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Mattel Reports First Quarter 2020 Financial Results
-
First quarter
Net Sales of$594 million , down 14% as reported, and down 12% in constant currency, versus prior year. -
Gross Sales of
$670 million , down 14% as reported, and down 12% in constant currency. - Reported Gross Margin of 43.0%, an improvement of 820 basis points; Adjusted Gross Margin of 43.5%, an improvement of 550 basis points.
-
Reported Operating Loss of
$150 million , compared to a prior year loss of$127 million ; Adjusted Operating Loss of$133 million , compared to a prior year loss of$97 million . -
Cash Flows Used for Operating Activities of
$174 million , an improvement of$19 million . - Global manufacturing and distribution capacity largely restored, expect to meet product demand for the second half of the year.
-
Liquidity, including cash on hand and access to
$1.6 billion senior secured revolving credit facilities, is expected to be sufficient to effectively manage through COVID-19 disruption and to continue to execute strategy. - Withdrawing previous 2020 guidance due to uncertainty related to COVID-19.
-
Mattel dedicated to community support through producing personal protective equipment for medical professionals and providing grants and toy donations.
“Our work over the past two years to develop a flexible and results-oriented organization is serving us well during this time,”
For the first quarter,
COVID-19 Business Update
The global supply chain organization has rapidly responded to the frequent and unpredictable changes occurring in various locations where
The global commercial organization has also been working with retail partners daily to navigate the dynamic landscape and evolving consumer path to purchase. The team developed and launched new promotions and marketing activation initiatives that were tailored to the new consumer behaviors. Additionally, joint business plans with retailers are being accelerated to compensate for the disruption and adapt to the retail environment, including transition to online retail and omni-channel experience.
The design and category management organizations have been quick to respond to consumer needs and find new ways to engage with Mattel’s brands. The Company recently launched the
Given the high level of uncertainty around the impact of COVID-19,
COVID-19 Community Support
Financial Overview
For the first quarter,
Gross Sales in the
Gross Sales in the International segment decreased 11% as reported, and 7% in constant currency, primarily driven by declines in Infant, Toddler and Preschool (including Fisher-Price and Thomas & Friends, and
Reported Gross Margin increased to 43.0%, versus 34.8% in the prior year’s first quarter, and Adjusted Gross Margin increased to 43.5%, versus 38.0%. The increase in Reported Gross Margin was primarily driven by the benefit of cost savings programs and the absence of the impact of the inclined sleeper product recalls. The increase in Adjusted Gross Margin was primarily driven by the benefit of Mattel’s cost savings programs.
Reported Other Selling and Administrative Expenses increased by
Sales by Categories
For the first quarter, Worldwide Gross Sales for Dolls were
Worldwide Gross Sales for Infant, Toddler and Preschool were
Worldwide Gross Sales for Vehicles were
Worldwide Gross Sales for Action Figures,
Conference Call and Live Webcast
At
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 assumptions, 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, and are currently, or in the future could be, amplified by the COVID-19 pandemic. Specific factors that might cause such a difference include, but are not limited to: (i) potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the global economy, including its impact on our sales; (ii) 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; (iii) 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; (iv) 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; (v) potential difficulties or delays
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with generally accepted accounting principles in
This earnings release and our earnings slide presentation are available on
Gross Sales
Gross Sales represent sales to customers, excluding the impact of Sales Adjustments.
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 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
Adjusted Other Selling and Administrative Expenses
Adjusted Other Selling and Administrative Expenses represents Mattel’s Reported Other Selling and Administrative Expenses, adjusted to exclude severance and restructuring expenses and the impact of the inclined sleeper product recalls, 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
Adjusted Operating Income (Loss)
Adjusted Operating Income (Loss) represents Mattel’s reported Operating Income (Loss), adjusted to exclude severance and restructuring expenses 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
Adjusted Earnings (Loss) Per Share
Adjusted Earnings (Loss) Per Share represents Mattel’s Reported Diluted Earnings (Loss) Per Common Share, adjusted to exclude 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.
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 share-based compensation, severance and restructuring expenses, and the impact of the inclined sleeper product recalls, which are not part of Mattel’s core business.
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,
About
EXHIBIT I | |||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)1 | |||||||||||||||||||
For the Three Months Ended |
|||||||||||||||||||
2020 |
2019 |
% Change as Reported |
% Change in Constant Currency |
||||||||||||||||
(In millions, except per share and percentage information) | $ Amt | % |
$ Amt | % |
|||||||||||||||
$ |
594.1 |
|
$ |
689.2 |
|
-14 |
% |
-12 |
% |
||||||||||
Cost of sales |
|
338.9 |
|
57.0 |
% |
|
449.5 |
|
65.2 |
% |
-25 |
% |
|||||||
Gross Profit |
|
255.2 |
|
43.0 |
% |
|
239.8 |
|
34.8 |
% |
6 |
% |
8 |
% |
|||||
Advertising and promotion expenses |
|
76.3 |
|
12.8 |
% |
|
69.5 |
|
10.1 |
% |
10 |
% |
|||||||
Other selling and administrative expenses |
|
328.7 |
|
55.3 |
% |
|
297.4 |
|
43.1 |
% |
11 |
% |
|||||||
Operating Loss |
|
(149.8 |
) |
-25.2 |
% |
|
(127.1 |
) |
-18.4 |
% |
18 |
% |
20 |
% |
|||||
Interest expense |
|
49.0 |
|
8.2 |
% |
|
47.0 |
|
6.8 |
% |
4 |
% |
|||||||
Interest (income) |
|
(2.1 |
) |
-0.4 |
% |
|
(2.3 |
) |
-0.3 |
% |
-8 |
% |
|||||||
Other non-operating expense, net |
|
2.1 |
|
|
1.9 |
|
|||||||||||||
Loss Before Income Taxes |
|
(198.8 |
) |
-33.5 |
% |
|
(173.6 |
) |
-25.2 |
% |
15 |
% |
15 |
% |
|||||
Provision for income taxes |
|
11.9 |
|
|
2.7 |
|
|||||||||||||
Net Loss |
$ |
(210.7 |
) |
-35.5 |
% |
$ |
(176.3 |
) |
-25.6 |
% |
20 |
% |
|||||||
Net Loss Per Common Share - Basic |
$ |
(0.61 |
) |
$ |
(0.51 |
) |
|||||||||||||
Weighted-average number of common shares |
|
346.9 |
|
|
345.9 |
|
|||||||||||||
Net Loss Per Common Share - Diluted |
$ |
(0.61 |
) |
$ |
(0.51 |
) |
|||||||||||||
Weighted-average number of common and potential common shares |
|
346.9 |
|
|
345.9 |
|
|||||||||||||
1 Amounts may not foot due to rounding. |
EXHIBIT II | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS1 | ||||||||||
2020 |
|
2019 |
|
2019 |
||||||
(In millions) | (Unaudited) | |||||||||
Assets | ||||||||||
Cash and equivalents |
$ |
499.4 |
|
$ |
380.1 |
|
$ |
630.0 |
||
Accounts receivable, net |
|
528.5 |
|
|
624.5 |
|
|
936.4 |
||
Inventories |
|
560.6 |
|
|
615.8 |
|
|
495.5 |
||
Prepaid expenses and other current assets |
|
218.5 |
|
|
274.7 |
|
|
186.1 |
||
Total current assets |
|
1,807.1 |
|
|
1,895.1 |
|
|
2,248.0 |
||
Property, plant, and equipment, net |
|
519.8 |
|
|
622.3 |
|
|
550.1 |
||
Right-of-use assets, net |
|
298.3 |
|
|
327.4 |
|
|
303.2 |
||
Other noncurrent assets |
|
2,179.2 |
|
|
2,237.6 |
|
|
2,223.9 |
||
Total Assets |
$ |
4,804.4 |
|
$ |
5,082.4 |
|
$ |
5,325.2 |
||
Liabilities and Stockholders' Equity | ||||||||||
Short-term borrowings |
$ |
150.0 |
|
$ |
- |
|
$ |
- |
||
Accounts payable and accrued liabilities |
|
963.7 |
|
|
982.0 |
|
|
1,228.9 |
||
Income taxes payable |
|
12.3 |
|
|
19.4 |
|
|
48.0 |
||
Total current liabilities |
|
1,126.0 |
|
|
1,001.4 |
|
|
1,276.9 |
||
Long-term debt |
|
2,848.9 |
|
|
2,853.5 |
|
|
2,846.8 |
||
Noncurrent lease liabilities |
|
262.6 |
|
|
294.8 |
|
|
270.9 |
||
Other noncurrent liabilities |
|
408.9 |
|
|
409.3 |
|
|
439.0 |
||
Total stockholders' equity |
|
157.9 |
|
|
523.4 |
|
|
491.7 |
||
Total Liabilities and Stockholders' Equity |
$ |
4,804.4 |
|
$ |
5,082.4 |
|
$ |
5,325.2 |
||
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW DATA (Unaudited)1 | ||||||||||
2020 |
2019 |
|||||||||
Key Balance Sheet Data: | ||||||||||
Accounts receivable, net days of sales outstanding (DSO) |
|
80 |
|
|
82 |
|
||||
Three Months Ended |
||||||||||
(In millions) |
2020 |
2019 |
||||||||
Condensed Cash Flow Data: | ||||||||||
Cash flows used for operating activities |
$ |
(174 |
) |
$ |
(193 |
) |
||||
Cash flows used for investing activities |
|
(81 |
) |
|
(19 |
) |
||||
Cash flows provided by (used for) financing activities and other |
|
125 |
|
|
(2 |
) |
||||
Decrease in cash and equivalents |
$ |
(131 |
) |
$ |
(214 |
) |
||||
1 Amounts may not foot due to rounding. |
EXHIBIT III | |||||||||||
WORLDWIDE GROSS SALES INFORMATION (Unaudited)1 | |||||||||||
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||||
For the Three Months Ended |
|||||||||||
(In millions, except percentage information) |
2020 |
2019 |
% Change as Reported |
% Change in Constant Currency |
|||||||
Worldwide Gross Sales: | |||||||||||
$ |
594.1 |
$ |
689.2 |
-14 |
% |
-12 |
% |
||||
Sales Adjustments2 |
|
75.9 |
|
90.9 |
|||||||
Gross Sales |
$ |
670.0 |
$ |
780.1 |
-14 |
% |
-12 |
% |
|||
Worldwide Gross Sales by Categories: | |||||||||||
Dolls |
$ |
225.9 |
$ |
252.9 |
-11 |
% |
-9 |
% |
|||
Infant, Toddler and Preschool |
|
140.3 |
|
193.6 |
-28 |
|
-26 |
|
|||
Vehicles |
|
185.7 |
|
183.4 |
1 |
|
4 |
|
|||
Action Figures, |
|
118.1 |
|
150.3 |
-21 |
|
-20 |
|
|||
Gross Sales |
$ |
670.0 |
$ |
780.1 |
-14 |
% |
-12 |
% |
|||
Supplemental Gross Sales Disclosure | |||||||||||
Worldwide Gross Sales by Top 3 Power Brands: | |||||||||||
Barbie |
$ |
147.5 |
$ |
163.5 |
-10 |
% |
-8 |
% |
|||
Hot Wheels |
|
158.6 |
|
150.5 |
5 |
|
8 |
|
|||
Fisher-Price and Thomas & Friends |
|
128.8 |
|
172.4 |
-25 |
|
-24 |
|
|||
Other |
|
235.1 |
|
293.7 |
-20 |
|
-19 |
|
|||
Gross Sales |
$ |
670.0 |
$ |
780.1 |
-14 |
% |
-12 |
% |
|||
1 Amounts may not foot due to rounding. | |||||||||||
2 Sales Adjustments are not allocated to individual products. As such, |
EXHIBIT IV |
|||||||||||
GROSS SALES BY SEGMENT (Unaudited)1 | |||||||||||
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||||
For the Three Months Ended |
|||||||||||
(In millions, except percentage information) |
2020 |
2019 |
% Change as Reported |
% Change in Constant Currency |
|||||||
North America Segment Gross Sales: | |||||||||||
$ |
287.6 |
$ |
341.4 |
-16 |
% |
-16 |
% |
||||
Sales Adjustments2 |
|
18.2 |
|
28.0 |
|||||||
Gross Sales |
$ |
305.8 |
$ |
369.4 |
-17 |
% |
-17 |
% |
|||
North America Gross Sales by Categories: | |||||||||||
Dolls |
$ |
73.9 |
$ |
80.3 |
-8 |
% |
-8 |
% |
|||
Infant, Toddler and Preschool |
|
76.6 |
|
108.0 |
-29 |
|
-29 |
|
|||
Vehicles |
|
88.7 |
|
85.0 |
4 |
|
4 |
|
|||
Action Figures, |
|
66.5 |
|
96.2 |
-31 |
|
-31 |
|
|||
Gross Sales |
$ |
305.8 |
$ |
369.4 |
-17 |
% |
-17 |
% |
|||
Supplemental Gross Sales Disclosure | |||||||||||
North America Gross Sales by Top 3 Power Brands: | |||||||||||
Barbie |
$ |
67.8 |
$ |
69.3 |
-2 |
% |
-2 |
% |
|||
Hot Wheels |
|
74.1 |
|
67.1 |
11 |
|
11 |
|
|||
Fisher-Price and Thomas & Friends |
|
69.9 |
|
96.6 |
-28 |
|
-28 |
|
|||
Other |
|
94.0 |
|
136.5 |
-31 |
|
-31 |
|
|||
Gross Sales |
$ |
305.8 |
$ |
369.4 |
-17 |
% |
-17 |
% |
|||
1 Amounts may not foot due to rounding. | |||||||||||
2 Sales Adjustments are not allocated to individual products. As such, |
EXHIBIT V | |||||||||||
GROSS SALES BY SEGMENT (Unaudited)1 | |||||||||||
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||||
For the Three Months Ended |
|||||||||||
(In millions, except percentage information) |
2020 |
2019 |
% Change as Reported |
% Change in Constant Currency |
|||||||
International Segment Gross Sales: | |||||||||||
$ |
269.4 |
$ |
303.4 |
-11 |
% |
-8 |
% |
||||
Sales Adjustments2 |
|
56.8 |
|
61.8 |
|||||||
Gross Sales |
$ |
326.1 |
$ |
365.2 |
-11 |
% |
-7 |
% |
|||
International Gross Sales by Geographic Area: | |||||||||||
EMEA | |||||||||||
$ |
173.3 |
$ |
174.5 |
-1 |
% |
2 |
% |
||||
Sales Adjustments2 |
|
42.0 |
|
41.9 |
|||||||
Gross Sales |
$ |
215.3 |
$ |
216.3 |
- |
% |
3 |
% |
|||
$ |
51.3 |
$ |
64.5 |
-20 |
% |
-14 |
% |
||||
Sales Adjustments2 |
|
8.4 |
|
10.8 |
|||||||
Gross Sales |
$ |
59.7 |
$ |
75.3 |
-21 |
% |
-14 |
% |
|||
$ |
44.8 |
$ |
64.4 |
-31 |
% |
-28 |
% |
||||
Sales Adjustments2 |
|
6.4 |
|
9.1 |
|||||||
Gross Sales |
$ |
51.2 |
$ |
73.6 |
-30 |
% |
-28 |
% |
|||
International Gross Sales by Categories: | |||||||||||
Dolls |
$ |
113.9 |
$ |
127.1 |
-10 |
% |
-7 |
% |
|||
Infant, Toddler and Preschool |
|
63.8 |
|
85.6 |
-26 |
|
-22 |
|
|||
Vehicles |
|
96.9 |
|
98.4 |
-2 |
|
3 |
|
|||
Action Figures, |
|
51.5 |
|
54.1 |
-5 |
|
-1 |
|
|||
Gross Sales |
$ |
326.1 |
$ |
365.2 |
-11 |
% |
-7 |
% |
|||
Supplemental Gross Sales Disclosure | |||||||||||
International Gross Sales by Top 3 Power Brands: | |||||||||||
Barbie |
$ |
79.7 |
$ |
94.2 |
-15 |
% |
-12 |
% |
|||
Hot Wheels |
|
84.5 |
|
83.5 |
1 |
|
6 |
|
|||
Fisher-Price and Thomas & Friends |
|
58.8 |
|
75.8 |
-22 |
|
-19 |
|
|||
Other |
|
103.1 |
|
111.7 |
-8 |
|
-4 |
|
|||
Gross Sales |
$ |
326.1 |
$ |
365.2 |
-11 |
% |
-7 |
% |
|||
1 Amounts may not foot due to rounding. | |||||||||||
2 Sales Adjustments are not allocated to individual products. As such, |
EXHIBIT VI | |||||||||||
GROSS SALES BY SEGMENT (Unaudited)1 | |||||||||||
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||||||
For the Three Months Ended |
|||||||||||
(In millions, except percentage information) |
2020 |
2019 |
% Change as Reported |
% Change in Constant Currency |
|||||||
American Girl Segment Gross Sales: | |||||||||||
$ |
37.2 |
$ |
44.4 |
-16 |
% |
-16 |
% |
||||
Sales Adjustments |
|
0.9 |
|
1.1 |
|||||||
Gross Sales |
$ |
38.1 |
$ |
45.6 |
-16 |
% |
-16 |
% |
|||
1 Amounts may not foot due to rounding. |
EXHIBIT VII | |||||||
SUPPLEMENTAL FINANCIAL INFORMATION (Unaudited)1 | |||||||
RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES | |||||||
For the Three Months Ended |
|||||||
(In millions, except per share and percentage information) |
2020 |
2019 |
|||||
Gross Profit | |||||||
Gross Profit, As Reported |
$ |
255.2 |
|
$ |
239.8 |
|
|
Gross Margin |
|
43.0 |
% |
|
34.8 |
% |
|
Adjustments: | |||||||
Severance and Restructuring Expenses |
|
3.1 |
|
|
- |
|
|
Inclined Sleeper Product Recalls2 |
|
- |
|
|
21.9 |
|
|
Gross Profit, As Adjusted |
$ |
258.2 |
|
$ |
261.7 |
|
|
Adjusted Gross Margin |
|
43.5 |
% |
|
38.0 |
% |
|
Other Selling and Administrative Expenses | |||||||
Other Selling and Administrative Expenses, As Reported |
$ |
328.7 |
|
$ |
297.4 |
|
|
% of |
|
55.3 |
% |
|
43.1 |
% |
|
Adjustments: | |||||||
Severance and Restructuring Expenses |
|
(7.5 |
) |
|
(8.7 |
) |
|
Inclined Sleeper Product Recalls2 |
|
(6.3 |
) |
|
- |
|
|
Other Selling and Administrative Expenses, As Adjusted |
$ |
314.9 |
|
$ |
288.7 |
|
|
% of |
|
53.0 |
% |
|
41.9 |
% |
|
Operating Loss | |||||||
Operating Loss, As Reported |
$ |
(149.8 |
) |
$ |
(127.1 |
) |
|
Adjustments: | |||||||
Severance and Restructuring Expenses |
|
10.6 |
|
|
8.7 |
|
|
Inclined Sleeper Product Recalls2 |
|
6.3 |
|
|
21.9 |
|
|
Operating Loss, As Adjusted |
$ |
(133.0 |
) |
$ |
(96.5 |
) |
|
Other Information | |||||||
Inclined Sleeper Product Recalls2 |
$ |
6.3 |
|
$ |
27.3 |
|
|
1 Amounts may not foot due to rounding. | |||||||
2 For the three months ended |
|||||||
For the Three Months Ended |
|||||||
(In millions, except per share and percentage information) |
2020 |
2019 |
|||||
Earnings Per Share | |||||||
Net Loss Per Common Share, As Reported |
$ |
(0.61 |
) |
$ |
(0.51 |
) |
|
Adjustments: | |||||||
Severance and Restructuring Expenses |
|
0.03 |
|
|
0.03 |
|
|
Inclined Sleeper Product Recalls2 |
|
0.02 |
|
|
0.06 |
|
|
Net Loss Per Common Share, As Adjusted |
$ |
(0.56 |
) |
$ |
(0.42 |
) |
|
EBITDA and Adjusted EBITDA | |||||||
Net Loss, As Reported |
$ |
(210.7 |
) |
$ |
(176.3 |
) |
|
Adjustments: | |||||||
Interest Expense |
|
49.0 |
|
|
47.0 |
|
|
Provision for Income Taxes |
|
11.9 |
|
|
2.7 |
|
|
Depreciation |
|
43.7 |
|
|
52.1 |
|
|
Amortization |
|
10.0 |
|
|
10.4 |
|
|
EBITDA |
|
(96.2 |
) |
|
(64.1 |
) |
|
Adjustments: | |||||||
Share-based Compensation |
|
14.3 |
|
|
11.9 |
|
|
Severance and Restructuring Expenses |
|
10.3 |
|
|
8.7 |
|
|
Inclined Sleeper Product Recalls2 |
|
6.3 |
|
|
21.9 |
|
|
Adjusted EBITDA |
$ |
(65.4 |
) |
$ |
(21.7 |
) |
|
1 Amounts may not foot due to rounding. | |||||||
2 For the three months ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200505005926/en/
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Source: