Mattel 2008 Annual Report Download - page 39

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International Segment
The following table provides a summary of percentage changes in gross sales within the International
segment in 2007 versus 2006:
Non-US Regions:
% Change in
Gross Sales
Impact of Change in
Currency Rates
(in % pts)
Total International ................................................. 17 7
Europe ...................................................... 16 9
Latin America ................................................ 23 5
Asia Pacific .................................................. 15 7
Other ....................................................... 3 6
International gross sales increased 17% in 2007 as compared to 2006, including a 7 percentage point benefit
from changes in currency exchange rates. Gross sales of Barbie®increased 12%, including an 8 percentage point
benefit from changes in currency exchange rates, primarily due to higher sales of Barbie®Reality and Barbie®
Collector products. Gross sales of Other Girls Brands increased 4%, including a 7 percentage point benefit from
changes in currency exchange rates, primarily driven by increased sales of Little Mommy®and Polly Pocket®,
partially offset by declines in Winx Club®and Pixel Chix®. Gross sales of Wheels products grew by 24%,
including a 7 percentage point benefit from changes in currency exchange rates, reflecting growth in
Hot Wheels®and Matchbox®. Gross sales of Entertainment products increased by 31%, including a 9 percentage
point benefit from changes in currency exchange rates, primarily driven by strong sales of CARS™products and
the inclusion of Radica®sales, partially offset by sales declines of Superman®products. Fisher-Price Brands
gross sales increased 17%, including a 7 percentage point benefit from changes in currency exchange rates, due
to higher sales of Core Fisher-Price®products, primarily infant, preschool, BabyGear™, newborn, and learning
products, partially offset by sales declines of Fisher-Price®Friends products. International segment income was
relatively flat with prior year at $420.9 million, primarily due to increased sales volume, offset by higher other
selling and administrative expenses and the impact of the 2007 Product Recalls, which decreased International
segment operating income by approximately $47 million.
Global Cost Leadership Program
During the middle of 2008, Mattel initiated its Global Cost Leadership program, which is designed to
improve operating efficiencies and leverage Mattel’s global scale to improve profitability and operating cash
flows. Mattel’s Global Cost Leadership program is intended to generate approximately $90 million to $100
million of net cost savings in 2009, and approximately $180 million to $200 million of cumulative net cost
savings by the end of 2010. The major initiatives included in Mattel’s Global Cost Leadership program include:
• A global reduction in Mattel’s professional workforce of approximately 1,000 people that was
implemented in November 2008.
• A coordinated efficiency strategic plan that includes structural changes designed to lower costs and
improve efficiencies; for example, offshoring and outsourcing certain back office functions, and more
clustering of management for international markets.
• Additional procurement initiatives designed to fully leverage Mattel’s global scale in areas such as
creative agency partnerships, legal services, and distribution, including ocean carriers and over-the-road
freight vendors.
The workforce reduction is expected to generate approximately $60 million in annualized compensation-
related savings. In connection with the workforce reduction, Mattel recorded severance and other termination-
related charges in 2008 of approximately $34 million.
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