Mattel 2014 Annual Report Download - page 42

Advertising and Promotion Expenses
Advertising and promotion expenses primarily consist of: (i) media costs, which primarily include the
media, planning, and buying fees for television, print, and online advertisements, (ii) non-media costs, which
primarily include commercial and website production, merchandising, and promotional costs, (iii) retail
advertising costs, which primarily include consumer direct catalogs, newspaper inserts, fliers, and mailers and
(iv) generic advertising costs, which primarily include trade show costs. Advertising and promotion expenses as
a percentage of net sales increased to 11.6% in 2013 from 11.2% in 2012, primarily as a result of lower than
expected fourth quarter sales and higher non-media and generic advertising spending.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $1.56 billion in 2013, or 24.1% of net sales, as compared to
$1.67 billion in 2012, or 26.0% of net sales. The decrease in other selling and administrative expenses was
primarily due to the Litigation Charge of $137.8 million in 2012 and lower incentive compensation expense of
approximately $43 million, partially offset by higher other employee-related expenses and investments in
strategic initiatives of approximately $78 million and an asset impairment charge of approximately $14 million.
Non-Operating Items
Interest expense decreased by $10.3 million to $78.5 million in 2013, as compared to $88.8 million in 2012,
primarily due to lower average interest rates related to long-term borrowings.
Provision for Income Taxes
Mattel’s effective tax rate on income before income taxes in 2013 was flat with 2012 at 17.8%. The 2013
and 2012 income tax provisions include net tax benefits of $32.2 million and $16.0 million, respectively,
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.
North America Segment
The following table provides a summary of Mattel’s gross sales by brand for the North America segment for
2013 and 2012:
For the Year
% Change2013 2012
(In millions, except percentage
information)
Mattel Girls & Boys Brands:
Barbie .......................................................... $ 458.6 $ 522.6 –12%
Other Girls ...................................................... 600.0 502.2 19%
Wheels ......................................................... 352.0 394.2 –11%
Entertainment .................................................... 454.1 485.0 –6%
1,864.7 1,904.0 –2%
Fisher-Price Brands:
Core Fisher-Price ................................................. 816.7 919.8 –11%
Fisher-Price Friends ............................................... 361.8 332.5 9%
Other Fisher-Price ................................................. 120.4 157.0 –23%
1,298.9 1,409.3 –8%
Other .......................................................... 17.6 16.9
Total Gross Sales ............................................. $3,181.2 $3,330.2 –4%
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