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 IDRs. 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 IDRs, 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 IDRs, which are held by our general partner pursuant to our Partnership Agreement, which are 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.

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 units. Basic and diluted net income per unit applicable to subordinated limited partners are the same because there are no potentially dilutive subordinated units outstanding.

Following the February 12, 2016 payment of the cash distribution attributable to the fourth quarter of 2015 and confirmation by the board of directors of our general partner (based on the recommendation of the Conflicts Committee) on February 25, 2016 that the requirements under the Partnership Agreement for the conversion of all subordinated units into common units were satisfied, the subordination period for such subordinated units ended. As a result, in the first quarter of 2016, each of the Partnership's 11,999,258 outstanding subordinated units converted into common units and began participating pro rata with the other common units in distributions of available cash. The conversion did not impact the amount of the cash distribution paid or the total number of the Partnership's outstanding units representing limited partner interests. The Partnership's net income was allocated to the general partner and the limited partners, including the holders of the subordinated units through February 24, 2016, in accordance with our Partnership Agreement.

Our distributions earned with respect to a given period 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 expected date of distribution for the distributions earned during the period ended September 30, 2016 is November 14, 2016. The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts):



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2016			2015		2016			2015
Net income attributable to partners	$	13,151		$	18,602	$	47,492		$	51,553
Less: General partner's distribution (including IDRs) ⁽¹⁾	3,382			1,314		8,443			3,212
Less: Limited partners' distribution	15,920			6,983		41,615			20,196
Less: Subordinated partner's distribution	—			6,839		4,424			19,798
(Distributions) earnings excess	$	(6,151	)	$	3,466	$	(6,990	)	$	8,347

General partner's earnings:
Distributions (including IDRs) ⁽¹⁾	$	3,382		$	1,314	$	8,443		$	3,212
Allocation of (distributions) earnings excess	(123		)	69		(140		)	167
Total general partner's earnings	$	3,259		$	1,383	$	8,303		$	3,379

Limited partners' earnings on common units:
Distributions	$	15,920		$	6,983	$	41,615		$	20,196
Allocation of (distributions) earnings excess	(6,028		)	1,716		(6,368		)	4,131
Total limited partners' earnings on common units	$	9,892		$	8,699	$	35,247		$	24,327

Limited partners' earnings on subordinated units:
Distributions	$	—		$	6,839	$	4,424		$	19,798
Allocation of (distributions) earnings excess	—			1,681		(482		)	4,049
Total limited partners' earnings on subordinated units	$	—		$	8,520	$	3,942		$	23,847

Weighted average limited partner units outstanding ⁽³⁾:
Common units - (basic)	24,303,740			12,250,847		21,878,935			12,230,560
Common units - (diluted)	24,380,334			12,369,777		21,962,733			12,362,340
Subordinated units - Delek (basic and diluted)⁽²⁾	—			11,999,258		2,408,610			11,999,258

Net income per limited partner unit ⁽³⁾:
Common units - (basic)	$	0.41		$	0.71	$	1.61		$	1.99
Common units - (diluted)	$	0.41		$	0.70	$	1.60		$	1.97
Subordinated units - Delek (basic and diluted)	$	—		$	0.71	$	1.64		$	1.99

⁽¹⁾General partner distributions (including IDRs) consist of the payment with respect to the 2% general partner interest and payment on the IDRs, which represent the right of the general partner to receive increasing percentages of quarterly distributions of available cash from operating surplus in excess of $0.43125 per unit per quarter. See Note 8 for further discussion related to IDRs.

⁽²⁾ On February 25, 2016, each of the Partnership's 11,999,258 outstanding subordinated units converted into common units and began participating pro rata with the other common units in distributions of available cash. Distributions and the Partnership's net income were allocated to the subordinated units through February 24, 2016.

⁽³⁾ We base our calculation of net income per unit on the weighted-average number of common and subordinated limited partner units outstanding during the period. The weighted-average number of common and subordinated units reflects the conversion of the subordinated units to common units on February 25, 2016.