Mattel Reports Q4 and 2012 Results
Mattel, Inc., reported 2012 fourth quarter and full-year financial results. For the fourth quarter, the company reported net income of $306.5 million, or $0.87 per share, and adjusted net income of $393.6 million, or $1.12 per share, excluding the litigation charge discussed below, compared to last year’s fourth quarter net income of $370.6 million, or $1.07 per share. For the year, the company reported net income of $776.5 million, or $2.22 per share, and adjusted net income of $863.6 million, or $2.47 per share, excluding the litigation charge, compared to last year’s net income of $768.5 million, or $2.18 per share.
“We had another great year at Mattel with record sales for both total company and our International division, stronger gross margins, and our second year of more than $1 billion in operating profit,” said Bryan Stockton, chairman and CEO of Mattel. “These results are particularly gratifying given the challenging global economic and cost environment.”
For the fourth quarter, net sales were $2.26 billion, a 5 percent increase from $2.15 billion last year, including an unfavorable impact of changes in currency exchange rates of 1 percentage point. On a regional basis, fourth quarter gross sales were up 5 percent in the North American region, which consists of the U.S., Canada, and American Girl, including a favorable impact of currency exchange rates of 1 percentage point. For the International region, gross sales increased 8 percent, including an unfavorable impact of currency exchange rates of 2 percentage points. Operating income for the quarter was $373.5 million. Adjusted operating income was $511.3 million, or 22.7 percent of net sales, excluding the litigation charge, compared to the prior year’s operating income for the quarter of $497.5 million.
For the year, net sales were $6.42 billion, a 2 percent increase from $6.27 billion last year, including an unfavorable impact of changes in currency exchange rates of 2 percentage points. On a regional basis, full-year gross sales were up 2 percent in the North American region, with no impact from changes in currency exchange rates. For the International region, gross sales were up 4 percent, including an unfavorable impact of currency exchange rates of 6 percentage points. Operating income for the year was $1.02 billion. Adjusted operating income was $1.16 billion, or 18 percent of net sales, excluding the litigation charge, compared to the prior year’s operating income of $1.04 billion.
The company’s debt-to-total-capital ratio of 33 percent is in line with the company’s capital and investment framework, and its year-end cash balance was $1.34 billion.
For the year, net cash flows from operating activities were approximately $1.28 billion, an increase of $611 million compared with approximately $665 million in 2011. The increase is primarily driven by reductions in working capital. Cash flows used for investing activities were approximately $900 million, an increase of $725 million, compared to approximately $175 million in 2011, driven primarily by the acquisition of HIT Entertainment. Cash flows used for financing and other activities were approximately $409 million, an increase of $7 million, compared with approximately $402 million in 2011, primarily due to lower net proceeds from the issuance of long-term debt and higher dividends, partially offset by lower share repurchases and lower repayments of long-term debt.
The company announced that its Board of Directors declared a first quarter cash dividend of $0.36 per share on the company’s common stock, which represents an increase of 16 percent versus last year’s dividend of $0.31 per share. The dividend will be payable on March 8, 2013, to stockholders of record on February 22, 2013. For the fourth quarter 2012, the company repurchased 1.4 million shares of its common stock at a cost of approximately $51 million, and for the year, the company repurchased 2.3 million shares of its common stock at a cost of approximately $78 million.
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 vacates 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 has taken 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.
Mattel Girls & Boys Brands
Fourth quarter worldwide gross sales for the Mattel Girls & Boys Brands business unit were $1.41 billion, up 5 percent versus a year ago. Worldwide gross sales for the Barbie brand were down 4 percent and worldwide gross sales for Other Girls Brands were up 55 percent, 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 1 percent, primarily driven by Matchbox. Worldwide gross sales for the Entertainment business, which includes Radica and Games, were down 13 percent for the quarter, primarily driven by decreases in the Cars 2 movie property.
For the year, worldwide gross sales for the Mattel Girls & Boys Brands business unit were $4.19 billion, or up 2 percent. Worldwide gross sales for the Barbie brand were down 3 percent. Worldwide gross sales for Other Girls Brands were up 57 percent 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 flat, with growth in Hot Wheels offset by decreases in Matchbox. Worldwide gross sales for the Entertainment business, including Radica and Games, were down 21 percent, primarily driven by decreases in the Cars 2 movie property.
Fisher-Price Brands
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 $744.5 million, up 6 percent. For the year, worldwide gross sales for the Fisher-Price Brands business unit were $2.25 billion, up 4 percent, driven by strength in Fisher-Price Friends with the addition of the HIT Entertainment portfolio and Disney’s Jake and the Never Land Pirates property.
American Girl Brands
Fourth quarter gross sales for the American Girl Brands business unit, which offers American Girl branded products direct to consumers, were $320.8 million, up 13 percent. For the year, gross sales for the American Girl Brands business unit were $567.5 million, up 11 percent, primarily driven by strong sales of McKenna, the 2012 Girl of the Year, and the expansion of retail locations.
BBC, Fremantle in Children’s Programming Deal
BBC Children’s and FremantleMedia Enterprises’ (FME) Kids & Family Entertainment division have signed a long-term deal that will see them develop and produce a continuous sequence of new programming for children of all ages. The deal will see FME and BBC Children’s co-developing, co-producing, and co-funding a number of new children’s shows over the course of the next five years, and investing tens of millions of dollars in order to fulfill the production requirements of the agreement.
Under the terms of the partnership, the BBC Children’s in-house production teams will produce the shows in conjunction with the FME Kids & Family team.
This partnership does not affect the first-look deal that BBC Children’s has with BBC Worldwide who continue to invest in children’s programming and also operate the CBeebies international channels. And BBC Children’s will continue to collaborate with a wide range of creative partners, broadcasters, distributors, and independents (who currently produce 70 percent of the BBC’s children’s programs).
Extending beyond television screens, the deal will also see FME representing a range of global ancillary rights, including merchandise, home entertainment, live events, publishing, worldwide distribution, and more. The BBC will retain television rights for the UK and Ireland, as well as certain other rights within those countries.