Mattel 2006 Annual Report Download - page 27

Unfavorable resolution of pending and future litigation matters and disputes could have a material
adverse effect on Mattel’s financial condition.
Mattel is involved in a number of litigation matters. An unfavorable resolution of pending litigation could
have a material adverse effect on Mattel’s financial condition. Litigation may result in substantial costs and
expenses and significantly divert the attention of Mattel’s management regardless of the outcome. There can be
no assurance that Mattel will be able to achieve a favorable settlement of pending litigation or obtain a favorable
resolution of litigation if it is not settled. In addition, current and future litigation, governmental proceedings,
labor disputes or environmental matters could lead to increased costs or interruptions of the normal business
operations of Mattel.
Recalls, post-manufacture repairs of Mattel products, product liability claims, absence or cost of
insurance, and associated administrative costs could harm Mattel’s reputation, increase costs or reduce
sales.
Mattel is subject to regulation by the Consumer Product Safety Commission and similar state and
international regulatory authorities, and its products could be subject to involuntary recalls and other actions by
these authorities. Concerns about product safety may lead Mattel to voluntarily recall selected products. Mattel
has experienced, and in the future may experience, defects or errors in products after their production and sale to
customers. These defects or errors could result in the rejection of Mattel’s products by customers, damage to its
reputation, lost sales, diverted development resources and increased customer service and support costs, any of
which could harm Mattel’s business. Individuals could sustain injuries from Mattel’s products, and Mattel may
be subject to claims or lawsuits resulting from these injuries. There is a risk that these claims or liabilities may
exceed, or fall outside the scope of, Mattel’s insurance coverage. Moreover, Mattel may be unable to obtain
adequate liability insurance in the future. Recalls, post-manufacture repairs of Mattel products, absence or cost of
insurance, and administrative costs associated with recalls could harm Mattel’s reputation, increase costs or
reduce sales.
Failure by Mattel to protect its proprietary intellectual property and information could have a material
adverse effect on Mattel’s business, financial condition and results of operations.
The value of Mattel’s business depends to a large degree on its ability to protect its intellectual property and
information, including its trademarks, trade names, copyrights, patents and trade secrets in the US and around the
world, as well as its customer, employee and consumer data. 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 its intellectual 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 war or terrorist activities
could materially impact Mattel, its personnel and facilities, its customers and suppliers, retail and
financial markets, and general economic conditions.
Mattel’s business is worldwide in scope, including operations in 42 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 of war or hostilities between countries or threat of
terrorist activities, and the responses to and results of these activities, could materially impact Mattel, its
personnel and facilities, its customers and suppliers, retail and financial markets, and general economic
conditions.
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