What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-28 · 311 added, 392 removed, 1135 unchanged (38% of the section changed)

4 unchanged sentences

Based on this evaluation, management concluded that Mattel's internal control over financial reporting was effective as of December 31, 2022.

The effectiveness of Mattel’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

The effectiveness of Mattel's internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears herein.

Report of Independent Registered Public Accounting Firm

31 unchanged sentences

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 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.

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

As disclosed by management, sales adjustments for such programs totaled $613.6 million for the year ended December 31, 2022.

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 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.

While certain sales adjustment amounts are readily determinable at year end and do not require estimates, other sales adjustments, such as 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.

28 unchanged sentences

Current Liabilities

Short-term borrowings $ — $ 969

Accounts payable 471,475 579,152

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Other non-operating expense, net 47,760 8,364 2,692

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

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

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

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

Net Income (Loss) Per Common Share - Basic $ 2.58 $ 0.36 $ ( 0.63 )

Income Before Income Taxes 504,335 470,764 177,657

Provision (benefit) for income taxes 135,851 ( 420,381 ) 65,549

(Income) from equity method investments ( 25,429 ) ( 11,842 ) ( 11,471 )

Net Income $ 393,913 $ 902,987 $ 123,579

Net Income Per Common Share - Basic $ 1.11 $ 2.58 $ 0.36

Weighted-average number of common shares 353,792 350,007 347,463

Net Income (Loss) Per Common Share - Diluted $ 2.53 $ 0.35 $ ( 0.63 )

Net Income Per Common Share - Diluted $ 1.10 $ 2.53 $ 0.35

Weighted-average number of common and potential common shares 359,612 357,253 349,116

6 unchanged sentences

(In thousands)

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

Net Income $ 393,913 $ 902,987 $ 123,579

Other Comprehensive Income (Loss), Net of Tax

1 unchanged sentence

Employee benefit plan adjustments 15,601 32,755 ( 16,997 )

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

Available-for-sale security adjustments 3,646 1,075 738

Net unrealized gains (losses) on derivative instruments:

Unrealized holding gains (losses) 40,449 23,253 ( 18,289 )

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

Reclassification adjustments included in net income ( 26,513 ) 912 ( 8,121 )

13,936 24,165 ( 26,410 )

Other Comprehensive Income (Loss), Net of Tax 26,992 3,305 ( 75,092 )

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

Comprehensive Income $ 420,905 $ 906,292 $ 48,487

The accompanying notes are an integral part of these consolidated financial statements.

6 unchanged sentences

Cash Flows From Operating Activities:

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

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

Net Income $ 393,913 $ 902,987 $ 123,579

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

Depreciation 144,577 146,274 154,526

3 unchanged sentences

Inventory obsolescence 64,916 40,881 44,006

Asset impairments 9,690 13,006 41,214

Deferred income taxes 69,510 56,658 ( 5,300 )

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

(Income) from equity method investments ( 25,429 ) ( 11,842 ) ( 10,752 )

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

1 unchanged sentence

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

Loss on liquidation of subsidiary 45,366 — —

Changes in assets and liabilities:

8 unchanged sentences

Purchases of other property, plant, and equipment ( 106,328 ) ( 77,131 ) ( 59,389 )

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

(Payments of) proceeds from foreign currency forward exchange contracts, net ( 520 ) 1,585 ( 22,883 )

Proceeds from sale of assets/business 38,148 43,649 5,815

5 unchanged sentences

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

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

Tax withholdings for share-based compensation ( 30,440 ) ( 19,987 ) ( 7,263 )

Proceeds from stock option exercises 27,750 12,131 64

Other, net ( 7,949 ) ( 2,165 ) 388

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

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

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

9 unchanged sentences

Share-based compensation — 69,072 — — — 69,072

Adjustment of accumulated other comprehensive loss to retained earnings for available-for-sale securities — — — ( 2,801 ) 2,801 —

Balance, December 31, 2022 $ 441,369 $ 1,808,308 $ ( 2,129,639 ) $ 2,847,709 $ ( 911,478 ) $ 2,056,269

5 unchanged sentences

The consolidated financial statements include the accounts of Mattel, Inc.

and its subsidiaries.

("Mattel") and its subsidiaries.

All wholly and majority-owned subsidiaries are consolidated and included in Mattel's consolidated financial statements.

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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

Preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S.

Preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States ("U.S.

GAAP") requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

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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.

Inventories, net of the obsolescence reserve, are stated at the lower of cost or net realizable value.

Expense associated with the obsolescence reserve is recognized in cost of sales and establishes a lower cost basis for the inventory.

Inventories are stated at the lower of cost or net realizable value.

Expense associated with inventory obsolescence is recognized in cost of sales and establishes a lower cost basis for the inventory.

Cost is determined by the first-in, first-out method.

1 unchanged sentence

Property, plant, and equipment are stated at cost less accumulated depreciation.

Depreciation is computed using the straight-line method over estimated useful lives of 10 to 30 years for buildings, 3 to 15 years for machinery and equipment, 3 to 10 years for software, and 10 to 20 years, not to exceed the lease term, for leasehold improvements.

Depreciation is computed using the straight-line method over estimated useful lives of 10 to 30 years for buildings and building improvements, 3 to 15 years for machinery and equipment, 3 to 10 years for software, and 10 to 20 years, not to exceed the lease term, for leasehold improvements.

Tools, dies, and molds are depreciated using the straight-line method over 3 years.

Estimated useful lives are periodically reviewed and, where appropriate, changes are made prospectively.

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.

The carrying amount of property, plant, and equipment is reviewed when events or changes in circumstances indicate that the carrying amount 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 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.

Mattel routinely enters into noncancelable lease agreements primarily for premises and equipment used in the normal course of business.

Mattel excludes right-of-use assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet, and combines lease and non-lease components for property leases, which primarily relate to ancillary expenses such as common area maintenance charges and management fees.

Mattel determines if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Mattel's leases may include one or more options to renew for additional terms of up to 10 years.

Renewal and termination options are included in the lease term when it is reasonably certain that Mattel will exercise the option.

Certain of these leases include escalation clauses that adjust rental expense to reflect changes in price indices, as well as renewal and termination options.

A portion of Mattel's lease agreements include contingent rental payments based on a percentage of sales.

Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

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.

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

Goodwill and Intangible Assets

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Mattel's reporting units are:

(i) North America, (ii) International, and (iii) American Girl.

(i) North America, which consists of the United States and Canada, (ii) International, and (iii) American Girl.

Components of the operating segments have been aggregated into a single reporting unit as the components have similar economic characteristics.

The similar economic characteristics include the nature of the products, the nature of the production processes, the customers, and the manner in which the products are distributed.

Mattel tests its 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.

Mattel also tests its amortizable intangible assets, which are primarily comprised of trademarks and trade names, for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recovered.

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

Amortization is computed primarily using the straight-line method over the estimated useful lives of the amortizable intangible assets.

6 unchanged sentences

dollars at year-end exchange rates.

Net income (loss) and cash flow items are translated at weighted-average exchange rates prevailing during the year.

Net income and cash flow items are translated at weighted-average exchange rates prevailing during the year.

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 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

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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 Polish zloty were the primary transactions that caused foreign currency transaction exposure for Mattel in 2021.

Derivative Instruments

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Revenue Recognition and Sales Adjustments

Revenue is recognized when control of the goods is transferred to the customer, which is either upon shipment or upon receipt of finished goods by the customer, depending on the contract terms.

Revenue is recognized when control of the goods is transferred to the customer, which is either upon shipment or upon receipt of finished goods by the customer, depending on the contract terms, with payment due typically within 60 days from the invoice date.

Mattel routinely enters into arrangements with its customers to provide sales incentives, support customer promotions, and allowances for returns or defective merchandise.

Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers.

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

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

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Revenues from functional licenses of IP are recognized once the license period has commenced and the licensee has the ability to use the delivered content.

Mattel applied the practical expedient prescribed in Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers and did not evaluate contracts of one year or less for the existence of a significant financing component.

Mattel does not evaluate contracts of one year or less for the existence of a significant financing component.

Multi-year contracts were not material.

7 unchanged sentences

Design and Development Costs

Product design and development costs primarily include employee compensation and outside services and are charged to the results of operations as incurred.

Product design and development costs primarily include employee compensation and outside services and are expensed in the period incurred.

Employee Benefit Plans

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Determining the fair value of share-based awards at the measurement date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility, and the expected dividends.

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.

Mattel estimates the fair value of options granted using the Black-Scholes valuation model.

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.

Expected stock price volatility is based on the historical volatility of Mattel's stock for a period approximating the expected life.

Expected dividend yield is based on the annual rate of dividends expected to be paid over the expected life.

The risk-free interest rate is based on the implied yield available on U.S.

Treasury zero-coupon issues approximating the expected life.

Judgment is also required in estimating the amount of share-based awards that will be forfeited prior to vesting.

Mattel determines the fair value of RSUs, excluding performance RSUs, based on the closing market price of Mattel’s common stock 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.

Mattel estimates and adjusts forfeiture rates based on a periodic review of recent forfeiture activity and expected future employee turnover.

Mattel determines the fair value of restricted stock units ("RSUs"), excluding performance RSUs, based on the closing market price of Mattel's common stock 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.

Mattel determines the fair value of the performance-related components of its performance RSUs based on the closing market price of Mattel's common stock on the date of grant.

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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.

In the normal course of business, Mattel is regularly audited by U.S.

federal, state, local, and foreign tax authorities.

The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel's consolidated financial statements.

Equity Method Investments

Mattel utilizes the equity method when accounting for investments in which Mattel is able to exercise significant influence, but does not hold controlling interest.

Mattel utilizes the equity method when accounting for investments in which Mattel is able to exercise significant influence, but does not hold a controlling interest.

Significant influence is generally presumed to exist when Mattel owns between 20% to 50% of the investee.

Under the equity method of accounting, the investee's financials are not consolidated within Mattel's financial statements.

Mattel records its portion of an investee’s earnings and losses on a three-month lag as investee financial information is not available in a sufficiently timely manner.

Equity method investments were not significant for the periods presented.

Under the equity method of accounting, the initial equity investment is recorded at cost.

The carrying amount of the investment is subsequently adjusted for Mattel's share of net income (loss) and distributions from the investee.

Mattel owns a 50 % equity interest in Mattel163 Limited, a joint venture with a third party that develops and operates online games.

Mattel's portion of the joint venture's earnings and losses is recognized on a three-month lag as the joint venture's financial information is not available in a sufficiently timely manner.

The joint venture was not significant for the periods presented.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

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.

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-10, Government Assistance (Topic 832):

Disclosure by Business Entities about Government Assistance, which requires business entities to disclose information about certain government assistance by applying the grant or contribution model.

Mattel adopted the guidance on January 1, 2022.

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

Accounting Pronouncements Not Yet Adopted

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

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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 LIBOR 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 London Interbank Offered Rate 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.

Mattel is currently evaluating the impact of the adoption of ASU 2020-04 and ASU 2021-01 on its consolidated financial statements.

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

Accounting Pronouncements Not Yet Adopted

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.

ASU 2022-04 requires that buyers in a supplier finance program disclose sufficient information for a user of the financial statements to understand the program's nature, activity, changes since prior period, and potential magnitude.

The guidance in ASU 2022-04 is effective for interim and fiscal years beginning after December 15, 2022.

Once adopted, it should be applied retrospectively to each period in which a balance sheet is presented, excluding the amendment on rollforward information, which should be presented prospectively.

Mattel is currently evaluating the impact of the adoption of ASU 2022-04 on its consolidated financial statements.

Note 2— Property, Plant, and Equipment

12 unchanged sentences

$ 469,132 $ 455,966

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

Goodwill is allocated to various reporting units, which are at the operating segment level, for the purpose of evaluating whether goodwill is impaired.

Mattel’s reporting units are:

(i) North America, (ii) International, and (iii) American Girl.

Components of the operating segments have been aggregated into a single reporting unit as the components have similar economic characteristics.

The similar economic characteristics include the nature of the products, the nature of the production processes, the customers, and the manner in which the products are distributed.

The change in the carrying amount of goodwill by operating segment for 2021 and 2020 is shown below.

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 second quarter of 2022, Mattel completed the sale of the American Girl corporate offices and a distribution center located in Middleton, Wisconsin, which included land and buildings.

Mattel received net proceeds from the sale of $ 23.8 million, which resulted in a pre-tax gain of $ 15.2 million, recorded in other selling and administrative expenses in the consolidated statement of operations.

During the first quarter of 2021, Mattel completed the sale of a manufacturing plant located in Mexico, which included land and buildings.

Mattel received net proceeds from the sale of $ 24.8 million, which resulted in a pre-tax gain of $ 15.8 million, recorded in other selling and administrative expenses in the consolidated statement of operations.

Note 3— Goodwill and Intangible Assets, Net

Mattel's reporting units are at the same level as its operating segments.

The change in the carrying amount of goodwill by reporting unit for 2022 and 2021 is shown below.

Brand-specific goodwill held by foreign subsidiaries is allocated to the North America reporting unit 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.

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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

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

Currency exchange rate impact 204 ( 11,860 ) — ( 11,656 )

Balance at December 31, 2022 $ 731,993 $ 438,987 $ 207,571 $ 1,378,551

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

In the third quarter of 2022, Mattel performed a qualitative assessment to determine whether it was more likely than not that the carrying amount of Mattel's reporting units exceeded their fair value.

As a result of Mattel's qualitative assessment, it was determined that goodwill was not impaired.

There were no events or changes in circumstances subsequent to the third quarter assessment that indicate that the carrying amount of a reporting unit may exceed its fair value as of December 31, 2022.

Intangible Assets, Net

Identifiable intangibles were $ 425.1 million, net of accumulated amortization of $ 364.9 million, and $ 476.9 million, net of accumulated amortization of $ 327.0 million, as of December 31, 2022 and 2021, respectively.

3 unchanged sentences

2023 $ 38,134

Mattel tests its amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

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.

Mattel tests its amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Mattel's amortizable intangible assets primarily consist of trademarks and trade names.

During 2022, Mattel's amortizable intangible assets were not impaired.

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

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

Note 4— Employee Benefit Plans

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(In thousands)

Defined benefit pension plans $ 14,858 $ 9,670 $ 9,815

Defined contribution retirement plans 36,900 34,821 26,697

Postretirement benefit plans ( 1,968 ) ( 1,972 ) ( 2,220 )

Defined benefit pension plans $ 5,693 $ 14,858 $ 9,670

Deferred compensation and excess benefit plans ( 7,113 ) 6,857 6,391

Postretirement benefit plans ( 2,047 ) ( 1,968 ) ( 1,972 )

$ 33,433 $ 54,568 $ 40,786

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Settlement loss 19 6,982 — — — —

Curtailment loss 48 50 92 — — —

Curtailment (gain) loss ( 326 ) 48 50 — — —

Net periodic benefit cost (credit) $ 5,693 $ 14,858 $ 9,670 $ ( 2,047 ) $ ( 1,968 ) $ ( 1,972 )

1 unchanged sentence

Net actuarial (gain) loss $ ( 23,501 ) $ ( 42,671 ) $ 12,624 $ ( 922 ) $ ( 605 ) $ 850

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

Prior service cost 1,022 204 269 — — —

Amortization of prior service (cost) credit ( 155 ) ( 163 ) ( 303 ) 2,038 2,038 2,038

1 unchanged sentence

Total recognized in net periodic benefit (credit) cost and other comprehensive income (loss) $ ( 16,941 ) $ ( 27,772 ) $ 22,260 $ ( 931 ) $ ( 535 ) $ 916

(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).

(a) Amounts exclude related tax expense of approximately $ 6 million, $ 9 million, and $ 2 million, during 2022, 2021, and 2020, 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:

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Impact of currency exchange rate changes ( 14,874 ) ( 5,762 ) — —

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

Actuarial gain ( 124,229 ) ( 16,597 ) ( 1,022 ) ( 614 )

Benefits paid ( 36,943 ) ( 49,895 ) ( 251 ) ( 536 )

Plan amendments — ( 656 ) — —

Curtailments ( 326 ) — — —

Settlements ( 359 ) 1,612 — —

3 unchanged sentences

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

Actual return on plan assets 28,622 44,104 — —

Actual (loss) return on plan assets ( 91,470 ) 28,622 — —

Employer contributions 5,029 21,841 251 536

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The actuarial gain recognized in 2022 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, 2022.

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, 2022 and 2021, information for defined benefit pension plans that had aggregate accumulated benefit obligations and projected benefit obligations in excess of plan assets is as follows:

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Post-65 2029 2028

Discount rates, weighted-average rates of future compensation increases, and long-term rates of return on plan assets for Mattel's foreign defined benefit pension plans differ from the assumptions used for Mattel's domestic defined benefit pension plans due to differences in local economic conditions in the locations where the non-U.S.

plans are based.

The rates shown in the preceding table are indicative of the weighted-average rates of all of Mattel's defined benefit pension plans given the relative insignificance of the foreign plans to the consolidated total.

At the end of each fiscal year, Mattel determines the weighted-average discount rate used to calculate the projected benefit obligation.

The discount rate is an estimate of the current interest rate at which the benefit plan liabilities could be effectively settled at the end of the year.

The discount rate also impacts the interest cost component of plan income or expense.

As of December 31, 2022, Mattel determined the discount rate for its domestic defined benefit pension and post retirement benefit plans used in determining the projected and accumulated benefit obligations to be 4.9 %, as compared to 2.5 % as of December 31, 2021.

In estimating this rate, Mattel reviews rates of return on high-quality corporate bond indices, which approximate the timing and amount of benefit payments.

The estimated future benefit payments for Mattel's defined benefit pension and postretirement benefit plans are as follows:

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Global fixed income 24,355

Diversified funds 46,407

Real Estate $ 20,984

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In December 2017, Mattel entered into an insurance buy-in policy contract with a private limited life insurance company to insure a portion of the U.K.

pension plan, covering approximately 40 % of the total membership in the plan.

pension plan, which initially covered approximately 40 % of the total membership in the plan.

In 2022, Mattel entered into an additional insurance buy-in policy contract to insure the remainder of the membership in the plan.

The assets and liabilities with respect to insured pensioners are assumed to match for the purposes of ASC 715, Pension — Retirement Benefits (i.e.

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Purchases, sales, and settlements ( 1,854 )

Change in fair value 3,380

Changes in fair value ( 209 )

Balance at December 31, 2021 30,731

Purchases, sales, and settlements 41,347

Change in fair value ( 209 )

Changes in fair value ( 14,768 )

Balance at December 31, 2022 $ 57,310

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Mattel has annual incentive compensation plans under which officers and key employees may earn cash incentive compensation based on Mattel's and individual performance, subject to certain approvals of the Compensation Committee of the Board of Directors.

Incentive compensation for 2021, 2020, and 2019, was $ 137.1 million, $ 122.5 million, and $ 119.5 million, respectively, for awards under these plans and was included in other selling and administrative expenses.

Mattel did not record incentive compensation for 2022 under its annual incentive compensation plan.

Incentive compensation for 2021 and 2020 was $ 137.1 million, and $ 122.5 million, respectively, for awards under these plans and was included in other selling and administrative expenses.

Note 5— Seasonal Financing and Debt

Seasonal Financing

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.

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

and certain of its subsidiaries entered into various foreign joinder agreements to the Credit Agreement.

The foreign joinder agreements join the relevant foreign borrowers and foreign lenders to the Credit Agreement, as contemplated therein, making portions of the senior secured revolving credit facilities available to other subsidiaries of Mattel, Inc.

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, (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.

subsidiaries of the Borrower (the “U.S.

Guarantors”), guarantee the obligations of all Borrowers under the senior secured revolving credit facilities.

Additionally, the obligations of the Canadian Borrower, the French Borrower, the Spanish Borrower, the European (GNU) Borrowers, and the Australian Borrower (collectively, the “Foreign Borrowers”), are guaranteed by the obligations of the other Foreign Borrowers, as well as certain additional foreign subsidiaries (“Foreign Guarantors”).

Subfacility is secured by liens on substantially all of the U.S.

Borrowers’ and the U.S.

Guarantors’ accounts receivable and inventory (the “U.S.

Current Assets Collateral”).

The Canadian Subfacility, the French Subfacility, the Spanish Subfacility, the European (GNU) Subfacility, and the Australian Subfacility are each secured by a first priority lien on (i) the accounts receivable and inventory of the applicable Foreign Borrower(s) and Foreign Guarantors under such facility, and (ii) the U.S.

Current Assets Collateral.

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 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 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 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.

Since the execution of the Credit Agreement, the fixed charge coverage ratio covenant has not been in effect as no event of default has occurred and as Mattel's excess availability has been greater than $ 100 million and the Availability Threshold.

As of December 31, 2021 and 2020, Mattel was in compliance with all covenants contained in the Credit Agreement.

The Credit Agreement is a material agreement, and failure to comply with its covenants may result in an event of default under the terms of the senior secured revolving credit facilities.

If Mattel were to default under the terms of the senior secured revolving credit facilities, its ability to meet its seasonal financing requirements could be adversely affected.

On September 15, 2022, Mattel entered into a revolving credit agreement (the "Credit Agreement") as the borrower with Bank of America, N.A., as administrative agent, and the other lenders and financial institutions party thereto, providing for $ 1.40 billion in aggregate principal amount of senior secured revolving credit facility (the "Revolving Credit Facility").

The Revolving Credit Facility will mature on September 15, 2025.

In connection with the entry into the Credit Agreement, the Company terminated the commitments and satisfied all outstanding obligations under the previous credit agreement, dated December 20, 2017 (as amended), by and among Mattel, certain domestic and foreign subsidiaries of Mattel, as additional borrowers, certain other domestic and foreign subsidiaries of Mattel, as guarantors thereunder, Bank of America, N.A., as global administrative agent, collateral agent, and Australian security trustee, and the other lenders and financial institutions party thereto.

Borrowings under the Revolving Credit Facility will bear interest at a floating rate, which can be either, at Mattel's option, (i) adjusted Term Secured Overnight Financing Rate ("SOFR") plus an applicable margin ranging from 1.125 % to 2.000 % per annum or (ii) an alternate base rate plus an applicable margin ranging from 0.125 % to 1.000 % per annum, in each case, such applicable margins to be determined based on Mattel's credit ratings.

In addition to paying interest on the outstanding principal under the Revolving Credit Facility, Mattel will be required to pay (i) an unused line fee per annum of the average daily unused portion of the Revolving Credit Facility, (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.

The obligations of Mattel under the Revolving Credit Facility are guaranteed by each domestic subsidiary of Mattel that guarantees any of Mattel's senior unsecured notes (collectively, the "Guarantors").

If Mattel achieves a debt rating of BBB-, Baa3, and/or BBB- (or higher) from any two of S&P, Moody's, and Fitch, respectively, and no event of default has occurred or is continuing at such time and Mattel provides a certification regarding the foregoing to the administrative agent (a "Fall-Away Event"), the obligations of Mattel under the Revolving Credit Facility will instead be required to be guaranteed by each existing and future direct and indirect domestic subsidiary of Mattel only to the extent such subsidiary guarantees other indebtedness of Mattel in an aggregate principal or committed amount in excess of $ 50 million.

The Revolving Credit Facility is secured by liens on substantially all of Mattel's and the Guarantors' present and after-acquired assets (subject to certain exceptions), including domestic accounts receivable, inventory, certain trademarks and patents, and certain equity interests in direct material subsidiaries of Mattel and the Guarantors.

If a Fall-Away Event occurs, all collateral securing the Revolving Credit Facility will be permanently released.

The Credit Agreement contains customary covenants, including, but not limited to, restrictions on Mattel'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 dispose of assets, amend organizational documents, change accounting policies or reporting practices, or enter into negative pledges with respect to assets that constitute collateral.

The restrictive covenants also contain customary exceptions, including the uncapped ability to make investments and pay dividends if, in each case, the pro forma total leverage ratio after giving effect to such investment or dividend will be at least 0.25 to 1.00 inside the then-applicable total leverage ratio financial covenant level.

Further, if a Fall-Away Event occurs, the restrictive covenants governing investments, dividends, negative pledges, and changes in accounting policies or reporting practices will no longer apply.

The Credit Agreement requires the maintenance of (a) an interest coverage ratio of not less than 2.75 to 1.00 as of the end of each fiscal quarter and (b) a total leverage ratio as of the end of each fiscal quarter, not to exceed 4.50 to 1.00 as of the end of the fiscal quarter ending September 30, 2022, with certain specified step-downs to occur thereafter with respect to subsequent fiscal quarters.

As of December 31, 2022, Mattel had no borrowings outstanding under the Revolving Credit Facility.

As of December 31, 2021, Mattel had no borrowings outstanding under the previous senior secured revolving credit facilities.

Outstanding letters of credit under the Revolving Credit Facility totaled approximately $ 8 million as of December 31, 2022.

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

To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel avails itself of individual short-term credit lines.

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Mattel expects to extend the majority of these credit lines throughout 2023.

As of December 31, 2022, Mattel was in compliance with all covenants contained in the Credit Agreement.

The Credit Agreement is a material agreement, and failure to comply with its covenants may result in an event of default under the terms of the Revolving Credit Facility.

If Mattel were to default under the terms of the Revolving Credit Facility, its ability to meet its seasonal financing requirements could be adversely affected.

Short-Term Borrowings

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 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.

As of December 31, 2022 and 2021, Mattel had no short-term borrowings outstanding.

During 2022 and 2021, Mattel had average borrowings under the new and previous senior secured revolving credit facilities and other short-term borrowings of $ 2.9 million and $ 77.3 million, respectively, to help finance its seasonal working capital requirements.

The weighted-average interest rate on borrowings under the senior secured revolving credit facilities and other short-term borrowings during 2022 and 2021 was 3.6 % and 1.3 %, respectively.

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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 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 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).

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and (vii) designate subsidiaries as unrestricted.

In December 2019, Mattel used the net proceeds from the issuance of the 2019 Senior Notes, plus cash on hand, to redeem and retire all of the 2010 Senior Notes due October 1, 2020 and all of the 2016 Senior Notes due August 15, 2021, at a redemption price equal to the principal amount, plus a "make-whole" premium, and accrued and unpaid interest.

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.

In 2021, Mattel used the net proceeds from the issuance of the $ 600 million of 2026 Notes and $ 600 million of 2029 Notes, plus cash on hand, to redeem and retire $ 1.50 billion in aggregate principal amount of the 6.75 % Senior Notes due 2025 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.

On December 30, 2022, Mattel used cash on hand to redeem and retire $ 250 million aggregate principal amount of the 3.15 % Senior Notes due 2023.

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 % 600,000 600,000

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(In thousands)

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

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

Other comprehensive income (loss) before reclassifications 40,449 — 14,988 ( 51,557 ) 3,880

Amounts reclassified from accumulated other comprehensive income (loss) ( 26,513 ) 3,646 613 45,366 23,112

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

Net increase (decrease) in other comprehensive income (loss) 13,936 3,646 15,601 ( 6,191 ) 26,992

Adjustment of accumulated other comprehensive loss to retained earnings — 2,801 — — 2,801

Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2022 $ 22,732 $ — $ ( 138,498 ) $ ( 795,712 ) $ ( 911,478 )

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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 ( 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 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 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 14,495 ( 1,713 ) ( 31,158 ) 18,919 543

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 )

The following table presents the classification and amount of the reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of operations:

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Derivative Instruments

(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)

Gain (loss) on foreign currency forward exchange and other contracts $ 26,500 $ ( 512 ) $ 8,040 Cost of sales

Tax effect 13 ( 400 ) 81 Provision (benefit) for income taxes

$ 26,513 $ ( 912 ) $ 8,121 Net Income

Employee Benefit Plans

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Recognized actuarial loss (a) ( 8,896 ) ( 11,167 ) ( 9,510 ) Other non-operating expense, net

Curtailment loss (a) ( 48 ) ( 50 ) ( 92 ) Other non-operating expense, net

Curtailment gain (loss) (a) 326 ( 48 ) ( 50 ) Other non-operating expense, net

Settlement loss (a) ( 19 ) ( 6,982 ) — Other non-operating expense, net

( 6,706 ) ( 16,322 ) ( 7,825 )

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

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

(a) The amortization of prior service credit, recognized actuarial loss, curtailment loss and settlement loss are included in the computation of net periodic benefit cost.

Tax effect 6,093 3,528 1,881 Provision (benefit) for income taxes

$ ( 613 ) $ ( 12,794 ) $ ( 5,944 ) Net Income

Currency Translation Adjustments

Loss on liquidation of subsidiary $ ( 45,366 ) $ — $ — Other non-operating expense, net

Tax effect (b) — — — Provision (benefit) for income taxes

$ ( 45,366 ) $ — $ —

(a) The amortization of prior service credit, recognized actuarial loss, curtailment gain (loss) and settlement loss are included in the computation of net periodic benefit cost.

Refer to "Note 4 to the Consolidated Financial Statements—Employee Benefit Plans" for additional information regarding Mattel's net periodic benefit cost.

(b) There is no tax affect associated with the loss on the liquidation of Mattel's subsidiary in Argentina.

During 2022, Mattel adjusted accumulated other comprehensive loss by $ 6.4 million in relation to previously recorded available-for-sale equity securities.

This amount was adjusted in order to account for such securities in a manner consistent with ASC 321, Investments—Equity Securities.

The adjustment includes $ 3.6 million of accumulated other comprehensive loss reclassified to other non-operating expense, net in the consolidated statement of operations and $ 2.8 million reclassified to retained earnings in the consolidated statement of stockholders' equity.

The adjustment, including tax effect, was immaterial to the financial statements.

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.

During 2022, currency translation adjustments resulted in a net other comprehensive loss of $ 51.6 million, primarily due to the weakening of the British pound sterling, Euro, and Hong Kong dollar against the U.S.

dollar, partially offset by the strengthening of the Mexican peso and Brazilian real against the U.S.

Upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity, the accumulated currency translation adjustment related to the foreign entity is reclassified from accumulated other comprehensive loss to earnings.

During the fourth quarter of 2022, the liquidation of Mattel's subsidiary in Argentina was substantially complete and as a result, $ 45.4 million of accumulated currency translation losses were recognized in other non-operating expense, net within the consolidated statement of operations.

During 2021, currency translation adjustments resulted in a net other comprehensive 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.

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

dollar, partially offset by the strengthening of the British pound sterling against the U.S.

For 2019, currency translation adjustments resulted in a net gain of $ 18.9 million, primarily due to the strengthening of the British pound sterling, Russian ruble, and Mexican peso against the U.S.

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

Note 7— Leases

Mattel routinely enters into noncancelable lease agreements primarily for premises and equipment used in the normal course of business.

Certain of these leases include escalation clauses that adjust rental expense to reflect changes in price indices, as well as renewal and termination options.

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

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.

Mattel also elected the practical expedients to exclude right-of-use assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet, and to combine lease and non-lease components for property leases, which primarily relate to ancillary expenses such as common area maintenance charges and management fees.

Mattel determines if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Mattel's leases have remaining lease terms of up to 11 years, and often include one or more options to renew for up to 10 years.

Renewal and termination options are included in the lease term when it is reasonably certain that Mattel will exercise the option.

In addition, certain of Mattel's lease agreements, primarily related to American Girl leases, include contingent rental payments based on a percentage of sales.

Contingent rental expense is recorded in the period in which the contingent event becomes probable.

During 2021, 2020, and 2019, contingent rental expense was not material, Mattel's lease agreements do not contain any material residual guarantees or material restrictive covenants.

Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

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:

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

2022 December 31,

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(In thousands)

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

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

Lease costs (a) (b) $ 140,188 $ 134,272 $ 136,842

(a) Includes short-term and variable lease costs of approximately $ 47 million, $ 39 million, and $ 42 million for 2022, 2021, and 2020 respectively.

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

Variable lease costs primarily relate to variable components of third party logistics rental charges, common area maintenance charges, management fees, and taxes.

(b) Contingent rental expense is recorded in the period in which the contingent event becomes probable.

During 2022, 2021, and 2020, contingent rental expense was not material.

Supplemental information related to leases are as follows:

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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 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").

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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.

For grants on or after March 2, 2021 through March 1, 2022, 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.

For grants on or after March 2, 2022, 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 one half available shares for each share actually subject to such full-value grant.

At December 31, 2022, there were approximately 36 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 30 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 $ 69.1 million, $ 60.1 million, and $ 60.2 million during 2022, 2021, and 2020, 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.

The income tax benefit related to stock options, RSUs, and performance awards during 2022 and 2021 was approximately $ 9 million and $ 7 million, respectively.

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

As of December 31, 2022, 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 1.9 years.

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Mattel recognized compensation expense of $ 13.2 million, $ 10.1 million, and $ 11.6 million for stock options during 2022, 2021, and 2020, respectively, which is included within other selling and administrative expenses in the consolidated statements of operations.

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.

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

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.

Expected dividend yield is based on the annual rate of dividends expected to be paid over the expected life.

The risk-free interest rate is based on the implied yield available on U.S.

Treasury zero-coupon issues approximating the expected life.

The weighted-average grant-date fair value of options granted during 2022, 2021, and 2020 was $ 11.18 , $ 9.31 , and $ 4.60 respectively.

The following weighted-average assumptions were used in determining the fair value of options granted:

The following weighted-average valuation assumptions were used in determining the fair value of options granted:

2022 2021 2020

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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 was approximately $ 3 million during 2021 and not material during 2020.

There were no stock option exercises during 2019.

The total intrinsic value of options exercised was approximately $ 8 million and $ 3 million during 2022 and 2021, respectively, and not material during 2020.

At December 31, 2022, options outstanding had an intrinsic value of approximately $ 26 million with a weighted-average remaining life of 3.9 years.

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

At December 31, 2022, options exercisable had an intrinsic value of approximately $ 21 million, with a weighted-average remaining life of 3.3 years.

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

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.

Cash received from stock options exercised, net of taxes during 2022 was approximately $ 28 million.

At December 31, 2022, stock options vested and expected to vest totaled approximately 17 million shares, with an intrinsic value of approximately $ 26 million, weighted-average exercise price of $ 21.74 , and weighted-average remaining life of 3.9 years.

During 2022, approximately 2 million stock options vested.

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Compensation expense recognized related to grants of performance awards was $ 18.2 million, $ 22.7 million, and $ 19.9 million during 2022, 2021, and 2020, respectively.

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

(i) a January 1, 2019—December 31, 2021 performance cycle, (ii) a January 1, 2020—December 31, 2022 performance cycle, and (iii) a January 1, 2021—December 31, 2023 performance cycle.

Mattel had four LTIP performance cycles in place during 2022, which were established by the Compensation Committee of the Board of Directors:

(i) a January 1, 2019—December 31, 2021 ("2019 LTIP"), which was completed in the first quarter of 2022 (ii) a January 1, 2020—December 31, 2022 performance cycle ("2020 LTIP"), (ii) a January 1, 2021—December 31, 2023 performance cycle ("2021 LTIP"), and (iii) a January 1, 2022—December 31, 2024 performance cycle ("2022 LTIP").

Under the LTIP performance cycles in place in 2022, officers and key employees may earn shares of Mattel's common stock based on attaining certain cumulative three-year performance targets, which are subject to approvals of the Compensation Committee of the Board of Directors.

The ultimate amount earned for these LTIP awards may vary from 0 % to 200 % of the target number of shares, depending on the cumulative results achieved.

The ultimate amount of shares earned for these LTIP awards may vary from 0 % to 200 % of the target number of shares, depending on the cumulative results achieved.

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 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.

Performance awards cliff-vest at the end of the requisite service period, which typically occurs in the first quarter subsequent to the end of the performance period.

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 2022, 2021, and 2020 was $ 28.39 , $ 22.91 , and $ 11.93 respectively.

The following weighted-average assumptions were used in determining the fair value of performance awards granted:

The following weighted-average valuation assumptions were used in determining the fair value of the market-related components of performance awards granted:

2022 2021 2020

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Unvested at January 1 3,347 $ 15.52 3,405 $ 13.79 2,217 $ 15.45

Granted (a) 906 22.04 1,461 11.93 1,206 14.89

Granted (a)(b) 1,440 21.35 906 22.04 1,461 11.93

Vested ( 1,823 ) 14.89 ( 884 ) 15.63 ( 95 ) 17.97

Forfeited ( 70 ) 17.26 ( 80 ) 14.70 ( 74 ) 15.65

Canceled — — ( 104 ) 17.97 ( 201 ) 37.70

Canceled (a) — — — — ( 104 ) 17.97

Unvested at December 31 2,894 $ 18.77 3,347 $ 15.52 3,405 $ 13.79

(a) The number of shares subject to performance awards represents the aggregate target numbers of shares that may be issued pursuant to the award over its full term.

(a) During 2022, Mattel granted 0.7 million shares as part of its 2022 LTIP and issued 0.8 million incremental shares under the 2019 LTIP based on the final earnout of the 2019 performance cycle, which are included in the weighted average grant-date fair value.

During 2021, Mattel granted 0.8 million shares under the 2021 LTIP and issued 0.1 million incremental shares under the 2018 LTIP based on the final earnout of the 2018 performance cycle, which are included in the weighted average grant-date fair value.

During 2020, Mattel granted 1.5 million shares under the 2020 LTIP and canceled 0.1 million shares under the 2017 LTIP based on the final earnout of the 2017 performance cycle.

(b) The number of shares granted for the 2022 LTIP, the 2021 LTIP, and the 2020 LTIP, represents the aggregate target numbers of shares that may be issued pursuant to the award over its full term.

The aggregate number of shares subject to performance awards that would be issued if performance goals are achieved at the maximum number of shares are approximately 1 million, 2 million, and 3 million for 2022, 2021, and 2020, respectively.

At December 31, 2022, performance awards expected to vest totaled approximately 3 million shares, with a weighted-average grant-date fair value of $ 13.47 .

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.

The total grant-date fair value of performance awards vested during 2022, 2021, and 2020 was approximately $ 27 million, $ 14 million, and $ 2 million, respectively.

Note 9— Earnings Per Share

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(In thousands, except per share amounts)

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

Net income $ 393,913 $ 902,987 $ 123,579

Weighted-average number of common shares 353,792 350,007 347,463

Basic net income per common share $ 1.11 $ 2.58 $ 0.36

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

Net income $ 393,913 $ 902,987 $ 123,579

Weighted-average number of common shares 353,792 350,007 347,463

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Diluted net income per common share $ 1.10 $ 2.53 $ 0.35

(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.

(a) Share-based awards totaling 10.6 million, 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, 2022, 2021, and 2020 respectively, because their effect would be antidilutive.

Note 10— Fair Value Measurements

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(In thousands)

Foreign currency forward exchange contracts and other (a) $ — $ 18,075 $ — $ 18,075

Available-for-sale (b) 5,343 — — 5,343

Total assets $ 5,343 $ 18,075 $ — $ 23,418

Foreign currency forward exchange contracts and other (a) $ — $ 3,810 $ — $ 3,810

Foreign currency forward exchange and other contracts (a) $ — $ 17,563 $ — $ 17,563

Foreign currency forward exchange and other contracts (a) $ — $ 10,754 $ — $ 10,754

December 31, 2021

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(In thousands)

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

Foreign currency forward exchange and other contracts (a) $ — $ 18,075 $ — $ 18,075

Available-for-sale (b) 5,343 — — 5,343

Total assets $ 5,343 $ 18,075 $ — $ 23,418

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.

Foreign currency forward exchange and other contracts (a) $ — $ 3,810 $ — $ 3,810

(a) The fair value of the foreign currency forward exchange and other contracts 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.

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Mattel's financial instruments include cash and equivalents, accounts receivable and payable, accrued liabilities, short-term borrowings, and long-term debt.

The fair values of these instruments, excluding long-term debt, approximate their carrying values because of their short-term nature.

The fair values of these instruments, excluding long-term debt, approximate their carrying amounts because of their short-term nature.

Cash and equivalents are classified as Level 1 and all other financial instruments are classified as Level 2 within the fair value hierarchy.

The estimated fair value of Mattel’s long-term debt was $ 2.82 billion (compared to a carrying value of $ 2.60 billion) as of December 31, 2021 and $ 3.11 billion (compared to a carrying value of $ 2.90 billion) as of December 31, 2020.

The estimated fair value of Mattel's long-term debt was $ 2.13 billion (compared to a carrying amount of $ 2.35 billion) as of December 31, 2022 and $ 2.82 billion (compared to a carrying amount of $ 2.60 billion) as of December 31, 2021.

The estimated fair values have been calculated based on broker quotes or rates for the same or similar instruments and are classified as Level 2 within the fair value hierarchy.

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Mattel uses foreign currency forward exchange contracts as cash flow hedges primarily to hedge its purchases and sales of inventory denominated in foreign currencies.

These contracts generally have maturity dates of up to 24 months.

These contracts have maturity dates of up to 24 months.

These derivative instruments have been designated as effective cash flow hedges, whereby the unsettled hedges are reported in Mattel's consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in other comprehensive income ("OCI").

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

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.

As of December 31, 2022 and 2021, Mattel held foreign currency forward exchange contracts and other commodity derivative instruments, with notional amounts of approximately $ 674 million and $ 925 million, respectively.

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

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Derivatives Designated as Hedging Instruments:

Foreign currency forward exchange contracts and other Prepaid expenses and other

current assets $ 13,361 $ 3,641

Foreign currency forward exchange contracts and other Other noncurrent assets 1,000 50

Foreign currency forward exchange and other contracts Prepaid expenses and other current assets $ 14,899 $ 13,361

Foreign currency forward exchange and other contracts Other noncurrent assets 1,501 1,000

Total Derivatives Designated as Hedging Instruments $ 16,400 $ 14,361

Derivatives Not Designated as Hedging Instruments:

Foreign currency forward exchange contracts and other Prepaid expenses and other

current assets $ 3,714 $ 1,982

Foreign currency forward exchange contracts and other Other noncurrent assets — 38

Foreign currency forward exchange and other contracts Prepaid expenses and other current assets $ 1,163 $ 3,714

Total Derivatives Not Designated as Hedging Instruments $ 1,163 $ 3,714

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Derivatives Designated as Hedging Instruments:

Foreign currency forward exchange contracts and other Accrued liabilities $ 2,301 $ 20,330

Foreign currency forward exchange contracts and other Other noncurrent liabilities 280 4,361

Foreign currency forward exchange and other contracts Accrued liabilities $ 3,647 $ 2,301

Foreign currency forward exchange and other contracts Other noncurrent liabilities 807 280

Total Derivatives Designated as Hedging Instruments $ 4,454 $ 2,581

Derivatives Not Designated as Hedging Instruments:

Foreign currency forward exchange contracts and other Accrued liabilities $ 1,229 $ 803

Foreign currency forward exchange and other contracts Accrued liabilities $ 6,261 $ 1,229

Foreign currency forward exchange and other contracts Other noncurrent liabilities 39 —

Total Derivatives Not Designated as Hedging Instruments $ 6,300 $ 1,229

$ 10,754 $ 3,810

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Amount of gains (losses) recognized in OCI $ 40,449 $ 23,253 $ ( 18,289 )

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.

Amount of gains (losses) reclassified from accumulated OCI to the consolidated statements of operations 26,513 ( 912 ) 8,121 Cost of sales

The net gains (losses) reclassified from accumulated other comprehensive loss to the consolidated statements of operations during 2022, 2021, and 2020, 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 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

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

Foreign currency forward exchange and other contracts $ ( 7,833 ) $ 2,872 $ ( 26,553 ) Other non-operating expense, net

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

$ ( 7,833 ) $ 3,511 $ ( 26,058 )

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.

The net (losses) gains recognized in the consolidated statements of operations during 2022, 2021, and 2020, respectively, were offset by foreign currency transaction gains and losses on the related derivative balances.

Note 12— Commitments and Contingencies

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2023 $ 301,889

Thereafter 6,062

Mattel has a wholly-owned subsidiary, Far West Insurance Company, Ltd.

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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.

Mattel’s liability for reported and incurred but not reported workers' compensation, general, automobile, product liability, and property claims at December 31, 2021 and 2020 totaled $ 13.0 million and $ 12.9 million, respectively, and is primarily included in other noncurrent liabilities in the consolidated balance sheets.

Mattel's liability for workers' compensation, general, automobile, product liability, and property claims at December 31, 2022 and 2021 totaled $ 14.2 million and $ 13.0 million, respectively, and is primarily included in other noncurrent liabilities in the consolidated balance sheets.

Loss reserves are accrued based on Mattel's estimate of the aggregate liability for claims incurred.

Litigation Related to Yellowstone do Brasil Ltda.

In April 1999, Yellowstone do Brasil Ltd.

In April 1999, Yellowstone do Brasil Ltda.

(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.

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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.

As of December 31, 2022, Mattel assessed its probable loss related to the Yellowstone matter and has accrued a reserve, which is not material.

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

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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 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.

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 U.S.

federal courts' Multi-District Litigation program.

In June 2022, the court denied the plaintiffs' motion to certify damages and injunctive relief classes under New York law, but granted plaintiffs' request to certify a New York issue class to resolve two issues on a class-wide basis.

In October 2022, the United States Court of Appeals for the Second Circuit denied plaintiffs' petition to appeal the denial of certification of the damages and injunctive relief classes.

Thirty-two additional lawsuits filed between April 2019 and July 2022 are pending against Fisher-Price, Inc.

and Mattel, Inc.

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

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

Several lawsuits have been settled and/or dismissed.

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and/or Mattel, Inc.

have also received letters from lawyers purporting to represent additional plaintiffs who are threatening to assert similar claims.

have also received letters from lawyers purporting to represent additional plaintiffs who have threatened to assert similar claims.

In addition, a stockholder has filed a derivative action in the Court of Chancery for the State of Delaware (Kumar v.

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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).

Bradley, et al., filed August 30, 2021), which is also stayed.

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

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

Mattel also is in discussions with the US Consumer Product Safety Commission ("CPSC") regarding a request from the CPSC that Mattel increase the proportional cash refund available to consumers who participate in the recall of the Sleeper first announced in 2019.

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

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 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.

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 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 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 was later approved by the court.

In February 2022, the Mattel Defendants paid $ 86 million in settlement of the claims against them, which was funded in full by Mattel's insurers.

A single stockholder has appealed the court's approval of the settlement, and the appeal is now pending in the United States Court of Appeals for the Ninth Circuit.

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.

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

Kreiz, et al., filed April 9, 2020) making allegations that are substantially identical to, or are based upon, the allegations of the class action lawsuits.

The defendants in the derivative action are certain of Mattel's current and former officers and directors, Mattel, Inc., and PricewaterhouseCoopers LLP.

The defendants in the derivative action are certain of Mattel's current and former officers and directors, and PricewaterhouseCoopers LLP ("PwC"), with Mattel, Inc.

named as a nominal defendant.

Subsequently, a nearly identical derivative action was filed by a different stockholder against the same defendants.

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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.

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

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

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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 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.

Mattel cannot predict the eventual scope, duration or outcome of potential legal action by the SEC or SDNY, if any, or whether any such action could have a material impact on Mattel's financial condition, results of operations or cash flows.

On March 11, 2022, the parties to the above actions engaged in a private mediation, after which defendants and certain of the plaintiffs reached an agreement in principle to settle the derivative claims asserted in certain of the actions.

Pursuant to the terms of the stipulation of settlement, which was approved by the Delaware Chancery Court in November 2022, Mattel received a settlement payment in the amount of $ 7 million, less attorneys' fees, paid by Mattel's insurers and PwC, and further agreed to institute certain governance enhancements requested by the plaintiffs.

The settlement did not entail any admission of fault or liability by any of the defendants.

Following approval of the settlement, the various derivative cases were dismissed with prejudice by each court.

Note 13— Segment Information

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

Mattel's operating segments are:

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

Mattel's operating and reportable segments are:

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

(ii) International;

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The North America and International segments sell products across categories, although some products are developed and adapted for particular international markets.

The following tables present information regarding net sales, operating income (loss), and assets by segment.

The following tables present information regarding net sales, operating income (loss), depreciation and amortization, and assets by segment.

The corporate and other expense category includes operating costs not allocated to individual segments, including charges related to incentive and share-based compensation, corporate headquarters functions managed on a worldwide basis, the impact of changes in foreign currency exchange rates on intercompany transactions, and certain severance and other restructuring costs.

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Interest (income) ( 9,398 ) ( 3,503 ) ( 3,945 )

Other non-operating expense, net 8,364 2,692 1,879

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

Other non-operating expense, net (c) 47,760 8,364 2,692

Income Before Income Taxes $ 504,335 $ 470,764 $ 177,657

(a) Segment operating income (loss) included severance and restructuring expenses of $ 10.7 million, $ 2.9 million, and $ 5.7 million for 2022, 2021, and 2020, respectively, which were allocated to the North America, International, and American Girl segments.

(b) Corporate and other expense included severance and restructuring charges of $ 26.2 million, $ 31.5 million, and $ 34.9 million for 2022, 2021, and 2020, 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.

Corporate and other expense also included (benefit) expenses related to inclined sleeper recall litigation of $( 0.3 ) million, $ 15.1 million, and $ 26.2 million for 2022, 2021, and 2020, respectively, and incentive and share-based compensation for all periods presented.

(c) Other non-operating expense, net includes $ 45.4 million of currency translation losses were recognized as a result of Mattel's liquidation of its subsidiary in Argentina, which was substantially completed in 2022.

For the Year Ended

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(In thousands)

Depreciation/Amortization by Segment

Depreciation and Amortization by Segment

North America $ 87,454 $ 86,308 $ 88,128

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

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.

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

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Optimizing for Growth (formerly Capital Light)

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:

Mattel's Optimizing for Growth program is a multi-year cost savings program that integrates and expands upon the previously announced Capital Light program (the "Program").

In February 2023, the Program was expanded to include additional initiatives, including actions to further streamline Mattel's organizational structure.

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

For the Year Ended

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

2022 December 31,

2021 December 31,

(In thousands)

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$ 34,277 $ 35,151 $ 12,901

(a) Severance and other restructuring costs recorded within cost of sales in the consolidated statements of operations include charges associated with the consolidation of manufacturing facilities.

(a) Severance and other restructuring costs recorded within cost of sales in the consolidated statements of operations are included in segment operating income (loss) in "Note 13 to the Consolidated Financial Statements—Segment Information."

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

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

Liability at December 31, 2021 Charges (a) Payments/Utilization Liability at December 31, 2022

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$ 15,245 $ 34,277 $ ( 36,627 ) $ 12,895

(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

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

(In thousands)

2 unchanged sentences

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

(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.

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 expected non-cash charges are $ 70 to $ 75 million.

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.

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

As of December 31, 2022, Mattel had recorded cumulative severance and other restructuring charges related to the Program of approximately $ 165 million, which include approximately $ 73 million of non-cash charges, including $ 45.4 million recognized within non-operating expense, net, during 2022 related to the liquidation of Mattel's subsidiary in Argentina.

Furthermore, cumulatively, in conjunction with previous actions taken under the Capital Light program, total expected cash expenditures are approximately $ 175 to $ 205 million and total expected non-cash charges are approximately $ 70 to $ 75 million.

During 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.

During 2020, Mattel recorded 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 associated with a prior cost savings program.

Note 15— Income Taxes

Consolidated pre-tax income (loss) consists of the following:

Consolidated pre-tax income consists of the following:

For the Year Ended

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Foreign operations 283,186 461,152 350,135

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:

Consolidated pre-tax income excluding equity method investments $ 504,335 $ 470,764 $ 177,657

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

For the Year Ended

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71,214 ( 488,401 ) ( 12,746 )

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

Provision (benefit) for income taxes $ 135,851 $ ( 420,381 ) $ 65,549

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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(In thousands)

Other noncurrent assets $ 526,906 $ 72,682

Deferred income tax assets $ 471,672 $ 526,906

Other noncurrent liabilities ( 55,195 ) ( 39,988 )

$ 416,477 $ 486,918

As of December 31, 2021, Mattel had federal and foreign loss carryforwards totaling $ 446.2 million and federal, state and foreign tax credit carryforwards of $ 100.6 million, which excludes carryforwards that do not meet the threshold for recognition in the financial statements.

As of December 31, 2022, Mattel had U.S.

federal and foreign loss carryforwards totaling $ 307.7 million and U.S.

federal, state, and foreign tax credit carryforwards of $ 70.3 million, which excludes carryforwards that do not meet the threshold for recognition in the financial statements.

Utilization of these loss and tax credit carryforwards is subject to annual limitations.

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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.

During the twelve months ended December 31, 2021, Mattel continued to see improved and sustained profitability, which presented 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 certain U.S.

federal, state, and 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.

As of December 31, 2021, Mattel's valuation allowances on its U.S.

federal and state deferred tax assets and foreign deferred tax assets were approximately $ 18 million and $ 83 million, respectively.

Changes in the valuation allowances in 2022 primarily related to utilization and expiration of tax attributes and functional currency fluctuations.

As of December 31, 2022, Mattel's valuation allowances on its U.S.

federal and state deferred tax assets and foreign deferred tax assets were approximately $ 18 million and $ 74 million, respectively.

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

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(In thousands)

Provision (benefit) at U.S.

Provision at U.S.

federal statutory rate $ 105,910 $ 98,861 $ 37,308

2 unchanged sentences

Foreign earnings taxed at different rates, including foreign losses without benefit 16,877 35,468 5,711

Tax related to pass-through income 5,340 2,487 2,409

Non deductible executive compensation 5,141 7,115 5,968

State and local taxes, net of U.S.

federal (expense) benefit ( 983 ) ( 1,056 ) 2,438

federal benefit (expense) 5,027 ( 983 ) ( 1,056 )

Adjustments to previously accrued taxes ( 9,471 ) ( 19,101 ) 5,354

1 unchanged sentence

Other ( 3,573 ) ( 10,425 ) ( 4,721 )

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

Provision (benefit) for income taxes $ 135,851 $ ( 420,381 ) $ 65,549

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 $ 114,057 $ 118,781 $ 140,309

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.

Of the $ 114.1 million of unrecognized tax benefits as of December 31, 2022, $ 113.2 million would impact the effective tax rate if recognized, and $ 0.9 million would result in an increase in the valuation allowance.

Mattel recognized a decrease of interest and penalties of $ 5.3 million in 2022, a decrease of $ 1.5 million in 2021, and a decrease of $ 2.1 million in 2020, related to unrecognized tax benefits, which are reflected in the provision (benefit) for income taxes in the consolidated statements of operations.

As of December 31, 2022, Mattel accrued $ 15.9 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, 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.

In January 2018, the FASB issued guidance stating that a company must make an accounting policy election of either (i) treating taxes due on future U.S.

inclusions in taxable income related to Global Intangible Low-Taxed Income ("GILTI") as a current-period expense when incurred (the "period cost method") or (ii) factoring such amounts into a company’s measurement of its deferred taxes (the "deferred method").

Mattel has elected the period cost method with respect to reporting taxes due on GILTI income inclusions.

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

In the normal course of business, Mattel is regularly audited by U.S.

federal, state, local, and foreign tax authorities.

Mattel remains subject to IRS examination for the 2019 through 2022 tax years.

Mattel files multiple state and local income tax returns and remains subject to examination in various jurisdictions, including California for the 2018 through 2022 tax years, New York for the 2019 through 2022 tax years, and Wisconsin for the 2015 through 2022 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.

Mattel files multiple foreign income tax returns and remains subject to examination in various foreign jurisdictions including Hong Kong for the 2016 through 2022 tax years, Mexico for the 2017 through 2022 tax years, Netherlands for the 2018 through 2022 tax years, Cyprus for the 2019 through 2022 tax years, China for the 2010 through 2022 tax years, and United Kingdom for the 2017 through 2022 tax years.

Based on the current status of U.S.

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 $ 14.3 million related to the settlement of tax audits and/or the expiration of statutes of limitations.

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.

Mattel has recorded a deferred tax liability of $ 28.0 million and $ 19.0 million related to undistributed earnings of certain foreign subsidiaries as of December 31, 2022 and 2021, respectively.

During 2022, Mattel recorded an approximately $ 9 million deferred tax liability on $ 2.60 billion of undistributed foreign earnings for which deferred taxes had not previously been recorded.

12 unchanged sentences

Advertising and promotion $ 115,707 $ 179,687

Lease liabilities 75,297 73,752

Royalties 65,330 62,618

Incentive compensation 2,889 140,769

Lease liability 73,752 79,540

For the Year Ended

10 unchanged sentences

Bad debt expense, net 18,279 1,202 9,149

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