Mattel 2008 Annual Report Download - page 56

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Mattel’s foreign currency forward exchange contracts that were used to hedge firm foreign currency
commitments as of December 31, 2008 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 contracts, which are maintained by entities with a rupiah functional currency.
Buy Sell
Contract
Amount
Weighted
Average
Contract
Rate
Fair
Value
Contract
Amount
Weighted
Average
Contract
Rate
Fair
Value
(In thousands of US dollars)
Euro* ................................. $281,356 1.40 $ 94 $337,477 1.43 $ 9,617
Canadian dollar* ........................ — — — 11,960 0.89 893
British pound sterling* ................... — — — 19,319 1.48 312
Japanese yen ........................... 8,510 90.00 (50) 16,718 90.00 132
Australian dollar* ....................... 19,801 0.68 588 13,558 0.92 3,281
Swiss franc ............................. 18,041 1.09 413 — — —
Mexican peso ........................... 95,107 13.55 (759) — — —
Indonesian rupiah ....................... 25,970 9,901 (3,635) — — —
New Zealand dollar* ..................... 6,298 0.57 91 — — —
Czech koruna ........................... 2,763 18.82 (47) — — —
Taiwan dollar ........................... — — — 9,801 33.03 (67)
Singapore dollar ......................... — — — 1,727 1.47 (41)
Hungarian forint ........................ 787 192.86 21 — — —
Polish zloty ............................ 7,371 2.96 53 — — —
New Turkish lira ........................ — — — 4,584 1.54 40
$466,004 $(3,231) $415,144 $14,167
*The weighted average contract rate for these contracts is 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 December 31, 2008. 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 December 31, 2008. The differences between the market forward amounts and
the contract amounts are expected to be fully offset by currency transaction 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 pound sterling for the purchase of Euro. As of December 31, 2008, these contracts had a contract
amount of $7.0 million and a fair value of $1.5 million.
Had Mattel not entered into hedges to limit the effect of currency exchange rate fluctuations on its results of
operations and cash flows, its income before income taxes would have decreased by approximately $16 million
in 2008, increased by approximately $7 million in 2007, and decreased by approximately $1 million in 2006.
Interest Rate Risk
To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel avails itself of
individual short-term credit lines with a number of banks. As of December 31, 2008, foreign credit lines totaled
approximately $162 million, a portion of which are used to support letters of credit. Mattel expects to extend the
majority of these credit lines throughout 2009.
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