Third Quarter Highlights
- Worldwide net sales up 3 percent;
- Domestic gross sales down 2 percent and international gross sales up 10
percent;
- Worldwide gross sales for core brands: Barbie(R) down 4 percent; Hot
Wheels(R) up 10 percent; Core Fisher-Price(R) up 19 percent and American
Girl(R) brands flat;
- Gross margin decreased 60 basis points of net sales; SG&A increased by 50
basis points of net sales;
- Operating income was $310.5 million, and included charges of
approximately $40 million related to the company's 2007 product recalls,
compared to operating income of $322.2 million in the third quarter of
2006, which included $19 million of non-cash compensation expense related
to prior periods; and
- Earnings per share of $0.61 vs. prior year of $0.62.
EL SEGUNDO, Calif., Oct. 15 /PRNewswire-FirstCall/ -- Mattel, Inc.
(NYSE: MAT) today reported 2007 third quarter financial results. For the
quarter, the company reported net income of $236.8 million, or $0.61 per
share, compared to last year's third quarter net income of $239.0 million,
or $0.62 per share.
Third quarter operating income of $310.5 million included charges and
incremental costs of approximately $40 million related to the company's
product recalls during 2007. Of this total, $13.3 million related to an
increase in the reserves recorded in the second quarter for the August
recalls, due primarily to higher than anticipated product return rates;
$9.1 million related to additional reserves for subsequent product recalls;
and approximately $17 million related to incremental recall related legal,
advertising and administration costs incurred in the third quarter.
"Despite the challenges the company faced during the third quarter, the
business has performed fairly well, even with some supply chain disruptions
that impacted our sales during the quarter. International has continued to
drive growth in every major region, and while the U.S. was down slightly in
the quarter, we did continue to see strong performance from several lines,
especially Core Fisher-Price(R) and our Disney/Pixar CARS(TM) entertainment
property," said Robert A. Eckert, chairman and chief executive officer of
Mattel. "U.S. Barbie(R) performance was soft and remains an area of focus,
although a good portion of the decline in the quarter was directly related
to the supply chain disruptions."
Financial Overview
For the quarter, net sales were $1.84 billion, up 3 percent compared to
$1.79 billion last year, including favorable changes in currency exchange
rates of 3 percentage points. On a regional basis, third quarter gross
sales decreased 2 percent in the U.S. and increased 10 percent in
international markets, including favorable changes in currency exchange
rates of 6 percentage points. Operating income for the quarter was $310.5
million, compared to prior year's operating income for the quarter of
$322.2 million.
The company's debt-to-total-capital ratio was 29 percent. Consistent
with the seasonality of the business, during the first nine months, the
company's cash and equivalents declined by approximately $929 million,
compared with a decline of approximately $445 million in the first nine
months of 2006. During the third quarter of 2007, the company repurchased
28.3 million shares of its common stock at a cost of $645 million.
Sales by Business Unit
Mattel Girls and Boys Brands
For the quarter, worldwide gross sales for the Mattel Girls & Boys
Brands business unit were $1.14 billion, up 6 percent versus a year ago.
Worldwide gross sales for the Barbie(R) brand were down 4 percent, with
increases in international markets partially offsetting declines in the
U.S. Worldwide gross sales for Other Girls Brands were down 10 percent, due
primarily to U.S. declines in the Polly Pocket!(TM) brand. Worldwide gross
sales for Wheels, which includes the Hot Wheels(R), Matchbox(R) and Tyco(R)
R/C brands, were up 9 percent, led by double-digit growth in the Hot
Wheels(R) and Matchbox(R) lines. Worldwide gross sales for the
Entertainment business, which includes Radica(R) and Games and Puzzles,
increased 29 percent, driven by strong performance of Disney/Pixar CARS(TM)
and the addition of the Radica(R) product lines.
Fisher-Price Brands
Third quarter worldwide gross sales for the Fisher-Price Brands
business unit, which includes the Fisher-Price(R) Core, Fisher-Price(R)
Friends and Power Wheels(R) brands, were $799.8 million, up 1 percent
versus the prior year, reflecting continued strong growth in Core
Fisher-Price(R) worldwide, which was partially offset by declines in
Fisher-Price(R) Friends.
American Girl Brands
Third quarter gross sales for the American Girl Brands business unit,
which offers American Girl(R) branded products directly to consumers, were
$71.0 million, or flat with last year.
Live Webcast
Mattel will webcast its 2007 third quarter earnings conference call
today at 8:30 a.m. (Eastern), 5:30 a.m. (Pacific). The conference call will
be webcast on the "Investors & Media" section of the company's corporate
Web site, http://www.mattel.com. To listen to the live call, log on to the
Web site 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 Web site 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 11:30 a.m. Eastern time (8:30 a.m. Pacific time)
the morning of the call, until Tuesday, October 16 at midnight Eastern time
(9 p.m. Pacific time) and may be accessed by dialing + (719) 457-0820. The
passcode is 1976462.
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. The Mattel family is comprised of such best-selling brands as
Barbie(R), the most popular fashion doll ever introduced, Hot Wheels(R),
Matchbox(R), American Girl(R), Radica(R) and Tyco(R) R/C, as well as
Fisher-Price(R) brands, including Little People(R), Power Wheels(R) and a
wide array of entertainment-inspired toy lines. Mattel is recognized as one
of the 100 Most Trustworthy U.S. Companies by Forbes Magazine and is ranked
among the 100 Best Corporate Citizens by CRO Magazine. Committed to ethical
manufacturing and sustainable business practices, Mattel marks a 10-year
milestone in 2007 for its Global Manufacturing Principles. With global
headquarters in El Segundo, Calif., Mattel employs more than 30,000 people
in 43 countries and territories and sells products in more than 150
nations. Mattel's 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 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 sellers of a broad range of play products including video
games and consoles, consumer electronics, and retailers' private label
products) 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; risks associated
with product recalls, product liability claims and product safety concerns,
such as possible reputational harm, reduced sales or increased 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, bird flu, 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 reserves for product recalls and other incremental recall
related costs and performance of various product lines. 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 For the Three Months Ended September 30,
and percentage 2007 2006 Yr / Yr
information) $ Amt % Net Sales $ Amt % Net Sales % Change
Net Sales $1,838.6 $1,790.3 3%
Cost of sales 973.9 53.0% 938.9 52.4% 4%
Gross Profit 864.7 47.0% 851.4 47.6% 2%
Advertising
and promotion
expenses 211.4 11.5% 205.9 11.5% 3%
Other selling
and
administrative
expenses 342.8 18.6% 323.3 18.1% 6%
Operating Income 310.5 16.9% 322.2 18.0% -4%
Interest
expense 16.4 0.9% 22.6 1.3% -28%
Interest
(income) (6.2) -0.3% (6.7) -0.4% -8%
Other non-
operating
(income)
expense, net (7.4) 1.7
Income Before
Income Taxes 307.7 16.7% 304.6 17.0% 1%
Provision for
income taxes 70.9 65.6
Net Income $236.8 12.9% $239.0 13.4% -1%
EPS - Basic $0.61 $0.63
Average Number
of Common Shares
Outstanding
- Basic 386.3 378.6
EPS - Diluted $0.61 $0.62
Average Number
of Common and
Common Equivalent
Shares Outstanding
- Diluted 391.3 382.7
(In millions,
except per share For the Nine Months Ended September 30,
and percentage 2007 2006 Yr / Yr
information) $ Amt % Net Sales $ Amt % Net Sales % Change
Net Sales $3,781.5 $ 3,541.3 7%
Cost of sales 2,054.9 54.3% 1,941.9 54.8% 6%
Gross Profit 1,726.6 45.7% 1,599.4 45.2% 8%
Advertising
and promotion
expenses 423.9 11.2% 395.3 11.2% 7%
Other selling
and
administrative
expenses 934.7 24.7% 863.9 24.4% 8%
Operating Income 368.0 9.7% 340.2 9.6% 8%
Interest
expense 45.0 1.2% 53.8 1.5% -16%
Interest
(income) (28.6) -0.8% (22.0) -0.6% 30%
Other non-
operating
(income)
expense, net (8.2) (2.0)
Income Before
Income Taxes 359.8 9.5% 310.4 8.8% 16%
Provision for
income taxes 88.3 3.8
Net Income $271.5 7.2% $306.6 8.7% -11%
EPS - Basic $0.69 $0.80
Average Number
of Common Shares
Outstanding
- Basic 390.8 384.5
EPS - Diluted $0.68 $0.79
Average Number
of Common and
Common Equivalent
Shares Outstanding
- Diluted 397.2 387.2
MATTEL, INC. AND SUBSIDIARIES EXHIBIT II
WORLDWIDE GROSS SALES INFORMATION (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions, except
percentage information) 2007 2006 2007 2006
Worldwide Gross Sales:
Mattel Girls
& Boys Brands $1,143.1 $1,082.1 $2,348.5 $2,184.9
% Change 6% 8% 7% 5%
Pos./(Neg.)
Impact of
Currency
(in % pts) 4 2 4 0
Fisher-Price Brands 799.8 790.5 1,601.4 1,463.5
% Change 1% 9% 9% 10%
Pos./(Neg.)
Impact of
Currency
(in % pts) 2 1 2 0
American Girl
Brands 71.0 71.2 189.7 194.7
% Change 0% 3% -3% 0%
Other 4.9 5.9 12.7 13.4
Gross Sales $2,018.8 $1,949.7 $4,152.3 $3,856.5
% Change 4% 8% 8% 7%
Pos./(Neg.)
Impact of
Currency
(in % pts) 3 1 3 1
Reconciliation of GAAP to Non-GAAP Financial Measure:
Gross Sales $2,018.8 $1,949.7 $4,152.3 $3,856.5
Sales Adjustments (180.2) (159.4) (370.8) (315.2)
Net Sales $1,838.6 $1,790.3 $3,781.5 $3,541.3
% Change 3% 7% 7% 6%
Pos./(Neg.)
Impact of
Currency
(in % pts) 3 1 3 0
MATTEL, INC. AND SUBSIDIARIES EXHIBIT III
CONDENSED CONSOLIDATED BALANCE SHEETS
At September 30, At Dec. 31,
2007 2006 2006
(In millions) (Unaudited)
Assets
Cash and equivalents $276.8 $552.4 $1,205.6
Accounts receivable, net 1,640.3 1,387.9 943.8
Inventories 732.3 672.2 383.1
Prepaid expenses and
other current assets 219.9 273.0 317.6
Total current assets 2,869.3 2,885.5 2,850.1
Property, plant
and equipment, net 515.4 525.4 536.7
Other noncurrent assets 1,743.9 1,459.3 1,569.1
Total Assets $5,128.6 $4,870.2 $4,955.9
Liabilities and Stockholders' Equity
Short-term borrowings $363.9 $57.4 $-
Current portion
of long-term debt 40.0 100.0 64.3
Accounts payable
and accrued liabilities 1,301.8 1,206.1 1,356.3
Income taxes payable 45.1 134.6 161.9
Total current liabilities 1,750.8 1,498.1 1,582.5
Long-term debt 560.0 775.0 635.7
Other noncurrent liabilities 454.8 297.3 304.7
Stockholders' equity 2,363.0 2,299.8 2,433.0
Total Liabilities and
Stockholders' Equity $5,128.6 $4,870.2 $4,955.9
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW DATA (Unaudited)
(In millions, except days At September 30,
and percentage information) 2007 2006
Key Balance Sheet Data:
Accounts Receivable, Net
Days of Sales Outstanding (DSO) 80 70
Inventories
Days of Supply (DOS) 62 62
Total Debt Outstanding $963.9 $932.4
Total Debt-to-Total Capital Ratio 29.0% 28.8%
Nine Months Ended September 30,
(In millions) 2007(a) 2006
Condensed Cash Flow Data:
Cash Flows (Used For) Operating Activities $(611) $(368)
Cash Flows (Used For) Investing Activities (237) (101)
Cash Flows (Used For) From Financing Activities
and Other (81) 24
(Decrease) in Cash and Equivalents $(929) $(445)
(a) Amounts shown are preliminary estimates. Actual amounts will be
reported in Mattel's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2007.
SOURCE Mattel, Inc.
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Related links:
http://www.mattel.com
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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