Employee Incentive Plans

3 Months Ended

Mar. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Incentive Plans

(7)Employee Incentive Plans

• Long-Term Incentive Plans

The Company accounts for share-based compensation in accordance with FASB ASC 718, which requires compensation related to all stock-based awards, including stock options, be recognized in the consolidated financial statements.

The Company and the Partnership each have similar unit or share-based payment plans for employees, which are described below. Share-based compensation associated with the CEI share-based compensation plan awarded to officers and employees of the Partnership are recorded by the Partnership since CEI has no operating activities other than its interest in the Partnership. Amounts recognized in the condensed consolidated financial statements with respect to these plans are as follows (in thousands):

		Three Months Ended
		March 31,
		2013		2012
Cost of share-based compensation charged to general and
	administrative expense	$	4,547	$	2,241
Cost of share-based compensation charged to operating expense			559		323
Total amount charged to income		$	5,106	$	2,564
Interest of non-controlling partners in share-based compensation		$	1,986	$	994
Amount of related income tax benefit recognized in income		$	1,157	$	582

(b) Partnership Restricted Units

The restricted units are valued at their fair value at the date of grant which is equal to the market value of common units on such date. A summary of the restricted unit activity for the three months ended March 31, 2013 is provided below:

		Three Months Ended March 31, 2013
				Weighted Average Grant-Date Fair Value
		Number of
Crosstex Energy, L.P. Restricted Units:		Units
Non-vested, beginning of period			1,003,159	$	13.31
	Granted		526,502		15.89
	Vested*		(264,140)		8.70
	Forfeited		(20,945)		15.37
Non-vested, end of period			1,244,576	$	15.35
Aggregate intrinsic value, end of period (in thousands)		$	22,900
_____________________
* Vested units include 82,348 units withheld for payroll taxes paid on behalf of employees.

The Partnership issued restricted units in 2013 to officers and other employees. These restricted units typically vest at the end of three years and are included in the restricted units outstanding and the current share-based compensation cost calculations at March 31, 2013.In March 2013, the Partnership issued 57,897 restricted units with a fair value of $1.0 million to officers andcertain employees as bonus paymentsfor 2012, which vested immediately and are included in the restricted units granted and vested line items above.

A summary of the restricted units' aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) during the three months ended March 31, 2013 and 2012 are provided below (in thousands):

	Three Months Ended
	March 31,
Crosstex Energy, L.P. Restricted Units:	2013		2012
Aggregate intrinsic value of units vested	$	4,024	$	3,511
Fair value of units vested	$	2,299	$	1,327
As of March 31, 2013, there was $10.6 million of unrecognized compensation cost related to non-vested restricted units. That cost is expected to be recognized over a weighted-average period of 1.7 years.

(c) Partnership Unit Options

A summary of the unit option activity for the three months ended March 31, 2013 is provided below:

		Three Months Ended March 31, 2013
				Weighted
		Number of		Average
Crosstex Energy, L.P. Unit Options:		Units		Exercise Price
Outstanding, beginning of period			349,018	$	7.25
	Exercised		(70,278)		5.70
	Forfeited		(2,681)		26.75
Outstanding, end of period			276,059	$	7.46
Options exercisable at end of period			276,059
Weighted average contractual term (years) end of period:
	Options outstanding		5.9
	Options exercisable		5.9
Aggregate intrinsic value end of period (in thousands):
	Options outstanding	$	3,345
	Options exercisable	$	3,345

A summary of the unit options intrinsic value exercised (market value in excess of exercise price at date of exercise) and fair value of units exercised (value per Black-Scholes-Merton option pricing model at date of grant) during the three months ended March 31, 2013and March 31, 2012 are provided below (in thousands):

	Three Months Ended
	March 31,
Crosstex Energy, L.P. Unit Options:	2013		2012
Intrinsic value of unit options exercised	$	814	$	411
Fair value of unit options vested	$	254	$	277
As of March 31, 2013, all options were vested and fully expensed.

(d)Crosstex Energy, Inc.'s Restricted Stock

The Company's restricted shares are valued at their fair value at the date of grant which is equal to the market value of the common stock on such date. A summary of the restricted share activities for the three months ended March 31, 2013 is provided below:

		Three Months Ended
		March 31, 2013
		Number of Shares		Weighted Average Grant-Date Fair Value
Crosstex Energy, Inc. Restricted Shares:
Non-vested, beginning of period			1,329,162	$	9.75
	Granted		533,482		15.63
	Vested*		(264,887)		7.43
	Forfeited		(25,318)		12.27
Non-vested, end of period			1,572,439	$	12.09
Aggregate intrinsic value, end of period (in thousands)		$	30,285
________________________
* Vested shares include 79,021 shares withheld for payroll taxes paid on behalf of employees.

CEI issued restricted shares in 2013 to officers and other employees. These restricted shares typically vest at the end of three years and are included in restricted shares outstanding and the current share-based compensation cost calculations at March 31, 2013. In March 2013, CEI issued 60,018 restricted shares with a fair value of $1.0 million to officers and certain employees as bonus payments for 2012, which vested immediately and are included in restricted shares granted and vested in the above line items.

A summary of the restricted shares' aggregate intrinsic value (market value at vesting date) and fair value of shares vested (market value at date of grant) during the three months ended March 31, 2013 and March 31, 2012 are provided below (in thousands):

	Three Months Ended
	March 31,
Crosstex Energy, Inc. Restricted Shares:	2013		2012
Aggregate intrinsic value of shares vested	$	3,990	$	2,736
Fair value of shares vested	$	1,967	$	1,006
As of March 31, 2013, there was $11.1 million of unrecognized compensation costs related to non-vested CEI restricted shares. The cost is expected to be recognized over a weighted average period of 1.6 years.

(e)Crosstex Energy, Inc.'s Stock Options

CEI stock options have not been granted as a means of compensation since 2005. All options outstanding at March 31, 2013 were vested and exercisable with all associated costs recognized. The following is a summary of the CEI stock options outstanding as of March 31, 2013:

		Three Months Ended March 31, 2013
				Weighted
		Number of		Average
Crosstex Energy, Inc. Stock Options:		Shares		Exercise Price
Outstanding, beginning of period			37,500	$	6.50
	Forfeited		-		-
Outstanding, end of period			37,500	$	6.50
Options exercisable at end of period			37,500	$	6.50
Weighted average contractual term (years) end of period			1.7