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Mattel Earnings Lower Than Last Year

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Mattel reported 2005 first quarter financial results including net income of $6.5 million, or $0.02 per share, compared to last year’s first quarter net income of $9.0 million, or $0.02 per share.

“Following last year’s encouraging holiday season, our early 2005 results were disappointing,” said Robert A. Eckert, chairman and chief executive officer of Mattel. “We will be adjusting programs for the balance of the year with the goal of continuing to build market share and improving financial performance.”

For the quarter, net sales were $783.1 million, flat compared to $780.9 million last year, which included a benefit from changes in currency exchange rates of 2 percentage points. On a regional basis, first quarter gross sales decreased 5 percent in the U.S., and were up 6 percent in international markets, which included a benefit from changes in currency exchange rates of 4 percentage points. Operating income for the quarter was down 57 percent at $5.5 million, primarily due to lower gross margin.

The company’s debt-to-total-capital ratio of 20.2 percent is in line with the company’s long-term goal. Consistent with the seasonality of the business, during the quarter the company’s cash and equivalents declined by approximately $378 million, compared with a decline of approximately $365 million in last year’s first quarter.

Mattel Brands

For the first quarter, worldwide gross sales for the Mattel Brands business unit were $514.4 million, a 3 percent decrease versus the prior year’s first quarter. Worldwide gross sales for the Barbie brand were down 15 percent. Worldwide gross sales of Other Girls Brands, which includes Polly Pocket! and several new brand introductions, including Winx Club, Doggie Daycare and Pound Puppies, were up 10 percent. Worldwide gross sales for the Wheels category, which includes the Hot Wheels, Matchbox and Tyco R/C brands, were down 5 percent. Worldwide gross sales for the Entertainment business, which includes Games and Puzzles, were up 18 percent for the quarter, primarily driven by higher sales in male-action entertainment properties, including Robots, Batman and Megaman.

Fisher-Price Brands

First quarter worldwide gross sales for the Fisher-Price Brands business unit, which includes the Fisher-Price, Little People, Rescue Heroes and Power Wheels brands, were $264.4 million, or flat versus the prior year. This reflects strong growth in Fisher-Price Friends worldwide and Core Fisher-Price internationally, offset by declines in shipments of Core Fisher-Price in the U.S., despite particularly strong performance at retail.

American Girl Brands

First quarter gross sales for the American Girl Brands business unit, which offers American Girl branded products direct to consumers, were $67.6 million, up 25 percent, driven by the January launch of a new American Girl Today doll and continued strong performance of the American Girl retail stores.

American Jobs Creation Act of 2004 (“Jobs Act”) Update

As previously communicated, the company has been studying whether, or to what extent, the company might repatriate foreign earnings under the Jobs Act. Earlier this week, Mattel completed and approved its plan for repatriation and reinvestment relating to the Jobs Act. Over the course of this year, Mattel expects to repatriate up to approximately $2.4 billion in foreign earnings and estimates that this will result in a tax liability of approximately $180 million, which will be included in the provision for income taxes in the second quarter. The amount of this estimated tax liability is based on existing law and does not include the potentially favorable effects of proposed changes to the law.

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Mattel Earnings Lower Than Last Year
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