Fourth Quarter Highlights- Worldwide net sales up 4 percent;
- Domestic gross sales down by 5 percent and international gross sales up 17 percent;
- Worldwide gross sales for core brands: Barbie(R) down 5 percent; Hot Wheels(R) up 22 percent; core Fisher-Price(R) up 16 percent and American Girl(R) brands flat;
- Gross margin decreased 40 basis points of net sales; SG&A improvement of 320 basis points of net sales;
- Operating income as a percentage of net sales was 17.5 percent, down 100 basis points;
- Earnings per share, excluding charges, of $0.50 vs. prior year of $0.43; and
- GAAP earnings per share of $0.49 vs. prior year of $0.42
Full-Year Highlights- Worldwide net sales up 2 percent;
- Domestic gross sales down by 6 percent and international gross sales up 15 percent;
- Worldwide gross sales for core brands: Barbie(R) flat; Hot Wheels(R) up 3 percent; core Fisher-Price(R) up 5 percent and American Girl(R) brands down 2 percent;
- Gross margin increased 60 basis points of net sales; SG&A improvement of 110 basis points of net sales;
- Operating income as a percentage of net sales was 16.2 percent, up 20 basis points;
- Earnings per share, excluding charges, of $1.25 vs. prior year of $1.10; and
- GAAP earnings per share of $1.22 vs. prior year of $0.52.
EL SEGUNDO, Calif., Feb. 3, 2004 -- Mattel, Inc. today reported 2003 fourth quarter and full year financial results. For the quarter, the company reported GAAP (Generally Accepted Accounting Principles) net income of $213.9 million, or $0.49 per share, compared to last year's fourth quarter income of $186.1 million, or $0.42 per share. For the quarter, net sales were $1.74 billion, a 4 percent increase from $1.67 billion last year, which included a benefit from changes in currency exchange rates of 4 percentage points. Operating income, excluding charges, was down 2 percent at $304.0 million. On a regional basis, fourth quarter gross sales decreased 5 percent in the U.S., and in international markets, fourth quarter gross sales were up 17 percent, which included a benefit from changes in currency exchange rates of 10 percentage points.
For the year, the company reported GAAP net income of $537.6 million, or $1.22 per share, compared to last year's income of $230.1 million, or $0.52 per share. For the year, net sales were $4.96 billion, a 2 percent increase from $4.89 billion last year, which included a benefit from changes in currency exchange rates of 4 percentage points. Operating income, excluding charges, was up 3 percent at $803.2 million. On a regional basis, full-year gross sales decreased 6 percent in the U.S., and in international markets, full-year gross sales were up 15 percent, which included a benefit from changes in currency exchange rates of 10 percentage points.
"Results for the year were mixed. While sales in the U.S. were below expectations, we continued to grow internationally, improve profit margins and generate significant cash flow," said Robert A. Eckert, chairman and chief executive officer of Mattel. "We also began executing our capital deployment framework by using our strong cash flow to significantly increase the cash dividend and initiate a share buy-back program."
Mattel Brands Business Unit: Fourth Quarter
For the fourth quarter, worldwide gross sales for the Mattel Brands business unit were $1.07 billion, a 2 percent increase. Worldwide gross sales for the Barbie® brand were down 5 percent. Worldwide gross sales for Other Girls Brands were up 2 percent. Worldwide gross sales for the Wheels category, which includes the Hot Wheels®, Matchbox® and Tyco® R/C brands, were up 17 percent. Worldwide gross sales for the Entertainment category, which includes the Games and Puzzles segment, were up 4 percent for the quarter.
Mattel Brands Business Unit: Full Year
For the year, worldwide gross sales for the Mattel Brands business unit were $3.26 billion, or up 1 percent. Worldwide gross sales for the Barbie® brand were flat with double-digit international gains offset by declines in domestic sales. Worldwide gross sales for Other Girls Brands were up 5 percent for the year with strong sales of the Polly Pocket!® and ello(TM) brands which more than offset sales declines in the What's Her Face!(TM) and Diva Starz(TM) brands.
Full year, worldwide gross sales for the Wheels category were down 2 percent. Gains in international sales for Hot Wheels® and Tyco® R/C were offset by declines in domestic Hot Wheels® and Tyco® R/C sales and worldwide sales declines in Matchbox®.
Full year, worldwide gross sales for the Entertainment category were up 3 percent with sales declines in the Harry Potter(TM) property more than offset by strong performances by the new Warner Bros. properties, Yu-Gi-Oh!(TM) and Games & Puzzles.
Fisher-Price® Brands Business Unit: Fourth Quarter
Fourth quarter worldwide gross sales for the Fisher-Price® Brands business unit, which includes the Fisher-Price®, Little People®, Rescue Heroes(TM) and Power Wheels® brands, were $601.2 million, up 10 percent due to strong worldwide sales of core Fisher-Price® and Fisher-Price Friends.
Fisher-Price® Brands Business Unit: Full Year
For the year, worldwide gross sales for the Fisher-Price® Brands business unit were $1.77 billion, up 4 percent driven by double-digit international growth for Fisher-Price® core and double-digit worldwide sales of Fisher-Price Friends.
American Girl® Brands Business Unit: Fourth Quarter
Fourth quarter gross sales for the American Girl® Brands business unit, which offers American Girl® branded products direct to consumers, were $200.1 million, or flat.
American Girl® Brands Business Unit: Full Year
For the full year, gross sales for the American Girl® Brands business unit were $344.4 million, down 2 percent. Declines in Angelina Ballerina®, Bitty Baby® and last year's highly successful launch of the historical Kaya® doll were partially offset by strong performances in this year's American Girl Today® brand, driven by the launch of the Kailey® doll, as well as the introduction of the Hopscotch Hill School(TM) brand.
Financial Realignment
Mattel recorded pre-tax charges of $0.4 million in the quarter as part of its $250 million financial realignment plan. The fourth quarter charges are related to the consolidation of two manufacturing facilities in Mexico and are included in Restructuring and Other Charges in the consolidated statement of operations.
For the year, Mattel recorded pre-tax charges of $26.3 million as part of the financial realignment plan. The full year charges are largely related to the consolidation of the Girls and Boys/Entertainment divisions; termination of a licensing arrangement; the consolidation of two manufacturing facilities in Mexico; streamlining backoffice functions; and restructuring Corolle, the company's French doll business. These charges are included in Cost of Sales ($4.1 million), Other Selling and Administrative Expenses ($8.6 million), Restructuring and Other Charges ($12.7 million) and Other Non-operating (Income), Net ($0.9 million) in the consolidated statement of operations. The financial realignment plan is now complete and the company has delivered an amount in excess of the targeted initial cumulative pre-tax cost savings of approximately $200 million over the three-year duration of the plan.
Change in Classification of Close Out Sales
Close out sales are sales of certain products that are no longer included in current product lines. Effective October 1, 2003, close out sales previously classified as a reduction of cost of sales are now classified as net sales in the company's consolidated statements of operations. This change in classification has no impact on gross profit, net income, EPS, balance sheets or cash flows. For the fourth quarter, close out sales, which are included in the reported net sales, were $19.2 million representing 1 percentage point of sales growth for the quarter and 40 basis points of sales growth for the year. For analytical purposes, exhibit IV provides the quarterly detail of worldwide close out sales by business unit for the last two years and the annual amount of worldwide close out sales by business unit for the last five years.
Live Webcast
Mattel will webcast its 2003 fourth quarter and year-end 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 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 769315. The telephonic playback will be available beginning at 8:30 a.m. Pacific time the morning of the call, until Wednesday, February 4 at 9 p.m. Pacific time.
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 www.mattel.com, under the headings "Financial Information" -- "Earnings Releases."
About Mattel
Mattel, Inc., (NYSE: MAT, www.mattel.com) is the worldwide leader in the design, manufacture and marketing of toys and family products, including Barbie®, 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®, Matchbox®, American Girl®, and Tyco® R/C, as well as Fisher- Price brands (www.fisher-price.com), including Little People®, Rescue Heroes(TM), Power Wheels® 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.
