Mattel 2002 Annual Report Download - page 42

action is based upon a claimed misrepresentation by Mattel during negotiations in the early 1960’s when G&H
sold all patent and other rights in and to the Bild Lilli property (“Lilli”) to Mattel. G&H alleges that Mattel’s
representative in those negotiations stated that Mattel’s international Barbie®brand sales were “insignificant” in
1964. The suit claims that, had the alleged misrepresentation not occurred, G&H would have succeeded in
extracting from Mattel an agreement to pay to G&H a royalty on Mattel’s future Barbie®sales. Underlying the
plaintiff’s claim is the allegation that the first Barbie®doll was copied from the Lilli doll.
G&H is seeking unspecified damages relating to Barbie®dolls sold from 1971 through 1974. It has initially
estimated damages in an amount equal to approximately $4.5 million. Mattel believes that if the plaintiff were to
be successful in the current action, it would pursue further actions for damages relating to sales for other time
frames as well. The current action further requests a declaration that G&H may resume production of the Lilli
doll.
Following an initial hearing on October 25, 2002, the German lower court dismissed G&H’s action in its
entirety on December 13, 2002, based on the expiration of the applicable statute of limitations and other
procedural grounds. G&H’s counsel has subsequently indicated an intention to appeal these rulings. Mattel
believes the action has no substantive merit and that the German lower court rightly decided the matter. If G&H
does in fact appeal, Mattel intends to defend the lower court’s decision vigorously.
Environmental
Fisher-Price
Fisher-Price has executed a consent order with the State of New York to implement a groundwater
remediation system at one of its former manufacturing plants. The execution of the consent order was in response
to the New York State Department of Environmental Conservation Record of Decision issued in March 2000.
The Department approved a conceptual work plan in March 2001, with work scheduled to begin in 2001.
However, in response to concerns expressed by a number of nearby residents, the Department has requested that
Mattel postpone implementation of the groundwater remediation plan until after the installation of a public water
line to those residents is completed. The ultimate liability associated with this cleanup presently is estimated to
be approximately $1.8 million, approximately $1.3 million of which has been incurred through December 31,
2002.
Beaverton, Oregon
Mattel previously operated a manufacturing facility on a leased property in Beaverton, Oregon that was
acquired as part of the March 1997 merger with Tyco Toys, Inc. In March 1998, samples of groundwater used by
the facility for process water and drinking water disclosed elevated levels of certain chemicals, including
trichloroethylene. Mattel immediately closed the water supply and self-reported the sample results to the Oregon
Department of Environmental Quality and the Oregon Health Division. Mattel also implemented a community
outreach program to employees, former employees and surrounding landowners.
Mattel has recorded pre-tax charges totaling $19.0 million related to this property, of which approximately
$4 million has been incurred through December 31, 2002, largely related to attorney fees, consulting work and an
employee medical screening program. In January 2003, Mattel entered into a settlement with the Oregon
Department of Environmental Quality resolving its cleanup liability in return for a contribution of $0.4 million to
the cleanup, which is being performed by the company that caused the contamination. The remaining liability of
approximately $15 million as of year end 2002 represents estimated amounts to be incurred for environmental
remediation, including the $0.4 million cleanup liability, employee medical screening, project management, legal
and other costs related to the Beaverton property.
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