SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: March 4, 1997
MATTEL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 001-05647 95-1567322
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File No.) Identification No.)
333 Continental Boulevard, El Segundo, California 90245-5012
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 252-2000
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N/A
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(Former name or former address, if changed since last report)
1
Item 5. Other Events
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In connection with the Registration Statement on Form S-3 (No. 333-01307) of
Mattel, Inc. ("Mattel" or the "Company") pertaining to the issuance of up to
$350,000,000 in aggregate amount of various types of the Company's securities
(the "Securities"), the Company is hereby providing the following information
for incorporation by reference into such registration statement:
(1) The following table sets forth the Company's unaudited ratios of earnings to
fixed charges and earnings to combined fixed charges and preferred stock
dividends for the periods indicated.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,(a)
--------------------------------------- ---------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------- ------- ------- ------- -------
Ratio of earnings to fixed
charges(b)(c)......................... 7.01 6.89 7.01 6.88 4.20 4.51 4.00
Ratio of earnings to combined fixed
charges and preferred stock
dividends(b)(c)....................... 7.01 6.54 6.76 6.43 3.94 4.25 3.71
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(a) The consolidated ratios of earnings to fixed charges and earnings to
combined fixed charges and preferred stock dividends for 1993, 1992 and
1991 have 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. Fisher-Price, Inc. was excluded
from periods prior to July 1, 1991, while its business was operated as a
division of The Quaker Oats Company.
(b) The ratio of earnings to fixed charges is computed by dividing income
before taxes, extraordinary items, cumulative effect of changes in
accounting principles, fixed charges, minority interest and undistributed
income of less-than-majority-owned affiliates (as used in this footnote
(b), "earnings") by fixed charges. Fixed charges are the sum of interest
costs (whether expensed or capitalized) and the portion of aggregate
rental expense (one-third) which is estimated to represent the interest
factor in such rentals. The ratio of earnings to combined fixed charges
and preferred stock dividends is computed by dividing earnings by the sum
of fixed charges plus dividends on the Company's outstanding shares of
preferred stock during the indicated period. As of the date hereof, the
Company has no outstanding shares of preferred stock.
(c) Until July 1, 1991, the Company was a guarantor of certain foreign bank
lines of credit extended to less-than-majority-owned joint ventures.
Performance by the Company pursuant to these guarantees was deemed
unlikely; thus the associated fixed charges have been excluded from
computation of the ratios of earnings to fixed charges and earnings to
combined fixed charges and preferred stock dividends. The portion of fixed
charges paid by less-than-majority-owned joint ventures for which the
Company was guarantor was approximately $4.5 million in 1991.
(2) The validity of the Securities will be passed upon for the Company by Irell
& Manella LLP, Los Angeles, California. Ronald M. Loeb, a partner of the law
firm of Irell & Manella LLP, is a Director of the Company and is the record
owner of 83,795 shares of Common Stock and has options to acquire up to 15,000
shares of Common Stock, all of which options are fully vested.
2
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Businesses Acquired.
None.
(b) Pro Forma Financial Information.
On November 17, 1996, the Company entered into an Agreement and Plan of Merger
(as amended to date, the "Merger Agreement") with Tyco Toys, Inc., a Delaware
corporation ("Tyco"), and Truck Acquisition Corp., a Delaware corporation,
pursuant to which the Company intends to acquire Tyco by way of a merger (the
"Merger"). The following unaudited pro forma condensed combined financial
statements give effect to the Merger under the pooling of interests method of
accounting. These pro forma financial statements are presented for illustrative
purposes only, and therefore are not necessarily indicative of the operating
results and financial position that might have been achieved had the Merger
occurred as of an earlier date, nor are they necessarily indicative of operating
results and financial position which may occur in the future.
A pro forma condensed combined balance sheet is provided as of September 30,
1996, giving effect to the Merger as though it had been consummated on that
date. Pro forma condensed combined income statements are provided for the
nine-month periods ended September 30, 1995 and 1996, and the years ended
December 31, 1993, 1994, and 1995, giving effect to the Merger as though it had
occurred at the beginning of the earliest period presented.
The condensed historical statements of income for annual periods are derived
from the historical consolidated financial statements of Mattel and Tyco, and
should be read in conjunction with the companies' separate 1995 Annual Reports
on Form 10-K filed with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The historical financial statements of Mattel as of or for the
nine months ended September 30, 1995 and 1996 have been prepared in accordance
with generally accepted accounting principles consistently applied ("GAAP")
applicable to interim financial information and, in the opinion of Mattel's
management, include all adjustments necessary for a fair presentation of
financial information for such interim periods. To the knowledge of Mattel, the
historical financial statements of Tyco as of and for the nine months ended
September 30, 1995 and 1996 have been prepared in accordance with GAAP
applicable to interim financial information and include all adjustments
necessary for a fair presentation of financial information for such interim
periods.
3
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
HISTORICAL PRO FORMA
--------------- ----------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS)
ASSETS
Current Assets:
Cash, cash equivalents and marketable
securities............................ $ 97.1 $ 29.8 $ 0.6 (a) $ 127.5
Accounts receivable, net............... 1,232.9 319.4 -- 1,552.3
Inventories............................ 477.6 89.1 -- 566.7
Prepaid expenses and other current
assets................................ 205.0 35.6 (2.1)(b) 238.5
-------- ------ ------ --------
Total current assets................. 2,012.6 473.9 (1.5) 2,485.0
-------- ------ ------ --------
Property, plant and equipment, net....... 562.5 31.7 -- 594.2
Other noncurrent assets.................. 511.2 273.5 7.0 (c) 791.7
-------- ------ ------ --------
Total Assets......................... $3,086.3 $779.1 $ 5.5 $3,870.9
======== ====== ====== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings and current
portion of long-term liabilities...... $ 423.3 $106.2 $(83.8)(d) $ 445.7
Accounts payable, accrued liabilities
and income taxes payable.............. 832.4 170.4 39.8 (e) 1,042.6
-------- ------ ------ --------
Total current liabilities............ 1,255.7 276.6 (44.0) 1,488.3
-------- ------ ------ --------
Medium-Term notes........................ 220.0 -- -- 220.0
Senior subordinated notes................ -- 126.5 -- 126.5
6-3/4% senior notes due 2000............. 100.0 -- -- 100.0
Other long-term debt..................... 55.2 20.6 -- 75.8
Other long-term liabilities.............. 105.6 2.0 -- 107.6
Shareholders' equity..................... 1,349.8 353.4 49.5 (f) 1,752.7
-------- ------ ------ --------
Total Liabilities and Shareholders'
Equity.............................. $3,086.3 $779.1 $ 5.5 $3,870.9
======== ====== ====== ========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
4
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
HISTORICAL PRO FORMA
---------------- ----------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Net Sales........................... $2,483.5 $494.0 $ -- $2,977.5
Cost of sales..................... 1,274.8 285.5 25.9 (g) 1,586.2
-------- ------ ------ --------
Gross Profit........................ 1,208.7 208.5 (25.9) 1,391.3
Advertising and promotion
expenses......................... 367.7 109.5 (24.1)(g) 453.1
Other selling and administrative
expenses......................... 432.8 87.5 (1.8)(g) 518.5
Interest expense.................. 51.8 20.4 -- 72.2
Restructuring and integration
charges.......................... -- 4.9 -- 4.9
Other (income) expense, net....... (13.2) 1.0 -- (12.2)
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions Before Income Taxes.......... 369.6 (14.8) -- 354.8
Provision (benefit) for income tax-
es................................. 123.8 (4.9) (2.7)(h) 116.2
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions.............................. 245.8 (9.9) 2.7 238.6
Preference stock dividend require-
ments.............................. 3.3 2.4 -- 5.7
-------- ------ ------ --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares............................. $ 242.5 $(12.3) $ 2.7 $ 232.9
======== ====== ====== ========
Income (Loss) Per Share from
Continuing Operations(i)........... $ 0.86 $(0.35) $ 0.79
======== ====== ========
Average number of common and common
equivalent shares outstanding(i)... 281.0 34.8 296.1
======== ====== ========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
5
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
HISTORICAL PRO FORMA
--------------- ----------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Net Sales............................. $2,595.4 $492.7 $ -- $3,088.1
Cost of sales....................... 1,291.8 278.2 23.7 (g) 1,593.7
-------- ------ ------ --------
Gross Profit.......................... 1,303.6 214.5 (23.7) 1,494.4
Advertising and promotion expenses.. 369.9 110.3 (23.4)(g) 456.8
Other selling and administrative ex-
penses............................. 471.1 84.4 (0.3)(g) 555.2
Interest expense.................... 52.5 17.1 -- 69.6
Other expense, net.................. 18.7 4.5 -- 23.2
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions Before Income Taxes............ 391.4 (1.8) -- 389.6
Provision (benefit) for income tax-
es................................. 127.2 (0.4) -- 126.8
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions................................ 264.2 (1.4) -- 262.8
Preference stock dividend require-
ments.............................. -- 4.6 -- 4.6
-------- ------ ------ --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares............................... $ 264.2 $ (6.0) $ -- $ 258.2
======== ====== ====== ========
Income (Loss) Per Share from Continu-
ing Operations(i).................... $ 0.95 $(0.17) $ 0.87
======== ====== ========
Average number of common and common
equivalent shares outstanding(i)..... 279.4 34.8 295.1
======== ====== ========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
6
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
HISTORICAL PRO FORMA
--------------- ----------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Net Sales............................. $2,704.4 $730.2 $ -- $3,434.6
Cost of sales....................... 1,378.2 436.7 38.6 (g) 1,853.5
-------- ------ ------ --------
Gross Profit.......................... 1,326.2 293.5 (38.6) 1,581.1
Advertising and promotion expenses.. 426.7 180.8 (42.1)(g) 565.4
Other selling and administrative ex-
penses............................. 473.4 134.9 3.5 (g) 611.8
Interest expense.................... 62.6 23.5 -- 86.1
Restructuring and integration
charges............................ 115.0 28.2 -- 143.2
Other expense, net.................. 11.9 9.4 -- 21.3
-------- ------ ------ --------
Income (Loss) from Continuing
Operations Before Income Taxes....... 236.6 (83.3) -- 153.3
Provision (benefit) for income tax-
es................................. 100.7 (13.4) (0.7)(h) 86.6
-------- ------ ------ --------
Income (Loss) from Continuing Opera-
tions................................ 135.9 (69.9) 0.7 66.7
Preference stock dividend require-
ments.............................. 4.9 -- -- 4.9
-------- ------ ------ --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares............................... $ 131.0 $(69.9) $ 0.7 $ 61.8
======== ====== ====== ========
Income (Loss) Per Share from Continu-
ing Operations(i).................... $ 0.49 $(2.08) $ 0.22
======== ====== ========
Average number of common and common
equivalent shares outstanding(i)..... 267.5 33.6 282.1
======== ====== ========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
HISTORICAL PRO FORMA
--------------- ---------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Net Sales.............................. $3,205.0 $753.1 $ -- $3,958.1
Cost of sales........................ 1,603.5 445.4 41.3 (g) 2,090.2
-------- ------ ----- --------
Gross Profit........................... 1,601.5 307.7 (41.3) 1,867.9
Advertising and promotion expenses... 516.5 172.5 (32.9)(g) 656.1
Other selling and administrative ex-
penses.............................. 536.4 123.6 (8.4)(g) 651.6
Interest expense..................... 55.5 30.9 -- 86.4
Restructuring and integration
charges............................. 72.0 4.7 -- 76.7
Other expense, net................... 27.5 7.5 -- 35.0
-------- ------ ----- --------
Income (Loss) from Continuing Opera-
tions Before Income Taxes............. 393.6 (31.5) -- 362.1
Provision for income taxes........... 137.8 1.5 (3.6)(h) 135.7
-------- ------ ----- --------
Income (Loss) from Continuing Opera-
tions................................. 255.8 (33.0) 3.6 226.4
Preference stock dividend require-
ments............................... 4.7 2.1 -- 6.8
-------- ------ ----- --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares................................ $ 251.1 $(35.1) $ 3.6 $ 219.6
======== ====== ===== ========
Income (Loss) Per Share from Continuing
Operations(i)......................... $ 0.90 $(1.01) $ 0.74
======== ====== ========
Average number of common and common
equivalent shares outstanding(i)...... 279.9 34.7 295.0
======== ====== ========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
8
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
HISTORICAL PRO FORMA
---------------- ---------------------
MATTEL TYCO ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Net Sales............................ $3,638.8 $709.1 $ -- $4,347.9
Cost of sales...................... 1,849.6 416.2 36.2 (g) 2,302.0
-------- ------ ----- --------
Gross Profit......................... 1,789.2 292.9 (36.2) 2,045.9
Advertising and promotion ex-
penses............................ 584.5 160.8 (32.4)(g) 712.9
Other selling and administrative
expenses.......................... 603.1 119.1 (3.8)(g) 718.4
Interest expense................... 73.6 28.0 -- 101.6
Restructuring and integration
charges........................... -- 8.9 -- 8.9
Other (income) expense, net........ (4.9) 4.3 -- (0.6)
-------- ------ ----- --------
Income (Loss) from Continuing Opera-
tions Before Income Taxes........... 532.9 (28.2) -- 504.7
Provision (benefit) for income tax-
es................................ 175.1 (1.0) (4.1)(h) 170.0
-------- ------ ----- --------
Income (Loss) from Continuing Opera-
tions............................... 357.8 (27.2) 4.1 334.7
Preference stock dividend require-
ments............................. 3.3 3.2 -- 6.5
-------- ------ ----- --------
Income (Loss) from Continuing
Operations Applicable to Common
Shares.............................. $ 354.5 $(30.4) $ 4.1 $ 328.2
======== ====== ===== ========
Income (Loss) Per Share from Continu-
ing Operations(i)................... $ 1.26 $(0.87) $ 1.11
======== ====== ========
Average number of common and common
equivalent shares outstanding(i).... 281.0 34.8 296.1
======== ====== ========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
9
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial statements are
presented for illustrative purposes only, giving effect to the Merger of
Mattel and Tyco as accounted for by the pooling of interests method. In
accordance with Commission reporting rules, the pro forma condensed combined
statements of income, and the historical statements from which they are
derived, present only income from continuing operations and, therefore, do not
include discontinued operations, extraordinary items and the cumulative
effects of accounting changes.
Because the Merger has not been completed, costs of the Merger can only be
estimated at this time. The pro forma condensed combined statement of income for
the nine months ended September 30, 1996 excludes: (i) the positive effects of
potential cost savings which may be achieved upon combining the resources of the
companies; (ii) transaction costs of approximately $60 to $70 million, including
investment banking, legal and accounting fees, and contractual termination and
incentive benefits. Additionally, Mattel expects to restructure the combined
operations, resulting in additional nonrecurring charges. The amount of such
charges cannot be reasonably estimated until an analysis of the newly combined
operations is completed and a restructuring plan developed.
The pro forma condensed combined balance sheet as of September 30, 1996
includes, in accordance with Commission reporting rules, the impact of all
transactions, whether of a recurring or nonrecurring nature, that can be
reasonably estimated and should be reflected as of that date.
2. PRO FORMA ADJUSTMENTS
Intercompany Transactions--There were no intercompany transactions which
required elimination from the pro forma combined operating results or balance
sheet.
(a) Cash--Cash has been adjusted to reflect the issuance of 3.0 million shares
of the common stock, $1.00 par value, of Mattel ("Mattel Common Stock") to an
independent third party prior to the consummation date of the Merger, and the
prepayment of certain Tyco short-term borrowings (including the related
prepayment fee).
(b) Prepaid Expenses and Other Current Assets--Current assets have been
adjusted to reflect the write-off of the current portion of Tyco's capitalized
debt issuance costs related to certain short-term borrowings that will be
prepaid.
(c) Other Noncurrent Assets--The combined pro forma financial information
has been adjusted to reflect the write-off of the noncurrent portion of Tyco's
capitalized debt issuance cost related to certain short-term borrowings that
will be prepaid, and recognition of tax benefits relating to certain foreign
net operating losses of Tyco.
(d) Short-term Borrowings--Borrowings have been adjusted to reflect the
prepayment of certain Tyco short-term borrowings.
(e) Accounts Payable, Accrued Liabilities, and Income Taxes Payable--The pro
forma adjustment principally reflects $45 million, net of related taxes, for
the minimum of the estimated range for transaction costs related to the
Merger.
(f) Shareholders' Equity--Shareholders' equity has been adjusted to reflect
the following:
--Common stock accounts are adjusted for the assumed issuance of
approximately 15.6 million shares of Mattel Common Stock in exchange for
approximately 34.8 million shares of the common stock, par value $.01 per
share, of Tyco ("Tyco Common Stock") outstanding as of September 30, 1996,
utilizing, for purposes of this analysis, an exchange ratio estimated to be
0.43459 shares of Mattel Common Stock for each one share of Tyco Common Stock
(the "Estimated Exchange Ratio"). Additionally, adjustments reflect conversion
into Mattel Common Stock of all options to acquire Tyco Common Stock issued
under Tyco's 1992 Non-Qualified Stock Option Plan ("Tyco Stock Options") and
all deferred restricted stock units issued under Tyco's Deferred Stock Unit
Plan ("Tyco Restricted Stock Units"). The number of shares of Mattel Common
Stock to be issued at consummation of the Merger will be based upon the actual
number of shares of Tyco Common Stock outstanding at that time and the actual
exchange ratio (determined in accordance with the terms of the Merger
Agreement).
10
--Additional paid-in capital is adjusted for the effects of: (i) issuance
of shares of Mattel Common Stock having a par value of $1.00 per share in
exchange for Tyco Common Stock having a par value of $0.01 per share; (ii)
cancellation of approximately 0.2 million shares of Tyco Common Stock held
in treasury as of September 30, 1996; (iii) the issuance of 0.5 million
shares of Mattel Common Stock for the Tyco Stock Options and Restricted
Stock Units; (iv) the issuance of 3.0 million shares of Mattel Common Stock
from its treasury to an independent third party prior to the consummation date
of the Merger; and (v) conversion of Tyco's Series B Voting Convertible
Exchangeable Preferred Stock and Tyco's Series C Mandatorily Convertible
Redeemable Preferred Stock, each having a par value of $.10 per share, into
equivalent shares of Mattel's Series B Preferred Stock and Mattel's Series C
Mandatorily Convertible Redeemable Preferred Stock, each having a par value of
$1.00 per share.
--Retained earnings is adjusted for the effects of: (i) accrual for the
minimum of the estimated range for transaction costs related to the Merger;
(ii) compensation expense related to the Tyco Restricted Stock Units; (iii)
write-off of Tyco's debt issuance costs and a prepayment fee related to
certain short-term borrowings; and (iv) recognition of tax benefits
relating to certain foreign net operating losses of Tyco.
(g) Pro Forma Combined Statement of Income--Certain reclassifications have
been made to conform Tyco's reporting of cost of sales, advertising and
promotion, and selling and administration expenses to that of Mattel.
(h) Provision (Benefit) for Income Taxes--The pro forma financial adjustment
reflects the reduction of valuation allowances established in the historical
financial statements of Tyco, resulting in the recognition of benefits of
losses incurred by certain foreign affiliates in the pro forma combined
financial statements.
(i) Income per Common Share--Historical and pro forma per share data of the
companies include the retroactive effect of the November 1993 merger of
Fisher-Price, Inc. into a wholly owned subsidiary of Mattel, accounted for as a
pooling of interests. Pro forma weighted-average common shares outstanding for
all periods presented are based upon Mattel's and Tyco's combined historical
weighted-average shares, after adjustment of Tyco's historical number of
shares by the Estimated Exchange Ratio.
11
(c) Exhibits:
Exhibit 12 Statement Re: Computation of Ratios of Earnings to
Fixed Charges and Earnings to Combined Fixed Charges
and Preferred Stock Dividends
12
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MATTEL, INC.
Registrant
By: /s/ Leland P. Smith
-------------------------
Leland P. Smith
Assistant Secretary and
Date: March 4, 1997 Assistant General Counsel
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