DCP MIDSTREAM PARTNERS, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2011, 2010 and 2009 — (Continued)
14. Equity-Based Compensation
Total compensation cost for equity-based arrangements was as follows:
Year Ended December 31,
2011 2010 2009
(Millions)
Performance Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4.2 $1.2 $1.2
Phantom Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 0.2 0.4
Restricted Phantom Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 1.4 0.6
Total compensation cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6.6 $2.8 $2.2
On November 28, 2005, the board of directors of our General Partner adopted a long-term incentive plan,
or LTIP, for employees, consultants and directors of our General Partner and its affiliates who perform services
for us. The LTIP provides for the grant of limited partner units, or LPUs, phantom units, unit options and
substitute awards, and, with respect to unit options and phantom units, the grant of dividend equivalent rights,
or DERs. Subject to adjustment for certain events, an aggregate of 850,000 LPUs may be delivered pursuant to
awards under the LTIP. Awards that are canceled or forfeited, or are withheld to satisfy the General Partner’s
tax withholding obligations, are available for delivery pursuant to other awards. The LTIP is administered by
the compensation committee of the General Partner’s board of directors. All awards are subject to cliff vesting,
with the exception of the Phantom Units issued to directors in conjunction with our initial public offering,
which are subject to graded vesting provisions.
Prior to February 18, 2011, substantially all equity-based awards were accounted for as liability awards.
Effective February 18, 2011, the Modification Date, we have the intent and ability to settle certain awards
within our control in units and therefore modified the accounting for these awards. We now classify them as
equity awards based on their re-measured fair value. The fair value was determined based on the closing price
of our common units on the Modification Date. Such modification resulted in a reclassification of $1.9 million
from share-based compensation liability to additional paid-in capital on the Modification Date. Compensation
expense on unvested equity awards as of the Modification Date will be recognized ratably over each remaining
vesting period.
We will continue to account for other awards, which are subject to settlement in cash, as liability awards.
Compensation expense on these awards is recognized ratably over each vesting period, and will be re-measured
each reporting period for all awards outstanding until the units are vested. The fair value of all liability awards
is determined based on the closing price of our common units at each measurement date.
The reclassification of the affected awards does not impact our accounting for dividend equivalent rights
as these instruments will continue to be settled in cash and therefore retain their share-based compensation
liability classification.
Performance Units
— We have awarded phantom LPUs, or Performance Units, pursuant to the LTIP to
certain employees. Performance Units generally vest in their entirety at the end of a three year performance
period. The number of Performance Units that will ultimately vest range, in value from 0% to 200% of the
outstanding Performance Units, depending on the achievement of specified performance targets over three year
performance periods. The final performance payout is determined by the compensation committee of the board
of directors of our General Partner. The DERs are paid in cash at the end of the performance period. Of the
remaining Performance Units outstanding at December 31, 2011, 11,641 units are expected to vest on
December 31, 2012 and 7,406 units are expected to vest on December 31, 2013.
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