Mattel 2001 Annual Report Download - page 79

For the Year
2001 2000 1999
(In thousands)
Selling and administrative expenses include the following:
Research and development ................................. $175,629 $179,525 $171,537
Bad debt expense ........................................ 57,746 18,280 19,050
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest ............................................... $157,926 $168,591 $134,086
Income taxes ........................................... 61,438 44,839 81,345
Noncash investing and financing activities:
Marketable securities tendered for debt repayment ................ $ 10,144 $ — $ —
Liability for Pictionaryacquisition .......................... 8,419 — —
Receipt of marketable securities from sale of business ............. — 42,167 —
Issuance of stock warrant .................................. — 5,789 —
Common stock issued for acquisitions:
Settlement of earn-out agreements ........................ — — 5,547
Note 13—Discontinued Operations
In May 1999, Mattel completed its merger with Learning Company, pursuant to which Learning Company
was merged with and into Mattel, with Mattel being the surviving corporation. Learning Company had been a
leading publisher of consumer software for home personal computers, including educational, productivity and
entertainment software. Each share of Learning Company Series A Preferred Stock was converted into 20 shares
of Learning Company common stock immediately prior to the consummation of the merger. Pursuant to the
merger agreement, each outstanding share of Learning Company common stock was then converted into 1.2
shares of Mattel common stock upon consummation of the merger. As a result, approximately 126 million Mattel
common shares were issued in exchange for all shares of Learning Company common stock outstanding as of the
merger date. The outstanding share of Learning Company special voting stock was converted into one share of
Mattel Special Voting Preferred Stock. Each outstanding exchangeable share of Learning Company’s Canadian
subsidiary, Softkey Software Products Inc., remained outstanding, but upon consummation of the merger became
exchangeable for 1.2 shares of Mattel common stock. This transaction was accounted for as a pooling of interests.
On March 31, 2000, Mattel’s board of directors resolved to dispose of its Consumer Software segment,
which was comprised primarily of Learning Company. As a result of this decision, the Consumer Software
segment was reported as a discontinued operation effective March 31, 2000, and the consolidated financial
statements were reclassified to segregate the net investment in, and the liabilities and operating results of the
Consumer Software segment.
On October 18, 2000, Mattel disposed of Learning Company to an affiliate of Gores Technology Group in
return for a contractual right to receive future consideration based on income generated from its business
operations and/or the net proceeds derived by the new company upon the sale of its assets or other liquidation
events, or 20% of its enterprise value at the end of five years. In the fourth quarter of 2001, Mattel received
proceeds totaling $10.0 million from Gores Technology Group as a result of liquidation events related to Gores
Technology’s sale of the entertainment and education divisions. Mattel also incurred additional costs of
approximately $10 million in 2001 related to the wind down of the Consumer Software segment. Accordingly,
no income was recorded in the consolidated statement of operations for discontinued operations.
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