Mattel 2014 Annual Report Download - page 57

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The weighted average grant date fair value of options granted during 2014, 2013, and 2012 was $4.57,
$8.80, and $7.32, respectively. The following weighted average assumptions were used in determining the fair
value of options granted:
2014 2013 2012
Expected life (in years) ....................................................... 4.9 4.9 5.0
Risk-free interest rate ......................................................... 1.6% 1.5% 0.7%
Volatility factor ............................................................. 23.7% 31.8% 35.0%
Dividend yield .............................................................. 4.3% 3.4% 3.6%
The following table summarizes the sensitivity of valuation assumptions within the calculation of stock
option fair values, if all other assumptions are held constant:
Increase in
Assumption
Factor
Increase
(Decrease)
in Fair
Value
(in % pts)
Expected life (in years) .................................................... 1year 3.6
Risk-free interest rate ..................................................... 1% 12.5
Volatility factor .......................................................... 1% 6.8
Dividend yield ........................................................... 1% (14.1)
(Decrease) in
Assumption
Factor
Increase
(Decrease)
in Fair
Value
(in % pts)
Expected life (in years) ................................................... (1)year (3.2)
Risk-free interest rate ..................................................... (1)% (9.8)
Volatility factor ......................................................... (1)% (4.8)
Dividend yield .......................................................... (1)% 18.2
Mattel recognized compensation expense of $12.5 million, $12.1 million, and $13.8 million for stock
options during 2014, 2013, and 2012, respectively, which is included within other selling and administrative
expenses. Compensation expense recognized related to grants of restricted stock units (“RSUs”), including
performance-based restricted stock units (“Performance RSUs”), was $39.5 million, $49.6 million, and $49.5
million in 2014, 2013, and 2012, respectively, and is also included within other selling and administrative
expenses. As of December 31, 2014, total unrecognized compensation cost related to unvested share-based
payments totaled $87.7 million and is expected to be recognized over a weighted-average period of 1.8 years.
Income Taxes
Mattel’s income tax provision and related income tax assets and liabilities are based on actual and expected
future income, US and foreign statutory income tax rates, and tax regulations and planning opportunities in the
various jurisdictions in which Mattel operates. Management believes that the accounting estimates related to
income taxes are “critical accounting estimates” because significant judgment is required in interpreting tax
regulations in the US and in foreign jurisdictions, evaluating Mattel’s worldwide uncertain tax positions, and
assessing the likelihood of realizing certain tax benefits. Actual results could differ materially from those
judgments, and changes in judgments could materially affect Mattel’s consolidated financial statements.
Certain income and expense items are accounted for differently for financial reporting and income tax
purposes. As a result, the income tax expense reflected in Mattel’s consolidated statements of operations is
different than that reported in Mattel’s tax returns filed with the taxing authorities. Some of these differences are
permanent, such as expenses that are not deductible in Mattel’s tax return, and some differences reverse over
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