Second Quarter Financial Highlights
* Worldwide net sales up 5 percent;
* Domestic gross sales up 1 percent and international gross sales up 12
percent;
* Worldwide gross sales for core brands: Barbie(R) down 13 percent; Hot
Wheels(R) up 37 percent; core Fisher-Price(R) up 12 percent and
American Girl(R) brands up 18 percent;
* Gross margin decreased 70 basis points of net sales; SG&A decreased
30 basis points of net sales;
* Operating income as a percentage of net sales was 5.4 percent, flat
with prior year; and
* Earnings per share of $0.06 vs. prior year of $0.05.
EL SEGUNDO, Calif., July 19 /PRNewswire-FirstCall/ -- Mattel, Inc.
(NYSE: MAT) today reported 2004 second quarter financial results. For the
quarter, the company reported net income of $23.5 million, or $0.06 per share,
compared to last year's second quarter net income of $20.9 million, or
$0.05 per share.
"The second quarter was consistent with our expectations that 2004 will be
a challenging year. To improve long term performance, we are acutely focused
on addressing the top line by reinvigorating the Barbie(R) brand and
capitalizing on the positive momentum of our electronic learning strategy,"
said Robert A. Eckert, chairman and chief executive officer of Mattel. "To
that end, we will continue to make strategic investments in the business to
drive that growth."
Second Quarter Financial Overview
For the quarter, net sales were $804.0 million, a 5 percent increase from
$769.0 million last year, which included a benefit from changes in currency
exchange rates of 2 percentage points. Additionally, beginning in last year's
fourth quarter, the company changed the way it classifies certain close-out
sales resulting in a 1.6 percentage point benefit to net sales for the second
quarter of 2004 when compared to the year ago quarter. On a regional basis,
second quarter gross sales increased 1 percent in the U.S., and in
international markets, second quarter gross sales were up 12 percent, which
included a benefit from changes in currency exchange rates of 4 percentage
points.
For the second quarter, operating income was $43.2 million, an increase of
4 percent compared to the prior year, driven primarily by sales growth. In
the second quarter of 2003, operating income included charges of $13.1 million
associated with the company's financial realignment plan, which was completed
in the fourth quarter of 2003. From time to time, the company expects to
invest in initiatives intended to enhance productivity and improve margins,
and while the company will continue to provide information regarding the cost
of these initiatives, it will no longer provide the pro forma impact on
results.
The company's balance sheet continued on track with a debt-to-total-
capital ratio of 26.3 percent, which is consistent with the company's long-
term goal. During the six months ended June 30, 2004, the company's cash and
short-term investments declined by approximately $789 million, compared to a
decline of $684 million in the prior year period, largely due to cash used for
share repurchases, which was partially offset by improvements in net cash used
for operating activities. During the second quarter, the company acquired
14.2 million shares of its common stock at a cost of $245.9 million.
Second Quarter Sales by Business Unit
Mattel Brands
For the second quarter, worldwide gross sales for the Mattel Brands
business unit were $513.3 million, an increase of 4 percent versus a year ago,
reflecting a 1 percent decline in domestic sales offset by an 8 percent
increase in international sales. Worldwide gross sales for the Barbie(R)
brand were down 13 percent. Worldwide gross sales for the Wheels category,
which includes the Hot Wheels(R), Matchbox(R) and Tyco(R) R/C brands, were up
22 percent. Worldwide gross sales for the Entertainment category, which
includes the Games and Puzzles segment, were up 31 percent for the quarter.
Fisher-Price(R) Brands
Second quarter worldwide gross sales for the Fisher-Price(R) Brands
business unit, which includes the Fisher-Price(R), PowerTouch(TM), Little
People(R), Rescue Heroes(R) and Power Wheels(R) brands, were $314.6 million,
up 6 percent due to strong worldwide sales of core Fisher-Price(R) and
international sales of Fisher-Price Friends.
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
$49.1 million, up 18 percent, primarily due to sales generated by the new
American Girl Place(R) retail store in New York City, which opened in November
2003.
Live Webcast
Mattel will webcast its 2004 second quarter earnings conference call at
5:30 a.m. Pacific time (8:30 a.m. Eastern time) today. The conference call
will be simulcast on the "Investors & Media" section of 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 call may be accessed beginning two hours after the completion of the live
call. To listen to a replay of the call via telephone, dial + (719) 457-0820.
The passcode is 174789. The telephonic playback will be available beginning
at 9:30 a.m. Pacific time the morning of the call, until Tuesday, July 20th at
9 p.m. Pacific time.
Mattel reports its financial results in accordance with generally accepted
accounting principles (GAAP). Information required by Securities and Exchange
Commission Regulation G, regarding any non-GAAP financial measures provided
for analytical purposes, 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 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. Leading the toy and
game market, 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 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 36 countries and sells products in more than 150 nations
throughout the world. The Mattel vision is to be 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; 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 on revenues and margins; the supply and cost of raw materials,
components, employee benefits and various services; the success of new
initiatives; 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; 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 the Company's challenges in
2004, growth in the Barbie brand and electronic learning category, the
Company's debt-to-equity ratio goal, and strategic initiatives to drive
growth. 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)
For the Three Months Ended June 30,
(In millions, except per share and 2004 2003 Yr / Yr
percentage information) % Net % Net %
$ Amt Sales $ Amt Sales Change
Net Sales (a) $804.0 $769.0 5%
Cost of sales (a) 437.7 54.4% 412.7 53.7% 6%
Gross Profit 366.3 45.6% 356.3 46.3% 3%
Advertising and promotion expenses 84.4 10.5% 80.8 10.5% 5%
Other selling and administrative
expenses 238.7 29.7% 230.5 30.0% 4%
Restructuring and other charges -- 0.0% 3.3 0.4% -100%
Operating Income 43.2 5.4% 41.7 5.4% 4%
Interest expense 16.4 2.0% 18.2 2.4% -10%
Interest (income) (4.1) -0.5% (5.3) -0.7% -21%
Other non-operating (income), net (1.5) -0.1% -- 0.0%
Income Before Income Taxes 32.4 4.0% 28.8 3.7% 13%
Provision for income taxes 8.9 7.9
Net Income $23.5 2.9% $20.9 2.7% 13%
EPS - Basic $0.06 $0.05
Average Number of Common Shares
Outstanding - Basic 419.2 439.7
EPS - Diluted $0.06 $0.05
Average Number of Common and Common
Equivalent Shares Outstanding -
Diluted 422.9 445.5
For the Six Months Ended June 30,
(In millions, except per share and 2004 2003 Yr / Yr
percentage information) % Net % Net %
$ Amt Sales $ Amt Sales Change
Net Sales (a) $1,584.9 $1,514.3 5%
Cost of sales (a) 866.9 54.7% 790.0 52.2% 10%
Gross Profit 718.0 45.3% 724.3 47.8% -1%
Advertising and promotion
expenses 171.8 10.9% 164.6 10.9% 4%
Other selling and
administrative expenses 490.3 30.9% 453.4 29.9% 8%
Restructuring and other
charges -- 0.0% 12.0 0.8% -100%
Operating Income 55.9 3.5% 94.3 6.2% -41%
Interest expense 31.6 2.0% 35.6 2.4% -11%
Interest (income) (9.0) -0.6% (11.7) -0.8% -23%
Other non-operating
(income), net (11.5) -0.7% (3.0) -0.2%
Income Before Income Taxes 44.8 2.8% 73.4 4.8% -39%
Provision for income taxes 12.3 19.7
Net Income $32.5 2.1% $53.7 3.5% -39%
EPS - Basic $0.08 $0.12
Average Number of Common Shares
Outstanding - Basic 423.7 439.0
EPS - Diluted $0.08 $0.12
Average Number of Common and
Common Equivalent Shares
Outstanding - Diluted 427.6 444.7
(a) Close out sales for the three- and six-months ended June 30, 2003,
totaling $12.0 million and $25.3 million, respectively, are
classified as a reduction of cost of sales.
MATTEL, INC. AND SUBSIDIARIES EXHIBIT II
WORLDWIDE GROSS SALES INFORMATION (Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
(In millions, except
percentage information) 2004 2003 2004 2003
Worldwide Gross
Sales (a):
Mattel Brands $513.3 $494.7 $1,045.4 $1,027.0
% Change 4% -9% 2% -4%
Pos./(Neg.) Impact of
Currency (in % pts) 2 5 4 5
Fisher-Price Brands 314.6 295.6 578.6 528.9
% Change 6% 0% 9% 1%
Pos./(Neg.) Impact of
Currency (in % pts) 1 3 2 2
American Girl Brands 49.1 41.6 103.2 88.0
% Change 18% -3% 17% -6%
Other 2.3 1.3 5.6 1.8
Gross Sales $879.3 $833.2 $1,732.8 $1,645.7
% Change 6% -6% 5% -3%
Pos./(Neg.) Impact of
Currency (in % pts) 2 4 3 4
Reconciliation of GAAP to
Non-GAAP Financial
Measure:
Gross Sales $879.3 $833.2 $1,732.8 $1,645.7
Sales Adjustments (75.3) (64.2) (147.9) (131.4)
Net Sales (a) $804.0 $769.0 $1,584.9 $1,514.3
% Change 5% -4% 5% -2%
Pos./(Neg.) Impact
of Currency (in % pts) 2 4 3 4
(a) Close out sales for the three- and six-months ended June 30, 2003,
totaling $12.0 million and $25.3 million, respectively, are
classified as a reduction of cost of sales. Please refer to
Mattel's Current Report on Form 8-K dated February 3, 2004, for
discussion of annual and quarterly close out sales amounts impacting
worldwide gross sales.
MATTEL, INC. AND SUBSIDIARIES EXHIBIT III
CONDENSED CONSOLIDATED BALANCE SHEETS
At June 30,
2004 2003 At Dec. 31,
(In millions) (Unaudited) (Unaudited) 2003
Assets
Cash and short-term investments $363.5 $582.8 $1,152.7
Accounts receivable, net 622.7 603.7 543.9
Inventories 557.5 540.4 388.7
Prepaid expenses and other
current assets 266.9 258.7 309.6
Total current assets 1,810.6 1,985.6 2,394.9
Property, plant and equipment,
net 603.2 604.3 625.9
Other assets 1,494.2 1,492.0 1,490.2
Total Assets $3,908.0 $4,081.9 $4,511.0
Liabilities and Stockholders' Equity
Short-term borrowings $76.3 $23.9 $19.6
Current portion of long-term debt 41.0 162.2 52.3
Accounts payable and accrued
liabilities 761.1 806.8 1,142.7
Income taxes payable 219.4 163.9 253.2
Total current liabilities 1,097.8 1,156.8 1,467.8
Long-term debt 588.6 629.6 589.1
Other long-term liabilities 242.0 202.6 237.9
Stockholders' equity 1,979.6 2,092.9 2,216.2
Total Liabilities and
Stockholders' Equity $3,908.0 $4,081.9 $4,511.0
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW DATA (Unaudited)
(In millions, except days and At June 30,
percentage information) 2004 2003
Key Balance Sheet Data:
Accounts Receivable, Net
Days of Sales Outstanding (DSO) 70 71
Inventories
Days of Supply (DOS) 57 54
Total Debt Outstanding $705.9 $815.7
Total Debt-to-Total
Capitalization 26.3% 28.0%
Six Months Ended June 30,
(In millions) 2004 2003
Preliminary Condensed
Cash Flow Data (a):
Cash Flows (Used For)
Operating Activities $(518) $(600)
Cash Flows(Used For)
Investing Activities (63) (91)
Cash Flows(Used For)
From Financing Activities
and Other (208) 7
Decrease in Cash and
Short-term Investments $(789) $(684)
(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, 2004.
SOURCE Mattel, Inc.
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Related links:
http://www.mattel.com
CONTACT:
media, Lisa Marie Bongiovanni,
+1-310-252-3524, LisaMarie.Bongiovanni@mattel.com, or securities
analysts, Dianne Douglas, +1-310-252-2703,
Dianne.Douglas@mattel.com, both of Mattel, Inc.
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