Mattel 2002 Annual Report Download - page 12

PART I
Item 1. Business.
Mattel, Inc. (“Mattel”) designs, manufactures, and markets a broad variety of toy products worldwide
through sales to retailers and directly to consumers.
Mattel believes its products are among the most widely recognized toy products in the world. Mattel’s
portfolio of brands and products are grouped in the following categories:
Girls—including Barbie®fashion dolls and accessories, Polly Pocket!®, Diva Starz™, What’s Her Face!™,
ello™, and American Girl®
Boys-Entertainment—including Hot Wheels®, Matchbox®, and Tyco®Radio Control vehicles and playsets
(collectively “Wheels”), and Nickelodeon®, Harry Potter™, Yu-Gi-Oh!™, He-Man®and Masters of the
Universe®, and games and puzzles (collectively “Entertainment”)
Infant & Preschool—including Fisher-Price®, Power Wheels®, Sesame Street®, Disney preschool and
plush, Winnie the Pooh, Blue’s Clues™, Rescue Heroes™, Barney™, See ’N Say®, Magna Doodle®,Dora
the Explorer™, and View-Master®
Mattel’s management has articulated its overall company vision: The World’s Premier Toy Brands—Today
and Tomorrow. Management set five key company strategies: (i) improve execution of the existing toy business;
(ii) globalize the brands; (iii) extend the brands; (iv) catch new trends; and (v) develop people.
Mattel faced several challenges during 2002, in its largest market, the US, including an uncertain retail
environment, weak consumer confidence, higher unemployment, labor unrest at West Coast ports and the threat
of continued terrorism and war. Mattel improved its performance despite these challenges by executing four
strategic priorities: (i) strengthening core brand momentum; (ii) executing the financial realignment plan and
cutting costs; (iii) improving supply chain performance; and (iv) developing people. By focusing on these
priorities, Mattel achieved, among other results, improvement in inventory levels, higher gross margins and
lower costs through management of the supply chain, improved development of employee talent through the
introduction of several new programs and a better alignment of employee activity with Mattel’s values.
In 2002, Mattel continued to execute its financial realignment plan, originally announced during the third
quarter of 2000, designed to improve gross margin; selling and administrative expenses; operating income; and
cash flows. The plan will require a total pre-tax charge estimated at approximately $250 million, or $170 million,
after-tax. Through December 31, 2002, Mattel had recorded pre-tax charges totaling $223.7 million or
approximately $151 million, after-tax. Under the plan, Mattel is on track to deliver at least the targeted initial
cumulative pre-tax cost savings of approximately $200 million over the three-year duration of the plan. Over the
last two years, Mattel recognized cumulative pre-tax cost savings of approximately $142 million, of which
approximately $55 million and $87 million were realized in 2001 and 2002, respectively. Mattel expects to
achieve pre-tax cost savings of approximately $80 million in 2003. See Item 7 “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Financial Realignment Plan” and Item 8 “Financial
Statements and Supplementary Data—Note 10 to the Consolidated Financial Statements.”
Mattel was incorporated in California in 1948 and reincorporated in Delaware in 1968. Its executive offices
are located at 333 Continental Boulevard, El Segundo, California 90245-5012, telephone [phone].
Business Segments
“Mattel” refers to Mattel, Inc. and its subsidiaries as a whole, unless the context requires otherwise. This
narrative discussion applies to all segments except where otherwise stated. Mattel’s reportable segments are
separately managed business units and are divided on a geographic basis between domestic and international.
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