World’s Largest Toy Company Reports Fourth
Consecutive Year of Growth Despite Challenging Quarter at
Retail
Fourth Quarter Highlights
- Worldwide net sales down 6% from the
prior year;
- North American1 gross
sales down 10% and International gross sales were flat to last
year;
- Worldwide gross sales for core
brands: Barbie® down 13%; Hot Wheels® down 8%; Fisher-Price® down
13% and American Girl® up 3%;
- Gross margin increased 20 basis
points of net sales; SG&A decreased 730 basis points of net
sales; SG&A decreased 120 basis points of net sales versus
prior year adjusted SG&A, excluding a litigation charge of
$137.8 million;
- Operating income was $479.3 million
compared to operating income of $373.5 million in the fourth
quarter of 2012, and adjusted operating income of $511.3 million in
the fourth quarter of 2012, excluding the litigation charge;
and
- Earnings per share of $1.07; prior
year earnings per share of $0.87, and prior year adjusted earnings
per share of $1.12, excluding the litigation charge.
Full Year Highlights
- Worldwide net sales up 1% from the
prior year;
- North American gross sales down 2%
and International gross sales up 5%;
- Worldwide gross sales for core
brands: Barbie down 6%; Hot Wheels down 4%; Fisher-Price down 6%;
and American Girl up 11%;
- Gross margin increased 50 basis
points of net sales; SG&A decreased 190 basis points of net
sales; SG&A increased 20 basis points of net sales versus prior
year adjusted SG&A, excluding the litigation charge;
- Operating income was $1.17 billion
compared to operating income of $1.02 billion for the full year
2012, and adjusted operating income of $1.16 billion for the full
year of 2012, excluding the litigation charge; and
- Earnings per share of $2.58; prior
year earnings per share of $2.22, and prior year adjusted earnings
per share of $2.47, excluding the litigation charge.
Capital Deployment
- Board declared 2014 first quarter
cash dividend of $0.38 per share, reflecting an annualized dividend
of $1.52 per share, which represents a 6% increase to last year’s
total dividends; and
- For the 2013 fourth quarter, the
Company repurchased 2.0 million shares of its common stock at a
cost of approximately $83 million, and for the year, the Company
repurchased 11.0 million shares of its common stock at a cost of
approximately $469 million.
Mattel, Inc. (NASDAQ: MAT) today reported 2013 fourth quarter
and full year financial results. For the fourth quarter, the
Company reported net income of $369.2 million, or $1.07 per share,
compared to last year’s fourth quarter net income of $306.5
million, or $0.87 per share, and last year’s fourth quarter
adjusted net income of $393.6 million, or adjusted earnings per
share of $1.12, excluding the impact of the litigation charge
discussed below. For the year, the Company reported net income of
$903.9 million, or $2.58 per share, compared to last year’s net
income of $776.5 million, or $2.22 per share, and last year’s
adjusted net income of $863.6 million, or adjusted earnings per
share of $2.47, excluding the impact of the litigation charge.
“By every account, 2013 was a challenging and transformative
year at retail," said Bryan G. Stockton, Mattel Chairman and Chief
Executive Officer. “Overall, the global toy industry held up pretty
well, but we did not meet our growth expectations for the fourth
quarter, or the full year, mainly driven by weakness in the U.S.
market. That said, Mattel did deliver a fourth consecutive year of
sales and earnings growth. We saw global strength in our girls
portfolio, expanded gross margins, returned nearly $1 billion to
our shareholders and continued to invest in emerging markets like
China and Russia, which experienced significant growth. Looking
ahead, Mattel enters 2014 with the strongest global portfolio of
brands, countries and customers in the toy industry. We must now
effectively execute against our strategy to grow the business and
deliver superior shareholder value.”
Financial Overview
For the fourth quarter, net sales were $2.11 billion, a 6%
decrease from $2.26 billion last year, with no impact from changes
in currency exchange rates. On a regional basis, fourth quarter
gross sales were down 10% in the North American Region, which
consists of the U.S., Canada and American Girl, with no impact from
changes in currency exchange rates. For the International Region,
gross sales were flat to last year, including an unfavorable impact
from changes in currency exchange rates of 1 percentage point.
Operating income for the quarter was $479.3 million, or 22.7% of
net sales. The prior year’s operating income for the quarter was
$373.5 million and adjusted operating income was $511.3 million,
excluding the impact of the litigation charge.
For the year, net sales were $6.48 billion, a 1% increase from
$6.42 billion last year, including an unfavorable impact from
changes in currency exchange rates of 1 percentage point. On a
regional basis, full year gross sales were down 2% in the North
American Region, with no impact from changes in currency exchange
rates. For the International Region, gross sales were up 5%,
including an unfavorable impact from changes in currency exchange
rates of 1 percentage point. Operating income for the year was
$1.17 billion, or 18% of net sales. The prior year’s operating
income was $1.02 billion, and adjusted operating income was $1.16
billion, excluding the impact of the litigation charge.
The Company’s debt-to-total capital ratio of 33.0% is in line
with its capital and investment framework, and its year-end cash
balance was $1.04 billion.
For the year, net cash flows from operating activities were
approximately $698 million, a decrease of $578 million compared
with approximately $1.28 billion in 2012. The decrease is primarily
driven by higher working capital usage, partially offset by higher
net income. Cash flows used for investing activities were
approximately $242 million, a decrease of $658 million, compared to
approximately $900 million in 2012, driven primarily by the prior
year acquisition of HIT Entertainment™. Cash flows used for
financing and other activities were approximately $752 million, an
increase of $343 million, compared with approximately $409 million
in 2012, primarily due to higher share repurchases and higher
repayments of long-term debt, partially offset by net proceeds
received from the issuance of long-term debt.
Capital Deployment
The Company announced today that its Board of Directors declared
a first quarter cash dividend of $0.38 per share on the Company's
common stock, which represents an increase of 6% versus last year’s
dividend of $0.36 per share. The dividend will be payable on March
7, 2014 to stockholders of record on February 20, 2014. For the
fourth quarter 2013, the Company repurchased 2.0 million shares of
its common stock at a cost of approximately $83 million, and for
the year, the Company repurchased 11.0 million shares of its common
stock at a cost of approximately $469 million.
In 2013, Mattel’s dividend will be classified as a non-dividend
distribution for U.S. federal income tax purposes. Although Mattel
has significant retained earnings, these earnings do not constitute
“earnings and profits” as defined in U.S. Federal tax rules.
Non-dividend distributions are considered a return of capital and
are generally not taxable; however, the recipient must adjust their
cost basis to reflect the distribution. For 2013, 100% of the
distribution is a non-dividend distribution. Please visit
http://investor.shareholder.com/mattel/ for more information.
Mattel Girls & Boys Brands
For the fourth quarter, worldwide gross sales for the Mattel
Girls & Boys Brands business unit were $1.35 billion, down 4%
versus a year ago. Worldwide gross sales for the Barbie brand were
down 13% and worldwide gross sales for Other Girls Brands were up
12%, primarily driven by Disney Princess™. Worldwide gross sales
for the Wheels business, which includes the Hot Wheels, Matchbox®
and Tyco R/C® brands, were down 11% for the quarter. Worldwide
gross sales for the Entertainment business, which includes Radica®
and Games, were down 6% for the quarter, driven by lower sales of
Radica and Games, partially offset by the Disney Planes™ movie
property.
For the year, worldwide gross sales for the Mattel Girls &
Boys Brands business unit were $4.32 billion, up 3% versus a year
ago. Worldwide gross sales for the Barbie brand were down 6% for
the year. Worldwide gross sales for Other Girls Brands were up 25%
for the year, primarily driven by Monster High®. Worldwide gross
sales for the Wheels business, which includes the Hot Wheels,
Matchbox and Tyco R/C brands, were down 8% for the year. Worldwide
gross sales for the Entertainment business, including Radica and
Games, were flat for the year, primarily driven by the Disney
Planes movie property, offset by decreases in Radica and Games.
Fisher-Price Brands
For the fourth quarter, worldwide gross sales for the
Fisher-Price Brands business unit, which includes the Fisher-Price
Core, Fisher-Price Friends, and Power Wheels brands, were $647.4
million, down 13% versus the prior year.
For the year, worldwide gross sales for the Fisher-Price Brands
business unit were $2.12 billion, down 6% versus the prior year,
driven by a decline in Fisher-Price Core, partially offset by
strong performance from Thomas & Friends®, Octonauts™ and new
franchises, such as Mike the Knight® and Bubble Guppies™.
American Girl Brands
For the fourth quarter, gross sales for the American Girl Brands
business unit were $331.6 million, up 3% versus the prior year,
primarily driven by Saige, the 2013 Girl of the Year.
For the year, gross sales for the American Girl Brands business
unit were $632.5 million, up 11% versus the prior year.
2012 Litigation Charge
On January 24, 2013, the U.S. Ninth Circuit Court of Appeals
issued a decision on the litigation related to Carter Bryant and
MGA Entertainment, Inc. The Ninth Circuit agreed with Mattel that
the verdict and damages on MGA’s toy fair claims must be reversed,
and directed the District Court to dismiss the claims without
prejudice. The Ninth Circuit’s decision vacated the District
Court’s judgment awarding MGA approximately $172 million,
consisting primarily of compensatory and punitive damages, for the
claims MGA made arising out of conduct at toy fairs. Consistent
with the District Court’s affirmance of the award of fees and costs
against Mattel arising out of the separate copyright claims, Mattel
took a charge of $137.8 million ($87.1 million net of taxes) with
respect to the fourth quarter of 2012 to cover these fees and
costs.
Live Webcast
Mattel will webcast its 2013 fourth quarter and full year
financial results conference call at 8:30 a.m. Eastern time today.
The conference call will be webcast on the "Investors" section of
the Company's corporate website: http://corporate.mattel.com/. To
listen to the live call, log on to the website at least 15 minutes
early to register, download and install any necessary audio
software. An archive of the webcast will be available on the
Company's website for 90 days and may be accessed beginning two
hours after the completion of the live call. A telephonic replay of
the call will be available beginning at 11:30 a.m. Eastern time the
morning of the call until Friday, Feb. 7 at midnight Eastern time
and may be accessed by dialing + 1 (404) 537-3406. The passcode is
29340428.
Presentation slides relating to the conference call, as well as
other financial and statistical information, will be available at
the time of the webcast on the “Investors” section of
http://corporate.mattel.com/, under the sub-headings “Financial
Information” – “Earnings Releases.” Information required by
Securities and Exchange Commission Regulation G regarding non-GAAP
financial measures is set forth in the Exhibits to this press
release.
About Mattel
The Mattel family of companies (Nasdaq: MAT) is the worldwide
leader in the design, manufacture and marketing of toys and family
products. Mattel’s portfolio of best-selling brands includes
Barbie®, the most popular fashion doll ever produced, Hot Wheels®,
Monster High®, American Girl®, Thomas & Friends® and
Fisher-Price® brands, including Little People® and Power Wheels®,
as well as a wide array of entertainment-inspired toy lines. In
2013, Mattel was named one of the "World's Most Ethical Companies"
by Ethisphere Magazine and is also ranked No. 2 on Corporate
Responsibility Magazine's "100 Best Corporate Citizens" list. With
worldwide headquarters in El Segundo, Calif., Mattel’s companies
employ nearly 30,000 people in 40 countries and territories and
sell products in more than 150 nations. At Mattel, we are Creating
the Future of Play. Visit us at www.mattel.com,
www.facebook.com/mattel or www.twitter.com/mattel.
Note: This press release contains forward-looking statements on
a variety of matters, including without limitation, the Company’s
expected quarterly cash dividend payments in 2014. These
forward-looking statements are based on currently available
operating, financial, economic and other information and are
subject to a number of significant risks and uncertainties. A
variety of factors, many of which are beyond our control, could
cause actual future results to differ materially from those
projected in the forward-looking statements. Some of these factors
are described in the Company's periodic filings with the Securities
and Exchange Commission, including the "Risk Factors" section of
Mattel's Annual Report on Form 10-K for the fiscal year ended
December 31, 2012 and Mattel's Quarterly Reports on Form 10-Q for
fiscal year 2013, as well as in Mattel's other public statements.
Mattel does not update forward-looking statements and expressly
disclaims any obligation to do so.
MAT-FIN
1 Consists of the North America Division (U.S. & Canada) and
American Girl
MATTEL, INC. AND SUBSIDIARIES
EXHIBIT I
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES
(In millions,
except per share and percentage information)
For the Three Months Ended December 31,
2013 As Reported vs.
2013 As Reported vs. 2013 2012 2012 As
Reported 2012 Adjusted Impact of
Litigation Yr/Yr Yr/Yr Yr/Yr
Yr/Yr As Reported Charge
Adjusted
$ Change
% Change
$ Change
% Change $ Amt % Net Sales $ Amt %
Net Sales $ Amt $ Amt % Net
Sales Net Sales $ 2,113.2 $ 2,255.9 $ -
$
2,255.9 $ (142.7 ) -6 %
$
(142.7 ) -6 % Cost of sales 962.4 45.5 % 1,030.0 45.7
% - 1,030.0 45.7 % (67.6 ) -7 % (67.6 ) -7 %
Gross Profit 1,150.8 54.5 % 1,225.9 54.3 % - 1,225.9 54.3 %
(75.1 ) -6 % (75.1 ) -6 % Advertising and promotion expenses 282.9
13.4 % 272.8 12.1 % - 272.8 12.1 % 10.1 4 % 10.1 4 % Other selling
and administrative expenses 388.6 18.4 % 579.6 25.7 % 137.8 441.8
19.6 % (191.0 ) -33 % (53.2 ) -12 %
Operating Income 479.3 22.7 % 373.5
16.6 % (137.8 ) 511.3 22.7 % 105.8 28 % (32.0 ) -6 % Interest
expense 20.3 1.0 % 23.5 1.0 % - 23.5 1.0 % (3.2 ) -13 % (3.2 ) -13
% Interest (income) (1.5 ) -0.1 % (1.7 ) -0.1 % - (1.7 ) -0.1 % 0.2
-13 % 0.2 -13 % Other non-operating (income), net (1.4 ) (5.0 ) -
(5.0 ) 3.6 3.6
Income Before Income
Taxes 461.9 21.9 % 356.7 15.8 % (137.8 ) 494.5 21.9 % 105.2 30
% (32.6 ) -7 % Provision for income taxes 92.7 50.2
(50.7 ) 100.9 42.5 85 % (8.2 ) -8 %
Net
Income $ 369.2 17.5 % $ 306.5 13.6 % $ (87.1 )
$
393.6 17.4 % $ 62.7 20 %
$
(24.4 ) -6 %
Net Income Per Common Share - Basic $
1.08 $ 0.88 $ (0.25 )
$
1.13 Weighted average number of common shares
339.4 343.6 - 343.6
Net Income Per Common Share - Diluted $ 1.07 $ 0.87
$ (0.25 )
$
1.12 Weighted average number of common and potential
common shares 343.2 348.4 - 348.4
MATTEL, INC. AND SUBSIDIARIES
EXHIBIT II
CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited) RECONCILIATION OF NON-GAAP TO GAAP
FINANCIAL MEASURES
(In millions,
except per share and percentage information)
For the Year Ended December 31, 2013 As Reported
vs. 2013 As Reported vs. 2013 2012 2012
As Reported 2012 Adjusted Impact of
Litigation Yr/Yr Yr/Yr Yr/Yr
Yr/Yr As Reported Charge
Adjusted
$ Change
% Change
$ Change
% Change $ Amt % Net Sales $ Amt %
Net Sales $ Amt $ Amt % Net Sales
Net Sales $ 6,484.9 $ 6,420.9 $ -
$
6,420.9 $ 64.0 1 % $ 64.0 1 % Cost of sales 3,006.0 46.4 %
3,011.7 46.9 % - 3,011.7 46.9 % (5.7 ) 0 %
(5.7 ) 0 %
Gross Profit 3,478.9 53.6 % 3,409.2 53.1 %
- 3,409.2 53.1 % 69.7 2 % 69.7 2 % Advertising and promotion
expenses 750.2 11.6 % 717.8 11.2 % - 717.8 11.2 % 32.4 5 % 32.4 5 %
Other selling and administrative expenses 1,560.6 24.1 % 1,670.4
26.0 % 137.8 1,532.6 23.9 % (109.8 ) -7 % 28.0 2 %
Operating Income 1,168.1 18.0 %
1,021.0 15.9 % (137.8 ) 1,158.8 18.0 % 147.1 14 % 9.3 1 % Interest
expense 78.5 1.2 % 88.8 1.4 % - 88.8 1.4 % (10.3 ) -12 % (10.3 )
-12 % Interest (income) (5.6 ) -0.1 % (6.8 ) -0.1 % - (6.8 ) -0.1 %
1.2 -19 % 1.2 -19 % Other non-operating (income), net (3.9 ) (6.0 )
- (6.0 ) 2.1 2.1
Income Before
Income Taxes 1,099.1 16.9 % 945.0 14.7 % (137.8 ) 1,082.8 16.9
% 154.1 16 % 16.3 2 % Provision for income taxes 195.2 168.5
(50.7 ) 219.2 26.7 16 % (24.0 ) -11 %
Net Income $ 903.9 13.9 % $ 776.5 12.1 % $
(87.1 )
$
863.6 13.4 % $ 127.4 16 % $ 40.3 5 %
Net Income Per Common Share - Basic $ 2.61 $ 2.25
$ (0.25 )
$
2.50 Weighted average number of common shares
343.4 341.7 - 341.7
Net Income Per Common Share - Diluted $ 2.58 $ 2.22
$ (0.25 ) $ 2.47 Weighted average number of
common and potential common shares 347.5 346.2 -
346.2
MATTEL, INC. AND SUBSIDIARIES
EXHIBIT III WORLDWIDE GROSS SALES
INFORMATION (Unaudited) Three Months Ended December
31, Year Ended December 31, (In
millions, except percentage information)
2013 2012 2013
2012
Worldwide Gross
Sales:
Mattel Girls & Boys Brands $ 1,350.6 $ 1,411.5 $ 4,315.9 $
4,186.6 % Change -4 % 5 % 3 % 2 % Pos./(Neg.) Impact of Currency
(in % pts) 0 -1 -1 -3 Fisher-Price Brands 647.4 744.5
2,120.7 2,252.3 % Change -13 % 6 % -6 % 4 % Pos./(Neg.) Impact of
Currency (in % pts) 0 -1 -1 -2 American Girl Brands 331.6
320.8 632.5 567.5 % Change 3 % 13 % 11 % 11 % Other
19.3 18.2 48.7 46.2
Gross Sales $ 2,348.9 $ 2,495.0 $
7,117.8 $ 7,052.6 % Change -6 % 6 % 1 % 3 %
Pos./(Neg.) Impact of Currency (in % pts) -1 -1 0 -3
Reconciliation of
Non-GAAP to GAAP Financial Measure:
Gross Sales $ 2,348.9 $ 2,495.0 $ 7,117.8 $ 7,052.6 Sales
Adjustments (235.7 ) (239.1 ) (632.9 )
(631.7 ) Net Sales $ 2,113.2 $ 2,255.9 $
6,484.9 $ 6,420.9 % Change -6 % 5 % 1 % 2 %
Pos./(Neg.) Impact of Currency (in % pts) 0 -1 -1 -2
MATTEL, INC. AND SUBSIDIARIES
EXHIBIT IV CONDENSED CONSOLIDATED BALANCE
SHEETS At December 31, 2013 2012
(In
millions)
(Unaudited) Assets Cash and equivalents
$ 1,039.2 $ 1,335.7 Accounts receivable, net 1,260.1 1,226.8
Inventories 568.8 465.1 Prepaid expenses and other current assets
509.9 529.2 Total current assets
3,378.0 3,556.8 Property, plant, and equipment, net 659.3
593.2 Other noncurrent assets 2,402.3 2,376.8
Total Assets $ 6,439.6 $ 6,526.8
Liabilities and Stockholders' Equity
Short-term borrowings $ 4.3 $ 9.8 Current portion of long-term debt
- 400.0 Accounts payable and accrued liabilities 1,015.4 1,273.2
Income taxes payable 27.7 33.0 Total
current liabilities 1,047.4 1,716.0 Long-term debt 1,600.0
1,100.0 Other noncurrent liabilities 540.6 643.8 Stockholders'
equity 3,251.6 3,067.0
Total
Liabilities and Stockholders' Equity $ 6,439.6 $
6,526.8
SUPPLEMENTAL BALANCE SHEET
AND CASH FLOW DATA (Unaudited) At December 31,
(In millions,
except days and percentage information)
2013 2012
Key Balance Sheet
Data:
Accounts receivable, net days of sales outstanding (DSO) 54 49
Total debt outstanding $ 1,604.3 $ 1,509.8 Total debt-to-total
capital ratio 33.0 % 33.0 %
Year Ended December 31,
(In
millions)
2013 (a)
2012
Condensed Cash
Flow Data:
Cash flows from operating activities $ 698 $ 1,276 Cash
flows (used for) investing activities (242 ) (900 ) Cash
flows (used for) financing activities and other (752 )
(409 ) Decrease in cash and equivalents $ (296 ) $
(33 ) (a) Amounts shown are preliminary estimates. Actual
amounts will be reported in Mattel's Annual Report on Form 10-K for
the year ended December 31, 2013.
MATTEL, INC. AND
SUBSIDIARIES
EXHIBIT V
COMPUTATION OF INCOME PER
COMMON AND POTENTIAL COMMON SHARE (Unaudited) RECONCILIATION
OF NON-GAAP TO GAAP FINANCIAL MEASURES For the Three
Months Ended For the Year Ended December 31, 2012
December 31, 2012 Impact of Impact of
Litigation Litigation As Reported
Charge Adjusted As Reported Charge
Adjusted (In millions, except per share amounts)
(In millions, except per share amounts)
BASIC
Net income $ 306.5 $ (87.1 ) $ 393.6 $ 776.5 $ (87.1 ) $
863.6 Less net income allocable to participating RSUs (3.2 )
0.9 (4.1 ) (7.8 ) 0.9
(8.7 ) Net income available for basic common shares $ 303.3
$ (86.2 ) $ 389.5 $ 768.7 $ (86.2 ) $ 854.9
Weighted average common shares outstanding 343.6
- 343.6 341.7
- 341.7
Basic Net Income Per Common
Share $ 0.88 $ (0.25 ) $ 1.13 $ 2.25 $
(0.25 ) $ 2.50
DILUTED
Net income $ 306.5 $ (87.1 ) $ 393.6 $ 776.5 $ (87.1 ) $
863.6 Less net income allocable to participating RSUs (3.2 )
0.9 (4.0 ) (7.7 ) 0.9
(8.6 ) Net income available for diluted common shares $
303.3 $ (86.2 ) $ 389.6 $ 768.8 $ (86.2 ) $
855.0 Weighted average common shares outstanding 343.6 -
343.6 341.7 - 341.7 Weighted average common equivalent shares
arising from: Dilutive stock options and non-participating RSUs
4.8 - 4.8 4.5
- 4.5 Weighted average number of
common and potential common shares 348.4 -
348.4 346.2 -
346.2
Diluted Net Income Per Common Share $
0.87 $ (0.25 ) $ 1.12 $ 2.22 $ (0.25 ) $ 2.47
Mattel, Inc.News MediaDallas
Lawrence310-252-6397Press@mattel.comorSecurities
AnalystsDrew Vollero310-252-2703Drew.Vollero@mattel.com
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