Mattel 2014 Annual Report Download - page 26

import duty of toys manufactured in China and imported into the US. In addition, the occurrence of war or
hostilities between countries or threat of terrorist activities, and the responses to and results of these activities,
could adversely impact Mattel, its personnel and facilities, its customers and suppliers, retail and financial
markets, and general economic conditions.
Disruptions in Mattel’s manufacturing operations due to political instability, civil unrest, or disease could
negatively impact Mattel’s business, financial position, and results of operations.
Mattel owns, operates and manages manufacturing facilities and utilizes third-party manufacturers
throughout Asia, primarily in China, Indonesia, Malaysia and Thailand. The risk of political instability and civil
unrest exists in certain of these countries, which could temporarily or permanently damage Mattel’s
manufacturing operations located there. In the past, outbreaks of SARS have been significantly concentrated in
Asia, particularly in Hong Kong, and in the Guangdong province of China, where many of Mattel’s
manufacturing facilities and third-party manufacturers are located. The design, development and manufacture of
Mattel’s products could suffer if a significant number of Mattel’s employees or the employees of its third-party
manufacturers or their suppliers contract SARS, avian flu or other communicable diseases, or otherwise are
unable to fulfill their obligations to Mattel. While Mattel has developed contingency plans designed to help
mitigate the impact of disruptions in its manufacturing operations, its business, financial position, and results of
operations could be negatively impacted by a significant disruption to its manufacturing operations or suppliers.
Earthquakes or other catastrophic events out of Mattel’s control may damage its facilities or those of its
contractors and harm Mattel’s results of operations.
Mattel has significant operations near major earthquake faults, including its corporate headquarters in El
Segundo, California. A catastrophic event where Mattel has important operations, such as an earthquake,
tsunami, flood, typhoon, fire, or other natural or manmade disaster, could disrupt Mattel’s operations or those of
its contractors and impair production or distribution of its products, damage inventory, interrupt critical
functions, or otherwise affect its business negatively, harming Mattel’s results of operations.
The production and sale of private-label toys by Mattel’s retail customers may result in lower purchases of
Mattel-branded products by those retail customers.
In recent years, consumer goods companies, including those in the toy business, generally have experienced
the phenomenon of retail customers developing their own private-label products that directly compete with the
products of traditional manufacturers. Some retail chains that are customers of Mattel sell private-label toys
designed, manufactured and branded by the retailers themselves. These toys may be sold at prices lower than
comparable toys sold by Mattel and may result in lower purchases of Mattel-branded products by these retailers.
In some cases, retailers who sell these private-label toys are larger than Mattel and may have substantially more
resources than Mattel.
Mattel depends on key personnel and may not be able to hire, retain, and integrate sufficient qualified
personnel to maintain and expand its business.
Mattel’s future success depends partly on the continued contribution of key executives, designers, technical,
sales, marketing, manufacturing, and administrative personnel. The loss of services of any of Mattel’s key
personnel could harm Mattel’s business. Recruiting and retaining skilled personnel is costly and highly
competitive. If Mattel fails to retain, hire, train, and integrate qualified employees and contractors, Mattel may
not be able to maintain or expand its business.
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