What changed in this filing

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Item 1. Financial Statements

2020-10-26 compared with 2020-08-07 · 179 added, 224 removed, 841 unchanged (32% of the section changed)

3 unchanged sentences

(Dollars in thousands)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(Unaudited) (Audited)

2 unchanged sentences

55,461 87,254

Product exchange receivables 212 —

Inventories 77,724 62,540

33 unchanged sentences

(Dollars and units in thousands, except per unit amounts)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

20 unchanged sentences

Other operating income (loss), net 23 16,302 2,548 13,949

Gain on involuntary conversion of property, plant and equipment 4,522 — 4,522 —

Operating income 11,013 25,461 34,573 40,077

2 unchanged sentences

Gain on retirement of senior unsecured notes — — 3,484 —

Loss on exchange of senior unsecured notes ( 8,516 ) — ( 8,516 ) —

Other, net — ( 1 ) 7 3

15 unchanged sentences

* Related Party Transactions Included Above

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

13 unchanged sentences

(Dollars and units in thousands, except per unit amounts)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

36 unchanged sentences

Contribution to parent ( 23,720 ) — — — ( 23,720 )

Balances - June 30, 2019 $ — 38,863,389 $ ( 39,255 ) $ 2,141 $ ( 37,114 )

Balances - September 30, 2019 $ — 38,863,389 $ ( 35,580 ) $ 2,210 $ ( 33,370 )

Balances - January 1, 2020 $ — 38,863,389 $ ( 38,342 ) $ 2,146 $ ( 36,196 )

5 unchanged sentences

Purchase of treasury units — ( 7,748 ) ( 9 ) — ( 9 )

Balances - June 30, 2020 $ — 38,852,507 $ ( 35,987 ) $ 2,180 $ ( 33,807 )

Balances - September 30, 2020 $ — 38,852,507 $ ( 46,423 ) $ 1,960 $ ( 44,463 )

See accompanying notes to consolidated and condensed financial statements.

2 unchanged sentences

(Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

Net income (loss) $ 6,612 $ ( 194,838 )

Net loss $ ( 4,207 ) $ ( 181,588 )

Loss from discontinued operations, net of income taxes — 179,466

Net income (loss) from continuing operations 6,612 ( 15,372 )

Net loss from continuing operations ( 4,207 ) ( 2,122 )

Adjustments to reconcile net loss to net cash provided by operating activities:

3 unchanged sentences

Deferred income tax expense 1,202 1,100

Loss on sale of property, plant and equipment, net 175 2,353

(Gain) loss on sale of property, plant and equipment, net 153 ( 13,949 )

Gain on involuntary conversion of property, plant and equipment ( 4,522 ) —

Non-cash impact related to exchange of senior unsecured notes ( 749 ) —

Gain on retirement of senior unsecured notes ( 3,484 ) —

43 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

17 unchanged sentences

Actual results could differ from those estimates.

Restructuring Support Agreement.

On June 25, 2020, the Partnership entered into a restructuring support agreement (as amended on July 7, 2020, the "Restructuring Support Agreement") with certain holders (the "Supporting Holders") that beneficially own, as of July 24, 2020, over 74 % in principal amount of the Partnership’s 7.25 % senior unsecured notes due 2021 (the "2021 Notes"), pursuant to which such holders and the Partnership agreed to enter into and implement a proposed debt restructuring transaction through an exchange offer with respect to the 2021 Notes (the "Exchange Offer") and a cash tender offer (the "Cash Tender Offer").

The Restructuring Support Agreement contemplates the following transactions:

• The Partnership agreed to commence the Exchange Offer to exchange the 2021 Notes, held by eligible holders of record, for either of:

(1) $ 650 in cash for each $1,000 in principal amount of 2021 Notes tendered (together with the Cash Tender Offer, the "Cash Offers"),

(2) $1,000 in principal amount of 11.50 % senior secured second lien notes due 2025 (the "Exchange Notes") for each $1,000 in principal amount of 2021 Notes tendered, and

(a) The right to acquire such holder’s pro rata share of $ 50 million of 10.00 % senior secured 1.5 lien notes due 2024 (the "New Notes", and the offer of the right to acquire such New Notes, the "Rights Offering"), the proceeds of which will be used to fund the Cash Offers;

(b) Holders that participate in the Rights Offering will receive Unused Proceeds (as described below) on a pro rata basis based on the principal amount of 2021 Notes participating in the Rights Offering, and $ 1,000 in principal amount of Exchange Notes for each $1,000 in principal amount of such holder’s 2021 Notes remaining after application of an amount (the "Unused Proceeds") equal to (i) the difference between $ 50 million and the amount of cash actually used in the Cash Offers multiplied by (ii) 0.85 .

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

• In connection with the Exchange Offer, the Partnership agreed to (x) commence a consent solicitation to make certain proposed amendments to the terms of the indenture governing the 2021 Notes to (i) eliminate substantially all of the restrictive covenants in the indenture governing the 2021 Notes, (ii) delete certain events of default and (iii) reduce the required time period for the Partnership to deliver a notice of redemption from at least 30 days before a redemption date to at least three business days before a redemption date and (y) solicit votes to accept the Plan, as further described below.

• The Partnership also agreed to commence a Cash Tender Offer to purchase 2021 Notes for $ 650 in cash for each $1,000 in principal amount of 2021 Notes tendered, to the extent held by holders of record not eligible to participate in the Exchange Offer.

In connection with the Cash Tender Offer, the Partnership also agreed to commence a consent solicitation to make certain proposed amendments to the terms of the indenture governing the 2021 Notes, as described above.

• Each Supporting Holder agreed to tender its 2021 Notes pursuant to the terms of the Exchange Offer and to deliver corresponding consents.

The Restructuring Support Agreement contemplates various closing conditions, including, among other things, the negotiation of definitive documentation and a minimum tender condition (the "Minimum Participation Condition"), as described below.

If the Exchange Offer and Cash Tender Offer are unsuccessful, the Restructuring Support Agreement provides agreed-upon terms for a pre-packaged financial restructuring plan (the "Plan") to be filed in cases commenced under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code" and such cases, the "Chapter 11 Cases"), subject to the terms and conditions of the Restructuring Support Agreement, including in the term sheet and the Plan attached thereto.

As of 5:00 p.m., New York City time, on July 23, 2020 (the “Early Participation Date”), the Partnership received tenders of approximately $ 335.5 million aggregate principal amount of the 2021 Notes in the Exchange Offer and Cash Tender Offer, which represented approximately 92.045 % in principal amount of the 2021 Notes.

On July 31, 2020, the required amount of Supporting Holders and the Partnership entered into an amendment to the Restructuring Support Agreement that, among other things, reduced the Minimum Participation Condition from 95 % to 92 % in principal amount of 2021 Notes tendered.

As a result, the Minimum Participation Condition has been satisfied and, subject to satisfaction of other customary closing conditions, the Exchange offer and Cash Tender Offer will be consummated on or about August 12, 2020 and the Plan will not be filed.

The Supporting Holders may terminate the Restructuring Support Agreement if, among other customary termination events, the Partnership files for bankruptcy other than as contemplated by the Restructuring Support Agreement.

The Partnership expects to continue the operation of its business in the ordinary course and does not anticipate interruption in its operations during the restructuring regardless of whether the Partnership conducts its restructuring in or out of the chapter 11 process.

The transactions contemplated by the Restructuring Support Agreement are not intended to impact trade vendors, employees, customers, or any related contractual agreements or obligations.

The Partnership’s common units will remain outstanding and are not a part of the transactions contemplated by the Restructuring Support Agreement.

See Note 18, "Subsequent Events" for further discussion of the Exchange Offer and the related transactions that are being conducted pursuant to the Restructuring Support Agreement.

Divestiture of Natural Gas Storage Assets.

4 unchanged sentences

The Partnership concluded the disposition represented a strategic shift which had a major effect on its financial results going forward.

As a result, the Partnership has presented the results of operations and

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

cash flows relating to the Natural Gas Storage Assets as discontinued operations for the three and six months ended June 30, 2019.

As a result, the Partnership has presented the results of operations and cash flows relating to the Natural Gas Storage Assets as discontinued operations for the three and nine months ended September 30, 2019.

See Note 3 for more information.

8 unchanged sentences

Accordingly, it is possible that the impact of the COVID-19 pandemic could have a material adverse effect on the Partnership's results of operations, financial position and cash flows for the year ended December 31, 2020, including the recoverability of long-lived assets and goodwill, the valuation of inventory, and the amount of expected credit losses.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

Management considered the impact of the COVID-19 pandemic on the assumptions and estimates used in the preparation of the financial statements.

5 unchanged sentences

Management also assessed the extent to which the current macroeconomic events brought about by COVID-19 and significant declines in refined product demand impacted the valuation of expected credit losses on accounts receivable and certain inventory items or resulted in modifications to any significant contracts.

Ultimately the results of these assessments did not have a material impact on the Partnership's results as of June 30, 2020.

Ultimately the results of these assessments did not have a material impact on the Partnership's results as of September 30, 2020.

NEW ACCOUNTING PRONOUNCEMENTS

9 unchanged sentences

The Partnership has concluded the disposition represents a strategic shift and will have a major effect on its financial results going forward.

As a result, the Partnership has presented the results of operations and cash flows relating to the Natural Gas Storage Assets as discontinued operations for the three and six months ended June 30, 2019.

The operating results, which are included in income from discontinued operations, were as follows:

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019

Total revenues

$ 11,902 $ 22,836

Total costs and expenses and other, net, excluding depreciation and amortization

( 9,609 ) ( 15,360 )

Depreciation and amortization

( 4,080 ) ( 8,161 )

Other operating loss 1

5 unchanged sentences

$ — $ ( 179,466 )

1 The three and six months ended June 30, 2019 includes a loss on the disposition of the Natural Gas Storage Assets of $ 178,781 .

1 The nine months ended September 30, 2019 includes a loss on the disposition of the Natural Gas Storage Assets of $ 178,781 .

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

Long-Lived Assets Held for Sale

1 unchanged sentence

These assets are considered non-core assets to the Partnership's operations and did not qualify for discontinued operations presentation under the guidance of ASC 205-20.

September 30,

2020 December 31, 2019

3 unchanged sentences

In the first quarter of 2020, the Partnership identified a triggering event related to a decline in the fair value related to the assets classified as held for sale at December 31, 2019.

As a result, an impairment charge of $ 3,052 and $ 1,300 was recorded in the Terminalling and Storage and Transportation segments, respectively, during the three months ended March 31, of 2020 and was recorded in "Other operating income (loss)" in the Partnership's Consolidated and Condensed Statements of Operations.

At June 30, 2020, the remaining assets previously classified as held for sale in the amount of $ 700 no longer met the criteria to be classified as held for sale in accordance with ASC 360-10.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

As a result, an impairment charge of $ 3,052 and $ 1,300 was recorded in the Terminalling and Storage and Transportation segments, respectively, during the three months ended March 31, 2020 and was recorded in "Other operating income (loss)" in the Partnership's Consolidated and Condensed Statements of Operations.

At September 30, 2020, the remaining assets previously classified as held for sale in the amount of $ 700 no longer met the criteria to be classified as held for sale in accordance with ASC 360-10.

The following table disaggregates our revenue by major source:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

18 unchanged sentences

The Partnership recognizes revenue when the Partnership satisfies a performance obligation, which typically occurs when the Partnership transfers control over a product to a customer or as the Partnership delivers a service.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

The following is a description of the principal activities - separated by reportable segments - from which the Partnership generates revenue.

10 unchanged sentences

Delivery of product is invoiced as the transaction occurs and is generally paid within a month.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

Sulfur Services Segment

10 unchanged sentences

The performance of the service is invoiced as the transaction occurs and is generally paid within a month.

The table includes estimated minimum revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period.

The table below includes estimated minimum revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period.

The Partnership applies the practical expedient in ASC 606-10-50-14(a) and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

5 unchanged sentences

Total $ 15,902 $ 60,298 $ 55,273 $ 55,439 $ 43,829 $ 339,313 $ 570,054

Components of inventories at June 30, 2020 and December 31, 2019 were as follows:

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

Components of inventories at September 30, 2020 and December 31, 2019 were as follows:

September 30,

2020 December 31,

5 unchanged sentences

$ 77,724 $ 62,540

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

At June 30, 2020 and December 31, 2019, long-term debt consisted of the following:

At September 30, 2020 and December 31, 2019, long-term debt consisted of the following:

September 30,

2020 December 31,

$ 400,000 Revolving credit facility at variable interest rate ( 3.44 % 1 weighted average at June 30, 2020), due August 2023 4 secured by substantially all of the Partnership’s assets, including, without limitation, inventory, accounts receivable, vessels, equipment, fixed assets and the interests in the Partnership’s operating subsidiaries, net of unamortized debt issuance costs of $ 4,206 and $ 4,586 , respectively 2

$ 300,000 Revolving credit facility at variable interest rate ( 4.75 % 1 weighted average at September 30, 2020), due August 2023 4 secured by substantially all of the Partnership’s assets, including, without limitation, inventory, accounts receivable, vessels, equipment, fixed assets and the interests in the Partnership’s operating subsidiaries, net of unamortized debt issuance costs of $ 4,030 and $ 4,586 , respectively 2,6

$ 200,970 $ 196,414

$ 400,000 Senior notes, 7.25 % interest, net of unamortized debt issuance costs of $ 428 and $ 770 , respectively, including unamortized premium of $ 191 and $ 344 , respectively, issued $ 250,000 February 2013 and $ 150,000 April 2014, $ 26,200 repurchased during 2015, $ 9,344 repurchased during 2020, due February 2021, unsecured 2,3,4,5

$ 400,000 Senior notes, 7.25 % interest, net of unamortized debt issuance costs of $ 0 and $ 770 , respectively, including unamortized premium of $ 0 and $ 344 , respectively, issued $ 250,000 February 2013 and $ 150,000 April 2014, $ 26,200 repurchased during 2015, $ 9,344 repurchased during 2020, and $ 335,666 refinanced as part of the August 2020 Exchange offer, due February 2021, unsecured 2,3,4,5

28,790 373,374

$ 53,750 Senior notes, 10.0 % interest, net of unamortized debt issuance costs of $ 3,864 and $ 0 , respectively, due February 2024 2,3,4

$ 291,970 Senior notes, 11.5 % interest, net of unamortized debt issuance costs of $ 1,824 and $ 0 , respectively, due February 2025 2,3,4

Total 569,792 569,788

7 unchanged sentences

Indebtedness under the credit facility bears interest at LIBOR plus an applicable margin or the base prime rate plus an applicable margin.

All amounts outstanding at June 30, 2020 and December 31, 2019 were at LIBOR plus an applicable margin.

All amounts outstanding at December 31, 2019 were at LIBOR plus an applicable margin.

All amounts outstanding at September 30, 2020 were at LIBOR plus an applicable margin with LIBOR having a floor of 1.0 % per annum in accordance with the July 8, 2020 amendment to the Partnership's revolving credit facility described in further detail below.

The applicable margin for revolving loans that are LIBOR loans currently ranges from 2.75 % to 4.00 % and the applicable margin for revolving loans that are base prime rate loans currently ranges from 1.75 % to 3.00 %.

The applicable margin for existing LIBOR borrowings at June 30, 2020 is 3.25 %.

The applicable margin for existing LIBOR borrowings at September 30, 2020 is 3.75 %.

The credit facility contains various covenants which limit the Partnership’s ability to make distributions;

3 unchanged sentences

and make certain amendments to the Partnership's omnibus agreement with Martin Resource Management Corporation (the "Omnibus Agreement").

Upon the earlier of (i) the closing of the Exchange Offer and related transactions and (ii) August 15, 2020, the applicable margin for revolving loans that are LIBOR loans will range from 2.75 % to 4.00 % and the applicable margin for revolving loans that are base prime rate loans will range from 1.75 % to 3.00 %.

Starting on such date, LIBOR will have a floor of 1.0 % per annum.

2 The Partnership is in compliance with all debt covenants as of June 30, 2020 and December 31, 2019, respectively.

3 The 2021 indenture restricts the Partnership’s ability to sell assets;

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

2 The Partnership is in compliance with all debt covenants as of September 30, 2020 and December 31, 2019, respectively.

3 The indentures for each of the outstanding senior notes restrict the Partnership’s ability to sell assets;

pay distributions or repurchase units or redeem or repurchase subordinated debt;

2 unchanged sentences

and consolidate, merge or transfer all or substantially all of its assets.

4 As of June 30, 2020, the 2021 Notes were due within twelve months and have therefore been presented as a current liability on the Consolidated and Condensed Balance Sheets at June 30, 2020.

The Partnership's amended revolving credit facility includes a provision that accelerates the August 31, 2023 maturity date of the revolving credit facility to (i) August 19, 2020 if either (x) more than $ 36.5 million of the 2021 Notes remain outstanding after completion of the Exchange Offer or (y) the Exchange Offer has not been completed by August 15, 2020 and the Partnership has not commenced the chapter 11 proceedings contemplated by the Plan prior to August 19, 2020 or (ii) October 16, 2020 if the Partnership commences such chapter 11 proceedings and the Plan is not effective by October 16, 2020.

On July 8, 2020, the Partnership amended its revolving credit facility to, among other things, permit the Exchange Offer.

Certain of the amendments to the revolving credit facility became effective immediately, such as a modification to its maturity date to facilitate either the Exchange Offer or the Plan.

Other amendments to the revolving credit facility will become effective upon the completion of the Exchange Offer and related transactions, or on August 15, 2020 if the Exchange Offer and

4 On August 12, 2020 (the "Settlement Date"), the Partnership and Martin Midstream Finance Corp.

(collectively, the "Issuers") completed an exchange offer (the "Exchange Offer") and consent solicitation to certain eligible holders of the Issuers’ 7.25 % senior unsecured notes due 2021 (the "2021 Notes") and separate but related cash tender offer (the "Cash Tender Offer" and, together with the Exchange Offer, the "Offers") and consent solicitation to certain other holders of the 2021 Notes.

Pursuant to the Exchange Offer, in exchange for $ 334,441 in aggregate principal amount of 2021 Notes, representing approximately 91.76 % of the outstanding aggregate principal amount of the 2021 Notes, the Issuers (i) paid $ 41,967 in cash, plus $ 11,854 of accrued and unpaid interest from and including February 15, 2020 until the Settlement Date, (ii) issued $ 291,970 in aggregate principal amount of the Issuers’ 11.50 % senior secured second lien notes due 2025 (the "2025 Notes"), and (iii) pursuant to the rights offering in connection with the Exchange Offer, issued $ 53,750 aggregate principal amount of the Issuers’ 10.00 % senior secured 1.5 lien notes due 2024 (the "2024 Notes"), which amount includes the previously disclosed $ 3,750 backstop commitment fee which was paid in 2024 Notes.

Pursuant to the Cash Tender Offer, in exchange for $ 1,225 in aggregate principal amount of 2021 Notes, representing approximately 0.34 % of the outstanding aggregate principal amount of 2021 Notes, the Issuers paid $ 791 in cash, plus $ 43 of accrued and unpaid interest on such existing 2021 Notes from February 15, 2020 up to, but not including, the Settlement Date.

Whether a debt exchange should be accounted for pursuant to ASC 470-60, Troubled Debt Restructurings by Debtors, or pursuant to ASC 470-50, Modifications and Extinguishments, requires judgments to be made with respect to whether or not an entity is experiencing financial difficulty and if a concession was granted by the creditor.

As it was determined that the Partnership did not experience a decrease in the effective borrowing rate of the Partnership’s restructured debt when compared to the Partnership’s existing debt, a concession was not provided and the accounting for troubled debt restructuring was not applied.

Further, the Partnership applied the provisions of ASC 470-50 in determining whether to account for the debt exchange as a modification or extinguishment and concluded the debt instruments were not substantially different.

Accordingly, the Partnership accounted for the debt exchange as a modification.

In conjunction with the transactions above, the Partnership recorded a loss on the Exchange Offer in the amount of $ 8,516 , which includes $ 9,264 in transaction costs related to the Exchange Offer, plus $ 189 in net unamortized issuance costs and premiums related to the 2021 Notes, offset by a gain on retirement of the 2021 Notes of $ 938 .

In accordance with ASC 470-50 related to debt modifications, the Partnership capitalized certain lender related costs of $ 5,883 (including the backstop commitment fee described above), which was allocated between the respective senior note issuances and will be amortized over the contractual terms of the 2025 Notes and 2024 Notes.

As of September 30, 2020, the remaining portion of the 2021 Notes were due within twelve months and have therefore been presented as a current liability on the Consolidated and Condensed Balance Sheets at September 30, 2020.

5 In March 2020, the Partnership repurchased on the open market an aggregate $ 9,344 of the 2021 Notes, resulting in a gain on retirement of $ 3,484 .

6 Amendment to Credit Facility.

On July 8, 2020, the Partnership amended its revolving credit facility (the "Credit Facility Amendment") to, among other things, permit the Exchange Offer.

On August 12, 2020, upon the closing of the Exchange Offer and Cash Tender Offer and satisfaction of certain other conditions set forth in the Credit Facility Amendment, the Credit Facility Amendment, among other things:

• reduced the aggregate amount of commitments under the revolving credit facility from $ 400 million to $ 300 million;

• requires an additional $ 25 million reduction in the commitments under the revolving credit facility if the Partnership receives $ 25 million or more in net cash proceeds from any asset sale;

• limits the Partnership’s ability to make quarterly distributions to its unitholders in excess of $ 0.005 per unit unless the Partnership’s Total Leverage Ratio (as defined in the Credit Facility Amendment) is below 3.75 :1:00;

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

such related transactions have not closed by such date.

The subsequent amendments to the Partnership’s revolving credit facility include, among other things, a reduction of the aggregate revolving commitments thereunder from $ 400 million to $ 300 million and an increase in the pricing under the revolving credit facility.

On July 9, 2020, the Partnership commenced the Exchange Offer and related transactions and offers contemplated by the Restructuring Support Agreement.

As of the Early Participation Date, the Partnership received sufficient 2021 Notes tendered such that the Minimum Participation Condition has been satisfied and, subject to satisfaction of other customary closing conditions, the Exchange offer and Cash Tender Offer will be consummated on or about August 12, 2020 and the Plan will not be filed.

In addition, the Partnership received the requisite majority consent necessary for the adoption of the proposed amendments to the indenture governing the 2021 Notes (the “2021 Notes Indenture”), which will, among other things, eliminate substantially all of the restrictive covenants in the 2021 Notes Indenture, delete certain events of default, and shorten the period of advance notice required to be given to holders of 2021 Notes from 30 days to three business days in the case of a redemption of the 2021 Notes.

See Note 18, "Subsequent Events" for further discussion of the Exchange Offer and related transactions.

If we are unable to refinance the 2021 Notes either via the Exchange Offer or the Plan, in each case as contemplated by the Restructuring Support Agreement, we would be in default under our revolving credit facility.

An event of default under our revolving credit facility would allow the lenders to declare the balance outstanding thereunder due and payable in full, which could trigger cross-defaults under other agreements, which could also result in the acceleration of those obligations by the counterparties to those agreements.

Pending the successful implementation of the refinancing of the 2021 Notes, the conditions described above have raised substantial doubt about the Partnership’s ability to continue as a going concern.

The Partnership’s management is engaged in ongoing communication with credit providers and presently believes the measures being taken will enable the Partnership to successfully refinance the 2021 Notes and comply with covenants under its revolving credit facility, although no assurance can be given.

5 In March 2020, the Partnership repurchased on the open market an aggregate $ 9,344 of the 2021 Notes, resulting in a gain on retirement of $ 3,484 .

The Partnership paid cash interest, net of capitalized interest, in the amount of $ 2,376 and $ 7,330 for the three months ended June 30, 2020 and 2019, respectively.

The Partnership paid cash interest, net of capitalized interest, in the amount of $ 19,113 and $ 26,693 for the six months ended June 30, 2020 and 2019, respectively.

Capitalized interest was $ 6 and $ 0 for the three months ended June 30, 2020 and 2019, respectively.

Capitalized interest was $ 9 and $ 2 for the six months ended June 30, 2020 and 2019, respectively.

September 30, 2020

• increases the pricing under the revolving credit facility and adds a 1.0 % LIBOR floor;

• requires the Partnership to maintain a minimum Interest Coverage Ratio (as defined in the revolving credit facility) of 2.0 :1.0 with respect to the fiscal quarters ending in September and December of 2020, 1.75 :1.0 with respect to each fiscal quarter ending in 2021, and 2.0 :1.0 with respect to each fiscal quarter thereafter;

• requires the Partnership to maintain a maximum Total Leverage Ratio of not more than 5.75 :1.0 with respect to the fiscal quarters ending in September and December of 2020 and March and June of 2021, 5.50 with respect to the fiscal quarter ending in September of 2021, 5.00 with respect to the fiscal quarter ending in December of 2021 and the fiscal quarters ending in March, June and September of 2022, and 4.50 :1.0 with respect to each fiscal quarter thereafter, which financial covenant replaces the existing maximum Leverage Ratio (as defined in the revolving credit facility in effect prior to the Credit Facility Amendment);

• requires the Partnership to maintain a maximum First Lien Leverage Ratio (as defined in the Credit Facility Amendment) of not more than 2.25 :1.0 with respect to the fiscal quarters ending in September and December of 2020 and each fiscal quarter ending in 2021, and 2.0 :1.0 with respect to each fiscal quarter thereafter, which financial covenant replaces the existing maximum Senior Leverage Ratio (as defined in the revolving credit facility in effect prior to the Credit Facility Amendment).

In conjunction with the Credit Facility Amendment, the Partnership expensed $ 1,063 in unamortized debt issuance costs related to the revolving credit facility for the three and nine months ended September 30, 2020, the amount of which is included in "Interest expense" in the Partnership's Consolidated and Condensed Statements of Operations.

The Partnership paid cash interest, net of capitalized interest, in the amount of $ 15,698 and $ 17,533 for the three months ended September 30, 2020 and 2019, respectively.

The Partnership paid cash interest, net of capitalized interest, in the amount of $ 34,811 and $ 44,226 for the nine months ended September 30, 2020 and 2019, respectively.

Capitalized interest was $ 16 and $ 0 for the three months ended September 30, 2020 and 2019, respectively.

Capitalized interest was $ 26 and $ 2 for the nine months ended September 30, 2020 and 2019, respectively.

The Partnership has numerous operating leases primarily for terminal facilities and transportation and other equipment.

8 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

The components of lease expense for the six months ended June 30, 2020 and 2019 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

September 30, 2020

The components of lease expense for the nine months ended September 30, 2020 and 2019 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

6 unchanged sentences

Total lease cost $ 6,195 $ 9,006 $ 20,082 $ 21,337

Supplemental balance sheet information related to leases at June 30, 2020 and December 31, 2019 was as follows:

Supplemental balance sheet information related to leases at September 30, 2020 and December 31, 2019 was as follows:

September 30,

2020 December 31, 2019

14 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

The Partnership’s future minimum lease obligations as of June 30, 2020 consist of the following:

September 30, 2020

The Partnership’s future minimum lease obligations as of September 30, 2020 consist of the following:

Operating Leases Finance Leases

9 unchanged sentences

The Partnership has non-cancelable revenue arrangements that are under the scope of ASC 842 whereby we have committed certain terminalling and storage assets in exchange for a minimum fee.

Future minimum revenues the Partnership expects to receive under these non-cancelable arrangements as of June 30, 2020 are as follows:

Future minimum revenues the Partnership expects to receive under these non-cancelable arrangements as of September 30, 2020 are as follows:

2020 - $ 4,825 ;

7 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

SUPPLEMENTAL BALANCE SHEET INFORMATION

Components of "Other accrued liabilities" were as follows:

September 30,

2020 December 31, 2019

7 unchanged sentences

The schedule below summarizes the changes in our asset retirement obligations:

June 30, 2020

September 30, 2020

Beginning asset retirement obligations $ 8,936

10 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 unchanged sentences

These hedging arrangements are in the form of swaps for NGLs.

At June 30, 2020, the Partnership has instruments totaling a gross notional quantity of 0 barrels.

At September 30, 2020, the Partnership had instruments totaling a gross notional quantity of 645,000 barrels settling during the period from October 31, 2020 through January 31, 2021.

At December 31, 2019, the Partnership had instruments totaling a gross notional quantity of 452,000 barrels settling during the period from January 31, 2020 through February 29, 2020.

4 unchanged sentences

We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

From time to time, the Partnership enters into interest rate swaps to manage interest rate risk associated with the Partnership’s variable rate credit facility and its 2021 Notes.

At June 30, 2020 and December 31, 2019, the Partnership did not have any outstanding interest rate derivative instruments.

From time to time, the Partnership enters into interest rate swaps to manage interest rate risk associated with the Partnership’s variable rate credit facility and its senior notes.

At September 30, 2020 and December 31, 2019, the Partnership did not have any outstanding interest rate derivative instruments.

For information regarding gains and losses on interest rate derivative instruments, see "Tabular Presentation of Gains and Losses on Derivative Instruments" below.

5 unchanged sentences

Balance Sheet Location

June 30, 2020 December 31, 2019 Balance Sheet Location

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019 Balance Sheet Location

September 30, 2020 December 31, 2019

Derivatives not designated as hedging instruments:

5 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

Effect of Derivative Instruments on the Consolidated and Condensed Statements of Operations

For the Three Months Ended June 30, 2020 and 2019

For the Three Months Ended September 30, 2020 and 2019

Location of Gain (Loss)

6 unchanged sentences

Effect of Derivative Instruments on the Consolidated and Condensed Statements of Operations

For the Six Months Ended June 30, 2020 and 2019

For the Nine Months Ended September 30, 2020 and 2019

Location of Gain (Loss)

6 unchanged sentences

PARTNERS' CAPITAL

As of June 30, 2020, Partners’ capital consisted of 38,852,507 common limited partner units, representing a 98 % partnership interest, and a 2 % general partner interest.

As of September 30, 2020, Partners’ capital consisted of 38,852,507 common limited partner units, representing a 98 % partnership interest, and a 2 % general partner interest.

Martin Resource Management Corporation, through subsidiaries, owns 6,114,532 of the Partnership's common limited partner units representing approximately 15.7 % of the Partnership's outstanding common limited partner units.

6 unchanged sentences

The Partnership is required to distribute all of its available cash from operating surplus, as defined in the Partnership Agreement.

The general partner was allocated no incentive distributions during the six months ended June 30, 2020 and 2019.

The general partner was allocated no incentive distributions during the nine months ended September 30, 2020 and 2019.

The target distribution levels entitle the general partner to receive 2 % of quarterly cash distributions from the minimum of $ 0.50 per unit up to $ 0.55 per unit, 15 % of quarterly cash distributions in excess of $ 0.55 per unit until all unitholders have received $ 0.625 per unit, 25 % of quarterly cash distributions in excess of $ 0.625 per unit until all unitholders have received $ 0.75 per unit and 50 % of quarterly cash distributions in excess of $ 0.75 per unit.

2 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

Distributions of Available Cash

14 unchanged sentences

The following is a reconciliation of net income from continuing operations and net income from discontinued operations allocated to the general partner and limited partners for purposes of calculating net income attributable to limited partners per unit:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

10 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

Three Months Ended June 30, Six Months Ended June 30,

September 30, 2020

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

2 unchanged sentences

Less general partner’s interest in net income (loss):

Distributions payable on behalf of IDRs — — — —

Distributions payable on behalf of general partner interest — — — 583

General partner interest in undistributed income — — — ( 4,173 )

— ( 3,797 ) — ( 3,952 )

Less income allocable to unvested restricted units — — — 5

2 unchanged sentences

The following are the unit amounts used to compute the basic and diluted earnings per limited partner unit for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

5 unchanged sentences

All outstanding units were included in the computation of diluted earnings per unit and weighted based on the number of days such units were outstanding during the periods presented.

All common unit equivalents were antidilutive for the three and six months ended June 30, 2019 and the three months ended June 30, 2020 because the limited partners were allocated a net loss in this period.

All common unit equivalents were antidilutive for the three and nine months ended September 30, 2020 and 2019 because the limited partners were allocated a net loss in this period.

UNIT BASED AWARDS

1 unchanged sentence

Amounts recognized in selling, general, and administrative expense in the consolidated and condensed financial statements with respect to these plans are as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

2 unchanged sentences

Total unit-based compensation expense $ 718 $ 349 $ 1,427 $ 1,064

All of the Partnership's outstanding awards at June 30, 2020 met the criteria to be treated under equity classification.

All of the Partnership's outstanding awards at September 30, 2020 met the criteria to be treated under equity classification.

Long-Term Incentive Plans

3 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

On May 26, 2017, the unitholders of the Partnership approved the Martin Midstream Partners L.P.

20 unchanged sentences

In addition, the PBRU's awarded on March 1, 2018 that are achieved will only vest if the grantee is employed by Martin Resource Management Corporation on March 31, 2021.

As of June 30, 2020, the Partnership is unable to ascertain if certain performance conditions will be achieved and, as such, has not recognized compensation expense for the vesting of the units.

As of September 30, 2020, the Partnership is unable to ascertain if certain performance conditions will be achieved and, as such, has not recognized compensation expense for the vesting of the units.

The Partnership will record compensation expense for the vested portion of the units once the achievement of the performance condition is deemed probable.

The restricted units are valued at their fair value at the date of grant which is equal to the market value of common units on such date.

A summary of the restricted unit activity for the six months ended June 30, 2020 is provided below:

A summary of the restricted unit activity for the nine months ended September 30, 2020 is provided below:

Number of Units Weighted Average Grant-Date Fair Value Per Unit

8 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

A summary of the restricted units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) during the three and six months ended June 30, 2020 and 2019 is provided below:

Three Months Ended June 30, Six Months Ended June 30,

September 30, 2020

A summary of the restricted units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) during the three and nine months ended September 30, 2020 and 2019 is provided below:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

1 unchanged sentence

Fair value of units vested — — 1,427 1,551

As of June 30, 2020, there was $ 1,249 of unrecognized compensation cost related to non-vested restricted units.

As of September 30, 2020, there was $ 889 of unrecognized compensation cost related to non-vested restricted units.

That cost is expected to be recognized over a weighted-average period of 1.31 years.

RELATED PARTY TRANSACTIONS

As of June 30, 2020, Martin Resource Management Corporation owns 6,114,532 of the Partnership’s common units representing approximately 15.7 % of the Partnership’s outstanding limited partner units.

As of September 30, 2020, Martin Resource Management Corporation owns 6,114,532 of the Partnership’s common units representing approximately 15.7 % of the Partnership’s outstanding limited partner units.

Martin Resource Management Corporation controls the Partnership's general partner by virtue of its 51 % voting interest in Holdings, the sole member of the Partnership's general partner.

The Partnership’s general partner, MMGP, owns a 2 % general partner interest in the Partnership and the Partnership’s IDRs.

The Partnership’s general partner’s ability, as general partner, to manage and operate the Partnership, and Martin Resource Management Corporation’s ownership as of June 30, 2020, effectively gives Martin Resource Management Corporation the ability to veto some of the Partnership’s actions and to control the Partnership’s management.

The Partnership’s general partner’s ability, as general partner, to manage and operate the Partnership, and Martin Resource Management Corporation’s ownership as of September 30, 2020, effectively gives Martin Resource Management Corporation the ability to veto some of the Partnership’s actions and to control the Partnership’s management.

The following is a description of the Partnership’s material related party agreements and transactions:

13 unchanged sentences

• any business operated by Martin Resource Management Corporation, including the following:

◦ distributing fuel oil, marine fuel and other liquids;

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

◦ distributing fuel oil, marine fuel and other liquids;

◦ providing marine bunkering and other shore-based marine services in Texas, Louisiana, Mississippi, Alabama, and Florida;

14 unchanged sentences

Effective January 1, 2020, through December 31, 2020, the Conflicts Committee approved an annual reimbursement amount for indirect expenses of $ 16,410 .

The Partnership reimbursed Martin Resource Management Corporation for $ 4,103 and $ 4,164 of indirect expenses for the three months ended June 30, 2020 and 2019, respectively.

The Partnership reimbursed Martin Resource Management Corporation for $ 8,261 and $ 8,328 of indirect expenses for the six months ended June 30, 2020 and 2019, respectively.

The Partnership reimbursed Martin Resource Management Corporation for $ 4,103 and $ 4,164 of indirect expenses for the three months ended September 30, 2020 and 2019, respectively.

The Partnership reimbursed Martin Resource Management Corporation for $ 12,364 and $ 12,492 of indirect expenses for the nine months ended September 30, 2020 and 2019, respectively.

The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.

4 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

Related Party Transactions .

32 unchanged sentences

Gulf Coast Index for #2 Fuel Oil.

Under this agreement, the Partnership agreed to purchase all of its marine fuel requirements that occur in the areas serviced by Martin Resource Management Corporation.

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

agreement, the Partnership agreed to purchase all of its marine fuel requirements that occur in the areas serviced by Martin Resource Management Corporation.

Terminal Services Agreements

30 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

Three Months Ended June 30, Six Months Ended June 30,

September 30, 2020

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

7 unchanged sentences

The impact of related party cost of products sold is reflected in the consolidated and condensed financial statements as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

4 unchanged sentences

The impact of related party operating expenses is reflected in the consolidated and condensed financial statements as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

6 unchanged sentences

The impact of related party selling, general and administrative expenses is reflected in the consolidated and condensed financial statements as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

9 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

BUSINESS SEGMENTS

6 unchanged sentences

There is no allocation of administrative expenses or interest expense.

Three Months Ended June 30, 2020 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

Three Months Ended September 30, 2020 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

Terminalling and storage 48,188 ( 1,823 ) 46,365 7,294 6,426 1,863

4 unchanged sentences

Total $ 158,130 $ ( 5,597 ) $ 152,533 $ 15,276 $ 11,013 $ 5,214

Three Months Ended June 30, 2019 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

Three Months Ended September 30, 2019 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

Terminalling and storage 55,376 ( 1,630 ) 53,746 7,690 5,393 1,616

4 unchanged sentences

Total $ 183,950 $ ( 6,050 ) $ 177,900 $ 15,009 $ 25,461 $ 7,867

Six Months Ended June 30, 2020 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

Nine Months Ended September 30, 2020 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

Terminalling and storage $ 146,298 $ ( 5,091 ) $ 141,207 $ 22,022 $ 10,153 $ 8,885

8 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

Six Months Ended June 30, 2019 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

September 30, 2020

Nine Months Ended September 30, 2019 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

Terminalling and storage $ 165,619 $ ( 4,954 ) $ 160,665 $ 23,353 $ 14,462 $ 9,465

5 unchanged sentences

Total $ 627,933 $ ( 22,677 ) $ 605,256 $ 44,997 $ 40,077 $ 26,793

The Partnership's assets by reportable segment as of June 30, 2020 and December 31, 2019, are as follows:

June 30, 2020 December 31, 2019

The Partnership's assets by reportable segment as of September 30, 2020 and December 31, 2019, are as follows:

September 30, 2020 December 31, 2019

Total assets:

21 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

FAIR VALUE MEASUREMENTS

10 unchanged sentences

Assets and liabilities measured at fair value on a recurring basis are summarized below:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Commodity derivative contracts, net $ ( 391 ) $ ( 667 )

7 unchanged sentences

The carrying amount of the revolving credit facility approximates fair value due to the debt having a variable interest rate and is in Level 2.

The estimated fair value of the 2021 Notes is considered Level 1, as the fair value is based on quoted market prices in active markets.

June 30, 2020 December 31, 2019

The estimated fair value of the 2021 Notes, 2024 Notes, and 2025 Notes (collectively, the "senior notes") is considered Level 1, as the fair value is based on quoted market prices in active markets.

September 30, 2020 December 31, 2019

Value Carrying

2021 Notes $ 28,790 $ 27,588 $ 373,374 $ 343,470

2024 Notes $ 49,886 $ 54,407 $ — $ —

2025 Notes $ 290,146 $ 261,474 $ — $ —

Total $ 368,822 $ 343,469 $ 373,374 $ 343,470

CONDENSED CONSOLIDATED FINANCIAL INFORMATION

4 unchanged sentences

In addition, the Operating Partnership may also issue senior or subordinated debt securities which, if issued, will be fully, irrevocably and unconditionally guaranteed by the Partnership.

Substantially all of the Partnership's operating subsidiaries are subsidiary guarantors of its 2021 Notes and any subsidiaries other than the subsidiary guarantors are minor.

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Provision for income taxes $ 790 $ 639 $ 1,137 $ 1,335

Substantially all of the Partnership's operating subsidiaries are subsidiary guarantors of its senior notes and any subsidiaries other than the subsidiary guarantors are minor.

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Provision for income taxes $ 373 $ 237 $ 1,510 $ 1,572

The operations of a partnership are generally not subject to income taxes, except for Texas margin tax, because its income is taxed directly to its partners.

MTI, a wholly owned subsidiary of the Partnership, is subject to income taxes due to its corporate structure.

Total income tax expense of $ 590 and $ 937 , related to the operation of the subsidiary, for the three and six months ended June 30, 2020, resulted in an effective income tax rate of ( 472 )% and 98.32 %, respectively.

Total income tax expense of $ 429 and $ 877 , related to the operation of the subsidiary, for the three and six months ended June 30, 2019, respectively, resulted in an effective income tax rate ("ETR") of 26.3 % and 25.49 %, respectively.

MTI, a wholly owned subsidiary of the Partnership, is subject to income taxes due to its corporate structure (the "Taxable Subsidiary").

Total income tax expense of $ 225 and $ 1,162 , related to the operation of the Taxable Subsidiary, for the three and nine months ended September 30, 2020, resulted in an effective income tax rate ("ETR") of 45.72 % and 80.42 %, respectively.

Total income tax expense of $ 237 and $ 1,114 , related to the operation of the Taxable Subsidiary, for the three and nine months ended September 30, 2019, respectively, resulted in an effective income tax rate of 27.37 % and 25.88 %, respectively.

The following items caused the quarterly and year-to-date ETR to be significantly different from the historical annual effective income tax rate ("AETR"):

• Pretax loss recorded for the three months ended June 30, 2020 due to the economic downturn resulting from the coronavirus pandemic.

• The Partnership has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the AETR for the full year to "ordinary" income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period.

The Partnership has used a discrete ETR method to calculate taxes for the three and six month periods ended June 30, 2020.

The Partnership determined that since small changes in estimated "ordinary" income would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the three and six month periods ended June 30, 2020.

• During the second quarter and six months ended June 30, 2020, the Partnership recorded an income tax expense of approximately $ 341 related to the filing of the 2019 Federal income tax return, which decreased the quarter-to-date ETR by 272.8 % and increased the year-to-date ETR by 35.78 %.

• The Taxable Subsidiary has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the AETR for the full year to "ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period.

The Taxable Subsidiary has used a discrete ETR method to calculate taxes for the three and nine month periods ended September 30, 2020.

The Taxable Subsidiary determined that since small changes in estimated "ordinary” income would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the three and nine month periods ended September 30, 2020.

• During the nine months ended September 30, 2020, the Taxable Subsidiary recorded income tax expense of approximately $ 341 related to the filing of the 2019 Federal income tax return, which increased the year-to-date ETR by 23.60 %.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted on March 27, 2020, in response to the market volatility and instability resulting from the COVID-19 pandemic, and includes changes to various income tax provisions including, but not limited to, providing for a five-year carryback of net operating losses generated in taxable years beginning after December 31, 2017, and before January 1, 2021, suspension of the 80% taxable income limitation for net operating losses generated after December 31, 2017, and before January 1, 2021, and relaxation of the limitation of adjusted taxable income as determined under Internal Revenue Code Section 163(j) from 30% to 50% when determining the deduction for business interest expense for 2019 and 2020.

Since, prior to its acquisition by the Partnership, MTI was a Qualified Subchapter S subsidiary ("QSub”) of Martin Resource Management Corporation, it is precluded from carrying back net operating losses to its QSub taxable years.

The other applicable provisions of the CARES Act have no material impact on the AETR, deferred taxes, or valuation allowances.

A current federal income tax expense (benefit) of $( 307 ) and $( 174 ), related to the operation of the subsidiary, were recorded for the three and six months ended June 30, 2020, respectively, and $( 78 ) and $ 218 , for the three and six months ended June 30, 2019, respectively.

A current state income tax expense (benefit) of $ 164 and $ 93 , related to the operation of the subsidiary, were recorded for the three and six months ended June 30, 2020, respectively, and $ 20 and $( 198 ) for the three and six months ended June 30, 2019, respectively.

The other applicable provisions of the CARES Act have no material impact on the annual effective tax rate ("AETR”), deferred taxes, or valuation allowances.

A current federal income tax expense (benefit) of $ 0 and $( 174 ), related to the operation of the Taxable Subsidiary, were recorded for the three and nine months ended September 30, 2020, respectively, and $( 51 ) and $ 167 , for the three and nine months ended September 30, 2019, respectively.

A current state income tax expense (benefit) of $ 41 and $ 134 , related to the operation of the Taxable Subsidiary, were recorded for the three and nine months ended September 30, 2020, respectively, and $ 45 and $( 153 ) for the three and nine months ended September 30, 2019, respectively.

With respect to MTI, income taxes are accounted for under the asset and liability method pursuant to the provisions of ASC 740 related to income taxes.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A deferred tax expense related to the MTI temporary differences of $ 733 and $ 487 was recorded for the three months ended June 30, 2020 and 2019, respectively, and $ 1,018 and $ 856 was recorded for the six months ended June 30, 2020 and 2019, respectively.

A deferred tax asset of $ 22,404 and $ 23,422 , related to the cumulative book and tax temporary differences, existed at June 30, 2020 and December 31, 2019, respectively.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

September 30, 2020

which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A deferred tax expense related to the MTI temporary differences of $ 183 and $ 244 was recorded for the three months ended September 30, 2020 and 2019, respectively, and $ 1,202 and $ 1,100 was recorded for the nine months ended September 30, 2020 and 2019, respectively.

A net deferred tax asset of $ 22,220 and $ 23,422 , related to the cumulative book and tax temporary differences, existed at September 30, 2020 and December 31, 2019, respectively.

All income tax positions taken for all open years are more likely than not to be sustained based upon their technical merit under applicable tax laws.

1 unchanged sentence

Quarterly Distribution.

On July 27, 2020, the Partnership declared a quarterly cash distribution of $ 0.005 per common unit for the second quarter of 2020, or $ 0.020 per common unit on an annualized basis, which will be paid on August 14, 2020 to unitholders of record as of August 7, 2020.

Amendment to Credit Facility .

On July 8, 2020, the Partnership amended its revolving credit facility (such amendment, the "Credit Facility Amendment") to, in part, facilitate the transactions contemplated by the Restructuring Support Agreement.

Upon the closing of the Credit Facility Amendment, the revolving credit facility was amended to, among other things:

• require the Partnership to prepay revolving loans to the extent that its Excess Cash (as defined in the Credit Facility Amendment) exceeds $ 25.0 million;

• provide that the maturity date of the lenders’ commitments under the revolving credit facility is August 31, 2023;

however, the maturity date will be:

◦ August 19, 2020 if either (x) more than $ 36.5 million of the 2021 Notes remain outstanding after completion of the Exchange Offer or (y) the Exchange Offer has not been completed by August 15, 2020 and the Partnership has not commenced the chapter 11 proceedings contemplated by the Plan prior to August 19, 2020;

◦ October 16, 2020 if the Partnership commences the chapter 11 proceedings contemplated by the Plan and the Plan is not effective by October 16, 2020.

Upon the earlier of (x) the closing of the Exchange Offer and Cash Tender Offer and satisfaction of certain other conditions set forth in the Credit Facility Amendment and (y) August 15, 2020, the Credit Facility Amendment will amend the Partnership’s revolving credit facility to, among other things:

• permit the Partnership to issue up to $ 54.0 million of the New Notes and up to $ 323.0 million of the Exchange Notes, subject to the restrictions set forth therein;

• reduce the aggregate amount of commitments under the revolving credit facility from $ 400 million to $ 300 million;

• require an additional $ 25 million reduction in the commitments under the revolving credit facility if the Partnership receives $ 25 million or more in net cash proceeds from any asset sale;

• limit the Partnership’s ability to make quarterly distributions to its unitholders in excess of $ 0.005 per unit unless the Partnership’s Total Leverage Ratio (as defined in the revolving credit facility) is below 3.75 x;

• increase the pricing under the revolving credit facility and add a 1.0 % LIBOR floor;

• require the Partnership to maintain a minimum Interest Coverage Ratio (as defined in the revolving credit facility) of 2.0 :1.0 with respect to the fiscal quarters ending in September and December of 2020, 1.75 :1.0 with respect to each fiscal quarter ending in 2021, and 2.0 x with respect to each fiscal quarter thereafter;

• require the Partnership to maintain a maximum Total Leverage Ratio (as defined in the Credit Facility Amendment) of not more than 5.75 :1.0 with respect to the fiscal quarters ending in September and December of 2020 and March and June of 2021, 5.50 with respect to the fiscal quarter ending in September of 2021, 5.00 with respect to the fiscal quarter ending in December of 2021 and the fiscal quarters ending in March, June and September of 2022, and

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

June 30, 2020

4.50 :1.0 with respect to each fiscal quarter thereafter, which financial covenant replaces the existing maximum Leverage Ratio (as defined in the revolving credit facility in effect prior to the Credit Facility Amendment);

• require the Partnership to maintain a maximum First Lien Leverage Ratio (as defined in the Credit Facility Amendment) of not more than 2.25 :1.0 with respect to the fiscal quarters ending in September and December of 2020 and each fiscal quarter ending in 2021, and 2.0 :1.0 with respect to each fiscal quarter thereafter, which financial covenant replaces the existing maximum Senior Leverage Ratio (as defined in the revolving credit facility in effect prior to the Credit Facility Amendment).

Backstop Agreement .

On July 9, 2020, the Partnership entered into a Backstop Agreement with certain of the Supporting Holders of the 2021 Notes, pursuant to which such Supporting Holders agreed to purchase any unsubscribed New Notes that are not purchased by eligible holders in the Rights Offering, or if the Exchange Offer and Cash Tender Offer are not consummated, pursuant to the Plan.

The Partnership has agreed to pay the Supporting Holders a backstop commitment fee of $ 3.75 million allocated among the Supporting Holders based on their pro rata shares of the backstop commitment, which commitment fee will be paid in New Notes.

However, if the Restructuring Support Agreement is terminated due to the Partnership’s governing body exercising its fiduciary duties, if the backstop agreement is materially breached by the Partnership and therefore terminated by the Supporting Holdings, or if the New Notes are not issued by August 17, 2020 and the Partnership has not commenced Chapter 11 Cases, the commitment fee will be paid in cash.

Exchange Offer .

On July 9, 2020, the Partnership commenced the Exchange Offer, the Cash Tender Offer, the Rights Offering and the consent solicitation contemplated by the Restructuring Support Agreement.

The Exchange Offer expires at 5:00 p.m., New York City time, on August 7, 2020;

however, the Early Participation Date occurred at 5:00 p.m., New York City time, on July 23, 2020.

As of the Early Participation Date, the Partnership received tenders of approximately $ 335.5 million aggregate principal amount of the 2021 Notes, which represented approximately 92.045 % in principal amount of the 2021 Notes.

In addition, the Partnership received the requisite majority consent necessary for the adoption of the proposed amendments to the 2021 Notes Indenture, which will, among other things, eliminate substantially all of the restrictive covenants in the 2021 Notes Indenture, delete certain events of default, and shorten the period of advance notice required to be given to holders of 2021 Notes from 30 days to three business days in the case of a redemption of the 2021 Notes.

This description of the Exchange Offer, Cash Tender Offer and related consent solicitations (collectively, the "Offers") is for informational purposes only and does not constitute an offer to purchase or exchange or a solicitation of an offer to purchase or exchange any 2021 Notes or an offer to sell securities.

The Offers are being made only pursuant to the Exchange Offer Memorandum, Consent Solicitation, Rights Offering, and Disclosure Statement Soliciting Acceptances of a Prepackaged Plan of Reorganization (the "Offering Memorandum") and Offer to Purchase and Consent Solicitation Statement, each dated July 9, 2020, which set forth a more detailed description of the terms of the Offers.

On October 21, 2020, the Partnership declared a quarterly cash distribution of $ 0.005 per common unit for the third quarter of 2020, or $ 0.020 per common unit on an annualized basis, which will be paid on November 13, 2020 to unitholders of record as of November 6, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements