Partners' Capital | (9) Partner’s Capital As of February 9, 2016, USA Compression Holdings held 7,267,511 common units and 14,048,588 subordinated units and controlled the General Partner which held an approximate 1.46% general partner interest (the “General Partner’s Interest”) and the incentive distribution rights (“IDRs”). See the Consolidated Statement of Changes in Partners’ Capital. Subordinated Units All of the subordinated units are held by USA Compression Holdings. The Partnership’s limited partnership agreement (the “Partnership Agreement”) provides that, during the subordination period, the common units have the right to receive distributions of Available Cash from Operating Surplus (each as defined in the Partnership Agreement) each quarter in an amount equal to $0.425 per common unit (the “Minimum Quarterly Distribution”), plus any arrearages in the payment of the Minimum Quarterly Distribution from Operating Surplus on the common units from prior quarters, before any distributions of Available Cash from Operating Surplus may be made on the subordinated units. These units are deemed “subordinated” because for a period of time, referred to as the subordination period, the subordinated units will not be entitled to receive any distributions from Operating Surplus until the common units have received the Minimum Quarterly Distribution plus any arrearages from prior quarters. The practical effect of the subordinated units is to increase the likelihood that during the subordination period there will be Available Cash from Operating Surplus to be distributed on the common units. The subordination period will end on the first business day after the Partnership has earned and paid at least (i) $1.70 (the Minimum Quarterly Distribution on an annualized basis) on each outstanding unit and the corresponding distribution on the General Partner’s Interest, for each of three consecutive, non-overlapping four-quarter periods ending on or after December 31, 2015 or (ii) $2.55 ( 150.0% of the annualized Minimum Quarterly Distribution) on each outstanding unit and the corresponding distributions on the General Partner’s Interest and the related distribution on the incentive distribution rights for the four-quarter period immediately preceding that date. When the subordination period ends, all subordinated units will convert into common units on a one -for-one basis, and all common units thereafter will no longer be entitled to arrearages. All of our outstanding subordinated units will convert to common units on a one-for-one basis on February 16, 2016 upon the Partnership’s payment of its quarterly distribution on February 12, 2016. Incentive Distribution Rights The General Partner holds all of the IDRs. The following table illustrates the percentage allocations of Available Cash from Operating Surplus between the unitholders and the General Partner based on the specified target distribution levels. The amounts set forth under “Marginal Percentage Interest in Distributions” are the percentage interests of the General Partner and the unitholders in any Available Cash from Operating Surplus the Partnership distributes up to and including the corresponding amount in the column “Total Quarterly Distribution per Unit.” The percentage interests shown for the Partnership’s unitholders and the General Partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for the General Partner include its General Partner’s Interest, and assume the General Partner has contributed any additional capital necessary to maintain its General Partner’s Interest, the General Partner has not transferred the IDRs and there are no arrearages on common units. Marginal Percentage Interest in Total Quarterly Distributions Distributions per Unit Unitholders General Partner Minimum Quarterly Distribution $0.425 % % First Target Distribution up to $0.4888 % % Second Target Distribution above $0.4888 up to $0.5313 % % Third Target Distribution above $0.5313 up to $0.6375 % % Thereafter above $0.6375 % % Cash Distributions The Partnership has declared quarterly distributions per unit to limited partner unitholders of record, including holders of common, subordinated and phantom units and distributions paid to the General Partner, including the General Partner’s Interest and IDRs, as follows (dollars in millions, except distribution per unit): Distribution per Amount Paid to Amount Paid to Amount Paid to Amount Paid to Limited Partner Common Subordinated General Phantom Total Payment Date Unit Unitholders Unitholder Partner Unitholders Distribution May 15, 2013 $ (1) $ $ $ $ — $ August 14, 2013 — November 14, 2013 — February 14, 2014 — May 15, 2014 August 14, 2014 November 14, 2014 February 13, 2015 May 15, 2015 August 14, 2015 November 13, 2015 (1) Prorated to reflect 72 days of quarterly cash distribution rate of $0.435 per unit. Announced Quarterly Distribution O n January 21, 2016 , the Partnership announced a cash distribution of $0.525 per unit on its common and subordinated units. The distribution will be paid on February 12, 2016 to unitholders of record as of the close of business on February 2, 2016 . USA Compression Holdings, the owner of approximately 41% of the Partnership’s outstanding limited partner interests has elected to reinvest all of this distribution with respect to its units pursuant to the Partnership’s distribution reinvestment plan (the “DRIP”). Dividend Reinvestment Program For the years ended December 31, 2015, 2014 and 2013, distributions of $56.9 million, $51.7 million and $26.3 million, respectively, were reinvested under the DRIP resulting in the issuance of 3.1 million, 2.1 million and 1.1 million common units, respectively. Such distributions are treated as non-cash transactions in the accompanying Consolidated Statements of Cash Flows. Equity Offerings On September 15, 2015, the Partnership closed a public offering of 4,000,000 common units at a price to the public of $19.33 per common unit. The Partnership used the net proceeds of $74.4 million (net of underwriting discounts and commission and offering expenses) to reduce the indebtedness outstanding under its revolving credit facility. On May 21, 2015, the Partnership issued 34,921 common units in a private placement to Argonaut for $0.7 million in a transaction that was exempt from registration under Section 4(a)(2) of the Securities Act. The Partnership used the proceeds from the private placement for general partnership purposes. There were no other unregistered sales of securities during the years ended December 31, 2015 or 2014. On May 19, 2014, the Partnership closed a public offering of 6,600,000 common units, of which 5,600,000 common units were sold by the Partnership and 1,000,000 common units were sold by certain selling unitholders, including USA Compression Holdings and Argonaut (the “Selling Unitholders”), at a price to the public of $25.59 per common unit. USA Compression Holdings and Argonaut granted the underwriters an option to purchase up to an additional 990,000 common units to cover over-allotments, which was exercised by the underwriters in full and closed on May 27, 2014. The Partnership used the net proceeds of $138 .0 million (net of underwriting discounts and commissions and offering expenses) to reduce the indebtedness outstanding under the revolving credit facility. On April 23, 2014, the Partnership’s registration statement on Form S-3 (Reg. No. 333-193724) (as amended, the “Shelf Registration Statement”) was declared effective by the Securities and Exchange Commission. Under the Shelf Registration Statement, the Partnership registered the offer and sale of (1) up to $1 .0 billion aggregate principal amount of Partnership securities, including common units and other classes of units representing limited partner interests in the Partnership, debt securities and guarantees of debt securities and (2) up to 27,074,118 common units held by certain selling unitholders and up to 6,266,024 common units that may be issued to such selling unitholders under the Partnership’s DRIP. Earnings Per Common and Subordinated Unit The computations of earnings per common unit and subordinated unit are based on the weighted average number of common units and subordinated units, respectively, outstanding during the applicable period. The subordinated units and the General Partner’s Interest (including its IDRs) meet the definition of participating securities as defined by the FASB’s ASC Topic 260 Earnings Per Share ; therefore, the Partnership is required to use the two-class method in the computation of earnings per unit. Basic earnings per common and subordinated unit are determined by dividing net income (loss) allocated to the common and subordinated units, respectively, after deducting the amount allocated to the General Partner (including distributions to the General Partner on the General Partner Interest and its IDRs), by the weighted average number of outstanding common and subordinated units, respectively, during the period. Net income (loss) is allocated to the common units, subordinated units and the General Partner Interest (including its IDRs) based on their respective shares of the distributed and undistributed earnings for the period. To the extent cash distributions exceed net income (loss) for the period, the excess distributions are allocated to all participating units outstanding based on their respective ownership percentages. Diluted earnings per unit are computed using the treasury stock method, which considers the potential issuance of limited partner units associated with the LTIP. Unvested phantom units are not included in basic earnings per unit, as they are liability classified and as such are not considered to be participating securities, but are included in the calculation of diluted earnings per unit. For the year ended December 31, 2015, approximately 121,000 incremental phantom units were excluded from the calculation of diluted units because the impact was anti-dilutive. |