Mattel 2011 Annual Report Download - page 89

debt-to-EBITDA ratio, as calculated per the terms of the Credit Facility agreement, was 1.3 to 1 (compared to a
maximum allowed of 3.0 to 1) and Mattel’s interest coverage ratio was 16.0 to 1 (compared to a minimum
required of 3.50 to 1).
The Credit Facility is a material agreement and failure to comply with the financial covenant ratios may
result in an event of default under the terms of the facility. If Mattel defaulted under the terms of the Credit
Facility, its ability to meet its seasonal financing requirements could be adversely affected.
Mattel believes its cash on hand, amounts available under its Credit Facility, and its foreign credit lines will
be adequate to meet its seasonal financing requirements in 2012.
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, 2011, foreign credit lines totaled
approximately $187 million. Mattel expects to extend the majority of these credit lines throughout 2012.
During 2009, sales of receivables pursuant to the domestic receivables sales facility occurred periodically,
generally quarterly. The receivables were sold by Mattel Sales Corp., Fisher-Price, Inc., and Mattel Direct
Import, Inc. to Mattel Factoring, who then sold such receivables to the bank group at a slight discount, and
Mattel acted as a servicer for such receivables. Mattel designated Mattel Sales Corp. and Fisher-Price, Inc. as
sub-servicers, as permitted by the facility. Mattel’s appointment as a servicer was subject to termination events
that were customary for such transactions. The domestic receivables sales facility was also subject to conditions
to funding, representations and warranties, undertakings and early termination events that were customary for
transactions of this nature.
Mattel did not sell receivables pursuant to the domestic receivables facility in 2011 or 2010. Mattel’s
aggregate losses on receivables sold under the domestic and other trade receivables facilities were $0.5 million,
$1.8 million, and $7.4 million during 2011, 2010, and 2009, respectively.
The outstanding amounts of accounts receivable that have been sold under other factoring arrangements
were $25.9 million and $60.6 million at December 31, 2011 and 2010, respectively. These amounts have been
excluded from Mattel’s consolidated balance sheets.
In May 2011, a major credit rating agency changed Mattel’s long-term credit rating from BBB+ to A-, and
maintained its short-term credit rating of F-2 and outlook at stable. In April 2011, another major credit rating
agency changed Mattel’s long-term credit rating from BBB to BBB+, and maintained its short-term credit rating
of A-2 and outlook at stable. Additionally, in April 2011, a major credit rating agency changed Mattel’s long-
term credit rating from Baa2 to Baa1, and maintained its short-term credit rating of P-2 and outlook at stable.
Short-Term Borrowings
As of December 31, 2011, Mattel had foreign short-term bank loans outstanding of $8.0 million. As of
December 31, 2010, Mattel had no foreign short-term bank loans outstanding. As of December 31, 2011 and
2010, Mattel had no borrowings outstanding under the Credit Facility.
During 2011 and 2010, Mattel had average borrowings of $15.9 million and $2.6 million, respectively,
under its foreign short-term bank loans, and $599.7 million and $196.9 million, respectively, under the Credit
Facility and other short-term borrowings, to help finance its seasonal working capital requirements. The weighted
average interest rate on foreign short-term bank loans during 2011 and 2010 was 11.4% and 3.4%, respectively.
The weighted average interest rate on the Credit Facility and other short-term borrowings during both 2011 and
2010 was 0.4%.
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