Mattel 2004 Annual Report Download - page 40

Download and view the complete annual report

Please find page 40 of the 2004 Mattel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 122

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122

Financing Activities
Cash flows used for financing activities of continuing operations decreased $88.1 million to $466.3 million
in 2004 compared to 2003, primarily due to the repayment of $150.0 million of 6% senior notes in 2003, partially
offset by increased dividends paid in 2004 and reduced cash from employee stock option exercises. Compared to
2002, cash flows used for financing activities in 2003 increased $160.1 million, primarily due to the purchase of
treasury stock and an increase in the annual dividend rate, partially offset by lower amounts of debt maturing in
2003 compared to 2002. In 2005, Mattel intends to repay its $150.0 million of 6
1
⁄
8
% senior notes and a
$39.1 million mortgage note upon maturity.
In July 2003, Mattel’s board of directors approved a share repurchase program of up to $250.0 million.
During 2003, Mattel repurchased 12.7 million shares at a cost of $244.4 million pursuant to this program. In
November 2003, the board of directors approved an increase to the share repurchase program of an additional
$250.0 million, bringing the total authorized repurchases to $500.0 million. During 2004, Mattel repurchased
14.7 million shares at a cost of $255.1 million pursuant to this program. Mattel’s share repurchase program has
no expiration date.
In 2004, 2003 and 2002, Mattel paid a $0.45 per share, $0.40 per share and $0.05 per share dividend to
holders of its common stock, respectively. The board of directors declared the dividend in November, and Mattel
paid the dividend in December of each year. The dividend payments were approximately $187 million,
$171 million and $22 million in 2004, 2003 and 2002, respectively.
Seasonal Financing
Mattel maintains and periodically amends or replaces a domestic unsecured committed revolving credit
facility with a commercial bank group that is used as the primary source of financing for the seasonal working
capital requirements of its domestic subsidiaries. The agreement in effect was amended and restated during 2004
and was increased to a $1.30 billion, 3-year facility expiring in March 2007. The other terms and conditions of
the amended and restated facility are substantially similar to those contained in the previous facility. Interest is
charged at various rates selected by Mattel, ranging from market commercial paper rates to the bank reference
rate. The domestic unsecured committed revolving credit facility contains a variety of covenants, including
financial covenants that require Mattel to maintain certain consolidated debt-to-capital and interest coverage
ratios. Specifically, Mattel is required to meet these financial covenant ratios at the end of each fiscal quarter and
fiscal year, using the formulae specified in the credit agreement to calculate the ratios. Mattel was in compliance
with such covenants at the end of each fiscal quarter and fiscal year in 2004. As of year end 2004, Mattel’s
consolidated debt-to-capital ratio, as calculated per the terms of the credit agreement, was 0.28 to 1 (compared to
a maximum allowed of 0.50 to 1) and Mattel’s interest coverage ratio was 12.30 to 1 (compared to a minimum
allowed of 3.50 to 1). The domestic unsecured committed revolving credit facility is a material agreement and
failure to comply with the financial covenant ratios may result in an event of default under the terms of the
facility. If Mattel defaulted under the terms of the domestic unsecured committed revolving credit facility, its
ability to meet its seasonal financing requirements could be adversely affected.
Mattel anticipates amending its domestic unsecured committed revolving credit facility in March 2005. The
size of the facility is expected to remain at $1.30 billion, although Mattel has an option to increase the size of the
facility up to $1.50 billion if there are sufficient aggregate commitments. The expiration date of the facility is
expected to be extended to March 31, 2010. All other terms and conditions of the amended facility will be
substantially similar to the existing facility, including the consolidated debt-to-capital and interest coverage
ratios.
To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel avails itself of
individual short-term credit lines with a number of banks. As of year end 2004, foreign credit lines total
approximately $213 million, a portion of which are used to support letters of credit. Mattel expects to extend
these credit lines throughout 2005.
29