Mattel 2003 Annual Report Download - page 34

year end 2002, after offsetting the reserve for customer benefits that were not earned by Kmart, was $2.7 million.
The $2.7 million reflected Mattel’s best estimate of the net realizable value of its pre-bankruptcy petition trade
claim as of year end 2002, considering the actual proceeds Mattel received upon the sale of this trade claim in
March 2003 to an unrelated third party.
The following is a summary of the activity related to Mattel’s net Kmart pre-bankruptcy petition accounts
receivable balance through year end 2003 (in millions):
Gross Kmart accounts receivable before bankruptcy filing .............................. $73.1
Balance of reserve, reclamation claim and unearned customer benefits accrued at time of
Kmart’s bankruptcy filing ..................................................... $(14.8)
Writedown for bad debt recorded in 2001 ........................................... (22.1)
Writedown for bad debt recorded in 2002 ........................................... (33.5)
Total reserves and unearned customer benefits at year end 2002 ..................... (70.4)
Net Kmart pre-bankruptcy petition accounts receivable at year end 2002 .................. 2.7
Proceeds from sale of Kmart pre-petition accounts receivable during 2003 ................. (2.7)
Net Kmart pre-bankruptcy petition accounts receivable at year end 2003 .................. $ —
Non-Operating Items
Interest expense was $113.9 million in 2002 compared to $155.1 million in 2001 due to lower average
borrowings resulting from improvements in working capital and higher cash at the beginning of 2002, repayment
of long-term debt and lower short-term interest rates. Other non-operating expense, net was $15.9 million in
2002 versus $9.7 million in 2001. Included in other non-operating expense, net in 2002 was a $25.4 million
charge recorded in the fourth quarter resulting from the settlement of shareholder litigation related to the 1999
acquisition of the Learning Company. See Item 7 “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Litigation—Litigation Related to Learning Company” and Item 8
“Financial Statements and Supplementary Data—Note 9 to the Consolidated Financial Statements.” Excluding
this charge, the decrease in other non-operating expense, net was largely due to net foreign currency transaction
gains totaling $10.5 million in 2002 compared to net foreign currency transaction losses totaling $8.8 million in
2001. Foreign currency transaction gains and losses on unhedged intercompany loans and advances are recorded
as a component of other non-operating (income) expense, net in the period in which the exchange rate changes.
Additionally, other non-operating expense, net in 2001 included a $5.5 million loss on derivative instruments.
Business Segment Results
Domestic Segment
Mattel Brands US gross sales decreased 2% in 2002 compared to 2001. Within this segment, lower sales of
Diva Starz™,Barbie®,large dolls, Wheels and Harry Potter™products and the elimination in 2002 of Disney
entertainment properties were partially offset by growth in Polly Pocket!™and games and puzzles and strong
sales from licensed properties such as He-Man®and Masters of the Universe®,Yu-Gi-Oh!™and SpongeBob
SquarePants™.Mattel Brands US segment income increased 10% to $446.0 million in 2002, primarily due to
gross profit improvement, lower advertising and selling and administrative costs, partially offset by lower
volume.
Fisher-Price Brands US gross sales increased 4%, due to growth in sales of core Fisher-Price®products,
partially offset by decreased sales of licensed character brands. Fisher-Price Brands US segment income
increased 19% to $187.0 million in 2002, largely due to increased volume and gross profit improvement.
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