Segment Information

9 Months Ended

Sep. 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 income (loss) represents income (loss) from operations before net interest, other non-operating 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 Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	(In thousands)
Revenues by Segment
North America	$	880,441		$	886,307		$	1,697,186		$	1,677,580
International	721,705			656,467			1,567,390			1,507,277
American Girl	54,764			63,862			134,726			175,910
Gross sales	1,656,910			1,606,636			3,399,302			3,360,767
Sales adjustments	(175,353		)	(169,185		)	(368,436		)	(370,238		)
Net sales	$	1,481,557		$	1,437,451		$	3,030,866		$	2,990,529



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	(In thousands)
Segment Income (Loss)
North America (a)	$	194,368		$	186,705		$	202,923		$	54,015
International (a)	89,244			46,466			61,434			(71,582		)
American Girl (a)	(11,079		)	(9,638		)	(41,442		)	(40,703		)
	272,533			223,533			222,915			(58,270		)
Corporate and other expense (b)	(122,446		)	(101,659		)	(251,255		)	(281,670		)
Operating income (loss)	150,087			121,874			(28,340		)	(339,940		)
Interest expense	47,689			48,156			140,881			132,702
Interest (income)	(821		)	(785		)	(4,625		)	(5,631		)
Other non-operating expense, net	1,264			1,911			2,874			4,366
Income (loss) before income taxes	$	101,955		$	72,592		$	(167,470	)	$	(471,377	)

__________________________________________

(a)

Segment income (loss) for the three and nine months ended September 30, 2019 included charges of $3.9 million and $34.3 million, respectively, attributable to the inclined sleeper product recalls, most of which was recorded in the North America segment. Segment income (loss) for the three and nine months ended September 30, 2018 included $(13.0) million and $66.8 million, respectively, of net sales reversal and bad debt expense, net, attributable to the Toys "R" Us liquidation. Of the $66.8 million of charges recognized for the Toys "R" Us liquidation for the nine months ended September 30, 2018, $57.4 million, $7.7 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 $11.3 million and $34.4 million for the three and nine months ended September 30, 2019, respectively, and $25.5 million and $98.2 million for the three and nine months ended September 30, 2018, respectively, and share-based compensation expense of $14.8 million and $39.1 million for the three and nine months ended September 30, 2019, respectively, and $13.8 million and $36.2 million for the three and nine months ended September 30, 2018, respectively.

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



	September 30, 2019		September 30, 2018		December 31, 2018
	(In thousands)
Assets by Segment
North America	$	916,250	$	912,008	$	615,654
International	906,788		917,668		728,870
American Girl	60,171		85,515		43,748
	1,883,209		1,915,191		1,388,272
Corporate and other	109,613		123,753		124,700
Accounts receivable and inventories, net	$	1,992,822	$	2,038,944	$	1,512,972

The table below presents worldwide revenues by categories:



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	(In thousands)
Revenues by Categories (a)
Dolls	$	567,598		$	538,368		$	1,093,890		$	1,062,357
Infant, Toddler, and Preschool	430,973			483,424			876,595			998,072
Vehicles	346,939			306,490			744,437			710,461
Action Figures, Building Sets, and Games	311,400			278,354			684,380			589,877
Gross sales	1,656,910			1,606,636			3,399,302			3,360,767
Sales adjustments	(175,353		)	(169,185		)	(368,436		)	(370,238		)
Net sales	$	1,481,557		$	1,437,451		$	3,030,866		$	2,990,529

__________________________________________


(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 Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	(In thousands)
Revenues by Top 3 Power Brands
Barbie	$	412,840		$	374,707		$	762,849		$	698,131
Hot Wheels	293,295			234,993			619,030			547,239
Fisher-Price and Thomas & Friends	396,339			409,497			791,146			833,468
Other	554,436			587,439			1,226,277			1,281,929
Gross sales	1,656,910			1,606,636			3,399,302			3,360,767
Sales adjustments	(175,353		)	(169,185		)	(368,436		)	(370,238		)
Net sales	$	1,481,557		$	1,437,451		$	3,030,866		$	2,990,529

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 Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
	(In thousands)
Revenues
North America	$	935,205		$	950,169		$	1,831,912		$	1,853,490
International (a)
EMEA	408,660			370,084			859,116			819,153
Latin America	213,535			198,760			430,095			411,778
Asia Pacific	99,510			87,623			278,179			276,346
Total International	721,705			656,467			1,567,390			1,507,277
Gross sales	1,656,910			1,606,636			3,399,302			3,360,767
Sales adjustments	(175,353		)	(169,185		)	(368,436		)	(370,238		)
Net sales	$	1,481,557		$	1,437,451		$	3,030,866		$	2,990,529

__________________________________________

(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.