Mattel 2005 Annual Report Download - page 88

carrying amount of $589.1 million) as of December 31, 2004. The estimated fair value has been calculated based
on broker quotes or rates for the same or similar instruments.
The estimated fair value of derivative financial instruments recognized in Mattel’s consolidated balance
sheets is as follows (in thousands):
December 31,
2005 2004
Accounts receivable ....................................................... $ 1,309 $ 2,120
Prepaid expenses and other current assets ...................................... 6,218 1,094
Accrued liabilities ........................................................ (2,231) (25,298)
Other noncurrent liabilities ................................................. — (1,458)
The estimated fair value of derivative financial instruments is based on dealer quotes and reflects the
amount that Mattel would receive or pay at maturity for contracts involving the same currencies and maturity
dates, if they had been entered into as of December 31, 2005 or 2004, respectively.
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, New York,
New York, and Los Angeles, California, 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 December 31, 2005 (in thousands):
Capitalized
Leases
Operating
Leases
2006 ................................................................ $ 300 $ 62,000
2007 ................................................................ 300 58,000
2008 ................................................................ 300 48,000
2009 ................................................................ 300 35,000
2010 ................................................................ 300 29,000
Thereafter ............................................................ 7,600 137,000
$ 9,100(a) $369,000
(a) Includes $6.8 million of imputed interest.
Rental expense under operating leases amounted to $77.6 million, $73.7 million and $66.6 million for 2005,
2004 and 2003, respectively, net of sublease income of $1.3 million, $1.7 million and $0.9 million in 2005, 2004
and 2003, 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.
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