Stock Options, Other Stock Awards and Warrants

12 Months Ended

Dec. 25, 2011

Stock Options, Other Stock Awards and Warrants [Abstract]

Stock Options, Other Stock Awards and Warrants

(13)           Stock Options, Other Stock Awards and Warrants

Hasbro has reserved 18,471 shares of its common stock for issuance upon exercise of options and the grant of other awards granted or to be granted under stock incentive plans for employees and for non-employee members of the Board of Directors (collectively, the "plans"). These options and other awards generally vest in equal annual amounts over three to five years. The plans provide that options be granted at exercise prices not less than the market value of the underlying common stock on the date the option is granted and options are adjusted for such changes as stock splits and stock dividends. Generally, options are exercisable for periods of no more than ten years after date of grant. Upon exercise in the case of stock options, grant in the case of restricted stock or vesting in the case of performance based contingent stock grants, shares are issued out of available treasury shares. The Company’s current plan permits the granting of awards in the form of stock, stock appreciation rights, stock awards and cash awards in addition to stock options.

The Company on occasion will issue restricted stock or grant restricted stock units to certain key employees. These shares or units are nontransferable and subject to forfeiture for periods prescribed by the Company.  These awards are valued at the market value of the underlying common stock at the date of grant and are subsequently amortized over the periods during which the restrictions lapse, generally between three and five years. During 2011, 2010 and 2009, the Company recognized compensation expense, net of forfeitures, on these awards of $1,761, $1,209 and $768, respectively. At December 26, 2011, the amount of total unrecognized compensation cost related to restricted stock units is $7,574 and the weighted average period over which this will be expensed is 48 months. Of the shares vested in 2011, the receipt of 58 shares has been deferred to the date upon which the recipient is no longer employed by the Company.

Information with respect to Restricted Stock Awards and Restricted Stock Units for 2011, 2010 and 2009 is as follows:

	2011	2010	2009
	-------------	-------------	-------------
Outstanding at beginning of year	196	70	92
Granted	97	138	-
Forfeited	(3)	-	(2)
Vested	(58)	(12)	(20)
	-----------	-----------	-----------
Outstanding at end of year	232	196	70
	======	======	======
Weighted average grant-date fair value:
Granted	$39.81	41.93	-
Forfeited	$40.98	-	34.61
Vested	$34.61	27.96	21.36
Outstanding at end of year	$41.06	39.77	33.51

In 2011, 2010 and 2009, as part of its annual equity grant to executive officers and certain other employees, the Compensation Committee of the Company's Board of Directors approved the issuance of contingent stock performance awards (the "Stock Performance Awards"). These awards provide the recipients with the ability to earn shares of the Company's common stock based on the Company's achievement of stated cumulative diluted earnings per share and cumulative net revenue targets over the three fiscal years ended December 2013, December 2012, and December 2011 for the 2011, 2010 and 2009 awards, respectively. Each Stock Performance Award has a target number of shares of common stock associated with such award which may be earned by the recipient if the Company achieves the stated diluted earnings per share and revenue targets. The ultimate amount of the award may vary, depending on actual results.  Awards prior to 2010 may vary from 0% to 125% of the target number of shares.  Awards for 2010 and 2011 may vary from 0% to 200% of the target number of shares. The Compensation Committee of the Company's Board of Directors has discretionary power to reduce the amount of the award regardless of whether the stated targets are met.

Information with respect to Stock Performance Awards for 2011, 2010 and 2009 is as follows:

	2011	2010	2009
	-------------	-------------	-------------
Outstanding at beginning of year	1,878	1,639	1,830
Granted	456	883	631
Forfeited	(86)	(64)	(52)
Vested	(621)	(580)	(770)
	-----------	-----------	-----------
Outstanding at end of year	1,627	1,878	1,639
	======	======	======
Weighted average grant-date fair value:
Granted	$45.66	33.44	22.31
Forfeited	$32.53	26.75	26.53
Vested	$27.10	28.74	19.06
Outstanding at end of year	$33.52	28.61	26.22

Stock Performance Awards granted during 2011, 2010 and 2009 include 23, 80 and 116 shares related to the 2009, 2008 and 2007 awards, respectively, reflecting an increase in the ultimate amount of the awards issued or expected to be issued based on the Company’s actual results during the performance period. These shares are excluded from the calculation of the weighted average grant-date fair value of Stock Performance Awards granted during 2011, 2010 and 2009.

During 2011, 2010 and 2009, the Company recognized $(3,558), $17,144 and $15,361, respectively, of (income) expense relating to these awards. Awards are valued at the market value of the underlying common stock at the dates of grant and are expensed over the performance period. On a periodic basis the Company reviews the actual and forecasted performance of the Company against the stated targets for each award. The total expense is adjusted upward or downward based on the expected amount of shares to be issued as defined in the agreement. If minimum targets as detailed under the award are not met, no additional compensation expense will be recognized and any previously recognized compensation expense will be reversed. In the fourth quarter of 2011, it was determined that it is no longer probable that the minimum targets will be met for certain Stock Performance Awards granted. As a result, all previously recognized expense totaling $16,332 related to these awards was reversed and there is no remaining unrecognized compensation cost related to these outstanding awards.

Total compensation expense related to stock options, restricted stock units and Stock Performance Awards for the years ended December 25, 2011, December 26, 2010 and December 27, 2009 was $10,903, $31,952, and $28,547, respectively, and was recorded as follows:

	2011	2010	2009
	------------------	------------------	------------------
Cost of sales	$       51	349	462
Product development	556	2,576	2,205
Selling, distribution and administration	10,296	29,027	25,880
	----------	----------	----------
	10,903	31,952	28,547
Income tax benefit	3,637	10,658	9,293
	----------	----------	----------
	$  7,266	21,294	19,254
	======	======	======

Information with respect to stock options for the three years ended December 25, 2011 is as follows:

	2011	2010	2009
	-------------	-------------	-------------
Outstanding at beginning of year	11,392	13,347	11,651
Granted	1,080	2,420	2,955
Exercised	(1,267)	(4,107)	(476)
Expired or forfeited	(201)	(268)	(783)
	-----------	-----------	-----------
Outstanding at end of year	11,004	11,392	13,347
	======	======	======
Exercisable at end of year	7,494	6,256	7,839
	======	======	======
Weighted average exercise price:
Granted	$45.66	33.96	22.73
Exercised	$23.55	22.78	19.35
Expired or forfeited	$29.35	25.92	31.53
Outstanding at end of year	$27.75	25.61	23.23
Exercisable at end of year	$24.35	23.03	21.70

With respect to the 11,004 outstanding options and 7,494 options exercisable at December 25, 2011, the weighted average remaining contractual life of these options was 3.53 years and 2.72 years, respectively. The aggregate intrinsic value of the options outstanding and exercisable at December 25, 2011 was $70,422 and $61,585, respectively.

The Company uses the Black-Scholes valuation model in determining the fair value of stock options. The weighted average fair value of options granted in fiscal 2011, 2010 and 2009 was $9.84, $7.24 and $5.16, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the fiscal years 2011, 2010 and 2009:

	2011	2010	2009
Risk-free interest rate	1.64%	2.17%	1.87%
Expected dividend yield	2.63%	2.97%	3.52%
Expected volatility	30%	30%	36%
Expected option life	5 years	5 years	4 years

The intrinsic values, which represent the difference between the fair market value on the date of exercise and the exercise price of the option, of the options exercised in fiscal 2011, 2010 and 2009 were $26,308, $80,783 and $4,044, respectively.

At December 25, 2011, the amount of total unrecognized compensation cost related to stock options was $17,076 and the weighted average period over which this will be expensed is 24 months.

In 2011 and 2010, the Company granted awards to certain employees consisting of cash settled restricted stock units. Under these awards, the recipients are granted restricted stock units that vest over three years. At the end of the vesting period, the fair value of those units based on Hasbro’s stock price will be paid in cash to the recipient. The Company accounts for these awards as a liability and marks the vested portion of the award to market through the statement of operations. In 2011 and 2010, the Company recognized expense of $804 and $1,004, respectively related to these awards.

In 2011, 2010 and 2009, the Company granted 33, 36 and 60 shares of common stock, respectively, to its non-employee members of its Board of Directors. Of these shares, the receipt of 27 shares from the 2011 grant, 30 shares from the 2010 grant and 51 shares from the 2009 grant has been deferred to the date upon which the respective director ceases to be a member of the Company's Board of Directors. These awards were valued at the market value of the underlying common stock at the date of grant and vested upon grant. In connection with these grants, compensation cost of $1,560, $1,440 and $1,365 was recorded in selling, distribution and administration expense in 2011, 2010 and 2009, respectively.