Mattel 2005 Annual Report Download - page 44

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. During 2004, Mattel repurchased 14.7 million shares at a cost of $255.1 million. In 2005, the
Board of Directors approved the repurchase of an additional $500.0 million of Mattel’s common stock. During
2005, Mattel repurchased 28.9 million shares at a cost of $500.4 million, of which $487.1 million was paid
during 2005. There were no remaining authorized funds for share repurchases as of December 31, 2005. In
January 2006, the Board of Directors authorized Mattel to increase its share repurchase program by an additional
$250.0 million. Repurchases will take place from time to time, depending on market conditions. Mattel’s share
repurchase program has no expiration date.
In 2005, 2004 and 2003, Mattel paid a $0.50 per share, $0.45 per share and $0.40 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 $200.5 million, $186.9 million
and $171.3 million in 2005, 2004 and 2003, 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 in March
2005 and the expiration date of the facility was extended to March 23, 2010. 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 2005. As of December 31, 2005, Mattel’s
consolidated debt-to-capital ratio, as calculated per the terms of the credit agreement, was 0.33 to 1 (compared to
a maximum allowed of 0.50 to 1) and Mattel’s interest coverage ratio was 11.81 to 1 (compared to a minimum
allowed of 3.50 to 1).
On December 9, 2005, Mattel, MAPS, a wholly-owned subsidiary of Mattel, Bank of America, N.A., as a
lender and administrative agent, and other financial institutions executed the MAPS facility which provides for
(i) a term loan facility of $225.0 million consisting of a term loan advanced to MAPS in the original principal
amount of $225.0 million, with $50.0 million of such amount to be repaid by MAPS on each of December 15,
2006 and December 15, 2007, and the remaining aggregate principal amount of $125.0 million to be repaid on
December 9, 2008 and (ii) a revolving loan facility consisting of revolving loans advanced to MAPS in the
maximum aggregate principal amount at any time outstanding of $100.0 million, with a maturity date of
December 9, 2008. Interest is charged at various rates selected by Mattel based on Eurodollar rates or bank
reference rates. In connection with the MAPS facility, Mattel executed a Continuing Guaranty Agreement
pursuant to which Mattel unconditionally guaranteed the obligations of MAPS arising pursuant to the MAPS
facility. The MAPS facility contains a variety of covenants, including financial covenants that require Mattel to
maintain certain consolidated debt-to-capital and interest coverage ratios at the end of each fiscal quarter and
fiscal year, using the formulae specified and ratios allowed in the MAPS facility to calculate the ratios. The
formulae specified in the MAPS facility are the same as those required by the domestic unsecured committed
revolving credit facility. Mattel was in compliance with such covenants at December 31, 2005.
The domestic unsecured committed revolving credit facility and the MAPS facility are material agreements
and failure to comply with the financial covenant ratios may result in an event of default under the terms of the
facilities. If Mattel defaulted under the terms of the domestic unsecured committed revolving credit facility or the
35