Mattel 2011 Annual Report Download

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The
imagination
of children
inspires
our
innovation.
Annual Report 2011

Table of contents

  • Page 1
    The imagination of children inspires our innovation. Annual Report 2011

  • Page 2

  • Page 3

  • Page 4
    Each and every year, Mattel's product line-up encompasses some of the most original and creative toy ideas in the world. These ideas have been winning the hearts of children, the trust of parents and the recognition of peers for more than 65 years.

  • Page 5
    ...the brand. We managed our business accordingly as these challenges played out during the year. We maintained momentum in our core brands, such as Barbie®, Hot Wheels®, American Girl® and our new brand franchise, Monster High®, as well as with key entertainment properties, such as Disney Princess...

  • Page 6
    ... $665 million in cash ï¬,ow from operations, which the Board of Directors deployed consistent with our focus on increasing Total Shareholder Return (TSR). We also invested in our portfolio of intellectual properties by acquiring HIT Entertainment, the home of such iconic brands as Thomas & Friends...

  • Page 7
    ... as retailer strategies have evolved and online shopping has become a significant channel of distribution for toys. Countries and economies are ever-changing. The burgeoning middle class in Latin America and certain parts of Asia is creating a whole new generation of toy-buyers. And children are...

  • Page 8
    ...disciplined investments in brands and infrastructure to create a strong foundation for future growth. Phenomenal brands A highly-successful franchise launch with Monster High A great acquisition with HIT Entertainment Strong entertainment partners An incredible global infrastructure An organization...

  • Page 9
    2011 ANNUAL REPORT "Mattel is a company of outstanding brands, people and values." 7

  • Page 10
    ... for growth. During 2011, we created a new North America Division and Global Brand Teams. This new structure recognizes the opportunity to move decision-making for the U.S. business closer to the retail customer and our toy consumers. Additionally, it gives our brand teams the ability to approach...

  • Page 11
    Mattel, Inc. Form 10-K 2011

  • Page 12

  • Page 13
    ... 001-05647 (Exact name of registrant as specified in its charter) MATTEL, INC. 333 Continental Blvd. El Segundo, CA 90245-5012 (Address of principal executive offices) Delaware (State or other jurisdiction of incorporation or organization) 95-1567322 (I.R.S. Employer Identification No.) (310...

  • Page 14
    .... Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services...

  • Page 15
    PART I Item 1. Business. Mattel, Inc. ("Mattel") designs, manufactures, and markets a broad variety of toy products worldwide which are sold to its customers and directly to consumers. Mattel's vision is "creating the future of play." Mattel's objectives are to grow its share in the marketplace, ...

  • Page 16
    ... and accessories will be released to support the Platinum DVD release of Cinderella. In 2012, Hot Wheels® will continue its overarching brand campaign with Team Hot Wheels. Hot Wheels® will introduce new product lines such as Total Control Racing vehicles and track sets, as well as a global launch...

  • Page 17
    ... its operating segments. The new operating segments are: (i) North America, which will include Mattel Girls & Boys Brands US, Fisher-Price Brands US, and Canada, (ii) American Girl, and (iii) International. Manufacturing and Materials Mattel manufactures toy products for all segments in both company...

  • Page 18
    ... manufacturers of video games and consumer electronics. American Girl Brands competes with companies that manufacture girls' toys and with children's book publishers and retailers. Mattel's International segment competes with global toy companies including Bandai, Hasbro, Lego, MGA Entertainment...

  • Page 19
    ... employees and as an outlet for its products. American Girl Brands products are sold directly to consumers and its children's publications are also sold to certain retailers. Mattel has eleven retail stores, American Girl Place® in Chicago, Illinois, New York, New York, and Los Angeles, California...

  • Page 20
    ... purchases of goods and services to ensure availability and timely delivery, and to obtain and protect Mattel's right to create and market certain products. Certain of these commitments routinely contain provisions for guarantees or minimum expenditures during the term of the contracts. Current...

  • Page 21
    ...Union and Canada. Mattel maintains a quality control program to help ensure compliance with various US federal, state, and applicable foreign product safety requirements. Nonetheless, Mattel has experienced, and may in the future experience, issues in products that result in recalls, withdrawals, or...

  • Page 22
    ..., 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 23
    ...he worked for two years with the Hay Group, a compensation consulting 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...

  • Page 24
    ... been Executive Vice President, North America since February 2012. He served as Senior Vice President and General Manager of Asia Pacific from December 2007 to January 2012, and Vice President and General Manager UK from August 2004 to December 2007. He began working at Mattel as Sales Director in...

  • Page 25
    ...other games, puzzles, educational toys, media-driven products, and fashion-related toys. Mattel competes domestically and internationally with a wide range of large and small manufacturers, marketers and sellers of toys, video games, consumer electronics and other play products, as well as retailers...

  • Page 26
    ... 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 2011, Mattel's three largest customers, Wal-Mart, Toys "R" Us, and Target, in the...

  • Page 27
    ... 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 customers and directly to consumers. Mattel's performance is...

  • Page 28
    ..., globalize 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...

  • Page 29
    ...names, copyrights, patents and trade secrets, in the US and around the world, as well as its customer, employee, and consumer data. Mattel may need to resort to litigation to protect its intellectual property rights, which could result in substantial costs and diversion of resources. If Mattel fails...

  • Page 30
    ..., reduced demand by consumers for its products, decreased willingness by retailer customers to purchase or provide marketing support for those products, adverse impacts on Mattel's ability to enter into licensing agreements for products on competitive terms, absence or increased cost of insurance...

  • Page 31
    ... 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 32
    ... actuaries. In the event that Mattel determines that changes are warranted in the assumptions used, such as the discount rate, expected long term rate of return, or health care costs, its future pension benefit expenses could increase or decrease. Due to changing market conditions or changes in the...

  • Page 33
    ... 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 34
    ... and 2010, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0 million. At December 31, 2011, share repurchase authorizations of $427.3 million had not been executed. Repurchases will take place from time to time, depending on market conditions. Mattel's share...

  • Page 35
    ... 2011, 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 36
    ...on December 31, 2006 and reinvestment of dividends. Comparison of Five Year Cumulative Total Return Mattel, Inc., S&P 500, and S&P 500 Consumer Staples Index 200 150 Dollars 100 50 0 2006 2007 Mattel, Inc. S&P 500 2008 2009 2010 2011 December 31 S&P 500 Consumer Staples Index Cumulative...

  • Page 37
    ... the status of current audits and tax filings in various jurisdictions around the world, settlements, and enacted tax law changes. The provision for income taxes in 2010 was positively impacted by net tax benefits of $16.8 million, primarily related to the release of a valuation allowance related to...

  • Page 38
    ...brands and markets, despite the soft global economic backdrop and the highly promotional environment. Mattel maintained momentum in its core brands such as Barbie®, Hot Wheels®, American Girl®, and its new franchise, Monster High®, as well as maximized key entertainment properties such as Disney...

  • Page 39
    ... international footprint. In 2012, Mattel is implementing a change to its organizational structure to include a North America division and global brand teams. This new structure recognizes the opportunity to move decisionmaking for the US business closer to its retail customers and its toy consumers...

  • Page 40
    ... exchange rates of 1 percentage point. American Girl Brands gross sales increased 5% to $510.9 million in 2011, driven primarily by sales from the American Girl® virtual world and Kanani®, the 2011 Girl of the Year® doll, and the benefit of two new American Girl® stores in McLean, Virginia and...

  • Page 41
    ... of increased sales of products tied to licensed properties. Gross margins increased primarily due to price increases and product mix, partially offset by higher product costs. Mattel Girls & Boys Brands US segment income increased 18% to $483.5 million in 2011 from $409.4 million in 2010, driven...

  • Page 42
    ...American Girl Brands segment operating income increased to $113.1 million in 2011 from $112.9 million in 2010, driven primarily by higher net sales, partially offset by higher other selling and administrative expenses from retail expansion and higher advertising and promotion expenses. International...

  • Page 43
    ... pricing and net cost savings related to the Global Cost Leadership program, partially offset by higher royalty expense as a result of increased sales of products tied to licensed properties. The following table provides a summary of Mattel's consolidated results for 2010 and 2009 (in millions...

  • Page 44
    ... smaller licensed properties products. Domestic gross sales of Fisher-Price® Friends increased 29% and international gross sales increased 17%, with unfavorable changes in currency exchange rates of 6 percentage points. American Girl Brands gross sales increased 5% to $486.6 million in 2010, driven...

  • Page 45
    ...in employee-related costs includes approximately $17 million in incremental share-based compensation expense, approximately $10 million in incremental annual incentive expense, and approximately $16 million related to annual merit increases that began during the second quarter of 2010. Non-Operating...

  • Page 46
    ... American Girl® virtual world. Cost of sales increased by 5% in 2010, as compared to a 6% increase in net sales, primarily due to higher freight and logistics expenses. Gross margins increased slightly by 30 basis points. American Girl Brands segment operating income increased 9% to $112.9 million...

  • Page 47
    ...creation of global brand teams and reorganization to a North America division, Additional procurement initiatives designed to fully leverage Mattel's global scale, SKU efficiency, and Packaging optimization. During 2011, Mattel realized Operational Excellence 2.0 gross cost savings before severance...

  • Page 48
    ... cash flows from operations, and access to the commercial paper markets and its Credit Facility, which it uses for seasonal working capital requirements. As of December 31, 2011, Mattel had available incremental borrowing resources totaling $1.40 billion under the Credit Facility, and Mattel has not...

  • Page 49
    ... from operating activities in 2010 from 2009 was primarily due to the decision not to factor $300.0 million of domestic receivables in 2010, as well as growth in accounts receivable due to increased net sales, and the rebuild of inventory to support point of sale momentum and customer service levels...

  • Page 50
    ...December 31, 2011, share repurchase authorizations of $427.3 million had not been executed. Repurchases will take place from time to time, depending on market conditions. Mattel's share repurchase program has no expiration date. In 2011, 2010, and 2009, Mattel paid total dividends per share of $0.92...

  • Page 51
    ... 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 52
    ... Events On January 31, 2012, Mattel announced that the Board of Directors declared a first quarter dividend of $0.31 per common share. On February 1, 2012, Mattel completed its acquisition of HIT Entertainment for $680.0 million. See Item 8 "Financial Statements and Supplementary Data-Note 17...

  • Page 53
    ... 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 and...

  • Page 54
    .... As more fully described below, valuation of Mattel's inventory could be impacted by changes in public and consumer preferences, demand for product, or changes in the buying patterns of both retailers and consumers and inventory management of customers. In the toy industry, orders are subject to...

  • Page 55
    ... bases its production schedules for toy products on 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...

  • Page 56
    ... are either at the operating segment level or one reporting level below the operating segment. Mattel's reporting units are: Mattel Girls Brands US, Mattel Boys Brands US, Fisher-Price Brands US, American Girl Brands, and International. Goodwill is allocated to Mattel's reporting units based on an...

  • Page 57
    ...; Rate of future compensation increases (for defined benefit pension plans); Expected long-term rate of return on plan assets (for funded plans); and Health care cost trend rates (for other postretirement benefit plans). Management believes that these assumptions are "critical accounting estimates...

  • Page 58
    ...in 2011, 2010, and 2009. 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 2012 of approximately $3 million. The health care cost trend rates used by Mattel for...

  • Page 59
    ... create deferred income tax assets and liabilities. Deferred income tax assets generally represent items that can be used as a tax deduction or credit in Mattel's tax returns in future years for which Mattel has already recorded a tax benefit in its consolidated statement of operations. Mattel...

  • Page 60
    ...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...

  • Page 61
    ... are recorded in the 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...

  • Page 62
    ... million in 2011, increased by approximately $4 million in 2010, and decreased by approximately $13 million in 2009. 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 63
    ... than 0.1% of Mattel's consolidated net sales in 2011 and had approximately $34 million of net monetary assets denominated in Venezuelan bolivar fuertes as of December 31, 2011. For every $10 million of net monetary assets denominated in Venezuelan bolivar fuertes, a 10% increase/(decrease) in the...

  • Page 64
    ... 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 Bryan G. Stockton, its principal executive officer, and Kevin...

  • Page 65
    ..., on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and...

  • Page 66
    MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2011 2010 (In thousands, except share data) ASSETS Current Assets Cash and equivalents ...Accounts receivable, less allowance of $26.3 million and 21.8 million in 2011 and 2010, respectively ...Inventories ......

  • Page 67
    ..., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Year 2011 2010 2009 (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
    ...) Share-based compensation ...53,476 67,138 49,962 (Decrease) increase from changes in assets and liabilities: Accounts receivable ...(175,526) (394,688) 154,909 Inventories ...(40,015) (106,182) 137,072 Prepaid expenses and other current assets ...(22,689) (5,464) (5,350) Accounts payable, accrued...

  • Page 69
    ... benefit pension plans, net prior service cost, and net actuarial loss, net of tax ...Currency translation adjustments ...Comprehensive income ...Purchase of treasury stock ...Issuance of treasury stock for stock option exercises ...Restricted stock units ...Deferred compensation ...Share-based...

  • Page 70
    ... with maturities of three months or less when purchased. Such investments are stated at cost, which approximates market value. Accounts Receivable and Allowance for Doubtful Accounts Credit is granted to customers on an unsecured basis. Credit limits and payment terms are established based on...

  • Page 71
    ... 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 72
    ... or exceeds the estimated product recall or withdrawal expenses. Design and Development Costs Product design and development costs primarily include employee compensation and outside services, and are charged to the results of operations as incurred. Employee Benefit Plans Mattel and certain of its...

  • Page 73
    ... certain 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...

  • Page 74
    ... impact to the US reporting units. Mattel Girls Brands US Mattel Boys Brands US FisherPrice Brands American Girl US Brands International (In thousands) Total Balance at December 31, 2009 ...Impact of currency exchange rate changes ...Balance at December 31, 2010 ...Impact of currency exchange...

  • Page 75
    ... 2010, Mattel acquired the intellectual property rights related to Phase 10® for $15.8 million, including acquisition costs, which is included within amortizable identifiable intangibles. Mattel tests nonamortizable intangible assets, including trademarks and trade names, for impairment annually...

  • Page 76
    ... 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 77
    ... 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 78
    ... 2006 and 2007. The resolution did not have a material impact on Mattel's 2010 consolidated financial statements. In 2011, income was positively impacted by net tax benefits of $6.8 million, primarily related to reassessments of prior years' tax liabilities based on the status of current audits and...

  • Page 79
    ...other stock compensation awards resulted in an increase to additional paid-in-capital for related income tax benefits totaling $24.2 million, $7.5 million, and $36.7 million, in 2011, 2010, and 2009, respectively. Note 4-Product Recalls and Withdrawals During 2007, Mattel recalled products with high...

  • Page 80
    ...of its cost savings program, Operational Excellence 2.0. The major initiatives within the Operational Excellence 2.0 program include The creation of global brand teams and reorganization to a North America division, Additional procurement initiatives designed to fully leverage Mattel's global scale...

  • Page 81
    ... benefit plans, and deferred compensation and excess benefit plans. In addition, Mattel makes contributions to government-mandated retirement plans in countries outside the US where its employees work. A summary of retirement plan expense is as follows: 2011 For the Year 2010 2009 (In millions...

  • Page 82
    ... the Year 2010 2009 Defined benefit pension plans: Discount rate ...5.2% 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 83
    ......Actual return on plan assets ...Employer contributions ...Participant 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...

  • Page 84
    ... and postretirement benefit plans are as follows: December 31, 2011 2010 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 85
    ..., 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 not directly...

  • Page 86
    ... 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 2011, 2010, and 2009, $75.3 million, $106.7 million...

  • Page 87
    ...Mattel recognized share-based compensation expense of $1.9 million for the market-related component. For the January 1, 2011-December 31, 2013 LTIP, Mattel granted performance RSUs under the Mattel, Inc. 2010 Equity and Long-Term Compensation Plan to officers and certain employees providing services...

  • Page 88
    ... the seasonal working capital requirements of its domestic subsidiaries. The Credit Facility was amended and restated on March 8, 2011 to, among other things, (i) extend the maturity date of the Credit Facility to March 8, 2015, (ii) increase aggregate commitments under the Credit Facility to $1.40...

  • Page 89
    .... During 2011 and 2010, Mattel had average borrowings of $15.9 million and $2.6 million, respectively, under its foreign short-term bank loans, and $599.7 million and $196.9 million, respectively, under the Credit Facility and other short-term borrowings, to help finance its seasonal working capital...

  • Page 90
    ... Note 8-Stockholders' Equity Preference Stock Mattel is authorized to issue up to 20.0 million shares of $0.01 par value preference stock, of which none is currently outstanding. Preferred Stock Mattel is authorized to issue up to 3.0 million shares of $1.00 par value preferred stock, of which none...

  • Page 91
    ... and 2010, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0 million. At December 31, 2011, share repurchase authorizations of $427.3 million had not been executed. Repurchases will take place from time to time, depending on market conditions. Mattel's share...

  • Page 92
    ... 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 93
    ... at the market value on the date of grant and the expense is evenly attributed to the periods in which the restrictions lapse, which is three years from the date of grant. Compensation expense recognized related to grants of RSUs was $30.7 million, $34.2 million, and $31.7 million in 2011, 2010, and...

  • Page 94
    ...-Term Incentive Program, also more fully described in "Note 6 to the Consolidated Financial Statements-Employee Benefit Plans." Income tax benefits related to performance RSU compensation expense recognized in the consolidated statements of operations during 2011, 2010, and 2009 totaled $3.1 million...

  • Page 95
    ... currencies. These contracts generally have maturity dates of up to 18 months. These derivative instruments have been designated as effective cash flow hedges, whereby the unsettled hedges are reported in Mattel's consolidated balance sheets at fair value, with changes in the fair value of the...

  • Page 96
    ... $31,896 $ 8,200 579 $ 8,779 Prepaid expenses and other current assets $ - $ 8,799 $17,578 $31,896 Liability Derivatives Balance Sheet Classification Fair Value December 31, December 31, 2011 2010 (In thousands) Derivatives designated as hedging instruments: Foreign currency forward exchange...

  • Page 97
    ...(745) Non-operating income/expense Cost of sales The net gain of $4.7 million and net loss of $0.7 million recognized in the consolidated statements of operations during 2011 and 2010, respectively, is offset by foreign currency transaction gains/losses on the related hedged balances. Note 12-Fair...

  • Page 98
    ... ...Balance at December 31, 2011 ... $ - 21,000 21,000 (5,370) $15,630 During 2010, Mattel adopted ASU 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives, and elected the fair value option under this standard, which resulted in an $8.7 million...

  • Page 99
    ... amortized by the end of 2010. In addition, certain leasehold improvements were fully impaired during 2010, resulting in an impairment charge of approximately $8 million. During 2009, Mattel fully impaired certain intangible assets relating to product lines that were discontinued, resulting in an...

  • Page 100
    ... $0.1 million in 2011, 2010, and 2009, 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 ensure availability and timely...

  • Page 101
    ...companies, that have an "A" or better AM Best rating at the time the policies are purchased, reinsure Mattel's risk in excess of the amounts insured by Far West. Mattel's liability for reported and incurred but not reported claims at December 31, 2011 and 2010 totaled $16.3 million and $16.9 million...

  • Page 102
    ... MGA Entertainment, Inc. In April 2004, Mattel filed a lawsuit in Los Angeles County Superior Court against Carter Bryant ("Bryant"), a former Mattel design employee. The suit alleges that Bryant aided and assisted a Mattel competitor, MGA Entertainment, Inc. ("MGA"), during the time he was employed...

  • Page 103
    ... defendants MGA, Larian, and MGA Entertainment (HK) Limited infringed Mattel's copyrights in the Bratz design drawings and other Bratz works, and awarded Mattel total damages of approximately $100 million against the defendants. On December 3, 2008, the Court issued a series of orders rejecting MGA...

  • Page 104
    ..., the jury ruled against Mattel on its claims for ownership of Bratz-related works, for copyright infringement, and for misappropriation of trade secrets. The jury ruled for MGA on its claim of trade secret misappropriation as to 26 of its claimed trade secrets and awarded $88.5 million in damages...

  • Page 105
    ...®. American Girl Brands products are sold directly to consumers via its catalogue, website, and proprietary retail stores. Its children's publications are also sold to certain retailers. Additionally, the International segment sells products in all toy categories, except American Girl Brands. 93

  • Page 106
    ... taxes as reported in the consolidated statements of operations. The corporate and other category includes costs not allocated to individual segments, including charges related to incentive compensation, share-based payments, and corporate headquarters functions managed on a worldwide basis, and...

  • Page 107
    ...830 Segment assets are comprised of accounts receivable and inventories, net of applicable reserves and allowances. December 31, 2011 2010 (In thousands) Assets Domestic: Mattel Girls & Boys Brands US ...Fisher-Price Brands US ...American Girl Brands ...Total Domestic ...International ...Corporate...

  • Page 108
    ... US segments sell products to each of Mattel's three largest customers. The International segment sells products to Wal-Mart and Toys "R" Us. The American Girl Brands segment sells its children's publications to Wal-Mart and Target. 2012 Changes to Segments As part of Mattel's Operational Excellence...

  • Page 109
    ...million and $64.2 million at December 31, 2011 and 2010, respectively) ...Other ...Accrued liabilities include the following: Royalties ...Incentive compensation ...Advertising and promotion ...Taxes other than income taxes ...Other ...Other noncurrent liabilities include the following: Benefit plan...

  • Page 110
    ... average number of common and potential common shares ...Dividends declared per common share ...Common stock market price: High ...Low ...Year Ended December 31, 2010: Net sales ...Gross profit ...Advertising and promotion expenses ...Other selling and administrative expenses ...Operating income...

  • Page 111
    ...share. The dividend is payable on March 9, 2012 to stockholders of record on February 23, 2012. On February 1, 2012, Mattel completed its acquisition of Helium Holdings 1A Ltd, a private limited company existing under the laws of Jersey ("HIT Entertainment"), pursuant to the Stock Purchase Agreement...

  • Page 112
    ... Commission rules and forms. Based on this evaluation, Bryan G. Stockton, Mattel's principal executive officer, and Kevin M. Farr, Mattel's principal financial officer, concluded that these disclosure controls and procedures were effective as of December 31, 2011. Management's Report on Internal...

  • Page 113
    ...its Audit, Compensation and Governance and Social Responsibility Committees of the Board of Directors on its corporate website at http://corporate.mattel.com. Copies of the corporate governance guidelines and committee charters may be obtained free of charge by mailing a request to the address noted...

  • Page 114
    ... 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, 2011 and 2010 ...Consolidated Statements of Operations for the years ended December 31, 2011, 2010, and 2009...

  • Page 115
    ... Corporate Bank, Ltd. and Royal Bank of Canada, as Co-Documentation Agents, and the other financial institutions party thereto First Amended and Restated Receivables Purchase Agreement dated as of March 20, 2002 among Mattel Factoring, Inc., as Transferor, Mattel, Inc., as Servicer, Bank of America...

  • Page 116
    ... 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 18, 2000 between Mattel and Robert A. Eckert Amendment to Executive Employment...

  • Page 117
    ...21, 2011, regarding Mr. Stockton's promotion to Chief Executive Officer 10.18* Letter Agreement between Mattel and Geoff Massingberd, dated June 25, 2008, regarding Mr. Massingberd's relocation to Mattel's headquarters 10.19 Mattel Incentive Plan 10.20 Amendment No. 1 to the Mattel Incentive Plan 10...

  • Page 118
    ... RSUs to Employees under the 2010 Plan Form of Grant Agreement for Long-Term Incentive Program Performance-Based Restricted Stock Units for Senior Executives under the 2010 Plan for Certain Executive Officers with Employment Agreements and Certain Executive Officers Participating in the Mattel, Inc...

  • Page 119
    ... RSUs to Robert A. Eckert under the 2010 Plan Form of Grant Agreement for August 1, 2005 grant to Thomas A. Debrowski of NQSOs under the 2005 Plan Form of Grant Agreement for August 1, 2006 grant to Thomas A. Debrowski of NQSOs under the 2005 Plan Form of Grant Agreement for August 1, 2007 grant to...

  • Page 120
    ... 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) 8-K 001-05647 99.1 March 17, 2006 10.70 8-K 001-05647 99.6 May 18, 2007 10.71 10...

  • Page 121
    ... authorized to be issued does not exceed 10% of its total assets. Copies of such agreements will be provided to the SEC upon request. (b) Exhibits Required by Item 601 of Regulation S-K See Item (3) above. (c) Financial Statement Schedule See Item (2) above. Copies of this Annual Report on Form 10...

  • Page 122
    ... financial officer) Senior Vice President and Corporate Controller (principal accounting officer) Director Chairman of the Board Director Director February 23, 2012 February 23, 2012 February 23, 2012 /s/ /s/ /s/ /s/ MICHAEL J. DOLAN Michael J. Dolan ROBERT A. ECKERT Robert A. Eckert February...

  • Page 123
    ... Christopher A. Sinclair Director February 23, 2012 /s/ Director February 23, 2012 /s/ G. CRAIG SULLIVAN G. Craig Sullivan DIRK VAN DE PUT Dirk Van De Put KATHY WHITE LOYD Kathy White Loyd Director February 23, 2012 /s/ Director February 23, 2012 /s/ Director February 23, 2012 111

  • Page 124
    SCHEDULE 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, 2011 ...Year ended December 31, 2010 ...

  • Page 125
    ... MATTEL, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited; in thousands, except ratios) 2011 2010 For the Year 2009 2008 2007 Earnings Available for Fixed Charges: Income from continuing operations before income taxes and cumulative effect of changes in accounting...

  • Page 126
    ...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 23, 2012 By: /s/ BRYAN G. STOCKTON Bryan G. Stockton Chief Executive Officer...

  • Page 127
    ... 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 23, 2012 By: /S/ KEVIN M. FARR Kevin M. Farr Chief Financial Officer...

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    ... Worldwide, Inc. Executive Vice President, Fisher-Price Brands Ellen L. Brothers Executive Vice President, Mattel and President, American Girl Dr. Andrea L. Rich (3) (4) Former President, Chief Executive Officer and Artistic Director, Los Angeles County Museum of Art Timothy J. Kilpin Executive...

  • Page 130
    ... of World Wrestling Entertainment, Inc. ©World Wrestling Entertainment, Inc. All Rights Reserved. iPad®, iPhone®, iPod Touch® and all related elements are trademarks of Apple Inc. All Rights Reserved. All other product names and associated designs mentioned or shown in this Annual Report on...

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