Equity Based Compensation | 9 Months Ended |
Sep. 30, 2014 |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' |
Equity Based Compensation | ' |
Equity Based Compensation |
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Enable GP has adopted the Enable Midstream Partners, LP Long Term Incentive Plan for officers, directors and employees of the Partnership, Enable GP or affiliates, including any individual who provides services to the Partnership or Enable GP as a seconded employee, and any consultants or affiliates of Enable GP or other individuals who perform services for the Partnership. |
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The long term incentive plan consists of the following components: phantom units, performance units, appreciations rights, restricted units, option rights, cash incentive awards, distribution equivalent rights or other unit-based awards and unit awards. The purpose of awards under the long term incentive plan is to provide additional incentive compensation to employees providing services to the Partnership, and to align the economic interests of such employees with the interests of unitholders. The long term incentive plan will limit the number of units that may be delivered pursuant to vested awards to 13,100,000 common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units cancelled, forfeited, expired or cash settled will be available for delivery pursuant to other awards. The plan is administered by the board of directors of Enable GP or a designated committee thereof. |
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The following table summarizes the Partnership’s compensation expense for the three and nine months ended September 30, 2014 and 2013 related to performance units, restricted units, and phantom units for the Partnership's employees. |
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| Three Months Ended | | Nine Months Ended | | | | | |
September 30, | September 30, | | | | | |
| 2014 | | 2013 | | 2014 | | 2013 | | | | | |
| (In millions) | | | | | |
Performance units | $ | 1 | | | $ | — | | | $ | 1 | | | $ | — | | | | | | |
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Restricted units | 3 | | | — | | | 8 | | | — | | | | | | |
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Phantom units | 1 | | | — | | | 1 | | | — | | | | | | |
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Total compensation expense | $ | 5 | | | $ | — | | | $ | 10 | | | $ | — | | | | | | |
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Performance Units |
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On June 2, 2014, the board of directors of Enable GP granted 563,963 performance based phantom units (performance units) to certain employees providing services to the Partnership, including executive officers, that cliff vest three years from the grant date. The performance units provide for accelerated vesting if there is a change in control (as defined in the Enable Midstream Partners, LP Long Term Incentive Plan). Each performance unit is subject to forfeiture if the recipient terminates employment with the Partnership prior to the end of the three-year award cycle for any reason other than death, disability or retirement. In the event of death or disability, a participant will receive a payment based on the targeted achievement of the performance goals during the award cycle. In the event of retirement, a participant will receive a pro rated payment based on the actual performance of the performance goals during the award cycle. |
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The payment of performance units is dependent upon the Partnership's total unitholder return ranking relative to a peer group of companies over the period of April 11, 2014 through December 31, 2016 as compared to a target set at the time of the grant by the board of directors of Enable GP. Any performance units that cliff vest three years from the grant date (i.e. the three year award cycle) will be payable in the Partnership's common units. All of these performance units are classified as equity in the Partnership's Condensed Consolidated Balance Sheet. If there is no or only a partial payout for the performance units at the end of the award cycle, the unearned performance units are cancelled. Payout requires approval of the board of directors of Enable GP. |
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The fair value of the performance units was estimated on the grant date using a lattice-based valuation model that factors in information, including the expected dividend yield, expected price volatility, risk-free interest rate and the probable outcome of the market condition, over the expected life of the performance units. Compensation expense for the performance units is a fixed amount determined at the grant date fair value and is recognized over the three-year award cycle regardless of whether performance units are awarded at the end of the award cycle. Distributions are accumulated and paid at vesting, and therefore, are not included in the fair value calculation. Due to the short trading history of the Partnership's common units, expected price volatility is based on the average of the three-year volatility of the peer group companies used to determine the total unitholder return ranking. The risk-free interest rate for the performance unit grants is based on the three-year U.S. Treasury yield curve in effect at the time of the grant. The expected life of the units is based on the non-vested period since inception of the award cycle. There are no post-vesting restrictions related to the Partnership’s performance units. The number of performance units granted based on total unitholder return and the assumptions used to calculate the grant date fair value of the performance units based on total unitholder return are shown in the following table. |
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| 2014 | | | | | | | | | | | | | | | | | |
Number of units granted | 563,963 | | | | | | | | | | | | | | | | | | |
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Fair value of units granted | $ | 26.12 | | | | | | | | | | | | | | | | | | |
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Expected price volatility | 22.2 | % | | | | | | | | | | | | | | | | | |
Risk-free interest rate | 0.83 | % | | | | | | | | | | | | | | | | | |
Expected life of units (in years) | 3 | | | | | | | | | | | | | | | | | | |
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Restricted Units |
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On April 16, 2014 the board of directors of Enable GP granted 375,000 restricted units to the Chief Executive Officer of Enable GP, of which 40% vested on August 1, 2014 and 20% vest on each of February 1, 2015, 2016 and 2017. Additionally, on April 16, 2014, the board of directors of Enable GP granted 150,000 restricted units to the Chief Executive Officer of Enable GP, which vest four years from the grant date. On April 16, 2014, the board of directors of Enable GP granted 137,500 restricted units to the Chief Financial Officer of Enable GP, which vest 45.46% on March 1, 2015 and 54.54% on March 1, 2016. Additionally, on April 16, 2014, the board of directors of Enable GP granted 25,000 restricted units to the Chief Financial Officer of Enable GP, which vest four years from the grant date. Prior to vesting, each share of restricted stock is subject to forfeiture if the recipient ceases to render substantial services to the Partnership for any reason other than death, disability or retirement. During the restriction period these units may not be sold, assigned, transferred or pledged and are subject to a risk of forfeiture. |
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The board of directors of Enable GP has also authorized various grants of time-based restricted units (restricted units) to certain employees providing services to the Partnership that are subject to cliff vesting over various terms, not longer than three years from the grant date. Prior to vesting, each share of restricted stock is subject to forfeiture if the recipient ceases to render substantial services to the Partnership for any reason other than death, disability or retirement. During the restriction period these units may not be sold, assigned, transferred or pledged and are subject to a risk of forfeiture. |
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The fair value of the restricted units was based on the closing market price of the Partnership’s common unit on the grant date. Compensation expense for the restricted units is a fixed amount determined at the grant date fair value and is recognized as services are rendered by employees over a vesting period, as defined in the agreements. Distributions are paid as declared prior to vesting and, therefore, are included in the fair value calculation. After payment, distributions are not subject to forfeiture. The expected life of the restricted units is based on the non-vested period since inception of the award cycle. There are no post-vesting restrictions related to the Partnership's restricted units. The number of restricted units granted related to the Partnership’s employees and the grant date fair value are shown in the following table. |
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| 2014 | | | | | | | | | | | | | | | | | |
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Restricted units granted on April 16, 2014 to the Chief Executive Officer and Chief Financial Officer of Enable GP | 687,500 | | | | | | | | | | | | | | | | | | |
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Fair value of restricted units granted | $ | 22.6 | | | | | | | | | | | | | | | | | | |
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Restricted units granted to the Partnership's employees | 243,616 | | | | | | | | | | | | | | | | | | |
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Fair value of restricted units granted | $24.65 - $25.50 | | | | | | | | | | | | | | | | | | |
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Phantom Units |
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On April 21, 2014, the board of directors of Enable GP granted 100,000 time-based phantom units (phantom units) to certain employees providing services to the Partnership, including executive officers, that vest on the first anniversary of the date of grant. Prior to vesting, each share of restricted units is subject to forfeiture if the recipient ceases to render substantial services to the Partnership for any reason other than death, disability or retirement. During the restriction period these units may not be sold, assigned, transferred or pledged and are subject to a risk of forfeiture. |
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The fair value of the phantom units was based on the closing market price of the Partnership’s common unit on the grant date. Compensation expense for the phantom unit is a fixed amount determined at the grant date fair value and is recognized as services are rendered by employees over a one-year vesting period. Distributions are accumulated and paid at vesting and, therefore, are not included in the fair value calculation. The expected life of the phantom unit is based on the non-vested period since inception of the one-year award cycle. There are no post-vesting restrictions related to the Partnership's phantom unit. The number of phantom units granted related to the Partnership’s employees and the grant date fair value are shown in the following table. |
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| 2014 | | | | | | | | | | | | | | | | | |
Phantom units granted to the Partnership's employees | 100,000 | | | | | | | | | | | | | | | | | | |
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Fair value of phantom units granted | $ | 23.16 | | | | | | | | | | | | | | | | | | |
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Units Outstanding |
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A summary of the activity for the Partnership's performance units, restricted units, and phantom units applicable to the Partnership’s employees at September 30, 2014 and changes in 2014 are shown in the following table. |
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| Performance Units | | Restricted Units | | Phantom Units |
| Number | | Aggregate | | Number | | Aggregate | | Number | | Aggregate |
of Units | Intrinsic | of Units | Intrinsic | of Units | Intrinsic |
| Value | | Value | | Value |
| (In millions, except unit data) |
Units Outstanding at December 31, 2013 | — | | | | | — | | | | | — | | | |
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Granted(1) | 563,963 | | | | | 931,116 | | | | | 100,000 | | | |
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Vested | (1,545 | ) | | | | (150,515 | ) | | | | (500 | ) | | | |
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Forfeited | (7,034 | ) | | | | (2,901 | ) | | | | (6,000 | ) | | |
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Units Outstanding at September 30, 2014 | 555,384 | | | $ | 13 | | | 777,700 | | | $ | 19 | | | 93,500 | | | $ | 2 | |
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Units Fully Vested at September 30, 2014 | 1,545 | | | $ | — | | | 150,515 | | | | | 500 | | | $ | — | |
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-1 | For performance units, this represents the target number of performance units granted. The actual number of performance units earned, if any, is dependent upon performance and may range from 0 percent to 200 percent of the target. | | | | | | | | | | | | | | | | | | | |
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Unrecognized Compensation Cost |
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A summary of the Partnership's unrecognized compensation cost for its non-vested performance units, restricted units, and phantom units, and the weighted-average periods over which the compensation cost is expected to be recognized are shown in the following table. |
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| September 30, 2014 | | | | | | | | | | | | | | | |
| Unrecognized Compensation Cost | | Weighted Average to be Recognized | | | | | | | | | | | | | | | |
(In millions) | (In years) | | | | | | | | | | | | | | | |
Performance Units | $ | 13 | | | 2.89 | | | | | | | | | | | | | | | |
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Restricted Units | 14 | | | 1.8 | | | | | | | | | | | | | | | |
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Phantom Units | 1 | | | 0.58 | | | | | | | | | | | | | | | |
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Total | $ | 28 | | | | | | | | | | | | | | | | | | |
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As of September 30, 2014, there were 11,519,555 units available for issuance under the long term incentive plan. |