Mattel Reports Third Quarter 2007 Financial Results

Third Quarter Highlights

- Worldwide net sales up 3 percent;

- Domestic gross sales down 2 percent and international gross sales up 10

percent;

- Worldwide gross sales for core brands: Barbie(R) down 4 percent; Hot

Wheels(R) up 10 percent; Core Fisher-Price(R) up 19 percent and American

Girl(R) brands flat;

- Gross margin decreased 60 basis points of net sales; SG&A increased by 50

basis points of net sales;

- Operating income was $310.5 million, and included charges of

approximately $40 million related to the company's 2007 product recalls,

compared to operating income of $322.2 million in the third quarter of

2006, which included $19 million of non-cash compensation expense related

to prior periods; and

- Earnings per share of $0.61 vs. prior year of $0.62.

    EL SEGUNDO, Calif., Oct. 15 /PRNewswire-FirstCall/ -- Mattel, Inc.
 ( MAT) today reported 2007 third quarter financial results. For the
 quarter, the company reported net income of $236.8 million, or $0.61 per
 share, compared to last year's third quarter net income of $239.0 million,
 or $0.62 per share.
     Third quarter operating income of $310.5 million included charges and
 incremental costs of approximately $40 million related to the company's
 product recalls during 2007. Of this total, $13.3 million related to an
 increase in the reserves recorded in the second quarter for the August
 recalls, due primarily to higher than anticipated product return rates;
 $9.1 million related to additional reserves for subsequent product recalls;
 and approximately $17 million related to incremental recall related legal,
 advertising and administration costs incurred in the third quarter.
     "Despite the challenges the company faced during the third quarter, the
 business has performed fairly well, even with some supply chain disruptions
 that impacted our sales during the quarter. International has continued to
 drive growth in every major region, and while the U.S. was down slightly in
 the quarter, we did continue to see strong performance from several lines,
 especially Core Fisher-Price(R) and our Disney/Pixar CARS(TM) entertainment
 property," said Robert A. Eckert, chairman and chief executive officer of
 Mattel. "U.S. Barbie(R) performance was soft and remains an area of focus,
 although a good portion of the decline in the quarter was directly related
 to the supply chain disruptions."
     Financial Overview
     For the quarter, net sales were $1.84 billion, up 3 percent compared to
 $1.79 billion last year, including favorable changes in currency exchange
 rates of 3 percentage points. On a regional basis, third quarter gross
 sales decreased 2 percent in the U.S. and increased 10 percent in
 international markets, including favorable changes in currency exchange
 rates of 6 percentage points. Operating income for the quarter was $310.5
 million, compared to prior year's operating income for the quarter of
 $322.2 million.
     The company's debt-to-total-capital ratio was 29 percent. Consistent
 with the seasonality of the business, during the first nine months, the
 company's cash and equivalents declined by approximately $929 million,
 compared with a decline of approximately $445 million in the first nine
 months of 2006. During the third quarter of 2007, the company repurchased
 28.3 million shares of its common stock at a cost of $645 million.
     Sales by Business Unit
     Mattel Girls and Boys Brands
     For the quarter, worldwide gross sales for the Mattel Girls & Boys
 Brands business unit were $1.14 billion, up 6 percent versus a year ago.
 Worldwide gross sales for the Barbie(R) brand were down 4 percent, with
 increases in international markets partially offsetting declines in the
 U.S. Worldwide gross sales for Other Girls Brands were down 10 percent, due
 primarily to U.S. declines in the Polly Pocket!(TM) brand. Worldwide gross
 sales for Wheels, which includes the Hot Wheels(R), Matchbox(R) and Tyco(R)
 R/C brands, were up 9 percent, led by double-digit growth in the Hot
 Wheels(R) and Matchbox(R) lines. Worldwide gross sales for the
 Entertainment business, which includes Radica(R) and Games and Puzzles,
 increased 29 percent, driven by strong performance of Disney/Pixar CARS(TM)
 and the addition of the Radica(R) product lines.
     Fisher-Price Brands
     Third quarter worldwide gross sales for the Fisher-Price Brands
 business unit, which includes the Fisher-Price(R) Core, Fisher-Price(R)
 Friends and Power Wheels(R) brands, were $799.8 million, up 1 percent
 versus the prior year, reflecting continued strong growth in Core
 Fisher-Price(R) worldwide, which was partially offset by declines in
 Fisher-Price(R) Friends.
     American Girl Brands
     Third quarter gross sales for the American Girl Brands business unit,
 which offers American Girl(R) branded products directly to consumers, were
 $71.0 million, or flat with last year.
     Live Webcast
     Mattel will webcast its 2007 third quarter earnings conference call
 today at 8:30 a.m. (Eastern), 5:30 a.m. (Pacific). The conference call will
 be webcast on the "Investors & Media" section of the company's corporate
 Web site, http://www.mattel.com. To listen to the live call, log on to the
 Web site 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 Web site 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 (8:30 a.m. Pacific time)
 the morning of the call, until Tuesday, October 16 at midnight Eastern time
 (9 p.m. Pacific time) and may be accessed by dialing + (719) 457-0820. The
 passcode is 1976462.
     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 & Media" section of http://www.mattel.com, under the
 sub-headings "Financial Information" -- "Earnings Releases."
     About Mattel
     Mattel, Inc., ( MAT, http://www.mattel.com) is the worldwide
 leader in the design, manufacture and marketing of toys and family
 products. The Mattel family is comprised of such best-selling brands as
 Barbie(R), the most popular fashion doll ever introduced, Hot Wheels(R),
 Matchbox(R), American Girl(R), Radica(R) and Tyco(R) R/C, as well as
 Fisher-Price(R) brands, including Little People(R), Power Wheels(R) and a
 wide array of entertainment-inspired toy lines. Mattel is recognized as one
 of the 100 Most Trustworthy U.S. Companies by Forbes Magazine and is ranked
 among the 100 Best Corporate Citizens by CRO Magazine. Committed to ethical
 manufacturing and sustainable business practices, Mattel marks a 10-year
 milestone in 2007 for its Global Manufacturing Principles. With global
 headquarters in El Segundo, Calif., Mattel employs more than 30,000 people
 in 43 countries and territories and sells products in more than 150
 nations. Mattel's vision is to be the world's premier toy brands -- today
 and tomorrow.
     Note: Forward-looking statements with respect to the financial
 condition, results of operations and business of the company 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,
 manufacture, introduction and customer acceptance of new products; the
 seasonality of the toy business; customer concentration and pricing;
 significant changes in buying and payment patterns of major customers,
 including as a result of bankruptcy and store closures; adverse changes in
 general economic conditions in the U.S. and internationally, including
 adverse changes in the retail environment, employment and the stock market;
 order predictability and supply chain management; the impact of competition
 (including from sellers of a broad range of play products including video
 games and consoles, consumer electronics, and retailers' private label
 products) on revenues and margins; the supply and cost of raw materials
 (including oil and resin prices), components, employee benefits and various
 services; the effect of currency exchange rate fluctuations on reportable
 income; risks associated with acquisitions and mergers; risks associated
 with product recalls, product liability claims and product safety concerns,
 such as possible reputational harm, reduced sales or increased costs; risks
 associated with foreign operations; negative results of litigation,
 governmental proceedings or environmental matters; changes in laws and
 regulations; possible work stoppages, slowdowns or strikes; possible
 outbreaks of SARS, bird flu, or other diseases; political developments and
 the threat or occurrence of war or terrorist acts; the possibility of
 catastrophic events; the inherent risk of new initiatives; and other risks
 and uncertainties as may be detailed from time to time in the company's
 public announcements and SEC filings. This release contains forward-looking
 statements about reserves for product recalls and other incremental recall
 related costs and performance of various product lines. Mattel does not
 update forward-looking statements and expressly disclaims any obligation to
 do so.
     MATTEL, INC. AND SUBSIDIARIES                                   EXHIBIT I
     CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
     (In millions,
      except per share     For the Three Months Ended September 30,
      and percentage        2007                   2006                Yr / Yr
      information)   $ Amt     % Net Sales    $ Amt     % Net Sales    % Change
 
     Net Sales      $1,838.6                $1,790.3                      3%
      Cost of sales    973.9      53.0%        938.9       52.4%          4%
 
     Gross Profit      864.7      47.0%        851.4       47.6%          2%
      Advertising
       and promotion
       expenses        211.4      11.5%        205.9       11.5%          3%
      Other selling
       and
       administrative
       expenses        342.8      18.6%        323.3       18.1%          6%
 
     Operating Income  310.5      16.9%        322.2       18.0%         -4%
      Interest
       expense          16.4       0.9%         22.6        1.3%        -28%
      Interest
       (income)         (6.2)     -0.3%         (6.7)      -0.4%         -8%
      Other non-
       operating
       (income)
       expense, net     (7.4)                    1.7
 
     Income Before
      Income Taxes     307.7      16.7%        304.6       17.0%          1%
      Provision for
      income taxes      70.9                    65.6
 
     Net Income       $236.8      12.9%       $239.0       13.4%         -1%
 
     EPS - Basic       $0.61                   $0.63
 
     Average Number
      of Common Shares
      Outstanding
      - Basic          386.3                   378.6
 
     EPS - Diluted     $0.61                   $0.62
 
     Average Number
      of Common and
      Common Equivalent
      Shares Outstanding
      - Diluted        391.3                   382.7
 
 
     (In millions,
      except per share            For the Nine Months Ended September 30,
      and percentage      2007                      2006               Yr / Yr
      information)   $ Amt     % Net Sales    $ Amt     % Net Sales    % Change
 
     Net Sales       $3,781.5              $ 3,541.3                      7%
      Cost of sales   2,054.9     54.3%      1,941.9       54.8%          6%
 
     Gross Profit     1,726.6     45.7%      1,599.4       45.2%          8%
      Advertising
       and promotion
       expenses         423.9     11.2%        395.3       11.2%          7%
      Other selling
       and
       administrative
       expenses         934.7     24.7%        863.9       24.4%          8%
 
     Operating Income   368.0      9.7%        340.2        9.6%          8%
      Interest
       expense           45.0      1.2%         53.8        1.5%        -16%
      Interest
      (income)          (28.6)    -0.8%        (22.0)      -0.6%         30%
      Other non-
       operating
       (income)
       expense, net      (8.2)                  (2.0)
 
     Income Before
      Income Taxes      359.8      9.5%        310.4        8.8%         16%
      Provision for
       income taxes      88.3                    3.8
 
     Net Income        $271.5      7.2%       $306.6        8.7%        -11%
 
     EPS - Basic        $0.69                  $0.80
 
     Average Number
      of Common Shares
      Outstanding
      - Basic           390.8                  384.5
 
     EPS - Diluted      $0.68                  $0.79
 
     Average Number
      of Common and
      Common Equivalent
      Shares Outstanding
      - Diluted         397.2                  387.2
 
 
 
     MATTEL, INC. AND SUBSIDIARIES                           EXHIBIT II
     WORLDWIDE GROSS SALES INFORMATION (Unaudited)
 
 
                               Three Months Ended            Nine Months Ended
                                 September 30,                 September 30,
     (In millions, except
     percentage information)   2007          2006          2007          2006
 
     Worldwide Gross Sales:
      Mattel Girls
       & Boys Brands         $1,143.1      $1,082.1    $2,348.5    $2,184.9
         % Change                      6%           8%          7%           5%
         Pos./(Neg.)
          Impact of
          Currency
          (in % pts)                   4            2           4            0
 
      Fisher-Price Brands       799.8         790.5     1,601.4     1,463.5
         % Change                      1%           9%          9%          10%
         Pos./(Neg.)
          Impact of
          Currency
          (in % pts)                   2            1           2            0
 
      American Girl
       Brands                    71.0          71.2       189.7       194.7
         % Change                      0%           3%         -3%           0%
 
      Other                       4.9           5.9        12.7        13.4
 
     Gross Sales             $2,018.8      $1,949.7    $4,152.3    $3,856.5
         % Change                      4%            8%         8%           7%
         Pos./(Neg.)
          Impact of
          Currency
          (in % pts)                   3             1          3            1
 
     Reconciliation of GAAP to Non-GAAP Financial Measure:
      Gross Sales            $2,018.8      $1,949.7    $4,152.3    $3,856.5
      Sales Adjustments        (180.2)       (159.4)     (370.8)     (315.2)
 
      Net Sales              $1,838.6      $1,790.3    $3,781.5    $3,541.3
         % Change                      3%            7%         7%           6%
         Pos./(Neg.)
          Impact of
          Currency
          (in % pts)                   3             1          3            0
 
 
 
     MATTEL, INC. AND SUBSIDIARIES                              EXHIBIT III
     CONDENSED CONSOLIDATED BALANCE SHEETS
 
                                         At September 30,         At Dec. 31,
                                       2007            2006          2006
     (In millions)                         (Unaudited)
 
     Assets
      Cash and equivalents            $276.8          $552.4      $1,205.6
      Accounts receivable, net       1,640.3         1,387.9         943.8
      Inventories                      732.3           672.2         383.1
      Prepaid expenses and
       other current assets            219.9           273.0         317.6
        Total current assets         2,869.3         2,885.5       2,850.1
 
      Property, plant
       and equipment, net              515.4           525.4         536.7
      Other noncurrent assets        1,743.9         1,459.3       1,569.1
        Total Assets                $5,128.6        $4,870.2      $4,955.9
 
     Liabilities and Stockholders' Equity
      Short-term borrowings           $363.9            $57.4            $-
      Current portion
       of long-term debt                40.0           100.0          64.3
      Accounts payable
       and accrued liabilities       1,301.8         1,206.1       1,356.3
      Income taxes payable              45.1           134.6         161.9
        Total current liabilities    1,750.8         1,498.1       1,582.5
 
      Long-term debt                   560.0           775.0         635.7
      Other noncurrent liabilities     454.8           297.3         304.7
      Stockholders' equity           2,363.0         2,299.8       2,433.0
        Total Liabilities and
            Stockholders' Equity    $5,128.6        $4,870.2      $4,955.9
 
 
     SUPPLEMENTAL BALANCE SHEET AND CASH FLOW DATA (Unaudited)
 
     (In millions, except days                              At September 30,
     and percentage information)                         2007           2006
 
     Key Balance Sheet Data:
      Accounts Receivable, Net
       Days of Sales Outstanding (DSO)                     80             70
 
      Inventories
       Days of Supply (DOS)                                62             62
 
      Total Debt Outstanding                           $963.9         $932.4
       Total Debt-to-Total Capital Ratio                 29.0%          28.8%
 
 
                                                Nine Months Ended September 30,
     (In millions)                                      2007(a)         2006
 
     Condensed Cash Flow Data:
     Cash Flows (Used For) Operating Activities         $(611)         $(368)
 
     Cash Flows (Used For) Investing Activities          (237)          (101)
 
     Cash Flows (Used For) From Financing Activities
      and Other                                           (81)            24
 
      (Decrease) in Cash and Equivalents                $(929)         $(445)
 
 
     (a) Amounts shown are preliminary estimates.  Actual amounts will be
         reported in Mattel's Quarterly Report on Form 10-Q for the quarter
         ended September 30, 2007.
 
 

SOURCE Mattel, Inc.