Mattel 2011 Annual Report Download - page 31

manufacturing operations located there. In the past, outbreaks of SARS have been significantly concentrated in
Asia, particularly in Hong Kong, and in the Guangdong province of China, where many of Mattel’s
manufacturing facilities and third-party manufacturers are located. The design, development and manufacture of
Mattel’s products could suffer if a significant number of Mattel’s employees or the employees of its third-party
manufacturers or their suppliers contract SARS, avian flu or other communicable diseases, or otherwise are
unable to fulfill their obligations to Mattel. While Mattel has developed contingency plans designed to help
mitigate the impact of disruptions in its manufacturing operations, its business, financial position, and results of
operations could be negatively impacted by a significant disruption to its manufacturing operations or suppliers.
Earthquakes or other catastrophic events out of Mattel’s control may damage its facilities or those of its
contractors and harm Mattel’s results of operations.
Mattel has significant operations near major earthquake faults, including its corporate headquarters in
Southern California. A catastrophic event where Mattel has important operations, such as an earthquake, tsunami,
flood, typhoon, fire, or other natural or manmade disaster, could disrupt Mattel’s operations or those of its
contractors and impair production or distribution of its products, damage inventory, interrupt critical functions, or
otherwise affect its business negatively, harming Mattel’s results of operations.
The production and sale of private-label toys by Mattel’s retail customers may result in lower purchases of
Mattel-branded products by those retail customers.
In recent years, consumer goods companies generally, including those in the toy business, have experienced
the phenomenon of retail customers developing their own private-label products that directly compete with the
products of traditional manufacturers. Some retail chains that are customers of Mattel sell private-label toys
designed, manufactured and branded by the retailers themselves. These toys may be sold at prices lower than
comparable toys sold by Mattel and may result in lower purchases of Mattel-branded products by these retailers.
In some cases, retailers who sell these private-label toys are larger than Mattel and may have substantially more
resources than Mattel.
Mattel’s failure to successfully market or advertise its products could have an adverse effect on Mattel’s
business, financial condition, and results of operations.
Mattel’s products are marketed worldwide through a diverse spectrum of advertising and promotional
programs. Mattel’s ability to sell products is dependent in part upon the success of these programs. If Mattel does
not successfully market its products or if media or other advertising or promotional costs increase, these factors
could have an adverse effect on Mattel’s business, financial condition, and results of operations.
Mattel depends on key personnel and may not be able to hire, retain, and integrate sufficient qualified
personnel to maintain and expand its business.
Mattel’s future success depends partly on the continued contribution of key executives, designers, technical,
sales, marketing, manufacturing, and administrative personnel. The loss of services of any of Mattel’s key
personnel could harm Mattel’s business. Recruiting and retaining skilled personnel is costly and highly
competitive. If Mattel fails to retain, hire, train, and integrate qualified employees and contractors, Mattel may
not be able to maintain or expand its business.
Mattel may engage in acquisitions, mergers, or dispositions, which may affect the profit, revenues, profit
margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel’s business. In addition,
Mattel has certain anti-takeover provisions in its by-laws that may make it more difficult for a third party
to acquire Mattel without its consent, which may adversely affect Mattel’s stock price.
Mattel may engage in acquisitions, mergers or dispositions, which may affect the profit, revenues, profit
margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel’s business. There can be no
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