Mattel 2005 Annual Report Download - page 57

Download and view the complete annual report

Please find page 57 of the 2005 Mattel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 119

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119

SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. Mattel does not expect the adoption of
SFAS No. 151 to have a material impact on its results of operations and financial position.
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement
of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim
Financial Statements. SFAS No. 154 applies to all voluntary changes in accounting principle, and changes the
requirements for accounting for and reporting of a change in accounting principle. SFAS No. 154 requires
retrospective application to prior periods’ financial statements of a voluntary change in accounting principle
unless it is impracticable, whereas APB Opinion No. 20 previously required that most voluntary changes in
accounting principle be recognized by including in net income of the period of the change the cumulative effect
of changing to the new accounting principle. SFAS No. 154 is effective for fiscal years beginning after
December 15, 2005. Mattel does not expect the adoption of SFAS No. 154 to have a material impact on its results
of operations and financial position.
Non-GAAP Financial Measure
In this Annual Report on Form 10-K, Mattel includes a non-GAAP financial measure, gross sales, which it
uses to analyze its operations and to monitor, assess and identify meaningful trends in its operating and financial
performance. Net sales, as reported in the consolidated statements of operations, include the impact of sales
adjustments, such as trade discounts and other allowances. Gross sales represent sales to customers, excluding
the impact of sales adjustments. Consistent with its segment reporting, Mattel presents changes in gross sales as a
metric for comparing its aggregate, business unit, brand and geographic results to highlight significant trends in
Mattel’s business. Changes in gross sales are discussed because, while Mattel records the detail of such sales
adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally not
associated with individual products.
A reconciliation of gross sales to the most directly comparable GAAP financial measure, net sales, is as
follows (in thousands):
For the Year
2005 2004 2003
Revenues
Domestic:
Mattel Girls & Boys Brands US .......................... $1,364,922 $1,511,550 $1,594,144
Fisher-Price Brands US ................................. 1,358,562 1,319,200 1,265,224
American Girl Brands .................................. 436,085 379,112 344,446
Total Domestic ............................................ 3,159,569 3,209,862 3,203,814
International .............................................. 2,463,984 2,336,236 2,175,709
Gross sales ............................................... 5,623,553 5,546,098 5,379,523
Sales adjustments .......................................... (444,537) (443,312) (419,423)
Net sales ................................................. $5,179,016 $5,102,786 $4,960,100
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Exchange Rate Risk
Currency exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Inventory
purchase transactions denominated in the Euro, British pound sterling, Mexican peso, Hong Kong dollar and
Indonesian rupiah were the primary transactions that caused currency transaction exposure for Mattel during
2005, 2004, and 2003. Mattel seeks to mitigate its exposure to market risk by monitoring its currency transaction
exposure for the year and partially hedging such exposure using foreign currency forward exchange and option
contracts primarily to hedge its purchase and sale of inventory, and other intercompany transactions denominated
48