Enterprise Products Partners L.P.

SEC Filings

10-K
ENTERPRISE PRODUCTS PARTNERS L P filed this Form 10-K on 02/28/2018
Entire Document
 

ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
The grant date fair value of each Employee Partnership is based on (i) the estimated value (as determined using a Black-Scholes option pricing model) of such Employee Partnership’s assets that would be distributed to the Class B limited partners thereof upon liquidation and (ii) the value, based on a discounted cash flow analysis, of the residual quarterly cash amounts that such Class B limited partners are expected to receive over the life of the Employee Partnership.

The following table summarizes the assumptions we used in applying a Black-Scholes option pricing model to derive that portion of the estimated grant date fair value of the profits interest awards for each Employee Partnership:

 
Expected
Risk-Free
Expected
Expected Unit
Employee
Life
Interest
Distribution
Price
Partnership
of Award
Rate
Yield
Volatility
PubCo I
4.0 years
0.9% to 1.6%
6.2% to 7.0%
29% to 40%
PubCo II
5.0 years
1.1% to 1.8%
6.1% to 7.0%
27% to 40%
PubCo III
4.0 years
1.0% to 1.4%
6.1% to 6.2%
31% to 40%
PrivCo I
5.0 years
1.2% to 1.6%
6.1% to 6.7%
28% to 40%

Compensation expense attributable to the profits interest awards is based on the estimated grant date fair value of each award. A portion of the fair value of these equity-based awards is allocated to us under the ASA as a non-cash expense. We are not responsible for reimbursing EPCO for any expenses of the Employee Partnerships, including the value of any contributions of units made by EPCO Holdings.

Restricted Common Unit Awards
Restricted common unit awards allow recipients to acquire our common units (at no cost to the recipient apart from fulfilling service and other conditions) once a defined vesting period expires, subject to customary forfeiture provisions.  Restricted common unit awards generally vest at a rate of 25% per year beginning one year after the grant date and are non-vested until the required service periods expire.  Restricted common units are included in the number of common units outstanding as presented on our Consolidated Balance Sheets.

The fair value of a restricted common unit award is based on the market price per unit of our common units on the date of grant.  Compensation expense is recognized based on the grant date fair value, net of an allowance for estimated forfeitures, over the requisite service or vesting period.

The following table presents restricted common unit award activity for the periods indicated:

 
 
Number of
Units
   
Weighted-
Average Grant
Date Fair Value
per Unit (1)
 
Restricted common units at January 1, 2015
   
4,229,790
   
$
26.96
 
Vested
   
(2,009,970
)
 
$
26.00
 
Forfeited
   
(259,300
)
 
$
27.53
 
Restricted common units at December 31, 2015
   
1,960,520
   
$
27.88
 
Vested
   
(1,234,502
)
 
$
27.45
 
Forfeited
   
(43,724
)
 
$
28.48
 
Restricted common units at December 31, 2016
   
682,294
   
$
28.61
 
Vested
   
(681,044
)
 
$
28.60
 
Forfeited
   
(1,250
)
 
$
31.07
 
Restricted common units at December 31, 2017
   
--
     
N/A
 
                 
(1)   Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued.
 

Each recipient of a restricted common unit award is entitled to nonforfeitable cash distributions equal to the product of the number of restricted common units outstanding for the participant and the cash distribution per unit paid to our common unitholders.  These distributions are included in “Cash distributions paid to limited partners” as presented on our Statements of Consolidated Cash Flows.

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