Mattel 2011 Annual Report Download - page 39

2012 and Beyond
In 2012, Mattel will continue to work to deliver consistent growth and financial performance by executing
against its existing strategies through: (i) capitalizing on Fisher-Price’s global opportunity, (ii) integrating HIT
Entertainment, which was acquired in February 2012, into Mattel (iii) optimizing its entertainment partnerships
(which for 2012 include Brave™and Batman®), (iv) continuing to accelerate growth in Monster High®,
(v) creating new franchises, (vi) expanding into new toy categories, and (vii) continuing to expand its
international footprint. In 2012, Mattel is implementing a change to its organizational structure to include a North
America division and global brand teams. This new structure recognizes the opportunity to move decision-
making for the US business closer to its retail customers and its toy consumers. Additionally, it gives Mattel’s
brand teams the ability to approach the business and creative process more globally, recognizing the growth
outside the US. In addition, Mattel plans to deliver another year of cost savings through its Operational
Excellence 2.0 initiatives.
Results of Operations
2011 Compared to 2010
Consolidated Results
Net sales for 2011 were $6.27 billion, a 7% increase, as compared to $5.86 billion in 2010, with favorable
changes in currency exchange rates of 1 percentage point. Net income for 2011 was $768.5 million, or $2.18 per
diluted share, as compared to net income of $684.9 million, or $1.86 per diluted share, in 2010. As compared to
2010, net income for 2011 was positively impacted by higher net sales and higher operating income, partially
offset by a higher effective tax rate, higher interest expense, and higher other non-operating expense.
Gross profit as a percentage of net sales decreased to 50.2% in 2011 from 50.5% in 2010. The decrease in
gross profit as a percentage of net sales was driven primarily by higher product costs, higher royalty expenses as
a result of increased sales of products tied to licensed properties, and unfavorable changes in foreign currency
exchange rates, partially offset by price increases and net cost savings from Mattel’s Operational Excellence 2.0
initiatives.
The following table provides a summary of Mattel’s consolidated results for 2011 and 2010 (in millions,
except percentage and basis point information):
For the Year Year/Year
Change2011 2010
Amount
% of Net
Sales Amount
% of Net
Sales %
Basis Points
of Net Sales
Net sales ................................... $6,266.0 100.0% $5,856.2 100.0% 7%
Gross profit ................................ $3,145.8 50.2% $2,955.0 50.5% 6% (30)
Advertising and promotion expenses ............. 699.2 11.2 647.3 11.1 8% 10
Other selling and administrative expenses ......... 1,405.5 22.4 1,405.8 24.0 0% (160)
Operating income ............................ 1,041.1 16.6 901.9 15.4 15% 120
Interest expense ............................. 75.3 1.2 64.8 1.1 16% 10
Interest (income) ............................ (8.1) –0.1 (8.4) –0.1 –4% –
Other non-operating expense (income), net ........ 3.2 (1.3)
Income before income taxes ................... $ 970.7 15.5% $ 846.8 14.5% 15% 100
Sales
Net sales for 2011 were $6.27 billion, a 7% increase, as compared to $5.86 billion in 2010, with favorable
changes in currency exchange rates of 1 percentage point. Gross sales within the US increased 3% in 2011, as
compared to 2010, and accounted for 52% of consolidated gross sales in 2011, as compared to 54% of
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