Net Income Per Unit

We use the two-class method when calculating the net income per unit applicable to limited partners because we have more than one participating security. The two-class method is based on the weighted-average number of common units outstanding during the period. Basic net income per unit applicable to limited partners (including subordinated unitholders) is computed by dividing limited partners’ interest in net income, after deducting our general partner’s 2% interest and incentive distributions, if any, by the weighted-average number of outstanding common and subordinated units. Our net income is allocated to our general partner and limited partners in accordance with their respective partnership percentages after giving effect to priority income allocations for incentive distributions, if any, to our general partner, which is the holder of the incentive distribution rights pursuant to our partnership agreement, which are declared and paid following the close of each quarter.

Earnings in excess of distributions are allocated to our general partner and 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 net income per unit. The basic weighted-average number of units outstanding for the three months ended March 31, 2014 increased to 24,644,649 units from 24,514,527 units in the fourth quarter 2013.

Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units. At present, the only potentially dilutive units outstanding consist of unvested phantom unit awards under the Delek Logistics GP, LLC 2012 Long-Term Incentive Plan (the "LTIP"). Basic and diluted net income per unit applicable to subordinated limited partners are the same because there are no potentially dilutive subordinated units outstanding.

Our distributions are declared subsequent to quarter end. Therefore, the table represents total cash distributions applicable to the period in which the distributions are earned. The calculation of net income per unit is as follows (dollars in thousands, except per unit amounts):



	Three Months Ended
	March 31,
	2014		2013
Net Income	$	14,672	$	12,204
Less: General partner's distribution	209		189
Less: Limited partners' distribution	5,165		4,620
Less: Subordinated partner's distribution	5,100		4,620
Earnings in excess of distributions	$	4,198	$	2,775

General partner's earnings:
Distributions	$	209	$	189
Allocation of earnings in excess of distributions	84		55
Total general partner's earnings	$	293	$	244

Limited partners' earnings on common units:
Distributions	$	5,165	$	4,620
Allocation of earnings in excess of distributions	2,070		1,360
Total limited partners' earnings on common units	$	7,235	$	5,980

Limited partners' earnings on subordinated units:
Distributions	$	5,100	$	4,620
Allocation of earnings in excess of distributions	2,044		1,360
Total limited partner's earnings on subordinated units	$	7,144	$	5,980

Weighted average limited partner units outstanding:
Common units - (basic)	12,152,498		11,999,258
Common units - (diluted)	12,281,344		12,092,922
Subordinated units - Delek (basic and diluted)	11,999,258		11,999,258

Net income per limited partner unit:
Common - (basic)	$	0.60	$	0.50
Common - (diluted)	$	0.59	$	0.50
Subordinated - (basic and diluted)	$	0.60	$	0.50