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Mattel finance team and auditor reportedly obscured accounting error

James F. Peltz, Los Angeles Times on

Published in Business News

That complaint prompted Mattel to abruptly cancel a debt refinancing in August that was part of its effort, led by current CEO Ynon Kreiz, to rebound from years of financial problems.

Those problems include heavy debt, substantial losses, falling sales -- particularly at its Fisher-Price and American Girl lines -- and problems related to its Fisher-Price Rock 'n Play Sleeper products. Last year, the company lost $531 million on sales of $4.5 billion.

Mattel recalled all 4.7 million Rock 'n Play Sleeper products after they were linked to more than 30 infant deaths since being introduced in 2009, according to the U.S. Consumer Product Safety Commission. Mattel has said that it was not at fault and that the fatalities stemmed from the sleeper being "used contrary to the safety warnings and instructions."

In June, Mattel also rejected an unsolicited merger offer from rival MGA Entertainment Inc., a privately held Chatsworth company whose toys include L.O.L. Surprise, Little Tikes and Bratz dolls.

On Oct. 29, Mattel reported stronger-than-expected earnings for this year's third quarter. That, coupled with resolving the accounting matter, sent Mattel's stock soaring 14% that day. Mattel's stock fell back 2.7% on Wednesday to $12 a share.

Kreiz has been trying to improve Mattel's performance in part by widening the marketing of Mattel's popular toy brands -- especially in the entertainment and digital fields -- and by implementing a massive cost-cutting plan.

 

Some on Wall Street remain cautious. Camilla Yanushevsky of CFRA Research maintained her "hold" rating on Mattel's stock, saying in a note to clients that while the third-quarter results beat expectations, they reflected "deep cost cuts, conservative guidance and easier YoY (year-over-year) comparisons -- not sustainable value creation."

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