(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, 2015 was calculated based on the diluted weighted average number of units outstanding of 78,034,156, including 16,119 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, 2015 was calculated based on the diluted weighted average number of units outstanding of 76,657,439, including 16,514 dilutive units attributable to non-vested restricted unit and phantom unit awards. For the three and nine months ended September 30, 2015, 2,309,580 and 2,314,388 non-vested phantom unit and restricted unit awards, respectively, were anti-dilutive and therefore excluded from the calculation of diluted earnings per unit.

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,
	2014		2015		2014		2015

Net income	$	34,290	$	42,648	$	71,977	$	110,097
Less:
Pre-IPO net income attributed to parent		(34,290)		—		(71,977)		—
Pre-Water Acquisition net income attributed to parent		—		(7,841)		—		(40,193)
General partner interest in net income attributable to incentive distribution rights		—		(295)		—		(295)
Limited partner interest in net income	$	—	$	34,512	$	—	$	69,609

Net income allocable to common units - basic and diluted	$	—	$	17,561	$	—	$	35,110
Net income allocable to subordinated units - basic and diluted		—		16,951		—		34,499
Limited partner interest in net income - basic and diluted	$	—	$	34,512	$	—	$	69,609

Weighted average limited partner units outstanding - basic
Common units		—		78,018		—		76,641
Subordinated units		—		75,941		—		75,941

Weighted average limited partner units outstanding - diluted
Common units		—		78,034		—		76,657
Subordinated units		—		75,941		—		75,941

Net income per limited partner unit - basic
Common units	$	—	$	0.23	$	—	$	0.46
Subordinated units	$	—	$	0.22	$	—	$	0.45

Net income per limited partner unit - diluted
Common units	$	—	$	0.23	$	—	$	0.46
Subordinated units	$	—	$	0.22	$	—	$	0.45