Mattel 2000 Annual Report Download - page 37

thirty five
Mattel, Inc. and Subsidiaries
benefit obligation and the service and interest cost recognized as of and
for the year ended December 31, 2000 (in thousands):
One Percentage Point
Increase Decrease
Accumulated postretirement benefit obligation $3,979 $(3,402)
Service and interest cost 284 (243)
Domestic employees of Mattel participate in a contributory
postretirement benefit plan. The ongoing costs and obligations asso-
ciated with the Mattel, Inc. plan are not significant to the financial
position and results of operations during any year.
Incentive Awards
Mattel has annual incentive compensation plans for officers and key
employees based on Mattel’s performance and subject to certain
approvals of the Compensation/Options Committee of the board of
directors. For 2000 and 1998, $33.7 million and $11.7 million, respec-
tively, were charged to operating expense for awards under these
plans. No expense was recorded in 1999 for awards under these plans.
In November 2000, the Compensation/Options Committee of
the board of directors approved the Long-Term Incentive Plan cover-
ing certain key executives of Mattel, Inc. for the performance period
from August 15, 2000 through December 31, 2002. Awards are based
upon the financial performance of Mattel during the performance
period and are paid in the quarter following the end of the performance
period. In 2000, $8.3 million was charged to operating expense for
this plan.
In June 1999, the stockholders approved the Amended and
Restated Mattel Long-Term Incentive Plan. The Compensation/Options
Committee of the board of directors terminated this plan in November
2000, and no expense was recorded related to this plan. Amounts
charged to operating expense in 1998 for the final payout under the
previous plan were $10.8 million.
For 2000, $11.6 million was charged to operating expense for
costs related to the recruitment and retention of senior executives. For
1999, $22.0 million was charged to operating expense related to a spe-
cial award. This special broad-based employee award was approved by
Mattel’s board of directors and was designed to provide a competitive
compensation level to retain and motivate employees of Mattel.
NOTE 4 - SEASONAL FINANCING AND LONG-TERM DEBT
Seasonal Financing
Mattel maintains and periodically amends or replaces an unsecured
committed revolving credit agreement with a commercial bank group
that is used as the primary source of financing the seasonal working
capital requirements of its domestic and certain foreign subsidiaries.
The agreement in effect during 2000 consisted of a unsecured com-
mitted facility providing a total of $1.0 billion in seasonal financing
(a five-year facility that expires in 2003). Interest was charged at
various rates selected by Mattel, ranging from market commercial
paper rates to the bank reference rate. In first quarter 2000, Mattel
implemented a 364-day, $400.0 million unsecured committed credit
facility, with essentially the same terms and conditions as the
$1.0 billion revolving credit facility. The $400.0 million, 364-day
facility is expected to be renewed in first quarter 2001.
In third quarter 2000, Mattel entered into a $200.0 million
senior unsecured term loan that matures in July 2003. Interest is
charged at various rates, ranging from a LIBOR-based rate to the bank
reference rate (7.94875% as of December 31, 2000). The unsecured
credit facilities and term loan require Mattel to meet financial
covenants for consolidated debt-to-capital and interest coverage and
Mattel was in compliance with such covenants during 2000. In addi-
tion, Mattel avails itself of uncommitted domestic facilities provided
by certain banks to issue short-term money market loans.
To meet seasonal borrowing requirements of certain foreign
subsidiaries, Mattel negotiates individual financing arrangements, gen-
erally with the same group of banks that provided credit in the prior
year. Foreign credit lines total approximately $392 million, a portion of
which is used to support letters of credit. Mattel expects to extend
these credit lines throughout 2001 and believes available amounts will
be adequate to meet its seasonal financing requirements. Mattel also
enters into agreements with banks of its foreign subsidiaries for non-
recourse sales of certain of its foreign subsidiary receivables.
Information relating to Mattel’s unsecured committed credit
facilities, foreign credit lines and other short-term borrowings is sum-
marized as follows (in thousands):
For the Year
2000 1999 1998
Balance at end of year
Domestic $ 178,017 $ 293,744 $ 79,175
Foreign 48,386 75,805 54,831
Maximum amount outstanding
Domestic $1,320,000 $1,207,000 $1,076,600
Foreign 85,905 117,000 141,000
Average borrowing
Domestic $ 835,200 $ 573,100 $ 400,800
Foreign 79,561 40,000 58,000
Weighted average interest rate on average borrowing
Domestic (computed daily) 6.7% 5.5% 5.6%
Foreign (computed monthly) 15.65% 33.0% 20.3%
Long-Term Debt
Mattel’s long-term debt consists of the following (in thousands):
As of Year End
2000 1999
Euro notes due 2002 $ 190,710 $ -
Unsecured term loan due 2003 200,000 -
6% senior notes due 2003 150,000 150,000
6-1/8% senior notes due 2005 150,000 150,000
6-3/4% senior notes due 2000 - 100,000
Medium-term notes 540,500 540,500
10.15% mortgage note due 2005 42,380 43,007
Other 1,529 2,546
1,275,119 986,053
less: current portion (32,723) (3,173)
Total long-term debt $1,242,396 $982,880