Toro 2015 Annual Report Download - page 66

practicable because of the complexities with its hypothetical calcu- The compensation costs related to stock-based awards were as
lation. Upon distribution of these earnings, the company will be follows:
subject to U.S. taxes and withholding taxes payable to various for-
eign governments. A credit for foreign taxes already paid would be Fiscal years ended October 31 2015 2014 2013
available to reduce the U.S. tax liability. Stock option awards $ 4,704 $ 5,142 $ 4,710
A reconciliation of the beginning and ending amount of unrecog- Restricted stock and restricted stock units 1,756 1,653 1,694
nized tax benefits is as follows: Performance share awards 3,964 4,496 3,833
Total compensation cost for stock-based
Balance as of October 31, 2014 $5,042 awards $10,424 $11,291 $10,237
Increase as a result of tax positions taken during a prior period 801 Tax benefit realized for tax deductions from
Decrease as a result of tax positions taken during a prior period (138) stock-based awards $12,925 $12,988 $10,614
Increase as a result of tax positions taken during the current period 807
Decrease relating to settlements with taxing authorities (169) The number of unissued shares of common stock available for
Balance as of October 31, 2015 $6,343 future equity-based grants under the 2010 plan was 3,400,896 as
of October 31, 2015. Shares of common stock issued upon exer-
The company recognizes interest and penalties related to unrec- cise or settlement of stock options, restricted stock units, and per-
ognized tax benefits as a component of the provision for income formance shares are issued from treasury shares.
taxes. In addition to the liability of $6,343 for unrecognized tax During fiscal 2015, 2014 and 2013, 6,680, 7,000 and 10,152
benefits as of October 31, 2015 was an amount of approximately shares, respectively, of fully vested unrestricted common stock
$1,356 for accrued interest and penalties. awards were granted to certain members of the company’s Board
Included in the balance of unrecognized tax benefits as of Octo- of Directors as a component of their compensation for their service
ber 31, 2015 are potential benefits of $5,636 that, if recognized, on the board. Total compensation cost for these share grants in
would affect the effective tax rate from continuing operations. fiscal years 2015, 2014, and 2013 was $412, $409, and $438,
The company and its subsidiaries file income tax returns in the respectively, which is recorded in selling, general, and administra-
U.S. federal jurisdiction, and numerous state and foreign jurisdic- tive expense in the consolidated statements of earnings.
tions. With few exceptions, the company is no longer subject to
Stock Option Awards. Under the 2010 plan, stock options are
U.S. federal, state and local, and non-U.S. income tax examina-
granted with an exercise price equal to the closing price of the
tions by tax authorities for taxable years before fiscal 2010. The
company’s common stock on the date of grant, as reported by the
Internal Revenue Service is nearing completion of an audit for fis-
New York Stock Exchange. Options are generally granted to exec-
cal years 2010 through 2012, with no material adjustments to
utive officers, other employees, and non-employee members of the
income tax expense or unrecognized tax benefits expected. The
company’s Board of Directors on an annual basis in the first quar-
company is also under audit in several state jurisdictions, and
ter of the company’s fiscal year. Options generally vest one-third
expects various statutes of limitation to expire during the next 12
each year over a three-year period and have a ten-year term.
months. Due to the uncertain response of taxing authorities, a
Other options granted to certain employees vest in full on the
range of outcomes cannot be reasonably estimated at this time.
three-year anniversary of the date of grant and have a ten-year
term. Compensation expense equal to the grant date fair value is
generally recognized for these awards over the vesting period.
10 STOCK-BASED COMPENSATION PLANS Stock options granted to executive officers and other employees
are subject to accelerated expensing if the option holder meets the
The company maintains The Toro Company Amended and
retirement definition set forth in the 2010 plan. In that case, the fair
Restated 2010 Equity and Incentive Plan, as amended (the ‘‘2010
value of the options is expensed in the fiscal year of grant
plan’’), for executive officers, other employees, and non-employee
because the option holder must be employed as of the end of the
members of the company’s Board of Directors. The 2010 plan
fiscal year in which the options are granted in order for the options
allows the company to grant equity-based compensation awards,
to continue to vest following retirement. Similarly, if a
including stock options, restricted stock units, restricted stock, and
non-employee director has served on the company’s Board of
performance share awards.
Directors for ten full fiscal years or more, the awards vest immedi-
ately upon retirement, and therefore, the fair value of the options
granted is fully expensed on the date of the grant.
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