- Second quarter Net Sales of $860.1 million, up 2% as
reported, and up 5% in constant currency, versus prior
year.
- Gross Sales of $962.3 million, up 1% as reported, and up 4%
in constant currency.
- Dolls category Gross Sales up 3% as reported, and up 6% in
constant currency; Barbie® Gross Sales up 9% as reported,
and up 13% in constant currency.
- Vehicles category Gross Sales flat as reported, and up 3% in
constant currency; Hot Wheels® Gross Sales up 5% as
reported, and up 9% in constant currency.
- Infant, Toddler and Preschool category Gross Sales down 13%
as reported, and down 11% in constant currency; Fisher-Price®
and Thomas & Friends® Gross Sales down 6% as
reported, and down 4% in constant currency.
- Action Figures, Building Sets and Games categories combined
Gross Sales up 21% as reported, and up 23% in constant
currency.
- Structural Simplification run-rate savings of $754 million,
exceeding target of $650 million exiting 2019 six months ahead of
schedule; expect to achieve another $100 million of run-rate
savings by the end of the year.
- Reported Gross Margin of 39.7%, an improvement of 960 basis
points; Adjusted Gross Margin of 39.9%, an improvement of 950 basis
points.
- Reported Operating Loss of $51.4 million, an improvement of
$137.8 million; Adjusted Operating Loss of $30.4 million, an
improvement of $103.9 million.
- Fourth consecutive quarter of year-over-year improvement in
Gross Margin, Operating Profit / Loss, EBITDA and EPS.
- Cumulative improvement in reported Operating Income over the
past four quarters is $677 million, the largest improvement in any
four consecutive quarters in over 15 years.
Mattel, Inc. (NASDAQ: MAT) today reported second quarter 2019
financial results.
Ynon Kreiz, Chairman and CEO, Mattel said: “This quarter further
demonstrates the continued momentum of our multi-year turnaround
strategy. We delivered topline growth in our North America and
International segments across all regions, as well as growth in all
categories except one, exceeded our Structural Simplification
target and still expect additional savings, achieved the fourth
consecutive quarter of improved profitability and continued to make
progress in laying the groundwork to capture the full value of our
IP. We continue to gain traction and remain on-track to transform
Mattel into an IP-driven, high-performing toy company.”
Joseph Euteneuer, CFO, Mattel said: “We continue to execute
toward our goal to restore profitability and regain topline growth
in the short-to-mid term, and to capture the full value of our IP
in the mid-to-long term. The benefits of the team’s hard work are
clearly materializing across the P&L. We remain focused on
sustained progress, methodical execution and the creation of
long-term shareholder value.”
For the second quarter, Net Sales were up 2% as reported, and up
5% in constant currency, versus the prior year’s second quarter.
Gross Sales were up 1% as reported, and up 4% in constant currency.
Reported Operating Loss was $51.4 million, an improvement of $137.8
million, and Adjusted Operating Loss was $30.4 million, an
improvement of $103.9 million. Reported Loss Per Share was $0.31,
an improvement of $0.39, and Adjusted Loss Per Share was $0.25, an
improvement of $0.29.
For the first six months of the year, Net Sales were flat as
reported, and up 3% in constant currency, versus the prior year’s
first six months. Gross Sales were down 1% as reported, and up 3%
in constant currency. Reported Operating Loss was $182.4 million,
an improvement of $283.4 million, and Adjusted Operating Loss was
$130.8 million, an improvement of $250.8 million. Reported Loss Per
Share was $0.84, an improvement of $0.76, and Adjusted Loss Per
Share was $0.69, an improvement of $0.70.
Financial Overview
For the second quarter, Net Sales in the North America segment
increased by 2% as reported, and 3% in constant currency, versus
the prior year’s second quarter.
Gross Sales in the North America segment increased 1% as
reported, and in constant currency, primarily driven by growth in
Action Figures, Building Sets and Games (including Toy Story® 4
partially offset by Jurassic World®) and Dolls (including Barbie).
This was partially offset by a decline in Infant, Toddler and
Preschool (including Fisher-Price Friends and Thomas & Friends)
and Vehicles (including lower sales for Jurassic World
vehicles).
Net Sales in the International segment increased 5% as reported,
and 11% in constant currency, versus the prior year’s second
quarter.
Gross Sales in the International segment increased 3% as
reported, primarily driven by growth in Action Figures, Building
Sets and Games (including Toy Story 4 partially offset by Jurassic
World), Dolls (including Barbie and Polly Pocket® partially offset
by Enchantimals®), and Vehicles (including increased sales for Hot
Wheels partially offset by lower sales for CARS and Jurassic World
vehicles). This growth was partially offset by a decline in Infant,
Toddler and Preschool (including Fisher-Price Core and Thomas &
Friends).
Gross Sales in the International segment increased 9% in
constant currency, primarily driven by growth in Action Figures,
Building Sets and Games (including Toy Story 4 partially offset by
Jurassic World), Dolls (including Barbie and Polly Pocket partially
offset by Enchantimals), and Vehicles (including increased sales
for Hot Wheels partially offset by lower sales for CARS® and
Jurassic World vehicles). This growth was partially offset by a
decline in Infant, Toddler and Preschool (including Fisher-Price
Core and Thomas & Friends).
Net Sales in the American Girl® segment decreased by 22% as
reported, and in constant currency, versus the prior year’s second
quarter.
Gross Sales in the American Girl segment decreased by 23% as
reported, and in constant currency, primarily driven by lower sales
in proprietary retail and direct channels.
Reported Gross Margin increased to 39.7% versus 30.1% in the
prior year’s second quarter and Adjusted Gross Margin increased to
39.9% versus 30.4%.
The increase in Reported and Adjusted Gross Margin was primarily
driven by savings from our Structural Simplification program, lower
obsolescence and foreign exchange.
Reported Other Selling and Administrative Expenses decreased by
$51.7 million, or 14%, to $308.3 million, versus the prior year’s
second quarter. Adjusted Other Selling and Administrative Expenses
decreased by $18.4 million, or 6%, to $289.5 million. The
improvements in Reported and Adjusted Other Selling and
Administrative Expenses were primarily driven by savings from our
Structural Simplification program, partially offset by Toys “R” Us
bad debt recoveries in the second quarter 2018.
For the six months ended June 30, 2019, Cash Flows Used for
Operating Activities decreased by $156 million to $401 million,
versus the prior year first six months, primarily driven by a lower
net loss, excluding the impact of non-cash charges. Cash Flows Used
for Investing Activities decreased by $41 million to $44 million,
versus the prior year’s second quarter, primarily driven by lower
capital spending. Cash Flows Provided by Financing Activities and
Other decreased by $253 million to $44 million, versus the prior
year’s second quarter, primarily driven by net repayments of
long-term borrowings of $275 million during the first half of
2018.
Sales by Categories
For the second quarter, Worldwide Gross Sales for Dolls were
$273.4 million, up 3% as reported, and up 6% in constant currency,
versus the prior year’s second quarter, primarily driven by growth
in Barbie and Polly Pocket, partially offset by a decline in
American Girl and Enchantimals.
Worldwide Gross Sales for Infant, Toddler and Preschool were
$252.0 million, down 13% as reported, and down 11% in constant
currency, versus the prior year’s second quarter, primarily driven
by declines in Fisher-Price Core, Fisher-Price Friends and Thomas
& Friends.
Worldwide Gross Sales for Vehicles were $214.1 million, flat as
reported, and up 3% in constant currency, versus the prior year’s
second quarter, primarily driven by a decline in Jurassic World
vehicles and CARS, substantially offset by growth in Hot
Wheels.
Worldwide Gross Sales for Action Figures, Building Sets and
Games were $222.7 million, up 21% as reported, and up 23% in
constant currency, versus the prior year’s second quarter,
primarily driven by the initial sales of Toy Story 4, partially
offset by Jurassic World.
Conference Call and Live Webcast
At 5:00 p.m. (Eastern Time) today, Mattel will host a conference
call with investors and financial analysts to discuss its 2019
second quarter financial results. The conference call will be
webcast on Mattel's Investor Relations website,
https://mattel.gcs-web.com/. To listen to the live call, log on to
the website at least 10 minutes early to register, download and
install any necessary audio software. An archive of the webcast
will be available on Mattel's Investor Relations website for 90
days and may be accessed beginning approximately two hours after
the completion of the live call. A telephonic replay of the call
will be available beginning at 8:30 p.m. Eastern time the evening
of the call until Thursday, August 1, 2019 and may be accessed by
dialing +1-404-537-3406. The passcode is 6171977.
Forward-Looking Statements
This press release contains a number of forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The use of words such as “anticipates,”
“expects,” “intends,” “plans,” “confident that” and “believes,”
among others, generally identify forward-looking statements. 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. Specific factors that
might cause such a difference include, but are not limited to: (i)
Mattel’s ability to design, develop, produce, manufacture, source
and ship products on a timely and cost-effective basis, as well as
interest in and purchase of those products by retail customers and
consumers in quantities and at prices that will be sufficient to
profitably recover Mattel’s costs; (ii) downturns in economic
conditions affecting Mattel’s markets which can negatively impact
retail customers and consumers, and which can result in lower
employment levels, lower consumer disposable income and spending,
including lower spending on purchases of Mattel’s products; (iii)
other factors which can lower discretionary consumer spending, such
as higher costs for fuel and food, drops in the value of homes or
other consumer assets, and high levels of consumer debt; (iv)
potential difficulties or delays Mattel may experience in
implementing cost savings and efficiency enhancing initiatives; (v)
other economic and public health conditions or regulatory changes
in the markets in which Mattel and its customers and suppliers
operate, which could create delays or increase Mattel’s costs, such
as higher commodity prices, labor costs or transportation costs, or
outbreaks of disease; (vi) currency fluctuations, including
movements in foreign exchange rates, which can lower Mattel’s net
revenues and earnings, and significantly impact Mattel’s costs;
(vii) the concentration of Mattel’s customers, potentially
increasing the negative impact to Mattel of difficulties
experienced by any of Mattel’s customers, including the bankruptcy
of Toys “R” Us, Inc., or changes in their purchasing or selling
patterns; (viii) the future willingness of licensors of
entertainment properties for which Mattel currently has licenses or
would seek to have licenses in the future to license those products
to Mattel; (ix) the inventory policies of Mattel’s retail
customers, including retailers’ potential decisions to lower their
inventories, even if it results in lost sales, as well as the
concentration of Mattel’s revenues in the second half of the year,
which coupled with reliance by retailers on quick response
inventory management techniques increases the risk of
underproduction of popular items, overproduction of less popular
items and failure to achieve compressed shipping schedules; (x) the
increased costs of developing more sophisticated digital and smart
technology products, and the corresponding supply chain and design
challenges associated with such products; (xi) work disruptions,
which may impact Mattel’s ability to manufacture or deliver product
in a timely and cost-effective manner; (xii) the bankruptcy of Toys
“R” Us, Inc. or other of Mattel’s significant retailers, or the
general lack of success of one of Mattel’s significant retailers
which could negatively impact Mattel’s revenues or bad debt
exposure; (xiii) the impact of competition on revenues, margins and
other aspects of Mattel’s business, including the ability to offer
products which consumers choose to buy instead of competitor’s
products, the ability to secure, maintain and renew popular
licenses and the ability to attract and retain talented employees;
(xiv) the risk of product recalls or product liability suits and
costs associated with product safety regulations; (xv) changes in
laws or regulations in the United States and/or in other major
markets, such as China, in which Mattel operates, including,
without limitation, with respect to taxes, tariffs, trade policies
or product safety, which may increase Mattel’s product costs and
other costs of doing business, and reduce Mattel’s earnings, (xvi)
failure to realize the planned benefits from any investments or
acquisitions made by Mattel, (xvii) the impact of other market
conditions, third party actions or approvals and competition which
could reduce demand for Mattel’s products or delay or increase the
cost of implementation of Mattel’s initiatives or alter Mattel’s
actions and reduce actual results; (xviii) changes in financing
markets or the inability of Mattel to obtain financing on
attractive terms (xix) the impact of litigation or arbitration
decisions or settlement actions; (xx) uncertainty from the expected
discontinuance of LIBOR and transition to any other interest rate
benchmark and (xxi) other risks and uncertainties as may be
described in Mattel’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, 2018, as well as in Mattel’s other public statements.
Mattel does not update forward-looking statements and expressly
disclaims any obligation to do so.
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with
generally accepted accounting principles in the United States
(“GAAP”), Mattel presents certain non-GAAP financial measures
within the meaning of Regulation G promulgated by the Securities
and Exchange Commission. The non-GAAP financial measures that
Mattel uses in this earnings release include Gross Sales, Adjusted
Gross Profit, Adjusted Gross Margin, Adjusted Other Selling and
Administrative Expenses, Adjusted Operating Income (Loss), Adjusted
Earnings (Loss) Per Share, earnings before interest expense, taxes,
depreciation and amortization (“EBITDA”), Adjusted EBITDA, and
constant currency. Mattel uses these metrics to analyze its
continuing operations and to monitor, assess and identify
meaningful trends in its operating and financial performance, and
each is discussed in detail below. Mattel believes that the
disclosure of non-GAAP financial measures provides useful
supplemental information to investors to be able to better evaluate
ongoing business performance and certain components of the
Company’s results. These measures are not, and should not be viewed
as, substitutes for GAAP financial measures. Reconciliations of the
non-GAAP financial measures to the most directly comparable GAAP
financial measures are attached to this earnings release as
exhibits and to our earnings slide presentation as an appendix.
This earnings release and our earnings slide presentation are
available on Mattel's Investor Relations website,
https://mattel.gcs-web.com/, under the subheading “Financial
Information – Earnings Releases.”
Gross Sales
Gross Sales represent sales to customers, excluding the impact
of Sales Adjustments. Net Sales, as reported, include the impact of
Sales Adjustments, such as trade discounts and other allowances.
Mattel presents changes in Gross Sales as a metric for comparing
its aggregate, categorical, brand and geographic results to
highlight significant trends in Mattel’s business. Changes in Gross
Sales are discussed because, while Mattel records the details of
such Sales Adjustments in its financial accounting systems at the
time of sale, such Sales Adjustments are generally not associated
with brands and individual products, making Net Sales less
meaningful. Since Sales Adjustments are determined by customer
rather than at the brand level, Mattel believes that the disclosure
of Gross Sales by categories and brand is useful supplemental
information for investors to be able to assess the performance of
its underlying brands (e.g., Barbie) and also enhances their
ability to compare sales trends over time.
Adjusted Gross Profit and Adjusted Gross Margin
Adjusted Gross Profit and Adjusted Gross Margin represent
reported Gross Profit and Reported Gross Margin, respectively,
adjusted to exclude asset impairments, severance and restructuring
expenses and the impact of the inclined sleeper product recalls.
Adjusted Gross Margin represents Mattel’s Adjusted Gross Profit, as
a percentage of Net Sales. Adjusted Gross Profit and Adjusted Gross
Margin are presented to provide additional perspective on
underlying trends in Mattel’s core Gross Profit and Gross Margin,
which Mattel believes is useful supplemental information for
investors to be able to gauge and compare Mattel’s current business
performance from one period to another.
Adjusted Other Selling and Administrative Expenses
Adjusted Other Selling and Administrative Expenses represents
Mattel’s Reported Other Selling and Administrative Expenses,
adjusted to exclude asset impairments, non-recurring executive
compensation, severance and restructuring expenses, the impact of
the inclined sleeper product recalls, and sale of assets, which are
not part of Mattel’s core business. Adjusted Other Selling and
Administrative Expenses is presented to provide additional
perspective on underlying trends in Mattel’s core other selling and
administrative expenses, which Mattel believes is useful
supplemental information for investors to be able to gauge and
compare Mattel’s current business performance from one period to
another.
Adjusted Operating Income (Loss)
Adjusted Operating Income (Loss) represents Mattel’s reported
Operating Loss, adjusted to exclude the impact of asset
impairments, non-recurring executive compensation, severance and
restructuring expenses, sale of assets, and the impact of the
inclined sleeper product recalls, which are not part of Mattel’s
core business. Adjusted Operating Income (Loss) is presented to
provide additional perspective on underlying trends in Mattel’s
core operating results, which Mattel believes is useful
supplemental information for investors to be able to gauge and
compare Mattel’s current business performance from one period to
another.
Adjusted Earnings (Loss) Per Share
Adjusted Earnings (Loss) Per Share represents Mattel’s Reported
Diluted Earnings (Loss) Per Common Share, adjusted to exclude the
impact of asset impairments, severance and restructuring expenses,
and the impact of the inclined sleeper product recalls, which are
not part of Mattel’s core business. The aggregate tax effect of the
adjustments is calculated by tax effecting the adjustments by the
current effective tax rate, adjusting for certain discrete tax
items, and dividing by the reported weighted average number of
common shares. Adjusted Earnings (Loss) Per Share is presented to
provide additional perspective on underlying trends in Mattel’s
core business. Mattel believes it is useful supplemental
information for investors to gauge and compare Mattel’s current
earnings results from one period to another. Adjusted Earnings
(Loss) Per Share is a performance measure and should not be used as
a measure of liquidity.
EBITDA and Adjusted EBITDA
EBITDA represents Mattel’s Net Income (Loss), adjusted to
exclude the impact of interest expense, taxes, depreciation and
amortization. Adjusted EBITDA represents EBITDA adjusted to exclude
the impact of asset impairments, share-based compensation,
severance and restructuring expenses, sale of assets, and the
impact of the inclined sleeper product recalls, which are not part
of Mattel’s core business. Mattel believes EBITDA and Adjusted
EBITDA are useful supplemental information for investors to gauge
and compare Mattel’s business performance to other companies in our
industry with similar capital structures. The presentation of
Adjusted EBITDA differs from how we will calculate EBITDA for
purposes of covenant compliance under the indenture governing our
6.75% senior notes due 2025 and the syndicated facility agreement
governing our senior secured revolving credit facilities. Because
of these limitations, EBITDA and Adjusted EBITDA should not be
considered as measures of discretionary cash available to us to
invest in the growth of our business. As a result, we rely
primarily on our GAAP results and use EBITDA and Adjusted EBITDA
only supplementally.
Constant currency
Percentage changes in results expressed in constant currency are
presented excluding the impact from changes in currency exchange
rates. To present this information, Mattel calculates constant
currency information by translating current period and prior period
results for entities reporting in currencies other than the US
dollar using consistent exchange rates. The constant currency
exchange rates are determined by Mattel at the beginning of each
year and are applied consistently during the year. They are
generally different from the actual exchange rates in effect during
the current or prior period due to volatility in actual foreign
exchange rates. Mattel considers whether any changes to the
constant currency rates are appropriate at the beginning of each
year. The exchange rates used for these constant currency
calculations are generally based on prior year actual exchange
rates. The difference between the current period and prior period
results using the consistent exchange rates reflects the changes in
the underlying performance results, excluding the impact from
changes in currency exchange rates. Mattel analyzes constant
currency results to provide additional perspective on changes in
underlying trends in Mattel’s operating performance. Mattel
believes that the disclosure of the percentage change in constant
currency is useful supplemental information for investors to be
able to gauge Mattel’s current business performance and the
longer-term strength of its overall business since foreign currency
changes could potentially mask underlying sales trends. The
disclosure of the percentage change in constant currency enhances
investor’s ability to compare financial results from one period to
another.
About Mattel
Mattel is a leading global children’s entertainment company that
specializes in design and production of quality toys and consumer
products. We create innovative products and experiences that
inspire, entertain and develop children through play. We engage
consumers through our portfolio of iconic franchises, including
Barbie®, Hot Wheels®, American Girl®, Fisher-Price®, Thomas &
Friends® and MEGA®, as well as other popular brands that we own or
license in partnership with global entertainment companies. Our
offerings include film and television content, gaming, music and
live events. We operate in 40 locations and sell products in more
than 150 countries in collaboration with the world’s leading retail
and technology companies. Since its founding in 1945, Mattel is
proud to be a trusted partner in exploring the wonder of childhood
and empowering kids to reach their full potential. Visit us online
at www.mattel.com.
MAT-FIN MAT-CORP
MATTEL, INC. AND
SUBSIDIARIES
EXHIBIT I
CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)1
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
Yr / Yr
Yr / Yr
Yr / Yr
Yr / Yr
% Change
% Change
% Change
% Change
(In
millions, except per share and
2019
2018
as
in Constant
2019
2018
as
in Constant
percentage information)
$ Amt
% Net Sales
$ Amt
% Net Sales
Reported
Currency
$ Amt
% Net Sales
$ Amt
% Net Sales
Reported
Currency
Net Sales
$
860.1
$
840.7
2
%
5
%
$
1,549.3
$
1,549.1
0
%
3
%
Cost of sales
518.7
60.3
%
587.5
69.9
%
-12
%
968.1
62.5
%
1,077.0
69.5
%
-10
%
Gross Profit
341.4
39.7
%
253.2
30.1
%
35
%
32
%
581.2
37.5
%
472.1
30.5
%
23
%
27
%
Advertising and promotion
expenses
84.5
9.8
%
82.4
9.8
%
3
%
154.0
9.9
%
153.2
9.9
%
0
%
Other selling and administrative
expenses
308.3
35.8
%
360.0
42.8
%
-14
%
609.6
39.3
%
784.6
50.6
%
-22
%
Operating Loss
(51.4
)
-6.0
%
(189.2
)
-22.5
%
-73
%
-72
%
(182.4
)
-11.8
%
(465.8
)
-30.1
%
-61
%
-62
%
Interest expense
46.2
5.4
%
43.5
5.2
%
6
%
93.2
6.0
%
84.5
5.5
%
10
%
Interest (income)
(1.5
)
-0.2
%
(1.7
)
-0.2
%
-10
%
(3.8
)
-0.2
%
(4.8
)
-0.3
%
-22
%
Other non-operating (income)
expense, net
(0.3
)
3.1
1.6
2.5
Loss Before Income
Taxes
(95.8
)
-11.1
%
(234.0
)
-27.8
%
-59
%
-58
%
(273.4
)
-17.6
%
(547.9
)
-35.4
%
-50
%
-51
%
Provision for income taxes
12.2
6.9
18.3
4.3
Net Loss
$
(108.0
)
-12.6
%
$
(240.9
)
-28.7
%
-55
%
$
(291.7
)
-18.8
%
$
(552.2
)
-35.6
%
-47
%
Net Loss Per Common Share -
Basic
$
(0.31
)
$
(0.70
)
$
(0.84
)
$
(1.60
)
Weighted average number of common
shares
345.9
344.6
345.9
344.5
Net Loss Per Common Share -
Diluted
$
(0.31
)
$
(0.70
)
$
(0.84
)
$
(1.60
)
Weighted average number of common and
potential common shares
345.9
344.6
345.9
344.5
1 Amounts may not foot due to
rounding.
MATTEL, INC. AND SUBSIDIARIES EXHIBIT II
CONDENSED CONSOLIDATED BALANCE SHEETS1
June 30,
December 31,
2019
2018
2018
(In millions)
(Unaudited) Assets Cash and equivalents
$
194.1
$
228.6
$
594.5
Accounts receivable, net
755.7
780.1
970.1
Inventories
722.4
715.3
542.9
Prepaid expenses and other current assets
243.3
327.3
245.0
Total current assets
1,915.5
2,051.3
2,352.4
Property, plant, and equipment, net
595.8
719.7
657.6
Right-of-use assets, net2
317.1
-
-
Other noncurrent assets
2,218.2
2,282.4
2,233.4
Total Assets
$
5,046.6
$
5,053.4
$
5,243.5
Liabilities and Stockholders' Equity Short-term borrowings
$
45.0
$
80.0
$
4.2
Accounts payable and accrued liabilities2
1,007.0
1,014.3
1,238.4
Income taxes payable
22.6
3.1
10.0
Total current liabilities
1,074.6
1,097.4
1,252.6
Long-term debt
2,855.2
2,848.2
2,851.7
Noncurrent lease liabilities2
284.9
-
-
Other noncurrent liabilities
410.6
443.8
469.7
Stockholders' equity
421.3
664.0
669.5
Total Liabilities and Stockholders' Equity
$
5,046.6
$
5,053.4
$
5,243.5
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW DATA
(Unaudited)1
June 30,
2019
2018
Key Balance Sheet Data:
Accounts receivable, net days of sales outstanding (DSO)
79
84
Six Months Ended June
30,
(In millions)
2019
2018
Condensed Cash Flow
Data: Cash flows used for operating activities
$ (401
)
$ (557
)
Cash flows used for investing activities
(44
)
(85
)
Cash flows provided by (used for) financing activities and other
44
(209
)
Decrease in cash and equivalents
$ (400
)
$ (851
)
1
Amounts may not foot due to rounding.
2
Mattel adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019
using the modified retrospective transition method. Upon adoption,
Mattel recorded a right-of-use asset and lease liability on its
balance sheet. Prior periods were not retrospectively adjusted.
MATTEL, INC. AND SUBSIDIARIES EXHIBIT III
WORLDWIDE GROSS SALES INFORMATION (Unaudited)1
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
(In millions, except percentage
information)
2019
2018
% Change as Reported
% Change in Constant Currency
2019
2018
% Change as Reported
% Change in Constant Currency
Worldwide Gross Sales: Net
Sales
$
860.1
$
840.7
2
%
5
%
$
1,549.3
$
1,549.1
0
%
3
%
Sales Adjustments2
102.2
113.4
193.1
205.0
Gross Sales
$
962.3
$
954.1
1
%
4
%
$
1,742.4
$
1,754.1
-1
%
3
%
Worldwide Gross Sales by
Categories:3 Dolls
$
273.4
$
266.6
3
%
6
%
$
526.3
$
524.0
0
%
4
%
Infant, Toddler and Preschool
252.0
288.0
-13
-11
445.6
514.6
-13
-11
Vehicles
214.1
215.0
0
3
397.5
404.0
-2
3
Action Figures, Building Sets and Games
222.7
184.4
21
23
373.0
311.5
20
22
Gross Sales
$
962.3
$
954.1
1
%
4
%
$
1,742.4
$
1,754.1
-1
%
3
%
Supplemental Gross Sales
Disclosures Worldwide
Gross Sales by Top 3 Power Brands: Barbie
$
186.5
$
170.7
9
%
13
%
$
350.0
$
323.4
8
%
13
%
Hot Wheels
175.2
167.3
5
9
325.7
312.2
4
9
Fisher-Price and Thomas & Friends
222.4
236.2
-6
-4
394.8
424.0
-7
-4
Other
378.1
379.9
0
2
671.8
694.5
-3
-1
Gross Sales
$
962.3
$
954.1
1
%
4
%
$
1,742.4
$
1,754.1
-1
%
3
%
1
Amounts may not foot due to rounding.
2
Sales Adjustments are not allocated to individual products. As
such, Net Sales are not presented on a categories or brand level.
3
Mattel modified its reporting structure for revenues in the first
quarter of 2019 to disclose revenues by categories. Refer to Note
23, Segment Information, in the Form 10-Q for additional
information.
MATTEL, INC. AND SUBSIDIARIES
EXHIBIT IV
GROSS SALES BY SEGMENT (Unaudited)1 RECONCILIATION
OF GAAP AND NON-GAAP FINANCIAL MEASURES
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
(In millions, except percentage
information)
2019
2018
% Change as Reported
% Change in Constant Currency
2019
2018
% Change as Reported
% Change in Constant Currency
North America Segment Gross
Sales: Net Sales
$
422.9
$
412.7
2
%
3
%
$
764.3
$
738.9
3
%
4
%
Sales Adjustments2
24.5
30.2
52.5
52.4
Gross Sales
$
447.4
$
442.9
1
%
1
%
$
816.7
$
791.3
3
%
3
%
North America Gross Sales by
Categories:3 Dolls
$
93.3
$
84.1
11
%
11
%
$
173.6
$
153.4
13
%
13
%
Infant, Toddler and Preschool
142.6
161.3
-12
-11
250.6
280.1
-11
-10
Vehicles
88.6
92.2
-4
-4
173.6
175.4
-1
-1
Action Figures, Building Sets and Games
122.8
105.3
17
17
219.0
182.4
20
20
Gross Sales
$
447.4
$
442.9
1
%
1
%
$
816.7
$
791.3
3
%
3
%
Supplemental Gross Sales
Disclosures North
America Gross Sales by Top 3 Power Brands: Barbie
$
78.5
$
69.2
13
%
14
%
$
147.8
$
129.6
14
%
14
%
Hot Wheels
68.6
70.8
-3
-3
135.6
134.3
1
1
Fisher-Price and Thomas & Friends
124.6
128.5
-3
-3
221.2
228.3
-3
-3
Other
175.7
174.5
1
1
312.2
299.0
4
5
Gross Sales
$
447.4
$
442.9
1
%
1
%
$
816.7
$
791.3
3
%
3
%
1
Amounts may not foot due to
rounding.
2
Sales Adjustments are not
allocated to individual products. As such, Net Sales are not
presented on a categories or brand level.
3
Mattel modified its reporting structure for revenues in the first
quarter of 2019 to disclose revenues by categories. Refer to Note
23, Segment Information, in the Form 10-Q for additional
information.
MATTEL, INC. AND SUBSIDIARIES
EXHIBIT V
GROSS SALES BY SEGMENT (Unaudited)1 RECONCILIATION
OF GAAP AND NON-GAAP FINANCIAL MEASURES
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
(In millions, except percentage
information)
2019
2018
% Change as Reported
% Change in Constant Currency
2019
2018
% Change as Reported
% Change in Constant Currency
Total International Segment Gross
Sales: Net Sales
$
403.6
$
384.8
5
%
11
%
$
707.1
$
702.0
1
%
8
%
Sales Adjustments2
76.9
81.9
138.6
148.8
Gross Sales
$
480.5
$
466.7
3
%
9
%
$
845.7
$
850.8
-1
%
7
%
International Segment Gross
Sales: EMEA3 Net Sales
$
191.1
$
180.0
6
%
13
%
$
365.6
$
365.8
0
%
8
%
Sales Adjustments2
43.0
39.6
84.9
83.2
Gross Sales
$
234.1
$
219.5
7
%
13
%
$
450.5
$
449.1
0
%
9
%
Latin America Net Sales
$
121.2
$
116.8
4
%
9
%
$
185.7
$
180.2
3
%
9
%
Sales Adjustments2
20.1
21.7
30.9
32.8
Gross Sales
$
141.3
$
138.6
2
%
7
%
$
216.6
$
213.0
2
%
8
%
Asia Pacific3 Net Sales
$
91.3
$
88.0
4
%
9
%
$
155.8
$
156.0
0
%
5
%
Sales Adjustments2
13.7
20.6
22.9
32.7
Gross Sales
$
105.1
$
108.6
-3
%
2
%
$
178.7
$
188.7
-5
%
0
%
International Gross Sales by
Categories:4 Dolls
$
145.7
$
138.1
6
%
12
%
$
272.8
$
258.8
5
%
14
%
Infant, Toddler and Preschool
109.4
126.7
-14
-9
195.0
234.6
-17
-12
Vehicles
125.5
122.9
2
9
223.9
228.6
-2
6
Action Figures, Building Sets and Games
99.9
79.1
26
31
154.0
128.9
19
26
Gross Sales
$
480.5
$
466.7
3
%
9
%
$
845.7
$
850.8
-1
%
7
%
Supplemental Gross Sales
Disclosures International Gross Sales by Top 3 Power
Brands: Barbie
$
108.1
$
101.6
6
%
13
%
$
202.3
$
193.8
4
%
13
%
Hot Wheels
106.6
96.5
10
18
190.1
178.0
7
16
Fisher-Price and Thomas & Friends
97.8
107.7
-9
-5
173.6
195.6
-11
-6
Other
168.1
160.9
4
9
279.7
283.4
-1
5
Gross Sales
$
480.5
$
466.7
3
%
9
%
$
845.7
$
850.8
-1
%
7
%
1
Amounts may not foot due to
rounding.
2
Sales Adjustments are not
allocated to individual products. As such, Net Sales are not
presented on a categories or brand level.
3
Mattel reorganized its regional sales reporting structure in the
first quarter of 2019. As a result, the new regions are Europe, the
Middle East, and Africa (“EMEA”), Latin America, and Asia Pacific.
The Middle East, Africa, Russia, and Turkey were previously
included in the Asia Pacific region (previously Global Emerging
Markets) and are now included in EMEA (previously Europe). Prior
period amounts have been reclassified to conform to the current
period presentation.
4
Mattel modified its reporting structure for revenues in the first
quarter of 2019 to disclose revenues by categories. Refer to Note
23, Segment Information, in the Form 10-Q for additional
information.
MATTEL, INC. AND SUBSIDIARIES EXHIBIT VI
GROSS SALES BY SEGMENT (Unaudited)1 RECONCILIATION
OF GAAP AND NON-GAAP FINANCIAL MEASURES
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
(In millions, except percentage
information)
2019
2018
% Change as Reported
% Change in Constant Currency
2019
2018
% Change as Reported
% Change in Constant Currency
American Girl Segment Gross
Sales: Net Sales
$
33.5
$
43.2
-22
%
-22
%
$
78.0
$
108.2
-28
%
-28
%
Sales Adjustments
0.9
1.4
2.0
3.9
Gross Sales
$
34.4
$
44.6
-23
%
-23
%
$
80.0
$
112.0
-29
%
-28
%
1 Amounts may not foot due to rounding.
MATTEL, INC. AND
SUBSIDIARIES EXHIBIT VII SUPPLEMENTAL
FINANCIAL INFORMATION (Unaudited)1 RECONCILIATION OF GAAP
AND NON-GAAP FINANCIAL MEASURES
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
(In millions, except per share and
percentage information)
20192
20182
20192
20182
Gross Profit Gross
Profit, As Reported
$
341.4
$
253.2
$
581.2
$
472.1
Gross Margin
39.7
%
30.1
%
37.5
%
30.5
%
Adjustments: Asset Impairments
-
2.8
-
5.8
Severance and Restructuring Expenses3
3.5
-
3.5
-
Inclined Sleeper Product Recalls4
(1.3
)
-
20.6
-
Gross Profit, As Adjusted
$
343.5
$
256.0
$
605.2
$
477.9
Adjusted Gross Margin
39.9
%
30.4
%
39.1
%
30.8
%
Other Selling and Administrative
Expenses Other Selling and Administrative Expenses, As
Reported
$
308.3
$
360.0
$
609.6
$
784.6
% of Net Sales
35.8
%
42.8
%
39.3
%
50.6
%
Adjustments: Asset Impairments
-
(4.3
)
-
(6.1
)
Non-recurring Executive Compensation
-
-
-
(1.0
)
Severance and Restructuring Expenses3
(14.4
)
(47.8
)
(23.1
)
(72.7
)
Inclined Sleeper Product Recalls4
(4.4
)
-
(4.4
)
-
Sale of Assets
-
-
-
1.4
Other Selling and Administrative Expenses, As Adjusted
$
289.5
$
307.9
$
582.1
$
706.2
% of Net Sales
33.7
%
36.6
%
37.6
%
45.6
%
Operating Loss Operating
Loss, As Reported
$
(51.4
)
$
(189.2
)
$
(182.4
)
$
(465.8
)
Adjustments: Asset Impairments
-
7.1
-
11.9
Non-recurring Executive Compensation
-
-
-
1.0
Severance and Restructuring Expenses3
17.9
47.8
26.6
72.7
Inclined Sleeper Product Recalls4
3.1
-
25.0
-
Sale of Assets
-
-
-
(1.4
)
Operating Loss, As Adjusted
$
(30.4
)
$
(134.3
)
$
(130.8
)
$
(381.6
)
Other Information Toys
“R” Us Net Sales Reversal5
$
-
$
-
$
-
$
29.5
Toys “R” Us Bad Debt Expense, Net5
$
-
$
(7.0
)
$
-
$
50.3
Inclined Sleeper Product Recalls4
$
3.1
$
-
$
30.4
$
-
1
Amounts may not foot due to
rounding.
2
Toys “R” Us Net Sales Reversal and Toys “R” Us Bad Debt Expense,
Net are not presented as non-GAAP adjustments for the three and six
months ended June 30, 2019 and 2018.
3
For the three and six months ended June 30, 2019, severance and
restructuring expenses include $11.5 million related to Capital
Light initiatives of which $3.5 million was recorded to Cost of
Sales and $8.0 million was recorded to Other Selling and
Administrative Expenses.
4
Mattel recorded an estimated impact of $3.1 million and $30.4
million related to inclined sleeper product recalls for the three
and six months ended June 30, 2019, respectively. Of the $30.4
million recorded during the six months ended June 30, 2019, $5.4
million was a reduction to Net Sales for estimated retailer
returns.
5
As a result of the Toys “R” Us liquidation, Mattel reversed Net
Sales for the estimated uncollectible portion of its outstanding
receivables originating from first quarter 2018 sales. As such,
Gross Profit, As Reported includes the Cost of Sales for the
inventory sold to Toys “R” Us but excludes the corresponding Net
Sales. Additionally, during 2018, Mattel recorded Bad Debt Expense,
Net for the estimated uncollectible portion of its outstanding
receivables, net of recoveries and other reductions.
MATTEL,
INC. AND SUBSIDIARIES
EXHIBIT VII
SUPPLEMENTAL FINANCIAL INFORMATION (Unaudited)1
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
(In millions, except per share and
percentage information)
20192
20182
20192
20182
Earnings Per Share Net
Loss Per Common Share, As Reported
$
(0.31
)
$
(0.70
)
$
(0.84
)
$
(1.60
)
Adjustments: Asset Impairments
-
0.02
-
0.03
Severance and Restructuring Expenses3
0.05
0.14
0.08
0.21
Inclined Sleeper Product Recalls4
0.01
-
0.07
-
Tax Effect of Adjustments6
-
-
-
(0.03
)
Net Loss Per Common Share, As Adjusted
$
(0.25
)
$
(0.54
)
$
(0.69
)
$
(1.39
)
EBITDA and Adjusted
EBITDA Net Loss, As Reported
$
(108.0
)
$
(240.9
)
$
(291.7
)
$
(552.2
)
Adjustments: Interest Expense
46.2
43.5
93.2
84.5
Provision for Income Taxes
12.2
6.9
18.3
4.3
Depreciation
51.5
58.9
103.6
117.4
Amortization
9.9
9.5
20.3
19.7
EBITDA
11.8
(122.1
)
(56.3
)
(326.2
)
Adjustments: Asset Impairments
-
7.1
-
11.9
Shared-based Compensation
12.4
8.0
24.3
22.4
Severance and Restructuring Expenses3
14.5
47.8
23.2
72.7
Inclined Sleeper Product Recalls4
3.1
-
25.0
-
Sale of Assets
-
-
-
(1.4
)
Adjusted EBITDA
$
41.8
$
(59.2
)
$
16.2
$
(220.6
)
1
Amounts may not foot due to rounding.
2
Toys “R” Us Net Sales Reversal and Toys “R” Us Bad Debt Expense,
Net are not presented as non-GAAP adjustments for the three and six
months ended June 30, 2019 and 2018.
3
For the three and six months ended June 30, 2019, severance and
restructuring expenses include $11.5 million related to Capital
Light initiatives of which $3.5 million was recorded to Cost of
Sales and $8.0 million was recorded to Other Selling and
Administrative Expenses.
4
Mattel recorded an estimated impact of $3.1 million and $30.4
million related to inclined sleeper product recalls for the three
and six months ended June 30, 2019, respectively. Of the $30.4
million recorded during the six months ended June 30, 2019, $5.4
million was a reduction to Net Sales for estimated retailer
returns.
6
The aggregate tax effect of the adjustments is calculated by tax
effecting the adjustments by the current effective tax rate, and
dividing by the reported weighted average number of common and
potential common shares. Adjustments for the U.S. and certain
International affiliates were not tax effected because of the
valuation allowance on deferred tax assets.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190725005819/en/
News Media Dena Cook dena.cook@mattel.com
310-252-4247
Securities Analysts David Zbojniewicz
david.zbojniewicz@mattel.com 310-252-2703
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