Toro 2009 Annual Report Download - page 62

The following table illustrates the valuation assumptions of stock- The annual increase in cost of postretirement benefits is
based compensation in the following fiscal years. assumed to decrease gradually in future years reaching an ulti-
mate rate of 5 percent in fiscal 2015.
Fiscal years ended October 31 2009 2008 2007 Components of net benefit cost each fiscal year are as follows:
Stock option valuation
assumptions: Fiscal years ended October 31 2009 2008 2007
Expected life of option in Service cost $ 218 $ 358 $ 378
years 6 3 – 6.5 3 – 6.5 Interest cost 701 514 495
Expected volatility 30.6% 24.8% – 25.8% 25.0% – 26.4% Curtailment – 230 –
Weighted-average volatility 30.60% 25.26% 25.65% Prior service credit (194) (193) (194)
Risk-free interest rate 2.26% – 3.16% 3.10% – 4.08% 4.42% – 4.53% Amortization of losses 191 213 217
Expected dividend yield 1.53% – 1.81% 0.92% – 0.95% 0.78% – 0.90%
Net expense $ 916 $1,122 $ 896
Weighted-average dividend
yield 1.79% 0.94% 0.84%
Assumed trend rates for health-care costs have an important
Grant date weighted-average effect on the amounts reported for postretirement benefit plans. If
fair value of stock options $7.93 $13.87 $12.32
the health-care cost trend rate increased by one percentage point,
Performance share grant date
the postretirement benefit obligation as of October 31, 2009 would
fair value $28.62 $58.96 $44.90
increase by $566. If the health-care cost trend rate decreased by
one percentage point, the postretirement benefit obligation as of
October 31, 2009 would decrease by $508.
The benefits expected to be paid by the company in each fiscal
11 EMPLOYEE RETIREMENT PLANS
year from fiscal years 2010 through 2014 are $1,046, $1,108,
The company maintains The Toro Company Investment, Savings,
$1,021, $900, and $750, respectively. The aggregate benefits
and Employee Stock Ownership Plan for eligible employees. The
expected to be paid by the company in the five fiscal years from
company’s expenses under this plan were $15,200, $16,150, and
2015 to 2019 are $3,311. The expected benefits to be paid are
$17,170 for the fiscal years ended October 31, 2009, 2008, and
based on the same assumptions used to measure the company’s
2007, respectively.
benefit obligation as of October 31, 2009.
The company also sponsors a plan that provides health-care
In addition, the company and its subsidiaries have defined bene-
benefits to eligible employees upon retirement, up to age 65. Retir-
fit, supplemental, and other retirement plans covering certain
ees pay for a portion of the premiums for these health care bene-
employees in the U.S. and the United Kingdom. The projected
fits. The company funds these benefits for retirees on an annual
benefit obligation of these plans as of October 31, 2009 and 2008
basis. The company uses fiscal year end as the measurement
was $30,496 and $24,346, respectively, and the net liability
date for this plan.
amount recognized in the consolidated balance sheets as of Octo-
Reconciliation of the change in benefit obligation of this plan is
ber 31, 2009 and 2008 was $1,863 and $1,655, respectively. The
as follows:
accumulated benefit obligation of these plans as of October 31,
Fiscal years ended October 31 2009 2008 2009 and 2008 was $27,458 and $20,807, respectively. The fair
value of the plan assets as of October 31, 2009 and 2008 was
Projected Benefit Obligation
Beginning obligation $ 9,678 $ 9,262 $23,540 and $23,015, respectively. The net expense recognized in
Service cost 217 358 the consolidated financial statements for these plans was $713,
Interest cost 701 514 $681, and $954 for the fiscal years ended October 31, 2009, 2008,
Curtailment – 230 and 2007, respectively.
Actuarial (gain) loss (1,072) (99)
Benefits paid (906) (587)
Ending obligation $ 8,618 $ 9,678
Assumptions used in calculations are:
Fiscal years ended October 31 2009 2008
Discount rate used to determine year end obligation 5.00% 7.75%
Discount rate used to determine fiscal year expense 7.75% 5.75%
Annual increase in cost of benefits 8.5% 9.0%
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