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