Mattel 2001 Annual Report Download - page 60

A one percentage point increase/(decrease) in the assumed health care cost trend rate for each future year
would impact the accumulated postretirement benefit obligation as of December 31, 2001 by $4.7 million and
$(4.0) million, respectively, while a one percentage point increase/(decrease) would impact the service and
interest cost recognized for the year ended December 31, 2001 by $0.3 million and $(0.3) million, respectively.
Domestic employees of Mattel participate in a contributory postretirement benefit plan. The ongoing costs
and obligations associated with the Mattel, Inc. plan are not significant to the financial position and results of
operations during any year.
Incentive Awards
Mattel has annual incentive compensation plans for officers and key employees based on Mattel’s
performance and subject to certain approvals of the Compensation/Options Committee of the board of directors.
For 2001 and 2000, $36.2 million and $33.7 million, respectively, were charged to operating expense for
awards under these plans. No expense was recorded in 1999 for awards under these plans.
In November 2000, the Compensation/Options 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 are based upon the financial performance of Mattel during the
performance period and are paid in the quarter following the end of the performance period. For 2001 and
2000, $4.9 million and $8.3 million, respectively, were charged to operating expense for this plan.
In June 1999, the stockholders approved the Amended and Restated Mattel Long-Term Incentive Plan. The
Compensation/Options Committee of the board of directors terminated this plan in November 2000, and no
expense was recorded related to this plan.
For 2001 and 2000, $11.1 million and $11.6 million, respectively, was charged to operating expense for
costs related to the recruitment and retention of senior executives. For 1999, $22.0 million was charged to
operating expense related to a special award. This special broad-based employee award was approved by
Mattel’s board of directors and was designed to provide a competitive compensation level to retain and
motivate employees of Mattel.
Note 4—Seasonal Financing and Long-Term Debt
Seasonal Financing
Mattel maintains and periodically amends or replaces an unsecured committed revolving credit agreement
with a commercial 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 2001 consisted of
an unsecured committed revolving credit facility providing a total of $1.0 billion in seasonal financing available
for advances and backup for the issuance of commercial paper (a five-year facility that expires in 2003).
Interest was charged at various rates selected by Mattel, ranging from market commercial paper rates to the
bank reference rate. Within this facility, up to $300.0 million is available for non-recourse sales of certain trade
accounts receivable of Mattel to the commercial bank group providing the credit line. 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. 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 since 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.
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