Martin Midstream Partners Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-KMark OneAnnual Report Pursuant to Section 13 or 15(d) of the ýýSecurities Exchange Act of 1934 For the fiscal year ended December 31, 2018 ORoTransition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____ to _____.Commission file number 000-50056 MARTIN MIDSTREAM PARTNERS L.P.(Exact name of registrant as specified in its charter)Delaware 05-0527861State or other jurisdiction of incorporation or organization (I.R.S. Employer Identification No.) 4200 Stone Road Kilgore, Texas 75662(Address of principal executive offices) (Zip Code)903-983-6200(Registrant’s telephone number, including area code)_______________________ Securities Registered Pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Units representing limited partnership interests NASDAQ Global Select MarketSecurities Registered Pursuant to Section 12(g) of the Act:NONEIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No ý Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes o No ý Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements the past 90 days. Yes ý No o Indicate by check mark whether the Registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-Tduring the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of"large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.Large accelerated filer oAccelerated filer xNon-accelerated filer oSmaller reporting company o Emerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No ý As of June 30, 2018, 39,052,237 common units were outstanding. The aggregate market value of the common units held by non-affiliates of the registrant as of such dateapproximated $454,540,329 based on the closing sale price on that date. There were 39,049,181 of the registrant’s common units outstanding as of February 19, 2019. DOCUMENTS INCORPORATED BY REFERENCE: None. TABLE OF CONTENTS PagePART I 1Item 1.Business1Item 1A.Risk Factors17Item 1B.Unresolved Staff Comments35Item 2.Properties35Item 3.Legal Proceedings35Item 4.Mine Safety Disclosures35 PART II36Item 5.Market for Our Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities36Item 6.Selected Financial Data36Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations37Item 7A.Quantitative and Qualitative Disclosures about Market Risk57Item 8.Financial Statements and Supplementary Data58Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure98Item 9A.Controls and Procedures98Item 9B.Other Information100 PART III101Item 10.Directors, Executive Officers and Corporate Governance101Item 11.Executive Compensation106Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters112Item 13.Certain Relationships and Related Transactions, and Director Independence115Item 14.Principal Accounting Fees and Services120 PART IV 121Item 15.Exhibits, Financial Statement Schedules121 iPART IItem 1.BusinessReferences in this annual report to "we," "ours," "us" or like terms when used in a historical context refer to the assets and operations of MartinResource Management's business contributed to us in connection with our initial public offering on November 6, 2002. References in this annual report to"Martin Resource Management" refer to Martin Resource Management Corporation and its subsidiaries, unless the context otherwise requires. References inthis annual report to the "Partnership" refer to Martin Midstream Partners L.P. and its subsidiaries, unless the content otherwise requires. You should read thefollowing discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes theretoincluded elsewhere in this annual report. For more detailed information regarding the basis for presentation for the following information, you should readthe notes to the consolidated financial statements included elsewhere in this annual report.Forward-Looking StatementsThis annual report on Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements included in this annual report that are not historical facts(including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions or forecasts relatedthereto), are forward-looking statements. These statements can be identified by the use of forward-looking terminology including "forecast," "may," "believe,""will," "expect," "anticipate," "estimate," "continue" or other similar words. These statements discuss future expectations, contain projections of results ofoperations or of financial condition or state other "forward-looking" information. We and our representatives may from time to time make other oral or writtenstatements that are also forward-looking statements.These forward-looking statements are made based upon management's current plans, expectations, estimates, assumptions and beliefs concerningfuture events impacting us and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and thatactual results could differ materially from those expressed or implied in the forward-looking statements.Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied bythese forward-looking statements for a number of important reasons, including those discussed below in "Item 1A. Risk Factors - Risks Related to ourBusiness."Overview We are a publicly traded limited partnership with a diverse set of operations focused primarily in the United States ("U.S.") Gulf Coast region. Ourfour primary business lines include:•Natural gas liquids transportation and distribution services and natural gas storage;•Terminalling and storage services for petroleum products and by-products, including the refining of naphthenic crude oil and the blending andpackaging of finished lubricants;•Sulfur and sulfur-based products gathering, processing, marketing, manufacturing and distribution; and•Marine transportation services for petroleum products and by-products.The petroleum products and by-products we collect, transport, store and market are produced primarily by major and independent oil and gascompanies who often turn to third parties, such as us, for the transportation and disposition of these products. In addition to these major and independent oiland gas companies, our primary customers include independent refiners, large chemical companies, fertilizer manufacturers and other wholesale purchasers ofthese products. We operate primarily in the U.S. Gulf Coast region. This region is a major hub for petroleum refining, natural gas gathering and processing,and support services for the exploration and production industry.We were formed in 2002 by Martin Resource Management, a privately-held company whose initial predecessor was incorporated in 1951 as asupplier of products and services to drilling rig contractors. Since then, Martin Resource Management has expanded its operations through acquisitions andinternal expansion initiatives as its management identified1and capitalized on the needs of producers and purchasers of petroleum products and by-products and other bulk liquids. Martin Resource Management is animportant supplier and customer of ours. As of December 31, 2018, Martin Resource Management owned 15.7% of our total outstanding common limitedpartner units. Furthermore, Martin Resource Management controls Martin Midstream GP LLC ("MMGP"), our general partner, by virtue of its 51% votinginterest in MMGP Holdings, LLC ("Holdings"), the sole member of MMGP. MMGP owns a 2% general partner interest in us and all of our incentivedistribution rights. Martin Resource Management directs our business operations through its ownership interests in and control of our general partner.We entered into an omnibus agreement dated November 1, 2002, with Martin Resource Management (the "Omnibus Agreement") that governs,among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision ofgeneral administration and support services by Martin Resource Management and our use of certain of Martin Resource Management’s trade names andtrademarks. Under the terms of the Omnibus Agreement, the employees of Martin Resource Management are responsible for conducting our business andoperating our assets.Martin Resource Management has operated our business since 2002. Martin Resource Management began operating our natural gas servicesbusiness in the 1950s and our sulfur business in the 1960s. It began our marine transportation business in the late 1980s. It entered into our fertilizer andterminalling and storage businesses in the early 1990s. Over the last 10 years, Martin Resource Management has increased the size of our asset base throughexpansions and strategic acquisitions.Primary Business Segments Our primary business segments can be generally described as follows: •Terminalling and Storage. We own or operate 19 marine shore-based terminal facilities and 14 specialty terminal facilities located primarily inthe U.S. Gulf Coast region that provide storage, refining, blending, packaging, and handling services for producers and suppliers of petroleumproducts and by-products, including the refining of naphthenic crude oil and the blending and packaging of various grades and quantities ofindustrial, commercial, and automotive lubricants and greases. Our facilities and resources provide us with the ability to handle variousproducts that require specialized treatment, such as molten sulfur and asphalt. We also provide land rental to oil and gas companies along withstorage and handling services for lubricants and fuels. We provide these terminalling and storage services on a fee basis primarily under long-term contracts. A significant portion of the contracts in this segment provide for minimum fee arrangements that are not based on the volumeshandled.•Natural Gas Services. We distribute natural gas liquids ("NGLs"). We purchase NGLs primarily from refineries and natural gas processors. Westore and transport NGLs for wholesale deliveries to refineries, industrial NGL users in Texas and the Southeastern U.S, and propane retailers.We own an NGL pipeline, which spans approximately 200 miles from Kilgore, Texas to Beaumont, Texas. We own approximately 2.4 millionbarrels of underground storage capacity for NGLs. Additionally, we own 100% of the interests in Cardinal Gas Storage Partners LLC("Cardinal"), which is focused on the operation and management of natural gas storage facilities across northern Louisiana and Mississippi.•Sulfur Services. We have developed an integrated system of transportation assets and facilities relating to sulfur services. We process anddistribute sulfur produced by oil refineries primarily located in the U.S. Gulf Coast region. We buy and sell molten sulfur on contracts that aretied to sulfur indices and tend to provide stable margins. We process molten sulfur into prilled or pelletized sulfur at our facilities in Port ofStockton, California and Beaumont, Texas on contracts that often provide guaranteed minimum fees. The sulfur we process and handle isprimarily used in the production of fertilizers and industrial chemicals. We own and operate five sulfur-based fertilizer production plants andone emulsified sulfur blending plant that manufactures primarily sulfur-based fertilizer products for wholesale distributors and industrial users.These plants are located in Texas and Illinois. Demand for our sulfur products exist in both the domestic and foreign markets, and our asset baseprovides additional opportunities to handle increases in U.S. supply and access to foreign demand.•Marine Transportation. We operate a fleet of 31 inland marine tank barges, 17 inland push boats and one offshore tug and barge unit thattransport petroleum products and by-products largely in the U.S. Gulf Coast region. We provide these transportation services on a fee basisprimarily under annual contracts, and many of our customers have long standing contractual relationships with us. Our modernized asset base isattractive both to our existing customers as well as potential new customers. In addition, our fleet contains several vessels that reflect our focuson specialty products.2 Significant Recent DevelopmentsMartin Transport Inc. Stock Purchase Agreement. On October 22, 2018, we entered into a stock purchase agreement (the “Stock PurchaseAgreement”) with Martin Resource Management to acquire all of the issued and outstanding equity of Martin Transport, Inc. (“MTI”), a wholly-ownedsubsidiary of Martin Resource Management which operates a fleet of tank trucks providing transportation of petroleum products, liquid petroleum gas,chemicals, sulfur and other products, as well as owns twenty-three terminals located throughout the Gulf Coast and Midwest for total consideration of $135.0million with a $10.0 million earn-out based on certain performance thresholds. Additionally, a post-closing working capital adjustment was finalized onJanuary 28, 2019 which included additional consideration paid to Martin Resource Management of $2.2 million. The Stock Purchase Agreement containedcustomary representations and warranties. Martin Resource Management has owned and operated MTI or its predecessor for over 40 years and MTI is integralto our routine movements of sulfur and NGL’s. Based on operational estimates and current transportation market conditions, this drop-down from our generalpartner will provide strategic long-term growth for the Partnership. This transaction closed January 2, 2019 and was effective as of January 1, 2019. As ofJanuary 1, 2019, Martin Resource Management will no longer provide land transportation services.Divestiture of WTLPG Partnership Interest. On July 31, 2018, we completed the sale of our 20 percent non-operating interest in West Texas LPGPipeline L.P. ("WTLPG") to ONEOK, Inc. (“ONEOK”). WTLPG owns an approximate 2,300 mile common-carrier pipeline system that primarily transportsNGLs from New Mexico and Texas to Mont Belvieu, Texas for fractionation. A wholly-owned subsidiary of ONEOK, Inc. is the operator of the assets. Inconsideration of the sale of these assets, we received cash proceeds of $195.0 million at closing, before transaction fees and expenses. The proceeds from thesale were used to reduce outstanding borrowings under our revolving credit facility.Credit Facility Amendment. On February 21, 2018, we amended our revolving credit facility in order to achieve two primary objectives, the first ofwhich was to accommodate growth capital expenditures necessary for the previously announced WTLPG expansion project. Starting in the first quarter of2018, the amendment provided short-term (5 quarters) covenant relief by increasing the total leverage ratio to 5.75 to 1.00 (first and second quarters of 2018)with step downs to 5.50 to 1.00 (third and fourth quarters of 2018 and first quarter of 2019) and to 5.25 to 1.00 beginning in the second quarter of 2019.Additionally, the facility was amended to establish an inventory financing sublimit tranche for borrowings related to our NGL (butane) marketing business,which is a part of and not in addition to the already existing commitments under the revolving credit facility. This sublimit is not to exceed $75.0 million,with seasonal step downs to $10.0 million for the months of March through June of each fiscal year. The sublimit is subject to a monthly borrowing base notto exceed 90% of the value of forward sold/hedged inventory. In conjunction with the sale of WTLPG on July 31, 2018, we amended our revolving creditfacility which included, among other things, further revising our leverage covenants from the February 21, 2018 amendment (discussed in detail above). Total Indebtedness to EBITDA and Senior Secured Indebtedness to EBITDA (each as defined in the credit agreement) was amended to 5.25 times and 3.50times, respectively. No changes were made to the Consolidated Interest Coverage Ratio (as defined in the credit agreement) of 2.50 times. Subsequent EventsQuarterly Distribution. On January 17, 2019, we declared a quarterly cash distribution of $0.50 per common unit for the fourth quarter of 2018, or$2.00 per common unit on an annualized basis, which will be paid on February 14, 2019 to unitholders of record as of February 7, 2019.Our Growth StrategyThe key components of our growth strategy are:•Pursue Organic Growth Projects. We continually evaluate economically attractive organic expansion opportunities in existing areas ofoperation that will allow us to leverage our existing market position and increase the distributable cash flow from our existing assets throughimproved utilization and efficiency.•Pursue Internal Organic Growth by Attracting New Customers and Expanding Services Provided to Existing Customers. Opportunities exist toexpand our customer base and provide additional services and products to existing customers. We generally begin a relationship with acustomer by transporting, storing or marketing a limited range of products and services. Expanding our customer base and our service andproduct offerings to existing customers is an efficient and cost effective method of achieving organic growth in revenues and cash flow.3•Pursue Strategic Acquisitions. We continually monitor the marketplace to identify and pursue accretive acquisitions that expand the servicesand products we offer or that expand our geographic presence. After acquiring other businesses, we attempt to utilize our industry knowledge,network of customers and suppliers and strategic asset base to operate the acquired businesses more efficiently and competitively, therebyincreasing revenues and cash flow. Our diversified base of operations provides multiple platforms for strategic growth through acquisitions.•Pursue Strategic Commercial Alliances. Many of our larger customers, which include major integrated energy companies, have establishedstrategic alliances with midstream service providers such as us to address logistical and transportation problems or achieve operationalsynergies. We intend to pursue strategic commercial alliances with such customers in the future.Competitive StrengthsFee-Based Contracts. We generate a majority of our cash flow from fee-based contracts with our customers. A significant portion of the fee-basedcontracts consist of reservation charges or minimum fee arrangements, which reduce the volatility of our cash flows due to volume fluctuations.Asset Base and Integrated Distribution Network. We operate a diversified asset base that enables us to offer our customers an integrated distributionnetwork consisting of transportation, terminalling and storage and midstream logistical services for petroleum products and by-products.Strategically Located Assets. A significant portion of our cash flow comes from providing various services to the oil refining industry. Accordingly,a significant portion of our assets are located in proximity to refining operations along the U.S. Gulf Coast. For example, we are one of the largest operatorsof marine service shore-based terminals in the U.S. Gulf Coast region providing broad geographic coverage and distribution capability of our products andservices to our customers. Our natural gas storage and NGL distribution and storage assets are located in areas highly desirable for our customers. Finally,many of our sulfur services assets are strategically located to source sulfur from the largest refinery sources in the U.S.Specialized Transportation Equipment and Storage Facilities. We have the assets and expertise to handle and transport certain petroleum productsand by-products with unique requirements for transportation and storage. For example, we own facilities and resources to transport a variety of specialtyproducts, including ammonia, molten sulfur and asphalt. Some of these specialty products require treatment across a wide range of temperatures rangingbetween approximately -30 to +400 degrees Fahrenheit to remain in liquid form, which our facilities are designed to accommodate. These capabilities help usenhance relationships with our customers by offering them services to handle their unique product requirements.Strong Industry Reputation and Established Relationships with Suppliers and Customers. We have established a reputation in our industry as areliable and cost-effective supplier of services to our customers and have a track record of safe, efficient operation of our facilities. Our management has alsoestablished long-term relationships with many of our suppliers and customers. We benefit from our management's reputation and track record and from theselong-term relationships.Experienced Management Team and Operational Expertise. Members of our executive management team and the heads of our principal businesslines have a significant amount of experience in the industries in which we operate. Our management team has a successful track record of creating internalgrowth and completing acquisitions. Our management team's experience and familiarity with our industry and businesses are important assets that assist us inimplementing our business strategies.Terminalling and Storage Segment Industry Overview. The U.S. petroleum distribution system moves petroleum products and by-products from oil refineries and natural gas processingfacilities to end users. This distribution system is comprised of a network of terminals,4storage facilities, pipelines, tankers, barges, railcars and trucks. Terminals play a key role in moving these products throughout the distribution system byproviding storage, blending and other ancillary services. Although many large energy and chemical companies own terminalling and storage facilities, these companies also use third-party terminalling andstorage services. Major energy and chemical companies typically have a strong demand for terminals owned by independent operators when such terminalsare strategically located at or near key transportation links, such as deep-water ports. Major energy and chemical companies also need independent terminalstorage when their owned storage facilities are inadequate, either because of lack of capacity, the nature of the stored material or specialized handlingrequirements.The Gulf Coast region is a major hub for petroleum refining. Approximately 50% of U.S. refining capacity exists in this region. Growth in therefining and natural gas processing industries has increased the volume of petroleum products and by-products that are transported within the Gulf Coastregion, which consequently has increased the need for terminalling and storage services. The marine and offshore oil and gas exploration and production industries use terminal facilities in the Gulf Coast region as shore bases that providethem logistical support services as well as provide a broad range of products, including fuel oil, lubricants, chemicals and supplies. The demand for thesetypes of terminals, services and products is driven primarily by offshore exploration, development and production in the Gulf of Mexico. Offshore activity isgreatly influenced by current and projected prices of oil and natural gas. Specialty Petroleum Terminals. We own or operate 12 terminalling facilities providing storage, handling and transportation of various petroleumproducts and by-products. The locations and capabilities of our terminals are structured to complement our other businesses and reflect our strategy toprovide a broad range of integrated services in the storage, handling and transportation of products. We developed our terminalling and storage assets byacquisition and upgrades of existing facilities as well as developing our own properties strategically located near rail, waterways and pipelines. We anticipatefurther expansion of our terminalling facilities through both acquisition and organic growth.At the Neches and Stanolind terminals, our customers are primarily energy or petrochemical companies. We charge either a fixed monthly fee or athroughput fee for the use of our facilities based on the capacity of the applicable tank. We conduct a substantial portion of our terminalling and storageoperations under long-term contracts, which enhances the stability and predictability of our operations and cash flow. We attempt to balance our short-termand long-term terminalling contracts in order to allow us to maintain a consistent level of cash flow while maintaining flexibility to earn higher storagerevenues when demand for storage space increases. In addition, a significant portion of the contracts for our specialty terminals provide for minimum feearrangements that are not based on the volume handled.In Smackover, Arkansas, we own a refinery and terminal where we process crude oil into finished products that include naphthenic lubricants,distillates, asphalt and other intermediates. This process is dedicated to an affiliate of Martin Resource Management through a long-term tolling agreementbased on throughput rates and a monthly reservation fee.In Smackover, Arkansas, we own and operate a terminal used for lubricant blending, processing, packaging, marketing and distribution. Thisterminal is used as our central hub for branded and private label packaged lubricants where we receive, package and ship heavy-duty, passenger car, andindustrial lubricants to a network of retailers and distributors.In Kansas City, Missouri, we lease and operate a plant that specializes in the processing and packaging of automotive, commercial and industrialgreases.In Houston, Texas, we own and operate a plant that specializes in the processing and packaging of post tension greases.In Hondo, Texas, we own an asphalt terminal whose use is dedicated to an affiliate of Martin Resource Management through a terminalling serviceagreement based on throughput rates.In South Houston, Texas, we own an asphalt terminal whose use is dedicated to an affiliate of Martin Resource Management through a terminallingservice agreement based on throughput rates.In Port Neches, Texas, we own an asphalt terminal whose use is dedicated to an affiliate of Martin Resource Management through a terminallingservice agreement based upon throughput rates.5In Omaha, Nebraska, we own an asphalt terminal whose use is dedicated to an affiliate of Martin Resource Management through a terminallingservice agreement based on throughput rates.In Beaumont, Texas we own a terminal where we receive natural gasoline via pipeline and then ship the product to our customers via other pipelinesto which the facility is connected, referred to as the "Spindletop Terminal." Our fees for the use of this facility are based on the volume of barrels shippedfrom the terminal.The following is a summary description of our shore-based specialty terminals:Terminal Location Aggregate Capacity (inbarrels) Products DescriptionTampa (1) Tampa, Florida 719,000 Asphalt and fuel oil Marine terminal, loading/unloading forvessels, barges, railcars and trucksStanolind Beaumont, Texas 593,000 Asphalt, crude oil, sulfur, sulfuricacid and fuel oil Marine terminal, marine dock forloading/unloading of vessels, barges,railcars and trucksNeches (2) Beaumont, Texas 548,000 Molten sulfur, formed sulfur,ammonia, asphalt, fuel oil, crudeoil and sulfur-based fertilizer Marine terminal, loading/unloading forvessels, barges, railcars and trucks (1)This terminal is located on land owned by the Tampa Port Authority that was leased to us under a 10-year lease that expires in December 2021. Thislease may be extended at the option of the tenant for one option period of five years.(2)The Neches terminal is a deep water marine terminal located near Beaumont, Texas, on approximately 50 acres of land owned by us, and an additional96 acres leased to us under terms of a 20-year lease commencing May 1, 2014 with three five-year options.The following is a summary description of our non shore-based specialty terminals:Terminal Location Aggregate Capacity Products DescriptionSmackover Refinery Smackover,Arkansas 7,700 barrels per day;275,000 barrels of crudebulk storage; 647,000barrels of lubricant storage Naphthenic lubricants, distillates,asphalt, crude oil Crude refining facilityMartin Lubricants Smackover,Arkansas 3.9 million gallons bulkstorage Agricultural, automotive, andindustrial lubricants and grease Lubricants packaging facilityMartin Lubricants (1) Kansas City,Missouri 0.2 million gallons of bulkstorage Automotive, commercial andindustrial greases Grease manufacturing and packagingfacilityMartin Lubricants Houston, Texas 0.2 million gallons of bulkstorage Post tension greases Grease manufacturing and packagingfacilityHondo Asphalt Hondo, Texas 182,000 barrels Asphalt Asphalt processing and storageSouth HoustonAsphalt Houston, Texas 95,000 barrels Asphalt Asphalt processing and storagePort Neches Asphalt Port Neches, Texas 24,000 barrels Asphalt Asphalt processing and storageOmaha Asphalt Omaha, Nebraska 112,000 barrels Asphalt Asphalt processing and storageSpindletop Beaumont, Texas 90,000 barrels Natural gasoline Pipeline receipts and shipments(1)This terminal contains a warehouse owned by third parties and leased under a lease that expires in December 2020 and can be extended by us for twosuccessive five-year periods.6Marine Shore-Based Terminals. We own or operate 19 marine shore-based terminals along the Gulf Coast from Theodore, Alabama to CorpusChristi, Texas. Our terminalling assets are located at strategic distribution points for the products we handle and are in close proximity to our customers. Weare one of the largest operators of marine shore-based terminals in the Gulf Coast region. These terminals are used to distribute and market fuel and lubricants.Additionally, full service terminals also provide shore bases for companies that are operating in the offshore exploration and production industry. Customersare primarily oil and gas exploration and production companies and oilfield service companies, such as drilling fluid companies, marine transportationcompanies and offshore construction companies. Shore bases typically provide logistical support, including the storing and handling of tubular goods,loading and unloading bulk materials, providing facilities from which major and independent oil companies can communicate with and control offshoreoperations and leasing dockside facilities to companies which provide complementary products and services such as drilling fluids and cementing services.We generate revenues from our terminals that have shore bases by fees that we charge our customers under land rental contracts for the use of our terminalfacility for these shore bases. These contracts generally provide us a fixed land rental fee and additional rental fees that are determined based on a percentageof the sales value of the products and services delivered from the shore base. In addition, Martin Resource Management, through terminalling serviceagreements, pays us for terminalling and storage of fuels and lubricants at these terminal facilities and includes a provision for minimum volume throughputrequirements. Our marine shore-based terminals are divided into two classes of terminals: (i) full service terminals and (ii) fuel and lubricant terminals. Full Service Terminals. We own or operate 6 full service terminals. These facilities provide logistical support services and storage and handlingservices for fuel and lubricants. The significant difference between our full service terminals and our fuel and lubricant terminals is that our full serviceterminals generate additional revenues by providing shore bases to support our customer’s operating activities related to the offshore exploration andproduction industry. One typical use for our shore bases is for drilling fluids manufacturers to manufacture and sell drilling fluids to the offshore drillingindustry. Offshore drilling companies may also set up service facilities at these terminals to support their offshore operations. Customers of our full serviceterminals are primarily oil and gas exploration and production companies, oilfield service companies such as drilling fluids companies, marine transportationcompanies and offshore construction companies. The following is a summary description of our full service terminals:Terminal Location Aggregate Capacity(barrels) End of Lease (Including Options)Amelia Amelia, Louisiana 13,000 August 2023Fourchon 15 Fourchon, Louisiana 7,600 February 2047Harbor Island (1) Harbor Island, Texas 6,800 December 2039Intracoastal City 2 (2) Intracoastal City, Louisiana 17,700 December 2025Pelican Island Galveston, Texas 87,600 OwnTheodore Theodore, Alabama 19,900 Own(1)A portion of this terminal is owned.(2)This terminal is currently in caretaker status.Fuel and Lubricant Terminals. We own or operate 13 lubricant and fuel terminals located in the Gulf Coast region that provide storage andhandling services for lubricants and fuel oil. 7The following is a summary description of our fuel and lubricant terminals at:Terminal Location Aggregate Capacity (barrels) End of Lease (Including Options)Dulac (1) Dulac, Louisiana 15,400 December 2041Dock 193 (3) Gueydan, Louisiana 11,000 May 2020Fourchon Fourchon, Louisiana 80,900 May 2027Fourchon 16 Fourchon, Louisiana 16,400 July 2048Galveston T (2) Galveston, Texas 1,400 OwnIntracoastal City (2) Intracoastal City, Louisiana — OwnJennings Bulk Plant Jennings, Louisiana 9,100 OwnChannelview Houston, Texas 39,800 OwnLake Charles T Lake Charles, Louisiana 1,000 April 2023Pascagoula (2) Pascagoula, Mississippi 10,100 OwnPort Arthur Port Arthur, Texas 16,300 November 2025Port O'Connor (1) Port O'Connor, Texas 6,700 March 2028Sabine Pass (2) Sabine Pass, Texas 16,700 September 2036(1)This terminal is currently in caretaker status and the lease will not be renewed at the end of the current option.(2)These terminals are currently in caretaker status.(3)A portion of this terminal is owned.Competition. We compete with independent terminal operators and major energy and chemical companies that own their own terminalling andstorage facilities. Many customers prefer to contract with independent terminal operators rather than terminal operators owned by integrated energy andchemical companies that may have refining or marketing interests that compete with the customers.Independent terminal owners generally compete on the basis of the location and versatility of terminals, service and price. A favorably locatedterminal has access to various cost effective transportation modes, both to and from the terminal, such as waterways, railroads, roadways and pipelines.Terminal versatility depends upon the operator’s ability to handle diverse products, some of which have complex or specialized handling and storagerequirements. The service function of a terminal includes, among other things, the safe storage of product at specified temperature, moisture and otherconditions and receiving and delivering product to and from the terminal. All of these services must be in compliance with applicable environmental andother regulations.We successfully compete for terminal customers because of the strategic location of our terminals along the Gulf Coast, our integrated transportationservices, our reputation, the prices we charge for our services and the quality and versatility of our services. Additionally, while some companies havesignificantly more terminalling and storage capacity than us, not all terminalling and storage facilities located in the markets we serve are equipped toproperly handle specialty products such as asphalt, sulfur and anhydrous ammonia.The principal competitive factors affecting our terminals, which provide fuel and lubricants distribution and marketing, as well as shore bases atcertain terminals, are the locations of the facilities, availability of competing logistical support services and the experience of personnel and dependability ofservice. The distribution and marketing of our lubricant products is brand sensitive and we encounter brand loyalty competition. Shore base rental contractsare generally long-term contracts and provide more protection from competition. Our primary competitors for both lubricants and shore bases include severalindependent operators as well as major companies that maintain their own similarly equipped marine terminals, shore bases and fuel and lubricant supplysources.Natural Gas Services Segment Industry Overview. NGLs are produced through natural gas processing and as a by-product of crude oil refining. NGLs include ethane, propane,normal butane, iso butane and natural gasoline.Ethane is almost entirely used as a petrochemical feedstock in the production of ethylene and propylene. Propane is used as a petrochemicalfeedstock in the production of ethylene and propylene, as a fuel for heating, for industrial applications, as motor fuel and as a refrigerant. Normal butane isused as a petrochemical feedstock, as a blend stock for motor gasoline and as a component in aerosol propellants. Normal butane can also be made into isobutane through isomerization. Iso butane is used in the production of motor gasoline, alkylation and as a component in aerosol propellants. Natural gasolineis used as a component of motor gasoline, as a petrochemical feedstock and as a diluent.Facilities. We purchase NGLs primarily from major domestic oil refiners and natural gas processors. We transport NGLs using MTI’s landtransportation fleet or by contracting with common carriers, owner-operators and railroad tank cars. We typically enter into annual contracts withindependent retail propane distributors to deliver their estimated annual volume requirements based on prevailing market prices. Dependable delivery is veryimportant to these customers and in some cases may be more important than price. We ensure adequate supply of NGLs through:•storage of NGLs ;•efficient use of railroad tank cars•the transportation fleet of vehicles owned by MTI; and•product management expertise to obtain supplies when needed.The following is a summary description of our owned NGL facilities:NGL Facility Location Capacity Description Wholesale terminals Arcadia, Louisiana 2,400,000 barrels Underground storageRetail terminals Kilgore, Texas 90,000 gallons Retail propane distribution Longview, Texas 30,000 gallons Retail propane distribution Henderson, Texas 12,000 gallons Retail propane distributionRail terminal Arcadia, Louisiana 24 railcars per day NGL railcar loading and unloadingcapabilitiesIn addition to the owned NGL facilities above, we lease underground storage capacity at four locations under short-term lease agreements.Our NGL customers consist of refiners, industrial processors and retail propane distributors. The majority of our NGL volumes are sold to refiners andindustrial processors.Seasonality. The level of NGL supply and demand is subject to changes in domestic production, weather, inventory levels and other factors. Whileproduction is not seasonal, residential, refinery, and wholesale demand is highly seasonal. This imbalance causes increases in inventories during summermonths when consumption is low and decreases in inventories during winter months when consumption is high. In September, demand for normal butanetypically increases with refineries entering8the winter gasoline-blending season, resulting in upward pressure on prices. Abnormally cold weather can put extra upward pressure on propane prices duringthe winter.Competition. We compete with large integrated NGL producers and marketers, as well as small local independent marketers. The primarycomponents of competition related to our natural gas storage operations are location, rates, terms and flexibility of service and supply. Our natural gas storagefacilities compete with other storage providers and increased competition could result from newly developed storage facilities or expanded capacity fromexisting competitors.Natural Gas StorageNatural gas storage facilities provide a staging and warehousing function for seasonal swings in demand relative to supply, as well as an essentialreliability cushion against disruptions in natural gas supply, demand and transportation by allowing natural gas to be injected into, withdrawn from orwarehoused in such storage facilities as dictated by market conditions. The long term demand for storage services in the U.S. is driven primarily by the long-term demand for natural gas and the overall lack of balance between the supply of and demand for natural gas on a seasonal, monthly, daily or other basis. Ingeneral and on a long-term basis, to the extent the overall demand for natural gas increases and such growth includes higher demand from seasonal orweather-sensitive end-users (such as gas-fired power generators and residential and commercial consumers), demand for natural gas storage services shouldalso grow. In addition, any factors that contribute to more frequent and severe imbalances between the supply of and demand for natural gas, whether causedby supply or demand fluctuations, should increase the need for and the value of storage services. On a short term basis, storage demand and values are alsosignificantly influenced by operational imbalances, near term seasonal spreads, shorter term spreads and basis differentials.We own 100% of the interests in Cardinal, which is focused on the operation and management of natural gas storage facilities across northernLouisiana and Mississippi.Cardinal facilities are summarized below:Facility Name / Location Facility Type Working StorageCapacity Percent of CapacityContracted (1) Weighted AverageLife of RemainingContract TermArcadia Gas Storage, LLC Bienville Parish,Louisiana Salt dome 15.25 billion cubicfeet (bcf) 100% 2.2 yearsCadeville Gas Storage, LLC Ouachita Parish,Louisiana Depleted reservoir 17.0 bcf 100% 4.4 yearsPerryville Gas Storage, LLC Franklin Parish,Louisiana Salt dome 11.85 bcf 74% 2.2 yearsMonroe Gas Storage Company, LLC MonroeCounty, Mississippi Depleted reservoir 6.7 bcf 100% 3.0 years(1) Contracted capacity refers specifically to firm contracted capacity.These facilities were developed to provide producers, end users, local distribution companies, pipelines and energy marketers with high-deliverability storage services and hub services. Sulfur Services Segment Industry Overview. Sulfur is a natural element and is required to produce a variety of industrial products. In the U.S., approximately 9 million tonsof sulfur are consumed annually with the Tampa, Florida area being the largest single market. Currently, all sulfur produced in the U.S. is "recovered sulfur,"or sulfur that is a by-product from oil refineries and natural gas processing plants. Sulfur production in the U.S. is principally located along the Gulf Coast,along major inland waterways and in some areas of the western U.S. Sulfur is an important plant nutrient and is primarily used in the manufacture of phosphate fertilizers and other industrial purposes. The primaryapplication of sulfur in fertilizers occurs in the form of sulfuric acid. Burning sulfur creates sulfur dioxide, which is subsequently oxidized and dissolved inwater to create sulfuric acid. The sulfuric acid is then combined with phosphate rock to make phosphoric acid, the base material for most high-gradephosphate fertilizers. 9Sulfur-based fertilizers are manufactured chemicals containing nutrients known to improve the fertility of soils. Nitrogen, phosphorus, potassiumand sulfur are the four most important nutrients for crop growth. These nutrients are found naturally in soils. However, soils used for agriculture becomedepleted of nutrients and require fertilizers rich in nutrients to restore fertility. Industrial sulfur products (including sulfuric acid) are used in a wide variety of industries. For example, these products are used in power plants,paper mills, auto and tire manufacturing plants, food processing plants, road construction, cosmetics and pharmaceuticals. Our Operations and Products. We maintain an integrated system of transportation assets and facilities relating to our sulfur services. We gathermolten sulfur from refiners, primarily located on the Gulf Coast. We transport sulfur by inland and offshore barges, railcars and trucks. In the U.S., recoveredsulfur is mainly kept in liquid form from production to usage at a temperature of approximately 275 degrees Fahrenheit. Because of the temperaturerequirement, the sulfur industry uses specialized equipment to store and transport molten sulfur. We have the necessary assets and expertise to handle theunique requirements for transportation and storage of molten sulfur. Terms for our standard purchase and sales contracts typically range from one to two years in length with prices that are usually tied to a publishedmarket indicator and fluctuate according to the price movement of the indicator. We also provide barge transportation and tank storage services to largeproducers and consumers of sulfur under contracts with remaining terms from one to five years in duration. We operate sulfur forming assets in the Port of Stockton, California and Beaumont, Texas, which are used to convert molten sulfur into solid form(prills/granules). The Stockton facility is equipped with one wet prill unit capable of processing 1,000 metric tons of molten sulfur per day. The Beaumontfacility is equipped with two wet prill units and one granulation unit capable of processing a combined 5,500 metric tons of molten sulfur per day. Formedsulfur at both facilities is stored in bulk until sold into local or international agricultural markets. Our forming services contracts are fee based and typicallyinclude minimum fee guarantees.Our sulfuric acid production facility at our Plainview, Texas location processes molten sulfur to produce a dedicated supply of raw material sulfuricacid to our ammonium sulfate production plant. The ammonium sulfate plant produces approximately 400 tons per day of quality ammonium sulfate and ismarketed to our customers throughout the U.S. The sulfuric acid produced and not consumed by the captive ammonium sulfate production is sold to thirdparties.Fertilizer and related sulfur products are a natural extension of our molten sulfur business because of our access to sulfur and our distributioncapabilities. In the U.S., fertilizer is generally sold to farmers through local dealers. These dealers are typically owned and supplied by much larger wholesaledistributors. We sell to these wholesale distributors. Our industrial sulfur products are marketed primarily in the southern U.S., where many papermanufacturers and power plants are located. Our products are sold in accordance with price lists that vary from state to state. These price lists are updatedperiodically to reflect changes in seasonal or competitive prices. We transport our fertilizer and industrial sulfur products to our customers using third-partycommon carriers. We utilize barge and rail shipments for large volume and long distance shipments where available. We manufacture and market the following sulfur-based fertilizer and related sulfur products: •Plant nutrient sulfur products. We produce plant nutrient and agricultural ground sulfur products at our facilities in Odessa, Texas, Seneca,Illinois and Cactus, Texas. Our plant nutrient sulfur product is a 90% degradable sulfur product marketed under the Disper-Sul® trade name andsold throughout the U.S. to direct application agricultural markets.•Ammonium sulfate products. We produce various grades of ammonium sulfate including granular, coarse, standard, and 40% ammonium sulfatesolution. These products primarily serve direct application agricultural markets. We package these custom grade products under bothproprietary and private labels and sell them to major retail distributors and other retail customers.•Industrial sulfur products. We produce industrial sulfur products such as elemental pastille sulfur, industrial ground sulfur products, andemulsified sulfur. We produce elemental pastille sulfur at our Odessa, Texas and Seneca, Illinois facilities. Elemental pastille sulfur is used toincrease the efficiency of the coal-fired precipitators in the power industry. These industrial ground sulfur products are also used in a variety ofdusting and wettable10sulfur applications such as rubber manufacturing, fungicides, sugar and animal feeds. We produce emulsified sulfur at our Nash, Texas facility.Emulsified sulfur is primarily used to control the sulfur content in the pulp and paper manufacturing processes.•Liquid sulfur products. We produce ammonium thiosulfate at our Neches terminal facility in Beaumont, Texas. This agricultural sulfur productis a clear liquid containing 12% nitrogen and 26% sulfur. This product serves as a liquid plant nutrient used directly through spray rigs orirrigation systems. It is also blended with other nitrogen phosphorus potassium liquids or suspensions as well. Our market is predominantly theMid-South U.S. and Coastal Bend area of Texas.Our Sulfur Services Facilities. We own 26 railcars and lease 42 railcars equipped to transport molten sulfur. We own the following marine assets anduse them to transport molten sulfur between U.S. Gulf Coast storage terminals (including our terminal in Beaumont, Texas) under third-party marinetransportation agreements:Asset Class of Equipment Capacity/Horsepower Products TransportedMargaret Sue Offshore tank barge 10,500 long tons Molten sulfurM/V Martin Explorer Offshore tugboat 7,130 horsepower N/AM/V Martin Express Inland push boat 1,200 horsepower N/AMGM 101 Inland tank barge 2,500 long tons Molten sulfurMGM 102 Inland tank barge 2,500 long tons Molten sulfur We operate the following sulfur forming facilities as part of our sulfur services business: Terminal Location Daily Production Capacity Products StoredNeches Beaumont, Texas 5,500 metric tons per day Molten, prilled and granulated sulfurStockton Stockton, California 1,000 metric tons per day Molten and prilled sulfurWe lease 132 railcars to transport our fertilizer products. We own the following manufacturing plants as part of our sulfur services business:Facility Location Annual Capacity Description Fertilizer plant Plainview, Texas 150,000 tons Fertilizer productionFertilizer plant Beaumont, Texas 110,000 tons Liquid sulfur fertilizer productionFertilizer plants Odessa, Texas 35,000 tons Dry sulfur fertilizer productionFertilizer plant Seneca, Illinois 36,000 tons Dry sulfur fertilizer productionFertilizer plant Cactus, Texas 20,000 tons Dry sulfur fertilizer productionIndustrial sulfur plant Nash, Texas 18,000 tons Emulsified sulfur productionSulfuric acid plant Plainview, Texas 150,000 tons Sulfuric acid production Competition. The Martin Explorer/Margaret Sue articulated barge unit is one of four vessels currently used to transport molten sulfur between U.S.ports on the Gulf of Mexico and Tampa, Florida. Phosphate fertilizer manufacturers consume a majority of the sulfur produced in the U.S., which theypurchase directly from both producers and resellers. As a reseller, we compete against producers and other resellers capable of accessing the requiredtransportation and storage assets. Our sulfur-based fertilizer products compete with several large fertilizer and sulfur product manufacturers. However, theclose proximity of our manufacturing plants to our customer base is a competitive advantage for us in the markets we serve and allows us to minimize freightcosts and respond quickly to customer requests. Our sulfuric acid products compete with regional producers and importers in the South and Southwestportion of the U.S. from Louisiana to California. Seasonality. Sales of our agricultural fertilizer products are partly seasonal as a result of increased demand during the growing season.11Marine Transportation Segment Industry Overview. The inland waterway system is composed of a network of interconnected rivers and canals that serve as water highways and isused to transport vast quantities of products annually. This waterway system extends approximately 26,000 miles, of which 12,000 miles are generallyconsidered significant for domestic commerce. The Gulf Coast region is a major hub for petroleum refining. The petroleum refining process generates products and by-products that requiretransportation in large quantities from the refinery or processor. Convenient access to and use of this waterway system by the petroleum and petrochemicalindustry is a major reason for the current location of U.S. refineries and petrochemical facilities. The marine transportation industry uses push boats andtugboats as power sources and tank barges for freight capacity. The combination of the power source and tank barge freight capacity is called a tow. Marine Fleet. We utilize a fleet of inland and offshore tows that provide marine transportation of petroleum products and by-products produced inoil refining and natural gas processing. Our marine transportation business operates coastwise along the Gulf of Mexico and East Coast and on the U.S. inlandwaterway system, primarily between domestic ports along the Gulf of Mexico, Intracoastal Waterway, the Mississippi River system and the Tennessee-Tombigbee Waterway system. Our inland tows generally consist of one push boat and one to three tank barges, depending upon the horsepower of the pushboat, the river or canal capacity and conditions, and customer requirements. Our offshore tow consists of one tugboat, with much greater horsepower than aninland push boat, and one large tank barge. We transport asphalt, fuel oil, gasoline, sulfur and other bulk liquids. The following is a summary description of the marine vessels we use in our marine transportation business (excluding equipment classified as AssetsHeld for Sale):Class of Equipment Number in Class Capacity/Horsepower Description of Products Carried Inland tank barges 7 Under 20,000 barrels Asphalt, crude oil, fuel oil, gasolineand sulfurInland tank barges 24 20,000 - 31,000 barrels Asphalt, crude oil, fuel oil andgasolineInland push boats 17 800 - 2,650 horsepower N/AOffshore tank barge 1 59,000 barrels Diesel fuelOffshore tugboat 1 5,100 horsepower N/AOur largest marine transportation customers include major and independent oil and gas refining companies, petroleum marketing companies andMartin Resource Management. We conduct our marine transportation services on a fee basis primarily under spot contracts. We are a party to a marine transportation agreement under which we provide marine transportation services to Martin Resource Management on aspot contract basis at applicable market rates. Effective each January 1, this agreement automatically renews for consecutive one-year periods unless eitherparty terminates the agreement by giving written notice to the other party at least 60 days prior to the expiration of the then-applicable term. Competition. We compete primarily with other marine transportation companies. Competition in this industry has historically been based primarilyon price. However, customers are placing an increased emphasis on the age of equipment, safety, environmental compliance, quality of service and theavailability of a single source of supply of services. In addition to competitors that provide marine transportation services, we also compete with providers of other modes of transportation, such as rail,trucks and, to a lesser extent, pipelines. For example, a typical two inland barge unit carries a volume of product equal to approximately 80 railcars or 250tanker trucks. Pipelines generally provide a less expensive form of transportation than marine transportation. However, pipelines are not able to transportmost of the products we transport and are generally a less flexible form of transportation because they are limited to the fixed point-to-point distribution ofcommodities in high volumes over extended periods of time.12Our Relationship with Martin Resource Management Martin Resource Management is engaged in the following principal business activities: •providing land transportation of various liquids using a fleet of trucks and road vehicles and road trailers (the Partnership acquired MTI effectiveJanuary 1, 2019);•distributing fuel oil, asphalt, marine fuel and other liquids;•providing marine bunkering and other shore-based marine services in Texas, Louisiana, Mississippi, Alabama, and Florida;•operating a crude oil gathering business in Stephens, Arkansas;•providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;•providing crude oil marketing and transportation from the well head to the end market;•operating an environmental consulting company;•operating an engineering services company;•supplying employees and services for the operation of our business; and•operating, solely for our account, the asphalt facilities in Omaha, Nebraska, Port Neches, Texas, Hondo, Texas, and South Houston, Texas.We are and will continue to be closely affiliated with Martin Resource Management as a result of the following relationships.OwnershipMartin Resource Management owns approximately 15.7% of the outstanding limited partner units. In addition, Martin Resource Managementcontrols MMGP, our general partner, by virtue of its 51% voting interest in Holdings, the sole member of MMGP. MMGP owns a 2% general partner interestin us and all of our incentive distribution rights.ManagementMartin Resource Management directs our business operations through its ownership interests in and control of our general partner. We benefit fromour relationship with Martin Resource Management through access to a significant pool of management expertise and established relationships throughoutthe energy industry. We do not have employees. Martin Resource Management employees are responsible for conducting our business and operating ourassets on our behalf.Related Party AgreementsThe Omnibus Agreement with Martin Resource Management requires us to reimburse Martin Resource Management for all direct expenses it incursor payments it makes on our behalf or in connection with the operation of our business. We reimbursed Martin Resource Management for $127.9 million,$129.5 million and $135.8 million of direct costs and expenses for the years ended December 31, 2018, 2017 and 2016, respectively. There is no monetarylimitation on the amount we are required to reimburse Martin Resource Management for direct expenses.In addition to the direct expenses, under the Omnibus Agreement, we are required to reimburse Martin Resource Management for indirect generaland administrative and corporate overhead expenses. For the years ended December 31, 2018, 2017, and 2016, the conflicts committee of our general partner("Conflicts Committee") approved reimbursement amounts of $16.4 million, $16.4 million and $13.0 million, respectively, reflecting our allocable share ofsuch expenses. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any,annually. These indirect expenses covered the centralized corporate functions Martin Resource Management provides for us, such as accounting, treasury,clerical, engineering, legal, billing, information technology, administration of insurance,13environmental and safety compliance, general office expenses and employee benefit plans and other general corporate overhead functions we share withMartin Resource Management’s retained businesses. The Omnibus Agreement also contains significant non-compete provisions and indemnityobligations. Martin Resource Management also licenses certain of its trademarks and trade names to us under the Omnibus Agreement. Other agreements include, but are not limited to, a motor carrier agreement, marine transportation agreements, terminal services agreements, a tollingagreement, and a sulfuric acid sales agency agreement. Pursuant to the terms of the Omnibus Agreement, we are prohibited from entering into certain materialagreements with Martin Resource Management without the approval of the Conflicts Committee.For a more comprehensive discussion concerning the Omnibus Agreement and the other agreements that we have entered into with Martin ResourceManagement, please see "Item 13. Certain Relationships and Related Transactions, and Director Independence." Commercial We have been and anticipate that we will continue to be both a significant customer and supplier of products and services offered by MartinResource Management. Our motor carrier agreement with Martin Resource Management provides us with access to Martin Resource Management’s fleet ofroad vehicles and road trailers to provide land transportation in the areas served by Martin Resource Management (the Partnership acquired MTI effectiveJanuary 1, 2019). Our ability to utilize MTI’s land transportation operations is currently a key component of our integrated distribution network. In the aggregate, our purchases from Martin Resource Management accounted for approximately 9%, 8%, and 11% of our total cost of products soldduring for the years ended December 31, 2018, 2017 and 2016, respectively. We also purchase marine fuel from Martin Resource Management, which weaccount for as an operating expense. Correspondingly, Martin Resource Management is one of our significant customers. Our sales to Martin Resource Management accounted forapproximately 10%, 11%, and 13% of our total revenues for each of the years ended December 31, 2018, 2017 and 2016, respectively. We have entered intocertain agreements with Martin Resource Management pursuant to which we provide terminalling and storage and marine transportation services to itssubsidiary, Martin Energy Services LLC ("MES"), and MES provides terminal services to us to handle lubricants, greases and drilling fluids. Additionally,we have entered into a long-term, fee for services-based tolling agreement with Martin Resource Management where Martin Resource Management agrees topay us for the processing of its crude oil into finished products, including naphthenic lubricants, distillates, asphalt and other intermediate cuts.For a more comprehensive discussion concerning the Omnibus Agreement and the other agreements that we have entered into with Martin ResourceManagement, please see "Item 13. Certain Relationships and Related Transactions, and Director Independence." Approval and Review of Related Party TransactionsIf we contemplate entering into a transaction, other than a routine or in the ordinary course of business transaction, in which a related person willhave a direct or indirect material interest, the proposed transaction is submitted for consideration to the board of directors of our general partner or to ourmanagement, as appropriate. If the board of directors is involved in the approval process, it determines whether to refer the matter to the Conflicts Committee,as provided under our limited partnership agreement. If a matter is referred to the Conflicts Committee, it obtains information regarding the proposedtransaction from management and determines whether to engage independent legal counsel or an independent financial advisor to advise the members of thecommittee regarding the transaction. If the Conflicts Committee retains such counsel or financial advisor, it considers such advice and, in the case of afinancial advisor, such advisor’s opinion as to whether the transaction is fair and reasonable to us and to our unitholders.14InsuranceOur deductible for onshore physical damage resulting from named windstorms is 5% of the total value located at an individual location subject to anoverall minimum deductible of $1.0 million for damage caused by the named windstorm at all locations excluding Neches Industrial Park. Our onshoreprogram currently provides $40.0 million per occurrence for named windstorm events. For non-windstorm events, our deductible applicable to onshorephysical damage is $0.5 million per occurrence. Business interruption coverage in connection with a windstorm event is subject to the same $40.0 millionper occurrence and aggregate limit as the property damage coverage and has a waiting period of 45 days. For non-windstorm events, our waiting periodapplicable to business interruption is 30 days.We have various pollution liability policies which provide coverages ranging from remediation of our property to third party liability. The limits ofthese policies vary based on our assessments of exposure at each location.Loss of, or damage to, our vessels and cargo is insured through hull and cargo insurance policies. Vessel operating liabilities such as collision, cargo,environmental and personal injury are insured primarily through our participation in mutual insurance associations and other reinsurance arrangements,pursuant to which we are potentially exposed to assessments in the event claims by us or other members exceed available funds and reinsurance. Protectionand indemnity ("P&I") insurance coverage is provided by P&I associations and other insurance underwriters. Our vessels are entered in P&I associations thatare parties to a pooling agreement, known as the International Group Pooling Agreement ("Pooling Agreement") through which approximately 90% of theworld's ocean-going tonnage is reinsured through a group reinsurance policy. With regard to collision coverage, the first $1.0 million of coverage is insuredby our hull policy and any excess is insured by a P&I association. We insure our owned cargo through a domestic insurance company. We insure cargoowned by third parties through our P&I coverage. As a member of P&I associations that are parties to the Pooling Agreement, we are subject to supplementalcalls payable to the associations of which we are a member, based on our claims record and the other members of the other P&I associations that are parties tothe Pooling Agreement. Except for our marine operations, we self-insure against liability exposure up to a predetermined amount, beyond which we arecovered by catastrophe insurance coverage.For marine claims, our insurance covers up to $1.0 billion of liability per accident or occurrence. We believe our current insurance coverage isadequate to protect us against most accident related risks involved in the conduct of our business. However, there can be no assurance that all risks areadequately insured against, that any particular claim will be paid by the insurer, or that we will be able to procure adequate insurance coverage atcommercially reasonable rates in the future.Environmental and Regulatory Matters Our activities are subject to various federal, state and local laws and regulations, as well as orders of regulatory bodies, governing a wide variety ofmatters, including marketing, production, pricing, community right-to-know, protection of the environment, safety and other matters. Environmental We are subject to complex federal, state, and local environmental laws and regulations governing the discharge of materials into the environment orotherwise relating to protection of human health, natural resources and the environment. These laws and regulations can impair our operations that affect theenvironment in many ways, such as requiring the acquisition of permits to conduct regulated activities; restricting the manner in which we can releasematerials into the environment; requiring remedial activities or capital expenditures to mitigate pollution from former or current operations; and imposingsubstantial liabilities on us for pollution resulting from our operations. Many environmental laws and regulations can impose joint and several, strictliability, and any failure to comply with environmental laws and regulations may result in the assessment of administrative, civil, and criminal penalties, theimposition of investigatory and remedial obligations, and, in some circumstances, the issuance of injunctions that can limit or prohibit our operations.The clear trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment, and, thus, anychanges in environmental laws and regulations that result in more stringent and costly waste handling, storage, transport, disposal, or remediationrequirements could have a material adverse effect on our operations and financial position. Moreover, there is inherent risk of incurring significantenvironmental costs and liabilities in the performance of our operations due to our handling of petroleum products and by-products, chemical substances,and wastes as well as the accidental release or spill of such materials into the environment. Consequently, we cannot provide assurance that we will not incursignificant costs and liabilities as result of such handling practices, releases or spills, including those relating to claims for damage to property and persons. Inthe event of future increases in costs, we may be unable to pass on those increases to our customers. While we believe that we are in substantial compliancewith current environmental laws and regulations and that continued compliance with existing requirements would not have a material adverse impact on us,we cannot provide any assurance that our environmental compliance expenditures will not have a material adverse effect on us in the future. Superfund The Federal Comprehensive Environmental Response, Compensation and Liability Act, as amended, ("CERCLA"), also known as the "Superfund"law, and similar state laws, impose liability without regard to fault or the legality of the original conduct, on certain classes of "responsible persons,"including the owner or operator of a site where regulated hazardous substances have been released into the environment and companies that disposed orarranged for the disposal of the hazardous substances found at such site. Under CERCLA, these responsible persons may be subject to joint and several strictliability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources, and for thecosts of certain health studies, and it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and propertydamage allegedly caused by the release of hazardous substances into the environment. Although certain hydrocarbons are not subject to CERCLA’s reachbecause "petroleum" is excluded from CERCLA’s definition of a "hazardous substance," in the course of our ordinary operations we will generate wastes thatmay fall within the definition of a "hazardous substance." In addition, some state counterparts to CERCLA tie liability to a broader set of substances thandoes CERCLA. Solid Waste We generate both hazardous and nonhazardous solid wastes, which are subject to requirements of the federal Resource Conservation and RecoveryAct, as amended ("RCRA") and comparable state statutes. From time to time, the U.S. Environmental Protection Agency ("EPA") has considered makingchanges in nonhazardous waste standards that would result in stricter disposal requirements for these wastes. Furthermore, it is possible some wastesgenerated by us that are currently classified as nonhazardous may in the future be designated as "hazardous wastes," resulting in the wastes being subject tomore rigorous and costly disposal requirements. Changes in applicable regulations may result in an increase in our capital expenditures or operatingexpenses. We currently own or lease, and have in the past owned or leased, properties that have been used for the manufacturing, processing, transportationand storage of petroleum products and by-products. Solid waste disposal practices within oil and gas related industries have improved over the years with thepassage and implementation of various environmental laws and regulations. Nevertheless, a possibility exists that petroleum and other solid wastes may havebeen disposed of on or under various properties owned or leased by us during the operating history of those facilities. In addition, a number of theseproperties have been operated by third parties over whom we had no control as to such entities’ handling of petroleum, petroleum by-products or other wastesand the manner in which such substances may have been disposed of or released. State and federal laws and regulations applicable to oil and natural gaswastes and properties have gradually become more strict and, under such laws and regulations, we could be required to remove or remediate previouslydisposed wastes or property contamination, including groundwater contamination, even under circumstances where such contamination resulted from pastoperations of third parties.Clean Air Act Our operations are subject to the federal Clean Air Act ("CAA"), as amended, and comparable state statutes. Amendments to the CAA adopted in1990 contain provisions that may result in the imposition of increasingly stringent pollution control requirements with respect to air emissions from theoperations of our terminal facilities, processing and storage facilities and fertilizer and related products manufacturing and processing facilities. Such airpollution control requirements may include specific equipment or technologies to control emissions, permits with emissions and operational limitations, pre-approval of new or modified projects or facilities producing air emissions, and similar measures. Failure to comply with applicable air statutes or regulationsmay lead to the assessment of administrative, civil or criminal penalties, and/or result in the limitation or cessation of construction or operation of certain airemission sources. We believe our operations, including our manufacturing, processing and storage facilities and terminals, are in substantial compliance withapplicable requirements of the CAA and analogous state laws. Global Warming and Climate Change. Recent scientific studies have suggested that emissions of certain gases, commonly referred to as"greenhouse gases" and including carbon dioxide and methane, may be contributing to warming of the Earth’s atmosphere. In response to such studies, theU.S. Congress has from time to time considered climate change-related legislation to restrict greenhouse gas emissions. Many states have already taken legalmeasures to reduce emissions of greenhouse gases, primarily through the planned development of greenhouse gas emission inventories and/or regionalgreenhouse gas cap and trade programs. Also, as a result of the U.S. Supreme Court’s decision on April 2, 2007, in Massachusetts, et al. v. EPA, the EPAeventually concluded that it is required to regulate greenhouse gas emissions from mobile sources (e.g., cars and trucks) even if Congress does not adopt newlegislation specifically addressing emissions of greenhouse gases. The Court's holding in Massachusetts that greenhouse gases fall under the federal CAA'sdefinition of air pollutant has15also led the EPA to determine that regulation of greenhouse gas emissions from stationary sources under various Clean Air Act programs is required. To thatend, EPA promulgated regulations, referred to as the Tailoring Rule, 75 Fed. Red. 31514, to begin gradually subjecting stationary greenhouse gas emissionsources to various Clean Air Act programs, including permitting programs applicable to new and existing major sources of greenhouse gas emissions. Inreviewing the regulations at issue, the Supreme Court struck down EPA’s permitting requirements as applicable only to greenhouse gas emissions, although itupheld the EPA’s authority to control greenhouse gas emissions when a permit is required due to emissions of other pollutants.On an international level, almost 200 nations agreed in December 2015 to an international climate change agreement in Paris, France that calls for countriesto set their own greenhouse gas emissions targets and be transparent about the measures each country will use to achieve its emissions targets. Although thepresent administration has announced its intention to withdraw from the Paris accord, such withdrawal has not yet been finalized. It is not possible at thistime to predict how or when the United States might impose restrictions on GHGs as a result of the international climate change agreement. Further, severalstates and local governments have stated their commitment to its principles in their effectuation of policy and regulations. To date, applicable requirementshave not had a substantial effect upon our operations. Still, new legislation or regulatory programs that restrict emissions of greenhouse gases in areas inwhich we conduct business could adversely affect our operations and demand for our services.Moreover, in interpretative guidance on climate change disclosures, the U.S. Securities and Exchange Commission ("SEC") indicates that climatechange could have an effect on the severity of weather (including hurricanes and floods), sea levels, the arability of farmland, and water availability andquality. If such effects were to occur, our operations have the potential to be adversely affected. Potential adverse effects could include disruption of ourbusiness activities, including, for example, damages to our facilities from powerful winds or floods, or increases in our costs of operation or reductions in theefficiency of our operations, as well as potentially increased costs for insurance coverages in the aftermath of such effects. Significant physical effects ofclimate change could also have an indirect effect on our financing and operations by disrupting the transportation or process related services provided bycompanies or suppliers with whom we have a business relationship. In addition, the demand for and consumption of our products and services (due to changein both costs and weather patterns), and the economic health of the regions in which we operate, could have a material adverse effect on our business,financial condition, results of operations and cash flows. We may not be able to recover through insurance some or any of the damages, losses or costs thatmay result from potential physical effects of climate change.Clean Water Act The Federal Water Pollution Control Act of 1972, as amended, also known as Clean Water Act and comparable state laws impose restrictions andstrict controls regarding the discharge of pollutants, including hydrocarbon-bearing wastes, into state waters and waters of the U.S. Pursuant to the CleanWater Act and similar state laws, a National Pollutant Discharge Elimination System permit, or a state permit, or both, must be obtained to dischargepollutants into federal and state waters. In addition, the Clean Water Act and comparable state laws require that individual permits or coverage under generalpermits be obtained by subject facilities for discharges of storm water runoff. Furthermore, the Clean Water Act potentially requires individual permits orqualification for nationwide permits for activities that involve the discharge of dredged or fill material into waters of the United States, the definition ofwhich was expanded by the EPA and Corps of Engineers in a 2015 rulemaking. The 2015 rule, if it were to become effective, could significantly expandfederal control of land and water resources across the U.S., triggering substantial additional permitting and regulatory requirements to which our operationsmay be subject from time to time. The EPA and the Corps subsequently proposed a rulemaking in June 2017 to repeal the 2015 rule and also announced theirintent to issue a new rule defining the CWA’s jurisdiction. The EPA and the Corps issued a final rule in January 2018 staying implementation of the 2015rule for two years. On December 11, 2018, the EPA and the Corps proposed a new rule defining the CWA’s jurisdiction. A nationwide patchwork of litigationand court rulings developed regarding the rules. At this time, due to varied court rulings, the 2015 rule is effective in some states, while the agencies’decision to delay implementation of the 2015 rule is effective in other states. If finalized, the 2018 proposed rule would apply nationwide, replacing thenational patchwork of CWA jurisdictional applicability. Additionally, if finalized, it is possible that the 2018 proposed rule could be challenged. The scopeof the CWA’s jurisdiction will likely remain fluid until a final regulatory determination is made and subsequent litigation, if any, is finalized. To the extent arule ultimately promulgated expands the scope of the CWA’s jurisdiction, we could face increased costs and delays with respect to permitting. We believethat we are in substantial compliance with Clean Water Act permitting requirements as well as the conditions imposed thereunder, and that our continuedcompliance with such existing permit conditions will not have a material adverse effect on our business, financial condition or results of operations.Oil Pollution Act The Oil Pollution Act of 1990, as amended ("OPA") imposes a variety of regulations on "responsible parties" related to the prevention of oil spillsand liability for damages resulting from such spills in U.S. waters. A "responsible party" includes16the owner or operator of a facility or vessel or the lessee or permittee of the area in which an offshore facility is located. The OPA assigns liability to eachresponsible party for oil removal costs and a variety of public and private damages including natural resource damages. Under the OPA, vessels and shorefacilities handling, storing, or transporting oil are required to develop and implement oil spill response plans, and vessels greater than 300 tons in weightmust provide to the U.S. Coast Guard evidence of financial responsibility to cover the costs of cleaning up oil spills from such vessels. The OPA also requiresthat all newly constructed tank barges engaged in oil transportation in the U.S. be double hulled effective January 1, 2016. We believe we are in substantialcompliance with all of the oil spill-related and financial responsibility requirements. Nonetheless, in the aftermath of the Deepwater Horizon incident in2010, Congress has from time to time considered oil spill related legislation that could have the effect of substantially increasing financial responsibilityrequirements and potential fines and damages for violations and discharges subject to the OPA, and similar legislation. Any such changes in law affectingareas where we conduct business could materially affect our operations.Safety Regulation The Company’s marine transportation operations are subject to regulation by the U.S. Coast Guard, federal laws, state laws and certain internationaltreaties. Tank ships, push boats, tugboats and barges are required to meet construction and repair standards established by the American Bureau of Shipping,a private organization, and the U.S. Coast Guard and to meet operational and safety standards presently established by the U.S. Coast Guard. We believe ourmarine operations and our terminals are in substantial compliance with current applicable safety requirements. Occupational Health Regulations The workplaces associated with our manufacturing, processing, terminal and storage facilities are subject to the requirements of the federalOccupational Safety and Health Act ("OSHA") and comparable state statutes. We believe we have conducted our operations in substantial compliance withOSHA requirements, including general industry standards, record keeping requirements and monitoring of occupational exposure to regulatedsubstances. Our marine vessel operations are also subject to safety and operational standards established and monitored by the U.S. Coast Guard. In general, we expect to increase our expenditures relating to compliance with likely higher industry and regulatory safety standards such as thosedescribed above. These expenditures cannot be accurately estimated at this time, but we do not expect them to have a material adverse effect on our business. Jones Act The Jones Act is a federal law that restricts maritime transportation between locations in the U.S. to vessels built and registered in the U.S. and ownedand manned by U.S. citizens. Since we engage in maritime transportation between locations in the U.S., we are subject to the provisions of the law. As a result,we are responsible for monitoring the ownership of our subsidiaries that engage in maritime transportation and for taking any remedial action necessary toensure that no violation of the Jones Act ownership restrictions occurs. The Jones Act also requires that all U.S.-flagged vessels be manned by U.S. citizens.Foreign-flagged seamen generally receive lower wages and benefits than those received by U.S. citizen seamen. This requirement significantly increasesoperating costs of U.S.-flagged vessel operations compared to foreign-flagged vessel operations. Certain foreign governments subsidize their nations’shipyards. This results in lower shipyard costs both for new vessels and repairs than those paid by U.S.-flagged vessel owners. The U.S. Coast Guard andAmerican Bureau of Shipping maintain the most stringent regimen of vessel inspection in the world, which tends to result in higher regulatory compliancecosts for U.S.-flagged operators than for owners of vessels registered under foreign flags of convenience. Merchant Marine Act of 1936 The Merchant Marine Act of 1936 is a federal law that provides that, upon proclamation by the President of the U.S. of a national emergency or athreat to the national security, the U.S. Secretary of Transportation may requisition or purchase any vessel or other watercraft owned by U.S. citizens(including us, provided that we are considered a U.S. citizen for this purpose). If one of our push boats, tugboats or tank barges were purchased orrequisitioned by the U.S. government under this law, we would be entitled to be paid the fair market value of the vessel in the case of a purchase or, in thecase of a requisition, the fair market value of charter hire. However, if one of our push boats or tugboats is requisitioned or purchased and its associated tankbarge is left idle, we would not be entitled to receive any compensation for the lost revenues resulting from the idled barge. We also would not be entitled tobe compensated for any consequential damages we suffer as a result of the requisition or purchase of any of our push boats, tugboats or tank barges.Employees We do not have any employees. Under our Omnibus Agreement with Martin Resource Management, Martin Resource Management provides us withcorporate staff and support services. These services include centralized corporate functions, such as accounting, treasury, engineering, informationtechnology, insurance, administration of employee benefit plans and other corporate services. Martin Resource Management employs approximately 735individuals, including 57 employees represented by labor unions, who provide direct support to our operations as of December 31, 2018.Financial Information about Segments Information regarding our operating revenues and identifiable assets attributable to each of our segments is presented in Note 19 to our consolidatedfinancial statements included in this annual report on Form 10-K. Access to Public Filings We provide public access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to thesereports filed with the SEC under the Securities and Exchange Act of 1934. These documents may be accessed free of charge on our website at the followingaddress: www.martinmidstream.com. These documents are provided as soon as is reasonably practicable after their filing with the SEC. This website addressis intended to be an inactive, textual reference only, and none of the material on this website is part of this report. These documents may also be found at theSEC’s website at www.sec.gov.Item 1A.Risk Factors Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subjectare similar to those that would be faced by a corporation engaged in a business similar to ours. If any of the following risks were actually to occur, ourbusiness, financial condition or results of operations could be materially adversely affected. In this case, we might not be able to pay distributions on ourcommon units, the trading price of our common units could decline and unitholders could lose all or part of their investment. These risk factors should beread in conjunction with the other detailed information concerning us set forth herein.17Risks Relating to Our BusinessImportant factors that could cause actual results to differ materially from our expectations include, but are not limited to, the risks set forth below.The risks described below should not be considered to be comprehensive and all-inclusive. Many of such factors are beyond our ability to control or predict.Unitholders are cautioned not to put undue reliance on forward-looking statements. Additional risks that we do not yet know of or that we currently think areimmaterial may also impair our business operations, financial condition and results of operations.We may not have sufficient cash after the establishment of cash reserves and payment of our general partner's expenses to enable us to pay the minimumquarterly distribution each quarter.We may not have sufficient available cash each quarter in the future to pay the minimum quarterly distributions on all our units. Under the terms ofour partnership agreement, we must pay our general partner's expenses and set aside any cash reserve amounts before making a distribution to our unitholders.The amount of cash we can distribute on our common units principally depends upon the amount of net cash generated from our operations, which willfluctuate from quarter to quarter based on, among other things:•the costs of acquisitions, if any;•the prices of petroleum products and by-products;•fluctuations in our working capital;•the level of capital expenditures we make;•restrictions contained in our debt instruments and our debt service requirements;•our ability to make working capital borrowings under our credit facility; and•the amount, if any, of cash reserves established by our general partner in its discretion.Unitholders should also be aware that the amount of cash we have available for distribution depends primarily on our cash flow, including cash flowfrom working capital borrowings, and not solely on profitability, which will be affected by non-cash items. In addition, our general partner determines theamount and timing of asset purchases and sales, capital expenditures, borrowings, issuances of additional partnership securities and the establishment ofreserves, each of which can affect the amount of cash available for distribution to our unitholders. As a result, we may make cash distributions during periodswhen we record losses and may not make cash distributions during periods when we record net income.Restrictions in our credit facility could prevent us from making distributions to our unitholders.The payment of principal and interest on our indebtedness reduces the cash available for distribution to our unitholders. In addition, we areprohibited by our credit facility from making cash distributions during a default or an event of default under our credit facility or if the payment of adistribution would cause a default or an event of default thereunder. Our leverage and various limitations in our credit facility may reduce our ability to incuradditional debt, engage in certain transactions, and capitalize on acquisition or other business opportunities that could increase cash flows and distributionsto our unitholders.Demand for a portion of our terminalling and storage services is substantially dependent on the level of offshore oil and gas exploration, development andproduction activity.The level of offshore oil and gas exploration, development and production activity historically has been volatile and is likely to continue to be so inthe future. The level of activity is subject to large fluctuations in response to relatively minor changes in a variety of factors that are beyond our control,including:•prevailing oil and natural gas prices and expectations about future prices and price volatility;•the ability of exploration and production companies to drill in other basins that have more attractive rates of return;18•the cost of offshore exploration for and production and transportation of oil and natural gas;•worldwide demand for oil and natural gas;•consolidation of oil and gas and oil service companies operating offshore;•availability and rate of discovery of new oil and natural gas reserves in offshore areas;•local and international political and economic conditions and policies;•technological advances affecting energy production and consumption;•weather conditions;•environmental regulation; and•the ability of oil and gas companies to generate or otherwise obtain funds for exploration and production.We expect levels of offshore oil and gas exploration, development and production activity to continue to be volatile and affect demand for ourterminalling and storage services.Debt we owe or incur in the future could limit our flexibility to obtain financing and to pursue other business opportunities. Our indebtedness could have important consequences, including the following:•our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may beimpaired or such financing may not be available on favorable terms;•our funds available for operations, future business opportunities and distributions to unitholders will be reduced by that portion of our cashflows required to make interest payments on the debt;•we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; and•our flexibility in responding to changing business and economic conditions may be limited.Our ability to service our debt will depend upon, among other things, our future financial and operating performance, which will be affected byprevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are notsufficient to service any future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities,acquisitions, investments or capital expenditures, selling assets or seeking additional equity capital. We may not be able to effect any of these actions onsatisfactory terms or at all.Fluctuations in interest rates could materially affect our financial results.Because a significant portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense.Based on our debt outstanding as of December 31, 2018, if interest rates were to increase by 100 basis points, the corresponding increase in interest expenseon our variable rate debt would decrease future earnings and cash flows by approximately $2.9 million per year.Further, LIBOR and certain other interest rate “benchmarks” are the subject of recent national, international, and other regulatory guidance andproposals for reform. These reforms may cause such benchmarks to perform differently than in the past or have other consequences which cannot be predicted.On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop persuading orcompelling banks to submit LIBOR rates after 2021. It is expected that a transition away from the widespread use of LIBOR to alternative rates will occurover the course of the next several years. As a result of this transition, LIBOR may disappear entirely or perform differently than in the past, and interest rateson our variable rate indebtedness may be adversely affected.19If we do not have sufficient capital resources for acquisitions or opportunities for expansion, our growth will be limited.We intend to explore acquisition opportunities in order to expand our operations and increase our profitability. We may finance acquisitionsthrough public and private financing, or we may use our limited partner interests for all or a portion of the consideration to be paid in acquisitions.Distributions of cash with respect to these equity securities or limited partner interests may reduce the amount of cash available for distribution to thecommon units. In addition, in the event our limited partner interests do not maintain a sufficient valuation, or potential acquisition candidates are unwillingto accept our limited partner interests as all or part of the consideration, we may be required to use our cash resources, if available, or rely on other financingarrangements to pursue acquisitions. If we use funds from operations, other cash resources or increased borrowings for an acquisition, the acquisition couldadversely impact our ability to make our minimum quarterly distributions to our unitholders. Additionally, if we do not have sufficient capital resources orare not able to obtain financing on terms acceptable to us for acquisitions, our ability to implement our growth strategies may be adversely impacted.A higher cost of capital relative to our peers could limit our ability to grow through acquisitions.In order to expand our operations and increase profitability, we explore acquisition opportunities. When competing for acquisition targets, firmswith a lower cost of capital will be in a stronger position to secure the acquisition. A higher cost of capital relative to our peers could put us in a weakerposition to grow through acquisitions.We are exposed to counterparty risk in our credit facility and related interest rate protection agreements.We rely on our credit facility to assist in financing a significant portion of our working capital, acquisitions and capital expenditures. Our ability toborrow under our credit facility may be impaired because:•one or more of our lenders may be unable or otherwise fail to meet its funding obligations;•the lenders do not have to provide funding if there is a default under the credit facility or if any of the representations or warranties includedin the credit facility are false in any material respect; and•if any lender refuses to fund its commitment for any reason, whether or not valid, the other lenders are not required to provide additionalfunding to make up for the unfunded portion.If we are unable to access funds under our credit facility, we will need to meet our capital requirements, including some of our short-term capitalrequirements, using other sources. Alternative sources of liquidity may not be available on acceptable terms, if at all. If the cash generated from ouroperations or the funds we are able to obtain under our credit facility or other sources of liquidity are not sufficient to meet our capital requirements, then wemay need to delay or abandon capital projects or other business opportunities, which could have a material adverse effect on our business, financialcondition and results of operations.In addition, we have from time to time entered into interest rate protection agreements to manage our interest rate risk exposure by fixing a portionof the interest expense we pay on our long-term debt under our credit facility. Uncertainty in the global economy and banking markets exists, which couldaffect whether the counterparties to such interest rate protection agreements are able to honor their agreements. If the counterparties fail to honor theircommitments, we could experience higher interest rates, which could have a material adverse effect on our business, financial condition and results ofoperations. In addition, if the counterparties fail to honor their commitments, we also may be required to replace such interest rate protection agreements withnew interest rate protection agreements, and such replacement interest rate protection agreements may be at higher rates than our current interest rateprotection agreements, which could have a material adverse effect on our business, financial condition and results of operations.The impacts of climate-related initiatives at the international, federal and state levels remain uncertain at this time.Currently, there are numerous international, federal and state-level initiatives and proposals addressing domestic and global climate issues. Withinthe U.S., most of these proposals would regulate and/or tax, in one fashion or another, the production of carbon dioxide and other "greenhouse gases" tofacilitate the reduction of carbon compound emissions to the atmosphere and provide tax and other incentives to produce and use more "clean energy." Coststo comply with future climate-related initiatives could have a material impact on our business, financial condition and results of operations.20Our recent and future acquisitions may not be successful, may substantially increase our indebtedness and contingent liabilities and may createintegration difficulties.As part of our business strategy, we intend to acquire businesses or assets we believe complement our existing operations. We may not be able tosuccessfully integrate recent or any future acquisitions into our existing operations or achieve the desired profitability from such acquisitions. Theseacquisitions may require substantial capital expenditures and the incurrence of additional indebtedness. If we make acquisitions, our capitalization andresults of operations may change significantly. Further, any acquisition could result in:•post-closing discovery of material undisclosed liabilities of the acquired business or assets;•the unexpected loss of key employees or customers from the acquired businesses;•difficulties resulting from our integration of the operations, systems and management of the acquired business; and•an unexpected diversion of our management's attention from other operations.If recent or any future acquisitions are unsuccessful or result in unanticipated events or if we are unable to successfully integrate acquisitions intoour existing operations, such acquisitions could adversely affect our results of operations, cash flow and ability to make distributions to our unitholders.Adverse weather conditions, including droughts, hurricanes, tropical storms and other severe weather, could reduce our results of operations and ability tomake distributions to our unitholders.Our distribution network and operations are primarily concentrated in the Gulf Coast region and along the Mississippi River inland waterway.Weather in these regions is sometimes severe (including tropical storms and hurricanes) and can be a major factor in our day-to-day operations. Our marinetransportation operations can be significantly delayed, impaired or postponed by adverse weather conditions, such as fog in the winter and spring months andcertain river conditions. Additionally, our marine transportation operations and our assets in the Gulf of Mexico, including our barges, push boats, tugboatsand terminals, can be adversely impacted or damaged by hurricanes, tropical storms, tidal waves or other related events. Demand for our lubricants and thediesel fuel we throughput in our Terminalling and Storage segment can be affected if offshore drilling operations are disrupted by weather in the Gulf ofMexico.National weather conditions have a substantial impact on the demand for our products. Unusually warm weather during the winter months can causea significant decrease in the demand for NGL products. Likewise, extreme weather conditions (either wet or dry) can decrease the demand for fertilizer. Forexample, an unusually wet spring can delay planting of seeds, which can leave insufficient time to apply fertilizer at the planting stage. Conversely, droughtconditions can kill or severely stunt the growth of crops, thus eliminating the need to nurture plants with fertilizer. Any of these or similar conditions couldresult in a decline in our net income and cash flow, which would reduce our ability to make distributions to our unitholders.If we incur material liabilities that are not fully covered by insurance, such as liabilities resulting from accidents on rivers or at sea, spills, fires orexplosions, our results of operations and ability to make distributions to our unitholders could be adversely affected.Our operations are subject to the operating hazards and risks incidental to terminalling and storage, marine transportation and the distribution ofpetroleum products and by-products and other industrial products. These hazards and risks, many of which are beyond our control, include:•accidents on rivers or at sea and other hazards that could result in releases, spills and other environmental damages, personal injuries, loss oflife and suspension of operations;•leakage of NGLs, natural gas, and other petroleum products and by-products;•fires and explosions;•damage to transportation, terminalling and storage facilities and surrounding properties caused by natural disasters; and21•terrorist attacks or sabotage.Our insurance coverage may not be adequate to protect us from all material expenses related to potential future claims for personal-injury andproperty damage, including various legal proceedings and litigation resulting from these hazards and risks. If we incur material liabilities that are not coveredby insurance, our operating results, cash flow and ability to make distributions to our unitholders could be adversely affected.Changes in the insurance markets attributable to the effects of hurricanes and their aftermath may make some types of insurance more difficult orexpensive for us to obtain. As a result, we may be unable to secure the levels and types of insurance we would otherwise have secured prior to such events.Moreover, the insurance that may be available to us may be significantly more expensive than our existing insurance coverage.The price volatility of petroleum products and by-products could reduce our liquidity and results of operations and ability to make distributions to ourunitholders.We purchase petroleum products and by-products, such as molten sulfur, fuel oils, NGLs (including normal butane), lubricants, and other bulkliquids and sell these products to wholesale and bulk customers and to other end users. We also generate revenues through the terminalling and storage ofcertain products for third parties. The price and market value of petroleum products and by-products could be, and has recently been, volatile. Our liquidityand revenues have been adversely affected by this volatility during periods of decreasing prices because of the reduction in the value and resale price of ourinventory. In addition, our liquidity and costs have been adversely affected during periods of increasing prices because of the increased costs associated withour purchase of petroleum products and by-products. Future price volatility could have an adverse impact on our liquidity and results of operations, cashflow and ability to make distributions to our unitholders.Increasing energy prices could adversely affect our results of operations.Increasing energy prices could adversely affect our results of operations. Diesel fuel, natural gas, chemicals and other supplies are recorded inoperating expenses. An increase in price of these products would increase our operating expenses, which could adversely affect our results of operationsincluding net income and cash flows. We cannot assure unitholders that we will be able to pass along increased operating expenses to our customers.Decreasing energy prices could adversely affect our results of operations.Decreasing energy prices could adversely affect our results of operations. If commodity prices remain weak for a sustained period, our pipeline,terminalling throughput and NGL volumes may be negatively impacted, particularly as producers are curtailing or redirecting drilling, adversely affectingour results of operations. A sustained decline in commodity prices could result in a decrease in activity in the areas served by certain of our terminalling andstorage and marine transportation assets resulting in reduced utilization of these assets.Increased competition from alternative natural gas transportation and storage options and alternative fuel sources could have a significant financialimpact on us.Our ability to renew or replace existing contracts at rates sufficient to maintain current revenues and cash flows could be adversely affected byactivities of other interstate and intrastate pipelines and storage facilities that may expand or construct competing transportation and storage systems. Inaddition, future pipeline transportation and storage capacity could be constructed in excess of actual demand and with lower fuel requirements, operating andmaintenance costs than our facilities, which could reduce the demand for and the rates that we receive for our services in particular areas. Further, natural gasalso competes with alternative energy sources available to our customers that are used to generate electricity, such as hydroelectric power, solar, wind,nuclear, coal and fuel oil.Our NGL and sulfur-based fertilizer products are subject to seasonal demand and could cause our revenues to vary.The demand for NGLs and natural gas is highest in the winter. Therefore, revenue from our natural gas services business is higher in the winter thanin other seasons. Our sulfur-based fertilizer products experience an increase in demand during the spring, which increases the revenue generated by thisbusiness line in this period compared to other periods. The seasonality of the revenue from these products may cause our results of operations to vary on aquarter-to-quarter basis and thus could cause our cash available for quarterly distributions to fluctuate from period to period.22The highly competitive nature of our industry could adversely affect our results of operations and ability to make distributions to our unitholders.We operate in a highly competitive marketplace in each of our primary business segments. Most of our competitors in each segment are largercompanies with greater financial and other resources than we possess. We may lose customers and future business opportunities to our competitors and anysuch losses could adversely affect our results of operations and ability to make distributions to our unitholders.Our business is subject to compliance with environmental laws and regulations that could expose us to significant costs and liabilities and adversely affectour results of operations and ability to make distributions to our unitholders.Our business is subject to federal, state and local environmental laws and regulations governing the discharge of materials into the environment orotherwise relating to protection of human health, natural resources and the environment. These laws and regulations may impose numerous obligations thatare applicable to our operations, such as: requiring the acquisition of permits to conduct regulated activities; restricting the manner in which we can releasematerials into the environment; requiring remedial activities or capital expenditures to mitigate pollution from former or current operations; and imposingsubstantial liabilities on us for pollution resulting from our operations. Numerous governmental authorities, such as the U.S. Environmental ProtectionAgency and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimesrequiring difficult and costly actions. Many environmental laws and regulations can impose joint and several strict liability, and any failure to comply withenvironmental laws, regulations and permits may result in the assessment of administrative, civil and criminal penalties, the imposition of investigatory andremedial obligations and, in some circumstances, the issuance of injunctions that can limit or prohibit our operations. The clear trend in environmentalregulation is to place more restrictions and limitations on activities that may affect the environment, and, thus, any changes in environmental laws andregulations that result in more stringent and costly waste handling, storage, transport, disposal or remediation requirements could have a material adverseeffect on our operations and financial position.The loss or insufficient attention of key personnel could negatively impact our results of operations and ability to make distributions to our unitholders.Our success is largely dependent upon the continued services of members of the senior management team of Martin Resource Management. Thosesenior officers have significant experience in our businesses and have developed strong relationships with a broad range of industry participants. The loss ofany of these executives could have a material adverse effect on our relationships with these industry participants, our results of operations and our ability tomake distributions to our unitholders.We do not have employees. We rely solely on officers and employees of Martin Resource Management to operate and manage our business. MartinResource Management operates businesses and conducts activities of its own in which we have no economic interest. There could be competition for the timeand effort of the officers and employees who provide services to our general partner. If these officers and employees do not or cannot devote sufficientattention to the management and operation of our business, our results of operations and ability to make distributions to our unitholders may be reduced.Our loss of significant commercial relationships with Martin Resource Management could adversely impact our results of operations and ability to makedistributions to our unitholders.Martin Resource Management provides us with various services and products pursuant to various commercial contracts. The loss of any of theseservices and products provided by Martin Resource Management could have a material adverse impact on our results of operations, cash flow and ability tomake distributions to our unitholders. Additionally, we provide terminalling and storage, processing and marine transportation services to Martin ResourceManagement to support its businesses under various commercial contracts. The loss of Martin Resource Management as a customer could have a materialadverse impact on our results of operations, cash flow and ability to make distributions to our unitholders.Our business could be adversely affected if operations at our transportation, terminalling and storage and distribution facilities experienced significantinterruptions. Our business could also be adversely affected if the operations of our customers and suppliers experienced significant interruptions.Our operations are dependent upon our terminalling and storage facilities and various means of transportation. We are also dependent upon theuninterrupted operations of certain facilities owned or operated by our suppliers and customers. Any significant interruption at these facilities or inability totransport products to or from these facilities or to or from our customers for any reason would adversely affect our results of operations, cash flow and abilityto make distributions to our unitholders.23Operations at our facilities and at the facilities owned or operated by our suppliers and customers could be partially or completely shut down, temporarily orpermanently, as the result of any number of circumstances that are not within our control, such as:•catastrophic events, including hurricanes;•environmental remediation;•labor difficulties; and•disruptions in the supply of our products to our facilities or means of transportation.Additionally, terrorist attacks and acts of sabotage could target oil and gas production facilities, refineries, processing plants, terminals and otherinfrastructure facilities. Any significant interruptions at our facilities, facilities owned or operated by our suppliers or customers, or in the oil and gas industryas a whole caused by such attacks or acts could have a material adverse effect on our results of operations, cash flow and ability to make distributions to ourunitholders.NASDAQ does not require a publicly traded partnership like us to comply with certain of its corporate governance requirements, and therefore,unitholders do not have the same protections afforded to shareholders of corporations subject to all NASDAQ requirements. Because we are a publicly traded partnership, the Nasdaq Global Select Market ("NASDAQ") does not require our general partner to have a majorityof independent directors on its board of directors or to establish a compensation committee or nominating and corporate governance committee. Accordingly, unitholders do not have the same protections afforded to certain corporations that are subject to all of NASDAQ corporate governancerequirements.Our marine transportation business could be adversely affected if we do not satisfy the requirements of the Jones Act or if the Jones Act were modified oreliminated.The Jones Act is a federal law that restricts domestic marine transportation in the U.S. to vessels built and registered in the U.S. Furthermore, theJones Act requires that the vessels be manned and owned by U.S. citizens. If we fail to comply with these requirements, our vessels lose their eligibility toengage in coastwise trade within U.S. domestic waters.The requirements that our vessels be U.S. built and manned by U.S. citizens, the crewing requirements and material requirements of the Coast Guardand the application of U.S. labor and tax laws significantly increase the costs of U.S. flagged vessels when compared with foreign-flagged vessels. During thepast several years, certain interest groups have lobbied Congress to repeal the Jones Act to facilitate foreign flag competition for trades and cargoes reservedfor U.S. flagged vessels under the Jones Act and cargo preference laws. If the Jones Act were to be modified to permit foreign competition that would not besubject to the same U.S. government imposed costs, we may need to lower the prices we charge for our services in order to compete with foreign competitors,which would adversely affect our cash flow and ability to make distributions to our unitholders.Our marine transportation business could be adversely affected if the U.S. Government purchases or requisitions any of our vessels under the MerchantMarine Act.We are subject to the Merchant Marine Act of 1936, which provides that, upon proclamation by the President of the U.S. of a national emergency ora threat to the national security, the U.S. Secretary of Transportation may requisition or purchase any vessel or other watercraft owned by U.S. citizens(including us, provided that we are considered a U.S. citizen for this purpose). If one of our push boats, tugboats or tank barges were purchased orrequisitioned by the U.S. government under this law, we would be entitled to be paid the fair market value of the vessel in the case of a purchase or, in thecase of a requisition, the fair market value of charter hire. However, if one of our push boats or tugboats is requisitioned or purchased and its associated tankbarge is left idle, we would not be entitled to receive any compensation for the lost revenues resulting from the idled barge. We also would not be entitled tobe compensated for any consequential damages we suffer as a result of the requisition or purchase of any of our push boats, tugboats or tank barges. If any ofour vessels are purchased or requisitioned for an extended period of time by the U.S. government, such transactions could have a material adverse effect onour results of operations, cash flow and ability to make distributions to our unitholders.24Our interest rate swap activities could have a material adverse effect on our earnings, profitability, liquidity, cash flows and financial condition.We enter into interest rate swap agreements from time to time to manage some of our exposure to interest rate volatility. These swap agreementsinvolve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may not beeffective in reducing our exposure to changes in interest rates. When we use forward-starting interest rate swaps, there is a risk that we will not complete thelong-term borrowing against which the swap is intended to hedge. If such events occur, our results of operations may be adversely affected.The industry in which we operate is highly competitive, and increased competitive pressure could adversely affect our business and operating results.We compete with similar enterprises in our respective areas of operation. Some of our competitors are large oil, natural gas and petrochemicalcompanies that have greater financial resources and access to supplies of NGLs than we do. Our customers who produce NGLs may develop their own systemsto transport NGLs in lieu of using ours. Our ability to renew or replace existing contracts with our customers at rates sufficient to maintain current revenuesand cash flows could be adversely affected by the activities of our competitors and our customers. All of these competitive pressures could have a materialadverse effect on our business, results of operations, financial condition and ability to make cash distributions to our unitholders.Information technology systems present potential targets for cyber security attacks, which could adversely affect our business. We are reliant on technology to improve efficiency in our business. Information technology systems are critical to our operations. These systemscould be a potential target for a cyber security attack as they are used to store and process sensitive information regarding our operations, financial position,and information pertaining to our customers and vendors. While we take the utmost precautions, we cannot guarantee safety from all threats and attacks. Any successful breach of security could result in the spread of inaccurate or confidential information, disruption of operations, environmental harm,endangerment of employees, damage to our assets, and increased costs to respond. Any of these instances could have a negative impact on cash flows,litigation status and/or our reputation, which could have a material adverse affect on our business, financial conditions and operations. Risks Relating to an Investment in the Common UnitsUnits available for future sales by us or our affiliates could have an adverse impact on the price of our common units or on any trading market that maydevelop.Common units will generally be freely transferable without restriction or further registration under the Securities Act, except that any common unitsheld by an "affiliate" of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemptionunder Rule 144 or otherwise.Our partnership agreement provides that we may issue an unlimited number of limited partner interests of any type without a vote of the unitholders.Our general partner may also cause us to issue an unlimited number of additional common units or other equity securities of equal rank with the commonunits, without unitholder approval, in a number of circumstances such as:•the issuance of common units in additional public offerings or in connection with acquisitions that increase cash flow from operations on a proforma, per unit basis;•the conversion of subordinated units into common units;•the conversion of units of equal rank with the common units into common units under some circumstances; or•the conversion of our general partner's general partner interest in us and its incentive distribution rights into common units as a result of thewithdrawal of our general partner.Our partnership agreement does not restrict our ability to issue equity securities ranking junior to the common units at any time. Any issuance ofadditional common units or other equity securities would result in a corresponding decrease in the25proportionate ownership interest in us represented by, and could adversely affect the cash distributions to and market price of, common units thenoutstanding.Under our partnership agreement, our general partner and its affiliates have the right to cause us to register under the Securities Act and applicablestate securities laws the offer and sale of any units that they hold. Subject to the terms and conditions of our partnership agreement, these registration rightsallow the general partner and its affiliates or their assignees holding any units to require registration of any of these units and to include any of these units ina registration by us of other units, including units offered by us or by any unitholder. Our general partner will continue to have these registration rights fortwo years following its withdrawal or removal as a general partner. In connection with any registration of this kind, we will indemnify each unitholderparticipating in the registration and its officers, directors, and controlling persons from and against any liabilities under the Securities Act or any applicablestate securities laws arising from the registration statement or prospectus. Except as described below, the general partner and its affiliates may sell their unitsin private transactions at any time, subject to compliance with applicable laws. Our general partner and its affiliates, with our concurrence, have grantedcomparable registration rights to their bank group to which their partnership units have been pledged.The sale of any common or subordinated units could have an adverse impact on the price of the common units or on any trading market that maydevelop.Unitholders have less power to elect or remove management of our general partner than holders of common stock in a corporation. It is unlikely that ourcommon unitholders will have sufficient voting power to elect or remove our general partner without the consent of Martin Resource Management and itsaffiliates.Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and thereforelimited ability to influence management's decisions regarding our business. Unitholders did not elect our general partner or its directors and will have noright to elect our general partner or its directors on an annual or other continuing basis. Holdings, the sole member of MMGP, elects the board of directors ofour general partner.If unitholders are dissatisfied with the performance of our general partner, they will have a limited ability to remove our general partner. Our generalpartner generally may not be removed except upon the vote of the holders of at least 66 2/3% of the outstanding units voting together as a single class. As ofDecember 31, 2018, Martin Resource Management owned 15.7% of our total outstanding common limited partner units.Unitholders' voting rights are further restricted by our partnership agreement provision prohibiting any units held by a person owning 20% or moreof any class of units then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the priorapproval of our general partner's directors, from voting on any matter. In addition, our partnership agreement contains provisions limiting the ability ofunitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders' ability to influence themanner or direction of management.As a result of these provisions, it will be more difficult for a third party to acquire our partnership without first negotiating the acquisition with ourgeneral partner. Consequently, it is unlikely the trading price of our common units will ever reflect a takeover premium.Our general partner's discretion in determining the level of our cash reserves may adversely affect our ability to make cash distributions to our unitholders.Our partnership agreement requires our general partner to deduct from operating surplus cash reserves that it determines in its reasonable discretionto be necessary to fund our future operating expenditures. In addition, our partnership agreement permits our general partner to reduce available cash byestablishing cash reserves for the proper conduct of our business, to comply with applicable law or agreements to which we are a party, or to provide funds forfuture distributions to partners. These cash reserves will affect the amount of cash available for distribution to our unitholders.Unitholders may not have limited liability if a court finds that we have not complied with applicable statutes or that unitholder action constitutes controlof our business.The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established insome states. The holder of one of our common units could be held liable in some circumstances for our obligations to the same extent as a general partner if acourt were to determine that:26•we had been conducting business in any state without compliance with the applicable limited partnership statute; or•the right or the exercise of the right by our unitholders as a group to remove or replace our general partner, to approve some amendments toour partnership agreement, or to take other action under our partnership agreement constituted participation in the "control" of our business.Our general partner generally has unlimited liability for our obligations, such as our debts and environmental liabilities, except for our contractualobligations that are expressly made without recourse to our general partner. In addition, under some circumstances, a unitholder may be liable to us for theamount of a distribution for a period of nine years from the date of the distribution.Our partnership agreement contains provisions that reduce the remedies available to unitholders for actions that might otherwise constitute a breach offiduciary duty by our general partner.Our partnership agreement limits the liability and reduces the fiduciary duties of our general partner to the unitholders. Our partnership agreementalso restricts the remedies available to unitholders for actions that would otherwise constitute breaches of our general partner's fiduciary duties. For example,our partnership agreement:•permits our general partner to make a number of decisions in its "sole discretion." This entitles our general partner to consider only theinterests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, ouraffiliates or any limited partner;•provides that our general partner is entitled to make other decisions in its "reasonable discretion," which may reduce the obligations towhich our general partner would otherwise be held;•generally provides that affiliated transactions and resolutions of conflicts of interest not involving a required vote of unitholders must be"fair and reasonable" to us and that, in determining whether a transaction or resolution is "fair and reasonable," our general partner mayconsider the interests of all parties involved, including its own; and•provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners orassignees for errors of judgment or for any acts or omissions if our general partner and those other persons acted in good faith.Unitholders are treated as having consented to the various actions contemplated in our partnership agreement and conflicts of interest that mightotherwise be considered a breach of fiduciary duties under applicable state law.We may issue additional common units without unitholder approval, which would dilute unitholder ownership interests.Our general partner may also cause us to issue an unlimited number of additional common units or other equity securities of equal rank with thecommon units, without unitholder approval, in a number of circumstances such as:•the issuance of common units in additional public offerings or in connection with acquisitions that increase cash flow from operations on apro forma, per unit basis;•the conversion of subordinated units into common units;•the conversion of units of equal rank with the common units into common units under some circumstances; or•the conversion of our general partner's general partner interest in us and its incentive distribution rights into common units as a result of thewithdrawal of our general partner.We may issue an unlimited number of limited partner interests of any type without the approval of our unitholders. Our partnership agreement doesnot give our unitholders the right to approve our issuance of equity securities ranking junior to the common units at any time.27The issuance of additional common units or other equity securities of equal or senior rank will have the following effects:•our unitholders' proportionate ownership interest in us will decrease;•the amount of cash available for distribution on a per unit basis may decrease;•because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimumquarterly distribution will be borne by our common unitholders will increase;•the relative voting strength of each previously outstanding unit will diminish;•the market price of the common units may decline; and•the ratio of taxable income to distributions may increase.The control of our general partner may be transferred to a third party and that party could replace our current management team, without unitholderconsent.Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without theconsent of the unitholders. Furthermore, there is no restriction in our partnership agreement on the ability of the owner of our general partner to transfer itsownership interest in our general partner to a third party. A new owner of our general partner could replace the directors and officers of our general partnerwith its own designees and control the decisions taken by our general partner.Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, but not theobligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the remaining common units held by unaffiliated personsat a price not less than the then-current market price. As a result, unitholders may be required to sell their common units at an undesirable time or price andmay not receive any return on their investment. Unitholders may also incur a tax liability upon a sale of their units. No provision in our partnershipagreement, or in any other agreement we have with our general partner or Martin Resource Management, prohibits our general partner or its affiliates fromacquiring more than 80% of our common units. For additional information about this call right and unitholders' potential tax liability, please see "RiskFactors - Tax Risks - Tax gain or loss on the disposition of our common units could be different than expected."Our common units have a limited trading volume compared to other publicly traded securities.Our common units are quoted on the NASDAQ under the symbol "MMLP." However, daily trading volumes for our common units are, and maycontinue to be, relatively small compared to many other securities quoted on the NASDAQ. The price of our common units may, therefore, be volatile.Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effecton our unit price.In order to comply with Section 404 of the Sarbanes-Oxley Act, we periodically document and test our internal control procedures. Section 404 ofthe Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal controls over financial reporting addressing theseassessments. During the course of our testing we may identify deficiencies, which we may not be able to address in time to meet the deadline imposed by theSarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to maintain the adequacy of our internal controls, as suchstandards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we haveeffective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effectiveinternal control environment could have a material adverse effect on the price of our common units.28Risks Relating to Our Relationship with Martin Resource ManagementCash reimbursements due to Martin Resource Management may be substantial and will reduce our cash available for distribution to our unitholders.Under our Omnibus Agreement with Martin Resource Management, Martin Resource Management provides us with corporate staff and supportservices on behalf of our general partner that are substantially identical in nature and quality to the services it conducted for our business prior to ourformation. The Omnibus Agreement requires us to reimburse Martin Resource Management for the costs and expenses it incurs in rendering these services,including an overhead allocation to us of Martin Resource Management's indirect general and administrative expenses from its corporate allocation pool.These payments may be substantial. Payments to Martin Resource Management will reduce the amount of available cash for distribution to our unitholders.Martin Resource Management has conflicts of interest and limited fiduciary responsibilities, which may permit it to favor its own interests to the detrimentof our unitholders.As of December 31, 2018, Martin Resource Management owned 15.7% of our total outstanding common limited partner units and a 51% votinginterest in Holdings, the sole member of MMGP. MMGP owns a 2% general partnership interest in us and all of our incentive distribution rights. Conflicts ofinterest may arise between Martin Resource Management and our general partner, on the one hand, and our unitholders, on the other hand. As a result of theseconflicts, our general partner may favor its own interests and the interests of Martin Resource Management over the interests of our unitholders. Potentialconflicts of interest between us, Martin Resource Management and our general partner could occur in many of our day-to-day operations including, amongothers, the following situations:•Officers of Martin Resource Management who provide services to us also devote significant time to the businesses of Martin ResourceManagement and are compensated by Martin Resource Management for that time;•Neither our partnership agreement nor any other agreement requires Martin Resource Management to pursue a business strategy that favorsus or utilizes our assets or services. Martin Resource Management's directors and officers have a fiduciary duty to make these decisions inthe best interests of the shareholders of Martin Resource Management without regard to the best interests of the unitholders;•Martin Resource Management may engage in limited competition with us;•Our general partner is allowed to take into account the interests of parties other than us, such as Martin Resource Management, in resolvingconflicts of interest, which has the effect of reducing its fiduciary duty to our unitholders;•Under our partnership agreement, our general partner may limit its liability and reduce its fiduciary duties, while also restricting theremedies available to our unitholders for actions that, without the limitations and reductions, might constitute breaches of fiduciary duty.As a result of purchasing units, our unitholders will be treated as having consented to some actions and conflicts of interest that, withoutsuch consent, might otherwise constitute a breach of fiduciary or other duties under applicable state law;•Our general partner determines which costs incurred by Martin Resource Management are reimbursable by us;•Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered on termsthat are fair and reasonable to us or from entering into additional contractual arrangements with any of these entities on our behalf;•Our general partner controls the enforcement of obligations owed to us by Martin Resource Management;•Our general partner decides whether to retain separate counsel, accountants or others to perform services for us;•The audit committee of our general partner retains our independent auditors;29•In some instances, our general partner may cause us to borrow funds to permit us to pay cash distributions, even if the purpose or effect ofthe borrowing is to make incentive distributions; and•Our general partner has broad discretion to establish financial reserves for the proper conduct of our business. These reserves also will affectthe amount of cash available for distribution.Martin Resource Management and its affiliates may engage in limited competition with us.Martin Resource Management and its affiliates may engage in limited competition with us. For a discussion of the non-competition provisions ofthe Omnibus Agreement, please see "Item 13. Certain Relationships and Related Transactions, and Director Independence." If Martin Resource Managementdoes engage in competition with us, we may lose customers or business opportunities, which could have an adverse impact on our results of operations, cashflow and ability to make distributions to our unitholder allocations.If Martin Resource Management were ever to file for bankruptcy or otherwise default on its obligations under its credit facility, amounts we owe under ourcredit facility may become immediately due and payable and our results of operations could be adversely affected.If Martin Resource Management were ever to commence or consent to the commencement of a bankruptcy proceeding or otherwise default on itsobligations under its credit facility, its lenders could foreclose on its pledge of the interests in our general partner and take control of our general partner. IfMartin Resources Management no longer controls our general partner, the lenders under our credit facility may declare all amounts outstanding thereunderimmediately due and payable. In addition, either a judgment against Martin Resource Management or a bankruptcy filing by or against Martin ResourceManagement could independently result in an event of default under our credit facility if it could reasonably be expected to have a material adverse effect onus. If our lenders do declare us in default and accelerate repayment, we may be required to refinance our debt on unfavorable terms, which could negativelyimpact our results of operations and our ability to make distributions to our unitholders. A bankruptcy filing by or against Martin Resource Managementcould also result in the termination or material breach of some or all of the various commercial contracts between us and Martin Resource Management,which could have a material adverse impact on our results of operations, cash flow and ability to make distributions to our unitholders.Tax RisksThe U.S. Internal Revenue Service (“IRS”) could treat us as a corporation for tax purposes, which would substantially reduce the cash available fordistribution to unitholders.The anticipated after-tax economic benefit of an investment in us depends largely on our classification as a partnership for federal income taxpurposes. We have not requested a ruling from the IRS on this matter.Despite the fact that we are organized as a limited partnership under Delaware law, it is possible in certain circumstances for a partnership such asours to be treated as a corporation for federal income tax purposes. In order for us to be classified as a partnership for U.S. federal income tax purposes, morethan 90% of our gross income each year must be "qualifying income" under Section 7704 of the U.S. Internal Revenue Code of 1986, as amended (the"Code"). "Qualifying income" includes income and gains derived from the exploration, development, mining or production, processing, refining,transportation, or marketing of minerals or natural resources, including crude oil, natural gas and products thereof. Other types of qualifying income includeinterest (other than from a financial business), dividends, gains from the sale of real property and gains from the sale or other disposition of capital assets heldfor the production of income that otherwise constitutes qualifying income.Although we intend to meet this gross income requirement, we may not find it possible, regardless of our efforts, to meet this gross incomerequirement or may inadvertently fail to meet this gross income requirement. If we do not meet this gross income requirement for any taxable year and the IRSdoes not determine that such failure was inadvertent, we would be treated as a corporation for such taxable year and each taxable year thereafter.If we were treated as a corporation for federal income tax purposes, we would owe federal income tax on our income at the corporate tax rate, whichis currently a maximum of 21%, and would likely owe state income tax at varying rates. Distributions would generally be taxed again to unitholders ascorporate distributions and no income, gains, losses, or deductions would flow through to unitholders. Because a tax would be imposed upon us as an entity,cash available for30distribution to unitholders would be reduced. Treatment of us as a corporation would result in a reduction in the anticipated cash flow and after-tax return tounitholders and therefore would likely result in a reduction in the value of the common units.Our partnership agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as acorporation or otherwise subjects us to entity-level taxation for federal, state or local income tax purposes, then the minimum quarterly distribution amountand the target distribution amount will be adjusted to reflect the impact of that law on us.The tax treatment of publicly traded partnerships or an investment in our units could be subject to potential legislative, judicial or administrative changesand differing interpretations, possibly on a retroactive basis.The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units, may be modifiedby administrative, legislative or judicial interpretation at any time.At the federal level, members of Congress and the President of the United States have periodically considered substantive changes to the existingU.S. tax laws that would have affected certain publicly traded partnerships, including the elimination of partnership tax treatment for publicly tradedpartnerships. At the state level, because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships toentity-level taxation through the imposition of state income, franchise and other forms of taxation. For example, we are required to pay a Texas margin tax ata maximum effective rate of 0.525% of our gross income apportioned to Texas in the prior year. Imposition of any such tax on us by any other state willreduce the cash available for distribution to our unitholders.Any modification to the tax laws and interpretations thereof may or may not be applied retroactively and could make it more difficult or impossibleto meet the exception pursuant to which we are treated as a partnership for U.S. federal income tax purposes that is not taxable as a corporation, affect or causeus to change our business activities, affect the tax considerations of an investment in us, change the character or treatment of portions of our income andadversely affect an investment in our common units. We are unable to predict whether any of these changes or other proposals will ultimately be enacted.Any such changes could negatively impact the value of an investment in our common units.On January 24, 2017, the U.S. Department of the Treasury issued final regulations (the “Final Regulations”) regarding qualifying income underSection 7704(d)(1)(E) of the Code which relates to the qualifying income exception upon which we rely for partnership tax treatment. The Final Regulationsapply to income earned in a taxable year beginning on or after January 19, 2017. The Final Regulations include “reserved” paragraphs for fertilizer andhedging, which the U.S. Department of the Treasury plans to address in future proposed and final Treasury regulations (“Treasury regulations”). The FinalRegulations provide for a ten year transition period during which certain taxpayers that either obtained a favorable private letter ruling or treated incomeunder a reasonable interpretation of the statute or prior proposed regulations as qualifying income may continue to treat such income as qualifying income.We have obtained favorable private letter rulings from the IRS in the past as to what constitutes “qualifying income” within the meaning of Section 7704(d)(1)(E) of the Code and we expect to rely upon these private letter rulings for purposes of the ten year transition rule contained in the Final Regulations. Withrespect to some of these private letter rulings, the income that we derived from certain affected activities will be treated as qualifying income only until theend of the ten year transition period. Thus, at this time and through the transition period, we believe that the Final Regulations will not significantly impactthe amount of our gross income that we are able to treat as qualifying income.The effects of the budget reconciliation act commonly referred to as the Tax Cuts and Jobs Act (hereinafter, “Tax Cuts and Jobs Act”) could have anadverse effect on the timing and amount of income allocations to our unitholders.On December 22, 2017, the President signed into law Public Law No. 115-97, a comprehensive tax reform bill commonly referred to as the Tax Cutsand Jobs Act (the “Tax Act”) that makes significant changes to the U.S. Internal Revenue Code. Among other changes, the Tax Act includes a reduction inthe corporate and individual tax rates, a new deduction on certain pass-through income, a repeal of the partnership technical termination rule, and newlimitations on certain deductions and credits, including interest expense deductions. The Tax Act had no material impact on our unitholder allocations for2018.31A successful IRS contest of the federal income tax positions we take could adversely affect the market for our common units and the costs of any contestwill be borne by our unitholders, debt security holders and our general partner.We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes or any other matteraffecting us. The IRS may adopt positions that differ from the positions we take and our counsel's conclusions. It may be necessary to resort to administrativeor court proceedings to sustain some or all of our counsel's conclusions or the positions we take. A court may not agree with some or all our counsel'sconclusions or the positions we take. Any contest with the IRS may materially and adversely impact the market for our common units and the prices at whichthey trade. In addition, the costs of any contest with the IRS will be borne directly or indirectly by all of our unitholders, debt security holders and ourgeneral partner.If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it may assess and collect any taxes(including any applicable penalties and interest) resulting from such audit adjustment directly from us, in which case our cash available for distribution toour unitholders might be substantially reduced.Pursuant to the Bipartisan Budget Act of 2015 and recently issued proposed Treasury Regulations (the “Proposed Partnership Audit Regulations”),for taxable years beginning after December 31, 2017, if the IRS makes audit adjustments to our income tax returns, it may assess and collect any taxes(including any applicable penalties and interest) resulting from such audit adjustment directly from us. Similarly, for such taxable years, if the IRS makesaudit adjustments to income tax returns filed by an entity in which we are a member or partner, the IRS may assess and collect any taxes (including penaltiesand interest) resulting from such audit adjustment directly from such entity. Generally, we expect to elect to have our unitholders take such audit adjustmentinto account in accordance with their interests in us during the tax year under audit, but there can be no assurance that such election will be effective in allcircumstances. If we are unable to have our unitholders take such audit adjustment into account in accordance with their interests in us during the tax yearunder audit, our current unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if such unitholders did not own unitsin us during the tax year under audit. If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest as a resultof audit adjustments cash available for distribution to our unitholders may be substantially reduced. These rules are not applicable to us for tax yearsbeginning on or prior to December 31, 2017.Additionally, pursuant to the Bipartisan Budget Act of 2015 and the Proposed Partnership Audit Regulations, we are no longer required to designatea “tax matters partner.” Instead, for taxable years beginning after December 31, 2017, we are required to designate a partner, or other person, with a substantialpresence in the United States as the partnership representative (“Partnership Representative”). The Partnership Representative will have the sole authority toact on our behalf for purposes of, among other things, U.S. federal income tax audits and judicial review of administrative adjustments by the IRS. If we donot make such a designation, the IRS can select any person as the Partnership Representative. Any actions taken by us or by the Partnership Representativeon our behalf with respect to, among other things, U.S. federal income tax audits and judicial review of administrative adjustments by the IRS, will bebinding on us and all of the unitholders. We anticipate that our current tax matters partner will be designated the Partnership Representative.Unitholders may be required to pay taxes on income from us, including their share of income from the cancellation of debt, even if they do not receive anycash distributions from us.Unitholders may be required to pay federal income taxes and, in some cases, state, local and foreign income taxes on their share of our taxableincome even if they receive no cash distributions from us. Unitholders may not receive cash distributions from us equal to their share of our taxable income oreven the tax liability that results from the taxation of their share of our taxable income.We may engage in transactions to delever the partnership and manage our liquidity that may result in income to our unitholders without acorresponding cash distribution. For example, if we sell assets and use the proceeds to repay existing debt or fund capital expenditures, you may be allocatedtaxable income and gain resulting from the sale without receiving a cash distribution. Further, taking advantage of opportunities to reduce our existing debt,such as debt exchanges, debt repurchases, or modifications of our existing debt could result in “cancellation of indebtedness income” (also referred to as“COD income”) being allocated to our unitholders as taxable income. Unitholders may be allocated COD income, and income tax liabilities arising therefrommay exceed cash distributions or the value of the units. The ultimate effect of any such allocations will depend on the unitholder's individual tax positionwith respect to its units. Unitholders are encouraged to consult their tax advisor with respect to the consequences to them of COD income.32Tax gain or loss on the disposition of our common units could be different than expected.If our unitholders sell their common units, they will recognize gain or loss equal to the difference between the amount realized and their tax basis inthose common units. Prior distributions in excess of the total net taxable income unitholders were allocated for a common unit, which decreased unitholdertax basis in that common unit, will, in effect, become taxable income to our unitholders if the common unit is sold at a price greater than their tax basis in thatcommon unit, even if the price they receive is less than their original cost. A substantial portion of the amount realized, whether or not representing gain, maybe ordinary income to our unitholders. Should the IRS successfully contest some positions we take, our unitholders could recognize more gain on the sale ofunits than would be the case under those positions without the benefit of decreased income in prior years. In addition, if our unitholders sell their units, theymay incur a tax liability in excess of the amount of cash they receive from the sale.Tax-exempt entities and non-U.S. persons face unique tax issues from owning common units that may result in adverse tax consequences to them.Investment in common units by tax-exempt entities, such as employee benefit plans, individual retirement accounts (known as IRAs), Keogh plansand other retirement plans, regulated investment companies, real estate investment trusts, mutual funds and non-U.S. persons raises issues unique to them. Forexample, virtually all of our income allocated to organizations exempt from federal income tax, including IRAs and other retirement plans, will be unrelatedbusiness income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective taxrate, and non-U.S persons will be required to file U.S. federal income tax returns and pay tax on their share of our taxable income. Tax-exempt entities, non-U.S. persons and other unique investors should consult their tax advisor regarding their investment in our common units.We treat a purchaser of our common units as having the same tax benefits without regard to the seller's identity. The IRS may challenge this treatment,which could adversely affect the value of the common units.Because we cannot match transferors and transferees of common units and because of other reasons, we have adopted depreciation positions thatmay not conform to all aspects of the Treasury regulations. Any position we take that is inconsistent with applicable Treasury regulations may have to bedisclosed on our federal income tax return. This disclosure increases the likelihood that the IRS will challenge our positions and propose adjustments to someor all of our unitholders. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our unitholders. It alsocould affect the timing of these tax benefits or the amount of gain from the sale of common units and could have a negative impact on the value of ourcommon units or result in audit adjustments to our unitholders' tax returns.Unitholders may be subject to state, local and foreign taxes and return filing requirements as a result of investing in our common units.In addition to federal income taxes, unitholders may be subject to other taxes, such as state, local and foreign income taxes, unincorporated businesstaxes and estate, inheritance, or intangible taxes that are imposed by the various jurisdictions in which we do business or own property. Unitholders may berequired to file state, local and foreign income tax returns and pay state and local income taxes in some or all of the various jurisdictions in which we dobusiness or own property and may be subject to penalties for failure to comply with those requirements. We own property and/or conduct business inAlabama, Arizona, Arkansas, California, Florida, Georgia, Illinois, Indiana, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Nebraska, Nevada, NewMexico, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, and West Virginia. We may do business or own property in other states or foreign countries in thefuture. It is the unitholder's responsibility to file all federal, state, local and foreign tax returns. Our counsel has not rendered an opinion on the state, local orforeign tax consequences of an investment in our common units.There are limits on the deductibility of our losses that may adversely affect our unitholders.There are a number of limitations that may prevent unitholders from using their allocable share of our losses as a deduction against unrelatedincome. In cases when our unitholders are subject to the passive loss rules (generally, individuals and closely-held corporations), any losses generated by uswill only be available to offset our future income and cannot be used to offset income from other activities, including other passive activities or investments.Unused losses may be deducted when the unitholder disposes of its entire investment in us in a fully taxable transaction with an unrelated party. Aunitholder's share of our net passive income may be offset by unused losses from us carried over from prior years but not by losses from other passiveactivities, including losses from other publicly traded partnerships. Other limitations that may further restrict the33deductibility of our losses by a unitholder include the at-risk rules, the excess loss limitation rules for non-corporate unitholders that applies until January 1,2026, and the prohibition against loss allocations in excess of the unitholder's tax basis in its units.We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of ourunits on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which couldchange the allocation of items of income, gain, loss and deduction among our unitholders.We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership ofour units on the first day of each month, instead of on the basis of the date a particular unit is transferred. Treasury regulations permit publicly tradedpartnerships to use a monthly simplifying convention that is similar to ours, but they do not specifically authorize all aspects of the proration method wehave adopted. Therefore, the use of our proration method may not be permitted under existing Treasury regulations, and, accordingly, our counsel is unableto opine as to the validity of such method. If the IRS were to challenge our proration method, we may be required to change the allocation of items of income,gain, loss and deduction among our unitholders.A unitholder whose units are loaned to a "short seller" to cover a short sale of units may be considered as having disposed of those units. If so, he would nolonger be treated for tax purposes as a partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition.Because a unitholder whose units are loaned to a "short seller" to cover a short sale of units may be considered as having disposed of the loanedunits, he may no longer be treated for tax purposes as a partner with respect to those units during the period of the loan to the short seller and the unitholdermay recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller any of our income, gain, loss or deduction withrespect to those units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those units could be fully taxable asordinary income. Our counsel has not rendered an opinion regarding the treatment of a unitholder where common units are loaned to a short seller to cover ashort sale of common units; therefore, unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short sellerare urged to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their units.34Item 1B.Unresolved Staff CommentsNone. Item 2.Properties A description of our properties is contained in "Item 1. Business" and is incorporated herein by reference. We believe we have satisfactory title to our assets. Some of the easements, rights-of-way, permits, licenses or similar documents relating to the use ofthe properties that have been transferred to us in connection with our initial public offering and the assets we acquired in our acquisitions, required theconsent of third parties, which in some cases is a governmental entity. We believe we have obtained sufficient third-party consents, permits andauthorizations for the transfer of assets necessary for us to operate our business in all material respects. With respect to any third-party consents, permits orauthorizations that have not been obtained, we believe the failure to obtain these consents, permits or authorizations will not have a material adverse effecton the operation of our business. Title to our property may be subject to encumbrances, including liens in favor of our secured lender. We believe none ofthese encumbrances materially detract from the value of our properties or our interest in these properties or materially interfere with their use in the operationof our business.Item 3.Legal ProceedingsFrom time to time, we are subject to certain legal proceedings, claims and disputes that arise in the ordinary course of our business. Although wecannot predict the outcomes of these legal proceedings, we do not believe these actions, in the aggregate, will have a material adverse impact on our financialposition, results of operations or liquidity. A description of our legal proceedings is included in "Item 8. Financial Statements and Supplementary Data, Note22. Commitments and Contingencies", and is incorporated herein by reference.Item 4.Mine Safety DisclosuresNot applicable.35PART IIItem 5.Market for Our Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities Market Information and HoldersOur common units are traded on the NASDAQ under the symbol "MMLP." As of January 25, 2019, there were approximately 279 holders of recordand approximately 20,329 beneficial owners of our common units. Cash Distribution Policy Within 45 days after the end of each quarter, we distribute all of our available cash, as defined in our partnership agreement, to unitholders of recordon the applicable record date. Our general partner has broad discretion to establish cash reserves that it determines are necessary or appropriate to properlyconduct our business. These can include cash reserves for future capital and maintenance expenditures, reserves to stabilize distributions of cash to theunitholders and our general partner, reserves to reduce debt, or, as necessary, reserves to comply with the terms of any of our agreements or obligations. Ourdistributions are effectively made 98% to unitholders and 2% to our general partner, subject to the payment of incentive distributions to our general partner ifcertain target cash distribution levels to common unitholders are achieved. Distributions to our general partner increase to 15%, 25% and 50% based onincremental distribution thresholds as set forth in our partnership agreement. Our ability to distribute available cash is contractually restricted by the terms of our credit facility. Our credit facility contains covenants requiringus to maintain certain financial ratios. We are prohibited from making any distributions to unitholders if the distribution would cause a default or an event ofdefault, or a default or an event of default exists, under our credit facility. Please read "Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations — Liquidity and Capital Resources — Description of Our Credit Facility."Quarterly Distribution. On January 17, 2019, we declared a quarterly cash distribution of $0.50 per common unit for the fourth quarter of 2018, or$2.00 per common unit on an annualized basis, which will be paid on February 14, 2019 to unitholders of record as of February 7, 2019.Item 6.Selected Financial DataThe following table sets forth selected financial data and other operating data of the Partnership for the years ended December 31, 2018, 2017, 2016,2015 and 2014 and is derived from the audited consolidated financial statements of the Partnership. The following selected financial data are qualified by reference to and should be read in conjunction with the Partnership's Consolidated FinancialStatements and Notes thereto and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in thisdocument.36 2018 2017 2016 2015 2014 (Dollars in thousands, except per unit amounts) Revenues$972,655 $946,116 $827,391 $1,036,844 $1,642,141 Income (loss) from continuing operations(7,595) 13,007 27,003 32,088 (11,590)Income (loss) from discontinued operations, net of tax51,700 4,128 4,649 10,169 (115)Net income (loss)$44,105 $17,135 $31,652 $42,257 $(11,705)Net income (loss) attributable to limited partners$43,195 $16,750 $23,143 $21,902 $(15,176) Net income (loss) per limited partner unit – continuingoperations(0.19) 0.33 0.55 0.47 (0.48)Net income (loss) per limited partner unit –discontinued operations1.30 0.11 0.10 0.15 (0.01)Net income (loss) per limited partner unit$1.11 $0.44 $0.65 $0.62 $(0.49) Total assets$1,033,398 $1,253,498 $1,246,363 $1,380,473 $1,553,919Long-term debt656,459 812,632 808,107 865,003 902,005 Cash dividends per common unit (in dollars)2.00 2.00 2.94 3.25 3.18Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsOverview We are a publicly traded limited partnership with a diverse set of operations focused primarily in the United States ("U.S.") Gulf Coast region. Ourfour primary business lines include:•Terminalling and storage services for petroleum products and by-products, including the refining of naphthenic crude oil and the blending andpackaging of finished lubricants;•Natural gas liquids transportation and distribution services and natural gas storage;•Sulfur and sulfur-based products gathering, processing, marketing, manufacturing and distribution; and•Marine transportation services for petroleum products and by-products.The petroleum products and by-products we collect, transport, store and market are produced primarily by major and independent oil and gascompanies who often turn to third parties, such as us, for the transportation and disposition of these products. In addition to these major and independent oiland gas companies, our primary customers include independent refiners, large chemical companies, fertilizer manufacturers and other wholesale purchasers ofthese products. We operate primarily in the U.S. Gulf Coast region. This region is a major hub for petroleum refining, natural gas gathering and processing,and support services for the exploration and production industry.We were formed in 2002 by Martin Resource Management, a privately-held company whose initial predecessor was incorporated in 1951 as asupplier of products and services to drilling rig contractors. Since then, Martin Resource Management has expanded its operations through acquisitions andinternal expansion initiatives as its management identified and capitalized on the needs of producers and purchasers of petroleum products and by-productsand other bulk liquids. Martin Resource Management is an important supplier and customer of ours. As of December 31, 2018, Martin Resource Managementowned 15.7% of our total outstanding common limited partner units. Furthermore, Martin Resource Management controls Martin Midstream GP LLC("MMGP"), our general partner, by virtue of its 51% voting interest in MMGP Holdings, LLC ("Holdings"), the sole member of MMGP. MMGP owns a 2%general partner interest in us and all of our incentive distribution rights. Martin Resource Management directs our business operations through its ownershipinterests in and control of our general partner.We entered into an omnibus agreement dated November 1, 2002, with Martin Resource Management (the "Omnibus Agreement") that governs,among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision ofgeneral administration and support services by Martin Resource Management and our use of certain of Martin Resource Management’s trade names andtrademarks. Under the terms of the Omnibus Agreement, the employees of Martin Resource Management are responsible for conducting our business andoperating our assets. The Omnibus Agreement was amended on November 25, 2009, to include processing crude oil into finished products includingnaphthenic lubricants, distillates, asphalt and other intermediate cuts. The Omnibus Agreement was amended further on October 1, 2012, to permit thePartnership to provide certain lubricant packaging products and services to Martin Resource Management.Martin Resource Management has operated our business since 2002. Martin Resource Management began operating our natural gas servicesbusiness in the 1950s and our sulfur business in the 1960s. It began our marine transportation business in the late 1980s. It entered into our fertilizer andterminalling and storage businesses in the early 1990s. In recent years, Martin Resource Management has increased the size of our asset base throughexpansions and strategic acquisitions.Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on the historical consolidated financial statementsincluded elsewhere herein. We prepared these financial statements in conformity with United States generally accepted accounting principles ("U.S. GAAP"or "GAAP"). The preparation of these financial statements required us to make estimates and assumptions that affect the reported amounts of assets andliabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We based our estimates onhistorical experience and on various other assumptions we believe to be reasonable under the circumstances. We routinely evaluate these estimates, utilizinghistorical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Our results may differ from theseestimates, and any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period inwhich the facts that give rise to the revision become known. Changes in these estimates could materially affect our financial position, results of operations orcash flows. You should also read Note 2, "Significant Accounting Policies" in Notes to Consolidated Financial Statements. The following table evaluates thepotential impact of estimates utilized during the periods ended December 31, 2018 and 2017:37Description Judgments and Uncertainties Effect if Actual Results Differ from Estimates andAssumptionsImpairment of Long-Lived AssetsWe periodically evaluate whether the carryingvalue of long-lived assets has been impairedwhen circumstances indicate the carrying valueof the assets may not be recoverable. Theseevaluations are based on undiscounted cash flowprojections over the remaining useful life of theasset. The carrying value is not recoverable if itexceeds the sum of the undiscounted cash flows.Any impairment loss is measured as the excess ofthe asset's carrying value over its fair value. Our impairment analyses require management touse judgment in estimating future cash flows anduseful lives, as well as assessing the probability ofdifferent outcomes. Applying this impairment review methodology, noimpairment of long-lived assets was recordedduring the year ended December 31, 2018. In2017, we recorded an impairment charge of $1.6million in our Marine Transportation segment and$0.6 million in our Terminalling and Storagesegment.Asset Retirement ObligationsAsset retirement obligations ("AROs") associatedwith a contractual or regulatory remediationrequirement are recorded at fair value in theperiod in which the obligation can be reasonablyestimated and the related asset is depreciated overits useful life or contractual term. The liability isdetermined using a credit-adjusted risk-freeinterest rate and is accreted over time until theobligation is settled. Determining the fair value of AROs requiresmanagement judgment to evaluate requiredremediation activities, estimate the cost of thoseactivities and determine the appropriate interestrate. If actual results differ from judgments andassumptions used in valuing an ARO, we mayexperience significant changes in ARO balances.The establishment of an ARO has no initial impacton earnings.Our Relationship with Martin Resource Management Martin Resource Management directs our business operations through its ownership and control of our general partner and under the OmnibusAgreement. In addition to the direct expenses, under the Omnibus Agreement, we are required to reimburse Martin Resource Management for indirect generaland administrative and corporate overhead expenses. For the years ended December 31, 2018, 2017 and 2016, the conflicts committee of our general partner("Conflicts Committee") approved reimbursement amounts of $16.4 million, $16.4 million and $13.0 million, respectively, reflecting our allocable share ofsuch expenses. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.We are required to reimburse Martin Resource Management for all direct expenses it incurs or payments it makes on our behalf or in connection withthe operation of our business. Martin Resource Management also licenses certain of its trademarks and trade names to us under the Omnibus Agreement.We are both an important supplier to and customer of Martin Resource Management. Among other things, we provide marine transportation andterminalling and storage services to Martin Resource Management. We purchase land transportation services and marine fuel from Martin ResourceManagement (the Partnership acquired MTI effective January 1, 2019). All of these services and goods are purchased and sold pursuant to the terms of anumber of agreements between us and Martin Resource Management.For a more comprehensive discussion concerning the Omnibus Agreement and the other agreements that we have entered into with Martin ResourceManagement, please see "Item 13. Certain Relationships and Related Transactions, and Director Independence."How We Evaluate Our OperationsOur management uses a variety of financial and operational measurements other than our financial statements prepared in accordance with U.S.GAAP to analyze our performance. These include: (1) net income before interest expense, income tax expense, and depreciation and amortization("EBITDA"), (2) adjusted EBITDA and (3) distributable cash flow. Our management views these measures as important performance measures of coreprofitability for our operations and the38ability to generate and distribute cash flow, and as key components of our internal financial reporting. We believe investors benefit from having access to thesame financial measures that our management uses.EBITDA and Adjusted EBITDA. Certain items excluded from EBITDA and adjusted EBITDA are significant components in understanding andassessing an entity's financial performance, such as cost of capital and historic costs of depreciable assets. We have included information concerning EBITDAand adjusted EBITDA because they provide investors and management with additional information to better understand the following: financial performanceof our assets without regard to financing methods, capital structure or historical cost basis; our operating performance and return on capital as compared tothose of other similarly situated entities; and the viability of acquisitions and capital expenditure projects. Our method of computing adjusted EBITDA maynot be the same method used to compute similar measures reported by other entities. The economic substance behind our use of adjusted EBITDA is tomeasure the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness and make distributions to our unit holders.Distributable Cash Flow. Distributable cash flow is a significant performance measure used by our management and by external users of ourfinancial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by us to the cash distributions weexpect to pay our unitholders. Distributable cash flow is also an important financial measure for our unitholders since it serves as an indicator of our successin providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not we are generating cash flow at a level thatcan sustain or support an increase in our quarterly distribution rates. Distributable cash flow is also a quantitative standard used throughout the investmentcommunity with respect to publicly-traded partnerships because the value of a unit of such an entity is generally determined by the unit's yield, which in turnis based on the amount of cash distributions the entity pays to a unitholder.EBITDA, adjusted EBITDA and distributable cash flow should not be considered alternatives to, or more meaningful than, net income, cash flowsfrom operating activities, or any other measure presented in accordance with U.S. GAAP. Our method of computing these measures may not be the samemethod used to compute similar measures reported by other entities.Non-GAAP Financial MeasuresThe following table reconciles the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for theyears ended December 31, 2018, 2017, and 2016, which represents EBITDA, Adjusted EBITDA and Distributable Cash Flow from continuing operations.39Reconciliation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow Year Ended December 31, 2018 2017 2016 Net income$44,105 $17,135 $31,652Less: Income from discontinued operations, net of income taxes(51,700) (4,128) (4,649)Income (loss) from continuing operations(7,595) 13,007 27,003Adjustments: Interest expense52,037 47,743 46,100Income tax expense369 352 726Depreciation and amortization76,866 85,195 92,132EBITDA121,677 146,297 165,961Adjustments: (Gain) loss on sale of property, plant and equipment379 (523) (33,400)Impairment of long-lived assets— 2,225 26,953Impairment of goodwill— — 4,145Unrealized mark-to-market on commodity derivatives(76) (3,832) 4,579Hurricane damage repair accrual— 657 —Asset retirement obligation revision— 5,547 —Unit-based compensation1,224 650 904Transaction costs associated with acquisitions465 — —Adjusted EBITDA123,669 151,021 169,142Adjustments: Interest expense(52,037) (47,743) (46,100)Income tax expense(369) (352) (726)Amortization of deferred debt issuance costs3,445 2,897 3,684Amortization of debt premium(306) (306) (306)Non-cash mark-to-market on interest rate derivatives— — (206)Payments for plant turnaround costs(1,893) (1,583) (2,061)Maintenance capital expenditures(21,505) (18,080) (17,163)Distributable Cash Flow1$51,004 $85,854 $106,2641 Excludes distributable cash flow from discontinued operations were $3,253, $5,214 and $7,435 for the years ended December 31, 2018, 2017 and 2016,respectively.Results of OperationsThe results of operations for the years ended December 31, 2018, 2017, and 2016 have been derived from our consolidated 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. Our consolidated results of operations are presented on a comparative basis below. There are certain items of income and expense which we do notallocate on a segment basis. These items, including equity in earnings (loss) of unconsolidated entities, interest expense, and indirect selling, general andadministrative expenses, are discussed after the comparative discussion of our results within each segment.The Natural Gas Services segment information below excludes the discontinued operations of the WTLPG partnership interests disposed of on July31, 2018 for the years ended December 31, 2018, 2017 and 2016. See Item 8, Note 5.The following table sets forth our operating revenues and operating income by segment for the years ended December 31, 2018, 2017, and 2016. 40 OperatingRevenues RevenuesIntersegmentEliminations OperatingRevenues afterEliminations OperatingIncome (loss) Operating IncomeIntersegmentEliminations OperatingIncome (loss) afterEliminations (In thousands)Year Ended December 31, 2018: Terminalling and storage$247,840 $(6,226) $241,614 $17,820 $(4,095) $13,725Natural gas services548,135 — 548,135 24,938 3,632 28,570Sulfur services132,536 — 132,536 17,216 (2,940) 14,276Marine transportation52,830 (2,460) 50,370 2,713 3,403 6,116Indirect selling, general andadministrative— — — (17,901) — (17,901)Total$981,341 $(8,686) $972,655 $44,786 $— $44,786 Year Ended December 31, 2017: Terminalling and storage$236,169 $(5,998) $230,171 $3,305 $(2,676) $629Natural gas services532,908 (226) 532,682 49,377 2,472 51,849Sulfur services134,684 — 134,684 25,862 (2,657) 23,205Marine transportation51,915 (3,336) 48,579 (1,211) 2,861 1,650Indirect selling, general andadministrative— — — (17,332) — (17,332)Total$955,676 $(9,560) $946,116 $60,001 $— $60,001 Year Ended December 31, 2016: Terminalling and storage$242,363 $(5,653) $236,710 $44,143 $(3,483) $40,660Natural gas services391,333 — 391,333 38,447 3,056 41,503Sulfur services141,058 — 141,058 26,815 (3,422) 23,393Marine transportation61,233 (2,943) 58,290 (19,888) 3,849 (16,039)Indirect selling, general andadministrative— — — (16,794) — (16,794)Total$835,987 $(8,596) $827,391 $72,723 $— $72,72341Terminalling and Storage SegmentComparative Results of Operations for the Twelve Months Ended December 31, 2018 and 2017 Year Ended December 31, Variance PercentChange 2018 2017 (In thousands) Revenues: Services$102,514 $105,703 $(3,189) (3)%Products145,326 130,466 14,860 11%Total revenues247,840 236,169 11,671 5% Cost of products sold132,384 118,832 13,552 11%Operating expenses54,129 63,191 (9,062) (14)%Selling, general and administrative expenses5,327 5,832 (505) (9)%Impairment of long-lived assets— 600 (600) (100)%Depreciation and amortization39,508 45,160 (5,652) (13)% 16,492 2,554 13,938 546%Other operating income, net1,328 751 577 77%Operating income$17,820 $3,305 $14,515 439% Lubricant sales volumes (gallons)24,016 21,897 2,119 10%Shore-based throughput volumes (guaranteed minimum) (gallons)80,000 144,998 (64,998) (45)%Smackover refinery throughput volumes (guaranteed minimum BBL per day)6,500 6,500 — —%Services revenues. Services revenue decreased $3.2 million, of which $7.6 million was primarily a result of decreased throughput fees at our shore-based terminals, offset by a $4.1 million increase at our specialty terminals primarily as a result of the Hondo asphalt plant being put into service on July 1,2017.Products revenues. A 28% increase in sales volumes combined with a 4% increase in average sales price at our blending and packaging facilitiesresulted in a $20.3 million increase to products revenues. Offsetting this increase was a 9% decrease in sales volumes offset by a 1% increase in average salesprice at our shore based terminals resulting in a $5.4 million decrease in products revenues.Cost of products sold. A 28% increase in sales volumes combined with a 10% increase in average cost per gallon at our blending and packagingfacilities resulted in a $19.0 million increase in cost of products sold. Offsetting this increase was a 9% decrease in sales volume offset by a 2% increase inaverage cost per gallon at our shore based terminals resulting in a $5.5 million decrease in cost of products sold.Operating expenses. Operating expenses at our shore-based terminals decreased by $8.0 million primarily due to the 2017 period including anincrease in the accrual related to asset retirement obligations of $6.3 million. Additionally, lease expense decreased $0.7 million as a result of closing severalfacilities. Operating expenses at our specialty terminals decreased $1.8 million, primarily due to the 2017 period including $2.5 million in hurricaneexpenses offset by an increase of $1.0 million in expenses at our Hondo facility which was placed in service in July of 2017. Offsetting this decrease was a$0.8 million increase at our Smackover refinery due to an increase in utilities of $0.4 million, $0.2 million in repairs and maintenance, and $0.2 million inprofessional fees.Selling, general and administrative expenses. Selling, general and administrative expenses decreased primarily as a result of decreased legalexpenses.Impairment of long-lived assets. This represents the loss on impairment of non-core operating assets in 2017.42Depreciation and amortization. The decrease in depreciation and amortization is due to the disposition of assets at several closed shore-basedfacilities, offset by recent capital expenditures.Other operating income, net. Other operating income, net represents gains from the disposition of property, plant and equipment.Comparative Results of Operations for the Twelve Months Ended December 31, 2017 and 2016 Year Ended December 31, Variance PercentChange 2017 2016 (In thousands) Revenues: Services$105,703 $128,783 $(23,080) (18)%Products130,466 113,580 16,886 15%Total revenues236,169 242,363 (6,194) (3)% Cost of products sold118,832 102,883 15,949 16%Operating expenses63,191 65,292 (2,101) (3)%Selling, general and administrative expenses5,832 4,677 1,155 25%Impairment of long-lived assets600 15,252 (14,652) (96)%Depreciation and amortization45,160 45,484 (324) (1)% 2,554 8,775 (6,221) (71)%Other operating income, net751 35,368 (34,617) (98)%Operating income$3,305 $44,143 $(40,838) (93)% Lubricant sales volumes (gallons)21,897 17,995 3,902 22%Shore-based throughput volumes (guaranteed minimum) (gallons)144,998 200,000 (55,002) (28)%Smackover refinery throughput volumes (guaranteed minimum BBL per day)6,500 6,500 — —%Corpus Christi crude terminal (barrels per day)— 66,167 (66,167) (100)%Services revenues. Services revenue decreased primarily as a result of decreased throughput volumes and pass-through revenues at our CorpusChristi crude terminal, which was sold on December 21, 2016.Products revenues. An 11% increase in sales volumes offset by a 1% decrease in average sales price at our blending and packaging facilities resultedin a $5.9 million increase to products revenues. Products revenues at our shore-based terminals increased $11.0 million resulting from an 18% increase inaverage sales price and a 1% increase in sales volume.Cost of products sold. An 11% increase in sales volumes at our blending and packaging facilities resulted in a $4.9 million increase in cost ofproducts sold. Average cost per gallon increased 2%, resulting in a $0.8 million increase in cost of products sold. Cost of products sold at our shore-basedterminals increased $10.1 million resulting from an 19% increase in average cost per gallon and a 1% increase in sales volumes.Operating expenses. Operating expenses at our specialty terminals decreased $4.8 million, primarily as a result of the disposition of the CorpusChristi crude terminalling assets in the fourth quarter 2016 of $7.6 million, offset by hurricane expenses of $2.5 million. Operating expenses at our shore-based terminals increased by $3.2 million, primarily due to a $5.5 million increase in the accrual related to asset retirement obligations at leased terminalfacilities and hurricane expenses of $0.3 million, offset by $2.7 million decrease associated with closed facilities.Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to increased legal fees of $0.6million and compensation expense of $0.5 million.Impairment of long-lived assets. This represents the loss on impairment of non-core operating assets.43Depreciation and amortization. The decrease in depreciation and amortization is due to the impact of the disposition of assets and assets beingfully depreciated, offset by capital expenditures.Other operating income, net. Other operating income, net represents gains and losses from the disposition of property, plant and equipment. The2016 period includes the gain on the disposition of the Corpus Christi crude terminalling assets of $37.3 million.Natural Gas Services SegmentComparative Results of Operations for the Twelve Months Ended December 31, 2018 and 2017 Year Ended December 31, Variance PercentChange 2018 2017 (In thousands) Revenues: Services$52,109 $58,817 $(6,708) (11)%Products496,026 474,091 21,935 5%Total revenues548,135 532,908 15,227 3% Cost of products sold467,571 425,073 42,498 10%Operating expenses24,065 22,347 1,718 8%Selling, general and administrative expenses9,063 11,106 (2,043) (18)%Depreciation and amortization21,283 24,916 (3,633) (15)% 26,153 49,466 (23,313) (47)%Other operating loss, net(1,215) (89) (1,126) (1,265)%Operating income$24,938 $49,377 $(24,439) (49)% NGLs Volumes (barrels)10,223 10,487 (264) (3)%Services Revenues. The decrease in services revenue is primarily a result of lower firm storage re-contracting rates at our natural gas storage facilities.Products Revenues. Our NGL average sales price per barrel increased $3.31, or 7%, resulting in an increase to products revenues of $34.7 million.The increase in average sales price per barrel was a result of an increase in market prices. Product sales volumes decreased 3%, decreasing revenues $12.8million.Cost of products sold. Our average cost per barrel increased $5.20, or 13%, increasing cost of products sold by $54.6 million. The increase inaverage cost per barrel was a result of an increase in market prices. The decrease in sales volume of 3% resulted in a $12.1 million decrease to cost ofproducts sold. Our margins decreased $1.89 per barrel, or 40% during the period.Operating expenses. Operating expenses increased $1.4 million at our natural gas storage facilities, primarily as a result of $0.6 million in increasedutility expense, $0.5 million in insurance premiums, and $0.3 million in park and loan expense. Additionally, repairs and maintenance expense at ourunderground NGL storage facility increased $0.3 million.Selling, general and administrative expenses. Selling, general and administrative expenses decreased primarily as a result of decreasedcompensation expense.Depreciation and amortization. Depreciation and amortization decreased primarily due to a $3.9 million decrease in amortization related tocontracts acquired during the purchase of Cardinal Gas Storage Partners, LLC (“Cardinal”), offset by a $0.3 million increase in depreciation expense relatedto recent capital expenditures.Other operating loss, net. Other operating loss, net represents losses from the disposition of property, plant and equipment.44Comparative Results of Operations for the Twelve Months Ended December 31, 2017 and 2016 Year Ended December 31, Variance PercentChange 2017 2016 (In thousands) Revenues: Services$58,817 $61,133 $(2,316) (4)%Products474,091 330,200 143,891 44%Total revenues532,908 391,333 141,575 36% Cost of products sold425,073 292,573 132,500 45%Operating expenses22,347 23,152 (805) (3)%Selling, general and administrative expenses11,106 8,970 2,136 24%Depreciation and amortization24,916 28,081 (3,165) (11)% 49,466 38,557 10,909 28%Other operating loss, net(89) (110) 21 19%Operating income$49,377 $38,447 $10,930 28% NGLs Volumes (barrels)10,487 9,532 955 10%Services Revenues. The decrease in services revenue is primarily a result of decreased storage rates at our Arcadia gas storage facility.Products Revenues. Our NGL average sales price per barrel increased $10.57, or 31%, resulting in an increase to products revenues of $100.7million. The increase in average sales price per barrel was a result of an increase in market prices. Product sales volumes increased 10%, increasing revenues$43.2 million.Cost of products sold. Our average cost per barrel increased $9.84, or 32%, increasing cost of products sold by $93.8 million. The increase inaverage cost per barrel was a result of an increase in market prices. The increase in sales volume of 10% resulted in a $38.7 million increase to cost ofproducts sold. Our margins increased $0.73 per barrel, or 18% during the period.Operating expenses. Operating expenses decreased $0.8 million due to $0.3 million of decreased maintenance expense at our NGL East Texaspipeline, decreased compensation expense of $0.3 million, and decreased repairs and maintenance at our underground NGL storage facility of $0.2 million.Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily as a result of increasedcompensation expense.Depreciation and amortization. Depreciation and amortization decreased primarily due to a $3.7 million decrease in amortization related tocontracts acquired during the purchase of Cardinal Gas Storage Partners, LLC (“Cardinal”), offset by a $0.6 million increase in depreciation expense relatedto recent capital expenditures.Other operating loss, net. Other operating loss, net represents losses from the disposition of property, plant and equipment.45Sulfur Services SegmentComparative Results of Operations for the Twelve Months Ended December 31, 2018 and 2017 Year Ended December 31, Variance PercentChange 2018 2017 (In thousands) Revenues: Services$11,148 $10,952 $196 2%Products121,388 123,732 (2,344) (2)%Total revenues132,536 134,684 (2,148) (2)% Cost of products sold90,780 82,760 8,020 10%Operating expenses11,618 13,783 (2,165) (16)%Selling, general and administrative expenses4,326 4,136 190 5%Depreciation and amortization8,485 8,117 368 5% 17,327 25,888 (8,561) (33)%Other operating loss, net(111) (26) (85) (327)%Operating income$17,216 $25,862 $(8,646) (33)% Sulfur (long tons)688.0 807.0 (119.0) (15)%Fertilizer (long tons)277.0 276.0 1.0 —%Sulfur services volumes (long tons)965.0 1,083.0 (118.0) (11)% Services Revenues. Services revenues increased as a result of a contractually prescribed index based fee adjustment.Products Revenues. Products revenues decreased $14.8 million due to an 11% decrease in sales volumes, primarily related to a 15% decrease insulfur volumes. Offsetting, products revenues increased $12.5 million as a result of a 10% rise in average sulfur services sales prices.Cost of products sold. A 23% increase in prices impacted cost of products sold by $19.1 million, resulting from an increase in commodity prices. An11% decrease in sales volumes resulted in an offsetting decrease in cost of products sold of $11.1 million. Margin per ton decreased $6.11, or 16%.Operating expenses. Our operating expenses decreased primarily as a result of a $1.5 million reduction in compensation expense and $0.4 million inlower property taxes. Additionally, outside towing decreased $0.3 million, railcar leases decreased $0.3 million, and repairs and maintenance on marinevessels decreased $0.2 million. An offsetting increase of $0.5 million resulted from an increase in marine fuel and lube.Selling, general and administrative expenses. Increased primarily as a result of increased compensation expense.Depreciation and amortization. Depreciation expense increased $0.4 million due to capital projects being completed and placed in service in thefourth quarter of 2017 and throughout 2018.Other operating loss, net. Other operating loss, net represents losses from the disposition of property, plant and equipment.46Comparative Results of Operations for the Twelve Months Ended December 31, 2017 and 2016 Year Ended December 31, Variance PercentChange 2017 2016 (In thousands) Revenues: Services$10,952 $10,800 $152 1%Products123,732 130,258 (6,526) (5)%Total revenues134,684 141,058 (6,374) (5)% Cost of products sold82,760 88,325 (5,565) (6)%Operating expenses13,783 13,771 12 —%Selling, general and administrative expenses4,136 3,861 275 7%Depreciation and amortization8,117 7,995 122 2% 25,888 27,106 (1,218) (4)%Other operating loss, net(26) (291) 265 91%Operating income$25,862 $26,815 $(953) (4)% Sulfur (long tons)807.0 797.0 10.0 1%Fertilizer (long tons)276.0 262.0 14.0 5%Sulfur services volumes (long tons)1,083.0 1,059.0 24.0 2%Services Revenues. Services revenues increased as a result of a contractually prescribed index based fee adjustment.Products Revenues. Products revenues decreased $9.3 million as a result of a 7% decline in average sales price. Offsetting, products revenuesincreased $2.8 million due to a 2% increase in sales volumes, primarily related to a 5% increase in fertilizer volumes.Cost of products sold. An 8% decrease in prices reduced cost of products sold by $7.4 million, resulting from a decline in commodity prices. A 2%increase in sales volumes caused an offsetting increase in cost of products sold of $1.9 million. Margin per ton decreased $1.78, or 4%.Selling, general and administrative expenses. Our selling, general and administrative expenses increased $0.3 million due to increasedcompensation expense offset slightly by a decrease of $0.1 million in bad debt expense.Depreciation and amortization. Depreciation expense increased $0.1 million due to capital projects being completed and placed in service duringthe second half of 2016.Other operating loss, net. Other operating loss, net represents losses from the disposition of property, plant and equipment.47Marine Transportation SegmentComparative Results of Operations for the Twelve Months Ended December 31, 2018 and 2017 Year Ended December 31, Variance PercentChange 2018 2017 (In thousands) Revenues$52,830 $51,915 $915 2%Operating expenses41,086 44,028 (2,942) (7)%Selling, general and administrative expenses1,060 358 702 196%Impairment of long-lived assets— 1,625 (1,625) (100)%Depreciation and amortization7,590 7,002 588 8% 3,094 (1,098) 4,192 382%Other operating loss, net(381) (113) (268) (237)%Operating income (loss)$2,713 $(1,211) $3,924 324%Revenues. An increase of $1.8 million in inland revenue was primarily related to new equipment being placed in service. Revenue was alsoimpacted by an increase in pass-through revenue (primarily fuel) of $2.1 million. An offsetting decrease of $3.1 million is attributable to revenue related toequipment sold or being classified as idle or held for sale. A $0.2 million increase in offshore revenues is primarily the result of increased utilization.Operating expenses. The decrease in operating expenses is primarily a result of decreased labor and burden of $1.8 million, a reclassification oflabor and burden from operating expense to selling general and administrative expense for the 2018 period of $0.7 million, repairs and maintenance of $0.8million, barge rental expense of $1.0 million, property and liability insurance premiums of $1.0 million, and outside towing of $0.3 million. These decreaseswere offset by an increase in pass through expenses (primarily fuel) of $2.2 million, marine Jones Act claims of $0.4 million, and contract labor of $0.3million. Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to the reclassification ofexpenses from operating expense to selling, general, and administrative expense of $0.7 million for the 2018 period.Impairment of long-lived assets. This represents the loss on impairment of non-core operating assets.Depreciation and amortization. Depreciation and amortization increased as a result of recent capital expenditures offset by asset disposals.Other operating loss, net. Other operating loss represents losses from the disposition of property, plant and equipment.48Comparative Results of Operations for the Twelve Months Ended December 31, 2017 and 2016 Year Ended December 31, Variance PercentChange 2017 2016 (In thousands) Revenues$51,915 $61,233 $(9,318) (15)%Operating expenses44,028 53,118 (9,090) (17)%Selling, general and administrative expenses358 18 340 1,889%Impairment of long lived assets1,625 11,701 (10,076) (86)%Impairment of goodwill— 4,145 (4,145) (100)%Depreciation and amortization7,002 10,572 (3,570) (34)% (1,098) (18,321) 17,223 94%Other operating loss, net(113) (1,567) 1,454 93%Operating income (loss)$(1,211) $(19,888) $18,677 94% Inland revenues. A decrease of $7.2 million is primarily attributable to decreased transportation rates and decreased utilization of the inland fleetresulting from an abundance of supply of marine equipment in our predominantly Gulf Coast market.Offshore revenues. A $2.4 million decrease in offshore revenues is primarily the result of the 2016 period including the recognition of previouslydeferred revenues of $1.5 million and decreased utilization of the offshore fleet due to downtime associated with regulatory inspections of $0.7 million.Operating expenses. The decrease in operating expenses is primarily a result of decreased labor and burden of $3.9 million, repairs and maintenanceof $1.3 million, Jones Act claims of $0.8 million, pass-through expenses (primarily barge tank cleaning) of $0.7 million, outside towing of $0.4 million,barge rental expense of $0.4 million, property taxes of $0.3 million, operating supplies of $0.3 million, and property insurance premiums of $0.2 million. Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to the 2016 period includingthe collection of a previously deemed uncollectible receivable of $0.5 million, offset by decreased legal fees of $0.1 million.Impairment of long-lived assets. This represents the loss on impairment of non-core operating assets.Loss on impairment of goodwill. This represents the loss on impairment of goodwill in the Marine Transportation reporting unit during the secondquarter of 2016. Depreciation and amortization. Depreciation and amortization decreased as a result of the disposal of property, plant and equipment combined withthe impairment of long-lived assets recognized in the fourth quarter of 2016, offset by recent capital expenditures.Other operating loss, net. Other operating loss represents losses from the disposition of property, plant and equipment.49Interest ExpenseComparative Components of Interest Expense, Net for the Twelve Months Ended December 31, 2018 and 2017 Year Ended December 31, Variance PercentChange 2018 2017 (In thousands) Revolving loan facility$20,193 $18,192 $2,001 11%7.250 % senior unsecured notes27,101 27,101 — —%Amortization of deferred debt issuance costs3,445 2,897 548 19%Amortization of debt premium(306) (306) — —%Other2,258 1,532 726 47%Capitalized interest(624) (730) 106 15%Interest income(30) (943) 913 97%Total interest expense, net$52,037 $47,743 $4,294 9% Comparative Components of Interest Expense, Net for the Twelve Months Ended December 31, 2017 and 2016 Year Ended December 31, Variance PercentChange 2017 2016 (In thousands) Revolving loan facility$18,192 $19,482 $(1,290) (7)%7.250 % senior unsecured notes27,101 27,326 (225) (1)%Amortization of deferred debt issuance costs2,897 3,684 (787) (21)%Amortization of debt premium(306) (306) — —%Impact of interest rate derivative activity, including cash settlements— (995) 995 100%Other1,532 291 1,241 426%Capitalized interest(730) (1,126) 396 35%Interest income(943) (2,256) $1,313 58%Total interest expense, net$47,743 $46,100 $1,643 4%Indirect Selling, General and Administrative Expenses Year Ended December 31, Variance PercentChange Year Ended December 31, Variance PercentChange 2018 2017 2017 2016 (In thousands) (In thousands) Indirect selling, general andadministrative expenses$17,901 $17,332 $569 3% $17,332 $16,795 $537 3%The increase in indirect selling, general and administrative expenses from 2017 to 2018 is primarily a result of increased unit based compensationexpense.The increase in indirect selling, general and administrative expenses from 2016 to 2017 is primarily a result of a $0.6 million increase in audit,consulting and other professional fees.Martin Resource Management allocates to us a portion of its indirect selling, general and administrative expenses for services such as accounting,treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit plans andother general corporate overhead functions we share with Martin Resource Management retained businesses. This allocation is based on the percentage oftime spent by Martin Resource Management personnel that provide such centralized services. GAAP also permits other methods for allocation of theseexpenses, such as basing the allocation on the percentage of revenues contributed by a segment. The allocation of these expenses between Martin ResourceManagement and us is subject to a number of judgments and estimates, regardless of the50method 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 ofallocation for these expenses. Other methods could result in a higher allocation of selling, general and administrative expense to us, which would reduce ournet income.Under the Omnibus Agreement, we are required to reimburse Martin Resource Management for indirect general and administrative and corporateoverhead expenses. The Conflicts Committee approved the following reimbursement amounts: Year Ended December 31, Variance PercentChange Year Ended December 31, Variance PercentChange 2018 2017 2017 2016 (In thousands) (In thousands) Conflicts Committee approvedreimbursement amount$16,416 $16,416 $— —% $16,416 $13,033 $3,383 26%The amounts reflected above represent our allocable share of such expenses. The Conflicts Committee will review and approve future adjustments inthe reimbursement amount for indirect expenses, if any, annually.Liquidity and Capital Resources GeneralOur primary sources of liquidity to meet operating expenses, pay distributions to our unitholders and fund capital expenditures have historicallybeen cash flows generated by our operations and access to debt and equity markets, both public and private. Management believes that expenditures for ourcurrent capital projects will be funded with cash flows from operations, current cash balances and our current borrowing capacity under the expandedrevolving credit facility. Given the current environment, we have altered and reduced our planned growth capital expenditures. We believe that controllingour spending in an effort to preserve liquidity is prudent and reduces our need for near-term access to the somewhat uncertain capital markets.Our ability to satisfy our working capital requirements, to fund planned capital expenditures and to satisfy our debt service obligations will alsodepend upon our future operating performance, which is subject to certain risks. Please read "Item 1A. Risk Factors - Risks related to Our Business" for adiscussion of such risks.Recent Debt Financing Activity Credit Facility Amendment. On February 21, 2018, we amended our revolving credit facility in order to achieve two primary objectives, the first ofwhich was to accommodate growth capital expenditures necessary for the previously announced WTLPG expansion project. Starting in the first quarter of2018, the amendment provided short-term (5 quarters) covenant relief by increasing the total leverage ratio to 5.75 to 1.00 (first and second quarters of 2018)with step downs to 5.50 to 1.00 (third and fourth quarters of 2018 and first quarter of 2019) and to 5.25 to 1.00 beginning in the second quarter of 2019.Additionally, the facility was amended to establish an inventory financing sublimit tranche for borrowings related to our NGL (butane) marketing business,which is a part of and not in addition to the already existing commitments under the revolving credit facility. This sublimit is not to exceed $75.0 million,with seasonal step downs to $10.0 million for the months of March through June of each fiscal year. The sublimit is subject to a monthly borrowing base notto exceed 90% of the value of forward sold/hedged inventory. In conjunction with the sale of WTLPG on July 31, 2018, we amended our revolving creditfacility which included, among other things, further revising our leverage covenants from the February 21, 2018 amendment (discussed in detail above). Total Indebtedness to EBITDA and Senior Secured Indebtedness to EBITDA (each as defined in the credit agreement) was amended to 5.25 times and 3.50times, respectively. No changes were made to the Consolidated Interest Coverage Ratio (as defined in the credit agreement) of 2.50 times. Due to the foregoing, we believe that cash generated from operations and our borrowing capacity under our credit facility will be sufficient to meetour working capital requirements and anticipated maintenance capital expenditures in 2019.Finally, our ability to satisfy our working capital requirements, to fund planned capital expenditures and to satisfy our debt service obligations willdepend upon our future operating performance, which is subject to certain risks. Please read "Item 1A. Risk Factors - Risks Relating to Our Business" for adiscussion of such risks.51Cash Flows - Twelve Months Ended December 31, 2018 Compared to Twelve Months Ended December 31, 2017The following table details the cash flow changes between the twelve months ended December 31, 2018 and 2017: Years Ended December 31, Variance PercentChange 2018 2017 (In thousands) Net cash provided by (used in): Operating activities$90,726 $67,506 $23,220 34%Investing activities147,654 (37,878) 185,532 490%Financing activities(238,170) (29,616) (208,554) (704)%Net increase (decrease) in cash and cash equivalents$210 $12 $198 34%Net cash provided by operating activities. The increase in net cash provided by operating activities for the twelve months ended December 31, 2018includes a $52.6 million favorable variance in working capital and a $4.8 million decrease in other non-cash charges. Offsetting was a decrease in operatingresults of $20.6 million and an unfavorable variance in other non-current assets and liabilities of $2.1 million. Net cash provided by discontinued operatingactivities decreased $2.0 million.Net cash provided by (used in) investing activities. Net cash provided by investing activities for the twelve months ended December 31, 2018increased primarily as a result of a $177.3 million increase in net cash provided by discontinued investing activities. Additionally, a decrease in cash used ininvesting activities as a result of the acquisition of certain asphalt terminalling assets from Martin Resource Management in 2017, compared to noacquisitions in 2018, resulted in an increase of $19.5 million. Further, a decrease in cash used of $2.3 million is due to lower payments for capitalexpenditures and plant turnaround costs in 2018 as well as a $1.0 million increase in proceeds received as a result of higher sales of property, plant andequipment in 2018. Offsetting was a $15.0 million decline in proceeds received resulting from repayment of the Note receivable - affiliate in 2017 ascompared to none in 2018.Net cash used in financing activities. Net cash used in financing activities increased for the twelve months ended December 31, 2018 as a result ofan increase in net repayments of long-term borrowings of $160.0 million as well as a decrease in proceeds received from the issuance of common units(including the related general partner contribution) of $52.3 million. Also contributing was an increase in cash distributions paid of $1.5 million and anadditional $1.2 million in costs associated with our credit facility amendment. Offsetting was a decrease in cash used of $6.7 million related to excesspurchase price over the carrying value of acquired assets in common control transactions. Cash Flows - Twelve Months Ended December 31, 2017 Compared to Twelve Months Ended December 31, 2016The following table details the cash flow changes between the twelve months ended December 31, 2017 and 2016: Years Ended December 31, Variance PercentChange 2017 2016 (In thousands) Net cash provided by (used in): Operating activities$67,506 $110,848 $(43,342) (39)%Investing activities(37,878) 63,839 (101,717) (159)%Financing activities(29,616) (174,703) 145,087 83%Net decrease in cash and cash equivalents$12 $(16) $28 175%Net cash provided by operating activities. The decline in net cash provided by operating activities includes a decrease in operating results fromcontinuing operations of $14.5 million and a $29.6 million unfavorable variance in working capital. Further decreases were due to an $11.8 million decreasein other non-cash charges and a decrease in distributions received from WTLPG of $2.1 million. Offsetting was an increase of $14.6 million attributable to afavorable variance in other non-current assets and liabilities.Net cash (used in) provided by investing activities. Net cash from investing activities decreased as a result of a decrease of $100.1 million in netproceeds from the sale of property, plant and equipment. The 2017 period also included an52acquisition of $19.5 million compared to an acquisition of $2.2 million in 2016, resulting in a $17.4 million decrease in cash. Offsetting these decreases wasan increase of $15.0 million for proceeds received from repayment of the Note receivable - affiliate and a decrease in payments for capital expenditures andplant turnaround costs of $1.2 million.Net cash used in financing activities. Net cash used in financing activities decreased for the year ended December 31, 2017 as a result of a decreasein net repayments of long-term borrowings of $57.0 million. Proceeds received from the issuance of common units (including the related general partnercontribution) increased net cash by $52.2 million. Also contributing was a decrease in cash distributions paid of $41.2 million and $5.2 million less in costsassociated with our credit facility amendment. Offsetting was an increase of $10.9 million related to excess purchase price over the carrying value of acquiredassets in common control transactions.Capital ResourcesHistorically, we have generally satisfied our working capital requirements and funded our capital expenditures with cash generated from operationsand borrowings. We expect our primary sources of funds for short-term liquidity will be cash flows from operations and borrowings under our credit facility.Total Contractual Obligations. A summary of our total contractual obligations as of December 31, 2018, is as follows (dollars in thousands): Payments due by periodType of ObligationTotalObligation Less thanOne Year 1-3Years 3-5Years More than 5yearsRevolving credit facility$287,000 $— $287,000 $— $—2021 senior unsecured notes373,800 — 373,800 — —Throughput commitment16,030 6,194 9,836 — —Operating leases27,921 7,869 8,633 3,596 7,823Interest payable on fixed long-term obligations57,589 27,101 30,488 — —Total contractual cash obligations$762,340 $41,164 $709,757 $3,596 $7,823The interest payable under our revolving credit facility is not reflected in the above table because such amounts depend on the outstanding balancesand interest rates, which vary from time to time.Letter of Credit. At December 31, 2018, we had outstanding irrevocable letters of credit in the amount of $16.9 million, which were issued under ourrevolving credit facility.Off Balance Sheet Arrangements. We do not have any off-balance sheet financing arrangements. Description of Our Long-Term Debt2021 Senior NotesWe and Martin Midstream Finance Corp., a subsidiary of us (collectively, the "Issuers"), entered into (i) an Indenture, dated as of February 11, 2013(the "2021 Indenture") among the Issuers, certain subsidiary guarantors (the "2021 Guarantors") and Wells Fargo Bank, National Association, as trustee (the"2021 Trustee") and (ii) a Registration Rights Agreement, dated as of February 11, 2013 (the "2021 Registration Rights Agreement"), among the Issuers, the2021 Guarantors and Wells Fargo Securities, LLC, RBC Capital Markets, LLC, RBS Securities Inc., SunTrust Robinson Humphrey, Inc. and Merrill Lynch,Pierce, Fenner & Smith Incorporated, as representatives of a group of initial purchasers, in connection with a private placement to eligible purchasers of$250.0 million in aggregate principal amount of the Issuers' 7.25% senior unsecured notes due 2021 (the "2021 Notes"). On April 1, 2014, we completed aprivate placement add-on of $150.0 million of the 2021 Notes. In 2015, we repurchased on the open market and subsequently retired an aggregate $26.2million of our outstanding 2021 Notes.Interest and Maturity. The Issuers issued the 2021 Notes pursuant to the 2021 Indenture in transactions exempt from registration requirements underthe Securities Act of 1933, as amended (the "Securities Act"). The 2021 Notes were resold to qualified institutional buyers pursuant to Rule 144A under theSecurities Act and to persons outside the United States pursuant to Regulation S under the Securities Act. The 2021 Notes will mature on February 15, 2021.The interest payment dates are February 15 and August 15.53 Optional Redemption. Prior to February 15, 2017, the Issuers may on any one or more occasions redeem all or a part of the 2021 Notes at theredemption price equal to the sum of (i) the principal amount thereof, plus (ii) a make whole premium at the redemption date, plus accrued and unpaidinterest, if any, to the redemption date. On or after February 15, 2017, the Issuers may on any one or more occasions redeem all or a part of the 2021 Notes atthe redemption prices (expressed as percentages of principal amount) equal to 103.625% for the twelve-month period beginning on February 15, 2017,101.813% for the twelve-month period beginning on February 15, 2018 and 100.00% for the twelve-month period beginning on February 15, 2019 and atany time thereafter, plus accrued and unpaid interest, if any, to the applicable redemption date on the 2021 Notes.Certain Covenants. The 2021 Indenture restricts our ability and the ability of certain of our subsidiaries to: (i) sell assets including equity interestsin our subsidiaries; (ii) pay distributions on, redeem or repurchase our units or redeem or repurchase our subordinated debt; (iii) make investments; (iv) incuror guarantee additional indebtedness or issue preferred units; (v) create or incur certain liens; (vi) enter into agreements that restrict distributions or otherpayments from our restricted subsidiaries to us; (vii) consolidate, merge or transfer all or substantially all of our assets; (viii) engage in transactions withaffiliates; (ix) create unrestricted subsidiaries; (x) enter into sale and leaseback transactions; or (xi) engage in certain business activities. These covenants aresubject to a number of important exceptions and qualifications. If the 2021 Notes achieve an investment grade rating from each of Moody's Investors Service,Inc. and Standard & Poor's Ratings Services and no Default (as defined in the 2021 Indenture) has occurred and is continuing, many of these covenants willterminate. Events of Default. The 2021 Indenture provides that each of the following is an Event of Default: (i) default for 30 days in the payment when due ofinterest on the 2021 Notes; (ii) default in payment when due of the principal of, or premium, if any, on the 2021 Notes; (iii) failure by us to comply withcertain covenants relating to asset sales, repurchases of the 2021 Notes upon a change of control and mergers or consolidations; (iv) failure by us for 180 daysafter notice to comply with our reporting obligations under the Securities Exchange Act of 1934; (v) failure by us for 60 days after notice to comply with anyof the other agreements in the 2021 Indenture; (vi) default under any mortgage, indenture or instrument governing any indebtedness for money borrowed orguaranteed by us or any of our restricted subsidiaries, whether such indebtedness or guarantee now exists or is created after the date of the 2021 Indenture, ifsuch default: (a) is caused by a payment default; or (b) results in the acceleration of such indebtedness prior to its stated maturity, and, in each case, theprincipal amount of the indebtedness, together with the principal amount of any other such indebtedness under which there has been a payment default oracceleration of maturity, aggregates $20.0 million or more, subject to a cure provision; (vii) failure by us or any of our restricted subsidiaries to pay finaljudgments aggregating in excess of $20.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (viii) except as permitted bythe 2021 Indenture, any subsidiary guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force oreffect, or any 2021 Guarantor, or any person acting on behalf of any Guarantor, denies or disaffirms its obligations under its subsidiary guarantee; and(ix) certain events of bankruptcy, insolvency or reorganization described in the 2021 Indenture with respect to the Issuers or any of our restricted subsidiariesthat is a significant subsidiary or any group of restricted subsidiaries that, taken together, would constitute a significant subsidiary of us. Upon a continuingEvent of Default, the 2021 Trustee, by notice to the Issuers, or the holders of at least 25% in principal amount of the then outstanding 2021 Notes, by noticeto the Issuers and the 2021 Trustee, may declare the 2021 Notes immediately due and payable, except that an Event of Default resulting from entry into abankruptcy, insolvency or reorganization with respect to the Issuers, any restricted subsidiary of us that is a significant subsidiary or any group of itsrestricted subsidiaries that, taken together, would constitute a significant subsidiary of us, will automatically cause the 2021 Notes to become due andpayable.Revolving Credit FacilityAt December 31, 2018, we maintained a $664.4 million credit facility. This facility was most recently amended on July 24, 2018, which included,among other things, revising our existing leverage covenants. Total Indebtedness to EBITDA and Senior Secured Indebtedness to EBITDA (each as definedin the credit agreement) was amended to 5.25 times and 3.50 times, respectively. No changes were made to the Consolidated Interest Coverage Ratio (asdefined in the credit agreement) of 2.50 times.As of December 31, 2018, we had $287.0 million outstanding under the revolving credit facility and $16.9 million of letters of credit issued, leavinga maximum available to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $360.5 million. Subject to thefinancial covenants contained in our credit facility and based on our existing EBITDA (as defined in our credit facility) calculations, as of December 31,2018, we have the ability to borrow approximately $25.8 million of that amount. We were in compliance with all financial covenants at December 31, 2018.54 The revolving credit facility is used for ongoing working capital needs and general partnership purposes, and to finance permitted investments,acquisitions and capital expenditures. During the year ended December 31, 2018, the level of outstanding draws on our credit facility has ranged from a lowof $287.0 million to a high of $500.0 million.The credit facility is guaranteed by substantially all of our subsidiaries. Obligations under the credit facility are secured by first priority liens onsubstantially all of our assets and those of the guarantors, including, without limitation, inventory, accounts receivable, bank accounts, marine vessels,equipment, fixed assets and the interests in our subsidiaries.We may prepay all amounts outstanding under the credit facility at any time without premium or penalty (other than customary LIBOR breakagecosts), subject to certain notice requirements. The credit facility requires mandatory prepayments of amounts outstanding thereunder with the net proceeds ofcertain asset sales, equity issuances and debt incurrences.Indebtedness under the credit facility bears interest at our option at the Eurodollar Rate (the British Bankers Association LIBOR Rate) plus anapplicable margin or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0%, or the administrative agent’sprime rate) plus an applicable margin. We pay a per annum fee on all letters of credit issued under the credit facility, and we pay a commitment fee per annumon the unused revolving credit availability under the credit facility. The letter of credit fee, the commitment fee and the applicable margins for our interestrate vary quarterly based on our leverage ratio (as defined in the credit facility, being generally computed as the ratio of total funded debt to consolidatedearnings before interest, taxes, depreciation, amortization and certain other non-cash charges) and are as follows as of December 31, 2018: Leverage RatioBase RateLoans EurodollarRateLoans Letters of CreditLess than 3.00 to 1.001.00% 2.00% 2.00%Greater than or equal to 3.00 to 1.00 and less than 3.50 to 1.001.25% 2.25% 2.25%Greater than or equal to 3.50 to 1.00 and less than 4.00 to 1.001.50% 2.50% 2.50%Greater than or equal to 4.00 to 1.00 and less than 4.50 to 1.001.75% 2.75% 2.75%Greater than or equal to 4.50 to 1.002.00% 3.00% 3.00% At December 31, 2018, the applicable margin for revolving loans that are LIBOR loans ranges from 2.00% to 3.00% and the applicable margin forrevolving loans that are base prime rate loans ranges from 1.00% to 2.00%. The applicable margin for LIBOR borrowings at December 31, 2018 is 2.75%. The credit facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last dayof each fiscal quarter.In addition, the credit facility contains various covenants, which, among other things, limit our and our subsidiaries’ ability to: (i) grant or assumeliens; (ii) make investments (including investments in our joint ventures) and acquisitions; (iii) enter into certain types of hedging agreements; (iv) incur orassume indebtedness; (v) sell, transfer, assign or convey assets; (vi) repurchase our equity, make distributions and certain other restricted payments, but thecredit facility permits us to make quarterly distributions to unitholders so long as no default or event of default exists under the credit facility; (vii) changethe nature of our business; (viii) engage in transactions with affiliates; (ix) enter into certain burdensome agreements; (x) make certain amendments to theOmnibus Agreement and our material agreements; (xi) make capital expenditures; and (xii) permit our joint ventures to incur indebtedness or grant certainliens.The credit facility contains customary events of default, including, without limitation: (i) failure to pay any principal, interest, fees, expenses orother amounts when due; (ii) failure to meet the quarterly financial covenants; (iii) failure to observe any other agreement, obligation, or covenant in thecredit facility or any related loan document, subject to cure periods for certain failures; (iv) the failure of any representation or warranty to be materially trueand correct when made; (v) our, or any of our subsidiaries’ default under other indebtedness that exceeds a threshold amount; (vi) bankruptcy or otherinsolvency events involving us or any of our subsidiaries; (vii) judgments against us or any of our subsidiaries, in excess of a threshold amount; (viii) certainERISA events involving us or any of our subsidiaries, in excess of a threshold amount; (ix) a change in control (as defined in the credit facility); and (x) theinvalidity of any of the loan documents or the failure of any of the collateral documents to create a lien on the collateral.55The credit facility also contains certain default provisions relating to Martin Resource Management. If Martin Resource Management no longercontrols our general partner, the lenders under the credit facility may declare all amounts outstanding thereunder immediately due and payable. In addition,an event of default by Martin Resource Management under its credit facility could independently result in an event of default under our credit facility if it isdeemed to have a material adverse effect on us.If an event of default relating to bankruptcy or other insolvency events occurs with respect to us or any of our subsidiaries, all indebtedness underour credit facility will immediately become due and payable. If any other event of default exists under our credit facility, the lenders may terminate theircommitments to lend us money, accelerate the maturity of the indebtedness outstanding under the credit facility and exercise other rights and remedies. Inaddition, if any event of default exists under our credit facility, the lenders may commence foreclosure or other actions against the collateral. We are subject to interest rate risk on our credit facility due to the variable interest rate and may enter into interest rate swaps to reduce this variablerate risk.The Partnership is in compliance with all debt covenants as of December 31, 2018 and expects to be in compliance for the next twelve months.SeasonalityA substantial portion of our revenues are dependent on sales prices of products, particularly NGLs and fertilizers, which fluctuate in part based onwinter and spring weather conditions. The demand for NGLs is strongest during the winter heating season and the refinery blending season. The demand forfertilizers is strongest during the early spring planting season. However, natural gas storage division of the Natural Gas Services segment provides stable cashflows and is not generally subject to seasonal demand factors. Additionally, our Terminalling and Storage and Marine Transportation segments and themolten sulfur business are typically not impacted by seasonal fluctuations and a significant portion of our net income is derived from our terminalling andstorage, sulfur and marine transportation businesses. Therefore, we do not expect that our overall net income will be impacted by seasonalityfactors. However, extraordinary weather events, such as hurricanes, have in the past, and could in the future, impact our Terminalling and Storage and MarineTransportation segments.Impact of InflationInflation did not have a material impact on our results of operations in 2018, 2017 or 2016. Although the impact of inflation has been insignificantin recent years, it is still a factor in the U.S. economy and may increase the cost to acquire or replace property, plant and equipment. It may also increase thecosts of labor and supplies. In the future, increasing energy prices could adversely affect our results of operations. Diesel fuel, natural gas, chemicals andother supplies are recorded in operating expenses. An increase in price of these products would increase our operating expenses which could adversely affectnet income. We cannot provide assurance that we will be able to pass along increased operating expenses to our customers.Environmental MattersOur operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which theseoperations are conducted. We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contaminationduring 2018, 2017 or 2016.56Item 7A.Quantitative and Qualitative Disclosures about Market RiskCommodity Risk. The Partnership from time to time uses derivatives to manage the risk of commodity price fluctuation. Commodity risk is theadverse effect on the value of a liability or future purchase that results from a change in commodity price. We have established a hedging policy and monitorand manage the commodity market risk associated with potential commodity risk exposure. In addition, we focus on utilizing counterparties for thesetransactions whose financial condition is appropriate for the credit risk involved in each specific transaction. We have entered into hedging transactions as of December 31, 2018 to protect a portion of our commodity price risk exposure. These hedgingarrangements are in the form of swaps for NGLs. We have instruments totaling a gross notional quantity of 55,000 barrels settling during the period fromJanuary 31, 2019 through February 28, 2019. These instruments settle against the applicable pricing source for each grade and location. These instrumentsare recorded on our Consolidated Balance Sheets at December 31, 2018 in "Fair value of derivatives" as a current asset of $0.04 million. Based on the currentnet notional volume hedged as of December 31, 2018, a $0.10 change in the expected settlement price of these contracts would result in an impact of $0.2million to the Partnership's net income.Interest Rate Risk. We are exposed to changes in interest rates as a result of our credit facility, which had a weighted-average interest rate of 5.24%as of December 31, 2018. Based on the amount of unhedged floating rate debt owed by us on December 31, 2018, the impact of a 100 basis point increase ininterest rates on this amount of debt would result in an increase in interest expense and a corresponding decrease in net income of approximately $2.9 millionannually.We are not exposed to changes in interest rates with respect to our senior unsecured notes as these obligations are fixed rate. The estimated fairvalue of the senior unsecured notes was approximately $360.1 million as of December 31, 2018, based on market prices of similar debt at December 31,2018. Market risk is estimated as the potential decrease in fair value of our long-term debt resulting from a hypothetical increase of a 100 basis pointincrease in interest rates. Such an increase in interest rates would result in approximately a $6.8 million decrease in fair value of our long-term debt atDecember 31, 2018. 57Item 8.Financial Statements and Supplementary DataThe following financial statements of Martin Midstream Partners L.P. (Partnership) are listed below: PageReports of Independent Registered Public Accounting Firm59Consolidated Balance Sheets as of December 31, 2018 and 201761Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 201662Consolidated Statements of Changes in Capital for the years ended December 31, 2018, 2017 and 201665Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 201666Notes to Consolidated Financial Statements6758Report of Independent Registered Public Accounting Firm To the Unitholders and Board of DirectorsMartin Midstream Partners L.P. and Martin Midstream GP LLC:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of Martin Midstream Partners L.P. and subsidiaries (the “Partnership”) as of December 31,2018 and 2017, the related consolidated statements of operations, changes in capital, and cash flows for each of the years in the three‑year period endedDecember 31, 2018, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statementspresent fairly, in all material respects, the financial position of the Partnership as of December 31, 2018 and 2017, and the results of its operations and its cashflows for each of the years in the three‑year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Partnership’sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 19, 2019 expressed an unqualified opinion on theeffectiveness of the Partnership’s internal control over financial reporting.Basis for OpinionThese consolidated financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent withrespect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performingprocedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures thatrespond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ KPMG LLP We have served as the Partnership’s auditor since 1981Dallas, TexasFebruary 19, 2019 59Report of Independent Registered Public Accounting FirmTo the Unitholders and Board of DirectorsMartin Midstream Partners L.P. and Martin Midstream GP LLC:Opinion on Internal Control Over Financial ReportingWe have audited Martin Midstream Partners L.P. and subsidiaries' (the “Partnership”) internal control over financial reporting as of December 31, 2018, basedon criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission. In our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidatedbalance sheets of the Partnership as of December 31, 2018 and 2017, the related consolidated statements of operations, changes in capital, and cash flows foreach of the years in the three‑year period ended December 31, 2018, and the related notes (collectively, the “consolidated financial statements”), and ourreport dated February 19, 2019, expressed an unqualified opinion on those consolidated financial statements.Basis for OpinionThe Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ KPMG LLP Dallas, TexasFebruary 19, 201960MARTIN MIDSTREAM PARTNERS L.P.CONSOLIDATED BALANCE SHEETS(Dollars in thousands) December 31, 2018 2017Assets Cash$237 $27Trade and accrued accounts receivable, less allowance for doubtful accounts of $291 and $314, respectively79,031 107,242Product exchange receivables166 29Inventories (Note 7)85,068 97,252Due from affiliates18,609 23,668Fair value of derivatives (Note 13)4 —Other current assets5,275 4,866Assets held for sale (Note 5)5,652 9,579Total current assets194,042 242,663 Property, plant and equipment, at cost (Note 8)1,264,730 1,253,065Accumulated depreciation(466,381) (421,137)Property, plant and equipment, net798,349 831,928 Goodwill (Note 9)17,296 17,296Investment in WTLPG (Note 11)— 128,810Intangibles and other assets, net (Note 15)23,711 32,801 $1,033,398 $1,253,498Liabilities and Partners’ Capital Trade and other accounts payable$63,157 $92,567Product exchange payables13,237 11,751Due to affiliates2,459 3,168Income taxes payable445 510Fair value of derivatives (Note 13)— 72Other accrued liabilities (Note 15)22,215 26,340Total current liabilities101,513 134,408 Long-term debt, net (Note 16)656,459 812,632Other long-term obligations10,714 8,217Total liabilities768,686 955,257Commitments and contingencies (Note 22) Partners’ capital (Note 17)264,712 298,241Total partners’ capital264,712 298,241 $1,033,398 $1,253,498See accompanying notes to consolidated financial statements.61MARTIN MIDSTREAM PARTNERS L.P.CONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except per unit amounts) Year Ended December 31, 2018 2017 2016Revenues: Terminalling and storage *$96,287 $99,705 $123,132Marine transportation *50,370 48,579 58,290Natural gas storage services *52,109 58,817 61,133Sulfur services11,148 10,952 10,800Product sales: * Natural gas services496,026 473,865 330,200Sulfur services121,388 123,732 130,258Terminalling and storage145,327 130,466 113,578 762,741 728,063 574,036Total revenues972,655 946,116 827,391 Costs and expenses: Cost of products sold: (excluding depreciation and amortization) Natural gas services *463,939 421,444 289,516Sulfur services *90,418 82,338 87,963Terminalling and storage *130,253 116,495 100,714 684,610 620,277 478,193Expenses: Operating expenses *128,337 140,177 152,325Selling, general and administrative *37,677 38,764 34,320Impairment of long-lived assets— 2,225 26,953Impairment of goodwill— — 4,145Depreciation and amortization76,866 85,195 92,132Total costs and expenses927,490 886,638 788,068Other operating income (loss), net(379) 523 33,400Operating income44,786 60,001 72,723 Other income (expense): Interest expense, net(52,037) (47,743) (46,100)Other, net25 1,101 1,106Total other income (expense)(52,012) (46,642) (44,994)Net income (loss) before taxes(7,226) 13,359 27,729Income tax expense(369) (352) (726)Income (loss) from continuing operations(7,595) 13,007 27,003Income from discontinued operations, net of income taxes51,700 4,128 4,649Net income44,105 17,135 31,652Less general partner's interest in net income(882) (343) (8,419)Less income allocable to unvested restricted units(28) (42) (90)Limited partner's interest in net income$43,195 $16,750 $23,143*Related Party Transactions Shown BelowSee accompanying notes to consolidated financial statements.62MARTIN MIDSTREAM PARTNERS L.P.CONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except per unit amounts)*Related Party Transactions Included Above Year Ended December 31, 2018 2017 2016Revenues: Terminalling and storage$79,219 $82,205 $82,437Marine transportation15,442 16,801 21,767Natural gas services— 122 699Product sales1,407 3,578 3,034Costs and expenses: Cost of products sold: (excluding depreciation and amortization) Natural gas services14,816 18,946 22,886Sulfur services17,418 15,564 15,339 Terminalling and storage28,304 17,612 13,838Expenses: Operating expenses55,528 64,344 70,841Selling, general and administrative28,246 29,416 25,890See accompanying notes to consolidated financial statements.63MARTIN MIDSTREAM PARTNERS L.P.CONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except per unit amounts) Year Ended December 31, 2018 2017 2016Allocation of net income attributable to: Limited partner interest: Continuing operations$(7,438) $12,715 $19,744 Discontinued operations50,633 4,035 3,399 $43,195 $16,750 $23,143General partner interest: Continuing operations$(152) $260 $7,182 Discontinued operations1,034 83 1,237 $882 $343 $8,419 Net income per unit attributable to limited partners: Basic: Continuing operations$(0.19) $0.33 $0.55Discontinued operations1.30 0.11 0.10 $1.11 $0.44 $0.65 Weighted average limited partner units - basic38,907 38,102 35,347 Diluted: Continuing operations$(0.19) $0.33 $0.55Discontinued operations1.30 0.11 0.10 $1.11 $0.44 $0.65 Weighted average limited partner units - diluted38,923 38,165 35,375See accompanying notes to consolidated financial statements.64MARTIN MIDSTREAM PARTNERS L.P.CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL(Dollars in thousands) Partners’ Capital Common General Partner Units Amount Amount TotalBalances – December 31, 201535,456,612 $380,845 $13,034 $393,879 Net income— 23,233 8,419 31,652Issuance of common units, net— (29) — (29)Issuance of restricted units13,800 — — —Forfeiture of restricted units(2,250) — — —Cash distributions— (104,137) (14,041) (118,178)Reimbursement of excess purchase price over carrying value of acquired assets— 4,125 — 4,125Unit-based compensation— 904 — 904Purchase of treasury units(16,100) (347) — (347)Balances – December 31, 201635,452,062 304,594 7,412 312,006 Net income— 16,792 343 17,135Issuance of common units, net2,990,000 51,056 — 51,056Issuance of restricted units12,000 — — —Forfeiture of restricted units(9,250) — — —General partner contribution— — 1,098 1,098Cash distributions— (75,399) (1,539) (76,938)Reimbursement of excess purchase price over carrying value of acquired assets— 1,125 — 1,125Excess purchase price over carrying value of acquired assets— (7,887) — (7,887)Unit-based compensation— 650 — 650Purchase of treasury units(200) (4) — (4)Balances – December 31, 201738,444,612 290,927 7,314 298,241 Net income— 43,223 882 44,105Issuance of common units, net— (118) — (118)Issuance of time-based restricted units315,500 — — —Issuance of performance-based restricted units317,925 — — —Forfeiture of restricted units(27,000) — — —Cash distributions— (76,872) (1,569) (78,441)Excess purchase price over carrying value of acquired assets— (26) — (26)Unit-based compensation— 1,224 — 1,224Purchase of treasury units(18,800) (273) — (273)Balances – December 31, 201839,032,237 $258,085 $6,627 $264,712See accompanying notes to consolidated financial statements.65MARTIN MIDSTREAM PARTNERS L.P.CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in thousands) Year Ended December 31, 2018 2017 2016Cash flows from operating activities: Net income$44,105 $17,135 $31,652Less: Income from discontinued operations(51,700) (4,128) (4,649)Net income (loss) from continuing operations(7,595) 13,007 27,003Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization76,866 85,195 92,132Amortization and write-off of deferred debt issue costs3,445 2,897 3,684Amortization of premium on notes payable(306) (306) (306)(Gain) loss on disposition or sale of property, plant, and equipment379 (523) (33,400)Impairment of long lived assets— 2,225 26,953Impairment of goodwill— — 4,145Derivative (income) loss(14,024) 1,304 4,133Net cash (paid) received for commodity derivatives13,948 (5,136) (550)Net cash received for interest rate derivatives— — 160Net premiums received on derivatives that settled during the year on interest rate swaption contracts— — 630Unit-based compensation1,224 650 904Change in current assets and liabilities, excluding effects of acquisitions and dispositions: Accounts and other receivables28,440 (26,739) (6,153)Product exchange receivables(137) 178 843Inventories11,844 (14,656) (6,761)Due from affiliates5,059 (12,096) (1,441)Other current assets1,178 (1,699) 2,478Trade and other accounts payable(27,478) 20,037 3,254Product exchange payables1,486 4,391 (5,372)Due to affiliates(709) (5,306) 2,736Income taxes payable(65) (360) (115)Other accrued liabilities(6,415) (3,187) 686Change in other non-current assets and liabilities332 2,416 (12,230)Net cash provided by continuing operating activities87,472 62,292 103,413Net cash provided by discontinued operating activities3,254 5,214 7,435Net cash provided by operating activities90,726 67,506 110,848Cash flows from investing activities: Payments for property, plant, and equipment(37,090) (39,749) (40,455)Acquisitions, net of cash acquired— (19,533) (2,150)Payments for plant turnaround costs(1,893) (1,583) (2,061)Proceeds from sale of property, plant, and equipment9,381 8,377 108,505Proceeds from repayment of Note receivable - affiliate— 15,000 —Net cash provided by (used in) continuing investing activities(29,602) (37,488) 63,839Net cash provided by (used in) discontinued investing activities177,256 (390) —Net cash provided by (used in) investing activities147,654 (37,878) 63,839Cash flows from financing activities: Payments of long-term debt(557,000) (339,000) (386,700)Proceeds from long-term debt399,000 341,000 331,700Net proceeds from issuance of common units(118) 51,056 (29)General partner contributions— 1,098 —Excess purchase price over carrying value of acquired assets(26) (7,887) —Reimbursement of excess purchase price over carrying value of acquired assets— 1,125 4,125Purchase of treasury units(273) (4) (347)Payments of debt issuance costs(1,312) (66) (5,274)Cash distributions paid(78,441) (76,938) (118,178)Net cash used in financing activities(238,170) (29,616) (174,703) Net increase (decrease) in cash210 12 (16)Cash at beginning of year27 15 31Cash at end of year$237 $27 $15 See accompanying notes to consolidated financial statements.66MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESSMartin Midstream Partners L.P. (the "Partnership") is a publicly traded limited partnership with a diverse set of operations focused primarily in theUnited States ("U.S.") Gulf Coast region. Its four primary business lines include: terminalling and storage services for petroleum products and by-productsincluding the refining of naphthenic crude oil and the blending and packaging of finished lubricants; natural gas services, including liquids transportationand distribution services and natural gas storage; sulfur and sulfur-based products processing, manufacturing, marketing and distribution; and marinetransportation services for petroleum products and by-products.The petroleum products and by-products the Partnership collects, transports, stores and distributes are produced primarily by major and independentoil and gas companies who often turn to third parties, such as the Partnership, for the transportation and disposition of these products. In addition to thesemajor and independent oil and gas companies, the Partnership's primary customers include independent refiners, large chemical companies, fertilizermanufacturers and other wholesale purchasers of these products. The Partnership operates primarily in the U.S. Gulf Coast region, which is a major hub forpetroleum refining, natural gas gathering and processing and support services for the oil and gas exploration and production industry.On August 30, 2013, Martin Resource Management completed the sale of a 49% non-controlling voting interest (50% economic interest) in MMGPHoldings, LLC ("Holdings"), a newly-formed sole member of Martin Midstream GP LLC ("MMGP"), the general partner of the Partnership, to certain affiliatedinvestment funds managed by Alinda Capital Partners ("Alinda"). Upon closing the transaction, Alinda appointed two representatives to serve on the board ofdirectors of the general partner of the Partnership.NOTE 2. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES(a) Principles of Presentation and ConsolidationThe consolidated financial statements include the financial statements of the Partnership and its wholly-owned subsidiaries and equity methodinvestees. In the opinion of the management of the Partnership’s general partner, all adjustments and elimination of significant intercompany balancesnecessary for a fair presentation of the Partnership’s results of operations, financial position and cash flows for the periods shown have been made. All suchadjustments are of a normal recurring nature. In addition, the Partnership evaluates its relationships with other entities to identify whether they are variableinterest entities under certain provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), 810-10 and toassess whether it is the primary beneficiary of such entities. If the determination is made that the Partnership is the primary beneficiary, then that entity isincluded in the consolidated financial statements in accordance with ASC 810-10. No such variable interest entities exist as of December 31, 2018 or 2017.Divestiture of WTLPG Partnership Interest. On July 31, 2018, the Partnership completed the sale of its 20 percent non-operating interest in WestTexas LPG Pipeline L.P. ("WTLPG") to ONEOK, Inc. (“ONEOK”). WTLPG owns an approximate 2,300 mile common-carrier pipeline system that primarilytransports NGLs from New Mexico and Texas to Mont Belvieu, Texas for fractionation. A wholly-owned subsidiary of ONEOK, Inc. is the operator of theassets. The Partnership has concluded the disposition represents a strategic shift and will have a major effect on its financial results going forward. As a result,the Partnership has presented the results of operations and cash flows relating to its equity method investment in WTLPG as discontinued operations for theyears ended December 31, 2018, 2017, and 2016. See Note 5 for more information.Correction of Immaterial Error. The year to date amounts for 2017 and 2016 have been revised to reflect a reclassification in the presentation ofcertain expenses associated with the manufacturing and shipping of product related to a location in the Partnership's Terminalling and Storage operatingsegment. The reclassification resulted in a decrease in operating expenses from $146,874 to $140,177 and an increase in cost of products sold from $613,580to $620,277 for the year ended December 31, 2017, and a decrease in operating expenses from $158,864 to $152,325 and an increase in cost of products soldfrom $471,654 to $478,193 for the year ended December 31, 2016.67MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)(b) Product Exchanges The Partnership enters into product exchange agreements with third parties, whereby the Partnership agrees to exchange natural gas liquids ("NGLs")and sulfur with third parties. The Partnership records the balance of exchange products due to other companies under these agreements at quoted marketproduct prices and the balance of exchange products due from other companies at the lower of cost or market. Cost is determined using the first-in, first-out("FIFO") method. Product exchanges with the same counterparty are entered into in contemplation of one another and are combined. The net amount relatedto location differentials is reported in "Product sales" or "Cost of products sold" in the Consolidated Statements of Operations. (c) Inventories Inventories are stated at the lower of cost or market. Cost is generally determined by using the FIFO method for all inventories except lubricants andlubricants packaging inventories. Lubricants and lubricants packaging inventories cost is determined using standard cost, which approximates actual cost,computed on a FIFO basis. (d) Revenue Recognition Terminalling and Storage – Revenue is recognized for storage contracts based on the contracted monthly tank fixed fee. For throughput contracts,revenue is recognized based on the volume moved through the Partnership’s terminals at the contracted rate. For the Partnership’s tolling agreement, revenueis recognized based on the contracted monthly reservation fee and throughput volumes moved through the facility. When lubricants and drilling fluids aresold by truck or rail, revenue is recognized upon delivering product to the customers as title to the product transfers when the customer physically receivesthe product. Delivery of product is invoiced as the transaction occurs and are generally paid within a month. Natural Gas Services – NGL distribution revenue is recognized when product is delivered by truck, rail, or pipeline to the Partnership's NGLcustomers. Revenue is recognized on title transfer of the product to the customer. Delivery of product is invoiced as the transaction occurs and are generallypaid within a month. Natural gas storage revenue is recognized when the service is provided to the customer. The performance of the service is invoiced asthe transaction occurs and are generally paid within a month.Sulfur Services – Revenue from sulfur product sales is recognized when the customer takes title to the product. Delivery of product is invoiced asthe transaction occurs and are generally paid within a month. Revenue from sulfur services is recognized as deliveries are made during each monthly period.The performance of the service is invoiced as the transaction occurs and are generally paid within a month. Marine Transportation – Revenue is recognized for time charters based on a per day rate. For contracted trips, revenue is recognized uponcompletion of the particular trip. The performance of the service is invoiced as the transaction occurs and are generally paid within a month. (e) Equity Method Investments The Partnership uses the equity method of accounting for investments in unconsolidated entities where the ability to exercise significant influenceover such entities exists. Investments in unconsolidated entities consist of capital contributions and advances plus the Partnership’s share of accumulatedearnings as of the entities’ latest fiscal year-ends, less capital withdrawals and distributions. Equity method investments are subject to impairment under theprovisions of ASC 323-10, which relates to the equity method of accounting for investments in common stock. No portion of the net income from theseentities is included in the Partnership’s operating income.(f) Property, Plant, and EquipmentOwned property, plant, and equipment is stated at cost, less accumulated depreciation. Owned buildings and equipment are depreciated usingstraight-line method over the estimated lives of the respective assets.Equipment under capital leases is stated at the present value of minimum lease payments less accumulated amortization. Equipment under capitalleases is amortized on a straight line basis over the estimated useful life of the asset.68MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)Routine maintenance and repairs are charged to expense while costs of betterments and renewals are capitalized. When an asset is retired or sold, itscost and related accumulated depreciation are removed from the accounts, and the difference between net book value of the asset and proceeds fromdisposition is recognized as gain or loss. (g) Goodwill and Other Intangible AssetsGoodwill is subject to a fair-value based impairment test on an annual basis, or more often if events or circumstances indicate there may beimpairment. The Partnership is required to identify its reporting units and determine the carrying value of each reporting unit by assigning the assets andliabilities, including the existing goodwill and intangible assets. The Partnership is required to determine the fair value of each reporting unit and compare itto the carrying amount of the reporting unit. To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit, the Partnershipwill record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount ofgoodwill allocated to the reporting unit.When assessing the recoverability of goodwill and other intangible assets, the Partnership may first assess qualitative factors in determining whetherit is more likely than not that the fair value of a reporting unit or other intangible asset is less than its carrying amount. After assessing qualitative factors, ifthe Partnership determines that it is not more likely than not that the fair value of a reporting unit or other intangible asset is less than its carrying amount,then performing a quantitative assessment is not required. If an initial qualitative assessment indicates that it is more likely than not the carrying amountexceeds the fair value of a reporting unit or other intangible asset, a quantitative analysis will be performed. The Partnership may also elect to bypass thequalitative assessment and proceed directly to a quantitative analysis depending on the facts and circumstances.Of the Partnership's four reporting units, the terminalling and storage, natural gas services, and sulfur services reporting units contain goodwill. Nogoodwill impairment was recorded for the year ended December 31, 2018 or 2017. During the second quarter of 2016, the Partnership experienced animpairment of all the goodwill in the Partnership's marine transportation reporting unit.In performing a quantitative analysis, recoverability of goodwill for each reporting unit is measured using a weighting of the discounted cash flowmethod and two market approaches (the guideline public company method and the guideline transaction method). The discounted cash flow modelincorporates discount rates commensurate with the risks involved. Use of a discounted cash flow model is common practice in assessing impairment in theabsence of available transactional market evidence to determine the fair value. The key assumptions used in the discounted cash flow valuation modelinclude discount rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the mostsensitive and susceptible to change as they require significant management judgment. Discount rates are determined by using a weighted average cost ofcapital ("WACC"). The WACC considers market and industry data as well as company-specific risk factors for each reporting unit in determining theappropriate discount rate to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive forinvesting in such a business. Management, considering industry and company specific historical and projected data, develops growth rates and cash flowprojections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flowestimates beyond the last projected period assuming a constant WACC and low long-term growth rates. If the calculated fair value is less than the currentcarrying amount, the Partnership will record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not toexceed the total amount of goodwill allocated to the reporting unit.Significant changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit which couldgive rise to future impairment. Changes to these estimates and assumptions can include, but may not be limited to, varying commodity prices, volumechanges and operating costs due to market conditions and/or alternative providers of services.Other intangible assets that have finite lives are tested for impairment when events or circumstances indicate that the carrying value may not berecoverable. An impairment is indicated if the carrying amount of a long-lived intangible asset exceeds the sum of the undiscounted future cash flowsexpected to result from the use and eventual disposition of the asset. If impairment is indicated, the Partnership would record an impairment loss equal to thedifference between the carrying value and the fair value of the asset. There were no intangible asset impairments in 2018, 2017 or 2016.69MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated) (h) Debt Issuance CostsDebt issuance costs relating to the Partnership’s revolving credit facility and senior unsecured notes are deferred and amortized over the terms of thedebt arrangements and are shown, net of accumulated amortization, as a reduction of the related long-term debt.In connection with the issuance, amendment, expansion and restatement of debt arrangements, the Partnership incurred debt issuance costs of$1,312, $66 and $5,274 in the years ended December 31, 2018, 2017 and 2016, respectively.During 2016, the Partnership made certain strategic amendments to its credit facility which, among other things, decreased its borrowing capacityfrom $700,000 to $664,444 and extended the maturity date of the facility from March 28, 2018 to March 28, 2020. In connection with the amendment, thePartnership expensed $820 of unamortized debt issuance costs determined not to have continuing benefit.Remaining unamortized deferred issuance costs are amortized over the term of each respective revised debt arrangement.Amortization and write-off of debt issuance costs, which is included in interest expense, totaled $3,445, $2,897 and $3,684 for the years endedDecember 31, 2018, 2017 and 2016, respectively. Accumulated amortization amounted to $20,607 and $17,162 at December 31, 2018 and 2017,respectively. (i) Impairment of Long-Lived Assets In accordance with ASC 360-10, long-lived assets, such as property, plant and equipment, and intangible assets with definite lives are reviewed forimpairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to beheld and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by theasset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carryingamount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lowerof the carrying amount or fair value less costs to sell and would no longer be depreciated. The assets and liabilities of a disposed group classified as held forsale would be presented separately in the appropriate asset and liability sections of the balance sheet. In the fourth quarter of 2017, the Partnership identified a triggering event related to the planned disposition of certain assets that were no longerdeemed core assets in the Partnership's Marine Transportation business. The triggering event was the assets' inability to generate cash flows in recent quartersand going forward. As a result, an impairment charge of $1,625 was recorded in the Marine Transportation segment results of operations in the fourth quarterof 2017. Additionally, the Partnership recorded an adjustment to the fair value less cost to sell of a certain asset classified as held for sale in the MartinLubricants division of the Terminalling and Storage segment. As a result, an impairment charge of $600 was recorded in the Terminalling and Storagesegment results of operations in the fourth quarter of 2017.On August 25, 2017, Hurricane Harvey made landfall as a Category 4 hurricane. The storm lingered over Texas and Louisiana for days producingover 50 inches of rain in some areas, resulting in widespread flooding and damage. The Partnership experienced an impact from Hurricane Harvey in ourTerminalling and Storage and Sulfur Services segments, where damages were suffered to the Partnership's property, plant, and equipment at its Neches,Stanolind, Galveston, and Harbor Island terminals located along the Texas gulf coast. The damage incurred did not exceed the insurance deductible at theselocations and therefore the Partnership does not expect to receive any insurance proceeds resulting from the damage from Hurricane Harvey. In the thirdquarter of 2017, the Partnership recorded a write-off in the amount of $186 related to assets damaged. In the fourth quarter of 2016, the Partnership identified a triggering event related to certain organic growth projects in the Smackover Refinery andSpecialty Terminals divisions of the Partnership's Terminalling and Storage segment. These triggering events were the decision to not move forward withcertain expansion projects due to the evaporation of the economic viability of the projects. Additionally, a triggering event was identified related to theplanned disposition of certain assets that were no longer deemed core assets to the Partnership's Martin Lubricants division. As a result, an impairment chargeof $15,252 was recorded70MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)in the Terminalling and Storage segment results of operations for the year ended December 31, 2016. Also, in the fourth quarter of 2016, the Partnershipidentified a triggering event related to the planned disposition of certain assets that were no longer deemed core assets in the Partnership's MarineTransportation business. The triggering event was the assets' inability to generate cash flows in recent quarters and going forward. As a result, an impairmentcharge of $11,701 was recorded in the Marine Transportation segment results of operations in the fourth quarter of 2016.(j) Asset Retirement Obligations Under ASC 410-20, which relates to accounting requirements for costs associated with legal obligations to retire tangible, long-lived assets, thePartnership records an asset retirement obligation ("ARO") at fair value in the period in which it is incurred by increasing the carrying amount of the relatedlong-lived asset. In each subsequent period, the liability is accreted over time towards the ultimate obligation amount and the capitalized costs aredepreciated over the useful life of the related asset. (k) Derivative Instruments and Hedging Activities In accordance with certain provisions of ASC 815-10 related to accounting for derivative instruments and hedging activities, all derivatives andhedging instruments are included in the Consolidated Balance Sheets as an asset or liability measured at fair value and changes in fair value are recognizedcurrently in earnings unless specific hedge accounting criteria are met. If a derivative qualifies for hedge accounting, changes in the fair value can be offsetagainst the change in the fair value of the hedged item through earnings or recognized in other comprehensive income until such time as the hedged item isrecognized in earnings. Derivative instruments not designated as hedges are marked to market with all market value adjustments being recorded in the ConsolidatedStatements of Operations. (l) Use of EstimatesManagement has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingentassets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the U.S. Actual resultscould differ from those estimates. (m) Indirect Selling, General and Administrative Expenses Indirect selling, general and administrative expenses are incurred by Martin Resource Management and allocated to the Partnership to cover costs ofcentralized corporate functions such as accounting, treasury, engineering, information technology, risk management and other corporate services. Suchexpenses are based on the percentage of time spent by Martin Resource Management’s personnel that provide such centralized services. Under an omnibusagreement with Martin Resource Management, the Partnership is required to reimburse Martin Resource Management for indirect general and administrativeand corporate overhead expenses. For the years ended December 31, 2018, 2017 and 2016, the conflicts committee of the Partnership's general partner("Conflicts Committee") approved reimbursement amounts of $16,416, $16,416 and $13,033, respectively, reflecting the Partnership's allocable share ofsuch expenses. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually. (n) Environmental Liabilities and Litigation The Partnership’s policy is to accrue for losses associated with environmental remediation obligations when such losses are probable and reasonablyestimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedialfeasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmentalremediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assetswhen their receipt is deemed probable. 71MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)(o) Trade and Accrued Accounts Receivable and Allowance for Doubtful Accounts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Partnership’sbest estimate of the amount of probable credit losses in the Partnership’s existing accounts receivable. (p) Deferred Catalyst CostsThe cost of the periodic replacement of catalysts is deferred and amortized over the catalyst’s estimated useful life, which ranges from 12 to 36months.(q) Deferred Turnaround CostsThe Partnership capitalizes the cost of major turnarounds and amortizes these costs over the estimated period to the next turnaround, which rangesfrom 12 to 36 months.(r) Income Taxes The Partnership is subject to the Texas margin tax, which is considered a state income tax, and is included in income tax expense on theConsolidated Statements of Operations. Since the tax base on the Texas margin tax is derived from an income-based measure, the margin tax is construed asan income tax and, therefore, the recognition of deferred taxes applies to the margin tax. The impact on deferred taxes as a result of this provision isimmaterial.(s) Comprehensive Income Comprehensive income includes net income and other comprehensive income. There are no items of other comprehensive income or loss in any ofthe years presented.NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTSIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount ofrevenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognitionguidance in U.S. GAAP. The new standard is effective for the Partnership on January 1, 2018. The standard permits the use of either the retrospective orcumulative effect transition method. The Partnership adopted the new standard utilizing the cumulative effect method which resulted in no cumulative effectof the adoption being recorded as of January 1, 2018. The Partnership adopted ASU 2014-09 on January 1, 2018 and did not identify any significant changesin the timing of revenue recognition when considering the amended accounting guidance. Additional disclosures related to revenue recognition appear in"Note 6. Revenue."In February 2016, the FASB issued ASU 2016-02, Leases, which introduces the recognition of lease assets and lease liabilities by lessees for thoseleases classified as operating leases under previous guidance. Lessor accounting under the new standard is substantially unchanged and the Partnershipbelieves substantially all of our leases will continue to be classified as operating leases under the new standard. Additional qualitative and quantitativedisclosures, including significant judgments made by management, will be required. The update is effective for annual reporting periods beginning afterDecember 15, 2018, including interim periods within those reporting periods, with early adoption permitted. The original guidance required application on amodified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, whichincludes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the date of initial application oftransition. Based on the effective date, this guidance will apply and the Partnership will adopt this ASU beginning on January 1, 2019 and plans to elect thetransition option provided under ASU 2018-11. Consequently, financial information will not be updated and the disclosures required under the new standardwill not be provided for dates and periods before January 1, 2019.The new standard provides a number of optional practical expedients in transition. The Partnership expects to elect the "package of practicalexpedients", which permits the Partnership not to reassess under the new standard our prior conclusions about lease identification, lease classification andinitial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. The Partnership expects to elect the short-termlease recognition exemption for72MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)all leases that qualify. This means, for those assets that qualify, the Partnership will not recognize ROU assets or lease liabilities, and this includes notrecognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.Based on its current lease portfolio, the Partnership estimates that the adoption of this ASU will result in approximately $19,879 of additional assetsand liabilities being reflected on its Consolidated Balance Sheet as of January 1, 2019.NOTE 4. ACQUISITIONSAcquisition of Terminalling Assets. On February 22, 2017, the Partnership acquired 100% of the membership interests of MEH South TexasTerminals LLC (“MEH”), a subsidiary of Martin Resource Management, for a purchase price of $27,420 (the “Hondo Acquisition”), which was was fundedwith borrowings under the Partnership's revolving credit facility. At the date of acquisition, MEH was in the process of constructing an asphalt terminalfacility in Hondo, Texas (the "Hondo Terminal”), which will serve the asphalt market in San Antonio, Texas and surrounding areas. This acquisition isconsidered a transfer of net assets between entities under common control. The acquisition of these assets was recorded at the historical carrying value of theassets at the acquisition date. The excess of the purchase price over the carrying value of the assets of $7,887 was recorded as an adjustment to "Partners'capital."Purchase price$27,420Historical carrying value of assets allocated to "Property, plant and equipment"19,533Excess purchase price over carrying value of acquired assets$7,887As no individual line item of the historical financial statements of the acquired assets was in excess of 3% of the Partnership's relative consolidatedfinancial statement captions, the Partnership elected not to retrospectively recast the historical financial information to include these assets.NOTE 5. DISCONTINUED OPERATIONS, DIVESTITURES, AND ASSETS HELD FOR SALEDivestituresDivestiture of WTLPG Partnership Interest. On July 31, 2018, the Partnership completed the sale of its 20 percent non-operating interest in WTLPGto ONEOK. WTLPG owns an approximate 2,300 mile common-carrier pipeline system that primarily transports NGLs from New Mexico and Texas to MontBelvieu, Texas for fractionation. A wholly-owned subsidiary of ONEOK is the operator of the assets. In consideration for the sale of these assets, thePartnership received cash proceeds of $193,705, after transaction fees and expenses. The proceeds from the sale were used to reduce outstanding borrowingsunder the Partnership's revolving credit facility. The Partnership has concluded the disposition represents a strategic shift and will have a major effect on itsfinancial results going forward. As a result, the Partnership has presented the results of operations and cash flows relating to its equity method investment inWTLPG as discontinued operations for the years ended December 31, 2018, 2017, and 2016.The operating results, which are included in income from discontinued operations, were as follows: For the Year Ended December 31, 2018 2017 2016 Total costs and expenses and other, net, excluding depreciation and amortization1$(247) $(186) $(65)Other operating income248,564 — —Equity in earnings3,383 4,314 4,714Income from discontinued operations before income taxes51,700 4,128 4,649Income tax expense— — —Income from discontinued operations, net of income taxes$51,700 $4,128 $4,64973MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)1 These expenses represent direct operating expenses as a result of the Partnership's ownership interest in WTLPG.2 Other operating income represents the gain on the disposition of the investment in WTLPG.Divestiture of Terminalling Assets. On December 21, 2016, the Partnership sold its 900,000 barrel crude oil storage terminal, refined product bargeterminal, certain pipelines and related easements as well as dockage and trans-loading assets located in Corpus Christi, Texas (collectively the "CCCTAssets") to NuStar Logistics, L.P. (“NuStar”) for gross consideration of $107,000 plus the reimbursement of certain capital expenditures and prepaid items of$2,057. The Partnership received net proceeds of approximately $93,347 after transaction fees and expenses as well as the application of certain net cashpayments previously received by us in conjunction with its mandated relocation of certain dockage assets to the purchase price in the amount of $13,400.Proceeds from the sale were used to reduce outstanding borrowings under the Partnership's revolving credit facility. The Partnership recorded a gain from thedivestiture of $37,345, which was included in "Other operating income, net" on the Partnership's Consolidated Statements of Operations for the year endedDecember 31, 2016. Net income attributable to the CCCT Assets included in the Partnership's Consolidated Statements of Operations was $0, $0, and$43,804 for the years ended December 31, 2018, 2017, and 2016, respectively.The divestiture of the CCCT Assets did not qualify for discontinued operations presentation under the guidance of ASC 205-20.Long-Lived Assets Held for SaleIn the fourth quarter of 2017, the Partnership identified certain assets that were no longer deemed core to the operations of the Partnership in theinland division of the Marine Transportation segment. Additionally, the Partnership recorded an adjustment to the fair value less cost to sell of a certain assetclassified as held for sale in the Martin Lubricants division of the Terminalling and Storage segment. As a result, an impairment charge of $600 and $1,625was recorded in the Terminalling and Storage and Marine Transportation segments, respectively, in the fourth quarter of 2017 and was presented as"Impairment of long-lived assets" in the Partnership's Consolidated Statements of Operations.In the fourth quarter of 2016, the Partnership identified certain assets that were no longer deemed core to the operations of the Partnership in theSmackover refinery and Martin Lubricants divisions of the Terminalling and Storage segment as well as the inland and offshore divisions of the MarineTransportation segment. These assets were deemed non-core due to the each asset's inability to generate cash flows in recent quarters as well as the expectedcash flows in future quarters. As a result, an impairment charge of $15,252 and $11,701 was recorded in the Terminalling and Storage and MarineTransportation segments, respectively, in the fourth quarter of 2016 and was presented as "Impairment of long-lived assets" in the Partnership's ConsolidatedStatements of Operations.At December 31, 2018 and 2017, the assets met the criteria to be classified as held for sale in accordance with ASC 360-10 and are presented at theassets' fair value less cost to sell by segment in current assets as follows: December 31, 2018 December 31, 2017 Terminalling and storage$3,552 $4,152Marine transportation2,100 5,427 Assets held for sale$5,652 $9,579During 2018, the Partnership received $1,002 in proceeds from the sale of assets classified as held for sale resulting in a loss of $1,022, which waspresented as a component of "Other operating income (loss), net" in the Partnership's Consolidated Statements of Operations.During 2017, the Partnership received $8,341 in proceeds from the sale of assets classified as held for sale resulting in a gain of $822, which waspresented as a component of "Other operating income (loss), net" in the Partnership's Consolidated Statements of Operations.74MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)The non-core assets discussed above did not qualify for discontinued operations presentation under the guidance of ASC 205-20.75MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)NOTE 6. REVENUEThe following table disaggregates our revenue by major source: 2018 2017 2016 Terminalling and storage segment Lubricant product sales$145,327 $130,466 $113,578Throughput and storage96,287 99,705 123,132 $241,614 $230,171 $236,710Natural gas services segment Natural gas liquids product sales$496,026 $473,865 $330,200Natural gas storage52,109 58,817 61,133 $548,135 $532,682 $391,333Sulfur service segment Sulfur product sales$46,347 $49,204 $53,327Fertilizer product sales75,041 74,528 76,931Sulfur services11,148 10,952 10,800 $132,536 $134,684 $141,058Marine transportation segment Inland transportation$44,580 $42,874 $50,556Offshore transportation5,790 5,705 7,734 $50,370 $48,579 $58,290Revenue is measured based on a consideration specified in a contract with a customer and excludes amounts collected on behalf of third partieswhere the Partnership is acting as an agent. The Partnership recognizes revenue when the Partnership satisfies a performance obligation, which typicallyoccurs when the Partnership transfers control over a product to a customer or as the Partnership delivers a service.The following is a description of the principal activities - separated by reportable segments - from which the Partnership generates revenue.Terminalling and Storage SegmentRevenue is recognized for storage contracts based on the contracted monthly tank fixed fee. For throughput contracts, revenue is recognized basedon the volume moved through the Partnership’s terminals at the contracted rate. For the Partnership’s tolling agreement, revenue is recognized based on thecontracted monthly reservation fee and throughput volumes moved through the facility. When lubricants and drilling fluids are sold by truck or rail, revenueis recognized when title is transferred, which is either upon delivering product to the customer or when the product leaves the Partnership's facility,depending on the specific terms of the contract. Delivery of product is invoiced as the transaction occurs and is generally paid within a month.Natural Gas Services SegmentNatural Gas Liquids ("NGL") distribution revenue is recognized when product is delivered by truck, rail, or pipeline to the Partnership's NGLcustomers. Revenue is recognized on title transfer of the product to the customer. Delivery of product is invoiced as the transaction occurs and are generallypaid within a month. Natural gas storage revenue is recognized when the service is provided to the customer. The performance of the service is invoiced asthe transaction occurs and is generally paid within a month.76MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)Sulfur Services SegmentRevenue from sulfur product sales is recognized when the customer takes title to the product. Delivery of product is invoiced as the transactionoccurs and are generally paid within a month. Revenue from sulfur services is recognized as services are performed during each monthly period. Theperformance of the service is invoiced as the transaction occurs and is generally paid within a month.Marine Transportation SegmentRevenue is recognized for time charters based on a per day rate. For contracted trips, revenue is recognized upon completion of the particular trip.The performance of the service is invoiced as the transaction occurs and is generally paid within a month.The table includes estimated minimum revenue expected to be recognized in the future related to performance obligations that are unsatisfied at theend of the reporting period. The Partnership applies the practical expedient in ASC 606-10-50-14(a) and does not disclose information about remainingperformance obligations that have original expected durations of one year or less. 2019 2020 2021 2022 2023 Thereafter TotalTerminalling and storage Throughput and storage$50,079 $49,354 $46,642 $42,735 $42,854 $392,624 $624,288Natural gas services Natural gas storage37,979 32,119 26,276 24,615 10,107 — 131,096Sulfur services Sulfur product sales17,082 4,898 1,181 295 — — 23,456Marine transportation Offshore transportation6,205 — — — — — 6,205Total$111,345 $86,371 $74,099 $67,645 $52,961 $392,624 $785,045NOTE 7. INVENTORIESComponents of inventories at December 31, 2018 and 2017 were as follows: 2018 2017Natural gas liquids$32,388 $47,462Sulfur12,818 8,436Fertilizer14,208 18,674Lubricants22,887 20,086Other2,767 2,594 $85,068 $97,25277MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)NOTE 8. PROPERTY, PLANT, AND EQUIPMENTAt December 31, 2018 and 2017, property, plant and equipment consisted of the following: Depreciable Lives 2018 2017Land— $22,293 $21,719Improvements to land and buildings10-25 years 129,985 135,896Storage equipment5-50 years 174,851 178,815Marine vessels4-25 years 191,070 176,782Operating plant and equipment3-50 years 673,909 659,854Base Gas— 43,755 43,799Furniture, fixtures and other equipment3-20 years 11,832 11,134Transportation equipment3-7 years 1,821 1,535Construction in progress 15,214 23,531 $1,264,730 $1,253,065Depreciation expense for the years ended December 31, 2018, 2017 and 2016 was $67,122, $70,904 and $72,405.Additions to property, plant and equipment included in accounts payable at December 31, 2018 and 2017 were $2,166 and $4,100, respectively.NOTE 9. GOODWILLThe following table represents the goodwill balance by reporting unit at December 31, 2018 and 2017 as follows: 2018 2017Carrying amount of goodwill: Terminalling and storage$11,868 $11,868 Natural gas services79 79 Sulfur services5,349 5,349 Total goodwill$17,296 $17,296During the impairment evaluation performed at August 31, 2018 and 2017, the Partnership first assessed qualitative factors in determining whether itis more likely than not that the fair value of a reporting unit or other intangible asset is less than its carrying amount. After assessing qualitative factors, thePartnership determined that it is not more likely than not that the fair value of its reporting units are less than its carrying amount. Therefore, no impairmentwas recorded for the year ended December 31, 2018 or 2017.During the second quarter of 2016, the Partnership determined that the state of market conditions in the Marine Transportation reporting unit,including the demand for utilization, day rates and the current oversupply of inland tank barges, indicated that an impairment of goodwill may exist. As aresult, the Partnership assessed qualitative factors and determined that the Partnership could not conclude it was more likely than not that the fair value ofgoodwill exceeded its carrying value. In turn, the Partnership prepared a quantitative analysis of the fair value of the goodwill as of June 30, 2016, based onthe weighted average valuation of the aforementioned income and market based valuation approaches. The underlying results of the valuation were drivenby actual results during the six months ended June 30, 2016 and the pricing and market conditions existing as of June 30, 2016, which were below forecastsat the time of the previous goodwill assessments. Other key estimates, assumptions and inputs used in the valuation included long-term growth rates,discounts rates, terminal values, valuation multiples and relative valuations when comparing the reporting unit to similar businesses or asset bases. Uponcompletion of the analysis, a $4,145 impairment of all goodwill in the Marine Transportation reporting unit was incurred during the second quarter of 2016.The Partnership did not recognize any other goodwill impairment losses for the year ended December 31, 2016. 78MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)NOTE 10. LEASESThe Partnership has numerous non-cancelable operating leases primarily for terminal facilities and transportation and other equipment. The leasesgenerally provide that all expenses related to the equipment are to be paid by the lessee. The Partnership also has cancelable operating lease land rentals andoutside marine vessel charters.The Partnership’s future minimum lease obligations as of December 31, 2018 consist of the following:Fiscal yearOperating Leases 2019$7,86920205,41720213,21620222,12920231,467Thereafter7,823Total$27,921Rent expense for continuing operating leases for the years ended December 31, 2018, 2017 and 2016 was $14,076, $15,908 and $19,005,respectively.NOTE 11. INVESTMENT IN WTLPGAs discussed in Note 5, on July 31, 2018, the Partnership completed the sale of its 20 percent non-operating interest in WTLPG. Prior to the sale, thePartnership owned a 19.8% limited partnership and 0.2% general partnership interest in WTLPG. A wholly-owned subsidiary of ONEOK is the operator of theassets. WTLPG owns an approximate 2,300 mile common-carrier pipeline system that primarily transports NGLs from New Mexico and Texas to MontBelvieu, Texas for fractionation. The Partnership recognized its 20% interest in WTLPG as "Investment in WTLPG" on its Consolidated Balance Sheets. ThePartnership accounted for its ownership interest in WTLPG under the equity method of accounting. As discussed in Note 5, the Partnership sold its 20% non-operating partnership interest to ONEOK on July 31, 2018.Selected financial information for WTLPG during the period of ownership is as follows: As of July 31, Seven Months Ended July 31, Total Assets Long-Term Debt Members’Equity/Partners'Capital Revenues Net Income2018 WTLPG$928,349 $— $868,894 $55,534 $16,642 As of December 31, Years ended December 31, Total Assets Long-Term Debt Members’Equity/Partners'Capital Revenues Net Income2017 WTLPG$837,163 $— $787,426 $87,048 $21,5712016 WTLPG$812,464 $— $790,406 $88,468 $23,883 NOTE 12. FAIR VALUE MEASUREMENTSThe Partnership uses a valuation framework based upon inputs that market participants use in pricing certain assets and liabilities. These inputs areclassified into two categories: observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources.Unobservable inputs represent the Partnership's own market assumptions. Unobservable inputs are used only if observable inputs are unavailable or notreasonably available without undue cost and effort. The two types of inputs are further prioritized into the following hierarchy:Level 1: Quoted market prices in active markets for identical assets or liabilities.Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.Level 3: Unobservable inputs that reflect the entity's own assumptions and are not corroborated by market data.79MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)Assets and liabilities measured at fair value on a recurring basis are summarized below: Level 2 December 31, 2018 2017Commodity derivative contracts, net$4 $(72)The Partnership is required to disclose estimated fair values for its financial instruments. Fair value estimates are set forth below for these financialinstruments. The following methods and assumptions were used to estimate the fair value of each class of financial instrument:•Accounts and other receivables, trade and other accounts payable, accrued interest payable, other accrued liabilities, income taxes payable and duefrom/to affiliates: The carrying amounts approximate fair value due to the short maturity and highly liquid nature of these instruments, and as suchthese have been excluded from the table below. There is negligible credit risk associated with these instruments.•Long-term debt: The carrying amount of the revolving credit facility approximates fair value due to the debt having a variable interest rate and is inLevel 2. The Partnership has not had any indicators which represent a change in the market spread associated with its variable interest rate debt. Theestimated fair value of the senior unsecured notes is considered Level 1, as the fair value is based on quoted market prices in active markets. December 31, 2018 December 31, 2017 CarryingValue FairValue CarryingValue FairValue2021 Senior unsecured notes$372,996 $360,138 $372,618 $381,657NOTE 13. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIESThe Partnership’s results of operations could be materially impacted by changes in NGL prices and interest rates. In an effort to manage its exposureto these risks, the Partnership periodically enters into various derivative instruments, including commodity and interest rate hedges. All derivatives andhedging instruments are included on the balance sheet as an asset or a liability measured at fair value and changes in fair value are recognized currently inearnings. All of the Partnership's derivatives are non-hedge derivatives and therefore all changes in fair values are recognized as gains and losses in theearnings of the periods in which they occur.(a) Commodity Derivative InstrumentsThe Partnership from time to time has used derivatives to manage the risk of commodity price fluctuation. Commodity risk is the adverse effect onthe value of a liability or future purchase that results from a change in commodity price. The Partnership has established a hedging policy and monitors andmanages the commodity market risk associated with potential commodity risk exposure. In addition, the Partnership has focused on utilizing counterpartiesfor these transactions whose financial condition is appropriate for the credit risk involved in each specific transaction. The Partnership has entered intohedging transactions as of December 31, 2018 to protect a portion of its commodity price risk exposure. These hedging arrangements are in the form of swapsfor NGLs. The Partnership has instruments totaling a gross notional quantity of 55 barrels settling during the period from January 31, 2019 through February28, 2019. At December 31, 2017, the Partnership had instruments totaling a gross notional quantity of 145 barrels settling during the period from January 31,2018 through February 28, 2018. These instruments settle against the applicable pricing source for each grade and location.(b) Interest Rate Derivative InstrumentsThe Partnership is exposed to market risks associated with interest rates. Market risk is the adverse effect on the value of a financial instrument thatresults from a change in interest rates. We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market riskthat may be undertaken. The Partnership enters into80MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)interest rate swaps to manage interest rate risk associated with the Partnership’s variable rate credit facility and its senior unsecured notes.During the twelve months ended December 31, 2016, the Partnership entered into contracts which provided the counterparty the option to enter intoswap contracts to hedge the Partnership's exposure to changes in the fair value of its senior unsecured notes ("interest rate swaptions"). In connection with theinterest rate swaption contracts, the Partnership received premiums of $630, which represented the fair value on the date the transactions were initiated andwere initially recorded as a derivative liability on the Partnership's Consolidated Balance Sheet, during the twelve months ended December 31, 2016. Each ofthe interest rate swaptions was fully amortized as of December 31, 2016. Interest rate swaption contract premiums received are amortized over the period frominitiation of the contract through their termination date. For the twelve months ended December 31, 2016, the Partnership recognized $630 of premium in"Interest expense, net" on the Partnership's Consolidated Statement of Operations related to the interest rate swaption contracts. For information regarding fair value amounts and gains and losses on interest rate derivative instruments and related hedged items, see "TabularPresentation of Gains and Losses on Derivative Instruments and Related Hedged Items" below.(c) Tabular Presentation of Gains and Losses on Derivative InstrumentsThe following table summarizes the fair values and classification of the Partnership’s derivative instruments in its Consolidated Balance Sheets: Fair Values of Derivative Instruments in the Consolidated Balance Sheet Derivative AssetsDerivative Liabilities Fair Values Fair Values Balance SheetLocationDecember 31, 2018 December 31, 2017 Balance SheetLocationDecember 31, 2018 December 31, 2017Derivatives not designatedas hedging instruments:Current: Commodity contractsFair value ofderivatives$4 $—Fair value ofderivatives$— $72Total derivatives notdesignated as hedginginstruments $4 $— $— $72Effect of Derivative Instruments on the Consolidated Statement of Operations For the Twelve Months Ended December 31, 2018, 2017, and 2016 Location of Gain or (Loss) Recognized inIncome on DerivativesAmount of (Gain) or Loss Recognized in Income on Derivatives 2018 2017 2016Derivatives not designated as hedging instruments: Interest rate swaption contractsInterest expense$— $— $(630)Interest rate contractsInterest expense— — (366)Commodity contractsCost of products sold(14,024) 1,304 5,129Total derivatives not designated as hedging instruments$(14,024) $1,304 $4,133NOTE 14. RELATED PARTY TRANSACTIONSAs of December 31, 2018, Martin Resource Management owned 6,114,532 of the Partnership’s common units representing approximately 15.7% ofthe Partnership’s outstanding limited partnership units. Martin Resource Management controls the Partnership's general partner by virtue of its 51% votinginterest in Holdings, the sole member of the Partnership's general partner. The Partnership’s general partner, MMGP, owns a 2% general partner interest in thePartnership and the Partnership’s incentive distribution rights. The Partnership’s general partner’s ability, as general partner, to manage and operate thePartnership, and Martin Resource Management’s ownership as of December 31, 2018, of approximately 15.7% of the81MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)Partnership’s outstanding limited partnership units, effectively gives Martin Resource Management the ability to veto some of the Partnership’s actions andto control the Partnership’s management. The following is a description of the Partnership’s material related party agreements: Omnibus Agreement Omnibus Agreement. The Partnership and its general partner are parties to the Omnibus Agreement dated November 1, 2002, with Martin ResourceManagement that governs, among other things, potential competition and indemnification obligations among the parties to the agreement, related partytransactions, the provision of general administration and support services by Martin Resource Management and the Partnership’s use of certain MartinResource Management trade names and trademarks. The Omnibus Agreement was amended on November 25, 2009, to include processing crude oil intofinished products including naphthenic lubricants, distillates, asphalt and other intermediate cuts. The Omnibus Agreement was amended further on October1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management.Non-Competition Provisions. Martin Resource Management has agreed for so long as it controls the general partner of the Partnership, not to engagein the business of:•providing terminalling and storage services for petroleum products and by-products including the refining, blending and packaging of finishedlubricants;•providing marine transportation of petroleum products and by-products;•distributing NGLs; and•manufacturing and selling sulfur-based fertilizer products and other sulfur-related products.This restriction does not apply to:•the ownership and/or operation on the Partnership’s behalf of any asset or group of assets owned by it or its affiliates;•any business operated by Martin Resource Management, including the following:◦providing land transportation of various liquids;◦distributing fuel oil, asphalt, marine fuel and other liquids;◦providing marine bunkering and other shore-based marine services in Texas, Louisiana, Mississippi, Alabama, and Florida;◦operating a crude oil gathering business in Stephens, Arkansas;◦providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;◦providing crude oil marketing and transportation from the well head to the end market;◦operating an environmental consulting company;◦operating an engineering services company;◦supplying employees and services for the operation of the Partnership's business; and◦operating, solely for the Partnership's account, the asphalt facilities in Omaha, Nebraska, Port Neches, Texas, Hondo, Texas, and SouthHouston, Texas.82MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)•any business that Martin Resource Management acquires or constructs that has a fair market value of less than $5,000;•any business that Martin Resource Management acquires or constructs that has a fair market value of $5,000 or more if the Partnership has beenoffered the opportunity to purchase the business for fair market value and the Partnership declines to do so with the concurrence of the ConflictsCommittee; and•any business that Martin Resource Management acquires or constructs where a portion of such business includes a restricted business and the fairmarket value of the restricted business is $5,000 or more and represents less than 20% of the aggregate value of the entire business to be acquired orconstructed; provided that, following completion of the acquisition or construction, the Partnership will be provided the opportunity to purchase therestricted business. Services. Under the Omnibus Agreement, Martin Resource Management provides the Partnership with corporate staff, support services, andadministrative services necessary to operate the Partnership’s business. The Omnibus Agreement requires the Partnership to reimburse Martin ResourceManagement for all direct expenses it incurs or payments it makes on the Partnership’s behalf or in connection with the operation of the Partnership’sbusiness. There is no monetary limitation on the amount the Partnership is required to reimburse Martin Resource Management for direct expenses. Inaddition to the direct expenses, under the Omnibus Agreement, the Partnership is required to reimburse Martin Resource Management for indirect general andadministrative and corporate overhead expenses.Effective January 1, 2018, through December 31, 2018, the Conflicts Committee approved an annual reimbursement amount for indirect expenses of$16,416. The Partnership reimbursed Martin Resource Management for $16,416, $16,416 and $13,033 of indirect expenses for the years ended December 31,2018, 2017 and 2016, respectively. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses,if any, annually.These indirect expenses are intended to cover the centralized corporate functions Martin Resource Management provides for the Partnership, such asaccounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefitplans and other general corporate overhead functions the Partnership shares with Martin Resource Management retained businesses. The provisions of theOmnibus Agreement regarding Martin Resource Management’s services will terminate if Martin Resource Management ceases to control the general partnerof the Partnership.Related Party Transactions. The Omnibus Agreement prohibits the Partnership from entering into any material agreement with Martin ResourceManagement without the prior approval of the Conflicts Committee. For purposes of the Omnibus Agreement, the term material agreements means anyagreement between the Partnership and Martin Resource Management that requires aggregate annual payments in excess of then-applicable agreed uponreimbursable amount of indirect general and administrative expenses. Please read "Services" above.License Provisions. Under the Omnibus Agreement, Martin Resource Management has granted the Partnership a nontransferable, nonexclusive,royalty-free right and license to use certain of its trade names and marks, as well as the trade names and marks used by some of its affiliates.Amendment and Termination. The Omnibus Agreement may be amended by written agreement of the parties; provided, however, that it may not beamended without the approval of the Conflicts Committee if such amendment would adversely affect the unitholders. The Omnibus Agreement was firstamended on November 25, 2009, to permit the Partnership to provide refining services to Martin Resource Management. The Omnibus Agreement wasamended further on October 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin ResourceManagement. Such amendments were approved by the Conflicts Committee. The Omnibus Agreement, other than the indemnification provisions and theprovisions limiting the amount for which the Partnership will reimburse Martin Resource Management for general and administrative services performed onits behalf, will terminate if the Partnership is no longer an affiliate of Martin Resource Management.83MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)Motor Carrier AgreementMotor Carrier Agreement. The Partnership is a party to a motor carrier agreement effective January 1, 2006 as amended, with Martin Transport, Inc.,a wholly owned subsidiary of Martin Resource Management through which Martin Transport, Inc. operates its land transportation operations. Under theagreement, Martin Transport, Inc. agreed to transport the Partnership's NGLs as well as other liquid products.Term and Pricing. The agreement has an initial term that expired in December 2007 but automatically renews for consecutive one year periodsunless either party terminates the agreement by giving written notice to the other party at least 30 days prior to the expiration of the then-applicableterm. The Partnership has the right to terminate this agreement at any time by providing 90 days prior notice. These rates are subject to any adjustmentswhich are mutually agreed or in accordance with a price index. Additionally, during the term of the agreement, shipping charges are also subject to fuelsurcharges determined on a weekly basis in accordance with the U.S. Department of Energy’s national diesel price list.Indemnification. Martin Transport has indemnified us against all claims arising out of the negligence or willful misconduct of Martin Transport andits officers, employees, agents, representatives and subcontractors. We indemnified Martin Transport against all claims arising out of the negligence or willfulmisconduct of us and our officers, employees, agents, representatives and subcontractors. In the event a claim is the result of the joint negligence ormisconduct of Martin Transport and us, our indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligenceor misconduct.As discussed in Item 1. Business, the Partnership purchased Martin Transport, Inc. effective January 1, 2019.Marine AgreementsMarine Transportation Agreement. The Partnership is a party to a marine transportation agreement effective January 1, 2006, as amended, underwhich the Partnership provides marine transportation services to Martin Resource Management on a spot-contract basis at applicable market rates. Effectiveeach January 1, this agreement automatically renews for consecutive one year periods unless either party terminates the agreement by giving written notice tothe other party at least 60 days prior to the expiration of the then applicable term. The fees the Partnership charges Martin Resource Management are basedon applicable market rates.Marine Fuel. The Partnership is a party to an agreement with Martin Resource Management dated November 1, 2002 under which Martin ResourceManagement provides the Partnership with marine fuel from its locations in the Gulf of Mexico at a fixed rate in excess of a price index. Under thisagreement, the Partnership agreed to purchase all of its marine fuel requirements that occur in the areas serviced by Martin Resource Management.Terminal Services AgreementsDiesel Fuel Terminal Services Agreement. Effective January 1, 2016, the Partnership entered into a second amended and restated terminallingservices agreement under which the Partnership provides terminal services to Martin Resource Management for marine fuel distribution. At such time, the pergallon throughput fee the Partnership charged under this agreement was increased when compared to the previous agreement and may be adjusted annuallybased on a price index. This agreement was further amended on January 1, 2017 and October 1, 2017 to modify its minimum throughput requirements andthroughput fees. This agreement, as amended, expired September 30, 2018 and continued thereafter on a month to month basis until terminated by eitherparty by giving 60 days’ written notice. Miscellaneous Terminal Services Agreements. The Partnership is currently party to several terminal services agreements and from time to time thePartnership may enter into other terminal service agreements for the purpose of providing terminal services to related parties. Individually, each of theseagreements is immaterial but when considered in the aggregate they could be deemed material. These agreements are throughput based with a minimumvolume commitment. Generally, the fees due under these agreements are adjusted annually based on a price index.Other Agreements84MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated) Cross Tolling Agreement. The Partnership is a party to an amended and restated tolling agreement with Cross Oil Refining and Marketing, Inc.("Cross") dated October 28, 2014, under which the Partnership processes crude oil into finished products, including naphthenic lubricants, distillates, asphaltand other intermediate cuts for Cross. The tolling agreement expires November 25, 2031. Under this tolling agreement, Cross agreed to process a minimumof 6,500 barrels per day of crude oil at the facility at a fixed price per barrel. Any additional barrels are processed at a modified price per barrel. In addition,Cross agreed to pay a monthly reservation fee and a periodic fuel surcharge fee based on certain parameters specified in the tolling agreement. All of thesefees (other than the fuel surcharge) are subject to escalation annually based upon the greater of 3% or the increase in the Consumer Price Index for a specifiedannual period. In addition, on the third, sixth and ninth anniversaries of the agreement, the parties can negotiate an upward or downward adjustment in thefees subject to their mutual agreement.Sulfuric Acid Sales Agency Agreement. The Partnership was previously a party to a third amended and restated sulfuric acid sales agency agreementdated August 2, 2017 but effective October 1, 2017, under which a successor in interest to the agreement from Martin Resource Management, Saconix LLC("Saconix"), a limited liability company in which Martin Resource Management held a minority equity interest, purchased and marketed the sulfuric acidproduced by the Partnership’s sulfuric acid production plant at Plainview, Texas, that was not consumed by the Partnership’s internal operations. Thisagreement, as amended, was to remain in place until September 30, 2020 and automatically renew year to year thereafter until either party provided 90 days’written notice of termination prior to the expiration of the then existing term. Under this agreement, the Partnership sold all of its excess sulfuric acid toSaconix, who then marketed and sold such acid to third-parties. The Partnership shared in the profit of such sales. Effective May 31, 2018, Martin ResourceManagement no longer holds an equity interest in Saconix. These transactions are reported below as related party transactions during the period the equityinterest was held. Transactions subsequent to Martin Resource Management's disposition of the equity interest will be reported as third party transactions.Other Miscellaneous Agreements. From time to time the Partnership enters into other miscellaneous agreements with Martin Resource Managementfor the provision of other services or the purchase of other goods.The tables below summarize the related party transactions that are included in the related financial statement captions on the face of thePartnership’s Consolidated Statements of Operations. The revenues, costs and expenses reflected in these tables are tabulations of the related partytransactions that are recorded in the corresponding caption of the Consolidated Statements of Operations and do not reflect a statement of profits and lossesfor related party transactions.The impact of related party revenues from sales of products and services is reflected in the Consolidated Statements of Operations as follows:Revenues:2018 2017 2016Terminalling and storage$79,219 $82,205 $82,437Marine transportation15,442 16,801 21,767Natural gas services— 122 699Product sales: Natural gas services19 1,043 8Sulfur services630 1,963 2,006Terminalling and storage758 572 1,020 1,407 3,578 3,034 $96,068 $102,706 $107,937The impact of related party cost of products sold is reflected in the Consolidated Statements of Operations as follows:Cost of products sold: Natural gas services$14,816 $18,946 $22,886Sulfur services17,418 15,564 15,339Terminalling and storage28,304 17,612 13,838 $60,538 $52,122 $52,06385MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)The impact of related party operating expenses is reflected in the Consolidated Statements of Operations as follows:Operating expenses: Marine transportation$22,326 $23,815 $28,107Natural gas services8,851 9,007 9,258Sulfur services5,497 5,821 5,995Terminalling and storage18,854 25,701 27,481 $55,528 $64,344 $70,841The impact of related party selling, general and administrative expenses is reflected in the Consolidated Statements of Operations as follows:Selling, general and administrative: Marine transportation$704 $34 $30Natural gas services5,568 8,162 7,566Sulfur services2,684 2,526 2,732Terminalling and storage2,847 2,278 2,526Indirect overhead allocation, net of reimbursement16,443 16,416 13,036 $28,246 $29,416 $25,890Other Related Party TransactionsThe Partnership had a $15,000 note receivable from an affiliate of Martin Resource Management which previously bore an annual interest rate of15% and had a maturity date of August 31, 2026, the balance of which could be prepaid on or after September 1, 2016. On February 14, 2017, the Partnershipnotified Martin Resource Management that it would be requesting voluntary repayment of the long-term Note Receivable plus accrued interest. Duringsecond quarter of 2017, the Note Receivable was fully repaid. The note has historically been recorded in "Note receivable - affiliates" on the Partnership'sConsolidated Balance Sheets. Interest income for the years ended December 31, 2018, 2017, and 2016 was $0, $943 and $2,256, respectively, and is includedin "Interest expense, net" in the Consolidated Statements of Operations.NOTE 15. SUPPLEMENTAL BALANCE SHEET INFORMATIONComponents of "Intangibles and other assets, net" at December 31, 2018 and 2017 were as follows: 2018 2017Customer contracts and relationships, net$18,222 $25,252Other intangible assets1,310 1,752Other4,179 5,797 $23,711 $32,801Other intangible assets consist of covenants not-to-compete and technology-based assets.Aggregate amortization expense for customer contracts and other intangible assets included in continuing operations was $9,228, $13,887, and$19,548, for the years ended December 31, 2018, 2017 and 2016, respectively, and accumulated amortization amounted to $44,510 and $39,462 atDecember 31, 2018 and 2017, respectively.Estimated amortization expense for intangibles and other assets for the years subsequent to December 31, 2018 are as follows: 2019 - $6,063; 2020 -$5,272; 2021 - $4,319; 2022 - $4,295; 2023 - $1,952; subsequent years - $55.86MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)Components of "Other accrued liabilities" at December 31, 2018 and 2017 were as follows: 2018 2017Accrued interest$10,735 $11,726Asset retirement obligations2,721 5,429Property and other taxes payable5,621 5,638Accrued payroll3,109 3,385Other29 162 $22,215 $26,340The schedule below summarizes the changes in our asset retirement obligations: Year Ended December 31, 2018 2017 (In thousands) Beginning asset retirement obligations$13,512 $16,418Revisions to existing liabilities14,041 5,547Accretion expense516 404Liabilities settled(5,640) (8,857)Ending asset retirement obligations12,429 13,512Current portion of asset retirement obligations2(2,721) (5,429)Long-term portion of asset retirement obligations3$9,708 $8,0831Several factors are considered in the annual review process, including inflation rates, current estimates for removal cost, discount rates, and the estimatedremaining useful life of the assets.2The current portion of asset retirement obligations is included in "Other current liabilities" on the Partnership's Consolidated Balance Sheets.3The non-current portion of asset retirement obligations is included in "Other long-term obligations" on the Partnership's Consolidated Balance Sheets.NOTE 16. LONG-TERM DEBTAt December 31, 2018 and 2017, long-term debt consisted of the following: 2018 2017$664,444 Revolving credit facility at variable interest rate (5.24%1 weighted average at December 31, 2018), dueMarch 2020 secured by substantially all of the Partnership’s assets, including, without limitation, inventory,accounts receivable, vessels, equipment, fixed assets and the interests in the Partnership’s operating subsidiaries,net of unamortized debt issuance costs of $3,537 and $4,986, respectively3$283,463 $440,014$400,000 Senior notes, 7.25% interest, including unamortized premium of $650 and $956, respectively, also netof unamortized debt issuance costs of $1,454 and $2,138 respectively, issued $250,000 February 2013 and$150,000 April 2014, $26,200 repurchased during 2015, due February 2021, unsecured3,4372,996 372,618Total long-term debt$656,459 $812,6321 Interest rate fluctuates based on the LIBOR rate plus an applicable margin set on the date of each advance. The margin above LIBOR is set everythree months. Indebtedness under the credit facility bears interest at LIBOR plus an87MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)applicable margin or the base prime rate plus an applicable margin. All amounts outstanding at December 31, 2018 and 2017 were at LIBOR plus anapplicable margin. The applicable margin for revolving loans that are LIBOR loans ranges from 2.00% to 3.00% and the applicable margin for revolvingloans that are base prime rate loans ranges from 1.00% to 2.00%. The applicable margin for LIBOR borrowings at December 31, 2018 is 2.75%. The creditfacility contains various covenants which limit the Partnership’s ability to make certain investments and acquisitions; enter into certain agreements; incurindebtedness; sell assets; and make certain amendments to the Omnibus Agreement. The Partnership is permitted to make quarterly distributions so long asno event of default exists.3 The Partnership is in compliance with all debt covenants as of December 31, 2018.4 The 2021 indentures restrict the Partnership’s ability to sell assets; pay distributions or repurchase units or redeem or repurchase subordinated debt;make investments; incur or guarantee additional indebtedness or issue preferred units; and consolidate, merge or transfer all or substantially all of its assets.The Partnership paid cash interest, net of proceeds received from interest rate swaptions, in the amount of $50,543, $45,728, and $46,046 for theyears ended December 31, 2018, 2017 and 2016, respectively. Capitalized interest was $624, $730, and $1,126 for the years ended December 31, 2018, 2017and 2016, respectively.NOTE 17. PARTNERS' CAPITALAs of December 31, 2018, partners’ capital consisted of 39,032,237 common limited partner units, representing a 98% partnership interest, anda 2% general partner interest. Martin Resource Management, through subsidiaries, owned 6,114,532 of the Partnership's common limited partnership unitsrepresenting approximately 15.7% of the Partnership's outstanding common limited partnership units. MMGP, the Partnership's general partner, ownsthe 2% general partnership interest.The partnership agreement of the Partnership (the "Partnership Agreement") contains specific provisions for the allocation of net income and losses toeach of the partners for purposes of maintaining their respective partner capital accounts.Issuance of Common UnitsOn February 22, 2017, the Partnership completed a public offering of 2,990,000 common units at a price of $18.00 per common unit, before thepayment of underwriters' discounts, commissions and offering expenses (per unit value is in dollars, not thousands). Total proceeds from the sale of the2,990,000 common units, net of underwriters' discounts, commissions and offering expenses, were $51,056. Additionally, the Partnership's general partnercontributed $1,098 in cash to the Partnership in conjunction with the issuance in order to maintain its 2% general partner interest in the Partnership. All ofthe net proceeds were used to pay down outstanding amounts under the Partnership's revolving credit facility.Incentive Distribution RightsMMGP holds a 2% general partner interest and certain incentive distribution rights ("IDRs") in the Partnership. IDRs are a separate class of non-voting limited partner interest that may be transferred or sold by the general partner under the terms of the Partnership Agreement, and represent the right toreceive an increasing percentage of cash distributions after the minimum quarterly distribution and any cumulative arrearages on common units once certaintarget distribution levels have been achieved. The Partnership is required to distribute all of its available cash from operating surplus, as defined in thePartnership Agreement. The target distribution levels entitle the general partner to receive 2% of quarterly cash distributions up to $0.55 per unit, 15% of quarterly cashdistributions in excess of $0.55 per unit until all unitholders have received $0.625 per unit, 25% of quarterly cash distributions in excess of $0.625 per unituntil all unitholders have received $0.75 per unit and 50% of quarterly cash distributions in excess of $0.75 per unit. For the years ended December 31, 2018, 2017 and 2016, the general partner was allocated $0, $0, and $7,786 in incentive distributions.88MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)Distributions of Available CashThe Partnership distributes all of its available cash (as defined in the Partnership Agreement) within 45 days after the end of each quarter tounitholders of record and to the general partner. Available cash is generally defined as all cash and cash equivalents of the Partnership on hand at the end ofeach quarter less the amount of cash reserves its general partner determines in its reasonable discretion is necessary or appropriate to: (i) provide for the properconduct of the Partnership’s business; (ii) comply with applicable law, any debt instruments or other agreements; or (iii) provide funds for distributions tounitholders and the general partner for any one or more of the next four quarters, plus all cash on the date of determination of available cash for the quarterresulting from working capital borrowings made after the end of the quarter.Net Income per UnitThe Partnership follows the provisions of the FASB ASC 260-10 related to earnings per share, which addresses the application of the two-classmethod in determining income per unit for master limited partnerships having multiple classes of securities that may participate in partnership distributionsaccounted for as equity distributions. Undistributed earnings are allocated to the general partner and limited partners utilizing the contractual terms of thePartnership Agreement. Distributions to the general partner pursuant to the IDRs are limited to available cash that will be distributed as defined in thePartnership Agreement. Accordingly, the Partnership does not allocate undistributed earnings to the general partner for the IDRs because the general partner'sshare of available cash is the maximum amount that the general partner would be contractually entitled to receive if all earnings for the period weredistributed. When current period distributions are in excess of earnings, the excess distributions for the period are to be allocated to the general partner andlimited partners based on their respective sharing of losses specified in the Partnership Agreement. Additionally, as required under FASB ASC 260-10-45-61A, unvested share-based payments that entitle employees to receive non-forfeitable distributions are considered participating securities, as defined inFASB ASC 260-10-20, for earnings per unit calculations. For purposes of computing diluted net income per unit, the Partnership uses the more dilutive of the two-class and if-converted methods. Under theif-converted method, the weighted-average number of subordinated units outstanding for the period is added to the weighted-average number of commonunits outstanding for purposes of computing basic net income per unit and the resulting amount is compared to the diluted net income per unit computedusing the two-class method. The following is a reconciliation of net income from continuing operations and net income from discontinued operationsallocated to the general partner and limited partners for purposes of calculating net income attributable to limited partners per unit: Years Ended December 31, 2018 2017 2016Continuing operations: Income from continuing operations$(7,595) $13,007 $27,003Less general partner’s interest in net income: Distributions payable on behalf of IDRs— — 6,642Distributions payable on behalf of general partner interest(270) 1,191 1,756General partner interest in undistributed loss118 (931) (1,216)Less income allocable to unvested restricted units(5) 32 77Limited partners’ interest in net income$(7,438) $12,715 $19,74489MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated) Years Ended December 31, 2018 2017 2016Discontinued operations: Income from discontinued operations$51,700 $4,128 $4,649Less general partner’s interest in net income: Distributions payable on behalf of IDRs— — 1,144Distributions payable on behalf of general partner interest1,839 378 302General partner interest in undistributed loss(805) (295) (209)Less income allocable to unvested restricted units33 10 13Limited partners’ interest in net income$50,633 $4,035 $3,399The Partnership allocates the general partner's share of earnings between continuing and discontinued operations as a proportion of net income fromcontinuing and discontinued operations to total net income.The following are the unit amounts used to compute the basic and diluted earnings per limited partner unit for the periods presented: Years Ended December 31, 2018 2017 2016Basic weighted average limited partner units outstanding 38,907,000 38,101,583 35,347,032Dilutive effect of restricted units issued 15,678 63,318 28,231Total weighted average limited partner diluted units outstanding 38,922,678 38,164,901 35,375,263All outstanding units were included in the computation of diluted earnings per unit and weighted based on the number of days such units wereoutstanding during the period presented.NOTE 18. UNIT BASED AWARDS The Partnership recognizes compensation cost related to stock-based awards to employees in its consolidated financial statements in accordancewith certain provisions of ASC 718. The Partnership recognizes compensation costs related to stock-based awards to directors under certain provisions ofASC 505-50-55 related to equity-based payments to non-employees. Amounts recognized in selling, general, and administrative expense in theconsolidated financial statements with respect to these plans are as follows: For the Year Ended December 31, 2018 2017 2016Employees$1,098 $534 $783Non-employee directors126 116 121 Total unit-based compensation expense$1,224 $650 $904Long-Term Incentive Plans The Partnership's general partner has a long term incentive plan for employees and directors of the general partner and its affiliates who performservices for the Partnership. On May 26, 2017, the unitholders of the Partnership approved the Martin Midstream Partners L.P. 2017 Restricted Unit Plan. The plan currentlypermits the grant of awards covering an aggregate of 3,000,000 common units, all of which can be awarded in the form of restricted units. The plan isadministered by the compensation committee of the general partner’s board of directors (the "Compensation Committee"). 90 A restricted unit is a unit that is granted to grantees with certain vesting restrictions, which may be time-based and/or performance-based. Once theserestrictions lapse, the grantee is entitled to full ownership of the unit without restrictions. The Compensation Committee may determine to make grants underthe plan containing such terms as the Compensation Committee shall determine under the plan. With respect to time-based restricted units ("TBRU's"), theCompensation Committee will determine the time period over which restricted units granted to employees and directors will vest. The CompensationCommittee may also award a percentage of restricted units with vesting requirements based upon the achievement of specified pre-established performancetargets ("Performance Based Restricted Units" or "PBRU's"). The performance targets may include, but are not limited to, the following: revenue and incomemeasures, cash flow measures, net income before interest expense and income tax expense ("EBIT"), net income before interest expense, income tax expense,and depreciation and amortization ("EBITDA"), distribution coverage metrics, expense measures, liquidity measures, market measures, corporatesustainability metrics, and other measures related to acquisitions, dispositions, operational objectives and succession planning objectives. PBRU's are earnedonly upon our achievement of an objective performance measure for the performance period. PBRU's which vest are payable in common units. Unvestedunits granted under the 2017 LTIP may or may not participate in cash distributions depending on the terms of each individual award agreement.The restricted units issued to directors generally vest in equal annual installments over a four-year period.On February 20, 2018, the Partnership issued 4,650 TBRU's to each of the Partnership's three independent directors under the 2017 LTIP. Theserestricted common units vest in equal installments of 1,162.5 units on January 24, 2019, 2020, 2021, and 2022.On March 1, 2018, the Partnership issued 301,550 TBRU's and 317,925 PBRU's to certain employees of Martin Resource Management. The TBRU'svest in equal installments over a three-year service period. The PBRU's will vest at the conclusion of a three-year performance period based on certainperformance targets. In addition, the PBRU's awarded on March 1, 2018 that are achieved will only vest if the grantee is employed by Martin ResourceManagement on March 31, 2021. As of December 31, 2018, the Partnership is unable to ascertain if the performance conditions will be achieved and, as such,has not recognized compensation expense for the vesting of the units. The Partnership will record compensation expense for the vested portion of the unitsonce the achievement of the performance condition is deemed probable. The restricted units are valued at their fair value at the date of grant which is equal to the market value of common units on such date. A summary ofthe restricted unit activity for the year ended December 31, 2018 is provided below: Number of Units WeightedAverage Grant-Date Fair ValuePer UnitNon-vested, beginning of year98,750 $24.80 Granted (TBRU)315,500 $13.89 Granted (PRBU)317,925 $13.89 Vested(81,050) $27.77 Forfeited(27,000) $13.90Non-Vested, end of year624,125 $13.78 Aggregate intrinsic value, end of year$6,416 A summary of the restricted units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date ofgrant) during the years ended December 31, 2018, 2017 and 2016 is provided below:91 For the Year EndedDecember 31, 2018 2017 2016Aggregate intrinsic value of units vested$1,195 $143 $1,233Fair value of units vested$2,250 $208 $1,773As of December 31, 2018, there was $3,083 of unrecognized compensation cost related to non-vested restricted units. That cost is expected to berecognized over a weighted-average period of 2.3 years.NOTE 19. INCOME TAXESThe operations of a partnership are generally not subject to income taxes because its income is taxed directly to its partners.The Partnership is subject to the Texas margin tax, which is considered a state income tax, and is included in income tax expense on theConsolidated Statements of Operations. Since the tax base on the Texas margin tax is derived from an income-based measure, the margin tax is construed asan income tax and, therefore, the recognition of deferred taxes applies to the margin tax. The impact on deferred taxes as a result of this provision isimmaterial. State income taxes attributable to the Texas margin tax of $369, $352 and $726 were recorded in income tax expense for the years endedDecember 31, 2018, 2017 and 2016, respectively.A current income tax liability of $445 and $510 existed at December 31, 2018 and 2017, respectively.Cash paid for income taxes was $434, $712, and $841 for the years ended December 31, 2018, 2017 and 2016, respectively. On December 22, 2017, the President signed into law Public Law No. 115-97, a comprehensive tax reform bill commonly referred to as the Tax Cutsand Jobs Act (the “Tax Act”) that makes significant changes to the U.S. Internal Revenue Code. Among other changes, the Tax Act includes a new deductionon certain pass-through income, a repeal of the partnership technical termination rule, and new limitations on certain deductions and credits, includinginterest expense deductions. Since the operations of a partnership are not subject to federal income tax, the legislation has no material impact on our financialstatements in 2018.As of December 31, 2018, the tax years that remain open to assessment by federal and state jurisdictions are 2015-2017.NOTE 20. BUSINESS SEGMENTSThe Partnership has four reportable segments: terminalling and storage, natural gas services, marine transportation, and sulfur services. ThePartnership’s reportable segments are strategic business units that offer different products and services. The operating income of these segments is reviewedby the chief operating decision maker to assess performance and make business decisions.The accounting policies of the operating segments are the same as those described in Note 2. The Partnership evaluates the performance of itsreportable segments based on operating income. There is no allocation of administrative expenses or interest expense.92MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated) OperatingRevenues IntersegmentEliminations Operating RevenuesAfter Eliminations Depreciation andAmortization Operating Income(Loss) afterEliminations CapitalExpenditures andPlant TurnaroundCosts Year Ended December 31, 2018: Terminalling and storage$247,840 $(6,226) $241,614 $39,508 $13,725 $13,704Natural gas services548,135 — 548,135 21,283 28,570 4,728Sulfur services132,536 — 132,536 8,485 14,276 4,429Marine transportation52,830 (2,460) 50,370 7,590 6,116 14,188Indirect selling, general, andadministrative— — — — (17,901) —Total$981,341 $(8,686) $972,655 $76,866 $44,786 $37,049 Year Ended December 31, 2017: Terminalling and storage$236,169 $(5,998) $230,171 $45,160 $629 $29,644Natural gas services532,908 (226) 532,682 24,916 51,849 7,430Sulfur services134,684 — 134,684 8,117 23,205 2,611Marine transportation51,915 (3,336) 48,579 7,002 1,650 3,929Indirect selling, general, andadministrative— — — — (17,332) —Total$955,676 $(9,560) $946,116 $85,195 $60,001 $43,614 Year Ended December 31, 2016: Terminalling and storage$242,363 $(5,653) $236,710 $45,484 $40,660 $26,097Natural gas services391,333 — 391,333 28,081 41,503 4,807Sulfur services141,058 — 141,058 7,995 23,393 5,093Marine transportation61,233 (2,943) 58,290 10,572 (16,039) 2,334Indirect selling, general, andadministrative— — — — (16,794) —Total$835,987 $(8,596) $827,391 $92,132 $72,723 $38,331Revenues from two customers in the Natural Gas Services segment were $179,729, $169,504 and $122,381 for the years ended December 31, 2018,2017 and 2016, respectively.The Partnership's assets by reportable segment as of December 31, 2018 and 2017, are as follows: 2018 2017Total assets: Terminalling and storage$298,784 $326,920Natural gas services512,817 704,524Sulfur services115,498 120,790Marine transportation106,299 101,264Total assets$1,033,398 $1,253,49893MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)NOTE 21. QUARTERLY FINANCIAL INFORMATIONConsolidated Quarterly Income Statement Information (Unaudited) First Quarter Second Quarter Third Quarter FourthQuarter (Dollar in thousands, except per unit amounts)2018 Revenues$284,204 $216,571 $219,047 $252,833Operating income (loss)24,120 5,616 3,527 11,523Income (loss) from continuing operations11,286 (8,282) (9,686) (913)Income from discontinued operations1,532 1,036 49,132 —Net income (loss)12,818 (7,246) 39,446 (913)Income (loss) from continuing operations per unit0.29 (0.21) (0.25) (0.02)Limited partners' interest in net income (loss) per limited partner unit0.33 (0.18) 1.00 (0.04) First Quarter Second Quarter Third Quarter FourthQuarter (Dollar in thousands, except per unit amounts)2017 Revenues$253,325 $193,922 $193,128 $305,741Operating income23,804 10,891 (4,440) 29,746Income (loss) from continuing operations12,734 179 (17,031) 17,125Income from discontinued operations849 810 745 1,724Net income (loss)13,583 989 (16,286) 18,849Income (loss) from continuing operations per unit0.34 — (0.44) 0.45Limited partners' interest in net income (loss) per limited partner unit0.36 0.03 (0.42) 0.47NOTE 22. COMMITMENTS AND CONTINGENCIESContingenciesFrom time to time, the Partnership is subject to various claims and legal actions arising in the ordinary course of business. In the opinion ofmanagement, the ultimate disposition of these matters will not have a material adverse effect on the Partnership. Pursuant to a Purchase Price Reimbursement Agreement between the Partnership and Martin Resource Management related to the Partnership’sacquisition of the Redbird Gas Storage LLC ("Redbird") Class A interests on October 2, 2012,94MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)beginning in the second quarter of 2015, Martin Resource Management will reimburse the Partnership $750 each quarter for four consecutive quarters as areduction in the purchase price of the Redbird Class A interests. These payments are a result of Cardinal Gas Storage Partners LLC ("Cardinal") not achievingcertain financial targets set forth in the Purchase Price Reimbursement Agreement. These payments are considered a reduction of the excess of the purchaseprice over the carrying value of the assets transferred to the Partnership from Martin Resource Management and will be recorded as an adjustment to "Partners'capital" in each quarter the payments are made. The agreement further provided for purchase price reimbursements of up to $4,500 in 2016 in the eventcertain financial conditions were not met. For the year ended December 31, 2017, the Partnership received $1,125, respectively, related to the Purchase PriceReimbursement Agreement. The amount received in the first quarter of 2017 represented the final payment under the Purchase Price ReimbursementAgreement.In 2015, the Partnership was named as a defendant in the cause J. A. Davis Properties, LLC v. Martin Operating Partnership L.P., in the 38th JudicialDistrict Court, Cameron Parish, Louisiana. The plaintiff alleged that the Partnership breached a lease agreement by failing to perform work to the plaintiff'sproperty as required under the lease agreement. The plaintiff originally sought to evict the Partnership from the leased property and to recover damages. Prior to trial, this matter was settled for a confidential amount in September of 2017. The Partnership's financial statements reflect the terms of the settlementand all amounts have been accrued as asset retirement obligations.On December 31, 2015, the Partnership received a demand from a customer in its lubricants packaging business for defense and indemnity inconnection with lawsuits filed against it in various United States District Courts, which generally allege that the customer engaged in unlawful and deceptivebusiness practices in connection with its marketing and advertising of its private label motor oil. The Partnership disputes that it has any obligation todefend or indemnify the customer for its conduct. Accordingly, on January 7, 2016, the Partnership filed a Complaint for Declaratory Judgment in theChancery Court of Davidson County, Tennessee requesting a judicial determination that the Partnership does not owe the customer the demanded defenseand indemnity obligations. The lawsuits against the customer have been transferred to the United States District Court for the Western District of Missouri forconsolidated pretrial proceedings. On March 1, 2017, at the request of the parties, the Chancery Court of Davidson County, Tennessee administrativelyclosed the Partnership's lawsuit pending rulings in the United States District Court for the Western District of Missouri. In the event that either party movesthe Chancery Court of Davidson County, Tennessee to reopen the case, we expect the Court would grant such motion and reopen the case. If the case isreopened, we are currently unable to determine the exposure we may have in this matter, if any.CommitmentsThe Partnership has non-cancelable revenue arrangements whereby we have committed certain terminalling and storage assets in exchange for aminimum fee. Future minimum revenues we expect to receive under these non-cancelable arrangements as of December 31, 2018, are as follows: 2019 -$17,343; 2020 - $13,345; 2021 - $10,576; 2022 - $10,576; 2023 - $10,576; subsequent years - $58,128.NOTE 23. CONDENSED CONSOLIDATIING FINANCIAL INFORMATIONThe Partnership's operations are conducted by its operating subsidiaries as it has no independent assets or operations. Martin Operating PartnershipL.P. (the "Operating Partnership"), the Partnership’s wholly-owned subsidiary, and the Partnership's other operating subsidiaries have issued in the past, andmay issue in the future, unconditional guarantees of senior or subordinated debt securities of the Partnership. The guarantees that have been issued are full,irrevocable and unconditional and joint and several. In addition, the Operating Partnership may also issue senior or subordinated debt securities which, ifissued, will be fully, irrevocably and unconditionally guaranteed by the Partnership. Substantially all of the Partnership's operating subsidiaries aresubsidiary guarantors of its outstanding senior unsecured notes and any subsidiaries other than the subsidiary guarantors are minor.95MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)NOTE 24. SUBSEQUENT EVENTSMartin Transport Inc. Stock Purchase Agreement. On October 22, 2018, the Operating Partnership entered into a stock purchase agreement (the“Stock Purchase Agreement”) with Martin Resource Management Corporation (“MRMC”) to acquire all of the issued and outstanding equity of MartinTransport, Inc. (“MTI”), a wholly-owned subsidiary of MRMC which operates a fleet of tank trucks providing transportation of petroleum products, liquidpetroleum gas, chemicals, sulfur and other products, as well as owns twenty-three terminals located throughout the Gulf Coast and Midwest for totalconsideration as follows:96MARTIN MIDSTREAM PARTNERS L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except where otherwise indicated)Purchase price1$135,000Plus: Working Capital Adjustment2,796Less: Capital leases assumed(11,682)Cash consideration paid$126,1141The Stock Purchase Agreement also includes a $10,000 earn-out based on certain performance thresholds. The transaction closed on January 2,2019 and was effective as of January 1, 2019. The Stock Purchase Agreement contained customary representations and warranties.The Partnership also acquired certain operating leases that will result in additional assets and liabilities being recorded at the transaction date inaccordance with ASU 2016-02 in the amount of $7,082. Quarterly Distribution. On January 17, 2019, the Partnership declared a quarterly cash distribution of $0.50 per common unit for the fourth quarterof 2018, or $2.00 per common unit on an annualized basis, which was paid on February 14, 2019 to unitholders of record as of February 7, 2019. 97Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A.Controls and Procedures(a) Evaluation of Disclosure Controls and Procedures. In accordance with Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, asamended (the "Exchange Act"), we, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of our generalpartner, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) of theExchange Act) as of December 31, 2018. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of our general partner concludedthat our disclosure controls and procedures were effective as of December 31, 2018 to provide reasonable assurance that information required to be disclosedby the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periodsspecified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer andprincipal financial officer, as appropriate to allow timely decisions regarding required disclosure.During 2017 we began implementation of a new enterprise resource planning ("ERP") system. The new ERP system is expected to take several yearsto fully implement, and has and will continue to require significant capital and human resources to deploy. During the year ended December 31, 2018, wecompleted the implementation of certain functional areas of the ERP implementation project that affect the processes that constitute our internal control overfinancial reporting (as defined in Rule 13a-15(f) under the Exchange Act) and this initial deployment will require testing for effectiveness throughout 2018.Management has taken steps to ensure that appropriate controls are designed and implemented as each functional area of the new ERP system is enacted.Beginning January 1, 2018, we implemented ASC 606, Revenue from Contracts with Customers. Although the new revenue standard is expected tohave an immaterial impact on our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activitieswithin them. These included the development of new policies based on the five-step model provided in the new revenue standard, new training, ongoingcontract review requirements, and gathering of information provided for disclosures. (b) Management’s Report on Internal Control Over Financial Reporting. Management is responsible for establishing and maintainingadequate internal control over financial reporting. A company’s internal control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition ofthe company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.Our management, including the Chief Executive Officer and Chief Financial Officer of our general partner, conducted an evaluation of theeffectiveness of our internal control over financial reporting based on criteria established in the Internal Control — Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under the framework in Internal Control — IntegratedFramework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2018. The effectiveness ofour internal control over financial reporting as of December 31, 2018 has been audited by KPMG LLP, our independent registered public accounting firm, asstated in their report appearing in "Item 8 - Financial Statements and Supplementary Data."(c) Changes in Internal Control Over Financial Reporting. Other than as described above, there were no changes in our internal controls overfinancial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred98during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. 99Item 9B.Other InformationNone.100PART IIIItem 10.Directors, Executive Officers and Corporate Governance Management of Martin Midstream Partners L.P. Martin Midstream GP LLC, as our general partner, manages our operations and activities on our behalf. Our general partner was not elected by ourunitholders and will not be subject to re-election in the future. Unitholders do not directly or indirectly participate in our management or operation. Ourgeneral partner owes a fiduciary duty to our unitholders. Our general partner is liable, as general partner, for all of our debts (to the extent not paid from ourassets), except for indebtedness or other obligations that are made specifically non-recourse to it. However, whenever possible, our general partner seeks toprovide that our indebtedness or other obligations are non-recourse to our general partner. Three directors of our general partner serve on a conflicts committee of the Partnership's general partner ("Conflicts Committee") to review specificmatters that the directors believe may involve conflicts of interest. The Conflicts Committee determines if the resolution of the conflict of interest is fair andreasonable to us. The members of the Conflicts Committee may not be officers or employees of our general partner or directors, officers, or employees of itsaffiliates and must meet the independence standards established by NASDAQ to serve on an audit committee of a board of directors. Any matters approvedby the Conflicts Committee will be conclusively deemed to be fair and reasonable to us, approved by all of our partners, and not a breach by our generalpartner of any duties it may owe us or our unitholders. The current members of our Conflicts Committee are outside directors, James M. Collingsworth, C.Scott Massey and Byron R. Kelley, all of whom meet the independence standards established by NASDAQ, except as referenced above. The Audit Committee reviews our external financial reporting, recommends engagement of our independent auditors and reviews procedures forinternal auditing and the adequacy of our internal accounting controls. The current members of our Audit Committee are outside directors, C. Scott Massey,Byron R. Kelley and James M. Collingsworth, all of whom meet the independence standards established by NASDAQ.The Compensation Committee oversees compensation decisions for the officers of our general partner as well as the compensation plans describedbelow. The current members of our Compensation Committee are our outside directors, James M. Collingsworth, C. Scott Massey, and Byron R. Kelley.The current members of our Nominating Committee are outside directors, James M. Collingsworth, Byron R. Kelley and C. Scott Massey. We are managed and operated by the directors and officers of our general partner. All of our operational personnel are employees of Martin ResourceManagement. All of the officers of our general partner will spend a substantial amount of time managing the business and affairs of Martin ResourceManagement and its other affiliates. These officers may face a conflict regarding the allocation of their time between our business and the other businessinterests of Martin Resource Management. Our general partner intends to cause its officers to devote as much time to the management of our business andaffairs as is necessary for the proper conduct of our business and affairs.101Directors and Executive Officers of Martin Midstream GP LLCThe following table shows information for the directors and executive officers of our general partner. Directors and executive officers are elected forone-year terms.Name Age Position with the General PartnerRuben S. Martin 67 President, Chief Executive Officer and DirectorRobert D. Bondurant 60 Executive Vice President and Chief Financial Officer and DirectorRandall L. Tauscher 53 Executive Vice President and Chief Operating OfficerChris H. Booth 49 Executive Vice President, Chief Legal Officer, General Counsel and SecretaryScot A. Shoup 58 Senior Vice President of OperationsC. Scott Massey 66 DirectorJames M. Collingsworth 64 DirectorByron R. Kelley 71 DirectorSean P. Dolan 45 DirectorZachary S. Stanton 43 DirectorRuben S. Martin serves as President, Chief Executive Officer and a member of the board of directors of our general partner. Mr. Martin has served insuch capacities since June 2002. Mr. Martin has served as President of Martin Resource Management since 1981 and has served in various capacities withinthe company since 1974. Mr. Martin holds a Bachelor of Science degree in industrial management from the University of Arkansas. Mr. Martin was selectedto serve as a director on our general partner's board of directors due to his depth of knowledge of the Partnership, including its strategies and operations, hisbusiness judgment and his position within the Partnership.Robert D. Bondurant serves as Executive Vice President and Chief Financial Officer and a member of the board of directors of our general partner.Mr. Bondurant has served in such capacities since June 2002. Mr. Bondurant joined Martin Resource Management in 1983 as Controller and subsequentlywas appointed Chief Financial Officer and a member of its board of directors in 1990. Mr. Bondurant served in the audit department at Peat Marwick,Mitchell and Co. from 1980 to 1983. Mr. Bondurant holds a Bachelor of Business Administration degree in accounting from Texas A&M University and is aCertified Public Accountant, licensed in the state of Texas. Randall L. Tauscher serves as Executive Vice President and Chief Operating Officer of our general partner. Mr. Tauscher has served in this capacitysince May 2011. From September 2007 through May 2011, Mr. Tauscher served as Executive Vice President. Prior to joining Martin, Mr. Tauscher wasemployed by Koch Industries for over 18 years, most recently as Senior Vice President of the Koch Carbon Division. Mr. Tauscher earned a Bachelor ofBusiness Administration degree from Kansas State University. Chris H. Booth serves as Executive Vice President, Chief Legal Officer, General Counsel and Secretary of our general partner. Mr. Booth has servedas an officer of our general partner since February 2006. Mr. Booth joined Martin Resource Management in October 2005. Prior to joining Martin ResourceManagement, Mr. Booth was an attorney with the law firm of Mehaffy Weber located in Beaumont, Texas. Mr. Booth holds a Doctor of Jurisprudence degreeand a Masters of Business Administration degree with a concentration in finance from the University of Houston. Additionally, Mr. Booth holds a Bachelorof Science degree in business management from LeTourneau University. Mr. Booth is an attorney licensed to practice in the State of Texas.Scot A. Shoup serves as Senior Vice President of Operations for our general partner. Mr. Shoup joined Martin in May 2011. Prior to joining Martin,Mr. Shoup was employed by Exline, Inc. as Executive Vice President from 2005 to 2011 and was employed by Koch Industries in various capacities for 18years. Mr. Shoup holds a bachelor of science degree in Civil Engineering from the University of Kansas.C. Scott Massey serves as a member of the board of directors of our general partner. Mr. Massey has served as a Director since June 2002. Mr. Masseyhas been self employed as a Certified Public Accountant since 1998. From 1977 to 1998, Mr. Massey worked for KPMG Peat Marwick, LLP in variouspositions, including, most recently, as a Partner in the firm's Tax Practice - Energy, Real Estate, Timber from 1986 to 1998. Mr. Massey received a Bachelor ofBusiness Administration degree from the University of Texas at Austin and a Doctor of Jurisprudence degree from the University of Houston. Mr. Massey is aCertified Public Accountant, licensed in the States of Louisiana and Texas. Mr. Massey was selected102to serve as a director on our general partner's board of directors due to his extensive background in public accounting and taxation. Mr. Massey qualifies asan "audit committee financial expert" under the SEC guidelines. James M. Collingsworth serves as a member of the board of directors of our general partner. Mr. Collingsworth has spent 41 years in all facets of themidstream and petrochemical industry. In 2013, Mr. Collingsworth retired from Enterprise Products Company as a Sr. Vice President of Regulated NGLPipelines & Natural Gas Storage. Mr. Collingsworth currently serves on the board of directors of NGL Energy Partners LP, and has served on the board ofdirectors of Texaco Canada, Dixie Pipeline Company, Seminole Pipeline Company and the Petrochemical Feedstock Association of America. Mr.Collingsworth has served as a Director since October 2014. Mr. Collingsworth received a bachelor’s degree in Finance and Marketing from Northeastern StateUniversity. Mr. Collingsworth was selected to serve as a director on our general partner's board of directors due to his extensive corporate businessexperience. Byron R. Kelley serves as a member of the board of directors of our general partner and also served as an Advisory Director from April 2011 toAugust 2012. On December 31, 2013, Mr. Kelley retired as CEO, President and a member of the board of directors of CVR Partners, LP, a chemical companyengaged in the production of nitrogen based fertilizers and served in this position from June 2011 through December 2013. Prior to joining CVR Partners inJune of 2011 he served as President, Chief Executive Officer and a member of the board of directors of Regency GP, LLC from April 2008 to November 2010.From 2004 through March of 2008, Mr. Kelley served as Senior Vice President and Group President of Pipeline and Field Services at CenterPoint Energy.Preceding his work at CenterPoint, Mr. Kelley served as Executive Vice President of Development, Operations and Engineering, and as President of El PasoEnergy International. Mr. Kelley is a past member and Chairman of the board of directors of the Interstate National Gas Association and previously served asone of the association's representatives on the United States Natural Gas Council of America. Mr. Kelley received a Bachelor of Science degree in civilengineering from Auburn University. Mr. Kelley was selected to serve as a director on our general partner's board of directors due to his extensive corporatebusiness experience.Sean P. Dolan serves as a member of the board of directors of our general partner. Mr. Dolan has served as a Director since 2013. Mr. Dolan is aManaging Director of Alinda Capital Partners, which he joined in 2009. Prior to joining Alinda, Mr. Dolan spent over 12 years with Citigroup GlobalMarkets in investment banking primarily focused in the energy sector. Mr. Dolan received a bachelor's degree from Georgetown University. Mr. Dolan wasselected to serve as a director on our general partner's board of directors due to his affiliation with Alinda, his knowledge of the energy industry and hisfinancial and business expertise.Zachary S. Stanton serves as a member of the board of directors of our general partner. Mr. Stanton was appointed to the board of directors onFebruary 24, 2016. Mr. Stanton is a Director of Alinda Capital Partners, which he joined in 2011. Prior to joining Alinda, he was a Director at Zolfo Cooper,LLC, a consulting firm based in New York. Mr. Stanton has over 15 years of experience focused on the corporate development and operations of energy andtransportation infrastructure businesses as well as diversified industrial companies. Mr. Stanton received a bachelor's degree from Wesleyan University. Mr.Stanton was selected to serve as a director on our general partner's board of directors due to his affiliation with Alinda, his knowledge of the energy industry,and his financial and business expertise.Independence of DirectorsMessrs. Massey, Collingsworth, and Kelley qualify as "independent" in accordance with the published listing requirements of NASDAQ andapplicable securities laws. The NASDAQ independence definition includes a series of objective tests, such as that the director is not an employee of us andhas not engaged in various types of business dealings with us. In addition, as further required by the NASDAQ rules, the board of directors has made asubjective determination as to each independent director that no relationships exist which, in the opinion of the board, would interfere with the exercise ofindependent judgment in carrying out the responsibilities of a director. In making these determinations, the directors reviewed and discussed informationprovided by the directors and us with regard to each director's business and personal activities as they may relate to us and our management. Board Meetings and Committees From January 1, 2018 to December 31, 2018, the board of directors of our general partner held 10 meetings. All directors then in office attendedeach of these meetings, either in person, by teleconference or by videoconference with the exception of: Zach Stanton, who was not in attendance at themeeting of the board of directors on the dates of April 19, 2018 and July 19, 2018. Additionally, the board of directors undertook action one time during2018 without a meeting by acting through written unanimous consent. We have standing conflicts, audit, compensation and nominating committees of theboard of directors of our general partner. The board of directors of our general partner appoints the members of the Audit,103Compensation, Nominating and Conflicts Committees. Each member of the Audit Committee is an independent director in accordance with NASDAQ andapplicable securities laws. Each of the board committees has a written charter approved by the board. Copies of each charter are posted on our website atww.martinmidstream.com under the "Corporate Governance" section. The current members of the committees, the number of meetings held by eachcommittee from January 1, 2018 to December 31, 2018, and a brief description of the functions performed by each committee are set forth below: Conflicts Committee (9 meetings). The members of the Conflicts Committee are: Messrs. Kelley (chairman), Massey and Collingsworth. All of themembers of the Conflicts Committee attended all meetings of the committee for the period noted above. The primary responsibility of the ConflictsCommittee is to review matters that the directors believe may involve conflicts of interest. The Conflicts Committee determines if the resolution of theconflict of interest is fair and reasonable to us. The members of the Conflicts Committee may not be officers or employees of our general partner or directors,officers, or employees of its affiliates and must meet the independence standards to serve on an audit committee of a board of directors established byNASDAQ. Any matters approved by the Conflicts Committee will be conclusively deemed to be fair and reasonable to us, approved by all of our partners,and not a breach by our general partner of any duties it may owe us or our unitholders. Audit Committee (5 meetings). The members of the Audit Committee are Messrs. Massey (chairman), Kelley and Collingsworth. All of the membersattended all meetings of the Audit Committee for the period noted. The primary responsibilities of the Audit Committee are to assist the board of directors inits general oversight of our financial reporting, internal controls and audit functions, and it is directly responsible for the appointment, retention,compensation and oversight of the work of our independent auditors. The members of the Audit Committee of the board of directors of our general partnereach qualify as "independent" under standards established by the SEC for members of audit committees, and the Audit Committee includes at least onemember who is determined by the board of directors to meet the qualifications of an "audit committee financial expert" in accordance with SEC rules,including that the person meets the relevant definition of an "independent" director. C. Scott Massey is the independent director who has been determined tobe an audit committee financial expert. Unitholders should understand that this designation is a disclosure requirement of the SEC related to Mr. Massey'sexperience and understanding with respect to certain accounting and auditing matters. The designation does not impose on Mr. Massey any duties,obligations or liability that are greater than are generally imposed on him as a member of the Audit Committee and board of directors, and his designation asan audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the AuditCommittee or board of directors. Compensation Committee (2 meetings). The members of the Compensation Committee are Messrs. Collingsworth (chairman), Massey and Kelley. All members attended the meeting of the Compensation Committee for the period noted above. The primary responsibility of the Compensation Committeeis to oversee compensation decisions for the outside directors of our general partner and executive officers of our general partner (in the event they are to bepaid by our general partner) as well as our long-term incentive plan. Nominating Committee (1 meetings). The members of the Nominating Committee are Messrs. Collingsworth (chairman), Massey, and Kelley. All ofthe members attended the meeting of the Nominating Committee for the period noted above. The primary responsibility of the nominating committee is toselect and recommend nominees for election to the board of directors of our general partner.Code of Ethics and Business Conduct Our general partner has adopted a Code of Ethics and Business Conduct applicable to all of our general partner's employees (including anyemployees of Martin Resource Management who undertake actions with respect to us or on our behalf), including all officers, and including our generalpartner's independent directors, who are not employees of our general partner, with regard to their activities relating to us. The Code of Ethics and BusinessConduct incorporate guidelines designed to deter wrongdoing and to promote honest and ethical conduct and compliance with applicable laws andregulations. They also incorporate our expectations of our general partner's employees (including any employees of Martin Resource Management whoundertake actions with respect to us or on our behalf) that enable us to provide accurate and timely disclosure in our filings with the Securities and ExchangeCommission and other public communications. The Code of Ethics and Business Conduct is publicly available on our website under the "CorporateGovernance" section (at www.martinmidstream.com). This website address is intended to be an inactive, textual reference only, and none of the material onthis website is part of this report. If any substantive amendments are made to the Code of Ethics and Business Conduct or if we or our general partner grantany waiver, including any implicit waiver, from a provision of the code to any of our general partner's executive officers and directors, we will disclose thenature of such amendment or waiver on that website or in a report on Form 8-K.104Section 16(a) Beneficial Ownership Reporting Compliance Our general partner's directors and officers and beneficial owners of more than 10% of a registered class of our equity securities are required to filereports of ownership and reports of changes in ownership with the SEC and NASDAQ. Directors, officers and beneficial owners of more than 10% of ourequity securities are also required to furnish us with copies of all such reports that are filed. Based solely on our review of copies of such forms andamendments previously provided to us, we believe directors, officers and greater than 10% beneficial owners complied with all filing requirements during theyear ended December 31, 2018, with the exception of one Form 4 for Scot Shoup which was filed late. 105Item 11.Executive Compensation Compensation Discussion and AnalysisBackgroundWe are required to provide information regarding the compensation program in place as of December 31, 2018, for the CEO, CFO and the three othermost highly-compensated executive officers of our general partner as reflected in the summary compensation table set forth below (the "Named ExecutiveOfficers"). This section should be read in conjunction with the detailed tables and narrative descriptions regarding compensation below.We are a master limited partnership and have no employees. We are managed by the executive officers of our general partner. These executiveofficers are employed by Martin Resource Management, a private corporation that has significant operations that are separate from ours. The executiveofficers of our general partner are also the executive officers of Martin Resource Management and devote significant time to the management of MartinResource Management’s operations. We reimburse Martin Resource Management for a portion of the indirect general and administrative expenses, includingcompensation expense relating to the service of these individuals that are allocated to us pursuant to the omnibus agreement between us and our generalpartner, as amended on October 1, 2012 ("Omnibus Agreement"). Under the Omnibus Agreement, we are required to reimburse Martin Resource Managementfor indirect general and administrative and corporate overhead expenses. For the years ended December 31, 2018, 2017 and 2016 the conflicts committee ofour general partner ("Conflicts Committee") approved reimbursement amounts of $16.4 million, $16.4 million and $13.0 million, respectively, reflecting ourallocable share of such expenses. Please see "Item 13. Certain Relationships and Related Transactions, and Director Independence — Agreements —Omnibus Agreement" for a discussion of the Omnibus Agreement.Compensation ObjectivesAs we do not directly compensate the executive officers of our general partner, we do not have any set compensation programs. The elements ofMartin Resource Management’s compensation program discussed below, along with Martin Resource Management’s other rewards, are intended to provide atotal rewards package designed to yield competitive total cash compensation, drive performance and reward contributions in support of the businesses ofMartin Resource Management and other Martin Resource Management affiliates, including us, for which the Named Executive Officers perform services.Although we bear an allocated portion of Martin Resource Management’s costs of providing compensation and benefits to the Named Executive Officers, wedo not have control over such costs and do not establish or direct the compensation policies or practices of Martin Resource Management. During 2018,Martin Resource Management paid compensation based on the performance of Martin Resource Management but did not set any specific performance-basedcriteria and did not have any other specific performance-based objectives.Elements of CompensationMartin Resource Management’s executive officer compensation package includes a combination of annual cash, long-term incentive compensationand other compensation. Elements of compensation which the Named Executive Officers may be eligible to receive from Martin Resource Managementconsist of the following: (1) annual base salary; (2) discretionary annual cash awards; (3) awards pursuant to the Martin Midstream Partners L.P. 2017Restricted Unit Plan and Martin Resource Management employee benefit plans and (4) where appropriate, other compensation, including limited perquisites.Annual Base Salary. Base salary is intended to provide fixed compensation to the Named Executive Officers for their performance of core dutieswith respect to Martin Resource Management and its affiliates, including us, and to compensate for experience levels, scope of responsibility and futurepotential. Base salaries are not intended to compensate individuals for extraordinary performance or for above average company performance. The basesalaries of the Named Executive Officers are generally reviewed on an annual basis, as well as at the time of promotion and other changes in responsibilitiesor market conditions.Discretionary Annual Cash Awards. In addition to the annual base salary, the Named Executive Officers may be eligible to receive discretionaryannual cash awards that, if awarded, are paid in a lump sum in the quarter following the end of the fiscal year. These cash awards are designed to provide theNamed Executive Officers with competitive incentives to help drive performance and promote achievement of Martin Resource Management’s businessobjectives. Named Executive Officers may also be eligible to receive a cash award based upon their services provided to us in the event that any such NamedExecutive Officer has devoted a significant amount of their time to working for us. Any such award is determined in106accordance with the same methodologies as the discretionary annual cash awards for Martin Resource Management, as described below.Employee Benefit Plan Awards. The Named Executive Officers may be eligible to receive awards pursuant to the Martin Midstream Partners L.P.2017 Restricted Unit Plan and Martin Resource Management employee benefit plans. These employee benefit plan awards are designed to reward theperformance of the Named Executive Officers by providing annual incentive opportunities tied to the annual performance of Martin ResourceManagement. In particular, these awards are provided to the Named Executive Officers in order to provide competitive incentives to these executives whocan significantly impact performance and promote achievement of the business objectives of Martin Resource Management.Other Compensation. Martin Resource Management generally does not pay for perquisites for any of the Named Executive Officers, other thangeneral recreational activities at certain Martin Resource Management’s properties located in Texas, including aircraft. No perquisites are paid for servicesrendered to us. Martin Resource Management provides an executive life insurance policy and long term disability policy for the Named Executive Officerswith the annual premiums being paid by Martin Resource Management. Martin Resource Management does not provide any greater allocation towardemployee health insurance premiums than is provided for all other employees covered on the health benefits plan.Compensation MethodologyThe compensation policies and philosophy of Martin Resource Management govern the types and amount of compensation granted to each of theNamed Executive Officers. The board of directors and Conflicts Committee have responsibility for evaluating and determining the reasonableness of the totalamount we are charged under the Omnibus Agreement for managerial, administrative and operational support, including compensation of the NamedExecutive Officers, provided by Martin Resource Management. Our allocation for the costs incurred by Martin Resource Management in providing compensation and benefits to its employees who serve as theNamed Executive Officers is governed by the Omnibus Agreement. In general, this allocation is based upon estimates of the relative amounts of time thatthese employees devote to the business and affairs of our general partner and to the business and affairs of Martin Resource Management. We bearsubstantially less than a majority of Martin Resource Management’s costs of providing compensation and benefits to the Named Executive Officers.When setting compensation for the Named Executive Officers, the elements of compensation above are considered holistically to provide anappropriate combination of compensation. Annual base salaries for the Named Executive Officers are determined by Mr. Ruben Martin, Chief ExecutiveOfficer, Mr. Robert Bondurant, Chief Financial Officer, Mr. Randall Tauscher, Chief Operating Officer, and Mrs. Melanie Mathews, Vice President-HumanResources (collectively, the "Management Compensation Committee of Martin Resource Management") based on a periodic performance review of eachNamed Executive Officer. Except in the case of an exceptional amount of time devoted to us, discretionary annual cash awards are based on the performanceof Martin Resource Management. Annual discretionary cash awards, if any, are calculated first by allocating a portion of Martin Resource Management’searnings as determined by the Management Compensation Committee of Martin Resource Management for distribution to key employees of MartinResource Management. Upon such allocation, the Management Compensation Committee of Martin Resource Management, with input from appropriatebusiness leaders determines the allocation and distribution of the bonus pool among such employees, including the Named Executive Officers. All decisionsof the Management Compensation Committee of Martin Resource Management concerning the compensation of the Named Executive Officers are reviewedand approved by the Compensation Committee of the Board of Directors of Martin Resource Management, which is made up of Mr. Cullen M. Godfrey, anindependent director of Martin Resource Management and Mr. Ruben Martin. With respect to employee benefit plan awards pursuant to plans maintained bythe Partnership, the Management Compensation Committee of Martin Resource Management makes a recommendation as to whether such awards should beawarded to any employees. Any such employee plan awards are then considered and must be approved by the Compensation Committee and then aredistributed to the employees, including Named Executive Officers, accordingly. Further, Martin Resource Management, with the approval of theCompensation Committee of the Board of Directors of Martin Resource Management or the Compensation Committee regularly reviews market data andrelevant compensation surveys when setting base compensation and, when appropriate, engages compensation consultants. Because he serves on both theManagement Compensation Committee of Martin Resource Management and on the Compensation Committee of the Board of Directors of Martin ResourceManagement, Mr. Martin, as Chief Executive Officer, has significant authority in setting base salaries, discretionary annual cash award allocations andamounts and employee benefit award distributions.107Any awards granted under our long-term incentive plan, which to date have consisted of the grant of restricted common units to the independentdirectors and employees of our general partner, are approved by the Compensation Committee.Determination of 2018 Compensation Amounts During 2018, elements of all compensation paid to the Named Executive Officers by Martin Resource Management consisted of the following: (1)annual base salary; (2) discretionary annual cash awards; (3) awards pursuant to the Martin Midstream Partners L.P. 2017 Restricted Unit Plan and MartinResource Management employee benefit plans; and (4) other compensation, including limited perquisites. With respect to the Named Executive Officers,they were paid an allocated portion of their base salaries.Annual Base Salary. The portions of the annual base salaries paid by Martin Resource Management to the Named Executive Officers, which areallocable to us under our Omnibus Agreement with Martin Resource Management, are reflected in the summary compensation table below. Based upon theagreement of our general partner with Martin Resource Management, we have reimbursed Martin Resource Management for approximately 55.5% of theaggregate annual base salaries paid to the Named Executive Officers by Martin Resource Management during 2017. The foregoing agreement has beendeveloped based on an assessment of the estimated percentage of the time spent by the Named Executive Officers managing our affairs, relative to the affairsof Martin Resource Management ranging from approximately 50% to 75%. Our Named Executive Officers are Mr. Ruben Martin, the President and ChiefExecutive Officer of our general partner, Mr. Robert Bondurant, an Executive Vice President and Chief Financial Officer of our general partner, Mr. RandallTauscher, an Executive Vice President and Chief Operating Officer of our general partner, Mr. Chris Booth, the Executive Vice President, General Counseland Secretary of our general partner, and Mr. Scot A. Shoup, Senior Vice President of Operations. Aggregate annual base salaries of the Named ExecutiveOfficers were not increased during 2016 or 2017.Discretionary Annual Cash Awards. Discretionary annual cash awards paid to the Named Executive Officers which are allocable to us are reflectedin the summary compensation table below.Martin Midstream Partners L.P. Long-Term Incentive PlanOn May 26, 2017, the unitholders of the Partnership approved the Martin Midstream Partners L.P. 2017 Restricted Unit Plan (the "2017 LTIP"). Theplan currently permits the grant of awards covering an aggregate of 3,000,000 common units, all of which can be awarded in the form of restricted units. Theplan is administered by the Compensation Committee of our general partner’s board of directors. The purpose of the 2017 LTIP is designed to enhance ourability to attract, retain, reward and motivate the services of certain key employees, officers, and directors of the General Partner and Martin ResourceManagement.Our general partner’s board of directors or the Compensation Committee, in their discretion, may terminate or amend the 2017 LTIP at any time withrespect to any units for which a grant has not yet been made. Our general partner’s board of directors or the Compensation Committee also have the right toalter or amend the 2017 LTIP or any part of the plan from time to time, including increasing the number of units that may be reserved for issuance under theplan subject to any applicable unitholder approval. However, no change in any outstanding grant may be made that would materially impair the rights of theparticipant without the consent of the participant. In addition, the restricted units will vest upon a change of control of us, our general partner or MartinResource Management or if our general partner ceases to be an affiliate of Martin Resource Management.Restricted Units. A restricted unit is a unit that is granted to grantees with certain vesting restrictions, which may be time-based and/or performance-based. Once these restrictions lapse, the grantee is entitled to full ownership of the unit without restrictions. The Compensation Committee may determine tomake grants under the plan containing such terms as the Compensation Committee shall determine under the plan. With respect to time-based restricted units("TBRU's"), the Compensation Committee will determine the time period over which restricted units granted to employees and directors will vest. TheCompensation Committee may also award a percentage of restricted units with vesting requirements based upon the achievement of specified pre-establishedperformance targets ("Performance Based Restricted Units" or "PBRU's"). The performance targets may include, but are not limited to, the following: revenueand income measures, cash flow measures, EBIT, EBITDA, distribution coverage metrics, expense measures, liquidity measures, market measures, corporatesustainability metrics, and other measures related to acquisitions, dispositions, operational objectives and succession planning objectives. PBRU's are earnedonly upon our achievement of an objective performance measure for the performance period. PBRU's which vest are payable in common units. TheCompensation Committee believes this type of incentive award strengthens the tie between each grantee's pay and our financial performance. We intend theissuance of the common units108upon vesting of the restricted units under the plan to serve as a means of incentive compensation for performance and not primarily as an opportunity toparticipate in the equity appreciation of the common units. Therefore, plan participants will not pay any consideration for the common units they receive,and we will receive no remuneration for the units. Unvested units granted under the 2017 LTIP may or may not participate in cash distributions depending onthe terms of each individual award agreement.If a grantee’s service to the Partnership terminates for any reason, the grantee’s restricted units will be automatically forfeited unless, and to theextent, the Compensation Committee provides otherwise. Common units to be delivered upon the vesting of restricted units may be common units acquiredby our general partner in the open market, common units already owned by our general partner, common units acquired by our general partner directly fromus or any affiliate of our general partner, newly issued common units under the LTIP, or any combination of the foregoing. Our general partner will be entitledto reimbursement by us for the cost incurred in acquiring common units. If we issue new common units upon vesting of the restricted units, the total numberof common units outstanding will increase.On February 20, 2018, we issued 4,650 TBRU's to each of our three independent directors under the 2017 LTIP. These restricted common units vestin equal installments of 1,162.5 units on January 24, 2019, 2020, 2021, and 2022.On March 1, 2018, we issued 301,550 TBRU's and 317,925 PBRU's to certain employees of Martin Resource Management. The TBRU's vest inequal installments over a three-year service period. The PBRU's will vest at the conclusion of a three-performance period based on certain performancetargets. In addition, the PBRU's awarded on March 1, 2018 that are achieved will only vest if the grantee is employed by Martin Resource Management onMarch 31, 2021.Martin Resource Management Employee Benefit PlansMartin Resource Management has employee benefit plans for its employees who perform services for us. The following summary of these plans isnot complete but outlines the material provisions of these plans.Martin Resource Management Purchase Plan for Units of Martin Midstream Partners L.P. Martin Resource Management maintains a purchase planfor our units to provide employees of Martin Resource Management and its affiliates who perform services for us the opportunity to acquire an equity interestin us through the purchase of our common units. Each individual employed by Martin Resource Management or an affiliate of Martin Resource Managementthat provides services to us is eligible to participate in the purchase plan. Enrollment in the purchase plan by an eligible employee will constitute a grant byMartin Resource Management to the employee of the right to purchase common units under the purchase plan. The right to purchase common units grantedby the Company under the purchase plan is for the term of a purchase period.During each purchase period, each participating employee may elect to make contributions to his bookkeeping account each pay period in anamount not less than one percent of his compensation and not more than fifteen percent of his compensation. The rate of contribution shall be designated bythe employee at the time of enrollment. On each purchase date (the last day of such purchase period), units will be purchased for each participating employeeat the fair market value of such units. The fair market value of the Units to be purchased during such purchase period shall mean the closing sales price of aunit on the purchase date. Martin Resource Management Employee Stock Ownership Plans.MRMC Employee Stock Ownership Plan. Martin Resource Management maintains an employee stock ownership plan that covers employees whosatisfy certain minimum age and service requirements ("ESOP"). Under the terms of the ESOP, Martin Resource Management has the discretion to makecontributions in an amount determined by its board of directors. Those contributions are allocated under the terms of the ESOP and invested primarily in thecommon stock of Martin Resource Management. Participants in the ESOP become 100% vested upon completing six years of vesting service or upon theirattainment of Normal Retirement Age (as defined in the plan document), permanent disability or death during employment. Any forfeitures of non-vestedaccounts may be used to pay administrative expenses and restore previous forfeitures of employees rehired before incurring five consecutive breaks-in-service. Any remaining forfeitures will be allocated to the accounts of employed participants. Participants are not permitted to make contributions includingrollover contributions to the ESOP.Martin Employee Stock Ownership Plan. Martin Resource Management maintains an employee stock ownership plan that covers employees whosatisfied certain minimum age and service requirements but no Employee shall become eligible to participate in the Plan on or after January 1, 2013. Thisplan is referred to as the "Martin Employee Stock Ownership Plan". Under the terms of the plan, Martin Resource Management has the discretion to makecontributions in an amount determined109by its board of directors. Those contributions are allocated under the terms of the Martin Employee Stock Ownership Plan and invested primarily in thecommon stock of Martin Resource Management. No contributions will be made to the Plan for any Plan Year commencing on or after January 1, 2013. Theaccount balances of any participant who was employed by Martin Resource Management on December 31, 2012 shall be fully vested and non-forfeitable.This plan converted to an employee stock ownership plan on January 1, 2013.Martin Resource Management 401(k) Profit Sharing Plan. Martin Resource Management maintains a profit sharing plan that covers employeeswho satisfy certain minimum age and service requirements. This profit sharing plan is referred to as the "401(k) Plan." Eligible employees may elect toparticipate in the 401(k) Plan by electing pre-tax contributions up to 30% of their regular compensation. Matching contributions are made to the 401(k) Planequal to 50% of the first 4% of eligible compensation. Martin Resource Management may make annual discretionary profit sharing contributions in anamount at the plan year end as determined by the board of directors of Martin Resource Management. Participants in the 401(k) Plan prior to January 1, 2017are 100% vested in matching contributions, while those employed after January 1, 2017 become vested upon completion of the five years of vesting serviceschedule or upon their attainment of age 65, permanent disability or death during employment. The five year vesting service schedule is also applicable todiscretionary contributions made to the plan.Martin Resource Management Non-Qualified Option Plan. In September 1999, Martin Resource Management adopted a stock option plandesigned to retain and attract qualified management personnel, directors and consultants. Under the plan, Martin Resource Management is authorized toissue to qualifying parties from time to time options to purchase up to 2,000 shares of its common stock with terms not to exceed ten years from the date ofgrant and at exercise prices generally not less than fair market value on the date of grant. In November 2007, Martin Resource Management adopted anadditional stock option plan designed to retain and attract qualified management personnel, directors and consultants. In December 2013, all outstandingoptions were exercised or redeemed in lieu of redemption. There are no outstanding options under this plan as of December 31, 2018.Other CompensationMartin Resource Management generally does not pay for perquisites for any of our named executive officers other than general recreationalactivities at certain Martin Resource Management’s properties located in Texas and use of Martin Resource Management vehicles, including aircraft. SUMMARY COMPENSATION TABLEThe following table sets forth the compensation expense that was allocated to us for the services of the named executive officers for the years endedDecember 31, 2018, 2017 and 2016.Name and Principal Position Year Salary Bonus Stock Awards(1) Total CompensationRuben S. Martin, President and Chief Executive Officer 2018 $262,500 $— $1,158,913 $1,421,413 2017 $412,500 $— $— $412,500 2016 $412,500 $— $— $412,500Robert D. Bondurant, Executive Vice President and ChiefFinancial Officer 2018 $240,000 $— $740,870 $980,870 2017 $230,000 $— $— $230,000 2016 $230,000 $— $— $230,000Randall L. Tauscher, Executive Vice President and ChiefOperating Officer 2018 $288,000 $— $740,870 $1,028,870 2017 $276,000 $— $— $276,000 2016 $308,200 $— $— $308,200Chris H. Booth, Executive Vice President, General Counseland Secretary 2018 $192,500 $— $556,000 $748,500 2017 $183,600 $— $— $183,600 2016 $165,240 $— $— $165,240Scot A. Shoup, Senior Vice President of Operations 2018 $279,000 $— $222,400 $501,400 2017 $270,000 $— $— $270,000 2016 $180,000 $— $— $180,000110(1) The amounts shown represent the grant date fair value of awards computed in accordance with FASB ASC 718, however, such awards are subject to vesting requirements forTBRU's and PBRU's which have not been met as it relates to the 2018 stock award. See Note 18 included in Item 8 herein for the assumptions made in our valuation of suchawards.Director CompensationAs a partnership, we are managed by our general partner. The board of directors of our general partner performs for us the functions of a board ofdirectors of a business corporation. Directors of our general partner are entitled to receive total quarterly retainer fees of $16,250 each which are paid by thegeneral partner. Martin Resource Management employees who are a member of the board of directors of our general partner do not receive any additionalcompensation for serving in such capacity. Officers of our general partner who also serve as directors will not receive additional compensation. All directorsof our general partner are entitled to reimbursement for their reasonable out-of-pocket expenses in connection with their travel to and from, and attendance at,meetings of the board of directors or committees thereof. Each director will be fully indemnified by us for actions associated with being a director to theextent permitted under Delaware law.The following table sets forth the compensation of our board members for the period from January 1, 2018 through December 31, 2018. Name Fees EarnedPaid inCash StockAwards (2) TotalRuben S. Martin $— $1,158,913 $1,158,913Robert D. Bondurant $— $740,870 $740,870C. Scott Massey (1) $65,000 $74,633 $139,633Byron R. Kelley (1) $65,000 $74,633 $139,633James M. Collingsworth (1) $65,000 $74,633 $139,633Sean P. Dolan $— $— $—Zachary S. Stanton $— $— $—(1) On February 20, 2018, the Partnership issued 4,650 restricted common units to each of three independent directors, C. Scott Massey, Byron R. Kelley,and James M. Collingsworth under our 2017 LTIP. These restricted common units vest in equal installments of 1,162.5 units on January 24, 2019, 2020,2021 and 2022, respectively. In calculating the fair value of the award, we multiplied the closing price of our common units on the NASDAQ on the date ofgrant by the number of restricted common units granted to each director.(2) The amounts shown represent the grant date fair value of awards computed in accordance with FASB ASC 718, however, such awards are subject tovesting requirements for TBRU's and PBRU's which have not been met as it relates to the 2018 stock award. See Note 18 included in Item 8 herein for theassumptions made in our valuation of such awards.COMPENSATION REPORT OF THE COMPENSATION COMMITTEE The Compensation Committee of the general partner of Martin Midstream Partners L.P. has reviewed and discussed the Compensation Discussionand Analysis section of this report with management of the general partner of Martin Midstream Partners L.P. and, based on that review and discussions, hasrecommended that the Compensation Discussion and Analysis be included in this report. Members of the Compensation Committee:/s/ James M. CollingsworthJames M. Collingsworth, Committee Chair /s/ Byron R. KelleyByron R. Kelley /s/ C. Scott MasseyC. Scott Massey Compensation Committee Interlocks and Insider ParticipationOther than these independent directors, no other officer or employee of our general partner or its subsidiaries is a member of the CompensationCommittee. Employees of Martin Resource Management, through our general partner, are the individuals who work on our matters. 111Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth the beneficial ownership of our units as of February 19, 2019 held by beneficial owners of 5% or more of the unitsoutstanding, by directors of our general partner, by each executive officer and by all directors and executive officers of our general partner as a group.Name of Beneficial Owner(1) Common UnitsBeneficially Owned Percentage of Common Units BeneficiallyOwned (3)MRMC ESOP Trust (4) 6,114,532 15.7%Martin Resource Management Corporation (5) 6,114,532 15.7%Martin Resource, LLC (5) 4,203,823 10.8%Martin Product Sales LLC (5) 1,021,265 2.6%Cross Oil Refining & Marketing Inc. (6) 889,444 2.3%OppenheimerFunds, Inc. (2) 7,760,760 19.9%Ruben S. Martin (6) 6,446,851 16.5%Robert D. Bondurant 69,772 —%Randall L. Tauscher 55,145 —%Chris H. Booth 31,330 —%Scot A. Shoup 10,100 —%Sean Dolan — —%Zachary S. Stanton — —%C. Scott Massey (7) 41,298 —%Byron R. Kelley 26,898 —%James M. Collingsworth (8) 24,298 —%All directors and executive officers as a group (10 persons) (9) 6,705,692 17.2% (1)The address for Martin Resource Management Corporation and all of the individuals listed in this table, unless otherwise indicated, is c/o MartinMidstream Partners L.P., 4200 Stone Road, Kilgore, Texas 75662.(2)The address for OppenheimerFunds, Inc. is 225 Liberty Street, New York, NY 10281.(3)The percent of class shown is less than one percent unless otherwise noted.(4)By virtue of its ownership of 87.87% of the outstanding common stock of Martin Resource Management Corporation ("Martin ResourceManagement"), the MRMC ESOP Trust (the "MRMC ESOP") is the controlling shareholder of Martin Resource Management, and may be deemedto beneficially own the 6,114,532 MMLP Common Units held by Martin Resource LLC, Cross Oil Refining & Marketing Inc., and Martin ProductSales LLC. Wilmington Trust Retirement and Institutional Services Company serves as trustee of the MRMC ESOP but all of its voting andinvestment decisions are directed by the board of directors of Martin Resource Management. The MRMC ESOP expressly disclaims beneficialownership of the MMLP Common Units as voting and investment decisions are directed by the board of directors of Martin ResourceManagement.(5)Martin Resource Management is the owner of Martin Resource, LLC, Martin Product Sales LLC, and Cross Oil Refining & Marketing Inc., and assuch may be deemed to beneficially own the common units held by Martin Resource LLC, Cross Oil Refining & Marketing Inc, and MartinProduct Sales LLC. The 4,203,823 common units beneficially owned by Martin Resource Management through its ownership of MartinResource, LLC have been pledged as security to a third party to secure payment for a loan made by such third party. The 1,021,265 commonunits beneficially owned by Martin Resource Management through its ownership of Martin Product Sales LLC have been pledged as security to athird party to secure payment for a loan made by such third party. The 889,444 common units beneficially owned by Martin ResourceManagement through its ownership of Cross Oil Refining & Marketing Inc. have been pledged as security to a third party to secure payment for aloan made by such third party.(6)Includes 332,319 common units owned directly by Mr. Martin, 297,147 of which are pledged to third parties to secure payment for loans. Byvirtue of serving as the Chairman of the Board and President of Martin Resource112Management, Ruben S. Martin may exercise control over the voting and disposition of the securities owned by Martin Resource Management,and therefore, may be deemed the beneficial owner of the common units owned by Martin Resource Management, which include 6,114,532common units beneficially owned through its ownership of Martin Resource LLC, Cross Oil Refining & Marketing Inc. and Martin Product SalesLLC.(7)Mr. Massey may be deemed to be the beneficial owner of 1,500 common units held by his wife.(8)Mr. Collingsworth may be deemed to be the beneficial owner of 775 common units held by his wife.(9)The total for all directors and executive officers as a group includes the common units directly owned by such directors and executive officers aswell as the common units beneficially owned by Martin Resource Management as Ruben S. Martin may be deemed to be the beneficial ownerthereof.Martin Resource Management owns a 51% voting interest in the holding company that is the sole member of our general partner and, together withour general partner, owns approximately 15.7% of our outstanding common limited partner units as of December 31, 2018. The table below sets forthinformation as of December 31, 2018 concerning (i) each person owning beneficially in excess of 5% of the voting common stock of Martin ResourceManagement, and (ii) the beneficial common stock ownership of (a) each director of Martin Resource Management, (b) each executive officer of MartinResource Management, and (c) all such executive officers and directors of Martin Resource Management as a group. Except as indicated, each individual hassole voting and investment power over all shares listed opposite his or her name. Beneficial Ownership ofVoting Common StockName of Beneficial Owner(1) Number ofShares Percent ofOutstanding VotingStockMRMC ESOP Trust (2) 170,278.81 87.87%Martin ESOP Trust (3) 23,510.25 12.13%Robert D. Bondurant (3) 23,510.25 12.13%Randall Tauscher (3) 23,510.25 12.13%(1)The business address of each shareholder, director and executive officer of Martin Resource Management Corporation is c/o Martin ResourceManagement Corporation, 4200 Stone Road, Kilgore, Texas 75662.(2)The MRMC ESOP owns 170,278.81 shares of common stock of Martin Resource Management. Wilmington Trust Retirement and InstitutionalServices Company serves as trustee of the MRMC ESOP but all of its voting and investment decisions related to the unallocated shares ofcommon stock are directed by the board of directors of Martin Resource Management. Of the common stock held by the MRMC ESOP, 99,195.49shares of common stock are allocated to participant accounts, and 71,083.32 shares of common stock are unallocated.(3)Robert D. Bondurant and Randall Tauscher (the "Co-Trustees") are co-trustees of the Martin Employee Stock Ownership Trust which convertedfrom a profit sharing plan known as the Martin Employees' Stock Profit Sharing Plan on January 1, 2014. The Co-Trustees exercise shared controlover the voting and disposition of the securities owned by this trust. As a result, the Co-Trustees may be deemed to be the beneficial owner of thesecurities held by such trust; thus, the number of shares of common stock reported herein as beneficially owned by the Co-Trustees includes the23,510 shares owned by such trust. The Co-Trustees disclaim beneficial ownership of these 23,510 shares.113The following table sets forth information regarding securities authorized for issuance under our equity compensation plans as of December 31,2018: Equity Compensation Plan Information Number of securities to be issued upon exerciseof outstanding options, Warrantsand rights Weighted-average exercise price of outstanding options,warrants and rights Number of securities remaining availablefor future issuance underequity compensationplans (excluding securities reflected in column (a))Plan Category(a) (b) (c)Equity compensation plans approved by security holdersN/A N/A 2,393,575Total— $— 2,393,575 (1) Our general partner has adopted and maintains the Martin Midstream Partners L.P. Long-Term Incentive Plan. For a description of the materialfeatures of this plan, please see "Item 11. Executive Compensation – Employee Benefit Plans – Martin Midstream Partners L.P. Long-Term Incentive Plan".In February 2019, we issued 5,648 restricted common units to independent directors under our long-term incentive plan. These restricted commonunits vest in equal installments of 1,412 units on January 24, 2020, 2021, 2022 and 2023.114Item 13.Certain Relationships and Related Transactions, and Director Independence Martin Resource Management owns 6,114,532 of our common limited partnership units representing approximately 15.7% of our outstandingcommon limited partnership units as of February 19, 2019. Martin Resource Management controls Martin Midstream GP LLC, our general partner, by virtueof its 51% voting interest in MMGP Holdings, LLC, the sole member of our general partner. Our general partner owns a 2% general partner interest in us andall of our incentive distribution rights. Our general partner’s ability to manage and operate us and Martin Resource Management’s ownership ofapproximately 15.7% of our outstanding common limited partnership units effectively gives Martin Resource Management the ability to veto some of ouractions and to control our management. Distributions and Payments to the General Partner and its Affiliates The following table summarizes the distributions and payments to be made by us to our general partner and its affiliates in connection with ourformation, ongoing operation and liquidation. These distributions and payments were determined by and among affiliated entities and, consequently, are notthe result of arm’s-length negotiations. Formation Stage The consideration received by our generalpartner and Martin Resource Managementfor the transfer of assets to usŸ 4,253,362 subordinated units (All of the original 4,253,362 subordinated units issued to Martin ResourceManagement have been converted into common units on a one-for-one basis since the formation of thePartnership. 850,672 subordinated units were converted on each of November 14, 2005, 2006, 2007 and 2008,respectively, and 850,674 subordinated units were converted on November 14, 2009) Ÿ 2% general partner interest; andŸ the incentive distribution rights.Operational Stage Distributions of available cash to our generalpartnerWe will generally make cash distributions 98% to our unitholders, including Martin Resource Management asholder of all of the subordinated units, and 2% to our general partner. In addition, if distributions exceed theminimum quarterly distribution and other higher target levels, our general partner will be entitled to increasingpercentages of the distributions, up to 50% of the distributions above the highest target level as a result of itsincentive distribution rights. Assuming we have sufficient available cash to pay the full minimum quarterly distribution on all of ouroutstanding units for four quarters, our general partner would receive an annual aggregate distribution ofapproximately $1.6 million on its 2% general partner interest.Payments to our general partner and itsaffiliatesMartin Resource Management is entitled to reimbursement for all direct expenses it or our general partnerincurs on our behalf. The direct expenses include the salaries and benefit costs employees of Martin ResourceManagement who provide services to us. Our general partner has sole discretion in determining the amount ofthese expenses. In addition to the direct expenses, Martin Resource Management is entitled to reimbursementfor a portion of indirect general and administrative and corporate overhead expenses. Under the omnibusagreement, we are required to reimburse Martin Resource Management for indirect general and administrativeand corporate overhead expenses. The conflicts committee of our general partner ("Conflicts Committee") willreview and approve future adjustments in the reimbursement amount for indirect expenses, if any,annually. Please read "Agreements — Omnibus Agreement" below.Withdrawal or removal of our general partner If our general partner withdraws or is removed, its general partner interest and its incentive distribution rightswill either be sold to the new general partner for cash or converted into common units, in each case for anamount equal to the fair market value of those interests.Liquidation Stage Liquidation Upon our liquidation, the partners, including our general partner, will be entitled to receive liquidatingdistributions according to their particular capital account balances.Agreements Omnibus AgreementWe and our general partner are parties to an omnibus agreement with Martin Resource Management (the "Omnibus Agreement") that governs, amongother things, potential competition and indemnification obligations among the parties to the115agreement, related party transactions, the provision of general administration and support services by Martin Resource Management and our use of certain ofMartin Resource Management’s trade names and trademarks. The Omnibus Agreement was amended on November 25, 2009, to include processing crude oilinto finished products including naphthenic lubricants, distillates, asphalt and other intermediate cuts. The Omnibus Agreement was amended further onOctober 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management.Non-Competition Provisions. Martin Resource Management has agreed for so long as it controls the general partner of the Partnership, not to engagein the business of:•providing terminalling and storage services for petroleum products and by-products including the refining, blending and packaging of finishedlubricants;•providing marine transportation of petroleum products and by-products;•distributing NGLs; and•manufacturing and selling sulfur-based fertilizer products and other sulfur-related products.This restriction does not apply to:•the ownership and/or operation on the Partnership’s behalf of any asset or group of assets owned by it or its affiliates;•any business operated by Martin Resource Management, including the following:◦providing land transportation of various liquids (the Partnership acquired MTI effective January 1, 2019);◦distributing fuel oil, asphalt, marine fuel and other liquids;◦providing marine bunkering and other shore-based marine services in Texas, Louisiana, Mississippi, Alabama, and Florida;◦operating a crude oil gathering business in Stephens, Arkansas;◦providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;◦providing crude oil marketing and transportation from the well head to the end market;◦operating an environmental consulting company;◦operating an engineering services company;◦supplying employees and services for the operation of the Partnership's business; and◦operating, solely for the Partnership's account, the asphalt facilities in Omaha, Nebraska, Port Neches, Texas, Hondo, Texas, and SouthHouston, Texas.•any business that Martin Resource Management acquires or constructs that has a fair market value of less than $5,000;•any business that Martin Resource Management acquires or constructs that has a fair market value of $5,000 or more if the Partnership has beenoffered the opportunity to purchase the business for fair market value and the Partnership declines to do so with the concurrence of the conflictscommittee of the board of directors of the general partner of the Partnership (the "Conflicts Committee"); and•any business that Martin Resource Management acquires or constructs where a portion of such business includes a restricted business and the fairmarket value of the restricted business is $5,000 or more and represents less than 20% of the aggregate value of the entire business to be acquired orconstructed; provided that, following completion of the acquisition or construction, the Partnership will be provided the opportunity to purchase therestricted business.116Services. Under the Omnibus Agreement, Martin Resource Management provides us with corporate staff and support services that are substantiallyidentical in nature and quality to the services previously provided by Martin Resource Management in connection with its management and operation of ourassets during the one-year period prior to the date of the agreement. The Omnibus Agreement requires us to reimburse Martin Resource Management for alldirect expenses it incurs or payments it makes on our behalf or in connection with the operation of our business. There is no monetary limitation on theamount we are required to reimburse Martin Resource Management for direct expenses. In addition to the direct expenses, Martin Resource Management isentitled to reimbursement for a portion of indirect general and administrative and corporate overhead expenses. Under the Omnibus Agreement, we are required to reimburse Martin Resource Management for indirect general and administrative and corporateoverhead expenses. For the years ended December 31, 2018, 2017 and 2016, the Conflicts Committee approved and we reimbursed Martin ResourceManagement of $16.4 million, $16.4 million and $13.0 million, respectively, reflecting our allocable share of such expenses. The Conflicts Committee willreview and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.These indirect expenses cover all of the centralized corporate functions Martin Resource Management provides for us, such as accounting, treasury,clerical billing, information technology, administration of insurance, general office expenses and employee benefit plans and other general corporateoverhead functions we share with Martin Resource Management retained businesses. The provisions of the Omnibus Agreement regarding Martin ResourceManagement’s services will terminate if Martin Resource Management ceases to control our general partner. Related Party Transactions. The Omnibus Agreement prohibits us from entering into any material agreement with Martin Resource Managementwithout the prior approval of the Conflicts Committee. For purposes of the Omnibus Agreement, the term material agreements means any agreement betweenus and Martin Resource Management that requires aggregate annual payments in excess of then-applicable limitation on the reimbursable amount of indirectgeneral and administrative expenses. Please read " Services" above.License Provisions. Under the Omnibus Agreement, Martin Resource Management has granted us a nontransferable, nonexclusive, royalty-free rightand license to use certain of its trade names and marks, as well as the trade names and marks used by some of its affiliates.Amendment and Termination. The Omnibus Agreement may be amended by written agreement of the parties; provided, however that it may not beamended without the approval of the Conflicts Committee if such amendment would adversely affect the unitholders. The Omnibus Agreement was firstamended on November 25, 2009, to permit us to provide refining services to Martin Resource Management. The Omnibus Agreement was amended further onOctober 1, 2012, to permit us to provide certain lubricant packaging products and services to Martin Resource Management. Such amendments wereapproved by the Conflicts Committee. The Omnibus Agreement, other than the indemnification provisions and the provisions limiting the amount for whichwe will reimburse Martin Resource Management for general and administrative services performed on our behalf, will terminate if we are no longer anaffiliate of Martin Resource Management.Motor Carrier AgreementWe are a party to a motor carrier agreement effective January 1, 2006, as amended, with Martin Transport, Inc., a wholly owned subsidiary of MartinResource Management through which Martin Resource Management operates its land transportation operations. Under the agreement, Martin Transport, Inc.agrees to ship our NGL shipments as well as other liquid products.Term and Pricing. The agreement has an initial term that expired in December 2007 but automatically renews for consecutive one-year periodsunless either party terminates the agreement by giving written notice to the other party at least 30 days prior to the expiration of the then-applicableterm. We have the right to terminate this agreement at anytime by providing 90 days prior notice. Under this agreement, Martin Transport, Inc. transports ourNGL shipments as well as other liquid products. These rates are subject to any adjustment to which are mutually agreed or in accordance with a priceindex. Additionally, during the term of the agreement, shipping charges are also subject to fuel surcharges determined on a weekly basis in accordance withthe United States Department of Energy’s national diesel price list.Indemnification. Martin Transport, Inc. has indemnified us against all claims arising out of the negligence or willful misconduct of MartinTransport, Inc. and its officers, employees, agents, representatives and subcontractors. We indemnified Martin Transport against all claims arising out of thenegligence or willful misconduct of us and our officers, employees, agents, representatives and subcontractors. In the event a claim is the result of the jointnegligence or misconduct of Martin117Transport and us, our indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligence or misconduct.As discussed in Item 8. Financial Statements and Supplementary Data, the Partnership purchased Martin Transport, Inc. effective January 1, 2019.Terminal Services AgreementsDiesel Fuel Terminal Services Agreement. Effective January 1, 2016, we entered into a second amended and restated terminalling servicesagreement under which we provide terminal services to Martin Resource Management for marine fuel distribution. At such time, the per gallon throughputfee we charged under this agreement was increased when compared to the previous agreement and may be adjusted annually based on a price index. Thisagreement was further amended on January 1, 2017 and October 1, 2017 to modify its minimum throughput requirements and throughput fees. Thisagreement, as amended, expired September 30, 2018 and continued thereafter on a month to month basis until terminated by either party by giving 60 days’written notice. Miscellaneous Terminal Services Agreements. We are currently party to several terminal services agreements and from time to time we may enterinto other terminal service agreements for the purpose of providing terminal services to related parties. Individually, each of these agreements is immaterialbut when considered in the aggregate they could be deemed material. These agreements are throughput based with a minimum volume commitment.Generally, the fees due under these agreements are adjusted annually based on a price index.Marine AgreementsMarine Transportation Agreement. We are a party to a marine transportation agreement effective January 1, 2006, as amended, under which weprovide marine transportation services to Martin Resource Management on a spot-contract basis at applicable market rates. Effective each January 1, thisagreement automatically renews for consecutive one-year periods unless either party terminates the agreement by giving written notice to the other party atleast 60 days prior to the expiration of the then- applicable term. The fees we charge Martin Resource Management are based on applicable market rates. Marine Fuel. We are a party to an agreement with Martin Resource Management dated November 1, 2002 under which Martin ResourceManagement provides us with marine fuel from its locations in the Gulf of Mexico at a fixed rate in excess of a price index. Under this agreement, we agreedto purchase all of its marine fuel requirements that occur in the areas serviced by Martin Resource Management.Other Agreements Cross Tolling Agreement. We are a party to an amended and restated tolling agreement with Cross dated October 28, 2014 under which we processcrude oil into finished products, including naphthenic lubricants, distillates, asphalt and other intermediate cuts for Cross. The tolling agreement expiresNovember 25, 2031. Under this tolling agreement, Martin Resource Management agreed to refine a minimum of 6,500 barrels per day of crude oil at therefinery at a fixed price per barrel. Any additional barrels are refined at a modified price per barrel. In addition, Martin Resource Management agreed to paya monthly reservation fee and a periodic fuel surcharge fee based on certain parameters specified in the tolling agreement. All of these fees (other than thefuel surcharge) are subject to escalation annually based upon the greater of 3% or the increase in the Consumer Price Index for a specified annual period. Inaddition, every three years, the parties can negotiate an upward or downward adjustment in the fees subject to their mutual agreement.Sulfuric Acid Sales Agency Agreement. We were previously a party to a third amended and restated sulfuric acid sales agency agreement datedAugust 2, 2017 but effective October 1, 2017, under which a successor in interest to the agreement from Martin Resource Management, Saconix LLC("Saconix"), a limited liability company in which Martin Resource Management held a minority equity interest, purchased and marketed the sulfuric acidproduced by our sulfuric acid production plant at Plainview, Texas, that was not consumed by our internal operations. This agreement, as amended, was toremain in place until September 30, 2020 and automatically renew year to year thereafter until either party provided 90 days’ written notice of terminationprior to the expiration of the then existing term. Under this agreement, we sold all of our excess sulfuric acid to Saconix, who then marketed and sold suchacid to third-parties. We shared in the profit of such sales.Other Miscellaneous Agreements. From time to time we enter into other miscellaneous agreements with Martin Resource Management for theprovision of other services or the purchase of other goods.118Other Related Party TransactionsRelated Party Note ReceivableWe had a $15.0 million note receivable from an affiliate of Martin Resource Management which previously bore an annual interest rate of 15% andhad a maturity date of August 31, 2026, the balance of which could be prepaid on or after September 1, 2016. On February 14, 2017, we notified MartinResource Management that we would be requesting voluntary repayment of the long-term Note Receivable plus accrued interest. During second quarter of2017, the Note Receivable was fully repaid. Interest income for the years ended December 31, 2017 and 2016 was $0.9 million and $2.3 million, respectively.2017 Public Offerings In conjunction with a public offering, our general partner contributed $1.1 million in order to maintain its 2% general partner interest in us. Transfers of Assets Between Entities Under Common Control Acquisition of Terminalling Assets. On February 22, 2017, we acquired 100% of the membership interests of MEH South Texas Terminals LLC(“MEH”), a subsidiary of Martin Resource Management, for a purchase price of $27.4 million (the “Hondo Acquisition”). At the date of acquisition, MEHwas in the process of constructing an asphalt terminal facility in Hondo, Texas (the "Hondo Terminal”), which will serve the asphalt market in San Antonio,Texas and surrounding areas. The excess of the purchase price over the carrying value of the assets of $7.9 million was recorded as an adjustment to"Partners' capital."Miscellaneous Certain of directors, officers and employees of our general partner and Martin Resource Management maintain margin accounts with broker-dealerswith respect to our common units held by such persons. Margin account transactions for such directors, officers and employees were conducted by suchbroker-dealers in the ordinary course of business.For information regarding amounts of related party transactions that are included in the Partnership's Consolidated Statements of Operations, pleasesee Footnote 14, "Related Party Transactions", in Part II, Item 8. Approval and Review of Related Party Transactions If we contemplate entering into a transaction, other than a routine or in the ordinary course of business transaction, in which a related person willhave a direct or indirect material interest, the proposed transaction is submitted for consideration to the board of directors of our general partner or to ourmanagement, as appropriate. If the board of directors is involved in the approval process, it determines whether to refer the matter to the Conflicts Committee,as constituted under our limited partnership agreement. If a matter is referred to the Conflicts Committee, it obtains information regarding the proposedtransaction from management and determines whether to engage independent legal counsel or an independent financial advisor to advise the members of thecommittee regarding the transaction. If the Conflicts Committee retains such counsel or financial advisor, it considers such advice and, in the case of afinancial advisor, such advisor’s opinion as to whether the transaction is fair and reasonable to us and to our unitholders.119Item 14.Principal Accounting Fees and Services KPMG, LLP served as our independent auditors for the fiscal years ended December 31, 2018 and 2017. The following fees were paid to KPMG,LLP for services rendered during our last two fiscal years: 2018 2017 Audit fees $1,238,500(1)$1,349,934(1)Audit related fees — — Audit and audit related fees 1,238,500 1,349,934 Tax fees 82,106(2)123,167(2)All other fees — 124,550(3)Total fees $1,320,606 $1,597,651 (1)2018 audit fees include fees for the annual integrated audit and fees related to services in connection with transactions. 2017 audit fees include feesfor the annual integrated audit and fees related to services in connection with transactions.(2)Tax fees are for services related to the review of our partnership K-1's returns, and research and consultations on other tax related matters.(3)All other fees are for accounting advisory services related to the adoption of ASC 606.Under policies and procedures established by the Board of Directors and the Audit Committee, the Audit Committee is required to pre-approve allaudit and non-audit services performed by our independent auditor to ensure that the provisions of such services do not impair the auditor’sindependence. All of the services described above that were provided by KPMG, LLP in years ended December 31, 2018 and December 31, 2017 wereapproved in advance by the Audit Committee.120PART IVItem 15.Exhibits, Financial Statement Schedules(a) Financial Statements, Schedules(1)Financial Statements (see Part II, Item 8. of this Annual Report on Form 10-K regarding financial statements)(2)Financial Statement Schedules: The separate filing of financial statement schedules has been omitted because such schedules are either notapplicable or the information called for therein appears in the footnotes of our Consolidated Financial Statements.(3)Financial Statements of West Texas LPG Pipeline Limited Partnership, an affiliate accounted for by the equity method, which constituted asignificant subsidiary.121Financial Statement SchedulePursuant to Item 15(a)(3)West Texas LPG Pipeline Limited PartnershipFinancial StatementsFor the seven-month period from January 1, 2018 to July 31, 2018 and each of the years ended December 31, 2017 and 2016(unaudited)Independent Auditor’s ReportTo the Partnership Committee of West Texas LPG Pipeline Limited PartnershipWe have audited the accompanying financial statements of West Texas LPG Pipeline Limited Partnership, which comprise the balance sheets as of July 31,2018 and December 31, 2017, and the related statements of operations, changes in partners’ capital and cash flows for the period from January 1, 2018 to July31, 2018 and the year ended December 31, 2017.Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally acceptedin the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud or error.Auditors’ ResponsibilityOur responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standardsgenerally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selecteddepend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, we consider internal control relevant to the Partnership's preparation and fair presentation of the financial statements in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internalcontrol. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonablenessof significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of West Texas LPG Pipeline LimitedPartnership as of July 31, 2018 and December 31, 2017, and the results of its operations and its cash flows for the period from January 1, 2018 to July 31,2018 and the year ended December 31, 2017 in accordance with accounting principles generally accepted in the United States of America.Other MatterThe accompanying statements of operations, changes in partners’ capital and cash flows for the year ended December 31, 2016 are presented for purposes ofcomplying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does not require the 2016 financial statements to be audited and they are thereforenot covered by this report./s/PricewaterhouseCoopers LLPTulsa, OklahomaFebruary 19, 2019West Texas LPG Pipeline Limited PartnershipBalance Sheets(Dollars in thousands) July 31, December 31, 2018 2017 Assets Current assets Cash and cash equivalents$6,247 $27,927Accounts receivable17,069 17,151Materials and supplies inventories2,168 2,168Other current assets208 66Total current assets25,692 47,312 Property and equipment952,969 831,823Accumulated depreciation(50,468) (42,308)Property, plant and equipment, net902,501 789,515 Other assets311 337 Total assets$928,504 $837,164 Liabilities and Partners' Capital Current liabilities Accounts payable$49,706 $40,919Taxes payable1,575 2,396Other current liabilities2,436 459Total current liabilities53,717 43,774 Environmental reserve5,488 5,964Other liabilities405 —Total liabilities59,610 49,738 Commitments and contingencies (Note 6) Partners' capital868,894 787,426Total liabilities and partners' capital$928,504 $837,164See accompanying notes to the financial statements.West Texas LPG Pipeline Limited PartnershipStatements of Operations(Dollars in thousands) Period fromJanuary 1, 2018through July 31,2018 Year EndedDecember 31, 2017 Year EndedDecember 31, 2016* (unaudited) Revenue (Note 3)$55,534 $87,049 $88,467 Costs and expenses Cost of services (exclusive of items shown separately below)8,379 12,336 11,401Operations and maintenance20,464 36,510 36,824Depreciation8,144 13,842 13,686Taxes other than income1,866 2,842 2,651Total costs and expenses38,853 65,530 64,562 Other income (expense), net(39) 53 (22) Net income$16,642 $21,572 $23,883*Not covered by the auditor’s reportSee accompanying notes to the financial statements.West Texas LPG Pipeline Limited PartnershipStatements of Changes in Partners' Capital(Dollars in thousands) ONEOKPermian NGLPipeline LP,LLC ONEOK PermianNGL Pipeline GP,LLC MartinMidstreamHoldings II,LLC MartinMidstreamHoldings, LLC Total Balances - December 31, 2015$636,786 $6,432 $159,197 $1,608 $804,023 Net income (unaudited)18,915 191 4,729 48 23,883Distributions to partners (unaudited)(29,700) (300) (7,425) (75) (37,500)Balances - December 31, 2016 (unaudited)*626,001 6,323 156,501 1,581 790,406 Net income (unaudited)17,086 172 4,270 44 21,572Contributions by partners1,542 16 386 4 1,948Distributions to partners(20,988) (212) (5,247) (53) (26,500)Balances - December 31, 2017623,641 6,299 155,910 1,576 787,426 Cumulative effect of adoption of ASC 606 (Note 2)65 1 17 — 83Net income13,181 133 3,295 33 16,642Contributions by partners65,137 658 16,284 164 82,243Distributions to partners(13,860) (140) (3,465) (35) (17,500)Purchase and sale of Partnership interest (Note 1)$172,041 $1,738 $(172,041) $(1,738) —Balances - July 31, 2018$860,205 $8,689 $— $— $868,894*Not covered by the auditor’s reportSee accompanying notes to the financial statements.West Texas LPG Pipeline Limited PartnershipStatements of Cash Flows(Dollars in thousands) Period from January1, 2018 through July31, 2018 Year EndedDecember 31, 2017 Year EndedDecember 31, 2016* (unaudited)Cash flows from operating activities: Net income$16,642 $21,572 $23,883Adjustments to reconcile net income and net cash provided by operatingactivities: Depreciation8,144 13,842 13,686Change in assets and liabilities: Accounts receivable82 (4,008) (4,169)Materials and supplies inventories— (221) 59Other current assets(142) (24) (42)Other assets26 28 (365)Accounts payable(21,665) 23,971 7,797Taxes other than income(821) 226 88Other current liabilities(83) 368 (219)Other liabilities(36) — —Environmental reserve(476) (877) (1,413)Net cash provided by operating activities1,671 54,877 39,305 Cash flows from investing activities: Payments for property and equipment(90,094) (5,555) (3,946)Net cash used in investing activities(90,094) (5,555) (3,946) Cash flows from financing activities: Contributions by partners82,243 1,948 —Distributions to partners(15,500) (26,500) (37,500)Net cash used in financing activities66,743 (24,552) (37,500) Net increase (decrease) in cash and cash equivalents(21,680) 24,770 (2,141) Cash and cash equivalents at beginning of period27,927 3,157 5,298 Cash and cash equivalents at end of period$6,247 $27,927 $3,157*Not covered by the auditor’s reportSee accompanying notes to the financial statements.West Texas LPG Pipeline Limited PartnershipNotes to Financial Statements(Dollars in thousands, except where otherwise indicated)(1)Organization and Basis of PresentationWest Texas LPG Pipeline Limited Partnership (the “Partnership” or “WTLPG”) is a Texas limited partnership. The Partnership was formed in 1999and owns an approximately 2,300 mile common-carrier pipeline system that transports natural gas liquids (“NGLs”) from New Mexico and Texas to MontBelvieu, Texas for fractionation. On July 31, 2018, ONEOK Permian NGL Pipeline GP, L.L.C. acquired the 0.2% General Partner Interest from MartinMidstream NGL Holdings, LLC, and ONEOK Permian NGL Pipeline LP, L.L.C. acquired the 19.8% Limited Partner Interest from Martin Midstream NGLHoldings II, LLC. As of July 31, 2018, the Partnership is a wholly owned subsidiary of ONEOK. Prior to the sale of partnership interests on July 31, 2018, thepartners’ capital interests were owned by the following:OwnerInterest Interest TypeONEOK Permian NGL Pipeline GP, L.L.C0.8% General PartnerONEOK Permian NGL Pipeline LP, L.L.C.79.2% Limited PartnerMartin Midstream NGL Holdings, LLC0.2% General PartnerMartin Midstream NGL Holdings II, LLC19.8% Limited Partner 100% ONEOK Permian NGL Pipeline GP, L.L.C. and ONEOK Permian NGL Pipeline LP, L.L.C. are wholly owned subsidiaries of ONEOK, Inc. (“ONEOK”).A subsidiary of ONEOK is also the pipeline operator (“Operator”). Martin Midstream NGL Holdings, LLC and Martin Midstream NGL Holdings II, LLC arewholly owned subsidiaries of Martin Midstream Partners, L.P. (“Martin”).The operating agreement among the partners provides that net income and distributions are to be allocated among the partner interests in proportionto their respective capital interests. Partners’ liabilities are limited to the amount of capital contributed.The limited partnership agreement of WTLPG provides that distributions to the partners are to be made on a pro rata basis according to eachpartner’s ownership interest. Cash distributions to the partners are declared and paid by WTLPG each calendar quarter. Any changes to, or suspension of, thecash distributions from WTLPG required the approval of a minimum of 90 percent of the ownership interest and a minimum of two general partners ofWTLPG. Cash distributions are equal to 100 percent of distributable cash as defined in the limited partnership agreement of WTLPG.(2)Significant Accounting Policies(a)Use of EstimatesManagement has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingentassets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States ofAmerica. Actual results could differ from those estimates.(b)Revenue RecognitionThe Partnership’s revenue is derived from fees collected for transporting NGLs. Transportation fees charged to shippers are based on either tariffsregulated by governmental agencies, including the Federal Energy Regulatory Commission (“FERC”) and the Railroad Commission of Texas (“RRC”), orcontractual arrangements. Our tariffs specify the maximum rates we may charge our customers and the general terms and conditions for NGL transportationservice on our pipelines. Revenue is recognized when transportation services are provided. See Note 3 for additional disclosures.(c)Cash and Cash EquivalentsThe Partnership considers all highly liquid cash investments with maturities of three months or less at the time of purchase to be cash equivalents.128West Texas LPG Pipeline Limited PartnershipNotes to Financial Statements(Dollars in thousands, except where otherwise indicated)(d)Property and EquipmentProperty and equipment is stated at cost, less accumulated depreciation. Our property and equipment are depreciated using the straight-line methodover their estimated useful lives. We periodically conduct depreciation studies to assess the economic lives of our assets. These depreciation studies arecompleted as a part of our rate proceedings, and the changes in economic lives, if applicable, are implemented prospectively.Property and equipment on our Balance Sheets includes construction work in process for capital projects that have not yet been placed in serviceand therefore are not being depreciated. Assets are transferred out of construction work in process when they are substantially complete and ready for theirintended use.Property and equipment consists of the following: Useful Life July 31, 2018 December 31, 2017 Gathering lines and related equipment20-88 $819,780 $813,037General plant and other71-80 8,238 8,097Construction work in process 124,951 10,689 Property and equipment 952,969 831,823 Accumulated depreciation (50,468) (42,308) Property and equipment, net $902,501 $789,515Additions to property and equipment included in accounts payable as of July 31, 2018 and December 31, 2017 were $35,528 and $4,000,respectively.(a)Impairment of Long-Lived AssetsIn accordance with ASC 360-10, long-lived assets such as property and equipment are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparisonof the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an assetexceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value ofthe asset. We determined that there were no asset impairments for the seven-month period from January 1, 2018 to July 31, 2018 or the years ended December31, 2017 and 2016.(a)Asset Retirement ObligationsAsset retirement obligations represent legal obligations associated with the retirement of long-lived assets that result from the acquisition,construction, development and/or normal use of the asset. We are not able to estimate reasonably the fair value of the asset retirement obligations for ourassets because the settlement dates are indeterminable given the expected continued use of the assets with proper maintenance. We expect our pipeline assets,for which we are unable to estimate reasonably the fair value of the asset retirement obligation, will continue in operation as long as supply and demand forNGLs exists. Based on the widespread use of NGLs by the petrochemical industry, we expect supply and demand to exist for the foreseeable future.(a)Fair Value Measurements and Financial InstrumentsWe use a valuation framework based upon inputs that market participants use in pricing certain assets and liabilities. These inputs are classified intotwo categories: observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources. Unobservable inputsrepresent our own market assumptions. Unobservable inputs are used only if observable inputs are unavailable or not reasonably available without unduecost and effort. The two types of inputs are further prioritized into the following hierarchy:129West Texas LPG Pipeline Limited PartnershipNotes to Financial Statements(Dollars in thousands, except where otherwise indicated)Level 1: Quoted market prices in active markets for identical assets or liabilities.Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.Level 3: Unobservable inputs that reflect the entity's own assumptions and are not corroborated by market data.We classify the fair value of an asset or liability based on the lowest level of input significant to its measurement. A fair value initially reported asLevel 3 will be subsequently reported as Level 2 if the unobservable inputs become inconsequential to its measurement, or corroborating market databecomes available. Asset and liability fair values initially reported as Level 2 will be subsequently reported as Level 3 if corroborating market data becomesunavailable.Our financial instruments consist of cash and cash equivalents, accounts receivable, and accounts payable. The carrying amounts of financialinstruments approximate fair value due to their short maturities. Our cash and cash equivalents are comprised of bank and money market accounts and areclassified as Level 1.(h)Operating and Maintenance ExpensesOperating and maintenance expenses are incurred by the Operator and charged for the cost of personnel that operate the pipeline and other operatingcosts. Where costs are incurred specifically on our behalf, the costs are billed directly to us by the Operator. In other situations, the costs may be allocated tous through a variety of methods, depending upon the nature of the expense and activities. Under our operating agreement, we are required to reimburse theOperator for such operating expenses.(i)Environmental ReservesOur policy is to accrue for losses associated with environmental remediation obligations when such losses are probable and reasonablyestimable. We routinely conduct reviews of potential environmental issues and claims that could impact our assets or operations. These reviews assist us inidentifying environmental issues and estimating the costs and timing of remediation efforts. In making environmental liability estimations, we consider thematerial effect of environmental compliance, pending legal actions against us and potential third-party liability claims. Accruals for estimated losses fromenvironmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted asfurther information develops or circumstances change. These revisions are reflected in our income in the period in which they are probable and can bereasonably estimated. Estimated future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries ofenvironmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.(j)Accounts Receivable and Allowance for Doubtful Accounts.Trade accounts receivable are recorded at the invoiced amount and do not bear interest. We assess collectability at the inception of an arrangementbased upon credit ratings and prior collections history. In general, we conduct business with customers with whom we have a long collection history. As aresult, we have not experienced significant credit losses nor has our revenue recognition been impacted due to assessments of collectability. We have notrecorded an allowance for doubtful accounts as of July 31, 2018 or December 31, 2017, as all accounts receivable were determined to be collectible.(k)Transportation ImbalancesIn the course of transporting NGLs for others, we may receive for redelivery different quantities of NGLs than the quantities we ultimately redeliver.We record these differences as transportation and exchange imbalance receivables or payables that are subject to cash-out provisions. Imbalance receivablesare included in accounts receivable, and imbalance payables are included in accounts payable on the balance sheet at current market prices in effect for thereporting period of the outstanding imbalances. As of July 31, 2018 and December 31, 2017, we had imbalance receivables and payables totaling $7,964 and$8,409, respectively.(l)Concentration of Credit RiskSubstantially all of our accounts receivable at July 31, 2018 and December 31, 2017, results from transportation fees earned from companies in theoil and gas industry and transportation imbalances. This concentration of customers may impact our overall credit risk, either positively or negatively, in thatthese entities may be similarly affected by industry-wide changes in economic or other conditions. Such receivables are generally not collateralized.However, we perform credit evaluations on130West Texas LPG Pipeline Limited PartnershipNotes to Financial Statements(Dollars in thousands, except where otherwise indicated)all our customers to minimize exposure to credit risk. For the seven-month period from January 1, 2018 to July 31, 2018 and years ended December 31, 2017and 2016 credit losses were not material.As of July 31, 2018, accounts receivable includes receivables from one customer representing 52% of total accounts receivable. As of December 31,2017, accounts receivable includes receivables from two customers representing 47% and 13% of total accounts receivable.For the seven-month period from January 1, 2018 to July 31, 2018, revenue includes transportation fees received from three customers representing23%, 20% and 17% of total revenue, respectively. For the year ended December 31, 2017, revenue includes transportation fees received from three customersrepresenting 23%, 16% and 15% of total revenue, respectively. For the year ended December 31, 2016, revenue includes transportation fees received fromtwo customers representing 18% (unaudited) and 12% (unaudited) of total revenue, respectively.(m)Income TaxesWe are a limited partnership for federal and state income taxes. Income taxes are the responsibility of our members and, with the exception of theTexas franchise tax, are not reflected in our financial statements.(n)Materials and Supplies InventoryThe cost of materials, supplies and other inventories is principally determined using the average-cost method.(o)Subsequent EventsWe have evaluated subsequent events through February 19, 2019, the date our financial statements were available, and we believe all requiredsubsequent events disclosures have been made.(p)Recent Accounting PronouncementsIn February 2016, the FASB issued ASU 2016-02, Leases. This ASU amends the existing accounting standards for lease accounting, includingrequiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 is effective for annualreporting periods beginning after December 15, 2019. The standard requires a modified retrospective transition approach for all leases existing at, or enteredinto after, the date of initial application, with an option to use certain transition relief. We expect to record right of use assets and lease obligations on ourbalance sheet upon adoption. We do not expect the impact of adopting this standard to be material to our income statement or related disclosures.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize theamount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Topic 606 replaced most existing revenuerecognition guidance in U.S. GAAP. The Partnership adopted the standard on January 1, 2018. The standard permits the use of either the retrospective orcumulative effect transition method. The Partnership utilized the cumulative effect method which resulted an increase of $83 to retained earnings as ofJanuary 1, 2018. Results for reporting periods beginning on or after January 1, 2018, are presented under the new standard, while prior periods are notadjusted and continue to be reported under the accounting standards in effect for those periods. The Partnership did not identify any significant changes inthe timing of revenue recognition when considering the amended accounting guidance.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments. The standard clarifies the classification of certain cash receipts and cash payments on the statement of cash flows where diversity in practice hasbeen identified. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2019. We do not expect the impact of adopting thisstandard to be material to our financial statements and related disclosures.(3)RevenueOn January 1, 2018, we adopted Topic 606 using the cumulative effect transition method applied to those contracts which were not completed as ofJanuary 1, 2018. Results for reporting periods beginning on or after January 1, 2018 are131West Texas LPG Pipeline Limited PartnershipNotes to Financial Statements(Dollars in thousands, except where otherwise indicated)presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASCTopic 605, Revenue Recognition. The following disclosures discuss the Partnership’s revised revenue recognition policies upon the adoption of Topic 606,as discussed in Note 2.There were no material impacts to revenues, or any other income statement caption, for the period from January 1, 2018 to July 31, 2018 as a resultof applying Topic 606. The impact to the Balance Sheet resulted from contributions in aid of construction as follows: July 31, 2018 As reported Balance without adoption ofTopic 606 Effect of change increase /(decrease) Property and equipment$952,969 $952,369 $600Accumulated depreciation50,468 50,445 23Other current liabilities2,436 2,376 60Other liabilities405 0 405Partners’ capital868,894 868,782 112Under Topic 606, we disaggregate our revenues by interstate transportation contracts, intrastate transportation contracts, and other contractualarrangements. These categories depict the nature, amount, timing and uncertainty of revenues. Disaggregated revenue for the period from January 1, 2018through July 31, 2018 is as follows:Revenue Interstate transportation services $32,654Intrastate transportation services 19,007Other services 3,775Total revenue from contracts with customers 55,436Noncustomer revenue 98Total revenue $55,534The Partnership satisfies its obligations by providing services in exchange for consideration from customers. The timing of performance may differfrom the timing of the associated consideration received from the customer, thus resulting in the recognition of a contract asset or a contract liability. As ofJuly 31, 2018 and January 1, 2018, no contract assets have been recognized.The Partnership recognizes a contract liability if the customer's payment of consideration precedes the Partnership’s fulfillment of the performanceobligations. Our contract liabilities represent deferred revenue on contributions in aid of construction received from customers and are recorded in Othercurrent liabilities and Other liabilities. These amounts are recognized in revenue as services are provided over the contract period, which averagesapproximately 10 years. The change in the contract liability is as follows:Contract Liability As of January 1, 2018 $500Revenue recognized included in beginning balance (35)As of July 31, 2018 $465We expect to record approximately $50 per year through 2027.(4)Related Party Transactions132West Texas LPG Pipeline Limited PartnershipNotes to Financial Statements(Dollars in thousands, except where otherwise indicated)Related Party Transactions - We provide transportation services to affiliates of our partners. Affiliate services are recorded on the same basis asservices to unaffiliated customers.We do not have any employees; therefore, the Operator’s employees support and maintain our assets as provided by the terms of the operatingagreement. We record direct costs for all compensation, benefits, employer taxes and other employer expenses for these employees. Pursuant to the operatingagreement, we pay a management fee, which is reflected in operations and maintenance expenses in our Statements of Operations, to the Operator foradministrative costs associated with operating our pipelines.We also lease an approximate 300 mile pipeline, the Mesquite Pipeline, from affiliates of ONEOK, the cost of which is reflected in cost of services inour Statements of Operations.The following table sets forth the transactions with related parties for the periods indicated: Period fromJanuary 1, 2018through July 31,2018 Year EndedDecember 31, 2017 Year EndedDecember 31, 2016 (unaudited) Revenues$12,735 $13,309 $7,606 Expenses: Cost of serivces$1,305 $2,172 $2,117Operating costs3,735 8,924 9,359Administrative costs5,821 5,608 5,546Total Expenses$10,861 $16,704 $17,022Related Party Balances - We reimburse the Operator for direct costs of employees that support and maintain our assets. We also reimburse theOperator for direct third-party costs incurred on our behalf such as costs for materials, supplies and other charges. As of July 31, 2018, and December 31,2017, we had accounts payable to the Operator of $47,668 and $39,306, respectively, related to management fees and reimbursements of expenditures. As ofJuly 31, 2018 and December 31, 2017, we had accounts receivable from affiliates of ONEOK of $8,885 and $8,042, respectively, related to amounts due fortransportation services provided and imbalance receivables.(5)Operating LeasesWe have non-cancelable operating leases primarily for the Mesquite Pipeline and other equipment. The leases generally provide that all expensesrelated to the pipeline and equipment are to be paid by the lessee.Our future minimum lease obligations as of July 31, 2018 consist of the following:2018$1,14520192,72920202,3892121955Thereafter—Total$7,218Lease expense for operating leases for the period from January 1, 2018 through July 31, 2018, and years ended December 31, 2017 and 2016 was$5,626, $8,534 and $7,683 (unaudited) respectively.133West Texas LPG Pipeline Limited PartnershipNotes to Financial Statements(Dollars in thousands, except where otherwise indicated)(6)Commitments and Contingencies2015 Rate Complaints - On July 1, 2015, WTLPG began charging market-based common carrier rates for intrastate transportation service under atariff on file with the Railroad Commission of Texas (“RRC”). Certain shippers filed complaints with the RRC challenging the increased rates WTLPGimplemented effective July 1, 2015. The complaints requested that the rate increase be suspended until the RRC has determined appropriate new rates. OnMarch 8, 2016, the RRC issued an order directing that WTLPG’s rates “in effect prior to July 1, 2015 are the lawful rates for the duration of this docket unlesschanged by Commission order.” The RRC indicated that WTLPG’s rates should be reviewed on a market basis, without consideration of cost of service, ifmarket information is available.In September 2017, the hearings examiner issued his Proposal for Decision rejecting the rates WTLPG filed on July 1, 2015, and finding thatWTLPG could not charge rates similar to rates charged by new or expansion pipelines, since the rates of those newer pipelines included amounts associatedwith construction costs and those newer pipelines were allegedly “more reliable.” In January 2018, the Commissioners remanded the case back to the hearingexaminer “for the limited scope of admitting and considering additional relevant evidence on common carrier market competition, transportation options,and pricing in the Permian Basin, Barnett Shale and Haynesville Shale markets, including pertinent market studies and/or analysis.” The shippers’ complaints about increased rates implemented by WTLPG in July 2015 were resolved by a settlement that was formally approved bythe RRC in January 2019. All prior claims have been resolved, and no contingency exists.Occidental Energy Marketing, Inc. v. WTLPG - In December 2014, Occidental Energy Marketing, Inc. (“Oxy”) filed a lawsuit against WTLPG instate court in Houston, Texas asserting breach of contract and related claims arising from allegations that during a period from 2010 through 2014, WTLPGfailed to redeliver approximately 11.7 million gallons of product received by WTLPG from Oxy. Oxy asserts approximately $11 million in damages. InAugust 2016, the Court granted summary judgment in favor of WTLPG on all of Oxy’s claims. In January 2017, the Court entered Final Judgment in favor ofWTLPG, including an award of $257 thousand in attorneys’ fees. Oxy filed a Notice of Appeal in January 2017. All briefs have been filed and the oralargument was heard by the Texas Court of Appeals in November 2017.In October 2018, the Texas Court of Appeals issued its decision affirming in part, reversing in part and remanding the case to the trial court forfurther proceedings consistent with its opinion. Oxy did not seek rehearing of the case en banc or request review by the Texas Supreme Court. Accordingly,the case was remanded to the trial court for further proceedings consistent with the decision of the Court of Appeals.Because of the uncertainty surrounding the Oxy litigation, we cannot estimate a reasonably possible range of potential exposure at this time.However, it is reasonably possible that the ultimate resolution of this matter could result in future charges that may be material to our results of operations.134(b) ExhibitsINDEX TO EXHIBITSExhibitNumberExhibit Name 3.1Certificate of Limited Partnership of Martin Midstream Partners L.P. (the "Partnership"), dated June 21, 2002 (filed as Exhibit 3.1 to thePartnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).3.2Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated November 25, 2009 (filed as Exhibit 10.1 to thePartnership's Amendment to Current Report on Form 8-K/A (SEC File No. 000-50056), filed January 19, 2010, and incorporated herein byreference).3.3Amendment No. 2 to the Second Amended and Restated Agreement of Limited Partnership of the Partnership dated January 31, 2011 (filed asExhibit 3.1 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed February 1, 2011, and incorporated herein byreference).3.4Amendment No. 3 to the Second Amended and Restated Agreement of Limited Partnership of the Partnership dated October 2, 2012 (filed asExhibit 10.5 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed October 9, 2012, and incorporated herein byreference).3.5Certificate of Limited Partnership of Martin Operating Partnership L.P. (the "Operating Partnership"), dated June 21, 2002 (filed as Exhibit 3.3to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).3.6Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated November 6, 2002 (filed as Exhibit 3.2 to thePartnership's Current Report on Form 8-K (SEC File No. 000-50056), filed November 19, 2002, and incorporated herein by reference).3.7Certificate of Formation of Martin Midstream GP LLC (the "General Partner"), dated June 21, 2002 (filed as Exhibit 3.5 to the Partnership'sRegistration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).3.8Amended and Restated Limited Liability Company Agreement of the General Partner, dated August 30, 2013 (filed as Exhibit 3.1 to thePartnership's Current Report on Form 8-K (Reg. No. 000-50056), filed September 3, 2013, and incorporated herein by reference).3.9Certificate of Formation of Martin Operating GP LLC (the "Operating General Partner"), dated June 21, 2002 (filed as Exhibit 3.7 to thePartnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).3.10Limited Liability Company Agreement of the Operating General Partner, dated June 21, 2002 (filed as Exhibit 3.8 to the Partnership'sRegistration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).3.11Certificate of Formation of Arcadia Gas Storage, LLC, dated June 26, 2006 (filed as Exhibit 3.11 to the Partnership’s Quarterly Report on Form10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.12Company Agreement of Arcadia Gas Storage, LLC, dated December 27, 2006 (filed as Exhibit 3.12 to the Partnership’s Quarterly Report onForm 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.13Amendment to the Company Agreement of Arcadia Gas Storage, LLC, dated September 5, 2014 (filed as Exhibit 3.13 to the Partnership’sQuarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.14Certificate of Formation of Cadeville Gas Storage LLC, dated May 23, 2008 (filed as Exhibit 3.14 to the Partnership’s Quarterly Report onForm 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.15Limited Liability Company Agreement of Cadeville Gas Storage LLC, dated May 23, 2008 (filed as Exhibit 3.15 to the Partnership’sQuarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.16First Amendment to the Limited Liability Company Agreement of Cadeville Gas Storage LLC, dated April 16, 2012 (filed as Exhibit 3.16 tothe Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.17Second Amendment to the Limited Liability Company Agreement of Cadeville Gas Storage LLC, dated September 5, 2014 (filed as Exhibit3.17 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein byreference).3.18Certificate of Formation of Monroe Gas Storage Company, LLC, dated June 14, 2006 (filed as Exhibit 3.18 to the Partnership’s QuarterlyReport on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).1353.19Amended and Restated Limited Liability Company Agreement of Monroe Gas Storage Company, LLC, dated May 31, 2011 (filed as Exhibit3.19 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein byreference).3.20First Amendment to the Amended and Restated Limited Liability Company Agreement of Monroe Gas Storage Company, LLC, datedSeptember 5, 2014 (filed as Exhibit 3.20 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29,2014, and incorporated herein by reference).3.21Certificate of Formation of Perryville Gas Storage LLC, dated May 23, 2008.(filed as Exhibit 3.21 to the Partnership’s Quarterly Report onForm 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.22Limited Liability Company Agreement of Perryville Gas Storage LLC, dated June 16, 2008 (filed as Exhibit 3.22 to the Partnership’sQuarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.23First Amendment to the Limited Liability Company Agreement of Perryville Gas Storage LLC, dated April 14, 2010 (filed as Exhibit 3.23 tothe Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.24Second Amendment to the Limited Liability Company Agreement of Perryville Gas Storage LLC, dated September 5, 2014 (filed as Exhibit3.24 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein byreference).3.25Certificate of Formation of Cardinal Gas Storage Partners LLC, dated April 2, 2008 (filed as Exhibit 3.25 to the Partnership’s Quarterly Reporton Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).3.26Third Amended and Restated Limited Liability Company Agreement of Cardinal Gas Storage Partners LLC (F/K/A Redbird Gas Storage LLC)dated October 27, 2014 (filed as Exhibit 3.26 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29,2014, and incorporated herein by reference).3.27Certificate of Formation of Redbird Gas Storage LLC, dated May 24, 2011 (filed as Exhibit 3.27 to the Partnership's Annual Report on Form10-K (SEC File No. 000-50056), filed March 2, 2015, and incorporation herein by reference).3.28Second Amended and Restated LLC Agreement of Redbird Gas Storage LLC, dated as of October 2, 2012. (filed as Exhibit 10.6 to thePartnership's Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed November 5, 2012, and incorporated herein by reference).3.29Certificate of Merger of Cardinal Gas Storage Partners LLC with and into Redbird Gas Storage LLC, dated October 27, 2014 (filed as Exhibit3.27 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein byreference).4.1Indenture (including form of 7.250% Senior Notes due 2021), dated February 11, 2013, by and among the Partnership, Martin MidstreamFinance Corp., the Guarantors named therein and Wells Fargo Bank, National Association, as trustee (filed as Exhibit 4.1 to the Partnership'sCurrent Report on Form 8-K (SEC File No. 000-50056), filed February 12, 2013, and incorporated herein by reference).4.2Second Supplemental Indenture, to the Indenture dated February 11, 2013 dated September 30, 2014, by and among the Partnership, MartinMidstream Finance Corp., the Guarantors named therein and Wells Fargo Bank National Association, as trustee (filed as Exhibit 4.4 to thePartnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014 and incorporated herein by reference).4.3Third Supplemental Indenture, to the Indenture dated February 11, 2013 dated October 27, 2014, by and among the Partnership, MartinMidstream Finance Corp., the Guarantors named therein and Wells Fargo Bank National Association, as trustee (filed as Exhibit 4.5 to thePartnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014 and incorporated herein by reference).4.4Fourth Supplemental Indenture, to the Indenture dated February 11, 2013 dated January 18, 2019, by and among the Partnership, MartinMidstream Finance Corp., the Guarantors named therein and Wells Fargo Bank National Association, as trustee.10.1Third Amended and Restated Credit Agreement, dated March 28, 2013, among the Partnership, the Operating Partnership, Royal Bank ofCanada and the other Lenders set forth therein (filed as Exhibit 10.1 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed April 3, 2013 and incorporated herein by reference).10.2First Amendment to Third Amended and Restated Credit Agreement, dated as of July 12, 2013, among the Partnership, the OperatingPartnership, Royal Bank of Canada and the other Lenders as set forth therein (filed as Exhibit 10.2 to the Partnership’s Quarterly Report onForm 10-Q (SEC File No. 000-50056), filed May 5, 2014 and incorporated herein by reference).10.3Second Amendment to Third Amended and Restated Credit Agreement, dated as of May 5, 2014, among the Partnership, the OperatingPartnership, Royal Bank of Canada and the other Lenders as set forth therein (filed as Exhibit 10.2 to the Partnership's Current Report on Form8-K/A (SEC File No. 000-50056), filed May 6, 2014 and incorporated herein by reference)13610.4Third Amendment to Third Amended and Restated Credit Agreement, dated June 27, 2014, among the Partnership, the Operating Partnership,Royal Bank of Canada and the other Lenders as set forth therein (filed as Exhibit 10.1 to the Partnership's Current Report on Form 8-K (SECFile No. 000-50056), filed July 1, 2014, and incorporated herein by reference).10.5Fourth Amendment to Third Amended and Restated Credit Agreement, dated June 23, 2015, among the Partnership, the Operating Partnership,Royal Bank of Canada and the other Lenders as set forth therein (filed as Exhibit 10.1 to the Partnership's Current Report on Form 8-K (SECFile No. 000-50056), filed June 24, 2015, and incorporated herein by reference).10.6Fifth Amendment to Third Amended and Restated Credit Agreement, dated April 27, 2016, among the Partnership, the Operating Partnership,Royal Bank of Canada and the other Lenders as set forth therein (filed as Exhibit 10.1 to the Partnership’s Current Report on Form 8-K (SECFile No. 000-50056), filed April 27, 2016, and incorporated herein by reference).10.7Sixth Amendment to Third Amended and Restated Credit Agreement, dated February 21, 2018, among the Partnership, the OperatingPartnership, Royal Bank of Canada and the other Lenders as set forth therein (filed as Exhibit 10.1 to the Partnership’s Current Report on Form8-K (SEC File No. 000-50056), filed February 22, 2018, and incorporated herein by reference).10.8Seventh Amendment to Third Amended and Restated Credit Agreement, dated July 24, 2018, among the Partnership, the OperatingPartnership, Royal Bank of Canada and the other Lenders as set forth therein (filed as Exhibit 10.2 to the Partnership’s Current Report on Form8-K (SEC File No. 000-50056), filed July 25, 2018, and incorporated herein by reference).10.9*Pledge and Security Agreement, Dated January 2, 201910.10*Supplement to Pledge Agreement, Dated January 2, 201910.11Omnibus Agreement, dated November 1, 2002, by and among Martin Resource Management Corporation, the General Partner, the Partnershipand the Operating Partnership (filed as Exhibit 10.3 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filedNovember 19, 2002, and incorporated herein by reference).10.12Amendment No. 1 to Omnibus Agreement, dated as of November 25, 2009, by and among Martin Resource Management Corporation, theGeneral Partner, the Partnership and the Operating Partnership (filed as Exhibit 10.3 to the Partnership’s Current Report on Form 8-K (SEC FileNo. 000-50056), filed December 1, 2009, and incorporated herein by reference).10.13Amendment No. 2 to Omnibus Agreement, dated October 1, 2012, by Martin Resource Management Corporation, the General Partner, thePartnership and the Operating Partnership (filed as Exhibit 10.4 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056),filed October 9, 2012, and incorporated herein by reference).10.14Motor Carrier Agreement, dated January 1, 2006, by and between the Operating Partnership and Martin Transport, Inc. (filed as Exhibit 10.9 tothe Partnership’s Annual Report on Form 10-K (SEC File No. 000-50056), filed March 2, 2011, and incorporated herein by reference).10.15Membership Interests Purchase Agreement, dated August 10, 2014, by and among Energy Capital Partners and its affiliated funds and RedbirdGas Storage LLC (filed as Exhibit 10.1 to the Partnership’s Current Report on Form 8-K (Sec File No. 000-50056), filed August 12, 2014, andincorporated herein by reference).10.162014 Amended and Restated Tolling Agreement, dated October 28, 2014, by and between the Operating Partnership and Cross Oil Refining &Marketing, Inc. (filed as Exhibit 10.5 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014,and incorporated herein by reference).10.17Marine Transportation Agreement, dated January 1, 2006, by and between the Operating Partnership and Midstream Fuel Service, L.L.C. (filedas Exhibit 10.10 to the Partnership’s Annual Report on Form 10-K (SEC File No. 000-50056), filed March 2, 2011, and incorporated herein byreference).10.18Product Storage Agreement, dated November 1, 2002, by and between Martin Underground Storage, Inc. and the Operating Partnership (filedas Exhibit 10.8 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed November 19, 2002, and incorporated hereinby reference).10.19Marine Fuel Agreement, dated November 1, 2002, by and between Martin Fuel Service LLC and the Operating Partnership (filed as Exhibit10.9 to the Partnership’s Current Report on Form 8-K (SEC No. 000-50056), filed November 19, 2002, and incorporated herein by reference).10.20†Martin Midstream Partners L.P. Amended and Restated Long-Term Incentive Plan (filed as Exhibit 10.1 to the Partnership’s Current Report onForm 8-K (SEC No. 000-50056), filed January 26, 2006, and incorporated herein by reference).10.21†Form of Restricted Common Unit Grant Notice (filed as Exhibit 10.2 to the Partnership’s Current Report on Form 8-K (SEC No. 000-50056),filed January 26, 2006, and incorporated herein by reference).10.22Purchaser Use Easement, Ingress-Egress Easement, and Utility Facilities Easement dated November 1, 2002, by and between MGSLLC and theOperating Partnership (filed as Exhibit 10.13 to the Partnership’s Current Report on Form 8-K/A (SEC No. 000-50056), filed November 19,2002, and incorporated herein by reference).13710.23Amended and Restated Terminal Services Agreement by and between the Operating Partnership and Martin Fuel Service LLC ("MFSLLC"),dated October 27, 2004 (filed as Exhibit 10.1 to the Partnership's Current Report on Form 8-K (SEC No. 000-50056), filed October 28, 2004,and incorporated herein by reference).10.24Lubricants and Drilling Fluids Terminal Services Agreement by and between the Operating Partnership and MFSLLC, dated December 23,2003 (filed as Exhibit 10.4 to the Partnership’s Amendment No. 1 to Current Report on Form 8-K/A (SEC No. 000-50056), filed January 23,2004, and incorporated herein by reference).10.25(1)Second Amended and Restated Sales Agency Agreement, dated August 5, 2013, by and between the Operating Partnership and Martin ProductSales LLC (filed as Exhibit 10.2 to the Partnership's Quarterly Report on Form 10-Q (SEC No. 000-50056) filed November 4, 2013).10.26(1)Third Amended and Restated Sales Agency Agreement, dated August 2, 2017, by and between the Operating Partnership and Martin ProductSales LLC (filed as Exhibit 10.20 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056) filed October 25, 2017, andincorporated herein by reference).10.27†Amended and Restated Martin Resource Management Corporation Purchase Plan for Units of the Partnership, effective April 1, 2015 (filed asExhibit 10.1 to the Partnership's registration statement on Form S-8 (SEC File No. 333-203857), filed May 5, 2015, and incorporated herein byreference).10.28Form of Partnership Indemnification Agreement (filed as Exhibit 10.1 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed November 6, 2008, and incorporated herein by reference).10.29Amended and Restated Common Unit Purchase Agreement, dated as of November 24, 2009, by and between the Partnership and MartinResource Management (filed as Exhibit 10.4 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed December 1,2009, and incorporated herein by reference).10.30Supply Agreement dated, as of October 2, 2012, by and between the Partnership and Cross Oil & Refining Marketing Inc. (filed as Exhibit10.7 to the Partnership's Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed November 5, 2012, and incorporated herein byreference).10.31Noncompetition Agreement dated, as of October 2, 2012, by and among the Partnership, Cross Oil Refining & Marketing, Inc., and MartinResource Management Corporation (filed as Exhibit 10.8 to the Partnership's Quarterly Report on Form 10-Q (SEC File No. 000-50056), filedNovember 5, 2012, and incorporated herein by reference).10.32Purchase Price Reimbursement Agreement, dated October 2, 2012, by Martin Resource Management Corporation to and for the benefit of theOperating Partnership (filed as Exhibit 10.2 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed October 9, 2012,and incorporated herein by reference).10.33Lubricants Terminalling Services Agreement, dated January 1, 2015, by and between the Operating Partnership and Martin Energy ServicesLLC (filed as Exhibit 10.26 to the Partnership's Annual Report on Form 10-K (SEC File No. 000-50056), filed March 2, 2015, andincorporated herein by reference).10.34Fuel Terminalling Services Agreement, dated January 1, 2015, by and between the Operating Partnership and Martin Energy Services LLC(filed as Exhibit 10.27 to the Partnership's Current Report on Form 10-K (SEC File No. 000-50056), filed March 2, 2015, and incorporatedherein by reference).10.35(1)First Amended and Restated Fuel Terminalling Services Agreement, dated January 1, 2016, by and between the Operating Partnership andMartin Energy Services, LLC (filed as Exhibit 10.29 to the Partnership's Annual Report on Form 10-K (SEC File No. 000-50056), filedFebruary 29, 2016, and incorporated herein by reference).10.36(1)First Amendment to the First Amended and Restated Fuel Terminalling Services Agreement, dated January 1, 2017, by and between theOperating Partnership and Martin Energy Services, LLC (filed as Exhibit 10.30 to the Partnership’s Annual Report on Form 10-K (SEC FileNo. 000-50056), filed February 15, 2017, and incorporated herein by reference).10.37(1)Second Amendment to the First Amended and Restated Fuel Terminalling Services Agreement, dated October 1, 2017, by and between theOperating Partnership and Martin Energy Services, LLC (filed as Exhibit 10.31 to the Partnership’s Quarterly Report on Form 10-Q (SEC FileNo. 000-50056) filed October 25, 2017).10.38Martin Midstream Partners L.P. 2017 Restricted Unit Plan (filed as Exhibit A to the Partnership’s Definitive Proxy Statement on Schedule 14A(SEC File No. 000-50056), filed April 21, 2017, and incorporated herein by reference).10.39Restricted Unit Agreement under the Martin Midstream Partners L.P. 2017 Restricted Unit Plan (filed as Exhibit 10.34 to the Partnership'sAnnual Report on Form 10-K (SEC File No. 000-50056), filed February 16, 2018).10.40Partnership Interest Purchase Agreement (filed as Exhibit 10.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056),filed July 25, 2018 and incorporated herein by reference).10.41Stock Purchase Agreement between Martin Resource Management Corporation and the Operating Partnership (filed as Exhibit 10.1 on thePartnership’s Current Report Form 8-K (SEC File No. 000-50056), filed October 24, 2018 and incorporated herein by reference).21.1*List of Subsidiaries.23.1*Consent of KPMG LLP.23.2*Consent of PricewaterhouseCoopers LLP13831.1*Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be "filed."32.2*Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be "filed."101Interactive Data: the following financial information from Martin Midstream Partners L.P.’s Annual Report on Form 10-K for the fiscal yearended December 31, 2018, formatted in Extensible Business Reporting Language: (1) the Consolidated Balance Sheets; (2) the ConsolidatedStatements of Income; (3) the Consolidated Statements of Cash Flows; (4) the Consolidated Statements of Capital; and (6) the Notes toConsolidated Financial Statements.*Filed or furnished herewith.†As required by Item 15(a)(3) of Form 10-K, this exhibit is identified as a compensatory plan or arrangement.(1) Material has been redacted from this exhibit and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended, which has been granted.Item 16.Form 10-K SummaryNot applicable.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this Report to be signed on ourbehalf by the undersigned, thereunto duly authorized representative. Martin Midstream Partners L.P (Registrant) By:Martin Midstream GP LLC It's General Partner February 19, 2019By:/s/ Ruben S. Martin Ruben S. Martin President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of theregistrant and in the capacities indicated on February 19, 2019.139Signature Title /s/ Ruben S. Martin President, Chief Executive Officer and Director of Martin Midstream GPLLC (Principal Executive Officer)Ruben S. Martin /s/ Robert D. Bondurant Executive Vice President, Director, and Chief Financial Officer of MartinMidstream GP LLC (Principal Financial Officer, Principal AccountingOfficer)Robert D. Bondurant /s/ Zachary S. Stanton Director of Martin Midstream GP LLCZachary S. Stanton /s/ James M. Collingsworth Director of Martin Midstream GP LLCJames M. Collingsworth /s/ Sean P. Dolan Director of Martin Midstream GP LLCSean P. Dolan /s/ Byron R. Kelley Director of Martin Midstream GP LLCByron R. Kelley /s/ C. Scott Massey Director of Martin Midstream GP LLCC. Scott Massey 140Exhibit 4.6MARTIN MIDSTREAM PARTNERS L.P.MARTIN MIDSTREAM FINANCE CORP.andthe Guarantors named herein 7 1 / 4 % SENIOR NOTES DUE 2021 FOURTH SUPPLEMENTAL INDENTUREDATED AS OF JANUARY 18, 2019 WELLS FARGO BANK, NATIONAL ASSOCIATION,As TrusteeSUPPLEMENTAL INDENTURETO BE DELIVERED BY SUBSEQUENT GUARANTORS This FOURTH SUPPLEMENTAL INDENTURE, dated as of January 18, 2019, is among Martin Midstream Partners L.P., aDelaware limited partnership (the “Company”), Martin Midstream Finance Corp., a Delaware corporation (“Finance Corp.” and,together with the Company, the “Issuers”), each of the parties identified under the caption “Guarantors” on the signature page hereto(the “Guarantors”) and Wells Fargo Bank, National Association, a national banking association, as Trustee.RECITALSWHEREAS, the Issuers, the initial Guarantors and the Trustee entered into an Indenture, dated as of February 11, 2013 (the“Indenture”), pursuant to which the Company has issued $250,000,000 in the aggregate principal amount of 7 1/4% Senior Notes due2021 (the “Original Notes”) and has issued $150,000,000 in the aggregate principal amount of additional 7 1/4% Senior Notes due2021 (the “Additional Notes”, and together with the Original Notes the “Notes”);WHEREAS, the Issuers, the Guarantors identified on the signature page thereto, and the Trustee entered into the FirstSupplemental Indenture, dated as of July 21, 2014, pursuant to which the Company added Martin Midstream NGL Holdings, LLCand Martin Midstream NGL Holdings II, LLC as guarantors;WHEREAS, the Issuers, the Guarantors identified on the signature page thereto, and the Trustee entered into the SecondSupplemental Indenture, dated as of September 30, 2014, pursuant to which the Company added Cardinal Gas Storage Partners LLC(“Cardinal”), Perryville Gas Storage partners LLC, Arcadia Gas Storage Partners LLC, Cadeville Gas Storage Partners LLC andMonroe Gas Storage Company, LLC as guarantors;WHEREAS, the Issuers, the Guarantors identified on the signature page thereto, and the Trustee entered into the ThirdSupplemental Indenture, dated as of October 27, 2014, pursuant to which the surviving entity of the merger between Cardinal andRedbird Gas Storage LLC (together with Cardinal, the “Merging Guarantors”) unconditionally assumed all of the obligations of theMerging Guarantors;WHEREAS, Section 9.01(g) of the Indenture provides that the Issuers, the Guarantors and the Trustee may amend orsupplement the Indenture in order to comply with Section 4.13 thereof, without the consent of the Holders of the Notes; andWHEREAS, all acts and things prescribed by the Indenture, by law and by the Certificate of Incorporation and the Bylaws (orcomparable constituent documents) of the Issuers, of the Guarantors and of the Trustee necessary to make this Fourth SupplementalIndenture a valid instrument legally binding on the Issuers, the Guarantors and the Trustee, in accordance with its terms, have beenduly done and performed;NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Issuers,the Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes asfollows:ARTICLE 1Section 1.01. This Fourth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form apart of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.Section 1.02. This Fourth Supplemental Indenture shall become effective immediately upon its execution and delivery byeach of the Issuers, the Guarantors and the Trustee.ARTICLE 2From this date, in accordance with Section 4.13 and by executing this Fourth Supplemental Indenture, the Guarantors whosesignatures appear below are subject to the provisions of the Indenture to the extent provided for in Article 10 thereunder.ARTICLE 3Section 3.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed(mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein withoutdefinition having the same respective meanings ascribed to them as in the Indenture.Section 3.02. Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall beconstrued to be assumed, by the Trustee by reason of this Fourth Supplemental Indenture. This Fourth Supplemental Indenture isexecuted and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect asif those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.Section 3.03. THIS FOURTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUEDIN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.Section 3.04. The parties may sign any number of copies of this Fourth Supplemental Indenture. Each signed copy shall bean original, but all of such executed copies together shall represent the same agreement.[NEXT PAGE IS SIGNATURE PAGE]IN WITNESS WHEREOF, the parties hereto have caused this Fourth Supplemental Indenture to be duly executed, all as ofthe date first written above.TRUSTEE:WELLS FARGO BANK, NATIONAL ASSOCIATION, as TrusteeBy:/s/ Casey A. BoyleName: Casey A. BoyleTitle: Assistant Vice PresidentISSUERS:MARTIN MIDSTREAM PARTNERS L.P.By: Martin Midstream GP LLC, as general partnerBy:/s/ Robert D. BondurantName: Robert D. BondurantTitle: Executive Vice President, Treasurer and Chief Financial OfficerMARTIN MIDSTREAM FINANCE CORP.By:/s/ Robert D. BondurantName: Robert D. BondurantTitle: Executive Vice President and Chief Financial Officer GUARANTORS:MARTIN OPERATING PARTNERSHIP L.P.By: MARTIN OPERATING GP LLC,its General PartnerBy: MARTIN MIDSTREAM PARTNERS L.P.,its Sole MemberBy: MARTIN MIDSTREAM GP LLC,its General PartnerBy: /s/ Robert D. BondurantName: Robert D. BondurantTitle: Executive Vice President, Treasurer and Chief Financial OfficerMARTIN OPERATING GP LLCBy: MARTIN MIDSTREAM PARTNERS L.P.,its Sole MemberBy: MARTIN MIDSTREAM GP LLC,its General PartnerBy: /s/ Robert D. BondurantName: Robert D. Bondurant,Title: Executive Vice President, Treasurer andChief Financial OfficerMOP MIDSTREAM HOLDINGS LLCBy: /s/ Robert D. BondurantName: Robert D. Bondurant,Title: Executive Vice President, Treasurer andChief Financial OfficerMARTIN MIDSTREAM NGL HOLDINGS, LLCBy: /s/ Robert D. BondurantName: Robert D. BondurantTitle:Executive Vice President and ChiefFinancial OfficerMARTIN MIDSTREAM NGL HOLDINGS II, LLCBy: /s/ Robert D. BondurantName: Robert D. BondurantTitle:Executive Vice President and ChiefFinancial OfficerCARDINAL GAS STORAGE PARTNERS LLCBy: /s/ Robert D. BondurantName: Robert D. BondurantTitle: Executive Vice PresidentPERRYVILLE GAS STORAGE LLCBy: /s/ Robert D. BondurantName: Robert D. BondurantTitle: Executive Vice PresidentARCADIA GAS STORAGE, LLCBy: /s/ Robert D. BondurantName: Robert D. BondurantTitle: Executive Vice PresidentCADEVILLE GAS STORAGE LLCBy: /s/ Robert D. BondurantName: Robert D. BondurantTitle: Executive Vice PresidentMONROE GAS STORAGE COMPANY, LLCBy: /s/ Robert D. BondurantName: Robert D. BondurantTitle: Executive Vice PresidentMARTIN TRANSPORT, INC.By: /s/ Robert D. BondurantName: Robert D. BondurantTitle: Executive Vice President and ChiefFinancial OfficerExhibit 10.6PLEDGE AND SECURITY AGREEMENT(Subsidiary)THIS PLEDGE AND SECURITY AGREEMENT (as renewed, extended, amended, restated, supplemented or otherwise modified fromtime to time, this “Security Agreement”) is executed as of January 2, 2019, by Martin Transport, Inc., a Texas corporation (“Debtor”),whose address is 4200 Stone Road, Kilgore, Texas 75662, for the benefit of ROYAL BANK OF CANADA (in its capacity as“Collateral Agent” for the Lenders and the Lender Swap Parties), as “Secured Party,” whose address is 4th Floor, 20 King Street West,Toronto, Ontario M5H 1C4.1.RECITALS. Pursuant to that certain Third Amended and Restated Credit Agreement dated as of March 28, 2013 (asthe same may be amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “CreditAgreement”), among Martin Operating Partnership L.P., a Delaware limited partnership, as borrower (the “Borrower”), MartinMidstream Partners L.P., a Delaware limited partnership, as guarantor, the various financial institutions that are, or may from time totime become, parties thereto (each individually a “Lender,” and collectively, the “Lenders”), and Royal Bank of Canada, asAdministrative Agent and Collateral Agent, the Lenders have agreed to make Loans for the account of Borrower.Debtor is a subsidiary of the Borrower. Debtor has agreed to guarantee the obligations of the Borrower under the CreditAgreement and to secure its guaranteed obligations by the pledge of its assets hereunder. It is in the best interests of Debtor to guaranteethe obligations of the Borrower under the Credit Agreement and to secure such guaranty by executing this Security Agreementinasmuch as Debtor will derive substantial direct and indirect benefits from the Loans made from time to time to the Borrower by theLenders pursuant to the Credit Agreement.Debtor has duly authorized the execution, delivery and performance of this Security Agreement, and this Security Agreement isintegral to the transactions contemplated by the Loan Documents, and the execution and delivery hereof is a condition precedent to theLenders’ obligations to extend credit under the Loan Documents. Therefore, for valuable consideration, the receipt and adequacy ofwhich are hereby acknowledged, Debtor and Secured Party hereby agree as herein set forth.2.CERTAIN DEFINITIONS. Unless otherwise defined herein, or the context hereof otherwise requires, each termdefined in the Credit Agreement or in the UCC is used in this Security Agreement with the same meaning; provided, that if thedefinition given to such term in the Credit Agreement conflicts with the definition given to such term in the UCC, the definition in theCredit Agreement shall control to the extent legally allowable; and if any definition given to such term in Article 9 of the UCC conflictswith the definition given to such term in any other chapter of the UCC, the Article 9 definition shall prevail. As used herein, thefollowing terms have the meanings indicated:“Borrower” has the meaning set forth in the first recital hereof.“Cash Collateral Account” has the meaning set forth in Paragraph 8(h) hereof.“Collateral” has the meaning set forth in Paragraph 4 hereof.“Collateral Agent” has the meaning set forth in the introductory paragraph hereof.“Collateral Note Security” has the meaning set forth in Paragraph 4 hereof.“Collateral Notes” has the meaning set forth in Paragraph 4 hereof.“Commodity Account” means any “commodity account,” as such term is defined in Section 9.102(a)(14) of the UCC, and allsub-accounts thereof.“Control Agreement” means, with respect to any Collateral consisting of investment property, Commodity Accounts, DepositAccounts, Security Accounts, electronic chattel paper, and letter-of-credit rights, an agreement evidencing that Secured Party has“control” (as defined in the UCC) of such Collateral which agreement shall be in form and substance satisfactory to the Secured Party.“Copyrights” has the meaning set forth in Paragraph 4 hereof.“Credit Agreement” has the meaning set forth in the first recital hereof.“Deposit Accounts” has the meaning set forth in Paragraph 4 hereof.“Intellectual Property” has the meaning set forth in Paragraph 4 hereof.“Lender” has the meaning set forth in the first recital hereof.“Material Agreements” means, collectively, current and future “Material Agreements” (as defined in the Credit Agreement) towhich Debtor is a party.“Obligations” means, collectively, (a) the Obligations as such term is defined in the Credit Agreement, and (b) all indebtedness,liabilities, and obligations of Debtor arising under this Security Agreement or any Guaranty assuring payment of all or any part of theObligations; it being the intention and contemplation of Debtor and Secured Party that future advances will be made by one or moreLenders to Borrower under the Credit Agreement.“Obligor” means any Person obligated with respect to any of the Collateral, whether as an account debtor, obligor on aninstrument, issuer of securities, or otherwise.“Partnerships/Limited Liability Companies” means (a) those partnerships and limited liability companies listed on Annex B-1attached hereto and incorporated herein by reference, as such partnerships or limited liability companies exist or may hereinafter berestated, amended, or restructured, (b) any partnership, joint venture, or limited liability company in which Debtor shall, at any time,become a limited or general partner, venturer, or member, or (c) any partnership, joint venture, or limited liability company formed as aresult of the restructure, reorganization, or amendment of the Partnerships/Limited Liability Companies described in clause (a) herein.“Partnership/Limited Liability Company Agreements” means the partnership agreements, joint venture agreements, ororganizational agreements for the Partnerships/Limited Liability Companies (together with any modifications, amendments orrestatements thereof), and “Partnership/Limited Liability Company Agreement” means any one of the Partnership/Limited LiabilityCompany Agreements.“Partnership/Limited Liability Company Interests” means all of Debtor’s Right, title and interest in the Partnership/LimitedLiability Companies now or hereafter accruing under the Partnership/Limited Liability Company Agreements, including, withoutlimitation, all rights with respect to distributions, allocations, proceeds, fees, preferences, payments, or other benefits, which Debtornow is or may hereafter become entitled to receive with respect to such interests in the Partnerships/Limited Liability Companies andwith respect to the repayment of all loans now or hereafter made by Debtor to the Partnerships/Limited Liability Companies.“Patents” has the meaning set forth in Paragraph 4 hereof.“Pledged Securities” means, collectively, the Pledged Shares and any other Collateral constituting securities.“Pledged Shares” has the meaning set forth in Paragraph 4 hereof.“Rights” means rights, remedies, powers, privileges and benefits.“Securities Account” means any “securities account”, as such term is defined in Section 8.501(a) of the UCC, and all sub-accounts thereof.“Security Interest” means the security interest granted and the pledge and assignment made under Paragraph 3 hereof.“Trademarks” has the meaning set forth in Paragraph 4 hereof.“UCC” means the Uniform Commercial Code, including each such provision as it may subsequently be renumbered, as enactedin the State of New York or other applicable jurisdiction, as amended at the time in question.“Vessel Charters” has the meaning set forth in Paragraph 4 hereof.“Vessels” means collectively, all vessels owned by Debtor from time to time, including without limitation those vessels listed onAnnex B-4 hereto, and including any of such vessels.3.SECURITY INTEREST. In order to secure the full and complete payment and performance of the Obligations whendue, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment ofamounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code or any similarprovisions of other applicable Laws), Debtor hereby grants to Secured Party a security interest in all of Debtor’s Rights, titles, andinterests in and to the Collateral and pledges, collaterally transfers, and collaterally assigns the Collateral to Secured Party, all upon andsubject to the terms and conditions of this Security Agreement. Such Security Interest is granted and pledge and collateral assignmentare made as security only and shall not subject Secured Party to, or transfer or in any way affect or modify, any obligation of Debtorwith respect to any of the Collateral or any transaction involving or giving rise thereto. If the grant, pledge, or collateral transfer orcollateral assignment of any specific item of the Collateral is expressly prohibited by, or would cause a default under or termination,avoidance or forfeiture of, any contract, license, law or regulation, then the Security Interest created hereby nonetheless remainseffective to the extent allowed by the UCC, such contract, license, regulation or other applicable Law, but is otherwise limited by thatprohibition.4.COLLATERAL. As used herein, the term “Collateral” means the following items and types of property, whereverlocated, now owned or in the future existing or acquired by Debtor, and all proceeds and products thereof, and any substitutes orreplacements therefor:(a)All personal property and fixture property of every kind and nature including, without limitation, all accounts, chattelpaper (whether tangible or electronic), goods (including inventory, equipment, and any accessions thereto), software (specificallyincluding, but not limited to, accounting software), instruments, investment property, documents, deposit accounts, money, commercialtort claims set forth on Annex B-1, letters of credit or letter-of-credit rights, supporting obligations, tax refunds, and general intangibles(including payment intangibles);(b)All Rights, titles, and interests of Debtor in and to all outstanding stock, equity, or other investment securities ownedby Debtor, including, without limitation, all capital stock of each Subsidiary of Debtor set forth on Annex B-1 (such capital stock andequity interests in each Subsidiary of Debtor being hereinafter referred to as “Pledged Shares”);(c)All Rights, titles, and interests of Debtor in and to all promissory notes and other instruments payable to Debtor,including, without limitation, all inter-company notes from Subsidiaries and those set forth on Annex B-1 (“Collateral Notes”) and allRights, titles, interests, and Liens Debtor may have, be, or become entitled to under all present and future loan agreements, securityagreements, pledge agreements, deeds of trust, mortgages, guarantees, or other documents assuring or securing payment of orotherwise evidencing the Collateral Notes, including, without limitation, those set forth on Annex B-1 (“Collateral Note Security”);(d)The Partnership/Limited Liability Company Interests and all Rights of Debtor with respect thereto, including, withoutlimitation, all Partnership/Limited Liability Company Interests set forth on Annex B-1 and all of Debtor’s distribution rights, incomerights, liquidation interest, accounts, contract rights, general intangibles, notes, instruments, drafts, and documents relating to thePartnership/Limited Liability Company Interests;(e)(i) All United States and foreign copyrights (including community designs), including copyrights in software anddatabases, and all Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or unregistered,including derivative works and also including, without limitation, the copyrights set forth on Annex B-2; (ii) all renewals, extensions,and modifications thereof; (iii) all income, licenses, royalties, damages, profits, and payments relating to or payable under any of theforegoing; (iv) the Right to sue for past, present, or future infringements of any of the foregoing; and (v) all other rights and benefitsrelating to any of the foregoing throughout the world; in each case, whether now owned or hereafter acquired by Debtor(“Copyrights”);(f)(i) All patents, patent applications, patent licenses, and patentable inventions of Debtor, including, without limitation,registrations, recordings, and applications thereof in the United States Patent and Trademark Office or in any similar office or agency ofthe United States, any state thereof or any other country or any political subdivision thereof, including, without limitation, those setforth on Annex B-2, and all of the inventions and improvements described and claimed therein; (ii) all continuations, divisions,renewals, extensions, modifications, substitutions, reexaminations, continuations-in-part, or reissues of any of the foregoing; (iii) allincome, royalties, profits, damages, awards, and payments relating to or payable under any of the foregoing; (iv) the right to sue forpast, present, and future infringements of any of the foregoing; and (v) all other rights and benefits relating to any of the foregoingthroughout the world; in each case, whether now owned or hereafter acquired by Debtor (“Patents”);(g)(i) All trademarks, trademark licenses, trade names, corporate names, company names, business names, fictitiousbusiness names, trade styles, internet domain names, service marks, certification marks, collective marks, logos, other businessidentifiers, designs and general intangibles of a like nature, all registrations, recordings, and applications thereof, including, withoutlimitation, registrations, recordings, and applications in the United States Patent and Trademark Office or in any similar office or agencyof the United States, any state thereof or any other country or any political subdivision thereof, including, without limitation, those setforth on Annex B-2; (ii) all reissues, extensions, and renewals thereof; (iii) all income, royalties, damages, and payments now orhereafter relating to or payable under any of the foregoing, including, without limitation, damages or payments for past or futureinfringements of any of the foregoing; (iv) the right to sue for past, present, and future infringements of any of the foregoing; (v) allrights corresponding to any of the foregoing throughout the world; and (vi) all goodwill associated with and symbolized by any of theforegoing, in each case, whether now owned or hereafter acquired by Debtor (“Trademarks”, and collectively with the Copyrights andthe Patents, the “Intellectual Property”);(h)(i) All of Debtor’s Rights, titles, and interests in and to all Material Agreements and other contracts and agreements ofDebtor (together with the Material Agreements, “Agreements”), including, without limitation, all Rights of Debtor to receive moneysdue and to become due under or pursuant to the Agreements, (ii) all rights of Debtor to receive proceeds of any insurance, indemnity,warranty, or guaranty with respect to the Agreements, (iii) all claims of Debtor for damages arising out of or for breach of or defaultunder the Agreements, and (iv) all rights of Debtor to compel performance and otherwise exercise all rights and remedies under theAgreements;(i)All of Debtor’s rights under contracts for the use of Vessels and all charters of all Vessels (such managementagreements, contracts and charters, collectively, the “Vessel Charters”), including rights to terminate Vessel Charters pursuant to theterms thereof and to compel performance of terms thereof, whether in effect as of the date hereof or entered into at any time hereafter),rights to the payment of money, rights to compel payment of hire and other monies due under the Vessel Charters, including, but notlimited to, all freight, hire, earnings and charter payments, and all claims for damages arising out of the breach or termination thereof;(j)All personal and fixture property of every kind and nature arising out of, resulting from the operation of, or related tothe Vessels which are presently or may hereafter be subject to a U.S. Vessel Mortgage (collectively, the “Mortgaged Vessels”),including, without limitation, all furniture, fixtures, equipment, raw materials, inventory, goods, all insurance, including withoutlimitation, all certificates of entry in protection and indemnity and war risks associations or clubs in respect of the Mortgaged Vessels,or any of them, whether heretofore, now or hereafter effected, and all renewals of or replacements for the same, all claims, returns ofpremium and other moneys and claims for moneys due and to become due under or in respect of said insurance, all other rights ofDebtor under or in respect of said insurance, and any proceeds of any of the foregoing, including, without limitation, those arising fromthe actualor constructive loss of, or the requisition (whether of title or use), condemnation, sequestration, seizure, forfeiture or other taking of, theMortgaged Vessels, tort claims and all vessels (including all offshore service vessels), barges and tugs, together with all engines,boilers, machinery, masts, boats, anchors, cables, chains, rigging, tackle, apparel, spare parts, furniture, equipment and gear and allother appurtenances thereto, appertaining or belonging, whether on board or not, and any and all additions, improvements andreplacements thereof hereafter made;(k)All present and future automobiles, trucks, truck tractors, trailers, semi-trailers, or other motor vehicles or rollingstock, now owned or hereafter acquired by such Debtor (collectively, the “Vehicles”);(l)Any and all deposit accounts, bank accounts, Commodity Accounts, investment accounts, or Securities Accounts, nowowned or hereafter acquired or opened by Debtor, including, without limitation, any such accounts set forth on Annex B-1, and anyaccount which is a replacement or substitute for any of such accounts, together with all monies, instruments, certificates, checks, drafts,wire transfer receipts, and other property deposited therein and all balances therein (the “Deposit Accounts”);(m)All permits, licenses and other authorizations (“Authorizations”) issued by any governmental authority, to the extentand only to the extent that the grant of a security interest in any such Authorization does not result in the forfeiture of, or default under,any such Authorization;(n)All present and future distributions, income, increases, and profits with respect to, combinations, reclassifications,improvements, and products of, accessions, attachments, and other additions to, tools, parts, and equipment used in connection with,and substitutes and replacements for, all or part of the Collateral described above;(o)All present and future accounts, contract Rights, general intangibles, chattel paper, documents, instruments, cash andnoncash proceeds, and other Rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, orcollections with respect to, or insurance proceeds payable with respect to, or proceeds payable by virtue of warranty or other claimsagainst the manufacturer of, or claims against any other Person with respect to, all or any part of the Collateral heretofore described inthis clause or otherwise; and(p)All present and future security for the payment to Debtor or any Subsidiary of any of the Collateral described aboveand goods which gave or will give rise to any such Collateral or are evidenced, identified, or represented therein or thereby.Notwithstanding anything to the contrary contained herein, Debtor shall not be required to take any action with respect to the perfectionof the security interests in cash or assets in Deposit Accounts, and Debtor shall not be required to enter into any Control Agreementwith respect to cash or assets in Deposit Accounts.The description of the Collateral contained in this Paragraph 4 shall not be deemed to permit any action prohibited by this SecurityAgreement or by the terms incorporated in this Security Agreement.5.REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Secured Party that:(a)General. Certain representations and warranties in the Credit Agreement are applicable to Debtor or its assets oroperations, and each such representation and warranty is true and correct in all material respects.(b)Binding Obligation/ Perfection. This Security Agreement creates a legal, valid, and binding Lien in and to theCollateral in favor of Secured Party and enforceable against Debtor. For Collateral in which the Security Interest may be perfected bythe filing of Financing Statements pursuant to Article 9 of the UCC, once those Financing Statements have been properly filed in thejurisdictions described on Annex A hereto, the Security Interest in that Collateral will be fully perfected. Such Security Interest willconstitute a first-priority Lien on such Collateral (other than fixtures), subject only to Permitted Liens. With respect to Collateralconsisting of investment property (other than Pledged Securities covered by Paragraph 5(j) hereof), Deposit Accounts, electronicchattel paper, letter-of-creditrights, and instruments, upon the delivery of such Collateral to Secured Party or delivery of an executed Control Agreement withrespect to such Collateral, the Security Interest in that Collateral will be fully perfected and the Security Interest will constitute a first-priority Lien on such Collateral, subject only to Permitted Liens. None of the Collateral has been delivered nor control with respectthereto given to any Person, other than the Collateral Agent. Other than the Financing Statements and Control Agreements with respectto this Security Agreement, there are no other financing statements or control agreements covering any Collateral, other than thoseevidencing Permitted Liens, control agreements otherwise permitted under the Loan Documents and Liens being released on the datehereof. Except as set forth in Paragraph 3 hereof, the creation of the Security Interest does not require the consent of any Person thathas not been obtained.(c)Debtor Information. Debtor’s exact legal name, mailing address, jurisdiction of organization, type of entity, and stateissued organizational identification number are as set forth on Annex A hereto.(d)Location. As of the date hereof (i) Debtor’s principal place of business and chief executive office is where Debtor isentitled to receive notices hereunder; the present and foreseeable location of Debtor’s books and records concerning any of theCollateral that is accounts is as set forth on Annex A hereto; (ii) the location of Debtor’s inventory with a fair market value in excess of$1,000,000 in the aggregate and equipment with an orderly liquation value in excess of $1,000,000 in the aggregate is as set forth onAnnex A hereto; (iii) each such location of inventory and collateral listed on Annex A is owned by Debtor or, if not owned by Debtor, isleased or otherwise used by Debtor pursuant to a lease, storage contract or other contract with the Person named on Annex A; and (iv)except as noted on Annex A hereto, all such books, records, equipment and inventory are in Debtor’s possession.(e)Governmental Authority. Other than the filing of Financing Statements contemplated hereby and appropriate filings toperfect the Security Interest in the Intellectual Property, Vessels and Vehicles, no Authorization, approval, or other action by, and nonotice to or filing with, any Governmental Authority is required either (i) for the pledge by Debtor of the Collateral pursuant to thisSecurity Agreement or for the execution, delivery, or performance of this Security Agreement by Debtor, or (ii) for the exercise bySecured Party of the voting or other Rights provided for in this Security Agreement or the remedies in respect of the Collateral pursuantto this Security Agreement (except as may be required in connection with the disposition of the Pledged Securities by Laws affectingthe offering and sale of securities generally).(f)Maintenance of Collateral. All Vessels are in the condition required by Section 6.14 of the Credit Agreement and allassets necessary to Debtor’s business are in the repair and condition required by Section 6.06 of the Credit Agreement.(g)Ownership of Property; Liens. Debtor owns, leases or has valid rights to use all presently existing Collateral, and willacquire or lease all hereafter-acquired Collateral, free and clear of all Liens, except Permitted Liens.(h)Collateral. As of the date hereof, Annex B-1 accurately lists all Collateral Notes, Collateral Note Security, PledgedShares, Partnership/Limited Liability Company Interests, commercial tort claims, and Deposit Accounts, and Schedule 1.01(c) of theCredit Agreement accurately lists all Material Agreements in which Debtor has any Rights, titles, or interest (but such failure of suchdescription to be accurate or complete shall not impair the Security Interest in such Collateral).(i)Instruments, Chattel Paper, Collateral Notes and Collateral Note Security. As of the date hereof, all instruments andchattel paper with a principal amount in excess of $1,000,000, including, without limitation, the Collateral Notes, have been deliveredto Secured Party, together with corresponding endorsements duly executed by Debtor in favor of Secured Party, and such endorsementshave been duly and validly executed and are binding and enforceable against Debtor in accordance with their terms.(j)Pledged Securities; Pledged Shares. All Pledged Shares are duly authorized, validly issued, fully paid, and non-assessable, and the transfer thereof is not subject to any restrictions, other than restrictions imposed hereunder and by applicablesecurities and corporate Laws. As of the date hereof, the Pledged Shares securing the Obligationsconstitute 100% of the issued and outstanding common stock or other equity interests of each Subsidiary. Debtor has good title to thePledged Securities, free and clear of all Liens and encumbrances thereon (except for the Security Interest created hereby), and hasdelivered to Secured Party (i) all stock certificates, or other instruments or documents representing or evidencing the Pledged Securities,together with corresponding assignment or transfer powers duly executed in blank by Debtor, and such powers have been duly andvalidly executed and are binding and enforceable against Debtor in accordance with their terms, or (ii) to the extent such PledgedSecurities are uncertificated, an executed Acknowledgment of Pledge with respect to such Pledged Securities. The pledge of thePledged Securities in accordance with the terms hereof creates a valid and perfected first priority security interest in the PledgedSecurities securing payment of the Obligations. Debtor is the record and beneficial owner of the Pledged Shares and Pledged Securitiesowned by it free of all Liens, rights, or claims of other Persons other than Permitted Liens, and there are no outstanding warrants,options, or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that isconvertible into, or that requires the issuance or sale of, any such Pledged Shares or Pledged Securities. No consent of any Personincluding any other general or limited partner, any other member of a limited liability company, any other shareholder, or any othertrust beneficiary is necessary or desirable in connection with the creation, perfection, or first priority status of the Security Interest inany Pledged Share or any Pledged Securities or the exercise by Secured Party of the voting or other rights provided for in this SecurityAgreement or the exercise of remedies in respect thereof, other than such as have been obtained and are in full force and effect. Noneof the Pledged Shares or Pledged Securities are or represent interests in issuers that (a) are registered as investment companies, or (b) aredealt in or traded on securities exchanges or markets.(k)Partnership/Limited Liability Company Interests. Each Partnership/Limited Liability Company issuing aPartnership/Limited Liability Company Interest is currently existing and in good standing under all applicable Laws; there have been noamendments to any Partnership/Limited Liability Company Agreement, of which Secured Party has not been advised in writing; as ofthe date hereof, no event of default, default, breach or potential default has occurred and is continuing under any Partnership/LimitedLiability Company Agreement; and no approval or consent of the partners of any Partnership/Limited Liability Company is required asa condition to the validity and enforceability of the Security Interest created hereby or the consummation of the transactionscontemplated hereby which has not been duly obtained by Debtor. Debtor has good title to the Partnership/Limited Liability CompanyInterests free and clear of all Liens and encumbrances (except for the Security Interest granted hereby). The Partnership/LimitedLiability Company Interests are validly issued, fully paid, and nonassessable and are not subject to statutory, contractual, or otherrestrictions governing their transfer, ownership, or control, except as set forth in the applicable Partnership/Limited Liability CompanyAgreements or applicable securities Laws. All capital contributions required to be made by Debtor by the terms of thePartnership/Limited Liability Company Agreements for each Partnership/Limited Liability Company have been made. No limitedliability company interests are evidenced by certificates.(l)Material Agreements. As of the date hereof: (i) each Material Agreement is in full force and effect, (ii) there have beenno amendments, modifications, or supplements to any Material Agreement of which Secured Party has not been advised in writing, and(iii) no material event of default, default, breach or potential default by Debtor or, to Debtor’s knowledge, by any other party theretohas occurred and is continuing under any Material Agreement, except as disclosed on Annex B-3 hereto. As used in this clause (l),“material” means could reasonably be expected to have a Material Adverse Effect.(m)Deposit Accounts. With respect to the Deposit Accounts, (i) Debtor maintains each Deposit Account with the bankslisted on Annex B-1 hereto, (ii) Debtor has the legal Right to pledge and assign to Secured Party the funds deposited and to bedeposited in each such Deposit Account, and (iii) the Deposit Accounts set forth on Annex B-1 represent all of the Deposit Accounts ofDebtor.(n)Intellectual Property.(i)All of the Intellectual Property is subsisting, valid, and enforceable, except to the extent that such failure couldnot be reasonably expected to have a Material Adverse Effect. The information contained on Annex B-2 hereto is true, correct,and complete. As of the date hereof, all issued Patents, Patent applications,registered Trademarks, Trademark applications, registered Copyrights, and Copyright applications of Debtor material to theoperation of Debtor’s business are identified on Annex B-2 hereto.(ii)Debtor is the sole and exclusive owner of the entire and unencumbered Right, title, and interest in and to theIntellectual Property material to the operation of Debtor’s business free and clear of any Liens, including, without limitation, anypledges, assignments, licenses, user agreements, and covenants by Debtor not to sue third Persons, other than Permitted Liens orlicenses permitted by Paragraph 8(c) hereof.(iii)Each of the Patents and Trademarks identified on Annex B-2 hereto has been properly registered with theUnited States Patent and Trademark Office and in corresponding offices throughout the world (where appropriate) and each ofthe Copyrights identified on Annex B-2 hereto has been properly registered with the United States Copyright Office and incorresponding offices throughout the world (where appropriate). Debtor has performed and will continue to perform all acts andhas paid and will continue to pay all required fees and Taxes to maintain each and every item of the Intellectual Propertymaterial to such Debtor's business in full force and effect throughout the world, as applicable.(iv)To Debtor’s knowledge, no claims with respect to the Intellectual Property material to the operation ofDebtor’s business have been asserted and are pending (i) to the effect that the sale, licensing, pledge, or use of any of theproducts of Debtor’s business infringes any other party’s valid copyright, trademark, service mark, trade secret, or otherintellectual property Right, (ii) against the use by Debtor of such Intellectual Property, or (iii) challenging the ownership or useby Debtor of any of the Intellectual Property that Debtor purports to own or use, nor, to Debtor’s knowledge, is there a validbasis for such a claim described in this Paragraph 5(n)(iv).The foregoing representations and warranties will be true and correct in all material respects with respect to any additional Collateral oradditional specific descriptions of certain Collateral delivered to Secured Party in the future by Debtor. The failure of any of theserepresentations or warranties or any description of Collateral therein to be accurate or complete shall not impair the Security Interest inany such Collateral.6.COVENANTS. So long as any Lenders are committed to make Credit Extensions under the Credit Agreement, anduntil the Obligations are paid and performed in full, Debtor covenants and agrees with Secured Party that Debtor will:(a)Credit Agreement. (i) Comply with, perform, and be bound by all covenants and agreements in the Credit Agreementthat are applicable to it, its assets, or its operations, each of which is hereby ratified and confirmed (INCLUDING, WITHOUTLIMITATION, THE INDEMNIFICATION AND RELATED PROVISIONS IN SECTION 10.05 OF THE CREDITAGREEMENT); AND (ii) CONSENT TO AND APPROVE THE VENUE, SERVICE OF PROCESS, AND WAIVER OF JURYTRIAL PROVISIONS OF SECTIONS 10.15 and 10.16 OF THE CREDIT AGREEMENT.(b)Information/Record of Collateral. Maintain, at the place where Debtor is entitled to receive notices under the LoanDocuments, a current record of where all Collateral is located, permit representatives of Secured Party at any time during normalbusiness hours to inspect and make abstracts from such records in accordance with Section 6.10 of the Credit Agreement, and furnish toSecured Party, at such intervals as Secured Party may reasonably request, such documents, lists, descriptions, certificates, and otherinformation as may be necessary or proper to keep Secured Party informed with respect to the identity, location, status, condition, andvalue of the Collateral. In addition, from time to time at the request of Secured Party, deliver to Secured Party such informationregarding Debtor as Secured Party may reasonably request.(c)Perform Obligations. Notwithstanding anything to the contrary contained herein, (i) Debtor shall remain liable underthe contracts, agreements, documents, and instruments included in the Collateral to the extent set forth therein to perform all of its dutiesand obligations thereunder to the same extent as if this Security Agreement had not been executed, (ii) the exercise by Secured Party ofany of its Rights or remedies hereunder shall not releaseDebtor from any of its duties or obligations under the contracts, agreements, documents, and instruments included in the Collateral, and(iii) Secured Party shall not have any indebtedness, liability, or obligation under any of the contracts, agreements, documents, andinstruments included in the Collateral by reason of this Security Agreement, and Secured Party shall not be obligated to perform any ofthe obligations or duties of Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.(d)Notices. (i) Promptly notify Secured Party (A) of any material claim, action, or proceeding affecting title to all or anyof the Collateral, (B) of any material damage to or loss of Collateral, (C) of the occurrence of any other event or condition (including,without limitation, matters as to Lien priority) that could reasonably be expected to have a material adverse effect on the Collateral(taken as a whole) or the Security Interest created hereunder, or (D) of the commencement and termination of any period during whichany Vessel is requisitioned.(ii) Give Secured Party five (5) days written notice before any proposed (A) relocation of its principal place of business orchief executive office, (B) except as otherwise permitted in the Credit Agreement, change of its name or identity or conversion intoanother form of legal entity, (C) relocation of the place where its books and records concerning its accounts are kept, or (D) change ofits jurisdiction of organization or organizational identification number, as applicable. Prior to making any of the changes contemplatedin clause (ii) preceding, Debtor shall execute and deliver all such additional documents and perform all additional acts as Secured Partymay request in order to continue or maintain the existence and priority of the Security Interests in all of the Collateral, and will not makeany of such changes unless all amendments to lien filings have been made that are necessary to continue and maintain the existenceand priority of such Security Interests.(iii) Together with each Compliance Certificate delivered pursuant to Section 6.02(a) of the Credit Agreement, deliver toSecured Party updated Annexes, if any of the information on the Annexes hereto is no longer correct in any material respect.Debtor’s failure to give to Secured Party notices as required herein, or to fully describe the Collateral on any annex hereto, shall notimpair Secured Party’s interest in the Collateral.(e)Collateral in Trust. Hold in trust (and not commingle with other assets of Debtor) for Secured Party all Collateral that ischattel paper, instruments, Collateral Notes, Pledged Securities, or documents at any time received by Debtor and promptly deliversame to Secured Party, unless Secured Party at its option (which may be evidenced only by a writing signed by Secured Party statingthat Secured Party elects to permit Debtor to so retain) permits Debtor to retain the same, but any chattel paper, instruments, CollateralNotes, Pledged Securities, or documents so retained shall be marked to state that they are assigned to Secured Party; each suchinstrument shall be endorsed to the order of Secured Party (but the failure of same to be so marked or endorsed shall not impair theSecurity Interest thereon).(f)Control. Execute all documents and take any action required by Secured Party in order for Secured Party to obtain“control” (as defined in the UCC) with respect to Collateral consisting of investment property, uncertificated Pledged Securities (withrespect to which the execution of an Acknowledgement of Pledge shall be sufficient), and letter-of-credit rights. If Debtor at any timeholds or acquires an interest in any electronic chattel paper or any “transferable record,” as that term is defined in the federal ElectronicSignatures in Global and National Commerce Act, or in the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction,promptly notify Secured Party thereof and, at the request of Secured Party, take such action as Secured Party may reasonably request tovest in Secured Party control under the UCC of such electronic chattel paper or control under the federal Electronic Signatures in Globaland National Commerce Act or, as the case may be, the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, ofsuch transferable record.(g)Further Assurances. At Debtor’s expense and Secured Party’s request, (i) from time to time promptly execute anddeliver to Secured Party all such other assignments, certificates, supplemental documents, and financing statements, and do all otheracts or things as Secured Party may reasonably request in order to more fully create, evidence, perfect, continue, and preserve thepriority of the Security Interest and to carry out the provisions of this Security Agreement; and (ii) pay all filing fees in connection withany financing, continuation, or termination statement or other instrument with respect to the Security Interests.(h)Encumbrances. Not create, permit, or suffer to exist, and shall defend the Collateral against, any Lien or otherencumbrance on the Collateral, other than Permitted Liens, and shall defend Debtor’s Rights in the Collateral and Secured Party’sSecurity Interest in, the Collateral against the claims and demands of all Persons except those holding or claiming Permitted Liens.(i)Estoppel and Other Agreements and Matters. Upon the request of Secured Party, use commercially reasonable effortsto cause the landlord or lessor for each location where any of its inventory or equipment is maintained to execute and deliver to SecuredParty an estoppel and subordination agreement in such form as may be reasonably acceptable to Secured Party and its counsel.(j)Fixtures. For any Collateral that is a fixture or an accession which has been attached to real estate or other goods priorto the perfection of the Security Interest, use commercially reasonable efforts to furnish to Secured Party, upon reasonable demand, adisclaimer of interest in each such fixture or accession and a consent in writing to the Security Interest of Secured Party therein, signedby all Persons having any interest in such fixture or accession by virtue of any interest in the real estate or other goods to which suchfixture or accession has been attached.(k)Certificates of Title. Upon the request of Secured Party, if certificates of title are issued or outstanding with respect toany of the Vehicles or other Collateral, cause the Security Interest to be properly noted thereon.(l)Warehouse Receipts Non-Negotiable. If any warehouse receipt or receipt in the nature of a warehouse receipt is issuedin respect of any of the Collateral, agree that such warehouse receipt or receipt in the nature thereof shall not be “negotiable” (as suchterm is used in Section 7‑104 of the UCC), unless such warehouse receipt or receipt in the nature thereof is delivered to Secured Party.(m)Impairment of Collateral. Not use any of the Collateral, or permit the same to be used, for any unlawful purpose, inany manner inconsistent with the provisions or requirements of any policy of insurance thereon or in any manner contrary to thestandard of care typical in the industry for the operation and maintenance of such Collateral.(n)Collateral Notes and Collateral Note Security. Without the prior written consent of Secured Party, after the occurrenceof and during the continuation of an Event of Default, not (i) modify or substitute, or permit the modification or substitution of, anyCollateral Note or any document evidencing the Collateral Note Security, or (ii) release any Collateral Note Security unless paid in fullor otherwise specifically required by the terms thereof. Debtor shall promptly notify Secured Party of any extensions of or materialamendments to any Collateral Notes.(o)Securities. Except as otherwise permitted by the Credit Agreement, not sell, exchange, or otherwise dispose of, orgrant any option, warrant, or other Right with respect to, any of the Pledged Securities; to the extent any issuer of any PledgedSecurities is controlled by Debtor and/or its Affiliates, not permit such issuer to issue any additional shares of stock or other securities inaddition to or in substitution for the Pledged Securities, except issuances to Debtor on terms acceptable to Secured Party; pledgehereunder, immediately upon Debtor’s acquisition (directly or indirectly) thereof, any and all additional shares of stock or othersecurities of each Subsidiary of Debtor; and take any action necessary, required, or requested by Secured Party to allow Secured Partyto fully enforce its Security Interest in the Pledged Securities, including, without limitation, the filing of any claims with any court,liquidator, trustee, custodian, receiver, or other like person or party.(p)Partnerships/Limited Liability Companies and Partnership/Limited Liability Company Interests. (i) Comply in allmaterial respects with each material requirement and condition set forth in the contracts and agreements creating or relating to anyPartnership/Limited Liability Company, (ii) do or cause to be done all things necessary or appropriate to keep the Partnerships/LimitedLiability Companies in full force and effect (except as otherwise permitted by the Credit Agreement) and the Rights of Debtor andSecured Party thereunder unimpaired, (iii) pledge hereunder, immediately upon Debtor’s acquisition (directly or indirectly) thereof, anyand all additional Partnership/Limited Liability Company Interests of any Partnership/Limited Liability Company granted to Debtor asrequired pursuant to Section 6.17(a) of the Credit Agreement, (iv) deliver to Secured Party a fully-executed Acknowledgment ofPledge, substantially in the form of Annex C, for each Partnership/Limited Liability Company Interest constituting Collateral,if such Partnership/Limited Liability Company Interest represents an interest in a Subsidiary of Debtor, and (v) take any actionrequested by Secured Party to allow Secured Party to fully enforce its Security Interest in the Partnership/Limited Liability CompanyInterests, including, without limitation, the filing of any claims with any court, liquidator, trustee, custodian, receiver, or other likeperson or party.(q)Marking of Chattel Paper. At the request of Secured Party, place a legend acceptable to Secured Party on all chattelpaper, indicating that Secured Party has a security interest in the chattel paper.(r)Modification of Accounts. In accordance with prudent business practices, endeavor to collect or cause to be collectedfrom each account debtor under its accounts, as and when due, any and all amounts owing under such accounts. Except in the ordinarycourse of business consistent with prudent business practices and industry standards, without the prior written consent of Secured Party,Debtor shall not, (i) grant any extension of time for any payment with respect to any such account, (ii) compromise, compound, orsettle any such account for less than the full amount thereof, (iii) release, in whole or in part, any Person liable for payment of any suchaccount, (iv) allow any credit or discount for payment with respect to any such account, other than trade discounts granted in theordinary course of business, (v) release any Lien or guaranty securing any such account, or (vi) modify or substitute, or permit themodification or substitution of, any contract to which any of the Collateral which is any such account relates.(s)Intellectual Property. Except to the extent not required in Debtor’s reasonable business judgment, (i) make federalapplications on all of its unpatented but patentable inventions and all of its registrable but unregistered Copyrights and Trademarks, (ii)preserve and maintain its material rights in the Intellectual Property and protect the Intellectual Property from infringement, unfaircompetition, cancellation, or dilution by appropriate action necessary in Debtor’s reasonable business judgment, including, withoutlimitation, the commencement and prosecution of legal proceedings to recover damages for infringement and to defend and preserve itsrights in the Intellectual Property, (iii) not abandon any of the Intellectual Property necessary to the conduct of its business in theexercise of Debtor’s reasonable business judgment, (iv) give Secured Party prompt written notice if Debtor shall obtain Rights to orbecome entitled to the benefit of any Intellectual Property material to its business and not identified on Annex B-2 hereto, and (v) if aDefault or Event of Default exists, use its commercially reasonable efforts to obtain any consents, waivers, or agreements necessary toenable Secured Party to exercise its rights and remedies with respect to the Intellectual Property.(t)Control of Third Parties. Debtor shall not grant “control” (as defined in the UCC) with respect to any Deposit Accountto any Person other than Secured Party and the bank with which the Deposit Account is maintained.7.DEFAULT; REMEDIES. If an Event of Default exists, Secured Party may, at its election, exercise any and all Rightsavailable to a secured party under the UCC and other applicable law, in addition to any and all other Rights afforded by the LoanDocuments, at law, in equity, or otherwise, including, without limitation, (a) requiring Debtor to assemble all or part of the Collateraland make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to Debtor andSecured Party, (b) surrendering any policies of insurance on all or part of the Collateral and receiving and applying the unearnedpremiums as a credit on the Obligations, (c) applying by appropriate judicial proceedings for appointment of a receiver for all or part ofthe Collateral (and Debtor hereby consents to any such appointment), and (d) applying to the Obligations any cash held by SecuredParty under this Security Agreement, including, without limitation, any cash in the Cash Collateral Account (as defined in Paragraph8(h) hereof).(a)Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification ofthe time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Debtor and to anyother Person entitled to notice under the UCC; provided that, if any of the Collateral threatens to decline speedily in value or is of thetype customarily sold on a recognized market, Secured Party may sell or otherwise dispose of the Collateral without notification,advertisement, or other notice of any kind. It is agreed that notice sent or given not less than ten (10) Business Days prior to the takingof the action to which the notice relates is reasonable notification and notice for the purposes of this clause.(b)Condition of Collateral; Warranties. Secured Party has no obligation to clean-up or otherwise prepare the Collateral forsale. Secured Party may sell the Collateral without giving any warranties as to the Collateral. Secured Party may specifically disclaimany warranties of title or the like. This procedure will not be considered affect adversely the commercial reasonableness of any sale ofthe Collateral.(c)Compliance with Other Laws. Secured Party may comply with any applicable state or federal law requirements inconnection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonablenessof any sale of the Collateral.(d)Sales of Pledged Securities.(i)Debtor agrees that, because of the Securities Act of 1933, as amended, or the rules and regulationspromulgated thereunder (collectively, the “Securities Act”), or any other Laws or regulations, and for other reasons, there maybe legal or practical restrictions or limitations affecting Secured Party in any attempts to dispose of certain portions of thePledged Securities and for the enforcement of its Rights. For these reasons, Secured Party is hereby authorized by Debtor, butnot obligated, upon the occurrence and during the continuation of an Event of Default, to sell all or any part of the PledgedSecurities at private sale, subject to investment letter or in any other manner which will not require the Pledged Securities, or anypart thereof, to be registered in accordance with the Securities Act or any other Laws or regulations, at a reasonable price at suchprivate sale or other distribution in the manner mentioned above. Debtor understands that Secured Party may in its discretionapproach a limited number of potential purchasers and that a sale under such circumstances may yield a lower price for thePledged Securities, or any part thereof, than would otherwise be obtainable if such Collateral were either afforded to a largernumber or potential purchasers, registered under the Securities Act, or sold in the open market. Debtor agrees that any suchprivate sale made under this Paragraph 7(d) shall be deemed to have been made in a commercially reasonable manner, and thatSecured Party has no obligation to delay the sale of any Pledged Securities to permit the issuer thereof to register it for publicsale under any applicable federal or state securities Laws.(ii)Secured Party is authorized, in connection with any such sale, (A) to restrict the prospective bidders on orpurchasers of any of the Pledged Securities to a limited number of sophisticated investors who will represent and agree that theyare purchasing for their own account for investment and not with a view to the distribution or sale of any of such PledgedSecurities, and (B) to impose such other limitations or conditions in connection with any such sale as Secured Party reasonablydeems necessary in order to comply with applicable Law. Debtor covenants and agrees that it will execute and deliver suchdocuments and take such other action as Secured Party reasonably deems necessary in order that any such sale may be made incompliance with applicable Law. Upon any such sale Secured Party shall have the Right to deliver, assign, and transfer to thepurchaser thereof the Pledged Securities so sold. Each purchaser at any such sale shall hold the Pledged Securities so soldabsolutely free from any claim or Right of Debtor of whatsoever kind, including any equity or Right of redemption of Debtor.Debtor, to the extent permitted by applicable Law, hereby specifically waives all Rights of redemption, stay, or appraisal whichit has or may have under any Law now existing or hereafter enacted.(iii)Debtor agrees that ten (10) days’ written notice from Secured Party to Debtor of Secured Party’s intention tomake any such public or private sale or sale at a broker’s board or on a securities exchange shall constitute reasonable noticeunder the UCC. Such notice shall (A) in case of a public sale, state the time and place fixed for such sale, (B) in case of sale at abroker’s board or on a securities exchange, state the board or exchange at which such a sale is to be made and the day on whichthe Pledged Securities, or the portion thereof so being sold, will first be offered to sale at such board or exchange, and (C) in thecase of a private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such timeor times within ordinary business hours and at such place or places as Secured Party may fix in the notice of such sale. At anysuch sale, the Pledged Securities may be sold in one lot as an entirety or in separate parcels, as Secured Party may reasonablydetermine. Secured Party shall not be obligated to make any such sale pursuant to any such notice. Secured Party may, withoutnotice or publication, adjourn any public or privatesale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and suchsale may be made at any time or place to which the same may be so adjourned.(iv)In case of any sale of all or any part of the Pledged Securities on credit or for future delivery, the PledgedSecurities so sold may be retained by Secured Party until the selling price is paid by the purchaser thereof, but Secured Partyshall not incur any liability in case of the failure of such purchaser to take up and pay for the Pledged Securities so sold and incase of any such failure, such Pledged Securities may again be sold upon like notice. Secured Party, instead of exercising thepower of sale herein conferred upon it, may proceed by a suit or suits at Law or in equity to foreclose the Security Interests andsell the Pledged Securities, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction.(v)Without limiting the foregoing, or imposing upon Secured Party any obligations or duties not required byapplicable Law, Debtor acknowledges and agrees that, in foreclosing upon any of the Pledged Securities, or exercising anyother Rights or remedies provided Secured Party hereunder or under applicable Law, Secured Party may, but shall not berequired to, (A) qualify or restrict prospective purchasers of the Pledged Securities by requiring evidence of sophistication orcreditworthiness, and requiring the execution and delivery of confidentiality agreements or other documents and agreements asa condition to such prospective purchasers’ receipt of information regarding the Pledged Securities or participation in any publicor private foreclosure sale process, (B) provide to prospective purchasers business and financial information regarding Debtorand its Subsidiaries available in the files of Secured Party at the time of commencing the foreclosure process, without therequirement that Secured Party obtain, or seek to obtain, any updated business or financial information or verify, or certify toprospective purchasers, the accuracy of any such business or financial information, or (C) offer for sale and sell the PledgedSecurities with, or without, first employing an appraiser, investment banker, or broker with respect to the evaluation of thePledged Securities, the solicitation of purchasers for Pledged Securities, or the manner of sale of Pledged Securities.(e)Application of Proceeds. Secured Party shall apply the proceeds of any sale or other disposition of the Collateral inaccordance with the terms and conditions of the Credit Agreement. Any surplus remaining shall be delivered to Debtor or as a court ofcompetent jurisdiction may direct. If the proceeds are insufficient to pay the Obligations in full, Debtor shall remain liable for anydeficiency.(f)Sales on Credit. If Secured Party sells any of the Collateral upon credit, Debtor will be credited only with paymentsactually made by the purchaser, received by the Secured Party, and applied to the indebtedness of the purchaser. In the event thepurchaser fails to pay for the Collateral, Secured Party may resell the Collateral and Debtor shall be credited with the proceeds of thesale.8.OTHER RIGHTS OF SECURED PARTY.(a)Performance. If Debtor fails to keep the Collateral in good repair, working order, and condition, as required by theLoan Documents, or fails to pay when due all Taxes on any of the Collateral in the manner required by the Loan Documents, or fails topreserve the priority of the Security Interest in any of the Collateral, or fails to keep the Collateral insured as required by the LoanDocuments, or otherwise fails to perform any of its obligations under the Loan Documents with respect to the Collateral, then SecuredParty may, at its option, but without being required to do so, make such repairs, pay such Taxes, prosecute or defend any suits inrelation to the Collateral, or insure and keep insured the Collateral in any amount deemed appropriate by Secured Party, or take all otheraction which Debtor is required, but has failed or refused, to take under the Loan Documents. Any sum which may be expended or paidby Secured Party under this subparagraph (including, without limitation, court costs and reasonable attorneys’ fees) shall bear interestfrom the dates of expenditure or payment at the Default Rate until paid and, together with such interest, shall be payable by Debtor toSecured Party upon demand and shall be part of the Obligations.(b)Collection. If an Event of Default exists and upon notice from Secured Party, each Obligor with respect to anypayments on any of the Collateral (including, without limitation, dividends and other distributions with respect to the Pledged Securitiesand Partnership/Limited Liability Company Interests, payments on Collateral Notes,insurance proceeds payable by reason of loss or damage to any of the Collateral, or payments or distributions with respect to DepositAccounts) is hereby authorized and directed by Debtor to make payment directly to Secured Party, regardless of whether Debtor waspreviously making collections thereon; provided, that as between Debtor and Secured Party, insurance proceeds or other amountspayable by reason of casualty or condemnation shall be subject to the requirements of the Credit Agreement applicable to Dispositions,including Section 2.03(b) thereof. Subject to Paragraph 8(f) hereof, until such notice is given, Debtor is authorized to retain andexpend all payments made on Collateral. If an Event of Default exists, Secured Party shall have the Right in its own name or in thename of Debtor to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and uponsuch terms as Secured Party may determine; to demand, collect, receive, receipt for, sue for, compound, and give acquittances for anyand all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorsethe name of Debtor on any notes, acceptances, checks, drafts, money orders, or other evidences of payment on Collateral that maycome into the possession of Secured Party; to sign the name of Debtor on any invoice or bill of lading relating to any Collateral, on anydrafts against Obligors or other Persons making payment with respect to Collateral, on assignments and verifications of accounts orother Collateral and on notices to Obligors making payment with respect to Collateral; to send requests for verification of obligations toany Obligor; and to do all other acts and things necessary to carry out the intent of this Security Agreement. If an Event of Defaultexists and any Obligor fails or refuses to make payment on any Collateral when due, Secured Party is authorized, in its sole discretion,either in its own name or in the name of Debtor, to take such action as Secured Party shall deem appropriate for the collection of anyamounts owed with respect to Collateral or upon which a delinquency exists. Regardless of any other provision hereof, however,Secured Party shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owedwith respect to Collateral, nor shall it be under any duty whatsoever to anyone except Debtor to account for funds that it shall actuallyreceive hereunder. Without limiting the generality of the foregoing, Secured Party shall have no responsibility for ascertaining anymaturities, calls, conversions, exchanges, offers, tenders, or similar matters relating to any Collateral, or for informing Debtor withrespect to any of such matters (irrespective of whether Secured Party actually has, or may be deemed to have, knowledge thereof). Thereceipt of Secured Party to any Obligor shall be a full and complete release, discharge, and acquittance to such Obligor, to the extent ofany amount so paid to Secured Party.(c)Intellectual Property. For purposes of enabling Secured Party to exercise its Rights and remedies under this SecurityAgreement and enabling Secured Party and its successors and assigns to enjoy the full benefits of the Collateral, Debtor hereby grantsto Secured Party an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to Debtor) to use,license, or sublicense any of the Intellectual Property. Debtor shall provide Secured Party with reasonable access to all media in whichany of the Intellectual Property may be recorded or stored and all computer programs used for the completion or printout thereof. Thislicense shall also inure to the benefit of all successors, assigns, and transferees of Secured Party. Upon the occurrence and during thecontinuation of an Event of Default, Secured Party may require that Debtor assign all of its Right, title, and interest in and to theIntellectual Property or any part thereof to Secured Party or such other Person as Secured Party may designate pursuant to documentssatisfactory to Secured Party. If no Default or Event of Default exists, Debtor shall have the exclusive, non-transferable Right andlicense to use the Intellectual Property in the ordinary course of business and the exclusive Right to grant to other Persons licenses andsublicenses with respect to the Intellectual Property for full and fair consideration.(d)Record Ownership of Securities. If an Event of Default exists, Secured Party at any time may have any Collateral thatis Pledged Securities and that is in the possession of Secured Party, or its nominee or nominees, registered in its name, or in the name ofits nominee or nominees, as Secured Party; and, as to any Collateral that is Pledged Securities so registered, Secured Party shall executeand deliver (or cause to be executed and delivered) to Debtor all such proxies, powers of attorney, dividend coupons or orders, andother documents as Debtor may reasonably request for the purpose of enabling Debtor to exercise the voting Rights and powers whichit is entitled to exercise under this Security Agreement or to receive the dividends and other distributions and payments in respect ofsuch Collateral that is Pledged Securities or proceeds thereof which it is authorized to receive and retain under this Security Agreement.(e)Voting of Securities. As long as no Event of Default exists, Debtor is entitled to exercise all voting Rights pertaining toany Pledged Securities and Partnership/Limited Liability Company Interests; provided, however, that no vote shall be cast or consent,waiver, or ratification given or action taken without the prior written consent of Secured Party which would (x) be inconsistent with orviolate any provision of this Security Agreement or any other Loan Document, or (y) amend, modify, or waive any term, provision orcondition of the certificate of incorporation, bylaws, certificate of formation, or other charter document, or other agreement relating to,evidencing, providing for the issuance of, or securing any Collateral, to the extent any such amendment, modification or a waiverresults in a material adverse effect on the value of the Collateral or any part thereof; and provided further, that Debtor shall giveSecured Party at least five (5) Business Days’ prior written notice in the form of an officers’ certificate of the manner in which it intendsto exercise, or the reasons for refraining from exercising, any voting or other consensual Rights pertaining to the Collateral or any partthereof which might have a material adverse effect on the value of the Collateral or any part thereof. If an Event of Default exists and ifSecured Party elects to exercise such Right, the Right to vote any Pledged Securities shall be vested exclusively in Secured Party. Tothis end, Debtor hereby irrevocably constitutes and appoints Secured Party the proxy and attorney-in-fact of Debtor, with full power ofsubstitution, to vote, and to act with respect to, any and all Collateral that is Pledged Securities standing in the name of Debtor or withrespect to which Debtor is entitled to vote and act, subject to the understanding that such proxy may not be exercised unless an Event ofDefault exists. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligations have beenpaid and performed in full.(f)Certain Proceeds. Notwithstanding any contrary provision herein, any and all:(i)dividends, interest, or other distributions paid or payable other than in cash in respect of, and instruments andother property received, receivable, or otherwise distributed in respect of, or in exchange for, any Collateral;(ii)dividends, interest, or other distributions hereafter paid or payable in cash in respect of any Collateral inconnection with a partial or total liquidation or dissolution, or in connection with a reduction of capital, capital surplus, or paid-in-surplus;(iii)cash paid, payable, or otherwise distributed in redemption of, or in exchange for, any Collateral; and(iv)dividends, interest, or other distributions paid or payable in violation of the Loan Documents;shall be part of the Collateral hereunder, and shall, if received by Debtor, be held in trust for the benefit of Secured Party, and shallforthwith be delivered to Secured Party (accompanied by proper instruments of assignment and/or stock and/or bond powers executedby Debtor in accordance with Secured Party’s instructions) to be held subject to the terms of this Security Agreement (provided, thatinsurance proceeds or any other amounts payable as a result of casualty or condemnation shall be governed by the terms of the CreditAgreement applicable to Dispositions, including Section 2.03(b) thereof). Any cash Collateral in the possession of Secured Party maybe invested by Secured Party in time deposits or certificates of deposit issued by Secured Party (if Secured Party issues such certificates)or by any state or national bank having combined capital and surplus greater than $100,000,000 with a rating from Moody’s and S&Pof P‑1 and A‑1+, respectively, or in Cash Equivalents, as Secured Party may choose. Secured Party shall never be obligated to makeany such investment and shall never have any liability to Debtor for any loss which may result therefrom. All interest and otheramounts earned from any investment of Collateral may be dealt with by Secured Party in the same manner as other cash Collateral.(g)Use and Operation of Collateral. Should any Collateral come into the possession of Secured Party, Secured Party mayuse or operate such Collateral for the purpose of preserving it or its value pursuant to the order of a court of appropriate jurisdiction orin accordance with any other Rights held by Secured Party in respect of such Collateral. Debtor covenants to promptly reimburse andpay to Secured Party, at Secured Party’s request, the amount of all expenses (including, without limitation, the cost of any insurance andpayment of Taxes or other charges) incurred by Secured Party in connection with its custody and preservation of Collateral, and allsuch expenses, costs, Taxes, and other charges shall bear interest at the Default Rate until repaid and, together with such interest, shallbe payableby Debtor to Secured Party upon demand and shall become part of the Obligations. However, the risk of accidental loss or damage to,or diminution in value of, Collateral is on Debtor, and Secured Party shall have no liability whatever for failure to obtain or maintaininsurance, nor to determine whether any insurance ever in force is adequate as to amount or as to the risks insured. With respect toCollateral that is in the possession of Secured Party, Secured Party shall have no duty to fix or preserve Rights against prior parties tosuch Collateral and shall never be liable for any failure to use diligence to collect any amount payable in respect of such Collateral, butshall be liable only to account to Debtor for what it may actually collect or receive thereon. The provisions of this subparagraph areapplicable whether or not an Event of Default exists.(h)Cash Collateral Account. If an Event of Default exists and is continuing, Secured Party shall have, and Debtor herebygrants to Secured Party, the Right and authority to transfer all funds on deposit in the Deposit Accounts subject to a Control Agreementdelivered in connection with the Existing Credit Agreement to a cash collateral account (a “Cash Collateral Account”) maintained withSecured Party or with a depository institution acceptable to Secured Party and subject to the exclusive direction, domain, and control ofSecured Party, and no disbursements or withdrawals shall be permitted to be made by Debtor from such Cash Collateral Account. SuchCash Collateral Account shall be subject to the Security Interest and Liens in favor of Secured Party herein created, and Debtor herebygrants a security interest to Secured Party on behalf of Lenders in and to, such Cash Collateral Account and all checks, drafts, and otheritems ever received by Debtor for deposit therein. Furthermore, if an Event of Default exists, Secured Party shall have the Right, at anytime in its discretion without notice to Debtor, (i) to transfer to or to register in the name of Secured Party or any Lender or nominee anycertificates of deposit or deposit instruments constituting Deposit Accounts and shall have the Right to exchange such certificates orinstruments representing Deposit Accounts for certificates or instruments of smaller or larger denominations, and (ii) to take and applyagainst the Obligations any and all funds then or thereafter on deposit in the Cash Collateral Account or otherwise constituting DepositAccounts.(i)Power of Attorney. Debtor hereby irrevocably constitutes and appoints Secured Party and any officer or agent thereof,with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the name of Debtor orin its own name, to take after the occurrence and during the continuance of an Event of Default, any and all action and to execute anyand all documents and instruments which Secured Party at any time and from time to time deems necessary or desirable to accomplishthe purposes of this Security Agreement and, without limiting the generality of the foregoing, Debtor hereby gives Secured Party thepower and Right on behalf of Debtor and in its own name to do any of the following after the occurrence and during the continuance ofan Event of Default, without notice to or the consent of Debtor:(i)to transfer any and all funds on deposit in the Deposit Accounts to the Cash Collateral Account as set forthherein;(ii)to receive, endorse, and collect any drafts or other instruments or documents in connection with clause (b)above and this clause (ii);(iii)to use the Intellectual Property or to grant or issue any exclusive or non-exclusive license under theIntellectual Property to anyone else, and to perform any act necessary for the Secured Party to assign, pledge, convey, orotherwise transfer title in or dispose of the Intellectual Property to any other Person;(iv)to demand, sue for, collect, or receive, in the name of Debtor or in its own name, any money or property atany time payable or receivable on account of or in exchange for any of the Collateral and, in connection therewith, endorsechecks, notes, drafts, acceptances, money orders, documents of title or any other instruments for the payment of money underthe Collateral or any policy of insurance;(v)to pay or discharge taxes, Liens, or other encumbrances levied or placed on or threatened against theCollateral;(vi)to notify post office authorities to change the address for delivery of Debtor to an address designated bySecured Party and to receive, open, and dispose of mail addressed to Debtor; and(vii)(A) to direct account debtors and any other parties liable for any payment under any of the Collateral tomake payment of any and all monies due and to become due thereunder directly to Secured Party or as Secured Party shalldirect, (B) to receive payment of and receipt for any and all monies, claims, and other amounts due and to become due at anytime in respect of or arising out of any Collateral, (C) to sign and endorse any invoices, freight or express bills, bills of lading,storage or warehouse receipts, drafts against debtors, assignments, proxies, stock powers, verifications, and notices inconnection with accounts and other documents relating to the Collateral, (D) to commence and prosecute any suit, action, orproceeding at Law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforceany other Right in respect of any Collateral, (E) to defend any suit, action, or proceeding brought against Debtor with respect toany Collateral, (F) to settle, compromise, or adjust any suit, action, or proceeding described above and, in connection therewith,to give such discharges or releases as Secured Party may deem appropriate, (G) to exchange any of the Collateral for otherproperty upon any merger, division, consolidation, reorganization, recapitalization, or other readjustment of the issuer thereofand, in connection therewith, deposit any of the Collateral with any committee, depositary, transfer agent, registrar, or otherdesignated agency upon such terms as Secured Party may determine, (H) to add or release any guarantor, indorser, surety, orother party to any of the Collateral, (I) to renew, extend, or otherwise change the terms and conditions of any of the Collateral,(J) to endorse Debtor’s name on all applications, documents, papers, and instruments necessary or desirable in order for SecuredParty to use or maintain any of the Intellectual Property, (K) to make, settle, compromise or adjust any claims under orpertaining to any of the Collateral (including claims under any policy of insurance), (L) to execute on behalf of Debtor anyfinancing statements or continuation statements with respect to the Security Interests created hereby, and to do any and all actsand things to protect and preserve the Collateral, including, without limitation, the protection and prosecution of all Rightsincluded in the Collateral, and (M) to sell, transfer, pledge, convey, make any agreement with respect to or otherwise deal withany of the Collateral as fully and completely as though Secured Party were the absolute owner thereof for all purposes, and todo, at Secured Party’s option and Debtor’s expense, at any time, or from time to time, all acts and things which Secured Partydeems necessary to protect, preserve, maintain, or realize upon the Collateral and Secured Party’s security interest therein.This power of attorney is a power coupled with an interest and shall be irrevocable. Secured Party shall be under no duty to exercise orwithhold the exercise of any of the Rights, powers, privileges, and options expressly or implicitly granted to Secured Party in thisSecurity Agreement, and shall not be liable for any failure to do so or any delay in doing so. Neither Secured Party nor any Persondesignated by Secured Party shall be liable for any act or omission or for any error of judgment or any mistake of fact or Law. Thispower of attorney is conferred on Secured Party solely to protect, preserve, maintain, and realize upon its Security Interest in theCollateral. Secured Party shall not be responsible for any decline in the value of the Collateral and shall not be required to take anysteps to preserve rights against prior parties or to protect, preserve, or maintain any Lien given to secure the Collateral.(j)Purchase Money Collateral. To the extent that Secured Party or any Lender has advanced or will advance fundspursuant to the Credit Agreement to or for the account of Debtor to enable Debtor to purchase or otherwise acquire Rights in Collateral,Secured Party or such Lender, at its option, may pay such funds (i) directly to the Person from whom Debtor will make such purchaseor acquire such Rights, or (ii) to Debtor, in which case Debtor covenants to promptly pay the same to such Person, and forthwithfurnish to Secured Party evidence satisfactory to Secured Party that such payment has been made from the funds so provided.(k)Subrogation. If any of the Obligations are given in renewal or extension or applied toward the payment ofindebtedness secured by any Lien, Secured Party shall be, and is hereby, subrogated to all of the Rights, titles, interests, and Lienssecuring the indebtedness so renewed, extended, or paid.(l)INDEMNIFICATION. DEBTOR HEREBY ASSUMES ALL LIABILITY FOR THE COLLATERAL, FOR THESECURITY INTEREST, AND FOR ANY USE, POSSESSION, MAINTENANCE, AND MANAGEMENT OF, ALL OR ANY OF THECOLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY TAXES ARISING AS A RESULT OF, OR IN CONNECTION WITH,THE TRANSACTIONS CONTEMPLATEDHEREIN, AND AGREES TO ASSUME LIABILITY FOR, AND TO INDEMNIFY AND HOLD SECURED PARTY, THEADMINISTRATIVE AGENT AND EACH LENDER HARMLESS FROM AND AGAINST, ANY AND ALL CLAIMS, CAUSES OFACTION, OR LIABILITY, FOR INJURIES TO OR DEATHS OF PERSONS AND DAMAGE TO PROPERTY, HOWSOEVERARISING FROM OR INCIDENT TO SUCH USE, POSSESSION, MAINTENANCE, AND MANAGEMENT, WHETHER SUCHPERSONS BE AGENTS OR EMPLOYEES OF DEBTOR OR OF THIRD PARTIES, OR SUCH DAMAGE BE TO PROPERTY OFDEBTOR OR OF OTHERS. DEBTOR AGREES TO INDEMNIFY, SAVE, AND HOLD SECURED PARTY, THE ADMINISTRATIVEAGENT AND EACH LENDER HARMLESS FROM AND AGAINST, AND COVENANTS TO DEFEND SECURED PARTY, THEADMINISTRATIVE AGENT AND EACH LENDER AGAINST, ANY AND ALL LOSSES, DAMAGES, CLAIMS, COSTS,PENALTIES, LIABILITIES, AND EXPENSES (COLLECTIVELY, “CLAIMS”), INCLUDING, WITHOUT LIMITATION, COURTCOSTS AND ATTORNEYS’ FEES, AND ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF SECUREDPARTY, THE ADMINISTRATIVE AGENT OR ANY LENDER, OR ANY OF THEIR RESPECTIVE OFFICERS,EMPLOYEES, AGENTS, ADVISORS, EMPLOYEES, OR REPRESENTATIVES, HOWSOEVER ARISING OR INCURREDBECAUSE OF, INCIDENT TO, OR WITH RESPECT TO COLLATERAL OR ANY USE, POSSESSION, MAINTENANCE, ORMANAGEMENT THEREOF; PROVIDED, HOWEVER, THAT THE INDEMNITY SET FORTH IN THIS PARAGRAPH 8(l) WILL NOTAPPLY TO CLAIMS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SECURED PARTY, THEADMINISTRATIVE AGENT OR ANY LENDER.9.MISCELLANEOUS.(a)Continuing Security Interest. This Security Agreement creates a continuing security interest in the Collateral and shall(i) remain in full force and effect until the termination of the obligations of Lenders and the L/C Issuer to make Credit Extensions underthe Loan Documents, termination of all Letters of Credit and the payment in full of the Obligations (except as otherwise provided inSection 10.01(e) of the Credit Agreement with respect to Obligations under Lender Hedging Agreements); and (ii) inure to the benefitof and be enforceable by Secured Party, Lenders, and their respective successors, transferees, and assigns. Without limiting thegenerality of the foregoing clause (ii), Secured Party and Lenders may assign or otherwise transfer any of their respective Rights underthis Security Agreement to any other Person in accordance with the terms and provisions of Section 10.07 of the Credit Agreement, andto the extent of such assignment or transfer such Person shall thereupon become vested with all the Rights and benefits in respectthereof granted herein or otherwise to Secured Party or Lenders, as the case may be. Upon payment in full of the Obligations, Debtorshall be entitled to the return, upon its request and at its expense, of such of the Collateral as shall not have been sold or otherwiseapplied pursuant to the terms hereof.(b)Reference to Miscellaneous Provisions. This Security Agreement is one of the “Loan Documents” referred to in theCredit Agreement, and all provisions relating to Loan Documents set forth in Article X of the Credit Agreement (including, withoutlimitation, Section 10.10 therein) are incorporated herein by reference, the same as if set forth herein verbatim.(c)Term; Release of Liens. Upon the satisfaction of the conditions set forth in Section 10.01(e) of the Credit Agreement,the Collateral Agent shall release the liens created by this Security Agreement in accordance with Section 10.01(d) of the CreditAgreement; provided that no Obligor, if any, on any of the Collateral shall ever be obligated to make inquiry as to the termination ofthis Security Agreement, but shall be fully protected in making payment directly to Secured Party until actual notice of such totalpayment of the Obligations is received by such Obligor. At such time as the Liens created by this Security Agreement are to be releasedpursuant to this paragraph, Secured Party shall, at the request and expense of Debtor following such termination, promptly deliver toDebtor any Collateral held by the Secured Party hereunder, and promptly execute and deliver to such Debtor such documents andinstruments as Debtor shall reasonably request to evidence such termination and release as provided in the Credit Agreement. Inaddition, if any of the Collateral shall be sold, transferred, assigned or otherwise disposed of by Debtor in a transaction permitted by theCredit Agreement, then the Secured Party, at the request and expense of Debtor, shall promptly execute and deliver releases as providedin the Credit Agreement.(d)Actions Not Releases. The Security Interest and Debtor’s obligations and Secured Party’s Rights hereunder shall notbe released, diminished, impaired, or adversely affected by the occurrence of any one or more of the following events: (i) the taking oraccepting of any other security or assurance for any or all of the Obligations; (ii) any release, surrender, exchange, subordination, orloss of any security or assurance at any time existing in connection with any or all of the Obligations; (iii) the modification of,amendment to, or waiver of compliance with any terms of any of the other Loan Documents without the notification or consent ofDebtor, except as required therein (the Right to such notification or consent being herein specifically waived by Debtor); (iv) theinsolvency, bankruptcy, or lack of corporate or trust power of any party at any time liable for the payment of any or all of theObligations, whether now existing or hereafter occurring; (v) any renewal, extension, or rearrangement of the payment of any or all ofthe Obligations, either with or without notice to or consent of Debtor, or any adjustment, indulgence, forbearance, or compromise thatmay be granted or given by Secured Party or any Lender to Debtor; (vi) any neglect, delay, omission, failure, or refusal of SecuredParty or any Lender to take or prosecute any action in connection with any other agreement, document, guaranty, or instrumentevidencing, securing, or assuring the payment of all or any of the Obligations; (vii) any failure of Secured Party or any Lender to notifyDebtor of any renewal, extension, or assignment of the Obligations or any part thereof, or the release of any Collateral or other security,or of any other action taken or refrained from being taken by Secured Party or any Lender against Debtor or any new agreementbetween or among Secured Party or one or more Lenders and Debtor, it being understood that except as expressly provided herein,neither Secured Party nor any Lender shall be required to give Debtor any notice of any kind under any circumstances whatsoever withrespect to or in connection with the Obligations, including, without limitation, notice of acceptance of this Security Agreement or anyCollateral ever delivered to or for the account of Secured Party hereunder; (viii) the illegality, invalidity, or unenforceability of all orany part of the Obligations against any party obligated with respect thereto by reason of the fact that the Obligations, or the interest paidor payable with respect thereto, exceeds the amount permitted by Law, the act of creating the Obligations, or any part thereof, is ultravires, or the officers, partners, or trustees creating same acted in excess of their authority, or for any other reason; or (ix) if any paymentby any party obligated with respect thereto is held to constitute a preference under applicable Laws or for any other reason SecuredParty or any Lender is required to refund such payment or pay the amount thereof to someone else.(e)Waivers. Except to the extent expressly otherwise provided herein or in other Loan Documents and to the fullestextent permitted by applicable Law, Debtor waives (i) any Right to require Secured Party or any Lender to proceed against any otherPerson, to exhaust its Rights in Collateral, or to pursue any other Right which Secured Party or any Lender may have, (ii) with respect tothe Obligations, presentment and demand for payment, protest, notice of protest and nonpayment, and notice of the intention toaccelerate, and (iii) all Rights of marshaling in respect of any and all of the Collateral.(f)Financing Statement; Authorization. Secured Party shall be entitled at any time to file this Security Agreement or acarbon, photographic, or other reproduction of this Security Agreement, as a financing statement, but the failure of Secured Party to doso shall not impair the validity or enforceability of this Security Agreement. Debtor hereby irrevocably authorizes Secured Party at anytime and from time to time to file in any UCC jurisdiction any initial or other financing statements and amendments thereto (without therequirement for Debtor’s signature thereon) that (i) indicate the Collateral (A) as “all assets of Debtor”, or words of similar effect;regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC of the state or suchjurisdiction or whether such assets are included in the Collateral hereunder, or (B) as being of an equal or lesser scope or with greaterdetail, and (ii) contain any other information required by Article 9 of the UCC of the state or such jurisdiction for the sufficiency orfiling office acceptance of any financing statement or amendment, including (A) whether Debtor is an organization, the type oforganization, and any organization identification number issued to Debtor, and (B) in the case of a financing statement filed as a fixturefiling or indicating Collateral as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateralrelates. Debtor agrees to furnish any such information to Secured Party promptly upon request.(g)Amendments. This Security Agreement may be amended only by an instrument in writing executed jointly by Debtorand Secured Party, and supplemented only by documents delivered or to be delivered in accordance with the express terms hereof.(h)Multiple Counterparts. This Security Agreement has been executed in a number of identical counterparts, each ofwhich shall be deemed an original for all purposes and all of which constitute, collectively, one agreement; but, in making proof of thisSecurity Agreement, it shall not be necessary to produce or account for more than one such counterpart.(i)Parties Bound; Assignment. This Security Agreement shall be binding on Debtor and Debtor’s heirs, legalrepresentatives, successors, and assigns and shall inure to the benefit of Secured Party and Secured Party’s successors and assigns.(i)Secured Party is the agent for each Lender under the Credit Agreement, the Security Interest and all Rightsgranted to Secured Party hereunder or in connection herewith are for the ratable benefit of each Lender, and Secured Party may,without the joinder of any Lender, exercise any and all Rights in favor of Secured Party or Lenders hereunder, including,without limitation, conducting any foreclosure sales hereunder, and executing full or partial releases hereof, amendments ormodifications hereto, or consents or waivers hereunder. The Rights of each Lender vis-a-vis Secured Party and each otherLender may be subject to one or more separate agreements between or among such parties, but Debtor need not inquire aboutany such agreement or be subject to any terms thereof unless Debtor specifically joins therein; and consequently, neither Debtornor Debtor’s heirs, personal representatives, successors, and assigns shall be entitled to any benefits or provisions of any suchseparate agreements or be entitled to rely upon or raise as a defense, in any manner whatsoever, the failure or refusal of anyparty thereto to comply with the provisions thereof.(ii)Debtor may not, without the prior written consent of Secured Party, assign any Rights, duties, or obligationshereunder.(j)Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED INACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWRULES OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATION LAW) AND APPLICABLE FEDERALLAW; AND THE SECURED PARTY AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.(k)All notices given pursuant hereto shall be given in the manner set forth in the Credit Agreement, if to Secured Party,to the address of Secured Party therein set forth and if to Debtor, to the following address:Martin Transport, Inc.4200 Stone RoadKilgore, TX 75662Attn: Robert D. BondurantChief Financial OfficerTelephone: (903) 983-6250Facsimile: (903) 983-6403(l)Non-Liability of Secured Parties. Secured Party shall not have any fiduciary responsibilities to Debtor; and noprovision in this Security Agreement or in any of the other Loan Documents, and no course of dealing between or among any of theparties hereto, shall be deemed to create any fiduciary duty owing by Secured Party to Debtor, or any Subsidiary of any Debtor.Secured Party undertakes no responsibility to Debtor to review or inform Debtor of any matter in connection with any phase of anyDebtor’s business or operations.(m)Severability of Provisions. Any provision of this Security Agreement which is prohibited or unenforceable in anyjurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidatingthe remainder of such provision or the remaining provisions or affecting the validity or enforceability of such provision in any otherjurisdiction.(n)THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEENTHE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENTORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.Remainder of Page Intentionally Blank.Signature Page to Follow.EXECUTED as of the date first stated in this Security Agreement.MARTIN TRANSPORT, INC.,a Texas corporation, as DebtorBy: Name: Robert D. BondurantTitle: Executive Vice President and Chief Financial OfficerANNEX A TO SECURITY AGREEMENTDEBTOR INFORMATION AND LOCATION OF COLLATERALExact Legal Name of Debtor:Martin Transport, Inc.Mailing Address of Debtor:4200 Stone Road, Kilgore, Texas 75662Type of Entity:CorporationJurisdiction of Organization:TexasState Issued Organizational Identification Number:0055985300Tax ID Number:75-1756074Location of Books and Records:4200 Stone RoadKilgore, Texas 75662Location of Inventory with Fair Market Value in Excess of $1,000,000:None. Location of Equipment with Fair Market Value in Excess of $1,000,000:None. Location of Real Property:Owned Real Property - Address of Real EstateMTI BAYTOWN10850 INTERSTATE 10 EBAYTOWNTX77523MTI CORPUS CHRISTI502 FLATO ROADCORPUS CHRISTITX78405MTI LONGVIEW5146 WEST LOOP 281LONGVIEWTX75603MTI BATON ROUGE1616 MENGAL ROADBATON ROUGELA70807MTI BOSSIER CITY4295 MEADOW LANEBOSSIER CITYLA71111MTI HATTIESBURG7604 US HWY 49 NHATTIESBURGMS39401MTI KENOVA2200 OAK STREETKENOVAWV25530MTI SMACKOVER2346 PERSHING HWYSMACKOVERAR71762MTI DAYTON66 E. DAYTON ROADARTESIANM88211MTI CAMPBELLTONHWY 281 SCAMPBELLTONTX78008MTI LAKE CHARLES124 BUNKER ROADLAKE CHARLESLA70615Leased Real Property - Address of Real EstateMTI KILGORE2800 N LONGVIEW STREETKILGORETX75662MTI BEAUMONT6030 S. MLK JR. PARKWAYBEAUMONTTX77705MTI CHANNELVIEW15551 EAST FREEWAYCHANNELVIEWTX77530MTI RESERVE180 POWER BLVD.RESERVELA70084MTI STEPHENS658 OUACHITA 137STEPHENSAR71764MTI WEST MEMPHIS5788 US Hwy 70MARIONAR72364MTI CHATTANOOGA3500 N. HAWTHORNE STREETCHATTANOOGATN37406MTI PLAINVIEW669 CR TPLAINVIEWTX79072MTI ARCADIA(Parking Only)662 HWY 147SARCADIALA71001MTI ARCADIA599 HWY. 147ARCADIALA71001MTI KINGSPORT348 DILLOWKINGSPORTTN37663MTI LAKE CHARLES124 BUNKER ROADLAKE CHARLESLA70615MTI THEODORE7778 DAUPHIN ISLAND PKWYTHEODOREAL36582MTI ST. GABRIEL4250 GEIGY ACCESS ROADST. GABRIELLA71001MTI JENNINGS1707 EVANGELINE HWYJENNINGSLA70546Jurisdiction for Filing Financing Statements:Texas Secretary of StateANNEX B-1 TO SECURITY AGREEMENTCOLLATERAL DESCRIPTIONSA. Collateral Notes and Collateral Note Security: N/AB. Pledged Shares: N/AC.Partnerships and Limited Liability Companies and Partnership/Limited Liability Company Agreements: N/AD. Commercial Tort Claims: N/AE. Deposit Accounts (including name of bank, address and account number): BANKADDRESSACCT NO. TYPEDESCRIPTIONAUSTIN BANK1006 STONE ROADKILGORE, TX 7566249271CHECKINGPERMIT FUNDAUSTIN BANK1006 STONE ROADKILGORE, TX 756623609002391CHECKINGPENALTY FUNDAUSTIN BANK1006 STONE ROADKILGORE, TX 756623609001980CHECKINGKILGORE PETTY CASH ACCTREGIONS BANK1717 MCKINNEY AVE.11TH FLOORDALLAS, TEXAS 752020247443359CHECKINGCOLLATERAL ACCOUNT FORMTI’S DEBT THAT HAS BEENREPAIDF. Commodity Accounts (including name of bank, address and account number): None.G. Securities Accounts (including name of bank, address and account number): None. ANNEX B-2 TO SECURITY AGREEMENTINTELLECTUAL PROPERTY1. Registered Copyrights and Copyright Applications: None.2. Issued Patents and Patent Applications: None.3. Registered Trademarks and Trademark Applications: None. ANNEX B-3 TO SECURITY AGREEMENTMATERIAL AGREEMENTS; DEFAULTSDefaults or Potential Defaults under Material AgreementsNone.ANNEX B-4 TO SECURITY AGREEMENTVESSELSNone. ANNEX C TO SECURITY AGREEMENTACKNOWLEDGMENT OF PLEDGEPARTNERSHIP/LIMITED LIABILITY COMPANY: (the “Company”)INTEREST OWNER: (the “Interest Owner”)SECURITY AGREEMENT: Pledge and Security Agreement dated as of January 2, 2019 (as amended, supplemented, restated orotherwise modified from time to time, the “Security Agreement”)DATE: _______________BY THIS ACKNOWLEDGMENT OF PLEDGE dated as of the date first above written, the Company hereby acknowledges the pledgein favor of Royal Bank of Canada (“Pledgee”), in its capacity as Collateral Agent for certain Lenders (as defined in the SecurityAgreement) and as Secured Party under the Security Agreement, against, and a security interest in favor of Pledgee in, all of the InterestOwner’s rights in connection with any equity interest in the Company now and hereafter owned by the Interest Owner (“CompanyInterest”).A. Pledge Records. The Company has identified Pledgee’s interest in all of the Interest Owner’s right, title, and interest in andto all of the Interest Owner’s Company Interest as subject to a pledge and security interest in favor of Pledgee in the Company’s booksand records.B. Company Distributions, Accounts, and Correspondence. The Company hereby acknowledges that (i) all proceeds,distributions, and other amounts payable to the Interest Owner, including, without limitation, upon the termination, liquidation, anddissolution of the Company, shall be paid and remitted to the Pledgee upon demand, (ii) all funds in deposit accounts held for theaccount of, or otherwise payable to, the Interest Owner shall be held for the benefit of Pledgee, and (iii) all future correspondence,accountings of distributions, and tax returns of the Company shall be provided to the Pledgee. The Company acknowledges and acceptssuch direction and hereby agrees that it shall, upon the written demand by the Pledgee, pay directly to the Pledgee to its offices as shallbe specified by the Pledgee any and all distributions, income, and cash flow arising from the Company Interests whether payable incash, property or otherwise, subject to and in accordance with the terms and conditions of the organizational documents of theCompany. The Pledgee may from time to time notify the Company of any change of address to which such amounts are to be paid.Remainder of Page Intentionally Blank.Signature Page to Follow.EXECUTED as of the date first stated in this Acknowledgment of Pledge.[PARTNERSHIP/LIMITED LIABILITY COMPANY]By: ,as [General Partner] [Manager]By: Name: Title: Exhibit 10.7 SUPPLEMENT AGREEMENT(Third Amended and Restated Pledge and Security Agreement)Martin Operating Partnership L.P.4200 Stone Road Kilgore, Texas 75662January 2, 2019Royal Bank of Canada4th Floor, 20 King Street WestToronto, Ontario M5H 1C4Attention: Jason YorkLadies and Gentlemen:Reference is made to the Third Amended and Restated Pledge and Security Agreement, dated as of March 28, 2013 (asamended, restated, supplemented or otherwise modified and in effect from time to time, the “Security Agreement”), by and between (a)Martin Operating Partnership L.P., a Delaware limited partnership (the “Pledgor”) and (b) Royal Bank of Canada, as collateral agent(in such capacity, the “Collateral Agent”) for its own benefit and the benefit of the other Lenders (as defined in the SecurityAgreement) and the Lender Swap Parties (as defined in the Credit Agreement). All capitalized terms used but not defined herein shallhave the meanings set forth in the Security Agreement.This Supplement Agreement is delivered by the undersigned, the Pledgor, to supplement the Security Agreement pursuant toSection 6(g) of the Security Agreement. Schedule 1 attached hereto is a supplement to Annex B-1 to the Security Agreement. Theparties hereto hereby agree to supplement Annex B-1 to the Security Agreement with the information contained on Schedule 1attached hereto, and such supplement shall be deemed to be part of the Security Agreement. The Pledgor hereby agrees to continue tobe bound to the Security Agreement by all of the terms, covenants and conditions set forth in the Security Agreement as herebysupplemented. Without limiting the generality of the foregoing, the Pledgor hereby grants and pledges to the Collateral Agent, itssuccessors and permitted assigns, for its own benefit and the benefit of the other Lenders and the Lender Swap Parties, as collateralsecurity for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration orotherwise) of the Obligations, a Lien on and security interest in the equity interests described on Annex B-1 to the Security Agreement,acknowledges and agrees that such equity interests shall be Pledged Shares and Collateral for all purposes under the SecurityAgreement and affirms all of its obligations and liabilities as a Debtor under the Security Agreement with respect to such PledgedShares. The Pledgor hereby makes with respect to such Pledged Shares each of the representations and warranties in the SecurityAgreement and agrees to each of the covenants applicable to the Pledgor contained in the Security Agreement.2This Supplement Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number ofcounterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed tobe an original, but all such counterparts together shallconstitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Supplement Agreement bytelecopier or other electronic transmission (e.g. “pdf”) shall be effective as delivery of a manually executed counterpart of thisSupplement Agreement.THIS SUPPLEMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,THE LAWS OF THE STATE OF NEW YORK.[Signature Pages Follow]IN WITNESS WHEREOF, the Pledgor has caused this Supplement Agreement to be executed and delivered by its dulyauthorized officer as of the date first above written.MARTIN OPERATING PARTNERSHIP L.P., a Delaware limited partnership, as PledgorBy:MARTIN OPERATING GP LLC, its General PartnerBy:MARTIN MIDSTREAM PARTNERS L.P., its Sole MemberBy:MARTIN MIDSTREAM GP LLC, its General PartnerBy: Name: Robert D. BondurantTitle: Executive Vice President andChief Financial OfficerAGREED TO AND ACCEPTED:ROYAL BANK OF CANADA,as Collateral AgentBy: Name: Jason YorkTitle: Authorized SignatorySCHEDULE 1COLLATERAL DESCRIPTIONSIssuerRecord OwnerClass of EquityInterestsCertificate No.Number ofIssued andOutstandingEquity InterestsPercentage ofEquity Interestsheld by RecordOwnerPercentage ofEquity Interestspledged byRecord OwnerMartin Transport, Inc.Martin OperatingPartnership L.P.Common stockCS-0041,000 Shares100%100%Exhibit 21.1 SUBSIDIARIES OFMARTIN MIDSTREAM PARTNERS L.P. Subsidiary Jurisdiction of Organization Martin Operating GP LLC Delaware Martin Operating Partnership L.P. Delaware Martin Midstream Finance Corp Delaware MOP Midstream Holdings LLC Delaware Cardinal Gas Storage Partners LLC Delaware Monroe Gas Storage Company LLC Delaware Arcadia Gas Storage, LLC Texas Cadeville Gas Storage, LLC Delaware Perryville Gas Storage, LLC Delaware Talen's Marine & Fuel LLC Louisiana Exhibit 23.1 Consent of Independent Registered Public Accounting FirmThe Board of DirectorsMartin Midstream GP LLC:We consent to the incorporation by reference in the registration statements on Form S-3 (No. 333‑211407) and on Form S-8 (No. 333-218693, No. 333-203857 and No. 333-140152) of Martin Midstream Partners L.P. of our reports dated February 19, 2019, with respect to the consolidated balance sheets ofMartin Midstream Partners L.P. and subsidiaries as of December 31, 2018 and 2017, the related consolidated statements of operations, changes in capital, andcash flows for each of the years in the three-year period ended December 31, 2018, and the related notes, and the effectiveness of internal control overfinancial reporting as of December 31, 2018, which reports appear in the December 31, 2018 annual report on Form 10‑K of Martin Midstream Partners L.P./s/ KPMG LLPDallas, TexasFebruary 19, 2019Exhibit 23.2CONSENT OF INDEPENDENT ACCOUNTANTSWe hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-211407) and Form S-8 (No 333-218693, 333-203857 and 333-140152) of Martin Midstream Partners L.P. of our report dated February 19, 2019 relating to the financial statements of West Texas LPGPipeline Limited Partnership, which appears in this Form 10-K./s/ PricewaterhouseCoopers LLPTulsa, OklahomaFebruary 19, 2019Exhibit 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERPursuant to 17 CFR 240.13a-14(a)/15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002) I, Ruben S. Martin, certify that: 1. I have reviewed this annual report on Form 10-K of Martin Midstream Partners L.P.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.February 19, 2019 /s/ Ruben S. Martin Ruben S. Martin, President and Chief Executive Officer of Martin Midstream GP LLC, the General Partner of Martin Midstream Partners L.P. Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPursuant to 17 CFR 240.13a-14(a)/15d-14(a)(Section 302 of the Sarbanes-Oxley Act of 2002)I, Robert D. Bondurant, certify that: 1. I have reviewed this annual report on Form 10-K of Martin Midstream Partners L.P.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. February 19, 2019 /s/ Robert D. Bondurant Robert D. Bondurant, Executive Vice President and Chief Financial Officer of Martin Midstream GP LLC, the General Partner of Martin Midstream Partners L.P. Exhibit 32.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*In connection with the Annual Report of Martin Midstream Partners L.P., a Delaware limited partnership (the “Partnership”), on Form 10-K for theyear ended December 31, 2018, as filed with the Securities and Exchange Commission (the “Report”), I, Ruben S. Martin, Chief Executive Officer of MartinMidstream GP LLC, the general partner of the Partnership, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), thatto my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/ Ruben S. Martin Ruben S. Martin, Chief Executive Officer of Martin Midstream GP LLC, General Partner of Martin Midstream Partners L.P. February 19, 2019*A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership andfurnished to the Securities and Exchange Commission or its staff upon request.Exhibit 32.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*In connection with the Annual Report of Martin Midstream Partners L.P., a Delaware limited partnership (the “Partnership”), on Form 10-K for theyear ended December 31, 2018, as filed with the Securities and Exchange Commission (the “Report”), I, Robert D. Bondurant, Chief Financial Officer ofMartin Midstream GP LLC, the general partner of the Partnership, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section1350), that to my knowledge:(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/ Robert D. Bondurant Robert D. Bondurant, Chief Financial Officer of Martin Midstream GP LLC, General Partner of Martin Midstream Partners L.P. February 19, 2019*A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership andfurnished to the Securities and Exchange Commission or its staff upon request.

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