Net Income per Limited Partner Unit and Cash Distributions | Equity The following table summarizes changes in EQM's Series A Preferred Units, common units and Class B units, each representing limited partner interests in EQM, and general partner units during the year ended December 31, 2018 and from January 1, 2019 through June 30, 2019 . Limited Partner Interests Series A Preferred Units Common Units Class B Units General Partner Units Total Balance at January 1, 2018 — 80,581,758 — 1,443,015 82,024,773 Common units issued (1) — 10,821 — — 10,821 Drop-Down Transaction consideration — 5,889,282 — — 5,889,282 Common units issued in the EQM-RMP Merger — 33,975,777 — — 33,975,777 Balance at December 31, 2018 — 120,457,638 — 1,443,015 121,900,653 Unit cancellation — (8 ) — — (8 ) EQM IDR Transaction (2) — 80,000,000 7,000,000 (1,443,015 ) 85,556,985 Issuance of Series A Preferred Units 24,605,291 — — — 24,605,291 Balance at June 30, 2019 24,605,291 200,457,630 7,000,000 — 232,062,921 (1) Units issued upon the resignation of a member of the Board of Directors of EQM's general partner. (2) In exchange for the cancellation of the EQM IDRs, EQM issued 87,000,000 EQM common units (the Exchange Consideration) to the Former EQM General Partner. At the effective time of the EQM IDR Merger, (i) the Exchange Consideration held by the Former EQM General Partner was canceled, (ii) 80,000,000 EQM common units and 7,000,000 Class B units were issued on a pro rata basis to certain affiliates of Equitrans Midstream, and (iii) 21,811,643 EQM common units held by EQGP were canceled and 21,811,643 EQM common units were issued pro rata to certain affiliates of Equitrans Midstream. As of June 30, 2019 , Equitrans Gathering Holdings, LLC (Equitrans Gathering Holdings), EQM GP Corporation (EQM GP Corp) and Equitrans Midstream Holdings, LLC (EMH), each a wholly-owned subsidiary of Equitrans Midstream, held 89,505,616 , 89,536 and 27,650,303 EQM common units, respectively. Additionally, Equitrans Gathering Holdings, EQM GP Corp and EMH held 6,153,907 , 6,155 and 839,938 Class B units, respectively. As of June 30, 2019 , Equitrans Midstream owned, directly or indirectly, 117,245,455 EQM common units and 7,000,000 Class B units (collectively representing, after taking into account the Series A Preferred Units issued in the Private Placement on an as-converted basis, a 53.5% limited partner interest in EQM) and the entire non-economic general partner interest in EQM, while the public owned a 46.5% limited partner interest in EQM. Following the completion of the Private Placement, certain investors owned an aggregate of 24,605,291 Series A Preferred Units. Class B Units As discussed above and in Note 1 , in February 2019, EQM issued 7,000,000 Class B units representing a new class of limited partner interests in EQM as partial consideration for the EQM IDR Transaction. The Class B units are substantially similar in all respects to EQM's common units, except that the Class B units are not entitled to receive distributions of available cash until the applicable Class B unit conversion date (or, if earlier, a change of control). The Class B units are divided into three tranches, with the first tranche of 2,500,000 Class B units becoming convertible at the holder’s option into EQM common units on April 1, 2021, the second tranche of 2,500,000 Class B units becoming convertible at the holder’s option into EQM common units on April 1, 2022, and the third tranche of 2,000,000 Class B units becoming convertible at the holder’s option on April 1, 2023 (each, a Class B unit conversion date). Additionally, the Class B units will become convertible at the holder’s option into EQM common units immediately before a change of control of EQM. After the applicable Class B unit conversion date (or, if earlier, a change of control), whether or not such Class B units have been converted into EQM common units, the Class B units will participate pro rata with the EQM common units in distributions of available cash. The holders of Class B units vote together with the holders of EQM common units as a single class, except that Class B units owned by the general partner of EQM and its affiliates are excluded from voting if EQM common units owned by such parties are excluded from voting. Holders of Class B units are entitled to vote as a separate class on any matter that adversely affects the rights or preferences of the Class B units in relation to other classes of EQM partnership interests in any material respect or as required by law. Series A Preferred Units As discussed in Note 1 , in March 2019, EQM entered into the Preferred Unit Purchase Agreement with certain investors to issue and sell in a private placement an aggregate of 24,605,291 Series A Preferred Units representing limited partner interests in EQM for a cash purchase price of $48.77 per Series A Preferred Unit, resulting in total gross proceeds of approximately $1.2 billion . The net proceeds from the Private Placement were used in part to fund the purchase price in the Bolt-on Acquisition and to pay certain fees and expenses related to the Bolt-on Acquisition, and the remainder was used for general partnership purposes. The Private Placement closed concurrently with the closing of the Bolt-on Acquisition on April 10, 2019 . The Series A Preferred Units rank senior to all common units and Class B units representing limited partner interests in EQM with respect to distribution rights and rights upon liquidation. The Series A Preferred Units will vote on an as-converted basis with the EQM common units and Class B units and will have certain other class voting rights with respect to any amendment to EQM's partnership agreement or its certificate of limited partnership that would be adverse (other than in a de minimis manner) to any of the rights, preferences or privileges of the Series A Preferred Units. The holders of the Series A Preferred Units are entitled to receive cumulative quarterly distributions at a rate of $1.0364 per Series A Preferred Unit for the first twenty distribution periods, and thereafter the quarterly distributions on the Series A Preferred Units will be an amount per Series A Preferred Unit for such quarter equal to (i) the Series A Preferred Unit purchase price of $48.77 per such unit, multiplied by (ii) a percentage equal to the sum of (A) the greater of (x) the 3-month LIBOR as of the second London banking day prior to the beginning of the applicable quarter and (y) 2.59% , and (B) 6.90% , multiplied by (iii) 25% . EQM will not be entitled to pay any distributions on any junior securities, including any EQM common units, prior to paying the quarterly distributions payable to the holders of Series A Preferred Units, including any previously accrued and unpaid distributions. Each holder of the Series A Preferred Units may elect to convert all or any portion of the Series A Preferred Units owned by it into EQM common units initially on a one-for-one basis, subject to customary anti-dilution adjustments and an adjustment for any distributions that have accrued but have not been paid when due and partial period distributions, at any time (but not more often than once per fiscal quarter) after April 10, 2021 (or earlier liquidation, dissolution or winding up of EQM), provided that any conversion is for at least $30 million (calculated based on the closing price of the EQM common units on the trading day preceding notice of conversion) or such lesser amount if such conversion relates to all of a holder’s remaining Series A Preferred Units. EQM may elect to convert all or any portion of the Series A Preferred Units into EQM common units at any time (but not more often than once per quarter) after April 10, 2021 if (i) the common units are listed for, or admitted to, trading on a national securities exchange, (ii) the closing price per common unit on the national securities exchange on which the common units are listed for, or admitted to, trading exceeds 140% of the Series A Preferred Unit purchase price of $48.77 per such unit for the 20 consecutive trading days immediately preceding notice of the conversion, (iii) the average daily trading volume of the common units on the national securities exchange on which the common units are listed for, or admitted to, trading exceeds 500,000 common units for the 20 consecutive trading days immediately preceding notice of the conversion, (iv) EQM has an effective registration statement on file with the SEC covering resales of the common units to be received by such holders upon any such conversion and (v) EQM has paid all accrued quarterly distributions in cash to the holders. In addition, upon certain events involving a change in control, the holders of Series A Preferred Units may elect, among other potential elections, to convert their preferred units into EQM common units at a certain conversion rate. Net Income per Limited Partner Unit and Cash Distributions Net Income per Limited Partner Unit. Net income per limited partner unit is calculated utilizing the two-class method by dividing the limited partner interest in net income by the weighted average number of limited partner units outstanding during the period. The two-class method uses an earnings allocation method under which earnings per limited partner unit are calculated for each class of common unit and any participating security considering all distributions declared and participation rights in undistributed earnings as if all earnings had been distributed during the period. Diluted net income per limited partner unit reflects the potential dilution that could occur if securities or agreements to issue common units were exercised, settled or converted into EQM common units. EQM uses the if-converted method to compute potential common units from phantom units granted to independent and non-employee directors and the if-converted method to compute potential common units related to the conversion of Series A Preferred Units and Class B units. Under the if-converted method, dilutive convertible securities are assumed to be converted from the date of the issuance, and the resulting common units are included in the denominator of the diluted net income per unit calculation for the period being presented. Each series of potential common units is evaluated in sequence from the most dilutive to the least dilutive. Distributions declared in the period and undeclared distributions on the cumulative Series A Preferred Units that accumulated during the period are added back to the numerator for purposes of the if-converted calculation. As a result of the EQM IDR Transaction, EQM’s common unitholders are entitled to all distributions until the Class B units are converted to common units (other than distributions in respect of the Series A Preferred Units following the initial distribution period for such Series A Preferred Units commencing with the quarter ended June 30, 2019 ). Class B unitholders have no rights to distributions until they are convertible into common units. Accordingly, for all periods prior to the date such Class B units are convertible, the Class B units are not considered participating securities under the two-class method. In addition, the Series A Preferred Units are not considered a participating security as they only have distribution rights up to the specified per-unit quarterly distribution and have no rights to EQM’s undistributed earnings prior to conversion of the Series A Preferred Units into EQM common units, as discussed in Note 5 . For the three and six months ended June 30, 2019 , limited partner interest in net income, which excludes the Series A Preferred Units interest in net income, was fully allocated to EQM’s common unitholders. For the three and six months ended June 30, 2018 , net income attributable to EQM was allocated to the general partner and limited partners in accordance with their respective ownership percentages. Any common units issued during the relevant periods are included on a monthly weighted-average basis for the periods in which they were outstanding. The phantom units granted to the independent and non-employee directors of EQM's general partner will be paid in common units on a director’s termination of service on the Board of Directors of EQM's general partner. The weighted average phantom unit awards included in the calculation of basic weighted average limited partner units outstanding were 24,007 and 21,041 for the three months ended June 30, 2019 and 2018 , respectively, and 22,896 and 20,506 for the six months ended June 30, 2019 and 2018, respectively. The following table presents EQM's calculation of net income per limited partner unit for common and Class B limited partner units. Three Months Ended Six Months Ended 2019 2018 (1) 2019 2018 (1) (Thousands, except per unit data) Net income attributable to EQM $ 152,438 $ 233,832 $ 404,369 $ 494,182 Less: Series A Preferred Units interest in net income (22,979 ) — (22,979 ) — Less: pre-acquisition net income allocated to parent — (72,620 ) — (155,752 ) Less: general partner interest in net income – general partner units — (1,700 ) — (4,791 ) Less: general partner interest in net income – IDRs — (68,121 ) — (112,285 ) Limited partner interest in net income $ 129,459 $ 91,391 $ 381,390 $ 221,354 Net income allocable to common units $ 129,459 $ 91,391 $ 381,390 $ 221,354 Net income allocable to Class B units $ — $ — $ — $ — Weighted average limited partner common units outstanding - basic 200,482 83,553 177,498 82,290 Weighted average limited partner common units outstanding - diluted (2) 207,482 83,553 195,645 82,290 Net income per limited partner common unit - basic $ 0.65 $ 1.09 $ 2.15 $ 2.69 Net income per limited partner common unit - diluted $ 0.62 $ 1.09 $ 2.07 $ 2.69 (1) Net income attributable to the Drop-Down Transaction and the EQM-RMP Merger for the periods prior to May 1, 2018 and July 23, 2018, respectively, was not allocated to the limited partners for purposes of calculating net income per limited partner unit as these pre-acquisition amounts were not available to the EQM unitholders. (2) For the three months ended June 30, 2019, 7,000,000 Class B units were included in the calculation of diluted weighted average limited partner units outstanding based upon the application of the if-converted method. The effect of Series A Preferred Units was anti-dilutive. For the six months ended June 30, 2019, 7,000,000 Class B units and 11,147,148 Series A Preferred Units and Class B units were included in the calculation of diluted weighted average limited partner units outstanding based upon the application of the if-converted method. Class B units are not a participating security as they do not participate in distributions. Distributions to common unitholders. On July 24, 2019 , the Board of Directors of EQM's general partner declared a cash distribution to EQM's unitholders for the second quarter of 2019 of $1.160 per common unit. The cash distribution will be paid on August 13, 2019 to common unitholders of record at the close of business on August 2, 2019 . Based on the EQM common units outstanding on July 30, 2019 , cash distributions paid by EQM to Equitrans Midstream will be approximately $136.0 million related to Equitrans Midstream's limited partner interest in EQM. Distributions to Series A Preferred Unit holders. On July 24, 2019 , the Board of Directors of EQM's general partner declared a quarterly cash distribution on the Series A Preferred Units for the second quarter of 2019 of $0.9339 per Series A Preferred Unit, which amount reflected pro-ration in accordance with the Fourth Amended and Restated Agreement of Limited Partnership of EQM, dated April 10, 2019. The cash distribution will be paid on August 13, 2019 to Series A Preferred unitholders of record at the close of business on August 2, 2019 . For the quarter ended June 30, 2019 , no distributions were declared on the Class B units as none of these units were convertible into EQM common units. |