Mattel Inc. (MAT) reported second quarter 2010 earnings of 14 cents per share, missing the Zacks Consensus Estimate by a penny. However, earnings shot up from 6 cents per share in the prior-year quarter.
 
The second quarter earnings were primarily driven by strong sales of its core brands such as Barbie and Hot Wheels and solid contribution from Toy Story 3. Mattel is also focused on controlling its expenses and has reaped benefits.

Worldwide net sales increased 13% from the prior-year quarter to $1.02 billion and were up 16% excluding the impact of an unfavorable currency exchange rate. U.S. gross sales improved 17% year over year and international gross sales increased 9% year over year.

Worldwide gross sales for the Mattel Girls & Boys Brands business unit were up 21% versus the last year. Worldwide gross sales for Barbie spiked 6% over last year while Hot Wheels was up 11%. Fisher-Price Brands sales leaped 4% while the American Girl line decreased 4%, compared with the prior-year period.
 
Gross margin was 48.1%, up 290 basis points versus the prior-year period. The improvement was primarily attributable to savings from the global cost leadership initiatives and price increases. Selling, general and administrative (SG&A) expenses, as a percentage of net sales, decreased 30 bps to 31.3%.
 
The company reported an operating income of $69.4 million, compared with $32.5 million in the year-ago quarter. The year-over-year improvement was attributed to higher sales, gross margin improvement and lower SG&A expenses and flat advertising expenses.

Interest expenses of $13.4 million were down from $17.5 million last year, reflecting lower average borrowings as well as lower average interest rates.
 
Financial Position
 
As on June 30, 2010, cash and cash equivalents were $544.9 million compared with $422.7 million in the year-ago period. Long-term debt reduced to $460.0 million compared with $710.0 million in the year-ago quarter.
 
The company’s debt-to-total-capital ratio was 22.1% at the end of the quarter. During the quarter, the company repurchased approximately 5 million shares at a cost of $111 million.

Read the full analyst report on “MAT”
Zacks Investment Research