Mattel 2003 Annual Report Download - page 57

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Mattel’s foreign currency forward exchange contracts that were used to hedge firm foreign currency
commitments as of year end 2003 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
Contract
Amount
Weighted
Average
Contract Rate
Fair
Value
Contract
Amount
Weighted
Average
Contract Rate
Fair
Value
(In thousands of US dollars)
Euro* ........................ $278,979 1.24 $284,402 $319,866 1.12 $357,137
British pound sterling* ........... 21,141 1.76 21,442
Canadian dollar* ................ 75,381 0.73 79,199
Japanese yen ................... 3,558 107.53 3,569
Australian dollar* ............... 29,280 0.73 30,061 24,352 0.65 27,505
Swiss franc .................... 10,804 1.26 10,963
Mexican peso .................. 151,860 11.21 151,663
Indonesian rupiah ............... 40,135 8,838.00 40,599
New Zealand dollar* ............ 3,200 0.64 3,276 136 0.54 164
Chilean peso ................... 6,800 632.00 7,241
Brazilian real .................. 7,553 3.16 8,210
Singapore dollar ................ 1,819 1.71 1,829
Thai baht ...................... 5,600 41.90 5,920
$523,416 $530,453 $457,048 $502,727
*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 2003. 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 2003. The differences between the fair value and the contract amounts are
expected to be fully offset by 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 pound sterling for the purchase of Euro. As of year end 2003, these contracts had a notional amount
of $88.8 million and a fair value of $87.9 million.
Had Mattel not entered into hedges to limit the effect of currency exchange rate fluctuations on its results of
operations and cash flows, its income from continuing operations before income taxes would have increased by
approximately $57 million and $25 million for 2003 and 2002, respectively, and would have been reduced by
$10 million for 2001.
In June 1998, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 133. 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 and recorded a 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 on Mattel’s short-term borrowings would have had an
immaterial impact on its 2003 results of operations.
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