Mattel 1999 Annual Report Download - page 32

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Mattel, Inc. and Subsidiaries
amount reducing annually to 10 0% by November 1, 20 00 . During the years ended
December 31 , 1998 and 19 97 , Learning Company repurchased $6.0 million and
$2 8.0 million, respectively, of 5 -1/ 2% Notes. In June 1 998, Learning Company
repurchased $ 96 .7 million of 5-1/ 2 % Notes in exchange for issuance of 4 .1 million
shares of common stock. At December 31, 1 99 9 and 19 98 , the bid prices for the
5-1/ 2% Notes, as provided by one of the underwriters, were $ 98 0.0 0 and $ 98 5.0 0,
respectively, based on a par value of $1,0 00 .00 . As of December 31 , 1999, the
5-1/ 2% Senior Notes are classified in the consolidated balance sheets as a long-term
liability because management has the ability and intent to repay this obligation upon
maturity with proceeds from the issuance of other long-term debt instruments.
Mattel assumed Learning Company’s obligations related to the 5-1/ 2 % Notes
upon consummation of the May 1 99 9 merger. As a result, the 5 -1/ 2% Notes are
now convertible at the option of the holders into a number of shares of Mattel com-
mon stock determined by dividing the principal amount of the notes to be converted
by the $ 53 .00 conversion price and multiplying the resulting number by 1 .2.
In December 1995, Tribune Company made an investment in Learning
Company in the form of $ 15 0.0 million aggregate principal amount of 5-1/ 2 %
Notes. These notes were sold by Tribune Company during 19 97 in a private transac-
tion to an investor group prior to the issuance by Learning Company of 750.0 thou-
sand shares of Series A Convertible Participating Preferred Stock ( “ Series A Preferred
Stock” ) and were surrendered by the investor group for the shares of the Series A
Preferred Stock.
6% and 6 -1/ 8% Senior Notes
In July 1 99 8, Mattel issued $3 00 .0 million aggregate principal amount of senior
notes, $1 50 .0 million of which were 6 % Senior Notes maturing July 1 5, 2 00 3 and
$1 50 .0 million of which were 6 -1/ 8% Senior Notes maturing July 1 5, 2 00 5.
Interest is payable semiannually on the fifteenth day of January and July. At
December 31 , 1999 and 19 98 , the bid prices for the 6 % and 6-1/ 8 % Senior Notes,
as provided by one of the underwriters, were $ 92 9.2 0 and $1 ,0 04 .40 , respectively,
for the 6% Senior Notes and $ 88 4.6 0 and $9 98 .6 5, respectively, for the 6-1/ 8 %
Senior Notes, based on a par value of $1 ,000 .00 .
Medium-Term Notes ( “ MT Notes” )
During the 19 94 third quarter, Mattel commenced a program for the issuance of debt
and equity securities under various shelf registration statements. In November 1 99 8,
Mattel filed its current universal shelf registration statement allowing the issuance of
up to $4 00 .0 million of debt and equity securities, all of which was available to be
issued as of December 31 , 1 99 9. The following is a summary of MT Notes currently
outstanding ( in millions, except bid prices) :
Year Maturity Bid Price ( b)
Issued Amount Date Rate ( a) 1 9 9 9 199 8
19 9 4 $ 50 .5 1 2 / 01 -12 / 04 8 .48% -8.55% $1 ,0 0 8 .57 -$9 9 1.65 $1 ,0 5 2 .61 -$1 ,11 2 .7 0
19 9 5 1 3 0.0 04/ 0 2 -05/ 0 7 7.0 1 % -7.65 % 9 3 7 .40 -$963.78 1,04 3 .2 0 -$1,05 1 .3 4
19 9 7 3 1 0.0 11/ 0 4 -07/ 1 2 6.7 0 % -7.49 % 8 6 7 .40 -$912.10 1,02 1 .5 9 -$1,07 3 .4 5
19 9 8 5 0 .0 11/ 1 3 6 .5 0% -6.6 1% 77 7 .5 0 -$7 86.30 99 0 .5 2 -$1 ,000 .8 5
( a) Interest is payable semiannually at fixed rates on the fifteenth day of May and November.
( b) Based on a par value of $ 1 ,0 0 0 .00.
Mortgage Note
In 1 99 0, Mattel borrowed $45.0 million under a mortgage agreement collateral-
ized by its headquarters office facility in El Segundo, California. Interest accrues at
10 .15 % and monthly principal and interest payments are due through December
20 05 . The fair value of the original mortgage note, estimated by discounting future
cash flows at interest rates currently available for debt with the same credit rating,
similar terms and maturity date, was approximately $4 6 million and $5 1 million at
December 31 , 1999 and 19 98 , respectively.
7% Convertible Subordinated Notes ( “ 7% Notes” )
Upon consummation of the March 19 97 merger, Mattel assumed Tyco’s $1 6.0 mil-
lion obligation related to the 7% Notes. On September 1 0, 1 99 7, the holder con-
verted all of the 7 % Notes into 8 92 .7 thousand shares of Mattel common stock.
10 -1/ 8% Senior Subordinated Notes ( “ 10 -1/ 8% Notes” )
Upon consummation of the March 19 97 merger, Mattel assumed Tyco’s $1 26 .5 mil-
lion obligation related to the 10 -1/ 8% Notes. On August 15, 1 99 7, Mattel exer-
cised its option and redeemed the 10 -1/ 8% Notes at 1 03 .797% of par together with
accrued interest. In the third quarter of 1 99 7, Mattel recognized a pre-tax extraordi-
nary loss of $ 7.3 million, and a related income tax benefit of $2.7 million, as a
result of the early retirement.
6-7/ 8% Senior Notes
Mattel’s $1 00 .0 million of 6-7/ 8 % Senior Notes issued in August 19 92 were repaid
upon maturity on August 1, 1997.
Scheduled Maturities
The aggregate amounts of long-term debt and other obligations maturing in the next
five years are as follows ( in thousands) :
MT Mortgage
Senior Notes Notes Note Other Total
20 0 0 $3 0 1 ,0 0 0 $ – $6 0 0 $ 2 ,5 00 $ 3 0 4 ,100
20 0 1 – 30 ,5 0 0 7 0 0 5 0 0 3 1 ,7 00
20 0 2 – 30 ,0 0 0 8 0 0 2 0 0 3 1 ,0 00
20 0 3 15 0 ,0 0 0 3 0,00 0 80 0 200 18 1 ,0 0 0
20 0 4 – 50 ,0 0 0 9 0 0 2 0 0 5 1 ,1 00
Note 5 - Stockholders’ Equity
Preference Stock and Preference Share Purchase Rights
Mattel is authorized to issue 20 .0 million shares of $0.0 1 par value preference stock,
of which none is currently outstanding. There are 2.0 million shares of $ 0.01 par value
preference stock designated as Series E Junior Participating Preference Stock in connec-
tion with a distribution of Preference Share Purchase Rights ( the “ Rights” ) to Mattel’s
common stockholders. The Rights may be exercised by their holders to purchase shares
of Mattel’s Series E Junior Participating Preference Stock upon the occurrence of a
change of control as defined in the rights agreement. The Rights will expire on
February 1 7, 2002, unless the agreement is further extended or the Rights are earlier
redeemed or exchanged by Mattel.
Preferred Stock
Mattel is authorized to issue 3.0 million shares of $ 1.0 0 par value preferred stock, of
which 7 71 .9 thousand shares were outstanding as of December 31 , 1998.
Series A Preferred Stock
During 1 99 7, Learning Company issued 75 0.0 thousand shares of Series A Preferred
Stock to an investor group in exchange for $1 50 .0 million of 5-1/ 2 % Notes. Just
prior to the consummation of the May 19 99 merger, each share of Series A Preferred
Stock was converted into 20 shares of Learning Company common stock, and the
resale restrictions expired.