Form 10-K/A December 31, 2013



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
(Amendment No. 1)
Mark One
Annual Report Pursuant to Section 13 or 15(d) of the
 
ý
Securities Exchange Act of 1934
 
 
For the fiscal year ended December 31, 2013
 
OR
o
Transition Report Pursuant to Section 13 or 15(d) of the
 
 
Securities Exchange Act of 1934
 
  
For the transition period from  _____ to _____.
Commission file number 000-50056
 MARTIN MIDSTREAM PARTNERS L.P.
(Exact name of registrant as specified in its charter)
Delaware
 
05-0527861
State or other jurisdiction of incorporation or organization
 
(I.R.S. Employer Identification No.)
 
4200 Stone Road Kilgore, Texas  75662
(Address of principal executive offices)  (Zip Code)

903-983-6200
(Registrant’s telephone number, including area code)
_______________________
 
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Units representing limited partnership interests
 
NASDAQ Global Select Market
Securities Registered Pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes  ý                       No o
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o                        No ý
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements the past 90 days.
 Yes ý                        No o
 
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).





 Yes ý                        No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o                        No ý
 
As of June 30, 2013, 26,624,276 common units were outstanding.  The aggregate market value of the common units held by non-affiliates of the registrant as of such date approximated $949,302,187 based on the closing sale price on that date.  There were 26,622,276 of the registrant’s common units outstanding as of March 3, 2014.
 
DOCUMENTS INCORPORATED BY REFERENCE:         None.
 






TABLE OF CONTENTS
 
EXPLANATORY NOTE
 
PART IV
Item 15. Exhibits, Financial Statement Schedules
 
SIGNATURES
 
EXHIBIT INDEX
EX-23.3 Consent of Independent Accountants
EX-31.1 Certifications of Chief Executive Officer Pursuant to Section 302
EX-31.2 Certifications of Chief Financial Officer Pursuant to Section 302
EX-32.1 Certification of Chief Executive Officer Pursuant to Section 906
EX-32.2 Certification of Chief Financial Officer Pursuant to Section 906
EX-99.1 Cardinal Financial Statements







EXPLANATORY NOTE
 
Martin Midstream Partners L.P.'s (the “Partnership”) Annual Report on Form 10-K for the year ended December 31, 2013, initially filed on March 3, 2014 (“Form 10-K”), is revised by this Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) to include the separate financial statements of Cardinal Gas Storage Partners LLC (“Cardinal”), in accordance with Rule 3-09 of Regulation S-X (“Rule 3-09”), as new Exhibit 99.1, in Part IV, Item 15, Exhibits, Financial Statements Schedules (“Item 15”).  Cardinal represents an unconsolidated affiliate, accounted for under the equity method of accounting, which met the conditions of a significant subsidiary pursuant to Rule 3-09(a) and Rule 1-02(w) of Regulation S-X for the three year period ended December 31, 2013.  In accordance with Rule 3-09(b)(1), the separate financial statements of Cardinal are being filed as an amendment to the Partnership's Form 10-K, within 90 days after the end of the Partnership's fiscal year, as they were not available prior to the filing of the Partnership's Form 10-K.

Rule 3-09 of Regulation S-X provides that if a 50%-or-less-owned person accounted for by the equity method meets the first or third condition of the significant subsidiary tests set forth in Rule 1-02(w) of Regulation S-X, substituting 20% for 10%, separate financial statements for that 50%-or-less-owned person shall be filed.  The significance tests are calculated as of the end of each of the Partnership's fiscal years with respect to each fiscal year.

The consent of PricewaterhouseCoopers LLP, independent accountants for Cardinal, is also filed as exhibit 23.3 to this Amendment No. 1 to the Form 10-K.

In addition, this Amendment No. 1 includes new Exhibits 31.1, 31.2, 32.1 and 32.2, certifications of the Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a-14(a) and (b).

Except as described above, no other amendments are being made to the Form 10-K.  This Amendment No. 1 does not intend to update or modify the disclosure contained in the Partnership's Form 10-K in any way other than as required to reflect the items discussed above and does not reflect events occurring after the March 3, 2014 filing of the Partnership's Form 10-K.  Accordingly this Form 10-K/A should be read in conjunction with the Partnership's other filings.


















i





Item 15.
Exhibits, Financial Statement Schedules
(a)    Financial Statements, Schedules
(1)
The following financial statements of Martin Midstream Partners L.P. and Subsidiaries are included in Part II, Item 8:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Changes in Capital for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
Notes to the Consolidated Financial Statements
(2)
Financial Statements of Waskom Gas Processing Company for the seven months ended July 31, 2012 and year ended December 31, 2011, an affiliate accounted for by the equity method, which constituted a significant subsidiary.

(b)    Exhibits

The Exhibit Index attached to this report is incorporated by reference into this Item 15(b).





SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this Report to be signed on our behalf by the undersigned, thereunto duly authorized representative.
Martin Midstream Partners L.P.
(Registrant)
By:    Martin Midstream GP LLC
It's General Partner        
Date: March 28, 2014                    By:    /s/ Ruben S. Martin        
Ruben S. Martin
President and Chief Executive Officer                     
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 28th day of March, 2014.






Signature
 
Title
 
 
 
/s/ Ruben S. Martin
 
President, Chief Executive Officer and Director of Martin Midstream GP LLC (Principal Executive Officer)
Ruben S. Martin
 
 
 
 
 
/s/ Robert D. Bondurant
 
Executive Vice President and Chief Financial Officer of Martin Midstream GP LLC (Principal Financial Officer)
Robert D. Bondurant
 
 
 
 
 
/s/ Wesley M. Skelton
 
Executive Vice President, Chief Administrative Officer, Secretary and Controller of Martin Midstream GP LLC (Principal Accounting Officer)
Wesley M. Skelton
 
 
 
 
 
/s/ Alexander W.F. Black
 
Director of Martin Midstream GP LLC
Alexander W.F. Black
 
 
 
 
 
/s/ Sean P. Dolan
 
Director of Martin Midstream GP LLC
Sean P. Dolan
 
 
 
 
 
/s/ C. Scott Massey
 
Director of Martin Midstream GP LLC
C. Scott Massey
 
 
 
 
 
/s/ Byron R. Kelley
 
Director of Martin Midstream GP LLC
Byron R. Kelley
 
 
 
 
 
/s/ Joe N. Averett, Jr.
 
Director of Martin Midstream GP LLC
Joe N. Averett, Jr.
 
 
 
 
 
/s/ Charles H. Still
 
Director of Martin Midstream GP LLC
Charles H. Still
 
 






Exhibit
Number
Exhibit Name
 
 
3.1
Certificate of Limited Partnership of Martin Midstream Partners L.P. (the “Partnership”), dated June 21, 2002 (filed as Exhibit 3.1 to the Partnership’s Registration Statement on Form S-1 (SEC File No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.2
Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of November 25, 2009 (filed as Exhibit 10.1 to the Partnership’s Amendment to Current Report on Form 8-K/A (SEC File No. 000-50056), filed January 19, 2010, and incorporated herein by reference).
3.3
Amendment No. 2 to the Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated January 31, 2011 (filed as Exhibit 3.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed February 1, 2011, and incorporated herein by reference).
3.4
Amendment No. 3 to the Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated October 2, 2012 (filed as Exhibit 10.5 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed October 9, 2012, and incorporated herein by reference).
3.5
Certificate of Limited Partnership of the Martin Operating Partnership L.P.(the “Operating Partnership”), dated June 21, 2002 (filed as Exhibit 3.3 to the Partnership’s Registration Statement on Form S-1 (SEC File No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.6
Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated November 6, 2002 (filed as Exhibit 3.2 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed November 19, 2002, and incorporated herein by reference).
3.7
Certificate of Formation of Martin Midstream GP LLC (the “General Partner”), dated June 21, 2002 (filed as Exhibit 3.5 to the Partnership’s Registration Statement on Form S-1 (SEC File No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.8
Amended and Restated Limited Liability Company Agreement of the General Partner, dated August 30, 2013 (filed as Exhibit 3.1 to the Partnership’s Current Report on Form 8-K (SEC File. No. 000-50056), filed September 3, 2013, and incorporated herein by reference.
3.9
Certificate of Formation of Martin Operating GP LLC (the “Operating General Partner”), dated June 21, 2002 (filed as Exhibit 3.7 to the Partnership’s Registration Statement on Form S-1 (SEC File No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.10
Limited Liability Company Agreement of the Operating General Partner, dated June 21, 2002 (filed as Exhibit 3.8 to the Partnership’s Registration Statement on Form S-1 (SEC File No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
4.1
Specimen Unit Certificate for Common Units (contained in Exhibit 3.2).
4.2
Specimen Unit Certificate for Subordinated Units (filed as Exhibit 4.2 to Amendment No. 4 to the Partnership’s Registration Statement on Form S-1 (SEC File No. 333-91706), filed October 25, 2002, and incorporated herein by reference).
4.3
Indenture (including form of 8.875% Senior Note due 2018), dated as of March 26, 2010, by and among the Partnership, Martin Midstream Finance Corp., the Guarantors named therein and Wells Fargo Bank, National Association, as trustee (filed as Exhibit 4.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed March 26, 2010, and incorporated herein by reference).
4.4
First Supplemental Indenture, to the Indenture dated as of March 26, 2010, dated as of February 11, 2013, by and among the Partnership, Martin Midstream Finance Corp., the Guarantors named therein and Wells Fargo Bank, National Association, as trustee (filed as Exhibit 4.4 to the Partnership's Annual Report on Form 10-K (SEC File No. 000-50056), filed March 4, 2013, and incorporated herein by reference).
4.5
Indenture (including form of 7.250% Senior Notes due 2021), dated as of February 11, 2013, by and among the Partnership, Martin Midstream Finance Corp., the Guarantors named therein and Wells Fargo Bank, National Association, as trustee (filed as Exhibit 4.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed February 12, 2013, and incorporated herein by reference).
10.1
Third Amended and Restated Credit Agreement, dated March 28, 2013, among the Partnership, the Operating Partnership, Royal Bank of Canada and the other Lenders set forth therein (filed as Exhibit 10.1 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed April 3, 2013 and incorporated herein by reference).
10.2
Omnibus Agreement, dated November 1, 2002, by and among Martin Resource Management Corporation, the General Partner, the Partnership and the Operating Partnership (filed as Exhibit 10.3 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed November 19, 2002, and incorporated herein by reference).
10.3
Amendment No. 1 to Omnibus Agreement, dated as of November 25, 2009, by and among Martin Resource Management Corporation, the General Partner, the Partnership and the Operating Partnership (filed as Exhibit 10.3 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed December 1, 2009, and incorporated herein by reference).
10.4
Amendment No. 2 to Omnibus Agreement, dated October 1, 2012, by Martin Resource Management Corporation, the General Partner, the Partnership and the Operating Partnership (filed as Exhibit 10.4 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed October 9, 2012, and incorporated herein by reference).
10.5
Motor Carrier Agreement, dated January 1, 2006, by and between the Operating Partnership and Martin Transport, Inc. (filed as Exhibit 10.9 to the Partnership’s Annual Report on Form 10-K (SEC File No. 000-50056), filed March 2, 2011, and incorporated herein by reference).





10.6
Marine Transportation Agreement, dated January 1, 2006, by and between the Operating Partnership and Midstream Fuel Service, L.L.C. (filed as Exhibit 10.10 to the Partnership’s Annual Report on Form 10-K (SEC File No. 000-50056), filed March 2, 2011, and incorporated herein by reference).
10.7
Product Storage Agreement, dated November 1, 2002, by and between Martin Underground Storage, Inc. and the Operating Partnership (filed as Exhibit 10.8 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed November 19, 2002, and incorporated herein by reference).
10.8
Marine Fuel Agreement, dated November 1, 2002, by and between Martin Fuel Service LLC and the Operating Partnership (filed as Exhibit 10.9 to the Partnership’s Current Report on Form 8-K (SEC No. 000-50056), filed November 19, 2002, and incorporated herein by reference).
10.9†
Martin Midstream Partners L.P. Amended and Restated Long-Term Incentive Plan (filed as Exhibit 10.1 to the Partnership’s Current Report on Form 8-K (SEC No. 000-50056), filed January 26, 2006, and incorporated herein by reference).
10.10†
Form of Restricted Common Unit Grant Notice (filed as Exhibit 10.2 to the Partnership’s Current Report on Form 8-K (SEC No. 000-50056), filed January 26, 2006, and incorporated herein by reference).
10.11
Purchaser Use Easement, Ingress-Egress Easement, and Utility Facilities Easement dated November 1, 2002, by and between MGSLLC and the Operating Partnership (filed as Exhibit 10.13 to the Partnership’s Current Report on Form 8-K/A (SEC No. 000-50056), filed November 19, 2002, and incorporated herein by reference).
10.12
Asset Purchase Agreement by and among the Partnership, the Operating Partnership and Tesoro Marine Services, L.L.C., dated October 27, 2003 (filed as Exhibit 10.1 to the Partnership’s Amendment No. 1 to Current Report on Form 8-K/A (SEC No. 000-50056), filed January 23, 2004, and incorporated herein by reference).
10.13
Purchase Agreement by and among the Operating Partnership, Prism Gas Systems I, L.P., Natural Gas Partners V, L.P., Robert E. Dunn, William J. Diehnelt, Gene A. Adams, Philip D. Gettig, Sharon L. Taylor and Scott A. Southard, dated September 6, 2005 (filed as Exhibit 10.1 to the Partnership’s Current Report on Form 8-K (SEC No. 000-50056), filed September 6, 2005, and incorporated herein by reference).
10.14
Amended and Restated Terminal Services Agreement by and between the Operating Partnership and Martin Fuel Service LLC (“MFSLLC”), dated October 27, 2004 (filed as Exhibit 10.1 to the Partnership's Current Report on Form 8-K (SEC No. 000-50056), filed October 28, 2004, and incorporated herein by reference).
10.15
Lubricants and Drilling Fluids Terminal Services Agreement by and between the Operating Partnership and MFSLLC, dated December 23, 2003 (filed as Exhibit 10.4 to the Partnership’s Amendment No. 1 to Current Report on Form 8-K/A (SEC No. 000-50056), filed January 23, 2004, and incorporated herein by reference).
10.16 (¹)
Second Amended and Restated Sales Agency Agreement, dated August 5, 2013, by and between the Operating Partnership and Martin Product Sales LLC (filed as Exhibit 10.2 to the Partnership's Quarterly Report on Form 10-Q (SEC No. 000-50056) filed November 4, 2013).
10.17
Martin Resource Management Corporation Purchase Plan for Units of the Partnership, effective July 1, 2006, (filed as Exhibit 10.1 to the Partnership's registration statement on Form S-8 (SEC File No. 333-140152), filed January 23, 2007, and incorporated herein by reference).
10.18
Form of Partnership Indemnification Agreement (filed as Exhibit 10.1 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed November 6, 2008, and incorporated herein by reference).
10.19
Tolling Agreement, dated as of November 25, 2009, by and between the Operating Partnership and Cross Oil Refining & Marketing, Inc. (filed as Exhibit 10.2 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed December 1, 2009, and incorporated herein by reference).
10.20
Amended and Restated Common Unit Purchase Agreement, dated as of November 24, 2009, by and between the Partnership and Martin Resource Management (filed as Exhibit 10.4 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed December 1, 2009, and incorporated herein by reference).
10.21
Second Amended and Restated LLC Agreement of Redbird Gas Storage LLC, dated as of October 2, 2012. (filed as Exhibit 10.6 to the Partnership's Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed November 5, 2012, and incorporated herein by reference).
10.22
Supply Agreement dated, as of October 2, 2012, by and between the Partnership and Cross Oil & Refining Marketing Inc. (filed as Exhibit 10.7 to the Partnership's Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed November 5, 2012, and incorporated herein by reference).
10.23
Noncompetition Agreement dated, as of October 2, 2012, by and among the Partnership, Cross Oil Refining & Marketing, Inc., and Martin Resource Management Corporation (filed as Exhibit 10.8 to the Partnership's Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed November 5, 2012, and incorporated herein by reference).
10.24
Purchase Price Reimbursement Agreement, dated October 2, 2012, by Martin Resource Management Corporation to and for the benefit of the Operating Partnership (filed as Exhibit 10.2 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed October 9, 2012, and incorporated herein by reference).
21.1**
List of Subsidiaries.
23.1**
Consent of KPMG LLP.
23.2**
Consent of KPMG LLP.
23.3*
Consent of Pricewaterhouse Coopers LLP.
31.1*
Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





32.1*
Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”
32.2*
Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be “filed.”
99.1*
Cardinal Gas Storage Partners LLC and Subsidiaries Consolidated Financial Statements as of and for the periods ended December 31, 2013, 2012 and 2011.
101
Interactive Data: the following financial information from Martin Midstream Partners L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, formatted in Extensible Business Reporting Language: (1) the Consolidated Balance Sheets; (2) the Consolidated Statements of Income; (3) the Consolidated Statements of Cash Flows; (4) the Consolidated Statements of Capital; (5) the Consolidated Statements of Other Comprehensive Income; and (6) the Notes to Consolidated Financial Statements, tagged as blocks of text.
*
Filed or furnished herewith.
**
Filed March 3, 2014, with the Partnership's Annual Report on Form 10-K (SEC File No.000-50056), for the year ended December 31, 2013, and incorporated, herein by reference.
As required by Item 15(a)(3) of Form 10-K, this exhibit is identified as a compensatory plan or arrangement.
(¹)
Material has been redacted from this exhibit and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, which has been granted.



Exhibit 23.3


Exhibit 23.3

Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Registration Statements (No. 333-183481 and No. 333-193715) on Form S-3 and (No. 333-140152) on Form S-8 of Martin Midstream Partners L.P. and subsidiaries of our report dated March 28, 2014 relating to the consolidated financial statements of Cardinal Gas Storage Partners LLC, which appears in the December 31, 2013 annual report on Form 10-K/A of Martin Midstream Partners L.P.


/s/ PricewaterhouseCoopers LLP
Houston, Texas
March 28, 2014




Exhibit 31.1


Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to 17 CFR 240.13a-14(a)/15d-14(a)
(Section 302 of the Sarbanes-Oxley Act of 2002)
 
I, Ruben S. Martin, certify that:
 
1.  I have reviewed this annual report on Form 10-K of Martin Midstream Partners L.P.;
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a.  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     March 28, 2014
 
 
 
/s/ Ruben S. Martin
 
Ruben S. Martin, President and
 
Chief Executive Officer of
 
Martin Midstream GP LLC,
 
the General Partner of Martin Midstream Partners L.P.
 



Exhibit 31.2


Exhibit 31.2
 
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to 17 CFR 240.13a-14(a)/15d-14(a)
(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Robert D. Bondurant, certify that:
 
1.  I have reviewed this annual report on Form 10-K of Martin Midstream Partners L.P.;
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a.  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b.  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:     March 28, 2014
 
 
 
/s/ Robert D. Bondurant
 
Robert D. Bondurant, Executive Vice President and
 
Chief Financial Officer of
 
Martin Midstream GP LLC,
 
the General Partner of Martin Midstream Partners L.P.
 



Exhibit 32.1


Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C.  SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Annual Report of Martin Midstream Partners L.P., a Delaware limited partnership (the “Partnership”), on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission (the “Report”), I, Ruben S. Martin, Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to my knowledge:

(1)          the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
 
 
/s/ Ruben S. Martin
 
 
Ruben S. Martin,
 
Chief Executive Officer of Martin Midstream GP LLC,
 
General Partner of Martin Midstream Partners L.P.
 
 
 
March 28, 2014

*A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.



Exhibit 32.2


Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C.  SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Annual Report of Martin Midstream Partners L.P., a Delaware limited partnership (the “Partnership”), on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission (the “Report”), I, Robert D. Bondurant, Chief Financial Officer of Martin Midstream GP LLC, the general partner of the Partnership, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to my knowledge:

(1)          the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

 
 
/s/ Robert D. Bondurant
 
 
Robert D. Bondurant,
 
Chief Financial Officer
 
of Martin Midstream GP LLC,
 
General Partner of Martin Midstream Partners L.P.
 
 
 
March 28, 2014

*A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.



EX 99.1 Cardinal Financial Statements (2013)

Exhibit 99.1








Cardinal Gas Storage Partners, LLC
and Subsidiaries
Consolidated Financial Statements
December 31, 2013, 2012 and 2011



Cardinal Gas Storage Partners, LLC and Subsidiaries
Table of Contents
December 31, 2013, 2012 and 2011

 
Page
Independent Auditor's Report    
 
 
Consolidated Financial Statements
 
Statements of Financial Position
Statements of Operations
Statements of Members' Capital
Statements of Cash Flows
Notes to Financial Statements






Independent Auditor’s Report

To the Members of Cardinal Gas Storage Partners LLC

We have audited the accompanying consolidated financial statements of Cardinal Gas Storage Partners LLC and its subsidiaries, which comprise the consolidated statements of financial position as of December 31, 2013 and 2012, and the related consolidated statements of operations, of members’ capital and of cash flows for each of the three years in the period ended December 31, 2013.

Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cardinal Gas Storage Partners LLC and its subsidiaries at December 31, 2013 and 2012, and the results of their operations, their comprehensive income, and their cash flows for each of the three years in the period ended December 31, 2013 in accordance with accounting principles generally accepted in the United States of America.


/s/PricewaterhouseCoopers LLP
March 28, 2014



PricewaterhouseCoopers LLP, 1201 Louisiana, Suite 2900, Houston, TX 77002-5678
T: (713) 356 4000, F: (713) 356 4717, www.pwc.com/us


Cardinal Gas Storage Partners, LLC and Subsidiaries
Consolidated Statements of Financial Position
December 31, 2013 and 2012
(Dollars in thousands)

 
2013
 
2012
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
7,260

 
$
4,128

Restricted cash
14,892

 
12,764

Accounts receivable, net
4,193

 
1,451

Value of derivative instruments, current

 
272

Prepaid expenses and other current assets
1,384

 
327

Total current assets
27,729

 
18,942

Property, plant and equipment, net
622,794

 
657,529

Debt issuance costs, net
8,003

 
9,904

Value of derivative instruments
1,562

 
2,043

Intangible assets, net
1,420

 
6,349

Other assets
308

 

Total assets
$
661,816

 
$
694,767

Liabilities and Members' Capital
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued liabilities
$
6,372

 
$
21,887

Current portion of long term debt
12,420

 
4,801

Value of derivative instruments, current

 
685

Total current liabilities
18,792

 
27,373

Value of derivative instruments

 
18

Long term debt
295,261

 
210,079

Other long term liabilities
1,179

 

Total liabilities
315,232

 
237,470

Commitments and contingencies (Note 5)
 
 
 
Members' capital
346,584

 
457,297

Total liabilities and members' capital
$
661,816

 
$
694,767


The accompanying notes are an integral part of these consolidated financial statements.


2

Cardinal Gas Storage Partners, LLC and Subsidiaries
Consolidated Statements of Operations
Years Ended December 31, 2013, 2012 and 2011
(Dollars in thousands)

 
2013
 
2012
 
2011
Revenues
 
 
 
 
 
Firm capacity revenues
$
47,427

 
$
29,962

 
$
17,366

Hub services revenues
2,449

 
905

 
932

Fuel charges
2,659

 
628

 
830

Professional service fees
227

 
504

 
343

Total revenues
52,762

 
31,999

 
19,471

Expenses
 
 
 
 
 
Operating expenses
14,285

 
8,701

 
6,828

Depreciation and amortization
18,752

 
14,346

 
11,175

General and administrative
7,998

 
3,634

 
4,884

Impairment losses
129,384

 
580

 

Loss on abandoned project

 
1,259

 

Loss (gain) on sale of investment
921

 
(1
)
 
(91
)
Loss (gain) on natural gas sold
20

 
(211
)
 
64

Total expenses
171,360

 
28,308

 
22,860

Income (loss) from operations
(118,598
)
 
3,691

 
(3,389
)
Other income (expense)
 
 
 
 
 
Gain (loss) on derivative instruments
110

 
(4,735
)
 
(4,382
)
Interest income
3

 
3

 
49

Interest expense
(9,798
)
 
(4,910
)
 
(3,812
)
Total other expense
(9,685
)
 
(9,642
)
 
(8,145
)
Net loss
$
(128,283
)
 
$
(5,951
)
 
$
(11,534
)

The accompanying notes are an integral part of these consolidated financial statements.

3

Cardinal Gas Storage Partners, LLC and Subsidiaries
Consolidated Statements of Members' Capital
Years Ended December 31, 2013, 2012 and 2011
(Dollars in thousands)

 
ECP
 
Redbird
 
Total
 
 
 
 
 
 
Members' capital at December 31, 2010
$
203,214

 
$
(2,399
)
 
$
200,815

Contributions
142,142

 
95,083

 
$
237,225

Distributions
(2,140
)
 
(1,431
)
 
(3,571
)
Net loss
(6,813
)
 
(4,721
)
 
(11,534
)
Members' capital at December 31, 2011
336,403

 
86,532

 
422,935

Contributions
27,299

 
30,280

 
57,579

Distributions
(9,076
)
 
(8,190
)
 
(17,266
)
Net loss
(2,820
)
 
(3,131
)
 
(5,951
)
Members' capital at December 31, 2012
351,806

 
105,491

 
457,297

Contributions
5,887

 
15,878

 
21,765

Distributions
(2,456
)
 
(1,739
)
 
(4,195
)
Net loss
(74,089
)
 
(54,194
)
 
(128,283
)
Members' capital at December 31, 2013
$
281,148

 
$
65,436

 
$
346,584


The accompanying notes are an integral part of these consolidated financial statements.

4

Cardinal Gas Storage Partners, LLC and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2013, 2012 and 2011
(Dollars in thousands)

 
2013
 
2012
 
2011
Cash flows from operating activities:
 
 
 
 
 
Net loss
$
(128,283
)
 
$
(5,951
)
 
$
(11,534
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
(Gain) loss on derivative instruments
(110
)
 
4,735

 
4,382

Depreciation and amortization expense
18,752

 
14,346

 
11,175

Amortization of debt issuance cost
1,901

 
1,639

 
542

Impairment losses
129,384

 
580

 

Loss on abandoned project

 
1,259

 

Loss on disposal of assets
921

 

 

Provision for (recovery of) doubtful accounts
2

 
(16
)
 
13

Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable
(2,744
)
 
5,532

 
(1,784
)
Prepaid expenses and other current assets
(1,057
)
 
76

 
(325
)
Other noncurrent assets
(308
)
 

 

Payable to affiliates

 

 
(144
)
Accounts payable and accrued liabilities
2,052

 
(6,106
)
 
(5,632
)
Deferred revenue

 
(17
)
 
17

Other noncurrent liabilities
1,179

 

 

Net cash provided by (used in) operating activities
21,689

 
16,077

 
(3,290
)
Cash flows from investing activities:
 
 
 
 
 
Settlement of derivative instrument
160

 
(2,459
)
 
(5,618
)
Derivative instrument

 
(3,591
)
 

Acquisition of a business and related adjustments

 
316

 
(147,817
)
Capital expenditures
(131,857
)
 
(131,873
)
 
(91,602
)
Proceeds from sale of fixed asset
4,897

 

 

Restricted cash
(2,128
)
 
(2,026
)
 
(10,738
)
Net cash used in investing activities
(128,928
)
 
(139,633
)
 
(255,775
)
Cash flows from financing activities:
 
 
 
 
 
Proceeds from long term debt
118,117

 
102,695

 
25,802

Repayment of debt
(25,316
)
 
(11,729
)
 

Cash paid for financing costs

 
(5,071
)
 

Contributions from members
21,765

 
57,579

 
237,225

Distributions to members
(4,195
)
 
(17,266
)
 
(3,571
)
Net cash provided by financing activities
110,371

 
126,208

 
259,456

Net increase in cash and cash equivalents
3,132

 
2,652

 
391

Beginning of year
4,128

 
1,476

 
1,085

End of year
$
7,260

 
$
4,128

 
$
1,476

Supplemental disclosure:
 
 
 
 
 
Cash paid for interest, net of capitalized interest
$
7,086

 
$
3,976

 
$
3,664

Noncash investing activities:
 
 
 
 
 
Change in capital expenditures included in accounts payable and accrued liabilities
(17,567
)
 
14,389

 
4,477


The accompanying notes are an integral part of these consolidated financial statements.

5

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

1. Business Description, Formation of Company and Acquisitions

Cardinal Gas Storage Partners LLC (the “Company”) was formed on May 1, 2008, as a Delaware limited liability company with Energy Capital Partners (ECP) and Martin Resource Management Corporation (“MRMC”) as the two members. In April 2011, Redbird Gas Storage LLC (“Redbird”) was formed as a joint venture between MRMC and Martin Midstream Partners (“MMLP”). In October 2012, MMLP acquired the MRMC interest in Redbird. As a result of this transaction, Redbird is now a wholly owned subsidiary of MMLP. As of December 31, 2013, ECP had a 58.2% ownership and Redbird had a 41.8% ownership in the Company.

The Company focuses on the development, construction, operation, and management of natural gas storage facilities.
The Company has four natural gas storage facilities in operation. Arcadia Gas Storage LLC (“Arcadia”), located in Bienville Parish, Louisiana is in service with approximately 14.5 bcf of working gas storage capacity. Monroe Gas Storage LLC (“Monroe”), located in Monroe County, Mississippi, is in operation with a current working gas capacity of approximately 7.0 bcf. Cadeville Gas Storage LLC (“Cadeville”), located in Ouachita Parish, Louisiana was placed into operation during 2013 with working gas capacity of 20.0 bcf. Perryville Gas Storage LLC (“Perryville”), located in Franklin Parish, Louisiana was placed into operation during 2013 with working gas capacity of 8.7 bcf. These facilities provide producers, end users, local distribution companies, pipelines and energy marketers with high deliverability storage services and hub services.
The Company maintains two classes of member units, Category A units and Category B units. Category B Unit holders do not receive loss allocations; however, they do participate in income resulting from certain triggering events, including the sale of assets or the sale of the Company. The Board approved 7% to be allocated as Category B units; however, due to departed employees during 2012 and 2013, only 6.46% is currently outstanding as of December 31, 2013. Income is allocated first to Category A members until certain conditions are met; thereafter, 93.54% and 6.46% to Category A and Category B members, respectively.
Under the LLC agreement, each Category A member appoints two managers to the Board. If either member fails to hold a 30%-interest in the Company, one manager position would be transferred to the other member.
The wholly owned subsidiaries of the Company are Arcadia Gas Storage Holding LLC, Cadeville Gas Storage Holding LLC, Perryville Gas Storage Holding LLC, MGS Holding LLC, and Cardinal Gas Consulting LLC.
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include the accounts of the Company and the subsidiaries on a consolidated basis. All intercompany transactions have been eliminated.
Management’s Estimates and Assumptions
The preparation of consolidated financial statements in conformity with the accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements. Actual results could differ from these estimates.
Subsequent Events
The Company has performed an evaluation of subsequent events through March 28, 2014, which is the date the financial statements were made available for issuance.
Cash and Cash Equivalents
The Company considers cash and highly liquid investments with a maturity of three months or less, at the time of purchase, to be cash equivalents.

6

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

Restricted Cash
At December 31, 2013 and 2012, the Company held $14.9 and $12.8 million in restricted cash, respectively. As of December 31, 2013 and 2012, respectively, $11.5 million and $3.6 million of this balance was restricted under the terms of a loan agreement for the primary purpose of making future principal reduction payments, $2.7 million and $6.4 million was restricted for the purpose of funding development costs, and $0.7 million and $2.8 million was restricted for distributions to members under the terms of the partnership agreement. The 2013 and 2012 distributions were made to Redbird on January 31, 2014 and January 25, 2013, respectively. The ECP distribution was held to offset future contributions and is reflected within accrued liabilities as of December 31, 2013 and 2012.
Accounts Receivable and Bad Debt
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. As of December 31, 2012, management considered $0.02 million to be uncollectible and, accordingly, established an allowance for doubtful accounts. As of December 31, 2013, all receivables were considered collectible and no allowance for doubtful accounts was recorded.
Inventory
Inventory consists of natural gas received as a result of fuel revenue and certain balancing agreements and is stated at the lower of weighted average cost or market. The inventory balance as of December 31, 2013 and 2012 is reflected within other current assets on the statement of financial position.
Revenue Recognition
The Company provides various types of natural gas storage services to customers. Revenues from these services are classified as firm capacity revenue, hub services revenue, and fuel charges. In addition, the Company provided consulting services for natural gas storage projects. Revenues from these consulting services are classified as professional service fees.
Firm capacity revenues consist of (i) firm storage reservation revenues - contractually obligated monthly capacity reservation fee. These fees are paid to the Company and recognized in revenue over the term of the contract regardless of the actual storage capacity utilized. (ii) Firm storage cycling revenues for the use of injection and withdrawal services based on the volume of natural gas nominated for injection and/or withdrawal. These fees are recognized in revenue in the period the volumes are nominated.
Hub service revenue consist of fees from (i) “interruptible” storage services pursuant to which customers receive only limited assurance regarding the availability of capacity in the Company’s storage facilities and pay fees based on actual utilization of assets, (ii) “park and loan” services and (iii) “wheeling and balancing” services pursuant to which customers pay fees for the right to move a volume of gas through our facilities from an interconnection point to another and true up their deliveries of gas to, or takeaways of gas from, our facilities. A portion of our revenues related to these activities may include fuel collections.
Fuel charges consist of the small portion of a customer’s natural gas nominated for injection retained by the Company as compensation for fuel use. These fees are reflected as revenue when received. Any excess fuel collected is carried as inventory until sold.
Professional service fees consist of consulting services and are recognized as the services are performed.
Property and Equipment
Property and equipment are recorded at cost. The costs of major renewals and betterments are capitalized; repair and maintenance costs are expensed as incurred. The Company capitalizes interest related to the debt facility used for funding development as well as certain general and administrative costs associated with employees that are deemed to be dedicated to capitalized projects in process. When assets are sold or retired, the cost and related accumulated depreciation are removed from the appropriate accounts, and the resulting gain or loss is included in current operations. Leasehold improvements are capitalized and amortized over the lesser of their estimated useful lives or the applicable lease term.

7

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

Depreciation of property and equipment is provided over the estimated useful lives of the property as follows:
 
Straight Line
Storage, surface and pipeline facilities
20 to 50-year
Office equipment
5 to 7-year
Automobiles
5-year
Impairment of Long-lived Assets
The Company ensures its long-lived assets, such as property, plant, and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation were required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine whether a write-down is required. If this review indicates that the assets will not be recoverable, the carrying value of the Company’s assets would be reduced to their estimated market value.
During the winter of 2013 and early 2014, the Company determined that the Monroe facility was not able to perform at the previously calculated 9 bcf of working gas capacity. The facility was determined to have working gas capacity of 7 bcf at two turns. Based on the asset’s capability, an impairment of the Monroe fixed assets was calculated using a discounted cash flow model and recorded in the amount of $129.4 million in 2013 on the consolidated statements of operations.
In September 2012, the Company determined that a natural gas storage project in Colorado was no longer a favorable investment. The Company had previously purchased gas storage rights and mineral rights with the intention of constructing a storage facility but was unable to obtain agreements for all of the rights needed to pursue the project. The project assets were written off resulting in a loss from abandoned projects of $1.3 million in 2012 on the consolidated statements of operations.
In 2012, macro-economic factors including low gas prices and low gas price volatility reduced the amount of active gas storage development projects and the trend had a significant impact on the valuation metrics used in determining the long-term estimated value of the Company’s wholly owned subsidiary Cardinal Gas Consulting LLC (“IGC”). These specific negative factors, combined with (i) lower enterprise values resulting from lower multiples of revenues and EBITDA comparables, and (ii) the lack of relevant third party transactions due to depressed macro-economic conditions, resulted in goodwill impairment of approximately $0.6 million in 2012.
Debt Issuance Costs
Costs incurred for debt borrowings are capitalized and amortized over the life of the associated debt utilizing the effective interest rate method. When debt is retired before its scheduled maturity date, any remaining transaction-related costs associated with that debt are expensed. Total amortization for the years ended December 31, 2013, 2012 and 2011 was approximately $1.9 million, $1.6 million and $1.1 million, of which approximately $0.6 million, $1.1 million and $0.6 million was capitalized during the period of construction, respectively.
Income Taxes
The Company’s taxable income (loss) is reported on the respective income tax returns of its members. With respect to a franchise or income tax imposed by a state or local municipality, these taxes are accounted for under the asset and liability method.
The amount of Texas margin tax for the years ended December 31, 2013, 2012 and 2011 was approximately $4.8, $3.5 and $1.0, respectively. No Louisiana franchise tax was due for any of these years.
Derivative Instruments and Hedging Activities
The Company records its derivative instruments on the balance sheet as an asset or liability measured at fair value and changes in fair value are recognized currently in earnings unless specific hedge accounting criteria are met. If a derivative qualifies for hedge accounting, changes in the fair value can be offset against the change in the fair value of the hedged item through earnings or recognized in other comprehensive income until such time as the hedged item is recognized in earnings.

8

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

Derivative instruments not designated as hedges are marked-to-market with all market value adjustments recorded in the consolidated statement of operations. As of December 31, 2013, the Company has not elected hedge accounting for any of its derivative instruments. Fair value changes for these derivative instruments have been recorded in the consolidated statement of operations.
Fair Value of Financial Instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, long-term debt and derivative instruments. Management considers the carrying values of cash and cash equivalents, trade receivables and trade payables to be representative of their respective fair values because of their short-term maturities or expected settlement dates. The carrying value of outstanding amounts under the revolving credit facility and term debt approximate fair value due to the floating interest rate. Derivative instruments are recorded at fair value in the accompanying statements of financial position.
The authoritative guidance related to fair value defines a hierarchy of inputs to valuation techniques based upon whether those inputs reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). The following summarizes the fair value hierarchy:
Level 1    Inputs utilize quoted prices in active markets for identical assets or liabilities.
Level 2
Inputs utilize data points other than quoted prices included in Level 1, that are observable such as quoted prices, interest rates and yield curves.
Level 3
Inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.
The Company performed an analysis on its derivative instruments and recorded a net asset related to its derivative instruments of approximately $1.6 million for both the years ended December 31, 2013 and 2012, within Level 2 of the fair value hierarchy. Refer to Note 9 for more information on these instruments.
The Company does not have any other assets or liabilities classified within Level 3 of the fair value hierarchy. The carrying amounts reflected in the statements of financial position for other current assets and accrued expenses approximate fair value due to their short-term maturities.
Asset Retirement Obligations and Environmental Liabilities
FASB guidance establishes accounting requirements for retirement obligations associated with tangible long-lived assets including (i) the timing of the liability recognition, (ii) initial measurement of the liability, (iii) allocation of asset retirement cost to expense, (iv) subsequent measurement of the liability and (v) financial statement disclosures. FASB guidance also requires that the cost for asset retirement should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. The Company assets have contractual or regulatory obligations to perform remediation when the assets are abandoned. These assets, with regular maintenance, will continue to be in service for many years to come. It is not possible to predict when demands for our services will cease and we do not believe that such demand will cease for the foreseeable future. Accordingly, the Company believes the date when these assets will be abandoned is indeterminate. With no reasonably determinable abandonment date, the Company cannot reasonably estimate the fair value of the associated asset retirement obligation. The Company will record an asset retirement obligation in the period in which sufficient information becomes available for us to reasonably determine the settlement date.
The Company’s policy is to accrue for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.
The Company has not identified any environmental remediation obligations as of December 31, 2013.

9

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

Pad Gas Lease
The Company has a lease agreement with Credit Suisse executed on June 12, 2009 for the lease of 3.6 bcf of natural gas to use as pad gas for the storage facility at Monroe. The lease agreement expires on January 1, 2015. The Company is required to begin returning the natural gas to Credit Suisse upon expiration of the lease and to have all 3.6 bcf of the leased gas returned by the end of February 2015.
During 2011, approximately 2.5 bcf of pad gas was determined to be unrecoverable from the Monroe reservoir. The Company executed an agreement with Credit Suisse on April 20, 2012 requiring that on or before May 1, 2012, this approximate amount will be placed into an escrow fund for the repurchase of leased base gas. All base gas was repurchased as of January 2013 and the funds were released from escrow. This agreement waived default, and the pad gas lease is in good standing. A liability in the amount of $5.7 million was accrued as a short term liability on the consolidated statements of financial position as of December 31, 2011, of which 0.05 bcf, valued at $0.2 million, remained as of December 31, 2012. No liability remained as of December 31, 2013.
Share-Based Payments
The Company recognizes compensation expense for all stock-based compensation based on the fair value of the awards granted, net of estimated forfeitures, at the date of grant. The Company maintained one class of membership interests that were granted to employees of the Company. Category B membership interests, totaling 7.0% of the total membership interests, were granted to employees in various dates in 2008, 2009, and 2010. However, due to departed employees during 2012 and 2013, only 6.46% is held by Category B Unit holders as of December 31, 2013. Category B membership interests vest over an average service period of four years. Prior to Category B membership interests receiving profit allocations or equity distributions, certain future triggering events must occur. No compensation expense has been recorded as the category B membership interests have an initial threshold value of $0.
Capitalization of Interest
Interest on borrowed funds is capitalized on projects during construction based on the approximate average interest rate of the Company’s debt. The Company capitalized $2.7 million, $3.5 million and $3.1 million during the years ended December 31, 2013, 2012 and 2011, respectively.
3. Acquisition

On May 31, 2011, the Company acquired 100% of the equity interests of Monroe for an aggregate purchase price of $147.8 million in cash.
The fair value of assets acquired and liabilities assumed is as follows:
Current assets
$
5,075

Fixed assets
135,135

Intangible assets
12,968

Goodwill
316

Total assets acquired
153,494

Total liabilities assumed
(5,677
)
Net assets acquired
$
147,817

In April 2012, the Company received $5.5 million, less a $0.5 million working capital adjustment, from the Acquisition Indemnification Holdback Escrow account as a result of an indemnity claim for approximately 2.5 bcf of lease pad gas that was not recoverable from the reservoir. This net receipt of $5.0 million is reflected as a receivable on the consolidated statements of financial position as of December 31, 2011.

10

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

4. Property, Plant and Equipment

A summary of property, plant and equipment as of December 31, 2013 and 2012, is as follows:
 
2013
 
2012
Operating plant
$
609,699

 
$
346,610

Construction in progress
19,536

 
321,641

Base gas
32,457

 
11,346

Land
3,315

 
3,315

Office equipment
861

 
1,079

Automobiles
620

 
423

 
666,488

 
684,414

Accumulated depreciation
(43,694
)
 
(26,885
)
 
$
622,794

 
$
657,529

Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $16.9 million, $11.1 million and $7.8 million, respectively.
On April 1, 2013, Arcadia sold 1.22 bcf of base gas for $4.9 million, reducing the total base gas from 2.22 bcf to 1.0 bcf. This sale was made in order to reduce the amount of capital invested in base gas through entering into a low-turn storage agreement with Cadeville. This low-turn contract allows Arcadia to maintain the required cavern pressure by injecting water into the cavern as needed rather than holding base gas. The historical cost of the non-depreciable base gas asset was $5.8 million, resulting in a loss on the sale of assets of $0.9 million.
5. Commitments and Contingencies
Leases
The Company has noncancelable operating leases for office space and office equipment. Rental payments for each of the years ended December 31, 2013, 2012 and 2011 were $0.5 million.
Future minimum noncancelable lease payments by year as of December 31, 2013, are as follows:
2014
$
450

2015
202

2016 and thereafter

Total commitments
$
652

Litigation
The Company may be subject to claims and litigation arising in the normal course of its business. The Company believes that any current or potential claims proceedings arising in the normal course of its business will not have a material, adverse effect on its financial position, results of operations or cash flows.

11

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

6. Intangible Assets

In connection with the Monroe acquisition in 2011 (Note 3), the Company acquired certain intangible assets. A summary of intangible assets as of December 31, 2013 and 2012 is as follows:
 
 Estimated Lives
 
2013
 
2012
Pad Gas Lease
4 years
 
$
3,388

 
$
3,388

Ad Valorem Tax Contract
8 years
 
1,611

 
4,729

Gas Storage Contracts
1 to 2 years
 
4,351

 
4,351

FERC Permit
50 years
 
500

 
500

 
 
 
9,850

 
12,968

Accumulated amortization
 
 
(8,430
)
 
(6,619
)
 
 
 
$
1,420

 
$
6,349

Amortization expense for intangible assets was $1.8 million, $3.2 million and $3.3 million for the periods ended December 31, 2013, 2012 and 2011, respectively. The estimated future aggregate amortization expense of intangible assets as of December 31, 2013 is set forth below:
2014
$
956

2015
10

2016
10

2017
10

2018
10

Thereafter
424

 
$
1,420

7. Concentrations

Concentration of Credit Risk
As of December 31, 2013, the Company had cash deposits with financial institutions in excess of the amount insured by the Federal Deposit Insurance Corporation. Management believes that any credit risk associated with excess deposits in these financial institutions is minimal.
The Company’s principal customers for natural gas storage are natural gas pipeline and natural gas marketing companies. These concentrations of customers may affect the Company’s overall credit risk in that certain customers may be similarly affected by changes in economic, regulatory, or other factors. Where exposed to credit risk, the Company analyzes the counterparties’ financial condition prior to entering into an agreement, obtains additional financial assurance where possible through guarantees and letters of credit, establishes credit limits, and monitors the appropriateness of those limits on an ongoing basis.
Gas Storage Inventory
At December 31, 2013 and 2012, the value of gas storage inventory held for others was approximately $192.9 million and $45.1 million, respectively. There were no gas loan transactions. This balance represents the volume of stored natural gas valued at December 31, 2013 and 2012, respectively, utilizing the closing prices of various published delivery points. Because the Company does not take title to the gas, the Company’s gas storage inventory and loan transactions are not recorded in the consolidated statement of financial position.
Significant Customers
Significant customers are those that individually account for more than 10% of the Company’s consolidated revenues or accounts receivables. For the year ended December 31, 2013, four customers accounted for approximately 26%, 16%, 14% and 12% of the Company’s total revenues. At December 31, 2013, four customers accounted for approximately 41%, 14%, 11% and 11% of the Company’s accounts receivable. For the year ended December 31, 2012, four customers

12

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

accounted for approximately 24%, 16%, 15%, and 12% of the Company’s total revenues. At December 31, 2012, two customers accounted for approximately 39%, and 19% of the Company’s accounts receivable. For the year ended December 31, 2011, six customers accounted for approximately 16%, 16%, 14%, 13%, 11% and 10% of the Company's total revenues.
8. Long Term Debt

A summary of long term debt at December 31, 2013 and 2012 is as follows:
 
2013
 
2012
Construction loan - Arcadia
$
69,641

 
$
80,771

Base gas revolver - Arcadia
13,747

 
18,639

Construction loan - Perryville
100,079

 
62,700

Base gas revolver - Perryville
15,575

 
5,375

Construction loan - Cadeville
108,639

 
47,395

 
307,681

 
214,880

Less: Current portion
(12,420
)
 
(4,801
)
 
$
295,261

 
$
210,079

On June 30, 2008, Arcadia entered into a $118 million multibank nonrecourse construction and term loan agreement comprised of a $92.5 million construction loan and $25.5 million base gas revolver (“Arcadia facility”). The Arcadia facility matures in 2016. The base gas loan is interest only. The construction loan converted to a five-year term note upon substantial completion of the construction in September 2011. Arcadia began making principal payments on the term loan in 2012. The credit facilities are collateralized with a perfected first priority security interest in the Arcadia assets.
Prior to conversion, the interest rate on the Arcadia construction loan was based on LIBOR, plus 3.25%, set on the date of each advance. Upon conversion to a term loan in September 2011, the interest rate was based on LIBOR, plus 3.00%, set on the date of each advance. Upon the second anniversary of the conversion date, which occurred in September 2013, the interest rate was based on LIBOR, plus 3.25%, set on the date of each advance. The interest rate as of December 31, 2013 was approximately 3.42%.
The interest rate on the base gas revolver fluctuates based on LIBOR, plus 3.25%, set on the date of each advance. The interest rate as of December 31, 2013 was approximately 3.42%.
On May 12, 2010, Perryville entered into a $125 million multibank construction and term loan agreement comprised of a $105 million construction loan and $20 million base gas revolver (“Perryville facility”). The Perryville facility matures in 2018. The base gas loan is interest only. Upon conversion to a term loan at substantial completion in July 2013, the interest rate on the loan was based on LIBOR, plus 3.50%, set on the date of each advance. The interest rate as of December 31, 2013 was approximately 3.67%. The credit facilities are collateralized with a perfected first security interest in the Perryville assets.
In May 2010, Perryville entered into interest rate caps effectively capping LIBOR to 4.0% through 2014 and 6.0% thereafter through 2015. The notional amount changes on a stated monthly basis starting in October 2011 and expires in December 2015. The maximum notional amount is $125 million.

13

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

On April 19, 2012, Cadeville entered into a construction and term loan agreement for an aggregate principal amount up to $115 million (“Cadeville facility”). Upon conversion to a term loan at substantial completion in July 2013, the interest rate was based on LIBOR, plus 2.75%, set on the date of each advance. The interest rate as of December 31, 2013 was approximately 2.92%.
Maturities of long term debt are as follows as of December 31, 2013:
2014
$
12,420

2015
12,420

2016
84,709

2017
8,721

2018
189,411

Thereafter

 
$
307,681

9. Derivative Instruments

The Company enters into derivative contracts such as cash flow swaps and call options in an effort to reduce commodity price risk and interest rate fluctuations. Cash flow swaps exchange a variable price for a fixed price, while a call option places a limit on the commodity price of a future purchase or the interest rate applied to debt.
The components of gain (loss) on derivative instruments for the years ended December 31, 2013, 2012, and 2011 are as follows:
 
2013
 
2012
 
2011
Interest rate
$
691

 
$
(245
)
 
$
(864
)
Natural gas
(581
)
 
(4,490
)
 
(3,518
)
Gain (loss) on derivative instruments
$
110

 
$
(4,735
)
 
$
(4,382
)
A summary of derivative instruments at December 31, 2013 and 2012 is as follows:


14

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

Transaction Type
 
Settlement Date
 
Pricing Terms
 
Quantity
 
2013
 
2012
 
 
 
 
 
 
 
 
 
 
 
Natural gas call option
 
1,250,000 MMBTU on April 8, 2013, and 1,250,000 MMBTU on May 8, 2013
 
Fixed price of $5.00/MMBTU settled against Henry Hub Natural Gas Index
 
2,500,000 MMBTU
 
$

 
$
14

 
 
 
 
 
 
 
 
 
 
 
Natural gas call option
 
1,250,000 MMBTU on January 31, 2013, and 1,250,000 MMBTU on February 28, 2013
 
Fixed price of $4.50/MMBTU settled against Henry Hub Natural Gas Index
 
2,500,000 MMBTU
 

 
1

 
 
 
 
 
 
 
 
 
 
 
Natural gas call option
 
1,333,333 MMBTU on March 31, 2013; 1,333,333 MMBTU on April 30, 2013 and 1,333,334 MMBTU on May 31, 2013
 
Fixed price of $4.00/MMBTU settled against Columbia Gulf Mainline - Inside FERC
 
4,000,000 MMBTU
 

 
257

 
 
 
 
 
 
 
 
 
 
 
          Current assets fair value of derivatives
 
 
 
 
 

 
272

 
 
 
 
 
 
 
 
 
 
 
Natural gas call option
 
2,345,498 MMBTU on January 31, 2015; 1,286,242 MMBTU on February 15, 2015
 
Fixed price of $4.50/MMBTU settled against Henry Hub Natural Gas Index
 
3,631,740 MMBTU
 
1,507

 
1,976

 
 
 
 
 
 
 
 
 
 
 
Interest rate cap
 
$115 million on December 31, 2015
 
Fixed rate of 2.00% settled against LIBOR, quarterly LIBOR resets
 
$115 million
 
52

 
67

 
 
 
 
 
 
 
 
 
 
 
Interest rate cap
 
$125 million on December 31, 2015
 
Cap rate of 4.00% settled monthly through 2014, and Cap rate of 6.00% for 2015
 
$125 million
 
3

 

 
 
 
 
 
 
 
 
 
 
 
           Non-current assets fair value of derivatives
 
 
 
 
 
1,562

 
2,043

 
 
 
 
 
 
 
 
 
 
 
Interest rate swap
 
$60 million on December 31, 2013
 
Fixed rate of 1.46% settled against LIBOR, quarterly LIBOR resets
 
$60 million
 

 
(685
)
 
 
 
 
 
 
 
 
 
 
 
          Current liabilities fair value of derivatives
 
 
 
 
 

 
(685
)
 
 
 
 
 
 
 
 
 
 
 
Interest rate cap
 
$125 million on December 31, 2015
 
Cap rate of 4.00% settled monthly through 2014, and Cap rate of 6.00% for 2015
 
$125 million
 

 
(18
)
 
 
 
 
 
 
 
 
 
 
 
          Long term liabilities fair value of derivatives
 
 
 
 
 

 
(18
)
 
 
 
 
 
 
 
 
 
 
 
         Net fair value of derivatives
 
 
 
 
 
$
1,562

 
$
1,612

In June 2008, Arcadia entered into an interest rate swap effectively fixing LIBOR at 3.79% for $75 million notional of the Arcadia facility. The swap began settling in $25 million increments in 2009 and 2010, with the remaining $25 million notional settled at December 31, 2011. In December 2010, Arcadia entered into a second interest rate swap fixing LIBOR at 1.46% for $35 million notional, accreting by $25 million at December 31, 2011, which settled at $60 million notional at December 31, 2013. The interest rate swaps are classified in value of derivative instruments on the consolidated statement of financial position.

15

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

On April 19, 2012, Cadeville entered into an interest rate cap agreement effectively capping LIBOR at 2.00% for 100% of the projected outstanding notional under the construction facility. The notional amount changes on a stated monthly basis starting in April 2012 and expires in April 2016. The maximum notional amount is $115 million.
In January 2012, the Company sold natural gas call options for a gain of $0.06 million. These call options had a strike price of $5.00 per MMBTU, a notional quantity of 3,000,000 MMBTU and were scheduled to settle in three equal increments of 1,000,000 MMBTU in March 2014, April 2014, and May 2014. The Company received a cash payment of $0.8 million resulting from this sale which is reflected in the consolidated statements of cash flows. The change in value of the call options is reflected on the consolidated statements of operations.
In July 2011, Perryville sold call options entered into in May 2010 with a strike price of $6.00 and a notional quantity of 4,000,000 MMBTU and purchased call options with a strike price of $5.00 and a notional quantity of 2,500,000 MMBTU. Perryville made a cash payment of $0.6 million for this transaction. These swaps settled in April and May 2013. The change in value of the call options is reflected on the consolidated statements of operation, the cash paid for the repurchase is reflected on the consolidated statements of cash flows, and the value of the derivative as of December 31, 2012 is reflected in short term assets on the consolidated statements of financial position.
On April 19, 2012, Cadeville entered into natural gas call options, settled monthly at the Columbia Gulf Mainline, with a strike price of $4.00 per MMBTU and a notional quantity of 4,000,000 MMBTU. The call options settled in three equal installments of 1,333,333 MMBTU in March, April, and May 2013. The cash paid for the purchase is reflected on the consolidated statements of cash flows, the change in value is reflected in derivative instruments on the consolidated statements of operations, and the value of the derivative as of December 31, 2012 is reflected in short term assets on the consolidated statements of financial position.
On June 1, 2012, Monroe entered into natural gas call options, settled monthly against Henry Hub, with a strike price of $4.50 per MMBTU and a notional quantity of 3,631,740 MMBTU. These call options settled in two increments of 2,345,498 MMBTU and 1,286,242 MMBTU on January 31, 2015 and February 28, 2015, respectively. The cash paid for the purchase is reflected on the consolidated statements of cash flows, the change in value is reflected in derivative instruments on the consolidated statements of operations, and the value of the derivative as of December 31, 2013 is reflected in long term assets on the consolidated statements of financial position.
On July 5, 2012, Monroe entered into natural gas call options, settled against Henry Hub, with a strike price of $4.50 per MMBTU and a notional quantity of 2,500,000 MMBTU. These call options settled in two increments of 1,250,000 MMBTU on January 31, 2013 and February 28, 2013. The cash paid for the purchase is reflected on the consolidated statements of cash flows, the change in value is reflected in derivative instruments on the consolidated statements of operations, and the value of the derivative as of December 31, 2012 is reflected in short term assets on the consolidated statements of financial position.
On July 5, 2012, Monroe entered into natural gas call options, settled against the NYMEX Natural Gas Index, with a strike price of $5.00 per MMBTU and a notional quantity of 2,000,000 MMBTU. These call options settled on January 31, 2013. The cash paid for the purchase is reflected on the consolidated statements of cash flows, the change in value is reflected in derivative instruments on the consolidated statements of operations, and the value of the derivative as of December 31, 2012 is reflected in short term assets on the consolidated statements of financial position.
10. Member and Related Party Transactions

The Company maintained one class of membership interests that was granted to employees of the Company. Category B membership interests totaling 6.46% of the total membership interests were granted to employees in various dates in 2008, 2009 and 2010. Category B membership interests vest over an average service period of four years. Category B membership participation to receive profit allocations or equity distribution is restricted by certain future triggering events.
MRMC provides payroll processing, IT services, and other general administrative support services to the Company under a Master Services Agreement that expires on April 30, 2016. The Company may terminate the agreement upon 30 days’ notice and MRMC may terminate the agreement only if specific events occur during the term of the agreement. The service fee for each of the years ending December 31, 2013, 2012 and 2011 was $0.2 million.

16

Cardinal Gas Storage Partners, LLC and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except where otherwise indicated)

The Company also pays to MRMC a direct cost fee equal to the actual amount incurred that directly benefits the Company. The most significant ongoing portion of the fee is for salary, wages, taxes, and benefits paid by MRMC to the employees of the Company.
The Company paid $13.2 million, $10.3 million and $8.8 million to MRMC under the Master Services Agreement for the years ending December 31, 2013, 2012 and 2011, respectively.
Arcadia entered into a Brine Facilities Lease Agreement with Martin Product Sales LLC (“MPS”) effective February 2012 and renewed annually. The agreement allows Arcadia to lease the brine facilities from MPS to process its brine for sale for a monthly rental fee.
The Company entered into a Shared Water Well Services Agreement with Martin Underground Storage, Inc. (“MUS”) effective May 1, 2008, this expires on April 30, 2016. The agreement permits the Company to utilize the fresh water wells owned by MUS to meet the Company’s reasonable operation needs. Costs are shared proportionally on water usage.


17