Derivative Instruments

3 Months Ended

Mar. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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 March 31, 2019, March 31, 2018, and December 31, 2018, Mattel held foreign currency forward exchange contracts with notional amounts of $1.10 billion, $1.10 billion, and $962.1 million, respectively.

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



	Derivative Assets
	Fair Value						Balance Sheet Classification
	March 31, 2019		March 31, 2018		December 31, 2018		Balance Sheet Classification
	(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	$	16,703	$	1,787	$	12,122	Prepaid expenses and other current assets
Foreign currency forward exchange contracts	3,041		390		1,613		Other noncurrent assets
Total derivatives designated as hedging instruments	$	19,744	$	2,177	$	13,735

Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	$	377	$	1,424	$	2,357	Prepaid expenses and other current assets
Total	$	20,121	$	3,601	$	16,092

	Derivative Liabilities
	Fair Value						Balance Sheet Classification
	March 31, 2019		March 31, 2018		December 31, 2018		Balance Sheet Classification
	(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	$	1,045	$	17,456	$	954	Accrued liabilities
Foreign currency forward exchange contracts	146		1,419		185		Other noncurrent liabilities
Total derivatives designated as hedging instruments	$	1,191	$	18,875	$	1,139

Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	$	4,992	$	4,663	$	1,771	Accrued liabilities
Total	$	6,183	$	23,538	$	2,910

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
	March 31, 2019				March 31, 2018						Statements of Operations Classification
	Amount of Gain Recognized in OCI		Amount of Gain Reclassified from Accumulated OCI to Statement of Operations		Amount of (Loss) Recognized in OCI			Amount of (Loss) Reclassified from Accumulated OCI to Statement of Operations			Statements of Operations Classification
	(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	$	5,818	$	759	$	(5,319	)	$	(4,431	)	Cost of sales

The net gain of $0.8 million and the net loss of $4.4 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three months ended March 31, 2019 and 2018, respectively, are offset by the changes in cash flows associated with the underlying hedged transactions.



	Amount of (Loss) Gain Recognized in the Statements of Operations					Statements of Operations Classification
	For the Three Months Ended
	March 31, 2019			March 31, 2018
	(In thousands)
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	$	(498	)	$	14,688	Other non-operating expense (income), net

The net loss of $0.5 million and net gain of $14.7 million recognized in the consolidated statements of operations for the three months ended March 31, 2019 and 2018, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances.