Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Share-based Compensation [Abstract]

Stock-Based Compensation

Stock-Based Compensation

As of September 30, 2012, we have two principal share-based compensation plans including the Frontier plan that was retained upon the July 1, 2011 merger (collectively, the “Long-Term Incentive Compensation Plan”).

The compensation cost charged against income for these plans was $7.3 million and $9.4 million for the three months ended September 30, 2012 and 2011, respectively, and $23.2 million and $13.9 million for the nine months ended September 30, 2012 and 2011, respectively. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (substantially all of our awards) is to expense the costs ratably over the vesting periods.

Additionally, HEP maintains a share-based compensation plan for HEP directors and select Holly Logistic Services, L.L.C. executives and employees. Compensation cost attributable to HEP’s share-based compensation plan was $0.5 million and $0.6 million for the three months ended September 30, 2012 and 2011, respectively, and $2.1 million and $1.6 million for the nine months ended September 30, 2012 and 2011, respectively.

Restricted Stock

Under our Long-Term Incentive Compensation Plan, we grant certain officers, other key employees and non-employee directors restricted stock awards with most awards vesting over a period of one to three years. Although ownership of the shares does not transfer to the recipients until after the shares vest, recipients generally have dividend rights on these shares from the date of grant. The vesting for certain key executives is contingent upon certain performance targets being realized. The fair value of each share of restricted stock awarded, including the shares issued to the key executives, is measured based on the market price as of the date of grant and is amortized over the respective vesting period.

A summary of restricted stock activity and changes during the nine months ended September 30, 2012 is presented below:

Restricted Stock	Grants		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2012 (non-vested)	1,122,350		$	25.48
Granted	420,922		33.97
Vesting and transfer of ownership to recipients	(574,408	)	23.48
Forfeited	(3,975	)	33.06
Outstanding at September 30, 2012 (non-vested)	964,889		$	30.35	$	39,821

For the nine months ended September 30, 2012, we issued 574,408 shares of our common stock upon the vesting of restricted stock grants having a grant date fair value of $13.5 million. As of September 30, 2012, there was $12.3 million of total unrecognized compensation cost related to non-vested restricted stock grants. That cost is expected to be recognized over a weighted-average period of 1.1 years.

Performance Share Units

Under our Long-Term Incentive Compensation Plan, we grant certain officers and other key employees performance share units, which are payable in stock upon meeting certain criteria over the service period, and generally vest over a period of three years. Under the terms of our performance share unit grants, awards are subject to either a “financial performance” or “market performance” criteria, or both.

The fair value of performance share unit awards subject to financial performance criteria is computed using the grant date closing stock price of each respective award grant and will apply to the number of units ultimately awarded. The number of shares ultimately issued for each award will be based on our financial performance as compared to peer group companies over the performance period and can range from zero to 200%. As of September 30, 2012, estimated share payouts for outstanding non-vested performance share unit awards ranged from 107% to 175%.

For the performance share units subject to market performance criteria, performance is calculated as the total shareholder return achieved by HollyFrontier stockholders compared with the average shareholder return achieved by an equally-weighted peer group of independent refining companies over a three-year period. These share unit awards are valued using a Monte Carlo valuation model, which simulates future stock price movements using key inputs including grant date stock prices, expected stock price performance, expected rate of return and volatility. These units are payable in stock based on share price performance relative to the defined peer group and can range from zero to 200% of the initial target award.

A summary of performance share unit activity and changes during the nine months ended September 30, 2012 is presented below:

Performance Share Units	Grants
Outstanding at January 1, 2012 (non-vested)	774,788
Granted	298,559
Vesting and transfer of ownership to recipients	(240,019	)
Forfeited	(5,057	)
Outstanding at September 30, 2012 (non-vested)	828,271

For the nine months ended September 30, 2012, we issued 459,426 shares of our common stock, representing a 191% payout on vested performance share units having a grant date fair value of $2.8 million. Based on the weighted-average grant date fair value of $28.20 per share, there was $15.1 million of total unrecognized compensation cost related to non-vested performance share units. That cost is expected to be recognized over a weighted-average period of 1.4 years.