Mattel 2001 Annual Report Download - page 63

Preferred Stock
Mattel is authorized to issue 3.0 million shares of $1.00 par value preferred stock, of which none is
currently outstanding.
Special Voting Preferred Stock and Related Exchangeable Shares
Mattel is authorized to issue one share of $1.00 par value Special Voting Preferred Stock, which was
issued in exchange for one share of Learning Company special voting stock in connection with the May 1999
merger. The par value and liquidation preference of the Special Voting Preferred Stock are $1.00 and $10.00
per share, respectively. The Special Voting Preferred Stock has a number of votes equal to 1.2 times the
number of outstanding exchangeable shares of Softkey Software Products Inc. that are not owned by Mattel, its
subsidiaries or any entity controlled by Mattel. The Special Voting Preferred Stock votes together with the
holders of Mattel’s common stock as a single class on all matters on which the holders of Mattel’s common
stock may vote. No dividends are paid on the Special Voting Preferred Stock. The Special Voting Preferred
Stock will be redeemed for $10.00 on February 4, 2005, the redemption date for the exchangeable shares,
unless the board of directors of Mattel’s Canadian subsidiary, Softkey Software Products Inc., extends or
accelerates the redemption date.
As of December 31, 2001 and 2000, there were 935.1 thousand and 1.6 million outstanding exchangeable
shares, respectively, that were not owned by Mattel, its subsidiaries or any entity controlled by Mattel. As a
result of the May 1999 merger, each exchangeable share is convertible at the option of the holder, without
additional payment, for the right to receive 1.2 shares of Mattel common stock until February 4, 2005. On that
date, any exchangeable shares not previously converted will be redeemed at the current market price of Mattel’s
common stock multiplied by 1.2. The redemption price will be paid in the form of Mattel’s common stock, plus
cash equal to any unpaid dividends. The board of directors of Softkey Software Products Inc. may extend the
automatic redemption date at its option and may accelerate the automatic redemption date if the number of
outstanding exchangeable shares is less than 0.5 million. Holders of exchangeable shares are entitled to receive
dividends declared on Mattel’s common stock with respect to each exchangeable share multiplied by 1.2.
Holders of exchangeable shares vote their shares through the Special Voting Preferred Stock at the rate of 1.2
votes per exchangeable share on all matters on which the holders of Mattel’s common stock may vote.
During 2001, 2000 and 1999, 622.5 thousand, 1.6 million and 1.9 million exchangeable shares,
respectively, were converted by the holders into common stock at the rate of 1.2 common shares per
exchangeable share.
Series C Mandatorily Convertible Redeemable Preferred Stock (‘‘Series C Preferred Stock’’)
In 1999, all 771.9 thousand shares of Series C Preferred Stock outstanding (and the related depositary
shares) were converted by the holders into 7.7 million shares of Mattel common stock pursuant to terms of the
certificate of designations.
Stock Warrants
In 2000, Mattel issued Warner Bros. Consumer Products a stock warrant to purchase 3.0 million shares of
Mattel’s common stock at an exercise price of $10.875 per share. This warrant expires on December 31, 2003.
In 1996, Mattel issued Disney Enterprises, Inc. a warrant to purchase 3.0 million shares of Mattel’s common
stock at an exercise price of $27.375 per share. This warrant expires on October 2, 2002.
The fair value of these warrants is being amortized as a component of royalty expense when the related
properties are introduced over the period the related revenues are recognized. During 2001, 2000 and 1999,
$8.0 million, $10.4 million and $5.6 million, respectively, was recognized in the results of operations related to
these warrants.
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