NET LOSS PER LIMITED PARTNER UNIT AND DISTRIBUTIONS | NET INCOME/LOSS PER LIMITED PARTNER UNIT AND DISTRIBUTIONS Net Income/Loss Per Limited Partner Unit The following is a reconciliation of the net loss attributable to our limited partners and our limited partner units and the basic and diluted earnings per unit calculations for the three and six months ended June 30, 2015 and 2014 (in thousands, except unit and per unit data): Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Net loss $ (15,451 ) $ (2,961 ) $ (29,356 ) $ (4,249 ) Series A Preferred Unit fair value adjustment (1) — (5,062 ) — (5,029 ) Series A Preferred Unit in-kind distribution — (738 ) — (1,272 ) General partner Unit in-kind distribution (61 ) — (137 ) — Net loss attributable to Holdings (1,103 ) — (4,258 ) — Net loss attributable to partners $ (14,409 ) $ (8,761 ) $ (25,235 ) $ (10,550 ) General partner's interest (2) (306 ) (59 ) (561 ) (84 ) Class B Convertible limited partner interest (2) (3,981 ) — (7,100 ) — Limited partners' interest (2) Common (6,928 ) (7,382 ) (11,830 ) (8,398 ) Subordinated (3,194 ) (1,320 ) (5,744 ) (2,068 ) (1) The valuation adjustment to maximum redemption value of the Series A Preferred Unit in-kind distribution increased the net loss attributable to partners for the three and six months ended June 30, 2014 . (2) General Partner's and limited partners’ interests are calculated based on the allocation of net losses for the period, net of the allocation of Series A Preferred Unit in-kind distributions, Series A Preferred Unit fair value adjustments and General Partner Unit in-kind distributions. The Class B Convertible Unit interest is calculated based on the allocation of only net losses for the period. Three Months Ended June 30, Six Months Ended June 30, Common Units 2015 2014 2015 2014 Interest in net loss $ (6,928 ) $ (7,382 ) $ (11,830 ) $ (8,398 ) Effect of dilutive units - numerator (1) — — — — Dilutive interest in net loss $ (6,928 ) $ (7,382 ) $ (11,830 ) $ (8,398 ) Weighted-average units - basic 26,476,520 21,472,420 25,143,455 19,887,523 Effect of dilutive units - denominator (1) — — — Weighted-average units - dilutive 26,476,520 21,472,420 25,143,455 19,887,523 Basic and diluted net loss per common unit $ (0.26 ) $ (0.34 ) $ (0.47 ) $ (0.42 ) Three Months Ended June 30, Six Months Ended June 30, Subordinated Units 2015 2014 2015 2014 Interest in net loss $ (3,194 ) $ (1,320 ) $ (5,744 ) $ (2,068 ) Effect of dilutive units - numerator (1) — — — — Dilutive interest in net loss $ (3,194 ) $ (1,320 ) $ (5,744 ) $ (2,068 ) Weighted-average units - basic 12,213,713 12,213,713 12,213,713 12,213,713 Effect of dilutive units - denominator (1) — — — — Weighted-average units - dilutive 12,213,713 12,213,713 12,213,713 12,213,713 Basic and diluted net loss per subordinated unit $ (0.26 ) $ (0.11 ) $ (0.47 ) $ (0.17 ) (1) Because we had a net loss for all periods for common units and the subordinated units, the effect of the dilutive units would be anti-dilutive to the per unit calculation. Therefore, the weighted average units outstanding are the same for basic and dilutive net loss per unit for those periods. The weighted average units that were not included in the computation of diluted per unit amounts were 53,747 and 28,887 for the three and six months ended June 30, 2015 , respectively. Our calculation of the number of weighted-average units outstanding includes the common units that have been awarded to our directors that are deferred under our Non-Employee Director Deferred Compensation Plan. All of our Series A Preferred Units were converted into common units on August 4, 2014 (see Note 8). Prior to conversion, our Series A Preferred Units were considered participating securities for purposes of the basic earnings per unit calculation during periods in which they received cash distributions. We were required to pay in-kind distributions to the Series A Preferred Units for the first four full quarters beginning the second quarter of 2013, and continued to pay these distributions until the Series A Preferred Units were converted into common units. Because the Series A Preferred Units received in-kind distributions, they have been excluded from the basic earnings per unit calculation for the three and six months ended June 30, 2014 . Distributions Our agreement of limited partnership, which was amended and restated on August 4, 2014 in order to establish the Class B Convertible Units (as amended and restated, the “Partnership Agreement”), requires that within 45 days after the end of each quarter, we distribute all of our available cash to unitholders of record on the applicable record date, as determined by our General Partner. Subject to the waiver and credit agreement restriction, described below, we intend to make a minimum quarterly distribution to the holders of our common units and subordinated units of $0.40 per unit, or $1.60 on an annualized basis, to the extent we have sufficient cash from our operations after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of expenses to our General Partner. However, there is no guarantee that we will pay the minimum quarterly distribution on our units in any quarter. Beginning with the third quarter of 2014, until such time that we have a distributable cash flow divided by cash distributions ratio (“Distributable Cash Flow Ratio”) of at least 1.0, Holdings, the holder of all of our subordinated units, waived the right to receive distributions on any subordinated units that would cause the Distributable Cash Flow Ratio to be less than 1.0. In addition, the Credit Agreement Amendment (as defined in Note 6) imposed additional restrictions on our ability to declare and pay quarterly cash distributions with respect to our subordinated units. See Note 6. With respect to the fourth quarter of 2014, Holdings also waived the requirement that any distribution owed to it for that quarter be paid within 45 days of the end of the quarter, provided that the distribution was paid before or in conjunction with the filing of our 2014 Annual Report on Form 10-K. We paid a distribution of $0.28 per unit on our 12,213,713 subordinated units in conjunction with the filing of our 2014 Annual Report on Form 10-K. Holdings did not receive a distribution for the first quarter of 2015 in respect of the 4.5 million common units acquired by it in connection with the 2015 Holdings Acquisition. Paid In-Kind Distributions Series A Preferred Units. During the second quarter of 2013, we raised $40.0 million of equity through issuances of 1,715,000 Series A Preferred Units and an additional General Partner contribution to satisfy the requirements of our Previous Credit Facility (as defined in Note 6) (see Notes 6 and 8). Under the terms of our Partnership Agreement, we were required to pay the holders of our Series A Preferred Units quarterly distributions of in-kind Series A Preferred Units for the first four full quarters following the issuance of the units and continuing thereafter until the board of directors of our General Partner determined to begin paying quarterly distributions in cash. In-kind distributions were in the form of Series A Preferred Units at a rate of $0.40 per outstanding Series A Preferred Unit per quarter (or 7% per year of the per unit purchase price). Cash distributions were required to equal the greater of $0.40 per unit per quarter or the quarterly distribution paid with respect to each common unit. In accordance with the Partnership Agreement, our General Partner received a corresponding distribution of in-kind general partner units to maintain its 2.0% interest in us. In connection with the Holdings Transaction (see Notes 1 and 2), all holders of the Series A Preferred Units elected to convert their Series A Preferred Units into 2,015,638 common units based on a 110% exchange ratio. The following table represents the paid in-kind (“PIK”) distribution declared in 2014 through August 4, 2014 , the date on which all outstanding Series A Preferred Units were converted to common units (in thousands, except per unit and in-kind distribution units): Payment Date Attributable to the Quarter Ended (1) Per Unit Distribution In-Kind Series A In-Kind Series A Distributions (2) In-Kind Unit to General Partner In-Kind General Partner Distribution Value (2) 2014 May 15, 2014 March 31, 2014 $ 0.40 31,513 $ 534 643 $ 11 (1) As a result of the conversion, the Series A Preferred Unit holders (and the corresponding General Partner units) ceased receiving PIK distributions effective with the quarter ended June 30, 2014, but received a cash distribution on the converted common units. (2) The fair value was calculated as required, based on the common unit price at the quarter end date for the period attributable to the distribution, multiplied by the number of units distributed. Class B Convertible Units. In connection with the Contribution and the TexStar Rich Gas System Transaction, on August 4, 2014 , we established our Class B Convertible Units. As of June 30, 2015 , the Class B Convertible Units consist of 15,414,754 of such units including the additional Class B Convertible Units issued in-kind as a distribution (“Class B PIK Units”). The Class B Convertible Units are not participating securities for purposes of the earnings per unit calculation. Commencing with the quarter ended September 30, 2014 and until converted, as long as certain requirements are met, the holders of the Class B Convertible Units will receive quarterly distributions in an amount equal to $0.3257 per unit. These distributions will be paid quarterly in Class B PIK Units within 45 days after the end of each quarter. Our General Partner was entitled, and has exercised its right, to retain its 2.0% general partner interest in us in connection with the original issuance of 14,633,000 Class B Convertible Units. In connection with future distributions of Class B PIK Units, the General Partner is entitled to a corresponding distribution to maintain its 2.0% general partner interest in us. The Class B Convertible Units have the same rights, preferences and privileges, and are subject to the same duties and obligations, as our common units, with certain exceptions. See Note 9. The following table presents the PIK distribution earned on the Class B Convertible Units for periods after issuance on August 4, 2014 through June 30, 2015 (in thousands, except per unit and in-kind distribution units): Payment Date Attributable to the Quarter Ended Per Unit Distribution In-Kind Class B Convertible Unit In-Kind Class B Convertible Distributions (1) In-Kind Unit to General Partner In-Kind General Partner Distribution Value (1) 2015 August 14, 2015 June 30, 2015 $ 0.3257 269,758 $ 2,994 5,505 $ 61 May 14, 2015 March 31, 2015 0.3257 265,118 3,712 5,410 76 2014 February 13, 2015 December 31, 2014 0.3257 260,558 4,143 5,318 85 November 14, 2014 September 30, 2014 0.3257 256,078 5,467 5,226 112 (1) The fair value was calculated as required, based on the common unit price at the quarter end date for the period attributable to the distribution, multiplied by the number of units distributed. Cash Distributions The following table represents our distributions declared for the quarterly periods beginning in 2014 through the six months ended June 30, 2015 (in thousands, except per unit data): Distributions Attributable to the Per Unit Limited Partners Payment Date Quarter Ended Distribution Common Subordinated General Partner Total 2015 August 14, 2015 June 30, 2015 $ 0.40 $ 11,325 $ — $ 457 $ 11,782 May 14, 2015 March 31, 2015 0.40 9,520 — 418 9,938 2014 February 13, 2015 December 31, 2014 0.40 (1) 9,520 3,432 (2) 416 13,368 November 14, 2014 September 30, 2014 0.40 (1) 9,520 — 413 9,933 August 14, 2014 June 30, 2014 0.40 9,399 4,886 290 14,575 May 15, 2014 March 31, 2014 0.40 8,586 4,886 290 13,762 (1) The common unit distribution in the table above includes the distribution payment to the Series A Preferred unitholders for their Series A Preferred Units converted into common units or to the units that vested as part of our LTIP (as defined in Note 11) as a result of the Holdings Transaction (see Notes 1, 8 and 11). (2) Holdings waived the requirement that any distribution owed to it for the fourth quarter be paid within 45 days of the end of the quarter. We paid a distribution of $0.28 per unit on our 12,213,713 subordinated units in conjunction with the filing of our 2014 Annual Report on Form 10-K. |