Mattel 2012 Annual Report Download - page 93

Stock Options
Mattel recognized compensation expense of $13.8 million, $14.5 million, and $13.4 million for stock
options during 2012, 2011, and 2010, respectively, which is included within other selling and administrative
expenses. Income tax benefits related to stock option compensation expense recognized in the consolidated
statements of operations during 2012, 2011, and 2010 totaled $4.5 million, $4.8 million, and $4.3 million,
respectively.
The fair value of options granted has been estimated using the Black-Scholes valuation model. The expected
life of the options used in this calculation is the period of time the options are expected to be outstanding and has
been determined based on historical exercise experience. Expected stock price volatility is based on the historical
volatility of Mattel’s stock for a period approximating the expected life, the expected dividend yield is based on
Mattel’s most recent actual annual dividend payout, and the risk-free interest rate is based on the implied yield
available on US Treasury zero-coupon issues approximating the expected life. The weighted average grant date
fair value of options granted during 2012, 2011, and 2010 was $7.32, $5.76, and $4.84, respectively. The
following weighted average assumptions were used in determining the fair value of options granted:
2012 2011 2010
Expected life (in years) ................................................. 5.0 5.1 5.0
Risk-free interest rate ................................................... 0.7% 1.4% 1.7%
Volatility factor ....................................................... 35.0% 34.0% 34.3%
Dividend yield ........................................................ 3.6% 3.5% 3.5%
The following is a summary of stock option information and weighted average exercise prices for Mattel’s
stock options:
2012 2011 2010
Number
Weighted
Average
Exercise
Price Number
Weighted
Average
Exercise
Price Number
Weighted
Average
Exercise
Price
(In thousands, except weighted average exercise price)
Outstanding at January 1 ...................... 19,299 $20.30 23,265 $19.48 25,285 $18.45
Granted ............................... 1,827 34.29 2,211 26.38 3,097 21.52
Exercised .............................. (6,312) 19.50 (5,977) 19.34 (4,761) 15.41
Forfeited ............................... (134) 27.13 (163) 20.50 (232) 19.29
Canceled .............................. (50) 20.02 (37) 17.46 (124) 17.73
Outstanding at December 31 ................... 14,630 $22.34 19,299 $20.30 23,265 $19.48
Exercisable at December 31 ................... 10,971 $20.03 14,359 $19.39 16,630 $19.30
The intrinsic value of a stock option is the amount by which the current market value of the underlying stock
exceeds the exercise price of an option. The total intrinsic value of options exercised during 2012, 2011, and
2010 was $85.8 million, $43.5 million, and $34.6 million, respectively. At December 31, 2012, options
outstanding had an intrinsic value of $209.0 million, with a weighted average remaining life of 5.9 years. At
December 31, 2012, options exercisable had an intrinsic value of $182.0 million, with a weighted average
remaining life of 5.0 years. At December 31, 2012, stock options vested or expected to vest totaled 14.5 million
shares, with a total intrinsic value of $208.1 million, weighted average exercise price of $22.25, and weighted
average remaining life of 5.9 years. During 2012, approximately 3 million stock options vested. The total grant
date fair value of stock options vested during 2012, 2011, and 2010 was approximately $15 million, $14 million,
and $12 million, respectively.
Mattel uses treasury shares purchased under its share repurchase program to satisfy stock option exercises.
Cash received from stock options exercised during 2012, 2011, and 2010 was $122.3 million, $115.6 million, and
$73.4 million, respectively.
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