Mattel 2000 Annual Report Download - page 28

twenty six
Mattel, Inc. and Subsidiaries
For the purchase of foreign currencies, fair value reflects the
amount, based on dealer quotes, that Mattel would pay at maturity
for contracts involving the same currencies and maturity dates, if they
had been entered into as of year end 2000. For the sale of foreign
currencies, fair value reflects the amount, based on dealer quotes,
that Mattel would receive at maturity for contracts involving the
same currencies and maturity dates, if they had been entered into
as of year end 2000. The differences between the fair value and the
contract amounts are expected to be fully offset by foreign currency
exchange gains and losses on the underlying hedged transactions.
In addition to the contracts involving the US dollar detailed in
the above table, Mattel also had contracts to sell British pounds ster-
ling for the purchase of Euros. As of December 31, 2000, these con-
tracts had a notional amount of $58.0 million and a fair value of
$56.3 million.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement requires
companies to record derivatives on the balance sheet as assets or lia-
bilities, measured at fair value. It also requires that gains or losses
resulting from changes in the values of those derivatives be account-
ed for depending on the use of the derivative and whether it qualifies
for hedge accounting.
Mattel adopted SFAS 133 on January 1, 2001. Mattel will record
a one-time, pre-tax charge of approximately $12 million in the consoli-
dated statement of operations for the quarter ending March 31, 2001
for the transition adjustment related to the adoption of SFAS 133.
Interest Rate Sensitivity
An assumed 50 basis point movement in interest rates affecting
Mattel’s variable rate borrowings would have had an immaterial
impact on its 2000 results of operations.
ECONOMIC CONDITIONS
In the current environment where there are growing concerns regarding
the economy and declining consumer confidence, both domestically
and internationally, there can be no assurance that Mattel’s business,
financial condition, cash flows or results of operations will not be
materially and adversely impacted by such trends.
MANUFACTURING RISK
Mattel owns and operates manufacturing facilities and utilizes third-
party manufacturers throughout Asia, primarily in China, Indonesia,
Malaysia and Thailand. A risk of political instability and civil unrest
exists in these countries, which could temporarily or permanently
damage Mattel’s manufacturing operations located there. Mattel’s
business, financial position and results of operations would be nega-
tively impacted by a significant disruption to its manufacturing oper-
ations or suppliers.
EFFECTS OF INFLATION
Inflation rates in the US and in major foreign countries where Mattel
does business have not had a significant impact on its results of oper-
ations or financial position during the three years ended December 31,
2000. The US Consumer Price Index increased 3.4% in 2000, 2.7% in
1999 and 1.6% in 1998. Mattel receives some protection from the
impact of inflation from high turnover of inventories and its ability
to pass on higher prices to consumers.
Buy Sell
Weighted Weighted
Contract Average Fair Contract Average Fair
(In thousands of US dollars) Amount Contract Rate Value Amount Contract Rate Value
Euro $34,438 0.93 $34,725 $310,974 0.94 $312,693
British pounds sterling - - - 19,415 1.48 19,568
Canadian dollar 3,483 1.51 3,507 41,800 0.67 41,466
Japanese yen 828 113 816 10,858 111 10,551
Australian dollar 6,716 0.56 6,687 11,664 0.56 11,605
Swiss franc 3,137 1.63 3,154 - - -
Indonesian rupiah 23,523 9,304 21,699 - - -
New Zealand dollar - - - 1,218 0.42 1,278
Venezuelan bolivar - - - 5,000 703 5,004
Brazilian real - - - 25,717 1.96 25,618
Singapore dollar - - - 2,782 1.73 2,785
Taiwanese dollar - - - 1,706 33.7 1,738
Thai baht 7,939 40.43 7,419 - - -
$80,064 $78,007 $431,134 $432,306