Mattel 2003 Annual Report Download - page 25

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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. In February 2003, Mattel announced the consolidation of its US Girls and US Boys-
Entertainment segments into one segment, renamed Mattel Brands US. Additionally, Pleasant Company, which
was previously part of the US Girls segment, is now a separate segment for management reporting purposes. The
results of Pleasant Company are now reported as American Girl Brands and US Infant & Preschool are now
reported as Fisher-Price Brands US for segment purposes. To facilitate the comparison of current year segment
results to that of the prior years, segment disclosures for 2002 and 2001 have been restated to reflect these
changes.
Overview
Mattel designs, manufactures, and markets a broad variety of toy products worldwide through sales to
retailers and wholesalers (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 to successfully market those products and product lines.
Mattel plans to continue to focus on its portfolio of traditional brands that have historically had worldwide
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:
Mattel Brands—including Barbie®fashion dolls and accessories (“Barbie®”), Polly Pocket!™and ello™
(collectively “Other Girls Brands”), Hot Wheels®,Matchbox®and Tyco®R/C vehicles and playsets
(collectively “Wheels”) and Nickelodeon®,Harry Potter™,Yu-Gi-Oh!™,He-Man®and Masters of the
Universe®,Batman™,Justice League™,and games and puzzles (collectively “Entertainment”).
Fisher-Price Brands—including Fisher-Price®,Power Wheels®,Sesame Street®,Little People®,Disney
preschool and plush, Winnie the Pooh, Rescue Heroes™,Barney™,See ’N Say®,Dora the Explorer™,
PowerTouch™and View-Master®.
American Girl Brands—including American Girl Today®,The American Girls Collection®and Bitty
Baby®.American Girl Brands products are sold directly to consumers and its children’s publications are
sold to certain retailers.
During 2003, there were several factors that had a negative impact on Mattel’s revenue in the US, including
increased competition in the doll and various boys toys categories, a weak economy, retail consolidation and
aggressive retail pricing. In addition, management believes that its fourth quarter and full year 2003 results were
negatively affected by a shift in consumer purchases to later in the holiday season and increased purchase of gift
cards. This shift in the timing of consumer purchases compared to prior years changed the re-order pattern of
Mattel’s products by retailers during the holiday season. When consumers purchase toys in October or
November, retailers are typically inclined to re-order more toys to restock their shelves for the holiday season.
However, when consumers buy products late in December or purchase gift cards that will be used after the
holidays, retailers have less incentive to refill their shelves with holiday products. Mattel’s management expects
that some or all of these factors may continue in 2004 and may have an impact on future results of operations.
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