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 class of securities. Our participating securities consist of common units, subordinated units, general partner units and incentive distribution rights. 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 distribution rights, 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 distribution rights, 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 six months ended June 30, 2014 increased to 24,651,912 units from 24,644,649 units in the first quarter of 2014.

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 below 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				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Net income attributable to partners	$	21,754	$	11,756	$	36,426	$	23,960
Less: General partner's distribution (including IDRs) ⁽¹⁾	424		193		633		382
Less: Limited partners' distribution	5,787		4,755		10,952		9,375
Less: Subordinated partner's distribution	5,699		4,740		10,799		9,360
Earnings in excess of distributions	$	9,844	$	2,068	$	14,042	$	4,843

General partner's earnings:
Distributions (including IDRs) ⁽¹⁾	$	424	$	193	$	633	$	382
Allocation of earnings in excess of distributions	196		41		281		96
Total general partner's earnings	$	620	$	234	$	914	$	478

Limited partners' earnings on common units:
Distributions	$	5,787	$	4,755	$	10,952	$	9,375
Allocation of earnings in excess of distributions	4,861		1,015		6,930		2,375
Total limited partners' earnings on common units	$	10,648	$	5,770	$	17,882	$	11,750

Limited partners' earnings on subordinated units:
Distributions	$	5,699	$	4,740	$	10,799	$	9,360
Allocation of earnings in excess of distributions	4,787		1,012		6,831		2,372
Total limited partner's earnings on subordinated units	$	10,486	$	5,752	$	17,630	$	11,732

Weighted average limited partner units outstanding:
Common units - (basic)	12,159,732		12,006,843		12,156,135		12,003,071
Common units - (diluted)	12,291,273		12,159,084		12,281,598		12,128,764
Subordinated units - Delek (basic and diluted)	11,999,258		11,999,258		11,999,258		11,999,258

Net income per limited partner unit:
Common - (basic)	$	0.88	$	0.48	$	1.47	$	0.98
Common - (diluted)	$	0.87	$	0.47	$	1.46	$	0.97
Subordinated - (basic and diluted)	$	0.87	$	0.48	$	1.47	$	0.98

⁽¹⁾General partner's distributions (including IDRs) consist of the 2% general partner interest and IDRs, which represent the right of the general partner to receive increasing percentages, up to 50%, of quarterly distributions of available cash from operating surplus in excess of 0.43125 per unit per quarter. See Note 7 for further discussion related to IDRs.