Mattel 2002 Annual Report Download - page 53

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Mattel’s foreign currency forward exchange contracts that were used to hedge firm foreign currency
commitments as of December 31, 2002 are shown in the following table. All contracts are against the US dollar
and are maintained by reporting units with a US dollar functional currency, with the exception of the Indonesian
rupiah and Thai baht contracts that are maintained by entities with either a rupiah or baht functional currency.
Buy Sell
(In thousands of US dollars)
Contract
Amount
Weighted
Average
Contract
Rate
Fair
Value
Contract
Amount
Weighted
Average
Contract
Rate
Fair
Value
Euro*............................... $225,976 1.03 $229,920 $486,897 0.98 $518,623
British pounds sterling* ................ 11,130 1.60 11,243
Canadian dollar* ...................... 10,289 0.64 10,150 51,418 0.68 50,682
Japaneseyen ......................... 6,663 121 6,805
Australian dollar* ..................... 18,040 0.56 18,061 15,943 0.55 16,057
Swiss franc .......................... 9,190 1.43 9,454
Indonesian rupiah ..................... 28,740 9,461 29,631
Singapore dollar ...................... 1,951 1.75 1,963
Hong Kong dollar ..................... 167,870 7.82 168,076
Thaibaht ............................ 6,050 42.15 5,905
$472,818 $478,002 $567,339 $598,568
* The weighted average contract rate for these contracts is quoted in US dollar per local currency.
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 2002. 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 2002. 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 sterling and Polish zloty for the purchase of Euros. As of December 31, 2002, these contracts
had a notional amount of $72.9 million and a fair value of $71.2 million.
Had Mattel not entered into hedges to limit the effect of exchange rate fluctuations on results of operations
and cash flows, pre-tax income would have been increased by approximately $25 million for 2002, and would
have been reduced by $10 million and $35 million for 2001 and 2000, respectively.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. This statement requires companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. It also requires that gains or losses resulting from changes in the values of those
derivatives be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting.
Mattel adopted SFAS No. 133 on January 1, 2001. Mattel recorded a one-time charge of $12.0 million, net
of tax, in the consolidated statement of operations for the quarter ended March 31, 2001, for the transition
adjustment related to the adoption of SFAS No. 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 2002 results of operations.
44