Mattel 2001 Annual Report Download - page 35

to $0.05 per share when and as declared by the board of directors. The $0.05 per share annual dividend rate
under the new dividend policy became effective in December 2001. The reduction of the dividend resulted in
annual cash savings of approximately $132 million, which Mattel used to reduce debt. During 2001, Mattel
repaid $30.5 million of its medium-term notes, which became due in the fourth quarter.
In 2000, Mattel received proceeds from the issuance of a term loan and Euro Notes, which were used to
repay its 6-3/4% Senior Notes upon maturity and to support operating activities. In 1999, Mattel increased its
short-term borrowings to support its operating activities and to fund the Consumer Software segment. During
1999, Mattel repaid $30.0 million of its medium-term notes. During 2001, 2000 and 1999, Mattel paid
dividends on its common stock and, in 1999, Mattel repurchased treasury stock. In 2001 and 2000, Mattel did
not repurchase treasury stock.
Seasonal Financing
Mattel expects to finance its seasonal working capital requirements for the coming year by using existing
and internally generated cash, issuing commercial paper, selling certain trade receivables and using various
short-term bank lines of credit. Mattel’s domestic unsecured committed revolving credit facility provides $1.0
billion in short-term borrowings from a commercial bank group. Within this facility, up to $300.0 million is
available for non-recourse sales of certain trade accounts receivable to the bank group as an additional source
of liquidity and to lower its borrowing cost. Such non-recourse sales are made pursuant to an arrangement
whereby certain of Mattel’s subsidiaries sell receivables to Mattel Factoring, Inc., which in turn sells those
receivables to the commercial bank group. Mattel Factoring, Inc. is a separate special-purpose legal entity with
its own assets and liabilities. This facility was executed in 1998 for a term of five years, expiring in 2003. In
March 2002, Mattel amended and restated this facility into a $1.060 billion, 3-year facility that expires in 2005
with substantially similar terms and conditions. Additionally, during 2001, Mattel utilized a 364-day
$400.0 million unsecured committed credit facility with essentially the same terms and conditions as the
$1.0 billion revolving credit facility. Mattel has elected not to renew this facility when it expires in March
2002, as it believes that cash on hand at the beginning of 2002 and its $1.060 billion domestic unsecured
committed revolving facility will be sufficient to meet its seasonal working capital requirements in 2002.
Mattel also has a $200.0 million senior unsecured term loan that matures in July 2003. Interest is charged
at various rates, ranging from a LIBOR-based rate to the bank reference rate (3.66% as of December 31, 2001).
Both the unsecured credit facilities and term loan require Mattel to meet financial covenants for consolidated
debt-to-capital and interest coverage. Mattel was in compliance with such covenants during 2001. In addition,
Mattel avails itself of uncommitted domestic facilities provided by certain banks to issue short-term money
market loans.
To meet seasonal borrowing requirements of certain foreign subsidiaries, Mattel negotiates individual
financing arrangements, generally with the same group of banks that provided credit in the prior year. Foreign
credit lines total approximately $368 million, a portion of which is used to support letters of credit. Mattel
expects to extend these credit lines throughout 2002 and believes available amounts will be adequate to meet its
seasonal financing requirements. Mattel also enters into agreements with banks of its foreign subsidiaries for
non-recourse sales of certain of its foreign subsidiary receivables. In fourth quarter 2001, Mattel entered into a
securitization agreement to sell certain receivables of its French and German subsidiaries with one of its
European banks.
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