• Worldwide net sales up 10 percent;
• Domestic gross sales up 9 percent and international gross sales up 11 percent;
• Worldwide gross sales for core brands: Barbie(R) down 4 percent; Hot Wheels(R) up 5 percent; Core Fisher-Price(R) up 5 percent and American Girl(R) brands up 20 percent;
• Gross margin decreased 200 basis points of net sales; SG&A increased 20 basis points of net sales;
• Operating income as a percentage of net sales was 3.2 percent, down 220 basis points;
• Net loss of $94.0 million, which includes incremental tax expense of $112.9 million associated with the previously announced plan to repatriate foreign earnings in 2005 under the American Jobs Creation Act (AJCA), vs. last year's net income of $23.5 million; and
• Loss per share of $0.23 (includes AJCA-related tax expense of $0.28 per share) vs. last year's second quarter earnings per share of $0.06.

"While this quarter's results were positively impacted by improving sales trends across our portfolio of brands, including key contributions from entertainment properties, our margins were under pressure," said Robert A. Eckert, chairman and chief executive officer of Mattel. "We continue to expect 2005 to be a challenging year as we focus on the all-important second half."

Financial Overview

For the quarter, net sales were $886.8 million, up 10 percent compared to $804.0 million last year, and included a benefit from changes in currency exchange rates of 2 percentage points. On a regional basis, second quarter gross sales increased 9 percent in the U.S., and were up 11 percent in international markets, which included a benefit from changes in currency exchange rates of 5 percentage points. Operating income for the quarter was down 34 percent at $28.5 million, primarily due to higher costs, partially offset by higher sales volume.

The company's debt-to-total-capital ratio of 23.0 percent is in line with the company's capital and investment framework. Consistent with the seasonality of the company's business and its use of working capital, the company's cash and equivalents declined by approximately $795 million during the six months ended June 30, 2005, compared to a decline of approximately $789 million in the prior year period. Additionally, during the second quarter of 2005, the company repurchased 12.9 million shares of its common stock at a cost of $236.5 million. During the second quarter of 2004, the company repurchased 14.2 million shares of its common stock at a cost of $245.8 million.

Sales by Business Unit

Mattel Brands

For the second quarter, worldwide gross sales for the Mattel Brands business unit were $563.8 million, a 10 percent increase versus the prior year's second quarter. Worldwide gross sales for the Barbie® brand were down 4 percent. Worldwide gross sales of Other Girls Brands, which includes Polly Pocket!™ and several new brand introductions, including Disney Princesses, Winx Club™, Pound Puppies® and Furryville™, were up double-digits.

Worldwide gross sales for the Wheels category, which includes the Hot Wheels®, Matchbox® and Tyco® R/C brands, were up 4 percent, primarily driven by higher sales of Hot Wheels®. Worldwide gross sales for the Entertainment business, which includes Games and Puzzles, were up 27 percent for the quarter, primarily driven by higher sales of the Batman™ property and the Scene It?® game, partially offset by sales declines in the Yu-Gi-Oh!™ and Harry Potter™ properties.

Fisher-Price® Brands

Second quarter worldwide gross sales for the Fisher-Price® Brands business unit, which includes the Fisher-Price®, Little People®, Rescue Heroes® and Power Wheels® brands, were $337.3 million, a 7 percent increase versus the prior year's second quarter. The increase reflects the strong growth in Fisher-Price® Friends worldwide and Core Fisher-Price® in international markets.

American Girl® Brands

Second quarter gross sales for the American Girl® Brands business unit, which offers American Girl® branded products direct to consumers, were $58.8 million, up 20 percent from the prior year, primarily driven by the continued success of the new American Girl Today® doll and strong performance of the American Girl® retail stores.

American Jobs Creation Act (AJCA) Update

In the second quarter of 2005, Mattel completed and approved its plan for reinvestment and repatriation of unremitted foreign earnings under AJCA. This plan takes advantage of the company's ability to repatriate approximately $2.4 billion in foreign earnings at a substantially reduced tax cost provided the repatriation occurs before the end of 2005. The AJCA-related tax expense of $112.9 million, or $0.28 per share, has been disclosed since it could be meaningful in evaluating the company's operating results and financial condition for the quarter in light of the nature and magnitude of the expense.

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 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 42 countries and sells products in more than 150 nations throughout the world. Mattel's vision is: the world's premier toy brands -- today and tomorrow.