Net Income Per Common Unit

We calculate basic and diluted net income/(loss) per common unit by dividing net income attributable to PAA (after deducting amounts allocated to the preferred unitholders and participating securities, and for periods prior to the closing of the Simplification Transactions, the 2% general partner’s interest and IDRs) by the basic and diluted weighted-average number of common units outstanding during the period. Participating securities include LTIP awards that have vested DERs, which entitle the grantee to a cash payment equal to the cash distribution paid on our outstanding common units.

Diluted net income/(loss) per common unit is computed based on the weighted-average number of common units plus the effect of potentially dilutive securities outstanding during the period, which include (i) our Series A preferred units, (ii) our LTIP awards and (iii) common units that are issuable to AAP when certain AAP Management Units become earned. When applying the if-converted method prescribed by FASB guidance, the possible conversion of our Series A preferred units was excluded from the calculation of diluted net income/(loss) per common unit for the three and six months ended June 30, 2017 and 2016 as the effect was antidilutive. Our LTIP awards that contemplate the issuance of common units and certain AAP Management Units that contemplate the issuance of common units to AAP when such AAP Management Units become earned are considered dilutive unless (i) they become vested or earned only upon the satisfaction of a performance condition and (ii) that performance condition has yet to be satisfied. LTIP awards that were deemed to be dilutive were reduced by a hypothetical common unit repurchase based on the remaining unamortized fair value, as prescribed by the treasury stock method in guidance issued by the FASB. LTIP awards were excluded from the computation of diluted net loss per common unit for the three and six months ended June 30, 2016 as the effect was antidilutive. As none of the necessary conditions for the remaining AAP Management Units to become earned had been satisfied by June 30, 2017, no common units issuable to AAP were contemplated in the calculation of diluted net income/(loss) per common unit. See Note 16 to our Consolidated Financial Statements included in Part IV of our 2016 Annual Report on Form 10-K for a complete discussion of our LTIP awards including specific discussion regarding DERs.

The following table sets forth the computation of basic and diluted net income/(loss) per common unit (in millions, except per unit data):



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Basic Net Income per Common Unit
Net income attributable to PAA	$	188		$	101		632			302
Distributions to Series A preferred units ⁽¹⁾	(35		)	(33		)	(69		)	(55		)
Distributions to general partner ⁽¹⁾	—			(155		)	—			(310		)
Distributions to participating securities⁽¹⁾	(1		)	(1		)	(1		)	(2		)
Undistributed loss allocated to general partner⁽¹⁾	—			7			—			12
Other	(4		)	—			(7		)	—
Net income/(loss) allocated to common unitholders	$	148		$	(81	)	$	555		$	(53	)

Basic weighted average common units outstanding	725			398			708			398

Basic net income/(loss) per common unit	$	0.21		$	(0.20	)	$	0.78		$	(0.13	)

Diluted Net Income per Common Unit
Net income attributable to PAA	$	188		$	101		$	632		$	302
Distributions to Series A preferred units ⁽¹⁾	(35		)	(33		)	(69		)	(55		)
Distributions to general partner ⁽¹⁾	—			(155		)	—			(310		)
Distributions to participating securities⁽¹⁾	(1		)	(1		)	(1		)	(2		)
Undistributed loss allocated to general partner⁽¹⁾	—			7			—			12
Other	(4		)	—			(7		)	—
Net income/(loss) allocated to common unitholders	$	148		$	(81	)	$	555		$	(53	)

Basic weighted average common units outstanding	725			398			708			398
Effect of dilutive securities:
LTIP units	2			—			2			—
Diluted weighted average common units outstanding	727			398			710			398

Diluted net income/(loss) per common unit	$	0.21		$	(0.20	)	$	0.78		$	(0.13	)

⁽¹⁾

We calculate net income/(loss) allocated to common unitholders 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 (“undistributed loss”), if any, are allocated to the general partner, common unitholders and participating securities in accordance with the contractual terms of our partnership agreement in effect for the period and as further prescribed under the two-class method. The Simplification Transactions, which closed on November 15, 2016, simplified our governance structure and permanently eliminated our IDRs and the economic rights associated with our 2% general partner interest. Therefore, beginning with the distribution pertaining to the fourth quarter of 2016, our general partner is no longer entitled to receive distributions or allocations on such interests.