What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-07-26 compared with 2021-04-26 · 271 added, 93 removed, 386 unchanged (49% of the section changed)

16 unchanged sentences

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

As of March 31, 2021, Martin Resource Management Corporation owned 15.8% of our total outstanding common limited partner units.

As of June 30, 2021, Martin Resource Management Corporation owned 15.8% of our total outstanding common limited partner units.

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

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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 has operated our business since our inception in 2002.

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

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Significant Recent Developments

Amendment to Revolving Credit Facility.

On July 16, 2021, the Operating Partnership and the Partnership entered into a Twelfth Amendment to Third Amended and Restated Credit Agreement (the "Twelfth Amendment") with Royal Bank of Canada, as administrative agent and collateral agent for the lenders and as an L/C Issuer and a lender, and the other lenders party thereto, which amends the Third Amended and Restated Credit Agreement, dated as of March 28, 2013, as amended (the “Credit Agreement”).

Upon the closing of the Twelfth Amendment, the Credit Agreement was amended to, among other things:

• reduce the aggregate amount of commitments under the Credit Agreement from $300.0 million to $275.0 million;

• eliminate the Partnership’s ability to increase the commitments under the Credit Agreement without the requisite consent of the lenders;

• eliminate the requirement for a $25.0 million reduction in the commitments under the Credit Agreement if the Partnership receives $25.0 million or more in net cash proceeds from any asset sale;

• require the Operating Partnership to maintain a minimum Interest Coverage Ratio (as defined in the Credit Agreement) of 1.75:1.0 with respect to the fiscal quarter ended in June of 2021, 1.6:1.0 with respect to the fiscal quarter ending in September of 2021, 1.75:1.0 with respect to the fiscal quarter ending in December of 2021, 1.85:1.0 with respect to the fiscal quarters ending in March and June of 2022, and 2.0:1.0 with respect to each fiscal quarter thereafter;

• require the Operating Partnership to maintain a maximum Total Leverage Ratio (as defined in the Credit Agreement) of not more than 5.75:1.0 with respect to the fiscal quarters ending in June and September of 2021, 5.25:1.0 with respect to the fiscal quarter ending in December of 2021, and 5.0:1.0 with respect to each fiscal quarter thereafter;

• require the Operating Partnership to maintain a maximum First Lien Leverage Ratio (as defined in the Credit Agreement) of not more than 2.25:1.0 with respect to each fiscal quarter ending in 2021, 1.75:1.0 with respect to each fiscal quarter ending in 2022, and 1.5:1.0 with respect to each fiscal quarter thereafter.

Winter Storm Uri.

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The majority of the impact we experienced was centered around our transportation and sulfur services segments where we saw reduced activity due to Uri's impact on Gulf Coast refinery utilization.

Additionally, our Smackover Refinery was down approximately nine days due to Uri, during which time we began preparations for the

previously scheduled turnaround in March of 2021.

Additionally, our Smackover Refinery was down approximately nine days due to Uri, during which time we began preparations for the previously scheduled turnaround in March of 2021.

This allowed us to minimize the amount of downtime at the Smackover Refinery which was back in operation by March 9, 2021.

We continue to monitor the impacts of the COVID-19 pandemic on all aspects of our business.

Travel restrictions and stay-at-home orders implemented by governments in many regions and countries across the globe, including the U.S., have greatly impacted the demand for refined products resulting in a significant reduction in refinery utilization, which impacted our 2020 performance and continues to impact our marine and land transportation businesses in 2021.

Looking forward, we expect to continue to experience some adverse impacts of COVID-19 in our transportation segment through the middle part of the year 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.

Travel restrictions and stay-at-home orders in place during much of 2020 that were implemented by governments in many regions and countries across the globe, including the U.S., have greatly impacted the demand for refined products resulting in a significant reduction in refinery utilization, which impacted our 2020 performance and continues to impact our marine transportation business in 2021.

Looking forward, we expect to continue to experience some adverse impacts of COVID-19 in our marine transportation segment 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 generally return to in-person work and resume travel.

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

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

Overall, 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 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, 2021 including the recoverability of long-lived assets and goodwill, the valuation of inventory, and the amount of expected credit losses.

Accordingly, it is possible that the impact of the pandemic, including the impact of variants of COVID-19, such as the Delta variant, could have a material adverse effect on the Partnership's results of operations, financial position and cash flows for the year ended December 31, 2021 including the recoverability of long-lived assets and goodwill, the valuation of inventory, and the amount of expected credit losses.

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

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 the pandemic 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 March 31, 2021.

to any significant contracts.

Ultimately the results of these assessments did not have a material impact on our results as of June 30, 2021.

Sale of Mega Lubricants.

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Quarterly Distribution.

On April 21, 2021, we 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.

On July 22, 2021, we declared a quarterly cash distribution of $0.005 per common unit for the second quarter of 2021, or $0.020 per common unit on an annualized basis, which will be paid on August 13, 2021 to unitholders of record as of August 6, 2021.

Critical Accounting Policies and Estimates

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

We reimbursed Martin Resource Management Corporation for $30.5 million of direct costs and expenses for the three months ended March 31, 2021 compared to $34.4 million for the three months ended March 31, 2020.

We reimbursed Martin Resource Management Corporation for $32.6 million of direct costs and expenses for the three months ended June 30, 2021 compared to $30.2 million for the three months ended June 30, 2020.

We reimbursed Martin Resource Management Corporation for $63.1 million of direct costs and expenses for the six months ended June 30, 2021 compared to $64.6 million for the six months ended June 30, 2020.

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

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

In each of the three months ended March 31, 2021 and 2020, the Conflicts Committee approved reimbursement amounts of $3.5 million and $4.1 million, respectively.

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

In each of the three months ended June 30, 2021 and 2020, the Conflicts Committee approved reimbursement amounts of $3.7 million and $4.1 million, respectively.

In each of the six months ended June 30, 2021 and 2020, the Conflicts Committee approved reimbursement amounts of $7.2 million and $8.3 million, respectively.

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

These indirect expenses covered the centralized corporate functions Martin Resource Management Corporation provides for us, 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 R esource Management Corporation’s retained businesses.

These indirect expenses covered the centralized corporate functions Martin Resource Management Corporation provides for us, su ch 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 R esource Management Corporation’s retained businesses.

The Omnibus Agreement also contains significant non-compete provisions and indemnity obligations.

5 unchanged sentences

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

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 19% and 21% of our total costs and expenses during the three months ended March 31, 2021 and 2020, respectively.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 21% and 26% of our total costs and expenses during the three months ended June 30, 2021 and 2020, respectively.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 20% and 23% of our total costs and expenses during the six months ended June 30, 2021 and 2020, respectively.

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

Our sales to Martin Resource Management Corporation accounted for approximately 10% and 11% of our total revenues for both the three months ended March 31, 2021 and 2020, respectively.

Our sales to Martin Resource Management Corporation accounted for approximately 11% and 15% of our total revenues for the three months

ended June 30, 2021 and 2020, respectively.

Our sales to Martin Resource Management Corporation accounted for approximately 10% and 13% of our total revenues for the six months ended June 30, 2021 and 2020, respectively.

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

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Reconciliation of Non-GAAP Financial Measures

The following table reconciles the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three months ended March 31, 2021 and 2020.

The following table reconciles the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three and six months ended June 30, 2021 and 2020.

Reconciliation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Adjusted Free Cash Flow

Three Months Ended

(in thousands)

Net income $ 2,511 $ 8,815

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

(in thousands) (in thousands)

Net income (loss) $ (6,612) $ (2,203) $ (4,101) $ 6,612

Interest expense, net 13,309 9,377 26,262 19,302

2 unchanged sentences

EBITDA 22,115 23,307 52,235 57,633

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

(Gain) loss on sale of property, plant and equipment, net (89) (15) 671 175

Unrealized mark-to-market on commodity derivatives 424 — 205 (669)

Non-cash insurance related accruals — 250 — 250

Lower of cost or market adjustments — — — 335

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Results of Operations

The results of operations for the three months ended March 31, 2021 and 2020 have been derived from our consolidated and condensed financial statements.

The results of operations for the three and six months ended June 30, 2021 and 2020 have been derived from our consolidated and condensed financial statements.

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

The following table sets forth our operating revenues and operating income by segment for the three months ended March 31, 2021 and 2020.

The following table sets forth our operating revenues and operating income by segment for the three and six months ended June 30, 2021 and 2020.

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

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

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

1 unchanged sentence

Income (Loss)

Three Months Ended March 31, 2021 (in thousands)

Three Months Ended June 30, 2021 (in thousands)

Terminalling and storage $ 45,524 $ (1,675) $ 43,849 $ 3,698 $ (1,122) $ 2,576

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Income (Loss)

Three Months Ended March 31, 2020 (in thousands)

Three Months Ended June 30, 2020 (in thousands)

Terminalling and storage $ 46,976 $ (1,542) $ 45,434 $ 3,352 $ (383) $ 2,969

5 unchanged sentences

Total $ 145,955 $ (5,317) $ 140,638 $ 7,960 $ — $ 7,960

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

after Eliminations Operating Income (Loss) Operating Income (Loss) Intersegment Eliminations Operating

Income (Loss)

Six Months Ended June 30, 2021 (in thousands)

Terminalling and storage $ 85,358 $ (3,270) $ 82,088 $ 7,128 $ (2,244) $ 4,884

Transportation 72,318 (7,577) 64,741 (641) (7,571) (8,212)

Sulfur services 73,121 — 73,121 12,750 3,852 16,602

Natural gas liquids 165,317 — 165,317 11,781 5,963 17,744

Indirect selling, general and administrative

— — — (7,699) — (7,699)

Total $ 396,114 $ (10,847) $ 385,267 $ 23,319 $ — $ 23,319

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

after Eliminations Operating Income (Loss) Operating Income (Loss) Intersegment Eliminations Operating

Income (Loss)

Six Months Ended June 30, 2020 (in thousands)

Terminalling and storage $ 98,110 $ (3,268) $ 94,842 $ 4,381 $ (654) $ 3,727

Transportation 80,433 (10,007) 70,426 2,944 (10,043) (7,099)

Sulfur services 61,756 (13) 61,743 18,681 3,991 22,672

Natural gas liquids 112,515 (5) 112,510 6,287 6,706 12,993

Indirect selling, general and administrative

— — — (8,733) — (8,733)

Total $ 352,814 $ (13,293) $ 339,521 $ 23,560 $ — $ 23,560

Terminalling and Storage Segment

Comparative Results of Operations for the Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31, Variance Percent Change

Comparative Results of Operations for the Three Months Ended June 30, 2021 and 2020

Three Months Ended June 30, Variance Percent Change

(In thousands, except BBL per day)

7 unchanged sentences

3,637 3,355 282 8 %

Other operating income (loss), net 61 (3) 64 2,133 %

Operating income $ 3,698 $ 3,352 $ 346 10 %

Shore-based throughput volumes (guaranteed minimum) (gallons) 20,000 20,000 — — %

Smackover refinery throughput volumes (guaranteed minimum BBL per day) 6,500 6,500 — — %

Services revenues.

Services revenues decreased $1.1 million, of which $1.1 million was primarily a result of the disposition of the consigned lube business as part of the Mega Lubricants sale as well as decreases in space rent and throughput revenue of $0.2 million at our shore-based terminals .

In addition, revenue at the Smackover refinery decreased $0.3 million primarily due to the expiration of the capital recovery fee .

Offsetting these decreases are increases at our specialty terminals related to throughput revenue of $0.5 million.

Products revenues.

The disposition of our Mega Lubricants business resulted in a $5.2 million decrease in product revenues at our shore-based terminals.

Offsetting this reduction, a 14% increase in average sales price combined with 9% higher sales volumes at our blending and packaging facilities resulted in a $4.9 million increase to products revenues.

Cost of products sold.

The disposition of our Mega Lubricants business resulted in a $6.0 million decrease in cost of products sold at our shore-based terminals.

Offsetting this reduction, a 15% increase in average cost per gallon combined with 9% higher sales volumes at our blending and packaging facilities resulted in a $4.2 million increase in cost of products sold.

Operating expenses.

Operating expenses increased $0.4 million primarily as a result of increases in utilities of $0.4 million, insurance premiums of $0.1 million and lease expense of $0.1 million offset by lower compensation expense of $0.3 million.

Selling, general and administrative expenses.

Selling, general and administrative expenses remained consistent.

Depreciation and amortization.

The reduction in depreciation and amortization is primarily the result of asset disposals, offset by recent capital expenditures.

Other operating income (loss), net.

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

Comparative Results of Operations for the Six Months Ended June 30, 2021 and 2020

Six Months Ended June 30, Variance Percent Change

(In thousands, except BBL per day)

Services $ 40,317 $ 43,603 $ (3,286) (8) %

Products 45,041 54,507 (9,466) (17) %

Total revenues 85,358 98,110 (12,752) (13) %

Cost of products sold 35,700 47,685 (11,985) (25) %

Operating expenses 25,457 25,205 252 1 %

Selling, general and administrative expenses 2,967 3,057 (90) (3) %

Depreciation and amortization 14,101 14,728 (627) (4) %

7,133 7,435 (302) (4) %

Other operating loss, net (5) (3,054) 3,049 100 %

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Services revenues.

Services revenue decreased $2.2 million, of which $1.5 million was primarily a result of the disposition of the consigned lube business as part of the Mega Lubricants sale as well as decreases in throughput revenue of $0.2 million at our shore-based terminals.

Services revenues decreased $3.3 million, of which $2.6 million was primarily a result of the disposition of the consigned lube business as part of the Mega Lubricants sale as well as decreases in space rent and throughput revenue of $0.6 million at our shore-based terminals.

In addition, revenue at the Smackover refinery decreased $0.8 primarily due to the expiration of the capital recovery fee.

Offsetting these decreases were increases at our specialty terminals related to throughput revenue of $0.3 million and storage revenue of $0.3 million.

Products revenues.

The disposition of our Mega Lubricants business resulted in a $12.9 million decrease in product revenues at our shore-based terminals.

In addition, a 4% decrease in average sales price combined with a 3% decrease in sales volumes at our blending and packaging facilities resulted in a $1.4 million decrease to products revenues.

Offsetting this reduction, a 12% increase in average sales price offset by a 3% decrease in sales volumes at our blending and packaging facilities resulted in a $3.5 million increase to products revenues.

Cost of products sold.

The disposition of our Mega Lubricants business resulted in an $8.4 million decrease in cost of products sold at our shore-based terminals.

In addition, an 8% decrease in average cost per gallon combined with a 3% decrease in sales volumes at our blending and packaging facilities resulted in a $1.7 million decrease in cost of products sold.

The disposition of our Mega Lubricants business resulted in a $14.4 million decrease in cost of products sold at our shore-based terminals.

Offsetting this reduction, an 11% increase in average cost per gallon offset by a 3% decrease in sales volumes at our blending and packaging facilities resulted in a $2.5 million increase in cost of products sold.

Operating expenses.

Operating expenses decreased $0.2 million primarily as a result of decreased compensation expense of $0.4 million, and repairs and maintenance of $0.1 million, offset by an increase in utilities of $0.3 million.

Operating expenses increased $0.3 million primarily as a result of increases in utilities of $0.6 million, insurance premiums of $0.5 million offset by lower compensation expense of $0.7 million

Selling, general and administrative expenses.

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

Selling, general and administrative expenses remained consistent.

Depreciation and amortization.

The decrease in depreciation and amortization is primarily the result of asset disposals, offset by recent capital expenditures.

The reduction in depreciation and amortization is primarily the result of asset disposals, offset by recent capital expenditures.

Other operating loss, net.

1 unchanged sentence

Transportation Segment

Comparative Results of Operations for the Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31, Variance Percent Change

Comparative Results of Operations for the Three Months Ended June 30, 2021 and 2020

Three Months Ended June 30, Variance Percent Change

(In thousands)

4 unchanged sentences

675 542 133 25 %

Other operating loss, net (4) (1,208) 1,204 100 %

Other operating income, net 21 13 8 62 %

Operating income $ 696 $ 555 $ 141 25 %

Marine Transportation Revenues .

Inland revenues decreased $4.3 million, primarily related to lower transportation rates and reduction in marine equipment.

Offshore revenues decreased $0.5 million primarily due to lower utilization.

Land Transportation Revenues.

Freight revenue increased $5.6 million.

Total miles increased 19%, resulting in a $4.1 million increase and transportation rates increased 7%, resulting in a $1.5 million increase.

Additionally, fuel surcharge revenue increased $2.2 million.

Operating expenses .

The increase in operating expenses is primarily a result of increases in pass-through expenses (primarily fuel) of $1.8 million, compensation expense of $0.9 million and repairs and maintenance of $0.7 million.

Selling, general and administrative expenses .

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

Depreciation and amortization .

Depreciation and amortization remained relatively consistent.

Other operating income, net.

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

Comparative Results of Operations for the Six Months Ended June 30, 2021 and 2020

Six Months Ended June 30, Variance Percent Change

(In thousands)

Revenues $ 72,318 $ 80,433 $ (8,115) (10) %

Operating expenses 60,989 63,493 (2,504) (4) %

Selling, general and administrative expenses 3,658 4,193 (535) (13) %

Depreciation and amortization 8,329 8,608 (279) (3) %

$ (658) $ 4,139 $ (4,797) (116) %

Other operating income (loss), net 17 (1,195) 1,212 101 %

Operating income (loss) $ (641) $ 2,944 $ (3,585) (122) %

Marine Transportation Revenues.

Inland revenues decreased $6.7 million, primarily related to a decrease in tows, utilization and transportation rates.

In addition, offshore revenue decreased $0.9 million primarily due to a decrease in utilization.

Inland revenues decreased $11.0 million, primarily related to lower utilization, transportation rates, and reduction in marine equipment.

Offshore revenues decreased $1.4 million primarily due to lower utilization.

Additionally, ancillary revenue (primarily fuel) decreased $0.9 million.

Land Transportation Revenues.

Freight revenue decreased primarily due to a 10% decrease in miles resulting in a $2.5 million decrease, offset by a 2% increase in transportation rates resulting in a $0.5 million increase.

Freight revenue increased primarily due to a 5% increase in transportation rates resulting in a $2.3 million increase and total miles increased 3% resulting in a $1.4 million increase.

Additionally, fuel surcharge decreased $1.5 million .

Operating expenses.

The decrease in operating expenses is primarily a result of decreases in compensation expense of $3.2 million, pass through expenses (primarily fuel) of $0.9 million, outside services of $0.7 million, repairs and maintenance of $0.4 million, and other operating expenses of $0.4 million.

The decrease in operating expenses is primarily a result of decreases in compensation expense of $2.3 million, outside services of $1.3 million, offset by increases in pass through expenses (primarily fuel) of $1.1 million.

Selling, general and administrative expenses.

1 unchanged sentence

Depreciation and amortization.

Depreciation and amortization decreased as a result of recent disposals and assets being fully depreciated.

Other operating loss, net.

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

Depreciation and amortization decreased as a result of recent disposals and assets being fully depreciated, offset by recent capital expenditures.

Other operating income (loss), net.

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

Sulfur Services Segment

Comparative Results of Operations for the Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31, Variance Percent Change

Comparative Results of Operations for the Three Months Ended June 30, 2021 and 2020

Three Months Ended June 30, Variance Percent Change

(In thousands)

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Products revenues.

Products revenue increased $23.4 million as a result of a 92% rise in average sulfur services sales prices.

Products revenues increased $9.0 million as a result of a 29% rise in average sulfur services sales prices.

Products revenues decreased $4.2 million due to an 11% decrease in sales volumes, primarily related to a 12% decrease in sulfur volumes.

Cost of products sold.

A 53% increase in product cost impacted cost of products sold by $9.8 million, resulting from a rise in commodity prices.

An 11% decrease in sales volumes resulted in an offsetting decrease in cost of products sold of $3.0 million.

Margin per ton decreased $3.11, or 7%.

Operating expenses.

Operating expenses decreased due to a reduction in insurance premiums and claims of $0.3 million, outside towing of $0.2 million, and repairs and maintenance of marine assets of $0.1 million.

Offsetting this decrease was an increase of $0.2 million in marine fuel and lube expense and a combined increase of $0.1 million in assist tugs and utilities.

Selling, general and administrative expenses.

Selling, general and administrative expenses remained relatively consistent.

Depreciation and amortization.

Depreciation and amortization decreased as a result of certain assets being fully depreciated in the prior period as well as reduced amortization of turnaround costs.

Other operating income, net.

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

Comparative Results of Operations for the Six Months Ended June 30, 2021 and 2020

Six Months Ended June 30, Variance Percent Change

(In thousands)

Services $ 5,899 $ 5,829 $ 70 1 %

Products 67,222 55,927 11,295 20 %

Total revenues 73,121 61,756 11,365 18 %

Cost of products sold 47,820 35,405 12,415 35 %

Operating expenses 4,813 6,052 (1,239) (20) %

Selling, general and administrative expenses 2,456 2,369 87 4 %

Depreciation and amortization 5,288 6,025 (737) (12) %

12,744 11,905 839 7 %

Other operating income, net 6 6,776 (6,770) (100) %

Operating income $ 12,750 $ 18,681 $ (5,931) (32) %

Sulfur (long tons) 219 349 (130) (37) %

Fertilizer (long tons) 179 165 14 8 %

Total sulfur services volumes (long tons) 398 514 (116) (23) %

Services revenues.

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

Products revenues.

Products revenues increased $30.9 million as a result of a 55% rise in average sulfur services sales prices.

Products revenues decreased $19.6 million due to a 23% decrease in sales volumes, primarily related to a 37% decr ease in sulfur volumes.

4 unchanged sentences

Operating expenses.

Operating expenses decreased as a result of a decrease in marine fuel of $0.4 million, a decrease in assist tugs of $0.2 million, decreased outside towing of $0.2 million , and decreased repairs and maintenance of $0.1 million.

Operating expenses decreased due to a reduction in outside towing of $0.4 million, insurance premiums and claims of $0.3 million, repairs and maintenance of marine assets of $0.2 million, marine fuel and lube expense of $0.2 million, assist tugs of $0.2 million, and lease expense of $0.1 million.

Offsetting this decrease was an increase in utilities of $0.1 million.

Selling, general and administrative expenses.

1 unchanged sentence

Depreciation and amortization.

Depreciation and amortization decreased as a result of decreased amortization of turnaround costs.

Depreciation and amortization decreased as a result of certain assets being fully depreciated in the prior period as well as reduced amortization of turnaround costs.

Other operating income, net.

Other operating income, net decreased $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 decrease is related to a net gain from the disposition of property, plant and equipment during first quarter 2020.

An additional $4.1 million decrease is related to a net gain from the disposition of property, plant and equipment during the first quarter of 2020.

Natural Gas Liquids Segment

Comparative Results of Operations for the Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31, Variance Percent Change

Comparative Results of Operations for the Three Months Ended June 30, 2021 and 2020

Three Months Ended June 30, Variance Percent Change

(In thousands)

5 unchanged sentences

710 1,029 (319) (31) %

Other operating income, net 1 — 1

Operating income $ 711 $ 1,029 $ (318) (31) %

NGL sales volumes (Bbls) 1,259 1,698 (439) (26) %

Products Revenues.

Our average sales price per barrel increased $35.56, or 199%, increasing revenues by $60.4 million.

The increase in average sales price per barrel was due to a rise in commodity prices.

Sales volumes decreased 26%, lowering revenues by $23.4 million.

Cost of products sold .

Our average cost per barrel increased $35.32, or 226%, increasing cost of products sold by $60.0 million.

The increase in average cost per barrel was due to a rise in commodity prices.

The decrease in sales volume of 26% resulted in a $22.4 million reduction to cost of products sold.

Our margins improved $0.24 per barrel, or 11%, during the period.

Operating expenses .

Operating expenses decreased $0.1 million related to lower utilities, permits and property taxes.

Selling, general and administrative expenses .

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

Depreciation and amortization.

Depreciation and amortization remained relatively consistent.

Other operating income, net.

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

Comparative Results of Operations for the Six Months Ended June 30, 2021 and 2020

Six Months Ended June 30, Variance Percent Change

(In thousands)

Products Revenues $ 165,317 $ 112,515 $ 52,802 47 %

Cost of products sold 146,688 100,839 45,849 45 %

Operating expenses 2,056 2,089 (33) (2) %

Selling, general and administrative expenses 2,904 2,077 827 40 %

Depreciation and amortization 1,199 1,221 (22) (2) %

12,470 6,289 6,181 98 %

Other operating loss, net (689) (2) (687) (34,350) %

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Products Revenues.

Our average sales price per barrel increased $12.10, or 36%, resulting in an increase to revenues of $29.6 million.

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

Sales volumes decreased 12%, decreasing revenues by $13.7 million.

Our average sales price per barrel increased $21.41, or 79%, increasing revenues by $88.7 million.

The increase in average sales price per barrel was due to a rise in commodity prices.

Sales volumes decreased 18%, lowering revenues by $35.9 million.

Cost of products sold .

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

The decrease in sales volume of 12% resulted in a $11.5 million decrease to cost of products sold.

Our margins increased $4.01 per barrel, or 123%, during the period.

The decrease in sales volume of 18% resulted in a $31.9 million reduction to cost of products sold.

Our margins improved $2.65 per barrel, or 94%, during the period.

Operating expenses .

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Interest Expense, Net

Comparative Components of Interest Expense, Net for the Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31, Variance Percent Change

Comparative Components of Interest Expense, Net for the Three Months Ended June 30, 2021 and 2020

Three Months Ended June 30, Variance Percent Change

(In thousands)

Revolving loan facility $ 2,091 $ 2,444 $ (353) (14) %

Revolving credit facility $ 2,226 $ 1,720 $ 506 29 %

Senior notes 9,846 6,679 3,167 47 %

Amortization of deferred debt issuance costs 766 499 267 54 %

Amortization of debt discount — (76) 76 100 %

Other 466 475 (9) (2) %

Finance leases 5 85 (80) (94) %

Capitalized interest — (5) 5 100 %

Total interest expense, net $ 13,309 $ 9,377 $ 3,932 42 %

Comparative Components of Interest Expense, Net for the Six Months Ended June 30, 2021 and 2020

Six Months Ended June 30, Variance Percent Change

(In thousands)

Revolving credit facility $ 4,317 $ 4,164 $ 153 4 %

Senior notes 19,503 13,210 6,293 48 %

Amortization of deferred debt issuance costs 1,521 991 530 53 %

Amortization of debt premium — (153) 153 100 %

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Indirect Selling, General and Administrative Expenses

Three Months Ended March 31, Variance Percent Change

(In thousands)

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

2021 2020 2021 2020

(In thousands) (In thousands)

Indirect selling, general and administrative expenses

$ 3,780 $ 4,361 $ (581) (13) % $ 7,699 $ 8,733 $ (1,034) (12) %

Indirect selling, general and administrative expenses decreased for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to a decrease in the indirect expenses allocated from Martin Resource Management.

Indirect selling, general and administrative expenses decreased for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 primarily due to a decrease in the indirect expenses allocated from Martin Resource Management Corporation.

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

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The allocation of these expenses between Martin Resource Management Corporation and us is subject to a number of judgments and estimates, regardless of the method used.

We can provide no assurances that our method of allocation, in the past or in the future, is or will be the most accurate or appropriate method of allocation for these expenses.

We can provide no assurances that our method of allocation, in the past or in the future, is or will

be the most accurate or appropriate method of allocation for these expenses.

Other methods could result in a higher allocation of selling, general and administrative expense to us, which would reduce our net income.

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

The Conflicts Committee of our general partner approved the following reimbursement amounts during the three months ended March 31, 2021 and 2020:

Three Months Ended March 31, Variance Percent Change

(In thousands)

The Conflicts Committee of our general partner approved the following reimbursement amounts during the three and six months ended June 30, 2021 and 2020:

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

2021 2020 2021 2020

(In thousands) (In thousands)

Conflicts Committee approved reimbursement amount

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

Cash Flows - Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

The following table details the cash flow changes between the three months ended March 31, 2021 and 2020:

Three Months Ended March 31, Variance Percent Change

Cash Flows - Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

The following table details the cash flow changes between the six months ended June 30, 2021 and 2020:

Six Months Ended June 30, Variance Percent Change

(In thousands)

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Net cash provided by operating activities.

The decrease in net cash provided by operating activities for the three months ended March 31, 2021 includes a decrease in operating results of $6.3 million and an unfavorable variance in working capital of $39.0 million.

Offsetting this decrease was a $3.7 million increase in other non-cash charges and a favorable variance in other non-current assets and liabilities of $0.6 million.

The decrease in net cash provided by operating activities for the six months ended June 30, 2021 includes a reduction in operating results of $10.7 million, an unfavorable variance in working capital of $30.7 million, and an unfavorable variance in other non-current assets and liabilities of $0.3 million.

Offsetting this decrease was a $3.2 million increase in other non-cash charges.

Net cash used in investing activities.

Net cash used in investing activities for the three months ended March 31, 2021 decreased $2.1 million.

A decrease in cash used of $8.2 million resulted from higher payments for capital expenditures and plant turnaround costs in 2020.

Net cash used in investing activities for the six months ended June 30, 2021 decreased $3.4 million.

A reduction in cash used of $9.4 million resulted from higher payments for capital expenditures and plant turnaround costs in 2020.

Net proceeds from the sale of property, plant and equipment decreased $1.6 million and proceeds received from the involuntary conversion of property, plant and equipment decreased $4.4 million.

Net cash used in financing activities.

Net cash used in financing activities for the three months ended March 31, 2021 decreased primarily as a result of a $36.1 million decrease in net payments of long-term borrowings.

Further, cash distributions paid decreased $2.3 million and costs associated with our credit facility decreased $0.1 million.

Offsetting was an increase in payments of finance lease obligations of $0.6 million.

Net cash used in financing activities for the six months ended June 30, 2021 decreased primarily as a result of a $28.6 million reduction in net payments of long-term borrowings.

Further, cash distributions paid decreased $4.5 million and payments of finance lease obligations decreased $0.6 million.

Total Contractual Obligations

A summary of our total contractual cash obligations as of March 31, 2021, is as follows:

A summary of our total contractual cash obligations as of June 30, 2021, is as follows:

Payments due by period

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Letters of Credit .

At March 31, 2021, we had outstanding irrevocable letters of credit in the amount of $20.4 million, which were issued under our revolving credit facility.

At June 30, 2021, we had outstanding irrevocable letters of credit in the amount of $26.7 million, which were issued under our revolving credit facility.

Off Balance Sheet Arrangements.

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Revolving Credit Facility

At March 31, 2021, we maintained a $300.0 million revolving credit facility that matures on August 31, 2023.

As of March 31, 2021, we had $176.0 million outstanding under the revolving credit facility and $20.4 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 $103.6 million.

After giving effect to our then current borrowings, letters of credit to the extent drawn, and the financial covenants contained in our revolving credit facility, we had the ability to borrow approximately $29.3 million in additional amounts thereunder as of March 31, 2021.

At June 30, 2021, we maintained a $300.0 million revolving credit facility that matures on August 31, 2023.

As of June 30, 2021, we had $179.5 million outstanding under the revolving credit facility and $26.7 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 $93.8 million.

After giving effect to our then current borrowings, letters of credit (to the extent drawn), and the financial covenants contained in our revolving credit facility, we had the ability to borrow approximately $40.6 million in additional amounts thereunder as of June 30, 2021.

As part of the amendment to our credit facility that closed on July 16, 2021, the lenders’ commitments were reduced from $300.0 million to $275.0 million.

As a result of the financial covenants in the revolving credit facility, such reduction of the lenders’ commitments would not have impacted our available liquidity under the revolving credit facility at June 30, 2021, nor did it reduce the currently foreseeable amount that we can borrow under the revolving credit facility.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Recent Developments – Amendment to Revolving Credit Facility” for more information regarding this amendment.

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

During the three months ended March 31, 2021, the level of outstanding draws on our credit facility has ranged from a low of $148.0 million to a high of $201.0 million.

During the six months ended June 30, 2021, the level of outstanding draws on our credit facility has ranged from a low of $148.0 million to a high of $201.0 million.

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

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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, 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 March 31, 2021:

Leverage Ratio

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

The applicable margin for LIBOR borrowings at March 31, 2021 is 4.00%, with a 1% floor for LIBOR.

The applicable margin for LIBOR borrowings at June 30, 2021 is 4.00%, 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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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.

On March 31, 2021, we had cash and cash equivalents of $1.1 million and available borrowing capacity of $103.6 million under our revolving credit facility with $176.0 million of borrowings outstanding.

After giving effect to our current borrowings, outstanding letters of credit and the financial covenants contained in our revolving credit facility, we had the ability to borrow approximately $29.3 million in additional amounts thereunder as of March 31, 2021.

On June 30, 2021, we had cash and cash equivalents of $0.7 million and available borrowing capacity of $93.8 million under our revolving credit facility with $179.5 million of borrowings outstanding.

After giving effect to our current borrowings, outstanding letters of credit and the financial covenants contained in our revolving credit facility, we had the ability to borrow approximately $40.6 million in additional amounts thereunder as of June 30, 2021.

Our revolving credit facility matures on August 31, 2023.

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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.

We are in compliance with all debt covenants as of March 31, 2021 and expect to be in compliance for the next twelve months.

We are in compliance with all debt covenants as of June 30, 2021 and expect to be in compliance for the next twelve months.

Interest Rate Risk

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Impact of Inflation

Inflation did not have a material impact on our results of operations for the three months ended March 31, 2021 or 2020.

Inflation did not have a material impact on our results of operations for the six months ended June 30, 2021 or 2020.

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

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

We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the three months ended March 31, 2021 or 2020.

We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the six months ended June 30, 2021 or 2020.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis