Mattel 1998 Annual Report Download - page 42

Mattel, Inc. and Subsidiaries 40
Reconciliation of the funded status of Fisher-Price’s domestic
pension plan to the related prepaid asset included in the consolidated
balance sheets are as follows (in thousands):
As of Year End
1998 1997
Funded status of the plan $41,335 $60,809
Unrecognized net gain (4,438) (28,271)
Unrecognized prior service cost 1,366 1,474
Unrecognized net transition asset (1,285) (3,854)
Prepaid pension asset $36,978 $30,158
Reconciliation of the assets and liabilities of Fisher-Price’s
domestic pension plan are as follows (in thousands):
As of Year End
1998 1997
Change in Plan Assets
Plan assets at fair value, beginning of year $202,887 $157,507
Actual return on plan assets 2,793 51,218
Benefits paid (7,768) (5,838)
Plan assets at fair value, end of year $197,912 $202,887
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year $142,078 $131,379
Service cost 2,508 2,594
Interest cost 10,929 10,327
Plan amendments 1,154 (826)
Actuarial loss 7,676 4,442
Benefits paid (7,768) (5,838)
Projected benefit obligation, end of year $156,577 $142,078
For the Period
1998 1997 1996
Assumptions:
Weighted average discount rate 7.50% 7.75% 7.75%
Rate of future compensation increases 4.00% 4.00% 4.00%
Long-term rate of return on plan assets 11.00% 11.00% 11.00%
Other Retirement Plans
Domestic employees are eligible to participate in the Company’s 401(k)
savings plans, which are defined contribution plans satisfying ERISA
requirements. The Company also maintains unfunded supplemental
executive retirement plans which are nonqualified defined benefit
plans covering certain key executives. For 1998, 1997 and 1996, the
accumulated and vested benefit obligations and related expense of
these plans were not significant.
Deferred Compensation and Excess Benefit Plans
The Company provides a deferred compensation plan which permits
certain officers and key employees to elect to defer portions of their
compensation. The deferred compensation plan, together with certain
Company and employee contributions made to an excess benefit
plan, earn various rates of return. The liability for these plans as of
December 31, 1998 and 1997 was $47.8 million and $39.2 million,
respectively. The Company’s contribution to these plans and the
related administrative expense were not significant to the results
of operations during any year.
In 1996, the Company purchased group trust-owned life
insurance contracts designed to assist in funding these programs.
The cash surrender value of these policies, valued at $40.7 million
and $32.9 million as of December 31, 1998 and 1997, respectively,
are held in an irrevocable rabbi trust which is included in other
assets in the consolidated balance sheets.
Postretirement Benefits
Fisher-Price has an unfunded postretirement health insurance
plan covering certain eligible domestic employees hired prior to
January 1, 1993. Details of the expense for the Fisher-Price plan
recognized in the consolidated financial statements for the years
ended December 31, 1998, 1997 and 1996 are as follows (in
thousands):
For the Year
1998 1997 1996
Service cost $ 218 $ 284 $ 344
Interest cost 2,416 2,465 2,496
Net postretirement benefit cost $2,634 $2,749 $2,840
Amounts included in the Company’s consolidated balance
sheets for this plan are as follows (in thousands):
As of Year End
1998 1997
Current retirees $25,140 $23,846
Fully eligible active employees 4,222 4,640
Other active employees 4,239 4,829
Accumulated postretirement benefit obligation 33,601 33,315
Unrecognized net loss (1,716) (1,213)
Accrued postretirement benefit liability $31,885 $32,102
Reconciliation of the liabilities of Fisher-Price’s postretirement
health insurance plan are as follows (in thousands):
As of Year End
1998 1997
Change in Accumulated Postretirement Benefit Obligation
Accumulated postretirement benefit obligation, beginning of year $33,315 $33,182
Service cost 218 284
Interest cost 2,416 2,465
Actuarial loss (gain) 503 (383)
Benefits paid, net of participant contributions (2,851) (2,233)
Accumulated postretirement benefit obligation, end of year $33,601 $33,315
The discount rates used in determining the accumulated
postretirement benefit obligation were 7.50% for 1998 and 7.75%
for 1997 and 1996. For all participants, the health care cost trend
rate for expected claim costs was assumed to be 5.50% in 1998 and
remaining constant thereafter. A one percentage point increase or
decrease in the assumed health care cost trend rate for each future