Mattel 2001 Annual Report Download - page 43

Mattel’s foreign currency forward exchange contracts that were used to hedge firm foreign currency
commitments as of December 31, 2001 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, Thai baht, Brazilian real and Venezuelan bolivar contracts that are maintained by entities
with either a rupiah, baht, real or bolivar functional currency.
Buy Sell
(In thousands of US dollars)
Contract
Amount
Weighted
Average
Contract
Rate
Fair
Value
Contract
Amount
Weighted
Average
Contract
Rate
Fair
Value
Euro* ............................ $128,041 0.88 $128,775 $346,861 0.90 $341,164
British pounds sterling* ............... 5,159 1.45 5,144
Canadian dollar* .................... 4,375 0.63 4,399 31,478 0.65 30,646
Japanese yen ....................... 4,045 128 3,966
Australian dollar* ................... 3,045 0.51 3,064 9,941 0.52 9,659
Swiss franc ........................ 3,052 1.69 3,083
Indonesian rupiah ................... 27,300 11,219 28,197
New Zealand dollar* ................. 619 0.42 607
Venezuelan bolivar .................. 2,000 761 1,968
Singapore dollar .................... 2,873 1.83 2,843
Hong Kong dollar ................... 30,282 7.81 30,315
Brazilian real ...................... 27,206 2.66 24,801
Polish zloty ........................ 2,091 3.97 2,211
Taiwanese dollar .................... 3,352 34.87 3,326
Thai baht ......................... 3,970 44.49 3,938
$231,316 $230,538 $404,374 $397,568
* The currencies for these contracts are 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 2001. 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 2001. 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.
In addition to the contracts involving the US dollar detailed in the above table, Mattel also had contracts to
sell British pounds sterling for the purchase of Euros. As of December 31, 2001, these contracts had a notional
amount of $79.5 million and a fair value of $80.7 million.
Had Mattel not entered into hedges to limit the effect of exchange rate fluctuations on results of operations
and cash flows, pre-tax income would have been reduced by approximately $10 million, $35 million, and $16
million for 2001, 2000 and 1999, respectively.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. 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. Mattel recorded a one-time charge of approximately
$12 million, net of tax, in the consolidated statements 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 affecting Mattel’s variable rate borrowings would
have had an immaterial impact on its 2001 results of operations.
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