Mattel 2014 Annual Report Download - page 27

Mattel may engage in acquisitions, mergers, or dispositions, which may affect the profit, revenues, profit
margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel’s business. In addition,
Mattel has certain anti-takeover provisions in its by-laws that may make it more difficult for a third party
to acquire Mattel without its consent, which may adversely affect Mattel’s stock price.
Mattel may engage in acquisitions, mergers or dispositions, which may affect the profit, revenues, profit
margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel’s business. There can be no
assurance that Mattel will be able to identify suitable acquisition targets or merger partners or that, if identified, it
will be able to acquire these targets on terms acceptable to Mattel and to potential merger partners. There can
also be no assurance that Mattel will be successful in integrating any acquired company into its overall
operations, or that any such acquired company will operate profitably or will not otherwise adversely impact
Mattel’s results of operations. Further, Mattel cannot be certain that key talented individuals at those acquired
companies will continue to work for Mattel after the acquisition or that they will continue to develop popular and
profitable products or services. In addition, Mattel has certain anti-takeover provisions in its by-laws that may
make it more difficult for a third party to acquire Mattel without its consent, which may adversely affect Mattel’s
stock price.
Mattel relies extensively on information technology in its operations, and any material failure, inadequacy,
interruption, or security breach of that technology could have a material adverse impact on its business.
Mattel relies extensively on information technology systems across its operations, including for
management of its supply chain, sale and delivery of its products, reporting its results of operations, collection
and storage of consumer data, personal data of customers, employees and other stakeholders, and various other
processes and transactions. Many of these systems are managed by third-party service providers. Mattel’s ability
to effectively manage its business and coordinate the production, distribution, and sale of its products depends
significantly on the reliability and capacity of these systems and third-party service providers. Mattel has
exposure to similar security risks faced by other large companies that have data stored on their information
technology systems. To its knowledge, Mattel has not experienced any material breach of its cybersecurity
systems. The cybersecurity system of Mattel’s third party insurance provider has been recently compromised. If
Mattel’s or its third-party service providers’ systems fail to operate effectively or are damaged, destroyed, or shut
down, or there are problems with transitioning to upgraded or replacement systems, or there are security breaches
in these systems, any of the above which could occur as a result of natural disasters, software or equipment
failures, telecommunications failures, loss or theft of equipment, acts of terrorism, circumvention of security
systems, or other cyber-attacks, Mattel could experience delays or decreases in product sales, and reduced
efficiency of its operations. Additionally, any of these events could lead to violations of privacy laws, loss of
customers, or loss, misappropriation or corruption of confidential information, trade secrets or data, which could
expose Mattel to potential litigation, regulatory actions, sanctions or other statutory penalties, any or all of which
could adversely affect its business, and cause it to incur significant losses and remediation costs.
The level of returns on pension plan assets and the actuarial assumptions used for valuation purposes
could affect Mattel’s earnings in future periods. Changes in standards and government regulations could
also affect its pension plan expense and funding requirements.
Assumptions used in determining projected benefit obligations and the fair value of plan assets for Mattel’s
pension plan are evaluated by Mattel in consultation with outside actuaries. In the event that Mattel determines
that changes are warranted in the assumptions used, such as the discount rate, expected long term rate of return,
or health care costs, its future pension benefit expenses could increase or decrease. Due to changing market
conditions or changes in the participant population, the actuarial assumptions that Mattel uses may differ from
actual results, which could have a significant impact on its pension and postretirement liability and related costs.
Funding obligations are determined based on the value of assets and liabilities on a specific date as required
under relevant government regulations for each plan. Future pension funding requirements, and the timing of
funding payments, could be affected by legislation enacted by the relevant governmental authorities.
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