Mattel 2014 Annual Report Download - page 102

The estimated fair value of Mattel’s long-term debt, including the current portion, was $2.18 billion
(compared to a carrying value of $2.10 billion) as of December 31, 2014 and $1.62 billion (compared to a
carrying value of $1.60 billion) as of December 31, 2013. The estimated fair values have been calculated based
on broker quotes or rates for the same or similar instruments and are classified as Level 2 within the fair value
hierarchy.
Note 11—Commitments and Contingencies
Leases
Mattel routinely enters into noncancelable lease agreements for premises and equipment used in the normal
course of business. Certain of these leases include escalation clauses that adjust rental expense to reflect changes
in price indices, as well as renewal options. In addition to minimum rental payments, certain of Mattel’s leases
require additional payments to reimburse the lessors for operating expenses such as real estate taxes,
maintenance, utilities, and insurance. Rental expense is recorded on a straight-line basis, including escalating
minimum payments. The American Girl Place leases in Chicago, Illinois, Los Angeles, California, and New
York, New York, and American Girl store leases in Alpharetta, Georgia, Bloomington, Minnesota, Charlotte,
North Carolina, Chesterfield, Missouri, Columbus, Ohio, Dallas, Texas, Houston, Texas, Lone Tree, Colorado,
Lynnwood, Washington, McLean, Virginia, Miami, Florida, Nashville, Tennessee, Natick, Massachusetts,
Orlando, Florida, Overland Park, Kansas, Palo Alto, California, and Scottsdale, Arizona also contain provisions
for additional rental payments based on a percentage of the sales of each store after reaching certain sales
benchmarks. Contingent rental expense is recorded in the period in which the contingent event becomes
probable. During 2014, 2013, and 2012, contingent rental expense was not material. The following table shows
the future minimum obligations under lease commitments in effect at December 31, 2014:
Capital
Leases
Operating
Leases
(In thousands)
2015 ................................................................... $ 294 $113,756
2016 ................................................................... 294 93,917
2017 ................................................................... 294 73,299
2018 ................................................................... 294 54,503
2019 ................................................................... 294 40,179
Thereafter .............................................................. 25 143,856
$ 1,495(a) $519,510
(a) Includes $0.3 million of imputed interest.
Rental expense under operating leases amounted to $120.9 million, $111.0 million, and $116.5 million for
2014, 2013, and 2012, respectively, net of sublease income of $2.6 million, $0.9 million, and $0.9 million in
2014, 2013, and 2012, respectively.
Commitments
In the normal course of business, Mattel enters into contractual arrangements to obtain and protect Mattel’s
right to create and market certain products and for future purchases of goods and services to ensure availability
and timely delivery. Such arrangements include royalty payments pursuant to licensing agreements and
commitments primarily for future inventory purchases. 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.
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