Mattel 2006 Annual Report Download - page 34

The following table provides the quantification of total close out sales by year (in thousands):
For the Year Ended
2003 2002
$57,328 $112,673
(b) The provision for income taxes in 2006 was positively impacted by the Tax Increase Prevention and
Reconciliation Act (the “Tax Act”) passed in May 2006, and income tax benefits of $63.0 million related to
tax settlements of ongoing audits with foreign tax authorities and a settlement with a state tax authority for
tax years 1997 and 1998. The provision for income taxes in 2005 was negatively impacted by incremental
tax expense of $107.0 million, resulting from Mattel’s decision to repatriate $2.4 billion in previously
unremitted foreign earnings under the American Jobs Creation Act (the “Jobs Act”), partially offset by
$38.6 million of tax benefit primarily relating to audit settlements with certain tax authorities in both the US
and abroad. The provision for income taxes in 2004 was positively impacted by a $65.1 million tax benefit
related to an audit settlement with the US Internal Revenue Service (“IRS”).
(c) The Consumer Software segment, which was comprised primarily of The Learning Company, Inc.
(“Learning Company”), was reported as a discontinued operation effective March 31, 2000, and the
consolidated financial statements were reclassified to segregate the operating results of the Consumer
Software segment. In 2002, Gores Technology Group completed the sale and liquidation of non-cash
proceeds related to the sales of the education and productivity divisions of the former Learning Company,
Mattel received $43.3 million in cash proceeds from Gores Technology Group and recognized a gain on the
disposal of discontinued operations of $27.3 million, net of taxes of $16.0 million, in the consolidated
statement of operations in 2002.
(d) The cumulative effect of change in accounting principle, net of tax, in 2002, relates to the adoption of
SFAS No. 142, Goodwill and Other Intangible Assets, and an impairment of goodwill upon adoption.
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.”
Overview
Mattel designs, manufactures and markets a broad variety of toy products worldwide through sales to its
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’s portfolio of brands and products are grouped in the following categories:
Mattel Girls & Boys Brands—including Barbie®fashion dolls and accessories (“Barbie®”),
Polly Pocket!™, Pixel Chix™,Winx Club™and Disney Classics (collectively “Other Girls Brands”),
Hot Wheels®, Matchbox®and Tyco®R/C vehicles and playsets (collectively “Wheels”) and Batman™,
CARS™, Superman™, Radica:®products, and games and puzzles (collectively “Entertainment”).
Fisher-Price Brands—including Fisher-Price®, Little People®, BabyGear™and View-Master®
(collectively “Core Fisher-Price®”), Sesame Street®, Dora the Explorer™, Go-Diego-Go!™,
Winnie the Pooh, InteracTV™and See ‘N Say®(collectively “Fisher-Price®Friends”) and
Power Wheels®.
American Girl Brands—including Just Like You™, the historical collection and Bitty Baby®. American
Girl Brands products are sold directly to consumers and its children’s publications are also sold to
certain retailers.
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