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Equity-based Awards | 3 Months Ended
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Mar. 31, 2016
Equity-based Awards [Abstract] |
Equity-based Awards | Note 11. Equity-Based Awards An allocated portion of the fair value of EPCO's equity-based awards is charged to us under the ASA. The following table summarizes compensation expense we recognized in connection with equity-based awards for the periods indicated:
|  | For the Three Months Ended March 31, |
|  | 2016 |  |  | 2015 |
Equity-classified awards: |  |  |  |  |  |
Phantom unit awards |  | $ | 19.4 |  |  | $ | 17.2 |
Restricted common unit awards |  |  | 2.2 |  |  |  | 6.1 |
Profits interests awards |  |  | 0.7 |  |  |  | -- |
Liability-classified awards |  |  | 0.1 |  |  |  | 0.1 |
Total |  | $ | 22.4 |  |  | $ | 23.4 |
The fair value of equity-classified awards is amortized into earnings over the requisite service or vesting period. Equity-classified awards are expected to result in the issuance of common units upon vesting. Compensation expense for liability-classified awards is recognized over the requisite service or vesting period based on the fair value of the award remeasured at each reporting date. Liability-classified awards are settled in cash upon vesting. At March 31, 2016, EPCO's significant long-term incentive plans applicable to us were the Enterprise Products 1998 Long-Term Incentive Plan ("1998 Plan") and the 2008 Enterprise Products Long-Term Incentive Plan (Third Amendment and Restatement) ("2008 Plan"). Up to 14,000,000 of our common units may be issued as awards under the 1998 Plan. The maximum number of common units available for issuance under the 2008 Plan was 35,000,000 at March 31, 2016. This amount will automatically increase under the terms of the 2008 Plan by 5,000,000 common units on January 1, 2017 and will continue to automatically increase annually on January 1 thereafter during the term of the 2008 Plan; provided, however, that in no event shall the maximum aggregate number exceed 70,000,000 common units. After giving effect to awards granted under the 1998 Plan and 2008 Plan through March 31, 2016, a total of 3,245,652 and 17,981,493 additional common units were available for issuance under these plans, respectively. In addition, in February 2016, EPCO formed three limited partnerships (generally referred to as "Employee Partnerships") to serve as incentive arrangements for key employees of EPCO by providing them a "profits interest" in an Employee Partnership. The names of the Employee Partnerships are EPD PubCo Unit I L.P. ("EPD PubCo I"), EPD PubCo Unit II L.P. ("EPD PubCo II") and EPD PrivCo Unit I L.P. ("EPD PrivCo I"). The Employee Partnerships are discussed later in this note. Phantom Unit Awards Phantom 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. Phantom 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. At March 31, 2016, substantially all of our phantom unit awards are expected to result in the issuance of common units upon vesting; therefore, the applicable awards are accounted for as equity-classified awards. The grant date fair value of a phantom 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 phantom unit award activity for the period indicated:
|  | Number of Units |  |  | Weighted- Average Grant Date Fair Value per Unit (1) |
Phantom unit awards at December 31, 2015 |  |  | 5,426,949 |  |  | $ | 33.63 |
Granted (2) |  |  | 4,467,730 |  |  | $ | 21.86 |
Vested |  |  | (1,586,493 | ) |  | $ | 33.56 |
Forfeited |  |  | (41,673 | ) |  | $ | 31.11 |
Phantom unit awards at March 31, 2016 |  |  | 8,266,513 |  |  | $ | 27.29 |
(1) Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued. (2) The aggregate grant date fair value of phantom unit awards issued during 2016 was $97.7 million based on a grant date market price of our common units of $21.86 per unit. An estimated annual forfeiture rate of 3.9% was applied to these awards. |
Our long-term incentive plans provide for the issuance of distribution equivalent rights ("DERs") in connection with phantom unit awards. A DER entitles the participant to nonforfeitable cash payments equal to the product of the number of phantom unit awards outstanding for the participant and the cash distribution per common unit paid to our common unitholders. Cash payments made in connection with DERs are charged to partners' equity when the phantom unit award is expected to result in the issuance of common units; otherwise, such amounts are expensed. The following table presents supplemental information regarding phantom unit awards for the periods indicated:
|  | For the Three Months Ended March 31, |
|  | 2016 |  |  | 2015 |
Cash payments made in connection with DERs |  | $ | 2.0 |  |  | $ | 1.2 |
Total intrinsic value of phantom unit awards that vested during period |  | $ | 36.3 |  |  | $ | 26.6 |
For the EPCO group of companies, the unrecognized compensation cost associated with phantom unit awards was $145.2 million at March 31, 2016, of which our share of the cost is currently estimated to be $133.1 million. Due to the graded vesting provisions of these awards, we expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 2.2 years. 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 Unaudited Condensed 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 period indicated:
|  | Number of Units |  |  | Weighted- Average Grant Date Fair Value per Unit (1) |
Restricted common units at December 31, 2015 |  |  | 1,960,520 |  |  | $ | 27.88 |
Vested |  |  | (1,167,578 | ) |  | $ | 27.39 |
Forfeited |  |  | (9,350 | ) |  | $ | 28.32 |
Restricted common units at March 31, 2016 |  |  | 783,592 |  |  | $ | 28.60 |
(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 Unaudited Condensed Statements of Consolidated Cash Flows. The following table presents supplemental information regarding restricted common unit awards for the periods indicated:
| For the Three Months Ended March 31, |
| 2016 |  | 2015 |
Cash distributions paid to restricted common unitholders |  | $ | 0.8 |  |  | $ | 1.5 |
Total intrinsic value of restricted common unit awards that vested during period |  | $ | 26.8 |  |  | $ | 62.4 |
For the EPCO group of companies, the unrecognized compensation cost associated with restricted common unit awards was an aggregate $4.7 million at March 31, 2016, of which our share of the cost is currently estimated to be $3.5 million. Due to the graded vesting provisions of these awards, we expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of approximately one year. Unit Option Awards EPCO's long-term incentive plans provide for the issuance of non-qualified incentive options denominated in our common units. All of our unit option awards had been exercised as of December 31, 2015 and no new unit option awards were granted during the three months ended March 31, 2016. In order to fund its unit option award-related obligations, EPCO purchased our common units at fair value directly from us. When employees exercise unit option awards, we reimburse EPCO for the cash difference between the strike price paid by the employee and the actual purchase price paid by EPCO for the units issued to the employee. The following table presents supplemental information regarding unit option awards during the three months ended March 31, 2015:
Total intrinsic value of unit option awards exercised during period |  | $ | 17.4 |
Cash received from EPCO in connection with the exercise of unit option awards |  |  | 10.1 |
Unit option award-related cash reimbursements to EPCO |  |  | 17.4 |
Profits Interest Awards On February 22, 2016, EPCO Holdings Inc. ("EPCO Holdings"), a privately held affiliate of EPCO, contributed the following Enterprise common units it owned to the Employee Partnerships: (i) 2,723,052 units to EPD PubCo I, (ii) 2,834,198 units to EPD PubCo II and (iii) 1,111,438 units to EPD PrivCo I. In exchange for these contributions, EPCO Holdings was admitted as the Class A limited partner of each Employee Partnership. Also on the contribution date, certain key EPCO employees were issued Class B limited partner interests (i.e., profits interest awards) and admitted as Class B limited partners of each Employee Partnership, all without any capital contribution by such employees. EPCO serves as the general partner of each Employee Partnership. In general, the Class A limited partner earns a preferred return (the "Class A Preference Return," as described below) on its investment (or "Capital Base") in each Employee Partnership, with any residual cash amounts being paid to the Class B limited partners of such Employee Partnership on a quarterly basis. Upon liquidation of an Employee Partnership, assets having a then current fair market value equal to the Class A limited partner's Capital Base in such Employee Partnership, plus any preferred return for the period in which liquidation occurs, will be distributed to the Class A limited partner. Any remaining assets of such Employee Partnership will be distributed to the Class B limited partners of such Employee Partnership as a residual profits interest, which represents the appreciation in value of the Employee Partnership's assets since the date of EPCO Holdings' contribution to it, as described above. Unless otherwise agreed to by EPCO and a majority in interest of the limited partners of each Employee Partnership, such Employee Partnership will terminate at the earliest to occur of (i) 30 days following its vesting date, (ii) a change of control or (iii) a dissolution of the Employee Partnership. Class B limited partner interests in EPD PubCo I vest four years from February 22, 2016, and Class B limited partner interests in EPD PubCo II and EPD PrivCo I vest five years from that date. Individually, each Class B limited partner interest is subject to forfeiture if the participating employee's employment with EPCO is terminated prior to vesting, with customary exceptions for death, disability and certain retirements. The risk of forfeiture will also lapse upon certain change of control events. Forfeited individual Class B limited partner interests are allocated to the remaining Class B limited partners. The following table summarizes key elements of each Employee Partnership:
Employee Partnership | Enterprise Common Units owned by Employee Partnership | Class A Capital Base (1) |  | Class A Partner Preferred Return Rate (2) |  | Expected Liquidation Date | Estimated Grant Date Fair Value of Profits Interest Awards (3) | Unrecognized Compensation Cost (4)
EPD PubCo I | 2,723,052 units | $63.5 million |  |  | 6.6638 | % | Feb. 2020 | $13.2 million | $12.7 million
EPD PubCo II | 2,834,198 units | $66.1 million |  |  | 6.6638 | % | Feb. 2021 | $14.8 million | $14.3 million
EPD PrivCo I | 1,111,438 units | $25.9 million |  |  | 6.6638 | % | Feb. 2021 | $5.8 million | $1.2 million
(1)Represents the fair market value of the Enterprise common units contributed at the contribution date. (2)For each period, the Class A Preference Return equals the Class A Capital Base, after adjusting for certain retained cash distributions and other amounts as defined in the underlying agreements, multiplied by 6.6638% divided by 365 or 366 days, as the case may be during such calendar year, multiplied by the number of days in the applicable period. (3)Represents the total grant date fair value of the profits interest awards irrespective of how such costs will be allocated between us and EPCO and its privately held affiliates. (4)Represents our expected share of the unrecognized compensation cost at March 31, 2016. We expect to recognize our share of the unrecognized compensation cost for EPD PubCo I, EPD PubCo II and EPD PrivCo I over a weighted-average period of 3.9 years, 4.9 years and 4.9 years, respectively.
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
EPD PubCo I | 4.0 years | 1.09% | 6.68% | 40%
EPD PubCo II | 5.0 years | 1.25% | 6.68% | 40%
EPD PrivCo I | 5.0 years | 1.25% | 6.68% | 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.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51659978&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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