Mattel 2008 Annual Report Download - page 94

Note 12—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 and American Girl Boutique and Bistro®leases in Dallas, Texas, Atlanta, Georgia,
Natick, Massachusetts, and Bloomington, Minnesota 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, 2008:
Capitalized
Leases
Operating
Leases
(In thousands)
2009 ................................................................... $ 300 $ 88,000
2010 ................................................................... 300 82,000
2011 ................................................................... 300 69,000
2012 ................................................................... 300 54,000
2013 ................................................................... 300 37,000
Thereafter ............................................................... 1,800 180,000
$3,300(a) $510,000
(a) Includes $1.1 million of imputed interest.
Rental expense under operating leases amounted to $105.3 million, $93.0 million, and $86.9 million for
2008, 2007, and 2006, respectively, net of sublease income of $0.7 million, $1.0 million, and $1.1 million in
2008, 2007, and 2006, 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
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.
Licensing and similar agreements provide for terms extending from 2009 through 2013 and thereafter and
contain provisions for future minimum payments as shown in the following table:
Minimum
Payments
(In thousands)
2009 ........................................................................... $ 58,000
2010 ........................................................................... 52,000
2011 ........................................................................... 48,000
2012 ........................................................................... 22,000
2013 ........................................................................... 23,000
Thereafter ...................................................................... 41,000
$244,000
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