Mattel 2005 Annual Report Download - page 45

MAPS facility, its ability to meet its seasonal financing requirements could be adversely affected. See Item 8
“Financial Statements and Supplementary Data—Note 5 to the Consolidated Financial Statements.”
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 December 31, 2005, foreign credit lines total
approximately $187 million, a portion of which are used to support letters of credit. Mattel expects to extend
these credit lines throughout 2006.
In October 2005, two major credit rating agencies changed Mattel’s long-term credit rating outlook to
negative and one of the credit rating agencies reduced Mattel’s short-term credit rating. Management does not
expect these actions to have a significant impact on Mattel’s ability to obtain financing or to have a significant
negative impact on Mattel’s liquidity or results of operations.
Mattel believes its cash on hand at the beginning of 2006, amounts available under its domestic unsecured
committed revolving credit facility, the MAPS facility, its uncommitted money market facility, and its foreign
credit lines will be adequate to meet its seasonal financing requirements in 2006. As of December 31, 2005,
Mattel had available incremental borrowing resources totaling approximately $1.2 billion under its domestic
unsecured committed revolving credit facility, the MAPS facility and foreign credit lines.
Mattel has a $300.0 million domestic receivables sales facility that is a sub-facility of Mattel’s domestic
unsecured committed revolving credit facility. The outstanding amount of receivables sold under the domestic
receivables facility may not exceed $300.0 million at any given time, and the amount available to be borrowed
under the credit facility is reduced to the extent of any such outstanding receivables sold. Under the domestic
receivables facility, certain trade receivables are sold to a group of banks, which currently include, among others,
Bank of America, N.A., as administrative agent, Citicorp USA, Inc. and Barclays Bank PLC, as co-syndication
agents, and Societe Generale and BNP Paribas, as co-documentation agents. Pursuant to the domestic receivables
facility, Mattel Sales Corp. and Fisher-Price, Inc. (which are wholly-owned subsidiaries of Mattel) can sell
eligible trade receivables from Wal-Mart and Target to Mattel Factoring, Inc. (“Mattel Factoring”), a Delaware
corporation and wholly-owned, consolidated subsidiary of Mattel. Mattel Factoring is a special purpose entity
whose activities are limited to purchasing and selling receivables under this facility. Pursuant to the terms of the
domestic receivables facility and simultaneous with each receivables purchase, Mattel Factoring sells those
receivables to the bank group. Mattel records the transaction, reflecting cash proceeds and sale of accounts
receivable in its consolidated balance sheet, at the time of the sale of the receivables to the bank group.
Mattel International Holdings B.V., a company incorporated in the Netherlands, Mattel France S.A.S., a
company incorporated in France, and Mattel GmbH, a company incorporated in Germany, each of which is a
subsidiary of Mattel, and Societe Generale Bank Nederland N.V. are parties to a Master Agreement for the
Transfer of Receivables establishing a Euro 150 million European trade receivables facility, pursuant to which
Mattel France S.A.S. and Mattel GmbH may sell trade receivables to Societe Generale Bank Nederland N.V. As
with the domestic receivables facility, each sale of accounts receivable is recorded in Mattel’s consolidated
balance sheet at the time of such sale. No Mattel subsidiary is used as a special purpose entity in connection with
these transactions. Under the European trade receivables facility, the outstanding amount of receivables sold may
not exceed Euro 60 million from February 1 through July 31 of each year and may not exceed Euro 150 million
at all other times. Pursuant to a letter agreement between Societe Generale Bank Nederland N.V. and Mattel
International Holdings B.V., Mattel France S.A.S. and Mattel GmbH effective June 24, 2005, the commitment
termination date for the European trade receivables facility was extended to June 23, 2006.
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