Mattel 2001 Annual Report Download - page 31

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partially offset by decreased sales of large dolls. Worldwide Barbiesales increased 5%, up 9% in the US and
down 1% in international markets. Excluding the unfavorable exchange impact, Barbiesales were up 8% in
international markets.
Worldwide gross sales in the Boys-Entertainment category were flat, or up 2% in local currency. Domestic
sales decreased by 4%, while international sales increased by 7%, or 14% in local currency. The Boys-
Entertainment category was negatively impacted by lower sales of Toy Story 2 products in 2000 compared to
1999. Excluding the impact of Toy Story 2 and Harry Potterproducts, the Boys-Entertainment category grew
2% for the year. Worldwide Wheels sales decreased 2%, or were flat before the unfavorable impact of foreign
exchange. Sales of Entertainment products increased 2% worldwide, driven by strength of Max Steel, Mattel
games and Harry Potterproducts, partially offset by lower sales of Toy Story 2 products.
Worldwide gross sales in the Infant & Preschool category were flat, or up 3% in local currency. Domestic
sales grew by 4%, while international sales decreased by 10%, or 2% in local currency. Worldwide sales of
core Fisher-Priceproducts grew 26%, up 37% in the US and flat in international markets. Excluding the
unfavorable exchange impact, core Fisher-Priceproducts were up 11% in international markets. Declines in
worldwide sales for Sesame Street, Disney preschool and Winnie the Poohoffset domestic growth in core
Fisher-Priceproducts.
Gross profit, as a percentage of net sales, was 45.0% in 2000 compared to 47.5% in 1999. Cost of sales in
2000 includes a $78.6 million charge related to the termination of a variety of licensing agreements and other
contractual arrangements and elimination of product lines that did not deliver an adequate level of profitability.
Excluding financial realignment plan charges, gross profit was 46.7% in 2000 compared to 47.5% in 1999 due
to unfavorable product mix, unfavorable foreign exchange rates and higher shipping costs.
Advertising and promotion expense was 14.7% of net sales in 2000 compared to 14.9% in 1999.
Excluding the $4.8 million financial realignment plan charge, largely related to exiting certain product lines,
advertising and promotion expenses, as a percentage of net sales, was 14.6% in 2000. The decrease was
attributable to improved efficiencies of promotional spending.
Other selling and administrative expenses were 20.7% of net sales in 2000 compared to 18.9% in 1999.
Excluding the $5.9 million charge related to settlement of certain litigation matters and the $53.1 million charge
related to termination costs for the departure of senior executives, other selling and administrative expenses
were 19.4% of net sales in 2000. The increase was largely due to compensation costs incurred for the
recruitment and retention of senior executives.
Other expense (income), net in 2000 includes a $12.5 million charge primarily related to the writeoff of
certain noncurrent assets and an $8.4 million charge related to losses realized on the disposition of a portion of
the stock received as part of the sale of CyberPatrol. Excluding these charges, the $14.1 million increase in
other expense (income), net was largely due to investment and interest income.
Interest expense was $153.0 million in 2000 compared with $131.6 million in 1999, largely due to higher
borrowings necessitated by the funding of Mattel’s Consumer Software business. In addition, Mattel’s overall
interest rate was higher due to increased market rates and debt refinancing that occurred during the second half
of the year.
Business Segment Results
US Girls segment sales increased by 10% in 2000 compared to 1999 due to a 9% increase in sales of
Barbieproducts and a 7% increase in sales of American Girlproducts. US Boys-Entertainment segment
sales decreased 4% due to a 3% decrease in sales of Wheels products and a 7% decrease in sales of
Entertainment products. Within the Wheels category, Mattel gained market share. However, sales fell below
1999 levels as relatively high retail inventories were adjusted down throughout 2000. Within the Entertainment
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