Second Quarter Highlights
- Worldwide net sales up 10 percent;
- Domestic gross sales up 9 percent and international gross sales
up 11 percent;
- Worldwide gross sales for core brands: Barbie(R) down 4 percent;
Hot Wheels(R) up 5 percent; Core Fisher-Price(R) up 5 percent and
American Girl(R) brands up 20 percent;
- Gross margin decreased 200 basis points of net sales; SG&A increased
20 basis points of net sales;
- Operating income as a percentage of net sales was 3.2 percent,
down 220 basis points;
- Net loss of $94.0 million, which includes incremental tax expense of
$112.9 million associated with the previously announced plan to
repatriate foreign earnings in 2005 under the American Jobs Creation
Act (AJCA), vs. last year's net income of $23.5 million; and
- Loss per share of $0.23 (includes AJCA-related tax expense of
$0.28 per share) vs. last year's second quarter earnings per share
of $0.06.
EL SEGUNDO, Calif., July 18 /PRNewswire-FirstCall/ -- Mattel, Inc.
(NYSE: MAT) today reported 2005 second quarter financial results. For the
quarter, the company reported a net loss of $94.0 million, or $0.23 per share,
compared to last year's second quarter net income of $23.5 million, or
$0.06 per share. The net loss for the second quarter was significantly
impacted by incremental tax expense of $112.9 million, or $0.28 per share,
resulting from the company's decision to repatriate $2.4 billion in unremitted
foreign earnings under AJCA.
"While this quarter's results were positively impacted by improving sales
trends across our portfolio of brands, including key contributions from
entertainment properties, our margins were under pressure," said Robert A.
Eckert, chairman and chief executive officer of Mattel. "We continue to expect
2005 to be a challenging year as we focus on the all-important second half."
Financial Overview
For the quarter, net sales were $886.8 million, up 10 percent compared to
$804.0 million last year, and included a benefit from changes in currency
exchange rates of 2 percentage points. On a regional basis, second quarter
gross sales increased 9 percent in the U.S., and were up 11 percent in
international markets, which included a benefit from changes in currency
exchange rates of 5 percentage points. Operating income for the quarter was
down 34 percent at $28.5 million, primarily due to higher costs, partially
offset by higher sales volume.
The company's debt-to-total-capital ratio of 23.0 percent is in line with
the company's capital and investment framework. Consistent with the
seasonality of the company's business and its use of working capital, the
company's cash and equivalents declined by approximately $795 million during
the six months ended June 30, 2005, compared to a decline of approximately
$789 million in the prior year period. Additionally, during the second quarter
of 2005, the company repurchased 12.9 million shares of its common stock at a
cost of $236.5 million. During the second quarter of 2004, the company
repurchased 14.2 million shares of its common stock at a cost of
$245.8 million.
Sales by Business Unit
Mattel Brands
For the second quarter, worldwide gross sales for the Mattel Brands
business unit were $563.8 million, a 10 percent increase versus the prior
year's second quarter. Worldwide gross sales for the Barbie(R) brand were
down 4 percent. Worldwide gross sales of Other Girls Brands, which includes
Polly Pocket!(TM) and several new brand introductions, including Disney
Princesses, Winx Club(TM), Pound Puppies(R) and Furryville(TM), were up
double-digits.
Worldwide gross sales for the Wheels category, which includes the Hot
Wheels(R), Matchbox(R) and Tyco(R) R/C brands, were up 4 percent, primarily
driven by higher sales of Hot Wheels(R). Worldwide gross sales for the
Entertainment business, which includes Games and Puzzles, were up 27 percent
for the quarter, primarily driven by higher sales of the Batman(TM) property
and the Scene It?(R) game, partially offset by sales declines in the
Yu-Gi-Oh!(TM) and Harry Potter(TM) properties.
Fisher-Price(R) Brands
Second quarter worldwide gross sales for the Fisher-Price(R) Brands
business unit, which includes the Fisher-Price(R), Little People(R), Rescue
Heroes(R) and Power Wheels(R) brands, were $337.3 million, a 7 percent
increase versus the prior year's second quarter. The increase reflects the
strong growth in Fisher-Price(R) Friends worldwide and Core Fisher-Price(R) in
international markets.
American Girl(R) Brands
Second quarter gross sales for the American Girl(R) Brands business unit,
which offers American Girl(R) branded products direct to consumers, were
$58.8 million, up 20 percent from the prior year, primarily driven by the
continued success of the new American Girl Today(R) doll and strong
performance of the American Girl(R) retail stores.
American Jobs Creation Act (AJCA) Update
In the second quarter of 2005, Mattel completed and approved its plan for
reinvestment and repatriation of unremitted foreign earnings under AJCA. This
plan takes advantage of the company's ability to repatriate approximately
$2.4 billion in foreign earnings at a substantially reduced tax cost provided
the repatriation occurs before the end of 2005. The AJCA-related tax expense
of $112.9 million, or $0.28 per share, has been disclosed since it could be
meaningful in evaluating the company's operating results and financial
condition for the quarter in light of the nature and magnitude of the expense.
Live Webcast
Mattel will webcast its 2005 second quarter earnings conference call at
8 a.m. Eastern time (5 a.m. Pacific time) today. The conference call will be
webcast on the "Investors & Media" section of the company's corporate Website,
http://www.mattel.com. To listen to the live call, logon to the Website at least 15
minutes early to register, download and install any necessary audio software.
An archive of the webcast will be available on the company's Website for 90
days and may be accessed beginning two hours after the completion of the live
call. A telephonic replay of the call will be available beginning at 11 a.m.
Eastern time (8 a.m. Pacific time) the morning of the call, until Wednesday,
July 20, 2005 at midnight Eastern time (9 p.m. Pacific time) and may be
accessed by dialing + (719) 457-0820. The passcode is 4559083.
Information required by Securities and Exchange Commission Regulation G,
regarding non-GAAP financial measures, as well as other financial and
statistical information, will be available at the time of the webcast on the
"Investors & Media" section of http://www.mattel.com, under the sub-headings
"Financial Information" -- "Earnings Releases."
About Mattel
Mattel, Inc., (NYSE: MAT) (http://www.mattel.com) is the worldwide leader in the
design, manufacture and marketing of toys and family products, including
Barbie(R), the most popular fashion doll ever created. The Mattel family is
comprised of such best-selling brands as Hot Wheels(R), Matchbox(R), American
Girl(R) and Tyco(R) R/C, as well as Fisher-Price(R) brands
(http://www.fisher-price.com), including Little People(R), Rescue Heroes(R), Power
Wheels(R) and a wide array of entertainment-inspired toy lines. With
worldwide headquarters in El Segundo, Calif., Mattel employs more than
25,000 people in 42 countries and sells products in more than 150 nations
throughout the world. Mattel's vision is: the world's premier toy brands --
today and tomorrow.
Note: Forward-looking statements with respect to the financial condition,
results of operations and business of the company are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those set forth in such statements. These include without limitation: the
company's dependence on the timely development, manufacture, introduction and
customer acceptance of new products; the seasonality of the toy business;
customer concentration and pricing; significant changes in buying and payment
patterns of major customers, including as a result of bankruptcy and store
closures; adverse changes in general economic conditions in the U.S. and
internationally, including adverse changes in the retail environment,
employment and the stock market; order predictability and supply chain
management; the impact of competition, including from private label toys, on
revenues and margins; the supply and cost of raw materials (including oil and
resin prices), components, employee benefits and various services; the effect
of currency exchange rate fluctuations on reportable income; risks associated
with acquisitions and mergers; the possibility of product recalls and related
costs; risks associated with foreign operations; negative results of
litigation, governmental proceedings or environmental matters; changes in laws
and regulations; possible work stoppages, slowdowns or strikes; possible
outbreaks of SARS or other diseases; political developments and the threat or
occurrence of war or terrorist acts; the possibility of catastrophic events;
the inherent risk of new initiatives; and other risks and uncertainties as may
be detailed from time to time in the company's public announcements and SEC
filings. This release contains forward-looking statements about outlook and
challenges for the year, cost pressures, financial performance, the company's
debt-to-total capital ratio, capital and investment framework and the expected
repatriation of unremitted foreign earnings and the tax effect thereof. Mattel
does not update forward-looking statements and expressly disclaims any
obligation to do so.
MATTEL, INC. AND SUBSIDIARIES EXHIBIT I
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except
per share and For the Three Months Ended June 30,
percentage 2005 2004 Yr / Yr
information) $ Amt % Net Sales $ Amt % Net Sales % Change
Net Sales $886.8 $804.0 10%
Cost of sales 500.0 56.4% 437.7 54.4% 14%
Gross Profit 386.8 43.6% 366.3 45.6% 6%
Advertising and
promotion
expenses 93.1 10.5% 84.4 10.5% 10%
Other selling and
administrative
expenses 265.2 29.9% 238.7 29.7% 11%
Operating Income 28.5 3.2% 43.2 5.4% -34%
Interest expense 19.6 2.2% 16.4 2.0% 20%
Interest (income) (12.4) -1.4% (4.1) -0.5%
Other non-operating
(income), net (4.7) -0.5% (1.5) -0.1%
Income Before
Income Taxes 26.0 2.9% 32.4 4.0% -20%
Provision for
income taxes 120.0 8.9
Net Income (Loss) $(94.0) $23.5 2.9%
EPS - Basic $(0.23) $0.06
Average Number of
Common Shares
Outstanding -
Basic 409.8 419.2
EPS - Diluted $(0.23) $0.06
Average Number of
Common and Common
Equivalent Shares
Outstanding -
Diluted 409.8 422.9
(In millions, except
per share and For the Six Months Ended June 30,
percentage 2005 2004 Yr / Yr
information) $ Amt % Net Sales $ Amt % Net Sales % Change
Net Sales $1,669.9 $1,584.9 5%
Cost of sales 939.1 56.2% 866.9 54.7% 8%
Gross Profit 730.8 43.8% 718.0 45.3% 2%
Advertising and
promotion
expenses 180.8 10.8% 171.8 10.9% 5%
Other selling and
administrative
expenses 516.0 30.9% 490.3 30.9% 5%
Operating Income 34.0 2.1% 55.9 3.5% -39%
Interest expense 37.2 2.2% 31.6 2.0% 18%
Interest (income) (24.5) -1.4% (9.0) -0.6%
Other non-operating
(income), net (13.6) -0.8% (11.5) -0.7%
Income Before
Income Taxes 34.9 2.1% 44.8 2.8% -22%
Provision for
income taxes 122.4 12.3
Net Income (Loss) $(87.5) $32.5 2.1%
EPS - Basic $(0.21) $0.08
Average Number of
Common Shares
Outstanding -
Basic 412.9 423.7
EPS - Diluted $(0.21) $0.08
Average Number of
Common and Common
Equivalent Shares
Outstanding -
Diluted 412.9 427.6
MATTEL, INC. AND SUBSIDIARIES EXHIBIT II
WORLDWIDE GROSS SALES INFORMATION (Unaudited)
(In millions, except Three Months Ended June 30,
percentage information) 2005 2004
Worldwide Gross Sales:
Mattel Brands $563.8 $513.3
% Change 10% 4%
Pos./(Neg.) Impact of
Currency (in % pts) 3 2
Fisher-Price Brands 337.3 314.6
% Change 7% 6%
Pos./(Neg.) Impact of
Currency (in % pts) 1 1
American Girl Brands 58.8 49.1
% Change 20% 18%
Other 4.7 2.3
Gross Sales $964.6 $879.3
% Change 10% 6%
Pos./(Neg.) Impact of
Currency (in % pts) 2 2
Reconciliation of GAAP to
Non-GAAP Financial Measure:
Gross Sales $964.6 $879.3
Sales Adjustments (77.8) (75.3)
Net Sales $886.8 $804.0
% Change 10% 5%
Pos./(Neg.) Impact of
Currency (in % pts) 2 2
(In millions, except Six Months Ended June 30,
percentage information) 2005 2004
Worldwide Gross Sales:
Mattel Brands $1,078.2 $1,045.4
% Change 3% 2%
Pos./(Neg.) Impact of
Currency (in % pts) 2 4
Fisher-Price Brands 601.7 578.6
% Change 4% 9%
Pos./(Neg.) Impact of
Currency (in % pts) 2 2
American Girl Brands 126.4 103.2
% Change 22% 17%
Other 8.6 5.6
Gross Sales $1,814.9 $1,732.8
% Change 5% 5%
Pos./(Neg.) Impact of
Currency (in % pts) 2 3
Reconciliation of GAAP to
Non-GAAP Financial Measure:
Gross Sales $1,814.9 $1,732.8
Sales Adjustments (145.0) (147.9)
Net Sales $1,669.9 $1,584.9
% Change 5% 5%
Pos./(Neg.) Impact of
Currency (in % pts) 2 3
MATTEL, INC. AND SUBSIDIARIES EXHIBIT III
CONDENSED CONSOLIDATED BALANCE SHEETS
At June 30,
2005 2004 At Dec. 31,
(In millions) (Unaudited) (Unaudited) 2004
Assets
Cash and equivalents $361.9 $363.5 $1,156.8
Accounts receivable, net 692.4 622.7 759.0
Inventories 579.9 557.5 418.6
Prepaid expenses and other
current assets 246.5 266.9 302.8
Total current assets 1,880.7 1,810.6 2,637.2
Property, plant and
equipment, net 550.5 603.2 586.5
Other noncurrent assets 1,480.4 1,494.2 1,532.8
Total Assets $3,911.6 $3,908.0 $4,756.5
Liabilities and Stockholders'
Equity
Short-term borrowings $31.3 $76.3 $29.0
Current portion of
long-term debt 218.6 41.0 189.1
Accounts payable and
accrued liabilities 709.3 761.1 1,229.2
Income taxes payable 269.3 219.4 279.9
Total current liabilities 1,228.5 1,097.8 1,727.2
Long-term debt 370.0 588.6 400.0
Other long-term liabilities 242.1 242.0 243.5
Stockholders' equity 2,071.0 1,979.6 2,385.8
Total Liabilities and
Stockholders' Equity $3,911.6 $3,908.0 $4,756.5
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW DATA (Unaudited)
(In millions, except days At June 30,
and percentage information) 2005 2004
Key Balance Sheet Data:
Accounts Receivable, Net
Days of Sales Outstanding (DSO) 70 70
Inventories
Days of Supply (DOS) 56 57
Total Debt Outstanding $619.9 $705.9
Total Debt-to-Total
Capital Ratio 23.0% 26.3%
Six Months Ended June 30,
(In millions) 2005 (a) 2004
Condensed Cash Flow Data:
Cash Flows (Used For)
Operating Activities $(551) $(518)
Cash Flows (Used For)
Investing Activities (32) (63)
Cash Flows (Used For)
Financing Activities and
Other (212) (208)
(Decrease) in Cash
and Equivalents $(795) $(789)
(a) Amounts shown are preliminary estimates. Actual amounts will be
reported in Mattel's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2005.
SOURCE Mattel, Inc.
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Related links:
http://www.mattel.com
Company News On-Call:
http://www.prnewswire.com/comp/540363.html
CONTACT:
News Media, Lisa Marie Bongiovanni,
+1-310-252-3524, LisaMarie.Bongiovanni@mattel.com, or Securities
Analysts, Joleen Jackson, +1-310-252-2702,
Joleen.Jackson@mattel.com, both of Mattel, Inc.
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