Mattel 2014 Annual Report Download - page 47

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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 annual 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 annual cash flows from operating activities.
There is no assurance that Mattel will continue to generate strong annual cash flows from operating activities or
achieve its targeted goals for investing activities.
Operating Activities
Cash flows from operating activities were $888.6 million during 2014, as compared to $698.4 million
during 2013 and $1.28 billion during 2012. The increase in cash flows from operating activities in 2014 from
2013 was primarily due to reductions in working capital usage, partially offset by lower net income. The decrease
in cash flows from operating activities in 2013 from 2012 was primarily due to higher working capital usage,
including payment of the Litigation Charge of approximately $138 million, partially offset by higher net income.
Investing Activities
Cash flows used for investing activities were $708.6 million during 2014, as compared to $242.1 million
during 2013 and $900.2 million during 2012. The increase in cash flows used for investing activities in 2014
from 2013 was primarily due to the acquisition of MEGA Brands. The decrease in cash flows used for investing
activities in 2013 from 2012 was primarily due to the acquisition of HIT Entertainment in 2012, partially offset
by higher purchases of tools, dies, and molds and other property, plant, and equipment in 2013.
Financing Activities
Cash flows used for financing activities were $227.3 million during 2014, as compared to $740.0 million
during 2013 and $410.9 million during 2012. The decrease in cash flows used for financing activities in 2014
from 2013 was primarily due to lower repayments of long-term borrowings and lower share repurchases,
partially offset by lower proceeds from the exercise of stock options. The increase in cash flows used for
financing activities in 2013 from 2012 was primarily due to higher share repurchases and higher repayments of
long-term borrowings, partially offset by net proceeds from long-term borrowings.
During 2014, Mattel repurchased 4.9 million shares of its common stock at a cost of $177.2 million. During
2013, Mattel repurchased 11.0 million shares of its common stock at a cost of $469.2 million. During 2012,
Mattel repurchased 2.3 million shares of its common stock at a cost of $77.9 million, of which $23.5 million was
unsettled at December 31, 2012. Mattel’s share repurchase program was first announced on July 21, 2003. On
July 17, 2013, the Board of Directors authorized Mattel to increase its share repurchase program by $500.0
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