Mattel (MAT) 10-Q 28 Apr 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 26, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	MAT
Entity Registrant Name	MATTEL INC /DE/
Entity Central Index Key	0000063276
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		364,739,969

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	Mar. 31, 2010	Dec. 31, 2009	Mar. 31, 2009
Current Assets
Cash and equivalents	$871,891	$1,116,997	$404,872
Accounts receivable, net	661,881	749,335	565,314
Inventories	429,638	355,663	487,886
Prepaid expenses and other current assets	337,905	332,624	375,561
Total current assets	2,301,315	2,554,619	1,833,633
Noncurrent Assets
Property, plant, and equipment, net	492,221	504,808	516,424
Goodwill	820,557	828,468	812,233
Other noncurrent assets	889,123	892,660	943,659
Total Assets	4,503,216	4,780,555	4,105,949
Current Liabilities
Short-term borrowings		1,950
Current portion of long-term debt	50,000	50,000	150,000
Accounts payable	246,276	350,675	198,584
Accrued liabilities	412,321	617,881	401,545
Income taxes payable	14,713	40,368	20,838
Total current liabilities	723,310	1,060,874	770,967
Noncurrent Liabilities
Long-term debt	700,000	700,000	750,000
Other noncurrent liabilities	484,284	488,692	538,939
Total noncurrent liabilities	1,184,284	1,188,692	1,288,939
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	1,683,718	1,684,694	1,650,966
Treasury stock at cost; 76.8 million shares, 82.9 million shares, and 79.5 million shares, respectively	(1,502,202)	(1,555,046)	(1,620,062)
Retained earnings	2,364,509	2,339,506	2,034,654
Accumulated other comprehensive loss	(391,772)	(379,534)	(460,884)
Total stockholders' equity	2,595,622	2,530,989	2,046,043
Total Liabilities and Stockholders' Equity	$4,503,216	$4,780,555	$4,105,949

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
	Mar. 31, 2010	Dec. 31, 2009	Mar. 31, 2009
Common stock, par value	$1	$1	$1
Common stock, shares authorized	1,000,000,000	1,000,000,000	1,000,000,000
Common stock, shares issued	441,400,000	441,400,000	441,400,000
Treasury stock, shares	76,800,000	79,500,000	82,900,000

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net Sales	$880,082	$785,646
Cost of sales	448,230	439,774
Gross Profit	431,852	345,872
Advertising and promotion expenses	94,169	84,064
Other selling and administrative expenses	292,456	317,017
Operating Income (Loss)	45,227	(55,209)
Interest expense	13,623	15,917
Interest (income)	(2,452)	(3,478)
Other non-operating expense (income), net	774	(2,198)
Income (Loss) Before Income Taxes	33,282	(65,450)
Provision (benefit) for income taxes	8,440	(14,464)
Net Income (Loss)	$24,842	($50,986)
Net Income (Loss) Per Common Share-Basic	0.07	-0.14
Weighted average number of common shares	363,231	358,891
Net Income (Loss) Per Common Share-Diluted	0.07	-0.14
Weighted average number of common and potential common shares	366,144	358,891

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash Flows From Operating Activities:
Net income (loss)	$24,842	($50,986)
Adjustments to reconcile net income to net cash flows used for operating activities:
Depreciation	36,670	38,388
Amortization	3,891	5,977
Deferred income taxes	(4,988)	(8,169)
Share-based compensation	12,829	9,438
Increase (decrease) from changes in assets and liabilities:
Accounts receivable	75,459	291,386
Inventories	(76,710)	(4,539)
Prepaid expenses and other current assets	2,368	(27,528)
Accounts payable, accrued liabilities, and income taxes payable	(333,188)	(477,021)
Other, net	14,220	8,247
Net cash flows used for operating activities	(244,607)	(214,807)
Cash Flows From Investing Activities:
Purchases of tools, dies, and molds	(17,843)	(9,366)
Purchases of other property, plant, and equipment	(6,322)	(10,766)
Proceeds from sale of investments		55,400
Proceeds from sale of other property, plant, and equipment	251	135
Payments for foreign currency forward exchange contracts	(11,133)	(12,112)
Net cash flows (used for) provided by investing activities	(35,047)	23,291
Cash Flows From Financing Activities:
Payment for short-term borrowings	(1,950)
Payment of credit facility renewal costs		(10,208)
Proceeds from exercise of stock options	31,486	206
Other, net	4,261	499
Net cash flows provided by (used for) financing activities	33,797	(9,503)
Effect of Currency Exchange Rate Changes on Cash	751	(11,803)
Decrease in Cash and Equivalents	(245,106)	(212,822)
Cash and Equivalents at Beginning of Period	1,116,997	617,694
Cash and Equivalents at End of Period	$871,891	$404,872

Basis of Presentation

Basis of Presentation
	3 Months Ended Mar. 31, 2010
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 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 presentation of the financial position and interim results of Mattel, Inc. and its subsidiaries (Mattel or the Company) as of and for the periods presented, have been included. Because Mattels business is seasonal, results for interim periods are not necessarily indicative of those that may be expected for a full year. The year-end balance sheet data was derived from audited financial statements, however, the accompanying interim notes to the consolidated financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. The financial information included herein should be read in conjunction with Mattels consolidated financial statements and related notes in its 2009 Annual Report on Form 10-K.

Accounts Receivable

Accounts Receivable
	3 Months Ended Mar. 31, 2010
Accounts Receivable	2. Accounts Receivable Accounts receivable are net of allowances for doubtful accounts of $20.5 million, $23.2 million, and $24.5million as of March31, 2010,March31, 2009, and December31, 2009, respectively.

Inventories

Inventories
	3 Months Ended Mar. 31, 2010
Inventories	3. Inventories Inventories include the following: March31,2010 March31,2009 December31,2009 (In thousands) Raw materials and work in process $ 65,295 $ 63,996 $ 47,991 Finished goods 364,343 423,890 307,672 $ 429,638 $ 487,886 $ 355,663

Property, Plant, and Equipment

Property, Plant, and Equipment
	3 Months Ended Mar. 31, 2010
Property, Plant, and Equipment	4. Property, Plant, and Equipment Property, plant, and equipment, net include the following: March31,2010 March31,2009 December31,2009 (In thousands) Land $ 26,646 $ 26,694 $ 26,664 Buildings 243,425 237,040 242,360 Machinery and equipment 777,828 754,302 775,129 Tools, dies, and molds 581,946 553,565 577,418 Capital leases 23,271 23,271 23,271 Leasehold improvements 180,673 168,272 178,218 1,833,789 1,763,144 1,823,060 Less: accumulated depreciation (1,341,568 ) (1,246,720 ) (1,318,252 ) $ 492,221 $ 516,424 $ 504,808

Goodwill

Goodwill
	3 Months Ended Mar. 31, 2010
Goodwill	5. Goodwill Goodwill is allocated to various reporting units, which are either at the operating segment level or one reporting level below the operating segment level, for purposes of evaluating whether goodwill is impaired. Mattels reporting units are: MattelGirls BrandsUS, Mattel Boys Brands US, Fisher-Price Brands US, AmericanGirl Brands, and International. Mattel tests its goodwill for impairment annually in the third quarter, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable, based on the fair value of the cash flows that the reporting units can be expected to generate in the future. The change in the carrying amount of goodwill by reporting unit for the three months ended March31,2010 is shown below. Brand-specific goodwill held by foreign subsidiaries is allocated to the US reporting units selling those brands, thereby causing foreign currency translation impact for the US reporting units. December31,2009 Impactof Currency ExchangeRate Changes March31,2010 (In thousands) Mattel Girls Brands US $ 32,082 $ (1,787 ) $ 30,295 Mattel Boys Brands US 130,737 (139 ) 130,598 Fisher-Price Brands US 216,080 (352 ) 215,728 American Girl Brands 207,571 207,571 International 241,998 (5,633 ) 236,365 $ 828,468 $ (7,911 ) $ 820,557

Other Noncurrent Assets

Other Noncurrent Assets
	3 Months Ended Mar. 31, 2010
Other Noncurrent Assets	6. Other Noncurrent Assets Other noncurrent assets include the following: March31,2010 March31,2009 December31,2009 (In thousands) Deferred income taxes $ 485,809 $ 533,807 $ 481,240 Nonamortizable identifiable intangibles 122,223 128,382 122,223 Identifiable intangibles (net of amortization of $72.0 million, $63.2million, and $69.5 million, respectively) 90,997 102,355 93,546 Other 190,094 179,115 195,651 $ 889,123 $ 943,659 $ 892,660

Accrued Liabilities

Accrued Liabilities
	3 Months Ended Mar. 31, 2010
Accrued Liabilities	7. Accrued Liabilities Accrued liabilities include the following: March31,2010 March31,2009 December31,2009 (In thousands) Advertising and promotion $ 42,396 $ 32,612 $ 47,913 Royalties 40,307 35,781 73,467 Taxes other than income taxes 35,547 9,482 70,817 Derivatives payable 8,389 21,797 21,032 Other 285,682 301,873 404,652 $ 412,321 $ 401,545 $ 617,881

Product Recalls

Product Recalls
	3 Months Ended Mar. 31, 2010
Product Recalls	8. Product Recalls During 2007, Mattel recalled products with high-powered magnets that may become dislodged and other products, some of which were produced using non-approved paint containing lead in excess of applicable regulatory and Mattel standards. During the second half of 2007, additional products were recalled, withdrawn from retail stores, or replaced at the request of consumers as a result of safety or quality issues (collectively, the 2007 Product Recalls). Following the announcement of the 2007 Product Recalls, a number of lawsuits were filed against Mattel with respect to the recalled products, which are more fully described in Note 14 to the Consolidated Financial Statements in Mattels 2009 Annual Report on Form 10-K and Note 23, Contingencies, of this Quarterly Report on Form 10-Q. During the three months ended March31, 2009, Mattel recorded charges of $20.9 million to reserve for the settlement of a portion of the above-described product liability related litigation. During the three months ended March31, 2010, based on actual experience to date under the settlement program related to the above-described product liability related litigation, Mattel reduced its estimate of these settlement costs, which had the effect of reducing other selling and administrative expenses by $7.5 million. Although management is not aware of any additional quality or safety issues that are likely to result in material recalls or withdrawals, there can be no assurance that additional issues will not be identified in the future.

Restructuring Charges

Restructuring Charges
	3 Months Ended Mar. 31, 2010
Restructuring Charges	9. Restructuring Charges During the second quarter of 2008, Mattel initiated its Global Cost Leadership program, which is designed to improve operating efficiencies and leverage Mattels global scale to improve profitability and operating cash flows. The major initiatives within Mattels Global Cost Leadership program include: A global reduction in Mattels professional workforce of approximately 1,000 employees that was initiated in November 2008, and an additional reduction in Mattels professional workforce initiated in the third quarter of 2009. A coordinated efficiency strategic plan that includes structural changes designed to lower costs and improve efficiencies; for example, offshoring and outsourcing certain back office functions, and more clustering of management in international markets. Additional procurement initiatives designed to fully leverage Mattels global scale in areas such as creative agency partnerships, legal services, and distribution, including ocean carriers and over-the-road freight vendors. In connection with the Global Cost Leadership program, Mattel recorded severance and other termination-related charges of $2.3 million and $4.7 million during the three months ended March31, 2010 and 2009, respectively, which are included in other selling and administrative expenses. The following table summarizes Mattels severance and other termination costs activity for the three months ended March31, 2010 and 2009 (in thousands): Reserves at December31, 2009 Additional Expenses Incurred Payments Reservesat March31, 2010 Severance $ 18,783 $ 1,982 $ (5,981 ) $ 14,784 Other termination costs 225 334 (34 ) 525 $ 19,008 $ 2,316 $ (6,015 ) $ 15,309 Reserves at December31, 2008 Additional Expenses Incurred Payments Reservesat March31, 2009 Severance $ 17,115 $ 4,686 $ (9,760 ) $ 12,041 Other termination costs 881 13 (54 ) 840 $ 17,996 $ 4,699 $ (9,814 ) $ 12,881

Long-term Debt

Long-term Debt
	3 Months Ended Mar. 31, 2010
Long-term Debt	10. Long-term Debt Long-term debt includes the following: March31,2010 March31,2009 December31,2009 (In thousands) Medium-term notes due May 2010 to November2013 $ 200,000 $ 250,000 $ 200,000 2006 Senior Notes due June 2011 200,000 300,000 200,000 2008 Senior Notes due March 2013 350,000 350,000 350,000 750,000 900,000 750,000 Less: current portion (50,000 ) (150,000 ) (50,000 ) $ 700,000 $ 750,000 $ 700,000 In June 2009, Mattel repaid $100.0 million of the 2006 unsecured floating rate senior notes (Floating Rate Senior Notes) in connection with their scheduled maturity. Additionally, in April and November 2009, Mattel repaid $50.0 million of its Medium-term notes in connection with their scheduled maturity.

Other Noncurrent Liabilities

Other Noncurrent Liabilities
	3 Months Ended Mar. 31, 2010
Other Noncurrent Liabilities	11. Other Noncurrent Liabilities Other noncurrent liabilities include the following: March31,2010 March31,2009 December31,2009 (In thousands) Benefit plan liabilities $ 250,548 $ 283,844 $ 255,234 Noncurrent tax liabilities 108,372 132,667 108,600 Other 125,364 122,428 124,858 $ 484,284 $ 538,939 $ 488,692

Comprehensive Income

Comprehensive Income (Loss)
	3 Months Ended Mar. 31, 2010
Comprehensive Income (Loss)	12. Comprehensive Income (Loss) The changes in the components of comprehensive income (loss), net of tax, are as follows: FortheThreeMonthsEnded March31,2010 March31,2009 (In thousands) Net income (loss) $ 24,842 $ (50,986 ) Currency translation adjustments (29,076 ) (39,125 ) Defined benefit pension plans, net prior service cost and net actuarial loss (gain) 2,341 (5,985 ) Net unrealized gains on derivative instruments: Unrealized holding gains 11,739 16,522 Reclassification adjustment for realized losses (gains) included in net income (loss) 2,758 (1,661 ) 14,497 14,861 $ 12,604 $ (81,235 ) The components of accumulated other comprehensive loss are as follows: March31,2010 March31,2009 December31,2009 (In thousands) Currency translation adjustments $ (251,717 ) $ (313,976 ) $ (222,641 ) Defined benefit pension and other postretirement plans, net of tax (139,676 ) (166,698 ) (142,017 ) Net unrealized (loss) gain on derivative instruments, net of tax (379 ) 19,790 (14,876 ) $ (391,772 ) $ (460,884 ) $ (379,534 ) Currency Translation Adjustments Mattels reporting currency is the US dollar. The translation of its results of operations and financial position of subsidiaries with non-US dollar functional currencies subjects Mattel to currency exchange rate fluctuations in its results of operations and financial position. Assets and liabilities of subsidiaries with non-USdollar 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 loss within stockholders equity. For the three months ended March31, 2010, currency translation adjustments resulted in a net loss of $29.1million, with losses primarily from the weakening of the Euro and British pound sterling, partially offset by the strengthening of the Mexico peso against the US dollar. For the three months ended March31, 2009, currency translation adjustments resulted in a net loss of $39.1 million, with losses primarily from the weakening of the Euro, British pound sterling, and Mexico peso against the US dollar.

Derivative Instruments

Derivative Instruments
	3 Months Ended Mar. 31, 2010
Derivative Instruments	13. 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 up to 18 months. These derivative instruments have been designated as effective cash flow hedges, whereby the unsettled hedges are reported in Mattels consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in other comprehensive income (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 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. As of March31, 2010, Mattel held foreign currency forward exchange contracts with notional amounts of approximately $1.12 billion. In connection with the issuance of its $100.0 million of Floating Rate Senior Notes, Mattel entered into two interest rate swap agreements, each in a notional amount of $50.0million, for the purpose of hedging the variability of cash flows in the interest payments due to fluctuations of the LIBOR benchmark interest rate. The two interest rate swap agreements expired in June 2009, which corresponded with the maturity of the Floating Rate Senior Notes. These derivative instruments were designated as effective cash flow hedges, whereby the hedges were reported in Mattels consolidated balance sheets at fair value, with changes in the fair value of the hedges reflected in OCI. Under the terms of the agreements, Mattel received quarterly interest payments from the swap counterparties based on the three-month LIBORplus 40 basis points and made semi-annual interest payments to the swap counterparties based on a fixed rate of 5.871%. The three-month LIBOR used to determine interest payments under the interest rate swap agreements had reset every three months, matching the variable interest on the Floating Rate Senior Notes. The following table presents Mattels derivative assets and liabilities (in thousands): Asset Derivatives BalanceSheetLocation Fair Value March31, 2010 March31, 2009 December31, 2009 Derivatives designated as hedging instruments Foreign currency forward exchange contracts Prepaidexpensesandother current assets $ 12,188 $ 28,214 $ 7,008 Foreign currency forward exchange contracts Other noncurrent assets 83 2,380 962 Total derivatives designated as hedging instruments $ 12,271 $

Fair Value Measurements

Fair Value Measurements
	3 Months Ended Mar. 31, 2010
Fair Value Measurements	14. Fair Value Measurements The following table presents information about Mattels assets and liabilities measured and reported in the financial statements at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. The three levels of the fair value hierarchy are as follows: 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 does not have any significant financial assets or liabilities measured at fair value using Level 1 or Level 3 inputs as of March31, 2010,March 31, 2009, or December31, 2009. Mattels financial assets and liabilities measured using Level 2 inputs include the following: March31,2010 March31,2009 December31,2009 (In thousands) Assets: Foreign currency forward exchange contracts (a) $ 14,861 $ 30,594 $ 10,192 Liabilities: Foreign currency forward exchange contracts (a) $ 8,389 $ 19,516 $ 21,051 Interest rate swaps (b) 2,495 Total liabilities $ 8,389 $ 22,011 $ 21,051 (a) The fair value of the foreign currency forward exchange contracts is based on dealer quotes of market forward rates and reflects the amount that Mattel would receive or pay at their maturity dates for contracts involving the same currencies and maturity dates. (b) The fair value of the interest rate swaps was based on dealer quotes using cash flows discounted at relevant market interest rates.

Fair Value of Financial Instrum

Fair Value of Financial Instruments
	3 Months Ended Mar. 31, 2010
Fair Value of Financial Instruments	15. Fair Value of Financial Instruments Mattels financial instruments include cash and equivalents, accounts receivable and payable, short-term borrowings, and accrued liabilities. The carrying amount of these instruments approximates fair value because of their short-term nature. The estimated fair value of Mattels long-term debt, including the current portion is $799.7 million (compared to a carrying amount of $750.0 million) as of March31, 2010 and $794.7 million (compared to a carrying amount of $750.0 million) as of December31, 2009. The estimated fair value has been calculated based on broker quotes or rates for the same or similar instruments. The fair value related disclosures for Mattels derivative financial instruments are included in Note 13, Derivative Instruments, and Note 14, Fair Value Measurements.

Earnings Per Share

Earnings Per Share
	3 Months Ended Mar. 31, 2010
Earnings Per Share	16. 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 shall be included in the computation of earnings per share pursuant to the two-class method. Certain of Mattels 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. The following table reconciles earnings per common share for the three months ended March31, 2010 and 2009. FortheThreeMonthsEnded March31,2010 March31,2009 (inthousands,except pershareamounts) BASIC Net income (loss) $ 24,842 $ (50,986 ) Less net income allocable to participating RSUs (295 ) Net income (loss) available for basic common shares $ 24,547 $ (50,986 ) Weighted average common shares outstanding 363,231 358,891 Basic net income (loss) per common share $ 0.07 $ (0.14 ) DILUTED Net income (loss) $ 24,842 $ (50,986 ) Less net income allocable to participating RSUs (293 ) Net income (loss) available for diluted common shares $ 24,549 $ (50,986 ) Weighted average common shares outstanding 363,231 358,891 Weighted average common equivalent shares arising from: Dilutive stock options and non-participating RSUs 2,913 Weighted average number of common and potential common shares 366,144 358,891 Diluted net income (loss) per common share $ 0.07 $ (0.14 ) 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. Nonqualified stock options and non-participating RSUs totaling 1.8million shares were excluded from the calculation of diluted net income per common share for the three months ended March31, 2010 because they were antidilutive. All potential common shares were excluded from the calculation of diluted net loss per common share for the three months ended March31, 2009 because they were antidilutive due to Mattel

Employee Benefit Plans

Employee Benefit Plans
	3 Months Ended Mar. 31, 2010
Employee Benefit Plans	17. 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 Note 7 to the Consolidated Financial Statements in its 2009 Annual Report on Form 10-K. A summary of the components of net periodic benefit cost for Mattels defined benefit pension plans is as follows: FortheThreeMonthsEnded March31,2010 March31,2009 (In thousands) Service cost $ 3,317 $ 3,382 Interest cost 8,155 7,500 Expected return on plan assets (7,239 ) (7,348 ) Amortization of prior service cost 438 385 Recognized actuarial loss 3,668 3,025 $ 8,339 $ 6,944 A summary of the components of net periodic benefit cost for Mattels postretirement benefit plans is as follows: FortheThreeMonthsEnded March31,2010 March31,2009 (In thousands) Service cost $ 22 $ 26 Interest cost 627 664 Recognized actuarial loss 149 177 $ 798 $ 867 During the three months ended March31, 2010, Mattel made cash contributions totaling approximately $5million and $1 million to its defined benefit pension and postretirement benefit plans, respectively.

Share-Based Payments

Share-Based Payments
	3 Months Ended Mar. 31, 2010
Share-Based Payments	18. Share-Based Payments Mattel has various stock compensation plans, which are more fully described in Note 10 to the Consolidated Financial Statements in its 2009 Annual Report on Form 10-K. Under the Mattel, Inc. 2005 Equity Compensation Plan (the 2005 Plan), Mattel has the ability to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, dividend equivalent rights, and shares of common stock to officers, employees, and other persons providing services to Mattel. Stock options expire no later than ten years from the date of grant and both stock options and RSUs generally provide for vesting over a period of three years from the date of grant. Such stock options under the 2005 Plan were granted with exercise prices at or above the fair market value of Mattels common stock on the applicable measurement dates. Compensation expense, included within other selling and administrative expenses, related to stock options and RSUs is as follows: FortheThreeMonthsEnded March31,2010 March31,2009 (In thousands) Stock option compensation expense $ 2,684 $ 2,462 RSU compensation expense 10,145 6,976 $ 12,829 $ 9,438 During the three months ended March31, 2010 and 2009, Mattel recognized compensation expense of $1.7million and $0.5 million, respectively, which is included in the RSU compensation expense amounts noted above, for performance RSUs granted in connection with its January1, 2008 December31, 2010 Long Term Incentive Plan, which is more fully described in Note 10 to the Consolidated Financial Statements in its 2009 Annual Report on Form 10-K. As of March31, 2010, total unrecognized compensation cost related to unvested share-based payments totaled $67.4 million and is expected to be recognized over a weighted-average period of 1.7 years. Mattel uses treasury shares purchased under its share repurchase program to satisfy stock option exercises and the vesting of RSUs. Cash received for stock option exercises for the three months ended March31, 2010 and 2009 was $31.5million and $0.2 million, respectively.

Other Selling and Administrativ

Other Selling and Administrative Expenses
	3 Months Ended Mar. 31, 2010
Other Selling and Administrative Expenses	19. Other Selling and Administrative Expenses Other selling and administrative expenses include the following: FortheThreeMonthsEnded March31,2010 March31,2009 (In thousands) Design and development $ 41,395 $ 40,120 Identifiable intangible asset amortization 2,552 2,724

Foreign Currency Transaction Ga

Foreign Currency Transaction Gains and Losses
	3 Months Ended Mar. 31, 2010
Foreign Currency Transaction Gains and Losses	20. Foreign Currency Transaction Gains and Losses Currency exchange rate fluctuations may impact Mattels results of operations and cash flows. Mattels 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 onthe 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 non-operating(income) expense in the consolidated statements ofoperations.Inventory purchase and sale transactions denominated in the Euro, British pound sterling, and Mexican peso 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: FortheThreeMonthsEnded March31,2010 March31,2009 (In thousands) Operating income (loss) $ 9,865 $ 14,394 Other non-operating expense (income), net (2,032 ) 2,378 Net transaction gains $ 7,833 $ 16,772

Venezuelan Operations

Venezuelan Operations
	3 Months Ended Mar. 31, 2010
Venezuelan Operations	21. Venezuelan Operations Mattel applies to the Venezuelan governments Foreign Exchange Administrative Commission, CADIVI, for the conversion of local currency to US dollars at the official exchange rate.For US dollar needs exceeding conversions obtained through CADIVI, the parallel exchange market, with rates substantially less favorable than the official exchange rate, may be used to obtain US dollars without approval from CADIVI. At December31, 2009, Mattel changed the rate it used to translate its Venezuelan subsidiarys transactions and balances from the official exchange rate to the parallel exchange rate, which was quoted at 5.97 Venezuelan bolivar fuertes to the US dollar on December31, 2009. The resulting foreign currency translation adjustment of approximately $15 million increased accumulated other comprehensive loss within stockholders equity as of December31, 2009. Mattels considerations for changing the rate included indications that the Venezuelan government is not likely to continue to provide substantial currency exchange at the official rate for companies importing discretionary products, such as toys, difficulties in obtaining approval for the conversion of local currency to US dollars at the official exchange rate (for imported products and dividends), delays in previously obtained approvals being honored by CADIVI, and Mattels 2009 repatriation of dividends from its Venezuelan subsidiary at the parallel exchange rate. Effective January1, 2010, Mattel has accounted for Venezuela as a highly inflationary economy as the three-year cumulative inflation rate for Venezuela, using a blend of the Consumer Price Index associated with the city of Caracas and the National Consumer Price Index (developed commencing in 2008 and covering the entire country of Venezuela), exceeded 100%. Accordingly, Mattels Venezuelan subsidiary uses the US dollar as its functional currency. As a result of the change to a US dollar functional currency, monetary assets and liabilities denominated in bolivar fuertes generate income or expense for changes in value associated with parallel exchange rate fluctuations against the US dollar. Mattels Venezuelan subsidiary had approximately $17 million of net monetary assets denominated in bolivar fuertes as of March31, 2010. For every $10 million of net monetary assets denominated in bolivar fuertes, a 1% increase/(decrease) in the parallel exchange rate would decrease/(increase) Mattels pre-tax income by approximately $100 thousand. While Mattels level of net monetary assets denominated in bolivar fuertes will vary from one period to another based on operating cycles and seasonality, Mattel does not expect the remeasurement adjustments to be material to Mattels consolidated financial statements. During the three months ended March, 31, 2010, Mattels Venezuelan subsidiary generated less than 1% of Mattels consolidated net sales. On January11, 2010, the Venezuelan government devalued the Venezuelan bolivar fuerte and changed to a two-tier exchange structure. The official exchange rate moved from 2.15 bolivar fuerte per US dollar to 2.60 for essential goods and 4.30 for non-essential goods and s

Income Taxes

Income Taxes
	3 Months Ended Mar. 31, 2010
Income Taxes	22. Income Taxes Mattels provision for income taxes was $8.4 million for the three months ended March31, 2010, as compared to an income tax benefit of $14.5 million for the three months ended March31, 2009. Mattel recognized discrete tax expense of $0.3 million during the three months ended March31, 2010, primarily related to reassessments of prior years tax exposure based on the status of current audits in various jurisdictions, settlements, and enacted tax law changes. There were no discrete tax items recognized during the three months ended March31, 2009. During the three months ended March31, 2010, Mattel reached a resolution with the Internal Revenue Service (IRS) regarding all open issues relating to the examination of Mattels US federal income tax returns for the years 2006 and 2007. The resolution did not have a material impact on Mattels first quarter 2010 consolidated financial statements.

Contingencies

Contingencies
	3 Months Ended Mar. 31, 2010
Contingencies	23. Contingencies With regards to the claims against Mattel described below, Mattel intends to defend itself vigorously. Except as more fully described in Note 8 to the Consolidated Financial StatementsProduct Recalls, management cannot reasonably determine the scope or amount of possible liabilities that could result from an unfavorable settlement or resolution of these claims, and no reserves for these claims have been established as of March31, 2010. However, it is possible that an unfavorable resolution of these claims could have a material adverse effect on Mattels financial condition and results of operations, and there can be no assurance that Mattel will be able to achieve a favorable settlement or resolution of these claims. 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 Mattels Confidential Information and Proprietary Inventions Agreements with its employees. Bryant also removed Mattels suit to the United States District Court for the Central District of California. In December 2004, MGA intervened as a party-defendant in Mattels 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 Bryants 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. MGAs 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. MGAs 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 Mattels 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 July17, 2006, the Court issued an order dismissi

Segment Information

Segment Information
	3 Months Ended Mar. 31, 2010
Segment Information	24. Segment Information Mattels operating segments are separately managed business units and are divided on a geographic basis between domestic and international. Mattels domestic operating segments include: Mattel Girls Boys Brandsincluding Barbie fashion dolls and accessories (Barbie), PollyPocket, Little Mommy, Disney Classics, and High School Musical (collectively Other Girls Brands), HotWheels, Matchbox, Battle Force 5, and Tyco R/C vehicles and play sets (collectively Wheels), and CARS, Radica, Toy Story, Max Steel, WWE Wrestling, and Batman products, and games and puzzles (collectively Entertainment). Fisher-Price Brandsincluding Fisher-Price, Little People, BabyGear, and View-Master (collectively Core Fisher-Price), Sesame Street , Dora the Explorer, Go Diego Go!, Thomasand Friends, and SeeN Say (collectively Fisher-Price Friends), and Power Wheels . American Girl Brandsincluding Just Like You, the historical collection, and Bitty Baby. American Girl Brands products are sold directly to consumers via its catalogue, website, and proprietary retail stores. Its childrens publications are also sold to certain retailers. Additionally, the International segment sells products in all toy categories, except American Girl Brands. The following tables present information about revenues, income (loss), and assets by segment. Mattel does not include sales adjustments such as trade discounts and other allowances in the calculation of segment revenues (referred to as gross sales). Mattel records these adjustments in its financial accounting systems at the time of sale to each customer, but the adjustments are not allocated to individual products. For this reason, Mattels 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 (loss) from operations based on the adjustments recorded in the financial accounting systems. Segment income (loss) from operations represents operating income (loss), while consolidated income (loss) from operations represents income (loss) from operations before income taxes as reported in the consolidated statements of operations. The corporate and other category includes costs not allocated to individual segments, including charges related to incentive compensation, share-based payments, and corporate headquarters functions managed on a worldwide basis, and the impact of changes in foreign currency rates on intercompany transactions. FortheThreeMonthsEnded March31,2010 March31,2009 (In thousands) Revenues Domestic: Mattel Girls Boys Brands US $ 259,306 $ 220,933 Fisher-Price Brands US 183,249 170,272 American Girl Brands 70,206 66,430 Total Domestic 512,761 457,635 International 447,513 399,504 Gross sales 960,274 857,139 Sales adjustments (80,192 ) (71,493 ) $ 880,082 $ 785,646 Segment Income (Loss) Domestic:

New Accounting Pronouncements

New Accounting Pronouncements
	3 Months Ended Mar. 31, 2010
New Accounting Pronouncements	25. New Accounting Pronouncements Effective January1, 2010, Mattel adopted Financial Accounting Standards Board Accounting Standards Update (ASU) 2009-16, Accounting for Transfers of Financial Assets. This pronouncement improves the relevance and comparability of the information that a reporting entity provides in its financial statements about transfers of financial assets; the effects of the transfer on its financial position, financial performance, and cash flows; and a transferors continuing involvement, if any, in transferred financial assets. This pronouncement also eliminates the concept of a qualifying special-purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting criteria, and changes the initial measurement of a transferors interest in transferred financial assets. The adoption of this pronouncement did not impact Mattels financial position or results of operations as of or for the three months ended March31, 2010. Additionally, based on Mattels current arrangements for selling accounts receivable, Mattel does not expect the adoption to have an impact on the amounts reported in the financial statements in future periods. Effective January1, 2010, Mattel adopted ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This pronouncement requires an enterprise to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the enterprise that has both (i)the power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance, and (ii)the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. The adoption of this pronouncement did not impact Mattels financial position or results of operations as of or for the three months ended March31, 2010. Additionally, Mattel does not expect the adoption to have an impact on the amounts reported in the financial statements in future periods.