What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-10-24 compared with 2023-07-25 · 138 added, 132 removed, 520 unchanged (34% of the section changed)

14 unchanged sentences

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

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

As of September 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.

18 unchanged sentences

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,

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

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

Products revenue $ 55,912 $ 56,890 $ 13,649 $ — $ 126,451

14 unchanged sentences

The Partnership expects to fund approximately $22.5 million in aggregate capital expenditures in connection with this joint venture and the Partnership’s related services in 2023 and 2024.

For the nine months ended September 30, 2023, we have funded approximately $4.6 million toward Elsa related project costs.

Subsequent Events

Quarterly Distribution.

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.

On October 18, 2023, we declared a quarterly cash distribution of $0.005 per common unit for the third quarter of 2023, or $0.020 per common unit on an annualized basis, which will be paid on November 14, 2023 to unitholders of record as of November 7, 2023.

Critical Accounting Policies and Estimates

15 unchanged sentences

• operating an environmental consulting company;

• operating a butane optimization business;

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

10 unchanged sentences

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 $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.

We reimbursed Martin Resource Management Corporation for $43.2 million of direct costs and expenses for the three months ended September 30, 2023 compared to $40.8 million for the three months ended September 30, 2022.

We reimbursed Martin Resource Management Corporation for $122.7 million of direct costs and expenses for the nine months ended September 30, 2023 compared to $120.1 million for the nine months ended September 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 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.

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

In each of the nine months ended September 30, 2023 and 2022, the Conflicts Committee approved reimbursement amounts of $10.5 million and $10.1 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 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.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 29% and 18% of our total costs and expenses during the three months ended September 30, 2023 and 2022, respectively.

In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 23% and 18% of our total costs and expenses during the nine months ended September 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 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.

Our sales to Martin Resource Management Corporation accounted for approximately 15% and 10% of our total revenues for the three months ended September 30, 2023 and 2022, respectively.

Our sales to Martin Resource Management Corporation accounted for approximately 13% and 9% of our total revenues for the nine months ended September 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.

3 unchanged sentences

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.

35 unchanged sentences

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 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 June 30, Six Months Ended June 30,

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three and nine months ended September 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 Loss to EBITDA, Adjusted EBITDA, and Adjusted EBITDA After Giving Effect to the Exit of the Butane Optimization Business

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

(in thousands) (in thousands)

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

Net loss $ (1,061) $ (28,043) $ (5,066) $ (9,959)

Interest expense 14,994 13,906 45,914 39,181

2 unchanged sentences

EBITDA 26,944 1,475 82,138 77,698

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

Gain on disposition or sale of property, plant and equipment (811) (790) (1,096) (1,050)

Loss on extinguishment of debt — — 5,121 —

2 unchanged sentences

Adjusted EBITDA $ 26,170 $ 18,815 $ 73,440 $ 97,099

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

net loss associated with butane optimization business — 20,032 2,255 15,280

lower of cost or net realizable value and other non-cash adjustments — $ (18,457) 12,850 (18,826)

2 unchanged sentences

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

12 unchanged sentences

Adjusted EBITDA 26,170 18,815 73,440 97,099

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

net loss associated with butane optimization business — 20,032 2,255 15,280

lower of cost or net realizable value and other non-cash adjustments — (18,457) 12,850 (18,826)

14 unchanged sentences

Results of Operations

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.

The results of operations for the three and nine months ended September 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 and six months ended June 30, 2023 and 2022.

The following table sets forth our operating revenues and operating income by segment for the three and nine months ended September 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.

6 unchanged sentences

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

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

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

1 unchanged sentence

Income (Loss)

Three Months Ended June 30, 2023 (in thousands)

Three Months Ended September 30, 2023 (in thousands)

Terminalling and storage $ 23,973 $ (1,771) $ 22,202 $ 3,107 $ (1,750) $ 1,357

8 unchanged sentences

Income (Loss)

Three Months Ended June 30, 2022 (in thousands)

Three Months Ended September 30, 2022 (in thousands)

Terminalling and storage $ 23,034 $ (3,046) $ 19,988 $ (47) $ (2,999) $ (3,046)

5 unchanged sentences

Total $ 236,899 $ (7,594) $ 229,305 $ (12,244) $ — $ (12,244)

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

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Operating Revenues Intersegment Revenues Eliminations Operating Revenues

1 unchanged sentence

Income (Loss)

Six Months Ended June 30, 2023 (in thousands)

Nine Months Ended September 30, 2023 (in thousands)

Terminalling and storage $ 71,798 $ (7,054) $ 64,744 $ 10,661 $ (7,004) $ 3,657

8 unchanged sentences

Income (Loss)

Six Months Ended June 30, 2022 (in thousands)

Nine Months Ended September 30, 2022 (in thousands)

Terminalling and storage $ 69,027 $ (9,219) $ 59,808 $ (258) $ (9,121) $ (9,379)

6 unchanged sentences

Terminalling and Storage Segment

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

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands, except BBL per day)

5 unchanged sentences

3,142 (47) 3,189 6,785 %

Other operating income, net 25 8 17 213 %

Other operating loss, net (35) — (35)

Operating income (loss) $ 3,107 $ (47) $ 3,154 6,711 %

2 unchanged sentences

Revenues increased $0.9 million, of which $0.8 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.

In addition, revenue at our specialty terminals increased $0.5 million primarily as a result of higher throughput and storage revenue as a result of contractually prescribed, index-based fee adjustments.

Revenue at our Smackover refinery decreased $0.7 million as a result of decreased pipeline revenue of $1.4 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.

Operating expenses decreased primarily as a result of lease expense of $1.4 million and natural gas utilities of $0.6 million, offset by increased insurance premiums of $0.3 million and employee related expenses of $0.1 million.

Selling, general and administrative expenses.

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

Selling, general and administrative expenses increased 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

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 Nine Months Ended September 30, 2023 and 2022

Nine Months Ended September 30, Variance Percent Change

(In thousands, except BBL per day)

9 unchanged sentences

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.

Revenues increased $2.8 million, of which $2.6 million was primarily a result of increased fuel throughput at our shore-based terminals.

In addition, revenue at our specialty terminals increased $1.3 million primarily as a result of higher throughput and storage revenue resulting from contractually prescribed, index-based fee adjustments.

Revenue at our Smackover refinery decreased $1.3 million as a result of decreased pipeline revenue of $4.2 million, offset by increases in natural gas surcharge revenue of $1.2 million, reservation fees of $0.9 million, and throughput revenue of $0.8 million.

Operating expenses.

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

Operating expenses decreased primarily as a result of lease expense of $4.1 million and natural gas utilities of $0.3 million, offset by increased employee-related expenses of $0.4 million.

Selling, general and administrative expenses.

5 unchanged sentences

Transportation Segment

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

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

7 unchanged sentences

Marine Transportation Revenues .

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

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

Inland revenues increased $1.4 million, primarily related to higher transportation rates, offset by a decrease in utilization associated with equipment repairs and regulatory inspections.

Additionally, there was a decline in pass-through revenue (primarily fuel) of $0.6 million.

Land Transportation Revenues.

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.

Revenue decreased $1.8 million, primarily due to an 8% decrease in miles, offset by a 22% increase in load count.

Additionally, ancillary revenue decreased $4.0 million.

Operating expenses .

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.

Operating expenses remained relatively consistent.

Selling, general and administrative expenses .

1 unchanged sentence

Depreciation and amortization.

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

Depreciation and amortization remained relatively consistent.

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

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

Comparative Results of Operations for the Nine Months Ended September 30, 2023 and 2022

Nine Months Ended September 30, Variance Percent Change

(In thousands)

7 unchanged sentences

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.

Inland revenues increased $6.2 million, primarily related to higher transportation rates coupled with a decrease in pass-through revenue (primarily fuel) of $2.1 million.

Land Transportation Revenues.

1 unchanged sentence

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.

The increase in operating expenses is primarily a result of employee-related expenses of $4.8 million, lease expense of $3.6 million, repairs and maintenance of $2.9 million and insurance premiums of $1.2 million, offset by pass-through expenses (primarily fuel) of $5.2 million and recruitment expenses of $0.4 million.

Selling, general and administrative expenses.

5 unchanged sentences

Sulfur Services Segment

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

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

7 unchanged sentences

2,743 (6,606) 9,349 142 %

Other operating income, net 1 8 (7) (88) %

Operating income $ 5,286 $ 9,134 $ (3,848) (42) %

Other operating loss, net — (70) 70 100 %

Operating income (loss) $ 2,743 $ (6,676) $ 9,419 141 %

Sulfur (long tons) 155 95 60 63 %

2 unchanged sentences

Services revenues.

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

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

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.

Products revenues decreased $9.5 million as a result of a 37% drop in average sulfur services sales prices, offset by an increase of $12.9 million due to a 79% increase in sales volumes, primarily related to a 142% increase in fertilizer volumes.

Cost of products sold.

1 unchanged sentence

A 79% increase in sales volumes resulted in an offsetting increase in cost of products sold of $9.7 million.

Margin per ton decreased $36.54, or 45%.

Margin per ton increased $45.94, or 386%.

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.

Operating expenses decreased due to decreases in insurance claims of $0.3 million and outside towing of $0.2 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.

Selling, general and administrative expenses increased primarily due to higher 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 loss, 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

Comparative Results of Operations for the Nine Months Ended September 30, 2023 and 2022

Nine Months Ended September 30, Variance Percent Change

(In thousands)

7 unchanged sentences

12,565 15,144 (2,579) (17) %

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

Other operating income (loss), net 17 (34) 51 150 %

Operating income $ 12,582 $ 15,110 $ (2,528) (17) %

5 unchanged sentences

Products revenues.

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

Products revenues decreased $9.8 million due to a 12% decrease in sales volumes, primarily related to a 15% decrease in sulfur volumes.

Products revenues decreased $45.7 million as a result of a 34% drop in average sulfur products sales prices.

Products revenues increased $8.5 million due to a 9% increase in sales volumes, primarily related to a 13% increase in fertilizer volumes.

Cost of products sold.

A 36% decrease in product cost impacted cost of products sold by $38.0 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.

A 9% increase in sales volumes resulted in an increase in cost of products sold of $6.4 million.

Margin per ton decreased $15.52, or 26%.

Operating expenses.

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

Operating expenses decreased due to decreases in outside towing of $0.7 million, marine fuel and lube expense of $0.6 million, insurance claims of $0.5 million, and repairs and maintenance of $0.3 million offset by an increase in utilities of $0.3 million.

There were no other individually significant fluctuations between periods.

3 unchanged sentences

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.

Other operating income (loss), net.

Other operating income (loss), 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 June 30, 2023 and 2022

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

5 unchanged sentences

6,014 (13,576) 19,590 144 %

Other operating loss, net — (24) 24 100 %

Operating income $ 2,475 $ 5,596 $ (3,121) (56) %

Other operating income, net — 242 (242) (100) %

Operating income (loss) $ 6,014 $ (13,334) $ 19,348 145 %

NGL sales volumes (Bbls) 509 1,180 (671) (57) %

2 unchanged sentences

Products Revenues.

Product revenues decreased $28.4 million as a result of the exit of the butane optimization business in the second quarter 2023.

For the remaining products, sales volumes decreased 26%, lowering revenues by $22.9 million, primarily related to a 29% decrease in NGL sales volumes.

Our average sales price per barrel decreased $4.19, or 4%, decreasing revenues by $3.5 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 .

Cost of products sold decreased $47.9 million as a result of the exit of the butane optimization business in the second quarter of 2023.

For the remaining products, the decrease in sales volumes of 26% resulted in a $20.0 million reduction to cost of products sold.

Our average cost per barrel decreased $6.92, or 7%, decreasing cost of products sold by $5.7 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.

Our margins increased $2.72 per barrel, or 24%, during the period.

Operating expenses.

Operating expenses remained consistent.

Selling, general and administrative expenses .

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

Selling, general and administrative expenses decreased primarily due to the exit of the butane optimization business in the second quarter of 2023.

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

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

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 Nine Months Ended September 30, 2023 and 2022

Nine Months Ended September 30, Variance Percent Change

(In thousands)

5 unchanged sentences

13,148 2,093 11,055 528 %

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

Other operating income (loss), net (59) 218 (277) (127) %

Operating income $ 13,089 $ 2,311 $ 10,778 466 %

3 unchanged sentences

Products Revenues.

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

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.

Product revenues decreased $46.3 million as a result of the exit of the butane optimization business in the second quarter of 2023.

For the remaining products, sales volumes decreased 22%, lowering revenues by $58.8 million, primarily related to a 24% decrease in NGL sales volumes.

Products revenues decreased $26.3 million as a result of a 9% drop in average specialty products sales prices.

Cost of products sold .

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

Cost of products sold decreased $58.1 million as a result of the exit of the butane optimization business in the second quarter of 2023.

For the remaining products, an 11% decrease in product cost impacted cost of products sold by $29.6 million, resulting from a drop in commodity prices.

A 22% reduction in sales volumes resulted in an additional decrease in cost of products sold of $52.3 million.

Operating expenses.

Operating expenses remained consistent.

Selling, general and administrative expenses .

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

Selling, general and administrative expenses decreased primarily due to the exit of the butane optimization business in the second quarter of 2023.

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.

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

Other operating income (loss), net.

Other operating income (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 June 30, 2023 and 2022

Three Months Ended June 30, Variance Percent Change

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

Three Months Ended September 30, Variance Percent Change

(In thousands)

7 unchanged sentences

Total interest expense, net $ 14,994 $ 13,906 $ 1,088 8 %

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

Six Months Ended June 30, Variance Percent Change

Comparative Components of Interest Expense, Net for the Nine Months Ended September 30, 2023 and 2022

Nine Months Ended September 30, Variance Percent Change

(In thousands)

8 unchanged sentences

Indirect Selling, General and Administrative Expenses

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

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

2023 2022 2023 2022

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Indirect selling, general and administrative expenses $ 3,837 $ 4,260 $ (423) (10) % $ 11,929 $ 12,772 $ (843) (7) %

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.

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

Indirect selling, general and administrative expenses decreased for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 as a result of decreased employee-related expenses of $1.3 million, offset by an increase in overhead expenses allocated from Martin Resource Management Corporation of $0.4 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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Under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses.

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

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

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

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

2023 2022 2023 2022

7 unchanged sentences

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

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

Cash Flows - Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

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

Nine Months Ended September 30, Variance Percent Change

(In thousands)

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Net increase (decrease) in cash and cash equivalents $ 9 $ (7) $ 16 229 %

Net cash provided by operating activities.

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 provided by (used in) operating activities.

The increase in net cash provided by operating activities for the nine months ended September 30, 2023 includes an increase in operating results and other non-cash charges of $6.6 million combined with a favorable variance in cash flows associated with changes in working capital of $116.2 million, which includes $107.3 million related to the liquidation of working capital associated with our butane optimization business and will be non-recurring in future reporting periods.

Net cash used in investing activities.

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

Net cash used in investing activities for the nine months ended September 30, 2023 decreased $0.6 million.

A decrease in cash used of $2.4 million resulted from lower payments for capital expenditures and plant turnaround costs in 2023.

In addition, net proceeds from the sale of property, plant and equipment increased $3.0 million.

Net cash used in financing activities.

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.

Net cash (used in) provided by financing activities.

Net cash (used in) provided by financing activities for the nine months ended September 30, 2023 increased primarily as a result of a $110.4 million increase in net payments of long-term borrowings.

Additionally, payments of debt issuance costs increased $14.2 million.

Total Contractual Obligations

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

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

Payments due by period

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Letters of Credit .

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.

At September 30, 2023, we had outstanding irrevocable letters of credit in the amount of $9.4 million, which were issued under our credit facility.

Off-Balance Sheet Arrangements.

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Credit Facility

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.

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

As of September 30, 2023, we had $62.5 million outstanding under the credit facility and $9.4 million of outstanding irrevocable letters of credit, leaving a maximum available amount to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $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 $84.1 million in additional amounts thereunder as of September 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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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 low of $148.5 million to a high of $184.0 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.

From February 8, 2023 through September 30, 2023, the level of outstanding draws on our amended credit facility ranged from a low of $57.5 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 June 30, 2023 is 3.50%.

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

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

The applicable margin for Adjusted Term SOFR borrowings effective October 18, 2023 is 3.25%.

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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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 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.

On September 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 $62.5 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 $84.1 million in additional amounts thereunder as of September 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 June 30, 2023 and expect to be in compliance for the next twelve months.

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

Interest Rate Risk

6 unchanged sentences

Impact of Inflation

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

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

We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the nine months ended September 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