Mattel 2010 Annual Report Download - page 55

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 any administrative guidance or developments. Mattel recognizes unrecognized
tax benefits in the first financial reporting period in which information becomes available indicating that such
benefits will more-likely-than-not be realized.
Mattel’s effective tax rate on income before income taxes in 2010 was 19.1% as compared to 19.9% in
2009. 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 current 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. The 2009 income tax provision includes net tax benefits of $28.8 million related to reassessments of
prior years’ tax liabilities based on the status of audits in various jurisdictions around the world, settlements, and
enacted law changes.
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 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
2010 2009 2008
(In thousands)
Revenues
Domestic:
Mattel Girls & Boys Brands US ............................ $1,626,407 $1,402,224 $1,437,933
Fisher-Price Brands US ................................... 1,352,729 1,310,886 1,418,213
American Girl Brands .................................... 486,644 462,899 463,056
Total Domestic ............................................. 3,465,780 3,176,009 3,319,202
International ............................................... 2,920,830 2,758,315 3,166,820
Gross sales ................................................. 6,386,610 5,934,324 6,486,022
Sales adjustments ........................................... (530,415) (503,478) (568,020)
Net sales .................................................. $5,856,195 $5,430,846 $5,918,002
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