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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ___________________________________________________________ 
FORM 10-Q
 ___________________________________________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended
June 30, 2019
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)
___________________________________________________________ 
Delaware
 
95-1567322
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
333 Continental Blvd.
 
90245-5012
El Segundo,
CA
 
(Address of principal executive offices)
 
(Zip Code)
(310) 252-2000
(Registrant's telephone number, including area code)
(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 class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock, $1.00 per share
 
MAT
 
The 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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      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 accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
  
Accelerated filer
 
 
 
 
 
Non-accelerated filer
 
  
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  
Number of shares outstanding of registrant's common stock, $1.00 par value, as of July 12, 2019: 345,535,050 shares

1



MATTEL, INC. AND SUBSIDIARIES

 
 
Page
 
 
 
 
PART I
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  

2



(Cautionary Statement Under the Private Securities Litigation Reform Act of 1995)
Mattel is including this Cautionary Statement to caution investors and qualify for the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the "Act") for forward-looking statements. This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Act. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. The use of words such as "anticipates," "expects," "intends," "plans," "confident that," and "believes," among others, generally identify forward-looking statements.  These forward-looking statements are based on currently available operating, financial, economic and other information, and are subject to a number of significant risks and uncertainties. A variety of factors, many of which are beyond our 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's ability to design, develop, produce, manufacture, source, and ship products on a timely and cost-effective basis, as well as interest in and purchase of those products by retail customers and consumers in quantities and at prices that will be sufficient to profitably recover Mattel's costs; (ii) downturns in economic conditions affecting Mattel's markets which can negatively impact retail customers and consumers, and which can result in lower employment levels, lower consumer disposable income and spending, including lower spending on purchases of Mattel's products; (iii) 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) potential difficulties or delays Mattel may experience in implementing cost savings and efficiency enhancing initiatives; (v) other economic and public health conditions or regulatory changes in the markets in which Mattel and its customers and suppliers operate, which could create delays or increase Mattel's costs, such as higher commodity prices, labor costs or transportation costs, or outbreaks of disease; (vi) currency fluctuations, including movements in foreign exchange rates, which can lower Mattel's net revenues and earnings, and significantly impact Mattel's costs; (vii) the concentration of Mattel's customers, potentially increasing the negative impact to Mattel of difficulties experienced by any of Mattel's customers, including the bankruptcy and liquidation of Toys "R" Us, Inc., 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) the inventory policies of Mattel's retail customers, including retailers' potential decisions to lower their inventories, even if it results in lost sales, as well as the concentration of Mattel's revenues in the second half of the year, which coupled with reliance by retailers on quick response inventory management techniques increases the risk of underproduction of popular items, overproduction of less popular items and failure to achieve compressed shipping schedules; (x) the increased costs of developing more sophisticated digital and smart technology products, and the corresponding supply chain and design challenges associated with such products; (xi) work disruptions, which may impact Mattel's ability to manufacture or deliver product in a timely and cost-effective manner; (xii) the bankruptcy and liquidation of Toys "R" Us, Inc. or other of Mattel's significant retailers, or the general lack of success of one of Mattel's significant retailers which could negatively impact Mattel's revenues or bad debt exposure; (xiii) the impact of competition on revenues, margins, and other aspects of Mattel's business, including the ability to offer products which consumers choose to buy instead of competitive products, the ability to secure, maintain and renew popular licenses and the ability to attract and retain talented employees; (xiv) the risk of product recalls or product liability suits and costs associated with product safety regulations; (xv) changes in laws or regulations in the United States and/or in other major markets, such as China, in which Mattel operates, including, without limitation, with respect to taxes, tariffs, trade policies, or product safety, which may increase Mattel's product costs and other costs of doing business, and reduce Mattel's earnings; (xvi) failure to realize the planned benefits from any investments or acquisitions made by Mattel; (xvii) the impact of other market conditions, third party actions or approvals and competition which could reduce demand for Mattel's products or delay or increase the cost of implementation of Mattel's programs or alter Mattel's actions and reduce actual results; (xviii) changes in financing markets or the inability of Mattel to obtain financing on attractive terms; (xix) the impact of litigation or arbitration decisions or settlement actions; (xx) uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; and (xxi) other risks and uncertainties detailed in Part 1, Item 1A "Risk Factors" in Mattel's 2018 Annual Report on Form 10-K. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so, except as required by law.

3



PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
June 30,
2019
 
June 30,
2018
 
December 31,
2018
 
(Unaudited; in thousands, except share data)
ASSETS
 
 
 
 
 
Current Assets
 
 
 
 
 
Cash and equivalents
$
194,125

 
$
228,606

 
$
594,481

Accounts receivable, net
755,698

 
780,064

 
970,083

Inventories
722,394

 
715,288

 
542,889

Prepaid expenses and other current assets
243,305

 
327,297

 
244,987

Total current assets
1,915,522

 
2,051,255

 
2,352,440

Noncurrent Assets
 
 
 
 
 
Property, plant, and equipment, net
595,838

 
719,747

 
657,595

Right-of-use assets, net
317,085

 

 

Goodwill
1,386,057

 
1,390,076

 
1,386,424

Other noncurrent assets
832,127

 
892,364

 
847,006

Total Assets
$
5,046,629

 
$
5,053,442

 
$
5,243,465

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
Current Liabilities
 
 
 
 
 
Short-term borrowings
$
45,000

 
$
80,000

 
$
4,176

Accounts payable
416,430

 
428,741

 
537,965

Accrued liabilities
590,532

 
585,585

 
700,421

Income taxes payable
22,618

 
3,119

 
10,046

Total current liabilities
1,074,580

 
1,097,445

 
1,252,608

Noncurrent Liabilities
 
 
 
 
 
Long-term debt
2,855,194

 
2,848,177

 
2,851,723

Noncurrent lease liabilities
284,947

 

 

Other noncurrent liabilities
410,571

 
443,849

 
469,669

Total noncurrent liabilities
3,550,712

 
3,292,026

 
3,321,392

Stockholders' Equity
 
 
 
 
 
Common stock $1.00 par value, 1.0 billion shares authorized; 441.4 million shares issued
441,369

 
441,369

 
441,369

Additional paid-in capital
1,831,952

 
1,820,432

 
1,812,682

Treasury stock at cost: 95.9 million shares, 97.2 million shares, and 96.1 million shares, respectively
(2,349,874
)
 
(2,381,777
)
 
(2,354,617
)
Retained earnings
1,337,552

 
1,608,025

 
1,629,257

Accumulated other comprehensive loss
(839,662
)
 
(824,078
)
 
(859,226
)
Total stockholders' equity
421,337

 
663,971

 
669,465

Total Liabilities and Stockholders' Equity
$
5,046,629

 
$
5,053,442

 
$
5,243,465

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

4



MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
For the Three Months Ended
 
For the Six Months Ended
June 30,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
 
(Unaudited; in thousands, except per share amounts)
Net Sales
$
860,063

 
$
840,748

 
$
1,549,309

 
$
1,549,120

Cost of sales
518,679

 
587,546

 
968,135

 
1,077,045

Gross Profit
341,384

 
253,202

 
581,174

 
472,075

Advertising and promotion expenses
84,489

 
82,393

 
153,954

 
153,230

Other selling and administrative expenses
308,311

 
360,000

 
609,595

 
784,617

Operating Loss
(51,416
)
 
(189,191
)
 
(182,375
)
 
(465,772
)
Interest expense
46,234

 
43,467

 
93,192

 
84,546

Interest (income)
(1,532
)
 
(1,699
)
 
(3,804
)
 
(4,846
)
Other non-operating (income) expense, net
(294
)
 
3,063

 
1,610

 
2,455

Loss Before Income Taxes
(95,824
)
 
(234,022
)
 
(273,373
)
 
(547,927
)
Provision for income taxes
12,163

 
6,909

 
18,332

 
4,257

Net Loss
$
(107,987
)
 
$
(240,931
)
 
$
(291,705
)
 
$
(552,184
)
Net Loss Per Common Share - Basic
$
(0.31
)
 
$
(0.70
)
 
$
(0.84
)
 
$
(1.60
)
Weighted average number of common shares
345,941

 
344,584

 
345,946

 
344,507

Net Loss Per Common Share - Diluted
$
(0.31
)
 
$
(0.70
)
 
$
(0.84
)
 
$
(1.60
)
Weighted average number of common and potential common shares
345,941

 
344,584

 
345,946

 
344,507


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

5



MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 
For the Three Months Ended
 
For the Six Months Ended
 
June 30,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
 
(Unaudited; in thousands)
Net Loss
$
(107,987
)
 
$
(240,931
)
 
$
(291,705
)
 
$
(552,184
)
Other Comprehensive (Loss) Income, Net of Tax

 

 

 

Currency translation adjustments
(1,170
)
 
(105,727
)
 
12,963

 
(63,738
)
Defined benefit pension plan adjustments
624

 
1,069

 
847

 
2,685

Net unrealized losses on available-for-sale security
(1,944
)
 
(2,709
)
 
(67
)
 
(2,789
)
Net unrealized gains on derivative instruments:

 

 

 

Unrealized holding gains
3,254

 
17,652

 
9,072

 
12,333

Reclassification adjustment for realized (losses) gains included in net loss
(2,492
)
 
4,786

 
(3,251
)
 
9,217

 
762

 
22,438

 
5,821

 
21,550

Other Comprehensive (Loss) Income, Net of Tax
(1,728
)
 
(84,929
)
 
19,564

 
(42,292
)
Comprehensive Loss
$
(109,715
)
 
$
(325,860
)
 
$
(272,141
)
 
$
(594,476
)

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

6



MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Six Months Ended
June 30,
2019
 
June 30,
2018
 
(Unaudited; in thousands)
Cash Flows From Operating Activities:
 
 
 
Net loss
$
(291,705
)
 
$
(552,184
)
Adjustments to reconcile net loss to net cash flows used for operating activities:
 
 
 
Depreciation
103,580

 
117,440

Amortization
20,338

 
19,730

Asset impairments
6,845

 
11,913

Share-based compensation
24,310

 
22,417

Bad debt expense
2,487

 
52,935

Inventory obsolescence
35,351

 
45,394

Deferred income taxes
36

 
(827
)
Increase (decrease) from changes in assets and liabilities:
 
 
 
Accounts receivable
222,823

 
274,306

Inventories
(207,984
)
 
(184,950
)
Prepaid expenses and other current assets
146

 
(27,784
)
Accounts payable, accrued liabilities, and income taxes payable
(307,889
)
 
(328,998
)
Other, net
(8,857
)
 
(6,001
)
Net cash flows used for operating activities
(400,519
)
 
(556,609
)
Cash Flows From Investing Activities:
 
 
 
Purchases of tools, dies, and molds
(20,933
)
 
(36,793
)
Purchases of other property, plant, and equipment
(27,248
)
 
(41,498
)
Proceeds from (payments for) foreign currency forward exchange contracts, net
3,992

 
(12,577
)
Other, net
484

 
5,685

Net cash flows used for investing activities
(43,705
)
 
(85,183
)
Cash Flows From Financing Activities:
 
 
 
Proceeds from short-term borrowings, net
40,824

 
80,000

Payments of long-term borrowings

 
(750,000
)
Proceeds from long-term borrowings, net

 
475,550

Other, net
(158
)
 
(3,548
)
Net cash flows provided by (used for) financing activities
40,666

 
(197,998
)
Effect of Currency Exchange Rate Changes on Cash
3,202

 
(10,825
)
Decrease in Cash and Equivalents
(400,356
)
 
(850,615
)
Cash and Equivalents at Beginning of Period
594,481

 
1,079,221

Cash and Equivalents at End of Period
$
194,125

 
$
228,606

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, 2018
$
441,369

 
$
1,812,682

 
$
(2,354,617
)
 
$
1,629,257

 
$
(859,226
)
 
$
669,465

Net loss

 

 

 
(183,718
)
 

 
(183,718
)
Other comprehensive income, net of tax

 

 

 

 
21,292

 
21,292

Issuance of treasury stock for restricted stock units vesting

 
(1,829
)
 
1,442

 

 

 
(387
)
Share-based compensation

 
11,865

 

 

 

 
11,865

Balance, March 31, 2019
441,369

 
1,822,718

 
(2,353,175
)
 
1,445,539

 
(837,934
)
 
518,517

Net loss

 

 

 
(107,987
)
 

 
(107,987
)
Other comprehensive loss, net of tax

 

 

 

 
(1,728
)
 
(1,728
)
Issuance of treasury stock for restricted stock units vesting

 
(3,060
)
 
3,025

 

 

 
(35
)
Deferred compensation

 
(151
)
 
276

 

 

 
125

Share-based compensation

 
12,445

 

 

 

 
12,445

Balance, June 30, 2019
$
441,369

 
$
1,831,952

 
$
(2,349,874
)
 
$
1,337,552

 
$
(839,662
)
 
$
421,337

 
 
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Stockholders'
Equity
 
(Unaudited; in thousands)
Balance, December 31, 2017
$
441,369

 
$
1,808,391

 
$
(2,389,877
)
 
$
2,179,358

 
$
(781,786
)
 
$
1,257,455

Cumulative effect of accounting change

 

 

 
(19,148
)
 

 
(19,148
)
Net loss

 

 

 
(311,253
)
 

 
(311,253
)
Other comprehensive income, net of tax

 

 

 

 
42,637

 
42,637

Issuance of treasury stock for restricted stock units vesting

 
(5,675
)
 
4,027

 

 

 
(1,648
)
Share-based compensation

 
14,423

 

 

 

 
14,423

Balance, March 31, 2018
441,369

 
1,817,139

 
(2,385,850
)
 
1,848,957

 
(739,149
)
 
982,466

Net loss

 

 

 
(240,931
)
 

 
(240,931
)
Other comprehensive loss, net of tax

 

 

 

 
(84,929
)
 
(84,929
)
Issuance of treasury stock for restricted stock units vesting

 
(4,624
)
 
3,872

 

 

 
(752
)
Deferred compensation

 
(77
)
 
201

 

 

 
124

Share-based compensation

 
7,994

 

 

 

 
7,994

Balance, June 30, 2018
$
441,369

 
$
1,820,432

 
$
(2,381,777
)
 
$
1,608,025

 
$
(824,078
)
 
$
663,971

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
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") 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 statement of the financial position and interim results of Mattel, Inc. and its subsidiaries ("Mattel") as of and for the periods presented have been included.
Mattel adopted Accounting Standards Update ("ASU") No. 2016-02—Leases (Topic 842) and its related amendments (collectively "the new lease standard") on January 1, 2019 using the modified retrospective transition method. Prior periods were not retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods, as further discussed in "Note 5 to the Consolidated Financial Statements—Leases."
Mattel modified its reporting structure for revenues and reorganized its regional sales reporting structure in the first quarter of 2019. Prior period amounts have been reclassified to conform to the current period presentation, as further discussed in "Note 23 to the Consolidated Financial Statements—Segment Information."
The December 31, 2018 balance sheet data was derived from audited financial statements; however, the accompanying interim notes to the consolidated financial statements do not include all 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's consolidated financial statements and related notes in its 2018 Annual Report on Form 10-K.
2.
Accounts Receivable
Accounts receivable are net of allowances for doubtful accounts of $21.3 million, $21.0 million, and $22.0 million as of June 30, 2019June 30, 2018, and December 31, 2018, respectively.
3.
Inventories
Inventories include the following:
 
June 30,
2019
 
June 30,
2018
 
December 31,
2018
 
(In thousands)
Raw materials and work in process
$
129,937

 
$
130,093

 
$
115,966

Finished goods
592,457

 
585,195

 
426,923

 
$
722,394

 
$
715,288

 
$
542,889



9



4.
Property, Plant, and Equipment
Property, plant, and equipment, net includes the following: 
 
June 30,
2019
 
June 30,
2018
 
December 31,
2018
 
(In thousands)
Land
$
25,133

 
$
25,030

 
$
25,023

Buildings
298,768

 
296,672

 
294,227

Machinery and equipment
873,294

 
887,496

 
875,308

Software
409,209

 
385,284

 
400,488

Tools, dies, and molds
818,166

 
867,997

 
831,743

Capital leases

 
23,927

 
23,927

Leasehold improvements
237,150

 
241,275

 
240,636


2,661,720

 
2,727,681

 
2,691,352

Less: accumulated depreciation
(2,065,882
)
 
(2,007,934
)
 
(2,033,757
)
 
$
595,838

 
$
719,747

 
$
657,595


5.
Leases
Mattel adopted the new lease standard on January 1, 2019 using the modified retrospective transition method. Prior periods were not retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods. Mattel elected the package of practical expedients, permitted under the transition guidance within the new lease standard, which among other things, allowed Mattel to continue to account for existing leases based on the historical lease classification. Mattel also elected the practical expedients to exclude right-of-use ("ROU") assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet, and to combine lease and non-lease components for property leases, which primarily relate to ancillary expenses such as common area maintenance charges and management fees.
Mattel determines if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Mattel's leases are primarily related to property leases for its retail stores, warehouses, and corporate offices. Mattel's leases have remaining lease terms of up to 14 years, and often include one or more options to renew for up to 10 years. Renewal and termination options are included in the lease term when it is reasonably certain that Mattel will exercise the option.
In addition, certain of Mattel's lease agreements include contingent rental payments based on a percentage of sales. Contingent rental expense is recorded in the period in which the contingent event becomes probable. Mattel's lease agreements do not contain any material residual guarantees or material restrictive covenants.
ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As substantially all of Mattel's leases do not provide an implicit rate, Mattel uses its incremental borrowing rate, based on the information available at the lease commencement date, to determine the present value of lease payments. Based on the present value of lease payments for Mattel's existing leases, Mattel recorded net lease assets and lease liabilities of approximately $343 million and $390 million, respectively, upon adoption. The net lease assets were adjusted for deferred rent, lease incentives, and prepaid rent. Mattel had no material finance leases. The new lease standard did not materially impact Mattel's consolidated statements of operations and had no impact on Mattel's consolidated statements of cash flows.

10


The impact of the new lease standard on the June 30, 2019 consolidated balance sheet was as follows:
 
June 30,
2019
 
(In thousands, except years and percentage information)
Right-of-use assets, net
$
317,085

 
 
Accrued liabilities
$
75,071

Noncurrent lease liabilities
284,947

Total lease liabilities
$
360,018

 
 
Weighted average remaining lease term
6.7 years

 
 
Weighted average discount rate
8.1
%

Operating lease costs are recognized on a straight-line basis over the lease term. Total operating lease costs for the three months ended June 30, 2019 were $35.2 million, which included approximately $10 million related to short-term and variable lease costs. Total operating lease costs for the six months ended June 30, 2019 were $69.2 million, which included approximately $20 million related to short-term and variable lease costs.
Supplemental information related to leases was as follows:
 
For the Three Months Ended
June 30, 2019
 
For the Six Months Ended
June 30, 2019
 
(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities
$
26,743

 
$
53,169

Right-of-use assets obtained in exchange for new operating lease liabilities
$
6,617

 
$
7,431


The following table shows the future maturities of lease liabilities for leases in effect as of June 30, 2019:
Years Ending December 31,
 
Lease Liabilities
 
 
(In thousands)
2019 (excluding the six months ended June 30, 2019)
 
$
51,442

2020
 
93,318

2021
 
78,005

2022
 
57,874

2023
 
43,129

Thereafter
 
151,103

 
 
474,871

Less: imputed interest
 
(114,853
)
 
 
$
360,018



11


As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease standard (Topic 840), future minimum obligations under lease commitments in effect at December 31, 2018 were as follows:
 
Capital
Leases
 
Operating
Leases
 
(In thousands)
2019
$
294

  
$
110,794

2020
25

  
83,566

2021

  
72,606

2022

  
59,191

2023

  
56,123

Thereafter

  
133,716

 
$
319

(a) 
$
515,996


_______________________________________
(a)
Includes minimal imputed interest.
Rental expense under operating leases were $127.1 million for 2018.
6.
Goodwill
Goodwill is allocated to various reporting units, which are at the operating segment level, for the purpose of evaluating whether goodwill is impaired. Mattel's reporting units are: (i) North America, (ii) International, and (iii) American Girl. Mattel tests its goodwill for impairment annually in the third quarter and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value.
The change in the carrying amount of goodwill by operating segment for the six months ended June 30, 2019 is shown below. Brand-specific goodwill held by foreign subsidiaries is allocated to the North America segment, thereby causing a foreign currency translation impact.
 
December 31,
2018
 
Currency
Exchange Rate
Impact
 
June 30,
2019
 
(In thousands)
North America
$
731,234

 
$
(157
)
 
$
731,077

International
447,619

 
(210
)
 
447,409

American Girl
207,571

 

 
207,571

 
$
1,386,424

 
$
(367
)
 
$
1,386,057


7.
Other Noncurrent Assets
Other noncurrent assets include the following: 
 
June 30,
2019
 
June 30,
2018
 
December 31,
2018
 
(In thousands)
Identifiable intangible assets (net of accumulated amortization of $228.2 million, $179.5 million, and $207.9 million, respectively)
$
566,737

 
$
612,234

 
$
587,528

Deferred income taxes
49,937

 
74,992

 
49,937

Other
215,453

 
205,138

 
209,541

 
$
832,127

 
$
892,364

 
$
847,006


Mattel's amortizable intangible assets primarily consist of trademarks. Mattel tests its amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Mattel's amortizable intangible assets were not impaired during the three and six months ended June 30, 2019. During the three months ended June 30, 2018, Mattel discontinued the use of certain brands and products, which resulted in $4.3 million of asset impairments.

12



8.
Accrued Liabilities
Accrued liabilities include the following: 
 
June 30,
2019
 
June 30,
2018
 
December 31,
2018
 
(In thousands)
Current lease liabilities
$
75,071

 
$

 
$

Royalties
62,781

 
63,453

 
108,109

Advertising and promotion
58,276

 
45,864

 
86,935

Taxes other than income taxes
26,529

 
27,819

 
54,317

Other
367,875

 
448,449

 
451,060

 
$
590,532

 
$
585,585

 
$
700,421


9.
Seasonal Financing
On December 20, 2017, Mattel, Inc. entered into a syndicated facility agreement (as amended, the "Credit Agreement"), as a borrower thereunder (in such capacity, the "Borrower"), along with certain of the Borrower's other subsidiaries as additional borrowers and/or guarantors thereunder, providing for $1.60 billion in aggregate principal amount of senior secured revolving credit facilities (the "senior secured revolving credit facilities"), consisting of (i) an asset based lending facility with aggregate commitments of $1.31 billion, subject to borrowing base capacity, secured by substantially all of the accounts receivable and inventory of the Borrower and its subsidiaries who are borrowers and/or guarantors under the Credit Agreement, as well as (ii) a revolving credit facility with $294.0 million in aggregate commitments secured by certain fixed assets and intellectual property and various equity interests in the borrower and guarantor subsidiaries under the Credit Agreement. The senior secured revolving credit facilities will mature on June 1, 2021.
Borrowings under the senior secured revolving credit facilities will (i) be limited by jurisdiction-specific borrowing base calculations based on the sum of specified percentages of eligible accounts receivable, eligible inventory and certain fixed assets and intellectual property, as applicable, minus the amount of any applicable reserves, and (ii) bear interest at a floating rate, which can be either, at the Borrower's option, (a) an adjusted LIBOR rate plus an applicable margin ranging from 1.25% to 3.00% per annum or (b) an alternate base rate plus an applicable margin ranging from 0.25% to 2.00% per annum, in each case, such applicable margins to be determined based on the Borrower's average borrowing availability remaining under the senior secured revolving credit facilities.
In addition to paying interest on the outstanding principal under the senior secured revolving credit facilities, the Borrower will be required to pay (i) an unused line fee per annum of the average daily unused portion of the senior secured revolving credit facilities, (ii) a letter of credit fronting fee based on a percentage of the aggregate face amount of outstanding letters of credit, and (iii) certain other customary fees and expenses of the lenders and agents.
Mattel had borrowings under the senior secured revolving credit facilities of approximately $45 million and $80 million as of June 30, 2019 and June 30, 2018, respectively and had no borrowings under the senior secured revolving credit facilities as of December 31, 2018. Outstanding letters of credit under the senior secured revolving credit facilities totaled approximately $70 million, $42 million, and $89 million as of June 30, 2019, June 30, 2018, and December 31, 2018, respectively.
The Credit Agreement contains customary covenants, including, but not limited to, restrictions on the Borrower's and its subsidiaries' ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances, or investments, pay dividends, sell or otherwise transfer assets outside of the ordinary course, optionally prepay or modify terms of any junior indebtedness, enter into transactions with affiliates, or change their line of business.
The Credit Agreement requires the maintenance of a fixed charge coverage ratio of 1.00 to 1.00 at the end of each fiscal quarter when excess availability under the senior secured revolving credit facilities is less than the greater of (x) $100 million and (y) 10% of the aggregate amount available thereunder (the "Availability Threshold") and on the last day of each subsequent fiscal quarter ending thereafter until no event of default exists and excess availability is greater than the Availability Threshold for at least 30 consecutive days.

13



Since the execution of the Credit Agreement, the fixed charge coverage ratio covenant has not been in effect as no event of default has occurred and as Mattel's excess availability has been greater than $100 million and the Availability Threshold. As of June 30, 2019, Mattel was in compliance with all covenants contained in the Credit Agreement. The Credit Agreement is a material agreement, and failure to comply with the covenants may result in an event of default under the terms of the senior secured revolving credit facilities. If Mattel were to default under the terms of the senior secured revolving credit facilities, its ability to meet its seasonal financing requirements could be adversely affected.
10.
Long-Term Debt
Long-term debt includes the following:
 
June 30,
2019
 
June 30,
2018
 
December 31,
2018
 
(In thousands)
2010 Senior Notes due October 2020 and October 2040
$
500,000

 
$
500,000

 
$
500,000

2011 Senior Notes due November 2041
300,000

 
300,000

 
300,000

2013 Senior Notes due March 2023
250,000

 
250,000

 
250,000

2016 Senior Notes due August 2021
350,000

 
350,000

 
350,000

2017/2018 Senior Notes due December 2025
1,500,000

 
1,500,000

 
1,500,000

Debt issuance costs and debt discount
(44,806
)
 
(51,823
)
 
(48,277
)

2,855,194

 
2,848,177

 
2,851,723

Less: current portion

 

 


$
2,855,194

 
$
2,848,177

 
$
2,851,723



11.
Other Noncurrent Liabilities
Other noncurrent liabilities include the following:
 
June 30,
2019
 
June 30,
2018
 
December 31,
2018
 
(In thousands)
Benefit plan liabilities
$
184,220

 
$
179,473

 
$
166,289

Noncurrent tax liabilities
138,018

 
122,425

 
150,960

Other
88,333

 
141,951

 
152,420

 
$
410,571

 
$
443,849

 
$
469,669



14



12.
Accumulated Other Comprehensive Income (Loss)
The following tables present changes in the accumulated balances for each component of other comprehensive income (loss), including current period other comprehensive income (loss) and reclassifications out of accumulated other comprehensive income (loss):
 
For the Three Months Ended June 30, 2019
 
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 March 31, 2019
$
16,470

 
$
(4,670
)
 
$
(142,540
)
 
$
(707,194
)
 
$
(837,934
)
Other comprehensive income (loss) before reclassifications
3,254

 
(1,944
)
 
(618
)
 
(1,170
)
 
(478
)
Amounts reclassified from accumulated other comprehensive income (loss)
(2,492
)
 

 
1,242

 

 
(1,250
)
Net increase (decrease) in other comprehensive income (loss)
762

 
(1,944
)
 
624

 
(1,170
)
 
(1,728
)
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of June 30, 2019
$
17,232

 
$
(6,614
)
 
$
(141,916
)
 
$
(708,364
)
 
$
(839,662
)
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 30, 2019
 
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, 2018
$
11,411

 
$
(6,547
)
 
$
(142,763
)
 
$
(721,327
)
 
$
(859,226
)
Other comprehensive income (loss) before reclassifications
9,072

 
(67
)
 
(1,824
)