Mattel 1999 Annual Report Download - page 12

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Mattel, Inc. and Subsidiaries
Cautionary Statement
Certain written and oral statements made or incorporated by reference from time to time by
Mattel or its representatives in this Annual Report, other filings or reports with the Securities
and Exchange Commission, press releases, conferences, or otherwise, are ' ' forward-looking
statements'' within the meaning of the Private Securities Litigation Reform Act of 19 95 .
Mattel is including this Cautionary Statement to make applicable and take advantage of
the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any
such forward-looking statements. Forw ard-looking statements include any statement that
may predict, forecast, indicate, or imply future results, performance, or achievements, and
forward-looking statements can be identified by the use of terminology such as ' ' believe,' '
' ' anticipate,' ' ' ' expect,' ' ' ' estimate,' ' ' ' may,' ' ' ' will,' ' ' ' should,' ' ' ' project,' ' ' ' continue,' '
' ' plans,' ' ' ' aims,' ' ' ' intends,' ' ' 'likely,' ' or other words or phrases of similar terminology.
Management cautions you that forward-looking statements involve risks and uncertainties
which may cause actual results to differ materially from the forward-looking statements.
In addition to the risk factors listed in Mattel' s Annual Report on Form 1 0-K and other
important factors detailed herein and from time to time in other reports filed by Mattel
with the Securities and Exchange Commission, including Forms 8 -K, 10-Q and 10 -K, the
following important factors could cause actual results to differ materially from those sug-
gested by any forward-looking statements.
Marketplace Risks
- Increased competitive pressure, both domestically and internationally, which may
negatively affect the sales of Mattel’s products
- Changes in public and consumer preferences, w hich may negatively affect Mattel’s
toy and consumer software business
- Significant changes in the play patterns of children, whereby they are increasingly
attracted to more developmentally advanced products at younger ages, which may
affect brand loyalty and the perceived value of and demand for Mattel' s products
- Possible weaknesses in economic conditions, both domestically and internationally,
which may negatively affect the sales of Mattel' s products and the costs associated
with manufacturing and distributing these products
Financing Considerations
- Currency fluctuations, which may affect Mattel’s reportable income
- Significant changes in interest rates, both domestically and internationally, which may
negatively affect Mattel’s cost of financing both its operations and investments
- Reductions in Mattel’s credit ratings which may significantly increase the cost of
satisfying Mattel’s long-term capital needs
Merger-Related Risk
- Continued difficulty integrating the operations of Learning Company into Mattel, which
may prevent Mattel from realizing the expected benefitrs from the merger, such as
cost savings, operating efficiencies, revenue enhancements or other synergies
Other Risks
- Inability to successfully complete licensing and e-commerce deals in a timely fashion,
which may reduce Mattel' s ability to realize the full value of its intellectual property
rights
- Development of new technologies, including the Internet, which may create new risks to
Mattel' s ability to protect its intellectual property rights
- Changes in law s or regulations, both domestically and internationally, including those
affecting the Internet, consumer products or environmental activities or trade restrictions,
which may lead to increased costs or interruption in normal business operations of Mattel
- Current and future litigation, governmental proceeding or environmental matters, which
may lead to increased costs or interruption in normal business operations of Mattel
- Labor disputes, which may lead to increased costs or disruption of any of Mattel' s
operations
The risks included herein are not exhaustive. Other sections of this Annual Report
may include additional factors which could materially and adversely impact Mattel' s busi-
ness, financial condition and results of operations. Moreover, Mattel operates in a very
competitive and rapidly changing environment. New risk factors emerge from time to
time and it is not possible for management to predict all such risk factors on Mattel' s busi-
ness, financial condition or results of operations or the extent to which any factor, or com-
bination of factors, may cause actual results to differ materially from those contained in
any forward-looking statements. Given these risks and uncertainties, investors should not
place undue reliance on forward-looking statements as a prediction of actual results.
Summary
The following discussion should be read in conjunction with Mattel' s consolidated financial
statements and notes thereto, and the information included elsewhere herein. This discus-
sion and the accompanying consolidated financial statements and notes thereto have been
prepared to reflect the retroactive effect of Mattel' s merger w ith Learning Company in
May 19 99 . The merger was accounted for as a pooling of interests, which means that for
accounting and financial reporting purposes and the discussion herein, the two companies
are treated as if they have alw ays been combined.
Mattel designs, manufactures, and markets a broad variety of family products on a
worldwide basis through both sales to retailers and direct to consumers. Mattel' s business
is dependent in great part on its ability each year to redesign, restyle and extend existing
core products and product lines, to design and develop innovative new products and product
lines, and to successfully market those products and product lines. Mattel plans to continue
to focus on its portfolio of traditional brands which have historically had worldwide sustain-
able appeal. The recent acquisitions of Pleasant Company and Learning Company are part
of Mattel' s strategic plan to better position itself as a consumer products company that
provides its core customers – children – with products that meet their preferences in an
increasingly interactive and technology-driven world. The strategy has three components:
first, Mattel is communicating with consumers more directly. Second, Mattel is combining
its traditional and recently acquired brands with new technologies, including software, elec-
tronic games, interactive toys and new media. Through its integration of Learning Company
and Mattel Media into the Mattel Interactive division, Mattel has one of the leading con-
sumer software operations in the world. Mattel' s joint venture with Intel is focused on
producing high-technology, interactive toys that appeal to increasingly technology-oriented
children and teenagers. Third, Mattel is implementing a ' ' market by market' ' approach to
Mattel International. Mattel intends to grow its international business by adapting products
to local tastes, economic conditions and price requirements.
Mattel’s portfolio of brands can be grouped in the following categories:
Girls - including Barbie®fashion dolls and accessories, collector dolls,
Fashion Magic®, American Girl®, Cabbage Patch Kids®and Polly Pocket®
Infant and Preschool - including Fisher-Price®, Disney preschool and plush,
Power Wheels®, Sesame Street®, See ‘ N Say®, Magna Doodle®, View-
Master®and Blue’s Clues®
Wheels - including Hot Wheels®, Matchbox®, Tyco®Electric Racing and
Tyco®Radio Control
Entertainment - including Disney, Nickelodeon®, games and puzzles
Consumer Software - including Reader Rabbit®, Carmen Sandiego™,
The Oregon Trail®, Myst®and The Print Shop®