What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-03-02 compared with 2022-03-01 · 47 added, 64 removed, 665 unchanged (14% of the section changed)

6 unchanged sentences

The following is a summary of risk factors that could adversely impact our business, financial condition, results of operations or our ability to make quarterly distributions to our unitholders:

The reduction in demand for refined products resulting from measures taken to prevent the spread of the COVID-19 virus has and is likely to continue to adversely affect our results of operations, cash flows and financial condition for an indeterminate amount of time.

We may not have sufficient cash after the establishment of cash reserves and payment of our general partner's expenses to enable us to pay a distribution each quarter.

4 unchanged sentences

We have significant capital needs, and our ability to access the capital and credit markets to raise capital on favorable terms is limited by our debt level, industry conditions, and financial covenants in our debt instruments.

Fluctuations in interest rates could materially affect our financial results, and the phase-out of LIBOR may increase interest expense related to our floating rate debt.

We are exposed to counterparty risk in our credit facility and related interest rate protection agreements and we may not be able to access funds under our credit facility if there is a default.

Fluctuations in interest rates could materially affect our financial results

We are exposed to counterparty risk in our credit facility and hedging agreements and we may not be able to access funds under our credit facility if there is a default.

We are exposed to counterparty credit risk.

75 unchanged sentences

Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business operations, financial condition and results of operations.

The markets experienced a decline in oil prices in response to oil demand concerns due to the economic impacts of the COVID-19 pandemic, greatly impacting the demand for refined products resulting in a significant reduction in refinery utilization.

As demand for our services and products decline, we could experience a reduction in the utilization of our assets.

The continued spread of COVID-19 (including its variants) or a similar pandemic could result in further instability in the markets and decreases in commodity prices resulting in further adverse impacts on our results of operations, cash flows, and financial condition.

In addition, the continued spread of the COVID-19 virus (including its variants), or similar pandemic, and the continuation of the measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, may further impact our workforce and operations, the operations of our customers, and those of our vendors and suppliers.

There is considerable uncertainty regarding such measures and potential future measures, which would have a material adverse effect on our results of operations, cash flows, and financial condition.

We may not have sufficient cash after the establishment of cash reserves and payment of our general partner's expenses to enable us to pay a distribution each quarter.

15 unchanged sentences

The payment of principal and interest on our indebtedness reduces the cash available for distribution to our unitholders.

In addition, our credit facility and the indentures governing our secured notes severely restrict our ability to make distributions until our total leverage ratio (as defined in the applicable debt instruments) is less than 3.75 to 1.0.

In addition, our credit facility and the indenture governing our secured notes severely restrict our ability to make distributions until our total leverage ratio (as defined in the applicable debt instruments) is less than 3.75 to 1.00 (under the indenture) and 4.50 to 1.00 (under our credit facility), pro forma first lien leverage is less than 1.00 to 1.00, and our pro forma liquidity is greater than or equal to 35% of the commitments under our credit facility.

After deleveraging, the covenants in our debt instruments will continue to restrict our ability to make distributions, including a prohibition in our credit facility from making cash distributions during a default or an event of default under our credit facility or if the payment of a distribution would cause a default or an event of default thereunder.

12 unchanged sentences

• weather conditions;

• climate change;

• environmental regulation;

22 unchanged sentences

The covenants in our debt instruments restrict our ability to incur additional indebtedness.

For instance, while our credit facility has $275.0 million in lender commitments, the amount we are able to borrow is limited by the financial covenants contained therein.

However, as of December 31, 2021, we had the ability to borrow approximately $92.9 million under our credit facility and were not constrained by such financial covenants.

Fluctuations in interest rates could materially affect our financial results, and the phase-out of LIBOR may increase interest expense related to our floating rate debt.

Borrowings under our credit facility are at variable rates and include a LIBOR floor of 1.00%.

Because a significant portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense.

Based on our debt outstanding as of December 31, 2021, if LIBOR exceeds the 1.00% floor the impact of a 100 basis point increase in interest rates on this amount of debt would result in an increase in interest expense and a corresponding decrease in net income of approximately $1.6 million annually.

Further, on March 5, 2021, the Financial Conduct Authority in the U.K.

issued an announcement on the future cessation or loss of representativeness of LIBOR benchmark settings currently published by ICE Benchmark Administration.

That announcement confirmed that LIBOR will either cease to be provided by any administrator or will no longer be representative after December 31, 2021 for all non-USD LIBOR reference rates, and for certain short-term USD LIBOR reference rates, and after June 30, 2023 for other reference rates.

It is uncertain whether LIBOR will be available as a benchmark for pricing our floating rate indebtedness until, or after, June 30, 2023.

Our credit facility includes a mechanism to amend the facility to reflect the establishment of an alternative rate of interest upon the occurrence of certain events related to the phase-out of LIBOR.

However, we have not yet pursued any technical amendment or other contractual alternative to address this matter and are currently evaluating the impact of the potential replacement of LIBOR.

If no such amendment or other contractual alternative is established on or prior to the phase-out of LIBOR, interest under our credit facility will bear interest at higher rates based on the prime rate until such amendment or other contractual amendment is established.

Even where we have entered into interest rate swaps or other derivative instruments for purposes of managing our interest rate exposure, our hedging strategies may not be effective as a result of the replacement or phasing out of LIBOR, and our earnings may be subject to volatility.

In addition, the overall financial markets may be disrupted as a result of the phase-out or replacement of LIBOR.

The potential increase in our interest expense as a result of the phase-out of LIBOR and uncertainty as to the nature of such potential phase-out and alternative references rates or disruption in the financial market could have an adverse effect on our financial condition, results of operations and cash flows.

We are exposed to counterparty risk in our credit facility and related interest rate protection agreements and we may not be able to access funds under our credit facility if there is a default.

For instance, while our credit facility had $275.0 million in lender commitments at December 31, 2022, the amount we were able to borrow was limited by the financial covenants contained therein.

Fluctuations in interest rates could materially affect our financial results

Borrowings under our credit facility are at variable rates.

Because a portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense.

Based on our floating rate debt outstanding as of December 31, 2022, a 100 basis point increase in interest rates on this amount of debt would result in an increase in interest expense and a corresponding decrease in net income of approximately $1.7 million annually.

We are exposed to counterparty risk in our credit facility and hedging agreements and we may not be able to access funds under our credit facility if there is a default.

We rely on our credit facility to assist in financing a significant portion of our working capital, acquisitions and capital expenditures.

6 unchanged sentences

If the cash generated from our operations or the funds we are able to obtain under our credit facility or other sources of liquidity are not sufficient to meet our capital requirements, then we may need to delay or abandon capital projects or other business opportunities, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, we have from time to time entered into interest rate protection agreements to manage our interest rate risk exposure by fixing a portion of the interest expense we pay on our long-term debt under our credit facility.

If the counterparties fail to honor their commitments, we could experience higher interest rates, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, if the counterparties fail to honor their commitments, we also may be required to replace such interest rate protection agreements with new interest rate protection agreements, and such replacement interest rate protection agreements may be at higher rates than our current interest rate protection agreements, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, we have from time to time entered into hedging agreements to manage our interest rate and commodity risk exposure.

If the counterparties fail to honor their commitments, we could experience higher interest rates or commodity price risk, which could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to counterparty credit risk.

22 unchanged sentences

However, the EPA has adopted rules that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the U.S., and implement New Source Performance Standards directing the reduction of methane from certain new, modified, or reconstructed facilities in the oil and natural gas sector, including midstream sources.

The United States Environmental Protection Agency has proposed strict new methane emission regulations for certain oil and gas facilities and the IRA establishes a charge on methane emissions above certain limits from the same facilities.

Despite potential changes with respect to the federal regulation of GHGs, various states and groups of states have adopted or are considering adopting legislation, regulations, or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and various other measures that would restrict emissions of GHGs from different industrial sectors.

8 unchanged sentences

For example, our business could be impacted by initiatives to address greenhouse gases and climate change and incentives to conserve energy or use alternative energy sources.

For example, the Build Back Better Act, passed by the U.S.

House of Representatives and supported by President Biden, includes incentives to increase wind and solar electric generation and encourage consumers to use these alternative energy sources.

At this time, it is uncertain whether, and in what form, the Build Back Better Act may become law.

However, the Build Back Better Act or similar state or federal initiatives to incentivize a shift away from fossil fuels could reduce demand for hydrocarbons, thereby reducing demand for our products and services and negatively impacting our business.

For example, the IRA, signed into law in August 2022 by President Biden, includes incentives to increase renewable energy, such as wind and solar electric generation, and encourages consumers to use these alternative energy sources.

The IRA and similar state or federal initiatives to incentivize a shift away from fossil fuels could reduce demand for hydrocarbons, thereby reducing demand for our products and services and negatively impacting our business.

Additionally, there are increasing potential financial risks for fossil fuel energy companies as environmental activists concerned about the potential effects of climate change are focusing intensive lobbying efforts on institutional lenders, including financial institutions and institutional investors, not to provide funding to such companies.

5 unchanged sentences

Moreover, societal pressures or political or other factors may shape the success of such claims, without regard to the company’s causation of or contribution to the asserted damage, or to other mitigating factors.

midstream services providers such as ourselves could result in increased costs of compliance or costs of consuming, and thereby reduce demand for or erode value for, the petroleum products and by-products that we process, store and transport.

The adoption and implementation of new or more stringent international, federal, or state legislation, regulations, or other regulatory initiatives that impose more stringent standards for GHG emissions from oil and natural gas producers or their midstream services providers such as ourselves could result in increased costs of compliance or costs of consuming, and thereby reduce demand for or erode value for, the petroleum products and by-products that we process, store and transport.

Additionally, political, financial, and litigation risks may result in our customers restricting or cancelling oil and natural gas production activities, which could result in reduced demand for our services.

64 unchanged sentences

Decreasing energy prices could adversely affect our results of operations.

If commodity prices remain weak for a sustained period, our terminalling throughput and NGL volumes may be negatively impacted, particularly as producers are curtailing or redirecting drilling, adversely affecting our results of operations.

A sustained decline in commodity prices could result in a decrease in activity in the areas served by certain of our terminalling and storage and marine transportation assets resulting in reduced utilization of these assets.

For example, due to the economic impacts of the COVID-19 pandemic in 2020, the markets experienced a decline in oil prices in response to oil demand concerns.

These concerns were further exacerbated by the price war among members of the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC producer nations during the first quarter of 2020 and global storage considerations.

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

This impact started in February of 2020 and continued through the end of 202, during which time we saw unfavorable trends in certain key metrics across several of our business lines compared to historical periods.

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

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

If commodity prices remain weak for a sustained period, our terminalling throughput volumes may be negatively impacted, particularly as producers are curtailing or redirecting drilling, adversely affecting our results of operations.

A sustained decline in commodity prices could result in a decrease in activity in the areas served by certain of our terminalling and storage and transportation assets resulting in reduced utilization of these assets.

For example, in 2020, the markets experienced a decline in oil prices in response to oil demand concerns due to the economic impacts of the COVID-19 pandemic, greatly impacting the demand for refined products resulting in a significant reduction in refinery utilization.

The significant reduction in refinery utilization as a result of reduced refined products demand

significantly impacted our Transportation and NGL segments.

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

The natural decline in production in our operating regions and in other regions from which we source NGL supplies means our long-term success depends on our ability to obtain new sources of supplies of natural gas, NGLs and crude oil, which depends on certain factors beyond our control.

13 unchanged sentences

Reductions in exploration and production activity, competitor actions or shut-ins by producers in the areas in which we operate may prevent us from obtaining supplies of natural gas or crude oil to replace the natural decline in volumes from existing wells, which could result in reduced volumes through our facilities and reduced utilization of our assets.

Our NGL and sulfur-based fertilizer products are subject to seasonal demand and could cause our revenues to vary.

The demand for NGLs is highest in the winter.

Therefore, revenue from our NGL business is higher in the winter than in other seasons.

Our sulfur-based fertilizer products experience an increase in demand during the spring, which increases the revenue generated by this business line in this period compared to other periods.

Our sulfur-based fertilizer products are subject to seasonal demand and could cause our revenues to vary.

The demand for our sulfur-based fertilizer products experience an increase in demand during the spring, which increases the revenue generated by this business line in this period compared to other periods.

The seasonality of the revenue from these products may cause our results of operations to vary on a quarter-to-quarter basis and thus could cause our cash available for quarterly distributions to fluctuate from period to period.

10 unchanged sentences

and imposing substantial liabilities on us for pollution resulting from our operations.

Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring difficult and costly actions.

Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits

issued under them, oftentimes requiring difficult and costly actions.

Many environmental laws and regulations can impose joint and several strict liability, and any failure to comply with environmental laws, regulations and permits may result in the assessment of administrative, civil and criminal penalties, the imposition of investigatory and remedial obligations and, in some circumstances, the issuance of injunctions that can limit or prohibit our operations.

200 unchanged sentences

Unitholders may also incur a tax liability upon a sale of their units.

No provision in our Partnership Agreement, or in any other agreement we have with our general partner or Martin Resource Management Corporation, prohibits our general partner or its affiliates from acquiring more than 80% of our common units.

No provision in our Partnership Agreement, or

in any other agreement we have with our general partner or Martin Resource Management Corporation, prohibits our general partner or its affiliates from acquiring more than 80% of our common units.

For additional information about this call right and unitholders' potential tax liability, please see "Risk Factors-Tax Risks-Tax gain or loss on the disposition of our common units could be different than expected."

67 unchanged sentences

At the state level, because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation.

For example, we are required to pay a Texas margin tax at a maximum effective

rate of 0.525% of our gross income apportioned to Texas in the prior year.

For example, we are required to pay a Texas margin tax at a maximum effective rate of 0.525% of our gross income apportioned to Texas in the prior year.

Imposition of any such tax on us by any other state will reduce the cash available for distribution to our unitholders.

10 unchanged sentences

The Final Regulations provide for a ten year transition period during which certain taxpayers that either obtained a favorable private letter ruling or treated income under a reasonable interpretation of the statute or prior proposed regulations as qualifying income may continue to treat such income as qualifying income.

We have obtained favorable private letter rulings from the IRS in the past as to what constitutes "qualifying income" within the meaning of Section 7704(d)(1)(E) of the Code and we expect to rely upon these private letter rulings for purposes of the ten year transition rule contained in the Final Regulations.

We have obtained favorable private letter rulings from the IRS in the past as to what constitutes "qualifying income" within the meaning

of Section 7704(d)(1)(E) of the Code and we expect to rely upon these private letter rulings for purposes of the ten year transition rule contained in the Final Regulations.

With respect to some of these private letter rulings, the income that we derived from certain affected activities will be treated as qualifying income only until the end of the ten year transition period.

27 unchanged sentences

Unitholders may be allocated COD income, and income tax liabilities arising therefrom may exceed cash distributions or the value of the units.

The ultimate effect of any such allocations will depend on the unitholder's individual tax position with respect to its units.

The ultimate effect of any such allocations will depend on the unitholder's individual tax position with

respect to its units.

Unitholders are encouraged to consult their tax advisor with respect to the consequences to them of COD income.

7 unchanged sentences

In general, the Partnership is entitled to a deduction for interest paid or accrued on indebtedness properly allocable to our trade or business during its taxable year.

However, under the Tax Cuts and Jobs Act, for taxable years beginning after December 31, 2017, the deduction for "business interest" is limited to the sum of the Partnership’s business interest income and 30% of its "adjusted taxable income." For the purposes of this limitation, the Partnership’s adjusted taxable income is computed without regard to any business interest expense or business interest income, and in the case of taxable years beginning before January 1, 2022, any deduction allowable for depreciation, amortization, or depletion to the extent such depreciation, amortization, or depletion is not capitalized into cost of goods sold with respect to inventory.

For our 2020 tax year only, the Coronavirus Aid, Relief, and Economic Security Act increased the 30% adjusted taxable income limitation to 50%.

However, the deduction for "business interest" is limited to the sum of the Partnership’s business interest income and 30% of its "adjusted taxable income." For the purposes of this limitation, the Partnership’s adjusted taxable income is computed without regard to any business interest expense or business interest income.

In the case of taxable years beginning on or after January 1, 2022, the Partnership’s adjusted taxable income is computed by taking into account any deduction allowable for depreciation, amortization, or depletion to the extent such depreciation, amortization, or depletion is not capitalized into cost of goods sold with respect to inventory.

If the Partnership’s "business interest" is subject to limitation under these rules, unitholders will be limited in their ability to deduct their share of any interest expense that has been allocated to them.

10 unchanged sentences

federal income tax returns and pay tax on their share of our taxable income.

In addition, if a unitholder sells or otherwise disposes of a unit, the transferee is required to withhold 10% of the amount realized by the transferor unless the transferor certifies that it is not a foreign person, and we are required to deduct and withhold from the transferee amounts that should have been withheld by the transferee but were not withheld.

However, the U.S.

Treasury and the IRS have suspended these rules for transfers of certain publicly traded partnership interests, including transfers of our common units that occur before January 1, 2023.

Under recently finalized Treasury Regulations and a recent IRC Notice, in the case of transfers of our common units occurring on or after January 1, 2023, such withholding will be required on open market transactions, but in the case of a transfer made through a broker, the obligation to withhold will be imposed on the broker instead of the transferee (and we will generally not be required to withhold from the transferee amounts that should have been withheld by the transferee but were not withheld).

Distributions to non-U.S.

persons will also be subject to a 10% withholding tax on the amount realized with respect to any distribution, and in the case of a distribution effected through a broker, the amount realized is the amount of any distribution in excess of our “cumulative net income.” As we do not compute our cumulative net income for such purposes due to the complexity of the calculation and lack of clarity in how it would apply to us, we intend to treat all of our distributions as being in excess of our cumulative net income for such purposes and subject to such 10% withholding tax.

If a unitholder sells or otherwise disposes of a unit, the transferee is required to withhold 10% of the amount realized by the transferor unless the transferor certifies that it is not a foreign person, and we are required to deduct and withhold from the transferee amounts that should have been withheld by the transferee but were not withheld.

Under the Treasury Regulations, such withholding will be required on open market transactions, but in the case of a transfer made through a broker, a partner’s share of liabilities will be excluded from the amount realized.

In addition, the obligation to withhold will be imposed on the broker instead of the transferee (and we will generally not be required to withhold from the transferee amounts that should have been withheld by the transferee but were not withheld).

These withholding obligations will apply to transfers of our common units occurring on or after January 1, 2023.

Current and prospective non-U.S.

unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units.

We treat a purchaser of our common units as having the same tax benefits without regard to the seller's identity.

15 unchanged sentences

Unitholders may be required to file state, local and foreign income tax returns and pay state and local income taxes in some or all of the various jurisdictions in which we do business or own property and may be subject to penalties for failure to comply with those requirements.

We own property and/or conduct business in Alabama, Arizona, Arkansas, California, Florida, Georgia, Illinois, Indiana, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Nebraska, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, and West Virginia.

We own property and/or conduct business in several states, many of which impose a personal income tax and also impose income taxes on corporations and other entities.

We may do business or own property in other states or foreign countries in the future.

5 unchanged sentences

Unused losses may be deducted when the unitholder disposes of its entire investment in us in a fully taxable transaction with an unrelated party.

A unitholder's share of our net passive income may be offset by unused losses from us carried over from prior years but not by losses from other

passive activities, including losses from other publicly traded partnerships.

A unitholder's share of our net passive income may be offset by unused losses from us carried over from prior years but not by losses from other passive activities, including losses from other publicly traded partnerships.

Other limitations that may further restrict the deductibility of our losses by a unitholder include the at-risk rules, the excess loss limitation rules for non-corporate unitholders that applies until January 1, 2026, and the prohibition against loss allocations in excess of the unitholder's tax basis in its units.

2 unchanged sentences

We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred.

Treasury regulations permit publicly traded partnerships to use a monthly simplifying convention that is similar to ours, but they do not specifically authorize all aspects of the proration method we have adopted.

Treasury regulations permit publicly traded partnerships to use a monthly simplifying convention that is similar to

ours, but they do not specifically authorize all aspects of the proration method we have adopted.

Therefore, the use of our proration method may not be permitted under existing Treasury regulations, and, accordingly, our counsel is unable to opine as to the validity of such method.

16 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors