Mattel Inc 10-Q for FY2023 Q3
Mattel Inc (MAT)
10-Q
2023-11-09
For: 2023-09-30
View Original
Added on
April 10, 2026
About this 10-Q
Mattel Inc filed this 10-Q on November 9, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.92B
- up 9.3% from $1.76B a year earlier
- Net income
- $146.32M
- down 49.5% from net income of $289.88M a year earlier
- Diluted EPS
- $0.41
- down 48.8% from $0.80 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________
FORM 10-Q
___________________________________________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the quarterly period ended | ||||||||
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to | |||||
Commission File Number 001-05647
___________________________________________________________
MATTEL, INC.
(Exact name of registrant as specified in its charter)
___________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(310 ) 252-2000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last report)
__________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||||||||
Emerging growth company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares outstanding of registrant's common stock, $1.00 par value, as of October 25, 2023: 353,232,620 shares
1
MATTEL, INC. AND SUBSIDIARIES
| Page | ||||||||
| PART I — FINANCIAL INFORMATION | ||||||||
| PART II — OTHER INFORMATION | ||||||||
2
(Cautionary Note Regarding Forward-Looking Statements)
Mattel cautions investors that this Quarterly Report on Form 10-Q includes forward-looking statements, which are statements that relate to the future and are, by their nature, uncertain. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. The use of words such as "anticipates," "expects," "intends," "plans," "projects," "looks forward," "confident that," "believes," and "targeted," among others, generally identify forward-looking statements. These forward-looking statements are based on currently available operating, financial, economic, and other information and assumptions, and are subject to a number of significant risks and uncertainties. A variety of factors, many of which are beyond Mattel's control, could cause actual future results to differ materially from those projected in the forward-looking statements. Specific factors that might cause such a difference include, but are not limited to: (i) Mattel's ability to design, develop, produce, manufacture, source, ship, and distribute products on a timely and cost-effective basis; (ii) sufficient interest in and demand for the products and entertainment Mattel offers by retail customers and consumers to profitably recover Mattel's costs; (iii) downturns in economic conditions affecting Mattel's markets which can negatively impact retail customers and consumers, and which can result in lower employment levels and lower consumer disposable income and spending, including lower spending on purchases of Mattel's products; (iv) other factors which can lower discretionary consumer spending, such as higher costs for fuel and food, drops in the value of homes or other consumer assets, and high levels of consumer debt; (v) potential difficulties or delays Mattel may experience in implementing cost savings and efficiency enhancing initiatives; (vi) other economic and public health conditions or regulatory changes in the markets in which Mattel and its customers and suppliers operate, which could create delays or increase Mattel's costs, such as higher commodity prices, labor costs or transportation costs, or outbreaks of disease; (vii) the effect of inflation on Mattel's business, including cost inflation in supply chain inputs and increased labor costs, as well as pricing actions taken in an effort to mitigate the effects of inflation; (viii) currency fluctuations, including movements in foreign exchange rates, which can lower Mattel's net revenues and earnings, and significantly impact Mattel's costs; (ix) the concentration of Mattel's customers, potentially increasing the negative impact to Mattel of difficulties experienced by any of Mattel's customers, such as bankruptcies or liquidations or a general lack of success, or changes in their purchasing or selling patterns; (x) the inventory policies of Mattel's retail customers, as well as the concentration of Mattel's revenues in the second half of the year, which coupled with reliance by retailers on quick response inventory management techniques, increases the risk of underproduction, overproduction, and shipping delays; (xi) legal, reputational, and financial risks related to security breaches or cyberattacks; (xii) work disruptions, including as a result of supply chain disruption such as plant or port closures, which may impact Mattel's ability to manufacture or deliver product in a timely and cost-effective manner; (xiii) the impact of competition on revenues, margins, and other aspects of Mattel's business, including the ability to offer products that consumers choose to buy instead of competitive products, the ability to secure, maintain, and renew popular licenses from licensors of entertainment properties, and the ability to attract and retain talented employees and adapt to evolving workplace models; (xiv) the risk of product recalls or product liability suits and costs associated with product safety regulations; (xv) changes in laws or regulations in the United States and/or in other major markets, such as China, in which Mattel operates, including, without limitation, with respect to taxes, tariffs, trade policies, or product safety, which may increase Mattel's product costs and other costs of doing business, and reduce Mattel's earnings and liquidity; (xvi) business disruptions or other unforeseen impacts due to economic instability, political instability, civil unrest, armed hostilities (including the impact of the war in Ukraine and geopolitical developments in the Middle East), natural and man-made disasters, pandemics or other public health crises, such as the COVID-19 pandemic, or other catastrophic events; (xvii) failure to realize the planned benefits from any investments or acquisitions made by Mattel; (xviii) the impact of other market conditions or third party actions or approvals, including those that result in any significant failure, inadequacy, or interruption from vendors or outsourcers, which could reduce demand for Mattel's products, delay or increase the cost of implementation of Mattel's programs, or alter Mattel's actions and reduce actual results; (xix) changes in financing markets or the inability of Mattel to obtain financing on attractive terms; (xx) the impact of litigation, arbitration, or regulatory decisions or settlement actions; (xxi) Mattel's ability to navigate regulatory frameworks in connection with new areas of investment, product development, or other business activities, such as non-fungible tokens and cryptocurrency; and (xxii) other risks and uncertainties detailed in Part I, Item 1A "Risk Factors" in Mattel's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 Annual Report on Form 10-K"), and subsequent periodic filings. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so, except as required by law.
3
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| September 30, 2023 | September 30, 2022 | December 31, 2022 | |||||||||||||||
| (Unaudited; in thousands, except share data) | |||||||||||||||||
| ASSETS | |||||||||||||||||
| Current Assets | |||||||||||||||||
| Cash and equivalents | $ | $ | $ | ||||||||||||||
Accounts receivable, net of allowances for credit losses of $ | |||||||||||||||||
| Inventories | |||||||||||||||||
| Prepaid expenses and other current assets | |||||||||||||||||
| Total current assets | |||||||||||||||||
| Noncurrent Assets | |||||||||||||||||
| Property, plant, and equipment, net | |||||||||||||||||
| Right-of-use assets, net | |||||||||||||||||
| Goodwill | |||||||||||||||||
| Deferred income tax assets | |||||||||||||||||
| Intangible assets, net | |||||||||||||||||
| Other noncurrent assets | |||||||||||||||||
| Total Assets | $ | $ | $ | ||||||||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||
| Current Liabilities | |||||||||||||||||
| Current portion of long-term debt | $ | $ | $ | ||||||||||||||
| Accounts payable | |||||||||||||||||
| Accrued liabilities | |||||||||||||||||
| Income taxes payable | |||||||||||||||||
| Total current liabilities | |||||||||||||||||
| Noncurrent Liabilities | |||||||||||||||||
| Long-term debt | |||||||||||||||||
| Noncurrent lease liabilities | |||||||||||||||||
| Other noncurrent liabilities | |||||||||||||||||
| Total noncurrent liabilities | |||||||||||||||||
| Stockholders' Equity | |||||||||||||||||
Common stock $ | |||||||||||||||||
| Additional paid-in capital | |||||||||||||||||
Treasury stock at cost: | ( | ( | ( | ||||||||||||||
| Retained earnings | |||||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ( | ||||||||||||||
| Total stockholders' equity | |||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (Unaudited; 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 | |||||||||||||||||||||||
| Interest (income) | ( | ( | ( | ( | |||||||||||||||||||
| Other non-operating (income) expense, net | ( | ( | ( | ||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| (Income) from equity method investments | ( | ( | ( | ( | |||||||||||||||||||
| Net Income | $ | $ | $ | $ | |||||||||||||||||||
| Net Income Per Common Share - Basic | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average number of common shares | |||||||||||||||||||||||
| Net Income Per Common Share - Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average number of common and potential common shares | |||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (Unaudited; in thousands) | |||||||||||||||||||||||
| Net Income | $ | $ | $ | $ | |||||||||||||||||||
| Other Comprehensive Loss, Net of Tax | |||||||||||||||||||||||
| Currency translation adjustments | ( | ( | ( | ( | |||||||||||||||||||
| Employee benefit plan adjustments | |||||||||||||||||||||||
| Available-for-sale security adjustments | |||||||||||||||||||||||
| Net unrealized gains (losses) on derivative instruments: | |||||||||||||||||||||||
| Unrealized holding gains (losses) | ( | ||||||||||||||||||||||
| Reclassification adjustments included in net income | ( | ( | ( | ( | |||||||||||||||||||
| ( | |||||||||||||||||||||||
| Other Comprehensive Loss, Net of Tax | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive Income | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended | |||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||
| (Unaudited; in thousands) | |||||||||||
| Cash Flows From Operating Activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash flows used for operating activities: | |||||||||||
| Depreciation | |||||||||||
| Amortization | |||||||||||
| Share-based compensation | |||||||||||
| Bad debt expense | |||||||||||
| Inventory obsolescence | |||||||||||
| Deferred income taxes | |||||||||||
| Income from equity method investments | ( | ( | |||||||||
| Loss (gain) on sale of assets, net | ( | ||||||||||
| Valuation allowance on foreign deferred tax assets | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable, net | ( | ( | |||||||||
| Inventories | ( | ||||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Accounts payable, accrued liabilities, and income taxes payable | ( | ||||||||||
| Other, net | ( | ( | |||||||||
| Net cash flows used for operating activities | ( | ( | |||||||||
| Cash Flows From Investing Activities: | |||||||||||
| Purchases of tools, dies, and molds | ( | ( | |||||||||
| Purchases of other property, plant, and equipment | ( | ( | |||||||||
| Proceeds from foreign currency forward exchange contracts, net | |||||||||||
| Proceeds from sale of assets | |||||||||||
| Other, net | ( | ||||||||||
| Net cash flows used for investing activities | ( | ( | |||||||||
| Cash Flows From Financing Activities: | |||||||||||
| Share repurchases | ( | ||||||||||
| Tax withholdings for share-based compensation | ( | ( | |||||||||
| Proceeds from stock option exercises | |||||||||||
| Other, net | ( | ( | |||||||||
| Net cash flows used for financing activities | ( | ( | |||||||||
| Effect of Currency Exchange Rate Changes on Cash and Equivalents | ( | ( | |||||||||
| Decrease in Cash and Equivalents | ( | ( | |||||||||
| Cash and Equivalents at Beginning of Period | |||||||||||
| Cash and Equivalents at End of Period | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
| Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| (Unaudited; in thousands) | |||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
| Share repurchases | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Issuance of treasury stock for stock option exercises | — | ( | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock for restricted stock units vesting | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Share repurchases | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Issuance of treasury stock for stock option exercises | — | ( | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock for restricted stock units vesting | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Deferred compensation | — | ( | — | — | |||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Share repurchases | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Issuance of treasury stock for stock option exercises | — | ( | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock for restricted stock units vesting | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| (Unaudited; in thousands) | |||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock for stock option exercises | — | ( | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock for restricted stock units vesting | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Adjustment of accumulated other comprehensive loss to retained earnings for available-for-sale securities | — | — | — | ( | |||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock for stock option exercises | — | ( | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock for restricted stock units vesting | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Deferred compensation | — | ( | — | — | |||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Issuance of treasury stock for stock option exercises | — | ( | — | — | |||||||||||||||||||||||||||||||
| Issuance of treasury stock for restricted stock units vesting | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
8
MATTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The December 31, 2022 balance sheet data was derived from audited financial statements; however, the accompanying interim notes to the consolidated financial statements do not include all of the annual disclosures required by GAAP. As Mattel's business is seasonal, results for interim periods are not necessarily indicative of those that may be expected for a full year. The financial information included herein should be read in conjunction with Mattel's consolidated financial statements and related notes in the 2022 Annual Report on Form 10-K.
2. Accounts Receivable, Net
3. Inventories
Inventories included the following:
| September 30, 2023 | September 30, 2022 | December 31, 2022 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Raw materials and work in process | $ | $ | $ | ||||||||||||||
| Finished goods | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
4. Property, Plant, and Equipment, Net
Property, plant, and equipment, net included the following:
| September 30, 2023 | September 30, 2022 | December 31, 2022 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Land | $ | $ | $ | ||||||||||||||
| Buildings | |||||||||||||||||
| Machinery and equipment | |||||||||||||||||
| Software | |||||||||||||||||
| Tools, dies, and molds | |||||||||||||||||
| Leasehold improvements | |||||||||||||||||
| Construction in progress | |||||||||||||||||
| Less: accumulated depreciation | ( | ( | ( | ||||||||||||||
| $ | $ | $ | |||||||||||||||
9
5. Goodwill and Intangible Assets, Net
Goodwill
Goodwill is allocated to various reporting units, which are at the operating segment level, for the purpose of evaluating whether goodwill is impaired. Mattel's reporting units are: (i) North America; (ii) International; and (iii) American Girl. Components of the operating segments have been aggregated into a single reporting unit as the components have similar economic characteristics. The similar economic characteristics include the nature of the products, the nature of the production processes, the customers, and the manner in which the products are distributed. Mattel tests its goodwill for impairment annually in the third quarter and whenever events or changes in circumstances indicate that the carrying amount of a reporting unit may exceed its fair value.
In the third quarter of 2023, Mattel performed its annual impairment test and determined that goodwill was not impaired. The change in the carrying amount of goodwill by reporting unit for the nine months ended September 30, 2023 is shown below. Brand-specific goodwill held by foreign subsidiaries is allocated to the North America reporting unit selling those brands, thereby causing a foreign currency translation impact.
| December 31, 2022 | Currency Exchange Rate Impact | September 30, 2023 | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| North America | $ | $ | $ | ||||||||||||||||||||
| International | |||||||||||||||||||||||
| American Girl | |||||||||||||||||||||||
| $ | $ | $ | |||||||||||||||||||||
Intangible Assets, Net
Amortizable intangible assets were $397.8 million, net of accumulated amortization of $396.8 million, $426.3 million, net of accumulated amortization of $355.3 million, and $425.1 million, net of accumulated amortization of $364.9 million as of September 30, 2023, September 30, 2022, and December 31, 2022, respectively.
Mattel's amortizable intangible assets primarily consist of trademarks and trade names. Mattel tests its amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Mattel's amortizable intangible assets were no
6. Accrued Liabilities
Accrued liabilities included the following:
| September 30, 2023 | September 30, 2022 | December 31, 2022 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Advertising and promotion | $ | $ | $ | ||||||||||||||
| Incentive compensation | |||||||||||||||||
| Royalties | |||||||||||||||||
10
7. Supplier Finance Program
8. Seasonal Financing
On September 15, 2022, Mattel entered into a revolving credit agreement (the "Credit Agreement") as the borrower with Bank of America, N.A., as administrative agent, and the other lenders and financial institutions party thereto, providing for a senior secured revolving credit facility in an aggregate principal amount of $1.40 billion (the "Revolving Credit Facility"). The Revolving Credit Facility will mature on September 15, 2025. In connection with the entry into the Credit Agreement, Mattel terminated the commitments and satisfied all outstanding obligations under the previous credit agreement, dated December 20, 2017 (as amended).
Borrowings under the Revolving Credit Facility bear interest at a floating rate, which can be either, at Mattel's option, (i) adjusted Term Secured Overnight Financing Rate ("SOFR") plus an applicable margin ranging from 1.125 % to 2.000 % per annum or (ii) an alternate base rate plus an applicable margin ranging from 0.125 % to 1.000 % per annum, in each case, such applicable margins to be determined based on Mattel's debt ratings.
In addition to paying interest on the outstanding principal under the Revolving Credit Facility, Mattel is required to pay (i) an unused line fee per annum of the average daily unused portion of the Revolving Credit Facility; (ii) a letter of credit fronting fee based on a percentage of the aggregate face amount of outstanding letters of credit; and (iii) certain other customary fees and expenses of the lenders and agents.
In November 2022, Moody's upgraded Mattel's debt rating from Ba1 to Baa3, and in April 2023, S&P upgraded Mattel's debt rating from BB+ to BBB- and maintained a positive outlook. On April 27, 2023 (the "Fall-Away Date"), Mattel provided a certification of the foregoing to the administrative agent under the Credit Agreement, which resulted in certain subsidiary guarantees, liens, covenants, and other restrictions falling away under the Credit Agreement.
The obligations of Mattel under the Revolving Credit Facility were previously guaranteed by each domestic subsidiary of Mattel that guaranteed any of Mattel's senior unsecured notes (collectively, the "Guarantors"). On the Fall-Away Date, the foregoing guarantees were released and the obligations of Mattel under the Revolving Credit Facility are instead required to be guaranteed by each existing and future direct and indirect domestic subsidiary of Mattel only to the extent such subsidiary guarantees other indebtedness of Mattel in an aggregate principal or committed amount in excess of $50 million.
The Revolving Credit Facility was previously secured by liens on substantially all of Mattel's and the Guarantors' present and after-acquired assets (subject to certain exceptions), including domestic accounts receivable, inventory, certain trademarks and patents, and certain equity interests in direct material subsidiaries of Mattel and the Guarantors, but all such liens were permanently released on the Fall-Away Date.
The Credit Agreement contains customary covenants (subject to customary exceptions), including, but not limited to, restrictions on Mattel's and its subsidiaries' ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, sell or otherwise dispose of assets, or amend organizational documents.
The Credit Agreement requires the maintenance of (a) an interest coverage ratio of not less than 2.75 to 1.00 as of the end of each fiscal quarter and (b) a total leverage ratio not to exceed 3.75 to 1.00 as of the end of each fiscal quarter.
Mattel had no no 9 million, $9 million, and $8 million as of September 30, 2023, September 30, 2022, and December 31, 2022, respectively.
11
9. Long-Term Debt
Long-term debt included the following:
| September 30, 2023 | September 30, 2022 | December 31, 2022 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| 2010 Senior Notes due October 2040 | $ | $ | $ | ||||||||||||||
| 2011 Senior Notes due November 2041 | |||||||||||||||||
| 2013 Senior Notes due March 2023 | |||||||||||||||||
| 2019 Senior Notes due December 2027 | |||||||||||||||||
| 2021 Senior Notes due April 2026 | |||||||||||||||||
| 2021 Senior Notes due April 2029 | |||||||||||||||||
| Debt issuance costs and debt discount | ( | ( | ( | ||||||||||||||
| $ | $ | $ | |||||||||||||||
| Less: current portion | ( | ||||||||||||||||
| Total long-term debt | $ | $ | $ | ||||||||||||||
On December 30, 2022, Mattel used cash on hand to redeem and retire the $250 million aggregate principal amount of the 2013 Senior Notes due March 2023.
Mattel's 2019 Senior Notes due 2027 were issued pursuant to an indenture dated November 20, 2019, and its 2021 Senior Notes due 2026 and 2021 Senior Notes due 2029 were issued pursuant to an indenture dated March 19, 2021. These indentures contain covenants that limit Mattel's (and some of its subsidiaries') ability to, among other things: (i) incur additional debt or issue certain preferred shares; (ii) pay dividends on or make other distributions in respect of their capital stock or make other restricted payments; (iii) make investments in unrestricted subsidiaries; (iv) create liens; (v) enter into certain sale/leaseback transactions; (vi) merge or consolidate, or sell, transfer or otherwise dispose of substantially all of their assets; and (vii) designate subsidiaries as unrestricted. The indentures also provided that certain of these covenants would be suspended if Mattel achieved a debt rating of BBB-, Baa3, and/or BBB- (or higher) from any two of S&P, Moody's, and Fitch, respectively, and no event of default has occurred.
In April 2023, S&P upgraded Mattel’s debt rating from BB+ to BBB- and maintained a positive outlook, and in November 2022, Moody’s previously upgraded Mattel’s debt rating from Ba1 to Baa3. As a result of the upgraded debt ratings and no events of default, the covenants limiting Mattel’s ability to incur additional debt or issue certain preferred shares, pay dividends on or make other distributions in respect of their capital stock or make other restricted payments, and make investments in unrestricted subsidiaries, and certain provisions of the covenant limiting Mattel’s ability to merge or consolidate, or sell, transfer or otherwise dispose of substantially all of their assets, are suspended. If Mattel ceases to have debt ratings of BBB-, Baa3, and/or BBB- (or higher) from any two of S&P, Moody's, and Fitch, respectively, Mattel will thereafter be subject to the suspended covenants with respect to future events. Following the Fall-Away Date under the Revolving Credit Facility, all guarantee obligations of the Guarantors under the 2019 Senior Notes due 2027, 2021 Senior Notes due 2026, and 2021 Senior Notes due 2029 were released, and the obligations of Mattel under the 2019 Senior Notes due 2027, 2021 Senior Notes due 2026, and 2021 Senior Notes due 2029 will be required to be guaranteed by each existing and future direct and indirect domestic subsidiary of Mattel only to the extent such subsidiary guarantees other indebtedness of Mattel in an aggregate principal or committed amount in excess of $50 million.
12
10. Accumulated Other Comprehensive Income (Loss)
The following tables present changes in the accumulated balances for each component of other comprehensive loss, including current period other comprehensive loss and reclassifications from accumulated other comprehensive income (loss):
| For the Three Months Ended September 30, 2023 | |||||||||||||||||||||||||||||
| Derivative Instruments | Available-for-Sale Security | Employee Benefit Plans | Currency Translation Adjustments | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
| Net increase (decrease) in other comprehensive income | ( | ( | |||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
| For the Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||
| Derivative Instruments | Available-for-Sale Security | Employee Benefit Plans | Currency Translation Adjustments | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
| Net (decrease) increase in other comprehensive income | ( | ( | ( | ||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
| For the Three Months Ended September 30, 2022 | |||||||||||||||||||||||||||||
| Derivative Instruments | Available-for-Sale Security | Employee Benefit Plans | Currency Translation Adjustments | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
| Net increase (decrease) in other comprehensive income | ( | ( | |||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
13
| For the Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||||
| Derivative Instruments | Available-for-Sale Security | Employee Benefit Plans | Currency Translation Adjustments | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2021 | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
| Net increase (decrease) in other comprehensive income | ( | ( | |||||||||||||||||||||||||||
| Adjustment of accumulated other comprehensive loss to retained earnings | |||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
The following tables present the classification and amount of the reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of operations:
| For the Three Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Derivative Instruments: | |||||||||||||||||
| Gain on foreign currency forward exchange and other contracts | $ | $ | Cost of sales | ||||||||||||||
| Tax effect | Provision for income taxes | ||||||||||||||||
| $ | $ | Net income | |||||||||||||||
| Employee Benefit Plans: | |||||||||||||||||
| Amortization of prior service credit (a) | $ | $ | Other non-operating (income) expense, net | ||||||||||||||
| Recognized actuarial loss (a) | ( | ( | Other non-operating (income) expense, net | ||||||||||||||
| ( | ( | ||||||||||||||||
| Tax effect | Provision for income taxes | ||||||||||||||||
| $ | ( | $ | ( | Net income | |||||||||||||
(a)The amortization of prior service credit and recognized actuarial loss are included in the computation of net periodic benefit cost. Refer to "Note 15 to the Consolidated Financial Statements—Employee Benefit Plans" for additional information regarding Mattel's net periodic benefit cost.
14
| For the Nine Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Derivative Instruments: | |||||||||||||||||
| Gain on foreign currency forward exchange and other contracts | $ | $ | Cost of sales | ||||||||||||||
| Tax effect | ( | Provision for income taxes | |||||||||||||||
| $ | $ | Net income | |||||||||||||||
| Employee Benefit Plans: | |||||||||||||||||
| Amortization of prior service credit (a) | $ | $ | Other non-operating (income) expense, net | ||||||||||||||
| Recognized actuarial loss (a) | ( | ( | Other non-operating (income) expense, net | ||||||||||||||
| ( | ( | ||||||||||||||||
| Tax effect | Provision for income taxes | ||||||||||||||||
| $ | ( | $ | ( | Net income | |||||||||||||
(a)The amortization of prior service credit and recognized actuarial loss are included in the computation of net periodic benefit cost. Refer to "Note 15 to the Consolidated Financial Statements—Employee Benefit Plans" for additional information regarding Mattel's net periodic benefit cost.
During the three months ended March 31, 2022, Mattel adjusted accumulated other comprehensive loss by $6.4 million in relation to previously recorded available-for-sale equity securities. This amount was adjusted in order to account for such securities in a manner consistent with Accounting Standards Codification 321, Investments—Equity Securities. The adjustment included $3.6 million of accumulated other comprehensive loss reclassified to other non-operating expense (income), net in the consolidated statement of operations and $2.8 million reclassified to retained earnings in the consolidated statement of stockholders' equity. The adjustment, including tax effect, was immaterial to the financial statements.
Currency Translation Adjustments
During the nine months ended September 30, 2023, currency translation adjustments resulted in a net loss of $9.0 million, primarily due to the weakening of the Russian ruble and Malaysian ringgit against the U.S. dollar, offset by the strengthening of the Mexican peso, British pound sterling, and Brazilian real against the U.S. dollar.
During the nine months ended September 30, 2022, currency translation adjustments resulted in a net loss of $78.2 million, primarily due to the weakening of the British pound sterling and the Euro against the U.S. dollar, offset by the strengthening of the Russian ruble against the U.S. dollar.
15
11. Foreign Currency Transaction Exposure
Currency transaction gains (losses) included in the consolidated statements of operations were as follows:
| For the Three Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Currency transaction (losses) | $ | ( | $ | ( | Operating income/expense | ||||||||||||
| Currency transaction gains (losses) | ( | Other non-operating income/expense, net | |||||||||||||||
| Currency transaction gains (losses), net | $ | $ | ( | ||||||||||||||
| For the Nine Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Currency transaction (losses) | $ | ( | $ | ( | Operating income/expense | ||||||||||||
| Currency transaction gains (losses) | ( | Other non-operating income/expense, net | |||||||||||||||
| Currency transaction (losses), net | $ | ( | $ | ( | |||||||||||||
12. Derivative Instruments
16
The following tables present Mattel's derivative assets and liabilities:
| Derivative Assets | |||||||||||||||||||||||
| Balance Sheet Classification | Fair Value | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | December 31, 2022 | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Derivatives Designated as Hedging Instruments: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts | Prepaid expenses and other current assets | $ | $ | $ | |||||||||||||||||||
| Foreign currency forward exchange and other contracts | Other noncurrent assets | ||||||||||||||||||||||
| Total Derivatives Designated as Hedging Instruments | $ | $ | $ | ||||||||||||||||||||
| Derivatives Not Designated as Hedging Instruments: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts | Prepaid expenses and other current assets | $ | $ | $ | |||||||||||||||||||
| Total Derivatives Not Designated as Hedging Instruments | $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | |||||||||||||||||||||
| Derivative Liabilities | |||||||||||||||||||||||
| Balance Sheet Classification | Fair Value | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | December 31, 2022 | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Derivatives Designated as Hedging Instruments: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts | Accrued liabilities | $ | $ | $ | |||||||||||||||||||
| Foreign currency forward exchange and other contracts | Other noncurrent liabilities | ||||||||||||||||||||||
| Total Derivatives Designated as Hedging Instruments | $ | $ | $ | ||||||||||||||||||||
| Derivatives Not Designated as Hedging Instruments: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts | Accrued liabilities | $ | $ | $ | |||||||||||||||||||
| Foreign currency forward exchange and other contracts | Other noncurrent liabilities | ||||||||||||||||||||||
| Total Derivatives Not Designated as Hedging Instruments | $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | |||||||||||||||||||||
17
The following tables present the classification and amount of gains and losses, net of tax, from derivatives reported in the consolidated statements of operations:
| Derivatives Designated as Hedging Instruments | |||||||||||||||||
| For the Three Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Foreign Currency Forward Exchange and Other Contracts: | |||||||||||||||||
| Amount of gains recognized in OCI | $ | $ | |||||||||||||||
| Amount of gains reclassified from accumulated OCI to the consolidated statements of operations | Cost of sales | ||||||||||||||||
| Derivatives Designated as Hedging Instruments | |||||||||||||||||
| For the Nine Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Foreign Currency Forward Exchange and Other Contracts: | |||||||||||||||||
| Amount of (losses) gains recognized in OCI | $ | ( | $ | ||||||||||||||
| Amount of gains reclassified from accumulated OCI to consolidated statements of operations | Cost of sales | ||||||||||||||||
The net gains reclassified from accumulated other comprehensive loss to the consolidated statements of operations during the three and nine months ended September 30, 2023 and 2022, respectively, were offset by changes in cash flows associated with the underlying hedged transactions.
| Derivatives Not Designated as Hedging Instruments | |||||||||||||||||
| For the Three Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Amount of Net Gains (Losses) Recognized in the Statements of Operations: | |||||||||||||||||
| Foreign currency forward exchange and other contracts | $ | $ | ( | Other non-operating (income) expense, net | |||||||||||||
| Derivatives Not Designated as Hedging Instruments | |||||||||||||||||
| For the Nine Months Ended | |||||||||||||||||
| September 30, 2023 | September 30, 2022 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Amount of Net Gains Recognized in the Statements of Operations: | |||||||||||||||||
| Foreign currency forward exchange and other contracts | $ | $ | Other non-operating (income) expense, net | ||||||||||||||
The net gains and losses recognized in the consolidated statements of operations during the three and nine months ended September 30, 2023 and September 30, 2022, respectively, were offset by foreign currency transaction gains and losses on the related derivative balances.
18
13. Fair Value Measurements
The following tables present information about Mattel's financial assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of September 30, 2023, September 30, 2022, and December 31, 2022 and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value. The three levels of the fair value hierarchy are as follows:
•Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
•Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
•Level 3 – Valuations based on inputs that are unobservable, supported by little or no market activity, and that are significant to the fair value of the assets or liabilities.
| September 30, 2023 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts (a) | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts (a) | $ | $ | $ | $ | |||||||||||||||||||
| September 30, 2022 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts (a) | $ | $ | $ | $ | |||||||||||||||||||
| Available-for-sale (b) | |||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts (a) | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts (a) | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Foreign currency forward exchange and other contracts (a) | $ | $ | $ | $ | |||||||||||||||||||
(a)The fair value of the foreign currency forward exchange and other contracts was based on dealer quotes of market forward rates and reflects the amount that Mattel would receive or pay at their maturity dates for contracts involving the same notional amounts, currencies, and maturity dates.
(b)The fair value of the available-for-sale security was based on the quoted price on an active public exchange.
19
Other Financial Instruments
Mattel's financial instruments included cash and equivalents, accounts receivable and payable, accrued liabilities, short-term borrowings, and long-term debt. The fair values of these instruments, excluding long-term debt, approximate their carrying amounts because of their short-term nature. Cash and equivalents were classified as Level 1 and all other financial instruments were classified as Level 2 within the fair value hierarchy.
The estimated fair value of Mattel's long-term debt was $2.13 billion (compared to a carrying amount of $2.35 billion) as of September 30, 2023, $2.35 billion (compared to a carrying amount of $2.60 billion) as of September 30, 2022, and $2.13 billion (compared to a carrying amount of $2.35 billion) as of December 31, 2022. The estimated fair values have been calculated based on broker quotes or rates for the same or similar instruments and were classified as Level 2 within the fair value hierarchy.
14. Earnings Per Share
The following table reconciles basic and diluted earnings per common share for the three and nine months ended September 30, 2023 and 2022:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||||||
| Basic: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average number of common shares | |||||||||||||||||||||||
| Basic net income per common share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average number of common shares | |||||||||||||||||||||||
| Dilutive share-based awards (a) | |||||||||||||||||||||||
| Weighted-average number of common and potential common shares | |||||||||||||||||||||||
| Diluted net income per common share | $ | $ | $ | $ | |||||||||||||||||||
15. Employee Benefit Plans
20
The components of net periodic benefit cost for Mattel's defined benefit pension plans were as follows:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of prior service cost | |||||||||||||||||||||||
| Recognized actuarial loss | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
The components of net periodic benefit cost for Mattel's postretirement benefit plans were as follows:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Interest cost | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of prior service credit | ( | ( | ( | ( | |||||||||||||||||||
| Recognized actuarial gain | ( | ( | ( | ( | |||||||||||||||||||
| $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Mattel's service cost component is recorded within operating income while other components of net periodic pension cost and postretirement benefit cost are recorded within other non-operating (income) expense, net.
During the nine months ended September 30, 2023, Mattel made cash contributions totaling approximately $11 million related to its defined benefit pension and postretirement benefit plans. During the remainder of 2023, Mattel expects to make additional cash contributions of approximately $3 million.
16. Share-Based Payments
Mattel has various stock compensation plans, which are described in Part II, Item 8 "Financial Statements and Supplementary Data—Note 8 to the Consolidated Financial Statements—Share-Based Payments" in the 2022 Annual Report on Form 10-K. Under the Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan, Mattel has the ability to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs"), performance RSUs ("performance awards"), dividend equivalent rights, and shares of common stock to officers, employees, non-employee directors, and consultants providing services to Mattel. Stock options are granted with exercise prices at the fair market value of Mattel's common stock on the applicable grant date and expire no later than ten years from the date of grant. Stock options, RSUs, and performance awards generally provide for vesting over, or at the end of, a period of three years from the date of grant.
Compensation expense, included within other selling and administrative expenses in the consolidated statements of operations, related to stock options, RSUs, and performance awards was as follows:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Stock option compensation expense | $ | $ | $ | $ | |||||||||||||||||||
| RSU compensation expense | |||||||||||||||||||||||
| Performance award compensation expense | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
21
As of September 30, 2023, total unrecognized compensation expense related to unvested share-based payments totaled $110.7 million and is expected to be recognized over a weighted-average period of 2.1 years.
Mattel uses treasury shares purchased under its share repurchase program to satisfy stock option exercises and the vesting of RSUs and performance awards. Cash received for stock option exercises, net of taxes, was $26.0 million and $27.7 million for the nine months ended September 30, 2023 and 2022, respectively.
17. Other Selling and Administrative Expenses
Other selling and administrative expenses included the following:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Design and development | $ | $ | $ | $ | |||||||||||||||||||
| Intangible asset amortization | |||||||||||||||||||||||
18. Restructuring Charges
Optimizing for Growth (formerly Capital Light)
Mattel's Optimizing for Growth program is a multi-year cost savings program that integrates and expands upon the previously announced Capital Light program (the "Program"). In February 2023, the Program was expanded to include additional initiatives, including actions to further streamline Mattel's organizational structure.
In connection with the Program, Mattel recorded severance and other restructuring costs in the following cost and expense categories within operating income in the consolidated statements of operations:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Cost of sales (a) | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Other selling and administrative expenses (b) | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
(a)Severance and other restructuring charges recorded within cost of sales in the consolidated statements of operations are included in segment operating income in "Note 21 to the Consolidated Financial Statements—Segment Information."
(b)Severance and other restructuring charges recorded within other selling and administrative expenses in the consolidated statements of operations are included in corporate and other expense in "Note 21 to the Consolidated Financial Statements—Segment Information."
The following tables summarize Mattel's severance and other restructuring charges activity within operating income related to the Program:
| Liability at December 31, 2022 | Charges | Payments/Utilization | Liability at September 30, 2023 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Severance | $ | $ | $ | ( | $ | ||||||||||||||||||
| Other restructuring charges (a) | ( | ||||||||||||||||||||||
| $ | $ | $ | ( | $ | |||||||||||||||||||
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| Liability at December 31, 2021 | Charges | Payments/Utilization | Liability at September 30, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Severance | $ | $ | $ | ( | $ | ||||||||||||||||||
| Other restructuring charges (a) | ( | ||||||||||||||||||||||
| $ | $ | $ | ( | $ | |||||||||||||||||||
(a)Other restructuring charges consist primarily of expenses associated with the restructuring of commercial and corporate functions and consolidation of manufacturing facilities.
As of September 30, 2023, Mattel had recorded cumulative severance and other restructuring charges related to the Program of approximately $196 million, which included approximately $73 million of non-cash charges, including $45.4 million recognized within other non-operating expense, net, during the fourth quarter of 2022 related to the liquidation of Mattel's subsidiary in Argentina. Furthermore, cumulatively, in conjunction with previous actions taken under the Capital Light program, total expected cash expenditures are approximately $195 to $225 million and total expected non-cash charges are approximately $75 million.
Other Cost Savings Actions
In the third quarter of 2023, Mattel committed to actions not included in the Program to discontinue production at a plant located in China. In connection with these actions, Mattel recorded severance expense of $25.3 million within other selling and administrative expenses in the consolidated statements of operations in the three months ended September 30, 2023, which are recorded in corporate and other expense in "Note 21 to the Consolidated Financial Statements—Segment Information." The $25.3 million of severance expense accrued during the quarter remained outstanding as of September 30, 2023. Total expected cash charges in connection with these actions are approximately $30 to $35 million and total expected non-cash charges are approximately $6 million.
Additionally, in the first nine months of 2023, Mattel executed other cost savings actions not included in the Program to streamline its organizational structure. In connection with these actions, Mattel recorded severance expense of $6.1 million within other selling and administrative expenses in the consolidated statement of operations.
19. Income Taxes
Mattel's provision for income taxes was $309.3 million and $296.8 million for the three and nine months ended September 30, 2023, respectively, and $80.0 million and $130.5 million for the three and nine months ended September 30, 2022, respectively. Mattel recognized a net discrete income tax expense of $200.7 million and $201.0 million during the three and nine months ended September 30, 2023, respectively, which included the establishment of a valuation allowance of $212.4 million on certain foreign deferred tax assets resulting from the planned intra-group transfer of certain intellectual property ("IP") rights, partially offset by undistributed earnings of certain foreign subsidiaries and reassessments of prior years' tax liabilities. Mattel recognized a net discrete income tax benefit of $19.4 million and $4.8 million during the three and nine months ended September 30, 2022, respectively, primarily related to income taxes recorded on a discrete basis in various jurisdictions and reassessments of prior years' tax liabilities.
Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant
judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will
be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. During the third quarter of 2023, Mattel finalized a plan to complete an intra-group transfer of certain IP rights, resulting in the establishment of a valuation allowance on certain foreign deferred tax assets of $212.4 million, that will not be realized upon execution of the plan.
In the normal course of business, Mattel is regularly audited by federal, state, and foreign tax authorities. Based on the current status of federal, state, and foreign audits, Mattel believes it is reasonably possible that in the next 12 months, the total unrecognized tax benefits could decrease by approximately $17 million related to the settlement of tax audits and/or the expiration of statutes of limitations. The ultimate settlement of any particular issue with the applicable taxing authority could
have a material impact on Mattel's consolidated financial statements.
23
20. Contingencies
Litigation Related to Yellowstone do Brasil Ltda.
In April 1999, Yellowstone do Brasil Ltda. (formerly known as Trebbor Informática Ltda.) filed a lawsuit against Mattel do Brasil before the 15th Civil Court of Curitiba, State of Parana, requesting the annulment of its security bonds and promissory notes given to Mattel do Brasil as well as damages due to an alleged breach of an oral exclusive distribution agreement between the parties relating to the supply and sale of toys in Brazil. Yellowstone's complaints sought alleged loss of profits plus an unspecified amount of damages.
Mattel do Brasil filed its defenses to these claims and simultaneously presented a counterclaim for unpaid accounts receivable for goods supplied to Yellowstone.
In April 2018, Mattel do Brasil entered into a settlement agreement to resolve this matter, but the settlement was later rejected by the courts, subject to a pending appeal by Mattel.
In October 2018, the Superior Court of Justice issued a final ruling in favor of Yellowstone on the merits of Yellowstone's claims. Previously, the courts had ruled in Mattel's favor on its counterclaim.
In October 2019, Mattel reached an agreement with Yellowstone's former counsel regarding payment of the attorney's fees portion of the judgment. In November 2019, Yellowstone initiated an action to enforce its judgment against Mattel, but did not account for an offset for Mattel's counterclaim. In January 2020, Mattel obtained an injunction, staying Yellowstone's enforcement action pending resolution of Mattel's appeal to enforce the parties' April 2018 settlement. As of September 30, 2023, Mattel assessed its probable loss related to this matter and has accrued a reserve, which is not material.
Litigation Related to the Fisher-Price Rock 'n Play Sleeper
A number of putative class action lawsuits filed between April 2019 and October 2019 are pending against Fisher-Price, Inc. and/or Mattel, Inc. asserting claims for false advertising, negligent product design, breach of warranty, fraud, and other claims in connection with the marketing and sale of the Fisher-Price Rock 'n Play Sleeper (the "Sleeper"). In general, the lawsuits allege that the Sleeper should not have been marketed and sold as safe and fit for prolonged and overnight sleep for infants. The putative class action lawsuits propose nationwide and over 10 statewide consumer classes comprised of those who purchased the Sleeper as marketed as safe for prolonged and overnight sleep. The class actions have been consolidated before a single judge in the United States District Court for the Western District of New York for pre-trial purposes pursuant to the U.S. federal courts' Multi-District Litigation program. In June 2022, the court denied the plaintiffs' motion to certify damages and injunctive relief classes under New York law, but granted plaintiffs' request to certify a New York issue class to resolve two issues on a class-wide basis. In October 2022, the United States Court of Appeals for the Second Circuit denied plaintiffs' petition to appeal the denial of certification of the damages and injunctive relief classes.
In addition, a stockholder has filed a derivative action in the Court of Chancery for the State of Delaware (Kumar v. Bradley, et al., filed July 7, 2020) alleging breach of fiduciary duty and unjust enrichment related to the development, marketing, and sale of the Sleeper. The defendants in the derivative action are certain of Mattel's current and former officers and directors. In August 2020, the derivative action was stayed pending further developments in the class action lawsuits. In August 2021, a second similar derivative action was filed in the Court of Chancery for the State of Delaware (Armon v. Bradley, et al., filed August 30, 2021), which is also stayed.
The lawsuits seek compensatory damages, punitive damages, statutory damages, restitution, disgorgement, attorneys' fees, costs, interest, declaratory relief, and/or injunctive relief. Mattel believes that the allegations in the lawsuits are without merit and intends to vigorously defend against them. A reasonable estimate of the amount of any possible loss or range of loss for the lawsuits cannot be made at this time.
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21. Segment Information
Mattel designs, manufactures, and markets a broad variety of toy products worldwide, which are sold to its customers and directly to consumers.
Segment Data
Mattel's reportable segments are: (i) North America, which consists of the United States and Canada; (ii) International; and (iii) American Girl. The North America and International segments sell products across Mattel's categories, although some products are developed and adapted for particular international markets.
The following tables present information regarding Mattel's net sales, operating income, and assets by reportable segment. The corporate and other expense category includes operating costs not allocated to individual segments, including charges related to incentive and share-based compensation, corporate headquarters functions managed on a worldwide basis, the impact of changes in foreign currency exchange rates on intercompany transactions, and certain severance and other restructuring costs. It is impracticable for Mattel to present net sales by categories, brands, or products, as trade discounts and other allowances are generally recorded in the financial accounting systems by customer.
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net Sales by Segment | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| International | |||||||||||||||||||||||
| American Girl | |||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Operating Income by Segment (a) | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| International | |||||||||||||||||||||||
| American Girl | ( | ( | ( | ( | |||||||||||||||||||
Corporate and other expense (b) | ( | ( | ( | ( | |||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Interest (income) | ( | ( | ( | ( | |||||||||||||||||||
| Other non-operating (income) expense, net | ( | ( | ( | ||||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | |||||||||||||||||||
(a)Segment operating income included (i) severance and other restructuring charges of $(0.1 ) million and $(1.3 ) million for the three and nine months ended September 30, 2023, respectively, and $1.4 million and $9.8 million for the three and nine months ended September 30, 2022, respectively, which were allocated to the North America and International segments; and (ii) a loss on sale of assets of $1.8 15.2 million from the sale of the American Girl corporate office and distribution center for the nine months ended September 30, 2022, which was recorded in the American Girl segment.
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Segment assets are comprised of accounts receivable, net and inventories.
| September 30, 2023 | September 30, 2022 | December 31, 2022 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Assets by Segment | |||||||||||||||||
| North America | $ | $ | $ | ||||||||||||||
| International | |||||||||||||||||
| American Girl | |||||||||||||||||
| Corporate and other | |||||||||||||||||
| Accounts receivable, net and inventories | $ | $ | $ | ||||||||||||||
Geographic Information
The following table presents information regarding Mattel's net sales by geographic area. Net sales are attributed to countries based on the location of the customer:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net Sales by Geographic Area | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| International | |||||||||||||||||||||||
| EMEA | |||||||||||||||||||||||
| Latin America | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Total International | |||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
22. New Accounting Pronouncements
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
In the discussion that follows, "Mattel" refers to Mattel, Inc. and/or one or more of its subsidiaries.
The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear in Part I, Item 1 "Financial Statements" of this Quarterly Report on Form 10-Q. Mattel's business is seasonal with consumers making a large percentage of all toy purchases during the traditional holiday season; therefore, results of operations are most comparable to corresponding periods.
The following discussion includes currency exchange rate impact, a non-GAAP financial measure within the meaning of Regulation G promulgated by the SEC ("Regulation G"), to supplement the financial results as reported in accordance with GAAP. The currency exchange rate impact reflects the portion (expressed as a percentage) of changes in Mattel's reported results that are attributable to fluctuations in currency exchange rates. Mattel uses this non-GAAP financial measure to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. Management believes that the disclosure of this non-GAAP financial measure provides useful supplemental information to investors to allow them to better evaluate ongoing business performance and certain components of Mattel's results. This measure is not, and should not be viewed as, a substitute for GAAP financial measures.
The following discussion also includes the use of gross billings, a key performance indicator. Gross billings represent amounts invoiced to customers. It does not include the impact of sales adjustments, such as trade discounts and other allowances. Mattel presents changes in gross billings as a metric for comparing its aggregate, categorical, brand, and geographic results to highlight significant trends in Mattel's business. Changes in gross billings are discussed because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and are not associated with categories, brands, or individual products.
Note that amounts shown in millions or billions within this Item 2 may not sum due to rounding.
Overview
Mattel is a leading global toy company and owner of one of the strongest catalogs of children's and family entertainment franchises in the world. Mattel creates innovative products and experiences that inspire, entertain, and develop children through play. Mattel is focused on the following evolved strategy to grow its intellectual property ("IP") driven toy business and expand its entertainment offering:
•Accelerate topline growth through scaling Mattel's portfolio, growing franchise brands, and advancing e-commerce and direct-to-consumer business, and increasing profitability by continuing to optimize operations; and
•Expand entertainment offering to capture the full value of Mattel's IP in highly accretive business verticals, including content, consumer products, and digital experiences.
Mattel is the owner of a portfolio of iconic brands and partners with global entertainment companies to license other IP. Mattel's portfolio of owned and licensed brands and products are organized into the following categories:
Dolls—including brands such as Barbie, American Girl, Disney Princess and Disney Frozen, Monster High, and Polly Pocket. Mattel's Dolls portfolio is driven by the flagship Barbie brand and a collection of complementary brands offered globally. Empowering girls since 1959, Barbie has inspired the limitless potential of every girl by showing them that they can be anything. American Girl, with an extensive portfolio of dolls and accessories, content, gaming, and lifestyle products, is best known for imparting valuable life lessons that instill confidence through its inspiring dolls and books, featuring diverse characters from past and present. American Girl products are sold directly to consumers through its website, proprietary retail stores in the United States, and at select retailers in the United States and Canada.
Infant, Toddler, and Preschool—including brands such as Fisher-Price, Thomas & Friends, and Power Wheels. As a leader in play and child development, Fisher-Price's mission is to help families by making the most fun, enriching products for infants, toddlers, and preschoolers. Thomas & Friends is an award-winning preschool train brand franchise that brings meaningful life lessons of friendship and teamwork to kids through toys, content, live events, and other consumer products.
Vehicles—including brands such as Hot Wheels (including Hot Wheels Monster Trucks and Hot Wheels Mario Kart (Nintendo)), Matchbox, and Cars (Disney Pixar). In production for over 50 years, Hot Wheels continues to push the limits of performance and design and ignites the challenger spirit of kids, adults, and collectors. From die-cast vehicles to tracks, playsets, and accessories, the Mattel Vehicles portfolio has broad appeal that engages and excites kids of all ages.
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Action Figures, Building Sets, Games, and Other—including brands such as Masters of the Universe, MEGA, UNO, Lightyear (Disney Pixar), Jurassic World (NBCUniversal), WWE, and Star Wars (Disney's Lucasfilm). Mattel's Action Figures portfolio is comprised of product lines associated with licensed entertainment franchises that are driven by major tentpole releases, such as Lightyear and Jurassic World, as well as product lines from Mattel's owned IP, such as Masters of the Universe. As the challenger brand in Building Sets, MEGA sparks creativity through the power of connection with builders of all ages and fans of global franchises. Within Games, UNO is the classic matching card game that is easy to learn and fast fun for everyone. Other includes Plush, which contains products associated with movie releases from licensed entertainment franchises, as well as Mattel-owned IP.
Recent Developments
Mattel's third quarter 2023 financial results showed meaningful sales growth, gross margin expansion, and improvement to operating cash flows, with significant contributions from the theatrical release of the Barbie movie during the quarter. Third quarter 2023 net sales increased $163.0 million to $1.92 billion and gross margin improved to 51.0%, from 48.2% in the third quarter of 2022.
Mattel's cash flows used for operations were $79.6 million for the first nine months of 2023, an improvement of $195.1 million as compared to the first nine months of 2022. Mattel executed $60.0 million of share repurchases in the third quarter of 2023, and has executed $109.9 million of repurchases during the first nine months of 2023. As of September 30, 2023 Mattel has a remaining authorization of $93.2 million under its existing share repurchase program.
Retailer inventory levels were elevated entering 2023. During the first nine months of 2023, retailer inventory levels improved and at the end of the third quarter had decreased compared to prior year levels. Additionally, as of September 30, 2023, Mattel's owned inventory had also decreased by $293.2 million compared to prior year levels.
Mattel is operating in a challenging macro-economic environment with higher volatility that may impact consumer demand. To the extent the macro-economic environment remains challenging, or worsens, it may have a material effect on Mattel's results of operations and financial condition. Refer to Part I, Item 1A "Risk Factors" in the 2022 Annual Report on Form 10-K for further discussion regarding potential impacts on Mattel's business.
Russia - Ukraine War
The ongoing war between Russia and Ukraine has led to volatility and disruption in these countries. The length and impact of the ongoing war is highly unpredictable. While Mattel has no direct operations in Ukraine, its operations in Russia have experienced significant disruption and Mattel paused all shipments into Russia in early 2022. Mattel's net sales in these two countries represented less than 2% of total net sales during the nine months ended September 30, 2022.
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Results of Operations—Third Quarter
Consolidated Results
The following table presents Mattel's consolidated results for the third quarter of 2023 and 2022:
| For the Three Months Ended | Year/Year Change | ||||||||||||||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||||||||||||||
| Amount | % of Net Sales | Amount | % of Net Sales | % | Basis Points of Net Sales | ||||||||||||||||||||||||||||||
| (In millions, except percentage and basis point information) | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,918.8 | $ | 1,755.8 | 9 | % | |||||||||||||||||||||||||||||
| Cost of sales | 940.9 | 49.0 | % | 908.9 | 51.8 | % | 4 | % | (280) | ||||||||||||||||||||||||||
| Gross profit | 977.9 | 51.0 | % | 846.9 | 48.2 | % | 15 | % | 280 | ||||||||||||||||||||||||||
| Advertising and promotion expenses | 124.3 | 6.5 | % | 127.6 | 7.3 | % | -3 | % | (80) | ||||||||||||||||||||||||||
| Other selling and administrative expenses | 379.8 | 19.8 | % | 327.9 | 18.7 | % | 16 | % | 110 | ||||||||||||||||||||||||||
| Operating income | 473.9 | 24.7 | % | 391.4 | 22.3 | % | 21 | % | 240 | ||||||||||||||||||||||||||
| Interest expense | 30.7 | 1.6 | % | 33.9 | 1.9 | % | -9 | % | (30) | ||||||||||||||||||||||||||
| Interest (income) | (4.6) | -0.2 | % | (1.9) | -0.1 | % | 140 | % | (10) | ||||||||||||||||||||||||||
| Other non-operating (income), net | (2.4) | (4.3) | |||||||||||||||||||||||||||||||||
| Income before income taxes | 450.1 | 23.5 | % | 363.7 | 20.7 | % | 24 | % | 280 | ||||||||||||||||||||||||||
| Provision for income taxes | 309.3 | 80.0 | |||||||||||||||||||||||||||||||||
| (Income) from equity method investments | (5.6) | (6.2) | |||||||||||||||||||||||||||||||||
| Net income | $ | 146.3 | 7.6 | % | $ | 289.9 | 16.5 | % | -50 | % | (890) | ||||||||||||||||||||||||
Sales
Net sales in the third quarter of 2023 were $1.92 billion, an increase of $163.0 million, or 9%, as compared to $1.76 billion in the third quarter of 2022. The increase in net sales was the result of an increase in gross billings of $173.7 million, partially offset by an increase in sales adjustments of $10.7 million.
Gross billings represent amounts invoiced to a customer and do not include the impact of sales adjustments, such as trade discounts and other allowances. Changes in gross billings are discussed below because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and are not associated with categories, brands, or individual products. The following tables provide a summary of Mattel's consolidated gross billings by categories, along with supplemental information by brand, for the third quarter of 2023 and 2022:
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 884.5 | $ | 697.2 | 27 | % | 3 | % | |||||||||||||||
| Infant, Toddler, and Preschool | 361.1 | 370.1 | -2 | % | 3 | % | |||||||||||||||||
| Vehicles | 518.5 | 437.9 | 18 | % | 3 | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 357.7 | 442.9 | -19 | % | 2 | % | |||||||||||||||||
| Gross Billings | $ | 2,121.8 | $ | 1,948.0 | 9 | % | 3 | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 605.1 | $ | 519.6 | 16 | % | 2 | % | |||||||||||||||
| Hot Wheels | 454.8 | 371.6 | 22 | % | 3 | % | |||||||||||||||||
| Fisher-Price | 317.0 | 319.0 | -1 | % | 2 | % | |||||||||||||||||
| Other | 744.9 | 737.9 | 1 | % | 3 | % | |||||||||||||||||
| Gross Billings | $ | 2,121.8 | $ | 1,948.0 | 9 | % | 3 | % | |||||||||||||||
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Gross billings were $2.12 billion in the third quarter of 2023, an increase of $173.7 million, or 9%, as compared to $1.95 billion in the third quarter of 2022, with a favorable impact from changes in currency exchange rates of three percentage points. The increase in gross billings was primarily due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games, and Other, and Infant, Toddler, and Preschool.
Dolls gross billings increased 27%, of which 12% was due to higher billings of Barbie, driven primarily by licensing revenues associated with the release of the Barbie movie, 12% was due to higher billings of Disney Princess and Disney Frozen products, and 4% was due to higher billings of Monster High products.
Infant, Toddler, and Preschool gross billings decreased 2%, primarily due to lower billings of Thomas & Friends products.
Vehicles gross billings increased 18%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings decreased 19%, of which 12% was due to lower billings of Jurassic World products and 8% was due to lower billings of Lightyear products, following their theatrical releases during the second quarter of 2022, partially offset by higher billings of Buildings Sets products of 4%.
Sales adjustments generally represent arrangements with Mattel's customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. Additionally, sales adjustments may include foreign currency transaction gains and losses from the remeasurement of accounts receivable denominated in currencies that are different from the relevant entity’s functional currency. Sales adjustments increased to $203.0 million in the third quarter of 2023, from $192.3 million in the third quarter of 2022, due to higher gross billings. Sales adjustments as a percentage of net sales was relatively consistent at 10.6% in the third quarter of 2023, as compared to 11.0% in the third quarter of 2022.
Cost of Sales
Cost of sales increased by $32.0 million, or 4%, to $940.9 million in the third quarter of 2023 from $908.9 million in the third quarter of 2022. Within cost of sales, royalty expense increased by $14.5 million, or 20%, to $87.6 million in the third quarter of 2023 from $73.2 million in the third quarter of 2022, freight and logistics expenses increased by $8.8 million, or 11%, to $92.0 million in the third quarter of 2023 from $83.2 million in the third quarter of 2022, and product and other costs increased by $8.7 million, or 1%, to $761.3 million in the third quarter of 2023 from $752.5 million in the third quarter of 2022.
Gross Margin
Gross margin increased to 51.0% in the third quarter of 2023 from 48.2% in the third quarter of 2022. The increase in gross margin was primarily due to favorable mix of 170 basis points, which primarily related to the release of the Barbie movie, favorable pricing of 140 basis points, incremental realized savings from the Optimizing for Growth program of 130 basis points, and cost deflation of 70 basis points. These favorable factors were partially offset by unfavorable fixed cost absorption and other supply chain costs of 230 basis points.
Advertising and Promotion Expenses
Advertising and promotion expenses primarily consist of: (i) media costs, which include the media, planning, and buying fees for television, print, and online advertisements; (ii) non-media costs, which include commercial and website production, merchandising, and promotional costs; (iii) retail advertising costs, which include consumer direct catalogs; and (iv) generic advertising costs, which include trade show costs. Advertising and promotion expenses as a percentage of net sales decreased to 6.5% in the third quarter of 2023 from 7.3% in the third quarter of 2022, primarily due to the 9% increase in net sales as compared to the third quarter of 2022.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $379.8 million, or 19.8% of net sales, in the third quarter of 2023, an increase of $51.9 million, as compared to $327.9 million, or 18.7% of net sales, in the third quarter of 2022. The increase in other selling and administrative expenses was primarily due to higher severance and restructuring charges of $24.7 million, higher incentive compensation expense of $18.0 million, and salary and market-related pay increases of $7.5 million, partially offset by incremental realized savings from the Optimizing for Growth program of $12.5 million.
Interest Expense
Interest expense was $30.7 million in the third quarter of 2023, as compared to $33.9 million in the third quarter of 2022. The decrease in interest expense was due to the $250.0 million repayment of the 2013 Senior Notes due March 2023 in the fourth quarter of 2022.
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Provision for Income Taxes
Mattel's provision for income taxes was $309.3 million in the third quarter of 2023, as compared to $80.0 million in the third quarter of 2022. The provision for income taxes during the three months ended 2023 included a net discrete income tax expense of $200.7 million, which included the establishment of a valuation allowance of $212.4 million on certain foreign deferred tax assets during the third quarter of 2023 resulting from the planned intra-group transfer of certain IP rights, partially offset by other discrete income tax benefits of $11.7 million. During the three months ended September 30, 2022, Mattel recognized a net discrete income tax benefit of $19.4 million, primarily related to income taxes recorded on a discrete basis in various jurisdictions and reassessments of prior years' tax liabilities.
Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. During the third quarter of 2023, Mattel finalized a plan to complete an intra-group transfer of certain IP rights, resulting in the establishment of a valuation allowance on certain foreign deferred tax assets of $212.4 million that will not be realized upon execution of the plan. While the transfer will not result in a taxable gain, Mattel expects to recognize a one-time tax benefit of approximately $53 million in the fourth quarter of 2023, when the transaction is completed, in connection with the establishment of deferred tax assets related to the transferred IP.
Segment Results
North America Segment
The following tables provide a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the North America segment for the third quarter of 2023 and 2022:
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 1,104.4 | $ | 1,002.1 | 10 | % | — | % | |||||||||||||||
| Segment Operating Income | 405.7 | 337.3 | 20 | % | |||||||||||||||||||
Net sales for the North America segment in the third quarter of 2023 were $1.10 billion, an increase of $102.2 million, or 10%, as compared to $1.00 billion in the third quarter of 2022. The increase in net sales was the result of an increase in gross billings of $108.9 million, partially offset by an increase in sales adjustments of $6.6 million.
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| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 468.5 | $ | 342.9 | 37 | % | — | % | |||||||||||||||
| Infant, Toddler, and Preschool | 230.6 | 239.8 | -4 | % | — | % | |||||||||||||||||
| Vehicles | 263.4 | 226.3 | 16 | % | -1 | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 214.1 | 258.7 | -17 | % | — | % | |||||||||||||||||
| Gross Billings | $ | 1,176.6 | $ | 1,067.8 | 10 | % | — | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 349.9 | $ | 278.5 | 26 | % | — | % | |||||||||||||||
| Hot Wheels | 225.7 | 184.1 | 23 | % | — | % | |||||||||||||||||
| Fisher-Price | 204.8 | 206.4 | -1 | % | — | % | |||||||||||||||||
| Other | 396.2 | 398.8 | -1 | % | — | % | |||||||||||||||||
| Gross Billings | $ | 1,176.6 | $ | 1,067.8 | 10 | % | — | % | |||||||||||||||
Gross billings for the North America segment were $1.18 billion in the third quarter of 2023, an increase of $108.9 million, or 10%, as compared to $1.07 billion in the third quarter of 2022. The increase in the North America segment gross billings was primarily due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games, and Other, and Infant, Toddler, and Preschool.
Dolls gross billings increased 37%, of which 21% was due to higher billings of Barbie, driven primarily by licensing revenues associated with the release of the Barbie movie, and 15% was due to higher billing of Disney Princess and Disney Frozen products.
Infant, Toddler, and Preschool gross billings decreased 4%, primarily due to lower billings of Thomas & Friends products.
Vehicles gross billings increased 16%, due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings decreased 17%, of which 11% was due to lower billings of Jurassic World products and 7% was due to lower billings of Lightyear products, following their theatrical releases during the second quarter of 2022, and 4% was due to lower billings of other Action Figures products, partially offset by higher billings of Buildings Sets products of 4%.
Sales adjustments increased to $72.2 million in the third quarter of 2023 from $65.6 million in the third quarter of 2022, primarily due to higher gross billings. Sales adjustments as a percentage of net sales were flat at 6.5% in the third quarter of 2023 and 2022.
Cost of sales increased by $31.2 million, or 6%, to $553.3 million in the third quarter of 2023 from $522.2 million in the third quarter of 2022, due to an increase in product and other costs of $13.3 million, an increase in freight and logistics expenses of $9.1 million, and an increase in royalty expenses of $8.8 million.
Gross margin in the third quarter of 2023 increased to 49.9% from 47.9% in the third quarter of 2022, primarily due to favorable mix of 140 basis points, which primarily related to the release of the Barbie movie, incremental realized savings from the Optimizing for Growth program of 130 basis points, favorable pricing of 80 basis points, and cost deflation of 70 basis points, partially offset by unfavorable fixed cost absorption and other supply chain costs of 220 basis points.
North America segment operating income was $405.7 million in the third quarter of 2023, as compared to segment operating income of $337.3 million in the third quarter of 2022, primarily due to higher gross profit.
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International Segment
The following tables provide a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the International segment for the third quarter of 2023 and 2022:
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 771.8 | $ | 704.6 | 10 | % | 7 | % | |||||||||||||||
| Segment Operating Income | 202.5 | 162.8 | 24 | % | |||||||||||||||||||
Net sales for the International segment in the third quarter of 2023 were $771.8 million, an increase of $67.2 million, or 10%, as compared to $704.6 million in the third quarter of 2022. The increase in net sales was the result of an increase in gross billings of $71.4 million, partially offset by an increase in sales adjustments of $4.2 million.
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 371.7 | $ | 303.5 | 22 | % | 7 | % | |||||||||||||||
| Infant, Toddler, and Preschool | 130.5 | 130.3 | — | % | 8 | % | |||||||||||||||||
| Vehicles | 255.0 | 211.6 | 21 | % | 8 | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 143.6 | 184.2 | -22 | % | 5 | % | |||||||||||||||||
| Gross Billings | $ | 900.9 | $ | 829.5 | 9 | % | 7 | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 255.2 | $ | 241.1 | 6 | % | 6 | % | |||||||||||||||
| Hot Wheels | 229.1 | 187.5 | 22 | % | 7 | % | |||||||||||||||||
| Fisher-Price | 112.2 | 112.6 | — | % | 8 | % | |||||||||||||||||
| Other | 304.4 | 288.3 | 6 | % | 7 | % | |||||||||||||||||
| Gross Billings | $ | 900.9 | $ | 829.5 | 9 | % | 7 | % | |||||||||||||||
Gross billings for the International segment were $900.9 million in the third quarter of 2023, an increase of $71.4 million, or 9%, as compared to $829.5 million in the third quarter of 2022, with a favorable impact from changes in currency exchange rates of seven percentage points. The increase in the International segment gross billings was due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games, and Other.
Dolls gross billings increased 22%, of which 11% was due to higher billings of Disney Princess and Disney Frozen products, 9% was due to higher billings of Monster High products, and 5% was due to higher billings of Barbie, driven primarily by licensing revenues associated with the release of the Barbie movie.
Infant, Toddler, and Preschool gross billings were flat year-over-year.
Vehicles gross billings increased 21%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings decreased 22%, primarily due to lower billings of Jurassic World products of 13% and lower billings of Lightyear products of 10%, following their theatrical releases during the second quarter of 2022, partially offset by higher billings of Buildings Sets products of 3%.
Sales adjustments increased to $129.1 million in the third quarter of 2023 from $124.9 million in the third quarter of 2022. Sales adjustments as a percentage of net sales decreased to 16.7% in the third quarter of 2023 from 17.7% in the third quarter of 2022. The decrease in sales adjustments as a percentage of net sales was primarily due to higher gross billings, which includes licensing revenues associated with the release of the Barbie movie.
Cost of sales increased by $28.5 million, or 8%, to $399.4 million in the third quarter of 2023 from $370.9 million in the third quarter of 2022, primarily due to an increase in product and other costs of $22.6 million.
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Gross margin increased to 48.3% in the third quarter of 2023 from 47.4% in the third quarter of 2022, primarily due to favorable pricing actions of 250 basis points, favorable mix of 230 basis points, which primarily related to the release of the Barbie movie, incremental realized savings from the Optimizing for Growth program of 140 basis points, and cost deflation of 80 basis points. These favorable factors were partially offset by unfavorable foreign currency exchange of 330 basis points and unfavorable fixed cost absorption from lower production volumes and other supply chain costs of 280 basis points.
International segment operating income was $202.5 million in the third quarter of 2023, as compared to segment operating income of $162.8 million in the third quarter of 2022, primarily due to higher gross profit.
American Girl Segment
The following table provides a summary of Mattel's net sales and segment operating loss for the American Girl segment for the third quarter of 2023 and 2022:
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 42.6 | $ | 49.0 | -13 | % | — | % | |||||||||||||||
| Segment Operating Loss | (4.6) | (9.0) | -49 | % | |||||||||||||||||||
Net sales for the American Girl segment in the third quarter of 2023 were $42.6 million, a decrease of $6.4 million, or 13%, as compared to $49.0 million in the third quarter of 2022. The decrease in net sales was the result of a decrease in gross billings of $6.5 million, or 13%. Gross billings decreased to $44.3 million in the third quarter of 2023 from $50.7 million in the third quarter of 2022, primarily due to lower billings of Truly Me products.
Sales adjustments were flat at $1.7 million in the third quarter of 2023 and 2022.
Cost of sales decreased by $3.0 million, or 13%, to $20.0 million in the third quarter of 2023, as compared to a 13% decrease in net sales, primarily due to a decrease in product and other costs of $2.4 million.
Gross margin was relatively consistent at 52.9% in the third quarter of 2023, as compared to 53.0% in the third quarter of 2022.
American Girl segment operating loss was $4.6 million in the third quarter of 2023, as compared to segment operating loss of $9.0 million in the third quarter of 2022, primarily due to lower advertising and promotion expenses.
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Results of Operations—First Nine Months
Consolidated Results
The following table presents Mattel's consolidated results for the first nine months of 2023 and 2022:
| For the Nine Months Ended | Year/Year Change | ||||||||||||||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||||||||||||||
| Amount | % of Net Sales | Amount | % of Net Sales | % | Basis Points of Net Sales | ||||||||||||||||||||||||||||||
| (In millions, except percentage and basis point information) | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 3,820.5 | $ | 4,032.8 | -5 | % | |||||||||||||||||||||||||||||
| Cost of sales | 2,027.0 | 53.1 | % | 2,154.1 | 53.4 | % | -6 | % | (30) | ||||||||||||||||||||||||||
| Gross profit | 1,793.5 | 46.9 | % | 1,878.7 | 46.6 | % | -5 | % | 30 | ||||||||||||||||||||||||||
| Advertising and promotion expenses | 290.3 | 7.6 | % | 291.5 | 7.2 | % | — | % | 40 | ||||||||||||||||||||||||||
| Other selling and administrative expenses | 1,081.6 | 28.3 | % | 990.6 | 24.6 | % | 9 | % | 370 | ||||||||||||||||||||||||||
| Operating income | 421.6 | 11.0 | % | 596.5 | 14.8 | % | -29 | % | (380) | ||||||||||||||||||||||||||
| Interest expense | 92.5 | 2.4 | % | 99.7 | 2.5 | % | -7 | % | (10) | ||||||||||||||||||||||||||
| Interest (income) | (15.4) | -0.4 | % | (5.1) | -0.1 | % | 204 | % | (30) | ||||||||||||||||||||||||||
| Other non-operating (income) expense, net | (6.0) | 12.0 | |||||||||||||||||||||||||||||||||
| Income before income taxes | 350.5 | 9.2 | % | 489.9 | 12.1 | % | -28 | % | (290) | ||||||||||||||||||||||||||
| Provision for income taxes | 296.8 | 130.5 | |||||||||||||||||||||||||||||||||
| (Income) from equity method investments | (13.3) | (18.4) | |||||||||||||||||||||||||||||||||
| Net income | $ | 67.0 | 1.8 | % | $ | 377.8 | 9.4 | % | -82 | % | (760) | ||||||||||||||||||||||||
Sales
Net sales in the first nine months of 2023 were $3.82 billion, a decrease of $212.2 million, or 5%, as compared to $4.03 billion in the first nine months of 2022. The decrease in net sales was the result of a decrease in gross billings of $228.1 million, partially offset by a decrease in sales adjustments of $15.9 million.
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Gross billings represent amounts invoiced to a customer and do not include the impact of sales adjustments, such as trade discounts and other allowances. Changes in gross billings are discussed below because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and are not associated with categories, brands, or individual products. The following tables provide a summary of Mattel's consolidated gross billings by categories, along with supplemental information by brand, for the first nine months of 2023 and 2022:
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 1,631.1 | $ | 1,494.6 | 9 | % | 1 | % | |||||||||||||||
| Infant, Toddler, and Preschool | 708.6 | 850.3 | -17 | % | 1 | % | |||||||||||||||||
| Vehicles | 1,165.9 | 1,048.3 | 11 | % | 1 | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 755.0 | 1,095.5 | -31 | % | 1 | % | |||||||||||||||||
| Gross Billings | $ | 4,260.6 | $ | 4,488.7 | -5 | % | 1 | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 1,064.7 | $ | 1,118.4 | -5 | % | 1 | % | |||||||||||||||
| Hot Wheels | 1,014.9 | 899.5 | 13 | % | 2 | % | |||||||||||||||||
| Fisher-Price | 607.3 | 719.1 | -16 | % | 1 | % | |||||||||||||||||
| Other | 1,573.7 | 1,751.6 | -10 | % | 1 | % | |||||||||||||||||
| Gross Billings | $ | 4,260.6 | $ | 4,488.7 | -5 | % | 1 | % | |||||||||||||||
Gross billings were $4.26 billion in the first nine months of 2023, a decrease of $228.1 million, or 5%, as compared to $4.49 billion in the first nine months of 2022. The decrease in gross billings for the first nine months of 2023 was primarily due to lower billings of Action Figures, Building Sets, Games, and Other, and Infant, Toddler, and Preschool, partially offset by higher billings of Dolls and Vehicles.
Dolls gross billings increased 9%, of which 11% was due to higher billings of Disney Princess and Disney Frozen products, and 6% was due to higher billings of Monster High products, partially offset by lower billings of Barbie products of 4%, and lower billings of Enchantimals products of 2%.
Infant, Toddler, and Preschool gross billings decreased 17%, of which 13% was due to lower billings of Fisher-Price products and 2% was due to lower billings of Fisher-Price Friends products.
Vehicles gross billings increased 11%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings decreased 31%, of which 16% was due to lower billings of Jurassic World products and 10% was due to lower billings of Lightyear products, following their theatrical releases during the second quarter of 2022, and 4% was due to lower billings of other Action Figures products.
Sales adjustments generally represent arrangements with Mattel's customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. Additionally, sales adjustments may include foreign currency transaction gains and losses from the remeasurement of accounts receivable denominated in currencies that are different from the relevant entity’s functional currency. Sales adjustments decreased to $440.1 million in the first nine months of 2023 from $456.0 million in the first nine months of 2022, primarily due to lower gross billings. Sales adjustments as a percentage of net sales was relatively consistent at 11.5% in the first nine months of 2023, as compared to 11.3% in the first nine months of 2022.
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Cost of Sales
Cost of sales decreased by $127.1 million, or 6%, to $2.03 billion in the first nine months of 2023 from $2.15 billion in the first nine months of 2022. Within cost of sales, product and other costs decreased by $132.1 million, or 8%, to $1.62 billion in the first nine months of 2023 from $1.75 billion in the first nine months of 2022, freight and logistics expenses increased by $7.9 million, or 4%, to $230.2 million in the first nine months of 2023, as compared to $222.3 million in the first nine months of 2022, and royalty expense was relatively consistent at $175.0 million in the first nine months of 2023, as compared to $177.9 million in the first nine months of 2022.
Gross Margin
Gross margin increased to 46.9% in the first nine months of 2023 from 46.6% in the first nine months of 2022. The increase in gross margin was primarily due to favorable pricing of 150 basis points, incremental realized savings from the Optimizing for Growth program of 140 basis points, and favorable mix of 90 basis points, which primarily related to the release of the Barbie movie, partially offset by inventory management efforts of 100 basis points, including higher close-out sales and inventory obsolescence, cost inflation of 50 basis points, and unfavorable fixed cost absorption and other supply chain costs of 200 basis points.
Advertising and Promotion Expenses
Advertising and promotion expenses primarily consist of: (i) media costs, which include the media, planning, and buying fees for television, print, and online advertisements; (ii) non-media costs, which include commercial and website production, merchandising, and promotional costs; (iii) retail advertising costs, which include consumer direct catalogs; and (iv) generic advertising costs, which include trade show costs. Advertising and promotion expenses as a percentage of net sales was relatively consistent at 7.6% in the first nine months of 2023, as compared to 7.2% in the first nine months of 2022.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $1.08 billion, or 28.3% of net sales, in the first nine months of 2023, as compared to $990.6 million, or 24.6% of net sales, in the first nine months of 2022. The increase in other selling and administrative expenses was primarily due to higher severance and restructuring charges of $45.9 million, market-related pay increases of $35.4 million, higher incentive compensation of $21.1 million, and a prior year gain on the sale of the American Girl corporate office and distribution center in the second quarter of 2022 of $15.2 million, partially offset by incremental realized savings from the Optimizing for Growth program of $32.2 million.
Interest Expense
Interest expense was $92.5 million in the first nine months of 2023, as compared to $99.7 million in the first nine months of 2022. The decrease in interest expense was primarily due to the $250.0 million repayment of the 2013 Senior Notes due March 2023 in the fourth quarter of 2022.
Provision for Income Taxes
Mattel's provision for income taxes was $296.8 million in the first nine months of 2023, as compared to $130.5 million in the first nine months of 2022. The provision for income taxes during the nine months ended 2023 included a net discrete income tax expense of $201.0 million, which included the establishment of a valuation allowance of $212.4 million on certain foreign deferred tax assets during the third quarter of 2023 resulting from the planned intra-group transfer of certain IP rights, partially offset by other discrete income tax benefits of $11.4 million. During the nine months ended September 30, 2022, Mattel recognized a net discrete income tax benefit of $4.8 million, primarily related to income taxes recorded on a discrete basis in various jurisdictions and reassessments of prior years' tax liabilities.
Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. During the third quarter of 2023, Mattel finalized a plan to complete an intra-group transfer of certain IP rights, resulting in the establishment of a valuation allowance on certain foreign deferred tax assets of $212.4 million that will not be realized upon execution of the plan. While the IP transfer will not result in a taxable gain, Mattel expects to recognize a one-time tax benefit of approximately $53 million in the fourth quarter of 2023, when the transaction is completed, in connection with the establishment of deferred tax assets related to the transferred IP.
37
Segment Results
North America Segment
The following tables provide a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the North America segment for the first nine months of 2023 and 2022:
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 2,138.2 | $ | 2,330.8 | -8 | % | — | % | |||||||||||||||
| Segment Operating Income | 589.7 | 707.6 | -17 | % | |||||||||||||||||||
Net sales for the North America segment in the first nine months of 2023 were $2.14 billion, a decrease of $192.5 million, or 8%, as compared to $2.33 billion in the first nine months of 2022. The decrease in net sales was the result of a decrease in gross billings of $201.9 million, partially offset by a decrease in sales adjustments of $9.3 million.
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 812.3 | $ | 715.8 | 13 | % | -1 | % | |||||||||||||||
| Infant, Toddler, and Preschool | 437.7 | 549.6 | -20 | % | — | % | |||||||||||||||||
| Vehicles | 579.1 | 550.7 | 5 | % | — | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 453.4 | 668.3 | -32 | % | — | % | |||||||||||||||||
| Gross Billings | $ | 2,282.5 | $ | 2,484.4 | -8 | % | — | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 587.6 | $ | 599.2 | -2 | % | — | % | |||||||||||||||
| Hot Wheels | 492.3 | 458.4 | 7 | % | -1 | % | |||||||||||||||||
| Fisher-Price | 380.9 | 469.2 | -19 | % | — | % | |||||||||||||||||
| Other | 821.8 | 957.6 | -14 | % | — | % | |||||||||||||||||
| Gross Billings | $ | 2,282.5 | $ | 2,484.4 | -8 | % | — | % | |||||||||||||||
Gross billings for the North America segment were $2.28 billion in the first nine months of 2023, a decrease of $201.9 million, or 8%, as compared to $2.48 billion in the first nine months of 2022. The decrease in the North America segment gross billings for the first nine months of 2023 was primarily due to lower billings of Action Figures, Building Sets, Games, and Other, and Infant, Toddler, and Preschool, partially offset by higher billings of Dolls and Vehicles.
Dolls gross billings increased 13%, of which 12% was due to higher billings of Disney Princess and Disney Frozen products and 5% was due to higher billings of Monster High products, partially offset by lower billings of Polly Pocket products of 2%.
Infant, Toddler, and Preschool gross billings decreased 20%, of which 16% was due to lower billings of Fisher-Price products and 2% was due to lower billings of Thomas & Friends products.
Vehicles gross billings increased 5%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings decreased 32%, of which 16% was due to lower billings of Jurassic World products and 9% was due to lower billings of Lightyear products, following their theatrical releases during the second quarter of 2022, and 4% was due to lower billings of other Action Figures products.
Sales adjustments decreased to $144.3 million in the first nine months of 2023 from $153.6 million in the first nine months of 2022, primarily due to lower gross billings. Sales adjustments as a percentage of net sales were relatively consistent at 6.7% for the first nine months of 2023, as compared to 6.6% for the first nine months of 2022.
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Cost of sales decreased by $84.6 million, or 7%, to $1.16 billion in the first nine months of 2023 from $1.25 billion in the first nine months of 2022, primarily due to a decrease in product and other costs of $86.8 million.
Gross margin in the first nine months of 2023 decreased to 45.5% from 46.4% in the first nine months of 2022, primarily due to inventory management efforts of 90 basis points, including higher close-out sales and inventory obsolescence, cost inflation of 50 basis points, and unfavorable fixed cost absorption and other supply chain costs of 240 basis points. These negative factors were partially offset by incremental realized savings from the Optimizing for Growth program of 120 basis points, favorable pricing of 90 basis points, and favorable mix of 80 basis points, which primarily related to the release of the Barbie movie.
North America segment operating income was $589.7 million in the first nine months of 2023, as compared to segment operating income of $707.6 million in the first nine months of 2022. The decrease was primarily due to lower gross profit.
International Segment
The following tables provide a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the International segment for the first nine months of 2023 and 2022:
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 1,578.6 | $ | 1,584.9 | — | % | 3 | % | |||||||||||||||
| Segment Operating Income | 245.8 | 268.0 | -8 | % | |||||||||||||||||||
Net sales for the International segment were relatively consistent at $1.58 billion, in the first nine months of 2023 and 2022.
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 712.0 | $ | 658.3 | 8 | % | 3 | % | |||||||||||||||
| Infant, Toddler, and Preschool | 270.9 | 300.6 | -10 | % | 3 | % | |||||||||||||||||
| Vehicles | 586.8 | 497.6 | 18 | % | 3 | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 301.7 | 427.3 | -29 | % | 3 | % | |||||||||||||||||
| Gross Billings | $ | 1,871.3 | $ | 1,883.9 | -1 | % | 3 | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 477.1 | $ | 519.3 | -8 | % | 2 | % | |||||||||||||||
| Hot Wheels | 522.6 | 441.1 | 18 | % | 3 | % | |||||||||||||||||
| Fisher-Price | 226.4 | 249.9 | -9 | % | 4 | % | |||||||||||||||||
| Other | 645.1 | 673.6 | -4 | % | 3 | % | |||||||||||||||||
| Gross Billings | $ | 1,871.3 | $ | 1,883.9 | -1 | % | 3 | % | |||||||||||||||
Gross billings for the International segment were $1.87 billion in the first nine months of 2023, a decrease of $12.6 million, or 1%, as compared to $1.88 billion in the first nine months of 2022. The decrease in the International segment gross billings was due to lower billings of Action Figures, Building Sets, Games, and Other, and Infant, Toddler, and Preschool, partially offset by higher billings of Vehicles and Dolls.
Dolls gross billings increased 8%, of which 12% was due to higher billings of Disney Princess and Disney Frozen products and 8% was due to higher billings of Monster High products, partially offset by lower billings of Barbie products of 6%, and lower billings of Enchantimals products of 4%.
Infant, Toddler, and Preschool gross billings decreased 10%, primarily due to lower billings of Fisher-Price products.
Vehicles gross billings increased 18%, primarily due to higher billings of Hot Wheels products.
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Action Figures, Building Sets, Games, and Other gross billings decreased 29%, of which 15% was due to lower billings of Jurassic World products and 10% was due to lower billings of Lightyear products, following their theatrical releases during the second quarter of 2022, and 2% was due to lower billings of other Action Figures products.
Sales adjustments decreased to $292.7 million in the first nine months of 2023 from $299.0 million in the first nine months of 2022, primarily due to lower gross billings. Sales adjustments as a percentage of net sales were relatively consistent at 18.5% for the first nine months of 2023, as compared to 18.9% for the first nine months of 2022.
Cost of sales increased by $13.4 million, or 2%, to $866.1 million in the first nine months of 2023 from $852.8 million in the first nine months of 2022, primarily due to an increase in product and other costs of $10.0 million.
Gross margin decreased to 45.1% in the first nine months of 2023 from 46.2% in the first nine months of 2022, primarily due to unfavorable foreign currency exchange of 220 basis points, inventory management efforts of 120 basis points, including higher close-out sales and inventory obsolescence, cost inflation of 40 basis points, and unfavorable fixed cost absorption from lower production volumes and other supply chain costs of 250 basis points. These negative factors were partially offset by favorable pricing actions of 250 basis points, incremental realized savings from the Optimizing for Growth program of 160 basis points, and favorable mix of 110 basis points, which primarily related to the release of the Barbie movie.
International segment operating income was $245.8 million in the first nine months of 2023, as compared to segment operating income of $268.0 million in the first nine months of 2022, primarily due to lower gross profit.
American Girl Segment
The following table provides a summary of Mattel's net sales and segment operating loss for the American Girl segment for the first nine months of 2023 and 2022:
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 103.7 | $ | 117.1 | -11 | % | — | % | |||||||||||||||
| Segment Operating Loss | (24.1) | (20.4) | 18 | % | |||||||||||||||||||
Net sales for the American Girl segment in the first nine months of 2023 were $103.7 million, a decrease of $13.4 million, or 11%, as compared to $117.1 million in the first nine months of 2022. The decrease in net sales was the result of a decrease in gross billings of $13.7 million, or 11%, to $106.8 million in the first nine months of 2023 from $120.5 million in the first nine months of 2022. The decrease in net sales was primarily due to lower billings of Girl of the Year dolls.
Sales adjustments were $3.1 million in the first nine months of 2023, as compared to $3.3 million in the first nine months of 2022.
Cost of sales decreased by $6.0 million, or 11%, to $50.6 million in the first nine months of 2023, as compared to an 11% decrease in net sales in the first nine months of 2023, primarily due to a decrease in product and other costs of $5.2 million.
Gross margin decreased to 51.2% in the first nine months of 2023 from 51.7% in the first nine months of 2022, primarily due to cost inflation of 190 basis points, and unfavorable fixed cost absorption of 90 basis points, partially offset by incremental realized savings from the Optimizing for Growth program of 120 basis points and favorable product mix and other of 110 basis points.
American Girl segment operating loss was $24.1 million in the first nine months of 2023, as compared to segment operating loss of $20.4 million in the first nine months of 2022, primarily due to lower gross profit of $7.5 million. In addition, other selling and administrative expenses were flat compared to prior year, as a $15.2 million gain on sale of the American Girl corporate office and distribution center that was recognized in the first nine months of 2022 was offset by lower rent expense of $7.1 million and lower miscellaneous other selling and administrative expenses in the first nine months of 2023.
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Cost Savings Program
Optimizing for Growth (formerly Capital Light)
In February 2021, Mattel announced the Optimizing for Growth program, a multi-year cost savings program that integrates and expands upon the previously announced Capital Light program (the "Program"), which had targeted annual gross cost savings of $250 million from actions expected to be completed beginning 2021 through 2023. In February 2023, Mattel expanded the Program and increased the targeted annual gross cost savings from $250 million to $300 million, reflecting additional initiatives, including actions to further streamline Mattel's organizational structure. As of September 30, 2023, Mattel had realized annual gross cost savings of approximately $297 million and expects to exceed the targeted annual gross costs savings of $300 million during the fourth quarter of 2023.
Of the $300 million in targeted gross cost savings, approximately 60% is expected to benefit cost of sales, 30% is expected to benefit other selling and administrative expenses, and 10% is expected to benefit advertising and promotion expenses. Estimated total cash expenditures associated with the Program, excluding previous actions taken under the Capital Light program, are expected to be approximately $155 to $185 million.
Mattel estimates the cost of actions for the Program, excluding previous actions taken under the Capital Light program, to be as follows:
| Optimizing for Growth - Actions | Estimate of Cost | ||||
| Employee severance | $50 to $60 million | ||||
| Real estate/supply chain optimization and other restructuring costs | $30 to $40 million | ||||
| Non-cash charges (a) | $55 to $60 million | ||||
| Total estimated severance and restructuring costs | $135 to $160 million | ||||
| Information technology enhancements and other investments | $75 to $85 million | ||||
| Total estimated actions | $210 to $245 million | ||||
(a)Non-cash charges include $45.4 million of currency translation losses that were recognized within other non-operating expense, net, in the consolidated statement of operations during the fourth quarter of 2022 as a result of Mattel's liquidation of its subsidiary in Argentina, which was substantially completed in 2022.
Cumulatively, in conjunction with previous actions taken under the Capital Light program prior to 2021, targeted annual gross cost savings for the Program are $375 million by 2023, with total expected cash expenditures of approximately $195 to $225 million, and total expected non-cash charges of approximately $75 million. Of the $375 million in targeted annual gross cost savings, approximately 65% was expected to benefit cost of sales, 25% was expected to benefit other selling and administrative expenses, and 10% was expected to benefit advertising and promotion expenses.
In connection with the Program, Mattel has recorded severance and other restructuring costs in the following cost and expense categories within operating income in the consolidated statements of operations:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Cost of sales (a) | $ | (0.1) | $ | 1.4 | $ | (1.3) | $ | 9.8 | |||||||||||||||
| Other selling and administrative expenses (b) | 3.1 | 4.4 | 31.6 | 16.6 | |||||||||||||||||||
| $ | 3.0 | $ | 5.8 | $ | 30.3 | $ | 26.4 | ||||||||||||||||
(a)Severance and other restructuring costs recorded within cost of sales in the consolidated statements of operations are included in segment operating income in "Note 21 to the Consolidated Financial Statements—Segment Information."
(b)Severance and other restructuring costs recorded within other selling and administrative expenses in the consolidated statements of operations are included in corporate and other expense in "Note 21 to the Consolidated Financial Statements—Segment Information."
As of September 30, 2023, Mattel has recorded cumulative severance and other restructuring charges related to the Program of approximately $196 million, which include approximately $73 million of non-cash charges. Non-cash charges include $45.4 million recorded in non-operating expense, net, during 2022 related to the liquidation of Mattel's subsidiary in Argentina. Mattel realized cumulative cost savings (before severance, restructuring costs, and cost inflation) of approximately $372 million, which represents approximately 70% benefit to cost of sales, 25% benefit to other selling and administrative expenses, and 5% benefit to advertising and promotion expenses, as of September 30, 2023, in connection with the Program.
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Other Cost Savings Actions
On September 14, 2023, Mattel committed to cost savings actions not included in the Program to optimize its manufacturing footprint by discontinuing production at a plant located in China, which actions were announced to plant employees on November 8, 2023. The targeted annual gross cost savings from these actions, which are expected to be completed at the end of 2024, are approximately $21 million and are expected to benefit cost of sales of the North America and International segments. During the three months ended September 30, 2023, Mattel recorded severance expense in connection with these actions of $25.3 million within other selling and administrative expenses in the consolidated statements of operations. Total expected cash charges in connection with these actions are approximately $30 to $35 million, which consist of severance and other restructuring costs. Total expected non-cash charges are approximately $6 million, which consist of accelerated depreciation expense. Additionally, Mattel expects to invest approximately $6 million in capital expenditures to support incremental production capabilities at Mattel's other manufacturing plants.
Additionally, in the first nine months of 2023, Mattel executed other cost savings actions not included in the Program to streamline its organizational structure. In connection with these actions, Mattel recorded severance expense of $6.1 million within other selling and administrative expenses in the consolidated statement of operations.
Liquidity and Capital Resources
Mattel's primary sources of liquidity are its domestic and foreign cash and equivalents balances, short-term borrowing facilities, including its $1.40 billion Revolving Credit Facility, and access to capital markets to fund its operations and obligations. Such obligations may include capital expenditures, debt service, future royalty payments pursuant to licensing agreements, future inventory and service purchases, and required cash contributions and payments related to benefit plans. Of Mattel's $455.7 million in cash and equivalents at September 30, 2023, $195.5 million was held by foreign subsidiaries, including $51.5 million held in Russia. Mattel's cash held in Russia can be used within the country; however, its movement out of Russia is currently limited.
Cash flows from operating activities could be negatively impacted by decreased demand for Mattel's products, which could result from factors such as, but not limited to, adverse economic conditions and changes in public and consumer preferences, or by increased costs associated with manufacturing and distribution of products or shortages in raw materials or component parts. Additionally, Mattel's ability to issue long-term debt and obtain seasonal financing could be adversely affected by factors such as, but not limited to, global economic crises and tight credit environments, an inability to comply with its debt covenants and its Revolving Credit Facility covenants, or deterioration of Mattel's credit ratings. However, based on Mattel's current business plan and factors known to date, it is expected that existing cash and equivalents, cash flows from operations, availability under the Revolving Credit Facility, and access to capital markets will be sufficient to meet working capital and operating expenditure requirements for the next twelve months and in the long-term.
Current Market Conditions
Mattel is exposed to financial market risk resulting from changes in interest and foreign currency exchange rates.
Consistent with prior periods, Mattel intends to utilize its existing cash and cash equivalents, cash flow from operations, and borrowing under the Revolving Credit Facility to meet its short-term liquidity needs. At September 30, 2023, Mattel had no outstanding borrowings under the Revolving Credit Facility and approximately $9 million in outstanding letters of credit under the Revolving Credit Facility.
Market conditions could affect certain terms of other debt instruments that Mattel enters into from time to time.
Mattel monitors the third-party depository institutions that hold Mattel's cash and equivalents. Mattel's emphasis is primarily on safety and liquidity of principal, and secondarily on maximizing the yield on those funds. Mattel diversifies its cash and equivalents among counterparties and securities to minimize risks.
Mattel is subject to credit risks relating to the ability of its counterparties in hedging transactions to meet their contractual payment obligations. The risks related to creditworthiness and nonperformance have been considered in the fair value measurements of Mattel's foreign currency forward exchange contracts. Mattel closely monitors its counterparties and takes action, as necessary, to manage its counterparty credit risk.
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Mattel expects that some of its customers and vendors may experience difficulty in obtaining the liquidity required to buy inventory or raw materials. Mattel monitors its customers' financial condition and their liquidity in order to mitigate accounts receivable collectability risks, and customer terms and credit limits are adjusted, if necessary. Additionally, Mattel uses a variety of financial arrangements to support the collectability of accounts receivable of customers deemed to be a credit risk, including requiring letters of credit, purchasing various forms of credit insurance with unrelated third parties, or requiring cash in advance of shipment.
Mattel sponsors defined benefit pension plans and postretirement benefit plans for its employees. Actual returns below the expected rate of return, along with changes in interest rates that affect the measurement of the liability, would impact the amount and timing of Mattel's future contributions to these plans.
Cash Flow Activities
Cash flows used for operating activities were $79.6 million in the first nine months of 2023, as compared to $274.8 million in the first nine months of 2022. The decrease was due to $335.1 million of lower working capital usage, partially offset by changes in net income, excluding the impact of the establishment of a valuation allowance on foreign deferred tax assets of $212.4 million and other non-cash items.
Cash flows used for investing activities were $93.9 million in the first nine months of 2023, as compared to $97.5 million in the first nine months of 2022. The change was primarily due to higher net proceeds from foreign currency forward exchange contracts of $16.8 million and lower capital expenditures of $8.8 million, partially offset by lower proceeds from the sale of assets of $19.5 million in the first nine months of 2023.
Cash flows used for financing activities were $119.5 million in the first nine months of 2023, as compared to $9.5 million in the first nine months of 2022. The increase was primarily due to share repurchases of $109.9 million in the first nine months of 2023.
Seasonal Financing
See Part I, Item 1 "Financial Statements—Note 8 to the Consolidated Financial Statements—Seasonal Financing" of this Quarterly Report on Form 10-Q.
Financial Position
Mattel's cash and equivalents decreased $305.5 million to $455.7 million at September 30, 2023 from $761.2 million at December 31, 2022, primarily due to capital expenditures of $117.5 million, share repurchases of $109.9 million and cash flows used for operating activities of $79.6 million during the nine months ended September 30, 2023. Mattel's cash and equivalents increased $106.8 million to $455.7 million at September 30, 2023 from $349.0 million at September 30, 2022, primarily due to trailing twelve month cash flows generated from operating activities of $638.0 million, partially offset by the repayment of the $250.0 million aggregate principal amount of the 2013 Senior Notes due March 2023 in the fourth quarter of 2022, capital expenditures of $176.7 million in the trailing twelve months, and share repurchases of $109.9 million in the first nine months of 2023.
Accounts receivable increased $710.8 million to $1.57 billion at September 30, 2023 from $860.2 million at December 31, 2022, primarily due to the seasonality of Mattel's business. Accounts receivable increased $189.5 million to $1.57 billion at September 30, 2023 from $1.38 billion at September 30, 2022, primarily due to the increase in net sales in the third quarter of 2023 compared to the prior year.
Inventories decreased $103.5 million to $790.5 million at September 30, 2023 from $894.1 million at December 31, 2022, primarily due to higher inventory production and cost inflation in 2022. Inventories decreased $293.2 million to $790.5 million at September 30, 2023 from $1.08 billion at September 30, 2022, primarily due to higher net sales in the third quarter of 2023, and higher inventory production and cost inflation in 2022.
Prepaid expenses and other current assets increased $11.3 million to $224.8 million at September 30, 2023 from $213.5 million at December 31, 2022, primarily due to increases in prepaid royalties. Prepaid expenses and other current assets decreased by $44.1 million to $224.8 million at September 30, 2023 from $268.9 million at September 30, 2022, primarily due to a decrease in derivative receivables of $31.4 million.
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Accounts payable and accrued liabilities increased $103.0 million to $1.25 billion at September 30, 2023 from $1.15 billion at December 31, 2022, primarily due to increases in accrued incentive compensation of $86.3 million and accrued interest of $26.6 million. Accounts payable and accrued liabilities decreased $22.6 million to $1.25 billion at September 30, 2023 from $1.28 billion at September 30, 2022, primarily due to lower payables associated with inventory production, partially offset by an increase in accrued incentive compensation of $22.3 million.
A summary of Mattel's capitalization is as follows:
| September 30, 2023 | September 30, 2022 | December 31, 2022 | |||||||||||||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||||||||||||||
| Cash and equivalents | $ | 455.7 | $ | 349.0 | $ | 761.2 | |||||||||||||||||||||||||||||
| Short-term borrowings | — | — | — | ||||||||||||||||||||||||||||||||
| 2010 Senior Notes due October 2040 | 250.0 | 250.0 | 250.0 | ||||||||||||||||||||||||||||||||
| 2011 Senior Notes due November 2041 | 300.0 | 300.0 | 300.0 | ||||||||||||||||||||||||||||||||
| 2013 Senior Notes due March 2023 | — | 250.0 | — | ||||||||||||||||||||||||||||||||
| 2019 Senior Notes due December 2027 | 600.0 | 600.0 | 600.0 | ||||||||||||||||||||||||||||||||
| 2021 Senior Notes due April 2026 | 600.0 | 600.0 | 600.0 | ||||||||||||||||||||||||||||||||
| 2021 Senior Notes due April 2029 | 600.0 | 600.0 | 600.0 | ||||||||||||||||||||||||||||||||
| Debt issuance costs and debt discount | (21.1) | (25.5) | (24.4) | ||||||||||||||||||||||||||||||||
| Total debt | 2,328.9 | 53 | % | 2,574.5 | 57 | % | 2,325.6 | 53 | % | ||||||||||||||||||||||||||
| Stockholders' equity | 2,035.5 | 47 | 1,967.5 | 43 | 2,056.3 | 47 | |||||||||||||||||||||||||||||
| Total capitalization (debt plus equity) | $ | 4,364.4 | 100 | % | $ | 4,541.9 | 100 | % | $ | 4,381.9 | 100 | % | |||||||||||||||||||||||
Total debt, including short-term borrowings, was $2.33 billion at September 30, 2023, flat as compared to $2.33 billion at December 31, 2022. Total debt, including short-term borrowings, was $2.33 billion at September 30, 2023, as compared to $2.57 billion at September 30, 2022. The decrease was due to the repayment of the $250.0 million aggregate principal amount of the 2013 Senior Notes due March 2023 in the fourth quarter of 2022.
Stockholders' equity decreased $20.8 million to $2.04 billion at September 30, 2023 from $2.06 billion at December 31, 2022, primarily due to share repurchases of $109.9 million, partially offset by net income of $67.0 million for the first nine months of 2023 and the net effect of share based compensation and related issuance of treasury stock of $44.6 million. Stockholders' equity increased $68.0 million to $2.04 billion at September 30, 2023 from $1.97 billion at September 30, 2022, primarily due to net income in the trailing twelve months of $83.2 million and the net effect of share based compensation and related issuance of treasury stock of $57.7 million, partially offset by share repurchases of $109.9 million.
Litigation
See Part I, Item 1 "Financial Statements—Note 20 to the Consolidated Financial Statements—Contingencies" of this Quarterly Report on Form 10-Q.
Application of Critical Accounting Policies and Estimates
Mattel's critical accounting policies and estimates are included in the 2022 Annual Report on Form 10-K and did not materially change during the first nine months of 2023.
New Accounting Pronouncements
See Part I, Item 1 "Financial Statements—Note 22 to the Consolidated Financial Statements—New Accounting Pronouncements" of this Quarterly Report on Form 10-Q.
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Non-GAAP Financial Measure
To supplement the financial results presented in accordance with GAAP, Mattel presents a non-GAAP financial measure within the meaning of Regulation G promulgated by the SEC. The non-GAAP financial measure that Mattel presents is currency exchange rate impact. Mattel uses this measure to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. Mattel believes that the disclosure of this non-GAAP financial measure provides useful supplemental information to investors to be able to better evaluate ongoing business performance and certain components of Mattel's results. This measure is not, and should not be viewed as, a substitute for GAAP financial measures and may not be comparable to similarly-titled measures used by other companies.
Currency Exchange Rate Impact
The currency exchange rate impact reflects the portion (expressed as a percentage) of changes in Mattel's reported results that are attributable to fluctuations in currency exchange rates.
For entities reporting in currencies other than the U.S. dollar, Mattel calculates the percentage change of period-over-period results at constant currency exchange rates (established as described below) by translating current period and prior period results using these rates and then determines the currency exchange rate impact percentage by calculating the difference between the percentage change at such constant currency exchange rates and the percentage change at actual exchange rates.
The constant currency exchange rates are determined by Mattel at the beginning of each year and are applied consistently during the year. They are generally different from the actual exchange rates in effect during the current or prior period due to volatility in actual foreign currency exchange rates. Mattel considers whether any changes to the constant currency rates are appropriate at the beginning of each year. The exchange rates used for these constant currency calculations are generally based on prior year actual exchange rates.
Mattel believes that the disclosure of the percentage impact of foreign currency changes is useful supplemental information for investors to be able to gauge Mattel's current business performance and the longer-term strength of its overall business since foreign currency changes could potentially mask underlying sales trends. The disclosure of the percentage impact of foreign currency exchange allows investors to calculate the impact on a constant currency basis and also enhances their ability to compare financial results from one period to another.
Key Performance Indicator
Gross billings represent amounts invoiced to customers. It does not include the impact of sales adjustments, such as trade discounts and other allowances. Mattel presents changes in gross billings as a metric for comparing its aggregate, categorical, brand, and geographic results to highlight significant trends in Mattel's business. Changes in gross billings are discussed because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and are not associated with categories, brands, or individual products.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Exchange Rate Risk
Currency exchange rate fluctuations may impact Mattel's results of operations and cash flows. The Chinese yuan, Euro, Russian ruble, and Turkish lira were the primary currencies that caused foreign currency transaction exposure for Mattel during the first nine months of 2023. Mattel seeks to mitigate its exposure to foreign currency exchange risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts primarily to hedge its purchase and sale of inventory and other intercompany transactions denominated in foreign currencies. These contracts generally have maturity dates of up to 24 months. For those intercompany receivables and payables that are not hedged, the transaction gains or losses are recorded in the consolidated statements of operations in the period in which the exchange rate changes as part of operating income or other non-operating (income) expense, net based on the nature of the underlying transaction. Transaction gains or losses on hedged intercompany inventory transactions are recorded in the consolidated statements 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 financial instruments for speculative purposes.
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Mattel's financial position is also impacted by currency exchange rate fluctuations on translation of its net investments in subsidiaries with non-U.S. dollar functional currencies. Assets and liabilities of subsidiaries with non-U.S. dollar functional currencies are translated into U.S. dollars at fiscal period-end exchange rates. Income, expense, and cash flow items are translated at weighted-average exchange rates prevailing during the fiscal period. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive loss within stockholders' equity. Mattel's primary currency translation adjustments for the nine months ended September 30, 2023 were related to its net investments in entities having functional currencies denominated in the Russian ruble, Mexican peso, British pound sterling, Brazilian real, and Malaysian ringgit.
There are numerous factors impacting the amount by which Mattel's financial results are affected by foreign currency translation and transaction gains and losses resulting from changes in currency exchange rates, including, but not limited to, the level of foreign currency forward exchange contracts in place at a given time and the volume of foreign currency-denominated transactions in a given period. However, assuming that such factors were held constant, Mattel estimates that a one percent change in the U.S. dollar would have impacted Mattel's third quarter net sales by approximately 0.3% and would have less than a $0.01 impact to Mattel's net income per share.
Turkey Operations
Effective April 1, 2022, Mattel has accounted for Turkey as a highly inflationary economy, as the projected three-year cumulative inflation rate exceeded 100%. As such, beginning April 1, 2022, Mattel's Turkey subsidiary has designated the U.S. dollar as its functional currency.
Argentina Operations
During the third quarter of 2021, Mattel began a process to liquidate its subsidiary in Argentina. The liquidation was substantially completed during the fourth quarter of 2022. Prior to the substantial completion of the liquidation, Mattel had recorded $45.4 million of currency translation adjustments in accumulated other comprehensive loss, net within its consolidated balance sheet. As a result of the substantially complete liquidation, the cumulative currency translation adjustments were removed from accumulated other comprehensive loss and recognized as a loss in other non-operating expense within the consolidated statement of operations in the fourth quarter of 2022.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of September 30, 2023, Mattel's disclosure controls and procedures were evaluated, with the participation of Mattel's principal executive officer and principal financial officer, to assess whether they are effective in providing reasonable assurance that information required to be disclosed by Mattel in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Based on this evaluation, Ynon Kreiz, Mattel's principal executive officer, and Anthony DiSilvestro, Mattel's principal financial officer, concluded that these disclosure controls and procedures were effective to provide reasonable assurance as of September 30, 2023.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, Mattel's internal control over financial reporting.
46
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The content of Part I, Item 1 "Financial Statements—Note 20 to the Consolidated Financial Statements—Contingencies" of this Quarterly Report on Form 10-Q is hereby incorporated by reference in its entirety in this Item 1.
Item 1A. Risk Factors.
There have been no material changes to the risk factors disclosed under Part I, Item 1A "Risk Factors" in the 2022 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Equity Securities
During the third quarter of 2023, Mattel did not sell any unregistered equity securities.
Issuer Purchases of Equity Securities
The following table provides certain information with respect to Mattel's purchases of its common stock during the third quarter of 2023:
| Period | Total Number of Shares Purchased (a) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (b) | |||||||||||||||||||
| July 1-31 | 573,509 | $ | 21.34 | 353,583 | $ | 145,600,081 | |||||||||||||||||
| August 1-31 | 2,655,743 | 21.21 | 2,472,883 | 93,155,887 | |||||||||||||||||||
| September 1-30 | 48,178 | 22.03 | — | 93,155,887 | |||||||||||||||||||
| Total | 3,277,430 | $ | 21.25 | 2,826,466 | $ | 93,155,887 | |||||||||||||||||
____________________________________
(a)The total number of shares purchased includes 450,964 shares withheld from employees to satisfy minimum tax withholding obligations that occur upon settlement of equity awards, which were not purchased as part of a publicly announced repurchase plan or program.
(b)Mattel's share repurchase program was first announced on July 21, 2003. On July 17, 2013, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0 million. At September 30, 2023, share repurchase authorizations of $93.2 million had not been executed. Repurchases under the program will take place from time to time, depending on market conditions. Mattel's share repurchase program has no expiration date.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
(a)Item 2.05 Costs Associated with Exit or Disposal Activities
The information set forth in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations— Cost Savings Program— Other Cost Savings Actions" above is incorporated herein by reference.
(b)Not applicable.
(c)None.
47
Item 6. Exhibits.
| Incorporated by Reference | ||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit Description | Form | File No. | Exhibit(s) | Filing Date | |||||||||||||||||||||||||||
| Restated Certificate of Incorporation of Mattel, Inc. | 8-K | 001-05647 | 99.0 | May 21, 2007 | ||||||||||||||||||||||||||||
| Amended and Restated Bylaws of Mattel, Inc. | 8-K | 001-05647 | 3.1 | September 15, 2023 | ||||||||||||||||||||||||||||
| Specimen Stock Certificate with respect to Mattel, Inc. | 10-Q | 001-05647 | 4.0 | August 3, 2007 | ||||||||||||||||||||||||||||
31.0* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||||||||||||||||
31.1* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||||||||||||||||
32.0** | Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||||||||||||||||
101.INS* | Inline XBRL Instance Document | |||||||||||||||||||||||||||||||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||||||||||||||||||||||||||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||||||||||||||||||||||||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||||||||||||||||||||||||
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||||||||||||||||||||||||||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||||||||||||||||||||||||
104* | The cover page from Mattel's Quarterly Report on Form 10-Q for the three months ended September 30, 2023, formatted in Inline XBRL. | |||||||||||||||||||||||||||||||
______________________________________________
| * | Filed herewith. | ||||
| ** | Furnished herewith. This exhibit should not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934. | ||||
48
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MATTEL, INC. Registrant | |||||||||||
| By: | /s/ Yoon Hugh | ||||||||||
| Yoon Hugh Senior Vice President and Corporate Controller (Duly Authorized Officer and Chief Accounting Officer) | |||||||||||
Date: November 9, 2023
49
EXHIBIT 31.0
CERTIFICATION
I, Ynon Kreiz, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mattel, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize 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: | November 9, 2023 | By: | /s/ Ynon Kreiz | |||||||||||||||||
| Ynon Kreiz Chairman and Chief Executive Officer (Principal Executive Officer) | ||||||||||||||||||||
EXHIBIT 31.1
CERTIFICATION
I, Anthony DiSilvestro, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mattel, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize 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: | November 9, 2023 | By: | /s/ Anthony DiSilvestro | |||||||||||||||||
| Anthony DiSilvestro Chief Financial Officer (Principal Financial Officer) | ||||||||||||||||||||
EXHIBIT 32.0
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Mattel, Inc. a Delaware corporation (the “Company”), on Form 10-Q for the quarter ended September 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), Ynon Kreiz, Chief Executive Officer, and Anthony DiSilvestro, Chief Financial Officer, of the Company, do each hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) that, to his knowledge:
(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | November 9, 2023 | By: | /s/ Ynon Kreiz | |||||||||||||||||
| Ynon Kreiz | ||||||||||||||||||||
| Chairman and Chief Executive Officer | ||||||||||||||||||||
| /s/ Anthony DiSilvestro | ||||||||||||||||||||
| Anthony DiSilvestro | ||||||||||||||||||||
| Chief Financial Officer | ||||||||||||||||||||