Mattel 2005 Annual Report Download - page 38

Girls Brands were more than offset by declining sales of discontinued product lines. Worldwide gross sales in the
Wheels category increased 3% compared to 2003, including a 3 percentage point benefit from changes in
currency exchange rates. Worldwide gross sales of the Hot Wheels®product line increased compared to 2003,
driven by double digit growth internationally resulting from new product introductions. Worldwide gross sales in
the Entertainment category increased 22% compared to 2003, including a 3 percentage point benefit from
changes in currency exchange rates, mainly attributable to strong sales of Scene It?™and the launch of Mattel’s
personal video player, JuiceBox™, and continued strength in male action entertainment properties such as
Batman™, MegaMan™and Yu-Gi-Oh!™.
Worldwide gross sales of Fisher-Price Brands increased 8% to $1.9 billion in 2004 compared to 2003,
including a 1 percentage point benefit from changes in currency exchange rates. Domestic gross sales increased
4%, while international sales grew 18%, including a 6 percentage point benefit from changes in currency
exchange rates. Worldwide gross sales of Core Fisher-Price®increased 9% compared to 2003, including a
2 percentage point benefit from changes in currency exchange rates. Sales growth in Core Fisher-Price®was
primarily related to sales growth in infant and preschool products and continued growth in the BabyGear™line.
Worldwide gross sales of Fisher-Price®Friends increased 19% compared to 2003, including a 2 percentage point
benefit from changes in currency exchange rates, driven by the expansion of learning-related products and strong
sales growth from new product introductions featuring Dora the Explorer™and Winnie the Pooh.
Gross sales of American Girl Brands increased 10% to $379.1 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 aired in November 2004.
Gross Profit
Gross profit, as a percentage of net sales, was 47.2% in 2004 compared to 49.0% in 2003. The decrease in
gross profit, as a percentage of net sales, resulted from sales of lower margin products, including the impact of
sales mix, value enhancement initiatives, change in classification of close out sales, higher royalty costs and
ongoing external cost pressures. This decline was partially offset by a benefit from changes in currency exchange
rates and savings generated from continuous improvement programs. Mattel plans to continue to invest in value
enhancement initiatives and expects the external cost pressures to continue. Mattel is actively pursuing cost
saving actions and effective in January 2005, Mattel modestly increased the prices it charges to customers on a
worldwide basis across most product lines. Cost of sales in 2003 includes a charge of $4.1 million for the
financial realignment plan, primarily related to the consolidation of two of Mattel’s manufacturing facilities in
Mexico.
Advertising and Promotion Expenses
Advertising and promotion expenses were 12.6% of net sales in 2004, compared to 12.8% in 2003.
Other Selling and Administrative Expenses
Other selling and administrative expenses increased $34.0 million to $1.04 billion compared to $1.0 billion
in 2003, with the percentage of net sales remaining flat at 20.3%. Other selling and administrative expenses
increased in 2004, primarily due to the following:
• A $16.2 million charge for severance related to the elimination of approximately 285 positions resulting
from headcount reductions at certain domestic and international locations and relocation of the
Matchbox®and Tyco®R/C brands from New Jersey to California to take advantage of synergies in the
Wheels business;
• Higher overhead costs associated with the American Girl Place®retail store in New York City that
opened in November 2003;
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