What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-10-26 compared with 2020-08-07 · 196 added, 160 removed, 525 unchanged (40% of the section changed)

16 unchanged sentences

Martin Resource Management Corporation is an important supplier and customer of ours.

As of June 30, 2020, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units.

As of September 30, 2020, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units.

Furthermore, Martin Resource Management Corporation controls Martin Midstream GP LLC ("MMGP"), our general partner, by virtue of its 51% voting interest in MMGP Holdings, LLC ("Holdings"), the sole member of MMGP.

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Significant Recent Developments

Exchange Offer and Cash Tender Offer

On August 12, 2020, we successfully completed our previously announced Exchange Offer and consent solicitation to certain eligible holders of our 2021 Notes and separate but related Cash Tender Offer and consent solicitation to certain other

holders of our 2021 Notes.

Please see Note 6 in Part I of this Form 10-Q for more information about the Exchange Offer and related transactions.

The Partnership continues to prioritize the health and safety of our employees, the businesses we serve, and the communities where we live and work.

To support the safety of all of our employees and operations, precautionary measures were implemented to prevent the COVID-19 virus from spreading in our workplace or the locations we serve, including suspending non-essential travel, limiting the number of employees attending meetings, reducing the number of people at our locations at any one time, monitoring the health of all employees, and implementing work-from-home initiatives for all eligible

Further, we continue to provide awareness training for all of our drivers, vessel crews, blending operators and other affected personnel regarding preventative measures in or around our docks, vessels, and trucks and locations to which they are delivering.

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The COVID-19 pandemic has impacted our 2020 performance to date.

The impact of this outbreak started in February and continued through the second quarter, during which time we have seen unfavorable trends in certain key metrics across several of our business lines compared to recent periods.

The impact of this outbreak started in February and continued through the third quarter, during which time we have seen unfavorable trends in certain key metrics across several of our business lines compared to recent periods.

We expect to continue to experience the adverse impacts of COVID-19 on our business throughout the remainder of 2020 as a result of an expected continued reduction in refined product demand across the industries we serve.

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However, downside risk remains in our packaged lubricant and grease businesses due to reduced demand from our oil and gas production customers and our construction customers.

In our Transportation segment, reduced demand for refined products and chemicals is expected to continue to impact our land and marine transportation businesses.

In our Transportation segment, reduced demand for refined products and chemicals is expected to continue to impact our marine and land transportation businesses.

In our Natural Gas Liquids segment, our butane optimization business could be impacted by reduced butane production out of third-party refineries as they run at lower utilization rates during the economic shutdown.

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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 our results as of June 30, 2020.

Other Recent Developments

Beginning in July of 2018, we committed to strengthening our balance sheet through strategic initiatives aimed at reducing leverage by divesting non-core assets and businesses, creating the ability to focus on a streamlined corporate strategy and position the Partnership for growth.

The first set of initiatives was executed in 2018 with the divestiture of our 20% interest in West Texas LPG Pipeline Limited Partnership for $195.0 million and the sale of a non-strategic terminal asset located in Nevada for $8.0 million.

On January 1, 2019, we completed the next initiative with the acquisition of Martin Transport, Inc.

from Martin Resource Management Corporation for $135.0 million, positioning us for cash flow growth.

On July 1, 2019, we completed the sale of our natural gas storage assets for $215.0 million, which was an important piece of the Partnership’s strategy to strengthen the balance sheet and re-focus our operational expertise on the refinery services industry.

On August 12, 2019, we completed the sale of our East Texas Pipeline for $17.5 million.

As a result of dispositions, offset by acquisitions, we were able to pay down $300.5 million of outstanding debt while incurring only a slight reduction to projected EBITDA.

Consistent with our strategy of reducing leverage and improving

liquidity, on January 28, 2020, we announced a $0.75 per unit reduction of our cash distribution on an annual basis, allowing us to retain $29.2 million to continue to strengthen our balance sheet.

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

Subsequent Events

Quarterly Distribution.

On July 27, 2020, we 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.

Restructuring Support Agreement;

Exchange Offer and Related Transactions.

On June 25, 2020, the Partnership entered into the Restructuring Support Agreement with certain Supporting Holders, pursuant to which such holders and the Partnership agreed to enter into and implement a proposed debt restructuring transaction through the Exchange Offer and Cash Tender Offer, and 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 to be filed in the Chapter 11 Cases.

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.

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.

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.

Please see Note 1 and Note 18 in Part I of this Form 10-Q for more information about the Restructuring Support Agreement, the Exchange Offer and related transactions.

On October 21, 2020, we 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.

Critical Accounting Policies and Estimates

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The Omnibus Agreement requires us to reimburse Martin Resource Management Corporation for all direct expenses it incurs or payments it makes on our behalf or in connection with the operation of our business.

We reimbursed Martin Resource Management Corporation for $30.2 million of direct costs and expenses for the three months ended June 30, 2020 compared to $38.8 million for the three months ended June 30, 2019.

We reimbursed Martin Resource Management Corporation for $64.6 million of direct costs and expenses for the six months ended June 30, 2020 compared to $74.2 million for the six months ended June 30, 2019.

We reimbursed Martin Resource Management Corporation for $29.9 million of direct costs and expenses for the three months ended September 30, 2020 compared to $34.8 million for the three months ended September 30, 2019.

We reimbursed Martin Resource Management Corporation for $94.5 million of direct costs and expenses for the nine months ended September 30, 2020 compared to $105.4 million for the nine months ended September 30, 2019.

There is no monetary limitation on the amount we are required to reimburse Martin Resource Management Corporation for direct expenses.

In addition to the direct expenses, under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses.

For the three months ended June 30, 2020 and 2019, the conflicts committee of the board of directors of the general partner of the Partnership (the "Conflicts Committee") approved reimbursement amounts of $4.1 million and $4.3 million, respectively.

In each of the six months ended June 30, 2020 and 2019, the Conflicts Committee approved reimbursement amounts of $8.3 million and $8.4 million, respectively.

For the three months ended September 30, 2020 and 2019, the conflicts committee of the board of directors of the general partner of the Partnership (the "Conflicts Committee") approved reimbursement amounts of $4.2 million and $4.2 million, respectively.

In each of the nine months ended September 30, 2020 and 2019, the Conflicts Committee approved reimbursement amounts of $12.5 million and $12.6 million, respectively.

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

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We have been and anticipate that we will continue to be both a significant customer and supplier of products and services offered by Martin Resource Management Corporation.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 26% and 24% of our total costs and expenses during the three months ended June 30, 2020 and 2019, respectively.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 23% and 20% of our total costs and expenses during the six months ended June 30, 2020 and 2019, respectively.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 23% and 23% of our total costs and expenses during the three months ended September 30, 2020 and 2019, respectively.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 23% and 20% of our total costs and expenses during the nine months ended September 30, 2020 and 2019, respectively.

Correspondingly, Martin Resource Management Corporation is one of our significant customers.

Our sales to Martin Resource Management Corporation accounted for approximately 15% and 13% of our total revenues for the three months ended June 30, 2020 and 2019, respectively.

Our sales to Martin Resource Management Corporation accounted for approximately 13% and 11% of our total revenues for both the six months ended June 30, 2020 and 2019, respectively.

Our sales to Martin Resource Management Corporation accounted for approximately 14% and 14% of our total revenues for the three months ended September 30, 2020 and 2019, respectively.

Our sales to Martin Resource Management Corporation accounted for approximately 13% and 12% of our total revenues for both the nine months ended September 30, 2020 and 2019, respectively.

For a more comprehensive discussion concerning the agreements that we have entered into with Martin Resource Management Corporation, please refer to "Item 13.

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If the board of directors of our general partner is involved in the approval process, it determines whether to refer the matter to the Conflicts Committee of our general partner's board of directors, as constituted under our limited partnership agreement.

If a matter is referred to the Conflicts Committee, it obtains information regarding the proposed transaction from management and determines whether to engage independent legal counsel or an independent financial advisor to advise the members of the committee regarding the transaction.

If a matter is referred to the Conflicts

Committee, it obtains information regarding the proposed transaction from management and determines whether to engage independent legal counsel or an independent financial advisor to advise the members of the committee regarding the transaction.

If the Conflicts Committee retains such counsel or financial advisor, it considers such advice and, in the case of a financial advisor, such advisor’s opinion as to whether the transaction is fair and reasonable to us and to our unitholders.

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Reconciliation of Non-GAAP Financial Measures

The following table reconciles the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three and six months ended June 30, 2020 and 2019.

The following table reconciles the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three and nine months ended September 30, 2020 and 2019.

Reconciliation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

9 unchanged sentences

(Gain) loss on sale of property, plant and equipment, net (22) (16,302) 153 (13,949)

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

Unrealized mark-to-market on commodity derivatives 393 (2,602) (276) (529)

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Lower of cost or market adjustments 35 104 370 407

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

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

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Results of Operations

The results of operations for the three and six months ended June 30, 2020 and 2019 have been derived from our consolidated and condensed financial statements.

The results of operations for the three and nine months ended September 30, 2020 and 2019 have been derived from our consolidated and condensed financial statements.

We evaluate segment performance on the basis of operating income, which is derived by subtracting cost of products sold, operating expenses, selling, general and administrative expenses, and depreciation and amortization expense from revenues.

The following table sets forth our operating revenues and operating income by segment for the three and six months ended June 30, 2020 and 2019.

The following table sets forth our operating revenues and operating income by segment for the three and nine months ended September 30, 2020 and 2019.

The results of operations for these interim periods are not necessarily indicative of the results of operations which might be expected for the entire year.

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These items, including interest expense and indirect selling, general and administrative expenses, are discussed following the comparative discussion of our results within each segment.

Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019

Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

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Income (Loss)

Three Months Ended June 30, 2020 (in thousands)

Three Months Ended September 30, 2020 (in thousands)

Terminalling and storage $ 48,188 $ (1,823) $ 46,365 $ 6,975 $ (549) $ 6,426

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Income (Loss)

Three Months Ended June 30, 2019 (in thousands)

Three Months Ended September 30, 2019 (in thousands)

Terminalling and storage $ 55,376 $ (1,630) $ 53,746 $ 5,576 $ (183) $ 5,393

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Total $ 183,950 $ (6,050) $ 177,900 $ 25,461 $ — $ 25,461

Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

1 unchanged sentence

Income (Loss)

Six Months Ended June 30, 2020 (in thousands)

Nine Months Ended September 30, 2020 (in thousands)

Terminalling and storage $ 146,298 $ (5,091) $ 141,207 $ 11,356 $ (1,203) $ 10,153

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Income (Loss)

Six Months Ended June 30, 2019 (in thousands)

Nine Months Ended September 30, 2019 (in thousands)

Terminalling and storage $ 165,619 $ (4,954) $ 160,665 $ 15,062 $ (600) $ 14,462

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Terminalling and Storage Segment

Comparative Results of Operations for the Three Months Ended June 30, 2020 and 2019

Three Months Ended June 30, Variance Percent Change

Comparative Results of Operations for the Three Months Ended September 30, 2020 and 2019

Three Months Ended September 30, Variance Percent Change

(In thousands, except BBL per day)

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6,912 5,576 1,336 24 %

Other operating income (loss), net (3) 7 (10) (143) %

Other operating income, net 1 — 1

Gain on involuntary conversion of property, plant and equipment 62 — 62

Operating income $ 6,975 $ 5,576 $ 1,399 25 %

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Services revenues.

Services revenues decreased $1.5 million, of which $0.9 million was primarily a result of expiring capital recovery fees at our Smackover refinery and decreased fees related to a crude pipeline gathering rate adjustment combined with a $0.3 million decrease as a result of decreased lubricant delivery fees at our shore-based terminals.

In addition, a decrease of $0.3 million was a result of decreased throughput rates at our specialty terminals.

Services revenues decreased $0.3 million, of which $1.1 million was primarily a result of expiring capital recovery fees at our Smackover refinery and decreased fees related to a crude pipeline gathering rate adjustment.

Offsetting this decrease, a $0.5 million increase at our shore-based terminals was primarily a result of $1.0 million in contract termination fees and $0.2 million in space rental income, offset by decreased throughput revenue of $0.6 million.

In addition, an increase of $0.3 million was a result of increased throughput revenue at our specialty terminals.

Products revenues.

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Operating expenses.

Operating expenses decreased $1.0 million which is primarily a result of decreased compensation expenses of $0.3 million, repairs and maintenance of $0.2 million and materials and supplies of $0.2 million.

Operating expenses decreased $0.9 million as a result of decreased compensation expense of $0.5 million, repairs and maintenance of $0.2 million, $0.1 million in wharfage fees, and outside services of $0.1 million.

Selling, general and administrative expenses.

Selling, general and administrative expenses remained consistent.

Selling, general and administrative expenses decreased $0.2 million primarily as a result of decreased professional fees.

Depreciation and amortization.

The decrease in depreciation and amortization is the result of assets becoming fully depreciated.

Other operating income (loss), net.

Other operating loss, net represents gains and losses from the disposition of property, plant and equipment.

Comparative Results of Operations for the Six Months Ended June 30, 2020 and 2019

Six Months Ended June 30, Variance Percent Change

Other operating income, net.

Other operating income, net represents gains and losses from the disposition of property, plant and equipment.

Gain on involuntary conversion of property, plant and equipment.

The $0.1 million gain is due to insurance proceeds received related to structural damage of terminalling assets during a weather incident at our Neches Terminal in May of 2019.

Comparative Results of Operations for the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended September 30, Variance Percent Change

(In thousands, except BBL per day)

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Other operating income (loss), net (3,053) 17 (3,070) (18,059) %

Gain on involuntary conversion of property, plant and equipment 62 — 62

Operating income $ 11,356 $ 15,062 $ (3,706) (25) %

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Services revenues.

Services revenue decreased $4.2 million, of which $1.8 million was primarily a result of decreased throughput fees at our shore-based terminals combined with a $1.8 million decrease as a result of expiring capital recovery fees at our Smackover refinery and decreased fees related to a crude pipeline gathering rate adjustment.

In addition, a decrease of $0.6 million was a result of decreased throughput rates at our specialty terminals.

Services revenue decreased $4.5 million, of which $2.8 million was primarily a result of expiring capital recovery fees at our Smackover refinery and decreased fees related to a crude pipeline gathering rate adjustment.

In addition, a decrease of $1.3 million was primarily a result of decreased throughput at our shore-based terminals combined with a decrease of $0.3 million as a result of decreased throughput rates at our specialty terminals.

Products revenues.

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A 16% decrease in sales volumes combined with a 17% decrease in average cost per gallon at our shore-based terminals resulted in a $6.8 million decrease in cost of products sold.

In addition, a 7% decrease in sales volumes combined with a 3% decrease in average cost per gallon at our blending and packaging facilities resulted in a $3.6 million decrease in cost of products sold.

In addition, a 6% decrease in sales volumes combined with a 9% decrease in average cost per gallon at our blending and packaging facilities resulted in an $8.5 million decrease in cost of products sold.

Operating expenses.

Operating expenses decreased $1.4 million primarily as a result of decreased utilities of $0.4 million, materials and supplies of $0.3 million, chemicals of $0.3 million and compensation expense of $0.2 million across our terminals.

Operating expenses decreased $2.3 million primarily as a result of decreased compensation expense of $0.5 million, utilities of $0.4 million, operating supplies of $0.4 million, chemicals of $0.3 million, professional fees of $0.2 million, and other operating expenses of $0.2 million across our terminals.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased primarily due to an increase in professional fees across our terminals.

Selling, general and administrative expenses remained relatively consistent.

Depreciation and amortization.

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Other operating income (loss), net represents gains and losses from the disposition of property, plant and equipment.

For the six months ended June 30, 2020, other operating income (loss), net represents the impairment charge resulting from a decline in the fair value related to assets previously classified as held for sale.

Gain on involuntary conversion of property, plant and equipment.

The $0.1 million gain is due to insurance proceeds received related to structural damage of terminalling assets during a weather incident at our Neches Terminal in May of 2019.

Transportation Segment

Comparative Results of Operations for the Three Months Ended June 30, 2020 and 2019

Three Months Ended June 30, Variance Percent Change

Comparative Results of Operations for the Three Months Ended September 30, 2020 and 2019

Three Months Ended September 30, Variance Percent Change

(In thousands)

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1,106 4,296 (3,190) (74) %

Other operating income (loss), net 13 (1,649) 1,662 101 %

Other operating income, net 21 150 (129) (86) %

Operating income $ 1,127 $ 4,446 $ (3,319) (75) %

1 unchanged sentence

Inland revenue decreased $3.5 million, primarily related to decreased utilization and transportation rates.

In addition, offshore revenue decreased $0.5 million primarily due to a decrease in transportation rates.

Offshore revenue decreased $0.8 million primarily due to a decrease in transportation rates.

Additionally, ancillary revenue (primarily fuel) decreased $0.8 million.

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Operating expenses .

The decrease in operating expenses is primarily a result of decreases in pass through expenses (primarily fuel) of $3.3 million, compensation expense of $3.6 million, and repairs and maintenance of $0.9 million.

The decrease in operating expenses is primarily a result of decreases in compensation expense of $2.3 million, pass through expenses (primarily fuel) of $1.9 million, repairs and maintenance of $1.1 million, lease expense of $0.3 million, and regulatory taxes and related expenses of $0.3 million.

Selling, general and administrative expenses .

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Depreciation and amortization increased as a result of recent capital expenditures offset by asset disposals.

Other operating income (loss), net.

Other operating income (loss), net represents losses from the disposition of property, plant and equipment.

Comparative Results of Operations for the Six Months Ended June 30, 2020 and 2019

Six Months Ended June 30, Variance Percent Change

Other operating income, net.

Other operating income, net represents gains from the disposition of property, plant and equipment.

Comparative Results of Operations for the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended September 30, Variance Percent Change

(In thousands)

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Marine Transportation Revenues .

Inland revenue decreased $1.4 million, primarily related to decreased tows.

Inland revenues decreased $4.8 million, primarily related to a decrease in tows, utilization and transportation rates.

In addition, offshore revenue decreased $1.5 million primarily due to a decrease in transportation rates.

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Land Transportation Revenues.

Freight revenue decreased $6.1 million primarily due to a 12% decrease in miles.

Freight revenue decreased $8.1 million primarily due to an 11% decrease in miles.

Additionally, fuel surcharge decreased $4.7 million.

Operating expenses .

The decrease in operating expenses is primarily a result of decreases in pass through expenses (primarily fuel) of $3.6 million, compensation expense of $3.4 million, lease expense of $0.9 million, and repairs and maintenance of $0.9 million.

The decrease in operating expenses is primarily a result of decreases in pass through expenses (primarily fuel) of $5.4 million, compensation expense of $5.2 million, repairs and maintenance of $1.9 million, lease expense of $0.9 million, and regulatory taxes and related expenses of $0.5 million.

Selling, general and administrative expenses .

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Sulfur Services Segment

Comparative Results of Operations for the Three Months Ended June 30, 2020 and 2019

Three Months Ended June 30, Variance Percent Change

Comparative Results of Operations for the Three Months Ended September 30, 2020 and 2019

Three Months Ended September 30, Variance Percent Change

(In thousands)

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Other operating income (loss), net 1 — 1

Gain on involuntary conversion of property, plant and equipment 4,460 — 4,460

Operating income $ 5,580 $ 291 $ 5,289 1,818 %

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Products revenues.

Products revenues decreased $1.0 million as a result of a 3% decrease in average sales price.

A 5% decrease in sales volumes, primarily attributable to a 9% decrease in sulfur volumes, resulted in an additional decrease of $1.5 million.

Products revenues decreased $3.9 million as a result of a 17% decrease in sales volumes, primarily attributable to a 25% decrease in fertilizer volumes.

A 13% increase in average sales price resulted in an offsetting $2.7 million increase in products revenues.

Cost of products sold.

A 17% decrease in average cost of products sold per ton reduced our cost of products sold by $4.1 million.

A 17% decrease in sales volumes decreased our cost of products sold by $2.9 million.

An 8% increase in average cost of products sold per ton resulted in an offsetting $1.2 million increase to our cost of products sold.

Margin per ton increased $5.93, or 32%.

Operating expenses.

Our operating expenses increased primarily as a result of a $0.3 million increase in insurance premiums and claims.

An additional $0.2 million increase related to outside towing offset by a $0.2 million decrease in marine fuel and lube.

Operating expenses decreased $0.4 million.

Marine fuel expense, assist tugs, marine repairs and maintenance, and insurance claims each decreased $0.1 million.

Selling, general and administrative expenses.

Selling, general and administrative expenses decreased a combined $0.1 million due to decreased compensation expense and professional fees.

Selling, general and administrative expenses remained relatively consistent.

Depreciation and amortization.

Depreciation and amortization increased as a result of recent capital expenditures.

Other operating income (loss), net.

Other operating income (loss), net represents gains and losses from the disposition of property, plant and equipment.

Comparative Results of Operations for the Six Months Ended June 30, 2020 and 2019

Six Months Ended June 30, Variance Percent Change

Gain on involuntary conversion of property, plant and equipment.

The $4.5 million gain is due to insurance proceeds received related to structural damage of our ship-loader assets during a weather incident at our Neches Terminal in May of 2019.

Comparative Results of Operations for the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended September 30, Variance Percent Change

(In thousands)

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Other operating income (loss), net 6,777 (1) 6,778 677,800 %

Gain on involuntary conversion of property, plant and equipment 4,460 — 4,460

Operating income $ 24,261 $ 9,394 $ 14,867 158 %

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Operating expenses.

Operating expenses increased as a result of a $0.4 million increase in insurance premiums and claims, a $0.4 million increase in outside towing, a $0.2 million increase in harbor and agency fees and a $0.1 million increase in repairs and maintenance expense.

Operating expenses increased as a result of a $0.3 million increase in insurance premiums and claims, a $0.4 million increase in outside towing, and a $0.2 million increase in harbor and agency fees.

Offsetting was a decrease of $0.1 million in both marine fuel and assist tugs.

Selling, general and administrative expenses.

Selling, general and administrative expenses decreased slightly due to a decrease in professional fees.

Selling, general and administrative expenses remained relatively consistent.

Depreciation and amortization.

1 unchanged sentence

Other operating income (loss), net.

Other operating income, net increased $2.7 million as a result of business interruption recoveries related to the Neches ship-loader insurance claim received in the first quarter of 2020.

Other operating income, net increased $2.7 million as a result of business interruption recoveries related to downtime associated with the Neches ship-loader insurance claim received in the first quarter of 2020.

An additional $4.1 million increase is related to a net gain from the disposition of property, plant and equipment.

Gain on involuntary conversion of property, plant and equipment.

The $4.5 million gain is due to insurance proceeds received related to structural damage of our ship-loader assets during a weather incident at our Neches Terminal in May of 2019.

Natural Gas Liquids Segment

Comparative Results of Operations for the Three Months Ended June 30, 2020 and 2019

Three Months Ended June 30, Variance Percent Change

Comparative Results of Operations for the Three Months Ended September 30, 2020 and 2019

Three Months Ended September 30, Variance Percent Change

(In thousands)

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1,854 3,511 (1,657) (47) %

Other operating income (loss), net — 10 (10) (100) %

Operating income (loss) $ 1,029 $ (3,390) $ 4,419 130 %

Other operating income, net — 16,152 (16,152) (100) %

Operating income $ 1,854 $ 19,663 $ (17,809) (91) %

NGL sales volumes (Bbls) 2,572 1,905 667 35 %

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The increase in sales volume of 35% resulted in a $12.4 million increase to cost of products sold.

Our margins increased $2.19 per barrel, or $3.7 million during the period.

Our margins decreased $1.67 per barrel, or $2.0 million during the period.

Operating expenses .

Operating expenses decreased $0.5 million related to the divestiture of retail propane assets and the elimination of the associated expenses.

Operating expenses decreased $0.6 million related to the divestiture of assets and the elimination of the associated expenses.

Selling, general and administrative expenses .

Selling, general and administrative expenses decreased primarily due to decreased compensation expense.

Selling, general and administrative expenses increased primarily due to increased compensation expense.

Depreciation and amortization.

2 unchanged sentences

Other operating income, net represents gains and losses from the disposition of property, plant and equipment.

Comparative Results of Operations for the Six Months Ended June 30, 2020 and 2019

Six Months Ended June 30, Variance Percent Change

Comparative Results of Operations for the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended September 30, Variance Percent Change

(In thousands)

6 unchanged sentences

Other operating income (loss), net (2) 16,168 (16,170) (100) %

Operating income (loss) $ 6,287 $ (1,651) $ 7,938 481 %

Operating income $ 8,141 $ 18,012 $ (9,871) (55) %

NGL sales volumes (Bbls) 6,952 6,269 683 11 %

2 unchanged sentences

The decrease in average sales price per barrel was a result of a decrease in market prices.

Sales volumes decreased 5%, decreasing revenues by $6.0 million.

Sales volumes increased 11%, increasing revenues by $16.2 million.

Cost of products sold .

1 unchanged sentence

The decrease in average cost per barrel was a result of a decrease in market prices.

The decrease in sales volume of 5% resulted in a $5.4 million decrease to cost of products sold.

The increase in sales volume of 11% resulted in a $14.6 million increase to cost of products sold.

Our margins increased $0.47 per barrel, or $4.5 million, during the period.

8 unchanged sentences

Interest Expense, Net

Comparative Components of Interest Expense, Net for the Three Months Ended June 30, 2020 and 2019

Three Months Ended June 30, Variance Percent Change

Comparative Components of Interest Expense, Net for the Three Months Ended September 30, 2020 and 2019

Three Months Ended September 30, Variance Percent Change

(In thousands)

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Total interest expense, net $ 12,943 $ 11,973 $ 970 8

Comparative Components of Interest Expense, Net for the Six Months Ended June 30, 2020 and 2019

Six Months Ended June 30, Variance Percent Change

Comparative Components of Interest Expense, Net for the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended September 30, Variance Percent Change

(In thousands)

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Indirect Selling, General and Administrative Expenses

Three Months Ended June 30, Variance Percent Change Six Months Ended June 30, Variance Percent Change

Three Months Ended September 30, Variance Percent Change Nine Months Ended September 30, Variance Percent Change

2020 2019 2020 2019

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$ 4,523 $ 4,515 $ 8 — % $ 13,256 $ 13,681 $ (425) (3) %

Indirect selling, general and administrative expenses decreased for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to decreased professional fees.

Indirect selling, general and administrative expenses decreased for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to transaction expenses incurred in the first quarter of 2019 related to the acquisition of MTI of $0.2 million and decreased professional fees of $0.2 million.

Indirect selling, general and administrative expenses remained consistent for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

Indirect selling, general and administrative expenses decreased for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to transaction expenses incurred in the first quarter of 2019 related to the acquisition of MTI of $0.2 million and decreased professional fees of $0.2 million.

Martin Resource Management Corporation allocates to us a portion of its indirect selling, general and administrative expenses for services such as accounting, legal, treasury, clerical, billing, information technology, administration of insurance, engineering, general office expense and employee benefit plans and other general corporate overhead functions we share with Martin Resource Management Corporation retained businesses.

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Under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses.

The Conflicts Committee of our general partner approved the following reimbursement amounts during the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30, Variance Percent Change Six Months Ended June 30, Variance Percent Change

The Conflicts Committee of our general partner approved the following reimbursement amounts during the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30, Variance Percent Change Nine Months Ended September 30, Variance Percent Change

2020 2019 2020 2019

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Set forth below is a description of our cash flows for the periods indicated.

Cash Flows - Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

The following table details the cash flow changes between the six months ended June 30, 2020 and 2019:

Six Months Ended June 30, Variance Percent Change

Cash Flows - Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

The following table details the cash flow changes between the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30, Variance Percent Change

(In thousands)

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Net cash provided by operating activities.

The increase in net cash provided by operating activities for the six months ended June 30, 2020 includes an increase in operating results of $22.0 million, a favorable variance in working capital of $5.8 million, and a favorable variance in other non-current assets and liabilities of $1.2 million.

Offsetting this increase was a $7.8 million decrease in net cash received from discontinued operating activities and a $9.1 million decrease in other non-cash charges.

The decrease in net cash provided by operating activities for the nine months ended September 30, 2020 includes a $7.8 million decrease in net cash received from discontinued operating activities, a decrease in operating results of $2.1 million, an unfavorable variance in working capital of $2.2 million, and an unfavorable variance in other non-current assets and liabilities of $0.1 million.

Offsetting this decrease was and a $5.7 million increase in other non-cash charges.

Net cash provided by (used in) investing activities.

Net cash provided by (used in) investing activities for the six months ended June 30, 2020 decreased $180.4 million.

A decrease of $23.7 million in cash used was a result of assets acquired from MTI in January of 2019.

Offsetting this decrease was $3.7 million in proceeds received as a result of higher sales of property, plant and equipment in 2020 as well as $1.8 million in proceeds received from the involuntary conversion of property, plant and equipment.

Net cash provided by (used in) investing activities for the nine months ended September 30, 2020 decreased $188.6 million.

Cash received from discontinued investing activities decreased $209.2 million.

An increase in cash used of $0.4 million resulted from higher payments for capital expenditures and plant turnaround costs in 2020.

Net proceeds from the sale of property, plant and equipment decreased $13.9 million offset by $7.2 million in proceeds received from the involuntary conversion of property, plant and equipment.

A decrease in cash used of $3.6 million resulted from higher payments for capital expenditures and plant turnaround costs in 2019 as well as a decrease of $23.7 million in cash used resulting from assets acquired from MTI in January of 2019.

Net cash used in financing activities.

Net cash used in financing activities for the six months ended June 30, 2020 decreased primarily as a result of a $102.4 million decrease in cash used related to excess purchase price over the carrying value of acquired assets in common control transactions during 2019.

Net cash used in financing activities for the nine months ended September 30, 2020 decreased primarily as a result of a $102.4 million decrease in cash used related to excess purchase price over the carrying value of acquired assets in common control transactions during 2019.

Additionally, net payments of long-term borrowings decreased $54.7 million and cash distributions paid decreased $34.1 million.

Costs associated with our credit facility decreased $0.7 million.

Total Contractual Obligations

A summary of our total contractual cash obligations as of June 30, 2020, is as follows:

A summary of our total contractual cash obligations as of September 30, 2020, is as follows:

Payments due by period

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7.25% senior unsecured notes, due 2021 28,790 28,790 — — —

11.5% senior secured notes, due 2025 291,970 — — 291,970 —

10.0% senior secured notes, due 2024 53,750 — — 53,750 —

Throughput commitment 10,487 6,244 4,243 — —

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Total contractual cash obligations $ 788,541 $ 86,618 $ 92,482 $ 603,372 $ 6,069

(1) The revolving credit facility matures on (a) August 31, 2023, or (b) (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.

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.

The interest payable under our credit facility is not reflected in the above table because such amounts depend on the outstanding balances and interest rates, which vary from time to time.

Letters of Credit .

At June 30, 2020, we had outstanding irrevocable letters of credit in the amount of $21.7 million, which were issued under our revolving credit facility.

At September 30, 2020, we had outstanding irrevocable letters of credit in the amount of $17.4 million, which were issued under our revolving credit facility.

Off Balance Sheet Arrangements.

We do not have any off-balance sheet financing arrangements.

Description of Our Long-Term Debt

2021 Senior Notes

For a description of our 7.25% senior unsecured notes due 2021, see "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended.

Description of Our Indebtedness

Revolving Credit Facility

At June 30, 2020, we maintained a $400.0 million revolving credit facility.

The revolving credit facility matures on August 31, 2023, or 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.

As of June 30, 2020, we had $181.0 million outstanding under the revolving credit facility and $21.7 million of outstanding irrevocable letters of credit, leaving a maximum amount available to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $197.3 million.

After giving effect to our then current borrowings, outstanding letters of credit and the financial covenants contained in our revolving credit facility, we had the ability to borrow approximately $33.7 million in additional amounts thereunder as of June 30, 2020.

Upon the effectiveness of the Credit Facility Amendment, the aggregate amount of commitments under the revolving credit facility will be reduced from $400 million to $300 million.

At September 30, 2020, we maintained a $300.0 million revolving credit facility, after giving effect to the Credit Facility Amendment.

The revolving credit facility matures on August 31, 2023.

Please see Note 6 in Part I of this Form 10-Q for more information about the Credit Facility Amendment.

As of September 30, 2020, we had $205.0 million outstanding under the revolving credit facility and $17.4 million of outstanding irrevocable letters of credit, leaving a maximum amount available to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $77.6 million.

After giving effect to our then current borrowings, outstanding letters of credit and the financial covenants contained in our revolving credit facility, we had the ability to borrow approximately $77.6 million in additional amounts thereunder as of September 30, 2020.

The revolving credit facility is used for ongoing working capital needs and general partnership purposes, and to finance permitted investments, acquisitions and capital expenditures.

During the six months ended June 30, 2020, the level of outstanding draws on our credit facility has ranged from a low of $170.0 million to a high of $223.0 million.

During the nine months ended September 30, 2020, the level of outstanding draws on our credit facility has ranged from a low of $170.0 million to a high of $223.0 million.

The credit facility is guaranteed by substantially all of our subsidiaries.

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We may prepay all amounts outstanding under the credit facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

The credit facility requires mandatory prepayments of amounts outstanding thereunder with excess cash that exceeds $25.0 million and the net proceeds of certain asset sales, equity issuances and debt incurrences.

After giving effect to the Credit Facility Amendment, if we sell assets and receive net

cash proceeds in excess of $25.0 million, the commitments of the lenders under the revolving credit facility will be reduced by $25.0 million.

Indebtedness under the credit facility bears interest at our option at the Eurodollar Rate (the British Bankers Association LIBOR Rate) plus an applicable margin or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0%, or the administrative agent’s prime rate) plus an applicable margin.

The credit facility requires mandatory prepayments of amounts outstanding thereunder with excess cash (as defined in the revolving credit facility) that exceeds $25.0 million and the net proceeds of certain asset sales, equity issuances and debt incurrences.

If we sell assets and receive net cash proceeds in excess of $25.0 million, the commitments of the lenders under the revolving credit facility will be reduced by $25.0 million.

Indebtedness under the credit facility bears interest at our option at the Eurodollar Rate (the British Bankers Association LIBOR Rate) plus an applicable margin, with a floor for LIBOR of 1%) or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0%, or the administrative agent’s prime rate) plus an

applicable margin.

We pay a per annum fee on all letters of credit issued under the credit facility, and we pay a commitment fee per annum on the unused revolving credit availability under the credit facility.

The letter of credit fee, the commitment fee and the applicable margins for our interest rate vary quarterly based on our leverage ratio (as defined in the credit facility, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) and are as follows as of June 30, 2020:

The letter of credit fee, the commitment fee and the applicable margins for our interest rate vary quarterly based on our Total Leverage Ratio (as defined in the Credit Facility Amendment, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) and are as follows as of September 30, 2020:

Leverage Ratio

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Greater than or equal to 5.00 to 1.00 3.00 % 4.00 % 4.00 %

At June 30, 2020, the applicable margin for revolving loans that are LIBOR loans ranges from 2.25% to 3.50% and the applicable margin for revolving loans that are base prime rate loans ranges from 1.25% to 2.50%.

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

After giving effect to the Credit Facility Amendment, the applicable margin for revolving loans that are LIBOR loans will range from 2.75% to 4.00%, with a 1.0% floor for LIBOR, and the applicable margin for revolving loans that are base prime rate loans will range from 1.75% to 3.00%.

At September 30, 2020, the applicable margin for revolving loans that are LIBOR loans ranges from 2.75% to 4.00%, with a 1% floor for LIBOR, and the applicable margin for revolving loans that are base prime rate loans ranges from 1.75% to 3.00%.

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

The credit facility includes financial covenants that are tested on a quarterly basis, based on the rolling four quarter period that ends on the last day of each fiscal quarter.

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(v) sell, transfer, assign or convey assets;

(vi) repurchase our equity, make distributions (including a limit on our ability to make quarterly distributions to unitholders in excess of $0.005 per unit unless our total leverage ratio is below 3.75x) and certain other restricted payments;

(vi) repurchase our equity, make distributions (including a limit on our ability to make quarterly distributions to unitholders in excess of $0.005 per unit unless our Total Leverage Ratio (as defined in the Credit Facility Amendment) is below 3.75:1:00) and certain other restricted payments;

(vii) change the nature of our business;

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If an event of default relating to bankruptcy or other insolvency events occurs with respect to us or any of our subsidiaries, all indebtedness under our credit facility will immediately become due and payable.

If any other event of default

exists under our credit facility, the lenders may terminate their commitments to lend us money, accelerate the maturity of the indebtedness outstanding under the credit facility and exercise other rights and remedies.

If any other event of default exists under our credit facility, the lenders may terminate their commitments to lend us money, accelerate the maturity of the indebtedness outstanding under the credit facility and exercise other rights and remedies.

In addition, if any event of default exists under our credit facility, the lenders may commence foreclosure or other actions against the collateral.

2025 Senior Notes and Indenture

The 2025 Notes were issued to eligible holders that participated in the Exchange Offer pursuant to an indenture, dated as of August 12, 2020 (the "2025 Notes Indenture"), among the Issuers, the guarantors party thereto, U.S.

Bank National Association, as trustee, and U.S.

Bank National Association as collateral trustee.

The 2025 Notes are guaranteed on a full, joint and several basis by each of the Partnership’s existing domestic restricted subsidiaries (other than Finance Corp.

and Talen’s Marine & Fuel, LLC) (the "Guarantors") and will be guaranteed in the future by any domestic restricted subsidiaries, in each case, if and so long as such entity guarantees (or is an obligor with respect to) any other indebtedness for borrowed money of either the Issuers or any Guarantor.

The 2025 Notes and the guarantees thereof are secured on a third-priority basis by a lien on substantially all assets of the Issuers and the Guarantors, subject to the terms of an intercreditor agreement (the "Intercreditor Agreement") and certain other exceptions.

The 2025 Notes and the guarantees thereof are, pursuant to the Intercreditor Agreement, secured by third-priority liens and thus are effectively junior to any obligations under the Credit Facility, which are secured on a "first-lien" basis, and effectively junior to any obligations under the 2024 Notes Indenture (as defined below), which are secured on a "second-lien" basis, in each case, to the extent of the value of the collateral securing such first-lien obligations, second-lien obligations and third-lien obligations.

The 2025 Notes and the guarantees thereof rank effectively senior to all of the Partnership’s existing and future unsecured indebtedness (including the 2021 Notes) to the extent of the value of the collateral securing the 2025 Notes and such guarantees.

Maturity and Interest

The 2025 Notes will mature on February 28, 2025.

Interest on the 2025 Notes accrues at a rate of 11.50% per annum and is payable semi-annually in cash in arrears on February 15 and August 15 of each year, commencing on February 15, 2021.

At any time prior to August 12, 2022, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2025 Notes issued under the 2025 Notes Indenture at a redemption price of 111.5% of the principal amount of the 2025 Notes, plus accrued and unpaid interest to the redemption date, with an amount of cash equal to the net cash proceeds of certain equity offerings.

On or after August 12, 2022, the Issuers may redeem all or part of the 2025 Notes at redemption prices equal to 100%, plus accrued and unpaid interest up to, but not including, the redemption date.

In addition, at any time prior to August 12, 2022, the Issuers may redeem all or a part of the 2025 Notes at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed plus a make-whole premium, plus accrued and unpaid interest up to, but not including, the redemption date.

Also, if at any time the Total Leverage Ratio (as defined in the Credit Facility Amendment) is greater than 3.75:1:00, Issuers will use 25% of any excess cash flow (as defined in the 2025 Notes Indenture) to make an offer to all holders of the 2025 Notes to purchase the 2025 Notes at 100% of the principal amount thereof;

provided, however, the Issuers, in their sole discretion, can allocate up to 100% of excess cash flow to offer to repurchase the 2025 Notes at 100% of the principal amount thereof, subject to restrictions in the revolving credit facility on prepaying junior debt.

Certain Covenants and Events of Default

The 2025 Notes Indenture contains customary covenants restricting the Partnership’s ability and the ability of its restricted subsidiaries to:

(i) pay distributions on, purchase or redeem its common units or purchase or redeem its subordinated debt;

(ii) incur or guarantee additional indebtedness or issue certain kinds of preferred equity securities;

(iii) create or incur certain liens securing indebtedness;

(iv) sell assets, including dispositions of the collateral securing the 2025 Notes;

(v) consolidate, merge or transfer all or substantially all of its assets;

(vi) enter into transactions with affiliates;

and (vii) enter into agreements that restrict distributions or other payments from its restricted subsidiaries to the Partnership.

The 2025 Notes Indenture also contains customary events of default and acceleration provisions relating to such events of default, which provide that upon an event of default under the 2025 Notes Indenture, U.S.

Bank National Association, as trustee, or the holders of at least 25% in aggregate principal amount of the then outstanding 2025 Notes may declare all of the 2025 Notes to be due and payable immediately and subject to the terms of the Intercreditor Agreement, foreclose upon the collateral for the 2025 Notes.

2024 Senior Notes and Indenture

The 2024 Notes were issued to eligible holders that participated in the Exchange Offer pursuant to an indenture, dated as of August 12, 2020 (the "2024 Notes Indenture"), among the Issuers, the guarantors party thereto, U.S.

Bank National Association, as trustee, and U.S.

Bank National Association as collateral trustee.

The 2024 Notes are guaranteed on a full, joint and several basis by the Guarantors and will be guaranteed in the future by any domestic restricted subsidiaries, in each case, if and so long as such entity guarantees (or is an obligor with respect to) any other indebtedness for borrowed money of either the Issuers or any Guarantor.

The 2024 Notes and the guarantees thereof are secured on a second-priority basis by a lien on substantially all assets of the Issuers and the Guarantors, subject to the terms of the Intercreditor Agreement and certain other exceptions.

The 2024 Notes and the guarantees thereof are, pursuant to the Intercreditor Agreement, secured by second-priority liens and thus are effectively junior to any obligations under the Credit Facility, which are secured on a "first-lien" basis, and are effectively senior to the obligations under the 2025 Notes Indenture, which are secured on a "third-lien" basis, in each case, to the extent of the value of the collateral securing such first-lien, second-lien obligations and third-lien obligations.

The 2024 Notes and the guarantees thereof rank effectively senior to all of the Issuers’ existing and unsecured indebtedness (including the 2021 Notes) to the extent of the value of the collateral securing the 2024 Notes and such guarantees.

Maturity and Interest

The 2024 Notes will mature on February 29, 2024.

Interest on the 2024 Notes accrues at a rate of 10.00% per annum and will be payable semi-annually in cash in arrears on February 15 and August 15 of each year, commencing on February 15, 2021.

At any time prior to August 12, 2021, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2024 Notes issued under the 2024 Notes Indenture at a redemption price of 110% of the principal amount of the 2024 Notes, plus accrued and unpaid interest to the redemption date, with an amount of cash equal to the net cash proceeds of certain equity offerings.

On or after August 12, 2021, the Issuers may redeem all or part of the 2024 Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 102% for the twelve-month period beginning on August 12, 2021;

(ii) 101% for the twelve-month period beginning on August 12, 2022 and (iii) 100% at any time thereafter, plus accrued and unpaid interest up to, but not including, the redemption date.

In addition, at any time prior to August 12, 2021, the Issuers may redeem all or a part of the 2024 Notes at a redemption price equal to 100% of the principal amount of the 2024 Notes to be redeemed plus a make-whole premium, plus accrued and unpaid interest up to, but not including, the redemption date.

Certain Covenants and Events of Default

The 2024 Notes Indenture contains covenants that are substantially the same as those contained in the 2025 Notes Indenture described above.

2021 Senior Notes

For a description of our 7.25% senior unsecured notes due 2021, see "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations — Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended.

In connection with the completion of the Exchange Offer and consent solicitation to certain eligible holders of the 2021 Notes, on August 12, 2020, we entered into a supplemental indenture to eliminate substantially all of the restrictive covenants in the indenture governing the 2021 Notes.

Capital Resources and Liquidity

Historically, we have generally satisfied our working capital requirements and funded our debt service obligations and capital expenditures with cash generated from operations and borrowings under our revolving credit facility.

At June 30, 2020, we had cash and cash equivalents of $0.1 million and available borrowing capacity of $33.7 million under our revolving credit facility with $181.0 million of borrowings outstanding.

Our revolving credit facility matures on August 31, 2023, or 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.

Following the successful refinancing of the 2021 Notes, we expect that our primary sources of liquidity to meet operating expenses, service our indebtedness, pay distributions to our unitholders and fund capital expenditures will be provided by cash flows generated by our operations, borrowings under our revolving credit facility and access to the debt and equity capital markets.

At September 30, 2020, we had cash and cash equivalents of $1.9 million and available borrowing capacity of $77.6 million under our revolving credit facility with $205.0 million of borrowings outstanding.

Our revolving credit facility matures on August 31, 2023

We expect that our primary sources of liquidity to meet operating expenses, service our indebtedness, pay distributions to our unitholders and fund capital expenditures will be provided by cash flows generated by our operations, borrowings under our revolving credit facility and access to the debt and equity capital markets.

Our ability to generate cash from operations will depend upon our future operating performance, which is subject to certain risks.

For a discussion of such risks, please read "Item 1A.

Risk Factors" of our Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020, as updated and supplemented in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020 and Part II, Item 1A of this Quarterly Report on Form 10-Q, as may be further updated and supplemented from time to time in our future Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Risk Factors" of our Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020, as updated and supplemented in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2020 and June 30, 2020, and as may be further updated and supplemented from time to time in our future Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

In addition, due to the covenants in our revolving credit facility, our financial and operating performance impacts the amount we are permitted to borrow under that facility.

To address these challenges, since July of 2018, we have taken a number of strategic actions to strengthen our balance sheet and reduce leverage, such as asset dispositions and acquisitions, reductions in the distributions payable to our unitholders and efforts to focus our growth on business segments with a stronger economic outlook.

For example, in an effort to preserve liquidity, we recently reduced the quarterly cash distribution per common unit to $0.0625 beginning with the distribution payable for the fourth quarter of 2019.

We expect this distribution reduction, along with the reduction announced in 2019, to result in approximately $68.2 million in cash we can retain annually for debt reduction and investment in higher return opportunities.

If we are unable to refinance the 2021 Notes in accordance with the Credit Facility Amendment 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.

We are in compliance with all debt covenants as of June 30, 2020 and expect to be in compliance for the next twelve months provided the Partnership successfully completes the refinancing of the 2021 Notes.

We are in compliance with all debt covenants as of September 30, 2020 and expect to be in compliance for the next twelve months.

Interest Rate Risk

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The demand for fertilizers is strongest during the early spring planting season.

However, our Terminalling and Storage and Transportation business segments and the molten sulfur business are typically not impacted by seasonal fluctuations and a significant portion of our net income is derived from our Terminalling and Storage,

Sulfur Services and Transportation business segments.

Further, extraordinary weather events, such as hurricanes, have in the past, and could in the future, impact our Terminalling and Storage and Transportation business segments.

Impact of Inflation

Inflation did not have a material impact on our results of operations for the six months ended June 30, 2020 or 2019.

Inflation did not have a material impact on our results of operations for the nine months ended September 30, 2020 or 2019.

Although the impact of inflation has been insignificant in recent years, it is still a factor in the U.S.

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Our operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which these operations are conducted.

We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the six months ended June 30, 2020 or 2019.

We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the nine months ended September 30, 2020 or 2019.

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 2. Management’s Discussion and Analysis