Mattel 2007 Annual Report Download - page 48

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International Segment
The following table provides a summary of percentage changes in gross sales within the International
segment in 2006 versus 2005:
Non-US Regions:
% Change in
Gross Sales
Impact of Change in
Currency Rates
(in % pts)
Total International .............................................. 11 2
Europe ................................................... 9 2
Latin America ............................................. 15 1
Asia Pacific ............................................... 10 —
Other .................................................... 12 4
International gross sales increased 11% in 2006 as compared to 2005, including a 2 percentage point benefit
from changes in currency exchange rates. Gross sales of Barbie®decreased 2%, including a 2 percentage point
benefit from changes in currency exchange rates. Gross sales of Other Girls Brands increased 26%, including a
3 percentage point benefit from changes in currency exchange rates, primarily driven by increased sales of
Polly Pocket®, Pixel Chix®and Winx Club™. Gross sales of Wheels products grew by 7%, including a
2 percentage point benefit from changes in currency exchange rates, mainly driven by the success of
Hot Wheels®and Matchbox®products, partially offset by Tyco®R/C sales declines. Gross sales of
Entertainment products increased by 15%, mainly due to strong sales in CARS™and Superman™products,
which more than offset declines in sales of Batman™and Yu-Gi-Oh!™products. Fisher-Price Brands gross sales
increased 20%, including a 2 percentage point benefit from changes in currency exchange rates, due to increased
sales of Core Fisher-Price®products, primarily infant and newborn and BabyGear™products and growth in
Fisher-Price®Friends, mainly Dora the Explorer™and Go-Diego-Go!™properties, and T.M.X.™Elmo from
Sesame Street®. International segment income increased 33% to $419.1 million in 2006, as a result of an increase
in sales volume, improved gross profit and benefits from changes in currency exchange rates. Improved gross
profit resulted from price increases, partially offset by external cost pressures, unfavorable product mix, and
higher royalty costs.
Income Taxes
Mattel’s effective tax rate on income before income taxes in 2007 was 14.7% as compared to 13.3% in
2006. The 2007 income tax provision includes net benefits related to prior years of $42.0 million related to
reassessments of tax exposures based on the status of current audits in various jurisdictions around the
world, including settlements, partially offset by enacted tax law changes. The 2006 income tax provision
includes a benefit of $63.0 million related to settlements with foreign and state tax authorities. Of the total
benefit recorded in 2006, $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 2006
income tax provision was also positively impacted by approximately $37 million as a result of the Tax Act
passed in May 2006.
The 2005 income tax provision includes US federal and state taxes of $107.0 million related to Mattel’s
repatriation of $2.4 billion in qualifying dividends from Mattel’s foreign subsidiaries pursuant to the Jobs Act.
The 2005 effective tax rate also includes a tax benefit of $38.6 million as a result of tax settlements reached with
various tax authorities and reassessments of tax exposures based on the status of current audits in various
jurisdictions around the world.
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