Note 12—Segment Information

Description of Segments

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™, BOOMco™, 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^TM, 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. Factors considered in determining the operating segments include the nature of business activities, the management structure directly accountable to the Chief Operating Decision Maker (“CODM”) for operating and administrative activities, availability of discrete financial information, and strategic priorities within the organizational structure. These factors correspond to the manner in which the CODM reviews and evaluates operating performance to make decisions about resources to be allocated to these operating segments.

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”). 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 CODM 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, 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 rates on intercompany transactions.


	For the Year
	2014			2013			2012
	(In thousands)
Revenues by Segment
North America	$	3,011,633		$	3,181,205		$	3,330,217
International		3,061,506			3,277,840			3,126,088
American Girl		645,309			658,768			596,298

Gross sales		6,718,448			7,117,813			7,052,603
Sales adjustments		(694,629	)		(632,921	)		(631,722	)

Net sales	$	6,023,819		$	6,484,892		$	6,420,881

Segment Income
North America	$	459,833		$	723,834		$	810,271
International		359,904			622,910			571,413
American Girl		113,571			138,029			121,642

		933,308			1,484,773			1,503,326
Corporate and other expense (a)		(279,594	)		(316,670	)		(482,311	)

Operating income		653,714			1,168,103			1,021,015
Interest expense		79,271			78,505			88,835
Interest (income)		(7,382	)		(5,555	)		(6,841	)
Other non-operating (income), net		(5,085	)		(3,975	)		(6,024	)

Income before income taxes	$	586,910		$	1,099,128		$	945,045

(a)

Corporate and other expense includes (i) incentive compensation expense of $25.2 million, $65.0 million, and $108.1 million for 2014, 2013, and 2012, respectively, (ii) $51.8 million, $17.6 million, and $13.4 million of charges related to severance and other termination-related costs for 2014, 2013, and 2012, respectively, (iii) share-based compensation expense of $52.0 million, $61.7 million, and $63.3 million for 2014, 2013, and 2012, respectively, (iv) the Litigation Charge of $137.8 million for 2012, and (v) legal fees associated with MGA litigation matters.


	For the Year
	2014		2013		2012
	(In thousands)
Depreciation/Amortization by Segment
North America	$	118,633	$	84,935	$	76,593
International		86,011		71,380		65,340
American Girl		18,434		17,364		15,622

		223,078		173,679		157,555
Corporate and other		25,623		22,714		16,727

Depreciation and amortization	$	248,701	$	196,393	$	174,282

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


	December 31,
	2014		2013		2012
	(In thousands)
Assets by Segment
North America	$	697,377	$	723,886	$	694,479
International		778,849		920,770		807,911
American Girl		108,667		100,438		90,335

		1,584,893		1,745,094		1,592,725
Corporate and other		70,334		83,854		99,165

Accounts receivable and inventories, net	$	1,655,227	$	1,828,948	$	1,691,890

Mattel sells a broad variety of toy products, which are grouped into four major categories: Mattel Girls & Boys Brands, Fisher-Price Brands, American Girl Brands, and Construction and Arts & Crafts Brands. The table below presents worldwide revenues by brand category:


	For the Year
	2014			2013			2012
	(In thousands)
Worldwide Revenues by Brand Category
Mattel Girls & Boys Brands	$	3,897,218		$	4,315,855		$	4,186,550
Fisher-Price Brands		1,842,550			2,120,719			2,252,339
American Girl Brands		620,654			632,515			567,521
Construction and Arts & Crafts Brands		314,994			—			—
Other		43,032			48,724			46,193

Gross sales		6,718,448			7,117,813			7,052,603
Sales adjustments		(694,629	)		(632,921	)		(631,722	)

Net sales	$	6,023,819		$	6,484,892		$	6,420,881

Geographic Information

The tables below present information by geographic area. Revenues are attributed to countries based on location of customer. Long-lived assets principally include goodwill, property, plant, and equipment, net, and identifiable intangibles, net.


	For the Year
	2014			2013			2012
	(In thousands)
Revenues
North American Region (a)	$	3,656,942		$	3,839,973		$	3,926,515
International Region:
Europe		1,687,039			1,806,707			1,685,274
Latin America		909,432			1,011,718			1,008,236
Asia Pacific		465,035			459,415			432,578

Total International Region		3,061,506			3,277,840			3,126,088

Gross sales		6,718,448			7,117,813			7,052,603
Sales adjustments		(694,629	)		(632,921	)		(631,722	)

Net sales	$	6,023,819		$	6,484,892		$	6,420,881


	December 31,
	2014		2013		2012
	(In thousands)
Long-Lived Assets
North American Region (b)	$	1,658,028	$	1,361,538	$	1,252,938
International Region		1,492,633		1,326,457		1,342,375

Consolidated total	$	3,150,661	$	2,687,995	$	2,595,313

(a)

Revenues for the North American Region include revenues attributable to the US of $3.41 billion, $3.58 billion, and $3.61 billion for 2014, 2013, and 2012, respectively.

(b)

Long-lived assets for the North American Region include long-lived assets attributable to the US of $1.65 billion, $1.36 billion, and $1.25 billion for 2014, 2013, and 2012, respectively.

Major Customers

Sales to Mattel’s three largest customers accounted for 35%, 36%, and 37% of worldwide consolidated net sales for 2014, 2013, and 2012, respectively, as follows:


	For the Year
	2014		2013		2012
	(In billions)
Wal-Mart	$	1.1	$	1.2	$	1.2
Toys “R” Us		0.6		0.7		0.7
Target		0.5		0.5		0.5

The North America segment sells products to each of Mattel’s three largest customers. The International segment sells products to Wal-Mart and Toys “R” Us. The American Girl segment sells its children’s publications to Wal-Mart and Target.