Mattel 2010 Annual Report Download - page 77

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On September 30, 2010, Fisher-Price, Inc., a subsidiary of Mattel, in cooperation with the US Consumer
Product Safety Commission and Health Canada, voluntarily recalled certain products in the US and international
markets. These recalls resulted in a total reduction to operating income of $7.6 million in 2010, which is based on
estimates such as the expected levels of affected products at retail and historical consumer return rates.
Although management is not aware of any additional quality or safety issues that are likely to result in
material recalls or withdrawals, there can be no assurance that additional issues will not be identified in the
future.
Note 5—Restructuring Charges
During the second quarter of 2008, Mattel initiated its Global Cost Leadership program, which was designed
to improve operating efficiencies and leverage Mattel’s global scale to improve profitability and operating cash
flows. The major initiatives within Mattel’s Global Cost Leadership program included:
• A global reduction in Mattel’s professional workforce of approximately 1,000 employees that was
initiated in November 2008, and an additional reduction in Mattel’s professional workforce initiated in
the third quarter of 2009.
• A coordinated efficiency strategic plan that includes structural changes designed to lower costs and
improve efficiencies; for example, offshoring and outsourcing certain back office functions, and
additional clustering of management in international markets.
• Procurement initiatives designed to fully leverage Mattel’s global scale in areas such as creative agency
partnerships, legal services, and distribution, including ocean carriers and over-the-road freight
vendors.
In connection with the Global Cost Leadership program, Mattel recorded severance and other termination-
related charges of $13.0 million, $31.5 million, and $34.4 million during 2010, 2009, and 2008, respectively,
which are included in other selling and administrative expenses. The following table summarizes Mattel’s
severance and other termination costs activity:
Severance
Other
termination
costs Total
(In thousands)
Charges ....................................................... $32,771 $1,656 $ 34,427
Payments ...................................................... (15,656) (775) (16,431)
Balance at December 31, 2008 .................................... 17,115 881 17,996
Charges ....................................................... 31,176 324 31,500
Payments ...................................................... (29,508) (980) (30,488)
Balance at December 31, 2009 .................................... 18,783 225 19,008
Charges ....................................................... 12,951 10 12,961
Payments ...................................................... (26,463) (90) (26,553)
Balance at December 31, 2010 .................................... $ 5,271 $ 145 $ 5,416
Note 6—Employee Benefit Plans
Mattel and certain of its subsidiaries have qualified and nonqualified retirement plans covering substantially
all employees of these companies. These plans include defined benefit pension plans, defined contribution
retirement plans, postretirement benefit plans, and deferred compensation and excess benefit plans. In addition,
Mattel makes contributions to government-mandated retirement plans in countries outside the US where its
employees work.
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