Mattel 2014 Annual Report Download - page 44

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Gross sales for the International segment were $3.28 billion in 2013, up $151.8 million or 5%, as compared
to $3.13 billion in 2012, with an unfavorable impact from changes in currency exchange rates of 1 percentage
point. The increase in the International segment gross sales was due to higher sales of Other Girls products. Of
the 30% increase in Other Girls gross sales, 29% was due to higher sales of Monster High products. Cost of sales
increased by 2% in 2013, as compared to a 5% increase in net sales, primarily due to higher product and other
costs and higher freight and logistics expenses. Gross margins increased as a result of Operational Excellence 3.0
savings, favorable product mix, and price increases partially offset by higher input costs, partially offset by
unfavorable changes in foreign currency exchange rates.
International segment income increased by 9% to $622.9 million in 2013, as compared to $571.4 million in
2012, primarily due to higher gross profit, partially offset by higher other selling and administrative expenses and
higher advertising and promotion expenses.
American Girl Segment
The following table provides a summary of Mattel’s gross sales by brand for the American Girl segment for
2013 and 2012:
For the Year
% Change2013 2012
(In millions, except percentage
information)
American Girl Segment:
American Girl Brands ................................................. $632.5 $567.5 11%
Other Brands ........................................................ 26.3 28.8 –9%
Total American Girl Segment ..................................... $658.8 $596.3 10%
Gross sales for the American Girl segment were $658.8 million in 2013, up $62.5 million or 10%, as
compared to $596.3 million in 2012, with an unfavorable impact from changes in currency exchange rates of 1
percentage point. Of the 11% increase in American Girl Brands gross sales, 6% was due to higher sales of the
2013 Girl of the Year, Saige®, and 3% was due to higher sales of My American Girl products. Cost of sales
increased 8% in 2013, as compared to a 10% increase in net sales, primarily due to higher product and other costs
and higher freight and logistics expenses. Gross margins increased as a result of favorable product mix and price
increases partially offset by higher input costs.
American Girl segment income increased by 13% to $138.0 million in 2013, as compared to $121.6 million
in 2012, primarily due to higher gross profit, partially offset by higher other selling and administrative expenses.
Cost Savings Programs
During 2011, Mattel initiated Operational Excellence 2.0, which targeted cumulative cost savings of
approximately $175 million by the end of 2012. Mattel exceeded its Operational Excellence 2.0 goal by realizing
approximately $187 million of cumulative gross cost savings throughout the program. The major initiatives
within the Operational Excellence 2.0 program included:
• A reorganization which resulted in the North America division,
• Additional procurement initiatives designed to fully leverage Mattel’s global scale,
• SKU efficiency, and
• Packaging optimization.
During 2012, Mattel realized gross cost savings before severance charges and investments of approximately
$93 million (or approximately $77 million in net cost savings). The gross cost savings included approximately
$53 million of structural cost savings and approximately $40 million of legal cost savings. Of the gross cost
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