Mattel 2002 Annual Report Download - page 40

Mattel’s commitments for debt and other contractual arrangements are summarized as follows (in
thousands):
Payments Due by Period
Total 2003 2004 2005 2006 2007 Thereafter
Long-term debt .......... $ 822,365 $182,295 $ 50,939 $189,131 $ 50,000 $ 50,000 $300,000
Licensing minimums ...... 369,000 80,000 85,000 78,000 25,000 27,000 74,000
Inventory purchases ....... 103,000 99,000 4,000 ————
Operating leases ......... 352,000 46,000 46,000 41,000 35,000 30,000 154,000
Capitalized leases ........ 9,800 300 300 300 300 300 8,300
Total .................. $1,656,165 $407,595 $186,239 $308,431 $110,300 $107,300 $536,300
Discontinued Operations
In May 1999, Mattel merged with Learning Company, with Mattel being the surviving corporation. Due to
substantial losses experienced by its Consumer Software segment during 1999, which was comprised primarily
of Learning Company, Mattel’s board of directors, on March 31, 2000, resolved to dispose of its Consumer
Software segment. 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 Group’s sale of the entertainment and
education divisions of the former Learning Company. 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.
In the third quarter of 2002, Gores Technology Group completed the sale and liquidation of non-cash
proceeds related to the sales of the education and productivity divisions of the former Learning Company. Mattel
has a contractual right to share with Gores Technology Group in proceeds from the sale of the assets of the
former Learning Company and other liquidation events. Mattel recognized a gain from discontinued operations
of $27.3 million, net of taxes, in the consolidated statement of operations for the quarter ended September 30,
2002. Mattel collected the $43.3 million pre-tax amount due from Gores Technology Group related to these
events during the fourth quarter of 2002.
As of December 31, 2002, Gores Technology Group had sold essentially all of the former Learning
Company businesses. Therefore, Mattel does not expect to receive any significant additional proceeds from
Gores Technology Group related to the discontinued operations. At December 31, 2002, Mattel had net
obligations related to its discontinued Consumer Software segment of approximately $14 million. Mattel believes
that it has adequately reserved for future obligations of this segment.
In December 2000 and January 2001, Mattel entered into worldwide, multi-year licensing agreements with
Vivendi Universal Publishing and THQ, respectively, for the development and publishing of gaming, educational
and productivity software based on Mattel’s brands, which Mattel had previously developed and sold directly
through its Mattel Media division. These partnerships allow Mattel to provide the content from its library of
brands, while Vivendi Universal Publishing and THQ provide software development and distribution expertise.
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