Mattel 2014 Annual Report TO OUR SHAREHOLDERS: I am confi dent that Mattel has at its disposal every tool and resource necessary to maintain a strong leadership position within By any measure, 2014 was – the toy industry. In 2015, we are taking a number of aggressive candidly – a challenging year for steps to deliver improved profi tability throughout the business. Mattel. Even as the global toy These steps include: industry grew in 2014, we fell short of our own expectations, as well • Driving innovation across our key brands, and in particular as those of our shareholders. The amongst those in the doll category; numbers tell the story. Mattel’s • Developing and implementing a rigorous sales plan – both worldwide net sales declined in-store and online – to improve customer service and retail 1 approximately 7% . Lower sales, exacerbated by higher costs, performance; resulted in earnings per share of $1.45, compared to $2.58 in ® 20132. • Accelerating our efforts to better position Fisher-Price as a child development brand; and But, I want to assure you, we are not standing still. We are taking • Focusing our efforts on the most signifi cant international bold and aggressive steps to reignite momentum in 2015 and market opportunities for our brands. beyond. As Chairman and Chief Executive Offi cer of Mattel, I am squarely focused on working with our talented team to Additionally, through the Funding Our Future initiative, we will revitalize the business. As we develop our go-forward plan, we continue to reduce costs throughout the business, reinvesting the are addressing the areas where we fell short in 2014, which we savings to support our efforts around restoring and growing our believe fall into three categories. profi tability. First, in a highly-competitive retail environment, our brands 2015 marks an important milestone for Mattel, as the company and products were not suffi ciently compelling to consumers. celebrates its 70th anniversary. In keeping with Mattel’s rich While some brands performed well, many did not, and product history of building cherished brands and memorable play innovation was inconsistent across our portfolio. Moreover, our experiences for children, we will continue to bolster our creative marketing efforts delivered mixed results and did not generate a momentum and enhance brand relevance by partnering with lift in overall brand sales. some of the biggest brands in kids’ entertainment. In addition to outstanding partnerships with © Disney, Nickelodeon®, Warner Second, 2014 brought one of the most competitive environments Bros. Consumer Products and WWE® Wrestling, we recently in the doll category we have seen in many years. Overall, the added Star WarsTM to our ever-expanding entertainment portfolio, doll category accounts for about 40% of Mattel’s total business3, as well as new licenses like Teenage Mutant Ninja Turtles®. and our portfolio includes the top fi ve most popular fashion doll And we are exploring innovative partnerships to bring new properties in the world4. The doll category, however, did not perspectives and dimensions to our products in 2015 and beyond. show signifi cant overall growth in 20145. And, as a result, the In fact, earlier this year we announced a novel collaboration with TM remarkable success of Disney’s Frozen franchise came at the ® Google to reimagine the venerable View-Master , giving the iconic expense of several of our brands, including Barbie®6. toy a 21st-century twist. Third, our retail execution did not meet our expectations. Our I passionately believe in Mattel, our time-tested brands, our results were impacted by inventory overhang from 2013 and, fi nancial strength and our world-class talent. Thank you for your against the backdrop of a more challenging retail environment we ongoing support, as we work to revitalize the company and its did not execute well in-store, resulting in a decline in retail support brands, deepen our connections with children and parents around and shelf space productivity. the world, and deliver value to you, our shareholders. Clearly, we have a lot of work to do. But there is ample reason to be optimistic about Mattel and our performance over the long term. Our unmatched portfolio of iconic brands, global scale and Sincerely, strong balance sheet give Mattel a unique and enviable position of leadership within the industry. The worldwide toy industry itself is strong and growing, having shown 4% annual growth last year7. And we benefi t from world-class talent across every function of Christopher A. Sinclair the company. Chairman and CEO __________________________________________________________________________ Mattel, Inc. 1 Mattel Financials 2 Mattel Financials 3 Mattel Internal Analysis 4 The NPD Group/Retail Tracking Service/Annual 2014 5 The NPD Group/Retail Tracking Service/Annual 2014 6 Mattel Internal Analysis 7 The NPD Group/Retail Tracking Service/Annual 2014 446499_TXT.indd6499_TXT.indd 1 44/3/15/3/15 111:461:46 AAMM Mattel, Inc. Form 10-K 2014 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2014 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 È 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 È 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 È 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 È 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. ‘ Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer È Accelerated filer ‘ Non-accelerated filer ‘ Smaller reporting company ‘ Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $13,157,986,680 based upon the closing market price as of the close of business June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter. Number of shares outstanding of registrant’s common stock, $1.00 par value, as of February 13, 2015: 338,254,021 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Mattel, Inc. Notice of Annual Meeting of Stockholders and 2015 Proxy Statement, to be filed with the Securities and Exchange Commission (“SEC”) within 120 days after the close of the registrant’s fiscal year (incorporated into Part III). MATTEL, INC. AND SUBSIDIARIES Page PART I Item 1. Business ...................................................................... 3 Item 1A. Risk Factors ................................................................... 13 Item 1B. Unresolved Staff Comments ...................................................... 22 Item 2. Properties ..................................................................... 22 Item 3. Legal Proceedings .............................................................. 23 Item 4. Mine Safety Disclosures ......................................................... 23 PART II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ............................................................. 24 Item 6. Selected Financial Data .......................................................... 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ..... 28 Item 7A. Quantitative and Qualitative Disclosures About Market