Mattel 2000 Annual Report Download - page 34

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Mattel, Inc. and Subsidiaries
statement and tax bases of assets and liabilities, applying enacted
statutory tax rates in effect for the year in which the differences are
expected to reverse.
Income and Dividends Per Common Share
Share and per share data for 1998 and 1999 presented in these
financial statements reflect the retroactive effects of the May 1999
Learning Company merger.
Basic income (loss) per common share is computed by dividing
earnings available to common stockholders by the weighted average
number of common shares and common shares obtainable upon the
exchange of the exchangeable shares of Mattel’s Canadian subsidiary,
Softkey Software Products Inc., outstanding during each period.
Earnings available to common stockholders represent reported net
income (loss) less preferred stock dividend requirements.
Diluted income (loss) per common share is computed by dividing
diluted earnings available to common stockholders by the weighted
average number of common shares, common shares obtainable upon
the exchange of the exchangeable shares of Mattel’s Canadian sub-
sidiary, Softkey Software Products Inc., and other common equivalent
shares outstanding during each period. The calculation of common
equivalent shares assumes the exercise of dilutive stock options and
warrants, net of assumed treasury share repurchases at average market
prices, and conversion of dilutive preferred stock and convertible debt,
as applicable. Dilutive securities are included in the calculation of
weighted average shares outstanding for those periods in which
Mattel recorded income from continuing operations.
A reconciliation of earnings available to common stockholders
and diluted earnings available to common stockholders and the related
weighted average shares for the years ended December 31 follows
(in thousands):
2000 1999 1998
Earnings Shares Earnings Shares Earnings Shares
Income from continuing
operations $170,177 $108,387 $328,253
Less: preferred stock dividend
requirements - (3,980) (7,960)
Earnings available to common
stockholders $170,177 426,166 $104,407 414,186 $320,293 390,210
Dilutive securities:
Dilutive stock options 960 3,920 8,685
Warrants - 665 4,812
Preferred stock - 6,510 18,000
Diluted earnings available to
common stockholders $170,177 427,126 $104,407 425,281 $320,293 421,707
Premium price stock options totaling 16.3 million and other
nonqualified stock options totaling 25.6 million were excluded from
the calculation of diluted earnings per share in 2000 because they
were anti-dilutive. Premium price stock options totaling 16.9 million,
other nonqualified stock options totaling 23.2 million, convertible
debt, and Series C preferred stock were excluded from the calculation
of diluted earnings per share in 1999 because they were anti-dilutive.
Premium price stock options totaling 18.7 million, Series C preferred
stock, and convertible debt were excluded from the calculation of
diluted earnings per share in 1998 because they were anti-dilutive.
Risk Management Contracts
Mattel enters into foreign currency forward exchange and option
contracts primarily as hedges of purchases and sales of inventory,
and other intercompany transactions denominated in foreign curren-
cies to limit the effect of exchange rate fluctuations on its results of
operations and cash flows. Mattel also entered into a cross currency
interest rate swap related to its Euro Notes. Mattel does not enter
into contracts for speculative purposes.
Mattel designates its financial instruments as hedges of specific
assets, liabilities or anticipated transactions. Gains and losses related
to contracts that have been designated as hedges are deferred and are
recognized in the results of operations, balance sheet, and statement
of cash flows as part of the underlying transaction. Contracts that
have not been designated as hedges are marked to market with gains
and losses recognized in the results of operations currently. If a con-
tract previously designated as a hedge is terminated prior to the
transaction date of the related commitment, the resultant gain or
loss is recognized at the time of maturity of the original contract
as a component of other expense (income), net.
NOTE 2 - INCOME TAXES
Consolidated income from continuing operations before income taxes
consists of the following (in thousands):
For the Year
2000 1999 1998
US operations $(140,747) $(126,675) $ 53,965
Foreign operations 366,171 296,839 405,481
$ 225,424 $ 170,164 $459,446
The provision for current and deferred income taxes consists of
the following (in thousands):
For the Year
2000 1999 1998
Current
Federal $ 2,860 $ 9,816 $ 40,132
State 3,500 7,400 5,500
Foreign 52,900 58,150 98,336
59,260 75,366 143,968
Deferred
Federal (9,890) (30,109) 1,825
State (13,400) 3,420 (1,400)
Foreign 19,277 13,100 (13,200)
(4,013) (13,589) (12,775)
Total provision for income taxes $55,247 $61,777 $131,193