Mattel 2007 Annual Report Download - page 31

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Significant changes in currency exchange rates could have a material adverse effect on Mattel’s business
and results of operations.
Mattel’s net investment in its foreign subsidiaries and its results of operations and cash flows are subject to
changes in currency exchange rates and regulations. Mattel seeks to mitigate the exposure of its results of
operations to fluctuations in currency exchange rates by partially hedging this exposure using foreign currency
forward exchange contracts. These contracts are primarily used to hedge Mattel’s purchase and sale of inventory,
and other intercompany transactions denominated in foreign currencies. Government action may restrict Mattel’s
ability to transfer capital across borders and may also impact the fluctuation of currencies in the countries where
Mattel conducts business or has invested capital. Significant changes in currency exchange rates, reductions in
Mattel’s ability to transfer its capital across borders, and changes in government-fixed currency exchange rates,
including the Chinese yuan and Venezuela bolivar, could have a material adverse effect on Mattel’s business and
results of operations.
Increases in interest rates, reduction of Mattel’s credit ratings or the inability of Mattel to meet the debt
covenant coverage requirements in its credit facilities could negatively impact Mattel’s ability to conduct
its operations.
Increases in interest rates, both domestically and internationally, could negatively affect Mattel’s cost of
financing both its operations and investments. Any reduction in Mattel’s credit ratings could increase the cost of
obtaining financing. Additionally, Mattel’s ability to issue long-term debt and obtain seasonal financing could be
adversely affected by factors such as an inability to meet its debt covenant requirements, which include
maintaining consolidated debt-to-capital and interest coverage ratios. Mattel’s ability to conduct its operations
could be negatively impacted should these or other adverse conditions affect its primary sources of liquidity.
Mattel’s failure to successfully market or advertise its products could have a material adverse effect on
Mattel’s business, financial condition and results of operations.
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 these 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 effect on Mattel’s business, financial condition and results of operations.
Failure to successfully implement new initiatives could have a material adverse effect on Mattel’s business,
financial condition and results of operations.
Mattel has announced, and in the future may announce, initiatives to improve the execution of its core
business, globalize and extend Mattel’s brands, catch new trends, create new brands, and offer new innovative
products, enhance product safety, develop people, improve productivity, simplify processes, maintain customer
service levels, as well as new initiatives designed to drive sales growth, manage costs, capitalize on Mattel’s
scale advantage and improve its supply chain. These initiatives involve investment of capital and complex
decision-making as well as extensive and intensive execution, and the success of these initiatives is not assured.
Failure to successfully implement any of these initiatives could have a material adverse effect on Mattel’s
business, financial condition and results of operations.
Mattel depends on key personnel and may not be able to hire, retain and integrate sufficient qualified
personnel to maintain and expand its business.
Mattel’s future success depends partly on the continued contribution of key executives, designers, technical,
sales, marketing, manufacturing and administrative personnel. The loss of services of any of Mattel’s key
personnel could harm Mattel’s business. Recruiting and retaining skilled personnel is costly and highly
competitive. If Mattel fails to retain, hire, train and integrate qualified employees and contractors, Mattel may not
be able to maintain and expand its business.
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