Mattel 2000 Annual Report Download

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.Refocus.
MATTEL, INC. 2000 ANNUAL REPORT

Table of contents

  • Page 1
    .Refocus. M AT T E L , I N C . 2 0 0 0 A N N UA L R E P O RT

  • Page 2

  • Page 3
    .../Barbie; Matt Bousquette, President, Boys/Entertainment; Neil Friedman, President, Fisher-Price Brands, and Kevin Farr, Chief Financial Officer, we recruited three new executives who will help us strengthen our business and execute our growth strategy. Joe Eckroth, our Chief Information Officer...

  • Page 4
    ..., our international sales grew 6 percent for the year. Worldwide sales for our major brands increased across all divisions: Barbie grew by 5 percent; Hot Wheels was up 2 percent; American Girl advanced 7 percent, and Fisher-Price posted a strong 26 percent gain. In the United States, the world...

  • Page 5
    ... execute better than the competition, and we are fortunate to have the very best employees in the toy industry. In order to achieve this objective, we recently launched a new, comprehensive Strategic Plan for Human Resources, a first in Mattel's history. We also added depth to the Board of Directors...

  • Page 6
    ...U.S. and abroad; To execute the financial realignment plan, and deliver the cost savings announced in September; To improve supply chain performance and customer service levels; and To develop our people, and improve our employee development processes. I am honored to lead Mattel. When I joined the...

  • Page 7
    Strategy. Robert A. Eckert Chairman and Chief Executive Officer

  • Page 8
    ... supply chain, from Product Planning to Manufacturing to Distribution, as well as Finance, Information Technology and Sales. We have undertaken a financial realignment that will provide $200 million in pre-tax savings over the next three years, and we will continue to identify opportunities for new...

  • Page 9

  • Page 10
    ...-tested favorites have proven kid appeal. Barbie is the best-selling fashion doll of all time and one of the most popular girls' brands in the world; Fisher-Price is the number one brand worldwide for infant and preschool; and Hot Wheels vehicles are number one, outselling all other toy categories...

  • Page 11

  • Page 12
    ... the toy market. In January of 2001, we announced multiyear, worldwide licensing agreements with two interactive industry leaders - Vivendi Universal Publishing and THQ - that will allow us to extend our brands like never before into the gaming, educational and productivity software arenas. And...

  • Page 13

  • Page 14
    ...Mattel created the hottest new trend in the small doll aisle with these unique interactive fashion dolls. Hot Wheels Thunder Roller Racing Game was the first handheld electronic game that used a real Hot Wheels die-cast car with a handheld game for realistic racing. And intelli-Table by Fisher-Price...

  • Page 15

  • Page 16
    .... There are over 30,000 employees worldwide behind the Mattel name, and it is their creativity and talent that makes us the world's largest and most innovative toy company today. Much like our brands, our people also need development and growth opportunities. We plan to focus on their needs as...

  • Page 17

  • Page 18
    sixteen Mattel's Family of Brands. Hot Wheels® Fisher-Price® Barbie® Max Steel™ licensed toys Little People® Diva Starz™ Harry Potter™ licensed toys Sesame Street® licensed toys American Girl®

  • Page 19
    .... (c) Represents income from continuing operations before interest expense and provision for income taxes. (d) Per share data reflect the retroactive effect of a stock split distributed to stockholders in March 1996, and the mergers with Learning Company and Tyco in 1999 and 1997, respectively.

  • Page 20
    ...designs, manufactures, and markets a broad variety of toy products on a worldwide basis through both sales to retailers (i.e. "customers") and direct to consumers. Mattel's business is dependent in great part on its ability each year to redesign, restyle and extend existing core products and product...

  • Page 21
    ...based headquarters locations in El Segundo, Fisher-Price and Pleasant Company through a combination of layoffs, elimination of open requisitions, attrition and retirements; and - Close and consolidate certain international offices. Mattel incurred a $22.9 million pre-tax restructuring charge related...

  • Page 22
    ...™, Mattel games and Harry Potter™ products, partially offset by lower sales of Toy Story 2 products. Sales in the Infant & Preschool category were flat worldwide, or up 2% compared to last year before the unfavorable impact of foreign exchange. Worldwide sales of core Fisher-Price® products...

  • Page 23
    .... The International Toy Marketing segment sales decreased by 3% compared to last year. Excluding the unfavorable foreign exchange impact, sales grew by 6% due to increased sales across all core categories, including Barbie®, Fisher-Price®, Wheels and Entertainment products. Operating profit in the...

  • Page 24
    ... inventory management. By brand, the International Toy Marketing segment experienced lower sales of Barbie® and core Fisher-Price® products, partially offset by sales increases in Wheels and Entertainment products. Operating profit for the US Girls, US Boys-Entertainment and US Infant & Preschool...

  • Page 25
    ..., retire higher-cost debt and support operating activities. In 1998, Mattel repaid the long-term debt and mortgage note assumed as part of the Pleasant Company acquisition. During the last three years, Mattel paid dividends on its common stock and, in 1998 and 1999, Mattel repurchased treasury stock...

  • Page 26
    ... on its licensing partners, and less direct control by Mattel over research and development, marketing, and sales decisions related to its consumer software products. As a result, Mattel's ability to create innovative new consumer software products may be reduced. LITIGATION Power Wheels® Recall On...

  • Page 27
    ..., including trichloroethylene. Mattel immediately closed the water supply and self-reported the sample results to the Oregon Department of Environmental Quality and the Oregon Health Division. Mattel also implemented a community outreach program to employees, former employees and surrounding...

  • Page 28
    ... where Mattel does business have not had a significant impact on its results of operations or financial position during the three years ended December 31, 2000. The US Consumer Price Index increased 3.4% in 2000, 2.7% in 1999 and 1.6% in 1998. Mattel receives some protection from the impact of...

  • Page 29
    ... rights of 1.6 million and 3.2 million outstanding exchangeable shares in 2000 and 1999, respectively Common stock $1.00 par value, 1.0 billion shares authorized; 435.6 million shares and 433.6 million shares issued in 2000 and 1999, respectively Additional paid-in capital Treasury stock at cost...

  • Page 30
    twenty eight Consolidated Statements of Operations Mattel, Inc. and Subsidiaries For the Year (In thousands, except per share amounts) 2000 1999 1998 NET SALES Cost of sales GROSS PROFIT Advertising and promotion expenses Other selling and administrative expenses Restructuring and other charges ...

  • Page 31
    ... taxes Other, net Net cash flows from operating activities of continuing operations CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of tools, dies and molds Purchases of other property, plant and equipment Payment for acquisitions, net of cash acquired Proceeds from sale of other property, plant...

  • Page 32
    ... of Series C Preferred Stock Purchase of treasury stock Issuance of treasury stock Stock option exercises Tax benefit of stock option exercises Shares issued for acquisitions Conversion of exchangeable shares Shares issued under employee stock purchase plan Tax adjustment related to 1987 quasi...

  • Page 33
    ... advertising consists primarily of catalog production and mailing costs that are generally amortized within three months from the date catalogs are mailed. Advertising costs associated with customer benefit programs are accrued as the related revenues are recognized. Stock-Based Compensation Mattel...

  • Page 34
    ... the exchange of the exchangeable shares of Mattel's Canadian subsidiary, Softkey Software Products Inc., outstanding during each period. Earnings available to common stockholders represent reported net income (loss) less preferred stock dividend requirements. Diluted income (loss) per common share...

  • Page 35
    .... federal income tax returns through December 31, 1994. NOTE 3 - EMPLOYEE BENEFITS Mattel and certain of its subsidiaries have retirement plans covering substantially all employees of these companies. Expense related to these plans totaled $31.6 million, $18.6 million and $20.0 million in 2000, 1999...

  • Page 36
    ... million as of December 31, 2000 and 1999, respectively, are held in an irrevocable rabbi trust which is included in other assets in the consolidated balance sheets. Postretirement Benefits Fisher-Price has an unfunded postretirement health insurance plan covering certain eligible domestic employees...

  • Page 37
    ... million was charged to operating expense for costs related to the recruitment and retention of senior executives. For 1999, $22.0 million was charged to operating expense related to a special award. This special broad-based employee award was approved by Mattel's board of directors and was designed...

  • Page 38
    ...the 1999 merger, each exchangeable share will include the right to acquire exchangeable shares under a rights agreement issued by Softkey Software Products Inc. These rights have an economically equivalent value to the Rights attached to Mattel's common stock. During 2000, 1999 and 1998, 1.6 million...

  • Page 39
    ... 2000, Mattel issued Warner Bros. Consumer Products a stock warrant, valued at $5.8 million, to purchase 3.0 million shares of Mattel's common stock at an exercise price of $10.875 per share. This warrant became fully vested and exercisable upon signing of the related licensing agreement and expires...

  • Page 40
    ... provided benefits for eligible employees and non-employee directors. Effective with the 1999 merger, each outstanding option under these plans was converted into an option to purchase 1.2 shares of Mattel common stock. The exercise price of such options was adjusted by dividing the Learning Company...

  • Page 41
    ... Disney characters such as Mickey Mouse, Winnie the Pooh and the Disney Princesses, as well as any new infant and preschool toys based on film and television properties created by Disney. Additionally, Mattel is in the final year of its Disney entertainment agreement for products to be marketed...

  • Page 42
    ...that Fisher-Price, in cooperation with the Consumer Product Safety Commission, would conduct a voluntary recall involving up to 10 million battery-powered Power Wheels® ride-on vehicles. The recall involves the replacement of electronic components that may overheat, particularly when consumers make...

  • Page 43
    ..., including trichloroethylene. Mattel immediately closed the water supply and self-reported the sample results to the Oregon Department of Environmental Quality and the Oregon Health Division. Mattel also implemented a community outreach program to employees, former employees and surrounding...

  • Page 44
    ..., 2001 for the transition adjustment related to the adoption of SFAS 133. NOTE 9 - ACQUISITIONS AND NONRECURRING ITEMS Business Combinations In August 1998, Learning Company completed its merger with Broderbund, a publisher and developer of consumer software for the home and school market. The stock...

  • Page 45
    ...based headquarters locations in El Segundo, Fisher-Price and Pleasant Company through a combination of layoffs, elimination of open requisitions, attrition and retirements; and - Close and consolidate certain international offices. Mattel incurred a $22.9 million pre-tax restructuring charge related...

  • Page 46
    ... Net sales from continuing operations Operating Profit (Loss) (a) Toy Marketing US Girls US Boys-Entertainment Total US Girls and US Boys-Entertainment US Infant & Preschool Other International Toy Manufacturing Segment total Restructuring and other charges (c) Interest expense Corporate and...

  • Page 47
    ... (loss) Weighted average number of common and common equivalent shares Dividends declared per common share Common stock market price: High Low Year Ended December 31, 1999 Net sales Gross profit Advertising and promotion expenses Other selling and administrative expenses Restructuring and other...

  • Page 48
    ...: Common stock issued for acquisitions: Settlement of earn-out agreements $ Sofsource, Inc. Mindscape, Inc. Conversion of 5-1/2% Notes Receipt of marketable securities from sale of business 42,167 Issuance of stock warrant 5,789 For the Year 1999 1998 subsidiary, Softkey Software Products Inc...

  • Page 49
    ...United States and perform such tests and related procedures as they deem necessary to arrive at an opinion on the fairness of the financial statements. Kevin M. Farr Chief Financial Officer REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Mattel, Inc. In our opinion...

  • Page 50
    ... Director, Los Angeles County Museum of Art William Stavro Senior Vice President and Treasurer William D. Rollnick (1) (2) (3) Former Chairman, Mattel, Inc. and Retired Chairman, Genstar Rental Electronics, Inc. Bryan Stockton Executive Vice President, Business Planning and Development BUSINESS...

  • Page 51
    ... Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2000 is available upon request by writing to the Secretary of the Company, 333 Continental Boulevard, El Segundo, California 90245-5012. TRADEMARK LEGENDS Barbie, Hot Wheels, Matchbox, Tyco, Fisher-Price...

  • Page 52
    Mattel, Inc. 333 Continental Boulevard El Segundo, California 90245