Earnings Per Share

12 Months Ended

Dec. 31, 2017

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 Ended
	December 31, 2017			December 31, 2016			December 31, 2015
	(In thousands, except per share amounts)
Basic:
Net (loss) income	$	(1,053,836	)	$	318,022		$	369,416
Less: Net income allocable to participating RSUs (a)	—			(1,377		)	(3,179		)
Net (loss) income available for basic common shares	$	(1,053,836	)	$	316,645		$	366,237
Weighted average common shares outstanding	343,564			341,480			339,172
Basic net (loss) income per common share	$	(3.07	)	$	0.93		$	1.08
Diluted:
Net (loss) income	$	(1,053,836	)	$	318,022		$	369,416
Less: Net income allocable to participating RSUs (a)	—			(1,377		)	(3,179		)
Net (loss) income available for diluted common shares	$	(1,053,836	)	$	316,645		$	366,237
Weighted average common shares outstanding	343,564			341,480			339,172
Weighted average common equivalent shares arising from:
Dilutive stock options and non-participating RSUs	—			2,753			576
Weighted average number of common and potential common shares	343,564			344,233			339,748
Diluted net (loss) income per common share	$	(3.07	)	$	0.92		$	1.08

(a) During 2017, Mattel did not allocate its net loss to its participating RSUs as its participating RSUs are not obligated to share in Mattel's losses.

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. Mattel was in a net loss position in 2017 and, accordingly, all outstanding nonqualified stock options and non-participating RSUs were excluded from the calculation of diluted earnings per common share because their effect would be antidilutive. Nonqualified stock options and non-participating RSUs totaling 8.5 million shares and 9.6 million shares were excluded from the calculation of diluted net income per common share for 2016 and 2015, respectively, because they were antidilutive.