Mattel 2011 Annual Report Download - page 49

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accounts receivable of customers deemed to be a credit risk, including requiring letters of credit, factoring,
purchasing various forms of credit insurance with unrelated third parties, or requiring cash in advance of
shipment.
Mattel sponsors defined benefit pension plans and postretirement benefit plans for its employees. Actual
returns below the expected rate of return, along with changes in interest rates that affect the measurement of the
liability, would impact the amount and timing of Mattel’s future contributions to these plans.
Capital and Investment Framework
To guide future capital deployment decisions, with a goal of maximizing stockholder value, Mattel’s Board
of Directors established the following capital and investment framework:
• To maintain approximately $800 million to $1 billion in year-end cash available to fund a substantial
portion of seasonal working capital;
• To maintain a year-end debt-to-capital ratio of about 35%;
• To invest approximately $180 million to $200 million in capital expenditures annually to maintain and
grow the business;
• To make strategic opportunistic acquisitions; and
• To return excess funds to stockholders through dividends and share repurchases.
Over the long term, assuming cash flows from operating activities remain strong, Mattel plans to use its free
cash flows to invest in strategic acquisitions and to return funds to stockholders through cash dividends and share
repurchases. Mattel’s share repurchase program has no expiration date and repurchases will take place from time
to time, depending on market conditions. The ability to successfully implement the capital deployment plan is
directly dependent on Mattel’s ability to generate strong cash flows from operating activities. There is no
assurance that Mattel will continue to generate strong cash flows from operating activities or achieve its targeted
goals for investing activities.
Operating Activities
Cash flows from operating activities were $664.7 million during 2011, as compared to $528.0 million
during 2010 and $945.0 million during 2009. The increase in cash flows from operating activities in 2011 from
2010 was primarily due to the decision not to factor $300.0 million of domestic receivables in 2010 and higher
net income, partially offset by higher working capital usage. The decrease in cash flows from operating activities
in 2010 from 2009 was primarily due to the decision not to factor $300.0 million of domestic receivables in
2010, as well as growth in accounts receivable due to increased net sales, and the rebuild of inventory to support
point of sale momentum and customer service levels, partially offset by higher net income.
Investing Activities
Cash flows used for investing activities were $174.5 million during 2011, as compared to $146.7 million
during 2010 and $33.5 million during 2009. The increase in cash flows used for investing activities in 2011 from
2010 was primarily due to higher purchases of tools, dies, molds and other property, plant, and equipment,
partially offset by higher net proceeds from settled foreign currency forward exchange contracts. The increase in
cash flows used for investing activities in 2010 from 2009 was primarily due to lower proceeds received from the
redemption of a money market investment fund, lower net proceeds from settled foreign currency forward
exchange contracts, and higher purchases of tools, dies, and molds and other property, plant, and equipment.
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