Q Written Case #1: Mattel in 2018 Written Case #1: Mattel in 2018 Written Case #1 is Mattel Mattel - Alternative Formats . Click on the links below to access the files needed to complete Individual Written Case 1. • GBA 490 Report Layout Structure GBA 490 Report Layout Structure - Alternative Formats • GBA 490 Report Sample Grade Sheet GBA 490 Report Sample Grade Sheet - Alternative Formats tho75109_case19_C216-C231.indd?C-216 12/18/18 10:49 AM Mattel Incorporated in 2018: Can Ynon Kreiz Save the Toys? Randall D. Harris Texas A&M University—Corpus Christi “Ynon is a good guy, but he doesn’t know toys and will fail like Margo did,” read Ynon Kreiz, Chairman and Chief Executive Officer (CEO) of Mattel, Incorporated.1 It was April 26, 2018, and it was Ynon Kreiz’s first day on the job as Mattel CEO. Mattel, maker of Barbie dolls and Hot Wheels cars, had just received a letter offering to merge Mattel with privately held MGA Entertainment, run by CEO Isaac Larian. In his offer letter, Mr. Larian did not put a specific value or terms on his offer, but had proposed that the two companies merge based upon the value of MGA Entertainment and its brands, which included the Little Tykes line of preschool toys. Larian also argued that he, not Kreiz, should be the executive to lead the turnaround of Mattel.2 Kreiz had been named Chairman and CEO of Mattel on April 19, 2018, and was succeeding Margo Georgiadis in the job. Ms. Georgiadis, hired away from Alphabet Inc.’s Google division, had been appointed as Mattel CEO in February 2017. Unfortunately, Georgiadis had been unable to reverse a sharp drop in Mattel’s revenues, earnings, and stock price.3 The slide in Mattel’s fortunes had been sharpened by the bankruptcy of the retailer Toys “R” Us in 2017, a key customer for Mattel’s products. Kreiz was now the fourth CEO for Mattel in four years. Sitting in his new office at Mattel headquarters in El Segundo, California, Ynon Kreiz knew that he had numerous problems with which to contend as the incoming CEO of Mattel. Where to begin? In his hands on his first day was an unsolicited offer to merge with MGA Entertainment. Mattel had also been in involved in off and on merger negotiations with Hasbro, another close toy industry competitor. Central to all of these discussions was a painful reality—children around the world were growing up faster and were increasingly drawn to online content, movies, smartphones, and video games. Competition for store space, sales, and market share in the toy industry was intense. Making matters worse, Mattel’s traditional sales channel, physical retail stores, were increasingly under strain and consolidating. The bankruptcy of Toys “R” Us was symptomatic of this retail consolidation. Online retail competition, notably Amazon.com, was increasingly making inroads into the sales of traditional bricks-and-mortar retailers. Mattel had also stumbled in their competition with Hasbro, their closest competitor in the toy industry. Kreiz had taken the reins of the company with a mandate from investors to streamline Mattel operations, improve the company’s focus on technology and entertainment, and to deliver a recovery in Mattel’s struggling stock price. From a peak of $47.82 per share in 2013, Mattel was now trading between $12 and $18 per share. The company had reported a $1 billion loss in 2017. Sales, deeply affected by the bankruptcy of Toys “R” Us, were down 10 percent from 2016 to 2017. With all of these challenges for the struggling company, the pressing question was this: Could Ynon Kreiz stop the slide at Mattel? Further, what should Kreiz and Mattel do next? COMPANY HISTORY Mattel was founded by Ruth and Elliott Handler out of a garage in Southern California in 1945.4 Their first CASE 19 Copyright ©2018 by Randall D. Harris. All rights reserved. Final PDF to printer tho75109_case19_C216-C231.indd?C-217 12/18/18 10:49 AM Case 19 Mattel Incorporated in 2018: Can Ynon Kreiz Save the Toys? C-217 two products were picture frames and dollhouse furniture crafted from scraps of picture frame. Their first hit toy was the “Uke-A-Doodle,” a toy ukulele, released in 1947. Mattel was formally incorporated in 1948 with their headquarters based in Los Angeles, California.5 In 1955, Mattel began advertising their toys on a popular television show, the Mickey Mouse Club, which revolutionized the way in which toys were marketed to children. Mattel released a number of new toys on the television show. In 1959, Ruth Handler created an innovative design for a new type of doll, and named it after her own daughter, Barbara. The introduction of the Barbie doll became a smash hit and propelled Mattel to the top of the toy industry. Mattel would go on to sell over one billion Barbie dolls, making Barbie the largest selling and most profitable toy in Mattel’s toy lineup. The Barbie doll was followed in 1960 with the Chatty Cathy, a talking doll that would change the toy industry and lead to many imitators. Hot Wheels die-cast vehicles were rolled out in 1968. Hot Wheels toys influenced the lives of several generations of children, leading the company to estimate that at least 41 million children had grown up alongside the Hot Wheels brand. After a long and successful career with Mattel, Ruth and Elliott Handler left Mattel in 1975. Mattel was an early entrant into the electronic games market, introducing an electronic handheld game in 1977. Initial success with the handheld game led to the IntelliVision home video entertainment system and a spin-off corporation, Mattel Electronics. This early venture into electronics did not last, however, as declining sales and mounting losses forced Mattel into abandoning the electronics initiative. Mattel took a $394 million loss in 1983 and debated a bankruptcy filing. Mattel reevaluated their diversification strategy as a result and closed or divested all non-toy related subsidiaries in the wake of the losses. The He-Man and the Masters of the Universe line of action figures was the next best seller for the company beginning in 1982. The company estimated sales of the He-Man line at $400 million in 1985.6 However, the success was short lived and sales dropped, contributing to a loss of $115 million in 1987. Mattel began a revived working relationship with the Disney Company in 1988. This combination revived Mattel, leading to hit products based on Disney characters like Mickey Mouse and characters from the top-grossing Disney animated movie Toy Story. Mattel purchased Fisher-Price in 1993, merged with Tyco Toys in 1997, and acquired the parent company for the American Girl Brand in 1998. The company also acquired the Learning Company, a U.S. based educational software company, in the fall of 1998. The Learning Company, a merger financed with Mattel stock, was acquired for $3.5 billion.7 One of the Learning Company’s more popular software offerings was the “Where in the World is Carmen Sandiego?” series. Losses from the Learning Company acquisition were almost immediate. In addition to inflated sales forecasts for the unit, Mattel had bought the Learning Company just as children were switching from games and learning toys on CD-ROM to downloading them from the Internet. Unfortunately, the Learning Company was delivering their products primarily on CD-ROM at that time.8 In addition to the ouster of then CEO Jill Barad, Mattel booked a $430 million loss in 2000. New CEO Robert Eckert moved swiftly in 2000 to restructure Mattel. He dumped the Learning Company along with other software-related assets and began a restructuring plan for the company, with the goal of achieving $200 million in immediate cost savings. Eckert also reduced the company’s dividend and cut about 10 percent of the workforce.9 Although painful, the company had better luck that year with licensing agreements. In 2000, Mattel retained the master licensing rights to market and sell Harry Potter toys, collectibles and games, and also agreed with Disney to market Disney Princess dolls. As part of CEO Eckert’s restructuring efforts, the company announced in April 2001 that Mattel would close its last U.S. manufacturing site and move the operations to Mexico.10 This plant closure was part of the continuing cost-cutting efforts at the company, and closed Mattel’s final U.S. plant in Murray, Kentucky. The plant had been operational since 1973 and employed 980 manufacturing and distribution workers. Mattel had been an early adopter of overseas manufacturing, and had been making toys in Mexico for 25 years and in Asia for 30 years at the time of this final U.S. plant closure.11 By 2007, approximately 65 percent of Mattel’s toys were made in China. This included five wholly owned Mattel factories as well as numerous contractor and subcontractor facilities. Mattel had also developed, over time, a reputation for quality and safety in their manufacturing practices.12 Nevertheless, in May Final PDF to printer tho75109_case19_C216-C231.indd?C-218 12/18/18 10:49 AM C-218 PART 2 Cases in Crafting and Executing Strategy worse, sales during the fourth quarter of 2016 failed to meet expectations, and Mattel had to cut prices to salvage the all-important holiday season.19 In the wake of the holiday 2016 debacle, Margo Georgiadis was named CEO of Mattel in February of 2017. From February 2017 to April 2018, Mattel’s stock price dropped by 50 percent, and Ms. Georgiadis was unable to reverse the continued slide in Mattel’s sales and earnings.20 In November of 2017, Hasbro made a takeover offer for Mattel, an offer that Mattel’s board rejected.21 Ms. Georgiadis then left Mattel abruptly in April 2018. Former studio executive Ynon Kreiz, a member of Mattel’s board of directors since June of 2017, was named the incoming CEO. Kreiz began his tenure as CEO of Mattel on April 26, 2018. VISION, MISSION, AND STRATEGIC GOALS Mattel Inc. had no formal mission or vision statement. The company stated that the Mattel Incorporated family of companies was “a worldwide leader in the design, manufacture, and marketing of toys and family products.”22 The company also emphasized the power of play, stating that play was essential for creating future generations of thinkers, makers, and doers. Mattel had been named one of the world’s most ethical companies by Ethnisphere Magazine in 2013, and was also ranked Number 2 on Corporate Responsibility Magazine’s “100 Best Corporate Citizens” list.23 In her report to Mattel shareholders in early 2018, CEO Margo Georgiadis had outlined five strategic pillars to transform the company and return it to growth: 1. Building Mattel’s core brands into connected 360-degree play systems and experiences, 2. Accelerating emerging markets growth with digital first solutions, 3. Focusing and strengthening the company’s innovation pipeline, 4. Reshaping the company’s operations, and 5. Reigniting Mattel’s culture and team.24 Ms. Georgiadis noted a number of changes in Mattel’s executive ranks in her report, including the appointment of Ynon Kreiz to Mattel’s Board of Directors in June 2017. Georgiadis also noted that to June 2007, Mattel discovered toys manufactured with lead-tainted paint during routine safety checks at a number of contractor facilities in China. The subsequent investigation into the tainted toys led to a crisis for Mattel, with a large public outcry, regulatory scrutiny and the recall of over 19 million Mattel-branded toys.13 While a major setback for the company, Mattel was noted for handling the recalls swiftly and effectively.14 Mattel also moved swiftly to diversify their manufacturing facilities to other countries in order to avoid supply disruptions and other risks. Mattel gradually recovered from the lead paint crisis, and revenue growth for the company resumed in 2010. Then, in 2012, sales of Barbie dolls began to drop.15 Gross sales for the Barbie doll line exceeded $1.2 billion in 2012, and the drop in Barbie sales was balanced by strong sales in other Mattel toy lines, particularly the Disney Princess doll line. The release of the Disney movie “Frozen” provided a sharp boost to Mattel’s Disney line of dolls and related products in 2013, and this somewhat countered the slump in the core Barbie brand. Net sales for Mattel Inc. overall peaked in 2013 at $6.48 billion, despite the Barbie sales slump. By the third quarter of 2014, however, sales of the Barbie brand had dropped 21 percent from the previous year.16 What was wrong with Barbie? Analysts acknowledged that Barbie was still one of the top doll brands in the world, but noted that girls were increasingly drawn to other, more innovative dolls and games that ran on tablets, computers, and smartphones.17 Further, while Barbie’s core demographic used to be between the ages of 3 and 9, the market for Barbie now appeared to be between the ages of 3 and 6. Children were maturing faster than ever in the 21st century. There had also been longstanding complaints about a lack of diversity in the Barbie doll line, particularly given the changing demographics of the U.S. child population.18 Other Mattel lines then began to join the Barbie sales slump, including the popular American Girl brand, Hot Wheels, and Fisher Price infant toys. Overall net sales for Mattel dropped by $400 million in 2014. In January 2015, Mattel CEO Bryan Stockton was replaced by Christopher Sinclair, a longstanding director on Mattel’s board of directors. In 2016, Disney moved their license to the Princess line of dolls, including their blockbuster “Frozen” toys, to Mattel rival Hasbro. The loss of the Disney license had a negative impact on Mattel. Making matters Final PDF to printer tho75109_case19_C216-C231.indd?C-219 12/18/18 10:49 AM Case 19 Mattel Incorporated in 2018: Can Ynon Kreiz Save the Toys? C-219 Manufacturing for the company was conducted through both company-owned facilities and by contract through third-party manufacturers. Mattel had company-owned manufacturing facilities in Canada, China, Indonesia, Malaysia, Mexico, and Thailand. Manufacture of core products for the company was generally conducted by company-owned facilities in order to improve flexibility and to lower manufacturing costs.28 Non-core toy products were produced by third-party contract manufacturers. Mattel also purchased some toys from unrelated companies for resale through Mattel sales channels. Creativity and innovation was a critical issue for companies like Mattel in the toy industry. Mattel invested heavily in refreshing, redesigning, and extending their existing toy lines, as well as developing brand new toy product lines for their company. Product design and development was conducted in house by a group of professional toy designers and engineers. In 2017, the company spent approximately $225 million on product design and development. Mattel’s toy business was highly seasonal. Sales built into the fourth quarter of the year and end of year holidays. A significant portion of purchasing by Mattel’s customers occurred during the third and fourth quarters of the year.29 It was critical that Mattel manufacture enough of the right toys in advance of the fourth quarter to meet this surge in demand. Conversely, not manufacturing unpopular toys was also important to avoid stocking unpopular items. It was difficult for the company to match supply and demand with significant lead times for production early in the year. This seasonality in demand also meant increased need by Mattel for working capital earlier in the year in order to meet the anticipated surge in production to meet year-end demand for toys. MATTEL PRODUCTS Mattel’s brands and products were organized into four main categories: (1) Mattel Girls and Boys Brands, (2) Fisher-Price Brands, (3) American Girl Brands, and (4) Construction and Arts & Crafts Brands. Each category had a multitude of products as part of their portfolio: 1. Mattel Girls&BoysBrands. This category included the Barbie doll and related accessories, Monster High, DC Super Hero Girls, Enchantimals, and Polly Pocket brand lines. Wheeled toy lines the organizational structure of Mattel had been flattened and simplified to accelerate decision making within the company. Ms. Georgiadis introduced incoming CEO Kreiz on Mattel’s April 26, 2018 call with analysts. On the call, CEO Kreiz said: We have a lot to do to reach our objectives. But I’m very confident that we have the right plan and the right team in place . . . . We are already making strong progress against our strategic pillars. My immediate focus (for Mattel) includes the following priorities: implementing our Structural Simplification to restore profitability, stabilizing revenue, reinvigorating our concept to drive creativity, which I believe is essential to our success; and strengthening our collaboration with our partners.25 Incoming CEO Kreiz also articulated his longerrange vision for Mattel during the call with analysts: The big picture opportunity is to transform Mattel to an IT (information technology) driven high-performing toy company, that is more efficient, more profitable, and has a higher growth trajectory. We have very strong assets, including some of the world’s best and greatest toy brands. We have a very good team and a very good strategy that I feel very good about. So our focus now is to deliver on our transformation plan and maximize value for the company and for our shareholders. This is not going to be easy. There’s no denying that we faced significant challenges over the last few years and there are still headwinds in certain key areas of the business. But I feel confident about where we sit and what we have to do to take it on.26 COMPANY OPERATIONS Mattel Inc. had their worldwide headquarters in El Segundo, California, just south of the Los Angeles International Airport (LAX). As of December 2017, the company employed 28,000 people on a worldwide basis. The corporate headquarters consisted of two main buildings in El Segundo, with additional leased buildings in the immediate area for company operations. Mattel also had another major facility in East Aurora, New York, that was used for North American operations and support. Mattel’s American Girl operations were based in Middleton, Wisconsin, with a headquarters facility, a warehouse, and distribution facilities in the immediate Middleton, Wisconsin area. Mattel also had retail and related office space in 20 additional cities around the United States, and 40 countries around the world.27 Mattel sold their products in 150 nations. Final PDF to printer tho75109_case19_C216-C231.indd?C-220 12/18/18 10:49 AM C-220 PART 2 Cases in Crafting and Executing Strategy MATTEL CUSTOMERS Mattel sold their products throughout the world. Mattel toys and related products were sold directly to discount retailers, freestanding toy stores, department stores, chain stores, and wholesalers. Mattel also had several small retail stores near to their corporate headquarters and distribution centers. American Girl products were sold directly to consumers through their own retail stores and also to retailers. Mattel also sold some of their products online through company subsidiaries. In 2017, three customers of Mattel accounted for 37 percent of company sales. These three customers were Wal-Mart, Toys “R” Us, and Target. Exhibit 1 presents a sales breakdown of Mattel’s Major Customers for 2015 through 2017. The bankruptcy of Toys “R” Us had already damaged Mattel sales, and the pending plan to close some or all of the Toys “R” Us locations in the United States was anticipated to further damage Mattel sales in 2018. KEY EXECUTIVES Ynon Kreiz was new the Chairman and CEO of Mattel. Kreiz, 53, was born and raised in Israel. He earned a BA in Economics and Management in 1991 from Tel Aviv University. After moving to Los Angeles, Kreiz earned an MBA from UCLA in 1993. In 1996, Kreiz moved to London to launch Fox Kids Europe, a Pay-TV children’s television network. He served as Chairman and CEO of Fox Kids Europe from 1997 to 2002. Fox Kids Europe was acquired by the Walt Disney Company in 2001. After a stint at a venture capital firm, Kreiz served as Chairman and CEO of Endemol from 2008 to 2011. Endemol was a European-based global television and digital production company. Then in 2013, Kreiz became Chairman and CEO of Maker Studios in Los Angeles. Maker Studios produced included Hot Wheels, Matchbox, and CARS. Additional brand lines were DC Comics, WWE Wrestling, Minecraft, Toy Story, and additional games and puzzles. 2. Fisher-Price Brands. The core Fisher-Price brands included Fisher-Price, Little People, BabyGear, Laugh & Learn, and Imaginext. Additional brand lines included Thomas & Friends, Shimmer & Shine, Mickey Mouse Clubhouse, and Power Wheels. 3. American Girl Brands. American Girl brands and products included American Girl, Truly Me, Girl of the Year, BeForever, Bitty Baby, and WellieWishers. 4. Construction andArts & CraftsBrands. These brand lines included MEGA BLOKS and RoseArt.30 MATTEL MARKETING Marketing toys to children and their parents was an advertising intensive activity. Mattel spent heavily on marketing and promotional activities. Marketing activity was seasonal, with a peak during the fourth quarter of the year. Mattel advertised through TV and radio commercials, magazines, and newspapers. Promotional activity for the company included in-store displays, major events focusing on Mattel branded products, and marketing tie-ins with various consumer products companies. During 2017, Mattel spent $642.3 million, or 13.2 percent of company net sales, on advertising and promotion. Of particular importance to Mattel was the rise of social media and the Internet as a marketing and promotional channel. Children and their parents were increasingly accessing information about toys on social media websites. Mattel had carefully developed their Facebook presence, and had cultivated 14 million followers for their Barbie page. Mattel also had a strong presence on YouTube for Barbie, with 3.8 million subscribers. EXHIBIT 1 Mattel Incorporated Major Customers (U.S. dollars in thousands) Major Customer 2015 2016 2017 Wal-Mart $1,000,000 $1,100,000 $1,000,000 Toys “R” Us $ 600,000 $ 600,000 $ 400,000 Target $ 500,000 $ 400,000 $ 400,000 Source: Mattel Form 10-K 12/31/2017. Final PDF to printer tho75109_case19_C216-C231.indd?C-221 12/18/18 10:49 AM Case 19 Mattel Incorporated in 2018: Can Ynon Kreiz Save the Toys? C-221 EXHIBIT 2 Mattel, Inc. Leadership in 2018 Name Brief Biography Ynon Kreiz Chairman and Chief Executive Officer Age: 53 Tenure: 0 years Ynon Kreiz, has served as Chairman of Mattel Inc. since May 17, 2018, as its Chief Executive Officer since April 26, 2018. Mr. Kreiz holds a BA in Economics and Management from Tel Aviv University and an MBA from UCLA’s Anderson School of Management. Richard Dickson President and Chief Operating Officer Age: 50 Tenure: 4 years Richard Dickson, has been the President and Chief Operating Officer of Mattel, Inc. since April 2, 2015. Mr. Dickson started his career and spent nearly a decade with Bloomingdale’s, a leading U.S. fashion retailer. Michael Eilola Executive Vice President, Chief Supply Chain Officer Age: 56 Tenure: 0 years Michael J. Eilola, has been Executive Vice President and Chief Supply Chain Officer of Mattel, Inc. since January 2018. Prior to joining Mattel, Inc., Mr. Eilola held executive positions with Honeywell International Inc. Nancy Elder Chief Communications Officer Tenure: 1 year Nancy Elder has been Chief Communications Officer of Mattel since September 2017. From 2014 to 2017, she served as Chief Communications Officer of JetBlue Airways. Joseph Euteneuer Chief Financial Officer Age: 61 Tenure: 1 year Joe Euteneuer has been the Chief Financial Officer of Mattel Inc. since September 25, 2017. Mr. Euteneuer holds a Bachelor’s degree from Arizona State University and is a certified public accountant. Sven Gerjets Chief Technology Officer Tenure: 1 year Sven Gerjets has been Chief Technology Officer of Mattel since July 2017. From January 2017 to July 2017, he served as Chief Product Officer of n.io Innovation. Mr. Gerjets was the Chief Information Officer of Time Warner Cable, Inc., from October 2015 to June 2016. Robert Normile Executive Vice President, Chief Legal Officer, Secretary Age: 58 Tenure: 19 years Robert Normile has served as Executive Vice President, Chief Legal Officer and Secretary of Mattel, Inc. since February 2011. Mr. Normile was previously associated with the law firms of Latham & Watkins LLP and Sullivan & Cromwell LLP. Amanda Thompson Executive Vice President, Chief People Officer Age: 42 Tenure: 1 year Amanda J. Thompson, has been Executive Vice President and Chief People Officer of Mattel, Inc. since September 2017. From 2012 to 2017, Ms. Thompson served as Chief People Officer of TOMS Shoes. Ms. Thompson held several executive and leadership roles at Starbucks Coffee Company from 2006 to 2012. Source: Mattel, Inc. short-form videos for YouTube and other platforms. Maker was sold to the Walt Disney Company in 2014. Kreiz stepped down as CEO of Maker Studios in January 2016. Kreiz then joined Mattel’s board in 2017 and became Mattel CEO in April 2018. CEO Kreiz was joined by Richard Dickson as Mattel’s President and Chief Operating Officer (COO). Dickson, 50, had been President and COO since April 2015. Mr. Dickson had extensive retail experience, including almost a decade at Bloomingdale’s. Mattel’s Chief Legal Officer, Robert Normile, was the longest serving executive at Mattel. Normile had been Chief Legal Officer at Mattel since February 2011, and had an extensive legal background. All of the remaining members of Kreiz’s top management team, including Chief Financial Officer Joseph Euteneuer, had served one year or less in their current roles. Exhibit 2 provides a brief summary of Mattel’s top leadership team in 2018. Final PDF to printer tho75109_case19_C216-C231.indd?C-222 12/18/18 10:49 AM C-222 PART 2 Cases in Crafting and Executing Strategy EXHIBIT 3 Mattel, Inc. Consolidated Income Statements 2013–2017 (amounts in thousands of U.S. dollars, except per share, employee and stockholder data) 2017 2016 2015 2014 2013 Net Sales $ 4,881,951 $5,456,650 $5,702,613 $6,023,819 $6,484,892 Cost of sales 3,061,122 2,902,259 2,896,255 3,022,797 3,006,009 Gross profit (loss) 1,820,829 2,554,391 2,806,358 3,001,022 3,478,883 Advertising & promotion expenses 642,286 634,947 717,852 733,243 750,205 Other selling & administrative expenses 1,521,366 1,400,211 1,547,584 1,614,065 1,560,575 Operating income (loss) (342,823) 519,233 540,922 653,714 1,168,103 Interest expense 10,5214 95,118 85,270 79,271 78,505 Interest income 7,777 9,144 7,230 7,382 5,555 Other non-operating income (expense), net (64,727) (23,517) 1,033 5,085 3,975 Income (loss) before income taxes (504,987) 409,742 463,915 586,910 1,099,128 Total deferred income tax provision (benefit) 436,802 1,236 4,133 8,142 19,632 Provision (benefit) for income taxes 548,849 91,720 94,499 88,036 195,184 Net income (loss) (1,053,836) 318,022 369,416 498,874 903,944 Less net income allocable to participating restricted stock units – 1,377 3,179 4,028 8,335 Net income (loss) applicable to common shares $ (1,053,836) $ 316,645 $ 366,237 $ 494,846 $ 895,609 Weighted average shares outstanding –basic 343,564 341,480 339,172 339,016 343,394 Weighted average shares outstanding –diluted 343,564 344,233 339,748 340,768 347,459 Year end shares outstanding 343,800 342,400 339,700 338,100 339,300 Net income (loss) per share – basic ($3.07) $0.93 $1.08 $1.46 $2.61 Net income (loss) per share – diluted ($3.07) $0.92 $1.08 $1.45 $2.58 Dividends declared per common share $0.91 $1.52 $1.52 $1.52 $1.44 Total number of employees 28,000 32,000 31,000 31,000 29,000 Number of common stockholders 27,000 28,000 29,000 30,000 31,000 Source: Mergent Online. FINANCIAL STATUS Net sales for Mattel decreased from $6.48 billion in 2013 to $4.88 billion in 2017. Variable expenses remained relatively stable during the 2013 to 2017 time period, resulting in a sharp drop in gross profit as well. The company reported a negative operating income and a $1 billion net loss in 2017. Mattel’s consolidated income statements for 2013 through 2017 are presented in Exhibit 3. Final PDF to printer tho75109_case19_C216-C231.indd?C-223 12/18/18 10:49 AM Case 19 Mattel Incorporated in 2018: Can Ynon Kreiz Save the Toys? C-223 EXHIBIT 4 Mattel, Inc. Consolidated Balance Sheets 2016–2017 (amounts in thousands of U.S. dollars) ASSETS 2017 2016 Cash & equivalents $1,079,221 $ 869,531 Accounts receivable, net 1,128,610 1,115,217 Inventories 600,704 613,798 Prepaid expenses & other current assets 303,053 341,518 Total current assets 3,111,588 2,940,064 Property, plant & equipment, gross 2,740,997 2,645,539 Less: accumulated depreciation 1,955,712 1,871,574 Property, plant & equipment, net 785,285 773,965 Goodwill 1,396,669 138,7628 Deferred income taxes 76,750 508,363 Total assets $6,238,503 $6,493,794 LIABILITIES Accounts payable $ 5,721,66 $ 664,857 Accrued royalties 111,669 107,077 Other accrued liabilities 420,054 350,248 Accrued liabilities 792,139 628,826 Income taxes payable 9,498 19,722 Total current liabilities 1,623,803 1,505,573 Long-term debt 2,873,119 2,134,271 Benefit plan liabilities 168,539 192,466 Total noncurrent liabilities 3,357,245 2,580,439 Total liabilities 4,981,048 4,086,012 Equity Common stock 441,369 441,369 Additional paid-in capital 1,808,391 1,790,832 Treasury stock at cost 2,389,877 2,426,749 Retained earnings (accumulated deficit) 2,179,358 3,545,359 Total stockholders’ equity (deficit) 1,257,455 2,407,782 Total liabilities and stockholders’ equity $6,238,503 $6,493,794 Source: Mergent Online. The 2017 losses in net income resulted in a writedown in retained earnings on Mattel’s balance sheet in excess of $1.3 billion. In an effort to solidify their short-term debt position, Mattel entered into a credit agreement in December 2017 to provide seasonal financing for their company operations. This credit facility consisted of $1.3 billion in an asset-based lending facility and $294 million in a revolving credit facility.31 Also in December 2017, Mattel issued $1.00 billion in 6.75 percent senior unsecured notes, due December 2020. The net result of these moves resulted in total debt for Mattel reaching $2.8 billion at year end 2017. The company’s consolidated balance sheets for 2016 and 2017 are shown in Exhibit 4. Cash flow from operations had been positive since 2014 but turned negative in 2017 along with the Final PDF to printer tho75109_case19_C216-C231.indd?C-224 12/18/18 10:49 AM C-224 PART 2 Cases in Crafting and Executing Strategy EXHIBIT 5 Mattel, Inc. Cash Flow Statements 2015–2017 (amounts in thousands of U.S. dollars) For the Year Ended December 31, 2017 December 31, 2016 December 31, 2015 Cash Flows from Operating Activities: Net (loss) income ($1,053,836) $318,022 $369,416 Adjustments to reconcile net (loss) income to net cash flows from operating activities: Depreciation 240,818 235,797 233,025 Amortization 33,949 26,543 32,402 Deferred income taxes (19,840) 1,236 4,133 Share-based compensation 67,119 53,950 56,691 Asset impairments 56,324 – – Loss on discontinuation of Venezuelan operations 58,973 – – Inventory obsolescence 127,592 31,455 33,305 Valuation allowance on U.S. deferred tax assets and U.S. tax reform 456,642 – – Increase (decrease) from changes in assets and liabilities, net of acquired assets and liabilities: Accounts receivable 13,626 (24,033) (136,259) Inventories (91,644) (68,650) (107,567) Prepaid expenses and other current assets 33,681 34,754 (36,865) Accounts payable, accrued liabilities, and income taxes payable 98,044 9,006 248,047 Other, net (49,062) (23,571) 38,229 Net cash flows (used for) provided by operating activities (27,614) 594,509 734,557 Cash Flows from Investing Activities: Purchases of tools, dies, and molds (128,940) (140,124) (142,363) Purchases of other property, plant, and equipment (168,219) (122,069) (111,818) Payments for acquisition, net of cash acquired – (33,154) – Proceeds from (payments for) foreign currency forward exchange contracts 60,993 (6,103) (61,509) Other, net 503 (10,460) 33,195 Net cash flows used for investing activities (235,663) (311,910) (282,495) Cash Flows from Financing Activities: Payments of short-term borrowings, net (1,611,586) (83,914) – Proceeds from short-term borrowings, net 1,419,418 259,168 16,914 Payments of long-term borrowings – (300,000) – losses in net income. Mattel continued to invest cash flows into the company as well, with net cash flows from investment activities reaching ($235 million) in 2017. Financing activities contributed all of the positive cash flow for the company in 2017. Cash and equivalents at year-end 2017 were stable at approximately $1 billion. Exhibit 5 presents Mattel’s consolidated cash flow statements for 2015 through 2017. Final PDF to printer tho75109_case19_C216-C231.indd?C-225 12/18/18 10:49 AM Case 19 Mattel Incorporated in 2018: Can Ynon Kreiz Save the Toys? C-225 Proceeds from long-term borrowings, net 988,622 350,000 – Payment of dividends on common stock (311,973) (518,529) (515,073) Proceeds from exercise of stock options 1,775 34,065 14,995 Other, net (27,806) (22,261) (17,058) Net cash flows provided by (used for) financing activities 458,450 (281,471) (500,222) Effect of Currency Exchange Rate Changes on Cash 14,517 (24,411) (30,676) Increase (decrease) in Cash and Equivalents 209,690 (23,283) (78,836) Cash and Equivalents at Beginning of Year 869,531 892,814 971,650 Cash and Equivalents at End of Year $ 1,079,221 $869,531 $892,814 Supplemental Cash Flow Information: Cash paid during the year for: Income taxes, gross $ 117,690 $113,022 $120,232 Interest 103,339 84,763 83,005 Source: Mattel, Inc. 2017 10-K. EXHIBIT 6 Mattel Revenues by Major Brand Category, 2015–2017 (U.S. dollars in thousands) Brand Category 2017 2016 2015 Mattel Girls & Boys Brands $3,077,716 $3,194,100 $3,464,195 Fisher-Price Brands 1,677,223 1,888,146 1,852,219 American Girl Brands 451,481 570,770 571,957 Construction and Arts & Crafts Brands 269,543 377,570 351,747 Other 38,162 43,128 43,510 Gross Sales 5,514,125 6,073,714 6,283,628 Sales Adjustments (632,174) (617,064) (581,015) Net Sales $4,881,951 $5,456,650 $5,702,613 Source: Mattel, Inc. 2017 10-K. MATTEL REVENUES BY CATEGORY AND REGION The Mattel Girls and Boys brand category dropped from $3.46 billion in 2015 to $3.07 billion in 2017. The same trends could be seen across all other categories: Fisher-Price Brands, American Girl Brands, Construction and Arts & Crafts category, and other miscellaneous sales. As of 2017, there wasn’t a single category at Mattel that had not been affected by the sales downturn. Exhibit 6 provides Mattel’s revenues by major brand category for 2015 through 2017. Geographically, the revenue downturn was most pronounced in the North American region. Sales in North America declined from $3.68 billion in 2015 to $3.01 billion in 2017. International, while declining, was not declining as sharply. Total international sales declined from $2.60 billion in 2015 to $2.50 billion in 2017. Sales in the Asia Pacific region actually Final PDF to printer tho75109_case19_C216-C231.indd?C-226 12/18/18 10:49 AM C-226 PART 2 Cases in Crafting and Executing Strategy EXHIBIT 7 Mattel Revenues by Geography, 2015–2017 (U.S. dollars in thousands) Geographic Region 2017 2016 2015 North American Region $3,010,598 $3,626,099 $3,680,091 International Region Europe 1,281,672 1,293,302 1,388,753 Latin America 675,286 636,535 711,041 Asia Pacific Region 546,569 517,778 503,743 Total International Region 2,503,527 2,447,615 2,603,537 Gross Sales 5,514,125 6,073,714 6,283,628 Sales Adjustments (632,174) (617,064) (581,015) Net Sales $4,881,951 $5,456,650 $5,702,613 Source: Mattel, Inc. 2017 10-K. increased from 2015 to 2017, an unusual bright spot for the company, and a possible harbinger for future growth. Overall, international sales appeared to be resilient to the current downturn in Mattel sales. Exhibit 7 provides Mattel’s revenues by geography for 2015 through 2017. STOCK PERFORMANCE Mattel’s stock price peaked at an all-time high of $47.82 on December 30, 2013. Sales and earnings for the company also peaked into 2013, and the company’s stock price closely tracked this spike in revenues and earnings. Exhibit 8 tracks Mattel Incorporated’s stock price performance from July 2013 through July 2018. From this peak in December 2013, Mattel’s stock price had drifted lower in fits and starts. 2016 saw a brief rebound in the company’s fortunes, but a continual stream of weakening revenues and earnings had fed the weakening price action for the stock price as well. This would culminate with a major sell off in October of 2017 following the release of negative third quarter 2017 earnings for the company. In 2018, the company had been trading in $12 to $18 price range. Given this price range, the market capitalization of the company was approximately $5.40 billion. It was not possible to calculate a trailing price/earnings ratio for the company, given the negative earnings for the company in 2017. Dividends for the company had also been suspended. U.S. TOY AND CRAFT SUPPLIES WHOLESALING INDUSTRY Mattel participated in the U.S. Toy and Craft Supplies Wholesaling Industry (Toy Industry). The toy industry consisted of U.S. based companies that were wholesalers of toys and craft supplies, as well as various miscellaneous items.32 Toys and craft supplies were purchased from both U.S. and international manufacturers and then sold to U.S. retailers, including discount department stores, big-box retailers, and independent specialty retail outlets. While industry revenues were forecasted to reach $28.3 billion in 2018, the toy industry faced an increasingly difficult market environment in the United States. With only occasional reversals, revenue for the industry had fallen every year since 2013. Toy industry participants were squeezed on all sides. On the manufacturing side, large and mostly international manufacturers were increasingly integrating vertically and bypassing the toy industry wholesalers to sell directly to large retail chains in the United States. On the retail side, there was increasing consolidation of industry players, leaving only a few very large retailers with which to negotiate. These conditions, combined with decreasing demand for toys and falling prices, resulted in fierce competition for toy industry participants. Revenue for the toy industry was projected to fall by 0.8 percent in 2018.33 Final PDF to printer tho75109_case19_C216-C231.indd?C-227 12/18/18 10:49 AM Case 19 Mattel Incorporated in 2018: Can Ynon Kreiz Save the Toys? C-227 EXHIBIT 8 Monthly Performance of Mattel, Inc.’s Stock Price, July 2013–July 2018 Stock Price Percent Change (July 2013 = 0) (a) Trend in Mattel Inc.’s Common Stock Price (b) Performance of Mattel Inc.’s Stock Price versus the S&P 500 Index Year Year 14 15 16 17 18 10 15 20 25 30 35 40 45 50 14 15 16 17 18 +75% +60% +45% +30% +15% +0% –15% –30% –45% –60% –75% S&P 500 Mattel’s Stock Price Products and Services The $28.3 billion U.S. toy industry was comprised of four major segments: (1) traditional toys, including children’s vehicles, (2) video games, (3) hobby and craft supplies, and (4) other items. Demand for toys was seasonal, with sales peaking in the fourth quarter of the years, and closely tied to consumer confidence and spending. However, while consumer confidence in the United States had been rising, consumers had also become increasingly frugal and thrifty, particularly with toy purchases. Consumers were tending to buy less expensive toys in order save money.34 Traditional toys made up 54.7 percent of industry revenue in 2018. This segment included action figures, dolls, sporting goods, building sets, board games, and plush toys for children. Demand for traditional toys were under pressure in the United States. Children were increasingly demanding electronic toys and video games. Further, children appeared to be outgrowing toys at a faster rate, particularly as they entered the 8 to 12 age range. Traditional toys continued to decline as percentage of industry revenue. Exhibit 9 illustrates the relative sizes of the toy industry product and service segments in 2018. Demand for video games, as a result, continued to grow into 2018. Major manufacturers such as Sony and Microsoft continued to introduce new gaming consoles, spurring new game introduction and passionate usage by teenagers. Demand for video games was also increasingly penetrating younger and younger age groups. Sales of video games represented 27.1 percent of industry sales in 2018, and was anticipated to rise as a percentage of industry revenue.35 The hobby and craft supplies segment included items such as scrapbooking supplies, needlework kits, and craft kits. Demand in this segment had remained relatively stable, and was closely tied to consumer discretionary spending. Hobby and craft supplies represented 4.5 percent of industry revenue in 2018. Final PDF to printer tho75109_case19_C216-C231.indd?C-228 12/18/18 10:49 AM C-228 PART 2 Cases in Crafting and Executing Strategy EXHIBIT 9 U.S. Toy & Craft Supplies Wholesaling Industry: Product and Services Segmentation, 2018 54.70% 27.10% 13.70% 4.50% Hobby & Craft Video Games Other Traditional Toys Products & Services Source: IBIS World. The other category in the industry consisted of various other product categories not classified elsewhere. This included items such as playing cards, fireworks, and coloring books. Revenues in this segment had remained fairly consistent at 13.7 percent of industry revenue.36 Major Markets The bulk of toy industry sales were conducted through major retailers in the United States. Market share of major retailers had increased, however, allowing them to source toys directly from manufacturers. Wholesale toy companies, as a result, faced a difficult and increasingly competitive environment for sales, with significant pricing pressure from retailers. This had pressured pricing on toys downward. Toy companies had also begun to focus their sales efforts on retailers and retail chains with less purchasing power (smaller retailers) and also had begun to focus more on direct sales of toys to consumers. Exhibit 10 illustrates a percentage breakdown of the major market segments of the U.S. toy industry in 2018. Discount department stores, such as Wal-Mart and Target, made up 29.2 percent of toy industry sales in 2018. These large retailers purchased toys in large volumes in attempt to drive down prices for the end consumer. Retailers had also begun to bypass toy wholesalers, such as Mattel and Hasbro, and had begun to increasingly purchase toys directly from international manufacturers. The net combination of these conditions continued to pressure the margins of toy industry wholesalers. The volume of toys supplied to discount department stores was expected to continue a gradual decline. Big box retailers, such as Toys “R” Us, Michaels, and Jo-Ann, represented 27.4 percent of toy industry revenues in 2018.37 The bankruptcy of Toys “R” Us in 2017 posed a considerable threat to toy industry participants, given that Toys “R” Us represented a significant proportion of toy company sales. Toys “R” Us decision in 2018 to close its U.S. store locations was expected to have a significant negative effect on toy wholesaling. Independent specialty stores represented 20.3 percent of toy industry revenues in 2018. Independent specialty stores were smaller than other retail outlets, and relied more heavily on toy industry wholesalers for shipments of toys and related items. Independent retailers were under considerable pressure from discount department stores and big box retailers due to intense price competition from their larger competitors. Sales to Final PDF to printer tho75109_case19_C216-C231.indd?C-229 12/18/18 10:49 AM Case 19 Mattel Incorporated in 2018: Can Ynon Kreiz Save the Toys? C-229 Mattel had been the undisputed industry leader in the U.S. toy industry for many years, but Hasbro’s sales had exceeded Mattel in 2017. Hasbro had seen sharp sales gains when it had been awarded a license from Walt Disney Company to market dolls and other products tied to Disney’s smash hit movie “Frozen” in 2016. Exhibit 11 presents a revenue comparison for Mattel and Hasbro. Notable competitors in the U.S. toy industry included Mattel, Hasbro, Jakks Pacific, Just Play Products, Lego, Mega Entertainment, Moose Toys, Spin Master and VTech. Notable competitors in the international market included Mattel, Hasbro, Famosa, Giochi Preziosi, Lego, MGA Entertainment, Playmobil, Ravensburger, Simba, Spin Master and Vtech.40 Competition in both the United States and worldwide was very strong and intensifying. Individual toys faced shorter and shorter life cycles as children would discard older toys in favor of the latest fashion or Hollywood movie release. Technology was also increasingly in use by children at an earlier and earlier age. A phenomena also increasingly observed was the trend of “children getting older younger” as children outgrew toys at an earlier age.41 Competition for retailer shelf space was fierce, and was increasingly independent specialty stores was anticipated to remain stable, although a number of smaller independents were expected to be acquired or leave the industry.38 The heavy competition in retail had led many toy industry participants to attempt direct sales to consumers through company websites. Consumers rarely purchased toys in large volumes, however, making online sales generally unprofitable. Direct sales accounted for 3.0 percent of industry revenues in 2018. The remaining sales in the industry were either trade between wholesalers in the industry (18.8 percent of industry revenue) or directly to other businesses (1.3 percent of industry revenue). Both sales channels were relatively stable, and generally represented trade among industry participants for various reasons. Competition The two main competitors in the U.S. toy industry were Mattel and Hasbro. Combined, the two companies controlled approximately 25 percent of the U.S. market for toys.39 The remaining 75 percent of companies were predominately small, privately owned competitors with five or less employees that typically competed for consumers in their local communities. EXHIBIT 10 U.S. Toy & Craft Supplies Wholesaling Industry: Major Market Segmentation, 2018 1% 29% 28% 20% 19% 3% Discount Department Stores Big Box Stores Independent Specialty Wholesalers & Distributors Direct Sales Business for End Use Major Markets Source: Ibis World. Final PDF to printer tho75109_case19_C216-C231.indd?C-230 12/18/18 10:49 AM C-230 PART 2 Cases in Crafting and Executing Strategy EXHIBIT 11 Revenue Comparison for Mattel and Hasbro, 2013–2017 (U.S. dollars in billions) 0 2013 2014 2015 2016 2017 $1 $2 $3 $4 Billion $5 $6 $7 Hasbro Mattel Source: Mergent Online. concentrated in the hands of companies like Wal-Mart and Target. Competition was also intensifying due to the entry of online retailers, such as Amazon.com, who would promote toys from a wide variety of toy companies and compete aggressively on price. The Outlook for the U.S. Toy and Crafts Industry Looking ahead in the U.S. toys and crafts industry, revenues for the industry were forecasted to continue a downward trend from 2018 to 2023, according to IBIS World. Industry revenue was forecasted to decrease at a rate of 1.0 percent per year to $26.9 billion in 2023. The retail price of toys was also forecasted to continue to decline, as softening demand, retailer consolidation and pricing pressure from international toy manufacturers continued to pressure pricing in the industry. Industry participants were also forecasted to decline through 2023 as margin pressures continued to force the exit of smaller and weaker industry participants in the toy industry. CONCLUSION Mattel CEO Ynon Kreiz sat in his new office in El Segundo, CA and reread the merger proposal letter from MGA Entertainment CEO Isaac Larian. Was Larian serious about merging with Mattel? There were no details tied to the proposal, and no tangible values stated for either MGA Entertainment or Mattel.42 How was Kreiz intended to evaluate the merger without tangible values stated for both companies? CEO Kreiz was also aware of discussions that previous Mattel CEO Margo Georgiadis had undertaken with rival company Hasbro regarding a possible takeover in 2017. Those discussions had stalled without any clear resolution.43 There was a time in Mattel’s history when the company had discussed taking over Hasbro, but that was not the situation today. Ynon Kreiz, in his first day as Chief Executive Officer for Mattel, had been tasked with leading the way forward for Mattel. What were his options for consideration? Should he consider a merger with MGA Entertainment, or maybe another company? Perhaps now was the time to reevaluate the takeover proposal from Hasbro. Would a bid by Hasbro for Mattel spark a bidding war, and possibly other bids for Kreiz’s company? What would Mattel’s Board of Directors say if Kreiz undertook either a merger or acquisition negotiations? Would the Mattel Board rebel and force Kreiz from his job? Kreiz, having been a member of Mattel’s Board of Directors before becoming CEO, was very familiar with Mattel’s transformation plan. Was the way forward the excellent execution of the company’s turnaround plan? What were the elements of the plan that required action, and what other steps Final PDF to printer tho75109_case19_C216-C231.indd?C-231 12/18/18 10:49 AM Case 19 Mattel Incorporated in 2018: Can Ynon Kreiz Save the Toys? C-231 ENDNOTES 14 Story, L. & Barboza, D., “Mattel Recalls 19 Million Toys Sent from China.” New York Times, August 15, 2007, www.nytimes.com. 15 Kell, J., “Mattel’s Barbie Sales Down for a Third Consecutive Year,” Fortune. January 30, 2015, www.fortune.com. 16 Halzak, S. “Barbie Sales Are Nosediving, and That’s Just One of Mattel’s Problems,” Washington Post. October 16, 2014, www.washingtonpost.com. 17 Halzak, S. “Barbie Sales Are Nosediving, and That’s Just One of Mattel’s Problems,” Washington Post. October 16, 2014, www.washingtonpost.com. 18 Ziebro, P., “Mattel to Add Curvy, Petite, Tall Barbies,” Wall Street Journal, January 28, 2018, www.wsj.com. 19 Cimilluca, D. & Ziobro, P., “Mattel Names New CEO as it Seeks Answer to Sales Slump,” Wall Street Journal, April 19, 2018, www.wsj.com. 20 Cimilluca, D. & Ziobro, P., “Mattel Names New CEO as it Seeks Answer to Sales Slump,” Wall Street Journal, April 19, 2018, www.wsj.com. 21 Ziebro, P. & Mattioli, D., “Hasbro Sets Its Sights on Mattel,” Wall Street Journal, November 10, 2017, www.wsj.com. 22 Source: Mattel, Inc. 23 Source: Mattel, Inc. 24 Mattel 2017 Annual Report, www.mattel.com. 25 Mattel Earnings Call 04-26-2018, www.mattel.com. 26 Mattel Earnings Call 04-26-2018, www.mattel.com. 27 Mattel 2017 Annual Report, www.mattel.com. 1 Ziobro, P., “Bratz Boss Makes Play to Run Mattel, Is Told to Take his Toys and Go Home,” Wall Street Journal, May 18, 2018, www.wsj.com. 2 Ziobro, P., “Bratz Boss Makes Play to Run Mattel, Is Told to Take his Toys and Go Home,” Wall Street Journal, May 18, 2018, www.wsj.com. 3 Cimilluca, D. & Ziobro, P., “Mattel Names New CEO as it Seeks Answer to Sales Slump,” Wall Street Journal, April 19, 2018, www.wsj.com. 4 A third partner, Harold Matson, dropped out early in the company’s history. 5 Source: Mattel, Inc., corporate.mattel.com. 6 Source: Mattel, Inc., corporate.mattel.com. 7 Goldman, A., “Mattel Cuts its Losses by Giving Learning Co. Away,” Los Angeles Times, September 20, 2000, articles.latimes.com. 8 Goldman, A., “Mattel Cuts its Losses by Giving Learning Co. Away,” Los Angeles Times, September 20, 2000, articles.latimes.com. 9 Goldman, A., “Mattel will Shut Last U.S. Manufacturing Site,” Los Angeles Times, April 4, 2001, articles.latimes.com. 10 Goldman, A., “Mattel will Shut Last U.S. Manufacturing Site,” Los Angeles Times, April 4, 2001, articles.latimes.com. 11 Goldman, A., “Mattel will Shut Last U.S. Manufacturing Site,” Los Angeles Times, April 4, 2001, articles.latimes.com. 12 Story, L. & Barboza, D., “Mattel Recalls 19 Million Toys Sent from China.” New York Times, August 15, 2007, www.nytimes.com. 13 Story, L. & Barboza, D., “Mattel Recalls 19 Million Toys Sent from China.” New York Times, August 15, 2007, www.nytimes.com. 28 Mattel 2017 Annual Report, www.mattel.com 29 Mattel 2017 Annual Report, www.mattel.com 30 Source: Mattel 2017 Annual Report, www.mattel.com. 31 Source: Mattel 2017 Annual Report, www.mattel.com. 32 IBIS World, “Toys & Crafts Supplies Wholesaling in the U.S.,” www.ibisworld.com. 33 IBIS World, “Toys & Crafts Supplies Wholesaling in the U.S.,” www.ibisworld.com. 34 IBIS World, “Toys & Crafts Supplies Wholesaling in the U.S.,” www.ibisworld.com. 35 IBIS World, “Toys & Crafts Supplies Wholesaling in the U.S.,” www.ibisworld.com. 36 IBIS World, “Toys & Crafts Supplies Wholesaling in the U.S.,” www.ibisworld.com. 37 IBIS World, “Toys & Crafts Supplies Wholesaling in the U.S.,” www.ibisworld.com. 38 IBIS World, “Toys & Crafts Supplies Wholesaling in the U.S.,” www.ibisworld.com. 39 IBIS World, “Toys & Crafts Supplies Wholesaling in the U.S.,” www.ibisworld.com. 40 IBIS World, “Toys & Crafts Supplies Wholesaling in the U.S.,” www.ibisworld.com. 41 Mattel 2017 Annual Report, www.mattel .com. 42 Ziobro, P., “Bratz Boss Makes Play to Run Mattel, Is Told to Take his Toys and Go Home,” Wall Street Journal, May 18, 2018, www.wsj .com. 43 Cimilluca, D. & Ziobro, P., “Mattel Names New CEO as it Seeks Answer to Sales Slump,” Wall Street Journal, April 19, 2018, www.wsj .com. should Kreiz undertake in order to restore Mattel to market success and profitability? What were the defensive actions that needed to be undertaken to defend Mattel’s core products and brands, and what offensive actions should he undertake to move the company forward in the toy industry? Kreiz wondered how much time he had left to effect a rescue of Mattel Incorporated. Final PDF to printer