Mattel 2012 Annual Report Download - page 15

PART I
Item 1. Business.
Mattel, Inc. (“Mattel”) designs, manufactures, and markets a broad variety of toy products worldwide which
are sold to its customers and directly to consumers. Mattel’s vision is “creating the future of play.” Mattel’s
objectives are to grow its share in the marketplace, continue to improve its operating margins, and create long-
term stockholder value. To achieve these objectives, management has established the following strategies:
The first strategy is to deliver consistent growth by continuing the momentum in its core brands, optimizing
entertainment partnerships, building new franchises, and working to expand and leverage its international
footprint.
The second strategy is to optimize operating margins through sustaining gross margins within the low-to-
mid 50% range in the near-term and above 50% in the long-term, and delivering on cost savings initiatives.
The third strategy is to generate significant cash flow and continue its disciplined, opportunistic, and value-
enhancing deployment.
Mattel believes its products are among the most widely recognized toy products in the world. Mattel’s
portfolio of brands and products are grouped in the following categories:
Mattel Girls & Boys Brands—including Barbie®fashion dolls and accessories (“Barbie”), Polly Pocket®,
Little Mommy®, Disney Classics®, and Monster High®(collectively “Other Girls Brands”), Hot Wheels®,
Matchbox®, and Tyco R/C®vehicles and play sets (collectively “Wheels”), and CARS®, Radica®, Toy
Story®, Max Steel®, WWE®Wrestling, and Batman®, and games and puzzles (collectively
“Entertainment”).
Fisher-Price Brands—including Fisher-Price®, Little People®, BabyGear™, and Imaginext®(collectively
“Core Fisher-Price”), Dora the Explorer®, Go Diego Go!®, Thomas & Friends®, Mickey Mouse®
Clubhouse, Disney’s Jake and the Never Land Pirates®, and See ‘N Say®(collectively “Fisher-Price
Friends”), and Power Wheels®.
American Girl Brands—including My American Girl®, the historical collection, and Bitty Baby®. American
Girl Brands products are sold directly to consumers via its catalog, website, and proprietary retail stores. Its
children’s publications are also sold to certain retailers.
Mattel was incorporated in California in 1948 and reincorporated in Delaware in 1968. Its executive offices
are located at 333 Continental Blvd., El Segundo, California 90245-5012, telephone number [phone].
Business Segments
“Mattel” refers to Mattel, Inc. and its subsidiaries as a whole, unless the context requires otherwise. This
narrative discussion applies to all segments except where otherwise stated. Mattel’s operating segments are
separately managed business units. Prior to 2012, Mattel’s operating segments were divided on a geographic
basis between domestic and international. The domestic segment was further divided into Mattel Girls & Boys
Brands US, Fisher-Price Brands US, and American Girl Brands. Effective January 1, 2012, Mattel modified its
organizational structure into North America, International, and American Girl divisions. This reorganization was
implemented in order to simplify the organization and to move decision-making for the North America business
closer to its retail customers and its toy consumers. Prior to the reorganization, the functions of the US operations
were divided between the Mattel Girls & Boys Brands US and Fisher-Price Brands US operating segments. Both
of these segments had distinct and separate reporting structures. The reorganization consolidated functions within
the US into a single reporting structure that is no longer structured around brands, including the US sales,
customer marketing, customer forecasting, customer service, and finance teams. The new structure is primarily
organized based on customer-focused teams that are designated to specific retail customers. As a result, the
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