| Equity | 5. Equity On May 29, 2018 (the “Closing Date”), we entered into a Series A Preferred Unit Purchase Agreement (the “Preferred Unit Purchase Agreement”) with an entity controlled by Charles C. Stephenson, Jr. (the “Purchaser”), an affiliate of our General Partner, where we issued and sold in a private placement 5,769,231 Series A Preferred Units representing limited partner interests in the Partnership (the “Preferred Units”) to the Purchaser for a cash purchase price of $7.54 per Preferred Unit, resulting in gross proceeds to the Partnership of $43.5 million. We used proceeds from the transaction to reduce outstanding borrowings on our revolving credit facility. Concurrent with the closing of this transaction, we entered into an amended and restated Credit Agreement dated as of May 29, 2018, to amend and restate the terms of our credit facility, as more fully described in Note 3. The Preferred Unit Purchase Agreement contains customary representations, warranties, and covenants of the Partnership and the Purchaser. The Partnership and the Purchaser agreed to indemnify each other and their respective officers, directors, managers, employees, agents, counsel, accountants, investment bankers, and other representatives against certain losses resulting from breaches of their respective representations, warranties, and covenants, subject to certain negotiated limitations and survival periods set forth in the Preferred Unit Purchase Agreement. Pursuant to the Preferred Unit Purchase Agreement, and in connection with the closing of this transaction, our General Partner executed the First Amendment to First Amended and Restated Agreement of Limited Partnership of the Partnership, which authorizes and establishes the rights and preferences of the Preferred Units. The Preferred Units have voting rights that are identical to the voting rights of the common units into which such Preferred Units would be converted at the then-applicable conversion rate. The Purchaser is entitled to receive quarterly distributions that represent an annual return of 9.5% on the Preferred Units. Of this 9.5% annual return, we are required to pay at least 2.5% in cash and will have the option to pay the remaining 7.0% in kind (in the form of issuing additional preferred units) for the first twelve quarters after the Closing Date. After the third anniversary of the Closing Date, the Purchaser will have the option to convert the Preferred Units into common units on a one-for-one basis. If certain conditions are met after the third anniversary of the Closing Date, we will have the option to cause the Preferred Units to convert to common units. After the third anniversary of the Closing Date, we will also have the option to redeem the Preferred Units. The Partnership may redeem the Preferred Units (a) at any time after the third anniversary of the closing date and on or prior to the fourth anniversary of the closing date at a redemption price equal to 105% of the issue price, and (b) at any time after the fourth anniversary of the closing date at a redemption price equal to 101% of the issue price. Earnings Per Unit Our net income Income attributable to our preferred unitholder Net income (loss) attributable to noncontrolling interests Net income attributable to common unitholders Basic net income per common limited partner unit net income attributable to common unitholders Diluted net income per common limited partner unit basic net income per common limited partner unit
Three Months Ended March 31,
2019 2018
(in thousands, except per unit data)
Net income attributable to common unitholders $ 567 $ 725
Weighted average common units outstanding 11,971 11,899
Basic net income per common limited partner unit $ 0.05 $ 0.06 The following summarizes the calculation of the diluted net income per common limited partner unit
Three Months Ended March 31,
2019 2018
(in thousands, except per unit data)
Net income attributable to common unitholders $ 567 $ 725
Weighted average common units outstanding 11,971 11,899
Effect of dilutive securities:
Weighted average preferred units outstanding (a) — —
Long-term incentive plan unvested units 384 85
Diluted weighted average common units outstanding 12,355 11,984
Diluted net income per common limited partner unit $ 0.05 $ 0.06
(a) For the three months ended March 31, 2019, the preferred units would have been antidilutive and therefore, were excluded from the computation of diluted net income per limited partner unit Distributions The following table summarizes the cash distributions declared and paid, or expected to be paid, to our common partners for 2018 and 2019:
Payment Date Per Unit Cash Distributions Total Cash Distributions Total Cash Distributions to Affiliates (a)
(in thousands)
February 14, 2018 $ 0.21 $ 2,498 $ 1,599
May 15, 2018 0.21 2,506 1,604
August 14, 2018 0.21 2,506 1,604
November 14, 2018 0.21 2,509 1,606
Total 2018 Distributions $ 0.84 $ 10,019 $ 6,413
February 14, 2019 $ 0.21 $ 2,510 $ 1,606
May 15, 2019 (b) 0.21 2,531 1,622
Total 2019 Distributions (to date) $ 0.42 $ 5,041 $ 3,228
(a)
64% of the Partnership's outstanding common units at March 31, 2019 were held by affiliates.
(b)
First quarter 2019 distribution was declared and will be paid in the second quarter of 2019. The following table summarizes the distributions paid to our preferred unitholder for 2018 and 2019:
Payment Date Total Cash Distributions Total Paid-in-Kind Distributions Total Distributions
(in thousands)
November 14, 2018 (a) $ 1,412 $ — $ 1,412
Total 2018 Distributions $ 1,412 $ — $ 1,412
February 14, 2019 $ 1,033 $ — $ 1,033
May 15, 2019 (b) 1,033 — 1,033
Total 2019 Distributions (to date) $ 2,066 $ — $ 2,066
(a)
This distribution represents the period from May 29, 2018 (date of preferred unit issuance) through September 30, 2018.
(b)
First quarter 2019 distribution will be paid in the second quarter of 2019. Equity Compensation Our General Partner has adopted a
long-term incentive plan (“LTIP”) that authorizes the issuance of up to 2.5 million common units. Certain directors
and employees of the Partnership have been awarded Phantom Restricted Units (“Units”) under the terms of the LTIP.
The fair value of each award is determined based on the quoted market value of the publicly-traded common units at the grant date,
adjusted for a discount to reflect the fact that distributions are not paid on the Units during the vesting period. Compensation
expense is recognized on a straight-line basis over the vesting period of the grant. We account for forfeitures of share-based
awards when the forfeitures occur. We recorded expense of $0.3 million and $0.2 million during the three months ended March 31,
2019 and 2018, respectively, related to the unit awards. We have historically granted annual LTIP awards to key employees
in the second quarter of each year. The following table summarizes the LTIP Unit activity for the three months ended March 31, 2019 and 2018:
Three Months Ended March 31,
2019 2018
Number of Units
Weighted Average Grant Date Fair Value / Unit
Number of Units
Weighted Average Grant Date Fair Value / Unit
Units at January 1 974,709 $ 5.76 664,509 $ 8.42
Units granted — 16,668 $ 4.76
Units vested (127,505 ) $ 8.74 (54,306 ) $ 13.14
Units forfeited (35,872 ) $ 5.82 (13,971 ) $ 6.15
Units at March 31 811,332 $ 5.29 612,900 $ 8.00 The majority of the Unit awards vest in three tranches, with one-third of the units vesting three years from the grant date, one-third vesting four years from the grant date, and one-third vesting five years from the grant date. However, certain of the awards have different, and typically shorter, vesting periods. One grant, totaling 72,046 units, vests three years from the grant date, contingent upon the recipient meeting certain performance targets. Total unearned compensation associated with the LTIP at March 31, 2019 was $2.7 million with an average remaining life of 2.2 years. |
