Despite Record Sales, Mattel Says It Will Cut 1,000 Workers : Earnings: Toy maker also announces 5-for-4 stock split for shareholders and continuation of 6-cents-per share dividend.
Toy maker Mattel Inc., winding up a robust holiday season that has propelled it toward a sixth consecutive year of record sales and earnings, announced plans Monday for a $70-million worldwide restructuring effort that will eliminate more than 1,000 jobs.
Despite the record performance, a spokesman said the layoffs--which will hit Mattel’s 2,000-employee headquarters staff in El Segundo as well as its far-flung overseas operations--are “in the best interests of the company.”
The restructuring includes the consolidation of manufacturing operations and the reduction of headquarters expense and support functions at the world’s largest toy manufacturer, which operates in 34 countries around the world.
Also announced was a 5-for-4 stock split for shareholders and a continuation of its 6 cents-per-share dividend, making an effective 25% dividend increase to be paid in the second quarter of next year.
Mattel said elimination of the 1,000 jobs--nearly 5% of the Mattel’s 22,000-member worldwide work force--is necessary in part to eliminate redundancies after its merger with Fisher-Price in late 1993 and the purchases of toy makers Kransco and J.W. Spear earlier this year.
Toy analyst Laurie Lively Smith of the Seidler Companies in Los Angeles called the restructuring an “evolutionary process” in the wake of the acquisitions.
“Mattel has been a very dynamic, pro-active company when it comes to looking for ways to enhance efficiency, particularly in manufacturing,” said Lively Smith.
With the acquisitions, Mattel became the largest toy manufacturer in the world, with principal brands of Barbie, Fisher-Price, Walt Disney-licensed merchandise and Hot Wheels together accounting for 80% of its total sales.
“While corporate restructuring is often seen only during difficult times, this action comes as we anticipate reporting record results for the sixth consecutive year,” said John W. Amerman, Mattel’s chairman and chief executive.
The restructuring, according to Mattel spokesman Glenn Bozarth, will save the company approximately $25 million next year and more in the following years by consolidating manufacturing operations and reducing headquarter expenses.
Although specific jobs to be eliminated will not be announced until January, Bozarth said the El Segundo headquarters operation will not escape the firings.
Mattel earned $1.17 a share in the first nine months and company officials anticipated meeting expectations of profit from operations for the fourth quarter with strong Christmas sales of mostly Barbie dolls and Lion King merchandise. However, the company will take a one-time charge against fourth-quarter earnings of $70 million.
The stock split will give shareholders one additional share of Mattel common stock for every four shares they hold as of Jan. 6. The board of directors plans to maintain its regular quarterly dividend of 6 cents a share on post-split shares, resulting in the equivalent of a 25% dividend increase.
The announcement was made after close of trading on the New York Stock Exchange, where Mattel shares closed at $26.375, off 12.5 cents.
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MATTEL INC.
Headquarters: El Segundo
Chairman: John W. Amerman
Employees: 22,000
Major products: Barbie fashion dolls, Hot Wheels toy cars, Fisher-Price toys
1993 revenue: $2.7 billion, up 46%
1993 profit: $136 million, down 5%
Monday stock price: $26.375, down 12.5 cents
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Source: Standard & Poors
