Mattel 2002 Annual Report Download - page 52

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If any of the risks and uncertainties described in the cautionary factors listed above actually occurs, Mattel’s
business, financial condition and results of operations could be materially and adversely affected. The factors
listed above are not exhaustive. Other sections of this Annual Report on Form 10-K include additional factors
that could materially and adversely impact Mattel’s business, financial condition and results of operations.
Moreover, Mattel operates in a very competitive and rapidly changing environment. New factors emerge from
time to time and it is not possible for management to predict the impact of all such factors on Mattel’s business,
financial condition or results of operations or the extent to which any factor, or combination 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 rely on forward-looking statements as a prediction of actual results.
Any or all of the forward-looking statements contained in this Annual Report on Form 10-K and any other public
statement made by Mattel or its representatives may turn out to be wrong. Mattel expressly disclaims any
obligation to update or revise any forward-looking statements, whether as a result of new developments or
otherwise.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Risk Management
Exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Inventory purchase
transactions denominated in the Euro, British pound sterling, Mexican peso, Hong Kong dollar and Indonesian
rupiah are the primary transactions that cause exchange rate exposure for Mattel. Mattel seeks to mitigate its
exposure to market risk by monitoring its currency exchange exposure for the year and partially or fully hedging
such exposure using foreign currency forward exchange and option 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. Inventory purchase exposure in Mexico is partially offset by
Mexico’s cash position that is held in US dollars. Excluding the US dollar denominated intercompany balances in
Mexico, the majority of all other intercompany receivables and payables denominated in foreign currencies are
hedged or are short-term balances with minimal currency exposure. In addition, Mattel manages its exposure
through the selection of currencies used for international borrowings. Mattel does not trade in financial
instruments for speculative purposes.
Mattel’s financial position is also impacted by exchange rate fluctuations on its net investment in foreign
subsidiaries. Assets and liabilities of foreign subsidiaries are translated into US dollars at fiscal period-end
exchange rates. Income, expense and cash flow items are translated at weighted average exchange rates
prevailing during the fiscal period. The resulting currency translation adjustments are recorded as a component of
accumulated other comprehensive income (loss) within stockholders’ equity. Mattel’s primary currency
exposures are on its net investment in entities having functional currencies denominated in the Euro, British
pound sterling, Mexican peso, Hong Kong dollar and Indonesian rupiah.
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