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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: April 16, 1999
MATTEL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 001-05647 95-1567322
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File No.) Identification No.)
333 Continental Boulevard, El Segundo, California 90245-5012
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 252-2000
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N/A
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(Former name or former address, if changed since last report)
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Information to be included in the Report
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Item 5. Other Events
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On April 15, 1999, Mattel, Inc. reported a net loss of $17.9
million or $.07 per share for the quarter ended March 31, 1999,
compared to net income of $12.7 million or $.04 per share in the
first quarter of 1998. Net sales for the first quarter of 1999
were $692.1 million, down 2.0% from $705.2 million in the first
quarter of 1998. Mattel's profitability was affected by the
addition of Pleasant Company, due to the $.04 per share impact
of goodwill amortization and interest costs related to the
acquisition of that company. Increased sales, general and
administrative expense levels were also a factor in the first
quarter of 1999 and are being addressed through a business
realignment and a restructuring described below. Mattel's gross
margin was 45.8% for the first quarter of 1999, compared to
45.9% for the first quarter of 1998. On a comparable basis,
excluding the impact of Pleasant Company, inventories were down
by $31 million from the first quarter of 1998, and accounts
receivable were down by $116 million.
Mattel also announced that a planned realignment of its
operations to reduce overhead and advertising costs would
include the closure of certain of its facilities and a workforce
reduction affecting over 3,000 positions, or more than 10% of
Mattel's current employees. Based on such actions and the
anticipated completion of the merger of Mattel and The Learning
Company, Inc., Mattel reported that it expects to incur a pre-
tax charge of approximately $300 million to $350 million to be
taken in the second quarter of 1999. Approximately $75 million
of the one-time charge is expected to be related to merger
transaction costs, approximately $90 million is expected to be
related to merger integration costs, and $135 million to $185
million is expected to be related to Mattel restructuring costs.
Mattel expects the combined actions to result in cost savings of
approximately $50 million in 1999 and at least $400 million over
the following three years. However, the amount of the expected
cost savings are preliminary estimates and there can be no
assurance that Mattel's actions will result in such cost
savings.
On April 15, 1999, Mattel also announced that it will spend an
initial $50 million to launch an Internet venture, which is
expected to result in the creation of a new subsidiary later
this year, a portion of which may be offered to the public.
Mattel expects that it will be able to offset a portion of its
investment in the Internet venture with cost savings from the
restructuring discussed above. Mattel's goal is to create a
premier online destination and E-commerce site to better serve
children and their families. Mattel's strategy to reach this
goal is premised on attracting consumers to its sites by
bringing together the branded proprietary content of both Mattel
and The Learning Company, Inc. at one "Mattel.com" Web
destination. After the merger with The Learning Company, Inc.,
Mattel expects to have over 80 websites and a database of
approximately 25 million consumers.
Note:
Forward-looking statements included in this release with respect
to the financial condition, results of operations and business
of the company, which include, but are not limited to sales
levels, restructuring and integration charges, special
charges, other non-recurring charges, costs savings, operating
efficiencies and profitability, are subject to certain risks and
uncertainties that could cause actual results to differ
materially from those set forth in such statements. These
include without limitation: the company's dependence on the
timely development, introduction and customer acceptance of new
products; significant changes in buying patterns of major
customers; possible weaknesses of international markets; the
impact of competition on revenues and margins; the company's
ability to successfully integrate the operations of The Learning
Company following its merger into the company; the effect of
currency fluctuations on reportable income; unanticipated
negative results of litigation, governmental proceedings or
environmental matters; and other risks and uncertainties as may
be detailed from time to time in the company's public
announcements and SEC filings.
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MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
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MARCH 31, MARCH 31,
(In thousands, except per share amounts) 1999 1998
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<S> <C> <C>
Net Sales $ 692,116 $ 705,164
Cost of sales 375,379 381,246
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Gross Profit 316,737 323,918
Advertising and promotion expenses 92,051 98,081
Other selling and administrative expenses 209,414 183,791
Other expense, net 2,269 185
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Operating Profit Before Amortization 13,003 41,861
Amortization of intangibles 13,153 7,713
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Operating (Loss) Profit (150) 34,148
Interest expense 24,858 16,392
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(Loss) Income Before Income Taxes (25,008) 17,756
(Benefit) provision for income taxes (7,152) 5,087
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Net (Loss) Income (17,856) 12,669
Less: dividends on convertible preferred stock 1,990 1,990
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Net (Loss) Income Applicable to Common Shares $ (19,846) $ 10,679
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Net (Loss) Income Per Share - Basic (a) $ (0.07) $ 0.04
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Average Number of Common Shares
Outstanding - Basic 286,153 293,048
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</TABLE>
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(a) The impact of amortization of intangibles, net of taxes, on (loss) income
per share for the period ended March 1999 was $0.03 compared to $0.02 in
1998.
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MATTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, DEC. 31,
(In thousands) 1999 1998 1998
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<S> <C> <C> <C>
ASSETS
Cash $ 50,215 $ 331,884 $ 212,454
Accounts receivable, net 880,360 987,906 983,050
Inventories 567,658 531,623 584,358
Prepaid expenses and other current assets 290,673 251,397 277,948
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Total current assets 1,788,906 2,102,810 2,057,810
Property, plant and equipment, net 733,535 602,793 736,457
Other assets 1,454,893 738,191 1,467,898
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Total Assets $ 3,977,334 $ 3,443,794 $4,262,165
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LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 259,435 $ 18,204 $ 134,006
Current portion of long-term liabilities 33,401 13,577 33,518
Accounts payable and accrued liabilities 620,385 636,684 944,434
Income taxes payable 175,535 134,284 205,253
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Total current liabilities 1,088,756 802,749 1,317,211
Senior notes 400,000 100,000 400,000
Medium-term notes 540,500 520,500 540,500
Long-term debt 42,856 54,089 43,007
Other long-term liabilities 148,953 126,210 141,249
Stockholders' equity 1,756,269 1,840,246 1,820,198
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Total Liabilities and Stockholders' Equity $ 3,977,334 $ 3,443,794 $4,262,165
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</TABLE>
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MATTEL, INC.
Registrant
By: /s/ Robert Normile
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Robert Normile
Date: April 16, 1999 Vice President and General Counsel
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