Employee Incentive Plans

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Employee Incentive Plans

(12) Employee Incentive Plans

(a) Long-Term Incentive Plans

We account for unit-based compensation in accordance with 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.

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

	Year Ended December 31,
	2022		2021		2020
Cost of unit-based compensation charged to operating expense	$	5.7	$	6.6	$	7.1
Cost of unit-based compensation charged to general and administrative expense	24.7		18.7		21.3
Total unit-based compensation expense	$	30.4	$	25.3	$	28.4
Amount of related income tax benefit recognized in net income (loss) (1)	$	7.1	$	5.9	$	6.7

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(1)For the years ended December 31, 2022, 2021, and 2020 the amount of related income tax benefit recognized in net income (loss) excluded $0.7 million of income tax benefit and $3.1 million, and $6.0 million of income tax expense, respectively, related to book-to-tax differences recorded upon the vesting of restricted units.

(b) Restricted Incentive Units

The restricted incentive units were 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 year ended December 31, 2022 is provided below:

	Year Ended December 31, 2022
Restricted Incentive Units:	Number of Units		Weighted Average Grant-Date Fair Value
Unvested, beginning of period	7,507,471		$	5.46
Granted (1)	2,461,950		8.83
Vested (1)(2)	(2,615,805)		7.28
Forfeited	(578,430)		6.53
Unvested, end of period	6,775,186		$	5.89
Aggregate intrinsic value, end of period (in millions)	$	83.3

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(1)Restricted incentive units typically vest at the end of three years. In March 2022, we granted 193,935 restricted incentive units with a fair value of $1.7 million. These restricted incentive units vested immediately and are included in the restricted incentive units granted and vested line items.

(2)Vested units included 863,909 ENLC common 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 years ended December 31, 2022, 2021, and 2020 is provided below (in millions):

	Year Ended December 31,
Restricted Incentive Units:	2022		2021		2020
Aggregate intrinsic value of units vested	$	24.4	$	5.6	$	12.1
Fair value of units vested	$	19.0	$	16.3	$	31.5

As of December 31, 2022, there were $15.3 million of unrecognized compensation costs that related to unvested restricted incentive units. These costs are expected to be recognized over a weighted average period of 1.8 years.

For restricted incentive unit awards granted to certain officers and employees (the “grantee”), such awards (the “Subject Grants”) generally provide that, subject to the satisfaction of the conditions set forth in the agreement, the Subject Grants will vest on the third anniversary of the vesting commencement date (the “Regular Vesting Date”). The Subject Grants will be forfeited if the grantee’s employment or service with ENLC and its affiliates terminates prior to the Regular Vesting Date except that the Subject Grants will vest in full or on a pro-rated basis for certain terminations of employment or service prior to the Regular Vesting Date. For instance, the Subject Grants will vest on a pro-rated basis for any terminations of the grantee’s employment: (i) due to retirement, (ii) by ENLC or its affiliates without cause, or (iii) by the grantee for good reason (each, a “Covered Termination” and more particularly defined in the Subject Grants agreement) except that the Subject Grants will vest in full if the applicable Covered Termination is a “normal retirement” (as defined in the Subject Grants agreement) or the applicable Covered Termination occurs after a change of control (if any). The Subject Grants will vest in full if death or a qualifying disability occurs prior to the Regular Vesting Date.

(c) Performance Units

We grant 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 performance goals 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 such units ranges from zero to 200% of the units granted depending on the extent to which the related performance goals are achieved over the relevant performance period.

Performance Unit Awards Vesting

The vesting of performance units is dependent on (a) the grantee’s continued employment or service with ENLC or its affiliates for all relevant periods and (b) the TSR performance of ENLC (the “ENLC TSR”) and a performance goal based on cash flow (“Cash Flow”). At the time of grant, the Board of Directors of the Managing Member (the “Board”) will determine the relative weighting of the two performance goals by including in the award agreement the number of units that will be eligible for vesting depending on the achievement of the TSR performance goals (the “Total TSR Units”) versus the achievement of the Cash Flow performance goals (the “Total CF Units”). These performance awards have four separate performance periods: (i) three performance periods are each of the first, second, and third calendar years that occur following the vesting commencement date of the performance awards and (ii) the fourth performance period is the cumulative three-year period from the vesting commencement date through the third anniversary thereof (the “Cumulative Performance Period”).

One-fourth of the Total TSR Units (the “Tranche TSR Units”) relates to each of the four performance periods described above. Following the end date of a given performance period, the Governance and Compensation Committee (the “Committee”) of the Board will measure and determine the ENLC TSR relative to the TSR performance of a designated group of peer companies (the “Designated Peer Companies”) to determine the Tranche TSR Units that are eligible to vest, subject to the grantee’s continued employment or service with ENLC or its affiliates through the end date of the Cumulative Performance Period. In short, the TSR for a given performance period is defined as (i)(A) the average closing price of a common equity security at the end of the relevant performance period minus (B) the average closing price of a common equity security at the beginning of the relevant performance period plus (C) reinvested dividends divided by (ii) the average closing price of a common equity security at the beginning of the relevant performance period.

The following table sets out the levels at which the Tranche TSR Units may vest (using linear interpolation) based on the ENLC TSR percentile ranking for the applicable performance period relative to the TSR achievement of the Designated Peer Companies:

Performance Level	Achieved ENLC TSR Position Relative to Designated Peer Companies	Vesting percentage of the Tranche TSR Units
Below Threshold	Less than 25%	0%
Threshold	Equal to 25%	50%
Target	Equal to 50%	100%
Maximum	Greater than or Equal to 75%	200%

Approximately one-third of the Total CF Units (the “Tranche CF Units”) relates to each of the first three performance periods described above (i.e., the Cash Flow performance goal does not relate to the Cumulative Performance Period). The Board will establish the Cash Flow performance targets for purposes of the column in the table below titled “ENLC’s Achieved Cash Flow” for each performance period no later than March 31 of the year in which the relevant performance period begins. Following the end date of a given performance period, the Committee will measure and determine the Cash Flow performance of ENLC to determine the Tranche CF Units that are eligible to vest, subject to the grantee’s continued employment or service with ENLC or its affiliates through the end of the Cumulative Performance Period.

In 2021, the Board adopted the metric free cash flow after distributions (“FCFAD”) as the cash flow performance goal in the Performance-Based Award Agreement rather than the previously used distributable cash flow per unit. The following table sets out the levels at which the Tranche CF Units were eligible to vest (using linear interpolation) based on the FCFAD performance of ENLC for the performance period ending December 31, 2022:

Performance Level	ENLC’s Achieved FCFAD	Vesting percentage of the Tranche CF Units
Below Threshold	Less than $154 million	0%
Threshold	Equal to $154 million	50%
Target	Equal to $202 million	100%
Maximum	Greater than or Equal to $241 million	200%

The following table sets out the levels at which the Tranche CF Units were eligible to vest (using linear interpolation) based on the FCFAD performance of ENLC for the performance period ending December 31, 2021:

Performance Level	ENLC’s Achieved FCFAD	Vesting percentage of the Tranche CF Units
Below Threshold	Less than $205 million	0%
Threshold	Equal to $205 million	50%
Target	Equal to $256 million	100%
Maximum	Greater than or Equal to $300 million	200%

The following table sets out the levels at which the Tranche CF Units were eligible to vest (using linear interpolation) based on the distributable cash flow (“DCF”) performance of ENLC for the performance period ending December 31, 2020:

Performance Level	ENLC’s Achieved  DCF per Unit	Vesting percentage of the Tranche CF Units
Below Threshold	Less than $1.345	0%
Threshold	Equal to $1.345	50%
Target	Equal to $1.494	100%
Maximum	Greater than or Equal to $1.643	200%

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’ or Peer Companies’ securities as applicable; (iii) an estimated ranking of ENLC among the Designated Peer Companies or 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:

Performance Units:	June 2022			March 2022 (1)			January 2021			July 2020			March 2020			January 2020
Grant-date fair value	$	11.71		$	11.90		$	4.70		$	2.33		$	1.13		$	7.69
Beginning TSR price	$	8.54		$	8.83		$	3.71		$	2.52		$	1.25		$	6.13
Risk-free interest rate	3.35		%	2.15		%	0.17		%	0.17		%	0.42		%	1.62		%
Volatility factor	76.00		%	75.00		%	71.00		%	67.00		%	51.00		%	37.00		%

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(1)Excludes certain performance units awarded March 1, 2022 with vesting conditions based on performance metrics. The 88,863 performance units have a grant-date fair value of $8.90 and were scheduled to vest in February 2023. However, this award partially vested in October 2022 and is reflected in the “Vested” row of the summary of the performance units table below.

The following table presents a summary of the performance units:

	Year Ended December 31, 2022
Performance Units:	Number of Units		Weighted Average Grant-Date Fair Value
Unvested, beginning of period	3,574,827		$	6.40
Granted	1,204,882		11.60
Vested (1)	(1,480,802)		9.32
Forfeited	(319,753)		12.11
Unvested, end of period	2,979,154		$	6.44
Aggregate intrinsic value, end of period (in millions)	$	36.6

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(1)Vested units included 806,918 ENLC common 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 years ended December 31, 2022, 2021, and 2020 is provided below (in millions).

	Year Ended December 31,
Performance Units:	2022		2021		2020
Aggregate intrinsic value of units vested	$	20.4	$	0.6	$	0.9
Fair value of units vested	$	26.2	$	4.4	$	5.5

As of December 31, 2022, there were $10.1 million of unrecognized compensation costs that related to unvested performance units. These costs are expected to be recognized over a weighted-average period of 1.8 years.

(d) Benefit Plan

ENLK maintains a tax-qualified 401(k) plan whereby it matches 100% of every dollar contributed up to 6% of an employee’s eligible compensation. Contributions of $7.4 million, $7.0 million, and $7.2 million were made to the plan for the years ended December 31, 2022, 2021, and 2020, respectively.