What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-28 compared with 2021-02-25 · 355 added, 370 removed, 1172 unchanged (38% of the section changed)

13 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 7 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

19 unchanged sentences

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Test - American Girl Reporting Uni t

As described in Notes 1 and 3 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1.4 billion as of December 31, 2020, and the goodwill associated with the American Girl reporting unit was $207.6 million.

Management tests goodwill for impairment annually in the third quarter and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value.

As disclosed by management, the fair value of the American Girl reporting unit is estimated based upon the discounted cash flows that the reporting unit is expected to generate in the future (the "income approach").

The income approach includes various projections such as expected sales growth, gross margin, operating costs, working capital investment, and discount rate for the American Girl reporting unit.

The principal considerations for our determination that performing procedures relating to the goodwill impairment test of the American Girl reporting unit is a critical audit matter are the significant judgment by management when developing the fair value measurement of the American Girl reporting unit, which in turn led to a high degree of auditor judgment, subjectivity, and audit effort in performing procedures and evaluating audit evidence relating to management’s fair value estimate and significant assumptions, related to projections of expected sales growth rate, gross margin and operating costs, and the discount rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment test, including controls over the valuation of the Company’s reporting units.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the American Girl reporting unit, (ii) evaluating the appropriateness of the discounted cash flow model, (iii) testing the completeness, accuracy, and relevance of underlying data used in the model, and (iv) evaluating the reasonableness of significant assumptions related to the projections of expected sales growth rate, gross margin and operating costs, and the discount rate.

Evaluating management’s assumptions related to projections of expected sales growth rate, gross margin and operating costs involved evaluating whether the assumptions were reasonable considering the current and past performance of the American Girl reporting unit and whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the discounted cash flow model and evaluating the reasonableness of the discount rate assumption.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sales Adjustments Accrual – Discretionary Component

As described in Note 1 to the consolidated financial statements, the Company routinely enters into arrangements with its customers to provide sales incentives, support customer promotions, and provide allowances for returns or defective merchandise.

Accruals for these programs are recorded as sales adjustments that reduce gross billings in the period the related sale is recognized.

1 unchanged sentence

The accrual for such programs, which can either be contractual or discretionary in nature, is based on an assessment of customer purchases, customer performance of specified promotional activities, and other specified factors such as customer sales volume.

While the majority of sales adjustment amounts are readily determinable at period end and do not require estimates, certain of the sales adjustments (i.e., discretionary sales adjustments) require management to make estimates.

While certain sales adjustment amounts are readily determinable at year end and do not require estimates, other sales adjustments (i.e., discretionary sales adjustments) require significant judgment by management to make these estimates.

In making these estimates, management considers all available information, including the overall business environment, historical trends, and information from customers.

The principal considerations for our determination that performing procedures relating to the discretionary component of the sales adjustments accrual is a critical audit matter are the significant judgment by management in estimating the discretionary component, which in turn led to a high degree of auditor judgment, subjectivity, and audit effort in performing procedures and evaluating audit evidence relating to management’s estimate of the discretionary component of the sales adjustments accrual.

The principal considerations for our determination that performing procedures relating to the discretionary component of the sales adjustments accrual is a critical audit matter are the significant judgment by management in estimating the discretionary component of the sales adjustments accrual, which in turn led to a high degree of auditor judgment, subjectivity, and audit effort in performing procedures and evaluating audit evidence relating to management’s estimate.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the completeness and accuracy of the discretionary component of the sales adjustments accrual.

These procedures also included, among others (i) testing management’s process for developing the discretionary component of the sales adjustments accrual, (ii)

evaluating the reasonableness of the assumptions used by management to develop the discretionary component of the sales adjustments accrual, (iii) testing the completeness, accuracy, and relevance of underlying data used in developing the discretionary component of the sales adjustments accrual, (iv) considering the results of a retrospective comparison of sales adjustments accrued in the prior year to settlements in the current year, and (v) testing settlements subsequent to year-end.

These procedures included testing the effectiveness of controls relating to the estimate of the discretionary component of the sales adjustments accrual.

These procedures also included, among others (i) testing management’s process for developing the estimate of the discretionary component of the sales adjustments accrual, (ii) evaluating the reasonableness of available information considered by management in developing the estimate, (iii) testing the completeness and accuracy of underlying data used in the estimate, (iv) evaluating, on a sample basis, the results of a retrospective comparison of sales adjustments accrued in the prior year to settlements in the current year, and (v) testing, on a sample basis, settlements subsequent to year-end.

/s/ PricewaterhouseCoopers LLP

17 unchanged sentences

Goodwill 1,390,207 1,393,834

Deferred income tax assets 526,906 72,682

Identifiable intangible assets, net 476,858 518,190

Other noncurrent assets 343,944 288,098

37 unchanged sentences

Other selling and administrative expenses 1,351,426 1,342,564 1,390,022

Operating Income (Loss) 380,885 39,240 ( 234,349 )

Operating Income 729,562 374,736 37,102

Interest expense 253,937 198,332 201,044

2 unchanged sentences

Income (Loss) Before Income Taxes 470,764 177,657 ( 159,655 )

Provision for income taxes 68,649 55,224 116,196

(Benefit) provision for income taxes ( 420,381 ) 65,549 58,324

Income (loss) from equity method investments 11,842 11,471 ( 771 )

12 unchanged sentences

Net Income (Loss) $ 902,987 $ 123,579 $ ( 218,750 )

Other Comprehensive Loss, Net of Tax

Other Comprehensive Income (Loss), Net of Tax

Currency translation adjustments ( 54,690 ) ( 32,423 ) 18,919

1 unchanged sentence

Net unrealized gains (losses) on available-for-sale security 1,075 738 ( 1,713 )

Net unrealized (losses) gains on derivative instruments:

Unrealized holding (losses) gains ( 14,037 ) 17,024 24,082

Amounts reclassified from accumulated other comprehensive loss ( 12,373 ) ( 17,394 ) 8,427

Net unrealized gains (losses) on derivative instruments:

Unrealized holding gains (losses) 23,253 ( 18,289 ) 14,495

Reclassification adjustments included in net income (loss) 912 ( 8,121 ) ( 14,865 )

24,165 ( 26,410 ) ( 370 )

Other Comprehensive Loss, Net of Tax ( 75,092 ) ( 10,258 ) ( 77,440 )

Other Comprehensive Income (Loss), Net of Tax 3,305 ( 75,092 ) ( 10,258 )

Comprehensive Income (Loss) $ 906,292 $ 48,487 $ ( 229,008 )

8 unchanged sentences

Net income (loss) $ 902,987 $ 123,579 $ ( 218,750 )

Adjustments to reconcile net income (loss) to net cash flows provided by (used for) operating activities:

Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:

Depreciation 146,274 154,526 204,406

5 unchanged sentences

Deferred income taxes 56,658 ( 5,300 ) ( 6,036 )

Indefinite reinvestment assertion and U.S.

Tax Act — — 18,275

(Income) loss from equity method investments ( 11,842 ) ( 10,752 ) 771

Loss on extinguishment of long-term borrowings 101,695 — 9,236

(Gain) loss on sale of assets/business, net ( 23,823 ) 1,028 ( 1,521 )

Release of valuation allowances on deferred tax assets ( 540,803 ) — ( 13,489 )

Changes in assets and liabilities:

4 unchanged sentences

Other, net ( 59,684 ) ( 5,530 ) ( 32,343 )

Net cash flows provided by (used for) operating activities 288,502 180,977 ( 27,317 )

Net cash flows provided by operating activities 485,463 285,696 168,436

Cash Flows From Investing Activities:

1 unchanged sentence

Purchases of other property, plant, and equipment ( 77,131 ) ( 59,389 ) ( 50,817 )

Payments for foreign currency forward exchange contracts ( 22,883 ) ( 681 ) ( 18,615 )

Proceeds from (payments of) foreign currency forward exchange contracts, net 1,585 ( 22,883 ) ( 681 )

Proceeds from sale of assets/business 43,649 5,815 3,302

Other, net 1,022 3,757 ( 445 )

1 unchanged sentence

Cash Flows From Financing Activities:

Proceeds from (payments of) short-term borrowings, net 969 ( 4,176 ) 4,176

(Payments of) proceeds from short-term borrowings, net ( 969 ) 969 ( 4,176 )

Payments of long-term borrowings ( 1,575,997 ) — ( 607,898 )

Proceeds from long-term borrowings, net 1,184,913 — 588,244

Option proceeds and tax withholdings for share-based compensation, net ( 7,856 ) ( 7,199 ) ( 7,510 )

Other, net ( 2,165 ) 388 ( 1,798 )

Net cash flows used for financing activities ( 402,074 ) ( 5,842 ) ( 33,138 )

Effect of Currency Exchange Rate Changes on Cash ( 15,597 ) 1,884 ( 11,508 )

Increase (Decrease) in Cash and Equivalents 132,153 35,547 ( 484,740 )

Effect of Currency Exchange Rate Changes on Cash and Equivalents ( 9,111 ) ( 15,597 ) 1,884

Change in Cash and Equivalents ( 30,819 ) 132,153 35,547

Cash and Equivalents at Beginning of Period 762,181 630,028 594,481

15 unchanged sentences

Balance, December 31, 2018 $ 441,369 $ 1,812,682 $ ( 2,354,617 ) $ 1,648,781 $ ( 859,226 ) $ 688,989

Cumulative effect of accounting change — — — ( 19,149 ) — ( 19,149 )

Net loss — — — ( 218,750 ) — ( 218,750 )

3 unchanged sentences

Share-based compensation — 55,968 — — — 55,968

Dividend equivalents for restricted stock units — — — 41 — 41

Balance, December 31, 2019 441,369 1,825,569 ( 2,318,921 ) 1,430,031 ( 869,484 ) 508,564

Net loss — — — ( 213,512 ) — ( 213,512 )

Net income — — — 123,579 — 123,579

Other comprehensive loss, net of tax — — — — ( 75,092 ) ( 75,092 )

Issuance of treasury stock for stock option exercises — ( 41 ) 105 — — 64

Issuance of treasury stock for restricted stock units vesting — ( 42,830 ) 35,567 — — ( 7,263 )

3 unchanged sentences

Net income — — — 902,987 — 902,987

Other comprehensive loss, net of tax — — — — ( 75,092 ) ( 75,092 )

Other comprehensive income, net of tax — — — — 3,305 3,305

Issuance of treasury stock for stock option exercises — ( 4,806 ) 16,937 — — 12,131

14 unchanged sentences

Certain prior period amounts have been reclassified to conform to the current period presentation.

Revision of Previously Issued Consolidated Financial Statements

During the second quarter of 2021, Mattel identified a misstatement in its accounting for inventory tooling expenses, which were expensed to cost of sales rather than first being capitalized into the cost of inventory, which resulted in an understatement of inventory balances and a misstatement of cost of sales.

Mattel also identified a misstatement related to the timing of disbursements for certain capital expenditures, which resulted in a cash flow misclassification between operating activities and investing activities.

Mattel evaluated the misstatements and concluded that the misstatements were not material, either individually or in the aggregate, to its current or previously issued consolidated financial statements.

To correct the immaterial misstatements, during the second quarter of 2021, Mattel elected to revise its previously issued consolidated financial statements as of December 31, 2020 and 2019, and for each of the three years ended December 31, 2020, 2019, and 2018.

The revision of the historical consolidated financial statements also includes the correction of other immaterial misstatements in its consolidated statement of operations that Mattel had previously recorded as out of period adjustments, as well as other previously identified balance sheet misclassifications.

Mattel had previously determined that these misstatements did not, either individually or in the aggregate, result in a material misstatement of its previously issued consolidated financial statements and reached the same conclusion when aggregating with the recently identified misstatements.

Accordingly, the accompanying financial statements and relevant footnotes to the consolidated financial statements in this Annual Report on Form 10-K have been revised to correct for such misstatements.

Further information regarding the misstatements and related revision is included in "Note 17 to the Consolidated Financial Statements—Revision of Immaterial Misstatements."

Use of Estimates

10 unchanged sentences

For customers who are experiencing financial difficulties, management performs additional financial analyses before shipping to those customers on credit.

Mattel uses a variety of financial arrangements to ensure collectability of accounts receivable of customers, including requiring letters of credit, purchasing various forms of credit insurance with unrelated third parties, factoring, or requiring cash in advance of shipment.

Mattel records an allowance for credit losses based on collection history and management's assessment of the current economic trends, business environment, customers' financial condition, accounts receivable aging, and customer disputes that may impact the level of future credit losses.

8 unchanged sentences

The carrying value of property, plant, and equipment is reviewed when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

Any potential impairment identified is initially assessed by evaluating the operating performance and future undiscounted cash flows of the underlying assets.

When property is sold or retired, the cost of the property and the related accumulated depreciation are removed from the consolidated balance sheets, and any resulting gain or loss is included in the consolidated statements of operations.

Any potential impairment identified is initially assessed by evaluating the operating performance and future undiscounted cash flows of the underlying assets groups.

When property, plant and equipment are sold or retired, the cost of the property and the related accumulated depreciation are removed from the consolidated balance sheets, and any resulting gain or loss is included in the consolidated statements of operations.

Goodwill and Intangible Assets

16 unchanged sentences

The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive loss within stockholders’ equity.

Mattel’s primary currency translation adjustments in 2020 were related to its net investments in entities having functional currencies denominated in the Brazilian real, Russian ruble, British pound sterling and the Mexican peso.

Mattel’s primary currency translation adjustments in 2021 were related to its net investments in entities having functional currencies denominated in the Turkish lira, Chilean peso, Mexican peso, Euro, and Brazilian real.

Foreign Currency Transaction Exposure

1 unchanged sentence

Mattel’s currency transaction exposures include gains and losses realized on unhedged inventory purchases and unhedged receivables and payables balances that are denominated in a currency other than the applicable functional currency.

Gains and losses on unhedged inventory purchases and other transactions associated with operating activities are recorded in the components of operating income (loss) in the consolidated statements of operations.

Gains and losses on unhedged inventory purchases and other transactions associated with operating activities are recorded in the components of operating income in the consolidated statements of operations.

Transaction gains or losses on hedged intercompany inventory transactions are recorded in the consolidated statements of operations in the period in which the inventory is sold to customers.

Gains and losses on unhedged intercompany loans and advances are recorded as a component of other non-operating expense, net in the consolidated statements of operations in the period in which the currency exchange rate changes.

Inventory transactions denominated in the Euro, Mexican peso, British pound sterling, Canadian dollar, Russian ruble, Australian dollar and Brazilian real were the primary transactions that caused foreign currency transaction exposure for Mattel in 2020.

Inventory transactions denominated in the Euro, Mexican peso, British pound sterling, Canadian dollar, Russian ruble, Australian dollar, and Polish zloty were the primary transactions that caused foreign currency transaction exposure for Mattel in 2021.

Derivative Instruments

38 unchanged sentences

With the exception of certain market-based options granted in 2018, which are valued using a Monte Carlo valuation methodology, Mattel estimates the fair value of options granted using the Black-Scholes valuation model.

The expected life of the options used in this calculation is the period of time the options are expected to be outstanding and has been determined based on historical exercise experience.

The expected life of stock options used in this calculation is the period of time the options are expected to be outstanding and has been determined based on historical exercise experience.

Expected stock price volatility is based on the historical volatility of Mattel’s stock for a period approximating the expected life, the expected dividend yield is based on Mattel’s most recent actual annual dividend payout, and the risk-free interest rate is based on the implied yield available on U.S.

6 unchanged sentences

Deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, applying enacted statutory income tax rates in effect for the year in which the differences are expected to reverse.

Mattel evaluates the realization of our deferred tax assets based on all available evidence and establishes a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized.

Mattel evaluates the realization of its deferred tax assets based on all available evidence and establishes a valuation allowance to reduce deferred tax assets when it is more likely than not that they will not be realized.

Mattel recognizes the financial statement effects of a tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination.

The tax benefits of the position recognized in the financial statements are then measured based on the largest amount of benefit that is greater than 50% likely to be realized upon settlement with a taxing authority.

In addition, we recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision .

In addition, Mattel recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision .

In the normal course of business, Mattel is regularly audited by federal, state, local, and foreign tax authorities.

6 unchanged sentences

Equity method investments were not significant for the periods presented.

Argentina Operations

Effective July 1, 2018, Mattel accounted for Argentina as a highly inflationary economy, as the projected three-year cumulative inflation rate exceeded 100%.

As such, beginning July 1, 2018, Mattel's Argentina subsidiary has designated the U.S.

dollar as its functional currency.

Mattel’s Argentina subsidiary represented less than 1 % of Mattel's consolidated net sales for the years ended December 31, 2020 and 2019.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.

This update replaces the existing incurred loss impairment model with an expected loss model (referred to as the Current Expected Credit Loss model).

In November 2018, the FASB issued ASU 2018-19, Codifications Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies that receivables arising from operating leases are accounted for using lease guidance and not as financial instruments.

Mattel adopted ASU 2016-13 and its related amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11, and ASU 2020-02) on January 1, 2020.

The adoption of this new accounting standard and its related amendments did not have a material impact on Mattel's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements on fair value measurements, including the consideration of costs and benefits.

ASU 2018-13 was effective for interim and annual reporting periods beginning on January 1, 2020.

The amendments on changes in unrealized gains and losses, the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty are applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments are applied retrospectively to all periods presented upon their effective date.

Mattel adopted ASU 2018-13 on January 1, 2020.

The adoption of this new accounting standard did not have a material impact on the disclosures to Mattel's consolidated financial statements.

In March 2019, the FASB issued ASU 2019-02, Entertainment - Films - Other Assets - Film Costs (Subtopic 926-20) and Entertainment - Broadcasters - Intangibles - Goodwill and Other (Subtopic 920-350):

Improvements to Accounting for Costs of Films and License Agreements for Program Materials , which aligns the accounting for production costs of episodic television series with the accounting of films by removing the content distinction for capitalization.

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify the accounting for other areas of Topic 740 by clarifying and amending existing guidance.

The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries are applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

Mattel adopted ASU 2019-12 on January 1, 2021.

The adoption of this new accounting standard did not have a material impact on Mattel's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20):

Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

Mattel adopted ASU 2018-14 on January 1, 2020 on a retrospective basis for all periods presented.

The adoption of the new accounting standard did not have a material impact on the disclosures to Mattel's consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify the accounting for other areas of Topic 740 by clarifying and amending existing guidance.

ASU 2019-12 will become effective for the fiscal year beginning on January 1, 2021.

Early adoption is permitted.

The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries will be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

The amendments related to franchise taxes that are partially based on income will be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

All other amendments will be applied on a prospective basis.

Mattel will adopt ASU 2019-12 on January 1, 2021 and does not expect the adoption to have a material impact on its consolidated financial statements.

In March 2020 and January 2021, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

2 unchanged sentences

ASU 2020-04 and ASU 2021-01 provide optional expedients and exceptions for applying U.S.

GAAP, to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met.

GAAP, to contracts, hedging relationships, and other transactions that reference the LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met.

The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022.

10 unchanged sentences

Leasehold improvements 115,844 130,789

Construction in progress 55,559 47,958

2,158,351 2,216,430

1 unchanged sentence

$ 455,966 $ 473,794

During the quarter ended December 31, 2019, in conjunction with Mattel's cost savings programs, Mattel discontinued production at one of its plants based in Mexico and has committed to a plan to dispose of the land and building.

These assets meet the held for sale criteria and are actively being marketed for sale.

The estimated fair value of the land and building, less costs to dispose, were determined to exceed its net book value of $ 8.4 million and $ 12.1 million as of December 31, 2020 and December 31, 2019, respectively, and are included within property, plant and equipment, net in the consolidated balance sheets within the Corporate and Other segment.

During the three months ended March 31, 2021, Mattel completed the sale of a manufacturing plant based in Mexico, which included land and buildings, resulting in a pre-tax gain of $ 15.8 million.

The assets sold were previously designated as held for sale, and included within property, plant, and equipment, net in the consolidated balance sheets as of December 31, 2020.

Note 3— Goodwill and Other Intangibles

6 unchanged sentences

Brand-specific goodwill held by foreign subsidiaries is allocated to the North America operating segment selling those brands, thereby causing a foreign currency translation impact.

During the first quarter of 2021, Mattel sold its arts, crafts, and stationery business, resulting in a reduction of goodwill of approximately $ 2 million.

North America International American Girl Total

3 unchanged sentences

Balance at December 31, 2020 733,401 452,862 207,571 1,393,834

Dispositions ( 1,290 ) ( 1,056 ) — ( 2,346 )

Currency exchange rate impact ( 322 ) ( 959 ) — ( 1,281 )

Balance at December 31, 2021 $ 731,789 $ 450,847 $ 207,571 $ 1,390,207

In the third quarter of 2020, Mattel performed its annual impairment test and determined that goodwill was not impaired since each reporting unit's fair value exceeded its carrying value.

In the third quarter of 2021, Mattel performed a qualitative assessment to determine whether it was more likely than not that the book value of each reporting unit exceeded its fair value.

As a result of Mattel's qualitative assessment, it was determined that goodwill was no t impaired.

There were no events or changes in circumstances subsequent to the third quarter assessment that indicate that the carrying value of a reporting unit may exceed its fair value as of December 31, 2021.

Other Intangibles

6 unchanged sentences

Mattel's amortizable intangible assets primarily consist of trademarks.

During the fourth quarter of 2021, Mattel discontinued the use of an intangible asset which resulted in an asset impairment charge of $ 2.0 million.

During 2020 and 2019, Mattel's amortizable intangible assets were no t impaired.

During 2018, Mattel discontinued the use of certain brands and products, which resulted in asset impairments of $ 4.3 million.

Note 4— Employee Benefit Plans

1 unchanged sentence

These plans include defined benefit pension plans, defined contribution retirement plans, postretirement benefit plans, and deferred compensation and excess benefit plans.

In addition, Mattel makes contributions to government-mandated retirement plans in countries outside the U.S.

where its employees work.

In addition, Mattel makes contributions to government-mandated retirement plans in countries outside the United States where its employees work.

A summary of retirement plan expense, net is as follows:

13 unchanged sentences

Mattel also has unfunded postretirement health insurance plans covering certain eligible domestic employees.

A summary of the components of Mattel’s net periodic benefit cost (credit) and other changes in plan assets and benefit obligations recognized in other comprehensive loss for the years ended December 31 is as follows:

A summary of the components of Mattel’s net periodic benefit cost (credit) and other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended December 31 is as follows:

Defined Benefit Pension Plans Postretirement Benefit Plans

10 unchanged sentences

Net periodic benefit cost (credit) $ 14,858 $ 9,670 $ 9,815 $ ( 1,968 ) $ ( 1,972 ) $ ( 2,220 )

Other changes in plan assets and benefit obligations recognized in other comprehensive loss:

Net actuarial loss (gain) $ 12,624 $ 28,740 $ ( 4,433 ) $ 850 $ 1,870 $ ( 276 )

Prior service cost 269 26 114 — — —

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):

Net actuarial (gain) loss $ ( 42,671 ) $ 12,624 $ 28,740 $ ( 605 ) $ 850 $ 1,870

Prior service (credit) cost 204 269 26 — — —

Amortization of prior service (cost) credit ( 163 ) ( 303 ) ( 64 ) 2,038 2,038 2,038

Total recognized in other comprehensive loss (a) $ 12,590 $ 28,702 $ ( 4,348 ) $ 2,888 $ 3,908 $ 1,761

Total recognized in net periodic benefit cost (credit) and other comprehensive loss $ 22,260 $ 38,517 $ 8,018 $ 916 $ 1,688 $ ( 387 )

(a) Amounts exclude related tax expense (benefit) of $ 1.5 million, $( 5.5 ) million, and $ 2.1 million, during 2020, 2019, and 2018, respectively, which are also included in other comprehensive loss.

Total recognized in other comprehensive (income) loss (a) $ ( 42,630 ) $ 12,590 $ 28,702 $ 1,433 $ 2,888 $ 3,908

Total recognized in net periodic benefit (credit) cost and other comprehensive income (loss) $ ( 27,772 ) $ 22,260 $ 38,517 $ ( 535 ) $ 916 $ 1,688

(a) Amounts exclude related tax expense (benefit) of approximately $ 9 million, $ 2 million, and $( 6 ) million, during 2021, 2020, and 2019, respectively, which are also included in other comprehensive income (loss).

Net periodic benefit cost (credit) for Mattel’s domestic defined benefit pension and postretirement benefit plans was calculated on January 1 of each year using the following assumptions:

35 unchanged sentences

Impact of currency exchange rate changes ( 5,762 ) 9,076 — —

Actuarial loss 45,907 72,353 773 1,486

Actuarial (gain) loss ( 16,597 ) 45,907 ( 614 ) 773

Benefits paid ( 49,895 ) ( 33,447 ) ( 536 ) ( 448 )

Plan amendments ( 656 ) 2,066 — —

Settlements 1,612 — — —

Other ( 1,636 ) — — —

Benefit obligation, end of year $ 613,266 $ 671,181 $ 5,176 $ 6,246

6 unchanged sentences

Settlements — ( 230 ) — —

Other ( 72 ) — — —

Plan assets at fair value, end of year $ 457,132 $ 457,880 $ — $ —

8 unchanged sentences

$ 236,856 $ 279,486 $ ( 9,066 ) $ ( 10,499 )

(a) Amounts exclude related tax benefits of $ 83.0 million and $ 84.5 million for December 31, 2020 and 2019, respectively, which are also included in accumulated other comprehensive loss.

(a) Amounts exclude related tax benefits of approximately $ 74 million and $ 83 million for December 31, 2021 and 2020, respectively, which are also included in accumulated other comprehensive loss.

The accumulated benefit obligation differs from the projected benefit obligation in that it assumes future compensation levels will remain unchanged.

Mattel’s accumulated benefit obligation for its defined benefit pension plans as of 2021 and 2020 totaled $ 595.4 million and $ 652.7 million, respectively.

The actuarial loss recognized in 2020 for the defined benefit pension plan was driven primarily by the decrease in the discount rate from the prior year that was used to determine the projected benefit obligation at December 31, 2020.

The actuarial gain recognized in 2021 for the defined benefit pension plan was driven primarily by the increase in the discount rate from the prior year that was used to determine the projected benefit obligation at December 31, 2021.

As of December 31, 2020 and 2019, information for pension plans that had aggregate accumulated benefit obligations and projected benefit obligations in excess of plan assets is as follows:

As of December 31, 2021 and 2020, information for defined benefit pension plans that had aggregate accumulated benefit obligations and projected benefit obligations in excess of plan assets is as follows:

For the Year Ended

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International equity securities 12,832

International fixed income 17,799

Global fixed income 48,745

Diversified funds 46,407

Real Estate $ 16,961

Total $ 3,650 $ 100,385 $ 30,731 $ 457,132

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International equity securities 66,749

International fixed income 15,387

Global fixed income 45,862

Diversified funds 42,884

Real Estate $ 16,647

Total $ 323 $ 109,779 $ 32,794 $ 457,880

(a) These investments consist of privately placed funds that are valued based on net asset value per share.

(a) These investments primarily consist of privately placed funds that are valued based on net asset value per share.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position and its related disclosures.

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Balance at December 31, 2019 $ 31,281

Purchases, sales, and settlements (a) —

Purchases, sales, and settlements ( 1,867 )

Change in fair value 3,380

Balance at December 31, 2020 32,794

Purchases, sales, and settlements (a) —

Purchases, sales, and settlements ( 1,854 )

Change in fair value ( 209 )

Balance at December 31, 2021 $ 30,731

(a) There were no purchases, sales, or settlements of Level 3 assets, or transfers in or out of Level 3, for the years ended December 31, 2020 and December 31, 2019.

Mattel’s defined benefit pension plan assets are not directly invested in Mattel common stock.

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Contributions to the Plan include voluntary contributions by eligible employees and employer automatic and matching contributions by Mattel.

The automatic contributions by Mattel were temporarily suspended in May 2020 and reinstated in November 2020.

The Plan allows employees to allocate both their voluntary contributions and their employer automatic and matching contributions to a variety of investment funds, including a fund that is invested in Mattel common stock (the "Mattel Stock Fund").

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Separately, Mattel has purchased group trust-owned life insurance contracts designed to assist in funding these benefits under the DCP.

The cash surrender value of these

policies, valued at $ 79.9 million and $ 75.7 million as of December 31, 2020 and 2019, respectively, are held in an irrevocable grantor trust, the assets of which are subject to the claims of Mattel’s creditors and are included in other noncurrent assets in the consolidated balance sheets.

The cash surrender value of these policies, valued at $ 88.6 million and $ 79.9 million as of December 31, 2021 and 2020, respectively, are held in an irrevocable grantor trust, the assets of which are subject to the claims of Mattel’s creditors and are included in other noncurrent assets in the consolidated balance sheets.

Annual Incentive Compensation

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Seasonal Financing

On December 20, 2017, Mattel entered into a syndicated facility agreement (the "Credit Agreement"), as a borrower thereunder (in such capacity, the "Borrower"), along with certain of Mattel’s domestic subsidiaries, as additional borrowers thereunder (together with the Borrower, the "U.S.

On December 20, 2017, Mattel entered into a syndicated facility agreement, which was subsequently amended in 2018, 2019, and 2021 (as amended, the “Credit Agreement”), as a borrower thereunder (in such capacity, the “Borrower”), along with certain of Mattel’s domestic subsidiaries, as additional borrowers thereunder (together with the Borrower, the “U.S.

Borrowers”), Mattel Canada Inc.

as a borrower thereunder (the "Canadian Borrower"), certain additional domestic and foreign subsidiaries of Mattel, as guarantors thereunder, Bank of America, N.A., as global administrative agent, collateral agent, Australian security trustee, and lender, and the other lenders and financial institutions party thereto, providing for $ 1.60 billion in aggregate principal amount of senior secured revolving credit facilities (the "senior secured revolving credit facilities").

The senior secured revolving credit facilities consist of an asset based lending facility with aggregate commitments of $ 1.31 billion, subject to borrowing base capacity, and a revolving credit facility with $ 294.0 million in aggregate commitments secured by certain fixed assets and intellectual property of the U.S.

Borrowers and certain equity interests in various subsidiaries of Mattel, subject to borrowing base capacity (the "Fixed Asset & IP Facility").

The senior secured revolving credit facilities will mature on November 18, 2022.

as a borrower thereunder (the “Canadian Borrower”), certain additional domestic and foreign subsidiaries of Mattel, as guarantors thereunder, Bank of America, N.A., as global administrative agent, collateral agent, Australian security trustee, and lender, and the other lenders and financial institutions party thereto.

On March 28, 2018 and March 29, 2018, Mattel, Inc.

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such that, together with the initial entry into the Credit Agreement, the senior secured revolving credit facilities are available to certain subsidiaries of Mattel, Inc., in their capacity as borrowers, located in the following jurisdictions:

(i) the United States (the "U.S.

Borrowers"), (ii) Canada (the "Canadian Borrower"), (iii) Germany, the Netherlands and the United Kingdom (the "European (GNU) Borrowers"), (iv) Spain (the "Spanish Borrower"), (v) France (the "French Borrower"), and (vi) Australia (the "Australian Borrower"), in each case through subfacilities in each such jurisdiction (each, a "Subfacility").

Through the initial Credit Agreement and the foreign joinder agreements, certain additional domestic and foreign subsidiaries of Mattel Inc., are also parties to the Credit Agreement as guarantors of various obligations of the borrowers under the Credit Agreement as further described below.

On December 14, 2018, Mattel, Inc.

entered into an amendment to the Credit Agreement, which included the expansion of eligibility criteria for accounts receivable and inventory included in the borrowing base.

In support of the foregoing, two additional Mattel subsidiaries, Mattel Import Services, LLC ("MISL") and Mattel Finco Europe B.V.

("Mattel Finco") were added as borrowers to the Credit Agreement.

The Credit Agreement allows for certain inventory located in the Czech Republic and the Netherlands to be included in the borrowing base.

Additionally, certain accounts receivable with account debtors located in Italy and Poland, as well as other countries agreed upon with the Administrative Agent, may be purchased by Mattel Finco and added to the borrowing base in the future.

On November 20, 2019, Mattel, Inc.

entered into an amendment to the Credit Agreement, which included, but not limited to, amendments to certain definitions related to the borrowing base, a reduction in certain interest rates thereunder and an extension of the maturity date thereof.

Each of the facilities under the Credit Agreement will mature, and lending commitments thereunder will terminate, on November 18, 2022.

Borrowings under the senior secured revolving credit facilities will (i) be limited by jurisdiction-specific borrowing base calculations based on the sum of specified percentages of eligible accounts receivable, eligible inventory and certain fixed assets and intellectual property, as applicable, minus the amount of any applicable reserves, and (ii) bear interest at a floating rate, which can be either, at the Borrower’s option, (a) an adjusted LIBOR rate plus an applicable margin ranging from 1.25 % to 2.75 % per annum or (b) an alternate base rate plus an applicable margin ranging from 0.25 % to 1.75 % per annum, in each case, such applicable margins to be determined based on the Borrower’s average borrowing availability remaining under the senior secured revolving credit facilities.

In addition to paying interest on the outstanding principal under the senior secured revolving credit facilities, the Borrower is required to pay (i) an unused line fee per annum of the average daily unused portion of the senior secured revolving credit facilities, (ii) a letter of credit fronting fee based on a percentage of the aggregate face amount of outstanding letters of credit, and (iii) certain other customary fees and expenses of the lenders and agents.

Outstanding letters of credit under the senior secured revolving credit facilities totaled approximately $ 11 million as of December 31, 2020.

(i) the United States, (ii) Canada, (iii) Germany, the Netherlands and the United Kingdom (the “ European (GNU) Borrowers ” ), (iv) Spain (the “ Spanish Borrower ” ), (v) France (the “ French Borrower ” ), and (vi) Australia (the “ Australian Borrower ” ), in each case through subfacilities in each such jurisdiction (each, a “ Subfacility ” ).

Through the Credit Agreement and the foreign joinder agreements, certain additional domestic and foreign subsidiaries of Mattel, Inc.

are also parties to the Credit Agreement as guarantors of various obligations of the borrowers under the Credit Agreement.

On March 19, 2021, the Company entered into the fourth amendment to the Credit Agreement, which amended certain terms, including, but not limited to, amendments to certain components of the borrowing base, a reduction of the aggregate principal amount of the senior secured revolving credit facilities from $ 1.60 billion to $ 1.40 billion and an extension of the maturity date from November 20, 2022 to March 19, 2024.

The senior secured revolving credit facilities consist of (i) an asset based lending facility with aggregate commitments up to $ 1.11 billion, subject to borrowing base capacity, secured by substantially all of the accounts receivable and inventory of the Borrower and certain of its subsidiaries who are borrowers and/or guarantors under the Credit Agreement, as well as (ii) a revolving credit facility with $ 294.0 million in aggregate commitments secured by certain fixed assets and intellectual property of the U.S.

borrowers under the Credit Agreement, and equity interests in certain borrower and guarantor subsidiaries under the Credit Agreement (the “Fixed Asset & IP Facility”).

Borrowings under the senior secured revolving credit facilities will (i) be limited by jurisdic tion-specific borrowing base calculations based on the sum of specified percentages of eligible accounts receivable, eligible inventory and certain fixed assets and intellectual property, as applicable, minus the amount of any applicable reserves, and (ii) bear interest at a floating rate, which can be either, at the Borrower’s option, (a) an adjusted LIBOR rate plus an applicable margin ranging from 1.25 % to 1.75 % per annum or (b) an alternate base rate plus an applicable margin ranging from 0.25 % to 0.75 % per annum, in each case, such applicable margins to be determined based on the Borrower’s average borrowing availability remaining under the senior secured revolving credit facilities.

In addition to paying interest on the outstanding principal under the senior secured revolving credit facilities, the Borrower is required to pay (i) an unused line fee based on the average daily unused portion of the senior secured revolving credit facilities, (ii) a letter of credit fronting fee based on a percentage of the aggregate face amount of outstanding letters of credit, and (iii) certain other customary fees and expenses of the lenders and agents.

Outstanding letters of credit under the senior secured revolving credit facilities totaled approximately $ 10 million and $ 11 million as of December 31, 2021 and December 31, 2020, respectively.

Borrowers, as well as certain U.S.

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Current Assets Collateral.

The Fixed Asset & IP Facility is secured by a first priority lien on certain owned real property in the U.S., certain U.S.

The Fixed Asset & IP Facility is secured by a first priority lien on certain owned real property in the United States, certain U.S.

trademarks and patents, and 100 % of the equity interests in the U.S.

Borrowers (aside from Mattel) and U.S.

Guarantors, as well as 65 % of the voting equity interests and 100 % of the non-voting equity interests in Mattel Holdings Limited.

Upon the additional Foreign Borrowers and Foreign Guarantors joining the Credit Agreement, the Fixed Asset & IP Facility will also be secured by 65 % of the voting equity interests of such additional Foreign Borrowers and Foreign Guarantors that are directly owned by a U.S.

Guarantors, as well as 65 % of the voting equity interests and 100 % of the non-voting equity interests in Mattel Holdings Limited and the Foreign Borrowers and Foreign Guarantors that are directly owned by a U.S.

Borrower or U.S.

The net book value of the accounts receivable, inventory, and certain owned real property in the U.S.

currently pledged as collateral under the senior secured revolving credit facilities was approximately $ 935 million as of December 31, 2020.

The net book value of the accounts receivable, inventory, and certain owned real property in the United States currently pledged as collateral under the senior secured revolving credit facilities was approximately $ 1.1 billion as of December 31, 2021.

The Credit Agreement contains customary covenants, including, but not limited to, restrictions on the Borrower’s and its subsidiaries’ ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances, or investments, pay dividends, sell or otherwise transfer assets outside of the ordinary course, optionally prepay or modify terms of any junior indebtedness, enter into transactions with affiliates, or change their line of business.

The Credit Agreement requires the maintenance of a fixed charge coverage ratio of 1.00 to 1.00 at the end of each fiscal quarter when excess availability under the senior secured revolving credit facilities is less than the greater of (x) $ 100 million and (y) 10 % of the aggregate amount available thereunder (the "Availability Threshold") and on the last day of each subsequent fiscal quarter ending thereafter, until no event of default exists and excess availability is greater than the Availability Threshold for at least 30 consecutive days.

The Credit Agreement requires the maintenance of a consolidated fixed charge coverage ratio of 1.00 to 1.00 at the end of each fiscal quarter when excess availability under the senior secured revolving credit facilities is less than the greater of (x) $ 100 million and (y) 10 % of the aggregate amount available thereunder (the "Availability Threshold") and on the last day of each subsequent fiscal quarter ending thereafter, until no event of default exists and excess availability is greater than the Availability Threshold for at least 30 consecutive days.

Mattel had no borrowings under the senior secured revolving credit facilities as of December 31, 2021 and 2020.

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Mattel expects to extend the majority of these credit lines throughout 2022.

Additionally, sales of foreign receivables occur periodically to finance seasonal working capital requirements.

As of December 31, 2020 and 2019, there were no outstanding amounts of accounts receivable that were sold under international factoring arrangements.

Short-Term Borrowings

As of December 31, 2020, Mattel had no borrowings outstanding under the senior secured revolving credit facilities and approximately $ 1 million of foreign short-term borrowings outstanding.

As of December 31, 2021, Mattel had no borrowings outstanding under the senior secured revolving credit facilities and no foreign short-term borrowings outstanding.

As of December 31, 2020, Mattel had no borrowings outstanding under the senior secured revolving credit facilities and approximately $ 1 million of foreign short-term borrowings outstanding.

During 2021 and 2020, Mattel had average borrowings under the senior secured revolving credit facilities and other short-term borrowings of $ 77.3 million and $ 201.7 million, respectively, to help finance its seasonal working capital requirements.

Average borrowings were higher during 2020 than in 2019 due to the accelerated timing of borrowings under the senior secured revolving credit facilities in 2020 in anticipation of its projected seasonal working capital requirements and in light of the uncertainties surrounding COVID-19.

Average borrowings were lower during 2021 than 2020 due to the accelerated timing of borrowings under the senior secured credit facilities in 2020 in anticipation of its projected seasonal working capital requirements and in light of the uncertainties surrounding COVID-19.

The weighted-average interest rate on borrowings under the senior secured revolving credit facilities and other short-term borrowings during 2021 and 2020 was 1.3 % and 2.2 %, respectively.

Mattel's average borrowings on its foreign short-term bank loans were not material during 2020 and 2019.

Mattel's average foreign short-term borrowings were not material during 2021 and 2020.

Long-Term Debt

In November 2019, Mattel issued $ 600 million aggregate principal amount of 5.875 % senior unsecured notes due December 15, 2027 ("2019 Senior Notes").

The 2019 Senior Notes were issued pursuant to an indenture, dated November 20, 2019, among Mattel, the guarantors named therein, and MUFG Union Bank, N.A., as Trustee (the "Indenture").

Interest on the 2019 Senior Notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2020.

Mattel may redeem all or part of the 2019 Senior Notes at any time or from time to time prior to December 15, 2022 at its option, at a redemption price equal to 100 % of the principal amount, plus a "make whole" premium, plus accrued and unpaid interest on the 2019 Senior Notes being redeemed to, but excluding, the redemption date.

Mattel may also redeem up to 40 % of the principal amount of the 2019 Senior Notes at any time or from time to time prior to December 15, 2022 at its option, at a redemption price equal to 105.875 % of the principal amount, plus accrued and unpaid interest on the 2019 Senior Notes being redeemed to, but excluding, the redemption date, with the net cash proceeds of sales of one or more equity offerings by Mattel or any direct or indirect parent of Mattel.

Mattel may redeem all or part of the 2019 Senior Notes at any time or from time to time on or after December 15, 2022, at its option, at a redemption price including a call premium that varies (from 0 % to 4.406 %) depending on the year of redemption, plus accrued and unpaid interest on the 2019 Senior Notes being redeemed to, but excluding, the redemption date.

The 2019 Senior Notes are Mattel’s and the guarantors’ senior unsecured obligations.

The 2019 Senior Notes are guaranteed by Mattel's existing, and subject to certain exceptions, future wholly-owned domestic restricted subsidiaries that guarantee Mattel’s 2017/2018 Senior Notes due 2025 and senior secured revolving credit facilities or certain other indebtedness.

Under the terms of the Indenture, the 2019 Senior Notes rank equally in right of payment with all of Mattel’s existing and future senior debt, including Mattel’s Existing Notes (as defined in the Indenture) and borrowings under the senior secured revolving credit facilities, and rank senior in right of payment to Mattel's existing and future debt and other obligations that expressly provide for their subordination to the 2019 Senior Notes.

The 2019 Senior Notes are structurally subordinated to all of the existing and future liabilities, including trade payables, of Mattel’s subsidiaries that do not guarantee the 2019 Senior Notes (including the Canadian Subfacility, the French Subfacility, the Spanish Subfacility, the European (GNU) Subfacility, and the Australian Subfacility of the senior secured revolving credit facilities) and are effectively subordinated to Mattel’s and the guarantors’ existing and future senior secured debt to the extent of the value of the collateral securing such debt (including borrowings under the senior secured revolving credit facilities).

The guarantees are, with respect to the assets of the guarantors of the 2019 Senior Notes, structurally senior to all of Mattel’s existing indebtedness, future indebtedness or other liabilities that are not guaranteed by such guarantors, including Mattel’s obligations under the Existing Notes (other than the 2017/2018 Senior Notes due 2025).

The Indenture contains covenants that limit Mattel’s (and some of its subsidiaries’) ability to, among other things:

On March 19, 2021, Mattel issued (i) $ 600 million aggregate principal amount of 3.375 % Senior Notes due 2026 (the “2026 Notes”) and (ii) $ 600 million aggregate principal amount of 3.750 % Senior Notes due 2029 (the “2029 Notes” and, together with the 2026 Notes, the “Notes” and each a “series” of the Notes).

The 2026 Notes were issued pursuant to an indenture dated March 19, 2021 (the “2026 Notes Indenture”), among the Company, the guarantors named therein and U.S.

Bank National Association, as trustee (the “Trustee”).

The 2029 Notes were issued pursuant to an indenture dated March 19, 2021 (the “2029 Notes Indenture” and, together with the 2026 Notes Indenture, the “Indentures” and each, an “Indenture”), among the Company, the guarantors named therein and the Trustee.

The Notes of each series pay interest semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021.

Mattel may redeem all or part of the 2026 Notes at any time or from time to time prior to April 1, 2023, or April 1, 2024, in the case of the 2029 Notes, at its option, at a redemption price equal to 100 % of the principal amount, plus a "make whole" premium, plus accrued and unpaid interest on applicable Notes being redeemed to, but excluding, the redemption date.

Mattel may also redeem up to 40 % of the principal amount of the Notes of such series at any time or from time to time prior to April 1, 2023, in the case of the 2026 Notes, or April 1, 2024, in the case of the 2029 Notes, at its option, at a redemption price equal to 103.375 %, in the case of the 2026 Notes, or 103.750 %, in the case of the 2029 Notes, of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the applicable redemption date, with the net cash proceeds of sales of one or more equity offerings by Mattel or any direct or indirect parent of Mattel.

Mattel may redeem all or part of the 2026 Notes or 2029 Notes at any time or from time to time on or after April 1, 2023, in the case of the 2026 Notes, or April 1, 2024, in the case of the 2029 notes, at its option, at a redemption price including a call premium that varies (from 0 % to 1.688 %, in the case of the 2026 Notes, or from 0 % to 1.875 %, in the case of the 2029 Notes) depending on the year of redemption, plus accrued and unpaid interest to, but excluding, the applicable redemption date.

The Notes of each series are Mattel’s and the guarantors’ senior unsecured obligations.

The Notes of each series are guaranteed by Mattel's existing, and subject to certain exceptions, future wholly-owned domestic restricted subsidiaries that guarantee Mattel’s senior secured revolving credit facilities or certain other indebtedness.

Under the terms of the applicable Indenture, the Notes of each series rank equally in right of payment with all of Mattel’s existing and future senior debt, including Mattel’s Existing Notes (as defined in the Indenture) and borrowings under the senior secured revolving credit facilities, and rank senior in right of payment to Mattel's existing and future debt and other obligations that expressly provide for their subordination to the Notes.

The Notes of each series are structurally subordinated to all of the existing and future liabilities, including trade payables, of Mattel’s subsidiaries that do not guarantee the Notes of each series (including the Canadian Subfacility, the French Subfacility, the Spanish Subfacility, the European (GNU) Subfacility, and the Australian Subfacility of the senior secured revolving credit facilities) and are effectively subordinated to Mattel’s and the guarantors’ existing and future senior secured debt to the extent of the value of the collateral securing such debt (including borrowings under the senior secured revolving credit facilities).

The guarantees are, with respect to the assets of the guarantors of the Notes of each series, structurally senior to all of Mattel’s existing indebtedness, future indebtedness or other liabilities that are not guaranteed by such guarantors, including Mattel’s obligations under the Existing Non-Guaranteed Notes (as defined in the Indentures).

The Indentures contain covenants that limit Mattel’s (and some of its subsidiaries’) ability to, among other things:

(i) incur additional debt or issue certain preferred shares;

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Upon redemption, Mattel recognized total debt extinguishment costs, including write off of debt issuance costs, of $ 9.2 million which were recorded within interest expense in the consolidated statements of operations.

In 2021, Mattel used the net proceeds from the issuance of the $ 600 million of 3.375 % Senior Notes due 2026 and $ 600 million of 3.750 % Senior Notes due 2029, plus cash on hand, to redeem and retire $ 1.50 billion in aggregate principal amount of the 2025 Notes and pay related prepayment premiums and transaction fees and expenses.

As a result of the redemptions, Mattel incurred losses on extinguishment of debt of $ 101.7 million, comprised of $ 76.0 million of prepayment premiums and a $ 25.7 million write-off of the unamortized debt issuance costs, which was recorded within interest expense in the consolidated statements of operations.

Mattel’s long-term debt consists of the following:

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2019 Senior Notes due December 2027 5.875 % 600,000 600,000

2021 Senior Notes due April 2026 3.375 % 600,000 —

2021 Senior Notes due April 2029 3.75 % 600,000 —

Debt issuance costs and debt discount ( 29,008 ) ( 45,336 )

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The aggregate principal amount of long-term debt maturing in the next five years and thereafter is as follows:

Notes 2017/2018

(In thousands)

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(In thousands)

Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2019 $ 11,041 $ ( 8,260 ) $ ( 169,857 ) $ ( 702,408 ) $ ( 869,484 )

Other comprehensive (loss) income before reclassifications ( 14,037 ) 738 ( 22,941 ) ( 32,423 ) ( 68,663 )

Amounts reclassified from accumulated other comprehensive income (loss) ( 12,373 ) — 5,944 — ( 6,429 )

Net (decrease) increase in other comprehensive (loss) income ( 26,410 ) 738 ( 16,997 ) ( 32,423 ) ( 75,092 )

Accumulated Other Comprehensive Loss, Net of Tax, as of December 31, 2020 $ ( 15,369 ) $ ( 7,522 ) $ ( 186,854 ) $ ( 734,831 ) $ ( 944,576 )

Other comprehensive income (loss) before reclassifications 23,253 1,075 19,961 ( 54,690 ) ( 10,401 )

Amounts reclassified from accumulated other comprehensive income (loss) 912 — 12,794 — 13,706

Net increase (decrease) in other comprehensive loss 24,165 1,075 32,755 ( 54,690 ) 3,305

Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2021 $ 8,796 $ ( 6,447 ) $ ( 154,099 ) $ ( 789,521 ) $ ( 941,271 )

For the Year Ended December 31, 2020

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Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2019 $ 11,041 $ ( 8,260 ) $ ( 169,857 ) $ ( 702,408 ) $ ( 869,484 )

Other comprehensive income (loss) before reclassifications 17,024 ( 1,713 ) ( 31,158 ) 18,919 3,072

Other comprehensive (loss) income before reclassifications ( 18,289 ) 738 ( 22,941 ) ( 32,423 ) ( 72,915 )

Amounts reclassified from accumulated other comprehensive income (loss) ( 8,121 ) — 5,944 — ( 2,177 )

Net (decrease) increase in other comprehensive income (loss) ( 26,410 ) 738 ( 16,997 ) ( 32,423 ) ( 75,092 )

Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2019 $ 11,041 $ ( 8,260 ) $ ( 169,857 ) $ ( 702,408 ) $ ( 869,484 )

Accumulated Other Comprehensive Loss, Net of Tax, as of December 31, 2020 $ ( 15,369 ) $ ( 7,522 ) $ ( 186,854 ) $ ( 734,831 ) $ ( 944,576 )

For the Year Ended December 31, 2019

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(In thousands)

Accumulated Other Comprehensive Loss, Net of Tax, as of December 31, 2017 $ ( 21,098 ) $ ( 2,799 ) $ ( 143,213 ) $ ( 614,676 ) $ ( 781,786 )

Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2018 $ 11,411 $ ( 6,547 ) $ ( 142,763 ) $ ( 721,327 ) $ ( 859,226 )

Other comprehensive income (loss) before reclassifications 14,495 ( 1,713 ) ( 31,158 ) 18,919 543

Amounts reclassified from accumulated other comprehensive loss 8,427 — 7,832 — 16,259

Net increase (decrease) in other comprehensive income (loss) 32,509 ( 3,748 ) 450 ( 106,651 ) ( 77,440 )

Amounts reclassified from accumulated other comprehensive income (loss) ( 14,865 ) — 4,064 — ( 10,801 )

Net (decrease) increase in other comprehensive income (loss) ( 370 ) ( 1,713 ) ( 27,094 ) 18,919 ( 10,258 )

Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2019 $ 11,041 $ ( 8,260 ) $ ( 169,857 ) $ ( 702,408 ) $ ( 869,484 )

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Derivative Instruments

Gain (loss) on foreign currency forward exchange contracts and other $ 12,293 $ 18,046 $ ( 8,575 ) Cost of sales

Tax effect of net gain (loss) 80 ( 652 ) 148 Provision for income taxes

(Loss) gain on foreign currency forward exchange contracts and other contracts $ ( 512 ) $ 8,040 $ 15,517 Cost of sales

Tax effect ( 400 ) 81 ( 652 ) (Benefit) provision for income taxes

$ ( 912 ) $ 8,121 $ 14,865 Net Income (Loss)

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( 16,322 ) ( 7,825 ) ( 5,319 )

Tax effect of net loss 1,881 1,255 2,345 Provision for income taxes

Tax effect 3,528 1,881 1,255 (Benefit) provision for income taxes

$ ( 12,794 ) $ ( 5,944 ) $ ( 4,064 ) Net Income (Loss)

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Currency Translation Adjustments

For 2021, currency translation adjustments resulted in a net loss of $ 54.7 million, primarily due to the weakening of the Turkish lira, Chilean peso, Mexican peso, Euro, and Brazilian real against the U.S.

For 2020, currency translation adjustments resulted in a net loss of $ 32.4 million, primarily due to the weakening of the Brazilian real, Russian ruble, and Mexican peso against the U.S.

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dollar, partially offset by the weakening of the Euro against the U.S.

For 2018, currency translation adjustments resulted in a net loss of $ 106.7 million, primarily due to the weakening of the Euro, British pound sterling, Russian ruble, and Brazilian real against the U.S.

Note 7— Leases

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Mattel adopted the new lease standard on January 1, 2019 using the modified retrospective transition method.

Prior periods were not retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

Prior periods were not retrospectively adjusted.

Mattel elected the package of practical expedients, permitted under the transition guidance within the new lease standard, which among other things, allowed Mattel to continue to account for existing leases based on the historical lease classification.

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As substantially all of Mattel's leases do not provide an implicit rate, Mattel uses its incremental borrowing rate, based on the information available at the lease commencement date, to determine the present value of lease payments.

The following table summarize Mattel's right-of-use assets and liabilities and other information about our leases:

Operating lease costs are recognized on a straight-line basis over the lease term.

The following table summarize Mattel's right-of-use assets and liabilities and other information about its leases:

2021 December 31,

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Weighted-average discount rate 6.5 % 7.6 %

Operating lease costs are recognized on a straight-line basis over the lease term.

The components of lease costs for the years ended December 31, 2021, 2020, and 2019 are as follows:

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2021 December 31,

2020 December 31,

(In thousands)

Operating lease costs (a) $ 136,842 $ 142,100

Lease costs (a) $ 134,272 $ 136,842 $ 142,100

Sublease rental income $ 2,077 $ 2,697 $ 5,690

(a) Includes short-term and variable lease costs of $ 42.3 million and $ 43.8 million for 2020 and 2019, respectively.

(a) Includes short-term and variable lease costs of approximately $ 39 million, $ 42 million, and $ 44 million for 2021, 2020, and 2019 respectively.

Variable lease costs primarily relate to common area maintenance charges, management fees, taxes and storage fees.

Operating lease expense under ASC 840, Leases was $ 127.1 million for 2018, net of sublease income of $ 3.0 million.

Supplemental information related to leases was as follows:

Supplemental information related to leases are as follows:

For the Year Ended

2021 December 31,

2020 December 31,

(In thousands)

Cash paid for amounts included in the measurement of operating lease liabilities $ 96,953 $ 105,015

Right-of-use assets obtained in exchange for new and modified operating lease liabilities $ 41,802 $ 38,795

Cash payments for leases $ 100,286 $ 96,953 $ 105,015

Right-of-use assets obtained in exchange for new and modified lease liabilities $ 105,898 $ 53,753 $ 29,389

The following table shows the future maturities of lease liabilities for leases in effect as of December 31, 2021:

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Upon approval of the 2010 Plan, Mattel terminated its 2005 Equity Compensation Plan (the "2005 Plan"), except with respect to grants then outstanding under the 2005 Plan.

All restricted stock unit ("RSU") awards made under the 2005 Plan have vested.

All RSU awards made under the 2005 Plan have vested.

Outstanding stock option grants under the 2005 Plan that have not expired or have not been terminated continue to be exercisable under the terms of their respective grant agreements.

In May 2015, Mattel’s stockholders approved the Amended and Restated 2010 Equity and Long-Term Compensation Plan (the "Amended 2010 Plan").

The terms of the Amended 2010 Plan are substantially similar to the terms of the 2010 Plan and the 2005 Plan.

Under the Amended 2010 Plan, Mattel has the ability to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, performance RSUs ("performance awards"), dividend equivalent rights, and shares of common stock to officers, employees, non-employee directors, and consultants providing services to Mattel.

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The Amended 2010 Plan expires on March 26, 2025, except as to any grants then outstanding.

The number of shares of common stock available for grant under the Amended 2010 Plan is subject to an aggregate limit of the sum of (i) 114.5 million shares, (ii) the number of shares that remained available for issuance under the 2005 Plan on May 12, 2010, and (iii) any shares subject to awards outstanding under the 2005 Plan that on or after May 12, 2010 are forfeited or otherwise terminate or expire without the issuance of shares to the holder of the award.

The number of shares of common stock available for grant under the Amended 2010 Plan is subject to an aggregate limit of the sum of (i) approximately 120 million shares, (ii) the number of shares that remained available for issuance under the 2005 Plan on May 12, 2010, and (iii) any shares subject to awards outstanding under the 2005 Plan that on or after May 12, 2010 are forfeited or otherwise terminate or expire without the issuance of shares to the holder of the award.

The Amended 2010 Plan is further subject to detailed share-counting rules.

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For grants on or after March 1, 2019 through March 1, 2020, each stock option or stock appreciation right grant is treated as using one available share for each share actually subject to such grant, whereas each restricted stock or RSU grant is treated as using two and seven tenths available shares for each share actually subject to such full-value grant.

For grants on or after March 2, 2020, each stock option or stock appreciation right grant is treated as using one available share for each share actually subject to such grant, whereas each restricted stock or RSU grant is treated as using two and thirty-five hundredths available shares for each share actually subject to such full-value grant.

At December 31, 2020, there were approximately 29 million shares available for grant under the Amended 2010 Plan if target

performance goals are achieved under Mattel's long-term incentive programs ("LTIPs"), and approximately 23 million shares available if maximum performance goals are achieved under the LTIPs.

For grants on or after March 2, 2020 through March 1, 2021, each stock option or stock appreciation right grant is treated as using one available share for each share actually subject to such grant, whereas each restricted stock or RSU grant is treated as using two and thirty-five hundredths available shares for each share actually subject to such full-value grant.

For grants on or after March 2, 2021, each stock option or stock appreciation right grant is treated as using one available share for each share actually subject to such grant, whereas each restricted stock or RSU grant is treated as using one and nine tenths available shares for each share actually subject to such full-value grant.

At December 31, 2021, there were approximately 32 million shares available for grant under the Amended 2010 Plan if target performance goals are achieved under Mattel's long-term incentive programs ("LTIPs"), and approximately 24 million shares available if maximum performance goals are achieved under the LTIPs.

Mattel recognized total share-based compensation expense related to stock options, RSUs, and performance awards of $ 60.1 million, $ 60.2 million, and $ 56.0 million during 2021, 2020, and 2019, respectively, which is included in other selling and administrative expenses in the consolidated statements of operations.

The income tax benefit related to stock options, RSUs, and performance awards during 2021 was approximately $ 7 million.

There was no income tax benefit related to stock options, RSUs, or performance awards during 2020 or 2019 as future tax benefits related to these awards were fully offset by a valuation allowance.

As of December 31, 2021, total unrecognized compensation cost related to unvested share-based payments totaled $ 89.5 million and is expected to be recognized over a weighted-average period of 2.1 years.

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Mattel recognized compensation expense of $ 10.1 million, $ 11.6 million, and $ 11.3 million for stock options during 2021, 2020, and 2019, respectively, which is included within other selling and administrative expenses in the consolidated statements of operations.

There was no current year income tax benefit related to stock options during 2020, 2019 or 2018 as future tax benefits related to stock options were fully offset by a valuation allowance.

In 2018, Mattel granted market-based options under the Amended 2010 Plan to certain senior executives in connection with its April 26, 2018—April 26, 2021 and May 31, 2018—May 31, 2021 performance cycles.

These performance options are earned at the initial target number of options granted based on achievement of a certain threshold of Mattel’s total shareholder return ("TSR") for the three-year performance cycle relative to the TSR realized by companies comprising the S&P 500 as of the first day of the performance cycle.

If this threshold is not met at the end of the three-year cycle, no shares are earned.

For the performance options granted during 2018 that remain outstanding at December 31, 2018, the range of possible outcomes is that between zero and 1.3 million shares could be earned.

The fair value of these performance options has been estimated at the grant dates using a Monte Carlo valuation methodology, and the weighted-average grant-date fair value of performance options granted during 2018 was $ 4.21 .

In 2018, Mattel granted market-based options under the Amended 2010 Plan to certain senior executives with April 26, 2018—April 26, 2021 and May 31, 2018—May 31, 2021 performance cycles.

These options may be earned at the initial target number of options granted based on achievement of a certain threshold of Mattel’s total shareholder return ("TSR") for the three-year performance cycle relative to the TSR realized by companies comprising the S&P 500 as of the first day of the performance cycle.

For the options granted during 2018, the range of possible outcomes was that between zero and 1.3 million shares could be earned.

The fair value of these options was estimated at the grant dates using a Monte Carlo valuation methodology, and the weighted-average grant-date fair value of options granted during 2018 was $ 4.21 .

The TSR threshold was not met at the end of the three-year cycles, thus no options were earned.

The fair values of all other options granted have been estimated using the Black-Scholes valuation model.

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The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option.

The total intrinsic value of options exercised during 2020 was not material and there were no stock option exercises during 2019 and 2018.

At December 31, 2020, options outstanding had an intrinsic value of $ 30 million with a weighted-average remaining life of 5.0 years.

The total intrinsic value of options exercised was approximately $ 3 million during 2021 and not material during 2020.

There were no stock option exercises during 2019.

At December 31, 2021, options outstanding had an intrinsic value of approximately $ 56 million with a weighted-average remaining life of 4.3 years.

At December 31, 2021, options exercisable had an intrinsic value of $ 36 million, with a weighted-average remaining life of 3.5 years.

Mattel uses treasury shares purchased under its share repurchase program to satisfy stock option exercises.

Cash received from stock options exercised during 2020 was not material.

At December 31, 2020, stock options vested and expected to vest totaled 21.1 million shares, with an intrinsic value of $ 27.5 million, weighted-average exercise price of $ 22.33 , and weighted-average remaining life of 4.9 years.

Cash received from stock options exercised, net of taxes during 2021 was $ 12 million.

At December 31, 2021, stock options vested and expected to vest totaled approximately 19 million shares, with an intrinsic value of $ 54.2 million, weighted-average exercise price of $ 22.47 , and weighted-average remaining life of 4.2 years.

During 2021, approximately 3 million stock options vested.

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Compensation expense recognized related to grants of RSUs was $ 27.3 million, $ 28.6 million, and $ 33.6 million in 2021, 2020, and 2019, respectively, and was included within other selling and administrative expenses in the consolidated statements of operations.

There was no current year income tax benefit related to RSUs during 2020, 2019, and 2018 as future tax benefits related to stock options were fully offset by a valuation allowance.

RSUs are valued at the market value on the date of grant, adjusted by the present value of the expected dividends for RSUs that are not entitled to a dividend during the vest period.

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Compensation expense recognized related to grants of performance awards was $ 22.7 million, $ 19.9 million, and $ 11.0 million during 2021, 2020, and 2019, respectively.

There was no current year income tax benefit related to performance awards during 2020, 2019, and 2018 as future tax benefits related to performance awards were fully offset by a valuation allowance.

Mattel had three LTIP performance cycles in place during 2021, which were established by the Compensation Committee of the Board of Directors:

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Mattel determines the fair value of the performance-related components of its performance awards based on the closing market price of Mattel's common stock on the date of grant and determines the fair value of the market-related components of its performance awards based on the Monte Carlo valuation methodology.

With respect to performance awards, which generally vest over three years , Mattel recognizes compensation expense on a straight-line basis over the requisite service period, provided that certain cumulative three-year performance targets and other vesting criteria are met.

With respect to performance awards, which generally cliff-vest over three years , Mattel recognizes compensation expense on a straight-line basis over the requisite service period, provided that certain cumulative three-year performance targets and other vesting criteria are met.

The weighted-average grant-date fair value of performance awards granted during 2021, 2020, and 2019 was $ 22.04 , $ 11.93 , and $ 14.89 respectively.

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At December 31, 2021, performance awards expected to vest totaled approximately 4 million shares, with a weighted-average grant-date fair value of $ 14.93 .

The total grant-date fair value of performance awards vested during 2020 was approximately $ 2 million.

No performance awards vested during 2019 and 2018.

The total grant-date fair value of performance awards vested during 2021 and 2020 was approximately $ 14 million and $ 2 million, respectively.

No performance awards vested during 2019.

Note 9— Earnings Per Share

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method.

Prior to June 30, 2018, certain of Mattel’s RSUs were considered participating securities because they contained nonforfeitable rights to dividend equivalents.

Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and participating securities.

The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed.

Basic earnings per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted-average number of common shares outstanding for the period.

Diluted earnings per common share is calculated by dividing net income allocable to common shares by the weighted-average number of common shares for the period, as adjusted for the potential dilutive effect of non-participating share-based awards.

The following table reconciles earnings per common share:

The following table reconciles basic and diluted earnings per common share for the years ended December 31, 2021, 2020, and 2019.

For the Year Ended

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Net income (loss) $ 902,987 $ 123,579 $ ( 218,750 )

Net income (loss) allocable to participating RSUs (a) — — —

Net income (loss) available for basic common shares $ 126,628 $ ( 213,512 ) $ ( 533,299 )

Weighted-average number of common shares 350,007 347,463 346,127

Basic net income (loss) per common share $ 0.36 $ ( 0.62 ) $ ( 1.55 )

Basic net income per common share $ 2.58 $ 0.36 $ ( 0.63 )

Net income (loss) $ 902,987 $ 123,579 $ ( 218,750 )

Net income (loss) allocable to participating RSUs (a) — — —

Net income (loss) available for diluted common shares $ 126,628 $ ( 213,512 ) $ ( 533,299 )

Weighted-average number of common shares 350,007 347,463 346,127

Dilutive stock options and restricted stock units ("RSUs") (b) 1,653 — —

Dilutive share-based awards (a) 7,246 1,653 —

Weighted-average number of common and potential common shares 357,253 349,116 346,127

Diluted net income (loss) per common share $ 0.36 $ ( 0.62 ) $ ( 1.55 )

(a) Mattel did not have participating RSUs for the years ended December 31, 2020 or 2019.

For the year ended December 31, 2018, Mattel did not allocate its net loss to its participating RSUs as its participating RSUs are not obligated to share in Mattel's losses.

(b) Nonqualified stock options and RSUs totaling 21.7 million were excluded from the calculation of diluted net income per common share for the year ended December 31, 2020, because their effect would be antidilutive.

Mattel was in a net loss position for the years ended December 31, 2019 and 2018, and, accordingly, all outstanding nonqualified stock options and non-participating RSUs were excluded from the calculation of diluted earnings per common share because their effect would be antidilutive.

Diluted net income per common share $ 2.53 $ 0.35 $ ( 0.63 )

(a) Nonqualified stock options and RSUs totaling 12.1 million and 21.7 million were excluded from the calculation of diluted net income per common share for the years ended December 31, 2021 and December 31, 2020, respectively, because their effect would be antidilutive.

Mattel was in a net loss position for the year ended December 31, 2019 and, accordingly, all outstanding nonqualified stock options and non-participating RSUs were excluded from the calculation of diluted earnings per common share because their effect would be antidilutive.

Note 10— Fair Value Measurements

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(In thousands)

Foreign currency forward exchange contracts (a) $ — $ 15,002 $ — $ 15,002

Foreign currency forward exchange contracts and other (a) $ — $ 5,711 $ — $ 5,711

Available-for-sale (b) 4,268 — — 4,268

Total assets $ 4,268 $ 5,711 $ — $ 9,979

Foreign currency forward exchange contracts (a) $ — $ 2,976 $ — $ 2,976

Foreign currency forward exchange contracts and other (a) $ — $ 25,494 $ — $ 25,494

(a) The fair value of the foreign currency forward exchange contracts and other is based on dealer quotes of market forward rates and reflects the amount that Mattel would receive or pay at their maturity dates for contracts involving the same notional amounts, currencies, and maturity dates.

(b) The fair value of the available-for-sale security is based on the quoted price on an active public exchange.

Non-Recurring Fair Value Measurements

Mattel tests its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable or that the carrying value may exceed its fair value.

During the year ended December 31, 2019, Mattel impaired certain property, plant, and equipment totaling $ 38.7 million, of which $ 25.9 million related to the impairment of certain American Girl retail store assets.

The fair value of the American Girl retail stores was determined based on the income approach, with Level 3 inputs utilizing certain market participant assumptions.

These inputs included revenue forecasts, profit forecasts, and the discount rate.

The other impairment charges of $ 12.8 million were primarily related to the full impairment of certain tools, dies, and molds and machinery equipment due to discontinued use.

The remaining book value attributed to these assets was subsequently impaired in 2020 due to discontinued use.

During the year ended December 31, 2020, Mattel fully impaired certain right-of-use assets, tooling, and property, plant, and equipment totaling $ 13.0 million due to discontinued use.

Subsequent to these impairment charges, there was no remaining value attributed to these assets as of December 31, 2020.

Other Financial Instruments

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Mattel utilizes derivative contracts to hedge certain purchases of commodities, which were not material.

As of December 31, 2020 and December 31, 2019, Mattel held foreign currency forward exchange contracts and other commodity derivative instruments, with notional amounts of $ 855.0 million and $ 742.0 million, respectively.

As of December 31, 2021 and December 31, 2020, Mattel held foreign currency forward exchange contracts and other commodity derivative instruments, with notional amounts of approximately $ 925 million and $ 855 million, respectively.

The following tables present Mattel’s derivative assets and liabilities:

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Foreign currency forward exchange contracts:

Amount of (losses) gains recognized in OCI $ ( 14,037 ) $ 17,024 $ 24,082

Amount of gains (losses) reclassified from accumulated OCI to the consolidated statements of operations 12,373 17,394 ( 8,427 ) Cost of sales

The net gains (losses) of $ 12.4 million, $ 17.4 million, and $( 8.4 ) million reclassified from accumulated other comprehensive loss to the consolidated statements of operations during 2020, 2019, and 2018, respectively, were offset by the changes in cash flows associated with the underlying hedged transactions.

Amount of gains (losses) recognized in OCI $ 23,253 $ ( 18,289 ) $ 14,495

Amount of (losses) gains reclassified from accumulated OCI to the consolidated statements of operations ( 912 ) 8,121 14,865 Cost of sales

The net (losses) gains reclassified from accumulated other comprehensive loss to the consolidated statements of operations during 2021, 2020, and 2019, respectively, were offset by changes in cash flows associated with the underlying hedged transactions.

Derivatives Not Designated As Hedging Instruments Consolidated Statements of

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(In thousands)

Amount of (loss) gain recognized in the consolidated statements of operations:

Foreign currency forward exchange contracts $ ( 26,553 ) $ 2,530 $ ( 23,109 ) Other non-operating expense, net

Foreign currency forward exchange contracts 495 — ( 244 ) Cost of sales

Amount of net gains (losses) recognized in the Statements of Operations:

Foreign currency forward exchange contracts and other $ 2,872 $ ( 26,553 ) $ 2,530 Other non-operating expense, net

Foreign currency forward exchange contracts and other 639 495 — Cost of sales

$ 3,511 $ ( 26,058 ) $ 2,530

The net (losses) gains of $( 26.1 ) million, $ 2.5 million, and $( 23.4 ) million recognized in the consolidated statements of operations during 2020, 2019, and 2018, respectively, were offset by foreign currency transaction gains and losses on the related hedged balances.

The net gains (losses) recognized in the consolidated statements of operations during 2021, 2020, and 2019, respectively, were offset by foreign currency transaction gains and losses on the related hedged balances.

Note 12— Commitments and Contingencies

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("Far West"), that was established to insure Mattel’s workers’ compensation, general, automobile, product liability, and property risks.

For the year ended December 31, 2020, Far West insured the first $ 1.0 million per occurrence for workers’ compensation risks, the first $ 0.5 million for general and automobile liability risks, the first $ 2.0 million per occurrence for product liability risks for the month ending January 31, 2020 and the first $ 5.0 million per occurrence for product liability risks thereafter, and up to $ 1.0 million per occurrence for property risks.

For the year ended December 31, 2021, Far West insured the first $ 1.0 million per occurrence for workers’ compensation risks, the first $ 0.5 million per occurrence for general and automobile liability risks, the first $ 2.0 million per occurrence for product liability losses occurring prior to February 1, 2020, and the first $ 5.0 million per occurrence for product liability risks thereafter, and up to $ 1.0 million per occurrence for property risks.

Various insurance companies that have an "A" or better AM Best rating at the time the policies are purchased reinsured Mattel’s risk in excess of the amounts insured by Far West.

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Litigation Related to Yellowstone do Brasil Ltda.

Yellowstone do Brasil Ltda.

(formerly known as Trebbor Informática Ltda.) was a customer of Mattel's subsidiary Mattel do Brasil Ltda.

when a commercial dispute arose between Yellowstone and Mattel do Brasil regarding the supply of product and related payment terms.

As a consequence of the dispute, in April 1999, Yellowstone filed a declarative action against Mattel do Brasil before the 15 th Civil Court of Curitiba – State of Parana (the "Trial Court"), requesting the annulment of its security bonds and promissory notes given to Mattel do Brasil as well as requesting the Trial Court to find Mattel do Brasil liable for damages incurred as a result of Mattel do Brasil’s alleged abrupt and unreasonable breach of an oral exclusive distribution agreement between the parties relating to the supply and sale of toys in Brazil.

Yellowstone's complaint sought alleged loss of profits of approximately $ 1 million, plus an unspecified amount of damages consisting of:

(i) compensation for all investments made by Yellowstone to develop Mattel do Brasil's business;

(ii) reimbursement of the amounts paid by Yellowstone to terminate labor and civil contracts in connection with the business;

(iii) compensation for alleged unfair competition and for the goodwill of trade;

and (iv) compensation for non-pecuniary damages.

Mattel do Brasil filed its defenses to these claims and simultaneously presented a counterclaim for unpaid accounts receivable for goods supplied to Yellowstone in the approximate amount of $ 4 million.

During the evidentiary phase a first accounting report was submitted by a court-appointed expert.

Such report stated that Yellowstone had invested approximately $ 3 million in its business.

Additionally, the court-appointed expert calculated a loss of profits compensation of approximately $ 1 million.

Mattel do Brasil challenged the report since it was not made based on the official accounting documents of Yellowstone and since the report calculated damages based only on documents unilaterally submitted by Yellowstone.

The Trial Court accepted the challenge and ruled that a second accounting examination should take place in the lawsuit.

Yellowstone appealed the decision to the Court of Appeals of the State of Parana (the "Appeals Court"), but it was upheld by the Appeals Court.

The second court-appointed expert’s report submitted at trial did not assign a value to any of Yellowstone’s claims and found no evidence of causation between Mattel do Brasil's actions and such claims.

In January 2010, the Trial Court ruled in favor of Mattel do Brasil and denied all of Yellowstone’s claims based primarily on the lack of any causal connection between the acts of Mattel do Brasil and Yellowstone’s alleged damages.

Additionally, the Trial Court upheld Mattel do Brasil's counterclaim and ordered Yellowstone to pay Mattel do Brasil approximately $ 4 million.

The likelihood of Mattel do Brasil recovering this amount was uncertain due to the fact that Yellowstone was declared insolvent and filed for bankruptcy protection.

In February 2010, Yellowstone filed a motion seeking clarification of the decision which was denied.

In September 2010, Yellowstone filed a further appeal with the Appeals Court.

Under Brazilian law, the appeal was de novo and Yellowstone restated all of the arguments it made at the Trial Court level.

Yellowstone did not provide any additional information supporting its unspecified alleged damages.

The Appeals Court held hearings on the appeal in March and April 2013.

On July 26, 2013, the Appeals Court awarded Yellowstone approximately $ 17 million in damages, plus attorney's fees, as adjusted for inflation and interest.

The Appeals Court also awarded Mattel do Brasil approximately $ 7.5 million on its counterclaim, as adjusted for inflation.

On August 2, 2013, Mattel do Brasil filed a motion with the Appeals Court for clarification since the written decision contained clear errors in terms of amounts awarded and interest and inflation adjustments.

Mattel do Brasil's motion also asked the Appeals Court to decide whether Yellowstone’s award could be offset by the counterclaim award, despite Yellowstone's status as a bankrupt entity.

Yellowstone also filed a motion for clarification on August 5, 2013.

A decision on the clarification motions was rendered on November 11, 2014, and the Appeals Court accepted partially the arguments raised by Mattel do Brasil.

As a result, the Appeals Court awarded Yellowstone approximately $ 14.5 million in damages, as adjusted for inflation and interest, plus attorney's fees.

The Appeals Court also awarded Mattel do Brasil approximately $ 7.5 million on its counterclaim, as adjusted for inflation.

The decision also recognized the existence of legal rules that support Mattel do Brasil's right to offset its counterclaim award of approximately $ 7.5 million.

Mattel do Brasil filed a new motion for clarification with the Appeals Court on January 21, 2015, due to the incorrect statement made by the reporting judge of the Appeals Court, that the court-appointed expert analyzed the "accounting documents" of Yellowstone.

On April 26, 2015, a decision on the motion for clarification was rendered.

The Appeals Court ruled that the motion for clarification was denied and imposed a fine on Mattel do Brasil equal to 1 % of the value of the claims made for the delay caused by the motion.

On July 3, 2015, Mattel do Brasil filed a special appeal to the Superior Court of Justice based upon both procedural and substantive grounds.

This special appeal sought to reverse the Appeals Court's decision of July 26, 2013, and to reverse the fine as inappropriate under the law.

This special appeal was submitted to the Appeals Court.

Yellowstone also filed a special appeal with the Appeals Court in February 2015, which was made available to Mattel do Brasil on October 7, 2015.

Yellowstone's special appeal sought to reverse the Appeals Court decision with respect to:

(a) the limitation on Yellowstone's loss of profits claim to the amount requested in the complaint, instead of the amount contained in the first court-appointed experts report, and (b) the award of damages to Mattel do Brasil on the counterclaim, since the specific amount was not requested in Mattel do Brasil's counterclaim brief.

On October 19, 2015, Mattel do Brasil filed its answer to the special appeal filed by Yellowstone and Yellowstone filed its answer to the special appeal filed by Mattel do Brasil.

On April 4, 2016, the Appeals Court rendered a decision denying the admissibility of Mattel's and Yellowstone's special appeals.

On May 11, 2016, both Mattel and Yellowstone filed interlocutory appeals.

On August 31, 2017, the reporting justice for the Appeals Court denied Yellowstone’s interlocutory appeal.

As to Mattel, the reporting justice reversed the fine referenced above that had been previously imposed on Mattel for filing a motion for clarification.

However, the reporting justice rejected Mattel’s arguments on the merits of Yellowstone’s damages claims.

On September 22, 2017, Mattel filed a further appeal to the full panel of five appellate justices to challenge the merits of Yellowstone's damages claims.

Yellowstone did not file a further appeal.

In April 1999, Yellowstone do Brasil Ltd.

(formerly known as Trebbor Informática Ltda.) filed a lawsuit against Mattel do Brasil before the 15th Civil Court of Curitiba, State of Parana, requesting the annulment of its security bonds and promissory notes given to Mattel do Brasil as well as damages due to an alleged breach of an oral exclusive distribution agreement between the parties relating to the supply and sale of toys in Brazil.

Yellowstone's complaints sought alleged loss of profits plus an unspecified amount of damages.

Mattel do Brasil filed its defenses to these claims and simultaneously presented a counterclaim for unpaid accounts receivable for goods supplied to Yellowstone.

In April 2018, Mattel do Brasil entered into a settlement agreement to resolve this matter, but the settlement was later rejected by the courts, subject to a pending appeal by Mattel.

On October 2, 2018, the Appeals Court rejected Mattel's merits appeal, and affirmed the prior rulings in favor of Yellowstone.

In October 2018, the Superior Court of Justice issued a final ruling in favor of Yellowstone on the merits of Yellowstone's claims.

Previously, the courts had ruled in Mattel's favor on its counterclaim.

In October 2019, Mattel reached an agreement with Yellowstone's former counsel regarding payment of the attorney's fees portion of the judgment.

In November 2019, Yellowstone initiated an action to enforce its judgment against Mattel, but did not account for an offset for Mattel's counterclaim.

On January 27, 2020, Mattel obtained an injunction, staying Yellowstone's enforcement action pending resolution of Mattel's appeal to enforce the parties' April 2018 settlement.

In January 2020, Mattel obtained an injunction, staying Yellowstone's enforcement action pending resolution of Mattel's appeal to enforce the parties' April 2018 settlement.

As of December 31, 2021, Mattel assessed its probable loss related to the Yellowstone matter and has accrued a reserve, which was not material.

Litigation Related to the Fisher-Price Rock 'n Play Sleeper

A number of putative class action lawsuits are pending against Fisher-Price, Inc.

A number of putative class action lawsuits filed between April 2019 and October 2019 are pending against Fisher-Price, Inc.

and/or Mattel, Inc.

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The putative class action lawsuits propose nationwide and over 10 statewide consumer classes comprised of those who purchased the Sleeper as marketed as safe for prolonged and overnight sleep.

The class actions have been consolidated before a single judge for pre-trial purposes pursuant to the federal courts’ Multi-District Litigation program.

Forty-eight additional lawsuits are pending against Fisher-Price, Inc.

The class actions have been consolidated before a single judge in the United States District Court for the Western District of New York for pre-trial purposes pursuant to the federal courts’ Multi-District Litigation program.

Forty additional lawsuits filed between April 2019 and April 2021 are pending against Fisher-Price, Inc.

and Mattel, Inc.

alleging that a product defect in the Sleeper caused the fatalities of or injuries to fifty-two children.

alleging that a product defect in the Sleeper caused the fatalities of or injuries to forty-four children.

Several lawsuits have been settled and/or dismissed.

Additionally, Fisher-Price, Inc.

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In August 2020, the derivative action was stayed pending further developments in the class action lawsuits.

In August 2021, a second similar derivative action was filed in the Court of Chancery for the State of Delaware (Armon v.

Bradley, et al., filed August 30, 2021).

The lawsuits seek compensatory damages, punitive damages, statutory damages, restitution, disgorgement, attorneys’ fees, costs, interest, declaratory relief, and/or injunctive relief.

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Litigation and Investigations Related to Whistleblower Letter.

In December 2019 and January 2020, two stockholders filed separate complaints styled as class actions against Mattel, Inc., and certain of its current and former officers, alleging violations of federal securities laws.

In December 2019 and January 2020, two stockholders filed separate complaints styled as class actions against Mattel, Inc., and certain of its former officers (the "Mattel Defendants"), as well as others, in the United States District Court for the Central District of California, alleging violations of federal securities laws.

The two complaints were consolidated in April 2020 and an amended complaint was filed in May 2020.

The complaints rely on the results of an investigation announced by Mattel in October 2019 regarding allegations in a whistleblower letter and claim that Mattel misled the market in several of its financial statements beginning in the third quarter of 2017.

The lawsuits allege that the defendants' conduct caused the plaintiff and other stockholders to purchase Mattel common stock at artificially inflated prices.

The lawsuits allege that the defendants' conduct caused the plaintiffs and other stockholders to purchase Mattel common stock at artificially inflated prices, the court granted plaintiffs' motion for class certification in September 2021.

Following a mediation on October 25, 2021, the parties reached an agreement in principle to settle the class action lawsuits, which has been preliminarily approved by the court.

The Mattel Defendants are paying $ 86 million in settlement of the claims against them, which will be funded in full by Mattel's insurers.

The settlement does not entail any admission of fault or liability by the Mattel Defendants, which the Mattel Defendants have expressly contested throughout the pendency of the litigation.

Mattel's receivables from its insurers and the offsetting settlement liability have been recorded as of December 31, 2021 within prepaid expenses and other current assets and accrued liabilities, respectively, with no net impact to Mattel's statement of operations or statement of cash flows.

In addition, a stockholder has filed a derivative action in the United States District Court for the District of Delaware (Moher v.

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Kreiz, et al., amended complaint filed April 16, 2020).

In May 2020, the derivative actions were consolidated and stayed pending further developments in the class action lawsuits.

The lawsuits seek unspecified compensatory damages, attorneys' fees, expert fees, costs and/or injunctive relief.

In May 2020, the Moher and Lombardi derivative actions were consolidated and stayed pending further developments in the class action lawsuits.

In June 2021, a third similar derivative action was filed in the United States District Court for the District of Delaware (Chagnon v.

Kreiz, et al., filed June 22, 2021).

Seven additional derivative actions asserting similar claims are also pending in the Court of Chancery for the State of Delaware (Owen v.

Euteneuer, et al., filed May 12, 2021;

Georgiadis, et al., filed May 18, 2021;

Euteneuer, et al., filed June 29, 2021;

Euteneuer, et al., filed September 9, 2021;

Kreiz, et al., filed October 19, 2021;

PricewaterhouseCoopers LLP, et al., filed October 29, 2021;

and Behrens v.

Euteneuer, et al., filed November 18, 2021).

An additional derivative action was also filed in United States District Court for the Central District of California (City of Pontiac Police and Fire Retirement System v.

PricewaterhouseCoopers LLP, et al.

filed October 27, 2021).

The lawsuits seek unspecified compensatory and punitive damages, attorneys' fees, expert fees, costs, equitable relief and/or injunctive relief.

Mattel believes that the allegations in the lawsuits are without merit and intends to vigorously defend against them.

A reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time.

Mattel has also received subpoenas from the SEC, seeking documents related to the whistleblower letter and subsequent investigation, and is responding to those subpoenas.

Mattel has also received subpoenas from the Securities and Exchange Commission (the "SEC"), seeking documents related to the whistleblower letter and subsequent investigation, and is responding to those subpoenas.

Mattel is also responding to requests from the United States Attorney's Office for the Southern District of New York ("SDNY") related to this matter.

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Mattel's operating segments are:

(i) North America, which consists of the U.S.

(i) North America, which consists of the United States and Canada;

(ii) International;

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Net sales $ 5,457,741 $ 4,588,433 $ 4,504,571

Operating Income (Loss) by Segment

Operating Income (Loss) by Segment (a)

North America $ 872,536 $ 621,859 $ 381,112

2 unchanged sentences

1,227,897 880,164 507,661

Corporate and other expense (a) ( 464,070 ) ( 425,859 ) ( 451,307 )

Operating income (loss) 380,885 39,240 ( 234,349 )

Corporate and other expense (b) ( 498,335 ) ( 505,428 ) ( 470,559 )

Operating Income 729,562 374,736 37,102

Interest expense 253,937 198,332 201,044

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Income (Loss) Before Income Taxes $ 470,764 $ 177,657 $ ( 159,655 )

(a) Corporate and other expense includes (i) incentive compensation expense of $ 122.5 million, $ 119.5 million, and $ 84.1 million for 2020, 2019, and 2018, respectively;

(ii) $ 34.9 million, $ 40.5 million, and $ 104.1 million of charges related to severance and other restructuring costs for 2020, 2019, and 2018, respectively;

and (iii) share-based compensation expense of $ 60.2 million, $ 56.0 million, and $ 48.9 million for 2020, 2019, and 2018, respectively.

(a) Segment operating income (loss) included severance and restructuring expenses of $ 2.9 million, $ 5.7 million, and $ 18.6 million for 2021, 2020, and 2019, respectively, which were allocated to the North America, International, and American Girl segments.

(b) Corporate and other expense included severance and restructuring charges of $ 31.5 million, $ 34.9 million, and $ 40.5 million for 2021, 2020, and 2019, respectively.

Corporate and other expense also included expenses related to inclined sleeper recall litigation of $ 15.1 million, $ 26.2 million, and $ 10.3 million for 2021, 2020, and 2019, respectively, and incentive and share-based compensation for all periods presented.

For the Year Ended

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Consolidated total $ 781,450 $ 765,395 $ 823,242

(a) Net sales for the North America Region include net sales attributable to the U.S.

of $ 2.53 billion, $ 2.39 billion, and $ 2.46 billion for 2020, 2019, and 2018, respectively.

(b) Long-lived assets for the North America Region include long-lived assets attributable to the U.S.

of $ 329.3 million, $ 410.3 million, and $ 243.5 million for 2020, 2019, and 2018, respectively.

(a) Net sales for the North America Region include net sales attributable to the United States of $ 3.07 billion, $ 2.53 billion, and $ 2.39 billion for 2021, 2020, and 2019, respectively.

(b) Long-lived assets for the North America Region include long-lived assets attributable to the United States of $ 343.7 million, $ 329.3 million, and $ 383.3 million for 2021, 2020, and 2019, respectively.

Major Customers

In 2020, net sales to Mattel’s three largest customers accounted for 47 % of world consolidated net sales.

2020 net sales to Walmart, Target, and Amazon were $ 1.07 billion, $ 0.62 billion, and $ 0.47 billion, respectively.

In 2019, net sales to Mattel’s two largest customers accounted for 32 % of world consolidated net sales.

2019 net sales to Walmart and Target were $ 1.01 billion and $ 0.44 billion, respectively.

In 2018, net sales to Mattel’s two largest customers accounted for 34 % of world consolidated net sales.

2018 net sales to Walmart and Target were $ 1.07 billion and $ 0.45 billion, respectively.

In 2021, net sales to Mattel’s three largest customers accounted for 46 % of worldwide consolidated net sales.

In 2021, net sales to Walmart, Target, and Amazon were $ 1.17 billion, $ 0.74 billion, and $ 0.62 billion, respectively.

In 2020, net sales to Mattel’s three largest customers accounted for 47 % of worldwide consolidated net sales.

In 2020, net sales to Walmart, Target, and Amazon were $ 1.07 billion, $ 0.62 billion, and $ 0.47 billion, respectively.

In 2019, net sales to Mattel’s two largest customers accounted for 32 % of worldwide consolidated net sales.

In 2019, net sales to Walmart and Target were $ 1.01 billion and $ 0.44 billion, respectively.

The North America segment sells products to each of Mattel’s three largest customers.

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Optimizing for Growth (formerly Capital Light)

On February 9, 2021, Mattel announced the Optimizing for Growth program, a multi-year cost savings program which integrates and expands upon the previously announced Capital Light program (the "Program").

In February 2021, Mattel announced the Optimizing for Growth program, a multi-year cost savings program that integrates and expands upon the previously announced Capital Light program, which commenced in 2019 (the "Program").

In connection with the Program, Mattel recorded severance and other restructuring costs in the following cost and expense categories within the consolidated statements of operations:

For the Year Ended

December 31, 2020 December 31, 2019

December 31, 2021 December 31, 2020 December 31, 2019

(In thousands)

Cost of sales (a) $ 2,885 $ 5,656 $ 18,579

Other selling and administrative (b) 7,245 18,992

Other selling and administrative expenses (b) 32,266 7,245 18,992

$ 35,151 $ 12,901 $ 37,571

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(b) Severance and other restructuring costs recorded within other selling and administrative expenses in the consolidated statements of operations are included in corporate and other expense in "Note 13 to the Consolidated Financial Statements—Segment Information."

The following table summarizes Mattel's severance and other restructuring charges activity related to the Program for the year ended December 31, 2020:

The following tables summarize Mattel's severance and other restructuring charges activity related to the Program:

Liability at December 31, 2020 Charges (a) Payments/Utilization Liability at December 31, 2021

3 unchanged sentences

$ 5,324 $ 35,151 $ ( 25,230 ) $ 15,245

(a) Other restructuring charges consist primarily of expenses associated with the consolidation of manufacturing facilities.

As of December 31, 2020, Mattel has recorded cumulative severance and other restructuring charges related to the Program of approximately $ 51 million, which include approximately $ 15 million of non-cash charges.

Furthermore, cumulatively, in conjunction with previous actions taken under the Capital Light program, total expected cash expenditures are approximately $ 140 to $ 165 million and total non-cash charges are $ 40 to $ 45 million.

Other Cost Savings Actions

In connection with Mattel's continued efforts to streamline its organizational structure and restore profitability, on May 4, 2020, Mattel committed to a planned 4 % reduction in its non-manufacturing workforce.

The timing of this action was accelerated due to the impact of COVID-19.

The following table summarizes Mattel's severance charges activity related to other cost savings actions for the year ended December 31, 2020:

Liability at December 31, 2019 Charges (a) Payments/Utilization Liability at December 31, 2020

(a) Other restructuring charges consist primarily of expenses associated with the consolidation of manufacturing facilities and restructuring of commercial and corporate functions.

Liability at December 31, 2019 Charges (b) Payments/Utilization Liability at December 31, 2020

(In thousands)

Severance $ 6,151 $ 6,874 $ ( 7,731 ) $ 5,294

(a) Severance charges recorded within other selling and administrative expense in the consolidated statements of operations are included in corporate and other expense in "Note 13 to the Consolidated Financial Statements—Segment Information."

During the year ended December 31, 2020, Mattel recorded additional severance and other restructuring charges of approximately $ 9 million, related to actions initiated in the prior year associated with the Structural Simplification cost savings program.

Other restructuring charges 11,484 6,027 ( 17,481 ) 30

$ 17,635 $ 12,901 $ ( 25,212 ) $ 5,324

(b) Other restructuring charges consist primarily of expenses associated with the consolidation of manufacturing facilities.

As of December 31, 2021, Mattel had recorded cumulative severance and other restructuring charges related to the Program of approximately $ 86 million, which include approximately $ 21 million of non-cash charges.

During the year ended December 31, 2021, in conjunction with the Program, Mattel completed the sale of a manufacturing plant based in Mexico, which included land and buildings, resulting in a pre-tax gain of $ 15.8 million.

Other Cost Savings Actions

In connection with Mattel's continued efforts to streamline its organizational structure and restore profitability, in May 2020, Mattel committed to a planned 4 % reduction in its non-manufacturing workforce.

The timing of this action was accelerated due to the impact of COVID-19.

During the year ended December 31, 2020, Mattel recorded additional severance and other restructuring charges of approximately $ 28 million, of which approximately $ 19 million related to actions taken to streamline Mattel's organizational structure and approximately $ 9 million related to actions initiated in 2019 associated with the Structural Simplification cost savings program.

Note 15— Income Taxes

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Foreign operations 461,152 350,135 169,457

$ 183,806 $ ( 157,517 ) $ ( 414,879 )

The provision for current and deferred income taxes consists of the following:

Consolidated pre-tax income (loss) excluding equity method $ 470,764 $ 177,657 $ ( 159,655 )

The (benefit) provision for current and deferred income taxes consists of the following:

For the Year Ended

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( 488,401 ) ( 12,746 ) ( 18,203 )

Provision for income taxes $ 68,649 $ 55,224 $ 116,196

(Benefit) provision for income taxes $ ( 420,381 ) $ 65,549 $ 58,324

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.

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Total $ 446,215 $ 100,574

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.

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 realizable.

Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction.

During the twelve months ended December 31, 2021, Mattel continued to see improved and sustained profitability, which presents objective positive evidence for the realizability of certain deferred tax assets.

As such, based on the overall analysis of the positive and negative evidence in each tax jurisdiction, during 2021 Mattel released the valuation allowances related to U.S.

federal, state and certain foreign deferred tax assets, except for certain tax assets that are primarily expected to expire before utilization.

Valuation allowance releases for the year ended December 31, 2021 resulted in recognition of a portion of these deferred tax assets and a benefit to Mattel's provision for income taxes of $ 540.8 million.

As of December 31, 2021, Mattel’s valuation allowances on its federal and state deferred tax assets and foreign deferred tax assets were approximately $ 18 million and $ 83 million, respectively.

Changes in the valuation allowance in 2020 primarily related to interest limitations and credits generated.

As of December 31, 2020, Mattel's valuation allowances on its federal and state deferred tax assets and foreign deferred tax assets were approximately $ 319 million and $ 313 million, respectively.

Differences between the provision for income taxes at the U.S.

6 unchanged sentences

federal statutory rate $ 101,347 $ 41,008 $ ( 33,240 )

Increase resulting from:

valuation allowance 17,676 19,141 64,907

Differences resulting from:

Changes in valuation allowances ( 540,803 ) 14,576 8,752

Foreign earnings taxed at different rates, including foreign losses without benefit 35,468 6,203 65,101

Tax Act (a) — — 3,709

State and local taxes, net of U.S.

2 unchanged sentences

Change in indefinite reinvestment assertion 7,000 — ( 2,700 )

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.

Other ( 3,309 ) ( 536 ) 3,813

(Benefit) provision for income taxes $ ( 420,381 ) $ 65,549 $ 58,324

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.

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Unrecognized tax benefits at December 31 $ 118,781 $ 140,309 $ 137,929

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.

The $ 118.8 million of unrecognized tax benefits as of December 31, 2021 would impact the effective tax rate if recognized and there would be no impact in the valuation allowance due to reversal of valuation allowance.

Mattel recognized a decrease of interest and penalties of $ 1.5 million in 2021, a decrease of $ 2.1 million in 2020, and a decrease of $ 1.6 million in 2019, related to unrecognized tax benefits, which are reflected in the provision for income taxes in the consolidated statements of operations.

As of December 31, 2021, Mattel accrued $ 21.2 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, 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 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.

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Mattel files multiple state and local income tax returns and remains subject to examination in various jurisdictions, including California for the 2017 through 2021 tax years, New York for the 2018 through 2021 tax years, and Wisconsin for the 2013 through 2021 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.

Mattel files multiple foreign income tax returns and remains subject to examination in various foreign jurisdictions including Hong Kong for the 2015 through 2021 tax years, Brazil for the 2016 through 2021 tax years, Mexico for the 2016 through 2021 tax years, Netherlands for the 2017 through 2021 tax years, Russia for the 2019 through 2021 tax years, Cyprus for the 2019 through 2021 tax years, China for the 2010 through 2021 tax years, and United Kingdom for the 2017 through 2021 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 $ 15.0 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.

The ultimate settlement of certain issues with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.

Mattel has recorded a deferred tax liability of $ 19.0 million and $ 12.0 million related to undistributed earnings of certain foreign subsidiaries as of December 31, 2021 and December 31, 2020, respectively.

The impact in 2020 was a tax expense of $ 0.1 million mainly related to withholding tax rate change during the year.

During 2021, Mattel recorded an approximately $ 7.0 million deferred tax liability on $ 3.5 billion of undistributed foreign earnings for which deferred taxes had not previously been recorded.

Taxes have not been provided on approximately $ 2.8 billion of undistributed foreign U.S.

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Inventories include the following:

Raw materials and work in process $ 110,010 $ 103,123

Finished goods $ 600,784 $ 418,464

$ 514,673 $ 495,504

Other noncurrent assets include the following:

Identifiable intangibles (net of accumulated amortization of $ 286.9 million and $ 248.0 million at December 31, 2020 and 2019, respectively)

Raw materials and work in process 176,400 110,010

$ 777,184 $ 528,474

Deferred income taxes 72,682 67,900

Accrued liabilities include the following:

1 unchanged sentence

Incentive compensation 140,769 126,601

Royalties 54,442 94,228

Lease liability 73,752 79,540

Other noncurrent liabilities include the following:

Benefit plan liabilities $ 225,957 $ 212,280

Noncurrent income tax payable 71,342 69,022

Deferred income tax liability 60,892 56,494

For the Year Ended

3 unchanged sentences

Currency transaction losses included in:

Operating Income (Loss) $ ( 20,843 ) $ 164 $ ( 5,061 )

Operating income $ ( 10,212 ) $ ( 8,780 ) $ ( 4,463 )

Other non-operating expense, net ( 8,224 ) ( 696 ) ( 527 )

4 unchanged sentences

Bad debt expense, net 1,202 9,149 967

Note 17— Revision for Immaterial Misstatements

As disclosed in "Note 1 to the Consolidated Financial Statements—Basis of Presentation," during the second quarter of 2021, Mattel identified misstatements for inventory tooling expenses that should have first been capitalized into inventory and a misstatement related to the timing of disbursements for certain capital expenditures that resulted in a cash flow misclassification between operating activities and investing activities.

Although Mattel concluded that these misstatements were not material, either individually or in the aggregate, to its current or previously issued consolidated financial statements, Mattel elected to revise its previously issued consolidated financial statements to correct for these misstatements.

In conjunction with such revision, Mattel is also correcting for other previously identified immaterial misstatements that were previously corrected for as out of period adjustments in the period of identification.

Due to certain misstatements originating prior to 2018, the opening retained earnings balance as of January 1, 2018 was understated by $ 25.1 million, primarily due to the net impact of the tooling misstatement of $ 37.2 million, partially offset by other previously identified misstatements of $ 12.1 million.

Such previously identified misstatements were previously corrected for as out of period adjustments and included the improper revenue recognition for certain licensing contracts executed prior to 2018 and the understatement of depreciation expense for certain fixed assets.

Similarly, the opening retained earnings balance as of January 1, 2020 was understated by $ 16.9 million, which principally included the net impact of the tooling misstatement and an over-accrual of advertising costs.

The revision also reflects the correction of previously identified balance sheet misclassifications, including a misclassification between property, plant and equipment and other assets associated with capitalized implementation costs for cloud computing software.

The accompanying consolidated statements of cash flows have been revised to reflect the above items, inclusive of the cash flow misstatement between operating and investing activities related to capitalized implementation costs for cloud computing software and the timing of disbursements for capital expenditures.

The revision to the accompanying consolidated balance sheets, consolidated statement of operations and comprehensive loss, and consolidated statement of cash flows are as follows.

There were no changes to the consolidated statements of stockholders’ equity that have not otherwise been reflected in the consolidated balance sheet and consolidated statement of operations and comprehensive income or loss as detailed in the tables below:

As of December 31, 2020

As Previously Reported Adjustments As Revised

(In thousands)

Consolidated Balance Sheet

Inventories $ 514,673 $ 13,801 $ 528,474

Total current assets 2,482,890 13,801 2,496,691

Total assets 5,521,089 13,801 5,534,890

Retained earnings 1,539,809 13,801 1,553,610

Total stockholders' equity 596,343 13,801 610,144

Total liabilities and stockholders' equity 5,521,089 13,801 5,534,890

Year Ended December 31, 2020

As Previously Reported Adjustments As Revised

(In thousands, except per share amounts)

Consolidated Statement of Operations and Comprehensive Income

Net sales $ 4,583,660 $ 4,773 $ 4,588,433

Cost of sales 2,340,066 5,264 2,345,330

Gross profit 2,243,594 ( 491 ) 2,243,103

Advertising and promotion expenses 516,803 9,000 525,803

Other selling and administrative expenses 1,345,906 ( 3,342 ) 1,342,564

Operating income 380,885 ( 6,149 ) 374,736

Income before income taxes 183,806 ( 6,149 ) 177,657

Provision for income taxes 68,649 ( 3,100 ) 65,549

Net income 126,628 ( 3,049 ) 123,579

Comprehensive income 51,536 ( 3,049 ) 48,487

Net loss per common share - basic $ 0.36 $ ( 0.01 ) $ 0.36

Net income per common share - diluted $ 0.36 $ ( 0.01 ) $ 0.35

Year Ended December 31, 2019

As Previously Reported Adjustments As Revised

(In thousands, except per share amounts)

Consolidated Statement of Operations and Comprehensive Loss

Cost of sales $ 2,523,792 $ 3,438 $ 2,527,230

Gross profit 1,980,779 ( 3,438 ) 1,977,341

Advertising and promotion expenses 551,517 ( 1,300 ) 550,217

Operating income 39,240 ( 2,138 ) 37,102

Loss before income taxes ( 157,517 ) ( 2,138 ) ( 159,655 )

Provision for income taxes 55,224 3,100 58,324

Net loss ( 213,512 ) ( 5,238 ) ( 218,750 )

Comprehensive loss ( 223,770 ) ( 5,238 ) ( 229,008 )

Net loss per common share - basic $ ( 0.62 ) $ ( 0.01 ) $ ( 0.63 )

Net income per common share - diluted $ ( 0.62 ) $ ( 0.01 ) $ ( 0.63 )

Year Ended December 31, 2020

As Previously Reported Adjustments As Revised

(In thousands)

Consolidated Statement of Cash Flows

Net income $ 126,628 $ ( 3,049 ) $ 123,579

Depreciation 160,973 ( 6,447 ) 154,526

Deferred income taxes ( 2,200 ) ( 3,100 ) ( 5,300 )

Changes in assets and liabilities:

Inventories ( 50,562 ) 8,369 ( 42,193 )

Prepaid expenses and other current assets 5,661 ( 25,700 ) ( 20,039 )

Accounts payable, accrued liabilities, and income taxes payable 11,209 6,194 17,403

Other, net ( 26,457 ) 20,927 ( 5,530 )

Net cash flows provided by operating activities 288,502 ( 2,806 ) 285,696

Purchases of other property, plant, and equipment ( 62,195 ) 2,806 ( 59,389 )

Net cash flows used for investing activities ( 134,910 ) 2,806 ( 132,104 )

Year Ended December 31, 2019

As Previously Reported Adjustments As Revised

(In thousands)

Consolidated Statement of Cash Flows

Net loss $ ( 213,512 ) $ ( 5,238 ) $ ( 218,750 )

Asset impairments 38,729 2,485 41,214

Deferred income taxes ( 9,136 ) 3,100 ( 6,036 )

Changes in assets and liabilities:

Inventories ( 26,920 ) 4,234 ( 22,686 )

Prepaid expenses and other current assets 47,971 1,100 49,071

Accounts payable, accrued liabilities, and income taxes payable ( 58,679 ) 4,027 ( 54,652 )

Other, net ( 10,094 ) ( 22,249 ) ( 32,343 )

Net cash flows provided by operating activities 180,977 ( 12,541 ) 168,436

Purchases of tools, dies, and molds ( 50,509 ) ( 2,485 ) ( 52,994 )

Purchases of other property, plant, and equipment ( 65,843 ) 15,026 ( 50,817 )

Net cash flows used for investing activities ( 114,176 ) 12,541 ( 101,635 )

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data