Mattel 2006 Annual Report Download - page 100

December 31, 2005, $4.5 million of pre-tax unrealized gains ($4.2 million net of tax), related to derivative
instruments have been recorded in accumulated other comprehensive loss. Mattel expects to reclassify the
unrealized gains as of December 31, 2006 from accumulated other comprehensive loss to its results of operations
over the life of the contracts, generally within 18 months or less.
Fair Value of Financial Instruments
Mattel’s financial instruments include cash, cash equivalents, marketable securities, investments, accounts
receivable and payable, short-term borrowings, and accrued liabilities. The carrying amount of these instruments
approximates fair value because of their short-term nature.
The estimated fair value of Mattel’s long-term debt, including the current portion, is $714.9 million
(compared to a carrying amount of $700.0 million) as of December 31, 2006 and $644.6 million (compared to a
carrying amount of $625.0 million) as of December 31, 2005. 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,
2006 2005
Accounts receivable .......................................................... $2,961 $ 1,309
Prepaid expenses and other current assets ......................................... 2,072 6,218
Accrued liabilities ............................................................ (8,706) (2,231)
Other non-current liabilities .................................................... (81) —
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, 2006 or 2005, 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. Rental expense is recorded on a straight-line basis, including escalating
minimum payments. 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. Contingent rental expense is recorded in the period in which
the contingent event becomes probable. The following table shows the future minimum obligations under lease
commitments in effect at December 31, 2006 (in thousands):
Capitalized
Leases
Operating
Leases
2007 ................................................................. $ 300 $ 71,000
2008 ................................................................. 300 58,000
2009 ................................................................. 300 48,000
2010 ................................................................. 300 42,000
2011 ................................................................. 300 40,000
Thereafter ............................................................. 7,300 228,000
$ 8,800 (a) $487,000
(a) Includes $6.5 million of imputed interest.
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