Derivative Instruments

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

Mattel seeks to mitigate its exposure to foreign currency transaction risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts. Mattel uses foreign currency forward exchange contracts as cash flow hedges primarily to hedge its purchases and sales of inventory denominated in foreign currencies. These contracts generally have maturity dates of up to 18 months. These derivative instruments have been designated as effective cash flow hedges, whereby the unsettled hedges are reported in Mattel’s consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in other comprehensive income (“OCI”). Realized gains and losses for these contracts are recorded in the consolidated statements of operations in the period in which the inventory is sold to customers. Additionally, Mattel uses foreign currency forward exchange contracts to hedge intercompany loans and advances denominated in foreign currencies. Due to the short-term nature of the contracts involved, Mattel has not designated these contracts as hedging instruments, and as such, changes in fair value are recorded in the period of change in the consolidated statements of operations. As of March 31, 2017, March 31, 2016, and December 31, 2016, Mattel held foreign currency forward exchange contracts with notional amounts of approximately $1.48 billion, $1.22 billion, and $1.20 billion, respectively.

The following tables present Mattel’s derivative assets and liabilities:

	Derivative Assets
	Balance Sheet Classification	Fair Value
		March 31, 2017		March 31, 2016		December 31, 2016
		(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	$	12,198	$	3,748	$	18,747
Foreign currency forward exchange contracts	Other noncurrent assets	2,683		82		5,782
Total derivatives designated as hedging instruments		$	14,881	$	3,830	$	24,529
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	$	2,303	$	4,739	$	2,678
Total		$	17,184	$	8,569	$	27,207
	Derivative Liabilities
	Balance Sheet Classification	Fair Value
		March 31, 2017		March 31, 2016		December 31, 2016
		(In thousands)
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	Accrued liabilities	$	7,808	$	11,352	$	1,917
Foreign currency forward exchange contracts	Other noncurrent liabilities	706		3,852		223
Total derivatives designated as hedging instruments		$	8,514	$	15,204	$	2,140
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	Accrued liabilities	$	6,671	$	472	$	7,072
Total		$	15,185	$	15,676	$	9,212

The following tables present the classification and amount of gains and losses, net of tax, from derivatives reported in the consolidated statements of operations:

	For the Three Months Ended
	March 31, 2017					March 31, 2016					Statements of Operations Classification
	Amount of Gain (Loss) Recognized in OCI			Amount of Gain (Loss) Reclassified from Accumulated OCI to Statements of Operations		Amount of Gain (Loss) Recognized in OCI			Amount of Gain (Loss) Reclassified from Accumulated OCI to Statements of Operations
	(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange contracts	$	(12,584	)	$	2,229	$	(15,893	)	$	7,010	Cost of sales

The net gains of $2.2 million and $7.0 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three months ended March 31, 2017 and 2016, respectively, are offset by the changes in cash flows associated with the underlying hedged transactions.

	Amount of Gain (Loss) Recognized in the Statements of Operations				Statements of Operations Classification
	For the Three Months Ended
	March 31, 2017		March 31, 2016
	(In thousands)
Derivatives not designated as hedging instruments
Foreign currency forward exchange contracts	$	25,569	$	23,592	Other non-operating income/expense
Foreign currency forward exchange contracts	386		1,125		Cost of sales
Total	$	25,955	$	24,717

The net gains of $26.0 million and $24.7 million recognized in the consolidated statements of operations for the three months ended March 31, 2017 and 2016, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances.