Mattel 2001 Annual Report Download - page 24

Any failure by Mattel to protect its proprietary intellectual property and information, including any successful
challenge to Mattel’s ownership of its intellectual property or material infringements of such property, could
have a material adverse effect on Mattel’s business, financial condition and results of operations.
Political Developments, including Trade Relations, and the Threat or Occurrence of Terrorist Activities
Mattel’s business is worldwide in scope, including operations in 36 countries. The deterioration of the
political situation in a country in which Mattel has significant sales or operations, or the breakdown of trade
relations between the US and a foreign country in which Mattel has significant manufacturing facilities or other
operations, could adversely affect Mattel’s business, financial condition and results of operations. For example,
a change in trade status for China could result in a substantial increase in the import duty of toys manufactured
in China and imported into the US. In addition, the occurrence or threat of terrorist activities, and the responses
to and results of such activities, could materially impact Mattel, its personnel and facilities, its customers and
suppliers, retail and financial markets and general economic conditions.
Manufacturing Risk
Mattel owns and operates manufacturing facilities and utilizes third-party manufacturers throughout Asia,
primarily in China, Indonesia, Malaysia and Thailand. A risk of political instability and civil unrest exists in
these countries, which could temporarily or permanently damage Mattel’s manufacturing operations located
there. Mattel’s business, financial position and results of operations would be negatively impacted by a
significant disruption to its manufacturing operations or suppliers.
Financial Realignment Plan
Mattel announced a significant financial realignment plan in 2000, which was designed to improve gross
margins; selling and administrative expenses; operating profit; and cash flow. See ‘‘2000 Financial Realignment
Plan’’ and Item 8 ‘‘Financial Statements and Supplementary Data—Note 9 to the Consolidated Financial
Statements.’’ The financial realignment plan requires substantial management and financial resources to
implement. The plan may not achieve intended cost reductions or adequately address significant operating
issues. The failure of the plan to meet its objectives in whole or in part, or any delay in implementing the plan,
could have a material adverse effect on Mattel’s business, financial condition and results of operations. In 2002,
as part of the financial realignment plan, Mattel will commence a long-term information technology strategy to
help it better manage the business, while lowering costs in procurement, finance, distribution and
manufacturing. The failure of this program to meet its objectives in whole or in part, or any delay in
implementing the program, could have a material adverse effect on Mattel’s business, financial condition and
results of operations.
Financing Matters
Increases in interest rates, both domestically and internationally, could negatively affect Mattel’s cost of
financing both its operations and investments. Foreign currency exchange fluctuations may affect Mattel’s
reportable income. Reductions in Mattel’s credit ratings may negatively impact the cost of satisfying Mattel’s
financing requirements.
Advertising and Promotion
Mattel’s products are marketed worldwide through a diverse spectrum of advertising and promotional
programs. Mattel’s ability to sell products is dependent in part upon the success of such programs. If Mattel
does not successfully market its products or if media or other advertising or promotional costs increase, these
factors could have a material adverse affect on Mattel’s business, financial condition and results of operations.
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