-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OwW5l1f8C9vc8G6DrISa0vj/1qLpLf3KMYtL4Uw4HH0p2Xe3gTflpGln0VMAvE1E +alwQxFZuGZtsX8XpwjUvA== 0000063276-98-000015.txt : 19980723 0000063276-98-000015.hdr.sgml : 19980723 ACCESSION NUMBER: 0000063276-98-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980721 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATTEL INC /DE/ CENTRAL INDEX KEY: 0000063276 STANDARD INDUSTRIAL CLASSIFICATION: DOLLS & STUFFED TOYS [3942] IRS NUMBER: 951567322 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05647 FILM NUMBER: 98668876 BUSINESS ADDRESS: STREET 1: 333 CONTINENTAL BLVD CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3102522000 10-Q 1 2ND QUARTER 1998 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 ------------- OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-05647 ---------------------------------- MATTEL, INC. ------------ (Exact name of registrant as specified in its charter) Delaware 95-1567322 - ------------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 333 Continental Boulevard, El Segundo, California 90245-5012 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (310) 252-2000 -------------- (Former name, former address and former fiscal year, None if changed since last report) -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Number of shares outstanding of registrant's common stock as of July 17, 1998: Common Stock - $1 par value -- 292,654,006 shares PART I -- FINANCIAL INFORMATION ------------------------------- MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, June 30, Dec. 31, (In thousands) 1998 1997 1997 - -------------- ----------- ----------- ----------- ASSETS Current Assets Cash $ 151,949 $ 58,989 $ 694,947 Accounts receivable, net 1,249,205 1,315,815 1,091,416 Inventories 627,534 552,463 428,844 Prepaid expenses and other current assets 255,288 194,962 246,529 ----------- ----------- ----------- Total current assets 2,283,976 2,122,229 2,461,736 ----------- ----------- ----------- Property, Plant and Equipment Land 25,919 35,221 29,556 Buildings 196,249 215,446 198,396 Machinery and equipment 473,535 458,401 453,978 Capitalized leases 23,362 25,374 24,625 Leasehold improvements 72,391 74,721 68,179 ----------- ----------- ----------- 791,456 809,163 774,734 Less: accumulated depreciation 354,735 344,792 336,946 ----------- ----------- ----------- 436,721 464,371 437,788 Tools, dies and molds, net 170,938 153,980 163,809 ----------- ----------- ----------- Property, plant and equipment, net 607,659 618,351 601,597 ----------- ----------- ----------- Other Noncurrent Assets Intangible assets, net 585,407 590,145 542,759 Sundry assets 199,910 236,697 197,699 ----------- ----------- ----------- $ 3,676,952 $ 3,567,422 $ 3,803,791 =========== =========== =========== See accompanying notes to consolidated financial information.
2 MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued)
June 30, June 30, Dec. 31, (In thousands, except share data) 1998 1997 1997 - --------------------------------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term borrowings $ 191,454 $ 164,991 $ 17,468 Current portion of long-term liabilities 12,341 231,708 13,659 Accounts payable 238,982 216,220 310,117 Accrued liabilities 486,546 523,018 629,445 Income taxes payable 147,101 120,033 202,735 ----------- ----------- ----------- Total current liabilities 1,076,424 1,255,970 1,173,424 ----------- ----------- ----------- Long-Term Liabilities 6-3/4% Senior Notes due 2000 100,000 100,000 100,000 Medium-Term Notes 520,500 380,000 520,500 Mortgage note 43,297 43,836 43,573 Other 134,540 143,458 144,224 ----------- ----------- ----------- Total long-term liabilities 798,337 667,294 808,297 ----------- ----------- ----------- Shareholders' Equity Preferred stock, Series B $1.00 par value, $1,050.00 liquidation preference per share, 0.1 million shares authorized, issued and outstanding at June 30, 1997 - 54 - Preferred stock, Series C $1.00 par value, $125.00 liquidation preference per share, 0.8 million shares authorized, issued and outstanding 772 773 772 Common stock $1.00 par value, 1,000.0 million shares authorized at June 30, 1998 and 600.0 million shares authorized at June 30, 1997 and December 31, 1997; 300.4 million shares issued at June 30, 1998 and December 31, 1997 and 296.7 million shares issued at June 30, 1997 300,381 296,729 300,381 Additional paid-in capital 488,888 506,224 509,172 Treasury stock at cost; 7.7 million shares, 5.8 million shares and 8.8 million shares, respectively (267,293) (162,269) (285,420) Retained earnings 1,515,803 1,122,343 1,490,804 Accumulated other comprehensive (loss) (236,360) (119,696) (193,639) ----------- ----------- ----------- Total shareholders' equity 1,802,191 1,644,158 1,822,070 ----------- ----------- ----------- $ 3,676,952 $ 3,567,422 $ 3,803,791 =========== =========== =========== See accompanying notes to consolidated financial information.
3 MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
For the For the Three Months Ended Six Months Ended ---------------------- ---------------------- June 30, June 30, June 30, June 30, (In thousands, except per share amounts) 1998 1997 1998 1997 - ---------------------------------------- ---------- ---------- ---------- ---------- Net Sales $ 861,526 $ 972,656 $1,566,690 $1,666,176 Cost of sales 456,778 513,819 838,024 884,528 ---------- ---------- ---------- ---------- Gross Profit 404,748 458,837 728,666 781,648 Advertising and promotion expenses 109,875 131,713 207,956 234,339 Other selling and administrative expenses 190,689 192,707 374,480 377,993 Integration and restructuring costs - - - 275,000 Interest expense 15,625 18,514 32,017 38,150 Other expense, net 3,942 7,959 11,840 15,841 ---------- ---------- ---------- ---------- Income (Loss) Before Income Taxes 84,617 107,944 102,373 (159,675) Provision (benefit) for income taxes 24,233 32,310 29,320 (30,685) ---------- ---------- ---------- ---------- Net Income (Loss) 60,384 75,634 73,053 (128,990) Less: preferred stock dividend requirements 1,990 2,837 3,980 5,677 ---------- ---------- ---------- ---------- Net Income (Loss) Applicable to Common Shares $ 58,394 $ 72,797 $ 69,073 $ (134,667) ========== ========== ========== ========== Basic Income (Loss) Per Common Share - ------------------------------------ Net income (loss) $ 0.20 $ 0.25 $ 0.24 $ (0.46) ========== ========== ========== ========== Average number of common shares 293,433 291,737 293,242 290,069 ========== ========== ========== ========== Diluted Income (Loss) Per Common Share - -------------------------------------- Net income (loss) $ 0.20 $ 0.25 $ 0.23 $ (0.46) ========== ========== ========== ========== Average number of common and common equivalent shares 297,720 296,609 297,943 290,069 ========== ========== ========== ========== Dividends Declared Per Common Share $ 0.08 $ 0.07 $ 0.15 $ 0.13 ========== ========== ========== ========== See accompanying notes to consolidated financial information.
4 MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended ----------------------- June 30, June 30, (In thousands) 1998 1997 - -------------- ---------- ---------- Cash Flows From Operating Activities: - ------------------------------------- Net income (loss) $ 73,053 $ (128,990) Adjustments to reconcile net income (loss) to net cash flows from operating activities: Noncash restructuring and integration charges - 90,382 Depreciation 79,961 79,721 Amortization 16,175 17,374 Increase (decrease) from changes in net assets and liabilities: Accounts receivable (144,930) (389,743) Inventories (197,079) (125,622) Prepaid expenses and other current assets (7,384) (246) Accounts payable, accrued liabilities and income taxes payable (345,798) (177,471) Deferred compensation and other retirement plans 3,713 1,368 Deferred income taxes (2,575) (15,947) Other, net 1,272 (3,111) ---------- ---------- Net cash used in operating activities (523,592) (652,285) ---------- ---------- Cash Flows From Investing Activities: - ------------------------------------- Purchases of tools, dies and molds (57,001) (47,968) Purchases of other property, plant and equipment (68,434) (59,032) Purchase of other long-term investments (7,906) (6,955) Proceeds from sales of other property, plant and equipment 18,021 6,552 Investment in acquired businesses (11,057) (8,625) Other, net (1,231) (230) ---------- ---------- Net cash used in investing activities (127,608) (116,258) ---------- ---------- Cash Flows From Financing Activities: - ------------------------------------- Short-term borrowings, net 174,066 136,527 Issuance of Medium-Term Notes - 160,000 Payment of Medium-Term Notes (9,500) - Long-term foreign borrowings (2,904) (3,492) Tax benefit of employee stock options exercised 30,673 6,878 Exercise of stock options 63,269 18,795 Sale of treasury stock - 71,276 Purchase of treasury stock (96,099) (61,313) Dividends paid on common and preferred stock (47,128) (40,905) Other, net (447) (2,552) ---------- ---------- Net cash provided by financing activities 111,930 285,214 Effect of Exchange Rate Changes on Cash (3,728) (7,953) ---------- ---------- Decrease in Cash (542,998) (491,282) Cash at Beginning of Period 694,947 550,271 ---------- ---------- Cash at End of Period $ 151,949 $ 58,989 ========== ========== See accompanying notes to consolidated financial information.
5 MATTEL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL INFORMATION ------------------------------------------- 1. The accompanying unaudited consolidated financial statements and related disclosures have been prepared in accordance with generally accepted accounting principles applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments considered necessary for a fair presentation of Mattel, Inc. and its subsidiaries' ("the Company's") financial position and interim results as of and for the periods presented have been included. Certain amounts in the financial statements for prior periods have been reclassified to conform with the current period's presentation. Because the Company's business is seasonal, results for interim periods are not necessarily indicative of those which may be expected for a full year. The financial information included herein should be read in conjunction with the Company's consolidated financial statements and related notes in its 1997 Annual Report to Shareholders. 2. Accounts receivable are shown net of allowances for doubtful accounts of $26.4 million (June 30, 1998), $25.3 million (June 30, 1997) and $30.7 million (December 31, 1997). 3. Inventories are comprised of the following:
June 30, June 30, Dec. 31, (In thousands) 1998 1997 1997 - -------------- --------- --------- --------- Raw materials and work in progress $ 71,562 $ 89,093 $ 48,620 Finished goods 555,972 463,370 380,224 --------- --------- --------- $ 627,534 $ 552,463 $ 428,844 ========= ========= =========
4. Net cash flows from operating activities include cash payments for the following:
For the Six Months Ended ------------------------ June 30, June 30, (In thousands) 1998 1997 - -------------- ---------- ----------- Cash paid during the period for: Interest $ 34,674 $ 37,648 Income taxes 62,004 37,996 - --------------------------------------------------------------------
Noncash investing activities for the six months ended June 30, 1998 include the accrual of the purchase price payable in connection with the acquisition of Bluebird Toys PLC ("Bluebird"). See Note 10. 5. In the current quarter, the Board of Directors declared cash dividends of $0.08 per common share, compared to $0.07 per common share in the second quarter of 1997. 6. In the fourth quarter of 1997, the Company adopted Statement of Financial Accounting Standards No. 128, Earnings per Share. Accordingly, June 1997 ------------------ results have been restated to present basic and diluted income (loss) per common share. Basic income (loss) per common share is computed by dividing earnings available to common shareholders by the average number of common shares outstanding during each period. Earnings available to common shareholders represent reported net income (loss) less preferred stock dividend requirements. Diluted income (loss) per common share is computed by dividing diluted earnings available to common shareholders by the weighted average number of common and common equivalent shares outstanding during each period. Weighted average share computations assume the exercise of dilutive stock options and warrants, net of assumed treasury share repurchases at average market prices, and conversion of dilutive preferred stock and convertible debt, as applicable. Diluted earnings available to common shareholders represent earnings available to common shareholders plus preferred stock dividend requirements and interest savings resulting from assumed conversions of dilutive securities. 7. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. It also requires that gains or losses resulting from changes in the values of those derivatives be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company is required to adopt SFAS 133 for its fiscal year beginning January 1, 2000. Management believes the adoption of SFAS 133 will not have a material impact on the Company's consolidated financial position or results of operations. 8. In the first quarter of 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, which ------------------------------ establishes standards for the reporting and display of comprehensive income and its components (revenue, expenses, gains, and losses) in a full set of general-purpose financial statements. Accordingly, comprehensive income has been reported as a separate component of shareholders' equity in the consolidated balance sheets. Total elements of comprehensive income (which is comprised of net income (loss) and currency translation adjustments) are presented in the following table in total for the quarter and year-to-date periods ended June 30:
June 30, June 30, (In thousands) 1998 1997 - -------------- --------- --------- Quarter ended $ 47,425 $ 71,935 Year-to-date 30,332 (161,741) - -------------------------------------------------------------
9. On July 9, 1998, the Company completed its previously announced acquisition of Pleasant Company and related companies ("Pleasant"), a Wisconsin-based direct marketer of books, dolls, clothing, accessories and activity products bearing the "American Girl" brand. The purchase price included net cash consideration of approximately $715 million, including costs directly related to the acquisition, subject to certain adjustments, and the assumption by the Company of certain indebtedness. Short-term borrowings were incurred by the Company in connection with this acquisition, $300.0 million of which will be repaid from the net proceeds received from the issuance of long-term debt securities under its current universal shelf registration statement. The acquisition will be accounted for using the purchase method of accounting and, accordingly, the results of operations of Pleasant will be included in the Company's consolidated financial statements from the date of acquisition. On July 15, 1998, Pleasant Rowland Frautschi, the President and founder of Pleasant, became Vice-Chairman of the Company and a member of the Company's Board of Directors. 10. On June 19, 1998, the Company acquired a controlling interest in Bluebird, a company organized in the United Kingdom, from which Mattel licenses the product designs for its POLLY POCKET and Disney Tiny Collections brands, as well as the POLLY POCKET trademarks. The aggregate purchase price, including investment advisor and other directly related expenses was approximately $80 million. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the results of operations of Bluebird have been included in the Company's consolidated financial statements since the date of acquisition. Intercompany accounts and transactions between Bluebird and the Company have been eliminated. The excess of cost over the estimated fair market value of tangible net assets acquired is being amortized on a straight-line basis over 30 years. As of June 30, 1998, the purchase price is included in accrued liabilities in the consolidated balance sheets. 11. In January 8, 1998, the Company acquired PrintPaks, Inc. ("PrintPaks"), a Portland, Oregon-based publisher of multimedia craft products. The purchase price included net cash consideration of $11.1 million. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the results of PrintPaks have been included in the Company's consolidated financial statements since the date of acquisition. The agreement and plan of merger also provides for future contingent consideration in the event that net sales of PrintPaks product lines reach or exceed certain levels in each of calendar years 1998, 1999, and 2000. 12. In connection with the Tyco Toys, Inc. ("Tyco") merger, the Company commenced an integration and restructuring plan and recorded a $275 million pre-tax charge against operations in March 1997. The plan consisted of consolidating certain manufacturing and distribution operations, eliminating duplicative marketing and administrative offices, terminating various distributor and licensing arrangements and abandoning certain product lines. Included in the charge was approximately $86 million for estimated severance costs related to the elimination of 2,700 positions principally associated with facilities to be closed. The remainder of the charge consisted of transaction costs related to the merger, asset write-downs and contract termination expenses. Of the total pre-tax charge, approximately $90 million represents non-cash asset write-downs. Through June 30, 1998, the total integration and restructuring expenditures and write-offs were approximately $208 million, $66 million of which related to severance payments. The plan is expected to be substantially completed in 1998. MATTEL, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- THE FOLLOWING CAUTIONARY STATEMENT IS INCLUDED IN THIS QUARTERLY REPORT PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY, WHICH INCLUDE, BUT ARE NOT LIMITED TO, SALES LEVELS, THE MATTEL AND TYCO RESTRUCTURING CHARGE, COST SAVINGS, AND PROFITABILITY, ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH IN SUCH STATEMENTS. THESE INCLUDE WITHOUT LIMITATION: THE COMPANY'S DEPENDENCE ON THE TIMELY DEVELOPMENT, INTRODUCTION AND CUSTOMER ACCEPTANCE OF NEW PRODUCTS; SIGNIFICANT CHANGES IN BUYING PATTERNS OF MAJOR CUSTOMERS; POSSIBLE WEAKNESSES OF INTERNATIONAL MARKETS; THE IMPACT OF COMPETITION ON REVENUES AND MARGINS; THE EFFECT OF CURRENCY FLUCTUATIONS ON REPORTABLE INCOME; UNANTICIPATED NEGATIVE RESULTS OF LITIGATION, GOVERNMENTAL PROCEEDINGS OR ENVIRONMENTAL MATTERS; AND OTHER RISKS AND UNCERTAINTIES AS MAY BE DETAILED FROM TIME TO TIME IN THE COMPANY'S PUBLIC ANNOUNCEMENTS AND SEC FILINGS. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS "MAY," "WILL," "SHOULD," "EXPECT," "ANTICIPATE," "ESTIMATE," "CONTINUE," "PLANS," "INTENDS," OR OTHER SIMILAR TERMINOLOGY. Mattel, Inc. designs, manufactures, markets and distributes a broad variety of toy products on a worldwide basis. The Company's business is dependent in great part on its ability each year to redesign, restyle and extend existing core products and product lines and to design and develop innovative new toys and product lines. New products have limited lives, ranging from one to three years, and generally must be updated and refreshed each year. The Company plans to continue to focus on core brands that have fundamental play patterns and worldwide appeal, are sustainable, and have delivered consistent profitability and stable growth. The Company's core brands can be grouped in the following five categories: Fashion Dolls (BARBIE fashion dolls and accessories, Collector dolls, and Fashion Magic); Infant and Preschool (FISHER- PRICE, Disney Preschool and Plush, POWER WHEELS, SESAME STREET, SEE 'N SAY, MAGNA DOODLE, and VIEW-MASTER); Entertainment (Disney, Nickelodeon, games and puzzles); Wheels (HOT WHEELS, MATCHBOX, Tyco Electric Racing and Tyco Radio Control); and Large and Small Dolls (CABBAGE PATCH KIDS, POLLY POCKET and Tyco large dolls and plush). RESULTS OF OPERATIONS --------------------- The Company's business is seasonal, and, therefore, results of operations are comparable only with corresponding periods. Following is a percentage analysis of operating results:
For the For the Three Months Ended Six Months Ended ------------------------ ------------------------ June 30, June 30, June 30, June 30, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Net sales 100% 100% 100% 100% =========== =========== =========== =========== Gross profit 47% 47% 47% 47% Advertising and promotion expenses 13 14 13 14 Other selling and administrative expenses 22 20 24 23 Integration and restructuring costs - - - 16 Other expense, net - - 1 1 ----------- ----------- ----------- ----------- Operating profit (loss) 12 13 9 (7) Interest expense 2 2 2 2 ----------- ----------- ----------- ----------- Income (loss) before income taxes 10% 11% 7% (9)% =========== =========== =========== ===========
SECOND QUARTER - -------------- Net sales in the second quarter of 1998 decreased by 11%, including a net $14.6 million unfavorable effect from the generally stronger US dollar relative to last year. At comparable foreign currency exchange rates, sales decreased by 10%. Sales were negatively impacted in the quarter by a change in buying practices by Toys R Us, the Company's largest customer. Sales of the Company's Wheels category increased 11%, led by an increase in HOT WHEELS vehicles and playsets, partially offset by a decline in Tyco Radio Control. The Entertainment category increased 3%, primarily due to higher sales of Nickelodeon products. Sales of BARBIE and BARBIE-related products, including Fashion Magic products, decreased 17%. The Infant and Preschool category decreased 6%, mainly due to lower sales of FISHER-PRICE and SESAME STREET, partially offset by higher sales of WINNIE THE POOH. Sales to customers within the United States decreased 15%, mainly as a result of the change in buying practices by Toys R Us and high retail inventory levels of certain BARBIE dolls entering the year. Sales to customers outside the United States decreased 3% compared to 1997, including the unfavorable effect of generally stronger US dollar relative to the year-ago quarter. At comparable foreign currency exchange rates, sales internationally grew 2%. Gross margin, as a percentage of net sales, remained virtually constant. Advertising and promotion as a percentage of net sales decreased one percentage point to 13% as the Company continues to reduce non-media spending. As a percentage of net sales, other selling and administrative expenses increased two percentage points over the year-ago quarter; however, the expenses decreased by $2.0 million reflecting direct cost savings realized from the Tyco integration and Mattel restructuring. Other expense, net decreased by $4.0 million mainly due to a favorable impact from foreign exchange and higher interest income. Interest expense declined by $2.9 million primarily due to realization of savings from the refinancing of Tyco debt and the Company's favorable cash position. SIX MONTHS - ---------- Net sales in the first half of 1998 decreased $99.5 million or 6%, including a net $29.3 million unfavorable effect from the generally stronger US dollar relative to last year. Sales of the Company's Infant and Preschool brands increased 10%, led by strength in Disney's WINNIE THE POOH and growth in SESAME STREET, partially offset by a decline in FISHER-PRICE products. The Wheels category increased 10%, led by an increase in HOT WHEELS, partially offset by a decline in Tyco Radio Control. The Entertainment category increased 8%, primarily due to higher sales of Nickelodeon products. Sales of BARBIE and BARBIE-related products, including Fashion Magic products, decreased 17% primarily due to the change in buying practices by Toys R Us and high retail inventory levels of certain BARBIE dolls entering the year. Sales to customers within the United States decreased 7%. Sales to customers outside the United States decreased 3%, including the unfavorable effect from the generally stronger US dollar relative to the year-ago period. At comparable foreign currency exchange rates, sales internationally increased 3%. Gross profit, as a percentage of net sales, remained virtually constant. Advertising and promotion as a percentage of net sales decreased one percentage point to 13% primarily due to synergies realized from the merger with Tyco and reductions in non-media spending. Although other selling and administrative expenses increased one percentage point as a percentage of net sales, it decreased by $3.5 million reflecting direct cost savings realized from the Tyco integration and Mattel restructuring. Interest expense decreased $6.1 million or 16% primarily due to realization of savings from the refinancing of Tyco debt and the Company's favorable cash position. ACQUISITIONS AND NONRECURRING ITEM ---------------------------------- On July 9, 1998, the Company completed its previously announced acquisition of Pleasant, a Wisconsin-based direct marketer of books, dolls, clothing, accessories and activity products bearing the "American Girl" brand. The purchase price included net cash consideration of approximately $715 million, including costs directly related to the acquisition, subject to certain adjustments, and the assumption by the Company of certain indebtedness. The acquisition will be accounted for using the purchase method of accounting and, accordingly, the results of operations of Pleasant will be included in the Company's consolidated financial statements from the date of acquisition. On June 19, 1998, the Company acquired a controlling interest in Bluebird, a company organized in the United Kingdom, from which Mattel licenses the product designs for its POLLY POCKET and Disney Tiny Collections brands, as well as the POLLY POCKET trademarks. The aggregate purchase price, including investment advisor and other directly related expenses was approximately $80 million. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the results of operations of Bluebird have been included in the Company's consolidated financial statements since the date of acquisition. Intercompany accounts and transactions between Bluebird and the Company have been eliminated. The excess of cost over the estimated fair market value of tangible net assets acquired is being amortized on a straight-line basis over 30 years. On January 8, 1998, the Company acquired PrintPaks, a Portland, Oregon-based publisher of multimedia craft products. The purchase price included net cash consideration of $11.1 million. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the results of PrintPaks have been included in the Company's consolidated financial statements since the date of the acquisition. The agreement and plan of merger also provides for future contingent consideration in the event that net sales of PrintPaks product lines reach or exceed certain levels in each of calendar years 1998, 1999, and 2000. In connection with the Tyco merger, the Company commenced an integration and restructuring plan and recorded a $275 million pre-tax charge against operations in March 1997. After related tax effects, the net $210 million charge impacted year- to-date earnings by $0.72 per share. The plan consisted of consolidating certain manufacturing and distribution operations, eliminating duplicative marketing and administrative offices, terminating various distributor and licensing arrangements and abandoning certain product lines. Included in the charge was approximately $86 million for estimated severance costs related to the elimination of 2,700 positions principally associated with facilities to be closed. The remainder of the charge consisted of transaction costs related to the merger, asset write-downs and contract termination expenses. Of the total pre-tax charge, approximately $90 million represents non-cash asset write-downs. Through June 30, 1998, the total integration and restructuring expenditures and write-offs were approximately $208 million, $66 million of which related to severance payments. The plan is expected to be substantially completed in 1998. FINANCIAL CONDITION ------------------- The Company's financial position remained strong during the 1998 second quarter. The Company's cash position as of June 30, 1998 was $151.9 million compared to $59.0 million as of the second quarter 1997. Cash decreased by $543.0 million since December 31, 1997 primarily due to funding of operating activities. Inventory balances increased $198.7 million since year end and $75.1 million over the 1997 quarter end, primarily as a result of the Company's production in support of future sales volume. Prepaid expenses and other current assets increased $60.3 million over the 1997 quarter-end, mainly due to higher deferred income tax benefits related to the Tyco integration and Mattel restructuring charge. Intangibles increased $42.6 million since year-end, primarily due to the Company's acquisitions of PrintPaks and Bluebird during the first and second quarters of 1998, respectively, partially offset by amortization. Sundry assets decreased $36.8 million, as compared to the year-ago quarter, primarily due to lower deferred income taxes that were reclassified to prepaid expenses. Current portion of long-term liabilities decreased $219.4 million over the 1997 quarter-end, primarily due to the repayment of the $100.0 million 6-7/8% Senior Notes which matured on August 1 and the $126.5 million Tyco 10-1/8% Senior Notes which were redeemed on August 15. Accrued liabilities decreased $36.5 million compared to the year-ago quarter, mainly due to the completion of certain activities related to the Tyco integration and Mattel restructuring partially offset by the accrual for the purchase of Bluebird. Seasonal financing needs for the next twelve months are expected to be satisfied through internally generated cash, issuance of commercial paper, issuance of long-term debt, and use of the Company's various short-term bank lines of credit. Details of the Company's capitalization are as follows:
(In millions) June 30, 1998 June 30, 1997 Dec. 31, 1997 - ------------- ---------------------------------------------- Medium-Term Notes $ 520.5 20% $ 380.0 17% $ 520.5 20% 6-3/4% Senior Notes 100.0 4 100.0 4 100.0 4 Convertible Subordinated Notes - - 16.0 1 - - Other long-term debt obligations 43.3 2 53.6 2 55.0 2 ----------------------------------------------- Total long-term debt 663.8 26 549.6 24 675.5 26 Other long-term liabilities 134.5 5 117.7 5 132.8 5 Shareholders' equity 1,802.2 69 1,644.2 71 1,822.1 69 ---------------------------------------------- $2,600.5 100% $2,311.5 100% $2,630.4 100% ==============================================
Total long-term debt increased as a percentage of total capitalization compared to the year-ago quarter, primarily due to the issuance of $140.5 million of Medium-Term Notes. Future long-term capital needs are expected to be satisfied through the retention of corporate earnings and the issuance of long-term debt instruments. Shareholders' equity increased $158.0 million since June 30, 1997, primarily due to the cumulative earnings and issuance of treasury stock for the exercises of employee stock options, partially offset by treasury stock repurchases, dividends declared to common and preferred shareholders, and unfavorable currency translation adjustments. During July 1998, the Company incurred short-term borrowings in connection with the acquisitions of Pleasant and Bluebird, $300.0 million of which will be repaid from the net proceeds received from the issuance of long-term debt securities under its current universal shelf registration statement. FOREIGN CURRENCY RISK --------------------- The Company enters into foreign currency forward exchange and option contracts primarily as hedges of inventory purchases, sales and other intercompany transactions denominated in foreign currencies, to limit the effect of exchange rate fluctuations on the results of operations and cash flows. Market risk exposures exist with respect to the settlement of foreign currency transactions during the year because currency fluctuations cannot be predicted with certainty. The Company's primary market risk exposures are in Europe and Asia. The Company seeks to mitigate its exposure to market risk by monitoring its currency exchange exposure for the year and partially or fully hedging such exposure. In addition, the Company manages its exposure through the selection of currencies used for international borrowings and intercompany invoicing. The Company does not trade in financial instruments for speculative purposes. CERTAIN CONSIDERATIONS ---------------------- The Company has reviewed its computer systems and developed a plan to achieve proper processing of transactions in the year 2000 and beyond. Management believes that all of Mattel's computer systems will be year 2000 compliant by the end of second quarter 1999. Costs incurred to date to implement the plan have not been material and are not expected to be material to operating results in the future. However, there can be no assurance that the systems of other companies on which Mattel's systems rely will also be timely converted or that any such failure to convert by another company would not have an adverse effect on Mattel's systems. Any significant disruption of the Company's ability to communicate electronically with its business partners could negatively impact the Company's business, financial condition and results of operations. The statement set forth herein is forward-looking, and actual results may differ materially (see the Cautionary Statement above). PART II -- OTHER INFORMATION ---------------------------- ITEM 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------- The Annual Meeting of Shareholders of Mattel, Inc. was held on May 6, 1998, for the purpose of electing directors, approving the 1997 Premium Price Stock Option and the Mattel Management Incentive Plans and an amendment to Article Fourth of Mattel's Restated Certificate of Incorporation, and approving the appointment of independent auditors. Proxies for the meeting were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934 and there was no solicitation in opposition to that of management. All of management's nominees for directors as listed in the proxy statement were elected with the number of votes cast for each nominee as follows: Shares Voted Votes "FOR" Withheld ------------- ---------- Jill E. Barad 254,641,544 2,323,109 Harold Brown 256,711,964 2,323,109 Tully M. Friedman 256,859,412 2,323,109 Joseph C. Gandolfo 254,430,701 2,323,109 Ronald M. Loeb 252,965,531 2,323,109 Ned Mansour 254,568,637 2,323,109 William D. Rollnick 256,814,579 2,323,109 Christopher A. Sinclair 256,858,376 2,323,109 Bruce L. Stein 254,562,709 2,323,109 John L. Vogelstein 256,749,371 2,323,109 The Mattel, Inc. 1997 Premium Price Stock Option Plan was approved by the following vote: Shares Voted Shares Voted Shares Broker "FOR" "AGAINST" "ABSTAINING" "NON-VOTE" ------------ ------------ ------------ ---------- 132,108,956 86,390,970 1,381,596 37,960,489 The Mattel Management Incentive Plan was approved by the following vote: Shares Voted Shares Voted Shares Broker "FOR" "AGAINST" "ABSTAINING" "NON-VOTE" ------------ ------------ ------------ ---------- 249,676,453 6,803,656 1,361,902 0 The amendment to Article Fourth of the Company's restated Certificate of Incorporation was approved by the following vote: Shares Voted Shares Voted Shares Broker "FOR" "AGAINST" "ABSTAINING" "NON-VOTE" ------------ ------------ ------------ ---------- 241,138,084 15,013,571 1,690,356 0 The proposal to appoint Price Waterhouse LLP as independent accountants for the Company for the year ending December 31, 1998 was ratified by the following vote: Shares Voted Shares Voted Shares Broker "FOR" "AGAINST" "ABSTAINING" "NON-VOTE" ------------ ------------ ------------ ---------- 256,591,830 604,918 645,263 0 A stockholder proposal regarding executive compensation was included in the Proxy Statement dated March 30, 1998. A motion was not made at the meeting to vote on this proposal. Priort to the meeting, the following votes had been cast by proxy on this proposal: Shares Voted Shares Voted Shares Broker "FOR" "AGAINST" "ABSTAINING" "NON-VOTE" ------------ ------------ ------------ ---------- 11,158,925 200,817,743 7,900,958 37,960,430 ITEM 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits -------- 10.0 First Amendment to the Mattel, Inc. 1997 Premium Price Stock Option Plan 10.1 Form of Option and TLSAR Agreement under the Mattel, Inc. 1997 Premium Price Stock Option Plan (25% Premium Grant), as amended 10.2 Form of Option and TLSAR Agreement under the Mattel, Inc. 1997 Premium Price Stock Option Plan (33-1/3% Premium Grant), as amended 11.0 Computation of Income (Loss) per Common and Common Equivalent Share 12.0 Computation of Ratio of Earnings (Loss) to Fixed Charges and Ratio of Earnings (Loss) to Combined Fixed Charges and Preferred Stock Dividends 27.0 Financial Data Schedule (EDGAR filing only) (b) Reports on Form 8-K ------------------- Mattel, Inc. filed the following Current Reports on Form 8-K during the quarterly period ended June 30, 1998: Financial Date of Report Items Reported Statements Filed -------------- -------------- ---------------- April 17, 1998 5, 7 None June 16, 1998 5, 7 None SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934 as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MATTEL, INC. ------------ (Registrant) Date: As of July 20, 1998 By: /s/ Kevin M. Farr ------------------- ----------------------- Kevin M. Farr Senior Vice President and Controller EX-10.0 2 FIRST AMDT TO 97 PREM PRICE OPT PLAN EXHIBIT 10.0 FIRST AMENDMENT TO MATTEL, INC. 1997 PREMIUM PRICE STOCK OPTION PLAN ------------------------------------------------- The Mattel, Inc. 1997 Premium Price Stock Option Plan (the "Plan") is hereby amended as follows, effective as of November 6, 1997. I. -- Section 2.8 of the Plan is hereby amended to read as follows: 2.8 "Disability" means that there is a determination to that effect under the group long-term disability plan of the Company, and the Participant is also approved for permanent disability benefits by the Social Security Administration. However, except as provided in the following sentence, in no event will a Participant be considered to be disabled for purposes of this Plan if the Participant s incapacity is a result of intentionally self-inflicted injuries (while sane or insane), alcohol or drug abuse, or a criminal act for which the Participant is convicted or to which the Participant pleads guilty or nolo contendere. "Disability" shall also include any termination of a Participant s employment which is treated as due to disability under an employment agreement which is in effect between the Company and the Participant at the time of such termination. II. --- Section 2.28 of the Plan is hereby amended to read as follows: 2.28 "Retirement" means a Severance where the Participant (i) had previously attained the age of fifty-five (55) and completed five (5) years of service (as determined in accordance with the terms of the Mattel, Inc. Personal Investment Plan) or (ii) is otherwise eligible to be treated as retired for purposes of Mattel stock option plans under an employment agreement which is in effect between the Company and the Participant at the time of Severance. III. ---- A new Section 2.34 is hereby added to the Plan to read as follows: 2.34 "Termination without Cause" means termination of the Participant s employment by the Company without cause, where cause means any of the following: (i) an act or acts of dishonesty on the Participant's part which are intended to result in his substantial personal enrichment at the expense of the Company; (ii) repeated violations by the Participant of his obligations to the Company which are demonstrably willful and deliberate on the Participant's part and which resulted in material injury to the Company; (iii) conduct of a criminal nature which has or which is more likely than not to have a material adverse effect on the Company's reputation or standing in the community or on its continuing relationships with its customers or those who purchase or use its products; or (iv) fraudulent conduct in connection with the business or affairs of the Company, regardless of whether said conduct is designed to defraud the Company or others. Notwithstanding the foregoing, for any Participant who has an employment agreement with the Company which is in effect at the time of Severance, "Termination without Cause" shall mean termination of the Participant s employment by the Company without "cause" or by the Participant for "good reason" pursuant to the terms of such employment agreement. IV. --- The current Section 2.34 is hereby renumbered as Section 2.35 to read as follows: 2.35 "Trading Day" means a day on which a share of Common Stock is publicly traded on the New York Stock Exchange, or any successor to the New York Stock Exchange. V. -- Section 5.1 of the Plan is hereby amended to read as follows: 5.1 NUMBER OF SHARES. The maximum number of shares of Common Stock for which Grants may be awarded under the Plan shall be 21,000,000, which maximum number is divided into two separate allocations. The first allocation comprises a maximum number of 20,000,000 shares, which shares may be granted to any eligible employee, as provided in Sections 6.1 and 6.2. The second allocation comprises a maximum number of 1,000,000 shares, which shares may be granted only to new employees described in Section 6.3. Any adjustments made under Sections 5.2., 5.3 or 5.4 with respect to any Grant shall operate as adjustments of the maximum limit set forth above for the allocation from which the Grant was originally made. VI. --- A new Section 6.3 is hereby added to the Plan to read as follows: 6.3 PERSONS NEWLY HIRED BY THE COMPANY. In the event a Grant is made to a new employee who is hired by the Company in a transaction meeting the requirements of paragraph 312.03(a)(3) of the New York Stock Exchange's Shareholder Approval Policy, as amended from time to time, the Committee may authorize Grants to that employee under the second allocation described in Section 5.1. VII. ---- Section 9.5.4.2 of the Plan is hereby amended to read as follows: 9.5.4.2 EARLY SEVERANCE. (A) DEATH OR DISABILITY. If a Participant incurs a Severance on account of death or Disability before December 31, 2000, then 100% of the shares subject to the Option may be purchased on or after the Exercise Date, provided one of the performance criteria for the Option has been met. (B) RETIREMENT OR TERMINATION WITHOUT CAUSE. If a Participant incurs a Severance on account of Retirement or Termination without Cause before December 31, 2000, then a pro-rated portion of the shares subject to the Option may be purchased on or after the Exercise Date, provided one of the performance criteria for the Option has been met. The pro-rated portion shall be calculated based on the Participant s number of full months of employment with Mattel, measured from the Grant Date to the earlier of the date of the Severance or November 6, 2000, divided by 36, and the remaining shares subject to the Option shall be forfeited. (C) EARLY SEVERANCE FOR OTHER REASONS. If a Participant incurs a Severance for any reason other than death, Disability, Retirement, or Termination without Cause before November 6, 2000, then the Option shall be forfeited in its entirety. (D) CHANGE IN CONTROL. This Section shall not apply if a Participant incurs a Severance subsequent to a Change in Control. VIII. ----- Section 10.1.1 of the Plan is hereby amended to read as follows: 10.1.1 Except to the extent the terms of an Option require its prior termination, each Option from the Initial Grant shall terminate on the earliest of the following dates: (a) If the Participant continues to be employed at Mattel, a date which is five (5) years from the Start Date of the Option, that is December 31, 2002. (b) The date on which the Option may no longer become exercisable due to failure to meet any of the performance criteria established for exercise of the Option pursuant to Section 9.5. (c) If the Participant incurs a Severance for reasons of death, Disability, or Retirement, a date which is five (5) years from the Start Date of the Option, that is December 31, 2002. (d) If the Participant incurs a Severance for reason of Termination without Cause at a time when the Option was already exercisable under Section 9.5, a date which is five (5) years from the Start Date of the Option, that is December 31, 2002. (e) If the Participant incurs a Severance for reason of Termination without Cause at a time before the Option was exercisable under Section 9.5, then a date which is 90 days after the date when the Option first becomes exercisable. (f) If the Participant incurs a Severance for reasons other than death, Disability, Retirement, or Termination without Cause at a time when the Option was already exercisable under Section 9.5, then a date which is 90 days after the date of Severance. (g) If the Participant incurs a Severance for reasons other than death, Disability, Retirement, or Termination without Cause at a time before the Option was exercisable under Section 9.5, then the date of Severance. An Option shall also terminate on such date as the Committee may determine upon a Change in Control if the Committee determines that such event will make it impossible in the future to meet any of the performance criteria for exercise of the Option. IN WITNESS WHEREOF, the Company has caused this First Amendment to the Plan to be executed this 17th day of June, 1998, effective as of November 6, 1997. MATTEL, INC. By /s/ Alan Kaye ------------- ALAN KAYE Title: Senior Vice President, Human Resources -------------------------------------- EX-10.1 3 FORM OF OPTION AGMT (25%) EXHIBIT 10.1 ======================================================================== NOTICE OF GRANT OF MATTEL, INC. PREMIUM PRICE STOCK ID: 95-1567322 OPTION AND TLSAR AND 333 Continental Boulevard GRANT AGREEMENT El Segundo, CA 90245 25% PREMIUM ======================================================================== Recipient Name ID: xxx-xx-xxx Recipient Address Recipient City, State and Zip Code You have been granted an Option to buy Mattel, Inc. Common Stock as follows: Non-Qualified Premium Price Stock Option Grant No. 00xxxx Date of Grant 11/06/97 Start Date 12/31/97 Stock Option Plan 1997 Premium Price Option Exercise Price per Share $42.31 Total Number of Option Shares Granted __________ Total Exercise Price of Option Shares Granted $__________ You have also been granted a Tandem Limited Stock Appreciation Right in conjunction with the above Option. Total Number of TLSAR Shares Granted __________ Exercise Price per Share of TLSAR $__________ - ------------------------------------------------------------------------- By signing your name below, you and Mattel, Inc. agree that (a) this Option and related TLSAR are granted under and governed by the terms and conditions of the Grant Agreement referenced above, which is attached hereto and made a part of this document, and (b) both of these documents are subject to the terms of the above referenced 1997 Premium Price Stock Option Plan. _________________________ _______-______-_______ Full Legal Name (print) Social Security Number Current Address: _________________________________ _________________________________ - ------------------------------------------------------------------------ __________________________________ __________________________________ For MATTEL, INC. Date __________________________________ __________________________________ Optionee Date GRANT AGREEMENT FOR A NON-QUALIFIED PREMIUM PRICE STOCK OPTION AND TLSAR UNDER THE MATTEL 1997 PREMIUM PRICE STOCK OPTION PLAN ----------------------------------------------------- This is a Grant Agreement between Mattel, Inc. (the "Company") and the individual (the "Participant") named in the Notice of Grant of Premium Price Stock Option and TLSAR (the "Notice") attached hereto as the cover page of this agreement. RECITALS - -------- The Company has adopted the Mattel 1997 Premium Price Stock Option Plan, as amended by the First Amendment to Mattel, Inc. Premium Price Stock Option Plan (as amended, the "Plan"), to grant selected employees options to purchase shares of Common Stock of the Company. In accordance with the terms of the Plan, the Compensation/Options Committee of the Board of Directors (the "Committee") has approved the execution of this Grant Agreement (the "Grant") between the Company and the Participant. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Plan. GRANT - ----- The Company grants to the Participant the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of the aggregate number of Option shares set forth in the Notice exercisable in accordance with the provisions of this Grant during a period expiring FIVE years from December 31, 1997 (the "Start Date"), or on December 31, 2002 (the "Expiration Date"), unless terminated prior to that date pursuant to Section 1 or 5 below. This Option is a Non-Qualified Stock Option. The Company also grants to the Participant, in conjunction with the Option granted hereby, a Tandem Limited Stock Appreciation Right ("TLSAR") for the number of TLSAR shares set forth in the Notice, as described in Section 11 of the Plan and Section 2 below. 1. OPTION A. EXERCISABILITY (VESTING) OF OPTION. The Participant may purchase the number of Option shares of Common Stock determined pursuant to Section 1(B) below on or after November 6, 2000 (the third anniversary of the Grant Date), provided that one of the following performance criteria has been met on or before December 31, 1999. I. STOCK PRICE. The Fair Market Value of Mattel Common Stock is equal to or greater than the Exercise Price of the Option on at least one Trading Day on or after February 27, 1998 and before December 31, 1999. II. EARNINGS PER SHARE. The Earnings Per Share of Mattel Common Stock for calendar year 1999 is equal to or greater than 132.25% of the Earnings Per Share of Mattel Common Stock for calendar year 1997. If there is a Change in Control and the Option has not previously been forfeited, the Participant may exercise the Option at any time after either of the performance criteria set forth above is met. B. NUMBER OF OPTION SHARES EXERCISABLE. The Participant shall have the following number of Option shares available for exercise, subject to the requirements of Section 1(A) above: i. CONTINUOUS EMPLOYMENT. If the Participant has been continuously employed at Mattel through November 6, 2000, 100% of the Option shares granted in this Notice. ii. DEATH OR DISABILITY. If the Participant incurs a Severance on account of death or Disability before December 31, 2000, 100% of the Option shares granted in this Notice. iii. RETIREMENT OR TERMINATION WITHOUT CAUSE. If the Participant incurs a Severance on account of Retirement or Termination without Cause before December 31, 2000, a pro-rated portion of the Option shares granted in this Notice, based upon the number of full months of employment with Mattel since the Grant Date to the earlier of the date of Severance or November 6, 2000, divided by 36, and the remaining Option shares granted in this Notice shall be forfeited. iv. EARLY SEVERANCE FOR OTHER REASONS. If the Participant incurs a Severance for any reason other than death, Disability, Retirement, or Termination without Cause before November 6, 2000, then the Option shall be forfeited in its entirety. v. CHANGE IN CONTROL. If there is a Change in Control before November 6, 2000, and the Participant is employed at Mattel at the time of the Change in Control, 100% of the Option shares granted in this Notice. The number of Option shares which may be purchased upon exercise under this Grant shall in each case be calculated to the nearest full share. C. TERM OF OPTION. The Option under this Grant shall expire on the first to occur of the following dates: i. The fifth anniversary of the Start Date, that is December 31, 2002, if the Participant remains in employment with the Company. ii. December 31, 1999, if the Option has not become exercisable by that date in accordance with Section 1(A) above. iii. If the Participant incurs a Severance for reasons of death, Disability, or Retirement, the fifth anniversary of the Start Date, that is December 31, 2002. iv. If the Participant incurs a Severance for reason of Termination without Cause at a time when the Option was already exercisable, the fifth anniversary of the Start Date, that is December 31, 2002. v. If the Participant incurs a Severance for reason of Termination without Cause at a time before the Option was exercisable, a date which is ninety (90) days after the date when the Option first becomes exercisable. vi. If the Participant incurs a Severance for reasons other than death, Disability, Retirement, or Termination without Cause at a time when the Option was already exercisable, a date which is ninety (90) days after the date of Severance. vii. If the Participant incurs a Severance for reasons other than death, Disability, Retirement, or Termination without Cause at a time before the Option was exercisable, the date of Severance. All or a proportionate part of this Option shall also be cancelled if the Participant exercises all or a portion of the TLSAR as provided in Section 2 of this Grant or if the Participant does not comply with the conditions set forth in Section 12.4 of the Plan. 2. Tandem Limited Stock Appreciation Rights. A. EXERCISABILITY (VESTING) OF TLSAR. The Participant may exercise all or a portion of the TLSAR for a 60 day period commencing on the date a Change in Control of Mattel occurs. B. NUMBER OF TLSAR SHARES EXERCISABLE. The number of TLSAR shares available for exercise shall be calculated in the same manner as provided for Option shares in Section 1(B) above. C. TERM OF TLSAR. The TLSAR under this Grant shall expire on the first to occur of the following dates: (i) The date of expiration of the related Option, as specified in Section 1(C) above, unless the TLSAR is exercisable on such date. (ii) 60 days after a Change in Control occurs. All or a proportionate part of the TLSAR shall also be cancelled if the Participant exercises all or a portion of the Option as provided in Section 1 of this Grant or if the Participant does not comply with the conditions set forth in Section 12.4 of the Plan. 3. METHOD OF EXERCISING OPTION OR TLSAR. Each exercise under this Grant shall be by means of a written notice of exercise delivered to the office of the Secretary of the Company, specifying the number of whole shares for which the Option or TLSAR is being exercised, accompanied upon exercise of the Option by payment of the full purchase price of the shares to be purchased. The payment shall be in the form of cash or such other forms of consideration as the Committee shall deem acceptable, such as the surrender of outstanding shares of Common Stock owned by the Participant or by withholding shares that would otherwise be issued upon the exercise under this Grant. The Participant may exercise the Option by the delivery to the Company or its designated agent of an irrevocable written notice of exercise form together with irrevocable instructions to the broker-dealer to sell or margin a sufficient portion of the shares of Common Stock and to deliver the sale or margin loan proceeds directly to the Company to pay the exercise price of the Option. If the Participant's employment is terminated by reason of death, the heirs of the Participant will be able to exercise this Grant (if and when exercisable) until the date on which this Grant would otherwise expire. 4. WITHHOLDING. Upon any exercise of this Grant, the Participant shall pay, or make provisions satisfactory to the Company or its Subsidiary for payment of, any federal, state and local taxes required to be withheld. 5. CANCELLATION OF GRANTS. Participant specifically acknowledges that this Grant is subject to the provisions of Section 12.4 of the Plan, entitled "Cancellation of Grants," which can cause the forfeiture of this Grant, or the rescission of Common Stock or payment of cash acquired upon exercise under this Grant. As a condition of exercise under this Grant, the Participant shall certify on a form acceptable to the Committee that he or she is in compliance with the terms and conditions of the Plan, including Section 12.4 thereof, entitled "Cancellation of Grants." 6. COMPLIANCE WITH LAW. No shares issuable upon the exercise of this Option or TLSAR shall be issued and delivered unless and until all applicable registration requirements of the Securities Act of 1933, all applicable listing requirements of any national securities exchange on which the Common Stock is then listed, and all other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery shall have been complied with. In particular, the Committee may require certain investment (or other) representations and undertakings in connection with the issuance of securities in connection with the Plan in order to comply with applicable law. 7. ASSIGNABILITY. Except as may be effected by will or by the laws of descent and distribution, any attempt to assign this Option or TLSAR shall be of no effect. 8. CERTAIN CORPORATION TRANSACTIONS. In the event of any change or reclassification of shares, recapitalization, merger, or similar event, the Committee may adjust proportionately the number of shares and the Exercise Price of the Option and TLSAR subject to this Grant. In the event of any other change affecting the Common Stock or any distribution (other than normal cash dividends) to holders of Common Stock, the Committee may make such adjustments as it may deem equitable (including adjustments to avoid fractional shares) in order to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, spin-off, reorganization or liquidation, the Committee may substitute a new Grant for this Grant or provide for the assumption of this Grant by the other corporation that is a party to the transaction. 9. NO ADDITIONAL RIGHTS. Neither the Grant of this Option and TLSAR nor its exercise shall (a) confer upon the Participant any right to continue in the employ of the Company or a Subsidiary, (b) interfere in any way with the rights of the Company or a Subsidiary to terminate such employment at any time for any reason, with or without cause, or (c) interfere with the right of the Company or a Subsidiary to undertake any lawful corporate action. Participant acknowledges that he or she is an "employee at will." The provisions of this Section 9 are subject to the terms of any employment agreement between the Participant and the Company (or a Subsidiary). 10. RIGHTS AS A STOCKHOLDER. Neither the Participant nor any other person legally entitled to exercise this Option and TLSAR shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercise of this Option and/or TLSAR unless and until a certificate or certificates representing such shares shall have been actually issued and delivered to the Participant. 11. COMPLIANCE WITH PLAN. This Grant is subject to, and the Company and Participant agree to be bound by, all of the terms and conditions of the Plan as it shall be amended from time-to-time. No amendment to the Plan shall adversely affect this Grant without the consent of the Participant. In the case of a conflict between the terms of the Plan and this Grant, the terms of the Plan shall govern. 12. GOVERNING LAW. This Grant has been granted, executed and delivered with effect from the date of Notice, at El Segundo, California, and interpretation, performance and enforcement of this Grant shall be governed by the laws of the State of Delaware. EX-10.2 4 FORM OF OPTION AGMT (33-1/3%) EXHIBIT 10.2 ======================================================================== NOTICE OF GRANT OF MATTEL, INC. PREMIUM PRICE STOCK ID: 95-1567322 OPTION AND TLSAR AND 333 Continental Boulevard GRANT AGREEMENT El Segundo, CA 90245 33-1/3% PREMIUM ======================================================================== Recipient Name ID: xxx-xx-xxx Recipient Address Recipient City, State and Zip Code You have been granted an Option to buy Mattel, Inc. Common Stock as follows: Non-Qualified Premium Price Stock Option Grant No. 00xxxx Date of Grant 11/06/97 Start Date 12/31/97 Stock Option Plan 1997 Premium Price Option Exercise Price per Share $44.87 Total Number of Option Shares Granted __________ Total Exercise Price of Option Shares Granted $__________ You have also been granted a Tandem Limited Stock Appreciation Right in conjunction with the above Option. Total Number of TLSAR Shares Granted __________ Exercise Price per Share of TLSAR $__________ - ------------------------------------------------------------------------- By signing your name below, you and Mattel, Inc. agree that (a) this Option and related TLSAR are granted under and governed by the terms and conditions of the Grant Agreement referenced above, which is attached hereto and made a part of this document, and (b) both of these documents are subject to the terms of the above referenced 1997 Premium Price Stock Option Plan. _________________________ _______-______-_______ Full Legal Name (print) Social Security Number Current Address: _________________________________ _________________________________ - ------------------------------------------------------------------------ __________________________________ __________________________________ For MATTEL, INC. Date __________________________________ __________________________________ Optionee Date GRANT AGREEMENT FOR A NON-QUALIFIED PREMIUM PRICE STOCK OPTION AND TLSAR UNDER THE MATTEL 1997 PREMIUM PRICE STOCK OPTION PLAN This is a Grant Agreement between Mattel, Inc. (the "Company") and the individual (the "Participant") named in the Notice of Grant of Premium Price Stock Option and TLSAR (the "Notice") attached hereto as the cover page of this agreement. RECITALS - -------- The Company has adopted the Mattel 1997 Premium Price Stock Option Plan, as amended by the First Amendment to Mattel, Inc. Premium Price Stock Option Plan (as amended, the "Plan"), to grant selected employees options to purchase shares of Common Stock of the Company. In accordance with the terms of the Plan, the Compensation/Options Committee of the Board of Directors (the "Committee") has approved the execution of this Grant Agreement (the "Grant") between the Company and the Participant. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Plan. GRANT - ----- The Company grants to the Participant the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of the aggregate number of Option shares set forth in the Notice exercisable in accordance with the provisions of this Grant during a period expiring FIVE years from December 31, 1997 (the "Start Date"), or on December 31, 2002 (the "Expiration Date"), unless terminated prior to that date pursuant to Section 1 or 5 below. This Option is a Non-Qualified Stock Option. The Company also grants to the Participant, in conjunction with the Option granted hereby, a Tandem Limited Stock Appreciation Right ("TLSAR") for the number of TLSAR shares set forth in the Notice, as described in Section 11 of the Plan and Section 2 below. 1. OPTION A. EXERCISABILITY (VESTING) OF OPTION. The Participant may purchase the number of Option shares of Common Stock determined pursuant to Section 1(B) below on or after November 6, 2000 (the third anniversary of the Grant Date), provided that one of the following performance criteria has been met on or before December 31, 2000. Notwithstanding the foregoing, if the Participant incurs a Severance between November 6, 2000 and December 31, 2000 for any reason other than death, Disability, Retirement, or Termination without Cause, the only performance criteria which may be met is the stock price performance criteria set forth in subparagraph (i) below. I. STOCK PRICE. The Fair Market Value of Mattel Common Stock is equal to or greater than the Exercise Price of the Option on at least one Trading Day on or after February 27, 1998 and before December 31, 2000. II. EARNINGS PER SHARE. The Earnings Per Share of Mattel Common Stock for calendar year 2000 is equal to or greater than 152.09% of the Earnings Per Share of Mattel Common Stock for calendar year 1997. If there is a Change in Control and the Option has not previously been forfeited, the Participant may exercise the Option at any time after either of the performance criteria set forth above is met. B. NUMBER OF OPTION SHARES EXERCISABLE. The Participant shall have the following number of Option shares available for exercise, subject to the requirements of Section 1(A) above: i. CONTINUOUS EMPLOYMENT. If the Participant has been continuously employed at Mattel through November 6, 2000, 100% of the Option shares granted in this Notice. ii. DEATH OR DISABILITY. If the Participant incurs a Severance on account of death or Disability before December 31, 2000, 100% of the Option shares granted in this Notice. iii. RETIREMENT OR TERMINATION WITHOUT CAUSE. If the Participant incurs a Severance on account of Retirement or Termination without Cause before December 31, 2000, a pro-rated portion of the Option shares granted in this Notice, based upon the number of full months of employment with Mattel since the Grant Date to the earlier of the date of Severance or November 6, 2000, divided by 36, and the remaining Option shares granted in this Notice shall be forfeited. iv. EARLY SEVERANCE FOR OTHER REASONS. If the Participant incurs a Severance for any reason other than death, Disability, Retirement, or Termination without Cause before November 6, 2000, then the Option shall be forfeited in its entirety. v. CHANGE IN CONTROL. If there is a Change in Control before November 6, 2000, and the Participant is employed at Mattel at the time of the Change in Control, 100% of the Option shares granted in this Notice. The number of Option shares which may be purchased upon exercise under this Grant shall in each case be calculated to the nearest full share. C. TERM OF OPTION. The Option under this Grant shall expire on the first to occur of the following dates: i. The fifth anniversary of the Start Date, that is December 31, 2002, if the Participant remains in employment with the Company. ii. December 31, 2000, if the Option has not become exercisable by that date in accordance with Section 1(A) above. iii. If the Participant incurs a Severance for reasons of death, Disability, or Retirement, the fifth anniversary of the Start Date, that is December 31, 2002. iv. If the Participant incurs a Severance for reason of Termination without Cause at a time when the Option was already exercisable, the fifth anniversary of the Start Date, that is December 31, 2002. v. If the Participant incurs a Severance for reason of Termination without Cause at a time before the Option was exercisable, a date which is ninety (90) days after the date when the Option first becomes exercisable. vi. If the Participant incurs a Severance for reasons other than death, Disability, Retirement, or Termination without Cause at a time when the Option was already exercisable, a date which is ninety (90) days after the date of Severance. vii. If the Participant incurs a Severance for reasons other than death, Disability, Retirement, or Termination without Cause at a time before the Option was exercisable, the date of Severance. All or a proportionate part of this Option shall also be cancelled if the Participant exercises all or a portion of the TLSAR as provided in Section 2 of this Grant or if the Participant does not comply with the conditions set forth in Section 12.4 of the Plan. 2. TANDEM LIMITED STOCK APPRECIATION RIGHTS. A. EXERCISABILITY (VESTING) OF TLSAR. The Participant may exercise all or a portion of the TLSAR for a 60 day period commencing on the date a Change in Control of Mattel occurs. B. NUMBER OF TLSAR SHARES EXERCISABLE. The number of TLSAR shares available for exercise shall be calculated in the same manner as provided for Option shares in Section 1(B) above. C. TERM OF TLSAR. The TLSAR under this Grant shall expire on the first to occur of the following dates: (i) The date of expiration of the related Option, as specified in Section 1(C) above, unless the TLSAR is exercisable on such date. (ii) 60 days after a Change in Control occurs. All or a proportionate part of the TLSAR shall also be cancelled if the Participant exercises all or a portion of the Option as provided in Section 1 of this Grant or if the Participant does not comply with the conditions set forth in Section 12.4 of the Plan. 3. METHOD OF EXERCISING OPTION OR TLSAR. Each exercise under this Grant shall be by means of a written notice of exercise delivered to the office of the Secretary of the Company, specifying the number of whole shares for which the Option or TLSAR is being exercised, accompanied upon exercise of the Option by payment of the full purchase price of the shares to be purchased. The payment shall be in the form of cash or such other forms of consideration as the Committee shall deem acceptable, such as the surrender of outstanding shares of Common Stock owned by the Participant or by withholding shares that would otherwise be issued upon the exercise under this Grant. The Participant may exercise the Option by the delivery to the Company or its designated agent of an irrevocable written notice of exercise form together with irrevocable instructions to the broker-dealer to sell or margin a sufficient portion of the shares of Common Stock and to deliver the sale or margin loan proceeds directly to the Company to pay the exercise price of the Option. If the Participant's employment is terminated by reason of death, the heirs of the Participant will be able to exercise this Grant (if and when exercisable) until the date on which this Grant would otherwise expire. 4. WITHHOLDING. Upon any exercise of this Grant, the Participant shall pay, or make provisions satisfactory to the Company or its Subsidiary for payment of, any federal, state and local taxes required to be withheld. 5. CANCELLATION OF GRANTS. Participant specifically acknowledges that this Grant is subject to the provisions of Section 12.4 of the Plan, entitled "Cancellation of Grants," which can cause the forfeiture of this Grant, or the rescission of Common Stock or payment of cash acquired upon exercise under this Grant. As a condition of exercise under this Grant, the Participant shall certify on a form acceptable to the Committee that he or she is in compliance with the terms and conditions of the Plan, including Section 12.4 thereof, entitled "Cancellation of Grants." 6. COMPLIANCE WITH LAW. No shares issuable upon the exercise of this Option or TLSAR shall be issued and delivered unless and until all applicable registration requirements of the Securities Act of 1933, all applicable listing requirements of any national securities exchange on which the Common Stock is then listed, and all other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery shall have been complied with. In particular, the Committee may require certain investment (or other) representations and undertakings in connection with the issuance of securities in connection with the Plan in order to comply with applicable law. 7. ASSIGNABILITY. Except as may be effected by will or by the laws of descent and distribution, any attempt to assign this Option or TLSAR shall be of no effect. 8. CERTAIN CORPORATION TRANSACTIONS. In the event of any change in the Common Stock by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, or similar event, the Committee may adjust proportionately the number of shares and the Exercise Price of the Option and TLSAR subject to this Grant. In the event of any other change affecting the Common Stock or any distribution (other than normal cash dividends) to holders of Common Stock, the Committee may make such adjustments as it may deem equitable (including adjustments to avoid fractional shares) in order to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, spin-off, reorganization or liquidation, the Committee may substitute a new Grant for this Grant or provide for the assumption of this Grant by the other corporation that is a party to the transaction. 9. NO ADDITIONAL RIGHTS. Neither the Grant of this Option and TLSAR nor its exercise shall (a) confer upon the Participant any right to continue in the employ of the Company or a Subsidiary, (b) interfere in any way with the rights of the Company or a Subsidiary to terminate such employment at any time for any reason, with or without cause, or (c) interfere with the right of the Company or a Subsidiary to undertake any lawful corporate action. Participant acknowledges that he or she is an "employee at will." The provisions of this Section 9 are subject to the terms of any employment agreement between the Participant and the Company (or a Subsidiary). 10. RIGHTS AS A STOCKHOLDER. Neither the Participant nor any other person legally entitled to exercise this Option and TLSAR shall be entitled to any of the rights or privileges of a stockholder of the Company in respect of any shares issuable upon any exercise of this Option and/or TLSAR unless and until a certificate or certificates representing such shares shall have been actually issued and delivered to the Participant. 11. COMPLIANCE WITH PLAN. This Grant is subject to, and the Company and Participant agree to be bound by, all of the terms and conditions of the Plan as it shall be amended from time-to-time. No amendment to the Plan shall adversely affect this Grant without the consent of the Participant. In the case of a conflict between the terms of the Plan and this Grant, the terms of the Plan shall govern. 12. GOVERNING LAW. This Grant has been granted, executed and delivered with effect from the date of Notice, at El Segundo, California, and interpretation, performance and enforcement of this Grant shall be governed by the laws of the State of Delaware. EX-11.0 5 STATEMENT RE COMPUTATION OF EARNINGS PER SHARE MATTEL, INC. AND SUBSIDIARIES EXHIBIT 11.0 (Page 1 of 2) COMPUTATION OF INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE -------------------------------------------------------------------
FOR THE FOR THE THREE MONTHS ENDED SIX MONTHS ENDED ---------------------- ---------------------- June 30, June 30, June 30, June 30, BASIC 1998 1997 1998 1997 - ----- --------- --------- --------- --------- Net income (loss) $ 60,384 $ 75,634 $ 73,053 $(128,990) Less: Dividends on convertible preferred stock (1,990) (2,837) (3,980) (5,677) --------- --------- --------- --------- Net income (loss) applicable to common shares $ 58,394 $ 72,797 $ 69,073 $(134,667) ========= ========= ========= ========= Applicable Shares for Computation of Income (Loss) per Share: - -------------------------------------------------- Weighted average common shares outstanding 291,737 292,890 290,069 293,131 ========= ========= ========= ========= MATTEL, INC. AND SUBSIDIARIES EXHIBIT 11.0 (Page 2 of 2) COMPUTATION OF INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE ------------------------------------------------------------------- (In thousands, except per share amounts) FOR THE FOR THE THREE MONTHS ENDED SIX MONTHS ENDED ---------------------- ---------------------- June 30, June 30, June 30, June 30, DILUTED 1997 (a) 1996 (b) 1997 (b) 1996 (b) - ------- --------- --------- --------- --------- Net income (loss) $ 60,384 $ 75,634 $ 73,053 $(128,990) Add: Interest savings, net of tax, applicable to: Assumed conversion of 7% Notes - 182 - 364 Net income (loss) applicable to common shares --------- --------- --------- --------- $ 60,384 $ 75,816 $ 73,053 $(128,626) ========= ========= ========= ========= Applicable Shares for Computation of Income (Loss) per Share: - -------------------------------------------------- Weighted average common shares outstanding 293,433 291,737 293,242 290,069 Weighted average common equivalent shares arising from: Dilutive stock options 3,627 3,352 4,024 3,072 Assumed conversion of Series B convertible preferred stock - 2,753 - 2,753 Assumed conversion of Series C convertible preferred stock 7,731 7,740 7,731 7,740 Assumed conversion of 7% Notes - 893 - 838 Disney warrant - - 15 - Stock subscription warrants 660 627 662 621 --------- --------- --------- --------- Weighted average number of common and common equivalent shares 305,451 307,102 305,674 305,093 ========= ========= ========= ========= Diluted Income (Loss) Per Common Share: - --------------------------------------- Net income (loss) per common share $ 0.20 $ 0.25 $ 0.24 $ (0.42) ========= ========= ========= ========= (a) - This calculation is submitted in accordance with Regulation S-K, Item 601 (b)(11), although it is contrary to paragraph 13 of FAS No. 128 because it produces an anti-dilutive result.
EX-12.0 6 STATEMENT RE COMPUTATION OF RATIOS MATTEL, INC. AND SUBSIDIARIES EXHIBIT 12.0 (Page 1 of 2) COMPUTATION OF RATIO OF EARNINGS (LOSS) TO FIXED CHARGES -------------------------------------------------------- (Amounts in thousands, except ratios) (Unaudited)
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, (a) --------------------- ---------------------------------------------------- JUNE 30, JUNE 30, 1998 1997(a) 1997 1996 1995 1994 1993(b) --------- --------- ---------------------------------------------------- EARNINGS (LOSS) AVAILABLE FOR FIXED CHARGES: Income (loss) before income taxes, cumulative effect of changes in accounting principles and extraordinary items $ 102,373 $(159,675) $425,082 $536,756 $504,668 $362,157 $153,306 Less (plus) minority interest and undistributed income (loss) of less-than-majority-owned affiliates, net 58 7 (144) 303 (36) (649) 124 Add: Interest expense 32,017 38,150 90,130 100,226 102,983 87,071 86,101 Appropriate portion of rents (c) 8,288 9,744 17,665 19,527 19,450 16,224 16,221 --------- --------- -------- -------- -------- -------- -------- Earnings (loss) available for fixed charges $ 142,736 $(111,774) $532,733 $656,812 $627,065 $464,803 $255,752 ========= ========= ======== ======== ======== ======== ======== FIXED CHARGES: Interest expense $ 32,017 $ 38,150 $ 90,130 $100,226 $102,983 $ 87,071 $ 86,101 Capitalized interest - 577 991 1,789 693 285 - Appropriate portion of rents (c) 8,288 9,744 17,665 19,527 19,450 16,224 16,221 --------- --------- -------- -------- -------- -------- -------- Fixed charges $ 40,305 $ 48,471 $108,786 $121,542 $123,126 $103,580 $102,322 ========= ========= ======== ======== ======== ======== ======== Ratio of earnings (loss) to fixed charges 3.54X - (d) 4.90X 5.40X 5.09X 4.49X 2.50X ========= ========= ======== ======== ======== ======== ======== (a) Consolidated financial information for 1997 through 1993 has been restated for the effects of the March 1997 merger of Tyco Toys, Inc. ("Tyco") into the Company, accounted for as a pooling of interests. (b) Consolidated financial information for 1993 has been restated for the effects of the November 1993 merger of Fisher-Price, Inc. into a wholly-owned subsidiary of the Company, accounted for as a pooling of interests. (c) Portion of rental expenses which is deemed representative of an interest factor, not to exceed one-third of total rental expense. (d) As a result of an approximately $275 million restructuring charge to earnings taken in the first quarter of 1997, earnings did not cover fixed charges by $160.2 million for the six month period ended June 30, 1997.
MATTEL, INC. AND SUBSIDIARIES EXHIBIT 12.0 (Page 2 of 2) COMPUTATION OF RATIO OF EARNINGS (LOSS) TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS --------------------------------------------------------- (Amounts in thousands, except ratios) (Unaudited)
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, (a) --------------------- ---------------------------------------------------- JUNE 30, JUNE 30, 1998 1997(a) 1997 1996 1995 1994 1993(b) --------- --------- ---------------------------------------------------- EARNINGS (LOSS) AVAILABLE FOR FIXED CHARGES: Income (loss) before income taxes, cumulative effect of changes in accounting principles and extraordinary items $ 102,373 $(159,675) $425,082 $536,756 $504,668 $362,157 $153,306 Less (plus) minority interest and undistributed income (loss) of less-than-majority-owned affiliates, net 58 7 (144) 303 (36) (649) 124 Add: Interest expense 32,017 38,150 90,130 100,226 102,983 87,071 86,101 Appropriate portion of rents (c) 8,288 9,744 17,665 19,527 19,450 16,224 16,221 --------- --------- -------- -------- -------- -------- -------- Earnings (loss) available for fixed charges $ 142,736 $(111,774) $532,733 $656,812 $627,065 $464,803 $255,752 ========= ========= ======== ======== ======== ======== ======== FIXED CHARGES: Interest expense $ 32,017 $ 38,150 $ 90,130 $100,226 $102,983 $ 87,071 $ 86,101 Capitalized interest - 577 991 1,789 693 285 - Dividends - Series B preferred stock - 1,692 2,537 3,406 3,200 2,157 - Dividends - Series C preferred stock 3,980 3,985 7,968 3,985 - - - Dividends - Series F preference stock - - - - 3,342 4,689 4,894 Appropriate portion of rents (c) 8,288 9,744 17,665 19,527 19,450 16,224 16,221 --------- --------- -------- -------- -------- -------- -------- Fixed charges $ 44,285 $ 54,148 $119,291 $128,933 $129,668 $110,426 $107,216 ========= ========= ======== ======== ======== ======== ======== Ratio of earnings (loss) to fixed charges 3.22X - (d) 4.47X 5.09X 4.84X 4.21X 2.39X ========= ========= ======== ======== ======== ======== ======== (a) Consolidated financial information for 1997 through 1993 has been restated for the effects of the March 1997 merger of Tyco into the Company, accounted for as a pooling of interests. (b) Consolidated financial information for 1993 has been restated for the effects of the November 1993 merger of Fisher-Price, Inc. into a wholly-owned subsidiary of the Company, accounted for as a pooling of interests. (c) Portion of rental expenses which is deemed representative of an interest factor, not to exceed one-third of total rental expense. (d) As a result of an approximately $275 million restructuring charge to earnings taken in the first quarter of 1997, earnings did not cover fixed charges plus preferred stock dividends by $165.9 million for the six month period ended June 30, 1997.
EX-27.0 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MATTEL INC.'S BALANCE SHEETS AND INCOME STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JUN-30-1998 151,949 0 1,275,633 26,428 627,534 2,283,976 962,394 354,735 3,676,952 1,076,424 663,797 300,381 0 772 1,501,038 3,676,952 1,566,690 1,566,690 838,024 838,024 594,276 0 32,017 102,373 29,320 73,053 0 0 0 73,053 0.24 0.24 Notes - Amounts disclosed as EPS-Primary and EPS-Diluted represent Basic and Diluted Earnings Per Share as required by Statement of Financial Accounting Standards No. 128 "Earnings per Share." Diluted earnings per share for the six months ended June 30, 1998 has been submitted in accordance with Regulation S-K, Item 601 (b)(11), although it is contrary to paragraph 13 of FAS No. 128 because it produces an anti-dilutive result. Mattel, Inc. has reviewed its quarterly Financial Data Schedule filed during 1997 and has determined that no restatement is necessary since amounts reported as Primary and Fully Diluted Earnings Per Share are the same as those that would have been reported as Basic and Diluted Earnings Per Share under FAS No. 128 for the same reporting periods.
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