Mattel 2003 Annual Report Download - page 78

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In November 2000, the Compensation Committee of the board of directors approved the Long-Term
Incentive Plan covering certain key executives of Mattel, Inc. for the performance period from August 15, 2000
through December 31, 2002. Awards were based upon the financial performance of Mattel during the
performance period and were paid in the quarter following the end of the performance period. For 2002 and
2001, $32.5 million and $4.9 million, respectively, were charged to operating expense for this plan.
For 2003, 2002 and 2001, $3.5 million, $10.7 million and $11.1 million, respectively, was charged to
operating expense for costs related to the recruitment and retention of senior executives.
Note 5—Seasonal Financing and Long-Term Debt
Seasonal Financing
Mattel maintains and periodically amends or replaces an unsecured committed revolving credit facility with
acommercial 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).
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, 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.
Information relating to Mattel’s unsecured committed credit facilities, foreign credit lines and other short-
term borrowings is summarized as follows (in thousands):
For the Year
2003 2002 2001
Balance at end of year ...........................................
Domestic ................................................. $ — $ — $ —
Foreign .................................................. 19,590 25,190 38,108
Maximum amount outstanding ....................................
Domestic ................................................. $900,250 $820,477 $1,028,090
Foreign .................................................. 40,056 38,062 64,158
Average borrowing .............................................
Domestic ................................................. $456,600 $481,600 $ 694,900
Foreign .................................................. 24,992 35,330 43,168
Weighted average interest rate on average borrowing ..................
Domestic ................................................. 1.2% 2.1% 4.6%
Foreign .................................................. 10.2% 17.9% 17.5%
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