Mattel 2011 Annual Report Download - page 60

benefits are reviewed periodically and adjusted as circumstances 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 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 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.
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. 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
2011 2010 2009
(In thousands)
Domestic:
Mattel Girls & Boys Brands US ............................ $1,775,954 $1,626,407 $1,402,224
Fisher-Price Brands US ................................... 1,293,780 1,352,729 1,310,886
American Girl Brands .................................... 510,936 486,644 462,899
Total Domestic ............................................. 3,580,670 3,465,780 3,176,009
International ............................................... 3,260,417 2,920,830 2,758,315
Gross sales ................................................. 6,841,087 6,386,610 5,934,324
Sales adjustments ........................................... (575,050) (530,415) (503,478)
Net sales .................................................. $6,266,037 $5,856,195 $5,430,846
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