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Breaking News: Stockton Resigns from Mattel; Sinclair Named Interim CEO

Mattel, Inc., announced this morning that Bryan Stockton has resigned as Mattel’s chairman and CEO and has also resigned from the board of directors. Christopher Sinclair has been named the company’s chairman and interim CEO, effective immediately.

Sinclair, who has served as a member of Mattel’s board of directors since 1996 and as independent lead director since 2011, has extensive experience in leading global, multi-brand, consumer-focused companies, says Mattel. In addition to leadership roles at prominent venture capital and private equity firms, Sinclair was chairman and CEO of Caribiner International, Inc., from 1999–2000, president and CEO of Quality Food, Inc., from 1996–1998, and prior to that served in senior roles at PepsiCo, including as chairman and CEO of Pepsi-Cola Company, and president and CEO of PepsiCo Foods & Beverages International and Pepsi-Cola International. He also served as chair of Mattel’s audit committee.

“Mattel is an exceptional company with a great future but the board believes that it is the right time for new leadership to maximize its potential,” said Sinclair, in this morning’s statement issued by Mattel. “We are committed to delivering improved growth and financial performance and remain confident in our ability to leverage our unmatched portfolio of brands, global scale, and strong balance sheet as we execute on our strategic plan. I look forward to engaging with the entire Mattel community as we work to deepen our connections with children and parents through expanded product innovation and improved retail execution. We will be working during the coming months to revitalize the business and to identify the right leadership for Mattel as it enters its next phase of growth and value creation.”

In this morning’s statement, Mattel also announced preliminary fourth quarter and full year 2014 financial results. For the fourth quarter, Mattel reported net income of $149.9 million, or $0.44 per share, which includes a negative impact of $0.05 per share from MEGA Brands integration costs and a negative tax impact of $0.03 per share, compared to net income of $369.2 million, or $1.07 per share, in the fourth quarter of 2013. Worldwide net sales in the fourth quarter were $1.99 billion, down 6 percent, including an unfavorable impact from changes in currency exchange rates of 3 percentage points, compared to $2.11 billion last year. Gross margin decreased by 410 basis points of net sales to 50.4 percent, which was partially due to the acquisition of MEGA Brands. SG&A expenses increased by 390 basis points of net sales, including the impact of the acquisition of MEGA Brands. Operating income for the quarter was $237 million compared to $479.3 million in the fourth quarter of 2013.

For the year, the company reported net income of $498.9 million, or $1.45 per share, which includes a negative impact of $0.16 per share from the MEGA Brands acquisition and integration costs and a tax benefit of $0.13 per share, compared to net income of $903.9 million, or $2.58 per share, in 2013, which included a tax benefit of $0.09. Worldwide net sales were $6.02 billion, down 7 percent, including an unfavorable impact from changes in currency exchange rates of 2 percentage points, compared to $6.48 billion last year. Gross margin decreased by 380 basis points of net sales to 49.8 percent, which was partially due to the acquisition of MEGA Brands. SG&A expenses increased by 270 basis points of net sales, including the impact of the acquisition of MEGA Brands. Operating income for the year was $653.7 million compared to $1.17 billion in 2013.

For the year, net cash flows from operating activities were approximately $889 million, an increase of $191 million over approximately $698 million in 2013. The increase was primarily driven by reductions in working capital, partially offset by lower net income. Mattel ended the year with cash of $971.7 million, which is consistent with its capital and investment framework target of $800 million to $1 billion of year-end cash. The company’s debt-to-total capital ratio as of December 31, 2014, was 41.6 percent.

Mattel announced a first quarter cash dividend of $0.38 per share, which is flat compared to the first quarter of 2014. The dividend will be payable on March 6, 2015, to stockholders of record on February 19, 2015.