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Net Income Per Limited Partner Unit
 9 Months Ended
Sep. 30, 2016
Net Income Per Limited Partner Unit  
Net Income Per Limited Partner Unit

(7)Net Income Per Limited Partner Unit

The Partnership’s net income is attributed to the general partner and limited partners, including subordinated unitholders, in accordance with their respective ownership percentages, and when applicable, giving effect to incentive distributions paid to the general partner. Basic and diluted net income per limited partner unit is calculated by dividing limited partners’ interest in net income, less general partner incentive distributions, by the weighted average number of outstanding limited partner units during the period.

We compute earnings per unit using the two-class method for master limited partnerships. Under the two-class method, earnings per unit is calculated as if all of the earnings for the period were distributed under the terms of the partnership agreement, regardless of whether the general partner has discretion over the amount of distributions to be made in any particular period, whether those earnings would actually be distributed during a particular period from an economic or practical perspective, or whether the general partner has other legal or contractual limitations on its ability to pay distributions that would prevent it from distributing all of the earnings for a particular period.

We calculate net income available to limited partners based on the distributions pertaining to the current period’s net income. After adjusting for the appropriate period’s distributions, the remaining undistributed earnings or excess distributions over earnings, if any, are attributed to the general partner and limited partners in accordance with the contractual terms of the partnership agreement under the two-class method.

Basic earnings per unit is computed by dividing net earnings attributable to unitholders by the weighted average number of units outstanding during each period. Diluted net income per limited partner unit reflects the potential dilution that could occur if agreements to issue common units, such as awards under long-term incentive plans, were exercised, settled or converted into common units. When it is determined that potential common units resulting from an award should be included in the diluted net income per limited partner unit calculation, the impact is reflected by applying the treasury stock method. Earnings per common unit assuming dilution for the three months ended September 30, 2016 was calculated based on the diluted weighted average number of units outstanding of 100,824,582, including 370,594 dilutive units attributable to non-vested restricted unit and phantom unit awards. Earnings per common unit assuming dilution for the nine months ended September 30, 2016 was calculated based on the diluted weighted average number of units outstanding of 100,364,955, including 62,647 dilutive units attributable to non-vested restricted unit and phantom unit awards. For the three and nine months ended September 30, 2016, zero and 1,562,669 non-vested phantom unit and restricted unit awards, respectively, were anti-dilutive.

The Partnership’s calculation of net income per common and subordinated unit for the periods indicated is as follows (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Three months ended September 30,

 

Nine months ended September 30,

 

    

2015

    

2016

    

2015

    

2016

  

 

 

 

 

 

 

 

 

 

 

 

 

Net income

  

$
42,648

  

$
70,524

  

$
110,097

  

$
163,352

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Water Acquisition net income attributed to parent

 

 
(7,841)

 

 

 —

 

 
(40,193)

 

 

 —

General partner interest in net income attributable to incentive distribution rights

 

 
(295)

 

 
(4,807)

 

 
(295)

 

 
(9,387)

Limited partner interest in net income

  

$
34,512

 

$
65,717

  

$
69,609

 

$
153,965

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income allocable to common units - basic and diluted

 

$
17,561

 

$
37,409

 

$
35,110

 

$
87,615

Net income allocable to subordinated units - basic and diluted

 

 
16,951

 

 
28,308

 

 
34,499

 

 
66,350

Limited partner interest in net income - basic and diluted

 

$
34,512

 

$
65,717

 

$
69,609

 

$
153,965

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - basic

 

 

 

 

 

 

 

 

 

 

 

 

Common units

 

$
0.23

 

$
0.37

 

$
0.46

 

$
0.87

Subordinated units

 

$
0.22

 

$
0.37

 

$
0.45

 

$
0.87

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per limited partner unit - diluted

 

 

 

 

 

 

 

 

 

 

 

 

Common units

 

$
0.23

 

$
0.37

 

$
0.46

 

$
0.87

Subordinated units

 

$
0.22

 

$
0.37

 

$
0.45

 

$
0.87

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - basic

 

 

 

 

 

 

 

 

 

 

 

 

Common units

 

 
78,018

 

 
100,454

 

 
76,641

 

 
100,302

Subordinated units

 

 
75,941

 

 
75,941

 

 
75,941

 

 
75,941

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units  outstanding - diluted

 

 

 

 

 

 

 

 

 

 

 

 

Common units

 

 
78,034

 

 
100,825

 

 
76,657

 

 
100,365

Subordinated units

 

 
75,941

 

 
75,941

 

 
75,941

 

 
75,941