Mattel 2002 Annual Report Download - page 84

Download and view the complete annual report

Please find page 84 of the 2002 Mattel annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

Note 10—Restructuring and Other Charges
Financial Realignment Plan
During the third quarter of 2000, Mattel initiated a financial realignment plan designed to improve gross
margin; selling and administrative expenses; operating income; and cash flow. The plan will require a total pre-
tax charge estimated at $250 million, or $170 million, after-tax, of which approximately $120 million represents
cash expenditures and $50 million represents non-cash writedowns. Through December 31, 2002, Mattel has
recorded pre-tax charges totaling $223.7 million, or approximately $151 million, after-tax, related to this plan. Of
the total charge, $125.2 million (approximately $84 million after-tax) was recorded in 2000, $50.2 million
(approximately $35 million after-tax) was recorded in 2001, and $48.3 million (approximately $32 million after-
tax) was recorded in 2002. Management expects that the remaining pre-tax implementation costs of $26.3 million
will be recorded in 2003.
Expenditures are being made for the following initiatives under the plan:
• Reduce excess manufacturing capacity;
• Terminate a variety of licensing and other contractual arrangements that do not deliver an adequate
level of profitability;
• Eliminate product lines that do not meet required levels of profitability;
• Improve supply chain performance and economics;
• Implement an information technology strategy aimed at achieving operating efficiencies;
• Eliminate 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.
In January 2002, as part of the financial realignment plan, Mattel implemented further headcount reductions
of approximately 240 positions or 7% at its US-based headquarters locations through a combination of layoffs,
elimination of open requisitions, attrition, and retirements. Additionally, in 2002, Mattel commenced a long-term
information technology strategy aimed at achieving operating efficiencies and cost savings across all disciplines.
The program is focused on simplifying Mattel’s organization by defining common global processes based on
industry best practices, streamlining its organizational structure by eliminating redundancies, and upgrading its
systems to provide greater visibility to information and data on a global basis.
In April 2001, as part of the financial realignment plan, Mattel announced the closure of its Murray,
Kentucky, manufacturing and distribution facilities (the “North American Strategy”). Production from this
facility has been consolidated into other Mattel-owned and operated facilities in North America. Manufacturing
ceased at the Murray location at the end of May 2002.
In 2000, Mattel recorded a $22.9 million pre-tax restructuring charge as part of the initial phase of the
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 related
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. During 2001, Mattel recorded a
$15.7 million pre-tax restructuring charge as part of the financial realignment plan, largely related to
implementation of the North American Strategy. In 2002, Mattel recorded an additional $24.6 million pre-tax
restructuring charge as part of the financial realignment plan, principally related to further elimination of
positions at headquarters locations in El Segundo, Fisher-Price and Pleasant Company, the North American
Strategy, and consolidation of international facilities. From inception through December 31, 2002, a total of
75