Mattel 2009 Annual Report Download - page 25

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 Venezuelan bolivar fuerte, could have a significant adverse effect on Mattel’s
business and results of operations.
Failure to successfully implement new initiatives could have a significant adverse effect on Mattel’s
business, financial condition and results of operations.
Mattel has announced, and in the future may announce, initiatives to reduce its costs, increase its efficiency,
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 initiatives designed to drive sales growth,
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, or the failure of any of these
initiatives to produce the results anticipated by management, could have a significant adverse effect on Mattel’s
business, financial condition, and results of operations.
Mattel’s business depends in large part on the success of its vendors and outsourcers, and Mattel’s brands
and reputation may be harmed by actions taken by third-parties that are outside Mattel’s control. In
addition, any material failure, inadequacy or interruption resulting from such vendors or outsourcings
could harm Mattel’s ability to effectively operate its business.
As a part of our efforts to cut costs, achieve better efficiencies and increase productivity and service quality,
Mattel relies significantly on vendor and outsourcing relationships with third parties for services and systems
including manufacturing, transportation, logistics and information technology. Any shortcoming of a Mattel
vendor or outsourcer, particularly an issue affecting the quality of these services or systems, may be attributed by
customers to Mattel, thus damaging Mattel’s reputation, brand value and potentially affecting the results of
operations. In addition, problems with transitioning these services and systems or operating failures with these
vendors and outsourcers could cause delays in product sales, reduce efficiency of Mattel’s operations, and
significant capital investments could be required to remediate the problem.
Increases in interest rates, reduction of Mattel’s credit ratings, contraction of credit availability or the
inability of Mattel to meet the debt covenant 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 its operations. Any reduction in Mattel’s credit ratings could increase the cost of obtaining financing.
Mattel may be hindered from obtaining, or incur additional costs to obtain, additional credit in light of the current
tight credit market environment. Additionally, Mattel’s ability to issue long-term debt and obtain seasonal
financing could be adversely affected by factors such as market conditions and an inability to meet its debt
covenant requirements, which include maintaining certain financial ratios. Mattel’s ability to conduct its
operations could be negatively impacted should these or other adverse conditions affect its primary sources of
liquidity.
Liquidity problems or bankruptcy of Mattel’s key customers could have a significant adverse effect on
Mattel’s business, financial condition and results of operations.
Many of Mattel’s key customers are mass-market retailers. In the past, the mass-market retail channel in the
US has experienced significant shifts in market share among competitors, causing some large retailers to
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