Mattel becomes biggest toymaker in world as it reports 1994 sales.

Mattel Inc. toddled into top place as the world's largest toymaker last year, pocketing $3.2 billion in sales. Meanwhile, profits surged 34 percent.

Its sales overtook those of Pawtucket, R.I.-based Hasbro Inc., which reported sales of $2.7 billion last year.

The boost in Mattel's sales and profits can mostly be attributed to its $1 billion acquisition in November 1993 of East Aurora, N.Y.-based Fisher-Price Inc. Not only did the acquisition increase the sheer size of Mattel, but it also enabled the toymaker to become more efficient, analysts said. Fisher-Price manufactures infant and pre-school toys.

El Segundo-based Mattel eliminated operations duplicated at both companies, transferred some. Fisher-Price manufacturing to plants where production is cheaper, and boosted that subsidiary's sales overseas, analysts said.

New products prove popular

Aside from reaping the benefits from the Fisher-Price acquisition, Mattel last year introduced innovative Barbie, Hot Wheels and "The Lion King" merchandise that children couldn't resist, analysts say.

MATTEL INC.
(MAT/NYSE)

Qtr. Dec. 31:                     1994        1993

Sales                           $1,030        $754
Net income                       $42.9     ($42.7)
Average shares outstanding         182         170
EPS                              $0.19     ($0.21)

Closing price Feb. 14

$22.875
Down $0.50

52-week

High         Low

$23.50     $18.50

All figures except for EPS and stock price in millions.

Mattel reported its 1994 net income, before one-time charges, was $302.6 million, or $1.32 a share, vs. $226.4 million, or $1.01 a share, a year earlier. Its sales were $3.2 billion vs. $2.7 billion a year earlier.

Including one-time charges, it reported net income in 1994 of $255.8 million vs. $121.2 million a year earlier. Mattel took three charges when it bought Fisher-Price - $115 million for merger-related consolidating, $14.7 million for retiring some of Fisher-Price's debt, and $4 million for a change in accounting principles.

It also took a $72 million restructuring charge in December 1994 for more streamlining. Since then, it has eliminated 700 jobs at its Medina, N.Y., manufacturing plant and 75 at its headquarters. About 225 additional jobs are still in the process of being cut, said Mattel spokesman Glenn Bozarth.

Fisher-Price's results are consolidated into both Mattel's 1993 and 1994 earnings reports, so an apples-to-apples comparison can be made, Bozarth said.

The company's stock closed at $22.875 a share Feb. 14, close to its 52-week high of $23.50.

Duplication eliminated

When Mattel merged with Fisher-Price, it cut overhead that was duplicated at both companies, said Laurie Lively Smith, an analyst with Seidler Cos., a downtown L.A.-based brokerage firm.

It primarily eliminated corporate positions, for instance in administration and finance, both at Mattel and Fisher-Price, said Mattel spokesman Bozarth.

It also consolidated the companies' manufacturing plants in Mexico, said Michael Davies, director of equity research with New York-based Utendahl Capital Partners L.P., a brokerage firm. It closed three run by Fisher-Price and boosted production at its own, Bozarth said.

In addition, it moved production of some Fisher-Price products from the U.S. to Mattel plants in the Far East, where labor is cheaper, Smith said.

And international sales of Fisher-Price toys increased by 40 percent in 1994, Bozarth said.

All these changes have enabled Mattel to increase Fisher-Price's sales at a lower cost than before, leading to higher profits, Smith said.

Other acquisitions

Mattel made two other acquisitions during 1994 that added to its sales and profits, although much less than did the Fisher-Price purchase, Bozarth said. It bought San Francisco-based Kransco, maker of Power Wheels, battery-operated cars kids can ride in, and Morey Boogie Boards. The other acquisition was of England's J.W. Spear, which owned the overseas rights to the Scrabble board game.

Meanwhile, Barbie continues to charm children in record numbers. The line's sales hit $1.1 billion last year, compared with $1 billion in 1993, Bozarth said.

"Mattel had a very, very exceptional Barbie line in 1994," Smith said.

It included Gymnast Barbie, which "bends in places she never bent before," and Doctor Barbie, a pediatrician who comes complete with a baby she cares for, Bozarth said.

And as a licensee of Walt Disney Co. products, Mattel also reaped sales and profits from "The Lion King" merchandise it sold, said David Leibowitz, managing director of New York-based Burnham Securities. Sales of its Disney merchandise surged from $300 million in 1993 to $440 million last year, Bozarth said.

Sales of Hot Wheels, another of Mattel's core businesses, were boosted by the new plastic Top Speed cars. These race twice as fast as their traditional metal counterparts, Bozarth said.

Overall, the toys Mattel introduced in 1994 "were innovative, they were creative," and "they were toys children wanted," Leibowitz said.