XML 39 R22.htm IDEA: XBRL DOCUMENT v3.20.4
STOCK-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation
15. STOCK-BASED COMPENSATION
WESCO sponsors a stock-based compensation plan. The 1999 Long-Term Incentive Plan, as amended and restated (the “LTIP”) was designed to be the successor plan to all prior plans. Any shares remaining reserved for future issuance under the prior plans are available for issuance under the LTIP. The LTIP is administered by the Compensation Committee of the Board.
On May 31, 2017, the Company renewed and restated the LTIP, increasing the maximum number of shares of common stock that may be issued under the plan by 1.7 million shares to 3.4 million. In connection with the merger with Anixter on June 22, 2020, the Company assumed a portion of the remaining share reserve available under Anixter’s 2017 Stock Incentive Plan. The number of assumed shares, as adjusted, was equal to 185,000 shares and may be used for awards to be granted under the LTIP. Under the LTIP, the total number of shares of common stock authorized to be issued will be reduced by 1 share of common stock for every 1 share that is subject to a stock appreciation right granted, and 1.83 shares of common stock for every 1 share that is subject to an award other than a stock appreciation right granted on or after May 31, 2017. As of December 31, 2020, 1.1 million shares of common stock were reserved under the LTIP for future equity award grants.
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.
WESCO recognized $19.3 million, $19.1 million and $16.4 million of non-cash stock-based compensation expense, which is included in selling, general and administrative expenses, for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, there was $33.5 million of total unrecognized compensation expense related to non-vested stock-based compensation arrangements for all awards previously made of which approximately $17.6 million is expected to be recognized in 2021, $12.3 million in 2022 and $3.6 million in 2023.
The total intrinsic value of awards exercised during the years ended December 31, 2020, 2019, and 2018 was $8.8 million, $10.7 million, and $8.2 million, respectively. The gross deferred tax benefit associated with the exercise of stock-based awards totaled $2.0 million, $2.5 million, and $2.0 million in 2020, 2019, and 2018, respectively.
The following table sets forth a summary of stock-settled stock appreciation rights and related information for the periods presented:
Year Ended December 31,
 202020192018
AwardsWeighted-Average
Exercise
Price		Weighted-Average
Remaining
Contractual
Life		Aggregate
Intrinsic
Value
(In thousands)		AwardsWeighted-Average
Exercise
Price		AwardsWeighted-Average
Exercise
Price
Beginning of year2,337,049 $59.72   2,351,633 $59.26 2,238,607 $57.75 
Granted262,091 48.32   213,618 54.63 509,046 62.68 
Exercised(391,339)47.11   (113,099)35.01 (192,700)40.74 
Canceled(46,245)65.93   (115,103)65.27 (203,320)68.69 
End of year2,161,556 60.48 5.7$39,834 2,337,049 59.72 2,351,633 59.26 
Exercisable at end of year
1,630,891 $62.72 4.8$26,622 1,723,370 $59.00 1,453,932 $57.93 
The following table sets forth the weighted-average assumptions used to estimate the fair value of stock-settled stock appreciation rights granted during the periods presented:
Year Ended December 31,
202020192018
Stock-settled stock appreciation rights granted262,091213,618509,046
   Risk free interest rate1.4%2.5%2.5%
   Expected life (in years)555
   Expected volatility30%29%28%
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 weighted-average fair value per stock-settled stock appreciation right granted was $13.86, $16.36 and $18.38 for the years ended December 31, 2020, 2019 and 2018, respectively.
The following table sets forth a summary of time-based restricted stock units and related information for the periods presented:
Year Ended December 31,
202020192018
AwardsWeighted-Average
Fair
Value		AwardsWeighted-Average
Fair
Value		AwardsWeighted-Average
Fair
Value
Unvested at beginning of year363,729 $60.00 327,798 $57.87 290,054 $58.11 
Granted656,717 37.44 192,106 54.13 122,062 62.40 
Vested(83,253)69.17 (136,777)46.52 (64,166)67.91 
Forfeited(15,698)56.79 (19,398)59.62 (20,152)58.15 
Unvested at end of year921,495 $43.15 363,729 $60.00 327,798 $57.87 
The following table sets forth a summary of performance-based awards and related information for the periods presented:
Year Ended December 31,
202020192018
AwardsWeighted-Average
Fair
Value		AwardsWeighted-Average
Fair
Value		AwardsWeighted-Average
Fair
Value
Unvested at beginning of year195,305 $60.24 138,896 $59.33 148,508 $60.23 
     Granted158,756 49.56 126,874 54.64 44,144 62.80 
     Vested(25,909)78.04 (25,696)42.44 — — 
     Forfeited(22,883)69.39 (44,769)52.11 (53,756)64.67 
Unvested at end of year305,269 $52.61 195,305 $60.24 138,896 $59.33 
Vesting of the 305,269 shares of performance-based awards in the table above is dependent upon the achievement of certain performance targets, including 132,838 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 152,634 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.