5. Earnings Per Unit

Earnings in excess of distributions are allocated to the limited partners based on their respective ownership interests. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income or loss allocations used in the calculation of earnings per unit.

Diluted earnings per unit includes the effects of potentially dilutive units of our common units that consist of unvested phantom units. These units are non-participating securities due to the forfeitable nature of their associated distribution equivalent rights prior to vesting. We do not consider these units under the two-class method when calculating earnings per unit. Basic and diluted earnings per unit applicable to subordinated limited partners are the same because there are no potentially dilutive subordinated units outstanding.

In addition to the common and subordinated units, we have identified the general partner interest, incentive distribution rights and distributions associated with the TexNew Mex Units as participating securities and use the two-class method when calculating earnings per unit applicable to limited partners that is based on the weighted-average number of common units outstanding during the period. We make incentive distribution payments to our General Partner when our per unit distribution amount exceeds the target distribution. During the three months ended March 31, 2016 and 2015, respectively, we made incentive distribution right payments of $0.8 million and $0.02 million, respectively, to our General Partner. Refer to Note 11, Equity, for further information regarding incentive distribution rights.

The holder of the TexNew Mex Units is entitled to receive a distribution equal to 80% of the excess of TexNew Mex Shared Segment Distributable Cash Flow over the TexNew Mex Base Amount, both as defined in the Second Amended and Restated Agreement of Limited Partnership of WNRL (the “Second A&R Partnership Agreement”). The TexNew Mex Unit distributions are preferential to all other unit holder distributions. During the three months ended March 31, 2016 and 2015, we declared no distributions to TexNew Mex unitholders. Refer to Note 11, Equity, for further information.

The calculation of net income per unit for the three months ended March 31, 2016 and 2015, respectively, is as follows:



	Three Months Ended
	March 31,
	2016			2015
	(In thousands, except per unit data)
Net income	$	14,007		$	13,411
Net loss attributable to General Partner (1)	—			(1,912		)
Net income attributable to limited partners	14,007			15,323
General Partner distributions	(761		)	(16		)
Limited partners' distributions on common units	(9,595		)	(7,974		)
Limited partners' distributions on subordinated units	(8,954		)	(7,585		)
Distributions greater than earnings	$	(5,303	)	$	(252	)

General Partners' earnings:
Distributions	$	761		$	16
Net loss attributable to General Partner (1)	—			(1,912		)
Total General Partners' earnings (loss)	$	761		$	(1,896	)

Limited partners' earnings on common units:
Distributions	$	9,595		$	7,974
Allocation of distributions greater than earnings	(2,743		)	(129		)
Total limited partners' earnings on common units	$	6,852		$	7,845

Limited partners' earnings on subordinated units:
Distributions	$	8,954		$	7,585
Allocation of distributions greater than earnings	(2,560		)	(123		)
Total limited partners' earnings on subordinated units	$	6,394		$	7,462

Weighted-average limited partner units outstanding:
Common units - basic	24,448			23,985
Common units - diluted	24,454			23,996
Subordinated units - basic and diluted	22,811			22,811

Net income per limited partner unit:
Common - basic	$	0.28		$	0.33
Common - diluted	0.28			0.33
Subordinated - basic and diluted	0.28			0.33


(1)	We apply the two-class method to calculate earnings per unit and allocate the results of operations of the TexNew Mex Pipeline System prior to the TexNew Mex Pipeline Acquisition entirely to our general partner. The limited partners had no rights to the results of operations before this acquisition.