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
 3 Months Ended
Mar. 31, 2013
CASH DISTRIBUTIONS AND NET INCOME (LOSS) PER COMMON UNIT [Abstract]  
Cash Distributions and Net Income (Loss) per Common Unit
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 three months ended March 31, 2013:
 
 
 
 
 
 
 
 
Total Distribution (in thousands)
Date Paid
 
Period Covered by Distribution
 
Distribution Per Common Unit
 
Distribution Per Subordinated Unit
 
Common Units
 
Class B Units
 
Subordinated Units
 
General Partner Units
February 14, 2013
 
October 1 - December 31, 2012
 
$
0.425

 
$
—

 
$
16,783

 
—

 
—

 
$
342



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. 

Pursuant to the Blackstone and Cheniere Unit Purchase Agreements, we issued and sold 133.3 million Class B units at a price of $15.00 per Class B unit in 2012, resulting in total gross proceeds of $2.0 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 $1,950.0 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 months ended March 31, 2013.

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 the 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 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 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 March 31, 2013
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(42,487
)
 
 
 
 
 
 
 
 
Declared distributions
 
24,754

 
24,259

 
—

 
—

 
495

Assumed allocation of undistributed net loss
 
(67,241
)
 
(19,543
)
 
—

 
(46,353
)
 
(1,345
)
Assumed allocation of net income (loss)
 
 
 
$
4,716

 
$
—

 
$
(46,353
)
 
$
(850
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
45,547

 
133,333

 
135,384

 
 
Net income (loss) per unit
 
 
 
$
0.10

 
$
—

 
$
(0.34
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2012
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(19,332
)
 
 
 
 
 
 
 
 
Declared distributions
 
13,499

 
13,229

 
—

 
—

 
270

Assumed allocation of undistributed net loss
 
(32,831
)
 
(6,015
)
 
—

 
(26,160
)
 
(656
)
Assumed allocation of net income (loss)
 
 
 
$
7,214

 
$
—

 
$
(26,160
)
 
$
(386
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average units outstanding
 
 
 
31,017

 
—

 
135,384

 
 
Net income (loss) per unit
 
 
 
$
0.23

 
$
—

 
$
(0.19
)