Mattel 2003 Annual Report Download - page 39

In July 2003, the board of directors approved a share repurchase program of up to $250.0 million. In
November 2003, the board of directors approved an increase to the share repurchase program of an additional
$250.0 million, bringing the total authorized repurchases to $500.0 million. During 2003, Mattel repurchased
3.5 million shares of its common stock in the third quarter and 9.2 million shares in the fourth quarter, for a total
of 12.7 million shares. The cost of these repurchases was approximately $67 million in the third quarter and
$177 million in the fourth quarter, or a total cost of approximately $244 million pursuant to this program during
2003. Mattel anticipates that future repurchases will take place from time to time, depending on market
conditions.
During 2003, a $0.40 per share dividend was declared by the board of directors in November and paid in
December. In 2002 and 2001, a $0.05 per share dividend was declared by the board of directors in November and
paid in December. The change in the dividend amount resulted in dividend payments of approximately
$171 million in 2003 compared to $22 million in each of 2001 and 2002.
Seasonal Financing
Mattel expects to finance its seasonal working capital requirements for 2004 by using existing and internally
generated cash, issuing commercial paper, selling certain trade receivables, and using various short-term bank
lines of credit. Mattel maintains and periodically amends or replaces an unsecured committed revolving credit
facility 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 2003 was an
amended and restated $1.06 billion, 3-year facility with an expiration date in 2005. In March 2004, Mattel
anticipates amending and restating its domestic unsecured committed revolving credit facility. The size of the
facility is expected to be changed to $1.30 billion, and the expiration date of the facility is expected to be
extended to March 2007. The other terms and conditions of the amended and restated facility are expected to be
substantially similar to those currently in place. Interest is charged at various rates selected by Mattel, ranging
from market commercial paper rates to the bank reference rate. The unsecured committed revolving credit
facility contains a variety of covenants, including financial covenants that require Mattel to maintain certain
consolidated debt-to-capital and interest coverage ratios. Specifically, Mattel is required to meet these financial
covenant ratios at the end of each fiscal quarter and fiscal year, using the formulae specified in the credit
agreement to calculate the ratios. Mattel was in compliance with such covenants at the end of each fiscal quarter
and fiscal year in 2003. As of year end 2003, Mattel’s consolidated debt-to-capital ratio, as calculated per the
terms of the credit agreement, was 0.30 to 1 (compared to a maximum allowed of 0.50 to 1) and Mattel’s interest
coverage ratio was 12.47 to 1 (compared to a minimum allowed of 3.50 to 1). The unsecured committed
revolving credit facility is a material agreement and failure to comply with the financial covenant ratios may
result in an event of default under the terms of the facility. If Mattel defaulted under the terms of the unsecured
committed revolving credit facility, its ability to meet its seasonal financing requirements could be adversely
affected.
To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel avails itself of
individual short-term foreign credit lines with a number of banks. As of year end 2003, Mattel’s foreign credit
lines total approximately $320 million, a portion of which are used to support letters of credit. Mattel expects to
extend these credit lines throughout 2004.
Mattel believes its cash on hand at the beginning of 2004, amounts available under its domestic unsecured
committed revolving credit facility, its uncommitted money market facility, and its foreign credit lines will be
adequate to meet its seasonal financing requirements in 2004.
Mattel sells certain domestic and foreign trade receivables as one of its means for financing seasonal
working capital requirements. Mattel has a $300.0 million domestic receivables sales facility that is a sub-facility
of Mattel’s domestic unsecured committed revolving credit facility. The outstanding amount of receivables sold
under the domestic receivables facility may not exceed $300.0 million at any given time, and the amount
available to be borrowed under the credit facility is reduced to the extent of any such outstanding receivables
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