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, 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)
Deleware 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 25, 1994:
Common Stock - $1 par value -- 178,503,378 shares
<PAGE>
<TABLE>
PART I -- FINANCIAL INFORMATION
-------------------------------
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30, Dec. 31,
(In thousands) 1994 1993 1993
- - -------------- ----------- ----------- -----------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash $ 97,702 $ 74,626 $ 506,113
Marketable securities 19,488 15,139 17,468
Accounts receivable, net 879,276 744,655 580,313
Inventories 323,364 312,094 219,993
Prepaid expenses and other current assets 150,318 128,915 146,863
----------- ----------- -----------
Total current assets 1,470,148 1,275,429 1,470,750
----------- ----------- -----------
Property, Plant and Equipment:
Land 16,491 10,514 15,664
Buildings 163,190 144,683 146,622
Machinery and equipment 266,262 242,713 240,449
Capitalized leases 38,209 38,209 38,209
Leasehold improvements 44,601 40,416 41,948
----------- ----------- -----------
528,753 476,535 482,892
Less: Accumulated depreciation 242,236 224,742 229,130
----------- ----------- -----------
286,517 251,793 253,762
Tools, dies and molds, net 90,890 71,228 73,115
----------- ----------- -----------
Property, plant and equipment, net 377,407 323,021 326,877
----------- ----------- -----------
Other Noncurrent Assets:
Intangible assets, net 345,961 145,798 139,277
Sundry assets 68,204 54,575 63,173
----------- ----------- -----------
$ 2,261,720 $ 1,798,823 $ 2,000,077
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial information.
</TABLE>
2
<PAGE>
<TABLE>
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
<CAPTION>
June 30, June 30, Dec. 31,
(In thousands) 1994 1993 1993
- - -------------- ----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities:
Notes payable $ 342,326 $ 87,411 $ -
Current portion of long-term liabilities 3,301 8,675 104,862
Accounts payable 178,844 142,390 175,424
Accrued liabilities 295,677 212,234 397,800
Income taxes payable 109,462 52,602 105,243
----------- ----------- -----------
Total current liabilities 929,610 503,312 783,329
----------- ----------- -----------
Long-Term Liabilities:
Senior Notes 199,536 199,404 199,470
8% Convertible subordinated debentures - 97,652 73,953
Other long-term debt 59,147 162,995 54,689
Other 80,266 58,946 70,827
----------- ----------- -----------
Total long-term liabilities 338,949 518,997 398,939
----------- ----------- -----------
Shareholders' Equity:
Preference stock 9 9 9
Common stock $1 par value, 300,000
shares authorized; 178,367 shares,
171,770 shares and 172,470 shares
issued, respectively (a) 178,367 137,416 172,470
Additional paid-in capital 281,390 259,570 226,528
Treasury stock at cost; 362 shares,
3,426 shares and 2,601 shares,
respectively (a) (7,636) (57,176) (47,350)
Retained earnings (b) 589,402 487,831 532,003
ESOP note receivable (1,040) (5,960) (3,500)
Deferred compensation (12,555) (4,443) (13,003)
Currency translation adjustments (b) (34,776) (40,733) (49,348)
----------- ----------- -----------
Total shareholders' equity 993,161 776,514 817,809
----------- ----------- -----------
$ 2,261,720 $ 1,798,823 $ 2,000,077
=========== =========== ===========
<FN>
(a) Share data for June 1993 have been restated for the effects of the Fisher-Price merger
and a five-for-four stock split distributed in January 1994.
(b) Since December 26, 1987.
See accompanying notes to consolidated financial information.
</TABLE>
3
<PAGE>
<TABLE>
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED RESULTS OF OPERATIONS
<CAPTION>
For the For the
Three Months Ended Six Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
(In thousands, except per share amounts) 1994 1993 1994 1993
- - ---------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 650,263 $ 576,618 $1,137,534 $1,053,802
Cost of sales 335,758 297,605 584,925 556,019
---------- ---------- ---------- ----------
Gross profit 314,505 279,013 552,609 497,783
Advertising and promotion expenses 94,010 83,390 165,640 151,879
Other selling and administrative expenses 118,608 113,652 235,405 223,149
Interest expense 11,490 14,929 19,613 28,138
Other expense, net 1,315 3,819 4,600 4,379
---------- ---------- ---------- ----------
Income before income taxes and cumulative
effect of changes in accounting principles 89,082 63,223 127,351 90,238
Provision for income taxes 32,000 22,453 46,200 30,988
---------- ---------- ---------- ----------
Income before cumulative effect of changes in
accounting principles 57,082 40,770 81,151 59,250
Cumulative effect of changes in accounting
principles - - - (4,022)
---------- ---------- ---------- ----------
Net income 57,082 40,770 81,151 55,228
Preference stock dividend requirements 1,223 1,223 2,446 2,447
---------- ---------- ---------- ----------
Net income applicable to common shares $ 55,859 $ 39,547 $ 78,705 $ 52,781
========== ========== ========== ==========
Income Per Common And Common Equivalent Share:
- - ----------------------------------------------
Income before cumulative effect of changes in
accounting principles $ 0.31 $ 0.23 $ 0.44 $ 0.33
Cumulative effect of changes in accounting
principles - - - (0.02)
---------- ---------- ---------- ----------
Net income per share $ 0.31 $ 0.23 $ 0.44 $ 0.31
========== ========== ========== ==========
Average number of common and common
equivalent shares 179,779 170,685 177,934 170,999
========== ========== ========== ==========
Dividends declared per common share $ 0.06 $ 0.05 $ 0.12 $ 0.09
========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial information.
</TABLE>
4
<PAGE>
<TABLE>
MATTEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the
Six Months Ended
-----------------------
June 30, June 30,
(In thousands) 1994 1993
- - -------------- ---------- ----------
<S> <C> <C>
Cash Flows Used for Operating Activities:
- - -----------------------------------------
Net income $ 81,151 $ 55,228
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 50,534 45,019
Cumulative effect of changes in accounting principles, net of tax - 4,022
Provision for lease termination, net - (40,320)
(Increase) in marketable securities (2,020) (1,025)
(Increase) in receivables (244,368) (215,433)
(Increase) in inventories (68,080) (77,659)
(Increase) decrease in prepaid and other current assets (2,492) 10,276
(Decrease) in payables, accrued liabilities and income taxes payable (110,943) (92,014)
Other, net 4,820 (3,381)
---------- ----------
Net cash flows used for operating activities (291,398) (315,287)
---------- ----------
Cash Flows Used For Investing Activities:
- - -----------------------------------------
Purchases of tools, dies and molds (37,447) (29,127)
Purchases of other property, plant and equipment (27,161) (15,977)
Sales of other property, plant and equipment 6,495 4,933
Cash payment for business purchased (282,363) -
Other, net 127 (390)
---------- ----------
Net cash flows used for investing activities (340,349) (40,561)
---------- ----------
Cash Flows From Financing Activities:
- - -------------------------------------
Notes payable, net 342,547 73,128
Issuance of 6-3/4% senior notes - 100,000
Redemption of Fisher-Price debt (120,629) -
Long-term foreign borrowing (4,968) (23,047)
Collection of ESOP note receivable 2,460 2,460
Payment of ESOP notes payable (2,460) (2,460)
Tax benefit of employee stock options 21,596 2,654
Exercise of stock options 29,930 4,415
Purchase of treasury stock (21,671) (22,826)
Dividends paid on common stock (18,771) (12,598)
Dividends paid on preference stock (2,446) (2,447)
Payment made to Fisher-Price warrant holders (4,891) -
Other, net (746) (233)
---------- ----------
Net cash flows from financing activities 219,951 119,046
Effect of Exchange Rate Changes on Cash 3,385 (2,265)
---------- ----------
(Decrease) in Cash (408,411) (239,067)
Cash at Beginning of Period 506,113 313,693
---------- ----------
Cash at End of Period $ 97,702 $ 74,626
========== ==========
<FN>
See accompanying notes to consolidated financial information.
</TABLE>
5
<PAGE>
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. Certain amounts in the financial
statements for the period ending June 30, 1993 have been
reclassified to conform with the current period's presentation.
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.
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 merger, accounted for as a pooling-of-
interests, of Fisher-Price, Inc. into a wholly-owned subsidiary of
the Company was completed. Accordingly, all financial information
as of and for the period ended June 30, 1993 includes Fisher-Price.
2. On May 31, 1994, the Company acquired substantially all of the
business assets of Kransco, a San Francisco-based designer,
manufacturer and marketer of brand name recreational and sporting
products including POWER WHEELS battery-powered, ride-on vehicles,
HULA HOOP and FRISBEE products marketed under the WHAM-O trademark,
STREET JAM sporting goods, MOREY BOOGIE bodyboards and other
watersport toys. The purchase price included initial cash
consideration of $260.0 million plus the assumption by the Company
of all of Kransco's business debts and liabilities associated with
the purchased assets. The asset purchase agreement also provides
for future contingent consideration in the event that net sales of
the POWER WHEELS product line reaches or exceeds certain levels in
each of calendar years 1994, 1995 and 1996. The contingent
consideration payable with respect to any year shall not exceed
$8.6 million.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the Company's consolidated financial
statements for the three- and six-month periods ending June 30,
1994 include the effect of this transaction for only the month of
June. Intercompany accounts and transactions, although immaterial,
were eliminated. The asset purchase agreement requires completion
of an audited closing date balance sheet in order to finalize the
initial purchase price. Because the audited closing date balance
sheet was not completed, for purposes of these financial statements
the initial purchase price was allocated to assets and liabilities
based upon preliminary best estimates of fair values as of May 31,
1994. Based upon such preliminary unaudited data, the excess of
cost over net assets acquired was approximately $211.4 million,
which is being amortized on a straight-line basis over 20 years.
6
<PAGE>
The following summary presents unaudited pro forma operating
results as though the asset purchase transaction had occurred at
the beginning of 1994 and 1993, and includes adjustments for
estimated amounts of goodwill amortization, depreciation of fixed
assets at their estimated fair values, increases in interest
expense assuming the initial purchase consideration resulted in
additional short-term borrowing during the periods presented, and
the elimination of intercompany transactions. These pro forma data
are for illustrative purposes only, and do not purport to be
indicative of the actual results which would have occurred had the
transaction been consummated as of those earlier dates, nor are
they indicative of results of operations which may occur in the
future.
<TABLE>
<CAPTION>
For the Six Months Ended
-------------------------
June 30, June 30,
(In thousands, except per share amounts) 1994 1993
---------------------------------------- ----------- -----------
<S> <C> <C>
Net sales $ 1,183,462 $ 1,110,265
----------- -----------
Income before extraordinary item and
cumulative effect of accounting changes $ 78,267 $ 57,332
----------- -----------
Net income $ 78,267 $ 53,310
=========== ===========
Income Per Common Share
Income before extraordinary item and
cumulative effect of accounting changes $ 0.43 $ 0.32
----------- -----------
Net income per share $ 0.43 $ 0.30
=========== ===========
</TABLE>
3. Accounts receivable are shown net of allowances for doubtful
accounts of $23.7 million (June 30, 1994), $25.5 million (June 30,
1993) and $21.0 million (December 31, 1993).
4. Inventories are comprised of the following:
<TABLE>
<CAPTION>
June 30, June 30, Dec. 31,
(In thousands) 1994 1993 1993
- - -------------- --------- --------- ---------
<S> <C> <C> <C>
Raw materials and work in progress $ 70,307 $ 71,297 $ 50,927
Finished goods 253,057 240,797 169,066
--------- --------- ---------
$ 323,364 $ 312,094 $ 219,993
========= ========= =========
</TABLE>
5. Net cash flows from operating activities include cash payments for
the following:
<TABLE>
<CAPTION>
For the Six Months Ended
--------------------------
June 30, June 30,
(In thousands) 1994 1993
- - -------------- ----------- -----------
<S> <C> <C>
Interest $ 17,117 $ 28,145
Income taxes 28,164 19,777
</TABLE>
7
<PAGE>
6. 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.
7. As discussed in Note 5 to the Consolidated Financial Statements in
the Company's 1993 Annual Report to Shareholders, the warrants
assumed by the Company in connection with the Fisher-Price merger
permitted holders, upon such a change of control, to surrender
their warrants for an amount in cash at any time during the six-
month period from the merger date. During June 1994, holders of
288,653 warrants elected the cash option and received $4.9 million.
8. In the current quarter, the Board of Directors declared cash
dividends of $0.06 per common share, compared to $0.05 per common
share in the second quarter of 1993. Additionally, cash dividends
of $1.4149 per Series F preference share were declared, which
includes participating common dividends of $0.06 per share.
Effective with the Company's most recent dividend declaration, the
Board announced the introduction of a dividend reinvestment
program. In addition to providing automatic reinvestment of
dividends, the new program also allows shareholders of record to
purchase additional shares through cash payments.
9. 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.
10. In July 1994, the Company announced that it had received
irrevocable commitments to acquire a majority of the shares of J.W.
Spear & Sons ("Spear"), a company organized in the United Kingdom,
that holds the rights to SCRABBLE and other games in certain
markets outside of the United States and Canada. The transaction,
which is valued at approximately $90 million, is to be accounted
for as a purchase. Under the terms of the offer, shareholders may
elect to receive the purchase consideration of 11.50 pounds
sterling per issued share in either cash, interest-bearing notes or
in a combination of cash and notes. It is anticipated that the
remaining issued shares will be received by the Company during
August.
8
<PAGE>
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.
The Company's May 1994 acquisition of the business assets of Kransco
has provided Mattel with another core consumer franchise, namely the
POWER WHEELS line of battery-powered, ride-on vehicles.
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:
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales 100% 100% 100% 100%
=========== =========== =========== ===========
Gross Profit 48% 48% 49% 47%
Advertising and promotion expenses 14 14 15 15
Other selling and administrative expenses 18 20 21 21
----------- ----------- ----------- -----------
Operating Profit 16 14 13 11
Interest expense 2 3 2 2
----------- ----------- ----------- -----------
Income before income taxes and
cumulative effect of changes in
accounting principles 14% 11% 11% 9%
=========== =========== =========== ===========
</TABLE>
Second Quarter
- - --------------
Net sales in the second quarter of 1994 increased $73.6 million or 13%
over the 1993 second quarter. The current quarter's performance was
fueled by sales of FISHER-PRICE toys and children's products, new toy
introductions in connection with the releases of "The Lion King" and
"The Flintstones" motion pictures, as well as by June's sales of Kransco
products, the most significant of which was POWER WHEELS. Additional
volume was added by continued demand for POLLY POCKET toys and the
Company's line of McDonald's activity toys.
9
<PAGE>
Worldwide sales of core products represented 83% of the Company's second
quarter gross revenues compared to 84% in the second quarter of 1993.
Sales to customers within the United States increased 15% and accounted
for 61% of consolidated sales compared to 60% in the year-ago quarter.
Sales to customers outside the United States increased 9%. Including a
$6.5 million unfavorable effect of a strengthening U.S. dollar relative
to the year-ago quarter, at comparable foreign currency exchange rates,
sales internationally grew 13%.
Gross profit as a percentage of net sales remained at 48%, consistent
with the year-ago quarter. Higher sales volumes and lower direct
product costs were offset by increases in manufacturing and distribution
overhead and royalty expenses related to sales of licensed products.
Advertising and promotion expenses increased $10.6 million in support of
the increased sales volume, but remained at 14% of net sales in both
1994 and 1993. As a percentage of net sales, other selling and
administrative expenses decreased from 20% to 18%, reflecting the
Company's ongoing expense control measures as well as efficiencies
realized from the integration of Fisher-Price. Other expense, net
decreased $2.5 million, as higher goodwill amortization arising from the
Kransco asset purchase transaction was more than offset by the effect of
nonrecurring fixed asset write-offs, which occurred during the 1993
second quarter.
Interest expense decreased 23% compared to the second 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, both
of which were completed during the 1994 first quarter. These cost
savings were partially offset by interest expense on the 6-3/4% Senior
Notes issued in May 1993 and increases in short-term borrowing to meet
seasonal working capital needs and to finance portions of the Kransco
asset purchase transaction.
Six Months
- - ----------
Net sales in the first half of 1994 increased $83.7 million or 8% over
1993, reflecting continued worldwide demand for the Company's core
products. Worldwide core product sales accounted for 83% of total sales
compared to 85% during 1993, largely as a result of strong non-core
product sales such as POLLY POCKET toys, the McDonald's line of activity
toys, MIGHTY MAX action figures and products based on "The Flintstones"
motion picture. Sales to customers within the United States increased
6% and accounted for 60% of consolidated sales compared to 61% in 1993.
Sales to customers outside the United States increased 9%. Including a
$15.2 million unfavorable effect of a strengthening U.S. dollar relative
to the year-ago period, at comparable foreign currency exchange rates,
sales internationally grew 13%.
10
<PAGE>
As a percentage of net sales, gross profit increased to 49% as compared
to 47% for the first half of 1993. Gross profit increased $54.8 million
or 11% over 1993, primarily due to increased sales volume and a
favorable product mix.
Advertising and promotion expenses remained constant as a percentage of
net sales, however, spending increased $13.8 million in support of the
growth in sales volume. In both 1994 and 1993, other selling and
administrative expenses were 21% of net sales. The $12.3 million
increase for 1994 reflects expenditures for new product development and
the Company's expansion into additional markets.
Interest expense decreased $8.5 million or 30% from 1993 levels due to
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 1993 reflect a $4.0 million charge in the
first quarter 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.
FINANCIAL CONDITION
-------------------
The Company's continuing financial strength reflects its consistent
focus on asset management and advantageous utilization of financial
resources. Cash balances as of June 30, 1994 were $23.1 million higher
than the year-ago quarter. The $408.4 million decrease in cash since
December 31, 1993 primarily reflects cash consideration paid to the
owners of Kransco pursuant to the asset purchase agreement, the
retirement of approximately $20.0 million of Kransco's short-term
borrowing which had been assumed by the Company, the prepayment of
Fisher-Price's 10.69% term loan and reductions of year-end accrued
liabilities of which the most significant expenditures related to
approximately $50.1 million of merger integration and restructuring
costs. Cash outflows were partially offset by cash generated from
operations, short-term bank borrowing and proceeds from sales of
certain trade accounts receivable pursuant to the Company's receivables
purchase facility.
Accounts receivable increased $299.0 million since year end and $134.6
million over the year-ago quarter, reflecting increased sales volumes
during the current year and the addition of $42.5 million of Kransco
receivables. Inventory balances increased $103.4 million since year
end and $11.3 million over the 1993 quarter end, which includes the
$28.7 million addition of Kransco inventories and the Company's
production in support of future sales volumes, partially offset by the
effect of inventory control programs and the termination of the
Company's Nintendo distribution agreement.
11
<PAGE>
Other noncurrent assets increased $214.0 million over the year ago
quarter, primarily as a result of goodwill and intangible assets of
$212.6 million arising in connection with the Kransco asset purchase
transaction and an increase of $15.1 million in deferred tax assets,
partially reduced by the amortization of intangible assets.
Short-term bank borrowing increased $254.9 million compared to the 1993
quarter end and $342.3 million since year end, in order to fund the
Company's seasonal working capital requirements and finance a portion
of the Kransco asset purchase transaction. Seasonal financing needs
for the next twelve months are expected to be satisfied through
internally generated cash, issuances of commercial paper, the Company's
various short-term bank lines of credit and, from time to time, medium
or long-term debt issuances which the Company may elect to offer.
Details of the Company's capitalization are as follows:
<TABLE>
<CAPTION>
(In millions) June 30, 1994 June 30, 1993 Dec. 31, 1993
- - ------------- ----------------------------------------------
<S> <C> <C> <C>
6-7/8% Senior notes $ 99.5 7% $ 99.4 8% $ 99.5 8%
6-3/4% Senior notes 100.0 8 100.0 8 100.0 8
8% Convertible subordinated
debentures - - 97.7 7 74.0 6
Fisher-Price term loan - - 98.6 8 - -
Mortgage note 45.0 3 45.0 3 45.0 4
Economic development bonds 9.7 1 - - - -
Term loans 4.5 - 19.4 2 9.6 1
-----------------------------------------------
Total long-term debt 258.7 19 460.1 36 328.1 27
Other long-term liabilities 80.2 6 58.9 4 70.8 6
Shareholders' equity 993.2 75 776.5 60 817.8 67
----------------------------------------------
$1,332.1 100% $1,295.5 100% $1,216.7 100%
==============================================
</TABLE>
In connection with the Kransco asset purchase transaction, the Company
assumed debt secured by a manufacturing facility in Ft. Wayne, Indiana.
Interest on the debt, consisting of $9.7 million outstanding principal
amount of County of Allen Variable Rate Demand Economic Development
Revenue Bonds, is charged at varying rates (2.6% in June 1994).
Principal payments are $300,000 annually, commencing in 1994 and
continuing through 2018.
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 conversions of the 8% Debentures into shares
of the Company's common stock. Shareholders' equity increased $175.4
million since December 31, 1993 and $216.7 million over the 1993 second
quarter principally as a result of the Company's profitable operating
results, conversions of the 8% Debentures and exercises of employee
stock options, partially offset by treasury stock purchases and
dividends declared to common and preference shareholders.
12
<PAGE>
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 11,
1994, for the purpose of electing directors, approving the Mattel
Management Incentive and Long-Term Incentive Plans 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
------------- --------
John W. Amerman 152,650,834 470,393
Jill E. Barad 152,677,601 470,393
Dr. Harold Brown 152,648,810 470,393
James A. Eskridge 152,173,951 470,393
Tully M. Friedman 152,183,542 470,393
Ronald M. Loeb 152,664,802 470,393
Edward H. Malone 152,091,611 470,393
Edward N. Ney 152,143,503 470,393
William D. Rollnick 152,669,727 470,393
John L. Vogelstein 152,658,335 470,393
Lindsey F. Williams 152,660,057 470,393
The Mattel Management Incentive Plan and Mattel Long-Term Incentive Plan
were approved by the following votes:
Shares Voted Shares Voted Shares
Plan "FOR" "AGAINST" "ABSTAINING"
- - -------------------------------- ------------ ------------ ------------
Mattel Management Incentive Plan 146,381,812 3,774,825 2,788,552
Mattel Long-Term Incentive Plan 124,158,081 25,773,459 3,013,650
The proposal to appoint Price Waterhouse as independent accountants for
the Company for the year ending December 31, 1994 was ratified by the
following vote:
Shares Voted Shares Voted Shares
"FOR" "AGAINST" "ABSTAINING"
------------ ------------ ------------
151,270,652 1,371,247 303,291
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits
--------
2.1 Agreement and Plan of Merger, dated as of August 19, 1993,
by and among the Company, MAT Acquisition, Inc. and
Fisher-Price, Inc. (incorporated by reference to Exhibit
2.1 to the Company's Registration Statement on Form S-4,
Registration Statement No. 33-50749)
2.2 Amended and Restated Asset Purchase Agreement, dated as
of March 26, 1994 and amended and restated as of May 15,
1994, by and between Kransco and Mattel, Inc.
(incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated May 31, 1994)
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
and Form 8-K/A during the quarterly period ended June 30, 1994:
Financial
Form Date of Report Items Reported Statements Filed
----- ---------------- -------------- ----------------
8-K April 14, 1994 5, 7 None
8-K April 20, 1994 5, 7 None
8-K May 31, 1994 2, 5, 7 None
8-K/A June 30, 1994 7 See Below
The following Financial Statements were filed in connection with
the First Amendment to Form 8-K dated May 31, 1994 on Form 8-K/A
dated June 30, 1994:
Audited historical financial statements of Kransco for
the year ended December 31, 1993.
Unaudited historical financial statements of Kransco for
the three months ended March 31, 1994 and 1993.
Unaudited proforma condensed balance sheet of the Company
as of March 31, 1994.
Unaudited proforma condensed statements of income of the
Company for the three months ended March 31, 1994 and
for the year ended December 31, 1993.
14
<PAGE>
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 29, 1994 By: /s/ Gary P. Rolfes
------------------- ------------------
Gary P. Rolfes
Senior Vice President &
Controller
15
<PAGE>
<TABLE>
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)
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
June 30, June 30, June 30, June 30,
PRIMARY 1994 1993 1994 1993
- - ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income before cumulative effect of changes in
accounting principles $ 57,082 $ 40,770 $ 81,151 $ 59,250
Add: Interest savings, net of tax, applicable
to assumed exercise of Fisher-Price warrants - 163 - 324
Less: Dividends on convertible preference stock (1,223) (1,223) (2,446) (2,447)
--------- --------- --------- ---------
Income, before cumulative effect of changes in
accounting principles, applicable to common shares 55,859 39,710 78,705 57,127
Cumulative effect of changes in accounting principles - - - (4,022)
--------- --------- --------- ---------
Net income applicable to common shares $ 55,859 $ 39,710 $ 78,705 $ 53,105
========= ========= ========= =========
Applicable Shares for Computation of Income per Share:
- - ------------------------------------------------------
Weighted average common shares outstanding 177,199 167,750 174,738 167,874
Weighted average common equivalent shares arising from:
Dilutive stock options 1,780 1,598 2,389 1,754
Fisher-Price warrants 724 1,076 732 1,076
Restricted stock 76 261 75 295
--------- --------- --------- ---------
Weighted average number of common and common
equivalent shares 179,779 170,685 177,934 170,999
========= ========= ========= =========
Income Per Common Share:
- - ------------------------
Income per share before cumulative effect of changes in
accounting principles $ 0.31 $ 0.23 $ 0.44 $ 0.33
Cumulative effect of changes in accounting principles - - - (0.02)
--------- --------- --------- ---------
Net income per common share $ 0.31 $ 0.23 $ 0.44 $ 0.31
========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
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)
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED (a) SIX MONTHS ENDED (a)
---------------------- ----------------------
June 30, June 30, June 30, June 30,
FULLY DILUTED 1994 1993 1994 1993
- - ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income before cumulative effect of changes in
accounting principles $ 57,082 $ 40,770 $ 81,151 $ 59,250
Add: Interest savings, net of tax, applicable to:
Assumed conversion of 8% convertible debentures - 1,336 628 -
Assumed exercise of Fisher-Price warrants - 163 - 324
Less: Impact of required ESOP dividends or
contributions upon conversion (1,223) (1,223) (2,446) (2,447)
--------- --------- --------- ---------
Income, before cumulative effect of changes in
accounting principles, applicable to common shares 55,859 41,046 79,333 57,127
Cumulative effect of changes in accounting principles - - - (4,022)
--------- --------- --------- ---------
Net income applicable to common shares $ 55,859 $ 41,046 $ 79,333 $ 53,105
========= ========= ========= =========
Applicable Shares for Computation of Income per Share:
- - ------------------------------------------------------
Weighted average common shares outstanding 177,199 167,750 174,738 167,874
Weighted average common equivalent shares arising from:
Assumed conversion of 8% convertible debentures - 7,792 2,090 -
Assumed conversion of convertible preference stock 1,621 1,620 1,621 1,620
Dilutive stock options 1,801 1,752 2,548 1,913
Fisher-Price warrants 724 1,076 742 1,076
Restricted stock 99 295 99 355
--------- --------- --------- ---------
Weighted average number of common and common
equivalent shares 181,444 180,285 181,838 172,838
========= ========= ========= =========
Income Per Common Share:
- - ------------------------
Income per share before cumulative effect of changes in
accounting principles $ 0.31 $ 0.23 $ 0.44 $ 0.33
Cumulative effect of changes in accounting principles - - - (0.02)
--------- --------- --------- ---------
Net income per common share $ 0.31 $ 0.23 $ 0.44 $ 0.31
========= ========= ========= =========
<FN>
(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%.
</TABLE>
<PAGE>
