Toy Industry Overview: Growth, Trends, and Opportunities in 2006

1. State of the Toy Industry April 3, 2007 Annual 2006 Data

2. Agenda Toy Industry Overview Supercategory Overview Boys & Girls Retailers Licensing Opportunities Movies Wuz^ With Kids?

3. Overview

4. 2006 Was The Year Of The Rebound For Toys Billions of Dollars Billions of Units -1.9% +0.3% - 4.6% - 4.4% Source: The NPD Group / Consumer Tracking Service

5. Unit Price Mix Has Changed Average Retail Price, Unit Sales Distribution Unit % Change 3.3B -9% 3.0B 21% 23% +2% 23% 22% -10% -12% 57% 55% Source: The NPD Group / Consumer Tracking Service

6. Big 5 European Countries Combined Grow Value Sales by 2% Change vs. 2005 +5% -2% Flat +2% +5% POS

7. Quarterly Trends Show Growth Total Industry % Change – by Quarter in 2006 v 2005 Easter in 2006 was in April (Q2) whereas Easter in 2005 was in March (Q1). Source: The NPD Group / Consumer Tracking Service

8. Toys Increases Time Share Among 5-12 Year Olds Pt Chg -0.6 14.9% +0.7 +0.8 All Other +0.3 9.4% +0.2 -0.6 6.8% -0.2 4.7% -0.4 6.5% 4.8% -0.4 4.9% 5.7% 6.4% All Other includes non-elective activities such as eating dinner, personal hygiene, and taking naps. Source: The NPD Group / Kids Leisure Time II

9. Parents Love Toys! Statements Evaluated – Top 2 Box Agree Toys help my child learn. The time we spend playing with toys together brings us closer together. Toys keep my child from watching too much TV. Playing with toys allows my family to interact with each other without distractions. I think toys are more interesting and stimulating today than they used to be. I feel that I am a good parent when my child plays with toys. Source: The NPD Group / Parents’ Opinions on Toys

10. Innovation, Adaptation, Evolution Drove Sales In 2006 Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM) 53% 27% 20% Source: The NPD Group / Consumer Tracking Service

11. Most Top Manufacturers Grew Top 10 Manufacturers, 2006 Dollar Share Dollar Volume Percent Change 2006 vs. 2005 Share Point Change 2006 vs. 2005 Annual 2005 Ranking Dollar Share (%) 1 2 3 4 6 5 7 9 8 14 Source: The NPD Group / Consumer Tracking Service

12. Two Boy’s Segments Showed Significant Increases Boys, By Age of Recipient Dollars, 2006 +9% -6% +10% -2% +1% Source: The NPD Group / Consumer Tracking Service

13. Girls 0-8 Grew Girls, By Age of Recipient Dollars, 2006 -14% +5% -9% +3% +8% Source: The NPD Group / Consumer Tracking Service

14. More Toy Dollars Are Spent Per Child/Year Than Ten Years Ago Per Capita Estimates Of Toy Dollars Across Age Ranges, Annual 2006 Note: Population estimates used are based on Census Bureau Projections of U.S. Population

15. More Kids +5% +7% -2% Source: U.S. Census Bureau Projections of Kids

16. The Building Blocks Are In Place • Industry Sales are on the upswing • Kids are spending more time playing with toys and their parents like that • Innovation is paying off for manufacturers • The core consumer is showing significant growth • Growth expected to continue as the population of kids goes up over the next few years

17. Supercategory Overview

18. Four Supercategories Drove Sales In 2006 Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM) Source: The NPD Group / Consumer Tracking Service

19. Youth Electronics Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM)

20. Vehicles Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM)

21. Arts & Crafts Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM)

22. Infant / Preschool Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM)

23. Dolls Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM)

24. Building Sets Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM)

25. Outdoor & Sports Toys Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM)

26. Games & Puzzles Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM)

27. Plush Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM) Source: The NPD Group / Consumer Tracking Service

28. All Other Toys Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM) Source: The NPD Group / Consumer Tracking Service

29. Action Figures & Accessories Annual 2006 vs. 2005 Dollar % Change Dollar Sales (MM) Source: The NPD Group / Consumer Tracking Service

30. Demographics

31. Two Boy’s Segments Showed Significant Increases Boys, By Age of Recipient Dollars, 2006 +9% -6% +10% -2% +1% Source: The NPD Group / Consumer Tracking Service

32. Boys, 0-2 Years Old Top Dollar Sales Categories (MM) – Annual 2006 vs. 2005 Boys, 0-2 Years Old 2005: $2.0B 2006: $2.2B % Change: 8.7% Key Findings & Opportunities: • Toys for 0-2 year old boys have the highest average retail price, at $9.32 • 27% of toys for 0-2 year old boys are purchased by grandparents • Purchases made by Hispanics and Asians helped drive the overall growth for this age group Source: The NPD Group / Consumer Tracking Service

33. Boys, 3-5 Years Old Top Dollar Sales Categories (MM) – Annual 2006 vs. 2005 Boys, 3-5 Years Old 2005: $2.9B 2006: $2.9B % Change: -2.3% Key Findings & Opportunities: • Toys for this group have the lowest average retail price, at $7.32 • 3-5 year olds have the highest share of Licensed sales, at 35% • Approximately half of 3-5 year old boys ask for specific and/or brand/type of toy Source: The NPD Group / Consumer Tracking Service

34. Boys, 6-8 Years Old Top Dollar Sales Categories (MM) – Annual 2006 vs. 2005 Boys, 6-8 Years Old 2005: $2.0B 2006: $2.0B % Change: 1.4% Key Findings & Opportunities: • While Mass Merchants were the #1 channel for this group, the Online Channel grew the most • Purchases made for Christmas/Hanukah and Birthday’s grew, which offset declines for other occasions Source: The NPD Group / Consumer Tracking Service

35. Boys, 9-11 Years Old Top Dollar Sales Categories (MM) – Annual 2006 vs. 2005 Boys, 9-11 Years Old 2005: $1.2B 2006: $1.3B % Change: 9.8% +35% -7% -15% +5% Key Findings & Opportunities: • Average retail prices climbed to $8.79 in 2006 vs. $7.73 in 2005, a 14% increase • Boys 9-11 are more likely to ask for a specific toy more than any other age group • Purchases made by Grandparents increased +4 share points +3% +80% +167% Source: The NPD Group / Consumer Tracking Service

36. Girls 0-8 Grew Girls, By Age of Recipient Dollars, 2006 -14% +5% -9% +3% +8% Source: The NPD Group / Consumer Tracking Service

37. Girls, 0-2 Years Old Top Dollar Sales Categories (MM) – Annual 2006 vs. 2005 Girls, 0-2 Years Old 2005: $2.0B 2006: $2.1B % Change: 4.8% Key Findings & Opportunities: • Toys for this group have the highest average retail price, at $9.42 • Girls 0-2 years old have the highest share of Licensed toys, at 30% • 29% of toys for 0-2 year old girls are purchased by the grandparent Source: The NPD Group / Consumer Tracking Service

38. Girls, 3-5 Years Old Top Dollar Sales Categories (MM) – Annual 2006 vs. 2005 Girls, 3-5 Years Old 2005: $2.8B 2006: $3.0B % Change: 7.8% Key Findings & Opportunities: • Average retail prices climbed to $8.50 in 2006 vs. $7.62 in 2005, a 11% increase • Purchases made by Parents increased 4 share points while purchases made by Grandparents decreased -2 share points • Purchases made for Birthday’s are up 22% to almost $700MM Source: The NPD Group / Consumer Tracking Service

39. Girls, 6-8 Years Old Top Dollar Sales Categories (MM) – Annual 2006 vs. 2005 Girls, 6-8 Years Old 2005: $2.1B 2006: $2.1B % Change: 2.8% Key Findings & Opportunities: • Girls are becoming more vocal! 2/3 of 6-8 year olds are asking for a toy, most of that comes from girls asking for a specific toy • 6-8 year old girls under-indexed for purchases made by African Americans • Purchases made for Christmas/Hanukah and Birthday’s contributed to overall growth in this segment Source: The NPD Group / Consumer Tracking Service

40. Girls, 9-11 Years Old Top Dollar Sales Categories (MM) – Annual 2006 vs. 2005 Girls, 9-11 Years Old 2005: $1.2B 2006: $1.1B % Change: -9.0% Key Findings & Opportunities • 33% of sales came from items introduced in 2006, vs. 27% from items introduced in 2005 • 71% of 9-11 year old girls are asking for a specific toy • Hallmark was the fastest growing retailer among this age group, and the Toy Store Channel grew the most Source: The NPD Group / Consumer Tracking Service

41. Retailers

42. The Big Get Bigger…And Target Is Gunning For #2 Retailer Dollar Share Source: The NPD Group / Consumer Tracking Service

43. Per Store Sales Stronger For Toys ‘R Us For 2 Consecutive Years Retailer Dollar Sales Per Store (,000) – Annual 2006 Wal-Mart Toys ‘R Us Target +8% +1% # Stores 3,066 3,189 3,331 681 679 586 1,308 1,397 1,448 Source: The NPD Group / Consumer Tracking Service

44. % Chg. +2 -1 -1 It’s A Seasonal Game Retailer Dollar Share – Annual 2006 Source: The NPD Group / Consumer Tracking Service

45. Both Toys ‘R Us And Target Had Double-digit Growth Per Store In Q4 Retailer Dollar Sales Per Store (,000) – 4th Quarter Wal-Mart Toys ‘R Us Target +10% +10% Source: The NPD Group / Consumer Tracking Service

46. There Are Regional Ups & Downs for the Big 3 Retailers Retailer Dollar % Change – Annual 2006 vs. 2005 CENTRAL In Northeast MSAs with population >2.5M TRU +9% Wal-Mart -1% Toys R Us 0% Target +6% NORTHEAST Wal-Mart +2% Toys R Us -2% Target +29% SOUTH WEST Wal-Mart -3% Toys R Us -9% Target +25% Wal-Mart +1% Toys R Us -16% Target +10% Source: The NPD Group / Consumer Tracking Service

47. The Big 3 Are Evenly Matched In The Largest Metro Areas Retailer Dollar Share by MSA (Market Size Area) – Annual 2006 45% 55% Population Size Source: The NPD Group / Consumer Tracking Service

48. Price Strategy Matters Average Consumer Reported Price by Retailer – Annual 2006 Wal-Mart Toys ‘R Us Target Source: The NPD Group / Consumer Tracking Service

49. 18% 25% 52% Price Matters Unit Distribution of Sales by Price Point – Annual 2006 Source: The NPD Group / Consumer Tracking Service

50. Target  Focused • Grew sales on a per store basis and expanded the # of stores to 1,443 in 2006 vs. 1,350 in 2005 • Grew in all regions • Strong in 4th quarter • Strong development in hot new properties (e.g. 29% of Go Diego Go sales in 2006)