Mattel Inc 10-Q for FY2024 Q3
Mattel Inc (MAT)
10-Q
2024-10-30
For: 2024-09-30
View Original
Added on
April 10, 2026
About this 10-Q
Mattel Inc filed this 10-Q on October 30, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.84B
- down 3.9% from $1.92B a year earlier
- Net income
- $372.38M
- up 154.5% from net income of $146.32M a year earlier
- Diluted EPS
- $1.09
- up 165.9% from $0.41 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 14, 2024: 336.9 million 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, product safety, or sustainability, 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, 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 artificial intelligence, non-fungible tokens, and cryptocurrency; (xxii) an inability to remediate the material weakness in Mattel's internal control over financial reporting, or additional material weaknesses or other deficiencies in the future or the failure to maintain an effective system of internal control; and (xxiii) 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, 2023 (the "2023 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, 2024 | September 30, 2023 | December 31, 2023 | |||||||||||||||
| (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 | |||||||||||||||||
| 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, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (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, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (Unaudited; in thousands) | |||||||||||||||||||||||
| Net Income | $ | $ | $ | $ | |||||||||||||||||||
| Other Comprehensive Income (Loss), Net of Tax | |||||||||||||||||||||||
| Currency translation adjustments | ( | ( | ( | ||||||||||||||||||||
| Employee benefit plan adjustments | |||||||||||||||||||||||
| Net unrealized gains (losses) on derivative instruments: | |||||||||||||||||||||||
| Unrealized holding (losses) gains | ( | ( | |||||||||||||||||||||
| Reclassification adjustments included in net income | ( | ( | ( | ||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| Other Comprehensive Income (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, 2024 | September 30, 2023 | ||||||||||
| (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 of intangible assets | |||||||||||
| Share-based compensation | |||||||||||
| Inventory obsolescence | |||||||||||
| Deferred income taxes | |||||||||||
| Income from equity method investments | ( | ( | |||||||||
| Valuation allowance on foreign deferred tax assets | |||||||||||
| Content assets amortization | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable, net | ( | ( | |||||||||
| Inventories | ( | ||||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Accounts payable, accrued liabilities, and income taxes payable | ( | ||||||||||
| Content assets spend | ( | ( | |||||||||
| 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 | |||||||||||
| 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 | ( | ( | |||||||||
| Change 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, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| 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, March 31, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| 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, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| 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, September 30, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
| 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 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
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 accompanying unaudited consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments, consisting of only those of a normal recurring nature, considered necessary for a fair statement of the financial position and interim results of Mattel, Inc. and its subsidiaries ("Mattel") as of and for the periods presented have been included.
The December 31, 2023 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 2023 Annual Report on Form 10-K.
2. Accounts Receivable, Net
Mattel estimates current expected credit losses based on collection history and management's assessment of the current economic trends, business environment, customers' financial condition, and accounts receivable aging that may impact the level of future credit losses. Accounts receivable were net of allowances for credit losses of $8.2 million, $12.5 million, and $8.8 million as of September 30, 2024, September 30, 2023, and December 31, 2023, respectively.
3. Inventories
Inventories included the following:
| September 30, 2024 | September 30, 2023 | December 31, 2023 | |||||||||||||||
| (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, 2024 | September 30, 2023 | December 31, 2023 | |||||||||||||||
| (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 for the purpose of evaluating whether goodwill is impaired. Mattel's reporting units are: (i) North America; (ii) American Girl; and (iii) International. Components of the reporting units have been aggregated into single reporting units where 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.
Mattel performed a quantitative goodwill impairment assessment as of August 1, 2024, and determined that goodwill was not impaired. The quantitative goodwill impairment assessment includes the use of certain assumptions and estimates to calculate the estimated fair value of Mattel’s reporting units. To the extent assumptions, estimations, or market factors, including seasonality, differ from Mattel’s current estimates, the estimated fair value of Mattel’s reporting units may be susceptible to significant changes. The reporting unit that is most susceptible to changes in assumptions and estimates given its smaller size is American Girl, as excess fair value over carrying value is a lesser dollar and percentage value than the other reporting units.
The change in the carrying amount of goodwill by reporting unit for the nine months ended September 30, 2024 is shown below. Brand-specific goodwill held by foreign subsidiaries is allocated to the North America reporting unit selling those brands, resulting in a foreign currency exchange rate impact.
| December 31, 2023 | Currency Exchange Rate Impact | September 30, 2024 | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| North America | $ | $ | $ | ||||||||||||||||||||
| American Girl | |||||||||||||||||||||||
| International | |||||||||||||||||||||||
| $ | $ | $ | |||||||||||||||||||||
Intangible Assets, Net
Identifiable intangible assets were $374.7 million, net of accumulated amortization of $435.1 million, $397.8 million, net of accumulated amortization of $396.8 million, and $393.0 million, net of accumulated amortization of $408.5 million as of September 30, 2024, September 30, 2023, and December 31, 2023, 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, 2024 | September 30, 2023 | December 31, 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Incentive compensation | $ | $ | $ | ||||||||||||||
| Royalties | |||||||||||||||||
| Advertising and promotion | |||||||||||||||||
10
7. Supplier Finance Program
8. Seasonal Financing
On July 15, 2024, Mattel entered into a revolving credit agreement (the "New Credit Agreement"), among Mattel, as the borrower, Bank of America, N.A., as administrative agent, and the other lenders and financial institutions party thereto, providing for $1.40 billion in aggregate principal amount of senior unsecured revolving credit facilities (the "New Revolving Credit Facility"). The New Revolving Credit Facility matures on July 15, 2029. In connection with the New Revolving Credit Facility, Mattel terminated the commitments and satisfied all outstanding obligations under the revolving credit agreement (the "Prior Credit Agreement"), dated as of September 15, 2022 (as amended), among Mattel, as the borrower, Bank of America, N.A., as administrative agent, and the other lenders and financial institutions party thereto, which provided for a senior secured revolving credit facility in an aggregate principal amount of $1.40 billion (the "Prior Revolving Credit Facility").
As of September 30, 2024, Mattel was in compliance with all covenants contained in the New Credit Agreement. Mattel had no no other short-term borrowings outstanding as of September 30, 2024. Under the Prior Revolving Credit Facility, Mattel had no no 9 million as of September 30, 2024. Outstanding letters of credit under the Prior Revolving Credit Facility totaled approximately $9
Borrowings under the New Revolving Credit Facility will bear interest at a floating rate, which for U.S. Dollar-denominated loans can be, at Mattel's option, either (a) Term SOFR (as defined in the New Credit Agreement), plus an applicable margin ranging from 0.875 % to 1.375 % per annum, or (b) Base Rate (as defined in the New Credit Agreement), plus an applicable margin ranging from 0.000 % to 0.375 % per annum, in each case, such applicable margins to be determined based on Mattel's debt rating.
In addition to paying interest on the outstanding principal under the New Revolving Credit Facility, Mattel will be required to pay (i) an unused line fee per annum of the average daily unused portion of the New 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.
The New Credit Agreement contains customary covenants, including, but not limited to, restrictions on Mattel's and its subsidiaries' ability to merge and consolidate with other companies, dispose of all or substantially all assets, incur indebtedness, or grant liens or other security interests on assets, in each case, subject to certain customary exceptions. No subsidiaries of Mattel were required to guarantee the New Revolving Credit Facility as of the closing date thereof.
The New 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 as of the end of each fiscal quarter, not to exceed (x) 3.75 to 1.00 with respect to fiscal quarters ending on March 31, June 30 and December 31 of each year, and (y) 4.00 to 1.00 with respect to fiscal quarters ending on September 30 of each year. The total leverage ratio financial covenant is subject to a step-up to 4.25 to 1.00, with respect to fiscal quarters in which certain material acquisitions are consummated, and for a period of four fiscal quarters thereafter, and subject to certain customary exceptions.
11
9. Long-Term Debt
Long-term debt included the following:
| September 30, 2024 | September 30, 2023 | December 31, 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| 2010 Senior Notes due October 2040 | $ | $ | $ | ||||||||||||||
| 2011 Senior Notes due November 2041 | |||||||||||||||||
| 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 | $ | $ | $ | ||||||||||||||
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.
10. Accumulated Other Comprehensive Income (Loss)
The following tables present changes in the accumulated balances for each component of other comprehensive income (loss), including current period other comprehensive income (loss) and reclassifications from accumulated other comprehensive income (loss):
| For the Three Months Ended September 30, 2024 | |||||||||||||||||||||||
| Derivative Instruments | Employee Benefit Plans | Currency Translation Adjustments | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2024 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | |||||||||||||||||||||||
| Net change in other comprehensive income (loss) | ( | ||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
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| For the Nine Months Ended September 30, 2024 | |||||||||||||||||||||||
| Derivative Instruments | Employee Benefit Plans | Currency Translation Adjustments | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Net change in other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| For the Three Months Ended September 30, 2023 | |||||||||||||||||||||||
| Derivative Instruments | 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 change in other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2023 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| For the Nine Months Ended September 30, 2023 | |||||||||||||||||||||||
| Derivative Instruments | Employee Benefit Plans | Currency Translation Adjustments | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2022 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | ||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Net change in other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2023 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
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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, 2024 | September 30, 2023 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Derivative Instruments: | |||||||||||||||||
| (Loss) gain on foreign currency forward exchange and other contracts | $ | ( | $ | Cost of sales | |||||||||||||
| Tax effect | Provision/benefit from income taxes | ||||||||||||||||
| $ | ( | $ | Net income/loss | ||||||||||||||
| 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/benefit from income taxes | ||||||||||||||||
| $ | ( | $ | ( | Net income/loss | |||||||||||||
| For the Nine Months Ended | |||||||||||||||||
| September 30, 2024 | September 30, 2023 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Derivative Instruments: | |||||||||||||||||
| Gain on foreign currency forward exchange and other contracts | $ | $ | Cost of sales | ||||||||||||||
| Tax effect | Provision/benefit from income taxes | ||||||||||||||||
| $ | $ | Net income/loss | |||||||||||||||
| 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/benefit from income taxes | ||||||||||||||||
| $ | ( | $ | ( | Net income/loss | |||||||||||||
(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.
Currency Translation Adjustments
During the nine months ended September 30, 2024, currency translation adjustments resulted in a net loss of $16.9 million, primarily due to the weakening of the Mexican peso and Brazilian real against the U.S. dollar, partially offset by the strengthening of the British pound sterling against the U.S. dollar.
14
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, 2024 | September 30, 2023 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Currency transaction (losses), net | $ | ( | $ | ( | Operating income/expense | ||||||||||||
| Currency transaction gains, net | Other non-operating income/expense, net | ||||||||||||||||
| Currency transaction (losses) gains, net | $ | ( | $ | ||||||||||||||
| For the Nine Months Ended | |||||||||||||||||
| September 30, 2024 | September 30, 2023 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Currency transaction (losses), net | $ | ( | $ | ( | Operating income/expense | ||||||||||||
| Currency transaction (losses) gains, net | ( | Other non-operating income/expense, net | |||||||||||||||
| Currency transaction (losses), net | $ | ( | $ | ( | |||||||||||||
12. Derivative Instruments
Mattel seeks to mitigate its exposure to foreign currency transaction risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts. Mattel uses foreign currency forward exchange contracts as cash flow hedges primarily to hedge its purchases and sales of inventory denominated in foreign currencies. These contracts have maturity dates of up to 24 months. These derivative instruments have been designated as effective cash flow hedges, whereby the unsettled hedges are reported in Mattel's consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in other comprehensive income ("OCI"). Realized gains and losses for these contracts are recorded in the consolidated statements of operations in the period in which the inventory is sold to customers. Mattel uses foreign currency forward exchange contracts to hedge intercompany loans and advances denominated in foreign currencies. Due to the short-term nature of the contracts involved, Mattel does not use hedge accounting for these contracts, and as such, changes in fair value are recorded in the period of change in the consolidated statements of operations. Mattel utilizes derivative contracts to hedge certain purchases of commodities, which were not material. As of September 30, 2024, September 30, 2023, and December 31, 2023, Mattel held foreign currency forward exchange contracts and other commodity derivative instruments, with notional amounts of approximately $748 million, $636 million, and $609 million, respectively.
15
The following tables present Mattel's derivative assets and liabilities:
| Derivative Assets | |||||||||||||||||||||||
| Balance Sheet Classification | Fair Value | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | December 31, 2023 | |||||||||||||||||||||
| (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, 2024 | September 30, 2023 | December 31, 2023 | |||||||||||||||||||||
| (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 | $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | |||||||||||||||||||||
16
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, 2024 | September 30, 2023 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Foreign Currency Forward Exchange and Other Contracts: | |||||||||||||||||
| Amount of (losses) gains recognized in OCI | $ | ( | $ | ||||||||||||||
| Amount of (losses) 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, 2024 | September 30, 2023 | Statements of Operations Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Foreign Currency Forward Exchange and Other Contracts: | |||||||||||||||||
| Amount of gains (losses) recognized in OCI | $ | $ | ( | ||||||||||||||
| Amount of gains reclassified from accumulated OCI to the 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, 2024 and 2023, 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, 2024 | September 30, 2023 | 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, 2024 | September 30, 2023 | 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 | ||||||||||||||
17
The net gains and losses recognized in the consolidated statements of operations during the three and nine months ended September 30, 2024 and September 30, 2023, respectively, were offset by foreign currency transaction gains and losses on the related derivative balances.
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, 2024, September 30, 2023, and December 31, 2023 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, 2024 | |||||||||||||||||||||||
| 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, 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) | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 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) | $ | $ | $ | $ | |||||||||||||||||||
(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.
18
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 $2.31 billion (compared to a carrying amount of $2.35 billion) as of September 30, 2024, $2.13 billion (compared to a carrying amount of $2.35 billion) as of September 30, 2023, and $2.23 billion (compared to a carrying amount of $2.35 billion) as of December 31, 2023. 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, 2024 and 2023:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (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
Mattel and certain of its subsidiaries have qualified and nonqualified retirement plans covering substantially all employees of these companies, which are more fully described in Part II, Item 8 "Financial Statements and Supplementary Data—Note 4 to the Consolidated Financial Statements–Employee Benefit Plans" in the 2023 Annual Report on Form 10-K.
19
The components of Mattel's net periodic benefit cost for defined benefit pension plans were as follows:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of prior service cost | |||||||||||||||||||||||
| Recognized actuarial loss | |||||||||||||||||||||||
| Net periodic benefit cost | $ | $ | $ | $ | |||||||||||||||||||
The components of Mattel's net periodic benefit credit for postretirement benefit plans were as follows:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Interest cost | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of prior service credit | ( | ( | ( | ( | |||||||||||||||||||
| Recognized actuarial gain | ( | ( | ( | ( | |||||||||||||||||||
| Net periodic benefit credit | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
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, 2024, Mattel made cash contributions totaling approximately $14 million related to its defined benefit pension and postretirement benefit plans. During the remainder of 2024, Mattel expects to make additional cash contributions of approximately $5 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 9 to the Consolidated Financial Statements—Share-Based Payments" in the 2023 Annual Report on Form 10-K. Under the Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan ("the 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 grant date. Stock options, RSUs, and performance awards generally provide for vesting over, or at the end of, a period of three years from the grant date.
On September 30, 2024, a one-time retention award of performance-based restricted stock units (the "Retention Performance Grant") was granted to Ynon Kreiz, Mattel's Chief Executive Officer, in order to incentivize retention and drive significant stock price performance and market outperformance. The Retention Performance Grant has targeted approximately 0.8 million performance-based restricted stock units granted under the Plan, which was determined based on a target value of $15.0 million divided by the closing price of Mattel's common stock on the grant date. The Retention Performance Grant is 100 % performance-based, with 50 % of the Retention Performance Grant subject to vesting based on the achievement of the stock price hurdles during the final three years of the five-year performance measurement period, and the remaining 50 % of the Retention Performance Grant subject to vesting based on Mattel's relative Total Shareholder Return ("TSR") over the five-year performance measurement period.
No portion of the Retention Performance Grant will be earned unless Mattel achieves rigorous performance goals and Mr. Kreiz remains employed through the settlement date following the completion of a five-year vesting period from September 30, 2024 to September 30, 2029, subject to potential acceleration upon certain qualifying terminations of employment. The grant also allows for a maximum potential earnout of 200 % of the targeted number of performance-based restricted stock units.
20
The fair value of the Retention Performance Grant has been estimated using a Monte Carlo valuation methodology. The Retention Performance Grant has an estimated grant-date fair value of $24.42 per unit and total estimated grant-date fair value of $19.2 million, which will be recognized on a straight-line basis over the service period.
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, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Stock option compensation expense | $ | $ | $ | $ | |||||||||||||||||||
| RSU compensation expense | |||||||||||||||||||||||
| Performance award compensation expense | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
As of September 30, 2024, total unrecognized compensation expense related to unvested share-based payments totaled $139.0 million and is expected to be recognized over a weighted-average period of 2.5 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 $6.2 million and $26.0 million for the nine months ended September 30, 2024 and 2023, 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, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Design and development | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
18. Restructuring Charges
Optimizing for Profitable Growth
On February 7, 2024, Mattel announced the Optimizing for Profitable Growth program (the "OPG program"), a multi-year cost savings program that follows the Optimizing for Growth program (the "OFG program"), which concluded in the fourth quarter of 2023. The OPG program is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel's global supply chain, including its manufacturing footprint. The OPG program includes cost savings actions in connection with discontinuing production at a plant in China as previously announced in the third quarter of 2023, as well as savings from other previous actions taken in 2023 that were not recognized in the OFG program.
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In connection with the OPG 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, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (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 OPG program:
| Liability at December 31, 2023 | Charges | Payments/Utilization | Liability at September 30, 2024 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Severance | $ | $ | $ | ( | $ | ||||||||||||||||||
| Other restructuring charges (a) | ( | ||||||||||||||||||||||
| $ | $ | $ | ( | $ | |||||||||||||||||||
| Liability at December 31, 2022 | Charges | Payments/Utilization | Liability at September 30, 2023 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Severance | $ | $ | $ | $ | |||||||||||||||||||
| Other restructuring charges | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
(a)Other restructuring charges consist primarily of expenses associated with the consolidation of manufacturing facilities.
As of September 30, 2024, in connection with the OPG program, Mattel recorded cumulative severance and other restructuring charges of approximately $73 million, which included approximately $1 million of non-cash charges. Total expected cash expenditures are approximately $130 to $165 million and total non-cash charges are expected to be up to $5 million.
Other Cost Savings Actions
As of December 31, 2023, Mattel concluded the OFG program, a multi-year cost savings program that had integrated and expanded upon the previous Capital Light program. In connection with the OFG program, Mattel recorded severance and other restructuring charges of $3.1 million and $31.6 million within other selling and administrative expenses during the three and nine months ended September 30, 2023, respectively, and a credit to severance and other restructuring charges of ($0.1 ) million and ($1.3 ) million within cost of sales during the three and nine months ended September 30, 2023, respectively, in the consolidated statement of operations.
Additionally, during the three and nine months ended September 30, 2023, Mattel executed actions to further streamline its organizational structure that were not included in the OFG program. In connection with these actions, Mattel recorded severance charges of $0.9 million and $6.1 million within other selling and administrative expenses during the three and nine months ended September 30, 2023, respectively, in the consolidated statement of operations.
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19. Income Taxes
Mattel's provision for income taxes was $106.4 million and $94.8 million for the three and nine months ended September 30, 2024, respectively, and $309.3 million and $296.8 million for the three and nine months ended September 30, 2023, respectively. Mattel recognized a net discrete income tax benefit of $3.4 million during the three months ended September 30, 2024, primarily related to reassessments of prior years' tax liabilities, partially offset by the establishment of a valuation allowance on certain foreign deferred tax assets. Mattel recognized a net discrete income tax benefit of $16.3 million during the nine months ended September 30, 2024, primarily related to reassessment of prior years' tax liabilities and discrete tax benefit on tax elections filed to amortize certain intangible assets transferred as part of Mattel's intra-group intellectual property ("IP") rights transfer. 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 intra-group transfer of certain IP rights, partially offset by undistributed earnings of certain foreign subsidiaries 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 2024, there were no material changes to Mattel's valuation allowance.
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 $14.6 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.
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 remains the subject of ongoing appeals.
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, 2024, Mattel assessed its probable loss related to this matter and has accrued an estimated liability, which is not material.
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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. On July 24, 2024, the parties filed a settlement agreement with the court to resolve this litigation. On August 9, 2024, the settlement was preliminarily approved by the court. A final approval hearing is scheduled for January 28, 2025. As of September 30, 2024, Mattel assessed its probable loss related to this matter and has accrued an estimated liability, which is not material.
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 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). The parties have reached a settlement in principle of this litigation, which is subject to approval by the court. As of September 30, 2024, Mattel has determined that a recovery of prior losses in this matter is probable and has accrued for the estimated amount, which is not material.
The lawsuits seek compensatory damages, punitive damages, statutory damages, restitution, disgorgement, attorneys' fees, costs, interest, declaratory relief, and/or injunctive relief. Mattel believes that it has substantial defenses to the allegations in the lawsuits and intends to vigorously defend against them. Except as specifically noted above, a reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time.
Litigation Related to the Fisher-Price Snuga Swings
Purported class action lawsuits against Fisher-Price, Inc. and Mattel, Inc. have been filed in United States District Courts for the Western District of New York (Bigelow v. Mattel, Inc., et al., filed October 17, 2024, and Wall v. Mattel, Inc. et al., filed October 25, 2024), and the Central District of California (Shahbaz v. Fisher-Price, Inc., et al., filed October 24, 2024). The lawsuits assert claims for false advertising, breach of contract, breach of warranty, fraud, negligence, and other claims in connection with the marketing and sale of Fisher-Price Snuga Swings (the "Swings"). In general, the lawsuits allege that the Swings were falsely marketed and sold as safe for infant use, particularly infant sleep, and failed to disclose a risk of suffocation. The lawsuits propose nationwide and several state consumer classes comprised of those who purchased Swings.
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.
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Segment Data
In the first quarter of 2024, Mattel announced an organizational change that resulted in the American Girl business being integrated into Mattel's North America commercial organization. Such integration resulted in a change to Mattel's operating and reportable segments. Mattel's reportable segments are: (i) North America; and (ii) International. The prior period amounts have been reclassified to conform to the current period presentation. The North America and International segments sell products across Mattel's categories, although some products are developed and adapted for particular international markets, and American Girl products are only sold in North America.
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 generally 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, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net Sales by Segment | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| International | |||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Operating Income by Segment (a) | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| International | |||||||||||||||||||||||
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 $0.4 million and $3.0 million for the three and nine months ended September 30, 2024, respectively, and $(0.1 ) million and $(1.3 ) million for the three and nine months ended September 30, 2023, respectively, which were allocated to the North America and International segments; and (ii) a loss on sale of assets of $1.8
(b)Corporate and other expense included (i) severance and other restructuring charges of $27.1 million and $43.8 million for the three and nine months ended September 30, 2024, respectively, and $29.3 million and $63.0 million for the three and nine months ended September 30, 2023, respectively; and (ii) inclined sleeper product recall impact of $(11.7 ) million and $(5.8 ) million for the three and nine months ended September 30, 2024, respectively and $1.3 million and $9.0 million for the three and nine months ended September 30, 2023, respectively.
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Segment assets are comprised of accounts receivable, net and inventories.
| September 30, 2024 | September 30, 2023 | December 31, 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Assets by Segment | |||||||||||||||||
| North America | $ | $ | $ | ||||||||||||||
| International | |||||||||||||||||
| 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, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net Sales by Geographic Area | |||||||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| International | |||||||||||||||||||||||
| EMEA | |||||||||||||||||||||||
| Latin America | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Total International | |||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
22. New Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires incremental disclosure of significant segment expenses on an annual and interim basis to enable investors to develop more decision-useful financial analyses. The guidance in ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Mattel is currently evaluating the impact of the adoption of ASU 2023-07 on its consolidated financial statements.
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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 not associated with categories, brands, or individual products.
Amounts shown in millions or billions within this Item 2 may not sum due to rounding.
Overview
Mattel is a leading global toy and family entertainment company and owner of one of the most iconic brand portfolios in the world. Mattel creates innovative products and experiences that inspire fans, entertain audiences, and develop children through play. Mattel is focused on the following strategy to grow its intellectual property ("IP") driven toy business and expand its entertainment offering:
•Grow toy business profitably through scaling Mattel's portfolio, optimizing operations, evolving demand creation, and growing franchise brands; and
•Expand entertainment offering to capture the full value of Mattel's IP outside the toy aisle in highly accretive business verticals, by growing franchise brands and accelerating content, consumer products, and digital and live 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.
Infant, Toddler, and Preschool—including brands such as Fisher-Price (including Little People) and Thomas & Friends. 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.
In the first quarter of 2024, Mattel further divided its Infant, Toddler, and Preschool category into three subcategories. The first subcategory is Fisher-Price, the power brand, which includes the core Infant, Little People, and Newborn product lines, as well as the recently launched Fisher-Price Wood product line. The second subcategory is Preschool Entertainment, which includes owned IP such as Thomas & Friends and Barney, Mattel's character based Imaginext line, and partner entertainment brands. The third subcategory is Baby Gear and Power Wheels, in which Mattel has decided to strategically out-license or exit certain product lines.
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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 and nurtures 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 fans of all ages.
Action Figures, Building Sets, Games, and Other—including brands such as Masters of the Universe, MEGA, UNO, Jurassic World (NBCUniversal), Minecraft (Microsoft), WWE, and Star Wars (Disney's Lucasfilm). Mattel's Action Figures portfolio is comprised of product lines associated with licensed entertainment franchises, such as Jurassic World and WWE, as well as product lines from Mattel-owned IP, such as Masters of the Universe. As the challenger brand in Building Sets, MEGA inspires creativity through authentic building experiences for 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
During the third quarter of 2024, Mattel continued to execute its multi-year strategy to grow its IP-driven toy business and expand its entertainment offering. Mattel achieved gross margin expansion, continued to improve in profitability compared to the third quarter of 2023, and ended the quarter in a strong financial position.
Mattel's third quarter net sales declined 4% compared to the third quarter of 2023, which benefited from the success of the Barbie movie. Mattel's third quarter results included improvement to operating cash flows, as well as gross margin expansion to 53.1%, from 51.0% in the third quarter of 2023, with benefits from supply chain and other efficiencies, the Optimizing for Profitable Growth program ("OPG program"), favorable foreign currency exchange, and cost deflation. Earnings per share in the third quarter of 2024 increased to $1.09, compared to $0.41 in the third quarter of 2023.
Mattel ended the third quarter with a cash balance of $723.5 million, compared to $455.7 million in the third quarter of 2023. Cash increased primarily due to Mattel's cash flows from operations, which were $887.8 million during the trailing twelve months, due to an increase in net income, excluding the impact of non-cash items, and improved working capital. This increase was partially offset by cash used for share repurchases and capital expenditures, including the acquisition of a property that will serve as Mattel's new global design center, which will replace a facility that is currently leased.
On February 5, 2024, the Board of Directors authorized a $1.00 billion share repurchase program. During the first nine months of 2024, Mattel executed $268.3 million of share repurchases under the program.
Additionally, in July 2024, Mattel entered into a new $1.40 billion revolving credit facility (the "New Revolving Credit Facility"), which replaced its prior revolving credit facility (the "Prior Revolving Credit Facility"). The New Revolving Credit Facility matures in July 2029.
Mattel is operating in a macro-economic environment that may impact consumer demand. To the extent the macro-economic environment 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 2023 Annual Report on Form 10-K for further discussion regarding potential impacts on Mattel's business.
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Results of Operations—Third Quarter
Consolidated Results
The following table presents Mattel's consolidated results for the third quarter of 2024 and 2023:
| For the Three Months Ended | Year/Year Change | ||||||||||||||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||||||||||||||
| Amount | % of Net Sales | Amount | % of Net Sales | % | Basis Points of Net Sales | ||||||||||||||||||||||||||||||
| (In millions, except percentage and basis point information) | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,843.9 | $ | 1,918.8 | -4 | % | |||||||||||||||||||||||||||||
| Cost of sales | 864.9 | 46.9 | % | 940.9 | 49.0 | % | -8 | % | (210) | ||||||||||||||||||||||||||
| Gross profit | 979.0 | 53.1 | % | 977.9 | 51.0 | % | — | % | 210 | ||||||||||||||||||||||||||
| Advertising and promotion expenses | 105.0 | 5.7 | % | 124.3 | 6.5 | % | -16 | % | (80) | ||||||||||||||||||||||||||
| Other selling and administrative expenses | 385.7 | 20.9 | % | 379.8 | 19.8 | % | 2 | % | 110 | ||||||||||||||||||||||||||
| Operating income | 488.3 | 26.5 | % | 473.9 | 24.7 | % | 3 | % | 180 | ||||||||||||||||||||||||||
| Interest expense | 29.4 | 1.6 | % | 30.7 | 1.6 | % | -4 | % | — | ||||||||||||||||||||||||||
| Interest (income) | (9.8) | -0.5 | % | (4.6) | -0.2 | % | 114 | % | (30) | ||||||||||||||||||||||||||
| Other non-operating (income), net | (2.9) | (2.4) | |||||||||||||||||||||||||||||||||
| Income before income taxes | 471.7 | 25.6 | % | 450.1 | 23.5 | % | 5 | % | 210 | ||||||||||||||||||||||||||
| Provision for income taxes | 106.4 | 309.3 | |||||||||||||||||||||||||||||||||
| (Income) from equity method investments | (7.0) | (5.6) | |||||||||||||||||||||||||||||||||
| Net income | $ | 372.4 | 20.2 | % | $ | 146.3 | 7.6 | % | 154 | % | 1,260 | ||||||||||||||||||||||||
Sales
Net sales in the third quarter of 2024 were $1.84 billion, a decrease of $74.9 million, or 4%, as compared to $1.92 billion in the third quarter of 2023. The decrease in net sales was primarily due to a decrease in gross billings of $70.6 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 third quarter of 2024 and 2023:
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 757.1 | $ | 884.5 | -14 | % | -1 | % | |||||||||||||||
| Infant, Toddler, and Preschool | 349.8 | 361.1 | -3 | % | -1 | % | |||||||||||||||||
| Vehicles | 580.0 | 518.5 | 12 | % | -1 | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 364.3 | 357.7 | 2 | % | -1 | % | |||||||||||||||||
| Gross Billings | $ | 2,051.1 | $ | 2,121.8 | -3 | % | -1 | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 500.6 | $ | 605.1 | -17 | % | — | % | |||||||||||||||
| Hot Wheels | 508.2 | 454.8 | 12 | % | -1 | % | |||||||||||||||||
| Fisher-Price (a) | 265.4 | 264.3 | — | % | -1 | % | |||||||||||||||||
| Other | 777.0 | 797.6 | -3 | % | -1 | % | |||||||||||||||||
| Gross Billings | $ | 2,051.1 | $ | 2,121.8 | -3 | % | -1 | % | |||||||||||||||
(a) Beginning in the first quarter of 2024, the Fisher-Price power brand was revised to exclude Baby Gear and Imaginext products. Prior period amounts have been reclassified to conform to the current presentation.
Gross billings were $2.05 billion in the third quarter of 2024, a decrease of $70.6 million, or 3%, as compared to $2.12 billion in the third quarter of 2023, with an unfavorable impact from changes in currency exchange rates of one percentage point. The decrease in gross billings was primarily due to lower billings of Dolls and Infant, Toddler, and Preschool products, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products.
Dolls gross billings decreased 14%, of which 12% was due to lower billings of Barbie, which benefited from the Barbie movie in the prior year, and 2% was due to lower billings of Trolls (NBCUniversal) products.
Infant, Toddler, and Preschool gross billings decreased 3%, due to lower billings of Baby Gear and Power Wheels products.
Vehicles gross billings increased 12%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings increased 2%, of which 8% was due to higher billings of Games products, partially offset by lower billings of Other products of 3% and lower billings of Building Sets products of 3%.
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 $207.2 million in the third quarter of 2024, from $203.0 million in the third quarter of 2023. Sales adjustments as a percentage of net sales increased to 11.2% in the third quarter of 2024, as compared to 10.6% in the third quarter of 2023. The increase in sales adjustments as a percentage of net sales was primarily due to a shift in sales channel mix resulting in a higher proportion of sales with higher average sales adjustment rates.
30
Cost of Sales
Cost of sales decreased by $75.9 million, or 8%, to $864.9 million in the third quarter of 2024 from $940.9 million in the third quarter of 2023. Within cost of sales, product and other costs decreased by $65.2 million, or 9%, to $696.1 million in the third quarter of 2024 from $761.3 million in the third quarter of 2023. Freight and logistics expenses decreased by $7.0 million, or 8%, to $84.9 million in the third quarter of 2024 from $92.0 million in the third quarter of 2023. Royalty expense decreased by $3.7 million, or 4%, to $83.9 million in the third quarter of 2024 from $87.6 million in the third quarter of 2023.
Gross Margin
Gross margin increased to 53.1% in the third quarter of 2024 from 51.0% in the third quarter of 2023. The increase in gross margin included supply chain and other efficiencies of 190 basis points, incremental realized savings from the OPG program of 80 basis points, favorable foreign currency exchange of 70 basis points, and cost deflation of 50 basis points, partially offset by unfavorable mix of 180 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 5.7% in the third quarter of 2024, as compared to 6.5% in the third quarter of 2023, primarily due to a shift in the expected timing of advertising and promotion programs to the fourth quarter of 2024.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $385.7 million, or 20.9% of net sales, in the third quarter of 2024, an increase of $5.9 million, as compared to $379.8 million, or 19.8% of net sales, in the third quarter of 2023. The increase in other selling and administrative expenses was primarily due to employee compensation increases and higher incentive compensation of $25.2 million, partially offset by realized savings from cost savings programs of $7.5 million.
Interest Expense
Interest expense was $29.4 million in the third quarter of 2024, relatively flat as compared to $30.7 million in the third quarter of 2023.
Interest Income
Interest income increased by $5.2 million to $9.8 million in the third quarter of 2024 from $4.6 million in the third quarter of 2023, primarily due to higher average invested cash balances in the third quarter of 2024.
Provision for Income Taxes
Mattel's provision for income taxes was $106.4 million in the third quarter of 2024, as compared to $309.3 million in the third quarter of 2023. The decrease in provision for income taxes was primarily due to changes in discrete income taxes. During the three months ended September 30, 2023, Mattel recognized 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 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, 2024, Mattel recognized a net discrete tax benefit of $3.4 million primarily related to reassessments of prior years' tax liabilities, partially offset by the establishment of a valuation allowance on certain foreign deferred tax assets.
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 2024, there were no material changes to Mattel's valuation allowance.
31
The Organization for Economic Co-operation and Development ("OECD") reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two rules. Mattel is continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. Some of the legislative changes could impact Mattel's effective tax rate and tax liabilities. When and how these laws and regulations are adopted or enacted by various countries in which Mattel operates could increase tax complexity and uncertainty and may adversely affect Mattel's worldwide effective tax rate, income tax expense and cash flows. Mattel does not expect the provisions effective in 2024 to have a materially adverse impact on its results of operations, financial position, or cash flows.
Segment Results
North America Segment
Beginning in the first quarter of 2024, Mattel's American Girl business was integrated into its North America commercial organization and is reported within the North America operating segment. Prior to the first quarter of 2024, Mattel's American Girl business was a separate reportable operating segment. Prior period amounts have been reclassified to conform to the current period presentation.
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 2024 and 2023:
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 1,108.3 | $ | 1,147.0 | -3 | % | — | % | |||||||||||||||
| Segment Operating Income | 412.4 | 401.1 | 3 | % | |||||||||||||||||||
Net sales for the North America segment in the third quarter of 2024 were $1.11 billion, a decrease of $38.7 million, or 3%, as compared to $1.15 billion in the third quarter of 2023. The decrease in net sales was primarily due to a decrease in gross billings of $36.6 million.
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 442.3 | $ | 512.7 | -14 | % | — | % | |||||||||||||||
| Infant, Toddler, and Preschool | 228.0 | 230.6 | -1 | % | — | % | |||||||||||||||||
| Vehicles | 288.5 | 263.4 | 10 | % | — | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 225.5 | 214.1 | 5 | % | — | % | |||||||||||||||||
| Gross Billings | $ | 1,184.3 | $ | 1,220.9 | -3 | % | — | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 285.1 | $ | 349.9 | -19 | % | — | % | |||||||||||||||
| Hot Wheels | 249.7 | 225.7 | 11 | % | — | % | |||||||||||||||||
| Fisher-Price (a) | 168.5 | 166.5 | 1 | % | — | % | |||||||||||||||||
| Other | 481.0 | 478.7 | — | % | — | % | |||||||||||||||||
| Gross Billings | $ | 1,184.3 | $ | 1,220.9 | -3 | % | — | % | |||||||||||||||
(a) Beginning in the first quarter of 2024, the Fisher-Price power brand was revised to exclude Baby Gear and Imaginext products. Prior period amounts have been reclassified to conform to the current presentation.
Gross billings for the North America segment were $1.18 billion in the third quarter of 2024, a decrease of $36.6 million, or 3%, as compared to $1.22 billion in the third quarter of 2023. The decrease in the North America segment gross billings was due to lower billings of Dolls and Infant, Toddler, and Preschool products, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products.
32
Dolls gross billings decreased 14%, primarily due to lower billings of Barbie, which benefited from the Barbie movie in the prior year.
Infant, Toddler, and Preschool gross billings decreased 1%, due to lower billings of Baby Gear and Power Wheels products.
Vehicles gross billings increased 10%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings increased 5%, of which 8% was due to higher billings of Games products and 3% was due to higher billings of Action Figures products, partially offset by lower billings of Building Sets products of 3% and lower billings of Other products of 3%.
Sales adjustments increased to $76.0 million in the third quarter of 2024 from $73.9 million in the third quarter of 2023. Sales adjustments as a percentage of net sales was relatively consistent at 6.9% in the third quarter of 2024, as compared to 6.4% in the third quarter of 2023.
Cost of sales decreased by $38.6 million, or 7%, to $534.8 million in the third quarter of 2024 from $573.4 million in the third quarter of 2023, primarily due to a decrease in product and other costs of $29.4 million and a decrease in freight and logistics expenses of $8.4 million.
Gross margin increased to 51.7% in the third quarter of 2024 from 50.0% in the third quarter of 2023. The increase in gross margin included supply chain and other efficiencies of 200 basis points, incremental realized savings from the OPG program of 80 basis points, and cost deflation of 60 basis points, partially offset by unfavorable mix of 170 basis points.
North America segment operating income was $412.4 million in the third quarter of 2024, as compared to $401.1 million in the third quarter of 2023, primarily due to lower advertising and promotion expenses of $15.0 million, partially offset by higher other selling and administrative expenses of $3.6 million.
33
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 2024 and 2023:
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 735.6 | $ | 771.8 | -5 | % | -2 | % | |||||||||||||||
| Segment Operating Income | 217.7 | 202.5 | 7 | % | |||||||||||||||||||
Net sales for the International segment in the third quarter of 2024 were $735.6 million, a decrease of $36.2 million, or 5%, as compared to $771.8 million in the third quarter of 2023. The decrease in net sales was primarily due to a decrease in gross billings of $34.1 million.
| For the Three Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 314.8 | $ | 371.7 | -15 | % | -1 | % | |||||||||||||||
| Infant, Toddler, and Preschool | 121.8 | 130.5 | -7 | % | -3 | % | |||||||||||||||||
| Vehicles | 291.5 | 255.0 | 14 | % | -2 | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 138.8 | 143.6 | -3 | % | -2 | % | |||||||||||||||||
| Gross Billings | $ | 866.8 | $ | 900.9 | -4 | % | -2 | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 215.5 | $ | 255.2 | -16 | % | -1 | % | |||||||||||||||
| Hot Wheels | 258.4 | 229.1 | 13 | % | -2 | % | |||||||||||||||||
| Fisher-Price (a) | 96.9 | 97.7 | -1 | % | -3 | % | |||||||||||||||||
| Other | 296.1 | 318.9 | -7 | % | -2 | % | |||||||||||||||||
| Gross Billings | $ | 866.8 | $ | 900.9 | -4 | % | -2 | % | |||||||||||||||
(a) Beginning in the first quarter of 2024, the Fisher-Price power brand was revised to exclude Baby Gear and Imaginext products. Prior period amounts have been reclassified to conform to the current presentation.
Gross billings for the International segment were $866.8 million in the third quarter of 2024, a decrease of $34.1 million, or 4%, as compared to $900.9 million in the third quarter of 2023, with an unfavorable impact from changes in currency exchange rates of two percentage points. The decrease in the International segment gross billings was due to lower billings of Dolls, Infant, Toddler, and Preschool, and Action Figures, Building Sets, Games, and Other products, partially offset by higher billings of Vehicles products.
Dolls gross billings decreased 15%, of which 11% was due to lower billings of Barbie, which benefited from the Barbie movie in the prior year, 2% was due to lower billings of Polly Pocket products, and 2% was due to lower billings of Trolls (NBCUniversal) products.
Infant, Toddler, and Preschool gross billings decreased 7%, of which 3% was due to lower billings of Baby Gear and Power Wheels products and 3% was due to lower billings of Preschool Entertainment products.
Vehicles gross billings increased 14%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings decreased 3%, of which 4% was due to lower billings of Other products, 3% was due to lower billings of Building Sets products, and 3% was due to lower billings of Action Figures products, partially offset by higher billings of Games products of 7%.
34
Sales adjustments increased to $131.2 million in the third quarter of 2024 from $129.1 million in the third quarter of 2023. Sales adjustments as a percentage of net sales increased to 17.8% in the third quarter of 2024, as compared to 16.7% in the third quarter of 2023. The increase in sales adjustments as a percentage of net sales was primarily due to a shift in sales channel mix resulting in a higher proportion of sales with higher average sales adjustment rates.
Cost of sales decreased by $43.8 million, or 11%, to $355.6 million in the third quarter of 2024 from $399.4 million in the third quarter of 2023, primarily due to a decrease in product and other costs of $42.2 million.
Gross margin increased to 51.7% in the third quarter of 2024 from 48.3% in the third quarter of 2023. The increase in gross margin included favorable foreign currency exchange of 250 basis points, supply chain and other efficiencies of 220 basis points, incremental realized savings from the OPG program of 80 basis points, and cost deflation of 30 basis points, partially offset by unfavorable mix of 240 basis points.
International segment operating income was $217.7 million in the third quarter of 2024, as compared to $202.5 million in the third quarter of 2023, due to higher gross profit of $7.6 million, lower advertising and promotion expenses of $4.3 million, and lower other selling and administrative expenses of $3.3 million.
Results of Operations—First Nine Months
Consolidated Results
The following table presents Mattel's consolidated results for the first nine months of 2024 and 2023:
| For the Nine Months Ended | Year/Year Change | ||||||||||||||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||||||||||||||
| Amount | % of Net Sales | Amount | % of Net Sales | % | Basis Points of Net Sales | ||||||||||||||||||||||||||||||
| (In millions, except percentage and basis point information) | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 3,733.1 | $ | 3,820.5 | -2 | % | |||||||||||||||||||||||||||||
| Cost of sales | 1,834.5 | 49.1 | % | 2,027.0 | 53.1 | % | -9 | % | (400) | ||||||||||||||||||||||||||
| Gross profit | 1,898.6 | 50.9 | % | 1,793.5 | 46.9 | % | 6 | % | 400 | ||||||||||||||||||||||||||
| Advertising and promotion expenses | 250.1 | 6.7 | % | 290.3 | 7.6 | % | -14 | % | (90) | ||||||||||||||||||||||||||
| Other selling and administrative expenses | 1,112.5 | 29.8 | % | 1,081.6 | 28.3 | % | 3 | % | 150 | ||||||||||||||||||||||||||
| Operating income | 536.0 | 14.4 | % | 421.6 | 11.0 | % | 27 | % | 340 | ||||||||||||||||||||||||||
| Interest expense | 89.4 | 2.4 | % | 92.5 | 2.4 | % | -3 | % | — | ||||||||||||||||||||||||||
| Interest (income) | (39.5) | -1.1 | % | (15.4) | -0.4 | % | 156 | % | (70) | ||||||||||||||||||||||||||
| Other non-operating expense (income), net | 8.8 | (6.0) | |||||||||||||||||||||||||||||||||
| Income before income taxes | 477.3 | 12.8 | % | 350.5 | 9.2 | % | 36 | % | 360 | ||||||||||||||||||||||||||
| Provision for income taxes | 94.8 | 296.8 | |||||||||||||||||||||||||||||||||
| (Income) from equity method investments | (18.4) | (13.3) | |||||||||||||||||||||||||||||||||
| Net income | $ | 401.0 | 10.7 | % | $ | 67.0 | 1.8 | % | 498 | % | 890 | ||||||||||||||||||||||||
Sales
Net sales in the first nine months of 2024 were $3.73 billion, a decrease of $87.4 million, or 2%, as compared to $3.82 billion in the first nine months of 2023. The decrease in net sales was due to a decrease in gross billings of $109.2 million, partially offset by a decrease in sales adjustments of $21.8 million.
35
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 2024 and 2023:
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 1,465.6 | $ | 1,631.1 | -10 | % | — | % | |||||||||||||||
| Infant, Toddler, and Preschool | 675.1 | 708.6 | -5 | % | — | % | |||||||||||||||||
| Vehicles | 1,247.4 | 1,165.9 | 7 | % | — | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 763.2 | 755.0 | 1 | % | — | % | |||||||||||||||||
| Gross Billings | $ | 4,151.4 | $ | 4,260.6 | -3 | % | — | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 944.1 | $ | 1,064.7 | -11 | % | — | % | |||||||||||||||
| Hot Wheels | 1,093.7 | 1,014.9 | 8 | % | -1 | % | |||||||||||||||||
| Fisher-Price (a) | 494.7 | 480.6 | 3 | % | — | % | |||||||||||||||||
| Other | 1,618.9 | 1,700.4 | -5 | % | — | % | |||||||||||||||||
| Gross Billings | $ | 4,151.4 | $ | 4,260.6 | -3 | % | — | % | |||||||||||||||
(a) Beginning in the first quarter of 2024, the Fisher-Price power brand was revised to exclude Baby Gear and Imaginext products. Prior period amounts have been reclassified to conform to the current presentation.
Gross billings were $4.15 billion in the first nine months of 2024, a decrease of $109.2 million, or 3%, as compared to $4.26 billion in the first nine months of 2023. The decrease in gross billings was primarily due to lower billings of Dolls and Infant, Toddler, and Preschool products, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products.
Dolls gross billings decreased 10%, of which 7% was due to lower billings of Barbie, which benefited from the Barbie movie in the prior year, and 2% was due to lower billings of Disney Princess and Disney Frozen products.
Infant, Toddler, and Preschool gross billings decreased 5%, of which 4% was due to lower billings of Baby Gear and Power Wheels products and 2% was due to lower billings of Preschool Entertainment products, partially offset by higher billings of Fisher-Price products of 2%.
Vehicles gross billings increased 7%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings increased 1%, of which 7% was due to higher billings of Games products, partially offset by lower billings of Other products of 3% and lower billings of Building Sets products of 2%.
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 $418.3 million in the first nine months of 2024 from $440.1 million in the first nine months of 2023. Sales adjustments as a percentage of net sales were relatively consistent at 11.2% in the first nine months of 2024, as compared to 11.5% in the first nine months of 2023.
36
Cost of Sales
Cost of sales decreased by $192.5 million, or 9%, to $1.83 billion in the first nine months of 2024 from $2.03 billion in the first nine months of 2023. Within cost of sales, product and other costs decreased by $180.5 million, or 11%, to $1.44 billion in the first nine months of 2024 from $1.62 billion in the first nine months of 2023. Royalty expense decreased by $7.2 million, or 4%, to $167.7 million in the first nine months of 2024 from $175.0 million in the first nine months of 2023. Freight and logistics expenses decreased by $4.7 million, or 2%, to $225.5 million in the first nine months of 2024, as compared to $230.2 million in the first nine months of 2023.
Gross Margin
Gross margin increased to 50.9% in the first nine months of 2024 from 46.9% in the first nine months of 2023. The increase in gross margin was primarily due to supply chain and other efficiencies of 270 basis points, cost deflation of 100 basis points, incremental realized savings from the OPG program of 100 basis points, and favorable foreign currency exchange of 30 basis points, partially offset by unfavorable mix of 100 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 6.7% in the first nine months of 2024, as compared to 7.6% in the first nine months of 2023, primarily due to a shift in the expected timing of advertising and promotion programs to the fourth quarter of 2024.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $1.11 billion, or 29.8% of net sales, in the first nine months of 2024, an increase of $30.9 million, as compared to $1.08 billion, or 28.3% of net sales, in the first nine months of 2023. The increase in other selling and administrative expenses was primarily due to employee compensation increases and higher incentive compensation of $44.5 million, partially offset by realized savings from cost savings programs of $23.5 million and lower severance and restructuring charges of $19.2 million.
Interest Expense
Interest expense was $89.4 million in the first nine months of 2024, relatively flat as compared to $92.5 million in the first nine months of 2023.
Interest Income
Interest income increased by $24.1 million to $39.5 million in the first nine months of 2024 from $15.4 million in the first nine months of 2023, primarily due to higher average invested cash balances in the first nine months of 2024.
Provision for Income Taxes
Mattel's provision for income taxes was $94.8 million for the first nine months of 2024, as compared to $296.8 million for the first nine months of 2023. The decrease in provision for income taxes was due to discrete income tax expense in the first nine months of 2023, partially offset by the impact of higher income before income taxes in the first nine months of 2024, net of discrete income tax benefits. During the first nine months of 2023, Mattel recognized 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 intra-group transfer of certain IP rights, partially offset by other discrete income tax benefits of $11.4 million. During the first nine months of 2024, Mattel recognized a net discrete tax benefit of $16.3 million primarily related to reassessments of prior years' tax liabilities and a discrete tax benefit on tax elections filed to amortize certain intangible assets transferred as part of Mattel's intra-group IP rights transfer.
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 2024, there were no material changes to Mattel's valuation allowance.
37
The OECD reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two rules. Mattel is continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. Some of the legislative changes could impact Mattel's effective tax rate and tax liabilities. When and how these laws and regulations are adopted or enacted by various countries in which Mattel operates could increase tax complexity and uncertainty and may adversely affect Mattel's worldwide effective tax rate, income tax expense and cash flows. Mattel does not expect the provisions effective in 2024 to have a materially adverse impact on its results of operations, financial position, or cash flows.
Segment Results
North America Segment
Beginning in the first quarter of 2024, Mattel's American Girl business was integrated into its North America commercial organization and is reported within the North America operating segment. Prior to the first quarter of 2024, Mattel's American Girl business was a separate reportable operating segment. Prior period amounts have been reclassified to conform to the current period presentation.
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 2024 and 2023:
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 2,192.6 | $ | 2,241.9 | -2 | % | — | % | |||||||||||||||
| Segment Operating Income | 622.3 | 565.6 | 10 | % | |||||||||||||||||||
Net sales for the North America segment in the first nine months of 2024 were $2.19 billion, a decrease of $49.3 million, or 2%, as compared to $2.24 billion in the first nine months of 2023. The decrease in net sales was primarily due to a decrease in gross billings of $51.8 million.
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| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 838.2 | $ | 919.1 | -9 | % | — | % | |||||||||||||||
| Infant, Toddler, and Preschool | 420.1 | 437.7 | -4 | % | — | % | |||||||||||||||||
| Vehicles | 605.5 | 579.1 | 5 | % | — | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 473.8 | 453.4 | 5 | % | — | % | |||||||||||||||||
| Gross Billings | $ | 2,337.6 | $ | 2,389.3 | -2 | % | — | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 517.5 | $ | 587.6 | -12 | % | — | % | |||||||||||||||
| Hot Wheels | 521.1 | 492.3 | 6 | % | — | % | |||||||||||||||||
| Fisher-Price (a) | 300.6 | 285.9 | 5 | % | — | % | |||||||||||||||||
| Other | 998.4 | 1,023.5 | -2 | % | — | % | |||||||||||||||||
| Gross Billings | $ | 2,337.6 | $ | 2,389.3 | -2 | % | — | % | |||||||||||||||
(a) Beginning in the first quarter of 2024, the Fisher-Price power brand was revised to exclude Baby Gear and Imaginext products. Prior period amounts have been reclassified to conform to the current presentation.
Gross billings for the North America segment were $2.34 billion in the first nine months of 2024, a decrease of $51.8 million, or 2%, as compared to $2.39 billion in the first nine months of 2023. The decrease in gross billings was primarily due to lower billings of Dolls and Infant, Toddler, and Preschool products, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products.
Dolls gross billings decreased 9%, of which 8% was due to lower billings of Barbie, which benefited from the Barbie movie in the prior year, and 2% was due to lower billings of Disney Princess and Disney Frozen products.
Infant, Toddler, and Preschool gross billings decreased 4%, of which 5% was due to lower billings of Baby Gear and Power Wheels products and 2% was due to lower billings of Preschool Entertainment products, partially offset by higher billings of Fisher-Price products of 3%.
Vehicles gross billings increased 5%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings increased 5%, of which 6% was due to higher billings of Games products and 3% was due to higher billings of Action Figures products, partially offset by lower billings of Building Sets products of 2% and lower billings of Other products of 2%.
Sales adjustments decreased to $145.0 million in the first nine months of 2024 from $147.4 million in the first nine months of 2023, primarily due to lower gross billings. Sales adjustments as a percentage of net sales were flat at 6.6% for the first nine months of each of 2024 and 2023.
Cost of sales decreased by $103.3 million, or 8%, to $1.11 billion in the first nine months of 2024 from $1.22 billion in the first nine months of 2023, primarily due to a decrease in product and other costs of $96.1 million.
Gross margin in the first nine months of 2024 increased to 49.3% from 45.8% in the first nine months of 2023, primarily due to supply chain and other efficiencies of 240 basis points, cost deflation of 120 basis points, and incremental realized savings from the OPG program of 90 basis points, partially offset by unfavorable mix of 100 basis points.
North America segment operating income increased by $56.8 million to $622.3 million in the first nine months of 2024, as compared to $565.6 million in the first nine months of 2023, due to higher gross profit of $53.9 million and lower advertising and promotion expenses of $23.3 million, partially offset by higher other selling and administrative expenses of $20.4 million.
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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 first nine months of 2024 and 2023:
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Net Sales | $ | 1,540.6 | $ | 1,578.6 | -2 | % | -1 | % | |||||||||||||||
| Segment Operating Income | 304.3 | 245.8 | 24 | % | |||||||||||||||||||
Net sales for the International segment in the first nine months of 2024 were $1.54 billion, a decrease of $38.0 million, or 2%, as compared to $1.58 billion in the first nine months 2023. The decrease in net sales was due to a decrease in gross billings of $57.5 million, partially offset by a decrease in sales adjustments of $19.4 million.
| For the Nine Months Ended | % Change as Reported | Currency Exchange Rate Impact | |||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||
| Gross Billings by Categories | |||||||||||||||||||||||
| Dolls | $ | 627.5 | $ | 712.0 | -12 | % | -1 | % | |||||||||||||||
| Infant, Toddler, and Preschool | 255.0 | 270.9 | -6 | % | -1 | % | |||||||||||||||||
| Vehicles | 641.9 | 586.8 | 9 | % | -1 | % | |||||||||||||||||
| Action Figures, Building Sets, Games, and Other | 289.4 | 301.7 | -4 | % | -1 | % | |||||||||||||||||
| Gross Billings | $ | 1,813.8 | $ | 1,871.3 | -3 | % | -1 | % | |||||||||||||||
| Supplemental Gross Billings Disclosure | |||||||||||||||||||||||
| Gross Billings by Top 3 Power Brands | |||||||||||||||||||||||
| Barbie | $ | 426.6 | $ | 477.1 | -11 | % | -1 | % | |||||||||||||||
| Hot Wheels | 572.6 | 522.6 | 10 | % | -1 | % | |||||||||||||||||
| Fisher-Price (a) | 194.1 | 194.7 | — | % | -1 | % | |||||||||||||||||
| Other | 620.5 | 676.9 | -8 | % | -1 | % | |||||||||||||||||
| Gross Billings | $ | 1,813.8 | $ | 1,871.3 | -3 | % | -1 | % | |||||||||||||||
(a) Beginning in the first quarter of 2024, the Fisher-Price power brand was revised to exclude Baby Gear and Imaginext products. Prior period amounts have been reclassified to conform to the current presentation.
Gross billings for the International segment were $1.81 billion in the first nine months of 2024, a decrease of $57.5 million, or 3%, as compared to $1.87 billion in the first nine months of 2023, with an unfavorable impact from changes in currency exchange rates of one percentage point. The decrease in gross billings was due to lower billings of Dolls, Infant, Toddler, and Preschool, and Action Figures, Building Sets, Games, and Other products, partially offset by higher billings of Vehicles products.
Dolls gross billings decreased 12%, of which 7% was due to lower billings of Barbie, which benefited from the Barbie movie in the prior year, and 3% was due to lower billings of Disney Princess and Disney Frozen products.
Infant, Toddler, and Preschool gross billings decreased 6%, of which 3% was due to lower billings of Baby Gear and Power Wheels products and 3% was due to lower billings of Preschool Entertainment products.
Vehicles gross billings increased 9%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings decreased 4%, of which 6% was due to lower billings of Action Figures products, 3% was due to lower billings of Other products, and 2% was due to lower billings of Building Sets products, partially offset by higher billings of Games products of 7%.
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Sales adjustments decreased to $273.2 million in the first nine months of 2024 from $292.7 million in the first nine months of 2023. Sales adjustments as a percentage of net sales decreased to 17.7% for the first nine months of 2024, as compared to 18.5% for the first nine months of 2023. The decrease in sales adjustments as a percentage of net sales was primarily due to $15.9 million of net foreign currency transaction losses from the remeasurement of certain accounts receivable denominated in foreign currencies in the first nine months of 2023.
Cost of sales decreased by $78.6 million, or 9%, to $787.5 million in the first nine months of 2024 from $866.1 million in the first nine months of 2023, primarily due to a decrease in product and other costs of $74.3 million.
Gross margin increased to 48.9% in the first nine months of 2024 from 45.1% in the first nine months of 2023, primarily due to supply chain and other efficiencies of 300 basis points, incremental realized savings from the OPG program of 110 basis points, and cost deflation of 70 basis points, partially offset by unfavorable mix of 100 basis points.
International segment operating income increased by $58.5 million to $304.3 million in the first nine months of 2024, as compared to $245.8 million in the first nine months of 2023, primarily due to higher gross profit of $40.6 million and lower advertising and promotion expenses of $16.9 million.
Cost Savings Program
Optimizing for Profitable Growth
On February 7, 2024, Mattel announced the OPG program, a multi-year cost savings program that follows the Optimizing for Growth program (the "OFG program"), which concluded in the fourth quarter of 2023. The OPG program is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel’s global supply chain, including its manufacturing footprint. The OPG program includes cost savings actions in connection with discontinuing production at a plant in China as previously announced in the third quarter of 2023, as well as savings from other previous actions taken in 2023 that were not recognized in the OFG program. Targeted annual gross cost savings from actions associated with the OPG program, which are expected to be completed by 2026, are $200 million. Of the $200 million in targeted annual gross costs savings, approximately 70% is expected to benefit cost of sales and 30% is expected to benefit other selling and administrative expenses. Total expected cash expenditures under the OPG program are expected to be between $130 and $165 million and total non-cash charges are expected to be up to $5 million.
The costs associated with the OPG program are expected to include the following:
| Optimizing for Profitable Growth – Actions | Estimate of Cost | ||||
| Employee severance | $90 to $105 million | ||||
| Other restructuring costs | $10 to $20 million | ||||
| Non-cash charges | up to $5 million | ||||
| Total estimated severance and other restructuring costs (a) | $100 to $130 million | ||||
| Investments | $30 to $40 million | ||||
| Total estimated actions | $130 to $170 million | ||||
In connection with the OPG 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, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Cost of sales (a) | $ | 0.4 | $ | — | $ | 3.0 | $ | — | |||||||||||||||
| Other selling and administrative expenses (b) | 26.8 | 25.3 | 44.7 | 25.3 | |||||||||||||||||||
| $ | 27.2 | $ | 25.3 | $ | 47.7 | $ | 25.3 | ||||||||||||||||
(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."
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As of September 30, 2024, Mattel has recorded cumulative severance and other restructuring charges related to the OPG program of approximately $73 million, which includes approximately $1 million of non-cash charges. Mattel realized cumulative cost savings (before severance, restructuring costs, and cost inflation) of approximately $60 million, which represents approximately 60% benefit to cost of sales, and 40% benefit to other selling and administrative expenses, as of September 30, 2024, in connection with the OPG Program.
Other Cost Savings Actions
As of December 31, 2023, Mattel concluded the OFG program, a multi-year cost savings program that had integrated and expanded upon the previous Capital Light program. The OFG program, excluding previous actions taken under the Capital Light program, realized gross annual cost savings of approximately $343 million upon conclusion of the program. In connection with the OFG program, Mattel recorded severance and other restructuring charges of $3.1 million and $31.6 million within other selling and administrative expenses during the three and nine months ended September 30, 2023, respectively, and a credit to severance and other restructuring charges of ($0.1) million and ($1.3) million within cost of sales during the three and nine months ended September 30, 2023, respectively, in the consolidated statement of operations.
Additionally, during the three and nine months ended September 30, 2023, Mattel executed actions to further streamline its organizational structure that were not included in the OFG program. In connection with these actions, Mattel recorded severance charges of $0.9 million and $6.1 million within other selling and administrative expenses during the three and nine months ended September 30, 2023, respectively, 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 New Revolving Credit Facility, which on July 15, 2024 replaced the $1.40 billion Prior 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 $723.5 million in cash and equivalents at September 30, 2024, $499.4 million was held by foreign subsidiaries, including $59.1 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. In early 2022, Mattel paused all shipments into Russia.
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 New 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 New 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.
Mattel intends to utilize its existing cash and cash equivalents, cash flow from operations, and borrowings under the New Revolving Credit Facility to meet its short-term liquidity needs. At September 30, 2024, Mattel had no outstanding borrowings under the New Revolving Credit Facility and approximately $9 million in outstanding letters of credit under the New 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 $61.6 million in the first nine months of 2024, as compared to $79.6 million in the first nine months of 2023. The change was primarily due to an increase in net income, excluding the impact of non-cash items, partially offset by an increase in cash used for working capital of $113.1 million.
Cash flows used for investing activities were $151.7 million in the first nine months of 2024, as compared to $93.9 million in the first nine months of 2023. The change was primarily due to higher capital expenditures of $39.4 million, due to the purchase of an office building for approximately $59 million in July 2024, and lower proceeds from foreign currency forward exchange contracts of $18.4 million in the first nine months of 2024.
Cash flows used for financing activities were $314.2 million in the first nine months of 2024, as compared to $119.5 million in the first nine months of 2023. The change was primarily due to $158.4 million of higher share repurchases in the first nine months of 2024 as compared to 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 $537.8 million to $723.5 million at September 30, 2024 from $1.26 billion at December 31, 2023, primarily due to share repurchases of $268.3 million, capital expenditures of $156.9 million, and cash flows used for operating activities of $61.6 million during the nine months ended September 30, 2024. Mattel's cash and equivalents increased $267.8 million to $723.5 million at September 30, 2024 from $455.7 million at September 30, 2023, primarily due to cash flows generated from operating activities of $887.8 million during the trailing twelve months, partially offset by $361.5 million of share repurchases and $199.7 million of capital expenditures during the trailing twelve months.
Accounts receivable increased $395.5 million to $1.48 billion at September 30, 2024 from $1.08 billion at December 31, 2023, primarily due to the seasonality of Mattel's business. Accounts receivable decreased by $93.7 million to $1.48 billion at September 30, 2024 from $1.57 billion at September 30, 2023, primarily due to lower sales in the third quarter of 2024 as compared to the third quarter of 2023.
Inventories increased $165.6 million to $737.2 million at September 30, 2024 from $571.6 million at December 31, 2023, primarily due to seasonal inventory build. Inventories decreased $53.3 million to $737.2 million at September 30, 2024 from $790.5 million at September 30, 2023, primarily due to continued inventory management efforts.
Prepaid expenses and other current assets increased $34.8 million to $242.3 million at September 30, 2024 from $207.5 million at December 31, 2023, which included increases in prepaid royalties of $13.2 million, other current assets of $13.0 million and prepaid value added taxes of $11.2 million. Prepaid expenses and other current assets increased $17.5 million to $242.3 million at September 30, 2024 from $224.8 million at September 30, 2023, which included increases in prepaid royalties of $14.2 million and other current assets of $13.4 million, partially offset by a decrease in derivative receivables of $10.4 million.
Accounts payable and accrued liabilities decreased $66.2 million to $1.24 billion at September 30, 2024 from $1.31 billion at December 31, 2023, due to seasonal declines in expenditure levels and the timing of incentive compensation payments. Accounts payable and accrued liabilities were $1.24 billion at September 30, 2024, relatively flat as compared to $1.25 billion at September 30, 2023.
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A summary of Mattel's capitalization is as follows:
| September 30, 2024 | September 30, 2023 | December 31, 2023 | |||||||||||||||||||||||||||||||||
| (In millions, except percentage information) | |||||||||||||||||||||||||||||||||||
| Cash and equivalents | $ | 723.5 | $ | 455.7 | $ | 1,261.4 | |||||||||||||||||||||||||||||
| 2010 Senior Notes due October 2040 | 250.0 | 250.0 | 250.0 | ||||||||||||||||||||||||||||||||
| 2011 Senior Notes due November 2041 | 300.0 | 300.0 | 300.0 | ||||||||||||||||||||||||||||||||
| 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 | (16.7) | (21.1) | (20.0) | ||||||||||||||||||||||||||||||||
| Total debt | 2,333.3 | 50 | % | 2,328.9 | 53 | % | 2,330.0 | 52 | % | ||||||||||||||||||||||||||
| Stockholders' equity | 2,312.9 | 50 | 2,035.5 | 47 | 2,149.2 | 48 | |||||||||||||||||||||||||||||
| Total capitalization (debt plus equity) | $ | 4,646.2 | 100 | % | $ | 4,364.4 | 100 | % | $ | 4,479.2 | 100 | % | |||||||||||||||||||||||
Total debt was $2.33 billion at each of September 30, 2024, December 31, 2023 and September 30, 2023, respectively.
Stockholders' equity increased $163.7 million to $2.31 billion at September 30, 2024 from $2.15 billion at December 31, 2023, primarily due to net income of $401.0 million and the net effect of share-based compensation and the related issuance of treasury stock of $44.1 million, partially offset by share repurchases of $268.3 million during the first nine months of 2024. Stockholders' equity increased $277.5 million to $2.31 billion at September 30, 2024 from $2.04 billion at September 30, 2023, primarily due to net income of $548.3 million and the net effect of share-based compensation and the related issuance of treasury stock of $74.5 million during the trailing twelve months, partially offset by share repurchases of $361.5 million during the trailing twelve months.
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 2023 Annual Report on Form 10-K and did not materially change during the first nine months of 2024.
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.
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.
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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 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 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 currency changes could potentially mask underlying sales trends. The disclosure of the percentage impact of 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 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 Euro, Chinese yuan, and Mexican peso were the primary currencies that caused foreign currency transaction exposure for Mattel during the first nine months of 2024. Mattel seeks to mitigate its 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.
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, 2024 were related to its net investments in entities having functional currencies denominated in the Mexican peso, British pound sterling and Brazilian real.
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.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of September 30, 2024, 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 are not effective as of September 30, 2024 due to a material weakness in Mattel's internal control over financial reporting, which is more fully described in Management's Report on Internal Control Over Financial Reporting, in Part II, Item 8 "Financial Statements and Supplementary Data" in the 2023 Annual Report on Form 10-K.
Remediation Plan
Management is in the process of implementing its remediation plan to address the material weakness, which includes the adoption of new program change management controls, and the design of new user access provisioning and review controls. During the quarter ended September 30, 2024, management implemented newly designed program change management controls. Additional time is required to test the operating effectiveness of these controls and to complete the design, implementation, and testing of the user access provisioning and review controls to demonstrate the effectiveness of the remediation efforts. The material weakness cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control Over Financial Reporting
Except as described above, there were no changes in internal control over financial reporting that occurred during the quarter ended September 30, 2024 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 2023 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 2024, 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 2024:
| 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 | 5,677 | $ | 19.28 | — | $ | 800,014,073 | |||||||||||||||||
| August 1-31 | 3,733,131 | 19.10 | 3,574,595 | 731,693,173 | |||||||||||||||||||
| September 1-30 | 53,845 | 19.04 | — | 731,693,173 | |||||||||||||||||||
| Total | 3,792,653 | $ | 19.10 | 3,574,595 | $ | 731,693,173 | |||||||||||||||||
____________________________________
(a)The total number of shares purchased includes 218,058 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)On February 5, 2024, the Board of Directors authorized a $1.00 billion share repurchase program. As of September 30, 2024, Mattel had a remaining authorization of $731.7 million under the program. Repurchases under the share repurchase 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)None.
(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 | ||||||||||||||||||||||||||||
| Revolving Credit Agreement, dated as of July 15, 2024, among Mattel, as the borrower, Bank of America, N.A., as administrative agent, and the other lenders and financial institutions party thereto | 8-K | 001-05647 | 10.1 | July 16, 2024 | ||||||||||||||||||||||||||||
| Form of Grant Agreement for Performance-Based Restricted Stock Units for Ynon Kreiz under the Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan | 8-K | 001-05647 | 10.1 | September 13, 2024 | ||||||||||||||||||||||||||||
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 this Quarterly Report on Form 10-Q, formatted in Inline XBRL. | |||||||||||||||||||||||||||||||
______________________________________________
| + | Management contract or compensatory plan or arrangement. | ||||
| * | 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: October 29, 2024
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: | October 29, 2024 | 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: | October 29, 2024 | 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, 2024 as filed with the Securities and Exchange Commission (the “Report”), Ynon Kreiz, Chairman and 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: | October 29, 2024 | By: | /s/ Ynon Kreiz | |||||||||||||||||
| Ynon Kreiz | ||||||||||||||||||||
| Chairman and Chief Executive Officer | ||||||||||||||||||||
| /s/ Anthony DiSilvestro | ||||||||||||||||||||
| Anthony DiSilvestro | ||||||||||||||||||||
| Chief Financial Officer | ||||||||||||||||||||