2015 Annual Report
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Mattel 2015 Annual Report 80706_MTL_AR11_Cover.indd 3 3/7/12 5:34 PM TO OUR SHAREHOLDERS: Superhero Girls™ franchise we will be supporting with a terrifi c line of products beginning this year. Importantly, we also reset our 2015 was a year of transformation relationship with Disney, and Mattel was recently awarded license for Mattel, as we took a number renewals for its upcoming Cars® 3 and Toy Story® 4 fi lms. And we of aggressive steps to stabilize continued our strong partnerships with DreamWorks Animation, our business and help position the Microsoft, Nickelodeon, WWE Wrestling and Universal Pictures, company for sustained growth and and developed new partnerships with 9Story Media Group, improved profi tability. Amazon Studios, DHX Media Ltd., Netfl ix and YouTube. Our transformation began with Improved retail execution was a major goal in 2015, and Mattel’s rebuilding our culture to re-focus commercial organization helped drive outstanding progress in key on brand building, creativity and areas like retail customer support, merchandising and pricing, all innovation, while putting a premium while strengthening our relationships with key retailers like Wal- on speed-to-market and accountability. Against this backdrop, Mart, Toys ‟R” Us, Target, Amazon, K-Mart and Argos. we identifi ed six strategic priorities for 2015 to guide our actions, decisions and investments throughout the year: While we took steps to be more competitive on pricing, we also continued to apply thoughtful fi nancial discipline in 2015, driving 1) Exploiting the franchise strength of our core brands efforts to reduce our cost base across our global supply chain and 2) Re-establishing toy leadership throughout the organization. Adjusted gross margin ended around 3) Achieving distinctiveness and excellence in our 50%.4* Adjusted other selling and administrative expenses were commercial organization down approximately $70 million compared to 2014, and we ended 4) Strengthening our global supply chain the year nearly $30 million ahead of our cost savings target.5* 5) Continuously drive cost improvement We are on track to deliver at the high end of our two-year savings 6) Rapidly expanding in emerging markets target of $250 to $300 million.6 Importantly, we achieved all of this while improving product quality and customer fulfi llment, and we I’m pleased to say we made solid progress on all fronts, and I maintained a cash dividend to our shareholders. think it’s fair to say Mattel is a signifi cantly different – and stronger – company than it was just a year ago. We successfully stabilized Finally, our results in 2015 were quite strong in key emerging the business in 2015, despite substantial global economic markets, China and Russia in particular. Despite some headwinds and competitive pressures. Setting aside the impact of challenging economic and political dynamics, we saw outstanding foreign exchange rates, Mattel’s gross sales in constant currency growth in both markets.7 Importantly, we now have solid teams in were up 1% for the year.1* Our gross profi t in constant currency place in both China and Russia, to help drive continued success for the year improved, and in the fourth quarter, adjusted earnings in 2016 and beyond. per share2 also improved.3 In summary, we made a great deal of progress in 2015, and our Underpinning our performance, we made great strides towards foundation for stability and growth is much stronger. However, rebuilding Mattel’s culture and organizational capabilities by despite the real progress we made this past year, we will continue articulating a set of core values – innovation, speed, accountability to face challenges in 2016. The loss of the Disney Princess® and trust – and by rallying every Mattel employee around a license, which was announced in 2014, continued softness in our common mission: to be the recognized leader in play, learning and Monster High® brand and ongoing foreign exchange pressures development worldwide. Importantly, over the past year we have will all be factors. But I believe our strengths far outweigh our replaced or re-assigned more than half of the members of our challenges, and I am confi dent we have the right strategies in senior leadership team to ensure we have the best talent fi lling place to execute and deliver. So while 2016 will likely be a year our most critical roles. We created the Chief Operating Offi cer in which we strengthen our business through continued strong position to ensure consistent alignment across our brand and execution, I believe we are well on the path to renewed growth in sales teams, and we took a number of steps to re-organize teams 2017 and beyond. and resources throughout the company to focus on strategic imperatives like core brand development, licensed entertainment I am deeply optimistic about Mattel and its prospects moving partnerships and toy leadership. Additionally, we hired several forward. We operate in a vibrant industry that is growing on executives from outside Mattel with deep expertise in crucial a worldwide basis, and the strength of our iconic brands and areas like brand management, content creation and distribution, global commercial operations is virtually unrivaled in the industry. e-commerce, fi nance and human resources. We also completely We have a strong leadership team and a re-energized global revamped our performance management systems to better workforce, and we are excited about the future of our partnerships connect individual and team performance to our core values. with both retailers and licensors. We have a solid balance sheet that enables us to invest in our business while rewarding In addition to rebuilding our culture, we also made great progress our shareholders, and we have a strategic roadmap that I am against each of our strategic priorities in 2015. Our core brands confi dent will drive continued progress in 2016 and beyond. showed improved momentum throughout the year, with particular strength demonstrated by our Hot Wheels® and Thomas & As always, thank you for your support as we work to return Mattel Friends® brands, and a very positive shift by some of our more to growth and continued industry leadership. challenged brands, like Barbie® and Fisher-Price®. We also made great strides towards focusing our marketing and messaging, adjusting our pricing strategy and improving our content and Sincerely, media distribution capabilities. Equally important, we had some big wins in the toy leadership category. In collaboration with Google, we successfully re- launched our View-Master® line, bringing the magic of virtual Christopher A. Sinclair reality to the iconic toy. We reinvigorated relationships with Chairman and CEO key licensors like Warner Bros. Consumer Products, whose DC Mattel, Inc. __________________________________________________________________________ *Gross sales and constant currency results, adjusted gross margin and adjusted other selling and 1 Mattel Financials administrative expenses are non-GAAP fi nancial measures. Please refer to “Non-GAAP Financial 2 Including discrete tax items Measures” beginning on page 42 of this Annual Report for more information about these results, 3 Mattel Financials including defi nitions of and qualifi cations for these measures, as well as reconciliations to the most 4 Mattel Financials directly comparable fi nancial measures in accordance with GAAP. 5 Mattel Financials; Mattel Internal Analysis 6 Mattel Internal Analysis 7 Mattel Internal Analysis 448213_Letter.indd8213_Letter.indd 1 33/23/16/23/16 88:42:42 AM Mattel, Inc. Form 10-K 2015 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________________________________________ FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-05647 ________________________________________________________ MATTEL, INC. (Exact name of registrant as specified in its charter) Delaware 95-1567322 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 333 Continental Blvd. El Segundo, CA 90245-5012 (Address of principal executive offices) (310) 252-2000 (Registrant’s telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $1.00 par value The NASDAQ Global Select Market ________________________________________________________ Securities registered pursuant to Section 12(g) of the Act: NONE ________________________________________________________ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.