SHARE-BASED COMPENSATION

The Company may grant various forms of share-based compensation awards including stock options, restricted stock, restricted stock awards and stock appreciation rights through the HEICO Corporation 2012 Incentive Compensation Plan (“2012 Plan”). The 2012 Plan became effective in fiscal 2012, the same time the Company's 2002 Stock Option Plan (“2002 Plan”) expired. Also, in fiscal 2012, the Company made a decision to no longer issue options under its Non-Qualified Stock Option Plan (“NQSOP”). Options outstanding under the 2002 Plan and NQSOP may be exercised pursuant to their terms. The total number of shares approved by the shareholders of the Company for the 2012 Plan is 3.3 million plus any options outstanding under the 2002 Plan and NQSOP as of the 2012 Plan's effective date that are subsequently forfeited or expire. A total of approximately 5.2 million shares of the Company's common stock are reserved for issuance to employees, directors, officers and consultants as of October 31, 2017, including 4.7 million shares currently under option and 0.5 million shares available for future grants.

Stock options granted pursuant to the 2012 Plan may be designated as Common Stock and/or Class A Common Stock in such proportions as shall be determined by the Board of Directors or the Stock Option Plan Committee at its sole discretion. The exercise price per share of a stock option granted under the 2012 Plan may not be less than the fair market value of the designated class of Company common stock as of the date of grant and stock option grants vest ratably over a period specified as of the date of grant (generally five years) and expire ten years after the date of grant. Options issued under the 2012 Plan may be designated as incentive stock options or non-qualified stock options, but only employees are eligible to receive incentive stock options and no incentive stock options were outstanding as of October 31, 2017. The 2012 Plan will terminate no later than the tenth anniversary of its effective date.

Information concerning share-based activity for each of the last three fiscal years ended October 31 is as follows (in thousands, except per share data):



			Shares Under Option
	Shares Available For Grant		Shares		Weighted Average Exercise Price
Outstanding as of October 31, 2014	2,021		4,080			$18.08
Granted	(363	)	363			$41.48
Exercised	—		(274	)		$13.48
Outstanding as of October 31, 2015	1,658		4,169			$20.42
Granted	(375	)	375			$36.84
Exercised	—		(364	)		$16.33
Cancelled	7		(7	)		$29.10
Outstanding as of October 31, 2016	1,290		4,173			$22.23
Granted	(759	)	759			$64.63
Exercised	—		(262	)		$23.85
Outstanding as of October 31, 2017	531		4,670			$29.04

Information concerning stock options outstanding (all of which are vested or expected to vest) and stock options exercisable by class of common stock as of October 31, 2017 is as follows (in thousands, except per share and contractual life data):



	Options Outstanding
	Number Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Common Stock	2,343		$25.44	4.0		$152,858
Class A Common Stock	2,327		$32.66	6.1	101,081
	4,670		$29.04	5.1		$253,939



	Options Exercisable
	Number Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Common Stock	1,887		$17.82	2.9		$137,469
Class A Common Stock	1,226		$20.30	4.3	68,432
	3,113		$18.80	3.5		$205,901

Information concerning stock options exercised is as follows (in thousands):



	Year ended October 31,
	2017		2016		2015
Cash proceeds from stock option exercises		$5,659		$5,924		$3,673
Tax benefit realized from stock option exercises	3,087		868		1,402
Intrinsic value of stock option exercises	10,376		9,751		6,958

Net income attributable to HEICO for the fiscal years ended October 31, 2017, 2016 and 2015 includes compensation expense of $7.4 million, $6.4 million and $5.8 million, respectively, and an income tax benefit of $2.6 million, $2.4 million and $2.2 million, respectively, related to the Company’s stock options. Substantially all of the stock option compensation expense was recorded as a component of SG&A expenses in the Company’s Consolidated Statements of Operations. As of October 31, 2017, there was $25.5 million of pre-tax unrecognized compensation expense related to nonvested stock options, which is expected to be recognized over a weighted average period of approximately 3.7 years. The total fair value of stock options that vested in fiscal 2017, 2016 and 2015 was $5.3 million, $5.8 million and $5.5 million, respectively. If there were a change in control of the Company, all of the unvested options outstanding as of October 31, 2017 would become immediately exercisable.

As previously mentioned in Note 1, Summary of Significant Accounting Policies - New Accounting Pronouncements, the Company adopted ASU 2016-09 in fiscal 2017, resulting in the recognition of a $3.1 million discrete income tax benefit from stock option exercises in the Company's Consolidated Statement of Operations as a component of income tax expense. For the fiscal years ended October 31, 2016 and 2015, the excess tax benefit resulting from tax deductions in excess of the cumulative compensation cost recognized for stock options exercised was $.9 million and $1.4 million, respectively, and is presented as a financing activity in the Company’s Consolidated Statements of Cash Flows.

The fair value of each stock option grant in fiscal 2017, 2016 and 2015 was estimated on the date of grant using the Black-Scholes option-pricing model based on the following weighted average assumptions:



	Year ended October 31,
	2017				2016				2015
	Common Stock		Class A Common Stock		Common Stock		Class A Common Stock		Common Stock		Class A Common Stock
Expected stock price volatility	37.89	%	28.18	%	39.63	%	32.52	%	39.96	%	36.51	%
Risk-free interest rate	2.44	%	2.06	%	2.16	%	1.82	%	2.30	%	2.12	%
Dividend yield	.26	%	.31	%	.24	%	.32	%	.24	%	.32	%
Forfeiture rate	.00	%	.00	%	.00	%	.00	%	.00	%	.00	%
Expected option life (years)	9		7		9		6		9		7
Weighted average fair value	$33.38		$19.49		$18.90		$12.38		$22.77		$15.67