SEC Filing | Mattel, Inc.

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mat-20220331

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			March 31, 2022


☐			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)

NONE

(Former name, former address and former fiscal year, if changed since last report):

__________________________________________________________

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 April 20, 2022: 352,493,840 shares

MATTEL, INC. AND SUBSIDIARIES


		Page

	PART I

Item 1.	Financial Statements	4

	Consolidated Balance Sheets	5

	Consolidated Statements of Operations	6

	Consolidated Statements of Comprehensive Income (Loss)	7

	Consolidated Statements of Cash Flows	8

	Consolidated Statements of Stockholders' Equity	9

	Notes to Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42

Item 4.	Controls and Procedures	43

	PART II

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	46

	Signature	47

(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," "believes," and "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 Mattel's control, could cause actual future results to differ materially from those projected in the forward-looking statements, and are currently, and in the future may be, amplified by the COVID-19 pandemic. Specific factors that might cause such a difference include, but are not limited to: (i) potential impacts of and uncertainty regarding the COVID-19 pandemic (and actions taken in response to it by governments, businesses, and individuals) on Mattel's business operations, financial results and financial position and on the global economy, including its impact on Mattel's sales; (ii) Mattel’s ability to design, develop, produce, manufacture, source, ship, and distribute products on a timely and cost-effective basis; (iii) sufficient interest in and demand for the products and entertainment Mattel offers by retail customers and consumers to profitably recover Mattel’s costs; (iv) downturns in economic conditions affecting Mattel’s markets which can negatively impact retail customers and consumers, and which can result in lower employment levels and lower consumer disposable income and spending, including lower spending on purchases of Mattel’s products; (v) other factors which can lower discretionary consumer spending, such as higher costs for fuel and food, drops in the value of homes or other consumer assets, and high levels of consumer debt; (vi) potential difficulties or delays Mattel may experience in implementing cost savings and efficiency enhancing initiatives; (vii) other economic and public health conditions or regulatory changes in the markets in which Mattel and its customers and suppliers operate, which could create delays or increase Mattel’s costs, such as higher commodity prices, labor costs or transportation costs, or outbreaks of disease; (viii) inflation and currency fluctuations, including movements in foreign exchange rates, which can lower Mattel’s net revenues and earnings, and significantly impact Mattel’s costs; (ix) the concentration of Mattel’s customers, potentially increasing the negative impact to Mattel of difficulties experienced by any of Mattel’s customers, such as bankruptcies or liquidations or a general lack of success, or changes in their purchasing or selling patterns; (x) the inventory policies of Mattel’s retail customers, 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, overproduction, and shipping delays; (xi) legal, reputational, and financial risks related to security breaches or cyberattacks; (xii) work disruptions, including as a result of supply chain disruption such as plant and port closures, which may impact Mattel’s ability to manufacture or deliver product in a timely and cost-effective manner; (xiii) the impact of competition on revenues, margins, and other aspects of Mattel’s business, including the ability to offer products that 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 and adapt to evolving workplace models; (xiv) the risk of product recalls or product liability suits and costs associated with product safety regulations; (xv) changes in laws or regulations in the United States and/or in other major markets, such as China, in which Mattel operates, including, without limitation, with respect to taxes, tariffs, trade policies, or product safety, which may increase Mattel’s product costs and other costs of doing business, and reduce Mattel’s earnings; (xvi) business disruptions or other unforeseen impacts due to economic instability, political instability, civil unrest, armed hostilities (including the impact of the war in Ukraine), natural and man-made disasters, or other catastrophic events; (xvii) failure to realize the planned benefits from any investments or acquisitions made by Mattel; (xviii) the impact of other market conditions or third party actions or approvals, including those that result in any significant failure, inadequacy, or interruption from vendors or outsourcers, which could reduce demand for Mattel’s products, delay or increase the cost of implementation of Mattel’s programs, or alter Mattel’s actions and reduce actual results; (xix) changes in financing markets or the inability of Mattel to obtain financing on attractive terms; (xx) the impact of litigation, arbitration, or regulatory 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 cryptocurrency; (xxii) uncertainty from the expected discontinuance of London Interbank Offer Rate ("LIBOR") and transition to any other interest rate benchmark; and (xxiii) other risks and uncertainties detailed in Part I, Item 1A "Risk Factors" in Mattel's 2021 Annual Report on Form 10-K (the "2021 Annual Report on Form 10-K"), Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q, and subsequent periodic filings. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so, except as required by law.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	March 31, 2022		March 31, 2021		December 31, 2021
	(Unaudited; in thousands, except share data)
ASSETS
Current Assets
Cash and equivalents	$	536,631	$	615,238	$	731,362
Accounts receivable, net of allowances for credit losses of $13.1 million, $13.1 million and $10.7 million, respectively	862,236		680,642		1,072,684
Inventories	969,166		626,469		777,184
Prepaid expenses and other current assets	267,666		187,186		293,299
Total current assets	2,635,699		2,109,535		2,874,529
Noncurrent Assets
Property, plant, and equipment, net	451,981		451,001		455,966
Right-of-use assets, net	339,681		294,819		325,484
Goodwill	1,387,137		1,392,289		1,390,207
Deferred income tax assets	515,004		71,157		526,906
Intangible assets, net	463,752		509,844		476,858
Other noncurrent assets	354,113		290,305		343,944
Total Assets	$	6,147,367	$	5,118,950	$	6,393,894
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings	$	—	$	878	$	—
Current portion of long-term debt	250,000		—		—
Accounts payable	478,643		361,902		579,152
Accrued liabilities	799,357		689,686		991,592
Income taxes payable	16,710		30,106		27,509
Total current liabilities	1,544,710		1,082,572		1,598,253
Noncurrent Liabilities
Long-term debt	2,322,150		2,837,732		2,570,992
Noncurrent lease liabilities	296,387		255,670		283,626
Other noncurrent liabilities	366,053		452,411		372,174
Total noncurrent liabilities	2,984,590		3,545,813		3,226,792
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	1,804,761		1,836,958		1,832,144
Treasury stock at cost: 88.9 million shares, 92.6 million shares and 90.7 million shares, respectively	(2,176,904)		(2,267,961)		(2,219,990)
Retained earnings	2,475,250		1,441,225		2,456,597
Accumulated other comprehensive loss	(926,409)		(961,026)		(941,271)
Total stockholders’ equity	1,618,067		490,565		1,568,849
Total Liabilities and Stockholders’ Equity	$	6,147,367	$	5,118,950	$	6,393,894

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

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Three Months Ended
	March 31, 2022		March 31, 2021
	(Unaudited; in thousands, except per share amounts)
Net Sales	$	1,041,301	$	874,192
Cost of sales	558,406		462,355
Gross Profit	482,895		411,837
Advertising and promotion expenses	73,752		74,096
Other selling and administrative expenses	329,076		303,870
Operating Income	80,067		33,871
Interest expense	33,049		130,482
Interest (income)	(1,202)		(820)
Other non-operating expense (income), net	9,112		(1,086)
Income (Loss) Before Income Taxes	39,108		(94,705)
Provision for income taxes	23,910		20,305
(Income) from equity method investments	(6,256)		(2,625)
Net Income (Loss)	$	21,454	$	(112,385)
Net Income (Loss) Per Common Share - Basic	$	0.06	$	(0.32)
Weighted-average number of common shares	352,215		349,041
Net Income (Loss) Per Common Share - Diluted	$	0.06	$	(0.32)
Weighted-average number of common and potential common shares	359,003		349,041

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

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	For the Three Months Ended
	March 31, 2022		March 31, 2021
	(Unaudited; in thousands)
Net Income (Loss)	$	21,454	$	(112,385)
Other Comprehensive Income (Loss), Net of Tax
Currency translation adjustments	921		(28,133)
Employee benefit plan adjustments	1,387		2,348
Available-for-sale security adjustments	3,646		1,964
Net unrealized gains on derivative instruments:
Unrealized holding gains	7,464		10,101
Reclassification adjustments included in net income (loss)	(1,357)		(2,730)
	6,107		7,371
Other Comprehensive Income (Loss), Net of Tax	12,061		(16,450)
Comprehensive Income (Loss)	$	33,515	$	(128,835)

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

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Three Months Ended
	March 31, 2022		March 31, 2021
	(Unaudited; in thousands)
Cash Flows From Operating Activities:
Net Income (Loss)	$	21,454	$	(112,385)
Adjustments to reconcile net income (loss) to net cash flows used for operating activities:
Depreciation	35,888		36,533
Amortization	9,325		9,514
Share-based compensation	19,323		15,112
Bad debt expense	3,221		237
Inventory obsolescence	11,967		10,892

Deferred income taxes	10,398		1,851
(Income) from equity method investments	(6,256)		(2,625)
Loss on extinguishment of long-term borrowings	—		83,213
(Gain) on sale of assets/business, net	(276)		(20,710)

Changes in assets and liabilities:
Accounts receivable	209,044		338,305
Inventories	(203,245)		(137,936)
Prepaid expenses and other current assets	(46,232)		(12,943)
Accounts payable, accrued liabilities, and income taxes payable	(210,015)		(257,126)
Other, net	1,608		12,344
Net cash flows used for operating activities	(143,796)		(35,724)
Cash Flows From Investing Activities:
Purchases of tools, dies, and molds	(19,378)		(18,171)
Purchases of other property, plant, and equipment	(16,653)		(17,628)
Payments of foreign currency forward exchange contracts, net	(19,298)		(3,245)
Proceeds from sale of assets/business	346		39,861

Net cash flows (used for) provided by investing activities	(54,983)		817
Cash Flows From Financing Activities:
Payments of short-term borrowings, net	—		(91)
Payments of long-term borrowings	—		(1,287,022)
Proceeds from long-term borrowings, net	—		1,188,000
Tax withholdings for share-based compensation	(17,555)		(6,966)
Proceeds from stock option exercises	13,935		1,110
Other, net	(593)		(736)
Net cash flows used for financing activities	(4,213)		(105,705)
Effect of Currency Exchange Rate Changes on Cash and Equivalents	8,261		(6,331)
Decrease in Cash and Equivalents	(194,731)		(146,943)
Cash and Equivalents at Beginning of Period	731,362		762,181
Cash and Equivalents at End of Period	$	536,631	$	615,238

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

MATTEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


	Common Stock		Additional Paid-In Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	(Unaudited; in thousands)
Balance, December 31, 2021	$	441,369	$	1,832,144	$	(2,219,990)	$	2,456,597	$	(941,271)	$	1,568,849
Net income	—		—		—		21,454		—		21,454
Other comprehensive income, net of tax	—		—		—		—		12,061		12,061
Issuance of treasury stock for stock option exercises	—		(3,183)		17,118		—		—		13,935
Issuance of treasury stock for restricted stock units vesting	—		(43,523)		25,968		—		—		(17,555)
Share-based compensation	—		19,323		—		—		—		19,323
Adjustment of accumulated other comprehensive loss to retained earnings for available-for-sale securities	—		—		—		(2,801)		2,801		—
Balance, March 31, 2022	$	441,369	$	1,804,761	$	(2,176,904)	$	2,475,250	$	(926,409)	$	1,618,067















	Common Stock		Additional Paid-In Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	(Unaudited; in thousands)
Balance, December 31, 2020	$	441,369	$	1,842,680	$	(2,282,939)	$	1,553,610	$	(944,576)	$	610,144
Net loss	—		—		—		(112,385)		—		(112,385)
Other comprehensive loss, net of tax	—		—		—		—		(16,450)		(16,450)
Issuance of treasury stock for stock option exercises	—		(803)		1,913		—		—		1,110
Issuance of treasury stock for restricted stock units vesting	—		(20,031)		13,065		—		—		(6,966)
Share-based compensation	—		15,112		—		—		—		15,112
Balance, March 31, 2021	$	441,369	$	1,836,958	$	(2,267,961)	$	1,441,225	$	(961,026)	$	490,565

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

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.

The December 31, 2021 balance sheet data was derived from audited financial statements; however, the accompanying interim notes to the consolidated financial statements do not include all of the annual disclosures required by GAAP. As Mattel's business is seasonal, results for interim periods are not necessarily indicative of those that may be expected for a full year. The financial information included herein should be read in conjunction with Mattel's consolidated financial statements and related notes in the 2021 Annual Report on Form 10-K.

Certain prior period amounts have been reclassified to conform to the current period presentation.

Revision of Previously Issued Consolidated Financial Statements

During the quarter ended June 30, 2021, Mattel identified a misstatement in its accounting for inventory tooling expenses, which were expensed to cost of sales rather than first being capitalized into the cost of inventory, which resulted in an understatement of inventory balances and a misstatement of cost of sales. Mattel also identified a misstatement related to the timing of disbursements for certain capital expenditures, which resulted in a cash flow misclassification between operating activities and investing activities. Mattel evaluated the misstatements and concluded that the misstatements were not material, either individually or in the aggregate, to its current or previously issued consolidated financial statements.

To correct the immaterial misstatements, during the quarter ended June 30, 2021, Mattel elected to revise its previously issued consolidated financial statements as of December 31, 2020 and 2019, and for each of the three years ended December 31, 2020, 2019, and 2018 and its unaudited consolidated financial statements as of and for the quarters and year-to-date periods ended March 31, 2020 and 2021, June 30, 2020, and September 30, 2020. The revision of the historical consolidated financial statements also includes the correction of other immaterial misstatements in its consolidated statement of operations that Mattel had previously recorded as out of period adjustments, as well as other previously identified balance sheet misclassifications. Mattel had previously determined that these misstatements did not, either individually or in the aggregate, result in a material misstatement of its previously issued consolidated financial statements and reached the same conclusion when aggregating with the recently identified misstatements. Further information regarding the misstatements and related revision is included in "Note 23 to the Consolidated Financial Statements— Revision for Immaterial Misstatements."

Mattel presented the revision of its previously issued consolidated financial statements as of December 31, 2020 and for the year ended December 31, 2020 in connection with the filing of its 2021 Annual Report on Form 10-K. Mattel is presenting the revision of its previously issued unaudited consolidated financial statements as of and for the three months ended March 31, 2021 in the accompanying unaudited consolidated financial statements and related disclosures.

2. Accounts Receivable

Mattel estimates current expected credit losses based on collection history and management’s assessment of the current economic trends, business environment, customers’ financial condition, and accounts receivable aging that may impact the level of future credit losses. Accounts receivable are net of allowances for credit losses of $13.1 million, $13.1 million, and $10.7 million as of March 31, 2022, March 31, 2021, and December 31, 2021, respectively.

3. Inventories

Inventories include the following:


	March 31, 2022		March 31, 2021		December 31, 2021
	(In thousands)
Raw materials and work in process	$	194,145	$	119,417	$	176,400
Finished goods	775,021		507,052		600,784
	$	969,166	$	626,469	$	777,184

4. Property, Plant, and Equipment

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


	March 31, 2022		March 31, 2021		December 31, 2021
	(In thousands)
Land	$	21,858	$	22,029	$	21,811
Buildings	330,519		307,955		317,114
Machinery and equipment	759,379		746,593		762,462
Software	348,888		343,905		348,062
Tools, dies, and molds	541,891		581,281		537,499
Leasehold improvements	116,558		118,228		115,844
Construction in progress	47,373		47,550		55,559
	2,166,466		2,167,541		2,158,351
Less: accumulated depreciation	(1,714,485)		(1,716,540)		(1,702,385)
	$	451,981	$	451,001	$	455,966

During the three months ended March 31, 2022, Mattel announced the planned consolidation and integration of the American Girl corporate offices and distribution center, located in Middleton, Wisconsin, and committed to a plan to dispose of the land and buildings. These assets meet the held for sale criteria and are actively being marketed for sale. The net book value of the land and buildings is $9.4 million as of March 31, 2022, and is included within property, plant and equipment, net in the consolidated balance sheet within the American Girl segment.

During the three months ended March 31, 2021, Mattel completed the sale of a manufacturing plant based in Mexico, which included land and buildings, resulting in a pre-tax gain of $15.8 million.

5. Goodwill and Other Intangibles

Goodwill is allocated to various reporting units, which are at the operating segment level, for the purpose of evaluating whether goodwill is impaired. Mattel’s reporting units are: (i) North America, (ii) International, and (iii) American Girl. Components of the operating segments have been aggregated into a single reporting unit as the components have similar economic characteristics. The similar economic characteristics include the nature of the products, the nature of the production processes, the customers, and the manner in which the products are distributed. 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 three months ended March 31, 2022 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, 2021		Currency Exchange Rate Impact		March 31, 2022
	(In thousands)
North America	$	731,789	$	(912)	$	730,877
International	450,847		(2,158)		448,689
American Girl	207,571		—		207,571
	$	1,390,207	$	(3,070)	$	1,387,137

Other Intangibles

Identifiable intangibles were $463.8 million, net of accumulated amortization of $336.3 million, $509.8 million, net of accumulated amortization of $296.4 million, and $476.9 million, net of accumulated amortization of $327.0 million as of March 31, 2022, March 31, 2021, and December 31, 2021, respectively.

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 months ended March 31, 2022 and 2021.

6. Accrued Liabilities

Accrued liabilities include the following:


	March 31, 2022		March 31, 2021		December 31, 2021
	(In thousands)
Incentive compensation	$	157,403	$	143,414	$	140,769
Advertising and promotion	106,813		78,755		179,687
Current lease liabilities	74,198		73,155		73,752

7. Seasonal Financing

On December 20, 2017, Mattel entered into a syndicated facility agreement, which was subsequently amended in 2018, 2019, and 2021 (as amended, the "Credit Agreement"), as a borrower (in such capacity, the "Borrower") and guarantor thereunder, along with certain of the Borrower's domestic and foreign subsidiaries as additional borrowers and/or guarantors thereunder.

On March 19, 2021, Mattel entered into the fourth amendment to the Credit Agreement, which amended certain terms, including, but not limited to, certain components of the borrowing base, a reduction of the aggregate principal amount of the senior secured revolving credit facilities from $1.60 billion to $1.40 billion and an extension of the maturity date from November 20, 2022 to March 19, 2024.

The senior secured revolving credit facilities consist of (i) an asset based lending facility with aggregate commitments up to $1.11 billion, subject to borrowing base capacity, secured by substantially all of the accounts receivable and inventory of the Borrower and certain of its subsidiaries who are borrowers and/or guarantors under the Credit Agreement, as well as (ii) a revolving credit facility with $294.0 million in aggregate commitments secured by certain fixed assets and intellectual property of the U.S. borrowers under the Credit Agreement, and equity interests in certain borrower and guarantor subsidiaries under the Credit Agreement.

Any borrowings under the senior secured revolving credit facilities are (i) limited by jurisdiction-specific borrowing base calculations based on the sum of specified percentages of eligible accounts receivable, eligible inventory and certain fixed assets and intellectual property, as applicable, minus the amount of any applicable reserves, and (ii) bear interest at a floating rate, which can be either, at the Borrower's option, (a) an adjusted LIBOR rate plus an applicable margin ranging from 1.25% to 1.75% per annum or (b) an alternate base rate plus an applicable margin ranging from 0.25% to 0.75% per annum, in each case, such applicable margins to be determined based on the Borrower's average borrowing availability remaining under the senior secured revolving credit facilities.

In addition to paying interest on the outstanding principal under the senior secured revolving credit facilities, the Borrower is required to pay (i) an unused line fee based on the average daily unused portion of the senior secured revolving credit facilities, (ii) a letter of credit fronting fee based on a percentage of the aggregate face amount of outstanding letters of credit, and (iii) certain other customary fees and expenses of the lenders and agents.

As of March 31, 2022, Mattel had no borrowings outstanding under the senior secured revolving credit facilities and no foreign short-term borrowings outstanding. As of March 31, 2021, Mattel had no borrowings outstanding under the senior secured revolving credit facilities and $0.9 million of foreign short-term borrowings outstanding. As of December 31, 2021, Mattel had no borrowings outstanding under the senior secured revolving credit facilities and no foreign short-term borrowings outstanding. Outstanding letters of credit under the senior secured revolving credit facilities totaled approximately $10 million, $11 million, and $10 million as of March 31, 2022, March 31, 2021, and December 31, 2021, respectively.

As of March 31, 2022, Mattel was in compliance with all covenants contained in the Credit Agreement. The Credit Agreement is a material agreement, and failure to comply with its covenants may result in an event of default under the terms of the 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.

8. Long-Term Debt

Long-term debt includes the following:


	March 31, 2022		March 31, 2021		December 31, 2021
	(In thousands)
2010 Senior Notes due October 2040	$	250,000	$	250,000	$	250,000
2011 Senior Notes due November 2041	300,000		300,000		300,000
2013 Senior Notes due March 2023	250,000		250,000		250,000
2017/2018 Senior Notes due December 2025	—		275,000		—
2019 Senior Notes due December 2027	600,000		600,000		600,000
2021 Senior Notes due April 2026	600,000		600,000		600,000
2021 Senior Notes due April 2029	600,000		600,000		600,000
Debt issuance costs and debt discount	(27,850)		(37,268)		(29,008)
	$	2,572,150	$	2,837,732	$	2,570,992
Less: current portion	(250,000)		—		—
Total long-term debt	$	2,322,150	$	2,837,732	$	2,570,992

On March 19, 2021, Mattel issued (i) $600 million aggregate principal amount of 3.375% Senior Notes due 2026 (the "2026 Notes") and (ii) $600 million aggregate principal amount of 3.750% Senior Notes due 2029 (the "2029 Notes" and, together with the 2026 Notes, the "Notes"). The 2026 Notes will mature on April 1, 2026 and the 2029 Notes will mature on April 1, 2029, unless earlier redeemed in accordance with their respective terms. The Notes are guaranteed by Mattel’s existing and, subject to certain exceptions, future wholly-owned domestic restricted subsidiaries that guarantee Mattel’s senior secured revolving credit facilities or certain other indebtedness.

The net proceeds from the offering, together with cash on hand, were used to redeem $1.225 billion in aggregate principal amount of Mattel’s outstanding 6.750% Senior Notes due December 2025 (the "2025 Notes") and pay related prepayment premiums and transaction fees and expenses. As a result of the partial redemption of the 2025 Notes, Mattel incurred a loss on extinguishment of $83.2 million, comprised of $62.0 million of prepayment premium costs and a $21.2 million write-off of the unamortized debt issuance costs, which was recorded within interest expense in the consolidated statements of operations in the first quarter of 2021.

On July 1, 2021, Mattel redeemed the remaining outstanding $275 million aggregate principal amount of the 2025 Notes. As a result of the redemption, Mattel incurred a loss on extinguishment of $18.5 million, comprised of $14.0 million of prepayment premium costs and a $4.5 million write-off of the unamortized debt issuance costs, which was recorded within interest expense in the consolidated statements of operations in the third quarter of 2021.

9. Other Noncurrent Liabilities

Other noncurrent liabilities include the following:


	March 31, 2022		March 31, 2021		December 31, 2021
	(In thousands)
Benefit plan liabilities	$	172,694	$	221,345	$	179,857
Income taxes payable	68,082		72,252		62,915

10. Accumulated Other Comprehensive Income (Loss)

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


	For the Three Months Ended March 31, 2022
	Derivative Instruments		Available-for-Sale Security		Employee Benefit Plans		Currency 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 reclassifications	7,464		—		(315)		921		8,070
Amounts reclassified from accumulated other comprehensive income (loss)	(1,357)		3,646		1,702		—		3,991
Net increase in other comprehensive income (loss)	6,107		3,646		1,387		921		12,061
Adjustment of accumulated other comprehensive loss to retained earnings	—		2,801		—		—		2,801
Accumulated Other Comprehensive Income (Loss), Net of Tax, as of March 31, 2022	$	14,903	$	—	$	(152,712)	$	(788,600)	$	(926,409)


	For the Three Months Ended March 31, 2021
	Derivative Instruments		Available-for-Sale Security		Employee Benefit Plans		Currency Translation Adjustments		Total
	(In thousands)
Accumulated Other Comprehensive Loss, Net of Tax, as of December 31, 2020	$	(15,369)	$	(7,522)	$	(186,854)	$	(734,831)	$	(944,576)
Other comprehensive income (loss) before reclassifications	10,101		1,964		(67)		(28,133)		(16,135)
Amounts reclassified from accumulated other comprehensive income (loss)	(2,730)		—		2,415		—		(315)
Net increase (decrease) in other comprehensive income (loss)	7,371		1,964		2,348		(28,133)		(16,450)
Accumulated Other Comprehensive Loss, Net of Tax, as of March 31, 2021	$	(7,998)	$	(5,558)	$	(184,506)	$	(762,964)	$	(961,026)

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


	For the Three Months Ended
	March 31, 2022		March 31, 2021		Statements of Operations Classification
	(In thousands)
Derivative Instruments
Gain on foreign currency forward exchange and other contracts	$	1,429	$	2,838	Cost of sales
Tax effect	(72)		(108)		Provision for income taxes
	$	1,357	$	2,730	Net income (loss)
Employee Benefit Plans
Amortization of prior service credit (a)	$	469	$	398	Other non-operating expense, net
Recognized actuarial loss (a)	(2,222)		(2,783)		Other non-operating expense, net
	$	(1,753)	$	(2,385)
Tax effect	51		(30)		Provision for income taxes
	$	(1,702)	$	(2,415)	Net income (loss)

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

During the three months ended March 31, 2022, Mattel adjusted accumulated other comprehensive loss by $6.4 million in relation to previously recorded available-for-sale equity securities. This amount was adjusted in order to account for such securities in a manner consistent with ASC 321, Investments—Equity Securities. The adjustment includes $3.6 million of accumulated other comprehensive loss reclassified to other non-operating expense (income) in the statement of operations and $2.8 million reclassified to retained earnings in the statement of stockholders' equity. The adjustment, including tax effect, was immaterial to the financial statements.

Currency Translation Adjustments

Mattel's reporting currency is the U.S. dollar. The translation of its net investments in subsidiaries with non-U.S. dollar functional currencies subjects Mattel to the impact of foreign currency exchange rate fluctuations in its results of operations and financial position. Assets and liabilities of subsidiaries with non-U.S. dollar functional currencies are translated into U.S. dollars at fiscal period-end exchange rates. Income and expense 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 loss within stockholders' equity. Currency translation adjustments resulted in a net gain of $0.9 million for the three months ended March 31, 2022, primarily due to the strengthening of the Brazilian real, Mexican peso, and the Chilean peso against the U.S. dollar, offset by the weakening of the British pound sterling and the Russian ruble against the U.S. dollar. Currency translation adjustments resulted in a net loss of $28.1 million for the three months ended March 31, 2021, primarily due to the weakening of the Brazilian real, Mexican peso, Euro, and Turkish lira against the U.S. dollar.

11. Foreign Currency Transaction Exposure

Currency exchange rate fluctuations impact Mattel's results of operations and cash flows. Mattel's currency transaction exposures include gains and losses realized on unhedged inventory purchases and unhedged receivables and payables balances that are denominated in a currency other than the applicable functional currency. Gains and losses on unhedged inventory purchases and other transactions associated with operating activities are recorded in the components of operating income in the consolidated statements of operations. Gains and losses on unhedged intercompany loans and advances are recorded as a component of other non-operating expense (income), net in the consolidated statements of operations in the period in which the currency exchange rate changes. Transactions denominated in the Chinese yuan, Euro, Russian ruble, and Mexican peso, were the primary transactions that caused foreign currency transaction exposure for Mattel during the three months ended March 31, 2022.

Currency transaction losses included in the consolidated statements of operations are as follows:


	For the Three Months Ended
	March 31, 2022		March 31, 2021		Statements of Operations Classification
	(In thousands)
Currency transaction gains (losses)	$	462	$	(3,572)	Operating income
Currency transaction (losses)	(6,444)		(3,308)		Other non-operating income/expense, net
Currency transaction (losses), net	$	(5,982)	$	(6,880)

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 24 months. These derivative instruments have been designated as effective cash flow hedges, whereby the unsettled hedges are reported in Mattel's consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in other comprehensive income (loss) ("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. 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 does not use hedge accounting for these contracts, 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 March 31, 2022, March 31, 2021, and December 31, 2021, Mattel held foreign currency forward exchange contracts and other commodity derivative instruments, with notional amounts of approximately $953 million, $952 million, and $925 million, respectively.

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


	Derivative Assets
	Balance Sheet Classification	Fair Value
		March 31, 2022		March 31, 2021		December 31, 2021
		(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange and other contracts	Prepaid expenses and other current assets	$	17,146	$	4,534	$	13,361
Foreign currency forward exchange and other contracts	Other noncurrent assets	1,655		1,250		1,000
Total derivatives designated as hedging instruments		$	18,801	$	5,784	$	14,361
Derivatives not designated as hedging instruments
Foreign currency forward exchange and other contracts	Prepaid expenses and other current assets	$	14,096	$	2,050	$	3,714
		$	32,897	$	7,834	$	18,075

	Derivative Liabilities
	Balance Sheet Classification	Fair Value
		March 31, 2022		March 31, 2021		December 31, 2021
		(In thousands)
Derivatives designated as hedging instruments
Foreign currency forward exchange and other contracts	Accrued liabilities	$	2,345	$	11,009	$	2,301
Foreign currency forward exchange and other contracts	Other noncurrent liabilities	720		808		280
Total derivatives designated as hedging instruments		$	3,065	$	11,817	$	2,581
Derivatives not designated as hedging instruments
Foreign currency forward exchange and other contracts	Accrued liabilities	$	454	$	5,487	$	1,229
		$	3,519	$	17,304	$	3,810

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

Derivatives Designated As Hedging Instruments

For the Three Months Ended

March 31,
2022

March 31,
2021

Statements of
Operations
Classification

(In thousands)

Foreign currency forward exchange contracts:

Amount of gains recognized in OCI

7,464

10,101

Amount of gains reclassified from accumulated OCI to consolidated statements of operations

1,357

2,730

Cost of sales

The net gains reclassified from accumulated other comprehensive loss to the consolidated statements of operations during the three months ended March 31, 2022 and 2021, respectively, were offset by the changes in cash flows associated with the underlying hedged transactions.


	Derivatives Not Designated As Hedging Instruments
	For the Three Months Ended
	March 31, 2022		March 31, 2021		Statements of Operations Classification
	(In thousands)
Amount of net (losses) gains recognized in the Statements of Operations
Foreign currency forward exchange and other contract (losses)	$	(7,832)	$	(8,636)	Other non-operating (income)/expense, net

Foreign currency forward exchange and other contract gains	—		639		Cost of sales
	$	(7,832)	$	(7,997)

The net (losses) gains recognized in the consolidated statements of operations during the three months ended March 31, 2022 and March 31, 2021, respectively, were partially offset by foreign currency transaction gains and losses on the related derivative balances.

13. Fair Value Measurements

The following tables present information about Mattel's assets and liabilities measured and reported in the financial statements at fair value on a recurring basis as of March 31, 2022, March 31, 2021, and December 31, 2021 and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value. The three levels of the fair value hierarchy are as follows:

•Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

•Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities, either directly or indirectly.

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

Mattel's financial assets and liabilities include the following:


	March 31, 2022
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Foreign currency forward exchange contracts and other (a)	$	—	$	32,897	$	—	$	32,897
Equity securities (b)	4,471		—		—		4,471
Total assets	$	4,471	$	32,897	$	—	$	37,368
Liabilities:
Foreign currency forward exchange contracts and other (a)	$	—	$	3,519	$	—	$	3,519

	March 31, 2021
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Foreign currency forward exchange contracts and other (a)	$	—	$	7,834	$	—	$	7,834
Equity securities (b)	6,232		—		—		6,232
Total assets	$	6,232	$	7,834	$	—	$	14,066
Liabilities:
Foreign currency forward exchange contracts and other (a)	$	—	$	17,304	$	—	$	17,304

	December 31, 2021
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Foreign currency forward exchange contracts and other (a)	$	—	$	18,075	$	—	$	18,075
Equity securities (b)	5,343		—		—		5,343
Total assets	$	5,343	$	18,075	$