Mattel 2002 Annual Report Download - page 38

sold to a group of banks, which currently include, among others, Bank of America, N.A. as administrative agent,
Citicorp USA, Inc. and Fleet National Bank as syndication agents, and Societe Generale and BNP Paribas as
documentation agents. Pursuant to the domestic receivables facility, Mattel Sales Corp. and Fisher-Price, Inc.
(which are wholly-owned subsidiaries of Mattel) can sell trade receivables from Wal-Mart and Target to Mattel
Factoring, a Delaware corporation and wholly-owned subsidiary of Mattel. Mattel Factoring is a special purpose
entity whose activities are limited to purchasing and selling receivables under this facility. Mattel Factoring is a
consolidated subsidiary of Mattel. Pursuant to the terms of the domestic receivables facility and simultaneous
with each receivables purchase, Mattel Factoring sells those receivables to the bank group. Mattel records the
transaction, reflecting cash proceeds and sale of accounts receivable on its consolidated balance sheet, at the time
of the sale of the receivables to the bank group.
Mattel’s subsidiaries Mattel International Holdings B.V., a Netherlands company, Mattel France S.A.S., a
French company, and Mattel GmbH, a German company, have entered into a Euro 150 million European trade
receivables facility, pursuant to which Mattel France S.A.S. and Mattel GmbH may sell trade receivables to a
bank, Societe Generale Nederland N.V. The receivables sales are accounted for as a sale. As with the domestic
receivables facility, each sale of accounts receivable is recorded on Mattel’s consolidated balance sheet at the
time of such sale. No Mattel subsidiary is used as a special purpose entity in connection with these transactions.
Under the European receivables facility, the outstanding amount of receivables sold may not exceed Euro
60 million from February 1 through July 31 of each year and may not exceed Euro 150 million at all other times.
Pursuant to a letter agreement between Societe Generale Nederland and Mattel International Holdings B.V.,
Mattel France S.A.S. and Mattel GmbH dated July 1, 2002, the commitment termination date for the European
receivables facility was extended to June 29, 2003.
The outstanding amounts of accounts receivable that have been sold under these facilities and other
factoring arrangements, net of collections from customers, and have been excluded from Mattel’s consolidated
balance sheets are summarized as follows (in millions):
As of Year End
2002 2001
Receivables sold pursuant to the:
Domestic receivables facility .................... $276.1 $261.5
European receivables facility .................... 85.2 78.0
Other factoring arrangements ....................... 76.0 159.2
$437.3 $498.7
Financial Position
Mattel’s cash and short-term investments increased by $650.4 million to $1.267 billion at year end 2002
compared to $616.6 million at year end 2001. The increase was primarily due to cash flows generated from
operating activities and reductions in working capital, partially offset by repayment of long-term debt. Accounts
receivable, net decreased by $175.0 million to $490.8 million at year end 2002, reflecting shorter payment terms
to customers and improved cash collections, partially offset by lower factoring of accounts receivable.
Inventories decreased by $148.9 million to $338.6 million at year end 2002. Inventory levels were positively
impacted by the execution of the supply chain initiatives and the elimination of pre-built inventory related to the
closure of the Murray, Kentucky, plant, which was completed in the second quarter of 2002. While Mattel will
continue to strive for working capital improvement through its supply chain initiatives and focus on cash
collections in 2003, management does not expect to generate the same magnitude of cash from working capital
improvements as in 2002 considering the current level of its accounts receivable and inventories. Property, plant
and equipment, net decreased $27.1 million to $599.6 million at year end 2002, largely due to depreciation,
partially offset by capital spending. Goodwill decreased by $386.2 million to $703.2 million at year end 2002,
largely due to the one-time $400.0 million pre-tax transition adjustment resulting from the implementation of
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