Mattel 2004 Annual Report Download - page 93

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 (“ODEQ”) 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 2004
and 2003, Mattel recognized pre-tax income of $0.9 million and $7.9 million, respectively, representing
adjustments to the reserve accrued in 1999 associated with the closure of the Beaverton facility. Costs totaling
approximately $5 million have been incurred through year end 2004 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 ODEQ 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 $5 million as of year end 2004 represents estimated
amounts to be incurred for employee medical screening, project management, 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, which was designed to improve gross profit, other 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 asset writedowns.
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
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