Mattel 2009 Annual Report Download - page 41

positively impacted by net tax benefits of $42.0 million as a result of 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.
Gross profit, as a percentage of net sales, decreased to 45.4% in 2008 from 46.5% in 2007. The decrease in
gross profit was primarily due to higher product costs driven by higher commodities, labor, and product testing
costs, along with appreciating Asian currencies (collectively, “input costs”), higher costs of distribution, and mix,
partially offset by the benefit of price increases, favorable changes in currency exchange rates, and lower product
recall costs as compared to 2007.
Income before income taxes as a percentage of net sales declined to 8.2% in 2008 from 11.8% in 2007.
Contributing to this decline were lower gross margins, higher advertising and promotion expenses, and higher
other selling and administrative expenses, which were all impacted by lower sales. The increase in other selling
and administrative expense in 2008 was primarily due to incremental legal and settlement related costs of
approximately $52 million, the impact of foreign exchange rates, and higher bad debt expense. Additionally,
interest expense increased in 2008 due to higher average borrowings, partially offset by lower average interest
rates and interest income decreased in 2008 due to lower average interest rates, partially offset by higher average
invested cash balances.
The following table provides a summary of Mattel’s consolidated results for 2008 and 2007 (in millions,
except percentage and basis point information):
For the Year
2008 2007 Year/Year Change
Amount
% of Net
Sales Amount
% of Net
Sales %
Basis Points
of Net Sales
Net sales .................................. $5,918.0 100.0% $5,970.1 100.0% –1%
Gross profit ................................ $2,684.4 45.4% $2,777.3 46.5% –3% (110)
Advertising and promotion expenses ............ 719.2 12.2 708.8 11.9 1% 30
Other selling and administrative expenses ........ 1,423.4 24.1 1,338.4 22.4 6% 170
Operating income ........................... 541.8 9.2 730.1 12.2 –26% (300)
Interest expense ............................ 81.9 1.4 71.0 1.2 15% 20
Interest (income) ........................... (25.0) –0.4 (33.3) –0.6 –25% 20
Other non-operating (income), net .............. (3.1) (11.0)
Income before income taxes ................... $ 488.0 8.2% $ 703.4 11.8% –31% (360)
Sales
Net sales for 2008 were $5.92 billion, a 1% decrease as compared to $5.97 billion in 2007, with no impact
from changes in currency exchange rates. Gross sales within the US decreased 2% from 2007, and accounted for
51% of consolidated gross sales in both 2008 and 2007. Gross sales in international markets decreased 1% as
compared to 2007, including a 1 percentage point benefit from changes in currency exchange rates.
Worldwide gross sales of Mattel Girls & Boys Brands decreased 2% to $3.64 billion in 2008 as compared to
2007, with no impact from changes in currency exchange rates. Domestic gross sales of Mattel Girls & Boys
Brands decreased 1% and international gross sales of Mattel Girls & Boys Brands decreased 2%, including a 2
percentage point benefit from changes in currency exchange rates. Worldwide gross sales of Barbie®decreased
9%, with no impact from changes in currency exchange rates. Domestic gross sales of Barbie®decreased 7%,
primarily driven by sales declines in Barbie Girls®MP3 Player and Barbie®Collector products, partially offset
by increased sales in Barbie®Fantasy products. International gross sales of Barbie®decreased 9%, including a 2
percentage point benefit from changes in currency exchange rates, primarily driven by sales declines of Barbie®
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