Mattel 2013 Annual Report Download - page 62

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the Central Bank of Venezuela, to remeasure monetary assets and liabilities denominated in Venezuelan bolivar
fuerte. The SITME rate was quoted at 5.30 Venezuelan bolivares fuerte per US dollar at December 31, 2012.
During February 2013, the Central Bank of Venezuela revised its official exchange rate to 6.30 Venezuelan
bolivares fuerte per US dollar and eliminated the SITME rate. Since February 2013, Mattel’s Venezuelan
subsidiary has used the official exchange rate as its remeasurement rate. The change in the exchange rate resulted
in an unrealized foreign currency exchange loss of approximately $5 million, which was primarily recognized
within other non-operating (income) expense, net in the consolidated statements of operations.
During March 2013, the Venezuelan government announced a complementary currency exchange system,
the Sistema Complementario de Administracion de Divisas (“SICAD”). Participation in the SICAD is controlled
by the Venezuelan government. The SICAD is intended to function as an auction system, allowing entities in
specific sectors to bid for US dollars to be used for specified import transactions. Currently, it is unclear as to
whether companies are able to remit dividends using the SICAD. During December 2013, the government
regulation that created the SICAD was amended to expand its use and to require publication of the average
exchange rate implied by transactions settled in SICAD auctions. During the weeks of December 23 and
December 31, 2013, the SICAD rate posted on the website of the Central Bank of Venezuela was 11.3
Venezuelan bolivares fuerte per US dollar.
Mattel has not accessed US dollars in Venezuela through the SICAD and does not expect to be able to
access the SICAD rate in the foreseeable future. Mattel is currently monitoring and assessing the currency
exchange rates and restrictions associated with the SICAD. Based on a number of factors, including the
restrictions placed on eligible participants, the amount of US dollars available to purchase through the auction
process, and the ineligibility of past import transactions to be settled through the SICAD, Mattel does not
currently believe it is appropriate to use the SICAD rate as its remeasurement rate. If Mattel is able to utilize the
SICAD to regularly access US dollars for its operations in future periods, the SICAD rate may be used as its
remeasurement rate.
Mattel’s Venezuelan subsidiary represented less than 0.1% of Mattel’s consolidated net sales in 2013 and
had approximately $22 million of net monetary assets denominated in Venezuelan bolivares fuerte as of
December 31, 2013. For every $10 million of net monetary assets denominated in Venezuelan bolivares fuerte, a
10% increase/(decrease) in the foreign currency exchange rate would decrease/(increase) Mattel’s pre-tax income
by approximately $1 million. Venezuela currency matters, along with economic and political instability, continue
to impact the operating results of Mattel’s Venezuelan subsidiary. If the Venezuelan bolivar fuerte significantly
devalues in the future, or if the economic or political conditions significantly worsen, Mattel may consider
ceasing operations of its Venezuelan subsidiary, which could result in a pre-tax charge to its consolidated
statement of operations of up to $95 million.
Argentine Operations
In January 2014, the Central Bank of Argentina modified its currency exchange controls, resulting in the
devaluation of the Argentine peso. The official exchange rate was quoted at 6.52 Argentine pesos per US dollar
at December 31, 2013. As of January 31, 2014, the official exchange rate was quoted at 8.00 Argentine pesos per
US dollar. Mattel’s Argentine subsidiary represented less than 0.2% of Mattel’s consolidated net sales in 2013.
The devaluation of the Argentine peso did not impact Mattel’s 2013 operating results since the devaluation
occurred subsequent to year-end. The devaluation is expected to have an immaterial impact on Mattel’s 2014
operating results.
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