Good day, everyone and welcome to today’s Mattel fourth quarter 2007 earnings conference call. This conference is being recorded. At this time, I would like to turn the conference over to Mr. Mike Salop. Please go ahead, sir.

Thanks, April and good morning, everyone. Earlier this morning we issued a press release which details Mattel's fourth quarter and full year 2007 results. On the call today, Bob Eckert, Mattel's Chairman and Chief Executive Officer, will give a few brief remarks, and Kevin Farr, Chief Financial Officer, will provide more detail on the financials. After Kevin’s comments, we will open the call for your questions. Before we begin, let me note certain statements made during the call and the question-and-answer session that follows may include forward-looking statements about management’s expectations, strategic objectives, anticipated financial performance, and other matters. Such forward-looking statements may include comments regarding performance of our brands and product lines, new product introductions, new entertainment properties, brand strategies, international growth opportunities, the state of economies, profits and margins, quality control, impact of product recalls, manufacturing costs, price increases, capital spending, income tax provisions, acquisitions, share repurchase, and our capital investment framework. A variety of factors, many of which are beyond our control, affect the operations, performance, business strategy, and results of Mattel and could cause actual results to differ materially from those projected in such forward-looking statements. Some of these factors are described in our 2006 report on Form 10-K filed with the SEC and Mattel's other filings made with the SEC from time to time, as well as in Mattel's other public statements. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so. Information required by Regulation G regarding non-GAAP financial measures is available on the investors and media section of our corporate website, mattel.com, under the sub-headings financial information and earnings releases. Now I would like to turn the call over to Bob.

Thank you, Mike and good morning. Before Kevin provides an overview of the financial results, I’d like to provide my thoughts on the past year as well as a look forward. Considering the unexpected challenges we faced in 2007, I believe we delivered good results. While the U.S. business was down slightly for the year, in international markets we experienced double-digit growth across all regions. As in any year, some properties increased while others declined but we did see strong performance across many areas of our portfolio, including core Fisher Price and the Cars entertainment property. U.S. Barbie performance though was a disappointment as our two entertainment properties didn’t perform as well as the prior year’s Mermaidia and the Twelve Dancing Princesses. Overall, our portfolio continued to generate strong cash flow in 2007 and we strategically deployed over $1 billion of excess cash during the year. We acquired the Polly Pocket brand, a property we had licensed for years, and several board games, including the popular Apples to Apples. The dividend was increased by 15% to $0.75 per share and we repurchased 35.9 million shares of our stock, representing 9% of shares outstanding. While we have largely moved on from the issues of 2007, the new year, like any year offers its own set of challenges, including higher costs for commodities, labor, and quality testing, along with the general sentiment of worsening economies. That said, historically the toy business has held up relatively well during uncertain economic times. To address the margin challenges, we’re committed to pricing our products appropriately and reducing controllable costs, although price adjustments to reflect the new environment are more likely to impact the fall product line as the spring pricing has already been established. Despite the challenges, there are opportunities to build on the momentum…

Thank you, Bob and good morning, everyone. Before I provide my usual remarks on the fourth quarter and the full year results, I would like to take a few minutes to detail the impact of product recalls. During the fourth quarter, we recorded reserve charges totaling $17.3 million for last year’s product recalls. In addition to these charges, we incurred other recall related costs in the quarter of approximately $25 million. These costs primarily were comprised of legal fees, increased product testing costs, and incremental logistic costs. Collectively for our fourth quarter, results included approximately $42 million of pretax charges and costs related to product recalls. On a full year basis, we recorded reserves of approximately $68.4 million for affected product at retail and expected consumer returns, while other incremental costs related to the recalls totaled approximately $42 million. Consequently, our full year results include approximately $110 million of pretax charges and costs related to product recalls. Breaking these amounts down by line item in the P&L, net sales was reduced by $12.9 million in the fourth quarter and $48.9 million for the full year. Cost of sales increased by approximately $9 million in the fourth quarter and $22 million for the full year. Advertising increased by approximately $1 million in the fourth quarter and $5 million for the full year, and SG&A increased by approximately $19 million in the fourth quarter and $35 million for the full year. While some of these costs, this is reserve charges, should not be repeated in 2008, we will continue to incur these testing costs and, until all related litigation is resolved, additional legal expenses. During our last conference call, we also highlighted an import license situation in Brazil. We were able to get our containers cleared in the quarter early on so…

(Operator Instructions) We’ll first hear from Michael Savner of Banc of America Securities.

Good morning. A couple of questions, if that’s okay -- first on the Fisher Price brand, the growth in the second half of the year obviously has been somewhat anemic. For the fourth quarter, I assume there is some comp on the TMX Elmo but with the Fisher Price Friends, what exactly drove those declines? I know last quarter you had said that Dora, the Dora brand saw a lot of declines. Is that a continuation of Dora or are there other things that just didn’t seem to be clicking in the fourth quarter?

Across Fisher Price, remember that early in the year of ’07, we benefited from pipeline refill as retailers ended ’06 with extremely low levels of inventory. The core products in Fisher Price did well all year. The Kid Tough digital camera, the Smart Cycle, Imaginex, Shake-and-Go Cars, Bounce-and-Go Zebra, Baby Gear did well. So core Fisher Price did well. Fisher Price Friends didn’t do as well in ’07 as ’06, and then let me talk specifically to your question on Dora, because it continues to be a top selling property for Fisher Price. It’s had a long history of success in our Friends portfolio, Kevin, I think since 2002?

That’s correct, Bob.

It came off double-digit growth in ’06 but in ’07, the line just didn’t match what it did in ’06. With all toys, we go through cycles. Last year we simply didn’t sell as many Doras as we did in the prior year when we had record growth but the bottom line is Nickelodeon has a proven track record of creating [toyetic], kid-oriented properties. They’ve done a great job of building a global brand with Dora. We’ve had a great partnership with Nickelodeon and together I think we’ve built a global product with Dora with Nick’s great content and our great toys. Dora continues to be the top-rated TV shows for kids ages 2 through 5, and we’re fully committed to the brand and we want to do a better job with it.

Bob, I certainly wasn’t trying to pick on Dora -- I’m just trying to figure out if the Friends brand was down call it 19% to 20% worldwide, was Dora the key decline or was there something else in the Friends business that wasn’t working? What was the biggest loser, I guess, for the year?

Well, I don’t want to go into specific product lines. I would say across the board, we had obviously more do sales below prior year than those who did above. I guess I would cite Sesame Street as one of the properties that did grow for the year. TMX continued to be popular for the first part of the year, or the first three quarters of the year and then we had the new Elmo in the fourth quarter. So Sesame Street probably stands out as the one property in the portfolio that did the best and core Fisher Price did well.

Okay, and I’ll just ask one second question, if that’s okay, on American Girl; that business has been struggling for most of this year and a little bit surprising, given you opened up the two boutiques in the past few months. Is there a change to the strategy of the distribution for that business, or is it even strategically a necessity for Mattel going forward? I mean, you could certainly craft a very cautious argument on American Girl if we are heading into a recession and consumers are pulling back that something at the high end like American Girl could be a particular risk. I mean, how do you think about it strategically being part of your business in ’08?

I think American Girl is important. So many people on your side of these discussions focus on the Barbie brand that I think my Barbie U.S. sales are like 6% of our worldwide portfolio today. And people don’t recognize the importance of things like American Girl and its contribution to the business, or Fisher Price and its contribution to the business. We have a portfolio of brands. In any given year, some do better than others but we’ve managed the portfolio and the portfolio has grown every year since -- at least the year 2000, and I think American Girl will continue to do well and be a positive contributor to us both strategically and financially.

Okay. Thanks very much, Bob.

Next we’ll here from Sean McGowan of Needham & Company. Sean McGowan - Needham & Company : I have a couple of questions as well -- Kevin, can you help me understand the $0.89 reported number and the $0.13 tax benefit? What is the assumed rate that would get you to that $0.13 difference? It looks like there had to be a pretty low tax rate, even excluding the benefit of a quarter. I guess the question is what do you think is the normal tax rate that you would have seen in the fourth quarter?

I think if you exclude the tax benefits, I think our worldwide effective rate in 2007 ended the year slightly lower than expected. It was about 21%. Sean McGowan - Needham & Company : That’s for the year?

That’s for the year.

Yes, the quarter just -- Sean McGowan - Needham & Company : Right, right.

The quarter reflects the fact that we recorded $42 million in tax benefits in the fourth quarter. Sean McGowan - Needham & Company : Okay, that’s how it makes sense. Bob, would you care to comment on what product areas you think might have too much inventory out there as we begin the new year?

No, Sean, I don’t think it’s across entire brands and I don’t want to characterize it as a widespread issue. I talk to retailers and I always tell you all to talk to retail. Our calculation of retail inventories, which we do, as you know, by looking at our shipments and what we get directly from retailers on POS, suggest that the retailer inventories were up order of magnitude of 10% to 15%. But remember, it’s coming off very low levels in ’06. As you’ll recall, our first quarter results in ’07, I believe our sales were up almost 20% and clearly, I hope we pointed out at the time, we benefited from what I would have characterized as very low levels of retail inventories going into ’07 and I think that’s been corrected as we go into ’08. Sean McGowan - Needham & Company : And that obviously raises one of the next questions about how you see the timing of revenue in ’08 flowing, particularly with the concentration of entertainment properties around the middle of the year. Can you just comment on how you figure those entertainment properties are going to affect revenue? I mean, are we going to see a lot of that in the first quarter or is it really more second and third?

Sean. Sean McGowan - Needham & Company : I gotta ask.

We’re not going to do that one. Sean McGowan - Needham & Company : All right, last question then; Kevin, can you give us some commentary directionally how you think all these cost issues and pricing will affect gross margin for the year in ’08?

Well, I think that we are seeing cost increases from our vendors and we are experiencing them in our own plants, so when we look at these cost increases are not related to safety protocols but are also pressured from currency, from labor and commodity costs. So as we look at 2008, I think what we need to do again is do a modest increase in prices. Over the past few years, we’ve increased prices in low single digits but expect our price increase is likely to coincide with the fall product line, as Bob said, to be in the mid to high single digit range given the number of cost pressures we face. Sean McGowan - Needham & Company : Okay, so on a run-rate basis by the end of the year, do you think you will have offset the increase in cost? Obviously you can’t recapture that necessarily in the first part of the year but do you think on a run-rate basis you’ll be there?

Well, I think that’s our goal but again, I think it’s going to depend upon where these costs go through the year. If they continue to rise quickly, and that may not be the case but if they are at the current levels, we’ll see how it works out with regard to whether we are able to improve margins. That’s our goal for the year. Sean McGowan - Needham & Company : Thank you very much.

Our next question comes from Gerrick Johnson of BMO Capital Markets.

Good morning. I was wondering if you could talk about what you think retailers are planning for 2008 and do you think there will be any changes to allocated space for the toy category at say the discounters, like Wal-Mart, Target, so on and so forth?

I haven’t seen anything yet. As some of you know, I like to go to stores a lot early in the year to see what inventory positions look like and see what the spring sets look like and I haven’t noticed anything specific. I guess I would comment on a recent store check I made, and again, I caution all of you not to do this, so don’t make too much of a big deal out of one store or a handful of stores, but I was in a large retailer the other day and I noticed that the store was just much cleaner set, it was easier to shop, less inventory in the store, easier to walk through the store. And you know, it seemed to me that those folks understood the benefit of lower working capital, making their stores easier to shop and not having as much inventory cluttering the middle of the floor that you had to walk through. I think things like that will continue but I haven’t noticed anything in shelf space that causes me concern as I think about the toy business.

Okay. I have two more quick ones -- regarding Barbie Girls, are you where you thought you would be in the -- I guess it’s being called the virtual playground, these days, and is Barbie Girls trending according to your plan, or how is that doing? And then on the inventory, the 12% growth in inventory, what explains that growth in your own inventory?

I’ll start with Barbie Girls and maybe Kevin can talk about the inventory. We like the results we’ve had on Barbie Girls. It’s a global business now. We’re in five languages. We’ve done I think 9.5 million or 10 million registered users now. We’ve had a successful launch of what amounts to a new play pattern and it importantly keeps older girls engaged in the brand. I would say the MP3 device that sold to get deeper into Barbie Girls last year sold okay. The price point may have been too high but we knew there was only one opportunity to get the very early adopters in, so one of the things we’ll be doing in 2008 is having Barbie Girls product that allows girls to get deeper into the virtual world at lower price points.

And then with your question regarding inventories, as we plan for the year, we plan the inventories to be up to support international growth and then also, due to longer lead times and clearing product into certain countries, overall when we look at our retail inventory, or our own inventories, we think we are in pretty good shape. We are not concerned about obsolescence. We do have excess inventory levels that are up a little bit from last year but overall we think we’re in pretty good shape.

Okay. Thank you very much.

Next we’ll hear from Timothy Conder of Wachovia.

Thank you. A couple of questions, gentlemen; first of all, Bob, you characterized a little bit Barbie and framed it for us, Barbie represents in the U.S. about 6% of your total global sales. Could you do the same for Dora or maybe put Fisher Price Friends or Dora in perspective of the overall Fisher Price?

No, Tim, I probably shouldn’t have started that. We don’t generally disclose item by item line item sales or brand by brand, and it does mix every given year. My focus was on Barbie because for seven years, essentially I have heard a lot of people say this is the Barbie company. And Barbie is important. Barbie is the number one toy in the world. It was the number one toy in the world in 2007, but I’m just trying to communicate there’s more to the Mattel portfolio than one brand in one country, regardless of that brand and that country.

Fisher Price core isn’t much bigger than Fisher Price Friends, as you know, and within Friends, we not only have Dora but we have Disney, we have Sesame Street, so there’s a lot of things in there.

Okay. Last quarter, I think you guys gave some commentary as to what Dora did domestically and internationally, and I apologize if I missed that earlier in the conversation, but could you just refresh on that for the fourth quarter and year?

I don’t recall that we did disclose those things and in general, we don’t disclose specific brand lines within segments, sales by quarter or year by market.

Okay. Back to the retail inventory question obviously, as you mentioned already, the retail inventories are up 10% to 15% off of very depressed levels last year. Would you characterize those, Bob, what’s in the channel now as more of a normalized level, slightly elevated? Just maybe give a little more color on that?

I would characterize it as a normal level. Again, I ask people to talk directly to retailers but I don’t -- in conversations I’ve had with retailers, I don’t have any concerns about the overall inventory level. Again, on any given item, there may be too much or too little but broadly speaking, I don’t see a problem.

Okay. And then last question, please correct me if I’m wrong here, I think you characterized that your ongoing testing cost would be roughly 1% of cost of sales. Is that still valid or does that factor in any additional -- the increase in labor and so forth that’s also going on as far as the input costs?

No, I think you -- when we just look at the testing costs, we expect it to be about 1% of cost of sales and that will be reoccurring. And then I also wanted to mention, I think I said this in my speech, that legal expenses would continue until all related litigation is completed.

Okay, so we really though, Kevin, shouldn’t see any incremental testing costs -- well, maybe about a half-a-year’s work on a year-over-year basis -- is that fair?

Yes, I think we implemented this in mid-August, so I think prior to August, we’d expect to see year-on-year increases to --

Well, and some of that presumably is tied up inventory too.

Right.

Okay. Thank you, gentlemen.

Next we’ll hear from Gregory Badishkanian of Citigroup.

Thanks. Just two quick questions here; first, can you provide any color on U.S. retail sales in the fourth quarter? Obviously inventories were a little bit higher so retail sales would lag that. And how does that compare with what you think is going on in the industry?

Well, you know, we communicated with consumers throughout the holiday season. We used our website, our newspaper ads. We supported efforts of retailers as they communicated with their customers about toys, safety, and those kinds of things. I think the holiday season started out very nicely at retail, right after Thanksgiving, then it got slow and then, as we all expected, it did come through and the market cleared the week before Christmas. We all knew it was going to be a late last year -- we being retailers and manufacturers like us. We talked about it but of course there’s a fair amount of anxiety until that time hits. We ran a multi-brand advertising campaign on television at the very end of the year during the holiday season just to remind parents of the joy and fun of Mattel toys and what they bring to kids and families. I thought it was time to stop talking about lead and I’m glad we did.

And just looking at balance sheet, have you made any share repurchases since the end of the fourth quarter? And how aggressive will you be versus how you’ve been in the last few quarters, given your share price, where it’s at now?

We don’t talk anything about prospective things like share purchase activity and we don’t comment in the quarter about any activity. We only announce that at the end of the quarter.

I think I would just add, at the end of December we essentially exhausted our previous authorization, so with the new authorization announced today, there’s approximately $500 million left on the outstanding authorization -- $501 million.

Okay, and if you were looking back two quarters ago, just asking a different way, your view on the value of your shares now versus six months ago, do you feel better about maybe making more aggressive share buy-backs?

No, I apologize. We’re not going to answer that question. I’m sorry.

Okay. Thank you.

Next we’ll hear from Margaret Whitfield of Sterne, Agee. Margaret Whitfield - Sterne, Agee & Leach: Good morning, everyone. Bob, I was wondering if you could comment as to whether or not you grew your business last year, rather in the fourth quarter, with your top three retailers here in the U.S.

We don’t, Margaret, talk about specific retailers. I’d rather you ask questions to them about their business than me. Margaret Whitfield - Sterne, Agee & Leach: Or I guess I’ll read the Q or the K.

I feel good about our relationships with all the major retailers. I think we did pretty well with them, but again, I’d ask you to ask them that. Margaret Whitfield - Sterne, Agee & Leach: And it’s been painful to see the erosion in Barbie, especially this past year, in the younger age group. Are you satisfied with the entertainment approach, Bob? Can you give us some insight as to what we might expect in this new year for Barbie?

No, I think we do need to do some work, Margaret. Both our spring and fall fantasy lines didn’t meet our expectations. Generally speaking, the lead doll sold well but it didn’t translate into sales of the related accessories. The reality side of the Barbie business is relatively solid. The core lines like Beach or Fashion Fever or Collectors are performing better. MyScene is doing well internationally but it is pretty well cycled through here in the U.S. And we do need to do more work on Barbie, particularly in the U.S. In 2008, we are going to continue to focus on increasing the core reality offerings. We will continue to work on new play patterns, like some of the things you may have seen in the shelf lately, or as we talk about Barbie girls. But we also need to improve the performance of the entertainment side of Barbie and I think we’ll do that. Margaret Whitfield - Sterne, Agee & Leach: Are you going to have two entertainment properties again this year, one for spring, one for holiday?

Yes, I think there’s two and there’s a little something else going on too. Margaret, I think I’d rather talk about that at Toy Fair than today, but yes, we are committed and Mariposa is on the shelf right now and we’ll have a lot of activity in the fall, which I’ll talk about in a couple of weeks. Margaret Whitfield - Sterne, Agee & Leach: Some of us will not be at Toy Fair. I wonder if you could give us some update on what we might expect, some of the highlights that toy buyers have been excited about in terms of your new line.

I think I will be making a public presentation on the web, so Margaret, even if you can’t be with us in New York at what is -- Margaret Whitfield - Sterne, Agee & Leach: I will be there.

-- annually a 25-inch snowstorm, you can hear us on the web. Margaret Whitfield - Sterne, Agee & Leach: Okay, and finally, tax rate, would the new year also have a 21% rate, Kevin?

Well, I think -- you know, we don’t give guidance but I think at this time, we estimate that the 2008 effective rate will be in the range of 21% to 23%. Margaret Whitfield - Sterne, Agee & Leach: Okay. Thank you.

Next we’ll hear from John Taylor of Arcadia Investments.

Good morning. I’ve got two questions, one about margin and one about licenses, I guess. So on the one hand, you are facing cost pressures on the production side. On the other hand, it seems like your mix is going to benefit from a stronger entertainment lineup this year. I wonder if you can give us any relative impact of those things. Kevin, I think I heard you say that you are hoping that or you are planning for a slight improvement or some kind of improvement year-on-year. Is there anything else in that margin mix that we ought to keep our eyes on?

I think just to clarify the prior comment, I think that long-term our goal is for margins to go up. I think in the near-term, that’s going to depend upon where external cost pressures go and how well we are able to find supply chain savings to offset these cost increases. There’s so many moving parts, JT, as you know in our business that it’s very difficult to predict the impact of mix. I think there will be favorable impacts from the movies but we’ve gotten a lot of moving pieces and we’ll know when we look backwards whether that was positive or negative to our margins.

So have you gotten -- and maybe it would be helpful -- is there likely to be any difference in the margin impact or the cost impact of labor, et cetera, in your internal versus external factories?

No, we’re seeing pretty noticeable increases for a variety of components and labor and transportation and the like regardless of whether we are making the products or we are outsourcing them through vendors.

Okay, so pretty similar.

Yes.

Okay, good. And then Bob, for you probably; ’07 was, from a licensing standpoint, I think relatively easy to predict, with Spider-Man and Transformers, those sort of two tent poles. It seems like the license business, and I’m ignoring Hannah for now, I guess, but this year is going to be a lot more democratic and a lot more possibility. So I wonder, are you getting any feedback from retailers yet about what their tent-pole items are likely to be and where their concentrated storewide efforts are going to be, which properties?

Well, of course I’d tell you Speed Racer, Kung Fu Panda, and Batman, but I suspect we’re not the only ones out there. But I wanted to make another comment when you think about licensing -- this Cars business has been nothing short of phenomenal. It grew last year, the second year with no entertainment out there, in the face of a lot of good offerings in the entertainment space. So I see Cars as an evergreen property. I think we have created 175 characters or something in Cars. I mean, it’s really done quite well and I think we are going to continue to see good retail support of the Cars line.

Yeah, that’s been pretty impressive. I was wondering through -- I mean, there were -- I guess what I’m getting at is there were some storewide license focuses at some of the big retailers during last summer. It wasn’t just the toy department -- it was the whole thing. Are you getting a sense that the big retailers, any of the big three, are doing, have really decided to put their full shoulder behind something?

Yes, but I can’t really get into that because they compete with one another and they have their own plans and one may go in one way and another may go in another way, and I wouldn’t want to get into it. But I think retailers generally see the benefit of these strong licensed properties and we aim to have our fair share of them as long as they are good deals for the shareholders.

Thank you.

Our final question for today will come from Felicia Hendrix from Lehman Brothers.

Good morning. A lot of my questions have been asked. I just have two quickies; one is on Radica. I know it’s a small part of your business but it did grow significantly in the fourth quarter, which is much better performance than we’ve seen for the rest of the year. I’m just thinking -- I think about Radica going forward, should we see improvement in ’08?

Well, I won’t give you a projection like that but I will tell you overall, we are very pleased with the Radica results. They had their best year ever. The business is growing. It is growing globally. When we made that acquisition in October of 2006, I tried to communicated that I think this is going to be a very good deal for our shareholders and again, my bias is that most deals are not good for the acquiring company shareholder. But if you look at the Radica deal, it’s done every bit of what we expected and more and I think it’s gone quite well. The integration has gone well, the expansion has gone well, the products are sharp. We like Radica a lot.

Another question, just in the games business; were you guys interested in Cranium at all?

Boy, I don’t think I’d want to comment on that, Felicia. I think somebody else acquired Cranium, so I wouldn’t want to talk about anything that went on back in that time.

Okay. I was hoping you would. And then Kevin, just a quick question for you again on the recurring costs, additional costs, specifically the legal. We can kind of back into what the COGS will be because you kind of said that, but when I think about the continuing legal expenses, I’m guessing in SG&A but how should I think about that going forward, if I wanted to model that?

You know, there are going to be sizable legal costs this year. We’ve got a lot of litigation around the world on things related to product recalls and we’ve got a significant case coming to trial this year that are both -- both of those issues are sizable investments in legal costs but we think they are the right thing to do.

Do you foresee that continuing into ’09?

I don’t know. It depends on how things play out. I will tell you that we take our obligation seriously. We take defending our people and our business seriously and if that requires investment in lawyers, we’ll invest in lawyers.

Got it. Okay. Thank you.

Mr. Salop, do you have any closing comments?

Yes, thanks, April. There will be a replay of the call available today beginning at 11:30 a.m. Eastern Time. That number for the replay is 719-457-0820. The passcode is 2548464. I would like to thank everybody for participating in today’s call.

That does conclude today’s teleconference. Thank you all for your participation. You may now disconnect.