Mattel 2009 Annual Report Download - page 39

Advertising and Promotion Expenses
Advertising and promotion expenses decreased to 11.2% of net sales in 2009, from 12.2% of net sales in
2008, due primarily to lower than expected sales volume in 2008 and savings of approximately $14 million
related to Mattel’s Global Cost Leadership program.
Other Selling and Administrative Expenses
Other selling and administrative expenses were $1.37 billion in 2009, or 25.3% of net sales in 2009 as
compared to $1.42 billion in 2008, or 24.1% of net sales. The dollar decrease in other selling and administrative
expenses was primarily due to incremental year-over-year savings related to the Global Cost Leadership program
(approximately $88 million in gross savings along with approximately $3 million of lower severance in 2009),
the impact of foreign currency exchange benefits, and lower litigation and legal settlement-related costs of
approximately $27 million, partially offset by higher incentive compensation expense of approximately $81
million and higher equity compensation expense of approximately $14 million.
Non-Operating Items
Interest expense was $71.8 million in 2009 as compared to $81.9 million in 2008, due primarily to lower
average borrowings and lower average interest rates. Interest income decreased from $25.0 million in 2008 to
$8.1 million in 2009 due to lower average interest rates on lower average cash balances. Other non-operating
expense was $7.4 million in 2009 as compared to other non-operating income of $3.1 million in 2008. The
change in other non-operating income/expense relates primarily to foreign currency exchange gains and losses,
largely caused by revaluations of US dollar cash balances held by Mattel’s Venezuelan subsidiary.
Provision for Income Taxes
Mattel’s effective tax rate on income before income taxes in 2009 was 19.9% as compared to 22.2% in
2008. The 2009 income tax provision includes net tax benefits of $28.8 million related to reassessments of prior
years’ tax exposures based on the status of current audits in various jurisdictions around the world, settlements,
and enacted law changes.
Operating Segment Results
Mattel’s operating segments are separately managed business units and are divided on a geographic basis
between domestic and international. The Domestic segment is further divided into Mattel Girls & Boys Brands
US, Fisher-Price Brands US and American Girl Brands. Operating segment results should be read in conjunction
with Item 8 “Financial Statements and Supplementary Data—Note 15 to the Consolidated Financial
Statements—Segment Information.”
Domestic Segment
Mattel Girls & Boys Brands US gross sales decreased 2% in 2009 as compared to 2008. Within this
segment, gross sales of Barbie®increased 4% and gross sales of Other Girls Brands decreased 11%, primarily
driven by lower sales of High School Musical®products. Gross sales of Wheels products increased 1%, primarily
due to higher sales of Core Hot Wheels®and Matchbox®products, partially offset by sales declines in
Speed Racer®and Tyco R/C®products. Gross sales of Entertainment products decreased 7%, primarily driven by
lower sales of Radica®products and products tied to last year’s three key summer movie properties: Batman®,
Speed Racer®, and Kung Fu Panda®, partially offset by sales of products tied to Toy Story®and Toy Story®2
and higher sales of CARS™ products. Mattel Girls & Boys Brands US segment income increased 85% to
$293.4 million in 2009 from $158.2 million in 2008, primarily driven by higher gross profit and lower other
selling and administrative expenses.
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