What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-15 compared with 2023-02-22 · 247 added, 239 removed, 1207 unchanged (29% of the section changed)

3 unchanged sentences

Mattel's management, including Ynon Kreiz, its principal executive officer, and Anthony DiSilvestro, its principal financial officer, evaluated the effectiveness of Mattel's internal control over financial reporting using the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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

Based on this evaluation, management concluded that Mattel's internal control over financial reporting is not effective as of December 31, 2023, due to a material weakness in Mattel's internal control over financial reporting, as further described below.

The effectiveness of Mattel's internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears herein.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Mattel identified a material weakness in its internal control over financial reporting related to certain of its information technology general controls within certain of the Company's information technology systems.

Specifically, Mattel did not design and maintain effective user access and provisioning review controls to prevent or detect inappropriate user and privileged access to, or ensure the appropriate segregation of duties within, those systems.

Additionally, Mattel's software program change monitoring controls are not effectively designed to detect inappropriate changes to those systems.

The control deficiencies described did not result in a material misstatement to Mattel’s consolidated financial statements;

however, those deficiencies raise a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

Therefore, management concluded that the deficiencies represent a material weakness.

Report of Independent Registered Public Accounting Firm

2 unchanged sentences

We have audited the accompanying consolidated balance sheets of Mattel, Inc.

and its subsidiaries (the "Company") as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and schedule of valuation and qualifying accounts and allowances for each of the three years in the period ended December 31, 2022 appearing after the signature and power of attorney pages (collectively referred to as the "consolidated financial statements").

and its subsidiaries (the "Company") as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and schedule of valuation and qualifying accounts and allowances for each of the three years in the period ended December 31, 2023 appearing after Item 16 and the signature and power of attorney pages (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to certain of its information technology general controls within certain of the Company’s information technology systems, as the Company did not design and maintain effective user access and provisioning review controls to prevent or detect inappropriate user and privileged access to, or ensure the appropriate segregation of duties within, those systems.

Additionally, the Company’s software program change monitoring controls are not effectively designed to detect inappropriate changes to those systems.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness referred to above is described in the accompanying Management’s Report on Internal Control Over Financial Reporting.

We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting.

Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

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Los Angeles, California

February 21, 2023

March 15, 2024

We have served as the Company's auditor since 1974.

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Interest (income) ( 25,238 ) ( 9,398 ) ( 3,503 )

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

Other non-operating (income) expense, net ( 2,293 ) 47,760 8,364

Income Before Income Taxes 465,404 504,335 470,764

14 unchanged sentences

Net Income $ 214,352 $ 393,913 $ 902,987

Other Comprehensive Income (Loss), Net of Tax

Other Comprehensive Income, Net of Tax

Currency translation adjustments 37,123 ( 6,191 ) ( 54,690 )

1 unchanged sentence

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

Net unrealized gains (losses) on derivative instruments:

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

Net unrealized (losses) gains on derivative instruments:

Unrealized holding (losses) gains ( 15,903 ) 40,449 23,253

Reclassification adjustments included in net income ( 10,292 ) ( 26,513 ) 912

( 26,195 ) 13,936 24,165

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

Other Comprehensive Income, Net of Tax 6,510 26,992 3,305

Comprehensive Income $ 220,862 $ 420,905 $ 906,292

10 unchanged sentences

Depreciation 139,451 144,577 146,274

Amortization 37,602 38,039 38,925

Amortization of intangibles 37,893 37,602 38,039

Share-based compensation 83,334 69,072 60,081

4 unchanged sentences

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

(Gain) loss on sale of assets/business, net ( 26,905 ) ( 23,823 ) 1,028

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

Loss (gain) on sale of assets, net 1,016 ( 26,905 ) ( 23,823 )

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

Content asset amortization 51,837 56,037 47,369

Loss on liquidation of subsidiary — 45,366 —

Changes in assets and liabilities:

Accounts receivable 197,902 ( 85,603 ) ( 92,280 )

Accounts receivable, net ( 198,322 ) 197,902 ( 85,603 )

Inventories 261,309 ( 203,522 ) ( 330,899 )

1 unchanged sentence

Accounts payable, accrued liabilities, and income taxes payable 135,767 ( 341,605 ) 208,722

Content asset spend ( 58,062 ) ( 60,259 ) ( 44,313 )

Other, net ( 27,174 ) 15,348 ( 54,629 )

3 unchanged sentences

Purchases of other property, plant, and equipment ( 85,820 ) ( 106,328 ) ( 77,131 )

(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

Proceeds from (payments for) foreign currency forward exchange contracts, net 14,948 ( 520 ) 1,585

Proceeds from sale of assets 6,847 38,148 43,649

Other, net ( 3,913 ) 4,650 1,022

1 unchanged sentence

Cash Flows From Financing Activities:

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

Payments of long-term borrowings ( 250,000 ) ( 1,575,997 ) —

Payments of short-term borrowings, net — — ( 969 )

Payments of long-term borrowings, net — ( 250,000 ) ( 1,575,997 )

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

Share repurchases ( 203,016 ) — —

Tax withholdings for share-based compensation ( 35,108 ) ( 30,440 ) ( 19,987 )

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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

1 unchanged sentence

Other comprehensive income, net of tax — — — — 6,510 6,510

Share repurchases — — ( 203,016 ) — — ( 203,016 )

Issuance of treasury stock for stock option exercises — ( 16,059 ) 42,801 — — 26,742

2 unchanged sentences

Share-based compensation — 83,334 — — — 83,334

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

Balance, December 31, 2023 $ 441,369 $ 1,774,911 $ ( 2,224,160 ) $ 3,062,061 $ ( 904,968 ) $ 2,149,213

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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.

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

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

Content Assets

Mattel incurs and capitalizes direct costs associated with the production of episodic series, feature films, and other similar forms of content.

Content assets are recorded within other noncurrent assets in the consolidated balance sheets.

Mattel's content assets are predominately monetized individually and amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues ("Ultimate Revenues").

Ultimate Revenues include revenues forecasted to be earned within ten years from the date of initial release of the content asset.

Ultimate Revenues are reassessed each reporting period.

If Mattel's estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment.

To the extent Mattel's estimate of Ultimate Revenues increases, cost amortization may be slowed.

Content asset amortization is recorded within cost of sales in the consolidated statements of operations.

Unamortized content assets shall be tested for impairment at the individual content asset level when events or changes in circumstances indicate that the fair value of an asset may be less than its unamortized costs.

Foreign Currency Translation Exposure

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

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

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

Derivative Instruments

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Recently Adopted Accounting Pronouncements

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.

In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 about the program to allow a user of the financial statements to understand the program's nature, potential magnitude, obligations outstanding at the end of each period, and an annual rollforward of such obligations.

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

The annual rollforward disclosure is not required to be made until the fiscal year beginning after December 15, 2023, and is to be applied prospectively.

Refer to "Note 5 to the Consolidated Financial Statements—Supplier Finance Program" for additional information regarding Mattel's supplier finance program.

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

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU 2021-01, Reference Rate Reform (Topic 848):

Scope, respectively.

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

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

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.

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.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

ASU 2023-07 requires incremental disclosure of significant segment expenses on an annual and interim basis to enable investors to develop more decision-useful financial analyses.

The guidance in ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Mattel is currently evaluating the impact of the adoption of ASU 2023-07 on its consolidated financial statements.

Note 2— Property, Plant, and Equipment

Property, plant, and equipment, net includes the following:

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

ASU 2023-09 requires enhanced income tax disclosures on an annual basis for specific categories in the rate reconciliation and disclosure of income taxes paid by jurisdiction.

The guidance in ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

Mattel is currently evaluating the impact of the adoption of ASU 2023-09 on its consolidated financial statements.

Note 2— Property, Plant, and Equipment, Net

Property, plant, and equipment, net included the following:

2023 December 31,

10 unchanged sentences

$ 465,523 $ 469,132

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.

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

3 unchanged sentences

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.

North America International American Girl Total

2021 Currency Exchange Rate Impact December 31,

2022 Currency Exchange Rate Impact December 31,

(In thousands)

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

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 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.

North America $ 731,789 $ 204 $ 731,993 $ 1,494 $ 733,487

International 450,847 ( 11,860 ) 438,987 4,467 443,454

American Girl 207,571 — 207,571 — 207,571

$ 1,390,207 $ ( 11,656 ) $ 1,378,551 $ 5,961 $ 1,384,512

In the third quarter of 2023, Mattel performed its annual impairment test and determined each reporting unit's fair value exceeded its carrying amount and 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, 2023.

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

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

During 2023 and 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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Mattel also has unfunded postretirement health insurance plans covering certain eligible domestic employees.

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

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

Defined Benefit Pension Plans Postretirement Benefit Plans

7 unchanged sentences

Recognized actuarial loss (gain) 5,893 8,996 11,177 ( 226 ) ( 100 ) ( 10 )

Settlement loss 19 6,982 — — — —

Settlement (gain) loss ( 59 ) 19 6,982 — — —

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

Net periodic benefit cost (credit) $ 9,949 $ 5,693 $ 14,858 $ ( 2,084 ) $ ( 2,047 ) $ ( 1,968 )

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss):

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

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income:

Net actuarial loss (gain) $ 904 $ ( 23,501 ) $ ( 42,671 ) $ 311 $ ( 922 ) $ ( 605 )

Prior service cost 1,169 1,022 204 — — —

Amortization of prior service (cost) credit ( 150 ) ( 155 ) ( 163 ) 2,038 2,038 2,038

Total recognized in other comprehensive (income) loss (a) $ ( 22,634 ) $ ( 42,630 ) $ 12,590 $ 1,116 $ 1,433 $ 2,888

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 of approximately $ 6 million, $ 9 million, and $ 2 million, during 2022, 2021, and 2020, respectively, which are also included in other comprehensive income (loss).

Total recognized in other comprehensive loss (income) (a) $ 1,923 $ ( 22,634 ) $ ( 42,630 ) $ 2,349 $ 1,116 $ 1,433

Total recognized in net periodic benefit cost (credit) and other comprehensive income $ 11,872 $ ( 16,941 ) $ ( 27,772 ) $ 265 $ ( 931 ) $ ( 535 )

(a) Amounts exclude related tax (benefit) expense of approximately $( 2 ) million, $ 6 million, and $ 9 million, during 2023, 2022, and 2021, respectively, which are also included in other comprehensive income.

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 4,921 ( 14,874 ) — —

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

Actuarial loss (gain) 13,879 ( 124,229 ) 85 ( 1,022 )

Benefits paid ( 35,634 ) ( 36,943 ) ( 174 ) ( 251 )

6 unchanged sentences

Plan assets at fair value, beginning of year $ 322,175 $ 457,132 $ — $ —

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

Actual return (loss) on plan assets 24,184 ( 91,470 ) — —

Employer contributions 13,354 5,029 174 251

16 unchanged sentences

Mattel's accumulated benefit obligation for its defined benefit pension plans as of 2023 and 2022 totaled $ 445.2 million and $ 437.8 million, respectively.

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 2023 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, 2023.

As of December 31, 2023 and 2022, information for defined benefit pension plans that had aggregate accumulated benefit obligations and projected benefit obligations in excess of plan assets is as follows:

For the Year Ended

2023 December 31,

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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.

As of December 31, 2023, Mattel determined the discount rate for its domestic defined benefit pension and postretirement benefit plans used in determining the projected and accumulated benefit obligations to be 4.7 %, as compared to 4.9 % as of December 31, 2022.

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

10 unchanged sentences

2029 - 2033 172,194 1,210

Mattel expects to make cash contributions totaling approximately $ 6 million to its defined benefit pension and postretirement benefit plans in 2023, substantially all of which will be for benefit payments for its unfunded plans.

Mattel expects to make cash contributions totaling approximately $ 14 million to its defined benefit pension and postretirement benefit plans in 2024, substantially all of which will be for benefit payments for its under funded plans.

Mattel periodically commissions a study of the plans' assets and liabilities to determine an asset allocation that would best match expected cash flows from the plans' assets to expected benefit payments.

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

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

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets and its related disclosures.

The fair value of collective trust funds is determined based on the net asset value per share held at year-end.

5 unchanged sentences

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.

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

the full benefits have been insured).

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Annual Incentive Compensation

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.

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.

Mattel has an annual incentive compensation plan 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 2023, 2022, and 2021 were $ 137.8 million, $ 0 million , and $ 137.1 million, respectively, for awards under the plan and were included in other selling and administrative expenses.

During 2022, Mattel did not achieve threshold performance under the plan, and therefore, no cash payout was earned.

Note 5— Supplier Finance Program

Mattel has an agreement with a third-party financial institution that allows certain participating suppliers the opportunity to voluntarily finance payment obligations of Mattel under a supplier finance program.

Under this program, participating suppliers may accelerate the timing of collection of their receivables due from Mattel, prior to their scheduled due dates, by selling one or more of their receivables at a discounted price to the third-party financial institution.

The range of payment terms Mattel negotiates with suppliers are consistent, regardless of whether the suppliers participate in the supplier finance program and Mattel does not have any economic interest in any suppliers' decision to participate in the supplier finance program.

Suppliers participating in the program are able to select which individual Mattel invoices they sell to the third-party financial institution.

However, all Mattel payments of the full amounts due to participating suppliers are paid on the invoice due date based on the terms originally negotiated with the supplier, regardless of whether the individual invoice due to the supplier is sold to the third-party financial institution.

Included in Mattel's accounts payable in the consolidated balance sheets as of December 31, 2023 and 2022 were $ 54.3 million and $ 86.0 million of outstanding payment obligations due to suppliers, respectively, under the supplier finance program.

All payment activities related to the supplier finance program were presented within operating activities in the consolidated statements of cash flows.

Note 6— Seasonal Financing and Debt

Seasonal Financing

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").

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 a senior secured revolving credit facility in an aggregate principal amount of $ 1.40 billion (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.

In connection with the entry into the Credit Agreement, Mattel terminated the commitments and satisfied all outstanding obligations under the previous credit agreement, dated December 20, 2017 (as amended).

Borrowings under the Revolving Credit Facility 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 is 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.

In November 2022, Moody's upgraded Mattel's credit rating from Ba1 to Baa3, and in April 2023, S&P upgraded Mattel's credit rating from BB+ to BBB- and maintained a positive outlook.

On April 27, 2023 (the "Fall-Away Date"), Mattel provided a certification of the foregoing to the administrative agent under the Credit Agreement, which resulted in certain subsidiary guarantees, liens, covenants, and other restrictions falling away under the Credit Agreement.

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

On the Fall-Away Date, the foregoing guarantees were released and the obligations of Mattel under the Revolving Credit Facility are instead 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 was previously 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, but all such liens were permanently released on the Fall-Away Date.

The Credit Agreement contains customary covenants (subject to customary exceptions), 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, sell or otherwise dispose of assets, or amend organizational documents.

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 not to exceed 3.75 to 1.00 as of the end of each fiscal quarter.

As of December 31, 2023 and 2022, Mattel had no borrowings outstanding under the Revolving Credit Facility.

Outstanding letters of credit under the Revolving Credit Facility totaled approximately $ 9 million and $ 8 million as of December 31, 2023 and 2022, respectively.

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

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As of December 31, 2023 and 2022, 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.

During 2023, Mattel had no borrowings under the Revolving Credit Facility and no other short-term borrowings.

During 2022, Mattel had average borrowings under the new and previous senior secured revolving credit facilities and other short-term borrowings of $ 2.9 million, to help finance its seasonal working capital requirements, and the weighted-average interest rate on borrowings under the senior secured revolving credit facilities and other short-term borrowings during 2022 was 3.6 %.

Mattel's average foreign short-term borrowings were not material during 2023 and 2022.

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

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

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

Bank National Association, as trustee (the "Trustee").

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

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

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

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

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

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

Mattel may redeem all or part of the 2026 Notes any time or from time to time at its option, at a redemption price including a call premium that varies (from 0 % to 1.688 %) depending on the year of redemption, plus accrued and unpaid interest to, but excluding, the redemption date.

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

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

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

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

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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.

On December 30, 2022, Mattel used cash on hand to redeem and retire the $ 250 million aggregate principal amount of the 2013 Senior Notes due 2023.

In April 2023, S&P upgraded Mattel’s credit rating from BB+ to BBB- and maintained a positive outlook, and in November 2022, Moody’s upgraded Mattel’s credit rating from Ba1 to Baa3.

As a result of the upgraded credit ratings and no events of default, the covenants limiting Mattel’s ability to incur additional debt or issue certain preferred shares, pay dividends on or make other distributions in respect of their capital stock or make other restricted payments, and make investments in unrestricted subsidiaries, and certain provisions of the covenant limiting Mattel’s ability to merge or consolidate, or sell, transfer or otherwise dispose of substantially all of their assets, are suspended.

If Mattel ceases to have credit ratings of BBB-, Baa3, and/or BBB- (or higher) from any two of S&P, Moody's, and Fitch, respectively, Mattel will thereafter be subject to the suspended covenants with respect to future events.

Following the Fall-Away Date under the Revolving Credit Facility, all guarantee obligations of the Guarantors under the 2019 Senior Notes due 2027, 2021 Senior Notes due 2026, and 2021 Senior Notes due 2029 were released, and the obligations of Mattel under the 2019 Senior Notes due 2027, 2021 Senior Notes due 2026, and 2021 Senior Notes due 2029 will 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.

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

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2011 Senior Notes due November 2041 5.45 % 300,000 300,000

2013 Senior Notes due March 2023 3.15 % — 250,000

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

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Common Stock Repurchase Program

During 2023, Mattel repurchased 10.4 million shares of its common stock at a cost of $ 203.0 million.

During 2022 and 2021, Mattel did no t repurchase any shares of its common stock.

Mattel's share repurchase program was first announced on July 21, 2003.

On July 17, 2013, the Board of Directors authorized Mattel to increase its share repurchase program by $ 500.0 million.

At December 31, 2022, share repurchase authorizations of $ 203.0 million had not been executed.

On July 17, 2013, the Board of Directors approved a $ 500.0 million increase to Mattel's share repurchase authorization, and as of December 31, 2023, such authorization was exhausted.

On February 5, 2024, the Board of Directors authorized a new $ 1.00 billion share repurchase program.

During February 2024, Mattel executed $ 100.0 million of share repurchases under the new program.

Repurchases will take place from time to time, depending on market conditions.

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Accumulated Other Comprehensive Income (Loss)

The following tables present changes in the accumulated balances for each component of other comprehensive income (loss), including current period other comprehensive income (loss) and reclassifications out of accumulated other comprehensive income (loss):

The following tables present changes in the accumulated balances for each component of other comprehensive income (loss), including current period other comprehensive income and reclassifications out of accumulated other comprehensive income (loss):

For the Year Ended December 31, 2023

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Amounts reclassified from accumulated other comprehensive income (loss) ( 10,292 ) — 2,140 — ( 8,152 )

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 )

Net (decrease) increase in other comprehensive income ( 26,195 ) — ( 4,418 ) 37,123 6,510

Accumulated Other Comprehensive Loss, Net of Tax, as of December 31, 2023 $ ( 3,463 ) $ — $ ( 142,916 ) $ ( 758,589 ) $ ( 904,968 )

For the Year Ended December 31, 2022

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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 loss 912 — 12,794 — 13,706

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

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

Net increase (decrease) in other comprehensive income 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 income 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 )

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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Employee Benefit Plans

Amortization of prior service credit (a) $ 1,883 $ 1,875 $ 1,735 Other non-operating expense, net

Recognized actuarial loss (a) ( 8,896 ) ( 11,167 ) ( 9,510 ) 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

Amortization of prior service credit (a) $ 1,888 $ 1,883 $ 1,875 Other non-operating income/expense, net

Recognized actuarial (loss) (a) ( 5,667 ) ( 8,896 ) ( 11,167 ) Other non-operating income/expense, net

Curtailment gain (loss) (a) — 326 ( 48 ) Other non-operating income/expense, net

Settlement gain (loss) (a) 59 ( 19 ) ( 6,982 ) Other non-operating income/expense, net

( 3,720 ) ( 6,706 ) ( 16,322 )

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Currency Translation Adjustments

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

(Loss) on liquidation of subsidiary $ — $ ( 45,366 ) $ — Other non-operating income/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.

(a) The amortization of prior service credit, recognized actuarial (loss), curtailment gain (loss) and settlement gain (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.

(b) There is no tax effect 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.

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

The adjustment included $ 3.6 million of accumulated other comprehensive loss reclassified to other non-operating expense (income), 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

During 2023, currency translation adjustments resulted in a net other comprehensive gain of $ 37.1 million, primarily due to the strengthening of the Mexican peso and British pound sterling against the U.S.

dollar, partially offset by the weakening of the Russian ruble 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.

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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.

Note 8— Leases

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Weighted-average discount rate 6.5 % 6.5 %

The components of lease costs for the years ended December 31, 2022, 2021, and 2020 are as follows:

Lease costs for the years ended December 31, 2023, 2022, and 2021 were as follows:

For the Year Ended

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During 2023, 2022, and 2021, contingent rental expense was not material.

Supplemental information related to leases are as follows:

Supplemental information related to leases were as follows:

For the Year Ended

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imputed interest ( 77,288 )

Mattel has entered into noncancelable lease agreements for premises and equipment to be used in the normal course of business which had not yet commenced as of December 31, 2023.

The future minimum obligations related to these agreements is approximately $ 34.7 million.

Note 9— Share-Based Payments

Mattel Stock Plans

The 2010 Equity and Long-Term Compensation Plan was approved by Mattel's stockholders in May 2010 (the "2010 Plan").

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.

The 2010 Equity and Long-Term Compensation Plan was approved by Mattel's stockholders in May 2010.

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

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

Generally, options vest and become exercisable contingent upon the grantees' continued employment or service with Mattel.

Nonqualified stock options are granted with an exercise price not less than 100 % of the fair market value of Mattel's common stock on the date of grant, expire no later than 10 years from the date of grant, and vest on a schedule determined by the Compensation Committee of the Board of Directors, generally over a period of three years from the date of grant.

In the event of a retirement of an employee aged 55 years or older with five or more years of service, or the death or disability of an employee, that occurs in each case at least six months after the grant-date, nonqualified stock options become fully vested.

Time-vesting RSUs granted under the Amended 2010 Plan vest on a schedule determined by the Compensation Committee of the Board of Directors, generally over a period of three years from the date of grant.

In the event of the involuntary termination of an employee aged 55 years or older with five or more years of service, or the death or disability of an employee, that occurs at least six months after the grant-date, RSUs become fully vested.

The Amended 2010 Plan also contains provisions regarding grants of equity compensation to the non-employee members of the Board of Directors.

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

The number of shares of common stock available for grant under the Amended 2010 Plan is subject to an aggregate limit of the sum of (i) approximately 130 million shares, (ii) the number of shares that remained available for issuance under the 2005 Plan on May 12, 2010, and (iii) any shares subject to awards outstanding under the 2005 Plan that on or after May 12, 2010 are forfeited or otherwise terminate or expire without the issuance of shares to the holder of the award.

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

As a result of such share-counting rules, full-value grants such as grants of restricted stock or RSUs count against shares remaining available for grant at a higher rate than grants of stock options and stock appreciation rights.

For grants prior to March 1, 2019, 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 three available shares for each share actually subject to such full-value grant.

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

For grants on or after March 2, 2020 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 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.

Nonqualified stock options generally vest and become exercisable contingent upon the grantees' continued employment or service with Mattel.

In the event of a retirement, or an involuntary termination, of an employee that meets retirement provisions under the Amended 2010 Plan, or the death or disability of an employee, that occurs in each case at least six months after the grant-date, nonqualified stock options become fully vested.

In the event of an involuntary termination, an employee has 90 days to exercise vested options.

RSUs granted under the Amended 2010 Plan vest on a schedule determined by the Compensation Committee of the Board of Directors, generally over a period of three years from the date of grant.

In the event of the involuntary termination of an employee that meets retirement provisions under the Amended 2010 Plan, or the death or disability of an employee, that occurs at least six months after the grant-date, RSUs become fully vested.

Performance awards granted under the Amended 2010 Plan vest upon achievement of performance conditions at a settlement date determined by the Compensation Committee of the Board of Directors, which occurs in the first quarter subsequent the performance cycle.

In the event of a retirement of an employee that meets retirement provisions under the Amended 2010 Plan, or the death or disability of an employee, that occurs in each case at least six months after the start date of the performance period, performance awards vest at the settlement date.

In each case, vested performance awards are determined upon the achievement of performance conditions over the performance period, which is then prorated for the period of employment as a percentage of the performance period.

An employee qualifies for retirement provisions under the Amended 2010 Plan if;

aged 55 years or older with 5 or more years of service for grants prior to April 28, 2023, or aged 55 years or older with 10 or more years of service for grants on or after April 28, 2023, which includes Mattel's 2023 annual employee grant.

The number of shares of common stock available for grant under the Amended 2010 Plan is subject to an aggregate limit as defined therein.

At December 31, 2023, there were approximately 32 million shares available for grant under the Amended 2010 Plan if target performance goals are achieved under Mattel's long-term incentive programs ("LTIPs"), and approximately 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 $ 83.3 million, $ 69.1 million, and $ 60.1 million during 2023, 2022, and 2021, 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 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.

The income tax benefit related to stock options, RSUs, and performance awards during 2023, 2022, and 2021 was approximately $ 10 million, $ 9 million and $ 7 million, respectively.

As of December 31, 2023, total unrecognized compensation cost related to unvested share-based payments totaled $ 102.8 million and is expected to be recognized over a weighted-average period of 1.9 years.

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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 $ 8 million and $ 3 million during 2022 and 2021, respectively, and not material during 2020.

The total intrinsic value of options exercised was approximately $ 9 million, $ 8 million and $ 3 million, during 2023, 2022, and 2021, respectively.

At December 31, 2023, options outstanding had an intrinsic value of approximately $ 26 million with a weighted-average remaining life of 4.4 years.

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Compensation expense recognized related to grants of RSUs was $ 48.5 million, $ 37.7 million, and $ 27.3 million in 2023, 2022, and 2021, respectively, and was included within other selling and administrative expenses in the consolidated statements of operations.

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

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

The expense for RSUs is evenly attributed to the periods in which the restrictions lapse, which is generally three years from the date of grant.

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Forfeited ( 219 ) 18.96 ( 70 ) 17.26 ( 80 ) 14.70

Canceled (a) — — — — ( 104 ) 17.97

Unvested at December 31 2,440 $ 23.01 2,894 $ 18.77 3,347 $ 15.52

(a) During 2023, Mattel granted 1.2 million shares as part of its 2023 LTIP and issued 0.8 million incremental shares under the 2020 LTIP based on the final earnout of the 2020 performance cycle, which are included in the weighted average grant-date fair value.

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 2023 LTIP, the 2022 LTIP, and the 2021 LTIP, represents the aggregate target numbers of shares that may be issued pursuant to the award over its full term.

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Note 10— Earnings Per Share

The following table reconciles basic and diluted earnings per common share for the years ended December 31, 2022, 2021, and 2020.

The following table reconciles basic and diluted earnings per common share:

For the Year Ended

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Note 11— Fair Value Measurements

The following table presents information about Mattel's assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of December 31, 2022 and 2021 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

The following tables present information about Mattel's assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of December 31, 2023 and 2022 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

The three levels of the fair value hierarchy are as follows:

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• Level 3 – Valuations based on inputs that are unobservable, supported by little or no market activity, and that are significant to the fair value of the assets or liabilities.

Mattel's financial assets and liabilities include the following:

December 31, 2023

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

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

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

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

(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.

Other Financial Instruments

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

Mattel's financial instruments included 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 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.

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

The estimated fair value of Mattel's long-term debt was $ 2.23 billion (compared to a carrying amount of $ 2.35 billion) as of December 31, 2023 and $ 2.13 billion (compared to a carrying amount of $ 2.35 billion) as of December 31, 2022.

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The following tables present the classification and amount of gains and losses, net of tax, from derivatives reported in the consolidated statements of operations:

Derivatives Designated As Hedging Instruments Consolidated Statements of

Derivatives Designated As Hedging Instruments

For the Year Ended Statements of

Operations Classification

For the Year Ended

2023 December 31,

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Foreign currency forward exchange contracts:

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

Amount of (losses) gains recognized in OCI $ ( 15,903 ) $ 40,449 $ 23,253

Amount of gains (losses) reclassified from accumulated OCI to the consolidated statements of operations 10,292 26,513 ( 912 ) Cost of sales

The net gains (losses) reclassified from accumulated other comprehensive loss to the consolidated statements of operations during 2023, 2022, and 2021, respectively, were offset by changes in cash flows associated with the underlying hedged transactions.

Derivatives Not Designated As Hedging Instruments Consolidated Statements of

Derivatives Not Designated As Hedging Instruments

For the Year Ended Statements of

Operations Classification

For the Year Ended

2023 December 31,

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(In thousands)

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

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

Foreign currency forward exchange and other contracts $ 19,939 $ ( 7,833 ) $ 2,872 Other non-operating (income) expense, net

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

$ 19,939 $ ( 7,833 ) $ 3,511

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.

The net gains (losses) recognized in the consolidated statements of operations during 2023, 2022, and 2021, respectively, were offset by foreign currency transaction gains and losses on the related derivative balances.

Note 13— Commitments and Contingencies

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2024 $ 283,927

Thereafter 6,062

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

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

As of December 31, 2023, Mattel assessed its probable loss related to this matter and has accrued a reserve, which is not material.

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

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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.

On February 13, 2024, the parties filed a notice of settlement informing the court that they have reached a settlement in principle of this litigation.

The settlement in principle is subject to preliminary and final approval by the court.

As of December 31, 2023, Mattel assessed its probable loss related to this matter and has accrued a reserve, which is not material.

Thirty-one additional lawsuits filed between April 2019 and January 2024 are pending against Fisher-Price, Inc.

and Mattel, Inc.

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

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

Several lawsuits have been settled and/or dismissed.

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

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

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

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

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

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

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 U.S.

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 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.

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, 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.

The second lawsuit is styled as an amended complaint and replaces a complaint making unrelated allegations in a previously filed lawsuit already pending in Delaware federal court (Lombardi v.

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

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

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

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

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

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

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

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

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

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

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

and Behrens v.

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

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

PricewaterhouseCoopers LLP, et al.

filed October 27, 2021).

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.

Mattel has also had discussions with the U.S.

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.

As of December 31, 2023, Mattel assessed its probable loss related to this matter and has accrued a reserve, which is not material.

Note 14— 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 and reportable segments are:

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

Mattel's reportable segments are:

(i) North America, which consists 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), depreciation and amortization, and assets by segment.

In February 2024, Mattel announced an organizational change that American Girl will become part of Mattel's North America commercial organization and, as a result, American Girl will no longer be an operating segment.

Beginning in the first quarter of 2024, Mattel is expected to have two reportable segments, North America and International.

The following tables present information regarding net sales, operating income, 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) ( 25,238 ) ( 9,398 ) ( 3,503 )

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

Other non-operating (income) expense, net (c) ( 2,293 ) 47,760 8,364

Income before income taxes $ 465,404 $ 504,335 $ 470,764

(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 (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.

(a) Segment operating income included (i) severance and other restructuring charges of approximately $( 1 ) million, $ 11 million, and $ 3 million for 2023, 2022, and 2021, respectively, which were allocated to the North America, International, and American Girl segments.

(b) Corporate and other expense included (i) severance and other restructuring charges of approximately $ 61 million, $ 26 million, and $ 32 million for 2023, 2022, and 2021, respectively and (ii) inclined sleeper product recall litigation charges of approximately $ 18 million, $( 1 ) million, and $ 15 million for 2023, 2022, and 2021, respectively.

(c) Other non-operating (income) expense, net includes $ 45.4 million of currency translation losses 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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Optimizing for Growth (formerly Capital Light)

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:

Mattel's Optimizing for Growth program (the "OFG program") was a multi-year cost savings program that integrated and expanded upon the previously announced Capital Light program.

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

Mattel has concluded the OFG program as of December 31, 2023.

In connection with the OFG 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

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$ 31,026 $ 34,277 $ 35,151

(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."

(a) Severance and other restructuring costs recorded within cost of sales in the consolidated statements of operations are included in segment operating income in "Note 14 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 14 to the Consolidated Financial Statements—Segment Information."

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

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

Liability at December 31, 2022 Charges (a) Payments/Utilization Liability at December 31, 2023

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(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.

As of December 31, 2023, Mattel had recorded cumulative severance and other restructuring charges related to the OFG program, including previous actions taken under the Capital Light program, of approximately $ 196 million, which included approximately $ 73.0 million of non-cash charges, including $ 45.4 million recorded in non-operating expense, net, during 2022, related to the liquidation of Mattel's subsidiary in Argentina.

During 2021, in conjunction with the OFG 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.

Optimizing for Profitable Growth

On February 7, 2024, Mattel announced the Optimizing for Profitable Growth program, a multi-year cost savings program that follows the OFG program and is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel's global supply chain, including its manufacturing footprint (the "OPG program").

The OPG program includes cost savings actions in connection with discontinuing production at a plant in China as previously announced in the third quarter of 2023, that were not included in the OFG program.

In connection with the OPG program, as of Decemeber 31, 2023, Mattel recorded $ 25.3 million of severance costs within other selling and administrative expense in the consolidated statements of operations and is included in corporate and other expense in " Note 14 to the Consolidated Financial Statements—Segment Information."

The following table summarizes Mattel's severance charges activity related to the OPG program for the year ended December 31, 2023:

Liability at December 31, 2022 Charges Payments/Utilization Liability at December 31, 2023

(In thousands)

Severance $ — $ 25,296 $ ( 200 ) $ 25,096

As of December 31, 2023, Mattel expects to incur total cash expenditures under the OPG program of approximately $ 130 to $ 165 million and non-cash charges of up to $ 5 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.

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.

In 2023, Mattel executed other cost savings actions not included in the OFG program or the OPG program to streamline its organizational structure.

In connection with these actions, Mattel recorded severance expense of $ 3.4 million within other selling and administrative expenses in the consolidated statement of operations.

Note 16— Income Taxes

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Deferred income taxes are provided principally for tax credit carryforwards, net operating loss carryforwards, interest expense, research and development expenses, employee compensation-related expenses, right-of-use assets, lease liabilities, and certain other reserves that are recognized in different years for financial statement and income tax reporting purposes.

Mattel's deferred income tax assets (liabilities) are composed of the following:

Mattel's deferred income tax assets (liabilities) consist of the following:

2023 December 31,

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Net deferred income tax assets $ 243,050 $ 416,477

Net deferred income tax assets are reported in the consolidated balance sheets as follows:

Net deferred income tax assets are presented in the consolidated balance sheets as follows:

2023 December 31,

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No expiration date 165,707 21,105

Total $ 307,668 $ 70,346

$ 289,066 $ 44,377

In 2023, Mattel completed an intra-group transfer of certain IP rights, resulting in a net tax expense of $ 161.4 million related to the write-down of certain foreign deferred tax assets and establishment of certain U.S.

deferred tax assets, resulting in a reduction in intangible deferred tax assets and deferred tax liabilities and an increase in research and development deferred tax assets.

Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more likely than not that these assets will be realizable.

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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.

Changes in the valuation allowances in 2022 primarily related to utilization and expiration of tax attributes and 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 $ 16 million and $ 74 million, respectively.

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

Changes in the valuation allowances in 2023 primarily related to changes in the assessment of the future realizability of certain deferred tax assets, utilization and expiration of tax attributes, and currency fluctuations.

As of December 31, 2023, Mattel's valuation allowances on its U.S.

federal and state deferred tax assets and foreign deferred tax assets were approximately $ 14 million and $ 71 million, respectively.

As of December 31, 2023 and 2022, Mattel had recorded net deferred tax assets of $ 243.1 million and $ 416.5 million, respectively.

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

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Adjustments to previously accrued taxes 9,943 ( 9,471 ) ( 19,101 )

Change in indefinite reinvestment assertion 10,600 7,000 —

Tax on undistributed earnings of foreign subsidiaries ( 1,000 ) 10,600 7,000

Research and development tax credit ( 7,248 ) ( 5,487 ) ( 5,350 )

Discrete tax impact due to intra-group IP transfer 161,388 — —

Other ( 439 ) 1,914 ( 5,075 )

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In evaluating whether a tax position has met the more likely than not recognition threshold, Mattel presumes that the position will be examined by the appropriate taxing authority that would have full knowledge of all relevant information.

For tax positions that meet the more likely than not recognition threshold, Mattel measures the amount of benefit recognized in the financial statements at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

Mattel recognizes unrecognized tax benefits in the first financial reporting period in which information becomes available indicating that such benefits will more likely than not be realized.

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Unrecognized tax benefits at December 31 $ 129,970 $ 114,057 $ 118,781

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.

Of the $ 130.0 million of unrecognized tax benefits as of December 31, 2023, $ 110.7 million would impact the effective tax rate if recognized, $ 10.1 million would result in an increase in the valuation allowance, and $ 9.2 million would result in an offset with a non-current asset account.

Mattel recognized an increase of interest and penalties of $ 1.5 million in 2023, a decrease of $ 5.3 million in 2022, and a decrease of $ 1.5 million in 2021, 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, 2023, Mattel accrued $ 17.3 million in interest and penalties related to unrecognized tax benefits, all of which would impact the effective tax rate if recognized.

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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 $ 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.

Mattel has recorded a deferred tax liability of $ 23.0 million related to undistributed earnings of certain foreign subsidiaries of $ 0.56 billion as of December 31, 2023.

During 2023, Mattel reported a distribution of foreign earnings to the United States for which taxes had been previously provided.

Taxes have not been provided on approximately $ 1.05 billion of undistributed foreign U.S.

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(In thousands)

Inventories include the following:

Inventories included the following:

Finished goods $ 478,707 $ 754,852

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$ 571,609 $ 894,064

Accrued liabilities include the following:

Accrued liabilities included the following:

Incentive compensation $ 143,091 $ 2,889

Advertising and promotion 102,217 115,707

Lease liabilities 75,297 73,752

Royalties 86,475 65,330

Incentive compensation 2,889 140,769

Lease liabilities 77,254 75,297

For the Year Ended

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(In thousands)

Currency transaction losses included in:

Currency transaction gains (losses) included in:

Operating income $ ( 14,921 ) $ ( 15,544 ) $ ( 10,212 )

Other non-operating expense, net ( 11,550 ) ( 8,224 ) ( 696 )

Other non-operating income/expense, net 1,545 ( 11,550 ) ( 8,224 )

Currency transaction losses, net $ ( 13,376 ) $ ( 27,094 ) $ ( 18,436 )

Other selling and administrative expenses include the following:

Other selling and administrative expenses included the following:

Design and development $ 198,603 $ 195,451 $ 189,372

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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