This excerpt taken from the HAS DEF 14A filed Apr 17, 2006.
Management Incentive Bonus Awards
Approximately 1,200, or 20%, of the Companys employees, including all of the Companys executive officers, were awarded management incentive bonuses with respect to fiscal 2005. Management incentive bonus awards for the Companys executive officers were determined under two programs for fiscal 2005.
The management incentive bonus eligibility of Alfred J. Verrecchia, Frank P. Bifulco, Jr., Brian Goldner, Alan G. Hassenfeld and E. David Wilson was determined pursuant to the Companys 2004 Senior Management Annual Performance Plan (the Annual Performance Plan). Under the Annual Performance Plan, the Committee designated fiscal 2005 corporate and business unit performance goals for the Company at the beginning of the fiscal year. These performance goals were based on the 2005 operating plan and budgets approved by the Companys
Board of Directors and were the same performance criteria used for the Companys other bonus eligible employees as well.
The setting of performance goals involved both selecting the performance metrics that would be used to evaluate bonus eligibility and establishing the performance targets for each of those metrics. The Committee used four performance metrics to measure corporate performance in 2005. The four corporate performance criteria were total net revenues, net revenues attributable to identified core brand drivers, operating margin and free cash flow.
The Committee selected these four performance metrics to capture the most important aspects of the top and bottom line performance of the Company, in the form of sales, profitability and cash generation.
Business unit performance objectives were based on the first three of these criteria, namely total net revenues, net revenues attributable to identified core brand drivers and operating margin. Free cash flow is not used as a business unit performance objective because its computation can only occur for the Company at the corporate level.
In addition to establishing the performance criteria and target performance objectives for each such criteria, at the beginning of 2005 the Committee also established target bonus awards and maximum awards for each participant in the Annual Performance Plan corresponding with various levels of performance against the designated corporate and business unit objectives.
For Mr. Verrecchia and Mr. Hassenfeld, management incentive bonuses for 2005 were weighted 100% for corporate performance against the four corporate performance targets listed above. For Mr. Bifulco, Mr. Goldner and Mr. Wilson, who had business unit responsibility, bonuses were weighted 40% for corporate performance against the four corporate targets, and 60% for business unit performance, which consisted not only of the performance of the Companys U.S. Toys and Games segments as applicable to the individual executive, but also of the performance of other business units being overseen by Mr. Goldner and Mr. Wilson, against the three business unit objectives.
The ultimate management incentive bonus paid with respect to 2005 was a function of the percentage of the performance goals achieved, with the Committee reserving the right to lower the bonus paid in its sole discretion in each case. The Summary Compensation Table that follows this report includes the management incentive bonus awarded to each of the Companys named executive officers for fiscal 2005.
For fiscal 2005, Mr. Goldner, Mr. Hassenfeld and Mr. Wilson were awarded management incentive bonuses in the amount of $800,000, $107,200 and $290,000, respectively. The Companys performance in 2005 represented approximately 107% achievement of the corporate performance goals under the Annual Performance Plan. The weighted achievement of all target corporate objectives, U.S. Toy segment objectives and objectives of the other areas of the Companys business overseen by Mr. Goldner in 2005 was approximately 128%. The weighted achievement of all target corporate objectives, Games segment objectives and objectives of the other areas of the Companys business overseen by Mr. Wilson was approximately 66%.
With respect to executive officers other than Mr. Verrecchia, Mr. Bifulco, Mr. Goldner, Mr. Hassenfeld and Mr. Wilson, target bonuses in fiscal 2005 were determined pursuant to the Companys 2005 Management Incentive Plan (MIP). The same corporate performance criteria and targets that were used under the Annual Performance Plan were used under the MIP for fiscal 2005. The bonuses under the MIP for the remaining executive officers, all of whom are deemed to have corporate-wide responsibility, were based 100% on corporate performance, with such corporate performance representing approximately 107% achievement of the performance targets. In all cases, the bonuses earned under the MIP could be subject to adjustment downward to as low as 0% and upward by a factor of up to an additional 50%, based on individual performance against specified individual management objectives under the MIP. In all cases, the bonuses for performance under the MIP were reviewed by the Committee and adjusted to reflect the individual performance of the executive in question.