Mattel 2006 Annual Report Download - page 99

Download and view the complete annual report

Please find page 99 of the 2006 Mattel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 133

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133

Restricted Stock and Restricted Stock Units
Compensation expense recognized related to grants of restricted stock and RSUs to certain employees and
non-employee Board members was $3.6 million for the year ended December 31, 2006.
The following table summarizes the number and weighted average grant date fair value of Mattel’s unvested
restricted stock and RSUs as of December 31, 2006 (shares in thousands):
Shares
Weighted-average
grant date
fair value
Unvested at January 1, 2006 ................................................. 220 $12.55
Granted ................................................................. 1,615 17.95
Vested .................................................................. (5) 20.70
Forfeited ................................................................ (19) 17.94
Unvested at December 31, 2006 .............................................. 1,811 17.28
Note 8—Financial Instruments
Marketable Securities
As of December 31, 2006 and 2005, Mattel held no marketable securities.
During 2005 and 2004, Mattel sold marketable securities for proceeds totaling $42.0 million and
$28.2 million, respectively. Gains on sales of these securities totaling $25.8 million and $18.3 million, net of
transaction costs, were recorded in other non-operating (income), net in the consolidated statements of operations
for 2005 and 2004, respectively.
Derivative Financial Instruments
Currency exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Inventory
sale transactions denominated in the Euro, British pound sterling, Canadian dollar Mexican peso, Hong Kong
dollar and Indonesian rupiah are the primary transactions that caused currency transaction exposure for Mattel
during 2006 and 2005. Mattel seeks to mitigate its exposure to market risk by monitoring its currency transaction
exposure for the year and partially hedging such exposure using foreign currency forward exchange and option
contracts. Such contracts are primarily used to hedge Mattel’s 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 to currency exchange rate fluctuations through the
selection of currencies used for international borrowings. Mattel does not trade in financial instruments for
speculative purposes. The ineffectiveness related to cash flow hedges was not significant during any year.
Mattel uses fair value derivatives to hedge most intercompany loans and advances denominated in foreign
currencies. Due to the short-term nature of the contracts involved, Mattel does not use hedge accounting for these
contracts. Changes in the fair value of these derivatives were not significant to the results of operations during
any year.
As of December 31, 2006 and 2005, Mattel held foreign currency forward exchange contracts with notional
amounts totaling $1,088.6 million and $727.2 million. The notional amounts of these contracts were equal to the
exposure hedged in both years.
The net loss on derivative financial instruments reclassified from accumulated other comprehensive loss to
Mattel’s results of operations was $2.3 million, $3.9 million and $31.8 million during 2006, 2005 and 2004,
respectively. As of December 31, 2006, $6.7 million of pre-tax unrealized losses ($6.5 million net of tax) and
90