Unit-Based Compensation

The Company’s general partner originally adopted a Long-Term Incentive Plan on January 24, 2006, which was amended and restated effective December 10, 2015 (the “LTIP”), for its employees, consultants and directors and its affiliates who perform services for the Company. The LTIP provides for the grant of restricted units, phantom units, unit options and substitute awards and, with respect to unit options and phantom units, the grant of distribution equivalent rights (“DERs”). Subject to adjustment for certain events, an aggregate of 3,883,690 common units may be delivered pursuant to awards under the LTIP. Units withheld to satisfy the Company’s general partner’s tax withholding obligations are available for delivery pursuant to other awards. The LTIP is administered by the compensation committee of the Company’s general partner’s board of directors.

Liability Awards are awards that are currently expected to be settled in cash on their vesting dates, rather than in equity units. Phantom unit Liability Awards are recorded in accrued salaries, wages and benefits in the consolidated balance sheets based on the vested portion of the fair value of the awards on the balance sheet date. The fair value of Liability Awards are updated at each balance sheet date and changes in the fair values of the vested portions of the awards are recorded as increases or decreases to compensation expense within general and administrative expense in the consolidated statements of operations.

Phantom Units

Non-employee directors of the Company’s general partner have been granted phantom units under the terms of the LTIP as part of their director compensation package related to fiscal years 2019, 2018 and 2017. The phantom units granted related to fiscal years 2019, 2018 and 2017 have a three-year service period with the 25% vesting on the Grant Date and an additional 25% vesting on each subsequent December 31 with final vesting occurring on the third December 31 following the grant date. Although ownership of common units related to the vesting of such LTIP phantom units does not transfer to the recipients until the phantom units vest, the recipients have DERs on these phantom units from the date of grant.

Non-employee directors of the Company’s general partner are eligible to defer their fees earned into the Deferred Compensation Plan. When directors elect to defer any portion of their compensation into the plans, these deferred amounts are credited to the participant in the form of phantom units. The compensation committee may recommend a matching contribution for the deferred fees at its discretion.

For the year ended December 31, 2017, named executive officers were awarded phantom units as part of the Company’s achievement of specified levels of financial performance in fiscal year 2017. For the year ended December 31, 2018, certain named executive officers were awarded phantom units based on the Company’s achievement of specified levels of financial performance for the fiscal year 2018 which were awarded in 2019. These phantom units are subject to time-vesting requirements whereby 100% of the phantom units vest in three years. Although ownership of common units related to the vesting of such phantom units does not transfer to the recipients until the phantom units vest, the recipients have DERs on these phantom units from the date of grant. For the years ended December 31, 2018 and December 31, 2019, certain named executive officers were awarded phantom units as partial settlement of our annual incentive bonus program, which was based on the Company’s achievement of specified levels of financial performance for the fiscal year 2018 or 2019, as applicable, which were deferred into our Deferred Compensation Plan as fully vested phantom units.

For unit-based compensation equity awards granted, the Company uses the market price of its common units on the grant date to calculate the fair value and related compensation cost of the phantom units. The Company amortizes this compensation cost to partners’ capital and general and administrative expense in the consolidated statements of operations using the straight-line method over the service period, as it expects these units to fully vest.

Unit-based compensation liability awards are recorded in accrued salaries, wages and benefits based on the fair value of the vested portion of the awards on the balance sheet date. The fair value of liability awards is updated at each balance sheet date and changes in the fair value of the vested portions of the liability awards are recorded as increases or decreases to compensation expense recorded in general and administrative expense in the consolidated statements of operations.

Performance Units

In 2017, the Company granted certain named executive officers and other executives performance units with market performance conditions. The award will vest when market performance conditions are met during the period commencing January 1, 2017 and ending December 31, 2020. As of December 31, 2019, a portion of the performance units are equity-classified awards, in which the fair value was determined on the grant date by application of the Monte Carlo simulation model. In addition, a portion of the performance units are liability-classified awards and the fair value was determined by the market price of the Company’s common units on the grant date and remeasured at each balance sheet date. The Company amortizes this compensation over the service period only if the performance condition is considered probable of occurring.

A summary of the Company’s non-vested phantom units and performance units as of December 31, 2019, and the changes during the years ended December 31, 2019, 2018 and 2017, are presented below:



	Number of Phantom Units		Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2017	754,833		$	9.58
Granted	2,753,507		4.10
Vested	(925,199	)	7.30
Forfeited	(47,363	)	9.73
Non-vested at December 31, 2017	2,535,778		$	3.11
Granted	1,030,174		6.29
Vested	(1,175,363	)	6.97
Forfeited	(120,082	)	6.83
Non-vested at December 31, 2018	2,270,507		$	5.71
Granted	1,653,340		3.01
Vested	(883,511	)	4.28
Forfeited	(139,048	)	4.10
Non-vested at December 31, 2019	2,901,288		$	5.21

For the year ended December 31, 2019, compensation expense of $5.9 million was recognized in the consolidated statements of operations related to unit grants, including $4.1 million attributable to Liability Awards for the year ended December 31, 2019. For the year ended December 31, 2018, compensation income, net, of $1.2 million was recognized in the consolidated statements of operations related to vested phantom unit grants, including income of $4.4 million attributable to Liability Awards for the year ended December 31, 2018 caused by the decline in the Company’s unit price during 2018. For the year ended December 31, 2017, compensation expense of $11.6 million was recognized in the consolidated statements of operations related to vested phantom unit grants, including $7.0 million attributable to Liability Awards for the year ended December 31, 2017. As of December 31, 2019 and 2018, there was a total of $7.1 million and $10.3 million, respectively, of unrecognized compensation costs related to non-vested phantom unit grants, including $5.9 million attributable to Liability Awards for the year ended December 31, 2019. These costs are expected to be recognized over a weighted-average period of approximately one year. The total fair value of phantom units vested during the years ended December 31, 2019, 2018 and 2017, was $3.2 million, $8.0 million and $7.2 million, respectively.