Mattel 2004 Annual Report Download - page 82

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2004 and 2003, respectively, are held in an irrevocable grantor trust, the assets of which are subject to the claims
of Mattel’s creditors and are included in other noncurrent assets in the consolidated balance sheets.
Incentive Compensation Plans
Mattel has annual incentive compensation plans under which officers and key employees may earn incentive
compensation based on Mattel’s performance and subject to certain approvals of the Compensation Committee of
the board of directors. For 2004, 2003 and 2002, $41.8 million, $33.3 million and $73.5 million, respectively,
were charged to expense for awards under these plans.
In May 2003, Mattel’s stockholders approved the Mattel, Inc. 2003 Long-Term Incentive Plan (the “LTIP”).
The LTIP is intended to motivate and retain key executives of Mattel who regularly and directly make or
influence decisions that affect the medium- and long-term success of Mattel. The LTIP replaces the Long-Term
Incentive Plan approved in November 2000 and is effective as of January 1, 2003. Awards are based upon the
financial performance of Mattel during a specified performance period and are settled in cash or unrestricted or
restricted common stock of Mattel. For 2004 and 2003, no expense was recorded related to the LTIP.
In November 2000, the Compensation Committee of the board of directors approved the Long-Term
Incentive Plan covering certain key executives of Mattel, Inc. for a performance period from August 15, 2000
through December 31, 2002. Awards were based upon the financial performance of Mattel during the
performance period and were paid in the quarter following the end of the performance period. For 2002,
$32.5 million was charged to expense for this plan.
Note 5—Seasonal Financing and Debt
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).
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.
Mattel believes its cash on hand at the beginning of 2005, amounts available under its domestic unsecured
committed revolving credit facility, its uncommitted money market facility, and its foreign credit lines will be
adequate to meet its seasonal financing requirements in 2005. As of year end 2004, Mattel has available
borrowing resources totaling approximately $1.2 billion under its domestic unsecured committed revolving credit
facility and foreign credit lines.
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