Mattel 2009 Annual Report Download - page 88

For the January 1, 2008—December 31, 2010 LTIP performance cycle, the weighted average grant date fair
value of the performance-related and market-related components of the performance RSUs were $10.36 and
$3.99 per share, respectively, for 2009, and $18.14 and $3.99 per share, respectively, for 2008. The fair value of
the performance-related component was based on the closing stock price of Mattel’s common stock on the date
of grant, reduced by the present value of estimated dividends to be paid during the performance period as the
awards are not credited with dividend equivalents for actual dividends paid on Mattel’s common stock. The fair
value of the market-related component was estimated at the grant date using a Monte Carlo valuation
methodology. Share-based compensation is recognized as expense over the performance period using a straight-
line expense attribution approach reduced for estimated forfeitures. During 2009, $3.4 million was charged to
expense relating to the performance-related component as the 2009 actual results exceeded the 2009 performance
threshold. During 2008, $0 was charged to expense relating to the performance-related component as the 2008
actual results were below the 2008 performance threshold at the minimum award level and no shares were
earned. Additionally, during 2009 and 2008, Mattel recognized share-based compensation expense of $1.9
million and $1.5 million, respectively, for the market-related component.
Note 8—Seasonal Financing and Debt
Seasonal Financing
Mattel maintains and periodically amends or replaces its domestic unsecured committed revolving credit
facility with a commercial bank group that is used as the primary source of financing for the seasonal working
capital requirements of its domestic subsidiaries. The agreement in effect was amended and restated on
March 23, 2009 to, among other things, (i) extend the maturity date of the credit facility to March 23, 2012,
(ii) reduce aggregate commitments under the credit facility from $1.3 billion to $880.0 million, with an
“accordion feature,” which would allow Mattel to increase the availability under the credit facility to $1.08
billion under certain circumstances, (iii) add an interest rate floor equal to 30-day US Dollar London Interbank
Offered Rate (“LIBOR”) plus 1.00% for base rate loans under the credit facility, (iv) increase the applicable
interest rate margins to a range of 2.00% to 3.00% above the applicable base rate for base rate loans, and 2.5% to
3.5% above the applicable LIBOR rate for Eurodollar rate loans, depending on Mattel’s senior unsecured long-
term debt rating, (v) increase commitment fees to a range of 0.25% to 0.75% of the unused commitments under
the credit facility, and (vi) replace the consolidated debt-to-capital ratio with a consolidated debt-to-earnings
before interest, taxes, depreciation, and amortization (“EBITDA”) ratio. During 2009, Mattel utilized the
accordion feature of the credit facility to increase the aggregate commitments under the credit facility from
$880.0 million to $1.08 billion, which is the maximum aggregate commitment available under the credit facility.
Mattel is required to meet financial covenants at the end of each fiscal quarter and fiscal year, using the formulae
specified in the credit agreement to calculate the ratios. Mattel was in compliance with such covenants at the end
of each fiscal quarter and fiscal year in 2009. As of December 31, 2009, Mattel’s consolidated debt-to-EBITDA
ratio, as calculated per the terms of the credit agreement, was 1.2 to 1 (compared to a maximum allowed of 3.0 to
1) and Mattel’s interest coverage ratio was 12.6 to 1 (compared to a minimum required of 3.50 to 1).
The domestic unsecured committed revolving credit facility is a material agreement and failure to comply
with the financial covenant ratios may result in an event of default under the terms of the facility. If Mattel
defaulted under the terms of the domestic unsecured committed revolving credit facility, its ability to meet its
seasonal financing requirements could be adversely affected.
To finance seasonal working capital requirements of certain foreign subsidiaries, Mattel avails itself of
individual short-term credit lines with a number of banks. As of December 31, 2009, foreign credit lines totaled
approximately $155 million, a portion of which are used to support letters of credit. Mattel expects to extend the
majority of these credit lines throughout 2010.
In June 2006, Mattel issued $100.0 million of unsecured floating rate senior notes (“Floating Rate Senior
Notes”) due June 15, 2009 and $200.0 million of unsecured 6.125% senior notes (“6.125% Senior Notes”) due
June 15, 2011 (collectively “2006 Senior Notes”). Interest on the Floating Rate Senior Notes is based on the
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