Segment Information

9 Months Ended

Sep. 30, 2014

Segment Information

21. Segment Information

Mattel, through its subsidiaries, sells a broad variety of toy products which are grouped into four major brand categories, including the Construction and Arts & Crafts brand category, which was introduced in the second quarter of 2014:

Mattel Girls & Boys Brands—including Barbie^® fashion dolls and accessories (“Barbie”), Monster High^®, Disney Classics^®, Ever After High^®, Little Mommy^®, and Polly Pocket (collectively “Other Girls”), Hot Wheels^® and Matchbox^® vehicles and play sets (collectively “Wheels”), and CARS^®, Disney Planes™, Radica^®, Toy Story^®, Max Steel^®, WWE^® Wrestling, Batman^®, and games and puzzles (collectively “Entertainment”).

Fisher-Price Brands—including Fisher-Price^®, Little People^®, BabyGear™, Laugh & Learn^®, and Imaginext^® (collectively “Core Fisher-Price”), Thomas & Friends^®, Dora the Explorer^®, Mickey Mouse^® Clubhouse, and Disney Jake and the Never Land Pirates^® (collectively “Fisher-Price Friends”), and Power Wheels^®.

American Girl Brands—including My American Girl^®, BeForever™, and Bitty Baby^®. American Girl Brands products are sold directly to consumers via its catalog, website, and proprietary retail stores. Its children’s publications are also sold to certain retailers.

Construction and Arts & Crafts Brands—including MEGA BLOKS^®, RoseArt^®, and Board Dudes^®.

Mattel’s operating segments are: (i) North America, which consists of the US and Canada, (ii) International, and (iii) American Girl. The North America and International segments sell products in the Mattel Girls & Boys Brands, Fisher-Price Brands, and Construction and Arts & Crafts Brands categories, although some are developed and adapted for particular international markets.

Segment Data

The following tables present information about revenues, income, and assets by segment. Mattel does not include sales adjustments such as trade discounts and other allowances in the calculation of segment revenues (referred to as “gross sales” and reconciled to net sales in Part I, Item 2 “Non-GAAP Financial Measure” of this Quarterly Report on Form 10-Q). Mattel records these adjustments in its financial accounting systems at the time of sale to each customer, but the adjustments are not allocated to individual products. For this reason, Mattel’s chief operating decision maker uses gross sales by segment as one of the metrics to measure segment performance. Such sales adjustments are included in the determination of segment income from operations based on the adjustments recorded in the financial accounting systems. Segment income represents each segment’s operating income, while consolidated operating income represents income from operations before net interest, other non-operating (income) expense, and income taxes as reported in the consolidated statements of operations. The corporate and other expense category includes costs not allocated to individual segments, including charges related to incentive compensation, share-based payments, and corporate headquarters functions managed on a worldwide basis, and the impact of changes in foreign currency exchange rates on intercompany transactions.

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
	(In thousands)
Revenues by Segment
North America	$	1,124,463		$	1,211,544		$	2,079,357		$	2,234,484
International		989,228			1,061,829			2,048,403			2,216,736
American Girl		119,025			128,951			317,314			317,658
Gross sales		2,232,716			2,402,324			4,445,074			4,768,878
Sales adjustments		(211,292	)		(195,363	)		(415,221	)		(397,202	)
Net sales	$	2,021,424		$	2,206,961		$	4,029,853		$	4,371,676
Segment Income
North America	$	257,496		$	358,171		$	345,716		$	510,264
International		183,142			250,170			245,476			389,265
American Girl		7,618			16,144			15,599			23,307
		448,256			624,485			606,791			922,836
Corporate and other expense (a)		(38,777	)		(96,310	)		(190,086	)		(234,040	)
Operating income		409,479			528,175			416,705			688,796
Interest expense		21,009			19,576			57,220			58,172
Interest (income)		(1,773	)		(1,394	)		(5,238	)		(4,083	)
Other non-operating (income), net		(3,937	)		(4,350	)		(5,665	)		(2,530	)
Income before income taxes	$	394,180		$	514,343		$	370,388		$	637,237

(a) Corporate and other expense includes severance and other termination-related costs of $5.0 million and $39.1 million for the three and nine months ended September 30, 2014, respectively, and $2.4 million and $15.9 million for the three and nine months ended September 30, 2013, respectively, and share-based compensation expense of $12.0 million and $36.5 million for the three and nine months ended September 30, 2014, respectively, and $19.6 million and $47.2 million for the three and nine months ended September 30, 2013, respectively.

Segment assets are comprised of accounts receivable and inventories, net of applicable reserves and allowances.

	September 30, 2014		September 30, 2013		December 31, 2013
	(In thousands)
Assets by Segment
North America	$	1,075,890	$	1,097,763	$	723,886
International		1,244,067		1,385,467		920,770
American Girl		160,754		142,648		100,438
		2,480,711		2,625,878		1,745,094
Corporate and other		36,419		66,512		83,854
Accounts receivable and inventories, net	$	2,517,130	$	2,692,390	$	1,828,948

The table below presents worldwide revenues by brand category:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
	(In thousands)
Worldwide Revenues by Brand Category
Mattel Girls & Boys Brands	$	1,323,273		$	1,480,696		$	2,669,111		$	2,965,294
Fisher-Price Brands		663,446			789,303			1,263,655			1,473,298
American Girl Brands		113,291			122,302			302,375			300,931
Construction and Arts & Crafts Brands		123,415			—			185,015			—
Other		9,291			10,023			24,918			29,355
Gross sales		2,232,716			2,402,324			4,445,074			4,768,878
Sales adjustments		(211,292	)		(195,363	)		(415,221	)		(397,202	)
Net sales	$	2,021,424		$	2,206,961		$	4,029,853		$	4,371,676