Mattel Completes Internal Investigation of Whistleblower Letter and Announces Remedial Actions

Mattel, Inc. (NASDAQ: MAT) (“Mattel” or the “Company”) announced today that the Audit Committee of its Board of Directors has completed an independent investigation into the allegations contained in a whistleblower letter disclosed on August 8, 2019 (the “Letter”).

Overview

The Letter, which had been sent to Mattel’s outside auditors, questioned whether there were accounting errors in historical periods and whether Mattel’s outside auditor was independent.

The investigation determined that income tax expense was understated by $109 million in the third quarter of 2017, and overstated by $109 million in the fourth quarter of 2017, with no impact for the full year. The errors were non-cash, did not affect operating income or EBITDA, and had no impact on Mattel’s full year financial results for 2017 or subsequent periods. The investigation also determined that Mattel has certain material weaknesses in its internal control over financial reporting.

The Audit Committee concluded that the objectivity and impartiality of Mattel’s outside auditor has not been impaired, and that Mattel’s outside auditor can continue as its independent auditor. Mattel’s outside auditor agrees with that conclusion.

Mattel will undertake a series of remedial actions, including the amendment of the Company’s 2018 Form 10-K to restate the last two quarters of 2017, and certain related information, and the strengthening of its internal control over financial reporting.

Background on the Letter and the Internal Investigation

On August 2, 2019, Mattel’s outside auditor received the Letter. On August 8, 2019, Mattel publicly announced that it had received the Letter and would investigate its allegations. Thereafter, the Board directed the Audit Committee, which consists of independent directors, to investigate the Letter. Over the past two months, the Audit Committee, together with independent counsel from O’Melveny & Myers LLP and forensic accountants from FTI Consulting, thoroughly investigated the Letter’s allegations. Mattel provided all requested documents and made all requested witnesses available to the Audit Committee. Mattel’s outside auditor conducted its own investigation and informed the Audit Committee that it had shared all relevant information with the Audit Committee.