-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UyWq/GwwknfVVIs+ggwzyjtAUBZtNLyyZITI6k25di1Br8UgHNX85JfJ77Jmct/7 VQMWCgfZo02UwFXpO7+5ZA== 0000063276-94-000014.txt : 19940511 0000063276-94-000014.hdr.sgml : 19940511 ACCESSION NUMBER: 0000063276-94-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATTEL INC /DE/ CENTRAL INDEX KEY: 0000063276 STANDARD INDUSTRIAL CLASSIFICATION: 3944 IRS NUMBER: 951567322 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05647 FILM NUMBER: 94525744 BUSINESS ADDRESS: STREET 1: 333 CONTINENTAL BLVD CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3105244600 10-Q 1 1ST QUARTER 1994 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 March 31, 1994 -------------- 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) 524-2000 -------------- (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 April 25, 1994: Common Stock - $1 par value -- 177,028,149 shares PART I -- FINANCIAL INFORMATION ------------------------------- MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, March 31, Dec. 31, (In thousands) 1994 1993 1993 - - -------------- ----------- ----------- ----------- ASSETS Current Assets: Cash $ 183,541 $ 147,141 $ 506,113 Marketable securities 18,452 15,950 17,468 Accounts receivable, net 607,448 586,477 580,313 Inventories 244,864 262,562 219,993 Prepaid expenses and other current assets 145,223 136,911 146,863 ----------- ----------- ----------- Total current assets 1,199,528 1,149,041 1,470,750 ----------- ----------- ----------- Property, Plant and Equipment: Land 15,636 10,547 15,664 Buildings 149,761 144,442 146,622 Machinery and equipment 252,206 244,643 240,449 Capitalized leases 38,290 38,209 38,209 Leasehold improvements 41,733 41,594 41,948 ----------- ----------- ----------- 497,626 479,435 482,892 Less: Accumulated depreciation 242,839 223,469 229,130 ----------- ----------- ----------- 254,787 255,966 253,762 Tools, dies and molds, net 78,798 68,711 73,115 ----------- ----------- ----------- Property, plant and equipment, net 333,585 324,677 326,877 ----------- ----------- ----------- Other Noncurrent Assets: Intangible assets, net 135,401 148,773 139,277 Sundry assets 62,780 51,058 63,173 ----------- ----------- ----------- $ 1,731,294 $ 1,673,549 $ 2,000,077 =========== =========== =========== See accompanying notes to consolidated financial information.
2 MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued)
March 31, March 31, Dec.31, (In thousands) 1994 1993 1993 - - -------------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable to banks $ - $ 72,426 $ - Current portion of long-term liabilities 4,041 8,897 104,862 Accounts payable 122,008 122,065 175,424 Accrued liabilities 264,694 246,833 397,800 Income taxes payable 93,158 40,500 105,243 ----------- ----------- ----------- Total current liabilities 483,901 490,721 783,329 ----------- ----------- ----------- Long-Term Liabilities: 6-7/8% Senior notes due 1997 99,503 99,374 99,470 6-3/4% Senior notes due 2000 100,000 - 100,000 8% Convertible subordinated debentures - 97,598 73,953 Mortgage note 45,000 45,000 45,000 Term loans 6,805 123,910 9,689 Other 75,635 58,618 70,827 ----------- ----------- ----------- Total long-term liabilities 326,943 424,500 398,939 ----------- ----------- ----------- Shareholders' Equity: Preferred and preference stock 9 9 9 Common stock $1 par value, 300,000 shares authorized; 178,367 shares, 171,732 shares and 172,470 shares issued, respectively (a) 178,367 137,386 172,470 Additional paid-in capital 289,917 259,713 226,528 Treasury stock at cost; 1,378 shares, 3,156 shares and 2,601 shares, respectively (a) (29,108) (50,773) (47,350) Retained earnings (b) 544,212 455,571 532,003 ESOP note receivable (2,270) (7,190) (3,500) Deferred compensation (13,675) (5,235) (13,003) Currency translation adjustments (b) (47,002) (31,153) (49,348) ----------- ----------- ----------- Total shareholders' equity 920,450 758,328 817,809 ----------- ----------- ----------- $ 1,731,294 $ 1,673,549 $ 2,000,077 =========== =========== =========== (a) Share data for March 1993 have been restated for the effects of the Fisher-Price merger and a five-for-four stock split declared in November 1993. (b) Since December 26, 1987. See accompanying notes to consolidated financial information.
3 MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended ---------------------- March 31, March 31, (In thousands, except per share amounts) 1994 1993 - - ---------------------------------------- ---------- ---------- Net sales $ 487,271 $ 477,184 Cost of sales 249,167 250,481 ---------- ---------- Gross profit 238,104 226,703 Advertising and promotion expenses 71,630 68,489 Other selling and administrative expenses 116,797 117,430 Interest expense 8,123 13,209 Other expense, net 3,285 560 ---------- ---------- Income before income taxes and cumulative effect of changes in accounting principles 38,269 27,015 Provision for income taxes 14,200 8,535 ---------- ---------- Income before cumulative effect of changes in accounting principles 24,069 18,480 Cumulative effect of changes in accounting principles - (4,022) ---------- ---------- Net income 24,069 14,458 Preferred and preference stock dividend requirements 1,223 1,224 ---------- ---------- Net income applicable to common shares $ 22,846 $ 13,234 ========== ========== Income Per Common And Common Equivalent Share: - - ---------------------------------------------- Income before cumulative effect of changes in accounting principles $ 0.13 $ 0.10 Cumulative effect of changes in accounting principles - (0.02) ---------- ---------- Net income per share $ 0.13 $ 0.08 ========== ========== Average number of common and common equivalent shares 175,037 170,178 ========== ========== Dividends declared per common share $ 0.06 $ 0.04 ========== ========== See accompanying notes to consolidated financial information.
4 MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended ----------------------- March 31, March 31, (In thousands) 1994 1993 - - -------------- ---------- ---------- Cash Flows From Operating Activities: - - ------------------------------------- Net income $ 24,069 $ 14,458 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 23,538 20,365 Cumulative effect of changes in accounting principles, net of tax - 4,022 Provision for lease termination, net - (40,320) (Increase) in marketable securities (984) (1,836) (Increase) in receivables (22,841) (49,413) (Increase) in inventories (23,075) (23,394) Decrease in prepaid and other current assets 1,727 3,222 (Decrease) in payables, accrued liabilities and income taxes payable (181,788) (95,573) Other, net 2,651 (853) ---------- ---------- Net cash flows from operating activities (176,703) (169,322) ---------- ---------- Cash Flows From Investing Activities: - - ------------------------------------- Purchases of tools, dies and molds (16,803) (13,980) Purchases of other property, plant and equipment (11,308) (8,590) Sales of other property, plant and equipment 903 3,693 Other, net 347 (121) ---------- ---------- Net cash flows from investing activities (26,861) (18,998) ---------- ---------- Cash Flows From Financing Activities: - - ------------------------------------- Notes payable to banks, net (136) 57,753 Redemption of Fisher-Price debt (120,629) - Long-term foreign borrowing (2,590) (18,193) Collection of ESOP note receivable 1,230 1,230 Payment of ESOP notes payable (1,230) (1,230) Tax benefit of employee stock options 12,283 893 Exercise of stock options 21,555 1,863 Purchase of treasury stock (21,671) (11,099) Dividends paid on common stock (8,134) (6,267) Dividends paid on preference stock (1,223) (1,224) Other, net (59) (336) ---------- ---------- Net cash flows from financing activities (120,604) 23,390 Effect of Exchange Rate Changes on Cash 1,596 (1,622) ---------- ---------- (Decrease) in Cash (322,572) (166,552) Cash at Beginning of Period 506,113 313,693 ---------- ---------- Cash at End of Period $ 183,541 $ 147,141 ========== ========== 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 the Company's financial position and interim results as of and for the periods presented have been included. 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. On November 30, 1993, the Company completed its merger, accounted for as a pooling of interests, with Fisher-Price, Inc. Accordingly, all financial information as of and for the period ended March 31, 1993 includes Fisher-Price. The financial information included herein should be read in conjunction with the Company's consolidated financial statements and related notes in its 1993 Annual Report to Shareholders. 2. Accounts receivable are shown net of allowances for doubtful accounts of $22.2 million (March 31, 1994), $26.4 million (March 31, 1993) and $21.0 million (December 31, 1993). 3. Inventories are comprised of the following:
March 31, March 31, Dec. 31, (In thousands) 1994 1993 1993 - - -------------- --------- --------- --------- Raw materials and work in progress $ 51,914 $ 63,546 $ 50,927 Finished goods 192,950 199,016 169,066 --------- --------- --------- $ 244,864 $ 262,562 $ 219,993 ========= ========= ========= 4. Net cash flows from operating activities include cash payments for the following:
Three Months Ended -------------------------- March 31, March 31, (In thousands) 1994 1993 - - -------------- ----------- ----------- Interest $ 8,381 $ 18,748 Income taxes 19,480 12,788
6 5. As discussed in Note 5 to the Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders, on February 9, 1994, a notice of redemption was issued to holders of the 8% Debentures. During the first quarter of 1994, the remaining outstanding debentures were converted by the holders resulting in the issuance of 5,897,258 common shares. 6. In the current quarter, the Board of Directors declared cash dividends of $0.06 per common share, compared to $0.04 per common share in the first quarter of 1993. Additionally, cash dividends of $1.4154 per convertible preference share were declared, which includes participating common dividends of $0.06 per share. 7. Share and per share data presented in these financial statements reflect the retroactive effects of the Fisher- Price merger and the five-for-four stock split distributed in January 1994. Income per common share is computed by dividing earnings available to common shareholders by the 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, reduced by the number of shares which could be repurchased at average market prices with proceeds from exercise. 8. In March 1994, the Company entered into an agreement to purchase substantially all of the business assets of Kransco, a privately-held San Francisco-based toy maker. The transaction is subject to certain conditions, including obtaining regulatory approval. The Company anticipates it will complete the transaction by May 31, 1994. Kransco's principal product lines include Power Wheels battery-powered, ride-on vehicles, Hula Hoop and Frisbee products marketed under the Wham-O trademark, and Morey Boogie Boards and other water sports toys. Kransco's revenues for 1993 were approximately $175.0 million. 7 MATTEL, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION --------------------------------------------- Mattel, Inc. (the "Company") 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. Core brands which historically have provided the Company with relatively stable growth include BARBIE dolls, doll clothes and accessories, FISHER-PRICE toys and juvenile products, Disney- licensed toys, die-cast vehicles including HOT WHEELS, large dolls, preschool toys including SEE 'N' SAY toys, and the UNO and SKIP-BO card games. 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:
Three Months Ended ------------------------ March 31, March 31, 1994 1993 ----------- ----------- Net Sales 100% 100% =========== =========== Gross Profit 49% 48% Advertising and promotion expenses 15 14 Other selling and administrative expenses 24 25 ----------- ----------- Operating Profit 10 9 Interest expense 2 3 ----------- ----------- Income before income taxes and cumulative effect of changes in accounting principles 8% 6% =========== ===========
Net sales in the first quarter of 1994 increased $10.1 million or 2% over the 1993 first quarter, reflecting continued demand for the Company's core products. POLLY POCKET sales were exceptionally strong; additional volume was contributed by MIGHTY MAX and the MCDONALD'S HAPPY MEAL MAGIC line of activity toys which were introduced late in 1993, and by new product introductions for 1994. 8 Worldwide sales of core products represented 83% of gross revenues for the current quarter compared to 87% in the first quarter of 1993, primarily because of a decline in Disney Classics volume from the prior year's strong sales after releases of the "Aladdin" and "The Beauty and the Beast" movies. Sales to customers within the United States accounted for 60% of consolidated sales compared to 63% in the year-ago quarter. Sales to customers outside of the United States increased 9%; however, at comparable foreign currency exchange rates, total revenues internationally grew 14% over 1993 sales volume. Gross profit, as a percentage of net sales, increased one percent over the year-ago quarter to 49%, principally as a result of sales of higher-margin products. Advertising and promotion expenses increased $3.1 million in support of the increased sales volume. As a percentage of net sales, other selling and administrative expenses decreased from 25% to 24%, reflecting the Company's ongoing expense control measures as well as efficiencies beginning to be realized from the merger with Fisher-Price. Other expense, net increased $2.7 million, principally as a result of increased charitable contributions in the current quarter and foreign currency gains in the year-ago quarter. Interest expense decreased $5.1 million or 39% compared to the first quarter of 1993. This significant reduction reflects the prepayment of Fisher-Price's 10.69% term loan and conversions of 8% Debentures to common stock, partially offset by interest expense on the 6-3/4% Senior Notes issued in May 1993. Results of operations for the 1993 first quarter were reduced by a $4.0 million charge which represented the net cumulative effect of changes in accounting principles adopted as of January 1, 1993. A $20.0 million charge, net of related income tax effects of $11.6 million, arising in connection with the adoption of Statement of Financial Accounting Standards No. 106 was partially offset by a $16.0 million credit related to the adoption of Statement No. 109. 9 FINANCIAL CONDITION ------------------- The Company's strong financial condition continues to reflect management's focus on asset management and advantageous utilization of financial resources. Cash balances as of March 31, 1994 were $36.4 million higher than the year-ago quarter. Cash decreased by $322.6 million since December 31, 1993 as a result of the retirement of Fisher-Price's term loan and reductions of year- end accrued liabilities including those for trade accounts payable, dividends to shareholders, royalties, advertising and incentive compensation. Accounts receivable increased $27.1 million since year-end and $21.0 million over the year-ago quarter reflecting the current quarter's sales volume and seasonal collection patterns. Since year-end, inventories increased $24.9 million in support of future sales volume. Inventory balances decreased $17.7 million compared to the first quarter of 1993, primarily reflecting inventory control programs and termination of the Company's Nintendo distribution agreement. Sundry assets increased $11.7 million over the year-ago quarter, primarily reflecting an increase in deferred tax assets. Short-term bank borrowing in the first quarter of 1994 was repaid by March 31, as working capital was provided by available cash reserves as well as by proceeds from nonrecourse sales of certain trade accounts receivable pursuant to the Company's receivables purchase facility. Seasonal financing needs for the next twelve months are expected to be satisfied through internally generated cash, issuances of commercial paper and the Company's short-term bank lines of credit. The Company's capitalization is as follows:
(In millions) March 31, 1994 March 31, 1993 Dec. 31, 1993 - - ------------- ---------------------------------------------- 6-7/8% Senior notes $ 99.5 8% $ 99.4 8% $ 99.5 8% 6-3/4% Senior notes 100.0 8 - - 100.0 8 8% Convertible subordinated debentures - - 97.6 8 74.0 6 Fisher-Price term loan - - 98.6 8 - - Other long-term debt obligations 51.8 4 70.3 6 54.6 5 ----------------------------------------------- Total long-term debt 251.3 20 365.9 30 328.1 27 Other long-term liabilities 75.6 6 58.6 5 70.8 6 Shareholders' equity 920.5 74 758.3 65 817.8 67 ---------------------------------------------- $1,247.4 100% $1,182.8 100% $1,216.7 100% ==============================================
10 Total long-term debt decreased as a percentage of total capitalization compared to the year-ago quarter, primarily due to prepayment of the Fisher-Price term loan and the conversion of the 8% Debentures into shares of the Company's common stock. Shareholder's equity increased $102.7 million since December 31, 1993, primarily as a result of the Company's profitable operating results, conversions of the remaining outstanding 8% Debentures and exercises of employee stock options, partially offset by treasury stock purchases and dividends declared to common and preference shareholders. The $162.2 million increase in shareholders' equity over the 1993 first quarter reflects the Company's profitable operating results during the subsequent quarters, conversions of the 8% Debentures and exercises of employee stock options, partially offset by cash dividends declared and unfavorable movements in the currency translation adjustment component of shareholders' equity. 11 PART II -- OTHER INFORMATION ---------------------------- Item 6. Exhibits and Reports on Form 8-K - - ----------------------------------------- (a) Exhibits -------- 11.0 Computation of Income per Common and Common Equivalent Share (b) Reports on Form 8-K ------------------- Mattel, Inc. filed the following Current Reports on Form 8-K during the quarterly period ended March 31, 1994: Financial Date of Report Items Reported Statements Filed ---------------- -------------- ---------------- February 1, 1994 5, 7 None February 8, 1994 5, 7 None February 9, 1994 5, 7 None March 23, 1994 7 None March 28, 1994 5, 7 None 12 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, 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 May 2, 1994 By: /s/ Gary P. Rolfes ----------------- ------------------ Gary P. Rolfes Senior Vice President & Controller 13 EX-11.0 2 STATEMENT RE COMPUTATION OF EARNINGS PER SHARE MATTEL, INC. AND SUBSIDIARIES EXHIBIT 11.0 (Page 1 of 2) COMPUTATION OF INCOME PER COMMON AND COMMON EQUIVALENT SHARE ------------------------------------------------------------ (In thousands, except per share amounts)
THREE MONTHS ENDED ---------------------- March 31, March 31, PRIMARY 1994 1993 - - ------- --------- --------- Income before cumulative effect of changes in accounting principles $ 24,069 $ 18,480 Less: Dividends on convertible preference stock (1,223) (1,224) --------- --------- Income, before cumulative effect of changes in accounting principles, applicable to common shares 22,846 17,256 Cumulative effect of changes in accounting principles - (4,022) --------- --------- Net income applicable to common shares $ 22,846 $ 13,234 ========= ========= Applicable Shares for Computation of Income per Share: - - ------------------------------------------------------ Weighted average common shares outstanding 172,249 168,000 Weighted average common equivalent shares arising from: Dilutive stock options 2,010 1,879 Fisher-Price warrants 741 - Restricted stock 37 299 --------- --------- Weighted average number of common and common equivalent shares 175,037 170,178 ========= ========= Income Per Common Share: - - ------------------------ Income per share before cumulative effect of changes in accounting principles $ 0.13 $ 0.10 Cumulative effect of changes in accounting principles - (0.02) --------- --------- Net income per common share $ 0.13 $ 0.08 ========= =========
MATTEL, INC. AND SUBSIDIARIES EXHIBIT 11.0 (Page 2 of 2) COMPUTATION OF INCOME PER COMMON AND COMMON EQUIVALENT SHARE ------------------------------------------------------------ (In thousands, except per share amounts)
THREE MONTHS ENDED ---------------------- March 31, March 31, FULLY DILUTED 1994 (a) 1993 (b) - - ------------- --------- --------- Income before cumulative effect of changes in accounting principles $ 24,069 $ 18,480 Add: Interest savings, net of tax, applicable to: Assumed conversion of 8% convertible debentures 628 1,334 Assumed exercise of Fisher-Price warrants - 163 Less: Impact of required ESOP dividends or contributions upon conversion (1,223) (1,224) --------- --------- Income, before cumulative effect of changes in accounting principles, applicable to common shares 23,474 18,753 Cumulative effect of changes in accounting principles - (4,022) --------- --------- Net income applicable to common shares $ 23,474 $ 14,731 ========= ========= Applicable Shares for Computation of Income per Share: - - ------------------------------------------------------ Weighted average common shares outstanding 172,249 168,000 Weighted average common equivalent shares arising from: Assumed conversion of 8% convertible debentures 4,204 7,793 Assumed conversion of convertible preference stock 1,621 1,621 Dilutive stock options 2,880 1,879 Fisher-Price warrants 757 1,076 Restricted stock 49 332 --------- --------- Weighted average number of common and common equivalent shares 181,760 180,701 ========= ========= Income Per Common Share: - - ------------------------ Income per share before cumulative effect of changes in accounting principles $ 0.13 $ 0.10 Cumulative effect of changes in accounting principles - (0.02) --------- --------- Net income per common share $ 0.13 $ 0.08 ========= ========= (a) This calculation is submitted in accordance with Regulation S-K, Item 601 (b)(11), although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. (b) This calculation is submitted in accordance with Regulation S-K, Item 601 (b)(11), although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result.
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