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., October 18, 2004 -- Mattel, Inc. 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® brand were down 13 percent. Worldwide gross sales for the Wheels category, which includes the Hot Wheels®, Matchbox® and Tyco® 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® Brands
Third quarter worldwide gross sales for the Fisher-Price® Brands business unit, which includes the Fisher-Price®, PowerTouch(TM), Little People®, Rescue Heroes® and Power Wheels® brands, were $683.1 million, up 7 percent due to strong worldwide sales of core Fisher-Price® and Fisher-Price Friends.
American Girl® Brands
Third quarter gross sales for the American Girl® Brands business unit, which offers American Girl® branded products direct to consumers, were $61.5 million, up 9 percent, primarily due to sales generated by the new American Girl Place® retail store in New York City, which opened in November 2003 partially offset by declines in other channels.
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. The Mattel family is also 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®, 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.
