Mattel 2001 Annual Report Download - page 29

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Business Segment Results
Mattel’s reportable segments are separately managed business units and are divided on a geographic basis
between domestic and international. The domestic segment is further divided into US Girls, US Boys-
Entertainment, and US Infant & Preschool. The US Girls segment includes brands such as Barbie, Polly
Pocket!, Diva Starz, What’s Her Face!and American Girl. The US Boys-Entertainment segment
includes Hot Wheels, Matchbox, Hot WheelsElectric Racing and TycoRadio Control (collectively
‘‘Wheels’’), and Disney, Nickelodeon, Harry Potter, Max Steeland games and puzzles (collectively
‘‘Entertainment’’) products. The US Infant & Preschool segment includes Fisher-Price, Disney preschool and
plush, Power Wheels, Sesame Streetand other preschool products. The International segment sells products
in all toy categories.
Mattel’s segments were revised in January 2001 to conform to the current management structure.
Specifically, the results of Pleasant Company, which had been previously reported as part of Other, are now
being reported as part of US Girls, which is consistent with management responsibility for this business.
Additionally, Mattel’s toy manufacturing unit is now being managed as a cost center instead of as a profit
center; therefore, toy manufacturing is no longer being reported as a separate segment. Lastly, certain overhead
costs incurred at the headquarters’ level in El Segundo, including facilities, information technology, and other
administration support costs, are now being allocated to the US Girls and US Boys-Entertainment segments, to
more accurately reflect the costs associated with operating these businesses. These types of overhead costs were
already being reported as part of the US Infant & Preschool and International segments since these businesses
maintain their own, separate headquarters locations. All prior periods have been restated to reflect these
changes.
As used in this Form 10-K, ‘‘sales’’ or ‘‘gross sales’’ means sales excluding the impact of sales
adjustments, such as trade discounts or other allowances. ‘‘Net sales’’ includes the impact of such sales
adjustments. Business Segment Results should be read in conjunction with Item 8 ‘‘Financial Statements and
Supplementary Data—Note 10 to the Consolidated Financial Statements.’’
US Girls segment sales decreased by 4% in 2001 compared to 2000. A 12% decline in Barbiesales was
partially offset by increased sales of Polly Pocket!, Diva Starz, What’s Her Face!and American Girl.
The decrease in US Barbiesales compared to 2000 was primarily due to lower shipments of Holiday
CelebrationBarbiein response to lower demand at retail, lower sales of adult-targeted collector dolls
resulting from a weakening retail climate for higher-priced collectible items, and continuing inventory
management by retailers. US Boys-Entertainment segment sales increased 2%. The US Entertainment business
grew 6%, largely due to increased sales of Harry Potterproducts. The US Wheels business was flat with last
year as increased sales of Hot Wheelsproducts were offset by declines in TycoRadio Control and
Matchbox. US Infant & Preschool segment sales were flat with 2000. Growth in sales of core Fisher-Price
and Power Wheelsproducts was offset by a decline in sales of licensed character brand products.
Management believes the difficult retail environment, especially combined with the events of September 11,
2001, caused its retail customers to curtail their orders across all of the US segments during the fourth quarter,
resulting in an 8% decline in total US sales for the fourth quarter. However, despite weaker-than-expected
shipments to retailers, all of Mattel’s major brands showed strength with consumers and posted sales increases
at retail. According to NPD industry data for toy sales at the consumer level, Mattel gained market share in the
US in dolls, vehicles, action figures, games and puzzles and core infant and preschool categories. Mattel’s
market share of total traditional toys grew 1.2 percentage points to 23.5% in the US.
International segment sales increased by 10% in 2001 compared to 2000. Excluding the unfavorable
foreign exchange impact, sales grew by 13% due to double digit growth in Barbie, Polly Pocket!, core
Fisher-Priceand Hot Wheelsproducts combined with the expansion of Diva Starzand Harry Potter
products. Mattel also recorded strong market share gains outside the US, with market share growing in the five
major European markets, as well as in Canada, Mexico and Australia. Improved product availability, better
alignment of worldwide marketing and sales plans and strong product launches were the primary drivers for the
growth in International segment sales and market share.
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