Mattel 2012 Annual Report Download - page 44

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The following table provides a summary of Mattel’s consolidated results for 2011 and 2010 (in millions,
except percentage and basis point information):
For the Year Year/Year
Change2011 2010
Amount
% of Net
Sales Amount
% of Net
Sales %
Basis Points
of Net Sales
Net sales .....................................$6,266.0 100.0% $5,856.2 100.0% 7%
Gross profit ...................................$3,145.8 50.2% $2,955.0 50.5% 6% (30)
Advertising and promotion expenses ............... 699.2 11.2 647.3 11.1 8% 10
Other selling and administrative expenses ........... 1,405.5 22.4 1,405.8 24.0 0% (160)
Operating income .............................. 1,041.1 16.6 901.9 15.4 15% 120
Interest expense ............................... 75.3 1.2 64.8 1.1 16% 10
Interest (income) ............................... (8.1) –0.1 (8.4) –0.1 –4% –
Other non-operating expense (income), net .......... 3.2 (1.3)
Income before income taxes ......................$ 970.7 15.5% $ 846.8 14.5% 15% 100
Sales
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. Gross sales within the North American Region
increased 4% in 2011, as compared to 2010, with no impact from changes in currency exchange rates, driven
primarily by higher sales of Barbie, Monster High, and CARS 2 products. The gross sales within the North
American Region accounted for 56% of consolidated gross sales in 2011, as compared to 58% of consolidated
gross sales in 2010. Gross sales in the International Region increased 12% in 2011, as compared to 2010, with
favorable changes in currency exchange rates of 3 percentage points.
Cost of Sales
Cost of sales as a percentage of net sales was 49.8% in 2011, as compared to 49.5% in 2010. Cost of sales
increased by $219.0 million, or 8%, from $2.90 billion in 2010 to $3.12 billion in 2011, as compared to a 7%
increase in net sales. Within cost of sales, product and other costs increased by $192.5 million, or 8%, from $2.34
billion in 2010 to $2.53 billion in 2011; royalty expenses increased $16.5 million, or 7%, from $245.9 million in
2010 to $262.4 million in 2011; and freight and logistics expenses increased by $10.0 million, or 3%, from
$313.7 million in 2010 to $323.7 million in 2011.
Gross Profit
Gross profit as a percentage of net sales decreased to 50.2% in 2011 from 50.5% in 2010. The decrease in
gross profit as a percentage of net sales was driven primarily by higher input costs, higher royalty expense as a
result of increased sales of products tied to licensed properties, and unfavorable changes in foreign currency
exchange rates, partially offset by price increases and savings from Operational Excellence 2.0 programs.
Advertising and Promotion Expenses
Advertising and promotion expenses primarily consist of: (i) media costs, which primarily include the
media, planning, and buying fees for television, print, and online advertisements, (ii) non-media costs, which
primarily include commercial and website production, merchandising, and promotional costs, (iii) retail
advertising costs, which primarily include consumer direct catalogs, newspaper inserts, fliers, and mailers and
(iv) generic advertising costs, which primarily include trade show costs. Advertising and promotion expenses
slightly increased in 2011 at 11.2% of net sales, as compared to 11.1% of net sales in 2010, primarily due to
higher non-media spending.
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