Mattel 1998 Annual Report Download - page 33

Mattel, Inc. and Subsidiaries 31
For the purchase of foreign currencies, fair value reflects the
amount, based on dealer quotes, that the Company would pay at
maturity for contracts involving the same currencies and maturity
dates, if they had been entered into as of year-end 1998 and 1997.
For the sale of foreign currencies, fair value reflects the amount,
based on dealer quotes, that the Company would receive at
maturity for contracts involving the same currencies and maturity
dates, if they had been entered into as of year-end 1998 and 1997.
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.
Buy Sell
Weighted Weighted
Contract Average Fair Contract Average Fair
(In thousands of US dollars) Amount Contract Rate Value Amount Contract Rate Value
1998
German marks $ 19,119 1.67 $ 18,984 $144,660 1.68 $145,688
Italian lira 20,014 1,764.00 21,155 68,358 1,660.00 67,950
Hong Kong dollars 55,829 8.02 57,790---
French francs 27,435 5.62 27,536 9,105 5.82 9,479
British pounds sterling 6,548 0.60 6,415 66,856 0.61 66,950
Canadian dollars 16,144 1.55 16,545 18,794 1.46 18,119
Spanish pesetas 5,625 142.30 5,577 2,899 148.23 2,997
Dutch guilders 5,079 1.89 5,050 8,086 1.96 8,342
Japanese yen - - - 12,501 116.00 12,759
Australian dollars 4,988 1.66 5,268 21,610 1.58 21,732
Belgian francs - - - 11,641 35.46 11,871
Swiss francs 18,341 1.37 18,251---
Mexican peso - - - 22,000 10.02 21,956
Indonesian rupiah 10,000 15,720.50 19,183---
Singapore dollar - - - 3,962 1.64 3,943
Brazilian real - - - 2,500 1.25 2,554
$189,122 $201,754 $392,972 $394,340
1997
German marks $19,179 1.78 $ 18,972 $ 65,119 1.77 $ 64,941
Italian lira 38,277 1,800.00 39,203 53,161 1,749.00 52,585
Malaysian ringitts 53,304 3.08 41,551---
Hong Kong dollars 148,084 8.04 149,108 2,527 7.76 2,532
French francs - - - 38,166 5.86 37,639
British pounds sterling 32,548 0.61 32,751 72,580 0.63 73,570
Canadian dollars 22,608 1.42 22,474---
Spanish pesetas - - - 13,858 148.99 13,668
Dutch guilders 12,778 2.00 12,666 36,285 1.96 35,719
Japanese yen - - - 7,956 125.73 7,659
Australian dollars 6,398 1.54 6,391---
Belgian francs - - - 55,126 36.48 54,515
Swiss francs 13,677 1.44 13,454---
Mexican peso - - - 4,200 8.05 4,138
Indonesian rupiah 15,230 3,930.78 9,891---
Singapore dollar - - - 4,107 1.72 4,203
$362,083 $346,461 $353,085 $351,169
The Company did not enter into any new foreign currency
option contracts during 1998, and no option contracts remained
outstanding as of December 31, 1998. As of December 31, 1997,
the total amount of the option contracts was $93.5 million and the
fair value was $90.5 million. Fair value reflects the amount of US
dollars the Company would receive from the current contracts, less
the option value. The option value is determined based on dealer
quotes for contracts involving the same currencies and maturity dates.
Euro
The Treaty on European Economic and Monetary Union provides for
the introduction of a single European currency, the Euro, in substitution
for the national currencies of the member states of the European
Union that adopt the Euro.The transition period for member states
joining the Monetary Union began on January 1, 1999 and will end on
July 1, 2002 when the national currencies of member states will cease
to exist. Currently, the Company is unable to assess whether the
adoption of the Euro by the Monetary Union will have a material
impact on its financial position or results of operations in the future.
Manufacturing Risk
The Company 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 the Company’s manufacturing operations located there. The
Company’s business, financial position and results of operations would
be negatively impacted by a significant disruption to its manufacturing
operations or suppliers.
Effects of Inflation
Inflation rates in the US and in major foreign countries where the
Company does business have not had a significant impact on its
results of operations or financial position during the three years