Mattel 2009 Annual Report Download - page 15

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Mattel’s International segment revenue represented 46% of worldwide consolidated gross sales in 2009.
Within the International segment, Mattel operates in four regional groups that generated the following gross sales
during 2009:
Amount
Percentage of
International
Gross Sales
(In millions, except
percentage information)
Europe ................................................................ $1,442.5 52%
Latin America .......................................................... 860.5 31
Asia Pacific ............................................................ 267.4 10
Other ................................................................. 187.9 7
$2,758.3 100%
No individual country within the International segment exceeded 5% of worldwide consolidated gross sales
during 2009.
The strength of the US dollar relative to other currencies can significantly affect the revenues and
profitability of Mattel’s international operations. Mattel enters into foreign currency forward exchange contracts,
primarily to hedge its purchase and sale of inventory, and other intercompany transactions denominated in
foreign currencies, to limit the effect of exchange rate fluctuations on its results of operations and cash flows. See
Item 7A “Quantitative and Qualitative Disclosures About Market Risk” and Item 8 “Financial Statements and
Supplementary Data—Note 11 to the Consolidated Financial Statements—Derivative Instruments.” For financial
information by geographic area, see Item 8 “Financial Statements and Supplementary Data—Note 15 to the
Consolidated Financial Statements—Segment Information.”
Manufacturing and Materials
Mattel manufactures toy products for all segments in both company-owned facilities and through third-party
manufacturers. Products are also purchased from unrelated entities that design, develop, and manufacture those
products. To provide greater flexibility in the manufacture and delivery of its products, and as part of a
continuing effort to reduce manufacturing costs, Mattel has concentrated production of most of its core products
in company-owned facilities and generally uses third-party manufacturers for the production of non-core
products.
Mattel’s principal manufacturing facilities are located in China, Indonesia, Thailand, Malaysia, and Mexico.
To help avoid disruption of its product supply due to political instability, civil unrest, economic instability,
changes in government policies, and other risks, Mattel produces its products in multiple facilities in multiple
countries. Mattel believes that the existing production capacity at its own and its third-party manufacturers’
facilities is sufficient to handle expected volume in the foreseeable future. See Item 1A “Risk Factors—Factors
That May Affect Future Results.”
Mattel bases its production schedules for toy products on customer orders and forecasts, taking into account
historical trends, results of market research, and current market information. Actual shipments of products
ordered and order cancellation rates are affected by consumer acceptance of product lines, strength of competing
products, marketing strategies of retailers, changes in buying patterns of both retailers and consumers, and
overall economic conditions. Unexpected changes in these factors could result in a lack of product availability or
excess inventory in a particular product line.
The foreign countries in which most of Mattel’s products are manufactured (principally China, Indonesia,
Thailand, Malaysia, and Mexico) all enjoy permanent “normal trade relations” (“NTR”) status under US tariff
laws, which provides a favorable category of US import duties. China’s NTR status became permanent in 2002,
5