Mattel 2004 Annual Report Download - page 37

Charges relating to the financial realignment plan were recorded in the following captions in the
consolidated statements of income (in millions):
For the Year
2003 2002
Gross profit ............................................................ $ 4.1 $ 10.4
Other selling and administrative expenses .................................... 8.6 13.3
Restructuring and other charges ............................................ 12.7 24.6
Other non-operating (income) expense, net ................................... 0.9 —
Pre-tax charges ......................................................... $ 26.3 $ 48.3
In 2003, as part of its financial realignment plan, Mattel announced the consolidation of its US Girls and US
Boys—Entertainment segments into one segment, renamed Mattel Brands US. Costs associated with this
reorganization included the elimination of approximately 5% of executive-level positions, including the position
of president of the Girls division. Also in 2003, Mattel substantially completed the consolidation of two of its
manufacturing facilities in Mexico to streamline manufacturing within North America.
In 2002, as part of its financial realignment plan, Mattel commenced a long-term information technology
strategy aimed at achieving operating efficiencies and cost savings across all disciplines. The program 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 have greater
visibility to information and data on a global basis. Also in 2002, Mattel completed the closure of its
manufacturing and distribution facilities in Murray, Kentucky, as part of the North American Strategy.
In connection with the financial realignment plan, Mattel recorded pre-tax restructuring charges of
$37.3 million during 2002 and 2003, of which $0.1 million was not yet paid as of year end 2004. These charges
were largely related to the elimination of positions at its US-based headquarters locations in El Segundo,
Fisher-Price and American Girl, costs associated with the North American Strategy, closure of certain
international offices, and consolidation of facilities. From the inception of the plan through 2003, Mattel
terminated the employment of approximately 2,570 employees.
The components of the restructuring charge and reconciliation of the liability are as follows (in millions):
Severance
and Other
Compensation
Lease
Termination
Costs Other
Total
Restructuring
Charge
Balance at year end 2001 ........................ $ 8.8 $ 1.9 $ 1.0 $ 11.7
2002 charges .............................. 19.4 1.2 4.0 24.6
Amounts incurred .......................... (24.3) (1.8) (4.4) (30.5)
Balance at year end 2002 ........................ 3.9 1.3 0.6 5.8
2003 charges .............................. 12.9 (0.3) 0.1 12.7
Amounts incurred .......................... (16.2) (0.6) (0.6) (17.4)
Balance at year end 2003 ........................ 0.6 0.4 0.1 1.1
Amounts incurred .......................... (0.5) (0.4) (0.1) (1.0)
Balance at year end 2004 ........................ $ 0.1 $ — $ — $ 0.1
In 2003, Mattel recorded a net restructuring charge totaling $4.8 million in the consolidated statement of
income, representing $12.7 million of restructuring charges related to the financial realignment plan that were
partially offset by income of $7.9 million representing an adjustment to a reserve accrued in 1999 associated with
the closure of a manufacturing facility in Beaverton, Oregon.
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