Mattel 2004 Annual Report Download - page 90

Note 9—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. The American Girl Place®leases in Chicago, Illinois, and New York,
New York, also contain provisions for additional rental payments based on a percentage of the sales of each store
after reaching certain sales benchmarks. The following table shows the future minimum obligations under lease
commitments in effect at year end 2004 (in thousands):
Capitalized
Leases
Operating
Leases
2005 ................................................................ $ 300 $ 55,000
2006 ................................................................ 300 51,000
2007 ................................................................ 300 50,000
2008 ................................................................ 300 49,000
2009 ................................................................ 300 41,000
Thereafter ............................................................ 7,800 124,000
$ 9,300(a) $370,000
(a) Includes $7.0 million of imputed interest.
Rental expense under operating leases amounted to $73.7 million, $66.6 million and $65.1 million for 2004,
2003 and 2002, respectively, net of sublease income of $1.7 million, $0.9 million and $0.8 million in 2004, 2003
and 2002, 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 for future inventory purchases. Certain of these commitments routinely contain provisions for
guaranteed 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.
Licensing and similar agreements provide for terms extending from 2005 through 2013 and contain
provisions for future minimum payments as shown in the following table (in thousands):
Minimum
Payments
2005 ............................................................................. $ 93,000
2006 ............................................................................. 55,000
2007 ............................................................................. 43,000
2008 ............................................................................. 26,000
2009 ............................................................................. 27,000
Thereafter ......................................................................... 56,000
$300,000
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