STOCK-BASED COMPENSATION PLANS

The company maintains The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended (the "2010 plan"), for executive officers, other employees, and non-employee members of the company's Board of Directors. The 2010 plan allows the company to grant equity-based compensation awards, including stock options, restricted stock units, restricted stock, and performance share awards.

The compensation costs related to stock-based awards were as follows:


Fiscal years ended October 31		2015		2014		2013

Stock option awards	$	4,704	$	5,142	$	4,710
Restricted stock and restricted stock units		1,756		1,653		1,694
Performance share awards		3,964		4,496		3,833

Total compensation cost for stock-based awards	$	10,424	$	11,291	$	10,237

Tax benefit realized for tax deductions from stock-based awards	$	12,925	$	12,988	$	10,614

The number of unissued shares of common stock available for future equity-based grants under the 2010 plan was 3,400,896 as of October 31, 2015. Shares of common stock issued upon exercise or settlement of stock options, restricted stock units, and performance shares are issued from treasury shares.

During fiscal 2015, 2014 and 2013, 6,680, 7,000 and 10,152 shares, respectively, of fully vested unrestricted common stock awards were granted to certain members of the company's Board of Directors as a component of their compensation for their service on the board. Total compensation cost for these share grants in fiscal years 2015, 2014, and 2013 was $412, $409, and $438, respectively, which is recorded in selling, general, and administrative expense in the consolidated statements of earnings.

Stock Option Awards. Under the 2010 plan, stock options are granted with an exercise price equal to the closing price of the company's common stock on the date of grant, as reported by the New York Stock Exchange. Options are generally granted to executive officers, other employees, and non-employee members of the company's Board of Directors on an annual basis in the first quarter of the company's fiscal year. Options generally vest one-third each year over a three-year period and have a ten-year term. Other options granted to certain employees vest in full on the 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. Stock options granted to executive officers and other employees are subject to accelerated expensing if the option holder meets the retirement definition set forth in the 2010 plan. In that case, the fair value of the options is expensed in the fiscal year of grant because the option holder must be employed as of the end of the fiscal year in which the options are granted in order for the options to continue to vest following retirement. Similarly, if a non-employee director has served on the company's Board of Directors for ten full fiscal years or more, the awards vest immediately upon retirement, and therefore, the fair value of the options granted is fully expensed on the date of the grant.

The table below presents stock option activity for fiscal 2015:


	Stock Option Awards			Weighted- Average Exercise Price	Weighted- Average Contractual Life(years)		Intrinsic Value

Outstanding as of October 31, 2014	3,049,652		$	29.04	5.4	$	99,713
Granted	292,013			62.74
Exercised	(410,428	)		22.23
Cancelled/forfeited	(16,145	)		60.98
Expired	(371	)		59.50

Outstanding as of October 31, 2015	2,914,721		$	33.21	5.2	$	122,606

Exercisable as of October 31, 2015	2,309,155		$	26.92	4.4	$	111,644

As of October 31, 2015, there was $1,769 of total unrecognized compensation expense related to unvested stock options. That cost is expected to be recognized over a weighted-average period of 1.86 years.

The table below presents the total market value of stock options exercised and the total intrinsic value of options exercised during the following fiscal years:


Fiscal years ended October 31		2015		2014		2013

Market value of stock options exercised	$	27,860	$	19,017	$	23,160
Intrinsic value of options exercised1		18,739		12,311		13,875


1	Intrinsic value is calculated as amount by which the stock price at exercise date exceeded the option exercise price

The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation method with the assumptions noted in the table below. The expected life is a significant assumption as it determines the period for which the risk-free interest rate, volatility, and dividend yield must be applied. The expected life is the average length of time in which executive officers, other employees, and non-employee directors are expected to exercise their stock options, which is primarily based on historical experience. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. Expected volatilities are based on the movement of the company's common stock over the most recent historical period equivalent to the expected life of the option. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate over the expected life at the time of grant. Dividend yield is estimated over the expected life based on the company's historical cash dividends paid, expected future cash dividends and dividend yield, and expected changes in the company's stock price.

The table below illustrates the valuation assumptions of stock-based compensation for the following fiscal years:


Fiscal years ended October 31		2015			2014			2013

Expected life of option in years		5.94			6			6
Expected stock price volatility		29.66	%		34.29	%		35.19	%
Risk-free interest rate		1.61	%		1.92	%		0.88	%
Expected dividend yield		1.29	%		1.25	%		1.07	%

Weighted-average fair value at date of grant	$	16.81		$	18.69		$	13.03

Restricted Stock and Restricted Stock Units. Under the 2010 plan, restricted stock and restricted stock unit awards are generally granted to certain employees that are not executive officers. Occasionally, restricted stock or restricted stock unit awards may be granted, including to executive officers, in connection with hiring, mid-year promotions, leadership transition, or retention. Restricted stock and restricted stock units generally vest one-third each year over a three-year period, or vest in full on the three-year anniversary of the date of grant. Such awards may have performance-based rather than time-based vesting requirements. Compensation expense equal to the grant date fair value, which is equal to the closing price of the company's common stock on the date of grant multiplied by the number of shares subject to the restricted stock and restricted stock units, is recognized for these awards over the vesting period.

Factors related to the company's restricted stock and restricted stock units during the following fiscal years are as follows:


Fiscal years ended October 31		2015		2014		2013

Weighted-average fair value at date of grant	$	67.77	$	63.05	$	46.10
Fair value of restricted stock and restricted stock units vested		1,702		1,890		1,207

The table below summarizes the activity during fiscal 2015 for unvested restricted stock and restricted stock units:


	Restricted Stock and Units			Weighted- Average Fair Value at Date of Grant

Unvested as of October 31, 2014	78,529		$	49.22
Granted	55,180			67.77
Vested	(39,457	)		43.15
Forfeited	(2,455	)		56.72

Unvested as of October 31, 2015	91,797		$	62.78

As of October 31, 2015, there was $3,518 of total unrecognized compensation expense related to unvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 2.43 years.

Performance Share Awards. The company grants performance share awards to executive officers and other employees under which they are entitled to receive shares of the company's common stock contingent on the achievement of performance goals of the company and businesses of the company, which are generally measured over a three-year period. The number of shares of common stock a participant receives will be increased (up to 200 percent of target levels) or reduced (down to zero) based on the level of achievement of performance goals and vest at the end of a three-year period. Performance share awards are generally granted on an annual basis in the first quarter of the company's fiscal year. Compensation expense is recognized for these awards on a straight-line basis over the vesting period based on the per share fair value as of the date of grant and the probability of achieving each performance goal.

Factors related to the company's performance share awards are as follows:


Fiscal years ended October 31		2015		2014		2013

Weighted-average fair value at date of grant	$	65.68	$	59.31	$	42.06
Fair value of performance share awards vested		7,989		7,926		9,057

The table below summarizes the activity during fiscal 2015 for unvested performance share awards:


	Performance Shares			Weighted- Average Fair Value at Date of Grant

Unvested as of October 31, 2014	476,800		$	40.82
Granted	61,700			65.68
Vested	(202,400	)		28.24
Cancelled/forfeited	(6,300	)		58.69

Unvested as of October 31, 2015	329,800		$	52.85

As of October 31, 2015, there was $4,227 of total unrecognized compensation expense related to unvested performance share awards. That cost is expected to be recognized over a weighted-average period of 1.69 years.