Toro 2014 Annual Report Download - page 66

The tax effects of temporary differences that give rise to the net The company is subject to U.S. federal income tax as well as
deferred income tax assets are presented below: income tax of numerous state and foreign jurisdictions. The com-
pany is generally no longer subject to U.S. federal tax examina-
tions for taxable years before fiscal 2010 and with limited excep-
October 31 2014 2013
tions, state and foreign income tax examinations for fiscal years
Deferred tax assets (liabilities):
Allowance for doubtful accounts $ 858 $ 1,635 before 2009.
Inventory items 3,918 3,969
Compensation and other accruals 40,932 38,168
Employee benefits 20,374 18,315
Depreciation 3,093 (2,467) 10 STOCK-BASED COMPENSATION PLANS
Other 3,734 5,550
The company maintains The Toro Company 2010 Equity and
Deferred tax assets $72,909 $65,170
Incentive Plan, as amended (‘‘the plan’’), for officers, other employ-
Valuation allowance (4,012) (5,572)
ees, and non-employee members of the company’s Board of
Net deferred tax assets $68,897 $59,598
Directors. This plan allows the company to grant equity-based
The valuation allowance as of October 31, 2014 and 2013 princi- compensation awards, including stock options, restricted stock and
pally applies to capital loss carryforwards and foreign net operating restricted stock units, and performance share awards.
loss carryforwards that are expected to expire prior to utilization. The compensation costs related to stock-based awards were as
As of October 31, 2014, the company had net operating loss follows:
carryforwards of approximately $23,786 in foreign jurisdictions. The
carryforward periods on the company’s foreign loss carryforwards Fiscal years ended October 31 2014 2013 2012
are as follows: $10,740 that do not expire; none that expire in Stock option awards $ 5,142 $ 4,710 $ 4,200
fiscal years 2015 thru 2018; and $13,046 that expire between fis- Restricted stock and restricted stock units 1,653 1,694 1,721
Performance share awards 4,496 3,833 3,582
cal years 2019 and 2022.
As of October 31, 2014, the company had approximately Total compensation cost for stock-based
awards $11,291 $10,237 $ 9,503
$64,513 of accumulated undistributed earnings from subsidiaries
outside the U.S. that are considered to be reinvested indefinitely. Tax benefit realized for tax deductions from
stock-based awards $12,988 $10,614 $13,266
No deferred tax liability has been provided for such earnings.
A reconciliation of the beginning and ending amount of unrecog- The number of unissued shares of common stock available for
nized tax benefits is as follows: future equity-based grants under the company’s equity-based com-
pensation plan was 3,474,967 as of October 31, 2014. Shares of
Balance as of October 31, 2013 $4,506 common stock issued upon exercise or settlement of stock options,
Decrease as a result of tax positions taken during a prior period (164) restricted stock and restricted stock units, and performance shares
Increase as a result of tax positions taken during the current period 726
Decrease relating to settlements with taxing authorities (26) are issued from treasury shares.
Balance as of October 31, 2014 $5,042 Stock Option Awards. Under the plan, stock options are granted
with an exercise price equal to the closing price of the company’s
Included in the balance of unrecognized tax benefits as of Octo- common stock on the date of grant, as reported by the New York
ber 31, 2014 are potential benefits of $3,655 that, if recognized, Stock Exchange. Options are generally granted to executive
would affect the effective tax rate from continuing operations. officers, other employees, and non-employee members of the com-
The company recognizes potential accrued interest and penalties pany’s Board of Directors on an annual basis in the first quarter of
related to unrecognized tax benefits as a component of the provi- the company’s fiscal year. Options generally vest one-third each
sion for income taxes. In addition to the liability of $5,042 for year over a three-year period and have a ten-year term. Other
unrecognized tax benefits as of October 31, 2014 was an amount options granted to certain non-officer employees vest in full on the
of approximately $134 for accrued interest and penalties. To the three-year anniversary of the date of grant and have a ten-year
extent interest and penalties are not assessed with respect to term. Compensation expense equal to the grant date fair value is
uncertain tax positions, the amounts accrued will be revised and generally recognized for these awards over the vesting period.
reflected as an adjustment to the provision for income taxes. Stock options granted to officers and other employees are subject
The company anticipates that total unrecognized tax benefits will to accelerated expensing if the option holder meets the retirement
not change significantly within the next 12 months. definition set forth in the plan. In that case, the fair value of the
options is expensed in the fiscal year of grant because the option
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