5. STOCK-BASED COMPENSATION

WESCO’s stock-based employee compensation plans are comprised of stock-settled stock appreciation rights, restricted stock units and performance-based awards. Compensation cost for all stock-based awards is measured at fair value on the date of grant and compensation cost is recognized, net of estimated forfeitures, over the service period for awards expected to vest. The fair value of stock-settled stock appreciation rights and performance-based awards with market conditions is determined using the Black-Scholes and Monte Carlo simulation models, respectively. The fair value of restricted stock units and performance-based awards with performance conditions is determined by the grant-date closing price of WESCO’s common stock. The forfeiture assumption is based on WESCO’s historical employee behavior that is reviewed on an annual basis. No dividends are assumed.

During the three and nine months ended September 30, 2017 and 2016, WESCO granted the following stock-settled stock appreciation rights, restricted stock units and performance-based awards at the following weighted-average fair values:



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Stock-settled stock appreciation rights granted	12,076		1,745		455,807		709,999
Weighted-average fair value	$	15.74	$	16.68	$	20.52	$	12.91

Restricted stock units granted	2,313		—		100,993		143,305
Weighted-average fair value	$	57.30	$	—	$	71.33	$	42.45

Performance-based awards granted	—		—		39,978		91,768
Weighted-average fair value	$	—	$	—	$	76.63	$	47.00

The fair value of stock-settled stock appreciation rights was estimated using the following weighted-average assumptions:



	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Risk free interest rate	1.8	%	1.3	%	1.9	%	1.2	%
Expected life (in years)	5		5		5		5
Expected volatility	28	%	31	%	29	%	32	%

The risk-free interest rate is based on the U.S. Treasury Daily Yield Curve rate as of the grant date. The expected life is based on historical exercise experience and the expected volatility is based on the volatility of the Company's daily stock prices over a five-year period preceding the grant date.

The following table sets forth a summary of stock-settled stock appreciation rights and related information for the nine months ended September 30, 2017:



	Awards		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding at December 31, 2016	2,439,487		$	52.62
Granted	455,807		71.21
Exercised	(472,873	)	42.41
Forfeited	(143,506	)	66.21
Outstanding at September 30, 2017	2,278,915		57.60		6.4	$	18,344
Exercisable at September 30, 2017	1,359,744		$	56.71	4.8	$	12,212

The following table sets forth a summary of time-based restricted stock units and related information for the nine months ended September 30, 2017:



	Awards		Weighted- Average Fair Value
Unvested at December 31, 2016	257,096		$	57.47
Granted	100,993		71.33
Vested	(43,780	)	85.13
Forfeited	(18,022	)	55.96
Unvested at September 30, 2017	296,287		$	58.20

Performance shares are awards for which the vesting will occur based on market or performance conditions. The following table sets forth a summary of performance-based awards for the nine months ended September 30, 2017:



	Awards		Weighted- Average Fair Value
Unvested at December 31, 2016	149,320		$	60.36
Granted	39,978		76.63
Vested	—		—
Forfeited	(39,650	)	77.40
Unvested at September 30, 2017	149,648		$	60.19

The fair value of the performance shares granted during the nine months ended September 30, 2017 and 2016 was estimated using the following weighted-average assumptions:



	Nine Months Ended
	September 30, 2017			September 30, 2016
Grant date share price	$	71.65		$	42.44
WESCO expected volatility	29		%	26		%
Peer group median volatility	24		%	24		%
Risk-free interest rate	1.5		%	0.9		%
Correlation of peer company returns	114		%	122		%

The unvested performance-based awards in the table above include 74,824 shares in which vesting of the ultimate number of shares is dependent upon WESCO's total stockholder return in relation to the total stockholder return of a select group of peer companies over a three-year period. These awards are accounted for as awards with market conditions; compensation cost is recognized over the service period, regardless of whether the market conditions are achieved and the awards ultimately vest.

Vesting of the remaining 74,824 shares of performance-based awards in the table above is dependent upon the three-year average growth rate of WESCO's net income. These awards are accounted for as awards with performance conditions; compensation cost is recognized over the performance period based upon WESCO's determination of whether it is probable that the performance targets will be achieved.

WESCO recognized $3.5 million and $3.4 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the three months ended September 30, 2017 and 2016, respectively. WESCO recognized $11.3 million and $10.4 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, there was $22.6 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements for all awards previously made, of which approximately $3.7 million is expected to be recognized over the remainder of 2017, $11.4 million in 2018, $6.7 million in 2019 and $0.8 million in 2020.