What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-02-25 · 78 added, 76 removed, 282 unchanged (35% of the section changed)

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New factors emerge from time to time, and it is not possible for management to predict the impact of all of these factors on Mattel’s business, financial condition, or results of operations, or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

These factors are also currently, and in the future may be, amplified by the COVID-19 pandemic.

These factors are also currently, and in the future may be, amplified by the COVID-19 pandemic, the global economic climate and additional or unforeseen circumstances, developments, or risks.

Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.

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These challenges are intensifying due to trends towards shorter life cycles for individual toy products, the phenomenon of children outgrowing traditional toys at younger ages, an increasing use of more sophisticated technology in toys, and an evolving path to purchase.

In addition, entertainment media has become increasingly important for consumers to experience our brands and our partners' brands.

In addition, entertainment media has become increasingly important for consumers to experience Mattel's brands and its partners' brands.

The extent to which Mattel's entertainment offerings are successful can significantly impact the demand for its products and its financial performance.

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Mattel faces competitors who are also constantly monitoring and attempting to anticipate consumer tastes, seeking ideas which will appeal to consumers, and introducing new products that compete with Mattel’s products.

In addition, competition for access to entertainment properties has and may continue to lessen Mattel’s ability to secure, maintain, and renew popular licenses to entertainment products developed by other parties and licensed to Mattel, or require Mattel to pay licensors higher royalties and higher minimum guaranteed payments in order to obtain or retain these licenses.

As a licensee of entertainment properties, Mattel has no guarantee that a particular property or brand will translate into a successful toy, game, or other product.

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Inaccurately anticipating changes and trends in popular culture, media and movies, fashion, or technology can adversely affect Mattel’s sales, financial condition, and results of operations.

Successful movies and characters in children’s literature affect play preferences, and many products depend on media-based intellectual property licenses.

Successful movies and characters in children’s literature affect play preferences, and many products depend on media-based intellectual property licenses including trademarks, trade names, copyrights, patents, trade secrets, and rights under intellectual property license agreements and other agreements with third parties.

Media-based licenses can cause a line of toys or other products to gain immediate success among children, parents, or families.

Trends in media, movies, and children’s characters change swiftly and contribute to the transience and uncertainty of play preferences.

In addition, certain developments in the entertainment industry, including labor strikes, could cause delays in the release of new movies and television programs.

In addition, certain developments in the entertainment industry, including labor strikes, or impacts of COVID-19 such as delayed productions and theater closures, have at times in the past caused, and could in the future cause, delays in the release of new movies and television programs.

Such delays could adversely affect the sales of Mattel’s products based on such movies and television programs and the success of the movies and television programs that Mattel produces and distributes.

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Mattel’s ability to sell products is dependent in part upon the success of these programs.

Mattel’s business, financial condition, and results of operations could be adversely effected by its failure to successfully market its products or by an increase in its media or other advertising or promotional costs.

Mattel’s business, financial condition, and results of operations could be adversely affected by its failure to successfully market its products or by an increase in its media or other advertising or promotional costs.

Mattel’s business is highly seasonal, and its operating results depend, in large part, on sales during the relatively brief traditional holiday season.

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These factors may decrease sales or increase the risks that Mattel may not be able to meet demand for certain products at peak demand times or that Mattel’s own inventory levels may be adversely impacted by the need to pre-build products before orders are placed.

In addition, as a result of the seasonal nature of Mattel’s business, Mattel may be adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events, such as public health crises and pandemics, terrorist attacks, economic shocks, severe weather, earthquakes or other catastrophic events, that harm the retail environment or consumer buying patterns during its key selling season, or by events, such as strikes, disruptions in transportation, or port delays, that interfere with the manufacture or shipment of goods during the critical months leading up to the holiday purchasing season.

In addition, as a result of the seasonal nature of Mattel’s business, Mattel may be adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events, such as public health crises and pandemics, terrorist attacks, economic shocks, severe weather due to climate change or otherwise, earthquakes or other catastrophic events, that harm the retail environment or consumer buying patterns during its key selling season, or by events, such as strikes, disruptions in transportation, or port delays, that interfere with the manufacture or shipment of goods during the critical months leading up to the holiday purchasing season.

Mattel has significant customer concentration, so that economic difficulties or changes in the purchasing policies or patterns of its key customers could have an adverse effect on Mattel’s business, financial condition, and results of operations.

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Failure to successfully implement new initiatives or meet product introduction schedules can have an adverse effect on Mattel’s business, financial condition, and results of operations.

Mattel has at times in the past announced, and in the future may announce, initiatives to reduce its costs, optimize its manufacturing footprint, increase its efficiency, improve the execution of its core business, globalize and extend Mattel’s brands, catch new trends, create new brands, offer new innovative products and improve existing 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.

Mattel has in the past announced, and in the future may announce, initiatives to reduce its costs, optimize its manufacturing footprint, increase its efficiency, improve the execution of its core business, globalize and extend Mattel’s brands, catch new trends, create new brands, offer new innovative products and improve existing products, enhance product safety, develop people, improve productivity, simplify processes, and 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.

In addition, Mattel may anticipate introducing a particular product, product line, or brand at a certain time in the future.

Failure to achieve any of these initiatives could harm Mattel’s business, financial condition, and results of operations.

From time to time, Mattel anticipates introducing new products, product lines, or brands at a certain time in the future.

There is no guarantee that Mattel will be able to manufacture, source, ship, and distribute new or continuing products in a timely manner and on a cost-effective basis.

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Any shortcoming of a Mattel vendor or outsourcer, particularly an issue affecting the quality of these services or systems, results in risk of damage to Mattel’s reputation and brand value, and potentially adverse effects to Mattel's business, financial condition, and results of operations.

In addition, problems with transitioning these services and systems to, or operating failures with, these vendors and outsourcers cause delays in product sales and reduce efficiency of Mattel’s operations, and significant capital investments could be required to remediate the problem.

In addition, problems with transitioning these services and systems to, or operating failures with, these vendors and outsourcers cause delays in product sales and reduce the efficiency of Mattel’s operations, and significant capital investments could be required to remediate the problem.

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, including those in the toy business, generally 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 and online retailers that are customers of Mattel, including its largest retail customers, Walmart and Target, sell private-label toys designed, manufactured, and branded by the retailers themselves.

Some retail chains and online retailers that are customers of Mattel, including two of its largest retail customers, Walmart and Target, 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.

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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, entertainment, and other personnel.

Mattel’s future success depends partly on the continued contribution of key executives, designers, and technical, sales, marketing, manufacturing, entertainment, and other 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.

In addition, changes to Mattel’s current and future work environments may not meet the needs or expectations of its employees or be perceived as less favorable compared to other companies’ policies, which could negatively impact Mattel’s ability to hire and retain qualified personnel.

If Mattel fails to retain, hire, train, and integrate qualified employees and contractors, Mattel may not be able to maintain or expand its business.

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Negative impacts may result from, among other things:

• Declines in net sales as a result of retail store closures (including specialty retailers and Mattel’s brick-and-mortar American Girl retail stores), limited reopenings, evolving safer-at-home protocols, and limitations on the capacity of e-commerce in certain markets;

• Declines in net sales as a result of retail store closures (including specialty retailers and Mattel’s brick-and-mortar American Girl retail stores), limited re-openings, evolving safer-at-home protocols, and limitations on the capacity of e-commerce in certain markets;

• Disruptions to the design, development, manufacturing, and/or distribution operations of Mattel and/or its third-party suppliers resulting in limitations on Mattel’s ability to design, develop, manufacture, and distribute products effectively, efficiently, and in a timely manner;

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To the extent any of these disruptions become prolonged or recur, particularly during seasonally high periods of production or distribution, Mattel’s ability to meet demand may be materially impacted.

Since mid-March 2020, the majority of Mattel’s workforce has been working remotely.

Since mid-March 2020, the majority of Mattel’s corporate workforce has been working remotely.

Mattel continues to actively develop a plan to safely bring employees back to its offices, which will be based on need and governmental, health, and safety guidelines.

The impact of the COVID-19 pandemic continues to be fluid and uncertain, making it difficult to forecast the ultimate impact it could have on Mattel’s future operations.

If Mattel’s business experiences prolonged occurrence of adverse public health conditions due to COVID-19 or other similar public health incidents, Mattel’s business, financial position, sales, and results of operations could be materially impacted.

If Mattel’s business experiences prolonged effects from the occurrence of adverse public health conditions due to COVID-19 or other similar public health incidents, Mattel’s business, financial position, sales, and results of operations could be materially impacted.

Significant increases in the price of commodities, transportation, or labor, if not offset by declines in other input costs, or a reduction or interruption in the delivery of raw materials, components, and finished products from Mattel’s vendors, could adversely affect Mattel’s business, financial condition, and results of operations.

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Significant changes in currency exchange rates or the ability to transfer capital across borders could have an adverse effect on Mattel’s business, financial condition, and results of operations.

Mattel operates facilities and sells products in numerous countries outside the U.S.

Mattel operates facilities and sells products in numerous countries outside the United States.

During 2021, Mattel’s International segment net sales were 41% of Mattel’s total consolidated net sales.

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Future 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, financial condition, and results of operations.

For instance, Mattel's business, financial condition and results of operations could be adversely affected by the economic impact of changes in trade relations among the United States and other countries, such as China, including a new United States-Mexico-Canada Agreement, or changes in the EU, such as Brexit.

its personnel and facilities, its customers and suppliers, retail and financial markets, and general economic conditions."

For instance, Mattel's business, financial condition and results of operations could be adversely affected by the economic impact of changes in trade relations among the United States and other countries, such as China, including the United States-Mexico-Canada Agreement which became effective in 2020, or changes in the EU, such as Brexit.

For further discussion of these risks, see the below risk factor "Political developments, including trade relations, and the threat or occurrence of war or terrorist activities could adversely impact Mattel, its personnel and facilities, its customers and suppliers, retail and financial markets, and general economic conditions."

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.

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dealing with changes in governmental policies and the evolution of laws and regulations that impact Mattel's product offerings and related enforcement;

difficulties understanding the retail climate, consumer trends, local customs and competitive conditions in foreign markets, which are often quite different from the U.S.;

difficulties understanding the retail climate, consumer trends, local customs and competitive conditions in foreign markets, which are often quite different from those in the United States;

difficulties in moving materials and products from one country to another, including port congestion, strikes and other transportation delays and interruptions;

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and the impact of tariffs, quotas, or other protectionist measures.

Failure to properly manage the risks described above or to otherwise successfully manage Mattel's new and emerging market business could adversely affect Mattel's business, financial condition, and results of operations.

Failure to properly manage the risks described above could adversely affect Mattel's business, financial condition, and results of operations.

Political developments, including trade relations, and the threat or occurrence of war or terrorist activities could adversely impact Mattel, its personnel and facilities, its customers and suppliers, retail and financial markets, and general economic conditions.

Mattel’s business is worldwide in scope, including operations in over 50 countries and territories.

and a foreign country in which Mattel has significant manufacturing facilities or other operations, could adversely affect Mattel’s business, financial condition, and results of operations.

For example, a change in trade status between the U.S.

and a foreign country could result in a substantial increase in the import duty of toys manufactured in that foreign country and imported into the U.S.

has commenced certain trade actions, including imposing increased tariffs on certain goods imported into the U.S.

from China, which has resulted in retaliatory tariffs by China.

Any increased trade barriers or restrictions on global trade imposed by the U.S., or further retaliatory trade measures taken by China or other countries in response, could adversely affect Mattel's business, financial condition, and results of operations.

Given the recent change in the U.S.

presidential administration, Mattel faces uncertainty with respect to U.S.

trade policy going forward.

Political instability, civil unrest, the deterioration of the political situation in a country in which Mattel has significant sales or operations, or the breakdown of trade relations between the United States and a foreign country in which Mattel has significant manufacturing facilities or other operations, could adversely affect Mattel’s business, financial condition, and results of operations.

For example, a change in trade status between the United States and a foreign country could result in a substantial increase in the import duty of toys manufactured in that foreign country and imported into the United States.

The United States has commenced certain trade actions, including imposing increased tariffs on certain goods imported into the United States from China, which has resulted in retaliatory tariffs by China.

In addition, the United States has commended certain trade actions as a result of the Russia-Ukraine conflict, which are widely expected to result in retaliatory measures or actions, including tariffs, by Russia.

Any increased trade barriers or restrictions on global trade imposed by the United States, or further retaliatory trade measures taken by China, Russia, or other countries in response, could adversely affect Mattel's business, financial condition, and results of operations.

In addition, the occurrence of war or hostilities between countries or threat of terrorist activities, and the responses to and results of these activities, could adversely impact Mattel, its personnel and facilities, its customers and suppliers, retail and financial markets, and general economic conditions.

Disruptions in Mattel’s manufacturing operations or supply chain due to political instability, civil unrest, or disease could adversely affect Mattel’s business, financial position, sales, and results of operations.

Mattel owns, operates, and manages manufacturing facilities and utilizes third-party manufacturers and suppliers throughout Asia, primarily in China, Indonesia, Malaysia, Thailand, and in Canada and Mexico.

Mattel owns, operates, and manages manufacturing facilities and utilizes third-party manufacturers and suppliers throughout Asia, primarily in China, Indonesia, Malaysia, and Thailand, and in Mexico.

The risk of political instability and civil unrest exists in certain of these countries, which could temporarily or permanently damage the manufacturing operations of Mattel or its third-party manufacturers located there.

Outbreaks of communicable diseases have also been known to occur in certain of these countries.

For example, the COVID-19 pandemic began in Wuhan, Hubei Province, China and caused supply chain interruptions for Mattel, its suppliers, and its customers that contributed to lower net sales in the first have of 2020 and may cause lower net sales to the extent they remain issues in the future.

For example, the COVID-19 pandemic began in Wuhan, Hubei Province, China and has caused supply chain disruption for Mattel, its suppliers, and its customers that contributed to lower net sales in the first half of 2020 and may cause lower net sales to the extent they remain issues in the future.

Other disruptions from public health crises such as these result from, among other things, workers contracting diseases, restrictions on factory openings, restrictions on travel, restrictions on shipping, and the closure of critical infrastructure.

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 communicable diseases such as these, or if Mattel, Mattel’s third-party manufacturers, or their suppliers are adversely affected by other impacts of such diseases.

In addition, the contingency plans Mattel has developed to help mitigate the impact of disruptions in its manufacturing operations, may not prevent its business, financial position, sales, and results of operations from being adversely affected by a significant disruption to its manufacturing operations or suppliers.

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 communicable diseases, or if Mattel, Mattel’s third-party manufacturers, or their suppliers' are adversely affected by other impacts of such diseases.

In addition, the contingency plans Mattel has developed to help mitigate the impact of disruptions in its manufacturing operations and supply chain may not prevent its business, financial position, sales, and results of operations from being adversely affected 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 adversely affect Mattel’s business, financial condition, and results of operations.

Mattel has significant operations near major earthquake faults, including its corporate headquarters in El Segundo, 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, adversely affecting Mattel’s business, financial condition, and results of operations.

A catastrophic event where Mattel has important operations, such as an earthquake, tsunami, flood, typhoon, fire, or other natural or manmade disaster, including as a result of climate change, 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, adversely affecting Mattel’s business, financial condition, and results of operations.

Global climate change and our commitments to reduce our carbon footprint presents challenges to our business that could adversely affect us.

The effects of global climate change create financial and operational risks to our business, both directly and indirectly.

There is a general consensus that greenhouse gas (“GHG”) emissions are linked to global climate change, and that these emissions must be reduced dramatically to avert the worst effects of climate change.

In August 2021, Mattel announced its goal to reduce absolute Scope 1 and Scope 2 GHG emissions 50% by 2030.

While Mattel has been and remains committed to being responsive to climate change and to reducing its carbon footprint, there can be no assurance that Mattel’s current and future strategic plans to achieve its goals will be successful, that related costs may not be higher than expected, that proposed regulation or deregulation related to climate change will not be more aggressive than Mattel’s sustainability measures and result in higher costs, or that any investments Mattel makes in furtherance of achieving such goals will meet expectations or any binding or non-binding legal standards regarding sustainability performance, any one of which could have an adverse effect on Mattel’s financial condition and results of operations.

Mattel’s failure to achieve its goals regarding climate change could damage its reputation, causing investors, consumers, and other stakeholders to lose confidence in Mattel and its brands, and negatively impact Mattel’s operations.

Additionally, consumers and customers may put an increased priority on purchasing products that are sustainably manufactured and packaged, requiring Mattel to incur increased costs for additional transparency, due diligence, and reporting.

Financial and Accounting

To the extent Mattel is unable to realize the anticipated cost savings from its previously announced cost savings programs or incurs additional and/or unexpected costs in order to realize such cost savings, Mattel's business, financial condition, and results of operations could be adversely affected.

Mattel has and continues to implement a series of cost savings programs as described in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cost Savings Programs." Mattel incurred costs of $40.6 million and $59.1 million in 2020 and 2019, respectively, to achieve such cost savings, and expects to incur additional costs during 2021.

To the extent Mattel is unable to realize the anticipated cost savings from its previously announced cost savings programs or incurs additional and/or unexpected costs to realize such cost savings, Mattel's business, financial condition, and results of operations could be adversely affected.

Mattel has and continues to implement a series of cost savings programs as described in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cost Savings Programs." Mattel incurred costs of $35.2 million, $40.6 million, and $37.6 million in 2021, 2020, and 2019, respectively, to achieve such cost savings, and expects to incur additional costs during 2022.

There can be no assurance that Mattel will be able to realize the cost savings from its previously announced cost savings programs in the anticipated amounts or within the anticipated timeframes or at all.

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Mattel undertakes no obligation to update or otherwise revise or reconcile its expectations regarding its cost savings efforts, whether as a result of new information, future events, or otherwise.

Mattel has at times in the past engaged, and may in the future engage, in acquisitions, mergers, dispositions, or other strategic transactions, which can affect Mattel's revenues, profit, profit margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel’s business.

Mattel has in the past engaged, and may in the future engage, in acquisitions, mergers, dispositions, or other strategic transactions, which can affect Mattel's revenues, profit, 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 bylaws 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 regularly considers, and from time to time engages in, discussions and negotiations regarding acquisitions, mergers, or dispositions, or other strategic transactions that could affect the profit, revenues, profit margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel’s business.

Mattel regularly considers, and from time to time engages in, discussions and negotiations regarding acquisitions, mergers, dispositions, or other strategic transactions that could affect the profit, revenues, profit margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel’s business.

There can be no assurance that Mattel will be able to identify suitable acquisition targets or merger partners or that, if identified, it will be able to complete these transactions on terms acceptable to Mattel and to potential acquisition targets or merger partners.

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There is a purported class action alleging federal securities laws violations currently pending in the United States District Court for the Central District of California against Mattel, PricewaterhouseCoopers LLP, and individual defendants.

In addition, stockholders have filed derivative actions in the United States District Court for the District of Delaware making allegations that are substantially identical to, or are based upon, the allegations of the class action lawsuit.

In addition, stockholders have filed derivative actions in the United States District Court for the District of Delaware and the Central District of California, as well as the Court of Chancery for the State of Delaware, making allegations that are substantially identical to, or are based upon, the allegations of the class action lawsuit.

For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 12 to the Consolidated Financial Statements—Commitments and Contingencies—Litigation."

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A failure to maintain effective internal control processes could lead to violations, unintentional or otherwise, of laws and regulations.

As disclosed in Part II, Item 9A “Controls and Procedures” in Mattel's Annual Report on Form 10-K/A for the year ended December 31, 2018, Mattel determined that there were certain material weaknesses in its internal control over financial reporting.

Mattel determined that the material weaknesses were remediated and that its internal control over financial reporting was effective as of December 31, 2019.

In the past, Mattel has determined that there were certain material weaknesses in its internal control over financial reporting, which have since been remediated.

If the additional controls and procedures that Mattel has implemented to remediate the material weaknesses prove to be insufficient or if Mattel identifies other control deficiencies that individually or together constitute significant deficiencies or material weaknesses, Mattel's ability to record, process, and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected.

Litigation, government investigations, or regulatory enforcement actions arising out of any such failure or alleged failure could subject Mattel to civil and criminal penalties that could materially and adversely affect Mattel's reputation, financial condition, and operating results.

Similarly, the control deficiency, remediation efforts, and any related litigation or government investigations, or regulatory enforcement actions will require management attention and resources, cause Mattel to incur unanticipated costs, and negatively affect investor confidence in Mattel’s financial statements, cause Mattel reputational harm, and raise other risks to its operations.

Similarly, the control deficiency, remediation efforts, and any related litigation, government investigations, or regulatory enforcement actions will require management attention and resources, cause Mattel to incur unanticipated costs, and negatively affect investor confidence in Mattel’s financial statements, cause Mattel reputational harm, and raise other risks to its operations.

Legal and Regulatory

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Mattel’s ability to effectively manage its business and coordinate the production, distribution, and sale of its products and services depends significantly on the reliability and capacity of these systems and third-party service providers.

Mattel has exposure to similar security risks faced by other large companies that have data stored on their information technology systems.

In July 2020, Mattel discovered that it was the victim of a ransomware attack on its information technology systems that caused data on a number of systems to be encrypted.

Mattel contained the attack and, although some business functions were temporarily impacted, Mattel restored its operations.

A forensic investigation of the incident concluded that no exfiltration of any sensitive business data or retail customer, supplier, consumer, or employee data was identified.

Mattel has exposure to security risks similar to those faced by other large companies that have data stored on their information technology systems, and is not always successful in preventing attacks or other cyber incidents.

For example, in 2020, Mattel experienced a ransomware attack.

That attack was contained, Mattel restored its operations, and no exfiltration of any sensitive business data or retail customer, supplier, consumer, or employee data was identified;

however, there can be no assurance that Mattel will be able to mitigate negative impacts in the same way in the event of future attacks or other cyber

The systems and processes that Mattel has developed to protect personal information and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third-party provider as well as enhancements to the security of Mattel's systems and processes following the July 2020 ransomware attack, do not provide absolute security, and any failure or inadequacy of such systems or processes could have an adverse effect on Mattel's business, financial condition, and results of operations.

While Mattel carries cyber and business continuity insurance commensurate with its size and the nature of its operations, there can be no guarantee that costs incurred as a result of cyber events will be covered completely.

The recent global shift to remote work environments (including for Mattel’s employees, customers, sellers, suppliers, vendors, and other third parties) may amplify these security risks or introduce additional security vulnerabilities.

If Mattel’s or its third-party service providers' systems fail to operate effectively or are damaged, destroyed, or shut down, or there are problems with transitioning to upgraded or replacement systems, or there are future security breaches in these systems, any of which could occur as a result of natural disasters, software or equipment failures, telecommunications failures, loss or theft of equipment, acts of terrorism, circumvention of security systems, or other cyber-attacks, including denial-of-service attacks, Mattel could experience delays or decreases in product sales and reduced efficiency of its operations.

Additionally, any of these types of events could lead to violations of privacy laws, loss of customers, or loss, misappropriation or corruption of confidential information, trade secrets, or data, which could expose Mattel to potential litigation, regulatory actions, sanctions, or other statutory penalties, any or all of which could adversely affect its business and cause it to incur significant losses and remediation costs.

As a global company, Mattel is subject to a variety of continuously evolving and developing laws and regulations in the U.S.

and abroad regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.

As a global company, Mattel is subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.

Significant uncertainty exists as privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements.

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Mattel faces risks related to protecting its proprietary intellectual property and information and is subject to third-party claims that Mattel is infringing on their intellectual property rights, either of which could adversely affect Mattel's business, financial condition, and results of operations.

The value of Mattel’s business depends on its ability to protect its intellectual property and information, including its trademarks, trade names, copyrights, patents, trade secrets, and rights under intellectual property license agreements and other agreements with third parties, in the U.S.

and around the world, as well as its customer, employee, and consumer data.

From time to time, third parties have challenged, and may in the future try to challenge, Mattel's ownership of its intellectual property in the U.S.

and around the world.

From time to time, third parties have challenged, and may in the future try to challenge, Mattel's ownership of its intellectual property in the United States and around the world.

Responding to any infringement claim, regardless of its validity, may be costly and time-consuming and may divert management and key personnel from business operations.

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In addition, Mattel's business is subject to the risk of third parties counterfeiting its products or infringing on its intellectual property rights.

The steps Mattel has taken may not prevent unauthorized use of its intellectual property, particularly in foreign countries where the laws may not protect its intellectual property as fully as in the U.S.

Mattel at times resorts to litigation to protect its intellectual property rights, which could result in substantial costs and diversion of resources.

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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, and these laws and regulations can change frequently.

These policies or regulations 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 (including international trade laws and regulations, export controls, and economic sanctions), and regulations regarding currency and financial matters, anticorruption standards (such as the U.S.

These policies or regulations 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 (including international trade laws and regulations, export controls, and economic sanctions), regulations regarding currency and financial matters, anticorruption standards (such as the U.S.

Foreign Corrupt Practices Act), environmental matters, advertising directed toward children, product content, and privacy and data protection, as well as other administrative and regulatory restrictions.

The steps Mattel takes to comply with these laws and policies or regulations do not ensure that Mattel will be in compliance in the future.

attention and consumer dissatisfaction, which could have an adverse effect on Mattel’s business, financial condition, and results of operations.

Notwithstanding the reduction in the corporate income tax rate, Mattel is continuing to examine the long-term impact of the U.S.

During 2019 and 2020, the Department of the Treasury issued certain guidance in the form of notices and proposed regulations with respect to several provisions of the U.S.

Additional guidance related to U.S.

Tax Act may be forthcoming in 2021.

The current administration has proposed increasing the tax rate on U.S.

In addition, as Mattel enters into new areas of investment, product development, or other business activities, it will have to learn to navigate the regulatory framework surrounding those areas, which may be continuing to develop.

For example, in 2021 Mattel launched its Hot Wheels NFT series involving use of cryptocurrency.

Mattel may continue to transact in cryptocurrency or make investments involving cryptocurrency, and must comply with applicable regulations, which continue to evolve.

The steps Mattel takes to comply with these laws, regulations, and policies do not ensure that Mattel will be in compliance in the future.

Compliance with these various laws, regulations, and policies imposes significant costs on Mattel’s business, and failure to comply could result in monetary liabilities and other penalties and could lead to negative media attention and consumer dissatisfaction, which could have an adverse effect on Mattel’s business, financial condition, and results of operations.

New tax laws and interpretations of tax law are taken into account for financial statement purposes in the quarter or year that they become applicable.

Tax authorities are increasingly scrutinizing the tax positions of companies and Mattel has tax audits pending in several jurisdictions.

The United States federal and state governments, countries in the European Union, as well as a number of countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws that, if enacted, could increase Mattel’s tax obligations in jurisdictions where Mattel operates its business.

For example, the current administration has proposed increasing the tax rate on U.S.

corporations, changes to the global intangible low-taxed income (GILTI) tax regime, implementing a corporate minimum tax, and other corporate tax proposals that could adversely impact Mattel’s business.

It is uncertain if, and to what extent, various states will conform to new tax laws.

Foreign jurisdictions may also enact new tax laws that could adversely affect Mattel's business.

If United States or other foreign tax authorities change applicable tax laws or successfully challenge how or where Mattel’s profits are currently recognized, Mattel’s overall taxes could increase, and Mattel’s business, financial condition or results of operations may be adversely impacted.

In addition, increases in import and excise duties and/or sales or value added taxes in the jurisdictions in which Mattel operates could affect the affordability of Mattel’s products and, therefore, reduce demand.

From time to time, issues with products lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory or other actions by governmental authorities, which could divert resources, affect business operations, decrease sales, increase costs, and put Mattel at a competitive disadvantage, any of which could have an adverse effect on Mattel’s business, financial condition, and results of operations.

Mattel has at times in the past experienced, and may in the future experience, issues with products that lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory actions by governmental authorities.

Mattel has in the past experienced, and may in the future experience, issues with products that lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory actions by governmental authorities.

These issues and activities have resulted in increased governmental scrutiny and inquiries, harm to Mattel’s reputation, reduced demand by consumers for its products, decreased willingness by retailer customers to purchase or provide marketing support for those products, adverse impacts on Mattel’s ability to enter into licensing agreements for products on competitive terms, absence or increased cost of insurance, or additional safety and testing requirements.

For example, the insurance terms Mattel negotiated for the period from February 1, 2020 to December 31, 2021 were less favorable than in the past as a result of past claims, product liability incidents, changes in market conditions, and other factors.

For example, the insurance terms Mattel negotiated for recent periods were less favorable than in the past as a result of past claims, product liability incidents, changes in market conditions, and other factors.

These issues and activities can divert development and management resources, adversely affect Mattel’s business operations, decrease sales, increase legal fees and other costs, and put Mattel at a competitive disadvantage compared to other manufacturers not affected by similar issues with products, any of which could have an adverse effect on Mattel’s business, financial condition, and results of operations.

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Mattel’s current operating procedures and product requirements, including testing requirements and standards, have imposed costs on both Mattel and the vendors from which it purchases products.

Changes in business conditions, including those resulting from new legislative and regulatory requirements, have at times in the past caused, and in the future could cause, further revisions in Mattel’s operating procedures and product requirements.

Changes in business conditions, including those resulting from new legislative and regulatory requirements, have in the past caused, and in the future could cause, further revisions of Mattel’s operating procedures and product requirements.

Changes in Mattel’s operating procedures and product requirements can delay delivery of products and increase costs.

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Some vendors may choose not to continue to do business with Mattel or not to accommodate Mattel’s needs to the extent that they have done in the past.

In addition, rising production costs, contraction of credit availability, and labor shortages have caused a substantial contraction in the number of toy manufacturers in China, decreasing the number of potential vendors to manufacture Mattel’s products.

In addition, rising production costs, contraction of credit availability, and labor shortages have caused a substantial contraction in the number of toy manufacturers in China and other countries in Asia, decreasing the number of potential vendors to manufacture Mattel’s products.

Because of the seasonal nature of Mattel’s business and the demands of its customers for deliveries with short lead times, Mattel depends upon the cooperation of its vendors to meet market demand for its products in a timely manner.

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Mattel’s substantial indebtedness could adversely affect its ability to raise additional capital to fund its operations, limit its ability to react to changes in the economy or its industry, and expose it to interest rate risk to the extent of its variable rate debt.

At December 31, 2020, Mattel had $2.85 billion of indebtedness on a consolidated basis, consisting primarily of 6.75% Senior Notes due 2025 and 5.875% Senior Notes due 2027, as well as Senior Notes issued in prior years.

At December 31, 2021, Mattel had $2.57 billion of indebtedness on a consolidated basis, consisting primarily of 3.375% Senior Notes due 2026, 5.875% Senior Notes due 2027, and 3.750% Senior Notes due 2029, as well as Senior Notes issued in prior years.

In addition, Mattel has $1.40 billion of commitments under its senior secured revolving credit facilities, subject to borrowing base capacity.

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• Limit Mattel’s ability to obtain additional debt or equity financing for working capital, capital expenditures, business development, debt service requirements, acquisitions, and general corporate or other purposes.

Mattel’s credit ratings have declined in recent years and as a result, Mattel’s cost of issuing new debt has increased.

Any further reduction in Mattel’s credit ratings could further increase the cost of issuing any such debt.

Mattel’s credit ratings have fluctuated in recent years.

If Mattel’s credit ratings decline, its cost of issuing new debt could increase.

Mattel may be hindered from obtaining, or required to incur incremental costs to obtain, additional credit in tight credit markets.

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Mattel may not be able to refinance any of Mattel’s indebtedness, including its senior secured revolving credit facilities and the notes, on commercially reasonable terms or at all.

If Mattel cannot service its indebtedness, Mattel may need to take actions such as selling assets, seeking additional equity, reducing or delaying capital expenditures, strategic acquisitions, investments, and alliances.

If Mattel cannot service its indebtedness, Mattel may need to take actions such as selling assets, issuing additional equity, reducing or delaying capital expenditures, strategic acquisitions, investments, and alliances.

There can be no assurance that such actions, if necessary, will be effected on commercially reasonable terms or at all.

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Any interest rate swaps that Mattel enters into with respect to its variable rate indebtedness may not fully mitigate Mattel’s interest rate risk.

The phaseout of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, may adversely affect Mattel’s borrowing costs.

The phaseout of LIBOR, or the replacement of LIBOR with a different reference rate, may adversely affect Mattel’s borrowing costs.

LIBOR is an interest rate benchmark used as a reference rate for a wide range of financial transactions, including derivatives and loans.

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In light of these recent announcements, the future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist.

The Alternative Reference Rates Committee (ARRC) has identified the Secured Overnight Financing Rate (SOFR) as the recommended alternative for use in financial and other derivatives contracts that are currently indexed to United States dollar LIBOR.

The Alternative Reference Rates Committee ("ARRC") has identified the Secured Overnight Financing Rate ("SOFR") as the recommended alternative for use in financial and other derivatives contracts that are currently indexed to U.S.

dollar LIBOR.

At this time, it is not possible to predict the effect any modification or discontinuation of LIBOR, or the establishment of alternative reference rates such as SOFR, will have on Mattel.

Although regulators and IBA have made clear that the recent announcements should not be read to say that LIBOR has ceased or will cease, in the event LIBOR does cease to exist, Mattel may need to renegotiate its credit agreements and related agreements, which may result in interest rates and/or payments that do not correlate over time with the interest rates and/or payments that would have been made on its obligations if LIBOR was available in its current form.

Although regulators and IBA have made clear that the recent announcements should not be read to say that LIBOR has ceased or will cease, in the event LIBOR does cease to exist, Mattel's credit agreements and related agreements would transition from LIBOR to SOFR, which may result in interest rates and/or payments that do not correlate over time with the interest rates and/or payments that would have been made on its obligations if LIBOR was available in its current form.

Mattel is dependent upon its lenders for financing to execute its business strategy and meet its liquidity needs.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors