Mattel 2003 Annual Report Download - page 19

Mattel has a $300.0 million domestic receivables sales facility that is a sub-facility of Mattel’s domestic
unsecured committed revolving credit facility. The outstanding amount of receivables sold under the domestic
receivables facility may not exceed $300.0 million at any given time, and the amount available to be borrowed
under the credit facility is reduced to the extent of any such outstanding receivables sold. Under the domestic
receivables facility, certain trade receivables are sold to a group of banks, which currently include, among others,
Bank of America, N.A., as administrative agent, Citicorp USA, Inc. and Fleet National Bank, as syndication
agents, and Societe Generale and BNP Paribas, as documentation agents. After the amendment and restatement
of the domestic unsecured revolving credit facility, the group of banks is anticipated to include, among others,
Bank of America, N.A., as administrative agent, Citicorp USA, Inc. and Barclays Bank PLC, as co-syndication
agents, and Societe Generale and BNP Paribas, as co-documentation agents. Pursuant to the domestic receivables
facility, Mattel Sales Corp. and Fisher-Price, Inc. (which are wholly-owned subsidiaries of Mattel) can sell
eligible trade receivables from Wal-Mart and Target to Mattel Factoring, Inc. (“Mattel Factoring”), a Delaware
corporation and wholly-owned, consolidated subsidiary of Mattel. Mattel Factoring is a special purpose entity
whose activities are limited to purchasing and selling receivables under this facility. Pursuant to the terms of the
domestic receivables facility and simultaneous with each receivables purchase, Mattel Factoring sells those
receivables to the bank group. Mattel records the transaction, reflecting cash proceeds and sale of accounts
receivable on its consolidated balance sheet, at the time of the sale of the receivables to the bank group.
Mattel’s subsidiaries, Mattel International Holdings B.V., a Netherlands company, Mattel France S.A.S., a
French company, and Mattel GmbH, a German company, have entered into a Euro 150 million European trade
receivables facility, pursuant to which Mattel France S.A.S. and Mattel GmbH may sell trade receivables to a
bank, Societe Generale Bank Nederland N.V. The receivables sales are accounted for as a sale. As with the
domestic receivables facility, each sale of accounts receivable is recorded on Mattel’s consolidated balance sheet
at the time of such sale. No Mattel subsidiary is used as a special purpose entity in connection with these
transactions. Under the European trade receivables facility, the outstanding amount of receivables sold may not
exceed Euro 60 million from February 1 through July 31 of each year and may not exceed Euro 150 million at all
other times. Pursuant to a letter agreement between Societe Generale Bank Nederland N.V. and Mattel
International Holdings B.V., Mattel France S.A.S. and Mattel GmbH effective June 29, 2003, the commitment
termination date for the European receivables facility was extended to June 25, 2004.
Government Regulations and Environmental Quality
Mattel’s toy products sold in the US are subject to the provisions of the Consumer Product Safety Act and
the Federal Hazardous Substances Act, and may also be subject to the requirements of the Flammable Fabrics
Act or the Food, Drug and Cosmetics Act, and the regulations promulgated pursuant to such statutes. The
Consumer Product Safety Act and the Federal Hazardous Substances Act enable the Consumer Product Safety
Commission (“CPSC”) to exclude from the market consumer products that fail to comply with applicable
product safety regulations or otherwise create a substantial risk of injury, as well as articles that contain excessive
amounts of a banned hazardous substance. The CPSC may also require the recall and repurchase or repair of
articles that are banned. Similar laws exist in some states and cities and in many international markets.
In 2002, Fisher-Price exited the car seat business. Fisher-Price’s car seats are subject to the provisions of the
National Highway Transportation Safety Act, which enables the National Highway Traffic Safety Administration
(“NHTSA”) to promulgate performance standards for child restraint systems. When Fisher-Price was producing
car seats, Fisher-Price would conduct periodic tests to ensure that its child restraint systems met applicable
standards. A Canadian agency, Transport Canada, also regulates child restraint systems sold for use in Canada.
As with the CPSC, the NHTSA and Transport Canada can require the recall and repurchase or repair of products
that do not meet their respective standards.
Mattel maintains a quality control program to ensure compliance with various US federal, state and
applicable foreign product safety requirements. Notwithstanding the foregoing, there can be no assurance that all
of Mattel’s products are or will be free from defects or hazard-free. A product recall could have a material
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