Annual Report Financial Analysis Project Mattel Inc Finance Essay

Annual Report Financial Analysis Project Mattel Inc Finance Essay

The name of the company our group is traveling to analyse is Mattel, Inc. which is the planetary leader in the design, industry and selling of playthings and household goods. The Mattel includes such trade names as BarbieA® , the most celebrated manner doll of all time presented in the universe, Hot WheelsA® , MatchboxA® , American GirlA® , RadicaA® and Tyco R/CA® , Fisher-PriceA® trade names, which consist of Little PeopleA® , Power WheelsA® and a broad scope of entertainment-inspired plaything lines. Company ‘s merchandises consist of manner dolls and accoutrements, vehicles and playsets, games and mystifiers. Mattel, Inc. serves as a publishing house of advice and activity books, every bit good as magazines, such as the American Girl. Company sells its goods to retail merchants, every bit good as price reduction and free-standing plaything shops, concatenation shops, section shops, and other retail mercantile establishments ; jobbers ; and distribution centres. Mattel markets its merchandises both straight and through its official Web site, and agents and distributers. Mattel sells its productions throughout the universe, with about half of its gross revenues coming from outside the United States. Mattel ‘s aboriginal mark market is of class kids. On the other manus, some of Mattel ‘s electronic and board games have been designed for older clients ‘ scope, from adolescents to grownups.

In 2010 FORTUNE Magazine officially included Mattel in the list of “ 100 Best Companies to Work For ” for the 3rd back-to-back twelvemonth. Mattel was besides ranked among Corporate Responsibility Magazine ‘s “ 100 Best Corporate Citizens ” and “ World ‘s Most Ethical Companies. ” Mattel provides occupations to merely about 27,000 people in 43 states and sells its merchandises in more than 150 states. Mattel ‘s vision is to be the universe ‘s premier toy brands-today and tomorrow.

One of the major jobs Mattel is presently confronting is diminishing involvement in company ‘s merchandises due to the aggressive popularity of video games. The plaything industry in which the company operates is considered to be slow-growing now, as kids chose digital amusements over existent playthings. Furthermore, net income borders at Mattel being compressed by macro-economic factors such as force per unit area from retail merchants and increasing input and distribution costs. Fluctuations in monetary values for oil affected input costs for doing plastic-based playthings and had its affect on distribution costs for presenting merchandises from mills located in Asia to other universe districts.

However, Mattel has made a first measure to entryway of the universe of the electronic game industry when it acquired Radica Games in October 2006. Mattel has besides broadened its mixture of traditional playthings, by adding licencing contracts with WWE Wrestling and HIT Entertainment.

Mattel, Inc. operates in highly-competitive environment, as US toy fabricating industry includes about 900 companies with combined one-year gross of $ 5 billion. Mattel is one of the major companies in toy industry every bit good as its chief rivals Hasbro, and JAKKS Pacific. Among secondary rivals of Mattel are LEGO, Bandai and video game makers such as Electronic Humanistic disciplines ( ERTS ) , Microsoft ( MSFT ) , Sony ( SNE ) , and Atari ( ATAR ) .

Harmonizing to geographical gross revenues Mattel groups its concern into two divisions: Domestic ( North America ) and International. Mattel delivers the same scope of merchandises both domestically and abroad. Mattel ‘s international gross revenues presented 49 % of its gross gross revenues in 2008. Europe is Mattel ‘s primeval market after domestic in North America. In add-on, in 2008, domestic gross revenues decreased by 2 % while international gross revenues declined merely by 1 % .

Mattel spreads out its merchandises into three major sections:

1. Mattel Boys & A ; Girls Brands ( 56 % of gross revenues )

This trade name group is the major 1, as it includes chiefly all Mattel ‘s traditional merchandises and licencing contracts with Disney ( DIS ) , Time Warner ( TWX ) , and DC Comics. The Girls trade names are Barbie, Polly Pocket! , and Disney Classics ; the Boys trade names are Hot Wheels, Matchbox, Tyco R/C trade names, and licensed DC Comics merchandises. Radica Games which was acquired by Mattel in 2006 is besides included in this section. During 2008 gross gross revenues of this trade name group declined by 2 % and in 2009 gross gross revenues decreased farther by 10 % and resulted in $ 3.29 billion.

2. Fisher-Price Brands ( 37 % of gross revenues )

This trade name group consists of merchandises designed for younger kids. The major trade names in this section are Fiscer-Price, Little People, BabyGear, View-Master, and licensed merchandises from Nickelodeon ( Dora the Explorer and Go-Diego-Go ) , Sesame Street, and Disney ( Winnie the Pooh ) . In 2008 gross gross revenues for the Fisher-Price group raised by 1 % worldwide, in 2009, they gross gross revenues were $ 2.17 billion as they reduced by 8 % .

3. American Girl Brands ( 7 % of gross revenues )

American Girl is a subordinate of Mattel. It delivers bulk of its merchandises straight to buyers in the U.S. Furthermore, a scope of American Girl doll retail shops are operated throughout the state. American Girl trade name specializes on production of dolls, books, apparels, playthings, and accoutrements for misss of the age 3 and up. In 2008 American Girl gross revenues increased by 7 % largely due to let go of of the film Kit Kittredge: An American Girl. This movie led to bigger gross revenues of dolls and merchandises related to it. In 2009, American Girl Brands had gross gross revenues of $ 462.9 million.

During 2009, Mattel strengthened control over its supply concatenation and the company itself by doing some alterations in substructure, cut downing its capital disbursement by making merely business-critical projects.controlling costs and diminishing disbursals and pull offing its workers. The consequences of the difficult work of the companies were: improved profitableness, a stronger balance sheet, and improved hard currency flow, which Mattel used to take down debt, increase hard currency balances.

aˆ? Because of the addition in monetary value and in net cost nest eggs related to Mattel ‘s Global Cost Leadership plan, gross net income as a per centum of net gross revenues increased from 45.4 % in 2008 to 50.0 % in 2009.

aˆ? Because of the higher gross net income, lower publicity and other administrative disbursals runing income increased from $ 541.8 million in 2008 to $ 731.2 million in 2009.

aˆ? The Global Cost Leadership plan ‘s gross costs nest eggs of about $ 164 million during 2009

aˆ? The addition of hard currency flows from operations was from $ 436.3 million in 2008 to $ 945.0 million in 2009.

aˆ? The lessening of capital outgos was from $ 198.8 million in 2008 to $ 120.5 million in 2009.

Mattel besides designed its Global Cost Leadership Program to better operating efficiencies, profitableness and operating hard currency flows. The major points within this plan are:

aˆ? A planetary decrease in Mattel ‘s professional work force of about 1,000 employees

aˆ? Coordination of a strategic program how to take down costs and better efficiencies

aˆ? Designing extra enterprises designed to better such countries as originative bureau partnerships, legal services, and distribution.

By the terminal of 2010 Mattel ‘s Global Cost Leadership plan is intended to bring forth about $ 180 million to $ 200 million of cumulative cyberspace cost nest eggs.

Consequences of Operations 2009 Compared to 2008

Net income for 2009 was $ 528.7 million, or $ 1.45 per diluted portion as compared to net income of $ 379.6 million, or $ 1.04 per diluted portion, for 2008. Net income for 2009 was influenced by net revenue enhancement benefits of $ 28.8 million.

Gross net income as a per centum of net gross revenues changed from 45.4 % in 2008 to 50.0 % in 2009. The addition was because the monetary values increased. Income before income revenue enhancements as a per centum of net gross revenues increased to 12.2 % in 2009 from 8.2 % in 2008. This happened because of higher gross net income and lower advertisement, publicity and administrative disbursals. Net gross revenues for 2009 were $ 5.43 billion, an 8 % lessening as compared to $ 5.92 billion in 2008. Gross gross revenues within the US decreased 4 % from 2008. Gross gross revenues in international markets decreased 13 % as compared to 2008. Cost of gross revenues decreased by $ 517.4 million, or 16 % , from $ 3.23 billion in 2008 to $ 2.72 billion in 2009 as compared to an 8 % lessening in net gross revenues. The lessening from 2008 was because lower gross revenues volume, cost nest eggs from Mattel ‘s Global Cost Leadership plan, and lower input costs. Gross net income as a per centum of net gross revenues increased from 45.4 % in 2008 to 50.0 % in 2009. This addition happened because of the addition in monetary values and net cost nest eggs related to the Global Cost Leadership plan. Ad and publicity disbursals decreased to 11.2 % of net gross revenues in 2009, from 12.2 % of net gross revenues in 2008, due chiefly to take down gross revenues volume in 2008 and nest eggs of about $ 14 million related to Mattel ‘s Global Cost Leadership plan. Other merchandising and administrative disbursals were $ 1.37 billion in 2009, or 25.3 % of net gross revenues in 2009 as compared to $ 1.42 billion in 2008, or 24.1 % of net gross revenues. Interest disbursal was $ 71.8 million in 2009 as compared to $ 81.9 million in 2008, because of lower norm adoptions and lower mean involvement rates. Interest income decreased from $ 25.0 million in 2008 to $ 8.1 million in 2009 due to lower mean involvement rates on lower norm hard currency balances. Other non-operating disbursal was $ 7.4 million in 2009 as compared to other non-operating income of $ 3.1 million in 2008. The alteration in other non-operating income/expense foremost of all was because of foreign currency exchange additions and losingss.

Mattel ‘s revenue enhancement rate on income before income revenue enhancements decreased-it was 22.2 % in 2008 and 19.9 % in 2009. Mattel is be aftering to utilize its free hard currency flows to put in strategic acquisitions and to return financess to shareholders through hard currency dividend. Anyways there is no confidence that Mattel will hold strong hard currency flows from runing activities or accomplish its targeted ends for puting activities even though the ability to successfully implement its program is straight dependent on Mattel ‘s ability to bring forth strong hard currency flows from operating activities.

Cash flows generated from operating activities were $ 436.3 million in 2008 and increase to $ 945.0 million in 2009. This addition was because of higher profitableness and lower working capital demands.

Cash flows used for puting activities were higher in 2008 than in 2009 because of the lower purchases of belongings, works, and equipment, an addition in other investings in 2008 and lower payments for concerns. Because of the higher purchase of tools, belongings, works, and equipment hard currency flows used for puting activities decreased to $ 33.5 million during 2009.

Because of lower portion repurchases, revenue enhancement benefits, and higher returns from the exercising of stock options hard currency flows used for funding activities decreased to $ 376.1 million in 2009 from $ 395.7 million in 2008. During 2008, Mattel repurchased 4.9 million portions at a cost of $ 90.6 million and during 2009, Mattel did non buy back any portions of its common stock. In 2009, 2008, and 2007, Mattel paid a dividend per portion of $ 0.75 to holders of its common stock.

The addition in Mattel ‘s hard currency and equivalents of $ 499.3 million from 2008 was by hard currency flows generated from runing activities of $ 945.0 million, due to higher profitableness and lower working capital demands. Histories receivable decreased $ 124.2 million 2008 to $ 749.3 million in 2009 bettering yearss of gross revenues outstanding. Inventories decreased from $ 130.3 million in2008 to $ 355.7 million in 2009, foremost of all because the lower costs of bring forthing stock list in 2009. There was a lessening in histories collectible and accumulated liabilities from $ 102.6 million in 2008 to $ 968.6 million in 2009, foremost of all because of the sum of payments of histories collectible and assorted accrued liability balances. The current part of long-run debt decreased $ 100.0 million to $ 50.0 million in 2009 as compared to 2008 due to the refunds of $ 100.0 million of the 2006 Senior Notes and $ 50.0 million of Medium-term notes.

Mattel ‘s focal point for 2010 is to beef up its work on long-run profitableness ends such as: to accomplish gross border of about 50 % , publicizing disbursal of about 11 % to 13 % , and other merchandising and administrative disbursals of about 20 % , which should ensue in operating borders of about 15 % to 20 % . Mattel will go on to pull off its concern based on realistic gross premises, but is more optimistic about its gross in 2010 based on the impulse of its nucleus trade names from 2009, strong partnerships for accredited trade names in 2010, including WWEA® Wrestling, Disney/ Pixar ‘s Toy StoryA® , and HIT Entertainmenta„? ‘s Thomas and FriendsA® , and its evergreen licensed belongingss. ( Mattel Annual Report, 2009 )

Common ratios

Liquidity ratios are usedA for rating of the company ‘s ability to pay off itsA short-terms debts obligations.A So, higher ratios indicate company ‘s better capacity for covering short-run debts.

2007

2008

2009

Current ratio

1,65

1,89

2,41

Current ratio is above 1 which means that the company is able to pay offA its duties if they came due at some point, and that the company is efficient.

Quick ratio

1,19

1,30

1,87

The speedy ratioA estimations company’sA ability to meetA its short-run duties withA its most liquid assets. In comparing to current ratio, speedy ratio excludes assets that can be hard to change over into hard currency rapidly, f.i. stock lists. In 2009 speedy ratio increased significantly in comparing to the old old ages due to increase in hard currency and lessening in current liabilities.

Receivable turnover

6,17

6,35

6,69

In 2009 Mattel was more effectual in widening recognition and roll uping debts, moreover, company was utilizing its assets more expeditiously.

Dayss ‘ gross revenues uncollected

59,15

57,66

54,54

Estimates mean figure of yearss that a company needs for roll uping gross after a sale has been made.A Mattel sellsA its merchandise to retail merchants on recognition and it takes longer to collectA money, than if the company was selling production for hard currency. In 2009 this ratio decreased, which means that the company started to roll up grosss faster.

Inventory turnover

7,87

7,07

6,45

Shows how many timesA Mattel’sA stock list is sold and replaced over an accounting period. Inventory turnover decreased in 2009due to diminish in gross revenues.

Dayss ‘ stock list on manus

46,41

51,76

56,55

In 2009 stock list stayed on manus for more yearss than in 2008 due to diminishing demand for the company ‘s merchandise being sold.

Payabless ‘ turnover

12,33

13,93

Payabless ‘ turnover increased from 2008 to 2009, which meansA that the company is paying off its providers at a faster rate.

Dayss ‘ collectible

29,67

26,20

In 2009 it took fewer yearss for the company to pay its trade creditors, than in 2008.

Profitability Ratios are used to measure company ‘s ability to generateA net incomes comparing toA its disbursals and costs incurred during an accounting period.

Net income Margin

0,10

0,06

0,10

In 2009 Mattel had $ 0,10 of net income for each dollar of gross revenues, while in 2008 this sum was equal to $ 0,06, due to unfavourable economic conditions.

Asset turnover

1,22

1,25

1,14

In 2009 plus turnover decreased comparing to 2008 ; therefore, company was utilizing its assets in bring forthing gross revenues ( or cyberspace grosss ) less expeditiously.

Tax return on assets

0,12

0,08

0,11

Tax return on assets increased from 2008 to 2009, which means that the Mattel was more effectual in bring forthing its net incomes. The aboriginal ground of this addition was raise in net income from 2008 to 2009. In add-on, in 2008 company ‘s net income was smaller due to fiscal crisis that hit the planetary plaything industry. So, in 2009 return on assets about came back to its value before the crisis.

Tax return on equity

0,26

0,17

0,23

Tax return on equityA estimations company ‘s profitabilityA by bespeaking how muchA net income a company generatesA with the money invested by stockholders. Mattel ‘s return on equity every bit good as return on assets increased from 2008 to 2009.

Long-run Solvency Ratios step company ‘s ability to run into long-run duties. These ratios provide appraisal of company ‘s ability to prolong run intoing its debt duties.

Debt to equity ratio

1,05

1,16

0,46

Debt to equity ratio shows what proportion of equity and debt is used to finance company ‘s assets. In 2009 ratio was below 1 which means that equity provided bulk of the funding used to finance assets, while in 2008 bulk of the funding was provided by debt, so the ratio was greater than 1. Therefore, in 2009 Mattel was less exposed to involvement rate additions and creditor jitteriness

Interest coverage ratio

10,91

6,95

10,19

Interest coverage ratio is used to gauge how easy company can pay involvement on outstanding debt. The higher the involvement coverage ratio, the lower the company ‘s debt load and the possibility of bankruptcy or default is smaller. So, in 2009 Mattel was in better state of affairs than in 2008 as the company ‘s involvement coverage ratio increased.

Cash Flow Adequacy Ratios is a step of a company ‘s ability to bring forth hard currency sufficient to pay company ‘s debts, reinvest in its operations and do distributions ( dividends ) to proprietors.

Cash flow output

0,93

1,15

1,79

Cash flow output ratio is used to cipher company ‘s ability to bring forth operating hard currency flows in relation to net income. In 2009 hard currency flow output ratio increased in comparing to old old ages, which means that Mattel was more efficient in 2009.

Cash flows to gross revenues

9 %

7 %

17 %

This ratio provides information about company ‘s ability to turn gross revenues into hard currency. In 2009 hard currency flows to gross revenues ratio increased and was equal to about 17 cents of operating hard currency flow in every gross revenues dollar, while in 2008 ratio was equal to 7 cents.

Cash flows to assets

0,12

0,09

0,20

Cash flows to assets ratio estimates the hard currency a company can bring forth in relation to its assets size. In 2009 ratio increased, hence company has improved its ability to bring forth hard currency.

Free hard currency flow

Net hard currency Flows from Op. Act. – Dividends – Net Capital Outgos

N/A

894799,00

1419216,00

Free hard currency flow indicates the hard currency that company can bring forth afterA puting out the money required to keep or spread out its plus base.A In 2009 free hard currency flow increased comparing to 2008 due to increase in net hard currency flows from operating activities.

Market Strength Ratios supply information to the investors about the upward or downward tendencies of the market.

Price/Earnings ( P/E ) ratio

11,75

23,78

11,07

This ratio evaluates company ‘s current portion monetary value compared to its per-share net incomes. P/E ratio decreased from 2008 to 2009, due to diminish in market monetary value per portion. Lower P/EA ratio indicates that investors are expectingA lower earningsA growthA in the hereafter in relation to companies with higher P/E.

Dividends yield

0,04

0,03

0,05

Dividends yield ratio estimates how much company pays out in dividends each twelvemonth in relation to its portion price.A In 2009 dividends yield increased, so, Mattel ‘s investors were gaining greater return on their portions.