Mattel 2012 Annual Report Download - page 21

Mattel customarily seeks trademark, copyright, and patent protection covering its products, and it owns or
has applications pending for US and foreign trademarks, copyrights, and patents covering many of its products. A
number of these trademarks, copyrights, and patents relate to product lines that are significant to Mattel’s
business and operations. Mattel believes its rights to these properties are adequately protected, but there can be
no assurance that its rights can be successfully asserted in the future or will not be invalidated, circumvented, or
challenged.
Commitments
In the normal course of business, Mattel enters into contractual arrangements for future purchases of goods
and services to ensure availability and timely delivery and to obtain and protect Mattel’s right to create and
market certain products. Certain of these commitments routinely contain provisions for guarantees or minimum
expenditures during the term of the contracts. Current and future commitments for guaranteed payments reflect
Mattel’s focus on expanding its product lines through alliances with businesses in other industries. Additionally,
Mattel routinely enters into noncancelable lease agreements for premises and equipment used in the normal
course of business.
Purchase and service agreements with terms extending through 2016 contain future minimum payments
totaling approximately $394 million. Licensing and similar agreements with terms extending through 2017 and
beyond contain provisions for future guaranteed minimum payments totaling approximately $203 million.
Operating lease commitments with terms extending through 2017 and beyond contain future minimum
obligations totaling approximately $510 million. See Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Commitments” and Item 8 “Financial Statements and
Supplementary Data—Note 11 to the Consolidated Financial Statements—Commitments and Contingencies.”
Backlog
Mattel ships products in accordance with delivery schedules specified by its customers, which usually
request delivery within three months. In the toy industry, orders are subject to cancellation or change at any time
prior to shipment. In recent years, a trend toward just-in-time inventory practices in the toy industry has resulted
in fewer advance orders and therefore less backlog of orders. Mattel believes that the amount of backlog orders at
any given time may not accurately indicate future sales.
Financial Instruments
Currency exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Mattel seeks
to mitigate its exposure to market risk by monitoring its foreign currency transaction exposure for the year and
partially hedging such exposure using foreign currency forward exchange contracts primarily to hedge its
purchase and sale of inventory and other intercompany transactions denominated in foreign currencies. These
contracts generally have maturity dates of up to 18 months. In addition, Mattel manages its exposure to currency
exchange rate fluctuations through the selection of currencies used for international borrowings. Mattel does not
trade in financial instruments for speculative purposes.
For additional information regarding foreign currency contracts, see “International Segment” above,
Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” and Item 8 “Financial Statements and
Supplementary Data—Note 9 to the Consolidated Financial Statements—Derivative Instruments.”
Seasonal Financing
See Item 8 “Financial Statements and Supplementary Data—Note 5 to the Consolidated Financial
Statements—Seasonal Financing and Debt.”
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