Partners' Equity and Equity-Based Compensation

12 Months Ended

Dec. 31, 2019

Partners' Equity and Equity-Based Compensation

Partners' Equity and Equity-Based Compensation:

Special L.P. Interests

In accordance with the Partnership Agreement, certain partners were allocated $5.3 million of 1987 and 1988 taxable income (without any related cash distributions) for which they received Special L.P. Interests. The Special L.P. Interests do not participate in cash distributions and have no voting rights. However, the holders of Special L.P. Interests will receive in the aggregate $5.3 million upon liquidation of the Partnership.

Equity-Based Incentive Plan

The 2016 Omnibus Incentive Plan was approved by our unitholders in June 2016 and allows the awarding of up to 2.8 million unit options and other forms of equity as determined by the Compensation Committee of the Board of Directors as an element of compensation to senior management and other key employees. The 2016 Omnibus Incentive Plan superseded the 2008 Omnibus Incentive Plan which was approved by our unitholders in May 2008 and allowed the awarding of up to 2.5 million unit options and other forms of equity. Outstanding awards under the 2008 Omnibus Incentive Plan continue to be in effect and are governed by the terms of that plan. The 2016 Omnibus Incentive Plan provides an opportunity for officers, directors, and eligible persons to acquire an interest in the growth and performance of our units and provides employees annual and long-term incentive awards as determined by the Board of Directors. Under the 2016 Omnibus Incentive Plan, the Compensation Committee of the Board of Directors may grant unit options, unit appreciation rights, restricted units, performance awards, other unit awards, cash incentive awards and unrestricted unit awards. The awards granted by the Compensation Committee fall into two categories, Awards Payable in Cash or Equity, and Awards Payable in Equity. The impact of these awards is more fully described below.

Equity-based compensation expense recognized in the consolidated statements of operations and comprehensive income within "Selling, General and Administrative Expense" for the applicable periods was as follows:



	Years Ended December 31,
(In thousands)	2019		2018			2017
Awards Payable in Cash or Equity
Performance units	$	—	$	—		$	507
Deferred units	611		(266		)	627
Awards Payable in Equity
Performance units	5,535		5,413			8,822
Restricted units	6,375		5,830			4,612
Total equity-based compensation expense	$	12,521	$	10,977		$	14,568

Awards Payable in Cash or Equity

Performance Units

During the year ended December 31, 2019, no performance units payable in cash or equity were awarded. The number of performance units issuable under these awards are contingently based upon certain performance targets over a three-year period and these awards can be settled with cash, limited partnership units, or a combination of both as determined by the Compensation Committee, after the end of the performance period. Certain of these types of performance units were awarded in prior years. The effect of these outstanding performance unit awards for which the performance condition had been met has been included in the diluted earnings per unit calculation, as a portion of the awards were paid in limited partnership units. The effect of these outstanding performance unit awards for which the performance condition had not been met has been excluded from the diluted earnings per unit calculation. We had settled all outstanding performance unit awards payable in cash or equity in 2017.

Deferred Units



(In thousands, except per unit amounts)	Number of Units		Weighted Average Grant Date Fair Value Per Unit
Outstanding deferred units at December 31, 2018	56		$	54.21
Granted ⁽¹⁾	3		$	54.17
Forfeited	—		—
Settled	(10	)	54.45
Outstanding deferred units at December 31, 2019	49		$	54.16

(1) Includes 3 distribution-equivalent units

Deferred unit awards vest over a one-year period and the settlement of these units is deferred until the individual's service to the Partnership ends. The deferred units begin to accumulate distribution-equivalents upon vesting and are paid when the restriction ends. The effect of outstanding deferred unit awards has been included in the diluted earnings per unit calculation, as a portion of the awards are expected to be settled in limited partnership units. As of December 31, 2019, the market value of the deferred units was $2.7 million, was classified as current and was recorded within "Other accrued liabilities" within the consolidated balance sheet. As of December 31, 2019, there was no unamortized expense related to unvested deferred unit awards as all units were fully vested.

Awards Payable in Equity

Performance Units



(In thousands, except per unit amounts)	Number of Units		Weighted Average Grant Date Fair Value Per Unit
Unvested performance units at December 31, 2018	379		$	56.86
Granted ⁽¹⁾	131		$	55.63
Forfeited	(14	)	$	58.10
Vested	(101	)	$	57.00
Unvested performance units at December 31, 2019	395		$	56.36

(1) Includes 21 forfeitable distribution-equivalent units

The number of performance units issuable under these awards are contingently based upon certain performance targets over a three-year vesting period. The annual performance awards and the related forfeitable distribution-equivalent units generally are paid out in the first quarter following the performance period in limited partnership units. The effect of these types of outstanding

performance unit awards, for which the performance conditions have been met, have been included in the diluted earnings per unit calculation.

As of December 31, 2019, unamortized compensation expense related to these unvested performance unit awards was $10.6 million, which is expected to be amortized over a weighted average period of 2.4 years. The fair value of the performance units is based on the unit price the day before the date of grant along with reinvested forfeitable distribution-equivalent units. We assess the probability of the performance targets being met and may reverse prior period expense or recognize additional expense accordingly.

Restricted Units



(In thousands, except per unit amounts)	Number of Units		Weighted Average Grant Date Fair Value Per Unit
Unvested restricted units at December 31, 2018	310		$	57.85
Granted	77		$	55.44
Forfeited	(6	)	$	57.02
Vested	(71	)	$	58.60
Unvested restricted units at December 31, 2019	310		$	57.07

Most of the restricted units vest over a three-year period, and the restrictions on these units lapse upon vesting. In addition, of the unvested restricted units at December 31, 2019, 32,154 units vest following a two-year cliff vesting period and 82,500 units vest following a three-year cliff vesting period. During the vesting period for restricted unit awards, the units accumulate forfeitable distribution-equivalents, which, when the units are fully vested, are payable in cash. As of December 31, 2019, the amount of forfeitable distribution equivalents accrued totaled $1.8 million; $1.0 million of which was classified as current and recorded within "Other accrued liabilities" within the consolidated balance sheet and $0.7 million of which was classified as non-current and recorded within "Other Liabilities".

As of December 31, 2019, unamortized compensation expense, determined as the market value of the units on the day before the date of grant, related to unvested restricted unit awards was $8.4 million, which is expected to be amortized over a weighted average period of 2.2 years.

Unit Options



(In thousands, except per unit amounts)	Unit Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Options outstanding at December 31, 2018	368		$	34.51
Exercised	(7	)	35.97
Options outstanding at December 31, 2019	362		$	34.49
Options exercisable, end of year	362		$	34.49	2.8 years	$	7,575

Unit options are issued with an exercise price no less than the market closing price of the Partnership's units on the day before the date of grant. Outstanding unit options vest over three years and have a maximum term of ten years. As of December 31, 2019, we had 361,546 fixed-price unit options outstanding under the 2008 Omnibus Incentive Plan. No options have been granted under the 2016 Omnibus Incentive Plan.

The range of exercise prices of unit options outstanding was $29.53 to $36.95 as of December 31, 2019. The total intrinsic value of unit options exercised during the years ended December 31, 2019, 2018 and 2017 were $0.1 million, $0.2 million, and $0.7 million, respectively.

We have a policy of issuing limited partnership units from treasury to satisfy unit option exercises and we expect our treasury unit balance to be sufficient for 2020 based on estimates of unit option exercises for that period.