Mattel 2012 Annual Report Download - page 40

2013 and Beyond
In 2013, Mattel will continue to work to deliver consistent growth and financial performance by executing
against its existing strategies through: (i) capitalizing on Fisher-Price’s global growth opportunities,
(ii) continuing to accelerate growth in its key brands, including Barbie, Monster High, American Girl, and Hot
Wheels, (iii) launching new franchises, including Max Steel, (iv) optimizing its entertainment partnerships with
theatrical releases (Superman, Frozen, Planes, and Turbo) and television properties, and (v) continuing to expand
its international footprint. In addition, Mattel will continue to focus on improving its operating margin through
sustaining its gross margin within the low-to-mid 50% range and launching Operational Excellence 3.0, the next
phase of its cost savings program. Operational Excellence 3.0 will target additional cumulative cost savings of
approximately $150 million by the end of 2014, with up to 70% of the expected savings to be realized in gross
margin. Mattel also expects to generate significant cash flow and continue its disciplined, opportunistic, and
value-enhancing deployment of its cash.
Results of Operations
2012 Compared to 2011
Consolidated Results
Net sales for 2012 were $6.42 billion, a 2% increase, as compared to $6.27 billion in 2011, with unfavorable
changes in currency exchange rates of 2 percentage points. Net income for 2012 was $776.5 million, or $2.22 per
diluted share, as compared to net income of $768.5 million, or $2.18 per diluted share, in 2011. As compared to
2011, net income for 2012 was positively impacted by higher net sales, higher gross margins, and a lower
effective tax rate, partially offset by higher other selling and administrative expenses, which includes a litigation
charge of $137.8 million, arising out of the litigation between Mattel and MGA Entertainment, Inc. (“Litigation
Charge”). The Litigation Charge reduced net income by $87.1 million, or $0.25 per diluted share.
The following table provides a summary of Mattel’s consolidated results for 2012 and 2011 (in millions,
except percentage and basis point information):
For the Year Year/Year
Change2012 2011
Amount
% of Net
Sales Amount
% of Net
Sales %
Basis Points
of Net Sales
Net sales .................................. $6,420.9 100.0% $6,266.0 100.0% 2%
Gross profit ............................... $3,409.2 53.1% $3,145.8 50.2% 8% 290
Advertising and promotion expenses ............ 717.8 11.2 699.2 11.2 3% –
Other selling and administrative expenses ........ 1,670.4 26.0 1,405.5 22.4 19% 360
Operating income ........................... 1,021.0 15.9 1,041.1 16.6 –2% (70)
Interest expense ............................ 88.8 1.4 75.3 1.2 18% 20
Interest (income) ........................... (6.8) –0.1 (8.1) –0.1 –15% –
Other non-operating (income) expense, net ....... (6.0) 3.2
Income before income taxes .................. $ 945.0 14.7% $ 970.7 15.5% –3% (80)
Sales
Net sales for 2012 were $6.42 billion, a 2% increase, as compared to $6.27 billion in 2011, with unfavorable
changes in currency exchange rates of 2 percentage points. Gross sales within the North American Region, which
includes the North America and American Girl segments, increased 2% in 2012, as compared to 2011, with no
impact from changes in currency exchange rates. The increase in gross sales within the North American Region
was driven primarily by higher sales of key brands including Monster High, American Girl, and Hot Wheels,
partially offset by lower sales of CARS 2®products resulting from the timing of the movie release during 2011.
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