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Mattel Bests Analyst Estimates; Profit Rises 20% in 4th Quarter

February 02, 2001|ABIGAIL GOLDMAN | TIMES STAFF WRITER

Mattel Inc. said Thursday that its fourth-quarter earnings were up 20% over the same period last year, beating analysts' estimates, and offered a cautious but optimistic signal for the coming year.

That was welcome news to investors who in recent years had grown accustomed to limping earnings and a series of misguided attempts to pull the El Segundo company out of its slump.

"The management team is focused and on the right track," said Jill Krutick, an analyst with Salomon Smith Barney in New York. "They gave very reasonable projections, and we have pretty good confidence that they will be able to reach them."

Excluding charges, Mattel reported $120.7 million in fourth-quarter earnings, or 28 cents per share, compared with last year's $100.5-million earnings, or 24 cents per share. Analysts polled by First Call/Thomson Financial had expected an average of 26 cents per share.

Sales rose 4% to $1.58 billion, up from $1.52 billion a year earlier.

Investors considered the quarter an important signal for the company's future because it consists of sales during the all-important Christmas season and represents the company's first full quarter after shedding its money-losing Learning Co. software division.

Mattel, the world's largest toy maker and manufacturer of Barbie and Hot Wheels, reported annual income of $293.3 million, not including special charges, down 10% from $326.7 million the year before.

Yearly sales from continuing operations hit $4.67 billion, up 2% from last year's revenue of $4.6 billion.

For the next three to five years, Chief Financial Officer Kevin Farr said, the company anticipates "mid-single-digit" revenue growth and 2001 earnings-per-share gains in the "low double-digits to mid-teens."

Learning Co., acquired during the tenure of former Chief Executive Jill Barad as a way to extend the company's brands to video and computer games, was sold last fall to privately held Gores Technology in exchange for a portion of any of the division's future profits. Bought for $3.5 billion in 1999, the company began costing Mattel as much as $1 million a day.

Those losses, other costly moves and a tough environment weighed down the company's actual full-year results.

For the year, Mattel took restructuring and other charges of about $179 million before taxes. That figure includes a $53-million pretax charge for former executives' severance pay, the bulk of which went to Barad.

For the fourth quarter, losses from discontinued operations--including Learning Co.--totaled close to $34 million plus other charges, resulting in net income of $71.1 million.

The year's total loss under discontinued operations was $601 million, for a net loss of about $431 million, or $1.01 per share.

Sales for Mattel's girls division, which includes Barbie, were up 11% for the fourth quarter to $551.6 million, led by a 3% increase in Barbie sales and the introduction of the wide-eyed Diva Starz dolls. The annual sales increase was 4% worldwide, to $1.78 billion.

In the infant and preschool division, which includes Fisher-Price and Sesame Street brands, sales were down 1% for the quarter, to $517.5 million. Annual sales in the division were flat for the year, in spite of Fisher-Price's sales gain of 26%.

The firm's boys and entertainment division sales were flat for the fourth quarter at $414 million. Annual sales also were flat at $1.2 billion.

Mattel's direct-marketing business, which includes Pleasant Co.'s American Girls dolls, rose 16% for the fourth quarter and had an annual increase of 13%, or $358 million.

Mattel shares closed up 71 cents at $15.57 in New York Stock Exchange trading.

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