Mattel 2002 Annual Report Download - page 79

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adjustments resulted in a net gain of $13.0 million, with gains from the strengthening of the Euro, British pound
sterling and Indonesian rupiah against the US dollar being partially offset by losses from the weakening of the
Mexican peso against the US dollar. For 2001, currency translation adjustments resulted in a net loss of
$14.6 million, primarily due to losses from the weakening of the British pound sterling and Euro-legacy
currencies against the US dollar, partially offset by gains from the strengthening of the Mexican peso against the
US dollar. For 2000, currency translation adjustments resulted in a net loss of $50.5 million, primarily due to
losses from the weakening of the British pound sterling, Indonesian rupiah and Euro-legacy currencies against
the US dollar.
Mattel entered into a cross currency interest rate swap to convert the interest and principal amounts from
Euros to US dollars on its 200 million Euro Notes due 2002. The debt and related interest payable were marked-
to-market as of each balance sheet date with the change in fair value of the derivative recorded in accumulated
other comprehensive income (loss) within stockholders’ equity until the loan and related interest was repaid at
maturity in 2002.
Mattel uses fair value derivatives to hedge intercompany loans and management fees denominated in
foreign currencies. Due to the short-term nature of the contracts involved, Mattel does not use hedge accounting
for these contracts. Changes in fair value of these derivatives were not significant to the results of operations
during any year.
As a result of adopting SFAS No. 133, Mattel recorded a one-time transition adjustment of $2.1 million in
accumulated other comprehensive income (loss) related to unrealized gains on derivative instruments during
2001. During 2002 and 2001, the ineffectiveness related to cash flow hedges was not significant. The net loss
reclassified from accumulated other comprehensive income (loss) to Mattel’s results of operations was
$16.6 million during 2002, while the net gain reclassified during 2001 was $10.5 million. As of year end 2002,
$26.2 million of net unrealized losses related to derivative instruments have been recorded in accumulated other
comprehensive income (loss). Mattel expects to reclassify these unrealized losses from accumulated other
comprehensive income (loss) to its results of operations over the life of the contracts, generally 18 months or
less.
As of year end, Mattel held the following foreign exchange risk management contracts (in millions):
2002 2001
Notional
Amount
Exposure
Hedged
Notional
Amount
Exposure
Hedged
Foreign exchange forwards .................................. $1,113.0 $1,113.0 $715.2 $715.2
Cross-currency swaps ....................................... — — 190.7 190.7
$1,113.0 $1,113.0 $905.9 $905.9
Fair Value of Financial Instruments
Mattel’s financial instruments included cash, cash equivalents, marketable securities, investments, accounts
receivable and payable, short-term borrowings, long-term debt, and foreign currency contracts as of year end
2002 and 2001.
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