Mattel 2010 Annual Report Download

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ANNUA L REPORT
2010

Table of contents

  • Page 1
    0 1 E 0 R 2 AL U N N A T R PO

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  • Page 4
    ..., fundamental improvement. We know brands. In fact, Mattel boasts two-thirds of the top 12 properties in the U.S. toy industry for the 2010 holiday 1 2 season2, including Barbie®, Hot Wheels® and American Girl®. We are bringing our expertise in play to new and unexpected spaces, reaching kids...

  • Page 5
    ... nicely. Our toys - from Barbie ® and Ken®, the stars of Disney Pixar's Toy Story®3, and toy-of-the-year Sing-a-ma-jigs™ by Fisher-Price to the sold out Monster High ® - were well represented on holiday "must have" toy lists and, most importantly, on children's wish lists around the world. We...

  • Page 6

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  • Page 9
    ... using the market price as of the close of business June 30, 2010 was $7,618,899,076. Number of shares outstanding of registrant's common stock, $1.00 par value, as of February 17, 2011: 348,681,741 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Mattel, Inc. 2011 Notice of Annual Meeting...

  • Page 10
    ...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. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance...

  • Page 11
    ... Girls Brands"), Hot Wheels®, Matchbox®, Battle Force 5®, and Tyco R/C® vehicles and play sets (collectively "Wheels"), and CARS™, Radica®, Toy Story®, Max Steel®, WWE® Wrestling, and Batman® products, and games and puzzles (collectively "Entertainment"). Fisher-Price Brands-including...

  • Page 12
    Other Girls Brands. Wheels includes Hot Wheels®, Matchbox®, Battle Force 5®, and Tyco R/C® vehicles and play sets. Entertainment includes CARS™, Radica®, Toy Story®, WWE® Wrestling, and Batman® products, as well as games and puzzles. In 2011, Mattel expects to introduce new products, as ...

  • Page 13
    ... of worldwide consolidated gross sales in 2010. Within the International segment, Mattel operates in four regional groups that generated the following gross sales during 2010: Percentage of International Amount Gross Sales (In millions, except percentage information) Europe ...Latin America ...Asia...

  • Page 14
    ..., marketing, and sale of toys is based primarily on quality, play value, and price. Mattel offers a diverse range of products for children of all ages and families that include, among others, toys for infants and preschoolers, girls' toys, boys' toys, youth electronics, hand-held and other games...

  • Page 15
    ... world. Products within the Domestic 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 by Mattel Girls & Boys Brands US and Fisher-Price Brands US. Mattel also operates...

  • Page 16
    ... Entertainment™ relating to its Thomas and Friends® properties. Royalty expense for 2010, 2009, and 2008 was $245.9 million, $188.5 million, and $241.2 million, respectively. See "Commitments" and Item 8 "Financial Statements and Supplementary Data-Note 14 to the Consolidated Financial Statements...

  • Page 17
    ... number of employees increased from approximately 27,000 at December 31, 2009 to approximately 31,000 at December 31, 2010 due to increased staffing levels at manufacturing facilities, resulting from higher production levels at the end of 2010 to support point of sale momentum and improve customer...

  • Page 18
    ..., Worldwide Operations Chief Financial Officer Executive Vice President, Chief Human Resources Officer Executive Vice President, Mattel Brands El Segundo Executive Vice President, International Executive Vice President, Chief Legal Officer and Secretary Executive Vice President, North America Senior...

  • Page 19
    ...firm and for 12 years with IBM in various human resources positions. Mr. Kilpin has been Executive Vice President, Mattel Brands El Segundo since February 2011. From February 2010 to February 2011, he served as General Manager and Senior Vice President, Mattel Brands El Segundo. Mr. Kilpin served as...

  • Page 20
    ... spent eight years with Total Petroleum (North America) Ltd., most recently as Vice President of Human Resources. Available Information Mattel files its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and amendments to those reports filed or...

  • Page 21
    ... and trends in popular culture, media and movies, fashion, or technology can negatively affect 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...

  • Page 22
    ...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 2010, Mattel's three largest customers, Wal-Mart, Toys "R" Us and Target, in...

  • Page 23
    ... and extend 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...

  • Page 24
    ...around the world, as well as its customer, employee, and consumer data. If Mattel fails to protect its proprietary intellectual property and information, including any successful challenge to Mattel's ownership of its intellectual property or material infringements of its intellectual property, this...

  • Page 25
    ... China and imported into the US. In addition, the occurrence of war or hostilities between countries or threat of terrorist activities, and the responses to and results of these activities, could adversely impact Mattel, its personnel and facilities, its customers and suppliers, retail and financial...

  • Page 26
    ... in part upon the success of these programs. If Mattel does not successfully market its products or if media or other advertising or promotional costs increase, these factors could have an adverse effect on Mattel's business, financial condition, and results of operations. Mattel depends on key...

  • Page 27
    ... delays in product sales and reduced efficiency of its operations, and significant capital investments could be required to remediate the problem. The level of returns on pension plan assets and the actuarial assumptions used for valuation purposes could affect Mattel's earnings in future periods...

  • Page 28
    ... and distribution facilities in California, New Jersey, and Texas, all of which are used by the Domestic segment. Mattel has leased retail and related office space in Chicago, Illinois, New York, New York, and Los Angeles, California for its American Girl Place® stores, Dallas, Texas, Alpharetta...

  • Page 29
    ... share, is traded, see the cover page hereof. For information regarding the high and low closing prices of Mattel's common stock for the last two calendar years, see Item 8 "Financial Statements and Supplementary Data-Note 17 to the Consolidated Financial Statements-Quarterly Financial Information...

  • Page 30
    ... 2010, Mattel's Board of Directors authorized a $500.0 million increase to Mattel's repurchase program. Repurchases will take place from time to time, depending on market conditions. Mattel's share repurchase program has no expiration date. (2) Includes the sale of restricted shares for employee...

  • Page 31
    ...listed below assumes an initial investment of $100 on December 31, 2005 and reinvestment of dividends. Comparison of Five Year Cumulative Total Return Mattel, Inc., S&P 500, and S&P 500 Consumer Staples Index 250 200 Dollars 150 100 50 0 2005 2006 Mattel, Inc. S&P 500 2007 2008 2009 2010...

  • Page 32
    Item 6. Selected Financial Data. For the Year Ended December 31, 2010 2009 2008 2007 2006 (In thousands, except per share and percentage information) Operating Results: Net sales ...Gross profit ...% of net sales ...Operating income ...% of net sales ...Income before income taxes ...Provision for ...

  • Page 33
    ... as a result of increased sales of products tied to licensed properties. Mattel's Global Cost Leadership program generated year-over-year incremental gross costs savings before severance charges of approximately $61 million during 2010 (or approximately $48 million net of 2010 severance charges of...

  • Page 34
    ... millions, except percentage and basis point information): For the Year 2010 % of Net Amount Sales 2009 % of Net Amount Sales Year/Year Change Basis Points % of Net Sales Net sales ...Gross profit ...Advertising and promotion expenses ...Other selling and administrative expenses ...Operating income...

  • Page 35
    ...percentage point. Worldwide gross sales of Entertainment products increased 27%, including unfavorable changes in currency exchange rates of 4 percentage points, driven primarily by increased sales of Toy Story® 3, WWE® Wrestling, and Radica® products. Worldwide gross sales of Fisher-Price Brands...

  • Page 36
    ... of Hot Wheels® products decreased 1%. Gross sales of Entertainment products increased 33%, driven primarily by increased sales of Toy Story® 3, WWE® Wrestling, and Radica® products. Mattel Girls & Boys Brands US segment income increased 40% to $409.4 million in 2010 from $293.4 million in 2009...

  • Page 37
    ... launch of the American Girl® virtual world. American Girl Brands segment operating income increased 9% to $112.9 million in 2010 from $103.4 million in 2009, driven primarily by higher sales volume and higher gross margins, partially offset by higher advertising and promotion expenses and higher...

  • Page 38
    ... millions, except percentage and basis point information): For the Year 2009 2008 % 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 selling and administrative expenses ...Operating income...

  • Page 39
    ... tied to Toy Story® and Toy Story® 2 and increased sales of CARS™ products domestically. Worldwide gross sales of Fisher-Price Brands decreased 8% to $2.17 billion in 2009 as compared to 2008, including unfavorable changes in currency exchange rates of 1 percentage point. Domestic gross sales of...

  • Page 40
    ... to strong entertainment-related sales in 2008. American Girl Brands segment operating income increased 19% to $103.4 million in 2009 from $86.6 million in 2008, driven primarily by higher gross profit, lower other selling and administrative expenses, and lower advertising and promotion expenses. 32

  • Page 41
    ... points and gross sales of Fisher-Price® Friends products decreased 5%, with no impact from changes in currency exchange rates. International segment income increased 18% to $422.5 million in 2009 from $357.6 million in 2008, driven primarily by higher gross margin, lower advertising and promotion...

  • Page 42
    ... $75 million of cost savings, which will be reflected in gross profit, advertising and promotion expenses, and other selling and administrative expenses, from the launch of the next phase of the Global Cost Leadership program. Mattel will evaluate its operations for opportunities to identify work...

  • Page 43
    ... of the year cash and equivalents, cash flows from operations, and access to its $1.08 billion domestic unsecured committed revolving credit facility, which it uses for seasonal working capital requirements. As of December 31, 2010, Mattel had available incremental borrowing resources totaling $1.08...

  • Page 44
    ...to support point of sale momentum and customer service levels, partially offset by higher net income. The increase in cash flows from operating activities in 2009 from 2008 was primarily the result of higher profitability and lower working capital requirements, mainly due to lower levels of accounts...

  • Page 45
    ...from December 31, 2009 to $463.8 million at December 31, 2010, driven primarily by the rebuild of inventory to support point of sale momentum and improve customer service levels, as compared to a significant liquidation of inventories in 2009 due to economic uncertainty. Accounts payable and accrued...

  • Page 46
    ... of operations or financial position during 2010, 2009, or 2008. Mattel receives some protection from the impact of inflation from high turnover of inventories and its ability, under certain circumstances and at certain times, to pass on higher prices to its customers. Employee Savings Plan Mattel...

  • Page 47
    ... factors in relation to its customers' ability to pay amounts owed to Mattel. Mattel's products are sold throughout the world. Products within the Domestic segment are sold directly to retailers, including discount and free-standing toy stores, chain stores, department stores, other retail outlets...

  • Page 48
    ... payment may be delayed, because of bankruptcy or other factors beyond the control of Mattel. This could increase Mattel's exposure to losses from bad debts. A small number of customers account for a large share of Mattel's net sales and accounts receivable. In 2010, Mattel's three largest customers...

  • Page 49
    ... of, an obsolescence reserve based on the following factors Customer and/or consumer demand for the item; Overall inventory positions of Mattel's customers; Strength of competing products in the market; Quantity on hand of the item; Standard retail price of the item; Mattel's cost for the item...

  • Page 50
    ...method requires Mattel to make projections of revenue, operating costs, and working capital investment for the reporting unit over a multi-year period. Additionally, management must make an estimate of a weighted average cost of capital that a market participant would use as a discount rate. Changes...

  • Page 51
    ... at December 31, 2010 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- Note 6 to the...

  • Page 52
    ... in benefit plan expense during 2011 of approximately $2 million. The rate of future compensation increases used by Mattel for the benefit obligation and the net periodic pension cost of its domestic defined benefit pension plans averaged 3.8% for 2010, 2009, and 2008, based on plan demographics...

  • Page 53
    ...for 2010 by $0.2 million and $(0.2) million, respectively. Share-Based Payments Mattel recognizes the cost of employee share-based payment awards on a straight-line attribution basis over the requisite employee service period, net of estimated forfeitures. In determining when additional tax benefits...

  • Page 54
    ...unrecognized compensation cost related to unvested share-based payments totaled $63.7 million and is expected to be recognized over a weighted-average period of 2.0 years. Income Taxes Mattel's income tax provision and related income tax assets and liabilities are based on actual and expected future...

  • Page 55
    ...products, making net sales less meaningful. A reconciliation of gross sales to the most directly comparable GAAP financial measure, net sales, is as follows: 2010 For the Year 2009 (In thousands) 2008 Revenues Domestic: Mattel Girls & Boys Brands US ...Fisher-Price Brands US ...American Girl Brands...

  • Page 56
    ... with US dollar cash balances held by certain international subsidiaries, the transaction gains or losses are recorded in the consolidated statement of operations in the period in which the exchange rate changes as part of operating income or other non-operating (income) expense, net based on the...

  • Page 57
    ... would have increased by approximately $4 million in 2010, decreased by approximately $13 million in 2009, and increased by approximately $16 million in 2008. Venezuelan Operations Mattel's pricing decisions in Venezuela are intended to mitigate the risks of government imposed currency controls and...

  • Page 58
    ...no impact on Mattel's consolidated financial statements during 2010 as Mattel's products are considered non-essential goods. On May 17, 2010, the Venezuelan government enacted reforms to its foreign currency exchange control regulations ("the exchange control regulations") to close down the parallel...

  • Page 59
    ... not expect future remeasurement adjustments to be material to Mattel's consolidated financial statements. Venezuela exchange rate matters, along with local market and regulatory conditions, have resulted in a substantial decrease in net sales for Mattel's Venezuelan subsidiary. During 2010, Mattel...

  • Page 60
    ... Data. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Mattel's management, including Robert A. Eckert...

  • Page 61
    ... statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Mattel, Inc. and its subsidiaries at December 31, 2010 and December 31, 2009, and the results of their operations and their cash flows for each of the three years...

  • Page 62
    MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2010 2009 (In thousands, except share data) ASSETS Current Assets Cash and equivalents ...Accounts receivable, less allowance of $21.8 million and $24.5 million in 2010 and 2009, respectively ...Inventories ......

  • Page 63
    ...STATEMENTS OF OPERATIONS For the Year 2010 2009 2008 (In thousands, except per share amounts) Net Sales ...Cost of sales ...Gross Profit ...Advertising and promotion expenses ...Other selling and administrative expenses ...Operating...The accompanying notes are an integral part of these statements. 55

  • Page 64
    MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS 2010 For the Year 2009 (In thousands) 2008 Cash Flows From Operating Activities: Net income ...$ 684,863 $ 528,704 $ 379,636 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation ...149,977 ...

  • Page 65
    ...from share-based payment arrangements ...Dividend equivalents for restricted stock units ...Dividends ...Balance, December 31, 2009 ...Comprehensive income: Net income ...Change in net unrealized gain/loss on derivative instruments, net of tax ...Defined benefit pension plans, net prior service cost...

  • Page 66
    ... letters of credit, factoring or purchasing various forms of credit insurance with unrelated third parties, 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...

  • Page 67
    ... at the operating segment level or one reporting level below the operating segment, for purposes of evaluating whether goodwill is impaired. Mattel's reporting units are: Mattel Girls Brands US, Mattel Boys Brands US, Fisher-Price Brands US, American Girl Brands, and International. Mattel tests...

  • Page 68
    ... $100 thousand. While Mattel's level of net monetary assets denominated in Venezuelan bolivar fuertes will vary from one period to another based on operating cycles and seasonality, Mattel does not expect future remeasurement adjustments to be material to Mattel's consolidated financial statements...

  • Page 69
    ...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 70
    ...for retirement and other postretirement benefit plans (see "Note 6 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 period...

  • Page 71
    ... a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferor's interest in transferred financial assets. The adoption of this pronouncement did not impact Mattel's financial position or results of operations during 2010. During 2010, Mattel adopted ASU 2009...

  • Page 72
    ... at December 31, 2010 and 2009, respectively) ...Nonamortizable identifiable intangibles ... $ 91,359 122,223 $213,582 $ 93,546 122,223 $215,769 In October 2010, Mattel acquired the intellectual property rights related to Phase 10® for $15.8 million, including acquisition costs, which is included...

  • Page 73
    ... principally for tax credit carryforwards, research and development expenses, net 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...

  • Page 74
    ... warrant. Mattel's measurement of its unrecognized tax benefits is based on management's assessment of all relevant information, including prior audit experience, the status of current audits, conclusions of tax audits, lapsing of applicable statutes of limitations, identification of new issues, and...

  • Page 75
    ...any particular issue with the applicable taxing authority could have a material impact on Mattel's consolidated financial statements. In 2010, income was positively impacted by net tax benefits of $16.8 million. The August 2010 enactment of the foreign tax credit provisions in the Education Jobs and...

  • Page 76
    ... compensation awards resulted in increases/(decreases) to additional paid-in-capital for related income tax benefits totaling $7.5 million, $36.7 million, and ($2.3) million, in 2010, 2009, and 2008, respectively. Note 4-Product Recalls and Withdrawals During 2007, Mattel recalled products with high...

  • Page 77
    ... markets. These recalls resulted in a total reduction to operating income of $7.6 million in 2010, which is based on estimates such as the expected levels of affected products at retail and historical consumer return rates. Although management is not aware of any additional quality or safety issues...

  • Page 78
    ...domestic employees. A summary of the components of Mattel's net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31 are as follows: Defined Benefit Pension Plans Postretirement Benefit Plans 2010 2009...

  • Page 79
    ... the Year 2009 2008 Defined benefit pension plans: Discount rate ...5.6% Weighted average rate of future compensation increases ...3.8% Long-term rate of return on plan assets ...8.0% Postretirement benefit plans: Discount rate ...Annual increase in Medicare Part B premium ...Health care cost trend...

  • Page 80
    ... that it assumes future compensation levels will remain unchanged. Mattel's accumulated benefit obligation for its defined benefit pension plans as of December 31, 2010 and 2009 totaled $510.0 million and $476.1 million, respectively. Mattel does not have any defined benefit pension plans for which...

  • Page 81
    ... pension and postretirement benefit plans are as follows: December 31, 2010 2009 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...

  • Page 82
    ... of US Government, US Government agency securities, and corporate debt instruments are determined based on quoted market prices, or are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Mattel's defined benefit pension plan assets are...

  • Page 83
    ... balance sheets. Incentive Compensation Plans Mattel has annual incentive compensation plans under which officers and key employees may earn incentive compensation based on Mattel's performance and subject to certain approvals of the Compensation Committee of the Board of Directors. For 2010, 2009...

  • Page 84
    ... performance threshold at the minimum award level and no shares were earned. Additionally, during 2010, 2009, and 2008, Mattel recognized share-based compensation expense of $1.9 million, $1.9 million, and $1.5 million, respectively, for the market-related component. Note 7-Seasonal Financing and...

  • Page 85
    ... domestic receivables facility, Mattel Sales Corp., Fisher-Price, Inc., and Mattel Direct Import, Inc. (which are wholly-owned subsidiaries of Mattel) can sell eligible trade receivables from Wal-Mart and Target to Mattel Factoring, Inc. ("Mattel Factoring"), a Delaware corporation and wholly-owned...

  • Page 86
    ..., $7.4 million, and $5.4 million during 2010, 2009, and 2008, respectively. The outstanding amounts of accounts receivable that have been sold under these facilities and other factoring arrangements, net of collections from customers, have been excluded from Mattel's consolidated balance sheets and...

  • Page 87
    ... 18.6 million shares of its common stock at a cost of $446.7 million. During 2009, Mattel did not repurchase any shares of its common stock. During 2008, Mattel repurchased 4.9 million shares of its common stock at a cost of $90.6 million. During both 2010 and 2008, the Board of Directors authorized...

  • Page 88
    ... ...Defined benefit pension and other postretirement plans, net of tax ...Net unrealized loss on derivative instruments, net of tax ... $(221,758) $(222,641) (134,314) (142,017) (3,127) (14,876) $(359,199) $(379,534) Note 9-Share-Based Payments Mattel Stock Option Plans In May 2010, Mattel...

  • Page 89
    ... compensation cost related to unvested share-based payments totaled $63.7 million and is expected to be recognized over a weighted-average period of 2.0 years. Stock Options Mattel recognized compensation expense of $13.4 million, $13.0 million, and $9.5 million for stock options during 2010, 2009...

  • Page 90
    ... was $34.2 million, $31.7 million, and $24.7 million in 2010, 2009, and 2008, respectively, and is included within other selling and administrative expenses. Income tax benefits related to RSU compensation expense recognized in the consolidated statements of operations during 2010, 2009, and 2008...

  • Page 91
    ... Financial Statements-Employee Benefit Plans." Income tax benefits related to performance RSU compensation expense recognized in the consolidated statements of operations during 2010, 2009, and 2008 totaled $7.4 million, $2.0 million, and $0.6 million, respectively. Note 10- Earnings Per Share...

  • Page 92
    ... dilutive effect of non-participating share-based awards. The following table reconciles earnings per common share: For the Year 2010 2009 2008 (In thousands, except per share amounts) Basic: Net income ...Less net income allocable to participating RSUs ...Net income available for basic common...

  • Page 93
    ... in Mattel's consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in OCI. Under the terms of the agreements, Mattel received quarterly interest payments from the swap counterparties based on the three-month LIBOR plus 40 basis points and made semi-annual...

  • Page 94
    ...expense Cost of sales The net loss of $0.7 million recognized in the consolidated statements of operations during 2010 is offset by foreign currency transaction gains on the related hedged balances. The net gain of $20.8 million recognized in the consolidated statements of operations during 2009 is...

  • Page 95
    ... by observable data for substantially the full term of the assets or liabilities. Level 3 - Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities. • Mattel's financial assets and...

  • Page 96
    ..., New York, New York, and Los Angeles, California and American Girl® store leases in Dallas, Texas, Alpharetta, Georgia, Natick, Massachusetts, Bloomington, Minnesota, Lone Tree, Colorado, Overland Park, Kansas, and McLean, Virginia also contain provisions for additional rental payments based on...

  • Page 97
    ... of Mattel's workers' compensation, the first $0.5 million for general and automobile liability risks, and the first $2.0 million per occurrence and $2.0 million per year of product liability risks. Various insurance companies, that have an "A" or better AM Best rating at the time the policies are...

  • Page 98
    ... key Mattel employees and directing them to bring with them Mattel confidential and proprietary information, unfairly competed against Mattel using Mattel's trade secrets, confidential information, and key employees to build their business. On January 12, 2007, the Court granted Mattel leave to file...

  • Page 99
    ... 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 100
    ... 14, September 4, and/or October 25, 2007 voluntary product recalls by Mattel and Fisher-Price, as well as the withdrawal of red and green toy blood pressure cuffs from retail stores or their replacement at the request of consumers. Eighteen of those cases were commenced in the following United...

  • Page 101
    ...On September 5, 2007, Mattel and Fisher-Price filed a motion before the Judicial Panel on Multidistrict Litigation ("JPML") asking that all federal actions related to the recalls be coordinated and transferred to the Central District of California (In re Mattel Inc. Toy Lead Paint Products Liability...

  • Page 102
    ... and Fisher-Price in August and September 2007 and children, either directly or through their parents as "next friends," who have had contact with those toys. The actions in Canada generally allege that defendants were negligent in allowing their products to be manufactured and sold with lead paint...

  • Page 103
    ... magnet and lead recalls. CODECON did not file the special appeal thereby confirming the decision rendered by the originating court in favor of Mattel do Brasil. In October 2010, the court filed its records of the case and the matter is now closed. Since August 20, 2007, the Department of Consumer...

  • Page 104
    ...and 2009, including Fisher-Price branded drop-side cribs manufactured and sold by Stork Craft pursuant to a License Agreement with Fisher-Price, Inc. These claims follow product recalls of Stork Craftmanufactured drop-side cribs in the United States and Canada. Stork Craft and the corporate entities...

  • Page 105
    ... Girls Brands"), Hot Wheels®, Matchbox® , Battle Force 5®, and Tyco R/C® vehicles and play sets (collectively "Wheels"), and CARS™, Radica®, Toy Story®, Max Steel®, WWE® Wrestling, and Batman® products, and games and puzzles (collectively "Entertainment"). Fisher-Price Brands-including...

  • Page 106
    ...compensation, share-based payments, and corporate headquarters functions managed on a worldwide basis, and the impact of changes in foreign currency rates on intercompany transactions. 2010 For the Year 2009 (In thousands) 2008 Revenues Domestic: Mattel Girls & Boys Brands US ...Fisher-Price Brands...

  • Page 107
    ...Brands, Fisher-Price Brands, and American Girl Brands. The table below presents worldwide revenues by category: 2010 For the Year 2009 (In thousands) 2008 Worldwide Revenues Mattel Girls & Boys Brands ...Fisher-Price Brands ...American Girl Brands ...Other ...Gross sales ...Sales adjustments ...Net...

  • Page 108
    ...% of worldwide consolidated net sales for 2010, 2009, and 2008, respectively, as follows: For the Year 2010 2009 2008 (In billions) Wal-Mart ...Toys "R" Us ...Target ... $1.1 0.8 0.5 $1.0 0.7 0.5 $1.1 0.7 0.5 The Mattel Girls & Boys Brands US and Fisher-Price Brands US segments sell products to...

  • Page 109
    Note 16-Supplemental Financial Information December 31, 2010 2009 (In thousands) Inventories include the following: Raw materials and work in process ...Finished goods ...Property, plant, and equipment, net include the following: Land ...Buildings ...Machinery and equipment ...Tools, dies, and ...

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    ... common share ...Common stock market price: High ...Low ...Year Ended December 31, 2009: Net sales ...Gross profit ...Advertising and promotion expenses ...Other selling and administrative expenses ...Operating (loss) income ...(Loss) income before income taxes ...Net (loss) income (a) ...Net (loss...

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    ... Registered Public Accounting Firm, included in Part II, "Item 8. Financial Statements and Supplementary Data" of this report. Changes in Internal Control Over Financial Reporting Mattel continues to implement a conversion to new and upgraded financial and human resources information technology...

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    ... by applicable laws, regulations and stock exchange listing standards on its corporate website or in a Current Report on Form 8-K. Mattel has posted the Board of Directors' corporate governance guidelines and the charters of its Audit, Compensation and Governance and Social Responsibility Committees...

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    ... statements are filed as part of this report under Item 8 "Financial Statements and Supplementary 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, 2010 and 2009...

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    ... The Bank of New York Trust Company, N.A. Form of 5.625% Notes due March 15, 2013 Form of 4.35% Notes due 2020 Form of 6.20% Notes due 2040 Fourth Amended and Restated Credit Agreement dated as of March 23, 2009, by and among Mattel, Inc., as Borrower, Bank of America, N.A., as Administrative Agent...

  • Page 115
    ... 23, 2009, by and among Mattel Factoring, Inc., as Transferor, Mattel, Inc., as Servicer, Bank of America, N.A., as Administrative Agent, and the financial institutions party thereto Form of Indemnity Agreement between Mattel and certain of its directors Executive Employment Agreement dated October...

  • Page 116
    ... of employment agreement Letter agreement between Mattel and Kevin M. Farr dated June 30, 2009 regarding Mr. Farr's participation in the Mattel, Inc. Executive Severance Plan Executive Employment Agreement dated November 13, 2000 between Mattel and Thomas A. Debrowski Letter agreement between Mattel...

  • Page 117
    ... employment agreement Letter agreement between Mattel and 8-K Thomas A. Debrowski dated June 30, 2009 regarding Mr. Debrowski's participation in the Mattel, Inc. Executive Severance Plan Employment letter dated August 22, 2000 10-K between Mattel and Bryan G. Stockton Letter agreement between Mattel...

  • Page 118
    ...File No. Exhibit(s) Filing Date 10.42 Mattel, Inc. 2005 Supplemental Executive Retirement Plan (as amended and restated effective January 1, 2009) Mattel, Inc. Executive Severance Plan The Fisher-Price Excess Benefit Plan... 24, 2010 February 24, 2010 February 24, 2010 February 24, 2010 10-K ...

  • Page 119
    ...2 to the 2005 Plan Mattel, Inc. 2010 Equity and LongTerm Compensation Plan (the "2010 Plan") Form of Grant Agreement as of August 1, 2005 for grants to employees of Non-Qualified Stock Options ("NQSOs") under the 2005 Plan Form of Grant Agreement as of August 1, 2006 for grants to employees of NQSOs...

  • Page 120
    ... Performance-Based Restricted Stock Units for Senior Executives under the Mattel, Inc. 2005 Equity Compensation Plan - for Mr. Stockton and other LTIP award recipients Form of Notice of Grant and Grant Agreement for NQSOs to Certain Executive Officers with Employment Agreements under the 2010 Plan...

  • Page 121
    ... Agreement for May 13, 2009 Annual Grants to Outside Directors of RSUs under the 2005 Plan Form of Grant Agreement for Special Retention Award of RSUs under the 2005 Plan Mattel, Inc. Key Executive Life Insurance Plan (for Robert A. Eckert) Mattel, Inc. Summary of Compensation of the Non-Employee...

  • Page 122
    ... stockholders of Mattel without charge. Copies of other exhibits can be obtained by stockholders of Mattel upon payment of twelve cents per page for such exhibits. Written requests should be sent to: Secretary, Mail Stop M1-1516, Mattel, Inc., 333 Continental Blvd., El Segundo, California 90245-5012...

  • Page 123
    ... and Chief Executive Officer (principal executive officer) Chief Financial Officer (principal financial officer) Senior Vice President and Corporate Controller (principal accounting officer) Director February 24, 2011 /s/ February 24, 2011 /s/ February 24, 2011 /s/ February 24, 2011 /s/ DR...

  • Page 124
    ...RONALD L. SARGENT Ronald L. Sargent DEAN A. SCARBOROUGH Dean A. Scarborough Director February 24, 2011 /s/ Director February 24, 2011 /s/ Director February 24, 2011 /s/ Director February 24, 2011 /s/ CHRISTOPHER A. SINCLAIR Christopher A. Sinclair /s/ G. CRAIG SULLIVAN G. Craig Sullivan...

  • Page 125
    ... II MATTEL, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES Balance at Beginning of Year Additions Charged to Net Operations Deductions (In thousands) Balance at End of Year Allowance for Doubtful Accounts: Year ended December 31, 2010 ...Year ended December 31, 2009 ...Year...

  • Page 126
    EXHIBIT 11.0 MATTEL, INC. AND SUBSIDIARIES COMPUTATION OF INCOME PER COMMON AND POTENTIAL COMMON SHARE For the Year 2010 2009 2008 2007 (In thousands, except per share amounts) 2006 Basic: Net income ...Less net income allocable to participating RSUs ...Net income available for basic common shares ...

  • Page 127
    ... MATTEL, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited; in thousands, except ratios) 2010 2009 For the Year 2008 2007 2006 Earnings Available for Fixed Charges: Income from continuing operations before income taxes and cumulative effect of changes in accounting...

  • Page 128
    ... 31.0 CERTIFICATION I, Robert A. Eckert, certify that: 1. I have reviewed this annual report on Form 10-K of Mattel, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in...

  • Page 129
    ... with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for...

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    ...Chair CORPORATE OFFICERS Robert A. Eckert Chairman of the Board and Chief Executive Officer Bryan G. Stockton Chief Operating Officer Thomas A. Debrowski Executive Vice President, Worldwide Operations Kevin M. Farr Chief Financial Officer Alan Kaye Executive Vice President, Chief Human Resources...

  • Page 134
    ... Disney/ Pixar. Disney®, Disney Classics®, Disney Princess™, Handy Manny®, High School Musical®, Jungle Junction™, Mickey Mouse®, Tangled™, Toy Story® and all related elements are trademarks of Disney Enterprises, Inc. © Disney. Winnie the Pooh® is based on the "Winnie the Pooh" works...

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    Click to play! Please visit: w w w . M attel . co m /A n n ual R e p o r t

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