Mattel 2010 Annual Report Download - page 5

Chairman of the Board
and Chief Executive Offi cer
15 and 20 percent. Earnings per
share grew 28 percent to $1.86.
We also performed well in
the marketplace; sales of our
products at retail grew nicely.
Our toys – from Barbie® and
Ken®, the stars of Disney Pixar’s
Toy Stor y®3, and toy-of-the-year
Sing-a-ma-jigs™ by Fisher-Price
to the sold out Monster High®
– were well represented on
holiday “must have” toy lists and,
most importantly, on children’s
wish lists around the world.
We generated signifi cant cash
flow, which we deployed to
create value for our shareholders
by increasing the annual dividend
to 83 cents per share – up
11 percent, and by repurchasing
18.6 million of our shares. In total,
we returned about $700 million
to shareholders in 2010. And,
earlier this year, your Board of
Directors announced another
increase in the dividend and
began paying it quarterly.
For 2011 and beyond, I want
to frame our performance and
future expectations around the
concept of Total Shareholder
Return, or TSR. TSR is the
combination of share price
appreciation and dividend payout,
driven by three key factors:
profi t growth; price/earnings
(P/E) multiple; and cash yield.
Let me walk you through the
drivers of our TSR performance
during the last decade and how
delivering on our strategic priorities
and long-term goals should enable
us to build consistent, superior
value for you, our shareholders.
Over the last 10 years, Mattel has
delivered 9 percent annual TSR,
consistent with the top third of
S&P 500 performance.
(The S&P 500 index TSR was less
than 2 percent.) Mattel’s 9 percent
TSR was driven by 5 percent profi t
growth and 7 percent free cash fl ow
yield, partially offset by a 3 percent
reduction in the P/E multiple.
In the most recent fi ve-year period,
Mattel delivered 14 percent TSR,
driven by 6 percent profi t growth,
free cash flow yield of about
6 percent, and an increase in the
P/E of about 2 percent. This
performance places us in the
90th percentile of the S&P 500.
Our TSR performance in the last
three-year period was very
similar, but slightly better at
15 percent.
Our objective going forward is
to consistently outperform the
S&P 500 benchmark and deliver
top third to top quartile
Total Shareholder Return.
Management’s compensation
is well aligned with this goal.
Every year you have
come to expect a word
or phrase that becomes
our rallying cry for the
year ahead. This year
that word is “Accelerate.”
As we look to 2011 and beyond,
we have three overarching global
strategic priorities, all designed
to accelerate our performance:
Deliver CONSISTENT growth
by continuing the momentum in
our core brands, by optimizing
entertainment partnerships,
building new franchises, and
working to expand and leverage
our international footprint;
BUILD on the progress we
made on improving our operating
margins through at least sustaining
the gross margin and delivering
another round of cost savings; and
Generate signifi cant CASH
FLOW and continue our
disciplined, opportunistic and
value-enhancing deployment.
To further align Mattel’s senior
leadership team with the
company’s global strategic
priorities, at the start of the year,
we announced the appointment
of Bryan Stockton, Mattel’s
former President of International,
to the newly created position of
Chief Operating Offi cer. Bryan
now oversees all the day-to-day
operations of the business.
I am confi dent the offi ce of
COO will bring focus to help
accelerate innovation and growth
across brands and markets,
and further leverage our scale
and global structure as the
world’s largest toy company.
Our fundamentals are strong,
our management experienced
and we are keenly focused on
top tier TSR performance for
our owners. While it’s been a
fun and productive decade at
Mattel, I’m confi dent that our
best days are yet to come.