Net Income Per Limited Partner Unit

6 Months Ended

Jun. 30, 2011

Net Income Per Limited Partner Unit

Net Income Per Limited Partner Unit

7. NET INCOME PER LIMITED PARTNER UNIT

We apply the provisions of FASB ASC 260, Earnings Per Share ("FASB ASC 260"), which require the two-class method in calculating basic and diluted earnings per unit ("EPU"). Net income is allocated to the general partners and limited partners in accordance with their respective partnership percentages, after giving effect to any special income or expense allocations, including incentive distributions to our managing general partner, the holder of the IDR pursuant to our partnership agreement, which are declared and paid following the end of each quarter. Under the quarterly IDR provisions of our partnership agreement, our managing general partner is entitled to receive 15% of the amount we distribute in excess of $0.275 per unit, 25% of the amount we distribute in excess of $0.3125 per unit, and 50% of the amount we distribute in excess of $0.375 per unit. Our partnership agreement contractually limits our distributions to available cash; therefore, undistributed earnings of the ARLP Partnership are not allocated to the IDR holder. In addition, our outstanding awards under our Long-Term Incentive Plan ("LTIP"), Supplemental Executive Retirement Plan ("SERP") and the MGP Amended and Restated Deferred Compensation Plan for Directors ("Deferred Compensation Plan") include rights to nonforfeitable distributions or distribution equivalents and are therefore considered participating securities. As such, we allocate undistributed and distributed earnings to these outstanding awards in our calculation of EPU.

The following is a reconciliation of net income used for calculating basic earnings per unit and the weighted average units used in computing EPU for the three and six months ended June 30, 2011 and 2010, respectively, (in thousands, except per unit data):

Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	98,178		$	85,461		$	193,558		$	160,449
Adjustments:
General partner's priority distributions		(20,658	)		(16,579	)		(40,146	)		(32,439	)
General partners' 2% equity ownership		(1,551	)		(1,378	)		(3,068	)		(2,560	)
Limited partners' interest in Net Income		75,969			67,504			150,344			125,450
Less:
Distributions to participating securities		(491	)		(308	)		(961	)		(608	)
Undistributed earnings attributable to participating securities		(591	)		(384	)		(1,191	)		(674	)
Net income available to limited partners	$	74,887		$	66,812		$	148,192		$	124,168
Weighted average limited partner units outstanding – Basic and Diluted		36,776			36,717			36,762			36,704
Basic and Diluted Net Income per limited partner unit (1)	$	2.04		$	1.82		$	4.03		$	3.38

(1) Diluted EPU gives effect to all dilutive potential common units outstanding during the period using the treasury stock method. Diluted EPU excludes all dilutive potential units calculated under the treasury stock method if their effect is anti-dilutive. For the three and six months ended June 30, 2011, LTIP, SERP and Deferred Compensation Plan units of 392,719 and 400,626, respectively, were considered anti-dilutive. For the three and six months ended June 30, 2010, LTIP units of 210,328 and 206,988, respectively, were considered anti-dilutive.