Mattel 2013 Annual Report Download - page 86

certain employees providing services to Mattel. Performance RSUs granted under this program 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 cycle using a net operating profit after taxes less capital charge measure and a net sales performance
measure (“the performance-related components”), and (ii) Mattel’s total stock return (“TSR”) for the three-year
performance cycle relative to the TSR realized by companies comprising the S&P 500 as of the first day of the
performance cycle (“the market-related component”), adjusted for dividends declared during the three-year
performance cycle. The Performance RSUs also have dividend equivalent rights that are converted to shares of
Mattel common stock only when and to the extent the underlying Performance RSUs are earned and paid in
shares of Mattel common stock. For the performance-related components, the range of possible outcomes is that
between zero and 0.5 million shares that can be earned for each of the three years during the three-year
performance cycle. For the market-related component, the possible outcomes range from an upward adjustment
of 0.5 million shares to a downward adjustment of 0.5 million shares to the results of the performance-related
components over the three-year performance cycle. For the January 1, 2011—December 31, 2013 LTIP
performance cycle, 1.0 million shares were earned relating to the performance-related components, 0.5 million
shares were earned relating to the market-related component, and 0.1 million shares were earned related to
dividend equivalent rights, resulting in a total of 1.6 million shares that vested in February 2014.
For the January 1, 2011—December 31, 2013 LTIP performance cycle, the weighted average grant date fair
value of the performance-related and market-related components of the Performance RSUs were $42.30 and
$4.59 per share, respectively, for 2013, $32.87 and $4.55 per share, respectively, for 2012, and $24.67 and
$4.22 per share, respectively, for 2011. During 2013, $10.0 million was charged to expense relating to the
performance-related components as the actual results were below the targeted performance level for 2013.
During 2012, $12.4 million was charged to expense relating to the performance-related components as the 2012
actual results exceeded the 2012 performance threshold. 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 2013, 2012, and 2011, Mattel recognized share-based compensation expense of
$1.4 million, $1.8 million, and $1.2 million, respectively, for the market-related component.
The fair values of the performance-related components were based on the closing stock prices of Mattel’s
common stock on each of the grant dates. The fair values of the market-related component were estimated at the
grant dates using a Monte Carlo valuation methodology. Share-based compensation is recognized as expense
over the performance cycle using a straight-line attribution approach, reduced for estimated forfeitures.
Note 5—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. The facility is used as a back-up to Mattel’s commercial paper program,
which is used as the primary source of financing for the seasonal working capital requirements of its domestic
subsidiaries. The agreement governing the credit facility was amended and restated on March 11, 2013 to, among
other things, (i) extend the maturity date of the credit facility to March 12, 2018, (ii) increase aggregate
commitments under the credit facility to $1.60 billion, with an “accordion feature,” which allows Mattel to
increase the aggregate availability under the credit facility to $1.85 billion under certain circumstances,
(iii) decrease the applicable interest rate margins to a range of 0.00% to 0.75% above the applicable base rate for
base rate loans and 0.88% to 1.75% above the applicable LIBOR for Eurodollar rate loans, in each case
depending on Mattel’s senior unsecured long-term debt rating, and (iv) decrease commitment fees to a range of
0.08% to 0.28% of the unused commitments under the credit facility.
The amended credit facility has a borrowing capacity of up to $1.60 billion over a term of five years. Prior
to the amendment, the facility permitted Mattel to borrow up to $1.40 billion and had two years remaining to
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