Mattel 2006 Annual Report Download - page 43

Fisher-Price Brands US gross sales increased 3%, reflecting an increase in sales of Fisher-Price®Friends,
driven by the continued success of the Dora the Explorer™property. Sales increases in Fisher-Price®Friends
were partially offset by a decrease in sales of Power Wheels®and a decrease in sales of Core Fisher Price®
products, which included strong sales of infant and BabyGear™lines. Fisher-Price Brands US segment income
was $173.0 million in 2005, which was flat compared to 2004, primarily due to higher sales volume offset by
higher employee-related costs, additional investment in product design and development, and ongoing external
cost pressures.
American Girl Brands gross sales increased 15%, primarily as a result of the continued strong 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 income increased 37% to $106.2 million in
2005, driven by higher sales volume, improved gross profit, and tight management of costs.
International Segment
The following table provides a summary of percentage changes in gross sales within the International
segment in 2005 versus 2004:
Non-US Regions:
% Change in
Gross Sales
Impact of Change in
Currency Rates
(in % pts)
Europe .......................................................... — (1)
Latin America .................................................... 23 8
Asia Pacific ...................................................... 7 2
Other ........................................................... (3) 5
Total International ................................................. 5 1
International gross sales increased 5% in 2005 compared to 2004, including a 1 percentage point benefit
from changes in currency exchange rates. Gross sales of Barbie®decreased 7%, including a 1 percentage point
benefit from changes in currency exchange rates and gross sales of Other Girls Brands increased double-digits,
including a 2 percentage point benefit from changes in currency exchange rates, primarily driven by increased
sales of Disney Princesses, Pound Puppies™and Winx Club™. Gross sales in the Wheels category grew by mid
single-digits in 2005 compared to 2004, mainly due to growth in sales of Hot Wheels®products. Gross sales in
the Entertainment category increased by double-digits in 2005 compared to 2004, primarily due to strong sales in
the male-action properties including Batman™, Robots™and MegaMan™, partially offset by declines in
Harry Potter™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 Explorer™
properties. International segment income increased 6% to $316.2 million in 2005, as a result of an increase in
sales volume, benefits from changes in currency exchange rates and a modest price increase, partially offset by
increased external cost pressures, higher employee-related costs and investments in emerging international
markets.
Income Taxes
Mattel’s effective tax rate on income before income taxes in 2006 was 13.3% compared to 36.0% in 2005.
The 2006 income tax provision includes a tax benefit $63.0 million related to settlements with foreign and state
taxing authorities. Of the total benefit recorded, $57.5 million represents refunds of previously paid taxes,
recorded as an expense in previous years. These refunds were recorded as a reduction to income tax expense in
the period the refunds were received by Mattel. The balance of the tax benefit recorded in 2006 was a net
reduction to total income tax reserves resulting from tax settlements with foreign and state tax authorities. The
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