Mattel 2014 Annual Report Download - page 90

increase the aggregate availability under the credit facility to $1.85 billion under certain circumstances,
(iii) decrease the applicable interest rate margins to a range of 0.00% to 0.75% above the applicable base rate for
base rate loans and 0.88% to 1.75% above the applicable LIBOR for Eurodollar rate loans, in each case
depending on Mattel’s senior unsecured long-term debt rating, and (iv) decrease commitment fees to a range of
0.08% to 0.28% of the unused commitments under the credit facility.
The amended credit facility has a borrowing capacity of up to $1.60 billion over a term of five years. Prior
to the amendment, the facility permitted Mattel to borrow up to $1.40 billion and had two years remaining to
maturity. The proportion of unamortized debt issuance costs from the prior facility renewal related to creditors
involved in both the prior facility and amended facility and borrowing costs incurred as a result of the
amendment were deferred, and such costs will be amortized over the term of the amended facility.
Mattel is required to meet financial ratio covenants at the end of each 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 2014. As of December 31, 2014, Mattel’s consolidated debt-to-
EBITDA ratio, as calculated per the terms of the credit agreement, was 2.30 to 1 (compared to a maximum
allowed of 3.00 to 1), and Mattel’s interest coverage ratio was 11.55 to 1 (compared to a minimum required of
3.50 to 1).
The credit agreement is a material agreement, and failure to comply with the financial ratio covenants may
result in an event of default under the terms of the credit facility. If Mattel were to default under the terms of the
credit facility, its ability to meet its seasonal financing requirements could be adversely affected.
Mattel believes its cash on hand, amounts available under its credit facility, and its foreign credit lines will
be adequate to meet its seasonal financing requirements in 2015.
To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel avails itself of
individual short-term credit lines with a number of banks. As of December 31, 2014, foreign credit lines totaled
approximately $340 million. Mattel expects to extend the majority of these credit lines throughout 2015.
Additionally, sales of foreign receivables occur periodically to finance seasonal working capital
requirements. The outstanding amounts of accounts receivable that have been sold under international factoring
arrangements were $22.3 million and $25.6 million at December 31, 2014 and 2013, respectively. These amounts
have been excluded from Mattel’s consolidated balance sheets.
In January 2015, a major credit rating agency changed Mattel’s long-term credit rating from BBB+ to BBB
and maintained its short-term credit rating of A-2 and outlook at stable. Another major credit rating agency
maintained Mattel’s long-term credit rating of Baa1 and short-term credit rating of P-2 and changed its outlook
from stable to negative. A third major credit rating agency maintained Mattel’s long-term credit rating of A- and
short-term credit rating of F2 and changed its outlook from stable to negative. A reduction in Mattel’s credit
ratings could increase the cost of obtaining financing.
Short-Term Borrowings
As of December 31, 2014, Mattel had no foreign short-term bank loans outstanding. As of December 31,
2013, Mattel had foreign short-term bank loans outstanding of $4.3 million. As of December 31, 2014 and 2013,
Mattel had no borrowings outstanding under the credit facility.
During 2014 and 2013, Mattel had average borrowings of $17.5 million and $38.0 million, respectively,
under its foreign short-term bank loans, and $680.8 million and $262.3 million, respectively, under the credit
facility and other short-term borrowings, to help finance its seasonal working capital requirements. The weighted
average interest rate on foreign short-term bank loans during 2014 and 2013 was 11.2% and 9.4%, respectively.
The weighted average interest rate on the credit facility and other short-term borrowings was 0.2% during both
2014 and 2013.
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