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 (loss) 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 has not designated these contracts as hedging instruments, and as such, changes in fair value are recorded in the period of change in the consolidated statements of operations. As of June 30, 2018, June 30, 2017, and December 31, 2017, Mattel held foreign currency forward exchange contracts with notional amounts of $992.8 million, $1.38 billion, and $987.7 million, respectively.

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



	Derivative Assets
	Balance Sheet Classification	Fair Value
		June 30, 2018		June 30, 2017		December 31, 2017
		(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	$	7,321	$	3,026	$	2,175
Foreign currency forward exchange contracts	Other noncurrent assets	2,041		626		115
Total derivatives designated as hedging instruments		$	9,362	$	3,652	$	2,290
Derivatives not designated as hedging instruments
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	$	1,418	$	5,054	$	5,514
Total		$	10,780	$	8,706	$	7,804

	Derivative Liabilities
	Balance Sheet Classification	Fair Value
		June 30, 2018		June 30, 2017		December 31, 2017
		(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange contracts	Accrued liabilities	$	6,535	$	19,719	$	15,970
Foreign currency forward exchange contracts	Other noncurrent liabilities	195		6,127		3,159
Total derivatives designated as hedging instruments		$	6,730	$	25,846	$	19,129
Derivatives not designated as hedging instruments
Foreign currency forward exchange contracts	Accrued liabilities	$	630	$	772	$	191
Total		$	7,360	$	26,618	$	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:



	For the Three Months Ended
	June 30, 2018					June 30, 2017					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		Statements of Operations Classification
	(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange contracts	$	17,652	$	(4,786	)	$	(27,406	)	$	364	Cost of sales



	For the Six Months Ended
	June 30, 2018					June 30, 2017					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		Statements of Operations Classification
	(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange contracts	$	12,333	$	(9,217	)	$	(39,990	)	$	2,593	Cost of sales

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, and the net gains of $0.4 million and $2.6 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three and six months ended June 30, 2017 , 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, 2018			June 30, 2017
	(In thousands)
Derivatives not designated as hedging instruments
Foreign currency forward exchange contracts	$	(31,552	)	$	25,389	Other non-operating income/expense
Foreign currency forward exchange contracts	(248		)	116		Cost of sales
Total	$	(31,800	)	$	25,505

	Amount of Gain (Loss) Recognized in the Statements of Operations					Statements of Operations Classification
	For the Six Months Ended
	June 30, 2018			June 30, 2017
	(In thousands)
Derivatives not designated as hedging instruments
Foreign currency forward exchange contracts	$	(16,864	)	$	50,958	Other non-operating income/expense
Foreign currency forward exchange contracts	(248		)	502		Cost of sales
Total	$	(17,112	)	$	51,460

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, and the net gains of $25.5 million and $51.5 million recognized in the consolidated statements of operations for the three and six months ended June 30, 2017, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances.