UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________ 
FORM 10-Q
___________________________________________________________ 
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
For the quarterly period endedJune 30, 2022
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to  

Commission File Number 001-05647
___________________________________________________________ 
MATTEL, INC.
(Exact name of registrant as specified in its charter)
___________________________________________________________ 
Delaware95-1567322
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
333 Continental Blvd.
El Segundo, CA
90245-5012
El Segundo,CA
(Address of principal executive offices)(Zip Code)
(310) 252-2000
(Registrant’sRegistrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last report):
NONE
_____________________________________________________________________________________________________________________ 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $1.00 per shareMATThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company,”" and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filerýAccelerated filer¨
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company¨
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  ý☒
Number of shares outstanding of registrant’sregistrant's common stock, $1.00 par value, as of October 13, 2017:July 18, 2022: 353,252,965 shares
343,729,550 shares
1



MATTEL, INC. AND SUBSIDIARIES

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PART I
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PART II
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2


(Cautionary Statement Under the Private Securities Litigation Reform Act of 1995)
Mattel is including this Cautionary Statement to caution investors and qualify for the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”"Act") for forward-looking statements. This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Act. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. The use of words such as “anticipates,” “expects,” “intends,” “plans,” “confident that”"anticipates," "expects," "intends," "plans," "look forward," "confident that," "believes," and “believes,”"targeted," among others, generally identify forward-looking statements. These forward-looking statements are based on currently available operating, financial, economic, and other information and assumptions, and are subject to a number of significant risks and uncertainties. A variety of factors, many of which are beyond ourMattel's control, could cause actual future results to differ materially from those projected in the forward-looking statements.statements, and are currently, and in the future may be, amplified by the COVID-19 pandemic. Specific factors that might cause such a difference include, but are not limited to: (i) potential impacts of and uncertainty regarding the COVID-19 pandemic (and actions taken in response to it by governments, businesses, and individuals) on Mattel's business operations, financial results and financial position and on the global economy, including its impact on Mattel's sales; (ii) Mattel’s ability to design, develop, produce, manufacture, source, ship, and shipdistribute products on a timely and cost-effective basis, as well asbasis; (iii) sufficient interest in and purchase of thosedemand for the products and entertainment Mattel offers by retail customers and consumers in quantities and at prices that will be sufficient to profitably recover Mattel’s costs; (ii)(iv) downturns in economic conditions affecting Mattel’s markets which can negatively impact retail customers and consumers, and which can result in lower employment levels and lower consumer disposable income and spending, including lower spending on purchases of Mattel’s products; (iii)(v) other factors which can lower discretionary consumer spending, such as higher costs for fuel and food, drops in the value of homes or other consumer assets, and high levels of consumer debt; (iv)(vi) potential difficulties or delays Mattel may experience in implementing cost savings and efficiency enhancing initiatives; (v)(vii) other economic and public health conditions or regulatory changes in the markets in which Mattel and its customers and suppliers operate, which could create delays or increase Mattel’s costs, such as higher commodity prices, labor costs or transportation costs, or outbreaks of disease; (vi)(viii) inflation and currency fluctuations, including movements in foreign exchange rates, which can lower Mattel’s net revenues and earnings, and significantly impact Mattel’s costs; (vii)(ix) the concentration of the Mattel’s customers, potentially increasing the negative impact to Mattel of difficulties experienced by any of Mattel’s customers, including the bankruptcysuch as bankruptcies or liquidations or a general lack of Toys “R” Us, Inc.,success, or changes in their purchasing or selling patterns; (viii) the future willingness of licensors of entertainment properties for which Mattel currently has licenses or would seek to have licenses in the future to license those products to Mattel; (ix)(x) the inventory policies of Mattel’s retail customers, including retailers’ potential decisions to lower their inventories, even if it results in lost sales, as well as the concentration of Mattel’s revenues in the second half of the year, which coupled with reliance by retailers on quick response inventory management techniques, increases the risk of underproduction, of popular items, overproduction, of less popular items and failureshipping delays; (xi) legal, reputational, and financial risks related to achieve compressed shipping schedules; (x) the increased costssecurity breaches or cyberattacks; (xii) work disruptions, including as a result of developing more sophisticated digital and smart technology products, and the corresponding supply chain and design challenges associated withdisruption such products; (xi) work disruptions,as plant or port closures, which may impact Mattel’s ability to manufacture or deliver product in a timely and cost-effective manner; (xii) the bankruptcy of Toys “R” Us, Inc. or other of Mattel’s significant retailers, or the general lack of success of one of Mattel’s significant retailers which could negatively impact Mattel’s revenues or bad debt exposure; (xiii) the impact of competition on revenues, margins, and other aspects of Mattel’s business, including the ability to offer products whichthat consumers choose to buy instead of competitive products, the ability to secure, maintain, and renew popular licenses from licensors of entertainment properties, and the ability to attract and retain talented employees;employees and adapt to evolving workplace models; (xiv) the risk of product recalls or product liability suits and costs associated with product safety regulations; (xv) changes in laws or regulations in the United States and/or in other major markets, such as China, in which Mattel operates, including, without limitation, with respect to taxes, tariffs, trade policies, or product safety, which may increase Mattel’s product costs and other costs of doing business, and reduce Mattel’s earnings and liquidity; (xvi) business disruptions or other unforeseen impacts due to economic instability, political instability, civil unrest, armed hostilities (including the impact of the war in Ukraine), natural and man-made disasters, or other catastrophic events; (xvii) failure to realize the planned benefits from any investments or acquisitions made by Mattel, (xvii)Mattel; (xviii) the impact of other market conditions or third party actions or approvals, and competitionincluding those that result in any significant failure, inadequacy, or interruption from vendors or outsourcers, which could reduce demand for Mattel’s products, or delay or increase the cost of implementation of Mattel’s programs, or alter Mattel’s actions and reduce actual results; (xviii)(xix) changes in financing markets or the inability of Mattel to obtain financing on attractive terms (xix)terms; (xx) the impact of litigation, arbitration, or arbitrationregulatory decisions or settlement actions; (xxi) Mattel's ability to navigate regulatory frameworks in connection with new areas of investment, product development, or other business activities, such as non-fungible tokens and (xx)cryptocurrency; (xxii) uncertainty from the expected discontinuance of London Interbank Offer Rate ("LIBOR") and transition to any other interest rate benchmark; and (xxiii) other risks and uncertainties detailed in Part 1,I, Item 1A “Risk Factors”"Risk Factors" in Mattel’s 2016Mattel's 2021 Annual Report on Form 10-K.10-K (the "2021 Annual Report on Form 10-K"), Mattel's Quarterly Report on Form 10-Q for the three months ended March 31, 2022, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q, and subsequent periodic filings. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so.

so, except as required by law.


3

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30,
2017		 September 30,
2016		 December 31,
2016		June 30,
2022		June 30,
2021		December 31,
2021
(Unaudited; in thousands, except share data) (Unaudited; in thousands, except share data)
ASSETS     ASSETS
Current Assets     Current Assets
Cash and equivalents$181,308
 $297,089
 $869,531
Cash and equivalents$274,534 $384,743 $731,362 
Accounts receivable, net1,506,145
 1,528,808
 1,115,217
Accounts receivable, net of allowances for credit losses of $14.3 million, $12.3 million and $10.7 million, respectivelyAccounts receivable, net of allowances for credit losses of $14.3 million, $12.3 million and $10.7 million, respectively989,194 784,084 1,072,684 
Inventories989,995
 910,546
 613,798
Inventories1,177,551 818,037 777,184 
Prepaid expenses and other current assets352,711
 342,362
 341,518
Prepaid expenses and other current assets273,170 186,965 293,299 
Total current assets3,030,159
 3,078,805
 2,940,064
Total current assets2,714,449 2,173,829 2,874,529 
Noncurrent Assets     Noncurrent Assets
Property, plant, and equipment, net821,228
 747,451
 773,965
Property, plant, and equipment, net442,067 459,828 455,966 
Right-of-use assets, netRight-of-use assets, net326,228 343,793 325,484 
Goodwill1,397,642
 1,392,155
 1,387,628
Goodwill1,379,230 1,392,779 1,390,207 
Deferred income tax assetsDeferred income tax assets494,192 73,744 526,906 
Intangible assets, netIntangible assets, net444,971 500,812 476,858 
Other noncurrent assets950,655
 1,430,456
 1,392,137
Other noncurrent assets366,596 296,273 343,944 
Total Assets$6,199,684
 $6,648,867
 $6,493,794
Total Assets$6,167,733 $5,241,058 $6,393,894 
LIABILITIES AND STOCKHOLDERS’ EQUITY     
LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities     Current Liabilities
Short-term borrowings$732,649
 $—
 $192,168
Short-term borrowings$2,994 $214 $— 
Current portion of long-term debt250,000
 300,000
 —
Current portion of long-term debt250,000 — — 
Accounts payable713,488
 694,757
 664,857
Accounts payable535,273 438,913 579,152 
Accrued liabilities568,845
 629,114
 628,826
Accrued liabilities680,765 647,425 991,592 
Income taxes payable32,296
 21,695
 19,722
Income taxes payable19,157 35,838 27,509 
Total current liabilities2,297,278
 1,645,566
 1,505,573
Total current liabilities1,488,189 1,122,390 1,598,253 
Noncurrent Liabilities     Noncurrent Liabilities
Long-term debt1,886,404
 2,133,489
 2,134,271
Long-term debt2,323,303 2,839,119 2,570,992 
Noncurrent lease liabilitiesNoncurrent lease liabilities282,263 306,094 283,626 
Other noncurrent liabilities576,327
 454,434
 446,168
Other noncurrent liabilities345,929 445,736 372,174 
Total noncurrent liabilities2,462,731
 2,587,923
 2,580,439
Total noncurrent liabilities2,951,495 3,590,949 3,226,792 
Stockholders’ Equity     Stockholders’ Equity
Common stock $1.00 par value, 1.0 billion shares authorized; 441.4 million shares issued441,369
 441,369
 441,369
Common stock $1.00 par value, 1.0 billion shares authorized; 441.4 million shares issued441,369 441,369 441,369 
Additional paid-in capital1,793,036
 1,781,540
 1,790,832
Additional paid-in capital1,816,526 1,848,201 1,832,144 
Treasury stock at cost: 97.7 million shares, 99.3 million shares, and 99.0 million shares, respectively(2,392,422) (2,434,520) (2,426,749)
Treasury stock at cost: 88.1 million shares, 92.4 million shares and 90.7 million shares, respectivelyTreasury stock at cost: 88.1 million shares, 92.4 million shares and 90.7 million shares, respectively(2,158,388)(2,262,223)(2,219,990)
Retained earnings2,460,224
 3,502,076
 3,545,359
Retained earnings2,541,690 1,435,688 2,456,597 
Accumulated other comprehensive loss(862,532) (875,087) (943,029)Accumulated other comprehensive loss(913,148)(935,316)(941,271)
Total stockholders’ equity1,439,675
 2,415,378
 2,407,782
Total stockholders’ equity1,728,049 527,719 1,568,849 
Total Liabilities and Stockholders’ Equity$6,199,684
 $6,648,867
 $6,493,794
Total Liabilities and Stockholders’ Equity$6,167,733 $5,241,058 $6,393,894 
The accompanying notes are an integral part of these consolidated financial statements

statements.

4

MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended For the Three Months EndedFor the Six Months Ended
September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016		June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
(Unaudited; in thousands, except per share amounts) (Unaudited; in thousands, except per share amounts)
Net Sales$1,560,983
 $1,795,575
 $3,271,078
 $3,622,250
Net Sales$1,235,687 $1,026,366 $2,276,987 $1,900,558 
Cost of sales913,834
 924,810
 1,945,386
 1,929,247
Cost of sales686,769 538,361 1,245,174 1,000,716 
Gross Profit647,149
 870,765
 1,325,692
 1,693,003
Gross Profit548,918 488,005 1,031,813 899,842 
Advertising and promotion expenses179,691
 202,900
 348,752
 384,614
Advertising and promotion expenses90,194 88,328 163,945 162,424 
Other selling and administrative expenses381,756
 350,469
 1,066,943
 1,051,799
Other selling and administrative expenses333,644 350,537 662,721 654,407 
Operating Income (Loss)85,702
 317,396
 (90,003) 256,590
Operating IncomeOperating Income125,080 49,140 205,147 83,011 
Interest expense24,646
 24,989
 68,557
 70,133
Interest expense32,811 38,144 65,860 168,627 
Interest (income)(1,575) (2,477) (6,337) (7,550)Interest (income)(1,959)(584)(3,161)(1,403)
Other non-operating expense, net1,368
 856
 5,928
 23,210
Other non-operating expense (income), netOther non-operating expense (income), net7,147 533 16,259 (555)
Income (Loss) Before Income Taxes61,263
 294,028
 (158,151) 170,797
Income (Loss) Before Income Taxes87,081 11,047 126,189 (83,658)
Provision for income taxes664,510
 57,778
 614,402
 26,620
Provision for income taxes26,585 20,644 50,495 40,949 
Net (Loss) Income$(603,247) $236,250
 $(772,553) $144,177
Net (Loss) Income Per Common Share—Basic$(1.75) $0.69
 $(2.25) $0.42
Weighted average number of common shares343,870
 341,961
 343,304
 341,089
Net (Loss) Income Per Common Share—Diluted$(1.75) $0.68
 $(2.25) $0.42
Weighted average number of common and potential common shares343,870
 344,226
 343,304
 343,298
Dividends Declared Per Common Share$0.15
 $0.38
 $0.91
 $1.14
(Income) from equity method investments(Income) from equity method investments(5,944)(4,060)$(12,200)$(6,685)
Net Income (Loss)Net Income (Loss)$66,440 $(5,537)$87,894 $(117,922)
Net Income (Loss) Per Common Share - BasicNet Income (Loss) Per Common Share - Basic$0.19 $(0.02)$0.25 $(0.34)
Weighted-average number of common sharesWeighted-average number of common shares353,457 349,441 352,837 349,244 
Net Income (Loss) Per Common Share - DilutedNet Income (Loss) Per Common Share - Diluted$0.18 $(0.02)$0.24 $(0.34)
Weighted-average number of common and potential common sharesWeighted-average number of common and potential common shares359,838 349,441 358,948 349,244 
The accompanying notes are an integral part of these consolidated financial statements.

5


MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) INCOME
 For the Three Months EndedFor the Six Months Ended
 June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
 (Unaudited; in thousands)
Net Income (Loss)$66,440 $(5,537)$87,894 $(117,922)
Other Comprehensive Income, Net of Tax
Currency translation adjustments(6,490)20,932 (5,569)(7,201)
Employee benefit plan adjustments1,324 2,221 2,711 4,569 
Available-for-sale security adjustments— 1,268 3,646 3,232 
Net unrealized gains on derivative instruments:
Unrealized holding gains (losses)26,425 (771)33,889 9,331 
Reclassification adjustments included in net income (loss)(7,998)2,060 (9,355)(671)
18,427 1,289 24,534 8,660 
Other Comprehensive Income, Net of Tax13,261 25,710 25,322 9,260 
Comprehensive Income (Loss)$79,701 $20,173 $113,216 $(108,662)
 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (Unaudited; in thousands)
Net (Loss) Income$(603,247) $236,250
 $(772,553) $144,177
Other Comprehensive Income (Loss), Net of Tax:       
Currency translation adjustments36,912
 (14,570) 142,248
 (18,926)
Defined benefit pension plan adjustments1,106
 2,024
 3,185
 4,568
Net unrealized losses on available-for-sale security(3,848) —
 (7,585) —
Net unrealized losses on derivative instruments:       
Unrealized holding (losses) gains(24,009) 974
 (63,999) 642
Reclassification adjustment for realized losses (gains) included in net (loss) income9,241
 (2,157) 6,648
 (12,472)
 (14,768) (1,183) (57,351) (11,830)
Other Comprehensive Income (Loss), Net of Tax19,402
 (13,729) 80,497
 (26,188)
Comprehensive (Loss) Income$(583,845) $222,521
 $(692,056) $117,989


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

6


MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months EndedFor the Six Months Ended
September 30,
2017		 September 30,
2016		June 30,
2022		June 30,
2021
(Unaudited; in thousands) (Unaudited; in thousands)
Cash Flows From Operating Activities: Cash Flows From Operating Activities:
Net (loss) income$(772,553) $144,177
Adjustments to reconcile net (loss) income to net cash flows used for operating activities:   
Net Income (Loss)Net Income (Loss)$87,894 $(117,922)
Adjustments to reconcile net income (loss) to net cash flows used for operating activities:Adjustments to reconcile net income (loss) to net cash flows used for operating activities:
Depreciation179,831
 177,939
Depreciation71,698 72,727 
Amortization16,264
 19,577
Amortization18,997 19,058 
Asset impairments14,942
 —
Share-based compensationShare-based compensation37,888 30,280 
Bad debt expenseBad debt expense5,475 877 
Inventory obsolescenceInventory obsolescence18,672 21,263 
Deferred income taxes2,057
 (38,424)Deferred income taxes31,007 7,588 
Valuation allowance on deferred tax assets561,915
 —
Share-based compensation47,582
 38,744
(Decrease) increase from changes in assets and liabilities, net of acquired assets and liabilities:   
Accounts receivable(355,821) (389,550)
(Income) from equity method investments(Income) from equity method investments(12,200)(6,685)
Loss on extinguishment of long-term borrowingsLoss on extinguishment of long-term borrowings— 83,213 
(Gain) on sale of assets/business, net(Gain) on sale of assets/business, net(15,177)(21,839)
Changes in assets and liabilities:Changes in assets and liabilities:
Accounts receivable, netAccounts receivable, net68,797 239,567 
Inventories(359,013) (311,141)Inventories(447,230)(338,313)
Prepaid expenses and other current assets(19,027) 25,292
Prepaid expenses and other current assets(47,314)(14,700)
Accounts payable, accrued liabilities, and income taxes payable9,893
 42,006
Accounts payable, accrued liabilities, and income taxes payable(226,218)(211,295)
Other, net(66,140) (39,966)Other, net(17,268)(5,189)
Net cash flows used for operating activities(740,070) (331,346)Net cash flows used for operating activities(424,979)(241,370)
Cash Flows From Investing Activities: Cash Flows From Investing Activities:
Purchases of tools, dies, and molds(101,428) (101,562)Purchases of tools, dies, and molds(38,825)(34,355)
Purchases of other property, plant, and equipment(133,895) (77,586)Purchases of other property, plant, and equipment(39,677)(40,317)
Payments for acquisition, net of cash acquired—
 (33,154)
Proceeds from foreign currency forward exchange contracts60,376
 6,228
(Payments of) proceeds from foreign currency forward exchange contracts, net(Payments of) proceeds from foreign currency forward exchange contracts, net(460)4,402 
Proceeds from sale of assets/businessProceeds from sale of assets/business24,669 43,075 
Other, net38
 1,349
Other, net749 — 
Net cash flows used for investing activities(174,909) (204,725)Net cash flows used for investing activities(53,544)(27,195)
Cash Flows From Financing Activities: Cash Flows From Financing Activities:
Payments of short-term borrowings, net(878,937) (83,914)
Proceeds from short-term borrowings, net1,419,418
 67,000
Proceeds from (payments of) short-term borrowings, netProceeds from (payments of) short-term borrowings, net3,446 (755)
Payments of long-term borrowingsPayments of long-term borrowings— (1,287,022)
Proceeds from long-term borrowings, net—
 350,000
Proceeds from long-term borrowings, net— 1,185,117 
Payments of dividends on common stock(311,973) (388,518)
Proceeds from exercise of stock options1,768
 28,531
Tax withholdings for share-based compensationTax withholdings for share-based compensation(18,317)(7,495)
Proceeds from stock option exercisesProceeds from stock option exercises26,282 3,264 
Other, net(16,543) (16,341)Other, net(1,096)(884)
Net cash flows provided by (used for) financing activities213,733
 (43,242)Net cash flows provided by (used for) financing activities10,315 (107,775)
Effect of Currency Exchange Rate Changes on Cash13,023
 (16,412)
Effect of Currency Exchange Rate Changes on Cash and EquivalentsEffect of Currency Exchange Rate Changes on Cash and Equivalents11,380 (1,098)
Decrease in Cash and Equivalents(688,223) (595,725)Decrease in Cash and Equivalents(456,828)(377,438)
Cash and Equivalents at Beginning of Period869,531
 892,814
Cash and Equivalents at Beginning of Period731,362 762,181 
Cash and Equivalents at End of Period$181,308
 $297,089
Cash and Equivalents at End of Period$274,534 $384,743 
The accompanying notes are an integral part of these consolidated financial statements.

7



MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common
Stock		Additional
Paid-In
Capital		Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Total
Stockholders’
Equity
 (Unaudited; in thousands)
Balance, December 31, 2021$441,369 $1,832,144 $(2,219,990)$2,456,597 $(941,271)$1,568,849 
Net income— — — 21,454 — 21,454 
Other comprehensive income, net of tax— — — — 12,061 12,061 
Issuance of treasury stock for stock option exercises— (3,183)17,118 — — 13,935 
Issuance of treasury stock for restricted stock units vesting— (43,523)25,968 — — (17,555)
Share-based compensation— 19,323 — — — 19,323 
Adjustment of accumulated other comprehensive loss to retained earnings for available-for-sale securities— — — (2,801)2,801 — 
Balance, March 31, 2022$441,369 $1,804,761 $(2,176,904)$2,475,250 $(926,409)$1,618,067 
Net income— — — 66,440 — 66,440 
Other comprehensive income, net of tax— — — — 13,261 13,261 
Issuance of treasury stock for stock option exercises— (2,792)15,139 — — 12,347 
Issuance of treasury stock for restricted stock units vesting— (3,997)3,234 — — (763)
Deferred compensation— (12)143 — — 131 
Share-based compensation— 18,566 — — — 18,566 
Balance, June 30, 2022$441,369 $1,816,526 $(2,158,388)$2,541,690 $(913,148)$1,728,049 
Common
Stock		Additional
Paid-In
Capital		Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Total
Stockholders’
Equity
 (Unaudited; in thousands)
Balance, December 31, 2020$441,369 $1,842,680 $(2,282,939)$1,553,610 $(944,576)$610,144 
Net loss— — — (112,385)— (112,385)
Other comprehensive loss, net of tax— — — — (16,450)(16,450)
Issuance of treasury stock for stock option exercises— (803)1,913 — — 1,110 
Issuance of treasury stock for restricted stock units vesting— (20,031)13,065 — — (6,966)
Share-based compensation— 15,112 — — — 15,112 
Balance, March 31, 2021$441,369 $1,836,958 $(2,267,961)$1,441,225 $(961,026)$490,565 
Net loss— — — (5,537)— (5,537)
Other comprehensive income, net of tax— — — — 25,710 25,710 
Issuance of treasury stock for stock option exercises— (676)2,830 — — 2,154 
Issuance of treasury stock for restricted stock units vesting— (3,212)2,683 — — (529)
Deferred compensation— (37)225 — — 188 
Share-based compensation— 15,168 — — — 15,168 
Balance, June 30, 2021$441,369 $1,848,201 $(2,262,223)$1,435,688 $(935,316)$527,719 
The accompanying notes are an integral part of these consolidated financial statements.

8

MATTEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.Basis of Presentation
1.     Basis of Presentation
The accompanying unaudited consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”("GAAP") applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments, consisting of only those of a normal recurring nature, considered necessary for a fair presentationstatement of the financial position and interim results of Mattel, Inc. and its subsidiaries (“Mattel”("Mattel") as of and for the periods presented have been included. As Mattel’s business is seasonal, results for interim periods are not necessarily indicative of those that may be expected for a full year.
The year-endDecember 31, 2021 balance sheet data was derived from audited financial statements; however, the accompanying interim notes to the consolidated financial statements do not include all of the annual disclosures required by GAAP.
As Mattel's business is seasonal, results for interim periods are not necessarily indicative of those that may be expected for a full year. The financial information included herein should be read in conjunction with Mattel’sMattel's consolidated financial statements and related notes in its 2016the 2021 Annual Report on Form 10-K.
Certain prior period amounts have been reclassified to conform to the current period presentation.
2.Accounts Receivable
2.     Accounts Receivable, Net
Mattel estimates current expected credit losses based on collection history and management’s assessment of the current economic trends, business environment, customers’ financial condition, and accounts receivable aging that may impact the level of future credit losses. Accounts receivable are net of allowances for doubtful accountscredit losses of $22.4$14.3 million, $30.9$12.3 million, and $21.4$10.7 million as of SeptemberJune 30, 2017, September2022, June 30, 2016,2021, and December 31, 2016,2021, respectively. As a result of Toys “R” Us filing for bankruptcy in September 2017, Mattel reversed gross sales and accounts receivable of approximately $47 million, and reversed net sales of approximately $43 million in the three months ended September 30, 2017.
3.Inventories
3.     Inventories
Inventories include the following:
June 30,
2022		June 30,
2021		December 31,
2021
 (In thousands)
Raw materials and work in process$199,517 $169,794 $176,400 
Finished goods978,034 648,243 600,784 
$1,177,551 $818,037 $777,184 
4.     Property, Plant, and Equipment, Net
 September 30,
2017		 September 30,
2016		 December 31,
2016
 (In thousands)
Raw materials and work in process$130,895
 $137,385
 $112,327
Finished goods859,100
 773,161
 501,471
 $989,995
 $910,546
 $613,798
4.Property, Plant, and Equipment
Property, plant, and equipment, net includes the following:
June 30,
2022		June 30,
2021		December 31,
2021
 (In thousands)
Land$19,385 $21,969 $21,811 
Buildings304,308 309,513 317,114 
Machinery and equipment719,206 754,884 762,462 
Software341,711 344,742 348,062 
Tools, dies, and molds531,151 593,191 537,499 
Leasehold improvements108,075 115,457 115,844 
Construction in progress53,246 52,564 55,559 
2,077,082 2,192,320 2,158,351 
Less: accumulated depreciation(1,635,015)(1,732,492)(1,702,385)
$442,067 $459,828 $455,966 
9

 September 30,
2017		 September 30,
2016		 December 31,
2016
 (In thousands)
Land$25,045
 $25,193
 $25,113
Buildings293,024
 277,974
 280,226
Machinery and equipment933,967
 819,501
 828,969
Software374,934
 342,974
 356,622
Tools, dies, and molds923,752
 876,642
 869,385
Capital leases23,970
 23,970
 23,970
Leasehold improvements263,276
 255,769
 261,254
 2,837,968
 2,622,023
 2,645,539
Less: accumulated depreciation(2,016,740) (1,874,572) (1,871,574)
 $821,228
 $747,451
 $773,965

During the three months ended June 30, 2022, Mattel completed the sale of the American Girl corporate offices and a distribution center, located in Middleton, Wisconsin, which included land and buildings. The assets sold were previously designated as held for sale, and included within property, plant, and equipment, net in the consolidated balance sheet. 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 three months ended March 31, 2021, Mattel completed the sale of a manufacturing plant, located in Mexico, which included land and buildings. The assets sold were previously designated as held for sale, and included within property, plant, and equipment, net in the consolidated balance sheet. Mattel received net proceeds from the sale of $24.8 million, which resulted in a pre-tax gain of $15.8 million, recorded in other selling and administrative expenses in the consolidated statement of operations.
5.Goodwill
5.     Goodwill and Intangible Assets, Net
Goodwill
Goodwill is allocated to various reporting units, which are at the operating segment level, for purposesthe purpose of evaluating whether goodwill is impaired. Mattel’s reporting units are: (i) North America, (ii) International, and (iii) American Girl. Components of the operating segments have been aggregated into a single reporting unit as the components have similar economic characteristics. The similar economic characteristics include the nature of the products, the nature of the production processes, the customers, and the manner in which the products are distributed. Mattel tests its goodwill for impairment annually in the third quarter and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value. In the third quarter of 2017, Mattel early adopted Accounting Standards Update (“ASU”) 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which removes Step 2 from the goodwill impairment test. If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized in an amount equal to the excess, limited by the amount of goodwill in that reporting unit.
In the third quarter of 2017, Mattel performed its annual impairment tests and determined that goodwill was not impaired. The change in the carrying amount of goodwill by operating segment for the ninesix months ended SeptemberJune 30, 20172022 is shown below. Brand-specific goodwill held by foreign subsidiaries is allocated to the North America and American Girl operating segments selling those brands,segment, thereby causing a foreign currency translation impact for these operating segments.impact.

December 31,
2016		 Currency
Exchange Rate
Impact		 September 30,
2017		 December 31,
2021		Currency
Exchange Rate
Impact		June 30,
2022
(In thousands)(In thousands)
North America$730,139
 $2,595
 $732,734
North America$731,789 $(3,129)$728,660 
International445,008
 6,813
 451,821
International450,847 (7,848)442,999 
American Girl212,481
 606
 213,087
American Girl207,571 — 207,571 
$1,387,628
 $10,014
 $1,397,642
$1,390,207 $(10,977)$1,379,230 
AcquisitionsIntangible Assets, Net
Identifiable intangibles were $445.0 million, net of Sproutling, Inc. and Fuhu assets
In January 2016, Mattel completed its acquisitionaccumulated amortization of Sproutling, Inc. (“Sproutling”), a maker$346.0 million, $500.8 million, net of smart technology products for parents and families, for total considerationaccumulated amortization of $9.9$306.0 million, and additional contingent consideration that may become payable under the terms$476.9 million, net of the agreement based on Sproutling's operating results over the subsequent three years following the closing. Also in January 2016, Mattel acquired substantially allaccumulated amortization of the assets$327.0 million as of Fuhu, Inc. (“Fuhu”), a developer of high technology products for childrenJune 30, 2022, June 30, 2021, and families and best known for its nabi® brand of products, for total consideration of $23.3 million. These acquisitions are expected to strengthen December 31, 2021, respectively.
Mattel's digital and smart technology capabilities and create opportunities to bring new technology-enabled products to market.
Mattel finalized the valuation of the assets acquired and liabilities assumed in the fourth quarter of 2016, which resulted in adjustments to the purchase price allocation during the measurement period. During the three and nine months ended September 30, 2016, Mattel recognized $0.3 million and $1.4 million, respectively, of integration and acquisition costs. Integration and acquisition costs are recorded within other selling and administrative expenses in the consolidated statements of operations. The pro forma and actual results of operations for these acquisitions have not been presented because they are not material, individually or in the aggregate, to Mattel.
6.Other Noncurrent Assets
Other noncurrent assets include the following:
 September 30,
2017		 September 30,
2016		 December 31,
2016
 (In thousands)
Nonamortizable identifiable intangibles$462,398
 $466,384
 $458,589
Identifiable intangibles (net of amortization of $166.7 million, $147.9 million, and $153.7 million, respectively)189,382
 206,874
 201,859
Deferred income taxes75,660
 548,437
 508,363
Other223,215
 208,761
 223,326
 $950,655
 $1,430,456
 $1,392,137
In connection with the acquisitions of Sproutling and substantially all of the assets of Fuhu in the first quarter of 2016, as more fully described in “Note 5 to the Consolidated Financial Statements—Goodwill” of this Quarterly Report on Form 10-Q, Mattel recognized $11.2 million of amortizable identifiable intangible assets primarily related to patents.


Mattel tests nonamortizable intangible assets, including trademarks and trade names, for impairment annually in the third quarter and whenever events or changes in circumstances indicate that the carrying values may exceed the fair values.  During the third quarterconsist of 2017,trademarks. Mattel discontinued the use of a trademark which resulted in an asset impairment charge of $9.2 million.  The asset impairment charge is recorded within other selling and administrative expenses in the consolidated statements of operations. Mattel performed its annual impairment assessment during the third quarter of 2017 and determined that its remaining nonamortizable intangible asset was not impaired.
Mattel also tests its amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. AmortizableMattel's amortizable intangible assets were determined to not be impaired during the three and ninesix months ended SeptemberJune 30, 2017.2022 and 2021.
During the third quarter of 2017, Mattel established a valuation allowance on certain deferred tax assets, the benefits of which Mattel believes will likely not be realized. Refer to “Note 19 to the Consolidated Financial Statements—Income Taxes” of this Quarterly Report on Form 10-Q for additional information.
6.     Accrued Liabilities
7.Accrued Liabilities
Accrued liabilities include the following:
June 30,
2022		June 30,
2021		December 31,
2021
 (In thousands)
Current lease liabilities$74,097 $71,481 $73,752 
Advertising and promotion67,864 61,370 179,687 
Incentive compensation53,879 69,850 140,769 
10
 September 30,
2017		 September 30,
2016		 December 31,
2016
 (In thousands)
Royalties$90,968
 $92,739
 $107,077
Advertising and promotion81,185
 101,649
 85,116
Taxes other than income taxes61,318
 60,031
 67,555
Other335,374
 374,695
 369,078
 $568,845
 $629,114
 $628,826

7.     Seasonal Financing
8.Seasonal Financing
On December 20, 2017, Mattel maintainsentered into a syndicated facility agreement, which was subsequently amended in 2018, 2019, and periodically amends 2021 (as amended, the "Credit Agreement"), as a borrower (in such capacity, the "Borrower") and guarantor thereunder, along with certain of the Borrower's domestic and foreign subsidiaries as additional borrowers and/or replacesguarantors thereunder.
On March 19, 2021, Mattel entered into the fourth amendment to the Credit Agreement, which amended certain terms, including, but not limited to, certain components of the borrowing base, a reduction of the aggregate principal amount of the senior secured revolving credit facilities from $1.60 billion to $1.40 billion and an extension of the maturity date from November 20, 2022 to March 19, 2024.
The senior secured revolving credit facilities consist of (i) an asset-based lending facility with aggregate commitments up to $1.11 billion, subject to borrowing base capacity, secured by substantially all of the accounts receivable and inventory of the Borrower and certain of its domestic unsecured committedsubsidiaries who are borrowers and/or guarantors under the Credit Agreement, as well as (ii) a revolving credit facility (“Credit Facility”) with a commercial bank group. The Credit Facility is used as a back-up to Mattel’s commercial paper program, which is used as Mattel's primary short-term borrowing facility. The agreement governing$294.0 million in aggregate commitments secured by certain fixed assets and intellectual property of the Credit Facility was amended on June 15, 2017 to, among other things, increase the maximum allowed consolidated debt-to-consolidated earnings before interest, taxes, depreciation, and amortization (“consolidated EBITDA”) ratio that Mattel is required to maintainU.S. borrowers under the Credit Facility to 3.75 to 1 from 3.50 to 1 for the four consecutive quarters beginning with the second quarter of 2017. Additionally, the Credit Facility was amended on September 20, 2017 to remove the consolidated debt-to-consolidated EBITDA ratio requirement for the third fiscal quarter of 2017Agreement, and increase the consolidated debt-to-consolidated EBITDA ratio during a covenant modification period to 4.50 to 1.00 for the fourth fiscal quarter of 2017equity interests in certain borrower and 4.25 to 1.00 for each fiscal quarter thereafter. The covenant modification period commenced on September 20, 2017 and continues, at a minimum, through the fourth fiscal quarter of 2017 and thereafter until such time as Mattel (i) requests the termination of the covenant modification period, and (ii) delivers financial statements and a certificate to the lenders demonstrating a consolidated debt-to-consolidated EBITDA ratio of 3.75 to 1.00 or less for the period consisting of the preceding four consecutive fiscal quarters. The amendment further amends the Credit Facility to, among other items, (i) add certain restrictive covenants during the covenant modification period that include greater restrictions against certain receivable financing facilities, as well as restrictions on certain asset dispositions, burdensome agreements, and specified restricted payments, (ii) add a guarantee and lien trigger event that occurs if Mattel’s debt rating falls below certain thresholds, (iii) add covenants that require all U.S. materialguarantor subsidiaries under the Credit Facility (other than foreign subsidiary holding companies) to become guarantors upon a guarantee and lien trigger event, and (iv) provide that after a guarantee and lien trigger event and before the termination of the covenant modification period, indebtednessAgreement.
Any borrowings under the Credit Facilitysenior secured revolving credit facilities are (i) limited by jurisdiction-specific borrowing base calculations based on the sum of specified percentages of eligible accounts receivable, eligible inventory and certain fixed assets and intellectual property, as applicable, minus the amount of any applicable reserves, and (ii) bear interest at a floating rate, which can be either, at the Borrower's option, (a) an adjusted LIBOR rate plus an applicable margin ranging from 1.25% to 1.75% per annum or (b) an alternate base rate plus an applicable margin ranging from 0.25% to 0.75% per annum, in an amount noteach case, such applicable margins to exceed 10% of Mattel’s consolidated net tangible assets will be determined based on the Borrower's average borrowing availability remaining under the senior secured by pledges from Mattel andrevolving credit facilities.
In addition to paying interest on the guarantors of 100% ofoutstanding principal under the equity of all U.S. subsidiaries (other than any foreign subsidiary holding company) and 66% ofsenior secured revolving credit facilities, the equity of all first-tier foreign subsidiaries and foreign subsidiary holdings companies. Such guarantees and pledges, as well as the additional restrictive covenants, will be eliminated upon the termination of the covenant modification period.
Although the consolidated debt-to-consolidated EBITDA ratio was removed for the third quarter, MattelBorrower is required to meet financial ratio covenants atpay (i) an unused line fee based on the endaverage daily unused portion of each quarterthe senior secured revolving credit facilities, (ii) a letter of credit fronting fee based on a percentage of the aggregate face amount of outstanding letters of credit, and fiscal year, using(iii) certain other customary fees and expenses of the formulae specified inlenders and agents.
As of June 30, 2022, Mattel had no borrowings outstanding under the Credit Facility to calculatesenior secured revolving credit facilities and $3.0 million other short-term borrowings outstanding. As of June 30, 2021, Mattel had no borrowings outstanding under the ratios.senior secured revolving credit facilities and $0.2 million of other short-term borrowings outstanding. As of December 31, 2021, Mattel had no borrowings outstanding under the senior secured revolving credit facilities and no other short-term borrowings outstanding. Outstanding letters of credit under the senior secured revolving credit facilities totaled approximately $9 million, $10 million, and $10 million as of June 30, 2022, June 30, 2021, and December 31, 2021, respectively.
As of June 30, 2022, Mattel was in compliance with its interest coverage ratio covenant at September 30, 2017.


The aggregate commitments underall covenants contained in the Credit Facility remain at $1.60 billion, with an “accordion feature,” which allows Mattel to increase the aggregate availability under theAgreement. The Credit Facility to $1.85 billion under certain circumstances. In addition, applicable interest rate margins remain within a range of 0.00% to 0.75% above the applicable base rate for base rate loans and 0.88% to 1.75% above the applicable LIBOR for Eurodollar rate loans, and the commitment fees range from 0.08% to 0.25% of the unused commitments under the Credit Facility, in each case depending on Mattel’s senior unsecured long-term debt rating.
Both the borrowing costs incurred as a result of the amendment and the portion of unamortized debt issuance costs from the prior facility renewal related to creditors involved in both the prior facility and amended facility were deferred, and such costs will be amortized over the term of the amended Credit Facility.
The agreement governing the Credit FacilityAgreement is a material agreement, and failure to comply with the financial ratioits covenants may result in an event of default under the terms of the Credit Facility.senior secured revolving credit facilities. If Mattel were to default under the terms of the Credit Facility,senior secured revolving credit facilities, its ability to meet its seasonal financing requirements could be adversely affected. Furthermore, Mattel’s long-term debt agreements contain cross-default provisions which would result in an event of default if Mattel, among other items, fails to comply with the financial ratio covenants under the terms of the Credit Facility with outstanding borrowings in excess of $25 million. The Credit Facility is used as a back-up to Mattel’s commercial paper program.
11
9.Long-Term Debt

8.     Long-Term Debt
Long-term debt includes the following:
June 30,
2022		June 30,
2021		December 31,
2021
 (In thousands)
2010 Senior Notes due October 2040$250,000 $250,000 $250,000 
2011 Senior Notes due November 2041300,000 300,000 300,000 
2013 Senior Notes due March 2023250,000 250,000 250,000 
2017/2018 Senior Notes due December 2025— 275,000 — 
2019 Senior Notes due December 2027600,000 600,000 600,000 
2021 Senior Notes due April 2026600,000 600,000 600,000 
2021 Senior Notes due April 2029600,000 600,000 600,000 
Debt issuance costs and debt discount(26,697)(35,881)(29,008)
$2,573,303 $2,839,119 $2,570,992 
Less: current portion(250,000)— — 
Total long-term debt$2,323,303 $2,839,119 $2,570,992 
 September 30,
2017		 September 30,
2016		 December 31,
2016
 (In thousands)
2010 Senior Notes due October 2020 and October 2040$500,000
 $500,000
 $500,000
2011 Senior Notes due November 2016 and November 2041300,000
 600,000
 300,000
2013 Senior Notes due March 2018 and March 2023500,000
 500,000
 500,000
2014 Senior Notes due May 2019500,000
 500,000
 500,000
2016 Senior Notes due August 2021350,000
 350,000
 350,000
Debt issuance costs(13,596) (16,511) (15,729)
 2,136,404
 2,433,489
 2,134,271
Less: current portion(250,000) (300,000) —
Total long-term debt$1,886,404
 $2,133,489
 $2,134,271

In August 2016,On March 19, 2021, Mattel issued $350.0(i) $600 million aggregate principal amount of 2.35% senior unsecured notes due August 15, 2021 (“2016 Senior Notes”). Interest on the 20163.375% Senior Notes is payable semi-annuallydue 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"). The 2026 Notes will mature on April 1, 2026 and the 2029 Notes will mature on April 1, 2029, unless earlier redeemed in arrearsaccordance with their respective terms. The Notes are guaranteed by Mattel’s existing and, subject to certain exceptions, future wholly-owned domestic restricted subsidiaries that guarantee Mattel’s senior secured revolving credit facilities or certain other indebtedness.
The net proceeds from the offering, together with cash on February 15hand, were used to redeem $1.225 billion in aggregate principal amount of Mattel’s outstanding 6.750% Senior Notes due December 2025 (the "2025 Notes") and August 15 of each year, beginning February 15, 2017. Mattel may redeem all or partpay related prepayment premiums and transaction fees and expenses. As a result of the 2016 Senior Notes at any time or from time to time prior to July 15, 2021 (one month prior to the maturity datepartial redemption of the 2016 Senior Notes) (the “Par Call Date”), at its option, at2025 Notes, Mattel incurred a redemption price equal toloss on extinguishment of $83.2 million, comprised of $62.0 million of prepayment premium costs and a $21.2 million write-off of the greaterunamortized debt issuance costs, which was recorded within interest expense in the consolidated statements of (i) 100%operations in the first quarter of 2021.
On July 1, 2021, Mattel redeemed the remaining outstanding $275 million aggregate principal amount of the 2016 Senior Notes being redeemed or (ii)2025 Notes. As a “make-whole” amount based on the yieldresult of a comparable U.S. Treasury security plus 20 basis points, plus, in each case, accrued and unpaid interest on the 2016 Senior Notes being redeemed to, but excluding, the redemption, date. Mattel may redeem all or partincurred a loss on extinguishment of $18.5 million, comprised of $14.0 million of prepayment premium costs and a $4.5 million write-off of the 2016 Senior Notes at any time or from time to time on or afterunamortized debt issuance costs, which was recorded within interest expense in the Par Call Date, at its option, at a redemption price equal to 100%consolidated statements of operations in the principal amountthird quarter of the 2016 Senior Notes to be redeemed, plus accrued and unpaid interest on the 2016 Senior Notes being redeemed to, but excluding, the redemption date.2021.
10.Other Noncurrent Liabilities
9.     Other Noncurrent Liabilities
Other noncurrent liabilities include the following:
June 30,
2022		June 30,
2021		December 31,
2021
 (In thousands)
Benefit plan liabilities$167,262 $210,048 $179,857 
Income taxes payable59,644 67,161 62,915 
12
 September 30,
2017		 September 30,
2016		 December 31,
2016
 (In thousands)
Noncurrent tax liabilities$218,308
 $96,447
 $96,871
Benefit plan liabilities196,967
 179,979
 192,466
Other161,052
 178,008
 156,831
 $576,327
 $454,434
 $446,168



10.     Accumulated Other Comprehensive Income (Loss)
11.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): for each period:
 For the Three Months Ended June 30, 2022
 Derivative
Instruments		Available-for-Sale SecuritiesEmployee Benefit PlansCurrency
Translation
Adjustments		Total
 (In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of March 31, 2022$14,903 $— $(152,712)$(788,600)$(926,409)
Other comprehensive income (loss) before reclassifications26,425 — 217 (6,490)20,152 
Amounts reclassified from accumulated other comprehensive income (loss)(7,998)— 1,107 — (6,891)
Net increase (decrease) in other comprehensive income (loss)18,427 — 1,324 (6,490)13,261 
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2022$33,330 $— $(151,388)$(795,090)$(913,148)
 For the Six Months Ended June 30, 2022
 Derivative
Instruments		Available-for-Sale SecuritiesEmployee Benefit PlansCurrency
Translation
Adjustments		Total
 (In thousands)
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 reclassifications33,889 — (98)(5,569)28,222 
Amounts reclassified from accumulated other comprehensive income (loss)(9,355)3,646 2,809 — (2,900)
Net increase (decrease) in other comprehensive income (loss)24,534 3,646 2,711 (5,569)25,322 
Adjustment of accumulated other comprehensive loss to retained earnings— 2,801 — — 2,801 
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2022$33,330 $— $(151,388)$(795,090)$(913,148)
For the Three Months Ended June 30, 2021
 Derivative
Instruments		Available-for-Sale SecuritiesEmployee Benefit PlansCurrency
Translation
Adjustments		Total
 (In thousands)
Accumulated Other Comprehensive Loss, Net of Tax, as of March 31, 2021$(7,998)$(5,558)$(184,506)$(762,964)$(961,026)
Other comprehensive (loss) income before reclassifications(771)1,268 (254)20,932 21,175 
Amounts reclassified from accumulated other comprehensive loss2,060 — 2,475 — 4,535 
Net increase (decrease) in other comprehensive income (loss)1,289 1,268 2,221 20,932 25,710 
Accumulated Other Comprehensive Loss, Net of Tax, as of June 30, 2021$(6,709)$(4,290)$(182,285)$(742,032)$(935,316)

13

 For the Three Months Ended September 30, 2017
 Derivative
Instruments		 
Available-for-Sale
Security
 Defined Benefit
Pension Plans		 Currency
Translation
Adjustments		 Total
 (In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2017$(25,114) $(588) $(155,625) $(700,607) $(881,934)
Other comprehensive (loss) income before reclassifications(24,009) (3,848) (103) 36,912
 8,952
Amounts reclassified from accumulated other comprehensive income (loss)9,241
 —
 1,209
 —
 10,450
Net (decrease) increase in other comprehensive income (loss)(14,768) (3,848) 1,106
 36,912
 19,402
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2017$(39,882) $(4,436) $(154,519) $(663,695) $(862,532)
For the Six Months Ended June 30, 2021
 Derivative
Instruments		Available-for-Sale SecuritiesEmployee Benefit PlansCurrency
Translation
Adjustments		Total
 (In thousands)
Accumulated Other Comprehensive Loss, Net of Tax, as of December 31, 2020$(15,369)$(7,522)$(186,854)$(734,831)$(944,576)
Other comprehensive income (loss) before reclassifications9,331 3,232 (259)(7,201)5,103 
Amounts reclassified from accumulated other comprehensive loss(671)— 4,828 — 4,157 
Net increase (decrease) in other comprehensive income (loss)8,660 3,232 4,569 (7,201)9,260 
Accumulated Other Comprehensive Loss, Net of Tax, as of June 30, 2021$(6,709)$(4,290)$(182,285)$(742,032)$(935,316)

 For the Nine Months Ended September 30, 2017
 Derivative
Instruments		 
Available-for-Sale
Security
 Defined Benefit
Pension Plans		 Currency
Translation
Adjustments		 Total
 (In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2016$17,469
 $3,149
 $(157,704) $(805,943) $(943,029)
Other comprehensive (loss) income before reclassifications(63,999) (7,585) (303) 142,248
 70,361
Amounts reclassified from accumulated other comprehensive income (loss)6,648
 —
 3,488
 —
 10,136
Net (decrease) increase in other comprehensive income (loss)(57,351) (7,585) 3,185
 142,248
 80,497
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2017$(39,882) $(4,436) $(154,519) $(663,695) $(862,532)

 For the Three Months Ended September 30, 2016
 Derivative
Instruments		 
Available-for-Sale
Security
 Defined Benefit
Pension Plans		 Currency
Translation
Adjustments		 Total
 (In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2016$4,716
 $—
 $(157,314) $(708,760) $(861,358)
Other comprehensive income (loss) before reclassifications974
 —
 (74) (14,570) (13,670)
Amounts reclassified from accumulated other comprehensive income (loss)(2,157) —
 2,098
 —
 (59)
Net (decrease) increase in other comprehensive income (loss)(1,183) —
 2,024
 (14,570) (13,729)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2016$3,533
 $—
 $(155,290) $(723,330) $(875,087)


 For the Nine Months Ended September 30, 2016
 Derivative
Instruments		 
Available-for-Sale
Security
 Defined Benefit
Pension Plans		 Currency
Translation
Adjustments		 Total
 (In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2015$15,363
 $—
 $(159,858) $(704,404) $(848,899)
Other comprehensive income (loss) before reclassifications642
 —
 (208) (18,926) (18,492)
Amounts reclassified from accumulated other comprehensive income (loss)(12,472) —
 4,776
 —
 (7,696)
Net (decrease) increase in other comprehensive income (loss)(11,830) —
 4,568
 (18,926) (26,188)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2016$3,533
 $—
 $(155,290) $(723,330) $(875,087)
The following tables presenttable presents the classification and amount of the reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of operations:
For the Three Months Ended
June 30,
2022		June 30,
2021		Statements of Operations
Classification
 (In thousands) 
Derivative Instruments
Gain (loss) on foreign currency forward exchange and other contracts$8,043 $(1,969)Cost of sales
Tax effect(45)(91)Provision for income taxes
$7,998 $(2,060)Net income (loss)
Employee Benefit Plans
Amortization of prior service credit (a)$436 $390 Other non-operating expense (income), net
Recognized actuarial loss (a)(2,319)(2,773)Other non-operating expense (income), net
$(1,883)$(2,383)
Tax effect776 (92)Provision for income taxes
$(1,107)$(2,475)Net income (loss)
(a)The amortization of prior service credit and recognized actuarial loss are included in the computation of net periodic benefit cost. Refer to "Note 15 to the Consolidated Financial Statements—Employee Benefit Plans" for additional information regarding Mattel's net periodic benefit cost.
14

 For the Three Months Ended  
 September 30,
2017		 September 30,
2016		 
Statements of Operations
Classification
 (In thousands)  
Derivative Instruments 
(Loss) gain on foreign currency forward exchange contracts$(9,124) $2,383
 Cost of sales
 (117) (226) Provision for income taxes
 $(9,241) $2,157
 Net (loss) income
Defined Benefit Pension Plans
 
  
Amortization of prior service cost$(8) $(8) (a)
Recognized actuarial loss(1,860) (1,769) (a)
Settlement loss—
 (1,495) Other selling and administrative expenses
 (1,868) (3,272)  
 659
 1,174
 Provision for income taxes
 $(1,209) $(2,098) Net (loss) income


For the Six Months Ended
June 30, 2022June 30, 2021Statements of Operations
Classification
(In thousands)
Derivative Instruments
Gain on foreign currency forward exchange and other contracts$9,472 $870 Cost of sales
Tax effect(117)(199)Provision for income taxes
$9,355 $671 Net Income (loss)
Employee Benefit Plans
Amortization of prior service credit (a)$905 $789 Other non-operating expense (income), net
Recognized actuarial loss (a)(4,541)(5,555)Other non-operating expense (income), net
(3,636)(4,766)
Tax effect827 (62)Provision for income taxes
$(2,809)$(4,828)Net Income (loss)

(a)The amortization of prior service credit and recognized actuarial loss are included in the computation of net periodic benefit cost. Refer to "Note 15 to the Consolidated Financial Statements—Employee Benefit Plans" for additional information regarding Mattel's net periodic benefit cost.

 For the Nine Months Ended  
 September 30,
2017		 September 30,
2016		 Statements of Operations
Classification
 (In thousands)  
Derivative Instruments 
(Loss) gain on foreign currency forward exchange contracts$(6,658) $13,260
 Cost of sales
 10
 (788) Provision for income taxes
 $(6,648) $12,472
 Net (loss) income
Defined Benefit Pension Plans     
Amortization of prior service cost$(23) $(23) (a)
Recognized actuarial loss(5,576) (5,305) (a)
Settlement loss—
 (1,495) Other selling and
administrative expenses
 (5,599) (6,823)  
 2,111
 2,047
 Provision for income taxes
 $(3,488) $(4,776) Net (loss) income
During the three months ended March 31, 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 (income) in the statement of operations and $2.8 million reclassified to retained earnings in the statement of stockholders' equity. The adjustment, including tax effect, was immaterial to the financial statements.
 ____________________________________________
(a)The amortization of prior service cost and recognized actuarial loss are included in the computation of net periodic benefit cost. Refer to “Note 15 to the Consolidated Financial Statements—Employee Benefit Plans” of this Quarterly Report on Form 10-Q for additional information regarding Mattel’s net periodic benefit cost.
Currency Translation Adjustments
Mattel’sMattel's reporting currency is the USU.S. dollar. The translation of its net investments in subsidiaries with non-USnon-U.S. dollar functional currencies subjects Mattel to the impact of foreign currency exchange rate fluctuations in its results of operations and financial position. Assets and liabilities of subsidiaries with non-USnon-U.S. dollar functional currencies are translated into USU.S. dollars at fiscal period-end exchange rates. Income expense, and cash flowexpense items are translated at weighted averageweighted-average exchange rates prevailing during the fiscal period. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss)loss within stockholders’stockholders' equity. Currency translation adjustments resulted in a net gain of $142.2 million for the nine months ended September 30, 2017, primarily due to the strengthening of the Euro, British pound sterling, and Mexican peso against the US dollar. Currency translation adjustments resulted in a net loss of $18.9$5.6 million for the ninesix months ended SeptemberJune 30, 2016,2022, primarily due to the weakening of the British pound sterling and the Mexican pesoEuro against the USU.S. dollar, partially offset by the strengthening of the EuroRussian ruble and the Brazilian real.real against the U.S. dollar. Currency translation adjustments resulted in a net loss of $7.2 million for the six months ended June 30, 2021, primarily due to the weakening of the Turkish lira against the U.S. dollar.
12.Derivative Instruments
11.     Foreign Currency Transaction Exposure
Currency exchange rate fluctuations impact Mattel's results of operations and cash flows. Mattel's currency transaction exposures include gains and losses realized on unhedged inventory purchases and unhedged receivables and payables balances that are denominated in a currency other than the applicable functional currency. Gains and losses on unhedged inventory purchases and other transactions associated with operating activities are recorded in the components of operating income in the consolidated statements of operations. Gains and losses on unhedged intercompany loans and advances are recorded as a component of other non-operating expense (income), net in the consolidated statements of operations in the period in which the currency exchange rate changes. Transactions denominated in the Chinese yuan, Euro, Mexican peso, and Russian ruble were the primary transactions that caused foreign currency transaction exposure for Mattel during the six months ended June 30, 2022.
15

Currency transaction losses included in the consolidated statements of operations are as follows:
 For the Three Months Ended
 June 30,
2022		June 30,
2021		Statements of Operations Classification
 (In thousands)
Currency transaction (losses) gains$(8,721)$1,069 Operating income
Currency transaction (losses)(12,347)(1,501)Other non-operating expense (income), net
Currency transaction (losses), net$(21,068)$(432)

 For the Six Months Ended
 June 30,
2022		June 30,
2021		Statements of Operations Classification
 (In thousands)
Currency transaction (losses)$(8,258)$(2,503)Operating income
Currency transaction (losses)(18,791)(4,809)Other non-operating expense (income), net
Currency transaction (losses), net$(27,049)$(7,312)
12.     Derivative Instruments
Mattel seeks to mitigate its exposure to foreign currency transaction risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts. Mattel uses foreign currency forward exchange contracts as cash flow hedges primarily to hedge its purchases and sales of inventory denominated in foreign currencies. These contracts generally have maturity dates of up to 1824 months. These derivative instruments have been designated as effective cash flow hedges, whereby the unsettled hedges are reported in Mattel’sMattel's consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in other comprehensive income (loss) income (“OCI”("OCI"). Realized gains and losses for these contracts are recorded in the consolidated statements of operations in the period in which the inventory is sold to customers. Additionally, Mattel uses foreign currency forward exchange contracts to hedge intercompany loans and advances denominated in foreign currencies. Due to the short-term nature of the contracts involved, Mattel hasdoes not designateduse hedge accounting for these contracts, as hedging instruments, and as such, changes in fair value are recorded in the period of change in the consolidated statements of operations.


Mattel utilizes derivative contracts to hedge certain purchases of commodities, which were not material. As of SeptemberJune 30, 2017, September2022, June 30, 2016,2021, and December 31, 2016,2021, Mattel held foreign currency forward exchange contracts and other commodity derivative instruments, with notional amounts of $2.46 billion, $1.15approximately $872 million, $1.29 billion, and $1.20 billion,$925 million, respectively. The notional amounts of the foreign currency forward exchange contracts outstanding as of September 30, 2017 include foreign currency forward contracts executed on September 29, 2017 to settle contracts used to hedge intercompany loans and advances that matured on October 2, 2017.  The notional amounts also include additional foreign currency forward contracts executed on September 29, 2017 to replace the contracts used to hedge the intercompany loans and advances that matured and settled on October 2, 2017.  The increase to the notional amounts outstanding as of September 30, 2017 was primarily due to the timing of the scheduled settlements of Mattel’s intercompany loans and advances denominated in foreign currencies. As of September 30, 2016, Mattel also held cross currency swap contracts with notional amounts of $16.9 million.
16

The following tables present Mattel’sMattel's derivative assets and liabilities:
 Derivative Assets
 Balance Sheet ClassificationFair Value
 June 30,
2022		June 30,
2021		December 31,
2021
(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange and other contractsPrepaid expenses and other current assets$31,145 $5,405 $13,361 
Foreign currency forward exchange and other contractsOther noncurrent assets6,383 1,774 1,000 
Total derivatives designated as hedging instruments$37,528 $7,179 $14,361 
Derivatives not designated as hedging instruments
Foreign currency forward exchange and other contractsPrepaid expenses and other current assets$6,654 $1,624 $3,714 
$44,182 $8,803 $18,075 
 Derivative Liabilities
 Balance Sheet ClassificationFair Value
 June 30,
2022		June 30,
2021		December 31,
2021
(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange and other contractsAccrued liabilities$1,132 $10,774 $2,301 
Foreign currency forward exchange and other contractsOther noncurrent liabilities107 270 280 
Total derivatives designated as hedging instruments$1,239 $11,044 $2,581 
Derivatives not designated as hedging instruments
Foreign currency forward exchange and other contractsAccrued liabilities$897 $5,187 $1,229 
$2,136 $16,231 $3,810 
17
 Derivative Assets
 Balance Sheet Classification Fair Value
   September 30,
2017		 September 30,
2016		 December 31,
2016
   (In thousands) 
Derivatives designated as hedging instruments       
Foreign currency forward exchange contracts
Prepaid expenses and other
current assets
 $1,951
 $7,127
 $18,747
Foreign currency forward exchange contractsOther noncurrent assets 764
 1,122
 5,782
Total derivatives designated as hedging instruments  $2,715
 $8,249
 $24,529
Derivatives not designated as hedging instruments       
Foreign currency forward exchange contracts
Prepaid expenses and other
current assets
 $1,369
 $826
 $2,678
Total  $4,084
 $9,075
 $27,207
        
 Derivative Liabilities
 Balance Sheet Classification Fair Value
   September 30,
2017		 September 30,
2016		 December 31,
2016
   (In thousands) 
Derivatives designated as hedging instruments       
Foreign currency forward exchange contractsAccrued liabilities $21,624
 $5,131
 $1,917
Foreign currency forward exchange contractsOther noncurrent liabilities 7,206
 1,382
 223
Total derivatives designated as hedging instruments  $28,830
 $6,513
 $2,140
Derivatives not designated as hedging instruments       
Foreign currency forward exchange contractsAccrued liabilities $1,047
 $—
 $7,072
Cross currency swap contractAccrued liabilities —
 1,532
 —
Total derivatives not designated as hedging instruments  $1,047
 $1,532
 $7,072
Total  $29,877
 $8,045
 $9,212



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
For the Three Months Ended
 June 30,
2022		June 30,
2021		Statements of
Operations
Classification
 (In thousands)
Foreign currency forward exchange contracts:
Amount of gains (losses) recognized in OCI$26,425 $(771)
Amount of gains (losses) reclassified from accumulated OCI to consolidated statements of operations7,998 (2,060)Cost of sales
 For the Three Months Ended  
 September 30, 2017 September 30, 2016 
Statements of
Operations
Classification
 
Amount of Gain
(Loss) Recognized
in OCI
 
Amount of
Gain (Loss)
Reclassified from
Accumulated OCI
to Statements of
Operations
 
Amount of Gain
(Loss) Recognized
in OCI
 
Amount of
Gain (Loss)
Reclassified from
Accumulated OCI
to Statements of
Operations
 
 (In thousands)  
Derivatives designated as hedging instruments         
Foreign currency forward exchange contracts$(24,009) $(9,241) $974
 $2,157
 Cost of sales
          
 For the Nine Months Ended  
 September 30, 2017 September 30, 2016 
Statements of
Operations
Classification
 
Amount of Gain
(Loss) Recognized
in OCI
 
Amount of
Gain (Loss)
Reclassified from
Accumulated OCI
to Statements of
Operations
 
Amount of Gain
(Loss) Recognized
in OCI
 
Amount of
Gain (Loss)
Reclassified from
Accumulated OCI
to Statements  of
Operations
 
 (In thousands)  
Derivatives designated as hedging instruments         
Foreign currency forward exchange contracts$(63,999) $(6,648) $642
 $12,472
 Cost of sales

Derivatives Designated As Hedging Instruments
For the Six Months Ended
 June 30,
2022		June 30,
2021		Statements of
Operations
Classification
 (In thousands)
Foreign currency forward exchange contracts:
Amount of gains recognized in OCI$33,889 $9,331 
Amount of gains reclassified from accumulated OCI to consolidated statements of operations9,355 671 Cost of sales
The net losses of $9.2 million and $6.6 milliongains reclassified from accumulated other comprehensive loss to the consolidated statements of operations forduring the three and ninesix months ended SeptemberJune 30, 2017,2022 and 2021, respectively, and the net gains of $2.2 million and $12.5 million reclassified from accumulated other comprehensive loss to the consolidated statements of operations for the three and nine months ended September 30, 2016, respectively, arewere offset by the changes in cash flows associated with the underlying hedged transactions.
 Derivatives Not Designated As Hedging Instruments
For the Three Months Ended
June 30,
2022		June 30,
2021		Statements of
Operations
Classification
 (In thousands)
Amount of net gains recognized in the Statements of Operations
Foreign currency forward exchange and other contract gains$10,954 $7,673 Other non-operating expense (income), net
Foreign currency forward exchange and other contract gains— — Cost of sales
$10,954 $7,673 

 Derivatives Not Designated As Hedging Instruments
For the Six Months Ended
June 30,
2022		June 30,
2021		Statements of
Operations
Classification
 (In thousands)
Amount of net gains (losses) recognized in the Statements of Operations
Foreign currency forward exchange and other contract gains (losses)$3,121 $(963)Other non-operating expense (income), net
Foreign currency forward exchange and other contract gains— 639 Cost of sales
$3,121 $(324)
18
 
Amount of Gain
(Loss) Recognized in the
Statements of Operations
 
Statements of Operations
Classification
 For the Three Months Ended 
 September 30,
2017		 September 30,
2016		 
 (In thousands)  
Derivatives not designated as hedging instruments 
Foreign currency forward exchange contracts$13,624
 $306
 Other non-operating income/expense
Cross currency swap contract—
 (274) Other non-operating income/expense
Foreign currency forward exchange contracts9
 619
 Cost of sales
Total$13,633
 $651
  
      



 
Amount of Gain
(Loss) Recognized in the
Statements of Operations
 
Statements of Operations
Classification
 For the Nine Months Ended 
 September 30,
2017		 September 30,
2016		 
 (In thousands)  
Derivatives not designated as hedging instruments 
Foreign currency forward exchange contracts$64,582
 $5,909
 Other non-operating income/expense
Cross currency swap contract—
 (1,532) Other non-operating income/expense
Foreign currency forward exchange contracts511
 2,217
 Cost of sales
Total$65,093
 $6,594
  
The net gains of $13.6 million and $65.1 million(losses) recognized in the consolidated statements of operations forduring the three and ninesix months ended SeptemberJune 30, 2017,2022 and June 30, 2021, respectively, and the net gains of $0.7 million and $6.6 million recognized in the consolidated statements of operations for the three and nine months ended September 30, 2016, respectively, arewere partially offset by foreign currency transaction gains and losses on the related hedgedderivative balances.
13.Fair Value Measurements
13.     Fair Value Measurements
The following tables present information about Mattel’sMattel's assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of June 30, 2022, June 30, 2021, and indicatesDecember 31, 2021 and indicate 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:
•Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
•Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.liabilities, either directly or indirectly.
•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
19

Mattel's financial assets and liabilities measured and reported at fair value on a recurring basis include the following:
June 30, 2022
Level 1Level 2Level 3Total
(In thousands)
Assets:
Foreign currency forward exchange contracts and other (a)$— $44,182 $— $44,182 
Equity securities (b)4,400 — — 4,400 
Total assets$4,400 $44,182 $— $48,582 
Liabilities:
Foreign currency forward exchange contracts and other (a)$— $2,136 $— $2,136 
June 30, 2021
Level 1Level 2Level 3Total
(In thousands)
Assets:
Foreign currency forward exchange contracts and other (a)$— $8,803 $— $8,803 
Equity securities (b)7,500 — — 7,500 
Total assets$7,500 $8,803 $— $16,303 
Liabilities:
Foreign currency forward exchange contracts and other (a)$— $16,231 $— $16,231 
December 31, 2021
Level 1Level 2Level 3Total
(In thousands)
Assets:
Foreign currency forward exchange contracts and other (a)$— $18,075 $— $18,075 
Equity securities (b)5,343 — — 5,343 
Total assets$5,343 $18,075 $— $23,418 
Liabilities:
Foreign currency forward exchange contracts and other (a)$— $3,810 $— $3,810 
 September 30, 2017
 Level 1 Level 2 Level 3 Total
 (In thousands)
Assets:       
Foreign currency forward exchange contracts (a)$—
 $4,084
 $—
 $4,084
Available-for-sale security (b)7,354
 —
 —
 7,354
Total assets$7,354
 $4,084
 $—
 $11,438
Liabilities:       
Foreign currency forward exchange contracts (a)$—
 $29,877
 $—
 $29,877
        
(a)The fair value of the foreign currency forward exchange contracts and other commodity derivative instruments 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 equity securities are based on the quoted price on an active public exchange.

 September 30, 2016
 Level 1 Level 2 Level 3 Total
 (In thousands)
Assets:       
Foreign currency forward exchange contracts (a)$—
 $9,075
 $—
 $9,075
Liabilities:       
Foreign currency forward exchange contracts (a)$—
 $6,513
 $—
 $6,513
Cross currency swap contract (a)—
 1,532
 —
 1,532
Total liabilities$—
 $8,045
 $—
 $8,045
        
 December 31, 2016
 Level 1 Level 2 Level 3 Total
 (In thousands)
Assets:       
Foreign currency forward exchange contracts (a)$—
 $27,207
 $—
 $27,207
Available-for-sale security (b)14,939
 —
 —
 14,939
Total assets$14,939
 $27,207
 $—
 $42,146
Liabilities:       
Foreign currency forward exchange contracts (a)$—
 $9,212
 $—
 $9,212
 ____________________________________________
(a)The fair value of the foreign currency forward exchange contracts and cross currency swap contracts are based on dealer quotes of market forward rates and reflect 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’sMattel's financial instruments include cash and equivalents, accounts receivable, andaccounts payable, accrued liabilities, short-term borrowings, and accrued liabilities.long-term debt. The fair values of these instruments, excluding long-term debt, approximate their carrying values because of their short-term nature. Cash isand equivalents are classified as Level 1 and all other financial instruments are classified as Level 2 within the fair value hierarchy.
The estimated fair value of Mattel’sMattel's long-term debt including the current portion, was $2.17$2.42 billion (compared to a carrying value of $2.15$2.60 billion) as of SeptemberJune 30, 2017, $2.572022, $3.09 billion (compared to a carrying value of $2.45$2.88 billion) as of SeptemberJune 30, 2016,2021, and $2.18$2.82 billion (compared to a carrying value of $2.15$2.60 billion) as of December 31, 2016.2021. The estimated fair values have been calculated based on broker quotes or rates for the same or similar instruments and are classified as Level 2 within the fair value hierarchy.
20
14.Earnings Per Share
Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. Certain of Mattel’s restricted stock units (“RSUs”) are considered participating securities because they contain nonforfeitable rights to dividend equivalents.
Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic earnings per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net income allocable to common shares by the weighted average number of common shares for the period, as adjusted for the potential dilutive effect of non-participating share-based awards.


14.     Earnings Per Share

The following table reconciles basic and diluted earnings per common share for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016:2021:
 For the Three Months EndedFor the Six Months Ended
 June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
 (In thousands, except per share amounts)
Basic:
Net income (loss)$66,440 $(5,537)$87,894 $(117,922)
Weighted-average number of common shares353,457 349,441 352,837 349,244 
Basic net income (loss) per common share$0.19 $(0.02)$0.25 $(0.34)
Diluted:
Net income (loss)$66,440 $(5,537)$87,894 $(117,922)
Weighted-average number of common shares353,457 349,441 352,837 349,244 
Dilutive share-based awards (a)6,381 — 6,111 — 
Weighted-average number of common and potential common shares359,838 349,441 358,948 349,244 
Diluted net income (loss) per common share$0.18 $(0.02)$0.24 $(0.34)
 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (In thousands, except per share amounts)
Basic:       
Net (loss) income$(603,247) $236,250
 $(772,553) $144,177
Less: net income allocable to participating RSUs (a)—
 (610) —
 (1,628)
Net (loss) income available for basic common shares$(603,247) $235,640
 $(772,553) $142,549
Weighted average common shares outstanding343,870
 341,961
 343,304
 341,089
Basic net (loss) income per common share$(1.75) $0.69
 $(2.25) $0.42
Diluted:       
Net (loss) income$(603,247) $236,250
 $(772,553) $144,177
Less: net income allocable to participating RSUs (a)—
 (609) —
 (1,628)
Net (loss) income available for diluted common shares$(603,247) $235,641
 $(772,553) $142,549
Weighted average common shares outstanding343,870
 341,961
 343,304
 341,089
Weighted average common equivalent shares arising from:       
Dilutive stock options and non-participating RSUs—
 2,265
 —
 2,209
Weighted average number of common and potential common shares343,870
 344,226
 343,304
 343,298
Diluted net (loss) income per common share$(1.75) $0.68
 $(2.25) $0.42
 _______________________________________
(a)During the three and nine months ended September 30, 2017, Mattel did not allocate its net loss to its participating RSUs as its participating RSUs are not obligated to share in Mattel's losses. During the three and nine months ended September 30, 2016, Mattel allocated a proportionate share of both dividends and undistributed earnings to participating RSUs.
The calculation of potential common shares assumes the exercise of dilutive stock options and vesting of non-participating RSUs, net of assumed treasury share repurchases at average market prices. Mattel was in a net loss position during(a)For the three and ninesix months ended SeptemberJune 30, 2017 and, accordingly, all outstanding nonqualified stock options and non-participating RSUs were excluded from the calculation of diluted earnings per common share because their effect would be antidilutive. Nonqualified stock options and non-participating RSUs2022, share-based awards totaling 9.810.6 million and 7.710.1 million shares were excluded from the calculation of diluted net income per common share because their effect would be antidilutive. Mattel was in a net loss position for the three and ninesix months ended SeptemberJune 30, 2016, respectively,2021, and, accordingly, all outstanding share-based awards were excluded from the calculation of diluted net loss per common share because they weretheir effect would be antidilutive.
15.Employee Benefit Plans
15.    Employee Benefit Plans
Mattel and certain of its subsidiaries have qualified and nonqualified retirement plans covering substantially all employees of these companies, which are more fully described in Part II, Item 8 “Financial"Financial Statements and Supplementary Data—Note 4 to the Consolidated Financial Statements–Employee Benefit Plans”Plans" in its 2016the 2021 Annual Report on Form 10-K.


A summary of the components of net periodic benefit cost for Mattel’sMattel's defined benefit pension plans is as follows:
 For the Three Months EndedFor the Six Months Ended
 June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
 (In thousands)(In thousands)
Service cost$1,019 $1,293 $2,066 $2,586 
Interest cost3,039 2,530 6,116 5,070 
Expected return on plan assets(4,826)(4,637)(9,704)(9,264)
Amortization of prior service cost73 119 113 230 
Recognized actuarial loss2,344 2,775 4,591 5,560 
$1,649 $2,080 $3,182 $4,182 
21

 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
��(In thousands)
Service cost$1,198
 $1,609
 $3,441
 $4,293
Interest cost4,479
 6,107
 13,370
 18,407
Expected return on plan assets(5,768) (6,393) (17,253) (19,309)
Amortization of prior service cost8
 8
 23
 23
Recognized actuarial loss1,823
 1,732
 5,464
 5,194
Settlement loss—
 1,495
 —
 1,495
 $1,740
 $4,558
 $5,045
 $10,103

A summary of the components of net periodic benefit cost for Mattel’s postretirement benefit plans is as follows:
 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (In thousands)
Service cost$—
 $13
 $1
 $39
Interest cost203
 286
 609
 857
Recognized actuarial loss37
 37
 112
 111
 $240
 $336
 $722
 $1,007
A summary of the components of net periodic benefit cost for Mattel's postretirement benefit plans is as follows:
 For the Three Months EndedFor the Six Months Ended
 June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
 (In thousands)(In thousands)
Interest cost$22 $19 $44 $39 
Amortization of prior service credit(509)(509)(1,018)(1,019)
Recognized actuarial gain(25)(2)(50)(5)
$(512)$(492)$(1,024)$(985)
Mattel's service cost component is recorded within operating income while other components of net periodic pension cost and postretirement benefit cost are recorded outside of operating income, presented in other non-operating expense, net.
During the ninesix months ended SeptemberJune 30, 2017,2022, Mattel made cash contributions totaling approximately $3 million and $1$2 million related to its defined benefit pension and postretirement benefit plans, respectively.plans. During the remainder of 2017,2022, Mattel expects to make additional cash contributions of approximately $6$4 million.
16.Share-Based Payments
16.     Share-Based Payments
Mattel has various stock compensation plans, which are more fully described in Part II, Item 8 “Financial"Financial Statements and Supplementary Data—Note 78 to the Consolidated Financial Statements–Statements—Share-Based Payments”Payments" in its 2016the 2021 Annual Report on Form 10-K. Under the Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan, Mattel has the ability to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs"), performance RSUs ("performance awards,awards"), dividend equivalent rights, and shares of common stock to officers, employees, and other persons providing services to Mattel. Stock options are granted with exercise prices at the fair market value of Mattel’sMattel's common stock on the applicable grant date and expire no later than ten years from the date of grant. Both stockStock options, RSUs, and time-vesting RSUsperformance awards generally provide for vesting over, or at the end of, a period of three years from the date of grant.
In March 2017, the Compensation Committee approved a new long-term incentive program (“LTIP”) for the performance cycle of January 1, 2017–December 31, 2019. As of SeptemberJune 30, 2017, Mattel has two2022, 3 long-term incentive programs were in place:place with the following performance cycles: (i) a January 1, 2016–2020–December 31, 20182022 performance cycle, and (ii) a January 1, 2017–2021–December 31, 20192023 performance cycle.
For thecycle, and (iii) a January 1, 2017–2022–December 31, 2019 LTIP2024 performance cycle, Mattel granted performance-based restricted stock units (“Performance RSUs”) under the Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation Plan to senior executives. Performance RSUs granted under this program will be earned based on the product of the initial target number of Performance RSUs multiplied by a performance factor based on a three-year average of annual achievements of Mattel's performance with respect to annual EPS targets for the performance cycle (the “2017–2019 performance-related component”) and then adjusted upward or downward based on Mattel's total shareholder return (“TSR”) for the three-year performance cycle relative to the TSR realized by companies comprising the S&P 500 (the “2017–2019 market-related component”). The Performance RSUs under the 2017–2019 LTIP performance cycle have dividend equivalent rights that are converted to shares of Mattel common stock only when and to the extent the underlying Performance RSUs are earned and paid.


During the three and nine months ended September 30, 2017, Mattel recognized no expense related to the 2017–2019 performance-related component, and recognized $0.1 million of expense related to the 2017–2019 market-related component. During the three and nine months ended September 30, 2017, Mattel recognized no expense related to the 2016–2018 performance-related component, and recognized $0.1 million and $0.3 million of expense, respectively, related to the 2016–2018 market-related component. These amounts are included within RSU compensation expense in the table below.cycle.
Compensation expense, included within other selling and administrative expenses in the consolidated statements of operations, related to stock options, RSUs, and RSUsperformance awards is as follows:
For the Three Months Ended For the Nine Months Ended For the Three Months EndedFor the Six Months Ended
September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016		 June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
(In thousands) (In thousands)
Stock option compensation expense$3,446
 $2,528
 $9,262
 $6,826
Stock option compensation expense$2,575 $2,662 $4,894 $5,444 
RSU compensation expense13,583
 9,840
 38,320
 31,918
RSU compensation expense11,317 7,673 18,167 14,031 
Performance award compensation expensePerformance award compensation expense4,674 4,833 14,827 10,805 
$17,029
 $12,368
 $47,582
 $38,744
$18,566 $15,168 $37,888 $30,280 
As of SeptemberJune 30, 2017,2022, total unrecognized compensation costexpense related to unvested share-based payments totaled $127.9$132.2 million and is expected to be recognized over a weighted-average period of 2.22.3 years.
Mattel uses treasury shares purchased under its share repurchase program to satisfy stock option exercises and the vesting of RSUs.RSUs and performance awards. Cash received for stock option exercises, net of taxes, was $26.3 million and $3.3 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016 was $1.8 million2021, respectively.
22

17.     Other Selling and $28.5 million, respectively.Administrative Expenses
17.Other Selling and Administrative Expenses
Other selling and administrative expenses include the following:
 For the Three Months EndedFor the Six Months Ended
 June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
 (In thousands)
Design and development$49,306 $46,747 $91,941 $90,728 
Identifiable intangible asset amortization9,672 9,544 18,997 19,058 
18.     Restructuring Charges
 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (In thousands)
Design and development$58,288
 $54,680
 $166,784
 $160,264
Identifiable intangible asset amortization4,444
 5,524
 13,045
 16,354
Optimizing for Growth (formerly Capital Light)
18.Foreign Currency Transaction Gains and Losses
Currency exchange rate fluctuations impact Mattel’s results of operationsIn February 2021, Mattel announced the Optimizing for Growth program, a multi-year cost savings program that integrates and cash flows. Mattel’s currency transaction exposures include gains and losses realized on unhedged inventory purchases and unhedged receivables and payables balances that are denominatedexpands upon the previously announced Capital Light program, which commenced in a currency other than2019 (the "Program").
In connection with the applicable functional currency. Gains and losses on unhedged inventory purchasesProgram, Mattel recorded severance and other transactions associated with operating activities are recordedrestructuring costs in the components of operating income to which they relate infollowing cost and expense categories within the consolidated statements of operations. For hedgesoperations:
 For the Three Months EndedFor the Six Months Ended
June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
 (In thousands)
Cost of sales (a)$5,760 $(151)$8,429 $1,782 
Other selling and administrative expenses (b)5,747 11,444 12,161 17,154 
$11,507 $11,293 $20,590 $18,936 
(a)Severance and other restructuring costs recorded within cost of intercompany loans and advances, which do not qualify for hedge accounting treatment, the gains or losses on the hedges resulting from changes in fair value as well as the offsetting transaction gains or losses on the related hedged items, along with unhedged items, are recognized in other non-operating expense/income, net in the consolidated statements of operations.  Inventory purchase and sale transactions denominated in the Euro, Mexican peso, British pound sterling, Canadian dollar, Australian dollar, Brazilian real, and Russian ruble are the primary transactions that cause foreign currency transaction exposure for Mattel.
Currency transaction gains (losses) includedsales in the consolidated statements of operations are as follows:
included in segment operating income (loss) in "Note 21 to the Consolidated Financial Statements—Segment Information."
 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (In thousands)
Operating income (loss)$2,857
 $(48,076) $(32,137) $(85,081)
Other non-operating expense, net(1,244) (1,269) (7,368) (29,388)
Net transaction gains (losses)$1,613
 $(49,345) $(39,505) $(114,469)
(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 21 to the Consolidated Financial Statements—Segment Information."

The following tables summarize Mattel's severance and other restructuring charges activity related to the Program for the six months ended June 30, 2022 and 2021, respectively:

Liability at December 31, 2021 Charges (a)Payments/UtilizationLiability at
June 30, 2022
(In thousands)
Severance$12,411 $11,754 $(9,011)$15,154 
Other restructuring charges2,834 8,836 (10,705)965 
$15,245 $20,590 $(19,716)$16,119 
In March 2016, the Venezuelan government revised its currency exchange platform to a dual system. The Sistema Complementario de Administración de Divisas (“SICAD”) rate merged
Liability at December 31, 2020Charges (a)Payments/UtilizationLiability at
June 30, 2021
(In thousands)
Severance$5,294 $10,374 $(4,537)$11,131 
Other restructuring charges30 8,562 (5,417)3,175 
$5,324 $18,936 $(9,954)$14,306 
(a) Other restructuring charges consist primarily of charges associated with the official exchange rate, becoming the new Tipo de Cambio Protegido (“DIPRO”) exchange rate. The existing Marginal Currency System (“SIMADI”) rate was renamed the Tipo de Cambio Complementario (“DICOM”) exchange rate. During the three months ended March 31, 2016,consolidation of manufacturing facilities and restructuring of commercial and corporate functions.
23

As of June 30, 2022, Mattel changed its remeasurement rate from the official exchange ratehad recorded cumulative severance and other restructuring charges related to the new DICOM exchange rate and recognized an unrealized foreign currency exchange lossProgram of approximately $26$106 million, which included approximately $24 million of non-cash charges. Furthermore, cumulatively, in other non-operating expense/income, net as a result ofconjunction with previous actions taken under the change in the remeasurement rate.Capital Light program, total expected cash expenditures are approximately $165 to $190 million and total expected non-cash charges are $70 to $75 million.
19.Income Taxes
Mattel’s19.     Income Taxes
Mattel's provision for income taxes was $614.4$26.6 million and $26.6$50.5 million for the ninethree and six months ended SeptemberJune 30, 20172022, respectively, and 2016,$20.6 million and $40.9 million for the three and six months ended June 30, 2021, respectively. During the three and six months ended June 30, 2022, Mattel recognized a net discrete tax expense of $561.5$2.4 million and $558.8 million during the three and nine months ended September 30, 2017, respectively, and net discrete tax benefitsexpense of $9.0$14.6 million, and $12.8 million during the three and nine months ended September 30, 2016, respectively, primarily related to income taxes recorded on a discrete basis in various jurisdictions and reassessments of tax liabilities from prior years. During the establishmentthree and six months ended June 30, 2021, Mattel
recognized a net discrete tax expense of $12.2 million and net discrete tax expense of $19.5 million, respectively, primarily related to income taxes recorded on a discrete basis in various jurisdictions, tax rate changes impacting deferred tax assets, and reassessments of tax liabilities from prior years.

Evaluating the need for and the amount of a valuation allowance and reassessments of prior years’ tax liabilities based on the status of audits and tax filings in various jurisdictions around the world.
Mattel regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Mattel considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred taxthese assets will not be realized. In evaluatingrealizable. Mattel routinely assesses the need for a valuation allowance, Mattel considered its recent operating results which resulted in a cumulative net operating loss in the U.S. for the 36-month period ending September 30, 2017. The 36-month cumulative U.S. loss from operations is considered strongpositive and negative evidence for this realizability, including the evaluation of sustained profitability and outweighs other positive subjective evidence, such as projectionsthree years of future income. As a result, incumulative pretax income for each tax jurisdiction. For the third quarterthree and six months ended June 30, 2021, Mattel establishedhad a valuation allowance on its U.S. federal, state, and statecertain foreign deferred tax assets. This resultsDuring the second half of 2021, Mattel released the valuation allowances related to U.S. federal, state, and certain foreign deferred tax assets, except for certain tax assets that are primarily expected to expire before utilization. Valuation allowance releases resulted in a discrete charge to the quarterrecognition of $561.9$540.8 million for the balance of these net deferred tax assets as of December 31, 2016. Further, Mattel has provided zero tax benefit in the year-to-date tax expense for items such as the year-to-date U.S. operating loss and other effects occurring in the current year. The2021. Mattel's valuation allowance does not impact Mattel's actual ability under applicable tax laws to utilize deferred tax assets suchposition has remained unchanged as loss carryforwards and tax credits to reduce future cash tax payments if and when sufficient income is earned prior to the expiration of the deferred tax assets. Mattel will continue to assess the likelihood that the deferred tax assets will be realizable at each period end.June 30, 2022.

In the normal course of business, Mattel is regularly audited by federal, state, and foreign tax authorities. Based on the current status of federal, state, and foreign audits, Mattel believes it is reasonably possible that in the next twelve12 months, the total unrecognized tax benefits could decrease by approximately $27$18.4 million related to the settlement of tax audits and/or the expiration of statutes of limitations. The ultimate settlement of any particular issue with the applicable taxing authority could have a material impact on Mattel’sMattel's consolidated financial statements.

20.Contingencies
Litigation Related to Carter BryantDuring the three and MGA Entertainment, Inc.
In April 2004,six months ended June 30, 2022, Mattel filedhas recorded on a lawsuit in Los Angeles County Superior Court against Carter Bryant (“Bryant”),discrete basis a formerdeferred tax liability on certain foreign subsidiaries of approximately $7.1 million and $14.8 million, respectively. For remaining undistributed foreign earnings, Mattel design employee. The suit alleges that Bryant aided and assisted a Mattel competitor, MGA Entertainment, Inc. (“MGA”), during the time he was employed by Mattel, in violation of his contractual and other duties to Mattel. In September 2004, Bryant asserted counterclaims against Mattel, including counterclaims in which Bryant sought, as a putative class action representative, to invalidate Mattel’s Confidential Information and Proprietary Inventions Agreements with its employees. Bryant also removed Mattel’s suit to the United States District Court for the Central District of California. In December 2004, MGA intervened as a party-defendant in Mattel’s action against Bryant, asserting that its rights to Bratz properties are at stake in the litigation.
Separately, in November 2004, Bryant filed an action against Mattel in the United States District Court for the Central District of California. The action sought a judicial declaration that Bryant’s purported conveyance of rights in Bratz was proper and that he didhas not misappropriate Mattel property in creating Bratz.


In April 2005, MGA filed suit against Mattel in the United States District Court for the Central District of California. MGA’s action alleges claims of trade dress infringement, trade dress dilution, false designation of origin, unfair competition, and unjust enrichment. The suit alleges, among other things, that certain products, themes, packaging, and/or television commercials in various Mattel product lines have infringed upon products, themes, packaging, and/or television commercials for various MGA product lines, including Bratz. The complaint also asserts that various alleged Mattel actsprovided any deferred taxes with respect to unidentified retailers, distributors,items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S. because those foreign earnings are considered indefinitely reinvested in the business or may be remitted substantially free of any additional local taxes. The determination of any incremental tax liability associated with these earnings is not practicable due to the complexity of local country withholding rules and licensees have damaged MGAinteractions with tax treaties, foreign exchange considerations, and that various alleged acts by industry organizations, purportedly induced bythe diversity of state income tax treatment on actual distribution. Mattel have damaged MGA. MGA’s suit alleges that MGAwill remit reinvested earnings of its foreign subsidiaries for which a deferred tax liability has been damaged in an amount “believed to reach or exceed tens of millions of dollars” and further seeks punitive damages, disgorgement of Mattel’s profits and injunctive relief.
In June 2006, the three cases were consolidated in the United States District Court for the Central District of California. On July 17, 2006, the Court issued an order dismissing all claims that Bryant had asserted againstrecorded when Mattel including Bryant’s purported counterclaims to invalidate Mattel’s Confidential Information and Proprietary Inventions Agreements with its employees, and Bryant’s claims for declaratory relief.
On January 12, 2007, Mattel filed an Amended Complaint setting forth counterclaims that included additional claims against Bryant as well as claims for copyright infringement, Racketeer Influenced and Corrupt Organizations (“RICO”) violations, misappropriation of trade secrets, intentional interference with contract, aiding and abetting breach of fiduciary duty and breach of duty of loyalty, and unfair competition, among others, against MGA, its Chief Executive Officer Isaac Larian, certain MGA affiliates and an MGA employee. The RICO claim alleged that MGA stole Bratz and then, by recruiting and hiring key Mattel employees and directing them to bring with them Mattel confidential and proprietary information, unfairly competed against Mattel using Mattel’s trade secrets, confidential information, and key employees to build their business.
Mattel sought to try all of its claims in a single trial, but in February 2007, the Court decided that the consolidated cases would be tried in two phases, with the first trial to determine claims and defenses related to Mattel’s ownership of Bratz works and whether MGA infringed those works. On May 19, 2008, Bryant reached a settlement agreement with Mattel and is no longer a defendant in the litigation. In the public stipulation entered by Mattel and Bryant in connection with the resolution, Bryant agreed that he was and would continue to be bound by all prior and future Court Orders relating to Bratz ownership and infringement, including the Court’s summary judgment rulings.
The first phase of the first trial resulted in a unanimous jury verdict on July 17, 2008 in favor of Mattel. The jury found that almost all of the Bratz design drawings and other works in question were created by Bryant while he was employed at Mattel; that MGA and Isaac Larian intentionally interfered with the contractual duties owed by Bryant to Mattel, aided and abetted Bryant’s breaches of his duty of loyalty to Mattel, aided and abetted Bryant’s breaches of the fiduciary duties he owed to Mattel, and converted Mattel property for their own use. The same jury determined that defendants MGA, Larian, and MGA Entertainment (HK) Limited infringed Mattel’s copyrights in the Bratz design drawings and other Bratz works, and awarded Mattel total damages of approximately $100 million against the defendants. On December 3, 2008, the Court issued a series of orders rejecting MGA’s equitable defenses and granting Mattel’s motions for equitable relief, including an order enjoining the MGA party defendants from manufacturing, marketing, or selling certain Bratz fashion dolls or from using the “Bratz” name. The Court stayed its December 3, 2008 injunctive orders until further order of the Court.
The parties filed and argued additional motions for post-trial relief, including a request by MGA to enter judgment as a matter of law on Mattel’s claims in MGA’s favor and to reduce the jury’s damages award to Mattel. Mattel additionally moved for the appointment of a receiver. On April 27, 2009, the Court entered an order confirming that Bratz works found by the jury to have been created by Bryant during his Mattel employment were Mattel’s property and that hundreds of Bratz female fashion dolls infringe Mattel’s copyrights. The Court also upheld the jury’s award of damages in the amount of $100 million and ordered an accounting of post-trial Bratz sales. The Court further vacated the stay of the December 3, 2008 orders.
MGA appealed the Court’s equitable orders to the Court of Appeals for the Ninth Circuit. On December 9, 2009, the Ninth Circuit heard oral argument on MGA’s appeal and issued an order staying the District Court’s equitable orders pending a further order to be issued by the Ninth Circuit. On July 22, 2010, the Ninth Circuit vacated the District Court’s equitable orders. The Ninth Circuit stated that, because of several jury instruction errors it identified, a significant portion-if not all-of the jury verdict and damage award should be vacated.


In its opinion, the Ninth Circuit found that the District Court erred in concluding that Mattel’s Invention Agreement unambiguously applied to “ideas;” that it should have considered extrinsic evidence in determining the application of the agreement; and if the conclusion turns on conflicting evidence, it should have been up to the jury to decide. The Ninth Circuit also concluded that the District Judge erred in transferring the entire brand to Mattel based on misappropriated names and that the Court should have submitted to the jury, rather than deciding itself, whether Bryant’s agreement assigned works created outside the scope of his employment and whether Bryant’s creation of the Bratz designs and sculpt was outside of his employment. The Court then went on to address copyright issues which would be raised after a retrial, since Mattel “might well convince a properly instructed jury” that it owns Bryant’s designs and sculpt. The Ninth Circuit stated that the sculpt itself was entitled only to “thin” copyright protection against virtually identical works, while the Bratz sketches were entitled to “broad” protection against substantially similar works; in applying the broad protection, however, the Ninth Circuit found that the lower court had erred in failing to filter out all of the unprotectable elements of Bryant’s sketches. This mistake, the Court said, caused the lower court to conclude that all Bratz dolls were substantially similar to Bryant’s original sketches.
Judge Stephen Larson, who presided over the first trial, retired from the bench during the course of the appeal, and the case was transferred to Judge David O. Carter. After the transfer, Judge Carter granted Mattel leave to file a Fourth Amended Answer and Counterclaims which focused on RICO, trade secret and other claims, and added additional parties, and subsequently granted in part and denied in part a defense motion to dismiss those counterclaims.
Later, on August 16, 2010, MGA asserted several new claims against Mattel in response to Mattel’s Fourth Amended Answer and Counterclaims, including claims for alleged trade secret misappropriation, an alleged violation of RICO, and wrongful injunction. MGA alleged, in summary, that, for more than a decade dating back to 1992, Mattel employees engaged in a pattern of stealing alleged trade secret information from competitors “toy fair” showrooms, and then sought to conceal that alleged misconduct. Mattel moved to strike and/or dismiss these claims, as well as certain MGA allegations regarding Mattel’s motives for filing suit. The Court granted that motion as to the wrongful injunction claim, which it dismissed with prejudice, and as to the allegations about Mattel’s motives, which it struck. The Court denied the motion as to MGA’s trade secret misappropriation claim and its claim for violations of RICO.
The Court resolved summary judgment motions in late 2010. Among other rulings, the Court dismissed both parties’ RICO claims; dismissed Mattel’s claim for breach of fiduciary duty and portions of other claims as “preempted” by the trade secrets act; dismissed MGA’s trade dress infringement claims; dismissed MGA’s unjust enrichment claim; dismissed MGA’s common law unfair competition claim; and dismissed portions of Mattel’s copyright infringement claim as to “later generation” Bratz dolls.
Trial of all remaining claims began in early January 2011. During the trial, and before the case was submitted to the jury, the Court granted MGA’s motions for judgment as to Mattel’s claims for aiding and abetting breach of duty of loyalty and conversion. The Court also granted a defense motion for judgment on portions of Mattel’s claim for misappropriation of trade secrets relating to thefts by former Mattel employees located in Mexico.
The jury reached verdicts on the remaining claims in April 2011. In those verdicts, the jury ruled against Mattel on its claims for ownership of Bratz-related works, for copyright infringement, and for misappropriation of trade secrets. The jury ruled for MGA on its claim of trade secret misappropriation as to 26 of its claimed trade secrets and awarded $88.5 million in damages. The jury ruled against MGA as to 88 of its claimed trade secrets. The jury found that Mattel’s misappropriation was willful and malicious.
In early August 2011, the Court ruled on post-trial motions. The Court rejected MGA’s unfair competition claims and also rejected Mattel’s equitable defenses to MGA’s misappropriation of trade secrets claim. The Court reduced the jury’s damages award of $88.5 million to $85.0 million. The Court awarded MGA an additional $85.0 million in punitive damages and approximately $140 million in attorney’s fees and costs. The Court entered a judgment which totaled approximately $310 million in favor of MGA.
On August 11, 2011, Mattel appealed the judgment, challenging on appeal the entirety of the District Court’s monetary award in favor of MGA, including both the award of $170 million in damages for alleged trade secret misappropriation and approximately $140 million in attorney’s fees and costs. On January 24, 2013, the Ninth Circuit Court of Appeals issued a ruling on Mattel’s appeal. In that ruling, the Court found that MGA’s claim for trade secrets misappropriation was not compulsory to any Mattel claim and could not be filed as a counterclaim-in-reply. Accordingly, the Court of Appeals vacated the portion of the judgment awarding damages and attorney’s fees and costs to MGA for prevailing on its trade secrets misappropriation claim, totaling approximately $172.5 million. It ruled that, on remand, the District Court must dismiss MGA’s trade secret claim without prejudice. In its ruling, the Court of Appeals also affirmed the District Court’s award of attorney’s fees and costs under the Copyright Act. Accordingly, Mattel recorded a litigation accrual of approximately $138 million during the fourth quarter of 2012 to cover these fees and costs.


Because multiple claimants asserted rights to the attorney’s fees portion of the judgment, on February 13, 2013, Mattel filed a motion in the District Court for orders permitting Mattel to interplead the proceeds of the judgment and releasing Mattel from liability to any claimant based on Mattel’s payment of the judgment.
On February 27, 2013, MGA filed a motion for leave to amend its prior complaint in the existing federal court lawsuit so that it could reassert its trade secrets claim. Mattel opposed that motion. On December 17, 2013, the District Court denied MGA’s motion for leave to amend and entered an order dismissing MGA’s trade secrets claim without prejudice. Also on December 17, 2013, following a settlement between MGA and certain insurance carriers, the District Court denied Mattel’s motion for leave to interplead the proceeds of the judgment.
On December 21, 2013, a stipulation regarding settlement with insurers and payment of judgment was filed in the District Court, which provided that (i) Mattel would pay approximately $138 million, including accrued interest, in full satisfaction of the copyright fees judgment, (ii) all parties would consent to entry of an order exonerating and discharging the appeal bond posted by Mattel, and (iii) MGA’s insurers would dismiss all pending actions related to the proceeds of the copyright fees judgment, including an appeal by Evanston Insurance Company in an action against Mattel that was pending in the Ninth Circuit. On December 23, 2013, Mattel paid the copyright fees judgment in the total sum, including interest, of approximately $138 million. On December 26, 2013, the District Court entered an order exonerating and discharging the appeal bond posted by Mattel, and on December 27, 2013, MGA filed an acknowledgment of satisfaction of judgment. On December 30, 2013, Evanston Insurance Company’s appeal in its action against Mattel was dismissed.
On January 13, 2014, MGA filed a new, but virtually identical, trade secrets claim against Mattel in Los Angeles County Superior Court. In its complaint, MGA purports to seek damages in excess of $1 billion. Mattel believes that MGA’s claim should be barred as a matter of law, and intends to vigorously defend against it. On December 3, 2014, the Court overruled Mattel’s request to dismiss MGA’s case as barred as a result of prior litigation between the parties. In light of that ruling, Mattel believesdetermines that it is reasonably possible that damages in this matter could range from $0 to approximately $12.5 million. In addition, Mattel believes that if such damages are awarded, it is reasonably possible that pre-judgment interest, ranging from $0 to approximately $12.0 million, could be awarded. Mattel may be entitled to an offset against any damages awarded to MGA. Mattel has not quantified the amount of any such offset as it is not currently estimable. As Mattel believes a loss in this matter is reasonably possible but not probable, no liability has been accrued to date.advantageous for business operations or cash management purposes.
20.     Contingencies
Litigation Related to Yellowstone do Brasil Ltda.
In April 1999, Yellowstone do Brasil Ltda.Ltd. (formerly known as Trebbor Informática Ltda.) was a customer of Mattel’s subsidiary Mattel do Brasil Ltda. when a commercial dispute arose between Yellowstone and Mattel do Brasil regarding the supply of product and related payment terms. As a consequence of the dispute, in April 1999, Yellowstone filed a declarative actionlawsuit against Mattel do Brasil before the 15th15th Civil Court of Curitiba, - State of Parana, (the “Trial Court”), requesting the annulment of its security bonds and promissory notes given to Mattel do Brasil as well as requesting the Trial Courtdamages due to find Mattel do Brasil liable for damages incurred as a result of Mattel do Brasil’san alleged abrupt and unreasonable breach of an oral exclusive distribution agreement between the parties relating to the supply and sale of toys in Brazil. Yellowstone’s complaintYellowstone's complaints sought alleged loss of profits of approximately $1 million, plus an unspecified amount of damages consisting of: (i) compensation for all investments made by Yellowstone to develop Mattel do Brasil’s business; (ii) reimbursement of the amounts paid by Yellowstone to terminate labor and civil contracts in connection with the business; (iii) compensation for alleged unfair competition and for the goodwill of trade; and (iv) compensation for non-pecuniary damages.
Mattel do Brasil filed its defenses to these claims and simultaneously presented a counterclaim for unpaid accounts receivable for goods supplied to Yellowstone in the approximate amount of $4 million.Yellowstone.
During the evidentiary phase a first accounting report was submitted by a court-appointed expert. Such report stated that Yellowstone had invested approximately $3 million in its business. Additionally, the court-appointed expert calculated a loss of profits compensation of approximately $1 million.In April 2018, Mattel do Brasil challengedentered into a settlement agreement to resolve this matter, but the report since itsettlement was not made based on the official accounting documents of Yellowstone and since the report calculated damages based only on documents unilaterally submitted by Yellowstone.
The Trial Court accepted the challenge and ruled that a second accounting examination should take place in the lawsuit. Yellowstone appealed the decision to the Court of Appeals of the State of Parana (the “Appeals Court”), but it was upheldlater rejected by the Appeals Court.
The second court-appointed expert’s report submitted at trial did not assigncourts, subject to a value to any of Yellowstone’s claims and found no evidence of causation between Mattel do Brasil’s actions and such claims.


pending appeal by Mattel.
In January 2010, the Trial Court ruled in favor of Mattel do Brasil and denied all of Yellowstone’s claims based primarily on the lack of any causal connection between the acts of Mattel do Brasil and Yellowstone’s alleged damages. Additionally, the Trial Court upheld Mattel do Brasil’s counterclaim and ordered Yellowstone to pay Mattel do Brasil approximately $4 million. The likelihood of Mattel do Brasil recovering this amount was uncertain due to the fact that Yellowstone was declared insolvent and filed for bankruptcy protection. In February 2010, Yellowstone filed a motion seeking clarification of the decision which was denied.
In September 2010, Yellowstone filed a further appeal with the Appeals Court. Under Brazilian law, the appeal was de novo and Yellowstone restated all of the arguments it made at the Trial Court level. Yellowstone did not provide any additional information supporting its unspecified alleged damages. The Appeals Court held hearings on the appeal in March and April 2013. On July 26, 2013, the Appeals Court awarded Yellowstone approximately $17 million in damages, plus attorney's fees, as adjusted for inflation and interest. The Appeals Court also awarded Mattel do Brasil approximately $7.5 million on its counterclaim, as adjusted for inflation. On August 2, 2013, Mattel do Brasil filed a motion with the Appeals Court for clarification since the written decision contained clear errors in terms of amounts awarded and interest and inflation adjustments. Mattel do Brasil’s motion also asked the Appeals Court to decide whether Yellowstone’s award could be offset by the counterclaim award, despite Yellowstone’s status as a bankrupt entity. Yellowstone also filed a motion for clarification on August 5, 2013. A decision on the clarification motions was rendered on November 11, 2014, and the Appeals Court accepted partially the arguments raised by Mattel do Brasil. As a result, the Appeals Court awarded Yellowstone approximately $14.5 million in damages, as adjusted for inflation and interest, plus attorney's fees. The Appeals Court also awarded Mattel do Brasil approximately $7.5 million on its counterclaim, as adjusted for inflation. The decision also recognized the existence of legal rules that support Mattel do Brasil’s right to offset its counterclaim award of approximately $7.5 million. Mattel do Brasil filed a new motion for clarification with the Appeals Court on January 21, 2015, due to the incorrect statement made by the reporting judge of the Appeals Court, that the court-appointed expert analyzed the “accounting documents” of Yellowstone. On April 26, 2015, a decision on the motion for clarification was rendered. The Appeals Court ruled that the motion for clarification was denied and imposed a fine on Mattel do Brasil equal to 1% of the value of the claims made for the delay caused by the motion. On July 3, 2015, Mattel do Brasil filed a special appeal toOctober 2018, the Superior Court of Justice based upon both procedural and substantive grounds. This special appeal seeks to reverse the Appeals Court's decisionissued a final ruling in favor of July 26, 2013, and to reverse the fine as inappropriate under the law. This special appeal was submitted to the Appeals Court which must rule on its admissibility before it is transferred to the Superior Court.
Yellowstone also filed a special appeal with the Appeals Court in February 2015, which was made available to Mattel do Brasil on October 7, 2015. Yellowstone's special appeal seeks to reverse the Appeals Court decision with respect to: (a) the limitation on Yellowstone's loss of profits claim to the amount requested in the complaint, instead of the amount contained in the first court-appointed experts report, and (b) the award of damages to Mattel do Brasil on the counterclaim, since the specific amount was not requested in Mattel do Brasil's counterclaim brief.
On October 19, 2015, Mattel do Brasil filed its answer to the special appeal filed by Yellowstone and Yellowstone filed its answer to the special appeal filed by Mattel do Brasil. On April 4, 2016, the Appeals Court rendered a decision denying the admissibility of Mattel’s and Yellowstone’s special appeals. On May 11, 2016, both Mattel and Yellowstone filed interlocutory appeals and are awaiting the decision.
On August 31, 2017, the reporting justice for the Appeals Court denied Yellowstone’s interlocutory appeal. As to Mattel, the reporting justice reversed the fine referenced above that had been previously imposed on Mattel for filing a motion for clarification. However, the reporting justice rejected Mattel’s arguments on the merits of Yellowstone’s damagesYellowstone's claims. On September 22, 2017,Previously, the courts had ruled in Mattel's favor on its counterclaim.
24

In October 2019, Mattel filed a furtherreached an agreement with Yellowstone's former counsel regarding payment of the attorney's fees portion of the judgment. In November 2019, Yellowstone initiated an action to enforce its judgment against Mattel, but did not account for an offset for Mattel's counterclaim. In January 2020, Mattel obtained an injunction, staying Yellowstone's enforcement action pending resolution of Mattel's appeal to enforce the full panelparties' April 2018 settlement. As of five appellate justicesJune 30, 2022, Mattel assessed its probable loss related to challenge the meritsYellowstone matter and has accrued a reserve, which is not material.

Litigation Related to the Fisher-Price Rock 'n Play Sleeper
A number of Yellowstone’s damages claims. Yellowstone did not file a further appeal.
putative class action lawsuits filed between April 2019 and October 2019 are pending against Fisher-Price, Inc. and/or Mattel, believes that it is reasonably possible that a lossInc. asserting claims for false advertising, negligent product design, breach of warranty, fraud, and other claims in this matter could range from $0 to approximately $18.5 million. The high end of this range, approximately $18.5 million, is based onconnection with the calculationmarketing and sale of the current amount ofFisher-Price Rock 'n Play Sleeper (the "Sleeper"). In general, the damages (reported inlawsuits allege that the first court-appointed examination report submitted in the lawsuit),Sleeper should not have been marketed and loss of profits (indicated in the complaint by Yellowstone), including interest, inflation, currency adjustments, plus attorney's fees. Mattel do Brasil will be entitled to offset its counterclaim award of approximately $7.5 million, the current amount including inflation,sold as safe and currency adjustment, against such loss.fit for prolonged and overnight sleep for infants. The existence of procedural matters that will be addressed to the Superior Court of Justice adds some uncertainty to the final outcome of the matter. Mattel do Brasil believes, however, that it has valid legal grounds for an appeal of the Appeals Court decision. Mattel do Brasil may be required by the Trial Court to place a bond for the full amount of the damage award in escrow pending an appeal decision by the Superior Court. As Mattel believes a loss in this matter is reasonably possible but not probable, no liability has been accrued to date.


Securities Litigation
Two stockholders have filed purportedputative class action lawsuits propose nationwide and over 10 statewide consumer classes comprised of those who purchased the Sleeper as marketed as safe for prolonged and overnight sleep. The class actions have been consolidated before a single judge in the United States District Court for the CentralWestern District of California (Waterford Township Police & Fire Retirement SystemNew York for pre-trial purposes pursuant to the federal courts’ Multi-District Litigation program. In June 2022, the court denied the plaintiffs' motion to certify damages and injunctive relief classes under New York law, but granted plaintiffs' request to certify a New York issue class to resolve two issues on a classwide basis. Plaintiffs have filed a petition for leave to appeal the court's denial of certification to the United States Court of Appeals for the Second Circuit. Mattel has filed a response opposing that petition and, in the alternative, a cross-petition to appeal the portion of the order certifying the issue class.
Thirty-six additional lawsuits filed between April 2019 and July 2022 are pending against Fisher-Price, Inc. and Mattel, Inc. alleging that a product defect in the Sleeper caused the fatalities of or injuries to 40 children. Several lawsuits have been settled and/or dismissed. Additionally, Fisher-Price, Inc. and/or Mattel, Inc. have also received letters from lawyers purporting to represent additional plaintiffs who are threatening to assert similar claims.
In addition, a stockholder has filed a derivative action in the Court of Chancery for the State of Delaware (Kumar v. Mattel, Inc., et al., filed June 27, 2017; and Lathe v. Mattel, Inc.,Bradley, et al., filed July 6, 2017) against Mattel, Christopher A. Sinclair, Richard Dickson, Kevin M. Farr,7, 2020) alleging breach of fiduciary duty and Joseph B. Johnson alleging federal securities laws violations in connection with statements allegedly made by the defendants during the period October 20, 2016 through April 20, 2017. In general, the lawsuits assert the same or similar allegations, including that the defendants artificially inflated Mattel’s common stock price by knowingly making materially false and misleading statements and omissionsunjust enrichment related to the investing public about retail customer inventory,development, marketing, and sale of the alignment between point-of-saleSleeper. The defendants in the derivative action are certain of Mattel's current and shipping data,former officers and Mattel’s overall financial condition. The lawsuits allege thatdirectors. In August 2020, the defendants’ conduct causedderivative action was stayed pending further developments in the plaintiffs and other stockholders to purchase Mattel common stock at artificially inflated prices. By an order dated September 29, 2017,class action lawsuits. In August 2021, a second similar derivative action was filed in the two actions were ordered consolidated and a lead plaintiff was appointed.Court of Chancery for the State of Delaware (Armon v. Bradley, et al., filed August 30, 2021), which is also stayed.
The lawsuits seek unspecified compensatory damages, punitive damages, statutory damages, restitution, disgorgement, attorneys’ fees, expert fees, and costs.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.
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
21.Segment Information
In December 2019 and January 2020, 2 stockholders filed separate complaints styled as class actions against Mattel, Inc. and certain of its former officers (the "Mattel Defendants"), as well as others, in the United States District Court for the Central District of California, alleging violations of federal securities laws. The two complaints were consolidated in April 2020 and an amended complaint was filed in May 2020. The complaints rely on the results of an investigation announced by Mattel in October 2019 regarding allegations in a whistleblower letter and claim that Mattel misled the market in several of its financial statements beginning in the third quarter of 2017. The lawsuits allege that the defendants' conduct caused the 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. 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.
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In addition, a stockholder has 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). NaN additional derivative actions asserting similar claims are also pending in the Court of Chancery for the State of Delaware (Owen v. Euteneuer, et al., filed May 12, 2021; Andersen v. Georgiadis, et al., filed May 18, 2021; Armon v. Euteneuer, et al., filed June 29, 2021; Haag v. Euteneuer, et al., filed September 9, 2021; Shumacher v. Kreiz, et al., filed October 19, 2021; Mizell v. 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 filed with the Court of Chancery on July 1, 2022 and remains subject to court approval, Mattel will receive a settlement payment in the amount of $7 million, less attorneys' fees, to be paid by Mattel's insurers and PwC, and further agreed to institute certain governance enhancements requested by the plaintiffs. The settlement does not entail any admission of fault or liability by any of the defendants.
The lawsuits seek unspecified compensatory and punitive damages, attorneys' fees, expert fees, costs, equitable relief and/or injunctive relief. Mattel believes that the allegations in the lawsuits are without merit and intends to vigorously defend against them. Mattel believes that the estimated loss, if any, will be immaterial.

Mattel throughhas also received subpoenas from the Securities and Exchange Commission (the "SEC"), seeking documents related to the whistleblower letter and subsequent investigation, and has responded to those subpoenas. Mattel has also responded to requests from the United States Attorney's Office for the Southern District of New York ("SDNY") related to this matter. Mattel is in discussions with the SEC about resolving the matter. As of June 30, 2022, Mattel assessed its subsidiaries, sellsprobable loss related to this matter and has accrued a reserve, which is not material. Mattel cannot predict the ultimate outcome of any potential investigation resolution or legal action in this matter, or whether such outcome will result in a material impact on Mattel’s financial condition, results of operations, or cash flows.
21.     Segment Information
Mattel designs, manufactures, and markets a broad variety of toy products worldwide, which are grouped into four major brand categories:
Mattel Girls & Boys Brands—including Barbie® fashion dollssold to its customers and accessories (“Barbie”), Monster High®, Ever After High®, Polly Pocket®, and DC Super Hero Girls™ (collectively “Other Girls”), Hot Wheels® and Matchbox® vehicles and play sets (collectively “Wheels”), and CARS®, DC Comics®, WWE® Wrestling, Minecraft®, Max Steel®, BOOMco.®, Toy Story®, and games and puzzles (collectively “Entertainment”).
Fisher-Price Brands—including Fisher-Price®, Little People®, BabyGear™, Laugh & Learn®, and Imaginext® (collectively “Core Fisher-Price”), Thomas & Friends®, Dora the Explorer®, Mickey Mouse® Clubhouse, and Disney Jake and the Never Land Pirates® (collectively “Fisher-Price Friends”), and Power Wheels®.
American Girl Brands—including Truly Me®, Girl of the Year®, BeForever®, Bitty Baby®, and WellieWishers™. American Girl® Brands products are sold directly to consumers via its catalog, website, and proprietary retail stores, as well as sold directly to certain retailers.consumers.
Construction and Arts & Crafts Brands—including MEGA BLOKS® and RoseArt®.Segment Data
Mattel’sMattel's operating segments are: (i) North America, which consists of the USU.S. and Canada,Canada; (ii) International,International; and (iii) American Girl. The North America and International segments sell products in the Mattel Girls & Boys Brands, Fisher-Price Brands, and Construction and Arts & Crafts Brandsacross categories, although some products are developed and adapted for particular international markets.
Segment Data
The following tables present information about revenues,regarding net sales, operating income (loss), and assets by segment. In the following tables, Mattel does not include sales adjustments such as trade discounts and other allowances in the calculation of segment revenues (referred to as “gross sales” and reconciled to net sales in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Non-GAAP Financial Measures” of this Quarterly Report on Form 10-Q). Mattel records these adjustments in its financial accounting systems at the time of sale to each customer, but the adjustments are not allocated to brands or individual products. For this reason, Mattel’s chief operating decision maker uses gross sales by segment as one of the metrics to measure segment performance. Such sales adjustments are included in the determination of segment income from operations based on the adjustments recorded in the financial accounting systems. Segment income represents each segment’s operating income, while consolidated operating income represents income from operations before net interest, other non-operating expense/income, net, and income taxes as reported in the consolidated statements of operations. The corporate and other expense category includes operating costs not allocated to individual segments, including charges related to incentive compensation,and share-based payments, andcompensation, corporate headquarters functions managed on a worldwide basis, and the impact of changes in foreign currency exchange rates on intercompany transactions.transactions, and certain severance and other restructuring costs.


It is impracticable for Mattel to present net sales by categories, brands, or products, as trade discounts and other allowances are generally recorded in the financial accounting systems by customer.
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For the Three Months EndedFor the Six Months Ended
For the Three Months Ended For the Nine Months Ended June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016		 (In thousands)
(In thousands)
Revenues by Segment       
Net Sales by SegmentNet Sales by Segment
North America$839,341
 $1,071,030
 $1,708,901
 $2,077,147
North America$726,504 $560,830 $1,328,621 $1,040,489 
International776,947
 774,211
 1,637,031
 1,614,169
International476,396 424,897 880,238 $774,252 
American Girl93,876
 130,109
 247,376
 298,933
American Girl32,787 40,639 68,128 85,817 
Gross sales1,710,164
 1,975,350
 3,593,308
 3,990,249
Sales adjustments(149,181) (179,775) (322,230) (367,999)
Net sales$1,560,983
 $1,795,575
 $3,271,078
 $3,622,250
Net sales$1,235,687 $1,026,366 $2,276,987 $1,900,558 
 For the Three Months EndedFor the Six Months Ended
 June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
 (In thousands)
Operating Income (Loss) by Segment (a)
North America$198,887 $149,600 $370,300 $274,451 
International58,350 50,758 105,184 87,018 
American Girl5,765 (9,725)(11,462)(19,290)
263,002 190,633 464,022 342,179 
Corporate and other expense (b)(137,922)(141,493)(258,875)(259,168)
Operating Income125,080 49,140 205,147 83,011 
Interest expense32,811 38,144 65,860 168,627 
Interest (income)(1,959)(584)(3,161)(1,403)
Other non-operating expense (income), net7,147 533 16,259 (555)
Income (Loss) Before Income Taxes$87,081 $11,047 $126,189 $(83,658)
 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (In thousands)
Segment Income (Loss)       
North America$86,240
 $265,597
 $109,623
 $371,096
International81,307
 150,232
 48,140
 155,949
American Girl(14,601) 28,056
 (38,558) 21,850
 152,946
 443,885
 119,205
 548,895
Corporate and other expense (a)(67,244) (126,489) (209,208) (292,305)
Operating income (loss)85,702
 317,396
 (90,003) 256,590
Interest expense24,646
 24,989
 68,557
 70,133
Interest (income)(1,575) (2,477) (6,337) (7,550)
Other non-operating expense, net1,368
 856
 5,928
 23,210
Income (loss) before income taxes$61,263
 $294,028
 $(158,151) $170,797
(a)Segment operating income (loss) included (i) severance and restructuring expenses of $5.8 million and $8.4 million for the three and six months ended June 30, 2022, respectively, and $(0.2) million and $1.8 million, for the three and six months ended June 30, 2021, respectively, which were allocated to the North America and International segments, and (ii) a gain on sale of assets of $15.2 million from the sale of the American Girl corporate office and distribution center for the three months and six months ended June 30, 2022, which was recorded in the American Girl segment.
__________________________________________ (b)Corporate and other expense included (i) severance and restructuring charges of $5.8 million and $12.6 million for the three and six months ended June 30, 2022, respectively, and $10.7 million and $16.5 million for the three and six months ended June 30, 2021, respectively, (ii) no expenses related to inclined sleeper product recall litigation for the three months ended June 30, 2022 and $0.6 million for the six months ended June 30, 2022, and $6.8 million and $12.1 million, for the three and six months ended June 30, 2021, respectively, and (iii) a gain on sale of assets of $15.8 million from the sale of a manufacturing plant in Mexico for the six months ended June 30, 2021.
(a)Corporate and other expense includes severance and restructuring expenses of $12.6 million and $21.5 million for the three and nine months ended September 30, 2017, respectively, and $6.4 million and $33.6 million for the three and nine months ended September 30, 2016, respectively, and share-based compensation expense of $17.0 million and $47.6 million for the three and nine months ended September 30, 2017, respectively, and $12.4 million and $38.7 million for the three and nine months ended September 30, 2016, respectively.
Segment assets are comprised of accounts receivable and inventories, net of applicable reservesallowances and allowances.reserves.
June 30,
2022		June 30,
2021		December 31,
2021
 (In thousands)
Assets by Segment
North America$1,026,173 $686,959 $784,836 
International809,990 644,450 798,833 
American Girl72,806 51,453 52,168 
1,908,969 1,382,862 1,635,837 
Corporate and other257,776 219,259 214,031 
Accounts receivable and inventories, net$2,166,745 $1,602,121 $1,849,868 
27

 September 30,
2017		 September 30,
2016		 December 31,
2016
 (In thousands)
Assets by Segment     
North America$1,060,312
 $1,050,120
 $677,203
International1,144,772
 1,049,008
 766,584
American Girl197,110
 184,101
 154,924
 2,402,194
 2,283,229
 1,598,711
Corporate and other93,946
 156,125
 130,304
Accounts receivable, net and inventories$2,496,140
 $2,439,354
 $1,729,015


Geographic Information
The table below presents worldwide revenuesinformation by brand category:
 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (In thousands)
Worldwide Revenues by Brand Category       
Mattel Girls & Boys Brands$967,028
 $1,061,113
 $2,018,017
 $2,142,665
Fisher-Price Brands561,610
 661,489
 1,143,466
 1,280,435
American Girl Brands88,008
 125,499
 234,181
 286,910
Construction and Arts & Crafts Brands84,599
 118,605
 176,076
 252,802
Other8,919
 8,644
 21,568
 27,437
Gross sales1,710,164
 1,975,350
 3,593,308
 3,990,249
Sales adjustments(149,181) (179,775) (322,230) (367,999)
Net sales$1,560,983
 $1,795,575
 $3,271,078
 $3,622,250
22.New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition, and most industry-specific guidance.  The core principlegeographic area. Net sales are attributed to countries based on location of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The new guidance establishes a five-step model to achieve that core principle and also requires additional disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts.  ASU 2014-09 was originally effective for interim and annual reporting periods beginning after December 15, 2016.  customer.
 For the Three Months EndedFor the Six Months Ended
 June 30,
2022		June 30,
2021		June 30,
2022		June 30,
2021
 (In thousands)
Net Sales by Geographic Area
North America$759,291 $601,469 $1,396,749 $1,126,306 
International
EMEA270,910 246,816 548,652 484,985 
Latin America124,752 92,477 196,725 148,755 
Asia Pacific80,734 85,604 134,861 140,512 
Total International476,396 424,897 880,238 774,252 
Net sales$1,235,687 $1,026,366 $2,276,987 $1,900,558 
22.     New Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In August 2015,November 2021, the FASB issued ASU 2015-14, Revenue from Contracts with Customers - Deferral2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance, which requires business entities to disclose information about certain government assistance by applying the grant or contribution model. Mattel adopted the guidance on January 1, 2022. The adoption of the Effective Date, which defers the effective date to annual reporting periods beginning after December 15, 2017.  Early application is permitted after December 15, 2016.  new accounting standard does not currently have a material impact on Mattel's consolidated financial statements.
Accounting Pronouncements Not Yet Adopted

In March 2016,2020 and January 2021, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies2020-04, Reference Rate Reform (Topic 848): Facilitation of the implementation guidanceEffects of Reference Rate Reform on principal versus agent considerations,Financial Reporting and ASU 2016-10, Identifying Performance Obligations2021-01, Reference Rate Reform (Topic 848): Scope, respectively. ASU 2020-04 and Licensing, which clarifies the identification of performance obligationsASU 2021-01 provide optional expedients and the licensing implementation guidance.  In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers - Narrow-Scope Improvements and Practical Expedients, which clarifies guidance on assessing collectibility, presenting sales taxesexceptions for applying U.S. GAAP, to contracts, hedging relationships, and other similar taxes collected from customers, measuring noncash consideration, andtransactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform, if certain transition matters.criteria are met. The guidance in ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10,2020- 04 and ASU 2016-12 (collectively, the “new revenue standards”) will2021-01 was effective upon issuance and, once adopted, may be effective for interimapplied prospectively to contract modifications and annual reporting periods beginning on January 1, 2018. Uponhedging relationships through December 31, 2022.The adoption Mattel will recognize the cumulative effect of adopting this guidance as an adjustment to the opening balance of retained earnings. Prior periods willASU 2020-04 and ASU 2021-01 is not be retrospectively adjusted. Mattel continues to make progress in its implementation and assessment of the new revenue standards. While the completion of this assessment is still ongoing and certain licensing contracts will be impacted by the new revenue standards, Mattel does not expect the new standardsexpected to have a material impact on its revenue recognition accounting policy and itsMattel's consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, which requires a lessee to recognize a lease asset and lease liability on its balance sheet for all leases with a term greater than 12 months. ASU 2016-02 will be effective for interim and annual reporting periods beginning on January 1, 2019. Mattel is currently evaluating the impact of the adoption of ASU 2016-02 on its operating results and financial position.
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In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which adds and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 will be effective for interim and annual reporting periods beginning on January 1, 2018. Mattel is currently evaluating the impact of the adoption of ASU 2016-15 on its operating results and financial position.

In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 will be effective for interim and annual reporting periods beginning on January 1, 2018. Mattel is currently evaluating the impact of the adoption of ASU 2016-16 on its operating results and financial position.


In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses and refines the definition of the term output. ASU 2017-01 will be effective for interim and annual reporting periods beginning on January 1, 2018. Mattel is currently evaluating the impact of the adoption of ASU 2017-01 on its operating results and financial position.
In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, which clarifies the scope on recently established guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. ASU 2017-05 will be effective for interim and annual reporting periods beginning on January 1, 2018. Mattel is currently evaluating the impact of the adoption of ASU 2017-05 on its operating results and financial position.
In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires entities that sponsor defined benefit plans to (i) present service cost within operations, if such a subtotal is presented, (ii) other components of net benefit costs should be presented separately outside of income from operations, if such a subtotal is presented, and (iii) only the service cost component should be capitalized, when applicable. If a separate line item is not used, the line item in the income statement where the other components of net benefit costs are included must be disclosed. Further, gains and losses from curtailments and settlements, and the cost of certain termination benefits should be reported in the same manner as other components of net benefit cost. ASU 2017-07 will be effective for interim and annual reporting periods beginning on January 1, 2018. Mattel is currently evaluating the impact of the adoption of ASU 2017-07 on its operating results and financial position.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. ASU 2017-09 will be effective prospectively for interim and annual reporting periods beginning on January 1, 2018. Mattel is currently evaluating the impact of the adoption of ASU 2017-09 on its operating results and financial position.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which expands the hedging strategies eligible for hedge accounting and changes both how companies assess hedge effectiveness and presentation and disclosure requirements. ASU 2017-12 will be effective for interim and annual reporting periods beginning on January 1, 2019. Early application is permitted in any interim period after issuance of the update. Mattel is currently evaluating the impact of the adoption of ASU 2017-12 on its operating results and financial position.
23.Subsequent Event
On October 26, 2017, Mattel announced that its Board of Directors determined to suspend the Company's quarterly dividend beginning in the fourth quarter of 2017.


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
In the discussion that follows, “Mattel”"Mattel" refers to Mattel, Inc. and/or one or more of its family of companies.subsidiaries.
The following discussion should be read in conjunction with the consolidated financial informationstatements and the related notes that appear in Part I, Item 1 "Financial Statements" of this Quarterly Report on Form 10-Q. Mattel’sMattel's business is seasonal with consumers making a large percentage of all toy purchases during the traditional holiday season; therefore, results of operations are most comparable only withto corresponding periods.
The following discussion also includes gross sales and currency exchange rate impact, a non-GAAP financial measuresmeasure within the meaning of Regulation G promulgated by the Securities and Exchange Commission (“SEC ("Regulation G”G"), to supplement the financial results as reported in accordance with GAAP. Gross sales represent sales to customers, excluding the impact of sales adjustments, such as trade discounts and other allowances.generally accepted accounting principles ("GAAP"). The currency exchange rate impact reflects the portion (expressed as a percentage) of changes in Mattel's reported results that are attributable to fluctuations in currency exchange rates. Mattel uses thesethis non-GAAP financial measuresmeasure to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. Management believes that the disclosure of this non-GAAP financial measuresmeasure provides useful supplemental information to investors to allow them to better evaluate ongoing business performance and certain components of Mattel's results. These measures areThis measure is not, and should not be viewed as, a substitute for GAAP financial measures. Refer to “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q for a more detailed
The following discussion including a reconciliationalso includes the use of gross billings, a key performance indicator. Gross billings represent amounts invoiced to customers. It does not include the impact of sales adjustments, such as trade discounts and other allowances. Mattel presents changes in gross billings as a non-GAAPmetric for comparing its aggregate, categorical, brand, and geographic results to highlight significant trends in Mattel's business. Changes in gross billings are discussed because, while Mattel records the details of sales adjustments in its financial measure,accounting systems at the time of sale, such sales adjustments are generally not associated with categories, brands, and individual products.
Note that amounts shown in millions or billions within this Item 2 may not sum due to net sales, its most directly comparable GAAP financial measure.rounding.
Overview
Mattel designs, manufactures,is a leading global toy company and markets a broad varietyowner of one of the strongest catalogs of children’s and family entertainment franchises in the world. Mattel creates innovative products and experiences that inspire, entertain, and develop children through play. Mattel is focused on the following evolved strategy to grow its intellectual property ("IP") driven toy business and expand its entertainment offering:
•Accelerate topline growth through scaling Mattel’s portfolio, growing franchise brands, and advancing e-commerce and direct-to-consumer business, and increasing profitability by continuing to optimize operations; and
•Expand entertainment offering to capture the full value of Mattel's IP in highly accretive business verticals, including content, consumer products, worldwide which are sold to its customers and directly to consumers. digital experiences.
Mattel is the owner of a portfolio of iconic brands and partners with global brands with untappedentertainment companies to license other intellectual property potential.property. Mattel's products are among the most widely recognized toy products in the world. Mattel’s portfolio of owned and licensed brands and products are groupedorganized into four majorthe following categories:
Dolls—including brands such as Barbie, Monster High, American Girl, Polly Pocket, Spirit (Universal), and Enchantimals. Mattel's Dolls portfolio is driven by the flagship Barbie brand categories:
Mattel Girls & Boys Brands—including and a collection of complementary brands offered globally. Empowering girls since 1959, Barbie fashion has inspired the limitless potential of every girl by showing them that they can be anything. With an extensive portfolio of dolls and accessories, (“Barbie”), Monster High, Ever After High, Polly Pocket,content, gaming, and DC Super Hero Girls (collectively “Other Girls”), Hot Wheelslifestyle products, American Girl is best known for imparting valuable life lessons through its inspiring dolls and Matchbox vehiclesbooks, featuring diverse characters from past and play sets (collectively “Wheels”), and CARS, DC Comics, WWE Wrestling, Minecraft, Max Steel, BOOMco., Toy Story, and games and puzzles (collectively “Entertainment”).
Fisher-Price Brands—including Fisher-Price, Little People, BabyGear, Laugh & Learn, and Imaginext (collectively “Core Fisher-Price”), Thomas & Friends, Dora the Explorer, Mickey Mouse Clubhouse, and Disney Jake and the Never Land Pirates (collectively “Fisher-Price Friends”), and Power Wheels.
American Girl Brands—including Truly Me, Girl of the Year, BeForever, Bitty Baby, and WellieWishers. American Girl Brandspresent. Its products are sold directly to consumers via its catalog, website, and proprietary retail stores,stores.
Infant, Toddler, and Preschool—including brands such as Fisher-Price and Thomas & Friends, Power Wheels, and Fireman Sam. As a leader in play and child development, Fisher-Price’s purpose is amplifying the power of childhood. Thomas & Friends is an award-winning preschool train brand franchise that brings meaningful life lessons of friendship and teamwork to kids through content, toys, live events, and other lifestyle categories.
Vehicles—including brands such as Hot Wheels, including Hot Wheels Monster Trucks and Hot Wheels Mario Kart (Nintendo), Matchbox, and CARS (Disney Pixar).In production for over 50 years, Hot Wheels continues to push the limits of performance and design and ignites the challenger spirit of kids, adults, and collectors. From die-cast vehicles to tracks, playsets, and accessories, the Mattel Vehicles portfolio has broad appeal that engages and excites kids of all ages.
29

Action Figures, Building Sets, Games, and Other—these challenger categories include brands such as Masters of the Universe, MEGA, UNO, Lightyear (Disney Pixar), Jurassic World (NBCUniversal), WWE, and Star Wars (Disney).Mattel’s Action Figures portfolio is comprised of product lines associated with licensed entertainment franchises that are driven by major theatrical releases, such as Lightyear and Jurassic World, as well as sold directlyproduct lines from Mattel’s owned IP, including Masters of the Universe. As the challenger brand in Building Sets, MEGA sparks creativity through the power of connection with builders of all ages and fans of global franchises. UNO is the classic matching card game that is easy to certain retailers.learn and fast fun for everyone. Other includes Plush, which contains product offerings associated with theatrical releases from Mattel’s licensed entertainment franchises.
ConstructionRussia - Ukraine War
The ongoing war between Russia and Arts & Crafts Brands—Ukraine has led to volatility and disruption in these countries. The length and impact of the ongoing war is highly unpredictable. While Mattel has no direct operations in Ukraine, its operations in Russia have experienced significant disruption, Mattel has paused all shipments into Russia and expects its net sales in these countries to decline in 2022. Mattel's net sales in these two countries represented less than 3% of total net sales during the year ended December 31, 2021. In addition, as of June 30, 2022, Mattel held $60.9 million of cash in Russia. While this cash can be used within Russia, its movement out of Russia is currently limited.
COVID-19 Update / Recent Developments
The impact of the coronavirus disease ("COVID-19") and the actions taken by governments, businesses, and individuals in response to it have resulted in significant global economic disruption, including, MEGA BLOKSbut not limited to, temporary business closures, reduced retail traffic, volatility in financial markets, and RoseArt.restrictions on travel. Although COVID-19 disruption and local restrictions have impacted Mattel's business, consumer demand for toys has remained strong in recent periods.
Mattel's vision isRetail inventories have increased at the end of the second quarter of 2022 as retailers have ordered product to “inspiremeet the wonderprojected increase in consumer demand, including products tied to major theatrical releases, and to increase inventory levels in advance of childhood as the global leader in learning and development through play.” In orderholiday season to deliver on this vision, Mattel is focused on the following five-pillar strategy:
Build Mattel's Power Brands (American Girl, Barbie, Fisher-Price, Hot Wheels, and Thomas & Friends) into connected 360-degree play systems and experiences;
Accelerate emerging markets growth with digital-first solutions;
Focus and strengthen Mattel's innovation pipeline;
Reshape Mattel's operations to enable this strategy - leaner, faster, and smarter - via commercial realignment,reduce supply chain transformationrisk. These factors have contributed to year-over-year net sales increases during the first half of 2022 in the North America and IT transformation; and
Reignite Mattel's culture and team.


Third Quarter 2017 Overview
Mattel’s third quarter 2017 financial highlights include the following:
International segments. Net sales declined in the third quarterAmerican Girl segment during the first half of 2017 were $1.56 billion, down 13%2022, as compared to thirda strong first half of 2021.
While COVID-19 has caused manufacturing and distribution disruption for Mattel and the manufacturers and distribution network it relies upon, to date, this disruption, including temporary plant and port closures, has not materially impacted Mattel’s ability to meet demand for its products. To the extent COVID-19 causes further manufacturing and distribution disruption, particularly during seasonally-high periods of production and/or distribution, Mattel’s ability to meet demand may be materially impacted.
Cost inflation, primarily in raw materials and ocean freight, and other supply chain costs, has adversely affected Mattel’s gross margin in the first half of 2022, due to increased demand for raw materials and distribution services and the broad disruption of the global supply chain associated with the impact of COVID-19. Mattel's margins have also been negatively impacted by increased royalty expense, reflecting increased sales of licensed properties. These negative factors were partially offset by pricing, top-line growth, which generated favorable fixed cost absorption, and incremental realized savings from the Optimizing for Growth program. Mattel expects cost inflation will be more significant in 2022 than in 2021, however, the impact of cost inflation is expected to be partially offset by further pricing actions that will take effect in the second half of 2022.
Broad concerns related to macro-economic outlook, including inflation, may impact consumer spending, which could impact future demand for Mattel’s products. To the extent cost inflation becomes more significant than anticipated, or Mattel is unable to offset inflation through mitigating actions, it may have a material effect on Mattel’s results of operations and financial condition. The future impact of COVID-19, or other macro-economic factors, on Mattel's business, results of operations, financial position, and cash flows remains uncertain at this time due to evolving circumstances. Mattel continues to closely monitor the situation and is actively managing its business as developments occur. Refer to Part I, Item 1A "Risk Factors" in the 2021 Annual Report on Form 10-K for further discussion regarding potential impacts of COVID-19 on Mattel’s business.
The specific line items that have been materially affected by these impacts of COVID-19 are noted within "Results of Operations—Second Quarter" and "Results of Operations—First Half" below.  In addition to the impacts of COVID-19, it is reasonably likely that the pandemic and its resulting effects could have other unforeseen consequences that affect Mattel’s business.

30

Results of Operations—Second Quarter
Consolidated Results
The following table provides a summary of Mattel's consolidated results for the second quarter of 2016 net sales2022 and 2021:
 For the Three Months EndedYear/Year Change
June 30, 2022June 30, 2021
Amount% of Net
Sales		Amount% of Net
Sales		%Basis Points
of Net Sales
(In millions, except percentage and basis point information)
Net sales$1,235.7 $1,026.4 20 %
Cost of sales686.8 55.6 %538.4 52.5 %28 %310 
Gross profit548.9 44.4 %488.0 47.5 %12 %(310)
Advertising and promotion expenses90.2 7.3 %88.3 8.6 %2 %(130)
Other selling and administrative expenses333.6 27.0 %350.5 34.2 %-5 %(720)
Operating income125.1 10.1 %49.1 4.8 %155 %530 
Interest expense32.8 2.7 %38.1 3.7 %-14 %(100)
Interest (income)(2.0)-0.2 %(0.6)-0.1 %236 %-10 
Other non-operating expense, net7.1 0.5 
Income before income taxes87.1 7.0 %11.0 1.1 %688 %590 
Provision for income taxes26.6 20.6 
(Income) from equity method investments(5.9)(4.1)
Net income (loss)$66.4 5.4 %$(5.5)-0.5 %n/m590 
n/m - Not Meaningful
Sales
The following table provides a summary of $1.80 billion. AsMattel's consolidated gross billings by categories, along with supplemental information by brand, for the second quarter of 2022 and 2021:
For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
June 30,
2022		June 30,
2021
(In millions, except percentage information)
Gross Billings by Categories
Dolls$401.3 $394.7 2 %-3 %
Infant, Toddler, and Preschool274.6 229.4 20 %-3 %
Vehicles328.3 266.3 23 %-5 %
Action Figures, Building Sets, Games, and Other372.0 258.2 44 %-4 %
Gross Billings$1,376.3 $1,148.6 20 %-4 %
Sales Adjustments(140.6)(122.2)
Net Sales$1,235.7 $1,026.4 20 %-4 %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$300.8 $291.3 3 %-4 %
Hot Wheels286.5 227.4 26 %-5 %
Fisher-Price and Thomas & Friends250.5 207.8 21 %-3 %
Other538.4 422.2 28 %-3 %
Gross Billings$1,376.3 $1,148.6 20��%-4 %
31

Gross billings were $1.38 billion in the second quarter of 2022, an increase of $227.7 million, or 20%, as compared to $1.15 billion in the second quarter of 2021. The increase was due to higher billings across all categories.
Dolls gross billings increased 2%, of which 3% was due to higher billings of Barbie products and 2% was due to higher billings of Polly Pocket products. This was partially offset by lower billings of American Girl products of 2%.
Infant, Toddler, and Preschool gross billings increased 20%, of which 19% was due to higher billings of Fisher-Price and Thomas & Friends products, primarily driven by higher billings of Imaginext and Little People products.
Vehicles gross billings increased 23%, of which 22% was due to higher billings of Hot Wheels products, driven by positive brand momentum.
Action Figures, Building Sets, Games, and Other gross billings increased 44%, of which 28% was driven by higher billings of Jurassic World products and 21% was driven by initial billings of Lightyear products, as a result of Toys “R” Us filingtheir theatrical releases during the second quarter of 2022. This was partially offset by lower billings of other Action Figuresproducts of 7%.
Sales adjustments represent arrangements with Mattel’s customers to provide sales incentives, support customer promotions, and provide allowances for bankruptcy, Mattel reversed approximately $43returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. Sales adjustments increased to $140.6 million in the second quarter of 2022, as compared to $122.2 million in the second quarter of 2021, due to higher gross billings. Sales adjustments as a percentage of net sales inwas relatively consistent at 11.4% for the thirdsecond quarter of 2017.
Gross sales in the third quarter of 2017 were $1.71 billion, down 13%2022, as compared to third11.9% for the second quarter of 2016 gross2021.
Cost of Sales
Cost of sales of $1.98 billion. As a result of Toys “R” Us filing for bankruptcy, Mattel reversed approximately $47increased by $148.4 million, of gross salesor 28%, to $686.8 million in the thirdsecond quarter of 2017.2022 from $538.4 million in the second quarter of 2021. Within cost of sales, product and other costs increased by $113.1 million, or 26%, to $553.0 million in the second quarter of 2022 from $439.9 million in the second quarter of 2021; royalty expense increased by $22.4 million, or 60%, to $59.8 million in the second quarter of 2022 from $37.5 million in the second quarter of 2021; and outbound freight and logistics expenses increased by $13.0 million, or 21%, to $73.9 million in the second quarter of 2022 from $61.0 million in the second quarter of 2021.
Gross Margin
Gross margin decreased to 44.4% in the thirdsecond quarter of 2017 was 41.5%, a decrease of 700 basis points2022 from 47.5% in the thirdsecond quarter of 2016.2021. The decrease in gross margin was driven by unfavorable product mix,cost inflation, primarily in raw materials and ocean freight, other supply chain costs, and higher freight and logisticsroyalty expenses, an unfavorable impact from Toys “R” Us filing for bankruptcy, and lower licensing income.
Operating income in the third quarterreflecting increased sales of 2017 was $85.7 million, as compared to operating income of $317.4 million in the third quarter of 2016.
Diluted net loss per share in the third quarter of 2017 was $1.75, as compared to diluted net income per share of $0.68 in the third quarter of 2016. Mattel's provision for income taxes includes a discrete non-cash tax expense of $561.9 million related to deferred tax assets that will likely not be realized.
Results of Operations—Third Quarter
Consolidated Results
Net sales for the third quarter of 2017 were $1.56 billion, a 13% decrease, as compared to $1.80 billion in the third quarter of 2016, with a favorable impact from changes in currency exchange rates of 1 percentage point. As a result of Toys “R” Us filing for bankruptcy in September 2017, Mattel reversed approximately $43 million of net sales attributable to the North America segment in the third quarter of 2017. Mattel reduced shipping to Toys “R” Us in early September, which resulted in a loss of revenue in the third quarter of 2017.  Further, gross margin includes the cost of sales for the inventory sold to Toys “R” Us, but excludes the corresponding net sales. Net loss for the third quarter of 2017 was $603.2 million, or $1.75 per diluted share, as compared to net income of $236.3 million, or $0.68 per diluted share, in the third quarter of 2016. Net loss for the third quarter of 2017 was negatively impacted by discrete non-cash tax expense of $561.9 million related to the establishment of a valuation allowance on deferred tax assets that will likely not be realized and lower gross profit.
The following table provides a summary of Mattel’s consolidated results for the third quarter of 2017 and 2016:
 For the Three Months Ended Year/Year Change
September 30, 2017 September 30, 2016 
Amount % of Net
Sales		 Amount % of Net
Sales		 % Basis Points
of Net Sales
 (In millions, except percentage and basis point information)
Net sales$1,561.0
 100.0 % $1,795.6
 100.0 % -13 % —
Gross profit$647.2
 41.5 % $870.8
 48.5 % -26 % -700
Advertising and promotion expenses179.7
 11.5 % 202.9
 11.3 % -11 % 20
Other selling and administrative expenses381.8
 24.5 % 350.5
 19.5 % 9 % 500
Operating income85.7
 5.5 % 317.4
 17.7 % -73 % -1,220
Interest expense24.7
 1.6 % 25.0
 1.4 % -1 % 20
Interest (income)(1.5) -0.1 % (2.5) -0.1 % -36 % —
Other non-operating expense, net1.3
   0.9
      
Income before income taxes$61.2
 3.9 % $294.0
 16.4 % -79 % -1,250
Sales
Net sales for the third quarter of 2017 were $1.56 billion, a 13% decrease, as compared to $1.80 billion in the third quarter of 2016, with a favorable impact from changes in currency exchange rates of 1 percentage point.


The following table provides a summary of Mattel’s consolidated gross sales by brand for the third quarter of 2017 and 2016:
 For the Three Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Mattel Girls & Boys Brands:       
Barbie$329.6
 $349.7
 -6 % 1%
Other Girls96.3
 161.6
 -40 % 2%
Wheels270.3
 281.9
 -4 % 2%
Entertainment270.8
 267.9
 1 % 2%
 967.0
 1,061.1
 -9 % 1%
Fisher-Price Brands:       
Core Fisher-Price396.8
 453.3
 -12 % 1%
Fisher-Price Friends136.4
 166.7
 -18 % 1%
Other Fisher-Price28.4
 41.5
 -32 % —%
 561.6
 661.5
 -15 % 1%
American Girl Brands88.0
 125.5
 -30 % —%
Construction and Arts & Crafts Brands84.6
 118.6
 -29 % 1%
Other9.0
 8.7
    
Total Gross Sales$1,710.2
 $1,975.4
 -13 % 2%
Sales Adjustments(149.2) (179.8)    
Total Net Sales$1,561.0
 $1,795.6
 -13 % 1%
Gross sales were $1.71 billion in the third quarter of 2017, a decrease of $265.2 million or 13%, as compared to $1.98 billion in the third quarter of 2016, with a favorable impact from changes in currency exchange rates of 2 percentage points.licensed properties. The decrease in gross sales was primarily due to lower sales of Other Girls, American Girl, Construction and Arts & Crafts, Fisher-Price Friends, and Core Fisher-Price products, partially as a result of the reversal of approximately $47 million of gross
sales related to Toys “R” Us filing for bankruptcy. In addition, Mattel began to reduce shipping to Toys “R” Us in early
September, which resulted in a loss of revenue in the third quarter of 2017. Of the 40% decrease in Other Girls gross sales, 30% was due to lower sales of Monster High products, 15% was due to lower sales of DC Super Hero Girls products, and 11% was due to lower sales of Ever After High products, partially offset by initial sales of Enchantimals products of 12%. The 30% decrease in American Girl gross sales was due to lower licensing incomefavorable pricing actions, favorable fixed cost absorption, and initial sales inincremental realized savings from the prior year through external distribution channels. Of the 29% decrease in Construction and Arts & Crafts gross sales, 26% was due to lower sales of MEGA BLOKS products, primarily driven by licensed properties and MEGA BLOKS Preschool products. Of the 18% decrease in Fisher-Price Friends gross sales, 17% was due to lower sales of Thomas & Friends products. Of the 12% decrease in Core Fisher-Price gross sales, 6% was due to lower sales of infant products and 3% was due to lower sales of Imaginext products.
Cost of Sales
Cost of sales as a percentage of net sales was 58.5% in the third quarter of 2017, as compared to 51.5% in the third quarter of 2016. Cost of sales decreased by $11.0 million, or 1%, to $913.8 million in the third quarter of 2017 from $924.8 million in the third quarter of 2016, as compared to a 13% decrease in net sales. Within cost of sales, product and other costs decreased by $26.6 million, or 3%, to $738.4 million in the third quarter of 2017 from $765.0 million in the third quarter of 2016; freight and logistics expenses increased by $14.3 million, or 16%, to $103.0 million in the third quarter of 2017 from $88.7 million in the third quarter of 2016; royalty expense increased by $1.3 million, or 2%, to $72.4 million in the third quarter of 2017 from $71.1 million in the third quarter of 2016.
Gross Margin
Gross margin decreased to 41.5% in the third quarter of 2017 from 48.5% in the third quarter of 2016. The decrease in gross margin was driven by unfavorable product mix, higher freight and logistics expenses, an unfavorable impact from Toys “R” Us filingOptimizing for bankruptcy, and lower licensing income. As a result of the Toys “R” Us net sales reversal, gross margin includes the cost of sales for the inventory sold, but excludes the corresponding net sales.


Growth program.
Advertising and Promotion Expenses
Advertising and promotion expenses primarily consist of: (i) media costs, which primarily include the media, planning, and buying fees for television, print, and online advertisements, (ii) non-media costs, which primarily include commercial and website production, merchandising, and promotional costs, (iii) retail advertising costs, which primarily include consumer direct catalogs, newspaper inserts, fliers, and mailers, and (iv) generic advertising costs, which primarily include trade show costs. Advertising and promotion expenses as a percentage of net sales increaseddecreased to 11.5%7.3% in the thirdsecond quarter of 2017 from 11.3%2022, as compared to 8.6% in the thirdsecond quarter of 2016.2021, primarily due to a 20% increase in net sales.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $381.8$333.6 million, or 24.5%27.0% of net sales, in the thirdsecond quarter of 2017,2022, as compared to $350.5 million, or 19.5%34.2% of net sales, in the thirdsecond quarter of 2016.2021. The increasedecrease in other selling and administrative expenses was primarily due to asset impairmentsa gain on sale of approximately $15 million, higher employee-related costs of approximately $7 million, higher severance and restructuring expenses of approximately $6 million, and investments in the new American Girl flagship store in New York City of approximately $3 million,corporate office and distribution center and incremental realized savings from the Optimizing for Growth program, partially offset by information technology and administrative costs, as well as market-related pay increases.
32

Interest Expense
Interest expense was $32.8 million for the second quarter of 2022, as compared to $38.1 million for the second quarter of 2021. The decrease in interest expense was primarily due to lower incentiveinterest expense resulting from the partial repayment and equity compensation expensesrefinancing of approximately $8 million.the 2017/2018 Senior Notes due December 2025 (the "2025 Notes") in 2021.
Provision forFor Income Taxes
Mattel’sMattel's provision for income taxes was $664.5$26.6 million for the three months ended June 30, 2022, and $57.8$20.6 million infor the third quarterthree months ended June 30, 2021, primarily due to higher pre-tax income, partially offset by the impact of 2017 and 2016, respectively.discrete tax items. During the three months ended June 30, 2022, Mattel recognized a net discrete tax expense of $561.5$2.4 million, in the third quarter of 2017 primarily related to income taxes recorded on a non-cash chargediscrete basis in various jurisdictions and reassessments of $561.9tax liabilities from prior years. During the three months ended June 30, 2021, Mattel recognized a net discrete tax expense of $12.2 million, resultingprimarily related to income taxes recorded on a discrete basis in various jurisdictions, tax rate changes impacting deferred tax assets, and reassessments of tax liabilities from prior years.
Evaluating the establishmentneed for and the amount of a valuation allowance onfor 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 likely not be realizedrealizable. Mattel routinely assesses the positive and net discretenegative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax benefitsjurisdiction. For the three months ended June 30, 2021, Mattel had a valuation allowance on U.S. federal, state, and certain foreign deferred tax assets. During the second half of $9.0 million2021, Mattel released the valuation allowances related to U.S. federal, state, and certain foreign deferred tax assets, except for certain tax assets that are primarily expected to expire before utilization. Valuation allowance releases resulted in the third quarterrecognition of 2016 primarily related to reassessments$540.8 million of prior years’deferred tax liabilities based on the statusassets as of audits and tax filings in various jurisdictions around the world.December 31, 2021. Mattel's valuation allowance position has remained unchanged as of June 30, 2022.
Segment Results
North America Segment
The following table provides a summary of Mattel’sMattel's net sales, segment operating income, and gross salesbillings by categories, along with supplemental information by brand, for the North America segment for the thirdsecond quarter of 20172022 and 2016:2021:
For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
June 30,
2022		June 30,
2021
 (In millions, except percentage information)
Net Sales$726.5 $560.8 30 %— %
Segment Operating Income198.9 149.6 33 %
Gross Billings by Categories
Dolls$190.7 $172.6 10 %-1 %
Infant, Toddler, and Preschool178.3 139.9 27 %-1 %
Vehicles177.6 131.3 35 %— %
Action Figures, Building Sets, Games, and Other228.3 154.1 48 %— %
Gross Billings$774.9 $597.9 30 %— %
Sales Adjustments(48.3)(37.0)
Net Sales$726.5 $560.8 30 %— %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$156.7 $151.4 3 %-1 %
Hot Wheels152.6 109.7 39 %— %
Fisher-Price and Thomas & Friends162.2 122.9 32 %— %
Other303.4 213.9 42 %— %
Gross Billings$774.9 $597.9 30 %— %

33

 For the Three Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Mattel Girls & Boys Brands:       
Barbie$171.2
 $183.0
 -7 % —%
Other Girls33.2
 79.6
 -58 % —%
Wheels130.7
 157.5
 -17 % —%
Entertainment124.5
 157.0
 -21 % —%
 459.6
 577.1
 -20 % —%
Fisher-Price Brands:       
Core Fisher-Price225.1
 279.1
 -19 % —%
Fisher-Price Friends68.9
 88.6
 -22 % —%
Other Fisher-Price27.9
 40.3
 -31 % —%
 321.9
 408.0
 -21 % —%
Construction and Arts & Crafts Brands54.5
 82.9
 -34 % —%
Other3.3
 3.0
    
Total Gross Sales$839.3
 $1,071.0
 -22 % —%
Sales Adjustments(43.2) (67.4)    
Total Net Sales$796.1
 $1,003.6
 -21 % —%


Gross salesbillings for the North America segment were $839.3$774.9 million in the thirdsecond quarter of 2017, a decrease2022, an increase of $231.7$177.0 million, or 22%30%, as compared to $1.07 billion$597.9 million in the thirdsecond quarter of 2016.2021. The decreaseincrease in the North America segment gross sales was primarily due to lower sales of Other Girls, Construction and Arts & Crafts, Fisher-Price Friends, Entertainment, Core Fisher-Price, and Wheels products. As a result Toys “R” Us filing for bankruptcy, Mattel reversed approximately $47 million of gross sales in the third quarter of 2017. In addition, Mattel began to reduce shipping to Toys “R” Us in early September, which resulted in a loss of revenue in the third quarter of 2017. Of the 58% decrease in Other Girls gross sales, 40%billings was due to lower saleshigher billings across all categories.
Dolls gross billings increased 10%, of Monster High products and 18% was due to lower sales of DC Super Hero Girls products. Of the 34% decrease in Construction and Arts & Crafts gross sales, 30% was due to lower sales of MEGA BLOKS products, primarily driven by licensed properties and MEGA BLOKS Preschool products. Of the 22% decrease in Fisher-Price Friends gross sales, 22% was due to lower sales of Thomas & Friends products. Of the 21% decrease in Entertainment gross sales, 13% was due to lower sales of Minecraft products,which 4% was due to lower saleshigher billings of DC ComicsPolly Pocket products, 4%3% was due to lower saleshigher billings of games and puzzlesBarbie products, and 7%2% was due to lower saleshigher billings of other licensed properties, partially offset by higher salesMonster High products.
Infant, Toddler, and Preschool gross billings increased 27%, of CARS products of 12%. Of the 19% decrease in Core Fisher-Price gross sales, 8%which 28% was due to lower saleshigher billings of infant products Fisher-Price and 5% Thomas & Friends products.
Vehicles gross billings increased 35%, of which 32% was due to lower saleshigher billings of ImaginextHot Wheels products. Of the 17% decrease in Wheels
Action Figures, Building Sets, Games, and Other gross sales, 9%billings increased 48%, of which 26% was due to lower saleshigher billings of Hot Wheels Jurassic World products and 6%20% from initial billings of Lightyear products, as a result of their theatrical releases during the second quarter of 2022.
Sales adjustments as a percentage of net sales was duerelatively consistent at 6.7% for the second quarter of 2022, as compared to lower sales6.6% for the second quarter of Tyco™ RCvehicles products.2021.
Cost of sales decreased 6%increased 35% in the thirdsecond quarter of 2017,2022, as compared to a 21% decrease30% increase in net sales, primarily due to lowerwith the increase in cost of sales driven by higher product and other costs partially offset byand higher freight and logisticsroyalty expenses. Gross margin in the thirdsecond quarter of 20172022 decreased primarily due to an unfavorable impactcost inflation, primarily in raw materials and ocean freight, other supply chain costs, and higher royalty expenses, reflecting increased sales of licensed properties. The decrease was partially offset by favorable pricing actions, incremental realized savings from Toys “R” Us filingthe Optimizing for bankruptcy, higher freightGrowth program, and logistics expenses, and unfavorable product mix. As a result of the Toys “R” Us net sales reversal, gross margin includes thefavorable fixed cost of sales for the inventory sold, but excludes the corresponding net sales.
absorption. North America segment operating income decreased to $86.2was $198.9 million in the thirdsecond quarter of 2017,2022, as compared to $265.6segment operating income of $149.6 million in the thirdsecond quarter of 2016, primarily due to lower2021, driven by higher gross profit, andpartially offset by higher other selling and administrative expenses, partially offset by lower advertising and promotion expenses.
34

International Segment
The following table provides a summary of percentage changes inMattel's net sales, within the International segment in the third quarter of 2017 versus 2016:
 
% Change in
Net Sales as Reported
 
Currency Exchange
Rate Impact
Total International Segment1% 2%
Europe—% 3%
Latin America4% 3%
Asia Pacific1% —%
The following table provides a summary of percentage changes inoperating income, and gross sales within the International segment in the third quarter of 2017 versus 2016:
 
% Change in
Gross Sales as Reported
 
Currency Exchange
Rate Impact
Total International Segment— % 2%
Europe-1 % 4%
Latin America2 % 3%
Asia Pacific2 % 1%


The following table provides a summary of Mattel’s gross salesbillings by categories, along with supplemental information by brand, for the International segment for the thirdsecond quarter of 20172022 and 2016:2021:
 For the Three Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Mattel Girls & Boys Brands:       
Barbie$158.4
 $166.6
 -5 % 3%
Other Girls63.1
 82.1
 -23 % 3%
Wheels139.6
 124.4
 12 % 3%
Entertainment146.3
 110.9
 32 % 4%
 507.4
 484.0
 5 % 3%
Fisher-Price Brands:       
Core Fisher-Price171.7
 174.2
 -1 % 3%
Fisher-Price Friends67.5
 78.1
 -14 % 1%
Other Fisher-Price0.5
 1.2
 

 

 239.7
 253.5
 -5 % 3%
Construction and Arts & Crafts Brands29.9
 35.7
 -16 % 3%
Other—
 1.0
    
Total Gross Sales$777.0
 $774.2
 — % 2%
Sales Adjustments(101.8) (108.3)    
Total Net Sales$675.2
 $665.9
 1 % 2%
For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
June 30,
2022		June 30,
2021
(In millions, except percentage information)
Net Sales$476.4 $424.9 12 %-8 %
Segment Operating Income58.4 50.8 15 %
Gross Billings by Categories
Dolls$177.3 $180.7 -2 %-8 %
Infant, Toddler, and Preschool96.3 89.5 8 %-7 %
Vehicles150.7 135.0 12 %-8 %
Action Figures, Building Sets, Games, and Other143.7 104.1 38 %-10 %
Gross Billings$568.0 $509.2 12 %-8 %
Sales Adjustments(91.6)(84.3)
Net Sales$476.4 $424.9 12 %-8 %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$144.2 $139.9 3 %-8 %
Hot Wheels133.9 117.7 14 %-8 %
Fisher-Price and Thomas & Friends88.3 84.9 4 %-7 %
Other201.6 166.8 21 %-9 %
Gross Billings$568.0 $509.2 12 %-8 %
Gross salesbillings for the International segment were $777.0$568.0 million in the thirdsecond quarter of 2017,2022, an increase of $2.8$58.8 million, or 12%, as compared to $774.2$509.2 million in the thirdsecond quarter of 2016, with a favorable impact from changes in currency exchange rates of 2 percentage points.2021. The increase in the International segment gross sales was primarily due to higher salesbillings of EntertainmentAction Figures, Building Sets, Games, and WheelsOther, Vehicles, and Infant, Toddler, and Preschool.
Dolls gross billings decreased 2%, of which 2% was due to lower billings of Spirit products and 2% was due to lower billings of Cave Club products, partially offset by lower saleshigher billings of Other Girls, ConstructionBarbie products of 2%.
Infant, Toddler, and Arts & Crafts, and Fisher-Price Friends products. Of the 32% increase in EntertainmentPreschool gross sales, 44%billings increased 8%, of which 4% was due to higher salesbillings of CARS Fisher-Price and Thomas & Friends products partially offset by lower salesand 2% was due to higher billings of Dinotrux, WWE, and Minecraft products DC Comics products.
Vehicles gross billings increased 12%, of 3% each. Of the 12% increase in Wheels gross sales,which 12% was due to higher salesbillings of Hot Wheels products. Of the 23% decrease in
Action Figures, Building Sets, Games, and Other Girls gross sales, 21%billings increased 38%, of which 29% was due to lower saleshigher billings of Monster High Jurassic World products 13%and 22% was due to lower salesinitial billings of DC Super Hero Girls Lightyear products, and 12%as a result of their theatrical releases during the second quarter of 2022. This was due to lower sales of Ever After High products, partially offset by initial saleslower billings of Enchantimalsother Action Figures products of 19%9% and lower billings of Games products of 7%. Of
Sales adjustments as a percentage of net sales was relatively consistent at 19.2% for the 16% decrease in Construction and Arts & Crafts gross sales, 16% was duesecond quarter of 2022, as compared to lower sales19.9% for the second quarter of MEGA BLOKS products, primarily driven by MEGA BLOKS Preschool products and licensed properties. Of the 14% decrease in Fisher-Price Friends gross sales, 12% was due to lower sales of Thomas & Friends products.2021.
Cost of sales increased 1%19% in the thirdsecond quarter of 2017,2022, as compared to an 1%a 12% increase in net sales, primarily due towith the increase in cost of sales driven by higher royalty expense, partially offset by lower freightproduct and logisticsother costs and higher royalty expenses. Gross margin in the thirdsecond quarter of 20172022 decreased as a result of an unfavorable product mixprimarily due to cost inflation, primarily in raw materials and ocean freight, other supply chain costs, and higher royalty expense,expenses, reflecting increased sales of licensed properties. The decrease was partially offset by strategic pricing.
favorable product mix, favorable pricing actions, incremental realized savings from the Optimizing for Growth program, and favorable fixed cost absorption. International segment operating income decreased to $81.3 was $58.4 million in the thirdsecond quarter of 2017,2022, as compared to $150.2a segment operating income of $50.8 million in the thirdsecond quarter of 2016,2021, primarily due to lowerdriven by higher gross profit, partially offset by higher advertising and higher other selling and administrativepromotion expenses.

35


American Girl Segment
The following table provides a summary of Mattel’sMattel's net sales, segment operating income (loss), and gross sales by brandbillings for the American Girl segment for the thirdsecond quarter of 20172022 and 2016:2021:
 For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
 June 30,
2022		June 30,
2021
 (In millions, except percentage information)
Net Sales$32.8 $40.6 -19 %— %
Segment Operating Income (Loss)5.8 (9.7)n/m
American Girl Segment
Total Gross Billings$33.4 $41.5 -19 %— %
Sales Adjustments(0.6)(0.8)
Total Net Sales$32.8 $40.6 -19 %— %
 For the Three Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
American Girl Segment:       
American Girl Brands$88.0
 $124.5
 -29 % —%
Construction and Arts & Crafts Brands0.2
 —
 

 

Other Brands5.7
 5.6
 3 % 5%
Total Gross Sales$93.9
 $130.1
 -28 % —%
Sales Adjustments(4.2) (4.0)    
Total Net Sales$89.7
 $126.1
 -29 % —%
n/m - Not Meaningful
Gross salesbillings for the American Girl segment were $93.9was $33.4 million in the thirdsecond quarter of 2017,2022, a decrease of $36.2$8.1 million, or 28%19%, as compared to $130.1$41.5 million in the thirdsecond quarter of 2016.2021. The decrease in American Girl segment gross sales was primarily due todriven by lower sales of American Girl brands products. The 29% decrease in American Girl brands gross sales was due to lower licensing income and initial sales in the prior year through external distribution channels.direct-to-consumer channel billings.
Cost of sales decreased 1% in the third quarter of 2017,14.0%, as compared to a 29%19% decrease in net sales.sales, with the decrease in cost of sales driven by lower product and other costs. Gross margin in the thirdsecond quarter of 20172022 decreased primarily due to cost inflation and unfavorable fixed cost absorption, partially offset by incremental realized savings from the Optimizing for Growth program. American Girl segment operating income was $5.8 million in the second quarter of 2022, as compared to segment operating loss of $9.7 million in the second quarter of 2021, primarily driven by lower other selling and administrative expenses as a result of lower licensing income and higher obsolescence expense.
a gain on sale of the American Girl segment loss was $14.6 million in the third quarter of 2017, as compared to segment income of $28.1 million in the third quarter of 2016, primarily due to lower gross profit, lower licensing income,corporate office and higher other selling and administrative expenses.distribution center.

36

Results of Operations—First Nine MonthsHalf
Consolidated Results
Net sales for the first nine months of 2017 were $3.27 billion, a 10% decrease, as compared to $3.62 billion in the first nine months of 2016. As a result of Toys “R” Us filing for bankruptcy in September 2017, Mattel reversed approximately $43 million of net sales attributable to the North America segment in the third quarter of 2017. Mattel reduced shipping to Toys “R” Us in early September, which resulted in a loss of revenue in the third quarter of 2017.  Further, gross margin includes the cost of sales for the inventory sold to Toys “R” Us, but excludes the corresponding net sales. Net loss for the first nine months of 2017 was $772.6 million, or $2.25 per diluted share, as compared to net income of $144.2 million, or $0.42 per diluted share, in the first nine months of 2016. Net loss for the first nine months of 2017 was negatively impacted by discrete non-cash tax expense of $561.9 million related to the establishment of a valuation allowance on deferred tax assets that will likely not be realized and lower gross profit, partially offset by lower advertising and promotion expenses and lower other non-operating expense. Other non-operating expense was higher in the first nine months of 2016 due to the change in the remeasurement rate used by Mattel's Venezuelan subsidiary in the first quarter of 2016, which resulted in an unrealized foreign currency exchange loss of approximately $26 million.


The following table provides a summary of Mattel’sMattel's consolidated results for the first nine monthshalf of 20172022 and 2016 (in millions, except percentage and basis point information):2021:
 For the Six Months Ended Year/Year Change
June 30, 2022June 30, 2021 
Amount% of Net
Sales		Amount% of Net
Sales		 %Basis Points
of Net Sales
(In millions, except percentage and basis point information)
Net sales$2,277.0  $1,900.6   20 %
Cost of sales1,245.2 54.7 %1,000.7 52.7 %24 %200 
Gross profit1,031.8 45.3 %899.8 47.3 %15 %(200)
Advertising and promotion expenses163.9 7.2 %162.4 8.5 %1 %(130)
Other selling and administrative expenses662.7 29.1 %654.4 34.4 %1 %(530)
Operating income205.1 9.0 %83.0 4.4 %147 %460 
Interest expense65.9 2.9 %168.6 8.9 %-61 %(600)
Interest (income)(3.2)-0.1 %(1.4)-0.1 %125 %— 
Other non-operating expense (income), net16.3 (0.6)
Income (loss) before income taxes126.2 5.5 %(83.7)-4.4 %n/m990 
Provision for income taxes50.5 40.9 
Income from equity method investments(12.2)(6.7)
Net income (loss)$87.9 3.9 %$(117.9)-6.2 %n/m1,010 
 For the Nine Months Ended Year/Year Change
September 30, 2017 September 30, 2016 
Amount % of Net
Sales		 Amount % of Net
Sales		 % Basis Points
of Net Sales
 (In millions, except percentage and basis point information)
Net sales$3,271.1
 100.0 % $3,622.3
 100.0 % -10 % —
Gross profit$1,325.7
 40.5 % $1,693.0
 46.7 % -22 % -620
Advertising and promotion expenses348.8
 10.7 % 384.6
 10.6 % -9 % 10
Other selling and administrative expenses1,066.9
 32.6 % 1,051.8
 29.0 % 1 % 360
Operating (loss) income(90.0) -2.8 % 256.6
 7.1 % -135 % -990
Interest expense68.6
 2.1 % 70.1
 1.9 % -2 % 20
Interest (income)(6.3) -0.2 % (7.6) -0.2 % -16 % —
Other non-operating expense, net5.9
   23.3
      
(Loss) income before income taxes$(158.2) -4.8 % $170.8
 4.7 % -193 % -950
n/m - Not Meaningful
Sales
Net sales for the first nine months of 2017 were $3.27 billion, a 10% decrease, as compared to $3.62 billion in the first nine months of 2016.
The following table provides a summary of Mattel’sMattel's consolidated gross salesbillings by categories, along with supplemental information by brand, results for the first nine monthshalf of 20172022 and 2016:2021:
 For the Six Months Ended % Change as
Reported		Currency
Exchange Rate
Impact
June 30,
2022		June 30,
2021		 
 (In millions, except percentage information)
Gross Billings by Categories
Dolls$797.5 $776.0 3 %-3 %
Infant, Toddler, and Preschool480.2 412.5 16 %-3 %
Vehicles610.4 481.7 27 %-5 %
Action Figures, Building Sets, Games, and Other652.7 457.3 43 %-4 %
Gross Billings$2,540.7 $2,127.6 19 %-4 %
Sales Adjustments(263.7)(227.0)
Net Sales$2,277.0 $1,900.6 20 %-3 %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$598.8 $567.5 6 %-3 %
Hot Wheels527.9 412.0 28 %-5 %
Fisher-Price and Thomas & Friends439.8 379.3 16 %-3 %
Other974.1 768.7 27 %-3 %
Gross Billings$2,540.7 $2,127.6 19 %-4 %

37
 For the Nine Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Mattel Girls & Boys Brands:       
Barbie$605.2
  $651.3
  -7 % — %
Other Girls194.7
  304.5
  -36 % 1 %
Wheels563.3
  579.0
  -3 % — %
Entertainment654.8
  607.9
  8 % 1 %
 2,018.0
  2,142.7
  -6 % — %
Fisher-Price Brands:       
Core Fisher-Price794.6
  870.1
  -9 % — %
Fisher-Price Friends288.4
  330.8
  -13 % -1 %
Other Fisher-Price60.5
  79.5
  -24 % — %
 1,143.5
  1,280.4
  -11 % — %
American Girl Brands234.2
  286.9
  -18 % — %
Construction and Arts & Crafts Brands176.1
  252.8
  -30 % 1 %
Other21.5
  27.4
     
Total Gross Sales$3,593.3
  $3,990.2
  -10 % — %
Sales Adjustments(322.2) (367.9)    
Total Net Sales$3,271.1
 $3,622.3
 -10 % — %



Gross salesbillings were $3.59$2.54 billion in the first nine monthshalf of 2017, a decrease2022, an increase of $396.9$413.1 million, or 10%19%, as compared to $3.99$2.13 billion in the first nine monthshalf of 2016.2021, with an unfavorable impact from changes in currency exchange rates of four percentage points. The decreaseincrease in gross salesbillings for the first half of 2022 was due to higher billings across all categories.
Dolls gross billings increased 3%, of which 4% was due to higher billings of Barbie products, and 2% due to higher billings of Polly Pocket products, partially offset by lower salesbillings of Other Girls, Construction and Arts & Crafts, American Girl products of 3%.
Infant, Toddler, and Preschool gross billings increased 16%, of which 14% was due to higher billings of Fisher-Price and Thomas & Friends products.
Vehicles gross billings increased 27%, of which 24% was due to higher billings of Hot Wheels products, partiallydriven by positive brand momentum, and 1% was due to higher billings of Matchbox products.
Action Figures, Building Sets, Games, and Other gross billings increased 43%, of which 26% was due to higher billings of Jurassic World productsand 16% was driven by initial billings of Lightyear products, as a result of their theatrical releases during the reversalsecond quarter of approximately $472022.
Sales adjustments represent arrangements with Mattel’s customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors, such as sales to consumers. Sales adjustments increased to $263.7 million of gross sales related to Toys “R” Us filing for bankruptcy. In addition, Mattel began to reduce shipping to Toys “R” Us in early September, which resulted in a loss of revenue in the third quarterfirst half of 2017. Of2022, as compared to $227.0 million in the 36% decrease in Other Girls gross sales, 30% wasfirst half of 2021, due to lower saleshigher gross billings. Sales adjustments as a percentage of Monster High products and 13% was due to lower sales of Ever After High products, partially offset by initial sales of Enchantimals products of 7%. Of the 30% decrease in Construction and Arts & Crafts gross sales, 28% was due to lower sales of MEGA BLOKS products, primarily driven by licensed properties and MEGA BLOKS Preschool products. The 18% decrease in American Girl grossnet sales was duerelatively consistent at 11.6% for the first half of 2022 as compared to lower licensing income and initial sales in11.9% for the prior year through external distribution channels. Of the 13% decrease in Fisher-Price Friends gross sales, 14% was due to lower salesfirst half of Thomas & Friends products.2021.
Cost of Sales
Cost of sales as a percentage of net sales was 59.5% in the first nine months of 2017, as compared to 53.3% in the first nine months of 2016. Cost of sales increased by $16.1$244.5 million, or 1%24%, to $1.95$1.25 billion in the first nine monthshalf of 20172022 from $1.93$1.00 billion in the first nine monthshalf of 2016, as compared to a 10% decrease in net sales.2021. Within cost of sales, product and other costs increased by $184.6 million, or 23%, to $1.00 billion in the first half of 2022 from $816.7 million in the first half of 2021; royalty expense increased by $39.5 million, or 60%, to $104.7 million in the first half of 2022 from $65.2 million in the first half of 2021; and freight and logistics expenses increased by $24.5$20.4 million, or 12%17%, to $233.8$139.1 million in the first nine monthshalf of 20172022 from $209.3$118.7 million in the first nine monthshalf of 2016; royalty expense increased by $7.7 million, or 5%, to $155.7 million in the first nine months of 2017 from $148.0 million in the first nine months of 2016; product and other costs decreased by $16.1 million, or 1%, to $1.56 billion in the first nine months of 2017 from $1.57 billion in the first nine months of 2016.2021.
Gross Margin
Gross margin decreased to 40.5%45.3% in the first nine monthshalf of 20172022 from 46.7%47.3% in the first nine monthshalf of 2016. 2021. The decrease in gross margin was due to unfavorable product mix,driven by cost inflation, primarily in raw materials and ocean freight, other supply chain costs, and higher freightroyalty expenses, reflecting increased sales of licensed properties. The decrease was partially offset by favorable pricing actions, favorable fixed cost absorption, and logistics expenses, lower licensing income, and an unfavorable impactincremental realized savings from Toys “R” Us filingthe Optimizing for bankruptcy. As a result of the Toys “R” Us net sales reversal, gross margin includes the cost of sales for the inventory sold, but excludes the corresponding net sales.Growth program.
Advertising and Promotion Expenses
Advertising and promotion expenses primarily consist of: (i) media costs, which primarily include the media, planning, and buying fees for television, print, and online advertisements,advertisements; (ii) non-media costs, which primarily include commercial and website production, merchandising, and promotional costs,costs; (iii) retail advertising costs, which primarily include consumer direct catalogs, newspaper inserts, fliers, and mailers, and (iv) generic advertising costs, which primarily include trade show costs. Advertising and promotion expenses as a percentage of net sales increased slightlydecreased to 10.7%7.2% in the first nine monthshalf of 20172022 from 10.6%8.5% in the first nine monthshalf of 2016.2021, primarily due to a 20% increase in net sales.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $1.07 billion,$662.7 million, or 32.6%29.1% of net sales, in the first nine monthshalf of 2017,2022, as compared to $1.05 billion,$654.4 million, or 29.0%34.4% of net sales, in the first nine monthshalf of 2016.2021. The increase in other selling and administrative expenses was primarily due to asset impairments of approximately $15 millioninformation technology and higher employee-relatedadministrative costs, of approximately $15 million,as well as market-related pay increases, partially offset by lower severance and restructuring expenses of approximately $12 million.incremental realized savings from the Optimizing for Growth Program.
Other Non-OperatingInterest Expense
Other non-operatingInterest expense was $5.9$65.9 million in the first nine monthshalf of 2017,2022, as compared to $23.3$168.6 million in the first nine monthshalf of 2016.2021. The decrease in other non-operatinginterest expense was primarily due to a loss on extinguishment of $83.2 million as a result of the change inpartial redemption of the remeasurement rate used by Mattel's Venezuelan subsidiary in 2016, which resulted in an unrealized foreign currency exchange loss of approximately $26 million2025 Notes in the first quarterhalf of 2016.2021 and lower interest expense resulting from the partial repayment and refinancing of the 2025 Notes in 2021.
38

Provision for Income Taxes
Mattel’sMattel's provision for income taxes was $614.4$50.5 million for the six months ended June 30, 2022, and $26.6$40.9 million infor the first ninesix months ended June 30, 2021, primarily due to higher pre-tax income, partially offset by the impact of 2017 and 2016, respectively.discrete tax items. During the six months ended June 30, 2022, Mattel recognized a net discrete tax expense of $558.8$14.6 million, in the first nine months of 2017 primarily related to income taxes recorded on a non-cash chargediscrete basis in various jurisdictions and reassessments of $561.9tax liabilities from prior years. During the six months ended June 30, 2021, Mattel recognized a net discrete tax expense of $19.5 million, resultingprimarily related to income taxes recorded on a discrete basis in various jurisdictions, tax rate changes impacting deferred tax assets, and reassessments of tax liabilities from prior years.
Evaluating the establishmentneed for and the amount of a valuation allowance onfor 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 likely not be realizedrealizable. Mattel routinely assesses the positive and net discretenegative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax benefitsjurisdiction. For the three months ended June 30, 2021, Mattel had a valuation allowance on U.S. federal, state, and certain foreign deferred tax assets. During the second half of $12.8 million2021, Mattel released the valuation allowances related to U.S. federal, state, and certain foreign deferred tax assets, except for certain tax assets that are primarily expected to expire before utilization. Valuation allowance releases resulted in the first nine months 2016 primarily related to reassessmentsrecognition of prior years’$540.8 million of deferred tax liabilities based on the statusassets as of audits and tax filings in various jurisdictions around the world.December 31, 2021. Mattel's valuation allowance position has remained unchanged as of June 30, 2022.

39


Segment Results
North America Segment
The following table provides a summary of Mattel’sMattel's net sales, segment operating income, and gross salesbillings by categories, along with supplemental information by brand, for the North America segment for the first nine monthshalf of 20172022 and 2016:2021:
 For the Nine Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Mattel Girls & Boys Brands:         
Barbie$285.6
  $327.7
  -13 % —%
Other Girls73.5
  154.4
  -52 % —%
Wheels256.5
  294.4
  -13 % —%
Entertainment330.7
  356.9
  -7 % —%
 946.3
 1,133.4
 -17 % —%
Fisher-Price Brands:       
Core Fisher-Price449.0
 515.7
 -13 % —%
Fisher-Price Friends135.6
 168.3
 -19 % —%
Other Fisher-Price59.5
 77.5
 -23 % —%
 644.1
 761.5
 -15 % —%
Construction and Arts & Crafts Brands109.7
 170.1
 -36 % —%
Other8.8
 12.1
    
Total Gross Sales$1,708.9
 $2,077.1
 -18 % —%
Sales Adjustments(88.0) (123.0)    
Total Net Sales$1,620.9
 $1,954.1
 -17 % —%
For the Six Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
June 30, 2022June 30, 2021
(In millions, except percentage information)
Net Sales$1,328.6 $1,040.5 28 %— %
Segment Operating Income370.3 274.5 35 %
Gross Billings by Categories
Dolls$372.9 $348.8 7 %— %
Infant, Toddler, and Preschool309.8 248.4 25 %— %
Vehicles324.4 241.2 35 %— %
Action Figures, Building Sets, Games, and Other409.6 271.3 51 %— %
Gross Billings$1,416.6 $1,109.6 28 %— %
Sales Adjustments(88.0)(69.1)
Net Sales$1,328.6 $1,040.5 28 %— %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$320.7 $308.3 4 %— %
Hot Wheels274.3 202.4 36 %— %
Fisher-Price and Thomas & Friends283.4 223.7 27 %— %
Other538.2 375.2 43 %-1 %
Gross Billings$1,416.6 $1,109.6 28 %— %
Gross salesbillings for the North America segment were $1.71$1.42 billion in the first nine monthshalf of 2017, a decrease2022, an increase of $368.2$307.0 million, or 18%28%, as compared to $2.08$1.11 billion in the first nine monthshalf of 2016.2021. The decreaseincrease in the North America segment gross sales was primarily due to lower sales of Other Girls, Construction and Arts & Crafts, Fisher-Price Friends, Core Fisher-Price, Wheels, and Barbie products. As a result Toys “R” Us filing for bankruptcy, Mattel reversed approximately $47 million of gross sales in the third quarter of 2017. In addition, Mattel began to reduce shipping to Toys “R” Us in early September, which resulted in a loss of revenue in the third quarter of 2017. Of the 52% decrease in Other Girls gross sales, 37% was due to lower sales of Monster High products and 15% was due to lower sales of Ever After High products. Of the 36% decrease in Construction and Arts & Crafts gross sales, 32% was due to lower sales of MEGA BLOKS products, primarily driven by licensed properties and MEGA BLOKS Preschool products. Of the 19% decrease in Fisher-Price Friends gross sales, 19% was due to lower sales of Thomas & Friends products. Of the 13% decrease in Core Fisher-Price gross sales, 8% was due to lower sales of infant products and 3% was due to lower sales of Imaginext products. Of the 13% decrease in Wheels gross sales, 8% was due to lower sales of Hot Wheels products and 4% was due to lower sales of Matchbox products. The 13% decrease in Barbie gross sales was due to a shift in DVD entertainment strategy.
Cost of sales decreased 6% in the first nine months of 2017, as compared to a 17% decrease in net sales, primarily due to lower product and other costs, partially offset by higher freight and logistics expenses. Gross margin in the first nine months of 2017 decreased due to an unfavorable impact from Toys “R” Us filing for bankruptcy, higher freight and logistics expenses, and unfavorable product mix. As a result of the Toys “R” Us net sales reversal, gross margin includes the cost of sales for the inventory sold, but excludes the corresponding net sales.
North America segment income decreased to $109.6 million in the first nine months of 2017, as compared to $371.1 million in the first nine months of 2016, primarily due to lower gross profit and higher other selling and administrative expenses, partially offset by lower advertising and promotion expenses.


International Segment
The following table provides a summary of percentage changes in net sales within the International segment in the first nine months of 2017 versus 2016:
 
% Change in
Net Sales as Reported
 
Currency Exchange
Rate Impact
Total International Segment2 % — %
Europe-2 % — %
Latin America5 % 2 %
Asia Pacific10 % -1 %
The following table provides a summary of percentage changes in gross sales within the International segment in the first nine months of 2017 versus 2016:
 
% Change in
Gross Sales as Reported
 
Currency Exchange
Rate Impact
Total International Segment1 % — %
Europe-3 % — %
Latin America4 % 2 %
Asia Pacific8 % -1 %
The following table provides a summary of Mattel’s gross sales by brand for the International segment for the first nine months of 2017 and 2016:
 For the Nine Months Ended  % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		  
 (In millions, except percentage information)
Mattel Girls & Boys Brands:         
Barbie$319.6
  $323.6
  -1 % 1 %
Other Girls121.2
  150.0
  -19 % 2 %
Wheels306.8
  284.6
  8 % 1 %
Entertainment324.1
  251.0
  29 % — %
 1,071.7
 1,009.2
 6 % 1 %
Fisher-Price Brands:       
Core Fisher-Price345.6
 354.4
 -2 % 1 %
Fisher-Price Friends152.8
 162.5
 -6 % -2 %
Other Fisher-Price1.0
 2.0
    
 499.4
 518.9
 -4 % -1 %
Construction and Arts & Crafts Brands65.9
 82.7
 -20 % 1 %
Other—
 3.4
    
Total Gross Sales$1,637.0
 $1,614.2
 1 % — %
Sales Adjustments(221.6) (233.2)    
Total Net Sales$1,415.4
 $1,381.0
 2 % — %


Gross sales for the International segment were $1.64 billion in the first nine months of 2017, an increase of $22.8 million, or 1%, as compared to $1.61 billion in the first nine months of 2016. The increase in the International segment gross sales was primarily due to higher sales of Entertainment products, partially offset by lower sales of Construction and Arts & Crafts and Other Girls products. Of the 29% increase in Entertainment gross sales, 46%billings was due to higher salesbillings across all categories.
Dolls gross billings increased 7%, with 4% due to higher billings of CARSPolly Pocket products partially offset by lower salesand 4% due to higher billings of DC Comics productsBarbie products.
Infant, Toddler, and Preschool gross billings increased 25%, of 7%, lower sales of Minecraft products of 3%, and lower sales of Max Steel and WWE products of 2% each. Of the 20% decrease in Construction and Arts & Crafts gross sales, 20%which 24% was due to lower saleshigher billings of MEGA BLOKS products, primarily driven by licensed propertiesFisher-Price and MEGA BLOKS PreschoolThomas & Friends products. Of the 19% decrease in Other Girls
Vehicles gross sales, 23%billings increased 35%, of which 30% was due to lower saleshigher billings of Monster High Hot Wheels products and 10%2% was due to lowerhigher billings of Matchbox products.
Action Figures, Building Sets, Games, and Other gross billings increased 51%, of which 28% was due to higher billings of Jurassic World products, 16% was due to initial billings of Lightyear products, as a result of their theatrical releases during the second quarter of 2022, and 6% was driven by higher billings of MEGA products.
Sales adjustments as a percentage of net sales was flat at 6.6% for the first half of Ever After High products, partially offset by initial sales of Enchantimals products of 11%.2022 and 2021.
Cost of sales increased 6% in31% during the first nine monthshalf of 2017,2022, as compared to a 2%28% increase in net sales, primarily due to higher product and other costs and higher royalty expense.expenses. Gross margin in the first half of 2022 decreased primarily due to cost inflation, primarily in raw materials and ocean freight, other supply chain costs, and higher royalty expenses, reflecting increased sales of licensed properties, partially offset by favorable pricing actions, favorable fixed cost absorption, and incremental realized savings from the Optimizing for Growth program. North America segment operating income was $370.3 million in the first half of 2022, as compared to segment operating income of $274.5 million in the first half of 2021, driven by higher gross profit, partially offset by higher selling and administrative expenses.
40

International Segment
The following table provides a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the International segment for the first half of 2022 and 2021:
 For the Six Months Ended % Change as
Reported		Currency
Exchange Rate
Impact
June 30,
2022		June 30,
2021		 
 (In millions, except percentage information)
Net Sales$880.2 $774.3 14 %-8 %
Segment Operating Income105.2 87.0 21 %
Gross Billings by Categories
Dolls$354.9 $339.4 5 %-8 %
Infant, Toddler, and Preschool170.3 164.1 4 %-7 %
Vehicles286.0 240.5 19 %-9 %
Action Figures, Building Sets, Games, and Other243.1 186.1 31 %-9 %
Gross Billings$1,054.3 $930.2 13 %-9 %
Sales Adjustments(174.1)(155.9)
Net Sales$880.2 $774.3 14 %-8 %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$278.1 $259.2 7 %-9 %
Hot Wheels253.6 209.6 21 %-9 %
Fisher-Price and Thomas & Friends156.4 155.6 — %-7 %
Other366.2 305.8 20 %-8 %
Gross Billings$1,054.3 $930.2 13 %-9 %
Gross billings for the International segment were $1.05 billion in the first half of 2022, an increase of $124.2 million, or 13%, as compared to $930.2 million in the first half of 2021, with an unfavorable impact from changes in currency exchange rates of negative nine monthspercentage points. The increase in the International segment gross billings was due to higher billings across all categories.
Dolls gross billings increased 5%, of 2017 decreasedwhich 6% was due to higher billings of Barbie products and 1% was due to higher billings of Polly Pocket products, partially offset by lower billings of Cave Club products of 2%.
Infant, Toddler, and Preschool gross billings increased 4%, of which 2% was due to higher billings of DC Comics products.
Vehicles gross billings increased 19%, of which 18% was due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings increased 31%, of which 22% was due to higher billings of Jurassic World products and 14% was driven by initial billings of Lightyear products, as a result of unfavorable product mix, higher royalty expense, lower licensing income, and higher obsolescence expense,their theatrical releases during the second quarter of 2022. This was partially offset by strategic pricing.lower billings of Games products of 5%.
Sales adjustments as a percentage of net sales was relatively consistent at 19.8% for the first half of 2022, as compared to 20.1% for the first half of 2021.
Cost of sales increased 23% in the first half of 2022, as compared to a 14% increase in net sales, primarily due to higher product and other costs and higher royalty expenses. Gross margin in the first half of 2022 decreased primarily due to cost inflation, primarily in raw materials and ocean freight, other supply chain costs, and higher royalty expenses, reflecting increased sales of licensed properties, partially offset by favorable pricing actions, favorable product mix, incremental realized savings from the Optimizing for Growth program, and favorable fixed cost absorption. International segment operating income decreased to $48.1was $105.2 million in the first nine monthshalf of 2017,2022, as compared to $155.9segment operating income of $87.0 million in the first nine monthshalf of 2016,2021, primarily driven primarily by lowerhigher gross profit and higher other selling and administrative expenses.profit.
41

American Girl Segment
The following table provides a summary of Mattel’sMattel's net sales, segment operating loss, and gross sales by brandbillings for the American Girl segment for the first nine monthshalf of 20172022 and 2016:2021:
 For the Six Months Ended  % Change as
Reported		 Currency
Exchange Rate
Impact
 June 30,
2022		June 30,
2021		  
 (In millions, except percentage information)
Net Sales$68.1 $85.8 -21 %— %
Segment Operating Loss(11.5)(19.3)-41 %
American Girl Segment
Total Gross Billings$69.7 $87.8 -21 %— %
Sales Adjustments(1.6)(2.0)
Total Net Sales$68.1 $85.8 -21 %— %
 For the Nine Months Ended  % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		  
 (In millions, except percentage information)
American Girl Segment:        
American Girl Brands$234.2
 $285.9
  -18 % —%
Construction and Arts & Crafts Brands0.5
 —
 

 

Other Brands12.7
 13.0
  -2 % 1%
Total Gross Sales$247.4
 $298.9
 -17 % —%
Sales Adjustments(12.6) (11.7)    
Total Net Sales$234.8
 $287.2
 -18 % —%
Gross salesbillings for the American Girl segment were $247.4was $69.7 million in the first nine monthshalf of 2017,2022, a decrease of $51.5$18.1 million, or 17%21%, as compared to $298.9$87.8 million in the first nine monthshalf of 2016.2021. The decrease in American Girl gross billings was driven by lower direct-to-consumer channel billings.
Cost of sales decreased 13% in the first half of 2022, as compared to a 21% decrease in net sales, primarily due to higher product and other costs. Gross margin in the first half of 2022 decreased primarily due to cost inflation and unfavorable fixed cost absorption, partially offset by incremental realized savings from the Optimizing for Growth Program. American Girl segment gross salesoperating loss was $11.5 million in the first half of 2022, as compared to segment operating loss of $19.3 million in the first half of 2021. The improvement was primarily due to lower sales of American Girl brands products. The 18% decrease in American Girl brands gross sales was due to lower licensing incomeother selling and initial sales in the prior year through external distribution channels.
Cost of sales decreased 2% in the first nine months of 2017, as compared to an 18% decrease in net sales. Gross margin in the first nine months of 2017 decreasedadministrative expenses as a result of lower licensing income and higher obsolescence expense.
a gain on sale of the American Girl segment loss was $38.6 million in the first nine months of 2017, as compared to segment income of $21.9 million in the first nine months of 2016, driven primarilycorporate office and distribution center, partially offset by lower gross profit, lower licensing income,profit.
Cost Savings Program
Optimizing for Growth (formerly Capital Light)
In February 2021, Mattel announced the Optimizing for Growth program, a multi-year cost savings program that integrates and higherexpands upon the previously announced Capital Light program (the “Program”). Targeted annual gross cost savings from actions that are expected to be completed beginning 2021 through 2023 are $250 million. Of the $250 million in targeted gross cost savings, approximately 55% is expected to benefit cost of sales, 35% is expected to benefit other selling and administrative expenses, and 10% is expected to benefit advertising and promotion expenses. Estimated total cash expenditures associated with the Program, excluding previous actions taken under the Capital Light program, are expected to be approximately $125 to $150 million.
Mattel estimates the cost of actions for the Program, excluding previous actions taken under the Capital Light program, to be as follows:
Income Taxes
Optimizing for Growth - ActionsEstimate of Cost
Employee severance$30 to $35 million
Real estate/supply chain optimization and other restructuring costs$25 to $35 million
Non-cash charges$55 to $60 million
Total estimated severance and restructuring costs$110 to $130 million
Information technology enhancements and other investments$70 to $80 million
Total estimated actions$180 to $210 million
Mattel’s provision
42

Cumulatively, in conjunction with previous actions taken under the Capital Light program prior to 2021, targeted annual gross cost savings for income taxes was $614.4the Program are $325 million by 2023, with total expected cash expenditures of approximately $165 to $190 million, and $26.6total expected non-cash charges of $70 to $75 million. Of the $325 million forin targeted gross cost savings, approximately 65% is expected to benefit cost of sales, 25% is expected to benefit other selling and administrative expenses, and 10% is expected to benefit advertising and promotion expenses.
In connection with the nine months ended SeptemberProgram, Mattel has recorded severance and other restructuring costs in the following cost and expense categories within the consolidated statements of operations:
For the Six Months Ended
June 30,
2022		June 30,
2021
(In millions)
Cost of sales (a)$8.4 $1.8 
Other selling and administrative expenses (b)12.2 17.1 
$20.6 $18.9 
(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 21 to the Consolidated Financial Statements—Segment Information" of this Quarterly Report on Form 10-Q.
(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 21 to the Consolidated Financial Statements—Segment Information" of this Quarterly Report on Form 10-Q.
As of June 30, 20172022, Mattel has recorded cumulative severance and 2016, respectively. Mattel recognized net discrete non-cash tax expense of $561.5 million and $558.8 million during the three and nine months ended September 30, 2017, respectively, and net discrete tax benefits of $9.0 million and $12.8 million during the three and nine months ended September 30, 2016, respectively, primarilyother restructuring charges related to the establishmentProgram of a valuation allowanceapproximately $106 million, which include approximately $24 million of non-cash charges. Mattel realized cumulative cost savings (before severance, restructuring costs, and reassessmentscost inflation) of prior years’ tax liabilities based on the statusapproximately $211 million, which represents approximately 80% benefit to cost of auditssales, 15% benefit to other selling and tax filings in various jurisdictions around the world, respectively.


Mattel regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Mattel considers both positiveadministrative expenses, and negative evidence related5% benefit to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. In evaluating the need for a valuation allowance, Mattel considered its recent operating results which resulted in a cumulative net operating loss in the U.S. for the 36-month period ending September 30, 2017. The 36-month cumulative U.S. loss from operations is considered strong negative evidenceadvertising and outweighs other positive subjective evidence, such as projections of future income. As a result, in the third quarter Mattel established a valuation allowance on its U.S. federal and state deferred tax assets. This results in a discrete non-cash charge to the quarter of $561.9 million for the balance of these net deferred tax assetspromotion expenses, as of December 31, 2016. Further, Mattel has provided zero tax benefitJune 30, 2022, in the year-to-date tax expense for items such as the year-to-date U.S. operating loss and other effects occurring in the current year. The valuation allowance does not impact Mattel's actual ability under applicable tax laws to utilize deferred tax assets such as loss carryforwards and tax credits to reduce future cash tax payments if and when sufficient income is earned prior to the expiration of the deferred tax assets. Mattel will continue to assess the likelihood that the deferred tax assets will be realizable at each period end.
In the normal course of business, Mattel is regularly audited by federal, state, and foreign tax authorities. Based on the current status of federal, state, and foreign audits, Mattel believes it is reasonably possible that in the next twelve months, the total unrecognized tax benefits could decrease by approximately $27 million related to the settlement of tax audits and/or the expiration of statutes of limitations. The ultimate settlement of any issueconnection with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.Program.
Liquidity and Capital Resources
Mattel’sMattel's primary sources of liquidity are its domestic and foreign cash and equivalents balances, access to short-term borrowing facilities, including its $1.60$1.40 billion domestic unsecured committedsenior secured revolving credit facility (“Credit Facility”), commercial paper program,facilities, and issuances of long-termaccess to capital markets to fund its operations and obligations. Such obligations may include capital expenditures, debt securities. service, future royalty payments pursuant to licensing agreements, future inventory and service purchases, and required cash contributions and payments related to benefit plans. Of Mattel's $274.5 million in cash and equivalents at June 30, 2022, approximately $199.9 million was held by foreign subsidiaries, including $60.9 million held in Russia.
Cash flows from operating activities could be negatively impacted by decreased demand for Mattel’sMattel's products, which could result from factors such as, but not limited to, adverse economic conditions and changes in public and consumer preferences, or by increased costs associated with manufacturing and distribution of products or shortages in raw materials or component parts. Additionally, Mattel’sMattel's ability to issue long-term debt and obtain seasonal financing could be adversely affected by factors such as, but not limited to, global economic crises and tight credit environments, an inability to meetcomply with its debt covenant requirements, which include maintaining consolidated debt-to-earnings before interest, taxes, depreciation,covenants and amortization and interest coverage ratios,its senior secured revolving credit facilities covenants, or a deterioration of Mattel’sMattel's credit ratings. Mattel’s ability to conduct its operations couldAs discussed under Part I, Item 2 "Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19 Update / Recent Developments" of this Quarterly Report on Form 10-Q, many of the aforementioned factors have been and may be negatively impacted should theseadversely affected by COVID-19 or other adverse conditions affect its primary sourcesmacro-economic factors. However, based on Mattel’s current business plan and factors known to date, including the currently known impacts of liquidity.
Of Mattel’s $181.3 million inCOVID-19, it is expected that existing cash and equivalents, as of September 30, 2017, approximately $102 million is held by foreign subsidiaries. Mattel may need to accrue and pay additional income taxes if some or all of the undistributed earnings of foreign subsidiaries were repatriated. Mattel does not foresee a need to repatriate undistributed earnings of foreign subsidiaries. Mattel has several liquidity options to fund its domestic operations and obligations; such obligations include investing and financing activities such as dividends, share repurchases, and debt service. Positive cash flows generated annually by its domesticfrom operations, availability under the Credit Facility, alternative forms of financing,senior secured credit revolving facilities, and access to both long-termcapital markets, will be sufficient to meet working capital and short-term public and private debt markets at competitive interest rates are available to fund domestic operations and obligations. If these sources are not adequate, Mattel also hasoperating expenditure requirements for the ability to repatriate highly taxed foreign earnings, receive repayment of intercompany loans to foreign subsidiaries, and/or distribute liquidating dividends from foreign subsidiaries, all of which would have a very nominal impact, if any, on Mattel’s tax liabilities. Mattel believes that its policy to indefinitely reinvest the earnings of its foreign subsidiaries will not result in and is not reasonably likely to result in a material change to Mattel’s liquidity position.
In October 2017, Mattel's Board of Directors determined to suspend the Company's quarterly dividend beginning in the fourth quarter of 2017, which was previously $0.15 per share, in order to increase financial flexibility, strengthen the balance sheet, and facilitate strategic investments.next twelve months.
Current Market Conditions
Mattel is exposed to financial market risk resulting from changes in interest and foreign currency exchange rates. Mattel believes that it has ample liquidity to fund its business needs, including beginning of year cash and equivalents, cash flows from operations, and access to the commercial paper markets and its Credit Facility, which it uses for seasonal working capital requirements.


Subject to market conditions,Consistent with prior periods, Mattel intends to utilize its commercial paper program as its primary short-term borrowing facility, and does not intend to sell commercial paper notes in excess of the available amount under the Credit Facility as described below. The Credit Facility is used as a back-up to Mattel’s commercial paper program. If, for any reason, Mattel is unable to access the commercial paper market, Mattel intends to use the Credit Facility or alternative forms of financingsenior secured revolving credit facilities to meet its short-term liquidity needs. As of SeptemberAt June 30, 2017, there were2022, Mattel had no amounts outstanding borrowings under the Credit Facility. Assenior secured revolving credit facilities and approximately $9 million in outstanding letters of September 30, 2017, Mattel had borrowings of $732.6 million outstanding related to its commercial paper program. Mattel has not experienced any limitations on its ability to access this source of liquidity. credit under the senior secured revolving credit facilities. 
Market conditions could affect certain terms of other debt instruments that Mattel enters into from time to time.
43

Mattel monitors the third-party depository institutions that hold the Company'sMattel's cash and equivalents. Mattel’sMattel's emphasis is primarily on safety and liquidity of principal, and secondarily on maximizing the yield on those funds. Mattel diversifies its cash and equivalents among counterparties and securities to minimize risks.
Mattel is subject to credit risks relating to the ability of its counterparties in hedging transactions to meet their contractual payment obligations. The risks related to creditworthiness and nonperformance have been considered in the fair value measurements of Mattel’sMattel's foreign currency forward exchange contracts. Mattel closely monitors its counterparties and takes action, as necessary, to manage its counterparty credit risk.
Mattel expects that some of its customers and vendors may experience difficulty in obtaining the liquidity required to buy inventory or raw materials. Mattel monitors its customers’customers' financial condition and their liquidity in order to mitigate Mattel’s accounts receivable collectibilitycollectability risks, and customer terms and credit limits are adjusted, if necessary. Additionally, Mattel uses a variety of financial arrangements to ensure collectibilitycollectability of accounts receivable of customers deemed to be a credit risk, including requiring letters of credit, factoring, purchasing various forms of credit insurance with unrelated third parties, or requiring cash in advance of shipment. As a result of Toys “R” Us filing for bankruptcy in September 2017, Mattel reversed gross sales and accounts receivable of approximately $47 million, and reversed net sales of approximately $43 million in the three months ended September 30, 2017.
Mattel sponsors defined benefit pension plans and postretirement benefit plans for its employees. Actual returns below the expected rate of return, along with changes in interest rates that affect the measurement of the liability, would impact the amount and timing of Mattel’sMattel's future contributions to these plans.
OperatingMattel's business has been impacted by COVID-19. Refer to Part I, Item 2 "Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19 Update / Recent Developments" for further discussion regarding the impact and potential impacts of COVID-19 or other macro-economic factors on Mattel’s business.
Cash Flow Activities
Cash flows used for operating activities were $740.1$425.0 million in the first nine monthshalf of 2017,2022, as compared to $331.3$241.4 million in the first nine monthshalf of 2016.2021. The increase in cash flows used for operating activities increasedwas primarily due to ahigher working capital usage, partially offset by higher net loss,income, excluding the impact of the valuation allowance on deferred tax assets, and higher working capital usage.
Investing Activitiesnon-cash items.
Cash flows used for investing activities were $174.9$53.5 million in the first nine monthshalf of 2017,2022, as compared to $204.7$27.2 million in the first nine monthshalf of 2016.2021. The increase in cash flows used for investing activities decreasedwas primarily due to an increase inlower proceeds from foreign currency forward exchange contracts and payments relatedthe sale of assets/business in the first half of 2022 as compared to Fuhu and Sproutling in 2016, partially offset by higher capital spending.
Financing Activitiesthe first half of 2021.
Cash flows provided by financing activities were $213.7$10.3 million in the first nine monthshalf of 2017,2022, as compared to cash flows used for financing activities of $43.2$107.8 million in the first nine monthshalf of 2016.2021. The increasechange in cash flows provided byfor financing activities was primarily driven by higher net short-term borrowings, partially offset by proceeds from long-term borrowingsdue to cash used for partial repayment and refinancing of the 2017/2018 Senior Notes due December 2025 in 2016.


the first half of 2021.
Seasonal Financing
Mattel maintains and periodically amends or replaces its domestic unsecured committed revolving credit facility with a commercial bank group. Subject to market conditions, Mattel intends to utilize its commercial paper program as its primary short-term borrowing facility, and does not intend to sell commercial paper notes in excess of the available amount under the Credit Facility as described below. The Credit Facility is used as a back-up to Mattel’s commercial paper program. If, for any reason, Mattel is unable to access the commercial paper market, Mattel intends to use the Credit Facility. Mattel is contemplating alternative financing to replace the Credit Facility on a longer-term basis, including an asset based credit facility. The agreement governing the Credit Facility was amended on June 15, 2017 to, among other things, increase the maximum allowed consolidated debt-to-consolidated earnings before interest, taxes, depreciation, and amortization (“consolidated EBITDA”) ratio that Mattel is required to maintain under the Credit Facility to 3.75 toSee Part I, Item 1 from 3.50 to 1 for the four consecutive quarters beginning with the second quarter of 2017. Additionally, the Credit Facility was amended on September 20, 2017 to remove the consolidated debt-to-consolidated EBITDA ratio requirement for the third fiscal quarter of 2017 and increase the consolidated debt-to-consolidated EBITDA ratio during a covenant modification period to 4.50 to 1.00 for the fourth fiscal quarter of 2017 and 4.25 to 1.00 for each fiscal quarter thereafter. The covenant modification period commenced on September 20, 2017 and continues, at a minimum, through the fourth fiscal quarter of 2017 and thereafter until such time as Mattel (i) requests the termination of the covenant modification period, and (ii) delivers financial statements and a certificate"Financial Statements—Note 7 to the lenders demonstrating a consolidated debt-to-consolidated EBITDA ratioConsolidated Financial Statements—Seasonal Financing" of 3.75 to 1.00 or less for the period consisting of the preceding four consecutive fiscal quarters. The amendment further amends the Credit Facility to, among other items, (i) add certain restrictive covenants during the covenant modification period that include greater restrictions against certain receivable financing facilities, as well as restrictionsthis Quarterly Report on certain asset dispositions, burdensome agreements, and specified restricted payments, (ii) add a guarantee and lien trigger event that occurs if Mattel’s debt rating falls below certain thresholds, (iii) add covenants that require all U.S. material subsidiaries under the Credit Facility (other than foreign subsidiary holding companies) to become guarantors upon a guarantee and lien trigger event, and (iv) provide that after a guarantee and lien trigger event and before the termination of the covenant modification period, indebtedness under the Credit Facility in an amount not to exceed 10% of Mattel’s consolidated net tangible assets will be secured by pledges from Mattel and the guarantors of 100% of the equity of all U.S. subsidiaries (other than any foreign subsidiary holding company) and 66% of the equity of all first-tier foreign subsidiaries and foreign subsidiary holdings companies. Such guarantees and pledges, as well as the additional restrictive covenants, will be eliminated upon the termination of the covenant modification period.
The aggregate commitments under the Credit Facility remain at $1.60 billion, with an “accordion feature,” which allows Mattel to increase the aggregate availability under the Credit Facility to $1.85 billion under certain circumstances. In addition, applicable interest rate margins remain within a range of 0.00% to 0.75% above the applicable base rate for base rate loans and 0.88% to 1.75% above the applicable LIBOR for Eurodollar rate loans, and commitment fees range from 0.08% to 0.25% of the unused commitments under the Credit Facility, in each case depending on Mattel’s senior unsecured long-term debt rating.
Although the consolidated debt-to-consolidated EBITDA ratio was removed for the third quarter, Mattel is required to meet financial ratio covenants at the end of each quarter and fiscal year, using the formulae specified in the agreement governing the Credit Facility to calculate the ratios. Mattel was in compliance with its interest coverage ratio covenant at the end of the nine months ended September 30, 2017. Mattel’s interest coverage ratio was 6.19 to 1 (compared to a minimum required of 3.50 to 1) as of September 30, 2017.
The agreement governing the Credit Facility is a material agreement, and failure to comply with the financial ratio covenants may result in an event of default under the terms of the Credit Facility. If Mattel were to default under the terms of the Credit Facility, its ability to meet its seasonal financing requirements could be adversely affected. Furthermore, Mattel’s long-term debt agreements contain cross-default provisions which would result in an event of default if Mattel, among other items, fails to comply with the financial ratio covenants under the terms of the Credit Facility with outstanding borrowings in excess of $25 million. The Credit Facility is used as a back-up to Mattel’s commercial paper program. Mattel does not expect to have any outstanding borrowings under the Credit Facility at the end of 2017.
To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel avails itself of individual short-term credit lines with a number of banks. Mattel expects to extend the majority of these credit lines throughout 2017.
In July 2017, a major credit rating agency changed Mattel’s long-term credit rating to BBB-, changed its short-term credit rating to A-3, and changed its outlook to negative. Another major credit rating agency changed Mattel’s long-term credit rating to BBB.  A reduction in Mattel’s credit ratings could increase the cost of obtaining financing.
Mattel believes its cash on hand, its foreign credit lines, and amounts available under its Credit Facility or alternative forms of financing will be adequate to meet its seasonal financing requirements in 2017.


Form 10-Q.
Financial Position
Mattel’sMattel's cash and equivalents decreased $688.2$456.8 million to $181.3$274.5 million at SeptemberJune 30, 2017,2022, as compared to $869.5$731.4 million at December 31, 2016. The decrease was primarily2021, due to higherseasonal working capital usage dividend payments, and purchases of tools, dies, and molds and other property, plant, and equipment,capital expenditures. The decreases were partially offset by net proceedsincome during the first half of 2022. Mattel's cash and equivalents decreased $110.2 million to $274.5 million at June 30, 2022, as compared to $384.7 million at June 30, 2021, primarily due to the repayment of the remaining $275 million principal balance of the 2025 Notes in July 2021 and capital expenditures, partially offset by cash flows from short-term borrowings and proceeds from foreign currency forward exchange contracts.operating activities in the trailing twelve months.
Accounts receivable increased $390.9decreased $83.5 million to $1.51 billion$989.2 million at SeptemberJune 30, 2017,2022, as compared to $1.12$1.07 billion at December 31, 2016,2021, primarily due to the seasonality of Mattel's business.seasonal declines as year-end receivables are collected. Accounts receivable decreased $22.7increased $205.1 million to $1.51 billion$989.2 million at SeptemberJune 30, 2017,2022, as compared to $1.53 billion$784.1 million at SeptemberJune 30, 2016,2021, primarily due to lower volume, including the impact of Toys “R” Us filing for bankruptcy, partially offset by a shift in the timing of sales in the US to later in the quarter. growth.
Inventory increased $376.2$400.4 million to $990.0 million$1.2 billion at SeptemberJune 30, 2017,2022, as compared to $613.8$777.2 million at December 31, 2016,2021, primarily due to lower-than-expected sales volume in the first nine months of 2017, includingseasonal inventory build and the impact of Toys “R” Us filing for bankruptcy.cost inflation. Inventory increased $359.5 million to $1.2 billion at June 30, 2022, as compared to $818.0 million at June 30, 2021, primarily due to earlier seasonal build of inventory and the impact of cost inflation.
44

Prepaid expenses and other current assets decreased $20.1 million to $273.2 million at June 30, 2022, as compared to $293.3 million at December 31, 2021, due to settlement of a receivable due from insurers related to a legal matter during the first half of 2022, partially offset by increases in derivative receivables, prepaid taxes other than income taxes, and other miscellaneous prepaid expenses. Prepaid expenses and other current assets increased $86.2 million to $273.2 million at June 30, 2022, as compared to $187.0 million at June 30, 2021, due to increases in derivative receivables, prepaid taxes other than income taxes, and other miscellaneous prepaid expenses.
Accounts payable and accrued liabilities decreased $11.4$354.7 million to $1.28$1.22 billion at SeptemberJune 30, 2017,2022, as compared to $1.29$1.57 billion at December 31, 2016. The decrease was primarily2021, due to lower advertisingseasonal declines in expenditure levels and promotion accruals, partially offset by tighter managementthe settlement of vendor disbursements.
Noncurrent long-term debt decreasedan accrued legal matter during the first half of 2022. Accounts payable and accrued liabilities increased $129.7 million to $1.89$1.22 billion at SeptemberJune 30, 20172022, as compared to $1.09 billion at June 30, 2021, due to increased payables associated with higher inventory production levels and cost inflation, as well as increases in accrued freight and accrued royalties.
A summary of Mattel's capitalization is as follows:
 June 30, 2022June 30, 2021December 31, 2021
 (In millions, except percentage information)
Cash and equivalents$274.5 $384.7 $731.4 
Short-term borrowings3.0 0.2 — 
2010 Senior Notes due October 2040250.0 250.0 250.0 
2011 Senior Notes due November 2041300.0 300.0 300.0 
2013 Senior Notes due March 2023250.0 250.0 250.0 
2017/2018 Senior Notes due December 2025— 275.0 — 
2019 Senior Notes due December 2027600.0 600.0 600.0 
2021 Senior Notes due April 2026600.0 600.0 600.0 
2021 Senior Notes due April 2029600.0 600.0 600.0 
Debt issuance costs and debt discount(26.7)(35.9)(29.0)
Total debt2,576.3 60 %2,839.3 84 %2,571.0 62 %
Stockholders’ equity1,728.0 40 527.7 16 1,568.8 38 
Total capitalization (debt plus equity)$4,304.3 100 %$3,367.1 100 %$4,139.8 100 %
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"). The 2026 Notes will mature on April 1, 2026 and the 2029 Notes will mature on April 1, 2029, unless earlier redeemed in accordance with their respective terms. The Notes are guaranteed by Mattel’s existing and, subject to certain exceptions, future wholly-owned domestic restricted subsidiaries that guarantee Mattel’s senior secured revolving credit facilities or certain other indebtedness.
The net proceeds from $2.13the offering, together with cash on hand, were used to redeem $1.225 billion in aggregate principal amount of Mattel’s outstanding 2025 Notes and pay related prepayment premiums and transaction fees and expenses. As a result of the partial redemption of the 2025 Notes, Mattel incurred a loss on extinguishment of $83.2 million, comprised of $62.0 million of prepayment premium costs and a $21.2 million write-off of the unamortized debt issuance costs, which was recorded within interest expense in the consolidated statements of operations in the first quarter of 2021.
On July 1, 2021, Mattel redeemed the remaining outstanding $275 million aggregate principal amount of the 2025 Notes. As a result of the redemption, Mattel incurred a loss on extinguishment of $18.5 million, comprised of $14.0 million of prepayment premium costs and a $4.5 million write-off of the unamortized debt issuance costs, which was recorded within interest expense in the consolidated statements of operations in the third quarter of 2021.
Total debt, including short-term borrowings, remained relatively consistent at $2.58 billion at June 30, 2022, as compared to $2.57 billion at December 31, 20162021.
Total debt, including short-term borrowings, was $2.58 billion at June 30, 2022, as compared to $2.84 billion at June 30, 2021. The decrease was due to the reclassificationrepayment of $250.0the remaining $275 million principal balance of 2013 Seniorthe 2025 Notes due on March 15, 2018.
A summary of Mattel’s capitalization is as follows:in July 2021.
45

 September 30, 2017 September 30, 2016 December 31, 2016
 (In millions, except percentage information)
2010 Senior Notes$500.0
 13 % $500.0
 10 % $500.0
 10 %
2011 Senior Notes300.0
 7 % 300.0
 6 % 300.0
 6 %
2013 Senior Notes250.0
 6 % 500.0
 10 % 500.0
 10 %
2014 Senior Notes500.0
 13 % 500.0
 10 % 500.0
 10 %
2016 Senior Notes350.0
 9 % 350.0
 7 % 350.0
 7 %
Debt issuance costs(13.6) — % (16.5) — % (15.7) — %
Total noncurrent long-term debt1,886.4
 48 % 2,133.5
 43 % 2,134.3
 43 %
Other noncurrent liabilities576.3
 15 % 454.4
 9 % 446.1
 9 %
Stockholders’ equity1,439.7
 37 % 2,415.4
 48 % 2,407.8
 48 %
 $3,902.4
 100 % $5,003.3
 100 % $4,988.2
 100 %
Mattel’s debt-to-total capital ratio, including short-term borrowingsStockholders' equity increased $159.2 million to $1.73 billion at June 30, 2022, as compared to $1.57 billion at December 31, 2021, primarily due to net income for the first half of 2022 and the current portionimpact of long-term debt,share-based compensation recognized in additional paid-in capital. Stockholders' equity increased from 50.2%$1.20 billion to $1.73 billion at SeptemberJune 30, 20162022, as compared to 66.6%$527.7 million at SeptemberJune 30, 2017 as a result of higher debt and lower stockholders’ equity.2021, primarily due to net income for the trailing twelve months.
Litigation
See Part I, Item 1 “Financial"Financial Statements—Note 20 to the Consolidated Financial Statements—Contingencies”Contingencies" of this Quarterly Report on Form 10-Q.
Application of Critical Accounting Policies and Estimates
During the third quarter of 2017, Mattel elected to early adopt of ASU 2017-04 Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test. If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized in an amount equal to the excess, limited by the amount of goodwill in that reporting unit.
In determining the fair value for each of its reporting units, Mattel’s quantitative analysis contemplates both the income approach and the market approach. The income approach utilizes a discounted cash flow analysis based on what the business is forecasted to generate in the future. The market approach utilizes earnings multiples of comparable public companies, which are reflective of the market in which each respective reporting unit operates, and recent comparable market transactions.


In the third quarter of 2017, Mattel performed its annual impairment tests and determined that goodwill was not impaired since each reporting unit's fair value exceeded its carrying value. The fair value of the North America and American Girl reporting units were substantially in excess of their carrying value.
Mattel’s International reporting unit was deemed to be at risk of failing the goodwill impairment test. The estimated fair value was approximately 1.39x its carrying value. Based on year-to-date performance and business outlook, the International reporting unit has achieved lower-than-expected earnings resulting in a downward revision of future years’ forecasts. The International reporting unit did not meet its forecasts due to lower-than-expected sales growth, primarily driven by a net sales decline in Europe, and gross margin decline, driven by unfavorable product mix. The valuation model assumes incremental growth in sales and gross margin from current levels. If Mattel is unable to successfully execute its plans in international markets to achieve further growth in emerging markets, improve gross margin, market demand is below expectations, or the value of our common stock decreases, goodwill may be impaired.
Other than the early adoption of ASU 2017-04, Mattel’sMattel's critical accounting policies and estimates are included in the 2021 Annual Report on Form 10-K and did not materially change during the first ninesix months of 2017, and are included in its Annual Report on Form 10-K for the year ended December 31, 2016.2022.
New Accounting Pronouncements
See Part I, Item 1 “Financial"Financial Statements—Note 22 to the Consolidated Financial Statements—New Accounting Pronouncements”Pronouncements" of this Quarterly Report on Form 10-Q.
Non-GAAP Financial MeasuresMeasure
To supplement the financial results presented in accordance with accounting principles generally accepted accounting principles in the United States (“GAAP”of America ("U.S. GAAP"), Mattel presents certaina non-GAAP financial measuresmeasure within the meaning of Regulation G promulgated by the Securities and Exchange Commission.SEC. The non-GAAP financial measuresmeasure that Mattel presents includeis currency exchange rate impact and gross sales.impact. Mattel uses these metricsthis measure to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. Mattel believes that the disclosure of this non-GAAP financial measuresmeasure provides useful supplemental information to investors to be able to better evaluate ongoing business performance and certain components of the Company'sMattel's results. These measures areThis measure is not, and should not be viewed as, substitutesa substitute for GAAP financial measures and may not be comparable to similarly-titled measures used by other companies.
Currency Exchange Rate Impact
The currency exchange rate impact reflects the portion (expressed as a percentage) of changes in Mattel's reported results that are attributable to fluctuations in currency exchange rates.
For entities reporting in currencies other than the USU.S. dollar, Mattel calculates the percentage change of period-over-period results at constant currency exchange rates (established as described below) by translating current period and prior period results using these rates. It then determines the currency exchange rate impact percentage by calculating the difference between the percentage change at such constant currency exchange rates and the percentage change at actual exchange rates.
The consistentconstant currency exchange rates are determined by Mattel at the beginning of each year and are applied consistently during the year. They are generally different from the actual exchange rates in effect during the current or prior period due to volatility in actual foreign exchange rates. Mattel considers whether any changes to the constant currency rates are appropriate at the beginning of each year. The exchange rates used for these constant currency calculations are generally based on prior year actual exchange rates.
Mattel believes that the disclosure of the percentage impact of foreign currency changes is useful supplemental information for investors to be able to gauge Mattel’sMattel's current business performance and the longer termlonger-term strength of its overall business since foreign currency changes could potentially mask underlying sales trends. The disclosure of the percentage impact of foreign exchange allows investors to calculate the impact on a constant currency basis and also enhances their ability to compare financial results from one period to another.
Gross SalesKey Performance Indicator
Gross salesbillings represent salesamounts invoiced to customers, excluding the impact of sales adjustments. Net sales, as reported,customers. It does not include the impact of sales adjustments, such as trade discounts and other allowances. Mattel presents changes in gross salesbillings as a metric for comparing its aggregate, categorical, brand, and geographic results to highlight significant trends in Mattel’sMattel's business. Changes in gross


sales billings are discussed because, while Mattel records the details of such sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and not associated with categories, brands, and individual products, making net sales less meaningful. Because sales adjustments are not allocated to individual products, net sales are only presented on a consolidated and segment basis and not on a brand level.
Since sales adjustments are determined by customer rather than at the brand level, Mattel believes that the disclosure of gross sales by brand is useful supplemental information for investors to be able to assess the performance of its underlying brands (e.g., Barbie) and also enhances their ability to compare sales trends over time.
A reconciliation from Mattel's consolidated net sales to its consolidated gross sales is as follows:products.
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 For the Three Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Net sales$1,561.0
 $1,795.6
 -13 % 1%
Sales adjustments149.2
 179.8
    
Gross sales$1,710.2
 $1,975.4
 -13 % 2%
        
 For the Nine Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Net sales$3,271.1
 $3,622.3
 -10 % —%
Sales adjustments322.2
 367.9
    
Gross sales$3,593.3
 $3,990.2
 -10 % —%
A reconciliation from net sales to gross sales for the North America segment is as follows:

 For the Three Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Net sales$796.1
 $1,003.6
 -21 % —%
Sales adjustments43.2
 67.4
    
Gross sales$839.3
 $1,071.0
 -22 % —%
        
 For the Nine Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Net sales$1,620.9
 $1,954.1
 -17 % —%
Sales adjustments88.0
 123.0
    
Gross sales$1,708.9
 $2,077.1
 -18 % —%


A reconciliation from net sales to gross sales for the International segment is as follows:
 For the Three Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Net sales$675.2
 $665.9
 1% 2%
Sales adjustments101.8
 108.3
    
Gross sales$777.0
 $774.2
 —% 2%
        
 For the Nine Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Net sales$1,415.4
 $1,381.0
 2% —%
Sales adjustments221.6
 233.2
    
Gross sales$1,637.0
 $1,614.2
 1% —%
A reconciliation from net sales to gross sales for the American Girl segment is as follows:
 For the Three Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Net sales$89.7
 $126.1
 -29 % —%
Sales adjustments4.2
 4.0
    
Gross sales$93.9
 $130.1
 -28 % —%
        
 For the Nine Months Ended % Change as
Reported		 Currency
Exchange Rate
Impact
 September 30,
2017		 September 30,
2016		 
 (In millions, except percentage information)
Net sales$234.8
 $287.2
 -18 % —%
Sales adjustments12.6
 11.7
    
Gross sales$247.4
 $298.9
 -17 % —%
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Exchange Rate Risk
Currency exchange rate fluctuations impact Mattel’sMattel's results of operations and cash flows. Inventory transactions denominated in the Chinese yuan, Euro, Mexican peso, British pound sterling, Canadian dollar, Australian dollar, Brazilian real, and Russian ruble arewere the primary transactions that caused foreign currency transaction exposure for Mattel.Mattel during the first half of 2022. Mattel seeks to mitigate its exposure to market risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts primarily to hedge its purchase and sale of inventory and other intercompany transactions denominated in foreign currencies. These contracts generally have maturity dates of up to 1824 months. For those intercompany receivables and payables that are not hedged, the transaction gains or losses are recorded in the consolidated statementstatements of operations in the period in which the exchange rate changes as part of operating income or other non-operating income/expense (income), net based on the nature of the underlying transaction. Transaction gains or losses on hedged intercompany inventory transactions are recorded in the consolidated statementstatements of operations in the period in which the inventory is sold to customers. In addition, Mattel manages its exposure to currency exchange rate fluctuations through the selection of currencies used for international borrowings. Mattel does not trade in financial instruments for speculative purposes.


Mattel’sMattel's financial position is also impacted by currency exchange rate fluctuations on translation of its net investments in subsidiaries with non-USnon-U.S. dollar functional currencies. Assets and liabilities of subsidiaries with non-USnon-U.S. dollar functional currencies are translated into USU.S. dollars at fiscal period-end exchange rates. Income, expense, and cash flow items are translated at weighted averageweighted-average exchange rates prevailing during the fiscal period. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss)loss within stockholders’stockholders' equity. Mattel’sMattel's primary currency translation exposures duringadjustments for the first ninesix months of 2017ended June 30, 2022 were related to its net investments in entities having functional currencies denominated in the Euro, British pound sterling, Euro, Russian ruble, and Mexican peso.Brazilian real.
There are numerous factors impacting the amount by which Mattel’sMattel's financial results are affected by foreign currency translation and transaction gains and losses resulting from changes in currency exchange rates, including, but not limited to, the level of foreign currency forward exchange contracts in place at a given time and the volume of foreign currency denominatedcurrency-denominated transactions in a given period. ThereHowever, assuming that such factors were held constant, Mattel estimates that a 1 percent change in the U.S. dollar would have beenimpacted Mattel's second quarter net sales by approximately 0.3% and would have less than a $0.01 impact to Mattel's net income per share.
United Kingdom Operations
On January 29, 2020, the British Parliament approved an agreement to withdraw from the EU, and the United Kingdom ("U.K.") officially withdrew from the EU on January 31, 2020 and entered into a transition period that ended on December 31, 2020.
On December 24, 2020, the U.K. and EU agreed upon The EU-UK Trade and Cooperation Agreement. The agreement was provisionally applicable beginning January 1, 2021 and sets new rules and arrangements between the U.K. and EU in areas such as the trade of goods and services, intellectual property, transportation, and more. As a result of the agreement, the U.K. is no material changeslonger considered a member of the EU Single Market and Customs Union and exited all EU policies and trade agreements. The transfer of goods between the U.K. and EU is subject to additional inspections and checkpoints causing possible delays in the movement of inventory.
On April 27, 2021, the European Parliament gave final approval to the quantitative information about market risks as disclosed under Part II, Item 7A “QuantitativeEU-UK Trade and Qualitative Disclosures About Market Risk”Cooperation Agreement, and on April 29, 2021, the EU approved the conclusion of the agreement by way of a Council Decision. As a result, the agreements between the U.K. and the EU came into effect on May 1, 2021. This was the last official step in Mattel’s 2016 Annual Reportformalizing the new relationship between the U.K. and the EU. Although the agreement has mitigated a portion of the risk that arose due to the U.K.'s withdrawal from the EU, the overall impact on Form 10-K.Mattel's operations is still being evaluated, including the volatility of the British pound sterling. Mattel's U.K. operations represented approximately 6% of Mattel's consolidated net sales for the six months ended June 30, 2022.
VenezuelanTurkey Operations
Since JanuaryEffective April 1, 2010,2022, Mattel has accounted for VenezuelaTurkey as a highly inflationary economy, as the projected three-year cumulative inflation rate for Venezuela exceeded 100%. Accordingly, Mattel’s VenezuelanAs such, beginning April 1, 2022, Mattel's Turkey subsidiary useshas designated the USU.S. dollar as its functional currency, and monetary assets and liabilities denominated in Venezuelan bolívar fuerte (“BsF”) generate income or expense for changes in value associated with foreign currency exchange rate fluctuations against the US dollar. From January 2010 through January 2013, Mattel’s Venezuelan subsidiary used the Sistema de Transacciones con Títulos en Moneda Extranjera (“SITME”) rate, which was quoted at 5.30 BsF per US dollar as of December 31, 2012, to remeasure monetary assets and liabilities denominated in BsF. During February 2013, the Central Bank of Venezuela revised its official exchange rate to 6.30 BsF per US dollar and eliminated the SITME rate.
During March 2013, the Venezuelan government introduced a complementary currency exchange system, the Sistema Complementario de Administración de Divisas 1 (“SICAD 1”). SICAD 1 was intended to function as an auction system, allowing entities in specific sectors to bid for US dollars to be used for specified import transactions. During February 2014, the Venezuelan government introduced an additional currency exchange system, the Sistema Complementario de Administración de Divisas 2 (“SICAD 2”), which was expected to provide a greater supply of US dollars from sources other than the Venezuelan government and increase participation to all sectors and companies.
During February 2015, the Venezuelan government announced the launch of a new three-tiered currency exchange platform, which included a new exchange system called the Marginal Currency System (“SIMADI”). The first tier was used for food, medicine, agriculture, and other essential goods and used an official exchange rate of 6.30 BsF per US dollar. The second tier was a merger of the SICAD 1 and SICAD 2 systems, which held periodic auctions for entities in specific sectors. The third tier was the new SIMADI system, which was intended to be a market-driven exchange that allowed for legal trading of foreign currency based on supply and demand.
During March 2016, the Venezuelan government further revised its currency exchange platform to a dual system. The SICAD rate merged with the official exchange rate, becoming the new Tipo de Cambio Protegido (“DIPRO”) exchange rate, which was fixed at 10.00 BsF per US dollar. The existing SIMADI rate was renamed the Tipo de Cambio Complementario (“DICOM”) exchange rate. The DIPRO rate is used for essential imports, such as food and medicine, whereas the DICOM rate is used for all other transactions. During the first quarter of 2016, Mattel changed its remeasurement rate from the official exchange rate to the new DICOM exchange rate. The change in the remeasurement rate resulted in an unrealized foreign currency exchange loss of approximately $26 million, which was recognized in other non-operating expense/income, net in the consolidated statement of operations in the first quarter of 2016.
Mattel’s Venezuelancurrency. Mattel's Turkey subsidiary represented less than 0.01% of Mattel’s consolidated net sales in the first nine months of 2017 and had approximately $1 million of net monetary assets denominated in BsF as of September 30, 2017. Venezuela currency matters, along with economic and political instability, continue to impact the operating results of Mattel’s Venezuelan subsidiary. If the Venezuelan bolívar fuerte significantly devalues in the future, or if the economic or political conditions significantly worsen, Mattel may consider ceasing operations of its Venezuelan subsidiary, which could result in a pre-tax charge to its consolidated statement of operations of up to $71 million.


United Kingdom Operations
During June 2016, the referendum by British voters to exit the European Union (“Brexit”) adversely impacted global markets and resulted in a sharp decline of the British pound sterling against the US dollar. In February 2017, the British Parliament voted in favor of allowing the British government to begin the formal process of Brexit and discussions with the European Union began in March 2017. In the short-term, volatility in the British pound sterling could continue as the United Kingdom negotiates its anticipated exit from the European Union. In the longer term, any impact from Brexit on Mattel's United Kingdom operations will depend, in part, on the outcome of tariff, trade, regulatory, and other negotiations. Mattel's United Kingdom operations represented approximately 5%1% of Mattel's consolidated net sales infor the first ninesix months of 2017.ended June 30, 2022.
47

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of SeptemberJune 30, 2017,2022, Mattel’s disclosure controls and procedures were evaluated, with the participation of Mattel’s principal executive officer and principal financial officer, to assess whether they are effective in providing reasonable assurance that information required to be disclosed by Mattel in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange CommissionCommission's rules and forms. Based on this evaluation, Margaret H. Georgiadis,Ynon Kreiz, Mattel’s principal executive officer, and Joseph J. Euteneuer,Anthony DiSilvestro, Mattel’s principal financial officer, concluded that these disclosure controls and procedures were effective to provide reasonable assurance as of SeptemberJune 30, 2017.2022.

Changes in Internal Control Overover Financial Reporting
During the quarter ended September 30, 2017, Mattel madeThere were no changes to itsin internal control over financial reporting that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, itsMattel’s internal control over financial reporting.



48

PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The content of Part I, Item 1 “Financial"Financial Statements—Note 20 to the Consolidated Financial Statements—Contingencies”Contingencies" of this Quarterly Report on Form 10-Q is hereby incorporated by reference in its entirety in this Item 1.
Item 1A. Risk Factors.
ThereOther than as provided in Mattel's Quarterly Report on Form 10-Q for the three months ended March 31, 2022, there have been no material changes to the risk factors disclosed under Part I, Item 1A “Risk Factors”"Risk Factors" in Mattel’s 2016the 2021 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Equity Securities
During the thirdsecond quarter of 2017,2022, Mattel did not sell any unregistered equity securities.
Issuer Purchases of Equity Securities
This table provides certain information with respect to Mattel’sMattel's purchases of its common stock during the thirdsecond quarter of 2017:2022:
Period
Total Number of
Shares (or Units)
Purchased (1)
 
Average Price Paid
per Share (or Unit)
 
Total Number of Shares
(or Units) Purchased as
Part of Publicly
Announced Plans or
Programs
 
Maximum Number (or
Approximate Dollar 
Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2)
July 1—31167,334
 $20.12
 —
 $203,016,273
August 1—31289,305
 19.56
 —
 203,016,273
September 1—3048,922
 15.39
 —
 203,016,273
Total505,561
 $19.34
 —
 $203,016,273
PeriodTotal Number of
Shares (or Units)
Purchased (a)		Average Price Paid
per Share (or Unit)		Total Number of Shares
(or Units) Purchased as
Part of Publicly
Announced Plans or
Programs		Maximum Number (or
Approximate Dollar 
Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (b)
April 1—3019,719 $22.88 — $203,016,273 
May 1—312,225 25.12 — 203,016,273 
June 1—3011,269 22.53 — 203,016,273 
Total33,213 $22.91 — $203,016,273 
 ____________________________________
(1)The total number of shares purchased relates to 505,561 shares withheld from employees to satisfy minimum tax withholding obligations that occur upon vesting of restricted stock units. These shares were not purchased as part of a publicly announced repurchase plan or program.
(2)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 September 30, 2017, share repurchase authorizations of $203.0 million had not been executed. Repurchases under the program will take place from time to time, depending on market conditions. Mattel’s share repurchase program has no expiration date.
(a)The total number of shares purchased represents shares withheld from employees to satisfy minimum tax withholding obligations that occur upon settlement of equity awards. These shares were not purchased as part of a publicly announced repurchase plan or program.
(b)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 June 30, 2022, share repurchase authorizations of $203.0 million had not been executed. Repurchases under the program will take place from time to time, depending on market conditions. Mattel's share repurchase program has no expiration date.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.

49


Item 6. Exhibits.
 
   Incorporated by Reference  Incorporated by Reference
Exhibit No. Exhibit Description Form File No. Exhibit(s) Filing DateExhibit No.Exhibit DescriptionFormFile No.Exhibit(s)Filing Date
3.0
 Restated Certificate of Incorporation of Mattel, Inc. 8-K 001-05647 99.0 May 21, 2007Restated Certificate of Incorporation of Mattel, Inc.8-K001-0564799.0May 21, 2007
3.1
 Amended and Restated Bylaws of Mattel, Inc. 8-K 001-05647 3.1 January 30, 2017Amended and Restated Bylaws of Mattel, Inc.8-K001-056473.1March 29, 2022
4.0
 Specimen Stock Certificate with respect to Mattel, Inc. 10-Q 001-05647 4.0 August 3, 2007Specimen Stock Certificate with respect to Mattel, Inc.10-Q001-056474.0August 3, 2007
10.1
 Amendment No. 2 to Seventh Amended and Restated Credit Agreement dated as of June 8, 2015, by and among Mattel, Inc., as Borrower, Bank of America, N.A., as Administrative Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Bookrunners, Wells Fargo Bank, N.A. and Citibank N.A., as Co-Syndication Agents, Mizuho Bank, Ltd., MUFG Union Bank, N.A., and Royal Bank of Canada, as Co-Documentation Agents, and the other financial institutions party thereto 8-K 001-05647 10.1 September 21, 2017
10.2+
 Letter Agreement between Mattel, Inc. and Kevin M. Farr, dated August 16, 2017, regarding his separation from the Company 8-K 001-05647 10.1 August 18, 2017
10.3+
 Letter Agreement between Mattel, Inc. and Joseph J. Euteneuer, dated September 25, 2017, regarding an offer of employment for the position of Chief Financial Officer 8-K 001-05647 10.1 October 3, 2017
10.4+
 Participation Letter Agreement under the Mattel, Inc. Executive Severance Plan B between Mattel, Inc. and Joseph J. Euteneuer, dated September 25, 2017 8-K 001-05647 10.2 October 3, 2017
12.0*
 Computation of Ratio of Earnings to Fixed Charges 
Sixth Amendment to Mattel, Inc. Amended and Restated 2010 Equity and Long-Term Compensation PlanDEF 14A001-05647Appendix AApril 12, 2022
31.0*
 Certification of Principal Executive Officer dated October 26, 2017 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.1*
 Certification of Principal Financial Officer dated October 26, 2017 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.0**
 Certifications of Principal Executive Officer and Principal Financial Officer dated October 26, 2017 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
 XBRL Instance Document 
101.INS*
Inline XBRL Instance Document
101.SCH*
 XBRL Taxonomy Extension Schema Document 
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
 XBRL Taxonomy Extension Calculation Linkbase Document 
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
 XBRL Taxonomy Extension Definition Linkbase Document 
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
 XBRL Taxonomy Extension Label Linkbase Document 
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
 XBRL Taxonomy Extension Presentation Linkbase Document 
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*
104*
The cover page from Mattel's Quarterly Report on Form 10-Q for the three months ended June 30, 2022, formatted in Inline XBRL.

+Management contract or compensatory plan or arrangement.arrangement
*Filed herewith.
**Furnished herewith. This exhibit should not be deemed to be “filed”"filed" for purposes of Section 18 of the Securities Exchange Act of 1934.

50



SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
MATTEL, INC.
Registrant
MATTEL, INC.
Registrant
By:  		/s/ Yoon Hugh
By:  
/s/ JOSEPH B. JOHNSON
Joseph B. Johnson
Yoon Hugh
Senior Vice President and Corporate
Controller (Duly authorizedAuthorized Officer and
Chief Accounting Officer)
Date: October 26, 2017August 9, 2022



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