Net Income Per Limited Partner Unit

Net income per unit applicable to the limited partners is computed using the two-class method, because we have more than one class of participating securities. The classes of participating securities as of September 30, 2016, included common units, general partner units and incentive distribution rights (IDRs). To the extent net income attributable to the partnership exceeds or is less than cash distributions, this difference is allocated based on the unitholders’ respective ownership percentages, after consideration of any priority allocations of earnings.

When our financial statements are retrospectively adjusted after a dropdown transaction, the earnings of the acquired business or asset, prior to the closing of the transaction, are allocated entirely to our general partner and presented as net income (loss) attributable to predecessors as shown below. The earnings per unit of our limited partners prior to the close of the transaction do not change as a result of the dropdown. After the closing of a dropdown transaction, the earnings of the acquired business are allocated in accordance with our partnership agreement as previously described.

For purposes of applying the two-class method including the allocation of cash distributions in excess of earnings, net income per limited partner unit is computed as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	(In thousands)
Net income attributable to Holly Energy Partners	$	34,785		$	34,266		$	116,663		$	96,040
Net loss attributable to predecessors	—			219			—			649
Net Income attributable to partnership	34,785			34,485			116,663			96,689
Less: General partner’s distribution declared (including IDRs)	(15,888		)	(11,248		)	(41,424		)	(32,130		)
Limited partner’s distribution declared on common units	(37,354		)	(32,554		)	(105,657		)	(96,051		)
Distributions in excess of net income attributable to partnership	$	(18,457	)	$	(9,317	)	$	(30,418	)	$	(31,492	)



	General Partner (including IDRs)			Limited Partners’ Common Units			Total
	(In thousands, except per unit data)
Three Months Ended September 30, 2016
Net income attributable to partnership:
Distributions declared	$	15,888		$	37,354		$	53,242
Distributions in excess of net income attributable to partnership	(369		)	(18,088		)	(18,457		)
Net income attributable to partnership	$	15,519		$	19,266		$	34,785
Weighted average limited partners' units outstanding				59,223
Limited partners' per unit interest in earnings - basic and diluted				$	0.33

Three Months Ended September 30, 2015
Net income attributable to partnership:
Distributions declared	$	11,248		$	32,554		$	43,802
Distributions in excess of net income attributable to partnership	(186		)	(9,131		)	(9,317		)
Net income attributable to partnership	$	11,062		$	23,423		$	34,485
Weighted average limited partners' units outstanding				58,657
Limited partners' per unit interest in earnings - basic and diluted				$	0.40



	General Partner (including IDRs)			Limited Partners’ Common Units			Total
	(In thousands, except per unit data)
Nine Months Ended September 30, 2016
Net income attributable to partnership:
Distributions declared	$	41,424		$	105,657		$	147,081
Distributions in excess of net income attributable to partnership	(608		)	(29,810		)	(30,418		)
Net income attributable to partnership	$	40,816		$	75,847		$	116,663
Weighted average limited partners' units outstanding				58,895
Limited partners' per unit interest in earnings - basic and diluted				$	1.29

Nine Months Ended September 30, 2015
Net income attributable to partnership:
Distributions declared	$	32,130		$	96,051		$	128,181
Distributions in excess of net income attributable to partnership	(630		)	(30,862		)	(31,492		)
Net income attributable to partnership	$	31,500		$	65,189		$	96,689
Weighted average limited partners' units outstanding				58,657
Limited partners' per unit interest in earnings - basic and diluted				$	1.11