What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-26 compared with 2021-10-25 · 157 added, 353 removed, 315 unchanged (62% of the section changed)

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You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated and condensed financial statements and the notes thereto included elsewhere in this quarterly report.

We are a publicly traded limited partnership with a diverse set of operations focused primarily in the U.S.

Gulf Coast region.

We are a publicly traded limited partnership with a diverse set of operations focused primarily in the Gulf Coast region of the U.S.

Our four primary business lines include:

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In addition to these major and independent oil and gas companies, our primary customers include independent refiners, large chemical companies, and other wholesale purchasers of these products.

We operate primarily in the U.S.

Gulf Coast region.

We operate primarily in the Gulf Coast region of the U.S.

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

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

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.

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

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

As of March 31, 2022, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units.

Furthermore, on December 28, 2021, Martin Resource Management Corporation indirectly acquired, through its wholly owned subsidiary, Martin Resource LLC, the remaining 49% voting interest (50% economic interest) in MMGP Holdings, LLC ("Holdings"), which is the sole member of Martin Midstream GP LLC ("MMGP"), our general partner.

Such interests were previously held by certain affiliated investment funds managed by Alinda Capital Partners, which sold the interests to Senterfitt Holdings Inc.

(“Senterfitt”) on November 23, 2021.

At such time, Senterfitt granted Martin Resource LLC the right to purchase such interests for a period of ten years, which right was exercised on December 28, 2021.

As a result, Martin Resource Management Corporation indirectly owns 100% of MMGP.

Martin Resource Management Corporation directs our business operations through its ownership of our general partner.

MMGP owns a 2.0% general partner interest in us, and, until November 23, 2021, MMGP owned all of our incentive distribution rights.

On November 23, 2021, MMGP contributed to us all of our incentive distribution rights for no consideration, whereupon the incentive distribution rights were cancelled and cease to exist.

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

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Significant Recent Developments

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.

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 (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.

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 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, 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 September 30, 2021.

Sale of Mega Lubricants.

On December 22, 2020, we entered into an asset purchase and sale agreement to sell certain assets used in connection with our Mega Lubricants shore-based terminals business ("Mega Lubricants") to John W.

Stone Oil Distributor, LLC ("Stone Oil") for $22.4 million.

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

The transaction closed on December 22, 2020.

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

Subsequent Events

Excess Cash Flow Offer.

On April 14, 2022, we completed the payment of an aggregate principal amount of approximately $0.6 million, or approximately 0.20%, of our 2025 Notes, pursuant to the Excess Cash Flow Offer.

See “Note 17 – Subsequent Events” for more information on the Excess Cash Flow Offer.

Quarterly Distribution.

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.

On April 20, 2022, we declared a quarterly cash distribution of $0.005 per common unit for the first quarter of 2022, or $0.020 per common unit on an annualized basis, which will be paid on May 13, 2022 to unitholders of record as of May 6, 2022.

Critical Accounting Policies and Estimates

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• supplying employees and services for the operation of our business;

• operating, solely for our account, the asphalt facilities in Omaha, Nebraska, Port Neches, Texas, and South Houston, Texas

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

We are and will continue to be closely affiliated with Martin Resource Management Corporation as a result of the following relationships.

Martin Resource Management Corporation owns approximately 15.7% of the outstanding limited partner units.

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

MMGP owns a 2% general partner interest in us and all of our incentive distribution rights.

In addition, following its acquisition of the remaining 49% voting interest (50% economic interest) in Holdings, which is the sole member of MMGP, Martin Resource Management Corporation indirectly owns 100% of MMGP, our general partner.

MMGP owns a 2% general partner interest in us.

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

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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 $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.

We reimbursed Martin Resource Management Corporation for $39.1 million of direct costs and expenses for the three months ended March 31, 2022 compared to $30.5 million for the three months ended March 31, 2021.

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 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.

In each of the three months ended March 31, 2022 and 2021, the Conflicts Committee approved reimbursement amounts of $3.4 million and $3.5 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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Martin Resource Management Corporation also licenses certain of its trademarks and trade names to us under the Omnibus Agreement.

These additional agreements include, but are not limited to, a master transportation services agreement, marine transportation agreements, terminal services agreements, a tolling agreement, and a sulfuric acid sales agency agreement.

These additional related party agreements include, but are not limited to, a master transportation services agreement, marine transportation agreements, terminal services agreements, a tolling agreement, and a sulfuric acid sales agency agreement.

Pursuant to the terms of the Omnibus Agreement, we are prohibited from entering into certain material agreements with Martin Resource Management Corporation without the approval of the Conflicts Committee.

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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 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.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 17% and 19% of our total costs and expenses during the three months ended March 31, 2022 and 2021, respectively.

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

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.

Our sales to Martin Resource Management Corporation accounted for approximately 8% and 10% of our total revenues for the three months ended March 31, 2022 and 2021, 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, the Conflicts Committee 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.

How We Evaluate Our Operations

Non-GAAP Financial Measures

To assist management in assessing our business, we use the following non-GAAP financial measures:

earnings before interest, taxes, and depreciation and amortization ("EBITDA"), adjusted EBITDA (as defined below), distributable cash flow available to common unitholders (“Distributable Cash Flow”), and free cash flow after growth capital expenditures and principal payments under finance lease obligations ("Adjusted Free Cash Flow").

Our management uses a variety of financial and operational measurements other than our financial statements prepared in accordance with U.S.

GAAP to analyze our performance.

These include:

(1) net income before interest expense, income tax expense, and depreciation and amortization ("EBITDA"), (2) adjusted EBITDA, (3) distributable cash flow and (4) adjusted free cash flow.

Our management views these measures as important performance measures of core profitability for our operations and the ability to generate and distribute cash flow, and as key components of our internal financial reporting.

We believe investors benefit from having access to the same financial measures that our management uses.

Certain items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing an entity's financial performance, such as cost of capital and historical costs of depreciable assets.

EBITDA and Adjusted EBITDA .

We define Adjusted EBITDA as EBITDA before unit-based compensation expenses, gains and losses on the disposition of property, plant and equipment, impairment and other similar non-cash adjustments.

Certain items excluded from EBITDA and adjusted EBITDA are significant components in understanding and assessing an entity's financial performance, such as cost of capital and historical costs of depreciable assets.

We have included information concerning EBITDA and adjusted EBITDA because it provides investors and management with additional information to better understand the following:

financial performance of our assets without regard to financing methods, capital structure or historical cost basis;

our operating performance and return on capital as compared to those of other similarly situated entities;

and the viability of acquisitions and capital expenditure projects.

Our method of computing adjusted EBITDA may not be the same method used to compute similar measures reported by other entities.

The economic substance behind our use of adjusted EBITDA is to measure the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness and make distributions to our unitholders.

Adjusted EBITDA is used as a supplemental performance and liquidity measure by our management and by external users of our financial statements, such as investors, commercial banks, research analysts, and others, to assess:

• the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;

• the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness, and make cash distributions to our unitholders;

• our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing methods or capital structure.

The GAAP measures most directly comparable to adjusted EBITDA are net income (loss) and net cash provided by operating activities.

Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss), operating income (loss), net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP.

Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate Adjusted EBITDA in the same manner.

Adjusted EBITDA does not include interest expense, income tax expense, and depreciation and amortization.

Because we have borrowed money to finance our operations, interest expense is a necessary element of our costs and our ability to generate cash available for distribution.

Because we have capital assets, depreciation and amortization are also necessary elements of our costs.

Therefore, any measures that exclude these elements have material limitations.

To compensate for these limitations, we believe that it is important to consider net income (loss) and net cash provided by operating activities as determined under GAAP, as well as adjusted EBITDA, to evaluate our overall performance.

Distributable Cash Flow.

We define Distributable Cash Flow as Adjusted EBITDA less cash paid for interest, cash paid for income taxes, maintenance capital expenditures, and plant turnaround costs.

Distributable cash flow is a significant performance measure used by our management and by external users of our financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by us to the cash distributions it expects to pay unitholders.

We define Distributable Cash Flow as Net Cash Provided by (Used in) Operating Activities less cash received (plus cash paid) for closed commodity derivative positions included in Accumulated Other Comprehensive Income (Loss), plus changes in operating assets and liabilities which (provided) used cash, less maintenance capital expenditures and plant turnaround costs.

Distributable Cash Flow is a significant performance measure used by our management and by external users of our financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by us to the cash distributions we expect to pay unitholders.

Distributable Cash Flow is also an important financial measure for our unitholders since it serves as an indicator of our success in providing a cash return on investment.

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Adjusted Free Cash Flow.

Adjusted free cash flow is defined as distributable cash flow less growth capital expenditures and principle payments under finance lease obligations.

We define Adjusted Free Cash Flow as Distributable Cash Flow less growth capital expenditures and principal payments under finance lease obligations.

Adjusted Free Cash Flow is a significant performance measure used by our management and by external users of our financial statements and represents how much cash flow a business generates during a specified time period after accounting for all capital expenditures, including expenditures for growth and maintenance capital projects.

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Our calculation of Adjusted Free Cash Flow may or may not be comparable to similarly titled measures used by other entities.

EBITDA, adjusted EBITDA, distributable cash flow and adjusted free cash flow should not be considered alternatives to, or more meaningful than, net income, cash flows from operating activities, or any other measure presented in accordance with U.S.

Our method of computing these measures may not be the same method used to compute similar measures reported by other entities.

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 nine months ended September 30, 2021 and 2020.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

(in thousands) (in thousands)

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

The GAAP measure most directly comparable to Distributable Cash Flow and Adjusted Free Cash Flow is Net Cash Provided by (Used in) Operating Activities.

Distributable Cash Flow and Adjusted Free Cash Flow should not be considered alternatives to, or more meaningful than, Net Income (Loss), Operating Income (Loss), Net Cash Provided by (Used in) Operating Activities , or any other measure of liquidity presented in accordance with GAAP.

Distributable Cash Flow and Adjusted Free Cash Flow have important limitations because they exclude some items that affect Net Income (Loss), Operating Income (Loss), and Net Cash Provided by (Used in) Operating Activities.

Distributable Cash Flow and Adjusted Free Cash Flow may not be comparable to similarly titled measures of other companies because other companies may not calculate these non-GAAP metrics in the same manner.

To compensate for these limitations, we believe that it is important to consider Net Cash Provided by (Used in) Operating Activities determined under GAAP, as well as Distributable Cash Flow and Adjusted Free Cash Flow, to evaluate our overall liquidity.

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the years ended March 31, 2022 and 2021, which represents EBITDA, Adjusted EBITDA, Distributable Cash Flow, and Adjusted Free Cash Flow:

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

Three Months Ended March 31,

(in thousands)

Net income $ 11,478 $ 2,511

Interest expense 12,429 12,953

Income tax expense 1,541 222

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EBITDA 39,934 30,120

(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)

(Gain) loss on disposition of property, plant and equipment (14) 760

Unrealized mark-to-market on commodity derivatives — (219)

Non-cash insurance related accruals — — — 250

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)

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

Unit-based compensation 34 240

Adjusted EBITDA 39,954 30,901

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

Reconciliation of Net Cash provided by Operating Activities to Adjusted EBITDA, Distributable Cash Flow, and Adjusted Free Cash Flow

Three Months Ended March 31,

(in thousands)

Net cash provided by operating activities $ 28,375 $ 3,854

Interest expense 1

11,646 12,198

Current income tax expense 620 147

Commodity cash flow hedging gains reclassified to earnings 816 —

Net cash paid for closed commodity derivative positions included in AOCI 615 —

Changes in operating assets and liabilities which (provided) used cash:

Accounts and other receivables, inventories, and other current assets (3,896) 4,187

Trade, accounts and other payables, and other current liabilities 957 10,603

Other 821 (88)

Adjusted EBITDA 39,954 30,901

Interest expense (12,429) (12,953)

Income tax expense (1,541) (222)

Amortization of debt discount — — —

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

Deferred income taxes 921 75

Amortization of deferred debt issuance costs 783 755

Deferred income tax expense 661 184 1,419 1,202

Payments for plant turnaround costs (1,435) (1,674)

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Distributable Cash Flow 20,854 12,811

Expansion capital expenditures $ (1,367) $ (1,951) $ (3,344) $ (9,882)

Principal payments under finance lease obligations (59) (2,431)

Expansion capital expenditures (3,101) (830)

Adjusted Free Cash Flow $ 17,694 $ 9,550

1 Net of amortization of debt issuance costs and discount, which are included in interest expense but not included in net cash provided by operating activities.

Results of Operations

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.

The results of operations for the three months ended March 31, 2022 and 2021 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 nine months ended September 30, 2021 and 2020.

The following table sets forth our operating revenues and operating income by segment for the three months ended March 31, 2022 and 2021.

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

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

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

Income (Loss)

Three Months Ended September 30, 2021 (in thousands)

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

Transportation 42,568 (3,489) 39,079 3,927 (3,497) 430

Sulfur services 30,837 — 30,837 2,282 2,252 4,534

Natural gas liquids 91,764 — 91,764 1,579 2,415 3,994

Indirect selling, general and administrative

— — — (4,074) — (4,074)

Total $ 216,395 $ (5,137) $ 211,258 $ 8,153 $ — $ 8,153

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

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

Income (Loss)

Three Months Ended September 30, 2020 (in thousands)

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

Transportation 35,712 (3,774) 31,938 1,127 (3,800) (2,673)

Sulfur services 21,880 — 21,880 5,580 1,535 7,115

Natural gas liquids 52,350 — 52,350 1,854 2,814 4,668

Indirect selling, general and administrative

— — — (4,523) — (4,523)

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

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

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

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Income (Loss)

Nine Months Ended September 30, 2021 (in thousands)

Three Months Ended March 31, 2022 (in thousands)

Terminalling and storage $ 54,383 $ (1,578) $ 52,805 $ 3,914 $ (1,047) $ 2,867

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Income (Loss)

Nine Months Ended September 30, 2020 (in thousands)

Three Months Ended March 31, 2021 (in thousands)

Terminalling and storage $ 39,834 $ (1,595) $ 38,239 $ 3,430 $ (1,122) $ 2,308

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Terminalling and Storage Segment

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)

Services $ 20,628 $ 22,512 $ (1,884) (8) %

Products 30,598 25,676 4,922 19 %

Total revenues 51,226 48,188 3,038 6 %

Cost of products sold 24,618 20,381 4,237 21 %

Operating expenses 13,789 12,064 1,725 14 %

Selling, general and administrative expenses 1,528 1,537 (9) (1) %

Depreciation and amortization 7,049 7,294 (245) (3) %

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

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) %

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 $1.9 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 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 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 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.

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 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

Comparative Results of Operations for the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31, Variance Percent Change

(In thousands, except BBL per day)

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3,957 3,496 461 13 %

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

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

Other operating loss, net (43) (66) 23 35 %

Operating income $ 3,914 $ 3,430 $ 484 14 %

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Services revenues.

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.

Services revenues increased $1.0 million.

The revenue from the Smackover refinery increased $0.6 primarily due to $0.2 million in contractually prescribed, index-based fee adjustments, $0.2 million in throughput fees and $0.2 million in natural gas surcharge.

In addition, the revenue from our shore-based terminals increased $0.2 million related to space rent, and specialty terminals increased related to throughput revenue of $0.1 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 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.

A 44% increase in average sales price and a 16% rise in sales volumes at our blending and packaging facilities resulted in a $13.5 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 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.

A 55% increase in average cost per gallon and a 16% rise in sales volumes at our blending and packaging facilities resulted in a $12.2 million increase in cost of products sold.

Operating expenses.

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

Operating expenses increased primarily as a result of an increase in utilities expense of $1.1 million.

Selling, general and administrative expenses.

Selling, general and administrative expenses remained consistent.

Selling, general and administrative expenses increased primarily as a result of employee related expenses.

Depreciation and amortization.

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.

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

Other operating loss, net.

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

Transportation Segment

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

Revenues $ 42,568 $ 35,712 $ 6,856 19 %

Operating expenses 33,053 28,144 4,909 17 %

Selling, general and administrative expenses 1,920 2,050 (130) (6) %

Depreciation and amortization 3,710 4,412 (702) (16) %

3,885 1,106 2,779 251 %

Other operating income, net 42 21 21 100 %

Operating income $ 3,927 $ 1,127 $ 2,800 248 %

Marine Transportation Revenues .

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

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.

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 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 .

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

Depreciation and amortization.

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 Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30, Variance Percent Change

Comparative Results of Operations for the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31, Variance Percent Change

(In thousands)

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Marine Transportation Revenues.

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

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.

Inland revenues increased $1.9 million, primarily related to higher utilization and transportation rates.

Offshore revenues increased $1.2 million primarily due to higher utilization and transportation rates.

Additionally, ancillary revenue increased $1.2 million.

Land Transportation Revenues.

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.

Freight revenue increased primarily due to a 23% increase in load count combined with a 3% increase in total miles, which resulted in a $8.9 million increase.

Additionally, fuel surcharge increased $4.7 million .

Operating expenses.

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.

The increase in operating expenses is primarily a result of compensation expense of $5.0 million, pass through expenses of $3.3 million, recruitment expenses of $0.3 million, outside towing of $0.3 million and insurance premiums of $0.3 million.

Selling, general and administrative expenses.

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

Selling, general and administrative expenses increased primarily due to higher employee related expenses .

Depreciation and amortization.

Depreciation and amortization decreased as a result of disposals, offset by capital expenditures.

Other operating income (loss), net.

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Sulfur Services Segment

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

Services $ 2,950 $ 2,915 $ 35 1 %

Products 27,887 18,965 8,922 47 %

Total revenues 30,837 21,880 8,957 41 %

Cost of products sold 21,799 14,141 7,658 54 %

Operating expenses 2,849 2,501 348 14 %

Selling, general and administrative expenses 1,321 1,166 155 13 %

Depreciation and amortization 2,594 2,953 (359) (12) %

2,274 1,119 1,155 103 %

Other operating income, net 8 1 7 700 %

Operating income $ 2,282 $ 1,120 $ 1,162 104 %

Sulfur (long tons) 145 154 (9) (6) %

Fertilizer (long tons) 57 44 13 30 %

Total sulfur services volumes (long tons) 202 198 4 2 %

Services revenues.

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

Products revenues.

Products revenues increased $8.4 million as a result of a 44% rise in average sulfur services sales prices.

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.

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 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 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 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 Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30, Variance Percent Change

Comparative Results of Operations for the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31, Variance Percent Change

(In thousands)

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Other operating income, net 28 — 28

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

Operating income $ 12,652 $ 6,442 $ 6,210 96 %

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Products revenues increased $15.7 million as a result of a 49% rise in average sulfur services sales prices.

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

Products revenues increased $8.5 million due to an 18% increase in sales volumes, primarily related to a 56% increase in sulfur volumes.

Cost of products sold.

A 49% increase in product cost impacted cost of products sold by $10.9 million, resulting from a rise in commodity prices.

A 16% decrease in sales volumes resulted in an offsetting decrease in cost of products sold of $13.0 million.

Margin per ton increased $6.89, or 19%.

An 18% increase in sales volumes resulted in an additional increase in cost of products sold of $5.9 million.

Operating expenses.

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.

Operating expenses increased primarily due to higher marine fuel expense.

Selling, general and administrative expenses.

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

Selling, general and administrative expenses increased primarily due to higher employee related expenses.

Depreciation and amortization.

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

Depreciation and amortization remained consistent.

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 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.

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

Natural Gas Liquids Segment

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

Products revenues $ 91,764 $ 52,350 $ 39,414 75 %

Cost of products sold 87,551 47,723 39,828 83 %

Operating expenses 1,088 1,039 49 5 %

Selling, general and administrative expenses 954 1,117 (163) (15) %

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

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

NGL sales volumes (Bbls) 1,435 1,723 (288) (17) %

Products Revenues.

Our average sales price per barrel increased $33.56, or 110%, increasing revenues by $57.8 million.

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

Sales volumes decreased 17%, lowering revenues by $18.4 million.

Cost of products sold .

Our average cost per barrel increased $33.31, or 120%, increasing cost of products sold by $57.4 million.

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

The decrease in sales volume of 17% resulted in a $17.6 million reduction to cost of products sold.

Our margins improved $0.25 per barrel, or 9%, during the period.

Operating expenses .

Operating expenses remained relatively consistent.

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.

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

Nine Months Ended September 30, Variance Percent Change

Comparative Results of Operations for the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31, Variance Percent Change

(In thousands)

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The decrease in sales volume of 26% resulted in a $38.1 million reduction to cost of products sold.

Our margins improved $1.95 per barrel, or 71%, during the period.

Operating expenses .

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Selling, general and administrative expenses .

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

Selling, general and administrative decreased primarily as a result of lower employee related expenses.

Depreciation and amortization.

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Interest Expense, Net

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)

Revolving credit facility $ 2,631 $ 2,200 $ 431 20 %

Senior notes 9,846 8,528 1,318 15 %

Amortization of deferred debt issuance costs 1,064 1,683 (619) (37) %

Amortization of debt discount — (38) 38 100 %

Other 564 526 38 7 %

Finance leases 5 61 (56) (92) %

Capitalized interest — (17) 17 100 %

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

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

Nine Months Ended September 30, Variance Percent Change

Comparative Components of Interest Expense, Net for the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31, Variance Percent Change

(In thousands)

Revolving credit facility $ 6,948 $ 6,364 $ 584 9 %

Credit facility $ 1,923 $ 2,091 $ (168) (8) %

Senior notes 9,305 9,657 (352) (4) %

Amortization of deferred debt issuance costs 783 755 28 4 %

Amortization of debt premium — (191) 191 100 %

Other 415 441 (26) (6) %

Finance leases 3 9 (6) (67) %

Capitalized interest — (26) 26 100 %

Total interest expense, net $ 12,429 $ 12,953 $ (524) (4) %

Indirect Selling, General and Administrative Expenses

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

2021 2020 2021 2020

(In thousands) (In thousands)

Three Months Ended March 31, Variance Percent Change

(In thousands)

Indirect selling, general and administrative expenses

$ 4,122 $ 3,919 $ 203 5 %

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.

Indirect selling, general and administrative expenses increased for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increase in employee related expenses of $0.4 million, offset by a $0.2 million 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 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

(In thousands) (In thousands)

The Conflicts Committee of our general partner approved the following reimbursement amounts during the three months ended March 31, 2022 and 2021:

Three Months Ended March 31, Variance Percent Change

(In thousands)

Conflicts Committee approved reimbursement amount

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Liquidity and Capital Resources

Our primary sources of liquidity to meet operating expenses, service our indebtedness, fund capital expenditures and pay distributions to our unitholders have historically been cash flows generated by our operations, borrowings under our revolving credit facility and access to debt and equity capital markets, both public and private.

Our primary sources of liquidity to meet operating expenses, service our indebtedness, fund capital expenditures and pay distributions to our unitholders have historically been cash flows generated by our operations, borrowings under our credit facility and access to debt and equity capital markets, both public and private.

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

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

Cash Flows - Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The following table details the cash flow changes between the three months ended March 31, 2022 and 2021:

Three Months Ended March 31, 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 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.

The increase in net cash provided by operating activities for the three months ended March 31, 2022 includes an increase in operating results of $9.0 million and a favorable variance in working capital of $17.7 million.

Offsetting this increase was a $1.3 million decrease in other non-cash charges and an unfavorable 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 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 investing activities for the three months ended March 31, 2022 increased $7.2 million.

A rise in cash used of $7.5 million resulted from higher payments for capital expenditures and plant turnaround costs in 2022.

Net proceeds from the sale of property, plant and equipment increased $0.3 million.

Net cash used in financing activities.

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.

Net cash used in financing activities for the three months ended March 31, 2022 increased primarily as a result of a $15.7 million increase in net payments of long-term borrowings.

Offsetting, payments of finance lease obligations decreased $2.4 million.

Total Contractual Obligations

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

A summary of our total contractual cash obligations as of March 31, 2022, is as follows:

Payments due by period

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Obligation Less than

Revolving credit facility $ 208,500 $ — $ 208,500 $ — $ —

Credit facility $ 143,000 $ — $ 143,000 $ — $ —

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

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Letters of Credit .

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.

At March 31, 2022, we had outstanding irrevocable letters of credit in the amount of $25.4 million, which were issued under our credit facility.

Off Balance Sheet Arrangements.

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Description of Our Indebtedness

Revolving Credit Facility

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 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.

Credit Facility

At March 31, 2022, we maintained a $275.0 million credit facility that matures on August 31, 2023.

As of March 31, 2022, we had $143.0 million outstanding under the credit facility and $25.4 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 $106.6 million.

After giving effect to our then current borrowings, letters of credit, and the financial covenants contained in our credit facility, we had the ability to borrow approximately $106.6 million in additional amounts thereunder as of March 31, 2022.

The 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, 2022, the level of outstanding draws on our credit facility has ranged from a low of $143.0 million to a high of $177.0 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 September 30, 2021:

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, 2022:

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

The applicable margin for LIBOR borrowings at March 31, 2022 is 3.50%, with a 1% floor for LIBOR.

The applicable margin for LIBOR borrowings effective April 20, 2022 is 3.25%.

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;

• 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.

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

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

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

(vii) change the nature of our business;

(vi) repurchase our equity, make distributions (including a limit on our ability to make quarterly distributions to unitholders in excess of $0.005 per unit unless our total leverage ratio is below 3.75:1:00) and certain other restricted payments;

the nature of our business;

(viii) engage in transactions with affiliates;

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For a description of our 11.50% senior secured second lien notes due 2025 and 10.00% senior secured 1.5 lien notes due 2024, see "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2020.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022.

Capital Resources and Liquidity

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

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.

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

On March 31, 2022, we had cash and cash equivalents of $0.3 million and available borrowing capacity of $106.6 million under our credit facility with $143.0 million of borrowings outstanding.

Our credit facility matures on August 31, 2023.

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

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

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Risk Factors" of our Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022.

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

In addition, due to the covenants in our 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, 2022 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 nine months ended September 30, 2021 or 2020.

Inflation did not have a material impact on our results of operations for the three months ended March 31, 2022 or 2021.

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

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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 nine months ended September 30, 2021 or 2020.

We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the three months ended March 31, 2022 or 2021.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis