Mattel 2003 Annual Report Download - page 40

sold. Under the domestic receivables facility, certain trade receivables are 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. After the
amendment and restatement of the domestic unsecured revolving credit facility, the group of banks is anticipated
to include, among others, Bank of America, N.A., as administrative agent, Citicorp USA, Inc. and Barclays Bank
PLC, as co-syndication agents, and Societe Generale and BNP Paribas, as co-documentation agents. Pursuant to
the domestic receivables facility, Mattel Sales Corp. and Fisher-Price, Inc. (which are wholly-owned subsidiaries
of Mattel) can sell eligible trade receivables from Wal-Mart and Target to Mattel Factoring, a Delaware
corporation and wholly-owned, consolidated subsidiary of Mattel. Mattel Factoring is a special purpose entity
whose activities are limited to purchasing and selling receivables under this facility. 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 Bank 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 trade 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 Bank Nederland N.V. and Mattel
International Holdings B.V., Mattel France S.A.S. and Mattel GmbH effective June 29, 2003, the commitment
termination date for the European receivables facility was extended to June 25, 2004.
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
2003 2002
Receivables sold pursuant to the:
Domestic receivables facility ........................................ $279.5 $276.1
European receivables facility ........................................ 94.5 85.2
Other factoring arrangements ............................................ 82.0 76.0
$456.0 $437.3
Financial Position
Mattel’s cash and short-term investments decreased by $114.4 million to $1.15 billion at year end 2003
compared to $1.27 billion at year end 2002, primarily due to repurchase of common stock, payment of dividends,
repayment of long-term debt upon maturity and investment in capital, largely offset by cash flows generated
from operating activities. Accounts receivable, net increased by $53.1 million to $543.9 million at year end 2003,
reflecting an increase of $43.6 million due to changes in currency exchange rates and a slight shift in timing of
fourth quarter 2003 sales to later in the quarter compared to fourth quarter 2002 sales. The receivables associated
with these later shipments were collected in January 2004. Inventories increased by $50.1 million to
$388.7 million at year end 2003. While inventory levels were negatively impacted by $22.5 million due to
changes in currency exchange rates and lower than expected sales during the holiday season, Mattel was still able
to maintain the majority of the progress made in reducing inventories since 2001. In 2003, Mattel continued to
strive for working capital improvement through its supply chain initiatives and focus on cash collections.
However, management did not expect to generate the same magnitude of cash from working capital
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