Good day ladies and gentlemen, and welcome to the Mattel, Inc. Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this call is being recorded. I would now like to turn the conference over to Martin Gilkes, Vice President, Investor Relations. Please go ahead. Martin Gilkes - Vice President Corporate Strategy & Investor Relations: Thank you, Sabrina, and good afternoon, everyone. Joining me today are Chris Sinclair, Mattel's Chairman and Chief Executive Officer; Richard Dickson, Mattel's President and Chief Operating Officer; and Kevin Farr, Mattel's Chief Financial Officer. As you know, this afternoon we reported Mattel's 2015 fourth quarter and fiscal year-end financial results. We'll begin today's call with Chris, Richard, and Kevin providing commentary on our results, and then we'll take your questions. To help guide our discussion today, we have provided you with a slide presentation. Both, our earnings release and slide presentation include non-GAAP financial measures. The information required by Regulation G regarding non-GAAP financial measures is included in these materials, and both documents are available in the Investors section of our corporate website, corporate.mattel.com. Before we begin, I'd like to remind you that certain statements made during the call may include forward-looking statements relating to the future performance of our overall business, brands and product lines. These statements are based on currently available information and they are subject to a number of significant risks and uncertainties that could cause our results to differ materially from those projected in the forward-looking statements. We describe some of these uncertainties in the Risk Factors section of our 2014 annual report on Form 10-K, our 2015 quarterly reports on Form 10-Q, and other filings we make with the SEC from time-to-time, as well as in our other public statements. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so. Now, I'd like to turn the call over to Chris.

Thanks, Martin, and good afternoon, everyone. And let me add my thanks for all of you joining us today. To get things started, I'd like to provide some perspective on the fourth quarter and importantly on the progress that we're making against our transformation. Following this, Richard and Kevin will provide additional details on the quarter, as well as an outlook on what's ahead. And as Martin indicated, at the end we'll leave time for your questions. So let me begin by saying that our fourth quarter performance and our full year results were encouraging, and they reflect some significant and continuing progress from where we stood a year ago when we first began to execute against our six strategic priorities and our cultural transformation. Gross sales for the quarter greatly improved and excluding the impact of foreign exchange increased by 3%. Gratifying to me, for the full year, we achieved our goal of stabilizing the business with the gross sales increase of 1% in constant currency. Importantly, as an underpinning of this we also succeeded revitalizing some of our critical core brands. We executed very well at retail, as evidenced by both POS and shipping trends. Mattel's global POS was positive in the quarter up 3%. And we ended the full year up in both North America and in international. Majority of our core brands also ended the year with positive POS, while demonstrating some very solid momentum in the fourth quarter. We're particularly pleased with Barbie POS, which, despite a very competitive category, ended the year on a high note with the fourth quarter results reflecting continuing double-digit growth in North America and positive numbers in international. As expected, we also began to see overall shipping and POS trends converge with sales and POS both up by 3%…

Thank you, Chris. You can see that a remarkable transformation is well underway at Mattel. The transformation that goes far beyond our performance in the fourth quarter and includes the ongoing revitalization of our core brands, the rebuilding of relationships with strategic license partners, accelerated growth in emerging markets, and a much more effective presence at retail. Today I'll highlight some key aspects of our progress. I'll address our challenges for 2016 and share our optimistic views of our future. I'm also going to look forward to continuing this conversation in much more detail at Toy Fair in just a few weeks, where we will have much more news to share. On last quarter's call, I noted that our POS continued to outpace shipping, creating a major opportunity to increase sales going forward and we seized that opportunity, thanks to a vastly improved brand management and programming, a better aligned and higher performing commercial organization, and new marketing which is beginning to make strong connections with our consumers. The result is a very solid fourth quarter. Global POS increased by 3% and built momentum during the holiday season in both domestic and international markets. We also vastly improved the alignment of global POS with shipping with fourth quarter shipping up 3% excluding foreign exchange. In addition, as Chris noted, we saw overall shipping in constant currency and POS trends converge for a number of our core brands. Barbie global POS was up high single-digits in the fourth quarter aligned with global shipping up 8%. The brand continued to see double-digit POS performance in the U.S., which combined with positive international POS positions the brand for 2016 with solid momentum. Despite the very competitive North America doll market in 2015, exciting new brand initiatives proved effective with consumers, and sales were…

Thank you, Richard, and good afternoon, everyone. Echoing what Chris and Richard said, I'm also very pleased with the progress we've made in 2015. Despite significant challenges and through tremendous efforts across the organization, we achieved our full year financial outlook which included a stabilization of net revenues and constant currency, gross margins of about 50%, a decline in adjusted SG&A in absolute dollars and year-end cash of $800 million to $1 billion. We continue to be disappointed in our management of the P&L with large part of our success due to our cost savings efforts. For the full year, we over-delivered against our 2015 target with total gross savings of $153 million as well as nice leverage on our advertising spend in the fourth quarter. Today, I want to quickly highlight our 2015 performance metrics and then focus on our expectations for 2016. As a reminder, I'll be discussing our top-line results in constant currency. In addition, I'll be referring to adjusted financial measures that exclude certain items related to our acquisition of MEGA as well as severance expense, unless otherwise noted to provide better visibility into the underlying business performance as we continue to execute the turnaround. So as it relates to our 2015 performance, we achieved our objective to stabilize net revenues with full year sales of $5.7 billion up 2% in constant currency. This included growth of 7% in the fourth quarter as we began to see the expected inflection of shipping and POS for our key core brands. However, the foreign exchange headwind was less slightly in the quarter, but it was still significant reducing net revenues by about $140 million or about $400 million for the full year. This was at the high end of our revised 5% to 7% outlook that we provided…

Thank you. And our first question comes from the line of Tim Conder of Wells Fargo Securities. Your line is now open.

Thank you, gentlemen and congrats on getting everything stabilized and for the detail here that you've given today. A couple things here and not surprising, let's start with Disney Princess. Can you maybe give us a little more color on how you define significant? And then, as it relates to margin there, I think previously you mentioned that the Disney Princess margin that you get approximated the company operating margin. Is there a potential as you replace those dollars that the margin mix could be higher than what we've seen with Disney Princess? So that's my first question. And then any color that you can give us on Hot Wheels? How much of the growth was core Hot Wheels and how much was Star Wars related both at POS and wholesale?

Yeah. Hey, Tim I'll deflect Hot Wheels to Richard, but let me start. I think I understood your first question on Disney Princess, when you say what do we mean by a significant amount? I think the way to look at this is our goal is to get a top-line that's relatively flat and in constant currency, which says obviously we expect to cover pretty much the whole thing.

Okay.

And still cover some of the issues we've got Monster High. So that's what we're tracking to. I think what Kevin tried to set up was there's a higher percentage of the mix related to Disney Princess in the first quarter and second quarter. So it makes the challenge obviously a little bit harder as we enter the year. But broadly, we feel pretty good that we have the programs in place to hold the top-line flat. And on the margins we don't expect really much change in mix in this coming year. I think it's pretty much unbalanced with the loss of Disney and some of the other things we've got on our core brand. So I wouldn't expect an up or down either way on the. You want to take Hot Wheels?

Yeah. Tim, as it relates to How Wheels, I mentioned it had one of its best years ever, and it was the strongest of our core branded growth in 2015 both the core basic car business and the license property business, of course, Star Wars being the hero for 2015, were up. Clearly, significant growth from the licensing business within it, but really nice steady growth within Hot Wheels core. We continue to look to leverage the POS momentum and build upon the core business, basic track sets and a variety of exciting new initiatives as well as expand the licensing portfolio. I think Star Wars really proved that we can incorporate really innovated new ways of thinking about licensing as part of the Diecast platform. Then we're going to look to new product drivers in entertainment, Batman v Superman, Captain America and of course continue with Star Wars.

Okay. And then, on your structure changes and your key hires, I think on the last call you said you had – the main key position left to fill was the head of e-commerce. I haven't seen any press releases there. Just other than that, are those changes pretty well done? And then, last question for Kevin on cash flow. Would we anticipate the biggest swings, Kevin, in both EPS and working capital for 2016 year-over-year?

Yeah. Hey, Tim, I'll deflect it over Kevin, but yes we did hire a head of e-commerce and we've now got him underneath one of our very senior executives driving all of our technology and the e-commerce platforms.

Yeah, with regard to cash flow, as expected we generated strong cash flow in the fourth quarter of 2015 of $957 million. And most of that related to – we tightly managed capital. As receivables were up and improving sales and came later in the fourth quarter, which we're going to collect in 2016, and owned inventory was up slightly as our sales mix in 2015 shifted from direct import to trade sales which required us to call the inventory longer, and really we don't expect much of a shift in our DI trade sales mix since 2016. So we continue again next year, we expect to generate strong and consistent cash flow in 2016 and beyond and we think we'll have the amount to fund our business and fund a dividend. We're targeting $800 million to $1 billion of year-end cash. And we're going to continue to focus in on opportunities to manage working capital, both with the sales as well as with vendor, terms and accounts payable management.

Okay, great. Thank you, gentlemen.

Thank you. And our next question comes from the line of Gerrick Johnson of BMO Capital. Your line is now open.

Hey, good evening. Two questions. First, how much longer do we expect to be recording both MEGA integration and FOF severance charges? And then, second on Barbie, there is a dramatic difference between the results in North America and international, why the big disparity? It looked like we had an easy comp in international. Thanks.

Yeah. I think the MEGA expenses are going down this year with regard to not much integration. There is still a bit of amortization, but I think after this year both of those are eliminated. We do continue to look at opportunities to streamline our business and look at opportunities to be more efficient and effective. So I think severance won't be as high as it was in 2015. It'll be lower as I mentioned in my remarks and that we will have some restructuring expenses as we look at again, the back of the house and trying to streamline that business and be more efficient and save cost.

Yeah Gerrick. And as it relates to Barbie, we did obviously have a terrific quarter here in the U.S. with double-digit POS performance, but we also saw positive POS in the international markets giving us, again, solid momentum moving into 2016. Looking ahead, we continue to see opportunity, particularly in international where POS and shipping can align more effectively. It's also important to note a lot of the heavy lift we were able to activate in a much quicker and more strategic way in the U.S. We obviously launched and re-launched marketing. We changed creative execution. We introduced new segments of course and reinforced the You Can Be Anything campaign. We were able to really execute that with more speed and effectiveness in the U.S. but I'm very confident that the international group particularly with the recent POS will continue that momentum moving into 2016.

Got it. Thank you.

Thank you. And our next question comes from the line of Taposh Bari of Goldman Sachs. Your line is now open. Taposh Bari - Goldman Sachs & Co.: Hi. Good afternoon and great progress. Chris, I guess just to get the dividend question out of the way. You're keeping the dividend flat. You've declared the first quarter. You just completed your largest cash flow quarter of 2015. At this juncture, what would it take for you to revisit your dividend strategy over the next 12 months and how should we think about the timing around cash flows?

Always good to talk to you, Taposh. Look, we've been consistent on this. We see this as our top priority right now, short of anything major as a disruption in the business or something major on the investment front, which frankly we don't expect at this point. We stress tested this pretty carefully as we go through 2016. We feel comfortable that we could meet the targets. Kevin talked about on cash and still support the dividend. Importantly, I've said as we exit this year and get into next year, we would expect to start to grow into a little bit more of a normative dividend yield as we improve performance and it's very much in our target range. So right now, Taposh, I don't see anything changing on the dividend. Taposh Bari - Goldman Sachs & Co.: Great. And then I wanted to ask a follow-up on the new Barbie news from last week. Can you maybe, Richard talk to us about what kind of feedback you're getting from retailers. And also holistically across the portfolio, shelf space, how much you lost last year, or how you're thinking about shelf space into 2016?

Sure. We constantly test and gauge both our consumers and moms. And our research is continuing to show the brand's relevance and interest among moms and girls has been improving. We know it's been improving as a result off of the affected marketing, PR and various programs that we've been initiating. I think we started that real initiation with our 23 new ethnicities as part of the Fashionista collection, and really drove that point of difference with new choice and diversity for Barbie. Did very well and more importantly we created a lot of goodwill for the brand encouraging us to continue down the strategic path of diversity and choice for the brand with its most recent launch, again as you've seen. That the halo effect of this over the whole brand is something that we are watching and watching play out pretty carefully. Retailers are very excited with the changes that they see on the line, both from a marketing perspective as well as product. There's a lot of product initiatives, new innovation, price value, a lot of structural execution points that we're not talking about on this call that took place with Barbie as well. So we're feeling very good about the changes that we made and obviously executing against them at retail more effectively and we expect that that momentum will continue through 2016.

Hey on your question on space, Taposh, I think we've said before we probably lost 15% to 20% over the course of the last 12 months to 18 months. Part of what we're seeing is enough velocity now and turn on that current shelf space that we frankly would expect to see this move in the other direction as we get into the fall set. So it was significant and a lot of what we were able to do to offset that, I think is pretty settler as we came through the fourth quarter. Taposh Bari - Goldman Sachs & Co.: Great. Congrats again and we'll see you next week.

You bet.

Thank you.

Thank you. And our next question comes from the line of Mike Swartz of SunTrust. Your line is now open.

Hey good evening, guys.

Hey, Mike.

I just wanted to follow-up on some of the commentary, I guess, Richard made regarding the American Girl's brand. Just trying to understand I guess what's going on with that brand. It sounds like you'd mentioned a kind of value proposition that needs recalibrated, but is there anything you're seeing in terms of – I mean last holiday season you'd pointed out that you think there was a little bit of cannibalization from Frozen. Obviously, we didn't really have that this year. Do you think there is any impact with the growth you're seeing in Barbie on American Girl?

Yeah. I'll start it and let Richard jump in. Look, I don't think that was really the big factor. I think we have felt for the last few months that we're not doing what we need to be doing to get the brand's salience up. It's a combination of our content, the distribution of that content and price value and we've allowed price value and the total value proposition to shift and I think that hurt us in the quarter. As you know, there's been a fair amount of private label stuff out there, retail that actually competes directly with AG. So we have restructured things as we go into 2016. I think we feel a lot better about the line. We've got a lower price segment we're doing. I think Amazon with the Studio launch will help us on the content front. And we're going to be doing some interesting things on distribution to extend both our consumer reach as well our availability. So we think this is imminently fixable. We were just a little slow off the mark this year.

Okay. Great.

I would – there's not much I could add to what Chris was saying. I think he articulated it perfectly and I think, the efforts that we're doing to reenergize consumer engagement through content, and in particular, with this new deal with Amazon Studios is really a very big and exciting long-term effort. By the way, both for Amazon and for American Girl, we're talking about specials and episodic content based on our brand's characters. And the first special will be released in 2016. So we're looking forward to energizing the brand through that, and that is one dimension as Chris mentioned.

Thanks. And Kevin, just in your commentary, did you make note of what you expected the gross to net adjustments to be? In 2016, I know they've been running a little higher the last two years, but should we see more of a kind of historical level going forward?

Well, I think what I – I didn't mention 2016. I see 2016 being higher than historical, as we really want to make sure we've got the powder in our gun to again promote to the extent we need to, to drive POS in the current year. But I did say we think we'll get to more normal historical levels in 2017 as we look to get some operating leverage and we've got tailwinds in revenues both behind our core brands and the Cars 3 movie of incremental $350 million at sales in 2017, so back to more historical levels in both sales adjustments and advertising in 2017.

Thanks a lot.

Thank you. And our next question comes from the line of Felicia Hendrix of Barclays. Your line is now open.

Hi. Thanks so much. Kevin, just wanted to clarify something. When you were going through your long-term goals at the end of the prepared remarks on the operating margin goal of 15% to 20%, did you say that that would be something you could achieve by 2017?

Well we said we should be approaching that range as early as 2017.

Okay. And then, so that's a big bridge to gap between now and then, but all the initiatives that you talked about should get you pretty close to there?

Yeah. That's what our thought process. I think a major component of that is the incremental revenues that we expect to generate in 2017 from Cars 3 will put a lot of leverage on our infrastructure as well as the continued momentum in our core brands. And we expect to continue to gain traction in emerging markets. So top line is part of the story, but we're also going to be leaning into cost in 2016 and the supply chain and SG&A, and that will continue also into 2017.

Great. And then, I totally understand the excitement of Cars 3 then with you through the first two Cars movies. But when you think about Cars 3 in 2017 and then, obviously, even though it's a evergreen property, 2018 you have kind of rolling off, so as we think about a longer-term pipeline, how should we think about that?

Yeah. We think 2018 you'd look to Toy Story 4, which is a great toyetic property. So we see that and we're working on a whole bunch of other things with regard to licensing as well as I think it's continued emerging market growth particularly in Asia Pac.

Yeah. And I would say, Felicia, we're working pretty closely with Disney on how to ensure we don't just have a huge spike and drop-off. And I think we have the same objective to keep momentum going in the year too. So that's part of both of our plans.

Great. And then, as you think about the – well, I was just wondering, as you think about all of your goals, is Fuhu revenues in any of that? Or how should we think about that?

Yeah. We actually haven't rolled much of Fuhu, and it's not a huge business at this point. So I wouldn't look to anything major there in the short term. It's really more of a platform that we want to build into some of our Fisher-Price and technology-driven toys. So there will be some, which we'll illuminate on, Felicia, but not a huge amount.

Okay. Great. Helpful. Final, just, Kevin, we get asked about this all the time. Obviously, the lower commodity costs helped gross margins in the quarter. Going forward, how should we think about that benefit?

Yeah. I think with regard to commodities like oil, we expect to see a benefit in resins and logistics and that's really a tailwind. I think what we also have is again a headwind with regard to direct labor cost remain inflationary, as well as is packaging. But, overall, when you look at our gross margins, we're targeting 50% to be around there in 2016 and that reflects additional headwinds with regard to forex, but tailwind is our aggressive cost savings programs in 2016. So when it all mixes together, I think we're looking to again be around 50% next year.

Okay. Great. Thank you so much.

Thank you. And our next question comes from the line of Linda Bolton Weiser of B. Riley. Your line is now open. Linda B. Weiser - B. Riley & Co. LLC: Hi. With regard to the DC Super Hero Girls line, is that scheduled for a second quarter or a third quarter shipment? And can you talk a little bit about do you view that as being incremental to other types of action or fashion doll type of things? And what kind of positioning will you expect to get on the store shelf for that line? Thanks.

So, Linda, it's Richard. The shipments for that will be in the second quarter and third quarter, that will be the bulk of, obviously, the product flow. And we believe that the ecstatic, the feature, the look, the content, the research, all suggest that while action figures and fashion dolls are out there, this will visibly look and feel different than everything else. It will also obviously have a tremendous amount of content associated with it, defining characters and defining a real action-oriented girl proposition, which we think is really timed well with the girl empowerment trend that's happening. And certainly as a new brand executed by Mattel globally will get the full power of our execution skill set. Space will be concurrent with the excitement by retailers. So it varies by retailers, but obviously we are getting great support from retailers, they're excited about the brand. And we believe that this is a great proposition for a long-term growth strategy in girls. Linda B. Weiser - B. Riley & Co. LLC: Great. And then, on American Girl, you talked a little about that. I think at one point you mentioned potentially looking at expanded distribution. Can you give a little more color? Are you talking about experimenting a regular retail? Or what are you talking about exactly? Thanks.

We'll probably have more to talk about that, Linda, at Toy Fair, but we are looking at specialty retail and other opportunities to extend distribution. We've done some testing and some change this past year that were quite successful. So we would expect to extend that, but probably, also some of our lineup would be handled with Amazon. So I would think you'll have a lot of availability points than we've had this year. Linda B. Weiser - B. Riley & Co. LLC: Okay. Great. Thanks a lot. Martin Gilkes - Vice President Corporate Strategy & Investor Relations: Operator, I think we have time for one final question.

Thank you. Our final question comes from the line of Greg Badishkanian of Citi. Your line is now open.

Great. Thanks. So just looking at your flat sales target for 2016, which offsets the loss of Disney, and which categories or brands do you think you'll see the greatest accelerated growth in 2016 versus 2015 trend to bridge the gap, which if you can do that, I think, that would be very encouraging, but where do you think you'd get that?

Great. It's Richard. We've obviously got a lot of initiatives in play in 2016. And we believe many of them will get traction. But, clearly, the emphasis is going to be on core brand momentum. That is a paramount continuing strategy and priority for us going forward. I think we have proven stability in most of our core brands for 2015, leading us to believe we are certainly on the right track, and in fact, can dial up some of the methodologies that have been working. At the same time, we continue to look to stabilize Monster High, and obviously, regain some traction on American Girl. Notwithstanding that, we're pretty excited about some of the new licenses that we have. I mean, clearly, Warner Bros. relationship is becoming more and more important. And we've got a great new girl initiative coming out. We've got obviously the Batman v Superman and a trilogy of movies going forward well into 2017 and 2018. The MEGA business for us, which we haven't talked a lot about is strong and leveraging the platform itself and attracting new partners. Clearly, we're launching the Teenage Mutant Ninja Turtles license, which is going to be a terrific sleeper for us as well on a movie year. So we know that that's going to prove itself out. We've got some great new content partnerships that we've discussed that will both fuel core brands as well as some new that you'll hear about at Toy Fair. And last but not least, there's some really exciting programs in emerging markets where we continue to grow as the statistics show, but with even more fuel, if you will, to provide the right tools and the right products and the right content to help execute and grow market share in those areas. So on balance, we believe we've got a good robust program to significantly charge ourselves with covering that gap.

Good. And then, with the Barbie news, who do you think that's going to take share from? Obliviously, it might cannibalize a little bit of your existing Barbie sales, but it should expand that brand. And who do you think it's going to – who contribute to that share?

Yeah. I think our mindset is Barbie is owed business. And that brand has the capability to do a lot more than it has. We've proven it over the years. I think people are starting to understand that it is part of pop culture. And I think there are always girl brands that come and go, I think Shopkins was a great surprise, I think, in 2015. But these girl brands tend to have bell curves and Barbie has been a sustainable brand for almost 57 years. And I think at this point, we are well on our way to solidifying our positioning, expressing new marketing, innovating new product and executing flawlessly. So I would expect to need emphasis and growth on the Barbie brand moving forward.

Good. And finally, just as you enter the new year with clean inventories down 10% in the U.S. Is it reasonable to assume that retail sales growth will equal shipment growth throughout 2016? Or is that the right way to think about it?

Yeah. I think, Greg, that is a good way to think about it. We think we're pretty much in balance right now. And you'll get some pockets obviously in a few international markets. But, also, I think shipping and POS should be tracking pretty closely.

I think that's particularly true, because we're not losing shelf space. We hope to gain shelf space in the fall. So it should be much more aligned this year.

Great. It's good to see the improvement this quarter. Thank you.

Thanks, Greg.

Thanks, Greg.

Thank you. Martin Gilkes - Vice President Corporate Strategy & Investor Relations: There will be a replay of this call available beginning at 8:00 PM Eastern Time today. The number to call for the replay is 404-537-3406, and the passcode is 15869072. Thank you for participating in today's call.