Mattel Stops Counting Expenses, Inflates Segment Operating Income 25.6%
Toy company adds more than $11 million to segment operating income by no longer counting corporate expenses.
May 18, 2021
Mattel (MAT), a toy company, no longer wishes to be burdened by some of the costs of doing business. In its latest 10-Q, the company disclosed it’s changing how it calculates segment operating income. The new calculation strips out millions of dollars in overhead:

“Effective as of the first quarter of 2021, operating income by segment reviewed by the Chief Operating Decision Maker does not include certain corporate expenses which were historically allocated by segment.”

Mattel included the disclosure twice in its latest quarterly filing and restated the prior year’s segment results to conform with the change. What it did not do is quantify the impact of the change as we have. Our analysis compares Mattel’s 2020 segment operating income reported on the current 10-Q with the 2020 segment operating results reported on the previous year’s 10-Q.

Mattel’s new calculation method resulted in the following changes in its Q1 2020 segment operating income:

-The North American segment increased $5.95 million, or 74%
-The Internatonal segment increased $5.22 million, or 15.3%

There was no change in Mattel’s American Girl segment. In all, the new calculation method adds $11.17 million to Mattel’s 2020 segment operating income, or 25.6%. Mattel’s segment results appear much better if you stop counting the severance, restructuring, product recall litigation, and incentive based compensation expenses buried in the footnotes. It’s also a convenient time to change a calculation methodology. Mattel recently announced a cost savings plan— its second in the last year— that includes an estimated $180-$210 million in additional severance, restructuring, and asset impairment charges that will not be flattering to segment results in the years to come.
Related: HAS, NWL
Become a DuDil Insider

Get our due diligence alerts before they're published & be first to know.