Mattel 2003 Annual Report Download - page 28

During the fourth quarter of 2003, Mattel changed the way certain close out sales are classified in its
consolidated statement of operations. Close out sales are sales of certain products that are no longer included in
current product lines. Effective October 1, 2003, close out sales previously classified as a reduction of cost of
sales are now classified as net sales in Mattel’s consolidated statements of operations. This change in
classification has no impact on gross profit, net income, income per common share, balance sheets or cash flows
for any period. For the fourth quarter of 2003, close out sales, which are included in the reported net sales, were
$19.2 million representing 1 percentage point of sales growth for the quarter and 40 basis points of sales growth
for the year. For the first three quarters of 2003 and for 2002, close out sales classified as a reduction of cost of
sales were $38.1 million and $112.7 million, respectively. See Item 6 “Selected Financial Data” and Item 8
“Financial Statements and Supplementary Data – Notes 1, 11 and 12 to the Consolidated Financial Statements.”
Worldwide gross sales of Mattel Brands increased 1% to $3.3 billion in 2003 compared to 2002, including a
5percentage point benefit from changes in currency exchange rates. Domestic gross sales decreased 10% and
international gross sales grew 14%, including a 10 percentage point benefit from changes in currency exchange
rates. Worldwide gross sales of Barbie®remained flat with 2002, including a 6 percentage point benefit from
changes in currency exchange rates. A 17% increase in international Barbie®gross sales was offset by a 15%
decline in domestic Barbie®gross sales. The international Barbie®gross sales growth included an 11 percentage
point benefit from changes in currency exchange rates. An increase in international sales of dolls was more than
offset by declines in worldwide sales of Barbie®accessories and lower domestic sales of dolls. Worldwide gross
sales of Other Girls Brands increased 5%, including a 5 percentage point benefit from changes in currency
exchange rates. The increase in gross sales of Other Girls Brands was driven by solid performances by Polly
Pocket!™and ello™.Declines in sales of Diva Starz™and What’s Her Face!™were only partially offset by the
introduction of Flavas™in 2003. The Flavas™product line did not meet expectations in 2003 and will be
discontinued in 2004. Worldwide gross sales in the Wheels category were down 2% in 2003 compared to 2002,
including a 3 percentage point benefit from changes in currency exchange rates. Worldwide gross sales of the
Hot Wheels®product line increased 3% compared to 2002 as a 23% increase in international sales was partially
offset by a 7% decrease in domestic sales. The international Hot Wheels®gross sales growth included a
10 percentage point benefit from changes in currency exchange rates. Additionally, gross sales of Matchbox®
declined in both domestic and international markets. Worldwide gross sales in the Entertainment category
increased 3% in 2003 compared to 2002, including a 4 percentage point benefit from changes in currency
exchange rates. The growth in this category was driven by strong gains in games and puzzles, a solid
performance by Yu-Gi-Oh!™,and the introduction of the Warner Bros. properties Batman™and Justice
League™,partially offset by declines in sales of Harry Potter™and Max Steel™.InJuly 2002, Mattel and Warner
Bros. Consumer Products announced comprehensive, multi-year agreements granting Mattel master toy licenses
for several of Warner Bros.’ core franchises, including Looney Tunes™,Baby Looney Tunes™,Batman™,
Superman™and Justice League™.The agreements, which took effect in January 2003, cover all global territories
except Asia and include rights to market products based on any related theatrical releases or television programs
that are produced during the period covered by the agreements.
Worldwide gross sales of Fisher-Price Brands increased 4% to $1.8 billion in 2003 compared to 2002,
including a 2 percentage point benefit from changes in currency exchange rates. International gross sales
increased 20%, while domestic gross sales decreased 1%. The international gross sales growth included a
10 percentage point benefit from changes in currency exchange rates. Worldwide gross sales of core
Fisher-Price®products were up 5% due to a 25% increase in international sales, partially offset by a 3% decline
in domestic sales. The growth in international gross sales of core Fisher-Price®included a 12 percentage point
benefit from changes in currency exchange rates. Sales of licensed character brands increased in 2003 compared
to 2002 in both domestic and international markets. Additionally, Mattel benefited in 2003 from new product
launches in its interactive learning category, which includes PowerTouch™and other learning toys.
Gross sales of American Girl Brands decreased 2% to $344.4 million in 2003 compared 2002. Sales
declines in the Angelina Ballerina™,Bitty Baby®and last year’s launch of the historical Kaya®doll were
partially offset by strong performances in this year’s American Girl Today®brand, driven by the launch of the
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