Mattel 2000 Annual Report Download - page 22

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Mattel, Inc. and Subsidiaries
Components of the accrued restructuring and other charges,
including adjustments, related to continuing operations are as follows
(in millions):
Balance Balance
December 31, Amounts December 31,
1999 Adjustments Incurred 2000
Severance and other compensation $ 54 $(14) $(35) $ 5
Distributor, license and other
contract terminations 10 (4) (6) -
Lease termination costs 15 1 (10) 6
Total restructuring costs 79 (17) (51) 11
Merger-related transaction
and other costs 4 (1) - 3
Other nonrecurring charges 19 11 (6) 24
Total restructuring and
other charges $102 $ (7) $(57) $38
The adjustments made in 2000 to restructuring and merger-
related transaction costs largely reflect the reversal of excess reserves
as a result of lower than anticipated costs to complete certain actions
compared to previous estimates. The restructuring actions were com-
pleted in 2000; however, future cash outlays will extend beyond this
date, largely due to severance payment options available to affected
employees and future lease payments on vacated spaces.
The other nonrecurring charges principally relate to the 1998
recall of Mattel’s Power Wheels® vehicles and environmental remedia-
tion costs related to a former manufacturing facility on a leased prop-
erty in Beaverton, Oregon. The adjustment to other nonrecurring
charges reflects increases in reserves for these activities.
RESULTS OF CONTINUING OPERATIONS
2000 Compared to 1999
Consolidated Results
Net income from continuing operations for 2000 was $170.2 million
or $0.40 per diluted share as compared to net income from continuing
operations of $108.4 million or $0.25 per diluted share in 1999.
Profitability in 2000 was negatively impacted by a $125.2 million pre-
tax charge related to the initial phase of the 2000 financial realignment
plan, a $53.1 million pre-tax charge for the departure of certain senior
executives in the first quarter, and an $8.4 million pre-tax charge
related to losses realized on the disposition of a portion of the stock
received as part of the sale of CyberPatrol. These charges were partially
offset by a $7.0 million reversal of the 1999 reserve related to restruc-
turing and other charges. The combined effect of the above items (the
“nonrecurring charges”) resulted in a pre-tax net charge of $179.7 mil-
lion, approximately $123 million after-tax or $0.29 per diluted share.
Profitability in 1999 was negatively impacted by a $281.1 million
charge, approximately $218 million after-tax or $0.51 per diluted
share, related to restructuring and other nonrecurring charges.
The following table provides a comparison of the reported
results and the results excluding nonrecurring charges for 2000
versus 1999 (in millions):
For The Year
2000 1999
Results Excl.
Reported Nonrecurring Nonrecurring Reported
Results Charges Charges Results
Net sales $4,670 $ - $4,670 $4,595
Gross profit $2,101 45% $ (79) $2,180 47% $2,182 48%
Advertising and
promotion expenses 686 15 5 681 15 684 15
Other selling and admin.
expenses 967 21 59 908 19 868 19
Amortization of intangibles 52 1 - 52 1 52 1
Restructuring and
other charges 16 - 16 - - 281 6
Other (income) expense, net 2 - 21 (19) - (5) -
Operating income 378 8 (180) 558 12 302 7
Interest expense 153 3 - 153 3 132 3
Income from continuing
operations before
income taxes $ 225 5% $(180) $ 405 9% $ 170 4%
Net sales from continuing operations for 2000 increased 2% to
$4.7 billion, from $4.6 billion in 1999. In local currency, sales were up
4% compared to a year ago. Sales within the US increased 4% and
accounted for 71% of consolidated sales in 2000 compared to 70% in
1999. Sales outside the US decreased 3% from a year ago. However,
before the unfavorable exchange impact, international sales increased by
6% compared to 1999.
Worldwide sales in the Girls category increased 4% due to a 5%
worldwide increase in Barbie® products, partially offset by decreases in
sales of large dolls. Barbie® sales were up 9% in the US and down 1% in
international markets. Excluding the unfavorable exchange impact,
Barbie® sales were up 8% in international markets.
Sales in the Boys-Entertainment category were flat worldwide, or
up 2% before the unfavorable impact of foreign exchange. The Boys-
Entertainment category was negatively impacted by lower sales of Toy
Story 2 products in 2000 compared to 1999. Excluding the impact of Toy
Story 2 and this year’s Harry Potter™ products, the Boys-Entertainment
category grew 2% for the year. Worldwide Wheels sales decreased 2%,
or were flat before the unfavorable impact of foreign exchange. Sales of
Entertainment products increased 2% worldwide, driven by continued
strength of Max Steel™, Mattel games and Harry Potter™ products, par-
tially 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 grew 26%,
up 37% in the US and flat in international markets. Excluding the unfa-
vorable exchange impact, core Fisher-Price® products were up 11% in
international markets. Declines in worldwide sales for Sesame Street®,
Disney preschool and Winnie the Pooh® offset domestic growth in core
Fisher-Price® products.