Net Income Per Limited Partner Unit | Note 4. Net Income Per Limited Partner Unit Basic net income per limited partner unit applicable to common and subordinated units is computed by dividing the respective limited partners’ interest in net income attributable to Dominion Energy Midstream, after deducting any net income attributable to Series A Preferred Units and incentive distributions, by the weighted average number of common units and subordinated units outstanding. Because Dominion Energy Midstream has more than one class of participating securities, the two-class method is used when calculating the net income per unit applicable to limited partners. The classes of participating securities include common units, subordinated units, Series A Preferred Units and IDRs. See Note 2 to the Consolidated Financial Statements in Dominion Energy Midstream's Annual Report on Form 10-K for the year ended December 31, 2016 for further information about the Series A Preferred Units. Dominion Energy Midstream’s net income is allocated to the limited partners in accordance with their respective partnership interests, after giving effect to priority income allocations to the holders of the Series A Preferred Units and incentive distributions, if any, to Dominion Energy, the holder of the IDRs, pursuant to the partnership agreement. The distributions are declared and paid following the close of each quarter. Earnings in excess of distributions are allocated to the common and subordinated unitholders based on their respective ownership interests. Payments made to Dominion Energy Midstream's unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of earnings per limited partner unit. Diluted net income per limited partner unit reflects the potential dilution that could occur if securities or agreements to issue common units, such as the Series A Preferred Units, were converted into common units. When it is determined that potential common units resulting from the Series A Preferred Unit conversion should be included in the diluted net income per limited partner unit calculation, the impact is calculated using the two class method. There were no potentially dilutive common units outstanding at June 30, 2016. Basic and diluted earnings per unit applicable to subordinated limited partnerships are the same because there are no potentially dilutive subordinated units outstanding. The calculation of net income per limited partner unit is as follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 (millions) Net income attributable to partners $ 42.0 $ 22.5 $ 94.2 $ 45.6 Less: General partner allocation (1) (4.0 ) (0.1 ) (4.2 ) (0.1 ) Less: Preferred unitholder allocation 9.5 — 19.0 — Distributions declared on: IDRs (2) 4.3 0.7 7.2 1.1 Common unitholders 19.4 10.7 37.8 21.0 Subordinated unitholder 9.2 7.6 18.0 14.7 Total distributions declared 32.9 19.0 63.0 36.8 Undistributed earnings $ 3.6 $ 3.6 $ 16.4 $ 8.9 (1) Represents amounts recognized as equity contributions from our general partner for incurred amounts for which Dominion Energy did not seek reimbursement. See Notes 2 and 15 for further information. (2) Dominion Energy is a non-economic general partner that holds all of the IDRs. Distributions are declared and paid subsequent to quarter end. The table below summarizes the quarterly distributions on common and subordinated units related to the six months ended June 30, 2017 and 2016. Quarterly Period Ended Total Quarterly Distribution (per unit) Total Cash Distribution (in millions) Date of Declaration Date of Record Date of Distribution December 31, 2015 $ 0.2135 $ 16.8 January 21, 2016 February 5, 2016 February 15, 2016 March 31, 2016 0.2245 17.8 April 19, 2016 May 3, 2016 May 13, 2016 June 30, 2016 0.2355 19.0 July 22, 2016 August 5, 2016 August 15, 2016 December 31, 2016 0.2605 27.5 January 25, 2017 February 6, 2017 February 15, 2017 March 31, 2017 0.2740 30.1 April 21, 2017 May 5, 2017 May 15, 2017 June 30, 2017 0.2880 32.9 July 21, 2017 August 4, 2017 August 15, 2017 Record holders of the Series A Preferred Units are entitled to receive cumulative quarterly distributions, payable in cash, payable in kind or a combination thereof at the option of our general partner, equal to $0.3134 per Series A Preferred Unit in respect of each quarter ending before December 1, 2018. The table below summarizes the quarterly distributions on the Series A Preferred Units related to the six months ended June 30, 2017. Quarterly Period Ended Total Distribution (in millions) Amount Payable in Cash (in millions) Amount Payable in Kind (in millions) December 31, 2016 $ 3.2 (1) $ 3.2 $ — March 31, 2017 9.5 9.5 — June 30, 2017 9.5 9.5 — (1) For the period subsequent to the issuance of the Series A Preferred Units through December 31, 2016, the initial quarterly cash distribution was calculated as the minimum quarterly distribution of $0.3134 per unit prorated for the portion of the quarter subsequent to the issuance of the Series A Preferred Units. Basic and diluted net income per limited partner unit for the three and six months ended June 30, 2017 are as follows: Common Units Subordinated Units Series A Preferred Units General Partner (including IDRs) Total (millions, except for weighted average units and per unit data) Three Months Ended June 30, 2017 General partner allocation $ — $ — $ — $ (4.0 ) $ (4.0 ) Preferred unitholder allocation — — 9.5 — 9.5 Distributions declared 19.4 9.2 — 4.3 32.9 Undistributed earnings 2.4 1.2 — — 3.6 Net income attributable to partners (basic) $ 21.8 $ 10.4 $ 9.5 $ 0.3 $ 42.0 Dilutive effect of Series A Preferred Units (1) 8.6 — Net income attributable to partners (diluted) 30.4 10.4 Weighted average units outstanding (basic) 67,241,212 31,972,789 Dilutive effect of Series A Preferred Units (1) 30,308,342 — Weighted average units outstanding (diluted) 97,549,554 31,972,789 Net income per limited partner unit (basic) $ 0.33 $ 0.33 Net income per limited partner unit (diluted) $ 0.31 $ 0.33 Six Months Ended June 30, 2017 General partner allocation $ — $ — $ — $ (4.2 ) $ (4.2 ) Preferred unitholder allocation — — 19.0 — 19.0 Distributions declared 37.8 18.0 — 7.2 63.0 Undistributed earnings 11.1 5.3 — — 16.4 Net income attributable to partners (basic) $ 48.9 $ 23.3 $ 19.0 $ 3.0 $ 94.2 Dilutive effect of Series A Preferred Units (1) 16.0 — Net income attributable to partners (diluted) 64.9 23.3 Weighted average units outstanding (basic) 67,240,499 31,972,789 Dilutive effect of Series A Preferred Units (1) 30,308,342 — Weighted average units outstanding (diluted) 97,548,841 31,972,789 Net income per limited partner unit (basic) $ 0.73 $ 0.73 Net income per limited partner unit (diluted) $ 0.67 $ 0.73 (1) The dilutive effect of the Series A Preferred Units represents the reallocation of net income to limited partners including a reallocation of IDRs pursuant to the partnership agreement assuming conversion of the Series A Preferred Units into common units at the beginning of the period. Basic and diluted net income per limited partner unit for the three and six months ended June 30, 2016 are as follows: Common Units Subordinated Units General Partner (including IDRs) Total (millions, except for weighted average units and per unit data) Three Months Ended June 30, 2016 General partner allocation $ — $ — $ (0.1 ) $ (0.1 ) Distributions declared 10.7 7.6 0.7 19.0 Undistributed earnings 2.2 1.4 — 3.6 Net income attributable to partners (basic and diluted) $ 12.9 $ 9.0 $ 0.6 $ 22.5 Weighted average units outstanding 45,722,371 31,972,789 Net income per limited partner unit (basic and diluted) $ 0.28 $ 0.28 Six Months Ended June 30, 2016 General partner allocation $ — $ — $ (0.1 ) $ (0.1 ) Distributions declared 21.0 14.7 1.1 36.8 Undistributed earnings 5.3 3.6 — 8.9 Net income attributable to partners (basic and diluted) $ 26.3 $ 18.3 $ 1.0 $ 45.6 Weighted average units outstanding 45,722,242 31,972,789 Net income per limited partner unit (basic and diluted) $ 0.57 $ 0.57 |