Equity-Based Compensation

The Company recognized $3.9 million and $40.3 million in equity-based compensation expense for the three months ended September 30, 2014 and 2013, respectively, and $11.5 million and $44.3 million in equity-based compensation expense for the nine months ended September 30, 2014 and 2013, respectively. Equity-based compensation expense for the three and nine months ended September 30, 2013 included incremental expense of $36.7 million related to the acceleration of the expense recognition for the MPK Coworker Incentive Plan II (the "MPK Plan") units in conjunction with the Company's IPO.

The following table sets forth a summary of the Company's stock option activity for the nine months ended September 30, 2014:



Options	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2014	1,280,255		$	17.00
Granted	1,244,386		$	24.39
Forfeited/Expired	(9,264	)	$	24.29
Exercised	(63,432	)	$	17.00		$	0.8
Outstanding at September 30, 2014	2,451,945		$	20.72	8.6	$	25.3
Vested at September 30, 2014	524,824		$	17.00	7.5	$	7.4
Exercisable at September 30, 2014	524,824		$	17.00	7.5	$	7.4
Expected to vest at September 30, 2014	1,874,216		$	21.75	8.8	$	17.4

During the nine months ended September 30, 2014, the Company granted 1,244,386 stock options under the 2013 Long-Term Incentive Plan (the "2013 LTIP"). These options vest annually over three years. The Company has elected to use the Black-Scholes option pricing model to estimate the fair value of stock options granted. The Black-Scholes option pricing model incorporates various assumptions including volatility, expected term, risk-free interest rates and dividend yields. The assumptions used to value the stock options granted during the nine months ended September 30, 2014 are presented below.



Assumptions	Nine Months Ended September 30, 2014
Weighted-average grant date fair value	$	7.23
Weighted-average volatility ⁽¹⁾	30.00		%
Weighted-average risk-free rate ⁽²⁾	1.77		%
Dividend yield	0.70		%
Expected term (in years) ⁽³⁾	6.0


(1)	Based upon an assessment of the two-year, five-year and implied volatility for the Company’s selected peer group, adjusted for the Company’s leverage.


(2)	Based on a composite U.S. Treasury rate.


(3)	The expected term is calculated using the simplified method. The simplified method defines the expected term as the average of the option’s contractual term and the option’s weighted-average vesting period. The Company utilizes this method as it has limited historical stock option data that is sufficient to derive a reasonable estimate of the expected stock option term.

The following table sets forth a summary of the Company's restricted stock unit activity for the nine months ended September 30, 2014:



	Number of Units		Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2014	1,351,572		$	17.04
Granted	25,844		24.29
Vested/Settled	(1,528	)	17.00
Forfeited	(101,069	)	17.00
Nonvested at September 30, 2014	1,274,819		$	17.18

In connection with the Company's 2013 IPO discussed in Note 6, CDW Holdings distributed all of its shares of the Company's common stock to its existing members in accordance with the members' respective membership interests and was subsequently dissolved in August 2013. Common stock received by holders of B Units in connection with the distribution is subject to any vesting provisions previously applicable to the holder's B Units. At the time of the IPO, B Unit holders received 3,798,508 shares of restricted stock with respect to B Units that had not yet vested at the time of the distribution. For the nine months ended September 30, 2014, 1,737,866 shares of such restricted stock vested/settled and 7,122 shares were forfeited. As of September 30, 2014, 847,045 shares of restricted stock were outstanding.

During the nine months ended September 30, 2014, the Company granted 416,590 performance share units (the "PSUs") under the 2013 LTIP. The percentage of shares that shall vest will range from 0% to 200% of the number of PSUs granted based on the Company's performance against a cumulative adjusted free cash flow measure and cumulative non-GAAP net income per diluted share measure over a three-year performance period. The weighted-average grant-date fair value of the PSUs granted during the period was $24.39 per unit. During the nine months ended September 30, 2014, 3,100 PSUs were forfeited at a weighted-average grant-date fair value of $24.29. As of September 30, 2014, 413,490 PSUs were outstanding.

As of September 30, 2014, the Company estimated there was $30.3 million of total unrecognized compensation expense to be recognized over the next 2.5 years.