What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-07-25 compared with 2023-04-25 · 255 added, 95 removed, 397 unchanged (47% of the section changed)

6 unchanged sentences

• Sulfur and sulfur-based products processing, manufacturing, marketing, and distribution;

• Specialty products, including natural gas liquids, marketing, distribution, and transportation services.

• Marketing, distribution, and transportation services for natural gas liquids and blending and packaging services for specialty lubricants and grease.

The petroleum products and by-products we collect, transport, store and market are produced primarily by major and independent oil and gas companies who often turn to third parties, such as us, for the transportation and disposition of these products.

5 unchanged sentences

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

As of March 31, 2023, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units.

As of June 30, 2023, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units.

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

13 unchanged sentences

Significant Recent Developments

Exit from Butane Optimization Business.

In the second quarter of 2023, we completed the previously announced exit of our butane optimization business at the conclusion of the butane selling season.

Going forward, with respect to butane, we will operate as a fee-based butane logistics business, primarily utilizing our north Louisiana underground storage assets, which have both truck and rail capability.

This logistics business will also utilize our truck transportation assets for fee-based product movements.

As a result of this new business model, we will no longer carry butane inventory going forward, enabling us to reduce commodity risk exposure, cash flow and earnings volatility, and working capital requirements.

The following revenues and costs, which are included in the historical financial results for the twelve months ended June 30, 2023, will not be incurred under the new fee-based butane logistics business model.

Three Months Ended September 30, Three Months Ended December 31, Three Months Ended March 31, Three Months Ended June 30, Twelve Months Ended June 30,

Products revenue $ 28,398 $ 55,912 $ 56,890 $ 13,650 $ 154,850

Cost of products sold 47,926 60,338 56,208 16,074 180,546

Selling, general and administrative expenses 504 309 372 140 1,325

$ (20,032) $ (4,735) $ 310 $ (2,564) $ (27,021)

Issuance of 2028 Notes to Refinance Existing Secured Notes .

2 unchanged sentences

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.

8 unchanged sentences

Quarterly Distribution.

On April 19, 2023, we declared a quarterly cash distribution of $0.005 per common unit for the first quarter of 2023, or $0.020 per common unit on an annualized basis, which will be paid on May 15, 2023 to unitholders of record as of May 8, 2023.

On July 19, 2023, we declared a quarterly cash distribution of $0.005 per common unit for the second quarter of 2023, or $0.020 per common unit on an annualized basis, which will be paid on August 14, 2023 to unitholders of record as of August 7, 2023.

Critical Accounting Policies and Estimates

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The Omnibus Agreement requires us to reimburse Martin Resource Management Corporation for all direct expenses it incurs or payments it makes on our behalf or in connection with the operation of our business.

We reimbursed Martin Resource Management Corporation for $40.9 million of direct costs and expenses for the three months ended March 31, 2023 compared to $39.1 million for the three months ended March 31, 2022.

We reimbursed Martin Resource Management Corporation for $36.5 million of direct costs and expenses for the three months ended June 30, 2023 compared to $40.2 million for the three months ended June 30, 2022.

We reimbursed Martin Resource Management Corporation for $77.4 million of direct costs and expenses for the six months ended June 30, 2023 compared to $79.3 million for the six months ended June 30, 2022.

There is no monetary limitation on the amount we are required to reimburse Martin Resource Management Corporation for direct expenses.

In addition to the direct expenses, under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporat ion for indirect general and administrative and corporate overhead expenses.

In each of the three months ended March 31, 2023 and 2022, the Conflicts Committee approved reimbursement amounts of $3.5 million and $3.4 million, respectively.

In each of the three months ended June 30, 2023 and 2022, the Conflicts Committee approved reimbursement amounts of $3.5 million and $3.4 million, respectively.

In each of the six months ended June 30, 2023 and 2022, the Conflicts Committee approved reimbursement amounts of $7.0 million and $6.7 million, respectively.

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

7 unchanged sentences

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

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 20% and 17% of our total costs and expenses during the three months ended March 31, 2023 and 2022, respectively.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 22% and 18% of our total costs and expenses during the three months ended June 30, 2023 and 2022, respectively.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 21% and 17% of our total costs and expenses during the six months ended June 30, 2023 and 2022, respectively.

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

Our sales to Martin Resource Management Corporation accounted for approximately 10% and 8% of our total revenues for the three months ended March 31, 2023 and 2022, respectively.

Our sales to Martin Resource Management Corporation accounted for approximately 17% and 9% of our total revenues for the three months ended June 30, 2023 and 2022, respectively.

Our sales to Martin Resource Management Corporation accounted for approximately 13% and 9% of our total revenues for the six months ended June 30, 2023 and 2022, respectively.

For a more comprehensive discussion concerning the agreements that we have entered into with Martin Resource Management Corporation, please refer to "Item 13.

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If the board of directors of our general partner is involved in the approval process, it determines whether to refer the matter to the Conflicts Committee of our general partner's board of directors, as constituted under our limited partnership agreement.

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

If a matter is referred to the Conflicts Committee, the Conflicts Committee obtains information regarding the proposed transaction from management and determines

whether to engage independent legal counsel or an independent financial advisor to advise the members of the committee regarding the transaction.

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

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

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three months ended March 31, 2023 and 2022, which represents EBITDA, Adjusted EBITDA, Adjusted EBITDA after giving effect to the exit of the butane optimization business, distributable cash flow, and adjusted free cash flow:

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three and six months ended June 30, 2023 and 2022, which represents EBITDA, adjusted EBITDA, adjusted EBITDA after giving effect to the exit of the butane optimization business, distributable cash flow, and adjusted free cash flow:

Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA, and Adjusted EBITDA After Giving Effect to the Exit of the Butane Optimization Business

Three Months Ended March 31,

(in thousands)

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

(in thousands) (in thousands)

Net income (loss) $ 1,081 $ 6,606 $ (4,005) $ 18,084

3 unchanged sentences

EBITDA 29,887 36,289 55,194 76,223

(Gain) loss on disposition of property, plant and equipment 388 (14)

Gain on disposition of property, plant and equipment (673) (246) (285) (260)

Loss on extinguishment of debt — — 5,121 —

Lower of cost or market and other non-cash adjustments (9,133) —

Lower of cost or net realizable value and other non-cash adjustments (3,717) 2,242 (12,850) 2,242

Unit-based compensation 38 45 90 79

Adjusted EBITDA $ 25,535 $ 38,330 $ 47,270 $ 78,284

net income associated with butane optimization business (305) (5,694)

lower of cost or market and other non-cash adjustments $ 9,133 $ —

net (income) loss associated with butane optimization business 2,564 942 2,255 (4,752)

lower of cost or net realizable value and other non-cash adjustments 3,717 $ (369) 12,850 (369)

Adjusted EBITDA after giving effect to the exit of the butane optimization business

1 unchanged sentence

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA, Adjusted EBITDA After Giving Effect to the Exit of the Butane Optimization Business, Distributable Cash Flow, and Adjusted Free Cash Flow

Three Months Ended March 31,

(in thousands)

Net cash provided by operating activities $ 49,264 $ 28,375

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

(in thousands) (in thousands)

Net cash provided by (used in) operating activities $ 49,510 $ (2,494) $ 98,774 $ 28,451

Interest expense 1

1 unchanged sentence

Current income tax expense 306 654 964 1,274

Lower of cost or market and other non-cash adjustments (9,133) —

Lower of cost or net realizable value and other non-cash adjustments (3,717) 2,242 (12,850) 2,242

Commodity cash flow hedging gains reclassified to earnings — (82) — 734

6 unchanged sentences

net (income) loss associated with butane optimization business 2,564 942 2,255 (4,752)

lower of cost or market and other non-cash adjustments 9,133 —

lower of cost or net realizable value and other non-cash adjustments 3,717 (369) 12,850 (369)

Adjusted EBITDA after giving effect to the exit of the butane optimization business

13 unchanged sentences

Results of Operations

The results of operations for the three months ended March 31, 2023 and 2022 have been derived from our consolidated and condensed financial statements.

The results of operations for the three and six months ended June 30, 2023 and 2022 have been derived from our consolidated and condensed financial statements.

We evaluate segment performance on the basis of operating income, which is derived by subtracting cost of products sold, operating expenses, selling, general and administrative expenses, and depreciation and amortization expense from revenues.

The following table sets forth our operating revenues and operating income by segment for the three months ended March 31, 2023 and 2022.

The following table sets forth our operating revenues and operating income by segment for the three and six months ended June 30, 2023 and 2022.

The results of operations for these interim periods are not necessarily indicative of the results of operations which might be expected for the entire year.

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

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

1 unchanged sentence

Income (Loss)

Three Months Ended March 31, 2023 (in thousands)

Three Months Ended June 30, 2023 (in thousands)

Terminalling and storage $ 23,906 $ (2,222) $ 21,684 $ 4,446 $ (2,210) $ 2,236

8 unchanged sentences

Income (Loss)

Three Months Ended March 31, 2022 (in thousands)

Three Months Ended June 30, 2022 (in thousands)

Terminalling and storage $ 23,622 $ (3,199) $ 20,423 $ (99) $ (3,177) $ (3,276)

5 unchanged sentences

Total $ 275,295 $ (8,299) $ 266,996 $ 21,490 $ — $ 21,490

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

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

Income (Loss)

Six Months Ended June 30, 2023 (in thousands)

Terminalling and storage $ 47,825 $ (5,283) $ 42,542 $ 7,554 $ (5,254) $ 2,300

Transportation 120,334 (9,861) 110,473 18,458 (9,934) 8,524

Sulfur services 76,009 — 76,009 9,839 6,058 15,897

Specialty products 211,175 (34) 211,141 7,075 9,130 16,205

Indirect selling, general and administrative

— — — (8,092) — (8,092)

Total $ 455,343 $ (15,178) $ 440,165 $ 34,834 $ — $ 34,834

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

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

Income (Loss)

Six Months Ended June 30, 2022 (in thousands)

Terminalling and storage $ 45,993 $ (6,173) $ 39,820 $ (211) $ (6,122) $ (6,333)

Transportation 112,799 (10,257) 102,542 18,231 (10,288) 7,943

Sulfur services 116,076 — 116,076 21,786 5,051 26,837

Specialty products 287,827 (68) 287,759 15,645 11,359 27,004

Indirect selling, general and administrative

— — — (8,512) — (8,512)

Total $ 562,695 $ (16,498) $ 546,197 $ 46,939 $ — $ 46,939

Terminalling and Storage Segment

Comparative Results of Operations for the Three Months Ended March 31, 2023 and 2022

Three Months Ended March 31, Variance Percent Change

Comparative Results of Operations for the Three Months Ended June 30, 2023 and 2022

Three Months Ended June 30, Variance Percent Change

(In thousands, except BBL per day)

5 unchanged sentences

4,421 (107) 4,528 4,232 %

Other operating loss, net (349) (43) (306) (712) %

Other operating income, net 25 8 17 213 %

Operating income (loss) $ 4,446 $ (99) $ 4,545 4,591 %

1 unchanged sentence

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

Revenues increased $1.5 million, of which $0.5 million was a result of reservation and throughput fees at our Smackover refinery.

In addition, revenue at our shore-based terminals increased $0.5 million as a result of increased throughput revenue of $0.9 million, offset by decreased space rent of $0.4 million.

Specialty terminals increased $0.4 million due to throughput revenue of $0.3 million and service revenue of $0.1 million.

Revenues increased $0.3 million, of which $0.9 million was primarily a result of increased fuel throughput at our shore-based terminals.

In addition, revenue at our specialty terminals increased $0.4 million primarily as a result of higher throughput revenue as a result of contractually prescribed, index-based fee adjustments.

Revenue at our Smackover refinery decreased $1.1 million as a result of decreased pipeline revenue of $1.5 million and natural gas surcharge revenue of $0.2 million, offset by increases in throughput revenue of $0.3 million and reservation fees of $0.3 million.

Operating expenses.

Operating expenses decreased primarily as a result of lease expense of $1.5 million and natural gas utilities of $0.6 million at our Smackover refinery.

Selling, general and administrative expenses.

Selling, general and administrative expenses decreased primarily due to employee-related expenses.

Depreciation and amortization.

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

Other operating income, net.

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

Comparative Results of Operations for the Six Months Ended June 30, 2023 and 2022

Six Months Ended June 30, Variance Percent Change

(In thousands, except BBL per day)

Revenues $ 47,825 $ 45,993 $ 1,832 4 %

Cost of products sold 31 9 22 244 %

Costs of products sold remained relatively consistent period over period.

Operating expenses 28,240 30,954 (2,714) (9) %

Operating expenses decreased primarily as a result of property insurance premiums of $0.9 million, offset by an increase in employee-related expenses of $0.3 million.

Selling, general and administrative expenses 882 1,034 (152) (15) %

Selling, general and administrative expenses remained relatively consistent period over period.

Depreciation and amortization 10,794 14,172 (3,378) (24) %

7,878 (176) 8,054 4,576 %

Other operating loss, net (324) (35) (289) (826) %

Operating income (loss) $ 7,554 $ (211) $ 7,765 3,680 %

Shore-based throughput volumes (gallons) 85,783 27,543 58,240 211 %

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

Revenues increased $1.8 million, of which $1.8 million was primarily a result of increased fuel throughput, offset by a $0.4 million decrease in space rent at our shore-based terminals.

In addition, revenue at our specialty terminals increased $0.8 million primarily as a result of higher throughput revenue resulting from contractually prescribed, index-based fee adjustments.

Revenue at our Smackover refinery decreased $0.6 million as a result of decreased pipeline revenue of $2.8 million, offset by increases in natural gas surcharge revenue of $1.0 million, throughput revenue of $0.6 million, and reservation fees of $0.6 million.

Operating expenses.

Operating expenses decreased primarily as a result of lease expense at our Smackover refinery.

Selling, general and administrative expenses.

Selling, general and administrative expenses decreased primarily due to employee-related expenses.

Depreciation and amortization.

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

Other operating income (loss), net.

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

Other operating loss, net.

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

Transportation Segment

Comparative Results of Operations for the Three Months Ended March 31, 2023 and 2022

Three Months Ended March 31, Variance Percent Change

Comparative Results of Operations for the Three Months Ended June 30, 2023 and 2022

Three Months Ended June 30, Variance Percent Change

(In thousands)

8 unchanged sentences

Inland revenues increased $2.0 million, primarily related to higher transportation rates.

Offshore revenues decreased $0.1 million primarily due to lower utilization related to repairs and maintenance.

Additionally, ancillary revenue decreased $0.4 million.

Revenue was also impacted by a decrease in pass-through revenue (primarily fuel) of $1.0 million.

Land Transportation Revenues.

Revenue increased $6.3 million primarily due to a 35% increase in load count combined with a 10% increase in total miles .

Additionally, ancillary revenue increased $1.5 million.

Revenue increased $1.0 million, primarily due to a 30% increase in load count, offset by a decrease in ancillary revenue of $4.5 million.

Operating expenses .

The increase in operating expenses is primarily a result of employee-related expenses of $4.5 million, repairs and maintenance of $1.4 million, and lease expense of $0.9 million.

The decrease in operating expenses is primarily a result of pass-through expenses (primarily fuel) of $3.3 million.

Offsetting this decrease is higher lease expense of $1.1 million, employee-related expenses of $1.0 million, repairs and maintenance of $0.8 million, and insurance premiums of $0.5 million.

Selling, general and administrative expenses .

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

Depreciation and amortization.

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

Other operating income, net.

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

Comparative Results of Operations for the Six Months Ended June 30, 2023 and 2022

Six Months Ended June 30, Variance Percent Change

(In thousands)

Revenues $ 120,334 $ 112,799 $ 7,535 7 %

Operating expenses 90,475 83,730 6,745 8 %

Selling, general and administrative expenses 4,530 3,958 572 14 %

Depreciation and amortization 7,522 7,163 359 5 %

$ 17,807 $ 17,948 $ (141) (1) %

Other operating income, net 651 283 368 130 %

Operating income $ 18,458 $ 18,231 $ 227 1 %

Marine Transportation Revenues.

Inland revenues increased $4.8 million, primarily related to higher utilization and transportation rates.

Revenue was also impacted by a decrease in pass-through revenue (primarily fuel) of $1.4 million.

Land Transportation Revenues.

Revenue increased $7.3 million primarily due to a 32% increase in load count combined with a 5% increase in total miles, offset by a decrease in ancillary revenue of $3.1 million.

Operating expenses.

The increase in operating expenses is primarily a result of employee-related expenses of $5.5 million, repairs and maintenance of $2.2 million, lease expense of $2.0 million and insurance premiums of $0.7 million, offset by pass-through expenses (primarily fuel) of $3.5 million.

Selling, general and administrative expenses.

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

4 unchanged sentences

Sulfur Services Segment

Comparative Results of Operations for the Three Months Ended March 31, 2023 and 2022

Three Months Ended March 31, Variance Percent Change

Comparative Results of Operations for the Three Months Ended June 30, 2023 and 2022

Three Months Ended June 30, Variance Percent Change

(In thousands)

15 unchanged sentences

Products revenues.

Products revenues decreased $19.9 million as a result of a 37% drop in average sulfur services sales prices, offset by an increase of $3.0 million due to a 9% increase in sales volumes, primarily related to an 18% increase in fertilizer volumes.

Cost of products sold.

A 34% decrease in product cost impacted cost of products sold by $13.3 million, resulting from a drop in commodity prices.

A 9% increase in sales volumes resulted in an offsetting increase in cost of products sold of $2.3 million.

Margin per ton decreased $36.54, or 45%.

Operating expenses.

Operating expenses decreased due to decreases in outside towing of $0.4 million and marine fuel and lube expense of $0.4 million.

There were no other individually significant fluctuations between periods.

Selling, general and administrative expenses.

Selling, general and administrative expenses decreased primarily due to lower employee-related expenses.

Depreciation and amortization.

Depreciation and amortization decreased largely due to the sale of the Stockton assets in the fourth quarter of 2022.

Other operating income, net.

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

Comparative Results of Operations for the Six Months Ended June 30, 2023 and 2022

Six Months Ended June 30, Variance Percent Change

(In thousands)

Services $ 6,715 $ 6,168 $ 547 9 %

Products 69,294 109,908 (40,614) (37) %

Total revenues 76,009 116,076 (40,067) (35) %

Cost of products sold 52,090 78,439 (26,349) (34) %

Operating expenses 6,085 7,255 (1,170) (16) %

Selling, general and administrative expenses 2,579 3,041 (462) (15) %

Depreciation and amortization 5,433 5,591 (158) (3) %

9,822 21,750 (11,928) (55) %

Other operating income, net 17 36 (19) (53) %

Operating income $ 9,839 $ 21,786 $ (11,947) (55) %

Sulfur (long tons) 197 232 (35) (15) %

Fertilizer (long tons) 134 146 (12) (8) %

Total sulfur services volumes (long tons) 331 378 (47) (12) %

Services revenues.

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

Products revenues.

Products revenues decreased $30.8 million as a result of a 28% drop in average sulfur services sales prices.

1 unchanged sentence

Cost of products sold.

An 11% decrease in product cost impacted cost of products sold by $4.1 million, resulting from a drop in commodity prices.

A 24% decrease in product cost impacted cost of products sold by $18.9 million, resulting from a drop in commodity prices.

A 12% decrease in sales volumes resulted in an additional decrease in cost of products sold of $7.4 million.

Margin per ton decreased $31.28, or 38%.

Operating expenses.

Operating expenses remained relatively consistent period over period.

Operating expenses decreased due to decreases in outside towing of $0.6 million and marine fuel and lube expense of $0.6 million.

There were no other individually significant fluctuations between periods.

Selling, general and administrative expenses.

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

Selling, general and administrative expenses decreased primarily due to lower employee-related expenses.

Depreciation and amortization.

Depreciation and amortization remained relatively consistent period over period.

Other operating income (loss), net.

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

Depreciation and amortization decreased largely due to the sale of the Stockton assets in the fourth quarter of 2022.

Other operating income, net.

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

Specialty Products Segment

Comparative Results of Operations for the Three Months Ended March 31, 2023 and 2022

Three Months Ended March 31, Variance Percent Change

Comparative Results of Operations for the Three Months Ended June 30, 2023 and 2022

Three Months Ended June 30, Variance Percent Change

(In thousands)

11 unchanged sentences

Products Revenues.

Our average sales price per barrel decreased $20.50, or 19%, decreasing revenues by $25.8 million.

The decrease in average sales price per barrel was due to a drop in commodity prices.

Sales volumes decreased 27%, lowering revenues by $29.2 million.

Cost of products sold .

Our average cost per barrel decreased $18.77, or 1%, decreasing cost of products sold by $23.6 million.

The decrease in average cost per barrel was due to a drop in commodity prices.

The decrease in sales volume of 27% resulted in a $27.4 million reduction to cost of products sold.

Our margins declined $1.74 per barrel, or 26%, during the period.

Selling, general and administrative expenses .

Selling, general and administrative expenses decreased primarily due to lower employee-related expenses.

Depreciation and amortization.

Depreciation and amortization decreased due to certain assets becoming fully depreciated during the fourth quarter 2022.

Other operating loss, net.

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

Comparative Results of Operations for the Six Months Ended June 30, 2023 and 2022

Six Months Ended June 30, Variance Percent Change

(In thousands)

Products revenues $ 211,175 $ 287,827 $ (76,652) (27) %

Cost of products sold 198,721 265,076 (66,355) (25) %

Operating expenses 32 72 (40) (56) %

Selling, general and administrative expenses 3,589 4,650 (1,061) (23) %

Depreciation and amortization 1,699 2,360 (661) (28) %

7,134 15,669 (8,535) (54) %

Other operating loss, net (59) (24) (35) (146) %

Operating income $ 7,075 $ 15,645 $ (8,570) (55) %

NGL sales volumes (Bbls) 2,518 2,750 (232) (8) %

Other specialty products volumes (Bbls) 174 201 (27) (13) %

Total specialty products volumes (Bbls) 2,692 2,951 (259) (9) %

Products Revenues.

Products revenues decreased $56.3 million as a result of an 20% drop in average specialty products sales prices.

Products revenues increased $6.0 million due to a 5% increase in sales volumes, primarily related to a 6% increase in NGL volumes.

Products revenues decreased $20.3 million due to a 9% reduction in sales volumes, primarily related to a 13% decrease in other specialty products volumes.

Cost of products sold .

A 15% decrease in product cost impacted cost of products sold by $20.9 million, resulting from a drop in commodity prices.

A 5% increase in sales volumes resulted in an offsetting increase in cost of products sold of $5.6 million.

An 18% decrease in product cost impacted cost of products sold by $47.2 million, resulting from a drop in commodity prices.

A 9% reduction in sales volumes resulted in an additional decrease in cost of products sold of $19.1 million.

Selling, general and administrative expenses .

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

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

Depreciation and amortization.

1 unchanged sentence

Other operating loss, net.

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

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

Interest Expense

Comparative Components of Interest Expense, Net for the Three Months Ended March 31, 2023 and 2022

Three Months Ended March 31, Variance Percent Change

Comparative Components of Interest Expense, Net for the Three Months Ended June 30, 2023 and 2022

Three Months Ended June 30, Variance Percent Change

(In thousands)

7 unchanged sentences

Total interest expense, net $ 15,263 $ 12,846 $ 2,417 19 %

Indirect Selling, General and Administrative Expenses

Three Months Ended March 31, Variance Percent Change

Comparative Components of Interest Expense, Net for the Six Months Ended June 30, 2023 and 2022

Six Months Ended June 30, Variance Percent Change

(In thousands)

Credit facility $ 4,725 $ 3,586 $ 1,139 32 %

Senior notes 21,840 19,137 2,703 14 %

Amortization of deferred debt issuance costs 2,435 1,568 867 55 %

Amortization of debt discount 1,000 — 1,000

Other 931 979 (48) (5) %

Finance leases — 5 (5) (100) %

Capitalized interest (11) — (11)

Total interest expense, net $ 30,920 $ 25,275 $ 5,645 22 %

Indirect Selling, General and Administrative Expenses

Indirect selling, general and administrative expenses remained relatively consistent for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

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

2023 2022 2023 2022

(In thousands) (In thousands)

Indirect selling, general and administrative expenses $ 3,894 $ 4,390 $ (496) (11) % $ 8,092 $ 8,512 $ (420) (5) %

Indirect selling, general and administrative expenses decreased for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 as a result of decreased employee-related expenses.

Indirect selling, general and administrative expenses decreased for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 as a result of decreased employee-related expenses of $0.7 million, offset by an increase in overhead expenses allocated from Martin Resource Management Corporation of $0.2 million and increased professional fees of $0.1 million.

Martin Resource Management Corporation allocates to us a portion of its indirect selling, general and administrative expenses for services such as accounting, legal, treasury, clerical, billing, information technology, administration of insurance, engineering, general office expense and employee benefit plans and other general corporate overhead functions we share with Martin Resource Management Corporation retained businesses.

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GAAP also permits other methods for allocation of these expenses, such as basing the allocation on the percentage of revenues contributed by a segment.

The allocation of these expenses between Martin Resource Management Corporation and us is subject to a number of judgments and estimates, regardless of the method used.

The allocation of these expenses between Martin Resource Management Corporation and us is subject to a number of judgments and estimates,

regardless of the method used.

We can provide no assurances that our method of allocation, in the past or in the future, is or will be the most accurate or appropriate method of allocation for these expenses.

Other methods could result in a higher allocation of selling, general and administrative expense to us, which would reduce our net income.

Other methods could result in a higher allocation of selling, general and administrative expenses to us, which would reduce our net income.

Under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses.

The Conflicts Committee of our general partner approved the following reimbursement amounts during the three months ended March 31, 2023 and 2022:

Three Months Ended March 31, Variance Percent Change

(In thousands)

The Conflicts Committee of our general partner approved the following reimbursement amounts during the three and six months ended June 30, 2023 and 2022:

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

2023 2022 2023 2022

(In thousands) (In thousands)

Conflicts Committee approved reimbursement amount

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

Cash Flows - Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The following table details the cash flow changes between the three months ended March 31, 2023 and 2022:

Three Months Ended March 31, Variance Percent Change

Cash Flows - Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The following table details the cash flow changes between the six months ended June 30, 2023 and 2022:

Six Months Ended June 30, Variance Percent Change

(In thousands)

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Net cash provided by operating activities.

The increase in net cash used in operating activities for the three months ended March 31, 2023 includes a decrease in operating results and other non-cash charges of $9.6 million offset by a favorable variance in working capital of $30.5 million.

The increase in net cash provided by operating activities for the six months ended June 30, 2023 includes a decrease in operating results and other non-cash charges of $18.7 million offset by a favorable variance in working capital of $89.1 million.

The favorable variance in working capital of $89.1 million includes $75.1 million related to the liquidation of working capital associated with our butane optimization business which will be non-recurring in future reporting periods.

Net cash used in investing activities.

Net cash used in investing activities for the three months ended March 31, 2023 decreased $7.1 million.

Net cash used in investing activities for the six months ended June 30, 2023 decreased $2.1 million.

A decrease in cash used of $1.5 million resulted from lower payments for capital expenditures and plant turnaround costs in 2023.

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Net cash used in financing activities.

Net cash used in financing activities for the three months ended March 31, 2023 increased primarily as a result of a $14.7 million increase in net payments of long-term borrowings.

Net cash used in financing activities for the six months ended June 30, 2023 increased primarily as a result of a $59.5 million increase in net payments of long-term borrowings.

Additionally, payments of debt issuance costs increased $14.6 million.

Total Contractual Obligations

A summary of our total contractual cash obligations as of March 31, 2023, is as follows:

A summary of our total contractual cash obligations as of June 30, 2023, is as follows:

Payments due by period

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Operating leases 59,906 15,438 24,403 13,753 6,312

Finance lease obligations 3 3 — — —

Interest payable on finance lease obligations — — — — —

Interest payable on fixed long-term debt obligations 211,926 46,000 92,000 73,926 —

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Letters of Credit .

At March 31, 2023, we had outstanding irrevocable letters of credit in the amount of $19.2 million, which were issued under our credit facility.

At June 30, 2023, we had outstanding irrevocable letters of credit in the amount of $11.5 million, which were issued under our credit facility.

Off-Balance Sheet Arrangements.

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Credit Facility

At March 31, 2023, we maintained a $200.0 million credit facility that matures on February 8, 2027.

As of March 31, 2023, we had $100.0 million outstanding under the credit facility and $19.2 million of outstanding irrevocable letters of credit, leaving a maximum available amount to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $80.8 million.

After giving effect to our then current borrowings, letters of credit, and the financial covenants contained in our credit facility, we had the ability to borrow approximately $39.6 million in additional amounts thereunder as of March 31, 2023.

At June 30, 2023, we maintained a $175.0 million credit facility that matures on February 8, 2027.

As of June 30, 2023, we had $60.5 million outstanding under the credit facility and $11.5 million of outstanding irrevocable letters of credit, leaving a maximum available amount to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $103.1 million.

After giving effect to our then current borrowings, letters of credit, and the financial covenants contained in our credit facility, we had the ability to borrow approximately $56.3 million in additional amounts thereunder as of June 30, 2023.

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.

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

Prior to the credit facility amendment, the level of outstanding draws on our credit facility from January 1, 2023 through February 8, 2023 ranged from a l ow of $148.5 m illion to a high of $184.0 million.

From February 8, 2023 through March 31, 2023, the level of outstanding draws on our amended credit facility ranged from a lo w of $100.0 million to a high of $138 .0 million.

From February 8, 2023 through June 30, 2023, the level of outstanding draws on our amended credit facility ranged from a low of $60.5 million to a high of $138.0 million.

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

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

The applicable margin for Adjusted Term SOFR borrowings at March 31, 2023 is 3.50%.

The applicable margin for Adjusted Term SOFR borrowings effective April 19, 2023 is 3.50%.

The applicable margin for Adjusted Term SOFR borrowings at June 30, 2023 is 3.50%.

The applicable margin for Adjusted Term SOFR borrowings effective July 19, 2023 is 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:

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

Senior Secured Notes due 2028

For a description of our 11.50% senior secured second lien notes due 2028, see "Item 7.

For a description of our 2028 Notes, see "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 2, 2023.

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

On March 31, 2023, we had cash and cash equivalents of $0.05 million and available borrowing capacity of $80.8 million under our credit facility with $100.0 million of borrowings outstanding.

On June 30, 2023, we had cash and cash equivalents of $0.05 million and available borrowing capacity of $103.1 million under our credit facility with $60.5 million of borrowings outstanding.

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 $56.3 million in additional amounts thereunder as of June 30, 2023.

As discussed above, 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.

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In addition, due to the covenants in our credit facility, our financial and operating performance impacts the amount we are permitted to borrow under that facility.

We are in compliance with all debt covenants as of March 31, 2023 and expect to be in compliance for the next twelve months.

We are in compliance with all debt covenants as of June 30, 2023 and expect to be in compliance for the next twelve months.

Interest Rate Risk

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A substantial portion of our revenues is dependent on sales prices of products, particularly NGLs and fertilizers, which fluctuate in part based on winter and spring weather conditions.

The demand for NGLs is strongest during the winter heating season and refinery blending season.

The demand for NGLs is strongest during the winter heating season.

The demand for fertilizers is strongest during the early spring planting season.

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Impact of Inflation

Inflation did not have a material impact on our results of operations for the three months ended March 31, 2023 or 2022.

Inflation did not have a material impact on our results of operations for the six months ended June 30, 2023 or 2022.

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

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

We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the three months ended March 31, 2023 or 2022.

We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the six months ended June 30, 2023 or 2022.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis