Mattel 2012 Annual Report Download - page 43

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6 percentage points. Gross sales of Entertainment products decreased by 18%, with unfavorable changes in
currency exchange rates of 4 percentage points, driven primarily by lower sales of CARS 2 products, partially
offset by higher sales of Batman products and higher sales of Angry Birds games products. Gross sales of Fisher-
Price Brands increased 8%, with unfavorable changes in currency exchange rates of 5 percentage points. Gross
sales of Core Fisher-Price products decreased 2%, with unfavorable changes in currency exchange rates of 5
percentage points. Gross sales of Fisher-Price Friends products increased 43%, with unfavorable changes in
currency exchange rates of 6 percentage points, driven primarily by the benefit of licensing revenues from HIT
Entertainment and higher sales of Disney’s Jake and the Never Land Pirates products. Cost of sales decreased by
2% in 2012, as compared to a 4% increase in net sales, primarily due to lower product and other costs, lower
royalty expenses, and lower freight and logistics expenses. Gross margins increased as a result of favorable
product mix, savings from manufacturing efficiency and Operational Excellence 2.0 programs, favorable changes
in currency exchange rates, and price increases partially offset by higher input costs and higher customer
benefits. Additionally, gross margins were positively impacted by the acquisition of HIT Entertainment.
International segment income increased 11% to $571.4 million in 2012, as compared to $513.4 million in
2011, driven primarily by higher gross margins, partially offset by higher other selling and administrative
expenses, primarily related to HIT Entertainment’s ongoing other selling and administrative expenses, higher
employee-related costs, and investments in strategic initiatives, including the opening of a Russia subsidiary.
American Girl Segment
Gross sales for the American Girl segment were $596.3 million in 2012, up $53.9 million or 10%, as
compared to $542.4 million in 2011, with no impact from changes in currency exchange rates. The increase in
gross sales was driven primarily by sales of McKenna™, the 2012 Girl of the Year doll, and expansion of retail
locations. Cost of sales increased 14% in 2012, as compared to a 10% increase in net sales, driven primarily by
higher product and other costs and freight and logistics expenses. Gross margins decreased driven primarily by
higher input costs, partially offset by price increases.
American Girl segment income increased 9% to $121.6 million in 2012, as compared to $111.1 million in
2011, driven by higher net sales, partially offset by lower gross margins and higher other selling and
administrative expenses, primarily related to retail expansion.
2011 Compared to 2010
Consolidated Results
Net sales for 2011 were $6.27 billion, a 7% increase, as compared to $5.86 billion in 2010, with favorable
changes in currency exchange rates of 1 percentage point. Net income for 2011 was $768.5 million, or $2.18 per
diluted share, as compared to net income of $684.9 million, or $1.86 per diluted share, in 2010. As compared to
2010, net income for 2011 was positively impacted by higher net sales and higher operating income, partially
offset by a higher effective tax rate, higher interest expense, and higher other non-operating expense.
31