Mattel 1998 Annual Report Download - page 45

Mattel, Inc. and Subsidiaries 43
$5.000 per Depositary Share as of June 30, 2000) divided by the
current market price of Mattel common stock (as defined in the
Certificate of Designations) or 0.40064 common shares for each
Depositary Share, whichever is greater. On July 1, 2000, shares of
the Series C Preferred Stock (and the related Depositary Shares)
are mandatorily convertible into 0.54301 Mattel common shares
for each Depositary Share.
The Series C Preferred Stock entitles the holders of Depositary
Shares to vote (at the rate of 0.48876 common shares for each
Depositary Share) with the holders of the Company’s common
stock as a single class on all matters on which the holders of the
Company’s common stock may vote.
- Series B Voting Convertible Exchangeable Preferred Stock
(“Series B Preferred Stock”)
During 1994,Tyco sold 47.6 thousand shares of Series B Preferred
Stock to a private investment group. Each share of Series B Preferred
Stock was converted into like Mattel preferred stock as a result of
the March 1997 merger. Until April 15, 1996,Tyco paid dividends in
the form of additional shares of Series B Preferred Stock. Dividends
issued in shares in lieu of cash during 1996 were valued at $1.7 million
(or 1.6 thousand shares). On December 2, 1997, all outstanding
shares of Series B Preferred Stock were converted by the holders
into 2.8 million shares of Mattel common stock.
Common Stock
In May 1998, the stockholders of the Company approved an
amendment to the Company’s Restated Certificate of Incorporation
that increased the number of shares of authorized common stock
from 600.0 million to 1.0 billion in order to accommodate issuance
of common stock in connection with possible future mergers and
other financing transactions, future stock dividends or splits, future
awards pursuant to the Company’s stock option plans, warrant
exercises, and other general corporate purposes.
Stock Compensation Plans
- Stock Option Plans
In May 1996, the stockholders of the Company approved the Mattel
1996 Stock Option Plan. Under this plan, incentive stock options,
nonqualified stock options, stock appreciation rights, nonvested stock
awards, and shares of common stock may be granted to officers, key
employees, and other persons providing services to the Company.
In addition, nonqualified stock options may be granted to members
of the Company’s board of directors who are not employees of
the Company.
Generally, options are exercisable contingent upon the grantees’
continued employment with the Company. Nonqualified stock options
are granted at not less than 100% of the fair market value of the
Company’s common stock on the date of grant, generally vest at the
rate of 25% per year of service, and usually expire within ten years
from the date of grant. The 1996 Stock Option Plan provides that
up to 1.5% of Mattel’s outstanding common stock as of the first day
of each calendar year will be available for awards under the plan.
Grants made to individual participants cannot exceed 1.0 million shares
in any single calendar year. On February 4, 1999, the Company’s board
of directors approved an amendment to the 1996 Stock Option
Plan authorizing an additional 6.0 million shares for grant in connection
with new employees of businesses acquired by the Company. The
aggregate number of shares of common stock available for grants
under the 1996 Stock Option Plan may not exceed 50.0 million
shares. This plan expires on December 31, 2005. The Company’s
previous plans, the 1982 and 1990 Stock Option Plans, expired on
April 14, 1992 and December 31, 1996, respectively. All outstanding
awards under these plans continue to be exercisable under the terms
of their respective grant agreements.
The fair value of Mattel options granted during 1998, 1997
and 1996 has been estimated using the Black-Scholes pricing model.
The expected life of these options used in this calculation has been
determined using historical exercise patterns. The following weighted
average assumptions were used in determining fair value:
1998 1997 1996
Expected life (in years) 3.60 3.40 3.17
Risk-free interest rate 4.61% 5.69% 6.05%
Volatility factor 15.80% 17.40% 17.98%
Dividend yield 0.83% 0.86% 0.82%
The weighted average fair value of Mattel options granted
during 1998, 1997 and 1996 were $7.32, $4.86 and $5.12, respectively.
The following is a summary of stock option information and
weighted average exercise prices for Mattel’s stock option plans during
the year (options in thousands):
1998 1997 1996
Number Price Number Price Number Price
Outstanding at January 1 17,307 $21.73 13,310 $18.05 14,513 $14.27
Options granted 3,680 41.66 7,443 25.79 4,294 25.15
Options exercised (4,284) 17.80 (2,807) 14.89 (5,267) 13.48
Options canceled (628) 29.79 (639) 22.44 (230) 16.67
Outstanding at December 31 16,075 $27.02 17,307 $21.73 13,310 $18.05
Exercisable at December 31 5,645 $20.48 5,999 $16.29 5,263 $14.41
Available for grant at December 31 2,358 1,072 4,074
The following table summarizes information about the
weighted average remaining contractual life (in years) and the
weighted average exercise prices for Mattel stock options outstanding
as of December 31, 1998 (options in thousands):
Options Outstanding Options Exercisable
Exercise Remaining
Price Ranges Number Life Price Number Price
$ 4.69 to $15.76 1,775 4.87 $14.50 1,775 $14.50
16.16 to $24.00 2,212 6.59 18.96 1,263 17.98
24.70 to $25.50 2,199 7.08 24.72 806 24.73
25.75 to $25.75 5,372 8.10 25.75 1,311 25.75
26.13 to $41.38 1,400 8.23 30.76 490 27.55
42.00 to $42.00 3,117 9.10 42.00 - -
$ 4.69 to $42.00 16,075 7.60 $27.02 5,645 $20.48