What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-10-25 compared with 2021-07-26 · 150 added, 139 removed, 518 unchanged (36% of the section changed)

16 unchanged sentences

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

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

As of September 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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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.

Hurricane Ida.

On August 29, 2021, Hurricane Ida ("Ida") made landfall in Southeast Louisiana as a category 4 hurricane.

The effects of Ida did not have a material impact on our Gulf Coast shore-based terminal operations nor did we experience any material storm-related damage.

As of September 30, 2021, we have spent approximately $0.2 million on restoration and recovery costs as a result of Ida and expect the total spend to be approximately $0.2 million.

Winter Storm Uri.

In February 2021, we experienced Winter Storm Uri ("Uri"), an unprecedented storm bringing extreme cold temperatures to Texas and the surrounding areas, which resulted in gulf coast refineries running at reduced rates or halting operations entirely.

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.

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.

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.

We continue to monitor the impacts of the COVID-19 pandemic (including variants of the virus) on all aspects of our business.

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.

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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 June 30, 2021.

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

Sale of Mega Lubricants.

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Quarterly Distribution.

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.

On October 20, 2021, we declared a quarterly cash distribution of $0.005 per common unit for the third quarter of 2021, or $0.020 per common unit on an annualized basis, which will be paid on November 12, 2021 to unitholders of record as of November 5, 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 $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.

We reimbursed Martin Resource Management Corporation for $33.8 million of direct costs and expenses for the three months ended September 30, 2021 compared to $29.9 million for the three months ended September 30, 2020.

We reimbursed Martin Resource Management Corporation for $96.9 million of direct costs and expenses for the nine months ended September 30, 2021 compared to $94.5 million for the nine months ended September 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 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.

In each of the three months ended September 30, 2021 and 2020, the Conflicts Committee approved reimbursement amounts of $3.6 million and $4.2 million, respectively.

In each of the nine months ended September 30, 2021 and 2020, the Conflicts Committee approved reimbursement amounts of $10.8 million and $12.5 million, respectively.

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

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

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 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.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 18% and 23% of our total costs and expenses during the three months ended September 30, 2021 and 2020, respectively.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 19% and 23% of our total costs and expenses during the nine months ended September 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 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.

Our sales to Martin Resource Management Corporation accounted for approximately 10% and 14% of our total revenues for the three months ended September 30, 2021 and 2020, respectively.

Our sales to Martin Resource Management Corporation accounted for approximately 10% and 13% of our total revenues for the nine months ended September 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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If the board of directors of our general partner is involved in the approval process, it determines whether to refer the matter to the Conflicts Committee of our general partner's board of directors, as constituted under our limited partnership agreement.

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

If a matter is referred to the Conflicts

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

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

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Reconciliation of Non-GAAP Financial Measures

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

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

(in thousands) (in thousands)

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

Net loss $ (6,911) $ (10,819) $ (11,012) $ (4,207)

Loss from discontinued operations, net of income taxes

Income (loss) from continuing operations (6,911) (10,819) (11,012) (4,207)

Interest expense, net 14,110 12,943 40,372 32,245

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(Gain) loss on sale of property, plant and equipment, net (61) (22) 610 153

Gain on involuntary conversion of property, plant and equipment (186) (4,522) (186) (4,522)

Unrealized mark-to-market on commodity derivatives (412) 393 (207) (276)

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Lower of cost or market adjustments — 35 — 370

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

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

Unit-based compensation 48 363 288 709

Non-cash unit-based compensation 48 361 336 1,070

Adjusted EBITDA 21,487 22,534 74,886 77,483

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Income tax expense (954) (373) (2,111) (1,510)

Amortization of debt discount — — —

Amortization of debt premium — (38) — (191)

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Results of Operations

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.

The results of operations for the three and nine months ended September 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 and six months ended June 30, 2021 and 2020.

The following table sets forth our operating revenues and operating income by segment for the three and nine months ended September 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 June 30, 2021 Compared to the Three Months Ended June 30, 2020

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

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

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Income (Loss)

Three Months Ended June 30, 2021 (in thousands)

Three Months Ended September 30, 2021 (in thousands)

Terminalling and storage $ 51,226 $ (1,648) $ 49,578 $ 4,439 $ (1,170) $ 3,269

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Income (Loss)

Three Months Ended June 30, 2020 (in thousands)

Three Months Ended September 30, 2020 (in thousands)

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

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Total $ 158,130 $ (5,597) $ 152,533 $ 11,013 $ — $ 11,013

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

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

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Income (Loss)

Six Months Ended June 30, 2021 (in thousands)

Nine Months Ended September 30, 2021 (in thousands)

Terminalling and storage $ 136,584 $ (4,918) $ 131,666 $ 11,567 $ (3,414) $ 8,153

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Income (Loss)

Six Months Ended June 30, 2020 (in thousands)

Nine Months Ended September 30, 2020 (in thousands)

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

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Terminalling and Storage Segment

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

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands, except BBL per day)

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4,242 6,912 (2,670) (39) %

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

Other operating income, net 11 1 10 1,000 %

Gain on involuntary conversion of property, plant and equipment 186 62 124 200 %

Operating income $ 4,439 $ 6,975 $ (2,536) (36) %

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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.

Services revenues decreased $1.9 million, of which $1.0 million was primarily a result of contract termination fees, and $0.9 million was related to the disposition of the consigned lube business as part of the Mega Lubricants sale at our shore-based terminals .

In addition, revenue at the Smackover refinery decreased $0.2 million primarily due to the expiration of the capital recovery fee of $0.7 million, offset by contractually prescribed, index-based fee adjustments of $0.3 million and natural gas surcharge revenue of $0.1 million.

Products revenues.

The disposition of our Mega Lubricants business resulted in a $4.2 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.

Offsetting this reduction, a 32% increase in average sales price combined with a 7% rise in sales volumes at our blending and packaging facilities resulted in a $9.2 million increase to products revenues.

Cost of products sold.

The disposition of our Mega Lubricants business resulted in a $5.0 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.

Offsetting this reduction, a 48% increase in average cost per gallon combined with a 7% rise in sales volumes at our blending and packaging facilities resulted in a $9.3 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.

Operating expenses increased primarily as a result of utilities of $1.1 million, repairs and maintenance of $0.3 million and lease expense of $0.1 million.

Selling, general and administrative expenses.

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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

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

Other operating income, net.

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

Gain on involuntary conversion of property, plant and equipment.

The $0.2 million gain during the 2021 period is due to insurance proceeds received related to structural damage at one of our shore-based terminals.

The $0.1 million gain during the 2020 period is due to insurance proceeds received related to structural damage at one of our specialty terminals during a weather incident at our Neches Terminal in May of 2019.

Comparative Results of Operations for the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30, Variance Percent Change

(In thousands, except BBL per day)

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11,375 14,347 (2,972) (21) %

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

Other operating income (loss), net 6 (3,053) 3,059 100 %

Gain on involuntary conversion of property, plant and equipment 186 62 124 200 %

Operating income $ 11,567 $ 11,356 $ 211 2 %

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Services revenues.

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.

Services revenues decreased $5.2 million, of which $3.5 million was primarily a result of the disposition of the consigned lube business as part of the Mega Lubricants sale as well as a $1.0 million decrease related to contract termination fees at our shore-based terminals.

In addition, revenue at the Smackover refinery decreased $1.0 primarily due to the expiration of the capital recovery fee of $1.9 million, offset by $0.9 million in contractually prescribed, index-based fee adjustments.

Offsetting these decreases were increases at our specialty terminals related to storage revenue of $0.4 million and service revenue of $0.2 million.

Products revenues.

The disposition of our Mega Lubricants business resulted in a $17.1 million decrease in product revenues at our shore-based terminals.

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.

Offsetting this reduction, a 14% increase in average sales price and a 5% rise in sales volumes at our blending and packaging facilities resulted in a $12.8 million increase to products revenues.

Cost of products sold.

The disposition of our Mega Lubricants business resulted in a $19.4 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.

Offsetting this reduction, an 18% increase in average cost per gallon and a 5% rise in sales volumes at our blending and packaging facilities resulted in an $11.8 million increase in cost of products sold.

Operating expenses.

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

Operating expenses increased primarily as a result of utilities of $1.7 million, insurance premiums of $0.5 million, repairs and maintenance of $0.3 million, and lease expense of $0.2 million offset by lower compensation expense of $0.9 million

Selling, general and administrative expenses.

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Depreciation and amortization.

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

Other operating loss, net.

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

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

Other operating income (loss), net.

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

Gain on involuntary conversion of property, plant and equipment.

The $0.2 million gain during the 2021 period is due to insurance proceeds received related to structural damage at one of our shore-based terminals.

The $0.1 million gain during

the 2020 period is due to insurance proceeds received related to structural damage at one of our specialty terminals during a weather incident at our Neches Terminal in May of 2019.

Transportation Segment

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

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

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Inland revenues decreased $2.7 million, primarily related to lower transportation rates and reduction in marine equipment.

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

Offshore revenues increased $0.5 million primarily due to higher transportation rates.

Additionally, ancillary revenue (primarily fuel) increased $0.3 million.

Land Transportation Revenues.

Freight revenue increased $5.9 million.

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

Transportation rates increased 22%, resulting in a $5.0 million increase and total miles increased 4%, resulting in a $1.0 million increase.

Additionally, fuel surcharge revenue increased $2.8 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.

The increase in operating expenses is primarily a result of increases in compensation expense of $2.1 million, pass-through expenses (primarily fuel) of $1.6 million, repairs and maintenance of $0.8 million and regulatory taxes of $0.3 million.

Selling, general and administrative expenses .

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Depreciation and amortization.

Depreciation and amortization remained relatively consistent.

Depreciation and amortization decreased as a result of disposals and assets being fully depreciated, offset by capital expenditures as well as a transfer of assets between segments during the second quarter of 2021.

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

Comparative Results of Operations for the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30, Variance Percent Change

(In thousands)

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Other operating income (loss), net 59 (1,174) 1,233 105 %

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

Operating income $ 3,286 $ 4,071 $ (785) (19) %

Marine Transportation Revenues.

Inland revenues decreased $13.9 million, primarily related to lower utilization, transportation rates, and reduction in marine equipment.

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

Offshore revenues decreased $0.9 million primarily due to lower utilization offset by higher transportation rates.

Additionally, ancillary revenue (primarily fuel) decreased $0.3 million.

Land Transportation Revenues.

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 .

Freight revenue increased primarily due to an 11% increase in transportation rates resulting in a $7.2 million increase and a 3% increase in total miles, resulting in a $2.3 million increase.

Additionally, fuel surcharge increased $4.3 million .

Operating expenses.

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.

The increase in operating expenses is primarily a result of pass through expenses (primarily fuel) of $2.7 million, repairs and maintenance of $1.3 million, offset by a decrease in outside towing of $1.7 million.

Selling, general and administrative expenses.

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Depreciation and amortization.

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.

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Sulfur Services Segment

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

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

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Products revenues increased $8.4 million as a result of a 44% 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.

Products revenues increased an additional $0.5 million due to a 2% increase in sales volumes, primarily related to a 30% increase in fertilizer volumes.

Cost of products sold.

A 51% increase in product cost impacted cost of products sold by $7.2 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%.

A 2% increase in sales volumes resulted in an additional increase in cost of products sold of $0.4 million.

Margin per ton increased $5.77, or 24%.

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.

Operating expenses increased due to an increase in marine fuel and lube expense of $0.3 million, a rise in insurance premiums and claims of $0.1 million, and an increase in harbor agency fees of $0.1 million.

Offsetting this increase was a decrease of $0.1 million in repairs and maintenance.

Selling, general and administrative expenses.

Selling, general and administrative expenses remained relatively consistent.

Selling, general and administrative expenses increased $0.1 million in employee related expenses and $0.1 million in corporate overhead.

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.

Depreciation and amortization decreased as a result of certain assets being fully depreciated in the prior period as well as a transfer of assets between segments during the three months ended June 30, 2021.

A further decline was attributable to 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

Comparative Results of Operations for the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30, Variance Percent Change

(In thousands)

8 unchanged sentences

Other operating income, net 14 6,777 (6,763) (100) %

Gain on involuntary conversion of property, plant and equipment — 4,460 (4,460) (100) %

Operating income $ 15,032 $ 24,261 $ (9,229) (38) %

6 unchanged sentences

Products revenues increased $38.0 million as a result of a 51% 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.

Products revenues decreased $17.8 million due to a 16% decrease in sales volumes, primarily related to a 28% decrease in sulfur volumes.

Cost of products sold.

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Operating expenses.

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.

Operating expenses decreased due to a reduction in outside towing of $0.4 million, repairs and maintenance of marine assets and railcars of $0.3 million, insurance premiums and claims 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, marine fuel of $0.1 million, and harbor agency fees of $0.1 million.

Selling, general and administrative expenses.

Selling, general and administrative expenses remained relatively consistent.

Selling, general and administrative expenses increased $0.1 million in employee related expenses and $0.1 million in corporate overhead.

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.

A further decline was attributable to reduced amortization of turnaround costs.

Other operating income, net.

1 unchanged sentence

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.

Gain on involuntary conversion of property, plant and equipment.

The $4.5 million gain in the nine months ended September 30, 2020 is due to insurance proceeds received related to structural damage of our ship-loader assets during a weather incident at our Neches Terminal in May of 2019.

Natural Gas Liquids Segment

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

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

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Depreciation and amortization 592 617 (25) (4) %

710 1,029 (319) (31) %

Other operating income, net 1 — 1

Operating income $ 1,579 $ 1,854 $ (275) (15) %

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Operating expenses .

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

Operating expenses remained relatively consistent.

Selling, general and administrative expenses .

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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

Comparative Results of Operations for the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30, Variance Percent Change

(In thousands)

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Selling, general and administrative expenses .

Selling, general and administrative increased $0.8 million as a result of increased compensation expense.

Selling, general and administrative increased primarily as a result of increased compensation expense.

Depreciation and amortization.

Depreciation and amortization remained relatively consistent.

Other operating income (loss), net.

Other operating loss, net.

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

Interest Expense, Net

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

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

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Total interest expense, net $ 14,110 $ 12,943 $ 1,167 9 %

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

Six Months Ended June 30, Variance Percent Change

Comparative Components of Interest Expense, Net for the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30, Variance Percent Change

(In thousands)

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Indirect Selling, General and Administrative Expenses

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

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

2021 2020 2021 2020

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$ 4,074 $ 4,523 $ (449) (10) % $ 11,773 $ 13,256 $ (1,483) (11) %

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.

Indirect selling, general and administrative expenses decreased for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 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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Under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses.

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

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

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

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

2021 2020 2021 2020

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

Cash Flows - Six Months Ended June 30, 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

Cash Flows - Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

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

Nine Months Ended September 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 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.

The decrease in net cash provided by operating activities for the nine months ended September 30, 2021 includes a reduction in operating results of $6.8 million and an unfavorable variance in working capital of $30.4 million, primarily related to the season build of butane inventory.

Offsetting this decrease was a $4.7 million increase in other non-cash charges and a favorable variance in other non-current assets and liabilities of $0.9 million.

Net cash used in investing activities.

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 cash used in investing activities for the nine months ended September 30, 2021 increased $0.9 million.

Net proceeds from the sale of property, plant and equipment decreased $4.2 million and proceeds received from the involuntary conversion of property, plant and equipment decreased $6.9 million.

A reduction in cash used of $10.2 million resulted from higher payments for capital expenditures and plant turnaround costs in 2020.

Net cash used in financing activities.

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.

Net cash used in financing activities for the nine months ended September 30, 2021 decreased primarily as a result of a $26.3 million reduction in net payments of long-term borrowings.

Further, cash distributions paid decreased $4.5 million, costs associated with the credit facility decreased $3.0 million, and payments of finance lease obligations decreased $1.4 million.

Total Contractual Obligations

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

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

Payments due by period

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Letters of Credit .

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.

At September 30, 2021, we had outstanding irrevocable letters of credit in the amount of $28.2 million, which were issued under our revolving credit facility.

Off Balance Sheet Arrangements.

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Revolving Credit Facility

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.

At September 30, 2021, we maintained a $275.0 million revolving credit facility that matures on August 31, 2023.

As of September 30, 2021, we had $208.5 million outstanding under the revolving credit facility and $28.2 million of outstanding irrevocable letters of credit, leaving a maximum available amount to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $38.3 million.

After giving effect to our then current borrowings, letters of credit, and the financial covenants contained in our revolving credit facility, we had the ability to borrow approximately $26.0 million in additional amounts thereunder as of September 30, 2021.

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

During the six months ended June 30, 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 nine months ended September 30, 2021, the level of outstanding draws on our credit facility has ranged from a low of $148.0 million to a high of $228.0 million.

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

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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 June 30, 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 June 30, 2021 is 4.00%, with a 1% floor for LIBOR.

The applicable margin for LIBOR borrowings at September 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.

On July 16, 2021, the credit facility was amended to, among other things:

• 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 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 quarter ended in 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;

In addition, the credit facility contains various covenants, which, among other things, limit our and our subsidiaries’ ability to:

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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 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.

On September 30, 2021, we had cash and cash equivalents of $6.8 million and available borrowing capacity of $38.3 million under our revolving credit facility with $208.5 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 $26.0 million in additional amounts thereunder as of September 30, 2021.

Our revolving credit facility matures on August 31, 2023.

4 unchanged sentences

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 June 30, 2021 and expect to be in compliance for the next twelve months.

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

Interest Rate Risk

6 unchanged sentences

Impact of Inflation

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.

economy and may increase the cost to acquire or replace property, plant and equipment.

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

Inflation may increase the cost to acquire or replace property, plant and equipment.

It may also increase the costs of labor and supplies.

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

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

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