Segment Information

6 Months Ended

Jun. 30, 2019

Mattel designs, manufactures, and markets a broad variety of toy products worldwide, which are sold to its customers and directly to consumers.

Gross Sales

Although there were no changes to Mattel's commercial operations that impacted its operating segments, in the first quarter of 2019, Mattel modified its reporting structure for revenues, as outlined below, and reorganized its regional sales reporting structure within the International segment. Prior period amounts have been reclassified to conform to the current period presentation. Gross sales by categories are presented as follows:

Dolls—including brands such as Barbie, American Girl, Enchantimals, and Polly Pocket.

Infant, Toddler, and Preschool—including brands such as Fisher-Price and Thomas & Friends, Power Wheels, Fireman Sam, and Shimmer and Shine (Nickelodeon).

Vehicles—including brands such as Hot Wheels, Matchbox, and CARS (Disney Pixar).

Action Figures, Building Sets, and Games—including brands such as MEGA, UNO, Toy Story (Disney Pixar), Jurassic World (Universal), and WWE.

Segment Data

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 across categories, although some products are developed and adapted for particular international markets.

The following tables present information about revenues, income (loss), 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 the tables below). 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 and net sales by segment as metrics to measure segment performance. Such sales adjustments are included in the determination of segment income (loss) from operations based on the adjustments recorded in the financial accounting systems. Segment income (loss) represents each segment's operating income (loss), while consolidated operating loss represents loss from operations before net interest, other non-operating (income) expense, 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, severance and other restructuring costs, share-based compensation, 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, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	(In thousands)
Revenues by Segment
North America	$	447,354		$	442,883		$	816,745		$	791,273
International	480,507			466,676			845,685			850,810
American Girl	34,405			44,561			79,962			112,048
Gross sales	962,266			954,120			1,742,392			1,754,131
Sales adjustments	(102,203		)	(113,372		)	(193,083		)	(205,011		)
Net sales	$	860,063		$	840,748		$	1,549,309		$	1,549,120



	For the Three Months Ended						For the Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	(In thousands)
Segment Income (Loss)
North America (a)	$	28,297		$	(25,940	)	$	6,712		$	(132,690	)
International (a)	(3,507		)	(49,740		)	(27,810		)	(122,005		)
American Girl (a)	(16,305		)	(16,222		)	(30,559		)	(31,065		)
	8,485			(91,902		)	(51,657		)	(285,760		)
Corporate and other expense (b)	(59,901		)	(97,289		)	(130,718		)	(180,012		)
Operating loss	(51,416		)	(189,191		)	(182,375		)	(465,772		)
Interest expense	46,234			43,467			93,192			84,546
Interest (income)	(1,532		)	(1,699		)	(3,804		)	(4,846		)
Other non-operating (income) expense, net	(294		)	3,063			1,610			2,455
Loss before income taxes	$	(95,824	)	$	(234,022	)	$	(273,373	)	$	(547,927	)

__________________________________________

(a)

Segment income (loss) for the three and six months ended June 30, 2019 included charges of $3.1 million and $30.4 million, respectively, attributable to the inclined sleeper product recalls, substantially all of which was recorded in the North America segment. Segment income (loss) for the three and six months ended June 30, 2018 included $(7.0) million and $79.8 million, respectively, of net sales reversal and bad debt expense, net attributable to the Toys "R" Us liquidation. Of the $79.8 million of charges recognized for the six months ended June 30, 2018, $68.5 million, $9.6 million, and $1.7 million was recorded in the North America, International, and American Girl segments, respectively.

(b)

Corporate and other expense included severance and restructuring charges of $14.4 million and $23.1 million for the three and six months ended June 30, 2019, respectively, and $47.8 million and $72.7 million for the three and six months ended June 30, 2018, respectively, and share-based compensation expense of $12.4 million and $24.3 million for the three and six months ended June 30, 2019, respectively, and $8.0 million and $22.4 million for the three and six months ended June 30, 2018, respectively.

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



	June 30, 2019		June 30, 2018		December 31, 2018
	(In thousands)
Assets by Segment
North America	$	622,614	$	591,273	$	615,654
International	677,958		692,341		728,870
American Girl	42,681		78,315		43,748
	1,343,253		1,361,929		1,388,272
Corporate and other	134,839		133,423		124,700
Accounts receivable and inventories, net	$	1,478,092	$	1,495,352	$	1,512,972

The table below presents worldwide revenues by categories:



	For the Three Months Ended						For the Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	(In thousands)
Revenues by Categories (a)
Dolls	$	273,405		$	266,632		$	526,291		$	523,989
Infant, Toddler, and Preschool	251,996			288,002			445,622			514,648
Vehicles	214,137			215,038			397,498			403,971
Action Figures, Building Sets, and Games	222,728			184,448			372,981			311,523
Gross sales	962,266			954,120			1,742,392			1,754,131
Sales adjustments	(102,203		)	(113,372		)	(193,083		)	(205,011		)
Net sales	$	860,063		$	840,748		$	1,549,309		$	1,549,120

__________________________________________


(a)	Mattel modified its reporting structure for revenues in the first quarter of 2019 to disclose revenues by categories.

The table below presents supplemental disclosure of worldwide revenues:



	For the Three Months Ended						For the Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	(In thousands)
Revenues by Top 3 Power Brands
Barbie	$	186,531		$	170,733		$	350,009		$	323,424
Hot Wheels	175,199			167,306			325,735			312,246
Fisher-Price and Thomas & Friends	222,409			236,176			394,807			423,971
Other	378,127			379,905			671,841			694,490
Gross sales	962,266			954,120			1,742,392			1,754,131
Sales adjustments	(102,203		)	(113,372		)	(193,083		)	(205,011		)
Net sales	$	860,063		$	840,748		$	1,549,309		$	1,549,120

Geographic Information

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



	For the Three Months Ended						For the Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
	(In thousands)
Revenues
North America	$	481,759		$	487,444		$	896,707		$	903,321
International (a)
EMEA	234,107			219,525			450,456			449,069
Latin America	141,310			138,550			216,560			213,018
Asia Pacific	105,090			108,601			178,669			188,723
Total International	480,507			466,676			845,685			850,810
Gross sales	962,266			954,120			1,742,392			1,754,131
Sales adjustments	(102,203		)	(113,372		)	(193,083		)	(205,011		)
Net sales	$	860,063		$	840,748		$	1,549,309		$	1,549,120

__________________________________________

(a)

Mattel reorganized its regional sales reporting structure in the first quarter of 2019. As a result, the new regions are Europe, the Middle East, and Africa ("EMEA"), Latin America, and Asia Pacific. The Middle East, Africa, Russia, and Turkey were previously included in the Asia Pacific region (previously Global Emerging Markets) and are now included in EMEA (previously Europe). Prior period amounts have been reclassified to conform to the current period presentation.