Mattel 1999 Annual Report Download - page 20

18
Mattel, Inc. and Subsidiaries
Buy Sell
Weighted Weighted
Contract Average Fair Contract Average Fair
( In thousands of US dollars) Amount Contract Rate Value Amount Contract Rate Value
1999
Euro $ 92,4 4 5 1.0 1 $ 9 0 ,92 2 $2 5 3,09 6 1.05 $2 44,44 8
British pounds sterling 6,3 1 6 1.6 1 6,33 2 1 6 ,6 7 9 1.6 5 1 6 ,433
Canadian dollar 7,6 0 4 1.4 5 7,61 9 4 0 ,6 7 9 .68 4 1 ,4 9 8
Japanese yen – – – 19 ,4 1 2 11 6 1 9 ,5 5 7
Australian dollar – – – 8,4 3 8 .64 8 ,661
Swiss franc 1 4 ,8 9 3 1.5 8 1 4 ,798– – –
Indonesian rupiah 19 ,4 5 5 7,67 6 2 0 ,9 98– – –
Singapore dollar – – – 4,0 6 6 1.6 8 4,09 1
Thai bhat 3,9 9 0 39.59 4 ,207 – – –
$1 4 4 ,7 0 3 $1 4 4 ,8 7 6 $342,3 7 0 $334,6 8 8
1998
German mark $ 19,11 9 1.67 $ 1 8 ,9 8 4 $ 1 4 4 ,6 60 1.6 8 $ 1 4 5 ,688
Italian lira 20,01 4 1,7 6 4 .00 21,15 5 6 8 ,3 5 8 1,660.00 6 7 ,9 5 0
Hong Kong dollar 55 ,8 2 9 8.0 2 5 7 ,790– – –
French franc 27 ,4 3 5 5.6 2 2 7 ,536 9,1 0 5 5.8 2 9,4 7 9
British pounds sterling 6,5 4 8 0.6 0 6,41 5 6 6 ,8 5 6 0.6 1 6 6 ,950
Canadian dollar 16 ,1 4 4 1.5 5 1 6 ,545 18,79 4 1.46 1 8 ,1 1 9
Spanish peseta 5,6 2 5 1 4 2 .30 5,5 7 7 2,8 9 9 1 4 8 .23 2,9 9 7
Dutch guilder 5,07 9 1.89 5 ,050 8 ,0 86 1.96 8,3 4 2
Japanese yen – – – 12 ,5 0 1 1 1 6 .00 12,75 9
Australian dollar 4,9 8 8 1.6 6 5,26 8 2 1 ,6 1 0 1.5 8 2 1 ,732
Belgian franc – – – 11 ,6 4 1 35.4 6 1 1 ,8 7 1
Swiss franc 1 8 ,3 4 1 1.3 7 1 8 ,251– – –
Mexican peso – – – 22 ,0 0 0 10.0 2 2 1 ,9 5 6
Indonesian rupiah 10 ,0 0 0 15 ,7 2 0 .50 19,18 3 – – –
Singapore dollar – – – 3,9 6 2 1.6 4 3,94 3
Brazilian real – – – 2 ,5 00 1.2 5 2,5 5 4
$1 8 9 ,1 2 2 $2 0 1 ,7 5 4 $392,9 7 2 $394,3 4 0
General
Mattel is also involved in various other litigation and legal matters, including claims related
to intellectual property, product liability and labor, which Mattel is addressing or defending
in the ordinary course of business. Management believes that any liability which may
potentially result upon resolution of such matters will not have a material adverse effect
on Mattel’s business, financial condition or results of operations.
Commitments
In the normal course of business, Mattel enters into contractual arrangements for
future purchases of goods and services to ensure availability and timely delivery,
and to obtain and protect Mattel’s right to create and market certain products. These
arrangements include commitments for future inventory purchases and royalty pay-
ments. Certain of these commitments routinely contain provisions for guaranteed
or minimum expenditures during the term of the contracts.
As of December 31, 1 99 9, the Operations segment had outstanding commit-
ments for 20 00 purchases of inventory of approximately $9 2 million. Licensing and
similar agreements with terms extending through 2 00 7 contain provisions for future
guaranteed minimum payments aggregating approximately $3 46 million.
Foreign Currency Risk
Mattel’s results of operations and cash flows can be impacted by exchange rate
fluctuations. To limit the exposure associated with exchange rate movements, Mattel
enters into foreign currency forw ard exchange and option contracts primarily to hedge
its purchase of inventory, sales and other intercompany transactions denominated in
foreign currencies. Mattel’s results of operations can also be affected by the transla-
tion of foreign revenues and earnings into US dollars.
Market risk exposures exist with respect to the settlement of foreign currency
transactions during the year because currency fluctuations cannot be predicted with
certainty. Mattel seeks to mitigate its exposure to market risk by monitoring its
currency exchange exposure for the year and partially or fully hedging such exposure.
In addition, Mattel manages its exposure through the selection of currencies used for
foreign borrowings and intercompany invoicing. Mattel does not trade in financial
instruments for speculative purposes.
Mattel’s foreign currency forward exchange contracts that were used to hedge
firm foreign currency commitments as of December 31 , 1 99 9 and 19 98 are shown in
the following table.
These contracts generally mature within 18 months from the date of execution.
Contracts outstanding at year-end mature during the next 13 months. 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 contracts that are
maintained by an entity with a rupiah functional 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 19 99 and
19 98 . 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 19 99 and 19 98 . The dif-
ferences 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.