Third Quarter Highlights
* Worldwide net sales up 7 percent;
* Domestic gross sales up 5 percent and international gross sales up 12
percent;
* Worldwide gross sales for core brands: Barbie(R) up 1 percent; Hot
Wheels(R) up 3 percent; Core Fisher-Price(R) up 7 percent and American
Girl(R) brands up 3 percent;
* Gross margin increased 190 basis points of net sales; SG&A increased 240
basis points of net sales;
* Operating income was $322.2 million compared to operating income of
$308.8 million in the third quarter of 2005;
* Net income was $239.0 million compared to net income of $225.3 million in
the third quarter of 2005;
* Earnings per share of $0.62 vs. prior year's earnings per share of $0.55;
and
* The company completed a review of its historical stock option practices.
Included in third quarter results is $19 million of pre-tax non-cash
compensation expense (equivalent of $0.03 per share after tax) due to
unintentional accounting errors related to certain stock option grants made
prior to 2003.
EL SEGUNDO, Calif., Oct. 16 /PRNewswire-FirstCall/ -- Mattel, Inc.
(NYSE: MAT) today reported 2006 third quarter financial results. For the
quarter, the company reported net income of $239.0 million, or $0.62 per
share, compared to last year's third quarter net income of $225.3 million,
or $0.55 per share.
"I am pleased with our third quarter results. We had good performance
across our portfolio, with especially strong contributions from
Fisher-Price(R), the CARS entertainment property, and girls brands such as
Polly Pocket!(TM) and Pixel Chix(TM)," said Robert A. Eckert, chairman and
chief executive officer of Mattel. "The Barbie(R) business continued to
show encouraging signs of stabilization, with U.S. sales increasing for the
third consecutive quarter, and we generated early retail excitement with
the introduction of TMX(TM) Elmo in September."
Financial Overview
For the quarter, net sales were $1.79 billion, up 7 percent compared to
$1.67 billion last year, including a favorable change in currency exchange
rates of 1 percentage point. On a regional basis, third quarter gross sales
increased 5 percent in the U.S., and were up 12 percent in international
markets, including a favorable impact of changes in currency exchange rates
of 3 percentage points. Operating income for the quarter of $322.2 million
increased from $308.8 million in 2005 primarily due to the growth in sales
and improvement in gross margin.
The company's debt-to-total-capital ratio was 28.8 percent. Consistent
with the seasonality of the company's business and its use of working
capital, the company's cash and equivalents declined by approximately $445
million during the nine months ended September 30, 2006, compared to a
decline of approximately $983 million in the prior year period. During the
third quarter, the company repurchased 2.4 million shares of its common
stock at a cost of $39.4 million.
On October 3rd, the company completed the acquisition of Radica Games
Limited, the maker of electronic entertainment toys, for total
consideration of approximately $230 million. Since the transaction was
completed in the fourth quarter, the acquisition was not included in
Mattel's third quarter results.
Sales by Business Unit
Mattel Girls and Boys Brands
For the third quarter, worldwide gross sales for the Mattel Girls and
Boys Brands business unit were $1.08 billion, up 8 percent versus a year
ago. Worldwide gross sales for the Barbie(R) brand were up 1 percent.
Worldwide gross sales for Other Girls Brands were up 16 percent, due to
continued growth from the Pixel Chix(TM) and Polly Pocket!(TM) toy lines.
Worldwide gross sales for the Wheels category, which includes the Hot
Wheels(R), Matchbox(R) and Tyco(R) R/C brands, were down 3 percent.
Worldwide gross sales for the Entertainment business, which includes Games
and Puzzles, were up 27 percent for the quarter primarily due to the CARS
toy line.
Fisher-Price Brands
Third quarter worldwide gross sales for the Fisher-Price Brands
business unit, which includes the Fisher-Price(R), Little People(R), and
Power Wheels(R) brands, were $790.5 million, or up 9 percent versus the
prior year. This reflects strong growth in Core Fisher-Price(R) and
Fisher-Price Friends worldwide, including continued growth from Dora the
Explorer(TM) and the launch of TMX(TM) Elmo.
American Girl Brands
Third quarter gross sales for the American Girl Brands business unit,
which offers American Girl(R) branded products direct to consumers, were
$71.2 million, up 3 percent versus last year primarily due to sales from
the third American Girl Place(R) store, which opened in Los Angeles in
April 2006.
Stock Option Review
During the third quarter of 2006, the Company, along with outside
counsel, commenced and completed a comprehensive review of its historical
stock option practices for grants made during the period beginning fourth
quarter 1993 through third quarter 2006. The review found that there had
been no backdating of stock option grants, no misconduct or manipulation
associated with stock option grant dates, no intentional deviations from
generally accepted accounting principles, and no material inaccuracies with
respect to the current or historical financial statements of the Company.
The review did identify some administrative procedural deficiencies which
resulted in unintentional errors associated with incorrect accounting
measurement dates for certain grants made to the general population of
employees prior to 2003. The review found no errors associated with any
executive officer or Board member grants and no errors associated with any
grants made after 2002.
The unintentional accounting errors principally related to situations
in which, as of the grant date approved by the Compensation Committee of
the Board of Directors, an aggregate number of options to be granted was
approved and the exercise price was established, but the allocation of
those options to certain individual employee recipients was not yet
finalized. The errors associated with the use of incorrect accounting
measurement dates caused non-cash compensation expense to be understated by
a cumulative amount of $19 million ($13 million net of income tax) over the
years 1995 through 2005, the period in which the options in question
vested. The impact on income from continuing operations was not material to
any previously reported period (less than 1 percent in any individual
year). Because the errors are not material, a correcting entry was recorded
in the third quarter of 2006 to adjust for their cumulative impact on the
Company's financial statements. The adjustments increased SG&A and reduced
operating income by $19 million, or 110 basis points of net sales. This
resulted in an after-tax reduction to net income of $13 million, or 70
basis points of net sales. The net impact on third quarter earnings was a
reduction of $0.03 per share.
Live Webcast
Mattel will webcast its 2006 third quarter earnings conference call at
8:30 a.m. Eastern time (5:30 a.m. Pacific time) today. 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, Oct. 17th at midnight
Eastern time (9 p.m. Pacific time) and may be accessed by dialing + (719)
457-0820. The passcode is 8926049.
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 introduced. The
Mattel family is comprised of such best-selling brands as Hot Wheels(R),
Matchbox(R), American Girl(R), Radica(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 30,000 people in 42 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 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, 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 a
forward-looking statement about stabilization of the Barbie(R) business.
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 September 30,
(In millions, except per share 2006 2005
and percentage information) % Net % Net Yr/Yr
$ Amt Sales $ Amt Sales % Change
Net Sales $1,790.3 $1,666.1 7%
Cost of sales 938.9 52.4% 904.8 54.3% 4%
Gross Profit 851.4 47.6% 761.3 45.7% 12%
Advertising and promotion
expenses 205.9 11.5% 191.6 11.5% 7%
Other selling and
administrative expenses 323.3 18.1% 260.9 15.7% 24%
Operating Income 322.2 18.0% 308.8 18.5% 4%
Interest expense 22.6 1.3% 16.8 1.0% 34%
Interest (income) (6.7) -0.4% (4.3) -0.3% 57%
Other non-operating expenses
(income), net 1.7 (15.0)
Income Before Income Taxes 304.6 17.0% 311.3 18.7% -2%
Provision for income taxes 65.6 86.0
Net Income $239.0 13.4% $225.3 13.5% 6%
EPS - Basic $0.63 $0.56
Average Number of Common Shares
Outstanding - Basic 378.6 403.7
EPS - Diluted $0.62 $0.55
Average Number of Common and
Common Equivalent Shares
Outstanding - Diluted 382.7 407.2
For the Nine Months Ended September 30,
(In millions, except per share 2006 2005
and percentage information) % Net % Net Yr/Yr
$ Amt Sales $ Amt Sales % Change
Net Sales $3,541.3 $3,336.1 6%
Cost of sales 1,941.9 54.8% 1,844.0 55.3% 5%
Gross Profit 1,599.4 45.2% 1,492.1 44.7% 7%
Advertising and promotion
expenses 395.3 11.2% 372.4 11.2% 6%
Other selling and
administrative expenses 863.9 24.4% 776.8 23.3% 11%
Operating Income 340.2 9.6% 342.9 10.3% -1%
Interest expense 53.8 1.5% 54.0 1.6% 0%
Interest (income) (22.0) -0.6% (28.7) -0.9% -24%
Other non-operating expenses
(income), net (2.0) (28.7)
Income Before Income Taxes 310.4 8.8% 346.3 10.4% -10%
Provision for income taxes 3.8 208.4
Net Income $306.6 8.7% $137.9 4.1% 122%
EPS - Basic $0.80 $0.34
Average Number of Common Shares
Outstanding - Basic 384.5 409.8
EPS - Diluted $0.79 $0.33
Average Number of Common and
Common Equivalent Shares
Outstanding - Diluted 387.2 413.9
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) 2006 2005 2006 2005
Worldwide Gross Sales:
Mattel Girls & Boys
Brands $1,082.1 $1,005.0 $2,184.9 $2,083.2
% Change 8% -5% 5% -1%
Pos./(Neg.)
Impact of
Currency (in % pts) 2 2 0 2
Fisher-Price Brands 790.5 727.4 1,463.5 1,329.1
% Change 9% 6% 10% 5%
Pos./(Neg.)
Impact of
Currency (in % pts) 1 0 0 1
American Girl Brands 71.2 69.1 194.7 195.5
% Change 3% 12% 0% 19%
Other 5.9 3.5 13.4 12.1
Gross Sales $1,949.7 $1,805.0 $3,856.5 $3,619.9
% Change 8% 0% 7% 2%
Pos./(Neg.)
Impact of
Currency (in % pts) 1 1 1 1
Reconciliation of GAAP to Non-GAAP Financial Measure:
Gross Sales $1,949.7 $1,805.0 $3,856.5 $3,619.9
Sales Adjustments (159.4) (138.9) (315.2) (283.8)
Net Sales $1,790.3 $1,666.1 $3,541.3 $3,336.1
% Change 7% 0% 6% 3%
Pos./(Neg.)
Impact of
Currency (in % pts) 1 1 0 2
MATTEL, INC. AND SUBSIDIARIES EXHIBIT III
CONDENSED CONSOLIDATED BALANCE SHEETS
At September 30,
2006 2005 At Dec. 31,
(In millions) (Unaudited) 2005
Assets
Cash and equivalents $552.4 $173.8 $997.7
Accounts receivable, net 1,387.9 1,262.4 760.6
Inventories 672.2 725.9 376.9
Prepaid expenses and other current
assets 273.0 264.7 277.3
Total current assets 2,885.5 2,426.8 2,412.5
Property, plant and equipment, net 525.4 538.2 547.1
Other noncurrent assets 1,459.3 1,436.5 1,412.7
Total Assets $4,870.2 $4,401.5 $4,372.3
Liabilities and Stockholders' Equity
Short-term borrowings $57.4 $89.3 $118.0
Current portion of long-term debt 100.0 88.4 100.0
Accounts payable and accrued
liabilities 1,206.1 1,069.2 1,062.4
Income taxes payable 134.6 262.4 182.8
Total current liabilities 1,498.1 1,509.3 1,463.2
Long-term debt 775.0 350.0 525.0
Other noncurrent liabilities 297.3 259.4 282.4
Stockholders' equity 2,299.8 2,282.8 2,101.7
Total Liabilities and
Stockholders' Equity $4,870.2 $4,401.5 $4,372.3
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW DATA (Unaudited)
(In millions, except days and At September 30,
percentage information) 2006 2005
Key Balance Sheet Data:
Accounts Receivable, Net
Days of Sales Outstanding (DSO) 70 68
Inventories
Days of Supply (DOS) 62 67
Total Debt Outstanding $932.4 $527.7
Total Debt-to-Total Capital
Ratio 28.8% 18.8%
Nine Months Ended September 30,
(In millions) 2006 (a) 2005
Condensed Cash Flow Data:
Cash Flows (Used For) Operating
Activities $(368) $(629)
Cash Flows (Used For) Investing
Activities (101) (38)
Cash Flows From (Used For) Financing
Activities and Other 24 (316)
(Decrease) in Cash and Equivalents $(445) $(983)
(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, 2006.
SOURCE Mattel, Inc.
 back to top
Related links:
http://www.fisher-price.com
http://www.mattel.com
http://www.prnewswire.com/comp/540363.html /
CONTACT:
News Media, Lisa Marie Bongiovanni,
+1-310-252-3524, LisaMarie.Bongiovanni@mattel.com, or Securities
Analysts, Mike Salop, +1-310-252-2703, Mike.Salop@mattel.com,
both of Mattel, Inc.
|
