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Item 8. Financial Statements and Supplementary Data

2023-03-02 compared with 2022-03-01 · 151 added, 284 removed, 1128 unchanged (28% of the section changed)

35 unchanged sentences

Evaluation of the recoverability of certain long-lived assets

As discussed in Note 2 to the consolidated financial statements, the Partnership reviews long-lived assets, such as property, plant and equipment and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

2 unchanged sentences

We identified the evaluation of the recoverability of a certain long-lived asset group in the transportation segment as a critical audit matter.

A triggering event was identified as of an interim period in the fiscal year.

A higher degree of subjective auditor judgement was required to evaluate the forecasted revenue used in the asset group’s future undiscounted cash flows.

Specifically, the forecasted revenue was challenging to evaluate as the

future undiscounted cash flows were sensitive to minor changes in certain assumptions in the development of forecasted revenue that could have a significant effect on the Partnership’s assessment of the recoverability of the long-lived asset group.

Specifically, the forecasted revenue was challenging to evaluate as the future undiscounted cash flows were

sensitive to minor changes in certain assumptions in the development of forecasted revenue that could have a significant effect on the Partnership’s assessment of the recoverability of the long-lived asset group.

The following are the primary procedures we performed to address this critical audit matter.

42 unchanged sentences

Due from affiliates

14,409 14,807

Other current assets

13,633 12,908

Total current assets

16 unchanged sentences

Income taxes payable 665 385

Fair value of derivatives — 207

Other accrued liabilities 33,074 29,850

61 unchanged sentences

Loss on exchange of senior unsecured notes — — ( 8,817 )

( 5 ) ( 4 ) 6

Total other income (expense)

4 unchanged sentences

( 7,927 ) ( 3,380 ) ( 1,736 )

Income (loss) from continuing operations ( 211 ) ( 6,771 ) 4,520

Loss from discontinued operations, net of income taxes — — ( 179,466 )

Net loss ( 10,334 ) ( 211 ) ( 6,771 )

Less general partner's interest in net loss 207 4 135

Less (income) loss allocable to unvested restricted units — 21 ( 41 )

Less loss allocable to unvested restricted units 40 — 21

Limited partners' interest in net loss $ ( 10,087 ) $ ( 207 ) $ ( 6,615 )

Net loss per unit attributable to limited partners - basic and diluted $ ( 0.26 ) $ ( 0.01 ) $ ( 0.17 )

Weighted average limited partner units - basic and diluted 38,726,048 38,689,041 38,656,559

*Related Party Transactions Shown Below

18 unchanged sentences

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per unit amounts)

Year Ended December 31,

2021 2020 2019

Allocation of net income (loss) attributable to:

Limited partner interest:

Continuing operations $ ( 207 ) $ ( 6,615 ) $ 4,430

Discontinued operations — — ( 175,918 )

$ ( 207 ) $ ( 6,615 ) $ ( 171,488 )

General partner interest:

Continuing operations $ ( 4 ) $ ( 135 ) $ 91

Discontinued operations — — ( 3,590 )

$ ( 4 ) $ ( 135 ) $ ( 3,499 )

Net income (loss) per unit attributable to limited partners:

Continuing operations $ ( 0.01 ) $ ( 0.17 ) $ 0.11

Discontinued operations — — ( 4.55 )

$ ( 0.01 ) $ ( 0.17 ) $ ( 4.44 )

Weighted average limited partner units - basic 38,689 38,657 38,659

Continuing operations $ ( 0.01 ) $ ( 0.17 ) $ 0.11

Discontinued operations — — ( 4.55 )

$ ( 0.01 ) $ ( 0.17 ) $ ( 4.44 )

Weighted average limited partner units - diluted 38,689 38,657 38,659

See accompanying notes to consolidated financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

10 unchanged sentences

Partners’ Capital (Deficit)

Parent Net Investment Common General Partner Amount Accumulated Other Comprehensive Income

Common General Partner Amount Accumulated Other Comprehensive Income

Units Amount Total

1 unchanged sentence

Net loss — ( 6,636 ) ( 135 ) — ( 6,771 )

Issuance of common units, net — — ( 289 ) — — ( 289 )

Issuance of time-based restricted units 81,000 — — — —

1 unchanged sentence

Cash distributions — ( 5,211 ) ( 106 ) — ( 5,317 )

Excess carrying value of the assets over the purchase price paid by Martin Resource Management

— — ( 102,393 ) — — ( 102,393 )

Deferred taxes on acquired assets and liabilities — — 24,781 — 24,781

Unit-based compensation — 1,422 — — 1,422

Purchase of treasury units ( 7,748 ) ( 9 ) — — ( 9 )

Contribution to parent ( 23,720 ) — — — — ( 23,720 )

Balances – December 31, 2020 38,851,174 ( 48,776 ) 1,905 — ( 46,871 )

2 unchanged sentences

Forfeiture of restricted units ( 83,436 ) — — — —

General partner contribution — — 3 — 3

Cash distributions — ( 775 ) ( 16 ) — ( 791 )

Changes in fair values of commodity cash flow hedges — — — 816 816

Excess purchase price over carrying value of acquired assets — ( 1,350 ) — — ( 1,350 )

Unit-based compensation — 384 — — 384

3 unchanged sentences

Issuance of time-based restricted units 48,000 — — — —

Forfeiture of restricted units — ( 83,436 ) — — — —

General partner contribution — — — 3 — 3

Cash distributions — ( 777 ) ( 16 ) — ( 793 )

2 unchanged sentences

Unit-based compensation — 161 — — 161

Purchase of treasury units — ( 7,156 ) ( 17 ) — — ( 17 )

Balances – December 31, 2022 38,850,750 $ ( 61,110 ) $ 1,665 $ — $ ( 59,445 )

7 unchanged sentences

Net loss $ ( 10,334 ) $ ( 211 ) $ ( 6,771 )

Loss from discontinued operations — — 179,466

Net income (loss) from continuing operations ( 211 ) ( 6,771 ) 4,520

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 56,280 56,751 61,462

11 unchanged sentences

Accounts and other receivables 4,579 ( 31,448 ) 30,741

Product exchange receivables — — 166

Inventories ( 47,678 ) ( 8,334 ) 5,264

7 unchanged sentences

Change in other non-current assets and liabilities 1,381 649 ( 1,470 )

Net cash provided by continuing operating activities 35,729 64,785 68,046

Net cash provided by discontinued operating activities — — 7,769

Net cash provided by operating activities 16,148 35,729 64,785

1 unchanged sentence

Payments for property, plant, and equipment ( 27,237 ) ( 16,059 ) ( 28,622 )

Acquisitions, net of cash acquired — — ( 23,720 )

Payments for plant turnaround costs ( 5,176 ) ( 4,109 ) ( 1,478 )

1 unchanged sentence

Proceeds from involuntary conversion of property, plant and equipment — 284 7,550

Net cash provided by (used in) continuing investing activities ( 19,241 ) 2,604 ( 34,327 )

Net cash provided by discontinued investing activities — — 209,155

Net cash provided by (used in) investing activities ( 24,644 ) ( 19,241 ) 2,604

3 unchanged sentences

Proceeds from long-term debt 404,650 316,500 282,019

Proceeds from issuance of common units, net of issuance related costs — — ( 289 )

General partner contributions — 3 —

3 unchanged sentences

Cash distributions paid ( 793 ) ( 791 ) ( 5,317 )

Net cash used in financing activities ( 21,394 ) ( 65,287 ) ( 248,087 )

Net cash provided by (used in) financing activities 8,489 ( 21,394 ) ( 65,287 )

Net increase (decrease) in cash ( 7 ) ( 4,906 ) 2,102

27 unchanged sentences

No such variable interest entities existed as of December 31, 2022 or 2021.

Divestiture of Natural Gas Storage Assets.

On June 28, 2019, the Partnership completed the sale of its membership interests in Arcadia Gas Storage, LLC, Cadeville Gas Storage LLC, Monroe Gas Storage Company, LLC and Perryville Gas Storage LLC (the "Natural Gas Storage Assets") to Hartree Cardinal Gas, LLC ("Hartree"), a subsidiary of Hartree Bulk Storage, LLC.

The Natural Gas Storage Assets consist of approximately 50 billion cubic feet of working capacity located in northern Louisiana and Mississippi.

In consideration of the sale of the Natural Gas Storage Assets, the Partnership received cash proceeds of $ 210,067 after transaction fees and expenses.

The net proceeds were used to reduce outstanding borrowings under the Partnership's credit facility.

The Partnership concluded the disposition represents a strategic shift and will have a major effect on its financial results going forward.

As a result, the Partnership has presented the results of operations and cash flows relating to the Natural Gas Storage Assets as discontinued operations for the year ended December 31, 2019.

See Note 5 for more information.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

(b) Product Exchanges

6 unchanged sentences

Inventories are stated at the lower of cost or market.

Cost is generally determined by using the FIFO method for all inventories except lubricants and lubricants packaging inventories.

Lubricants and lubricants packaging inventories cost is determined using standard cost, which approximates actual cost, computed on a FIFO basis.

Cost is generally determined by using the FIFO method for all inventories except lubricants, greases, lubricants packaging, fertilizer and butane inventories.

Lubricants, greases, and lubricants packaging inventories cost is determined using standard cost, which approximates actual cost.

Fertilizer and butane inventory is determined using weighted average cost, which approximates actual cost.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

(d) Revenue Recognition

2 unchanged sentences

For the Partnership’s tolling agreement, revenue is recognized based on the contracted monthly reservation fee and throughput volumes moved through the facility.

When lubricants and drilling fluids are sold by truck or rail, revenue is recognized when title is transferred, which is either upon delivering product to the customer or when the product leaves the Partnership's facility, depending on the specific terms of the contract.

When lubricants and drilling fluids are sold by truck or rail, revenue is recognized when title is transferred, which is generally when the product leaves the Partnership's facility, depending on the specific terms of the contract.

Delivery of product is invoiced as the transaction occurs and is generally paid within a month.

22 unchanged sentences

Equipment under finance leases is amortized on a straight line basis over the estimated useful life of the asset.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

Routine maintenance and repairs are charged to expense while costs of betterments and renewals are capitalized.

5 unchanged sentences

To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit, the Partnership will record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

When assessing the recoverability of goodwill and other intangible assets, the Partnership may first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit or other intangible asset is less than its carrying amount.

16 unchanged sentences

Changes to these estimates and assumptions can include, but may not be limited to, varying commodity prices, volume changes and operating costs due to market conditions and/or alternative providers of services.

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

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

No goodwill impairment was recorded for the years ended December 31, 2021 or 2020.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

Other intangible assets that have finite lives are tested for impairment when events or circumstances indicate that the carrying value may not be recoverable.

7 unchanged sentences

Accumulated amortization amounted to $ 29,173 and $ 26,022 at December 31, 2022 and 2021, respectively.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

(i) Impairment of Long-Lived Assets

4 unchanged sentences

The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

The Partnership identified triggering events related to a certain asset group in its transportation segment in 2021.

The Partnership identified triggering events related to a certain asset group in its transportation segment in 2022 and 2021.

The Partnership performed a recoverability test and concluded the estimated undiscounted cash flows expected to be generated by the asset group exceeded the carrying value of the asset group and no impairment was recorded.

6 unchanged sentences

Derivative instruments not designated as hedges are marked to market with all market value adjustments being recorded in the Consolidated Statements of Operations.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

(l) Use of Estimates

10 unchanged sentences

The allowance for doubtful accounts is the Partnership’s best estimate of the amount of probable credit losses in the Partnership’s existing accounts receivable.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

(o) Deferred Catalyst Costs

6 unchanged sentences

The impact on deferred taxes as a result of this provision is immaterial.

MTI is a wholly owned subsidiary of the Partnership.

Prior to the acquisition of MTI on January 2, 2019, MTI was a Qualified Subchapter S subsidiary (“QSub”) of Martin Resource Management Corporation, a qualifying S Corporation.

A QSub is disregarded and not treated as a corporation separate from its S Corporation parent for federal income tax purposes.

S Corporations are generally not subject to income taxes because income and losses flow through to shareholders and are reported on their individual returns.

Three states in which MTI was subject to taxation prior to the acquisition - Louisiana, New Jersey and Tennessee - do not recognize the federal S Corporation status and, therefore, taxed MTI on a C Corporation basis.

Subsequent to the acquisition, the QSub election terminated resulting in MTI being taxed as a stand-alone C Corporation.

The Partnership's financial statements recognize the current and deferred income tax consequences that result from MTI’s activities during the current period pursuant to the provisions of the FASB ASC 740 related to income taxes.

The Partnership's financial statements recognize the current and deferred income tax consequences that result from the activities of its wholly owned C-Corporation subsidiary, MTI, during the current period pursuant to the provisions of the FASB ASC 740 related to income taxes.

As a result of the common control transaction with the Partnership, the deferred tax consequences of the changes in the tax bases of MTI’s assets and liabilities were included in equity under the provisions of ASC 740-20-45-11.

With respect to the Partnership’s taxable subsidiary (MTI), income taxes are accounted for under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

apply to taxable income in the years those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

7 unchanged sentences

In evaluating all income tax positions for all open years, management has determined all positions are more likely than not to be sustained at full benefit based upon their technical merit under applicable tax laws.

(r) Comprehensive Income

Comprehensive income includes net income and other comprehensive income.

Other comprehensive income for the Partnership includes unrealized gains and losses on derivative instruments.

In accordance with ASC 815-10, the Partnership records deferred hedge gains and losses on its derivative instruments that qualify as cash flow hedges as other comprehensive income.

(r) Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) and other comprehensive income (loss).

Other comprehensive income (loss) for the Partnership includes unrealized gains and losses on derivative instruments.

In accordance with ASC 815-10, the Partnership records deferred hedge gains and losses on its derivative instruments that qualify as cash flow hedges as other comprehensive income (loss).

RECENT ACCOUNTING PRONOUNCEMENTS

On January 1, 2021, the Partnership adopted FASB Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Accounting Standards Codification (“ASC”) Topic 740):

Simplifying the Accounting for Income Taxes , which removes certain exceptions to general principles in ASC 740 and clarifies and amends existing guidance within U.S.

Adoption of the new standard did not have a material impact on the Partnership’s consolidated financial statements.

On January 1, 2020, the Partnership adopted ASU 2016-13, "Financial Instruments - Credit Losses," which required the Partnership to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

This replaced the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables.

Adoption of the new standard did not have a material impact on the Partnership’s consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation:

Improvements to Non-employee Share-Based Payment Accounting , which will expand the scope of FASB ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees.

The standard is effective for the Partnership's financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

The Partnership adopted this standard effective January 1, 2019.

The result of this adoption did not have a material impact on the Partnership's consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases , which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance.

Lessor accounting under the new standard is substantially unchanged and substantially all of our leases will continue to be classified as operating leases under the new standard.

Additional qualitative and quantitative disclosures, including significant judgments made by management are required.

The update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those reporting periods, with early adoption permitted.

The original guidance required application on a modified retrospective basis with the earliest period presented.

In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to FASB ASC 842 , which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the date of initial application of transition.

The Partnership adopted this ASU on January 1, 2019, electing the transition option provided under ASU 2018-11.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

The new standard provides a number of optional practical expedients in transition.

The Partnership elected the "package of practical expedients", which permits the Partnership not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.

The new standard also provides practical expedients for an entity’s ongoing accounting.

The Partnership elected the short-term lease recognition exemption for all leases that qualify.

This means, for those assets that qualify, the Partnership did not recognize Right-of-Use ("ROU") assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.

See Note 10 for more information.

Martin Transport, Inc.

Stock Purchase Agreement.

On January 2, 2019, the Partnership acquired all of the issued and outstanding equity interests of MTI, a wholly-owned subsidiary of Martin Resource Management Corporation, which operates a fleet of trucks providing transportation of petroleum products, liquid petroleum gas, chemicals, sulfur and other products, as well as owns 24 terminals located throughout the U.S.

Gulf Coast and Southeastern U.S.

for total consideration as follows:

Purchase price 1

Working Capital Adjustment 2,795

Finance lease obligations assumed ( 11,682 )

Cash consideration paid $ 126,113

1 The stock purchase agreement also includes a $ 10,000 earn-out based on certain performance thresholds.

The performance threshold related to financial results for the years ended December 31, 2020 and 2019 was not achieved, which resulted in a reduction in the potential earn-out by $ 6,666 .

For the year ended December 31, 2021, the performance threshold related to financial results was exceeded, resulting in an earn-out payment of $ 1,350 , which, pursuant to the terms of the stock purchase agreement, will be paid in the second quarter of 2022.

The transaction closed on January 2, 2019 and was effective as of January 1, 2019 and was funded with borrowings under the Partnership's credit facility.

This acquisition is considered a transfer of net assets between entities under common control.

The acquisition of MTI was recorded at the historical carrying value of the assets at the acquisition date, which were as follows:

Accounts receivable, net $ 11,724

Inventories 1,138

Due from affiliates 1,042

Other current assets 897

Property, plant and equipment, net 25,383

Other noncurrent assets 362

Current installments of finance lease obligations ( 5,409 )

Accounts payable ( 2,564 )

Due to affiliates ( 482 )

Other accrued liabilities ( 2,588 )

Finance lease obligations, net of current installments ( 6,272 )

Historical carrying value of assets acquired $ 23,720

The excess purchase price over the historical carrying value of the assets at the acquisition date was $ 102,393 and was recorded as an adjustment to "Partners' capital (deficit)".

The earn out-payment discussed above was recorded as additional excess purchase price over the historical carrying value of the assets, resulting in an adjustment to "Partners' capital (deficit)" of $ 1,350 .

Simplifying the Accounting for Income Taxes , which removes certain

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

exceptions to general principles in ASC 740 and clarifies and amends existing guidance within U.S.

Adoption of the new standard did not have a material impact on the Partnership’s consolidated financial statements.

DISCONTINUED OPERATIONS AND DIVESTITURES

Exit from Butane Optimization Business.

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

Going forward, the Partnership intends to operate as a fee-based butane logistics business, primarily utilizing its north Louisiana underground storage assets, which have both truck and rail capability.

This logistics business will also utilize the Partnership's truck transportation assets for fee-based product movements.

As a result of this new business model, the Partnership anticipates no longer carrying butane inventory going forward, eliminating commodity risk, reducing earnings volatility, and substantially reducing working capital requirements.

Divestiture of Stockton, California Sulfur Terminal.

On October 7, 2022, the Partnership closed on the sale of its Stockton Sulfur Terminal to Gulf Terminals LLC for net proceeds of approximately $ 5,250 , which were used to reduce outstanding borrowings under the Partnership's credit facility.

The divestiture of the Stockton Sulfur Terminal did not qualify for discontinued operations presentation under the guidance of ASC 205-20.

Divestiture of Mega Lubricants.

4 unchanged sentences

The divestiture of Mega Lubricants did not qualify for discontinued operations presentation under the guidance of ASC 205-20.

Divestiture of East Texas Pipeline.

On August 12, 2019, the Partnership completed the sale of its East Texas Pipeline for $ 17,500 .

The Partnership recorded a gain on the disposition of $ 16,154 , which was included in "Other operating income, net" on the Partnership's Consolidated Statements of Operations.

The net proceeds were used to reduce outstanding borrowings under the Partnership's credit facility.

The divestiture of the East Texas Pipeline assets did not qualify for discontinued operations presentation under the guidance of ASC 205-20.

Divestiture of Natural Gas Storage Assets.

On June 28, 2019, the Partnership completed the sale of the Natural Gas Storage Assets to Hartree, a subsidiary of Hartree Bulk Storage, LLC.

The Natural Gas Storage Assets consist of approximately 50 billion cubic feet of working capacity located in northern Louisiana and Mississippi.

In consideration of the sale of these assets, the Partnership received cash proceeds of $ 210,067 after transaction fees and expenses.

The net proceeds were used to reduce outstanding borrowings under the Partnership's credit facility.

The Partnership concluded the disposition represents a strategic shift and will have a major effect on its financial results going forward.

As a result, the Partnership has presented the results of operations and cash flows relating to the Natural Gas Storage Assets as discontinued operations for the year ended December 31, 2019.

The operating results, which are included in income (loss) from discontinued operations, were as follows:

For the Year Ended December 31,

Total revenues

Total costs and expenses and other, net, excluding depreciation and amortization

Depreciation and amortization

Other operating loss, net 1

Income (loss) from discontinued operations before income taxes

Income tax expense

Income (loss) from discontinued operations, net of income taxes

$ ( 179,466 )

1 The year ended December 31, 2019 includes a loss on the disposition of the Natural Gas Storage Assets of $ 178,781 .

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

The following table disaggregates our revenue by major source:

18 unchanged sentences

Revenue is measured based on a consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties where the Partnership is acting as an agent.

The Partnership recognizes revenue when the Partnership satisfies a performance obligation, which typically occurs when the Partnership transfers control over a product to a customer or as the Partnership delivers a service.

The Partnership recognizes revenue when the Partnership

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

satisfies a performance obligation, which typically occurs when the Partnership transfers control over a product to a customer or as the Partnership delivers a service.

The following is a description of the principal activities - separated by reportable segments - from which the Partnership generates revenue.

10 unchanged sentences

Delivery of product is invoiced as the transaction occurs and is generally paid within a month.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

Sulfur Services Segment

20 unchanged sentences

Total $ 66,825 $ 68,165 $ 69,457 $ 53,913 $ 47,844 $ 204,927 $ 511,131

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

Components of inventories at December 31, 2022 and 2021 were as follows:

5 unchanged sentences

$ 109,798 $ 62,120

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

PROPERTY, PLANT, AND EQUIPMENT

23 unchanged sentences

As a result, an impairment charge of $ 3,052 and $ 1,300 was recorded in the Terminalling and Storage and Transportation segments, respectively, during the year ended December 31, 2020 and was recorded in "Other operating income (loss)" in the Partnership's Consolidated Statements of Operations.

At December 31, 2020, the remaining assets previously classified as held for sale in the amount of $ 700 no longer met the criteria to be classified as held for sale in accordance with ASC 360-10.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

The following table represents the goodwill balance by reporting unit at December 31, 2022 and 2021 as follows:

4 unchanged sentences

Total goodwill $ 16,671 $ 16,823

1 This change represents goodwill disposed of as part of the Partnership's divestiture of its Stockton, California Sulfur Terminal.

See Note 4 for more information.

The Partnership has numerous operating leases primarily for terminal facilities and transportation and other equipment.

3 unchanged sentences

The estimated rate is based on a risk-free rate plus a risk-adjusted margin.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

The Partnership's leases have remaining lease terms of 1 year to 14 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

9 unchanged sentences

Total lease cost $ 22,584 $ 19,861 $ 26,017

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

Supplemental cash flow information for the years ended December 31, 2022, 2021, and 2020 related to leases were as follows:

7 unchanged sentences

Finance leases — — 83

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

Supplemental balance sheet information related to leases was as follows at December 31, 2022 and 2021:

17 unchanged sentences

Finance leases 3.61 % 5.74 %

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

The Partnership’s future minimum lease obligations as of December 31, 2022 consist of the following:

19 unchanged sentences

subsequent years - $ 24,636 .

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

FAIR VALUE MEASUREMENTS

19 unchanged sentences

The carrying amount of the credit facility approximates fair value due to the debt having a variable interest rate and is in Level 2.

The estimated fair value of the 2021 Notes, 2024 Notes, and 2025 Notes (collectively, the "senior notes") is considered Level 2, as the fair value is based upon quoted prices for identical liabilities in markets that are not active.

The estimated fair value of the 2024 Notes and 2025

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

Notes (collectively, the "senior notes") is considered Level 2, as the fair value is based upon quoted prices for identical liabilities in markets that are not active.

December 31, 2022 December 31, 2021

2 unchanged sentences

2025 Notes $ 290,495 $ 290,689 $ 290,667 $ 307,146

2025 Notes $ 290,667 $ 307,146 $ 290,250 $ 288,692

Total $ 342,957 $ 344,770 $ 341,984 $ 362,366

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

21 unchanged sentences

These hedging arrangements are in the form of swaps for NGLs.

At December 31, 2021, the Partnership has instruments totaling a gross notional quantity of 0 barrels.

At December 31, 2020, the Partnership had instruments totaling a gross notional quantity of 137,000 barrels settling during the period from January 31, 2021 through February 28, 2021.

These instruments settle against the applicable pricing source for each grade and location.

At December 31, 2022 and December 31, 2021, the Partnership has instruments totaling a gross notional quantity of 0 barrels.

For information regarding gains and losses on commodity derivative instruments, see "Tabular Presentation of Gains and Losses on Derivative Instruments" below.

(b) Tabular Presentation of Gains and Losses on Derivative Instruments

The following table summarizes the fair value and classification of the Partnership’s derivative instruments in its Consolidated Balance Sheets:

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

(b) Tabular Presentation of Gains and Losses on Derivative Instruments

The following table summarizes the fair value and classification of the Partnership’s derivative instruments in its Consolidated Balance Sheets:

Derivative Assets Derivative Liabilities

5 unchanged sentences

Commodity contracts Fair value of derivatives $ — $ — Fair value of derivatives $ — $ —

Derivatives not designated as hedging instruments:

Commodity contracts Fair value of derivatives $ — $ — Fair value of derivatives $ — $ 207

The following table summarizes the loss recognized in AOCI at December 31, 2021 and the gain (loss) reclassified from accumulated other comprehensive loss into earnings during the year ended December 31, 2021 for derivative financial instruments designated as cash flow hedges:

The following table summarizes the loss recognized in AOCI at December 31, 2022 and December 31, 2021, respectively, and the gain (loss) reclassified from accumulated other comprehensive loss into earnings during the year ended December 31, 2022 and December 31, 2021, respectively, for derivative financial instruments designated as cash flow hedges:

Amount of Gain (Loss) Recognized in AOCI Location of Gain (Loss)

3 unchanged sentences

Total $ — $ 816 $ 816 $ ( 3,768 )

The following tables summarize the loss recognized in earnings for derivative instruments not designated as hedging instruments during the year ended December 31, 2021:

The following table summarizes the loss recognized in earnings for derivative instruments not designated as hedging instruments during the years ended December 31, 2022 and December 31, 2021, respectively:

Location of Gain (Loss)

7 unchanged sentences

As of December 31, 2022, Martin Resource Management Corporation owned 6,114,532 of the Partnership’s common units representing approximately 15.7 % of the Partnership’s outstanding limited partnership units.

Martin Resource Management Corporation controls the Partnership's general partner by virtue of owning 100 % of the membership interests in

Martin Resource Management Corporation controls the Partnership's general partner by virtue of owning 100 % of the membership interests in Holdings, the sole member of the Partnership's general partner.

The Partnership’s general partner, MMGP, owns a 2 % general partner interest in the Partnership.

The Partnership’s general partner’s ability, as general partner, to manage and operate the

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

Holdings, the sole member of the Partnership's general partner.

The Partnership’s general partner, MMGP, owns a 2 % general partner interest in the Partnership.

The Partnership’s general partner’s ability, as general partner, to manage and operate the Partnership, and Martin Resource Management Corporation’s ownership as of December 31, 2021 of approximately 15.8 % of the Partnership’s outstanding limited partnership units, effectively gives Martin Resource Management Corporation the ability to veto some of the Partnership’s actions and to control the Partnership’s management.

Partnership, and Martin Resource Management Corporation’s ownership as of December 31, 2022 of approximately 15.7 % of the Partnership’s outstanding limited partnership units, effectively gives Martin Resource Management Corporation the ability to veto some of the Partnership’s actions and to control the Partnership’s management.

The following is a description of the Partnership’s material related party agreements:

21 unchanged sentences

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

• any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of less than $ 5,000 ;

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

• any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of less than $ 5,000 ;

• any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of $ 5,000 or more if the Partnership has been offered the opportunity to purchase the business for fair market value and the Partnership declines to do so with the concurrence of the Conflicts Committee;

41 unchanged sentences

Diesel Fuel Terminal Services Agreement.

Effective January 1, 2016, the Partnership entered into a second amended and restated terminalling services agreement under which the Partnership provides terminal services to Martin Resource Management Corporation for marine fuel distribution.

At such time, the per-gallon throughput fee the Partnership charged under this agreement was increased when compared to the previous agreement and may be adjusted annually based on a price index.

This agreement was further amended on April 1, 2019 and January 1, 2020 to modify its minimum throughput requirements and throughput fees.

The term of this agreement is currently evergreen and it will continue on a month to month basis until terminated by either party by giving 60 days’ written notice.

Effective October 1, 2022, The Partnership entered into a third amended and restated terminalling services agreement under which it provides terminal services to Martin Energy Services LLC (“MES”), a wholly owned subsidiary of Martin Resource Management Corporation, for fuel distribution utilizing marine shore based terminals owned by the Partnership.

This agreement amended the existing arrangement between the Partnership and MES by eliminating any minimum throughput volume requirements and increasing the per gallon throughput fee.

The term of this agreement expires on December 31, 2023 but will continue on a year to year basis until terminated by either party by giving at least 90 days’ written notice prior to the end of any term.

Miscellaneous Terminal Services Agreements.

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Further, certain capital improvements, to the extent requested by Cross, are reimbursed through a capital recovery fee.

As of December 31, 2019, the annual capital recovery fee reimbursement of $ 2,088 expired.

An additional $ 2,586 of capital recovery fee reimbursement expired on December 31, 2020.

All of these fees (other than the fuel surcharge) are subject to escalation annually based upon two-thirds of any increase in the Consumer Price Index for a specified annual period.

In no event shall the fees charged under the agreement ever decrease below the amounts which existed as of October 20, 2021.

Also, the Partnership renegotiated a crude transportation contract set to expire in the first half of 2022 resulting in a reduction in revenue of $ 2,145 annually beginning January 1, 2020.

All of these fees (other than the fuel surcharge) are subject to escalation annually based upon the greater of 3 % or the increase in the Consumer Price Index for a specified annual perio d .

East Texas Mack Leases.

2 unchanged sentences

Amounts paid to East Texas Mack for tractor and trailer lease payments and lease residuals for the fiscal years ended December 31, 2022, 2021 and 2020 were approximately $ 1,935 , $ 1,089 , and $ 650 , respectively.

Consulting Services Agreement .

Martin Operating Partnership L.P.

(the “Operating Partnership”) is a party to a Consulting Services Agreement with Ruben S.

Martin (the “Consulting Services Agreement”).

Pursuant to the terms of the Consulting Services Agreement, Mr.

Martin has agreed to provide business and strategic development support to the Operating Partnership, and the Operating Partnership has agreed to pay Mr.

Martin $ 263 per year for such services, which amount was paid to Mr.

Martin for each of the fiscal years ended December 31, 2022 and 2021.

The Consulting Services Agreement expired on December 31, 2022.

Other Miscellaneous Agreements.

19 unchanged sentences

$ 50,092 $ 37,846 $ 28,948

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

The impact of related party operating expenses is reflected in the Consolidated Statements of Operations as follows:

9 unchanged sentences

$ 93,630 $ 78,607 $ 80,075

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

The impact of related party selling, general and administrative expenses is reflected in the Consolidated Statements of Operations as follows:

19 unchanged sentences

Amortization expense, included in "Depreciation and amortization" on the Partnership's Consolidated Statements of Operations includes amortization of intangible assets, turnaround expenses, and deferred charges.

Aggregate amortization expense included in continuing operations was $ 4,085 , $ 5,235 , and $ 5,797 , for the years ended December 31, 2021, 2020 and 2019, respectively.

Aggregate amortization expense was $ 5,713 , $ 4,085 , and $ 5,235 , for the years ended December 31, 2022, 2021 and 2020, respectively.

Estimated amortization expense for the years subsequent to December 31, 2022 are as follows:

2 unchanged sentences

2025 - $ 309 ;

2025 - $ 84 ;

subsequent years - $ 0 .

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At December 31, 2022 and 2021, long-term debt consisted of the following:

$ 275,000 1 Credit facility at variable interest rate ( 5.00 % 1 weighted average at December 31, 2021), due August 2023 4 secured by substantially all of the Partnership’s assets, including, without limitation, inventory, accounts receivable, vessels, equipment, fixed assets and the interests in the Partnership’s operating subsidiaries, net of unamortized debt issuance costs of $ 2,613 and $ 3,826 , respectively 2

$ 275,000 1 Credit facility at variable interest rate ( 7.81 % 1 weighted average at December 31, 2022), due August 2023 4 secured by substantially all of the Partnership’s assets, net of unamortized debt issuance costs of $ 1,086 and $ 2,613 , respectively 2

$ 169,914 $ 156,887

$ 400,000 Senior notes, 7.25 % interest, net of unamortized debt issuance costs of $ 0 and $ — respectively, including unamortized premium of $ 0 and $ 344 , respectively, issued $ 250,000 February 2013 and $ 150,000 April 2014, $ 26,200 repurchased during 2015, $ 9,344 repurchased during 2020, and $ 335,666 refinanced as part of the August 2020 Exchange offer, $ 28,790 repaid at maturity in February 2021, unsecured 2,3,4,5

$ 53,750 Senior notes, due February 2024, 10.0 % interest, net of unamortized debt issuance costs of $ 1,288 and $ 2,433 , respectively 2,3

8 unchanged sentences

Total finance lease obligations $ 9 $ 289

1 Interest rate fluctuates based on LIBOR plus an applicable margin set on the date of each advance.

The margin above LIBOR is set every three months.

All amounts outstanding at December 31, 2021 were at LIBOR plus an applicable margin of 4.00 %, with LIBOR having a floor of 1.00 %.

The applicable margin for revolving loans that are LIBOR loans currently ranges from 2.75 % to 4.00 % and the applicable margin for revolving loans that are base prime rate loans ranges from 1.75 % to 3.00 %.

1 At December 31, 2022, interest rates fluctuated based on LIBOR or the prime rate plus an applicable margin set on the date of each advance.

The margin above is set every three months.

Of amounts outstanding at December 31, 2022, $ 157,000 were at LIBOR plus an applicable margin of 3.25 % and $ 14,000 were at base prime rate plus an applicable margin of 2.25 %.

The credit facility was amended effective as of February 8, 2023, to, among other things, reduce the commitments to $ 200,000 (with further reductions scheduled in the future), replace LIBOR with Adjusted Term SOFR, and extend the maturity date of the commitments to February 8, 2027.

The applicable margin for Adjusted Term SOFR borrowings effective February 15, 2023 is 3.50 %;

the applicable margin for base prime rate borrowings effective February 15, 2023 is 2.50 %.

The credit facility contains various covenants which limit the Partnership’s ability to make distributions;

3 unchanged sentences

and make certain amendments to the Partnership's omnibus agreement with Martin Resource Management Corporation (the "Omnibus Agreement").

The credit facility was amended July 16, 2021 to, among other things, reduce the commitments thereunder from $ 300,000 to $ 275,000 .

2 The Partnership was in compliance with all debt covenants as of December 31, 2022.

3 The indentures for each of the outstanding senior notes restrict the Partnership’s ability to sell assets;

3 The indentures governing the senior notes restrict the Partnership’s ability to sell assets;

pay distributions or repurchase units or redeem or repurchase subordinated debt;

2 unchanged sentences

and consolidate, merge or transfer all or substantially all of its assets.

4 On February 15, 2021, our 2021 Notes matured and we retired the outstanding balance of $ 28,790 using proceeds from our credit facility.

5 In March 2020, the Partnership repurchased on the open market an aggregate $ 9,344 of the 2021 Notes, resulting in a gain on retirement of $ 3,484 .

4 Effective February 8, 2023, in connection with the completion of our sale of the 2028 Notes, we amended our credit facility to, among other things, reduce the commitments thereunder from $ 275,000 to $ 200,000 (with further scheduled reductions to $ 175,000 on June 30, 2023 and $ 150,000 on June 30, 2024) and extend the scheduled maturity date of the amended credit facility to February 8, 2027.

As of December 31, 2022, amounts outstanding under the Partnership's credit facility have been presented as non-current on the Consolidated Balance Sheets due to the successful extension of the previously scheduled maturity date of August 2023.

The Partnership paid cash interest, net of capitalized interest, in the amount of $ 50,518 , $ 51,708 , and $ 37,678 for the years ended December 31, 2022, 2021 and 2020, respectively.

14 unchanged sentences

The consideration transferred totaling $ 552,058 exceeds the historical cost of the net assets received.

This excess of the purchase price over the historical cost of the net assets received has resulted in cumulative distributions of $ 289,084 reflected as reductions to Partners' capital.

This excess of the purchase price over the historical cost of the net assets received has resulted in cumulative distributions of $ 289,019 reflected as reductions to Partners' capital (deficit).

Incentive Distribution Rights

23 unchanged sentences

Under the if-converted method, the weighted-average number of subordinated units outstanding for the period is added to the weighted-average number of common units outstanding for purposes of computing basic net income per unit and the resulting amount is compared to the diluted net income per unit computed using the two-class method.

The following is a reconciliation of net income from continuing operations and net income from discontinued operations allocated to the general partner and limited partners for purposes of calculating net income attributable to limited partners per unit:

Years Ended December 31,

2021 2020 2019

Continuing operations:

Income (loss) from continuing operations $ ( 211 ) $ ( 6,771 ) $ 4,520

Less general partner’s interest in net income (loss):

Distributions payable on behalf of IDRs — — —

Distributions payable on behalf of general partner interest 16 61 ( 20 )

General partner interest in undistributed income (loss) ( 20 ) ( 196 ) 111

Less income (loss) allocable to unvested restricted units — ( 21 ) ( 1 )

Limited partners’ interest in net income (loss) $ ( 207 ) $ ( 6,615 ) $ 4,430

The following is a reconciliation of net income (loss) allocated to the general partner and limited partners for purposes of calculating net income (loss) attributable to limited partners per unit:

Years Ended December 31,

2022 2021 2020

Discontinued operations:

Loss from discontinued operations $ — $ — $ ( 179,466 )

Less general partner’s interest in net income (loss):

Distributions payable on behalf of IDRs — — —

Net loss $ ( 10,334 ) $ ( 211 ) $ ( 6,771 )

Less general partner’s interest in net loss:

Distributions payable on behalf of general partner interest 16 16 61

General partner interest in undistributed loss ( 223 ) ( 20 ) ( 196 )

Less income allocable to unvested restricted units — — 42

Less loss allocable to unvested restricted units ( 40 ) — ( 21 )

Limited partners’ interest in net loss $ ( 10,087 ) $ ( 207 ) $ ( 6,615 )

The Partnership allocates the general partner's share of earnings between continuing and discontinued operations as a proportion of net income (loss) from continuing and discontinued operations to total net income (loss).

The following are the unit amounts used to compute the basic and diluted earnings per limited partner unit for the periods presented:

39 unchanged sentences

On July 21, 2021, 620,000 phantom units and 1,245,000 phantom unit appreciation rights were granted to employees of the general partner and its affiliates who perform services for the Partnership.

On April 20, 2022, the board of directors of

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

the general partner of the Partnership and the Compensation Committee approved the First Amendment to the Plan, effective as of the same date, which amendment increased the total number of phantom units available for grant under the Plan from 2,000,000 units to 5,000,000 units.

On April 20, 2022, 365,000 phantom units and 1,097,500 phantom unit appreciation rights were granted to employees of the general partner and its affiliates who perform services for the Partnership.

Phantom unit awards are recorded in operating expense and selling, general and administrative expense based on the fair value of the vested portion of the awards on the balance sheet date.

25 unchanged sentences

The restricted units issued to directors generally vest in equal annual installments over a four-year period.

On February 22, 2021, the Partnership issued 14,056 TBRUs to each of the Partnership's three independent directors under the 2017 LTIP.

In February 2022, the Partnership issued 11,400 TBRUs to each of the Partnership's three independent directors under the 2017 LTIP.

These restricted common units vest in equal installments of 2,850 units on January 24, 2023, 2024, 2025, and 2026.

In April 2022, the Partnership issued 4,600 TBRUs to each of the Partnership's three independent directors under the 2017 LTIP.

These restricted common units vest in equal installments of 1,150 units on January 24, 2023, 2024, 2025, and 2026.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

On March 1, 2018, the Partnership issued 301,550 TBRUs and 317,925 PBRUs to certain employees of Martin Resource Management Corporation.

2 unchanged sentences

In addition, the PBRUs awarded on March 1, 2018 would have only vested if the grantee was employed by Martin Resource Management Corporation on March 31, 2021.

However, the performance conditions related to the PBRUs awarded on March 1, 2018 were

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

not achieved and the Partnership treated these units as forfeited at expiration on March 31, 2021.

However, the performance conditions related to the PBRUs awarded on March 1, 2018 were not achieved and the Partnership treated these units as forfeited at expiration on March 31, 2021.

As such, the Partnership did not recognize compensation expense related to these units.

5 unchanged sentences

Vested ( 38,514 ) $ 4.76

Forfeited ( 83,436 ) $ 13.90

Non-Vested, end of year 124,362 $ 3.36

11 unchanged sentences

1,004 493 741

2,183 948 567

4,815 2,142 1,027

State 929 290 142

2 unchanged sentences

The operations of a partnership are generally not subject to income taxes, except for Texas margin tax, because its income is taxed directly to its partners.

The Texas margin tax is considered a state income tax and is included in income tax expense on the Consolidated Statements of Operations.

Since the tax base on the Texas margin tax is derived from an income-based measure, the margin tax is construed as income tax, and therefore, the recognition of deferred taxes applies to the margin tax.

The impact on deferred taxes as a result of this provision is immaterial.

State income taxes attributable to the Texas margin tax relating to the operation of the Partnership of $ 300 , $ 468 and $ 458 were recorded in income tax expense for the years ended December 31, 2021, 2020 and 2019, respectively.

The Texas margin tax is considered a state income tax and is included in income tax

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

MTI, a wholly owned subsidiary of the Partnership, is subject to income taxes due to its corporate structure (“Taxable Subsidiary”).

Prior to the acquisition of MTI on January 2, 2019, MTI was a QSub of Martin Resource Management Corporation, a qualifying S Corporation.

A QSub is not treated as a separate corporation for federal income tax purposes as it is deemed liquidated into its S Corporation parent.

S Corporations are generally not subject to income taxes because income and losses flow through to shareholders and are reported on their individual returns.

The principal component of the difference between the expected state tax expense and actual state tax expense relates to taxes incurred in states that do not recognize S corporation status.

Subsequent to the acquisition, the QSub election terminated resulting in MTI being taxed as a stand-alone C Corporation.

Total income tax expense relating to the operation of the Taxable Subsidiary of $ 3,080 and $ 1,268 was recorded in income tax expense for the years ended December 31, 2021 and 2020, respectively.

expense on the Consolidated Statements of Operations.

The impact on deferred taxes as a result of this provision is immaterial.

State income taxes attributable to the Texas margin tax relating to the operation of the Partnership of $ 496 , $ 300 and $ 468 were recorded in income tax expense for the years ended December 31, 2022, 2021 and 2020, respectively.

Total income tax expense relating to the operation of MTI, a wholly owned C-Corporation subsidiary of the Partnership (“Taxable Subsidiary”), of $ 7,431 , $ 3,080 and $ 1,268 was recorded in income tax expense for the years ended December 31, 2022, 2021 and 2020, respectively.

The income tax expense from the Taxable Subsidiary operations for the years ended December 31, 2022, 2021, and 2020 differs from the "expected" tax expense (computed by applying the federal corporate rate of 21% to income before income taxes of the Taxable Subsidiary) as follows:

2022 2021 2020

"Expected" tax expense $ 6,702 $ 2,223 $ 361

1 unchanged sentence

State income taxes, net of federal income tax expense 1,135 382 327

Other non-deductible items 384 472

Other non-deductible (non-taxable) items ( 86 ) 384 472

Other, net ( 320 ) 91 108

7 unchanged sentences

Employee benefits 6 57

Interest expense — —

Operating leases 14 —

Tax loss carryforwards 5,432 10,676

5 unchanged sentences

Property and equipment ( 2,956 ) ( 3,590 )

Operating leases — ( 4 )

Total deferred tax liabilities ( 2,956 ) ( 3,590 )

1 unchanged sentence

Deferred tax assets are regularly reviewed for recoverability and a valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The ultimate realization of deferred tax assets

The ultimate realization of deferred tax assets is dependent upon future taxable income during the periods in which those temporary differences become deductible.

In assessing the need for a valuation allowance, management considers all available positive and negative evidence, including the ability to carryback operating losses to prior periods and the expected future utilization of net operating loss carryforwards, the reversal of deferred tax liabilities, projected taxable income, and tax-planning strategies.

On the basis of these considerations, as of December 31, 2022, management believes it is more likely than not that the Taxable Subsidiary will realize the benefit of the existing deferred tax assets.

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

is dependent upon future taxable income during the periods in which those temporary differences become deductible.

On the basis of these considerations, as of December 31, 2021, management believes it is more likely than not that the Taxable Subsidiary will realize the benefit of the existing deferred tax assets.

Federal income taxes refundable related to the operation of the Taxable Subsidiary of $ 70 and $ 0 for the years ended December 31, 2021 and 2020, respectively, are included in “Other current assets”."Income taxes payable" includes a state income tax liability related to the operation of the Partnership of $ 304 and $ 455 for the years ended December 31, 2021 and 2020, respectively.

Federal income taxes refundable related to the operation of the Taxable Subsidiary of $ 374 and $ 70 for the years ended December 31, 2022 and 2021, respectively, are included in “Other current assets”.

"Income taxes payable" includes a state income tax liability related to the operation of the Partnership of $ 451 and $ 304 for the years ended December 31, 2022 and 2021, respectively.

Also included in "Income taxes payable" are state income tax liabilities related to the operation of the Taxable Subsidiary of $ 214 and $ 81 for the years ended December 31, 2022 and 2021, respectively.

49 unchanged sentences

$ 598,851 $ 579,861

COMMITMENTS AND CONTINGENCIES

MARTIN MIDSTREAM PARTNERS L.P.

1 unchanged sentence

(Dollars in thousands, except where otherwise indicated)

COMMITMENTS AND CONTINGENCIES

Contingencies

4 unchanged sentences

Accordingly, on January 7, 2016, the Partnership filed a Complaint for Declaratory Judgment in the Chancery Court of Davidson County, Tennessee (the “Tennessee Court”), under Case No.

16-0018-BC, requesting a judicial determination that the Partnership did not owe the customer the demanded defense and indemnity obligations (the “Declaratory Judgment Action”).

16-0018-BC, requesting a judicial determination that the Partnership did not owe the customer the demanded defense and indemnity obligations (the “Litigation”).

The Marketing Lawsuits pending in federal court against the customer were transferred to the U.S.

1 unchanged sentence

2709 for pretrial proceedings (the “Consolidated Lawsuits”).

On March 1, 2017, at the joint request of the customer and the Partnership, the Tennessee Court administratively closed the Declaratory Judgment Action.

On March 1, 2017, at the joint request of the customer and the Partnership, the Tennessee Court administratively closed the Litigation.

Recently, the customer settled the Consolidated Lawsuits.

On December 17, 2021, at the request of the customer, the Tennessee Court reopened the Declaratory Judgment Action and the customer asserted various counterclaims against the Partnership seeking, among other things, to recover its costs of defending and settling the Consolidated Lawsuits.

On December 17, 2021, at the request of the customer, the Tennessee Court reopened the Litigation and the customer asserted various counterclaims against the Partnership seeking, among other things, to recover its costs of defending and settling the Consolidated Lawsuits.

At this time, we are unable to determine what ultimate exposure we may have in this matter, if any.

The Partnership intends to vigorously defend the counterclaims asserted by the customer in the Declaratory Judgment Action.

The Partnership intends to vigorously defend the counterclaims asserted by the customer in the Litigation.

The trial for the Litigation is expected to be held in 2024.

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Partnership's operations are conducted by its operating subsidiaries as it has no independent assets or operations.

Martin Operating Partnership L.P.

The Operating Partnership, the Partnership’s wholly-owned subsidiary, and the Partnership's other operating subsidiaries have issued in the past, and may issue in the future, unconditional guarantees of senior or subordinated debt securities of the Partnership.

3 unchanged sentences

SUBSEQUENT EVENTS

Issuance of 2028 Notes to Refinance Existing Secured Notes .

On February 8, 2023, the Partnership completed the sale of $ 400,000 in aggregate principal amount of its 2028 Notes.

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

Simultaneously with the issuance of the 2028 Notes, the Partnership amended its credit facility to, among other things, reduce the commitments thereunder from $ 275,000 to $ 200,000 (with further scheduled reductions to $ 175,000 million on June 30, 2023 and $ 150,000 on June 30, 2024) and extend the scheduled maturity date of the credit facility to February 8, 2027.

Quarterly Distribution.

2 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 8. Financial Statements and Supplementary Data