Mattel sees $30 million charge from toy recall

By Justin Grant

NEW YORK (Reuters) - Mattel Inc (MAT.N) said on Thursday it expected to take a charge of $30 million for the recall of 1.5 million Chinese-made toys, including those with popular preschool characters from Sesame Street and Dora the Explorer.

Mattel said on Wednesday the toys manufactured by a contractor in China for the company's Fisher-Price unit were made with paint that may contain too much lead.

Lead has been linked to health problems in children, including brain damage.

"We require our manufacturing partners to use paint from approved and certified suppliers and have procedures in place to test and verify, but in this particular case our procedures were not followed," Jim Walter, Mattel's senior vice president of worldwide quality assurance, said in a statement.

"We are investigating the cause to ensure such events do not reoccur."

Of the 1 million products recalled from the U.S. market, Mattel said about 30 percent had reached store shelves.

Retailer Toys "R" Us said on Thursday it had already removed the toys from its shelves.

Mattel's shares were down 46 cents at $23.12 in afternoon trading on the New York Stock Exchange. The stock has traded within a 52-week range of $17.54 to $29.71.

Mattel said in a Thursday filing with the U.S Securities and Exchange Commission that it would adjust its second-quarter results to reflect the $30 million charge. Revenue for the period was $1.02 billion, with $410.4 million coming from Fisher-Price.

Mattel said it was reviewing procedures involving all of its Chinese-made products and that more issues could surface.

According to the Toy Industry Association, 80 percent of toys on U.S. store shelves are manufactured in China.

The recalled toys were manufactured between April 19 and July 6 and sold at stores across the United States between May and August 1, the company said.

Mattel said it was also expanding its testing programs to ensure that painted toys from third-party manufacturers are safe before they are sent to customers.

Don Mays, Consumer Reports' director for product safety and planning, called for third-party testing for toys similar to what independent tester Underwriters Laboratories does for small electronics.

"Fisher-Price entrusted the testing of these toys to the factory that manufactured them," Mays said.