Mattel 2014 Annual Report Download - page 15

Mattel’s license agreement with Disney Enterprises, Inc. for the global rights to produce and sell toys based
on Disney Princess characters is scheduled to expire at the end of 2015 and will not be renewed.
Mattel also licenses a number of its trademarks and other property rights to others for use in connection with
the sale of their products. Mattel distributes some third-party finished products that are independently designed
and manufactured.
Trademarks, Copyrights and Patents
Most of Mattel’s products are sold under trademarks, trade names, and copyrights, and a number of these
products incorporate patented devices or designs. Trademarks, copyrights, and patents are significant assets of
Mattel in that they provide product recognition and acceptance worldwide.
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.
Agreements to purchase inventory, services, and other items with terms extending through 2018 contain
future minimum payments totaling approximately $387 million. Licensing and similar agreements with terms
extending through 2019 and beyond contain provisions for future guaranteed minimum payments totaling
approximately $285 million. Operating lease commitments with terms extending through 2019 and beyond
contain future minimum obligations totaling approximately $520 million. See Part II, Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Commitments” and Part II, 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
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