Mattel 2003 Annual Report Download - page 89

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 $1.6 million of which has been incurred through year end 2003.
Beaverton, Oregon
Mattel previously operated a manufacturing facility on a leased property in Beaverton, OR 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.
Prior to 2003, Mattel recorded pre-tax charges totaling $19.0 million related to this property. During 2003,
Mattel recognized pre-tax income of $7.9 million representing an adjustment resulting from updated estimates
related to amounts accrued in 1999 associated with the closure of the Beaverton facility. Costs totaling
approximately $5 million have been incurred through year end 2003 for the Beaverton property, largely related to
environmental remediation, 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 $6 million as of year end 2003
represents estimated amounts to be incurred for employee medical screening, project management, legal and
other costs related to the Beaverton property.
General
Mattel is also involved in various other litigation and legal matters, including claims related to intellectual
property, product liability and labor, which Mattel is addressing or defending in the ordinary course of business.
Management believes that any liability that may potentially result upon resolution of such matters will not have a
material adverse effect on Mattel’s business, financial condition or results of operations.
Note 10—Restructuring and Other Charges
Financial Realignment Plan
In 2003, Mattel completed its financial realignment plan, originally announced during the third quarter of
2000, designed to improve gross profit; selling and administrative expenses; operating income; and cash flows.
Since its inception, Mattel recorded a total pre-tax charge of $250.0 million, or approximately $171 million after-
tax, of which approximately $123 million represented cash expenditures and $48 million represented non-cash
writedowns. A summary of the financial realignment plan charges recorded by year is as follows (in millions):
For the Year Ended
2000 2001 2002 2003 Total
Pre-tax charges ............................................ $125.2 $50.2 $48.3 $26.3 $250.0
Approximate after-tax charges ................................ $ 84 $ 35 $ 32 $ 20 $ 171
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