What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-03-03 compared with 2020-02-14 · 222 added, 353 removed, 325 unchanged (64% of the section changed)

12 unchanged sentences

This region is a major hub for petroleum refining, natural gas gathering and processing, and support services for the exploration and production industry.

We were formed in 2002 by Martin Resource Management Corporation, a privately-held company whose initial predecessor was incorporated in 1951 as a supplier of products and services to drilling rig contractors.

Since then, Martin Resource Management Corporation has expanded its operations through acquisitions and internal expansion initiatives as its management identified and capitalized on the needs of producers and purchasers of petroleum products and by-products and other bulk liquids.

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

As of December 31, 2019 , Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units.

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

MMGP owns a 2.0% general partner interest in us and all of our incentive distribution rights.

Martin Resource Management Corporation directs our business operations through its ownership interests in and control of our general partner.

Our Omnibus Agreement with Martin Resource Management Corporation governs, among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision of general administration and support services by Martin Resource Management Corporation and our use of certain of Martin Resource Management Corporation’s trade names and trademarks.

Under the terms of the Omnibus Agreement, the employees of Martin Resource Management Corporation are responsible for conducting our business and operating our assets.

Martin Resource Management Corporation has operated our business since 2002.

Martin Resource Management Corporation began operating our NGL business in the 1950s and our sulfur business in the 1960s.

It began our land transportation business in the early 1980s and our marine transportation business in the late 1980s.

It entered into our fertilizer and terminalling and storage businesses in the early 1990s.

Beginning in 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.

Significant Recent Developments

Sale of Mega Lubricants.

On December 22, 2020, we entered into an asset purchase and sale agreement to sell Mega Lubricants to Stone Oil for $22.4 million.

Mega Lubricants is engaged in the business of blending, manufacturing and delivering various marine application lubricants, sub-sea specialty fluids, and proprietary developed commercial and industrial products.

The transaction closed on December 22, 2020.

The proceeds from the transaction were used to reduce outstanding borrowings under our revolving credit facility.

Exchange Offer and Cash Tender Offer

On August 12, 2020, we successfully completed our 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 15 in Part II of this Form 10-K for more information about the exchange offer and related transactions.

COVID-19 surfaced in late 2019 and has spread around the world, including to the United States.

In March 2020, the World Health Organization declared COVID-19 a pandemic.

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 employees.

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.

Our communication lines are open 24/7 for the environmental health and safety division, land and marine logistics, and sales and marketing teams.

Due to the economic impacts of the COVID-19 pandemic, the markets experienced a decline in oil prices in response to oil demand concerns.

These concerns were further exacerbated by the price war among members of OPEC and other non-OPEC producer nations during the first quarter of 2020 and global storage considerations.

Travel restrictions and stay-at-home orders implemented by governments in many regions and countries across the globe, including the United States, have greatly impacted the demand for refined products resulting in a significant reduction in refinery utilization, which has impacted our 2020 performance.

This impact started in February of 2020 and continued through the end of the year, during which time we have seen unfavorable trends in certain key metrics across several of our business lines compared to historical periods.

significant reduction in refinery utilization as a result of reduced refined products demand significantly impacted our Transportation and NGL segments.

As the volume of products produced or purchased by refineries has been reduced, demand for our services has decreased.

Looking forward, we expect to continue to experience some adverse impacts of COVID-19 in our transportation segment during the first half of 2021 but we believe that refinery utilization will continue to increase in the second half of 2021 as a result of widespread vaccinations, government stimulus, and a rebounding economy.

This should ultimately improve refined product demand as people get back to work and begin traveling again.

We expect this will positively impact our transportation segment as demand for our services improves.

The extent to which the duration and severity of the pandemic impacts our business, results of operations, and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted at this time.

Accordingly, the full impact of COVID-19 will not be reflected in our results of operations and overall financial performance until future periods.

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 December 31, 2020.

Subsequent Events

Retirement of 2021 Notes.

On February 15, 2021, our 2021 Notes matured and we retired the outstanding balance of $28.8 million using our revolving credit facility.

Quarterly Distribution.

On January 25, 2021, we declared a quarterly cash distribution of $0.005 per common unit for the fourth quarter of 2020, or $0.02 per common unit on an annualized basis, which was paid on February 12, 2021 to unitholders of record as of February 5, 2021.

Critical Accounting Policies and Estimates

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The following table evaluates the potential impact of estimates utilized during the periods ended December 31, 2020 and 2019:

Judgments and Uncertainties

Effect if Actual Results Differ from Estimates and Assumptions

Description Judgments and Uncertainties Effect if Actual Results Differ from Estimates and Assumptions

Impairment of Long-Lived Assets

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Our impairment analyses require management to use judgment in estimating future cash flows and useful lives, as well as assessing the probability of different outcomes.

Applying this impairment review methodology, no impairment of long-lived assets was recorded during the years ended December 31, 2019 or 2018.

In 2017, we recorded an impairment charge of $1.6 million in our Transportation segment and $0.6 million in our Terminalling and Storage segment.

Asset Retirement Obligations

Asset retirement obligations ("AROs") associated with a contractual or regulatory remediation requirement are recorded at fair value in the period in which the obligation can be reasonably estimated and the related asset is depreciated over its useful life or contractual term.

The liability is determined using a credit-adjusted risk-free interest rate and is accreted over time until the obligation is settled.

Determining the fair value of AROs requires management judgment to evaluate required remediation activities, estimate the cost of those activities and determine the appropriate interest rate.

If actual results differ from judgments and assumptions used in valuing an ARO, we may experience significant changes in ARO balances.

The establishment of an ARO has no initial impact on earnings.

Applying this impairment review methodology, we recorded an impairment charge of $3.1 million and $1.3 million in our Terminalling and Storage and Transportation segments, respectively, during the year ended December 31, 2020.

No impairment of long-lived assets was recorded during the years ended December 31, 2019 or 2018.

Impairment of Goodwill

Goodwill is subject to a fair-value based

impairment test on an annual basis, or more frequently if events or changes in circumstances indicate that the fair value of any of our reporting units is less than its carrying amount.

When assessing the recoverability of goodwill , we may first assess qualitative factors in determining

whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

After assessing qualitative factors, if we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a quantitative assessment is not required.

If an initial qualitative assessment indicates that it is more likely than not the carrying amount exceeds the fair value of a reporting unit, a quantitative analysis will be performed.

We may also elect to bypass the qualitative assessment and proceed directly to a quantitative analysis depending on the facts and circumstances.

As part of the quantitative evaluation, we determine fair value using accepted valuation techniques, including discounted cash flow, the guideline public company method and the guideline transaction method.

These analyses require management to make assumptions and estimates regarding industry and economic factors, future operating results and discount rates.

We conduct impairment testing using present economic conditions, as well as future expectations.

Applying this impairment review methodology, we considered the impact that COVID-19 had on our cash flows and the value our unit price during 2020 and elected to bypass the qualitative assessment and perform a quantitative assessment.

Based upon the most recent annual review as of August 31, 2020, no goodwill impairment exists within our reporting units for the year ended December 31, 2020.

No goodwill impairment was recorded during the years ended December 31, 2019 or 2018.

Our Relationship with Martin Resource Management Corporation

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

For the years ended December 31, 2019 , 2018 and 2017 , the Conflicts Committee approved reimbursement amounts of $16.7 million, $16.4 million and $16.4 million, respectively, reflecting our allocable share of such expenses.

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

For the years ended December 31, 2020, 2019 and 2018, the board of directors of our general partner approved reimbursement amounts of $16.4 million, $16.7 million and $16.4 million, respectively, reflecting our allocable share of such expenses.

The board of directors of our general partner will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.

We are required 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.

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Year Ended December 31,

2020 2019 2018

(in thousands)

7 unchanged sentences

Gain on sale of property, plant and equipment (9,788) (13,332) (1,041)

Impairment of long-lived assets

Gain on involuntary conversion of property, plant and equipment (4,907) — —

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

Loss on exchange of senior unsecured notes 8,817 — —

Unrealized mark-to-market on commodity derivatives (460) 671 (76)

1 unchanged sentence

Lower of cost or market adjustments 370 633 —

Hurricane damage repair accrual

Asset retirement obligation revision

Unit-based compensation 1,422 1,424 1,224

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The results of operations for the years ended December 31, 2020, 2019, and 2018 have been derived from our consolidated financial statements.

Discussions of the year ended December 31, 2018 that are not included in this Annual Report on Form 10-K and year-to-year comparisons of the year ended December 31, 2019 and the year ended December 31, 2018 can be found in “Management’s Discussion and Analysis of Financial Condition and the Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019.

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.

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The following table sets forth our operating revenues and operating income by segment for the years ended December 31, 2020, 2019, and 2018.

Operating Revenues

Intersegment Eliminations

Operating Revenues

after Eliminations

Operating Income (loss)

Operating Income Intersegment Eliminations

Operating Revenues Revenues

Intersegment Eliminations Operating Revenues

after Eliminations Operating Income (loss) Operating Income Intersegment Eliminations Operating

Income (loss)

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Indirect selling, general and administrative

— — — (17,909) — (17,909)

Total $ 696,830 $ (24,688) $ 672,142 $ 46,502 $ — $ 46,502

Year Ended December 31, 2019:

4 unchanged sentences

Indirect selling, general and administrative

— — — (17,981) — (17,981)

Total $ 877,895 $ (30,777) $ 847,118 $ 58,104 $ — $ 58,104

Year Ended December 31, 2018:

4 unchanged sentences

Indirect selling, general and administrative

— — — (17,901) — (17,901)

Total $ 1,054,565 $ (34,461) $ 1,020,104 $ 45,057 $ — $ 45,057

Terminalling and Storage Segment

Comparative Results of Operations for the Years Ended December 31, 2020 and 2019

Year Ended December 31,

Percent Change

Year Ended December 31, Variance Percent Change

(In thousands)

Services $ 87,661 $ 93,980 $ (6,319) (7)%

Products 103,380 122,333 (18,953) (15)%

Total revenues 191,041 216,313 (25,272) (12)%

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Depreciation and amortization 29,489 30,952 (1,463) (5)%

17,477 19,004 (1,527) (8)%

Other operating income (loss), net 6,429 (1,334) 7,763 582%

Gain on involuntary conversion of property, plant and equipment 63 — 63

Operating income $ 23,969 $ 17,670 $ 6,299 36%

2 unchanged sentences

Services revenues.

Services revenue decreased $8.5 million, of which $5.2 million was primarily a result of decreased throughput fees at our shore-based terminals combined with a $1.7 million decrease at our specialty terminals as a result of the disposition of our sulfuric acid terminal in Elko, Nevada.

In addition, $1.6 million was a result of decreased activity at our Tampa specialty terminal.

Services revenue decreased $6.3 million, of which $3.8 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, revenue from shore-based terminals decreased $2.1 million primarily due to decreased throughput of $3.2 million and consigned lube revenue of $0.6 million, offset by $1.0 million related to contract termination fees, and $0.8 million in space rental income.

Revenue from specialty terminals decreased $0.3 million due to $1.2 million in decreased throughput rates, offset by $0.8 million related to a new contract.

Products revenues.

A 31% decrease in sales volumes combined with a 29% decrease in average sales price at our shore-based terminals resulted in a $33.1 million decrease to products revenues.

Offsetting this decrease was a 10% increase in sales volumes combined with a 3% increase in average sales price at our blending and packaging facilities resulting in an $11.1 million increase in products revenues.

A 22% decrease in lubricant sales volumes combined with a 13% decrease in average sales price at our shore-based terminals resulted in a $10.3 million decrease to products revenues.

In addition, a 7% decrease in average sales price combined with a 2% decrease in sales volumes at our blending and packaging facilities resulted in an $8.8 million decrease in products revenues.

Cost of products sold.

A 22% decrease in sales volumes combined with a 14% decrease in average cost per gallon at our shore-based terminals resulted in a $9.8 million decrease in cost of products sold.

Offsetting this decrease was a 10% increase in sales volume combined with a 1% increase in average cost per gallon at our blending and packaging facilities resulting in a $7.4 million increase in cost of products sold.

In addition, an 11% decrease in average cost per gallon combined with a 2% decrease in sales volume at our blending and packaging facilities resulted in a $9.7 million decrease in cost of products sold.

Operating expenses.

Operating expenses decreased $0.9 million, of which $0.8 million is a result of the disposition of our sulfuric acid terminal in Elko, Nevada combined with decreases in lease expense of $0.9 million and utilities of $0.8 million across our terminals.

Offsetting these decreases were increases in repairs and maintenance of $1.2 million across our terminals and $0.5 million in wharfage and dockage fees at our Tampa specialty terminal.

Operating expenses decreased $2.9 million, primarily as a result of decreases in repairs and maintenance of $1.0 million, miscellaneous operating expenses of $0.8, compensation expense of $0.7 million, and professional fees of $0.3 million across our terminals.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased primarily as a result of increases in legal expenses of $0.4 million and compensation expense of $0.3 million.

Selling, general and administrative expenses increased primarily as a result of an increase in legal expenses.

Depreciation and amortization.

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

Comparative Results of Operations for the Years Ended December 31, 2018 and 2017

Year Ended December 31,

Percent Change

(In thousands)

Total revenues

Cost of products sold

Operating expenses

Selling, general and administrative expenses

Impairment of long-lived assets

Depreciation and amortization

Other operating income, net

Operating income

Shore-based throughput volumes (guaranteed minimum) (gallons)

Smackover refinery throughput volumes (guaranteed minimum BBL per day)

Services revenues.

Services revenue decreased $3.2 million, of which $7.6 million was primarily a result of decreased throughput fees at our shore-based terminals, offset by a $4.1 million increase at our specialty terminals primarily as a result of the Hondo asphalt plant being put into service on July 1, 2017.

Products revenues.

A 28% increase in sales volumes combined with a 4% increase in average sales price at our blending and packaging facilities resulted in a $20.3 million increase to products revenues.

Offsetting this increase was a 9% decrease in sales volumes offset by a 1% increase in average sales price at our shore-based terminals resulting in a $5.4 million decrease in products revenues.

Cost of products sold.

A 28% increase in sales volumes combined with a 10% increase in average cost per gallon at our blending and packaging facilities resulted in a $19.0 million increase in cost of products sold.

Offsetting this increase was a 9% decrease in sales volume offset by a 2% increase in average cost per gallon at our shore-based terminals resulting in a $5.5 million decrease in cost of products sold.

Operating expenses.

Operating expenses at our shore-based terminals decreased by $8.0 million primarily due to the 2017 period including an increase in the accrual related to asset retirement obligations of $6.3 million.

Additionally, lease expense decreased $0.7 million as a result of closing several facilities.

Operating expenses at our specialty terminals decreased $1.8 million, primarily due to the 2017 period including $2.5 million in hurricane expenses offset by an increase of $1.0 million in expenses at our Hondo facility which was placed in service in July of 2017.

Offsetting this decrease was a $0.8 million increase at our Smackover refinery due to an increase in utilities of $0.4 million, $0.2 million in repairs and maintenance, and $0.2 million in professional fees.

Selling, general and administrative expenses.

Selling, general and administrative expenses decreased primarily as a result of decreased legal expenses.

Impairment of long-lived assets.

This represents the loss on impairment of non-core operating assets in 2017.

Depreciation and amortization.

The decrease in depreciation and amortization is due to the disposition of assets at several closed shore-based facilities, offset by recent capital expenditures.

Other operating income, net.

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

Gain on involuntary conversion of property, plant and equipment.

The $0.1 million gain on involuntary conversion of property, plant and equipment 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 Years Ended December 31, 2020 and 2019

Year Ended December 31,

Percent Change

Year Ended December 31, Variance Percent Change

(In thousands)

Revenues $ 150,285 $ 183,740 $ (33,455) (18)%

Operating expenses 122,064 141,713 (19,649) (14)%

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Depreciation and amortization 17,505 15,307 2,198 14%

Other operating income (loss), net

2,471 18,521 (16,050) (87)%

Other operating loss, net (690) (1,691) 1,001 59%

Operating income $ 1,781 $ 16,830 $ (15,049) (89)%

Marine Transportation Revenues .

Inland revenues decreased $11.2 million, primarily related to a decrease in tows, transportation rates and utilization.

In addition, offshore revenue decreased $2.4 million due to a decrease in transportation rates and utilization.

Revenue was also impacted by a decrease in pass-through revenue (primarily fuel) of $3.3 million.

Land Transportation Revenues.

A 5% decrease in miles resulted in a decrease to freight revenue of $5.0 million.

An 11% decrease in miles of product transported resulted in a decrease to freight revenue of $11.5 million.

Transportation rates increased 2% resulting in an offsetting increase of $1.5 million.

Additionally, fuel surcharge revenue decreased $6.6 million.

Marine Transportation Revenues .

An increase of $10.7 million in inland revenue was primarily related to increased rates, utilization and new equipment being placed in service.

Revenue was also impacted by an increase in pass-through revenue (primarily fuel) of $0.2 million.

An offsetting decrease of $0.4 million is attributable to revenue related to equipment sold or being classified as idle or held for sale.

Operating expenses .

The decrease in operating expenses is primarily a result of decreased leases expense of $4.2 million, pass through expenses (primarily fuel) of $1.7 million, compensation expense of $1.0 million, and property and liability insurance premiums and claims of $0.7 million.

These decreases were offset by an increase in outside services of $2.8 million and repairs and maintenance of $0.5 million.

The decrease in operating expenses is primarily a result of decreased pass through expenses (primarily fuel) of $8.5 million, compensation expense of $8.1 million, repairs and maintenance of $2.1 million, and outside services of $0.7 million.

Selling, general and administrative expenses .

The increase in selling, general and administrative expenses is primarily due to increased compensation expense of $1.4 million, lease expense of $0.2 million, and claims expenses of $0.2 million.

Selling, general and administrative expenses remained relatively consistent.

Depreciation and amortization .

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

Comparative Results of Operations for the Years Ended December 31, 2018 and 2017

Year Ended December 31,

Percent Change

(In thousands)

Operating expenses

Selling, general and administrative expenses

Impairment of long lived assets

Depreciation and amortization

Other operating income, net

Operating income

Land Transportation Revenues.

Freight revenue increased $7.0 million.

Transportation rates increased 8% resulting in an increase to freight revenue of $7.7 million.

Miles decreased 1% resulting in an offsetting decrease of $0.7 million.

Additionally, fuel increased $6.2 million.

Marine Transportation Revenues .

An increase of $1.8 million in inland revenue was primarily related to new equipment being placed in service.

Revenue was also impacted by an increase in pass-through revenue (primarily fuel) of $2.1 million.

An offsetting decrease of $3.1 million is attributable to revenue related to equipment sold or being classified as idle or held for sale.

A $0.2 million increase in offshore revenues is primarily the result of increased utilization.

Operating expenses .

The decrease in operating expenses is primarily a result of decreased lease expense of $5.8 million, claims expense of $1.5 million, barge rental expense of $1.0 million, property and liability insurance premiums of $1.0 million, outside towing of $0.3 million, and a reclassification of labor and burden from operating expense to selling general and administrative expense for the 2018 period of $0.7 million.

These decreases were offset by an increased fuel expense of $5.1 million, labor and burden of $2.6 million, repairs and maintenance of $0.5 million, and contract labor of $0.3 million.

Selling, general and administrative expenses .

Selling, general and administrative expenses increased primarily due to increased compensation expense of $0.8 million and the reclassification of expenses from operating expense to selling, general, and administrative expense of $0.7 million for the 2018 period.

Impairment of long-lived assets.

This represents the loss on impairment of non-core operating assets.

Depreciation and amortization .

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

Other operating income, net.

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

Sulfur Services Segment

Comparative Results of Operations for the Years Ended December 31, 2020 and 2019

Year Ended December 31,

Percent Change

Year Ended December 31, Variance Percent Change

(In thousands)

Services $ 11,659 $ 11,434 $ 225 2%

Products 96,361 99,906 (3,545) (4)%

Total revenues 108,020 111,340 (3,320) (3)%

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Depreciation and amortization 12,012 11,332 680 6%

Other operating income (loss), net

17,406 12,779 4,627 36%

Other operating income, net 6,751 1,210 5,541 458%

Gain on involuntary conversion of property, plant and equipment 4,844 — 4,844

Operating income $ 29,001 $ 13,989 $ 15,012 107%

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Products revenues decreased $2.7 million as a result of a 3% decline in average sulfur services sales prices.

Products revenues decreased an additional $4.3 million due to a 4% decrease in sales volumes, primarily related to a 6% decrease in fertilizer volumes.

Products revenues decreased an additional $0.8 million due to a 1% decrease in sales volumes, primarily related to a 3% decr ease in sulfur volumes.

Cost of products sold.

A 17% decline in prices impacted cost of products sold by $15.9 million, resulting from a decrease in commodity prices.

A 12% decline in product cost impacted cost of products sold by $8.3 million, resulting from a decrease in commodity prices.

A 1% decrease in sales volumes resulted in an additional decrease in cost of products sold of $0.5 million.

Margin per ton decreased $1.34, or 4%.

Margin per to n increased $6.09, or 20%.

Operating expenses.

Our operating expenses decreased $0.6 million due to marine fuel and lube, $0.2 million due to repairs and maintenance, $0.2 million due to outside towing, $0.1 million due to lease expense and $0.1 million due to insurance claims.

Offsetting, assist tugs increased $0.2 million.

Our operating expenses increased $0.4 million due to insurance claims and $0.4 million due to outside towing.

Offsetting were decreases in marine fuel and lube of $0.3 million, assist tugs of $0.1 million and repairs and maintenance of $0.1 million.

Selling, general and administrative expenses.

Increased primarily as a result of increased compensation expense of $0.4 million and professional fees of $0.1 million.

Selling, general and administrative expenses remained relatively consistent.

Depreciation and amortization.

1 unchanged sentence

Other operating income (loss), net.

Other operating income (loss), net increased as a result of $1.3 million in business interruption recoveries related to the Neches ship-loader insurance claim received in the fourth quarter of 2019.

Comparative Results of Operations for the Years Ended December 31, 2018 and 2017

Year Ended December 31,

Percent Change

(In thousands)

Total revenues

Cost of products sold

Operating expenses

Selling, general and administrative expenses

Depreciation and amortization

Other operating loss, net

Operating income

Sulfur (long tons)

Fertilizer (long tons)

Sulfur services volumes (long tons)

Services Revenues.

Services revenues increased as a result of a contractually prescribed index based fee adjustment.

Products Revenues.

Products revenues decreased $14.8 million due to an 11% decrease in sales volumes, primarily related to a 15% decrease in sulfur volumes.

Offsetting, products revenues increased $12.5 million as a result of a 10% rise in average sulfur services sales prices.

Cost of products sold.

A 23% increase in prices impacted cost of products sold by $19.1 million, resulting from an increase in commodity prices.

An 11% decrease in sales volumes resulted in an offsetting decrease in cost of products sold of $11.1 million.

Margin per ton decreased $6.11, or 16%.

Operating expenses.

Our operating expenses decreased primarily as a result of a $1.5 million reduction in compensation expense and $0.4 million in lower property taxes.

Additionally, outside towing decreased $0.3 million, railcar leases decreased $0.3 million, and repairs and maintenance on marine vessels decreased $0.2 million.

An offsetting increase of $0.5 million resulted from an increase in marine fuel and lube.

Selling, general and administrative expenses.

Increased primarily as a result of increased compensation expense.

Depreciation and amortization.

Depreciation expense increased $0.4 million due to capital projects being completed and placed in service in the fourth quarter of 2017 and throughout 2018.

Other operating loss, net.

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

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 $4.8 million gain is primarily 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 Years Ended December 31, 2020 and 2019

Year Ended December 31,

Percent Change

Year Ended December 31, Variance Percent Change

(In thousands)

4 unchanged sentences

Depreciation and amortization 2,456 2,469 (13) (1)%

9,662 11,194 (1,532) (14)%

Other operating income (loss), net (2) 16,402 (16,404) (100)%

11 unchanged sentences

Operating expenses .

Operating expenses decreased primarily due to the sale of our East Texas Pipeline on August 12, 2019.

Operating expenses decreased $2.3 million related to the divestiture of assets and the elimination of the associated expenses.

In addition, operating expenses decreased $1.0 million related to the settlement of an insurance claim for less than anticipated.

Selling, general and administrative expenses .

Selling, general and administrative expenses decreased $0.6 million primarily as a result of $0.3 million in decreased compensation expense and $0.2 million in decreased property taxes.

Selling, general and administrative expenses decreased $0.7 million as a result of decreased compensation expense.

Other operating income (loss), net.

Other operating income (loss), net represents the gains associated with the disposition of the East Texas Pipeline.

Comparative Results of Operations for the Years Ended December 31, 2018 and 2017

Year Ended December 31,

Percent Change

(In thousands)

Products Revenues

Cost of products sold

Operating expenses

Selling, general and administrative expenses

Depreciation and amortization

Other operating loss, net

Operating income

NGLs Volumes (barrels)

Products Revenues.

Our NGL average sales price per barrel increased $3.37, or 7%, resulting in an increase to products revenues of $35.3 million.

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

Product sales volumes decreased 3%, decreasing revenues $12.8 million.

Cost of products sold .

Our average cost per barrel increased $5.25, or 13%, increasing cost of products sold by $55.0 million.

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

The decrease in sales volume of 3% resulted in a $12.1 million decrease to cost of products sold.

Our margins decreased $1.88 per barrel, or 40% during the period.

Operating expenses .

Operating expenses increased $0.2 million as a result of increased repairs and maintenance expense at our underground NGL storage facility.

Selling, general and administrative expenses .

Selling, general and administrative expenses decreased $1.7 million as a result of $2.3 million in decreased compensation expense offset by $0.4 million in increased property taxes and $0.4 million in in increased property damage claims.

Other operating loss, net.

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

Other operating income (loss), net represents the gains associated with the disposition of the East Texas Pipeline in 2019.

Interest Expense

Comparative Components of Interest Expense, Net for the Years Ended December 31, 2020 and 2019

Year Ended December 31,

Percent Change

(In thousands)

Revolving loan facility

7.250 % senior unsecured notes

Amortization of deferred debt issuance costs

Amortization of debt premium

Finance leases

Capitalized interest

Interest income

Total interest expense, net

Comparative Components of Interest Expense, Net for the Years Ended December 31, 2018 and 2017

Year Ended December 31,

Percent Change

Year Ended December 31, Variance Percent Change

(In thousands)

Revolving loan facility

Revolving credit facility $ 8,719 $ 18,550 $ (9,831) (53)%

7.250% senior unsecured notes 16,969 27,101 (10,132) (37)%

11.5% senior secured notes 13,151 — 13,151

10.0% senior secured notes 2,105 — 2,105

Amortization of deferred debt issuance costs 3,422 4,041 (619) (15)%

Amortization of debt premium (191) (306) 115 38%

Other 1,787 1,728 59 3%

Finance leases 291 672 (381) (57)%

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Indirect Selling, General and Administrative Expenses

Year Ended December 31,

Percent Change

Year Ended December 31,

Percent Change

(In thousands)

Year Ended December 31, Variance Percent Change

(In thousands)

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Indirect selling, general and administrative expenses remained consistent from 2019 to 2020.

The increase in indirect selling, general and administrative expenses from 2017 to 2018 is primarily a result of increased unit based compensation expense.

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

This allocation is based on the percentage of time spent by Martin Resource Management Corporation personnel that provide such centralized services.

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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 approved the following reimbursement amounts:

Year Ended December 31,

Percent Change

Year Ended December 31,

Percent Change

(In thousands)

The board of directors of our general partner approved the following reimbursement amounts:

Year Ended December 31, Variance Percent Change

(In thousands)

Conflicts Committee approved reimbursement amount

Board approved reimbursement amount $ 16,410 $ 16,657 $ (247) (1)%

The amounts reflected above represent our allocable share of such expenses.

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

The board of directors of our general partner will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.

Liquidity and Capital Resources

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

Recent Debt Financing Activity

Credit Facility Amendment and Extension.

On July 18, 2019, the Partnership amended its revolving credit facility to, among other things, extend the maturity date from March 2020 to August 2023 (provided we have refinanced the 2021 Notes on or before August 19, 2020) and reduce commitments from $500.0 million to $400.0 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 $51.5 million in additional amounts thereunder as of December 31, 2019.

Cash Flows - Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

The following table details the cash flow changes between the years ended December 31, 2020 and 2019:

Years Ended December 31,

Percent Change

(In thousands)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

Net cash provided by operating activities.

The decrease in net cash provided by operating activities for the year ended December 31, 2019 includes a $22.6 million decrease in net cash received from discontinued operating activities, a $6.2 million unfavorable variance in working capital, and a $1.7 million unfavorable variance in other non-current assets and liabilities.

An additional $11.0 million decrease in other non-cash charges was primarily due to a $12.3 million gain on the sale of property, plant and equipment.

Offsetting was an increase in operating results of $12.4 million.

Net cash provided by investing activities.

Net cash provided by investing activities for the year ended December 31, 2019 increased primarily as a result of $35.9 million related to discontinued investing activities.

Also contributing was a $9.2 million increase in proceeds received as a result of higher sales of property, plant and equipment in 2019 as well as an increase of $5.0 million due to proceeds received from involuntary conversion of property, plant and equipment.

An additional increase of $0.9 million related to lower payments for capital expenditures and plant turnaround costs in 2019.

Offsetting was an increase in cash used of $23.7 million as a result of net assets acquired from MTI.

Net cash used in financing activities.

Net cash used in financing activities for the year ended December 31, 2019 decreased primarily as a result of $68.7 million decrease in net payments and a $29.3 million decrease in cash distributions paid.

An additional decrease of $12.1 million is due to distributions paid related to 2018, which included a pre-acquisition distribution to Martin Resource Management Corporation related to MTI.

Offsetting was an increase in cash paid of $102.4 million related to excess purchase price over the carrying value of acquired assets in common control transactions.

Further, costs associated with our credit facility amendment increased $3.1 million.

Cash Flows - Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

The following table details the cash flow changes between the years ended December 31, 2018 and 2017 :

Years Ended December 31,

Percent Change

Years Ended December 31, 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 year ended December 31, 2018 is primarily due to a $56.4 million favorable variance in working capital and $0.4 million in other non-cash charges.

Offsetting was a decrease in operating results of $6.6 million and an unfavorable variance in other non-current assets and liabilities of $1.6 million.

Net cash provided by discontinued operating activities decreased $12.7 million.

Net cash provided by (used in) investing activities.

Net cash provided by investing activities for the year ended December 31, 2018 increased primarily as a result of a $180.6 million increase in net cash provided by discontinued investing activities.

Additionally, a decrease in cash used in investing activities as a result of the acquisition of certain asphalt

terminalling assets from Martin Resource Management Corporation in 2017, compared to no acquisitions in 2018, resulted in an increase of $19.5 million.

Further, a decrease in cash used of $6.4 million is due to lower payments for capital expenditures and plant turnaround costs in 2018.

Offsetting was a $15.0 million decline in proceeds received resulting from repayment of the Note receivable - affiliate in 2017 as compared to none in 2018 as well as a $2.2 million decrease in proceeds received as a result of higher sales of property, plant and equipment in 2017.

The decrease in net cash provided by operating activities for the year ended December 31, 2020 includes a $7.8 million decrease in net cash received from discontinued operating activities, a decrease in operating results of $11.3 million, and an unfavorable variance in other non-current assets and liabilities of $0.9 million.

An additional $6.0 million decrease in other non-cash charges was primarily due to a $4.9 million gain on involuntary conversion of property, plant and equipment.

Offsetting this decrease was a favorable variance in working capital of $15.0 million.

Net cash provided by investing activities.

Net cash provided by investing activities for the year ended December 31, 2020 decreased $172.2 million.

Cash received from discontinued investing activities decreased $209.2 million.

Offsetting such decrease, net proceeds from the sale of property, plant and equipment increased $4.5 million and proceeds received from the involuntary conversion of property, plant and equipment increased $2.5 million.

A decrease in cash used of $6.2 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 increased for the year ended December 31, 2018 as a result of an increase in net repayments of long-term borrowings of $162.0 million as well as a decrease in proceeds received from the issuance of common units (including the related general partner contribution) of $52.3 million.

An additional increase of $1.5 million related to cash distributions paid and $14.8 million related to a preacquisition distribution to Martin Resource Management Corporation.

An increase of $1.2 million related to costs associated with our credit facility amendment.

Offsetting was a decrease in cash used of $6.7 million related to excess purchase price over the carrying value of acquired assets in common control transactions.

Net cash used in financing activities for the year ended December 31, 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 $35.3 million and cash distributions paid decreased $43.8 million.

Offsetting such decrease, costs associated with our credit facility increased $0.6 million.

Total Contractual Obligations

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Payments due by period

Type of Obligation

More than 5 years

Type of Obligation Total

Obligation Less than

Revolving credit facility $ 148,000 $ — $ 148,000 $ — $ —

2021 senior unsecured notes

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

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

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

Throughput commitment 9,711 6,439 3,272 — —

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Interest payable on finance lease obligations 35 26 9 — —

Interest payable on fixed long-term obligations

Interest payable on fixed long-term debt obligations 157,633 39,213 77,903 40,517 —

Total contractual cash obligations $ 719,264 $ 85,620 $ 238,739 $ 389,075 $ 5,830

(1) The revolving credit facility matures on (a) August 31, 2023, or (b) August 19, 2020 if the 2021 Notes have not been voluntarily refinanced on or prior to August 19, 2020.

The interest payable under our revolving 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.

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

2021 Senior Notes

We and Martin Midstream Finance Corp., a subsidiary of us (collectively, the "Issuers"), entered into (i) an Indenture, dated as of February 11, 2013 (the "2021 Indenture") among the Issuers, certain subsidiary guarantors (the "2021 Guarantors") and Wells Fargo Bank, National Association, as trustee (the "2021 Trustee") and (ii) a Registration Rights Agreement, dated as of February 11, 2013 (the "2021 Registration Rights Agreement"), among the Issuers, the 2021 Guarantors and Wells Fargo Securities, LLC, RBC Capital Markets, LLC, RBS Securities Inc., SunTrust Robinson Humphrey, Inc.

and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of a group of initial purchasers, in connection with a private placement to eligible purchasers of $250.0 million in aggregate principal amount of the Issuers' 7.25% senior unsecured notes due 2021 (the "2021 Notes").

On April 1, 2014, we completed a private placement add-on of $150.0 million of the 2021 Notes.

In 2015, we repurchased on the open market and subsequently retired an aggregate $26.2 million of our outstanding 2021 Notes.

Interest and Maturity.

The Issuers issued the 2021 Notes pursuant to the 2021 Indenture in transactions exempt from registration requirements under the Securities Act.

The 2021 Notes were resold to qualified institutional buyers pursuant to

Rule 144A under the Securities Act and to persons outside the United States pursuant to Regulation S under the Securities Act.

The 2021 Notes will mature on February 15, 2021.

The interest payment dates are February 15 and August 15.

Optional Redemption.

The Issuers may on any one or more occasions redeem all or a part of the 2021 Notes at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the applicable redemption date on the 2021 Notes.

Certain Covenants.

The 2021 Indenture restricts our ability and the ability of certain of our subsidiaries to:

(i) sell assets including equity interests in our subsidiaries;

(ii) pay distributions on, redeem or repurchase our units or redeem or repurchase our subordinated debt;

(iii) make investments;

(iv) incur or guarantee additional indebtedness or issue preferred units;

(v) create or incur certain liens;

(vi) enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us;

(vii) consolidate, merge or transfer all or substantially all of our assets;

(viii) engage in transactions with affiliates;

(ix) create unrestricted subsidiaries;

(x) enter into sale and leaseback transactions;

or (xi) engage in certain business activities.

These covenants are subject to a number of important exceptions and qualifications.

If the 2021 Notes achieve an investment grade rating from each of Moody's Investors Service, Inc.

and Standard & Poor's Ratings Services and no Default (as defined in the 2021 Indenture) has occurred and is continuing, many of these covenants will terminate.

Events of Default.

The 2021 Indenture provides that each of the following is an Event of Default:

(i) default for 30 days in the payment when due of interest on the 2021 Notes;

(ii) default in payment when due of the principal of, or premium, if any, on the 2021 Notes;

(iii) failure by us to comply with certain covenants relating to asset sales, repurchases of the 2021 Notes upon a change of control and mergers or consolidations;

(iv) failure by us for 180 days after notice to comply with our reporting obligations under the Exchange Act;

(v) failure by us for 60 days after notice to comply with any of the other agreements in the 2021 Indenture;

(vi) default under any mortgage, indenture or instrument governing any indebtedness for money borrowed or guaranteed by us or any of our restricted subsidiaries, whether such indebtedness or guarantee now exists or is created after the date of the 2021 Indenture, if such default:

(a) is caused by a payment default;

or (b) results in the acceleration of such indebtedness prior to its stated maturity, and, in each case, the principal amount of the indebtedness, together with the principal amount of any other such indebtedness under which there has been a payment default or acceleration of maturity, aggregates $20.0 million or more, subject to a cure provision;

(vii) failure by us or any of our restricted subsidiaries to pay final judgments aggregating in excess of $20.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;

(viii) except as permitted by the 2021 Indenture, any subsidiary guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force or effect, or any 2021 Guarantor, or any person acting on behalf of any Guarantor, denies or disaffirms its obligations under its subsidiary guarantee;

and (ix) certain events of bankruptcy, insolvency or reorganization described in the 2021 Indenture with respect to the Issuers or any of our restricted subsidiaries that is a significant subsidiary or any group of restricted subsidiaries that, taken together, would constitute a significant subsidiary of us.

Upon a continuing Event of Default, the 2021 Trustee, by notice to the Issuers, or the holders of at least 25% in principal amount of the then outstanding 2021 Notes, by notice to the Issuers and the 2021 Trustee, may declare the 2021 Notes immediately due and payable, except that an Event of Default resulting from entry into a bankruptcy, insolvency or reorganization with respect to the Issuers, any restricted subsidiary of us that is a significant subsidiary or any group of its restricted subsidiaries that, taken together, would constitute a significant subsidiary of us, will automatically cause the 2021 Notes to become due and payable.

Description of Our Indebtedness

Revolving Credit Facility

At December 31, 2019 , we maintained a $400.0 million revolving credit facility.

The revolving credit facility matures on (a) August 31, 2023, or (b) August 19, 2020 if the 2021 Notes have not been voluntarily refinanced on or prior to August 19, 2020.

At December 31, 2020, we maintained a $300.0 million revolving credit facility which matures on August 31, 2023.

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

Please see Note 16 in Part II of this Form 10-K for more information about the July 8, 2020 amendment to our revolving credit facility ("the Credit Facility Amendment")..

As of December 31, 2020, we had $148.0 million outstanding under the revolving credit facility and $16.7 million of outstanding irrevocable letters of credit, leaving a maximum available to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $135.3 million.

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

Obligations under the credit facility are secured by first priority liens on substantially all of our assets and those of the guarantors, including, without limitation,

inventory, accounts receivable, bank accounts, marine vessels, equipment, fixed assets and the interests in our subsidiaries and certain of our equity method investees.

Obligations under the credit facility are secured by first priority liens on substantially all of our assets and those of the guarantors, including, without limitation, inventory, accounts receivable, bank accounts, marine vessels, equipment, fixed assets and the interests in our subsidiaries.

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 the net proceeds of certain asset sales, equity issuances and debt incurrences.

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.

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 December 31, 2019 :

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.

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 (LIBOR), with a floor for LIBOR of 1%, 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.

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 commitments 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 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 December 31, 2020:

Leverage Ratio

Base Rate Loans

Letters of Credit

Base Rate Loans Eurodollar

Loans Letters of Credit

Less than 3.00 to 1.00 1.75 % 2.75 % 2.75 %

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

At December 31, 2019 , 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 December 31, 2019 is 3.50%.

The applicable margin for LIBOR borrowings at December 31, 2020 is 3.75%, with a 1% floor for LIBOR.

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 and certain other restricted payments, but the credit facility permits us to make quarterly distributions to unitholders so long as no default or event of default exists under the credit facility;

(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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(ix) enter into certain burdensome agreements;

(x) make certain amendments to our organizational documents and other material agreements, including the Omnibus Agreement and our material agreements;

(xi) make capital expenditures;

and (xii) permit our joint ventures to incur indebtedness or grant certain liens.

(x) make certain amendments to the Omnibus Agreement and our material agreements;

and (xi) permit our joint ventures to incur indebtedness or grant certain liens.

The credit facility contains customary events of default, including, without limitation:

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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 Secured Notes and Indenture

Pursuant to the Exchange Offer, we and Martin Midstream Finance Corp., our wholly owned subsidiary (collectively the "Issuers") issued $292.0 million in aggregate principal amount of the Issuers’ 11.50% senior secured second lien notes due 2025 (the "2025 Notes"), 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 Martin Midstream Finance Corp.

and Talen’s Marine & Fuel, LLC) 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 our 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 our existing and future unsecured indebtedness 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 the end of any fiscal year (commencing with the fiscal year ending December 31, 2021) the Total Leverage Ratio (as defined in the Credit Facility Amendment) is greater than 3.75:1:00, the Issuers will use 25% of any excess annual 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 Secured Notes and Indenture

Pursuant to the rights offering in connection with the Exchange Offer, the Issuers issued $53.8 million aggregate principal amount of the Issuers’ 10.00% senior secured 1.5 lien notes due 2024 (the "2024 Notes").

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 of the 2025 Notes 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 future unsecured indebtedness 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 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, 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 and Indenture

The Issuers entered into an Indenture, dated as of February 11, 2013.

among the Issuers, certain subsidiary guarantors and Wells Fargo Bank, National Association, as trustee, under which the Issuers issued $400.0 million in aggregate principal amount of their 7.25% senior unsecured notes due 2021 (the "2021 Notes").

In 2015, we repurchased on the open market and subsequently retired an aggregate $26.2 million of our outstanding 2021 Notes.

In 2020, we repurchased on the open market and subsequently retired an aggregate $9.3 million of our outstanding 2021 Notes.

On August 12, 2020, we completed the Exchange Offer and Cash Tender Offer.

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.

On February 15, 2021, our 2021 Notes matured and we retired the outstanding balance of $28.8 million using proceeds from our revolving credit facility.

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 December 31, 2019, we had cash and cash equivalents of $2.8 million and available borrowing capacity of $51.5 million in additional amounts under our revolving credit facility with $201.0 million of borrowings outstanding.

Our revolving credit facility matures on August 31, 2023 unless our 2021 Notes have not been refinanced on or before August 19, 2020.

We are currently seeking to refinance the 2021 Notes, although no assurance can be given that we will be able to refinance the 2021 Notes.

Upon 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 December 31, 2020, we had cash and cash equivalents of $5.0 million and available borrowing capacity of $20.5 million under our revolving credit facility with $148.0 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.

Please read "Item 1A.

Risk Factors - Risks related to Our Business" for a discussion of such risks.

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

Risk Factors" of this Form 10-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, over the last 18 months, 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 and are unable to repay the outstanding borrowings under our revolving credit facility on August 19, 2020, 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.

The Partnership is in compliance with all debt covenants as of December 31, 2020 and expects to be in compliance for the next twelve months.

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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.

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

Impact of Inflation

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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-K

Item 7. Management’s Discussion and Analysis