Mattel 2012 Annual Report Download - page 20

During 2012, 2011, and 2010, Mattel incurred expenses of $717.8 million (11.2% of net sales), $699.2 million
(11.2% of net sales), and $647.3 million (11.1% of net sales), respectively, for advertising and promotion.
Sales
Mattel’s products are sold throughout the world. Products within the North America segment are sold
directly to retailers, including discount and free-standing toy stores, chain stores, department stores, other retail
outlets, and, to a limited extent, wholesalers. Mattel also operates several small retail outlets, generally near or at
its corporate headquarters and distribution centers as a service to its employees and as an outlet for its products.
Products within the International segment are sold directly to retailers and wholesalers in most European, Latin
American, and Asian countries, and in Australia and New Zealand, and through agents and distributors in those
countries where Mattel has no direct presence. Mattel also has retail outlets in Latin America and Europe that
serve as outlets for its products. American Girl products are sold directly to consumers, and its children’s
publications are also sold to certain retailers. Mattel has fourteen American Girl retail stores: American Girl
Place in Chicago, Illinois, Los Angeles, California, and New York, New York, and American Girl stores in
Alpharetta, Georgia, Bloomington, Minnesota, Chesterfield, Missouri, Dallas, Texas, Houston, Texas, Lone Tree,
Colorado, Lynnwood, Washington, McLean, Virginia, Miami, Florida, Natick, Massachusetts, and Overland
Park, Kansas, each of which features children’s products from the American Girl segment. American Girl also
has a retail outlet in Oshkosh, Wisconsin that serves as an outlet for its products. Additionally, Mattel sells
certain of its products online through its website.
During 2012, Mattel’s three largest customers (Wal-Mart at $1.2 billion, Toys “R” Us at $0.7 billion, and
Target at $0.5 billion) accounted for approximately 37% of worldwide consolidated net sales. Within countries in
the International segment, there is also a concentration of sales to certain large customers that do not operate in the
US, none of which exceed 10% of net sales. The customers and the degree of concentration vary depending upon
the region or nation. See Item 1A “Risk Factors” and Item 8 “Financial Statements and Supplementary Data—Note
12 to the Consolidated Financial Statements—Segment Information.”
Licenses and Distribution Agreements
Mattel has license agreements with third parties that permit Mattel to utilize the trademark, characters, or
inventions of the licensor in products that Mattel sells. A number of these licenses relate to product lines that are
significant to Mattel’s business and operations.
Mattel has entered into agreements to license entertainment properties from, among others, Disney Enterprises, Inc.
(including
©
Disney characters such as Mickey Mouse, Disney Princess, Jake and the Never Land Pirates, CARS and
Toy Story from Pixar, Winnie the Pooh
®
, and certain Disney films and television properties), Viacom International, Inc.
relating to its Nickelodeon
®
properties (including Dora the Explorer and Go Diego Go!), Warner Bros. Consumer
Products (including Batman, Superman, Justice League
®
, and Green Lantern
®
), Sesame Workshop
®
through
December 31, 2010 (relating to its Sesame Street
®
properties including Elmo), and WWE Wrestling.
Royalty expense for 2012, 2011, and 2010 was $240.2 million, $262.4 million, and $245.9 million,
respectively. See “Commitments” and Item 8 “Financial Statements and Supplementary Data—Note 11 to the
Consolidated Financial Statements—Commitments and Contingencies.”
Mattel also licenses a number of its trademarks and other property rights to others for use in connection with
the sale of their products. Mattel distributes some third-party finished products that are independently designed
and manufactured.
Trademarks, Copyrights and Patents
Most of Mattel’s products are sold under trademarks, trade names, and copyrights, and a number of these
products incorporate patented devices or designs. Trademarks, copyrights, and patents are significant assets of
Mattel in that they provide product recognition and acceptance worldwide.
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