Mattel 2005 Annual Report Download - page 75

In 2005, Mattel reduced its total income tax reserves by $38.6 million as a result of tax settlements reached
with various tax authorities and reassessments of tax exposures based on the status of current audits in various
jurisdictions around the world. In 2004, Mattel reached a settlement with the IRS regarding the examination of
Mattel’s US federal income tax returns for the years 1998 through 2001. The settlement resulted in a net benefit
of $65.1 million from changes in tax estimates, and the benefit is reflected in the 2004 provision for income taxes
in the consolidated statement of operations. The IRS has completed its examination of Mattel’s US federal
income tax returns through 2003.
Cash paid for income taxes increased in 2005 as a result of an increase in foreign payments for current and
prior year tax accruals.
Accounting principles generally accepted in the United States of America require that tax benefits related to
the exercise of nonqualified stock options and stock warrants be credited to additional paid-in capital. The
exercise of nonqualified stock options resulted in an increase in additional paid-in capital totaling $4.3 million in
2005, a decrease in additional paid-in capital totaling $0.4 million in 2004, and an increase in additional paid-in
capital totaling $8.0 million during 2003. Stock warrants exercised in 2002 resulted in increases in additional
paid-in capital during 2003 of $4.3 million.
Note 4—Employee Benefit Plans
Mattel and certain of its subsidiaries have qualified and nonqualified retirement plans covering substantially
all employees of these companies. These plans include defined benefit pension plans, defined contribution
retirement plans, postretirement benefit plans, and deferred compensation and excess benefit plans. In addition,
Mattel makes contributions to government-mandated retirement plans in countries outside the US where its
employees work.
A summary of retirement plan expense is as follows (in millions):
For the Year
2005 2004 2003
Defined benefit pension plans ...................................... $ 22.2 $ 15.2 $ 16.4
Defined contribution retirement plans ................................ 29.6 27.8 24.0
Postretirement benefit plans ........................................ 4.9 5.0 5.0
Deferred compensation and excess benefit plans ........................ 3.2 3.1 3.0
Government-mandated plans outside the US ........................... 0.3 0.9 1.2
$ 60.2 $ 52.0 $ 49.6
Defined Benefit Pension and Postretirement Benefit Plans
Mattel provides defined benefit pension plans for eligible domestic employees, which satisfy the
requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). Some of Mattel’s foreign
subsidiaries have defined benefit pension plans covering substantially all of their eligible employees. Mattel
funds these plans in accordance with the terms of the plans and local statutory requirements, which differ for
each of the countries in which the subsidiaries are located. Mattel also has unfunded postretirement health
insurance plans covering certain eligible domestic employees.
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