Mattel 2005 Annual Report Download - page 40

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Fisher-Price Brands US gross sales increased 4%, reflecting an increase in sales of Core Fisher-Price®
products, mainly in the infant and preschool and BabyGear™lines and Fisher-Price®Friends, driven by the
expansion of learning-related products and strong sales growth from new product introductions featuring
Dora the Explorer™and Winnie the Pooh. These sales increases were partially offset by a decrease in sales of
Power Wheels®. Fisher-Price Brands US segment income decreased 4% to $173.2 million in 2004, primarily due
to increased sales of lower margin products, including the impact of sales mix, and higher product costs,
including transportation and royalty costs, partially offset by higher sales volume.
American Girl Brands gross sales increased 10%, primarily as a result 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 segment income increased 25% to $77.5 million in 2004,
driven by higher sales volume and improved gross profit, partially offset by higher overhead costs associated
with its American Girl Place®retail store in New York City.
International Segment
The following table provides a summary of percentage changes in gross sales within the International
segment in 2004 versus 2003:
Non-US Regions:
% Change in
Gross Sales
Impact of Change in
Currency Rates
(in % pts)
Europe .......................................................... 4 8
Latin America .................................................... 13 (2)
Asia Pacific ...................................................... 19 6
Other ........................................................... 6 5
Total International ................................................. 7 5
International gross sales increased 7% in 2004 compared to 2003, including a benefit from changes in
currency exchange rates of 5 percentage points. Gross sales of Barbie®decreased 3%, including a benefit from
changes in currency exchange rates of 5 percentage points. Gross sales in the Wheels category grew by double-
digits in 2004 compared to 2003, mainly due to growth in Hot Wheels®products, partially offset by declines in
sales of Matchbox®. Gross sales in the Entertainment category also increased by double-digits in 2004 compared
to 2003, primarily due to strong sales of games and puzzles, including Scene It?™, and the Warner Bros.
properties, including Batman™and Harry Potter™. Fisher-Price Brands gross sales increased 18%, including a
benefit from changes in currency exchange rates of 6 percentage points, due to strong growth in Core
Fisher-Price®products, primarily infant and preschool and BabyGear™lines and Fisher-Price®Friends, mainly
due to new product introductions featuring Dora the Explorer™and Winnie the Pooh. International segment
income decreased 18% to $299.2 million in 2004, as a result of a sales mix shift to lower margin products, the
higher cost of value enhancement initiatives and pricing adjustments made in 2004 on certain products in Europe
to remain competitive given the strength of the Euro versus the US dollar, and external cost pressures.
Financial Realignment Plan
In 2003, Mattel completed its financial realignment plan, originally announced during the third quarter of
2000, which was designed to improve gross profit, other selling and administrative expenses, operating income,
and cash flows. During the duration of the plan, Mattel recorded a total pre-tax charge of $250.0 million, or
approximately $171 million after-tax, of which approximately $123 million represented cash expenditures and
$48 million represented non-cash asset write-downs.
Mattel exceeded the targeted initial cumulative pre-tax cost savings of approximately $200 million,
achieving cumulative pre-tax cost savings of approximately $221 million by the end of 2003, of which
approximately $79 million was realized in 2003.
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