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Rescue Heroes and educational toys for infants helped lead the way to an 8 percent increase in core Fisher-Price toy sales in the third quarter -- a strong performance by that division of parent Mattel Inc., which saw sales rise 2 percent.

Mattel said Thursday its third-quarter earnings rose 19 percent before one-time charges, as the No. 1 toy manufacturer improved profit margins under its year-old leadership. Net income, before one-time charges, was $207.6 million, or 48 cents per share, up from $174.3 million, or 41 cents a share, a year ago. Sales rose 2 percent to $1.61 billion from $1.58 billion a year ago.

The earnings beat the consensus earnings estimate among analysts polled by Thomson Financial/First Call of 46 cents per share.

Including one-time items, Mattel reported net income rose to $199.8 million, or 46 cents per share from a loss of $336.9 million or 79 cents a share in third quarter of 2000. The one-time charges this quarter were mainly part of the restructuring plan, which required terminating licensing arrangements and closing its North American distribution and manufacturing facilities.

A strong performer was the Rescue Heroes action figures that Fisher-Price introduced in 1998 in response to mothers requesting a non-violent and inspirational action figure for their preschoolers, said Neil Friedman, president of Fisher-Price Brands.

Billy Blazes firefighter emerged as the most popular of the company's "Rescue Heroes" series and Fisher-Price was in the process of making a special edition of the toy, with the character wearing gear from the Fire Department of New York City, when the terrorist attacks occurred Sept. 11.

Fisher-Price and Toys R Us are donating all proceeds of the special edition to FDNY safety education fund.

Rescue Heroes are expected to be a popular holiday gift and the Aquatic Command Rescue Center, a staging platform for the Rescue Heroes, is on the Hot Dozen holiday toy list for Toy Wishes magazine.

However, sales of plush toys of Disney and Sesame Street characters made by Fisher-Price were flat in the third quarter.

"We've seen six quarters of decline in U.S. sales of character brands, but we're hopeful that this quarter represents a turning point," said Kevin Farr, Mattel's chief financial officer.

Already Tickle Me Elmo Surprise, which commemorates the fifth anniversary of the original toy, is selling well, Friedman said. Mattel has rebounded steadily in the last year under new management following the departure of former CEO Jill E. Barad and the sale of its poorly performing Learning Co. software unit. Mattel virtually gave the unit away late last year and has said it will focus on its core toy products. A few product lines did not fare well this quarter. Barbie sales in the United States fell 17 percent, the third consecutive quarter sales have fallen.

"We've had lower sales on our collector doll business and holiday Barbie," Bob Eckert, president and CEO, said during a conference call. "These are dolls that retail for $35 or more. I think that the reasons for the precipitous drops are the economic climate today just doesn't support those types of price points."

Company executives had an overall positive outlook for the fourth quarter.

"Retailers are expecting a good holiday season," Eckert said. "Parents will self-sacrifice first. Kids will still have a good Christmas and 90 percent of our toys sell for less than $20 and about three quarters of them sell for less than $10."


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