Mattel 2001 Annual Report Download - page 39

installation of a public water line to those residents is completed. The ultimate liability associated with this
cleanup presently is estimated to be approximately $1.76 million, approximately $1.26 million of which has
been incurred through December 31, 2001.
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. 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.
In November 1998, Mattel and another potentially responsible party entered into a consent order with the
Oregon Department of Environmental Quality to conduct a remedial investigation/feasibility study at the
property, to propose an interim remedial action measure, and to continue the community outreach program.
Mattel has recorded pre-tax charges totaling $19.0 million for environmental remediation costs related to this
property, based on the completion and approval of the remediation plan and feasibility study. Approximately $3
million has been incurred through December 31, 2001, largely related to attorney fees, consulting work and an
employee medical screening program.
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 resolving such matters is not likely to have a material adverse effect on Mattel’s
business, financial condition or results of operations.
Effects of Inflation
Inflation rates in the US and in major foreign countries where Mattel does business have not had a
significant impact on its results of operations or financial position during the three years ended December 31,
2001. The US Consumer Price Index increased 1.6% in 2001, 3.4% in 2000 and 2.7% in 1999. Mattel receives
some protection from the impact of inflation from high turnover of inventories and its ability to pass on higher
prices to consumers.
Employee Savings Plan
Certain employee savings plan provisions used by other companies can result in requirements to hold
substantial portions of a participant’s account balance in the stock of the sponsoring company, significantly
increasing the exposure of the account to market risk associated with a single company’s stock. However, the
Mattel Personal Investment Plan is designed to allow participants to limit their exposure to market changes in
Mattel’s stock price. Mattel makes company contributions in cash and allows employees to allocate both
individual and company contributions to a balanced variety of investment funds. Furthermore, Mattel’s plan
limits a participant’s allocation to the Mattel Stock Fund, which is fully invested in Mattel stock, to 50% of the
account balance. Participants may generally reallocate their account balances on a daily basis. This reallocation
is only limited for participants classified as insiders who wish to change their investment in the Mattel Stock
Fund. Insiders are limited to certain window periods for making a reallocation out of or into the Mattel Stock
Fund.
Critical Accounting Policies and Estimates
Mattel makes certain estimates and assumptions that affect the reported amounts of assets and liabilities
and the reported amounts of revenues and expenses. The accounting policies described below are those Mattel
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