6. Members’ Equity

Equity restructuring

As described in Note 1, the Company completed an equity restructuring on April 2, 2013 to eliminate its subordinated units and previous IDRs in exchange for new IDRs. This was accounted for as an exchange of equity between the subordinated unit holder and the Managing Member.

Phantom Unit Performance Plan (the “PUPP”)

Effective April 1, 2011, the Company maintains a compensatory PUPP plan (“the Plan”) to provide long-term incentive compensation for certain employees and directors and to align their economic interest with those of common unitholders.

A Phantom Unit is a notional unit granted under the PUPP that represents the right to receive a cash payment equal to the fair market value of a unit of the Company’s common units, following the satisfaction of certain time periods and/or certain performance criteria. Phantom Units are granted unvested and subject to both time and performance conditions. The default time period over which a Phantom Unit vests is three years from the date of grant. The performance measure is based upon total unitholder return (“TUR”) metrics compared to such metrics of a select group of peer companies. The TUR metrics are calculated based on the Company’s percentile ranking during the applicable performance period compared to the peer group. Provided that the Company has satisfied its minimum quarterly distribution targets for the underlying units, the Phantom Units will vest variably according to the Company’s performance relative to its peer group.

The plan was amended effective April 1, 2012. The performance measure for Phantom Units granted after that date is based on TUR metrics compared to such metrics of a select group of peer companies to the Company. The TUR metrics are calculated based on the Company’s percentile ranking during the applicable performance period compared to a peer group. Provided that the Company has satisfied its minimum quarterly distribution targets for the common units, the Phantom Units will vest variably according to the Company’s performance relative to its peer group.

During the three months ended June 30, 2013, Phantom Units totaling 270,042 were granted at a weighted average price of $12.68. During the three months ended June 30, 2012, Phantom Units totaling 695,349 were granted at a weighted average price of $9.99.

The Plan is administered by the Compensation Committee of the Board of Directors. The Plan currently permits the grant of unit awards, restricted units, phantom units, unit options, unit appreciation rights, other unit-based awards, distribution equivalent rights and substitution awards covering an aggregate of 3,380,474 units. As of June 30, 2013, 1,769,151 units (March 31, 2013 - 2,045,693 units) were available for grant.

The following is a reconciliation of Phantom Units Outstanding as of June 30, 2013:

	Number of Time- Based Units		Number of Performance-Based Units		Total Units
Balance at March 31, 2013	624,518		307,489		932,007
Granted	135,021		135,021		270,042
Forfeited	(17,217	)	(17,217	)	(34,434	)
Distribution equivalent rights	3,250		3,250		6,500
Balance at June 30, 2013	745,572		428,543		1,174,115

Unit-based compensation costs for the three months ended June 30, 2013 and 2012 were $3.2 million and $1.7 million respectively.

Earnings per unit:

Niska Partners uses the two-class method for allocating earnings per unit. The two-class method requires the determination of net income allocated to member interests as shown below. Net income for the three months ended June 30, 2013, after the allocation to Managing Member’s interest, was only attributable to common unitholders as a result of cancellation of the Company’s subordinated units at the beginning of the current fiscal year. The cancellation of subordinated units has not impacted prior-period calculation of earnings per unit.

	Three Months Ended
	June 30,
	2013			2012
*Numerator:*
Net income (loss) attributable to Niska Partners	$	7,967		$	(37,346	)
Less:
Managing Member’s interest	(158		)	740
Net income (loss) attributable to common and subordinated unitholders	$	7,809		$	(36,606	)

*Denominator:*
Basic:
Weighted average units outstanding	34,492,245			68,296,990

Diluted:
Weighted average units outstanding	34,492,245			68,296,990

Income (loss) per unit:
Basic	$	0.23		$	(0.54	)
Diluted	$	0.23		$	(0.54	)