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What changed in MATTEL INC /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MATTEL INC /DE/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+360 added−360 removedSource: 10-K (2024-03-15) vs 10-K (2023-02-22)

Top changes in MATTEL INC /DE/'s 2023 10-K

360 paragraphs added · 360 removed · 281 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

59 edited+9 added−20 removed36 unchanged
Biggest changeThis includes base pay equity by gender globally and pay equity by ethnicity in the United States. * • Maintained as a priority representation of women at all levels of the organization, with women comprising 58% of Mattel's global workforce and 47% of all management positions. * • Increased total representation of ethnically diverse employees at all levels of the organization in the United States to 44%. * • Mattel remains focused on actions to increase such representation, including strengthening relationships with schools, networks, and organizations to establish a talent pipeline of women for Technology, Supply Chain, and Finance positions. * Excludes manufacturing labor and temporary and seasonal employees.
Biggest changeThe report highlighted Mattel's progress on its goals as of December 31, 2022, including the following: • Maintained 100% base pay equity in 2022 for similar work performed in similar markets by gender globally and by ethnicity in the United States. * • Continued to achieve a high level of representation for women, who comprised 57% of Mattel's global workforce and 48% of managers and above in 2022. * • Continued to achieve a high level of representation for ethnically diverse employees, who made up 45% of U.S. employees in 2022. * • Mattel remains focused on actions to increase such representation, including strengthening relationships with schools, networks, and organizations to establish a talent pipeline of women for Technology, Supply Chain, and Finance positions. * Excludes manufacturing labor and temporary and seasonal employees.
Mattel makes available on its internet website, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC.
Mattel makes available on its internet website, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC. 10
Mattel believes its rights to these properties are adequately protected, but there can be no assurance that its rights can be successfully asserted in the future or will not be invalidated, circumvented, or challenged. Manufacturing and Materials Mattel manufactures toy products for all segments in both company-owned facilities and through third-party manufacturers.
Mattel believes its rights to these properties are adequately protected, but there can be no assurance that its rights can be successfully asserted in the future or will not be invalidated, circumvented, or challenged. 7 Manufacturing and Materials Mattel manufactures toy products for all segments in both company-owned facilities and through third-party manufacturers.
Mattel has entered into agreements to license entertainment properties, including among others, Disney Consumer Products (including Disney Princess and Frozen, Star Wars, Disney Pixar (including Cars , Lightyear , and Toy Story ) and certain other Disney films and television properties), NBCUniversal (including Jurassic World, Trolls, and Fast and Furious ), Paramount (relating to its Nickelodeon properties), Warner Bros.
Mattel has entered into agreements to license entertainment properties, including among others, Disney Consumer Products (including Disney Princess and Disney Frozen, Star Wars, Disney Pixar (including Cars and Toy Story ) and certain other Disney films and television properties), NBCUniversal (including Jurassic World, Trolls, and Fast and Furious ), Paramount (relating to its Nickelodeon properties), Warner Bros.
Vehicles —including brands such as Hot Wheels (including Hot Wheels Monster Trucks and Hot Wheels Mario Kart ( Nintendo )), Matchbox , and Cars ( Disney Pixar ). In production for over 50 years, Hot Wheels continues to push the limits of performance and design and ignites the challenger spirit of kids, adults, and collectors.
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.
Partnerships with some of the world's top franchises including Pokémon , Barbie and Hot Wheels , invite consumers to try MEGA building sets, while innovative building play, authentic details, compatible quality, and accessible value encourages consumers to stay in the MEGA building set collection.
Partnerships with some of the world's top franchises, including Pokémon and Hot Wheels , invite consumers to try MEGA building sets, while innovative building play, authentic details, compatible quality, and accessible value encourages consumers to stay in the MEGA building set collection.
For additional information regarding foreign currency contracts, see Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" and Part II, Item 8 "Financial Statements and Supplementary Data—Note 11 to the Consolidated Financial Statements—Derivative Instruments." Government Regulations Mattel's products sold in the United States are subject to the provisions of the Consumer Product Safety Act, as amended by the Consumer Product Safety Improvement Act of 2008, and the Federal Hazardous Substances Act, and may also be subject to the requirements of the Flammable Fabrics Act or the Food, Drug, and Cosmetics Act and the regulations promulgated pursuant to such statutes.
For additional information regarding foreign currency contracts, see Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" and Part II, Item 8 "Financial Statements and Supplementary Data—Note 12 to the Consolidated Financial Statements—Derivative Instruments." Government Regulations Mattel's products sold in the United States are subject to the provisions of the Consumer Product Safety Act, as amended by the Consumer Product Safety Improvement Act of 2008, and the Federal Hazardous Substances Act, and may also be subject to the requirements of the Flammable Fabrics Act or the Food, Drug, and Cosmetics Act and the regulations promulgated pursuant to such statutes.
Mattel believes that it is in substantial compliance with these federal and state laws and regulations. Mattel's products sold worldwide are subject to the provisions of similar laws and regulations in many jurisdictions, including the European Union ("EU") and Canada. Mattel believes that it is in substantial compliance with these laws and regulations.
Mattel believes that it is in substantial compliance with these federal and state laws and regulations. 8 Mattel's products sold worldwide are subject to the provisions of similar laws and regulations in many jurisdictions, including the European Union ("EU") and Canada. Mattel believes that it is in substantial compliance with these laws and regulations.
See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital 7 Resources—Commitments" and Part II, Item 8 "Financial Statements and Supplementary Data—Note 12 to the Consolidated Financial Statements—Commitments and Contingencies." Mattel licenses a number of its trademarks and other property rights to others for use in connection with the sale of their products.
See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Commitments" and Part II, Item 8 "Financial Statements and Supplementary Data—Note 13 to the Consolidated Financial Statements—Commitments and Contingencies." Mattel licenses a number of its trademarks and other property rights to others for use in connection with the sale of their products.
See Part I, Item 1A "Risk Factors" and Part II, Item 8 "Financial Statements and Supplementary Data—Note 13 to the Consolidated Financial Statements—Segment Information." License Agreements Mattel has license agreements with third parties that permit Mattel to utilize the trademark, characters, or inventions of the licensor in products that Mattel sells.
See Part I, Item 1A "Risk Factors" and Part II, Item 8 "Financial Statements and Supplementary Data—Note 14 to the Consolidated Financial Statements—Segment Information." License Agreements Mattel has license agreements with third parties that permit Mattel to utilize the trademark, characters, or inventions of the licensor in products that Mattel sells.
Mattel has retail space in Chicago, Illinois; Los Angeles, California; and New York, New York for its flagship American Girl stores, and in six other cities across the United States for its American Girl boutique stores, each of which features children's products from the American Girl segment.
Mattel has retail space in Chicago, Illinois; Los Angeles, California; and New York, New York for its flagship American Girl stores, and in five other cities across the United States for its American Girl boutique stores, each of which features children's products from the American Girl segment.
The North America segment competes with several large toy companies, including Hasbro, Jazwares, LEGO, MGA Entertainment, the Pokémon Company, Spin Master, many smaller toy companies, and manufacturers of video games and consumer electronics.
The North America segment competes with several large toy companies, including Hasbro, Jazwares, LEGO, the Pokémon Company, Spin Master, many smaller toy companies, and manufacturers of video games and consumer electronics.
Mattel is the owner of a portfolio of iconic brands and partners with global entertainment companies to license other intellectual property. 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 Frozen, Monster High, and Polly Pocket .
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 .
Privacy-related laws also exist in some U.S. states, such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act, and other state laws that have taken effect in 2023, or are yet to take effect. Mattel believes that it is in substantial compliance with these laws and regulations.
Privacy-related laws also exist in some U.S. states, such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act, and other state laws that took effect in 2023, or are yet to take effect. Mattel believes that it is in substantial compliance with these laws and regulations.
From die-cast vehicles to tracks, playsets, and accessories, the Mattel Vehicles portfolio has broad appeal that engages and excites kids of all ages.
From die-cast vehicles to tracks, playsets, and accessories, the Mattel Vehicles portfolio has broad appeal that engages and excites fans of all ages.
We believe Mattel's Employee Resource Groups ("ERGs") are an integral component of fostering an inclusive culture and enhancing engagement at Mattel. Mattel employees have created and continue to lead ten ERGs, which bring together members and allies of underrepresented identities across the global organization.
Mattel believes that Mattel's Employee Resource Groups ("ERGs") are an integral component of fostering an inclusive culture and enhancing engagement at Mattel. Mattel employees have created and continue to lead ten ERGs, which bring together members and allies of underrepresented identities across the global organization.
Mattel offers a diverse range of products for children of all ages and families that include, among others, toys for infants and preschoolers, dolls, vehicles, action figures, building sets, youth electronics, games, including digital, puzzles, plush, educational toys, technology-related products, media-driven products, and fashion-related toys.
Mattel offers a diverse range of products for children, fans of all ages, and families that include, among others, toys for infants, toddlers, and preschoolers, toys for school-aged children, dolls, vehicles, action figures, building sets, games, including digital, puzzles, plush, educational toys, technology-related products, media-driven products, and fashion-related items.
Action Figures, Building Sets, Games, and Other —including brands such as Masters of the Universe , MEGA , UNO , Lightyear ( Disney Pixar ), Jurassic World ( NBCUniversal ), WWE , and Star War s ( Disney's Lucasfilm ).
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 War s ( Disney's Lucasfilm ).
In addition, Mattel continues to monitor existing and pending environmental laws and regulations within the United States and elsewhere related to climate change and greenhouse gas emissions. Mattel is subject to various other federal, state, local, and international laws and regulations applicable to its business.
In addition, Mattel continues to monitor existing and pending environmental laws and regulations within the United States and elsewhere related to climate change and greenhouse gas emissions. Mattel is subject to various other federal, state, local, and international laws and regulations applicable to its business. Mattel believes that it is in substantial compliance with these laws and regulations.
Additionally, offering the opportunity for employees to continuously learn and grow their careers at Mattel is a key driver of its employee engagement strategy. In 2022, employees at all levels around the globe participated in several hundred thousand hours of learning content across professional, management development, and technical training. This included both online classes and instructor-led training.
Additionally, offering the opportunity for employees to continuously learn and grow their careers at Mattel is a key driver of its employee engagement strategy. In 2023, employees at all levels around the globe participated in several hundred thousand hours of online classes and instructor-led training regarding professional development, management development, and technical training.
Such retailers can and do promote their own private-label toys, facilitate the sale of competitors' toys, showcase toys online based on proprietary algorithms, and allocate shelf space to one type of toy over another.
Such retailers can and do promote their own private-label toys, facilitate the sale of competitors' toys, showcase toys online based on proprietary algorithms, and allocate shelf space to one type of toy over another. Online distributors are able to promote a wide variety of toys and represent a wide variety of toy manufacturers.
Item 1. Business. Throughout this report "Mattel" refers to Mattel, Inc. and/or one or more of its family of companies. Mattel is a leading global toy company and owner of one of the strongest catalogs of children's and family entertainment franchises in the world. Mattel creates innovative products and experiences that inspire, entertain, and develop children through play.
Item 1. Business. Throughout this report "Mattel" refers to Mattel, Inc. and/or one or more of its subsidiaries. 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.
Seasonal shipping patterns generally result in significant peaks in the third and fourth quarters in the respective levels of inventories and accounts receivable, which may result in seasonal working capital financing requirements.
Seasonal shipping patterns generally result in significant peaks in the third and fourth quarters in the respective levels of inventories and accounts receivable, which may result in seasonal working capital financing requirements. 6 Sales Mattel's products are sold throughout the world.
American Girl products and its children's publications are sold directly to consumers and select retailers in North America.
American Girl products and its children's publications are sold directly to consumers and select retailers in the United States.
Mattel offers several benefits to promote employee well-being, including flexible work hours and/or paid time off, health and welfare insurance options, retirement plans, and basic and supplemental employee life insurance for eligible individuals.
Mattel offers several benefits to promote employee well-being, including flexible work hours and/or paid time off, health and welfare insurance options, retirement plans, and basic and supplemental employee life insurance for eligible individuals, as well as programs targeted at matters such as maintaining work/life balance and improving health and happiness.
Infant, Toddler, and Preschool In 2023, Fisher-Price will continue its focus on engaging consumers as a trusted partner for families with infants, toddlers and preschoolers, by continuing to create brand love through innovative products and inviting adults back into the world of childhood.
Infant, Toddler, and Preschool In 2024, Fisher-Price will continue its focus on engaging consumers as a trusted partner for families with infants, toddlers and preschoolers, by continuing to create brand love through innovative products and enriching the first five years of childhood for every family.
Mattel is also excited to build upon its strong partnerships with Disney with the return of the Disney Princess and Frozen product lines, and Universal with the launch of new Trolls product lines. Monster High will look to build upon the success of its 2022 U.S. re-launch with a full global re-launch in 2023, including new content and product offerings.
Mattel is also excited to build upon its strong partnerships with Disney for the Disney Princess and Disney Frozen product lines. Monster High will look to build upon the success of its global re-launch, including planned new content and product offerings.
American Girl , with an extensive portfolio of dolls and accessories, content, gaming, and lifestyle products, is best known for imparting valuable life lessons that instill confidence through its inspiring dolls and books, featuring diverse characters from past and present.
American Girl , 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 Imaginext ) and Thomas & Friends .
Employee Engagement Mattel regularly collects feedback to measure employee engagement on an ongoing basis through its annual global engagement survey, which measures employee job satisfaction and is used to help improve the employee experience and strengthen its workplace culture.
Workplace Culture Mattel is committed to fostering a culture where all employees have the opportunity to realize their full potential. Management regularly collects feedback to measure employee engagement and job satisfaction on an ongoing basis through its annual global engagement survey, which is used to help improve the employee experience and strengthen its workplace culture.
American Girl is best known for its line of historical and contemporary characters that feature 18" dolls, books, and accessories that inspire girls to face the world with courage, resilience, and kindness.
American Girl Segment The American Girl segment is a direct marketer, retailer, and children's publisher dedicated to its mission to help girls grow up with confidence and character. American Girl is best known for its line of historical and contemporary characters that feature 18" dolls, books, and accessories that inspire girls to face the world with courage, resilience, and kindness.
Mattel is focused on the following evolved strategy to grow its intellectual property ("IP") driven toy business and expand its entertainment offering: • Accelerate topline growth through scaling Mattel's portfolio, growing franchise brands, and advancing e-commerce and direct-to-consumer business, and increasing profitability by continuing to optimize operations; and • Expand entertainment offering to capture the full value of Mattel's IP in highly accretive business verticals, including content, consumer products, and digital experiences.
Mattel is focused on the following evolved 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.
A significant portion of retailer purchasing typically occurs in the third and fourth quarters of Mattel's fiscal year in anticipation of holiday buying. These seasonal purchasing patterns and requisite production lead times create risk to Mattel's business associated with the underproduction of popular toys and the overproduction of less popular toys that do not match consumer demand.
These seasonal purchasing patterns and requisite production lead times create risk to Mattel's business associated with the underproduction of popular toys and the overproduction of less popular toys that do not match consumer demand.
During 2021, Mattel's three largest customers (Walmart at $1.17 billion, Target at $0.74 billion, and Amazon at $0.62 billion) accounted for approximately 46% of worldwide consolidated net sales.
During 2022, Mattel's three largest customers (Walmart at $0.95 billion, Target at $0.76 billion, and Amazon at $0.64 billion) accounted for approximately 43% of worldwide consolidated net sales.
The remaining workforce focuses on the design, marketing, sales, finance, and other aspects of Mattel's business. Mattel's Board of Directors, Compensation Committee, and Governance and Social Responsibility Committee are involved in the oversight of how the company fosters its culture and receive regular updates on the company's workforce management, including its diversity, equity, and inclusion initiatives.
Mattel's Board of Directors, Compensation Committee, and Governance and Social Responsibility Committee are involved in the oversight of how the company fosters its culture and receive regular updates on Mattel's workforce management.
(including Batman, Superman, Wonder Woman, Justice League and Harry Potter ), Microsoft (including Minecraft and Halo ), WWE, and Pokémon . Royalty expense for 2022, 2021, and 2020 was $230.8 million, $184.3 million, and $158.5 million, respectively.
(including DC Universe and Harry Potter ), Microsoft (including Minecraft and Halo ), WWE, and Pokémon . Royalty expense for 2023, 2022, and 2021 was $249.8 million, $230.8 million, and $184.3 million, respectively.
Mattel's products are sold directly to retailers and wholesalers in most European, Latin American, and Asian countries, in Australia and New Zealand, in certain countries in the Middle East and Africa, and through agents and distributors in those countries where Mattel has no direct presence.
Mattel's products are sold directly to retailers and wholesalers in most European, Latin American, and Asian countries, in Australia and New Zealand, and through agents and distributors in those countries where Mattel has no direct presence. No individual country within the International segment exceeded 8% of worldwide consolidated net sales during 2023.
International Segment Products marketed and sold by the International segment are generally the same as those marketed and sold by the North America segment, although some are developed or adapted for particular international markets.
Additionally, Mattel expects to introduce new game extensions and partnerships that celebrate pop culture. 5 International Segment Products marketed and sold by the International segment are generally the same as those marketed and sold by the North America segment, although some are developed or adapted for particular international markets.
Sales Mattel's products are sold throughout the world. Products within the North America segment are sold directly to retailers, including omnichannel retailers, discount and free-standing toy stores, chain stores, department stores, other retail outlets, and, to a limited extent, wholesalers.
Products within the North America segment are sold directly to retailers, including omnichannel retailers, discount and free-standing toy stores, chain stores, department stores, other retail outlets, and, to a limited extent, wholesalers. Mattel also operates small retail outlets at certain corporate offices as a service to its employees and as an outlet for its products.
The North America and International segments sell products across Mattel's categories, although some products are developed and adapted for particular international markets.
Business Segments Mattel's operating segments are: (i) North America, which consists of the United States and Canada; (ii) International; and (iii) American Girl. The North America and International segments sell products across Mattel's categories, although some products are developed and adapted for particular international markets.
Since then, these principles have become the foundation for Mattel's Responsible Supply Chain Commitment, a comprehensive set of standards and oversight processes that establish Mattel's expectations for responsible factory working conditions, environmental protections, social compliance, health, and safety in both its own manufacturing facilities and those of its supply chain partners.
Mattel is focused on creating a safe and healthy workplace for all of its employees. This is reflected in a comprehensive set of standards and oversight processes that establish Mattel's expectations for responsible working conditions, environmental protections, social compliance, health, and safety in both its own manufacturing facilities and those of its supply chain partners.
In conjunction with Mattel's cost savings programs, Mattel previously discontinued production at three plants located in China, Indonesia, and Mexico and discontinued production in 2021 at its plant located in Canada.
In conjunction with Mattel's cost savings programs, in 2021, Mattel discontinued production at its plant located in Canada. In addition, Mattel intends to discontinue production at a plant located in China in 2024.
Design-led innovation will continue to drive new product offerings, including the expansion of the Linkimals product line and new innovative toys from Imaginext . Mattel will look to continue its strong momentum in the Little People product line with the expansion of the Little People Barbie line and Little People Collector , tapping into a new consumer base.
Consumer-centric innovation will continue to drive new product offerings, including the expansion of Linked Play within Infant and new innovative toys from Imaginext , including new licensed entertainment offerings. Fisher-Price will add Fisher-Price Wood and continue its strong momentum in the Little People product line with the expansion of the Little People Barbie line and Little People Collector line.
Advertising includes television commercials, social media, catalogs, and internet advertisements. Promotions include in-store displays, merchandising materials, major events focusing on products, and tie-ins with various consumer products companies.
Advertising includes television commercials, social media, catalogs, and internet advertisements. Promotions include in-store displays, merchandising materials, major events focusing on products, and tie-ins with various consumer products companies. During 2023, 2022, and 2021, Mattel incurred advertising and promotion expenses of $524.8 million (9.6% of net sales), $534.3 million (9.8% of net sales), and $545.7 million (10.0% of net sales), respectively.
There is increasing competition among the above companies due to trends towards shorter life cycles for individual toy products and an increasing use of more sophisticated technology among consumers. In addition, Mattel competes with companies that sell non-toy products, such as electronic consumer products, video games, as well as content and other entertainment companies.
The American Girl segment competes with companies that manufacture dolls and accessories, and with children's book publishers and retailers. There is increasing competition among the above companies due to trends towards shorter life cycles for individual toy products and an increasing use of more sophisticated technology among consumers.
The International segment competes with global toy companies including Hasbro, Jazwares, LEGO, MGA Entertainment, the Pokémon Company, Spin Master, other national and regional toy companies, and manufacturers of video games and consumer electronics.
The International segment competes with global toy companies including Hasbro, Jazwares, LEGO, the Pokémon Company, Spin Master, other national and regional toy companies, and manufacturers of video games and consumer electronics. Foreign regions may include competitors that are strong in a particular toy line or geographical area but do not compete with Mattel or other international toy companies worldwide.
As of December 31, 2022, Mattel had approximately 33,900 employees (including temporary and seasonal employees) working in over 35 countries worldwide to create innovative products and experiences that inspire, entertain, and develop children through play. Approximately 29,300 employees (86% of the total workforce) are located outside the United States, with a significant global manufacturing labor workforce of approximately 24,400 employees.
Human Capital As of December 31, 2023, Mattel had approximately 33,000 employees (including temporary and seasonal employees) working in over 35 countries worldwide to create innovative products and experiences that inspire fans, entertain audiences, and develop children through play.
Matchbox will continue to bring exciting new products to market, including product partnerships with SpaceX, and new episodes of the globally popular YouTube series, Matchbox Adventures .
Die-cast pioneer Matchbox expects to continue to bring exciting new products to market following its successful 70 th anniversary, including new sustainable die-cast products, and new episodes of the globally popular YouTube series, Matchbox Adventures .
Additionally, Mattel sells certain of its products directly to consumers through its e-commerce platforms. During 2022, Mattel's three largest customers (Walmart a t $0.95 billion, Tar get at $0.76 billion, a nd Amazon at $0.64 billion) ac counted for approximately 43% of worldwide consolidated net sales.
Additionally, Mattel sells certain of its products directly to consumers through its e-commerce platform and various third-party e-commerce channels. During 2023, Mattel's three largest customers (Walmart at $1.13 billion, Target at $0.67 billion, and Amazon at $0.60 billion) accounted for approximately 44% of worldwide consolidated net sales.
Mattel's Action Figures portfolio is comprised of product lines associated with licensed entertainment franchises that are driven by major tentpole releases, such as Lightyear and Jurassic World , as well as product lines from Mattel's owned IP, such as Masters of the Universe .
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.
Competition and Industry Background Mattel is a worldwide leader in the manufacture, marketing, and sale of toys, games, and other products related to play, learning, and development. Competition in the toy industry is based primarily on quality, play value, brands, and price.
The American Girl segment sells products directly to consumers through its website, proprietary retail stores in the United States, and at select retailers in the United States. Competition and Industry Background Mattel is a worldwide leader in the manufacture, marketing, and sale of toys, games, and other products related to play, learning, and development.
Diversity, Equity, and Inclusion Mattel is committed to fostering a culture where all employees have the opportunity to realize their full potential. Mattel values and shares a wide range of ideas and voices that help evolve and broaden its perspectives, with a reach that extends to consumers, customers, business partners, and suppliers.
Mattel values a wide range of ideas and voices that help evolve and broaden its perspectives, with a reach that extends to consumers, customers, business partners, and suppliers. 9 In September 2023, Mattel published its 2022 Citizenship Report, which described goals and initiatives related to its diversity, equity, and inclusion efforts.
New preschool toys will include product lines associated with the episodic content launch of Batwheels , an ultimate world of racing and chasing series. Vehicles In 2023, industry leader Hot Wheels will look to continue its strong momentum as a multigenerational franchise with consumer interest that remains at historic highs.
Vehicles In 2024, industry leader Hot Wheels will look to continue its strong momentum as a multigenerational franchise with consumer interest that remains at historic highs. Hot Wheels product offerings are expected to excite consumers with innovation in both die-cast vehicles and tracks and playsets.
Online distributors are able to promote a wide variety of toys and represent a wide variety of toy manufacturers. 6 Seasonality Mattel's business is highly seasonal, with consumers making a large percentage of all toy purchases during the traditional holiday season.
Seasonality Mattel's business is highly seasonal, with consumers making a large percentage of all toy purchases during the traditional holiday season. A significant portion of retailer purchasing typically occurs in the third and fourth quarters of Mattel's fiscal year in anticipation of holiday buying.
Mattel will continue to expand its Masters of the Universe franchise with products for fans of all ages and continued expansion of the collector business. In Building Sets, MEGA sparks creativity through the power of connection with builders of all ages and fans of global franchises.
In Building Sets, MEGA inspires creativity through authentic building experiences for builders of all ages and fans of global franchises.
Mattel was also ranked among Forbes 2022 World's Best Employers and 2023 America's Best Midsize Employers; named to Fast Company's List of the 100 Best Workplaces for Innovators in 2022; Computerworld’s list of the Best Places to Work in IT 2023; and once again was certified by the Great Place to Work Institute in 2022. 10 Training and Development We believe continuously developing skills and capabilities for the future is essential to operating as an IP-driven, high-performing toy company.
Mattel was ranked among Forbes 2023 World's Best Employers and 2023 America's Best Midsize Employers; named to Fast Company's list of the Best Workplaces for Innovators in 2023; recognized by U.S.
As the challenger brand in Building Sets, MEGA sparks creativity through the power of connection with builders of all ages and fans of global franchises. Within Games, UNO is the classic matching card game that is easy to learn and fast fun for everyone.
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.
During 2022, 2021, and 2020, Mattel incurred advertising and promotion expenses of $534.3 million (9.8% of net sales), $545.7 million (10.0% of net sales), and $525.8 million (11.5% of net sales), respectively. 8 Financial Instruments Currency exchange rate fluctuations may impact Mattel's results of operations and cash flows.
Financial Instruments Currency exchange rate fluctuations may impact Mattel's results of operations and cash flows.
A sample of Mattel's 2023 Action Figures product lines include toys tied to Microsoft's Spring release of the new Minecraft Legends game, and NBCUniversal's Jurassic World , which will be celebrating the 30 th anniversary of the Jurassic Park franchise.
Mattel's 2024 Action Figures product lines will include toys tied to Netflix content for NBCUniversal’s Jurassic World ( Jurassic World: Chaos Theory ) and Masters of the Universe ( Masters of the Universe: Revolution ) as well as new innovation within Minecraft and WWE .
For the third consecutive year, Mattel received a perfect score on the Human Rights Campaign Foundation's Corporate Equality Index, a leading benchmarking survey and report measuring corporate policies and practices related to LGBTQ+ workplace equality.
Mattel has once again been recognized for its diversity, equity, and inclusion efforts, including by the Human Rights Campaign Foundation as a 2023-2024 "Equality 100 Award" recipient. For the fourth consecutive year, Mattel received a perfect score on the Human Rights Campaign Foundation's Corporate Equality Index.
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American Girl products are sold directly to consumers through its website, proprietary retail stores in the United States, at select retailers nationwide, and at specialty boutiques and franchise stores in Canada. Infant, Toddler, and Preschool —including brands such as Fisher-Price and Thomas & Friends , and PowerWheel s.
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In 2024, Barbie will look to continue to capitalize on the successful live action theatrical movie to help drive the full Barbie franchise, including toys, consumer products, and gaming. Barbie will be celebrating its 65 th anniversary with numerous activations, and also launch exciting new product lines and play patterns.
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Other includes Plush, which contains products associated with movie releases from licensed entertainment franchises, as well as Mattel-owned IP. Business Segments Mattel's operating segments are: (i) North America, which consists of the United States and Canada; (ii) International; and (iii) American Girl.
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These offerings will be supported by an all-new animated children's series on Netflix, Hot Wheels Let’s Race , and the expansion of the Hot Wheels Racerverse line. Hot Wheels also seeks to further expand die-cast vehicle distribution, targeting fans of all ages.
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In 2023, Barbie will be featured in a live action theatrical movie directed by Greta Gerwig and starring Margot Robbie and Ryan Gosling, which will include the launch of an all new Dreamhouse in support of the release.
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Mattel will continue to partner with Disney Pixar for Cars to drive innovation, including fresh new product offerings to support key marketing events in 2024.
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Barbie will also launch exciting new lines, including My First Barbie , Styling Head , and Large Doll , and will introduce more high-profile partnerships and pop culture collaborations.
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Mattel will focus on its expansion of Games into its direct-to-consumer business, collectability, and innovation.
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Hot Wheels product offerings will continue to excite with innovation in Tracks and Playsets , expansion of the 2022 Hot Wheels Skate launch, introduction of product lines for The Super Mario Bros. Movi e ( Universal ) animated theatrical movie, and more digital ways to collect with the NFT Garage series.
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Competition in the toy industry is based primarily on quality, play value, brands, and price.
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Hot Wheels will also continue to enter new vehicle play segments, while upholding the quality and performance of Hot Wheels . Die-cast pioneer Matchbox will celebrate its 70 th anniversary, honoring its legacy with special edition die-cast offerings and packaging.
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In addition, Mattel competes with companies that sell non-toy products, such as electronic consumer products, video games, as well as content and other entertainment companies.
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Mattel will continue to partner with Disney Pixar for Cars with fresh new product offerings, building on the excitement from the Fall 2022 release of Cars on the Road content, and supporting Disney's 100-year anniversary with Cars Disney 100 toys.
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Approximately 28,400 employees (86% of the total workforce) are located outside the United States, with a significant global manufacturing labor workforce of approximately 23,600 employees. The remaining workforce focuses on the design, marketing, sales, finance, and other aspects of Mattel's business. Mattel believes recruiting, developing, and motivating a talented global workforce are important to its long-term growth and success.
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Mattel will focus on its expansion of Games into its direct-to-consumer business, collectability, and innovation. Additionally, Mattel will continue to introduce new game extensions and partnerships that celebrate pop culture. 5 Mattel Plush will continue to collaborate with key licensor partners, including Disney's Lucasfilm , Pixar , Marvel , Microsoft's Minecraft , NBCUniversal's Jurassic World , and many more.
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News as one of the Best Companies to Work For 2023-2024; named to Newsweek America’s Greatest Workplaces for Women 2023 and America's Greatest Workplaces for Diversity 2024; and honored by Computerworld as one of the Best Places to Work in IT in 2023 and 2024.
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The Plush portfolio is expected to benefit from tentpole moments capitalizing on this strong entertainment slate in 2023. Mattel will also bring its iconic IP into the Plush category.
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The ERGs organize learning opportunities, cultural celebrations, and community outreach, elevate important issues, encourage open and honest conversations, and collect critical feedback. Employee Development and Well-Being Mattel believes continuously developing skills and capabilities for the future is essential to operating as an IP-driven, high-performing toy and family entertainment company.
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No individual country within the International segment exceeded 7% of worldwide consolidated net sales during 2022. American Girl Segment The American Girl segment is a direct marketer, retailer, and children's publisher dedicated to its mission to help girls grow up with confidence and character.
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The American Girl segment sells products directly to consumers through its website, in its proprietary retail stores in the United States, at select retailers nationwide, and at specialty boutiques and franchise stores in Canada.
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Foreign regions may include competitors that are strong in a particular toy line or geographical area but do not compete with Mattel or other international toy companies worldwide. The American Girl segment competes with companies that manufacture dolls and accessories, and with children's book publishers and retailers.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf Mattel's ESG practices do not meet, or are not viewed as meeting, investor or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones Mattel chooses to focus on), or if Mattel does not or appears not to achieve its ESG goals, then Mattel's brand, reputation, and employee retention may be negatively impacted.
Biggest changeIf Mattel's sustainability practices do not meet, or are not viewed as meeting, investor or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones Mattel chooses to focus on), or if Mattel does not or appears not to achieve its sustainability goals, then investors, consumers, and other stakeholders could lose confidence in Mattel and its brands, damaging Mattel's reputation and negatively impacting operations. 17 Financial and Accounting To the extent Mattel is unable to realize the anticipated cost savings from its previously announced cost savings programs or incurs additional and/or unexpected costs to realize such cost savings, Mattel's business, financial condition, and results of operations could be adversely affected.
A variety of stakeholders, including regulators, investors, advisory firms, rating agencies, and customers, are establishing laws, regulations, expectations, and/or assessments reflecting their expectations for corporate practices related to climate change and other corporate responsibility matters. In August 2021, Mattel announced its goal to reduce absolute Scope 1 and Scope 2 GHG emissions 50% by 2030 (versus a 2019 baseline).
A variety of other stakeholders, including regulators, investors, advisory firms, rating agencies, and customers, are establishing laws, regulations, expectations, and/or assessments reflecting their expectations for corporate practices related to climate change and other corporate responsibility matters. In August 2021, Mattel announced its goal to reduce absolute Scope 1 and Scope 2 GHG emissions 50% by 2030 (versus a 2019 baseline).
In addition, as a result of the seasonal nature of Mattel's business, Mattel may be adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events, such as pandemics or other public health crises, terrorist attacks, economic shocks, severe weather due to climate change or otherwise, earthquakes or other catastrophic events, that harm the retail environment or consumer buying patterns during its key selling season, or by events, such as strikes, disruptions in transportation, or port delays, that interfere with the manufacture or shipment of goods during the critical months leading up to the holiday purchasing season.
In addition, as a result of the seasonal nature of Mattel's business, Mattel may be adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events, such as 12 pandemics or other public health crises, terrorist attacks, economic shocks, severe weather due to climate change or otherwise, earthquakes or other catastrophic events, that harm the retail environment or consumer buying patterns during its key selling season, or by events, such as strikes, disruptions in transportation, or port delays, that interfere with the manufacture or shipment of goods during the critical months leading up to the holiday purchasing season.
For example, it could: • Require Mattel to dedicate a substantial portion of its cash flow from operations to payments on Mattel's indebtedness, thereby reducing the availability of Mattel's cash flow to fund acquisitions, working capital, capital expenditures, research and development efforts, and other general corporate purposes; • Increase Mattel's vulnerability to, and limit Mattel's flexibility in planning for or reacting to, changes in its business and the industries in which it operates; • Restrict Mattel from making strategic acquisitions or cause Mattel to make non-strategic divestitures; • Expose Mattel to the risk of increased interest rates as borrowings under its senior secured revolving credit facility will be subject to variable rates of interest; • Expose Mattel to additional risks related to currency exchange rates and repatriation of funds; • Place Mattel at a competitive disadvantage compared to its competitors that have less debt; and • Limit Mattel's ability to obtain additional debt or equity financing for working capital, capital expenditures, business development, debt service requirements, acquisitions, and general corporate or other purposes.
For example, it could: • Require Mattel to dedicate a substantial portion of its cash flow from operations to payments on Mattel's indebtedness, thereby reducing the availability of Mattel's cash flow to fund acquisitions, working capital, capital expenditures, research and development efforts, and other general corporate purposes; • Increase Mattel's vulnerability to, and limit Mattel's flexibility in planning for or reacting to, changes in its business and the industries in which it operates; • Restrict Mattel from making strategic acquisitions or cause Mattel to make non-strategic divestitures; • Expose Mattel to the risk of increased interest rates as borrowings under its revolving credit facility will be subject to variable rates of interest; • Expose Mattel to additional risks related to currency exchange rates and repatriation of funds; • Place Mattel at a competitive disadvantage compared to its competitors that have less debt; and • Limit Mattel's ability to obtain additional debt or equity financing for working capital, capital expenditures, business development, debt service requirements, acquisitions, and general corporate or other purposes.
Mattel relies on such third parties to provide services on a timely and effective basis, but Mattel ultimately does not control their performance. Mattel uses third-party technology and systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, regulatory compliance, back-office support, and other functions.
Mattel relies on such third parties to provide services on a timely and effective basis, but Mattel ultimately does not control their performance. Mattel uses third-party technology and systems for a variety of reasons, including, without limitation, 19 encryption and authentication technology, employee email, content delivery to customers, regulatory compliance, back-office support, and other functions.
As a licensee of entertainment properties, Mattel has no guarantee that a particular property or brand will translate into a successful toy, game, or other product. In addition, the barriers to entry for new participants in the toy products industry and entertainment industry are low.
As a licensee of entertainment properties, Mattel has no guarantee that a particular property or brand will translate into a successful toy, game, or other product. In addition, the barriers to entry for new participants in the toy products industry and 11 entertainment industry are low.
Mattel may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for Mattel's products. In addition, Mattel may incur capital expenditures, compliance costs, and other costs to comply with increasingly stringent environmental laws and enforcement policies.
Mattel may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for Mattel's products. In addition, Mattel may incur capital expenditures, compliance costs, and other costs to comply with increasingly stringent environmental laws, compliance reporting, and enforcement policies.
As a global company, Mattel is subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.
As a global company, Mattel is subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection, AI, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.
For example, the GDPR, which greatly increases the jurisdictional reach of EU law and became effective in May 2018, added a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, and imposes substantial penalties for non-compliance.
For example, the GDPR, which greatly increases 20 the jurisdictional reach of EU law and became effective in May 2018, added a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, and imposes substantial penalties for non-compliance.
An unfavorable resolution of these matters could have an adverse effect on Mattel's business, financial condition, and results of operations. Regardless of their outcome, these matters may result in substantial costs and expenses, significantly divert the attention of management, or interrupt Mattel's normal business operations.
An unfavorable resolution of these matters could have an adverse effect on Mattel's business, financial condition, and results of operations. Regardless of their outcome, these matters may result in substantial costs and expenses, significantly divert the 21 attention of management, or interrupt Mattel's normal business operations.
Mattel also relies heavily on the efforts of third parties, such as film studios and other content creators and distributors, with respect to the development of content, marketing support, and release dates, which has an impact on the success of such content and the associated toys and other products.
Mattel also relies heavily on the efforts of third parties, such as studios and other content creators and distributors, with respect to the development of content, marketing support, and release dates, which has an impact on the success of such content and the associated toys and other products.
Failure to successfully implement any of these initiatives or launches, or the failure of any of these initiatives or launches to produce the results anticipated by management, could have an adverse effect on Mattel's business, financial condition, and results of operations.
Failure to successfully implement any of these initiatives or launches, or the failure of any of these initiatives or launches to produce the 13 results anticipated by management, could have an adverse effect on Mattel's business, financial condition, and results of operations.
If Mattel fails to comply with applicable U.S. and foreign laws related to privacy, data security, and data protection, it could adversely affect Mattel's operating results and financial condition.
If Mattel fails to comply with applicable U.S. and foreign laws related to privacy, data security, AI, and data protection, it could adversely affect Mattel's operating results and financial condition.
In the event of such default, the holders of such indebtedness will have the right to elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under Mattel's senior secured revolving credit facility will have the right to elect to terminate their commitments thereunder, cease making further loans, and institute foreclosure proceedings against Mattel's assets, and Mattel could be forced into bankruptcy or liquidation.
In the event of such default, the holders of such indebtedness will have the right to elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under Mattel's revolving credit facility will have the right to elect to terminate their commitments thereunder, cease making further loans, and institute foreclosure proceedings against Mattel's assets, and Mattel could be forced into bankruptcy or liquidation.
Significant changes in currency exchange rates or the ability to transfer capital across borders could have an adverse effect on Mattel's business, financial condition, and results of operations. Mattel operates facilities and sells products in numerous countries outside the United States. During 2022, Mattel's International segment net sales were 41% of Mattel's total consolidated net sales.
Significant changes in currency exchange rates or the ability to transfer capital across borders could have an adverse effect on Mattel's business, financial condition, and results of operations. Mattel operates facilities and sells products in numerous countries outside the United States. During 2023, Mattel's International segment net sales were 41% of Mattel's total consolidated net sales.
Funding obligations are determined based on the value of assets and liabilities on a specific date as required under relevant government regulations for each plan. Future pension funding requirements, and the timing of funding payments, could be affected by legislation enacted by the relevant governmental authorities. 19 If Mattel's goodwill becomes impaired, Mattel's results of operations could be adversely affected.
Funding obligations are determined based on the value of assets and liabilities on a specific date as required under relevant government regulations for each plan. Future pension funding requirements, and the timing of funding payments, could be affected by legislation enacted by the relevant governmental authorities. 18 If Mattel's goodwill becomes impaired, Mattel's results of operations could be adversely affected.
Inaccurately anticipating changes and trends in popular culture, media and movies, fashion, or technology can adversely affect Mattel's sales, financial condition, and results of operations.
Inaccurately anticipating changes and trends in popular culture, media, fashion, or technology can adversely affect Mattel's sales, financial condition, and results of operations.
If this occurs, Mattel would be in default under its senior secured revolving credit facility, the lenders could exercise their rights, as described above, and Mattel could be forced into bankruptcy or liquidation. Mattel's variable rate indebtedness subjects Mattel to interest rate risk, which could cause Mattel's debt service obligations to increase significantly.
If this occurs, Mattel would be in default under its revolving credit facility, the lenders could exercise their rights, as described above, and Mattel could be forced into bankruptcy or liquidation. Mattel's variable rate indebtedness subjects Mattel to interest rate risk, which could cause Mattel's debt service obligations to increase significantly.
Assuming Mattel's senior secured revolving credit facility is fully drawn up to the maximum commitment level and the interest rates are above the interest rate floor set forth in the credit agreement governing Mattel's senior secured revolving credit facility, each one-eighth point change in interest rates would result in a $1.75 million change in annual interest expense on Mattel's indebtedness under its senior secured revolving credit facility.
Assuming Mattel's revolving credit facility is fully drawn up to the maximum commitment level and the interest rates are above the interest rate floor set forth in the credit agreement governing Mattel's revolving credit facility, each one-eighth point change in interest rates would result in a $1.75 million change in annual interest expense on Mattel's indebtedness under its revolving credit facility.
Consumer acceptance of Mattel's entertainment offerings is impacted by factors beyond its control, including critical reviews, promotions, the popularity of movies and television programs released into the marketplace at or near the same time, the availability of alternative forms of entertainment, general economic conditions, and public preferences generally.
Consumer acceptance of Mattel's and its license partners' entertainment offerings is impacted by factors beyond its control, including critical reviews, promotions, the popularity of movies and television programs released into the marketplace at or near the same time, the availability of alternative forms of entertainment, general economic conditions, and public preferences generally.
For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 12 to the Consolidated Financial Statements—Commitments and Contingencies—Litigation." Mattel is subject to various laws and government policies or regulations in numerous jurisdictions, violation of which could subject it to sanctions.
For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 13 to the Consolidated Financial Statements—Commitments and Contingencies—Litigation." Mattel is subject to various laws and government policies or regulations in numerous jurisdictions, violation of which could subject it to sanctions.
Item 1A. Risk Factors. If any of the risks, events, and uncertainties described in the cautionary risk factors listed below actually occurs, Mattel's business, financial condition and results of operations could be adversely affected, and such effects could at times be material. The risk factors listed below are not exhaustive.
Item 1A. Risk Factors. If any of the risks, events, and uncertainties described below actually occurs, Mattel's business, financial condition and results of operations could be adversely affected, and such effects could at times be material. The risk factors listed below are not exhaustive.
Any inability by Mattel to accurately anticipate trends in popular culture, movies, media, fashion, or technology may cause its products not to be accepted by children, parents, or families and may adversely affect its sales, financial condition, and results of operations.
Any inability by Mattel to accurately anticipate trends in popular culture, media, fashion, or technology may cause its products not to be accepted by children, parents, fans, or families and may adversely affect its sales, financial condition, and results of operations.
Declines in Mattel's operating performance may require Mattel to obtain waivers in the future from the required lenders under its senior secured revolving credit facility to avoid being in default. If Mattel breaches its covenants under its senior secured revolving credit facility and seeks a waiver, Mattel may not be able to obtain a waiver from the required lenders.
Declines in Mattel's operating performance may require Mattel to obtain waivers in the future from the required lenders under its revolving credit facility to avoid being in default. If Mattel breaches its covenants under its revolving credit facility and seeks a waiver, Mattel may not be able to obtain a waiver from the required lenders.
At December 31, 2022, Mattel had $2.33 billion of indebtedness on a consolidated basis, consisting primarily of 3.375% Senior Notes due 2026, 5.875% Senior Notes due 2027, and 3.750% Senior Notes due 2029, as well as Senior Notes issued in prior years. In addition, Mattel has $1.40 billion of commitments under its senior secured revolving credit facility.
At December 31, 2023, Mattel had $2.33 billion of indebtedness on a consolidated basis, consisting primarily of 3.375% Senior Notes due 2026, 5.875% Senior Notes due 2027, and 3.750% Senior Notes due 2029, as well as Senior Notes issued in prior years. In addition, Mattel has $1.40 billion of commitments under its revolving credit facility.
Mattel's efforts to be responsive to climate change, to reduce its carbon footprint, and regarding other ESG matters cannot provide assurance that Mattel will successfully achieve its ESG goals, that related costs may not be higher than expected, that proposed regulation or deregulation related to climate change and other ESG matters will not be more aggressive than Mattel's measures and result in higher costs (or require additional resources), or that any investments Mattel makes in furtherance of achieving such goals will meet expectations or any applicable binding or non-binding legal standards, any one of which could have an adverse effect on Mattel's financial condition, results of operations, or reputation.
Mattel's efforts to be responsive to climate change, to reduce its carbon footprint, and regarding other sustainability matters cannot provide assurance that Mattel will successfully achieve its sustainability goals, that related costs may not be higher than expected, that proposed regulation or deregulation related to climate change and other sustainability matters will not be more aggressive than Mattel's measures and result in higher costs (or require additional resources), or that any investments Mattel makes in furtherance of achieving such goals will meet expectations for all stakeholders or any applicable binding or non-binding legal standards, any one of which could have an adverse effect on Mattel's financial condition, results of operations, or reputation.
Political instability, civil unrest, the deterioration of the political, economic, or social situation in a country in which Mattel has significant sales or operations, or the breakdown of trade relations between the United States and a foreign country in which Mattel has significant manufacturing facilities or other operations, could adversely affect Mattel's business, financial condition, and results of operations.
Mattel's business is worldwide in scope, and political instability, civil unrest, the deterioration of the political, economic, or social situation in a country in which Mattel has significant sales or operations, or the breakdown of trade relations between the United States and a foreign country in which Mattel has significant manufacturing facilities or other operations, could adversely affect Mattel's business, financial condition, and results of operations.
For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 5 to the Consolidated Financial Statements—Seasonal Financing and Debt." Subject to the limits contained in the credit agreement that governs Mattel's senior secured revolving credit facility, the indentures that govern the notes, and Mattel's other debt instruments, Mattel may incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes.
For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 6 to the Consolidated Financial Statements—Seasonal Financing and Debt." Subject to the limits contained in the credit agreement that governs Mattel's revolving credit facility, the indentures that govern the notes, and Mattel's other debt instruments, Mattel may incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes.
Mattel offers a diverse range of products for children of all ages and families that includes, among others, toys for infants, toddlers, and preschoolers, toys for school-aged children, youth electronics, digital media, hand-held and other games, puzzles, educational toys, media-driven products, and fashion-related toys.
Mattel offers a diverse range of products for children, fans of all ages, and families that includes, among others, toys for infants, toddlers, and preschoolers, toys for school-aged children, youth electronics, digital media, hand-held and other games, puzzles, educational toys, and fashion-related items.
Global climate change, evolving stakeholder expectations for corporate responsibility matters, and Mattel's related goals present challenges to its business and reputation that could adversely affect Mattel. The effects of global climate change create financial, operational, and reputational risks to Mattel's business, both directly and indirectly.
Global climate change, evolving stakeholder expectations for sustainability matters, and Mattel's related goals present challenges to its business and reputation that could adversely affect Mattel. The effects of global climate change create financial, operational, and reputational risks to Mattel's business, both directly and indirectly.
Borrowings under Mattel's senior secured revolving credit facility will be at variable rates of interest and will expose Mattel to interest rate risk.
Borrowings under Mattel's revolving credit facility will be at variable rates of interest and will expose Mattel to interest rate risk.
If Mattel does not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, it could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, or loss of or damage to intellectual property through security breach. Many of these systems are managed by third-party service providers.
If Mattel does not allocate and effectively manage the resources necessary to build, sustain, and protect an appropriate technology infrastructure, it could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, shutdowns, or loss of or damage to intellectual property through security breach. Many of these systems are managed by third-party service providers.
Effective internal controls are necessary for companies to provide reliable and accurate financial reporting and financial statements for external purposes in accordance with generally accepted accounting principles. A failure to maintain effective internal control processes could lead to violations, unintentional or otherwise, of laws and regulations.
Effective internal controls are necessary for Mattel to provide reliable and accurate financial reporting and financial statements for external purposes in accordance with generally accepted accounting principles. A failure to maintain effective internal control over financial reporting could lead to violations, unintentional or otherwise, of laws and regulations.
Such goals are based on management's current assumptions related to scientific or technological developments, carbon markets, the workforce and hiring market, and other matters that are subject to change in the future, as well as standards for measuring progress that are still in development, and subject to a number of significant risks and uncertainties.
Such goals are based on Mattel management's current assumptions related to scientific or technological developments, carbon markets, the workforce and hiring market, and other matters that are subject to change in the future and which are outside of Mattel's control, as well as standards for measuring progress that are still in development, and subject to a number of significant risks and uncertainties.
In addition, competition for access to entertainment properties has lessened, and may in the future continue to lessen, Mattel's ability to secure, maintain, and renew popular licenses to entertainment products developed by other parties and licensed to Mattel, or require Mattel to pay licensors higher royalties and higher minimum guaranteed payments to obtain or retain these licenses.
In addition, competition for access to entertainment properties has lessened, and may in the future continue to lessen, Mattel's ability to secure, maintain, and renew popular licenses to entertainment products developed by other parties and licensed to Mattel on beneficial terms, if at all, or require Mattel to pay licensors higher royalties and higher minimum guaranteed payments to obtain or retain these licenses.
These factors are also currently, and in the future may be, amplified by the global economic or geopolitical climate and additional or unforeseen circumstances, developments, or risks, including pandemics or other public health crises. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.
These factors are also currently, and in the future may be, amplified by the global economic or geopolitical climate and additional or unforeseen circumstances, developments, or risks. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.
Such risks include complications in complying with different laws in varying jurisdictions; dealing with changes in governmental policies and the evolution of laws and regulations that impact Mattel's product offerings and related enforcement; difficulties understanding the retail climate, consumer trends, local customs and competitive conditions in foreign markets, which are often quite different from those in the United States; difficulties in moving materials and products from one country to another, including port congestion, strikes and other transportation delays and interruptions; potential challenges to Mattel's transfer pricing determinations and other aspects of its cross border transactions; and the impact of tariffs, quotas, or other protectionist measures.
Such risks include complications in complying with different laws in varying jurisdictions; dealing with changes in governmental policies and the evolution of laws and regulations that impact Mattel's product offerings and related enforcement; difficulties understanding the retail climate, consumer trends, local customs and competitive conditions in foreign markets, which are often quite different from those in the United States; difficulties in moving materials and products from one country to another, including port congestion, strikes and other transportation delays and interruptions; potential challenges to Mattel's transfer pricing determinations and other aspects of its cross border transactions; and the impact of tariffs, quotas, or other protectionist measures. 15 Failure to properly manage these risks could adversely affect Mattel's business, financial condition, and results of operations.
Failure to properly manage the risks described above could adversely affect Mattel's business, financial condition, and results of operations. 16 Disruptions due to political instability, civil unrest, future pandemics or other public health crises, or earthquakes or other natural disasters out of Mattel's control and actions taken by governments, businesses, and individuals in response to such events could adversely affect Mattel's business, financial position, sales, and results of operations.
Disruptions due to political instability, civil unrest, future pandemics or other public health crises, or earthquakes or other natural disasters out of Mattel's control and actions taken by governments, businesses, and individuals in response to such events could adversely affect Mattel's business, financial position, sales, and results of operations.
Mattel's ongoing compliance with the GDPR and other privacy and data protection laws, such as the PIPL, CCPA, CPRA, and COPPA, imposes significant costs and challenges that are likely to increase over time, including as Mattel introduces sophisticated digital and smart technology products.
Mattel's ongoing compliance with the GDPR and other privacy and data protection laws, such as the PIPL, CCPA, CPRA, and COPPA, as well as initiatives to comply with new legal regimes relating to privacy, data protection, and AI, imposes significant costs and challenges that are likely to increase over time, including as Mattel introduces sophisticated digital and smart technology products, including products that incorporate AI.
For example, Mattel is or may become subject to a variety of laws and regulations such as the European Union's General Data Protection Regulation ("GDPR"), China's Personal Information Protection Law ("PIPL"), California's Consumer Privacy Act ("CCPA"), or the U.S. Children's Online Privacy Protection Act of 1998 ("COPPA") regarding privacy, data protection, and data security.
For example, Mattel is or may become subject to a variety of laws and regulations such as the European Union's General Data Protection Regulation ("GDPR"), EU Artificial Intelligence Act ("EU AI Act"), China's Personal Information Protection Law ("PIPL"), California's Consumer Privacy Act ("CCPA"), or the U.S.
Consumers' discretionary purchases of toy products are often impacted by a number of factors beyond Mattel's control, including, inflation, job losses, foreclosures, bankruptcies, reduced access to credit, interest rates, investment losses, lower consumer confidence, and other macro-economic factors that affect consumer spending behavior. Any of these factors can reduce the amount that consumers spend on the purchase of Mattel's products.
Consumers' discretionary purchases of toy products are often impacted by a number of factors beyond Mattel's control, including, inflation, job losses, foreclosures, bankruptcies, reduced access to credit, interest rates, tax rates, investment losses, lower consumer confidence, and other macro-economic factors that affect consumer spending behavior.
Government action may restrict Mattel's ability to transfer capital across borders and may also impact the fluctuation of currencies in the countries where Mattel conducts business or has invested capital.
Government action may restrict Mattel's ability to transfer capital across borders, such as recently enacted currency control regulations in China, and may also impact the fluctuation of currencies in the countries where Mattel conducts business or has invested capital.
Those steps may increase costs and/or decrease profit margins and are not always successful. During periods of increased inflation, such as Mattel is currently facing, Mattel has increased prices of certain products, and may in the future need to increase prices further in order to cover increased costs of goods sold, which may reduce demand for products.
During periods of increased inflation, such as Mattel is currently facing, Mattel has increased prices of certain products, and may in the future need to increase prices further in order to cover increased costs of goods sold, which may reduce demand for products.
In addition, increases in import and excise duties and/or sales or value added taxes in the jurisdictions in which Mattel operates could affect the affordability of Mattel's products and, therefore, reduce demand. 23 From time to time, issues with products lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory or other actions by governmental authorities, which could divert resources, affect business operations, decrease sales, increase costs, and put Mattel at a competitive disadvantage, any of which could have an adverse effect on Mattel's business, financial condition, and results of operations.
From time to time, issues with products lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory or other actions by governmental authorities, which could divert resources, affect business operations, decrease sales, increase costs, and put Mattel at a competitive disadvantage, any of which could have an adverse effect on Mattel's business, financial condition, and results of operations.
Findings of infringement on the intellectual property rights of any third party by Mattel, its distributors, its licensors, or its manufacturers may require obtaining a license to use those rights, which may not be obtainable on reasonable terms, if at all. 22 In addition, Mattel's business is subject to the risk of third parties counterfeiting its products or infringing on its intellectual property rights.
Findings of infringement on the intellectual property rights of any third party by Mattel, its distributors, its licensors, or its manufacturers may require obtaining a license to use those rights, which may not be obtainable on reasonable terms, if at all.
If the U.S. or other foreign tax authorities change applicable tax laws or successfully challenge how or where Mattel's profits are currently recognized, Mattel's overall taxes could increase, and Mattel's business, financial condition or results of operations may be adversely impacted.
Tax authorities are increasingly scrutinizing the tax positions of companies and Mattel has tax audits pending in several jurisdictions. If the U.S. or foreign tax authorities change applicable tax laws or successfully challenge how or where Mattel's profits are currently recognized, Mattel's overall taxes could increase, and Mattel's business, financial condition or results of operations may be adversely impacted.
Any or all of the forward-looking statements contained in this Annual Report on Form 10-K and any other public statement made by Mattel or its representatives may turn out to be wrong.
Any or all of the forward-looking statements contained in this Annual Report on Form 10-K and any other public statement made by Mattel or its representatives may turn out to be wrong. Mattel expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.
Changes in Mattel's operating procedures and product requirements can delay delivery of products and increase costs. Mattel's relationships with its existing vendors may be adversely affected as a result of these changes, making Mattel more dependent on a smaller number of vendors. Mattel is not currently dependent on a single supplier or group of suppliers.
Mattel's relationships with its existing vendors may be adversely affected as a result of these changes, making Mattel more dependent on a smaller number of vendors. Mattel is not currently dependent on a single supplier or group of suppliers.
For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 12 to the Consolidated Financial Statements—Commitments and Contingencies—Litigation." Ineffective internal control over financial reporting could affect Mattel's ability to record, process, and report financial information accurately, impair its ability to prepare financial statements, negatively affect investor confidence, and cause reputational harm.
For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 13 to the Consolidated Financial Statements—Commitments and Contingencies—Litigation." Mattel identified a material weakness in its internal control over financial reporting which, if not remediated appropriately or timely, could affect Mattel's ability to record, process, and report financial information accurately, impair its ability to prepare financial statements, negatively affect investor confidence, and cause reputational harm.
Mattel's business may not generate sufficient cash flow from operations and future borrowings may not be available under Mattel's senior secured revolving credit facility in an amount sufficient to enable Mattel to pay its indebtedness or to fund its other liquidity needs.
Mattel's business may not generate sufficient cash flow from operations and future borrowings may not be available under Mattel's revolving credit facility in an amount sufficient to enable Mattel to pay its indebtedness or to fund its other liquidity needs. In such circumstances, Mattel may need to refinance all or a portion of its indebtedness upon or before maturity.
In recent years, consumer goods companies, including those in the toy business, generally have experienced the phenomenon of retail customers developing their own private-label products that directly compete with the products of traditional manufacturers.
The production and sale of private-label toys by Mattel's retail customers may result in lower purchases of Mattel-branded products by those retail customers. In recent years, consumer goods companies, including those in the toy business, generally have experienced the phenomenon of retail customers developing their own private-label products that directly compete with the products of traditional manufacturers.
The credit agreement governing Mattel's senior secured revolving credit facility and the indentures governing the notes will restrict Mattel's ability to sell assets and use the proceeds from such sales. 25 If Mattel is unable to generate sufficient cash flow or is otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on its indebtedness, or if Mattel otherwise fails to comply with the various covenants in the instruments governing its indebtedness, Mattel could be in default under the terms of the agreements governing such indebtedness.
If Mattel is unable to generate sufficient cash flow or is otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on its indebtedness, or if Mattel otherwise fails to comply with the various covenants in the instruments governing its indebtedness, Mattel could be in default under the terms of the agreements governing such indebtedness.
These laws and regulations are continuously evolving and developing, creating significant uncertainty as privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements.
Children's Online Privacy Protection Act of 1998 ("COPPA") regarding privacy, data protection, AI (including automated decision-making) and data security. These laws and regulations are continuously evolving and developing, creating significant uncertainty as privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements.
These issues and activities can divert development and management resources, adversely affect Mattel's business operations, decrease sales, increase legal fees and other costs, and put Mattel at a competitive disadvantage compared to other manufacturers not affected by similar issues with products, any of which could have an adverse effect on Mattel's business, financial condition, and results of operations.
These issues and activities can divert development and management resources, adversely affect Mattel's business operations, decrease sales, increase legal fees and other costs, and put Mattel at a competitive disadvantage compared to other manufacturers not affected by similar issues with products, any of which could have an adverse effect on Mattel's business, financial condition, and results of operations. 22 Mattel's current and future operating procedures and product requirements may increase costs, adversely affect its relationship with vendors, and make it more difficult for Mattel to produce, purchase, and deliver products on a timely basis to meet market demands.
Mattel's failure to successfully market or advertise its products could have an adverse effect on Mattel's business, financial condition, and results of operations. Mattel's products are marketed worldwide through a diverse spectrum of advertising and promotional programs. Mattel's ability to sell products is dependent in part upon the success of these programs.
Mattel's failure to successfully market or advertise its products could have an adverse effect on Mattel's business, financial condition, and results of operations. Mattel's products are marketed worldwide through a diverse spectrum of advertising, marketing, and promotional programs, including the use of digital and social media to reach consumers.
In addition, problems with transitioning these services and systems to, or operating failures with, these vendors and outsourcers cause delays in product sales and reduce the efficiency of Mattel's operations, and significant capital investments could be required to remediate the problem. 14 The production and sale of private-label toys by Mattel's retail customers may result in lower purchases of Mattel-branded products by those retail customers.
In addition, problems with transitioning these services and systems to, or operating failures with, these vendors and outsourcers cause delays in product sales and reduce the efficiency of Mattel's operations, and significant capital investments could be required to remediate the problem.
Mattel's current operating procedures and product requirements, including testing requirements and standards, have imposed costs on both Mattel and the vendors from which it purchases products. Changes in business conditions, including those resulting from new legislative and regulatory requirements, have in the past caused, and in the future could cause, further revisions of Mattel's operating procedures and product requirements.
Changes in business conditions, including those resulting from new legislative and regulatory requirements, have in the past caused, and in the future could cause, further revisions of Mattel's operating procedures and product requirements. Changes in Mattel's operating procedures and product requirements can delay delivery of products and increase costs.
The recent global shift to remote work environments (including for Mattel's employees, customers, sellers, suppliers, vendors, and other third parties) may amplify these security risks or introduce additional security vulnerabilities. 21 Mattel's information systems require an ongoing commitment of significant resources to maintain, upgrade and enhance existing systems and develop or contract for new systems in order to keep pace with continuing changes in information processing technology, emerging cybersecurity risks and threats, evolving industry, legal and regulatory standards and requirements, and other changes in Mattel's business, among other things.
Mattel's information systems require an ongoing commitment of significant resources to maintain, upgrade and enhance existing systems and develop or contract for new systems in order to keep pace with continuing changes in information processing technology, emerging cybersecurity risks and threats, evolving industry, legal and regulatory standards and requirements, and other changes in Mattel's business, among other things.
If Mattel cannot service its indebtedness, Mattel may need to take actions such as selling assets, issuing additional equity, reducing or delaying capital expenditures, strategic acquisitions, investments, and alliances. There can be no assurance that such actions, if necessary, will be effected on commercially reasonable terms or at all.
Mattel may not be able to refinance any of its indebtedness, including its revolving credit facility and the notes, on commercially reasonable terms or at all. If Mattel cannot service its indebtedness, Mattel may need to take actions such as selling assets, issuing additional equity, reducing or delaying capital expenditures, strategic acquisitions, investments, and alliances.
These challenges are intensifying due to trends towards shorter life cycles for individual toy products, the phenomenon of children outgrowing traditional toys at younger ages, an increasing use of more sophisticated technology in toys, and an evolving path to purchase. In addition, entertainment media has become increasingly important for consumers to experience Mattel's brands and its license partners' brands.
These challenges are intensifying due to trends towards shorter life cycles for individual toy products, the phenomenon of children outgrowing traditional toys at younger ages, an increasing use of more sophisticated technology in toys, including machine learning and artificial intelligence ("AI"), and an evolving path to purchase.
Successful movies and characters in children's literature affect play preferences, and many products depend on media-based intellectual property licenses including trademarks, trade names, copyrights, patents, trade secrets, and rights under intellectual property license agreements and other agreements with third parties. Media-based licenses can cause a line of toys or other products to gain immediate success among children, parents, or families.
Successful movies, television programs, video games, and characters in children's literature affect play preferences, and many products depend on media-based intellectual property licenses including trademarks, trade names, copyrights, patents, trade secrets, and rights under intellectual property license agreements and other agreements with third parties.
Mattel has implemented and continues to implement a series of cost savings programs as described in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cost Savings Programs." Mattel incurred costs within operating income of $34.3 million, $35.2 million, and $40.6 million in 2022, 2021, and 2020, respectively, to achieve such cost savings, and expects to incur additional costs during 2023. 18 There can be no assurance that Mattel will be able to realize the cost savings from its previously announced cost savings programs in the anticipated amounts or within the anticipated timeframes or at all.
Mattel has implemented and continues to implement a series of cost savings programs as described in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cost Savings Programs." There can be no assurance that Mattel will be able to realize the cost savings from its previously announced cost savings programs in the anticipated amounts or within the anticipated timeframes or at all, or that the impact of the efforts to achieve such cost savings will not be significantly different than currently anticipated.
Mattel's business, financial condition, and results of operations could be adversely affected by its failure to successfully market its products or by an increase in its media or other advertising or promotional costs.
Mattel's ability to sell products is dependent in part upon the success of these programs. As such, Mattel's business, financial condition, and results of operations could be adversely affected by its failure to successfully market its products or by an increase in its advertising, marketing, or promotional costs.
The inability to adequately increase prices to offset increased costs and inflationary pressures, or otherwise mitigate the impact of these macro-economic conditions and market disruptions, may also increase costs and/or decrease profit margins. 15 Significant increases in the price of commodities, transportation, or labor, if not offset by declines in other input costs, or a reduction or interruption in the delivery of raw materials, components, and finished products from Mattel's vendors, could adversely affect Mattel's business, financial condition, and results of operations.
Significant increases in the price of commodities, transportation, or labor, if not offset by declines in other input costs, or a reduction or interruption in the delivery of raw materials, components, and finished products from Mattel's vendors, could adversely affect Mattel's business, financial condition, and results of operations.
There can be no assurance that existing and future events will not require Mattel to adopt additional requirements and incur additional costs, and impose those requirements and costs on its vendors, which may adversely affect its relationship with those vendors and Mattel's ability to meet market demand in a timely manner. 24 Indebtedness Mattel's substantial indebtedness could adversely affect its ability to raise additional capital to fund its operations, limit its ability to react to changes in the economy or its industry, and expose it to interest rate risk to the extent of its variable rate debt.
There can be no assurance that existing and future events will not require Mattel to adopt additional requirements and incur additional costs, and impose those requirements and costs on its vendors, which may adversely affect its relationship with those vendors and Mattel's ability to meet market demand in a timely manner.
Similarly, the control deficiency, remediation efforts, and any related litigation, government investigations, or regulatory enforcement actions will require management attention and resources, cause Mattel to incur unanticipated costs, and negatively affect investor confidence in Mattel's financial statements, cause Mattel reputational harm, and raise other risks to its operations. 20 Legal and Regulatory Mattel relies extensively on information technology in its operations, and any material failure, inadequacy, interruption, or security breach of that technology could have an adverse effect on its business, financial condition, and results of operations.
The material weakness, remediation efforts, and any related litigation, government investigations, or regulatory enforcement actions will require management attention and resources and cause Mattel to incur unanticipated costs, and could negatively affect investor confidence in Mattel's financial statements, cause Mattel reputational harm, and raise other risks to its operations.
Some retail chains and online retailers that are customers of Mattel, including two of its largest retail customers, Walmart and Target, sell private-label toys designed, manufactured, and branded by the retailers themselves. These toys may be sold at prices lower than comparable toys sold by Mattel and may result in lower purchases of Mattel-branded products by these retailers.
Some retail chains and online retailers that are customers of Mattel, including three of its largest retail customers, Walmart, Amazon and Target, sell private-label toys designed, manufactured, and branded by the retailers themselves.
The extent to which Mattel's entertainment offerings are successful can significantly impact the demand for its products and its financial performance.
In addition, entertainment media has become increasingly important for consumers to experience Mattel's brands and its license partners' brands. The extent to which Mattel's and its license partners' entertainment offerings are successful can significantly impact the demand for Mattel's products and its financial performance.
In addition, the indentures governing the notes and the agreements governing Mattel's senior secured revolving credit facility contain affirmative and negative covenants that limit Mattel's ability to engage in activities that may be in its long-term best interests.
For example, if Mattel's credit ratings decline, its debt service obligations under its revolving credit facility may increase even if the principal amount borrowed remains the same. 23 In addition, the indentures governing the notes and the agreements governing Mattel's revolving credit facility contain affirmative and negative covenants that limit Mattel's ability to engage in activities that may be in its long-term best interests.
Mattel has subsequently established additional goals related to environmental, social, and governance ("ESG") matters.
Mattel has subsequently established additional goals related to sustainability matters.
In 2022, Mattel's three largest customers, Walmart, Target, and Amazon, in the aggregate, accounted for approximately 43% of net sales (Walmart at $0.95 billion, Target at $0.76 billion, and Amazon at $0.64 billion ) and its ten largest customers, in the aggregate, accounted for approximately 52% of net sales.
In 2023, Mattel's three largest customers, Walmart, Target, and Amazon, in the aggregate, accounted for approximately 44% of worldwide consolidated net sales (Walmart at $1.13 billion, Target at $0.67 billion, and Amazon at $0.60 billion ) and its ten largest customers, in the aggregate, accounted for approximately 50% of net sales.
If Mattel underestimates the demand for its products, its manufacturing plants or third-party manufacturers may not be able to produce products to meet customer requirements, which has in the past resulted in, and may in the future result in delays in, the shipment of Mattel products. 13 Mattel has significant customer concentration, such that economic difficulties or changes in the purchasing policies or patterns of its key customers could have an adverse effect on Mattel's business, financial condition, and results of operations.
If Mattel underestimates the demand for its products, its manufacturing plants or third-party manufacturers may not be able to produce products to meet customer requirements, which has in the past resulted in, and may in the future result in, delays in the shipment of Mattel products.
Any increased trade barriers or restrictions on global trade imposed by the United States, or further retaliatory trade measures taken by China, Russia, or other countries in response, could further adversely affect Mattel's business, financial condition, and results of operations. 17 The occurrence of war or hostilities between countries or threat of terrorist activities, and the responses to and results of these activities, could adversely impact Mattel, its personnel and facilities, its customers and suppliers, retail and financial markets, and general economic conditions.
Any increased trade barriers or restrictions on global trade imposed by the United States, or further retaliatory trade measures or currency controls taken by China, Russia, or other countries in response, could further adversely affect Mattel's business, financial condition, and results of operations.
Mattel designs, manufactures, and markets a wide variety of toy products worldwide through sales to retailer customers and directly to consumers. Mattel's performance is impacted by the level of discretionary consumer spending, which remains relatively weak in many countries around the world in which Mattel does business.
Mattel's performance is impacted by the level of discretionary consumer spending, which remains relatively weak in many countries around the world in which Mattel does business.
The interest rate margins, unused line fee, and letter of credit fronting fee under Mattel's senior secured revolving credit facility may fluctuate based on Mattel's credit ratings. For example, if Mattel's credit ratings decline, its debt service obligations under its senior secured revolving credit facility may increase even if the principal amount borrowed remains the same.
The interest rate margins, unused line fee, and letter of credit fronting fee under Mattel's revolving credit facility may fluctuate based on Mattel's credit ratings.
If the additional controls and procedures that Mattel has implemented to remediate the material weaknesses prove to be insufficient or if Mattel identifies other control deficiencies that individually or together constitute significant deficiencies or material weaknesses, Mattel's ability to record, process, and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected.
If Mattel is unable to remediate the material weakness, or is otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, Mattel's ability to record, process, and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected.
If Mattel's lenders are unable to fund borrowings under their credit commitments or Mattel is unable to borrow, it could be difficult to replace Mattel's senior secured revolving credit facility on similar terms, which could adversely affect Mattel's business, financial condition, and results of operations. Item 1B. Unresolved Staff Comments. None.
If Mattel's lenders are unable to fund borrowings under their credit commitments or Mattel is unable to borrow, it could be difficult to replace Mattel's revolving credit facility on similar terms, which could adversely affect Mattel's business, financial condition, and results of operations. 24 Mattel's stock repurchase program could affect the price of its common stock and may be suspended at any time, and there is no guarantee that repurchases under the program, if any, will enhance stockholder value.
While the impact of the COVID-19 pandemic has largely subsided, the impact of any new outbreaks of COVID-19, other variants, or other public health crises on Mattel's business and financial results will depend on future developments, which are highly uncertain and cannot be predicted.
The impact of any new outbreaks of COVID-19, other variants, or other public health crises on Mattel's business and financial results will depend on future developments, which are highly uncertain and cannot be predicted. Mattel owns, operates, and manages manufacturing facilities and utilizes third-party manufacturers and suppliers throughout Asia, primarily in China, Indonesia, Malaysia, Vietnam and Thailand, and in Mexico.
The steps Mattel has taken may not prevent unauthorized use of its intellectual property, particularly in foreign countries where the laws may not protect its intellectual property as fully as in the United States. Mattel at times resorts to litigation to protect its intellectual property rights, which could result in substantial costs and diversion of resources.
Mattel at times resorts to litigation to protect its intellectual property rights, which could result in substantial costs and diversion of resources.
Mattel's current and future operating procedures and product requirements may increase costs, adversely affect its relationship with vendors, and make it more difficult for Mattel to produce, purchase, and deliver products on a timely basis to meet market demands. Future conditions may require Mattel to adopt further changes that may increase its costs and further affect its relationship with vendors.
Future conditions may require Mattel to adopt further changes that may increase its costs and further affect its relationship with vendors. Mattel's current operating procedures and product requirements, including testing requirements and standards, have imposed costs on both Mattel and the vendors from which it purchases products.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeMattel also leases office space and principal manufacturing facilities in China, which support the North America, International, and American Girl segments. 26 For all remaining leases that are scheduled to expire within the next twelve months, Mattel may negotiate new lease agreements, renew existing lease agreements, or utilize alternate facilities.
Biggest changeFor all remaining leases that are scheduled to expire within the next twelve months, Mattel may negotiate new lease agreements, renew existing lease agreements, or utilize alternate facilities.
See Part II, Item 8 "Financial Statements and Supplementary Data—Note 7 to the Consolidated Financial Statements—Leases." Mattel believes that its owned and leased facilities, in general, are suitable and adequate for its present and currently foreseeable needs.
See Part II, Item 8 "Financial Statements and Supplementary Data—Note 8 to the Consolidated Financial Statements—Leases." Mattel believes that its owned and leased facilities, in general, are suitable and adequate for its present and currently foreseeable needs.
Mattel leases corporate office space in Middleton, Wisconsin for American Girl, retail and related office space in Chicago, Illinois; Los Angeles, California; and New York, New York for its flagship American Girl stores, and in six other cities across the United States for its American Girl boutique stores. Internationally, Mattel has offices and/or warehouse space in over 30 countries.
Mattel leases corporate office space in Middleton, Wisconsin for American Girl, retail and related office space in Chicago, Illinois; Los Angeles, California; and New York, New York for its flagship American Girl stores, and in five other cities across the United States for its American Girl boutique stores. Internationally, Mattel has offices and/or warehouse space in over 30 countries.
Mattel leases facilities used by the International segment in various foreign jurisdictions, including China, Mexico, the United Kingdom, Hong Kong, and Chile.
Mattel leases facilities used by the International segment in various foreign jurisdictions, including China, Mexico, and the United Kingdom. Mattel also leases office space and principal manufacturing facilities in China, which support the North America, International, and American Girl segments.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThese shares were not purchased as part of a publicly announced repurchase plan or program. (b) Mattel's share repurchase program was first announced on July 21, 2003. On July 17, 2013, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0 million. At December 31, 2022, share repurchase authorizations of $203.0 million had not been executed.
Biggest change(b) Mattel's share repurchase program was first announced on July 21, 2003. On July 17, 2013, the Board of Directors approved a $500.0 million increase to Mattel's share repurchase authorization and, as of December 31, 2023, such authorization was exhausted. On February 5, 2024, the Board of Directors authorized a new $1.00 billion share repurchase program.
Mattel's share repurchase program has no expiration date. 28 Performance Graph The following graph compares the performance of Mattel's common stock with that of the S&P 500 Index and the S&P 500 Consumer Discretionary Index. The Cumulative Total Return listed below assumes an initial investment of $100 on December 31, 2017 and reinvestment of dividends.
Mattel's share repurchase program has no expiration date. 27 Performance Graph The following graph compares the performance of Mattel's common stock with that of the S&P 500 Index and the S&P 500 Consumer Discretionary Index. The Cumulative Total Return listed below assumes an initial investment of $100 on December 31, 2018 and reinvestment of dividends.
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market Information Mattel's common stock, par value $1.00 per share, is traded under the symbol "MAT" on The Nasdaq Global Select Market. Holders of Record As of February 10, 2023, Mattel had approximately 17,000 holders of record of its common stock.
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market Information Mattel's common stock, par value $1.00 per share, is traded under the symbol "MAT" on The Nasdaq Global Select Market. Holders of Record As of March 4, 2024, Mattel had approximately 15,000 holders of record of its common stock.
Dividends See Part II, Item 8 "Financial Statements and Supplementary Data—Note 6 to the Consolidated Financial Statements —Stockholders' Equity—Dividends." Recent Sales of Unregistered Securities During the fourth quarter of 2022, Mattel did not sell any unregistered securities. Issuer Purchases of Equity Securities During 2022, 2021, and 2020, Mattel did not repurchase any shares of its common stock.
Dividends See Part II, Item 8 "Financial Statements and Supplementary Data—Note 7 to the Consolidated Financial Statements —Stockholders' Equity—Dividends." Recent Sales of Unregistered Securities During the fourth quarter of 2023, Mattel did not sell any unregistered securities. Issuer Purchases of Equity Securities During 2023, Mattel repurchased 10.4 million shares of its common stock at a cost of $203.0 million.
The following table provides certain information with respect to Mattel's purchases of its common stock during the fourth quarter of 2022: 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) Period: October 1 - 31 715 $ 18.96 — $ 203,016,273 November 1 - 30 1,595 18.15 — 203,016,273 December 1 - 31 3,799 17.84 — 203,016,273 Total 6,109 $ 18.05 — $ 203,016,273 (a) The total number of shares purchased represents shares withheld from employees to satisfy minimum tax withholding obligations that occur upon settlement of equity awards.
The following table provides certain information with respect to Mattel's purchases of its common stock during the fourth quarter of 2023: 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) Period: October 1 - 31 1,710,604 $ 18.82 1,710,221 $ 60,975,153 November 1 - 30 3,173,304 19.23 3,171,631 — December 1 - 31 3,835 18.88 — — Total 4,887,743 $ 19.08 4,881,852 $ — (a) The total number of shares purchased includes 5,891 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.
The resumption of repurchases under this program was announced on February 8, 2023. Repurchases under the program will take place from time to time, depending on market conditions.
During February 2024, Mattel executed $100.0 million of share repurchases under the new program. Repurchases under the program will take place from time to time, depending on market conditions.
Removed
December 31, 2017 2018 2019 2020 2021 2022 Cumulative Total Return: Mattel, Inc. $ 100.00 $ 64.95 $ 88.10 $ 113.46 $ 140.18 $ 115.99 S&P 500 $ 100.00 $ 95.61 $ 125.70 $ 148.81 $ 191.48 $ 156.77 S&P 500 Consumer Discretionary $ 100.00 $ 91.61 $ 116.91 $ 129.47 $ 153.59 $ 152.64 29 Item 6. Reserved.
Added
During 2022 and 2021, Mattel did not repurchase any shares of its common stock.
Added
December 31, 2018 2019 2020 2021 2022 2023 Cumulative Total Return: Mattel, Inc. $ 100.00 $ 135.64 $ 174.67 $ 215.82 $ 178.58 $ 188.99 S&P 500 $ 100.00 $ 126.17 $ 143.39 $ 178.85 $ 155.42 $ 180.90 S&P 500 Consumer Discretionary $ 100.00 $ 126.53 $ 165.74 $ 211.63 $ 167.12 $ 207.71 28 Item 6. Reserved.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn connection with the Program, Mattel has recorded severance and other restructuring costs in the following cost and expense categories within operating income in the consolidated statements of operations: For the Year Ended December 31, 2022 December 31, 2021 December 31, 2020 (In millions) Cost of sales (a) $ 10.7 $ 2.9 $ 5.7 Other selling and administrative expenses (b) 23.6 32.3 7.2 $ 34.3 $ 35.2 $ 12.9 (a) Severance and other restructuring costs recorded within cost of sales in the consolidated statements of operations are included in segment operating income (loss) in "Note 13 to the Consolidated Financial Statements—Segment Information".
Biggest changeIn connection with the OFG 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 Year Ended December 31, 2023 December 31, 2022 December 31, 2021 (In millions) Cost of sales (a) $ (1.3) $ 10.7 $ 2.9 Other selling and administrative expenses (b) 32.3 23.6 32.3 $ 31.0 $ 34.3 $ 35.2 (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 14 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 14 to the Consolidated Financial Statements—Segment Information." As of December 31, 2023, Mattel had recorded cumulative severance and other restructuring charges related to the OFG program, including previous actions taken under the Capital Light program, of approximately $196 million, which included approximately $73 million of non-cash charges.
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.
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.
There is a risk that customers will not pay, or that payment may be delayed, because of bankruptcy, financial difficulty, or other factors beyond the control of Mattel. This could increase Mattel's exposure to losses from bad debts. A small number of customers account for a large share of Mattel's net sales and accounts receivable.
There is a risk that customers will not pay, or that payment may be delayed, because of bankruptcy, financial difficulty, or other factors beyond the control of Mattel. This could increase Mattel's exposure to losses from bad debts. 42 A small number of customers account for a large share of Mattel's net sales and accounts receivable.
Unexpected changes in these factors could result in excess inventory in a particular product line, which would require management to record a valuation adjustment on such inventory. Mattel bases its production schedules for toy products on customer orders and forecasts, taking into account historical trends, results of market research, and current market information.
Unexpected changes in these factors could result in excess inventory in a particular product line, which would require management to record a valuation adjustment on such inventory. 43 Mattel bases its production schedules for toy products on customer orders and forecasts, taking into account historical trends, results of market research, and current market information.
Significant changes in the assumptions used in the goodwill impairment tests could materially affect key financial measures, including net income and goodwill. For purposes of evaluating whether goodwill is impaired, goodwill is allocated to various reporting units, which are at the operating segment level. Mattel's reporting units are: (i) North America, (ii) International, and (iii) American Girl.
Significant changes in the assumptions used in the goodwill impairment tests could materially affect key financial measures, including net income and goodwill. 44 For purposes of evaluating whether goodwill is impaired, goodwill is allocated to various reporting units, which are at the operating segment level. Mattel's reporting units are: (i) North America, (ii) International, and (iii) American Girl.
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. 47
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.
Mattel closely monitors its counterparties and takes action, as necessary, to manage its counterparty credit risk. 39 Mattel expects that some of its customers and vendors may experience difficulty in obtaining the liquidity required to buy inventory or raw materials.
Mattel closely monitors its counterparties and takes action, as necessary, to manage its counterparty credit risk. Mattel expects that some of its customers and vendors may experience difficulty in obtaining the liquidity required to buy inventory or raw materials.
Significant changes in the assumptions used to develop the estimate could materially affect key financial measures, including other selling and administrative expenses, net income, and accounts receivable. 42 Mattel's products are sold throughout the world.
Significant changes in the assumptions used to develop the estimate could materially affect key financial measures, including other selling and administrative expenses, net income, and accounts receivable. Mattel's products are sold throughout the world.
The increase in the North America segment gross billings was due to higher billings of Vehicles and Action Figures, Building Sets, Games, and Other, partially offset by lower billings of Dolls and Infant, Toddler, and Preschool.
The increase in the North America segment gross billings was primarily due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games, and Other and Infant, Toddler, and Preschool.
The Tax Cuts and Jobs Act, enacted on December 22, 2017 (the "U.S. Tax Act"), provides Mattel with a reduced cost to access the earnings of its foreign subsidiaries.
The Tax Cuts and Jobs Act, enacted on December 22, 2017 (the "U.S. Tax Act"), provides Mattel with a reduced cost to access the earnings of its foreign subsidiaries. With the passage of the U.S.
Mattel has omitted discussion of 2020 results where it would be redundant to the discussion previously included in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations," of Mattel's Annual Report on Form 10-K for the year ended December 31, 2021.
Mattel has omitted discussion of 2021 results where it would be redundant to the discussion previously included in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations," of Mattel's Annual Report on Form 10-K for the year ended December 31, 2022.
Changes in gross billings are discussed below because, while Mattel records the details of sales adjustments in its financial records at the time of sale, such sales adjustments are generally recorded by customer and are not associated with categories, brands, or individual products.
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.
There were no events or changes in circumstances subsequent to the third quarter assessment that indicate that the carrying amount of a reporting unit may exceed its fair value as of December 31, 2022. 45 Sales Adjustments Mattel routinely enters into arrangements with its customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise.
There were no events or changes in circumstances subsequent to the third quarter assessment that indicate that the carrying amount of a reporting unit may exceed its fair value as of December 31, 2023. Sales Adjustments Mattel routinely enters into arrangements with its customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise.
However, based on Mattel's current business plan and factors known to date, it is expected that existing cash and equivalents, cash flows from operations, availability under the Revolving Credit Facility, and access to capital markets, will be sufficient to meet working capital and operating expenditure requirements for the next twelve months.
However, based on Mattel's current business plan and factors known to date, it is expected that existing cash and equivalents, cash flows from operations, availability under the Revolving Credit Facility, and access to capital markets, will be sufficient to meet working capital and operating expenditure requirements for the next twelve months and in the long-term.
Additionally, Mattel uses a variety of financial arrangements to ensure 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.
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.
A hypothetical 1% increase or decrease to the allowance for credit losses as a percentage of accounts receivable would have impacted 2022 and 2021 other selling and administrative expenses by approximately $9 million and $11 million, respectively. 43 Inventories—Obsolescence Reserve Inventories are stated at the lower of cost or net realizable value.
A hypothetical 1% increase or decrease to the allowance for credit losses as a percentage of accounts receivable would have impacted 2023 and 2022 other selling and administrative expenses by approximately $11 million and $9 million, respectively. Inventories—Obsolescence Reserve Inventories are stated at the lower of cost or net realizable value.
The decrease in International segment gross billings was due to lower billings of Dolls and Infant, Toddler, and Preschool, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other.
The increase in the International segment gross billings was due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games and Other and Infant, Toddler, and Preschool.
The decrease in gross billings was due to lower billings of Dolls and Infant, Toddler, and Preschool, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other.
The increase in gross billings was due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games, and Other and Infant, Toddler, and Preschool.
As of December 31, 2022, Mattel's valuation allowances on its U.S. federal and state deferred tax assets and foreign deferred tax assets were approximately $18 million and $74 million, respectively.
As of December 31, 2022, Mattel's valuation allowances on its U.S. federal and state deferred tax assets and foreign deferred tax assets were approximately $16 million and $74 million, respectively.
As of December 31, 2022, Mattel's valuation allowances on its U.S. federal and state deferred tax assets and foreign deferred tax assets were approximately $18 million and $74 million, respectively.
As of December 31, 2022, Mattel's valuation allowances on its U.S. federal and state deferred tax assets and foreign deferred tax assets were approximately $16 million and $74 million, respectively.
A hypothetical 1% increase or decrease to inventory reserves as a percentage of gross inventory at December 31, 2022 and 2021 would have impacted 2022 and 2021 cost of sales by approximately $9 million and $8 million, respectively. Goodwill Mattel tests goodwill for impairment annually or more often if an event or circumstance indicates that an impairment may have occurred.
A hypothetical 1% increase or decrease to inventory reserves as a percentage of gross inventory at December 31, 2023 and 2022 would have impacted 2023 and 2022 cost of sales by approximately $6 million and $9 million, respectively. Goodwill Mattel tests goodwill for impairment annually or more often if an event or circumstance indicates that an impairment may have occurred.
The following table summarizes Mattel's allowance for credit losses: December 31, 2022 December 31, 2021 (In millions, except percentage information) Allowance for credit losses $ 27.6 $ 10.7 As a percentage of total accounts receivable 3.1 % 1.0 % Changes in the allowance for credit losses reflect management's assessment of the factors noted above, including changes in current economic trends, business environment, past due accounts, disputed balances with customers, and the financial condition of customers.
The following table summarizes Mattel's allowance for credit losses: December 31, 2023 December 31, 2022 (In millions, except percentage information) Allowance for credit losses $ 8.8 $ 27.6 As a percentage of total accounts receivable 0.8 % 3.1 % Changes in the allowance for credit losses reflect management's assessment of the factors noted above, including changes in current economic trends, business environment, past due accounts, disputed balances with customers, and the financial condition of customers.
Consistent with prior periods, Mattel intends to utilize its existing cash and cash equivalents, cash flow from operations, and Revolving Credit Facility to meet its short-term liquidity needs. At December 31, 2022, Mattel had no outstanding borrowings under the Revolving Credit Facility and approximately $8 million in outstanding letters of credit under the Revolving Credit Facility.
Consistent with prior periods, Mattel intends to utilize its existing cash and cash equivalents, cash flow from operations, and borrowings under the Revolving Credit Facility to meet its short-term liquidity needs. At December 31, 2023, Mattel had no outstanding borrowings under the Revolving Credit Facility and approximately $9 million in outstanding letters of credit under the Revolving Credit Facility.
Although the letters of credit are off-balance sheet, the majority of the obligations to which they relate are reflected as liabilities in the consolidated balance sheets. Outstanding letters of credit totaled approximately $8 million and $10 million as of December 31, 2022 and 2021, respectively.
Although the letters of credit are off-balance sheet, the majority of the obligations to which they relate are reflected as liabilities in the consolidated balance sheets. Outstanding letters of credit totaled approximately $9 million and $8 million as of December 31, 2023 and 2022, respectively.
As of December 31, 2022, Mattel's three largest customers accounted for approximately 38% of net accounts receivable, and its ten largest customers accounted for approximately 48% of net accounts receivable. Should one or more of Mattel's large customers experience bankruptcy or financial difficulty, the allowance for credit losses may not be sufficient to cover such losses.
As of December 31, 2023, Mattel's three largest customers accounted for approximately 41% of net accounts receivable, and its ten largest customers accounted for approximately 49% of net accounts receivable. Should one or more of Mattel's large customers experience bankruptcy or financial difficulty, the allowance for credit losses may not be sufficient to cover such losses.
Mattel last performed a quantitative goodwill impairment assessment as of August 1, 2020, and the resulting calculations indicated the fair values exceeded the carrying amounts of Mattel's reporting units by 3.7 times, 1.8 times, and 1.6 times for the North America, International, and American Girl reporting units, respectively.
Mattel performed a quantitative goodwill impairment assessment as of August 1, 2023, and the resulting calculations indicated that the fair values exceeded the carrying amounts of Mattel's reporting units by 4.3 times, 1.7 times, and 1.8 times for the North America, International, and American Girl reporting units, respectively.
Mattel has paused all shipments into Russia and net sales in these countries have declined during the year ended December 31, 2022. Mattel's net sales in these two countries represented less than 1% and 2% of total net sales during the years ended December 31, 2022 and 2021, respectively.
Mattel paused all shipments into Russia in early 2022, and net sales in these countries have declined during the years ended December 31, 2023 and 2022. Mattel's net sales in these two countries represented less than 1% of total net sales during the years ended December 31, 2023 and 2022, respectively.
The payment of dividends on common stock is at the discretion of the Board of Directors and is subject to customary limitations. Seasonal Financing See Item 8 "Financial Statements and Supplementary Data—Note 5 to the Consolidated Financial Statements—Seasonal Financing and Debt." Credit Ratings In 2022, Fitch changed Mattel's long-term credit rating from BB to BB+ with a positive outlook.
The payment of dividends on common stock is at the discretion of the Board of Directors and is subject to customary limitations. Seasonal Financing See Item 8 "Financial Statements and Supplementary Data—Note 6 to the Consolidated Financial Statements—Seasonal Financing and Debt." Credit Ratings In 2023, Fitch maintained Mattel's credit rating of BB+ with a positive outlook.
Accruals for these programs are recorded as sales adjustments that reduce gross billings in the period the related sale is recognized. Sales adjustments for such programs totaled $613.6 million or 11.3% as a percentage of net sales in 2022 and $623.9 million or 11.4% as a percentage of net sales in 2021.
Accruals for these programs are recorded as sales adjustments that reduce gross billings in the period the related sale is recognized. Sales adjustments for such programs totaled $660.6 million or 12.1% as a percentage of net sales in 2023 and $613.6 million or 11.3% as a percentage of net sales in 2022.
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 $761.2 million in cash and equivalents at December 31, 2022, approximately $304.1 million was held by foreign subsidiaries, including $69.2 million held in Russia.
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 $1.26 billion in cash and equivalents at December 31, 2023, $578.1 million was held by foreign subsidiaries, including $57.2 million held in Russia.
American Girl Segment The following table provides a summary of Mattel's net sales and segment operating income for the American Girl segment for 2022 and 2021: For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2022 December 31, 2021 (In millions, except percentage information) Net Sales $ 226.9 $ 270.3 -16 % — % Segment Operating Income 0.2 5.4 N/M N/M - Not meaningful Net sales for the American Girl segment in 2022 were $226.9 million, a decrease of $43.4 million or 16%, as compared to $270.3 million in 2021.
American Girl Segment The following table provides a summary of Mattel's net sales and segment operating income for the American Girl segment for 2023 and 2022: For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2023 December 31, 2022 (In millions, except percentage information) Net Sales $ 207.2 $ 226.9 -9 % — % Segment Operating (Loss) Income (5.7) 0.2 N/M N/M - Not meaningful Net sales for the American Girl segment in 2023 were $207.2 million, a decrease of $19.6 million, or 9%, as compared to $226.9 million in 2022.
Cost of sales decreased by $10.7 million, or 9%, to $106.1 million in 2022 from $116.8 million in 2021, as compared to a 16% decrease in net sales, primarily due to a decrease of product and other costs of $7.2 million.
Cost of sales decreased by $8.2 million, or 8%, to $97.9 million in 2023 from $106.1 million in 2022, as compared to a 9% decrease in net sales, primarily due to a decrease of product and other costs of $9.8 million.
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.
Mattel's cash held in Russia can be used within the country; however, its movement out of Russia is currently limited. 38 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.
Segment Results North America Segment The following table provides 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 2022 and 2021: For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2022 December 31, 2021 (In millions, except percentage information) Net Sales $ 2,987.8 $ 2,968.3 1 % — % Segment Operating Income 765.9 872.5 -12 % Net sales for the North America segment in 2022 were $2.99 billion, an increase of $19.6 million or 1%, as compared to $2.97 billion in 2021.
Segment Results North America Segment The following tables provide a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the North America segment for 2023 and 2022: For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2023 December 31, 2022 (In millions, except percentage information) Net Sales $ 3,003.2 $ 2,987.8 1 % — % Segment Operating Income 793.4 765.9 4 % Net sales for the North America segment in 2023 were $3.00 billion, an increase of $15.4 million or 1%, as compared to $2.99 billion in 2022.
In 2022, Mattel's three largest customers, Walmart, Target, and Amazon, in the aggregate, accounted for approximately 43% of net sales, and its ten largest customers, in the aggregate, accounted for approximately 52% of net sales.
In 2023, Mattel's three largest customers, Walmart, Target, and Amazon, in the aggregate, accounted for approximately 44% of net sales, and its ten largest customers, in the aggregate, accounted for approximately 50% of net sales.
The allowance for credit losses is also affected by the time at which uncollectable accounts receivable balances are actually written off. For the years ended December 31, 2022 and 2021, Mattel recorded a charge related to its allowance for credit losses of approximately $18 million and $1 million, respectively, which was recognized as other selling and administrative expenses.
The allowance for credit losses is also affected by the time at which uncollectable accounts receivable balances are actually written off. For the year ended December 31, 2023, Mattel recorded a benefit related to its allowance for credit losses of approximately $2 million, which was recognized as other selling and administrative income.
Mattel estimates the cost of actions for the Program, excluding previous actions taken under the Capital Light program, to be as follows: Optimizing for Growth - Actions Estimate of Cost Employee severance $40 to $50 million Real estate/supply chain optimization and other restructuring costs $25 to $35 million Non-cash charges (a) $55 to $60 million Total estimated severance and restructuring costs $120 to $145 million Information technology enhancements and other investments $70 to $80 million Total estimated actions $190 to $225 million (a) Non-cash charges include $45.4 million of currency translation losses that were recognized within other non-operating expense, net, in the consolidated statement of operations during 2022 as a result of Mattel's liquidation of its subsidiary in Argentina, which was substantially completed in 2022.
The cost of actions for the OFG program, excluding previous actions taken under the Capital Light program, were as follows: Optimizing for Growth – Actions Total Cost Employee severance $55 million Real estate/supply chain optimization and other restructuring costs $33 million Non-cash charges (a) $58 million Total severance and restructuring costs $146 million Information technology enhancements and other investments $82 million Total actions $228 million (a) Non-cash charges include $45.4 million of currency translation losses that were recognized within other non-operating expense, net, in the consolidated statement of operations during 2022 as a result of Mattel's liquidation of its subsidiary in Argentina, which was substantially completed in 2022.
These accounting policies and estimates include significant judgments made by management using information available at the time the estimates are made. As described below, however, these estimates could change materially if different information or assumptions were used instead.
The accounting policies and estimates described below are those Mattel considers most critical in preparing its consolidated financial statements. These accounting policies and estimates include significant judgments made by management using information available at the time the estimates are made. As described below, however, these estimates could change materially if different information or assumptions were used instead.
Overview Mattel is a leading global toy company and owner of one of the strongest catalogs of children's and family entertainment franchises in the world. Mattel creates innovative products and experiences that inspire, entertain, and develop children through play.
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.
A summary of Mattel's capitalization is as follows: December 31, 2022 December 31, 2021 (In millions, except percentage information) Cash and equivalents $ 761.2 $ 731.4 2010 Senior Notes due October 2040 250.0 250.0 2011 Senior Notes due November 2041 300.0 300.0 2013 Senior Notes due March 2023 — 250.0 2019 Senior Notes due December 2027 600.0 600.0 2021 Senior Notes due April 2026 600.0 600.0 2021 Senior Notes due April 2029 600.0 600.0 Debt issuance costs and debt discount (24.4) (29.0) Total debt 2,325.6 53 % 2,571.0 62 % Stockholders' equity 2,056.3 47 1,568.8 38 Total capitalization (debt plus equity) $ 4,381.9 100 % $ 4,139.8 100 % On December 30, 2022, Mattel used cash on hand to redeem and retire $250 million aggregate principal amount of the 3.15% Senior Notes due 2023.
Accounts payable and accrued liabilities increased $158.4 million to $1.31 billion at December 31, 2023, as compared to $1.15 billion at December 31, 2022, primarily due to higher accrued incentive compensation of $137.8 million. 40 A summary of Mattel's capitalization is as follows: December 31, 2023 December 31, 2022 (In millions, except percentage information) Cash and equivalents $ 1,261.4 $ 761.2 2010 Senior Notes due October 2040 250.0 250.0 2011 Senior Notes due November 2041 300.0 300.0 2019 Senior Notes due December 2027 600.0 600.0 2021 Senior Notes due April 2026 600.0 600.0 2021 Senior Notes due April 2029 600.0 600.0 Debt issuance costs and debt discount (20.0) (24.4) Total debt 2,330.0 52 % 2,325.6 53 % Stockholders' equity 2,149.2 48 2,056.3 47 Total capitalization (debt plus equity) $ 4,479.2 100 % $ 4,381.9 100 % On December 30, 2022, Mattel used cash on hand to redeem and retire the $250 million aggregate principal amount of the 2013 Senior Notes due 2023.
Action Figures, Building Sets, Games, and Other gross billings increased 8%, of which 13% was due to higher billings of Jurassic World products and 9% was due to higher billings of Lightyear products, as a result of their theatrical releases during the second quarter of 2022.
Action Figures, Building Sets, Games, and Other gross billings decreased 26%, of which 13% was due to lower billings of Jurassic World products and 9% was due to lower billings of Lightyear products, following their theatrical releases during the second quarter of 2022, and 2% was due to lower billings of other Action Figures products.
American Girl segment operating income was $0.2 million in 2022, as compared to segment operating income of $5.4 million in 2021, due to lower gross profit, partially offset by lower other selling and administrative expenses of $25.0 million, including $15.2 million from a gain on the sale of the American Girl corporate offices and distribution center during 2022. 37 Cost Savings Programs Optimizing for Growth (formerly Capital Light) In February 2021, Mattel announced the Optimizing for Growth program, a multi-year cost savings program that integrates and expands upon the previously announced Capital Light program (the "Program"), which had targeted annual gross cost savings of $250 million from actions expected to be completed beginning 2021 through 2023.
The decrease in other selling and administrative expenses was primarily due to lower rent expense of $7.9 million and lower miscellaneous other selling and administrative expenses, partially offset by a gain on the sale of the American Girl corporate office and distribution center in the prior year of $15.2 million, which reduced other selling and administrative expense in 2022. 36 Cost Savings Programs Optimizing for Growth (formerly Capital Light) In February 2021, Mattel announced the Optimizing for Growth program (the "OFG program"), a multi-year cost savings program that integrates and expands upon the previously announced Capital Light program, which had targeted annual gross cost savings of $250 million from actions expected to be completed beginning 2021 through 2023.
In February 2023, Mattel expanded the Program and increased the targeted annual gross cost savings from $250 million to $300 million, reflecting additional initiatives, including actions to further streamline Mattel's organizational structure. The additional initiatives are estimated to result in incremental employee severance charges of $10 million to $15 million during 2023.
In February 2023, Mattel expanded the OFG program and increased the targeted annual gross cost savings from $250 million to $300 million, reflecting additional initiatives, including actions to further streamline Mattel's organizational structure.
The increase in net sales was the result of an increase in gross billings of $31.2 million, partially offset by an increase in sales adjustments of $11.7 million. 34 For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2022 December 31, 2021 (In millions, except percentage information) Gross Billings by Categories Dolls $ 940.3 $ 1,011.1 -7 % — % Infant, Toddler, and Preschool 698.3 758.8 -8 % — % Vehicles 736.9 633.0 16 % -1 % Action Figures, Building Sets, Games, and Other 810.6 752.0 8 % — % Gross Billings $ 3,186.1 $ 3,154.9 1 % — % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 776.3 $ 903.5 -14 % — % Hot Wheels 617.9 529.5 17 % — % Fisher-Price and Thomas & Friends 635.1 685.5 -7 % — % Other 1,156.8 1,036.4 12 % — % Gross Billings $ 3,186.1 $ 3,154.9 1 % — % Gross billings were $3.19 billion in 2022, an increase of $31.2 million, or 1%, as compared to $3.15 billion in 2021.
The increase in net sales was the result of an increase in gross billings of $32.2 million, partially offset by an increase in sales adjustments of $16.8 million. 33 For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2023 December 31, 2022 (In millions, except percentage information) Gross Billings by Categories Dolls $ 1,153.8 $ 940.3 23 % — % Infant, Toddler, and Preschool 618.6 698.3 -11 % — % Vehicles 812.4 736.9 10 % — % Action Figures, Building Sets, Games, and Other 633.5 810.6 -22 % — % Gross Billings $ 3,218.3 $ 3,186.1 1 % — % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 840.4 $ 776.3 8 % — % Hot Wheels 690.8 617.9 12 % — % Fisher-Price 532.0 584.5 -9 % — % Other 1,155.1 1,207.3 -4 % — % Gross Billings $ 3,218.3 $ 3,186.1 1 % — % Gross billings were $3.22 billion in 2023, an increase of $32.2 million, or 1%, as compared to $3.19 billion in 2022.
Advertising and promotion expenses as a percentage of net sales were relatively flat in 2022 at 9.8% in 2022, compared to 10.0% in 2021. Other Selling and Administrative Expenses Other selling and administrative expenses were $1.27 billion in 2022, as compared to $1.35 billion in 2021.
Advertising and promotion expenses as a percentage of net sales were relatively flat in 2023 at 9.6% in 2023, compared to 9.8% in 2022. Other Selling and Administrative Expenses Other selling and administrative expenses were $1.50 billion, or 27.5% of net sales, in 2023, as compared to $1.27 billion, or 23.4% of net sales, in 2022.
The resumption of repurchases under this program was announced on February 8, 2023. Repurchases under the program will take place from time to time, depending on market conditions. Mattel's share repurchase program has no expiration date. During 2022 and 2021, Mattel did not pay any dividends to holders of its common stock.
On February 5, 2024, the Board of Directors authorized a new $1.00 billion share repurchase program. Repurchases under the program will take place from time to time, depending on market conditions. Mattel's share repurchase program has no expiration date. During 2023 and 2022, Mattel did not pay any dividends to holders of its common stock.
In 2022, Moody's changed Mattel's long-term credit rating from Ba2 to Baa3 and maintained a stable outlook. In 2022, Standard & Poor's changed Mattel's long-term credit rating from BB to BB+ and maintained a positive outlook.
In 2023, Moody's maintained Mattel's credit rating of Baa3 with a stable outlook. In 2023, Standard & Poor's changed Mattel's credit rating from BB+ to BBB- and maintained a positive outlook.
Generally, slow-moving inventory is liquidated during the next annual selling cycle. 44 The following table summarizes Mattel's obsolescence reserve: December 31, 2022 December 31, 2021 (In millions, except percentage information) Obsolescence reserve $ 41.8 $ 31.3 As a percentage of gross inventory 4.5 % 3.9 % For the years ended December 31, 2022 and 2021, Mattel recorded a charge related to its inventory obsolescence reserve of approximately $65 million and $41 million, which was recognized as cost of sales.
The following table summarizes Mattel's obsolescence reserve: December 31, 2023 December 31, 2022 (In millions, except percentage information) Obsolescence reserve $ 46.7 $ 41.8 As a percentage of gross inventory 7.5 % 4.5 % For the years ended December 31, 2023 and 2022, Mattel recorded a charge related to its inventory obsolescence reserve of approximately $64 million and $65 million, respectively, which was recognized as cost of sales.
During 2022 and 2021, Mattel did not repurchase any shares of its common stock. Mattel's share repurchase program was first announced on July 21, 2003. On July 17, 2013, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0 million. At December 31, 2022, share repurchase authorizations of $203.0 million had not been executed.
During 2022, Mattel did not repurchase any shares of its common stock. Mattel's share repurchase program was first announced on July 21, 2003. On July 17, 2013, the Board of Directors approved a $500.0 million increase to Mattel's share repurchase authorization and, as of December 31, 2023, such authorization was exhausted.
North America segment operating income was $765.9 million in 2022, as compared to segment operating income of $872.5 million in 2021, due to lower gross profit. 35 International Segment The following table provides 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 2022 and 2021: For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2022 December 31, 2021 (In millions, except percentage information) Net Sales $ 2,220.0 $ 2,219.2 — % -7 % Segment Operating Income 295.8 350.0 -15 % Net sales for the International segment in 2022 were $2.22 billion, relatively flat as compared to 2021.
North America segment operating income was $793.4 million in 2023, as compared to segment operating income of $765.9 million in 2022, due to higher gross profit of $42.9 million, partially offset by higher other selling and administrative expenses of $15.9 million. 34 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 2023 and 2022: For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2023 December 31, 2022 (In millions, except percentage information) Net Sales $ 2,230.8 $ 2,220.0 — % 3 % Segment Operating Income 299.1 295.8 1 % Net sales for the International segment in 2023 were $2.23 billion, relatively flat as compared to $2.22 billion in 2022.
The timeframe between when an estimate is made and the time of disposal depends on the above factors and may vary significantly.
The timeframe between when an estimate is made and the time of disposal depends on the above factors and may vary significantly. Generally, slow-moving inventory is liquidated during the next annual selling cycle.
Action Figures, Building Sets, Games, and Other gross billings increased 7%, of which 11% was due to higher billings of Jurassic World products and 10% was due to higher billings of Lightyear products, as a result of their theatrical releases during the second quarter of 2022.
Action Figures, Building Sets, Games, and Other gross billings decreased 24%, of which 14% was due to lower billings of Jurassic World products and 9% was due to lower billings of Lightyear products, following their theatrical releases during the second quarter of 2022.
For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2022 December 31, 2021 (In millions, except percentage information) Gross Billings by Categories Dolls $ 909.7 $ 1,010.1 -10 % -7 % Infant, Toddler, and Preschool 419.2 462.1 -9 % -6 % Vehicles 713.9 619.8 15 % -9 % Action Figures, Building Sets, Games, and Other 585.5 556.8 5 % -8 % Gross Billings $ 2,628.2 $ 2,648.8 -1 % -8 % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 714.2 $ 775.8 -8 % -7 % Hot Wheels 633.5 538.8 18 % -9 % Fisher-Price and Thomas & Friends 398.7 442.7 -10 % -6 % Other 881.8 891.4 -1 % -7 % Gross Billings $ 2,628.2 $ 2,648.8 -1 % -8 % Gross billings for the International segment were $2.63 billion in 2022, a decrease of $20.6 million, or 1%, as compared to $2.65 billion in 2021, with an unfavorable impact from changes in currency exchange rates of eight percentage points.
For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2023 December 31, 2022 (In millions, except percentage information) Gross Billings by Categories Dolls $ 1,026.2 $ 909.7 13 % 4 % Infant, Toddler, and Preschool 382.2 419.2 -9 % 4 % Vehicles 828.6 713.9 16 % 4 % Action Figures, Building Sets, Games, and Other 432.3 585.5 -26 % 3 % Gross Billings $ 2,669.4 $ 2,628.2 2 % 4 % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 697.4 $ 714.2 -2 % 3 % Hot Wheels 741.6 633.5 17 % 4 % Fisher-Price 320.6 351.4 -9 % 4 % Other 909.8 929.1 -2 % 3 % Gross Billings $ 2,669.4 $ 2,628.2 2 % 4 % Gross billings for the International segment were $2.67 billion in 2023, an increase of $41.1 million, or 2%, as compared to $2.63 billion in 2022, with a favorable impact from changes in currency exchange rates of four percentage points.
Mattel is focused on the following evolved strategy to grow its IP-driven toy business and expand its entertainment offering: • Accelerate topline growth through scaling Mattel's portfolio, growing franchise brands, and advancing e-commerce and direct-to-consumer business, and increasing profitability by continuing to optimize operations; and • Expand entertainment offering to capture the full value of Mattel's IP in highly accretive business verticals, including content, consumer products, and digital experiences.
Mattel is focused on the following strategy to grow its 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.
Stockholders' equity increased $487.4 million to $2.06 billion at December 31, 2022, as compared to $1.57 billion at December 31, 2021, primarily due to net income in 2022 of $393.9 million and the impact of share-based compensation on additional paid-in capital of $69.1 million.
Stockholders' equity increased $92.9 million to $2.15 billion at December 31, 2023, as compared to $2.06 billion at December 31, 2022, primarily due to net income in 2023 of $214.4 million and the impact of share-based compensation on additional paid-in capital of $83.3 million, partially offset by share repurchases of $203.0 million.
Dolls gross billings decreased 9%, of which 8% was due to lower billings of Barbie products, 2% was due to lower billings of American Girl products, and 2% was due to lower billings of Spirit products. This was partially offset by higher billings of Monster High products of 3% and higher billings of Disney Princess and Frozen products of 1%.
Dolls gross billings increased 13%, of which 12% was due to higher billings of Disney Princess and Disney Frozen products and 8% was due to higher billings of Monster High products, partially offset by lower billings of Enchantimals products of 4% and lower billings of Barbie products of 2%.
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 provided by operating activities were $442.8 million in 2022, as compared to $485.5 million in 2021.
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.
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.
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.
Within cost of sales, product and other costs increased by $65.6 million, or 3%, to $2.42 billion in 2022 from $2.35 billion in 2021; royalty expense increased by $46.5 million, or 25%, to $230.8 million in 2022 from $184.3 million in 2021, and freight and logistics expenses increased by $10.2 million, or 3%, to $302.6 million in 2022 from $292.4 million in 2021.
Within cost of sales, product and other costs decreased by $139.3 million, or 6%, to $2.28 billion in 2023 from $2.42 billion in 2022, freight and logistics expenses increased by $24.4 million, or 8%, to $327.0 million in 2023 from $302.6 million in 2022, and royalty expense increased by $19.0 million, or 8%, to $249.8 million in 2023 from $230.8 million in 2022.
International segment operating income was $295.8 million in 2022, as compared to segment operating income of $350.0 million in 2021, due to lower gross profit, partially offset by lower advertising and promotion expenses of $17.8 million.
International segment operating income was $299.1 million in 2023, as compared to segment operating income of $295.8 million in 2022, primarily due to lower other selling and administrative expenses of $7.6 million and lower advertising and promotion expenses of $5.7 million, offset by lower gross profit of $10.0 million.
Tax Act, repatriations of foreign cash generally will not be taxable for U.S. federal income tax, but may be subject to state income tax and/or foreign withholding tax, in addition to any local country distribution requirements. Current Market Conditions Mattel is exposed to financial market risk resulting from changes in interest and foreign currency exchange rates.
Tax Act, repatriations of foreign earnings generally will not be taxable for U.S. federal income tax purposes, but may be subject to state income tax and/or foreign withholding tax, in addition to any local country distribution requirements.
Infant, Toddler, and Preschool gross billings decreased 8%, of which 7% was due to lower billings of Fisher-Price and Thomas & Friends products. Vehicles gross billings increased 16%, of which 15% was due to higher billings of Hot Wheels products due to positive brand momentum and the successful launches of remote control vehicles and Hot Wheels Skate finger boards.
Infant, Toddler, and Preschool gross billings decreased 9%, of which 7% was due to lower billings of Fisher-Price products. Vehicles gross billings increased 16%, of which 15% was due to higher billings of Hot Wheels products.
Estimated total cash expenditures associated with the Program, excluding previous actions taken under the Capital Light program, are expected to be approximately $135 to $165 million.
Total cash expenditures associated with the OFG program, excluding previous actions taken under the Capital Light program, were approximately $170 million.
If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized in an amount equal to the excess, limited by the amount of goodwill in that reporting unit.
If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized in an amount equal to the excess, limited by the amount of goodwill in that reporting unit. When performing the quantitative goodwill impairment test, Mattel determines the fair value of its reporting units based upon one or more acceptable valuation approaches.
The following table provides a summary of Mattel's consolidated gross billings by categories, along with supplemental information by brand for 2022 and 2021: For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2022 December 31, 2021 (In millions, except percentage information) Gross Billings by Categories Dolls $ 2,084.0 $ 2,299.1 -9 % -3 % Infant, Toddler, and Preschool 1,117.5 1,220.9 -8 % -2 % Vehicles 1,450.8 1,252.8 16 % -4 % Action Figures, Building Sets, Games, and Other 1,396.1 1,308.9 7 % -3 % Gross Billings $ 6,048.3 $ 6,081.6 -1 % -4 % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 1,490.6 $ 1,679.3 -11 % -3 % Hot Wheels 1,251.4 1,068.3 17 % -5 % Fisher-Price and Thomas & Friends 1,033.7 1,128.2 -8 % -2 % Other 2,272.5 2,205.8 3 % -3 % Gross Billings $ 6,048.3 $ 6,081.6 -1 % -4 % 32 Gross billings were $6.05 billion in 2022, a decrease of $33.3 million, or 1%, as compared to $6.08 billion in 2021, with an unfavorable impact from changes in currency exchange rates of four percentage points.
The following tables provide a summary of Mattel's consolidated gross billings by categories, along with supplemental information by brand, for 2023 and 2022: For the Year Ended % Change as Reported Currency Exchange Rate Impact December 31, 2023 December 31, 2022 (In millions, except percentage information) Gross Billings by Categories Dolls $ 2,394.2 $ 2,084.0 15 % 2 % Infant, Toddler, and Preschool 1,000.8 1,117.5 -10 % 1 % Vehicles 1,641.0 1,450.8 13 % 2 % Action Figures, Building Sets, Games, and Other 1,065.8 1,396.1 -24 % 1 % Gross Billings $ 6,101.8 $ 6,048.3 1 % 1 % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 1,537.8 $ 1,490.6 3 % 1 % Hot Wheels 1,432.4 1,251.4 14 % 2 % Fisher-Price 852.6 935.9 -9 % 1 % Other 2,279.0 2,370.4 -4 % 1 % Gross Billings $ 6,101.8 $ 6,048.3 1 % 1 % Gross billings were $6.10 billion in 2023, an increase of $53.6 million, or 1%, as compared to $6.05 billion in 2022, with a favorable impact from changes in currency exchange rates of one percentage point.
Cumulatively, in conjunction with previous actions taken under the Capital Light program prior to 2021, targeted annual gross cost savings for the Program are $375 million by 2023, with total expected cash expenditures of approximately $175 to $205 million, and total expected non-cash charges of $70 to $75 million.
Cumulatively, in conjunction with previous actions taken under the Capital Light program prior to 2021, Mattel achieved annual gross cost savings for the OFG program of $418 million as of December 31, 2023. The total cash expenditures were approximately $208 million, and total non-cash charges were $73 million.
Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such benefits will more likely than not (a greater than 50 percent likelihood) be realized. As of December 31, 2022 and 2021, the unrecognized tax benefit balance, inclusive of interest and penalties, was $127.7 million and $137.9 million, respectively.
Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such benefits will more likely than not (a greater than 50 percent likelihood) be realized.
Gross margin in 2022 decreased to 53.2% in 2022 from 56.8% in 2021, due to cost inflation of 230 basis points, royalty expense and other of 170 basis points, and inventory obsolescence of 30 basis points, partially offset by incremental realized savings from the Optimizing for Growth program of 80 basis points.
Gross margin in 2023 decreased to 52.8% from 53.2% in 2022, primarily due to cost inflation of 130 basis points, partially offset by incremental realized savings from the Optimizing for Growth program of 70 basis points and favorable product mix and other of 20 basis points.
Results of Operations Consolidated Results The following table includes Mattel's consolidated results for 2022 and 2021: 31 For the Year Ended Year/Year Change December 31, 2022 December 31, 2021 Amount % of Net Sales Amount % of Net Sales % Basis Points of Net Sales (In millions, except percentage and basis point information) Net sales $ 5,434.7 $ 5,457.7 — % Cost of sales 2,953.3 54.3 % 2,831.1 51.9 % 4 % 240 Gross profit 2,481.4 45.7 % 2,626.7 48.1 % -6 % (240) Advertising and promotion expenses 534.3 9.8 % 545.7 10.0 % -2 % (20) Other selling and administrative expenses 1,271.6 23.4 % 1,351.4 24.8 % -6 % (140) Operating income 675.5 12.4 % 729.6 13.4 % -7 % (100) Interest expense 132.8 2.4 % 253.9 4.7 % -48 % (230) Interest (income) (9.4) -0.2 % (3.5) -0.1 % 168 % (10) Other non-operating expense, net 47.8 8.4 Income before income taxes 504.3 9.3 % 470.8 8.6 % 7 % 70 Provision (benefit) for income taxes 135.9 (420.4) (Income) from equity method investment (25.4) (11.8) Net income $ 393.9 7.2 % $ 903.0 16.5 % -56 % (930) Sales Net sales in 2022 were $5.43 billion, a decrease of $23.1 million as compared to $5.46 billion in 2021.
Results of Operations Consolidated Results The following table presents Mattel's consolidated results for 2023 and 2022: For the Year Ended Year/Year Change December 31, 2023 December 31, 2022 Amount % of Net Sales Amount % of Net Sales % Basis Points of Net Sales (In millions, except percentage and basis point information) Net sales $ 5,441.2 $ 5,434.7 — % Cost of sales 2,857.5 52.5 % 2,953.3 54.3 % -3 % (180) Gross profit 2,583.7 47.5 % 2,481.4 45.7 % 4 % 180 Advertising and promotion expenses 524.8 9.6 % 534.3 9.8 % -2 % (20) Other selling and administrative expenses 1,497.3 27.5 % 1,271.6 23.4 % 18 % 410 Operating income 561.7 10.3 % 675.5 12.4 % -17 % (210) Interest expense 123.8 2.3 % 132.8 2.4 % -7 % (10) Interest (income) (25.2) -0.5 % (9.4) -0.2 % 169 % (30) Other non-operating (income) expense, net (2.3) 47.8 Income before income taxes 465.4 8.6 % 504.3 9.3 % -8 % (70) Provision for income taxes 269.5 135.9 (Income) from equity method investments (18.4) (25.4) Net income $ 214.4 3.9 % $ 393.9 7.2 % -46 % (330) Sales Net sales in 2023 were $5.44 billion, relatively flat as compared to $5.43 billion in 2022.
Other Non-Operating Expense, Net Other non-operating expense, net was $47.8 million in 2022, as compared to $8.4 million in 2021. In the fourth quarter of 2022, Mattel substantially completed the liquidation of its subsidiary in Argentina and recognized $45.4 million of currency translation adjustments as a loss in other non-operating expense, net, as a result of the liquidation.
In the fourth quarter of 2022, the liquidation of Mattel's subsidiary in Argentina was substantially completed, and Mattel recognized its cumulative currency translation adjustments of $45.4 million as a loss in other non-operating expense, net. See Item 7A "Quantitative and Qualitative Disclosures About Market Risk—Argentina Operations" for more information.
Action Figures, Building Sets, Games, and Other gross billings increased 5%, of which 10% was due to higher billings of Lightyear products and 8% was due to higher billings of Jurassic World products, in each case as a result of their theatrical releases during the second quarter of 2022.
Action Figures, Building Sets, Games, and Other gross billings decreased 22%, of which 14% was due to lower billings of Jurassic World products and 8% was due to lower billings of Lightyear products, following their theatrical releases during the second quarter of 2022. Sales adjustments increased to $215.1 million in 2023, as compared to $198.3 million in 2022.
For each reporting period, management applies a consistent methodology to measure unrecognized tax benefits and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant.
Mattel records unrecognized tax benefits for U.S. federal, state, local, and foreign tax positions related primarily to transfer pricing, tax credits claimed, tax nexus, and apportionment. For each reporting period, management applies a consistent methodology to measure unrecognized tax benefits, and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant.
Accounts receivable decreased $212.5 million to $860.2 million at December 31, 2022, as compared to $1.07 billion at December 31, 2021, due to the decline in net sales in the fourth quarter of 2022.
Accounts receivable increased $221.6 million to $1.08 billion at December 31, 2023, as compared to $860.2 million at December 31, 2022, primarily due to the increase in net sales of $218.8 million in the fourth quarter of 2023 compared to the prior year.
The decrease in net sales was the result of declines in gross billings of $33.3 million, partially offset by declines in sales adjustments of $10.3 million. Gross billings represents amounts invoiced to a customer and does not include the impact of sales adjustments, such as trade discounts and other allowances.
Net sales were impacted by higher gross billings of $53.6 million, which were partially offset by increases in sales adjustments of $47.0 million. 30 Gross billings represent amounts invoiced to a customer and do not include the impact of sales adjustments, such as trade discounts and other allowances.
The 2022 income tax provision included an $11.0 million tax expense related to certain foreign subsidiaries' deferred tax liabilities of undistributed earnings and a $15.2 million tax benefit related to reassessments of prior year's tax liabilities based on the status of audits and settlements in various jurisdictions.
The 2022 income tax provision included an $11.0 million tax expense related to certain foreign subsidiaries' deferred tax liabilities of undistributed earnings and a $15.2 million tax benefit related to reassessments of prior year's tax liabilities based on the status of audits and settlements in various jurisdictions. 32 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.
The decrease in cash flows provided by operating activities was primarily due to $62.2 million of higher working capital usage, partially offset by changes in net income, excluding the impact of non-cash items. Cash flows used for investing activities were $144.2 million in 2022, as compared to $105.1 million in 2021.
The improvements to working capital were partially offset by changes in net income, excluding the changes to deferred tax assets of $176.4 million and other non-cash items. Cash flows used for investing activities were $142.4 million in 2023, as compared to $144.2 million in 2022.
When performing the quantitative goodwill impairment test, Mattel determines the fair value based upon both the discounted cash flows that the business can be expected to generate in the future (the "Income Approach") and the market approach.
Mattel utilizes the income approach for each of its reporting units and the market approach is also utilized for the North America and International reporting units. The income approach determines the fair value based upon the discounted cash flows that the business can be expected to generate in the future.
Income Taxes Mattel's income tax provision and related income tax assets and liabilities are based on actual and expected future income, U.S. federal and foreign statutory income tax rates, and tax regulations and planning opportunities in the various jurisdictions in which Mattel operates.
A hypothetical 1% increase or decrease in Mattel's sales adjustments as a percentage of net sales during the years ended December 31, 2023 and 2022 would have impacted 2023 and 2022 net sales by approximately $54 million. 45 Income Taxes Mattel's income tax provision and related income tax assets and liabilities are based on actual and expected future income, U.S. federal and foreign statutory income tax rates, and tax regulations and planning opportunities in the various jurisdictions in which Mattel operates.
Of the $300 million in targeted gross cost savings, approximately 60% is expected to benefit cost of sales, 30% is expected to benefit other selling and administrative expenses, and 10% is expected to benefit advertising and promotion expenses.
Of the $418 million annual gross cost savings, approximately 70% benefits cost of sales, 20% benefits other selling and administrative expenses, and 10% benefits advertising and promotion expenses.
The decrease in other selling and administrative expenses was primarily due to lower incentive compensation of $128.2 million and incremental realized savings from the Optimizing for Growth program of $30.9 million, partially offset by market-related pay increases of $50.8 million and increases in bad debt expense of $17.7 million.
The increase in other selling and administrative expenses was primarily due to higher incentive compensation of $152.2 million, market-related pay increases of $38.1 million, higher severance and restructuring charges of $34.7 million, and a prior year gain on sale of assets of $26.9 million, partially offset by incremental realized savings from the Optimizing for Growth program of $46.0 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+2 added−2 removed7 unchanged
Biggest changeHowever, assuming that such factors were held constant, Mattel estimates that a one percent change in the U.S. dollar would have impacted Mattel's 2022 net sales by approximately 0.4% and would have less than a $0.01 impact to Mattel's net income per share.
Biggest changeHowever, assuming that such factors were held constant, Mattel estimates that a one percent change in the U.S. dollar would have impacted Mattel's 2023 net sales by approximately 0.4% and would have less than a $0.01 impact to Mattel's net income per share. 47 Mattel's foreign currency forward e xchange contracts that were used to hedge firm commitments and anticipated transactions as of December 31, 2023 are shown below.
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 expense, net based on the nature of the underlying transaction.
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.
Mattel's Turkey subsidiary represented approximately 1% of Mattel's consolidated net sales for the year ended December 31, 2022. Argentina Operations During the third quarter of 2021, Mattel began a process to liquidate its subsidiary in Argentina. The liquidation was substantially completed during the fourth quarter of 2022.
Mattel's Turkey subsidiary represented approximately 1% of Mattel's consolidated net sales for the year ended December 31, 2023. Argentina Operations During the third quarter of 2021, Mattel began a process to liquidate its subsidiary in Argentina. The liquidation was substantially completed during the fourth quarter of 2022.
Prior to the substantial completion of the liquidation, Mattel had recorded $45.4 million of currency translation adjustments in accumulated other comprehensive loss, net within its consolidated balance sheet.
Prior to the substantial completion of the liquidation, Mattel had recorded $45.4 million of currency translation adjustments in accumulated other comprehensive loss within its consolidated balance sheet.
For the purchase of foreign currencies, fair value reflects the amount, based on dealer quotes, that Mattel would pay at maturity for contracts involving the same notional amounts, currencies, and maturity dates, if they had been entered into as of December 31, 2022.
For the purchase of foreign currencies, fair value reflects the amount, based on dealer quotes, that Mattel would pay at maturity for contracts involving the same notional amounts, currencies, and maturity dates, if they had been entered into as of December 31, 2023.
For the sale of foreign currencies, fair value reflects the amount, based on dealer quotes, that Mattel would receive at maturity for contracts involving the same notional amounts, currencies, and maturity dates, if they had been entered into as of December 31, 2022.
For the sale of foreign currencies, fair value reflects the amount, based on dealer quotes, that Mattel would receive at maturity for contracts involving the same notional amounts, currencies, and maturity dates, if they had been entered into as of December 31, 2023.
Had Mattel not entered into hedges to limit the effect of currency exchange rate fluctuations on its results of operations and cash flows, its earnings before income taxes would have decreased by approximately $19 million in 2022 and decreased by approximately $3 million in 2021.
Had Mattel not entered into hedges to limit the effect of currency exchange rate fluctuations on its results of operations and cash flows, its earnings before income taxes would have decreased by approximately $30 million in 2023 and decreased by approximately $19 million in 2022.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Foreign Currency Exchange Rate Risk Currency exchange rate fluctuations impact Mattel's results of operations and cash flows. Unhedged transactions denominated in the Chinese yuan, Euro, Mexican peso, and Russian ruble were the primary transactions that caused foreign currency transaction exposure for Mattel in 2022.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Foreign Currency Exchange Rate Risk Currency exchange rate fluctuations impact Mattel's results of operations and cash flows. Unhedged transactions denominated in the Chinese yuan and Euro were the primary transactions that caused foreign currency transaction exposure for Mattel in 2023.
As a result of the substantially complete liquidation, the cumulative currency translation adjustments were removed from accumulated other comprehensive loss and recognized as a loss in other non-operating expense within the consolidated statement of operations. 49
As a result of the substantially complete liquidation, the cumulative currency translation adjustments were removed from accumulated other comprehensive loss and recognized as a loss in other non-operating expense within the consolidated statement of operations in the fourth quarter of 2022. 48
Mattel's primary currency translation adjustments in 2022 were related to its net investments in entities having functional currencies denominated in the British pound sterling, Euro, Mexican peso, Brazilian real, and Hong Kong dollar.
Mattel's primary currency translation adjustments in 2023 were related to its net investments in entities having functional currencies denominated in the Mexican peso, Russian ruble, and British pound sterling.
As of December 31, 2022, these contracts had a contract amount of $47.4 million and a fair value liability of $1.7 million.
As of December 31, 2023, these contracts had a contract amount of $45.6 million and a fair value asset of less than $0.1 million.
Removed
Mattel's foreign currency forward e xchange contracts that were used to hedge firm commitments and anticipated transactions as of December 31, 2022 are shown below.
Added
All contracts in the following table are against the U.S. dollar and are maintained by reporting units with a U.S. dollar functional currency.
Removed
All contracts in the following table are against the U.S. dollar and are maintained by reporting units with a U.S. dollar functional currency, with the exception of the Indonesian rupiah contracts, which are maintained by entities with an Indonesian rupiah functional currency. 48 Buy Sell Contract Amount Weighted-Average Contract Rate Fair Value Contract Amount Weighted-Average Contract Rate Fair Value (In thousands of U.S. dollars, except for rates) Australian dollar (a) $ — — $ — $ 65,176 0.70 $ 1,345 British pound sterling (a) 28,414 1.20 219 — — — Canadian dollar (a) 19,253 0.74 (31) 32,816 0.79 2,128 Czech koruna 9,155 22.74 104 — — — Danish krone 2,728 6.99 19 — — — Euro (a) 15,833 1.06 120 224,270 1.12 7,943 Hungarian forint 5,210 381.53 127 — — — Indonesian rupiah 36,094 15,068 (1,240) — — — Japanese yen — — — 8,689 132.05 (58) Mexican peso 60,129 19.46 (28) 13,222 19.95 (145) New Zealand dollar (a) 6,535 0.63 13 — — — Polish zloty 19,806 4.42 297 — — — Russian ruble 29,681 59.27 (5,234) — — — Singapore dollar 12,276 1.35 123 — — — South African rand — — — 5,552 17.38 (94) Swiss franc 27,411 0.92 140 — — — $ 272,525 $ (5,371) $ 349,725 $ 11,119 (a) The weighted-average contract rate for these contracts is quoted in U.S. dollar per local currency.
Added
Buy Sell Contract Amount Weighted-Average Contract Rate Fair Value Contract Amount Weighted-Average Contract Rate Fair Value (In thousands of U.S. dollars, except for rates) Australian dollar (a) $ — — $ — $ 75,109 0.67 $ (1,096) British pound sterling (a) — — — 9,085 1.27 15 Canadian dollar (a) 12,002 0.75 107 24,548 0.75 (180) Czech koruna 2,740 22.36 6 — — — Euro (a) 30,880 1.10 158 312,151 1.10 (3,524) Hungarian forint 5,916 350.50 62 — — — Japanese yen — — — 7,909 143.54 (142) Mexican peso — — — 52,399 17.86 (1,773) Polish zloty 17,869 3.95 99 — — — South African rand — — — 2,919 18.39 15 Swiss franc 4,418 0.86 111 — — — $ 73,825 $ 543 $ 484,120 $ (6,685) (a) The weighted-average contract rate for these contracts is quoted in U.S. dollar per local currency.

Other MAT 10-K year-over-year comparisons