Net Income Per Limited Partner Unit

3 Months Ended

Mar. 31, 2020

Note 5—Net Income Per Limited Partner Unit

Net income per limited partner unit applicable to common units is computed by dividing the limited partners’ interest in net income by the weighted-average number of common units outstanding for the period. Prior to August 1, 2019, we had more than one class of participating securities and used the two-class method to calculate net income per unit applicable to the limited partners. The classes of participating securities prior to August 1, 2019, included common units, general partner units and incentive distribution rights (IDRs). Effective August 1, 2019, common units are the only participating securities. For the three months ended March 31, 2020 and 2019, our preferred units are potentially dilutive securities and were dilutive to net income per limited partner unit.

Net income earned by the Partnership is allocated between the classes of participating securities in accordance with our partnership agreement, after giving effect to priority income allocations to the holders of the preferred units. First, earnings are allocated based on actual cash distributions declared to our unitholders. To the extent net income exceeds or is less than cash distributions declared, this difference is allocated based on the unitholders’ respective ownership percentages, after consideration of any priority allocations of earnings. For the diluted net income per limited partner unit calculation, the preferred units are assumed to be converted at the beginning of the period into common limited partner units on a one-for-one basis, and the distribution formula for available cash in our partnership agreement is recalculated, using the original available cash amount increased only for the preferred distributions which would not have been paid after conversion.



	Millions of Dollars
	Three Months Ended March 31
	2020		2019

Net income	$	226	198
Less:
General partner’s distributions declared (including IDRs)*	—		69
Limited partners’ distributions declared on preferred units*	10		10
Limited partners’ distributions declared on common units*	199		105
Distributions less than net income	$	17	14

*Distributions declared are attributable to the indicated periods.



	Limited Partners’ Common Units		Limited Partners’ Preferred Units	Total
Three Months Ended March 31, 2020
Net income (millions):
Distributions declared	$	199	10	209
Distributions less than (more than) net income	17		—	17
Net income (basic)	216		10	226
Dilutive effect of preferred units	10
Net income (diluted)	$	226

Weighted-average units outstanding—basic	228,312,261
Dilutive effect of preferred units	13,819,791
Weighted-average units outstanding—diluted	242,132,052

Net income per limited partner unit—basic (dollars)	$	0.95
Net income per limited partner unit—diluted (dollars)	0.93



	Limited Partners’ Common Units		General Partner (including IDRs)	Limited Partners’ Preferred Units	Total
Three Months Ended March 31, 2019
Net income (millions):
Distributions declared	$	105	69	10	184
Distributions less than net income	14		—	—	14
Net income (basic)	119		69	10	198
Dilutive effect of preferred units*	8
Net income (diluted)	$	127

Weighted-average units outstanding—basic	124,257,933
Dilutive effect of preferred units*	13,819,791
Weighted-average units outstanding—diluted	138,077,724

Net income per limited partner unit—basic (dollars)	$	0.96
Net income per limited partner unit—diluted (dollars)	0.92
*The dilutive effect of preferred units assumes the reallocation of net income to the limited and general partners, including a reallocation associated with IDRs, pursuant to the available cash formula in the partnership agreement.

On April 21, 2020, the Board of Directors of our General Partner declared a quarterly cash distribution of $0.875 per common unit which, excluding distributions to holders of our preferred units, will result in a total distribution of $199 million attributable to the first quarter of 2020. This distribution is payable on May 14, 2020, to unitholders of record as of May 1, 2020.