Mattel 2012 Annual Report Download - page 45

Other Selling and Administrative Expenses
Other selling and administrative expenses were $1.41 billion in both 2011 and 2010, or 22.4% of net sales in
2011, as compared to 24.0% of net sales in 2010. The significant changes in other selling and administrative
expenses included higher employee-related expenses of approximately $38 million, including merit increases and
higher employee benefits, partially offset by lower legal fees of approximately $34 million. Additional drivers
include lower incentive compensation expense and cost savings from Operational Excellence 2.0 programs.
Non-Operating Items
Interest expense was $75.3 million in 2011, as compared to $64.8 million in 2010, driven primarily by
higher average borrowings resulting from the $500.0 million of senior notes issued in September 2010 and the
$600.0 million of senior notes issued in November 2011, partially offset by the repayment of $250.0 million of
maturing debt in 2011 and lower average interest rates. Interest income decreased from $8.4 million in 2010 to
$8.1 million in 2011, driven primarily by lower average interest rates, partially offset by higher average invested
cash balances. Other non-operating expense was $3.2 million in 2011, as compared to other non-operating
income of $1.3 million in 2010, driven primarily by other investment losses.
Provision for Income Taxes
Mattel’s effective tax rate on income before income taxes in 2011 was 20.8%, as compared to 19.1% in
2010. The 2011 income tax provision includes net tax benefits of $6.8 million, primarily related to reassessments
of prior years’ tax liabilities based on the status of audits and tax filings in various jurisdictions around the world,
settlements, and enacted tax law changes. The 2010 income tax provision includes net tax benefits of $16.8
million, primarily related to the release of a valuation allowance related to the anticipated utilization of excess
foreign tax credit carryforwards, reassessments of prior years’ tax liabilities based on the status of audits and tax
filings in various jurisdictions around the world, settlements, and enacted tax law changes, partially offset by the
incremental tax cost to repatriate earnings from certain foreign subsidiaries for which income taxes had not been
previously provided.
North America Segment
Gross sales for the North America segment were $3.30 billion in 2011, an increase of $106.7 million or 3%,
as compared to $3.19 billion in 2010, with no impact from changes in currency exchange rates, driven primarily
by higher sales of Barbie, Monster High, and CARS 2 products. Gross sales of Mattel Girls & Boys Brands
increased 10%. Gross sales of Barbie increased 8%. Gross sales of Other Girls Brands increased 24%, driven
primarily by higher sales of Monster High and Disney Princess products, partially offset by lower sales of Little
Mommy and Polly Pocket products. Gross sales of Wheels products decreased 5%, driven primarily by lower
sales of Matchbox products. Gross sales of Entertainment products increased 15%, driven primarily by higher
sales of CARS 2 products, partially offset by lower sales of Toy Story 3 products. Gross sales of Fisher-Price
Brands decreased 4%. Gross sales of Core Fisher-Price products increased 2%. Gross sales of Fisher-Price
Friends products decreased 25%, driven primarily by the discontinuation of the Sesame Street license. Cost of
sales increased 3% in 2011, as compared to a 3% increase in net sales, driven primarily by higher product and
other costs and higher royalty expenses, partially offset by lower freight and logistics expenses. Gross margins
were flat with 2010 due to price increases and favorable product mix, offset by higher input costs.
North America segment income increased 15% to $770.3 million in 2011, as compared to $671.2 million in
2010, driven primarily by higher net sales and lower other selling and administrative expenses.
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