Mattel(MAT) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section provides Mattel's unaudited consolidated financial statements and detailed notes for the periods ended June 30, 2025, and June 30, 2024, and December 31, 2024 Item 1. Financial Statements This section presents Mattel, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), cash flows, and stockholders' equity, along with detailed notes explaining the basis of presentation, significant accounts, debt, equity, and other financial disclosures for the periods ended June 30, 2025, and June 30, 2024, and December 31, 2024 Consolidated Balance Sheets This statement presents Mattel's financial position, detailing assets, liabilities, and stockholders' equity as of June 30, 2025, June 30, 2024, and December 31, 2024 Consolidated Balance Sheet (June 30, 2025, in thousands) | ASSETS | Amount (in thousands) | | :--- | :--- | | Current Assets | | | Cash and equivalents | $870,452 | | Accounts receivable, net | $792,495 | | Inventories | $867,898 | | Prepaid expenses and other current assets | $268,196 | | Total current assets | $2,799,041 | | Noncurrent Assets | | | Property, plant, and equipment, net | $527,264 | | Right-of-use assets, net | $313,769 | | Goodwill | $1,392,093 | | Deferred income tax assets | $307,068 | | Identifiable intangible assets, net | $354,226 | | Other noncurrent assets | $555,434 | | Total Assets | $6,248,895 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | Current Liabilities | | | Current portion of long-term debt | $598,873 | | Accounts payable | $419,478 | | Accrued liabilities | $703,493 | | Income taxes payable | $4,210 | | Total current liabilities | $1,726,054 | | Noncurrent Liabilities | | | Long-term debt | $1,737,660 | | Noncurrent lease liabilities | $264,875 | | Other noncurrent liabilities | $348,447 | | Total noncurrent liabilities | $2,350,982 | | Stockholders' Equity | | | Common stock $1.00 par value, 1.00 billion shares authorized; 441.4 million shares issued | $441,369 | | Additional paid-in capital | $1,756,671 | | Treasury stock at cost: 119.1 million shares | $(2,726,182) | | Retained earnings | $3,616,911 | | Accumulated other comprehensive loss | $(916,910) | | Total stockholders' equity | $2,171,859 | | Total Liabilities and Stockholders' Equity | $6,248,895 | Consolidated Statements of Operations This statement outlines Mattel's revenues, expenses, and net income (loss) for the three and six months ended June 30, 2025, and June 30, 2024 Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | For the Three Months Ended June 30, 2025 (in thousands) | For the Three Months Ended June 30, 2024 (in thousands) | For the Six Months Ended June 30, 2025 (in thousands) | For the Six Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,018,562 | $1,079,728 | $1,845,191 | $1,889,237 | | Cost of sales | $499,611 | $548,992 | $918,144 | $969,631 | | Gross Profit | $518,951 | $530,736 | $927,047 | $919,606 | | Advertising and promotion expenses | $79,124 | $73,719 | $149,322 | $145,160 | | Other selling and administrative expenses | $361,328 | $373,810 | $752,206 | $726,757 | | Operating Income | $78,499 | $83,207 | $25,519 | $47,689 | | Interest expense | $29,354 | $29,984 | $58,588 | $60,044 | | Interest (income) | $(12,365) | $(12,398) | $(28,317) | $(29,680) | | Other non-operating (income) expense, net | $(1,417) | $6,110 | $11,623 | $11,721 | | Income (loss) Before Income Taxes | $62,927 | $59,511 | $(16,375) | $5,604 | | Provision (benefit) from income taxes | $16,211 | $9,196 | $(14,355) | $(11,594) | | (Income) from equity method investments | $(6,636) | $(6,545) | $(15,053) | $(11,381) | | Net Income | $53,352 | $56,860 | $13,033 | $28,579 | | Net Income Per Common Share - Basic | $0.16 | $0.17 | $0.04 | $0.08 | | Weighted-average number of common shares | 323,529 | 342,200 | 325,505 | 344,555 | | Net Income Per Common Share - Diluted | $0.16 | $0.17 | $0.04 | $0.08 | | Weighted-average number of common and potential common shares | 325,532 | 344,409 | 328,504 | 347,359 | Consolidated Statements of Comprehensive Income (Loss) This statement details Mattel's net income and other comprehensive income (loss) components, including currency translation adjustments and derivative gains/losses Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | For the Three Months Ended June 30, 2025 (in thousands) | For the Three Months Ended June 30, 2024 (in thousands) | For the Six Months Ended June 30, 2025 (in thousands) | For the Six Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $53,352 | $56,860 | $13,033 | $28,579 | | Other Comprehensive Income (Loss), Net of Tax | | | | | | Currency translation adjustments | $61,940 | $(23,381) | $115,558 | $(41,327) | | Employee benefit plan adjustments | $1,285 | $249 | $2,570 | $2,447 | | Net unrealized (losses) gains on derivative instruments: | | | | | | Unrealized holding (losses) gains | $(44,639) | $9,828 | $(53,862) | $23,052 | | Reclassification adjustments included in net income | $11,091 | $(6,080) | $13,276 | $(14,321) | | Subtotal | $(33,548) | $3,748 | $(40,586) | $8,731 | | Other Comprehensive Income (Loss), Net of Tax | $29,677 | $(19,384) | $77,542 | $(30,149) | | Comprehensive Income (Loss) | $83,029 | $37,476 | $90,575 | $(1,570) | Consolidated Statements of Cash Flows This statement summarizes Mattel's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and June 30, 2024 Consolidated Statements of Cash Flows (in thousands) | Cash Flows From Operating Activities: | For the Six Months Ended June 30, 2025 (in thousands) | For the Six Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | Net income | $13,033 | $28,579 | | Adjustments to reconcile net income to net cash flows used for operating activities: | | | | Depreciation | $68,719 | $68,645 | | Amortization of intangible assets | $15,653 | $15,640 | | Share-based compensation | $38,624 | $37,763 | | Inventory obsolescence | $14,405 | $20,978 | | Deferred income taxes | $(10,771) | $(569) | | Income from equity method investments | $(15,053) | $(11,381) | | Content assets amortization | $36,251 | $40,714 | | Changes in assets and liabilities: | | | | Accounts receivable, net | $238,999 | $223,377 | | Inventories | $(327,702) | $(255,907) | | Prepaid expenses and other current assets | $(18,476) | $(60,024) | | Accounts payable, accrued liabilities, and income taxes payable | $(277,044) | $(295,704) | | Content assets spend | $(9,327) | $(14,446) | | Other, net | $(42,579) | $(15,070) | | Net cash flows used for operating activities | $(275,268) | $(217,405) | | Cash Flows From Investing Activities: | | | | Purchases of tools, dies, and molds | $(31,991) | $(33,409) | | Purchases of other property, plant, and equipment | $(44,028) | $(32,036) | | Proceeds from foreign currency forward exchange contracts, net | $8,870 | $442 | | Other, net | $12,568 | $(7,695) | | Net cash flows used for investing activities | $(54,581) | $(72,698) | | Cash Flows From Financing Activities: | | | | Share repurchases | $(210,000) | $(199,986) | | Tax withholdings for share-based compensation | $(14,509) | $(14,162) | | Proceeds from stock option exercises | $4,767 | $4,815 | | Other, net | $(2,652) | $(30,686) | | Net cash flows used for financing activities | $(222,394) | $(240,019) | | Effect of Currency Exchange Rate Changes on Cash and Equivalents | $34,787 | $(8,831) | | Change in Cash and Equivalents | $(517,456) | $(538,953) | | Cash and Equivalents at Beginning of Period | $1,387,908 | $1,261,363 | | Cash and Equivalents at End of Period | $870,452 | $722,410 | Consolidated Statements of Stockholders' Equity This statement presents changes in Mattel's stockholders' equity, including common stock, retained earnings, and comprehensive loss, for the six months ended June 30, 2025 Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Common Stock (in thousands) | Additional Paid-In Capital (in thousands) | Treasury Stock (in thousands) | Retained Earnings (in thousands) | Accumulated Other Comprehensive Loss (in thousands) | Total Stockholders' Equity (in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance, December 31, 2024 | $441,369 | $1,780,259 | $(2,566,929) | $3,603,878 | $(994,452) | $2,264,125 | | Net loss | — | — | — | $(40,319) | — | $(40,319) | | Other comprehensive income, net of tax | — | — | — | — | $47,865 | $47,865 | | Share repurchases | — | — | $(161,440) | — | — | $(161,440) | | Issuance of treasury stock for stock option exercises | — | $(1,151) | $2,819 | — | — | $1,668 | | Issuance of treasury stock for restricted stock units vesting | — | $(6,535) | $4,312 | — | — | $(2,223) | | Deferred compensation | — | $(73) | $73 | — | — | — | | Share-based compensation | — | $19,904 | — | — | — | $19,904 | | Balance, March 31, 2025 | $441,369 | $1,792,404 | $(2,721,165) | $3,563,559 | $(946,587) | $2,129,580 | | Net income | — | — | — | $53,352 | — | $53,352 | | Other comprehensive income, net of tax | — | — | — | — | $29,677 | $29,677 | | Share repurchases | — | — | $(50,462) | — | — | $(50,462) | | Issuance of treasury stock for stock option exercises | — | $(3,292) | $6,391 | — | — | $3,099 | | Issuance of treasury stock for restricted stock units vesting | — | $(51,100) | $38,698 | — | — | $(12,402) | | Deferred compensation | — | $(61) | $356 | — | — | $295 | | Share-based compensation | — | $18,720 | — | — | — | $18,720 | | Balance, June 30, 2025 | $441,369 | $1,756,671 | $(2,726,182) | $3,616,911 | $(916,910) | $2,171,859 | Notes to Consolidated Financial Statements This section provides detailed explanations and breakdowns for various accounts and financial activities presented in the consolidated financial statements, including accounting policies, asset and liability compositions, debt, equity, and other significant financial disclosures 1. Basis of Presentation This note describes the accounting principles and interim reporting standards used for the consolidated financial statements, highlighting the seasonal nature of Mattel's business - The accompanying unaudited consolidated financial statements are prepared in accordance with GAAP applicable to interim financial information, including only normal recurring adjustments[23] - The December 31, 2024 balance sheet data is derived from audited financial statements, but interim notes do not include all annual GAAP disclosures[24] - Due to the seasonal nature of Mattel's business, interim results are not necessarily indicative of full-year expectations[24] 2. Accounts Receivable, Net This note details Mattel's accounts receivable and the methodology for estimating allowances for credit losses based on various financial and economic factors - Mattel estimates current expected credit losses based on collection history, economic trends, business environment, customer financial condition, accounts receivable aging, and customer disputes[25] Allowances for Credit Losses | Date | Allowance for Credit Losses (in millions) | | :--- | :--- | | June 30, 2025 | $8.6 | | June 30, 2024 | $8.5 | | December 31, 2024 | $8.2 | 3. Inventories This note provides a breakdown of Mattel's inventory components, including raw materials, work in process, and finished goods, for specified periods Inventories Breakdown | Category | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | :--- | | Raw materials and work in process | $117,481 | $112,077 | $94,755 | | Finished goods | $750,417 | $664,786 | $406,977 | | Total Inventories | $867,898 | $776,863 | $501,732 | 4. Property, Plant, and Equipment, Net This note presents the composition of Mattel's property, plant, and equipment, net of accumulated depreciation, and discusses significant asset acquisitions Property, Plant, and Equipment, Net (in thousands) | Category | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | :--- | | Land | $42,672 | $19,785 | $42,584 | | Buildings | $370,947 | $314,063 | $350,920 | | Machinery and equipment | $629,548 | $622,727 | $605,311 | | Software | $234,716 | $233,550 | $234,699 | | Tools, dies, and molds | $480,164 | $494,555 | $476,551 | | Leasehold improvements | $109,375 | $122,107 | $107,139 | | Construction in progress | $63,564 | $38,410 | $62,130 | | Total Gross PPE | $1,930,986 | $1,845,197 | $1,879,334 | | Less: accumulated depreciation | $(1,403,722) | $(1,400,318) | $(1,363,285) | | Total PPE, Net | $527,264 | $444,879 | $516,049 | - In July 2024, Mattel purchased an office building in El Segundo, California for $58.8 million to replace a currently leased facility, supporting its global design and development activities for North America and International segments[28] 5. Goodwill and Identifiable Intangible Assets, Net This note outlines Mattel's goodwill and identifiable intangible assets, including impairment testing policies and changes due to currency exchange rates - Mattel's reporting units are North America, International, and American Girl, with goodwill tested annually for impairment in the third quarter and whenever circumstances indicate its carrying amount may exceed fair value[29] Change in Goodwill by Reporting Unit (Six Months Ended June 30, 2025) | Reporting Unit | December 31, 2024 (in thousands) | Currency Exchange Rate Impact (in thousands) | June 30, 2025 (in thousands) | | :--- | :--- | :--- | :--- | | North America | $732,995 | $2,800 | $735,795 | | International | $441,155 | $7,572 | $448,727 | | American Girl | $207,571 | — | $207,571 | | Total Goodwill | $1,381,721 | $10,372 | $1,392,093 | Identifiable Intangible Assets, Net (in thousands) | Category | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | :--- | | Identifiable intangibles | $814,436 | $800,371 | $798,655 | | Less: accumulated amortization | $(460,210) | $(423,703) | $(438,092) | | Total Identifiable Intangible Assets, Net | $354,226 | $376,668 | $360,563 | 6. Accrued Liabilities This note provides a detailed breakdown of Mattel's accrued liabilities, including lease liabilities, royalties, incentive compensation, and advertising expenses Accrued Liabilities Breakdown (in thousands) | Category | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | :--- | | Lease liabilities | $80,246 | $75,842 | $74,755 | | Royalties | $55,811 | $50,420 | $80,754 | | Incentive compensation | $52,259 | $60,094 | $157,669 | | Advertising and promotion | $43,236 | $53,643 | $120,290 | 7. Supplier Finance Program This note describes Mattel's supplier finance program, which allows suppliers to finance payment obligations through a third-party financial institution - Mattel has a supplier finance program allowing participating suppliers to voluntarily finance payment obligations by selling receivables at a discount to a third-party financial institution[34] - Mattel's payment terms with suppliers are consistent regardless of participation, and Mattel has no economic interest in suppliers' decisions to participate[34] Outstanding Payment Obligations under Supplier Finance Program | Date | Outstanding Payment Obligations (in millions) | | :--- | :--- | | June 30, 2025 | $86.6 | | June 30, 2024 | $64.9 | | December 31, 2024 | $69.2 | 8. Seasonal Financing This note details Mattel's revolving credit facility, its terms, interest rates, and compliance with covenants, supporting seasonal liquidity needs - On July 15, 2024, Mattel entered into a new $1.40 billion senior unsecured revolving credit facility, maturing July 15, 2029, replacing a prior secured facility[35] - Borrowings under the Credit Facility bear interest at a floating rate, either Term SOFR or Base Rate, plus an applicable margin determined by Mattel's debt rating[36] - As of June 30, 2025, Mattel was in compliance with all covenants, with no outstanding borrowings and approximately $9 million in outstanding letters of credit under the Credit Facility[40] 9. Long-Term Debt This note provides a breakdown of Mattel's senior notes, debt issuance costs, and the impact of improved credit ratings on debt covenants Long-Term Debt Breakdown (in thousands) | Senior Notes | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | December 31, 2024 (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 | | 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 | $(13,467) | $(17,831) | $(15,649) | | Total | $2,336,533 | $2,332,169 | $2,334,351 | | Less: current portion | $(598,873) | — | — | | Total long-term debt | $1,737,660 | $2,332,169 | $2,334,351 | - Due to improved credit ratings from Fitch, S&P, and Moody's in 2024, certain debt covenants limiting Mattel's ability to incur additional debt, pay dividends, or make restricted payments are suspended[43] 10. Accumulated Other Comprehensive Income (Loss) This note details the components of accumulated other comprehensive income (loss), including derivative instruments, employee benefits, and currency translation adjustments Accumulated Other Comprehensive Income (Loss) (Net of Tax) | Component | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | :--- | | Derivative Instruments | $(26,279) | $5,268 | $14,307 | | Employee Benefit Plans | $(137,093) | $(140,469) | $(139,663) | | Currency Translation Adjustments | $(753,538) | $(799,916) | $(869,096) | | Total Accumulated OCI (Loss) | $(916,910) | $(935,117) | $(994,452) | - For the six months ended June 30, 2025, currency translation adjustments resulted in a net gain of $115.6 million, primarily due to the strengthening of the Russian ruble, British pound sterling, and Mexican peso against the U.S. dollar[47] - For the six months ended June 30, 2024, currency translation adjustments resulted in a net loss of $41.3 million, mainly due to the weakening of the Mexican peso and Brazilian real, partially offset by the strengthening of the Russian ruble[48] 11. Foreign Currency Transaction Exposure This note quantifies Mattel's net currency transaction gains and losses impacting operating and non-operating income for various periods Currency Transaction Gains (Losses), Net (in thousands) | Period | Operating Income/Expense (in thousands) | Other Non-Operating Income/Expense, Net (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2025 | $1,724 | $2,030 | $3,754 | | Three Months Ended June 30, 2024 | $(6,158) | $(5,698) | $(11,856) | | Six Months Ended June 30, 2025 | $2,654 | $(8,405) | $(5,751) | | Six Months Ended June 30, 2024 | $(6,040) | $(4,984) | $(11,024) | 12. Derivative Instruments This note describes Mattel's use of foreign currency forward exchange contracts for hedging and details the fair value of derivative assets and liabilities - Mattel uses foreign currency forward exchange contracts as cash flow hedges for inventory purchases and sales, and to hedge intercompany loans, with maturity dates up to 24 months[50] - Notional amounts of derivative instruments were approximately $918 million at June 30, 2025, an increase from $642 million at June 30, 2024, and $628 million at December 31, 2024[50] Derivative Assets (Fair Value, in thousands) | Balance Sheet Classification | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | :--- | | Derivatives Designated as Hedging Instruments: | | | | | Prepaid expenses and other current assets | $1,649 | $8,872 | $17,290 | | Other noncurrent assets | $289 | $1,121 | $2,775 | | Total Designated | $1,938 | $9,993 | $20,065 | | Derivatives Not Designated as Hedging Instruments: | | | | | Prepaid expenses and other current assets | $1,347 | $513 | $1,966 | | Total Not Designated | $1,347 | $513 | $1,966 | | Grand Total Derivative Assets | $3,285 | $10,506 | $22,031 | Derivative Liabilities (Fair Value, in thousands) | Balance Sheet Classification | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | :--- | | Derivatives Designated as Hedging Instruments: | | | | | Accrued liabilities | $30,139 | $1,739 | $1,370 | | Other noncurrent liabilities | $8,574 | $127 | $65 | | Total Designated | $38,713 | $1,866 | $1,435 | | Derivatives Not Designated as Hedging Instruments: | | | | | Accrued liabilities | $936 | $517 | $902 | | Total Not Designated | $936 | $517 | $902 | | Grand Total Derivative Liabilities | $39,649 | $2,383 | $2,337 | 13. Fair Value Measurements This note explains Mattel's fair value hierarchy for financial instruments and compares the fair value of long-term debt to its carrying amount - Fair value hierarchy levels are defined as Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[57] - The fair values of cash and equivalents, accounts receivable and payable, accrued liabilities, and short-term borrowings approximate their carrying amounts due to their short-term nature[56] Fair Value of Long-Term Debt vs. Carrying Amount | Date | Estimated Fair Value of Long-Term Debt (in billions) | Carrying Amount of Long-Term Debt (in billions) | | :--- | :--- | :--- | | June 30, 2025 | $2.29 | $2.35 | | June 30, 2024 | $2.25 | $2.35 | | December 31, 2024 | $2.27 | $2.35 | 14. Earnings Per Share This note presents the calculation of basic and diluted net income per common share, including the impact of share-based awards Basic and Diluted Earnings Per Common Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (in thousands) | $53,352 | $56,860 | $13,033 | $28,579 | | Weighted-average common shares (in thousands) | 323,529 | 342,200 | 325,505 | 344,555 | | Basic Net Income Per Common Share | $0.16 | $0.17 | $0.04 | $0.08 | | Dilutive share-based awards (in thousands) | 2,003 | 2,209 | 2,999 | 2,804 | | Weighted-average common and potential common shares (in thousands) | 325,532 | 344,409 | 328,504 | 347,359 | | Diluted Net Income Per Common Share | $0.16 | $0.17 | $0.04 | $0.08 | - Share-based awards totaling 6.3 million and 6.5 million for the three and six months ended June 30, 2025, respectively, were excluded from the calculation of diluted net income per common share because their effect would be antidilutive[59] 15. Employee Benefit Plans This note details the net periodic benefit cost for Mattel's defined benefit pension plans and outlines cash contributions made to these plans Net Periodic Benefit Cost for Defined Benefit Pension Plans (in thousands) | Component | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Service cost | $842 | $839 | $1,672 | $1,698 | | Interest cost | $5,110 | $5,030 | $10,189 | $10,083 | | Expected return on plan assets | $(4,385) | $(4,678) | $(8,754) | $(9,359) | | Amortization of prior service cost | $50 | $47 | $99 | $96 | | Recognized actuarial loss | $2,175 | $1,943 | $4,340 | $3,886 | | Net periodic benefit cost | $3,792 | $3,181 | $7,546 | $6,404 | - During the six months ended June 30, 2025, Mattel made cash contributions totaling approximately $14 million related to its defined benefit pension and postretirement benefit plans, with an additional $7 million expected for the remainder of 2025[62] 16. Share-Based Payments This note describes Mattel's various share-based payment awards and reports the associated compensation expense and unrecognized compensation - Mattel grants nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, performance RSUs, dividend equivalent rights, and common stock shares to officers, employees, non-employee directors, and consultants[63] - Annual performance awards under the 2025-2027 LTIP are based on Mattel's relative Total Shareholder Return (TSR) over a three-year period, with payouts ranging from 0% to 200% of the target award[64] Share-Based Compensation Expense (in thousands) | Expense Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Stock option compensation expense | $453 | $753 | $1,030 | $1,798 | | RSU compensation expense | $14,982 | $16,077 | $28,470 | $28,325 | | Performance award compensation expense | $3,285 | $3,004 | $9,124 | $7,640 | | Total Compensation Expense | $18,720 | $19,834 | $38,624 | $37,763 | - As of June 30, 2025, total unrecognized compensation expense related to unvested share-based payments was $158.1 million, expected to be recognized over a weighted-average period of 2.4 years[66] 17. Other Selling and Administrative Expenses This note provides a breakdown of selected other selling and administrative expenses, including design, development, and intangible asset amortization Selected Other Selling and Administrative Expenses (in thousands) | Expense Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Design and development | $49,384 | $47,419 | $96,178 | $95,029 | | Identifiable intangible asset amortization | $7,884 | $7,817 | $15,653 | $15,640 | 18. Restructuring Charges This note details Mattel's 'Optimizing for Profitable Growth' program, outlining its cost savings targets, cumulative charges, and expected expenditures - On February 7, 2024, Mattel announced the 'Optimizing for Profitable Growth' (OPG) program, a multi-year cost savings initiative focused on global supply chain efficiency and manufacturing footprint[68] - The OPG program includes cost savings actions related to discontinuing production at a plant in China and other 2023 actions not recognized in the prior 'Optimizing for Growth' program[68] Severance and Other Restructuring Costs (OPG Program, in thousands) | Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Cost of sales | $2,070 | $412 | $3,691 | $2,625 | | Other selling and administrative expenses | $1,732 | $10,456 | $19,492 | $17,974 | | Total | $3,802 | $10,868 | $23,183 | $20,599 | - As of June 30, 2025, Mattel recorded cumulative OPG program charges of approximately $98 million (including $3 million non-cash), with total expected cash expenditures of $115-$140 million and non-cash charges up to $5 million[71] 19. Income Taxes This note presents the provision (benefit) from income taxes and discusses discrete income tax benefits and the impact of new tax legislation Provision (Benefit) from Income Taxes | Period | Provision (Benefit) from Income Taxes (in millions) | | :--- | :--- | | Three Months Ended June 30, 2025 | $16.2 (expense) | | Three Months Ended June 30, 2024 | $9.2 (expense) | | Six Months Ended June 30, 2025 | $(14.4) (benefit) | | Six Months Ended June 30, 2024 | $(11.6) (benefit) | - For the six months ended June 30, 2025, Mattel recognized a net discrete income tax benefit of $10.4 million, primarily related to a change in its indefinite reinvestment assertion for certain foreign subsidiary earnings[72] - Mattel is currently evaluating the impact of the recently enacted H.R.1- the One Big Beautiful Bill Act (OBBBA) on its consolidated financial statements, with effects to be recorded in the third quarter of 2025[75] 20. Contingencies This note outlines Mattel's involvement in ongoing litigation, including product liability lawsuits and class action settlements, and associated accrued liabilities - Mattel is involved in ongoing litigation related to Yellowstone do Brasil Ltda., with a probable loss accrued that is not material as of June 30, 2025[79] - Class action lawsuits regarding the Fisher-Price Rock 'n Play Sleeper were settled in July 2024, with final court approval in February 2025, and the settlement amount was not material[80] - Fourteen product liability lawsuits are pending against Fisher-Price and Mattel concerning the Sleeper, alleging defects caused fatalities or injuries, with estimated liabilities accrued where appropriate, which are not material[81] - New putative class action lawsuits were filed between October 2024 and February 2025 concerning Fisher-Price Snuga Swings, alleging false marketing and suffocation risk; a contingent settlement was reached in May 2025, subject to court approval[85] 21. Segment Information This note provides financial information by Mattel's reportable segments, North America and International, detailing net sales and operating income - Mattel's reportable segments are North America and International, with performance evaluated based on each segment's gross profit and operating income[88][89] Consolidated Net Sales and Operating Income by Segment (Three Months Ended June 30, 2025) | Segment | Net Sales (in thousands) | Operating Income (Loss) (in thousands) | | :--- | :--- | :--- | | North America | $510,796 | $93,812 | | International | $507,766 | $114,930 | | Corporate and other | — | $(130,243) | | Consolidated | $1,018,562 | $78,499 | Consolidated Net Sales and Operating Income by Segment (Six Months Ended June 30, 2025) | Segment | Net Sales (in thousands) | Operating Income (Loss) (in thousands) | | :--- | :--- | :--- | | North America | $1,002,161 | $176,883 | | International | $843,030 | $138,249 | | Corporate and other | — | $(289,613) | | Consolidated | $1,845,191 | $25,519 | Net Sales by Geographic Area (Three Months Ended June 30, in thousands) | Geographic Area | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | | North America | $510,796 | $606,480 | | EMEA | $277,470 | $250,688 | | Latin America | $128,611 | $134,597 | | Asia Pacific | $101,685 | $87,963 | | Total Net Sales | $1,018,562 | $1,079,728 | 22. New Accounting Pronouncements This note discusses recently issued accounting pronouncements and Mattel's ongoing evaluation of their potential impact on financial statements - FASB ASU 2023-09 (Income Taxes) requires enhanced annual income tax disclosures, effective for fiscal years beginning after December 15, 2024, with Mattel evaluating its impact[102] - FASB ASU 2024-03 (Expense Disaggregation Disclosures) requires enhanced expense disclosures, effective for fiscal years beginning after December 15, 2026, with Mattel evaluating its impact[103] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Mattel's financial performance and condition, discussing key operational results, financial trends, liquidity, and capital resources for the second quarter and first half of 2025 compared to 2024, including the impact of strategic initiatives and market conditions Overview This section introduces Mattel as a global toy and family entertainment company, highlighting its focus on IP-driven toy business and entertainment expansion - Mattel is a leading global toy and family entertainment company focused on growing its IP-driven toy business and expanding its entertainment offering[109][112] - Mattel's brand portfolio includes Dolls (Barbie, American Girl), Infant, Toddler, and Preschool (Fisher-Price, Thomas & Friends), Vehicles (Hot Wheels, Matchbox), and Action Figures, Building Sets, Games, and Other (Masters of the Universe, UNO, Jurassic World)[109][110][113][114] Recent Developments This section summarizes Mattel's strategic progress in Q2 2025, including international growth, gross margin expansion, and monitoring of global trade policies - In Q2 2025, Mattel continued its multi-year strategy, achieving strong international growth and expanded gross margin, despite a 6% decrease in net sales and U.S. business impact from global trade dynamics and tariff uncertainty[115][116] - Gross margin expanded to 50.9% in Q2 2025 (from 49.2% in Q2 2024) due to OPG program savings, lower inventory management costs, and favorable mix[116] - Mattel is monitoring evolving U.S. global trade policy, including tariffs on imports from China, Vietnam, and Mexico, and evaluating the impact of the newly enacted OBBBA tax legislation[117][118] Results of Operations—Second Quarter Mattel's second-quarter results showed a 6% decrease in net sales to $1.02 billion, primarily due to lower gross billings in Dolls and Infant, Toddler, and Preschool categories. Despite this, gross margin improved to 50.9% due to cost savings and favorable mix, while operating income slightly decreased Consolidated Results (Q2) This section provides a consolidated financial overview for Q2 2025, detailing net sales, cost of sales, gross profit, and operating income Consolidated Results (Three Months Ended June 30, in millions, except percentages) | Metric | 2025 (in millions) | % of Net Sales (2025) | 2024 (in millions) | % of Net Sales (2024) | YoY Change (%) | Basis Points of Net Sales Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,018.6 | | $1,079.7 | | -6% | | | Cost of sales | $499.6 | 49.1% | $549.0 | 50.8% | -9% | (170) | | Gross profit | $519.0 | 50.9% | $530.7 | 49.2% | -2% | 170 | | Advertising and promotion expenses | $79.1 | 7.8% | $73.7 | 6.8% | 7% | 100 | | Other selling and administrative expenses | $361.3 | 35.5% | $373.8 | 34.6% | -3% | 90 | | Operating income | $78.5 | 7.7% | $83.2 | 7.7% | -6% | — | | Net income | $53.4 | 5.2% | $56.9 | 5.3% | -6% | (10) | Sales (Q2) This section analyzes the drivers of Mattel's net sales decrease in Q2 2025, including changes in gross billings across product categories and brands - Net sales decreased by $61.2 million (6%) to $1.02 billion in Q2 2025, driven by a $50.9 million decrease in gross billings and a $10.3 million increase in sales adjustments[121] Gross Billings by Categories (Three Months Ended June 30, in millions) | Category | 2025 (in millions) | 2024 (in millions) | % Change Reported | | :--- | :--- | :--- | :--- | | Dolls | $335.2 | $414.0 | -19% | | Infant, Toddler, and Preschool | $143.4 | $190.3 | -25% | | Vehicles | $407.5 | $369.7 | 10% | | Action Figures, Building Sets, Games, and Other | $264.5 | $227.3 | 16% | | Gross Billings | $1,150.5 | $1,201.3 | -4% | Gross Billings by Top 3 Power Brands (Three Months Ended June 30, in millions) | Brand | 2025 (in millions) | 2024 (in millions) | % Change Reported | | :--- | :--- | :--- | :--- | | Barbie | $200.7 | $266.1 | -25% | | Hot Wheels | $357.3 | $327.4 | 9% | | Fisher-Price | $107.8 | $135.9 | -21% | - Sales adjustments increased to $131.9 million in Q2 2025 (12.9% of net sales) from $121.6 million (11.3% of net sales) in Q2 2024, primarily due to higher promotional activities and a shift in sales channel mix[125] Cost of Sales (Q2) This section explains the decrease in Mattel's cost of sales for Q2 2025, attributing it to lower product costs and freight expenses - Cost of sales decreased by $49.4 million (9%) to $499.6 million in Q2 2025, mainly due to a $49.2 million decrease in product and other costs and a $3.6 million decrease in freight and logistics expenses[126] - Royalty expense increased by $3.5 million (7%) to $51.2 million in Q2 2025[126] Gross Margin (Q2) This section details the improvement in Mattel's gross margin for Q2 2025, driven by cost savings, lower inventory costs, and favorable mix - Gross margin increased to 50.9% in Q2 2025 from 49.2% in Q2 2024, an increase of 170 basis points[127] - Key drivers for gross margin increase include incremental realized savings from the OPG program (120 bps), lower inventory management costs (60 bps), favorable mix (60 bps), and supply chain efficiencies (40 bps), partially offset by cost inflation (110 bps)[127] Advertising and Promotion Expenses (Q2) This section discusses the increase in advertising and promotion expenses as a percentage of net sales in Q2 2025 due to timing shifts - Advertising and promotion expenses as a percentage of net sales increased to 7.8% in Q2 2025 from 6.8% in Q2 2024, primarily due to a shift in the timing of advertising and promotion programs[128] Other Selling and Administrative Expenses (Q2) This section explains the decrease in other selling and administrative expenses for Q2 2025, primarily due to OPG program savings and lower restructuring charges - Other selling and administrative expenses decreased by $12.5 million to $361.3 million in Q2 2025, primarily due to $10.8 million in realized savings from the OPG program and $8.3 million lower severance and restructuring charges[129] Interest Expense (Q2) This section notes that Mattel's interest expense remained relatively stable in Q2 2025 compared to the prior year - Interest expense was relatively flat at $29.4 million in Q2 2025 compared to $30.0 million in Q2 2024[130] Interest Income (Q2) This section indicates that Mattel's interest income remained consistent in Q2 2025 compared to the prior year - Interest income remained flat at $12.4 million in Q2 2025 compared to Q2 2024[131] Provision for Income Taxes (Q2) This section explains the increase in income tax provision for Q2 2025, driven by changes in discrete income tax expense and higher income before taxes - Provision for income taxes increased to an expense of $16.2 million in Q2 2025 from $9.2 million in Q2 2024, driven by a change in discrete income tax expense and higher income before income taxes[132] - Mattel recognized a net discrete income tax expense of $1.0 million in Q2 2025, compared to a net discrete tax benefit of $4.5 million in Q2 2024[132] Segment Results (Q2) In Q2 2025, the North America segment experienced a 16% decrease in net sales and a 31% decrease in operating income, primarily due to lower gross billings in Dolls and Infant, Toddler, and Preschool. Conversely, the International segment saw a 7% increase in net sales and a 49% increase in operating income, driven by strong performance in Action Figures, Building Sets, Games, and Other, and Vehicles products, coupled with improved gross margin North America Segment (Q2) This section details the financial performance of Mattel's North America segment in Q2 2025, including net sales, gross billings by category, and operating income - North America net sales decreased by $95.7 million (16%) to $510.8 million in Q2 2025, primarily due to a $99.3 million decrease in gross billings[134] - North America segment operating income decreased by $43.1 million (31%) to $93.8 million in Q2 2025, mainly due to lower gross profit[134][142] North America Gross Billings by Categories (Three Months Ended June 30, in millions) | Category | 2025 (in millions) | 2024 (in millions) | % Change Reported | | :--- | :--- | :--- | :--- | | Dolls | $168.6 | $231.1 | -27% | | Infant, Toddler, and Preschool | $69.9 | $111.6 | -37% | | Vehicles | $174.8 | $166.8 | 5% | | Action Figures, Building Sets, Games, and Other | $134.3 | $137.3 | -2% | | Gross Billings | $547.5 | $646.9 | -15% | - North America gross margin increased to 48.0% in Q2 2025 from 47.3% in Q2 2024, driven by OPG program savings (130 bps) and lower inventory management costs (40 bps), partially offset by cost inflation (80 bps)[141] International Segment (Q2) This section details the financial performance of Mattel's International segment in Q2 2025, including net sales, gross billings by category, and operating income - International net sales increased by $34.5 million (7%) to $507.8 million in Q2 2025, driven by a $48.5 million increase in gross billings, partially offset by an increase in sales adjustments[143] - International segment operating income increased by $37.6 million (49%) to $114.9 million in Q2 2025, primarily due to higher gross profit[143][150] International Gross Billings by Categories (Three Months Ended June 30, in millions) | Category | 2025 (in millions) | 2024 (in millions) | % Change Reported | | :--- | :--- | :--- | :--- | | Dolls | $166.6 | $182.9 | -9% | | Infant, Toddler, and Preschool | $73.5 | $78.7 | -7% | | Vehicles | $232.7 | $202.9 | 15% | | Action Figures, Building Sets, Games, and Other | $130.2 | $90.0 | 45% | | Gross Billings | $602.9 | $554.5 | 9% | - International gross margin increased to 51.7% in Q2 2025 from 47.6% in Q2 2024, driven by favorable foreign currency exchange rates (190 bps), favorable mix (150 bps), OPG program savings (110 bps), and lower inventory management costs (90 bps), partially offset by cost inflation (130 bps)[149] Results of Operations—First Half For the first half of 2025, Mattel's net sales decreased by 2% to $1.85 billion, primarily due to lower gross billings in Dolls and Infant, Toddler, and Preschool categories. Despite this, gross margin improved to 50.2% due to cost savings. Operating income significantly decreased by 46%, and the company reported a net loss before income taxes Consolidated Results (H1) This section provides a consolidated financial overview for the first half of 2025, detailing net sales, cost of sales, gross profit, and operating income Consolidated Results (Six Months Ended June 30, in millions, except percentages) | Metric | 2025 (in millions) | % of Net Sales (2025) | 2024 (in millions) | % of Net Sales (2024) | YoY Change (%) | Basis Points of Net Sales Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,845.2 | | $1,889.2 | | -2% | | | Cost of sales | $918.1 | 49.8% | $969.6 | 51.3% | -5% | (150) | | Gross profit | $927.0 | 50.2% | $919.6 | 48.7% | 1% | 150 | | Advertising and promotion expenses | $149.3 | 8.1% | $145.2 | 7.7% | 3% | 40 | | Other selling and administrative expenses | $752.2 | 40.8% | $726.8 | 38.5% | 4% | 230 | | Operating income | $25.5 | 1.4% | $47.7 | 2.5% | -46% | (110) | | (Loss) income before income taxes | $(16.4) | -0.9% | $5.6 | 0.3% | N/M | N/M | | Net income | $13.0 | 0.7% | $28.6 | 1.5% | -54% | (80) | Sales (H1) This section analyzes the drivers of Mattel's net sales decrease in H1 2025, including changes in gross billings across product categories and brands - Net sales decreased by $44.0 million (2%) to $1.85 billion in H1 2025, due to a $25.6 million decrease in gross billings and an $18.4 million increase in sales adjustments[151] Gross Billings by Categories (Six Months Ended June 30, in millions) | Category | 2025 (in millions) | 2024 (in millions) | % Change Reported | Currency Exchange Rate Impact | | :--- | :--- | :--- | :--- | :--- | | Dolls | $631.8 | $708.5 | -11% | -1% | | Infant, Toddler, and Preschool | $269.8 | $325.3 | -17% | -1% | | Vehicles | $715.9 | $667.4 | 7% | -1% | | Action Figures, Building Sets, Games, and Other | $457.1 | $399.0 | 15% | —% | | Gross Billings | $2,074.6 | $2,100.3 | -1% | -1% | Gross Billings by Top 3 Power Brands (Six Months Ended June 30, in millions) | Brand | 2025 (in millions) | 2024 (in millions) | % Change Reported | Currency Exchange Rate Impact | | :--- | :--- | :--- | :--- | :--- | | Barbie | $374.4 | $443.5 | -16% | -1% | | Hot Wheels | $626.1 | $585.5 | 7% | -1% | | Fisher-Price | $198.0 | $229.3 | -14% | -1% | | Other | $876.1 | $841.9 | 4% | —% | | Gross Billings | $2,074.6 | $2,100.3 | -1% | -1% | - Sales adjustments increased to $229.4 million in H1 2025 (12.4% of net sales) from $211.0 million (11.2% of net sales) in H1 2024, primarily due to higher promotional activities[155] Cost of Sales (H1) This section explains the decrease in Mattel's cost of sales for H1 2025, attributing it to lower product costs and freight expenses - Cost of sales decreased by $51.5 million (5%) to $918.1 million in H1 2025, mainly due to a $58.0 million decrease in product and other costs and a $3.4 million decrease in freight and logistics expenses[156] - Royalty expense increased by $9.9 million (12%) to $93.7 million in H1 2025[156] Gross Margin (H1) This section details the improvement in Mattel's gross margin for H1 2025, driven by cost savings, lower inventory costs, and favorable mix - Gross margin increased to 50.2% in H1 2025 from 48.7% in H1 2024, an increase of 150 basis points[157] - Key drivers for gross margin increase include incremental realized savings from the OPG program (120 bps), lower inventory management costs (90 bps), and favorable mix and other factors (40 bps), partially offset by cost inflation (100 bps)[157] Advertising and Promotion Expenses (H1) This section notes that Mattel's advertising and promotion expenses as a percentage of net sales remained consistent in H1 2025 - Advertising and promotion expenses as a percentage of net sales were relatively consistent at 8.1% in H1 2025 compared to 7.7% in H1 2024[158] Other Selling and Administrative Expenses (H1) This section explains the increase in other selling and administrative expenses for H1 2025, driven by recall-related costs and employee compensation - Other selling and administrative expenses increased by $25.4 million to $752.2 million in H1 2025, primarily due to higher expenses related to inclined sleeper product recalls ($13.7 million), employee compensation ($7.7 million), severance and restructuring charges ($6.8 million), and outside services ($12.4 million), partially offset by OPG program savings ($20.3 million)[159] Interest Expense (H1) This section notes that Mattel's interest expense remained relatively stable in H1 2025 compared to the prior year - Interest expense was relatively flat at $58.6 million in H1 2025 compared to $60.0 million in H1 2024[160] Interest Income (H1) This section indicates that Mattel's interest income remained consistent in H1 2025 compared to the prior year - Interest income was relatively flat at $28.3 million in H1 2025 compared to $29.7 million in H1 2024[161] Benefit from Income Taxes (H1) This section explains the increase in income tax benefit for H1 2025, driven by a higher loss before income taxes - Benefit from income taxes increased to $14.4 million in H1 2025 from $11.6 million in H1 2024, due to a higher loss before income taxes, partially offset by lower discrete income tax benefits[162] - Mattel recognized a net discrete income tax benefit of $10.4 million in H1 2025, primarily from a change in indefinite reinvestment assertion for foreign subsidiary earnings, compared to $12.9 million in H1 2024[162] Segment Results (H1) For the first half of 2025, the North America segment experienced an 8% decrease in net sales and a 16% decrease in operating income, primarily due to lower gross billings in Dolls and Infant, Toddler, and Preschool. The International segment, however, saw a 5% increase in net sales and a significant 60% increase in operating income, driven by strong growth in Action Figures, Building Sets, Games, and Other, and Vehicles products, along with improved gross margin North America Segment (H1) This section details the financial performance of Mattel's North America segment in H1 2025, including net sales, gross billings by category, and operating income - North America net sales decreased by $82.1 million (8%) to $1.00 billion in H1 2025, primarily due to a $79.8 million decrease in gross billings[164] - North America segment operating income decreased by $33.0 million (16%) to $176.9 million in H1 2025, mainly due to lower gross profit and higher advertising and promotion expenses[172] North America Gross Billings by Categories (Six Months Ended June 30, in millions) | Category | 2025 (in millions) | 2024 (in millions) | % Change Reported | | :--- | :--- | :--- | :--- | | Dolls | $340.9 | $395.9 | -14% | | Infant, Toddler, and Preschool | $150.0 | $192.1 | -22% | | Vehicles | $324.3 | $317.0 | 2% | | Action Figures, Building Sets, Games, and Other | $258.2 | $248.3 | 4% | | Gross Billings | $1,073.5 | $1,153.3 | -7% | - North America gross margin increased to 47.9% in H1 2025 from 46.8% in H1 2024, driven by OPG program savings (120 bps) and lower inventory management costs (80 bps), partially offset by cost inflation (80 bps)[171] International Segment (H1) This section details the financial performance of Mattel's International segment in H1 2025, including net sales, gross billings by category, and operating income - International net sales increased by $38.1 million (5%) to $843.0 million in H1 2025, despite a 2 percentage point unfavorable currency impact, driven by a $54.1 million increase in gross billings[173] - International segment operating income increased by $51.7 million (60%) to $138.2 million in H1 2025, primarily due to higher gross profit[180] International Gross Billings by Categories (Six Months Ended June 30, in millions) | Category | 2025 (in millions) | 2024 (in millions) | % Change Reported | Currency Exchange Rate Impact | | :--- | :--- | :--- | :--- | :--- | | Dolls | $290.8 | $312.7 | -7% | -1% | | Infant, Toddler, and Preschool | $119.9 | $133.2 | -10% | -2% | | Vehicles | $391.6 | $350.4 | 12% | -2% | | Action Figures, Building Sets, Games, and Other | $198.9 | $150.6 | 32% | -1% | | Gross Billings | $1,001.1 | $947.0 | 6% | -2% | - International gross margin increased to 50.1% in H1 2025 from 46.3% in H1 2024, driven by favorable foreign currency (240 bps), OPG program savings (110 bps), lower inventory management costs (100 bps), and favorable mix (60 bps), partially offset by cost inflation (130 bps)[179] Cost Savings Program Mattel's 'Optimizing for Profitable Growth' (OPG) program, launched in February 2024, aims for $200 million in annual gross cost savings by 2026, primarily from global supply chain efficiencies and manufacturing footprint optimization. As of June 30, 2025, cumulative charges were $98 million, and $126 million in cost savings have been realized Optimizing for Profitable Growth This section outlines the objectives, expected savings, and cumulative charges of Mattel's OPG cost savings program - The OPG program targets $200 million in annual gross cost savings by 2026, with approximately 60% benefiting cost of sales and 40% benefiting other selling and administrative expenses[181] - Total expected cash expenditures for the OPG program are between $115 million and $140 million, with total non-cash charges expected to be up to $5 million[181] OPG Program Severance and Other Restructuring Costs (in millions) | Category | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | | Cost of sales | $3.7 | $2.6 | | Other selling and administrative expenses | $19.5 | $18.0 | | Total | $23.2 | $20.6 | - As of June 30, 2025, Mattel recorded cumulative OPG program charges of approximately $98 million and realized cumulative cost savings of approximately $126 million[183] Liquidity and Capital Resources Mattel's liquidity is primarily supported by cash, operating cash flows, and its $1.40 billion Credit Facility. The company manages market risks, including foreign currency and interest rates, and monitors customer and vendor credit. Cash flows from operating activities decreased in H1 2025, while cash used for investing and financing activities also decreased. Total debt remained stable, and stockholders' equity saw a slight decrease Current Market Conditions This section discusses Mattel's liquidity sources, including cash balances and credit facilities, and the impact of foreign currency fluctuations - Mattel's primary sources of liquidity are its domestic and foreign cash and equivalents balances, cash flows from operating activities, its $1.40 billion Credit Facility, and access to capital markets[184] - As of June 30, 2025, $635.3 million of Mattel's $870.5 million in cash and equivalents was held by foreign subsidiaries, including $73.6 million held in Russia, where movement out of the country is currently limited[184] - Mattel estimates that a one percent change in the U.S. dollar would have impacted Mattel's second quarter 2025 net sales by approximately 0.4% and would have less than a $0.01 impact to Mattel's net income per share[214] Cash Flow Activities This section summarizes Mattel's cash flows from operating, investing, and financing activities for the first half of 2025 and 2024 - Cash flows used for operating activities increased to $275.3 million in H1 2025 from $217.4 million in H1 2024, primarily due to decreased net income and an $18.4 million increase in cash used for working capital[192] - Cash flows used for investing activities decreased to $54.6 million in H1 2025 from $72.7 million in H1 2024, mainly due to increased proceeds from Mattel-owned life insurance policies and foreign currency forward exchange contracts[193] - Cash flows used for financing activities decreased to $222.4 million in H1 2025 from $240.0 million in H1 2024, primarily due to a decrease in cash used for other financing activities, partially offset by higher share repurchases[194] Seasonal Financing This section refers to Note 8 for details on Mattel's seasonal financing arrangements - Details on seasonal financing are incorporated by reference from Note 8 to the Consolidated Financial Statements[195] Financial Position This section analyzes changes in Mattel's key financial position items, including cash, inventories, and accounts payable, for the period - Cash and equivalents decreased by $517.5 million to $870.5 million at June 30, 2025, from $1.39 billion at December 31, 2024, primarily due to cash flows used for operating activities, share repurchases, and capital expenditures[196] - Inventories increased by $366.2 million to $867.9 million at June 30, 2025, from $501.7 million at December 31, 2024, primarily due to seasonal inventory build[198] - Accounts payable and accrued liabilities decreased by $154.7 million to $1.12 billion at June 30, 2025, from $1.28 billion at December 31, 2024, due to seasonal declines in expenditure levels[200] Capitalization This section provides a summary of Mattel's capitalization, including cash, total debt, and stockholders' equity, and discusses debt repayment plans Summary of Capitalization (in millions, except percentages) | Metric | June 30, 2025 (in millions) | June 30, 2024 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | :--- | | Cash and equivalents | $870.5 | $722.4 | $1,387.9 | | Total debt | $2,336.5 | $2,332.2 | $2,334.4 | | Stockholders' equity | $2,171.9 | $1,973.1 | $2,264.1 | | Total capitalization | $4,508.4 | $4,305.3 | $4,598.5 | - Total debt was $2.34 billion at June 30, 2025, remaining stable compared to prior periods, and Mattel intends to repay or refinance its $600.0 million 2021 Senior Notes due April 2026[201] - Stockholders' equity decreased by $92.3 million to $2.17 billion at June 30, 2025, from $2.26 billion at December 31, 2024, primarily due to share repurchases, partially offset by other comprehensive income and share-based compensation[202] Litigation This section refers to Note 20 for detailed information on Mattel's ongoing legal proceedings and contingencies - Details on litigation are incorporated by reference from Note 20 to the Consolidated Financial Statements[203] Application of Critical Accounting Policies and Estimates This section states that Mattel's critic