Mattel 2006 Annual Report Download - page 50

Off-Balance Sheet Arrangements
Mattel has no off-balance sheet arrangements that have or are reasonably likely to have a current or future
effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to shareholders.
Commitments
In the normal course of business, Mattel enters into debt agreements, 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. These arrangements include commitments for future inventory purchases
and royalty payments pursuant to licensing agreements. Certain of these commitments routinely contain
provisions for guaranteed or minimum expenditures during the term of the contracts.
Total 2007 2008 2009 2010 2011 Thereafter
Long-term debt ...................... $ 700.0 $ 64.3 $ 85.7 $150.0 $ 50.0 $250.0 $100.0
Interest on long-term debt .............. 163.7 44.3 39.4 31.0 24.8 15.3 8.9
Capital leases* ....................... 8.8 0.3 0.3 0.3 0.3 0.3 7.3
Operating leases ...................... 487.0 71.0 58.0 48.0 42.0 40.0 228.0
Purchases of inventory, other assets and
services .......................... 372.9 372.9———— —
Licensing minimum guarantees .......... 135.0 39.0 38.0 24.0 21.0 13.0 —
Defined benefit and postretirement benefit
plans ............................. 266.5 24.6 24.9 24.5 23.9 24.3 144.3
Total ............................... $2,133.9 $616.4 $246.3 $277.8 $162.0 $342.9 $488.5
*Represents total obligation, including imputed interest of $6.5 million.
Litigation
Litigation Related to LeapFrog Enterprises, Inc.
Fisher-Price, Inc. (“Fisher-Price”), a subsidiary of Mattel, was sued for patent infringement by LeapFrog
Enterprises, Inc. in a lawsuit filed in October 2003 in the United States District Court for the District of
Delaware, and in September 2004, Mattel was joined to the lawsuit as a defendant. The lawsuit alleged that
Fisher-Price’s PowerTouch™system infringed a LeapFrog patent relating to an electronic learning device for
teaching phonics. A 10-day trial commenced on May 16, 2005, which resulted in a deadlocked jury. As an
alternative to retrying the case, the parties agreed to submit the case for decision, based on the existing trial
record, to the presiding judge. The plaintiff in this lawsuit asserted a total damages claim of up to approximately
$90 million, which was reduced to approximately $58 million pursuant to rulings by the Court, and sought an
injunction preventing the further sale of the PowerTouch™system; the damages could possibly have been trebled
if a willful infringement had been found. On March 30, 2006, the Court issued a Memorandum and Order
holding that Mattel and Fisher-Price did not infringe LeapFrog’s patent and furthermore holding that LeapFrog’s
patent claim, which was the basis of LeapFrog’s lawsuit, was invalid due to obviousness. On May 1, 2006,
LeapFrog filed an appeal of the Court’s ruling with the Court of Appeals for the Federal Circuit. Both parties
have filed their briefs with regard to the appeal, and the Court of Appeals has scheduled a hearing on March 7,
2007 for oral arguments. Mattel and its subsidiary Fisher-Price continue to believe the action is without merit and
intend to continue defending themselves vigorously.
Litigation Related to Carter Bryant and MGA Entertainment, Inc.
In April 2004, Mattel filed a lawsuit in Los Angeles County Superior Court against Carter Bryant
(“Bryant”), a former Mattel design employee. The suit alleges that Bryant aided and assisted a Mattel competitor,
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