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Item 1A. Risk Factors

2024-03-15 compared with 2023-02-22 · 110 added, 83 removed, 287 unchanged (40% of the section changed)

Risk Factors.

If any of the risks, events, and uncertainties described in the cautionary risk factors listed below actually occurs, Mattel's business, financial condition and results of operations could be adversely affected, and such effects could at times be material.

If any of the risks, events, and uncertainties described below actually occurs, Mattel's business, financial condition and results of operations could be adversely affected, and such effects could at times be material.

The risk factors listed below are not exhaustive.

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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 global economic or geopolitical climate and additional or unforeseen circumstances, developments, or risks, including pandemics or other public health crises.

These factors are also currently, and in the future may be, amplified by the global economic or geopolitical 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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Business Operations

Mattel is not always able to successfully identify and/or satisfy consumer preferences, which could cause its business, financial condition, and results of operations to be adversely affected.

Mattel and its license partners are not always able to successfully identify and/or satisfy consumer preferences, which could cause Mattel ' s business, financial condition, and results of operations to be adversely affected.

Mattel's business and operating results depend largely upon the appeal of its products, driven by both innovation and marketing.

Consumer preferences, particularly with children as the end users of Mattel's products, are continuously changing and can vary by geographical markets.

Product life cycles and consumer preferences continue to be affected by the rapidly increasing use and proliferation of social and digital media by consumers, and the speed with which information is shared.

Mattel is not always able to identify trends in consumer preferences or identify and satisfy consumer preferences in a timely manner.

Significant, sudden shifts in demand are caused by "hit" toys and trends, which are often unpredictable and can result in short consumer life cycles.

Mattel offers a diverse range of products for children of all ages and families that includes, among others, toys for infants, toddlers, and preschoolers, toys for school-aged children, youth electronics, digital media, hand-held and other games, puzzles, educational toys, media-driven products, and fashion-related toys.

Mattel offers a diverse range of products for children, fans of all ages, and families that includes, among others, toys for infants, toddlers, and preschoolers, toys for school-aged children, youth electronics, digital media, hand-held and other games, puzzles, educational toys, and fashion-related items.

Mattel competes domestically and internationally with a wide range of large and small manufacturers, marketers, and sellers of toys, video games, consumer electronics such as tablets and mobile devices, and other play products, as well as retailers, which means that Mattel's market position is always at risk.

Mattel's ability to maintain its current product sales and increase its product sales or establish product sales with new, innovative toys, depends on Mattel's ability to satisfy play preferences, enhance existing products, develop and introduce new products, and achieve market acceptance of these products.

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 Mattel's brands and its license partners' brands.

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

Consumer acceptance of Mattel's entertainment offerings is impacted by factors beyond its control, including critical reviews, promotions, the popularity of movies and television programs released into the marketplace at or near the same time, the availability of alternative forms of entertainment, general economic conditions, and public preferences generally.

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

Consumer acceptance of Mattel's and its license partners' entertainment offerings is impacted by factors beyond its control, including critical reviews, promotions, the popularity of movies and television programs released into the marketplace at or near the same time, the availability of alternative forms of entertainment, general economic conditions, and public preferences generally.

Mattel's failure to successfully meet the challenges outlined above in a timely and cost-effective manner could decrease demand for its products and entertainment offerings and may adversely affect Mattel's business, financial condition, and results of operations.

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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 lessened, and may in the future 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 to obtain or retain these licenses.

In addition, competition for access to entertainment properties has lessened, and may in the future continue to lessen, Mattel's ability to secure, maintain, and renew popular licenses to entertainment products developed by other parties and licensed to Mattel on beneficial terms, if at all, or require Mattel to pay licensors higher royalties and higher minimum guaranteed payments 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.

In addition, the barriers to entry for new participants in the toy products industry and entertainment industry are low.

In addition, the barriers to entry for new participants in the toy products industry and

entertainment industry are low.

In a very short period of time, new market participants with a popular product idea or entertainment property can become a significant source of competition for Mattel and its products.

Reduced demand for Mattel's brands, products, and product lines as a result of these factors may adversely affect Mattel's business, financial condition, and results of operations.

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 including trademarks, trade names, copyrights, patents, trade secrets, and rights under intellectual property license agreements and other agreements with third parties.

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

Successful movies, television programs, video games, 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.

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

Mattel attempts to respond to such trends and developments by modifying, refreshing, extending, and expanding its product offerings on an annual basis.

Mattel spends considerable resources in designing and developing toys and other products based on its and its license partners' planned content releases.

Mattel also relies heavily on the efforts of third parties, such as film studios and other content creators and distributors, with respect to the development of content, marketing support, and release dates, which has an impact on the success of such content and the associated toys and other products.

Mattel also relies heavily on the efforts of third parties, such as studios and other content creators and distributors, with respect to the development of content, marketing support, and release dates, which has an impact on the success of such content and the associated toys and other products.

In many cases, Mattel does not fully control when or if any particular project will be greenlit, developed, or released.

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The pace of change in product offerings and consumer tastes for sophisticated technology products is potentially even greater than for Mattel's more traditional products, and consequently the window for consumer interest in such products may be shorter than for traditional toys and games.

Any inability by Mattel to accurately anticipate trends in popular culture, movies, media, fashion, or technology may cause its products not to be accepted by children, parents, or families and may adversely affect its sales, financial condition, and results of operations.

Any inability by Mattel to accurately anticipate trends in popular culture, media, fashion, or technology may cause its products not to be accepted by children, parents, fans, or families and may adversely affect its sales, financial condition, and results of operations.

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 products are marketed worldwide through a diverse spectrum of advertising, marketing, and promotional programs, including the use of digital and social media to reach consumers.

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 affected by its failure to successfully market its products or by an increase in its media or other advertising or promotional costs.

As such, 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 advertising, marketing, or promotional costs.

Mattel's business is highly seasonal and otherwise subject to fluctuations in demand, and its operating results depend, in large part, on sales during the relatively brief traditional holiday season.

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Management believes that the increase in "last minute" shopping during the holiday season and the popularity of gift cards (which often shift purchases to after the holiday season) may negatively impact customer re-orders during the holiday 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 pandemics or other public health crises, 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.

pandemics or other public health crises, 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.

If Mattel does not correctly anticipate demand for its products, Mattel may not be able to secure sufficient quantities or cost-effective production of its products or it could have costly excess production or inventories.

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A small number of customers account for a large share of Mattel's worldwide consolidated net sales.

In 2022, Mattel's three largest customers, Walmart, Target, and Amazon, in the aggregate, accounted for approximately 43% of net sales (Walmart at $0.95 billion, Target at $0.76 billion, and Amazon at $0.64 billion ) and its ten largest customers, in the aggregate, accounted for approximately 52% of net sales.

In 2023, Mattel's three largest customers, Walmart, Target, and Amazon, in the aggregate, accounted for approximately 44% of worldwide consolidated net sales (Walmart at $1.13 billion, Target at $0.67 billion, and Amazon at $0.60 billion ) and its ten largest customers, in the aggregate, accounted for approximately 50% of net sales.

This concentration exposes Mattel to risk of a material adverse effect if one or more of Mattel's large customers were to significantly reduce purchases for any reason, favor competitors or new entrants, redeploy their retail floor space to other product categories, or increase their direct competition with Mattel by expanding their private-label business.

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Unforeseen delays or difficulties in the development process or significant increases in the planned cost of development for new Mattel products may cause the introduction date for products to be later than anticipated or, in some situations, may cause a product or new product introduction to be discontinued.

Failure to successfully implement any of these initiatives or launches, or the failure of any of these initiatives or launches to produce the results anticipated by management, could have an adverse effect on Mattel's business, financial condition, and results of operations.

Failure to successfully implement any of these initiatives or launches, or the failure of any of these initiatives or launches to produce the

results anticipated by management, could have an 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 are subject to harm from actions taken by third parties that are outside Mattel's control.

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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 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.

Some retail chains and online retailers that are customers of Mattel, including three of its largest retail customers, Walmart, Amazon 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 and reduce overall consumer demand for Mattel products.

In some cases, retailers who sell these private-label toys are larger than Mattel and have substantially more resources than Mattel.

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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.

If Mattel fails to retain, hire, train, and integrate key personnel, Mattel's ability to maintain or expand its business could be harmed.

Recruiting and retaining qualified personnel is costly and highly competitive.

Labor shortages and increased labor costs as a result of increased competition for qualified talent, higher employee turnover rates, increases in employee benefit costs, wage inflation, or other disruptions to Mattel's workforce can negatively impact its business.

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.

Market Conditions

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Mattel's performance is impacted by the level of discretionary consumer spending, which remains relatively weak in many countries around the world in which Mattel does business.

Consumers' discretionary purchases of toy products are often impacted by a number of factors beyond Mattel's control, including, inflation, job losses, foreclosures, bankruptcies, reduced access to credit, interest rates, investment losses, lower consumer confidence, and other macro-economic factors that affect consumer spending behavior.

Any of these factors can reduce the amount that consumers spend on the purchase of Mattel's products.

Consumers' discretionary purchases of toy products are often impacted by a number of factors beyond Mattel's control, including, inflation, job losses, foreclosures, bankruptcies, reduced access to credit, interest rates, tax rates, investment losses, lower consumer confidence, and other macro-economic factors that affect consumer spending behavior.

These or other factors can reduce the amount that consumers spend on the purchase of Mattel's products.

Deterioration of global economic conditions have at times adversely affected Mattel's business and financial results.

Unfavorable economic conditions can also impair the ability of those with whom Mattel does business to satisfy their obligations to us.

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 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, and/or trade actions 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.

purchase of its products.

Those steps may increase costs and/or decrease profit margins and are not always successful.

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dollars, and partially hedging this exposure using foreign currency forward exchange contracts may ultimately be unsuccessful.

Government action may restrict Mattel's ability to transfer capital across borders and may also impact the fluctuation of currencies in the countries where Mattel conducts business or has invested capital.

Government action may restrict Mattel's ability to transfer capital across borders, such as recently enacted currency control regulations in China, and may also impact the fluctuation of currencies in the countries where Mattel conducts business or has invested capital.

Significant changes in currency exchange rates, reductions in Mattel's ability to transfer its capital across borders, and changes in government-fixed currency exchange rates, including the Chinese yuan, could have an adverse effect on Mattel's business, financial condition, and results of operations.

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

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

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

Disruptions due to political instability, civil unrest, future pandemics or other public health crises, or earthquakes or other natural disasters out of Mattel's control and actions taken by governments, businesses, and individuals in response to such events could adversely affect Mattel's business, financial position, sales, and results of operations.

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For example, the COVID-19 pandemic and the actions taken by governments, businesses, and individuals in response thereto affected how Mattel and its suppliers and partners operated their businesses, caused supply chain disruption and retail store closures, and adversely affected Mattel's operating results.

While the impact of the COVID-19 pandemic has largely subsided, the impact of any new outbreaks of COVID-19, other variants, or other public health crises on Mattel's business and financial results will depend on future developments, which are highly uncertain and cannot be predicted.

The impact of any new outbreaks of COVID-19, other variants, or other public health crises on Mattel's business and financial results will depend on future developments, which are highly uncertain and cannot be predicted.

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

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Political developments, including trade relations, and the threat or occurrence of war or terrorist activities, and/or trade actions 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 can be directly and indirectly impacted in a negative way by geopolitical tensions.

Political instability, civil unrest, the deterioration of the political, economic, or social 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.

Mattel's business is worldwide in scope, and political instability, civil unrest, the deterioration of the political, economic, or social 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.

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.

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In addition, the United States, United Kingdom, and European Union, among other jurisdictions, have each imposed export controls, as well as financial and economic sanctions, currency controls, and other trade actions, on certain products, technologies, industry sectors, and parties in Russia as a result of the Russia-Ukraine war, which have resulted and could further result in retaliatory measures and actions 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 further adversely affect Mattel's business, financial condition, and results of operations.

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

The outcomes of, and disruptions

associated with, upcoming elections in the United States and other jurisdictions in which Mattel operates could alter the political, economic, and regulatory landscape in ways that are unfavorable to Mattel's interests.

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.

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Mattel has paused all shipments into Russia and expects, for the foreseeable future, decreased revenues from Russia and Ukraine.

Global climate change, evolving stakeholder expectations for corporate responsibility matters, and Mattel's related goals present challenges to its business and reputation that could adversely affect Mattel.

Global climate change, evolving stakeholder expectations for sustainability matters, and Mattel's related goals present challenges to its business and reputation that could adversely affect Mattel.

The effects of global climate change create financial, operational, and reputational risks to Mattel's business, both directly and indirectly.

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Mattel may be subject to decreased availability or less favorable pricing for certain commodities that are necessary for Mattel's products.

In addition, Mattel may incur capital expenditures, compliance costs, and other costs to comply with increasingly stringent environmental laws and enforcement policies.

A variety of stakeholders, including regulators, investors, advisory firms, rating agencies, and customers, are establishing laws, regulations, expectations, and/or assessments reflecting their expectations for corporate practices related to climate change and other corporate responsibility matters.

In addition, Mattel may incur capital expenditures, compliance costs, and other costs to comply with increasingly stringent environmental laws, compliance reporting, and enforcement policies.

Governments around the world are increasingly focused on enacting laws and regulations regarding climate change and regulation of GHG emissions.

Lawmakers and regulators in the United States and certain jurisdictions where Mattel operates have proposed or enacted regulations requiring reporting of GHG emissions and the restriction thereof, including increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting, and incentives for renewable energy.

For example, in October 2023, California enacted legislation addressing the disclosure of GHG emissions, climate-related risks, environmental claims, and the use or sale of voluntary carbon offsets.

The Securities and Exchange Commission recently adopted a mandatory climate change reporting framework that is likely to materially increase the amount of time, monitoring, diligence and reporting costs related to these matters.

Global efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues.

In January 2023, the EU enacted the Corporate Sustainability Reporting Directive, which will require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies.

A variety of other stakeholders, including regulators, investors, advisory firms, rating agencies, and customers, are establishing laws, regulations, expectations, and/or assessments reflecting their expectations for corporate practices related to climate change and other corporate responsibility matters.

In August 2021, Mattel announced its goal to reduce absolute Scope 1 and Scope 2 GHG emissions 50% by 2030 (versus a 2019 baseline).

Mattel has subsequently established additional goals related to environmental, social, and governance ("ESG") matters.

Such goals are based on management's current assumptions related to scientific or technological developments, carbon markets, the workforce and hiring market, and other matters that are subject to change in the future, as well as standards for measuring progress that are still in development, and subject to a number of significant risks and uncertainties.

Mattel's efforts to be responsive to climate change, to reduce its carbon footprint, and regarding other ESG matters cannot provide assurance that Mattel will successfully achieve its ESG goals, that related costs may not be higher than expected, that proposed regulation or deregulation related to climate change and other ESG matters will not be more aggressive than Mattel's measures and result in higher costs (or require additional resources), or that any investments Mattel makes in furtherance of achieving such goals will meet expectations or any applicable binding or non-binding legal standards, any one of which could have an adverse effect on Mattel's financial condition, results of operations, or reputation.

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

Mattel has subsequently established additional goals related to sustainability matters.

Such goals are based on Mattel management's current assumptions related to scientific or technological developments, carbon markets, the workforce and hiring market, and other matters that are subject to change in the future and which are outside of Mattel's control, as well as standards for measuring progress that are still in development, and subject to a number of significant risks and uncertainties.

Mattel's efforts to be responsive to climate change, to reduce its carbon footprint, and regarding other sustainability matters cannot provide assurance that Mattel will successfully achieve its sustainability goals, that related costs may not be higher than expected, that proposed regulation or deregulation related to climate change and other sustainability matters will not be more aggressive than Mattel's measures and result in higher costs (or require additional resources), or that any investments Mattel makes in furtherance of achieving such goals will meet expectations for all stakeholders or any applicable binding or non-binding legal standards, any one of which could have an adverse effect on Mattel's financial condition, results of operations, or reputation.

Climate-related litigation has increased in recent years, including claims involving the failure of organizations to mitigate their impacts on climate change, the failure of organizations to adapt to climate change, and the insufficiency of disclosure around material financial risks or inaccuracy of climate-related disclosure.

Additionally, as consumers and customers continue to put an increased priority on purchasing products that are sustainably manufactured and packaged, Mattel may need to incur increased costs in order to effectively source materials that are more sustainable, as well as increased costs for additional transparency, due diligence, and reporting.

If Mattel's ESG practices do not meet, or are not viewed as meeting, investor or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones Mattel chooses to focus on), or if Mattel does not or appears not to achieve its ESG goals, then Mattel's brand, reputation, and employee retention may be negatively impacted.

If Mattel's sustainability practices do not meet, or are not viewed as meeting, investor or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones Mattel chooses to focus on), or if Mattel does not or appears not to achieve its sustainability goals, then investors, consumers, and other stakeholders could lose confidence in Mattel and its brands, damaging Mattel's reputation and negatively impacting operations.

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 to realize such cost savings, Mattel's business, financial condition, and results of operations could be adversely affected.

Mattel has implemented 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 within operating income of $34.3 million, $35.2 million, and $40.6 million in 2022, 2021, and 2020, respectively, to achieve such cost savings, and expects to incur additional costs during 2023.

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, or that the impact of the efforts to achieve such cost savings will not be significantly different than currently anticipated.

In addition, any cost savings that Mattel realizes may be offset, in whole or in part, by reductions in net sales or through increases in other expenses.

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Neither Mattel's independent registered public accounting firm nor any other independent registered public accounting firm, has examined, compiled, or performed any procedures with respect to these amounts, nor have they expressed any opinion, or any other form of assurance, on such information or their achievability.

Accordingly, there can be no assurance that the anticipated cost savings will be realized or that the impact of the efforts to achieve such cost savings will not be significantly different than currently anticipated.

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 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.

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For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 13 to the Consolidated Financial Statements—Commitments and Contingencies—Litigation."

Ineffective internal control over financial reporting could affect Mattel's ability to record, process, and report financial information accurately, impair its ability to prepare financial statements, negatively affect investor confidence, and cause reputational harm.

Effective internal controls are necessary for companies to provide reliable and accurate financial reporting and financial statements for external purposes in accordance with generally accepted accounting principles.

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

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.

Mattel identified a material weakness in its internal control over financial reporting which, if not remediated appropriately or timely, could affect Mattel's ability to record, process, and report financial information accurately, impair its ability to prepare financial statements, negatively affect investor confidence, and cause reputational harm.

Effective internal controls are necessary for Mattel to provide reliable and accurate financial reporting and financial statements for external purposes in accordance with generally accepted accounting principles.

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

As disclosed in Part II, Item 9A "Controls and Procedures," Mattel determined that there is a material weakness in its internal control over financial reporting and as a result, its disclosure controls and procedures and internal control over financial reporting are not effective as of December 31, 2023.

While Mattel is actively engaged in the planning for, and implementation of, remediation efforts to address the material weakness, there can be no assurance that the efforts will fully remediate the material weakness in a timely manner.

If Mattel is unable to remediate the material weakness, or is otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, 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, 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.

The material weakness, remediation efforts, and any related litigation, government investigations, or regulatory enforcement actions will require management attention and resources and cause Mattel to incur unanticipated costs, and could 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 relies extensively on information technology systems across its operations, including for management of its supply chain, sale and delivery of its products and services, reporting its results of operations, collection and storage of consumer data, personal data of customers, employees and other stakeholders, and various other processes and transactions.

If Mattel does not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, it could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, or loss of or damage to intellectual property through security breach.

If Mattel does not allocate and effectively manage the resources necessary to build, sustain, and protect an appropriate technology infrastructure, it could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, shutdowns, or loss of or damage to intellectual property through security breach.

Many of these systems are managed by third-party service providers.

Mattel relies on such third parties to provide services on a timely and effective basis, but Mattel ultimately does not control their performance.

Mattel uses third-party technology and systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, regulatory compliance, back-office support, and other functions.

Mattel uses third-party technology and systems for a variety of reasons, including, without limitation,

encryption and authentication technology, employee email, content delivery to customers, regulatory compliance, back-office support, and other functions.

A small and growing volume of Mattel's consumer products and services are web-based, and some are offered in conjunction with business partners or such third-party service providers.

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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.

Additionally, AI may increase the frequency or efficacy of cyberattacks against Mattel.

Mattel's information systems require an ongoing commitment of significant resources to maintain, upgrade and enhance existing systems and develop or contract for new systems in order to keep pace with continuing changes in information processing technology, emerging cybersecurity risks and threats, evolving industry, legal and regulatory standards and requirements, and other changes in Mattel's business, among other things.

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If Mattel fails to comply with applicable U.S.

and foreign laws related to privacy, data security, and data protection, it could adversely affect Mattel's operating results and financial condition.

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.

For example, Mattel is or may become subject to a variety of laws and regulations such as the European Union's General Data Protection Regulation ("GDPR"), China's Personal Information Protection Law ("PIPL"), California's Consumer Privacy Act ("CCPA"), or the U.S.

Children's Online Privacy Protection Act of 1998 ("COPPA") regarding privacy, data protection, and data security.

and foreign laws related to privacy, data security, AI, and data protection, it could adversely affect Mattel's operating results and financial condition.

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, AI, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.

For example, Mattel is or may become subject to a variety of laws and regulations such as the European Union's General Data Protection Regulation ("GDPR"), EU Artificial Intelligence Act ("EU AI Act"), China's Personal Information Protection Law ("PIPL"), California's Consumer Privacy Act ("CCPA"), or the U.S.

Children's Online Privacy Protection Act of 1998 ("COPPA") regarding privacy, data protection, AI (including automated decision-making) and data security.

These laws and regulations are continuously evolving and developing, creating significant uncertainty as privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements.

For example, the GDPR, which greatly increases the jurisdictional reach of EU law and became effective in May 2018, added a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, and imposes substantial penalties for non-compliance.

For example, the GDPR, which greatly increases

the jurisdictional reach of EU law and became effective in May 2018, added a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, and imposes substantial penalties for non-compliance.

The EU AI Act, which is expected to become effective in the coming years, imposes certain requirements and limitations on developers and deployers of AI systems designated as "high risk," including in some cases AI systems designed for interaction with children.

The requirements will apply to companies based outside the EU but operating on the EU market, and will carry the potential for substantial penalties for non-compliance.

China's PIPL imposes additional operational requirements relating to processing personal information and provides for penalties and enforcement mechanisms.

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The California Privacy Rights Act ("CPRA"), which became operative on January 1, 2023, established the California Privacy Protection Agency to enforce Californians' privacy rights under the CCPA.

Since the CCPA was enacted, several other states have enacted similar comprehensive privacy schemes.

Mattel's ongoing compliance with the GDPR and other privacy and data protection laws, such as the PIPL, CCPA, CPRA, and COPPA, imposes significant costs and challenges that are likely to increase over time, including as Mattel introduces sophisticated digital and smart technology products.

Since the CCPA was enacted, several other states have enacted and are in the process of enacting similar comprehensive privacy schemes, certain of which also impose obligations on companies developing and using AI or automated decision-making technologies.

Mattel's ongoing compliance with the GDPR and other privacy and data protection laws, such as the PIPL, CCPA, CPRA, and COPPA, as well as initiatives to comply with new legal regimes relating to privacy, data protection, and AI, imposes significant costs and challenges that are likely to increase over time, including as Mattel introduces sophisticated digital and smart technology products, including products that incorporate AI.

Given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be in conflict across jurisdictions, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or Mattel's practices.

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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 legal landscape for some new technologies, including AI (particularly generative AI), remains uncertain, and development of the law in this area could impact Mattel's ability to protect against potentially infringing uses associated with both the development and use of AI.

In addition, the availability of copyright protection and other legal protections for IP generated by certain new technologies, such as generative AI, is uncertain.

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 United States.

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An unfavorable resolution of these matters could have an adverse effect on Mattel's business, financial condition, and results of operations.

Regardless of their outcome, these matters may result in substantial costs and expenses, significantly divert the attention of management, or interrupt Mattel's normal business operations.

Regardless of their outcome, these matters may result in substantial costs and expenses, significantly divert the

attention of management, or interrupt Mattel's normal business operations.

There can be no assurance that Mattel will be able to prevail in, or achieve a favorable settlement of, any of these matters.

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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.

Mattel is actively monitoring proposals such as the Global Minimum Tax ("Pillar II") from the Organisation for Economic Co-operation and Development.

As countries adopt and enact Pillar II, Mattel's provision for income taxes and income taxes payable may be impacted.

The Organization for Economic Co-operation and Development reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two.

Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two rules.

Mattel is continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available.

Some of the legislative changes could impact Mattel’s effective tax rate and tax liabilities.

When and how these rules are adopted or enacted by various countries in which Mattel does business could increase tax complexity and uncertainty and may adversely affect Mattel’s worldwide effective tax rate, income tax expense, and cash flows.

Mattel is subject to regular review and audit by both domestic and foreign tax authorities.

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

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.

or 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.

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At December 31, 2023, Mattel had $2.33 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 facility.

In addition, Mattel has $1.40 billion of commitments under its revolving credit facility.

For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 6 to the Consolidated Financial Statements—Seasonal Financing and Debt."

Subject to the limits contained in the credit agreement that governs Mattel's senior secured revolving credit facility, the indentures that govern the notes, and Mattel's other debt instruments, Mattel may incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes.

Subject to the limits contained in the credit agreement that governs Mattel's revolving credit facility, the indentures that govern the notes, and Mattel's other debt instruments, Mattel may incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes.

To the extent Mattel does so, the risks related to Mattel's high level of debt would increase.

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• Restrict Mattel from making strategic acquisitions or cause Mattel to make non-strategic divestitures;

• Expose Mattel to the risk of increased interest rates as borrowings under its senior secured revolving credit facility will be subject to variable rates of interest;

• Expose Mattel to the risk of increased interest rates as borrowings under its revolving credit facility will be subject to variable rates of interest;

• Expose Mattel to additional risks related to currency exchange rates and repatriation of funds;

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Further, Mattel's ability to issue additional debt could be adversely affected by other factors, including market conditions.

The interest rate margins, unused line fee, and letter of credit fronting fee under Mattel's senior secured revolving credit facility may fluctuate based on Mattel's credit ratings.

For example, if Mattel's credit ratings decline, its debt service obligations under its senior secured revolving credit facility may increase even if the principal amount borrowed remains the same.

In addition, the indentures governing the notes and the agreements governing Mattel's senior secured revolving credit facility contain affirmative and negative covenants that limit Mattel's ability to engage in activities that may be in its long-term best interests.

The interest rate margins, unused line fee, and letter of credit fronting fee under Mattel's revolving credit facility may fluctuate based on Mattel's credit ratings.

For example, if Mattel's credit ratings decline, its debt service obligations under its revolving credit facility may increase even if the principal amount borrowed remains the same.

In addition, the indentures governing the notes and the agreements governing Mattel's revolving credit facility contain affirmative and negative covenants that limit Mattel's ability to engage in activities that may be in its long-term best interests.

Mattel's failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of Mattel's debts.

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This, to a significant extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond Mattel's control.

Mattel's business may not generate sufficient cash flow from operations and future borrowings may not be available under Mattel's senior secured revolving credit facility in an amount sufficient to enable Mattel to pay its indebtedness or to fund its other liquidity needs.

Mattel's business may not generate sufficient cash flow from operations and future borrowings may not be available under Mattel's revolving credit facility in an amount sufficient to enable Mattel to pay its indebtedness or to fund its other liquidity needs.

In such circumstances, Mattel may need to refinance all or a portion of its indebtedness upon or before maturity.

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

Mattel may not be able to refinance any of its indebtedness, including its revolving credit facility 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, 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.

The credit agreement governing Mattel's senior secured revolving credit facility and the indentures governing the notes will restrict Mattel's ability to sell assets and use the proceeds from such sales.

The credit agreement governing Mattel's revolving credit facility and the indentures governing the notes will restrict Mattel's ability to sell assets and use the proceeds from such sales.

If Mattel is unable to generate sufficient cash flow or is otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on its indebtedness, or if Mattel otherwise fails to comply with the various covenants in the instruments governing its indebtedness, Mattel could be in default under the terms of the agreements governing such indebtedness.

In the event of such default, the holders of such indebtedness will have the right to elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under Mattel's senior secured revolving credit facility will have the right to elect to terminate their commitments thereunder, cease making further loans, and institute foreclosure proceedings against Mattel's assets, and Mattel could be forced into bankruptcy or liquidation.

Declines in Mattel's operating performance may require Mattel to obtain waivers in the future from the required lenders under its senior secured revolving credit facility to avoid being in default.

If Mattel breaches its covenants under its senior secured revolving credit facility and seeks a waiver, Mattel may not be able to obtain a waiver from the required lenders.

If this occurs, Mattel would be in default under its senior secured revolving credit facility, the lenders could exercise their rights, as described above, and Mattel could be forced into bankruptcy or liquidation.

In the event of such default, the holders of such indebtedness will have the right to elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under Mattel's revolving credit facility will have the right to elect to terminate their commitments thereunder, cease making further loans, and institute foreclosure proceedings against Mattel's assets, and Mattel could be forced into bankruptcy or liquidation.

Declines in Mattel's operating performance may require Mattel to obtain waivers in the future from the required lenders under its revolving credit facility to avoid being in default.

If Mattel breaches its covenants under its revolving credit facility and seeks a waiver, Mattel may not be able to obtain a waiver from the required lenders.

If this occurs, Mattel would be in default under its revolving credit facility, the lenders could exercise their rights, as described above, and Mattel could be forced into bankruptcy or liquidation.

Mattel's variable rate indebtedness subjects Mattel to interest rate risk, which could cause Mattel's debt service obligations to increase significantly.

Borrowings under Mattel's senior secured revolving credit facility will be at variable rates of interest and will expose Mattel to interest rate risk.

Borrowings under Mattel's revolving credit facility will be at variable rates of interest and will expose Mattel to interest rate risk.

If interest rates continue to increase, Mattel's debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and Mattel's net income and cash flows, including cash available for servicing its indebtedness, will correspondingly decrease.

Assuming Mattel's senior secured revolving credit facility is fully drawn up to the maximum commitment level and the interest rates are above the interest rate floor set forth in the credit agreement governing Mattel's senior secured revolving credit facility, each one-eighth point change in interest rates would result in a $1.75 million change in annual interest expense on Mattel's indebtedness under its senior secured revolving credit facility.

Assuming Mattel's revolving credit facility is fully drawn up to the maximum commitment level and the interest rates are above the interest rate floor set forth in the credit agreement governing Mattel's revolving credit facility, each one-eighth point change in interest rates would result in a $1.75 million change in annual interest expense on Mattel's indebtedness under its revolving credit facility.

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

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There is risk that one or more of Mattel's lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments, including but not limited to extending credit up to the maximum amount permitted by a credit facility and otherwise accessing capital and/or honoring loan commitments.

If Mattel's lenders are unable to fund borrowings under their credit commitments or Mattel is unable to borrow, it could be difficult to replace Mattel's senior secured revolving credit facility on similar terms, which could adversely affect Mattel's business, financial condition, and results of operations.

Unresolved Staff Comments.

If Mattel's lenders are unable to fund borrowings under their credit commitments or Mattel is unable to borrow, it could be difficult to replace Mattel's revolving credit facility on similar terms, which could adversely affect Mattel's business, financial condition, and results of operations.

Mattel's stock repurchase program could affect the price of its common stock and may be suspended at any time, and there is no guarantee that repurchases under the program, if any, will enhance stockholder value.

Mattel has a stock repurchase program, under which it is currently authorized to repurchase up to $1.00 billion of its common stock.

The stock repurchase program does not obligate Mattel to repurchase any dollar amount or number of shares and may be suspended at any time without prior notice, which could cause the market price of Mattel's common stock to decline.

The amount and timing of repurchases under Mattel's share repurchase program, if any, are influenced by many factors and may fluctuate based on Mattel's operating results, cash flows, priorities for the use of cash, the market price of Mattel's common stock, and its possession of potentially material nonpublic information.

There is no guarantee as to the exact number of shares to be repurchased by Mattel, if any.

Repurchases pursuant to the stock repurchase program could affect Mattel's stock price and increase its volatility.

The existence of a stock repurchase program could also cause Mattel's stock price to be higher than it would be in the absence of such a program.

Additionally, repurchases under the stock repurchase program utilize Mattel's cash reserves, which could impact its ability to pursue possible future strategic opportunities and acquisitions.

There can be no assurance that any stock repurchases will enhance stockholder value because the market price of Mattel's common stock may decline below the levels at which it repurchased shares of common stock.

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What changed 10-K

Item 1A. Risk Factors