Equity Plans | Note 9—Equity Plans 2013 Long-Term Incentive Plan The Board approved and adopted the Arc Logistics Long-Term Incentive Plan (as amended from time to time, the “2013 Plan”) in November 2013. In July 2014, the Board formed a Compensation Committee (the “Compensation Committee”) to administer the 2013 Plan. Effective as of March 2015, the Board dissolved the Compensation Committee and, on and after such date, the Board serves as the administrative committee (the “Committee”) under the 2013 Plan. The Board amended and restated the 2013 Plan in March 2016. Employees (including officers), consultants and directors of the General Partner, the Partnership and its affiliates (the “Partnership Entities”) are eligible to receive awards under the 2013 Plan. The 2013 Plan authorizes up to an aggregate of 2.0 million common units to be available for awards under the 2013 Plan, subject to adjustment as provided in the 2013 Plan. Awards available for grant under the 2013 Plan include, but are not limited to, restricted units, phantom units, unit options and unit appreciation rights, but only phantom units have been granted under the 2013 Plan to date. Distribution equivalent rights (“DER”) are also available for grant under the 2013 Plan, either alone or in tandem with other specific awards, which entitle the recipient to receive an amount equal to distributions paid on an outstanding common unit. Upon the occurrence of a “change of control” or an award recipient’s termination of service due to death or “disability” (each quoted term, as defined in the 2013 Plan), any outstanding unvested award will vest in full, except that, with respect to awards issued on or after March 9, 2016, the Committee may condition the automatic vesting of any such awards then outstanding upon a separation of employment for certain reasons (as established in an individual award agreement) following the occurrence of a “change of control”. In July 2014, the Compensation Committee authorized the grant of an aggregate of 939,500 phantom units pursuant to the 2013 Plan to certain employees, consultants and non-employee directors of the Partnership Entities. Awards of phantom units are settled in common units, except that an award of less than 1,000 phantom units is settled in cash. If a phantom unit award recipient experiences a termination of service with the Partnership Entities other than (i) as a result of death or “disability” or (ii) due to certain circumstances in connection with a “change of control,” the Committee, at its sole discretion, may decide to vest all or any portion of the recipient’s unvested phantom units as of the date of such termination or may allow the unvested phantom units to remain outstanding and vest pursuant to the vesting schedule set forth in the applicable award agreement. Of the July 2014 awards, a total of 100,000 phantom units were granted to certain non-employee directors of the Board and are classified as equity awards for accounting purposes (the “Director Grants”). Each Director Grant will be settled in common units and includes a DER. The Director Grants have an aggregate grant date fair value of $2.5 million and vest in equal annual installments over a three-year period starting from the date of grant. For the three and six months ended June 30, 2017, the Partnership recorded approximately $0.2 million and $0.4 million, respectively, of unit-based compensation expense related to the Director Grants. For the three and six months ended June 30, 2016, the Partnership recorded $0.2 million and $0.4 million, respectively, of unit-based compensation related to the Director Grants. As of June 30, 2017, the unrecognized unit-based compensation expense for the Director Grants is less than $0.1 million, which will be recognized ratably over the remaining term of the awards. Through June 30, 2017, two-thirds of the phantom units granted under the Director Grants have vested. Of the July 2014 awards, a total of 832,000 phantom units were granted to employees and certain consultants of the Partnership Entities and are classified as equity awards for accounting purposes (the “Employee Equity Grants”). Each Employee Equity Grant will be settled in common units and includes a DER. The Employee Equity Grants have an aggregate grant date fair value of $21.2 million and vest as follows: (i) 25% of the Employee Equity Grants vested on the day after the end of the Subordination Period (as defined in the partnership agreement); and (ii) the three remaining 25% installments of the Employee Equity Grants will vest based on the date on which the Partnership has paid, for three consecutive quarters, distributions to its common unitholders at or above a stated level, with (A) 25% of the award vesting after distributions are paid at or above $0.4457 per unit for the required period, (B) 25% of the award vesting after distributions are paid at or above $0.4845 per unit for the required period, and (C) the last 25% of the award vesting after distributions are paid at or above $0.5814 per unit for the required period. To the extent not previously vested, the Employee Equity Grants expire on the fifth anniversary of the date of grant, provided that the expiration date can be extended to the eighth anniversary of the date of grant or longer upon the satisfaction of certain conditions specified in the award agreement. For the three and six months ended June 30, 2017, the Partnership recorded $0.1 million and $0.3 million, respectively, of unit-based compensation expense related to the Employee Equity Grants. For the three and six months June 30, 2016, the Partnership recorded $0.8 million and $1.5 million, respectively, of unit-based compensation expense related to the Employee Equity Grants. As of June 30, 2017, the unrecognized unit-based compensation expense for the Employee Equity Grants was approximately $10.9 million, which may be recognized variably over the remaining term of the awards based on the probability of the achievement of the performance vesting requirements. Through June 30, 2017, one-fourth of the phantom units granted under the Employee Equity Grants have vested. Of the July 2014 awards, a total of 7,500 phantom units were granted to certain employees of the Partnership Entities and are classified as liability awards for accounting purposes (the “Employee Liability Grants”). Each Employee Liability Grant will be settled in cash (as such award consists of less than 1,000 phantom units) and includes a DER. The Employee Liability Grants have an aggregate grant date fair value of $0.2 million and have the same term and vesting requirements as the Employee Equity Grants described in the preceding paragraph. For the three and six months ended June 30, 2017 and 2016, the Partnership recorded less than $0.1 million of unit-based compensation expense during each period, with respect to the Employee Liability Grants. As of June 30, 2017, the unrecognized unit based compensation expense for the Employee Liability Grants was approximately less than $0.1 million, which may be recognized variably over the remaining term of the awards based on the probability of the achievement of the performance vesting requirements and is subject to remeasurement each reporting period until the awards settle. Through June 30, 2017, one-fourth of the phantom units granted under the Employee Liability Grants have vested. In March 2015, the Board authorized the grant of an aggregate of 45,668 phantom units pursuant to the 2013 Plan to certain employees, consultants and non-employee directors of the Partnership Entities (“2015 Equity Grants”). Each 2015 Equity Grant will be settled in common units and includes a DER. The 2015 Equity Grants are classified as equity awards for accounting purposes and have an aggregate grant date fair value of $0.9 million and vest in equal annual installments over a three-year period starting from the date of grant. For the three and six months ended June 30, 2017, the Partnership recorded $0.1 million and $0.2 million, respectively, of unit-based compensation expense with respect to the 2015 Equity Grants. For the three and six months ended June 30, 2016, the Partnership recorded $0.1 million and $0.2 million, respectively, of unit-based compensation expense related to the 2015 Equity Grants. As of June 30, 2017, the unrecognized unit-based compensation expense for the 2015 Equity Grants is approximately $0.2 million, which will be recognized ratably over the remaining term of the awards. Through June 30, 2017, two-thirds of the phantom units granted under the 2015 Equity Grants have vested. During the year ended December 31, 2015, the Board and Chief Executive Officer authorized the grant of an aggregate of 57,100 phantom units (in addition to the 45,668 phantom units granted in March 2015) pursuant to the 2013 Plan to certain employees of the Partnership Entities (“2015 Performance Grants”). Each 2015 Performance Grant will be settled in common units and includes a DER. The 2015 Performance Grants are classified as equity awards for accounting purposes and have an aggregate grant date fair value of $1.0 million and have the same term and vesting requirements as the Employee Equity Grants described above. For the three and six months ended June 30, 2017, the Partnership recorded less than $0.1 million of unit-based compensation expense during each period with respect to the 2015 Performance Grants. For the three and six months ended June 30, 2016, the Partnership recorded $0.1 million of unit-based compensation expense during each period, with respect to the 2015 Performance Grants. As of June 30, 2017, the unrecognized unit-based compensation expense for the 2015 Performance Grants is approximately $0.6 million, which may be recognized variably over the remaining term of the awards based on the probability of the achievement of the performance vesting requirements. Through June 30, 2017, one-fourth of the phantom units granted under the 2015 Performance Grants have vested. During the year ended December 31, 2016, the Board authorized the grant of an aggregate of 94,000 phantom units pursuant to the 2013 Plan to certain employees and consultants of the Partnership Entities (“2016 Equity Grants”). Each 2016 Equity Grant will be settled in common units and includes a DER. The 2016 Equity Grants are classified as equity awards for accounting purposes and have an aggregate grant date fair value of $1.1 million and vest in three equal annual installments over a three-year period starting from the date of grant. For the three and six months ended June 30, 2017, the Partnership recorded $0.1 million and $0.2 million, respectively, of unit-based compensation expense with respect to the 2016 Equity Grants. For the three and six months ended June 30, 2016, the Partnership recorded $0.1 million of unit-based compensation during each period, with respect to the 2016 Equity Grants. As of June 30, 2017, the unrecognized unit-based compensation expense for the 2016 Equity Grants is approximately $0.6 million, which will be recognized ratably over the remaining term of the awards. Through June 30, 2017, one-third of the phantom units granted under the 2016 Equity Grants have vested. During the six months ended June 30, 2017, the Board authorized the grant of an aggregate of 127,561 phantom units pursuant to the 2013 Plan to certain employees and consultants of the Partnership Entities (“2017 Equity Grants”). Each 2017 Equity Grant will be settled in common units and includes a DER. The 2017 Equity Grants are classified as equity awards for accounting purposes and have an aggregate grant date fair value of $1.8 million, 109,111 of the 2017 Equity Grants vest in three equal annual installments over a three-year period starting from the date of grant, 16,450 of the 2017 Equity Grants vested immediately on the date of grant, and 2,000 of the 2017 Equity Grants had one-third of the phantom units vest on the date of grant while the remaining two-thirds will vest in two equal annual installments over a two-year period starting from the date of grant. For the three and six months ended June 30, 2017, the Partnership recorded $0.1 million and $0.4 million, respectively, of unit based compensation expense with respect to the 2017 Equity Grants. As of June 30, 2017, the unrecognized unit-based compensation expense for the 2017 Equity Grants is approximately $1.4 million, which will be recognized ratably over the remaining term of the awards. During the six months ended June 30, 2017, the Board authorized the grant of an aggregate of 26,250 phantom units pursuant to the 2013 Plan to an employee of an affiliate of the Partnership Entities (“2017 Performance Grant”). The 2017 Performance Grant will be settled in common units and includes a DER. The 2017 Performance Grant is classified as an equity award for accounting purposes, has an aggregate grant date fair value of $0.4 million and will vest in three equal installments based on the date on which the Partnership has paid, for three consecutive quarters, distributions to its common unitholders at or above a stated level, with (A) one-third of the award vesting after distributions are paid at or above $0.4457 per unit for the required period, (B) one-third of the award vesting after distributions are paid at or above $0.4845 per unit for the required period, and (C) the last one-third of the award vesting after distributions are paid at or above $0.5814 per unit for the required period. To the extent not previously vested, the 2017 Performance Grant expires on the fifth anniversary of the date of grant, provided that the expiration date can be extended to the eighth anniversary of the date of grant or longer upon the satisfaction of certain conditions specified in the award agreement. For the three and six months ended June 30, 2017, the Partnership recorded less than $0.1 million of unit-based compensation expense during each period with respect to the 2017 Performance Grant. As of June 30, 2017, the unrecognized unit-based compensation expense for the 2017 Performance Grant is approximately $0.3 million which may be recognized variably over the remaining term of the award based on the probability of the achievement of the performance vesting requirements. During the six months ended June 30, 2017, the Board authorized the grant of an aggregate of 10,475 phantom units pursuant to the 2013 Plan to employees of the Partnership Entities (“2017 Employee Liability Grants”). Each 2017 Employee Liability Grant will be settled in cash (as such award consists of less than 1,000 phantom units) and includes a DER. The 2017 Employee Liability Grants are classified as liability awards for accounting purposes, have an aggregate grant date fair value of $0.1 million and will vest in three equal installments over a three-year period starting from the date of grant. For the three and six months ended June 30, 2017, the Partnership recorded less than $0.1 million of unit-based compensation expense during each period, with respect to the 2017 Employee Liability Grants. As of June 30, 2017, the unrecognized unit-based compensation expense for the 2017 Employee Liability Grants is approximately $0.1 million, which will be recognized ratably over the remaining term of the awards. Subject to applicable earning criteria, the DER included in each phantom unit award described above entitles the award recipient to a cash payment (or, if applicable, payment of other property) equal to the cash distribution (or, if applicable, distribution of other property) paid on an outstanding common unit to unitholders generally based on the number of common units related to the portion of the award recipient’s phantom units that have not vested and been settled as of the record date for such distribution. Cash distributions paid during the vesting period on phantom units that are classified as equity awards for accounting purposes are reflected initially as a reduction of partners’ capital. Cash distributions paid on such equity awards that are not initially expected to vest or ultimately do not vest are classified as compensation expense. As the probability of vesting changes, these initial categorizations could change. Cash distributions paid during the vesting period on phantom units that are classified as liability awards for accounting purposes are reflected as compensation expense and included in the “Selling, general and administrative” line item in the accompanying unaudited condensed consolidated statements of operations and comprehensive income. During the three and six months ended June 30, 2017, the Partnership paid approximately $0.4 million and $0.8 million, respectively, in DERs to phantom unit-holders. For the three and six months ended June 30, 2017, $0.2 million and $0.4 million, respectively, was reflected as a reduction of partners’ capital, and the other $0.2 million and $0.4 million, respectively, was reflected as compensation expense and included in the “Selling, general and administrative” line item in the accompanying unaudited condensed consolidated statements of operations and comprehensive income. For the three and six months ended June 30, 2016, the Partnership paid approximately $0.5 million and $0.9 million, respectively, in DERs to phantom unit-holders. For the three months and six months ended June 30, 2016, $0.3 million and $0.5 million, respectively, was reflected as a reduction of partners’ capital, and the other $0.2 million and $0.4 million, respectively, was reflected as compensation expense and included in the “Selling, general and administrative” line item in the accompanying unaudited condensed consolidated statements of operations and comprehensive income. The total compensation expense related to the 2013 Plan for the three and six months ended June 30, 2017 was $0.5 million and $1.4 million, respectively, which was included in the “Selling, general and administrative” line item in the accompanying unaudited condensed consolidated statements of operations and comprehensive income included in the “Selling, general and administrative” line item in the accompanying unaudited condensed consolidated statements of operations and comprehensive income The following table presents phantom units granted pursuant to the 2013 Plan: Equity Awards Liability Awards Six Months Ended Six Months Ended June 30, 2017 June 30, 2017 Number Weighted Avg. Number Weighted Avg. of Phantom Grant Date of Phantom Grant Date Fair Value at Units Fair Value Units Fair Value 6/30/2017 Balance at December 31, 2016 804,818 $ 23.29 4,125 $ 25.46 $ 15.19 Granted 153,811 $ 14.30 10,475 $ 14.01 $ - Vested (56,961 ) $ 13.80 (500 ) $ 14.01 $ - Forfeited (6,667 ) $ 25.46 (775 ) $ 19.55 $ - Balance at June 30, 2017 895,001 $ 22.33 13,325 $ 17.23 $ 15.19 |