Mattel 2005 Annual Report Download - page 91

MGA’s suit alleges that MGA has been damaged in an amount “believed to reach or exceed tens of millions
of dollars” and further seeks punitive damages, disgorgement of Mattel’s profits and injunctive relief. Mattel
believes the claims by Bryant and MGA are without merit and intends to vigorously defend against them.
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 facilities. The execution of the consent order was in
response to the New York State Department of Environmental Conservation (“NYSDEC”) Record of Decision
issued in March 2000. The NYSDEC approved a conceptual work plan in March 2001. One component of the
remedial program mandated by the NYSDEC involves discharging the remediation wastewater into the publicly
owned treatment works (“POTW”), which is owned and operated by the Village of Medina, New York. In June
2003, the Village of Medina approved the discharge of wastewater from the groundwater collection system into
the POTW as part of a short-term, pilot scale pumping test to evaluate water quantity and quality necessary to
complete the remedial design. The pilot program was successfully conducted in November 2003, and plans are
underway to implement the actual groundwater remediation program. In 2005, Mattel constructed a ground water
pumping system and began pumping groundwater to the Village of Medina. The ultimate liability associated with
this cleanup presently is estimated to be approximately $2.3 million, approximately $2.0 million of which has
been incurred through December 31, 2005.
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 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 (“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 $5.8 million have been incurred through December 31, 2005 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 $4.3 million as of December 31, 2005 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,
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