Mattel 2003 Annual Report Download - page 12

PART I
Item 1. Business.
Mattel, Inc. (“Mattel”) designs, manufactures, and markets a broad variety of toy products worldwide
through sales to retailers and directly to consumers. Mattel’s vision is: The World’s Premier Toy Brands—Today
and Tomorrow. Management has set five key company strategies: (i) improve execution of the existing toy
business; (ii) globalize the brands; (iii) extend the brands; (iv) catch new trends; and (v) develop people.
Mattel believes its products are among the most widely recognized toy products in the world. Mattel’s
portfolio of brands and products are grouped in the following categories:
Mattel Brands—including Barbie®fashion dolls and accessories (“Barbie®”), Polly Pocket!™and ello™
(collectively “Other Girls Brands”), Hot Wheels®,Matchbox®and Tyco®R/C vehicles and playsets
(collectively “Wheels”) and Nickelodeon®,Harry Potter™,Yu-Gi-Oh!™,He-Man®and Masters of the
Universe®,Batman™,Justice League™,and games and puzzles (collectively “Entertainment”).
Fisher-Price Brands—including Fisher-Price®,Power Wheels®,Sesame Street®,Little People®,Disney
preschool and plush, Winnie the Pooh, Rescue Heroes™,Barney™,See ’N Say®,Dora the Explorer™,
PowerTouch™and View-Master®.
American Girl Brands—including American Girl Today®,The American Girls Collection®and Bitty
Baby®.American Girl Brands products are sold directly to consumers and its children’s publications are
sold to certain retailers.
In 2003, Mattel completed its financial realignment plan, originally announced during the third quarter of
2000, designed to improve gross profit; selling and administrative expenses; operating income; and cash flows.
Since its inception, the plan required a total pre-tax charge of $250.0 million, or approximately $171 million
after-tax, of which $26.3 million was incurred during 2003. Mattel exceeded the targeted initial cumulative cost
savings of approximately $200 million. Over the last three years, Mattel recognized cumulative pre-tax cost
savings of approximately $221 million, of which approximately $55 million, $87 million and $79 million were
realized in 2001, 2002 and 2003, respectively. See Item 7 “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Financial Realignment Plan” and Item 8 “Financial Statements and
Supplementary Data—Note 10 to the Consolidated Financial Statements.”
Mattel was incorporated in California in 1948 and reincorporated in Delaware in 1968. Its executive offices
are located at 333 Continental Boulevard, El Segundo, CA 90245-5012, telephone [phone].
Business Segments
“Mattel” refers to Mattel, Inc. and its subsidiaries as a whole, unless the context requires otherwise. This
narrative discussion applies to all segments except where otherwise stated. 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 Mattel Brands US, Fisher-Price Brands US and American Girl
Brands. For additional information on Mattel’s business segment reporting, including revenues, segment income,
and assets, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Results of Operations—Business Segment Results” and Item 8 “Financial Statements and
Supplementary Data—Note 11 to the Consolidated Financial Statements.” For additional information regarding
geographic areas, see Item 8 “Financial Statements and Supplementary Data—Note 11 to the Consolidated
Financial Statements.” For a discussion of the risks inherent in the foreign operations of Mattel, which affect
each segment, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Factors That May Affect Future Results—Political Developments, including Trade Relations, and
the Threat or Occurrence of War or Terrorist Activities.”
3