Mattel 2009 Annual Report Download - page 89

three-month US Dollar London Interbank Offered Rate (“LIBOR”) plus 40 basis points with interest payable
quarterly beginning September 15, 2006. Interest on the 6.125% Senior Notes is payable semi-annually
beginning December 15, 2006. The 6.125% Senior Notes may be redeemed at any time at the option of Mattel at
a redemption price equal to the greater of (i) the principal amount of the notes being redeemed plus accrued
interest to the redemption date, or (ii) a “make whole” amount based on the yield of a comparable US Treasury
security plus 20 basis points.
In June 2006, Mattel entered into two interest rate swap agreements on the $100.0 million Floating Rate
Senior Notes, each in a notional amount of $50.0 million, for the purpose of hedging the variability of cash flows
in the interest payments due to fluctuations of the LIBOR benchmark interest rate. These cash flow hedges were
reported in Mattel’s consolidated balance sheets at fair value, with changes in the fair value of the hedges
reflected in accumulated other comprehensive income. Under the terms of the agreements, Mattel received
quarterly interest payments from the swap counterparties based on the three-month LIBOR plus 40 basis points
and made semi-annual interest payments to the swap counterparties based on a fixed rate of 5.87125%. The
three-month LIBOR used to determine interest payments under the interest rate swap agreements reset every
three months, matching the variable interest on the Floating Rate Senior Notes. The agreements expired in June
2009, which corresponded with the maturity of the Floating Rate Senior Notes.
In March 2008, Mattel issued $350.0 million of unsecured 5.625% Senior Notes (“2008 Senior Notes”) due
March 15, 2013. Interest on the 2008 Senior Notes is payable semi-annually on March 15 and September 15 of
each year, beginning September 15, 2008. Mattel may redeem all or part of the 2008 Senior Notes at any time or
from time to time at its option at a redemption price equal to the greater of (i) 100% of the principal amount of
the notes being redeemed plus accrued and unpaid interest to the redemption date, or (ii) a “make-whole” amount
based on the yield of a comparable US Treasury security plus 50 basis points.
In September 2007, a major credit rating agency reaffirmed Mattel’s long-term credit rating at BBB-, but
changed the outlook from positive to stable. In August 2007, another major credit rating agency maintained its
long-term credit rating at BBB, but changed its outlook to positive. In May 2007, an additional credit rating
agency maintained its long-term rating for Mattel at Baa2, but changed its long-term outlook from negative to
stable. 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, amounts available under its domestic unsecured committed revolving
credit facility, and its foreign credit lines will be adequate to meet its seasonal financing requirements in 2010.
Mattel has a $300.0 million domestic receivables sales facility that was also amended in connection with the
amendment of the credit facility. The amendment to the receivables sales facility, among other things,
(i) extended the maturity date of the receivables sales facility to March 23, 2012, and (ii) incorporated the credit
facility’s increased applicable interest rate margins described above. 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., Fisher-Price, Inc., and Mattel Direct
Import, 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.
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