Mattel 2006 Annual Report Download - page 49

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Financial Position
Mattel’s cash and equivalents were $1,205.6 million at December 31, 2006, an increase of $207.8 million
from 2005. The increase was primarily driven by cash flows generated from operating activities of
$875.9 million, proceeds from the issuance of $300.0 million of Senior Notes in June 2006, and proceeds from
the exercise of stock options of $116.9 million, partially offset by dividend payments of $249.5 million, share
repurchases of $205.9 million, acquisition of Radica in October 2006 for net cash paid of $196.4 million (which
includes the purchase price and acquisition costs of $235.1 million, net of cash acquired of $38.7 million), and
repayments of $100.0 million on the MAPS revolving loan facility, $175.0 million on the MAPS term loan
facility, and $50.0 million on the Medium-term notes. Accounts receivable increased by $183.2 million to
$943.8 million at December 31, 2006, reflecting increased fourth quarter sales and lower factored receivables.
Management expects to collect the majority of these receivables in the first quarter of 2007. Inventory levels
were relatively consistent year over year. Based on its analysis of point of sale information for its top US
customers, management believes that inventory levels of Mattel products at retail were slightly lower at
December 31, 2006 than 2005.
Current portion of long-term debt decreased $35.7 million to $64.3 million at December 31, 2006, compared
to December 31, 2005 primarily due to the $50.0 million payment on the MAPS term loan facility in December
2006, partially offset by the reclassification of $14.3 million of the remaining $50.0 million on the MAPS term
loan facility from long-term debt. Accounts payable and accrued liabilities increased $293.9 million from
December 31, 2005 to $1.4 billion at December 31, 2006, mainly due to changes in currency exchange rates,
increased amounts due to third party manufacturers, and higher incentive compensation and royalty accruals.
A summary of Mattel’s capitalization is as follows (in millions, except percentage information):
December 31,
2006 2005
Medium-term notes .............................................. $ 300.0 9% $ 350.0 12%
Senior Notes ................................................... 300.0 9 — —
MAPS term loan ................................................ 35.7 1 175.0 6
Total noncurrent long-term debt .................................... 635.7 19 525.0 18
Other noncurrent liabilities ........................................ 304.7 9 282.4 10
Stockholders’ equity ............................................. 2,433.0 72 2,101.7 72
$3,373.4 100% $2,909.1 100%
Total noncurrent long-term debt increased $110.7 million at December 31, 2006 compared to December 31,
2005 due to the aforementioned proceeds from the issuance of $300.0 million of Senior Notes, partially offset by
the $125.0 million prepayment of the MAPS term loan facility and the reclassification of $14.3 million of the
MAPS term loan facility and $50.0 million of Medium-term notes to current portion of long-term debt. Mattel
expects to satisfy its future long-term capital needs through the generation of corporate earnings and issuance of
long-term debt instruments. Stockholders’ equity of $2.4 billion at December 31, 2006 increased $331.2 million
from December 31, 2005, primarily as a result of current year net income and the exercise of stock options
partially offset by share repurchases and payment of the annual dividend on common stock in the fourth quarter
of 2006.
Mattel’s debt-to-capital ratio, including short-term borrowings and the current portion of long-term debt
decreased to 22.3% at December 31, 2006 from 26.1% at December 31, 2005 due to higher net income in 2006,
higher stock option exercises, the repayment of all short-term borrowings outstanding at December 31, 2005 and
the repayment of $175.0 million on the MAPS term loan facility, partially offset by share repurchases, the annual
dividend payment, and proceeds from the issuance of $300.0 million of Senior Notes. Mattel’s objective is to
continue to maintain a year-end debt-to-capital ratio of approximately 25%.
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