Mattel 2011 Annual Report Download - page 41

Other Selling and Administrative Expenses
Other selling and administrative expenses were $1.41 billion in both 2011 and 2010, or 22.4% of net sales in
2011, as compared to 24.0% of net sales in 2010. Decreases in other selling and administrative expenses from
lower legal expenses, lower incentive compensation expense, lower share-based compensation expense, and net
cost savings from Mattel’s Operational Excellence 2.0 initiatives, were offset by higher employee-related
expenses, investments in strategic growth initiatives, and acquisition-related expenses of approximately $10
million.
Non-Operating Items
Interest expense was $75.3 million in 2011, as compared to $64.8 million in 2010, driven primarily by
higher average borrowings resulting from the $500.0 million of senior notes issued in September 2010 and the
$600.0 million of senior notes issued in November of 2011, partially offset by the repayment of $250.0 million of
maturing debt in 2011 and lower average interest rates. Interest income decreased from $8.4 million in 2010 to
$8.1 million in 2011, driven primarily by lower average interest rates, partially offset by higher average invested
cash balances. Other non-operating expense was $3.2 million in 2011, as compared to other non-operating
income of $1.3 million in 2010, driven primarily by other investment losses.
Provision for Income Taxes
Mattel’s effective tax rate on income before income taxes in 2011 was 20.8%, as compared to 19.1% in
2010. The 2011 income tax provision includes net tax benefits of $6.8 million, primarily related to 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. 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 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.
Business Segment Results
Mattel’s reportable segments are separately managed business units and are divided on a geographic basis
between domestic and international. The Domestic segment is further divided into Mattel Girls & Boys Brands
US, Fisher-Price Brands US, and American Girl Brands. Reportable segment results should be read in
conjunction with Item 8 “Financial Statements and Supplementary Data—Note 14 to the Consolidated Financial
Statements—Segment Information.”
Mattel Girls & Boys Brands US
Mattel Girls & Boys Brands US gross sales were $1.78 billion in 2011, up $149.5 million or 9%, as
compared to $1.63 billion in 2010. Within this segment, gross sales of Barbie®products increased 8% and gross
sales of Other Girls products increased 23%, driven primarily by higher sales of Monster High®and Disney
Princess®products, partially offset by lower sales of Little Mommy®and Polly Pocket®products. Gross sales of
Wheels products decreased 5%, driven primarily by lower sales of Matchbox®products. Gross sales of
Entertainment products increased 14%, driven primarily by higher sales of CARS 2®products, partially offset by
lower sales of Toy Story®3 products. Cost of sales increased 9% in 2011, as compared to a 10% increase in net
sales, primarily due to higher product costs and higher royalty expenses as a result 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 primarily by higher net sales and higher gross margins.
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