Delek Logistics Partners, LPDKL

Delek Logistics Partners, LP Stock Compensation Disclosure

10-KFiled Mar 1, 20192 min read
Equity Based Compensation
The Delek Logistics GP, LLC 2012 Long-Term Incentive Plan (the "LTIP") was adopted by the Delek Logistics GP, LLC board of directors in connection with the completion of the Offering in November 2012. The LTIP provides for officers, directors and employees of our general partner or its affiliates, and any consultants, affiliates of our general partner or other individuals who perform services for us. The LTIP consists of unit options, restricted units, phantom units, unit appreciation rights, distribution equivalent rights, other unit-based awards and unit awards. The LTIP limits the number of common units that may be delivered pursuant to awards under the plan to 612,207 units. The LTIP is administered by the Conflicts Committee of the board of directors of our general partner.
We incurred approximately $0.7 million, $0.7 million and $0.6 million of unit-based compensation expense related to the Partnership during the years ended December 31, 2018, 2017 and 2016, respectively. These amounts are included in general and administrative expenses in the accompanying consolidated statements of income and comprehensive income. The fair value of phantom unit awards under the LTIP is determined based on the closing market price of our common limited partner units on the grant date. The estimated fair value of our phantom units is amortized over the vesting period using the straight line method. Awards vest over one- to five-year service periods, unless such awards are amended in accordance with the LTIP. The total fair value of phantom units vested was $0.7 million, $1.7 million and $1.7 million during the years ended December 31, 2018, 2017 and 2016, respectively.
As of December 31, 2018, there was $0.3 million of total unrecognized compensation cost related to non-vested equity-based compensation arrangements, which is expected to be recognized over a weighted-average period of 0.4 years.
A summary of our unit award activity for the years ended December 31, 2018, 2017 and 2016, is set forth below:
 
 
Number of Phantom Units
 
Weighted-Average Grant Price
Non-vested
December 31, 2015
145,072

 
$
24.76

Granted
 
12,475

 
$
26.05

Vested
 
(69,094
)
 
$
24.66

Forfeited
 
(14,500
)
 
$
22.65

Non-vested
December 31, 2016
73,953

 
$
25.49

Granted
 
10,090

 
$
32.2

Vested
 
(68,079
)
 
$
24.6

Forfeited
 
—

 
$
—

Non-vested
December 31, 2017
15,964

 
$
33.54

Granted
 
19,536

 
$
28.57

Vested
 
(21,818
)
 
$
31.76

Non-vested
December 31, 2018
13,682

 
$
29.29

About Stock Compensation Disclosures

Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.

Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.

Other Available Disclosures

Income TaxesRevenueEarnings Per ShareFair ValuePP&EGoodwill & IntangiblesLeasesSegmentsDebtCommitmentsNew StandardsPay vs Performance