Mattel 2012 Annual Report Download - page 42

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Business Segment Results
Effective January 1, 2012, Mattel modified its organizational structure, which resulted in changes to its
operating segments. The new operating segments are: (i) North America, (ii) International, and (iii) American
Girl. The North America and International segments sell products in the Mattel Girls & Boys Brands and Fisher-
Price Brands categories, although some are developed and adapted for particular international markets. Prior
period amounts have been reclassified to conform to the current year presentation. Business segment results
should be read in conjunction with Item 8 “Financial Statements and Supplementary Data—Note 12 to the
Consolidated Financial Statements—Segment Information.”
North America Segment
Gross sales for the North America segment were $3.33 billion in 2012, up $33.2 million or 1%, as compared
to $3.30 billion in 2011, with no impact from changes in currency exchange rates, driven primarily by higher
sales of Monster High and Fisher-Price Friends products, partially offset by lower sales of CARS 2 products,
resulting from the timing of the movie release during 2011. Gross sales of Mattel Girls & Boys Brands were flat
compared to 2011. Gross sales of Barbie decreased 4%. Gross sales of Other Girls products increased 47%,
driven primarily by higher sales of Monster High products. Gross sales of Wheels products increased 3%, driven
by higher sales of Hot Wheels products. Gross sales of Entertainment products decreased 24%, driven primarily
by lower sales of CARS 2 products, partially offset by higher sales of Batman products and higher sales of Angry
Birds games products. Gross sales of Fisher-Price Brands increased 2%. Gross sales of Core Fisher-Price
products decreased 7%. Gross sales of Fisher-Price Friends products increased 38%, driven primarily by the
benefit of licensing revenues from the acquisition of HIT Entertainment and higher sales of Disney’s Jake and
the Never Land Pirates products. Cost of sales decreased 4% in 2012, as compared to flat net sales, driven
primarily by lower product and other costs and lower royalty expenses, partially offset by higher freight and
logistics expenses. Gross margins increased as a result of favorable product mix, including lower sales of royalty-
related entertainment properties, savings from manufacturing efficiency and Operational Excellence 2.0
programs, and price increases partially offset by higher input costs and higher customer benefits. Additionally,
gross margins were positively impacted by the acquisition of HIT Entertainment.
North America segment income increased by 5% to $810.3 million in 2012, as compared to $770.3 million
in 2011, driven primarily by higher gross margins, partially offset by higher other selling and administrative
expenses, primarily related to HIT Entertainment’s ongoing other selling and administrative expenses, higher
employee-related expenses, and investments in strategic initiatives.
International Segment
The following table provides a summary of percentage changes in gross sales within the International
segment in 2012 versus 2011:
% Change in
Gross Sales
Impact of Change in
Currency Rates
(in % pts)
Total International ................................................. 4 –6
Europe ...................................................... 4 –6
Latin America ................................................ 2 –7
Asia Pacific .................................................. 13 –2
Gross sales for the International segment were $3.13 billion in 2012, up $124.4 million or 4%, as compared
to $3.00 billion in 2011, with unfavorable changes in currency exchange rates of 6 percentage points. Gross sales
of Mattel Girls & Boys Brands increased 3%, with unfavorable changes in currency exchange rates of 6
percentage points. Gross sales of Barbie decreased 3%, with unfavorable changes in currency exchange rates of 6
percentage points. Gross sales of Other Girls Brands increased 66%, with unfavorable changes in currency
exchange rates of 8 percentage points, driven primarily by higher sales of Monster High and Disney Princess
products. Gross sales of Wheels products decreased 2%, with unfavorable changes in currency exchange rates of
30