MATTEL INC /DE/ 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Foreign Currency Exchange Rate Risk Currency exchange rate fluctuations impact Mattel's results of operations and cash flows. The Hong Kong dollar, Euro, and Chinese yuan were the primary currencies that caused foreign currency transaction exposure for Mattel in 2025. Mattel seeks to mitigate its exposure to foreign currency exchange risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts primarily to hedge its purchase and sale of inventory and other intercompany transactions denominated in foreign currencies. These contracts generally have maturity dates of up to 24 months. For those intercompany receivables and payables that are not hedged, the transaction gains or losses are recorded in the consolidated statements of operations in the period in which the exchange rate changes as part of operating income or other non-operating expense (income), net based on the nature of the underlying transaction. Transaction gains or losses on hedged intercompany inventory transactions are recorded in the consolidated statements of operations in the period in which the inventory is sold to customers. 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. 45 Mattel's financial position is also impacted by currency exchange rate fluctuations on translation of its net investments in subsidiaries with non-U.S. dollar functional currencies. 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, expense, and cash flow 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 loss within stockholders' equity. Mattel's primary currency translation adjustments in 2025 were related to its net investments in entities having functional currencies denominated in the Russian ruble, Mexican peso, and British pound sterling. There are numerous factors impacting the amount by which Mattel's financial results are affected by foreign currency translation and transaction gains and losses resulting from changes in currency exchange rates, including, but not limited to, the level of foreign currency forward exchange contracts in place at a given time and the volume of foreign currency-denominated transactions in a given period. However, assuming that such factors were held constant, Mattel estimates that a one percent change in the U.S. dollar would have impacted Mattel's 2025 net sales by approximately 0.4% and would have less than a $0.01 impact to Mattel's net income per share. Mattel's foreign currency forward e xchange contracts that were used to hedge firm commitments and anticipated transactions as of December 31, 2025 are shown below. All contracts in the following table are against the U.S. dollar and are maintained by reporting units with a U.S. dollar functional currency. Buy Sell Contract Amount Weighted-Average Contract Rate Fair Value Contract Amount Weighted-Average Contract Rate Fair Value (In thousands of U.S. dollars, except for rates) Australian dollar (a) $ — — $ — $ 95,816 0.66 $ (1,523) British pound sterling (a) 28,137 1.34 134 — — — Canadian dollar (a) — — — 53,008 0.73 (281) Czech koruna 5,301 20.61 21 — — — Euro (a) — — — 307,963 1.14 (12,016) Hungarian forint 6,881 327.67 18 — — — Indonesia rupiah 42,098 16,695.10 (73) — — — Japanese yen — — — 10,567 154.14 168 Mexican peso — — — 56,918 18.71 (1,657) Polish zloty 33,714 3.58 (20) — — — South African rand — — — 1,103 16.77 (12) Swiss franc 3,452 0.79 4 — — — $ 119,583 $ 84 $ 525,375 $ (15,321) (a) The weighted-average contract rate for these contracts is quoted in U.S. dollar per local currency. For foreign currency buy and sell contracts, fair value reflects the amount, based on dealer quotes, that Mattel would pay or receive at maturity for contracts involving the same notional amounts, currencies, and maturity dates, if they had been entered into as of December 31, 2025. 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 U.S. dollar detailed in the above table, Mattel also had contracts to sell British pound sterling for the purchase of Euro. As of December 31, 2025, these contracts had a contract amount of $10.3 million and a fair value of $0.2 million. If Mattel had not entered into hedges to limit the effect of currency exchange rate fluctuations on its results of operations and cash flows, its earnings before income taxes would have increased by approximately $10 million in 2025 and decreased by approximately $30 million in 2024. 46