XML 48 R22.htm IDEA: XBRL DOCUMENT
v3.20.4

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Consolidated pre-tax income (loss) consists of the following:
| For the Year Ended
| December 31, 2020 |  | December 31, 2019 |  | December 31, 2018
| (In thousands)
U.S. operations | $ | (165,736) |  |  | $ | (329,368) |  |  | $ | (342,219) |
Foreign operations | 349,542 |  |  | 171,851 |  |  | (72,660) |
| $ | 183,806 |  |  | $ | (157,517) |  |  | $ | (414,879) |
The provision for current and deferred income taxes consists of the following:
| For the Year Ended
| December 31, 2020 |  | December 31, 2019 |  | December 31, 2018
| (In thousands)
Current |  |  |  |  |
Federal | $ | — |  |  | $ | 5,520 |  |  | $ | 3,935 |
State | (575) |  |  | 2,170 |  |  | 1,340 |
Foreign | 78,870 |  |  | 68,837 |  |  | 95,404 |
| 78,295 |  |  | 76,527 |  |  | 100,679 |
Deferred |  |  |  |  |
Federal | 4,264 |  |  | (5,610) |  |  | (4,630) |
State | (481) |  |  | 68 |  |  | (3,368) |
Foreign | (13,429) |  |  | (15,761) |  |  | 23,515 |
| (9,646) |  |  | (21,303) |  |  | 15,517 |
Provision for income taxes | $ | 68,649 |  |  | $ | 55,224 |  |  | $ | 116,196 |
Deferred income taxes are provided principally for tax credit carryforwards, net operating loss carryforwards, interest expense, research and development expenses, employee compensation-related expenses, right-of-use assets, lease liabilities, and certain other reserves that are recognized in different years for financial statement and income tax reporting purposes. Mattel’s deferred income tax assets (liabilities) are composed of the following:
| December 31, 2020 |  | December 31, 2019
| (In thousands)
Tax credit carryforwards | $ | 71,428 |  |  | $ | 59,640 |
Research and development expenses | 41,862 |  |  | 58,340 |
Net operating loss carryforwards | 161,846 |  |  | 153,866 |
Interest expense | 108,069 |  |  | 80,774 |
Allowances and reserves | 92,372 |  |  | 100,896 |
Deferred compensation | 60,665 |  |  | 67,689 |
Postretirement benefits | 38,182 |  |  | 33,839 |
Intangible assets | 231,527 |  |  | 245,138 |
Lease liabilities | 74,600 |  |  | 77,948 |
Other | 42,058 |  |  | 33,619 |
Gross deferred income tax assets | 922,609 |  |  | 911,749 |
Intangible assets | (187,001) |  |  | (190,677) |
Right-of-use assets | (66,404) |  |  | (68,082) |
Other | (25,500) |  |  | (31,024) |
Gross deferred income tax liabilities | (278,905) |  |  | (289,783) |
Deferred income tax asset valuation allowances | (631,914) |  |  | (610,560) |
Net deferred income tax assets | $ | 11,790 |  |  | $ | 11,406 |
Net deferred income tax assets are reported in the consolidated balance sheets as follows:
| December 31, 2020 |  | December 31, 2019
| (In thousands)
Other noncurrent assets | $ | 72,682 |  |  | $ | 67,900 |
Other noncurrent liabilities | (60,892) |  |  | (56,494) |
| $ | 11,790 |  |  | $ | 11,406 |
As of December 31, 2020, Mattel had federal and foreign loss carryforwards totaling $694.6 million and federal, state and foreign tax credit carryforwards of $71.4 million, which excludes carryforwards that do not meet the threshold for recognition in the financial statements. Utilization of these loss and tax credit carryforwards is subject to annual limitations. Mattel’s loss and tax credit carryforwards expire in the following periods:
| Loss Carryforward |  | Tax Credit Carryforward
| (In thousands)
2021–2025 | $ | 36,337 |  |  | $ | 496 |
Thereafter | 250,810 |  |  | 47,287 |
No expiration date | 407,444 |  |  | 23,626 |
Total | $ | 694,591 |  |  | $ | 71,409 |
Periodically, Mattel considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely-than-not that some or all of the deferred tax assets will not be realized. As of December 31, 2020, Mattel's valuation allowance on its federal and state deferred tax assets was approximately $319 million. Changes in the valuation allowance in 2020 primarily related to current year interest limitations and credits generated. As of December 31, 2019, Mattel's valuation allowance on its federal and state deferred tax assets was approximately $300 million. Changes in the valuation allowance in 2019 primarily related to current year losses and credits generated. In addition, as of December 31, 2020, management determined that a valuation allowance of approximately $313 million was required for certain foreign deferred tax assets that will more than likely not be realized due to the determination that negative evidence outweighed the positive evidence. For the remaining foreign deferred tax assets without a valuation allowance, management believes it is more-likely-than-not that Mattel will generate sufficient taxable income in the appropriate future periods to realize the benefit of the remaining deferred income tax assets. As of December 31, 2019, management determined that a valuation allowance of approximately $311 million was required for certain foreign deferred tax assets that will more than likely not be realized due to the determination that negative evidence outweighed the positive evidence. Changes in the valuation allowance for 2019 primarily related to increases in the valuation allowance as related to the transfer of intangible property rights. Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will be realized. Mattel intends to continue maintaining a valuation allowance on our deferred tax assets until there is sufficient evidence to support the release of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of a portion of these deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change depending on the level of profitability that Mattel is able to achieve in the tax jurisdictions in which a valuation allowance has been recorded. Differences between the provision for income taxes at the U.S. federal statutory income tax rate and the provision in the consolidated statements of operations are as follows:
| For the Year Ended
| December 31, 2020 |  | December 31, 2019 |  | December 31, 2018
| (In thousands)
Provision (benefit) at U.S. federal statutory rate | $ | 41,008 |  |  | $ | (33,240) |  |  | $ | (87,592) |
Increase resulting from: |  |  |  |  |
U.S. valuation allowance | 17,676 |  |  | 19,141 |  |  | 64,907 |
Foreign earnings taxed at different rates, including foreign losses without benefit | 6,203 |  |  | 51,612 |  |  | 103,231 |
U.S. Tax Act (a) | — |  |  | — |  |  | 3,709 |
State and local taxes, net of U.S. federal (expense) benefit | (1,056) |  |  | 2,438 |  |  | (2,028) |
Adjustments to previously accrued taxes | 5,354 |  |  | 14,160 |  |  | 6,621 |
Change in indefinite reinvestment assertion | — |  |  | (2,700) |  |  | 14,566 |
Other (b) | (536) |  |  | 3,813 |  |  | 12,782 |
Provision for income taxes | $ | 68,649 |  |  | $ | 55,224 |  |  | $ | 116,196 |
(a) For 2018, U.S. Tax Act expense was netted with utilization of carryover tax attributes and current year generated tax attributes. (b) For 2018, Other includes $8.1 million of tax credit expiration. In assessing whether uncertain tax positions should be recognized in its financial statements, Mattel first determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, Mattel presumes that the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant information. For tax positions that meet the more-likely-than-not recognition threshold, Mattel measures the amount of benefit recognized in the financial statements at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such benefits will more-likely-than-not be realized. Mattel records a reserve for unrecognized tax benefits for U.S. federal, state, local, and foreign tax positions related primarily to transfer pricing, tax credits claimed, tax nexus, and apportionment. For each reporting period, management applies a consistent methodology to measure unrecognized tax benefits, and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant. Mattel’s measurement of its reserve for unrecognized tax benefits is based on management’s assessment of all relevant information, including prior audit experience, the status of audits, conclusions of tax audits, lapsing of applicable statutes of limitations, identification of new issues, and any administrative guidance or developments. A reconciliation of the reserve for unrecognized tax benefits is as follows:
| For the Year Ended
| December 31, 2020 |  | December 31, 2019 |  | December 31, 2018
| (In thousands)
Unrecognized tax benefits at January 1 | $ | 137,929 |  |  | $ | 119,818 |  |  | $ | 116,070 |
Increases for positions taken in current year | 5,969 |  |  | 3,836 |  |  | 7,548 |
Increases for positions taken in a prior year | 5,811 |  |  | 29,487 |  |  | 25,239 |
Decreases for positions taken in a prior year | (3,127) |  |  | (10,150) |  |  | (1,813) |
Decreases for settlements with taxing authorities | (3,410) |  |  | (1,982) |  |  | (1,143) |
Decreases for lapses in the applicable statute of limitations | (2,863) |  |  | (3,080) |  |  | (26,083) |
Unrecognized tax benefits at December 31 | $ | 140,309 |  |  | $ | 137,929 |  |  | $ | 119,818 |
Of the $140.3 million of unrecognized tax benefits as of December 31, 2020, $63.2 million would impact the effective tax rate if recognized, and $77.1 million would result in an increase in the valuation allowance. Mattel recognized a decrease of interest and penalties of $2.1 million in 2020, a decrease of $1.6 million in 2019, and an increase of $7.9 million in 2018, related to unrecognized tax benefits, which are reflected in the provision for income taxes in the consolidated statements of operations. As of December 31, 2020, Mattel accrued $22.7 million in interest and penalties related to unrecognized tax benefits, all of which would impact the effective tax rate if recognized. As of December 31, 2019, Mattel accrued $24.8 million in interest and penalties related to unrecognized tax benefits, all of which would impact the effective tax rate if recognized. As of the fourth quarter of 2018, at the close of the Staff Accounting Bulletin ("SAB") 118 measurement period, Mattel recorded a $3.7 million tax expense related to the deemed repatriation of accumulated foreign earnings (net of related valuation allowance change). In January 2018, the FASB issued guidance stating that a company must make an accounting policy election of either (i) treating taxes due on future U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income ("GILTI") as a current-period expense when incurred (the "period cost method") or (ii) factoring such amounts into a company’s measurement of its deferred taxes (the "deferred method"). Mattel has elected the period cost method with respect to reporting taxes due on GILTI income inclusions. In the normal course of business, Mattel is regularly audited by federal, state, local and foreign tax authorities. Mattel remains subject to IRS examination for the 2017 through 2020 tax years. Mattel files multiple state and local income tax returns and remains subject to examination in various jurisdictions, including California for the 2008 through 2020 tax years, New York for the 2018 through 2020 tax years, and Wisconsin for the 2013 through 2020 tax years. Mattel files multiple foreign income tax returns and remains subject to examination in various foreign jurisdictions including Hong Kong for the 2014 through 2020 tax years, Brazil for the 2015 through 2020 tax years, Mexico for the 2014 through 2020 tax years, Netherlands for the 2014 through 2020 tax years, Russia for the 2018 through 2020 tax years, Cyprus for the 2019 and 2020 tax years, and China for the 2010 through 2020 tax years. Based on the current status of federal, state, local, and foreign audits, Mattel believes it is reasonably possible that in the next 12 months, the total unrecognized tax benefits could decrease by $31.3 million related to the settlement of tax audits and/or the expiration of statutes of limitations. The ultimate settlement of any issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements. Mattel has recorded a deferred tax liability of $12.0 million and $11.9 million related to undistributed earnings of certain foreign subsidiaries as of December 31, 2020 and December 31, 2019, respectively. The impact in 2020 was a tax expense of $0.1 million mainly related to withholding tax rate change during the year. Taxes have not been provided on approximately $6.0 billion of undistributed foreign U.S. GAAP retained earnings. The determination of any incremental tax liability associated with these earnings is not practicable due to the complexity of local country withholding rules and interactions with tax treaties, foreign exchange considerations, and the diversity of state income tax treatment on actual distribution. Mattel will remit reinvested earnings of its foreign subsidiaries for which a deferred tax liability has been recorded when Mattel determines that it is advantageous for business operations or cash management purposes.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration