updated 10/16/2006 2:43:54 PM ET 2006-10-16T18:43:54

Mattel Inc., the No. 1 U.S. toy maker,  Monday reported better-than-expected third-quarter profit, boosted by the introduction of its T.M.X. Elmo plush red doll and improving sales of its Barbie fashion doll.

Mattel, known for its Fisher-Price and American Girl brands, reported net income of $239 million, or 62 cents per share, compared with $225.3 million, or 55 cents per share, a year earlier.

The toy company said its third-quarter results include 3 cents per share after tax related to accounting errors for certain stock option grants made prior to 2003.

Analysts on average had been expecting 61 cents per share, excluding items, according to Reuters Estimates.

Mattel has been trying to boost sales by revamping its management team, improving its Barbie line, and creating a marketing buzz around the launch of T.M.X. Elmo, its 10th anniversary Tickle Me Elmo doll.

Its Barbie division has introduced new products, like its 12 Dancing Princesses line, to counter fierce competition from MGA Entertainment’s Bratz dolls.

Mattel said the efforts have led to signs of ”stabilization” in the Barbie brand, with third-quarter worldwide gross Barbie sales increasing 1 percent and U.S. Barbie sales rising for the third consecutive quarter.

Its quarterly sales rose 7 percent to $1.79 billion, beating analysts’ targets of $1.73 billion. Third-quarter worldwide gross sales in its Fisher-Price division rose 9 percent to $790.5 million.

Its Fisher-Price unit unveiled the T.M.X. Elmo doll in September, after keeping the doll’s features a secret for months.

The new Elmo, which slaps its knee and falls over in a fit of laughter after being tickled, has been flying off store shelves since it was introduced.

Separately, the El Segundo, California-based company said it completed a review of its stock option practices.

The review found that there had been no backdating of stock option grants, but Mattel identified “administrative procedural deficiencies” that resulted in incorrect accounting measurement dates for certain grants.

Mattel said the errors caused non-cash compensation expense to be understated by $19 million from 1995 through 2005.

Numerous U.S. public companies have in recent months disclosed criminal, regulatory or internal probes into issues such as potential manipulation of dates by which option grants were recorded. Stock options let holders buy shares in the future at fixed prices.

Copyright 2012 Thomson Reuters. Click for restrictions.


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