What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-02 compared with 2022-03-01 · 136 added, 176 removed, 387 unchanged (45% of the section changed)

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Significant Recent Developments

Hurricane Ida.

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

Ida impacted our transportation and sulfur services segments due to the effects on refinery utilization in the Lake Charles, Louisiana area resulting from the storm.

We did not experience any material storm-related damage.

We spent approximately $0.1 million on restoration and recovery costs as a result of Ida.

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 continued 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 as a result of widespread vaccinations and a rebounding economy.

This should ultimately improve refined product demand as people continue to 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, could have a material adverse effect on the Partnership's results of operations, financial position and cash flows in 2022, 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 December 31, 2021.

Regulatory Developments .

On January 20, 2021, the Biden Administration came into office and immediately issued a number of executive orders related to climate change and the production of oil and gas that could affect our operations and those of our customers.

On his first day in office, President Biden signed an instrument reentering the U.S.

into the Paris Agreement, effective February 19, 2021, and issued an executive order on “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis” seeking to adopt new regulations and policies to address climate change and suspend, revise, or rescind prior agency actions that are identified as conflicting with the Biden Administration’s climate policies.

In addition, on January 27, 2021, President Biden issued an executive order indefinitely suspending new oil and natural gas leases on public lands or in offshore waters pending completion of an ongoing comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.

On June 15, 2021, however, a judge in the U.S.

District Court for the Western District of Louisiana issued a nationwide temporary injunction blocking the suspension.

The Department of the Interior appealed the U.S.

District Court’s ruling but resumed oil and gas leasing pending resolution of the appeal.

In November 2021, the Department of the Interior completed its review and issued a report on the federal oil and gas leasing program.

The Department of the Interior’s report recommends several changes to federal leasing practices, including changes to royalty payments, bidding, and bonding requirements.

Furthermore, on April 22, 2021, at a global summit on climate change, President Biden committed the U.S.

to target emissions reductions of 50-52% of 2005 levels by 2030.

Lastly, on June 30, 2021, President Biden signed into law a reinstatement of regulations put in place during the Obama administration regarding methane emissions.

The Company had previously complied with these regulations during the Obama administration and does not expect the reinstatement to have a material effect on the Company or its operations.

The Biden Administration could also seek, in the future, to put into place additional executive orders, policy and regulatory reviews, or seek to have Congress pass legislation that could adversely affect the production of oil and natural gas, and our operations and those of our customers.

Issuance of 2028 Notes to Refinance Existing Secured Notes .

On February 8, 2023, we completed the sale of $400.0 million in aggregate principal amount of our 2028 Notes.

We used the proceeds of the 2028 Notes to complete the tender offers for substantially all of our 2024 Notes and 2025 Notes, redeem all 2024 Notes and 2025 Notes that were not validly tendered, repay a portion of the indebtedness under our credit facility, and pay fees and expenses in connection with the foregoing.

Simultaneously with the issuance of the 2028 Notes we amended our credit facility to, among other things, reduce the commitments thereunder from $275.0 million to $200.0 million (with further scheduled reductions to $175.0 million on June 30, 2023 and $150.0 million on June 30, 2024) and extend the scheduled maturity date of the credit facility to February 8, 2027.

Exit from Butane Optimization Business.

In January 2023, we announced that we anticipate the exit of our butane optimization business at the conclusion of the butane selling season during the second quarter of 2023.

Electronic Level Sulfuric Acid Joint Venture.

On October 19, 2022, Martin ELSA Investment LLC, our affiliate, entered into definitive agreements with Samsung C&T America, Inc.

and Dongjin USA, Inc., an affiliate of Dongjin Semichem Co., Ltd., to form DSM.

DSM will produce and distribute ELSA.

By leveraging our existing assets located in Plainview, Texas and installing the ELSA Facility as required, DSM will produce ELSA that meets the strict quality standards required by the recent advances in semiconductor manufacturing.

In addition to owning a 10% non-controlling interest in DSM, we will be the exclusive provider of feedstock to the ELSA Facility.

We, through our affiliate MTI, will also provide land transportation services to end-users of the ELSA produced by DSM.

The Partnership expects to fund approximately $20.0 million in aggregate capital expenditures in connection with this joint venture and the Partnership’s related services in 2023 and 2024.

Divestiture of Stockton, California Sulfur Terminal.

On October 7, 2022, we closed on the sale of our Stockton Sulfur Terminal to Gulf Terminals LLC for net proceeds of approximately $5.25 million, which were used to reduce outstanding borrowings under our credit facility.

For more information about the potential physical effects of climate change and environmental regulation on our business, see our environmental and climate change related risk factors in Section 1A “Risk Factors.”

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Our impairment analyses require management to use judgment in estimating future cash flows and useful lives, as well as assessing the probability of different outcomes.

Applying this impairment review methodology, no impairment was recorded during the year ended December 31, 2021.

Applying this impairment review methodology, no impairment was recorded during the years ended December 31, 2022 or 2021.

We recorded an impairment charge of $3.1 million and $1.3 million in our Terminalling and Storage and Transportation segments, respectively, during the year ended December 31, 2020.

No impairment of long-lived assets was recorded during the year ended December 31, 2019.

Impairment of Goodwill

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We conduct impairment testing using present economic conditions, as well as future expectations.

Applying this impairment review methodology, we considered the impact that COVID-19 had on our cash flows and the value our unit price during 2021 and 2020 and elected to bypass the qualitative assessment and perform a quantitative assessment during each of those years.

Based upon the most recent annual review as of August 31, 2022, no goodwill impairment exists within our reporting units for the year ended December 31, 2022.

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• 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.

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

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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.

To compensate for these limitations, we believe that it is important to consider net income (loss) and net cash provided by (used in) 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 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.

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.

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The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the years ended December 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

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA

Year Ended December 31,

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Gain on involuntary conversion of property, plant and equipment — (196)

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

Loss on exchange of senior unsecured notes — 8,817

Unrealized mark-to-market on commodity derivatives — (207)

Non-cash insurance related accruals — 250

Lower of cost or market adjustments — 370

Lower of cost or market and other non-cash adjustments 12,850 —

Unit-based compensation 161 384

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Current income tax expense 2,183 948

Lower of cost or market adjustments — 370

Lower of cost or market and other non-cash adjustments 12,850 —

Loss on exchange of senior unsecured notes — —

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

Non-cash insurance related accrual — 250

Net cash (received) paid for closed commodity derivative positions included in AOCI (816) —

Commodity cash flow hedging gains reclassified to earnings 901 —

Net cash received for closed commodity derivative positions included in AOCI (85) (816)

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

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Deferred income taxes 5,744 2,432

Amortization of debt premium — (191)

Amortization of deferred debt issuance costs 3,152 3,367

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

The Natural Gas Liquids segment information below excludes the discontinued operations of the Natural Gas Storage Assets disposed of on June 28, 2019, for the year ended December 31, 2019.

See Item 8, Note 5.

The following table sets forth our operating revenues and operating income by segment for the years ended December 31, 2022, 2021, and 2020.

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19,068 15,314 3,754 25%

Other operating income (loss), net (48) 6,429 (6,477) (101)%

Other operating loss, net (166) (48) (118) (246)%

Gain on involuntary conversion of property, plant and equipment — 196 (196) (100)%

Operating income $ 18,902 $ 15,462 $ 3,440 22%

Shore-based throughput volumes (guaranteed minimum) (gallons) 80,000 80,000 — —%

Shore-based throughput volumes (gallons) 85,569 50,526 35,043 69%

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

Services revenues.

Services revenues decreased $5.9 million, of which $4.6 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 and $0.2 million in decreased throughput fees at our shore-based terminals.

In addition, revenue at the Smackover refinery decreased $1.1 million primarily due to the expiring capital recovery fees of $2.6 million, offset by contractually prescribed, index-based fee adjustments of $1.1 million and natural gas surcharge revenue of $0.3 million.

Offsetting these decreases were increases at our specialty terminals related to storage revenue of $0.5 million, service revenue of $0.3 million and throughput revenue of $0.3 million.

Service revenues increased $4.9 million.

Revenue at our Smackover Refinery increased $3.7 million, including $2.7 million in natural gas surcharge revenue, $0.9 million in reservation fees and $0.8 million in throughput fees, offset by a decrease of $0.8 million in pipeline revenue.

In addition, revenue at our specialty terminals increased $0.7 million as a result of $0.6 million in throughput revenue and $0.1 million in service revenue.

Our shore-based terminals increased $0.5 million due to $1.0 million in throughput revenue, offset by a reduction in space rent of $0.5 million.

Products revenues.

A 31% increase in average sales price combined with a 4% increase in sales volumes at our blending and packaging facilities resulted in a $38.0 million increase in products revenues.

Offsetting these increases, the disposition of our Mega Lubricants business resulted in a $21.3 million decrease in products revenues at our shore-based terminals.

Cost of products sold.

The disposition of our Mega Lubricants business resulted in a $24.3 million decrease in cost of products sold at our shore-based terminals.

Offsetting this decrease, a 26% increase in average cost per gallon combined with a 4% increase in sales volume at our blending and packaging facilities resulted in a $20.3 million increase in cost of products sold.

A 34% increase in average cost per gallon combined with a 4% increase in sales volumes at our blending and packaging facilities resulted in a $32.8 million increase in cost of goods sold.

Operating expenses.

Operating expenses increased primarily as a result of increased natural gas utilities across all of our terminals.

Operating expenses increased primarily as a result of natural gas utilities of $3.8 million and employee-related expenses of $1.6 million.

Selling, general and administrative expenses.

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

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

Depreciation and amortization.

The decrease in depreciation and amortization is due to recent disposals, offset by recent capital expenditures.

Other operating income (loss), net.

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

Depreciation and amortization remained relatively consistent.

Other operating loss, net.

Other operating 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 for the year ended December 31, 2021 is due to insurance proceeds received related to structural damage at one of our shore-based terminals.

The $0.1 million gain for the year ended December 31, 2020 is due to insurance proceeds received related to structural damage at one of our specialty terminals during a weather incident at our Neches Terminal in May of 2019.

Transportation Segment

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40,295 8,342 31,953 383%

Other operating income (loss), net 74 (690) 764 111%

Other operating income, net 1,062 74 988 1,335%

Operating income $ 41,357 $ 8,416 $ 32,941 391%

Marine Transportation Revenues .

Inland revenues decreased $13.1 million, primarily related to a reduction in marine equipment.

In addition, offshore revenue decreased $0.6 million due to decreased utilization related to regulatory inspections.

Inland and offshore revenues increased $12.2 million and $2.5 million, respectively, primarily related to higher utilization and transportation rates.

Revenue was also impacted by an increase in pass-through revenue (primarily fuel) of $5.1 million.

Land Transportation Revenues.

Transportation rates increased 14%, resulting in an increase of $13.1 million.

A 3% increase in miles of product transported resulted in an additional increase to freight revenue of $3.4 million.

Additionally, fuel surcharge revenue increased $7.9 million.

Freight revenue increased primarily due to a 25% increase in load count combined with a 7% increase in total miles, which resulted in a $34.4 million increase.

Additionally, ancillary revenue increased $23.8 million .

Operating expenses .

The increase in operating expenses is primarily a result of increased pass through expenses (primarily fuel) of $4.4 million and compensation expense of $2.9 million.

The increase in operating expenses is primarily a result of increased employee-related expenses of $24.2 million, pass through expenses (primarily fuel) of $14.0 million, insurance premiums of $2.0 million, lease expense of $1.7 million, and outside towing of $1.6 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 increased employee-related expenses.

Depreciation and amortization .

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

Other operating income (loss), net.

Other operating income, net.

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

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Other operating income, net 4,555 129 4,426 3,431%

Gain on involuntary conversion of property, plant and equipment — 4,844 (4,844) (100)%

Operating income $ 24,186 $ 23,965 $ 221 1%

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Products revenues increased $57.2 million as a result of a 43% rise in average sulfur services sales prices.

Products revenues decreased an offsetting $28.2 million due to a 17% decrease in sales volumes, primarily related to a 29% decrease in sulfur volumes.

Products revenues decreased an offsetting $23.7 million due to a 12% decrease in sales volumes, primarily related to a 30% decrease in fertilizer volumes.

Cost of products sold.

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Operating expenses.

Operating expenses decreased due to a decrease in outside towing of $0.3 million, repairs and maintenance of marine assets and railcars of $0.2 million, insurance premiums and claims of $0.2 million, employee related expenses of $0.1 million, assist tugs of $0.1 million, and lease expense of $0.1 million.

Offsetting was an increase in utilities of $0.2 million, contract labor of $0.1 million and harbor agency fees of $0.1 million.

Operating expenses increased due to an increase in marine fuel expense of $2.1 million, outside towing of $1.2 million, insurance premiums and claims of $0.5 million, contract labor of $0.4 million, repairs and maintenance of marine assets of $0.3 million, and assist tugs of $0.3 million.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased $0.3 million in employee related expenses and $0.2 million in corporate overhead.

Selling, general and administrative expenses increased $0.8 million in employee related expenses.

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.

Depreciation and amortization increased as a result of increased amortization of turnaround costs with a slight offset due to certain assets being fully depreciated.

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 2020.

Gain on involuntary conversion of property, plant and equipment.

The $4.8 million gain for the year ended December 31, 2020 is primarily 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 increased $4.4 million as a result of a net gain from the disposition of property, plant and equipment during 2022.

Natural Gas Liquids Segment

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(16,486) 26,255 (42,741) (163)%

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

Operating income $ 25,566 $ 9,660 $ 15,906 165%

Other operating income (loss), net 218 (689) 907 132%

Operating income (loss) $ (16,268) $ 25,566 $ (41,834) (164)%

NGLs Volumes (barrels) 5,791 7,121 (1,330) (19)%

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The decrease in sales volume of 19% resulted in a $88.4 million decrease to cost of products sold.

Our margins increased $3.02 per barrel, or 124% during the period.

Our margins decreased $3.15 per barrel, or 58% during the period.

Operating expenses .

Operating expenses increased $1.1 million related to the 2020 settlement of an insurance claim for less than anticipated with no corresponding transaction in 2021.

Operating expenses increased $0.5 million due to increased operating costs at our underground storage facility.

Selling, general and administrative expenses .

Selling, general and administrative expenses increased $2.1 million as a result of increased compensation expense.

Selling, general and administrative expenses decreased $2.0 million as a result of decreased compensation expense.

Other operating income (loss), net.

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Indirect selling, general and administrative expenses $ 16,914 $ 16,129 $ 785 5%

Indirect selling, general and administrative decreased primarily due to a decrease in the indirect expenses allocated from Martin Resource Management Corporation.

Indirect selling, general and administrative increased primarily due to increases in employee-related expenses of $1.2 million and professional fees of $0.3 million, offset by a $0.9 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, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit plans and other general corporate overhead functions we share with Martin Resource Management Corporation's retained businesses.

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The following table details the cash flow changes between the years ended December 31, 2022 and 2021:

Years Ended December 31, Variance Percent Change

Year Ended December 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 year ended December 31, 2021 includes an unfavorable variance in working capital of $53.7 million, primarily related to a decrease in accounts receivable when comparing the year ended December 31, 2019 to the year ended December 31, 2020, offset by an increase in accounts receivable when comparing the year ended December 31, 2020 to the year ended December 31, 2021.

Offsetting this decrease was an increase in operating results of $6.6 million and a favorable variance in other non-current assets and liabilities of $2.1 million.

An additional $16.0 million increase in other non-cash charges was primarily due to a $10.3 million gain on sale of property, plant and equipment and a $4.7 million gain on involuntary conversion of property, plant and equipment, both during year ended December 31, 2020.

Net cash provided by (used in) investing activities.

Net cash provided by investing activities for the year ended December 31, 2021 decreased $21.8 million.

Net proceeds from the sale of property, plant and equipment decreased $24.5 million and proceeds received from the involuntary conversion of property, plant and equipment decreased $7.3 million.

A reduction in cash used of $9.9 million resulted from higher payments for capital expenditures and plant turnaround costs in 2020.

Net cash used in financing activities.

Net cash used in financing activities for the year ended December 31, 2021 decreased primarily as a result of a $34.3 million increase in net proceeds from long-term debt.

Further, cash distributions paid decreased $4.5 million, costs associated with the credit facility decreased $3.2 million, and payments of finance lease obligations decreased $1.9 million.

Net cash provided by operating activities for the year ended December 31, 2022 decreased $19.6 million primarily as a result of a decrease in operating results and non-cash items of $15.2 million combined with an unfavorable variance in changes in working capital of $5.2 million.

Net cash used in investing activities.

Net cash used in investing activities for the year ended December 31, 2022 increased $5.4 million.

An increase in cash used of $12.2 million resulted from higher payments for capital expenditures and plant turnaround costs in 2022.

Offsetting this increase, net proceeds from the sale of property, plant and equipment increased $7.1 million.

Net cash provided by (used in) financing activities.

Net cash provided by (used in) financing activities for the year ended December 31, 2022 increased $29.9 million primarily as a result of a $30.6 million increase in net proceeds from long-term debt.

Total Contractual Obligations

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Credit facility 1

$ 171,000 $ — $ — $ 171,000 $ —

11.5% senior secured notes, due 2025 291,381 — 291,381 — —

10.0% senior secured notes, due 2024 53,750 — 53,750 — —

Throughput commitment 3,118 3,118 — — —

Operating leases 45,756 12,151 17,760 8,792 7,053

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Total contractual cash obligations $ 642,114 $ 51,044 $ 404,225 $ 179,792 $ 7,053

1 The credit facility was amended on February 8, 2023 to extend the maturity date to February 8, 2027.

See more detailed discussion in the section captioned "Description of Our Indebtedness" below.

The interest payable under our credit facility is not reflected in the above table because such amounts depend on the outstanding balances and interest rates, which vary from time to time.

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Credit Facility

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

As of December 31, 2021, we had $159.5 million outstanding under the credit facility and $22.6 million of outstanding irrevocable letters of credit, leaving a maximum available to be borrowed under our credit facility for future credit borrowings and letters of credit of $92.9 million.

At December 31, 2022, we maintained a $275.0 million credit facility that was scheduled to mature on August 31, 2023.

As of December 31, 2022, we had $171.0 million outstanding under the credit facility and $20.4 million of outstanding irrevocable letters of credit, leaving a maximum amount available to be borrowed under our credit facility for future borrowings and letters of credit of $83.6 million.

After giving effect to our then current borrowings, outstanding letters of credit and the financial covenants contained in our credit facility, we had the ability to borrow approximately $62.7 million in additional amounts thereunder as of December 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.

Effective February 8, 2023, in connection with the completion of our sale of the 2028 Notes, we amended our credit facility (the “amended credit facility”) to, among other things, reduce the commitments thereunder from $275.0 million to $200.0 million (with further scheduled reductions to $175.0 million on June 30, 2023 and $150.0 million on June 30, 2024) and extend the scheduled maturity date of the amended credit facility to February 8, 2027.

The commitments under the amended credit facility can be increased from time to time upon our request, subject to certain conditions (including the consent of the increasing lenders), up to an additional $50.0 million.

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

During the year ended December 31, 2022, the outstanding balance of our credit facility has ranged from a low of $141.5 million to a high of $219.0 million.

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

Obligations under the credit facility are secured by first priority liens on substantially all of our assets and those of the guarantors, including, without limitation, inventory, accounts receivable, bank accounts, marine vessels, equipment, fixed assets and the interests in our subsidiaries.

We may prepay all amounts outstanding under the credit facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

The credit facility requires mandatory prepayments of amounts outstanding thereunder with excess cash that exceeds $25.0 million and the net proceeds of certain asset sales, equity issuances and debt incurrences.

Indebtedness under the credit facility bears interest at our option at the Eurodollar Rate (LIBOR), with a floor for LIBOR of 1%, plus an applicable margin, or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0%, or the administrative agent’s prime rate) plus an applicable margin.

We pay a per annum fee on all letters of credit issued under the credit facility, and we pay a commitment fee per annum on the unused 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 December 31, 2021:

The amended credit facility is guaranteed by substantially all of our subsidiaries, other than Martin ELSA Investment LLC.

Obligations under the amended credit facility are secured by first priority liens on substantially all of our assets and those of the guarantors, including, without limitation, inventory, accounts receivable, bank accounts, marine vessels, equipment, fixed assets and the interests in certain subsidiaries.

We may prepay all amounts outstanding under the amended credit facility at any time without premium or penalty (other than customary breakage costs associated with Term SOFR (as defined in the amended credit facility), subject to certain notice requirements.

The amended credit facility requires mandatory prepayments of amounts outstanding thereunder with excess cash that exceeds $25.0 million and the net proceeds of certain asset sales.

Indebtedness under the credit facility bears interest at our option at the Adjusted Term SOFR (as defined in the amended credit facility), plus an applicable margin, or the Alternate Base Rate (the highest of the Federal Funds Rate plus 0.50%, the one-month Adjusted Term SOFR plus 1.0%, or the administrative agent’s prime rate) plus an applicable margin.

We pay a per annum fee on all letters of credit issued under the amended credit facility, and we pay a commitment fee per annum on the unused revolving credit commitments under the amended 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 amended 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:

Leverage Ratio

Base Rate Loans Eurodollar

Loans Letters of Credit

ABR Loans Term SOFR Rate Loans and Letters of Credit

Less than 3.00 to 1.00 1.75 % 2.75 %

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Greater than or equal to 4.00 to 1.00 and less than 4.50 to 1.00 2.50 % 3.50 %

Greater than or equal to 4.50 to 1.00 and less than 5.00 to 1.00 2.75 % 3.75 % 3.75 %

Greater than or equal to 4.50 to 1.00 2.75 % 3.75 %

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

The credit facility includes financial covenants that are tested on a quarterly basis, based on the rolling four quarter period that ends on the last day of each fiscal quarter.

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

• require us to maintain a minimum Interest Coverage Ratio (as defined in the credit facility) of 1.75:1.0 with respect to the fiscal quarter ended 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 us to maintain a maximum Total Leverage Ratio (as defined in the credit facility) of not more than 5.25:1.0 with respect to the fiscal quarter ended in December of 2021, and 5.0:1.0 with respect to each fiscal quarter thereafter;

• require us to maintain a maximum First Lien Leverage Ratio (as defined in the credit facility) of not more than 2.25:1.0 with respect to the fiscal quarter ended in December of 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:

The applicable margin for LIBOR borrowings at December 31, 2022 was 3.50%.

The amended 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, that require maintenance of:

• a minimum Interest Coverage Ratio (as defined in the amended credit facility) of at least 2.00:1.00;

• a maximum Total Leverage Ratio of not more than 4.75:1.00, stepping down to 4.50:1.00 on March 31, 2025;

• a maximum First Lien Leverage Ratio (as defined in the amended credit facility) of not more than 1.50:1.00.

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

(i) grant or assume liens;

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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 is below 3.75:1:00, 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 amended credit facility) and certain other restricted payments;

(vii) change the nature of our business;

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and (xi) permit our joint ventures to incur indebtedness or grant certain liens.

The credit facility contains customary events of default, including, without limitation:

The amended credit facility contains customary events of default, including, without limitation:

(i) failure to pay any principal, interest, fees, expenses or other amounts when due;

(ii) failure to meet the quarterly financial covenants;

(iii) failure to observe any other agreement, obligation, or covenant in the credit facility or any related loan document, subject to cure periods for certain failures;

(iii) failure to observe any other agreement, obligation, or covenant in the amended credit facility or any related loan document, subject to cure periods for certain failures;

(iv) the failure of any representation or warranty to be materially true and correct when made;

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(viii) certain ERISA events involving us or any of our subsidiaries, in excess of a threshold amount;

(ix) a change in control (as defined in the credit facility);

(ix) a change in control (as defined in the amended credit facility);

and (x) the invalidity of any of the loan documents or the failure of any of the collateral documents to create a lien on the collateral.

The credit facility also contains certain default provisions relating to Martin Resource Management Corporation.

If Martin Resource Management Corporation no longer controls our general partner, the lenders under the credit facility may declare all amounts outstanding thereunder immediately due and payable.

In addition, an event of default by Martin Resource Management Corporation under its credit facility could independently result in an event of default under our credit facility if it is deemed to have a material adverse effect on us.

If an event of default relating to bankruptcy or other insolvency events occurs with respect to us or any of our subsidiaries, all indebtedness under our credit facility will immediately become due and payable.

If any other event of default exists under our credit facility, the lenders may terminate their commitments to lend us money, accelerate the maturity of the indebtedness outstanding under the credit facility and exercise other rights and remedies.

In addition, if any event of default exists under our credit facility, the lenders may commence foreclosure or other actions against the collateral.

The amended credit facility also contains certain default provisions relating to Martin Resource Management Corporation.

If Martin Resource Management Corporation no longer controls our general partner, the lenders under the amended credit facility may declare all amounts outstanding thereunder immediately due and payable.

In addition, an event of default by Martin Resource Management Corporation under its credit facility could independently result in an event of default under our amended credit facility if it is deemed to have a material adverse effect on us.

If an event of default relating to bankruptcy or other insolvency events occurs with respect to us or any of our subsidiaries, all indebtedness under our amended credit facility will immediately become due and payable.

If any other event of default exists under our amended credit facility, the lenders may terminate their commitments to lend us money, accelerate the maturity of the indebtedness outstanding under the amended credit facility and exercise other rights and remedies.

In addition, if any event of default exists under our amended credit facility, the lenders may commence foreclosure or other actions against the collateral.

2025 Senior Secured Notes and Indenture

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Bank National Association as collateral trustee.

The 2025 Notes are guaranteed on a full, joint and several basis by each of the Partnership’s existing domestic restricted subsidiaries (other than Martin Midstream Finance Corp.

and Talen’s Marine & Fuel, LLC) and will be guaranteed in the future by any domestic restricted subsidiaries, in each case, if and so long as such entity guarantees (or is an obligor with respect to) any other indebtedness for borrowed money of either the Issuers or any guarantor.

The 2025 Notes and the guarantees thereof are secured on a third-priority basis by a lien on substantially all assets of the Issuers and the guarantors, subject to the terms of an intercreditor agreement (the "Intercreditor Agreement") and certain other exceptions.

The 2025 Notes and the guarantees thereof are, pursuant to the Intercreditor Agreement, secured by third-priority liens and thus are effectively junior to any obligations under our credit facility, which are secured on a "first-lien" basis, and effectively junior to any obligations under the 2024 Notes Indenture (as defined below), which are secured on a "second-lien" basis, in each case, to the extent of the value of the collateral securing such first-lien obligations, second-lien obligations and third-lien obligations.

The 2025 Notes and the guarantees thereof rank effectively senior to all of our existing and future unsecured indebtedness to the extent of the value of the collateral securing the 2025 Notes and such guarantees.

Maturity and Interest

The 2025 Notes will mature on February 28, 2025.

Interest on the 2025 Notes accrues at a rate of 11.50% per annum and is payable semi-annually in cash in arrears on February 15 and August 15 of each year, commencing on February 15, 2021.

At any time prior to August 12, 2022, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2025 Notes issued under the 2025 Notes Indenture at a redemption price of 111.5% of the principal amount of the 2025 Notes, plus accrued and unpaid interest to the redemption date, with an amount of cash equal to the net cash proceeds of certain equity offerings.

On or after August 12, 2022, the Issuers may redeem all or part of the 2025 Notes at redemption prices equal to 100%, plus accrued and unpaid interest up to, but not including, the redemption date.

In addition, at any time prior to August 12, 2022, the Issuers may redeem all or a part of the 2025 Notes at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed plus a make-whole premium, plus accrued and unpaid interest up to, but not including, the redemption date.

Also, if at the end of any fiscal year (commencing with the fiscal year ended December 31, 2021) the Total Leverage Ratio (as defined in the Credit Facility Amendment) is greater than 3.75:1:00, the Issuers will use 25% of any excess annual cash flow (as defined in the 2025 Notes Indenture) to make an offer to all holders of the 2025 Notes to purchase the 2025 Notes at 100% of the principal amount thereof;

provided, however, the Issuers, in their sole discretion, can allocate up to 100% of excess cash flow to offer to repurchase the 2025 Notes at 100% of the principal amount thereof, subject to restrictions in the credit facility on prepaying junior debt.

Certain Covenants and Events of Default

The 2025 Notes Indenture contains customary covenants restricting the Partnership’s ability and the ability of its restricted subsidiaries to:

(i) pay distributions on, purchase or redeem its common units or purchase or redeem its subordinated debt;

(ii) incur or guarantee additional indebtedness or issue certain kinds of preferred equity securities;

(iii) create or incur certain liens securing indebtedness;

(iv) sell assets, including dispositions of the collateral securing the 2025 Notes;

(v) consolidate, merge or transfer all or substantially all of its assets;

(vi) enter into transactions with affiliates;

and (vii) enter into agreements that restrict distributions or other payments from its restricted subsidiaries to the Partnership.

The 2025 Notes Indenture also contains customary events of default and acceleration provisions relating to such events of default, which provide that upon an event of default under the 2025 Notes Indenture, U.S.

Bank National Association, as trustee, or the holders

of at least 25% in aggregate principal amount of the then outstanding 2025 Notes may declare all of the 2025 Notes to be due and payable immediately and, subject to the terms of the Intercreditor Agreement, foreclose upon the collateral for the 2025 Notes.

The 2025 Notes were guaranteed on a full, joint and several basis by each of the Partnership’s domestic restricted subsidiaries (other than Martin Midstream Finance Corp.

and Talen’s Marine & Fuel, LLC).

The 2025 Notes and the guarantees thereof were secured on a third-priority basis by a lien on substantially all assets of the Issuers and the guarantors, subject to the terms of an intercreditor agreement and certain other exceptions.

The 2025 Notes were scheduled to mature on February 28, 2025.

Interest on the 2025 Notes accrued at a rate of 11.50% per annum and was payable semi-annually in cash in arrears on February 15 and August 15 of each year.

On February 8, 2023, we used the net proceeds of the 2028 Notes to complete a tender offer for substantially all of the 2025 Notes and redeem all of the 2025 Notes that were not validly tendered.

2024 Senior Secured Notes and Indenture

Pursuant to the rights offering in connection with the Exchange Offer, the Issuers issued $53.8 million aggregate principal amount of the Issuers’ 10.00% senior secured 1.5 lien notes due 2024 (the "2024 Notes").

The 2024 Notes were issued to eligible holders that participated in the Exchange Offer pursuant to an indenture, dated as of August 12, 2020 (the "2024 Notes Indenture"), among the Issuers, the guarantors party thereto, U.S.

The 2024 Notes were issued to eligible holders that participated in the Exchange Offer pursuant to an indenture, dated as of August 12, 2020 (the "2024

Notes Indenture"), among the Issuers, the guarantors party thereto, U.S.

Bank National Association, as trustee, and U.S.

Bank National Association as collateral trustee.

The 2024 Notes are guaranteed on a full, joint and several basis by the guarantors of the 2025 Notes and will be guaranteed in the future by any domestic restricted subsidiaries, in each case, if and so long as such entity guarantees (or is an obligor with respect to) any other indebtedness for borrowed money of either the Issuers or any guarantor.

The 2024 Notes and the guarantees thereof are secured on a second-priority basis by a lien on substantially all assets of the Issuers and the guarantors, subject to the terms of the Intercreditor Agreement and certain other exceptions.

The 2024 Notes and the guarantees thereof are, pursuant to the Intercreditor Agreement, secured by second-priority liens and thus are effectively junior to any obligations under our credit facility, which are secured on a "first-lien" basis, and are effectively senior to the obligations under the 2025 Notes Indenture, which are secured on a "third-lien" basis, in each case, to the extent of the value of the collateral securing such first-lien, second-lien obligations and third-lien obligations.

The 2024 Notes were guaranteed on a full, joint and several basis by the guarantors of the 2025 Notes.

The 2024 Notes and the guarantees thereof were secured on a second-priority basis by a lien on substantially all assets of the Issuers and the guarantors, subject to the terms of an intercreditor agreement and certain other exceptions.

The 2024 Notes were scheduled to mature on February 29, 2024.

Interest on the 2024 Notes accrued at a rate of 10.00% per annum and was payable semi-annually in cash in arrears on February 15 and August 15 of each year.

On February 8, 2023, we used the net proceeds of the 2028 Notes to complete a tender offer for substantially all of the 2024 Notes and redeem all of the 2024 Notes that were not validly tendered.

2028 Senior Secured Notes and Indenture

On February 8, 2023, the Issuers issued $400.0 million aggregate principal amount of their 11.50% senior secured second lien notes due 2028 (the "2028 Notes").

The 2028 Notes were issued under an indenture, dated as of February 8, 2023 (the "2028 Notes Indenture"), among the Issuers, the guarantors party thereto, and U.S.

Bank Trust Company, National Association, as trustee and as collateral trustee.

The 2028 Notes are guaranteed on a full, joint and several basis by each of the Partnership’s domestic restricted subsidiaries (other than Martin Midstream Finance Corp.).

The 2028 Notes will be guaranteed in the future by each of our domestic restricted subsidiaries, in each case, if and so long as such entity guarantees (or is an obligor with respect to) any other indebtedness for borrowed money of either the Issuers or any guarantor.

The 2028 Notes and the guarantees thereof are secured on a second-priority basis by a lien on substantially all assets of the Issuers and the guarantors, subject to the terms of an intercreditor agreement (the “Intercreditor Agreement”) and certain exceptions.

The 2028 Notes and the guarantees thereof are, pursuant to the Intercreditor Agreement, secured by second-priority liens and thus are effectively junior to any obligations under our credit facility, which are secured on a "first-lien" basis, to the extent of the value of the collateral securing such first-lien and second-lien obligations.

The 2028 Notes and the guarantees thereof rank effectively senior to all of the Issuers’ existing and future unsecured indebtedness to the extent of the value of the collateral securing the 2028 Notes and such guarantees.

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The 2028 Notes will mature on February 15, 2028.

Interest on the 2024 Notes accrues at a rate of 10.00% per annum and is payable semi-annually in cash in arrears on February 15 and August 15 of each year, commencing on February 15, 2021.

At any time prior to August 12, 2021, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2024 Notes issued under the 2024 Notes Indenture at a redemption price of 110% of the principal amount of the 2024 Notes, plus accrued and unpaid interest to the redemption date, with an amount of cash equal to the net cash proceeds of certain equity offerings.

On or after August 12, 2021, the Issuers may redeem all or part of the 2024 Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 102% for the twelve-month period beginning on August 12, 2021;

(ii) 101% for the twelve-month period beginning on August 12, 2022 and (iii) 100% at any time thereafter, plus accrued and unpaid interest up to, but not including, the redemption date.

In addition, at any time prior to August 12, 2021, the Issuers may redeem all or a part of the 2024 Notes at a redemption price equal to 100% of the principal amount of the 2024 Notes to be redeemed plus a make-whole premium, plus accrued and unpaid interest up to, but not including, the redemption date.

Interest on the 2028 Notes accrues at a rate of 11.50% per annum and is payable semi-annually in cash in arrears on February 15 and August 15 of each year, commencing on August 15, 2023.

At any time prior to August 15, 2025, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2028 Notes at a redemption price of 111.50% of the principal amount of the 2028 Notes redeemed, plus accrued and unpaid interest to the redemption date, with an amount not greater than the net cash proceeds of one or more equity offerings by the Partnership, so long as the redemption occurs within 180 days of completing such equity offering and 65% of the aggregate principal amount of the 2028 Notes remains outstanding immediately after such redemption.

In addition, at any time prior to August 15, 2025, the Issuers may redeem all or a portion of the 2028 Notes at a redemption price equal to 100% of the principal amount of the 2028 Notes redeemed, plus an applicable make-whole premium and accrued and unpaid interest to the redemption date.

On and after August 15, 2025, the Issuers may redeem all or a portion of the 2028 Notes at redemption prices set forth in the 2028 Indenture, plus accrued and unpaid interest to the redemption date.

If a Change of Control (as defined in the 2028 Indenture) occurs, the Partnership must offer to repurchase the 2028 Notes at a price equal to 101% of the aggregate principal amount of the 2028 Notes, plus accrued and unpaid interest to the date of repurchase.

Certain Covenants and Events of Default

The 2024 Notes Indenture contains covenants that are substantially the same as those contained in the 2025 Notes Indenture described above.

The terms of the 2028 Notes Indenture, among other things, limit the ability of the Partnership and certain of its subsidiaries to make distributions and other restricted payments, sell assets, make investments, create liens on assets, enter into sale and leaseback transactions, and consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries.

The 2028 Notes Indenture provides for customary events of default, which include (subject in certain cases to customary grace and cure periods), among others:

nonpayment of principal or interest;

breach of other agreements in the Indenture;

defaults in failure to pay certain other indebtedness;

the failure to pay final judgments of certain amounts of money against the Partnership or certain of its subsidiaries;

the failure of certain guarantees to be enforceable;

and certain events of bankruptcy or insolvency.

Generally, if an event of default occurs and is not cured within the time periods specified, the trustee under the 2028 Notes Indenture or the holders of at least 25% in principal amount of the 2028 Notes may declare all the 2028 Notes to be due and payable immediately.

Capital Resources and Liquidity

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At December 31, 2022, we had cash and cash equivalents of $0.05 million and available borrowing capacity of $83.6 million under our credit facility with $171.0 million of borrowings outstanding.

Our credit facility matures on August 31, 2023.

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 $62.7 million in additional amounts thereunder as of December 31, 2022.

At December 31, 2022, our credit facility was scheduled to mature on August 31, 2023.

We amended our credit facility effective as of February 8, 2023, to, among other things, reduce the commitments thereunder from $275.0 million to $200.0 million (with further scheduled reductions to $175.0 million on June 30, 2023 and $150.0 million on June 30, 2024) and extend the scheduled maturity date of the credit facility to February 8, 2027.

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.

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It may also increase the costs of labor and supplies.

In the future, increasing energy prices could adversely affect our results of operations.

Diesel fuel, natural gas, chemicals and other supplies are recorded in operating expenses.

In the future, increasing energy prices for products consumed by our operations, such as diesel fuel, natural gas, chemicals, and other supplies, could adversely affect our results of operations.

An increase in price of these products would increase our operating expenses which could adversely affect net income.

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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 7. Management’s Discussion and Analysis