Segment Information

Mattel designs, manufactures, and markets a broad variety of toy products worldwide which are sold to its customers and directly to consumers. Mattel reorganized its brands reporting structure in the first quarter of 2018 as outlined below. Prior period amounts have been reclassified to conform to the current period presentation.

Mattel’s portfolio of brands and products are classified as Power Brands, which includes Barbie, Hot Wheels, Fisher-Price and Thomas & Friends, and American Girl Brands, and Toy Box, which includes Owned Brands and Partner Brands.

Mattel’s operating segments are: (i) North America, which consists of the U.S. and Canada, (ii) International, and (iii) American Girl. The North America and International segments sell products in both the Power Brands, excluding American Girl, and Toy Box 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. In the following tables, 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 "Management’s Discussion and Analysis of Financial Condition and Results of Operations–Non-GAAP Financial Measures" 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 brands or 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 expense/income, net, 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, severance and restructuring, 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 Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
	(In thousands)
Revenues by Segment
North America	$	442,883		$	507,242		$	791,273		$	869,560
International	466,676			493,748			850,810			860,084
American Girl	44,561			67,516			112,048			153,500
Gross sales	954,120			1,068,506			1,754,131			1,883,144
Sales adjustments	(113,372		)	(94,029		)	(205,011		)	(173,049		)
Net sales	$	840,748		$	974,477		$	1,549,120		$	1,710,095



	For the Three Months Ended						For the Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
	(In thousands)
Segment (Loss) Income
North America (a)	$	(25,940	)	$	42,723		$	(132,690	)	$	23,383
International (a)	(49,740		)	(8,325		)	(122,005		)	(33,167		)
American Girl (a)	(16,222		)	(18,172		)	(31,065		)	(23,957		)
	(91,902		)	16,226			(285,760		)	(33,741		)
Corporate and other expense (b)	(97,289		)	(65,256		)	(180,012		)	(140,902		)
Operating loss	(189,191		)	(49,030		)	(465,772		)	(174,643		)
Interest expense	43,467			21,881			84,546			43,911
Interest (income)	(1,699		)	(2,296		)	(4,846		)	(4,762		)
Other non-operating expense, net	3,063			5,128			2,455			5,622
Loss before income taxes	$	(234,022	)	$	(73,743	)	$	(547,927	)	$	(219,414	)

__________________________________________

(a)

Segment loss for the three and six months ended June 30, 2018, includes $(7.0) million and $79.8 million, respectively, of net sales reversal and bad debt expense, net attributable to the Toys "R" Us liquidation. For the six months ended June 30, 2018, the North America, International, and American Girl segments recorded charges of $68.5 million, $9.6 million, and $1.7 million, respectively, related to the Toys "R" Us liquidation.

(b)

Corporate and other expense includes severance and restructuring expenses of $47.8 million and $72.7 million for the three and six months ended June 30, 2018, respectively, and $5.8 million and $8.8 million for the three and six months ended June 30, 2017, respectively, and share-based compensation expense of $8.0 million and $22.4 million for the three and six months ended June 30, 2018, respectively, and $17.9 million and $30.6 million for the three and six months ended June 30, 2017, respectively.

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



	June 30, 2018		June 30, 2017		December 31, 2017
	(In thousands)
Assets by Segment
North America	$	591,273	$	750,027	$	692,232
International	692,341		791,822		829,185
American Girl	78,315		168,114		100,184
	1,361,929		1,709,963		1,621,601
Corporate and other	133,423		143,622		107,713
Accounts receivable, net and inventories	$	1,495,352	$	1,853,585	$	1,729,314

The table below presents worldwide revenues by brand category:



	For the Three Months Ended						For the Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
	(In thousands)
Worldwide Revenues by Brand Category (a)
Barbie	$	170,733		$	152,175		$	323,424		$	275,566
Hot Wheels	167,306			138,372			312,246			264,052
Fisher-Price and Thomas & Friends	236,176			275,948			423,971			480,992
American Girl	45,218			67,292			112,645			153,105
Toy Box	334,687			434,719			581,845			709,429
Gross sales	954,120			1,068,506			1,754,131			1,883,144
Sales adjustments	(113,372		)	(94,029		)	(205,011		)	(173,049		)
Net sales	$	840,748		$	974,477		$	1,549,120		$	1,710,095

__________________________________________

(a) Mattel reorganized its brands reporting structure in the first quarter of 2018. Prior period amounts have been reclassified to conform to the current period presentation.

Geographic Information

The table below presents information by geographic area. Revenues are attributed to countries based on location of customer.



	For the Three Months Ended						For the Six Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
	(In thousands)
Revenues
North America	$	487,444		$	574,758		$	903,321		$	1,023,060
International (a)
Europe	171,311			178,224			339,649			334,785
Latin America	138,550			134,297			213,018			204,065
Global Emerging Markets	156,815			181,227			298,143			321,234
Total International	466,676			493,748			850,810			860,084
Gross sales	954,120			1,068,506			1,754,131			1,883,144
Sales adjustments	(113,372		)	(94,029		)	(205,011		)	(173,049		)
Net sales	$	840,748		$	974,477		$	1,549,120		$	1,710,095

__________________________________________

(a) Mattel reorganized its regional reporting structure in the first quarter of 2018. As a result, Global Emerging Markets, which was previously disclosed as Asia Pacific, includes Russia, Turkey, the Middle East, and Africa, which were previously included within Europe. Prior period amounts have been reclassified to conform to the current period presentation.