. 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.

Effective January 1, 2018, performance-based awards are based on two equally-weighted performance measures, which include the three-year average growth rate of the Company’s fully diluted earnings per share and the three-year cumulative return on net assets. From 2015 to 2017, the two equally-weighted performance-based award metrics were the three-year average growth rate of WESCO's net income and WESCO's total stockholder return in relation to the total stockholder return of a select group of peer companies over a three-year period.

During the three months ended March 31, 2018 and 2017, 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
	March 31, 2018		March 31, 2017
Stock-settled stock appreciation rights granted	491,229		443,731
Weighted-average fair value	$	18.40	$	20.65

Restricted stock units granted	114,269		98,680
Weighted-average fair value	$	62.81	$	71.65

Performance-based awards granted	44,144		39,978
Weighted-average fair value	$	62.80	$	76.63

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



	Three Months Ended
	March 31, 2018		March 31, 2017
Risk free interest rate	2.5	%	1.9	%
Expected life (in years)	5		5
Expected volatility	28	%	29	%

The risk-free interest rate is based on the U.S. Treasury Daily Yield Curve 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 three months ended March 31, 2018:



	Awards		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding at December 31, 2017	2,238,607		$	57.75
Granted	491,229		62.81
Exercised	(93,145	)	42.52
Forfeited	(48,248	)	65.57
Outstanding at March 31, 2018	2,588,443		59.11		6.6	$	19,575
Exercisable at March 31, 2018	1,639,025		$	57.81	5.1	$	16,000

The following table sets forth a summary of time-based restricted stock units and related information for the three months ended March 31, 2018:



	Awards		Weighted- Average Fair Value
Unvested at December 31, 2017	290,054		$	58.11
Granted	114,269		62.81
Vested	(57,175	)	69.44
Forfeited	(8,572	)	56.00
Unvested at March 31, 2018	338,576		$	57.84

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 three months ended March 31, 2018:



	Awards		Weighted- Average Fair Value
Unvested at December 31, 2017	148,508		$	60.23
Granted	44,144		62.80
Vested	—		—
Forfeited	(46,858	)	65.44
Unvested at March 31, 2018	145,794		$	59.33

The fair value of the performance shares granted during the three months ended March 31, 2018 and 2017 was estimated using the following weighted-average assumptions:



	Three Months Ended
	March 31, 2018		March 31, 2017
Grant date share price	$	62.80	$	71.65
WESCO expected volatility	n/a		29		%
Peer group median volatility	n/a		24		%
Risk-free interest rate	n/a		1.5		%
Correlation of peer company returns	n/a		114		%

The unvested performance-based awards in the table above include 50,825 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 94,969 shares of performance-based awards in the table above is dependent upon the achievement of certain performance targets, including 50,825 that are dependent upon the three-year average growth rate of WESCO's net income, 22,072 that are dependent upon the three-year average growth rate of the Company's fully diluted earnings per share, and 22,072 that are based upon the three-year cumulative return on net assets. 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 $3.9 million and $3.6 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, there was $31.7 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements for all awards previously made, of which approximately $12.7 million is expected to be recognized over the remainder of 2018, $12.0 million in 2019, $6.3 million in 2020 and $0.7 million in 2021.