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Hasbro
Mattel
Hasbro, Inc.
Mattel, Inc.
Corporate Headquarters
China
Year of Incorporation
El Segundo,
California, US
China
1945
Company Homepage
Hasbro.com
Mattel.com
Stock Symbol
HAS
MAT
Independent Auditor
KPMG, LLP
Primary Products/Services
Pricewaterhouse,
LLP
Toys and Games
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Horizontal Analysis
Revenues
Between 2010 and 2011 Hasbros revenue grew by about 7% then fell by
roughly 5% between 2011 and 2012. Hasbro has a strong reliance on licenses and
media advertising to sell their brands, and thus, are subject to large fluctuations of
sales from year to year. In 2011, sales from their Marvel line, Magic: The Gathering,
Battleship, and Twister were up, but they were offset by decreased revenue from
other brands. Of note, their girl products were up 7% due to the introduction of
Furby and One Direction brands, as well as increased revenue from My Little Pony.
Mattel increased their revenue by 7% from 2010 to 2011, and then by about 2%
from 2011 to 2012. This was fueled primarily by increased sales of Monster High
and Fisher-Price Friends. It was offset by lower sales of their CARS 2 and Barbie
products. All other brands remained primarily flat.
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Net Income
Hasbros net income fell by $49.3 million in 2012, added to the $12.4 million
decrease in 2011, mainly as a result of the decrease in sales. In contrast, Mattels
net income grew by $83.6 million in 2011, but only $8.0 million in 2012, despite the
high growth in Gross Profit. The main reason for the decrease in growth of net
income in 2011 is an increased effective tax rate of about 22% to 23%, depending
on jurisdiction, and an unfavorable foreign exchange rate.
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Total Assets
Hasbros total assets increased by 5% between 2010 and 2011, and this is
mainly due to Hasbro getting a new Gaming Center of Excellence which provided
a boost to the total assets. Mattels total assets increased by 4.6% in 2010 and by
15.1% in 2011. In 2011, Mattel acquired HIT Entertainment, which added to their
assets as well as to their costs.
Vertical Analysis
INCOME STATEMENT ANALYSIS
Product Cost Control
Both companies have a relatively high cost of sales, 41% for Hasbro and 47%
for Mattel, but it has been decreasing in recent years. For Hasbro, the cost of sales
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Debt Payment
Interest payments for Hasbro were slightly higher in 2012, because of an extra week
in 2012, which was a 53-week year, and had an above average increase in shortterm borrowings. In March 2010, Hasbro took out a 500 million dollar long-term
debt with an interest rate of 6.35%, which was used to pay for the Hasbros
Gaming Center of Excellence building.
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Tax Burden
Both companies incurred a similar tax burden between Hasbros 2.87% of
Revenues and Mattels 2.63% of Revenues, and both companies have been facing a
relatively high tax burden. This is due to the increasingly global nature of the toy
industry, and complying with tax laws of various jurisdictions. Of note, Hasbro is
facing litigation in Mexico over tax assessments for taxes due in 2000-2005 and
2007. However, the company expects to succeed in these proceedings, and outside
of posting a bond, there are no further expenses listed. Mattel, on the other hand,
got some tax relief and received 16 million dollars of tax benefits, mainly from
reassessments of previous tax years based on audits and tax filings. Further tax
credits net Mattel 59.1 million dollars reflected in the provision for income tax in the
income statement.
Net Income
Net income from Hasbro was 8.22% of revenues, reflecting a decrease of
sales, the expense of opening a new building, and tax liabilities from posting a bond
in Mexico, which was listed as a tax expense. Net income for Mattel was 12.09% of
revenues, due to steady sales, and a focus on reducing costs of sales.
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Total Liabilities
Hasbro has more total debt than Mattel as a percentage of total assets, with
65.15% compared to 53.01%, respectively. Hasbro has taken out a bit more long
term debt than Mattel, with Mattel only taking out $1.1 billion in 2010 and 2011 in
total, but Hasbro has taken out $1.39 billion, with $436 million due in 2014. Mattel,
while having a greater debt load in terms of raw dollars, still has less than Hasbro in
terms of a percentage of total assets. This translates into having more money
available for stockholders, and greater general stability for the company.
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Hasbr
Mattel
o
Current Ratio
Quick Ratio
2.61
2.07
2.28
1.79
.89
.93
Current
Cash/Debt
Both Hasbro and Mattel have a strong current ratio as well as a fairly healthy
quick ratio. Though Mattels 1.79 quick ratio is decent, it does not compare to
Hasbros 2.28 ratio. Based on these ratios, Hasbro is in a much stronger position
than Mattel. For every dollar in current liabilities, Hasbro has $.54 more in current
assets than Mattel. They also have $.49 more in their most liquid assets than Mattel.
Efficiency Ratio
Receivable Turnover ratio measures how often a company collects cash from
credit sales during a given year. Inventory Turnover measures how often a company
sells their inventory during a given year. A companys Asset Turnover ratio shows
how much revenue there is for every dollar a company has in assets. These ratios
together measure how efficient a company is on using their assets to generate
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Hasbro
Mattel
3.96
5.19
.97
1.05
5.14
6.18
Turnover
Hasbro and Mattel are almost equal when comparing their respective revenue
to their assets. Despite both companies being close in Asset Turnover, Mattel out
matches Hasbro in each ratio. Mattel collects cash from credit sales a little over five
times a year or nearly one and a quarter more often than Hasbro. Mattels Inventory
Turnover ratio is 6.18, showing us that Mattel will sell and replace their inventory
roughly six times during the year.
Solvency Ratio
Solvency ratios measure the risk and strength of a business. The debt to
equity ratio measures specifically the financial leverage of a company. This indicates
the proportion of debt and equity being used to finance a companys assets. The
times interest earned ratio is a metric used to measure the ability of a company to
meet its financial obligations. The cash to debt ratio is used to indicate a
companys ability to cover its total debt with the cash flow from operations during
the year. Creditors use these ratios to measure how well a company manages its
debt. Investors use these ratios to know where the company stands financially.
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Hasbro
1.87
4.97
Mattel
1.13
11.49
.3
.37
Coverage
Hasbros high debt to equity ratio, compared with Mattel, though, not a
terrible ratio, could spell trouble for investors due to the lack of increased revenue
between 2011 and 2012. Mattel, on the other hand, has a relatively high times
interest earned. This could indicate that Mattel has an undesirable lack of debt or is
paying too much down with earnings that could otherwise be spent on other
projects to help generate revenue and grow the company. Despite this ratio, Mattel
is in a stronger overall position.
Profitability Ratio
Gross margin helps measure how the cost of goods are being managed,
where as profit margin measures how much, for every dollar there is in revenues,
does the company actually keep as earnings. Return on Assets indicates how
efficient management is at using its assets to generate a profit. Return on equity
demonstrates how profitable a company is with the amount investors are putting
into the business. Investors will use these ratios to help determine how profitable a
company is.
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Hasbro
Mattel
Ratios
Gross Margin
Profit Margin
Return on
59.84%
8.22%
7.95%
53.10%
12.09%
12.73%
Assets
Return on
22.98%
27.35%
Equity
Mattel has a higher profit margin than Hasbro, despite Hasbros gross margin.
Mattel seems to use their assets more efficiently to generate revenue and increase
profitability. Hasbro though manages its cost of goods effectively, still lacks in
comparison to Mattels profitability ratios.
Valuation Ratio
Valuation ratios are used by investors to compare the overall position of a
company compared to other companies for investment decisions. The priceearnings ratio measures how much an investor is willing to pay per dollar of
earnings. It also measures future anticipated growth. The payout ratio indicates the
amount of earnings paid to investors through dividends.
Valuation
Hasbro
Mattel
Ratios
P/E Ratio
Payout Ratio
13.97
.9
15.93
.55
Hasbro has a fairly high payout ratio, indicating that they attract investors
through means of dividends being paid out, where as Mattel has a somewhat lower
payout ratio which may indicate that they are keeping some of their earnings for
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Public Perception
In the past year since they last filed their 10-K, Mattel has been doing well.
Mattel has been listed as one of the top 100 companies by Fortune magazine. They
noted that Mattel had 1,292 job openings in the year, but had 164,045 applicants to
those jobs. Also of note is that more than 1,000 employees at Mattel have been
there for over 15 years, indicating employee satisfaction. Mattel has been paying
their dividends on time, and they face no new litigation. The only black spot for
Mattel, though, is that they had a lower than expected showing in last quarter of
2013, causing their stock prices to drop.
Hasbro, on the other hand, has been facing a number of criticisms for a lack
of gender diversity in their toys. For example, one woman claimed that there is a
lack of boys in the packaging for Hasbros Easy Bake Oven, reinforcing the
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2012
$4,088,9
83
$2,417,0
03
$335,99
9
$551,78
5
$534,79
6
$4,325,3
87
Chan
ge
4.59%
1.32%
12.81
%
7.10%
35.03
%
4.71%
2011
$4,285,5
89
$2,449,3
26
$385,36
7
$593,98
1
$396,06
9
$4,130,7
74
Chan
ge
7.08
%
5.93
%
3.11
%
1.04
%
7.63
%
0.92
%
2010
$4,002,16
1
$2,312,10
4
$397,752
$587,859
$367,981
$4,093,22
6
Mattel
Revenues
Gross Profit
Net Income
Income from Continuing
Ops
Net Cash from
Continuing Ops
Total Assets
2012
$6,420,8
81
$3,409,1
97
$776,464
$1,021,0
15
$1,275,6
50
$6,526,7
85
Chan
ge
2.47%
8.37%
1.04%
1.93%
91.92
%
15.08
%
2011
$6,266,0
37
$3,145,8
26
$768,508
$1,041,1
01
$664,693
$5,671,6
38
Chan
ge
7.00%
6.46%
12.21
%
15.43
%
25.90
%
4.69%
2010
$5,856,1
95
$2,954,9
73
$684,863
$901,902
$527,970
$5,417,7
33
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Year 2012
As a
percentage
of Revenue
Revenues
COGS
Operating
Expense
Interest
Expense
Tax Expense
Net Income
$4,088,983
$1,671,980
$1,865,218
100.00%
40.89%
45.62%
$91,141
2.23%
$117,403
$335,999
2.87%
8.22%
Mattel
Year 2012
As a
percentag
e of
Revenue
Revenues
COGS
Operating
Expense
Interest
Expense
Tax Expense
Net Income
$6,420,881
$3,011,684
$2,388,182
100.00%
46.90%
37.19%
$88,835
1.38%
$168,581
$776,464
2.63%
12.09%
Year
2012
As a
percentag
e of Total
Assets
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$2,508,
202
$230,41
4
$1,586,
771
$4,325,
387
$960,43
5
$2,818,
008
$1,507,
379
57.99%
5.33%
36.69%
100.00%
22.20%
65.15%
34.85%
Mattel
Year
2012
As a
percentage
of Assets
Current Assets
$3,556,8
05
$593,21
3
$1,295,9
69
$6,526,7
85
$1,716,0
12
$3,459,7
41
$3,067,0
44
54.50%
PPE
Other Assets
Total Assets
Current Liabilities
Total Liabilities
Total Stockholder's
Equity
9.09%
19.86%
100.00%
26.29%
53.01%
46.99%
Year 2012
Liquidity Ratios
Current Assets
$2,508,202
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Current Ratio
Current Assets
- Inventory
Current Liabilities
Quick Ratio
Net Cash from Operating
Activities
Average Current Liabilities
$960,435
2.61
$2,508,202
$316,049
$960,435
2.28
$849,701
($960,435+
$942,344)/2
0.89
Receivable Turnover
Revenue
Average Total Assets
$4,088,983
($1,029,959+
$1,034,580)/2
3.96
$4,088,983
($4,325,387+
$4,130,774)/2
Asset Turnover
0.97
COGS
Average Inventory
$1,671,980
($342,965+
$325,021)/2
Inventory Turnover
5.14
Debt/Equity
$2,818,008
$1,507,379
1.87
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$453,402
$91,141
4.97
$2,818,008
Cash/Debt Coverage
0.30
$849,701
Profitability Ratios
Gross Profit
Net Sales
Gross Margin
Net Income
Net Sales
Profit Margin
Net Income
Weighted Avg. Common
Shares Outstanding
$2,447,003
$4,088,983
59.84%
$335,999
$4,088,983
8.22%
$335,999
209,694
2.58
Net Income
Average Total Assets
$335,999
($4,325,387+
$4,130,774)/2
Return on Assets
7.95%
Net Income
Average Stockholders'
Equity
Return on Equity
$335,999
($1,507,379+
$1,417,515)/2
22.98%
$36.04
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2.58
Price/Earnings Ratio
13.97
Cash Dividends
Net Income
$1.44*209,694
$335,999
Payout Ratio
0.90
*Figures used in calculating ratios are expressed in thousands of dollars, EXCEPT for
'Stock Price' & EPS
Year 2012
Liquidity Ratios
Current Assets
Current Liabilities
Current Ratio
Current Assets
- Inventory
Current Liabilities
Quick Ratio
Net Cash from Operating
Activities
Average Current Liabilities
$3,556,805
$1,716,012
2.07
$3,556,805
$487,000
$1,716,012
1.79
$1,275,650
($1,716,012+
$1,038,928)/2
0.93
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Receivable Turnover
Revenue
Average Total Assets
$6,420,881
($1,226,833+
$1,246,687)/2
5.19
$6,420,881
($6,526,785+
$5,671,638)/2
Asset Turnover
1.05
COGS
Average Inventory
$3,011,684
($487,000+
$487,000)/2
Inventory Turnover
6.18
Debt/Equity
EBIT
Interest Expense, net
Cash/Debt Coverage
$3,459,741
$3,067,044
1.13
$1,021,015
$88,835
11.49
$1,275,650
$3,459,741
0.37
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Profitability Ratios
Gross Profit
Net Sales
Gross Margin
Net Income
Net Sales
$3,409,197
$6,420,881
53.10%
$776,464
$6,420,881
Profit Margin
12.09%
Net Income
Weighted Avg. Common
Shares Outstanding
$776,464
342,269
2.25
Net Income
Average Total Assets
$776,464
($6,526,785+
$5,671,638)/2
Return on Assets
12.73%
Net Income
Average Stockholders'
Equity
Return on Equity
$776,464
($3,067,044+
$2,610,603)/2
27.35%
Price/Earnings Ratio
$35.84
2.25
15.93
Cash Dividends
Net Income
$1.24*342,269
$776,464
Payout Ratio
0.55
*Figures used in calculating ratios are expressed in thousands of dollars, EXCEPT for
'Stock Price' & EPS
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Current
Year
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Mattel (MAT)
Year 2012
Year 2012
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Mattel (MAT)
Year 2012
Appendix H: References
1. "Mattel - Best Companies to Work For 2013 - Fortune". Money.cnn.com. 2013-0204. Retrieved 2013-07-10.
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