Note 10 – Employee Stock Plans

As of June 30, 2017, the Company had three share-based compensation plans, which are described below. The compensation cost that has been charged against income for those plans was $7.5 million and $11.5 million for the first nine months of fiscal 2017 and 2016, respectively. During the first nine months of fiscal 2017 and 2016, the Company issued 532,491 and 154,075 shares, respectively, under its share-based compensation plans.

Employee Stock Purchase Plan (ESPP)

The ESPP is a “safe-harbor” designed plan whereby shares are purchased by participants at a discount of 5% of the market value on the purchase date and, therefore, compensation cost is not recorded.

Employee Sharesave Scheme

The Company offers shares under its employee sharesave scheme for U.K. employees. This plan allows participants the option to purchase shares at a 5% discount of the market price of the stock as of the beginning of the offering period. The term of these options is three years. The sharesave scheme is not a “safe-harbor” design, and therefore, compensation cost is recognized on this plan. Under the sharesave scheme, option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The Company granted 11,338 and 70,673 options in the nine month periods ended June 30, 2017, and July 1, 2016, respectively. The weighted-average grant date fair value of options granted during the nine month periods ended June 30, 2017, and July 1, 2016, was $24.61 and $16.65 per share, respectively.

The fair value of the awards under the employee share-save scheme was estimated using a Black-Scholes pricing model which uses the assumptions noted in the following table. The risk-free rate for the contractual life of the options is based on the U.S. Treasury zero coupon issues in effect at the time of grant.

	Nine Months Ended
	June 30,			July 1,
	2017			2016

Volatility		35.58	%		33.21	%
Risk-free interest rate		1.75	%		1.19	%
Expected life (years)	3			3
Dividends	0			0

Equity Incentive Plan

Under the equity incentive plan, option exercise prices are equal to the fair market value of the Company’s common stock on the date of grant. The Company granted 237,200 and 221,200 options to purchase shares in the nine month periods ended June 30, 2017, and July 1, 2016, respectively. The weighted-average grant date fair value of options granted during the nine month periods ended June 30, 2017, and July 1, 2016, was $32.66 and $35.69 per share, respectively.

The fair value of each option granted by the Company was estimated using a Black-Scholes pricing model, which uses the assumptions noted in the following table. The Company uses historical data to estimate volatility of the Company’s common stock and option exercise and employee termination assumptions. The risk-free rate for the contractual life of the option is based on the U.S. Treasury zero coupon issues in effect at the time of the grant.

	Nine Months Ended
	June 30,	July 1,
	2017	2016

Volatility	34.97 - 35.42%	33.06 - 40.52%
Risk-free interest rate	1.98 - 2.51%	1.61 - 2.24%
Expected life (years)	5 - 9	5 - 9
Dividends	0	0

The Company granted 37,100 and 36,000 restricted stock units in the nine month periods ended June 30, 2017, and July 1, 2016, respectively. The weighted-average grant date fair value of restricted stock units granted during the nine month periods ended June 30, 2017, and July 1, 2016, was $76.83 and $85.33 per share, respectively. The fair value of each restricted stock unit granted by the Company is equal to the fair market value of the Company’s common stock on the date of grant.

The Company granted 43,650 and 56,200 performance share plan (PSP) shares in the nine month periods ended June 30, 2017, and July 1, 2016, respectively. PSP shares will be paid out in shares of Esterline common stock at the end of the three year performance period. The PSP shares granted in each period equaled the number of shares participants would receive if the Company achieves target performance over the relevant period. The actual number of shares that will be paid out upon completion of the performance period is based on actual performance and may range from 0% to 300% of the target number of shares.