Third Quarter Financial Highlights
* Worldwide net sales down 2 percent;
* Domestic gross sales down 9 percent and international gross sales up
6 percent;
* Worldwide gross sales for core brands: Barbie(R) down 13 percent;
Hot Wheels(R) down 4 percent; core Fisher-Price(R) up 7 percent and
American Girl(R) brands up 9 percent;
* Gross margin decreased by 150 basis points of net sales; SG&A
decreased by 80 basis points of net sales;
* Operating income as a percentage of net sales was 21.6 percent,
down 110 basis points compared with prior year; and
* Earnings per share of $0.61, flat with the prior year.
EL SEGUNDO, Calif., Oct. 18 /PRNewswire-FirstCall/ -- Mattel, Inc.
(NYSE: MAT) today reported 2004 third quarter financial results. For the
quarter, the company reported net income of $255.9 million, or $0.61 per
share, compared to last year's third quarter net income of $270.0 million, or
$0.61 per share.
"Earnings per share for the quarter was flat with prior year reflecting
that the underlying performance of our business remains quite challenging,"
said Robert A. Eckert, chairman and chief executive officer of Mattel. "As
consumers respond to economic uncertainty, many retailers have been reluctant
to take inventory risk for the holiday season. Given this environment, our
focus continues to be on executing strategies to maximize our performance at
retail."
Third Quarter Financial Overview
For the quarter, net sales were $1.67 billion, a 2 percent decrease from
$1.70 billion 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 0.7 percentage
point benefit to net sales for the third quarter of 2004 when compared to the
year ago quarter. On a regional basis, third quarter gross sales decreased
9 percent in the U.S., and in international markets, third quarter gross sales
were up 6 percent, which included a benefit from changes in currency exchange
rates of 4 percentage points.
For the third quarter, operating income was $360.9 million, a decrease of
7 percent compared to the prior year, driven primarily by lower sales volume
and lower gross margins. In the third quarter of 2003, operating income
included income of $7.9 million associated with an adjustment of a reserve
accrued in 1999 related to the closure of the Beaverton manufacturing facility
partially offset by charges related to 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 24.2 percent, which is consistent with the
company's long-term goal. During the nine months ended September 30, 2004,
the company's cash and short-term investments declined by approximately
$822 million, compared to a decline of $866 million in the prior year period.
Third Quarter Sales by Business Unit
Mattel Brands
For the third quarter, worldwide gross sales for the Mattel Brands
business unit were $1.06 billion, a decrease of 9 percent versus a year ago,
reflecting an 18 percent decline in domestic sales and a 2 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 down 3 percent.
Worldwide gross sales for the Entertainment category, which includes the Games
and Puzzles business, were up 13 percent for the quarter.
Fisher-Price(R) Brands
Third 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 $683.1 million,
up 7 percent due to strong worldwide sales of core Fisher-Price(R) and
Fisher-Price Friends.
American Girl(R) Brands
Third quarter gross sales for the American Girl(R) Brands business unit,
which offers American Girl(R) branded products direct to consumers, were
$61.5 million, up 9 percent, primarily due to sales generated by the new
American Girl Place(R) retail store in New York City, which opened in November
2003 partially offset by declines in other channels.
Live Webcast
Mattel will webcast its 2004 third 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 Web
site, 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 944361. The telephonic
playback will be available beginning at noon Eastern time (9 a.m. Pacific
time) the morning of the call, until Wednesday, October 20th at midnight
Eastern time (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. The Mattel family is
also 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, 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; 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 consumer demand, customer inventory levels,
the Company's performance at retail, investment in initiatives aimed at
productivity and margins and the company's debt-to-capital ratio goal. 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 2004 2003 Yr / Yr
and percentage
information) $ Amt % Net Sales $ Amt % Net Sales % Change
Net Sales (a) $1,667.5 $1,704.7 -2%
Cost of
sales (a) 870.8 52.2% 864.6 50.7% 1%
Gross Profit 796.7 47.8% 840.1 49.3% -5%
Advertising
and promotion
expenses 192.1 11.5% 196.6 11.5% -2%
Other selling
and
administrative
expenses 243.7 14.7% 263.3 15.5% -7%
Restructuring
and other
charges -- 0.0% (7.6) -0.4% -100%
Operating Income 360.9 21.6% 387.8 22.7% -7%
Interest
expense 20.8 1.2% 21.2 1.2% -2%
Interest
(income) (5.2) -0.3% (3.0) -0.2% 73%
Other
non-operating
(income), net (5.9) -0.4% (3.8) -0.2%
Income Before
Income Taxes 351.2 21.1% 373.4 21.9% -6%
Provision for
income taxes 95.3 103.4
Net Income $255.9 15.3% $270.0 15.8% -5%
EPS - Basic $0.62 $0.61
Average Number
of Common Shares
Outstanding -
Basic 414.6 439.3
EPS - Diluted $0.61 $0.61
Average Number
of Common and
Common Equivalent
Shares
Outstanding -
Diluted 418.0 444.0
For the Nine Months Ended September 30,
(In millions,
except per share 2004 2003 Yr / Yr
and percentage
information) $ Amt % Net Sales $ Amt % Net Sales % Change
Net Sales (a) $3,252.4 $3,219.0 1%
Cost of
sales (a) 1,737.7 53.4% 1,654.6 51.4% 5%
Gross Profit 1,514.7 46.6% 1,564.4 48.6% -3%
Advertising
and promotion
expenses 363.9 11.2% 361.2 11.2% 1%
Other selling
and
administrative
expenses 734.0 22.6% 716.7 22.3% 2%
Restructuring
and other
charges -- 0.0% 4.4 0.1% -100%
Operating Income 416.8 12.8% 482.1 15.0% -14%
Interest
expense 52.4 1.6% 56.8 1.8% -8%
Interest
(income) (14.2) -0.5% (14.7) -0.5% -3%
Other
non-operating
(income), net (17.4) -0.5% (6.8) -0.2%
Income Before
Income Taxes 396.0 12.2% 446.8 13.9% -11%
Provision for
income taxes 107.6 123.1
Net Income $288.4 8.9% $323.7 10.1% -11%
EPS - Basic $0.69 $0.74
Average Number
of Common Shares
Outstanding -
Basic 420.6 439.1
EPS - Diluted $0.68 $0.73
Average Number
of Common and
Common Equivalent
Shares
Outstanding -
Diluted 424.4 444.5
(a) Close out sales for the three- and nine-months ended September 30,
2003, totaling $12.8 million and $38.1 million, respectively, are
classified as a reduction of cost of sales.
MATTEL, INC. AND SUBSIDIARIES EXHIBIT II
WORLDWIDE GROSS SALES INFORMATION (Unaudited)
Three Months Ended September 30,
(In millions, except
percentage information) 2004 2003
Worldwide Gross Sales (a):
Mattel Brands $1,060.9 $1,160.2
% Change -9% 3%
Pos./(Neg.) Impact of Currency
(in % pts) 2 3
Fisher-Price Brands 683.1 641.1
% Change 7% 2%
Pos./(Neg.) Impact of Currency
(in % pts) 2 2
American Girl Brands 61.5 56.3
% Change 9% -2%
Other 0.2 3.7
Gross Sales $1,805.7 $1,861.3
% Change -3% 2%
Pos./(Neg.) Impact of Currency
(in % pts) 2 2
Reconciliation of GAAP to Non-GAAP Financial Measure:
Gross Sales $1,805.7 $1,861.3
Sales Adjustments (138.2) (156.6)
Net Sales (a) $1,667.5 $1,704.7
% Change -2% 2%
Pos./(Neg.) Impact of Currency
(in % pts) 2 2
Nine Months Ended September 30,
(In millions, except
percentage information) 2004 2003
Worldwide Gross Sales (a):
Mattel Brands $2,106.3 $2,187.2
% Change -4% 0%
Pos./(Neg.) Impact of Currency 3 4
(in % pts)
Fisher-Price Brands 1,261.7 1,170.0
% Change 8% 2%
Pos./(Neg.) Impact of Currency 2 3
(in % pts)
American Girl Brands 164.7 144.3
% Change 14% -4%
Other 5.8 5.5
Gross Sales $3,538.5 $3,507.0
% Change 1% 0%
Pos./(Neg.) Impact of Currency 3 3
(in % pts)
Reconciliation of GAAP to Non-GAAP Financial Measure:
Gross Sales $3,538.5 $3,507.0
Sales Adjustments (286.1) (288.0)
Net Sales (a) $3,252.4 $3,219.0
% Change 1% 0%
Pos./(Neg.) Impact of Currency
(in % pts) 2 3
(a) Close out sales for the three- and nine- months ended September 30,
2003, totaling $12.8 million and $38.1 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 September 30,
2004 2003 At Dec. 31,
(In millions) (Unaudited) (Unaudited) 2003
Assets
Cash and short-term
investments $331.1 $401.4 $1,152.7
Accounts receivable, net 1,220.5 1,258.1 543.9
Inventories 666.5 619.7 388.7
Prepaid expenses and
other current assets 287.4 283.2 309.6
Total current assets 2,505.5 2,562.4 2,394.9
Property, plant and
equipment, net 597.0 619.3 625.9
Other assets 1,410.3 1,422.3 1,490.2
Total Assets $4,512.8 $4,604.0 $4,511.0
Liabilities and Stockholders' Equity
Short-term borrowings $89.2 $33.7 $19.6
Current portion of
long-term debt 191.0 12.2 52.3
Accounts payable and
accrued liabilities 1,060.8 1,199.9 1,142.7
Income taxes payable 240.9 187.5 253.2
Total current
liabilities 1,581.9 1,433.3 1,467.8
Long-term debt 438.4 629.4 589.1
Other long-term liabilities 244.5 206.9 237.9
Stockholders' equity 2,248.0 2,334.4 2,216.2
Total Liabilities and
Stockholders' Equity $4,512.8 $4,604.0 $4,511.0
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW DATA (Unaudited)
At September 30,
(In millions, except days and
percentage information) 2004 2003
Key Balance Sheet Data:
Accounts Receivable, Net
Days of Sales Outstanding (DSO) 66 66
Inventories
Days of Supply (DOS) 64 63
Total Debt Outstanding $718.6 $675.3
Debt-to-Total Capital Ratio 24.2% 22.4%
Nine Months Ended
September 30,
(In millions) 2004 2003
Preliminary Condensed Cash Flow Data (a):
Cash Flows (Used For) Operating Activities $(549) $(554)
Cash Flows (Used For) Investing Activities (85) (140)
Cash Flows (Used For) Financing Activities
and Other (188) (172)
Decrease in Cash and Short-term Investments $(822) $(866)
(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, 2004.
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, Dianne Douglas, +1-310-252-2703,
Dianne.Douglas@mattel.com, both of Mattel, Inc.
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