Mattel 2008 Annual Report Download - page 90

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retirement of a member of the Board of Directors aged 55 years or greater with 5 or more years of service, or the
death or disability of a director, that occurs at least 6 months after the grant date, RSUs receive accelerated
vesting as to some or all of the RSUs. The 2005 Plan expires on May 18, 2015, except as to any grants then
outstanding.
The number of shares of common stock available for grant under the 2005 Plan is subject to an aggregate
limit of 50 million shares and is further subject to share-counting rules as provided in the 2005 Plan. As a result
of such share-counting rules, full-value grants such as grants of restricted stock or RSUs count against shares
remaining available for grant at a higher rate than grants of stock options and stock appreciation rights. Each
stock option or stock appreciation right grant is treated as using one available share for each share actually
subject to such grant, whereas each full-value grant is treated as using three available shares for each share
actually subject to such full-value grant. The 2005 Plan contains detailed provisions with regard to share-
counting. At December 31, 2008, there were 15.1 million shares of common stock available for grant remaining
under the 2005 Plan.
In 2006 Mattel adopted the fair value recognition provisions of SFAS No. 123(R) using the modified-
prospective transition method.
SFAS No. 123(R) requires the benefits of tax deductions in excess of the compensation cost recognized for
those options (“excess tax benefits”) be classified as financing cash flows and benefits of tax deductions less than
the compensation cost recognized for those options (“shortfalls”) be classified as operating cash flows. Excess
tax (shortfalls) benefits reflected as financing cash (outflows) inflows totaled $(2.1) million, $5.7 million, and
$12.0 million during 2008, 2007, and 2006, respectively. Excess tax shortfalls (benefits) reflected as operating
cash (outflows) inflows totaled $(0.2) million, $0, and $(3.5) million during 2008, 2007, and 2006, respectively.
As of December 31, 2008, Mattel did not recognize cumulative excess tax benefits totaling $35.1 million that are
not currently realizable based on the ordering of deductions under the tax law.
As of December 31, 2008, total unrecognized compensation cost related to unvested share-based payments
totaled $69.2 million and is expected to be recognized over a weighted-average period of 2.0 years.
Stock Option Review
During 2006, Mattel recognized non-cash compensation expense of $19.3 million ($13.3 million net of
income tax) related to prior period unintentional stock option accounting errors associated with the use of
incorrect measurement dates for certain grants. The correcting adjustment also had the effect of increasing
noncurrent deferred tax assets by $3.5 million and additional paid in capital by $16.8 million as of
December 31, 2006.
Stock Options
Mattel recognized compensation expense of $9.5 million, $7.4 million, and $23.9 million for stock options
during 2008, 2007, and 2006, respectively, as a component of other selling and administrative expenses. Income
tax benefits related to stock option compensation expense recognized in the consolidated statements of operations
during 2008, 2007, and 2006 totaled $3.2 million, $2.5 million, and $5.2 million, respectively.
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