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 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 in 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 years ended December 31, 2016 and 2015, we made incentive distribution right payments of $4.4 million and $1.1 million, respectively, to our General Partner. We made no incentive distribution right payments to our General Partner prior to 2015. Refer to Note 14, Equity, for further information regarding incentive distribution rights.

The holder of the TexNew Mex Units will be 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. The TexNew Mex Unit distributions are preferential to all other unit holder distributions. During the year ended December 31, 2015, we declared distributions to TexNew Mex unitholders in the amount of $0.3 million. We made no distributions in 2016 or prior to 2015. Refer to Note 14, Equity, for further information.

The calculation of net income per unit for the years ended December 31, 2016, 2015 and 2014 is as follows:



	Period Ended December 31,
	2016			2015			2014
	(In thousands, except per unit data)
Net income	$	43,347		$	32,706		$	32,908
Net loss attributable to General Partner (1)	(23,309		)	(29,867		)	(20,084		)
Net income attributable to limited partners	66,656			62,573			52,992
Distributions on TexNew Mex Units (2)	—			(310		)	—
General Partner distributions	(4,447		)	(1,085		)	—
Limited partners' distributions on common units	(47,453		)	(34,436		)	(26,902		)
Limited partners' distributions on subordinated units	(37,182		)	(32,563		)	(26,534		)
Distributions greater than earnings	$	(22,426	)	$	(5,821	)	$	(444	)

General Partners' earnings:
Distributions	$	4,447		$	1,085		$	—
Net loss attributable to General Partner (1)	(23,309		)	(29,867		)	(20,084		)
Total General Partners' loss	$	(18,862	)	$	(28,782	)	$	(20,084	)

Limited partners' earnings on common units:
Distributions	$	47,453		$	34,436		$	26,902
Allocation of distributions greater than earnings	(12,736		)	(2,990		)	(223		)
Total limited partners' earnings on common units	$	34,717		$	31,446		$	26,679

Limited partners' earnings on subordinated units:
Distributions	$	37,182		$	32,563		$	26,534
Allocation of distributions greater than earnings	(9,690		)	(2,831		)	(221		)
Total limited partners' earnings on subordinated units	$	27,492		$	29,732		$	26,313

Weighted average limited partner units outstanding:
Common units - basic	29,979			24,084			23,059
Common units - diluted	29,994			24,099			23,107
Subordinated units - basic and diluted	22,811			22,811			22,811

Net income per limited partner unit:
Common - basic	$	1.16		$	1.31		$	1.16
Common - diluted	1.16			1.30			1.15
Subordinated - basic and diluted	1.21			1.30			1.15


(1)	We apply the two-class method to calculate earnings per unit and allocate the results of operations of WRW, the TexNew Mex Pipeline System and the St. Paul Park Logistics Assets prior to the respective acquisitions entirely to our general partner. The limited partners had no rights to the results of operations before these acquisitions.


(2)	The TexNew Mex Units entitle Western to participate in 80% of the operating results attributable to the TexNew Mex Shared Segment resulting from crude oil throughput on the TexNew Mex pipeline above 13,000 barrels per day. See Note 3, Acquisitions, for further information.