Equity-Based Awards

9 Months Ended

Sep. 30, 2020

Note 13. 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 September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Equity-classified awards:
Phantom unit awards	$	37.3	$	34.7	$	113.1	$	99.6
Profits interest awards		2.2		2.5		7.2		8.1
Liability-classified awards		–		0.1		–		0.1
Total	$	39.5	$	37.3	$	120.3	$	107.8

The fair value of equity-classified awards is amortized to 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.

Phantom Unit Awards

Subject to customary forfeiture provisions, phantom unit awards allow recipients to acquire EPD common units once a defined vesting period expires (at no cost to the recipient apart from fulfilling required service and other conditions). 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, 2019		12,974,684		$	27.21
Granted (2)		7,403,345		$	25.71
Vested		(4,447,460	)	$	26.35
Forfeited		(130,774	)	$	26.74
Phantom unit awards at September 30, 2020		15,799,795		$	26.75

(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 2020 was $190.4 million based on a grant date market price of EPD common units ranging from $17.24 to $25.76 per unit. An estimated annual forfeiture rate of 2.4% was applied to these awards.

Each phantom unit award includes a distribution equivalent right (“DER”), which 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 by EPD to its 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 September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Cash payments made in connection with DERs	$	7.1	$	5.9	$	20.0	$	16.4
Total intrinsic value of phantom unit awards that vested during period		2.0		7.2		113.4		108.9

For the EPCO group of companies, the unrecognized compensation cost associated with phantom unit awards was $196.6 million at September 30, 2020, of which our share of such cost is currently estimated to be $165.5 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 2.1 years.

Profits Interest Awards

EPCO currently serves as the general partner for each of four limited partnerships (referred to as the “Employee Partnerships”) that serve as long-term incentive arrangements for key employees of EPCO by providing such employees a profits interest in one or more of the Employee Partnerships.

On September 30, 2020, the partners of two such Employee Partnerships, namely EPD PubCo Unit II L.P. (“PubCo II”) and EPD PrivCo Unit I L.P. (“PrivCo I”), amended their respective limited partnership agreements to provide for the vesting of their Class B limited partner interests on the earlier of (i) February 22, 2023, (ii) the first date on or after September 30, 2020 on which the closing market price of the Partnership’s common units is equal to or greater than $25.41 per unit, (iii) a change of control event, or (iv) dissolution of the applicable Employee Partnership. As a result of these modifications, PubCo II and PrivCo I will recognize incremental compensation cost of $1.2 million and $0.5 million, respectively, through February 22, 2023.

The profits interest in EPD PubCo Unit I L.P. vested in February 2020 and was liquidated. At September 30, 2020, our share of the total unrecognized compensation cost related to the four remaining Employee Partnerships was $18.0 million, which we expect to recognize over a weighted-average period of 3.1 years.