Mattel 2011 Annual Report Download - page 28

confidence, and other macroeconomic factors that affect consumer spending behavior. Any of these factors can
reduce the amount which consumers spend on the purchase of Mattel’s products. Deterioration of global
economic conditions or disruptions in credit markets in the markets in which Mattel operates could potentially
have a material adverse effect on Mattel’s liquidity and capital resources, including increasing Mattel’s cost of
capital or its ability to raise additional capital if needed, or otherwise adversely affect Mattel’s business and
financial results.
In addition to experiencing potentially lower revenues during times of economic difficulty, in an effort to
maintain sales during such times, Mattel may need to increase promotional spending or take other steps to
encourage retailer and consumer purchase of its products. Those steps may lower net sales, increase costs and/or
decrease operating margins.
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 its 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 its results of
operations. In addition, problems with transitioning these services and systems to 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.
Mattel relies on external financing, including commercial paper and borrowings under its domestic
unsecured committed revolving credit facility, to help fund its seasonal working capital needs. 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 tight credit markets.
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 ability to access these sources of liquidity.
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