Mattel 2002 Annual Report Download - page 29

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functional currency are recognized as a component of other non-operating expense, net in the period in which the
exchange rate changes. Additionally, other non-operating expense, net in 2001 included a $5.5 million loss on
derivative instruments.
Business Segment Results
Mattel’s reportable segments are separately managed business units and are divided on a geographic basis
between domestic and international. The Domestic segment is further divided into US Girls, US Boys-
Entertainment, and US Infant & Preschool. The US Girls segment includes brands such as Barbie®, Polly
Pocket!®, Diva Starz™, What’s Her Face!™, ello™, and American Girl®. The US Boys-Entertainment segment
includes Hot Wheels®, Matchbox®, and Tyco®Radio Control vehicles and playsets (collectively “Wheels”), and
Nickelodeon®, Harry Potter™, Yu-Gi-Oh!™, He-Man®and Masters of the Universe®, and games and puzzles
(collectively “Entertainment”) products. The US Infant & Preschool segment includes Fisher-Price®, Power
Wheels®, Sesame Street®, Disney preschool and plush, Winnie the Pooh, Blue’s Clues™, Rescue Heroes™,
Barney™, Dora the Explorer™, and other preschool products. The International segment sells products in all toy
categories.
Effective January 1, 2002, Mattel ceased amortization of its goodwill in accordance with SFAS No. 142. To
maintain a consistent basis for measuring segment performance and to facilitate a comparison of current year
segment results to that of the prior year, management revised its previously reported segment information to
correspond to the earnings measurements by which management currently evaluates the business segments.
Accordingly, segment income for the years ended 2001 and 2000 has been restated to exclude goodwill
amortization of $46.1 million and $46.6 million, respectively.
As used in this Annual Report on Form 10-K, “sales” or “gross sales” is defined as sales excluding the
impact of sales adjustments, such as trade discounts or other allowances. “Net sales” includes the impact of such
sales adjustments. Segment income from operations represents operating income from continuing operations.
Business segment results should be read in conjunction with Item 8 “Financial Statements and Supplementary
Data—Note 11 to the Consolidated Financial Statements.”
US Girls segment sales decreased by 2% in 2002 compared to 2001. Lower sales of Diva Starz™, Barbie®,
and large dolls were partially offset by growth in Polly Pocket!®and American Girl®. The discontinuation of
Cabbage Patch Kids®in 2002 contributed to the decrease in total large doll sales. Domestic Barbie®sales
declined by 2% in 2002, largely due to the strategic initiative to reduce shipments of adult-targeted collector and
holiday dolls. Barbie®holiday doll shipments in 2002 were approximately one-half the amount shipped in 2001.
Excluding these adult-targeted lines, domestic Barbie®sales increased 2% in 2002. The US Boys-Entertainment
business in 2002 remained relatively flat with 2001 as a 2% decrease in US Wheels sales was largely offset by a
3% increase in US Entertainment sales. The decline in the US Wheels business reflects declines in Hot Wheels®
and Tyco®Radio Control brands, which more than offset strong sales in Matchbox®. In the US, certain
customers raised the retail price for Hot Wheels®, which had a negative impact on sales. Sales were also
negatively impacted by competition from Spider-Man™and Star Wars™product and Mattel’s own Matchbox®
brand. The improvement in the US Entertainment business was primarily due to strong sales of the newly
launched He-Man®and Masters of the Universe®, Yu-Gi-Oh!™, and SpongeBob SquarePants™lines, and
increased sales of games and puzzles, which more than offset the elimination of Disney entertainment properties
and a decline in Harry Potter™sales. US Infant & Preschool segment sales increased by 4% driven by increased
sales of core Fisher-Price®and Power Wheels®, partially offset by decreased sales of licensed character brands.
International segment sales increased by 12% in 2002 compared to 2001. Excluding the favorable foreign
currency exchange impact, sales grew by 11% due to growth across all the core brand categories—Girls, Boys-
Entertainment and Infant & Preschool. The International segment realized growth in all regions in local currency.
For the year, Europe sales grew by 20% (13% in local currency), Asia-Pacific sales were up 15% (12% in local
currency), Latin America sales decreased by 3% (up 7% in local currency), and Canada sales grew by 5% (6% in
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