Mattel 2008 Annual Report Download - page 92

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Compensation expense recognized related to grants of restricted stock and RSUs to certain employees and
non-employee Board members was $24.7 million, $14.8 million, and $3.6 million in 2008, 2007, and 2006,
respectively, and is a component of other selling and administrative expenses. Income tax benefits related to RSU
compensation expense recognized in the consolidated statements of operations during 2008, 2007, and 2006
totaled $7.9 million, $4.6 million, and $1.0 million, respectively.
The following table summarizes the number and weighted average grant date fair value of Mattel’s unvested
restricted stock and RSUs during the year (amounts in thousands, except weighted average grant date fair value):
2008 2007 2006
Shares
Weighted
Average
Grant Date
Fair Value Shares
Weighted
Average
Grant Date
Fair Value Shares
Weighted
Average
Grant Date
Fair Value
Unvested at January 1 ........................ 3,452 $20.38 1,811 $17.28 220 $12.55
Granted ............................... 1,873 20.09 1,744 23.60 1,615 17.95
Vested ................................ (990) 16.91 (15) 28.10 (5) 20.70
Forfeited .............................. (408) 21.16 (88) 19.27 (19) 17.94
Unvested at December 31 ..................... 3,927 $21.03 3,452 $20.38 1,811 $17.28
At December 31, 2008, total RSUs vested or expected to vest totaled 3.6 million shares, with a weighted
average grant date fair value of $21.06. The total grant date fair value of RSUs vested during 2008, 2007, and
2006 totaled $16.7 million, $0.4 million, and $0.1 million, respectively.
In addition to the expense and share amounts described above, Mattel recognized compensation expense of
$1.5 million during 2008 for performance RSUs granted during 2008 in connection with its January 1, 2008–
December 31, 2010 Long Term Incentive Plan, as more fully described in “Note 7 to the Consolidated Financial
Statements—Employee Benefit Plans.”
Note 11—Financial Instruments
Derivative Financial Instruments
Currency exchange rate fluctuations may impact Mattel’s results of operations and cash flows. Inventory
sale transactions denominated in the Euro, British pound sterling, Canadian dollar, Mexican peso, Hong Kong
dollar, Indonesian rupiah, and Venezuelan bolivar fuerte are the primary transactions that caused currency
transaction exposure for Mattel during 2008 and 2007. Mattel seeks to mitigate its exposure to market risk by
monitoring its currency transaction exposure for the year and partially hedging such exposure using foreign
currency forward exchange contracts. Such contracts are primarily used to hedge Mattel’s purchase and sale of
inventory, and other intercompany transactions denominated in foreign currencies. These contracts generally
have maturity dates of up to 18 months. In addition, Mattel manages its exposure to currency exchange rate
fluctuations through the selection of currencies used for international borrowings. Mattel does not trade in
financial instruments for speculative purposes. The ineffectiveness related to cash flow hedges was not
significant during any year.
Mattel uses fair value derivatives to hedge most intercompany loans and advances denominated in foreign
currencies. Due to the short-term nature of the contracts involved, Mattel does not use hedge accounting for these
contracts. Changes in the fair value of these derivatives were not significant to the results of operations during
any year.
As of December 31, 2008 and 2007, Mattel held foreign currency forward exchange contracts with notional
amounts totaling $888.1 million and $1.07 billion, respectively. The notional amounts of these contracts were
equal to the exposure hedged in both years.
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