Mattel 2001 Annual Report Download - page 72

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Fair Value of Financial Instruments
Mattel’s financial instruments included cash, cash equivalents, marketable securities, investments, accounts
receivable and payable, short-term borrowings, long-term debt, and foreign currency contracts as of
December 31, 2001 and 2000.
The fair values of cash, cash equivalents, accounts receivable and payable, and short-term borrowings
approximated carrying values because of the short-term nature of these instruments. The estimated fair values
of other financial instruments subject to fair value disclosure, determined based on broker quotes or rates for
the same or similar instruments, and the related carrying amounts are as follows as of year end (in millions):
2001 2000
Book
Value
Fair
Value
Book
Value
Fair
Value
Long-term debt ...................................... $1,231.0 $1,206.5 $1,275.1 $1,170.9
Risk management contracts:
Foreign exchange forwards .......................... 715.2 708.8 569.2 566.6
$1,946.2 $1,915.3 $1,844.3 $1,737.5
Credit Concentrations
Credit is granted to customers on an unsecured basis, and generally provides for extended payment terms,
which result in a substantial portion of trade receivables being collected during the latter half of the year.
Mattel’s three largest customers accounted for the following percentage of consolidated net sales and net
accounts receivable:
2001 2000 1999
Worldwide sales for the year ended .......................................... 50% 50% 43%
Accounts receivable as of December 31 ....................................... 28% 51% 43%
Note 9—Restructuring and Other Charges
2000 Financial Realignment Plan
During the third quarter of 2000, Mattel initiated a financial realignment plan designed to improve gross
margin; selling and administrative expenses; operating profit; and cash flow. The plan will require a total pre-
tax charge estimated at $250 million, or $170 million on an after-tax basis, of which approximately $100
million represents cash expenditures and $70 million represents non-cash writedowns. Through December 31,
2001, Mattel has recorded pre-tax charges totaling $175.4 million, or approximately $119 million on an after-
tax basis, related to this plan. Of the total charge, $125.2 million (approximately $84 million after-taxes) was
recorded in 2000 and $50.2 million (approximately $35 million after-taxes) was recorded in 2001. In
accordance with generally accepted accounting principles, future pre-tax implementation costs of approximately
$75 million have not been accrued as of December 31, 2001. Management expects these costs will be recorded
over approximately the next two years.
The following are the major initiatives included in the financial realignment plan:
•Reduce excess manufacturing capacity;
•Terminate a variety of licensing and other contractual arrangements that do not deliver an adequate
level of profitability;
•Eiminate product lines that do not meet required levels of profitability;
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