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EMPLOYEE BENEFIT PLANS (Notes) | 9 Months Ended
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Sep. 30, 2020
Retirement Benefits [Abstract] |
EMPLOYEE BENEFIT PLANS | 10. PENSION PLANS, POST-RETIREMENT BENEFITS AND OTHER BENEFITS Defined Contribution Plans WESCO Distribution sponsors a defined contribution retirement savings plan for the majority of its U.S. employees. The Company matches contributions made by employees at an amount equal to 50% of participants' total monthly contributions up to 6% of eligible compensation. Contributions are made in cash and employees have the option to transfer balances allocated to their accounts into any of the available investment options. The Company may also make, subject to the Board of Directors' approval, a discretionary contribution to the defined contribution retirement savings plan covering U.S. participants if certain predetermined profit levels are attained. Due to the COVID-19 pandemic and its adverse effect on WESCO's results of operations, the Company suspended matching employer contributions between April 16, 2020 and September 30, 2020. WESCO Distribution Canada LP, a wholly-owned subsidiary of the Company, sponsors a defined contribution plan for certain Canadian employees. The Company makes contributions in amounts ranging from 3% to 5% of participants' eligible compensation based on years of continuous service. Anixter Inc. sponsors a defined contribution plan covering all of its non-union U.S. employees (the "Anixter Employee Savings Plan"). The employer match for the Anixter Employee Savings Plan is equal to 50% of a participant's contribution up to 5% of the participant's compensation. Anixter Inc. will also make an annual contribution to the Anixter Employee Savings Plan on behalf of each active participant who is hired or rehired on or after July 1, 2015, or is not participating in the Anixter Inc. Pension Plan. The amount of the employer annual contribution is equal to either 2% or 2.5% of the participant’s compensation, as determined by the participant’s years of service. This contribution is in lieu of being eligible for the Anixter Inc. Pension Plan. Certain of Anixter Inc.'s foreign subsidiaries also have defined contribution plans. Contributions to these plans are based upon various levels of employee participation and legal requirements. Deferred Compensation Plans WESCO Distribution sponsors a deferred compensation plan (the "WESCO Deferred Compensation Plan") that permits select employees to make pre-tax deferrals of salary and bonus. Employees have the option to transfer balances allocated to their accounts in the WESCO Deferred Compensation Plan into any of the available investment options. The WESCO Deferred Compensation Plan is an unfunded plan. As of September 30, 2020, the Company's obligation under the WESCO Deferred Compensation Plan was $26.0 million, of which $10.1 million was included in other current liabilities and $15.9 million in other noncurrent liabilities in the Condensed Consolidated Balance Sheet. At December 31, 2019, the Company's obligation under the WESCO Deferred Compensation Plan was $25.2 million, which was included in other noncurrent liabilities in the Condensed Consolidated Balance Sheet. Anixter Inc. sponsors a non-qualified deferred compensation plan (the "Anixter Deferred Compensation Plan") that permits select employees to make pre-tax deferrals of salary and bonus. Interest is accrued monthly on the deferred compensation balances based on the average ten-year Treasury note rate for the previous three months times a factor of 1.4, and the rate is further adjusted if certain financial goals are achieved. At September 30, 2020, the deferred compensation liabilities included in other current liabilities and other noncurrent liabilities in the Condensed Consolidated Balance Sheet were $3.8 million and $42.4 million, respectively. Concurrent with the implementation of the Anixter Deferred Compensation Plan, the Company established a Rabbi Trust arrangement to provide for the liabilities associated with the deferred compensation plan and an executive non-qualified defined benefit plan. The assets are invested in marketable securities. At September 30, 2020, $39.5 million was recorded in other assets in the Condensed Consolidated Balance Sheet for this arrangement. Defined Benefit Plans WESCO sponsors a contributory defined benefit plan covering substantially all Canadian employees of EECOL Electric Corp. (""EECOL") and a Supplemental Executive Retirement Plan for certain executives of EECOL (the "EECOL SERP"). Anixter Inc. sponsors defined benefit pension plans in the U.S., which consist of the Anixter Inc. Pension Plan, the Executive Benefit Plan and the Supplemental Executive Retirement Plan (the "Anixter SERP") (together, the "Anixter Domestic Plans") and various defined benefit pension plans covering employees of foreign subsidiaries in Canada and Europe (together, the " Anixter Foreign Plans"). The Anixter Inc. Pension Plan was frozen to entrants first hired or rehired on or after July 1, 2015. The majority of these defined benefit pension plans are non-contributory, and with the exception of U.S. and Canada, cover substantially all full-time domestic employees and certain employees in other countries. Retirement benefits are provided based on compensation as defined in both the Anixter Domestic Plans and the Anixter Foreign Plans. The Anixter Domestic Plans are funded as required by the Employee Retirement Income Security Act of 1974 ("ERISA") and the IRS and all Anixter Foreign Plans are funded as required by applicable foreign laws. The Anixter Inc. Executive Benefit Plan and the Anixter SERP are unfunded plans. During the three and nine months ended September 30, 2020, the Company made aggregate cash contributions of $2.9 million and $4.7 million, respectively, for all of the benefit plans described above. For the nine months ended September 30, 2020 and 2019, WESCO incurred total charges of $13.6 million and $24.7 million, respectively, for all of the benefit plans described above. The following table sets forth the components of net periodic benefit costs for the Company's defined benefit plans:
| Three Months Ended |  | Nine Months Ended
| September 30 |  | September 30
(In thousands) | 2020 |  | 2019 |  | 2020 |  | 2019
Service cost | $ | 3,826 |  |  | $ | 1,158 |  |  | $ | 6,801 |  |  | $ | 3,446 |
Interest cost | 4,844 |  |  | 1,098 |  |  | 7,170 |  |  | 3,267 |
Expected return on plan assets | (8,399) |  |  | (1,433) |  |  | (12,001) |  |  | (4,265) |
Recognized actuarial gain(1) | (1) |  |  | (16) |  |  | 52 |  |  | (47) |
Net periodic benefit cost | $ | 270 |  |  | $ | 807 |  |  | $ | 2,022 |  |  | $ | 2,401 |
(1) For the three and nine months ended September 30, 2020 and 2019, no amounts were reclassified from accumulated other comprehensive income into net income, respectively. The service cost of $3.8 million and $1.2 million for the three months ended September 30, 2020 and 2019, respectively, and $6.8 million and $3.4 million for the nine months ended September 30, 2020 and 2019, respectively, is reported as a component of selling, general and administrative expenses. The other components of net periodic benefit cost totaling a net benefit of $3.6 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively, and $4.8 million and $1.0 million for the nine months ended September 30, 2020 and 2019, respectively, are presented as a component of other non-operating expenses ("other, net"). Other Benefits As permitted by the Merger Agreement, Anixter granted restricted stock units prior to June 22, 2020 in the ordinary course of business to its employees and directors. These awards, which did not accelerate solely as a result of the Merger, were converted into cash-only settled WESCO phantom stock units, which vest ratably over a 3-year period. As of September 30, 2020, the estimated fair value of these awards was $13.4 million. The Company recognized compensation expense associated with these awards of $1.4 million and $2.3 million for the three and nine months ended September 30, 2020, respectively, which is reported as a component of selling, general and administrative expenses.
STOCK-BASED COMPENSATION | 6. 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 is determined using the Black-Scholes model. 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. For stock-settled stock appreciation rights that are exercised and for restricted stock units and performance-based awards that vest, shares are issued out of WESCO's outstanding common stock. Stock-settled stock appreciation rights vest ratably over a three-year period and terminate on the tenth anniversary of the grant date unless terminated sooner under certain conditions. Except for the special award described below, vesting of restricted stock units is based on a minimum time period of three years. Vesting of performance-based awards is based on a three-year performance period, and the number of shares earned, if any, depends on the attainment of certain performance levels. Outstanding awards would vest upon the consummation of a change in control transaction and performance-based awards would vest at the target level. On July 2, 2020, a special award of restricted stock units was granted to certain officers of the Company. These awards vest in tranches of 30% on each of the first and second anniversaries of the grant date and 40% on the third anniversary of the grant date, subject, in each case, to continued employment through the applicable anniversary date. Performance-based awards granted in 2020 and 2019 were based on two equally-weighted performance measures: the three-year average growth rate of WESCO's net income and the three-year cumulative return on net assets. Performance-based awards granted in 2018 were based on two equally-weighted performance measures: the three-year average growth rate of the Company’s fully diluted earnings per share and the three-year cumulative return on net assets. During the three and nine months ended September 30, 2020 and 2019, 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, 2020 |  | September 30, 2019 |  | September 30, 2020 |  | September 30, 2019
Stock-settled stock appreciation rights granted | — |  |  | — |  |  | 262,091 |  |  | 213,618 |
Weighted-average fair value | $ | — |  |  | $ | — |  |  | $ | 13.86 |  |  | $ | 16.36 |
Restricted stock units granted | 444,375 |  |  | 6,256 |  |  | 655,825 |  |  | 181,800 |
Weighted-average fair value | $ | 32.18 |  |  | $ | 47.95 |  |  | $ | 37.38 |  |  | $ | 54.41 |
Performance-based awards granted | — |  |  | — |  |  | 158,756 |  |  | 126,874 |
Weighted-average fair value | $ | — |  |  | $ | — |  |  | $ | 48.67 |  |  | $ | 54.64 |
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, 2020 |  | September 30, 2019 |  | September 30, 2020 |  | September 30, 2019
Risk free interest rate | n/a |  | n/a |  | 1.4 | % |  | 2.5 | %
Expected life (in years) | n/a |  | n/a |  | 5 |  | 5
Expected volatility | n/a |  | n/a |  | 30 | % |  | 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 nine months ended September 30, 2020:
| Awards |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Term (In years) |  | Aggregate Intrinsic Value (In thousands)
Outstanding at December 31, 2019 | 2,337,049 |  |  | $ | 59.72 |  |  |  |  |
Granted | 262,091 |  |  | 48.32 |  |  |  |  |
Exercised | (182,487) |  |  | 33.57 |  |  |  |  |
Forfeited | (39,112) |  |  | 65.57 |  |  |  |  |
Outstanding at September 30, 2020 | 2,377,541 |  |  | 60.37 |  |  | 5.7 |  | $ | 679 |
Exercisable at September 30, 2020 | 1,844,929 |  |  | $ | 62.32 |  |  | 5.0 |  | $ | 679 |
The following table sets forth a summary of time-based restricted stock units and related information for the nine months ended September 30, 2020:
| Awards |  | Weighted- Average Fair Value
Unvested at December 31, 2019 | 363,729 |  |  | $ | 60.00 |
Granted | 655,825 |  |  | 37.38 |
Vested | (80,486) |  |  | 69.68 |
Forfeited | (8,364) |  |  | 60.03 |
Unvested at September 30, 2020 | 930,704 |  |  | $ | 43.23 |
The following table sets forth a summary of performance-based awards for the nine months ended September 30, 2020:
| Awards |  | Weighted- Average Fair Value
Unvested at December 31, 2019 | 195,305 |  |  | $ | 60.24 |
Granted | 158,756 |  |  | 48.67 |
Vested | (25,909) |  |  | 78.04 |
Forfeited | (20,538) |  |  | 71.47 |
Unvested at September 30, 2020 | 307,614 |  |  | $ | 52.60 |
Vesting of the 307,614 shares of performance-based awards in the table above is dependent upon the achievement of certain performance targets, including 134,010 that are dependent upon the three-year average growth rate of WESCO's net income, 19,797 that are dependent upon the three-year average growth rate of the Company's fully diluted earnings per share, and 153,807 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 $6.0 million and $4.4 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the three months ended September 30, 2020 and 2019, respectively. WESCO recognized $15.5 million and $14.2 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, there was $39.8 million of unrecognized compensation cost related to non-vested stock-based compensation arrangements for all awards previously made, of which $6.0 million is expected to be recognized over the remainder of 2020, $17.8 million in 2021, $12.4 million in 2022 and $3.6 million in 2023.
Compensation Related Costs, General | Other Benefits As permitted by the Merger Agreement, Anixter granted restricted stock units prior to June 22, 2020 in the ordinary course of business to its employees and directors. These awards, which did not accelerate solely as a result of the Merger, were converted into cash-only settled WESCO phantom stock units, which vest ratably over a 3-year period. As of September 30, 2020, the estimated fair value of these awards was $13.4 million. The Company recognized compensation expense associated with these awards of $1.4 million and $2.3 million for the three and nine months ended September 30, 2020, respectively, which is reported as a component of selling, general and administrative expenses.

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