Toro 2010 Annual Report Download - page 60

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As of October 31, 2010, there was $2,189 of total unrecognized
compensation expense related to unvested stock option compen-
sation arrangements. That cost is expected to be recognized over 11 EMPLOYEE RETIREMENT PLANS
a weighted-average period of 1.3 years. As of October 31, 2010, The company maintains The Toro Company Investment, Savings,
there was $3,469 of total unrecognized compensation expense and Employee Stock Ownership Plan for eligible employees. The
related to unvested performance share compensation arrange- company’s expenses under this plan were $15,500, $15,200, and
ments. That cost is expected to be recognized over a weighted- $16,150 for the fiscal years ended October 31, 2010, 2009, and
average period of 1.9 years. 2008, respectively.
The fair value of each share-based option is estimated on the In addition, the company and its subsidiaries have defined bene-
date of grant using a Black-Scholes valuation method that uses the fit, supplemental, and other retirement plans covering certain
assumptions noted in the table below. The expected life is a signif- employees in the U.S. and the United Kingdom. The projected
icant assumption as it determines the period for which the risk-free benefit obligation of these plans as of October 31, 2010 and 2009
interest rate, volatility, and dividend yield must be applied. The was $38,696 and $39,114, respectively, and the net liability
expected life is the average length of time that non-employee amount recognized in the consolidated balance sheets as of Octo-
director and employee groups are expected to exercise their ber 31, 2010 and 2009 was $4,272 and $8,911, respectively. The
options, which is based on historical experience with similar grants. accumulated benefit obligation of these plans as of October 31,
Separate groups of employees that have similar historical exercise 2010 and 2009 was $36,685 and $36,076, respectively. The
behavior are considered separately for valuation purposes. funded status of these plans as of October 31, 2010 and 2009 was
Expected volatilities are based on the movement of the company’s $10,022 and $15,574, respectively. The fair value of the plan
common stock over the most recent historical period equivalent to assets as of October 31, 2010 and 2009 was $28,674 and
the expected life of the option. The risk-free interest rate for peri- $23,540, respectively. The net expense recognized in the consoli-
ods within the contractual life of the option is based on the U.S. dated financial statements for these plans was $326, $1,629, and
Treasury rate over the expected life at the time of grant. Dividend $1,803 for the fiscal years ended October 31, 2010, 2009, and
yield is estimated over the expected life based on the company’s 2008, respectively.
dividend policy, historical cash dividends paid, expected future Amounts recognized in accumulated other comprehensive loss
cash dividends, and expected changes in the company’s stock consisted of:
price.
The following table illustrates the valuation assumptions of stock- Other
Defined Benefit Postretirement
based compensation in the following fiscal years.
October 31 Pension Plans Benefit Plans Total
2010
Fiscal years ended October 31 2010 2009 2008
Net actuarial loss $1,309 $2,221 $3,530
Stock option valuation Net prior service cost (credit) 248 (517) (269)
assumptions:
Accumulated other
Expected life of option in comprehensive loss $1,557 $1,704 $3,261
years 6 6 3 – 6.5
Expected volatility 33.0% – 33.1% 30.6% 24.8% – 25.8% 2009
Weighted-average volatility 33.0% 30.60% 25.26% Net actuarial loss $2,577 $1,627 $4,204
Risk-free interest rate 2.51% – 2.87% 2.26% – 3.16% 3.10% – 4.08% Net prior service cost (credit) 376 (638) (262)
Expected dividend yield 1.52% – 1.68% 1.53% – 1.81% 0.92% – 0.95% Accumulated other comprehensive
Weighted-average dividend loss $2,953 $ 989 $3,942
yield 1.54% 1.79% 0.94%
The following amounts are included in accumulated other com-
Grant date weighted-average
fair value of stock options $12.33 $7.93 $13.87 prehensive loss as of October 31, 2010 and are expected to be
Performance share grant date recognized as components of net periodic benefit cost during fiscal
fair value $40.73 $28.62 $58.96 2011.
Other
Defined Benefit Postretirement
Pension Plans Benefit Plans Total
Net loss $292 $ 184 $ 476
Net prior service cost (credit) 67 (193) (126)
54