the assets or liabilities.

Mattel’s financial assets and liabilities measured and reported at fair value on a recurring basis include the following:

 

     September 30, 2015  
     Level 1      Level 2      Level 3      Total  
     (In thousands)  

Assets:

            

Foreign currency forward exchange contracts (a)

    $       —        $ 22,992       $ —        $ 22,992   

Cross currency swap contract (a)

      —          5,288         —          5,288   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ —        $ 28,280       $ —        $ 28,280   
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities:

            

Foreign currency forward exchange contracts (a)

    $ —        $ 8,261       $ —        $ 8,261   
  

 

 

     

 

 

     

 

 

     

 

 

  
     September 30, 2014  
     Level 1      Level 2      Level 3      Total  
     (In thousands)  

Assets:

            

Foreign currency forward exchange contracts (a)

    $ —        $ 33,902       $ —        $ 33,902   

Auction rate security (b)

      —          —          31,142         31,142   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ —        $ 33,902       $ 31,142       $ 65,044   
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities:

            

Foreign currency forward exchange contracts (a)

    $ —        $ 12,596       $ —        $ 12,596   
  

 

 

     

 

 

     

 

 

     

 

 

  
     December 31, 2014  
     Level 1      Level 2      Level 3      Total  
     (In thousands)  

Assets:

            

Foreign currency forward exchange contracts (a)

    $ —        $ 33,743       $ —        $ 33,743   

Auction rate security (b)

      —          —          30,960         30,960   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ —        $ 33,743       $ 30,960       $ 64,703   
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities:

            

Foreign currency forward exchange contracts (a)

    $ —        $ 13,398       $ —        $ 13,398   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(a) The fair values of the foreign currency forward exchange contracts and the cross currency swap contract are based on dealer quotes of market forward rates and reflect the amount that Mattel would receive or pay at their maturity dates for contracts involving the same notional amounts, currencies, and maturity dates.
(b) The fair value of the auction rate security was estimated using a discounted cash flow model based on (i) estimated interest rates, timing, and amount of cash flows, (ii) credit spreads, recovery rates, and credit quality of the underlying securities, (iii) illiquidity considerations, and (iv) market correlation.

During the quarter, Mattel sold its auction rate security and received proceeds of $32.3 million, resulting in a gain of $1.3 million for the nine months ended September 30, 2015. The following table presents information about Mattel’s investments measured and reported at fair value on a recurring basis using significant Level 3 inputs:

 

     Level 3  
     (In thousands)  

Balance at December 31, 2014

    $ 30,960   

Proceeds from sale

      (32,250 ) 

Gain on sale

      1,290   
  

 

 

  

Balance at September 30, 2015

    $ —    
  

 

 

  

Other Financial Instruments

Mattel’s financial instruments include cash and equivalents, accounts receivable and payable, short-term borrowings, and accrued liabilities. The fair values of these instruments approximate their carrying values because of their short-term nature and are classified as Level 2 within the fair value hierarchy.

The estimated fair value of Mattel’s long-term debt, including the current portion, was $2.15 billion (compared to a carrying value of $2.10 billion) as of September 30, 2015, $2.19 billion (compared to a carrying value of $2.10 billion) as of September 30, 2014, and $2.18 billion (compared to a carrying value of $2.10 billion) as of December 31, 2014. The estimated fair values have been calculated based on broker quotes or rates for the same or similar instruments and are classified as Level 2 within the fair value hierarchy.