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MATTEL฀2005฀ANNUAL฀REPORT

Table of contents

  • Page 1
    MATTEL฀2005฀ANNUAL฀REPORT

  • Page 2

  • Page 3
    ...,฀primarily฀at฀our฀company's฀worldwide฀headquarters,฀ with฀the฀majority฀of฀the฀approximately฀200฀job฀reductions฀relating฀to฀the฀consolidation฀of฀the฀Mattel฀ Girls฀and฀Boys฀Brands฀and฀Fisher-Price฀Brands฀divisions.฀This฀decision฀was...

  • Page 4

  • Page 5
    ...-functional฀business฀teams฀and฀developed฀customer฀account฀plans฀on฀a฀global฀basis฀to฀build฀ retailers'฀toy฀sales฀and฀profits. SCALE As฀the฀world's฀largest฀toy฀company,฀we฀can฀realize฀significant฀cost฀savings฀when฀we฀make฀purchasing...

  • Page 6
    ...฀new฀community฀partnerships. In฀2005,฀Mattel฀donated฀approximately฀three฀million฀toys฀and฀the฀Foundation฀awarded฀72฀domestic฀and฀ 34฀international฀grants,฀funding฀programs฀in฀virtually฀every฀country฀in฀which฀we฀operate,฀including฀Mexico...

  • Page 7

  • Page 8
    ...Awareness,฀Responsible,฀Ethical)฀฀Process฀protocols฀for฀employee฀health,฀ safety,฀working฀conditions฀and฀welfare.฀That฀means,฀regardless฀of฀the฀toy฀brand฀consumers฀buy,฀they฀can฀be฀ assured฀that฀the฀employees฀who฀produced฀that฀product...

  • Page 9
    Mattel,฀Inc. 2005

  • Page 10
    ... the market price as of the close of business June 30, 2005 was $7,398,030,926. Number of shares outstanding of registrant's common stock, $1.00 par value, as of February 24, 2006: 388,739,744 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Mattel, Inc. 2006 Notice of Annual Meeting of...

  • Page 11
    ...Vote of Security Holders ...PART II Item 5. Item 6. Item 7. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results of Operations ... 20 21 22 48...

  • Page 12
    ...") 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 vision is to provide "the world's premier toy brands-today and tomorrow." Management has set six key company strategies...

  • Page 13
    ... of American Girl Brands, although some are developed or adapted for particular international markets. Mattel's products are sold directly to retailers and wholesalers in most European, Latin American and Asian countries, and in Australia, Canada and New Zealand, and through agents and distributors...

  • Page 14
    ...party manufacturers for the production of non-core products. Mattel's principal manufacturing facilities are located in China, Indonesia, Thailand, Malaysia and Mexico. Mattel also utilizes third-party manufacturers to manufacture its products in the US, Mexico, Brazil, Asia, India and Australia. To...

  • Page 15
    ... primarily on quality, play value and price. The Mattel Girls & Boys Brands US and Fisher-Price Brands US segments compete with several large toy companies, including Hasbro, Inc., Jakks Pacific, Lego, Leap Frog, Bandai, MGA Entertainment and many smaller toy companies. American Girl Brands competes...

  • Page 16
    ...including discount and free-standing toy stores, chain stores, department stores, other retail outlets and, to a limited extent, wholesalers by Mattel Girls & Boys Brands US and Fisher-Price Brands US. Mattel also operates several small retail outlets, generally near or at its corporate headquarters...

  • Page 17
    ... of non-toy products that do not compete with Mattel's products. Mattel distributes some third-party finished products that are independently designed and manufactured. Trademarks, Copyrights and Patents Most of Mattel's products are sold under trademarks, trade names and copyrights, and a number of...

  • Page 18
    ..., Mattel, Mattel Asia Pacific Sourcing Limited ("MAPS"), a wholly-owned subsidiary of Mattel, Bank of America, N.A., as a lender and administrative agent, and other financial institutions executed a Credit Agreement (the "MAPS facility") which provides for (i) a term loan facility of $225.0 million...

  • Page 19
    ... applicable foreign product safety requirements. Notwithstanding the foregoing, there can be no assurance that all of Mattel's products are or will be free from defects or are hazard-free. A product recall could have a material adverse effect on Mattel's results of operations and financial condition...

  • Page 20
    ...Chairman of the Board of Directors and Chief Executive Officer Executive Vice President of Mattel and President, American Girl Executive Vice President, Worldwide Operations Chief Financial Officer President, Mattel Brands Senior Vice President, Human Resources Senior Vice President, General Counsel...

  • Page 21
    ... Vice President-Sales, Marketing and Design of Just Toys, Vice President and General Manager of Baby Care for Gerber Products, Executive Vice President and Chief Operating Officer of Lionel Leisure, Inc., and President of Aviva/Hasbro. Mr. Kaye has been Senior Vice President, Human Resources since...

  • Page 22
    ... new trends, create new brands and enter new categories, develop people, improve productivity, simplify processes, maintain customer service levels and improve supply chain; operating efficiencies; capital and investment framework (including statements about free cash flow, seasonal working capital...

  • Page 23
    ... means that economic difficulties or changes in the purchasing policies of its major customers could have a significant impact on Mattel's business and operating results. A small number of customers account for a large share of Mattel's net sales. In 2005 Mattel's three largest customers, Wal-Mart...

  • Page 24
    ... of materials, transportation, services and labor (including but not limited to wages, expenses related to employee health plans and insurance), could impact the profit margins realized by Mattel on the sale of its products. Because of market conditions, timing of pricing decisions and other factors...

  • Page 25
    ...Asia, particularly in Hong Kong, and in the Guangdong province of China, where many of Mattel's manufacturing facilities and third-party manufacturers are located. The design, development and manufacture of Mattel's products could suffer if a significant number of Mattel's employees or the employees...

  • Page 26
    ... of its core business, globalize and extend Mattel's brands, catch new trends, create new brands and enter new categories, develop people, improve productivity, simplify processes, maintain customer service levels, as well as new initiatives designed to drive sales growth, manage costs and improve...

  • Page 27
    ... office building consisting of approximately 55,000 square feet. Mattel also leases buildings in El Segundo consisting of approximately 327,000 square feet. All segments use these facilities. Mattel's Fisher-Price subsidiary owns its headquarters facilities in East Aurora, New York, consisting...

  • Page 28
    ..., New York and Los Angeles, California for its American Girl Place® stores and leased retail space in Oshkosh, Wisconsin, which are used by the American Girl Brands segment. Mattel also has leased office space in Florida, which is used by the International segment. Mattel leases a computer facility...

  • Page 29
    ... of Mattel's Board of Directors and is subject to customary limitations. Securities Authorized for Issuance under Equity Compensation Plans The information regarding Mattel's equity compensation plans is incorporated herein by reference to Mattel's 2006 Notice of Annual Meeting of Stockholders...

  • Page 30
    ..., effective October 1, 2003, close out sales previously classified as a reduction of cost of sales are now classified as net sales in Mattel's consolidated statements of operations. Close out sales for the fourth quarter of 2003, totaling $19.2 million, were included in reported net sales. This...

  • Page 31
    ... in 2004 was positively impacted by a $65.1 million tax benefit related to an audit settlement with the US Internal Revenue Service ("IRS"). (d) The Consumer Software segment, which was comprised primarily of The Learning Company, Inc. ("Learning Company"), was reported as a discontinued operation...

  • Page 32
    ... vendor sourcing to reduce the cost of manufacturing, purchasing and distributing Mattel's products, and improve Mattel's cost structure by gaining further efficiencies in the supply chain through implementation of new spend management and e-procurement policies, procedures and information systems...

  • Page 33
    ... income in 2004 was positively impacted by a $65.1 million tax benefit related to an audit settlement with the IRS. Shares repurchased under Mattel's share repurchase program resulted in a benefit to Mattel's earnings per share in 2005 when compared to 2004, by reducing the average number of common...

  • Page 34
    ... Girl Place® retail stores and the direct channels, driven by the success of the Marisol™ doll and book from the Just Like You™ contemporary line, and doll and book products related to the American Girl® live-action, made-for-TV movies. Gross Profit Gross profit, as a percentage of net sales...

  • Page 35
    ... performance of the American Girl Place® retail stores and the direct channels, driven by the success of the Marisol™ doll and book from the Just Like You™ contemporary line, and doll and book products related to the American Girl® live-action, made-for-TV movies. American Girl Brands segment...

  • Page 36
    ...™ and Yu-Gi-Oh!™ properties. Fisher-Price Brands gross sales increased 11%, including a 1 percentage point benefit from changes in currency exchange rates, due to strong growth in Core Fisher-Price® products, primarily infant and BabyGear™ lines, and Fisher-Price® Friends, mainly Dora the...

  • Page 37
    ... distribution center located in Texas, which warehouses and distributes finished product for Mattel. Mattel carried insurance for this risk and in the fourth quarter of 2004, Mattel settled its claim with its insurance carrier. This event did not have a material impact on the results of operations...

  • Page 38
    ....1 million in 2004 compared to 2003, due primarily to the success of the American Girl Place® retail store in New York City which opened in November 2003, and increased sales of the historical collection dolls and accessories driven by the first American Girl® live-action, made-for-TV movie, which...

  • Page 39
    ... believes that Mattel Girls & Boys Brands US segment sales continue to be negatively impacted by a continued reduction in inventory of Mattel products held by retailers and continued competitive challenges. During 2004, management developed a new strategy designed to regain relevance with girls by...

  • Page 40
    ... of the success of the American Girl Place® retail store in New York City, which opened in November 2003, and increased sales of the historical collection dolls and accessories driven by the first American Girl® live-action, made-for-TV movie, which aired in November 2004. American Girl Brands...

  • Page 41
    ... US-based headquarters locations in El Segundo, Fisher-Price and American Girl, costs associated with the North American Strategy, closure of certain international offices, and consolidation of facilities. From the inception of the plan through 2003, Mattel terminated the employment of approximately...

  • Page 42
    ... April 14, 2005. Mattel's Board of Directors approved this domestic reinvestment plan on November 18, 2005. Mattel's effective tax rate on income before income taxes decreased in 2004 to 17.7% as compared to 27.4% in 2003 due to a net benefit of $65.1 million resulting from a settlement with the IRS...

  • Page 43
    ... 2003 was mainly due to higher spending in 2003 associated with the construction of the new American Girl Place® in New York City, expansion of manufacturing facilities in Mexico as part of the financial realignment plan, and reduced spending in 2004 on information technology. In 2003, Mattel used...

  • Page 44
    ... $0.40 per share dividend to holders of its common stock, respectively. The Board of Directors declared the dividend in November, and Mattel paid the dividend in December of each year. The dividend payments were $200.5 million, $186.9 million and $171.3 million in 2005, 2004 and 2003, respectively...

  • Page 45
    ...those receivables to the bank group. Mattel records the transaction, reflecting cash proceeds and sale of accounts receivable in its consolidated balance sheet, at the time of the sale of the receivables to the bank group. Mattel International Holdings B.V., a company incorporated in the Netherlands...

  • Page 46
    ...facility. Accounts receivable were flat at December 31, 2005 as compared to 2004. Inventories decreased $41.7 million to $376.9 million at December 31, 2005, mainly due to tighter management of inventory levels by Mattel, and changes in currency exchange rates. Based on its analysis of point of sale...

  • Page 47
    ... of its Learning Company division for the third quarter of 1999, various Mattel stockholders filed purported class action complaints naming Mattel and certain of its present and former officers and directors as defendants. These shareholder complaints were consolidated into two lead cases, one under...

  • Page 48
    ...Fisher-Price believe the action is without merit and intend to continue to vigorously defend themselves. Litigation Related to Carter Bryant and MGA Entertainment, Inc. In April 2004, Mattel filed a lawsuit in Los Angeles County Superior Court against Carter Bryant ("Bryant"), a former Mattel design...

  • Page 49
    ... system at one of its former manufacturing facilities. The execution of the consent order was in response to the New York State Department of Environmental Conservation ("NYSDEC") Record of Decision issued in March 2000. The NYSDEC approved a conceptual work plan in March 2001. One component of...

  • Page 50
    ... labor, which Mattel is addressing or defending in the ordinary course of business. Management believes that any liability that may potentially result upon resolution of such matters will not have a material adverse effect on Mattel's business, financial condition or results of operations. Effects...

  • Page 51
    ... and free-standing toy stores, chain stores, department stores, other retail outlets and, to a limited extent, wholesalers. Products within the International segment are sold directly to retailers and wholesalers in Canada and most European, Asian and Latin American countries, and through agents and...

  • Page 52
    ... would require management to make a valuation estimate on such inventory. Mattel bases its production schedules for toy products on customer orders and forecasts, taking into account historical trends, results of market research and current market information. Mattel ships products in accordance...

  • Page 53
    ... the sales of Mattel's products and its corresponding inventory levels, which would potentially impact the valuation of its inventory. At the end of each quarter, management within each business segment, Mattel Girls & Boys Brands US, Fisher-Price Brands US, American Girl Brands and International...

  • Page 54
    ...rate of return on plan assets is based on management's expectation of earnings on the assets that secure Mattel's funded defined benefit pension plans, taking into account the mix of invested assets, the arithmetic average of past returns, economic and stock market conditions and future expectations...

  • Page 55
    ... below the operating segment. Mattel's reporting units for purposes of applying the provisions of SFAS No. 142 are: Mattel Girls Brands US division, Mattel Boys Brands US division, Fisher-Price Brands US, American Girl Brands and International. Goodwill is allocated to Mattel's reporting units based...

  • Page 56
    ... of the Board of Directors of Mattel approved the acceleration of vesting of certain outstanding unvested stock options primarily to avoid future compensation expense for those stock options, and because there may be future benefits for the provision for income taxes for financial reporting purposes...

  • Page 57
    ..., is as follows (in thousands): 2005 For the Year 2004 2003 Revenues Domestic: Mattel Girls & Boys Brands US ...Fisher-Price Brands US ...American Girl Brands ...Total Domestic ...International ...Gross sales ...Sales adjustments ...Net sales ... $1,364,922 1,358,562 436,085 3,159,569 2,463,984...

  • Page 58
    ... are recorded in the consolidated statement of operations in the period in which the inventory is sold to customers. In addition, Mattel manages its exposure to currency exchange rate fluctuations through the selection of currencies used for international borrowings. Mattel does not trade in...

  • Page 59
    ... on Mattel's short-term borrowings would have had an immaterial impact on its results of operations for the year ended December 31, 2005. Item 8. Financial Statements and Supplementary Data. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing...

  • Page 60
    ... management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. A company's internal control...

  • Page 61
    ... of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP Los Angeles, California February 27, 2006...

  • Page 62
    ... ...Commitments and Contingencies (See Note 9) Stockholders' Equity Common stock $1.00 par value, 1.0 billion shares authorized; 441.4 million shares issued ...Additional paid-in capital ...Treasury stock at cost; 52.8 million shares and 26.0 million shares in 2005 and 2004, respectively ...Retained...

  • Page 63
    MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Year 2005 2004 2003 (In thousands, except per share amounts) Net Sales (See Note 1) ...Cost of sales (See Note 1) ...Gross Profit ...Advertising and promotion expenses ...Other selling and administrative expenses ......

  • Page 64
    ... cash flows from operating activities ...Cash Flows From Investing Activities: Purchases of tools, dies and molds ...Purchases of other property, plant and equipment ...Proceeds from sale of investments ...Payments for businesses acquired ...Proceeds from sale of other property, plant and equipment...

  • Page 65
    ... pension liability adjustments ...Currency translation adjustments ...Comprehensive income ...Purchase of treasury stock ...Issuance of common stock for exercise of stock options ...Tax impact of stock option exercises ...Tax impact of prior year stock warrant exercise ...Compensation cost related...

  • Page 66
    ... other companies are accounted for by the equity method or cost basis, depending upon the level of the investment and/or Mattel's ability to exercise influence over operating and financial policies. Mattel does not have any minority stock ownership interests in which it has a controlling financial...

  • Page 67
    ...below the operating segment for purposes of evaluating whether goodwill is impaired. Mattel's reporting units are: Mattel Girls Brands US division, Mattel Boys Brands US division, Fisher-Price Brands US, American Girl Brands and International. Mattel tests its goodwill for impairment annually in the...

  • Page 68
    ... Employees, and related interpretations in accounting for its stock compensation plans. Accordingly, no compensation cost has been recognized in the results of operations for nonqualified stock options granted under Mattel's plans as such options are granted at not less than the quoted market price...

  • Page 69
    ...exercise price of $16.09 or greater granted to employees other than Robert A. Eckert, Mattel's Chairman and Chief Executive Officer, under the Amended and Restated Mattel 1996 Stock Option Plan, the Amended and Restated Mattel 1999 Stock Option Plan and the Mattel, Inc. 2005 Equity Compensation Plan...

  • Page 70
    by non-employee members of the Board of Directors were also excluded from the acceleration. The effective date of the acceleration was December 28, 2005; on such date, the closing price of Mattel's common stock on the New York Stock Exchange was $15.95 per share. The options as to which vesting was ...

  • Page 71
    ..., if any, are recorded in the results of operations currently. Changes in fair value of Mattel's cash flow derivatives are deferred and recorded as part of accumulated other comprehensive loss in stockholders' equity until the underlying transaction is settled. Upon settlement, any gain or loss...

  • Page 72
    ...to the US reporting units. Mattel Girls Brands US Division Mattel Boys Brands US Division Fisher-Price American Girl Brands US Brands (In thousands) International Total Balance at December 31, 2003 ...$ Impact of currency exchange rate changes ...Balance at December 31, 2004 ...Impact of currency...

  • Page 73
    ...(18,560) $123,531 189,633 25,989 (5,800) (6,600) 13,589 $203,222 Deferred income taxes are provided principally for tax credit carryforwards, net operating loss carryforwards, research and development expenses, depreciation, employee compensation-related expenses and certain other reserves that are...

  • Page 74
    ... foreign corporations. Mattel repatriated $2.4 billion in foreign earnings during 2005. The statement of operations for the year ended December 31, 2005 includes a provision for income taxes of $107.0 million for the total amount of earnings repatriated. Management's domestic reinvestment plan for...

  • Page 75
    ... compensation and excess benefit plans. In addition, Mattel makes contributions to government-mandated retirement plans in countries outside the US where its employees work. A summary of retirement plan expense is as follows (in millions): 2005 For the Year 2004 2003 Defined benefit pension plans...

  • Page 76
    ...: 2005 For the Year 2004 2003 Defined benefit pension plans: Discount rate ...Weighted average rate of future compensation increases ...Long-term rate of return on plan assets ...Postretirement benefit plans: Discount rate ...Annual increase in Medicare Part B premium ...Health care cost trend rate...

  • Page 77
    ...,820) (a) The tax benefits related to accumulated other comprehensive loss are $39.0 million and $34.7 million for December 31, 2005 and 2004, respectively. Mattel's accumulated benefit obligation of its defined benefit pension plans as of December 31, 2005 and 2004 totaled $428.4 million and $395...

  • Page 78
    ... benefit pension and postretirement benefit plans are as follows: December 31, 2005 2004 Defined benefit pension plans: Discount rate ...Weighted average rate of future compensation increases ...Postretirement benefit plans: Discount rate ...Annual increase in Medicare Part B premium ...Health...

  • Page 79
    ... in the consolidated balance sheets. Mattel has purchased group trust-owned life insurance contracts designed to assist in funding these programs. The cash surrender value of these policies, valued at $58.7 million and $59.7 million as of December 31, 2005 and 2004, respectively, are held in an...

  • Page 80
    ... Plans Mattel has annual incentive compensation plans under which officers and key employees may earn incentive compensation based on Mattel's performance and subject to certain approvals of the Compensation Committee of the Board of Directors. For 2005, 2004 and 2003, $22.0 million, $41.8 million...

  • Page 81
    ...those receivables to the bank group. Mattel records the transaction, reflecting cash proceeds and sale of accounts receivable in its consolidated balance sheet, at the time of the sale of the receivables to the bank group. Mattel International Holdings B.V., a company incorporated in the Netherlands...

  • Page 82
    ... domestic unsecured committed credit facilities, $2.7 million and $0, respectively, under the MAPS revolving loan facility, and $32.9 million and $29.1 million, respectively, under its foreign credit lines and other short-term borrowings to help finance its seasonal working capital requirements. The...

  • Page 83
    ... In 2005, 2004 and 2003, Mattel paid a dividend per share of $0.50, $0.45 and $0.40, respectively, to holders of its common stock. The Board of Directors declared the dividend in November, and Mattel paid the dividend in December of each year. The payment of dividends on common stock is at the...

  • Page 84
    ...,828) Note 7-Stock Compensation Plans Mattel Stock Option Plans In May 2005, Mattel's stockholders approved the Mattel, Inc. 2005 Equity Compensation Plan (the "2005 Plan"). Upon approval of the 2005 Plan, Mattel terminated its Amended and Restated 1996 Stock Option Plan (the "1996 Plan") and its...

  • Page 85
    ... 12.4 million shares with an exercise price of $16.09 or greater granted to employees other than Mattel's Chairman and Chief Executive Officer. Vesting was not accelerated as to stock options held by any member of the Board of Directors. The following is a summary of stock option information and...

  • Page 86
    ... of these units was $0.2 million in 2005, 2004 and 2003. In 2005, Mattel granted 49.3 thousand shares of restricted stock and restricted stock units to certain employee officers and non-employee board members. The 2005 compensation expense recognized related to these grants was $0.2 million. 77

  • Page 87
    ... As of December 31, 2005, Mattel held no marketable securities. As of December 31, 2004, Mattel held marketable securities totaling $43.6 million, stated at fair market value based on quoted market prices. These equity securities were classified as securities available-for-sale and included in other...

  • Page 88
    ... rental payments, certain of Mattel's leases require additional payments to reimburse the lessors for operating expenses such as real estate taxes, maintenance, utilities and insurance. The American Girl Place® leases in Chicago, Illinois, New York, New York, and Los Angeles, California, also...

  • Page 89
    ... of its Learning Company division for the third quarter of 1999, various Mattel stockholders filed purported class action complaints naming Mattel and certain of its present and former officers and directors as defendants. These shareholder complaints were consolidated into two lead cases, one under...

  • Page 90
    ...Fisher-Price believe the action is without merit and intend to continue to vigorously defend themselves. Litigation Related to Carter Bryant and MGA Entertainment, Inc. In April 2004, Mattel filed a lawsuit in Los Angeles County Superior Court against Carter Bryant ("Bryant"), a former Mattel design...

  • Page 91
    ... system at one of its former manufacturing facilities. The execution of the consent order was in response to the New York State Department of Environmental Conservation ("NYSDEC") Record of Decision issued in March 2000. The NYSDEC approved a conceptual work plan in March 2001. One component of...

  • Page 92
    ... US-based headquarters locations in El Segundo, Fisher-Price and American Girl, costs associated with the North American Strategy, closure of certain international offices, and consolidation of facilities. From the inception of the plan through 2003, Mattel terminated the employment of approximately...

  • Page 93
    ... of the new "Mattel Brands" division, which will result in the consolidation of some management and support functions, is expected to more effectively and efficiently leverage Mattel's scale, and will preserve the natural marketing and design groups that are empowered to create and market toys based...

  • Page 94
    ... plan, incentive compensation and corporate headquarters functions managed on a worldwide basis. 2005 For the Year 2004 (In thousands) 2003 Revenues Domestic: Mattel Girls & Boys Brands US ...Fisher-Price Brands US ...American Girl Brands ...Total Domestic ...International ...Gross sales ...Sales...

  • Page 95
    ... and inventories, net of applicable reserves and allowances. December 31, 2005 2004 (In thousands) Assets Domestic: Mattel Girls & Boys Brands US ...Fisher-Price Brands US ...American Girl Brands ...Total Domestic ...International ...Corporate and other ...Accounts receivable and inventories, net...

  • Page 96
    ... US and Fisher-Price Brands US segments sell products to each of Mattel's three largest customers. The International segment sells products to Wal-Mart and Toys "R" Us. The American Girl Brands segment sells its children's publications to Wal-Mart and Target. Close Out Sales Information As discussed...

  • Page 97
    ...Fisher-Price Brands US ...American Girl Brands ...Total Domestic ...International ...Worldwide Mattel Girls & Boys Brands ...Fisher-Price Brands ...American Girl Brands ...Other ...Geographic Area United States ...International: Europe ...Latin America ...Asia Pacific ...Other ...Total International...

  • Page 98
    ...Information December 31, 2005 2004 (In thousands) Inventories include the following: Raw materials and work in process ...Finished goods ...Property, plant...Advertising and promotion ...Other ...Other noncurrent liabilities include the following: Benefit plan... and development ...Bad debt expense...

  • Page 99
    ... $ 0.50 17.00 14.53 Dividends declared per common share ...$ Common stock market price: High ...$ Low ...Year Ended December 31, 2004 Net sales ...Gross profit ...Advertising and promotion expenses ...Other selling and administrative expenses ...Operating income ...Income before income taxes ...Net...

  • Page 100
    ... "Financial Statements and Supplementary Data-Management's Report on Internal Control over Financial Reporting." Changes in Internal Control Over Financial Reporting Mattel continues to implement a conversion to new and upgraded financial and human resources information technology systems that began...

  • Page 101
    ... the heading "Executive Officers of the Registrant" in Part I herein. Mattel has adopted the Mattel Code of Conduct (the "Code of Conduct") applicable to all directors, officers and employees which includes its general comprehensive code of ethical business conduct as well as provisions related to...

  • Page 102
    ...Financial Statements and Supplementary Data." Page Management's Report on Internal Control over Financial Reporting ...Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of December 31, 2005 and 2004 ...Consolidated Statements of Operations for the years ended...

  • Page 103
    ...23, 2005, among Mattel Factoring, Inc., as Transferor, Mattel, Inc., as Servicer, Bank of America, N.A., as Administrative Agent, and the financial institutions party thereto Credit Agreement dated as of December 9, 2005, among Mattel Asia Pacific Sourcing Limited, as Borrower, Mattel, Inc., Bank of...

  • Page 104
    ... Bank Nederland N.V., Mattel International Holdings B.V., Mattel France S.A.S. and Mattel GmbH Amendment to Master Agreement for the Transfer of Receivables dated July 12, 2004 among Societe Generale Bank Nederland N.V., Mattel International Holdings B.V., Mattel France S.A.S. and Mattel GmbH Letter...

  • Page 105
    ... File No. Exhibit(s) Filing Date Executive Compensation Plans and Arrangements of Mattel 10.15 Form of Indemnity Agreement between Mattel and its directors and certain of its executive officers Executive Employment Agreement dated October 18, 2000 between Mattel and Robert A. Eckert Amendment to...

  • Page 106
    ... Plan for Non-Employee Directors Amendment No. 1 to Mattel, Inc. Deferred Compensation Plan for Non-Employee Directors 10-K 001-05647 10.24 March 8, 2005 10.28 8-K 001-05647 99.3 April 8, 2005 10.29 8-K 001-05647 99.2 October 14, 2005 10.30 10-K 001-05647 10.26 March 12, 2004...

  • Page 107
    ... to the Fisher-Price Pension Plan Sixth Amendment to the Fisher-Price Pension Plan Seventh Amendment to the FisherPrice Pension Plan Eighth Amendment to the Fisher-Price Pension Plan Ninth Amendment to the Fisher-Price Pension Plan The Fisher-Price Section 415 Excess Benefit Plan Mattel, Inc...

  • Page 108
    ... Outside Directors (Annual Grant) under the 1996 Plan, as amended Form of Option Grant Agreement (Three Year Vesting) under the 1996 Plan, as amended Form of Grant Agreement for a Restricted Stock Grant under the Mattel, Inc. 1996 Stock Option Plan Mattel, Inc. 1997 Premium Price Stock Option Plan...

  • Page 109
    ... (Three Year Vesting) under the 1999 Plan, as amended Mattel, Inc. 2005 Equity Compensation Plan ("the 2005 Plan") Form of Grant Agreement for grants to employees of Non-Qualified Stock Options ("NQSOs") under the 2005 Plan Form of Grant Agreement for grants to Robert A. Eckert of NQSOs under...

  • Page 110
    ... No. Exhibit(s) Filing Date 10.101 Form of Grant Agreement for grant to Neil B. Friedman of Restricted Stock Units with Dividend Equivalents under the 2005 Plan Mattel, Inc. Summary of Compensation of the Non-Employee Members of the Board of Directors Computation of Income per Common and Common...

  • Page 111
    ...TULLY M. FRIEDMAN Tully M. Friedman Chairman of the Board and Chief Executive Officer (principal executive officer) Chief Financial Officer (principal financial officer) Senior Vice President and Corporate Controller (principal accounting officer) Director February 27, 2006 /s/ February 27, 2006...

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    Signature Title Date /s/ ANDREA L. RICH Andrea L. Rich RONALD L. SARGENT Ronald L. Sargent Director February 27, 2006 /s/ Director February 27, 2006 /s/ CHRISTOPHER A. SINCLAIR Christopher A. Sinclair /s/ G. CRAIG SULLIVAN G. Craig Sullivan JOHN L. VOGELSTEIN John L. Vogelstein KATHY ...

  • Page 113
    ...MATTEL, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES Balance at Beginning of Year Additions Charged to Net Operations Deductions (In thousands) Balance at End of Year Allowance for Doubtful Accounts Year ended December 31, 2005 ...Year ended December 31, 2004...of related ...

  • Page 114
    ... ...$417,019 $572,723 $537,632 $ 455,042 $310,920 Gain from discontinued operations, net of tax ...- - - 27,253 - Cumulative effect of change in accounting principles, net of tax ...- - - (252,194) (12,001) Net income applicable to common shares ...$417,019 $572,723 $537,632 $ 230,101 $298,919...

  • Page 115
    ...in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who...

  • Page 116
    ...in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who...

  • Page 117
    ... President, External Affairs H. Scott Topham Senior Vice President and Corporate Controller BUSINESS UNIT EXECUTIVES Ellen L. Brothers Executive Vice President of Mattel and President, American Girl Neil B. Friedman President, Mattel Brands Bryan G. Stockton Executive Vice President, International

  • Page 118
    ...INFORMATION CORPORATE฀OFFICE 333฀Continental฀Blvd. El฀Segundo,฀CA฀฀90245-5012 310-252-2000 For฀more฀information,฀please฀visit฀Mattel's฀ corporate฀website:฀www.mattel.com TRANSFER฀AGENT฀AND฀REGISTRAR Mattel,฀Inc.฀Common฀Stock Computershare฀Trust฀Company...

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