SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] for the fiscal year ended
December 31, 1993.
[_] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period
from _________ to _________.
Commission File Number 001-05647
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MATTEL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-1567322
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
333 Continental Boulevard, El Segundo, California 90245-5012
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (310) 524-2000
--------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
<S> <C>
Common stock, $1 par value (and New York Stock Exchange
the associated Preference Pacific Stock Exchange
Share Purchase Rights)
6-7/8% Senior Notes Due 1997 New York Stock Exchange
6-3/4% Senior Notes Due 2000 (None)
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
(None)
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statement incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of the close of business on March 18, 1994 was $4,493,882,507.
Number of shares outstanding of registrant's common stock as of March 18, 1994:
Common Stock - $1 par value -- 177,098,818 shares
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Mattel, Inc. Annual Report to Shareholders for the year
ended December 31, 1993 (Incorporated into Parts I, II and IV).
2. Portions of the Mattel, Inc. 1994 Notice of Annual Meeting of Stockholders
and Proxy Statement, to be filed with the Securities and Exchange Commission
within 120 days after the close of the registrant's fiscal year
(Incorporated into Part III).
<PAGE>
PART I
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Item 1. Business
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The Company designs, develops, manufactures, markets and distributes a
broad variety of toy products on a worldwide basis. Measured by revenues, the
Company is the second largest toy company in the world. The Company's three
strongest principal product lines are BARBIE fashion dolls and doll clothing and
accessories, FISHER-PRICE toys and juvenile products and the Company's Disney-
licensed toys, each of which has broad worldwide appeal. Additional current
principal product lines consist of die-cast vehicles and accessories, including
HOT WHEELS; large dolls; preschool toys, including SEE 'N SAY talking toys; and
the UNO and SKIP-BO games. Revenues for 1993 of $2.7 billion were a record
level for the Company.
In November 1993, Fisher-Price, Inc. ("Fisher-Price") became a wholly-
owned subsidiary of Mattel as a result of a merger transaction (the "Fisher-
Price Merger"). See Note 2 to the Consolidated Financial Statements in the
Annual Report to Shareholders for the year ended December 31, 1993 (the
"Annual Report to Shareholders"), incorporated herein by reference and Item 4
"Submission of Matters to a Vote of Security Holders" below. As used herein,
unless the context requires otherwise, "Mattel" refers to Mattel, Inc., and its
subsidiaries other than Fisher-Price, and the "Company" refers to Mattel
together with Fisher-Price.
Mattel was incorporated in California in 1948 and reincorporated in
Delaware in 1968. Its executive offices are located at 333 Continental
Boulevard, El Segundo, California 90245-5012, telephone (310) 524-2000.
Competition and Industry Background
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Competition in the toy industry is based primarily on price, quality and
play value. In recent years, the toy industry has experienced rapid
consolidation driven, in part, by the desire of industry competitors to offer
a range of products across a broader variety of categories. In the United
States, the Company competes with several large toy companies, including Hasbro,
Inc. and Tyco Toys, Inc. as well as a number of smaller toy companies. The
larger toy companies have pursued a strategy of focusing on core product lines.
Core product lines are lines which are expected to be marketed for an extended
period of time, and which historically have provided relatively consistent
growth in sales and profitability. By focusing on core product lines, toy
manufacturers have been able to reduce their reliance on new product
introductions and the associated risk and volatility. The juvenile products
market, in which Fisher-Price is one of the leading companies, is more
fragmented. The more significant competitors in this area include Gerry Baby
Products Company, Century Products Company, Graco Children's Products, Inc.,
Cosco, Inc. and Evenflo Juvenile Furniture Company, Inc.
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The toy industry is also experiencing a shift toward greater
consolidation of retail distribution channels, such as large specialty toy
stores and discount retailers, including Toys R Us, Wal-Mart, Kmart and Target,
which have increased their overall share of the retail market. This
consolidation has resulted in an increasing reliance among retailers on the
large toy companies because of their financial stability and their ability to
support products through advertising and promotion and to distribute products
on a national basis. These retailers' growing acceptance of electronic data
interchange has provided toy manufacturers with an ability to more closely
monitor consumers' acceptance of a particular product or product line.
Over the last ten years, toy companies based in the United States have
expanded their international marketing and manufacturing operations. The
Company believes a strong international distribution system can add
significantly to the sales volume of core product lines and extend the life
cycles of newly-developed products.
Seasonality
- -----------
Sales of toy products at retail are seasonal, with a majority of retail
sales occurring during the period from September through December.
Consequently, shipments of toy products to retailers are greater in the third
and fourth quarters than in each of the first and second quarters. As the
large toy retailers become more efficient in their control of inventory levels,
this seasonality is likely to increase.
In anticipation of this seasonal increase in retail sales, the Company
significantly increases its production in advance of the peak selling period,
resulting in a seasonal build-up of inventory levels. In addition, the
Company and others in the industry develop sales programs, including offering
extended payment terms, to encourage retailers to purchase merchandise earlier
in the year. These sales programs, coupled with seasonal shipping patterns,
result in significant peaks in the third and fourth quarters in the respective
levels of inventories and accounts receivable, which contribute to a seasonal
working capital financing requirement. See "Seasonal Financing."
Products
- --------
The Company has been able to record consistent sales and earnings growth
by focusing on a number of core product lines supplemented by various new
product introductions. The Company's three strongest core product lines are
BARBIE fashion dolls and doll clothing and accessories, FISHER-PRICE toys and
juvenile products, and the Company's Disney-licensed toys, each of which has
broad worldwide appeal. Additional current core product lines consist of
die-cast vehicles and accessories, including HOT WHEELS; large dolls; preschool
toys, including SEE 'N SAY talking toys; and the UNO and SKIP-BO games. Core
product lines are expected to be marketed for an extended period of time and
historically have provided relatively consistent growth in sales and
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profitability. For the year ended December 31, 1993, core products accounted
for approximately 86% of sales. In order to provide greater flexibility in the
manufacture and delivery of products, and as part of a continuing effort to
reduce manufacturing costs, the Company has concentrated production of most
of its core products in Company-owned facilities and generally uses independent
contractors for the production of non-core products.
With respect to new product introductions, the Company's strategy is to
begin production on a limited basis until a product's initial success has been
proven in the marketplace. The production schedule is then modified to meet
anticipated demand. The Company further limits its risk by generally having
independent contractors manufacture new product lines in order to minimize
capital expenditures associated with new product introductions. This strategy
has reduced inventory risk and significantly limited the potential loss
associated with new product introductions.
New product introductions in 1993 included the HOLLYWOOD HAIR BARBIE
doll and the MY SIZE BARBIE doll, the addition of a series of dolls based on
the animated feature "Snow White and the Seven Dwarfs" to the Company's
Disney line, the BABY WALK 'N ROLL and SALLY SECRETS large dolls and the
addition of the ATTACK PACK line of monster trucks to the Company's HOT
WHEELS line. The Company also introduced a line of activity toys called
McDONALD'S HAPPY MEAL MAGIC.
New product introductions in 1994 will include the Gymnast BARBIE,
Bedtime BARBIE and DR. BARBIE dolls; Fisher-Price's new plush RUMPLE BEARS,
TRIPLE ARCADE electronic game, and electronic learning toys; the additions of
COLOR FX and HOT WHEELS TOP SPEED PIPEJAMMER vehicles to the HOT WHEELS line;
and the addition to the Company's Disney line of a series of plush products,
action figures and small dolls based on the animated feature "The Lion King".
The Company also will introduce a new line of large dolls called DREAMLAND
Babies, and Nickelodeon THINGMAKER, a new activity toy. In conjunction with
the release of the feature film "The Flintstones," the Company will introduce
a line of small dolls, large dolls, action figures and accessories.
International Operations
- ------------------------
Revenues from the Company's international operations represented
approximately 40% of total consolidated revenues in 1993. Products which are
developed and marketed successfully in the United States typically generate
incremental sales and profitability when marketed through the Company's
international distribution network. Generally, products marketed
internationally are the same as those marketed domestically, although some are
developed or adapted for particular international markets. The Company sells
its products directly through its wholly-owned subsidiaries in Australia,
Austria, the Benelux countries, Canada, Chile, France, Germany, Greece, Italy,
Japan, Mexico, Scandinavia, Spain, Switzerland, the United Kingdom and in
certain areas of Eastern Europe and Asia. In 1994, the Company will begin
selling its products directly in Argentina, Portugal and Venezuela
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through newly established subsidiaries. In addition to direct sales, the
Company sells principally through distributors in Central and South America,
the Middle East, South Africa and Southeast Asia. It also licenses some of its
products to other toy companies for sale in various other countries. Until
December 1993, Mattel also distributed the Nintendo Entertainment System and
related products in Australia. See "Licenses and Distribution Agreements."
The strength of the U.S. dollar relative to other currencies can
significantly affect the revenues and profitability of the Company's
international operations. The Company hedges intercompany purchases and sales
of inventory in order to protect local cash flows and profitability from
currency fluctuations. See "Foreign Currency Contracts." For financial
information by geographic area, see Note 8 to the Consolidated Financial
Statements in the Annual Report to Shareholders, incorporated herein by
reference.
Product Design and Development
- ------------------------------
Through its product design and development group, the Company regularly
refreshes, redesigns and extends existing product lines and develops innovative
new product lines. The Company's success is dependent on its ability to
continue this activity. Product design and development are principally
conducted by a group of professional designers and engineers employed by the
Company.
License agreements with third parties permit the Company to utilize the
name, character or product of the licensor in its product line. A principal
licensor is The Walt Disney Company, which licenses many of its characters for
use on the Company's products. The Company also has entered into license
agreements with, among others, McDonald's, Inc., MCA Universal Merchandising,
Inc., the Time Warner Entertainment Company, L.P. and DC Comics, Inc. units of
Time Warner Inc., LucasArts Entertainment Company, Turner Home Entertainment,
Inc., Hanna-Barbera Productions, Inc., American Greeting Cards, Inc.,
Children's Television Workshop, and Viacom International, Inc. relating to its
Nickelodeon properties. A number of these licenses relate to product lines
that are significant to the Company.
Independent toy designers and developers bring products to the Company
and are generally paid a royalty on the net sales price of products licensed by
the Company. These independent toy designers may also create different products
for other toy companies.
The Company devotes substantial resources to product design and
development. During the years ended December 31, 1993, December 31, 1992 and
December 31, 1991, the Company expended approximately $75 million, $77 million
and $56 million, respectively, in connection with the design and development of
products, exclusive of royalty payments.
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<PAGE>
Advertising and Promotion
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The Company supports its product lines with extensive advertising and
consumer promotions. Advertising continues at varying levels throughout the
year and peaks during the Christmas season. Advertising includes television and
radio commercials and magazine and newspaper ads. Promotions include in-store
displays, coupons, merchandising materials and major events focusing on products
and tie-ins with various consumer product companies. To further promote the
Company and its products, the Company participates in the attractions "It's A
Small World" at Disneyland and Disney World and "Autopia" at Euro Disneyland
under a ten-year agreement with The Walt Disney Company. The Company also
participates in toy stores in Disneyland and in the Disney Village Market Place
near Disney World and commenced participation in a new toy store in Euro
Disneyland in December 1993. Separately, the Company has established a total of
six BARBIE Boutiques in F.A.O. Schwarz toy stores, including the "BARBIE on
Madison" boutique at the F.A.O. Schwarz flagship store in New York City.
During the years ended December 31, 1993, December 31, 1992 and
December 31, 1991, Mattel spent approximately $427 million (16% of net sales),
$403 million (16% of net sales) and $308 million (15% of net sales),
respectively, on worldwide advertising and promotion.
Marketing and Sales
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The Company's toy products are sold throughout the world. In the United
States, the Company's products are distributed directly to large retailers,
including discount and free-standing toy stores, chain stores and department
stores, and other retail outlets and, to a limited extent, to wholesalers.
Discount and free-standing toy stores continue to increase their market share.
During the year ended December 31, 1993, Toys R Us and Wal-Mart accounted for
approximately 22% and 10%, respectively, of worldwide consolidated net sales and
were the only customers accounting for 10% or more of consolidated net sales.
In general, the Company's major domestic and international customers
review its product lines and product concepts for the upcoming year at showings
beginning in late summer. The Company also participates in the domestic and
international toy industry trade fairs in the first quarter of the year. A
majority of the full-year orders are received by May 1. As is traditional in
the toy industry, these orders may be canceled at any time before they are
shipped. Historically, the greater proportion of shipments of products to
retailers occurs during the third and fourth quarters of the year.
See "Seasonality."
Through its marketing research department, the Company conducts basic
consumer research and product testing and monitors demographic factors and
trends. This information assists the Company in evaluating consumer acceptance
of products, including an analysis of increasing or decreasing demand for its
products.
The Company bases its production schedules on customer orders, modified
by historical trends, results of market research and current market information.
The actual
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<PAGE>
shipments of products ordered and the order cancellation rate are affected by
consumer acceptance of the product line, the strength of competing products,
marketing strategies of retailers and overall economic conditions. Unexpected
changes in these factors can result in a lack of product availability or excess
inventory in a particular product line.
Manufacturing
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The Company's products are manufactured in Company facilities and by
independent contractors. Products are also purchased from unrelated entities
that design, develop and manufacture the products. In order to provide greater
flexibility in the manufacture and delivery of products, and as part of a
continuing effort to reduce manufacturing costs, the Company has concentrated
production of most of its core products in the Company's facilities and
generally uses independent contractors for the production of non-core products.
As a result of the Fisher-Price Merger, Mattel acquired manufacturing
facilities in the states of Kentucky and New York, and in England and Mexico,
which are in addition to its existing manufacturing facilities in the Far East
(China, Indonesia and Malaysia), Mexico and Italy. The Company also utilizes
independent contractors to manufacture products in the United States, the Far
East and Australia. To protect the stability of its product supply, the Company
produces many of its key products in more than one facility.
Foreign countries in which the Company's products are manufactured
(principally China, Indonesia, Malaysia and Mexico) currently enjoy "most
favored nation" ("MFN") status under U.S. tariff laws, which provides the most
favorable category of U.S. import duties. As a result of conditions in China,
there has been, and may be in the future, opposition to the extension of MFN
status for China. In May 1993, President Clinton signed an executive order
extending MFN status for China through June 3, 1994.
The loss of MFN status for China would result in a substantial increase
in the import duty for toys manufactured in China and imported into the United
States and would result in increased costs for the Company and others in the toy
industry. The impact of such an event on the Company would be significantly
mitigated by the Company's ability to source product for the U.S. market from
countries other than China and ship product manufactured in China elsewhere.
Toward that end, the Company has extended its production capacity in other
countries. In addition, all of the manufacturing facilities gained by the
Company in the Fisher-Price Merger are outside of China, although some
Fisher-Price product is sourced in China. A number of other factors, including
the Company's ability to pass along the added costs through price increases and
the pricing policies of vendors in China, could further mitigate the impact of
a loss of China's MFN status.
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<PAGE>
On February 8, 1994, the European Union ("EU") adopted quotas on the
importation of certain classes of toys (as well as other products) manufactured
in China, although regulations implementing the quotas have yet to be
promulgated. The Company expects that the impact of these quotas on its
business will be significantly mitigated by shifts in demand in favor of toy
categories not subject to the quotas, and by the ability of the Company to
source product for the EU from countries other than China and ship product
manufactured in China elsewhere. The Company does not currently expect that
these quotas will have a material effect on its business.
Commitments
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In the normal course of business, the Company enters into contractual
arrangements for future purchases of goods and services to ensure availability
and timely delivery, and to obtain and protect the right to create and market
certain toys. Such arrangements include commitments for future inventory
purchases and royalty payments pursuant to licensing agreements. Certain of
these purchase agreements and licenses contain provisions for guaranteed or
minimum payments during the terms of the contracts and licenses. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Commitments" and Note 7 to the Consolidated Financial Statements
in the Annual Report to Shareholders, incorporated herein by reference.
Licenses and Distribution Agreements
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The Company's level of licensing activity has expanded in recent years.
Royalties paid to licensors during the years ended December 31, 1993,
December 31, 1992 and December 31, 1991 were approximately $69 million,
$50 million and $39 million, respectively.
The Company also distributes products which are independently designed
and manufactured. The Company's agreement for the distribution of the Nintendo
Entertainment System and related products in Australia was terminated in
December 1993.
Foreign Currency Contracts
- --------------------------
From time to time, the Company enters into foreign currency forward
exchange contracts, swaps and options as hedges of inventory purchases and sales
and various other intercompany transactions. The contracts are intended to fix
a portion of the Company's product cost and intercompany cash flows, and thereby
moderate the impact of currency fluctuations. The Company does not speculate
in foreign currencies.
For additional information regarding foreign currency contracts, see
Note 7 to the Consolidated Financial Statements in the Annual Report to
Shareholders, incorporated herein by reference.
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Seasonal Financing
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The Company's financing of seasonal working capital typically grows
throughout the first half of the year and peaks in the third or fourth quarter,
when accounts receivable are at their highest due to increased sales volume and
Company sales programs, and when inventories are at their highest in
anticipation of expected second half sales volume. See "Seasonality."
Borrowings for seasonal financing are generally repaid in full by year-end from
cash flows generated in the fourth quarter from sales and collection of accounts
receivable.
To finance its working capital requirements, the Company maintains and
periodically revises or replaces a revolving credit agreement with a commercial
bank group. The agreement in effect during 1993, which was recently replaced
(see below), was amended in the first quarter of 1993 to increase the total
facility to $350 million from $250 millon and to release the banks' lien on
Mattel's inventory and receivables. Within the total facility, up to $175.0
million was a standard revolving credit line available for either advances or
letters of credit in support of commercial paper issuances. Interest was
charged at alternative rates selected by Mattel not greater than the prime rate
charged by the agent bank, plus a commitment fee of 3/8 of one percent of the
unused line available for advances and 1/2 of one percent of the amount
utilized for standby letters of credit. The remaining $175.0 million was
available for nonrecourse purchases of certain trade accounts receivable of
Mattel by the commercial bank group providing the credit line. The agreement
required Mattel to comply with certain consolidated financial ratios and to
maintain certain levels of income.
In 1993, the Company's domestic seasonal borrowings outstanding under
the revolving credit agreement and other bank borrowings averaged approximately
$45.1 million and reached a peak of approximately $167.0 million during the
third quarter. This balance was fully repaid by December 31, 1993. The
Company's 1993 seasonal borrowings outstanding under foreign credit lines
averaged approximately $55.1 million, reached a peak of approximately
$76.1 million in the third quarter, and were also fully repaid by year end.
Effective in March 1994, the Company renegotiated its revolving credit
agreement. The new agreement consists of unsecured facilities providing a total
of $500.0 million in seasonal financing from the same group of commercial banks.
The facilities provide for up to $250.0 million in advances and backup for
commercial paper issuances ($125.0 million of which is a 364-day facility and
the other $125.0 million is a 3-year facility), and up to an additional
$250.0 million (a 3-year facility) for nonrecourse purchases of certain trade
accounts receivable by the bank group. In connection with the agreement,
the Company is to comply with certain consolidated financial covenants for
debt-to-capital, interest coverage and tangible net worth levels.
Concurrently with the consummation of the Fisher-Price Merger, the
Fisher- Price domestic seasonal credit line was terminated with a view to
financing Fisher- Price's domestic seasonal working capital needs under Mattel's
revolving credit agreement. During 1994, the Company expects to finance
Fisher-Price's foreign seasonal working capital needs under Mattel's seasonal
credit facilities and to terminate Fisher-Price's foreign seasonal credit lines.
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Borrowings for seasonal financing were significantly reduced in 1993
primarily as a result of a higher level of cash at the beginning of the year,
the issuance by the Company in May 1993 of $100 million aggregate principal
amount of 6-3/4% Notes due 2000 and the utilization of the Company's accounts
receivable sales facility.
The Company believes the amounts available to it under its revolving
credit agreement and its foreign credit lines will be adequate to meet its
seasonal financing requirements.
Raw Materials
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Packaging materials, most plastics and zinc essential to the production
and marketing of toy products are currently in adequate supply. These and other
raw materials are generally available from a number of suppliers.
Trademarks, Copyrights, and Patents
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Most of the Company's products are sold under trademarks, trade names
and copyrights and a number of those products incorporate patented devices or
designs. Trade names and trademarks are significant assets to the Company in
that they provide product recognition and acceptance worldwide.
The Company customarily seeks patent, trademark or copyright protection
covering its products, and it owns or has applications pending for United States
and foreign patents covering many of its products. A number of these trademarks
and copyrights relate to product lines that are significant to the Company and
the Company believes its rights to these properties are adequately protected.
The Company also licenses various of its trademarks, characters and other
property rights to others for use in connection with the sale by others of
non-toy products and other products which do not compete with the Company's
products.
Government Regulations
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The Company's toys are subject to the provisions of the Consumer Product
Safety Act, the Federal Hazardous Substances Act and the Flammable Fabrics Act,
and the regulations promulgated thereunder. The Consumer Product Safety Act and
the Federal Hazardous Substances Act enable the Consumer Product Safety
Commission (the "CPSC") to exclude from the market consumer products that fail
to comply with applicable product safety regulations or otherwise create a
substantial risk of injury, and articles that contain excessive amounts of a
banned hazardous substance. The Flammable Fabrics Act enables the CPSC to
regulate and enforce flammability standards for fabrics used in consumer
products. The CPSC may also require the repurchase by the manufacturer of
articles which are banned. Similar laws exist in some states and cities and in
various international markets.
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Fisher-Price's car seats are subject to the provisions of the National
Highway Transportation Safety Act, which enables the National Highway Traffic
Safety Administration ("NHTSA") to promulgate performance standards for child
restraint systems. Fisher-Price conducts periodic tests to ensure that its
child restraint systems meet applicable standards. A Canadian agency,
Transport Canada, also regulates child restraint systems sold for use in Canada.
As with the CPSC, NHTSA and Transport Canada can require the recall and
repurchase or repair of products which do not meet their respective standards.
The Company maintains a quality control program to ensure product safety
compliance with the various federal, state and international requirements.
Effects of Inflation
- --------------------
Inflation rates in the U.S. and major foreign countries in which the
Company operates have not had a significant impact on operating results for the
three years ended December 31, 1993. The U.S. Consumer Price Index increased
2.7% in 1993, 2.9% in 1992 and 3.1% in 1991. The Company is afforded some
protection from the impact of inflation as a result of high turnover of
inventories and benefitted from inflation on the repayment of fixed-rate
liabilities during these periods.
Employees
- ---------
The total number of persons employed by the Company and its subsidiaries
at any one time varies because of the seasonal nature of its manufacturing
operations. At December 31, 1993, the Company's total number of employees,
including its international operations, was approximately 21,000.
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Executive Officers of the Registrant
- ------------------------------------
The executive officers of the Company, all of whom are appointed annually
by the Board of Directors and serve at the pleasure of the Board, are as
follows:
<TABLE>
<CAPTION> OFF
EXECUTIVE
OFFICER
NAME AGE POSITION SINCE
- --------------------- --- ------------------------------- ---------
<S> <C> <C> <C>
John W. Amerman 62 Chairman of the Board & 1980
Chief Executive Officer
Jill E. Barad 42 President & Chief Operating 1984
Officer and a Director of
Mattel, Inc.
James A. Eskridge 51 President, Fisher-Price, Inc. 1988
and a Director of Mattel, Inc.
Joseph C. Gandolfo 51 President, Mattel Operations 1990
Lindsey F. Williams 57 President, Mattel International 1976
and a Director of Mattel, Inc.
Michael G. McCafferty 55 Executive Vice President & 1985
Chief Financial Officer
N. Ned Mansour 45 Senior Vice President, 1992
General Counsel & Secretary
E. Joseph McKay 53 Senior Vice President, Human 1993
Resources and Administration
Gary P. Rolfes 42 Senior Vice President 1993
& Controller
William Stavro 54 Vice President 1993
& Treasurer
</TABLE>
Mr. Amerman has been Chairman of the Board & Chief Executive Officer since
February 1987 and a member of the Board of Directors since November 1985.
Prior to that he served as President of Mattel International.
Ms. Barad has been President & Chief Operating Officer since August 1992 and a
member of the Board of Directors since November 1991. From December 1989 until
August 1992, she was President, Mattel USA. Prior to that she served in various
executive positions in the Marketing, Product Design and Product Development
areas.
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Mr. Eskridge has been a member of the Board of Directors since February 1993
and President of Fisher-Price, Inc. since November 1993. Prior to that he was
Executive Vice President & Chief Financial Officer of Mattel, Inc.
Mr. Gandolfo has been President, Mattel Operations, since April 1990. Prior to
that he was General Manager of Manufacturing, Thompson Consumer Electronics.
Mr. Williams has been a member of the Board of Directors since November 1991 and
has been President, Mattel International for more than five years.
Mr. McCafferty has been Executive Vice President & Chief Financial Officer since
November 1993. From June 1993 to November 1993 and from November 1985 to
October 1992 he was Senior Vice President & Treasurer. During the period from
October 1992 to June 1993, he was Senior Vice President & Controller.
Mr. McKay has been Senior Vice President, Human Resources and Administration
since November 1993. From December 1991 until November 1993 he was Vice
President, Human Resources. He was Senior Director Human Resources from
March 1991 to December 1991. Prior to that he was Vice President Human
Resources-Administration of Mileage Plus, Inc.
Mr. Mansour has been Senior Vice President, General Counsel & Secretary since
February 1993. From May 1992 until February 1993 he was Senior Vice
President & General Counsel and from April 1991 until May 1992 he was Vice
President & Associate General Counsel. Prior to that he was Vice President
& Assistant General Counsel.
Mr. Rolfes has been Senior Vice President & Controller since November 1993.
From June 1993 to November 1993 he was Vice President & Controller. Prior to
that he held various executive positions within the finance department.
Mr. Stavro has been Vice President & Treasurer since November 1993. From
March 1992 to November 1993 he was Vice President and Assistant Treasurer.
Prior to that he was Assistant Treasurer for more than five years.
Item 2. Properties
- ------- ----------
The Company owns its corporate headquarters consisting of approximately
335,000 square feet in El Segundo, California. The facility is subject to a
$45 million mortgage. The Company also leases two buildings in El Segundo which
consist of a total of approximately 250,000 square feet for its design and
development and audio-visual departments.
The Company maintains sales offices in California, Illinois, New York and
Texas and warehouse and distribution facilities in California and Texas. The
Company owns a computer facility in Phoenix, Arizona. Internationally, the
Company has offices and/or warehouse space in Argentina, Australia, Belgium,
Canada, Chile, Denmark, France, Germany, Greece, Hong Kong and in certain other
areas of Asia, Italy, Japan, The Netherlands, Spain, Switzerland and the United
Kingdom. The Company's principal manufacturing facilities, including the
Fisher-Price facilities, are located in China, Indonesia, Italy, Malaysia,
Mexico, the United Kingdom and the United States. See "Manufacturing."
13
<PAGE>
Most of the Company's facilities are occupied under long-term leases and,
for the most part, are fully utilized, although excess manufacturing capacity
exists from time to time based on product mix and demand. With respect to
leases which are scheduled to expire during the next twelve months, the Company
may negotiate new lease agreements, renew leases or utilize alternative
facilities.
As a result of the Fisher-Price Merger, Mattel acquired the approximately
288,000 square foot Fisher-Price headquarters building and a second smaller
office building in East Aurora, New York and manufacturing, distribution and
warehousing facilities in Kentucky, New York, Tennessee, Belgium, Canada, Mexico
and the United Kingdom. In addition, Fisher-Price owns or leases office and
showroom space in New York, Texas, Belgium, Canada, Denmark, France, Germany,
Hong Kong, Italy, Mexico and the United Kingdom. The Company is currently in
the process of evaluating the desirability of maintaining certain of these
facilities and expects to sell, sublease or not renew the leases of those
facilities which are vacant, underutilized or redundant of Mattel facilities.
Item 3. Legal Proceedings
- ------- -----------------
The Company's Fisher-Price subsidiary has executed a consent order with
the State of New York involving a remedial action/feasibility study for
voluntary cleanup of contamination at one of its manufacturing plants. The
ultimate liability associated with this cleanup presently is estimated to be
less than $850,000.
The Company is involved in various litigation and other legal matters
which are being defended and handled in the ordinary course of business. None
of these matters is expected to result in outcomes having a material adverse
effect on the Company's liquidity, operating results or consolidated financial
position.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
A Special Meeting of Stockholders of Mattel was held on November 30, 1993
to consider the three proposals described below. Proxies for the meeting were
solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended, and there was no solicitation in opposition to that of management.
Each of the proposals was approved based upon the respective tallies of votes
set forth below.
14
<PAGE>
Proposal 1: To approve the issuance of shares of Mattel common stock
in connection with the Agreement and Plan of Merger, dated as of August 19,
1993, among Mattel, MAT Acquisition, Inc., a wholly-owned subsidiary of Mattel
("Sub"), and Fisher-Price pursuant to which (i) Sub was merged into Fisher-Price
and Fisher-Price became a wholly-owned subsidiary of Mattel, and (ii) each
outstanding share of Fisher-Price common stock (other than shares owned by
Fisher-Price as treasury stock or by its subsidiaries or by Mattel or its
subsidiaries, all of which were canceled), were converted into 1.275 shares of
Mattel common stock, including the corresponding percentage of rights to
purchase Mattel's Series E Junior Participating Preference Stock.
Votes Cast Votes Cast Votes Broker
For Against Abstaining Non-votes
---------- ---------- ---------- ---------
76,565,585 761,611 155,626 6,753,524
Proposal 2: To approve an amendment to the Amended & Restated
Certificate of Incorporation of Mattel to increase the number of shares of
common stock authorized to be issued from 150,000,000 to 300,000,000.
Votes Cast Votes Cast Votes Broker
For Against Abstaining Non-votes
---------- ---------- ---------- ---------
80,704,897 2,741,169 790,280 0
Proposal 3: To approve an amendment to the Mattel 1990 Stock Option
Plan to increase, above the 1% limitation set forth in the plan, the amount of
capital stock that may be the subject of awards granted wholly or partly in
stock in 1993 by 3,000,000 shares of capital stock (with any such capital stock
which is not the subject of awards in 1993 to be carried forward and available
for awards in succeeding calendar years).
Votes Cast Votes Cast Votes Broker
For Against Abstaining Non-votes
---------- ---------- ---------- ---------
64,197,291 12,446,002 839,528 6,753,525
15
<PAGE>
PART II
-------
Item 5. Market for the Registrant's Common Equity and Related
- ------- Stockholder Matters
-----------------------------------------------------
For information regarding the markets in which the Company's common stock
is traded, see the cover page hereof, and for information regarding the high and
low sales prices of the Company's common stock for the last two calendar years,
see Note 9 to the Consolidated Financial Statements in the Annual Report to
Shareholders, incorporated herein by reference.
As of March 18, 1994, the Company had approximately 40,000 holders of
record of its common stock.
In April 1992 the Company paid a dividend of $0.026 per share of common
stock. The Company paid per share dividends of $0.040 in July and October of
1992 and in January and April of 1993. In each of July and October of 1993 and
January of 1994, the Company paid dividends of $0.048 per share. The dividends
have been adjusted to reflect a three-for-two stock split and a five-for-four
stock split which the Company declared on its common stock to holders of record
on May 18, 1992 and December 17, 1993, respectively.
Item 6. Selected Financial Data
- ------- -----------------------
The information under the caption "Five-Year Financial Summary" on
page 27 in the Annual Report to Shareholders is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Results of Operations
- ------- and Financial Condition
-------------------------------------------------------------
The information under the caption "Management's Discussion and Analysis
of Results of Operations and Financial Condition" on pages 28 through 31 in the
Annual Report to Shareholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The consolidated financial statements of Mattel, Inc. and Subsidiaries,
together with the report of Price Waterhouse dated February 8, 1994, included on
pages 32 through 51 in the Annual Report to Shareholders are incorporated herein
by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
- ------- and Financial Disclosure
-----------------------------------------------------------
None
16
<PAGE>
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- --------- --------------------------------------------------
Information required under this Item relating to members of the Board of
Directors is incorporated by reference herein from the Company's 1994 Notice of
Annual Meeting of Stockholders and Proxy Statement. The information with
respect to executive officers of the Company appears under the heading
"Executive Officers of the Registrant" in Part I herein.
Item 11. Executive Compensation
- -------- ----------------------
The information required under this Item is incorporated by reference
herein from the Company's 1994 Notice of Annual Meeting of Stockholders and
Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
- -------- Management
---------------------------------------------------
The information required under this Item is incorporated by reference
herein from the Company's 1994 Notice of Annual Meeting of Stockholders and
Proxy Statement.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
The information required under this Item is incorporated by reference
herein from the Company's 1994 Notice of Annual Meeting of Stockholders and
Proxy Statement.
17
<PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statements, and Reports on Form 8-K
- -------- -------------------------------------------------------
(a) The following documents are filed as part of this report:
Annual Report
Page Number(1)
-------------
(1) Financial Statements
Consolidated Balance Sheets as of 32-33
December 31, 1993 and December 31, 1992
Consolidated Results of Operations for 34
the years ended December 31, 1993,
December 31, 1992 and December 31, 1991
Consolidated Statements of Cash Flows for 35
the years ended December 31, 1993,
December 31, 1992 and December 31, 1991
Consolidated Statements of Shareholders' 36
Equity for the years ended December 31, 1993,
December 31, 1992 and December 31, 1991
Notes to Consolidated Financial Statements 37-50
Report of Price Waterhouse, Independent Accountants 51
to the Company
(1) Incorporated by reference from the indicated pages of the Annual
Report to Shareholders for the year ended December 31, 1993. With the exception
of the information incorporated by reference in Items 1, 5, 6, 7, 8 and 14 of
this report, the Annual Report to Shareholders is not deemed filed as part of
this report.
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders
of Fisher-Price, Inc.
We have audited the consolidated balance sheet of Fisher-Price, Inc. and
subsidiaries as of January 3, 1993, and the related consolidated statements of
income, stockholder's equity and cash flows for the fiscal year then ended. We
have also audited the financial statement schedules. These financial statements
and financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Fisher-Price, Inc. and subsidiaries as of January 3, 1993, and the consolidated
results of their operations and their cash flows for the fiscal year then ended
in conformity with generally accepted accounting principles. In addition, in
our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand
- ---------------------
Boston, Massachusetts
February 4, 1993
19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors and
Stockholders of Fisher-Price, Inc.:
We have audited the consolidated statement of income, stockholders' equity and
cash flows of Fisher-Price, Inc. (a Delaware Corporation) and subsidiaries for
the six months ended December 29, 1991, prior to the restatement (and,
therefore, are not presented herein) for the merger between Mattel, Inc. and
Fisher-Price, Inc. as described in Note 2 to the Mattel, Inc. and subsidiaries
consolidated financial statements included in Mattel, Inc.'s Form 10-K as of
December 31, 1993. Fisher-Price, Inc.'s consolidated financial statements and
schedules related thereto referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on
Fisher-Price, Inc.'s consolidated financial statements and schedules based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Fisher-Price, Inc. and subsidiaries for the six months ended December 29, 1991,
in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements prior to the restatement, taken as a whole. The schedules, prior to
the restatement (and therefore, not presented herein), listed in Part IV,
Item 14(a)2 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
Fisher-Price, Inc.'s schedules, prior to restatement, have been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements,
prior to restatement, taken as a whole.
/s/ ARTHUR ANDERSEN & CO.
- -------------------------
Rochester, New York
February 11, 1992
20
<PAGE>
(2) Financial Statement Schedules for the years ended December 31, 1993,
December 31, 1992 and December 31, 1991 (1)
Schedule II - Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other than Related Parties
Schedule VIII - Valuation and Qualifying Accounts and Allowances
(3) Exhibits (Listed by numbers corresponding to Item 601 of Regulation S-K)
2.0 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 from Exhibit 2.1 to the
Company's Registration Statement on Form S-4, Registration
Statement No. 33-50749)
3.0 Restated Certificate of Incorporation of the Company
3.1 By-laws of the Company, as amended to date (incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992)
4.0 Rights Agreement, dated as of February 7, 1992, between the
Company and The First National Bank of Boston, as Rights Agent
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A, dated February 12, 1992)
(The Company has not filed certain long-term debt instruments
under which the principal amount of securities authorized to
be issued does not exceed 10% of the total assets of the
Company. Copies of such agreements will be provided to the
Securities and Exchange Commission upon request.)
10.0 Credit Agreement (Multi-Year Facility) dated as of March 18,
1994 among the Company, the Banks named therein and Bank of
America National Trust and Savings Association, as Agent
(incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated March 23, 1994)
10.1 Credit Agreement (364-Day Facility) dated as of March 18, 1994
among the Company, the Banks named therein and Bank of America
National Trust and Savings Association, as Agent (incorporated
by reference to Exhibit 99.2 to the Company's Current Report on
Form 8-K dated March 23, 1994)
(1) All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or notes thereto.
21
<PAGE>
10.2 Amended and Restated Transfer and Administration Agreement dated
as of March 18, 1994 among the Company, Mattel Sales Corp., the
Banks named therein and Nationsbank of Texas, N.A., as Agent
(incorporated by reference to Exhibit 99.3 to the Company's
Current Report on Form 8-K dated March 23, 1994)
10.3 Underwriting Agreement dated May 19, 1993 between the Company,
Morgan Stanley & Co. Incorporated and Kidder, Peabody & Co.
Incorporated
10.4 Stock Subscription Warrant dated as of June 28, 1991 between
Fisher-Price and certain investors (incorporated by reference to
Exhibit 4(c) to Fisher-Price's Report on Form 10-K for the
transition period from July 1, 1991 to December 29, 1991)
10.5 Third Amended and Restated Credit Agreement dated as of
March 19, 1993 among the Company, the Banks named therein, Bank
of America National Trust and Savings Association, as Agent and
Bank of America National Trust and Savings Association, as
Collateral Agent ("Third Amended and Restated Credit Agreement")
(incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated September 29, 1993)
10.6 First Amendment to Third Amended and Restated Credit Agreement,
dated as of July 19, 1993, among the Company, the Banks named
therein, Bank of America National Trust and Savings Association,
as Agent, and Bank of America National Trust and Savings
Association, as Collateral Agent (incorporated by reference to
Exhibit 99.2 to the Company's Current Report on Form 8-K dated
September 29, 1993)
10.7 Second Amendment to Third Amended and Restated Credit Agreement,
dated as of November 8, 1993, among the Company, the Banks named
therein, Bank of America National Trust and Savings Association,
as Agent and Bank of America National Trust and Savings
Association, as Collateral Agent
10.8 Transfer and Administration Agreement, dated as of March 19,
1993, among Mattel Sales Corp., Mattel, Inc., the Banks named
therein and Nationsbank of Texas, N.A., as Agent (incorporated
by reference to Exhibit 99.3 to the Company's Current Report on
Form 8-K dated September 29, 1993)
10.9 Underwriting Agreement dated July 31, 1992 between the Company,
Morgan Stanley & Co. Incorporated and Kidder, Peabody & Co.
Incorporated (incorporated by reference to Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992)
22
<PAGE>
Executive Compensation Plans and Arrangements of the Company
- ------------------------------------------------------------
10.10 Form of Indemnity Agreement between Mattel and its directors and
certain of its executive officers (incorporated by reference to
Exhibit B to Notice of Annual Meeting of Stockholders of the
Company dated March 24, 1987)
10.11 Form of Employment Agreement between the Company and certain
executive officers (incorporated by reference to Exhibit 10.6 of
Amendment No. 1 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 26, 1987)
10.12 Form of Employment Agreement between the Company and certain
executive officers (incorporated by reference to Exhibit 10.8
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992)
10.13 Form of Amended & Restated Employment Agreement between the
Company and certain executive officers
10.14 Mattel, Inc. 1993 Management Incentive Plan Highlights
10.15 Mattel, Inc. 1993 - 1995 Long-Term Incentive Plan Highlights
(incorporated by reference to Exhibit 99.4 to the Company's
Current Report on Form 8-K dated September 29, 1993)
10.16 Mattel, Inc. Financial Security Program Agreement for certain
officers (incorporated by reference to Exhibit 10.7 of the
Company's Registration Statement No. 2-95161 on Form S-1, filed
January 7, 1985)
10.17 Form of Deferred Compensation Plan for Directors (incorporated
by reference to Exhibit No. 10.11 of Amendment No. 1 of the
Company's Annual Report on Form 10-K for the year ended
December 26, 1987)
10.18 Mattel, Inc. 1990 Stock Option Plan (incorporated by reference
to Exhibit A to the Notice of Annual Meeting of Stockholders and
Proxy Statement of the Company dated March 15, 1990)
10.19 Amendment No. 1 to the Mattel, Inc. 1990 Stock Option Plan
(incorporated by reference to the information under the heading
"Amendment to Mattel 1990 Stock Option Plan" on page F-1 of the
Joint Proxy Statement/Prospectus of the Company and Fisher-Price
included in the Company's Registration Statement on Form S-4,
Registration Statement No. 33-50749)
10.20 Form of Award Agreement evidencing award of stock appreciation
rights granted pursuant to the Company's 1990 Stock Option Plan
to certain executive officers of the Company ("Award Agreement")
(incorporated by reference to Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991)
23
<PAGE>
10.21 Form of First Amendment to Award Agreement
10.22 Form of Restricted Stock Award Agreement under the Mattel 1990
Stock Option Plan
10.23 Mattel, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.10 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 29, 1990)
10.24 Description of the Mattel, Inc. Deferred Compensation Plan for
Officers (incorporated by reference to Exhibit 10.16 to the
Mattel, Inc. Annual Report on Form 10-K for the year ended
December 31, 1991)
Executive Compensation Plans and Arrangements of Fisher-Price
- -------------------------------------------------------------
10.25 Form of Employment Agreement, dated August 16, 1993, between
Fisher-Price and certain executive officers
10.26 Form of Employment Agreement, dated August 16, 1993, between
Fisher-Price and an executive officer
10.27 Form of Employment Agreement, dated as of March 12, 1993,
between Fisher-Price and Ronald J. Jackson (incorporated by
reference to Exhibit 10(f)(1) to Fisher-Price's Annual Report on
Form 10-K for the fiscal year ended January 3, 1993)
10.28 Form of Amendment, dated August 16, 1993, to Employment
Agreement, dated as of March 12, 1993, between Fisher-Price and
Ronald J. Jackson
10.29 Form of Employment Agreement, dated as of February 25, 1992,
between Fisher-Price and certain executive officers
(incorporated by reference to Exhibit 10(f)(2) to Fisher-Price's
Form 10-K for the transition period from July 1, 1991 to
December 29, 1991)
10.30 Deferred Compensation Plan for Outside Directors of Fisher-Price
(incorporated by reference to Exhibit 10(g) to Fisher-Price's
Registration Statement on Form 10 dated June 28, 1991)
10.31 Fisher-Price Long-Term Incentive Plan of 1991 (incorporated by
reference to Exhibit 10(h) to Fisher-Price's Registration
Statement on Form 10 dated June 28, 1991)
10.32 Fisher-Price Executive Incentive Bonus Plan (incorporated by
reference to Exhibit 10(i) to Fisher-Price's Registration
Statement on Form 10 dated June 28, 1991)
24
<PAGE>
10.33 First Amendment to Executive Incentive Bonus Plan, dated as of
February 12, 1992 (incorporated by reference to Exhibit 10(i)(1)
to Fisher-Price's Report on Form 10-K for the transition period
from July 1, 1991 to December 29, 1991)
10.34 The Fisher-Price Management Incentive Bonus Plan (incorporated
by reference to Exhibit 10(j) to Fisher-Price's Registration
Statement on Form 10 dated June 28, 1991)
10.35 Fisher-Price Matching Savings Plan (incorporated by reference to
Exhibit 10(k) to Fisher-Price's Registration Statement on
Form 10 dated June 28, 1991)
10.36 The Fisher-Price Pension Plan (1989 Restatement) (incorporated
by reference to Exhibit 10(l) to Fisher-Price's Registration
Statement on Form 10 dated June 28, 1991)
10.37 The Fisher-Price Profit Sharing and Retirement Savings Plan
(1989 Restatement) (incorporated by reference to Exhibit 10(m)
to Fisher-Price's Registration Statement on Form 10 dated
June 28, 1991)
10.38 The Fisher-Price Deferral and Compensation Adjustment Benefit
Plan (incorporated by reference to Exhibit 10(o) to
Fisher-Price's Registration Statement on Form 10 dated
June 28, 1991)
10.39 The Fisher-Price Salaried Employees Compensation and Benefits
Protection Plan (incorporated by reference to Exhibit 10(p)
to Fisher-Price's Registration Statement on Form 10 dated
June 28, 1991)
11.0 Computation of Income per Common and Common Equivalent Share
13.0 Pages 27 through 53 of the Mattel, Inc. Annual Report to
Shareholders for the year ended December 31, 1993
21.0 Subsidiaries of the Registrant
23.0 Consent of Price Waterhouse
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Coopers & Lybrand
24.0 Power of Attorney (on page 28 of Form 10-K)
25
<PAGE>
(b) Reports on Form 8-K
Mattel, Inc. filed the following Current Reports on Form 8-K
during the quarterly period ended December 31, 1993
Financial
Date of Report Items Reported Statements Filed
------------------ -------------- ----------------
September 29, 1993 7 None
October 18, 1993 5, 7 None
November 3, 1993 5, 7 None
November 30, 1993 5, 7 None
(c) Exhibits Required by Item 601 of Regulation S-K
See Item (3) above
(d) Financial Statement Schedules
Schedule II - Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other than Related
Parties
Schedule VIII - Valuation and Qualifying Accounts and Allowances
Copies of Form 10-K (which includes Exhibit 24.0), Exhibits
11.0, 13.0, 21.0, 23.0, 23.1, 23.2, and the Annual Report to
Shareholders are available to stockholders of the Company
without charge. Copies of other Exhibits can be obtained by
stockholders of the Company upon payment of ten cents per page
for such Exhibits. Written requests should be sent to
Secretary, Mattel, Inc., 333 Continental Boulevard,
El Segundo, California 90245-5012.
26
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Gary P. Rolfes
-----------------------
Gary P. Rolfes
Senior Vice President &
Date: As of March 24, 1994 Controller
--------------------
27
<PAGE>
POWER OF ATTORNEY
-----------------
We, the undersigned directors and officers of Mattel, Inc. do hereby
severally constitute and appoint John W. Amerman, N. Ned Mansour, Michael G.
McCafferty, Robert Normile and John L. Vogelstein, and each of them, our true
and lawful attorneys and agents, to do any and all acts and things in our name
and behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our names in the capacities indicated below, which
said attorneys and agents, or any of them, may deem necessary or advisable to
enable said Corporation to comply with the Securites Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Annual Report on Form 10-K,
including specifically, but without limitation, power and authority to sign for
us or any of us, in our names in the capacities indicated below, any and all
amendments hereto; and we do each hereby ratify and confirm all that said
attorneys and agents, or any one of them, shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John W. Amerman Chairman of the Board March 24, 1994
- ------------------- and Chief Executive Officer
JOHN W. AMERMAN
/s/ Michael G. McCafferty Executive Vice-President March 24, 1994
- ------------------------- and Chief Financial Officer
MICHAEL G. McCAFFERTY
/s/ Gary P. Rolfes Senior Vice-President March 24, 1994
- ------------------ and Controller
GARY P. ROLFES
/s/ Jill E. Barad Director, President and March 24, 1994
- ----------------- Chief Operating Officer
JILL E. BARAD
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Harold Brown Director March 24, 1994
- ----------------
HAROLD BROWN
/s/ James A. Eskridge Director and President, March 24, 1994
- --------------------- Fisher-Price, Inc.
JAMES A. ESKRIDGE
/s/ Tully M. Friedman Director March 24, 1994
- ---------------------
TULLY M. FRIEDMAN
/s/ Ronald J. Jackson Director March 24, 1994
- ---------------------
RONALD J. JACKSON
/s/ E. Robert Kinney Director March 24, 1994
- --------------------
E. ROBERT KINNEY
/s/ Ronald M. Loeb Director March 24, 1994
- ------------------
RONALD M. LOEB
/s/ Edward H. Malone Director March 24, 1994
- --------------------
EDWARD H. MALONE
/s/ John H. Mullin III Director March 24, 1994
- ----------------------
JOHN H. MULLIN, III
/s/ Edward N. Ney Director March 24, 1994
- -----------------
EDWARD N. NEY
/s/ William D. Rollnick Director March 24, 1994
- -----------------------
WILLIAM D. ROLLNICK
/s/ John L. Vogelstein Director March 24, 1994
- ----------------------
JOHN L. VOGELSTEIN
/s/ Lindsey F. Williams Director and President, March 24, 1994
- ----------------------- Mattel International
LINDSEY F. WILLIAMS
</TABLE>
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
---------------------------------
To the Board of Directors of Mattel, Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 8, 1994, appearing on page 51 of the December 31, 1993
Annual Report to Shareholders of Mattel, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) and the reports of other auditors also included an audit of the
Financial Statement Schedules listed in Item 14(a)(2) of this Form 10-K. In
our opinion, based on our audits and the reports of other auditors, these
Financial Statement Schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PRICE WATERHOUSE
- -----------------------
Los Angeles, California
February 8, 1994
30
<PAGE>
<TABLE>
SCHEDULE II
MATTEL, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
For the Year Ended December 31, 1993
(In thousands)
<CAPTION>
Deductions
Balance at ---------------------- Balance at End of Year
Beginning Amounts Amounts ----------------------
Name of Debtor (a) of Year Additions (b) Collected Written Off Current Not Current
- ------------------ ---------- ------------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert Tezak $171 $0 $171 $0 $0 $0
Joseph Cusimano 41 0 41 0 0 0
Thomas Ferguson 16 0 16 0 0 0
David Jackman 15 0 15 0 0 0
Jeff Conrad 13 0 13 0 0 0
Richard Penland 12 0 12 0 0 0
<FN>
(a) All of the above listed individuals are officers of International Games, Inc. ("IGI"), an affiliate of Mattel, Inc.
(b) All of the above amounts are notes receivable which resulted from the exercise of stock options by the above named
employeees of IGI immediately prior to the February 1992 merger and represent withholding taxes advanced by IGI on
behalf of the affected employees. The notes matured on April 15, 1993. All notes, except for Mr. Tezak's, bore
interest at 5.5%; Mr. Tezak had two notes as of January 1, 1993 as follows: (1) $133 which bore interest at 6.2%
and (2) $38 which bore interest at 5.5%.
</TABLE>
31
<PAGE>
SCHEDULE VIII
MATTEL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance
Beginning Charged to Net at End
of Year Operations Deductions of Year
---------- ---------- --------------- -------
Allowance for
Doubtful Accounts
- --------------------
<S> <C> <C> <C> <C>
Year Ended
December 31, 1993 $35,115 $4,169 ($18,260)(a) $21,024
Year Ended
December 31, 1992 31,545 21,665 (18,095)(a) 35,115
Year Ended
December 31, 1991 17,130 6,560 7,855 (a)(b) 31,545
<FN>
(a) Includes write-offs, recoveries of previous write-offs, and currency
translation adjustments.
(b) During 1991, a portion of the allowance was reclassified with the Child
World notes receivable to Sundry Assets. Additionally, the Fisher-Price
Allowance for Doubtful Accounts as of July 1, 1991 in the amount of $16.8
million was combined with that of Mattel as a result of the merger, in
accordance with pooling of interests accounting.
</TABLE>
32
<PAGE>
Exhibit 3.0
RESTATED CERTIFICATE OF INCORPORATION
OF
MATTEL, INC.
(Originally incorporated on March 6, 1968)
FIRST: The name of the corporation (hereinafter called the
"Company") is MATTEL, INC.
SECOND: The registered office of the Company in the State of
Delaware is located at Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, in the County of New Castle. The name of its
registered agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Company is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The Company is authorized to issue a total of three
hundred twenty three million (323,000,000) shares of all classes of stock.
Of such total number of authorized shares of stock, three hundred million
(300,000,000) shares are Common Stock, each of which shares of Common
Stock has a par value of One Dollar ($1.00), three million (3,000,000)
shares are Preferred Stock, each of which shares of Preferred Stock has a
par value of One Dollar ($1.00), and twenty million (20,000,000) shares of
Preference Stock, each of which shares of Preference Stock has a par value
of one cent ($0.01).
A statement of the designations of the authorized classes of stock or
of any series thereof, and the powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, or of the authority of the Board of Directors to fix by
resolution or resolutions such designations and other terms, is as follows:
A. Preferred Stock and Preference Stock:
Shares of Preferred Stock and Preference Stock may be issued from
time to time in one or more series.
The Board of Directors is hereby authorized, within the limitations
and restrictions stated in this Article FOURTH, to fix by resolution or
resolutions the designation of each series of Preferred Stock and Preference
Stock and the powers, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
including without limiting the generality of the foregoing, such provisions as
may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets,
1
<PAGE>
conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the Board of
Directors under the General Corporation Law of Delaware.
If any proposed amendment to the Certificate of Incorporation of the
Company would alter or change the preferences, special rights or powers
given to any one or more outstanding series of Preferred Stock or
Preference Stock so as to affect such series adversely, or would authorize
the issuance of a class or classes of stock having preferences or rights with
respect to dividends or dissolution or the distribution of assets that would
be superior to the preferences or rights of such series of Preferred Stock or
Preference Stock, then the holders of each such series of Preferred Stock
or Preference Stock so affected by the amendment shall be entitled to vote
as a series upon such amendment, and the affirmative vote of two-thirds
(2/3) of the outstanding shares of each such series shall be necessary to the
adoption thereof, in addition to such other vote as may be required by the
General Corporation Law of Delaware.
The number of authorized shares of Preferred Stock and Preference
Stock may be increased or decreased by the affirmative vote of the holders
of a majority of the stock of the Company entitled to vote, without there
being a class vote of the Preferred Stock or Preference Stock.
B. Common Stock:
Subject to all of the preferences and rights of the Preferred Stock
and the Preference Stock or a series of either that may be fixed by a
resolution or resolutions of the Board of Directors, dividends may be paid
on the Common Stock as and when declared by the Board of Directors, out
of any funds of the Company legally available for the payment of such
dividends.
Except as may otherwise be provided by a resolution or resolutions
of the Board of Directors concerning the Preferred Stock and the
Preference Stock or a series of either, or by this Certificate of Incorporation
or the General Corporation Law of Delaware, the holders of the shares of
Common Stock issued and outstanding shall have and possess the exclusive
right to notice of stockholders' meetings and the exclusive power to vote.
C. Series E Junior Participating Preference Stock:
The designated powers, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of the Series E Junior Participating Preference Stock
are as follows:
1. Designation and Amount. The shares of such series shall be
designated as "Series E Junior Participating Preference Stock" (the "Series
E Preference Stock") and the number of shares constituting the Series E
Preference Stock shall be 2,000,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors;
2
<PAGE>
provided,
that no decrease shall reduce the number of shares of Series E Preference
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding
securities issued by the Company convertible into Series E Preference
Stock.
2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), of the Company or Preference Stock (or
any similar stock) ranking prior and superior to the Series E
Preference Stock with respect to dividends, the holders of
shares of Series E Preference Stock, in preference to the
holders of Common Stock, par value $1.00 per share (the
"Common Stock"), of the Company, and of any other junior
stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day
of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of
a share of Series E Preference Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1
or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of
any share or fraction of a share of Series E Preference Stock.
In the event the Company shall at any time declare or pay
any dividend on the Common Stock payable in shares of
Common Stock, or effect subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise that by payment of a dividend in
shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount
to which holders of shares of Series E Preference Sock were
entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such
amount by fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to
such event.
3
<PAGE>
(B) The Company shall declare a dividend or distribution
on the Series E Preference Stock as provided in paragraph
(A) of this Section immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1 per share on the
Series E Preference Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series E Preference Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination
of holders of shares of Series E Preference Stock entitled to
receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the
shares of Series E Preference Stock in an amount less than
the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the
determination of holders of shares of Series E Preference
Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not
more than 60 days prior to the date fixed for the payment
thereof.
3. Voting Rights. The holders of shares of Series E
Preference Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series E Preference Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a
vote of the stockholders of the Company. In the event the
Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect
a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the number of votes
per share to which holders of shares of Series E Preference
Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the
4
<PAGE>
numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred
Stock or Preference Stock or any similar stock, or by law, the
holders of shares of Series E Preference Stock and the
holders of shares of Common Stock and any other capital
stock of the Company having general voting rights shall vote
together as one class on all matters submitted to a vote of
stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series E Preference Stock shall have no
special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate
action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series E Preference Stock as
provided in Section 2 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or
not declared, on shares of Series E Preference Stock
outstanding shall have been paid in full, the Company shall
not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution
or winding up) to the Series E Preference Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series E
Preference Stock, except dividends paid ratably on the
Series E Preference Stock and all such parity stock on
which dividends are payable or in arrears in
proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation, dissolution
or winding up) to the Series E Preference Stock,
provided that the Company may at any time redeem,
purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the
Company ranking junior (as to dividends and upon
5
<PAGE>
dissolution, liquidation and winding up) to the Series
E Preference Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series E Preference Stock,
or any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding
up) with the Series E Preference Stock, except in
accordance with a purchase offer made in writing or
by publication (as determined by the Board of
Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative
rights and preferences of the respective series and
classes, shall determine in good faith will result in fair
and equitable treatment among the respective series
or classes.
(B) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration
any shares of stock of the Company unless the Company
could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such
manner.
5. Reacquired Shares. Any shares of Series E Preference Stock
purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preference Stock and may be reissued as part of a new series of
Preference Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Designation creating a series of Preferred Stock or Preference Stock or
any similar stock or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall
be made (A) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series E
Preference Stock unless, prior thereto, the holders of shares of Series E
Preference Stock shall have received $100 per share, plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares
of Series E Preference Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock, or (B) to the holders of shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series E Preference Stock, except
distributions made ratably on the Series E Preference Stock and all such
parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up.
In the event the Company shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the
6
<PAGE>
outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series E Preference Stock were entitled
immediately prior to such event under the provision in clause (A) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
7. Consolidation, Merger, etc. In case the Company shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case
each share of Series E Preference Stock shall at the same time be similarly
exchanged or changed into an amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Company shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series E Preference Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
8. No Redemption. The shares of Series E Preference Stock
shall not be redeemable.
9. Rank. The Series E Preference Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all
series of any other class of Preferred Stock or Preference Stock.
10. Amendment. If any proposed amendment to the Certificate
of Incorporation would alter or change the preferences, special rights or
powers given to the Series E Preference Stock so as to affect the Series E
Preference Stock adversely, or would authorize the issuance of a class or
classes of stock having preferences or rights with respect to dividends or
dissolutions or the distribution of assets that would be superior to the
preferences or rights of the Series E Preference Stock, then the holders of
the Series E Preference Stock shall be entitled to vote as a series upon such
amendment, and the affirmative vote of two-thirds of the outstanding shares
of Series E Preference Stock shall
7
<PAGE>
be necessary to the adoption thereof, in
addition to such other vote as may be required by the General Corporation
Law of the State of Delaware.
D. 12.5% Convertible Preference Stock, Series F:
The designated powers, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, the 12.5% Convertible Preference Stock, Series F, are
as follows:
1. Designation. The shares of such series shall be designated as
"12.5% Convertible Preference Stock, Series F" (the "Series F Stock")
2. Number of Shares. The number of shares constituting the
Series F Stock be and the same is hereby fixed as 864,293 and cannot be
increased.
3. Stated Capital. The amount to be represented in stated
capital at all times for each share of the Series F Stock shall be its par
value of $.01 per share.
4. Rank. The Series F Stock shall, with respect to dividend
rights and rights on liquidation, rank (i) junior to, or on parity with, as the
case may be, any other series of the Preferred Stock or Preference Stock
established by the Board of Directors, the terms of which shall specifically
provide that such series shall rank senior to, or on parity with, as the case
may be, the Series F Stock with respect to dividend rights and rights on
liquidation, and (ii) prior to any other equity securities of the Company
including all classes of the Common Stock, $1.00 par value per share
(collectively, the "Common Stock"), of the Company. (All of such equity
securities of the Company to which the Series F Stock rank prior in right
of dividends or in liquidation, as the case may be, including all classes of
the Common Stock, are at times collectively referred to herein as the
"Junior Securities".)
5. Dividends.
(A) From and after November 26, 1991 and prior to the
date of conversion thereof, the holders of such stock shall be
entitled to receive, out of the assets of the Company at the
time legally available therefor and before any dividend or
other distribution is declared or paid with respect to the
outstanding shares of Common Stock, cumulative cash
dividends, as and when declared by the Board of Directors of
the Company, at the rate of $4.882 per share per annum.
Such dividends shall be payable in arrears, in equal quarterly
installments of $1.2205 per share on November 26, February
26, May 26 and August 26, or on such other date in
November, February, May or August of each year as or shall
be designated by the Board of Directors of the Company
(each such date is referred to herein as a "Dividend Payment
Date" and the quarterly period between consecutive Dividend
Payment Dates is referred to herein as a "Dividend Period");
each such quarterly dividend shall be paid to
8
<PAGE>
the holders of
record of outstanding shares of Series F Stock as their names
shall appear on the share register of the Company on the
corresponding Record Date. As used herein, the term
"Record Date" means, with respect to the quarterly dividends
payable on November 26, February 26, May 26 and August
26, respectively, the preceding November 15, February 15,
May 15 and August 15, or such other record date as may be
designated by the Board of Directors of the Company in the
event that the Board of Directors of the Company designates
a Dividend Payment Date other than the 26th day of each
such month.
(B) If, on any Dividend Payment Date which is prior to the
date of conversion of shares of Series F Stock, full cash
dividends pursuant to subclause (A) above are not paid or
made available to the holders of outstanding shares of Series
F Stock and the funds available to the Company for such
purpose shall be insufficient to permit payment in full in cash
to all such holders of outstanding shares of Series F Stock of
the preferential dividend amounts to which they are then
entitled pursuant to subclause (A) above, the entire amount
available for payment of cash dividends with respect to the
outstanding shares of Series F Stock pursuant to subclause
(A) above shall be distributed among the holders of
outstanding shares of Series F Stock ratably, in proportion to
the full amounts to which they would otherwise be entitled,
and any remainder not paid in cash to the holders of
outstanding shares of Series F Stock shall cumulate as
provided in subclause (C) below.
(C) If, on any Dividend Payment Date which is prior to the
date of conversion of shares of Series F Stock, the holders of
outstanding shares of Series F Stock shall not have received
the full cash dividends to which they are entitled pursuant to
sub-clause (A) above, then such unpaid dividends shall
cumulate, whether or not declared, until so paid.
(D) In addition to the cumulative dividends payable with
respect to outstanding shares of Series F Stock pursuant to
subclauses (A), (B) and (C) above, from and after February
26, 1992 and prior to the date (the "ESOP Payment Date")
the trustee of the International Games, Inc. ("International")
Restated Employee Stock Ownership Plan (the "ESOP")
receives written notice of final payment by the ESOP of all
amounts due to the Company pursuant to the Loan
Agreement dated as of August 1, 1987, or a suitable
replacement thereof, between International and the ESOP
(the "ESOP Loan Agreement"), the holders of such shares
shall be entitled to receive on any Dividend Payment Date in
any year, out of the assets of the Company at the time legally
available therefor and before any dividend or other
distribution is declared or paid with respect to the
outstanding shares of Common Stock, noncumulative cash
dividends, as and when declared by the Board of Directors of
the Company, and in such amounts as the Board of Directors of
9
<PAGE>
the Company shall, in its sole discretion, from time to time
determine to be necessary, together with the amount of the
Company's annual contribution to the ESOP, to amortize all
of the amounts due in such year to the holders of the
International's FRESOP Notes, Series 1987 A, or suitable
replacements thereof, issued pursuant to the Indenture of
Trust, dated as of August 1, 1987, between the International,
as issuer, and Bankers Trust Company, as trustee, in
accordance with the terms thereof; provided, however, that in
no event shall the outstanding shares of Series F Stock be
entitled to receive noncumulative dividends pursuant to this
subclause (D) in excess of $.5889 per share per annum. Each
such dividend shall be paid to the holders of record of
outstanding shares of Series F Stock as their names shall
appear on the share register of the Company on the
corresponding Record Date.
(E) In addition to the cumulative dividends payable with
respect to the outstanding shares of Series F Stock pursuant
to subclauses (A), (B) and (C) above and the noncumulative
dividends payable with respect to such shares pursuant to
subclause (D) above, if, on any Dividend Payment Date which
is prior to the date of conversion of shares of Series F Stock,
after the payment of all dividends, if any, with respect to the
outstanding shares of Series F Stock pursuant to subclauses
(A), (B), (C) and (D) above, any dividend shall be declared
by the Board of Directors of the Company with respect to the
outstanding shares of Common Stock, the holders of
outstanding shares of Series F Stock on the applicable Record
Date for the dividend on the Common Stock shall be entitled
to receive on the applicable Dividend Payment Date
dividends in such amount as they would be entitled to receive
if their shares of Series F Stock had been converted into
shares of Common Stock on the applicable Record Date.
6. Distributions Upon Liquidation, Dissolution or Winding Up.
(A) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company which
is prior to the ESOP Payment Date, after the payment in full
of all preferential liquidation amounts to which the holders
of outstanding shares of Preferred Stock or Preference Stock
ranking senior to the Series F Stock shall be entitled, but
before any distribution or payment shall be made to the
holders of outstanding shares of Common Stock, the holders
of outstanding shares of Series F Stock shall be entitled to
receive, out of the assets of the Company at the time legally
available therefor, an amount equal to the positive sum, if
any, of (x) $39.056 per share, together with all dividends
accrued (whether or not declared) during the dividend period
in which such liquidation, dissolution or winding up occurs
and all cumulated and unpaid dividends, if any, accrued
during any prior dividend periods, less (y) the quotient
obtained by dividing the principal amount of the indebtedness
of the ESOP to the Company pursuant to the
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<PAGE>
ESOP Loan Agreement outstanding on the date of such voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the Company by 864,293. If, upon any such
voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, the assets of the Company
legally available therefor after the payment in full of all
preferential liquidation amounts to which the holders of
outstanding shares of Preferred Stock or Preference Stock
ranking senior to the Series F Stock shall be entitled but
before any distribution or payment shall be made to the
holders of outstanding Junior Securities, shall be insufficient
to permit the payment in full to the holders of outstanding
shares of Series F Stock of the preferential liquidation
amounts to which they are then entitled, the entire assets of
the Company thus distributable shall be distributed among
the holders of outstanding shares of Series F Stock ratably, in
proportion to the full amounts to which such holders would
otherwise be entitled if such assets were sufficient to permit
payment in full. In addition, after the payment in full of all
preferential liquidation amounts to which the holders of
outstanding shares of Series F Stock shall be entitled, the
holders of all outstanding shares of Common Stock, and the
holders of outstanding shares of Series F Stock shall be
entitled to receive the entire assets of the Company available
for distribution, ratably with the holders of outstanding shares
of Common Stock, in proportion to the ratio which the total
number of shares of Common Stock into which the
outstanding shares of Series F Stock would be convertible on
the effective date of such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company bears
to the total number of shares of Common Stock deemed to
be outstanding on such date (assuming for this purpose the
conversion of all outstanding shares of Series F Stock on such
effective date). Each holder of outstanding shares of Series
F Stock shall be entitled to receive that portion of the assets
of the Company available for distribution which the number
of shares of Common Stock issuable upon conversion of such
holder's shares of Series F Stock bears to the total number of
shares of Common Stock deemed to be outstanding on the
effective date of such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company.
(B) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company which
is after the ESOP Payment Date, after the payment in full of
all preferential liquidation amounts to which the holders of
outstanding shares of Preferred Stock or Preference Stock
ranking senior to the Series F Stock shall be entitled, but
before any distribution or payment to the holders of Junior
Securities, the holders of outstanding shares of Series F Stock
shall be entitled to receive out of the assets of the Company
at the time legally available therefor, an amount equal to
$39.056 per share, together with all dividends accrued
(whether or not declared) during the dividend period in which
such liquidation, dissolution or
11
<PAGE>
winding up occurs and all
cumulated and unpaid dividends, if any, accrued during any
prior Dividend Periods. In addition, after the payment in full
of all preferential liquidation amounts to which the holders
of outstanding shares of Series F Stock shall be entitled, the
holders of outstanding shares of Series F Stock shall be
entitled to receive the entire assets of the Company available
for distribution, ratably with the holders of outstanding shares
of Common Stock, in proportion to the ratio which the total
number of shares of Common Stock into which the
outstanding shares of Series F Stock would be convertible on
the effective date of such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company bears
to the total number of shares of Common Stock deemed to
be outstanding on such date (assuming for this purpose the
conversion of all outstanding shares of Series F Stock on such
effective date). Each holder of outstanding shares of Series
F Stock shall be entitled to receive that portion of the assets
of the Company available for distribution which the number
of shares of Common Stock issuable upon conversion of such
holder's shares of Series F Stock bears to the total number of
shares of Common Stock deemed to be outstanding on the
effective date of such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company as set
forth above.
7. Redemption. The shares of Series F Stock shall not be
redeemable by the Company.
8. Conversion.
(A) From and after the Date of Issuance of shares of Series
F Stock and prior to the expiration of thirty days following
the ESOP Payment Date, each share of Series F Stock shall
be convertible, at the option of the holder thereof, into one
fully-paid and nonassessable share of Common Stock of the
Company, subject to adjustment as hereinafter set forth in
subclause (E) below.
(B) From and after the thirty-first day following the ESOP
Payment Date, each share of Series F Stock shall be
convertible, at the option of the holder thereof, into .3644353
of a fully-paid and nonassessable share of Common Stock of
the Company, subject to adjustment as hereinafter set forth
in subclause (E) below.
(C) To exercise such conversion option, the holder of shares
of Series F Stock shall surrender the certificate or certificates
representing the shares of Series F Stock to be converted,
duly endorsed for transfer to the Company, at the principal
executive office of the Company, and shall give written notice,
postage prepaid, by certified or registered mail, return receipt
requested, or by hand delivery to the Company at its principal
executive office, of the
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<PAGE>
election of such holder to convert all
or a portion of the shares of Series F Stock represented by
the certificate or certificates surrendered into shares of
Common Stock which notice shall set forth the name or
names in which the certificate or certificates representing the
shares of Common Stock to be issued upon conversion are to
be issued. Conversion shall be deemed to have been effected
on the date of receipt by the Company of such notice and the
certificate or certificates to be surrendered for conversion
(the "Conversion Date"). As promptly as practicable
thereafter, the Company shall issue to or upon the written
order of such holder, a certificate or certificates for the
number of full shares of Common Stock to which such holder
is entitled. The conversion of shares of Series F Stock into
shares of Common Stock shall be deemed to be effective and
such holder, or the person or persons designated by such
holder, shall be deemed to have become a holder of record
of the shares of Common Stock issuable upon conversion of
such shares of Series F Stock on the applicable Conversion
Date unless the transfer books of the Company are closed on
such date, in which event such holder shall be deemed to
have become a holder of record of the shares of Common
Stock issued upon conversion of the shares of Series F Stock
on the next succeeding date on which the transfer books of
the Company are open. Upon conversion of only a portion
of the number of shares of Series F Stock represented by a
certificate or certificates surrendered for conversion, the
Company shall issue and deliver to or upon the written order
of the holder of the certificate or certificates so surrendered
a new certificate or certificates representing the number of
shares of Series F Stock not so converted.
(D) No fractional shares of Common Stock shall be issued
upon conversion of shares of Series F Stock. In lieu of
issuing fractional shares of Common Stock upon conversion
of shares of Series F Stock, the Company shall pay a cash
adjustment in respect of such fractional shares of Common
Stock equal to the fair market value thereof as determined by
the Board of Directors of the Company. The Company shall
at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of outstanding shares of Series F
Stock, the full number of shares of Common Stock
deliverable upon the conversion of all shares of Series F
Stock from time to time outstanding.
(E) The number of shares of Common Stock into which a
share of Series F Stock shall be convertible as set forth in
subclauses (A) and (B) above, shall be subject to adjustment
from time to time as follows:
(i) In case the Company shall at any time subdivide
its outstanding shares of Common Stock or shall issue
a dividend or other distribution payable in shares of
Common Stock, the number of shares of Common
Stock into which a share of Series F Stock shall be
convertible shall be
13
<PAGE>
proportionately increased,
effective immediately after the effective date of such
subdivision or at the close of business on the record
date fixed by the Board of Directors of the Company
for such dividend or other distribution, as the case
may be;
(ii) In case the Company shall at any time combine
its outstanding shares of Common Stock, the number
of shares of Common Stock into which a share of
Series F Stock shall be convertible shall be
proportionately decreased, effective immediately after
the effective date of such combination; and
(iii) In case the Company shall at any time
recapitalize or reclassify its capital stock, or in case of
any consolidation or merger of the Company with or
into any other person (other than a consolidation or
merger in which the Company is the continuing entity
and which does not result in any change in the capital
stock of the Company) or in case of the sale or other
disposition of all or substantially all the assets of the
Company to any other person, then in each such case
each outstanding share of Series F Stock shall after
such recapitalization, reclassification, consolidation,
merger, sale or other disposition be convertible into
the kind and number of shares of capital stock or
other securities or assets of the Company or of the
entity resulting from such consolidation or surviving
such merger or to which such assets shall have been
sold or otherwise disposed of to which the holder
thereof would have been entitled if immediately prior
to such recapitalization, reclassification, consolidation,
merger, sale or other disposition such holder had
converted its shares of Series F Stock. The provisions
set forth above shall apply to successive
recapitalization, reclassifications, consolidations,
mergers, sales or other dispositions.
(F) All shares of Common Stock issued upon conversion of
shares of Series F Stock shall, upon issuance by the Company,
be duly and validly issued, fully-paid and nonassessable and
free from all taxes, liens and charges with respect to the
issuance thereof.
9. Voting Rights. The holders of shares of Series F Stock shall
be entitled to vote on or otherwise consent to any matter requiring the vote
or consent of the stockholders of the Company under the laws of the State
of Delaware. Each holder of outstanding shares of Series F Stock shall be
entitled to one vote for each whole share of Common Stock into which such
holder's outstanding shares of Series F Stock would be convertible
immediately after the close of business on the record date fixed by the
Board of Directors of the Company for determining the stockholders of the
Company entitled to vote or otherwise consent to such matter; provided,
however, that in the event (x) the Company shall fail to pay cumulative
dividends in full on the outstanding shares of Series F Stock for a period of
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<PAGE>
four consecutive Dividend Periods, or (y) the Company shall fail to pay
cumulative dividends in full on the outstanding shares of Series F Stock for
a period of eight Dividend Periods, in either case after the expiration of
thirty days following the ESOP Payment Date, each holder of outstanding
shares of Series F Stock shall be entitled to the number of votes equal to
the number of whole shares of Common Stock which such holder would
have been entitled to receive if the shares of Series F Stock held by such
holder had been converted into shares of Common Stock prior to the
expiration of thirty days following the ESOP Payment Date until such time
as all cumulative dividends in arrears with respect to the shares of Series F
Stock shall have been paid in full. Except as otherwise required by the laws
of the State of Delaware, the holders of outstanding shares of Series F
Stock shall vote together with the holders of outstanding shares of Common
Stock as a single class.
FIFTH: At all elections of Directors of the Company, each
stockholder who is entitled to vote upon such election shall be entitled to
as many votes as shall be equal to the number of votes which (except for
this provision as to cumulative voting) he would be entitled to cast for the
election of Directors with respect to his shares of stock multiplied by the
number of Directors to be elected, and he may cast all of such votes for a
single Director or may distribute them among the number to be voted for
or for any two or more of them, as he sees fit.
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter or repeal the Bylaws of the Company.
SEVENTH: The Company shall indemnify any and all persons
whom it has the power to indemnify pursuant to the Delaware General
Corporation Law against any and all expenses, judgments, fines amounts
paid in settlement, and any other liabilities to the fullest extent permitted
by such Law and may, at the discretion of the Board of Directors, purchase
and maintain insurance, at its expense, to protect itself and such persons
against any such expense, judgment, fine, amount paid in settlement or
other liability, whether or not the Company would have the power to so
indemnify such person under the Delaware General Corporation Law.
A director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director
derived any improper personal benefit. If the Delaware General
Corporation Law is amended after approval by the stockholders of this
article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the Company
shall be eliminated or limited to the fullest extent permitted by the
Delaware General Corporation Law, as so amended.
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<PAGE>
Any repeal or modification of the foregoing paragraph by the
stockholders of the Company shall not adversely affect any right or
protection of a director of the Company existing at the time of such repeal
or modification.
IN WITNESS WHEREOF, this Restated Certificate of
Incorporation, which only restates and integrates and does not further
amend the provisions of the Certificate of Incorporation of the Company as
heretofore amended, supplemented or restated and there being no
discrepancies between those provisions and the provisions of this Restated
Certificate of Incorporation and it having been duly adopted in accordance
with Section 245 of the General Corporation Law of the State of Delaware
by the Executive Committee of the Board of Directors, which Committee
is authorized to act on behalf of the Company's Board of Directors, has
been executed by its Vice President and attested by its Secretary on this
30th day of November, 1993.
Mattel, Inc.
By: /s/ Judy A. Willis
------------------
Vice President
Attest:
By: /s/ N. Ned Mansour
------------------
Secretary
16
<PAGE>
Exhibit 10.3
$100,000,000
MATTEL, INC.
6 3/4% NOTES DUE 2000
UNDERWRITING AGREEMENT
May 19, 1993
<PAGE>
May 19, 1993
Morgan Stanley & Co. Incorporated
Kidder, Peabody & Co. Incorporated
c/o Morgan Stanley & Co.
Incorporated
1251 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
Mattel, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") $100,000,000 principal amount of its 6 3/4%
Notes due May 15, 2000 (the "Securities") to be issued pursuant to the
provisions of an Indenture dated as of May 15, 1993 (the "Indenture")
between the Company and PNC Bank, National Association, as Trustee
(the "Trustee").
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including a
prospectus, relating to the Securities. The registration statement as
amended at the time it becomes effective, including the information (if
any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the "Securities Act"), is hereinafter referred to as the
Registration Statement; the prospectus in the form first used to confirm
sales of Securities is hereinafter referred to as the Prospectus. Any
reference herein to the Registration Statement or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein, and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement or the Prospectus
shall be deemed to refer to and include the filing after the execution
hereof of any document with the Commission deemed to be incorporated
by reference therein.
I.
The Company represents and warrants to each of the
Underwriters that:
(a) The Registration Statement has become effective; no
stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are
pending before or threatened to the Company by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and incorporated by
2
<PAGE>
reference in the Prospectus complied or
will comply when so filed in all material respects with the Exchange
Act and the applicable rules and regulations of the Commission
thereunder, (ii) Each part of the Registration Statement, when such
part became effective, did not contain and each such part, as
amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply
in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder and (iv) the
Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties
set forth in this paragraph I(b) do not apply (A) to statements or
omissions in the Registration Statement or the Prospectus based
upon information relating to any Underwriter furnished to the Com-
pany in writing by such Underwriter through you expressly for use
therein or (B) to that part of the Registration Statement that
constitutes the Statement of Eligibility and Qualification (Form T-1)
under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), of the Trustee.
(c) The financial statements of the Company and its
subsidiaries set forth in the Registration Statement and Prospectus
fairly present the financial condition of the Company and its
subsidiaries as of the dates indicated and the results of operations
and changes in financial position for the periods therein specified in
conformity with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise stated
therein).
(d) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
(e) Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the cor-
porate power and authority to own its property and to conduct its
business as described in the Prospectus except to the extent that the
failure of any such subsidiary, singly or in the aggregate, to be so
duly incorporated or validly existing or to have such corporate
power and authority, would not have a material adverse effect on
the Company and its subsidiaries taken as a whole or on the
business of the Company and its subsidiaries in any individual
country as described in the Prospectus. Each subsidiary of the
Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of
3
<PAGE>
its business or
its ownership or leasing of property requires such qualification,
except to the extent that the failure of any such subsidiary, singly or
in the aggregate, to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries
taken as a whole or on the business of the Company and its
subsidiaries in any individual country as described in the Prospectus.
(f) This Agreement has been duly authorized, executed
and delivered by the Company.
(g) The Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Com-
pany, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
(h) The Securities have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture, and will be valid and binding obligations
of the Company, enforceable in accordance with their terms except
as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may
be limited by equitable principles of general applicability.
(i) The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement, the Indenture and the Securities will not contravene any
provision of applicable law or the certificate of incorporation or
by-laws of the Company or any agreement or other instrument
binding upon the Company or any of its subsidiaries that is material
to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and
no consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, the Indenture
or the Securities, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and
sale of the Securities.
(j) There has not occurred any material adverse change,
or any development involving a prospective material adverse change,
in the condition, financial or otherwise, or in the earnings, business
or operations of the Company and its subsidiaries, taken as a whole,
from that set forth in the Prospectus.
(k) There are no legal or governmental proceedings
pending or threatened to the Company to which the Company or
any of its subsidiaries is a party or to
4
<PAGE>
which any of the properties of
the Company or any of its subsidiaries is subject that are required to
be described in the Registration Statement, the Prospectus or any
documents incorporated by reference in the Registration Statement
or the Prospectus that are not so described or any statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement, the Prospectus or any
documents incorporated by reference in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration
Statement that are not so described or filed as required.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the
Securities Act, complied when so filed in all material respects with
the Securities Act and the rules and regulations of the Commission
thereunder.
(m) The Company and its subsidiaries own or possess the
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names presently employed by
them in connection with the business now operated by them, and
neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of others
with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in any material adverse change, or any notice
of any other development with respect to the foregoing involving a
prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise,
except as may be described in writing to, and accepted for exclusion
by, the Underwriters.
(n) The Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
(o) The Company and its subsidiaries are (i) in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would
not, singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(p) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on
the business, operations and properties
5
<PAGE>
of the Company and its
subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities
and any potential liabilities to third parties). On the basis of such
review, the Company has reasonably concluded that such associated
costs and liabilities would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken
as a whole.
(q) Neither the Company nor any of its subsidiaries has,
directly or indirectly, paid or delivered any fee, commission or other
sum of money or item or property, however characterized, to any
finder, agent, government official or other party, in the United
States or any other country, which is in any manner related to the
business, assets or operations of Company or any of its subsidiaries,
which is, or may be with the passage of time or discovery, illegal
under any federal, state or local laws of the United States (including
without limitation the U.S. Foreign Corrupt Practices' Act) or any
other country having jurisdiction; and neither the Company nor any
of its subsidiaries has participated, directly or indirectly, in any
boycotts or other similar practices affecting any of its actual or
potential customers and has at all times done business in an open
and ethical manner.
(r) The Company has complied with all provisions of
Section 517.075, Florida Statutes relating to doing business with the
Government of Cuba or with any person or any affiliate located in
Cuba.
II.
The Company hereby agrees to sell to the several
Underwriters, and the Underwriters, upon the basis of the representations
and warranties herein contained, but subject to the conditions hereinafter
stated, agree, severally and not jointly, to purchase from the Company the
respective principal amounts of Securities set forth in Schedule I hereto
opposite their names at 99.35% of their principal amount -- the purchase
price -- plus accrued interest, if any, from May 15, 1993 to the date of
payment and delivery.
III
The Company is advised by you that the Underwriters
propose to make a public offering of their respective portions of the
Securities as soon after the Registration Statement and this Agreement
have become effective as in your judgment is advisable. The Company is
further advised by you that the Securities are to be offered to the public
initially at 100% of their principal amount -- the public offering price --
plus accrued interest, if any, and to certain dealers selected by you at a
price that represents a concession not in excess of .40% of their principal
amount under the public offering price, and that any Underwriter
6
<PAGE>
may allow, and such dealer may reallow, a concession, not in excess of .25% of
their principal amount, to any Underwriter or to certain other dealers.
IV.
Payment for the Securities shall be made by certified or
official bank check or checks payable to the order of the Company in New
York Clearing House funds at the office of Latham & Watkins, 633 W.
Fifth Street, Los Angeles, California at 7:00 A.M., local time, on May 26,
1993 or at such other time on the same or such other date, not later than
June 3, 1993, as shall be designated in writing by you. The time and date
of such payment are hereinafter referred to as the Closing Date.
Payment for the Securities shall be made against delivery to
you for the respective accounts of the several Underwriters of the
Securities registered in such names and in such denominations as you shall
request in writing not later than two full business days prior to the date of
delivery, with any transfer taxes payable in connection with the transfer of
the Securities to the Underwriters duly paid.
V.
The obligations of the Company and the several obligations
of the Underwriters hereunder are subject to the condition that the
Registration Statement shall have become effective not later than the date
hereof.
The several obligations of the Underwriters hereunder are
subject to the following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date,
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change, in
the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such
term is defined for purposes of Rule 436(g)(2) under the
Securities Act;
(ii) there shall not have occurred any change, or
any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings, business
or operations, of the Company and its subsidiaries, taken as a
whole, from that set forth in the Registration Statement, that,
in your judgment, is material and adverse and that makes it,
in your judgment, impracticable to market the Securities on
the terms and in the manner contemplated in the Prospectus;
and
7
<PAGE>
(iii) the Prospectus shall have been filed as required
hereunder; and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to
the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the
Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall
have been complied with to your satisfaction.
(b) The Underwriters shall have received on the Closing
Date a certificate, dated the Closing Date and signed by an
executive officer of the Company, to the effect set forth in clause (a)
above (except as to the knowledge of the Underwriters in clause
(a)(iii)) and to the effect that the representations and warranties of
the Company contained in this Agreement are true and correct as of
the Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be
performed or satisfied on or before the Closing Date.
The officer signing and delivering such certificate may
rely upon the best of his knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an
opinion of Irell & Manella, counsel for the Company, dated the
Closing Date, to the effect that
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate
power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified
to transact business and is in good standing in the state of
California;
(ii) this Agreement has been duly authorized,
executed and delivered by the Company;
(iii) the Indenture has been duly qualified under the
Trust Indenture Act and has been duly authorized, executed
and delivered by the Company and is a valid and binding
agreement of the Company, enforceable in accordance with
its terms except as (a) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (b) rights of acceleration and
the availability of equitable remedies may be limited by
equitable principles of general applicability;
(iv) the Securities have been duly authorized and,
when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by
the Underwriters in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company,
enforceable in accordance with their terms except as (a) the
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally
and (b) rights of
8
<PAGE>
acceleration and the availability of equitable
remedies may be limited by equitable principles of general
applicability;
(v) the execution and delivery by the Company of,
and the performance by the Company of its obligations
under, this Agreement, the Securities and the Indenture will
not contravene any provision of applicable law or the
certificate of incorporation or by-laws of the Company or, any
agreement or other instrument binding upon the Company or
any of its subsidiaries that is listed by the Company in an
officer's certificate by the Company as significant agreements
(which officer's certificate shall be provided to, and approved
by, the Underwriters) or, to the best of such counsel's
knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company or any subsidiary, and no consent, approval,
authorization or order of or qualification with any
governmental body or agency is required for the performance
by the Company of its obligations under this Agreement, the
Securities and the Indenture, except such as may be required
by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities;
(vi) to the best of such counsel's knowledge, neither
the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of
others with respect to any of the patents, patent rights,
licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names
presently employed by them in connection with the business
now operated by the Company or its subsidiaries which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in any material
adverse change, or notice of any other development with
respect to the foregoing involving a prospective material
adverse change, in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the
Company and its subsidiaries, taken as a whole, except as
may be disclosed in writing by the Company to, and accepted
for exclusion by, the Underwriters;
(vii) the statements (1) in the Prospectus under the
captions "Description of Notes," "Certain Federal Income Tax
Consequences" and "Underwriting" and (2) in the
Registration Statement under Item 15, in each case insofar as
such statements constitute summaries of the legal matters,
documents and proceedings referred to therein, fairly present
the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters
referred to therein;
(viii) to the best of such counsel's knowledge after
due inquiry, there are no legal or governmental proceedings
pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties
9
<PAGE>
of the Company or any of its subsidiaries is subject or any
development in such proceedings that are required to be
described in the Registration Statement, the Prospectus or
the documents incorporated by reference in the Registration
Statement or the Prospectus that are not so described and
there are no statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement, the Prospectus or any documents
incorporated by reference in the Registration Statement or
the Prospectus or to be filed as exhibits to the Registration
Statement that are not so described or filed as required;
(ix) the Company is not an "investment company" or
an entity "controlled" by an "investment company," as such
terms are defined in the Investment Company Act of 1940, as
amended; and
(x) the Registration Statement has become
effective under the Act; the Prospectus has been filed as
required hereunder; and to the best knowledge of such
counsel no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding
for that purpose has been instituted or threatened by the
Commission;
(xi) such counsel (1) is of the opinion that each
document filed pursuant to the Exchange Act and
incorporated by reference in the Registration Statement and
the Prospectus (except for financial statements and schedules
as to which such counsel need not express any opinion)
complied when so filed as to form in all material respects
with the Exchange Act and the applicable rules and
regulations of the Commission thereunder and (2) is of the
opinion that the Registration Statement and the Prospectus
(except for financial statements and schedules included
therein as to which such counsel need not express any
opinion) comply as to form in all material respects with the
Securities Act or the Exchange Act, as the case may be, the
rules and regulations of the Commission thereunder and the
Trust Indenture Act;
(xii) no facts have come to the attention of such
counsel that would lead such counsel to believe that (1)
(except for financial statements and schedules as to which
such counsel need not express any belief and except for that
part of the Registration Statement that constitutes the Form
T-1 heretofore referred to) the Registration Statement and
the prospectus included therein at the time the Registration
Statement (and the documents incorporated by reference in
the Registration Statement and such prospectus) became
effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading
and (2) (except for financial statements and schedules as to
which such counsel need not express any belief) the
Prospectus and the documents incorporated by reference
therein as of the Closing Date contain an untrue statement of
a material fact or omit to state a material fact necessary in
10
<PAGE>
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) You shall have received on the Closing Date an
opinion of the general counsel of the Company, dated the Closing
Date, to the effect that
(i) the Company is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would
not have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(ii) based upon opinions, oral or written, of foreign
counsel, each of the subsidiaries of the Company meeting the
definition of "Significant Subsidiary" under Regulation S-X of
the Securities and Exchange Commission has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material
adverse effect on such subsidiary;
(iii) the execution and delivery by the Company of,
and the performance by the Company of its obligations
under, this Agreement, the Securities and the Indenture will
not contravene any agreement or other instrument binding
upon the Company or any of its subsidiaries that is material,
individually or in the aggregate, to the Company and its
subsidiaries, taken as a whole, or any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no
consent, approval, authorization or order of or qualification
with any governmental body or agency is required for the
performance by the Company of its obligations under this
Agreement, the Securities and the Indenture, except such as
may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the
Securities;
(iv) the Company and its subsidiaries own or
possess the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service
marks and trade names presently employed by them in
connection with the business now operated by them, and
neither the Company nor any of its subsidiaries has received
any notice of infringement of or conflict with asserted rights
of others with respect to any of the foregoing which, singly or
in the aggregate, if the
11
<PAGE>
subject of an unfavorable decision,
ruling or finding, would result in any material adverse
change, or notice of any other development with respect to
the foregoing involving a prospective material adverse
change, in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the
Company and its subsidiaries, taken as a whole, except as
may be disclosed in writing by the Company to, and accepted
for exclusion by, the Underwriters;
(v) there are no legal or governmental proceedings
pending or threatened to the Company to which the
Company or any of its subsidiaries is a party or to which any
of the properties of the Company or any of its subsidiaries is
subject or any development in such proceedings that are
required to be described in the Registration Statement, the
Prospectus or the documents incorporated by reference in the
Registration Statement or the Prospectus that are not so
described and there are no statutes, regulations, contracts or
other documents that are required to be described in the
Registration Statement, the Prospectus or any documents
incorporated by reference in the Registration Statement or
the Prospectus or to be filed as exhibits to the Registration
Statement that are not so described or filed as required;
(vi) such counsel (1) is of the opinion that each
document filed pursuant to the Exchange Act and
incorporated by reference in the Registration Statement and
the Prospectus (except for financial statements and schedules
as to which such counsel need not express any opinion)
complied when so filed as to form in all material respects
with the Exchange Act and the applicable rules and
regulations of the Commission thereunder and (2) is of the
opinion that the Registration Statement and the Prospectus
(except for financial statements and schedules included
therein as to which such counsel need not express any
opinion) comply as to form in all material respects with the
Securities Act or the Exchange Act, as the case may be, the
rules and regulations of the Commission thereunder and the
Trust Indenture Act;
(vii) no facts have come to the attention of such
counsel that would lead such counsel to believe that (1)
(except for financial statements and schedules as to which
such counsel need not express any belief and except for that
part of the Registration Statement that constitutes the Form
T-1 heretofore referred to) the Registration Statement and
the prospectus included therein at the time the Registration
Statement (and the documents incorporated by reference in
the Registration Statement and such prospectus) became
effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading
and (2) (except for financial statements and schedules as to
which such counsel need not express any belief) the
Prospectus and the documents incorporated by reference
therein as of the Closing Date contain an untrue statement of
a material fact or omit to state a material fact necessary in
12
<PAGE>
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(e) You shall have received on the Closing Date an
opinion of Latham & Watkins, special counsel for the Underwriters,
dated the Closing Date, covering the matters referred to in sub-
paragraphs (ii), (iii), (iv), (vii) (but only as to the statements in the
Prospectus under "Description of Notes" and "Underwriting") and
that nothing has come to their attention with respect to the matters
in subparagraph (xii) of paragraph (c) above.
With respect to subparagraph (xii) of paragraph (c) above,
Irell & Manella may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and the
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification except as specified. With respect to subparagraph (xii) of
paragraph (e) above, Latham & Watkins may state that their opinion and
belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or
supplements thereto (other than the documents incorporated by reference)
and review and discussion of the contents thereof (including documents
incorporated by reference), but are without independent check or
verification except as specified.
The opinion of Irell & Manella described in paragraph (c)
above shall be rendered to you at the request of the Company and shall so
state therein.
(f) You shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to you,
from Price Waterhouse, independent public accountants for the
Company, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in or incorporated by reference into the
Registration Statement and the Prospectus.
(g) Prior to or on the Closing Date, the Company shall
have furnished to the Underwriters such further information,
certificates, opinions and documents as the Underwriters may
reasonably request.
VI.
In further consideration of the agreements of the
Underwriters herein contained, the Company covenants as follows:
(a) The Company will cause the Prospectus to be filed as
required hereunder (but only if you have not reasonably objected
thereto by notice to the Company after having been furnished a
copy a reasonable time prior to filing) and will notify you promptly
of such filing; it will notify you promptly of the time when
13
<PAGE>
any subsequent amendment to the Registration Statement has become
effective or any supplement to the Prospectus has been filed and of
any request by the Commission for any amendment or supplement
to the Registration Statement or Prospectus or for additional
information; it will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the
Registration Statement or Prospectus that, in your opinion, may be
necessary or advisable in connection with the distribution of the
Securities by the Underwriters; it will file no amendment or
supplement to the Registration Statement or Prospectus (other than
any document required to be filed under the Exchange Act that
upon filing is deemed to be incorporated by reference therein) to
which you shall reasonably object by notice to the Company after
having been furnished a copy a reasonable time prior to the filing;
and it will furnish to you at or prior to the filing thereof a copy of
any document that upon filing is deemed to be incorporated by
reference in the Registration Statement or Prospectus.
(b) To furnish to you, without charge, three signed copies
of the Registration Statement (including exhibits thereto and all
documents incorporated by reference therein) and for delivery to
each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto but including all documents
incorporated by reference therein) and, during the period mentioned
in paragraph (c) below, as many copies of the Prospectus, any
documents incorporated by reference therein and any supplements
and amendments thereto or to the Registration Statement as you
may reasonably request.
(c) The Company will advise you, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceeding for any such purpose; and it will
promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such a stop order should be
issued.
(d) If, during such period after the first date of the public
offering of the Securities as in the opinion of your counsel the
Prospectus is required by law to be delivered in connection with
sales by an Underwriter or dealer, any event shall occur or condition
exist as a result of which it is necessary to amend or supplement the
Prospectus so that it does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if, in the opinion of your counsel, it is necessary
to amend or supplement the Prospectus to comply with law,
forthwith to prepare, file with the Commission and furnish, at its
own expense, to the Underwriters and to the dealers (whose names
and addresses you will furnish to the Company) to which Securities
may have been sold by you on behalf of the Underwriters and to
any other dealers upon request, either amendments or supplements
to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of
14
<PAGE>
the circumstances
when the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus, as amended or supplemented, will comply with
law.
(e) To endeavor to qualify the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request and to pay all expenses (including fees and
disbursements of counsel) in connection with such qualification and
in connection with the determination of the eligibility of the
Securities for investment under the laws of such jurisdictions as you
may designate.
(f) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell,
contract to sell or otherwise dispose of any debt securities of the
Company or warrants to purchase debt securities of the Company
substantially similar to the Securities (other than (i) the Securities
and (ii) commercial paper issued in the ordinary course of business),
without your prior written consent.
(g) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement
covering the twelve-month period ending June 30, 1994 that satisfies
the provisions of Section 11(a) of the Securities Act and the rules
and regulations of the Commission thereunder.
(h) To pay all document production charges and expenses
of Latham & Watkins, special counsel for the Underwriters (but not
including their fees for professional services), in connection with the
preparation of this Agreement.
VII.
The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by any Underwriter or any such controlling person in
connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if
the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission
or alleged untrue statement or omission based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who
sign the Registration Statement and
15
<PAGE>
each person, if any, who controls the
Company within the meaning either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Underwriter, but only with reference
to information relating to such Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either of the two preceding
paragraphs, such person (the "indemnified party") shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection with
any proceeding or related proceedings in the same jurisdiction, be liable
for the fees and expenses of more than one separate firm (in addition to
any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to the second preceding paragraph, and by
the Company, in the case of parties indemnified pursuant to the first
preceding paragraph. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and
third sentences of this paragraph, the indemnifying party agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding.
16
<PAGE>
If the indemnification provided for in the first or second
paragraph of this Article VII is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand
and the Underwriters on the other hand from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the Underwriters on the other hand
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Underwriters on the other hand in connection with the
offering of the Securities shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Securities (before
deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as
set forth in the table on the cover of the Prospectus, bear to the aggregate
public offering price of the Securities. The relative fault of the Company
on the one hand and of the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Article VII are several in proportion to the
respective principal amounts of Securities they have purchased hereunder,
and not joint.
The Company and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Article VII were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Article VII, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Article VII are not exclusive and shall not limit any
rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
17
<PAGE>
The indemnity and contribution provisions contained in this
Article VII and the representations and warranties of the Company
contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter or by or on behalf of the Company, its officers
or directors or any person controlling the Company and (iii) acceptance of
and payment for any of the Securities.
VIII.
This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of
the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of
Trade, (ii) trading of any securities of the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall
have been declared by either Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment,
is material and adverse and (b) in the case of any of the events specified in
clauses (a)(i) through (iv), such event singly or together with any other
such event makes it, in your judgment, impracticable to market the
Securities on the terms and in the manner contemplated in the Prospectus.
IX.
This Agreement shall become effective upon the later of (x)
execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement by the
Commission.
If, on the Closing Date, any one or more of the Underwriters
shall fail or refuse to purchase Securities that it or they have agreed to
purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of the Securities to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the
principal amount of Securities set forth opposite their respective names in
Schedule I bears to the principal amount of Securities set forth opposite
the names of all such non-defaulting Underwriters, or in such other
proportions as you may specify, to purchase the Securities which such
defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the principal amount
of Securities that any Underwriter has agreed to purchase pursuant to
Article II be increased pursuant to this Article IX by an amount in excess
of one-ninth of such principal amount of Securities without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters
18
<PAGE>
shall fail or refuse to purchase Securities and the aggregate
principal amount of Securities with respect to which such default occurs is
more than one-tenth of the aggregate principal amount of Securities to be
purchased on such date, and arrangements satisfactory to you and the
Company for the purchase of such Securities are not made within 36 hours
after such default, this Agreement shall terminate without liability on the
part of any non-defaulting Underwriter or the Company. In any such case
either you or the Company shall have the right to postpone the Closing
Date but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in
any other documents or arrangements may be effected. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agree-
ment.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of the Company
to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Company shall be unable to perform
its obligations under this Agreement, the Company will reimburse the
Underwriters or such Underwriters as have so terminated this Agreement
with respect to themselves, severally, for all out-of-pocket expenses
(including the fees and disbursements of their counsel) reasonably incurred
by such Underwriters in connection with this Agreement or the offering
contemplated hereunder.
This Agreement may be signed in two or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
19
<PAGE>
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
Very truly yours,
MATTEL, INC.
By: /s/ Francesca Luzuriaga
-----------------------
Name: Francesca Luzuriaga
Title: Senior Vice President &
Treasurer
ACCEPTED, May 19, 1993
MORGAN STANLEY & CO. INCORPORATED
KIDDER, PEABODY & CO. INCORPORATED
By MORGAN STANLEY & CO. INCORPORATED
By: /s/ C. Daniel Ewell
-------------------
C. Daniel Ewell
Vice President
20
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal
Amount of
Securities
to be
Purchased
----------
<S> <C>
Underwriter
- -----------
Morgan Stanley & Co. Incorporated . . . . . . . . . . . . $ 50,000,000
Kidder, Peabody & Co. Incorporated. . . . . . . . . . . . 50,000,000
------------
Total .. . . . . . . . . . . . . . . $100,000,000
============
</TABLE>
21
<PAGE>
Exhibit 10.7
SECOND AMENDMENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
AND MATTEL SALES CONTINUING GUARANTY
THIS SECOND AMENDMENT TO THIRD AMENDED AND
RESTATED CREDIT AGREEMENT AND MATTEL SALES CONTINUING
GUARANTY (this "Second Amendment") is dated as of November
8, 1993 and is entered into by and among MATTEL, INC., a
Delaware corporation (the "Company"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF
(individually referred to herein as a "Bank" and
collectively as the "Banks"), BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION as the agent for the Banks (the
"Agent") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION as the collateral agent for the Banks (the
"Collateral Agent") and amends (a) the Third Amended and
Restated Credit Agreement dated as of March 19, 1993 among
the Company, the Banks, the Agent and the Collateral Agent,
as amended by a First Amendment to Third Amended and
Restated Credit Agreement dated as of July 19, 1993 (as so
amended, the "Credit Agreement") and (b) the Continuing
Guaranty executed by Mattel Sales Corp. dated as of March
19, 1993 in favor of the Collateral Agent.
PRELIMINARY STATEMENTS.
A. The parties hereto desire to release all
Collateral pledged under the Collateral Documents. In
furtherance thereof, the parties hereto desire to terminate
all Collateral Documents, including without limitation the
Pledge and Security Agreement, the Receivables Purchase
Subordination Agreement, the Mattel Sales Security
Agreement, and the Intercreditor Agreement.
B. The Company is acquiring Fisher-Price in the
Fisher-Price Acquisition and the parties hereto desire to
amend the Credit Agreement to permit the Fisher-Price
Acquisition.
C. The parties hereto desire to amend certain
other provisions of the Loan Documents.
In consideration of the premises and for other
good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as
follows:
1
<PAGE>
1. Terms. All capitalized terms used herein
shall have the same meanings as in the Loan Documents unless
otherwise defined herein. All references to the Loan
Documents shall mean the Loan Documents as hereby amended.
2. Amendments to Credit Agreement. The parties
hereto agree that the Credit Agreement is amended as
follows:
2.1 All references to "Collateral," "Collateral
Agent," "Collateral Documents" and "Intercreditor Agreement"
are hereby deleted. From and after the effective date
hereof, the Collateral Agent shall no longer be a party to
any Loan Document.
2.2 Section 1.1 of the Credit Agreement is
amended by inserting the following new definitions in proper
alphabetical order:
"'Fisher-Price' means Fisher-Price, Inc., a
Delaware corporation.
"'Fisher-Price Acquisition' means the
transaction contemplated by that certain Agreement
and Plan of Merger dated as of August 19, 1993
among the Company, Mat Acquisition, Inc. and
Fisher-Price.
2.3 Section 5.12 of the Credit Agreement is
deleted in its entirety and "Intentionally left blank" is
inserted in lieu thereof.
2.4 Section 8.1(c)(ii) of the Credit Agreement is
amended by replacing "and" before "8.8" in the last line
thereof with a comma and inserting "and 8.10" immediately
before the semi-colon at the end of such subsection.
2.5 A new Section 8.10 is inserted immediately
following Section 8.9 of the Credit Agreement as follows:
"8.10 Interest Coverage Ratio. The Company
shall not permit, as of the last day of each
fiscal quarter, the ratio of (a) the sum of (i)
its net income from continuing operations, for the
four consecutive fiscal quarters ending on such
date, before (A) special items, (B) minority
interest, (C) gains on reacquisition of debt, plus
(ii) income taxes accrued for the four consecutive
fiscal quarters ending on such date, plus (iii)
interest accrued for the four consecutive fiscal
quarters ending on such date, excluding
capitalized interest and without regard to
interest income plus (iv) depreciation and
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amortization for the four consecutive fiscal
quarters ending on such date to (b) interest
incurred for the four consecutive fiscal quarters
ending on such date, including capitalized
interest and without regard to interest income, to
be less than 3.5 to 1."
2.6 Section 9.1 of the Credit Agreement is
amended by deleting "and" at the end of subsection (p),
replacing the period at the end of subsection (q) with ";
and" and inserting a new subsection (r) immediately
following subsection (q) as follows:
"(r) The Company and its Subsidiaries may
remain liable in respect of Indebtedness of
Fisher-Price; provided, however, that such
Indebtedness existed on the date of the Fisher-
Price Acquisition and was not incurred in
anticipation thereof; provided, further, that such
Indebtedness does not otherwise cause a Default or
Event of Default hereunder."
2.7 Section 9.2 of the Credit Agreement is
amended by deleting "and" at the end of subsection (o),
replacing the period at the end of subsection (p) with ";
and" and inserting a new subsection (q) immediately
following subsection (p) as follows:
"(q) Any Liens on assets of Fisher-Price;
provided, however, that such Liens existed on the
date of the Fisher-Price Acquisition and were not
created in anticipation thereof; provided,
further, that such Liens do not otherwise cause a
Default or Event of Default hereunder."
2.8 Section 9.4 of the Credit Agreement is
amended by deleting "and" at the end of subsection (l),
replacing the period at the end of subsection (m) with ";
and" and inserting a new subsection (n) immediately
following subsection (m) as follows:
"(n) Contingent Obligations of Fisher-Price;
provided, however, that such Contingent
Obligations existed on the date of the Fisher-
Price Acquisition and were not incurred in
anticipation thereof; provided, further, that such
Contingent Obligations do not otherwise cause a
Default or Event of Default hereunder."
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2.9 Section 9.5 of the Credit Agreement is
amended by deleting "and" at the end of subsection (b),
replacing the period at the end of subsection (c) with ";
and" and inserting a new subsection (d) immediately
following subsection (c) as follows:
"(d) the Company may make payments or issue
common stock in respect of warrants to purchase
common stock of Fisher-Price pursuant to the terms
of such warrants; provided, however, that such
warrants existed on the date of the Fisher-Price
Acquisition and were not issued in anticipation
thereof; provided, further, that such payments or
issuances do not otherwise cause a Default or
Event of Default hereunder."
2.10 Section 9.6 of the Credit Agreement is
amended by deleting "and" at the end of subsection (c) and
amending and restating subsection (d) as follows:
"(d) The Company may acquire the stock or
assets of other companies engaged in the business
of the manufacture and sale of toys in exchange
for capital stock of the Company issued after the
Effective Date or the proceeds thereof; provided
that the Company may not acquire the stock or
assets of any Person that results in a Material
Adverse Effect; and
"(e) The Company and its Subsidiaries may
consummate the Fisher-Price Acquisition."
2.11 Section 9.7 of the Credit Agreement is
amended by deleting "and" at the end of subsection (b),
replacing the period at the end of subsection (c) with ";
and" and inserting a new subsection (d) immediately
following subsection (c) as follows:
"(d) Fisher-Price and its Subsidiaries may
sell accounts receivable owed by obligors located
outside the United States generated by foreign
offices of Fisher-Price and such Subsidiaries in
the ordinary course of business."
2.12 Section 9.9 of the Credit Agreement is
amended and restated in its entirety as follows:
"9.9 Restriction on Operating Leases. The
Company will not, and will not permit any of its
Domestic Subsidiaries to, become liable in any
way, whether directly or by assignment or as a
guarantor or other surety, for the obligations of
the lessee under any Operating Lease, except:
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"(a) The lease of certain property located on
Rosecrans Boulevard in El Segundo, California from
Continental Development Corporation;
"(b) Operating Leases in respect of which
Fisher-Price or any Subsidiary thereof is liable
that existed on the date of the Fisher-Price
Acquisition and were not entered into in
anticipation thereof; and
"(c) Other Operating Leases having aggregate
rental and other payments (net of sub-lease
income) which are payable in any future period of
twelve consecutive calendar months not exceeding
$20,000,000."
2.13 Section 10.14 of the Credit Agreement is
deleted in its entirety and "Intentionally left blank" is
inserted in lieu thereof.
2.14 Section 10.17 of the Credit Agreement is
amended by deleting the words after "and second" through the
end of such section and inserting the following in lieu
thereof:
"to the payment to or upon the order of the
Company or to whomsoever may be lawfully entitled
to receive the same or as a court of competent
jurisdiction may direct, of any surplus then
remaining from such proceeds."
2.15 Section 11.11 of the Credit Agreement is
deleted in its entirety.
2.16 Exhibits D (Intercreditor Agreement), H
(Pledge and Security Agreement), K (Receivables Purchase
Subordination Agreement), and N (Mattel Sales Security
Agreement) are deleted in their entirety and "Intentionally
left blank" is inserted in lieu thereof in the table of
contents.
2.17 The Intercreditor Agreement, Pledge and
Security Agreement, Receivables Purchase Subordination
Agreement and the Mattel Sales Security Agreement are hereby
terminated and deemed of no further force or effect.
2.18 The form of Exhibit M to the Credit Agreement
is amended by deleting all references to Collateral Agent
and inserting references to Agent in lieu thereof.
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3. Amendments to Mattel Sales Continuing
Guaranty. The parties hereto agree that the Mattel Sales
Continuing Guaranty is amended as follows:
3.1 All references to Collateral Agent in the
Mattel Sales Continuing Guaranty are deleted and references
to Agent are inserted in lieu thereof. From and after the
effective date hereof, the Agent shall replace the
Collateral Agent as a party to the Mattel Sales Continuing
Guaranty.
3.2 Section 10 of the Mattel Sales Continuing
Guaranty is deleted and "Intentionally left blank" is
inserted in lieu thereof.
4. Representations and Warranties. The Company
represents and warrants to the Banks, the Agent and the
Collateral Agent:
4.1 Authorization. The execution, delivery and
performance of this Second Amendment by the Company has been
duly authorized by all necessary corporate action by the
Company and has been duly executed and delivered by the
Company.
4.2 Binding Obligation. This Second Amendment
and the Loan Documents (except as expressly terminated
hereby) are legal, valid and binding agreements of the
Company, enforceable in accordance with their respective
terms, except to the extent enforceability thereof may be
limited by applicable law relating to bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or limiting creditors' rights generally or by
the application of general principles of equity.
4.3 No Legal Obstacle to Agreements. Neither the
execution of this Second Amendment, the making by the
Company of any borrowings under the Credit Agreement, as
amended hereby, nor the performance of the Loan Documents by
the Company has constituted or resulted in or will
constitute or result in a breach of the provisions of any
material agreement, or the violation of any law, judgment,
decree or governmental order, rule or regulation applicable
to the Company, or result in the creation under any material
agreement of any security interest, lien, charge, or
encumbrance upon any of the assets of the Company. No
approval or authorization of any governmental authority is
required to be obtained by the Company to permit the
execution, delivery or performance by the Company of this
Second Amendment, the Loan Documents, as amended hereby, or
the transactions contemplated hereby or thereby, or the
making of any borrowing by the Company under the Credit
Agreement, as amended hereby.
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<PAGE>
4.4 Incorporation of Certain Representations.
The representations and warranties set forth in Section 7 of
the Credit Agreement are true and correct in all material
respects on and as of the date hereof as though made on and
as of the date hereof except to the extent such
representations and warranties expressly relate to an
earlier date, in which case such representations and
warranties were true and correct in all material respects on
and as of such earlier date.
4.5 Default. No Event of Default or Potential
Event of Default under the Credit Agreement has occurred and
is continuing.
5. Conditions, Effectiveness. The effectiveness
of this Second Amendment shall be subject to the compliance
by the Company with its agreements herein contained, and to
the delivery of to the Agent of the following:
5.1 Corporate Resolution. A copy of a resolution
or resolutions passed by the Board of Directors of the
Company, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect
on the effective date of this Second Amendment, authorizing
the amendments to the Loan Documents herein provided for and
the execution, delivery and performance of this Second
Amendment and any note or other instrument or agreement
required hereunder.
5.2 Authorized Signatories. A certificate,
signed by the Secretary or an Assistant Secretary of the
Company and dated the date of this Second Amendment, as to
the incumbency of the person or persons authorized to
execute and deliver this Second Amendment and any instrument
or agreement required hereunder on behalf of the Company.
5.3 Other Evidence. Such other evidence with
respect to the Company or any other person as the Agent or
any Bank may reasonably request to establish the
consummation of the transactions contemplated hereby, the
taking of all corporate action in connection with this
Second Amendment and the Loan Documents and the compliance
with the conditions set forth herein.
6. Miscellaneous.
6.1 Termination of Collateral Documents. The
Intercreditor Agreement, Pledge and Security Agreement,
Receivables Purchase Subordination Agreement and the Mattel
Sales Security Agreement are hereby terminated and deemed of
no further force or effect.
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6.2 Amendments to Mattel Sales Subordination
Agreements. The Company shall cause each Mattel Sales
Subordination Agreement to be amended as set forth in
Section 2.18 of this Second Amendment. From and after the
effective date hereof, the Agent shall replace the
Collateral Agent as a party to the Mattel Sales
Subordination Agreement.
6.3 Effectiveness of the Agreements. Except as
hereby expressly amended or terminated, the Loan Documents
shall remain in full force and effect.
6.4 Termination of Security Interests. The
parties hereto hereby terminate their security interest in
all Collateral.
6.5 Release of Collateral. Upon the
effectiveness of this Second Amendment, the Collateral Agent
shall execute such documents and instruments as may be
reasonably necessary to terminate its security interest in
the Collateral.
6.6 Waivers. This Second Amendment is specific
in time and in intent and does not constitute, nor should it
be construed as, a waiver of any other right, power or
privilege under the Loan Documents, or under any agreement,
contract, indenture, document or instrument mentioned in the
Loan Documents; nor does it preclude any exercise thereof or
the exercise of any other right, power or privilege, nor
shall any future waiver of any right, power, privilege or
default hereunder, or under any agreement, contract,
indenture, document or instrument mentioned in the Loan
Documents, constitute a waiver of any other default of the
same or of any other term or provision.
6.7 Capacity. Each bank party hereto is
executing and delivering this Second Amendment, and consents
and agrees to the terms hereof in its capacity as a Bank, a
Domestic Bank, a Foreign Bank and, in the case of PNC Bank,
National Association, as Backstop Issuing Bank and, in the
case of NationsBank of Texas, N.A., as Transfer and
Administration Agent.
6.8 Counterparts. This Second Amendment may be
executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute
one and the same instrument. This Second Amendment shall
not become effective until the Company, the Banks, the
Agent, the Collateral Agent, Mattel Sales, the Domestic
Banks, the Foreign Banks and the Backstop Issuing Bank shall
have signed a copy hereof, whether the same or counterparts,
and the same shall have been delivered to the Agent.
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<PAGE>
6.9 Collateral Agent's Indemnities. Notwith-
standing the termination of the Collateral Documents, the
provisions of Section 5 of the Intercreditor Agreement,
Sections 13 and 14 of the Pledge and Security Agreement and
Sections 13 and 14 of the Mattel Sales Security Agreement
shall survive and inure to the benefit of Bank of America
National Trust and Saving Association as to any actions
taken or omitted to be taken thereunder while it was
Collateral Agent.
6.10 Jurisdiction. This Second Amendment, and
any instrument or agreement required hereunder, shall be
governed by and construed under the laws of the State of
California.
IN WITNESS WHEREOF, the parties hereto have
executed this Second Amendment by their duly authorized
officers as of the day and year first above written.
MATTEL, INC.
By: /s/ Francesca Luzuriaga
-------------------------
Senior Vice President and
Treasurer
(Signatures continue)
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AGENT AND COLLATERAL
AGENT: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
and Collateral Agent
By: /s/ L. Chenevert
----------------
Title: Vice President
BACKSTOP ISSUING PNC BANK, NATIONAL ASSOCIATION
BANK
By: /s/ Ted A. Dunn
--------------------------
Title: Commercial Banking Officer
BANKS: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Robert W. Troutman
----------------------
Title: Vice President
CHEMICAL BANK
By: /s/ Jeffrey Howe
----------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ J. Peter Mitchell
---------------------
Title: Director
(Signatures continue)
PNC BANK, NATIONAL ASSOCIATION, as
a Bank and as Backstop Issuing Bank
By: /s/ Ted A. Dunn
--------------------------
Title: Commercial Banking Officer
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THE CHASE MANHATTAN BANK, N.A.
By: /s/ Dawn Lee Lum
----------------
Title: Vice President
CONTINENTAL BANK N.A.
By: /s/ Hetty E. Harlon
-------------------
Title: Vice President
MARINE MIDLAND BANK, N.A.
By: /s/ William M. Holland
----------------------
Title: Vice President
NATIONSBANK OF TEXAS, N.A., as a Bank and
as Transfer and Administration Agent
By: /s/ J. Blake Seaton
-------------------
Title: Vice President
THE BANK OF CALIFORNIA, N.A.
By: /s/ Thomas H. Tegart
--------------------
Title: Vice President
(Signatures continue)
THE TORONTO-DOMINION BANK
By: /s/ Debbie A. Greene
---------------------
Title: Manager Credit Admin.
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CONSENT OF MATTEL SALES CORP.
The undersigned Mattel Sales Corp. hereby consents to the
foregoing Second Amendment to Third Amended and Restated Credit
Agreement dated as of November 8, 1993, and reaffirms the Second
Amended and Restated Continuing Guaranty dated as of March 19, 1993
executed and delivered by Mattel Sales Corp.
Date: November 8, 1993
MATTEL SALES CORP.
By: /s/ Francesca Luzuriaga
-------------------------
Title: Senior Vice President and
Treasurer
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Exhibit 10.13
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement")
between Mattel, Inc., a Delaware corporation ("Mattel") and __________
_________________ (the "Executive"), dated as of the ____ day of _____
____ , 199_.
Executive and Mattel are parties to an Employment Agreement
dated as of __________________, (the "Existing Employment Agreement")
providing for the employment of Executive.
Executive and Mattel desire to amend and restate the Existing
Employment Agreement in its entirety.
In consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, Executive
and Mattel agree to amend and restate the Existing Employment
Agreement in its entirety as follows:
1. Employment Period. Mattel hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain
in the employ of Mattel for the period commencing on the date of this
Agreement and ending on the earlier to occur of (i) the third
anniversary of such date or (ii) the first day of the month
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coinciding with or next following the Executive's sixty-fifth birthday.
Such date is herein called the "Normal Retirement Date" and such
period the "Employment Period"; provided, however, that commencing
on the first day of the month next following the effective date
hereof, and on the first day of each month hereafter (the most recent
of such dates is hereinafter referred to as the "Renewal Date"), the
Employment Period shall be automatically extended so as to terminate
on the earlier of (x) three years from such Renewal Date or (y) the
first day of the month coinciding with or next following the
Executive's Normal Retirement Date, unless at least 60 days prior to
any Renewal Date Mattel or the Executive shall give notice to the
other that the Employment Period shall not be so extended.
2. Duties. (a) Executive's Position and Duties. During the
Employment Period, the Executive's position (including titles),
authority and responsibilities shall be similar to those held by the
Executive on the date hereof with such additions and modifications,
and consistent with responsibilities generally assigned to executive
officers of Mattel as the Chief Executive Officer of Mattel may in
his discretion and acting in good faith from time to time assign to
Executive. The Executive's services shall be performed in the
general area in which Executive was employed on the date of this
Agreement and Executive will not be transferred outside the area
without Executive's consent, other than for normal business travel
and temporary assignments.
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<PAGE>
(b) Full Time. The Executive agrees to devote his full
business time to the business and affairs of Mattel and to use his
best efforts to perform faithfully and efficiently the responsibil-
ities assigned to him hereunder to the extent necessary to discharge
such responsibilities, except for (i) services on corporate, civic
or charitable boards or committees not significantly interfering with
the performance of such responsibilities; (ii) periods of vacation
and sick leave to which he is entitled; and (iii) the management of
his personal investments and affairs. Executive will not engage in
any outside business activity including, but not limited to, activity
as a consultant, agent, partner or officer or provide services of any
nature directly or indirectly to a corporation or other business
enterprise.
3. Compensation. (a) Base Salary. During the Employment
Period, the Executive shall receive a base salary ("Base Salary") at
a monthly rate at least equal to the monthly salary paid to Executive
by Mattel on the date of this Agreement. The Base Salary shall be
reviewed at least every two years and may be increased at any time
and from time to time by action of the Board of Directors of Mattel
(the "Board") or any committee thereof or any individual having
authority to take such action in accordance with Mattel's regular
practices. Any increase in the Base Salary shall not serve to limit
or reduce any other obligation of Mattel hereunder, and after any
such increase, the Base Salary shall not be reduced.
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<PAGE>
(b) Bonus Programs. In addition to the Base Salary, the
Executive shall continue to participate in Mattel's cash and deferred
bonus or incentive plans or programs ("Bonus Programs") as may be in
effect from time to time with respect to executives employed by
Mattel at a participation level reflecting Executive's responsibili-
ties, including but not limited to, the Management Incentive Plan and
Long-Term Incentive Plan as they may be modified from time to time
and including any plans substituted therefore, provided, however,
except as provided in Section 5(f) hereof, the determination of the
amounts to be paid pursuant to such plans shall be made by the Board
or a committee thereof authorized to take such action and shall be
made in accordance with Mattel's compensation practice and the terms
and provisions of such plans or programs.
(c) Incentive and Savings Plans. In addition to the Base
Salary and participation in the Bonus Programs, during the Employment
Period the Executive shall continue to be entitled to participate in
all incentive and savings plans and programs, including stock option
plans, as well as in all retirement plans, including the Mattel
Supplemental Executive Retirement Plan, as may be in effect from time
to time with respect to executives employed by Mattel at Executive's
level reflecting Executive's responsibilities.
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(d) Benefit Plans. The Executive and/or his family, as
the case may be, shall be entitled to receive all amounts which he
or his family is or would have been entitled to receive as benefits
under all medical, dental, disability, group life, accidental death
and travel accident insurance plans and programs of Mattel in which
Executive is a participant as in effect from time to time with
respect to executives employed by Mattel.
(e) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the policies
and practices of Mattel as in effect from time to time with respect
to executives employed by Mattel.
(f) Fringe Benefits. The Executive shall be entitled to
fringe benefits, including an automobile, a club membership and
related expenses, and financial counseling in accordance with the
policies of Mattel as in effect from time to time with respect to
executives employed by Mattel.
(g) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the policies
of Mattel as in effect from time to time with respect to executives
employed by Mattel.
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(h) Certain Amendments. Nothing herein shall be construed
to prevent Mattel from amending, altering, eliminating or reducing
any plans, benefits or programs so long as the Executive continues
to have the opportunity to receive compensation and benefits consis-
tent with Sections 3(a) through (g).
4. Termination. (a) Death or Disability. This Agreement
shall terminate automatically upon the Executive's death. Mattel may
terminate this Agreement, after having established the Executive's
Disability, by giving to the Executive written notice of its
intention to terminate his employment, and his employment with Mattel
shall terminate effective on the 90th day after receipt of such
notice (the "Disability Effective Date"). For purposes of this
Agreement, an Executive's Disability shall be deemed to have occurred
when the Executive becomes entitled to receive disability benefits
under the Mattel Long-Term Disability Plan for exempt employees.
(b) Cause. Mattel may terminate the Executive's employ-
ment for "Cause" if a majority of the Board determines that "Cause"
exists. For purposes of this Agreement, "Cause" means (i) an act or
acts of dishonesty on the Executive's part which are intended to
result in his substantial personal enrichment at the expense of
Mattel or (ii) repeated violations by the Executive of his obliga-
tions under Section 2 of this Agreement which are demonstrably
willful and deliberate on the Executive's part and
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<PAGE>
which resulted in material injury to Mattel or (iii) conduct of a
criminal nature may or which is likely to have an adverse impact on Mattel's
reputation or standing in the community or on its relationship with
its customers or those who purchase or use its products (iv)
fraudulent conduct in connection with the business or affairs of
Mattel, regardless of whether said conduct is designed to defraud
Mattel or others.
(c) Good Reason. The Executive may terminate his
employment for Good Reason. For purposes of this Agreement, "Good
Reason" means:
(i) Without the express written consent of the
Executive, the assignment to the Executive of any duties inconsistent
in any substantial respect with the Executive's position, authority
or responsibilities as contemplated by Section 2 of this Agreement;
(ii) any failure by Mattel to comply with any of the
provisions of Section 3 of this Agreement, other than an insubstan-
tial and inadvertent failure remedied by Mattel promptly after
receipt of notice thereof given by the Executive;
(iii) Mattel requires the Executive without his
consent to be based at any office or location other than an office
or location in the general area where Executive was based on the
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<PAGE>
date of this Agreement, except for travel reasonably required in the
performance of the Executive's responsibilities;
(iv) any purposed termination by Mattel of the
Executive's employment otherwise than as permitted by this Agreement;
or
(v) any failure by Mattel to obtain the assumption and
agreement to perform this Agreement by a successor as contemplated
by Section 11(b).
(d) Change of Control. A "Change of Control" shall be
deemed to have occurred if:
(i) any "Person", which shall mean a "person" as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (other than Mattel, any
trustee or other fiduciary holding securities under an employee
benefit plan of Mattel) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirect-
ly, or securities of Mattel representing 30% or more of the combined
voting power of Mattel's then outstanding voting securities;
(ii) during any period of 24 consecutive months,
individuals, who at the beginning of such period constitute the Board
of Mattel, and any new director whose election by the Board,
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<PAGE>
or whose nomination for election by Mattel's stockholders, was approved
by a vote of at least one-half (1/2) of the directors (other than in
connection with a contested election) cease for any reason to
constitute at least a majority thereof;
(iii) the stockholders of Mattel approve (I) a plan
of complete liquidation of Mattel or (II) the sale or disposition by
Mattel for all or substantially all of Mattel's assets unless the
acquirer of the assets or its board of directors shall meet the
conditions for a merger or consolidation in subparagraphs (iv) (I)
or (iv) (II) below; or
(iv) the consummation of a merger or consolidation of
Mattel with any other company other than:
(I) such a merger or consolidation which would
result in the voting securities of Mattel outstanding immediately
prior thereto continuing to represent (either by remaining outstand-
ing or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of Mattel's or
such surviving entity's outstanding voting securities immediately
after such merger or consolidation; or
(II) such a merger or consolidation, which would
result in the directors of Mattel who were directors immediately
prior thereto, continuing to constitute at least 50% of
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<PAGE>
the directors of the surviving entity immediately after such merger
or consolidation.
In this paragraph (iv), "surviving entity" shall mean only an entity
in which all of Mattel's stockholders immediately before such merger
or consolidation become stockholders by the terms of such merger or
consolidation, and the phrase "directors of Mattel who were directors
immediately prior thereto" shall include only individuals who were
directors of Mattel at the beginning of the 24 consecutive month
period preceding the date of such merger or consolidation.
(e) Notice of Termination. Any termination by Mattel for
Cause or following a Change of Control or by the Executive for Good
Reason shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 13(b). Any termination
by Mattel due to Disability shall be given in accordance with Section
4(a). For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) and except in the event
of a termination as a result of a Change of Control, sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the
provision so indicated, and (iii) if the termination date is other
than the date of receipt of such notice,
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specifies the termination date of this Agreement (which date shall
be not more than 15 days after the giving of such notice).
(f) Date of Termination. "Date of Termination" means the
fifth day following the mailing (or if personally delivered, the date
of delivery) of the Notice of Termination or any later date specified
therein, as the case may be. Notwithstanding any contrary provision
in Section 4(e), if the Executive's employment is terminated by
Mattel for any reason other than Cause, Death, or Disability, the
Date of Termination is the date on which Mattel notifies the
Executive of such termination; if the Executive's employment is
terminated due to Disability, the Date of Termination is the
Disability Effective Date, and if the Executive's employment is
terminated due to the Executive's death, the Date of Termination
shall be the date of death.
5. Obligations of Mattel upon Termination.
(a) Death. If the Executive's employment is terminated
by reason of the Executive's death, this Agreement shall terminate
without further obligations to the Executive's legal representatives
under this Agreement other than those obligations accrued hereunder
at the date of his death. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to receive
benefits at least equal to those provided by Mattel to surviving
families of executives of Mattel under the plan, programs and
policies described in Sections 3(d) and 3(f) of
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<PAGE>
this Agreement, if any, as in effect from time to time with respect
to executives employed by Mattel with comparable responsibilities and
their families.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, the Executive
shall be entitled to receive after the Disability Effective Date
disability and other benefits at least equal to those provided by
Mattel to disabled employees and/or their families in accordance with
the plans, programs and policies described in Sections 3(d) and 3(f)
of this Agreement if and as in effect on the Disability Effective
Date with respect to executives with comparable responsibilities and
their families.
(c) Cause. If the Executive's employment shall be
terminated for Cause or if the Executive terminates his employment
without Good Reason, Mattel shall pay the Executive his full Base
Salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given, and Mattel shall have no further
obligations to the Executive under this Agreement.
(d) Good Reason Other Than for Cause or Disability.
(i) Lump Sum Payments. If during the Employment
Period Mattel shall terminate the Executive's employment other than
for Cause or Disability, or the Executive shall terminate his
employment for Good Reason other than a termination for Good Reason
12
<PAGE>
within 18 months following a Change of Control as provided in Section
5(e);
(I) Mattel shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
(A) if not theretofore paid, the Executive's
Base Salary through the Date of Termination at the rate in effect
at the time of Notice of Termination was given; and
(B) an amount equal to the average annual
Management Incentive Plan bonus, if any, paid to Executive pursuant
to the Bonus Programs provided in Section 3(b) with respect to the
two fiscal years next preceding the Date of Termination ("Annual
Bonus") multiplied by a fraction whose numerator shall be the number
of full months that have elapsed from the end of the last fiscal year
with respect to which a Management Incentive Plan bonus calculation
was made, and ending on the Date of Termination and the denominator
shall be 12.
(C) an amount under the Long-Term Incentive
Plan which had been determined and allocated to Executive's account
under such plan plus amounts that had been earned in the next
preceding fiscal year that were not determined or allocated at the
Date of Termination but would have been allocated to Executive had
he continued in the employ of Mattel; such latter
13
<PAGE>
amounts to be payable 30 days after such amounts have been determined.
(D) three times the sum of (x) the
Executive's annual Base Salary at the rate in effect at the time the
Notice of Termination is given and (y) the Annual Bonus defined in
Section 5(d)(I)(B).
(II) Options granted to Executive under Mattel's
stock option plans (the "Stock Option Plan") which options have been
outstanding for more than six months shall become immediately
exercisable and Executive shall have for a period of 90 days
following such Date of Termination to exercise all options granted
under the Stock Option Plans then exercisable, but not to exceed the
term of the grant, or which become exercisable pursuant to this
clause (II).
(III) Awards of share units granted to Executive
shall become payable as of the Date of Termination and the amount
payable shall be determined by multiplying the value of the share
units by a fraction whose numerator shall be the number of full
months that have elapsed since the date of award of the share units
and the denominator shall be the number of months from the date of
the award of the share units to the date the share
14
<PAGE>
units are payable. The value of the share units shall be determined
in accordance with Section 6 of the award agreement with the Valuation
Date defined therein being the Date of Termination.
(IV) In addition, Mattel shall, promptly upon
submission by the Executive of supporting documentation, pay or
reimburse to the Executive any costs and expenses paid or incurred
by the Executive which would have been payable under Section 3(e) if
his employment had not terminated; and
(V) Until the earlier of (i) the first day of
the month coinciding with or next following the Executive's Normal
Retirement Date, (ii) the third anniversary of the Date of Termina-
tion referred to in this Section, or (iii) the date Executive accepts
other employment, Mattel shall continue benefits to the Executive
and/or his family at least equal to those which would have been
provided to them in accordance with the plans, programs and policies
described in Sections 3(d) and 3(f) of this Agreement if the
Executive's employment had not been terminated, if and as in effect
from time to time with respect to executives employed by Mattel with
comparable responsibilities and their families. The last 18 months
of Executive's participation shall be deemed to be participation
under an election to continue such benefits under the Consolidated
Omnibus Budget Reconciliation Act.
15
<PAGE>
(VI) For purposes of the Mattel Supplemental
Executive Retirement Plan, Executive shall be credited with three
years of service in addition to his years of service actually accrued
through the Date of Termination.
(e) Change of Control. If during the Employment Period
and within 18 months following a Change of Control, Executive shall
terminate his employment for Good Reason as defined in Section 4(c)
or if Mattel terminates the Executive's employment other than for
Cause or Disability;
(i) Mattel shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
(A) if not theretofore paid, the Executive's
Base Salary through the Date of Termination at the rate in effect
at the time of Notice of Termination was given; and
(B) an amount equal to the Management
Incentive Plan bonus that would have been payable to executives of
Mattel in the same bonus category as Executive pursuant to the Bonus
Programs provided in Section 3(b) assuming, for purposes of calculat-
ing the amount of the bonus pool under the plan, that the "maximum"
amount, as that term is used in the plan, were achieved, ("Annual
Bonus") multiplied by a fraction whose numerator shall be the number
of full months that have elapsed from the end of the last fiscal year
with respect to which a Management Incentive Plan bonus calculation
was made, and ending on the Date of Termination
16
<PAGE>
and the denominator shall be 12. The year on which the computation
is based shall be the year in which the Date of Termination occurred;
(C) an amount under the Long-Term Incentive
Plan which had been determined and allocated to Executive's account
under such plan plus amounts that had been earned in the next
preceding fiscal year that were not determined or allocated as of the
Date of Termination but would have been allocated to Executive had
he continued in the employ of Mattel; such latter amounts to be
payable 30 days after such amounts have been determined.
(D) three times the sum of (x) the
Executive's annual Base Salary at the rate in effect at the time the
Notice of Termination is given, (y) the Executive's Annual Bonus, and
(z) Current Year's Long-Term Bonus. For purposes of this clause (D),
Current Year's Long-Term Bonus shall be an amount equal to the Long-
Term Bonus provided in Section 3(b) that would have been allocated
to Executive, assuming, for purposes of calculating the amount earned
under the plan, that the maximum payment, as that term is used in the
plan, was achieved and the year on which the computation is based is
the year in which the Date of Termination occurred.
17
<PAGE>
(ii) If it is determined that the payment or
distribution by Mattel to Executive pursuant to Section 5(e)
(determined without regard to any additional payments required
pursuant to this sentence) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986 (the "Code") or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then Executive shall be entitled
to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-
Up Payment, Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
(iii) In addition, Executive shall receive the
amounts and be entitled to the benefits provided in clauses (IV), (V)
and (VI) of Section 5(d)(i).
(f) Bonus During Cancellation Period. If Mattel notifies
the Executive that the Employment Period provided in Section 1 hereof
will not be automatically extended as provided therein, the compensa-
tion of Executive shall continue as provided
18
<PAGE>
in this Agreement for the period provided therein, except that the
amount of short-term incentive compensation payable under the Bonus
Programs with respect to each fiscal year during such period (including
the year in which the notice was given) shall be the Annual Bonus as
determined in Section 5(d)(I)(B). Amounts payable with respect to the
year in which the term specified in Section 1 expires shall be prorated
based on a fraction the numerator of which is the number of full months
from the beginning of such year until the date of the expiration of
this Agreement and denominator is 12.
6. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future partici-
pating in any benefit, bonus, incentive or other plan or program
provided by Mattel and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the
Executive may have under any stock option or other agreements with
Mattel or any of its affiliated companies. Except as otherwise
provided herein, amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program
of Mattel at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.
7. No Set Off, Payment of Fees. Except as provided herein,
Mattel's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall
19
<PAGE>
not be affected by any circumstances, including without limitation
any set-off, counterclaim, recoupment, defense or other right which
Mattel may have against the Executive or others. Mattel agrees to
pay, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by Mattel or others of the
validity or enforceability of, or liability under, any provision of
this Agreement other than expenses relating to a claim by Executive
that he terminated for Good Reason or that the termination for Cause
was improper, in which case such fees and expenses shall be paid only
if Executive prevails in whole or in part. All amounts provided
herein shall include, in each case, interest, compounded quarterly,
on the total unpaid amount determined to be payable under this
Agreement, such interest to be calculated on the basis of the prime
commercial lending rate announced by Bank of American National Trust
and Savings Association in effect from time to time during the period
of such nonpayment. In the event that the Executive shall in good
faith give a Notice of Termination for Good Reason and it shall
thereafter be determined that Good Reason did not exist, the
employment of the Executive shall, unless Mattel and the Executive
shall otherwise mutually agree, be deemed to have terminated at the
date of giving such purported Notice of Termination by mutual consent
of Mattel and the Executive shall be entitled to receive only those
payments and benefits which he would have been entitled to receive
at such date.
20
<PAGE>
8. Arbitration of Disputes. (a) The parties agree that any
disputes, controversies or claims which arise out of or relate to
this Agreement, Executive's employment or the termination of his
employment, including, but not limited to, any claim relating to the
purported validity, interpretation, enforceability or breach of this
Agreement, and/or any other claim or controversy arising out of the
relationship between the Executive and Mattel (or the nature of the
relationship) or the continuation or termination of that relation-
ship, including, but not limited to, claims that a termination was
for Cause, including the Board's determination in accordance with
Section 4(b), or for Good Reason, claims for breach of covenant,
breach of an implied covenant of good faith and fair dealing,
wrongful termination, breach of contract, or intentional infliction
of emotional distress, defamation, breach of right of privacy,
interference with advantageous or contractual relations, fraud,
conspiracy or other tort or property claims of any kind, which are
not settled by agreement between the parties, shall be settled by
arbitration before a board of three arbitrators.
One arbitrator shall be selected by the Executive, one by Mattel
and the third by the two persons so selected, all in accordance with
the labor arbitration rules of the American Arbitration Association
then in effect. In the event that the arbitrator selected by the
Executive and the arbitrator selected by Mattel are unable to agree
upon a third arbitrator, then the third arbitrator shall be selected
from a list of seven provided by the
21
<PAGE>
office of the American Arbitration Association nearest to the employee's
residence with the parties striking names in order and the party striking
first to be determined by the flip of a coin. The arbitration shall be
held in a location to be mutually agreed upon by the parties. In the absence
of agreement, the Chairman of the Board of Mattel shall determine the
location.
(b) In consideration of the parties' agreement to submit
to arbitration all disputes with regard to this Agreement and/or with
regard to any alleged contract, or any other claim arising out of
their conduct, the relationship existing hereunder or the continua-
tion or termination of that relationship, and in further consider-
ation of the anticipated expedition and the minimizing of expense of
this arbitration remedy, the arbitration provisions of this Agreement
shall provide the exclusive remedy, and each party expressly waives
any right he or it may have to seek redress in any other forum.
(c) Any claim which either party has against the other
party which could be submitted for resolution pursuant to this
Section must be presented in writing by the claiming party to the
other within one year of the date the claiming party knew or should
have known of the facts giving rise to the claim, except that claim
arising out of or related to the termination of the Executive's
employment must be presented by him within one year of the Date of
Termination. Unless the party against whom any claim is asserted
22
<PAGE>
waives the time limits set forth above, any claim not brought within
the time periods specified shall be waived and forever barred.
(d) Mattel will pay all costs and expenses of the
arbitration to the extent provided in Section 8, hereof. In the
event expenses are not paid by Mattel, and without diminishing the
Executive's right to reimbursement as provided in this Section costs
and expenses shall be paid as follows: (x) the expenses of the
neutral arbitrator and of a transcript of any arbitration proceeding
shall be divided equally between the Executive and Mattel; and (y)
each party shall bear the expenses of the arbitrator selected by it
and of the witnesses it calls.
(e) Any decision and award or order of the majority of the
arbitrators shall be binding upon the parties hereto and judgment
thereon may be entered in the Superior Court of the State of
California or any other court having jurisdiction.
(f) Each of the above terms and conditions shall have
separate validity and the invalidity of any part thereof shall not
affect the remaining parts.
(g) Any decision and award or order of the majority of the
arbitrators shall be final and binding between the parties as to all
claims which were or could have been raised in connection
23
<PAGE>
with the dispute to the full extent permitted by law. In all other cases,
the parties agree that the decision of the board of arbitrators shall be
a condition precedent to the institution or maintenance of any legal,
equitable, administrative, or other formal proceeding by the employee
in connection with the dispute, and that the decision and opinion of
the board of arbitrators may be presented in any other forum on the
merits of the dispute.
9. General Release. Executive acknowledges and agrees that
this Agreement includes the entire agreement and understanding
between the parties with regard to Executive's employment or the
termination thereof during the Employment Period and all amounts to
which Executive shall be entitled whether during the term of
employment or upon termination thereof. Accordingly, upon Mattel's
fulfilling its obligations to Executive hereunder, Executive, on
behalf of himself and his related individuals and entities, if any,
including, but not limited to, any predecessors, successors/ assigns,
and any and all other related individuals and entities, if any, and
each of them, shall and does hereby forever relieve, release, and
discharge Mattel and its respective predecessors, successors,
assigns, owners, attorneys representatives, affiliates, parent
corporations, subsidiaries (whether or not wholly-owned), divisions,
partners and their officers, directors, agents, employees, servants,
executors, administrators, accountants, investigators, insurers, and
any and all other related individuals and entities, if any, and each
of them, in any and all capacities,
24
<PAGE>
from any and all claims, debts,
liabilities, demands, obligations, liens, promises, acts, agreements,
costs and expenses (including, but not limited to, attorneys' fees),
damages, actions and causes of action, of whatever kind or nature,
including, without limitation, any statutory, civil or administrative
claim, or any claim, arising out of acts or omissions occurring
before the execution of this Agreement, whether known or unknown,
suspected or unsuspected, fixed or contingent, apparent or concealed
(collectively referred to as "claims"), including, but not limited
to, any claims based on, arising out of, related to or connected with
the subject matter of this Agreement, Executive's employment or the
termination thereof, and any and all facts in any manner arising out
of, related to or connected with Executive's employment with, or
termination of employment from, Mattel or any of its related
entities, including, but not limited to, any claims arising from
rights under federal, state, and local laws prohibiting discrimina-
tion on the basis of race, national origin, sex, religion, age,
marital status, pregnancy, handicap, ancestry, sexual orientation,
or any other form of discrimination, and any common law claims of any
kind, including, but not limited to, contact, tort, and property
rights including, but not limited to, breach of contract, breach of
the implied covenant of good faith and fair dealing, tortious
interference with contract or current or prospective economic
advantage, fraud, deceit, misrepresentation, defamation, wrongful
termination, infliction of emotional distress, breach of
25
<PAGE>
fiduciary duty, and any other common law claim of any kind whatever.
Upon Mattel's fulfilling its obligations to Executive hereunder,
Executive expressly waives any and all rights under Section 1542 of
the Civil Code of the State of California, or any other federal or
state statutory rights or rules, or principles of common law or
equity, or those of any jurisdiction, government, or political
subdivision thereof, similar to Section 1542 ("similar provision").
Thus Executive may not invoke the benefits of Section 1542 or any
similar provision in order to prosecute or assert in any manner any
claims released hereunder. Section 1542 provides as follows:
"A general release does not extend to claims
which the creditor does not know or suspect to
exist in his favor at the time of executing the
release, which if known by him must have materi-
ally affected his settlement with the debtor."
10. Confidential Information. The Executive shall hold in
a fiduciary capacity for the benefit of Mattel all secret or
confidential information, knowledge or data relating to Mattel or any
of its affiliated companies, and their respective businesses,
26
<PAGE>
which shall have been obtained by the Executive during his employment
by Mattel or any of its affiliated companies and which shall not be
public knowledge and will continue to be bound by the provisions of
the Patent and Confidence Agreement previously executed by Executive.
After termination of the Executive's employment with Mattel, he shall
not, without the prior written consent of Mattel, communicate or
divulge any such information, knowledge or data to anyone other than
Mattel and those designated by it.
11. Successors. (a) This Agreement is personal to the Executive
and without the prior written consent of Mattel shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon Mattel and its successors. Mattel shall require any
successor to all or substantially all of the business and/or assets
of Mattel, whether direct or indirect, by purchase, merger, consoli-
dation, acquisition of stock, or otherwise, by an agreement in form
and substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same
extent as Mattel would be required to perform if no such succession
had taken place.
27
<PAGE>
12. Amendment. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and may
be amended or modified only by a written instruction executed by
Executive and Mattel.
13. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of California,
without reference to principles of conflict of laws. The captions of
this Agreement are not part of the provisions hereof and shall have
no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
--------------------
__________________________
__________________________
__________________________
If to the Corporation:
----------------------
MATTEL, INC.
333 Continental Blvd.
El Segundo, CA 90245
ATTENTION: General Counsel
or to such other address as either party shall have furnished to
28
<PAGE>
the other in writing in accordance herewith.
(c) The invalidity of unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(d) Mattel may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Executive has hereunto set hand and,
pursuant to the authorization from the Board of Directors, Mattel has
caused these presents to be executed in its name on its behalf,
29
<PAGE>
and its corporate seal to be hereunto affixed and attested by its Secretary,
all as of the day and year first above written.
__________________________
Executive
MATTEL, INC.
By:_______________________
ATTEST:
__________________________
Secretary
(SEAL)
30
<PAGE>
Exhibit 10.14
MATTEL, INC.
HIGHLIGHTS
----------
1993 MANAGEMENT INCENTIVE PLAN
------------------------------
OBJECTIVES
- Focus on key Mattel goals -- "growth in earnings" and "asset
management"
- Recognize individual contributions, while emphasizing a team approach
- Link participants' compensation to Mattel's business performance
PARTICIPATION
Eligibility extends to employees with the position of manager or above, and/or
those at salary grade 26 or higher. In addition, all participants must:
- Be an active employee as of September 30, 1993
- Be an active employee as of the date bonuses are distributed in
March, 1994
BONUS CRITERIA
The Management Incentive Plan provides an annual cash bonus to participating
employees based on the following factors:
- Corporate and division financial results
- Position in the company
- Individual employee performance
FUNDING
The incentive pool is funded based upon the following measurements of business
performance:
- Corporate Net Income
- Growth in Division Operating Profit
- Cash Flow Return on Investment (CFROI), which is a ratio of annual
cash flow (driven by operating profit) and net investments
driven by accounts receivable and inventory)
The entire incentive pool is generated and funded as a percentage of corporate
net income based upon the level of corporate earnings attained. The total pool
is then allocated between the corporation, its divisions and the Affiliates.
- Division and Affiliate pools receive 75% of their funding based on
their performance and 25% based on corporate performance
- Corporate staff funding will be determined based on overall corporate
results
The benchmarks for the levels of funding are:
- Maximum - pool is 100% funded, if corporate results exceed the
business plan
- Plan - pool is 67% funded, if corporate results meet the business
plan
INDIVIDUAL INCENTIVE AWARDS
Your individual award is then determined based on the total incentive pool
generated, your division's financial results, your position in the company and
your individual performance. The fund generated for each position (expressed
as a percentage of prorated salary) will be based on:
<TABLE>
<CAPTION>
POSITION PLAN MAXIMUM
------------------------ -------- ---------
<S> <C> <C>
Executive VP/Sr. VP 43% 65%
Vice President 40% 60%
Sr. Director/Director 33% 50%
Sr. Manager 20% 30%
Manager 10% 15%
</TABLE>
These percentages are provided only as a benchmark. The actual amount of your
incentive payment may vary depending on the size of the pool, which is directly
determined by corporate/division performance, and more significantly, your
individual performance.
SUMMARY
The Management Incentive Plan provides a significant benefit to both the
participants and the company's stockholders. The more efficient and pro-active
we are as managers of Mattel's assets, the better the margins and returns on
invested capital. Each of us contributes to these measures of success, and this
plan offers its participants the ability to achieve lucrative incentives for
truly superior company and individual performance.
This is only a summary of the Plan. The Compensation/Options Committee
has the authority to interpret the Plan and to establish rules and
regulations for administration of the Plan. The Compensation/Options
Committee may at any time amend, modify or terminate the Plan. (May 1993)
<PAGE>
Exhibit 10.21
MATTEL, INC.
FIRST AMENDMENT
TO
AWARD AGREEMENT
This First Amendment to Award Agreement (this
"Amendment") is made and entered into as of May 11, 1993, by and
between ___________________________ ("Grantee"), and Mattel, Inc.
("Mattel"), with reference to the following facts:
A. Grantee and Mattel are parties to the Award
Agreement dated February 12, 1991 (the "Award Agreement"),
pursuant to which Grantee was awarded Stock Appreciation Rights
under the Mattel 1990 Stock Option Plan.
B. Grantee and Mattel desire to amend the Award
Agreement to reflect the 5 for 4 and 3 for 2 stock splits which
have occurred since the date of the Award Agreement and to
reflect the agreement reached on May 11, 1993, to change the
leverage formula of the Stock Appreciation Rights for stock
prices above $26.67.
C. Grantee and Mattel desire further to amend the
Award Agreement to provide a new method of selecting the
comparison Mattel stock price for valuation of the Stock
Appreciation Rights if certain financial performance tests are
met for fiscal years 1994 and 1995.
For good and valuable consideration, receipt of which
is hereby acknowledged, the parties agree as follows:
1. The first sentence of Section 1 of the Award
Agreement is amended and restated in its entirety to read as
follows:
"The number of Stock Appreciation Rights ("Units")
awarded hereunder is ______________."
2. The first sentence of Section 4 of the Award
Agreement is amended and restated in its entirety to read as
follows:
"Units shall become vested as follows:
(a) ____________ Units on March 15, 1995,
(b) ____________ Units on March 15, 1996."
3. Section 6 of the Award Agreement is amended
and restated in its entirety to read as follows:
<PAGE>
"For purposes of determining Unit Value the following
additional definitions shall apply:
a) Fair Market Value shall be the average of the
closing prices of the Common Stock as
recorded on the New York Stock Exchange
Composite Tape for the 20 trading days next
preceding the Valuation Date (the "Recent
Average Price"); provided, however that if
either
(i) Mattel achieves a Cash Flow Return on
Investment of 25% for the year ended
December 31, 1994, for determining Unit Value
on the first Valuation Date, or the year
ended December 31, 1995, for determining Unit
Value on the second Valuation Date, as the
case may be; or
(ii) the closing price of the Common Stock on
the New York Stock Exchange on any trading
day during the fourth calendar quarter of
1994, for determining Unit Value on the first
Valuation Date, and on any trading day during
the fourth calendar quarter of 1995, for
determining Unit Value on the second
Valuation Date, as the case may be, is equal
to or greater than an amount equal to the
product of 5% multiplied by the Standard &
Poors 400 Index;
then "Fair Market Value" shall be an amount equal
to the greater of (X) the Recent Average Price,
and (Y) the product of 90% multiplied by the
average closing price of Common Stock for
whichever period of 20 consecutive trading days
between the date of this Award Agreement and the
Valuation Date has the highest average closing
price for the period.
b) Initial Unit Value shall be the amount, if
any, by which the Fair Market Value exceeds
the Initial Value.
c) Cash Flow Return on Investment shall mean the
consolidated cash flow return on investment
of Mattel as calculated by the chief
financial officer of Mattel based upon the
annual consolidated financial statements of
Mattel in accordance with the methodology
2
<PAGE>
approved by the Compensation/Options
Committee of the Board of Directors.
d) Unit Value shall be the following amounts:
(i) If the Initial Unit Value is $2.6667 or
less, the Unit Value shall be an amount
determined by multiplying the Initial Unit
Value by .5;
(ii) If the Initial Unit Value is more than
$2.6667 but less than or equal to $5.3333,
the Unit Value shall be an amount equal to
$1.3333 plus an amount determined by
multiplying the amount of the Initial Unit
Value in excess of $2.6667 by 1.0;
(iii) If the Initial Unit Value is more than
$5.3333 but less than or equal to $8.0000,
the Unit Value shall be an amount equal to
$4.0000 plus an amount determined by
multiplying the amount of the Initial Unit
Value in excess of $5.3333 by 1.5;
(iv) If the Initial Unit Value is more than
$8.0000, but less than or equal to $10.6667,
the Unit Value shall be an amount equal to
$8.0000 plus an amount determined by
multiplying the amount of the Initial Unit
Value in excess of $8.0000 by 2.0;
(v) If the Initial Unit Value is more than
$10.6667, but less than or equal to $13.3333,
the Unit Value shall be an amount equal to
$13.3333 plus an amount determined by
multiplying the amount of the Initial Unit
Value in excess of $10.6667 by 2.5;
(vi) If the Initial Unit Value is more than
$13.3333, but less than or equal to $16.0000,
the Unit Value shall be an amount equal to
$20.0000 plus an amount determined by
multiplying the amount of the Initial Unit
Value in excess of $13.3333 by 1.5;
(vii) If the Initial Unit Value is more than
$16.0000, but less than or equal to $18.6667,
the Unit Value shall be an amount equal to
$24.0000 plus an amount determined by
3
<PAGE>
multiplying the amount of the Initial Unit
Value in excess of $16.0000 by 1.5;
(viii) If the Initial Unit Value is more
than $18.6667, but less than or equal to
$21.3333, the Unit Value shall be an amount
equal to $28.0000 plus an amount determined
by multiplying the amount of the Initial Unit
Value in excess of $18.6667 by 2.0;
(ix) If the Initial Unit Value is more than
$21.3333, but less than or equal to $24.0000,
the Unit Value shall be an amount equal to
$33.3333 plus an amount determined by
multiplying the amount of the Initial Unit
Value in excess of $21.3333 by 2.0;
(x) If the Initial Unit Value is more than
$24.0000 the Unit Value shall be an amount
equal to $38.6667 plus an amount determined
by multiplying the amount of the Initial Unit
Value in excess of $24.0000 by 2.5."
4. Paragraph (c) of Section 7 of the Award
Agreement is amended and restated in its entirety to read as
follows:
"c) Change of Control - All Units shall become
vested on the Distribution Date as that term is
defined in the Company's Rights Agreement dated as
of February 7, 1992 ("Rights Agreement"), or, if
the Rights Agreement has terminated or the Rights
have been redeemed, on the date the Distribution
Date would have occurred under Section 3 of the
Rights Agreement had the Rights Agreement not
terminated or the Rights not been redeemed."
5. The foregoing changes shall be effective as
of May 11, 1993. All other terms and provisions of the Award
Agreement shall remain unchanged.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Amendment as of the date first above written.
GRANTEE: MATTEL, INC.
____________________ By: ________________
Title: ________________
5
<PAGE>
Exhibit 10.22
RESTRICTED STOCK AWARD AGREEMENT
UNDER THE
MATTEL 1990 STOCK OPTION PLAN
This Agreement (the "Agreement") is made effective as
of the 15th day of December, 1993, between Mattel, Inc., a
Delaware corporation (the "Company"), and ______________________
(the "Grantee"). Except as otherwise specifically provided
herein, capitalized terms used herein shall have the meanings
attributed thereto in the Mattel 1990 Stock Option Plan (the
"Plan").
WHEREAS, pursuant to the Plan, the Company desires to
grant the Grantee Restricted Stock on the terms and conditions
set forth herein;
NOW, THEREFORE, in connection with the mutual covenants
hereinafter set forth and for other good and valuable
consideration, the parties hereto agree as follows:
1. Grant of Restricted Stock. The Company hereby
grants to the Grantee ________ shares of Restricted Stock
(________ shares after giving effect to the five-to-four stock
split which becomes effective January 7, 1994) on the terms and
conditions set forth herein. The shares of Restricted Stock
granted hereunder shall be registered in the Grantee's name, but
the certificates evidencing such shares shall be retained by the
Company during the period prior to the vesting of such shares as
set forth in Section 4 hereof (the "Restriction Period") and may
bear any restrictive legend that the Company, in its discretion,
deems appropriate. The Grantee shall execute a stock power, in
blank, with respect to such shares and deliver the same to the
Company.
2. Rights as a Shareholder. Except as provided in
Sections 1, 3 and 4 hereof, during the Restriction Period, the
Grantee shall have all the rights of a shareholder with respect
to shares of Restricted Stock granted hereunder, including the
right to receive dividends and the right to vote such shares.
3. Non-Transferability. During the Restriction
Period, the Grantee may not sell, transfer, pledge, or otherwise
encumber or dispose of the shares of Restricted Stock.
4. Lapse of Restrictions; Forfeiture. (a) The shares
of Restricted Stock granted hereunder shall vest, and the
restrictions imposed thereon shall lapse, as of January 1, 1997,
provided that (i) the Grantee has been continuously employed by
the Company from December 15, 1993 through and until January 1,
1997, and (ii) the performance goals set forth on Schedule I
<PAGE>
hereto have been satisfied.
(b) Subject to satisfaction of the performance
goals set forth on Schedule I hereto, if, during the Restriction
Period, (i) the Grantee's employment with the Company is
terminated by the Company other than for Cause or Disability, or
(ii) the Grantee's employment with the Company is terminated by
the Grantee for Good Reason, then the shares of Restricted Stock
granted hereunder shall vest pro rata, determined by multiplying
the number of shares granted hereunder by a fraction, the
numerator of which is the number of months which have elapsed
from the date hereof until the date of such termination, and the
denominator of which is thirty-six (36).
(c) If, during the Restriction Period, (i) the
Grantee's employment with the Company is terminated by reason of
death or Disability, (ii) the Grantee's employment with the
Company is terminated by the Grantee without Good Reason, or
(iii) the Grantee's employment with the Company is terminated by
the Company for Cause, then the shares of Restricted Stock
granted hereunder shall be immediately forfeited to the Company,
and the Grantee shall have no further rights with respect to such
Restricted Shares.
(d) For purposes of this Agreement, "Cause",
"Disability and "Good Reason" shall have the meanings given such
terms in the Amended and Restated Employment Agreement between
the Grantee and the Company dated as of November 11, 1993.
5. Delivery of Share Certificates. Upon the
vesting of any shares of Restricted Stock granted hereunder, the
certificates evidencing such shares shall be delivered promptly
to the Grantee. In the case of the Grantee's death, such
certificates will be delivered to the beneficiary designated in
writing by the Grantee pursuant to a form of designation provided
by the Company, to the Grantee's legatee or legatees, or to his
personal representatives or distributees, as the case may be.
6. Binding Effect. This Agreement shall be binding
upon the heirs, executors, administrators and successors of the
parties hereto.
7. Governing Law. This Agreement shall be
construed and interpreted in accordance with the laws of the
State of California without reference to rules relating to
conflict of law.
8. Headings. Headings are for the convenience of
the parties and are not deemed to be a part of this Agreement.
2
<PAGE>
9. Plan. The terms of the Plan, a copy of which is
attached hereto, are made part of this Agreement and are
incorporated herein by reference. In the event of any conflict
between the terms of the Plan and the terms of this Agreement,
the terms of the Plan shall govern.
EXECUTED effective as of the day and year first
written above.
MATTEL, INC.
COMPANY: By:_____________________________
Name:
Title:
GRANTEE: _____________________________
Name: _______________________
3
<PAGE>
Exhibit 10.25
[Fisher-Price, Inc. letterhead]
[FORM OF EMPLOYMENT AGREEMENT]
August 16, 1993
Executive name
Executive address
Executive city, state and zip code
Dear [Executive]:
This agreement will constitute a revision and amendment to the letter
agreement dated February 25, 1992 between [Executive] and Fisher-Price, Inc.,
a Delaware corporation ("Fisher-Price").
You will continue to be employed by Fisher-Price as its [Title], at a
minimum base salary rate of $________ per annum ("Base Salary").
You will participate in The Fisher-Price Executive Incentive Bonus Plan
dated June 28, 1991 ("Incentive Bonus Plan") at a "Target Incentive Factor" of
35%, a "Corporate/Unit Range of Ratings" of 0.00 to 2.5, and an "Individual
Range of Ratings" of 0.00 to 1.5. (All quoted phrases shall have the meanings
set forth in the Incentive Bonus Plan.) In addition, you will be issued
restricted Common Stock of Fisher-Price under The Long Term Incentive Plan
of 1991 ("LTIP") equal to 25% of each actual cash payout to you (whether or
not deferred) under the Incentive Bonus Plan.
You will be eligible to participate in all Fisher-Price benefit programs
applicable to your position, in accordance with the terms of such benefit
programs.
In the event that we terminate your employment for reasons other than a
Change of Control as specified below, we shall pay you in a lump sum upon the
date of your termination, a payment equal to 18 months of your then annual
salary (not less than your Base Salary), a payment, in lieu of any payments or
stock due under the Incentive Bonus Plan and the LTIP, of 50% of your then
gross annual salary (not less than your Base Salary) for said 18 months, less
customary deductions for Federal and state tax withholding and F.I.C.A.
deductions, if any, as a severance consideration; provided, however, that if
your employment is involuntarily terminated because of death, or any act,
material in nature, constituting embezzlement, fraud or any other willful
misconduct involving moral turpitude, this agreement shall terminate and you
will be paid all salaried amounts and benefits accrued through the date of
termination and shall not be entitled
<PAGE>
to any other payments. Your right to the payments described in this paragraph
shall be conditioned upon your signing an effective waiver of any claims under
the Age Discrimination in Employment Act, and any other federal and state
employment discrimination laws.
If there is a Change of Control of Fisher-Price and you elect to resign
from Fisher-Price or your employment is terminated within eighteen (18) months
after said Change of Control (a "Qualified Termination"), Fisher-Price shall
pay you in a lump sum, within 10 days of your termination of employment, an
amount equal to the product of (x) three, and (y) the sum of your then annual
salary (not less than your Base Salary) and the incentive payment calculated
under the Incentive Bonus Plan (designated "EIB Award" in said Plan), as in
effect immediately prior to the Change of Control, using a Corporate/Unit
Rating of 1.50 and an Individual Rating of 1.50, as those terms are used in
the Incentive Bonus Plan as in effect immediately prior to the Change of
Control. The above payments shall be reduced by customary Federal and state
withholding taxes, as required by law. In addition, for three years after a
Qualified Termination, Fisher-Price shall continue to provide you with medical
insurance no less favorable than that provided to you immediately prior to the
Change of Control on terms no less favorable (including co-payments and
deductibles) to you than the terms existing immediately prior to the Change of
Control. For purposes of determining your eligibility (but not the time of
commencement of benefits) for retiree medical benefits you shall be considered
to have remained employed until three years after your date of termination
and to have retired on the last day of such period. Upon a Change of Control,
all shares of restricted Common Stock held by you shall become free of all
restrictions and fully vested and all non-statutory options shall become
immediately exercisable and fully vested. In the event it shall be determined
that any payment or distribution by Fisher-Price for your benefit (whether paid
or payable or distributed or distributable pursuant to the terms of this
agreement or otherwise, but determined without regard to any additional payments
required pursuant to this sentence) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by you with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then you shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by you of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
2
<PAGE>
A "Change of Control" shall be deemed to have occurred if:
a. Any "Person", which shall mean a "person" as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than Fisher-Price, any trustee or
other fiduciary holding securities under an employee benefit plan of
Fisher-Price, or any company owned, directly or indirectly, by the
stockholders of Fisher-Price in substantially the same proportions as
their ownership of stock of Fisher-Price), is or becomes the
"beneficial owner" (as defined in Rules 13d-3 under the Exchange Act),
directly or indirectly, of securities of Fisher-Price representing 30%
or more of the combined voting power of Fisher-Price's then
outstanding voting securities;
b. during any period of 24 consecutive months, individuals, who at the
beginning of such period constitute the Board of Directors of
Fisher-Price (the "Board"), and any new director whose election by the
Board, or whose nomination for election by Fisher-Price's
stockholders, was approved by a vote of at least two-thirds (2/3) of
the directors (other than in connection with a contested election)
before the beginning of the period cease for any reason to constitute
at least a majority thereof;
c. the stockholders of Fisher-Price approve (1) a plan of complete
liquidation of Fisher-Price or (2) the sale or disposition by
Fisher-Price of all or substantially all of Fisher-Price's assets
unless the acquirer of the assets or its directors shall meet the
conditions for a merger or consolidation in subparagraphs (d)(1) or
(d)(2); or
d. the consummation of a merger or consolidation of Fisher-Price with any
other company other than:
1. such a merger or consolidation which would result in the voting
securities of Fisher-Price outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than 70% of the combined voting power of Fisher-Price's or
such surviving entity's outstanding voting securities immediately
after such merger or consolidation; or
3
<PAGE>
2. such a merger or consolidation, which would result in the
directors of Fisher-Price who were directors immediately prior
thereto, continuing to constitute at least 50% of the directors of
the surviving entity immediately after such merger or
consolidation.
In this paragraph d., "surviving entity" shall mean only an entity in which
all of Fisher-Price's stockholders immediately before such merger or
consolidation become stockholders by the terms of such merger or
consolidation, and the phrase "directors of Fisher-Price who were directors
immediately prior thereto" shall include only individuals who were
directors of Fisher-Price at the beginning of the 24 consecutive month
period preceding the date of such merger or consolidation, or who were new
directors (other than any director nominated in connection with a contested
election, or a director designated by a Person who has entered into an
agreement with Fisher-Price to effect a transaction described in paragraphs
c.2, d.1 or d.2 of this Section) whose election by the Board, or whose
nomination for election by Fisher-Price's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors before the beginning
of such period.
Except as otherwise provided herein, all individual Federal, State and Excise
taxes are your responsibility.
Fisher-Price's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any setoff, counterclaim, recoupment, defense or other claim, right
or action which Fisher-Price may have against you or others. In no event shall
you be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to you under any of the provisions of the
Agreement and such amounts shall not be reduced whether or not you obtain other
employment. Fisher-Price agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses which you may reasonably incur as a result
of any contest (regardless of the outcome thereof) by Fisher-Price, by you or
others, of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof.
4
<PAGE>
If you agree to continue your employment for Fisher-Price upon the terms
and conditions set forth in this letter, please sign and date both copies where
indicated and return one copy to me.
Very truly yours,
FISHER-PRICE, INC.
/s/ Ronald J. Jackson
---------------------------
Ronald J. Jackson
Chairman, President and CEO
Accepted and Agreed:
- -----------------------
Executive Name
- -----------------------
Dated
5
<PAGE>
Exhibit 10.26
[Fisher-Price, Inc. (U.S.A.) letterhead]
[FORM OF EMPLOYMENT AGREEMENT]
August 16, 1993
Executive name
Executive address
Executive city, province and zip code
Dear [Executive]:
This agreement will constitute a revision and amendment to the letter
agreement dated March 1, 1993 between [Executive] and Fisher-Price, Inc. a
Delaware corporation ("Fisher-Price").
You will continue to be employed by Fisher-Price as its [Title],
at a minimum base salary rate of U.S. $_______ per annum ("Base Salary").
You will participate in The Fisher-Price Executive Incentive Bonus Plan
dated June 28, 1991 ("Incentive Bonus Plan") at a "Target Incentive Factor" of
35%, a "Corporate/Unit Range of Ratings" of 0.00 to 2.50, and an "Individual
Range of Ratings" of 0.00 to 1.50. (All quoted phrases shall have the meanings
set forth in the Incentive Bonus Plan.) In addition, you will be issued
restricted Common Stock of Fisher-Price under The Long Term Incentive Plan of
1991 ("LTIP") equal to 25% of each actual cash payout to you (whether or not
deferred) under the Incentive Bonus Plan.
In addition, we shall grant you Fisher-Price restricted Common Stock in
accordance with the following schedule; provided you remain [Title] of
Fisher-Price:
_____ shares on March 1, 1994
_____ shares on March 1, 1995
_____ shares on March 1, 1996
Such grants to be adjusted in the event of any change in the Common Stock
of Fisher-Price by reason of any stock dividend, spin-off, split-up, spin-out,
recapitalization, merger, consolidation, reorganization, combination or exchange
of shares.
<PAGE>
For as long as you are a resident of Canada, Fisher-Price shall cause all
cash payments described herein to be paid to you to be paid in equivalent
Canadian currency by Fisher-Price Inc. a Canadian corporation with a principal
place of business in Mississauga, Ontario ("Fisher-Price - Canada"). In
addition, you shall be eligible to participate in all Fisher-Price - Canada
benefit programs, in accordance with the terms of such benefit programs, and
such additional Fisher-Price perquisite programs as may be specified by the
Chief Executive Officer of Fisher-Price.
In the event that we terminate your employment for reasons other than a
Change of Control as specified below, we shall pay you in a lump sum upon the
date of your termination, a payment equal to 18 months of your then annual
salary (not less than your Base Salary) a payment, in lieu of any payments or
stock due under the Incentive Bonus Plan and the LTIP, of 50% of your then gross
annual salary (not less than your Base Salary) for said 18 months, less
customary deductions for Federal and state tax withholding and F.I.C.A.
deductions or equivalent Canadian deductions, if any, as a severance
consideration; provided, however, that if your employment is involuntarily
terminated because of death, or any act, material in nature, constituting
embezzlement, fraud or any other willful misconduct involving moral turpitude,
this agreement shall terminate and you will be paid all salaried amounts and
benefits accrued through the date of termination and shall not be entitled to
any other payments. Your right to the payments described in this paragraph
shall be conditioned upon your signing an effective waiver of any claims under
the Age Discrimination in Employment Act (and its Canadian equivalent), and
under any other United States and Canadian federal, state, and Provincial
employment discrimination laws.
If there is a Change of Control of Fisher-Price and you elect to resign
from Fisher-Price or your employment is terminated within eighteen (18) months
after said Change of Control (a "Qualified Termination"), Fisher-Price shall
pay you in a lump sum, within 10 days of your termination of employment, an
amount equal to the product of (x) three, and (y) the sum of your then annual
salary (not less than your Base Salary) and the incentive payment calculated
under the Incentive Bonus Plan (designated "EIB Award" in said Plan), as in
effect immediately prior to the Change of Control, using a Corporate/Unit
Rating of 1.50 and an Individual Rating of 1.50, as those terms are used in
the Incentive Bonus Plan as in effect immediately prior to the Change of
Control. The above payments shall be reduced by customary Federal and state
withholding taxes, as required by law. In addition, for three years after a
Qualified Termination, Fisher-Price shall continue to provide you with medical
insurance no less favorable than that provided to you immediately prior to the
Change of Control on terms
2
<PAGE>
no less favorable (including co-payments and deductibles)
to you than the terms existing immediately prior to the Change of Control.
For purposes of determining your eligibility (but not the time of
commencement of benefits) for retiree medical benefits you shall be considered
to have remained employed until three years after your date of termination
and to have retired on the last day of such period. Upon a Change of Control,
all shares of restricted Common Stock held by you shall become free of all
restrictions and fully vested and all non-statutory options shall become
immediately exercisable and fully vested. In the event it shall be determined
that any payment or distribution by Fisher-Price for your benefit (whether paid
or payable or distributed or distributable pursuant to the terms of this
agreement or otherwise, but determined without regard to any additional payments
required pursuant to this sentence) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by you with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then you shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by you of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
A "Change of Control" shall be deemed to have occurred if:
a. Any "Person", which shall mean a "person" as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than Fisher-Price, any trustee or
other fiduciary holding securities under an employee benefit plan of
Fisher-Price, or any company owned, directly or indirectly, by the
stockholders of Fisher-Price in substantially the same proportions as
their ownership of stock of Fisher-Price), is or becomes the
"beneficial owner" (as defined in Rules 13d-3 under the Exchange Act),
directly or indirectly, of securities of Fisher-Price representing 30%
or more of the combined voting power of Fisher-Price's then
outstanding voting securities;
b. during any period of 24 consecutive months, individuals, who at the
beginning of such period constitute the Board of Directors of
Fisher-Price (the "Board"), and any new director whose election by the
Board, or whose nomination for election by
3
<PAGE>
Fisher-Price's stockholders, was approved by a vote of at least
two-thirds (2/3) of the directors (other than in connection with
a contested election) before the beginning of the period cease for
any reason to constitute at least a majority thereof:
c. the stockholders of Fisher-Price approve (1) a plan of complete
liquidation of Fisher-Price or (2) the sale or disposition by
Fisher-Price of all or substantially all of Fisher-Price's assets
unless the acquirer of the assets or its directors shall meet the
conditions for a merger or consolidation in subparagraphs (d)(1) or
(d)(2); or
d. the consummation of a merger or consolidation of Fisher-Price with any
other company other than:
1. such a merger or consolidation which would result in the voting
securities of Fisher-Price outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than 70% of the combined voting power of Fisher-Price's or
such surviving entity's outstanding voting securities immediately
after such merger or consolidation; or
2. such a merger or consolidation, which would result in the
directors of Fisher-Price who were directors immediately prior
thereto, continuing to constitute at least 50% of the directors of
the surviving entity immediately after such merger or
consolidation.
In this paragraph d., "surviving entity" shall mean only an entity in which
all of Fisher-Price's stockholders immediately before such merger or
consolidation become stockholders by the terms of such merger or
consolidation, and the phrase "directors of Fisher-Price who were directors
immediately prior thereto" shall include only individuals who were
directors of Fisher-Price at the beginning of the 24 consecutive month
period preceding the date of such merger or consolidation, or who were new
directors (other than any director nominated in connection with a contested
election, or a director designated by a Person who has entered into an
agreement with Fisher-Price to effect a transaction described in paragraphs
c.2, d.1 or d.2 of this Section) whose election by the Board, or whose
nomination for election by Fisher-Price's stockholders was approved by
a vote
4
<PAGE>
of at least two-thirds (2/3) of the directors before the beginning of
such period.
Except as otherwise provided herein, all individual United States or
Canadian Federal, State and Provincial Excise taxes are your responsibility.
Fisher-Price's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any setoff, counterclaim, recoupment, defense or other claim, right
or action which Fisher-Price may have against you or others. In no event shall
you be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to you under any of the provisions of the
Agreement and such amounts shall not be reduced whether or not you obtain other
employment. Fisher-Price agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which you may reasonably incur as
a result of any contest (regardless of the outcome thereof) by Fisher-Price, by
you or others, of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof.
If you agree to continue your employment for Fisher-Price upon the terms
and conditions set forth in this letter, please sign and date both copies where
indicated and return one copy to me.
Very truly yours,
FISHER-PRICE, INC.
/s/ Ronald J. Jackson
---------------------------
Ronald J. Jackson
Chairman, President and CEO
Accepted and Agreed:
- -----------------------
Executive Name
- -----------------------
Dated
5
<PAGE>
Exhibit 10.28
AMENDMENT
AMENDMENT dated August 16, 1993 to the letter agreement (the "Agreement")
dated March 12, 1993 by and between Ronald J. Jackson (the "Executive") and
Fisher-Price, Inc., a Delaware corporation (the "Company").
The Executive and the Company agree that the Amendment shall be amended by
amending paragraph 5 thereof so that it reads in its entirety as follows:
If there is a Change of Control of Fisher-Price and thereafter you elect to
resign from Fisher-Price or your employment is terminated (a "Qualified
Termination"), Fisher-Price shall pay you in a lump sum, within 10 days of your
termination of employment, an amount equal to the product of (x) three, and
(y) the sum of your then annual salary (not less than your Base Salary) and the
incentive payment calculated under the Incentive Bonus Plan (designated "EIB
Award" in said Plan), as in effect immediately prior to the Change of Control,
using a Corporate/Unit Rating of 1.50 and an Individual Rating of 1.50, as
those terms are used in the Incentive Bonus Plan as in effect immediately prior
to the Change of Control. The above payments shall be reduced by customary
Federal and state withholding taxes, as required by law. In addition, for
three years after a Qualified Termination, Fisher-Price shall continue to
provide you with medical insurance no less favorable than that provided to you
immediately prior to the Change of Control on terms no less favorable (including
co-payments and deductibles) to you than the terms existing immediately prior
to the Change of Control. For purposes of determining your eligibility (but
not the time of commencement of benefits) for retiree medical benefits you
shall be considered to have remained employed until three years after your date
of termination and to have retired on the last day of such period. Upon a
Change of Control, all shares of restricted Common Stock held by you shall
become free of all restrictions and fully vested and all non-statutory options
shall become immediately exercisable and fully vested. In the event it shall
be determined that any payment or distribution by Fisher-Price for your benefit
(whether paid or payable or distributed or distributable pursuant to the terms
of this agreement or otherwise, but determined without regard to any
additional payments required pursuant to this sentence) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by you with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then you shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by you of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
<PAGE>
For the purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if:
a. Any "Person", which shall mean a "person" as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than Fisher-Price, any trustee or
other fiduciary holding securities under an employee benefit plan of
Fisher-Price, or any company owned, benefit plan of Fisher-Price, or
any company owned, directly or indirectly, by the stockholders of
Fisher-Price in substantially the same proportions as their
ownership of stock of Fisher-Price), is or becomes the "beneficial
owner" (as defined in Rules 13d-3 under the Exchange Act), directly
or indirectly, of securities of Fisher-Price representing 30% or
more of the combined voting power of Fisher-Price's then
outstanding voting securities;
b. during any period of 24 consecutive months, individuals, who at the
beginning of such period constitute the Board of Directors of
Fisher-Price (the "Board"), and any new director whose election by the
Board, or whose nomination for election by Fisher-Price's
stockholders, was approved by a vote of at least two-thirds (2/3) of
the directors (other than in connection with a contested election)
before the beginning of the period cease for any reason to constitute
at least a majority thereof;
c. the stockholders of Fisher-Price approve (1) a plan of complete
liquidation of Fisher-Price or (2) the sale or disposition by
Fisher-Price of all or substantially all of Fisher-Price's assets
unless the acquirer of the assets or its directors shall meet the
conditions for a merger or consolidation in subparagraphs (d)(1) or
(d)(2); or
d. the consummation of a merger or consolidation of Fisher-Price with any
other company other than:
1. such a merger or consolidation which would result in the voting
securities of Fisher-Price outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity
more than 70% of the combined voting power of Fisher-Price's or
such surviving entity's outstanding voting securities immediately
after such merger or consolidation; or
2
<PAGE>
2. such a merger or consolidation, which would result in the
directors of Fisher-Price who were directors immediately prior
thereto, continuing to constitute at least 50% of the directors of
the surviving entity immediately after such merger or
consolidation.
In this paragraph d., "surviving entity" shall mean only an entity in which
all of Fisher-Price's stockholders immediately before such merger or
consolidation become stockholders by the terms of such merger or
consolidation, and the phrase "directors of Fisher-Price who were directors
immediately prior thereto" shall include only individuals who were
directors of Fisher-Price at the beginning of the 24 consecutive month
period preceding the date of such merger or consolidation, or who were new
directors (other than any director nominated in connection with a contested
election, or a director designated by a Person who has entered into an
agreement with Fisher-Price to effect a transaction described in paragraphs
c.2, d.1 or d.2 of this Section) whose election by the Board, or whose
nomination for election by Fisher-Price's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors before the beginning
of such period.
Except as provided above, the Agreement shall remain in full force and
effect.
FISHER-PRICE, INC.
/s/ Rodney V. Campbell
----------------------------
Rodney V. Campbell
Senior Vice President
Chief Administrative Officer
Accepted:
/s/ Ronald J. Jackson
- ---------------------
Ronald J. Jackson
As of September 7, 1993
- -----------------------
Dated
3
<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 YEAR ENDED (A)(B)
------------------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 29, Dec. 30,
PRIMARY 1993 1992 1991 1990 1989
- ------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Before Extraordinary Item and Cumulative
Effect of Changes in Accounting Principles $135,911 $184,841 $134,038 $ 95,582 $ 81,965
Add: Interest savings, net of tax, applicable to
assumed exercise of Fisher-Price warrants 637 1,138 594 - -
Deduct: Dividends on senior preferred stock (4,894) (4,826) (4,830) (4,811) (4,830)
Dividends on convertible preference stock - (152) (605) (605) (605)
-------- -------- -------- -------- --------
Income Before Extraordinary Item and Cumulative
Effect of Changes in Accounting Principles for
Computation of Income Per Share 131,654 181,001 129,197 90,166 76,530
Extraordinary item (14,681) - (5,236) - (10,983)
Cumulative effect of changes in accounting principles (4,022) - - - -
-------- -------- -------- -------- --------
Net Income Applicable to Common Shares $112,951 $181,001 $123,961 $ 90,166 $ 65,547
======== ======== ======== ======== ========
Applicable Shares
Weighted average common shares outstanding 168,228 169,002 143,367 115,883 114,308
Weighted average common equivalent shares arising from:
Stock options 1,878 2,319 1,943 3,016 2,942
Fisher-Price warrants 1,076 2,085 1,122 - -
Common stock warrants - $6.25 Series - - 407 1,615 1,366
-------- -------- -------- -------- --------
Weighted average number of common and common
equivalent shares 171,182 173,406 146,839 120,514 118,616
======== ======== ======== ======== ========
Income Per Share Before Extraordinary Item and
Cumulative Effect of Changes in Accounting Principles $ 0.77 $ 1.04 $ 0.88 $ 0.75 $ 0.64
Extraordinary item (0.09) - (0.04) - (0.09)
Cumulative effect of changes in accounting
principles (0.02) - - - -
-------- -------- -------- -------- --------
Net Income Per Common Share $ 0.66 $ 1.04 $ 0.84 $ 0.75 $ 0.55
======== ======== ======== ======== ========
<FN>
(A) Consolidated financial information for 1993, 1992 and 1991 has been restated retroactively for the effects of
the November 1993 merger, accounted for as a pooling of interests, with Fisher-Price. The results of operations
and financial position of Fisher-Price are excluded from periods prior to July 1, 1991, while its business was
operated as a division of The Quaker Oats Company.
(B) Per share data reflect the retroactive effect of stock splits distributed to shareholders in January 1994, June
1992 and November 1991 and the mergers with Fisher-Price and IGI in 1993 and 1992, respectively.
</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 YEAR ENDED (A)(B)
------------------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 29, Dec. 30,
FULLY DILUTED 1993 1992 1991 1990 1989
- ------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Before Extraordinary Item and Cumulative
Effect of Changes in Accounting Principles $135,911 $184,841 $134,038 $ 95,582 $ 81,965
Add: Interest expense, net of tax, applicable to:
Assumed conversion of 8% convertible debentures 5,338 5,467 3,907 - -
Assumed exercise of Fisher-Price warrants 637 1,138 594 - -
Deduct: Dividends on senior preferred stock - (152) (605) (605) (605)
Impact of required ESOP dividends or
contributions upon conversion (4,894) (4,826) (4,830) (4,811) (4,830)
-------- -------- -------- -------- --------
Income Before Extraordinary Item and Cumulative
Effect of Changes in Accounting Principles for
Computation of Income Per Share 136,992 186,468 133,104 90,166 76,530
Extraordinary item (14,681) - (5,236) - (10,983)
Cumulative effect of changes in accounting principles (4,022) - - - -
-------- -------- -------- -------- --------
Net Income Applicable to Common Shares $118,289 $186,468 $127,868 $ 90,166 $ 65,547
======== ======== ======== ======== ========
Applicable Shares
Weighted average common shares outstanding 168,363 169,103 143,420 115,883 114,308
Weighted average common equivalent shares arising from:
Assumed conversion of 8% convertible debentures 7,566 7,793 5,966 - -
Assumed conversion of convertible preference stock 1,620 1,620 1,620 1,620 1,620
Stock options 2,224 2,657 2,888 3,016 3,957
Fisher-Price warrants 1,076 2,085 1,122 - -
Common stock warrants - $6.25 Series - - 570 1,615 1,604
-------- -------- -------- -------- --------
Weighted average number of common and common
equivalent shares 180,849 183,258 155,586 122,134 121,489
======== ======== ======== ======== ========
Income Per Share Before Extraordinary Item and
Cumulative Effect of Changes in Accounting Principles $ 0.75 $ 1.02 $ 0.85 $ 0.74 $ 0.63
Extraordinary item (0.08) - (0.03) - (0.09)
Cumulative effect of changes in accounting
principles (0.02) - - - -
-------- -------- -------- -------- --------
Net Income Per Common Share $ 0.65 $ 1.02 $ 0.82 $ 0.74 $ 0.54
======== ======== ======== ======== ========
<FN>
(A) Consolidated financial information for 1993, 1992 and 1991 has been restated retroactively for the effects of
the November 1993 merger, accounted for as a pooling of interests, with Fisher-Price. The results of operations
and financial position of Fisher-Price are excluded from periods prior to July 1, 1991, while its business was
operated as a division of The Quaker Oats Company.
(B) Per share data reflect the retroactive effect of stock splits distributed to shareholders in January 1994, June
1992 and November 1991 and the mergers with Fisher-Price and IGI in 1993 and 1992, respectively.
</TABLE>
<PAGE>
Exhibit 13.0
Mattel, Inc. and Subsidiaries
CONTENTS
--------
FINANCIAL INFORMATION
---------------------
Five-Year Financial Summary Page 27
Management's Discussion and Analysis of Results of
Operations and Financial Condition Page 28
Consolidated Financial Statements Page 32
Notes to Consolidated Financial Statements Page 37
Management Report on Responsibility for Financial Page 51
Reporting
Report of Independent Accountants Page 51
CORPORATE INFORMATION
---------------------
Directors and Officers Page 52
Corporate Information Page 53
<PAGE>
<TABLE>
Mattel, Inc. and Subsidiaries
FIVE-YEAR FINANCIAL SUMMARY
---------------------------
<CAPTION>
For the Year (a)(b)
----------------------------------------------------------
(In thousands, except per share and percentage information) 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results:
Net sales $2,704,448 $2,563,525 $2,046,489 $1,497,312 $1,257,555
Gross profit 1,360,978 1,269,766 989,506 716,153 626,111
% of net sales 50% 50% 48% 48% 50%
Operating profit before integration and
restructuring charge 414,260 351,661 278,660 193,411 162,416
% of net sales 15% 14% 14% 13% 13%
Integration and restructuring charge (c) 115,000 - - - -
Income before income taxes, extraordinary item
and cumulative effect of changes in
in accounting principles 236,646 282,945 214,326 143,482 109,165
Provision for income taxes 100,735 98,104 80,288 47,900 27,200
Income before extraordinary item and
cumulative effect of changes in
accounting principles 135,911 184,841 134,038 95,582 81,965
Extraordinary item - loss on debt retirement (14,681) - (5,236) - (10,983)
Cumulative effect of changes in accounting principles (4,022) - - - -
Net income 117,208 184,841 128,802 95,582 70,982
Income Per Common Share (d):
Income before extraordinary item and cumulative effect
of changes in accounting principles
Primary 0.77 1.04 0.88 0.75 0.64
Fully diluted 0.75 1.02 0.85 0.74 0.63
Net income
Primary 0.66 1.04 0.84 0.75 0.55
Fully diluted 0.65 1.02 0.82 0.74 0.54
Dividends declared per common share (d) 0.18 0.15 0.08 0.04 -
<CAPTION>
As of Year-End (a)(b)
----------------------------------------------------------
(In thousands) 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------
Financial Position:
<S> <C> <C> <C> <C> <C>
Cash and marketable securities $ 523,581 $ 327,807 $ 290,750 $ 204,349 $ 224,477
Accounts receivable, net 580,313 538,444 467,266 266,424 253,849
Inventories 219,993 238,895 225,411 152,134 118,056
Total assets 2,000,077 1,712,675 1,564,832 968,688 868,090
Notes payable to banks - 13,401 29,733 1,000 -
Long-term liabilities 398,939 434,930 353,575 229,070 244,144
Shareholders' equity 817,809 748,356 664,054 336,586 217,685
<FN>
(a) Consolidated financial information for 1993, 1992 and 1991 has been restated retroactively for the effects
of the November 1993 merger, accounted for as a pooling of interests, with Fisher-Price. The results of
operations and financial position of Fisher-Price are excluded from periods prior to July 1, 1991, while
its business was operated as a division of The Quaker Oats Company (Note 2).
(b) The Company's financial reporting year ended on December 31 for years 1991 through 1993 and on the last
Saturday of December for years 1989 and 1990.
(c) The nonrecurring charge represents transaction, integration and restructuring costs related to the
Fisher-Price merger.
(d) Per share data reflect the retroactive effect of stock splits distributed to shareholders in January 1994,
June 1992 and November 1991 and the mergers with Fisher-Price and IGI in 1993 and 1992, respectively.
</TABLE>
27
<PAGE>
Mattel, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
-----------------------------------------------
OF OPERATIONS AND FINANCIAL CONDITION
-------------------------------------
This analysis should be read in conjunction with the consolidated
financial statements which begin on page 32.
The Company's dedication to its long-term business strategies,
which include strengthening its core product lines, expansion of its
international marketing and distribution network and constant focus on
increasing manufacturing efficiency and flexibility, has resulted in
another record year with net sales of over $2.7 billion. Mattel's
merger with Fisher-Price completed in the fourth quarter of 1993 is
consistent with these strategies and should further enhance the
Company's standing as a worldwide leader in the manufacture and
marketing of children's toys.
Results of Operations
- ---------------------
The following is a percentage analysis of operating results for the
past three years:
<TABLE>
<CAPTION>
For the Year
---------------------
1993 1992 1991
---------------------
<S> <C> <C> <C>
Net sales 100% 100% 100%
==== ==== ====
Gross profit 50 50 48
Advertising and promotion expenses 16 16 15
Other selling and administrative expenses 19 19 19
Integration and restructuring charge 4 - -
Other expense, net - 1 1
---- ---- ----
Operating profit 11 14 13
Interest expense 2 3 3
---- ---- ----
Income before income taxes, extraordinary item
and changes in accounting principles 9% 11% 10%
==== ==== ====
</TABLE>
1993 Compared to 1992
- ---------------------
Net sales increased $140.9 million or 5% over 1992. In addition to
growth in core product sales, incremental volume was contributed by
sales of Nickelodeon-licensed toys and new product introductions such
as Baby Walk 'n Roll, Mighty Max, Sally Secrets and the Company's line
of McDonald's activity toys. The growth in worldwide net sales
includes unfavorable foreign currency impacts of $104.1 million and a
$57.5 million decrease in Nintendo volume as a result of terminations
of the Company's distributorship agreements for Nintendo products in
Australia in the 1993 fourth quarter and in Canada and Italy during the
first and third quarters of 1992, respectively.
Worldwide sales of core products, which 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 and the UNO and Skip-Bo card games, represented
86% of total revenues for both 1993 and 1992. In total, core brand
sales increased 6% over the prior year, with sales of Barbie products
exceeding $1.0 billion in volume. Fisher-Price contributed revenues
totaling $753.8 million in 1993 compared to $731.1 million in 1992.
Die-cast sales increased 24% and Disney-licensed product sales were 19%
higher than year-ago levels. These increases were partially offset by a
continuing decline in the large doll segment, which was 29% below the
prior year. Domestic sales grew 7%, and represented 60% of worldwide
gross revenues in 1993 compared to 59% in the prior year. Sales
internationally increased 4%, reflecting the unfavorable impacts of
foreign currency translation and the terminations of the
distributorship agreements for Nintendo products. At constant rates of
exchange, international revenues increased 15% over the prior year.
Excluding Nintendo, international sales grew 10% over 1992, or by 21%
at constant rates of exchange.
As a percentage of net sales, gross profit remained constant from
year to year. Advertising and promotion expenses, while constant as a
percentage of net sales, increased $23.3 million over 1992 levels in
support of increased sales of core brands and new product
introductions. The Company's expansion of its marketing operations and
manufacturing facilities resulted in a net increase in other selling
and administrative expenses of $6.5 million as compared to the prior
year, which included the effect of a $15.0 million pre-tax charge to
the provision for doubtful accounts related to the bankruptcy of Child
World and deteriorating financial condition of Lionel Leisure. Other
expense, net, decreased slightly, principally as a result of gains on
foreign currency transactions which were partially offset by
amortization of goodwill and losses on routine dispositions of fixed
assets.
In the 1993 fourth quarter, the Company recognized a $115.0
million pre-tax charge against continuing operations in connection with
its merger with Fisher-Price. Of the total, approximately $17.0
million represented transaction costs of the merger, including
investment banking, legal, accounting and related costs, and $30.0
million was related to the severance of key Fisher-Price executives.
Following the merger, the Company commenced restructuring and
integrating certain of the domestic and international business
operations of the entities. Of the estimated integration and
restructuring costs of $68.0 million, approximately $13.0 million
represented writedowns of fixed assets in connection with the
elimination of duplicative administration and plant facilities. The
remainder represented expenditures related to the combination of the
entities' worldwide business operations, including staff reductions and
outplacement expenses, costs of terminating contracts with lessors and
distributors
28
<PAGE>
and fees paid to consultants in connection with the
integration and restructuring process. After related tax effects, the
net $90.4 million charge impacted 1993 earnings by $0.53 per share on a
primary basis and $0.50 per share on a fully diluted basis.
Although no assurance can be given, the Company anticipates its
integration and restructuring activities will provide cost savings of
approximately $45.0 million during 1994, principally as a result of
consolidation of facilities and related staff reductions. Available
cash reserves and cash flow generated from normal business operations
will fund the costs of the integration and restructuring, with no
adverse impact expected on the Company's future liquidity or financial
position. Of the total integration and restructuring charge accrued,
approximately $20.2 million had been expended as of December 31, 1993.
Interest expense decreased $6.1 million or 9%, reflecting a
general decline in interest rates and lower levels of short-term bank
borrowing, partially offset by interest on the 6-7/8% Senior Notes
issued in August 1992 and the 6-3/4% Senior Notes issued in May 1993.
Following the merger, the Company negotiated an agreement with the
lenders to permit prepayment of Fisher-Price's 10.69% term loan. The
prepayment resulted in an extraordinary net-of-tax charge in the 1993
fourth quarter of $14.7 million, or $0.08 per fully diluted share, for
the prepayment premium and write-off of unamortized issuance costs.
1992 Compared to 1991
- ---------------------
The Company's consolidated results of operations include the activities
of Fisher-Price for 12 months of 1992 and for the last 6 months of
1991. Prior to July 1, 1991, the business of Fisher-Price was operated
as a division of The Quaker Oats Company; therefore, any such prior
financial data have been excluded from the Company's combined
consolidated financial statements.
Net sales increased $517.0 million or 25% over 1991, including the
effect of a $314.6 million increase related to Fisher-Price for the 12
months of 1992 over the 6 months of 1991. Excluding Fisher-Price, the
Company's worldwide net sales increased $202.4 million or 12%. The
increase in combined net sales included favorable foreign currency
impacts of $26.5 million and an $86.4 million decrease in Nintendo
volume as a result of terminations of the Company's distributorship
agreements for Nintendo products in Canada and Italy during the first
and third quarters of 1992, respectively.
Worldwide sales of core products increased 30%, and represented
86% of total revenues in 1992 compared to 83% for the prior year.
Sales of Disney-licensed products grew 45% over 1991 volumes and Barbie
product sales were higher by 15%, while large dolls declined 17%.
Sales to customers in the United States were 59% of 1992 consolidated
revenues compared to 54% in the prior year. In total, domestic sales
increased 36%, partially attributable to Fisher-Price volume which
represented 33% and 24% of the Company's domestic sales for 1992 and
1991, respectively. Excluding Fisher-Price, domestic sales of the
Company grew 18%. Total international sales increased 13% compared to
1991; at constant rates of exchange, international sales increased 10%.
Fisher-Price volume represented 17% and 12% of the Company's
international sales for 1992 and 1991, respectively. Excluding Fisher-
Price, the Company's international volume increased 7%. International
revenues excluding Nintendo grew 26% over the prior year, or 23% at
constant rates of exchange.
Gross profit as a percentage of net sales increased two points to
50%, principally as a result of higher sales volume and an improved
product mix due to decreased Nintendo volume. Advertising and
promotion spending was $95.4 million over 1991 levels, in support of
increased sales of core brands, new product introductions, and further
development of markets internationally. The increase also reflects a
$45.0 million differential arising from the inclusion of Fisher-Price's
activity on a 12-month basis in 1992 versus a 6-month basis in 1991.
Other selling and administrative expenses increased $109.3
million, while remaining constant at 19% of net sales. The change in
comparison to the prior year reflects a $15.0 million pre-tax provision
for doubtful accounts receivable related to Child World and Lionel
Leisure, an increase in design and development expenses in connection
with the Company's expansion into new product lines and markets, and a
$61.1 million differential related to inclusion of Fisher-Price results
on full year basis compared to 6 months for 1991.
Other expense, net decreased as a result of a reduction in
goodwill amortization related to a change in the estimated period of
benefit and gains on sales of marketable securities, partially offset
by losses on foreign currency transactions. Interest expense for 1992
increased 3% over the prior year, reflecting higher levels of short-
term borrowing, issuance of the 6-7/8% Senior Notes in August 1992, and
a $4.6 million effect of the inclusion of Fisher-Price activity on a 12-
month basis compared to 6 months for 1991. These increases were
partially offset by a decrease related to retirement of the Company's
14-3/4% Subordinated Debentures in mid-1991.
Income Taxes
- ------------
The effective income tax rates for 1993 and 1992 were 42.57% and
34.67%, respectively. The increased effective rate for 1993 resulted
from certain nondeductible restructuring costs, increased taxable
income earned in locations with relatively higher tax rates, and a
reduction in the U.S. tax benefit of foreign tax credits associated
with current dividends from subsidiaries located in higher tax rate
countries. In both years, benefits from foreign tax credit
carryforwards were credited to additional paid-in capital to the extent
that they resulted from net operating loss carryforwards originating
prior to the Company's 1987 quasi-reorganization.
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
which replaced Statement No. 96. Upon adoption, a deferred income tax
asset of $69.0 million was recorded, of which $16.0 million related to
postquasi-reorganization net operating losses carried forward, and
$53.0 million related principally to future tax
29
<PAGE>
deductions, and foreign
tax credit and alternative minimum tax credit carryovers resulting from
activities prior to the quasi-reorganization. The benefit of $16.0
million (or $0.09 per fully diluted share in the 1993 first quarter)
was recognized in after-tax earnings as the cumulative effect of a
change in accounting principle. The remaining $53.0 million was
credited to additional paid-in capital in accordance with the required
accounting treatment for transactions resulting from activities prior
to the quasi-reorganization.
Financial Position
- ------------------
The Company's financial position remained strong in 1993 as a result of
profitable operating results and benefits of reduced levels of bank
borrowing. Working capital increased to $687.4 million, and as of year-
end, the Company had repaid all of its short-term borrowing. At
December 31, 1993, the Company's cash position, including marketable
securities, was $523.6 million, compared to $327.8 million as of the
prior year end, and exceeded outstanding long-term debt by $195.5
million.
Accounts receivable increased 8% over the prior year level,
reflecting increases in fourth quarter sales volume as well as early
shipping of 1994 product. Inventories decreased 8% compared to the
prior year-end, principally as a result of the termination of the
distribution agreements for Nintendo products.
The $60.8 million net increase in prepaid assets primarily
reflects the effect on deferred income tax assets from the Company's
adoption of Statement No. 109 in the 1993 first quarter, as well as
current tax benefits related to the prepayment of Fisher-Price's long-
term debt obligation.
The Company's capitalization is as follows:
<TABLE>
<CAPTION>
(In millions) December 31, 1993 December 31, 1992
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
6-7/8% Senior notes $ 99.5 8% $ 99.3 9%
6-3/4% Senior notes 100.0 8 - -
8% Convertible subordinated 74.0 6 97.5 8
debentures
Fisher-Price term loan - - 98.5 8
Other long-term debt
obligations 54.6 5 90.4 8
-------- ---- -------- ----
Total long-term debt 328.1 27 385.7 33
Other long-term liabilities 70.8 6 49.2 4
Shareholders' equity 817.8 67 748.4 63
-------- ---- -------- ----
$1,216.7 100% $1,183.3 100%
======== ==== ======== ====
</TABLE>
Total long-term debt decreased as a percentage of total
capitalization principally as a result of voluntary conversions of 8%
Debentures into common stock by holders of the debt. Shareholders'
equity increased 9% over 1992 reflecting profitable operating results
for the current year, a credit of $24.3 million related to conversions
of the 8% Debentures, a $53.0 million credit to paid-in capital related
to the adoption of Statement No. 109, and an increase of $19.0 million
for activity related to employee stock compensation plans. These
increases were partially offset by treasury stock repurchases of $52.6
million, dividend declarations on common and preferred stock totaling
$33.8 million, a $41.1 million net-of-tax charge against paid-in
capital related to the cost of terminating a prequasi-reorganization
lease commitment and a $21.2 million unfavorable change in the currency
translation component of shareholders' equity.
In July 1992, two venture capital funds, of which Warburg, Pincus
& Co. ("Warburg") is the general partner, distributed to their
respective general and limited partners approximately 15.2 million
shares, representing 90 percent of the funds' shares of the Company's
common stock which had been beneficially owned by Warburg. Immediately
after the distribution, none of the general or limited partners held
more than 5 percent of the Company's outstanding shares of common
stock.
Liquidity
- ---------
Primary sources of liquidity for the Company over the last three years
have been cash flows generated from profitable operations, the proceeds
of long-term debt issuances, and short-term seasonal borrowing.
Operating activities generated cash flows of $303.3 million during
1993, compared to $131.6 million and $335.0 million in 1992 and 1991,
respectively.
Principal investing activities during 1993 included additions of
tooling, property and equipment at various manufacturing and office
facilities. In addition to fixed asset purchases to replenish
manufacturing and distribution facilities, investing activities during
1992 included the construction and start-up of a new manufacturing
facility in Indonesia and the $16.0 million payment of final purchase
consideration related to the Company's 1991 acquisition of Aviva Sport,
Inc. During 1991, in addition to its acquisition of Aviva Sport, Inc.,
the Company also acquired the remaining 60% interest in its joint
venture with a Mexico City-based group of companies.
Financing activities provided intermediate- and long-term funds
through issuances of the 6-3/4% Senior Notes in 1993, the 6-7/8% Senior
Notes in 1992 and 8% Debentures in 1991, which were utilized by the
Company to retire higher-cost debt and for seasonal financing
requirements. Cash outlays for treasury stock were made over the three-
year period in order to purchase shares for reissuance under the
Company's employee stock option plans and for potential conversions of
convertible securities. The Company has consistently increased cash
payments for common dividends over the three year period as a result of
its stock splits distributed to common shareholders.
Short-Term Financing
- --------------------
The Company's seasonal cash flow requirements for the coming year are
expected to be met by cash on hand as of December 31, 1993, cash
generated by 1994 operations, and short-term credit lines provided by
domestic and foreign banks. The Company's new domestic credit line
consists of unsecured facilities providing a total of $500.0 million in
seasonal financing from a commercial bank group. The facilities
provide up to $250.0 million for advances and backup for commercial
paper issuances (of which $125.0 million is a 364-day facility and the
other $125.0 million is a 3-year facility), and an additional
30
<PAGE>
3-year facility providing up to $250.0 million for nonrecourse purchases
of certain trade accounts receivable by the bank group. In connection
with the agreement, the Company must comply with certain financial
covenants for consolidated debt-to-capital, interest coverage and
tangible net worth levels.
In addition, the Company expects to have available approximately
$170.0 million of individual short-term foreign credit lines with a
number of banks, which customarily are extended as needed to meet
seasonal working capital requirements.
Acquisitions
- ------------
On November 30, 1993, a merger was consummated between the Company and
Fisher-Price, Inc. ("Fisher-Price"), one of the world's largest
manufacturers and marketers of infant and preschool toys and juvenile
products. The stock-for-stock transaction was approved by the
shareholders of both companies, after which Fisher-Price became a
wholly-owned subsidiary of the Company. The merger agreement provided
for the exchange of 1.275 shares of Mattel common stock for each
outstanding Fisher-Price common share, and resulted in the issuance of
approximately 39.1 million pre-split shares valued, on the merger's
effective date, at $1.19 billion. This transaction has been accounted
for as a pooling of interests, and accordingly, financial information
for periods prior to the merger reflect retroactive restatement for the
companies' combined financial position and operating results. Prior to
July 1, 1991, the business of Fisher-Price was operated as a division
of The Quaker Oats Company, and therefore, any such financial data are
excluded from the Company's combined consolidated results presented
herein.
In connection with the merger, the Company recognized a one-time
charge of $115.0 million, pre-tax, representing transaction expenses of
the merger and projected costs of integrating the business operations
of the companies. Of this charge, approximately $17.0 million
represented investment banking, legal, accounting and other transaction
costs of the merger, approximately $30.0 million related to the
severance of key Fisher-Price executives, and the remainder represented
estimated costs of integration and restructuring activities necessary
to align the worldwide business operations of the combined company.
This one-time charge recognized in the 1993 fourth quarter was $90.4
million, net of related taxes, and reduced earnings per share for the
year by $0.53 per share and $0.50 per share on a primary and fully
diluted basis, respectively. Although no assurance can be given, the
Company anticipates its integration and restructuring activities will
provide cost savings of approximately $45.0 million during 1994,
principally as a result of consolidation of facilities and related
staff reductions. Available cash reserves and cash flow generated from
normal business operations will fund the costs of the integration and
restructuring; no adverse impact is expected with respect to the
Company's future liquidity or financial position.
In 1992, the Company concluded its merger with International
Games, Inc. ("IGI"), a creator, manufacturer and marketer of
proprietary family and educational card and board games, including UNO
and Skip-Bo. The merger, accounted for as a pooling of interests, was
effected by exchanging all of IGI's outstanding voting preferred and
common stock for 1,627,007 (post-split basis) shares of Mattel common
stock and 864,293 shares of Mattel 12.5% Convertible Preference Stock,
Series F, representing a combined value of $58.5 million.
Litigation
- ----------
The Company is involved in various litigation and other legal matters,
including claims related to product liability and environmental
cleanup, which are being addressed or defended in the ordinary course
of business. Management believes that any liability which may
potentially result upon resolution of such matters will not have a
material adverse effect on the Company's consolidated financial
position or results of operations.
Commitments
- -----------
In the normal course of business, the Company enters into contractual
arrangements for future purchases of goods and services to ensure
availability and timely delivery, and to obtain and protect the
Company's right to create and market certain toys. Such arrangements
include commitments for future inventory purchases and royalty payments
pursuant to licensing agreements. Certain of these commitments
routinely contain provisions for guaranteed or minimum expenditures
during the terms of the contracts.
As of December 31, 1993, the Company had outstanding commitments
for 1994 purchases of inventory of approximately $56.0 million.
Licensing and similar agreements with terms extending through the year
2001 contain provisions for future guaranteed minimum payments
aggregating approximately $310.0 million.
Foreign Currency Contracts
- --------------------------
The Company enters into foreign currency forward exchange contracts,
swaps and options as hedges of inventory purchases, sales and various
other intercompany transactions. At December 31, 1993, the Company and
its foreign affiliates had outstanding forward exchange contracts
totaling $256.0 million to acquire U.S. dollars and held forward
contracts to purchase $219.4 million in foreign currencies.
Effects of Inflation
- --------------------
Inflation rates in the United States and in major foreign countries in
which the Company operates have not had a significant impact on the
Company's operating results for the three years ended December 31,
1993. The impact of inflation is minimized as a result of rapid
turnover of inventories, and the Company has benefited from inflation
with respect to repayment of fixed-rate liabilities during these
periods. The U.S. Consumer Price Index increased 2.7% in 1993, 2.9% in
1992 and 3.1% in 1991.
31
<PAGE>
Mattel, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December December
ASSETS (In thousands) 31, 1993 31, 1992
- -----------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash $ 506,113 $ 313,693
Marketable securities 17,468 14,114
Accounts receivable, less allowances of
$21,024 at December 31, 1993 and
$35,115 at December 31, 1992 580,313 538,444
Inventories 219,993 238,895
Prepaid expenses and other current assets 146,863 86,097
---------- ----------
Total current assets 1,470,750 1,191,243
---------- ----------
Property, Plant and Equipment
Land 15,664 10,560
Buildings 146,622 144,039
Machinery and equipment 240,449 239,495
Capitalized leases 38,209 38,209
Leasehold improvements 41,948 41,336
---------- ----------
482,892 473,639
Less: Accumulated depreciation 229,130 216,376
---------- ----------
253,762 257,263
Tools, dies and molds, net 73,115 66,882
---------- ----------
Property, plant and equipment, net 326,877 324,145
---------- ----------
Other Noncurrent Assets
Intangible assets, net 139,277 150,966
Sundry assets 63,173 46,321
---------- ----------
$2,000,077 $1,712,675
========== ==========
<FN>
The accompanying notes are an integral part of these statements.
32
<PAGE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (In December December
thousands, except share data) 31, 1993 31, 1992
- -----------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Notes payable to banks $ - $ 13,401
Current portion of long-term liabilities 104,862 8,914
Accounts payable 175,424 169,917
Accrued liabilities 397,800 267,170
Income taxes payable 105,243 69,987
---------- ----------
Total current liabilities 783,329 529,389
---------- ----------
Long-Term Liabilities
6-7/8% Senior notes due 1997 99,470 99,344
6-3/4% Senior notes due 2000 100,000 -
8% Convertible subordinated debentures due 2001 73,953 97,547
Mortgage note 45,000 45,000
Term loans 9,689 143,882
Other 70,827 49,157
---------- ----------
Total long-term liabilities 398,939 434,930
---------- ----------
Shareholders' Equity
Preferred and preference stock 9 9
Common stock $1 par value, 300,000,000 shares
authorized; 172,470,271 shares issued with
169,869,300 shares outstanding for 1993 and
171,700,036 shares issued with 168,931,628
shares outstanding for 1992 (a) 172,470 137,360
Additional paid-in capital 226,528 247,727
Treasury stock at cost; 2,600,971 shares for
1993 and 2,768,408 shares for 1992 (a) (47,350) (43,098)
Retained earnings (b) 532,003 448,600
ESOP note receivable (3,500) (8,420)
Deferred compensation (13,003) (5,650)
Currency translation adjustments (b) (49,348) (28,172)
---------- ----------
Total shareholders' equity 817,809 748,356
---------- ----------
$2,000,077 $1,712,675
========== ==========
<FN>
Contingencies and Commitments (See accompanying notes.)
(a) Share data for 1992 have been restated for the effects of the
five-for-four stock split declared in November 1993.
(b) Since December 26, 1987 (Note 1).
</TABLE>
33
<PAGE>
Mattel, Inc. and Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS
----------------------------------
<TABLE>
<CAPTION>
For the Year
----------------------------------
(In thousands, except per share amounts) 1993 1992 1991
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $2,704,448 $2,563,525 $2,046,489
Cost of sales 1,343,470 1,293,759 1,056,983
---------- ---------- ----------
Gross Profit 1,360,978 1,269,766 989,506
Advertising and promotion expenses 426,698 403,417 308,013
Other selling and administrative expenses 508,105 501,604 392,289
Integration and restructuring charge 115,000 - -
Interest expense 62,614 68,716 64,334
Other expense, net 11,915 13,084 10,544
---------- ---------- ----------
Income Before Income Taxes, Extraordinary
Item and Cumulative Effect of Changes
in Accounting Principles 236,646 282,945 214,326
Provision for income taxes 100,735 98,104 80,288
---------- ---------- ----------
Income Before Extraordinary Item and
Cumulative Effect of Changes in
Accounting Principles 135,911 184,841 134,038
Extraordinary item - loss on early
retirement of debt (14,681) - (5,236)
---------- ---------- ----------
Income Before Cumulative Effect of
Changes in Accounting Principles 121,230 184,841 128,802
Cumulative effect of changes in
accounting principles (4,022) - -
---------- ---------- ----------
Net Income 117,208 184,841 128,802
Preferred and preference stock dividend
requirements 4,894 4,978 5,435
---------- ---------- ----------
Net Income Applicable to Common Shares $ 112,314 $ 179,863 $ 123,367
========== ========== ==========
Income Per Common and Common Equivalent Share:
Primary Income Per Share
Income before extraordinary item and
cumulative effect of changes in
accounting principles $ 0.77 $ 1.04 $ 0.88
Extraordinary item - loss on early
retirement of debt (0.09) - (0.04)
Cumulative effect of changes in
accounting principles (0.02) - -
---------- ---------- ----------
Net income $ 0.66 $ 1.04 $ 0.84
========== ========== ==========
Average number of common and common
equivalent shares 171,182 173,406 146,839
========== ========== ==========
Fully Diluted Income Per Share
Income before extraordinary item and
cumulative effect of changes in
accounting principles $ 0.75 $ 1.02 $ 0.85
Extraordinary item - loss on early
retirement of debt (0.08) - (0.03)
Cumulative effect of changes in
accounting principles (0.02) - -
---------- ---------- ----------
Net income $ 0.65 $ 1.02 $ 0.82
========== ========== ==========
Average number of common and common
equivalent shares 180,849 183,258 155,586
========== ========== ==========
Dividends Declared Per Common Share $ 0.18 $ 0.15 $ 0.08
========== ========== ==========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
34
<PAGE>
Mattel, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
For the Year
--------------------------------
(In thousands) 1993 1992 1991
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
- -------------------------------------
Net income $117,208 $184,841 $128,802
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and amortization 91,970 87,825 75,450
Loss on early retirement of debt, net of tax 14,681 - 5,236
Utilization of net operating loss carryforwards - 300 1,800
Cumulative effect of changes in accounting
principles, net of tax 4,022 - -
Provision for lease termination, net (41,120) - -
(Increase) decrease in marketable securities (3,354) (5,391) 2,435
(Increase) in receivables (55,525) (95,706) (14,252)
Decrease (increase) in inventories 11,842 (24,781) 27,989
Decrease (increase) in prepaid and other
current assets 7,319 (20,460) (14,836)
Increase in payables, accrued liabilities and
income taxes payable 161,818 10,068 120,281
Other, net (5,517) (5,067) 2,128
-------- -------- --------
Net cash flows from operating activities 303,344 131,629 335,033
-------- -------- --------
Cash Flows From Investing Activities:
- -------------------------------------
Purchases of tools, dies and molds (60,809) (53,611) (32,371)
Purchases of other property, plant and equipment (40,060) (46,434) (23,368)
Sales of other property, plant and equipment 12,459 2,183 7,560
Investments in acquired businesses, net of
cash acquired - (17,740) (63,990)
Other, net (394) (841) (139)
-------- -------- --------
Net cash flows from investing activities (88,804) (116,443) (112,308)
-------- -------- --------
Cash Flows From Financing Activities:
- -------------------------------------
Notes payable to banks, net (14,135) (5,367) (75,844)
Issuance of 6-7/8% senior notes, net - 99,294 -
Issuance of 6-3/4% senior notes 100,000 - -
Issuance of 8% debentures, net - - 97,245
Redemption of 14-3/4% debentures - - (104,894)
Redemption of preferred stock of financing
subsidiary - - (62,500)
Long-term foreign borrowing (31,262) 2,717 17,613
Collection of ESOP note receivable 4,920 4,920 4,920
Payment of ESOP notes payable (4,920) (4,920) (4,920)
Redemption of senior preferred stock - (5,500) -
Tax benefit of employee stock options exercised 4,431 12,360 6,800
Exercise of stock options and warrants 8,012 12,212 12,881
Purchase of treasury stock (52,558) (52,036) (15,100)
Purchase of Fisher-Price warrants - (8,298) -
Dividends paid on common stock (25,582) (19,083) (8,110)
Dividends paid on preference stock (4,894) (4,826) (4,830)
Dividends paid on senior preferred stock - (1,059) (1,059)
Other, net (381) (947) (147)
-------- -------- --------
Net cash flows from financing activities (16,369) 29,467 (137,945)
Effect of Exchange Rate Changes on Cash (5,751) (12,987) (4,626)
-------- -------- --------
Increase in Cash 192,420 31,666 80,154
Cash at Beginning of Year 313,693 282,027 201,873
-------- -------- --------
Cash at End of Year $506,113 $313,693 $282,027
======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
35
<PAGE>
Mattel, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
<TABLE>
<CAPTION>
Preferred & Additional Common
Preference Common Paid-In Treasury Stock
(In thousands) Stock Stock Capital Stock Warrants
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 29, 1990
As previously reported $ 20 $ 50,117 $ 115,786 $ (3,266) $ 1,000
Pooling of interests with Fisher-Price, Inc. - 19,777 189,528 - -
Net Income
Five-for-four stock split 17,725 (17,725)
Purchase of treasury stock (15,100)
Amortization of deferred compensation
Exercise of stock options and warrants 2,015 16,343 (1,000)
Issuance of treasury stock (1,105) 3,428
Dividends declared on common stock
Dividends declared on senior preferred and
preference stock
Utilization of net operating loss carryforwards 1,800
Collection of ESOP note receivable
Currency translation adjustments
--------- -------- -------- -------- --------
Balance, December 31, 1991 20 89,634 304,627 (14,938) -
Net Income
Three-for-two stock split 47,971 (47,971)
Purchase of treasury stock (1,152) (12,490) (38,394)
Purchase of Fisher-Price warrants (8,298)
Restricted stock activity 3,977
Amortization of deferred compensation
Exercise of stock options and warrants 907 18,061
Issuance of treasury stock (4,990) 10,234
Dividends declared on common stock
Dividends declared on preference stock
Redemption of senior preferred stock (11) (5,489)
Utilization of net operating loss carryforwards 300
Collection of ESOP note receivable
Currency translation adjustments
--------- -------- -------- -------- --------
Balance, December 31, 1992 9 137,360 247,727 (43,098) -
Net Income
Five-for-four stock split 34,343 (34,781)
Purchase of treasury stock (52,558)
Conversion of 8% debentures (9,540) 33,876
Restricted stock activity 688 13,308
Amortization of deferred compensation
Exercise of stock options 79 6,494
Issuance of treasury stock (8,560) 14,430
Dividends declared on common stock
Dividends declared on preference stock
Cumulative effect of change in accounting
principle 53,000
Termination of pre-quasi lease commitment (41,120)
Collection of ESOP note receivable
Currency translation adjustments
--------- -------- -------- -------- --------
Balance, December 31, 1993 $ 9 $172,470 $226,528 $(47,350) $ -
========= ======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
<CAPTION>
ESOP Currency Total
Retained Note Deferred Translation Shareholders'
(In thousands) Earnings Receivable Compensation Adjustments Equity
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 29, 1990
As previously reported $ 185,843 $(18,260) $ - $ 5,346 $ 336,586
Pooling of interests with Fisher-Price, Inc. (8,586) - (5,670) (1,890) 193,159
Net Income 128,802 128,802
Five-for-four stock split -
Purchase of treasury stock (15,100)
Amortization of deferred compensation 945 945
Exercise of stock options and warrants 17,358
Issuance of treasury stock 2,323
Dividends declared on common stock (9,803) (9,803)
Dividends declared on senior preferred and
preference stock (5,889) (5,889)
Utilization of net operating loss carryforwards 1,800
Collection of ESOP note receivable 4,920 4,920
Currency translation adjustments 9,153 9,153
--------- -------- -------- -------- --------
Balance, December 31, 1991 290,367 (13,340) (4,725) 12,609 664,254
Net Income 184,841 184,841
Three-for-two stock split -
Purchase of treasury stock (52,036)
Purchase of Fisher-Price warrants (8,298)
Restricted stock activity (3,617) 360
Amortization of deferred compensation 2,692 2,692
Exercise of stock options and warrants 18,968
Issuance of treasury stock 5,244
Dividends declared on common stock (20,723) (20,723)
Dividends declared on preference stock (4,826) (4,826)
Redemption of senior preferred stock (1,059) (6,559)
Utilization of net operating loss carryforwards 300
Collection of ESOP note receivable 4,920 4,920
Currency translation adjustments (40,781) (40,781)
--------- ------- -------- -------- --------
Balance, December 31, 1992 448,600 (8,420) (5,650) (28,172) 748,356
Net Income 117,208 117,208
Five-for-four stock split (438)
Purchase of treasury stock (52,558)
Conversion of 8% debentures 24,336
Restricted stock activity (13,310) 686
Amortization of deferred compensation 5,957 5,957
Exercise of stock options 6,573
Issuance of treasury stock 5,870
Dividends declared on common stock (28,911) (28,911)
Dividends declared on preference stock (4,894) (4,894)
Cumulative effect of change in accounting
principle 53,000
Termination of pre-quasi lease commitment (41,120)
Collection of ESOP note receivable 4,920 4,920
Currency translation adjustments (21,176) (21,176)
--------- ------- -------- -------- --------
Balance, December 31, 1993 $ 532,003 $(3,500) $(13,003) $(49,348) $817,809
========= ======= ======== ======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
36
<PAGE>
Mattel, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Mattel,
Inc. and its subsidiaries (the "Company"). Majority-owned subsidiaries
are consolidated and less-than-majority-owned subsidiaries are
accounted for by the equity method. All significant intercompany
accounts and transactions are eliminated, and certain amounts in the
financial statements for prior years have been reclassified to conform
with the current year presentation. Financial data for all periods
presented reflect the retroactive effects of the mergers, accounted for
as poolings of interests, with Fisher-Price, Inc. consummated in
November 1993 and International Games, Inc. consummated in February
1992.
Foreign Currency Translation
- ----------------------------
Assets and liabilities of foreign subsidiaries are translated at end-of-
period rates of exchange. Income, expense and cash flows are
translated at weighted-average rates of exchange for the period. The
resulting currency translation adjustments are accumulated and reported
as a separate component of shareholders' equity.
Quasi-Reorganization
- --------------------
Effective December 26, 1987, the Company implemented a quasi-
reorganization and revalued its assets and liabilities to their fair
values as of that date. The $69.0 million net effect of these
adjustments was credited to additional paid-in capital. Additionally,
as of December 26, 1987, accumulated deficits of $256.0 million and
cumulative currency translation adjustments of $32.7 million were
transferred to additional paid-in capital.
Cash
- ----
Cash includes cash equivalents. Highly liquid investments with
maturities of three months or less when purchased are considered to be
cash equivalents. Because of the short maturities of these
instruments, the carrying amount is a reasonable estimate of fair
value.
Marketable Securities
- ---------------------
Marketable securities, comprised principally of U.S. dollar-denominated
debt securities of foreign governments held for liquidity purposes, are
stated at market value. The quoted market prices, which approximated
cost as of the balance sheet dates, are reasonable estimates of the
portfolio's fair value.
Inventories
- -----------
Inventories, net of an allowance for excess quantities and
obsolescence, are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed using the
straight-line method over estimated useful lives of 15 to 40 years for
buildings, 3 to 10 years for machinery and equipment, and 10 to 20
years, not to exceed the lease term, for leasehold improvements.
Tools, dies and molds are amortized using the straight-line method over
three years.
Capitalized lease assets are recorded at their fair values
determined as of December 26, 1987, less accumulated amortization
computed over the remaining lease terms. Major categories of
capitalized leases are as follows (in thousands):
<TABLE>
<CAPTION>
As of Year-End
------------------
1993 1992
- -----------------------------------------------------------------------
<S> <C> <C>
Land and buildings $37,208 $37,208
Machinery and equipment 1,001 1,001
------- -------
38,209 38,209
Less: Accumulated amortization 16,538 14,566
------- -------
$21,671 $23,643
======= =======
</TABLE>
Intangible Assets, Net
- ----------------------
Intangible assets consist of the excess of purchase price over the fair
value of net assets acquired in purchase acquisitions, additional
performance purchase payments, and the costs of acquired patents and
trademarks. Intangible assets are amortized using the straight-line
method over periods ranging from 10 to 40 years. Accumulated
amortization was $55.4 million and $46.1 million as of December 31,
1993 and December 31, 1992, respectively.
In 1992, the amortization period for goodwill arising from certain
acquisitions was changed from 10 years to 20 years, to better reflect
the estimated periods over which related economic benefits will be
realized.
Income Taxes
- ------------
Deferred income tax assets and liabilities are determined in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS No. 109"), and result from revenues and
expenses being recognized in different time periods for financial
reporting
37
<PAGE>
purposes than for income tax purposes. Under SFAS No. 109,
deferred income taxes arise from temporary differences and
carryforwards which are tax-effected at the enacted tax rates and
subsequently adjusted for changes in tax laws and rates. Deferred
income tax assets and liabilities are classified as current or
noncurrent based upon the financial reporting classification of assets
and liabilities to which they relate. A valuation allowance is
established if it is more likely than not that some portion or all of a
deferred income tax asset will not be realized. Effective January 1,
1993, the Company adopted SFAS No. 109, the effects of which are
covered in detail in Note 3 to the Consolidated Financial Statements.
Income and Dividends Per Common Share
- -------------------------------------
All share and per share data presented in these financial statements
reflect the retroactive effects of the Fisher-Price and IGI mergers,
the five-for-four stock split distributed in January 1994, the three-
for-two stock split distributed in June 1992 and the five-for-four
stock split distributed in November 1991.
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. Primary 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.
Primary earnings represent reported net income less preferred and
preference stock dividend requirements, plus interest savings from the
assumed retirement of debt upon exercise of dilutive warrants. On a
fully diluted basis, weighted average shares are determined assuming
conversion of the 8% Debentures and Series F preference shares, and
exercise of all dilutive stock options and warrants, net of assumed
treasury share repurchases at the higher of end-of-period or average
market prices. Fully diluted earnings represent reported income as
adjusted for the effects, net of tax, resulting from the assumed
conversions of convertible securities and the exercise of dilutive
warrants.
Foreign Currency Contracts
- --------------------------
The Company enters into forward exchange contracts, swap agreements,
and purchased currency options to hedge against foreign currency
fluctuations. Realized and unrealized gains and losses resulting from
foreign currency transactions are included in income currently, except
that gains and losses on contracts which hedge specific foreign
currency commitments are deferred and accounted for as part of the
transaction. The Company does not speculate in foreign currencies.
NOTE 2 - BUSINESS COMBINATIONS
- ------------------------------
Fisher-Price, Inc.
- ------------------
On November 30, 1993, a merger was consummated between the Company and
Fisher-Price, Inc. ("Fisher-Price"), one of the world's largest
manufacturers and marketers of infant and preschool toys and juvenile
products. The stock-for-stock transaction was approved by the
shareholders of both companies, after which Fisher-Price became a
wholly-owned subsidiary of the Company. The merger agreement provided
for the exchange of 1.275 shares of Mattel common stock for each
outstanding Fisher-Price common share, and resulted in the issuance of
approximately 39.1 million pre-split shares valued, on the merger's
effective date, at $1.19 billion. This transaction has been accounted
for as a pooling of interests, and accordingly, financial information
for periods prior to the merger (from July 1, 1991 forward) reflect
retroactive restatement for the companies' combined financial position
and operating results. Prior to July 1, 1991, the business of Fisher-
Price was operated as a division of The Quaker Oats Company, and
therefore, any such financial data are excluded from the Company's
combined consolidated results presented herein.
To effect the restatement, certain adjustments were necessary in
order to conform the accounting practices of the two companies.
Unamortized goodwill of $20.2 million related to The Quaker Oats
Company's 1969 acquisition of Fisher-Price was written off, with the
corresponding charge reflected in the 1991 beginning retained earnings
balance for the combined company. The portion of Fisher-Price's
inventories being accounted for under the LIFO method were
retroactively restated to a FIFO-cost basis, resulting in a net credit
to 1991's beginning retained earnings of $11.6 million. In addition,
this change in accounting method resulted in reductions of $0.6 million
and $0.4 million of Fisher-Price's previously reported net income for
the six months ended December 29, 1991 and year ended January 3, 1993,
respectively. In the first quarter of 1993, Fisher-Price adopted
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", by
electing to amortize its unrecognized transition obligation over 20
years. To conform Fisher-Price's methodology to that of the Company,
immediate recognition of the $29.4 million transition obligation was
reflected in the combined consolidated financial statements, effective
as of January 1, 1993. Prior to the merger, Fisher-Price's fiscal year
for financial reporting purposes ended on the Sunday closest to the
calendar year end; no adjustment to retained earnings in order to
conform with the Company's December 31 year end was necessary. In
addition, for periods preceding the merger, there were no intercompany
transactions which required elimination from the combined consolidated
results.
38
<PAGE>
Selected information for the combining entities included in the
Consolidated Results of Operations for the three years ending December
31, 1993 is as follows (in thousands):
<TABLE>
<CAPTION>
For the Year
----------------------------------
1993 1992 1991 (a)
----------------------------------
<S> <C> <C> <C>
Net sales
Mattel $1,996,766 $1,873,364 $1,670,932
Fisher-Price (b) 707,682 690,161 375,557
---------- ---------- ----------
Combined $2,704,448 $2,563,525 $2,046,489
========== ========== ==========
Income before extraordinary
item and cumulative effect
of accounting changes
Mattel (c) $ 181,083 $ 143,948 $ 122,395
Fisher-Price 45,228 40,893 11,643
Integration/restructuring
charge (d) (90,400) - -
---------- ---------- ----------
Combined $ 135,911 $ 184,841 $ 134,038
========== ========== ==========
Extraordinary item - debt
retirement
Mattel $ - $ - $ (5,236)
Fisher-Price (14,681) - -
--------- ---------- ----------
Combined $ (14,681) $ - $ (5,236)
========= ========== ==========
Cumulative effect of
accounting changes
Mattel (e) $ 14,590 $ - $ -
Fisher-Price (f) (18,612) - -
--------- ---------- ----------
Combined $ (4,022) $ - $ -
========= ========== ==========
Net income
Mattel (g) $ 195,673 $ 143,948 $ 117,159
Fisher-Price 11,935 40,893 11,643
Integration/restructuring
charge (d) (90,400) - -
--------- ---------- ----------
Combined $ 117,208 $ 184,841 $ 128,802
========= ========== ==========
<FN>
(a) Financial information for Fisher-Price represents the six-month
period from July 1, 1991 through December 29, 1991. Prior to
July 1, 1991, the business of Fisher-Price was operated as a division
of The Quaker Oats Company.
(b) Certain amounts for 1992 and 1991 have been classified differently
than previously published amounts in order to conform the accounting
presentation of the two entities.
(c) For 1993, primary and fully diluted earnings per share before
accounting changes, the effects of the merger and extraordinary
charges, but after adjustment for the five-for-four stock split, were
$1.46 per share and $1.40 per share, respectively.
(d) The integration and restructuring charge of $115.0 million, after
related income tax effects, reduced earnings of the combined company
by $90.4 million.
(e) The net effect on earnings related to the January 1, 1993 adoption
of SFAS Nos. 109 and 106 was an increase of $16.0 million and a
a decrease of $1.4 million, net of taxes, respectively.
(f) The effect on earnings, net of taxes of $10.7 million, related to
the adoption of SFAS No. 106 effective January 1, 1993.
(g) For 1993, primary and fully diluted net income per share, before
the effects of the merger but after adjustment for the five-for-four
stock split, were $1.58 per share and $1.51 per share, respectively.
</TABLE>
In connection with the merger, the Company recognized a one-time
charge of $115.0 million, pre-tax, representing transaction expenses of
the merger and projected costs of integrating the business operations
of the companies. Of this charge, approximately $17.0 million
represented investment banking, legal, accounting and other transaction
costs of the merger, and approximately $30.0 million related to the
severance of key Fisher-Price executives. Of the remaining $68.0
million estimated for integration and restructuring costs,
approximately $13.0 million represented writedowns of fixed assets in
connection with the elimination of duplicative administration and plant
facilities. The remainder represented expenditures related to the
combination of the entities' worldwide business operations, including
staff reductions and outplacement expenses, costs of terminating
contracts with lessors and distributors and fees paid to consultants in
connection with the integration and restructuring process. Net of
related taxes, the one-time charge recognized in the 1993 fourth
quarter was $90.4 million, which reduced earnings per share for the
year by $0.53 per share and $0.50 per share on a primary and fully
diluted basis, respectively.
Although no assurance can be given, the Company anticipates its
integration and restructuring activities will provide cost savings of
approximately $45.0 million during 1994, principally as a result of
consolidation of facilities and related staff reductions. Available
cash reserves and cash flow generated from normal business operations
will fund the costs of the integration and restructuring, with no
adverse impact expected on the Company's future liquidity or financial
position. Of the total integration and restructuring charge accrued,
approximately $20.2 million had been expended as of December 31, 1993.
International Games, Inc.
- -------------------------
In the first quarter of 1992, the Company completed a merger
transaction, also accounted for as a pooling of interests, with
International Games, Inc. ("IGI"). The merger, valued at $58.5
million, was effected by the exchange of Mattel preference stock,
Series F, and common stock for all outstanding shares of IGI voting
preferred and common stock. Financial information for periods
preceding the merger were retroactively restated to reflect the
combined operations of the companies.
39
<PAGE>
NOTE 3 - INCOME TAXES
- ---------------------
Consolidated pretax income before extraordinary item and cumulative
effect of changes in accounting principles consists of the following
(in thousands):
<TABLE>
<CAPTION>
For the Year
----------------------------
1993 1992 1991
----------------------------
<S> <C> <C> <C>
U.S. operations $127,937 $179,250 $116,126
Foreign operations 108,709 103,695 98,200
-------- -------- --------
$236,646 $282,945 $214,326
======== ======== ========
</TABLE>
The provision for current and deferred income tax expense consists
of the following (in thousands):
<TABLE>
<CAPTION>
For the Year
----------------------------
1993 1992 1991
----------------------------
<S> <C> <C> <C>
Current
Federal $ 64,358 $ 41,648 $ 30,840
State 11,758 13,300 8,600
Foreign 47,884 47,500 47,800
-------- -------- --------
124,000 102,448 87,240
-------- -------- --------
Deferred
Federal (21,841) (3,000) (6,488)
State (3,629) (844) (1,864)
Foreign (6,640) (500) (1,200)
-------- -------- --------
(32,110) (4,344) (9,552)
-------- -------- --------
Provision excluding extraordinary item 91,890 98,104 77,688
Benefit allocated to extraordinary item 8,845 - 2,600
-------- -------- --------
Total provision for income taxes $100,735 $ 98,104 $ 80,288
======== ======== ========
</TABLE>
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
which replaced Statement No. 96. Upon adoption, a net deferred income
tax asset of $69.0 million was recorded, of which $16.0 million related
to postquasi-reorganization net operating losses carried forward, and
$53.0 million related principally to future tax deductions, and foreign
tax credit and alternative minimum tax credit carryovers resulting from
activities prior to the 1987 quasi-reorganization. The benefit of
$16.0 million (or $0.09 per fully diluted share in the 1993 first
quarter) was recognized in after-tax earnings as the cumulative effect
of a change in accounting principle; the remaining $53.0 million was
credited to additional paid-in capital in accordance with the required
accounting treatment for transactions resulting from activities prior
to the 1987 quasi-reorganization.
Deferred income taxes are provided principally for certain
reserves, depreciation, employee compensation-related expenses and
certain other expenses that are recognized in different years for
financial statement and income tax purposes. The Company's deferred
income tax assets (liabilities) were comprised of the following (in
thousands):
<TABLE>
<CAPTION>
December 31, January 1,
1993 1993
-------------------------
<S> <C> <C>
Deferred compensation $ 17,035 $ 10,729
Sales allowances and inventory reserves 41,225 38,754
Operating loss and tax credit carryovers 68,774 104,798
Excess of tax basis over book basis 6,261 2,641
Postretirement benefits 12,210 11,645
Integration and restructuring charge 21,667 -
Loss on debt retirement 8,845 -
Other 22,271 16,927
---------- ---------
Gross deferred income tax assets 198,288 185,494
---------- ---------
Excess of book basis over tax basis (8,986) (11,959)
Depreciation (2,753) (6,715)
Retirement benefits (4,781) (4,266)
Other (15,005) (4,503)
---------- ---------
Gross deferred income tax liabilities (31,525) (27,443)
Deferred income tax asset valuation allowances (52,405) (73,733)
---------- ---------
Net deferred income tax assets $ 114,358 $ 84,318
========== =========
</TABLE>
Differences between the provision for income tax expense at the
United States federal statutory income tax rate and the provision in
the Consolidated Results of Operations were as follows (in thousands):
<TABLE>
<CAPTION>
For the Year
----------------------------
1993 1992 1991
----------------------------
<S> <C> <C> <C>
Provision at federal statutory rates $ 82,812 $96,179 $72,815
Increase (decrease) resulting from:
Losses without income tax benefit 2,436 9,068 6,121
Foreign earnings taxed at
different rates, including
withholding taxes (1,827) (14,815) 1,579
Tax benefit of future deductions (994) 3,600 (5,100)
State and local taxes, net of
federal benefit 5,417 8,259 4,742
Nondeductible interest - - 400
Dividends paid to ESOP (1,500) (1,600) (1,600)
Nondeductible restructuring costs 13,599 - -
Other 792 (2,587) 1,331
-------- ------- -------
Total provision $100,735 $98,104 $80,288
======== ======= =======
</TABLE>
Appropriate U.S. and foreign income taxes have been provided for
earnings of foreign subsidiary companies that are expected to be
remitted in the near future. The cumulative amount of undistributed
earnings of foreign subsidiaries which the Company intends to
permanently invest and upon which no deferred U.S. income taxes have
been provided is $322.3 million at December 31, 1993. The additional
U.S. income tax on the unremitted foreign earnings, if repatriated,
would be offset in whole or in part by foreign tax credits. Foreign
withholding taxes of $15.4 million would be due upon remittance of
these earnings.
40
<PAGE>
The Company has foreign tax credit carryforwards for tax purposes
at December 31, 1993 of approximately $26.4 million which expire in
1994. The Company also has an alternative minimum tax credit
carryforward of $11.9 million with no expiration date. Certain foreign
subsidiaries have net operating loss carryforwards totaling
approximately $43.8 million ($2.3 million with no expiration date;
$41.5 million expiring 1994 to 1998).
The foreign tax credit and alternative minimum tax credit
carryforwards will be credited to additional paid-in capital when and
if utilized, since they result from net operating loss carryforwards
which originated prior to the 1987 quasi-reorganization. In addition,
generally accepted accounting principles require that tax benefits
related to the exercise by employees of nonqualified stock options be
credited to additional paid-in capital. In 1993, 1992 and 1991,
nonqualified stock options exercised resulted in credits to additional
paid-in capital totaling $4.3 million, $12.1 million and $6.8 million,
respectively.
Legislation enacted in August 1993 increased the U.S. corporate
income tax rate from 34 percent to 35 percent, retroactive to January
1, 1993. The tax effect has been reflected in the calculation of the
Company's net U.S. deferred income tax asset.
The Internal Revenue Service has completed its examination of the
Company's federal income tax returns through January 28, 1984.
NOTE 4 - EMPLOYEE BENEFITS
- --------------------------
The Company and certain of its subsidiaries have various pension and
retirement plans covering substantially all employees of these
companies. Pension expense for the Company's plans totaled $10.0
million, $9.5 million and $6.8 million in 1993, 1992 and 1991,
respectively. Before the merger, Fisher-Price maintained a number of
benefit plans and compensation arrangements. These programs shall
continue to be administered by Fisher-Price without material change or
modification for periods up to five years following the merger,
depending upon the program.
Pension Plans
- -------------
The Company provides defined benefit pension plans covering certain of
its domestic and foreign employees. Plan benefits are based upon
covered employees' length of service and earnings. Pension costs are
actuarially determined and plans are generally funded to meet benefit
obligations existing as of the end of each year. Contributions are
based upon amounts required to be funded under applicable governmental
regulations, but will not exceed the maximum amount deductible for
income tax purposes. Assets of these plans are invested in equity
securities as well as corporate, government and other fixed-income
investments.
The Mattel, Inc. Pension Plan is a noncontributory defined benefit
plan for its domestic hourly employees who are covered by collective
bargaining agreements. Accumulated and vested benefit obligations,
pension cost and other expenses related to this plan were not
significant in 1993, 1992 or 1991.
The Fisher-Price, Inc. Pension Plan, a defined benefit plan
covering most of the domestic employees of Fisher-Price, contains
certain change-of-control provisions which were triggered as a result
of the merger. For a five-year period, or until the assets of the plan
are less than its liabilities, if earlier, the rate at which benefits
accrue on behalf of participants may not be decreased, and in the event
of the plan's termination or consolidation with another plan, assets in
excess of liabilities must be used to increase participants' benefits.
In addition, for a two-year period following the merger, participants
whose employment with the Company is terminated under certain
conditions may be entitled to immediate vesting and increased annual
benefits under the plan. The components of net pension cost for this
plan, based upon an October valuation date for the years ended December
31, 1993 and January 3, 1993 and for the six months ended December 29,
1991, are detailed below (in thousands):
<TABLE>
<CAPTION>
For the Period
----------------------------
1993 1992 1991
----------------------------
<S> <C> <C> <C>
Service cost $ 2,928 $ 2,450 $ 1,029
Interest cost 6,801 6,214 2,867
Actual return on plan assets (9,267) (8,831) (4,527)
Net amortization and deferral (2,261) (1,919) (560)
-------- -------- --------
Net pension income $ (1,799) $ (2,086) $ (1,191)
======== ======== ========
</TABLE>
Reconciliations of the funded status of Fisher-Price's domestic
pension plan to the related prepaid asset included in the Consolidated
Balance Sheets are as follows (in thousands):
<TABLE>
<CAPTION>
As of Year-End
-------------------
1993 1992
-------------------
<S> <C> <C>
Vested benefits $ 101,596 $ 78,727
Nonvested benefits 3,979 3,313
--------- --------
Accumulated benefit obligation 105,575 82,040
Effect of projected future salary increases 5,319 4,494
--------- --------
Projected benefit obligation 110,894 86,534
Plan assets at fair value 122,237 106,432
--------- --------
Plan assets in excess of projected
benefit obligation 11,343 19,898
Unrecognized net loss 12,308 4,216
Unrecognized prior service cost 3,194 3,502
Unrecognized net asset at transition (14,130) (16,700)
--------- --------
Prepaid pension asset $ 12,715 $ 10,916
========= ========
<CAPTION>
For the Period
----------------
1993 1992 1991
----------------
Assumptions:
<S> <C> <C> <C>
Weighted average discount rate 7% 8% 8%
Rate of future compensation increases 4% 5% 5%
Long-term rate of return on plan assets 10% 9% 9%
</TABLE>
Activity related to pension plans of foreign affiliates of the
Company were not significant during any year.
41
<PAGE>
Other Retirement Plans
- ----------------------
Domestic employees not covered by collective bargaining agreements are
eligible to participate in the Company's 401(k) savings plans. Under
these defined contribution plans, the Company makes contributions to a
trust based upon specified percentages of employee compensation, as
well as matching percentages of certain amounts of voluntary employee
contributions. Mattel's Personal Investment Plan covers employees of
Mattel, Inc. The Fisher-Price, Inc. Matching Savings Plan which covers
employees of Fisher-Price will be separately maintained for at least
two years following the merger.
The Company maintains an unfunded supplemental retirement plan
which is an unqualified defined benefit plan covering certain key
executives of Mattel, Inc. In addition, compensation deferral and
excess benefit plans exist for certain officers and key employees of
both Mattel, Inc. and Fisher-Price. For 1993, 1992 and 1991, the
accumulated and vested benefit obligations and related expense of these
plans were not significant.
The Fisher-Price Profit Sharing and Retirement Savings Plan is
maintained for the benefit of certain domestic employees. Effective in
1991, the plan was amended to discontinue further company
contributions; however, participant accounts continue to be held
pursuant to the plan's provisions.
Employee Stock Ownership Plan
- -----------------------------
In January 1987, an employee stock ownership plan (the "ESOP") was
established for employees of IGI. The ESOP is a defined contribution
plan satisfying the requirements of the Employee Retirement Income
Security Act of 1974. A combination of dividends and cash
contributions are paid by the Company in amounts sufficient for the
plan to meet its current obligations. Payments to the ESOP for the
years ended December 31, 1993 and December 31, 1992 were as follows (in
thousands):
<TABLE>
<CAPTION>
For the Year
-----------------
1993 1992
-----------------
<S> <C> <C>
Dividends on stock held by ESOP $4,900 $4,830
Company contribution to ESOP 20 90
------ ------
4,920 4,920
Interest on ESOP indebtedness 189 388
------ ------
Total payments to ESOP $5,109 $5,308
====== ======
</TABLE>
In connection with the February 1992 merger, IGI convertible
preferred stock held by the ESOP was exchanged for 35,723 shares of the
Company's common stock and 864,293 shares of the Company's 12.5%
Convertible Preference Stock, Series F. The Company must maintain the
ESOP until August 1994 when the ESOP indebtedness will be paid in full,
but shall terminate the ESOP no later than December 31, 2000.
Postretirement Benefits
- -----------------------
The Company maintains an unfunded postretirement benefit plan for
domestic employees of Mattel, Inc. The plan provides for health care
to retirees meeting certain age and years of service requirements, and
consists primarily of medical and prescription benefits, Medicare Part
B reimbursement and life insurance. The plan calls for the payment of
premiums by the participants, which amounts are intended to fund the
costs of the plan. The Company reimburses 100% of Medicare B premiums
for current retirees as of July 1, 1993; the plan provides no
reimbursement for employees retiring subsequent to that date. Life
insurance coverage is provided for union hourly employees retiring with
a pension.
In the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS No. 106"), with
immediate recognition of an actuarially-determined accumulated
postretirement benefit obligation of $2.3 million for the Mattel, Inc.
plan (based upon a discount rate of 8.0%, which was adjusted to 7.0% as
of year end). The related charge of $1.4 million, after deferred
income tax benefits of $0.9 million, was recognized in earnings as the
cumulative effect of a change in accounting principle. The ongoing
costs and obligations associated with the Mattel, Inc. plan are not
significant to the Company's financial position and results of
operations.
Fisher-Price has an unfunded postretirement health insurance plan
covering substantially all domestic employees hired prior to January 1,
1993. Existing retirees, employees who elected to retire before
January 1, 1994 and employees whose age-plus-service was equal to 70
years by December 31, 1993 may continue, for their lifetime,
participation in the Fisher-Price group health insurance plan at the
same contribution rate as active employees. All other active employees
who do not satisfy the criteria outlined above participate in a retiree
medical account balance plan. An account was established, as of
January 1, 1993, for each eligible employee, with a balance equal to
$865 for each year of service, including past service, up to a maximum
of 25 years of service. The account balance will become available upon
a participant's retirement at age 55 or anytime thereafter with five
years of service, and may be used to purchase benefits through the
Fisher-Price health care insurance plan or through an outside insurance
provider, and to pay for health care expenses not reimbursed by
insurance or Medicare. If an employee terminates employment prior to
satisfying the retirement criteria, the account balance is forfeited
and no benefits are paid.
In January 1993, Fisher-Price adopted the provisions of SFAS No.
106 by electing to amortize its unrecognized transition obligation over
20 years. Upon consummation of the merger, Fisher-Price's accounting
methodology was conformed to that of the Company, and accordingly, a
related $18.6 million charge, net of deferred income tax benefits of
$10.7 million, was recognized in earnings as the cumulative effect of a
change in accounting principle retroactively as of the 1993 first
quarter. Details of the plan's accumulated benefit obligation and
related expense
42
<PAGE>
recognized in the consolidated financial statements as of December 31,
1993 are as follows (in thousands):
<TABLE>
<CAPTION>
Accumulated postretirement benefit obligation:
- ----------------------------------------------
<S> <C>
Retirees $19,367
Fully eligible active employees 4,359
Other active employees 5,631
-------
$29,357
=======
<CAPTION>
Postretirement benefit cost:
- ----------------------------
<S> <C>
Service cost $ 475
Interest cost 1,999
-------
Periodic postretirement benefit cost 2,474
Recognition of transition obligation 29,357
-------
$31,831
=======
</TABLE>
In determining the $29.4 million transition obligation, a weighted-
average discount rate of 7.0% was used. For participants below 65
years of age, the health care cost trend rate for expected claim costs
was assumed to be 13.0% in 1993, declining to 5.5% by 1997 and
remaining constant thereafter. For participants 65 years of age or
older, the health care cost trend rate for expected claim costs was
assumed to be 10.0% in 1993, declining to 5.5% by 1996 and remaining
constant thereafter. A one percentage point increase in the assumed
health care cost trend rate for each future year would have increased
the aggregate of service and interest cost for 1993 by approximately
$0.3 million and increased the accumulated postretirement benefit
obligation as of December 31, 1993 by approximately $2.0 million.
Incentive Awards
- ----------------
The Company's Long-Term Incentive Plan is a variable compensation plan
available to certain key executives of Mattel, Inc. Awards are
determined annually based upon the performance of the Company over a
three-year period. Pursuant to the Company's 1990 stock option plan,
stock appreciation rights ("SAR") had been awarded in 1991 to certain
key executives of Mattel, Inc. In February 1994, the SAR were
converted into awards consisting of nonqualified stock options and
cash, which amount is payable within the five-year period as
established under the SAR program. At December 31, 1993 and 1992,
$13.6 million and $1.8 million, respectively, were accrued for awards
under these plans.
The Company also has discretionary annual incentive compensation
plans for officers and key employees of both Mattel, Inc. and Fisher-
Price, Inc. based on the Company's performance and subject to certain
approvals of the Board of Directors. At December 31, 1993 and 1992,
$22.4 million and $17.2 million, respectively, were accrued for awards
under these plans.
NOTE 5 - SEASONAL FINANCING AND LONG-TERM DEBT
- ----------------------------------------------
Seasonal Financing
- ------------------
The Company maintains and periodically revises or replaces a revolving
credit agreement with a commercial bank group which is utilized to
finance the working capital requirements of its domestic and certain
foreign operations. The agreement in effect during 1993, which was
recently renegotiated (see below), was amended in the first quarter of
1993 to increase the total facility to $350.0 million from $250.0
million. Within the total facility, up to $175.0 million was a
standard revolving credit line available for either advances or letters
of credit in support of commercial paper issuances. Interest was
charged at alternate rates selected by the Company not greater than the
prime rate charged by the agent bank, plus a commitment fee of 3/8 of
one percent of the unused line available for advances and 1/2 of one
percent of the amount utilized for standby letters of credit. The
remaining $175.0 million was available for nonrecourse purchases of
certain trade accounts receivable of the Company by the commercial bank
group providing the credit line. During 1993, proceeds of $165.0
million were received by the Company as a result of accounts receivable
purchases by the bank group. The agreement required the Company to
comply with certain consolidated financial ratios and to maintain
certain levels of income.
To meet seasonal borrowing requirements of international
operations in addition to amounts funded by proceeds of its revolving
credit agreement, the Company negotiates individual financing
arrangements, generally with the same groups of banks that provided
credit in the prior year. Foreign credit lines total approximately
$170.0 million, a portion of which is used to support letters of
credit. The Company expects to extend these credit lines throughout
1994 and believes available amounts will be adequate to meet its
seasonal financing requirements.
During 1993, Fisher-Price had available domestic and foreign
seasonal credit lines totaling $175.0 million and $90.0 million,
respectively. Upon consummation of the merger, the domestic credit
line was repaid and terminated. During 1994, Fisher-Price's foreign
credit lines will be terminated and its foreign operations will be
financed by the Company's existing credit facilities.
Interest rates charged on the Company's working capital credit
lines are adjusted on a periodic basis; therefore, the carrying amounts
of such obligations are a reasonable approximation of their fair value.
Information relating to the Company's domestic and foreign credit lines
is summarized as follows (in thousands):
<TABLE>
<CAPTION>
For the Year
------------------------------
1993 1992 1991
------------------------------
<S> <C> <C> <C>
Balance at end of year
Domestic $ - $ - $ -
Foreign - 13,400 29,700
Maximum amount outstanding
Domestic 167,000 258,800 277,100
Foreign 76,100 264,700 180,700
Average borrowing
Domestic 45,100 114,300 107,600
Foreign 55,100 156,300 101,800
Weighted average interest rate on
average borrowing, computed monthly
Domestic 3.5% 4.4% 6.3%
Foreign 8.5% 11.2% 12.5%
</TABLE>
43
<PAGE>
Effective in March 1994, the Company renegotiated its revolving
credit agreement. The new agreement consists of unsecured facilities
providing a total of $500.0 million in seasonal financing from the same
group of commercial banks. The facilities provide for up to $250.0
million in advances and backup for commercial paper issuances ($125.0
million of which is a 364-day facility and the other $125.0 million is
a 3-year facility), and up to an additional $250.0 million (a 3-year
facility) for nonrecourse purchases of certain trade accounts
receivable by the bank group. In connection with the agreement, the
Company is to comply with certain consolidated financial covenants for
debt-to-capital, interest coverage and tangible net worth levels.
Fisher-Price Term Loan
- ----------------------
The current portion of long-term liabilities as of December 31, 1993
includes $100.0 million of term indebtedness to insurance companies.
The debt required quarterly interest payments at a rate of 10.69% per
annum, and had a final maturity date of June 30, 2000. Following the
merger, the Company reached an agreement with the lenders permitting
prepayment of this obligation. The prepayment premium and write-off of
unamortized issuance costs resulted in an extraordinary charge against
earnings in the 1993 fourth quarter, net of an $8.8 million income tax
benefit, of $14.7 million, or $0.08 per fully diluted share. At
December 31, 1992, the $98.5 million obligation outstanding, net of
unamortized discounts, was included in term loans.
In connection with this debt agreement, Fisher-Price had issued to
the lenders detachable warrants allowing them to purchase shares of
Fisher-Price stock, subject to certain antidilution requirements. In
November 1992, Fisher-Price repurchased from the holders warrants
representing rights to 1,173,507 common shares (post-merger, post-split
basis). As of the effective date of the merger, the Company agreed to
assume Fisher-Price's obligations pursuant to the provisions of the
warrants. The exercise of all outstanding warrants by the holders
would result in delivery of approximately 1,075,880 shares of the
Company's common stock at an exercise price of $7.45555 per share,
after adjustment for the merger and five-for-four stock split. In
addition, change-of-control provisions of the warrants allow the
holders a six-month period from the merger date to elect to receive, in
lieu of exercises for common shares, an amount in cash equal to the
product obtained by multiplying the number of shares of common stock
purchasable upon exercise by the highest closing market price of such
shares, as reported on the NYSE Composite Tape during the period from
August 19, 1993 through November 30, 1993, less the warrant exercise
price. The Company has not received notification from holders as to
their intentions with respect to exercise of the warrants.
ESOP Refinancing Notes Payable ("ESOP Notes")
- ---------------------------------------------
As of December 31, 1993, the current portion of long-term liabilities
includes the remaining ESOP Notes of $3.5 million. The ESOP Notes,
which are supported by letters of credit, are scheduled to mature in
August 1994. The interest rate charged as of December 31, 1993 was
3.1%, representing 94.25% of LIBOR. Because the interest rate is
adjusted monthly, the carrying amount of this obligation approximates
its fair value.
6-7/8% Senior Notes
- -------------------
In August 1992, the Company issued $100.0 million aggregate principal
amount of 6-7/8% Senior Notes maturing August 1, 1997. Interest is
payable semiannually on the first day of February and August. The 6-
7/8% Senior Notes may not be redeemed prior to maturity. Net proceeds
from this issuance were used to reduce outstanding borrowings under the
Company's domestic revolving credit line. Bid prices for each
$1,000.00 par value of the 6-7/8% Senior Notes, as provided by one of
the underwriters, were $1,041.80 and $975.02 as of December 31, 1993
and 1992, respectively.
6-3/4% Senior Notes
- -------------------
In May 1993, the Company issued $100.0 million aggregate principal
amount of 6-3/4% Senior Notes maturing May 15, 2000. Interest is
payable semiannually on the fifteenth day of each May and November,
commencing on November 15, 1993. The 6-3/4% Senior Notes may not be
redeemed prior to maturity. Net proceeds from this issuance were used
in place of short-term borrowing for working capital purposes. At
December 31, 1993, the bid price for the 6-3/4% Senior Notes, as
provided by one of the underwriters, was $1,025.32 based on a par value
of $1,000.00.
8% Convertible Subordinated Debentures ("8% Debentures")
- --------------------------------------------------------
In March 1991, the Company issued $100.0 million aggregate principal
amount of 8% Debentures, with a maturity date of March 15, 2001 and
semiannual interest payments due on each March 15 and September 15.
Proceeds from this issuance were used to redeem $62.5 million of
preferred stock issued by a financing subsidiary and for general
corporate purposes. The quoted prices provided by underwriters for the
8% Debentures as of December 31, 1993 and 1992 were $1,722.50 and
$1,695.00, respectively, based on a par value of $1,000.00.
The terms of the 8% Debentures provide for early redemption at the
option of the Company at anytime on or after March 15, 1994. On
February 9, 1994, the Company issued its Notice of Redemption to the
holders. The redemption price is 104.571% of the principal amount,
together with interest accrued to March 15, 1994, the final interest
payment date. In lieu of redemption, holders may elect to convert the
8% Debentures into the Company's common stock at an conversion price of
$12.83 per share. During the 1993 fourth quarter, holders tendered
$24.3 million par value of the 8% Debentures for conversion into common
shares.
Mortgage Note
- -------------
In 1990, the Company borrowed $45.0 million under a mortgage agreement
secured by its headquarters office facility in El Segundo, California.
The agreement requires monthly interest-only payments for the first 60
months of its term and monthly principal and interest payments of
approximately $0.4 million thereafter, until its December 2005 maturity
date. Interest is payable at 10.15% for the term of the agreement.
The fair value of the mortgage note, estimated by discounting future
cash flows at the interest rates currently available for debt with the
same credit rating, similar terms and maturity date, was approximately
$53.0 million and $54.0 million at December 31, 1993 and 1992,
respectively.
44
<PAGE>
Term Loans
- ----------
Term loans include foreign term loans and, as of December 31, 1992, the
Fisher-Price long-term loan and the ESOP Notes. Foreign term loans
primarily consist of an Indonesian loan of $6.0 million, secured by
local assets and guaranteed by the Company. The loan, which matures in
1997, bears interest at the lending bank's short-term rate plus 1-3/4
percent. Other foreign borrowings include $1.1 million of unsecured
Malaysian export financing revolving on a long-term basis under an open-
ended term, bearing interest at 6.0%. The interest rates on foreign
term borrowings are adjusted periodically, thus the carrying amount is
a reasonable estimate of fair value.
Scheduled Maturities
- --------------------
The aggregate amounts of long-term debt and capitalized lease
obligations maturing in the next five years are as follows (in
thousands):
<TABLE>
<CAPTION>
Senior and Capitalized
Subordinated Mortgage Term Lease
Year Debt Note Loans Obligations Total
- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 $ 75,700 $ - $107,900 $ 200 $183,800
1995 - - 2,600 200 2,800
1996 - 400 2,100 2,400 4,900
1997 100,000 500 600 100 101,200
1998 - 500 - 100 600
</TABLE>
14-3/4% Subordinated Debentures
- -------------------------------
In July 1991, the Company redeemed its 14-3/4% Subordinated Debentures
with a remaining principal amount of $99.1 million at 105.9% of par.
The write-off of unamortized discount associated with the debt together
with the early redemption premium resulted in an extraordinary charge
of $4.5 million, net of an income tax benefit of $2.6 million.
Preferred Stock of Financing Subsidiary
- ---------------------------------------
In May 1991, a financing subsidiary of the Company exercised its option
to redeem $62.5 million of its variable rate, asset-backed preferred
stock held by unrelated investors. The write-off of unamortized
issuance costs resulted in an extraordinary charge of $0.7 million.
NOTE 6 - SHAREHOLDERS' EQUITY
- -----------------------------
Preference Share Purchase Rights
- --------------------------------
In 1992, the Board of Directors approved an extension of the Company's
Preference Share Purchase Rights plan. The rights may be exercised by
their holders to purchase shares of the Company's Series E Junior
Participating Preference Stock upon the occurrence of certain events,
including the acquisition, or announcement of intended acquisition, of
20 percent or more of Mattel's common stock by a person or group of
affiliated or associated persons. The rights are subject to adjustment
in the event of stock dividends, stock splits or other changes in the
Company's common stock, and will expire on February 17, 2002, unless
the plan is further extended or the rights are earlier redeemed or
exchanged by the Company.
Preferred and Preference Stock
- ------------------------------
The Company is authorized to issue 3,000,000 shares of $1.00 par value
preferred stock and 20,000,000 shares of $0.01 par value preference
stock. No preferred shares are outstanding and the Company has no
current plan to issue any such shares.
In February 1992, 1,500,000 shares of $0.01 par value preference
shares were designated as Series E Junior Participating Preference
Stock in connection with a distribution of Preference Share Purchase
Rights to the Company's common shareholders. Series E shares are
issuable only when rights become exercisable under the Preference Share
Purchase Rights plan (see above).
In connection with the IGI merger in February 1992, 864,293 shares
of $0.01 par value preference stock were designated as 12.5%
Convertible Preference Stock, Series F, and issued to the IGI ESOP.
Dividends are payable at the option of the Company and are cumulative.
Additionally, when cash dividends are declared on the Company's common
stock, Series F preference shares are entitled to participate in such
distribution as if converted into common stock at that time. Each
Series F share is convertible, at the option of the ESOP's trustee,
into one and seven-eighths shares of Mattel common stock at any time up
to 30 days after repayment of the ESOP note receivable, and into
.683316 shares of common stock thereafter. The aggregate liquidation
preference of the Series F shares as of December 31, 1993 was $30.3
million, or $39.056 per share reduced by the per share effect of ESOP
debt outstanding.
Common Stock
- ------------
Concurrently with their approval of the Fisher-Price merger,
shareholders of the Company voted to amend the Mattel, Inc. certificate
of incorporation to increase the number of common shares authorized
from 150,000,000 to 300,000,000 shares in order to accommodate issuance
of common stock pursuant to the Fisher-Price merger, potential
conversions of the 8% Debentures, future stock splits and for future
awards pursuant to the Company's stock option plans.
Stock Options
- -------------
Under the Company's stock option plans, officers and other key
employees may be granted nonqualified stock options, restricted stock
awards and stock appreciation rights. Generally, options are
exercisable contingent upon the grantees' continued employment with the
Company, and in installments when permitted by the Board of Directors
or its Compensation/Options Committee. As of December 31, 1993 and
1992 a total of 12,417,405 shares and 4,184,378 shares, respectively,
of Mattel common stock were reserved for issuance under these plans.
Nonqualified stock options are granted at not less than 100
percent of the fair market value of the Company's common stock on the
date of award, and generally expire within ten years from date of
grant. Restricted stock awards issued are subject to various
restrictions. During the time period from the award date until the
restrictions lapse, shares cannot be sold, assigned, pledged or
otherwise encumbered by the recipients. As of December 1993,
restricted stock awards granted to Mattel executives totaled 593,750
shares. The market value of these shares as of the date of grant is
reflected as deferred compensation in shareholders' equity, and is
being amortized over the restriction period which lapses on January 1,
1997.
45
<PAGE>
The following is a summary of stock option information for the
Company's plans during the year:
<TABLE>
<CAPTION>
Options Outstanding
-------------------------------
Nonqualified Plans Number (a) Price (a)
- ----------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1991 6,925,865 $ 2.77 to $12.90
Granted 2,045,324 11.33 to 19.60
Exercised (1,939,523) 2.77 to 10.99
Canceled (260,399) 3.63 to 17.67
----------
Outstanding at December 31, 1992 6,771,267 2.77 to 19.60
Granted 4,833,781 12.20 to 23.90
Exercised (1,063,433) 2.77 to 19.60
Canceled (547,723) 3.63 to 19.60
----------
Outstanding at December 31, 1993 9,993,892 2.77 to 23.90
==========
Options exercisable at:
December 31, 1992 (b) 1,531,457
December 31, 1993 (c) 4,218,697
<FN>
(a) Number of options and prices reflect the retroactive effect of the
Fisher-Price merger, a five-for-four stock split distributed in
January 1994 and a three-for-two stock split distributed in June
1992.
(b) Average exercise price - $9.22 per share. Expiration dates vary
from July 12, 1994 to July 20, 2002.
(c) Average exercise price - $14.03 per share. Expiration dates vary
from July 12, 1994 to December 15, 2003.
</TABLE>
The Company's 1990 stock option plan provides that up to 1% of
Mattel's outstanding common stock as determined on December 31 of the
preceding year will be available for awards during each calendar year
in which the plan is in effect. In connection with the Fisher-Price
merger, shareholders approved the Board of Directors' recommendation of
a one-time increase of 3,000,000 shares above the standard 1%
limitation as set forth in the plan. The purpose of such increase was
to accommodate the post-merger grant of awards to employees of Mattel
and Fisher-Price as motivation for the successful integration and
future operation of the combined business.
The Fisher-Price Long-Term Incentive Plan of 1991 provided
benefits for eligible participants in the form of stock options, stock
appreciation rights, restricted stock, performance units and other
awards as determined by the plan's administrative committee. Effective
with the merger, all stock-based awards and benefits previously granted
and outstanding under the plan became fully vested and, if not
previously exercised, converted into rights to receive equivalent
shares, as adjusted for the 1.275 merger exchange ratio, of Mattel
common stock. Accordingly, 300,547 Fisher-Price restricted stock
awards outstanding became fully vested; the remaining unamortized
deferred compensation of $3.0 million was recognized in the fourth
quarter of 1993.
Common Stock Repurchase Plan
- ----------------------------
In May 1990, the Board of Directors authorized a stock repurchase plan
which initially provided for annual repurchases on the open market of
up to one percent of the Company's common stock to fund the stock
option plans. In May 1993, the Board expanded the repurchase program
to permit the repurchase up to 10 million shares over the next four
years. During 1993 and 1992, the Company purchased 2,080,000 and
1,436,000 shares, respectively. At the time of the five-for-four stock
split in 1993 and the three-for-two stock split in 1992, the number of
treasury shares was increased as a result of the splits by 520,194
shares and 582,661 shares, respectively. Shares repurchased, less
2,213,949 shares reissued in 1993 and 532,377 shares reissued in 1992,
are included in treasury stock.
Common Stock Warrants - $6.25 Series
- ------------------------------------
Warrants to purchase 1,000,000 shares of the Company's common stock at
$6.25 per share were exercisable until their July 13, 1991 expiration
date; 910,000 warrants were exercised and 90,000 were repurchased from
the holders. These share data do not reflect adjustment for the common
stock splits, all of which occurred after the warrants' expiration
date.
Dividends and Capital Transactions
- ----------------------------------
On November 30, 1993, the Board of Directors declared a five-for-four
stock split on the Company's common stock, distributable on January 7,
1994 to shareholders of record as of December 17, 1993. Accordingly,
$34.3 million was transferred from additional paid-in capital to common
stock, representing the par value for additional shares issued,
including the effect of the split on shares issued pursuant to the
Fisher-Price merger. Similar transfers were made between paid-in
capital and common stock in the amounts of $48.0 million and $17.7
million to reflect the respective declarations of a three-for-two stock
split in May 1992 and a five-for-four stock split in October 1991.
A regular quarterly cash dividend has been declared by the Board
of Directors on the Company's common stock since the second quarter of
1990.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
Leases
- ------
The Company routinely enters into noncancellable lease agreements for
premises and equipment used in the normal course of business. The
following table shows the future minimum obligations under lease
commitments in effect at December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
Capitalized Leases Operating Leases
------------------ ----------------
<S> <C> <C>
1994 $ 800 $ 29,000
1995 900 26,300
1996 3,100 21,400
1997 400 14,700
1998 400 13,500
Thereafter 11,400 25,100
------- --------
17,000 (a) 130,000
Less: Sublease commitments 1,000 400
------- --------
$16,000 $129,600
======= ========
<FN>
(a) Includes $11.7 million of imputed interest.
</TABLE>
Rental expense under operating leases amounted to $33.8 million,
$32.1 million and $21.3 million for 1993, 1992 and 1991, respectively,
net of sublease income of $0.4 million, $2.8 million and $1.6 million.
46
<PAGE>
In connection with the discontinuance of certain operations in
1984, the Company remained obligated for a facility lease through 1998.
The Company determined in April 1993 that it would not, upon the
expiration of the sublease agreements, utilize such facility and made a
lease termination payment to discharge its remaining obligations to the
lessor. A net charge in the amount of $41.1 million, after related tax
effects of $26.9 million, for the cost of the lease termination was
charged to additional paid-in capital, consistent with the treatment
accorded transactions which preceded the Company's 1987 quasi-
reorganization.
Commitments
- -----------
In the normal course of business, the Company enters into contractual
arrangements for future purchases of goods and services to ensure
availability and timely delivery and to obtain and protect the
Company's right to create and market certain toys. Such arrangements
include commitments for future inventory purchases and royalty payments
pursuant to licensing agreements. Certain of these commitments
routinely contain provisions for guaranteed or minimum expenditures
during the terms of the contracts.
The Company has no significant exposure to credit risk in the
event of nonperformance by any counterparty or group of counterparties
to its outstanding commitments and foreign currency contracts. Market
risk exposures exist with respect to foreign currency contracts to the
extent that currency fluctuations cannot be predicted with certainty.
The Company seeks to mitigate its exposure to market risk through
forecasting its future foreign currency positions and hedge
requirements, by retaining flexibility with respect to currencies used
for international borrowing arrangements and in the invoicing of
transactions between international affiliates, and by varying the
degree of coverage of individual foreign currency exposures, which may
alternatively be left open, partially or fully hedged.
Current and future commitments for guaranteed payments reflect the
Company's focus on expanding its product lines through alliances with
businesses in other industries, such as sporting goods and television
and motion picture entertainment companies. The single largest
commitment involves the Company's 1991 agreements with The Walt Disney
Company. An extended licensing agreement permits the Company to use
the Disney name and characters on preschool and infant products through
2001 and provides for the addition of certain other Disney characters
and product lines to those previously licensed to the Company. In
addition, a related ten-year agreement involves the Company's
participation in attractions and toy stores at three Disney theme parks
and the development of theme park toys.
As of December 31, 1993, the Company had outstanding commitments
for 1994 purchases of inventory of approximately $56.0 million. As of
December 31, 1992, the Company had commitments for 1993 purchases of
inventory of approximately $64.0 million. The licensing and related
agreements provide for terms extending from 1994 through 2001 and
contain provisions for future minimum payments as shown in the
following table (in thousands):
<TABLE>
<CAPTION>
Minimum
Payments
--------
<S> <C>
1994 $ 37,000
1995 37,000
1996 36,000
1997 38,000
1998 38,000
Thereafter 124,000
--------
$310,000
========
</TABLE>
Royalty expense for the years ended December 31, 1993, 1992 and
1991 was $69.2 million, $50.2 million and $38.8 million, respectively,
with increases in 1993 and 1992 attributable principally to the Disney
license.
Foreign Currency Contracts
- --------------------------
The Company enters into foreign currency forward exchange contracts,
swaps and options as hedges of inventory purchases, sales and various
other intercompany transactions. At December 31, 1993, the Company and
its foreign affiliates had outstanding forward contracts to purchase
U.S. dollars and to sell Canadian, British and other European
currencies to obtain U.S. dollars totaling $256.0 million in 1994.
These contracts hedge $202.8 million of future inventory purchases and
$53.2 million of intercompany borrowing and other intercompany
transactions. Based on broker quotes, if the Company had entered into
contracts involving the same currencies and maturity dates on December
31, 1993, it would have received $248.0 million in 1994. At December
31, 1992, the Company and its foreign affiliates had outstanding
forward contracts totaling $273.0 million to purchase U.S. dollars and
to sell Italian, British, French, Japanese, Australian and Canadian
currencies to obtain U.S. dollars. If acquired on December 31, 1992,
contracts for the same currencies and maturity dates would have totaled
$258.6 million, based on broker quotes.
At December 31, 1993, the Company held forward contracts to
purchase $219.4 million in German, Malaysian, Italian, Hong Kong and
other currencies. The contracts, which expire on various dates during
1994, hedge $127.6 million of future sales and $91.8 million of
intercompany borrowings. Based on broker quotes, contracts for the
same currencies and maturity dates would have purchased the equivalent
of $222.7 million at 1993 year-end rates. At December 31, 1992, the
Company held forward contracts to purchase $153.4 million in British,
Hong Kong, Malaysian, Belgian and German currencies. Based on broker
quotes, contracts for the same currencies and maturity dates acquired
on December 31, 1992 would be worth the equivalent of $159.0 million at
1992 year-end rates.
As of December 31, 1992, Fisher-Price held forward currency
options involving British and Canadian currencies in the amount of
$35.2 million. The options, which hedged
47
<PAGE>
future transactions and expired within twelve months, were purchased at
a cost of $0.5 million and were valued at $1.5 million, based on broker
quotes, as of December 31, 1992.
Letters of Credit
- -----------------
The Company had outstanding irrevocable letters of credit in the amount
of $31.8 million and $22.5 million as of December 31, 1993 and 1992,
respectively. These letters of credit, which have terms from one month
to one year, collateralize the Company's obligations to third parties
for the purchase of inventory. The fair value of these letters of
credit is estimated to be the same as the contract values based on the
nature of the fee arrangements with the issuing banks.
Litigation
- ----------
The Company is involved in various litigation and other legal matters,
including claims related to product liability and environmental
cleanup, which are being addressed or defended in the ordinary course
of business. Management believes that any liability which may
potentially result upon resolution of such matters will not have a
material adverse effect on the Company's consolidated financial
position or results of operations.
NOTE 8 - FINANCIAL INFORMATION BY GEOGRAPHIC AREA
- -------------------------------------------------
The Company's business consists of the design, manufacture and
marketing of toys on a worldwide basis. The Company's foreign
operations are located principally in Europe, Canada, Latin America and
the Far East. Consolidated liabilities of these subsidiaries were
approximately $300.4 million, $311.3 million and $342.5 million at
December 31, 1993, 1992 and 1991, respectively.
The Company's toy products are sold throughout the world. Credit
is granted to customers on an unsecured basis, and generally provides
for extended payment terms which result in a substantial portion of
trade receivables being collected during the latter half of the year.
In the United States, toys are distributed directly to large retailers,
including discount and free-standing toy stores, chain stores,
department stores, other retail outlets, and to a limited extent,
wholesalers. Internationally, the Company sells its products directly
in Australia, Austria, the Benelux countries, Canada, Chile, France,
Germany, Greece, Italy, Japan, Mexico, Scandinavia, Spain, Switzerland,
the United Kingdom, and in certain areas of Eastern Europe and Asia.
In addition to direct sales, the Company's products are marketed
principally through distributors in Central and South America, the
Middle East and Southeast Asia. In 1994, the Company will begin
selling its products directly in Argentina, Portugal and Venezuela
through newly established offices. The Company also licenses some of
its products to other manufacturers for sale in Brazil and other Latin
American countries. In the fourth quarter of 1993, the Company's
distributorship agreement for Nintendo products in Australia was
terminated. The Company ceased distribution of Nintendo products in
Canada and Italy during the first and third quarters of 1992,
respectively.
The Company's worldwide sales to Toys R Us and Wal-Mart, the only
customers accounting for more than 10% of 1993 consolidated net sales,
were $598.7 million and $277.3 million, respectively. At December 31,
1993, accounts receivable from Toys R Us and Wal-Mart were $156.8
million and $63.2 million, respectively. In 1992 and 1991, worldwide
sales to Toy R Us, the only customer accounting for more than 10%
of consolidated net sales, were $466.4 million and $289.9 million,
respectively. At December 31, 1992, accounts receivable from Toys R Us
and Wal-Mart were $114.4 million and $69.6 million, respectively.
Information by geographic area is set forth in the tables below.
Profit from operations represents income before income taxes, interest
expense and general corporate expenses. Sales between geographic areas
are based upon transfer prices which include manufacturing cost and
profit.
<TABLE>
<CAPTION>
Profit From Identifiable
(In thousands) Net Sales Operations Assets
- -----------------------------------------------------------------------
<S> <C> <C> <C>
1993
- ----
United States $1,873,249 $ 187,923 $ 718,688
Europe and Canada 908,030 68,270 545,406
Far East and Latin America 993,001 96,924 290,759
---------- ---------- ----------
3,774,280 353,117 1,554,853
Sales and transfers between
geographic areas (a) (1,069,832) - -
Interest expense - (62,614) -
Corporate and other - (53,857) 445,224
---------- ---------- ----------
Consolidated total $2,704,448 $ 236,646 $2,000,077
========== ========== ==========
1992
- ----
United States $1,612,174 $ 226,193 $ 712,309
Europe and Canada 861,462 95,480 504,331
Far East and Latin America 844,917 66,461 286,185
---------- ---------- ----------
3,318,553 388,134 1,502,825
Sales and transfers between
geographic areas (a) (755,028) - -
Interest expense - (68,716) -
Corporate and other - (36,473) 209,850
---------- ---------- ----------
Consolidated total $2,563,525 $ 282,945 $1,712,675
========== ========== ==========
1991
- ----
United States $1,073,272 $ 162,584 $ 582,732
Europe and Canada 784,072 93,551 581,230
Far East and Latin America 793,930 66,115 245,986
---------- ---------- ----------
2,651,274 322,250 1,409,948
Sales and transfers between
geographic areas (a) (604,785) - -
Interest expense - (64,334) -
Corporate and other - (43,590) 154,884
---------- ---------- ----------
Consolidated total $2,046,489 $ 214,326 $1,564,832
========== ========== ==========
<FN>
(a) Primarily from the Far East and Latin America to other regions of
the world.
</TABLE>
48
<PAGE>
NOTE 9 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- ----------------------------------------------------
Due to seasonality of the Company's earnings, exclusion of antidilutive
common stock equivalents in certain periods and fluctuation in the
Company's common stock price, the sum of income per share amounts
reported for each of the four quarters may not equal income per share
reported for the full year.
<TABLE>
<CAPTION>
First Second Third Fourth
(In thousands, except per share amounts) Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1993 (a)
- --------------------------------
Net sales $477,184 $576,618 $896,732 $753,914
Gross profit 226,703 287,150 462,576 384,549
Advertising and promotion expenses 68,489 83,390 139,392 135,427
Other selling and administrative expenses 117,430 121,789 137,523 131,363
Integration and restructuring charge (b) - - - 115,000
Other expense, net 560 3,819 5,378 2,158
Operating profit (c) 40,224 78,152 180,283 601
Income before taxes, extraordinary item
and accounting changes 27,015 63,223 163,370 (16,962)
Extraordinary item - debt retirement - - - (14,681)
Cumulative effect of changes in accounting
principles (4,022) - - -
Net income 14,458 40,770 104,656 (42,676)
Preference stock dividend requirements (1,224) (1,223) (1,224) (1,223)
Net income applicable to common shares 13,234 39,547 103,432 (43,899)
Primary income per share (d):
Income before extraordinary item and
accounting changes $0.10 $0.23 $0.61 ($0.17)
Net income 0.08 0.23 0.61 (0.26)
Average number of common and common
equivalent shares 171,254 170,685 170,609 170,647
Fully diluted income per common share (d):
Income before extraordinary item and
accounting changes $0.10 $0.23 $0.58 ($0.17)
Net income 0.08 0.23 0.58 (0.26)
Average number of common and common
equivalent shares 180,699 180,285 180,335 169,640
Dividends declared per common share (d) $0.040 $0.048 $0.048 $0.048
Common stock market price (d)
High $23.10 $21.10 $22.80 $24.60
Low 16.40 17.10 18.50 21.50
Year Ended December 31, 1992 (a)
- --------------------------------
Net sales $476,889 $562,433 $797,197 $727,006
Gross profit 224,393 279,883 407,845 357,645
Advertising and promotion expenses 66,933 78,078 121,084 137,322
Other selling and administrative expenses 110,540 129,621 129,961 131,482
Other expense (income), net 4,860 4,753 4,190 (719)
Operating profit (c) 42,060 67,431 152,610 89,560
Net income 18,495 32,299 84,436 49,611
Preferred and preference stock dividend
requirements (1,388) (1,179) (1,206) (1,206)
Net income applicable to common shares 17,107 31,120 83,230 48,405
Primary income per share (d):
Net income $0.10 $0.18 $0.48 $0.28
Average number of common and common
equivalent shares 173,736 173,418 173,465 172,648
Fully diluted income per share (d):
Net income $0.10 $0.18 $0.46 $0.27
Average number of common and common
equivalent shares 183,293 183,030 183,075 182,228
Dividends declared per common share (d) $0.026 $0.040 $0.040 $0.040
Common stock market price (d)
High $18.87 $20.60 $20.60 $21.60
Low 15.87 15.80 16.90 17.70
<FN>
(a) Financial information for all quarters reflects the retroactive effect of the November
1993 merger, accounted for as a pooling of interests, with Fisher-Price.
(b) The nonrecurring charge represents transaction, integration and restructuring costs
related to the Fisher-Price merger.
(c) Represents income from operations before interest expense and provision for income taxes.
(d) Per share information and market prices for all periods reflect the retroactive effect
of stock splits distributed to shareholders in January 1994 and June 1992 and the
November 1993 merger with Fisher-Price.
</TABLE>
49
<PAGE>
NOTE 10 - SUPPLEMENTAL FINANCIAL INFORMATION
- --------------------------------------------
<TABLE>
<CAPTION>
As of Year-End
----------------
(In thousands) 1993 1992
- ----------------------------------------------------------------
<S> <C> <C>
Inventories include the following:
Raw materials and work in process $ 50,927 $ 59,018
Finished goods 169,066 179,877
-------- --------
$219,993 $238,895
======== ========
Prepaid expenses and other current
assets include the following:
Deferred income taxes $101,776 $ 29,151
======== ========
Accrued liabilities include the following:
Integration and restructuring charge $ 94,774 $ -
Advertising and promotion 80,396 86,306
Compensation 58,582 48,590
Royalties 25,917 16,808
Other 138,131 115,466
-------- --------
$397,800 $267,170
======== ========
<CAPTION>
For the Year
-----------------------
(In thousands) 1993 1992 1991
- ----------------------------------------------------------------
<S> <C> <C> <C>
Selling and administrative expenses
include the following:
Research and development $75,415 $76,619 $55,510
Provision for doubtful accounts 4,169 21,665 6,560
</TABLE>
Statement of Cash Flows
- -----------------------
For the years ended December 31, 1993, 1992 and 1991, cash paid
for interest totaled $76.1 million, $67.8 million and $62.1
million, respectively. Cash paid for incomes taxes in each of the
three years was $55.7 million, $72.5 million and $52.5 million,
respectively.
Significant noncash investing, financing and operating
activities during 1993 were as follows:
- The November 1993 merger with Fisher-Price in a stock-for-
stock transaction neither used nor provided cash (see Note
2). The Company's consolidated financial statements,
consistent with pooling of interests accounting treatment,
reflect retroactive restatement for the effects of the
merger. Accordingly, the assets and liabilities of Fisher-
Price and the changes in shareholders' equity as a result
of the merger are included in the combined consolidated
financial statements as of July 1, 1991, but are not
includable as of December 1990 while Fisher-Price was a
division of The Quaker Oats Company. Because the merger
transaction neither provided nor used cash with respect to
the combined companies, the effect of consolidating
financial statement balances as of July 1, 1991 is not
reflected in the statements of cash flows.
- Conversions by holders of $24.3 million aggregate par
value of the 8% Debentures during the 1993 fourth quarter
resulted in the issuance of 1,896,580 shares (post-split
basis) of the Company's common stock from its treasury.
- The effects of changes in accounting principles related to
the Company's adoption of Statements of Financial
Accounting Standards Nos. 106 and 109 in the 1993 first
quarter neither provided nor used cash, and accordingly,
have been excluded from the statement of cash flows.
NOTE 11 - NEW ACCOUNTING PRONOUNCEMENTS
- ---------------------------------------
Postemployment Benefits
- -----------------------
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits", is effective for fiscal
years beginning after December 15, 1993. This statement addresses
the treatment of costs related to postemployment plans not already
accounted for under SFAS Nos. 87 or 106, and requires that
employers who provide benefits to former or inactive employees
after employment, but before retirement, account for such costs on
an accrual basis rather than as expenditures are made. The
Company's practice has been to accrue its obligation for such
benefits when circumstances indicate it is probable a liability
has been incurred and the amount or range of amounts are
reasonably estimable. Therefore, there will be no effect on the
Company's financial position and results of operations as a result
of this pronouncement.
Charitable Contributions
- ------------------------
Statement of Financial Accounting Standards No. 116, "Accounting
for Contributions Received and Contributions Made", was issued in
June 1993. The statement, which is effective for fiscal years
beginning after December 15, 1994, provides that contributions
received or made, including unconditional promises for such gifts,
be recognized in the periods received or made at their fair
values. The Company supports the Mattel Foundation with annual
cash contributions which currently are accrued monthly in the year
of the pledge. Thus, the statement will have no effect on the
Company's results of operations or amount of expense recognized in
any year, only the timing of recognition with respect to interim
periods.
50
<PAGE>
Mattel, Inc. and Subsidiaries
MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
-----------------------------------------------------------
Management is responsible for the preparation of the Company's
consolidated financial statements and the related financial and
nonfinancial information appearing in this Annual Report. The
financial statements have been prepared in accordance with
generally accepted accounting principles and, in the opinion of
management, present fairly the Company's financial position,
results of operations and cash flows. The financial statements
necessarily contain some amounts that are based on the best
estimates and judgments of management.
The Company maintains accounting and internal control systems
which management believes are adequate to provide reasonable
assurance, in relation to reasonable cost, as to the integrity and
reliability of the financial statements and as to protection of
assets from unauthorized use or disposition. The selection and
training of qualified personnel, the establishment and
communication of accounting and administrative policies and
procedures, and a program of internal audit are important elements
of these control systems.
The Company's internal auditors are directed to examine the
adequacy and effectiveness of the Company's system of internal
accounting, administrative and operational controls. They conduct
formal and systematic reviews to determine that operations are
adequately controlled and to assure that assets are effectively
safeguarded.
The Board of Directors has appointed an audit committee,
composed entirely of nonemployee directors. The committee meets
regularly with financial management, internal auditors and the
independent accountants to review accounting control, auditing and
financial reporting matters.
Price Waterhouse, independent accountants, are retained to
audit the Company's consolidated financial statements. Their
report on their audits of the accompanying financial statements is
shown herein. This report states that the audits were made in
accordance with generally accepted auditing standards. These
standards do not include a study and evaluation of internal
control for the purpose of expressing an opinion thereon but do
include a study and evaluation for the purpose of establishing a
basis for reliance thereon relative to the scope of their audits
of these consolidated financial statements.
/s/ Michael G. McCafferty
- -------------------------
Michael G. McCafferty
Executive Vice President and Chief Financial Officer
Mattel, Inc. and Subsidiaries
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of Mattel, Inc.
In our opinion, based upon our audits and the reports of other
auditors, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of shareholders'
equity and of cash flows present fairly, in all material respects,
the financial position of Mattel, Inc. and its subsidiaries at
December 31, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We did not audit the 1992 and 1991 financial statements
of Fisher-Price, Inc. and its subsidiaries, which statements
reflect total assets of $455,198,000 at January 3, 1993 and total
net sales of $693,951,000 and $372,994,000 for the periods ended
January 3, 1993 and December 29, 1991, respectively. Those
statements were audited by other auditors whose reports thereon
have been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for Fisher-Price,
Inc. and its subsidiaries, is based solely on the reports of the
other auditors. We conducted our audits of these statements in
accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits and the reports of other auditors provide a reasonable
basis for the opinion expressed above.
As discussed in Notes 3 and 4 to the Consolidated Financial
Statements, the Company changed its method of accounting for
income taxes and for postretirement benefits other than pensions
in 1993.
/s/ Price Waterhouse
- --------------------
Los Angeles, California
February 8, 1994
51
<PAGE>
Mattel, Inc. and Subsidiaries
DIRECTORS AND OFFICERS
----------------------
<TABLE>
<CAPTION>
Board of Directors
- ------------------
<S> <C>
John W. Amerman (1) Chairman and Chief Executive Officer,
Mattel, Inc.
Jill E. Barad President and Chief Operating Officer,
Mattel, Inc.
Dr. Harold Brown (4) Senior Managing Director, E.M. Warburg, Pincus &
Co., Inc.
James A. Eskridge President, Fisher-Price, Inc.
Tully M. Friedman (1)(3) Co-Managing Partner, Hellman & Friedman
Ronald J. Jackson Former Chairman, President and Chief Executive
Officer, Fisher-Price, Inc.
E. Robert Kinney Former President and Chief Executive Officer,
General Mills, Inc.
Ronald M. Loeb (3) Partner, Irell & Manella
Edward H. Malone (1)(2)(4) Retired Vice President, General Electric Co.
John H. Mullin III Chairman, Ridgeway Farm, Inc.
Edward N. Ney Chairman of the Board of Advisors,
Burson-Marsteller
William D. Rollnick (1)(2)(3) Chairman, Genstar Rental Electronics, Inc.
John L. Vogelstein (1)(2)(3) Vice Chairman and Director, E.M. Warburg,
Pincus & Co., Inc.
Lindsey F. Williams (4) President, Mattel International
<FN>
(1) Member, Executive/Finance Committee, John L. Vogelstein, Chairman
(2) Member, Compensation/Options Committee, John L. Vogelstein, Chairman
(3) Member, Audit Committee, William D. Rollnick, Chairman
(4) Member, Pension Committee, Edward H. Malone, Chairman
<CAPTION>
Executive Officers
- ------------------
<S> <C>
John W. Amerman Chairman and Chief Executive Officer
Jill E. Barad President and Chief Operating Officer
James A. Eskridge President, Fisher-Price, Inc.
Joseph C. Gandolfo President, Mattel Operations
Lindsey F. Williams President, Mattel International
Michael G. McCafferty Executive Vice President and Chief Financial
Officer
E. Joseph McKay Senior Vice President, Human Resources and
Administration
N. Ned Mansour Senior Vice President, General Counsel and
Secretary
Gary P. Rolfes Senior Vice President and Controller
William Stavro Vice President and Treasurer
</TABLE>
52
<PAGE>
Mattel, Inc. and Subsidiaries
CORPORATE INFORMATION
---------------------
<TABLE>
<S> <C>
Transfer Mattel, Inc. Common Stock
Agent and The First National Bank of Boston
Registrar Shareholder Services Division
150 Royall Street, Canton, Massachusetts 02021 or
P.O. Box 644, Boston, Massachusetts 02102
Telephone: 617-575-2900
Mattel, Inc. 12.5% Convertible Preference Stock,
Series F
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245
Note Mattel, Inc. 6-3/4% Senior Notes due May 15, 2000
Trustees PNC Bank, N.A.
One Oliver Plaza, 23rd Floor
Pittsburgh, Pennsylvania 15265
Mattel, Inc. 6-7/8% Senior Notes due August 1, 1997
The First National Bank of Boston
150 Royall Street, Mail Stop 540215
Canton, Massachusetts 02021 or
P.O. Box 1618, Boston, Massachusetts 02105
Stock Mattel, Inc. Common Stock and
Exchange Mattel, Inc. Preference Share Purchase Rights
Listings New York and Pacific Stock Exchanges
Mattel, Inc. 6-7/8% Senior Notes due August 1, 1997
New York Stock Exchange
Common As of March 1, 1994, there were approximately 45,000
Shareholders holders of record of Mattel, Inc. Common Stock
Annual The Annual Meeting of Shareholders will be held May
Meeting 11, 1994, at 10:00 a.m. in the Manhattan Ballroom of
the Radisson Plaza Hotel, Manhattan Beach, California
Form 10-K Mattel's Annual Report to the Securities and
Exchange Commission on Form 10-K for the year ended
December 31, 1993, is available upon request by
writing to the Secretary of the Company, 333
Continental Boulevard, El Segundo, California 90245
Trademark Disney characters: [copyright] The Walt Disney Company.
Legends Happy Meal Magic is a trademark of McDonald's Corporation.
Nickelodeon is licensed for use by MTV Networks, a
division of Viacom International, Inc. Polly Pocket
and Mighty Max are trademarks owned by Bluebird Toys
(UK) Ltd., England.
[copyright] 1994 Mattel, Inc.
All Rights Reserved
Printed in USA
</TABLE>
53
<PAGE>
Exhibit 21.0
(Page 1 of 2)
SUBSIDIARIES OF MATTEL, INC.
----------------------------
<TABLE>
<CAPTION>
Percentage of
Voting Securities
Jurisdiction Owned Directly
in Which or Indirectly
Subsidiaries(1) Organized By Parent(2)
--------------- ------------ -----------------
<S> <C> <C>
ARCO Toys, Limited Hong Kong 100%
Arcotoys, Inc. Delaware 100%
Croner Toys Limited New Zealand 60%
Far West Insurance Company, Limited Bermuda 100%
Fisher-Price, Inc. Delaware 100%
Fisher-Price, N.V. Belgium 100%
Fisher-Price, Inc. Canada 100%
Fisher-Price S.A.R.L. France 100%
Fisher-Price Beteiligungs-G.m.b.H. Germany 100%
Fisher-Price Spielwaren-G.m.b.H. Germany 100%
Fisher-Price (Hong Kong) Ltd. Hong Kong 100%
Fisher-Price, S.r.l. Italy 100%
Fisher-Price de Acuna, S.A.
de C.V. Mexico 100%
Fisher-Price de Mexico,
S.A. de C.V. Mexico 100%
Fisher-Price de Baja California,
S.A. de C.V. Mexico 100%
Fisher-Price, S.A. Spain 100%
Fisher-Price Ltd. U.K. 100%
Fisher-Price Toys Ltd. U.K. 100%
International Games, Inc. Delaware 100%
International Games, Ltd. Cayman Islands 100%
Mabamex, S.A. de C.V. Mexico 100%
Mattel B.V. The Netherlands 100%
Mattel Chile S.A. Chile 100%
Mattel Espana, S.A. Spain 100%
Mattel Europa B.V. The Netherlands 100%
Mattel France S.A. France 100%
Corolle S.A. France 100%
Mattel GmbH Germany 100%
Mattel Toys K.F.T. Hungary 100%
Mattel Spol. S.R.O. Czech Republic 100%
<FN>
(1) All of the subsidiaries listed above are included in the Consolidated
Financial Statements. Four are not named because, when considered in
the aggregate, they do not constitute a significant subsidiary.
Furthermore, approximately fifteen subsidiaries are inactive and
financial statements are not prepared for such companies.
(2) Parent refers to Mattel, Inc. (a Delaware corporation) and excludes
Directors' qualifying shares.
</TABLE>
<PAGE>
Exhibit 21.0
(Page 2 of 2)
SUBSIDIARIES OF MATTEL, INC.
----------------------------
<TABLE>
<CAPTION>
Percentage of
Voting Securities
Jurisdiction Owned Directly
in Which or Indirectly
Subsidiaries(1) Organized By Parent(2)
--------------- ------------ -----------------
<S> <C> <C>
Mattel Gesellschaft m.b.H. Austria 100%
Mattel Holding, Inc. Delaware 100%
Mattel U.K. Limited U.K. 100%
Mattel Holdings Limited Canada 100%
Mattel Canada Inc. Canada 100%
Mattel I., Inc. Delaware 100%
Mattel Toys, S.r.l. Italy 100%
Mattel A.E.B.E. Greece 100%
Mattel A.G. Switzerland 100%
Mattel Manufacturing Europe, S.r.l. Italy 100%
Mattel K.K. Japan 100%
Mattel (K.L.) Sdn.Bhd. Malaysia 100%
Mattel (Malaysia) Sdn.Bhd. Malaysia 100%
Mattel Overseas, Inc. California 100%
Mattel Toys Vendor Operations Limited Hong Kong 100%
Mattel Pty. Limited Australia 100%
Mattel Realty Corporation Delaware 100%
Mattel, S.A. de C.V. Mexico 100%
Mattel Servicios, S.A. de C.V Mexico 100%
Mattel de Mexico, S.A. de C.V. Mexico 100%
Mattel Sales Corp. California 100%
Mattel Scandinavia A/S Denmark 100%
Mattel T Company Limited Hong Kong 100%
Mattel Tools Sdn.Bhd. Malaysia 100%
Mattel Toys, Inc. California 100%
Mattel Toys (HK) Limited Hong Kong 100%
Mattel Toys (Singapore) Pte. Ltd. Singapore 100%
Montoi S.A. de C.V. Mexico 100%
P.T. Mattel Indonesia Indonesia 95%
Precision Moulds Limited Hong Kong 100%
<FN>
(1) All of the subsidiaries listed above are included in the Consolidated
Financial Statements. Four are not named because, when considered in
the aggregate, they do not constitute a significant subsidiary.
Furthermore, approximately fifteen subsidiaries are inactive and
financial statements are not prepared for such companies.
(2) Parent refers to Mattel, Inc. (a Delaware corporation) and excludes
Directors' qualifying shares.
</TABLE>
<PAGE>
Exhibit 23.0
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in each of the five
Registration Statements on Form S-8 (No. 33-52723, No. 33-14717, No. 33-51454,
No. 33-34920 and No. 33-57082) and in each Prospectus constituting part of the
two Registration Statements on Form S-3 (No. 33-40434 and No. 33-46947) of
Mattel, Inc. and its subsidiaries of our report dated February 8, 1994,
appearing on page 51 of the December 31, 1993 Annual Report to Shareholders
which is incorporated by reference in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page 30 of the Company's Annual Report on
Form 10-K.
/s/ PRICE WATERHOUSE
- -----------------------
Los Angeles, California
March 24, 1994
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
As independent public accounts we hereby consent to the incorporation of our
report included in this Form 10-K, into Mattel, Inc.'s previously filed
Registration Statements on Form S-8 File Nos. 33-52723, 33-14717, 33-51454,
33-34920, and 33-57082 and into Mattel, Inc.'s Prospectus constituting part of
the two Registration Statements on Form S-3 File Nos. 33-40434 and 33-46947.
/s/ ARTHUR ANDERSEN & CO.
- -------------------------
Rochester, New York
March 23, 1994
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the Registration Statements of
Mattel, Inc. on Form S-8 (No. 33-52723, No. 33-14717, No. 33-51454, No. 33-34920
and No. 33-57082) and on Form S-3 (No. 33-40434 and No. 33-46947) of our report
dated February 4, 1993, on our audit of the consolidated financial statements
and financial statement schedules of Fisher-Price, Inc. as of January 3, 1993
and for the fiscal year then ended, which report is included in this Annual
Report on Form 10-K.
/s/ COOPERS & LYBRAND
- ----------------------
Rochester, New York
March 22, 1994
