Toro 2010 Annual Report Download - page 59

Included in the balance of unrecognized tax benefits as of Octo- increased (up to 200 percent of target levels) or reduced (down to
ber 31, 2010 are potential benefits of $4,278 that, if recognized, zero) based on the level of achievement of performance goals and
would affect the effective tax rate from continuing operations. vest over a three-year period. Performance share awards are
The company recognizes potential accrued interest and penalties granted in the first quarter of the company’s fiscal year. Compen-
related to unrecognized tax benefits as a component of the provi- sation expense is recognized for these awards on a straight-line
sion for income taxes. In addition to the liability of $5,752 for basis over the vesting period based on the fair value as of the
unrecognized tax benefits as of October 31, 2010 was an amount date of grant and the probability of achieving performance goals.
of approximately $1,049 for accrued interest and penalties. To the The number of unissued shares of common stock available for
extent interest and penalties are not assessed with respect to future equity-based grants under the company’s equity-based com-
uncertain tax positions, the amounts accrued will be revised and pensation plans was 2,747,525 as of October 31, 2010.
reflected as an adjustment to the provision for income taxes. A summary of activity under the plans previously described is
The company anticipates that total unrecognized tax benefits will presented below:
not change significantly within the next 12 months.
The company is subject to U.S. federal income tax as well as Performance
Aggregate Shares
income tax of numerous state and foreign jurisdictions. The com-
Options Intrinsic Potentially
pany is generally no longer subject to U.S. federal tax examina- Outstanding Price
1
Life
2
Value Issuable
tions for taxable years before fiscal 2008 and with limited excep-
Outstanding as of
tions, state and foreign income tax examinations for fiscal years October 31, 2009 2,231,025 $36.20 4.7 $11,979 344,868
before 2006. Granted 390,958 40.42 119,200
Exercised/earned (509,328) 32.18 (20,104)
Cancelled/forfeited (19,421) 42.54 (102,964)
Outstanding as of
10 STOCK-BASED COMPENSATION PLANS October 31, 2010 2,093,234 $37.91 5.4 $39,461 341,000
Under the company’s equity-based compensation plans, option Exercisable as of
awards are granted with an exercise price equal to the closing October 31, 2010 1,396,770 $38.03 3.9 $26,157 –
price of the company’s common stock on the date of grant, as
1
Weighted-average exercise price
reported by the New York Stock Exchange. Options are generally
2
Weighted-average contractual life in years
granted to non-employee directors, officers, and other key employ- Total stock-based compensation expense for these plans was
ees in the first quarter of the company’s fiscal year. Option awards $6,442, $4,116, and $5,684 for the fiscal years ended October 31,
generally vest one-third each year over a three-year period and 2010, 2009, and 2008, respectively. The total intrinsic value of
have a ten-year term. The company also issues limited restricted options (the amount by which the stock price exceeded the strike
stock awards with varying vesting terms. Compensation expense price of the option on the date of exercise) that were exercised
equal to the grant date fair value is generally recognized for these during the fiscal years ended October 31, 2010, 2009, and 2008
awards over the vesting period. However, if a non-employee direc- was $8,198, $18,394, and $8,398, respectively.
tor has served on the company’s Board of Directors for ten full The table below presents the unvested options and performance
fiscal years or longer, the fair value of the options granted is fully share awards as of October 31, 2010 and changes during the
expensed as of the date of the grant. Similarly, options granted to fiscal year ended October 31, 2010:
officers and other key employees are also subject to accelerated
expensing if the option holder meets the retirement definition set Weighted- Weighted-
forth in the applicable equity-based compensation plan. In that Average Average
case, the fair value of the options is expensed in the year of grant Fair Value Fair Value
because the option holder must be employed as of the end of the Stock at Date Performance at Date
Options of Grant Shares of Grant
fiscal year in which the options are granted in order for the option
to continue to vest following retirement. Unvested as of
October 31, 2009 717,326 $10.76 344,868 $42.25
The company also grants to key employees long-term perform-
Granted 390,958 12.33 119,200 40.73
ance share awards pursuant to which they are entitled to the right
Vested/earned (405,449) 11.45 (20,104) 44.90
to receive shares of common stock or performance share units Forfeited/cancelled (6,371) 10.18 (102,964) 44.90
contingent on the achievement of performance goals of the com-
Unvested as of
pany, which are generally measured over a three-year period. The October 31, 2010 696,464 $11.25 341,000 $40.87
number of shares of common stock a participant receives will be
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