Mattel 2004 Annual Report Download - page 43

ensure availability and timely delivery. These arrangements include commitments for future inventory purchases
and royalty payments pursuant to licensing agreements. Certain of these commitments routinely contain
provisions for guaranteed or minimum expenditures during the term of the contracts.
Mattel’s commitments for debt and other contractual obligations expected to be settled in cash are
summarized as follows (in millions):
Payments Due by Period
Total 2005 2006 2007 2008 2009 Thereafter
Long-term debt .................... $ 589.1 $189.1 $ 50.0 $ 50.0 $ 50.0 $ 50.0 $ 200.0
Interest on long-term debt ............ 157.6 41.1 27.0 23.4 19.4 16.1 30.6
Capitalized leases* ................. 9.3 0.3 0.3 0.3 0.3 0.3 7.8
Operating leases .................... 370.0 55.0 51.0 50.0 49.0 41.0 124.0
Purchases of inventory, other assets and
services ........................ 188.1 188.1———— —
Licensing minimums ................ 300.0 93.0 55.0 43.0 26.0 27.0 56.0
Total ............................. $1,614.1 $566.6 $183.3 $166.7 $144.7 $134.4 $ 418.4
*Represents total obligation, including imputed interest.
Discontinued Operations
In May 1999, Mattel merged with Learning Company, with Mattel being the surviving corporation. 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 statements of income were reclassified to segregate the 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 2001, Mattel received cash 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 income for discontinued operations in 2001.
In 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 received $43.3 million
in cash proceeds from Gores Technology Group and recognized a gain on disposal of discontinued operations of
$27.3 million, net of taxes of $16.0 million, in the consolidated statement of income in 2002.
As of year end 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 year end 2004, Mattel had net obligations related to
its discontinued Consumer Software segment of approximately $6 million. Mattel believes that it has adequately
reserved for future obligations of its discontinued operations.
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