Mattel Annual Report 2011 Click to play! Please visit: www.Mattel.com/AnnualReport The imagination of children inspires our innovation. Annual Report 2011 80706_MTL_AR11_Cover.indd 1 3/7/12 5:34 PM Each and every year, Mattel’s product line-up encompasses some of the most original and creative toy ideas in the world. These ideas have been winning the hearts of children, the trust of parents and the recognition of peers for more than 65 years. 80706_MTL_AR11_Text.indd 2 3/7/12 8:44 PPMM To Our Shareholders: am excited to be Mattel’s sixth environment. The year proved Chief Executive Offi cer in 67 to be a transition period for years, and honored to continue Fisher-Price with the expiration the legacy of such visionaries of the Sesame Street license as Mattel founders Ruth and and our strategic re-positioning Elliot Handler; Herman Fisher of the brand. and Irving Price, the name- sakes of Fisher-Price; Pleasant We managed our business Rowland, founder of American accordingly as these challenges Girl; and Reverend W. V. Awdry, played out during the year. We creator of Thomas & Friends®. maintained momentum in our core brands, such as Barbie®, First and foremost, I would like Hot Wheels®, American Girl® to acknowledge and thank and our new brand franchise, Bob Eckert for his tremendous Monster High®, as well as with contributions to the company key entertainment properties, during the last decade. Bob is such as Disney Princess® and a great business partner, friend CARS 2®. As a result, 2011 and mentor, and I am fortunate marks our third consecutive to still be working closely with year of solid performance: him as he remains Chairman revenues and operating of the Board. income grew by 7% and 15%, respectively; our portfolio of Looking back on 2011, it was brands performed well around a year of some signifi cant the globe; Point of Sale (POS) challenges. Most notably, the grew nicely; and we gained retail environment continued to category share according to be cautious throughout 2011 NPD’s most recent data. In due to retailers’ concerns about fact, Mattel had four of the consumer spending in the top fi ve properties for the 2011 uncertain global economic holiday season.1 1 NPD Data, US Toy Industry, Q4 2011 3 80706_MTL_AR11_Text.indd 3 3/13/12 1:40 PM In 2011, we continued to build ability front, we announced the Effective with this year’s on our operating margin im- Mattel Sustainable Sourcing stockholder meeting, Tully M. provements by delivering gross Principles, which will advance Friedman, a 28-year Mattel margins consistent with our the use of sustainably-sourced director, and G. Craig Sullivan, long-term target of about 50% paper and wood fi ber in our an 11-year Mattel director, for the third year in a row and packaging and products. will retire from Board service. leveraging Mattel’s scale. Mattel I want to personally thank remained disciplined All in all, we are proud of Tully and Craig for their years and generated approximately Mattel’s performance in 2011! of service to Mattel and for $665 million in cash fl ow from their thought-leadership during operations, which the Board of their tenures. In the wake of Directors deployed consistent Tully’s and Craig’s retirements, with our focus on increasing the Board has elected Total Shareholder Return Dirk Van de Put, president (TSR). We also invested and chief executive in our portfolio of All in all, offi cer of McCain intellectual properties we are proud Foods Limited, and by acquiring HIT Trevor A. Edwards, Entertainment, the of Mattel’s vice president of global home of such iconic performance brand and category brands as Thomas & in 2011!” management of NIKE , Friends, Mike the Knight™, Inc., as Mattel directors. Angelina Ballerina™, Bob the We look forward to the Builder® and Fireman Sam™. global insights and experience Dirk and Trevor will bring to We continued to drive our focus the Board. on the power of play through Corporate Responsibility. In its Lastly, as we look back on second year, the award-winning 2011, we were saddened Mattel 12 Days of Play™ pro- by the loss of Elliot Handler. gram embodies a creative Elliot was one of the founders approach to giving with Mattel of Mattel along with his employees worldwide foregoing wife, Ruth. Elliot leaves behind holiday parties to create extraor- a legacy that we will continue dinary, magical play experiences to build upon – to bring joy for underserved children around to children and parents around the world. And on the sustain- the world. 4 80706_MTL_AR11_Text.indd 4 3/13/12 1:43 PM 2011 ANNUAL REPORT What will remain at Mattel is that the toy industry the same? is always changing — I call it One thing that will remain the the “continuity of change.” same is our commitment to In the last decade, we’ve seen achieving consistent growth changes in the retail landscape and fi nancial performance as retailer strategies have evolved — this means Mattel will and online shopping has become continue to strive to be a very a signifi cant channel of distribu- well-run consumer goods tion for toys. Countries and company. We’ve delivered a economies are ever-changing. strong three-year trend of The burgeoning middle class in margin expansion, cash fl ow, Latin America and certain parts Since I was appointed CEO, earnings and share price of Asia is creating a whole new there are a handful of core growth, as well as disciplined generation of toy-buyers. And questions that I am asked capital deployment, all of which children are always changing. repeatedly: have resulted in strong TSR I know this from comparing • What will remain the same? • What’s going to change now gains. We’ve also accelerated how my own kids played with that you are CEO? our sales growth in the past how my granddaughter plays. • How does Mattel plan two years. Mattel will continue The play patterns are similar to achieve its vision? to be a company that can between the generations, weather economic storms — but today’s toys need to keep not only boasting the best pace with rapid changes in brands, but also the industry’s technology, fashion preferences most expansive global sourcing, and cultural trends. Mattel manufacturing and distribution is always changing and organizations, and a best-in- evolving too, which has helped class commercial country and us to remain the world’s No. 1 customer management system. toy company. When you look at our portfolio of brands and countries, the What’s going to discipline of our strategies and change now that I the quality of our organization, am CEO? we’re well-positioned for One of my guiding principles future growth. in life is “to be happy, but never satisfi ed.” This is the Having said all of this, one thing approach I am taking in my I have learned from my 11 years new role at Mattel. 5 80706_MTL_AR11_Text.indd 5 3/13/12 1:36 PPMM I am very happy with the entertainment partnerships by growing and entertainment current state of our business. living our credo partner with the currently comprises about a We have … best and be the best partner; and quarter of our total revenues. • Phenomenal brands expand and strengthen our Mattel manages a diverse and • A highly-successful franchise international footprint. evergreen entertainment launch with Monster High portfolio, and we treat these • A great acquisition with Our core brands are strong. entertainment licenses like our HIT Entertainment For the second year in a row, own brands — we constantly • Strong entertainment partners Barbie gained NPD share and innovate the product and work • An incredible global continued its fi ve-consecutive- with our customers to maximize infrastructure year reign in 2011 as the No. 1 their global reach. That is why • An organization that is property in the toy industry you see such strong evergreen never satisfi ed and for the holiday season.2 brands in our portfolio, like • Standout results Consumers responded well CARS®, Disney Princess, With that said, I want Mattel to to the innovations in Hot Toy Story®, Mickey Mouse® achieve its full potential in the Wheels with Wall Tracks™, Clubhouse, Batman®, WWE® marketplace. These existing and American Girl reached a and Dora the Explorer®. These components of our business set major milestone, hitting the properties are consistently on the stage for great opportunity half-billion-dollar sales mark. toy shelves around the globe. to drive our performance and And we are making great to do even better. progress with Fisher-Price. Our Latin American business When it comes to new has reached the “sweet spot” How does Mattel plan franchises, Monster High is where growth and scale to achieve its vision? performing beyond anyone’s intersect. The business We remain focused on four expectations, having been achieved a major milestone in keys to delivering success and launched in more than 2011, growing 14% and almost achieving our full potential: 35 countries. reaching the $1 billion sales plan for growth; structure for mark. Asia had another solid growth; nurture our talent; and Our proven leadership in brand year of performance, and we accelerate innovation. management — whether it be a are particularly pleased with the 50-year-old iconic brand like development of our businesses 1 | Plan for Growth Barbie or an up-and-comer like in China and India. Both Our plan for growth has four Monster High — combined with countries represent examples components: grow our core our global reach, makes us the of patient and disciplined businesses, both brands and strategic partner of choice for investments in brands and countries; launch new brands, anyone owning toyetic intellec- infrastructure to create a strong like Monster High; optimize our tual property.