Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________

FORM 10-Q

___________________________________________________________

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	For the quarterly period ended	March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File Number 001-05647

___________________________________________________________

MATTEL, INC.

(Exact name of registrant as specified in its charter)

___________________________________________________________



Delaware		95-1567322
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



333 Continental Blvd.		90245-5012
El Segundo,	CA	90245-5012
(Address of principal executive offices)		(Zip Code)

(310) 252-2000

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report):

NONE

__________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $1.00 per share	MAT	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares outstanding of registrant's common stock, $1.00 par value, as of April 17, 2020: 346,898,249 shares

MATTEL, INC. AND SUBSIDIARIES



		Page

	PART I

Item 1.	Financial Statements	4

	Consolidated Balance Sheets	4

	Consolidated Statements of Operations	5

	Consolidated Statements of Comprehensive Loss	6

	Consolidated Statements of Cash Flows	7

	Consolidated Statements of Stockholders' Equity	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures	41

	PART II

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	43

Item 4.	Mine Safety Disclosures	43

Item 5.	Other Information	43

Item 6.	Exhibits	44

	Signature	45

(Cautionary Statement Under the Private Securities Litigation Reform Act of 1995)

Mattel is including this Cautionary Statement to caution investors and qualify for the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the "Act") for forward-looking statements. This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Act. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. The use of words such as "anticipates," "expects," "intends," "plans," "confident that" and "believes," among others, generally identify forward-looking statements. These forward-looking statements are based on currently available operating, financial, economic and other information and assumptions, and are subject to a number of significant risks and uncertainties. A variety of factors, many of which are beyond our control, could cause actual future results to differ materially from those projected in the forward-looking statements, and are currently, or in the future could be, amplified by the COVID-19 pandemic. Specific factors that might cause such a difference include, but are not limited to: (i) potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the global economy, including its impact on our sales; (ii) Mattel’s ability to design, develop, produce, manufacture, source and ship products on a timely and cost-effective basis, as well as interest in and purchase of those products by retail customers and consumers in quantities and at prices that will be sufficient to profitably recover Mattel’s costs; (iii) downturns in economic conditions affecting Mattel’s markets which can negatively impact retail customers and consumers, and which can result in lower employment levels, lower consumer disposable income and spending, including lower spending on purchases of Mattel’s products; (iv) other factors which can lower discretionary consumer spending, such as higher costs for fuel and food, drops in the value of homes or other consumer assets, and high levels of consumer debt; (v) potential difficulties or delays Mattel may experience in implementing cost savings and efficiency enhancing initiatives; (vi) other economic and public health conditions or regulatory changes in the markets in which Mattel and its customers and suppliers operate, which could create delays or increase Mattel’s costs, such as higher commodity prices, labor costs or transportation costs, or outbreaks of disease; (vii) currency fluctuations, including movements in foreign exchange rates, which can lower Mattel’s net revenues and earnings, and significantly impact Mattel’s costs; (viii) the concentration of Mattel’s customers, potentially increasing the negative impact to Mattel of difficulties experienced by any of Mattel’s customers, such as the bankruptcy and liquidation of Toys "R" Us, Inc., or changes in their purchasing or selling patterns; (ix) the future willingness of licensors of entertainment properties for which Mattel currently has licenses or would seek to have licenses in the future to license those products to Mattel; (x) the inventory policies of Mattel’s retail customers, including retailers’ potential decisions to lower their inventories, even if it results in lost sales, as well as the concentration of Mattel’s revenues in the second half of the year, which coupled with reliance by retailers on quick response inventory management techniques increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve compressed shipping schedules; (xi) the increased costs of developing more sophisticated digital and smart technology products, and the corresponding supply chain and design challenges associated with such products; (xii) work disruptions, which may impact Mattel’s ability to manufacture or deliver product in a timely and cost-effective manner; (xiii) the bankruptcy and liquidation of Mattel’s significant retailers, such as Toys "R" Us, Inc. or the general lack of success of one of Mattel’s significant retailers which could negatively impact Mattel’s revenues or bad debt exposure; (xiv) the impact of competition on revenues, margins and other aspects of Mattel’s business, including the ability to offer products which consumers choose to buy instead of competitive products, the ability to secure, maintain and renew popular licenses and the ability to attract and retain talented employees; (xv) the risk of product recalls or product liability suits and costs associated with product safety regulations; (xvi) changes in laws or regulations in the United States and/or in other major markets, such as China, in which Mattel operates, including, without limitation, with respect to taxes, tariffs, trade policies, or product safety, which may increase Mattel’s product costs and other costs of doing business, and reduce Mattel’s earnings; (xvii) failure to realize the planned benefits from any investments or acquisitions made by Mattel; (xviii) the impact of other market conditions, third party actions or approvals and competition which could reduce demand for Mattel’s products or delay or increase the cost of implementation of Mattel’s programs or alter Mattel’s actions and reduce actual results; (xix) changes in financing markets or the inability of Mattel to obtain financing on attractive terms; (xx) the impact of litigation, arbitration, or regulatory decisions or settlement actions; (xxi) uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; and (xxii) other risks and uncertainties detailed in Part 1, Item 1A "Risk Factors" in Mattel's 2019 Annual Report on Form 10-K, as amended (the "2019 Annual Report on Form 10-K") and in Part II, Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so, except as required by law.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



	March 31, 2020			March 31, 2019			December 31, 2019
	(Unaudited; in thousands, except share data)
ASSETS
Current Assets
Cash and equivalents	$	499,407		$	380,107		$	630,028
Accounts receivable, net of allowances for credit losses of $20.9 million, $24.3 million, and $18.5 million, respectively	528,522			624,477			936,359
Inventories	560,645			615,828			495,504
Prepaid expenses and other current assets	218,516			274,674			186,083
Total current assets	1,807,090			1,895,086			2,247,974
Noncurrent Assets
Property, plant, and equipment, net	519,777			622,251			550,139
Right-of-use assets, net	298,288			327,419			303,187
Goodwill	1,382,852			1,388,758			1,390,714
Other noncurrent assets	796,345			848,853			833,212
Total Assets	$	4,804,352		$	5,082,367		$	5,325,226
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings	$	150,000		$	—		$	—
Accounts payable	306,440			324,949			459,357
Accrued liabilities	657,254			657,053			769,513
Income taxes payable	12,290			19,409			48,037
Total current liabilities	1,125,984			1,001,411			1,276,907
Noncurrent Liabilities
Long-term debt	2,848,924			2,853,454			2,846,751
Noncurrent lease liabilities	262,631			294,812			270,853
Other noncurrent liabilities	408,930			409,315			439,001
Total noncurrent liabilities	3,520,485			3,557,581			3,556,605
Stockholders' Equity
Common stock $1.00 par value, 1.0 billion shares authorized; 441.4 million shares issued	441,369			441,369			441,369
Additional paid-in capital	1,836,067			1,822,718			1,825,569
Treasury stock at cost: 94.5 million shares, 95.9 million shares, and 94.6 million shares, respectively	(2,316,110		)	(2,353,175		)	(2,318,921		)
Retained earnings	1,202,440			1,450,397			1,413,181
Accumulated other comprehensive loss	(1,005,883		)	(837,934		)	(869,484		)
Total stockholders' equity	157,883			523,375			491,714
Total Liabilities and Stockholders' Equity	$	4,804,352		$	5,082,367		$	5,325,226

The accompanying notes are an integral part of these consolidated financial statements.

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS



	For the Three Months Ended
	March 31, 2020			March 31, 2019
	(Unaudited; in thousands, except per share amounts)
Net Sales	$	594,069		$	689,246
Cost of sales	338,886			449,456
Gross Profit	255,183			239,790
Advertising and promotion expenses	76,282			69,465
Other selling and administrative expenses	328,711			297,336
Operating Loss	(149,810		)	(127,011		)
Interest expense	48,980			46,958
Interest (income)	(2,084		)	(2,272		)
Other non-operating expense, net	2,143			1,904
Loss Before Income Taxes	(198,849		)	(173,601		)
Provision for income taxes	11,892			2,695
Net Loss	$	(210,741	)	$	(176,296	)
Net Loss Per Common Share - Basic	$	(0.61	)	$	(0.51	)
Weighted-average number of common shares	346,867			345,852
Net Loss Per Common Share - Diluted	$	(0.61	)	$	(0.51	)
Weighted-average number of common and potential common shares	346,867			345,852

The accompanying notes are an integral part of these consolidated financial statements.

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS



	For the Three Months Ended
	March 31, 2020			March 31, 2019
	(Unaudited; in thousands)
Net Loss	$	(210,741	)	$	(176,296	)
Other Comprehensive (Loss) Income, Net of Tax
Currency translation adjustments	(145,634		)	14,133
Employee benefit plan adjustments	3,060			223
Net unrealized gains on available-for-sale security	195			1,877
Net unrealized gains on derivative instruments:
Unrealized holding gains	9,190			5,818
Amounts reclassified from accumulated other comprehensive loss	(3,210		)	(759		)
	5,980			5,059
Other Comprehensive (Loss) Income, Net of Tax	(136,399		)	21,292
Comprehensive Loss	$	(347,140	)	$	(155,004	)

The accompanying notes are an integral part of these consolidated financial statements.

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



	For the Three Months Ended
	March 31, 2020			March 31, 2019
	(Unaudited; in thousands)
Cash Flows From Operating Activities
Net loss	$	(210,741	)	$	(176,296	)
Adjustments to reconcile net loss to net cash flows used for operating activities:
Depreciation	43,654			52,071
Amortization	9,965			10,429
Share-based compensation	14,275			11,865
Bad debt expense	5,248			2,745
Inventory obsolescence	10,190			21,452
Deferred income taxes	5,210			(66		)
Changes in assets and liabilities:
Accounts receivable	365,002			346,381
Inventories	(109,938		)	(94,698		)
Prepaid expenses and other current assets	(16,343		)	(36,717		)
Accounts payable, accrued liabilities, and income taxes payable	(316,291		)	(321,874		)
Other, net	25,280			(8,102		)
Net cash flows used for operating activities	(174,489		)	(192,810		)
Cash Flows From Investing Activities
Purchases of tools, dies, and molds	(11,363		)	(10,706		)
Purchases of other property, plant, and equipment	(23,943		)	(13,409		)
(Payments for) proceeds from foreign currency forward exchange contracts, net	(46,565		)	4,703
Other, net	714			212
Net cash flows used for investing activities	(81,157		)	(19,200		)
Cash Flows From Financing Activities
Proceeds from (payments for) short-term borrowings, net	150,000			(4,176		)
Other, net	(678		)	(173		)
Net cash flows provided by (used for) financing activities	149,322			(4,349		)
Effect of Currency Exchange Rate Changes on Cash	(24,297		)	1,985
Decrease in Cash and Equivalents	(130,621		)	(214,374		)
Cash and Equivalents at Beginning of Period	630,028			594,481
Cash and Equivalents at End of Period	$	499,407		$	380,107

The accompanying notes are an integral part of these consolidated financial statements.

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	(Unaudited; in thousands)
Balance, December 31, 2019	$	441,369	$	1,825,569		$	(2,318,921	)	$	1,413,181		$	(869,484	)	$	491,714
Net loss	—		—			—			(210,741		)	—			(210,741		)
Other comprehensive loss, net of tax	—		—			—			—			(136,399		)	(136,399		)
Issuance of treasury stock for restricted stock units vesting	—		(3,777		)	2,811			—			—			(966		)
Share-based compensation	—		14,275			—			—			—			14,275
Balance, March 31, 2020	$	441,369	$	1,836,067		$	(2,316,110	)	$	1,202,440		$	(1,005,883	)	$	157,883

	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	(Unaudited; in thousands)
Balance, December 31, 2018	$	441,369	$	1,812,682		$	(2,354,617	)	$	1,626,693		$	(859,226	)	$	666,901
Net loss	—		—			—			(176,296		)	—			(176,296		)
Other comprehensive income, net of tax	—		—			—			—			21,292			21,292
Issuance of treasury stock for restricted stock units vesting	—		(1,829		)	1,442			—			—			(387		)
Share-based compensation	—		11,865			—			—			—			11,865
Balance, March 31, 2019	$	441,369	$	1,822,718		$	(2,353,175	)	$	1,450,397		$	(837,934	)	$	523,375

The accompanying notes are an integral part of these consolidated financial statements.

MATTEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	Basis of Presentation

The accompanying unaudited consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments, consisting of only those of a normal recurring nature, considered necessary for a fair statement of the financial position and interim results of Mattel, Inc. and its subsidiaries ("Mattel") as of and for the periods presented have been included.

The December 31, 2019 balance sheet data was derived from audited financial statements; however, the accompanying interim notes to the consolidated financial statements do not include all of the annual disclosures required by GAAP. As Mattel's business is seasonal, results for interim periods are not necessarily indicative of those that may be expected for a full year. The financial information included herein should be read in conjunction with Mattel's consolidated financial statements and related notes in the 2019 Annual Report on Form 10-K.


2.	Accounts Receivable

Mattel estimates current expected credit losses based on collection history and management’s assessment of the current economic trends, business environment, customers’ financial condition, accounts receivable aging, and customer disputes that may impact the level of future credit losses. Accounts receivable are net of allowances for credit losses of $20.9 million, $24.3 million, and $18.5 million as of March 31, 2020, March 31, 2019, and December 31, 2019, respectively.


3.	Inventories

Inventories include the following:



	March 31, 2020		March 31, 2019		December 31, 2019
	(In thousands)
Raw materials and work in process	$	107,880	$	118,143	$	103,123
Finished goods	452,765		497,685		392,381
	$	560,645	$	615,828	$	495,504


4.	Property, Plant, and Equipment

Property, plant, and equipment, net includes the following:



	March 31, 2020			March 31, 2019			December 31, 2019
	(In thousands)
Land	$	24,856		$	25,071		$	25,112
Buildings	297,910			298,022			302,956
Machinery and equipment	769,761			885,178			812,509
Software	367,143			398,071			364,391
Tools, dies, and molds	719,615			814,078			747,706
Leasehold improvements	179,872			241,769			183,250
	2,359,157			2,662,189			2,435,924
Less: accumulated depreciation	(1,839,380		)	(2,039,938		)	(1,885,785		)
	$	519,777		$	622,251		$	550,139

During the three months ended December 31, 2019, in conjunction with the Capital Light program, Mattel discontinued production at one of its plants based in Mexico and has committed to a plan to dispose of the land and building. These assets meet the held for sale criteria, are actively being marketed for sale, and are included within property, plant and equipment, net in the consolidated balance sheets.


5.	Goodwill

Goodwill is allocated to various reporting units, which are at the operating segment level, for the purpose of evaluating whether goodwill is impaired. Mattel's reporting units are: (i) North America, (ii) International, and (iii) American Girl. Mattel tests its goodwill for impairment annually in the third quarter and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value.

The change in the carrying amount of goodwill by operating segment for the three months ended March 31, 2020 is shown below. Brand-specific goodwill held by foreign subsidiaries is allocated to the North America segment, thereby causing a foreign currency translation impact.



	December 31, 2019		Currency Exchange Rate Impact			March 31, 2020
	(In thousands)
North America	$	732,430	$	(1,945	)	$	730,485
International	450,713		(5,917		)	444,796
American Girl	207,571		—			207,571
	$	1,390,714	$	(7,862	)	$	1,382,852


6.	Other Noncurrent Assets

Other noncurrent assets include the following:



	March 31, 2020		March 31, 2019		December 31, 2019
	(In thousands)
Identifiable intangible assets (net of accumulated amortization of $258.0 million, $218.3 million, and $248.0 million, respectively)	$	534,044	$	580,497	$	553,114
Deferred income taxes	62,674		50,510		67,900
Other	199,627		217,846		212,198
	$	796,345	$	848,853	$	833,212

Mattel's amortizable intangible assets primarily consist of trademarks. Mattel tests its amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Mattel's amortizable intangible assets were not impaired during the three months ended March 31, 2020 and 2019.


7.	Accrued Liabilities

Accrued liabilities include the following:



	March 31, 2020		March 31, 2019		December 31, 2019
	(In thousands)
Incentive compensation	$	135,833	$	87,504	$	122,923
Current lease liabilities	78,247		77,092		74,065
Advertising and promotion	71,563		61,793		93,804
Royalties	22,701		36,385		94,228
Other	348,910		394,279		384,493
	$	657,254	$	657,053	$	769,513


8.	Seasonal Financing

On December 20, 2017, Mattel entered into a syndicated facility agreement, which was subsequently amended in 2018 and 2019 (as amended, the "Credit Agreement"), as a borrower (in such capacity, the "Borrower") and guarantor thereunder, along with certain of the Borrower's domestic and foreign subsidiaries as additional borrowers and/or guarantors thereunder, Bank of America, N.A., as global administrative agent, collateral agent and Australian security trustee, and the other lenders and financial institutions from time to time party thereto, providing for $1.60 billion in aggregate principal amount of senior secured revolving credit facilities (the "senior secured revolving credit facilities") consisting of (i) an asset based lending facility with aggregate commitments of $1.31 billion, subject to borrowing base capacity, secured by substantially all of the accounts receivable and inventory of the Borrower and certain of its subsidiaries who are borrowers and/or guarantors under the Credit Agreement, as well as (ii) a revolving credit facility with $294.0 million in aggregate commitments secured by certain fixed assets and intellectual property of the U.S. borrowers under the Credit Agreement, and certain equity interests in the borrower and guarantor subsidiaries under the Credit Agreement. The senior secured revolving credit facilities will mature on November 18, 2022.

Borrowings under the senior secured revolving credit facilities (i) are limited by jurisdiction-specific borrowing base calculations based on the sum of specified percentages of eligible accounts receivable, eligible inventory and certain fixed assets and intellectual property, as applicable, minus the amount of any applicable reserves, and (ii) bear interest at a floating rate, which can be either, at the Borrower's option, (a) an adjusted LIBOR rate plus an applicable margin ranging from 1.25% to 2.75% per annum or (b) an alternate base rate plus an applicable margin ranging from 0.25% to 1.75% per annum, in each case, such applicable margins to be determined based on the Borrower's average borrowing availability remaining under the senior secured revolving credit facilities.

In addition to paying interest on the outstanding principal under the senior secured revolving credit facilities, the Borrower is required to pay (i) an unused line fee per annum of the average daily unused portion of the senior secured revolving credit facilities, (ii) a letter of credit fronting fee based on a percentage of the aggregate face amount of outstanding letters of credit, and (iii) certain other customary fees and expenses of the lenders and agents.

Mattel had borrowings under the senior secured revolving credit facilities of $150.0 million as of March 31, 2020 and had no borrowings under the senior secured revolving credit facilities as of March 31, 2019 and December 31, 2019. Outstanding letters of credit under the senior secured revolving credit facilities totaled approximately $13 million, $70 million, and $55 million as of March 31, 2020, March 31, 2019, and December 31, 2019, respectively.

The Credit Agreement contains customary covenants, including, but not limited to, restrictions on the Borrower's and its subsidiaries' ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances, or investments, pay dividends, sell or otherwise transfer assets outside of the ordinary course, optionally prepay or modify terms of any junior indebtedness, enter into transactions with affiliates, or change their line of business.

The Credit Agreement requires the maintenance of a fixed charge coverage ratio of 1.00 to 1.00 at the end of each fiscal quarter when excess availability under the senior secured revolving credit facilities is less than the greater of (x) $100 million and (y) 10% of the aggregate amount available thereunder (the "Availability Threshold") and on the last day of each subsequent fiscal quarter ending thereafter until no event of default exists and excess availability is greater than the Availability Threshold for at least 30 consecutive days.

Since the execution of the Credit Agreement, the fixed charge coverage ratio covenant has not been in effect, as no event of default has occurred and as Mattel's excess availability has been greater than $100 million and the Availability Threshold. As of March 31, 2020, Mattel was in compliance with all covenants contained in the Credit Agreement. The Credit Agreement is a material agreement, and failure to comply with the covenants may result in an event of default under the terms of the senior secured revolving credit facilities. If Mattel were to default under the terms of the senior secured revolving credit facilities, its ability to meet its seasonal financing requirements could be adversely affected.


9.	Long-Term Debt

Long-term debt includes the following:



	March 31, 2020			March 31, 2019			December 31, 2019
	(In thousands)
2010 Senior Notes due October 2020	$	—		$	250,000		$	—
2010 Senior Notes due October 2040	250,000			250,000			250,000
2011 Senior Notes due November 2041	300,000			300,000			300,000
2013 Senior Notes due March 2023	250,000			250,000			250,000
2016 Senior Notes due August 2021	—			350,000			—
2017/2018 Senior Notes due December 2025	1,500,000			1,500,000			1,500,000
2019 Senior Notes due December 2027	600,000			—			600,000
Debt issuance costs and debt discount	(51,076		)	(46,546		)	(53,249		)
	2,848,924			2,853,454			2,846,751
Less: current portion	—			—			—
	$	2,848,924		$	2,853,454		$	2,846,751


10.	Other Noncurrent Liabilities

Other noncurrent liabilities include the following:



	March 31, 2020		March 31, 2019		December 31, 2019
	(In thousands)
Benefit plan liabilities	$	205,694	$	183,294	$	212,280
Noncurrent income tax liabilities	125,798		143,723		125,515
Other	77,438		82,298		101,206
	$	408,930	$	409,315	$	439,001


11.	Accumulated Other Comprehensive Income (Loss)

The following tables present changes in the accumulated balances for each component of other comprehensive income (loss), including other comprehensive income (loss) and reclassifications out of accumulated other comprehensive income (loss) for each period:



	For the Three Months Ended March 31, 2020
	Derivative Instruments			Available-for-Sale Security			Employee Benefit Plans			Currency Translation Adjustments			Total
	(In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2019	$	11,041		$	(8,260	)	$	(169,857	)	$	(702,408	)	$	(869,484	)
Other comprehensive income (loss) before reclassifications	9,190			195			1,702			(145,634		)	(134,547		)
Amounts reclassified from accumulated other comprehensive income (loss)	(3,210		)	—			1,358			—			(1,852		)
Net increase (decrease) in other comprehensive income (loss)	5,980			195			3,060			(145,634		)	(136,399		)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of March 31, 2020	$	17,021		$	(8,065	)	$	(166,797	)	$	(848,042	)	$	(1,005,883	)



	For the Three Months Ended March 31, 2019
	Derivative Instruments			Available-for-Sale Security			Employee Benefit Plans			Currency Translation Adjustments			Total
	(In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2018	$	11,411		$	(6,547	)	$	(142,763	)	$	(721,327	)	$	(859,226	)
Other comprehensive income (loss) before reclassifications	5,818			1,877			(1,206		)	14,133			20,622
Amounts reclassified from accumulated other comprehensive income (loss)	(759		)	—			1,429			—			670
Net increase in other comprehensive income (loss)	5,059			1,877			223			14,133			21,292
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of March 31, 2019	$	16,470		$	(4,670	)	$	(142,540	)	$	(707,194	)	$	(837,934	)

The following table presents the classification and amount of the reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of operations:



	For the Three Months Ended
	March 31, 2020			March 31, 2019			Statements of Operations Classification
	(In thousands)
Derivative Instruments
Gain on foreign currency forward exchange contracts and other	$	3,193		$	927		Cost of sales
Tax effect	17			(168		)	Provision for income taxes
	$	3,210		$	759		Net loss
Employee Benefit Plans
Amortization of prior service credit (a)	$	466		$	493		Other non-operating expense, net
Recognized actuarial loss (a)	(2,340		)	(1,737		)	Other non-operating expense, net
	(1,874		)	(1,244		)
Tax effect	516			(185		)	Provision for income taxes
	$	(1,358	)	$	(1,429	)	Net loss

_______________________________________


(a)	The amortization of prior service credit and recognized actuarial loss are included in the computation of net periodic benefit cost. Refer to "Note 15 to the Consolidated Financial Statements—Employee Benefit Plans" of this Quarterly Report on Form 10-Q for additional information regarding Mattel's net periodic benefit cost.

Currency Translation Adjustments

Mattel's reporting currency is the U.S. dollar. The translation of its net investments in subsidiaries with non-U.S. dollar functional currencies subjects Mattel to the impact of foreign currency exchange rate fluctuations in its results of operations and financial position. Assets and liabilities of subsidiaries with non-U.S. dollar functional currencies are translated into U.S. dollars at fiscal period-end exchange rates. Income and expense items are translated at weighted-average exchange rates prevailing during the fiscal period. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity. Currency translation adjustments resulted in a net loss of $145.6 million for the three months ended March 31, 2020, primarily due to the weakening of the Mexican peso, Russian ruble, Brazilian real, and the British pound sterling against the U.S. dollar. Currency translation adjustments resulted in a net gain of $14.1 million for the three months ended March 31, 2019, primarily due to the strengthening of the British pound sterling and Russian ruble against the U.S. dollar.


12.	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. Mattel also 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 does not use hedge accounting for these contracts, and as such, changes in fair value are recorded in the period of change in the consolidated statements of operations. Additionally, Mattel utilizes derivative contracts to hedge commodities including certain raw materials. As of March 31, 2020, March 31, 2019, and December 31, 2019, Mattel held foreign currency forward exchange contracts and other commodity derivative instruments, with notional amounts of $1.37 billion, $1.10 billion, and $742.0 million, respectively.

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



	Derivative Assets
	Fair Value						Balance Sheet Classification
	March 31, 2020		March 31, 2019		December 31, 2019		Balance Sheet Classification
	(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange contracts and other	$	21,121	$	16,703	$	10,227	Prepaid expenses and other current assets
Foreign currency forward exchange contracts and other	2,525		3,041		715		Other noncurrent assets
Total derivatives designated as hedging instruments	$	23,646	$	19,744	$	10,942
Derivatives not designated as hedging instruments
Foreign currency forward exchange contracts and other	$	13,811	$	377	$	4,060	Prepaid expenses and other current assets
	$	37,457	$	20,121	$	15,002

	Derivative Liabilities
	Fair Value						Balance Sheet Classification
	March 31, 2020		March 31, 2019		December 31, 2019		Balance Sheet Classification
	(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange contracts and other	$	6,841	$	1,045	$	2,500	Accrued liabilities
Foreign currency forward exchange contracts and other	2,507		146		213		Other noncurrent liabilities
Total derivatives designated as hedging instruments	$	9,348	$	1,191	$	2,713
Derivatives not designated as hedging instruments
Foreign currency forward exchange contracts and other	$	1,594	$	4,992	$	263	Accrued liabilities
Foreign currency forward exchange contracts and other	224		—		—		Other noncurrent liabilities
Total derivatives not designated as hedging instruments	$	1,818	$	4,992	$	263
	$	11,166	$	6,183	$	2,976

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, 2020

March 31, 2019

Statements of

Operations

Classification

Amount of Gain Recognized in OCI

Amount of Gain Reclassified from Accumulated OCI to Statement of Operations

Amount of Gain Recognized in OCI

Amount of Gain Reclassified from Accumulated OCI to Statement of Operations

(In thousands)

Derivatives designated as hedging instruments

Foreign currency forward exchange contracts and other

9,190

3,210

5,818

759

Cost of sales

The net gains of $3.2 million and $0.8 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three months ended March 31, 2020 and 2019, respectively, are offset by the changes in cash flows associated with the underlying hedged transactions.



	Amount of (Loss) Gain Recognized in the Statements of Operations						Statements of Operations Classification
	For the Three Months Ended
	March 31, 2020			March 31, 2019
	(In thousands)
Derivatives not designated as hedging instruments
Foreign currency forward exchange contracts and other	$	(38,369	)	$	(498	)	Other non-operating expense, net

The net losses of $38.4 million and $0.5 million recognized in the consolidated statements of operations for the three months ended March 31, 2020 and 2019, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances.


13.	Fair Value Measurements

The following tables present information about Mattel's assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of March 31, 2020, March 31, 2019, and December 31, 2019 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. The three levels of the fair value hierarchy are as follows:


•	Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.


•	Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities, either directly or indirectly.


•	Level 3 – Valuations based on inputs that are unobservable, supported by little or no market activity, and that are significant to the fair value of the assets or liabilities.

Mattel's financial assets and liabilities include the following:



	March 31, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets
Foreign currency forward exchange contracts and other (a)	$	—	$	37,457	$	—	$	37,457
Available-for-sale security (b)	3,725		—		—		3,725
Total assets	$	3,725	$	37,457	$	—	$	41,182
Liabilities
Foreign currency forward exchange contracts and other (a)	$	—	$	11,166	$	—	$	11,166

	March 31, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets
Foreign currency forward exchange contracts and other (a)	$	—	$	20,121	$	—	$	20,121
Available-for-sale security (b)	7,150		—		—		7,150
Total assets	$	7,150	$	20,121	$	—	$	27,271
Liabilities
Foreign currency forward exchange contracts and other (a)	$	—	$	6,183	$	—	$	6,183

	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets
Foreign currency forward exchange contracts and other (a)	$	—	$	15,002	$	—	$	15,002
Available-for-sale security (b)	3,530		—		—		3,530
Total assets	$	3,530	$	15,002	$	—	$	18,532
Liabilities
Foreign currency forward exchange contracts and other (a)	$	—	$	2,976	$	—	$	2,976

____________________________________________


(a)	The fair value of the foreign currency forward exchange contracts and other commodity derivative instruments is based on dealer quotes of market forward rates and reflects the amount that Mattel would receive or pay at their maturity dates for contracts involving the same notional amounts, currencies, and maturity dates.


(b)	The fair value of the available-for-sale security is based on the quoted price on an active public exchange.

Other Financial Instruments

Mattel's financial instruments include cash and equivalents, accounts receivable and payable, accrued liabilities, short-term borrowings, and long-term debt. The fair values of these instruments, excluding long-term debt, approximate their carrying values because of their short-term nature. Cash and equivalents are classified as Level 1 and all other financial instruments are classified as Level 2 within the fair value hierarchy.

The estimated fair value of Mattel's long-term debt was $2.77 billion (compared to a carrying value of $2.90 billion) as of March 31, 2020, $2.71 billion (compared to a carrying value of $