Mattel 2009 Annual Report Download - page 26

experience liquidity problems. Certain of Mattel’s customers filed for bankruptcy in 2008 and 2009 and the
current global economic conditions have adversely affected the financial condition of most retailers. Mattel’s
sales to customers are typically made on credit without collateral. There is a risk that customers will not pay, or
that payment may be delayed, because of bankruptcy, contraction of credit availability to such customers or other
factors beyond the control of Mattel, which could increase Mattel’s exposure to losses from bad debts. In
addition, if these or other customers were to cease doing business as a result of bankruptcy or significantly
reduce the number of stores operated, it could have a significant adverse effect on Mattel’s business, financial
condition, and results of operations.
If Mattel is not able to adequately protect its proprietary intellectual property and information, its results
of operations could be adversely affected.
The value of Mattel’s business depends 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. If Mattel fails 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 significant adverse effect on Mattel’s business, financial
condition, and results of operations.
Unfavorable resolution of pending and future litigation matters, and disputes, including those arising from
recalls, withdrawals, or replacements of Mattel products, could have a significant adverse effect on
Mattel’s financial condition.
Mattel is involved in a number of litigation and regulatory matters, including those arising from recalls,
withdrawals, or replacements of Mattel products. An unfavorable resolution of these pending matters could have
a significant adverse effect on Mattel’s financial condition and its operations. Regardless of its outcome,
litigation may result in substantial costs and expenses, and significantly divert the attention of management.
There can be no assurance that Mattel will be able to prevail in, or achieve a favorable settlement of, pending
matters. In addition to the pending matters, future litigation, government proceedings, labor disputes, or
environmental matters could lead to increased costs or interruption of Mattel’s normal business operations.
Mattel is subject to various laws and government regulations, violation of which could subject it to
sanctions. In addition, changes in such laws or regulations may lead to increased costs, changes in Mattel’s
effective tax rate, or the interruption of normal business operations that would negatively impact Mattel’s
financial condition and results of operations.
Mattel operates in a highly regulated environment in the US and international markets. US federal, state and
local governmental entities, and foreign governments regulate many aspects of Mattel’s business, including its
products and the importation and exportation of its products. These regulations may include accounting
standards, taxation requirements (including changes in applicable income tax rates, new tax laws and revised tax
law interpretations), product safety and other safety standards, trade restrictions, regulations regarding financial
matters, environmental regulations, advertising directed toward children, product content, and other
administrative and regulatory restrictions. While Mattel takes all the steps it believes are necessary to comply
with these laws and regulations, there can be no assurance that Mattel will be in compliance in the future. Failure
to comply could result in monetary liabilities and other sanctions which could have a negative impact on Mattel’s
business, financial condition and results of operations.
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