MATTEL INC DE

Previous wording

The following discussion should be read in conjunction with the consolidated financial statements and the related notes. See Item 8 "Financial Statements and Supplementary Data." Note that amounts within this Item shown in millions may not foot due to rounding.

Current wording

The following discussion should be read in conjunction with the consolidated financial statements and the related notes. See Item 8 "Financial Statements and Supplementary Data." Amounts shown in millions or billions within this Item 7 may not sum due to rounding.

Previous wording

During 2023, Mattel made additional progress to execute its strategy to grow its IP-driven toy business and expand its entertainment offering, as it gained market share, achieved success with the Barbie movie, and further strengthened its financial position.

Current wording

During 2024, Mattel continued to execute its multi-year strategy to grow its IP-driven toy business and expand its entertainment offering, growing profitability, expanding gross margin, and generating strong cash flow.

Previous wording

Mattel ended the year with a cash balance of $1.26 billion, compared to $761.2 million in the prior year. The increase in cash was the result of Mattel's cash flows from operations, which were $869.8 million in 2023, driven by improved working capital, partially offset by cash used for capital expenditures and share repurchases.

Current wording

Mattel ended the year with a cash balance of $1.39 billion, compared to $1.26 billion in the prior year. Cash increased primarily due to Mattel's cash flows from operations, which were $800.6 million during the year. Cash flows from operations were partially offset by $400.0 million of cash used for share repurchases and capital expenditures, including $58.8 million for the acquisition of a property that will serve as Mattel's new global design center, which will replace a facility that is currently leased.

Previous wording

Additionally, in February 2024, Mattel announced the Optimizing for Profitable Growth program, a multi-year cost savings program that follows the Optimizing for Growth program and is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel's global supply chain, including its manufacturing footprint, with targeted annual gross cost savings of $200.0 million between 2024 and 2026.

Current wording

Additionally, in February 2024, Mattel announced the OPG program, a multi-year cost savings program that follows the Optimizing for Growth program ("OFG program") and is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel's global supply chain, including its manufacturing footprint. The OPG program has targeted annual gross cost savings of $200.0 million between 2024 and 2026. During 2024, Mattel generated approximately $83 million of cost savings under the OPG program.

Previous wording

Gross billings were $6.10 billion in 2023, an increase of $53.6 million, or 1%, as compared to $6.05 billion in 2022, with a favorable impact from changes in currency exchange rates of one percentage point. The increase in gross billings was due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games, and Other and Infant, Toddler, and Preschool.

Current wording

Gross billings were $6.03 billion in 2024, a decrease of $68.6 million, or 1%, as compared to $6.10 billion in 2023, with an unfavorable impact from changes in currency exchange rates of one percentage point. The decrease in gross billings was due to lower billings of Dolls and Infant, Toddler, and Preschool products, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products.

Previous wording

Sales adjustments generally represent arrangements with Mattel's customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. Additionally, sales adjustments may include foreign currency transaction gains and losses from the remeasurement of accounts receivable denominated in currencies that are different from the relevant entity's functional currency. Sales adjustments increased to $660.6 million in 2023, as compared to $613.6 million in 2022. Sales adjustments as a percentage of net sales increased to 12.1% in 2023 from 11.3% in 2022. The increase to sales adjustments as a percentage of net sales was primarily due to higher promotional activities among key retailers, as well as a shift in customer mix resulting in a higher proportion of sales with higher average sales adjustment rates.

Current wording

Sales adjustments generally represent arrangements with Mattel's customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. Additionally, sales adjustments may include foreign currency transaction gains and losses from the remeasurement of accounts receivable denominated in currencies that are different from the relevant entity's functional currency. Sales adjustments decreased to $653.7 million in 2024, as compared to $660.6 million in 2023. Sales adjustments as a percentage of net sales were relatively consistent at 12.2% in 2024, as compared to 12.1% in 2023.

Previous wording

Cost of sales decreased by $95.8 million, or 3%, to $2.86 billion in 2023 from $2.95 billion in 2022. Within cost of sales, product and other costs decreased by $139.3 million, or 6%, to $2.28 billion in 2023 from $2.42 billion in 2022, freight and logistics expenses increased by $24.4 million, or 8%, to $327.0 million in 2023 from $302.6 million in 2022, and royalty expense increased by $19.0 million, or 8%, to $249.8 million in 2023 from $230.8 million in 2022.

Current wording

Cost of sales decreased by $212.0 million, or 7%, to $2.65 billion in 2024 from $2.86 billion in 2023. Within cost of sales, product and other costs decreased by $203.4 million, or 9%, to $2.08 billion in 2024 from $2.28 billion in 2023. Royalty expense decreased by $5.7 million, or 2%, to $244.1 million in 2024 from $249.8 million in 2023. Freight and logistics expenses decreased by $2.9 million, or 1%, to $324.1 million in 2024 from $327.0 million in 2023.

Previous wording

Gross margin increased to 47.5% in 2023 from 45.7% in 2022. The increase in gross margin was primarily due to incremental realized savings from the Optimizing for Growth program of 130 basis points, favorable mix of 110 basis points, which primarily related to the release of the Barbie movie, favorable pricing, net of higher sales adjustments of 100 basis points, and cost deflation of 60 basis points, partially offset by unfavorable fixed cost absorption due to lower production volume and other supply chain costs of 220 basis points.

Current wording

Gross margin increased to 50.8% in 2024 from 47.5% in 2023. The increase in gross margin was primarily due to favorable supply chain and other efficiencies of 130 basis points, incremental realized savings from the OPG program of 90 basis points, lower inventory management costs of 60 basis points, including lower close-out sales and inventory obsolescence, cost deflation of 50 basis points, and favorable foreign currency exchange and other factors of 90 basis points, partially offset by unfavorable mix of 90 basis points primarily related to the prior year benefit from the Barbie movie.

Previous wording

Advertising and promotion expenses primarily consist of: (i) media costs, which include the media, planning, and buying fees for television, print, and online advertisements, (ii) non-media costs, which include commercial and website production, merchandising, and promotional costs, (iii) retail advertising costs, which include consumer direct catalogs; and (iv) generic advertising costs, which include trade show costs. Advertising and promotion expenses as a percentage of net sales were relatively flat in 2023 at 9.6% in 2023, compared to 9.8% in 2022.

Current wording

Advertising and promotion expenses primarily consist of: (i) media costs, which include the media, planning, and buying fees for television, print, and online advertisements, (ii) non-media costs, which include commercial and website production, merchandising, and promotional costs, (iii) retail advertising costs, which include consumer direct catalogs; and (iv) general advertising costs, which include trade show costs. Advertising and promotion expenses as a percentage of net sales were relatively flat at 9.4% in 2024, compared to 9.6% in 2023.

Previous wording

Other selling and administrative expenses were $1.50 billion, or 27.5% of net sales, in 2023, as compared to $1.27 billion, or 23.4% of net sales, in 2022. The increase in other selling and administrative expenses was primarily due to higher incentive compensation of $152.2 million, market-related pay increases of $38.1 million, higher severance and restructuring charges of $34.7 million, and a prior year gain on sale of assets of $26.9 million, partially offset by incremental realized savings from the Optimizing for Growth program of $46.0 million.

Current wording

Other selling and administrative expenses were $1.53 billion, or 28.5% of net sales, in 2024, an increase of $35.2 million, as compared to $1.50 billion, or 27.5% of net sales, in 2023. The increase in other selling and administrative expenses was primarily due to employee compensation increases and higher incentive compensation of $65.6 million, partially offset by realized savings from cost savings programs of $30.8 million.

Previous wording

Interest income increased to $25.2 million in 2023, as compared to $9.4 million in 2022, due to higher average interest rates on invested cash in 2023.

Current wording

Interest income increased by $26.2 million to $51.5 million in 2024 from $25.2 million in 2023, primarily due to higher average invested cash balances in 2024.

Previous wording

Mattel's provision for income taxes was $269.5 million in 2023, as compared to $135.9 million in 2022. In 2023, Mattel completed an intra-group transfer of certain IP rights, resulting in a net tax expense of $161.4 million related to the write-down of certain foreign deferred tax assets and the establishment of certain U.S. deferred tax assets. The 2023 income tax provision included a net tax expense of $9.9 million, including $19.2 million related to reassessments of prior year's tax liabilities based on the status of audits and settlements in various jurisdictions, partially offset by $9.2 million of benefits from the expiration of certain statutes of limitations. The 2022 income tax provision included an $11.0 million tax expense related to certain foreign subsidiaries' deferred tax liabilities of undistributed earnings and a $15.2 million tax benefit related to reassessments of prior year's tax liabilities based on the status of audits and settlements in various jurisdictions.

Current wording

Mattel's provision for income taxes was $105.6 million in 2024, as compared to a provision for income taxes of $269.5 million in 2023. The decrease in provision for income taxes was the result of the intra-group transfer of certain IP rights in the prior year, resulting in a net tax expense of $161.4 million related to the write-down of certain foreign deferred tax assets and establishment of certain U.S. deferred tax assets. Additionally, in 2024, Mattel recognized a net income tax benefit of $34.8 million related to tax elections filed to amortize certain intangible assets transferred as part of Mattel’s intra-group IP rights transfer and establishment of certain U.S. deferred tax assets, which was offset by higher income tax expense as a result of an increase in income before income taxes.

Previous wording

Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more likely than not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. Changes in the valuation allowances in 2022 primarily related to utilization and expiration of tax attributes and currency fluctuations. As of December 31, 2022, Mattel's valuation allowances on its U.S. federal and state deferred tax assets and foreign deferred tax assets were approximately $16 million and $74 million, respectively. Changes in the valuation allowances in 2023 primarily related to changes in the assessment of the future realizability of certain deferred tax assets, utilization and expiration of tax attributes, and currency fluctuations. As of December 31, 2023, Mattel's valuation allowances on its U.S. federal and state deferred tax assets and foreign deferred tax assets were approximately $14 million and $71 million, respectively. As of December 31, 2023 and 2022, Mattel had recorded net deferred tax assets of $243.1 million and $416.5 million, respectively.

Current wording

Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more likely than not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. Changes in the valuation allowances in 2023 primarily related to changes in the assessment of the future realizability of certain deferred tax assets, utilization and expiration of tax attributes, and currency fluctuations. As of December 31, 2023, Mattel's valuation allowances on its U.S. federal and state deferred tax assets and foreign deferred tax assets were approximately $14 million and $71 million, respectively. Changes in the valuation allowances in 2024 primarily related to changes in assessment of the future realizability of certain deferred tax assets, utilization and expiration of tax attributes. As of December 31, 2024, Mattel's valuation allowances on its U.S. federal and state deferred tax assets and foreign deferred tax assets were approximately $12 million and $85 million, respectively. As of December 31, 2024 and 2023, Mattel has recorded net deferred tax assets of $252.5 million and $243.1 million, respectively.

Previous wording

The Organization for Economic Co-operation and Development (OECD) reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two rules. Mattel is continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. Some of the legislative changes could impact Mattel's effective tax rate and tax liabilities. When and how these laws and regulations are adopted or enacted by various countries in which Mattel operates could increase tax complexity and uncertainty and may adversely affect Mattel's worldwide effective tax rate, income tax expense and cash flows.

Current wording

The Organization for Economic Co-operation and Development ("OECD") reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two rules. Mattel is continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. Some of the legislative changes could impact Mattel's effective tax rate and tax liabilities. When and how these laws and regulations are adopted or enacted by various countries in which Mattel operates could increase tax complexity and uncertainty and may adversely affect Mattel's worldwide effective tax rate, income tax expense and cash flows. Mattel does not expect the provisions that went into effect in 2024 to have a materially adverse impact on its results of operations, financial position, or cash flows.

Previous wording

Gross billings were $3.22 billion in 2023, an increase of $32.2 million, or 1%, as compared to $3.19 billion in 2022. The increase in the North America segment gross billings was primarily due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games, and Other and Infant, Toddler, and Preschool.

Current wording

Gross billings for the North America segment were $3.39 billion in 2024, a decrease of $37.9 million, or 1%, as compared to $3.43 billion in 2023. The decrease in the North America segment gross billings was primarily due to lower billings of Dolls and Infant, Toddler, and Preschool products, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products.

Previous wording

North America segment operating income was $793.4 million in 2023, as compared to segment operating income of $765.9 million in 2022, due to higher gross profit of $42.9 million, partially offset by higher other selling and administrative expenses of $15.9 million.

Current wording

North America segment operating income was $840.0 million in 2024, as compared to $787.7 million in 2023, due to higher gross profit of $78.7 million, partially offset by higher other selling and administrative expenses of $33.2 million.

Previous wording

Gross billings for the International segment were $2.67 billion in 2023, an increase of $41.1 million, or 2%, as compared to $2.63 billion in 2022, with a favorable impact from changes in currency exchange rates of four percentage points. The increase in the International segment gross billings was due to higher billings of Dolls and Vehicles, partially offset by lower billings of Action Figures, Building Sets, Games and Other and Infant, Toddler, and Preschool.

Current wording

Gross billings for the International segment were $2.64 billion in 2024, a decrease of $30.6 million, or 1%, as compared to $2.67 billion in 2023, with an unfavorable impact from changes in currency exchange rates of one percentage point. The decrease in the International segment gross billings was due to lower billings of Dolls, Infant, Toddler, and Preschool, and Action Figures, Building Sets, Games, and Other products, partially offset by higher billings of Vehicles products.

Previous wording

Dolls gross billings increased 23%, of which 11% was due to higher billings of Disney Princess and Disney Frozen products, 7% was due to higher billings of Barbie, driven primarily by licensing revenues associated with the release of the Barbie movie, and 5% was due to higher billings of Monster High products.

Current wording

Vehicles gross billings increased 12%, of which 11% was due to higher billings of Hot Wheels products.

Previous wording

Cost of sales decreased by $8.2 million, or 8%, to $97.9 million in 2023 from $106.1 million in 2022, as compared to a 9% decrease in net sales, primarily due to a decrease of product and other costs of $9.8 million.

Current wording

Cost of sales decreased by $95.2 million, or 8%, to $1.14 billion in 2024 from $1.23 billion in 2023, primarily due to a decrease of product and other costs of $92.4 million.

Previous wording

Gross margin increased to 45.9% in 2023 from 44.9% in 2022, primarily due to incremental realized savings from the Optimizing for Growth program of 130 basis points, favorable mix of 110 basis points, which primarily related to the release of the Barbie movie, cost deflation of 60 basis points, and favorable pricing, net of higher sales adjustments of 50 basis points, partially offset by unfavorable fixed cost absorption and other supply chain costs of 250 basis points.

Current wording

Gross margin in 2024 increased to 48.5% from 44.7% in 2023, primarily due to incremental realized savings from the OPG program of 100 basis points, cost deflation of 100 basis points, lower inventory management costs of 70 basis points, including lower close-out sales and inventory obsolescence, favorable supply chain and other efficiencies of 60 basis points, and favorable foreign currency exchange and other factors of 160 basis points, partially offset by unfavorable mix of 110 basis points, primarily related to the prior year benefit from the Barbie movie.

Previous wording

International segment operating income was $299.1 million in 2023, as compared to segment operating income of $295.8 million in 2022, primarily due to lower other selling and administrative expenses of $7.6 million and lower advertising and promotion expenses of $5.7 million, offset by lower gross profit of $10.0 million.

Current wording

International segment operating income was $389.0 million in 2024, as compared to $299.1 million in 2023, primarily due to higher gross profit of $75.9 million and lower advertising and promotion expenses of $10.8 million.

Previous wording

On February 7, 2024, Mattel announced the Optimizing for Profitable Growth program, a multi-year cost savings program that follows the OFG program and is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel’s global supply chain, including its manufacturing footprint (the "OPG program"). The OPG program includes cost savings actions in connection with discontinuing production at a plant in China as previously announced in the third quarter of 2023, that were not included in the OFG program. Targeted annual gross cost savings from actions associated with the OPG program, which are expected to be completed beginning 2024 through 2026, are $200 million. Of the $200 million in targeted annual gross costs savings, approximately 70% is expected to benefit cost of sales and 30% is expected to benefit other selling and administrative expenses. Total expected cash expenditures under the OPG program are expected to be between $130 and $165 million.

Current wording

On February 7, 2024, Mattel announced the OPG program, a multi-year cost savings program that follows the Optimizing for Growth program (the "OFG program"), which concluded in the fourth quarter of 2023. The OPG program is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel's global supply chain, including its manufacturing footprint. The OPG program includes cost savings actions in connection with discontinuing production at a plant in China, as previously announced in the third quarter of 2023, as well as savings from other previous actions taken in 2023 that were not recognized in the OFG program. Targeted annual gross cost savings from actions associated with the OPG program, which are expected to be completed by 2026, are $200 million. Of the $200 million in targeted annual gross costs savings, approximately 70% is expected to benefit cost of sales and 30% is expected to benefit other selling and administrative expenses. Total expected cash expenditures under the OPG program are expected to be between $130 and $165 million and total non-cash charges are expected to be up to $5 million.

Previous wording

In connection with the OFG program, Mattel recorded severance and other restructuring costs in the following cost and expense categories within operating income in the consolidated statements of operations:

Current wording

In connection with the OPG program, Mattel recorded severance and other restructuring costs in the following cost and expense categories within operating income in the consolidated statements of operations:

Previous wording

Mattel executed other cost savings actions in 2023 not included in the OFG program or the OPG program to streamline its organizational structure. In connection with these actions, Mattel recorded severance expense of $3.4 million within other selling and administrative expenses in the consolidated statement of operations.

Current wording

During 2023, Mattel executed actions to further streamline its organizational structure that were not included in the OFG program. In connection with these actions, Mattel recorded severance charges of $3.4 million within other selling and administrative expenses in the consolidated statement of operations.

Previous wording

Mattel's primary sources of liquidity are its domestic and foreign cash and equivalents balances, short-term borrowing facilities, including its $1.40 billion senior secured revolving credit facility (the "Revolving Credit Facility"), and access to capital markets to fund its operations and obligations. Such obligations may include capital expenditures, debt service, future royalty payments pursuant to licensing agreements, future inventory and service purchases, and required cash contributions and payments related to benefit plans. Of Mattel's $1.26 billion in cash and equivalents at December 31, 2023, $578.1 million was held by foreign subsidiaries, including $57.2 million held in Russia. Mattel's cash held in Russia can be used within the country; however, its movement out of Russia is currently limited.

Current wording

Mattel's primary sources of liquidity are its domestic and foreign cash and equivalents balances, short-term borrowing facilities, including its $1.40 billion in aggregate principal amount of senior unsecured revolving credit facilities (the "Credit Facility"), which on July 15, 2024 replaced the $1.40 billion prior credit facility, and access to capital markets to fund its operations and obligations. Such obligations may include capital expenditures, debt service, future royalty payments pursuant to licensing agreements, future inventory and service purchases, and required cash contributions and payments related to benefit plans. Of Mattel's $1.39 billion in cash and equivalents at December 31, 2024, $728.1 million was held by foreign subsidiaries, including $48.9 million held in Russia. Mattel's cash held in Russia can be used within the country; however, its movement out of Russia is currently limited. In early 2022, Mattel paused all shipments into Russia.

Previous wording

Cash flows from operating activities could be negatively impacted by decreased demand for Mattel's products, which could result from factors such as, but not limited to, adverse economic conditions and changes in public and consumer preferences, or by increased costs associated with manufacturing and distribution of products or shortages in raw materials or component parts. Additionally, Mattel's ability to issue long-term debt and obtain seasonal financing could be adversely affected by factors such as, but not limited to, global economic crises and tight credit environments, an inability to comply with its debt covenants and its Revolving Credit Facility covenants, or deterioration of Mattel's credit ratings. However, based on Mattel's current business plan and factors known to date, it is expected that existing cash and equivalents, cash flows from operations, availability under the Revolving Credit Facility, and access to capital markets, will be sufficient to meet working capital and operating expenditure requirements for the next twelve months and in the long-term.

Current wording

Cash flows from operating activities could be negatively impacted by decreased demand for Mattel's products, which could result from factors such as, but not limited to, adverse economic conditions and changes in public and consumer preferences, or by increased costs associated with manufacturing and distribution of products or shortages in raw materials or component parts. Additionally, Mattel's ability to issue long-term debt and obtain seasonal financing could be adversely affected by factors such as, but not limited to, global economic crises and tight credit environments, an inability to comply with its debt covenants and its Credit Facility covenants, or deterioration of Mattel's credit ratings. However, based on Mattel's current business plan and factors known to date, it is expected that existing cash and equivalents, cash flows from operations, availability under the Credit Facility, and access to capital markets, will be sufficient to meet working capital and operating expenditure requirements for the next twelve months and in the long-term.

Previous wording

The Tax Cuts and Jobs Act, enacted on December 22, 2017 (the "U.S. Tax Act"), provides Mattel with a reduced cost to access the earnings of its foreign subsidiaries. With the passage of the U.S. Tax Act, repatriations of foreign earnings generally will not be taxable for U.S. federal income tax purposes, but may be subject to state income tax and/or foreign withholding tax, in addition to any local country distribution requirements. As such, Mattel has evaluated its intentions related to its indefinite reinvestment assertion and has recorded a $23 million deferred tax liability related to approximately $556 million of foreign earnings that will not be indefinitely reinvested.

Current wording

The Tax Cuts and Jobs Act, enacted on December 22, 2017 (the "U.S. Tax Act"), provides Mattel with a reduced cost to access the earnings of its foreign subsidiaries. With the passage of the U.S. Tax Act, repatriations of foreign earnings generally will not be taxable for U.S. federal income tax purposes, but may be subject to state income tax and/or foreign withholding tax, in addition to any local country distribution requirements. As such, Mattel has evaluated its intentions related to its indefinite reinvestment assertion and has recorded a $22.1 million deferred tax liability related to approximately $559 million of foreign earnings that will not be indefinitely reinvested.

Previous wording

Consistent with prior periods, Mattel intends to utilize its existing cash and cash equivalents, cash flow from operations, and borrowings under the Revolving Credit Facility to meet its short-term liquidity needs. At December 31, 2023, Mattel had no outstanding borrowings under the Revolving Credit Facility and approximately $9 million in outstanding letters of credit under the Revolving Credit Facility.

Current wording

Mattel intends to utilize its existing cash and cash equivalents, cash flow from operations, and borrowings under the Credit Facility to meet its short-term liquidity needs. At December 31, 2024, Mattel had no outstanding borrowings under the Credit Facility and approximately $9 million in outstanding letters of credit under the Credit Facility.

Previous wording

Mattel sponsors defined benefit pension plans and postretirement benefit plans for its employees. Actual returns below the expected rate of return, along with changes in interest rates that affect the measurement of the liability, would impact the amount and timing of Mattel's future contributions to these plans. Mattel expects to make cash contributions totaling approximately $14 million to its defined benefit pension and postretirement benefit plans in 2024, substantially all of which will be for benefit payments for its under-funded plans.

Current wording

Mattel sponsors defined benefit pension plans and postretirement benefit plans for its employees. Actual returns below the expected rate of return, along with changes in interest rates that affect the measurement of the liability, would impact the amount and timing of Mattel's future contributions to these plans. Mattel expects to make cash contributions totaling approximately $21 million to its defined benefit pension and postretirement benefit plans in 2025, substantially all of which will be for benefit payments for its under-funded plans.

Previous wording

Cash flows provided by operating activities were $869.8 million in 2023, as compared to $442.8 million in 2022. The increase in cash flows provided by operating activities was primarily due to $525.8 million of improvements to working capital, which included $477.4 million of favorability from changes to accounts payable and accrued liabilities and $464.8 million of favorability from lower inventories, partially offset by the impact of higher accounts receivable of $396.2 million. The improvements to working capital were partially offset by changes in net income, excluding the changes to deferred tax assets of $176.4 million and other non-cash items.

Current wording

Cash flows provided by operating activities were $800.6 million in 2024, as compared to $869.8 million in 2023. The decrease in cash flows provided by operating activities was primarily due to an increase in cash used for working capital of $191.1 million, which included $285.8 million of unfavorable changes in inventories, reflecting the prior year impact of reduced inventory levels, and $86.1 million of unfavorable changes in accounts payable and accrued liabilities, partially offset by $219.7 million of favorable changes in accounts receivable. The unfavorable changes to working capital were partially offset by an increase in net income, excluding the impact of non-cash items.

Previous wording

Cash flows used for financing activities were $226.6 million in 2023, as compared to $260.6 million in 2022. The decrease in cash flows used for financing activities was primarily due to the $250.0 million repayment of the 3.15% Senior Notes due March 2023 in 2022, partially offset by $203.0 million of share repurchases in 2023.

Current wording

Cash flows used for financing activities were $449.4 million in 2024, as compared to $226.6 million in 2023. The increase in cash flows used for financing activities was primarily due to $197.0 million of higher share repurchases in 2024 compared to 2023.

Previous wording

During 2023, Mattel repurchased 10.4 million shares of its common stock at a cost of $203.0 million. During 2022, Mattel did not repurchase any shares of its common stock. Mattel's share repurchase program was first announced on July 21, 2003. On July 17, 2013, the Board of Directors approved a $500.0 million increase to Mattel's share repurchase authorization and, as of December 31, 2023, such authorization was exhausted. On February 5, 2024, the Board of Directors authorized a new $1.00 billion share repurchase program. Repurchases under the program will take place from time to time, depending on market conditions. Mattel's share repurchase program has no expiration date.

Current wording

During 2024, Mattel repurchased 21.0 million shares of its common stock at a cost of $400.0 million. During 2023, Mattel repurchased 10.4 million shares of its common stock at a cost of $203.0 million. Mattel's share repurchase program was first announced on July 21, 2003. On February 5, 2024, the Board of Directors authorized a new $1.00 billion share repurchase program. As of December 31, 2024, Mattel had a remaining authorization of $600.0 million under the program. Repurchases under the program will take place from time to time, depending on market conditions. Mattel's share repurchase program has no expiration date.

Previous wording

In 2023, Fitch maintained Mattel's credit rating of BB+ with a positive outlook. In 2023, Moody's maintained Mattel's credit rating of Baa3 with a stable outlook. In 2023, Standard & Poor's changed Mattel's credit rating from BB+ to BBB- and maintained a positive outlook. In February 2024, Fitch changed Mattel's credit rating from BB+ to BBB- with a stable outlook and Standard & Poor's changed Mattel's credit rating from BBB- to BBB with a stable outlook.

Current wording

In 2024, Fitch changed Mattel's credit rating from BB+ to BBB- with a stable outlook, Standard & Poor's changed Mattel's credit rating from BBB- to BBB with a stable outlook, and Moody's maintained Mattel's credit rating of Baa3 with a stable outlook.

Previous wording

Mattel's cash and equivalents increased $500.1 million to $1.26 billion at December 31, 2023, as compared to $761.2 million at December 31, 2022, primarily due to cash flow provided by operating activities of $869.8 million, partially offset by share repurchases of $203.0 million and capital expenditures of $160.3 million.

Current wording

Mattel's cash and equivalents increased $126.5 million to $1.39 billion at December 31, 2024, as compared to $1.26 billion at December 31, 2023, primarily due to cash flow provided by operating activities of $800.6 million, partially offset by share repurchases of $400.0 million and capital expenditures of $202.6 million.

Previous wording

Prepaid expenses and other current assets decreased $6.0 million to $207.5 million at December 31, 2023, as compared to $213.5 million at December 31, 2022, primarily due to a decrease in derivative receivables of $13.3 million.

Current wording

Prepaid expenses and other current assets increased $26.6 million to $234.1 million at December 31, 2024, as compared to $207.5 million at December 31, 2023, primarily due to an increase in derivative receivables of $16.5 million.

Previous wording

Accounts payable and accrued liabilities increased $158.4 million to $1.31 billion at December 31, 2023, as compared to $1.15 billion at December 31, 2022, primarily due to higher accrued incentive compensation of $137.8 million.

Current wording

Accounts payable and accrued liabilities decreased $30.9 million to $1.28 billion at December 31, 2024, as compared to $1.31 billion at December 31, 2023, primarily due to a decrease of $43.2 million in accounts payable, partially offset by an increase in accrued advertising expense of $18.1 million.

Previous wording

Stockholders' equity increased $92.9 million to $2.15 billion at December 31, 2023, as compared to $2.06 billion at December 31, 2022, primarily due to net income in 2023 of $214.4 million and the impact of share-based compensation on additional paid-in capital of $83.3 million, partially offset by share repurchases of $203.0 million.

Current wording

Stockholders' equity increased $114.9 million to $2.26 billion at December 31, 2024, as compared to $2.15 billion at December 31, 2023, primarily due to net income in 2024 of $541.8 million and the impact of share-based compensation on additional paid-in capital of $79.4 million, partially offset by share repurchases of $400.0 million and other comprehensive loss of $89.5 million.

Previous wording

Mattel is required to provide standby letters of credit to support certain obligations that arise in the ordinary course of business and may choose to provide letters of credit in place of posting cash collateral. Although the letters of credit are off-balance sheet, the majority of the obligations to which they relate are reflected as liabilities in the consolidated balance sheets. Outstanding letters of credit totaled approximately $9 million and $8 million as of December 31, 2023 and 2022, respectively.

Current wording

Mattel is required to provide standby letters of credit to support certain obligations that arise in the ordinary course of business and may choose to provide letters of credit in place of posting cash collateral. Although the letters of credit are off-balance sheet, the majority of the obligations to which they relate are reflected as liabilities in the consolidated balance sheets. Outstanding letters of credit totaled approximately $9 million as of December 31, 2024 and 2023.

Previous wording

The allowance for credit losses is based on collection history and management's assessment of the current economic trends, business environment, customers' financial condition, accounts receivable aging, and customer disputes that may impact the level of future credit losses. Management believes the accounting estimate related to the allowance for credit losses is a "critical accounting estimate" because significant judgment is required to evaluate the creditworthiness of its customers when estimating the collectability of its accounts receivable. In addition, the allowance requires a high degree of judgment since it involves estimation of the impact of both current and future economic factors in relation to its customers' ability to pay amounts owed to Mattel. Significant changes in the assumptions used to develop the estimate could materially affect key financial measures, including other selling and administrative expenses, net income, and accounts receivable.

Current wording

The allowance for credit losses is based on collection history and management's assessment of the current economic trends, business environment, customers' financial condition, accounts receivable aging, and customer disputes that may impact the level of future credit losses. Management believes the accounting estimate related to the allowance for credit losses is a "critical accounting estimate" because significant judgment is required to evaluate the creditworthiness of its customers when estimating the collectability of its accounts receivable. In addition, the allowance requires a high degree of judgment since it involves estimation of the impact of both current and future economic factors in relation to its customers' ability to pay amounts owed to Mattel. Significant changes in the assumptions used to develop the estimate could materially affect key financial statement line items, including other selling and administrative expenses, and accounts receivable.

Previous wording

A small number of customers account for a large share of Mattel's net sales and accounts receivable. In 2023, Mattel's three largest customers, Walmart, Target, and Amazon, in the aggregate, accounted for approximately 44% of net sales, and its ten largest customers, in the aggregate, accounted for approximately 50% of net sales. As of December 31, 2023, Mattel's three largest customers accounted for approximately 41% of net accounts receivable, and its ten largest customers accounted for approximately 49% of net accounts receivable. Should one or more of Mattel's large customers experience bankruptcy or financial difficulty, the allowance for credit losses may not be sufficient to cover such losses.

Current wording

A small number of customers account for a large share of Mattel's net sales and accounts receivable. In 2024, Mattel's three largest customers, Walmart, Target, and Amazon, in the aggregate, accounted for approximately 44% of net sales, and its ten largest customers, in the aggregate, accounted for approximately 51% of net sales. As of December 31, 2024, Mattel's three largest customers accounted for approximately 41% of net accounts receivable, and its ten largest customers accounted for approximately 51% of net accounts receivable. Should one or more of Mattel's large customers experience bankruptcy or financial difficulty, the allowance for credit losses may not be sufficient to cover such losses.