Toro 2011 Annual Report Download - page 61

The compensation costs related to stock-based awards were as cost is expected to be recognized over a weighted-average period
follows: of 1.8 years.
The following table presents the total market value of stock
options exercised and the total intrinsic value of options exercised
Fiscal years ended October 31 2011 2010 2009
during the following fiscal years:
Stock option awards $4,654 $4,117 $3,531
Restricted stock awards 699 68 4
Performance share awards 3,180 2,257 581 Fiscal years ended October 31 2011 2010 2009
Total compensation cost for stock-based Market value of stock options exercised $25,592 $24,588 $31,774
awards $8,533 $6,442 $4,116 Intrinsic value of options exercised
1
11,434 8,198 18,394
Tax benefit realized for tax deductions from
1
Intrinsic value is calculated as amount by which the stock price at exercise date
stock-based awards $4,469 $4,933 $8,490 exceeded the option exercise price
The fair value of each stock option is estimated on the date of
The number of unissued shares of common stock available for
grant using the Black-Scholes valuation method with the assump-
future equity-based grants under the company’s equity-based com-
tions noted in the table below. The expected life is a significant
pensation plan was 2,498,262 as of October 31, 2011.
assumption as it determines the period for which the risk-free inter-
Stock Option Awards. Under the company’s equity and incen- est rate, volatility, and dividend yield must be applied. The
tive plan, stock options are granted with an exercise price equal to expected life is the average length of time that officers, other key
the closing price of the company’s common stock on the date of employees, and non-employee members of the Board of Directors
grant, as reported by the New York Stock Exchange. Options are are expected to exercise their stock options, which is based on
generally granted to officers, other employees, and non-employee historical experience. Separate groups of employees that have
members of the company’s Board of Directors on an annual basis similar historical exercise behavior are considered separately for
in the first quarter of the company’s fiscal year. Options generally valuation purposes. Expected volatilities are based on the move-
vest one-third each year over a three-year period and have a ment of the company’s common stock over the most recent histori-
ten-year term. Other options granted to certain key employees vest cal period equivalent to the expected life of the option. The
in full on the three-year anniversary of the date of grant and have risk-free interest rate for periods within the contractual life of the
a ten-year term. Compensation expense equal to the grant date option is based on the U.S. Treasury rate over the expected life at
fair value is generally recognized for these awards over the vesting the time of grant. Dividend yield is estimated over the expected life
period. Stock options granted to officers and other employees are based on the company’s dividend policy, historical cash dividends
subject to accelerated expensing if the option holder meets the paid, expected future cash dividends, and expected changes in the
retirement definition set forth in the plan. In that case, the fair company’s stock price.
value of the options is expensed in the fiscal year of grant The following table illustrates the valuation assumptions of stock-
because the option holder must be employed as of the end of the based compensation for the following fiscal years:
fiscal year in which the options are granted in order for the options
to continue to vest following retirement. Similarly, if a Fiscal years ended October 31 2011 2010 2009
non-employee director has served on the company’s Board of Expected life of option in
Directors for ten full fiscal years or more, the fair value of the years 6 66
options granted is fully expensed on the date of the grant. Expected volatility 33.34% – 33.43% 33.00% – 33.10% 30.60%
Weighted-average volatility 33.42% 33.00% 30.60%
The table below presents stock option activity for fiscal 2011:
Risk-free interest rate 1.72% – 2.36% 2.51% – 2.87% 2.26% – 3.16%
Expected dividend yield 1.04% – 1.16% 1.52% – 1.68% 1.53% – 1.81%
Intrinsic Weighted-average dividend
Awards Price
1
Life
2
Value yield 1.05% 1.54% 1.79%
Outstanding as of October 31, 2010 2,093,234 $37.91 5.4 $39,461 Grant date weighted-average
Granted 235,739 62.89 fair value $20.30 $12.33 $7.93
Exercised (425,557) 33.27
Cancelled (21,724) 60.13 Restricted Stock Awards. In the first quarter of fiscal 2011, the
Outstanding as of October 31, 2011 1,881,692 41.83 5.6 $25,117 company began granting restricted stock awards to certain
Exercisable as of October 31, 2011 1,283,862 39.78 4.4 $18,543 non-officer employees. Previously, limited restricted stock awards
1
Weighted-average exercise price were granted to certain officers and other employees. In the sec-
2
Weighted-average contractual life in years ond quarter of fiscal 2011, the company granted restricted stock
awards to two officer employees to help ensure a smooth transition
As of October 31, 2011, there was $1,595 of total unrecognized
compensation expense related to unvested stock options. That
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