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 endedSeptember 30, 2023
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
90245-501290245
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, 2017:25, 2023: 353,232,620 shares
343,729,550 shares
1



MATTEL, INC. AND SUBSIDIARIES

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PART I — FINANCIAL INFORMATION
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PART II — OTHER INFORMATION
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2


(Cautionary Statement Under the Private Securities Litigation Reform Act of 1995)Note Regarding Forward-Looking Statements)
Mattel is includingcautions investors that this Cautionary Statement to caution investors and qualify for the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”) for forward-looking statements. This Quarterly Report on Form 10-Q includes forward-looking statements, withinwhich are statements that relate to the meaning of the Act.future and are, by their nature, uncertain. 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," "projects," "looks 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. Specific factors that might cause such a difference include, but are not limited to: (i) Mattel’sMattel's ability to design, develop, produce, manufacture, source, ship, and shipdistribute products on a timely and cost-effective basis, as well asbasis; (ii) 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’sMattel's costs; (ii)(iii) downturns in economic conditions affecting Mattel’sMattel'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’sMattel's products; (iii)(iv) 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)(v) potential difficulties or delays Mattel may experience in implementing cost savings and efficiency enhancing initiatives; (v)(vi) 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’sMattel's costs, such as higher commodity prices, labor costs or transportation costs, or outbreaks of disease; (vi)(vii) the effect of inflation on Mattel's business, including cost inflation in supply chain inputs and increased labor costs, as well as pricing actions taken in an effort to mitigate the effects of inflation; (viii) currency fluctuations, including movements in foreign exchange rates, which can lower Mattel’sMattel's net revenues and earnings, and significantly impact Mattel’sMattel's costs; (vii)(ix) the concentration of the Mattel’sMattel's customers, potentially increasing the negative impact to Mattel of difficulties experienced by any of Mattel’sMattel'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’sMattel'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’sMattel'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’sMattel'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’sMattel'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’sMattel's product costs and other costs of doing business, and reduce Mattel’sMattel'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 and geopolitical developments in the Middle East), natural and man-made disasters, pandemics or other public health crises, such as the COVID-19 pandemic, 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’sMattel's products, or delay or increase the cost of implementation of Mattel’sMattel's programs, or alter Mattel’sMattel'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; and (xxii) other risks and uncertainties detailed in Part 1,I, Item 1A “Risk Factors”"Risk Factors" in Mattel’s 2016Mattel's Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2022 (the "2022 Annual Report on Form 10-K"), 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		September 30,
2023		September 30,
2022		December 31,
2022
(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$455,735 $348,970 $761,235 
Accounts receivable, net1,506,145
 1,528,808
 1,115,217
Accounts receivable, net of allowances for credit losses of $12.5 million, $12.5 million, and $27.6 million, respectivelyAccounts receivable, net of allowances for credit losses of $12.5 million, $12.5 million, and $27.6 million, respectively1,571,047 1,381,534 860,221 
Inventories989,995
 910,546
 613,798
Inventories790,521 1,083,769 894,064 
Prepaid expenses and other current assets352,711
 342,362
 341,518
Prepaid expenses and other current assets224,796 268,886 213,515 
Total current assets3,030,159
 3,078,805
 2,940,064
Total current assets3,042,099 3,083,159 2,729,035 
Noncurrent Assets     Noncurrent Assets
Property, plant, and equipment, net821,228
 747,451
 773,965
Property, plant, and equipment, net457,202 444,442 469,132 
Right-of-use assets, netRight-of-use assets, net286,019 323,490 318,680 
Goodwill1,397,642
 1,392,155
 1,387,628
Goodwill1,380,042 1,370,986 1,378,551 
Deferred income tax assetsDeferred income tax assets230,415 439,965 471,672 
Intangible assets, netIntangible assets, net397,821 426,283 425,100 
Other noncurrent assets950,655
 1,430,456
 1,392,137
Other noncurrent assets450,956 379,850 385,491 
Total Assets$6,199,684
 $6,648,867
 $6,493,794
Total Assets$6,244,554 $6,468,175 $6,177,661 
LIABILITIES AND STOCKHOLDERS’ EQUITY     
LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities     Current Liabilities
Short-term borrowings$732,649
 $—
 $192,168
Current portion of long-term debt250,000
 300,000
 —
Current portion of long-term debt$— $250,000 $— 
Accounts payable713,488
 694,757
 664,857
Accounts payable450,109 495,221 471,475 
Accrued liabilities568,845
 629,114
 628,826
Accrued liabilities803,081 780,522 678,689 
Income taxes payable32,296
 21,695
 19,722
Income taxes payable51,366 50,366 37,584 
Total current liabilities2,297,278
 1,645,566
 1,505,573
Total current liabilities1,304,556 1,576,109 1,187,748 
Noncurrent Liabilities     Noncurrent Liabilities
Long-term debt1,886,404
 2,133,489
 2,134,271
Long-term debt2,328,897 2,324,459 2,325,644 
Noncurrent lease liabilitiesNoncurrent lease liabilities234,699 279,525 271,418 
Other noncurrent liabilities576,327
 454,434
 446,168
Other noncurrent liabilities340,936 320,618 336,582 
Total noncurrent liabilities2,462,731
 2,587,923
 2,580,439
Total noncurrent liabilities2,904,532 2,924,602 2,933,644 
Stockholders’ Equity     
Stockholders' EquityStockholders' 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 capital1,745,170 1,795,720 1,808,308 
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, 87.0 million shares, and 87.0 million shares, respectivelyTreasury stock at cost: 88.1 million shares, 87.0 million shares, and 87.0 million shares, respectively(2,131,676)(2,130,163)(2,129,639)
Retained earnings2,460,224
 3,502,076
 3,545,359
Retained earnings2,914,744 2,831,572 2,847,709 
Accumulated other comprehensive loss(862,532) (875,087) (943,029)Accumulated other comprehensive loss(934,141)(971,034)(911,478)
Total stockholders’ equity1,439,675
 2,415,378
 2,407,782
Total Liabilities and Stockholders’ Equity$6,199,684
 $6,648,867
 $6,493,794
Total stockholders' equityTotal stockholders' equity2,035,466 1,967,464 2,056,269 
Total Liabilities and Stockholders' EquityTotal Liabilities and Stockholders' Equity$6,244,554 $6,468,175 $6,177,661 
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
September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (Unaudited; in thousands, except per share amounts)
Net Sales$1,560,983
 $1,795,575
 $3,271,078
 $3,622,250
Cost of sales913,834
 924,810
 1,945,386
 1,929,247
Gross Profit647,149
 870,765
 1,325,692
 1,693,003
Advertising and promotion expenses179,691
 202,900
 348,752
 384,614
Other selling and administrative expenses381,756
 350,469
 1,066,943
 1,051,799
Operating Income (Loss)85,702
 317,396
 (90,003) 256,590
Interest expense24,646
 24,989
 68,557
 70,133
Interest (income)(1,575) (2,477) (6,337) (7,550)
Other non-operating expense, net1,368
 856
 5,928
 23,210
Income (Loss) Before Income Taxes61,263
 294,028
 (158,151) 170,797
Provision for income taxes664,510
 57,778
 614,402
 26,620
Net (Loss) Income$(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
 For the Three Months EndedFor the Nine Months Ended
September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (Unaudited; in thousands, except per share amounts)
Net Sales$1,918,788 $1,755,780 $3,820,531 $4,032,767 
Cost of sales940,854 908,902 2,027,004 2,154,076 
Gross Profit977,934 846,878 1,793,527 1,878,691 
Advertising and promotion expenses124,265 127,600 290,337 291,545 
Other selling and administrative expenses379,811 327,906 1,081,594 990,627 
Operating income473,858 391,372 421,596 596,519 
Interest expense30,716 33,870 92,486 99,730 
Interest (income)(4,569)(1,903)(15,409)(5,064)
Other non-operating (income) expense, net(2,391)(4,293)(5,976)11,966 
Income before income taxes450,102 363,698 350,495 489,887 
Provision for income taxes309,342 80,035 296,767 130,530 
(Income) from equity method investments(5,559)(6,219)(13,306)(18,419)
Net Income$146,319 $289,882 $67,034 $377,776 
Net Income Per Common Share - Basic$0.41 $0.82 $0.19 $1.07 
Weighted-average number of common shares354,139 354,471 354,559 353,394 
Net Income Per Common Share - Diluted$0.41 $0.80 $0.19 $1.05 
Weighted-average number of common and potential common shares357,474 360,229 357,977 359,731 
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 Nine Months Ended
 September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (Unaudited; in thousands)
Net Income$146,319 $289,882 $67,034 $377,776 
Other Comprehensive Loss, Net of Tax
Currency translation adjustments(39,273)(72,643)(8,992)(78,212)
Employee benefit plan adjustments664 1,354 2,120 4,065 
Available-for-sale security adjustments— — — 3,646 
Net unrealized gains (losses) on derivative instruments:
Unrealized holding gains (losses)7,521 24,715 (1,729)58,604 
Reclassification adjustments included in net income(5,801)(11,312)(14,062)(20,667)
1,720 13,403 (15,791)37,937 
Other Comprehensive Loss, Net of Tax(36,889)(57,886)(22,663)(32,564)
Comprehensive Income$109,430 $231,996 $44,371 $345,212 
 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (Unaudited; in thousands)
Net (Loss) Income$(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 Nine Months Ended
September 30,
2017		 September 30,
2016		September 30,
2023		September 30,
2022
(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 incomeNet income$67,034 $377,776 
Adjustments to reconcile net income to net cash flows used for operating activities:Adjustments to reconcile net income to net cash flows used for operating activities:
Depreciation179,831
 177,939
Depreciation104,042 108,450 
Amortization16,264
 19,577
Amortization28,570 28,304 
Asset impairments14,942
 —
Share-based compensationShare-based compensation52,425 55,941 
Bad debt expenseBad debt expense178 7,029 
Inventory obsolescenceInventory obsolescence42,245 35,410 
Deferred income taxes2,057
 (38,424)Deferred income taxes26,283 82,673 
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 investmentsIncome from equity method investments(13,306)(18,419)
Loss (gain) on sale of assets, netLoss (gain) on sale of assets, net1,408 (15,960)
Valuation allowance on foreign deferred tax assetsValuation allowance on foreign deferred tax assets212,379 — 
Changes in assets and liabilities:Changes in assets and liabilities:
Accounts receivable, netAccounts receivable, net(714,198)(348,229)
Inventories(359,013) (311,141)Inventories42,701 (401,845)
Prepaid expenses and other current assets(19,027) 25,292
Prepaid expenses and other current assets(4,768)(38,985)
Accounts payable, accrued liabilities, and income taxes payable9,893
 42,006
Accounts payable, accrued liabilities, and income taxes payable125,775 (126,552)
Other, net(66,140) (39,966)Other, net(50,409)(20,360)
Net cash flows used for operating activities(740,070) (331,346)Net cash flows used for operating activities(79,641)(274,767)
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(56,741)(57,955)
Purchases of other property, plant, and equipment(133,895) (77,586)Purchases of other property, plant, and equipment(60,797)(69,373)
Payments for acquisition, net of cash acquired—
 (33,154)
Proceeds from foreign currency forward exchange contracts60,376
 6,228
Proceeds from foreign currency forward exchange contracts, netProceeds from foreign currency forward exchange contracts, net20,021 3,247 
Proceeds from sale of assetsProceeds from sale of assets6,336 25,839 
Other, net38
 1,349
Other, net(2,731)749 
Net cash flows used for investing activities(174,909) (204,725)Net cash flows used for investing activities(93,912)(97,493)
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 long-term borrowings, net—
 350,000
Payments of dividends on common stock(311,973) (388,518)
Proceeds from exercise of stock options1,768
 28,531
Share repurchasesShare repurchases(109,860)— 
Tax withholdings for share-based compensationTax withholdings for share-based compensation(32,822)(30,327)
Proceeds from stock option exercisesProceeds from stock option exercises26,014 27,658 
Other, net(16,543) (16,341)Other, net(2,783)(6,795)
Net cash flows provided by (used for) financing activities213,733
 (43,242)
Effect of Currency Exchange Rate Changes on Cash13,023
 (16,412)
Net cash flows used for financing activitiesNet cash flows used for financing activities(119,451)(9,464)
Effect of Currency Exchange Rate Changes on Cash and EquivalentsEffect of Currency Exchange Rate Changes on Cash and Equivalents(12,496)(668)
Decrease in Cash and Equivalents(688,223) (595,725)Decrease in Cash and Equivalents(305,500)(382,392)
Cash and Equivalents at Beginning of Period869,531
 892,814
Cash and Equivalents at Beginning of Period761,235 731,362 
Cash and Equivalents at End of Period$181,308
 $297,089
Cash and Equivalents at End of Period$455,735 $348,970 
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, 2022$441,369 $1,808,308 $(2,129,639)$2,847,709 $(911,478)$2,056,269 
Net loss— — — (106,471)— (106,471)
Other comprehensive income, net of tax— — — — 23,160 23,160 
Share repurchases— — (33,986)— — (33,986)
Issuance of treasury stock for stock option exercises— (1,144)3,189 — — 2,045 
Issuance of treasury stock for restricted stock units vesting— (51,311)31,012 — — (20,299)
Share-based compensation— 16,943 — — — 16,943 
Balance, March 31, 2023$441,369 $1,772,796 $(2,129,424)$2,741,238 $(888,318)$1,937,661 
Net income— — — 27,187 — 27,187 
Other comprehensive loss, net of tax— — — — (8,934)(8,934)
Share repurchases— — (15,875)— — (15,875)
Issuance of treasury stock for stock option exercises— (4,075)10,670 — — 6,595 
Issuance of treasury stock for restricted stock units vesting— (18,079)13,698 — — (4,381)
Deferred compensation— (36)166 — — 130 
Share-based compensation— 19,991 — — — 19,991 
Balance, June 30, 2023$441,369 $1,770,597 $(2,120,765)$2,768,425 $(897,252)$1,962,374 
Net income— — — 146,319 — 146,319 
Other comprehensive loss, net of tax— — — — (36,889)(36,889)
Share repurchases— — (60,000)— — (60,000)
Issuance of treasury stock for stock option exercises— (10,095)27,469 — — 17,374 
Issuance of treasury stock for restricted stock units vesting— (30,824)21,620 — — (9,204)
Share-based compensation— 15,492 — — — 15,492 
Balance, September 30, 2023$441,369 $1,745,170 $(2,131,676)$2,914,744 $(934,141)$2,035,466 
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 
Net income— — — 289,882 — 289,882 
Other comprehensive loss, net of tax— — — — (57,886)(57,886)
Issuance of treasury stock for stock option exercises— (998)2,374 — — 1,376 
Issuance of treasury stock for restricted stock units vesting— (37,861)25,851 — — (12,010)
Share-based compensation— 18,053 — — — 18,053 
Balance, September 30, 2022$441,369 $1,795,720 $(2,130,163)$2,831,572 $(971,034)$1,967,464 
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, 2022 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 2022 Annual Report on Form 10-K.
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 arewere net of allowances for doubtful accountscredit losses of $22.4$12.5 million, $30.9$12.5 million, and $21.4$27.6 million as of September 30, 2017,2023, September 30, 2016,2022, and December 31, 2016,2022, 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 includeincluded the following:
September 30,
2023		September 30,
2022		December 31,
2022
 (In thousands)
Raw materials and work in process$102,582 $163,962 $139,212 
Finished goods687,939 919,807 754,852 
$790,521 $1,083,769 $894,064 
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 includesincluded the following:
September 30,
2023		September 30,
2022		December 31,
2022
 (In thousands)
Land$19,566 $19,198 $18,045 
Buildings311,030 303,862 303,827 
Machinery and equipment623,687 711,000 654,437 
Software232,995 343,172 336,716 
Tools, dies, and molds494,070 526,639 510,398 
Leasehold improvements123,240 105,223 104,135 
Construction in progress39,533 61,938 79,742 
1,844,121 2,071,032 2,007,300 
Less: accumulated depreciation(1,386,919)(1,626,590)(1,538,168)
$457,202 $444,442 $469,132 
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 second quarter of 2022, Mattel sold the American Girl corporate office and distribution center located in Middleton, Wisconsin, which included land and buildings. Mattel received net proceeds from the sale of $23.8 million, which resulted in a pre-tax gain of $15.2 million, recorded in other selling and administrative expenses in the consolidated statement of operations.

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’sMattel's reporting units are: (i) North America,America; (ii) International,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 valueamount 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 2017,2023, Mattel performed its annual impairment teststest and determined that goodwill was not impaired. The change in the carrying amount of goodwill by operating segmentreporting unit for the nine months ended September 30, 20172023 is shown below. Brand-specific goodwill held by foreign subsidiaries is allocated to the North America and American Girl operating segmentsreporting unit selling those brands, thereby causing a foreign currency translation impact for these operating segments.impact.

December 31,
2016		 Currency
Exchange Rate
Impact		 September 30,
2017		 December 31,
2022		Currency
Exchange Rate
Impact		September 30,
2023
(In thousands)(In thousands)
North America$730,139
 $2,595
 $732,734
North America$731,993 $265 $732,258 
International445,008
 6,813
 451,821
International438,987 1,226 440,213 
American Girl212,481
 606
 213,087
American Girl207,571 — 207,571 
$1,387,628
 $10,014
 $1,397,642
$1,378,551 $1,491 $1,380,042 
AcquisitionsIntangible Assets, Net
Amortizable intangible assets were $397.8 million, net of Sproutling, Inc. and Fuhu assets
In January 2016, Mattel completed its acquisitionaccumulated amortization of Sproutling, Inc. (“Sproutling”), a maker$396.8 million, $426.3 million, net of smart technology products for parents and families, for total considerationaccumulated amortization of $9.9$355.3 million, and additional contingent consideration that may become payable under the terms$425.1 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$364.9 million as of Fuhu, Inc. (“Fuhu”), a developer of high technology products for children and families and best known for its nabi® brand of products, for total consideration of $23.3 million. These acquisitions are expected to strengthen 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 million2023, September 30, 2022, 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.December 31, 2022, respectively.
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 ofMattel's amortizable identifiable intangible assets primarily related to patents.


Mattel tests nonamortizable intangible assets, includingconsist of 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 quarter of 2017,names. 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 valueamount of the asset may not be recoverable. AmortizableMattel's amortizable intangible assets were determined to not be impaired during the three and nine months ended September 30, 2017.2023 and 2022.
During
6.     Accrued Liabilities
Accrued liabilities included the third quarterfollowing:
September 30,
2023		September 30,
2022		December 31,
2022
 (In thousands)
Advertising and promotion$105,218 $100,091 $115,707 
Incentive compensation89,142 66,830 2,889 
Current lease liabilities76,021 72,591 75,297 
Royalties74,801 78,186 65,330 
10

7.     Supplier Finance Program
Mattel has an agreement with a third-party financial institution that allows certain participating suppliers the opportunity to voluntarily finance payment obligations of 2017, Mattel establishedunder a valuation allowance on certain deferred tax assets,supplier finance program. Under this program, participating suppliers may accelerate the benefitstiming of whichcollection of their receivables due from Mattel, believes will likely not be realized. Referprior to “Note 19their scheduled due dates, by selling one or more of their receivables at a discounted price to the Consolidated Financial Statements—Income Taxes”third-party financial institution. The range of this Quarterly Reportpayment terms Mattel negotiates with suppliers are consistent, regardless of whether the suppliers participate in the supplier finance program and Mattel does not have any economic interest in any suppliers' decision to participate in the supplier finance program. Suppliers participating in the program are able to select which individual Mattel invoices they sell to the third-party financial institution. However, all Mattel payments of the full amounts due to participating suppliers are paid on Form 10-Qthe invoice due date based on the terms originally negotiated with the supplier, regardless of whether the individual invoice due to the supplier is sold to the third-party financial institution. Included in Mattel's accounts payable in the consolidated balance sheets as of September 30, 2023, September 30, 2022, and December 31, 2022 were $90.5 million, $156.6 million, and $86.0 million of outstanding payment obligations due to suppliers, respectively, under the supplier finance program. All payment activities related to the supplier finance program were presented within operating activities in the consolidated statements of cash flows.
8.     Seasonal Financing
On September 15, 2022, Mattel entered into a revolving credit agreement (the "Credit Agreement") as the borrower with Bank of America, N.A., as administrative agent, and the other lenders and financial institutions party thereto, providing for additional information.
7.Accrued Liabilities
Accrued liabilities include the following:
 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
8.Seasonal Financing
Mattel maintains and periodically amends or replaces its domestic unsecured committeda senior secured revolving credit facility (“in an aggregate principal amount of $1.40 billion (the "Revolving Credit Facility”Facility") with a commercial bank group.. The Revolving 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 governingwill mature on September 15, 2025. In connection with the entry into the Credit Agreement, Mattel terminated the commitments and satisfied all outstanding obligations under the previous credit agreement, dated December 20, 2017 (as amended).
Borrowings under the Revolving Credit Facility was amendedbear interest at a floating rate, which can be either, at Mattel's option, (i) adjusted Term Secured Overnight Financing Rate ("SOFR") plus an applicable margin ranging from 1.125% to 2.000% per annum or (ii) an alternate base rate plus an applicable margin ranging from 0.125% to 1.000% per annum, in each case, such applicable margins to be determined based on June 15, 2017Mattel's debt ratings.
In addition to among other things, increasepaying interest on the maximum allowed consolidated debt-to-consolidated earnings before interest, taxes, depreciation, and amortization (“consolidated EBITDA”) ratio thatoutstanding principal under the Revolving Credit Facility, Mattel is required to maintainpay (i) an unused line fee per annum of the average daily unused portion of the Revolving Credit Facility; (ii) a letter of credit fronting fee based on a percentage of the aggregate face amount of outstanding letters of credit; and (iii) certain other customary fees and expenses of the lenders and agents.
In November 2022, Moody's upgraded Mattel's debt rating from Ba1 to Baa3, and in April 2023, S&P upgraded Mattel's debt rating from BB+ to BBB- and maintained a positive outlook. On April 27, 2023 (the "Fall-Away Date"), Mattel provided a certification of the foregoing to the administrative agent under the Credit Agreement, which resulted in certain subsidiary guarantees, liens, covenants, and other restrictions falling away under the Credit Agreement.
The obligations of Mattel under the Revolving Credit Facility were previously guaranteed by each domestic subsidiary of Mattel that guaranteed any of Mattel's senior unsecured notes (collectively, the "Guarantors"). On the Fall-Away Date, the foregoing guarantees were released and the obligations of Mattel under the Revolving Credit Facility are instead required to 3.75be guaranteed by each existing and future direct and indirect domestic subsidiary of Mattel only to 1 from 3.50 to 1 for the four consecutive quarters beginning with the second quarterextent such subsidiary guarantees other indebtedness of 2017. Additionally, theMattel in an aggregate principal or committed amount in excess of $50 million.
The Revolving Credit Facility was amendedpreviously secured by liens on September 20, 2017substantially all of Mattel's and the Guarantors' present and after-acquired assets (subject to remove the consolidated debt-to-consolidated EBITDA ratio requirement for the third fiscal quarter of 2017certain exceptions), including domestic accounts receivable, inventory, certain trademarks 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 2017patents, 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.equity interests in direct 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 guarantorsGuarantors, but all such liens were permanently released on the Fall-Away Date.
The Credit Agreement contains customary covenants (subject to customary exceptions), including, but not limited to, restrictions on Mattel's and its subsidiaries' ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, sell or otherwise dispose of 100%assets, or amend organizational documents.
The Credit Agreement requires the maintenance of the equity(a) an interest coverage ratio of all U.S. subsidiaries (othernot less than any foreign subsidiary holding company) and 66%2.75 to 1.00 as 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.
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 fiscal quarter and (b) a total leverage ratio not to exceed 3.75 to 1.00 as of the end of each fiscal year, usingquarter.
Mattel had no borrowings outstanding under the formulae specified in theRevolving Credit Facility to calculateand no other short-term borrowings outstanding as of September 30, 2023, September 30, 2022, and December 31, 2022. Outstanding letters of credit under the ratios.Revolving Credit Facility totaled approximately $9 million, $9 million, and $8 million as of September 30, 2023, September 30, 2022, and December 31, 2022, respectively.
11

As of September 30, 2023, 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 Revolving Credit Facility. If Mattel were to default under the terms of the Revolving Credit Facility, its ability to meet its seasonal financing requirements could be adversely affected. 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.
9.Long-Term Debt
9.     Long-Term Debt
Long-term debt includesincluded the following:
September 30,
2023		September 30,
2022		December 31,
2022
 (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 2023— 250,000 — 
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(21,103)(25,541)(24,356)
$2,328,897 $2,574,459 $2,325,644 
Less: current portion— (250,000)— 
Total long-term debt$2,328,897 $2,324,459 $2,325,644 
 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 December 30, 2022, Mattel issued $350.0used cash on hand to redeem and retire the $250 million aggregate principal amount of 2.35% senior unsecured notes due August 15, 2021 (“2016 Senior Notes”). Interest on the 20162013 Senior Notes is payable semi-annuallydue March 2023.
Mattel's 2019 Senior Notes due 2027 were issued pursuant to an indenture dated November 20, 2019, and its 2021 Senior Notes due 2026 and 2021 Senior Notes due 2029 were issued pursuant to an indenture dated March 19, 2021. These indentures contain covenants that limit Mattel's (and some of its subsidiaries') ability to, among other things: (i) incur additional debt or issue certain preferred shares; (ii) pay dividends on or make other distributions in arrears on February 15respect of their capital stock or make other restricted payments; (iii) make investments in unrestricted subsidiaries; (iv) create liens; (v) enter into certain sale/leaseback transactions; (vi) merge or consolidate, or sell, transfer or otherwise dispose of substantially all of their assets; and August 15(vii) designate subsidiaries as unrestricted. The indentures also provided that certain of each year, beginning February 15, 2017.these covenants would be suspended if Mattel may redeem all achieved a debt rating of BBB-, Baa3, and/or partBBB- (or higher) from any two of S&P, Moody's, and Fitch, respectively, and no event of default has occurred.
In April 2023, S&P upgraded Mattel’s debt rating from BB+ to BBB- and maintained a positive outlook, and in November 2022, Moody’s previously upgraded Mattel’s debt rating from Ba1 to Baa3. As a result of the 2016upgraded debt ratings and no events of default, the covenants limiting Mattel’s ability to incur additional debt or issue certain preferred shares, pay dividends on or make other distributions in respect of their capital stock or make other restricted payments, and make investments in unrestricted subsidiaries, and certain provisions of the covenant limiting Mattel’s ability to merge or consolidate, or sell, transfer or otherwise dispose of substantially all of their assets, are suspended. If Mattel ceases to have debt ratings of BBB-, Baa3, and/or BBB- (or higher) from any two of S&P, Moody's, and Fitch, respectively, Mattel will thereafter be subject to the suspended covenants with respect to future events. Following the Fall-Away Date under the Revolving Credit Facility, all guarantee obligations of the Guarantors under the 2019 Senior Notes at any time or from timedue 2027, 2021 Senior Notes due 2026, and 2021 Senior Notes due 2029 were released, and the obligations of Mattel under the 2019 Senior Notes due 2027, 2021 Senior Notes due 2026, and 2021 Senior Notes due 2029 will be required to time prior to July 15, 2021 (one month priorbe guaranteed by each existing and future direct and indirect domestic subsidiary of Mattel only to the maturity dateextent such subsidiary guarantees other indebtedness of the 2016 Senior Notes) (the “Par Call Date”), at its option, at a redemption price equal to the greaterMattel in an aggregate principal or committed amount in excess of (i) 100% of the principal amount of the 2016 Senior Notes being redeemed or (ii) a “make-whole” amount based on the yield 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 part of the 2016 Senior Notes at any time or from time to time on or after the Par Call Date, at its option, at a redemption price equal to 100% of the principal amount 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.
10.Other Noncurrent Liabilities
Other noncurrent liabilities include the following:$50 million.
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),loss, including current period other comprehensive income (loss)loss and reclassifications out offrom accumulated other comprehensive income (loss):
 For the Three Months Ended September 30, 2023
 Derivative
Instruments		Available-for-Sale SecurityEmployee Benefit PlansCurrency
Translation
Adjustments		Total
 (In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2023$5,221 $— $(137,042)$(765,431)$(897,252)
Other comprehensive income (loss) before reclassifications7,521 — 5 (39,273)(31,747)
Amounts reclassified from accumulated other comprehensive income (loss)(5,801)— 659 — (5,142)
Net increase (decrease) in other comprehensive income1,720 — 664 (39,273)(36,889)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2023$6,941 $— $(136,378)$(804,704)$(934,141)

 For the Nine Months Ended September 30, 2023
 Derivative
Instruments		Available-for-Sale SecurityEmployee Benefit PlansCurrency
Translation
Adjustments		Total
 (In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of December 31, 2022$22,732 $— $(138,498)$(795,712)$(911,478)
Other comprehensive (loss) income before reclassifications(1,729)— 20 (8,992)(10,701)
Amounts reclassified from accumulated other comprehensive income (loss)(14,062)— 2,100 — (11,962)
Net (decrease) increase in other comprehensive income(15,791)— 2,120 (8,992)(22,663)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2023$6,941 $— $(136,378)$(804,704)$(934,141)
For the Three Months Ended September 30, 2022
 Derivative
Instruments		Available-for-Sale SecurityEmployee Benefit PlansCurrency
Translation
Adjustments		Total
 (In thousands)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2022$33,330 $— $(151,388)$(795,090)$(913,148)
Other comprehensive income (loss) before reclassifications24,715 — 63 (72,643)(47,865)
Amounts reclassified from accumulated other comprehensive income (loss)(11,312)— 1,291 — (10,021)
Net increase (decrease) in other comprehensive income13,403 — 1,354 (72,643)(57,886)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2022$46,733 $— $(150,034)$(867,733)$(971,034)

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 Nine Months Ended September 30, 2022
 Derivative
Instruments		Available-for-Sale SecurityEmployee 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 reclassifications58,604 — (35)(78,212)(19,643)
Amounts reclassified from accumulated other comprehensive income (loss)(20,667)3,646 4,100 — (12,921)
Net increase (decrease) in other comprehensive income37,937 3,646 4,065 (78,212)(32,564)
Adjustment of accumulated other comprehensive loss to retained earnings— 2,801 — — 2,801 
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of September 30, 2022$46,733 $— $(150,034)$(867,733)$(971,034)
 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 present the classification and amount of the reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of operations:
For the Three Months Ended
September 30, 2023September 30, 2022Statements of Operations
Classification
(In thousands) 
Derivative Instruments:
Gain on foreign currency forward exchange and other contracts$5,784 $11,292 Cost of sales
Tax effect17 20 Provision for income taxes
$5,801 $11,312 Net income
Employee Benefit Plans:
Amortization of prior service credit (a)$472 $504 Other non-operating (income) expense, net
Recognized actuarial loss (a)(1,410)(2,108)Other non-operating (income) expense, net
(938)(1,604)
Tax effect279 313 Provision for income taxes
$(659)$(1,291)Net income
(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 Nine Months Ended
September 30, 2023September 30, 2022Statements of Operations
Classification
(In thousands) 
Derivative Instruments:
Gain on foreign currency forward exchange and other contracts$13,709 $20,764 Cost of sales
Tax effect353 (97)Provision for income taxes
$14,062 $20,667 Net income
Employee Benefit Plans:
Amortization of prior service credit (a)$1,416 $1,409 Other non-operating (income) expense, net
Recognized actuarial loss (a)(4,229)(6,649)Other non-operating (income) expense, net
(2,813)(5,240)
Tax effect713 1,140 Provision for income taxes
$(2,100)$(4,100)Net income

(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.

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 Accounting Standards Codification 321, Investments—Equity Securities. The adjustment included $3.6 million of accumulated other comprehensive loss reclassified to other non-operating expense (income), net in the consolidated statement of operations and $2.8 million reclassified to retained earnings in the consolidated statement of stockholders' equity. The adjustment, including tax effect, was immaterial to the financial statements.
 For the Nine Months Ended  
 September 30,
2017		 September 30,
2016		 Statements of Operations
Classification
 (In thousands)  
Derivative Instruments 
(Loss) gain on foreign currency forward exchange contracts$(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
 ____________________________________________
(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’s reporting currency is the US dollar. The translation of its net investments in subsidiaries with non-US dollar functional currencies subjects Mattel to the impact of currency exchange rate fluctuations in its results of operations and financial position. Assets and liabilities of subsidiaries with non-US dollar functional currencies are translated into US dollars at fiscal period-end exchange rates. Income, expense, and cash flow items are translated at weighted average exchange rates prevailing during the fiscal period. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Currency translation adjustments resulted in a net gain of $142.2 million forDuring 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. Currency2023, currency translation adjustments resulted in a net loss of $18.9$9.0 million, forprimarily due to the weakening of the Russian ruble and Malaysian ringgit against the U.S. dollar, offset by the strengthening of the Mexican peso, British pound sterling, and Brazilian real against the U.S. dollar.
During the nine months ended September 30, 2016,2022, currency translation adjustments resulted in a net loss of $78.2 million, 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 Russian ruble against the U.S. dollar.
15

11.     Foreign Currency Transaction Exposure
Currency transaction gains (losses) included in the consolidated statements of operations were as follows:
 For the Three Months Ended
 September 30,
2023		September 30,
2022		Statements of Operations Classification
 (In thousands)
Currency transaction (losses)$(2,276)$(6,689)Operating income/expense
Currency transaction gains (losses)3,301 (41)Other non-operating income/expense, net
Currency transaction gains (losses), net$1,025 $(6,730)
For the Nine Months Ended
September 30,
2023		September 30,
2022		Statements of Operations Classification
(In thousands)
Currency transaction (losses)$(11,987)$(14,948)Operating income/expense
Currency transaction gains (losses)5,390 (18,832)Other non-operating income/expense, net
Currency transaction (losses), net$(6,597)$(33,780)
The Chinese yuan, Euro, Russian ruble, and Turkish lira were the Brazilian real.primary currencies that caused foreign currency transaction exposure for Mattel during the nine months ended September 30, 2023.
12.Derivative Instruments
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 (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 September 30, 2017,2023, September 30, 2016,2022, and December 31, 2016,2022, Mattel held foreign currency forward exchange contracts and other commodity derivative instruments, with notional amounts of $2.46 billion, $1.15 billion,approximately $636 million, $771 million, and $1.20 billion,$674 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
September 30,
2023		September 30,
2022		December 31,
2022
(In thousands)
Derivatives Designated as Hedging Instruments:
Foreign currency forward exchange and other contractsPrepaid expenses and other current assets$13,308 $41,832 $14,899 
Foreign currency forward exchange and other contractsOther noncurrent assets747 8,320 1,501 
Total Derivatives Designated as Hedging Instruments$14,055 $50,152 $16,400 
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward exchange and other contractsPrepaid expenses and other current assets$519 $3,424 $1,163 
Total Derivatives Not Designated as Hedging Instruments$519 $3,424 $1,163 
$14,574 $53,576 $17,563 
 Derivative Liabilities
 Balance Sheet ClassificationFair Value
 September 30,
2023		September 30,
2022		December 31,
2022
(In thousands)
Derivatives Designated as Hedging Instruments:
Foreign currency forward exchange and other contractsAccrued liabilities$1,997 $1,981 $3,647 
Foreign currency forward exchange and other contractsOther noncurrent liabilities14 194 807 
Total Derivatives Designated as Hedging Instruments$2,011 $2,175 $4,454 
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward exchange and other contractsAccrued liabilities$323 $3,609 $6,261 
Foreign currency forward exchange and other contractsOther noncurrent liabilities— 44 39 
Total Derivatives Not Designated as Hedging Instruments$323 $3,653 $6,300 
$2,334 $5,828 $10,754 
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:
 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 Three Months Ended
 September 30,
2023		September 30,
2022		Statements of
Operations
Classification
 (In thousands)
Foreign Currency Forward Exchange and Other Contracts:
Amount of gains recognized in OCI$7,521 $24,715 
Amount of gains reclassified from accumulated OCI to the consolidated statements of operations5,801 11,312 Cost of sales
Derivatives Designated as Hedging Instruments
For the Nine Months Ended
September 30,
2023		September 30,
2022		Statements of
Operations
Classification
(In thousands)
Foreign Currency Forward Exchange and Other Contracts:
Amount of (losses) gains recognized in OCI$(1,729)$58,604 
Amount of gains reclassified from accumulated OCI to consolidated statements of operations14,062 20,667 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 nine months ended September 30, 2017,2023 and 2022, 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.
 
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
  
 Derivatives Not Designated as Hedging Instruments
For the Three Months Ended
September 30,
2023		September 30,
2022		Statements of
Operations
Classification
 (In thousands)
Amount of Net Gains (Losses) Recognized in the Statements of Operations:
Foreign currency forward exchange and other contracts$6,805 $(2,279)Other non-operating (income) expense, net
Derivatives Not Designated as Hedging Instruments
For the Nine Months Ended
September 30,
2023		September 30,
2022		Statements of
Operations
Classification
(In thousands)
Amount of Net Gains Recognized in the Statements of Operations:
Foreign currency forward exchange and other contracts$25,083 $843 Other non-operating (income) expense, net
The net gains of $13.6 million and $65.1 millionlosses recognized in the consolidated statements of operations forduring the three and nine months ended September 30, 2017, respectively,2023 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, 2016,2022, respectively, arewere offset by foreign currency transaction gains and losses on the related hedgedderivative balances.
18
13.Fair Value Measurements

13.     Fair Value Measurements
The following tables present information about Mattel’sMattel's financial assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of September 30, 2023, September 30, 2022, and indicatesDecember 31, 2022 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.
•Level 3 – Valuations based on inputs that are unobservable, supported by little or no market activity, and that are significant to the fair value of the assets or liabilities.
Mattel’s financial assets and liabilities measured and reported at
September 30, 2023
Level 1Level 2Level 3Total
(In thousands)
Assets:
Foreign currency forward exchange and other contracts (a)$— $14,574 $— $14,574 
Liabilities:
Foreign currency forward exchange and other contracts (a)$— $2,334 $— $2,334 
September 30, 2022
Level 1Level 2Level 3Total
(In thousands)
Assets:
Foreign currency forward exchange and other contracts (a)$— $53,576 $— $53,576 
Available-for-sale (b)3,360 — — 3,360 
Total assets$3,360 $53,576 $— $56,936 
Liabilities:
Foreign currency forward exchange and other contracts (a)$— $5,828 $— $5,828 
December 31, 2022
Level 1Level 2Level 3Total
(In thousands)
Assets:
Foreign currency forward exchange and other contracts (a)$— $17,563 $— $17,563 
Liabilities:
Foreign currency forward exchange and other contracts (a)$— $10,754 $— $10,754 
(a)The fair value of the foreign currency forward exchange and other contracts was based on a recurring basis includedealer quotes of market forward rates and reflects the following:amount that Mattel would receive or pay at their maturity dates for contracts involving the same notional amounts, currencies, and maturity dates.
(b)The fair value of the available-for-sale security was based on the quoted price on an active public exchange.
19
 September 30, 2017
 Level 1 Level 2 Level 3 Total
 (In thousands)
Assets:       
Foreign currency forward exchange contracts (a)$—
 $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
        



 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 includeincluded cash and equivalents, accounts receivable and 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 valuesamounts because of their short-term nature. Cash isand equivalents were classified as Level 1 and all other financial instruments arewere 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$2.13 billion (compared to a carrying valueamount of $2.15$2.35 billion) as of September 30, 2017, $2.572023, $2.35 billion (compared to a carrying valueamount of $2.45$2.60 billion) as of September 30, 2016,2022, and $2.18$2.13 billion (compared to a carrying valueamount of $2.15$2.35 billion) as of December 31, 2016.2022. The estimated fair values have been calculated based on broker quotes or rates for the same or similar instruments and arewere classified as Level 2 within the fair value hierarchy.
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 nine months ended September 30, 20172023 and 2016:2022:
 For the Three Months EndedFor the Nine Months Ended
 September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (In thousands, except per share amounts)
Basic:
Net income$146,319 $289,882 $67,034 $377,776 
Weighted-average number of common shares354,139 354,471 354,559 353,394 
Basic net income per common share$0.41 $0.82 $0.19 $1.07 
Diluted:
Net income$146,319 $289,882 $67,034 $377,776 
Weighted-average number of common shares354,139 354,471 354,559 353,394 
Dilutive share-based awards (a)3,335 5,758 3,418 6,337 
Weighted-average number of common and potential common shares357,474 360,229 357,977 359,731 
Diluted net income per common share$0.41 $0.80 $0.19 $1.05 
 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (In thousands, except per share amounts)
Basic:       
Net (loss) income$(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 nine months ended September 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 RSUs2023, share-based awards totaling 9.86.5 million and 7.711.5 million, sharesrespectively, were excluded from the calculation of diluted net income per common share forbecause their effect would be antidilutive. For the three and nine months ended September 30, 2016, respectively,2022, share-based awards totaling 10.4 million and 10.8 million were excluded from the calculation of diluted net income 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 2022 Annual Report on Form 10-K.

20


A summary of theThe components of net periodic benefit cost for Mattel’sMattel's defined benefit pension plans iswere as follows:
 For the Three Months EndedFor the Nine Months Ended
 September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (In thousands)
Service cost$848 $980 $2,548 $3,046 
Interest cost5,234 2,996 15,670 9,112 
Expected return on plan assets(5,103)(4,776)(15,280)(14,480)
Amortization of prior service cost37 5 112 118 
Recognized actuarial loss1,467 2,133 4,399 6,724 
$2,483 $1,338 $7,449 $4,520 
 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
The components of net periodic benefit cost for Mattel's postretirement benefit plans were as follows:
 For the Three Months EndedFor the Nine Months Ended
September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (In thousands)
Interest cost$45 $22 $134 $66 
Amortization of prior service credit(509)(509)(1,528)(1,527)
Recognized actuarial gain(57)(25)(170)(75)
$(521)$(512)$(1,564)$(1,536)
Mattel's service cost component is recorded within operating income while other components of net periodic pension cost and postretirement benefit cost are recorded within other non-operating (income) expense, net.
During the nine months ended September 30, 2017,2023, Mattel made cash contributions totaling approximately $3 million and $1$11 million related to its defined benefit pension and postretirement benefit plans, respectively.plans. During the remainder of 2017,2023, Mattel expects to make additional cash contributions of approximately $6$3 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 2022 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, non-employee directors, and other personsconsultants 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 September 30, 2017, Mattel has two long-term incentive programs in place: (i) a January 1, 2016–December 31, 2018 performance cycle, and (ii) a January 1, 2017–December 31, 2019 performance cycle.
For the January 1, 2017–December 31, 2019 LTIP 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.
Compensation expense, included within other selling and administrative expenses in the consolidated statements of operations, related to stock options, RSUs, and RSUs isperformance awards was as follows:
 For the Three Months EndedFor the Nine Months Ended
 September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (In thousands)
Stock option compensation expense$1,077 $5,170 $5,673 $10,064 
RSU compensation expense12,020 9,643 36,724 27,810 
Performance award compensation expense2,395 3,240 10,028 18,067 
$15,492 $18,053 $52,425 $55,941 
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)
Stock option compensation expense$3,446
 $2,528
 $9,262
 $6,826
RSU compensation expense13,583
 9,840
 38,320
 31,918
 $17,029
 $12,368
 $47,582
 $38,744

As of September 30, 2017,2023, total unrecognized compensation costexpense related to unvested share-based payments totaled $127.9$110.7 million and is expected to be recognized over a weighted-average period of 2.22.1 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, for the nine months ended September 30, 2017 and 2016net of taxes, was $1.8$26.0 million and $28.5 million, respectively.
17.Other Selling and Administrative Expenses
Other selling and administrative expenses include the following:
 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
18.Foreign Currency Transaction Gains and Losses
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 to which they relate in the consolidated statements of operations. For hedges 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) included in the consolidated statements of operations are 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)
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)


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 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, Mattel changed its remeasurement rate from the official exchange rate to the new DICOM exchange rate and recognized an unrealized foreign currency exchange loss of approximately $26 million in other non-operating expense/income, net as a result of the change in the remeasurement rate.
19.Income Taxes
Mattel’s provision for income taxes was $614.4 million and $26.6$27.7 million for the nine months ended September 30, 20172023 and 2016,2022, respectively.
17.     Other Selling and Administrative Expenses
Other selling and administrative expenses included the following:
 For the Three Months EndedFor the Nine Months Ended
 September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
(In thousands)
Design and development$49,781 $52,204 $148,319 $144,145 
Intangible asset amortization9,584 9,308 28,570 28,304 
18.     Restructuring Charges
Optimizing for Growth (formerly Capital Light)
Mattel's Optimizing for Growth program is a multi-year cost savings program that integrates and expands upon the previously announced Capital Light program (the "Program"). In February 2023, the Program was expanded to include additional initiatives, including actions to further streamline Mattel's organizational structure.
In connection with the Program, Mattel recorded severance and other restructuring costs in the following cost and expense categories within operating income in the consolidated statements of operations:
 For the Three Months EndedFor the Nine Months Ended
September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (In thousands)
Cost of sales (a)$(76)$1,366 $(1,276)$9,795 
Other selling and administrative expenses (b)3,082 4,441 31,550 16,602 
$3,006 $5,807 $30,274 $26,397 
(a)Severance and other restructuring charges recorded within cost of sales in the consolidated statements of operations are included in segment operating income in "Note 21 to the Consolidated Financial Statements—Segment Information."
(b)Severance and other restructuring charges 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 within operating income related to the Program:
Liability at December 31, 2022 ChargesPayments/UtilizationLiability at
September 30, 2023
(In thousands)
Severance$9,355 $21,607 $(20,104)$10,858 
Other restructuring charges (a)3,540 8,667 (10,650)1,557 
$12,895 $30,274 $(30,754)$12,415 
22

Liability at December 31, 2021ChargesPayments/UtilizationLiability at
September 30, 2022
(In thousands)
Severance$12,411 $14,021 $(12,290)$14,142 
Other restructuring charges (a)2,834 12,376 (14,278)932 
$15,245 $26,397 $(26,568)$15,074 
(a)Other restructuring charges consist primarily of expenses associated with the restructuring of commercial and corporate functions and consolidation of manufacturing facilities.
As of September 30, 2023, Mattel had recorded cumulative severance and other restructuring charges related to the Program of approximately $196 million, which included approximately $73 million of non-cash charges, including $45.4 million recognized within other non-operating expense, net, during the fourth quarter of 2022 related to the liquidation of Mattel's subsidiary in Argentina. Furthermore, cumulatively, in conjunction with previous actions taken under the Capital Light program, total expected cash expenditures are approximately $195 to $225 million and total expected non-cash charges are approximately $75 million.
Other Cost Savings Actions
In the third quarter of 2023, Mattel committed to actions not included in the Program to discontinue production at a plant located in China. In connection with these actions, Mattel recorded severance expense of $25.3 million within other selling and administrative expenses in the consolidated statements of operations in the three months ended September 30, 2023, which are recorded in corporate and other expense in "Note 21 to the Consolidated Financial Statements—Segment Information." The $25.3 million of severance expense accrued during the quarter remained outstanding as of September 30, 2023. Total expected cash charges in connection with these actions are approximately $30 to $35 million and total expected non-cash charges are approximately $6 million.
Additionally, in the first nine months of 2023, Mattel executed other cost savings actions not included in the Program to streamline its organizational structure. In connection with these actions, Mattel recorded severance expense of $6.1 million within other selling and administrative expenses in the consolidated statement of operations.

19.     Income Taxes
Mattel's provision for income taxes was $309.3 million and $296.8 million for the three and nine months ended September 30, 2023, respectively, and $80.0 million and $130.5 million for the three and nine months ended September 30, 2022, respectively. Mattel recognized a net discrete income tax expense of $561.5$200.7 million and $558.8$201.0 million during the three and nine months ended September 30, 2017,2023, respectively, which included the establishment of a valuation allowance of $212.4 million on certain foreign deferred tax assets resulting from the planned intra-group transfer of certain intellectual property ("IP") rights, partially offset by undistributed earnings of certain foreign subsidiaries and reassessments of prior years' tax liabilities. Mattel recognized a net discrete income tax benefitsbenefit of $9.0$19.4 million and $12.8$4.8 million during the three and nine months ended September 30, 2016,2022, respectively, primarily related to income taxes recorded on a discrete basis in various jurisdictions and reassessments of prior years' tax liabilities.
Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant
judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will
be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. During the third quarter of 2023, Mattel finalized a plan to complete an intra-group transfer of certain IP rights, resulting in the establishment 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 thecertain foreign deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not$212.4 million, 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 evidence 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 charge to the quarter of $561.9 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. 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 expirationrealized upon execution of the deferred tax assets. Mattel will continue to assess the likelihood that the deferred tax assets will be realizable at each period end.plan.
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$17 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.
23
20.Contingencies
Litigation Related to Carter Bryant and MGA Entertainment, Inc.
In April 2004, Mattel filed a lawsuit in Los Angeles County Superior Court against Carter Bryant (“Bryant”), a former 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 did 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 acts with respect to unidentified retailers, distributors, and licensees have damaged MGA and that various alleged acts by industry organizations, purportedly induced by Mattel, have damaged MGA. MGA’s suit alleges that MGA 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 against 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 believes 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.20.     Contingencies
Litigation Related to Yellowstone do Brasil Ltda.
In April 1999, Yellowstone do Brasil Ltda. (formerly known as Trebbor Informática Ltda.) was a customer of Mattel’s subsidiary Mattel do Brasil Ltda. when a commercial dispute arose between Yellowstone and Mattel do Brasil regarding the supply of product and related payment terms. As a consequence of the dispute, in April 1999, Yellowstone filed a declarative 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.
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 justicesSeptember 30, 2023, Mattel assessed its probable loss related to challenge the merits of Yellowstone’s damages claims. Yellowstone did not file a further appeal.
Mattel believes that it is reasonably possible that a loss in this matter could range from $0and has accrued a reserve, which is not material.
Litigation Related to approximately $18.5 million. The high endthe Fisher-Price Rock 'n Play Sleeper
A number of this range, approximately $18.5 million, is based onputative class action lawsuits filed between April 2019 and October 2019 are pending against Fisher-Price, Inc. and/or Mattel, Inc. asserting claims for false advertising, negligent product design, breach of warranty, fraud, and other claims in connection 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 U.S. federal courts' Multi-District Litigation program. In June 2022, the court denied the plaintiffs' motion to certify damages and injunctive relief classes under New York law, but granted plaintiffs' request to certify a New York issue class to resolve two issues on a class-wide basis. In October 2022, the United States Court of Appeals for the Second Circuit denied plaintiffs' petition to appeal the denial of certification of the damages and injunctive relief classes.
Thirty-one additional lawsuits filed between April 2019 and September 2023 are pending against Fisher-Price, Inc. and Mattel, Inc. alleging that a product defect in the Sleeper caused the fatalities of or injuries to thirty-four 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 have threatened to assert similar claims.
In addition, a stockholder has filed a derivative action in the Court of Chancery for the State of Delaware (Kumar v. 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, attorneys’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 for the lawsuits cannot be made at this time.
Mattel has also had discussions with the US Consumer Product Safety Commission ("CPSC") regarding a request from the CPSC that Mattel increase the proportional cash refund available to consumers who participate in the recall of the Sleeper first announced in 2019. As of September 30, 2023, Mattel assessed its probable loss related to this matter and has accrued a reserve, which is not material.
21.Segment Information
24

21.     Segment Information
Mattel through its subsidiaries, sellsdesigns, 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’s operatingMattel's reportable segments are: (i) North America, which consists of the USUnited States 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 Mattel's categories, although some products are developed and adapted for particular international markets.
Segment Data
The following tables present information about revenues,regarding Mattel's net sales, operating income, and assets by reportable 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.

 For the Three Months EndedFor the Nine Months Ended
 September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (In thousands)
Net Sales by Segment
North America$1,104,377 $1,002,126 $2,138,210 $2,330,747 
International771,827 704,640 1,578,632 1,584,878 
American Girl42,584 49,014 103,689 117,142 
Net sales$1,918,788 $1,755,780 $3,820,531 $4,032,767 

 For the Three Months EndedFor the Nine Months Ended
 September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (In thousands)
Operating Income by Segment (a)
North America$405,667 $337,305 $589,664 $707,605 
International202,550 162,828 245,773 268,012 
American Girl(4,572)(8,964)(24,073)(20,426)
603,645 491,169 811,364 955,191 
Corporate and other expense (b)
(129,787)(99,797)(389,768)(358,672)
Operating income473,858 391,372 421,596 596,519 
Interest expense30,716 33,870 92,486 99,730 
Interest (income)(4,569)(1,903)(15,409)(5,064)
Other non-operating (income) expense, net(2,391)(4,293)(5,976)11,966 
Income before income taxes$450,102 $363,698 $350,495 $489,887 
(a)Segment operating income included (i) severance and other restructuring charges of $(0.1) million and $(1.3) million for the three and nine months ended September 30, 2023, respectively, and $1.4 million and $9.8 million for the three and nine months ended September 30, 2022, respectively, which were allocated to the North America and International segments; and (ii) a loss on sale of assets of $1.8 million from the sale of a production facility for the three and nine months ended September 30, 2023, which was recorded in the International segment; and a gain on sale of assets of $15.2 million from the sale of the American Girl corporate office and distribution center for the nine months ended September 30, 2022, which was recorded in the American Girl segment.

25

 For the Three Months Ended For the Nine Months Ended
 September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
 (In thousands)
Revenues by Segment       
North America$839,341
 $1,071,030
 $1,708,901
 $2,077,147
International776,947
 774,211
 1,637,031
 1,614,169
American Girl93,876
 130,109
 247,376
 298,933
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
(b)Corporate and other expense included (i) severance and other restructuring charges of $29.3 million and $63.0 million for the three and nine months ended September 30, 2023 and $4.5 million and $17.1 million for the three and nine months ended September 30, 2022, respectively; and (ii) inclined sleeper product recall litigation expense of $1.3 million and $9.0 million for the three and nine months ended September 30, 2023, respectively; and $0.7 million and $1.2 million for the three months and nine months ended September 30, 2022, respectively.
 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)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, net and inventories, net of applicable reserves and allowances.inventories.
September 30,
2023		September 30,
2022		December 31,
2022
 (In thousands)
Assets by Segment
North America$1,194,978 $1,233,835 $778,897 
International1,024,549 961,097 756,830 
American Girl75,272 85,705 58,833 
2,294,799 2,280,637 1,594,560 
Corporate and other66,769 184,666 159,725 
Accounts receivable, net and inventories$2,361,568 $2,465,303 $1,754,285 
 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 following table below presents worldwide revenuesinformation regarding Mattel's net sales by brand category:geographic area. Net sales are attributed to countries based on the location of the customer:
 For the Three Months EndedFor the Nine Months Ended
 September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
 (In thousands)
Net Sales by Geographic Area
North America$1,146,961 $1,051,140 $2,241,899 $2,447,889 
International
EMEA423,923 410,187 874,972 958,839 
Latin America262,071 221,805 475,648 418,531 
Asia Pacific85,833 72,648 228,012 207,508 
Total International771,827 704,640 1,578,632 1,584,878 
Net sales$1,918,788 $1,755,780 $3,820,531 $4,032,767 
22.     New Accounting Pronouncements
 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
Accounting Pronouncements Recently Adopted
22.New Accounting Pronouncements
In May 2014,September 2022, 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”Update ("ASU") 605, Revenue Recognition, and most industry-specific guidance.  The core principle2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. ASU 2022-04 requires that buyers in a supplier finance program disclose sufficient information about the program to allow a user of the financial statements to understand the program's nature, activity during the period, changes since prior periods, and potential magnitude. 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 2014-092022-04 was originally effective for interim and annual reporting periodsfiscal years beginning after December 15, 2016.  In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date, which defers the effective date2022. Refer to annual reporting periods beginning after December 15, 2017.  Early application is permitted after December 15, 2016.  In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations, and ASU 2016-10, Identifying Performance Obligations and Licensing, which clarifies the identification of performance obligations 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 taxes and other similar taxes collected from customers, measuring noncash consideration, and certain transition matters. ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, and ASU 2016-12 (collectively, the “new revenue standards”) will be effective for interim and annual reporting periods beginning on January 1, 2018. Upon adoption, Mattel will recognize the cumulative effect of adopting this guidance as an adjustment"Note 7 to the opening balance of retained earnings. Prior periods will not be retrospectively adjusted. Mattel continues to make progress in its implementation and assessment of the new revenue standards. While the completionConsolidated Financial Statements—Supplier Finance Program" for additional information regarding Mattel's supplier finance program. The adoption of this assessment is still ongoing and certain licensing contracts will be impacted by the new revenue standards, Mattel doesaccounting standard did not expect the new standards 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.
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.
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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. 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 recorded by customer and are not associated with categories, brands, or 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 untapped intellectual property potential.entertainment companies to license other IP. 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, American Girl, Disney Princess and Disney Frozen, Monster High, and Polly Pocket. 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 fashionhas inspired the limitless potential of every girl by showing them that they can be anything. American Girl, 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, is best known for imparting valuable life lessons that instill confidence 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.
present. American Girl Brands—including Truly Me, Girl of the Year, BeForever, Bitty Baby, and WellieWishers. American Girl Brands products are sold directly to consumers viathrough its catalog, website, and proprietary retail stores in the United States, and at select retailers in the United States and Canada.
Infant, Toddler, and Preschool—including brands such as Fisher-Price,Thomas & Friends, and Power Wheels. As a leader in play and child development, Fisher-Price's mission is to help families by making the most fun, enriching products for infants, toddlers, and preschoolers. Thomas & Friends is an award-winning preschool train brand franchise that brings meaningful life lessons of friendship and teamwork to kids through toys, content, live events, and other consumer products.
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.
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Action Figures, Building Sets, Games, and Other—including brands such as Masters of the Universe, MEGA, UNO, Lightyear (Disney Pixar), Jurassic World (NBCUniversal), WWE,and Star Wars (Disney's Lucasfilm).Mattel's Action Figures portfolio is comprised of product lines associated with licensed entertainment franchises that are driven by major tentpole releases, such as Lightyear and Jurassic World, as well as sold directlyproduct lines from Mattel's owned IP, such as 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. Within Games, UNO is the classic matching card game that is easy to certain retailers.learn and fast fun for everyone. Other includes Plush, which contains products associated with movie releases from licensed entertainment franchises, as well as Mattel-owned IP.
Construction and Arts & Crafts Brands—including MEGA BLOKSand RoseArt.Recent Developments
Mattel's vision is to “inspire the wonder of childhood as the global leader in learning and development through play.” In order 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, supply chain transformation and IT transformation; and
Reignite Mattel's culture and team.


Third Quarter 2017 Overview
Mattel’s third quarter 20172023 financial highlights includeresults showed meaningful sales growth, gross margin expansion, and improvement to operating cash flows, with significant contributions from the following:
Nettheatrical release of the Barbie movie during the quarter. Third quarter 2023 net sales increased $163.0 million to $1.92 billion and gross margin improved to 51.0%, from 48.2% in the third quarter of 20172022.
Mattel's cash flows used for operations were $1.56 billion, down 13%$79.6 million for the first nine months of 2023, an improvement of $195.1 million as compared to third quarterthe first nine months of 2016 net sales of $1.80 billion. As a result of Toys “R” Us filing for bankruptcy,2022. Mattel reversed approximately $43executed $60.0 million of net salesshare repurchases in the third quarter of 2017.2023, and has executed $109.9 million of repurchases during the first nine months of 2023. As of September 30, 2023 Mattel has a remaining authorization of $93.2 million under its existing share repurchase program.
Gross sales inRetailer inventory levels were elevated entering 2023. During the first nine months of 2023, retailer inventory levels improved and at the end of the third quarter of 2017 were $1.71 billion, down 13% ashad decreased compared to third quarterprior year levels. Additionally, as of 2016 gross salesSeptember 30, 2023, Mattel's owned inventory had also decreased by $293.2 million compared to prior year levels.
Mattel is operating in a challenging macro-economic environment with higher volatility that may impact consumer demand. To the extent the macro-economic environment remains challenging, or worsens, it may have a material effect on Mattel's results of $1.98 billion. As a resultoperations and financial condition. Refer to Part I, Item 1A "Risk Factors" in the 2022 Annual Report on Form 10-K for further discussion regarding potential impacts on Mattel's business.
Russia - Ukraine War
The ongoing war between Russia and Ukraine has led to volatility and disruption in these countries. The length and impact of Toys “R” Us filing for bankruptcy,the ongoing war is highly unpredictable. While Mattel reversed approximately $47 million of grosshas no direct operations in Ukraine, its operations in Russia have experienced significant disruption and Mattel paused all shipments into Russia in early 2022. Mattel's net sales in these two countries represented less than 2% of total net sales during the third quarter of 2017.nine months ended September 30, 2022.
Gross margin in the third quarter of 2017 was 41.5%, a decrease of 700 basis points from 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 filing for bankruptcy, and lower licensing income.
Operating income in the third quarter 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.
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Results of Operations—Third Quarter
Consolidated Results
Net salesThe following table presents Mattel's consolidated results for the third quarter of 20172023 and 2022:
 For the Three Months EndedYear/Year Change
September 30, 2023September 30, 2022
Amount% of Net
Sales		Amount% of Net
Sales		%Basis Points
of Net Sales
(In millions, except percentage and basis point information)
Net sales$1,918.8 $1,755.8 9 %
Cost of sales940.9 49.0 %908.9 51.8 %4 %(280)
Gross profit977.9 51.0 %846.9 48.2 %15 %280 
Advertising and promotion expenses124.3 6.5 %127.6 7.3 %-3 %(80)
Other selling and administrative expenses379.8 19.8 %327.9 18.7 %16 %110 
Operating income473.9 24.7 %391.4 22.3 %21 %240 
Interest expense30.7 1.6 %33.9 1.9 %-9 %(30)
Interest (income)(4.6)-0.2 %(1.9)-0.1 %140 %(10)
Other non-operating (income), net(2.4)(4.3)
Income before income taxes450.1 23.5 %363.7 20.7 %24 %280 
Provision for income taxes309.3 80.0 
(Income) from equity method investments(5.6)(6.2)
Net income$146.3 7.6 %$289.9 16.5 %-50 %(890)
Sales
Net sales in the third quarter of 2023 were $1.56$1.92 billion, a 13% decrease,an increase of $163.0 million, or 9%, as compared to $1.80$1.76 billion in the third quarter of 2016,2022. The increase in net sales was the result of an increase in gross billings of $173.7 million, partially offset by an increase in sales adjustments of $10.7 million.
Gross billings represent amounts invoiced to a customer and do not include the impact of sales adjustments, such as trade discounts and other allowances. Changes in gross billings are discussed below because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and are not associated with categories, brands, or individual products. The following tables provide a summary of Mattel's consolidated gross billings by categories, along with supplemental information by brand, for the third quarter of 2023 and 2022:
For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30,
2023		September 30,
2022
(In millions, except percentage information)
Gross Billings by Categories
Dolls$884.5 $697.2 27 %3 %
Infant, Toddler, and Preschool361.1 370.1 -2 %3 %
Vehicles518.5 437.9 18 %3 %
Action Figures, Building Sets, Games, and Other357.7 442.9 -19 %2 %
Gross Billings$2,121.8 $1,948.0 9 %3 %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$605.1 $519.6 16 %2 %
Hot Wheels454.8 371.6 22 %3 %
Fisher-Price317.0 319.0 -1 %2 %
Other744.9 737.9 1 %3 %
Gross Billings$2,121.8 $1,948.0 9 %3 %
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Gross billings were $2.12 billion in the third quarter of 2023, an increase of $173.7 million, or 9%, as compared to $1.95 billion in the third quarter of 2022, with a favorable impact from changes in currency exchange rates of 1three percentage point. As a resultpoints. The increase in gross billings was primarily due to higher billings of Toys “R” Us filingDolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games, and Other, and Infant, Toddler, and Preschool.
Dolls gross billings increased 27%, of which 12% was due to higher billings of Barbie, driven primarily by licensing revenues associated with the release of the Barbie movie, 12% was due to higher billings of Disney Princess and Disney Frozen products, and 4% was due to higher billings of Monster High products.
Infant, Toddler, and Preschool gross billings decreased 2%, primarily due to lower billings of Thomas & Friends products.
Vehicles gross billings increased 18%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings decreased 19%, of which 12% was due to lower billings of Jurassic World products and 8% was due to lower billings of Lightyear products,following their theatrical releases during the second quarter of 2022, partially offset by higher billings of Buildings Sets products of 4%.
Sales adjustments generally represent arrangements with Mattel's customers to provide sales incentives, support customer promotions, and provide allowances for bankruptcyreturns 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. Additionally, sales adjustments may include foreign currency transaction gains and losses from the remeasurement of accounts receivable denominated in September 2017, Mattel reversed approximately $43currencies that are different from the relevant entity’s functional currency. Sales adjustments increased to $203.0 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 revenue2023, from $192.3 million in the third quarter of 2017.  Further,2022, due to higher gross margin includes the costbillings. Sales adjustments as a percentage of net 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,relatively consistent at 10.6% 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,2023, as compared to $1.80 billion11.0% 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. 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 income and initial sales in 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.2022.
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 decreasedincreased by $11.0$32.0 million, or 1%4%, to $913.8$940.9 million in the third quarter of 20172023 from $924.8$908.9 million in the third quarter of 2016, as compared to a 13% decrease in net sales.2022. Within cost of sales, product and other costs decreasedroyalty expense increased by $26.6$14.5 million, or 3%20%, to $738.4$87.6 million in the third quarter of 20172023 from $765.0$73.2 million in the third quarter of 2016;2022, freight and logistics expenses increased by $14.3$8.8 million, or 16%11%, to $103.0$92.0 million in the third quarter of 20172023 from $88.7$83.2 million in the third quarter of 2016; royalty expense2022, and product and other costs increased by $1.3$8.7 million, or 2%1%, to $72.4$761.3 million in the third quarter of 20172023 from $71.1$752.5 million in the third quarter of 2016.2022.
Gross Margin
Gross margin decreasedincreased to 41.5%51.0% in the third quarter of 20172023 from 48.5%48.2% in the third quarter of 2016.2022. The decreaseincrease in gross margin was drivenprimarily due to favorable mix of 170 basis points, which primarily related to the release of the Barbie movie, favorable pricing of 140 basis points, incremental realized savings from the Optimizing for Growth program of 130 basis points, and cost deflation of 70 basis points. These favorable factors were partially offset by unfavorable product mix, higher freightfixed cost absorption and logistics expenses, an unfavorable impact from Toys “R” Us filing for bankruptcy, and lower licensing income. As a resultother supply chain costs 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.


230 basis points.
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,catalogs; 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%6.5% in the third quarter of 20172023 from 11.3%7.3% in the third quarter of 2016.2022, primarily due to the 9% increase in net sales as compared to the third quarter of 2022.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $381.8$379.8 million, or 24.5%19.8% of net sales, in the third quarter of 2017,2023, an increase of $51.9 million, as compared to $350.5$327.9 million, or 19.5%18.7% of net sales, in the third quarter of 2016.2022. The increase in other selling and administrative expenses was primarily due to asset impairments of approximately $15 million, higher employee-related costs of approximately $7 million, higher severance and restructuring expensescharges of approximately $6$24.7 million, higher incentive compensation expense of $18.0 million, and investments in the new American Girl flagship store in New York Citysalary and market-related pay increases of approximately $3$7.5 million, partially offset by lower incentive and equity compensation expensesincremental realized savings from the Optimizing for Growth program of approximately $8$12.5 million.
Provision for Income TaxesInterest Expense
Mattel’s provision for income taxesInterest expense was $664.5 million and $57.8$30.7 million in the third quarter of 2017 and 2016, respectively. Mattel recognized net discrete tax expense of $561.52023, as compared to $33.9 million in the third quarter of 20172022. The decrease in interest expense was due to the $250.0 million repayment of the 2013 Senior Notes due March 2023 in the fourth quarter of 2022.
30

Provision for Income Taxes
Mattel's provision for income taxes was $309.3 million in the third quarter of 2023, as compared to $80.0 million in the third quarter of 2022. The provision for income taxes during the three months ended 2023 included a net discrete income tax expense of $200.7 million, which included the establishment of a valuation allowance of $212.4 million on certain foreign deferred tax assets during the third quarter of 2023 resulting from the planned intra-group transfer of certain IP rights, partially offset by other discrete income tax benefits of $11.7 million. During the three months ended September 30, 2022, Mattel recognized a net discrete income tax benefit of $19.4 million, primarily related to income taxes recorded on a non-cash chargediscrete basis in various jurisdictions and reassessments of $561.9 millionprior years' tax liabilities.
Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. During the third quarter of 2023, Mattel finalized a plan to complete an intra-group transfer of certain IP rights, resulting fromin the establishment of a valuation allowance on certain foreign deferred tax assets of $212.4 million that will likely not be realized and net discreteupon execution of the plan. While the transfer will not result in a taxable gain, Mattel expects to recognize a one-time tax benefitsbenefit of $9.0approximately $53 million in the thirdfourth quarter of 2016 primarily2023, when the transaction is completed, in connection with the establishment of deferred tax assets related to reassessments of prior years’ tax liabilities based on the status of audits and tax filings in various jurisdictions around the world.transferred IP.
Segment Results
North America Segment
The following table providestables provide 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 third quarter of 20172023 and 2016:2022:
For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30,
2023		September 30,
2022
 (In millions, except percentage information)
Net Sales$1,104.4 $1,002.1 10 %— %
Segment Operating Income405.7 337.3 20 %
 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 % —%


GrossNet sales for the North America segment were $839.3 million in the third quarter of 2017, a decrease2023 were $1.10 billion, an increase of $231.7$102.2 million, or 22%10%, as compared to $1.00 billion in the third quarter of 2022. The increase in net sales was the result of an increase in gross billings of $108.9 million, partially offset by an increase in sales adjustments of $6.6 million.
31

For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30,
2023		September 30,
2022
(In millions, except percentage information)
Gross Billings by Categories
Dolls$468.5 $342.9 37 %— %
Infant, Toddler, and Preschool230.6 239.8 -4 %— %
Vehicles263.4 226.3 16 %-1 %
Action Figures, Building Sets, Games, and Other214.1 258.7 -17 %— %
Gross Billings$1,176.6 $1,067.8 10 %— %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$349.9 $278.5 26 %— %
Hot Wheels225.7 184.1 23 %— %
Fisher-Price204.8 206.4 -1 %— %
Other396.2 398.8 -1 %— %
Gross Billings$1,176.6 $1,067.8 10 %— %
Gross billings for the North America segment were $1.18 billion in the third quarter of 2023, an increase of $108.9 million, or 10%, as compared to $1.07 billion in the third quarter of 2016.2022. The decreaseincrease in the North America segment gross salesbillings was primarily due to higher billings of Dolls and Vehicles, partially offset by lower salesbillings of Action Figures, Building Sets, Games, and Other, Girls, Construction and ArtsInfant, Toddler, and Preschool.
Dolls gross billings increased 37%, of which 21% was due to higher billings of Barbie, driven primarily by licensing revenues associated with the release of the Barbie movie, and 15% was due to higher billing of Disney Princess and Disney Frozen products.
Infant, Toddler, and Preschool gross billings decreased 4%, primarily due to lower billings of Thomas & Crafts, Fisher-Price Friends Entertainment, Core Fisher-Price, products.
Vehicles gross billings increased 16%, due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Wheels products. As a result Toys “R” Us filing for bankruptcy, Mattel reversed approximately $47 millionOther gross billings decreased 17%, 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%11% was due to lower salesbillings 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, 4% was due to lower sales of DC Comics products, 4% was due to lower sales of games and puzzlesJurassic World products and 7% was due to lower salesbillings of Lightyear products,following their theatrical releases during the second quarter of 2022, and 4% was due to lower billings of other licensed properties,Action Figures products, partially offset by higher salesbillings of CARSBuildings Sets products of 12%4%. Of the 19% decrease in Core Fisher-Price gross sales, 8% was due
Sales adjustments increased to lower sales of infant products and 5% was due to lower sales of Imaginext products. Of the 17% decrease in Wheels gross sales, 9% was due to lower sales of Hot Wheels products and 6% was due to lower sales of Tyco™ RCvehicles products.
Cost of sales decreased 6%$72.2 million in the third quarter of 2017, as compared to a 21% decrease2023 from $65.6 million in net sales,the third quarter of 2022, primarily due to lowerhigher gross billings. Sales adjustments as a percentage of net sales were flat at 6.5% in the third quarter of 2023 and 2022.
Cost of sales increased by $31.2 million, or 6%, to $553.3 million in the third quarter of 2023 from $522.2 million in the third quarter of 2022, due to an increase in product and other costs partially offset by higherof $13.3 million, an increase in freight and logistics expenses. expenses of $9.1 million, and an increase in royalty expenses of $8.8 million.
Gross margin in the third quarter of 2017 decreased2023 increased to 49.9% from 47.9% in the third quarter of 2022, primarily due to an unfavorable impact from Toys “R” Us filing for bankruptcy, higher freight and logistics expenses, and unfavorable product mix. As a resultfavorable mix of 140 basis points, which primarily related to the release of the Toys “R” Us net sales reversal, gross margin includesBarbie movie, incremental realized savings from the Optimizing for Growth program of 130 basis points, favorable pricing of 80 basis points, and cost deflation of sales for the inventory sold, but excludes the corresponding net sales.70 basis points, partially offset by unfavorable fixed cost absorption and other supply chain costs of 220 basis points.
North America segment operating income decreased to $86.2was $405.7 million in the third quarter of 2017,2023, as compared to $265.6segment operating income of $337.3 million in the third quarter of 2016,2022, primarily due to lowerhigher gross profit and higher other selling and administrative expenses, partially offset by lower advertising and promotion expenses.profit.
32

International Segment
The following table providestables provide 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 third quarter of 20172023 and 2016:2022:
For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30,
2023		September 30,
2022
(In millions, except percentage information)
Net Sales$771.8 $704.6 10 %7 %
Segment Operating Income202.5 162.8 24 %
 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%
GrossNet sales for the International segment in the third quarter of 2023 were $777.0$771.8 million, an increase of $67.2 million, or 10%, as compared to $704.6 million in the third quarter of 2017,2022. The increase in net sales was the result of an increase in gross billings of $2.8$71.4 million, as compared to $774.2partially offset by an increase in sales adjustments of $4.2 million.
For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30,
2023		September 30,
2022
(In millions, except percentage information)
Gross Billings by Categories
Dolls$371.7 $303.5 22 %7 %
Infant, Toddler, and Preschool130.5 130.3 — %8 %
Vehicles255.0 211.6 21 %8 %
Action Figures, Building Sets, Games, and Other143.6 184.2 -22 %5 %
Gross Billings$900.9 $829.5 9 %7 %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$255.2 $241.1 6 %6 %
Hot Wheels229.1 187.5 22 %7 %
Fisher-Price112.2 112.6 — %8 %
Other304.4 288.3 6 %7 %
Gross Billings$900.9 $829.5 9 %7 %
Gross billings for the International segment were $900.9 million in the third quarter of 2016,2023, an increase of $71.4 million, or 9%, as compared to $829.5 million in the third quarter of 2022, with a favorable impact from changes in currency exchange rates of 2seven percentage points. The increase in the International segment gross billings was due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games, and Other.
Dolls gross billings increased 22%, of which 11% was due to higher billings of Disney Princess and Disney Frozen products, 9% was due to higher billings of Monster High products, and 5% was due to higher billings of Barbie, driven primarily by licensing revenues associated with the release of the Barbie movie.
Infant, Toddler, and Preschool gross billings were flat year-over-year.
Vehicles gross billings increased 21%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Other gross billings decreased 22%, primarily due to lower billings of Jurassic World products of 13% and lower billings of Lightyear products of 10%, following their theatrical releases during the second quarter of 2022, partially offset by higher billings of Buildings Sets products of 3%.
Sales adjustments increased to $129.1 million in the third quarter of 2023 from $124.9 million in the third quarter of 2022. Sales adjustments as a percentage of net sales decreased to 16.7% in the third quarter of 2023 from 17.7% in the third quarter of 2022. The decrease in sales adjustments as a percentage of net sales was primarily due to higher salesgross billings, which includes licensing revenues associated with the release of Entertainment and Wheels products, partially offset by lower sales of Other Girls, Construction and Arts & Crafts, and Fisher-Price Friends products. Of the 32% increase in Entertainment gross sales, 44% was due to higher sales of CARS products, partially offset by lower sales of Dinotrux, WWE, and Minecraft products of 3% each. Of the 12% increase in Wheels gross sales, 12% was due to higher sales of Hot Wheels products. Of the 23% decrease in Other Girls gross sales, 21% was due to lower sales of Monster High products, 13% was due to lower sales of DC Super Hero Girls products, and 12% was due to lower sales of Ever After High products, partially offset by initial sales of Enchantimals products of 19%. Of the 16% decrease in Construction and Arts & Crafts gross sales, 16% was due to lower sales 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.Barbie movie.
Cost of sales increased 1% in the third quarter of 2017, as comparedby $28.5 million, or 8%, to an 1% increase in net sales, primarily due to higher royalty expense, partially offset by lower freight and logistics expenses. Gross margin in the third quarter of 2017 decreased as a result of an unfavorable product mix and higher royalty expense, partially offset by strategic pricing.
International segment income decreased to $81.3$399.4 million in the third quarter of 2017, as compared to $150.22023 from $370.9 million in the third quarter of 2016,2022, primarily due to an increase in product and other costs of $22.6 million.
33

Gross margin increased to 48.3% in the third quarter of 2023 from 47.4% in the third quarter of 2022, primarily due to favorable pricing actions of 250 basis points, favorable mix of 230 basis points, which primarily related to the release of the Barbie movie, incremental realized savings from the Optimizing for Growth program of 140 basis points, and cost deflation of 80 basis points. These favorable factors were partially offset by unfavorable foreign currency exchange of 330 basis points and unfavorable fixed cost absorption from lower production volumes and other supply chain costs of 280 basis points.
International segment operating income was $202.5 million in the third quarter of 2023, as compared to segment operating income of $162.8 million in the third quarter of 2022, primarily due to higher gross profit and higher other selling and administrative expenses.


profit.
American Girl Segment
The following table provides a summary of Mattel’s grossMattel's net sales by brandand segment operating loss for the American Girl segment for the third quarter of 20172023 and 2016:2022:
 For the Three Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
 September 30,
2023		September 30,
2022
 (In millions, except percentage information)
Net Sales$42.6 $49.0 -13 %— %
Segment Operating Loss(4.6)(9.0)-49 %
 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 % —%
GrossNet sales for the American Girl segment in the third quarter of 2023 were $93.9$42.6 million, a decrease of $6.4 million, or 13%, as compared to $49.0 million in the third quarter of 2017,2022. The decrease in net sales was the result of a decrease in gross billings of $36.2$6.5 million, or 28%, as compared13%. Gross billings decreased to $130.1$44.3 million in the third quarter of 2016. The decrease in American Girl segment gross sales was primarily due to 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.
Cost of sales decreased 1% in the third quarter of 2017, as compared to a 29% decrease in net sales. Gross margin in the third quarter of 2017 decreased as a result of lower licensing income and higher obsolescence expense.
American Girl segment loss was $14.62023 from $50.7 million in the third quarter of 2017, as compared2022, primarily due to segment incomelower billings of $28.1Truly Me products.
Sales adjustments were flat at $1.7 million in the third quarter of 2016,2023 and 2022.
Cost of sales decreased by $3.0 million, or 13%, to $20.0 million in the third quarter of 2023, as compared to a 13% decrease in net sales, primarily due to a decrease in product and other costs of $2.4 million.
Gross margin was relatively consistent at 52.9% in the third quarter of 2023, as compared to 53.0% in the third quarter of 2022.
American Girl segment operating loss was $4.6 million in the third quarter of 2023, as compared to segment operating loss of $9.0 million in the third quarter of 2022, primarily due to lower gross profit, lower licensing income,advertising and higher other selling and administrativepromotion expenses.
34

Results of Operations—First Nine Months
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’spresents Mattel's consolidated results for the first nine months of 20172023 and 2016 (in millions, except percentage and basis point information):2022:
For the Nine Months Ended Year/Year Change For the Nine Months EndedYear/Year Change
September 30, 2017 September 30, 2016 September 30, 2023September 30, 2022
Amount % of Net
Sales		 Amount % of Net
Sales		 % Basis Points
of Net Sales		Amount% of Net
Sales		Amount% of Net
Sales		%Basis Points
of Net Sales
(In millions, except percentage and basis point information)(In millions, except percentage and basis point information)
Net sales$3,271.1
 100.0 % $3,622.3
 100.0 % -10 % —
Net sales$3,820.5 $4,032.8 -5 %
Cost of salesCost of sales2,027.0 53.1 %2,154.1 53.4 %-6 %(30)
Gross profit$1,325.7
 40.5 % $1,693.0
 46.7 % -22 % -620
Gross profit1,793.5 46.9 %1,878.7 46.6 %-5 %30 
Advertising and promotion expenses348.8
 10.7 % 384.6
 10.6 % -9 % 10
Advertising and promotion expenses290.3 7.6 %291.5 7.2 %— %40 
Other selling and administrative expenses1,066.9
 32.6 % 1,051.8
 29.0 % 1 % 360
Other selling and administrative expenses1,081.6 28.3 %990.6 24.6 %9 %370 
Operating (loss) income(90.0) -2.8 % 256.6
 7.1 % -135 % -990
Operating incomeOperating income421.6 11.0 %596.5 14.8 %-29 %(380)
Interest expense68.6
 2.1 % 70.1
 1.9 % -2 % 20
Interest expense92.5 2.4 %99.7 2.5 %-7 %(10)
Interest (income)(6.3) -0.2 % (7.6) -0.2 % -16 % —
Interest (income)(15.4)-0.4 %(5.1)-0.1 %204 %(30)
Other non-operating expense, net5.9
   23.3
      
(Loss) income before income taxes$(158.2) -4.8 % $170.8
 4.7 % -193 % -950
Other non-operating (income) expense, netOther non-operating (income) expense, net(6.0)12.0 
Income before income taxesIncome before income taxes350.5 9.2 %489.9 12.1 %-28 %(290)
Provision for income taxesProvision for income taxes296.8 130.5 
(Income) from equity method investments(Income) from equity method investments(13.3)(18.4)
Net incomeNet income$67.0 1.8 %$377.8 9.4 %-82 %(760)
Sales
Net sales forin the first nine months of 20172023 were $3.27$3.82 billion, a 10% decrease of $212.2 million, or 5%, as compared to $3.62$4.03 billion in the first nine months of 2016.2022. The decrease in net sales was the result of a decrease in gross billings of $228.1 million, partially offset by a decrease in sales adjustments of $15.9 million.
35

Gross billings represent amounts invoiced to a customer and do not include the impact of sales adjustments, such as trade discounts and other allowances. Changes in gross billings are discussed below because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and are not associated with categories, brands, or individual products. The following table providestables provide a summary of Mattel’sMattel's consolidated gross salesbillings by categories, along with supplemental information by brand, results for the first nine months of 20172023 and 2016:2022:
 For the Nine Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30,
2023		September 30,
2022		 
 (In millions, except percentage information)
Gross Billings by Categories
Dolls$1,631.1 $1,494.6 9 %1 %
Infant, Toddler, and Preschool708.6 850.3 -17 %1 %
Vehicles1,165.9 1,048.3 11 %1 %
Action Figures, Building Sets, Games, and Other755.0 1,095.5 -31 %1 %
Gross Billings$4,260.6 $4,488.7 -5 %1 %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$1,064.7 $1,118.4 -5 %1 %
Hot Wheels1,014.9 899.5 13 %2 %
Fisher-Price607.3 719.1 -16 %1 %
Other1,573.7 1,751.6 -10 %1 %
Gross Billings$4,260.6 $4,488.7 -5 %1 %
 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$4.26 billion in the first nine months of 2017,2023, a decrease of $396.9$228.1 million, or 10%5%, as compared to $3.99$4.49 billion in the first nine months of 2016.2022. The decrease in gross salesbillings for the first nine months of 2023 was primarily due to lower billings of Action Figures, Building Sets, Games, and Other, and Infant, Toddler, and Preschool, partially offset by higher billings of Dolls and Vehicles.
Dolls gross billings increased 9%, of which 11% was due to lower saleshigher billings of Other Girls, ConstructionDisney Princess and Arts & Crafts, American Girl,Disney Frozen products, and Fisher-Price Friends 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 36% decrease in Other Girls gross sales, 30%6% was due to lower saleshigher billings of Monster High products, partially offset by lower billings of Barbie products of 4%, and lower billings of Enchantimals products of 2%.
Infant, Toddler, and Preschool gross billings decreased 17%, of which 13% was due to lower salesbillings of Ever After HighFisher-Price products partially offset by initial sales of Enchantimals products of 7%. Of the 30% decrease in Construction and Arts & Crafts gross sales, 28%2% was due to lower salesbillings of MEGA BLOKS products,Fisher-Price Friends products.
Vehicles gross billings increased 11%, primarily driven by licensed propertiesdue to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and MEGA BLOKS Preschool products. The 18% decrease in American GirlOther gross salesbillings decreased 31%, of which 16% was due to lower licensing incomebillings of Jurassic World products and initial sales in the prior year through external distribution channels. Of the 13% decrease in Fisher-Price Friends gross sales, 14%10% was due to lower billings of Lightyear products,following their theatrical releases during the second quarter of 2022, and 4% was due to lower billings of other Action Figuresproducts.
Sales adjustments generally 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 Thomas & Friends products.specified promotional activities, and other specified factors such as sales to consumers. Additionally, sales adjustments may include foreign currency transaction gains and losses from the remeasurement of accounts receivable denominated in currencies that are different from the relevant entity’s functional currency. Sales adjustments decreased to $440.1 million in the first nine months of 2023 from $456.0 million in the first nine months of 2022, primarily due to lower gross billings. Sales adjustments as a percentage of net sales was relatively consistent at 11.5% in the first nine months of 2023, as compared to 11.3% in the first nine months of 2022.
36

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 increaseddecreased by $16.1$127.1 million, or 1%6%, to $1.95$2.03 billion in the first nine months of 20172023 from $1.93$2.15 billion in the first nine months of 2016, as compared to a 10% decrease in net sales.2022. Within cost of sales, product and other costs decreased by $132.1 million, or 8%, to $1.62 billion in the first nine months of 2023 from $1.75 billion in the first nine months of 2022, freight and logistics expenses increased by $24.5$7.9 million, or 12%4%, to $233.8$230.2 million in the first nine months of 2017 from $209.32023, as compared to $222.3 million in the first nine months of 2016;2022, and royalty expense increased by $7.7 million, or 5%, to $155.7was relatively consistent at $175.0 million in the first nine months of 2017 from $148.02023, as compared to $177.9 million in the first nine months of 2016; product and other costs decreased by $16.1 million, or 1%,2022.
Gross Margin
Gross margin increased to $1.56 billion46.9% in the first nine months of 20172023 from $1.57 billion46.6% in the first nine months of 2016.
Gross Margin
Gross margin decreased to 40.5% in the first nine months of 2017 from 46.7% in the first nine months of 2016.2022. The decreaseincrease in gross margin was primarily due to unfavorable productfavorable pricing of 150 basis points, incremental realized savings from the Optimizing for Growth program of 140 basis points, and favorable mix higher freight and logistics expenses, lower licensing income, and an unfavorable impact from Toys “R” Us filing for bankruptcy. As a resultof 90 basis points, which primarily related to the release of the Toys “R” Us netBarbie movie, partially offset by inventory management efforts of 100 basis points, including higher close-out sales reversal, gross margin includes theand inventory obsolescence, cost inflation of sales for the inventory sold, but excludes the corresponding net sales.50 basis points, and unfavorable fixed cost absorption and other supply chain costs of 200 basis points.
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) retailretail advertising costs, which primarily include consumer direct catalogs, newspaper inserts, fliers, and mailers,catalogs; and (iv) generic advertising costs, which primarily include trade show costs. Advertising and promotion expenses as a percentage of net sales increased slightly to 10.7%was relatively consistent at 7.6% in the first nine months of 2017 from 10.6%2023, as compared to 7.2% in the first nine months of 2016.2022.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $1.07$1.08 billion, or 32.6%28.3% of net sales, in the first nine months of 2017,2023, as compared to $1.05 billion,$990.6 million, or 29.0%24.6% of net sales, in the first nine months of 2016.2022. The increase in other selling and administrative expenses was primarily due to asset impairmentshigher severance and restructuring charges of approximately $15$45.9 million, market-related pay increases of $35.4 million, higher incentive compensation of $21.1 million, and higher employee-related costsa prior year gain on the sale of approximately $15the American Girl corporate office and distribution center in the second quarter of 2022 of $15.2 million, partially offset by lower severance and restructuring expensesincremental realized savings from the Optimizing for Growth program of approximately $12$32.2 million.
Other Non-OperatingInterest Expense
Other non-operatingInterest expense was $5.9$92.5 million in the first nine months of 2017,2023, as compared to $23.3$99.7 million in the first nine months of 2016.2022. The decrease in other non-operatinginterest expense was primarily due to the change$250.0 million repayment of the 2013 Senior Notes due March 2023 in the remeasurement rate used by Mattel's Venezuelan subsidiary in 2016, which resulted in an unrealized foreign currency exchange loss of approximately $26 million in the firstfourth quarter of 2016.2022.
Provision for Income Taxes
Mattel’sMattel's provision for income taxes was $614.4 million and $26.6$296.8 million in the first nine months of 2017 and 2016, respectively. Mattel recognized net discrete tax expense of $558.82023, as compared to $130.5 million in the first nine months of 20172022. The provision for income taxes during the nine months ended 2023 included a net discrete income tax expense of $201.0 million, which included the establishment of a valuation allowance of $212.4 million on certain foreign deferred tax assets during the third quarter of 2023 resulting from the planned intra-group transfer of certain IP rights, partially offset by other discrete income tax benefits of $11.4 million. During the nine months ended September 30, 2022, Mattel recognized a net discrete income tax benefit of $4.8 million, primarily related to income taxes recorded on a non-cash chargediscrete basis in various jurisdictions and reassessments of $561.9 millionprior years' tax liabilities.
Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. During the third quarter of 2023, Mattel finalized a plan to complete an intra-group transfer of certain IP rights, resulting fromin the establishment of a valuation allowance on certain foreign deferred tax assets of $212.4 million that will likely not be realized and net discreteupon execution of the plan. While the IP transfer will not result in a taxable gain, Mattel expects to recognize a one-time tax benefitsbenefit of $12.8approximately $53 million in the first nine months 2016 primarilyfourth quarter of 2023, when the transaction is completed, in connection with the establishment of deferred tax assets related to reassessments of prior years’ tax liabilities based on the status of audits and tax filings in various jurisdictions around the world.transferred IP.

37


Segment Results
North America Segment
The following table providestables provide 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 months of 20172023 and 2016:2022:
For the Nine Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30, 2023September 30, 2022
(In millions, except percentage information)
Net Sales$2,138.2 $2,330.8 -8 %— %
Segment Operating Income589.7 707.6 -17 %
 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 % —%
GrossNet sales for the North America segment in the first nine months of 2023 were $1.71$2.14 billion, a decrease of $192.5 million, or 8%, as compared to $2.33 billion in the first nine months of 2017,2022. The decrease in net sales was the result of a decrease in gross billings of $368.2$201.9 million, or 18%, as compared to $2.08partially offset by a decrease in sales adjustments of $9.3 million.
For the Nine Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30, 2023September 30, 2022
(In millions, except percentage information)
Gross Billings by Categories
Dolls$812.3 $715.8 13 %-1 %
Infant, Toddler, and Preschool437.7 549.6 -20 %— %
Vehicles579.1 550.7 5 %— %
Action Figures, Building Sets, Games, and Other453.4 668.3 -32 %— %
Gross Billings$2,282.5 $2,484.4 -8 %— %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$587.6 $599.2 -2 %— %
Hot Wheels492.3 458.4 7 %-1 %
Fisher-Price380.9 469.2 -19 %— %
Other821.8 957.6 -14 %— %
Gross Billings$2,282.5 $2,484.4 -8 %— %
Gross billings for the North America segment were $2.28 billion in the first nine months of 2016.2023, a decrease of $201.9 million, or 8%, as compared to $2.48 billion in the first nine months of 2022. The decrease in the North America segment gross salesbillings for the first nine months of 2023 was primarily due to lower salesbillings of Action Figures, Building Sets, Games, and Other, Girls, Construction and Arts & Crafts, Fisher-Price Friends, Core Fisher-Price, Wheels,Infant, Toddler, and Barbie products. As a result Toys “R” Us filing for bankruptcy, Mattel reversed approximately $47 millionPreschool, partially offset by higher billings of Dolls and Vehicles.
Dolls gross sales in the third quarterbillings increased 13%, of 2017. In addition, Mattel beganwhich 12% was due to reduce shippinghigher billings of Disney Princess and Disney Frozen products and 5% was due to Toys “R” Us in early September,higher billings of Monster High products, partially offset by lower billings of Polly Pocket products of 2%.
Infant, Toddler, and Preschool gross billings decreased 20%, of which resulted in a loss of revenue in the third quarter of 2017. Of the 52% decrease in Other Girls gross sales, 37%16% was due to lower salesbillings of Monster HighFisher-Price products and 15%2% was due to lower salesbillings of Ever After HighThomas & Friends products. Of the 36% decrease in Construction
Vehicles gross billings increased 5%, primarily due to higher billings of Hot Wheels products.
Action Figures, Building Sets, Games, and Arts & CraftsOther gross sales,billings decreased 32%, of which 16% was due to lower salesbillings of MEGA BLOKS Jurassic World products primarily driven by licensed properties and MEGA BLOKS Preschool products. Of the 19% decrease in Fisher-Price Friends gross sales, 19%9% was due to lower salesbillings of Thomas & Friends products. OfLightyear products, following their theatrical releases during the 13% decrease in Core Fisher-Price gross sales, 8% was due to lower salessecond quarter 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 products2022, and 4% was due to lower salesbillings of Matchboxother Action Figures products. The 13% decrease in Barbie gross sales was due
Sales adjustments decreased to a shift in DVD entertainment strategy.
Cost of sales decreased 6%$144.3 million in the first nine months of 2017, as compared to a 17% decrease2023 from $153.6 million in net sales,the first nine months of 2022, primarily due to lower gross billings. Sales adjustments as a percentage of net sales were relatively consistent at 6.7% for the first nine months of 2023, as compared to 6.6% for the first nine months of 2022.
38

Cost of sales decreased by $84.6 million, or 7%, to $1.16 billion in the first nine months of 2023 from $1.25 billion in the first nine months of 2022, primarily due to a decrease in product and other costs partially offset by higher freight and logistics expenses. of $86.8 million.
Gross margin in the first nine months of 20172023 decreased to 45.5% from 46.4% in the first nine months of 2022, primarily due to an unfavorable impact from Toys “R” Us filing for bankruptcy,inventory management efforts of 90 basis points, including higher freightclose-out sales and logistics expenses,inventory obsolescence, cost inflation of 50 basis points, and unfavorable product mix. As a resultfixed cost absorption and other supply chain costs of 240 basis points. These negative factors were partially offset by incremental realized savings from the Optimizing for Growth program of 120 basis points, favorable pricing of 90 basis points, and favorable mix of 80 basis points, which primarily related to the release 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.Barbie movie.
North America segment operating income decreased to $109.6was $589.7 million in the first nine months of 2017,2023, as compared to $371.1segment operating income of $707.6 million in the first nine months of 2016,2022. The decrease was primarily due to lower gross profit and higher other selling and administrative expenses, partially offset by lower advertising and promotion expenses.


profit.
International Segment
The following table providestables provide a summary of percentage changes inMattel's 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 inoperating income, and 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 salesbillings by categories, along with supplemental information by brand, for the International segment for the first nine months of 20172023 and 2016:2022:
 For the Nine Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30,
2023		September 30,
2022		 
 (In millions, except percentage information)
Net Sales$1,578.6 $1,584.9 — %3 %
Segment Operating Income245.8 268.0 -8 %
 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 % — %


GrossNet sales for the International segment were $1.64relatively consistent at $1.58 billion, in the first nine months of 2017, an increase2023 and 2022.
 For the Nine Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
September 30,
2023		September 30,
2022		 
 (In millions, except percentage information)
Gross Billings by Categories
Dolls$712.0 $658.3 8 %3 %
Infant, Toddler, and Preschool270.9 300.6 -10 %3 %
Vehicles586.8 497.6 18 %3 %
Action Figures, Building Sets, Games, and Other301.7 427.3 -29 %3 %
Gross Billings$1,871.3 $1,883.9 -1 %3 %
Supplemental Gross Billings Disclosure
Gross Billings by Top 3 Power Brands
Barbie$477.1 $519.3 -8 %2 %
Hot Wheels522.6 441.1 18 %3 %
Fisher-Price226.4 249.9 -9 %4 %
Other645.1 673.6 -4 %3 %
Gross Billings$1,871.3 $1,883.9 -1 %3 %
Gross billings for the International segment were $1.87 billion in the first nine months of $22.82023, a decrease of $12.6 million, or 1%, as compared to $1.61$1.88 billion in the first nine months of 2016.2022. The increasedecrease in the International segment gross salesbillings was primarilydue to lower billings of Action Figures, Building Sets, Games, and Other, and Infant, Toddler, and Preschool, partially offset by higher billings of Vehicles and Dolls.
Dolls gross billings increased 8%, of which 12% was due to higher salesbillings of EntertainmentDisney Princess and Disney Frozen products and 8% was due to higher billings of Monster High products, partially offset by lower salesbillings of ConstructionBarbie products of 6%, and Arts & Craftslower billings of Enchantimals products of 4%.
Infant, Toddler, and Other Girls products. Of the 29% increase in EntertainmentPreschool gross sales, 46% wasbillings decreased 10%, primarily due to lower billings of Fisher-Price products.
Vehicles gross billings increased 18%, primarily due to higher salesbillings of CARS products, partially offset by lower sales Hot Wheels products.
39

Action Figures, Building Sets, Games, and Other gross billings decreased 29%, of DC Comics products 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 15% was due to lower salesbillings of MEGA BLOKS products, primarily driven by licensed properties and MEGA BLOKS Preschool products. Of the 19% decrease in Other Girls gross sales, 23% was due to lower sales of Monster High Jurassic World products and 10% was due to lower salesbillings of Ever After High Lightyear products, partially offset by initial salesfollowing their theatrical releases during the second quarter of Enchantimals products of 11%.
Cost of sales increased 6% in the first nine months of 2017, as compared to a2022, and 2% increase in net sales, primarilywas due to higher product andlower billings of other costs and higher royalty expense. Gross margin in the first nine months of 2017 decreased as a result of unfavorable product mix, higher royalty expense, lower licensing income, and higher obsolescence expense, partially offset by strategic pricing.Action Figures products.
International segment incomeSales adjustments decreased to $48.1$292.7 million in the first nine months of 2017, as compared to $155.92023 from $299.0 million in the first nine months of 2016, driven2022, primarily bydue to lower gross profitbillings. Sales adjustments as a percentage of net sales were relatively consistent at 18.5% for the first nine months of 2023, as compared to 18.9% for the first nine months of 2022.
Cost of sales increased by $13.4 million, or 2%, to $866.1 million in the first nine months of 2023 from $852.8 million in the first nine months of 2022, primarily due to an increase in product and other costs of $10.0 million.
Gross margin decreased to 45.1% in the first nine months of 2023 from 46.2% in the first nine months of 2022, primarily due to unfavorable foreign currency exchange of 220 basis points, inventory management efforts of 120 basis points, including higher close-out sales and inventory obsolescence, cost inflation of 40 basis points, and unfavorable fixed cost absorption from lower production volumes and other sellingsupply chain costs of 250 basis points. These negative factors were partially offset by favorable pricing actions of 250 basis points, incremental realized savings from the Optimizing for Growth program of 160 basis points, and administrative expenses.favorable mix of 110 basis points, which primarily related to the release of the Barbie movie.
International segment operating income was $245.8 million in the first nine months of 2023, as compared to segment operating income of $268.0 million in the first nine months of 2022, primarily due to lower gross profit.
American Girl Segment
The following table provides a summary of Mattel’s grossMattel's net sales by brandand segment operating loss for the American Girl segment for the first nine months of 20172023 and 2016:2022:
 For the Nine Months Ended% Change as
Reported		Currency
Exchange Rate
Impact
 September 30,
2023		September 30,
2022
 (In millions, except percentage information)
Net Sales$103.7 $117.1 -11 %— %
Segment Operating Loss(24.1)(20.4)18 %
 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 % —%
GrossNet sales for the American Girl segment in the first nine months of 2023 were $247.4$103.7 million, a decrease of $13.4 million, or 11%, as compared to $117.1 million in the first nine months of 2017,2022. The decrease in net sales was the result of a decrease in gross billings of $51.5$13.7 million, or 17%11%, as compared to $298.9$106.8 million in the first nine months of 2016. The decrease in the American Girl segment gross sales 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 income 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 decreased as a result of lower licensing income and higher obsolescence expense.
American Girl segment loss was $38.62023 from $120.5 million in the first nine months of 2017, as compared2022. The decrease in net sales was primarily due to segment incomelower billings of $21.9Girl of the Year dolls.
Sales adjustments were $3.1 million in the first nine months of 2016, driven2023, as compared to $3.3 million in the first nine months of 2022.
Cost of sales decreased by $6.0 million, or 11%, to $50.6 million in the first nine months of 2023, as compared to an 11% decrease in net sales in the first nine months of 2023, primarily due to a decrease in product and other costs of $5.2 million.
Gross margin decreased to 51.2% in the first nine months of 2023 from 51.7% in the first nine months of 2022, primarily due to cost inflation of 190 basis points, and unfavorable fixed cost absorption of 90 basis points, partially offset by incremental realized savings from the Optimizing for Growth program of 120 basis points and favorable product mix and other of 110 basis points.
American Girl segment operating loss was $24.1 million in the first nine months of 2023, as compared to segment operating loss of $20.4 million in the first nine months of 2022, primarily due to lower gross profit lower licensing income, and higherof $7.5 million. In addition, other selling and administrative expenses.
Income Taxes
Mattel’s provision for income taxesexpenses were flat compared to prior year, as a $15.2 million gain on sale of the American Girl corporate office and distribution center that was $614.4recognized in the first nine months of 2022 was offset by lower rent expense of $7.1 million and $26.6lower miscellaneous other selling and administrative expenses in the first nine months of 2023.
40

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 expands upon the previously announced Capital Light program (the "Program"), which had targeted annual gross cost savings of $250 million from actions expected to be completed beginning 2021 through 2023. In February 2023, Mattel expanded the Program and increased the targeted annual gross cost savings from $250 million to $300 million, reflecting additional initiatives, including actions to further streamline Mattel's organizational structure. As of September 30, 2023, Mattel had realized annual gross cost savings of approximately $297 million and expects to exceed the targeted annual gross costs savings of $300 million during the fourth quarter of 2023.
Of the $300 million in targeted gross cost savings, approximately 60% is expected to benefit cost of sales, 30% 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 $155 to $185 million.
Mattel estimates the cost of actions for the nineProgram, excluding previous actions taken under the Capital Light program, to be as follows:
Optimizing for Growth - ActionsEstimate of Cost
Employee severance$50 to $60 million
Real estate/supply chain optimization and other restructuring costs$30 to $40 million
Non-cash charges (a)$55 to $60 million
Total estimated severance and restructuring costs$135 to $160 million
Information technology enhancements and other investments$75 to $85 million
Total estimated actions$210 to $245 million
(a)Non-cash charges include $45.4 million of currency translation losses that were recognized within other non-operating expense, net, in the consolidated statement of operations during the fourth quarter of 2022 as a result of Mattel's liquidation of its subsidiary in Argentina, which was substantially completed in 2022.
Cumulatively, in conjunction with previous actions taken under the Capital Light program prior to 2021, targeted annual gross cost savings for the Program are $375 million by 2023, with total expected cash expenditures of approximately $195 to $225 million, and total expected non-cash charges of approximately $75 million. Of the $375 million in targeted annual gross cost savings, approximately 65% was expected to benefit cost of sales, 25% was expected to benefit other selling and administrative expenses, and 10% was expected to benefit advertising and promotion expenses.
In connection with the Program, Mattel has recorded severance and other restructuring costs in the following cost and expense categories within operating income in the consolidated statements of operations:
For the Three Months EndedFor the Nine Months Ended
September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
(In millions)
Cost of sales (a)$(0.1)$1.4 $(1.3)$9.8 
Other selling and administrative expenses (b)3.1 4.4 31.6 16.6 
$3.0 $5.8 $30.3 $26.4 
(a)Severance and other restructuring costs recorded within cost of sales in the consolidated statements of operations are included in segment operating income in "Note 21 to the Consolidated Financial Statements—Segment Information."
(b)Severance and other restructuring costs recorded within other selling and administrative expenses in the consolidated statements of operations are included in corporate and other expense in "Note 21 to the Consolidated Financial Statements—Segment Information."
As of September 30, 2023, Mattel has recorded cumulative severance and other restructuring charges related to the Program of approximately $196 million, which include approximately $73 million of non-cash charges. Non-cash charges include $45.4 million recorded in non-operating expense, net, during 2022 related to the liquidation of Mattel's subsidiary in Argentina. Mattel realized cumulative cost savings (before severance, restructuring costs, and cost inflation) of approximately $372 million, which represents approximately 70% benefit to cost of sales, 25% benefit to other selling and administrative expenses, and 5% benefit to advertising and promotion expenses, as of September 30, 2023, in connection with the Program.
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Other Cost Savings Actions
On September 14, 2023, Mattel committed to cost savings actions not included in the Program to optimize its manufacturing footprint by discontinuing production at a plant located in China, which actions were announced to plant employees on November 8, 2023. The targeted annual gross cost savings from these actions, which are expected to be completed at the end of 2024, are approximately $21 million and are expected to benefit cost of sales of the North America and International segments. During the three months ended September 30, 20172023, Mattel recorded severance expense in connection with these actions of $25.3 million within other selling and 2016, respectively.administrative expenses in the consolidated statements of operations. Total expected cash charges in connection with these actions are approximately $30 to $35 million, which consist of severance and other restructuring costs. Total expected non-cash charges are approximately $6 million, which consist of accelerated depreciation expense. Additionally, Mattel recognized net discrete non-cash taxexpects to invest approximately $6 million in capital expenditures to support incremental production capabilities at Mattel's other manufacturing plants.
Additionally, in the first nine months of 2023, Mattel executed other cost savings actions not included in the Program to streamline its organizational structure. In connection with these actions, Mattel recorded severance expense of $561.5$6.1 million within other selling 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, primarily related to the establishment 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, respectively.


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 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 lossadministrative expenses 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 evidence and outweighs other positive subjective evidence, such as projectionsconsolidated statement 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 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. 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.operations.
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 issue with the applicable taxing authority could have a material impact on Mattel’s consolidated financial statements.
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 committed revolving credit facility (“Revolving Credit Facility”), commercial paper program,Facility, and issuancesaccess to capital markets to fund its operations and obligations. Such obligations may include capital expenditures, debt 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 $455.7 million in cash and equivalents at September 30, 2023, $195.5 million was held by foreign subsidiaries, including $51.5 million held in Russia. Mattel's cash held in Russia can be used within the country; however, its movement out of long-term debt securities. Russia is currently limited. 
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 Revolving Credit Facility covenants, or a deterioration of Mattel’sMattel's credit ratings. Mattel’s abilityHowever, based on Mattel's current business plan and factors known to conduct its operations could be negatively impacted should these or other adverse conditions affect its primary sources of liquidity.
Of Mattel’s $181.3 million indate, 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 Revolving Credit Facility, alternative forms of financing, and access to both long-termcapital markets will be sufficient to meet working capital and short-term publicoperating expenditure requirements for the next twelve months and private debt markets at competitive interest rates are available to fund domestic operations and obligations. If these sources are not adequate, Mattel also has 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.long-term.
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-termexisting cash and cash equivalents, cash flow from operations, and borrowing facility, and does not intend to sell commercial paper notes in excess of the available amount under the Revolving 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 financing to meet its short-term liquidity needs. As ofAt September 30, 2017, there were2023, Mattel had no amounts outstanding borrowings under the Revolving Credit Facility and approximately $9 million in outstanding letters of credit under the Revolving Credit Facility. As 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.
Market conditions could affect certain terms of other debt instruments that Mattel enters into from time to time.
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.
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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 collectibilitysupport the collectability 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.
OperatingCash Flow Activities
Cash flows used for operating activities were $740.1$79.6 million in the first nine months of 2017,2023, as compared to $331.3$274.8 million in the first nine months of 2016.2022. The cash flows used for operating activities increased primarilydecrease was due to a higher$335.1 million of lower working capital usage, partially offset by changes in net loss,income, excluding the impact of the establishment of a valuation allowance on foreign deferred tax assets of $212.4 millionand higher working capital usage.
Investing Activitiesother non-cash items.
Cash flows used for investing activities were $174.9$93.9 million in the first nine months of 2017,2023, as compared to $204.7$97.5 million in the first nine months of 2016.2022. The cash flows used for investing activities decreasedchange was primarily due to an increase inhigher net proceeds from foreign currency forward exchange contracts of $16.8 million and payments related to Fuhu and Sproutling in 2016,lower capital expenditures of $8.8 million, partially offset by higher capital spending.
Financing Activities
Cash flows provided by financing activities were $213.7lower proceeds from the sale of assets of $19.5 million in the first nine months of 2017, as compared to cash2023.
Cash flows used for financing activities of $43.2were $119.5 million in the first nine months of 2016.2023, as compared to $9.5 million in the first nine months of 2022. The increase in cash flows provided by financing activities was primarily driven by higher net short-term borrowings, partially offset by proceeds from long-term borrowingsdue to share repurchases of $109.9 million in 2016.


the first nine months of 2023.
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 8 to the lenders demonstrating a consolidated debt-to-consolidated EBITDA ratioConsolidated Financial Statements—Seasonal Financing" of 3.75this Quarterly Report on Form 10-Q.
Financial Position
Mattel's cash and equivalents decreased $305.5 million to 1.00 or less$455.7 million at September 30, 2023 from $761.2 million at December 31, 2022, primarily due to capital expenditures of $117.5 million, share repurchases of $109.9 million and cash flows used for the period consistingoperating activities of the preceding four consecutive fiscal quarters. The amendment further amends the Credit Facility to, among other items, (i) add certain restrictive covenants$79.6 million 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. 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.


Financial Position
Mattel’s2023. Mattel's cash and equivalents decreased $688.2increased $106.8 million to $181.3$455.7 million at September 30, 2017, as compared2023 from $349.0 million at September 30, 2022, primarily due to $869.5trailing twelve month cash flows generated from operating activities of $638.0 million, partially offset by the repayment of the $250.0 million aggregate principal amount of the 2013 Senior Notes due March 2023 in the fourth quarter of 2022, capital expenditures of $176.7 million in the trailing twelve months, and share repurchases of $109.9 million in the first nine months of 2023.
Accounts receivable increased $710.8 million to $1.57 billion at September 30, 2023 from $860.2 million at December 31, 2016. The decrease was primarily due to higher working capital usage, dividend payments, and purchases of tools, dies, and molds and other property, plant, and equipment, partially offset by net proceeds from short-term borrowings and proceeds from foreign currency forward exchange contracts.
Accounts receivable increased $390.9 million to $1.51 billion at September 30, 2017, as compared to $1.12 billion at December 31, 2016,2022, primarily due to the seasonality of Mattel's business. Accounts receivable decreased $22.7increased $189.5 million to $1.51$1.57 billion at September 30, 2017, as compared to $1.532023 from $1.38 billion at September 30, 2016,2022, primarily due to lower volume, including the impact of Toys “R” Us filing for bankruptcy, partially offset by a shiftincrease in the timing ofnet sales in the USthird quarter of 2023 compared to later in the quarter. Inventory increased $376.2prior year.
Inventories decreased $103.5 million to $990.0$790.5 million at September 30, 2017, as compared to $613.82023 from $894.1 million at December 31, 2016,2022, primarily due to lower-than-expectedhigher inventory production and cost inflation in 2022. Inventories decreased $293.2 million to $790.5 million at September 30, 2023 from $1.08 billion at September 30, 2022, primarily due to higher net sales volume in the first nine monthsthird quarter of 2017, including the impact2023, and higher inventory production and cost inflation in 2022.
Prepaid expenses and other current assets increased $11.3 million to $224.8 million at September 30, 2023 from $213.5 million at December 31, 2022, primarily due to increases in prepaid royalties. Prepaid expenses and other current assets decreased by $44.1 million to $224.8 million at September 30, 2023 from $268.9 million at September 30, 2022, primarily due to a decrease in derivative receivables of Toys “R” Us filing for bankruptcy.$31.4 million.
43

Accounts payable and accrued liabilities decreased $11.4increased $103.0 million to $1.25 billion at September 30, 2023 from $1.15 billion at December 31, 2022, primarily due to increases in accrued incentive compensation of $86.3 million and accrued interest of $26.6 million. Accounts payable and accrued liabilities decreased $22.6 million to $1.25 billion at September 30, 2023 from $1.28 billion at September 30, 2017,2022, primarily due to lower payables associated with inventory production, partially offset by an increase in accrued incentive compensation of $22.3 million.
A summary of Mattel's capitalization is as follows:
 September 30, 2023September 30, 2022December 31, 2022
 (In millions, except percentage information)
Cash and equivalents$455.7 $349.0 $761.2 
Short-term borrowings— — — 
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 2023— 250.0 — 
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(21.1)(25.5)(24.4)
Total debt2,328.9 53 %2,574.5 57 %2,325.6 53 %
Stockholders' equity2,035.5 47 1,967.5 43 2,056.3 47 
Total capitalization (debt plus equity)$4,364.4 100 %$4,541.9 100 %$4,381.9 100 %
Total debt, including short-term borrowings, was $2.33 billion at September 30, 2023, flat as compared to $1.29$2.33 billion at December 31, 2016. The decrease2022. Total debt, including short-term borrowings, was primarily due to lower advertising and promotion accruals, partially offset by tighter management of vendor disbursements.
Noncurrent long-term debt decreased to $1.89$2.33 billion at September 30, 20172023, as compared to $2.57 billion at September 30, 2022. The decrease was due to the repayment of the $250.0 million aggregate principal amount of the 2013 Senior Notes due March 2023 in the fourth quarter of 2022.
Stockholders' equity decreased $20.8 million to $2.04 billion at September 30, 2023 from $2.13$2.06 billion at December 31, 20162022, primarily due to share repurchases of $109.9 million, partially offset by net income of $67.0 million for the reclassificationfirst nine months of $250.0 million of 2013 Senior Notes due on March 15, 2018.
A summary of Mattel’s capitalization is as follows:
 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 borrowings2023 and the current portionnet effect of long-term debt,share based compensation and related issuance of treasury stock of $44.6 million. Stockholders' equity increased from 50.2%$68.0 million to $2.04 billion at September 30, 2016 to 66.6%2023 from $1.97 billion at September 30, 2017 as a result2022, primarily due to net income in the trailing twelve months of higher debt$83.2 million and lower stockholders’ equity.the net effect of share based compensation and related issuance of treasury stock of $57.7 million, partially offset by share repurchases of $109.9 million.
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 2022 Annual Report on Form 10-K and did not materially change during the first nine months of 2017, and are included in its Annual Report on Form 10-K for the year ended December 31, 2016.2023.
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.
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Non-GAAP Financial MeasuresMeasure
To supplement the financial results presented in accordance with generally accepted accounting principles in the United States (“GAAP”),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. Itrates and 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 currency 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 currency 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 are not associated with categories, brands, andor 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.products.
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:
 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 may impact Mattel’sMattel's results of operations and cash flows. Inventory transactions denominated in theThe Chinese yuan, Euro, Mexican peso, British pound sterling, Canadian dollar, Australian dollar, Brazilian real, and Russian ruble, areand Turkish lira were the primary transactionscurrencies that caused foreign currency transaction exposure for Mattel.Mattel during the first nine months of 2023. Mattel seeks to mitigate its exposure to marketforeign currency exchange 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/(income) expense, 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.

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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 nine months of 2017ended September 30, 2023 were related to its net investments in entities having functional currencies denominated in the Euro,Russian ruble, Mexican peso, British pound sterling, Brazilian real, and Mexican peso.Malaysian ringgit.
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 one percent change in the U.S. dollar would have been no material changesimpacted Mattel's third quarter net sales by approximately 0.3% and would have less than a $0.01 impact to the quantitative information about market risks as disclosed under Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in Mattel’s 2016 Annual Report on Form 10-K.Mattel's net income per share.
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.currency.
Argentina Operations
During March 2013, the Venezuelan government introducedthird quarter of 2021, Mattel began a complementary currency exchange system,process to liquidate its subsidiary in Argentina. The liquidation was substantially completed during the Sistema Complementario de Administración de Divisas 1 (“SICAD 1”). SICAD 1 was intendedfourth quarter of 2022. Prior 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 mergersubstantial completion of the SICAD 1liquidation, Mattel had recorded $45.4 million of currency translation adjustments in accumulated other comprehensive loss, net within its consolidated balance sheet. As a result of the substantially complete liquidation, the cumulative currency translation adjustments were removed from accumulated other comprehensive loss 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 berecognized as 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 inexpense within the consolidated statement of operations in the firstfourth quarter of 2016.2022.
Mattel’s Venezuelan 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% of Mattel's consolidated net sales in the first nine months of 2017.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of September 30, 2017, Mattel’s2023, Mattel's disclosure controls and procedures were evaluated, with the participation of Mattel’sMattel'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, Mattel’sYnon Kreiz, Mattel's principal executive officer, and Joseph J. Euteneuer, Mattel’sAnthony DiSilvestro, Mattel's principal financial officer, concluded that these disclosure controls and procedures were effective to provide reasonable assurance as of September 30, 2017.2023.
Changes in Internal Control Overover Financial Reporting
DuringThere were no changes in internal control over financial reporting that occurred during the quarter ended September 30, 2017, Mattel made no changes to its internal control over financial reporting2023 that have materially affected, or are reasonably likely to materially affect, itsMattel's internal control over financial reporting.



46

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.
There have been no material changes to the risk factors disclosed under Part I, Item 1A “Risk Factors”"Risk Factors" in Mattel’s 2016the 2022 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 third quarter of 2017,2023, Mattel did not sell any unregistered equity securities.
Issuer Purchases of Equity Securities
ThisThe following table provides certain information with respect to Mattel’sMattel's purchases of its common stock during the third quarter of 2017:2023:
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
Purchased (a)		Average Price Paid
per Share 		Total Number of Shares
Purchased as
Part of Publicly
Announced Plans or
Programs		Approximate Dollar 
Value of Shares that May Yet Be Purchased Under the Plans or Programs (b)
July 1-31573,509 $21.34 353,583 $145,600,081 
August 1-312,655,743 21.21 2,472,883 93,155,887 
September 1-3048,178 22.03 — 93,155,887 
Total3,277,430 $21.25 2,826,466 $93,155,887 
 ____________________________________
(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 includes 450,964 shares withheld from employees to satisfy minimum tax withholding obligations that occur upon settlement of equity awards, which 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 September 30, 2023, share repurchase authorizations of $93.2 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.

(a)Item 2.05 Costs Associated with Exit or Disposal Activities

The information set forth in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of                 Operations— Cost Savings Program— Other Cost Savings Actions" above is incorporated herein by reference.
(b)Not applicable.
(c)None.
47

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-K001-056473.1September 15, 2023
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 
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 September 30, 2023, formatted in Inline XBRL.

+*Management contract or compensatory plan or arrangement.Filed herewith.
**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.

48



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, 2017November 9, 2023



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