Mattel 2013 Annual Report Download - page 104

in March and April 2013. On July 26, 2013, the appeals court awarded Yellowstone approximately $20 million in
damages, as adjusted for inflation and interest. The court also awarded Mattel approximately $8 million on its
counterclaim, as adjusted for inflation. On August 2, 2013, Mattel filed a motion for clarification since the
written decision contained clear errors in terms of amounts awarded and interest and inflation adjustments.
Mattel’s motion also asked the court to decide whether Yellowstone’s award could be offset by the counterclaim
award, despite Yellowstone’s status as a bankrupt entity. A decision on the clarification motion is expected in the
first quarter of 2014. Mattel intends to appeal the decision to the Superior Court based on both procedural and
substantive grounds.
Mattel believes that it is reasonably possible that a loss in this matter could range from $0 to approximately
$20 million. The high end of this range, approximately $20 million, is based on the calculation of the current
amount of the damages and loss of profits, including interest and inflation adjustments, reported in the first court-
appointed examination report submitted in the lawsuit, plus attorney’s fees. Mattel do Brasil may be entitled to
offset its counterclaim award of approximately $8 million, including inflation adjustment, against such loss. The
existence of pending motions for clarification filed by both parties and the resulting clarification decision
expected to be issued in the first quarter of 2014, as well as the procedural aspects of an appeal to the Superior
Court, adds some uncertainty to the final outcome of the matter. Mattel believes however that it has good legal
grounds for appeal of the decision and does not believe that a loss is probable for this matter. Accordingly, a
liability has not been accrued as of December 31, 2013. Mattel may be required to place the full amount of the
damage award in escrow pending an appeal decision by the Superior Court.
Note 12—Segment Information
Description of Segments
Mattel sells a broad variety of toy products which are grouped into three major brand categories:
Mattel Girls & Boys Brands—including Barbie fashion dolls and accessories (“Barbie”), Monster
High, Disney Classics, Ever After High, Little Mommy, and Polly Pocket (collectively “Other Girls”),
Hot Wheels, Matchbox, and Tyco R/C vehicles and play sets (collectively “Wheels”), and CARS,
Disney Planes, Radica, Toy Story, Max Steel, WWE Wrestling, Batman, and games and puzzles
(collectively “Entertainment”).
Fisher-Price Brands—including Fisher-Price, Little People, BabyGear, Laugh & Learn, and Imaginext
(collectively “Core Fisher-Price”), Thomas & Friends, Dora the Explorer, Mickey Mouse Clubhouse,
and Disney Jake and the Never Land Pirates (collectively “Fisher-Price Friends”), and Power Wheels.
American Girl Brands—including My American Girl, the historical collection, and Bitty Baby.
American Girl Brands products are sold directly to consumers via its catalog, website, and proprietary
retail stores. Its children’s publications are also sold to certain retailers.
Prior to 2012, Mattel’s operating segments were divided on a geographic basis between domestic and
international. The domestic segment was further divided into Mattel Girls & Boys Brands US, Fisher-Price
Brands US, and American Girl Brands. Effective January 1, 2012, Mattel modified its organizational structure
into North America, International, and American Girl divisions. This reorganization was implemented in order to
simplify the organization and to move decision-making for the North America business closer to its retail
customers and its toy consumers. Prior to the reorganization, the functions of the US operations were divided
between the Mattel Girls & Boys Brands US and Fisher-Price Brands US operating segments. Both of these
segments had distinct and separate reporting structures. The reorganization consolidated functions within the US
into a single reporting structure that is no longer structured around brands, including the US sales, customer
marketing, customer forecasting, customer service, and finance teams. The new structure is primarily organized
based on customer-focused teams that are designated to specific retail customers. As a result, the reorganization
changed the way the US business is being operated, and combined the US business with Canada under one
leadership team, to form the North America division. As part of the reorganization, new executive positions were
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