Mattel 2008 Annual Report Download - page 54

In 2006, Mattel recognized total tax benefits of $63.0 million related to settlements and refunds of ongoing
audits with foreign and state tax authorities. Of the $63.0 million of total tax benefit recorded, $57.5 million
represents refunds of previously paid taxes, which was recorded as an expense in previous years. Accordingly,
these refunds were recorded as a reduction to income tax expense in the period the refunds were received by
Mattel. The remainder of the tax benefit recorded in 2006 is a net reduction to total income tax reserves resulting
from tax settlements with foreign and state tax authorities.
In the normal course of business, Mattel is regularly audited by federal, state, local, and foreign tax
authorities. The ultimate settlement of any particular issue with the applicable taxing authority could have a
material impact on Mattel’s consolidated financial statements.
New Accounting Pronouncements
See Item 8 “Financial Statements and Supplementary Data—Note 1 to the Consolidated Financial
Statements—Summary of Significant Accounting Policies.”
Non-GAAP Financial Measure
In this Annual Report on Form 10-K, Mattel includes a non-GAAP financial measure, gross sales, which it
uses to analyze its operations and to monitor, assess and identify meaningful trends in its operating and financial
performance. Net sales, as reported in the consolidated statements of operations, include the impact of sales
adjustments such as trade discounts and other allowances. Gross sales represent sales to customers, excluding the
impact of sales adjustments, the 2007 Product Recalls, and the 2008 Product Withdrawal. Consistent with its
segment reporting, Mattel presents changes in gross sales as a metric for comparing its aggregate, business unit,
brand and geographic results to highlight significant trends in Mattel’s business. Changes in gross sales are
discussed because, while Mattel records the detail of such sales adjustments in its financial accounting systems at
the time of sale, such sales adjustments are generally not associated with individual products, making net sales
less meaningful.
A reconciliation of gross sales to the most directly comparable GAAP financial measure, net sales, is as
follows:
For the Year
2008 2007 2006
(In thousands)
Revenues
Domestic:
Mattel Girls & Boys Brands US ............................ $1,437,933 $1,445,028 $1,507,493
Fisher-Price Brands US ................................... 1,418,213 1,511,055 1,471,604
American Girl Brands .................................... 463,056 431,510 439,970
Total Domestic ............................................. 3,319,202 3,387,593 3,419,067
International ............................................... 3,166,820 3,205,341 2,738,967
Gross sales ................................................. 6,486,022 6,592,934 6,158,034
Sales adjustments ........................................... (568,020) (622,844) (507,878)
Net sales .................................................. $5,918,002 $5,970,090 $5,650,156
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