Mattel 2011 Annual Report Download - page 29

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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. Mattel may need to resort to litigation to protect its
intellectual property rights, which could result in substantial costs and diversion of resources. 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, this failure could have
a significant adverse effect on Mattel’s business, financial condition, and results of operations.
Mattel has acquired certain intellectual properties from third parties. Declines in the profitability of these
acquired brands may impact Mattel’s ability to recover the carrying value of the related assets and could result in an
impairment charge. Reduction in net earnings caused by impairment charges could harm Mattel’s financial results.
Unfavorable resolution of pending and future litigation matters and disputes could have a significant
adverse effect on Mattel’s financial condition.
Mattel is involved in a number of litigation and regulatory matters. 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 in numerous jurisdictions, 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, duties and tariffs, and
regulations regarding currency and financial matters, environmental matters, advertising directed toward
children, product content, and privacy and data protection, as well as 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.
In addition, changes in 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 its financial condition and
results of operations.
Issues with products may lead to product liability, personal injury or property damage claims, recalls,
withdrawals, replacements of products, or regulatory actions by governmental authorities that could
divert resources, affect business operations, decrease sales, increase costs, and put Mattel at a competitive
disadvantage, any of which could have a significant adverse effect on Mattel’s financial condition.
Mattel has experienced, and may in the future experience, issues with products that may lead to product
liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory
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