Quarterly report pursuant to Section 13 or 15(d)

Cash Distributions and Net Income (Loss) per Common Unit

v2.4.0.6
Cash Distributions and Net Income (Loss) per Common Unit
 9 Months Ended
Sep. 30, 2012
Earnings Per Share [Abstract]  
Cash Distributions
Cash Distributions and Net Income (Loss) per Common Unit

Cash Distributions

Our partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash (as defined in our partnership agreement). Generally, our available cash is our cash on hand at the end of a quarter less the amount of any reserves established by our general partner. All distributions paid to date have been made from operating surplus as defined in the partnership agreement. The following provides a summary of distributions paid by us during the nine months ended September 30, 2012 (in thousands, except per unit data): 
 
 
 
 
 
 
Total Distribution
Date Paid
 
Period Covered by Distribution
 
Distribution Per Common Unit
 
Common Units
 
Class B Units
 
Subordinated Units
 
General Partner Units
February 14, 2012
 
October 1, 2011 - December 31, 2011
 
$
0.425

 
$
13,176

 
$
—

 
$
—

 
$
269

May 15, 2012
 
January 1, 2012 - March 31, 2012
 
$
0.425

 
$
13,323

 
$
—

 
$
—

 
$
272

August 14, 2012
 
April 1, 2012 - June 30, 2012
 
$
0.425

 
$
13,383

 
$
—

 
$
—

 
$
273



The subordinated units will receive distributions only to the extent we have available cash above the minimum quarterly distribution requirement for our common unitholders and general partner and certain reserves.  As a result of the assignment of Cheniere Marketing's TUA to Cheniere Investments, effective July 1, 2010, our available cash for distributions was reduced. Therefore, we have not paid distributions on our subordinated units since the distribution made with respect to the quarter ended March 31, 2010.

Pursuant to the Blackstone and Cheniere Unit Purchase Agreements, we issued and sold 100 million Class B Units at a price of $15.00 per Class B Unit in the nine months ended September 30, 2012, resulting in total gross proceeds of $1.5 billion. The Class B Units were issued at a discount to the market price of the common units into which they are convertible.  This discount totaling $1,450.0 million represents a beneficial conversion feature and is reflected as an increase in common and subordinated unitholders’ capital and a decrease in Class B unitholders’ capital to reflect the fair value of the Class B Units at issuance on our consolidated statement of partners’ and owners' capital (deficit).  The beneficial conversion feature is considered a dividend that will be distributed ratably with respect to any Class B Unit from its issuance date through its conversion date, resulting in an increase in Class B unitholders' capital and a decrease in common and subordinated unitholders’ capital.  The impact of the beneficial conversion feature is also included in earnings per unit for the three and nine months ended September 30, 2012.

Net Income (Loss) per Common Unit
 
Net income (loss) per common unit for a given period is based on the distributions that will be made to unitholders with respect to the period plus an allocation of undistributed net income (loss) based on provisions of the partnership agreement, divided by the weighted average number of common units outstanding. The two class method dictates that net income (loss) for a period be reduced by the amount of available cash that will be distributed with respect to that period and that any residual amount representing undistributed net income be allocated to common unitholders and other participating unitholders to the extent that each unit may share in net income as if all of the net income for the period had been distributed in accordance with the partnership agreement. Undistributed income is allocated to participating securities based on the distribution waterfall for available cash specified in the partnership agreement. Undistributed losses (including those resulting from distributions in excess of net income) are allocated to common units and other participating securities on a pro rata basis based on provisions of the partnership agreement. Distributions are treated as distributed earnings in the computation of earnings per common unit even though cash distributions are not necessarily derived from current or prior period earnings.
    
Under our partnership agreement, the incentive distribution rights ("IDRs") participate in net income (loss) only to the extent of the amount of cash distributions actually declared, thereby excluding the IDRs from participating in undistributed net income (loss). We did not allocate earnings or losses to IDR holders for the purpose of the two class method earnings per common unit calculation for any of the periods presented.
        
The following table provides a reconciliation of net income (loss) and the allocation of net income (loss) to the common units, the Class B Units and the subordinated units for purposes of computing net income (loss) per unit (in thousands, except per unit data):
 
 
 
 
Limited Partner Units
 
 
 
 
Total
 
Common Units
 
Class B Units
 
Subordinated Units
 
General Partner
Three Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(42,422
)
 
 
 
 
 
 
 
 
Declared distributions
 
17,125

 
16,783

 
 
 


 
342

Amortization of beneficial conversion feature of Class B Units
 
—

 
(2,971
)
 
14,888

 
(11,917
)
 
—

Assumed allocation of undistributed net loss
 
(59,547
)
 
(12,467
)
 
—

 
(42,744
)
 
(4,336
)
Assumed allocation of net income (loss)
 
 
 
$
1,345

 
$
14,888

 
$
(54,661
)
 
$
(3,994
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
31,997

 
54,710

 
135,384

 
 
Net income (loss) per unit
 
 
 
$
0.04

 
$
0.27

 
$
(0.40
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2011
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(14,479
)
 
 
 
 
 
 
 
 
Declared distributions
 
13,445

 
13,176

 
 
 


 
269

Assumed allocation of undistributed net loss
 
(27,924
)
 
(5,099
)
 
—

 
(22,267
)
 
(558
)
Assumed allocation of net income (loss)
 
 
 
$
8,077

 
$
—

 
$
(22,267
)
 
$
(289
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
27,408

 
—

 
135,384

 
 
Net income (loss) per unit
 
 
 
$
0.29

 
$
—

 
$
(0.16
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(86,615
)
 
 
 
 
 
 
 
 
Declared distributions
 
44,376

 
43,488

 
 
 


 
888

Amortization of beneficial conversion feature of Class B Units
 
—

 
(3,863
)
 
19,625

 
(15,762
)
 
—

Assumed allocation of undistributed net loss
 
(130,991
)
 
(28,278
)
 
—

 
(96,948
)
 
(5,765
)
Assumed allocation of net income (loss)
 
 
 
$
11,347

 
$
19,625

 
$
(112,710
)
 
$
(4,877
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
31,449

 
19,181

 
135,384

 
 
Net income (loss) per unit
 
 
 
$
0.36

 
$
1.02

 
$
(0.83
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2011
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(23,557
)
 
 
 
 
 
 
 
 
Declared distributions
 
36,691

 
35,957

 
 
 
 
 
734

Assumed allocation of undistributed net loss
 
(60,248
)
 
(11,002
)
 
—

 
(48,041
)
 
(1,205
)
Assumed allocation of net income (loss)
 
 
 
$
24,955

 
$
—

 
$
(48,041
)
 
$
(471
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
26,867

 
—

 
135,384

 
 
Net income (loss) per unit
 
 
 
$
0.93

 
$
—

 
$
(0.35
)