Earnings Per Share

12 Months Ended

Dec. 31, 2013

Earnings Per Share

Note 8—Earnings Per Share

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. Certain of Mattel’s RSUs are considered participating securities because they contain nonforfeitable rights to dividend equivalents.

Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic earnings per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net income allocable to common shares by the weighted average number of common shares for the period, as adjusted for the potential dilutive effect of non-participating share-based awards. The following table reconciles earnings per common share:

	For the Year
	2013			2012			2011
	(In thousands, except per share amounts)
Basic:
Net income	$	903,944		$	776,464		$	768,508
Less: Net income allocable to participating RSUs		(8,335	)		(7,730	)		(8,821	)
Net income available for basic common shares	$	895,609		$	768,734		$	759,687
Weighted average common shares outstanding		343,394			341,665			344,669
Basic net income per common share	$	2.61		$	2.25		$	2.20
Diluted:
Net income	$	903,944		$	776,464		$	768,508
Less: Net income allocable to participating RSUs		(8,291	)		(7,682	)		(8,765	)
Net income available for diluted common shares	$	895,653		$	768,782		$	759,743
Weighted average common shares outstanding		343,394			341,665			344,669
Weighted average common equivalent shares arising from:
Dilutive stock options and non-participating RSUs		4,065			4,493			3,755
Weighted average number of common and potential common shares		347,459			346,158			348,424
Diluted net income per common share	$	2.58		$	2.22		$	2.18

The calculation of potential common shares assumes the exercise of dilutive stock options and vesting of non-participating RSUs, net of assumed treasury share repurchases at average market prices. Nonqualified stock options and non-participating RSUs totaling 0.6 million shares, 0.7 million shares, and 1.0 million shares were excluded from the calculation of diluted net income per common share for 2013, 2012, and 2011, respectively, because they were antidilutive.