Mattel 2000 Annual Report Download - page 45

forty three
Mattel, Inc. and Subsidiaries
- Eliminate product lines that do not meet required levels of profitability;
- Improve supply chain performance and economics;
- Eliminate approximately 350 positions at US-based headquarters
locations in El Segundo, Fisher-Price and Pleasant Company
through a combination of layoffs, elimination of open requisitions,
attrition and retirements; and
- Close and consolidate certain international offices.
Mattel incurred a $22.9 million pre-tax restructuring charge
related to the 2000 financial realignment plan. This charge, combined
with a $7.0 million adjustment to the 1999 restructuring plan, resulted
in $15.9 million of net pre-tax restructuring and other charges in 2000.
The $22.9 million charge for the 2000 realignment plan
relates to the elimination of positions at headquarters locations in
El Segundo, Fisher-Price and Pleasant Company, closure of certain
international offices, and consolidation of facilities. Total worldwide
headcount reduction as a result of the restructuring is approximately
500 employees, of which 340 were terminated during 2000. The com-
ponents of the restructuring costs are as follows (in millions):
Balance
Total Amounts December 31,
Charges Incurred 2000
Severance and other compensation $19 $(3) $16
Asset writedowns 2 (2) -
Lease termination costs 1 - 1
Other 1 - 1
Total restructuring charge and asset writedowns $23 $(5) $18
1999 Restructuring and Other Charges
During 1999, Mattel initiated a restructuring plan for its continuing
operations and incurred certain other nonrecurring charges totaling
$281.1 million, approximately $218 million after-tax or $0.51 per
diluted share. The restructuring plan was aimed at leveraging global
resources in the areas of manufacturing, marketing and distribution,
eliminating duplicative functions worldwide and achieving improved
operating efficiencies. Total cash outlays are funded from existing
cash balances and internally generated cash from operations. The
following were the major restructuring initiatives:
- Consolidation of the Infant &Preschool businesses;
- Consolidation of the domestic and international back-office
functions;
- Consolidation of direct marketing operations;
- Realignment of the North American sales force;
- Termination of various international distributor contracts; and
- Closure of three higher-cost manufacturing facilities.
The termination of approximately 3,000 employees around the
world was completed during 2000. Through December 31, 2000, a
total of approximately $60 million was incurred related to employee
terminations.
Components of the accrued restructuring and other charges,
including adjustments, related to continuing operations are as follows
(in millions):
Balance Balance
December 31, Amounts December 31,
1999 Adjustments Incurred 2000
Severance and other compensation $ 54 $(14) $(35) $ 5
Distributor, license and other
contract terminations 10 (4) (6) -
Lease termination costs 15 1 (10) 6
Total restructuring costs 79 (17) (51) 11
Merger-related transaction and other costs 4 (1) - 3
Other nonrecurring charges 19 11 (6) 24
Total restructuring and other charges $102 $ (7) $(57) $38
The adjustments made in 2000 to restructuring and merger-
related transaction costs largely reflect the reversal of excess reserves
as a result of lower than anticipated costs to complete certain actions
compared to previous estimates. The restructuring actions were com-
pleted in 2000; however, future cash outlays will extend beyond this
date, largely due to severance payment options available to affected
employees and future lease payments on vacated spaces.
The other nonrecurring charges principally relate to the 1998
recall of Mattel’s Power Wheels® vehicles and environmental remedia-
tion costs related to a former manufacturing facility on a leased
property in Beaverton, Oregon. The adjustment to other nonrecurring
charges reflects increases in reserves for these activities.
1998 Other Nonrecurring Charges
In 1998, Mattel recognized a $44.0 million pre-tax charge related to
a voluntary recall of certain Power Wheels® ride-on vehicles and the
settlement of customer-related antitrust litigation.
NOTE 10 - SEGMENT INFORMATION
The tables below present information about segment revenues, operat-
ing profit and assets. Mattel’s reportable segments are separately man-
aged business units and include toy marketing and toy manufacturing.
The Toy Marketing segment is divided on a geographic basis between
domestic and international. The domestic Toy Marketing segment
is further divided into US Girls, US Boys-Entertainment, US Infant
&Preschool and Other. The US Girls segment includes brands such
as Barbie®, Polly Pocket®, and Cabbage Patch Kids®. The US Boys-
Entertainment segment includes products in the Wheels and
Entertainment categories. The US Infant &Preschool segment includes
Fisher-Price®, Disney preschool and plush, Power Wheels®, Sesame
Street® and other preschool products. The Other segment principally
sells specialty girls products, including American Girl®, which are sold
through the direct marketing distribution channel. The International
Toy Marketing segment sells products in all toy categories. The Toy
Manufacturing segment manufactures toy products, which are sold
to the Toy Marketing segments based on intercompany transfer prices.
Such prices are based on manufacturing costs plus a profit margin.
Segment revenues do not include sales adjustments such as trade