Mattel 1999 Annual Report Download - page 30

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Mattel, Inc. and Subsidiaries
Reconciliation of the funded status of Fisher-Price’s domestic pension plan to
the related prepaid asset included in the consolidated balance sheets is as follows ( in
thousands) :
As of Year End
19 9 9 1 9 9 8
Funded status of the plan $ 65,4 0 1 $4 1 ,3 3 5
Unrecognized net gain ( 1 9 ,55 1 ) ( 4,4 3 8 )
Unrecognized prior service cost 6 9 2 1,36 6
Unrecognized net transition asset – ( 1 ,2 8 5 )
Prepaid pension asset $ 46,5 4 2 $3 6 ,9 7 8
Reconciliation of the assets and liabilities of Fisher-Price’s domestic pension
plan are as follows ( in thousands) :
As of Year End
19 9 9 1 9 9 8
Change in Plan Assets
Plan assets at fair value, beginning of year $1 9 7 ,9 1 2 $ 2 0 2 ,887
Actual return on plan assets 35 ,5 8 8 2,7 9 3
Benefits paid ( 1 0 ,70 7 ) ( 7,7 6 8 )
Plan assets at fair value, end of year $ 2 2 2 ,79 3 $1 97,91 2
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year $1 5 6 ,5 7 7 $ 1 4 2 ,078
Service cost 2,829 2 ,5 08
Interest cost 14 ,6 5 5 1 0 ,92 9
Plan amendments 2,0 0 3 1,15 4
Actuarial ( gain) loss ( 7 ,965 ) 7,6 7 6
Benefits paid ( 1 0 ,70 7 ) ( 7,7 6 8 )
Projected benefit obligation, end of year $1 5 7 ,3 9 2 $ 1 5 6 ,577
For the Period Ended
19 9 9 1 9 9 8 1 9 97
Assumptions:
Weighted average discount rate 8.0 0 % 7 .5 0 % 7.7 5 %
Rate of future compensation increases 4.0 0 % 4 .0 0 % 4.00 %
Long-term rate of return on plan assets 1 1 .00% 11.0 0 % 1 1 .00%
During 1 99 9, Mattel applied for a determination letter from the Internal
Revenue Service related to its planned conversion of the Fisher-Price Pension Plan
from a career-average plan to a cash balance plan. As of December 31 , 1 99 9,
the proposed cash balance plan is under review by the Internal Revenue Service.
Other Retirement Plans
Domestic employees are eligible to participate in 40 1( k) savings plans sponsored
by Mattel or its subsidiaries, which are defined contribution plans satisfying ERISA
requirements. Mattel also maintains unfunded supplemental executive retirement
plans which are nonqualified defined benefit plans covering certain key executives.
For 19 99 , 1 99 8 and 19 97 , the accumulated and vested benefit obligations and
related expenses of these plans were not significant.
Deferred Compensation and Excess Benefit Plans
Mattel 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 contributions made by Mattel and employees to an excess ben-
efit plan, earn various rates of return. The liability for these plans as of December 31,
19 99 and 1 99 8 was $6 5.1 million and $4 7.8 million, respectively. Mattel’s contribution
to these plans and the related administrative expense were not significant to the results of
operations during any year.
Mattel has purchased group trust-owned life insurance contracts designed to
assist in funding these programs. The cash surrender value of these policies, valued
at $ 55.7 million and $ 40.7 million as of December 31 , 1 99 9 and 19 98 , respectively,
are held in an irrevocable rabbi trust w hich is included in other assets in the consoli-
dated balance sheets.
Postretirement Benefits
Fisher-Price has an unfunded postretirement health insurance plan covering certain eli-
gible domestic employees hired prior to January 1 , 1 99 3. Details of the expense for
the Fisher-Price plan recognized in the consolidated statements of operations for the
years ended December 31 , 1999, 1 99 8 and 19 97 are as follows ( in thousands):
For the Year
1999 1998 1997
Service cost $ 2 2 4 $ 21 8 $ 28 4
Interest cost 2,5 3 1 2 ,4 1 6 2,4 6 5
Net postretirement benefit cost $2 ,7 5 5 $ 2 ,63 4 $ 2 ,7 4 9
Amounts included in the consolidated balance sheets for this plan are as fol-
lows ( in thousands) :
As of Year End
1999 1998
Current retirees $2 9 ,9 8 8 $ 2 5 ,1 40
Fully eligible active employees 3,0 1 3 4,22 2
Other active employees 4 ,1 6 2 4,2 3 9
Accumulated postretirement benefit obligation 37 ,1 6 3 3 3 ,60 1
Unrecognized net loss ( 6 ,254 ) ( 1,7 1 6 )
Accrued postretirement benefit liability $3 0,90 9 $31 ,8 8 5
Reconciliation of the liabilities of Fisher-Price’s postretirement health insur-
ance plan are as follows ( in thousands):
As of Year End
1999 1998
Change in Accumulated Postretirement Benefit Obligation
Accumulated postretirement benefit obligation, beginning of year $33 ,6 0 1 $ 3 3 ,3 1 5
Service cost 22 4 218
Interest cost 2,5 3 1 2,41 6
Actuarial loss 4 ,538 5 03
Benefits paid, net of participant contributions ( 3 ,731 ) ( 2,8 5 1 )
Accumulated postretirement benefit obligation, end of year $3 7 ,1 6 3 $ 3 3 ,6 01
The discount rates used in determining the accumulated postretirement bene-
fit obligation were 8 .00 % for 19 99 , 7.50 % for 1 99 8 and 7.75 % for 1 99 7. For all
participants, the health care cost trend rate for expected claim costs was assumed to
be 5.5 0% in 1 99 9 and remaining constant thereafter. A one percentage point
increase or decrease in the assumed health care cost trend rate for each future year
would have the following effect on the accumulated postretirement benefit obligation
and the service and interest cost recognized as of and for the year ended December
31 , 199 9 ( in thousands) :
One Percentage Point
Increase Decrease
Accumulated postretirement benefit obligation $3,72 9 $ ( 3 ,1 8 8 )
Service and interest cost 28 4 ( 2 39)