Mattel 2001 Annual Report Download - page 42

Emerging Issues Task Force (‘‘EITF’’) Issue No. 01-09, Accounting for Consideration Given by a Vendor
to a Customer, will be effective in the first quarter of 2002. This issue addresses (i) recognition, measurement,
and income statement classification for sales incentives offered by a vendor without charge to a customer as a
result of a single exchange transaction or as a result of attaining a specified cumulative level of transactions and
(ii) whether certain consideration from a vendor to a reseller of the vendor’s products is an adjustment to
selling prices or cost. The following table presents the quarterly and full year restated balances, excluding
charges, resulting from the implementation of EITF No. 01-09 (in millions):
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full
Year
Year Ended December 31, 2001
Net sales ..................................... $715.2 $836.2 $1,575.3 $1,561.2 $4,687.9
Gross profit ................................... 316.6 367.6 745.5 747.4 2,177.1
% of net sales .................................. 44.3% 44.0% 47.3% 47.9% 46.4%
Advertising and promotion expenses ................. 79.4 84.9 174.9 204.0 543.2
Year Ended December 31, 2000
Net sales ..................................... $679.6 $803.0 $1,549.6 $1,533.3 $4,565.5
Gross profit ................................... 299.9 348.3 703.7 719.9 2,071.8
% of net sales .................................. 44.1% 43.4% 45.4% 47.0% 45.4%
Advertising and promotion expenses ................. 76.8 83.0 186.5 227.2 573.5
Year Ended December 31, 1999
Net sales ..................................... $676.0 $791.5 $1,557.4 $1,477.8 $4,502.7
Gross profit ................................... 300.1 343.4 744.5 679.2 2,067.2
% of net sales .................................. 44.4% 43.4% 47.8% 46.0% 45.9%
Advertising and promotion expenses ................. 75.9 80.6 185.3 227.9 569.7
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Risk Management
Mattel’s results of operations and cash flows may be impacted by exchange rate fluctuations. 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 using foreign currency forward exchange and option contracts primarily to
hedge its purchase and sale of inventory, and other intercompany transactions denominated in foreign
currencies. These contracts generally have maturity dates of up to 18 months. In addition, Mattel manages its
exposure through the selection of currencies used for international borrowings and intercompany invoicing.
Mattel’s results of operations can also be affected by the translation of foreign revenues and earnings into US
dollars. Mattel does not trade in financial instruments for speculative purposes.
As of December 31, 2001, Mattel translated its Argentina peso denominated financial statements using the
free floating market exchange rate as of January 11, 2002, of 1.6 pesos to the dollar. This translation did not
have a significant impact on Mattel’s results of operations in 2001 and management believes that the
devaluation will have minimal impact to its results of operations in 2002.
Mattel entered into a cross currency interest rate swap to convert the interest rate and principal amount
from Euros to US dollars on its 200 million Euro Notes due July 2002. Interest is payable annually at the rate
of Euro 6.625%. The weighted average interest rate after the swap is 9.0% in US dollars.
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