Mattel 2010 Annual Report Download - page 83

employer automatic and matching contributions by Mattel. The Plan allows employees to allocate both their
voluntary contributions and their employer automatic and matching contributions to a variety of investment
funds, including a fund that is fully invested in Mattel common stock (the “Mattel Stock Fund”). Employees are
not required to allocate any of their Plan account balance to the Mattel Stock Fund, which allows employees to
limit or eliminate their exposure to market changes in Mattel’s stock price. Furthermore, the Plan limits the
percentage of the employee’s total account balance that may be allocated to the Mattel Stock Fund to 25%.
Employees may generally reallocate their account balances on a daily basis. However, pursuant to Mattel’s
insider trading policy, employees classified as insiders and restricted personnel under Mattel’s insider trading
policy are limited to certain periods in which they may make allocations into or out of the Mattel Stock Fund.
Certain non-US employees participate in other defined contribution retirement plans with varying vesting
and contribution provisions.
Deferred Compensation and Excess Benefit Plans
Mattel maintains a deferred compensation plan that permits certain officers and key employees to elect to
defer portions of their compensation. The deferred compensation plan, together with certain contributions made
by Mattel and participating employees to an excess benefit plan, earns various rates of return. The liability for
these plans as of December 31, 2010 and 2009 was $48.3 million and $45.6 million, respectively, and is included
in other noncurrent liabilities in the consolidated balance sheets. Changes in the market value of the participant
selected investment options are recorded as retirement plan expense within other selling and administrative
expenses. Separately, Mattel has purchased group trust-owned life insurance contracts designed to assist in
funding these programs. The cash surrender value of these policies, valued at $64.5 million and $60.4 million as
of December 31, 2010 and 2009, respectively, are held in an irrevocable grantor trust, the assets of which are
subject to the claims of Mattel’s creditors and are included in other noncurrent assets in the consolidated balance
sheets.
Incentive Compensation Plans
Mattel has annual incentive compensation plans under which officers and key employees may earn incentive
compensation based on Mattel’s performance and subject to certain approvals of the Compensation Committee of
the Board of Directors. For 2010, 2009, and 2008, $106.7 million, $96.6 million, and $15.4 million, respectively,
was charged to expense for awards under these plans.
Mattel has had one long-term incentive program (“LTIP”) performance cycle in place for the time period
between 2008 and 2010, which was established by the Compensation Committee of Mattel’s Board of Directors
in March 2008. For the January 1, 2008—December 31, 2010 LTIP performance cycle, during 2010, 2009, and
2008, Mattel granted performance RSUs under the Mattel, Inc. 2005 Equity Compensation Plan to officers and
certain employees providing services to Mattel. Performance restricted stock units (“RSUs”) are units that may
become payable in shares of Mattel’s common stock at the end of the three-year performance period, beginning
January 1, 2008 and ending December 31, 2010 (“the performance period”). Performance RSUs are earned based
on an initial target number with the final number of performance RSUs payable being determined based on the
product of the initial target number of performance RSUs multiplied by a performance factor based on
measurements of Mattel’s performance with respect to: (i) annual operating result targets for each year in the
performance period using a net operating profit after taxes less capital charge calculation (“the performance-
related component”), and (ii) Mattel’s total stockholder return (“TSR”) for the three-year performance period
relative to the TSR realized by companies comprising the S&P 500 as of January 1, 2008 (“the market-related
component”). For the performance-related component, the range of possible outcomes is that between zero and
0.7 million shares are earned for each of the three years during the three-year performance period. For the
market-related component, possible outcomes range from an upward adjustment of 0.7 million shares to a
downward adjustment of 0.7 million shares to the results of the performance-related component over the three-
year performance period. For the January 1, 2008—December 31, 2010 LTIP performance cycle, 1.3 million
shares were earned relating to the performance-related component and 0.7 million shares were earned relating to
the market-related component, resulting in a total of 2.0 million shares that vests in February 2011.
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