Mattel 2003 Annual Report Download - page 42

inventory purchases and licensing payments. Certain of these commitments routinely contain provisions for
guaranteed or minimum expenditures during the term of the contracts.
Mattel’s commitments for debt and other contractual arrangements are summarized as follows (in millions):
Payments Due by Period
Total 2004 2005 2006 2007 2008 Thereafter
Long-term debt .................... $ 641.4 $ 52.3 $189.1 $ 50.0 $ 50.0 $ 50.0 $250.0
Interest on long-term debt ............ 202.7 45.1 41.1 27.0 23.4 19.4 46.7
Licensing minimums ................ 295.0 85.0 78.0 30.0 29.0 18.0 55.0
Inventory purchases ................. 93.1 92.2 0.9——— —
Operating leases .................... 312.0 54.0 41.0 31.0 30.0 29.0 127.0
Capitalized leases* ................. 9.5 0.3 0.3 0.3 0.3 0.3 8.0
Total ............................. $1,553.7 $328.9 $350.4 $138.3 $132.7 $116.7 $486.7
*Represents total obligation, including imputed interest.
Discontinued Operations
In May 1999, Mattel merged with Learning Company, with Mattel being the surviving corporation. Due to
substantial losses experienced by its Consumer Software segment during 1999, which was comprised primarily
of Learning Company, Mattel’s board of directors on March 31, 2000 resolved to dispose of its Consumer
Software segment. As a result of this decision, the Consumer Software segment was reported as a discontinued
operation effective March 31, 2000, and the consolidated statements of operations were reclassified to segregate
the operating results of the Consumer Software segment.
On October 18, 2000, Mattel disposed of Learning Company to an affiliate of Gores Technology Group in
return for a contractual right to receive future consideration based on income generated from its business
operations and/or the net proceeds derived by the new company upon the sale of its assets or other liquidation
events, or 20% of its enterprise value at the end of five years.
In 2001, Mattel received proceeds totaling $10.0 million from Gores Technology Group as a result of
liquidation events related to Gores Technology Group’s sale of the entertainment and education divisions of the
former Learning Company. Mattel also incurred additional costs of approximately $10 million in 2001 related to
the wind down of the Consumer Software segment. Accordingly, no income was recorded in the consolidated
statement of operations for discontinued operations.
In 2002, Gores Technology Group completed the sale and liquidation of non-cash proceeds related to the
sales of the education and productivity divisions of the former Learning Company. Mattel recognized a gain from
discontinued operations of $27.3 million, net of taxes, in the consolidated statement of operations in 2002.
As of year end 2002, Gores Technology Group had sold essentially all of the former Learning Company
businesses. Therefore, Mattel does not expect to receive any significant additional proceeds from Gores
Technology Group related to the discontinued operations. At year end 2003, Mattel had net obligations related to
its discontinued Consumer Software segment of approximately $10 million. Mattel believes that it has adequately
reserved for future obligations of its discontinued operations.
Litigation
Litigation Related to Learning Company
Following Mattel’s announcement in October 1999 of the expected results of its Learning Company division
for the third quarter of 1999, various Mattel stockholders filed purported class action complaints naming Mattel
and certain of its present and former officers and directors as defendants.
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