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Mattel Reports Results for 1998 Fourth Quarter and Year in Line with Expectations
PR Newswire, Tuesday, February 02, 1999 at 09:26
LOS ANGELES, Feb. 2 /PRNewswire/ -- Mattel, Inc. (NYSE:MAT) today
reported that results for the full-year 1998 were in line with reduced
expectations cited in a December 14, 1998 press release.
Income for the year ended December 31 totaled $363.8 million or $1.20 per
share, before a previously announced, after-tax charge of $27 million or
$.09 per share related to a voluntary recall of certain Power Wheels ride-on
vehicles and an additional one-time, after-tax charge of $4 million or
$.01 per share. This second charge, incurred in the fourth quarter, is
related to an expected settlement of litigation stemming from a Federal Trade
Commission action involving Toys "R" Us. Earnings for the full year 1997 were
$499.5 million or $1.65 per share before charges.
Net sales for 1998 were $4.782 billion, down 1 percent from $4.835 billion
in 1997.
Net income for the 1998 fourth quarter totaled $63.8 million or $.21 per
share, before the $.01 charge, down from $195.1 million or $.64 per share in
the 1997 quarter. Net sales for the 1998 fourth quarter were $1.543 billion,
down from $1.613 billion in 1997.
U.S. revenues were down 2 percent for the year, and international volume
was down 1 percent in U.S. dollars and up 1 percent in local currency.
"As we disclosed in December, unexpected cutbacks by retailers and our
further adjustment to a just-in-time shipping pattern negatively impacted our
results," Jill E. Barad, Mattel's chairman and chief executive officer, said.
"But there was good news coming out of last year. Retail sales of Mattel
products at our top U.S. accounts were up 12 percent, and year-end retail
inventories were down 30 percent, positioning us well for 1999.
"Our gross margin was 49.4 percent, only slightly off last year's
49.6 percent, despite a decline in Barbie(R)," she said. "This demonstrates
the increased profitability we're deriving from our diversified brand
portfolio.
"And even though Barbie shipping was off by 14 percent for the year,
consumer demand for the Barbie brand was up, as evidenced by a 10 percent
increase in U.S. retail sales over year-ago," she said. "More importantly,
Barbie retail inventory was down over 40 percent at our top U.S. accounts.
"Our total Infant and Preschool sales were down 3 percent for the year,
and were negatively affected by the Power Wheels recall," Barad said. "On the
positive side, Fisher-Price(R) returned to strong profitability, and a robust
sell-through of their core products allowed us to achieve a 30 percent decline
in U.S. Fisher-Price retail inventory. Winnie the Pooh sales surged to nearly
$300 million, and Blue's Clues sold over $40 million in just four months.
"Our Wheels and Entertainment categories both had a very strong 1998," she
said. "Dramatic growth in Hot Wheels(R) and Matchbox(R) helped us achieve a
total Wheels increase of more than 20 percent. And the success of Disney and
Nickelodeon movie properties fueled a 14 percent rise in worldwide
Entertainment revenue.
"We had another great year for our interactive business, with Mattel Media
reaching $100 million in sales, versus $80 million last year," Barad said.
"Barbie software was up 39 percent. We had seven of the top 10 children's
software titles, including the Barbie Digital Camera as the #1 selling
children's title of the year," she said. "And with an average of 16 million
daily hits during the month of December, our Barbie website was cited as one
of the fastest-growing new shopping sites on the worldwide web, thanks to the
success of 'My Design,' which allows consumers to design their own Barbie doll
online.
"Our American Girl(R) brand achieved full-year sales of $300 million,
despite the difficulty we had in meeting consumer demand," she said. "We
opened our first 'American Girl Place' flagship store with great results in
Chicago this past November. And based on the overwhelming success of the
store, we are very excited about selling Pleasant Company products online in
the second half.
"Looking at 1999, we will reduce expenses to bring them back in line with
historical ratios," Barad said. "We will reduce them even further when we are
able to integrate The Learning Company and realign the Mattel business in
keeping with our long-term vision. These actions give us further confidence
that we can achieve our stated goal of at least $1.50 in earnings per share.
And we have the programs in place to deliver these results.
"We will celebrate the Barbie doll's 40th anniversary in 1999, and have
events planned to keep her in the news all year long," Barad said. "We will
begin marketing all of our Infant and Preschool brands under the Fisher-Price
umbrella, allowing us to better leverage this $1.7 billion franchise around
the world. Our Wheels business, with an exclusive Ferrari relationship as
well as NASCAR and Formula One licenses, is poised for another year of record
growth," she said. "We have an excellent Entertainment line-up for 1999,
including Disney's animated musical 'Tarzan' and the much-anticipated 'Toy
Story 2' from Disney and Pixar. And the first Sesame Street movie in
15 years,' Elmo in Grouchland,' will premier in the second half.
"We continue to execute against the strategies we initiated in early 1998,
which we believe will produce long-term benefits for our company and its
shareholders," Barad said. "Our direct-to-consumer business now represents
nearly 10 percent of Mattel's total sales. We will aggressively build this
segment in the second half of 1999, when all of our key brands will be sold
through catalogs and the Internet. We will be unveiling the revolutionary new
interactive products we developed through our alliance with Intel(R) next week
at New York Toy Fair. When you add this to our proposed merger with The
Learning Company -- which we expect to complete in April -- we not only become
the second largest consumer software company in the world, we become a leading
global children's products company, more relevant, more diverse and better
able to grow for years to come."
Mattel, Inc. is a worldwide leader in the design, manufacture and
marketing of children's products. With headquarters in El Segundo,
California, Mattel has offices and facilities in 36 countries and sells its
products in more than 150 nations throughout the world.
Note:
Forward-looking statements included in this release with respect to the
financial condition, results of operations and business of the company, which
include, but are not limited to sales levels, the Mattel and Tyco
restructuring charge, special charges, other non-recurring charges, cost
savings and profitability, are subject to certain risks and uncertainties that
could cause actual results to differ materially from those set forth in such
statements. These include without limitation: the company's dependence on the
timely development, introduction and customer acceptance of new products;
significant changes in buying patterns of major customers; possible weaknesses
of international markets; the impact of competition on revenues and margins;
the company's ability to successfully integrate the operations of The Learning
Company following its merger into the company; the effect of currency
fluctuations on reportable income; unanticipated negative results of
litigation, governmental proceedings or environmental matters; and other risks
and uncertainties as may be detailed from time to time in the company's public
announcements and SEC filings.
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOR THE
THREE MONTHS ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1998 1997 1998 1997 (a)
(In thousands, except
per share amounts)
Net Sales $1,543,082 $1,613,093 $4,781,892 $4,834,616
Cost of sales 760,992 795,018 2,418,899 2,434,616
Gross Profit 782,090 818,075 2,362,993 2,400,000
Advertising and
promotion expenses 351,844 300,569 813,293 779,139
Other selling and
administrative expenses 289,104 220,192 882,127 796,952
Amortization of intangibles 13,761 7,932 41,929 32,179
Special charge (b) 6,000 0 44,000 0
Integration/restructuring
costs (c) 0 0 0 275,000
Other (income)
expense, net (2,981) (4,968) 5,748 1,518
Operating Profit 124,362 294,350 575,896 515,212
Interest expense 41,158 27,348 110,833 90,130
Income Before Income Taxes 83,204 267,002 465,063 425,082
Provision for income taxes 23,658 71,873 132,799 135,288
Income Before
Extraordinary Item 59,546 195,129 332,264 289,794
Extraordinary item,
net of tax 0 0 0 (4,610)
Net Income 59,546 195,129 332,264 285,184
Less: dividends on
convertible preferred stock 1,990 1,990 7,960 10,505
Net Income Applicable
to Common Shares $57,556 $193,139 $324,304 $274,679
Income Per Share - Basic
Income Before Extraordinary
Item, Net of Tax $0.20 $0.66 $1.11 $0.96
Extraordinary Item
- Debt Retirement 0.00 0.00 0.00 (0.01)
Net Income Per Share
- Basic $0.20 $0.66 $1.11 $0.95
Average Number of Common
Shares Outstanding
- Basic 287,630 290,962 291,481 290,450
Income Per Share - Diluted (d)(e)
Income Before Extraordinary
Item, Net of Tax $0.20 $0.64 $1.10 $0.94
Extraordinary Item
- Debt Retirement 0.00 0.00 0.00 (0.01)
Net Income Per Share
- Diluted $0.20 $0.64 $1.10 $0.93
Average Number of Common and
Common Equivalent Shares
Outstanding - Diluted 290,399 306,053 303,243 295,653
MATTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DEC. 31, DEC. 31,
(In thousands) 1998 1997
Assets
Cash $212,454 $694,947
Accounts receivable, net 983,050 1,091,416
Inventories 584,358 428,844
Prepaid expenses and other current assets 277,948 246,529
Total current assets 2,057,810 2,461,736
Property, plant and equipment, net 736,457 601,597
Other assets 1,467,898 740,458
Total Assets $4,262,165 $3,803,791
Liabilities and Shareholders' Equity
Short-term borrowings $134,006 $17,468
Current portion of long-term liabilities 33,518 13,659
Accounts payable and accrued liabilities 944,434 939,562
Income taxes payable 205,253 202,735
Total current liabilities 1,317,211 1,173,424
Senior notes 400,000 100,000
Medium-term notes 540,500 520,500
Long-term debt 43,007 55,036
Other long-term liabilities 141,249 132,761
Shareholders' equity 1,820,198 1,822,070
Total Liabilities
and Shareholders' Equity $4,262,165 $3,803,791
(a) Consolidated results are restated for the March 1997 merger with Tyco
Toys, Inc.
(b) For the year ended December 1998, represents a one-time charge related
to a voluntary recall of Power Wheels brand ride-on vehicles. The related tax
benefit of $11 million is included in the provision for income taxes. For the
quarter and year ended December 1998, represents a one-time charge in
connection with the Toys R Us-related antitrust litigation settlement. The
related tax benefit of $2 million is included in the provision for income
taxes.
(c) Represents a nonrecurring charge for transaction, integration and
restructuring costs related to the Tyco merger. The related tax benefit of
$65 million is included in the provision for income taxes.
(d) Diluted income per share for the year ended December 1998 was
$1.20 per share, after absorbing $0.11 per share related to the amortization
of intangibles, before the $0.09 per share effect of a one-time charge of
$27 million after taxes related to a voluntary recall of Power Wheels brand
ride-on vehicles, and the $0.01 per share effect of a nonrecurring charge of
$4 million after-tax settlement in connection with the Toys R Us-related
antitrust litigation.
(e) Diluted income per share for the year ended December 1997 was
$1.65 per share, after absorbing $0.09 per share related to the amortization
of intangibles, before the $0.71 per share effect of the merger-related
nonrecurring charge of $210 million after taxes.
SOURCE Mattel, Inc.
-0- 02/02/99
/CONTACT: Glenn Bozarth of Mattel, Inc., 310-252-3521/
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