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Stock-Based Benefit Plans | 12 Months Ended
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Oct. 31, 2020
Share-based Payment Arrangement [Abstract] |
Stock-Based Benefit Plans | Stock-Based Benefit Plans We grant stock options, restricted stock, and various types of restricted stock units to our employees and our non-employee directors under our stock incentive plans. On March 12, 2019, shareholders approved the Toll Brothers, Inc. 2019 Omnibus Incentive Plan (the “Omnibus Plan”), which, succeeded the Toll Brothers, Inc. Stock Incentive Plan for Employees (2014) and the Toll Brothers, Inc. Stock Incentive Plan for Non-Executive Directors (2016) with respect to prospective equity awards, and no additional equity awards may be granted under such prior plans. As a result, the Omnibus Plan is the sole plan out of which new equity awards may be granted to employees (including executive officers), directors and other eligible participants under the plan. The Omnibus Plan provides for the granting of incentive stock options (solely to employees) and nonqualified stock options with a term of up to 10 years at a price not less than the market price of the stock at the date of grant. The Omnibus Plan also provide for the issuance of stock appreciation rights and restricted and unrestricted stock awards and stock units, which may be performance-based. At October 31, 2020, 2019, and 2018, we had 6.7 million; 7.7 million; and 5.1 million shares, respectively, available for grant under the plans. Prior to the adoption of the Omnibus Plan, the Company had granted equity awards under four separate stock incentive plans for employees, officers, and directors with respect to which equity awards remained outstanding as of October 31, 2020. No additional equity awards may be granted under these plans. Stock options granted under these plans were made with a term of up to 10 years at a price not less than the market price of the stock at the date of grant. Stock options and restricted stock units granted under these plans generally vested over a four-year period for employees and a two-year period for non-employee directors. The following table provides information regarding the amount of total stock-based compensation expense recognized by us for fiscal 2020, 2019, and 2018 (amounts in thousands):
| 2020 |  | 2019 |  | 2018
Total stock-based compensation expense recognized | $ | 24,326 |  |  | $ | 26,180 |  |  | $ | 28,312 |
Income tax benefit recognized | $ | 6,227 |  |  | $ | 6,749 |  |  | $ | 7,902 |
At October 31, 2020, 2019, and 2018, the aggregate unamortized value of outstanding stock-based compensation awards was approximately $15.9 million, $18.7 million, and $20.9 million, respectively. Information about our more significant stock-based compensation programs is outlined below. Stock Options: Stock options granted to employees generally vest over a four-year period, although certain grants may vest over a longer or shorter period. Stock options granted to non-employee directors generally vest over a two-year period. Shares issued upon the exercise of a stock option are either from shares held in treasury or newly issued shares. The fair value of each option award is estimated on the date of grant using a lattice-based option valuation model that uses ranges of assumptions noted in the following table. Expected volatilities were based on implied volatilities from traded options on our stock, historical volatility of our stock, and other factors. The expected lives of options granted were derived from the historical exercise patterns and anticipated future patterns and represent the period of time that options granted are expected to be outstanding. The ranges set forth below result from certain groups of employees exhibiting different behaviors. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following table summarizes the weighted-average assumptions and fair value used for stock option grants in each of the fiscal years ended October 31, 2020, 2019, and 2018:
| 2020 |  | 2019 |  | 2018
Expected volatility | 27.42% - 28.30% |  | 28.61% - 31.34% |  | 27.66% - 31.83%
Weighted-average volatility | 27.42% |  | 30.46% |  | 30.33%
Risk-free interest rate | 1.72% - 1.78% |  | 2.65% - 2.76% |  | 2.17% - 2.35%
Expected life (years) | 4.64 - 5.76 |  | 4.63 - 8.50 |  | 5.00 - 8.50
Dividends | 1.11% |  | 1.36% |  | none
Weighted-average fair value per share of options granted | $9.68 |  | $10.22 |  | $16.09
The fair value of stock option grants is recognized evenly over the vesting period of the options or over the period between the grant date and the time the option becomes nonforfeitable by the employee, whichever is shorter. Information regarding the stock compensation expense related to stock options for fiscal 2020, 2019 and 2018 was as follows (amounts in thousands):
| 2020 |  | 2019 |  | 2018
Stock compensation expense recognized - options | $ | 3,144 |  |  | $ | 5,181 |  |  | $ | 7,497 |
At October 31, 2020, total compensation cost related to nonvested stock option awards not yet recognized was approximately $2.5 million, and the weighted-average period over which we expect to recognize such compensation costs was approximately 1.1 years. The following table summarizes stock option activity for our plans during each of the fiscal years ended October 31, 2020, 2019, and 2018 (amounts in thousands, except per share amounts):
| 2020 |  | 2019 |  | 2018
| Number of options |  | Weighted- average exercise price |  | Number of options |  | Weighted- average exercise price |  | Number of options |  | Weighted- average exercise price
Balance, beginning | 4,780 |  |  | $ | 30.59 |  |  | 5,503 |  |  | $ | 28.84 |  |  | 6,120 |  |  | $ | 27.60 |
Granted | 118 |  |  | 39.51 |  |  | 344 |  |  | 32.42 |  |  | 210 |  |  | 47.84 |
Exercised | (1,284) |  |  | 24.50 |  |  | (1,044) |  |  | 21.87 |  |  | (797) |  |  | 24.16 |
Canceled | (54) |  |  | 33.83 |  |  | (23) |  |  | 34.47 |  |  | (30) |  |  | 33.08 |
Balance, ending | 3,560 |  |  | $ | 33.03 |  |  | 4,780 |  |  | $ | 30.59 |  |  | 5,503 |  |  | $ | 28.84 |
Options exercisable, at October 31, | 2,969 |  |  | $ | 32.38 |  |  | 3,799 |  |  | $ | 29.52 |  |  | 4,231 |  |  | $ | 27.03 |
The weighted average remaining contractual life (in years) for options outstanding and exercisable at October 31, 2020, was 4.7 and 4.1, respectively. The intrinsic value of options outstanding and exercisable is the difference between the fair market value of our common stock on the applicable date (“Measurement Value”) and the exercise price of those options that had an exercise price that was less than the Measurement Value. The intrinsic value of options exercised is the difference between the fair market value of our common stock on the date of exercise and the exercise price. The following table provides information pertaining to the intrinsic value of options outstanding and exercisable at October 31, 2020, 2019, and 2018 (amounts in thousands):
| 2020 |  | 2019 |  | 2018
Intrinsic value of options outstanding | $ | 34,058 |  |  | $ | 45,551 |  |  | $ | 30,477 |
Intrinsic value of options exercisable | $ | 29,961 |  |  | $ | 39,350 |  |  | $ | 29,010 |
Information pertaining to the intrinsic value of options exercised and the fair market value of options that became vested or modified in each of the fiscal years ended October 31, 2020, 2019, and 2018, is provided below (amounts in thousands):
| 2020 |  | 2019 |  | 2018
Intrinsic value of options exercised | $ | 23,281 |  |  | $ | 16,491 |  |  | $ | 18,165 |
Fair market value of options vested | $ | 5,926 |  |  | $ | 7,723 |  |  | $ | 10,007 |
Our stock option plans permit optionees to exercise stock options using a “net exercise” method at the discretion of the Executive Compensation Committee of the Board of Directors (“Executive Compensation Committee”). In a net exercise, we withhold from the total number of shares that otherwise would be issued to an optionee upon exercise of the stock option that number of shares having a fair market value at the time of exercise equal to the option exercise price and applicable minimum income tax withholdings and remit the remaining shares to the optionee. In fiscal 2018, the net exercise method was not utilized to exercise options. The following table provides information regarding the use of the net exercise method for fiscal 2020 and 2019:
| 2020 |  | 2019 |  |
Options exercised | 100,000 |  |  | 33,250 |  |  |
Shares withheld | 65,487 |  |  | 21,842 |  |  |
Shares issued | 34,513 |  |  | 11,408 |  |  |
Average fair market value per share withheld | $ | 43.11 |  |  | $ | 33.03 |  |  |
Aggregate fair market value of shares withheld (in thousands) | $ | 2,823 |  |  | $ | 721 |  |  |
Performance-Based Restricted Stock Units: In fiscal 2020, 2019, and 2018, the Executive Compensation Committee approved awards of performance-based restricted stock units (“Performance-Based RSUs”) relating to shares of our common stock to certain members of our senior management. The number of shares earned for Performance-Based RSUs are based on the attainment of certain operational performance metrics approved by the Executive Compensation Committee in the year of grant. The number of shares underlying the Performance-Based RSUs that may be issued to the recipients ranges from, 0% to 150% for grants awarded in fiscal 2020 and 2019 and 0% to 110% for grants awarded in fiscal 2018, of the base award depending on actual achievement as compared to the target performance goals. Shares earned based on actual performance generally vest pro-rata over a four-year period provided the recipients continue to be employed by us as specified in the award document. The value of the Performance-Based RSUs was determined to be equal to the estimated number of shares of our common stock to be issued multiplied by the closing price of our common stock on the New York Stock Exchange (“NYSE”) on the date the Performance-Based RSU awards were approved by the Executive Compensation Committee (“Valuation Date”), adjusted for post-vesting restrictions applicable to retirement eligible participants. We evaluate the performance goals quarterly and estimate the number of shares underlying the Performance-Based RSUs that are probable of being issued. The following table provides information regarding the issuance, valuation assumptions, and amortization of the Performance-Based RSUs issued in fiscal 2020, 2019, and 2018:
| 2020 |  | 2019 |  | 2018
Number of shares underlying Performance-Based RSUs to be issued | 116,423 |  |  | 158,721 |  |  | 135,554 |
Aggregate number of Performance-Based RSUs outstanding at October 31 | 579,115 |  |  | 645,538 |  |  | 786,857 |
Weighted-average fair value per share of Performance-Based RSUs | $ | 32.55 |  |  | $ | 34.86 |  |  | $ | 47.84 |
Aggregate grant date fair value of Performance-Based RSUs issued (in thousands) | $ | 3,790 |  |  | $ | 5,533 |  |  | $ | 6,485 |
Performance-Based RSU expense recognized (in thousands) | $ | 5,986 |  |  | $ | 5,514 |  |  | $ | 6,949 |
Unamortized value of Performance-Based RSUs at October 31 (in thousands) | $ | 1,674 |  |  | $ | 3,431 |  |  | $ | 3,824 |
Shares earned with respect to Performance-Based RSUs issued in December 2013, 2014, and 2015 were delivered in fiscal 2018, 2019, and 2020, respectively. The recipients of these Performance-Based RSUs elected to use a portion of the shares underlying the Performance-Based RSUs to pay the required income withholding taxes on the payout. In fiscal 2020, the gross value of the payout was $7.2 million (182,846 shares), the minimum income tax withholding was $3.0 million (75,206 shares) and the net value of the shares delivered was $4.3 million (107,640 shares). In fiscal 2019, the gross value of the payout was $9.7 million (300,040 shares), the minimum income tax withholding was $4.0 million (123,409 shares) and the net value of the shares delivered was $5.7 million (176,631 shares). In fiscal 2018, the gross value of the payout was $13.7 million (288,814 shares), the minimum income tax withholding was $6.0 million (126,330 shares) and the net value of the shares delivered was $7.7 million (162,484 shares). Total Shareholder Return Restricted Stock Units: In fiscal 2020, 2019, and 2018, the Executive Compensation Committee approved awards of relative total shareholder return performance-based restricted stock units (“TSR RSUs”) relating to 37,527, 48,710 and 39,411 target shares, respectively, of our common stock to certain members of our senior management. Shares underlying the TSR RSUs granted are earned by comparing our total shareholder return during specified performance periods to the total shareholder returns of companies in a performance peer group as defined in the award document. The specified performance periods are as follows:
|  | Performance Period |  | Target Number of TSR RSUs issued
Fiscal 2020 |  | November 1, 2019 to October 31, 2022 |  | 37,527 |
Fiscal 2019 |  | November 1, 2018 to October 31, 2021 |  | 48,710 |
Fiscal 2018 |  | November 1, 2017 to October 31, 2020 |  | 39,411 |
The TSR RSUs generally vest at the end of a 3-year period provided the recipients continue to be employed by us as specified in the award document. Based upon our ranking in the performance peer group, the recipient of the TSR RSUs may earn a total award ranging from 0% to 150% for awards granted in fiscal 2020 and 2019 and 0% to 200% for awards granted in fiscal 2018, of the target number of TSR RSUs granted. In fiscal 2020, recipients of the fiscal 2018 TSR RSUs earned 0% of the target based on total shareholder return ranking in the performance peer group during the three-year period ending October 31, 2020. In fiscal 2019, recipients of the fiscal 2017 TSR RSUs earned 0% of the target based on total shareholder return ranking in the performance peer group during the three-year period ending October 31, 2019. In fiscal 2018, recipients earned 76.81% of the 52,679 target TSR RSUs awarded in fiscal 2016 based upon our total shareholder return ranking in the performance peer group during the three-year period ended October 31, 2018. We estimated the fair value of the TSR RSUs at the grant date using a Monte Carlo simulation. The following table summarizes the assumptions used in the Monte Carlo simulation and the fair value per share of the TSR RSUs granted in fiscal 2020, 2019, and 2018:
| 2020 |  | 2019 |  | 2018
Weighted-average volatility | 27.96% |  | 29.06% |  | 26.58%
Risk-free interest rate | 1.66% |  | 2.64% |  | 1.92%
Dividends | none |  | none |  | none
Weighted-average fair value per share of TSR RSUs | $37.66 |  | $36.46 |  | $52.62
The length of each performance period was used as the expected term in the simulation for each respective tranche. The following table provides information on expense recognized and the unamortized value of our TSR RSUs for fiscal 2020, 2019, and 2018 (amounts in thousands):
| 2020 |  | 2019 |  | 2018
TSR RSUs expense recognized | $ | 2,264 |  |  | $ | 1,673 |  |  | $ | 2,502 |
Unamortized value of TSR RSUs at October 31 | $ | 716 |  |  | $ | 1,875 |  |  | $ | 1,773 |
Our stock incentive plans permit us to withhold from the total number of shares that otherwise would be issued to a TSR RSU recipient upon distribution that number of shares having a fair value at the time of distribution equal to the applicable income tax withholdings due and remit the remaining shares to the restricted stock unit recipient. The following table provides information regarding the number of shares withheld, the income tax withholding due, and the remaining shares issued to the recipients for fiscal 2019:
|  |  | 2019 |  |
Number of shares withheld |  |  | 16,643 |  |  |
Income tax withholdings due |  |  | $ | 537,902 |  |  |
Remaining shares issued to the recipients |  |  | 23,817 |  |  |
Time-Based Restricted Stock Units: In fiscal 2020, 2019, and 2018, we issued time-based restricted stock units (“Time-Based RSUs”) to various officers, employees, and non-employee directors. These Time-Based RSUs generally vest in annual installments over a two- to four-year period. The value of the Time-Based RSUs was determined to be equal to the number of shares of our common stock underlying the Time-Based RSUs multiplied by the closing price of our common stock on the NYSE on the date the Time-Based RSUs were awarded, adjusted for post-vesting restrictions applicable to retirement eligible participants. The following table provides information regarding these Time-Based RSUs for fiscal 2020, 2019, and 2018:
| 2020 |  | 2019 |  | 2018
Time-Based RSUs issued: |  |  |  |  |
Number of Time-Based RSUs issued | 461,280 |  |  | 449,380 |  |  | 296,790 |
Weighted-average fair value per share of Time-Based RSUs | $ | 37.43 |  |  | $ | 33.04 |  |  | $ | 47.84 |
Aggregate fair value of Time-Based RSUs issued (in thousands) | $ | 17,267 |  |  | $ | 14,848 |  |  | $ | 14,198 |
Time-Based RSU expense recognized (in thousands): | $ | 12,744 |  |  | $ | 13,627 |  |  | $ | 11,193 |
| 2020 |  | 2019 |  | 2018
At October 31: |  |  |  |  |
Aggregate number of Time-Based RSUs outstanding | 1,315,371 |  |  | 1,137,936 |  |  | 850,853 |
Cumulative unamortized value of Time-Based RSUs (in thousands) | $ | 10,972 |  |  | $ | 8,694 |  |  | $ | 8,818 |
Our stock incentive plans permit us to withhold from the total number of shares that otherwise would be issued to a restricted stock unit recipient upon distribution that number of shares having a fair value at the time of distribution equal to the applicable income tax withholdings due and remit the remaining shares to the restricted stock unit recipient. The following table provides information regarding the number of shares withheld, the income tax withholding due, and the remaining shares issued to the recipients for fiscal 2020, 2019, and 2018:
| 2020 |  | 2019 |  | 2018
Number of shares withheld | 58,356 |  |  | 29,681 |  |  | 23,289 |
Income tax withholdings due | $ | 2,214 |  |  | $ | 1,042 |  |  | $ | 1,145 |
Remaining shares issued to the recipients | 236,697 |  |  | 82,795 |  |  | 58,552 |
Employee Stock Purchase Plan Our employee stock purchase plan enables substantially all employees to purchase our common stock at 95% of the market price of the stock on specified offering dates without restriction or at 85% of the market price of the stock on specified offering dates subject to restrictions. The plan, which terminates in December 2027, provides that 500,000 shares be reserved for purchase. At October 31, 2020, 352,000 shares were available for issuance. The following table provides information regarding our employee stock purchase plan for fiscal 2020, 2019, and 2018:
| 2020 |  | 2019 |  | 2018
Shares issued | 54,235 |  |  | 41,744 |  |  | 35,471 |
Average price per share | $ | 26.10 |  |  | $ | 31.80 |  |  | $ | 34.08 |
Compensation expense recognized (in thousands) | $ | 189 |  |  | $ | 184 |  |  | $ | 171 |

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