Mattel 2002 Annual Report Download - page 25

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Summary
The following discussion should be read in conjunction with the consolidated financial statements and the
related notes. See Item 8 “Financial Statements and Supplementary Data.” Mattel’s consolidated financial
statements for all periods present the Consumer Software segment as a discontinued operation. See
“Discontinued Operations.” Unless otherwise indicated, the following discussion relates only to Mattel’s
continuing operations. Mattel’s consolidated statements of operations for 2001 and 2000 have been restated from
the prior year presentation to classify interest income and other non-operating expense, net below operating
income to conform to the 2002 presentation. Additionally, Mattel’s consolidated statements of operations for
2001 and 2000 have been restated to include reclassifications of certain customer benefits and allowances to
conform to the income statement requirements of Emerging Issues Task Force (“EITF”) Issue No. 01-09,
Accounting for Consideration Given by a Vendor to a Customer. Effective January 2002, Mattel ceased
amortization of its goodwill in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142,
Goodwill and Other Intangible Assets. To facilitate the comparison of current year segment results to that of the
prior year, the segment income was restated from prior year presentation to exclude goodwill amortization.
In February 2003, Mattel announced the consolidation of its US Girls and US Boys-Entertainment segments
into one segment, renamed Mattel Brands. Additionally, Pleasant Company, which was previously part of the
US Girls segment, is now a separate segment for management reporting purposes in 2003. Any discussion of
segment information in this Annual Report on Form 10-K is based on the segments evaluated by management
during 2002.
Mattel designs, manufactures, and markets a broad variety of toy products worldwide through sales to
retailers (i.e., “customers”) and directly to consumers. Mattel’s business is dependent in great part on its ability
each year to redesign, restyle and extend existing core products and product lines, to design and develop
innovative new products and product lines, and successfully to market those products and product lines. Mattel
plans to continue to focus on its portfolio of traditional brands that have historically had worldwide sustainable
appeal, to create new brands utilizing its knowledge of children’s play patterns and to target customer and
consumer preferences around the world. Mattel also intends to expand its core brands through the Internet, and
licensing and entertainment partnerships.
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®
Results of Continuing Operations
2002 Compared to 2001
Consolidated Results
Income from continuing operations for 2002 was $455.0 million or $1.03 per diluted share as compared to
income from continuing operations of $310.9 million or $0.71 per diluted share in 2001. Profitability in 2002 was
impacted by a pre-tax charge of $48.3 million ($31.9 million after-tax) related to the financial realignment plan.
Profitability in 2001 was impacted by a pre-tax charge of $50.2 million ($35.2 million after-tax) related to the
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