Mattel 2014 Annual Report Download

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Table of contents

  • Page 1

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  • Page 3
    ... brands, global scale and strong balance sheet give Mattel a unique and enviable position of leadership within the industry. The worldwide toy industry itself is strong and growing, having shown 4% annual growth last year7. And we benefit from world-class talent across every function of the company...

  • Page 4

  • Page 5
    Mattel, Inc. Form 10-K 2014

  • Page 6

  • Page 7
    ..., 2014 ' or 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 (Exact name of registrant as specified in its charter) MATTEL, INC. 333 Continental Blvd. El Segundo, CA 90245-5012 (Address of...

  • Page 8
    ... Statements and Supplementary Data ...Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ... Item 9A. Controls and Procedures ...Item 9B. Other Information ...PART III Item 10. Directors, Executive Officers and Corporate Governance ...Item 11. Executive Compensation...

  • Page 9
    ... of MEGA Brands Inc. ("MEGA Brands"). Mattel Girls & Boys Brands-including Barbie® fashion dolls and accessories ("Barbie"), Monster High®, Disney Classics®, Ever After High®, Little Mommy®, and Polly Pocket® (collectively "Other Girls"), Hot Wheels® and Matchbox® vehicles and play sets...

  • Page 10
    ...dolls and accessories. Other Girls includes Monster High, Disney Classics, Ever After High, Little Mommy, and Polly Pocket. Wheels includes Hot Wheels and Matchbox vehicles and play sets. Entertainment includes CARS, Disney Planes, BOOMco, Radica, Toy Story, Max Steel, WWE Wrestling, Batman, as well...

  • Page 11
    ... as those developed and marketed by the North America segment, although some are developed or adapted for particular international markets. Mattel's products are sold directly to retailers and wholesalers in most European, Latin American, and Asian countries, and in Australia and New Zealand, and...

  • Page 12
    ... manufacturers' facilities is sufficient to handle expected volume in the foreseeable future. See Item 1A "Risk Factors." Mattel bases its production schedules for toy products on customer orders and forecasts, taking into account historical trends, results of market research, and current market...

  • Page 13
    ... employed by Mattel. During 2014, 2013, and 2012, Mattel incurred expenses of $209.5 million, $201.9 million, and $195.1 million, respectively, in connection with the design and development of products, exclusive of royalty payments. See Part II, Item 8 "Financial Statements and Supplementary Data...

  • Page 14
    ... 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...

  • Page 15
    ... global rights to produce and sell toys based on Disney Princess characters is scheduled to expire at the end of 2015 and will not be renewed. 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...

  • Page 16
    ...and financial condition, depending on the product affected by the recall and the extent of the recall efforts required. A product recall could also negatively affect Mattel's reputation and the sales of other Mattel products. See Item 1A "Risk Factors." Mattel's advertising is subject to the Federal...

  • Page 17
    ... Vice President and Corporate Controller Executive Vice President, Global Brands Team-Fisher-Price 2015 2014 1996 2013 2000 2011 2013 1999 2010 2004 2013 Mr. Sinclair has been Chairman of the Board and Interim Chief Executive Officer since January 2015 and a member of the Board of Directors since...

  • Page 18
    ... 2014 to January 2015, he served as Executive Vice President, International. From February 2011 to May 2014, he served as Executive Vice President, Global Brands Team-Boys & Girls. From February 2010 to February 2011, he served as General Manager and Senior Vice President, Mattel Brands El Segundo...

  • Page 19
    ... President, Global Brands Teams-Fisher-Price since April 2013. From January 2011 to April 2013, he served as Senior Vice President and General Manager of Mattel's European businesses. From October 2010 through December 2010, he served as Senior Vice President Global Core Brands Marketing Strategy...

  • Page 20
    ...Mattel's sales. Successful movies and characters in children's literature affect play preferences, and many toys depend on media-based intellectual property licenses. Media-based licenses can cause a line of toys to gain immediate success among children, parents, or families. Trends in media, movies...

  • Page 21
    ...or changes in the purchasing policies or patterns of its key customers could have a significant impact on Mattel's business and operating results. A small number of customers account for a large share of Mattel's net sales. In 2014, Mattel's three largest customers, Wal-Mart, Toys "R" Us, and Target...

  • Page 22
    ... effect on Mattel's business and results of operations. If global economic conditions deteriorate, Mattel's business and financial results could be adversely affected. Mattel designs, manufactures, and markets a wide variety of toy products worldwide through sales to retailer customers and directly...

  • Page 23
    ... Mattel's brands, catch new trends, create new brands, and offer new innovative products, enhance product safety, develop people, improve productivity, simplify processes, maintain customer service levels, as well as initiatives designed to drive sales growth, capitalize on Mattel's scale advantage...

  • Page 24
    ... value of Mattel's business depends on its ability to protect its intellectual property and information, including its trademarks, trade names, copyrights, patents and trade secrets, in the US and around the world, as well as its customer, employee, and consumer data. The steps Mattel has taken may...

  • Page 25
    ...enter into licensing agreements for products on competitive terms, absence or increased cost of insurance, or additional safety and testing requirements. Such results could divert development and management resources, adversely affect Mattel's business operations, decrease sales, increase legal fees...

  • Page 26
    ... of China, where many of Mattel's manufacturing facilities and third-party manufacturers are located. The design, development and manufacture of Mattel's products could suffer if a significant number of Mattel's employees or the employees of its third-party manufacturers or their suppliers contract...

  • Page 27
    ...on its business. Mattel relies extensively on information technology systems across its operations, including for management of its supply chain, sale and delivery of its products, reporting its results of operations, collection and storage of consumer data, personal data of customers, employees and...

  • Page 28
    ...-looking statements, whether as a result of new developments or otherwise. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. Mattel owns its corporate headquarters in El Segundo, California, consisting of approximately 335,000 square feet, and an adjacent office building consisting...

  • Page 29
    ..., leased retail space in Oshkosh, Wisconsin, which is used by the American Girl segment, and Pomona, California, which is used by the North America segment. Internationally, Mattel has offices and/or warehouse space in Argentina, Australia, Austria, Belgium, Bermuda, Brazil, Canada, Chile, China...

  • Page 30
    ... Data-Note 14 to the Consolidated Financial Statements-Quarterly Financial Information (Unaudited)." Holders of Record As of February 13, 2015, Mattel had approximately 30,000 holders of record of its common stock. Dividends During 2014, 2013, and 2012, Mattel paid total dividends per share...

  • Page 31
    ... stock units. These shares were not purchased as part of a publicly announced repurchase plan or program. (2) Mattel's share repurchase program was first announced on July 21, 2003. On July 17, 2013, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0 million...

  • Page 32
    ... of dividends. Comparison of Five Year Cumulative Total Return Mattel, Inc., S&P 500, and S&P 500 Consumer Discretionary Index 300 250 200 150 100 50 0 2009 2010 2011 2012 2013 2014 Mattel S&P 500 Cumulative Total Return S&P 500 Consumer Discretionary 2010 2011 2012 2013 2014 Mattel, Inc...

  • Page 33
    ... charge related to a 2014 tax restructuring for the HIT Entertainment and MEGA Brands operations. The provision for income taxes in 2013 was positively impacted by net tax benefits of $32.2 million, primarily related to reassessments of prior years' tax liabilities based on the status of audits and...

  • Page 34
    ...million shares of its common stock. 2015 and Beyond In 2015 and beyond, Mattel intends to utilize its unmatched portfolio of brands, global scale of infrastructure, capable management team, and strong balance sheet to work towards revitalizing its business and to deepen its connection with children...

  • Page 35
    ... of Mattel's consolidated results for 2014 and 2013 (in millions, except percentage and basis point information): For the Year 2014 2013 % of Net % of Net Amount Sales Amount Sales Year/Year Change Basis Points % of Net Sales Net sales ...Gross profit ...Advertising and promotion expenses ...Other...

  • Page 36
    ...sales by brand for 2014 and 2013: For the Year 2014 2013 % Change (In millions, except percentage information) Mattel Girls & Boys Brands: Barbie ...Other Girls ...Wheels ...Entertainment ...Fisher-Price Brands: Core Fisher-Price ...Fisher-Price Friends ...Other Fisher-Price ...American Girl Brands...

  • Page 37
    ... tax charge related to a 2014 tax restructuring for the HIT Entertainment and MEGA Brands operations. The 2013 net tax benefits 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...

  • Page 38
    ... of Mattel's gross sales by brand for the North America segment for 2014 and 2013: For the Year 2014 2013 % Change (In millions, except percentage information) Mattel Girls & Boys Brands: Barbie ...Other Girls ...Wheels ...Entertainment ...Fisher-Price Brands: Core Fisher-Price ...Fisher-Price...

  • Page 39
    ... of Mattel's gross sales by brand for the International segment for 2014 and 2013: For the Year 2014 2013 % Change (In millions, except percentage information) Mattel Girls & Boys Brands: Barbie ...Other Girls ...Wheels ...Entertainment ...Fisher-Price Brands: Core Fisher-Price ...Fisher-Price...

  • Page 40
    ... consumer takeaway. American Girl segment income decreased by 18% to $113.6 million in 2014, as compared to $138.0 million in 2013, primarily due to lower gross profit and higher advertising and promotion expenses. 2013 Compared to 2012 Consolidated Results Net sales for 2013 were $6.48 billion...

  • Page 41
    ...sales by brand for 2013 and 2012: For the Year 2013 2012 % Change (In millions, except percentage information) Mattel Girls & Boys Brands: Barbie ...Other Girls ...Wheels ...Entertainment ...Fisher-Price Brands: Core Fisher-Price ...Fisher-Price Friends ...Other Fisher-Price ...American Girl Brands...

  • Page 42
    ... of Mattel's gross sales by brand for the North America segment for 2013 and 2012: For the Year 2013 2012 % Change (In millions, except percentage information) Mattel Girls & Boys Brands: Barbie ...Other Girls ...Wheels ...Entertainment ...Fisher-Price Brands: Core Fisher-Price ...Fisher-Price...

  • Page 43
    ... of Mattel's gross sales by brand for the International segment for 2013 and 2012: For the Year 2013 2012 % Change (In millions, except percentage information) Mattel Girls & Boys Brands: Barbie ...Other Girls ...Wheels ...Entertainment ...Fisher-Price Brands: Core Fisher-Price ...Fisher-Price...

  • Page 44
    ...advertising and promotion expenses. American Girl Segment The following table provides a summary of Mattel's gross sales by brand for the American Girl segment for 2013 and 2012: For the Year 2013 2012 % Change (In millions, except percentage information) American Girl Segment: American Girl Brands...

  • Page 45
    ... HIT Entertainment and MEGA Brands operations. Mattel's effective tax rate on income before income taxes in both 2013 and 2012 was 17.8%. The 2013 income tax provision included net tax benefits of $32.2 million, primarily related to reassessments of prior years' tax liabilities based on the status...

  • Page 46
    ... currency exchange rates. Mattel believes that it has ample liquidity to fund its business needs, including beginning of year cash and equivalents, cash flows from operations, and access to the commercial paper markets and its Credit Facility, which it uses for seasonal working capital requirements...

  • Page 47
    ... in capital expenditures annually to maintain and grow the business, To make strategic opportunistic acquisitions, and To return excess funds to stockholders through dividends and share repurchases. Over the long term, assuming annual cash flows from operating activities remain strong, Mattel plans...

  • Page 48
    ... royalties and advertising and promotion, partially offset by lower incentive compensation accruals. The change in accounts payable and accrued liabilities from December 31, 2013 includes an increase of $45.3 million related to the MEGA Brands acquisition. As of December 31, 2014, Mattel had no...

  • Page 49
    ... operations, liquidity, capital expenditures, or capital resources. Commitments In the normal course of business, Mattel enters into debt agreements and contractual arrangements to obtain and protect Mattel's right to create and market certain products and for future purchases of goods and services...

  • Page 50
    ...market changes in Mattel's stock price. Furthermore, the Plan limits the percentage of the employee's total account balance that may be allocated to the Mattel Stock Fund to 25%. Employees may generally reallocate their account balances on a daily basis. However, pursuant to Mattel's insider trading...

  • Page 51
    ... of both current and future economic factors in relation to its customers' ability to pay amounts owed to Mattel. 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...

  • Page 52
    ... customer orders and forecasts, taking into account historical trends, results of market research, and current market information. Mattel ships products in accordance with delivery schedules specified by its customers, who usually request delivery within three months. In anticipation of retail sales...

  • Page 53
    ... the next annual selling cycle. The following table summarizes Mattel's obsolescence reserve at December 31: 2013 2012 2014 (In millions, except percentage information) Allowance for obsolescence ...As a percentage of total inventory ... $46.9 $49.1 $46.6 7.7% 7.9% 9.1% Management believes that...

  • Page 54
    ... quarter of 2013, Mattel changed its brand strategy for Polly Pocket, which includes a more focused allocation of resources to support the Polly Pocket brand in specific markets, resulting in a reduction of the forecasted future cash flows of the brand. As a result of the change, Mattel tested the...

  • Page 55
    ... customer programs as of December 31, 2014 are adequate and proper. Benefit Plan Assumptions Mattel and certain of its subsidiaries have retirement and other postretirement benefit plans covering substantially all employees of these companies. See Item 8 "Financial Statements and Supplementary Data...

  • Page 56
    ...benefit pension plans was 8.0% in 2014, 2013, and 2012. Assuming all other benefit plan assumptions remain constant, a one percentage point decrease in the expected return on plan assets would result in an increase in benefit plan expense during 2015 of approximately $4 million. The health care cost...

  • Page 57
    ...restricted stock units ("Performance RSUs"), was $39.5 million, $49.6 million, and $49.5 million in 2014, 2013, and 2012, respectively, and is also included within other selling and administrative expenses. As of December 31, 2014, total unrecognized compensation cost related to unvested share-based...

  • Page 58
    ...the status of audits and tax filings in various jurisdictions around the world, settlements, and enacted tax law changes, partially offset by a tax charge related to a 2014 tax restructuring for the HIT Entertainment and MEGA Brands operations. The 2013 and 2012 net tax benefits primarily related to...

  • Page 59
    A reconciliation of gross sales to the most directly comparable GAAP financial measure, net sales, is as follows: 2014 For the Year 2013 (In thousands) 2012 Revenues by Segment North America ...International ...American Girl ...Gross sales ...Sales adjustments ...Net sales ... $3,011,633 3,061,506 ...

  • Page 60
    ... consolidated statement 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...

  • Page 61
    ... million in 2014, decreased by approximately $9 million in 2013, and decreased by approximately $35 million in 2012. Venezuelan Operations Since January 1, 2010, Mattel has accounted for Venezuela as a highly inflationary economy as the threeyear cumulative inflation rate for Venezuela exceeded 100...

  • Page 62
    ... which is a market-driven exchange that will allow for legal trading of foreign currency based on supply and demand. Mattel will monitor the accessibility of US dollars through the new currency exchange platform and will assess the impact to its financial statements as additional information becomes...

  • Page 63
    ... bolivar fuerte significantly devalues in the future, or if the economic or political conditions significantly worsen, Mattel may consider ceasing operations of its Venezuelan subsidiary, which could result in a pre-tax charge to its consolidated statement of operations of up to $95 million. 57

  • Page 64
    ... Commission. The scope of management's evaluation of the effectiveness of internal control over financial reporting does not include any internal controls of MEGA Brands Inc., a corporation incorporated under the laws of Canada ("MEGA Brands"), which was acquired on April 30, 2014. This exclusion is...

  • Page 65
    ... in Management's Report on Internal Control Over Financial Reporting, management has excluded MEGA Brands Inc. ("MEGA Brands"), from its assessment of internal control over financial reporting as of December 31, 2014 because MEGA Brands was acquired by the Company in a purchase business combination...

  • Page 66
    MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2014 2013 (In thousands, except share data) ASSETS Current Assets Cash and equivalents ...Accounts receivable, net of allowances of $26.3 million and $20.4 million in 2014 and 2013, respectively ...Inventories ......

  • Page 67
    ..., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Year 2014 2013 2012 (In thousands, except per share amounts) Net Sales ...Cost of sales ...Gross Profit ...Advertising and promotion expenses ...Other selling and administrative expenses ...Operating Income ...Interest expense...

  • Page 68
    ..., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 2014 For the Year 2013 (In thousands) 2012 Net Income ...Other Comprehensive (Loss) Income, Net of Tax: Currency translation adjustments ...Defined benefit pension plans net prior service credit (cost) and net actuarial gain...

  • Page 69
    ...,260 - Payment of credit facility renewal costs ...- (4,003) - Share repurchases ...(177,162) (492,740) (66,733) Payment of dividends on common stock ...(514,813) (494,371) (423,378) Proceeds from exercise of stock options ...43,299 134,506 122,296 Tax benefits from share-based payment arrangements...

  • Page 70
    ... ...Share-based compensation ...Tax benefits from share-based payment arrangements ...Dividend equivalents for restricted stock units ...Dividends ...Balance, December 31, 2013 ...Net income ...Other comprehensive loss, net of tax ...Purchase of treasury stock ...Issuance of treasury stock for stock...

  • Page 71
    ... of credit, purchasing various forms of credit insurance with unrelated third parties, factoring, or requiring cash in advance of shipment. Mattel records an allowance for doubtful accounts based on management's assessment of the business environment, customers' financial condition, historical...

  • Page 72
    ... potential impairment identified is assessed by evaluating the operating performance and future undiscounted cash flows of the underlying assets. When property is sold or retired, the cost of the property and the related accumulated depreciation are removed from the consolidated balance sheet, and...

  • Page 73
    ...Promotion Costs Costs of media advertising are expensed the first time the advertising takes place, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Direct-response advertising consists primarily of catalog production and mailing...

  • Page 74
    ... certain retirement and other postretirement benefit plans (see "Note 4 to the Consolidated Financial Statements-Employee Benefit Plans"). Share-Based Payments Mattel recognizes the cost of employee share-based payment awards on a straight-line attribution basis over the requisite employee service...

  • Page 75
    ... not been reported in financial statements previously issued or available for issuance. Mattel is currently evaluating the impact of the adoption of ASU 2014-08 on its operating results and financial position. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606...

  • Page 76
    ... Agreement, Mattel indirectly acquired, through the Purchasing Subsidiary, 100% of the issued and outstanding common shares and warrants of MEGA Brands for total cash consideration of $454.9 million, including payment for cash acquired of $31.6 million. The acquisition of MEGA Brands will build...

  • Page 77
    ... with the acquisition of MEGA Brands during 2014, Mattel recognized $95.0 million of amortizable identifiable intangible assets, primarily related to trade names and existing product lines. During the second quarter of 2013, Mattel changed its brand strategy for Polly Pocket®, which includes...

  • Page 78
    ... approximately $14 million, which was reflected within other selling and administrative expenses in the consolidated statement of operations for the North America and International operating segments during 2013. In conjunction with the Polly Pocket trade name impairment test, Mattel reassessed the...

  • Page 79
    ... operating loss carryforwards, employee compensation-related expenses, and certain other reserves that are recognized in different years for financial statement and income tax reporting purposes. Mattel's deferred income tax assets (liabilities) are composed of the following: December 31, 2014 2013...

  • Page 80
    ... 31, 2014, Mattel has federal and foreign loss carryforwards totaling $869.9 million and tax credit carryforwards of $72.5 million, which excludes carryforwards that do not meet the threshold for recognition in the financial statements. Utilization of these loss and tax credit carryforwards is...

  • Page 81
    ... the consolidated statements of operations. As of December 31, 2014, Mattel accrued $18.1 million in interest and penalties related to unrecognized tax benefits. Of this balance, $17.5 million would impact the effective tax rate if recognized. In the first quarter of 2014, Mattel adopted ASU 2013-11...

  • Page 82
    ... and vesting of other stock compensation awards resulted in an increase to additional paid-in capital for related windfall income tax benefits totaling $21.2 million, $50.4 million, and $35.8 million in 2014, 2013, and 2012, respectively. Note 4-Employee Benefit Plans Mattel and certain of its...

  • Page 83
    ... Plans 2014 2013 2012 2014 2013 2012 (In thousands) Net periodic benefit cost: Service cost ...$ 7,515 $ 12,982 $ 13,285 $ 67 $ 82 $ 79 Interest cost ...27,708 25,580 29,530 1,377 1,585 1,411 Expected return on plan assets ...(31,833) (29,786) (31,270) - - - Amortization of prior service credit...

  • Page 84
    ...: 2014 For the Year 2013 2012 Defined benefit pension plans: Discount rate ...Weighted average rate of future compensation increases ...Long-term rate of return on plan assets ...Postretirement benefit plans: Discount rate ...Annual increase in Medicare Part B premium ...Health care cost trend...

  • Page 85
    ...year ...Actual return on plan assets ...Employer contributions ...Impact of currency exchange rate changes ...Benefits paid ...Plan assets at fair value, end of year ...Net Amount Recognized in Consolidated Balance Sheets: Funded status, end of year ...Current accrued benefit liability ...Noncurrent...

  • Page 86
    ... and postretirement benefit plans are as follows: December 31, 2014 2013 Defined benefit pension plans: Discount rate ...Weighted average rate of future compensation increases ...Postretirement benefit plans: Discount rate ...Annual increase in Medicare Part B premium ...Health care cost trend rate...

  • Page 87
    ...duration of the liabilities and include US government treasuries and agencies, corporate bonds from various industries, and mortgage-backed and assetbacked securities. Mattel's defined benefit pension plan assets are measured and reported in the financial statements at fair value using inputs, which...

  • Page 88
    ...Compensation Plans Mattel has annual incentive compensation plans under which officers and key employees may earn incentive compensation based on Mattel's performance and are subject to certain approvals of the Compensation Committee of the Board of Directors. For 2014, 2013, and 2012, $25.2 million...

  • Page 89
    ... million, respectively, for the 2011-2013 market-related component. For the January 1, 2014-December 31, 2016 LTIP performance cycle, Mattel also granted 2014-2016 Performance RSUs under the Mattel, Inc. 2010 Equity and Long-Term Compensation Plan to officers and certain employees providing services...

  • Page 90
    ... amounts of accounts receivable that have been sold under international factoring arrangements were $22.3 million and $25.6 million at December 31, 2014 and 2013, respectively. These amounts have been excluded from Mattel's consolidated balance sheets. In January 2015, a major credit rating agency...

  • Page 91
    ... to 3.15%, with a weighted average interest rate of 2.425% as of December 31, 2014 and 2013. Mattel's 2014 Senior Notes bear interest at a fixed rate of 2.35% as of December 31, 2014. During 2014, Mattel repaid $44.6 million of long-term borrowings assumed through the acquisition of MEGA Brands. 85

  • Page 92
    ... on market conditions. Mattel's share repurchase program has no expiration date. Dividends During 2014, 2013, and 2012, Mattel paid total dividends per share of $1.52, $1.44, and $1.24, respectively, to holders of its common stock. The Board of Directors declared the dividends on a quarterly...

  • Page 93
    ... balances for each component of other comprehensive income, including current period other comprehensive income and reclassifications out of accumulated other comprehensive income (loss): For the Year Ended December 31, 2014 Derivative Instruments Currency Defined Benefit Translation Pension Plans...

  • Page 94
    ... Plan. Under the 2010 Plan, Mattel has the ability to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, dividend equivalent rights, performance awards, and shares of common stock to officers, employees, and other persons providing services...

  • Page 95
    ... compensation to the non-employee members of the Board of Directors. The 2010 Plan expires on March 25, 2020, except as to any grants then outstanding. The number of shares of common stock available for grant under the 2010 Plan is subject to an aggregate limit of the sum of (i) 48 million shares...

  • Page 96
    ...Mattel uses treasury shares purchased under its share repurchase program to satisfy stock option exercises. Cash received from stock options exercised during 2014, 2013, and 2012 was $43.3 million, $134.5 million, and $122.3 million, respectively. Restricted Stock Units RSUs are valued at the market...

  • Page 97
    ... Consolidated Financial Statements-Employee Benefit Plans." Income tax benefits related to Performance RSU compensation expense recognized in the consolidated statements of operations during 2013 and 2012 totaled $4.2 million and $5.2 million, respectively. Note 8-Earnings Per Share Unvested share...

  • Page 98
    ... assumed treasury share repurchases at average market prices. Nonqualified stock options and non-participating RSUs totaling 2.8 million shares, 0.6 million shares, and 0.7 million shares were excluded from the calculation of diluted net income per common share for 2014, 2013, and 2012, respectively...

  • Page 99
    ... tax, from derivatives reported in the consolidated statements of operations: Derivatives Designated As Hedging Instruments For the Year For the Year For the Year 2014 2013 2012 (In thousands) Statements of Operations Classification Foreign currency forward exchange contracts: Amount of gain (loss...

  • Page 100
    ... during 2014, 2013, and 2012, respectively, are offset by foreign currency transaction gains and losses on the related hedged balances. Note 10-Fair Value Measurements The following table presents information about Mattel's assets and liabilities measured and reported in the financial statements at...

  • Page 101
    ... of the intangible asset to approximately $99 million, as more fully described in "Note 2 to the Consolidated Financial Statements-Goodwill and Other Intangibles." During 2014, 2013, and 2012, Mattel did not have any other assets or liabilities measured and reported at fair value on a non-recurring...

  • Page 102
    ... $2.6 million, $0.9 million, and $0.9 million in 2014, 2013, and 2012, respectively. Commitments In the normal course of business, Mattel enters into contractual arrangements to obtain and protect Mattel's right to create and market certain products and for future purchases of goods and services to...

  • Page 103
    ... liabilities in the consolidated balance sheets. Loss reserves are accrued based on Mattel's estimate of the aggregate liability for claims incurred. Litigation Litigation Related to Carter Bryant and MGA Entertainment, Inc. In April 2004, Mattel filed a lawsuit in Los Angeles County Superior Court...

  • Page 104
    ... Inventions Agreements with its employees. Bryant also removed Mattel's suit to the United States District Court for the Central District of California. In December 2004, MGA intervened as a party-defendant in Mattel's action against Bryant, asserting that its rights to Bratz properties are...

  • Page 105
    ... by Bryant during his Mattel employment were Mattel's property and that hundreds of Bratz female fashion dolls infringe Mattel's copyrights. The Court also upheld the jury's award of damages in the amount of $100 million and ordered an accounting of post-trial Bratz sales. The Court further vacated...

  • Page 106
    ... would pay approximately $138 million, including accrued interest, in full satisfaction of the copyright fees judgment, (ii) all parties would consent to entry of an order exonerating and discharging the appeal bond posted by Mattel, and (iii) MGA's insurers would dismiss all pending actions related...

  • Page 107
    .... On December 30, 2013, Evanston Insurance Company's appeal in its action against Mattel was dismissed. On January 13, 2014, MGA filed a new, but virtually identical, trade secrets claim against Mattel in Los Angeles County Superior Court. In its complaint, MGA purports to seek damages in excess of...

  • Page 108
    ... Mattel Girls & Boys Brands-including Barbie® fashion dolls and accessories ("Barbie"), Monster High®, Disney Classics®, Ever After High®, Little Mommy®, and Polly Pocket (collectively "Other Girls"), Hot Wheels® and Matchbox® vehicles and play sets (collectively "Wheels"), and CARS®, Disney...

  • Page 109
    ..., share-based payments, and corporate headquarters functions managed on a worldwide basis, and the impact of changes in foreign currency rates on intercompany transactions. 2014 For the Year 2013 (In thousands) 2012 Revenues by Segment North America ...International ...American Girl ...Gross sales...

  • Page 110
    ...termination-related costs for 2014, 2013, and 2012, respectively, (iii) share-based compensation expense of $52.0 million, $61.7 million, and $63.3 million for 2014, 2013, and 2012, respectively, (iv) the Litigation Charge of $137.8 million for 2012, and (v) legal fees associated with MGA litigation...

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    ..., property, plant, and equipment, net, and identifiable intangibles, net. 2014 For the Year 2013 (In thousands) 2012 Revenues North American Region (a) ...International Region: Europe ...Latin America ...Asia Pacific ...Total International Region ...Gross sales ...Sales adjustments ...Net sales...

  • Page 112
    ...million and $68.3 million at December 31, 2014 and 2013, respectively) ...Other ...Accrued liabilities include the following: Royalties ...Advertising and promotion ...Taxes other than income taxes ...Incentive compensation ...Other ...Other noncurrent liabilities include the following: Benefit plan...

  • Page 113
    ...) income per common share-diluted ...Weighted average number of common and potential common shares ...Dividends declared per common share ...Common stock market price: High ...Low ...Year Ended December 31, 2013: Net sales ...Gross profit ...Advertising and promotion expenses ...Other selling and...

  • Page 114
    ... million, primarily related to a tax charge related to a 2014 tax restructuring for the HIT Entertainment and MEGA Brands operations, partially offset by reassessments of prior years' tax liabilities based on the status of audits and tax filings in various jurisdictions around the world, settlements...

  • Page 115
    ... Brands, which was acquired on April 30, 2014, that are also part of MEGA Brands' internal controls over financial reporting. This exclusion is in accordance with the SEC's general guidance that a recently acquired business may be omitted from the scope of the assessment in the year of acquisition...

  • Page 116
    ... Compliance"; and "The Board of Directors and Corporate Governance-Board Committees-Audit Committee" in the Mattel Notice of Annual Meeting of Stockholders and 2015 Proxy Statement to be filed with the SEC within 120 days after December 31, 2014 (the "Proxy Statement"). Information with respect to...

  • Page 117
    ... Data." Page Management's Report on Internal Control Over Financial Reporting ...Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of December 31, 2014 and 2013 ...Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013, and 2012...

  • Page 118
    ..., 2013, regarding an offer of employment for the position of EVP Global Operations. Letter Agreement among Mattel, Inc., MEGA Brands Inc. and Geoff Massingberd dated April 30, 2014 regarding an offer of employment for the position of President of MEGA Brands Inc. Letter Agreement between Mattel, Inc...

  • Page 119
    ... 1, 2014) The Mattel Cash Balance Excess Benefit Plan (as amended and restated, effective July 1, 2012) Amendment No. 1 to the Mattel Cash Balance Excess Benefit Plan (as amended and restated effective July 1, 2012) Mattel, Inc. Personal Investment Plan (amended and restated as of January 1, 2013...

  • Page 120
    ...and the MEGA Brands America, Inc. 401(k) Savings Plan Mattel, Inc. 2005 Equity Compensation Plan (the "2005 Plan") Amendment No. 1 to the 2005 Plan Amendment No. 2 to the 2005 Plan Amendment No. 3 to the 2005 Plan Mattel, Inc. 2010 Equity and LongTerm Compensation Plan (the "2010 Plan") Amendment No...

  • Page 121
    ... of NQSOs under the 2005 Plan Form of Grant Agreement as of May 17, 2007 for Initial Grant to Outside Director of NQSOs under the 2005 Plan 10-Q 001-05647 10.1 April 27, 2011 10.38+ 10-Q 001-05647 10.2 April 27, 2011 10.39+ 8-K 001-05647 10.1 November 16, 2012 10.40+ 10-Q 001-05647...

  • Page 122
    ... under the 2005 Plan Form of Grant Agreement for May 13, 2009 Annual Grants to Outside Directors of RSUs under the 2005 Plan Computation of Earnings to Fixed Charges Subsidiaries of the Registrant as of December 31, 2014 Consent of Independent Registered Public Accounting Firm Power of Attorney (on...

  • Page 123
    ... Financial Statement Schedule See Item (a)(2) above. Copies of this Annual Report on Form 10-K (including Exhibit 24.0) and Exhibits 12.0, 21.0, 23.0, 31.0, 31.1, and 32.0 are available to stockholders of Mattel without charge. Written requests should be sent to: Secretary, Mail Stop M1-1516, Mattel...

  • Page 124
    ... Board and Interim Chief Executive Officer (principal executive officer) Chief Financial Officer (principal financial officer) Senior Vice President and Corporate Controller (principal accounting officer) Director February 25, 2015 February 25, 2015 /S/ February 25, 2015 /S/ February 25, 2015...

  • Page 125
    ... Date /S/ ANN LEWNES Ann Lewnes DOMINIC NG Dominic Ng Director February 25, 2015 /S/ Director February 25, 2015 /S/ VASANT M. PRABHU Vasant M. Prabhu DEAN A. SCARBOROUGH Dean A. Scarborough Director February 25, 2015 /S/ Director February 25, 2015 /S/ DIRK VAN DE PUT Dirk Van de Put...

  • Page 126
    ... doubtful accounts of $12.8 million related to a transaction that was not recognized in the statement of operations as the transaction did not meet the relevant revenue recognition criteria. (e) Includes income tax valuation allowances of $70.9 million related to the acquisition of MEGA Brands that...

  • Page 127
    EXHIBIT 12.0 MATTEL, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited; in thousands, except ratios) 2014 2013 For the Year 2012 2011 2010 Earnings Available for Fixed Charges: Income from continuing operations before income taxes ...Add: Interest expense ......

  • Page 128
    ... record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 25, 2015 By: /s/ CHRISTOPHER A. SINCLAIR...

  • Page 129
    ... to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 25, 2015 By: /s/ KEVIN M. FARR Kevin...

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  • Page 131
    ...H. Walker Executive Vice President, Global Brands Team - Fisher-Price (1) (2) (3) (4) Member, Executive Committee Michael J. Dolan, Chair Member, Audit Committee Vasant M. Prabhu, Chair Member, Compensation Committee Michael J. Dolan, Chair Member, Governance and Social Responsibility Committee Dr...

  • Page 132
    ...MEDIA RELATIONS TRADEMARK LEGENDS 333 Continental Boulevard El Segundo, CA 90245-5012 310-252-2000 For more information, please visit Mattel's corporate Web site: http://corporate.mattel.com TRANSFER AGENT AND REGISTRAR Financial media should contact: Stephanie Cota, Senior Vice President, Global...

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