What changed in this filing

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Item 1. Financial Statements

2021-04-26 compared with 2020-10-26 · 174 added, 383 removed, 637 unchanged (47% of the section changed)

3 unchanged sentences

(Dollars in thousands)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(Unaudited) (Audited)

2 unchanged sentences

65,232 52,748

Product exchange receivables 212 —

Inventories 38,716 54,122

Due from affiliates 22,213 14,807

Fair value of derivatives 12 —

Other current assets 8,294 8,991

Assets held for sale — 5,052

Total current assets 135,579 135,626

29 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Three Months Ended

Terminalling and storage * $ 18,378 $ 20,474

19 unchanged sentences

Other operating income (loss), net ( 760 ) 2,510

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

Operating income 15,686 15,600

2 unchanged sentences

Gain on retirement of senior unsecured notes — 3,484

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

Other, net — 3

Total other expense ( 12,953 ) ( 6,438 )

Net income (loss) before taxes ( 10,446 ) 13,487 ( 2,697 ) ( 550 )

Net income before taxes 2,733 9,162

Income tax expense ( 222 ) ( 347 )

Income (loss) from continuing operations ( 10,819 ) 13,250 ( 4,207 ) ( 2,122 )

Income from discontinued operations, net of income taxes

— — — ( 179,466 )

Net income (loss) ( 10,819 ) 13,250 ( 4,207 ) ( 181,588 )

Less general partner's interest in net (income) loss 216 ( 265 ) 84 3,632

Less (income) loss allocable to unvested restricted units 53 ( 72 ) 8 ( 5 )

Net income 2,511 8,815

Less general partner's interest in net (income) ( 50 ) ( 176 )

Less (income) allocable to unvested restricted units ( 10 ) ( 55 )

Limited partners' interest in net income (loss) $ 2,451 $ 8,584

Net income per unit attributable to limited partners - basic $ 0.06 $ 0.22

Net income per unit attributable to limited partners - diluted $ 0.06 $ 0.22

Weighted average limited partner units - basic 38,692,609 38,640,862

Weighted average limited partner units - diluted 38,705,641 38,644,467

See accompanying notes to consolidated and condensed financial statements.

4 unchanged sentences

* Related Party Transactions Included Above

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Three Months Ended

Terminalling and storage $ 15,306 $ 15,874

10 unchanged sentences

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

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

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Allocation of net income (loss) attributable to:

Limited partner interest:

Continuing operations $ ( 10,550 ) $ 12,913 $ ( 4,115 ) $ ( 2,080 )

Discontinued operations — — — ( 175,881 )

$ ( 10,550 ) $ 12,913 $ ( 4,115 ) $ ( 177,961 )

General partner interest:

Continuing operations $ ( 216 ) $ 265 $ ( 84 ) $ ( 42 )

Discontinued operations — — — ( 3,590 )

$ ( 216 ) $ 265 $ ( 84 ) $ ( 3,632 )

Net income (loss) per unit attributable to limited partners:

Continuing operations $ ( 0.27 ) $ 0.33 $ ( 0.11 ) $ ( 0.05 )

Discontinued operations — — — ( 4.55 )

$ ( 0.27 ) $ 0.33 $ ( 0.11 ) $ ( 4.60 )

Weighted average limited partner units - basic 38,662 38,653 38,655 38,661

Continuing operations $ ( 0.27 ) $ 0.33 $ ( 0.11 ) $ ( 0.05 )

Discontinued operations — — — ( 4.55 )

$ ( 0.27 ) $ 0.33 $ ( 0.11 ) $ ( 4.60 )

Weighted average limited partner units - diluted 38,662 38,653 38,655 38,661

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF CAPITAL (DEFICIT)

1 unchanged sentence

Partners’ Capital (Deficit)

Parent Net Investment Common Limited General Partner Amount

Common Limited General Partner Amount

Units Amount Total

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

Net loss — — ( 177,956 ) ( 3,632 ) ( 181,588 )

Issuance of common units, net — — ( 289 ) — ( 289 )

Net income — 8,639 176 8,815

Issuance of restricted units 81,000 — — —

3 unchanged sentences

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

Excess purchase price over carrying value of acquired assets

— — ( 102,393 ) — ( 102,393 )

Deferred taxes on acquired assets and liabilities — — 24,781 — 24,781

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

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

Balances - March 31, 2020 38,852,507 $ ( 31,774 ) $ 2,273 $ ( 29,501 )

Balances - January 1, 2021 38,851,174 $ ( 48,776 ) $ 1,905 $ ( 46,871 )

5 unchanged sentences

Purchase of treasury units ( 7,156 ) ( 17 ) — ( 17 )

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

Balances - March 31, 2021 38,802,750 $ ( 46,285 ) $ 1,951 $ ( 44,334 )

See accompanying notes to consolidated and condensed financial statements.

2 unchanged sentences

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

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

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

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

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

Net Income $ 2,511 $ 8,815

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

Depreciation and amortization 14,434 15,239

Amortization and write-off of deferred debt issuance costs 2,674 3,558

Amortization of deferred debt issuance costs 755 492

Amortization of premium on notes payable — ( 77 )

Deferred income tax expense 75 286

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

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

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

Loss on sale of property, plant and equipment, net 760 190

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

4 unchanged sentences

Accounts and other receivables ( 12,484 ) 26,413

Product exchange receivables ( 212 ) 164

Inventories 15,070 15,710

7 unchanged sentences

Change in other non-current assets and liabilities 88 ( 547 )

Net cash provided by continuing operating activities 19,150 17,849

Net cash provided by discontinued operating activities — 7,770

Net cash provided by operating activities 3,854 44,889

1 unchanged sentence

Payments for property, plant and equipment ( 2,514 ) ( 12,260 )

Acquisitions — ( 23,720 )

Payments for plant turnaround costs ( 1,674 ) ( 150 )

1 unchanged sentence

Proceeds from sale of property, plant and equipment 3 4,347

Net cash used in continuing investing activities ( 12,747 ) ( 33,331 )

Net cash provided by discontinued investing activities — 209,155

Net cash provided by (used in) investing activities ( 12,747 ) 175,824

Net cash used in investing activities ( 4,185 ) ( 6,295 )

Cash flows from financing activities:

Payments of long-term debt and finance lease obligations ( 257,658 ) ( 639,308 )

Payments of long-term debt ( 87,790 ) ( 112,860 )

Payments under finance lease obligations ( 2,431 ) ( 1,864 )

Proceeds from long-term debt 87,000 76,000

Proceeds from issuance of common units, net of issuance related costs — ( 289 )

Purchase of treasury units ( 17 ) ( 9 )

Payment of debt issuance costs ( 80 ) ( 192 )

Excess purchase price over carrying value of acquired assets — ( 102,393 )

Cash distributions paid ( 197 ) ( 2,457 )

Net cash used in financing activities ( 3,515 ) ( 41,382 )

Net increase (decrease) in cash ( 994 ) 1,502

Net decrease in cash ( 3,846 ) ( 2,788 )

Cash at beginning of period 4,958 2,856

5 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

March 31, 2021

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

14 unchanged sentences

Results for such interim periods are not necessarily indicative of the results of operations for the full year.

These financial statements should be read in conjunction with the Partnership’s audited consolidated financial statements and notes thereto included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the "SEC") on February 14, 2020.

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated and condensed financial statements in conformity with U.S.

Actual results could differ from those estimates.

Divestiture of Natural Gas Storage Assets.

On June 28, 2019, the Partnership completed the sale of its membership interests in Arcadia Gas Storage, LLC, Cadeville Gas Storage LLC, Monroe Gas Storage Company, LLC and Perryville Gas Storage LLC (the "Natural Gas Storage Assets") to Hartree Cardinal Gas, LLC ("Hartree"), a subsidiary of Hartree Bulk Storage, LLC.

The Natural Gas Storage Assets consist of approximately 50 billion cubic feet of working capacity located in northern Louisiana and Mississippi.

In consideration of the sale of the Natural Gas Storage Assets, the Partnership received cash proceeds of $ 210,067 after transaction fees and expenses.

The net proceeds were used to reduce outstanding borrowings under the Partnership's revolving credit facility.

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

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

See Note 3 for more information.

Impact of COVID-19 Pandemic.

A novel strain of coronavirus ("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.

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

These concerns were further exacerbated by the price war among members of the Organization of Petroleum Exporting Countries ("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.

The COVID-19 pandemic has impacted the Partnership's 2020 performance to date, and the Partnership expects to continue to experience the impacts of COVID-19 throughout the remainder of 2020 as a result of continued reduction in refined product demand across the industries the Partnership serves.

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

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

Management identified triggering events requiring the performance of impairment testing of long-lived assets and goodwill related to both the performance of the Partnership's unit price during the first quarter of 2020 and certain of the Partnership's businesses that are sensitive to reductions in refined product demand and refinery utilization.

As a result, the Partnership recorded impairment charges totaling $ 4,352 related to long-lived assets during the first quarter of 2020.

See Note 3 for more information.

No impairments were identified related to goodwill.

A sustained reduction in refinery demand and utilization could lead to future asset impairments as well as adversely affect access to capital and financing to be able to meet future obligations.

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

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

NEW ACCOUNTING PRONOUNCEMENTS

During the first quarter of 2020, the Partnership adopted Accounting Standards Update ("ASU") 2016-13, "Financial Instruments - Credit Losses," which required the Partnership to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

This replaced the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables.

On January 1, 2021, the Partnership adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2019-12, Income Taxes (Accounting Standards Codification ("ASC") Topic 740):

Simplifying the Accounting for Income Taxes , which removes certain exceptions to general principles in ASC 740 and clarifies and amends existing guidance within U.S.

Adoption of the new standard did not have a material impact on the Partnership’s consolidated financial statements.

DIVESTITURES AND DISCONTINUED OPERATIONS

Divestiture of Natural Gas Storage Assets.

On June 28, 2019, the Partnership completed the sale of the Natural Gas Storage Assets to Hartree, a subsidiary of Hartree Bulk Storage, LLC.

The Natural Gas Storage Assets consist of approximately 50 billion cubic feet of working capacity located in northern Louisiana and Mississippi.

In consideration of the sale of these assets, the Partnership received cash proceeds of $ 210,067 after transaction fees and expenses.

The net proceeds were used to reduce outstanding borrowings under the Partnership's revolving credit facility.

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

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

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

Total revenues

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

Depreciation and amortization

Other operating loss 1

— ( 178,781 )

Loss from discontinued operations before income taxes

— ( 179,466 )

Income tax expense

Loss from discontinued operations, net of income taxes

$ — $ ( 179,466 )

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

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

Long-Lived Assets Held for Sale

At December 31, 2019, certain terminalling and storage and transportation assets met the criteria to be classified as held for sale in accordance with ASC 360-10 and are presented at the lower of the assets' carrying amount or fair value less cost to sell by segment in current assets in the table below.

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

September 30,

2020 December 31, 2019

Terminalling and storage $ — $ 3,552

Transportation — 1,500

Assets held for sale $ — $ 5,052

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

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

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

March 31, 2021

The following table disaggregates our revenue by major source:

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

2020 2019 2020 2019

Three Months Ended March 31,

Terminalling and storage segment

17 unchanged sentences

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

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

7 unchanged sentences

Natural Gas Liquids Segment

Natural Gas Liquids ("NGL") distribution revenue is recognized when product is delivered by truck, rail, or pipeline to the Partnership's NGL customers.

Natural Gas Liquids ("NGL") revenue is recognized when product is delivered by truck, rail, or pipeline to the Partnership's NGL customers.

Revenue is recognized on title transfer of the product to the customer.

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

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

Sulfur Services Segment

18 unchanged sentences

Total $ 45,057 $ 56,673 $ 56,838 $ 43,829 $ 45,172 $ 294,141 $ 541,710

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

September 30,

Components of inventories at March 31, 2021 and December 31, 2020 were as follows:

2021 December 31,

5 unchanged sentences

$ 38,716 $ 54,122

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

September 30,

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

At March 31, 2021 and December 31, 2020, long-term debt consisted of the following:

2021 December 31,

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

$ 300,000 Revolving credit facility at variable interest rate ( 5.00 % 1 weighted average at March 31, 2021), due August 2023 4 secured by substantially all of the Partnership’s assets, including, without limitation, inventory, accounts receivable, vessels, equipment, fixed assets and the interests in the Partnership’s operating subsidiaries, net of unamortized debt issuance costs of $ 3,541 and $ 3,826 , respectively 2

$ 172,459 $ 144,174

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

$ 400,000 Senior notes, 7.25 % interest, net of unamortized debt issuance costs of $ — and $ — , respectively, including unamortized premium of $ — and $ — , respectively, issued $ 250,000 February 2013 and $ 150,000 April 2014, $ 26,200 repurchased during 2015, $ 9,344 repurchased during 2020, $ 335,666 refinanced as part of the August 2020 Exchange offer, $28,790 repaid at maturity in February 2021, unsecured 2,3,4

$ 53,750 Senior notes, 10.0 % interest, net of unamortized debt issuance costs of $ 3,291 and $ 3,577 , respectively, due February 2024, secured 2,3

50,459 50,173

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

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

$ 291,970 Senior notes, 11.5 % interest, net of unamortized debt issuance costs of $ 1,616 and $ 1,720 , respectively, due February 2025, secured 2,3

290,354 290,250

Total 513,272 513,387

4 unchanged sentences

Total finance lease obligations $ 565 $ 2,996

1 Interest rate fluctuates based on the LIBOR rate plus an applicable margin set on the date of each advance.

The margin above LIBOR is set every three months.

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

1 Interest rate fluctuates based on LIBOR or the base prime rate (set on the date of each advance) plus an applicable margin.

The margin is set every three months.

All amounts outstanding at December 31, 2020 were at LIBOR plus an applicable margin.

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

All amounts outstanding at December 31, 2020 and March 31, 2021 were at LIBOR plus an applicable margin with LIBOR having a floor of 1.0 % per annum.

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

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

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

The applicable margin for LIBOR borrowings at March 31, 2021 is 4.00 %.

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

make certain investments and acquisitions;

2 unchanged sentences

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

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

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

2 The Partnership is in compliance with all debt covenants as of March 31, 2021 and December 31, 2020, respectively.

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

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

2 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

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

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

6 Amendment to Credit Facility.

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

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

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

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

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

4 On February 15, 2021, the 2021 Notes matured and the Partnership retired the outstanding balance of

$ 28,790 using funds borrowed under its revolving credit facility.

The Partnership paid cash interest, net of capitalized interest, in the amount of $ 23,347 and $ 16,736 for the three months ended March 31, 2021 and 2020, respectively.

Capitalized interest was $ 0 and $ 4 for the three months ended March 31, 2021 and 2020, respectively.

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

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

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

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

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

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

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

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

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

March 31, 2021

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

The leases generally provide that all expenses related to the equipment are to be paid by the lessee.

Operating lease Right-of-Use ("ROU") assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date.

Operating lease Right-of-Use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date.

Because most of the Partnership's leases do not provide an implicit rate of return, the Partnership uses its imputed collateralized rate based on the information available at commencement date in determining the present value of lease payments.

2 unchanged sentences

The Partnership includes extension periods and excludes termination periods from its lease term if, at commencement, it is reasonably likely that the Partnership will exercise the option.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

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

2020 2019 2020 2019

The components of lease expense for the three months ended March 31, 2021 and 2020 were as follows:

Three Months Ended March 31,

Operating lease cost $ 2,302 $ 2,844

5 unchanged sentences

Total lease cost $ 5,543 $ 6,995

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

September 30,

Supplemental balance sheet information related to leases at March 31, 2021 and December 31, 2020 was as follows:

2021 December 31, 2020

14 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

March 31, 2021

The Partnership’s future minimum lease obligations as of March 31, 2021 consist of the following:

Operating Leases Finance Leases

9 unchanged sentences

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

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

Future minimum revenues the Partnership expects to receive under these non-cancelable arrangements as of March 31, 2021 are as follows:

2021 - $ 15,715 ;

7 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

March 31, 2021

SUPPLEMENTAL BALANCE SHEET INFORMATION

Components of "Other accrued liabilities" were as follows:

September 30,

2021 December 31, 2020

7 unchanged sentences

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

September 30, 2020

March 31, 2021

Beginning asset retirement obligations $ 8,759

10 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

March 31, 2021

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Partnership’s revenues and cost of products sold are materially impacted by changes in commodity prices.

Additionally, the Partnership's results of operations are materially impacted by changes in interest rates.

The Partnership’s results of operations could be materially impacted by changes in commodity prices and interest rates.

In an effort to manage its exposure to these risks, the Partnership periodically enters into various derivative instruments, including commodity and interest rate hedges.

All derivatives and hedging instruments are non-hedge derivatives and are included on the balance sheet as an asset or a liability measured at fair value and changes in fair value are recognized as gains and losses in earnings of the periods in which they occur.

All derivatives and hedging instruments are non-hedge derivatives and are included on the balance sheet as an asset or a liability measured at fair value, and changes in fair value are recognized as gains and losses in the earnings of the periods in which they occur.

(a) Commodity Derivative Instruments

1 unchanged sentence

Commodity risk is the adverse effect on the value of a liability or future purchase that results from a change in commodity price.

The Partnership monitors and manages the commodity market risk associated with potential commodity risk exposure.

The Partnership has established a hedging policy and monitors and manages the commodity market risk associated with potential commodity risk exposure.

In addition, the Partnership has focused on utilizing counterparties for these transactions whose financial condition is appropriate for the credit risk involved in each specific transaction.

The Partnership has entered into hedging transactions as of March 31, 2021, to protect a portion of its commodity price risk exposure.

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

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

At March 31, 2021, the Partnership had instruments totaling a gross notional quantity of 225,000 barrels settling during the period from April 30, 2021 through June 30, 2021.

At December 31, 2020, the Partnership had instruments totaling a gross notional quantity of 137,000 barrels settling during the period from January 31, 2021 through February 28, 2021.

These instruments settle against the applicable pricing source for each grade and location.

(b) Interest Rate Derivative Instruments

The Partnership is exposed to market risks associated with interest rates.

Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates.

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

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

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

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

(b) Tabular Presentation of Gains and Losses on Derivative Instruments

The following table summarizes the fair value and classification of the Partnership’s derivative instruments in its Consolidated and Condensed Balance Sheets:

3 unchanged sentences

Balance Sheet Location

September 30, 2020 December 31, 2019 Balance Sheet Location

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020 Balance Sheet Location

March 31, 2021 December 31, 2020

Derivatives not designated as hedging instruments:

5 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

For the Three Months Ended September 30, 2020 and 2019

Location of Gain (Loss)

Recognized in Income on

Derivatives Amount of Gain (Loss) Recognized in

Income on Derivatives

Derivatives not designated as hedging instruments:

Commodity contracts Cost of products sold $ ( 134 ) $ 2,602

Total effect of derivatives not designated as hedging instruments $ ( 134 ) $ 2,602

March 31, 2021

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

For the Nine Months Ended September 30, 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

Location of Gain (Loss)

6 unchanged sentences

PARTNERS' CAPITAL

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

As of March 31, 2021, Partners’ capital consisted of 38,802,750 common limited partner units, representing a 98 % partnership interest, and a 2 % general partner interest.

Martin Resource Management Corporation, through subsidiaries, owns 6,114,532 of the Partnership's common limited partner units representing approximately 15.8 % of the Partnership's outstanding common limited partner units.

2 unchanged sentences

The partnership agreement of the Partnership (the "Partnership Agreement") contains specific provisions for the allocation of net income and losses to each of the partners for purposes of maintaining their respective partner capital accounts.

Impact on Partners Capital (Deficit) Related to Transactions Between Entities Under Common Control

Under ASC 805, assets and liabilities transferred between entities under common control are accounted for at the historical cost of those entities' ultimate parent, in a manner similar to a pooling of interests.

Any difference in the amount paid by the transferee versus the historical cost of the assets transferred is recorded as an adjustment to equity (contribution or distribution) by the transferee.

This is in contrast with a business combination between unrelated parties, where assets and liabilities are recorded at their fair values at the acquisition date, with any excess of amounts paid over the fair value representing goodwill.

From time to time, the most recent being in 2019, the Partnership has entered into common control acquisitions from Martin Resource Management Corporation.

The consideration transferred totaling $ 550,773 exceeds the historical cost of the net assets received.

This excess of the purchase price over the historical cost of the net assets received has resulted in cumulative distributions of $ 287,734 reflected as reductions to Partners' capital.

Incentive Distribution Rights

2 unchanged sentences

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

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

The general partner was allocated no incentive distributions during the three months ended March 31, 2021 and 2020.

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

2 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

March 31, 2021

Distributions of Available Cash

13 unchanged sentences

Under the if-converted method, the weighted-average number of subordinated units outstanding for the period is added to the weighted-average number of common units outstanding for purposes of computing basic net income per unit and the resulting amount is compared to the diluted net income per unit computed using the two-class method.

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

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

2020 2019 2020 2019

Continuing operations:

Income (loss) from continuing operations $ ( 10,819 ) $ 13,250 $ ( 4,207 ) $ ( 2,122 )

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

Three Months Ended March 31,

Net income $ 2,511 $ 8,815

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

1 unchanged sentence

General partner interest in undistributed income (loss)

( 220 ) 68 ( 141 ) ( 49 )

Less income (loss) allocable to unvested restricted units ( 53 ) 72 ( 8 ) —

Limited partners’ interest in net income (loss) $ ( 10,550 ) $ 12,913 $ ( 4,115 ) $ ( 2,080 )

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

2020 2019 2020 2019

Discontinued operations:

Income from discontinued operations $ — $ — $ — $ ( 179,466 )

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

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

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

Less income allocable to unvested restricted units 10 55

Limited partners’ interest in net income $ 2,451 $ 8,584

The Partnership allocates the general partner's share of earnings between continuing and discontinued operations as a proportion of net income from continuing and discontinued operations to total net income.

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

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

2020 2019 2020 2019

Three Months Ended March 31,

Basic weighted average limited partner units outstanding

3 unchanged sentences

38,705,641 38,644,467

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

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

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

UNIT BASED AWARDS

1 unchanged sentence

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

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

2020 2019 2020 2019

Three Months Ended March 31,

Employees $ 194 $ 301

1 unchanged sentence

Total unit-based compensation expense $ 240 $ 346

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

All of the Partnership's outstanding awards at March 31, 2021 met the criteria to be treated under equity classification.

Long-Term Incentive Plans

The Partnership's general partner has a long-term incentive plan for employees and directors of the general partner and its affiliates who perform services for the Partnership.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

12 unchanged sentences

Unvested units granted under the 2017 LTIP may or may not participate in cash distributions depending on the terms of each individual award agreement.

The performance conditions related to the PBRU's awarded on March 1, 2018 were not achieved and the Partnership, as such, did not recognize compensation expense for the vesting of the units.

The restricted units issued to directors generally vest in equal annual installments over a four-year period.

2 unchanged sentences

These restricted common units vest in equal installments of 3,514 units on January 24, 2022, 2023, 2024, and 2025.

On March 1, 2018, the Partnership issued 301,550 TBRU's and 317,925 PBRU's to certain employees of Martin Resource Management Corporation.

The TBRU's vest in equal installments over a three-year service period.

The PBRU's will vest at the conclusion of a three-year performance period based on certain performance targets.

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

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

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

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

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

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

A summary of the restricted unit activity for the three months ended March 31, 2021 is provided below:

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

5 unchanged sentences

Aggregate intrinsic value, end of period $ 284

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

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

2020 2019 2020 2019

A summary of the restricted units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) during the three months ended March 31, 2021 and 2020 is provided below:

Three Months Ended March 31,

Aggregate intrinsic value of units vested $ 257 $ 151

Fair value of units vested 1,418 1,427

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

As of March 31, 2021, there was $ 395 of unrecognized compensation cost related to non-vested restricted units.

That cost is expected to be recognized over a weighted-average period of 2.59 years.

RELATED PARTY TRANSACTIONS

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

As of March 31, 2021, Martin Resource Management Corporation owns 6,114,532 of the Partnership’s common units representing approximately 15.8 % of the Partnership’s outstanding limited partner units.

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

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

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

The Partnership’s general partner’s ability, as general partner, to manage and operate the Partnership, and Martin Resource Management Corporation’s ownership as of March 31, 2021, effectively gives Martin Resource Management Corporation the ability to veto some of the Partnership’s actions and to control the Partnership’s management.

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

4 unchanged sentences

The Omnibus Agreement was amended further on October 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management Corporation.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

Non-Competition Provisions .

7 unchanged sentences

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

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

◦ distributing fuel oil, marine fuel and other liquids;

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

◦ distributing asphalt, marine fuel and other liquids;

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

◦ operating a crude oil gathering business in Stephens, Arkansas;

◦ providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;

◦ providing crude oil gathering and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;

◦ providing crude oil marketing and transportation from the well head to the end market;

1 unchanged sentence

◦ supplying employees and services for the operation of the Partnership's business;

◦ operating, solely for our account, the asphalt facilities in each of Hondo, South Houston and Port Neches, Texas and Omaha, Nebraska.

◦ operating, solely for the Partnership's account, the asphalt facilities in Omaha, Nebraska, Port Neches, Texas, and South Houston, Texas.

• any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of less than $ 5,000 ;

4 unchanged sentences

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

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

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

monetary limitation on the amount the Partnership is required to reimburse Martin Resource Management Corporation for direct expenses.

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

Effective January 1, 2021, through December 31, 2021, the Conflicts Committee approved an annual reimbursement amount for indirect expenses of $ 14,386 .

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

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

The Partnership reimbursed Martin Resource Management Corporation for $ 3,542 and $ 4,103 of indirect expenses for the three months ended March 31, 2021 and 2020, respectively.

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

1 unchanged sentence

The provisions of the Omnibus Agreement regarding Martin Resource Management Corporation’s services will terminate if Martin Resource Management Corporation ceases to control the general partner of the Partnership.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

Related Party Transactions .

24 unchanged sentences

Martin Resource Management Corporation has agreed to indemnify MTI against all claims arising out of the negligence or willful misconduct of Martin Resource Management Corporation and its officers, employees, agents, representatives and subcontractors.

In the event a claim is the result of the joint negligence or misconduct of MTI and Martin Resource Management Corporation, indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligence or misconduct.

In the event a claim is the result of the joint negligence or misconduct of MTI and Martin Resource

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

Management Corporation, indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligence or misconduct.

Marine Agreements

5 unchanged sentences

Gulf Coast Index for #2 Fuel Oil.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

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

Terminal Services Agreements

19 unchanged sentences

As of December 31, 2019, the annual capital recovery fee reimbursement of $ 2,088 expired.

An additional $ 2,586 of capital recovery fee reimbursement will expire on December 31, 2020.

An additional $ 2,586 of capital recovery fee reimbursement expired on December 31, 2020.

All of these fees (other than the fuel surcharge and capital recovery fee) are subject to escalation annually based upon the greater of 3 % or the increase in the Consumer Price Index for a specified annual perio d .

A lso, the Partnership renegotiated a crude transportation contract set to expire in the first half of 2022 resulting in a reduction in revenue of $ 2,145 annually beginning January 1, 2020.

East Texas Mack Leases.

MTI leases equipment, including tractors and trailers, from East Texas Mack Sales ("East Texas Mack").

Certain of our directors or officers are owners of East Texas Mack, including entities affiliated with Ruben Martin, who owns approximately 46 % of the issued and outstanding stock of East Texas Mack.

Amounts paid to East Texas Mack for tractor and trailer lease payments and lease residuals for the three months ended March 31, 2021 and 2020 were $ 236 and $ 105 , respectively.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

Other Miscellaneous Agreements.

3 unchanged sentences

The impact of related party revenues from sales of products and services is reflected in the consolidated and condensed financial statements as follows:

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

2020 2019 2020 2019

Three Months Ended March 31,

Terminalling and storage $ 15,306 $ 15,874

4 unchanged sentences

$ 19,430 $ 21,860

$ 21,485 $ 24,102 $ 64,718 $ 72,757

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

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

2020 2019 2020 2019

Three Months Ended March 31,

Cost of products sold:

3 unchanged sentences

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

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

2020 2019 2020 2019

Three Months Ended March 31,

Operating expenses:

4 unchanged sentences

$ 18,368 $ 21,771

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

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

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

2020 2019 2020 2019

Three Months Ended March 31,

Selling, general and administrative:

5 unchanged sentences

$ 8,680 $ 8,312

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

BUSINESS SEGMENTS

3 unchanged sentences

The operating income of these segments is reviewed by the chief operating decision maker to assess performance and make business decisions.

The accounting policies of the operating segments are the same as those described in Note 2 in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020.

The accounting policies of the operating segments are the same as those described in Note 2 in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 3, 2021.

The Partnership evaluates the performance of its reportable segments based on operating income.

There is no allocation of administrative expenses or interest expense.

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

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

Transportation 35,712 ( 3,774 ) 31,938 4,412 ( 2,673 ) 1,785

Sulfur services 21,880 — 21,880 2,953 7,115 1,393

Natural gas liquids 52,350 — 52,350 617 4,668 173

Indirect selling, general and administrative — — — — ( 4,523 ) —

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

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

Three Months Ended March 31, 2021 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

Terminalling and storage $ 39,834 $ ( 1,595 ) $ 38,239 $ 7,105 $ 2,308 $ 2,665

3 unchanged sentences

Indirect selling, general and administrative

— — — — ( 3,919 ) —

Total $ 206,723 $ ( 5,749 ) $ 200,974 $ 14,434 $ 15,686 $ 6,575

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

Three Months Ended March 31, 2020 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs

Terminalling and storage $ 51,134 $ ( 1,726 ) $ 49,408 $ 7,456 $ 758 $ 3,745

8 unchanged sentences

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

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

Transportation 137,050 ( 17,723 ) 119,327 11,225 ( 6,509 ) 5,656

Sulfur services 90,521 — 90,521 8,553 16,292 9,781

Natural gas liquids 234,743 — 234,743 1,866 29,513 1,891

Indirect selling, general and administrative

— — — — ( 13,681 ) —

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

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

September 30, 2020 December 31, 2019

March 31, 2021

The Partnership's assets by reportable segment as of March 31, 2021 and December 31, 2020, are as follows:

March 31, 2021 December 31, 2020

Total assets:

18 unchanged sentences

If the case is reopened or the insurance claim by the customer is successful, we are currently unable to determine the exposure we may have in this matter, if any.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

FAIR VALUE MEASUREMENTS

9 unchanged sentences

Unobservable inputs that reflect the entity's own assumptions and are not corroborated by market data.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2021

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Commodity derivative contracts, net $ 12 $ ( 207 )

8 unchanged sentences

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Value Carrying

10 unchanged sentences

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

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

2020 2019 2020 2019

Three Months Ended March 31,

Provision for income taxes $ 222 $ 347

1 unchanged sentence

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Total income tax expense of $ 102 and $ 347 , related to the operation of the Taxable Subsidiary, for the three months ended March 31, 2021 and 2020, resulted in an effective income tax rate ("ETR") of 29.32 % and 32.17 %, respectively.

MARTIN MIDSTREAM PARTNERS L.P.

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(Dollars in thousands, except where otherwise indicated)

September 30, 2020

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

March 31, 2021

The decrease in the effective income tax rate for the income taxes during the three months ended March 31, 2021, compared to the three months ended March 31, 2020, is primarily due to a decrease in permanent differences.

The decrease in the provision for income taxes during the three months ended March 31, 2021, compared to the similar period in 2020, was primarily due to the impact of a decrease in income before income taxes in the current period.

A current federal income tax expense of $ 15 and $ 133 , related to the operation of the Taxable Subsidiary, were recorded for the three months ended March 31, 2021 and 2020, respectively.

A current state income tax expense (benefit) of $ 12 and $( 72 ), related to the operation of the Taxable Subsidiary, was recorded for the three months ended March 31, 2021 and 2020, respectively.

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

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

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

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

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

A deferred tax expense related to the MTI temporary differences of $ 75 and $ 286 was recorded for the three months ended March 31, 2021 and 2020, respectively.

A net deferred tax asset of $ 22,178 and $ 22,253 , related to the cumulative book and tax temporary differences, existed at March 31, 2021 and December 31, 2020, respectively.

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

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Quarterly Distribution.

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

On April 21, 2021, the Partnership declared a quarterly cash distribution of $ 0.005 per common unit for the first quarter of 2021, or $ 0.020 per common unit on an annualized basis, which will be paid on May 14, 2021 to unitholders of record as of May 7, 2021.

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

What changed 10-Q

Item 1. Financial Statements