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 September 30, 1994 ------------------ OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-05647 ---------------------------------- MATTEL, INC. ------------ (Exact name of registrant as specified in its charter) Deleware 95-1567322 - ------------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 333 Continental Boulevard, El Segundo, California 90245-5012 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (310) 252-2000 -------------- (Former name, former address and former fiscal year, None if changed since last report) -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Number of shares outstanding of registrant's common stock as of October 21, 1994: Common Stock - $1.00 par value -- 178,488,284 shares PART I -- FINANCIAL INFORMATION ------------------------------- MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Sept. 30, Sept. 30, Dec. 31, (In thousands) 1994 1993 1993 - -------------- ----------- ----------- ----------- ASSETS Current Assets: Cash $ 86,225 $ 56,514 $ 506,113 Marketable securities 20,417 13,950 17,468 Accounts receivable, net 1,251,738 1,094,525 580,313 Inventories 360,741 276,823 219,993 Prepaid expenses and other current assets 159,235 130,612 146,863 ----------- ----------- ----------- Total current assets 1,878,356 1,572,424 1,470,750 ----------- ----------- ----------- Property, Plant and Equipment: Land 20,843 10,507 15,664 Buildings 170,479 146,520 146,622 Machinery and equipment 281,675 248,606 240,449 Capitalized leases 38,209 38,209 38,209 Leasehold improvements 44,287 40,883 41,948 ----------- ----------- ----------- 555,493 484,725 482,892 Less: Accumulated depreciation 246,037 233,093 229,130 ----------- ----------- ----------- 309,456 251,632 253,762 Tools, dies and molds, net 89,434 73,952 73,115 ----------- ----------- ----------- Property, plant and equipment, net 398,890 325,584 326,877 ----------- ----------- ----------- Other Noncurrent Assets: Intangible assets, net 437,411 143,377 139,277 Sundry assets 70,973 50,946 63,173 ----------- ----------- ----------- $ 2,785,630 $ 2,092,331 $ 2,000,077 =========== =========== =========== <FN> See accompanying notes to consolidated financial information. 2 MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) Sept. 30, Sept. 30, Dec. 31, (In thousands) 1994 1993 1993 - -------------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable $ 477,567 $ 101,376 $ - Current portion of long-term liabilities 2,700 9,194 104,862 Accounts payable 220,250 158,884 175,424 Accrued liabilities 444,514 340,759 397,800 Income taxes payable 163,959 103,545 105,243 ----------- ----------- ----------- Total current liabilities 1,308,990 713,758 783,329 ----------- ----------- ----------- Long-Term Liabilities: Senior Notes 199,569 199,437 199,470 8% Convertible subordinated debentures - 97,706 73,953 Other long-term debt 58,970 160,911 54,689 Other 88,107 62,022 70,827 ----------- ----------- ----------- Total long-term liabilities 346,646 520,076 398,939 ----------- ----------- ----------- Shareholders' Equity: Preference stock 9 9 9 Common stock $1.00 par value, 300,000 shares authorized; 178,611 shares, 171,779 shares and 172,470 shares issued, respectively (a) 178,611 137,423 172,470 Additional paid-in capital 283,156 258,843 226,528 Treasury stock at cost; 153 shares, 4,183 shares and 2,601 shares, respectively (a) (4,114) (73,617) (47,350) Retained earnings (b) 709,359 584,031 532,003 ESOP note receivable - (4,730) (3,500) Deferred compensation (12,079) (3,681) (13,003) Currency translation adjustments (b) (24,948) (39,781) (49,348) ----------- ----------- ----------- Total shareholders' equity 1,129,994 858,497 817,809 ----------- ----------- ----------- $ 2,785,630 $ 2,092,331 $ 2,000,077 =========== =========== =========== <FN> (a) Share data for September 1993 have been restated for the effects of the Fisher-Price merger and a five-for-four stock split distributed in January 1994. (b) Since December 26, 1987. See accompanying notes to consolidated financial information. 3 MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED RESULTS OF OPERATIONS For the For the Three Months Ended Nine Months Ended ---------------------- ---------------------- Sept. 30, Sept. 30, Sept. 30, Sept. 30, (In thousands, except per share amounts) 1994 1993 1994 1993 - ---------------------------------------- ---------- ---------- ---------- ---------- Net sales $1,037,082 $ 896,732 $2,174,616 $1,950,534 Cost of sales 508,122 442,797 1,093,047 998,816 ---------- ---------- ---------- ---------- Gross profit 528,960 453,935 1,081,569 951,718 Advertising and promotion expenses 161,298 139,392 326,938 291,271 Other selling and administrative expenses 140,601 128,882 376,006 352,031 Interest expense 18,274 16,913 37,887 45,051 Other expense, net 5,967 5,378 10,567 9,757 ---------- ---------- ---------- ---------- Income before income taxes and cumulative effect of changes in accounting principles 202,820 163,370 330,171 253,608 Provision for income taxes 71,000 58,714 117,200 89,702 ---------- ---------- ---------- ---------- Income before cumulative effect of changes in accounting principles 131,820 104,656 212,971 163,906 Cumulative effect of changes in accounting principles - - - (4,022) ---------- ---------- ---------- ---------- Net income 131,820 104,656 212,971 159,884 Preference stock dividend requirements 1,152 1,224 3,598 3,671 ---------- ---------- ---------- ---------- Net income applicable to common shares $ 130,668 $ 103,432 $ 209,373 $ 156,213 ========== ========== ========== ========== Income Per Common And Common Equivalent Share - Primary: - ----------------------------------------------- Income before cumulative effect of changes in accounting principles $ 0.72 $ 0.61 $ 1.17 $ 0.94 Cumulative effect of changes in accounting principles - - - (0.02) ---------- ---------- ---------- ---------- Net income per share $ 0.72 $ 0.61 $ 1.17 $ 0.91 ========== ========== ========== ========== Average number of common and common equivalent shares - primary 180,744 170,609 178,933 170,893 ========== ========== ========== ========== Income Per Common And Common Equivalent Share - Fully Diluted: - ----------------------------------------------- Income before cumulative effect of changes in accounting principles $ 0.72 $ 0.58 $ 1.15 $ 0.91 Cumulative effect of changes in accounting principles - - - (0.02) ---------- ---------- ---------- ---------- Net income per share $ 0.72 $ 0.58 $ 1.15 $ 0.89 ========== ========== ========== ========== Average number of common and common equivalent shares - fully diluted 182,312 180,336 182,228 180,969 ========== ========== ========== ========== Dividends declared per common share $ 0.06 $ 0.05 $ 0.18 $ 0.14 ========== ========== ========== ========== <FN> See accompanying notes to consolidated financial information. 4 MATTEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended ----------------------- Sept. 30, Sept. 30, (In thousands) 1994 1993 - -------------- ---------- ---------- Cash Flows Used for Operating Activities: - ----------------------------------------- Net income $ 212,971 $ 159,884 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 82,933 67,819 Cumulative effect of changes in accounting principles, net of tax - 4,022 Provision for lease termination, net - (40,320) (Increase) decrease in marketable securities (2,949) 164 (Increase) in receivables (599,392) (563,332) (Increase) in inventories (90,362) (42,176) (Increase) decrease in prepaid and other current assets (9,866) 8,488 Increase in payables, accrued liabilities and income taxes payable 100,491 105,075 Other, net 2,621 1,275 ---------- ---------- Net cash flows used for operating activities (303,553) (299,101) ---------- ---------- Cash Flows Used For Investing Activities: - ----------------------------------------- Purchases of tools, dies and molds (51,718) (46,604) Purchases of other property, plant and equipment (50,708) (25,591) Sales of other property, plant and equipment 7,897 9,318 Investments in acquired businesses (367,321) - Other, net 29 (370) ---------- ---------- Net cash flows used for investing activities (461,821) (63,247) ---------- ---------- Cash Flows From Financing Activities: - ------------------------------------- Notes payable, net 470,855 87,447 Issuance of 6-3/4% senior notes - 100,000 Redemption of Fisher-Price debt (120,629) - Long-term foreign borrowing (5,110) (23,967) Collection of ESOP note receivable 3,500 3,690 Payment of ESOP notes payable (3,500) (3,690) Tax benefit of employee stock options 25,538 3,734 Exercise of stock options 36,542 6,493 Purchase of treasury stock (26,249) (43,209) Dividends paid on common stock (29,441) (19,868) Dividends paid on preference stock (3,598) (3,671) Payment for tendered Fisher-Price warrants (4,891) - Other, net (2,057) (136) ---------- ---------- Net cash flows from financing activities 340,960 106,823 Effect of Exchange Rate Changes on Cash 4,526 (1,654) ---------- ---------- (Decrease) in Cash (419,888) (257,179) Cash at Beginning of Period 506,113 313,693 ---------- ---------- Cash at End of Period $ 86,225 $ 56,514 ========== ========== <FN> See accompanying notes to consolidated financial information. 5 MATTEL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL INFORMATION ------------------------------------------- 1. The accompanying unaudited consolidated financial statements and related disclosures have been prepared in accordance with generally accepted accounting principles applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position and interim results as of and for the periods presented have been included. Certain amounts in the financial statements for the period ending September 30, 1993 have been reclassified to conform with the current period's presentation. The financial information included herein should be read in conjunction with the Company's consolidated financial statements and related notes in its 1993 Annual Report to Shareholders. Because the Company's business is seasonal, results for interim periods are not necessarily indicative of those which may be expected for a full year. On November 30, 1993 the merger, accounted for as a pooling-of- interests, of Fisher-Price, Inc. into a wholly-owned subsidiary of the Company was completed. Accordingly, all financial information as of and for the period ended September 30, 1993 includes Fisher- Price. 2. On May 31, 1994, the Company acquired substantially all of the business assets and assumed the associated debts and liabilities of Kransco, a San Francisco-based designer, manufacturer and marketer of brand name recreational and sporting products, including POWER WHEELS battery-powered, ride-on vehicles, HULA HOOP and FRISBEE products marketed under the WHAM-O trademark, STREET JAM sporting goods, MOREY BOOGIE bodyboards and other watersport toys. The purchase price included initial cash consideration of $260.0 million, subject to adjustment for changes in net assets between December 31, 1993 and the closing date. Based on the audited closing date balance sheet, the adjusted consideration was $252.3 million. The asset purchase agreement also provides for future contingent consideration in the event that net sales of the POWER WHEELS product line reaches or exceeds certain levels in each of calendar years 1994, 1995 and 1996. The contingent consideration payable with respect to any year shall not exceed $8.6 million. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the results of operations of Kransco have been included in the Company's consolidated financial statements since the date of the acquisition. The excess of the purchase price over the estimated fair market value of net assets acquired was approximately $211 million, which is being amortized on a straight-line basis over 20 years. 6 The following summary presents unaudited pro forma operating results as though the asset purchase transaction had occurred at the beginning of 1994 and 1993, and includes adjustments for estimated amounts of goodwill amortization, depreciation of fixed assets at their estimated fair values, increases in interest expense assuming the initial purchase consideration had resulted in additional short-term borrowing during the periods presented, and the elimination of intercompany transactions. These pro forma data are for illustrative purposes only, and do not purport to be indicative of the actual results which would have occurred had the transaction been consummated as of those earlier dates, nor are they indicative of results of operations which may occur in the future. For the Nine Months Ended ------------------------- Sept. 30, Sept. 30, (In thousands, except per share amounts) 1994 1993 ---------------------------------------- ----------- ----------- Net sales $ 2,220,544 $ 2,062,820 ----------- ----------- Income before cumulative effect of accounting changes $ 209,394 $ 169,123 ----------- ----------- Net income $ 209,394 $ 165,101 =========== =========== Income Per Common Share - Primary --------------------------------- Income before cumulative effect of accounting changes $ 1.15 $ 0.97 ----------- ----------- Net income per share $ 1.15 $ 0.95 =========== =========== Income Per Common Share - Fully Diluted --------------------------------------- Income before cumulative effect of accounting changes $ 1.13 $ 0.94 ----------- ----------- Net income per share $ 1.13 $ 0.92 =========== =========== 3. In July 1994, the Company acquired a majority of the shares of J.W. Spear & Sons PLC ("Spear"), a company organized in the United Kingdom, that holds the rights to SCRABBLE in markets outside of the United States and Canada, and certain other games worldwide. Under the terms of the Company's offer, shareholders had the option to receive the purchase consideration of 11.5 pounds sterling per issued share in either cash, interest-bearing notes or in a combination of cash and notes. As of September 30, 1994, holders of 5,041,847 shares of Spear had elected the cash option, receiving 58.0 million pounds sterling, and holders of 319,335 shares had elected the notes. The acquisition, valued at approximately $95 million, has been accounted for using the purchase method of accounting and, accordingly, the results of operations of Spear have been included in the Company's consolidated financial statements since the date of acquisition. The excess of cost, including investment advisor and other directly related expenses, over the estimated fair market value of tangible net assets acquired, was approximately $90 million, which is being amortized on a straight-line basis over 20 years. 7 4. Accounts receivable are shown net of allowances for doubtful accounts of $22.7 million (September 30, 1994), $27.5 million (September 30, 1993) and $21.0 million (December 31, 1993). 5. Inventories are comprised of the following: Sept. 30, Sept. 30, Dec. 31, (In thousands) 1994 1993 1993 - -------------- --------- --------- --------- Raw materials and work in progress $ 71,017 $ 63,513 $ 50,927 Finished goods 289,724 213,310 169,066 --------- --------- --------- $ 360,741 $ 276,823 $ 219,993 ========= ========= ========= 6. Net cash flows from operating activities include cash payments for the following: For the Nine Months Ended -------------------------- Sept. 30, Sept. 30, (In thousands) 1994 1993 - -------------- ----------- ----------- Interest $ 32,427 $ 45,694 Income taxes 36,995 28,078 7. As discussed in Note 5 to the Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders, on February 9, 1994, a notice of redemption was issued to holders of the Company's 8% Debentures. During the first quarter of 1994, the remaining outstanding 8% Debentures were converted by the holders resulting in the issuance of an aggregate of 5,897,258 shares of common stock. 8. As discussed in Note 5 to the Consolidated Financial Statements in the Company's 1993 Annual Report to Shareholders, the warrants assumed by the Company in connection with the Fisher-Price merger permitted holders, upon such a change of control, to surrender their warrants for an amount in cash at any time during the six- month period from the merger date. During June 1994, a holder of 288,653 warrants elected the cash option and received $4.9 million. 9. In the current quarter, the Board of Directors declared cash dividends of $0.06 per common share, compared to $0.05 per common share in the third quarter of 1993. Additionally, cash dividends of $1.333 per Series F preference share were declared, which includes participating common dividends of $0.06 per share. 10. Share and per share data presented in these financial statements reflect the retroactive effects of the Fisher-Price merger and the five-for-four stock split distributed in January 1994. 8 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 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 purchases 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. 11. The Company filed a shelf registration statement, which was declared effective on September 1, 1994, for the issuance from time to time of up to $250.0 million of debt securities. On September 19, 1994, the Company commenced a program for the issuance, pursuant to such shelf registration, of up to $250.0 million of Series A Medium-Term Notes. The notes are issuable in one or more series and can be denominated in U.S. dollars or other specified currencies. The notes will bear interest at either fixed or variable rates, as determined at the time of issuance, and have maturity dates of greater than nine months. As of October 17, 1994, the Company issued an aggregate of $30.0 million principal amount of Series A Medium-Term Notes maturing on various dates in October 1999. Interest is payable semiannually at the rate of 8% per annum on the fifteenth day of May and November, beginning on November 15, 1994. The net proceeds of these issuances were used to repay short-term borrowings. 9 MATTEL, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION --------------------------------------------- Mattel, Inc. (the "Company") designs, manufactures, markets and distributes a broad variety of toy products on a worldwide basis. The Company's business is dependent in great part on its ability each year to redesign, restyle and extend existing core products and product lines and to design and develop innovative new toys and product lines. New products have limited lives, ranging from one to three years, and generally must be updated and refreshed each year. Core brands which historically have provided the Company with relatively stable growth include BARBIE dolls, doll clothes and accessories, FISHER-PRICE toys and juvenile products, Disney-licensed toys, die-cast vehicles including HOT WHEELS, large dolls, preschool toys including SEE 'N' SAY toys, and the UNO and SKIP-BO card games. The Company's acquisitions of Kransco and Spear in May and July 1994, respectively, have provided Mattel with additional core consumer franchises represented by the POWER WHEELS line of battery-powered, ride-on vehicles and the rights to the SCRABBLE game in certain markets outside of the U.S. and Canada. RESULTS OF OPERATIONS --------------------- The Company's business is seasonal, and, therefore, results of operations are comparable only with corresponding periods. Following is a percentage analysis of operating results: For the For the Three Months Ended Nine Months Ended ------------------------ ------------------------ Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Net Sales 100% 100% 100% 100% =========== =========== =========== =========== Gross Profit 51% 50% 50% 49% Advertising and promotion expenses 16 16 15 15 Other selling and administrative expenses 14 14 18 19 ----------- ----------- ----------- ----------- Operating Profit 21 20 17 15 Interest expense 1 2 2 2 ----------- ----------- ----------- ----------- Income before income taxes and cumulative effect of changes in accounting principles 20% 18% 15% 13% =========== =========== =========== =========== Third Quarter - ------------- Net sales in the third quarter of 1994 increased $140.4 million or 16% over the 1993 third quarter. The current quarter's performance reflects the continuing strong demand for toys introduced in connection with the release of "The Lion King" motion picture, as well as sales of POLLY POCKET toys, and NICKELODEON-licensed products. Additional volume was added by sales of Kransco products, the most significant of which was POWER WHEELS, and Spear products. 10 Worldwide sales of core products represented 84% of the Company's third quarter gross revenues, compared to 88% in 1993. This decrease was primarily the result of strong sales of the Company's non-core product lines which include its POLLY POCKET toys and NICKELODEON-licensed products. Sales to customers within the United States represented 61% of consolidated revenues in both the 1994 and 1993 third quarters. Sales to customers within the United States increased 15% over the 1993 third quarter, while sales internationally increased 16%. At comparable foreign currency exchange rates, international sales grew 11%, which reflects a $16.4 million favorable effect of the weakening U.S. dollar relative to the year-ago quarter. Gross profit as a percentage of net sales increased to 51% as a result of higher sales volumes and lower direct product costs which were partially offset by increases in manufacturing and distribution overhead expenses and royalty expenses related to sales of licensed products. Advertising and promotion expenses increased $21.9 million in support of the increased sales volume, but remained constant at 16% of net sales in both 1994 and 1993. As a percentage of net sales, other selling and administrative expenses also remained at 14%. Interest expense increased 8% compared to the third quarter of 1993, mainly due to an increase in short-term borrowing to meet seasonal working capital needs and to finance portions of the Kransco and Spear acquisitions. This increase was partially offset by a reduction in long- term interest expense following prepayment of Fisher-Price's 10.69% term loan and conversions of 8% Debentures to common stock, both of which were completed during the first quarter of 1994. Nine Months - ----------- Net sales increased $224.1 million or 11% over 1993, reflecting continued worldwide demand for the Company's core products, including toys introduced in connection with the release of "The Lion King" motion picture, and sales of POWER WHEELS vehicles. In addition to increased core product sales, incremental volume was contributed by robust sales of POLLY POCKET toys. Worldwide core product sales accounted for 84% of total sales compared to 86% in 1993. Sales to customers within the United States increased 11% and accounted for 61% of consolidated sales in both 1993 and 1994. Sales to customers outside the United States increased 12%, both at actual and comparable foreign currency exchange rates, which reflects the $4.8 million favorable effect of the weakening U.S. dollar relative to the year-ago period. As a percentage of net sales, gross profit increased to 50% as compared to 49% in 1993. Gross profit increased $129.9 million or 14% over 1993, primarily due to increased sales volume and a favorable product mix. Advertising and promotion expenses, as a percentage of net sales, remained constant at 15%; however, spending increased $35.7 million in support of the growth in sales volume. As a percentage of net sales, other selling and administrative expenses decreased one percentage point to 18%, reflecting efficiencies realized from the integration of Fisher- Price. 11 Interest expense decreased $7.2 million or 16% from 1993 levels as a result of the prepayment of Fisher-Price's 10.69% term loan and conversions of 8% Debentures to common stock, partially offset by increases in short-term borrowing to finance working capital requirements and portions of the Kransco and Spear acquisitions. Results of operations for 1993 reflect a $4.0 million charge which represented the net cumulative effect of changes in accounting principles adopted as of January 1, 1993; a $20.0 million charge, net of related income tax effects of $11.6 million, arising in connection with the adoption of Statement of Financial Accounting Standards No. 106 which was partially offset by a $16.0 million credit related to the adoption of Statement No. 109. FINANCIAL CONDITION ------------------- The Company's continuing financial strength reflects its consistent focus on asset management and advantageous utilization of financial resources. Cash as of September 30, 1994 was $29.7 million higher than the year-ago quarter. The $416.9 million decrease in cash balances since December 31, 1993 primarily reflects the acquisitions of Kransco and Spear, the retirement of approximately $20 million of Kransco's short-term borrowing which had been assumed by the Company, the prepayment of Fisher-Price's 10.69% term loan, and reductions of year- end accrued liabilities, including approximately $74 million of integration and restructuring costs relating to the Fisher-Price merger. Accounts receivable increased $671.4 million since year end and $157.2 million over the year-ago quarter, reflecting increased sales volumes during the current year and the addition of Kransco and Spear receivables totaling $88.4 million. Inventory balances increased $140.7 million since year end and $83.9 million over the 1993 quarter end, which includes a combined $38.6 million increase for Kransco and Spear inventories acquired and the Company's production in support of future sales volumes, partially offset by the effect of inventory control programs. Other noncurrent assets increased $314.1 million over the year-ago quarter, primarily as a result of goodwill arising in connection with the Kransco and Spear acquisitions, and an increase of $15.0 million in deferred tax assets, partially reduced by the amortization of intangible assets. Short-term bank borrowing increased $376.2 million compared to the 1993 quarter end and $477.6 million since year end, in order to fund the Company's seasonal working capital requirements and finance a portion of the Kransco and Spear transactions. Seasonal financing needs for the next twelve months are expected to be satisfied through internally generated cash, issuances of commercial paper, the Company's various short-term bank lines of credit and, from time to time, issuance of the Company's Series A Medium-Term Notes. 12 Details of the Company's capitalization are as follows: (In millions) Sept. 30, 1994 Sept. 30, 1993 Dec. 31, 1993 - ------------- ---------------------------------------------- 6-7/8% Senior notes $ 99.5 7% $ 99.4 7% $ 99.5 8% 6-3/4% Senior notes 100.0 7 100.0 7 100.0 8 8% Convertible subordinated debentures - - 97.7 7 74.0 6 Fisher-Price term loan - - 98.7 7 - - Mortgage note 45.0 3 45.0 4 45.0 4 Economic development bonds 9.7 1 - - - - Term loans 4.3 - 17.3 1 9.6 1 ----------------------------------------------- Total long-term debt 258.5 18 458.1 33 328.1 27 Other long-term liabilities 88.1 6 62.0 5 70.8 6 Shareholders' equity 1,130.0 76 858.5 62 817.8 67 ---------------------------------------------- $1,476.6 100% $1,378.6 100% $1,216.7 100% ============================================== In connection with the Kransco acquisition, the Company assumed debt secured by a manufacturing facility in Ft. Wayne, Indiana. Interest on the debt, consisting of $10.0 million outstanding principal amount of County of Allen Variable Rate Demand Economic Development Revenue Bonds, is charged at rates reset monthly (3.85% in September 1994). Principal payments are $300,000 annually, commencing in 1994 and continuing through 2018. Total long-term debt decreased as a percentage of total capitalization compared to the year-ago quarter, primarily due to prepayment of the Fisher-Price term loan and conversions of the 8% Debentures into shares of the Company's common stock. Shareholders' equity increased $312.2 million since December 31, 1993 and $271.5 million over the 1993 third quarter principally as a result of the Company's profitable operating results, favorable currency translation impact, conversions of the 8% Debentures and exercises of employee stock options, partially offset by treasury share purchases and dividends declared to common and preference shareholders. 13 PART II -- OTHER INFORMATION ---------------------------- Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits -------- 2.1 Agreement and Plan of Merger, dated as of August 19, 1993, by and among the Company, MAT Acquisition, Inc. and Fisher-Price, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-4, Registration Statement No. 33-50749) 2.2 Amended and Restated Asset Purchase Agreement, dated as of March 26, 1994 and amended and restated as of May 15, 1994, by and between Kransco and Mattel, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated May 31, 1994) 11.0 Computation of Income Per Common and Common Equivalent Share 27.0 Financial Data Schedule (b) Reports on Form 8-K ------------------- Mattel, Inc. filed the following Current Reports on Form 8-K during the quarterly period ended September 30, 1994: Financial Form Date of Report Items Reported Statements Filed ----- ---------------- -------------- ---------------- 8-K July 21, 1994 5, 7 None 8-K July 22, 1994 5, 7 None 8-K July 29, 1994 5 None 8-K Sept. 19, 1994 7 None 14 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 October 26, 1994 By: /s/ Michael G. McCafferty ---------------------- ------------------------- Michael G. McCafferty Executive Vice President and Chief Financial Officer 15