INCENTIVE COMPENSATION

Overview

The Board of the Partnership’s general partner established a long-term incentive plan (the “2015 LTIP”), pursuant to which non-employee directors of the Partnership’s general partner and certain employees and consultants of the Partnership and its affiliates are eligible to receive awards with respect to the Partnership’s common and subordinated units. The 2015 LTIP permits the grant of unit options, unit appreciation rights, restricted units, unit awards, phantom units, distribution equivalent rights either in tandem with an award or as a separate award, cash awards, and other unit-based awards. Any vesting terms associated with incentive awards are based on a predetermined schedule as approved by the Board or a committee thereof.

Incentive compensation expense is included in general and administrative expense on the consolidated statements of operations. The total compensation expense related to the common and subordinated unit grants is measured as the number of units granted that are expected to vest multiplied by the grant-date fair value per unit. Incentive compensation expense is recognized using straight-line or accelerated attribution depending on the specific terms of the award agreements over the requisite service periods (generally equivalent to the vesting period).

Cash Awards

The Partnership may also provide from time to time short-term and long-term cash incentive and retention awards annually for its directors, executive officers and certain other employees. Certain employees are entitled to receive cash bonuses based on service criteria over a four-year requisite service period ending in 2019. Payments are disbursed as vesting is attained on a graded annual basis. The last grant of such cash awards with graded vesting requirements was made in 2016 and extends through December 31, 2019.

Restricted Unit Awards

Restricted common units in the Predecessor outstanding as of the date of the IPO were converted into restricted common and subordinated units of the Partnership in connection with the IPO. The converted restricted units awarded are subject to restrictions on transferability, customary forfeiture provisions, and time vesting provisions. Award recipients have all the rights of a unitholder in the Partnership with respect to the converted restricted units, including the right to receive distributions thereon, if and when made by the Partnership. Non-employee directors of the Partnership’s general partner receive compensation under the 2015 LTIP in the form of fully vested common units granted after each year of service.

In conjunction with the adoption of the 2015 LTIP, the Board approved a grant of awards to each of the executive officers of the Partnership's general partner, certain other employees, and each of the non-employee directors of the Partnership’s general partner. The grants included restricted common units subject to limitations on transferability, customary forfeiture provisions, and service based graded vesting requirements through March 15, 2019. The holders of restricted common unit awards have all of the rights of a common unitholder, including non-forfeitable distribution rights with respect to their restricted common units. The grant-date fair value of these awards, net of estimated forfeitures, is recognized ratably using the straight-line attribution method.

The Compensation Committee of the Board (the "Compensation Committee") approved a grant of awards to each of the executive officers of the Partnership's general partner and certain other employees. The grant includes restricted common units subject to limitations on transferability, customary forfeiture provisions, and service-based graded vesting requirements through January 7, 2020. Holders of restricted common unit awards have all of the rights of a common unitholder, including non-forfeitable distribution rights with respect to their restricted common units. The grant-date fair value of these awards, net of estimated forfeitures, is recognized ratably using the straight-line attribution method.

In April 2016, the Compensation Committee approved a resolution to change the form of settlement of certain employee long-term incentive compensation plans from cash to equity. As a result of the modification, $10.1 million of cash-settled liabilities were reclassified to equity-settled liabilities during the second quarter of 2016 and the remaining unamortized expense of the awards will be amortized as equity-settled liabilities.

Additionally, in January of each year, non-employee directors on the Board receive fully vested common units for their service in the previous year.

The following table summarizes information about restricted units for the year ended December 31, 2017.



	Units				Weighted-Average Grant-Date Fair Value per Unit
	Common		Subordinated		Common		Subordinated
Unvested at December 31, 2016	1,271,215		163,041		$	15.29	$	18.97
Granted	901,910		—		18.48		—
Vested	(602,764	)	(103,912	)	15.13		19.35
Converted	—		—		—		—
Forfeited	(28,303	)	—		17.64		—
Unvested at December 31, 2017	1,542,058		59,129		16.72		18.30

The weighted-average grant-date fair value per unit for unit-based awards was $18.48, $10.09, and $18.79 for the years ended December 31, 2017, 2016, and 2015, respectively. Unrecognized compensation cost associated with restricted common and subordinated unit awards was $15.7 million and $0.2 million, respectively, as of December 31, 2017, which the Partnership expects to recognize over a weighted-average period of 1.65 years and 0.2 years for common units and subordinated units, respectively. The fair value of units vested for the years ended December 31, 2017, 2016, and 2015 was $25.1 million, $11.9 million, and $9.4 million, respectively. There were no cash payments made for vested units during the years ended December 31, 2017, 2016 and 2015.

Performance Unit Awards

The Compensation Committee also approved grants of restricted performance units that are subject to both performance-based and service-based vesting provisions. The number of common units issued to a recipient upon vesting of a restricted performance unit will be calculated based on performance against certain metrics that relate to the Partnership’s performance over each of the three calendar year performance periods commencing January 1 of the first calendar period. The target number of common units subject to each restricted performance unit is one; however, based on the achievement of performance criteria, the number of common units that may be received in settlement of each restricted performance unit can range from zero to two times the target number. The restricted performance units are eligible to become earned at the end of the required service period assuming the minimum performance metrics are achieved. Compensation expense related to the restricted performance unit awards is determined by multiplying the number of common units underlying such awards that, based on the Partnership’s estimate, are probable to vest, by the measurement-date (i.e., the last day of each reporting period date) fair value and recognized using the accelerated or straight line attribution methods, depending on the terms of the award. Distribution equivalent rights for the restricted performance unit awards that are expected to vest are charged to partners’ capital.

The Compensation Committee also approved dollar-value targets for performance-based short-term incentive compensation for executive officers and certain other employees of the Partnership. The Partnership expects to ultimately settle the authorized awards, at the end of the annual performance period, in common units.

The following table summarizes information about performance units for the year ended December 31, 2017.



Performance units	Number of Units		Weighted-Average Grant-Date Fair Value per Unit
Unvested at December 31, 2016	1,156,419		$	14.94
Granted	438,288		17.99
Vested	—		—
Forfeited	(137,351	)	18.60
Unvested at December 31, 2017	1,457,356		15.51

Unrecognized compensation cost associated with performance unit awards was $10.1 million as of December 31, 2017, which the Partnership expects to recognize over a weighted-average period of 1.54 years.

Incentive Compensation Summary

The table below summarizes incentive compensation expense recorded in general and administrative expenses in the consolidated statements of operations for the years ended December 31, 2017, 2016, and 2015.



	Year Ended December 31,
Incentive compensation expense	2017		2016		2015
	(In thousands)
Cash — long-term incentive plan	$	1,412	$	2,725	$	15,064
Equity-based compensation — restricted common and subordinated units	13,476		13,408		10,137
Equity-based compensation — restricted performance units	17,367		18,518		4,743
Board of Directors incentive plan	2,202		2,012		3,120
Total incentive compensation expense	$	34,457	$	36,663	$	33,064