(10) Employee Incentive Plans


(a)	Long-Term Incentive Plans

ENLC and ENLK each have similar unit-based compensation payment plans for officers and employees. ENLC grants unit-based awards under the EnLink Midstream, LLC 2014 Long-Term Incentive Plan (the “2014 Plan”), and ENLK grants unit-based awards under the amended and restated EnLink Midstream GP, LLC Long-Term Incentive Plan (the “GP Plan”).

We account for unit-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”), which requires that compensation related to all unit-based awards be recognized in the consolidated financial statements. Unit-based compensation cost is valued at fair value at the date of grant, and that grant date fair value is recognized as expense over each award’s requisite service period with a corresponding increase to equity or liability based on the terms of each award and the appropriate accounting treatment under ASC 718. Unit-based compensation associated with ENLC’s unit-based compensation plan awarded to ENLC’s officers and employees is recorded by us since ENLC has no substantial or managed operating activities other than its interests in ENLK and EOGP.

Amounts recognized on the consolidated financial statements with respect to these plans are as follows (in millions):



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Cost of unit-based compensation charged to operating expense	$	2.3	$	2.6	$	4.3	$	7.6
Cost of unit-based compensation charged to general and administrative expense	7.3		6.7		10.4		21.1
Total unit-based compensation expense	$	9.6	$	9.3	$	14.7	$	28.7
Non-controlling interest in unit-based compensation	$	3.6	$	3.5	$	5.5	$	10.8
Amount of related income tax benefit recognized in net income (1)	$	1.2	$	2.1	$	1.9	$	6.7

(1)

For the three and six months ended June 30, 2018, the amount of related income tax benefit recognized in net income excluded $0.1 million of income tax benefit and $1.5 million of income tax expense, respectively, related to tax deficiencies recorded upon vesting of restricted units. For the six months ended June 30, 2017, the amount of related income tax benefit recognized in net income excluded $2.3 million of income tax expense related to tax deficiencies recorded upon vesting of restricted units. There was no income tax expense or benefit related to tax deficiencies recorded upon vesting of restricted units for the three months ended June 30, 2017.


(b)	EnLink Midstream Partners, LP Restricted Incentive Units

ENLK restricted incentive units are valued at their fair value at the date of grant, which is equal to the market value of ENLK common units on such date. A summary of the restricted incentive unit activity for the six months ended June 30, 2018 is provided below:



	Six Months Ended June 30, 2018
EnLink Midstream Partners, LP Restricted Incentive Units:	Number of Units			Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	1,980,224			$	15.81
Granted (1)	1,166,464			15.15
Vested (1)(2)	(601,581		)	22.04
Forfeited	(148,572		)	12.29
Non-vested, end of period	2,396,535			$	14.14
Aggregate intrinsic value, end of period (in millions)	$	37.2


(1)	Restricted incentive units typically vest at the end of three years. In March 2018, ENLK granted 200,753 restricted incentive units with a fair value of $3.0 million to officers and certain employees as bonus payments for 2017, and these restricted incentive units vested immediately and are included in the restricted incentive units granted and vested line items.


(2)	Vested units included 189,584 units withheld for payroll taxes paid on behalf of employees.

A summary of the restricted incentive units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) for the three and six months ended June 30, 2018 and 2017 is provided below (in millions):



	Three Months Ended June 30,				Six Months Ended June 30,
EnLink Midstream Partners, LP Restricted Incentive Units:	2018		2017		2018		2017
Aggregate intrinsic value of units vested	$	0.4	$	0.4	$	9.1	$	15.7
Fair value of units vested	$	0.5	$	0.5	$	13.3	$	21.0

As of June 30, 2018, there was $20.2 million of unrecognized compensation cost related to non-vested ENLK restricted incentive units. That cost is expected to be recognized over a weighted-average period of 1.9 years.


(c)	EnLink Midstream Partners, LP Performance Units

The General Partner grants performance awards under the GP Plan. The performance award agreements provide that the vesting of performance units (i.e., performance-based restricted incentive units) granted thereunder is dependent on the achievement of certain total shareholder return (“TSR”) performance goals relative to the TSR achievement of a peer group of companies (the “Peer Companies”) over the applicable performance period. The performance award agreements contemplate that the Peer Companies for an individual performance award (the “Subject Award”) are the companies comprising the AMZ, excluding ENLC and ENLK, on the grant date for the Subject Award. The performance units will vest based on the percentile ranking of the average of ENLC’s and ENLK’s TSR achievement (“EnLink TSR”) for the applicable performance period relative to the TSR achievement of the Peer Companies.

At the end of the vesting period, recipients receive distribution equivalents, if any, with respect to the number of performance units vested. The vesting of units ranges from zero to 200% of the units granted depending on the EnLink TSR as compared to the TSR of the Peer Companies on the vesting date. The fair value of each performance unit is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all performance unit grants made under the plan: (i) a risk-free interest rate based on United States Treasury rates as of the grant date; (ii) a volatility assumption based on the historical realized price volatility of ENLK’s common units and the designated Peer Companies securities; (iii) an estimated ranking of ENLK among the designated Peer Companies; and (iv) the distribution yield. The fair value of the performance unit on the date of grant is expensed over a vesting period of approximately three years. The following table presents a summary of the grant-date fair value of performance units granted and the related assumptions by performance unit grant date:



EnLink Midstream Partners, LP Performance Units:	March 2018
Beginning TSR price	$	15.44
Risk-free interest rate	2.38		%
Volatility factor	43.85		%
Distribution yield	10.5		%

The following table presents a summary of the performance units:



	Six Months Ended June 30, 2018
EnLink Midstream Partners, LP Performance Units:	Number of Units			Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	585,285			$	20.52
Granted	256,345			19.24
Vested (1)	(115,328		)	35.39
Forfeited	(76,351		)	16.62
Non-vested, end of period	649,951			$	17.83
Aggregate intrinsic value, end of period (in millions)	$	10.1


(1)	Vested units included 34,069 units withheld for payroll taxes paid on behalf of employees.

A summary of the performance units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) for the six months ended June 30, 2018 is provided below (in millions). No performance units vested for the three months ended June 30, 2018 or for the three and six months ended June 30, 2017.



EnLink Midstream Partners, LP Performance Units:	Six Months Ended June 30, 2018
Aggregate intrinsic value of units vested	$	2.0
Fair value of units vested	$	4.1

As of June 30, 2018, there was $7.4 million of unrecognized compensation cost that related to non-vested ENLK performance units. That cost is expected to be recognized over a weighted-average period of 2.0 years.


(d)	EnLink Midstream, LLC Restricted Incentive Units

ENLC restricted incentive units are valued at their fair value at the date of grant, which is equal to the market value of ENLC common units on such date. A summary of the restricted incentive unit activity for the six months ended June 30, 2018 is provided below:



	Six Months Ended June 30, 2018
EnLink Midstream, LLC Restricted Incentive Units:	Number of Units			Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	1,889,310			$	16.33
Granted (1)	1,059,062			15.67
Vested (1)(2)	(556,262		)	24.24
Forfeited	(138,187		)	12.24
Non-vested, end of period	2,253,923			$	14.32
Aggregate intrinsic value, end of period (in millions)	$	37.1


(1)	Restricted incentive units typically vest at the end of three years. In March 2018, ENLC granted 194,185 restricted incentive units with a fair value of $3.0 million to officers and certain employees as bonus payments for 2017, and these restricted incentive units vested immediately and are included in the restricted incentive units granted and vested line items.


(2)	Vested units included 178,824 units withheld for payroll taxes paid on behalf of employees.



	Three Months Ended June 30,				Six Months Ended June 30,
EnLink Midstream, LLC Restricted Incentive Units:	2018		2017		2018		2017
Aggregate intrinsic value of units vested	$	0.4	$	0.3	$	9.3	$	14.6
Fair value of units vested	$	0.4	$	0.4	$	13.5	$	20.8

As of June 30, 2018, there was $19.2 million of unrecognized compensation cost related to non-vested ENLC restricted incentive units. The cost is expected to be recognized over a weighted-average period of 1.9 years.


(e)	EnLink Midstream, LLC’s Performance Units

ENLC grants performance awards under the 2014 Plan. The performance award agreements provide that the vesting of performance units (i.e., performance-based restricted incentive units) granted thereunder is dependent on the achievement of certain TSR performance goals relative to the TSR achievement of the Peer Companies over the applicable performance period. At the end of the vesting period, recipients receive distribution equivalents, if any, with respect to the number of performance units vested. The vesting of units ranges from zero to 200% of the units granted depending on the EnLink TSR as compared to the TSR of the Peer Companies on the vesting date. The fair value of each performance unit is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all performance unit grants made under the plan: (i) a risk-free interest rate based on United States Treasury rates as of the grant date; (ii) a volatility assumption based on the historical realized price volatility of ENLC’s common units and the designated Peer Companies securities; (iii) an estimated ranking of ENLC among the designated Peer Companies, and (iv) the distribution yield. The fair value of the performance unit on the date of grant is expensed over a vesting period of approximately three years. The following table presents a summary of the grant-date fair value assumptions by performance unit grant date:



EnLink Midstream, LLC Performance Units:	March 2018
Beginning TSR price	$	16.55
Risk-free interest rate	2.38		%
Volatility factor	51.36		%
Distribution yield	6.7		%

The following table presents a summary of the performance units:



	Six Months Ended June 30, 2018
EnLink Midstream, LLC Performance Units:	Number of Units			Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	548,839			$	22.14
Granted	223,865			21.63
Vested (1)	(102,555		)	40.48
Forfeited	(70,918		)	17.75
Non-vested, end of period	599,231			$	19.33
Aggregate intrinsic value, end of period (in millions)	$	9.9


(1)	Vested units included 28,846 units withheld for payroll taxes paid on behalf of employees.



EnLink Midstream, LLC Performance Units:	Six Months Ended June 30, 2018
Aggregate intrinsic value of units vested	$	1.9
Fair value of units vested	$	4.2

As of June 30, 2018, there was $7.5 million of unrecognized compensation cost that related to non-vested ENLC performance units. That cost is expected to be recognized over a weighted-average period of 2.0 years.