Mattel 2011 Annual Report Download - page 87

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services to Mattel. Performance RSUs are units that may become payable in shares of Mattel’s common stock at
the end of the three-year performance cycle. The performance RSUs granted under this performance cycle were
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 measure (“the 2008—2010
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 the first day of the
performance cycle (“the 2008—2010 market-related component”). For the January 1, 2008—December 31, 2010
LTIP, 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 vested in February
2011.
For the January 1, 2008—December 31, 2010 LTIP, the weighted average grant date fair value of the
performance-related and market-related components of the performance RSUs were $22.02 and $3.99 per share,
respectively, for 2010, and $10.36 and $3.99 per share, respectively, for 2009. During 2010, $17.7 million was
charged to expense relating to the 2008—2010 performance-related component as the 2010 actual results
exceeded the 2010 performance threshold. During 2009, $3.4 million was charged to expense relating to the
2008—2010 performance-related component as the 2009 actual results exceeded the 2009 performance
threshold. Additionally, during both 2010 and 2009, Mattel recognized share-based compensation expense of
$1.9 million for the market-related component.
For the January 1, 2011—December 31, 2013 LTIP, Mattel granted performance RSUs under the Mattel,
Inc. 2010 Equity and Long-Term Compensation Plan to officers and certain employees providing services to
Mattel. Performance RSUs granted under this program are earned based on an initial target number, adjusted for
dividends declared during the three-year performance period, 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 measure
and a net sales performance measure (“the 2011—2013 performance-related components”), and (ii) Mattel’s TSR
for the three-year performance period relative to the TSR realized by companies comprising the S&P 500 as the
first day of the performance cycle (“the 2011—2013 market-related component”). For the 2011—2013
performance-related components, the range of possible outcomes is that between zero and 0.6 million shares that
can be earned for each of the three years during the three-year performance period. For the 2011—2013 market-
related component, the possible outcomes range from an upward adjustment of 0.9 million shares to a downward
adjustment of 0.9 million shares to the results of the performance-related components over the three-year
performance period.
For the January 1, 2011—December 31, 2013 LTIP, the weighted average grant date fair value of the
performance-related and market-related components of the performance RSUs were $24.67 and $4.22 per share,
respectively, for 2011. During 2011, $7.1 million was charged to expense relating to the performance-related
components as the 2011 actual results exceeded the 2011 performance threshold. Additionally, during 2011,
Mattel recognized share-based compensation expense of $1.2 million for the market-related component.
The fair value of the 2008—2010 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 were not credited with dividend equivalents for actual dividends
paid on Mattel’s common stock. The fair value of the 2011—2013 performance-related components was based
on the closing stock price of Mattel’s common stock on the date of grant. The fair values of the market-related
components were 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.
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