Mattel 2013 Annual Report Download - page 17

Commitments
In the normal course of business, Mattel enters into contractual arrangements for future purchases of goods
and services to ensure availability and timely delivery and to obtain and protect Mattel’s right to create and
market certain products. 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. Additionally,
Mattel routinely enters into noncancelable lease agreements for premises and equipment used in the normal
course of business.
Purchase and service agreements with terms extending through 2017 contain future minimum payments
totaling approximately $383 million. Licensing and similar agreements with terms extending through 2018 and
beyond contain provisions for future guaranteed minimum payments totaling approximately $209 million.
Operating lease commitments with terms extending through 2018 and beyond contain future minimum
obligations totaling approximately $544 million. See Part II, Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Commitments” and Part II, Item 8 “Financial Statements and
Supplementary Data—Note 11 to the Consolidated Financial Statements—Commitments and Contingencies.”
Backlog
Mattel ships products in accordance with delivery schedules specified by its customers, which usually
request delivery within three months. In the toy industry, orders are subject to cancellation or change at any time
prior to shipment. In recent years, a trend toward just-in-time inventory practices in the toy industry has resulted
in fewer advance orders and therefore less backlog of orders. Mattel believes that the amount of backlog orders at
any given time may not accurately indicate future sales.
Financial Instruments
Currency exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Mattel seeks
to mitigate its exposure to market risk by monitoring its foreign currency transaction exposure for the year and
partially hedging such exposure using foreign currency forward exchange contracts primarily to hedge its
purchase and sale of inventory and other intercompany transactions denominated in foreign currencies. These
contracts generally have maturity dates of up to 18 months. In addition, Mattel manages its exposure to currency
exchange rate fluctuations through the selection of currencies used for international borrowings. Mattel does not
trade in financial instruments for speculative purposes.
For additional information regarding foreign currency contracts, see “International Segment” above, Part II,
Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” and Part II, Item 8 “Financial
Statements and Supplementary Data—Note 9 to the Consolidated Financial Statements—Derivative
Instruments.”
Seasonal Financing
See Part II, Item 8 “Financial Statements and Supplementary Data—Note 5 to the Consolidated Financial
Statements—Seasonal Financing and Debt.”
Government Regulations and Environmental Quality
Mattel’s products sold in the US are subject to the provisions of the Consumer Product Safety Act, as
amended by the Consumer Product Safety Improvement Act of 2008, the Federal Hazardous Substances Act, and
the Consumer Product Safety Improvement Act of 2008, and may also be subject to the requirements of the
Flammable Fabrics Act or the Food, Drug, and Cosmetics Act and the regulations promulgated pursuant to such
9