Company Completes MEGA Brands Acquisition;
Declares Quarterly Dividend
Second Quarter Highlights
- Worldwide net sales down
9%;
- North American Region1
gross sales down 8% and International Region gross sales down
9%;
- Worldwide gross sales by core
brands: Barbie® down 15%; Hot Wheels® down 2%;
Fisher-Price® down 17% and American Girl® up
6%;
- Gross margin decreased 490 basis
points of net sales, partially due to MEGA® Brands;
- SG&A increased 340 basis points
of net sales, including the impact of MEGA Brands;
- Operating income of $1.0 million
compared to operating income of $94.8 million in the second quarter
of 2013; and
- Earnings per share of $0.08
(includes tax benefit of $0.11 per share and a negative impact of
$0.06 per share of MEGA Brands acquisition and integration
costs2) vs. prior year earnings per share of
$0.21.
Capital Deployment
- Board declared 2014 third quarter
cash dividend of $0.38 per share, reflecting an annualized dividend
of $1.52 per share;
- The Company acquired MEGA Brands for
approximately $423 million, net of cash acquired; and
- The Company repurchased 2.6 million
shares of its common stock during the second quarter at a cost of
approximately $100 million.
Mattel, Inc. (NASDAQ: MAT) today reported 2014 second quarter
financial results. For the quarter, the Company reported net income
of $28.3 million, or $0.08 per share, which includes a tax benefit
of $0.11 per share and a negative impact of $0.06 per share of MEGA
Brands acquisition and integration costs2, compared to last year’s
second quarter net income of $73.3 million, or $0.21 per share.
“In the second quarter, we made significant progress across a
number of initiatives to better position Mattel in the second half
of the year and beyond," said Bryan G. Stockton, Mattel Chairman
and Chief Executive Officer. “For example, we completed the
acquisition of MEGA Brands, reduced inventories, strengthened our
management team, shifted marketing spend to the back half of the
year, and exercised strong controls on SG&A expenses. And while
results for the quarter did not meet our expectations, we did see
improving POS trends. As we move into the second half of the year
and the all-important holiday season, we need to drive POS higher
by bringing innovative products to market, making additional
advertising investments and optimizing the effectiveness of our
marketing spend.”
Financial Overview
For the quarter, net sales were $1.06 billion, down 9% compared
to $1.17 billion last year. On a regional basis, second quarter
gross sales decreased 8% in the North American Region, which
consists of the U.S., Canada and American Girl, including a 1
percentage point unfavorable impact from changes in currency
exchange rates. For the International Region, gross sales decreased
9%, including a 2 percentage point unfavorable impact from changes
in currency exchange rates. Operating income for the quarter was
$1.0 million, compared to prior year’s operating income for the
quarter of $94.8 million. The Company’s debt-to-total capital ratio
as of June 30, 2014 was 41.8%.
Cash flows used for operating activities were approximately $79
million, compared to approximately $286 million in 2013, driven by
lower working capital usage. Cash flows used for investing
activities were approximately $525 million, an increase of
approximately $393 million, driven by the acquisition of MEGA
Brands. Cash flows from financing activities and other were
approximately $83 million, compared to cash flows used for
financing activities and other of approximately $95 million in
2013. The change was primarily due to lower repayments of long-term
debt, partially offset by lower proceeds from stock option
exercises.
Capital Deployment
The Company announced today that its Board of Directors declared
a third quarter cash dividend of $0.38 per share on the Company's
common stock. The dividend will be payable on September 19, 2014 to
stockholders of record on August 27, 2014. The dividend is the
third of four quarterly dividends the Company expects to pay this
year, reflecting an annualized dividend of $1.52 per share, which
represents a 6% increase to last year’s total dividends. During the
second quarter of 2014, the Company repurchased 2.6 million shares
of its common stock at a cost of approximately $100 million.
Sales by Brand
Mattel Girls and Boys Brands
For the second quarter, worldwide gross sales for Mattel Girls
& Boys Brands were $689.0 million, down 13% versus the prior
year. Worldwide gross sales for the Barbie brand were down 15%.
Worldwide gross sales for Other Girls brands were down 11%,
primarily due to Monster High®, partially offset by Disney Princess
and Ever After High®. Worldwide gross sales for the Wheels
category, which includes the Hot Wheels and Matchbox® brands, were
down 3%. Worldwide gross sales for the Entertainment business,
which includes Radica® and Games, were down 19%.
Fisher-Price Brands
Second quarter worldwide gross sales for Fisher-Price Brands,
which includes the Fisher-Price Core, Fisher-Price Friends and
Power Wheels® brands, were $328.8 million, down 17% versus the
prior year.
American Girl Brands
Second quarter gross sales for American Girl Brands, which
offers American Girl-branded products directly to consumers, were
$83.1 million, up 6% versus the prior year.
Construction and Arts & Crafts Brands
Second quarter gross sales for Construction and Arts &
Crafts Brands, which includes the MEGA BLOKS® and RoseArt® brands,
were $61.6 million. Mattel acquired MEGA Brands Inc. on April 30,
2014.
Live Webcast
Mattel will webcast its 2014 second quarter 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 in 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 Thursday,
July 24 at midnight Eastern time and may be accessed by dialing
+1-404-537-3406. The passcode is 61224509.
Information required by Securities and Exchange Commission
Regulation G, regarding non-GAAP financial measures, 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.”
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®,
MEGA® Brands, including MEGA BLOKS® and RoseArt®, 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 in 2014 ranked No. 5 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.
Forward-looking Statements
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, 2013 and Mattel’s Quarterly Reports on Form 10-Q for
fiscal year 2014, 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 U.S., Canada and American Girl2 Consists of
acquisition and integration costs, including amortization of
acquired intangible assets and inventory fair value markup above
cost
MATTEL, INC. AND SUBSIDIARIES
EXHIBIT I CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) For the Three Months Ended June 30,
For the Six Months Ended June 30,
(In millions,
except per share and
2014 2013 Yr / Yr 2014 2013
Yr / Yr
percentage
information)
$ Amt % Net Sales $ Amt % Net Sales
% Change $ Amt % Net Sales $ Amt %
Net Sales % Change Net Sales $ 1,062.3 $
1,169.1 -9 % $ 2,008.4 $ 2,164.7 -7 % Cost of sales 569.7
53.6 % 569.1 48.7 % 0 % 1,034.3 51.5 % 1,024.6
47.3 % 1 %
Gross Profit 492.6 46.4 % 600.0 51.3 % -18
% 974.1 48.5 % 1,140.1 52.7 % -15 % Advertising and promotion
expenses 99.9 9.4 % 113.4 9.7 % -12 % 190.7 9.5 % 217.9 10.1 % -13
% Other selling and administrative expenses 391.7 36.9 % 391.8 33.5
% 0 % 776.2 38.6 % 761.6 35.2 % 2 %
Operating Income 1.0 0.1 % 94.8 8.1 % -99 % 7.2 0.4 % 160.6
7.4 % -96 % Interest expense 19.0 1.8 % 18.3 1.6 % 4 % 36.2 1.8 %
38.6 1.8 % -6 % Interest (income) (2.2 ) -0.2 % (1.3 ) -0.1 % 70 %
(3.5 ) -0.2 % (2.7 ) -0.1 % 29 % Other non-operating (income)
expense, net (1.4 ) (0.9 ) (1.7 ) 1.8
(Loss)
Income Before Income Taxes (14.4 ) -1.4 % 78.7 6.7 % -118 %
(23.8 ) -1.2 % 122.9 5.7 % -119 % (Benefit) Provision for income
taxes (42.7 ) 5.4 (40.9 ) 11.0
Net
Income $ 28.3 2.7 % $ 73.3 6.3 % -61 % $ 17.1
0.9 % $ 111.9 5.2 % -85 %
Net Income Per
Common Share - Basic $ 0.08 $ 0.21 $ 0.05
$ 0.32 Weighted average number of common
shares 338.7 346.6 339.5 345.5
Net Income Per Common Share - Diluted $ 0.08 $
0.21 $ 0.05 $ 0.32
Weighted average number of common and
potential common shares
340.6 350.4 341.6 349.5
MATTEL, INC. AND SUBSIDIARIES EXHIBIT
II WORLDWIDE GROSS SALES INFORMATION (Unaudited)
Three Months Ended June 30, Six Months Ended June
30,
(In millions,
except percentage information)
2014 2013 2014 2013
Worldwide Gross
Sales:
Mattel Girls & Boys Brands $ 689.0 $ 792.4 $ 1,345.8 $ 1,484.6
% Change
-13 % 1 % -9 % 6 % Pos./(Neg.) Impact of Currency (in % pts) -1 0
-1 0 Fisher-Price Brands 328.8 396.7 600.2 684.0
% Change
-17 % -3 % -12 % -5 % Pos./(Neg.) Impact of Currency (in % pts) 0
-1 0 -1 American Girl Brands 83.1 78.2 189.1 178.6
% Change
6 % 14 % 6 % 23 % Construction and Arts & Crafts Brands
61.6 - 61.6 - Other 8.6 10.8
15.7 19.4 Gross Sales $ 1,171.1
$ 1,278.1 $ 2,212.4 $ 2,366.6
% Change
-8 % 1 % -7 % 4 % Pos./(Neg.) Impact of Currency (in % pts) -1 0 -1
0
Reconciliation of
Non-GAAP to GAAP Financial
Measure:
Gross Sales $ 1,171.1 $ 1,278.1 $ 2,212.4 $ 2,366.6 Sales
Adjustments (108.8 ) (109.0 ) (204.0 )
(201.9 ) Net Sales $ 1,062.3 $ 1,169.1 $
2,008.4 $ 2,164.7
% Change
-9 % 1 % -7 % 4 % Pos./(Neg.) Impact of Currency (in % pts) -1 0 -1
0
MATTEL, INC. AND SUBSIDIARIES
EXHIBIT III CONDENSED CONSOLIDATED
BALANCE SHEETS At June 30, At December 31,
2014 2013 2013
(In
millions)
(Unaudited) Assets Cash and equivalents $
518.2 $ 823.0 $ 1,039.2 Accounts receivable, net 878.9 945.7
1,260.1 Inventories 885.4 793.6 568.8 Prepaid expenses and other
current assets 602.8 564.9 509.9 Total
current assets 2,885.3 3,127.2 3,378.0 Property, plant, and
equipment, net 704.4 621.2 659.3 Other noncurrent assets
2,888.8 2,448.0 2,402.3
Total Assets $
6,478.5 $ 6,196.4 $ 6,439.6
Liabilities and Stockholders' Equity Short-term borrowings $
20.5 $ 40.7 $ 4.3 Current portion of long-term debt - 50.0 -
Accounts payable and accrued liabilities 867.4 921.7 1,015.4 Income
taxes payable 20.7 26.0 27.7 Total
current liabilities 908.6 1,038.4 1,047.4 Long-term debt
2,100.0 1,600.0 1,600.0 Other noncurrent liabilities 518.3 636.6
540.6 Stockholders' equity 2,951.6 2,921.4
3,251.6
Total Liabilities and Stockholders' Equity $
6,478.5 $ 6,196.4 $ 6,439.6
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW DATA
(Unaudited) At June 30,
(In millions,
except days and percentage information)
2014 2013
Key Balance Sheet
Data:
Accounts receivable, net days of sales outstanding (DSO) 74 73
Total debt outstanding $ 2,120.5 $ 1,690.7 Total debt-to-total
capital ratio 41.8 % 36.7 %
Six Months Ended June 30,
(In
millions)
2014 (a) 2013
Condensed Cash
Flow Data:
Cash flows (used for) operating activities $ (79 ) $ (286 )
Cash flows (used for) investing activities (525 ) (132 )
Cash flows from (used for) financing activities and other 83
(95 ) Decrease in cash and equivalents $ (521
) $ (513 )
(a)
Amounts shown are preliminary estimates.
Actual amounts will be reported in Mattel's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2014.
Mattel, Inc.News MediaAlex Clark,
310-252-6397alex.clark@mattel.comorSecurities AnalystsDrew
Vollero, 310-252-2703drew.vollero@mattel.com
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