UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Mark One
Annual Report Pursuant to Section 13 or 15(d) of the
☒
Securities Exchange Act of 1934
For the fiscal year ended December 31, 2024
OR
☐
Transition 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
05-0527861
State 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
Trading Symbol(s)
Name of each exchange on which registered
Common Units representing limited partnership interests
MMLP
The NASDAQ Global Select Market
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
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 ☐ No ☒
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 the
preceding 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 ☒ No ☐
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-
T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes ☒ No ☐
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 ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
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 financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of June 30, 2024, 39,001,086 common units were outstanding. The aggregate market value of the common units held by non-affiliates of the registrant as of such date
approximated $91,131,243 based on the closing sale price on that date. There were 39,055,086 of the registrant’s common units outstanding as of February 24, 2025.
DOCUMENTS INCORPORATED BY REFERENCE: None.
TABLE OF CONTENTS
Page
PART I
1
Item 1.
Business
1
Item 1A.
Risk Factors
19
Item 1B.
Unresolved Staff Comments
44
Item 1C.
Cybersecurity
44
Item 2.
Properties
45
Item 3.
Legal Proceedings
45
Item 4.
Mine Safety Disclosures
46
PART II
47
Item 5.
Market for Our Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities
47
Item 6.
[Reserved]
47
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
48
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
66
Item 8.
Financial Statements and Supplementary Data
67
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
109
Item 9A.
Controls and Procedures
109
Item 9B.
Other Information
110
PART III
111
Item 10.
Directors, Executive Officers and Corporate Governance
111
Item 11.
Executive Compensation
115
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
125
Item 13.
Certain Relationships and Related Transactions, and Director Independence
128
Item 14.
Principal Accounting Fees and Services
133
PART IV
134
Item 15.
Exhibits, Financial Statement Schedules
134
Item 16.
Form 10-K Summary
137
i
PART I
Item 1.
Business
References in this annual report to "we," "ours," "us" or like terms when used in a historical context refer to the assets and operations of Martin Resource
Management Corporation'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 Corporation" refer to Martin Resource Management Corporation and its subsidiaries, unless the context otherwise requires.
References in this annual report to the "Partnership" refer to Martin Midstream Partners L.P. and its subsidiaries, unless the content otherwise requires. You
should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes
thereto included elsewhere in this annual report. For more detailed information regarding the basis for presentation for the following information, you should
read the notes to the consolidated financial statements included elsewhere in this annual report.
Forward-Looking Statements
This Annual Report on Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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 related thereto), 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 of operations or of financial condition or state other "forward-looking" information. We and our representatives may
from time to time make other oral or written statements that are also forward-looking statements.
These forward-looking statements are made based upon management's current plans, expectations, estimates, assumptions and beliefs concerning
future events impacting us and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that
actual 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 by
these forward-looking statements for a number of important reasons, including those discussed below in "Item 1A. Risk Factors - Risks Relating to our
Business."
Overview
We are a publicly traded limited partnership with a diverse set of operations focused primarily in the Gulf Coast region of the United States ("U.S.").
Our four primary business lines include:
•
Terminalling, processing, and storage services for petroleum products and by-products;
•
Land and marine transportation services for petroleum products and by-products, chemicals, and specialty products;
•
Sulfur and sulfur-based products processing, manufacturing, marketing, and distribution; and
•
Marketing, distribution, and transportation services for natural gas liquids ("NGL") and blending and packaging services for specialty lubricants and
grease.
Our vertically integrated services have created long-standing relationships with a diversified customer base that includes major and independent oil and gas
companies, independent refiners, chemical companies, and other wholesale purchasers of certain petroleum products and by-products, with significant business
concentrated around the U.S. Gulf Coast refinery complex, which is a major hub for petroleum refining, natural gas gathering and processing, and support
services for the exploration and production industry. The petroleum products and by-products we gather, transport, store and market are produced primarily by
major and independent oil and gas companies who often rely on third parties, such as us, for the transportation and disposition of these products.
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We believe that we have become an integral part of the value chain for our customers by providing them with high value, niche services. We generate a
significant amount of our cash flow from fee-based businesses with a significant amount of the working capital demands and margin risk associated with the
collective services that we and our sponsor, Martin Resource Management Corporation, provide to customers mainly assumed under contracts between such
customers and Martin Resource Management Corporation. Our fixed fee and margin business provides a combination of long-term, spot and evergreen
contracts.
We were formed in 2002 by Martin Resource Management Corporation, a privately-held company whose initial predecessor was incorporated in 1951 as a
supplier of products and services to drilling rig contractors. Since then, Martin Resource Management Corporation has expanded its operations through
acquisitions and internal expansion initiatives as its management identified and capitalized on the needs of producers and purchasers of petroleum products and
by-products and other bulk liquids. Martin Resource Management Corporation is an important supplier and customer of ours. As of December 31, 2024, Martin
Resource Management Corporation owned 15.7% of our total outstanding common limited partner units. Furthermore, on December 28, 2021, Martin
Resource Management Corporation indirectly acquired, through its wholly owned subsidiary, Martin Resource LLC, the remaining 49% voting interest (50%
economic interest) in MMGP Holdings, LLC ("Holdings"), which is the sole member of Martin Midstream GP LLC ("MMGP"), our general partner. Such
interests were previously held by certain affiliated investment funds managed by Alinda Capital Partners, which sold the interests to Senterfitt Holdings Inc.
(“Senterfitt”) on November 23, 2021. At such time, Senterfitt granted Martin Resource LLC the right to purchase such interests for a period of ten years, which
right was exercised on December 28, 2021. As a result, Martin Resource Management Corporation indirectly owns 100% of MMGP. Martin Resource
Management Corporation directs our business operations through its ownership of our general partner. MMGP owns a 2.0% general partner interest in us, and,
until November 23, 2021, MMGP owned all of our incentive distribution rights. On November 23, 2021, MMGP contributed to us all of our incentive
distribution rights for no consideration, whereupon the incentive distribution rights were cancelled and cease to exist.
We entered into an omnibus agreement dated November 1, 2002, with Martin Resource Management Corporation (the "Omnibus Agreement") that governs,
among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision to us of
general administration and support services by Martin Resource Management Corporation and our use of certain of Martin Resource Management
Corporation’s trade names and trademarks. Under the terms of the Omnibus Agreement, the employees of Martin Resource Management Corporation are
responsible for conducting our business and operating our assets.
Martin Resource Management Corporation has operated our business since the Partnership's inception in 2002. Martin Resource Management Corporation
began operating our NGL business in the 1950s and our sulfur business in the 1960s. It began our land transportation business in the early 1980s and our
marine transportation business in the late 1980s. It entered into our fertilizer and terminalling and storage businesses in the early 1990s.
Primary Business Segments
Our primary business segments can be generally described as follows:
•
Terminalling and Storage. We own or operate 12 marine shore-based terminal facilities and 8 specialty terminal facilities located primarily in the
Gulf Coast region of the U.S. with aggregate storage capacity of 2.6 million barrels. We own one naphthenic lubricants refinery in Smackover,
Arkansas with a capacity of 7,700 barrels per day, 0.3 million barrels of crude bulk storage and 0.6 million barrels of lubricant storage. Further,
we own approximately 2.3 million barrels of underground storage capacity for NGLs. We store NGLs for wholesale deliveries to refineries,
industrial NGL users and propane retailers in the southern U.S. We provide storage, refining, and handling services for producers and suppliers of
petroleum products and by-products, including the refining of naphthenic crude oil. Our facilities and resources provide us with the ability to
handle various products that require specialized treatment, such as molten sulfur and asphalt. We also provide land rental to oil and gas companies
along with storage and handling services for lubricants and fuels through our shore-based terminals. We provide these terminalling and storage
services on a fixed-fee basis and a significant portion of the contracts in this segment provide for minimum fee arrangements that are not based on
the volumes handled. We believe that our terminalling, processing and storage for petroleum products and by-products would be difficult for our
customers or competitors to replicate.
•
Transportation. We operate a fleet of both land transportation and marine transportation assets that transport petroleum products and by-products,
petrochemicals, and chemicals. Our land transportation assets include approximately 600 trucks and 1,275 tank trailers which are based across 25
terminals strategically located
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throughout the U.S. Gulf Coast and southeastern U.S. Our marine transportation assets include 27 inland marine tank barges, 15 inland push boats
and one articulated offshore tug and barge unit that primarily operate coastwise along the Gulf of Mexico and on the U.S. inland waterway
system, primarily between domestic ports along the Gulf of Mexico, the Intracoastal Waterway, the Mississippi River system and the Tennessee-
Tombigbee Waterway system. Our "refinery and petrochemical services" model is focused on transportation of heavy tank bottoms (by-products)
and other petroleum products, hauling NGLs, molten sulfur, sulfuric acid, paper mill liquids, chemicals, and numerous other bulk liquid
commodities from refineries and petrochemical production locations to end markets. We provide these transportation services on a fee basis, and
many of our customers have long standing contractual relationships with us. We believe our modernized asset base is attractive both to our
existing customers as well as potential new customers. In addition, our marine fleet contains several vessels that reflect our focus on specialty
products.
•
Sulfur Services. We have developed an integrated system of transportation assets and facilities relating to sulfur services. We process and
distribute sulfur produced by oil refineries primarily located in the Gulf Coast region of the U.S. We purchase and sell molten sulfur on contracts
that are tied to sulfur indices to minimize margin fluctuations. We process molten sulfur into prilled or pelletized sulfur at our facility in
Beaumont, Texas on contracts that traditionally provide guaranteed minimum fees. The sulfur we process and handle is primarily used in the
production of fertilizers and industrial chemicals. We own and operate five sulfur-based fertilizer production plants and one emulsified sulfur
blending plant. These plants are located in Texas and Illinois and manufacture primarily sulfur-based fertilizer products for wholesale distributors
and industrial users. Demand for our sulfur products exists across the globe, and our asset base provides additional opportunities to handle
increases in U.S. supply and access to foreign demand.
•
Specialty Products. We own and operate facilities dedicated to both the blending and packaging of private label agricultural, automotive, and
industrial lubricants, and the manufacture and packaging of commercial and industrial greases. We sell and distribute NGLs that we primarily
purchase from refineries and natural gas processors. We store and transport NGLs for wholesale deliveries to industrial NGL users and propane
retailers in the southeastern U.S.
Significant Recent Developments
Termination of Merger Agreement. On October 3, 2024, the Partnership, Martin Resource Management Corporation, MMGP, and MRMC Merger Sub
LLC, a wholly owned subsidiary of Martin Resource Management Corporation (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger
Agreement”) pursuant to which Merger Sub agreed to merge with and into the Partnership, with the Partnership surviving as a wholly owned subsidiary of
Parent (the “Merger”).
On December 26, 2024, Martin Resource Management Corporation and the Partnership (with the approval of the conflicts committee (the “Conflicts
Committee”) of the board of directors of MMGP (the “Board of Directors”)) entered into a termination agreement (the “Termination Agreement”), pursuant to
which the Merger Agreement was terminated. As a result, the Merger Agreement has no further force and effect. As a result of the termination of the Merger
Agreement, the special meeting of the unitholders of the Partnership, which was to be held on December 30, 2024 for the purpose of voting on the Merger
Agreement and the Merger, was cancelled.
Electronic Level Sulfuric Acid Joint Venture. On October 19, 2022, Martin ELSA Investment LLC, our affiliate, entered into definitive agreements
with Samsung C&T America, Inc. and Dongjin USA, Inc., an affiliate of Dongjin Semichem Co., Ltd., to form DSM Semichem LLC (“DSM”). DSM will
produce and distribute electronic level sulfuric acid (“ELSA”). By leveraging our existing assets located in Plainview, Texas and installing additional facilities
(the “ELSA Facility”) as required, DSM will produce ELSA that meets the strict quality standards required by the recent advances in semiconductor
manufacturing. In addition to owning a 10% non-controlling interest in DSM, we will be the exclusive provider of feedstock to the ELSA Facility. We, through
our affiliate Martin Transport, Inc. ("MTI"), will also provide land transportation services for the ELSA produced by DSM. On April 1, 2024, we contributed
$6.5 million to DSM, which represents the cash contribution required pursuant to DSM's limited liability agreement for our 10% non-controlling interest. Also,
in conjunction with the formation of DSM, we contributed approximately 22 acres of land. As of December 31, 2024, we have funded approximately $27.6
million toward ELSA related project costs.
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Subsequent Events
Quarterly Distribution. On January 21, 2025, we declared a quarterly cash distribution of $0.005 per common unit for the fourth quarter of 2024, or
$0.02 per common unit on an annualized basis, which was paid on February 14, 2025 to unitholders of record as of February 7, 2025.
Amendment to Credit Facility. On February 13, 2025, we entered into an amendment (the “credit facility amendment”) to the credit facility (as defined
below) to amended the interest coverage ratio and first lien leverage ratios for the fiscal quarters ending March 31, 2025, June 30, 2025 and September 30,
2025. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources —
Description of Our Indebtedness — Credit Facility.”
2025 Phantom Unit Plan. On February 11, 2025, the Board of Directors and the compensation committee of the Board of Directors (the
"Compensation Committee") approved the Martin Midstream Partners L.P. 2025 Phantom Unit Plan (the “2025 Plan”), effective as of the same date. The 2025
Plan permits the awards of phantom units and phantom unit appreciation rights to any employee or non-employee director of the Partnership, including its
executive officers. The awards may be time-based or performance-based and will be paid, if at all, in cash.
Our Growth Strategy
The key components of our growth strategy are:
•
Establish Strategic Commercial Alliances. Many of our larger customers, which include major integrated energy companies, have established
strategic alliances with midstream service providers such as us to address logistical and transportation challenges or to achieve operational
synergies. We intend to utilize our industry knowledge, network of customers and suppliers, and strategic asset base to expand commercial
alliances to drive revenue and cash flow growth in the future.
•
Spur Internal Organic Growth by Attracting New Customers and Expanding Services Provided to Existing Customers. Opportunities exist to
expand our customer base and provide additional services and products to existing customers. We generally begin a relationship with a customer
by transporting, storing or marketing a limited range of products and services. Expanding our customer base and our service and product offerings
to existing customers is an efficient and cost-effective method of achieving organic growth in revenues and cash flow. We plan to focus on growth
in our business segments with a stronger economic outlook.
•
Pursue Organic Growth Projects. We continually evaluate organic expansion opportunities in existing areas of operation that will allow us to
leverage our existing market position and increase the revenues from our existing assets through improved utilization and efficiency.
Competitive Strengths
We believe we are well positioned to execute our business strategy because of the following competitive strengths:
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, our land transportation assets are based
out of terminals strategically located to serve refineries and chemical companies across the U.S. Gulf Coast. Many of our sulfur services assets are located to
source sulfur from the largest refinery sources in the U.S. Finally, our terminalling and storage assets are located in areas across the U.S. Gulf Coast to support
our refinery-based customers.
Specialized Transportation Equipment and Storage Facilities. We have the assets and expertise to handle and transport an array of petroleum products
and by-products with unique requirements for transportation and storage. For example, we own facilities and resources to transport a variety of specialty
products, including ammonia, molten sulfur and asphalt. Some of these specialty products require treatment across a wide range of temperatures (between
approximately -30 to +400 degrees Fahrenheit) to remain in liquid form, which our facilities are designed to accommodate. These capabilities help us enhance
relationships with our customers by offering them specialized services to handle their unique product requirements.
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Strong Industry Reputation and Established Relationships with Suppliers and Customers. We have established a reputation in our industry as a reliable
and cost-effective supplier of services to our customers and have a track record of safe and efficient operations at our facilities. Our management has also
established long-term relationships with many of our suppliers and customers. We benefit from our management’s reputation and track record and from these
long-term relationships. We provide specialized value-added services to our customers and believe we have become an integral part of their value chain.
Fee-Based Contracts. We generate a significant amount of our cash flow from fee-based contracts with our customers, many of which are major and
independent oil and gas companies with whom we have long-standing customer relationships. A majority of our fee-based contracts consist of reservation
charges or minimum fee arrangements, which reduce the volatility of our cash flows due to volume fluctuations.
Vertically Integrated Services Provided for U.S. Gulf Coast-Centric Asset and Operational Footprint. We own and operate a diversified asset base that
enables us to offer our customers an integrated distribution network consisting of terminalling, storage, packaging and other midstream logistical services for
petroleum products and by-products in one of the world’s most active refining and petrochemical regions.
Experienced Management Team and Operational Expertise. Members of our executive management team and the heads of our principal business lines
have a significant amount of experience in the industries in which we operate. Our management team's experience and familiarity with our industry and
businesses are important assets that assist us in implementing our business strategies. In addition, members of our senior management hold significant limited
and general partner interests in us, which we believe aligns incentives with our investors.
Strong Parent Support. Martin Resource Management Corporation, owner of our general partner, which is privately owned, assumes a significant amount of
the working capital demands and margin risk, providing stable fee-based cash flows to our limited partners.
Terminalling and Storage Segment
Specialty Terminal Operations
We own or operate nine terminalling facilities providing storage, handling and transportation of various petroleum products and by-products. The
locations and capabilities of our terminals are structured to complement our other businesses and reflect our strategy to provide a broad range of integrated
services in the storage, handling and transportation of products. We developed our terminalling and storage assets by acquisition and upgrades of existing
facilities as well as developing our own properties strategically located near rail, waterways and pipelines. We anticipate further expansion of our terminalling
facilities primarily through organic growth.
At the Neches, Stanolind, and Tampa terminals, our customers are primarily energy and petrochemical companies. In addition, Martin Resource
Management Corporation pays us for terminalling and storage of asphalt at these facilities through a terminalling service agreement that includes a provision
for minimum volume throughput requirements. We charge either a fixed monthly fee or a throughput fee for the use of services we perform at our facilities
based on the capacity of the applicable tank. We conduct a substantial portion of our terminalling and storage operations under long-term contracts, which
enhances the stability and predictability of our operations and cash flow. We attempt to balance our short-term and long-term terminalling contracts in order to
allow us to maintain a consistent level of cash flow while maintaining flexibility to earn higher storage revenues when demand for storage space increases. In
addition, a significant portion of the contracts for our specialty terminals provide for minimum fee arrangements that are not based on the volume handled.
In Smackover, Arkansas, we own a refinery where we process naphthenic crude oil into finished products that include naphthenic lubricants,
distillates, asphalt and other intermediates. The refinery's capacity is dedicated to a subsidiary of Martin Resource Management Corporation through a long-
term tolling agreement based on throughput rates and a monthly reservation fee.
We own asphalt terminals in each of Hondo, South Houston, and Port Neches, Texas and Omaha, Nebraska, each dedicated to a subsidiary of Martin
Resource Management Corporation through a terminalling service agreement based on throughput rates.
In Beaumont, Texas, we own a terminal ("Spindletop Terminal") where we receive natural gasoline via pipeline, store the natural gasoline in our
above-ground tank, and then ship the product to our customers via other pipelines to which the
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facility is connected. Our fees for the use of this facility are based on the volume of barrels shipped from the terminal under a take-or-pay arrangement that
includes a provision for minimum volume throughput requirements.
The following is a summary description of our shore-based specialty terminals:
Terminal
Location
Aggregate Capacity (in
barrels)
Products
Description
Tampa
Tampa, Florida
662,000
Asphalt, crude oil, and diesel
Marine terminal, loading/unloading for
vessels, barges, railcars and trucks
Stanolind
Beaumont, Texas
620,000
Asphalt, crude oil, sulfur, and
sulfuric acid
Marine terminal, marine dock for
loading/unloading of vessels, barges,
railcars and trucks
Neches
Beaumont, Texas
526,000
Molten sulfur, formed sulfur,
ammonia, asphalt, fuel oil, crude
oil and sulfur-based fertilizer
Marine terminal, loading/unloading for
vessels, barges, railcars and trucks
The terminal is located on land owned by the Tampa Port Authority that was leased to us under a lease that expires in December 2026.
The Neches terminal is a deep water marine terminal located near Beaumont, Texas, on approximately 50 acres of land owned by us, and an
additional 96 acres leased to us under terms of a 20-year lease that commenced on 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 (barrels)
Products
Description
Smackover Refinery
Smackover,
Arkansas
7,700 per day; 275,000 of
crude bulk storage; 647,000 of
lubricant storage
Naphthenic lubricants, distillates,
asphalt, crude oil
Naphthenic rude refining facility
Hondo Asphalt
Hondo, Texas
182,000
Asphalt
Asphalt processing and storage
South Houston Asphalt
Houston, Texas
95,000
Asphalt
Asphalt processing and storage
Port Neches Asphalt
Port Neches, Texas
17,500
Asphalt
Asphalt processing and storage
Omaha Asphalt
Omaha, Nebraska
112,000
Asphalt
Asphalt processing and storage
Spindletop
Beaumont, Texas
91,000
Natural gasoline
Pipeline receipts and shipments
Shore-Based Terminal Operations
We own or operate 12 marine shore-based terminals along the U.S. Gulf Coast from Theodore, Alabama to Corpus Christi, Texas. Our terminalling
assets are located at strategic distribution points for the products we handle and are in close proximity to our customers. We are one of the largest operators of
marine shore-based terminals in the Gulf Coast region of the U.S. 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. Customers are primarily oil and
gas exploration and production companies and oilfield service companies, such as drilling fluid companies, marine transportation companies and offshore
construction companies. Shore bases typically provide logistical support, including the storage and handling of tubular goods, loading and unloading bulk
materials, providing facilities from which major and independent oil companies can communicate with and control offshore operations and leasing dockside
facilities to companies which provide complementary products and services such as drilling fluids and cementing services. These contracts generally provide us
a fixed land rental fee and additional rental fees that are determined based on a percentage of the sales value of the products and services delivered from the
shore base. In addition, Martin Resource Management Corporation, through terminalling service agreements, pays us for terminalling and storage of fuels and
lubricants at these terminal facilities and includes a provision for minimum volume throughput requirements.
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2
1
2
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Our marine shore-based terminal operations are divided into two classes of terminals: (i) full service terminals and (ii) fuel and lubricant terminals.
Full Service Terminals. We own or operate three full service terminals. These facilities provide logistical support services and storage and handling
services for fuel and lubricants. The significant difference between our full service terminals and our fuel and lubricant terminals is that our full service
terminals generate additional revenues by providing shore bases to support our customers' operating activities related to the offshore exploration and production
industry. One typical use for our shore bases is for drilling fluids manufacturers to manufacture and sell drilling fluids to the offshore drilling industry. Offshore
drilling companies may also set up service facilities at these terminals to support their offshore operations. Customers of our full service terminals are primarily
oil and gas exploration and production companies, oilfield service companies such as drilling fluids companies, marine transportation companies 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)
Harbor Island
Port Aransas, Texas
5,200
December 2039
Pelican Island
Galveston, Texas
81,200
Own
Theodore
Theodore, Alabama
20,100
Own
A portion of this terminal is owned.
Fuel and Lubricant Terminals. We own or operate nine fuel and lubricant terminals located in the Gulf Coast region of the U.S. that provide storage
and handling services for lubricants and fuel oil.
The following is a summary description of our fuel and lubricant terminals at:
Terminal
Location
Aggregate Capacity (barrels)
End of Lease (Including Options)
Amelia
Amelia, Louisiana
13,000
August 2028
Dock 193
Gueydan, Louisiana
11,000
May 2029
Fourchon
Fourchon, Louisiana
80,900
May 2027
Fourchon 16
Fourchon, Louisiana
15,200
July 2048
Galveston T
Galveston, Texas
10,500
Own
Jennings Bulk Plant
Jennings, Louisiana
7,600
Own
Lake Charles T
Lake Charles, Louisiana
1,000
February 2028
Port Arthur
Port Arthur, Texas
16,400
November 2028
Sabine Pass
Sabine Pass, Texas
16,000
September 2036
This terminal is currently in caretaker status.
A portion of this terminal is owned.
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Underground NGL Storage Terminal Operations
Our underground NGL terminalling assets have storage and logistics capabilities for NGLs purchased primarily from major domestic oil refiners and
natural gas processors. This facility has a capacity of 2.3 million barrels for NGLs along with a railcar facility with the capacity to handle up to 24 railcars per
day. These operations support the NGL marketing efforts in our specialty products division and at Martin Resource Management Corporation.
Competition in our Terminalling and Storage Segment. We compete with independent terminal operators and major energy and chemical companies
that own their own terminalling and storage facilities. Many of our customers prefer to contract with independent terminal operators rather than terminal
operators owned by integrated energy and chemical companies that may have refining or marketing interests that compete with them.
Independent terminal owners generally compete on the basis of the location and versatility of terminals, service and price. A favorably located
terminal 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 storage
requirements. The service function of a terminal includes, among other things, the safe storage of product at specified temperature, moisture and other
conditions and receiving and delivering product to and from the terminal. All of these services must be in compliance with applicable environmental and other
regulations.
We successfully compete for terminal customers because of the strategic location of our terminals along the U.S. Gulf Coast, our integrated
transportation services, our reputation, the prices we charge for our services and the quality and versatility of our services. Additionally, while some companies
have significantly more terminalling and storage capacity than us, not all terminalling and storage facilities located in the markets we serve are equipped to
properly 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 at
certain terminals, are the locations of the facilities, availability of competing logistical support services and the experience of personnel and dependability of
service. Shore base rental contracts are generally long-term contracts and provide more protection from competition. Our primary competitors for both
lubricants and shore bases include several independent operators as well as major companies that maintain their own similarly equipped marine terminals,
shore bases and fuel and lubricant supply sources.
Transportation Segment
Land Transportation Operations
We operate a fleet of land transportation assets comprising approximately 600 trucks and 1,275 tank trailers that transport petroleum products and by-
products, petrochemicals, and chemicals. Our land transportation assets operate out of 25 strategically located terminals throughout the U.S. Gulf Coast and
Southeastern U.S.
The following is a listing of our terminals utilized in our land transportation business:
Terminal Locations
Texas
Louisiana
Arkansas
Florida
Baytown
Arcadia
West Memphis
Tampa
Beaumont
Baton Rouge
Smackover
Pace
Beaumont Lube
Bossier City
Stephens
Mulberry
Channelview
Jennings
Corpus Christi
Lake Charles
Tennessee
Other
Kilgore
Reserve
Chattanooga
Theodore, Alabama
Longview
Kingsport
Hattiesburg, Mississippi
Plainview
Kenova, West Virginia
Our major land transportation customers include energy, petrochemical, and chemical companies and Martin Resource Management Corporation. We
conduct our land transportation services under fee-based transportation agreements with customers in which we have long-term relationships.
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We are party to a master transportation services agreement under which we provide land transportation services to Martin Resource Management
Corporation on a demand basis at applicable market rates. The agreement will continue unless either party terminates the agreement by giving at least 30 days'
written notice to the other party. The rates under this agreement are subject to any adjustments which are mutually agreed upon or in accordance with a price
index. Additionally, shipping charges are also subject to fuel surcharges determined on a weekly basis in accordance with the U.S. Department of Energy’s
national diesel price list.
Competition. The U.S. tank truck market is highly competitive and fragmented, due to the presence of many small and medium-sized market participants.
Driver availability plays a major role in each market participant's ability to generate revenue. Competition in our service regions is based primarily on freight
rates, service, efficiency, and available capacity.
Marine Transportation Operations
We utilize a fleet of inland and offshore tows that provide marine transportation of petroleum products and by-products produced in oil refining. Our
marine transportation business operates coastwise along the Gulf of Mexico and the east coast of the U.S., as well as on the U.S. inland waterway 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 push boat, the river or canal
capacity and conditions, and customer requirements. Our offshore tow consists of one tugboat, with much greater horsepower than an inland 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:
Class of Equipment
Number in Class
Capacity/Horsepower
Products Transported
Inland tank barges
5
Under 20,000 barrels
Diesel fuel
Inland tank barges
22
20,000 - 31,000 barrels
Asphalt, crude oil, fuel oil and
gasoline
Inland push boats
15
800 - 2,650 horsepower
N/A
Offshore tank barge
1
59,000 barrels
Diesel fuel
Offshore tugboat
1
7,100 horsepower
N/A
Our largest marine transportation customers include major and independent oil and gas refining companies, petroleum marketing companies and
Martin Resource Management Corporation. 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
Corporation on a spot contract basis at applicable market rates. Effective each January 1, this agreement automatically renews for consecutive one-year periods
unless either party 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 primarily on
price. However, customers are placing an increased emphasis on the age of equipment, safety, environmental compliance, quality of service and the availability
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,
truck and, to a lesser extent, pipeline. For example, a typical two-barge tow carries a volume of product equal to approximately 80 railcars or 250 tanker trucks.
Pipelines generally provide a less expensive form of transportation than marine transportation. However, pipelines are not able to transport some 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 of commodities in
high volumes over extended periods of time.
Sulfur Services Segment
We maintain an integrated system of transportation assets and facilities relating to our sulfur services. We gather molten sulfur from refiners, primarily
located on the U.S. Gulf Coast, and transport it by inland and offshore barges, railcars and trucks. In the U.S., recovered sulfur is mainly kept in liquid form
from the point of production to the point of usage at an
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elevated temperature of approximately 275 degrees Fahrenheit. We have the necessary assets and expertise to handle the unique requirements for transportation
and storage of molten sulfur.
Our standard purchase and sale agreements have terms that typically range from one to two years in duration with prices that are usually tied to a published
market indicator and fluctuate according to the price movement of the indicator. We also provide barge transportation and tank storage services to large
producers and consumers of sulfur under agreements with remaining terms from one to five years in duration.
We operate a sulfur forming facility in Beaumont, Texas, which is used to convert molten sulfur into solid form (prills/granules). The Beaumont facility 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. Formed sulfur is stored
in bulk until sold into local or international agricultural markets. Our forming services contracts are fee based and typically include minimum fee guarantees.
Fertilizer and related sulfur products are a natural extension of our molten sulfur business because of our access to sulfur and our distribution
capabilities.
In the U.S., fertilizer is generally sold to farmers through local dealers. These dealers are typically owned and supplied by much larger wholesale
distributors. We sell to these wholesale distributors. Our industrial sulfur products are marketed throughout the U.S. via distributors. The sales price of our
industrial sulfur products vary based on the product and geographic region. We transport our fertilizer and industrial sulfur products to our customers using
third-party common 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:
•
Ammonium sulfate ("AMS") products. We produce various grades of AMS including granular, coarse, standard, and 40% ammonium sulfate
solution. These products primarily serve agricultural and industrial markets. We package these custom grade products under both proprietary and
private labels and sell them to major distributors and retail customers. Our ammonium sulfate plant produces approximately 400 tons per day of
quality ammonium sulfate and is marketed to our customers throughout the U.S.
•
Liquid sulfur products. We produce ammonium thiosulfate at our Neches terminal facility in Beaumont, Texas. This agricultural sulfur product is
a clear liquid containing 12% nitrogen and 26% sulfur. This product serves as a liquid plant nutrient used directly through spray rigs or irrigation
systems. It is also blended with other nitrogen phosphorus potassium liquids or suspensions as well. Our market is predominantly the Mid-South
and Southeastern U.S. and Coastal Bend area of Texas.
•
Plant nutrient sulfur products. We produce plant nutrient and agricultural ground sulfur products at our facilities in Odessa and Cactus, Texas, as
well as Seneca, Illinois. Our plant nutrient sulfur product is a 90% and 85% degradable sulfur product marketed under the Disper-Sul® trade
name and sold throughout the U.S. to direct application agricultural markets.
•
Industrial sulfur products. We produce industrial sulfur products such as elemental pastille sulfur, ground sulfur products, AMS, 40% AMS
solution, and emulsified sulfur (AS-7). We produce elemental pastille sulfur at our Odessa and Cactus, Texas and Seneca, Illinois facilities.
Elemental pastille sulfur is used to increase the efficiency of the coal-fired precipitators in the power industry. The industrial ground sulfur
products are also used in a variety of dusting and wettable sulfur applications such as rubber manufacturing, fungicides, sugar and animal feeds.
AMS dry products and 40% solutions manufactured in Plainview, Texas, are used in animal feed, water treatment, tanneries, and fire retardants.
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.
•
Sulfuric acid. We produce Sulfuric acid at our Plainview, Texas facility. This facility processes molten sulfur to produce a dedicated supply of raw
material sulfuric acid to our ammonium sulfate production plant. The sulfuric acid produced and not consumed by the captive ammonium sulfate
production is sold to third parties or converted into oleum (otherwise known as fuming sulfuric acid) and utilized by DSM to produce ultra-pure
electronic level sulfuric acid for the semiconductor manufacturing industry.
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We own the following marine assets and use them to transport molten sulfur between U.S. Gulf Coast storage terminals (including our terminal in
Beaumont, Texas) under third-party marine transportation agreements:
Class of Equipment
Number in Class
Capacity/Horsepower
Products Transported
Offshore tank barge
1
10,500 long tons
Molten sulfur
Offshore tugboat
1
5,100 horsepower
N/A
Inland push boat
1
1,200 horsepower
N/A
Inland tank barge
2
2,500 long tons
Molten sulfur
We operate the following sulfur forming facility as part of our sulfur services business:
Terminal
Location
Daily Production Capacity
Products Stored
Neches
Beaumont, Texas
5,500 metric tons per day
Molten, prilled and granulated sulfur
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 production
Fertilizer plant
Beaumont, Texas
146,000 tons
Liquid sulfur fertilizer production
Fertilizer plant
Odessa, Texas
35,000 tons
Dry sulfur fertilizer production
Fertilizer plant
Seneca, Illinois
36,000 tons
Dry sulfur fertilizer production
Fertilizer plant
Cactus, Texas
20,000 tons
Dry sulfur fertilizer production
Industrial sulfur plant
Nash, Texas
18,000 tons
Emulsified sulfur production
Sulfuric acid plant
Plainview, Texas
150,000 tons
Sulfuric acid production
Competition. We own the LaForce/Margaret Sue articulated tug and barge unit, which 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
they purchase directly from both producers and resellers. As a reseller, we compete against producers and other resellers capable of accessing the required
transportation and storage assets. Our sulfur-based fertilizer products compete with several large fertilizer and sulfur product manufacturers. However, the close
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 freight costs
and respond quickly to customer requests. Our sulfuric acid products compete with regional producers and importers in the South and Southwest portion 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 early spring planting season.
Specialty Products Segment
Lubricants and Greases Operations
In Smackover, Arkansas, we own and operate a terminal used for lubricant blending, processing, packaging, marketing and distribution. This terminal
is our central hub for branded and private label packaged lubricants where we receive, package and ship heavy-duty, passenger car, and industrial lubricants to
a network of retailers and distributors.
In Kansas City, Missouri, we lease and operate a plant that specializes in the production, packaging and distribution of automotive, commercial and
industrial greases. In Houston, Texas, we own and operate a plant that specializes in the production and distribution of commercial and industrial greases. In
Phoenix, Arizona, we lease and operate a plant that specializes in the production and distribution of commercial and industrial greases.
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Terminal
Location
Aggregate Capacity
Products
Description
Martin Lubricants
Smackover,
Arkansas
4.0 million gallons bulk
storage
Agricultural, automotive, and
industrial lubricants and grease
Lubricants packaging facility
Martin Specialty
Products
Kansas City,
Missouri
20 million pounds of
production capacity
Automotive, commercial and
industrial greases
Grease manufacturing and packaging
facility
Martin Specialty
Products
Houston, Texas
16 million pounds of
production capacity
Commercial and industrial greases
Grease manufacturing and packaging
facility
Martin Specialty
Products
Phoenix, Arizona
6 million pounds of
production capacity
Commercial and industrial greases
Grease manufacturing and packaging
facility
This terminal contains a warehouse owned by third parties and leased under a lease that expires in December 2025 and can be extended by us for one five-
year period.
This terminal contains a warehouse owned by third parties and leased under a lease that expires in October 2029.
Natural Gas Liquids Operations
NGLs are produced through natural gas processing and as a by-product of crude oil refining. NGLs include propane, natural gasoline, normal butane,
iso butane and ethane. Propane is used as a petrochemical feedstock in the production of ethylene and propylene, as a fuel for heating, for industrial
applications, as motor fuel and as a refrigerant. Natural gasoline is used as a component of motor gasoline, as a petrochemical feedstock and as a diluent.
Normal butane is used 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 iso butane through isomerization. Iso butane is used in the production of motor gasoline, alkylation and as a component in aerosol
propellants. Ethane is almost entirely used as a petrochemical feedstock in the production of ethylene and propylene.
We purchase NGLs, primarily propane and natural gasoline, from and provide NGL storage for major domestic oil refiners and natural gas
processors. We transport NGLs using MTI's land transportation fleet or by contracting with common carriers, owner-operators and railroad tank car
transportation companies. Our NGL customers consist of major domestic oil refiners, industrial processors, and retail propane distributors. We typically enter
into annual sales contracts with independent retail propane distributors to deliver their estimated annual volume requirements based on prevailing market
prices. Dependable delivery is very important to these customers and in some cases may be more important than price. We ensure adequate and timely supply
of NGLs through:
•
term purchase and exchange contracts;
•
storage of NGLs;
•
the transportation fleet owned by MTI; and
•
expertise in NGL supply and inventory management.
The following is a summary description of our owned NGL facilities, assets held in the Terminalling and Storage segment:
NGL Facility
Location
Capacity
Description
Wholesale terminals
Arcadia, Louisiana
2,300,000 barrels
Underground and above ground NGL
storage terminal
Rail terminal
Arcadia, Louisiana
24 railcars per day
Railcar loading and unloading facility
Spindletop storage facility
Beaumont, Texas
91,000 barrels
Above ground storage tank and
pipeline connections
Seasonality. The level of NGL supply and demand is subject to changes in domestic production, weather, inventory levels and other factors. While
production is not seasonal, residential, refinery, and wholesale demand is highly seasonal. This imbalance can cause increases in inventories during summer
months when consumption is low and decreases in inventories during winter months when consumption is high. Abnormally cold weather can put extra upward
pressure on propane prices during the winter.
1
2
1
2
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Competition. We compete with large integrated NGL producers and marketers as well as small local independent marketers, primarily with respect to
location, rates, terms and flexibility of service and supply.
Our Relationship with Martin Resource Management Corporation
Martin Resource Management Corporation is engaged in the following principal business activities:
•
distributing 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 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 a butane optimization business;
•
supplying employees and services for the operation of our business; and
•
operating, solely for our account, the asphalt facilities in Hondo, South Houston and Port Neches, Texas, and Omaha, Nebraska.
We are and will continue to be closely affiliated with Martin Resource Management Corporation as a result of the following relationships.
Ownership
As of December 31, 2024, Martin Resource Management Corporation owned approximately 15.7% of the outstanding limited partnership units. In addition,
Martin Resource Management Corporation indirectly owns, through its wholly owned subsidiary, Martin Resource LLC, 100% of Holdings, which is the sole
member of MMGP. As a result, Martin Resource Management Corporation indirectly owns 100% of MMGP, our general partner. MMGP owns a 2% general
partner interest in us.
Management
Martin Resource Management Corporation directs our business operations through its ownership interests in and control of our general partner. We
benefit from our relationship with Martin Resource Management Corporation through access to a significant pool of management expertise and established
relationships throughout the energy industry. We do not have employees. Martin Resource Management Corporation employees are responsible for conducting
our business and operating our assets on our behalf.
Related Party Agreements
The Omnibus Agreement with Martin Resource Management Corporation requires us to reimburse Martin Resource Management Corporation for all
direct expenses it incurs or payments it makes on our behalf or in connection with the operation of our business. We reimbursed Martin Resource Management
Corporation for $175.8 million and $165.6 million of direct costs and expenses for the years ended December 31, 2024 and 2023, respectively. There is no
monetary limitation on the amount we are required to reimburse Martin Resource Management Corporation for direct expenses.
In addition to the direct expenses, under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect
general and administrative and corporate overhead expenses. For the years ended December 31, 2024 and 2023, the Board of Directors approved
reimbursement amounts of $13.5 million and $14.0 million, respectively, reflecting our allocable share of such expenses. The Conflicts Committee will review
and approve future
13
adjustments in the reimbursement amount for indirect expenses, if any, annually. These indirect expenses covered the centralized corporate functions Martin
Resource Management Corporation provides for us, such as accounting, treasury, clerical, engineering, legal, billing, information technology, administration of
insurance, environmental and safety compliance, general office expenses and employee benefit plans and other general corporate overhead functions we share
with Martin Resource Management Corporation’s retained businesses. The Omnibus Agreement also contains significant non-compete provisions and
indemnity obligations. Martin Resource Management Corporation also licenses certain of its trademarks and trade names to us under the Omnibus Agreement.
Other agreements include, but are not limited to, a master transportation services agreement, marine transportation agreements, terminal services
agreements, and a tolling agreement. Pursuant to the terms of the Omnibus Agreement, we are prohibited from entering into certain material agreements with
Martin Resource Management Corporation 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 Resource
Management Corporation, 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 Martin Resource
Management Corporation. In the aggregate, our purchases from Martin Resource Management Corporation accounted for approximately 27% and 23% of our
total costs and expenses for each of the years ended December 31, 2024 and 2023, respectively.
Correspondingly, Martin Resource Management Corporation is one of our significant customers. Our sales to Martin Resource Management
Corporation accounted for approximately 15% and 14% of our total revenues for each of the years ended December 31, 2024 and 2023, respectively.
For a more comprehensive discussion concerning the Omnibus Agreement and the other agreements that we have entered into with Martin Resource
Management Corporation, please see "Item 13. Certain Relationships and Related Transactions, and Director Independence."
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 or as permitted under the Omnibus
Agreement, in which a related person will have a direct or indirect material interest, the proposed transaction is submitted for consideration to the Board of
Directors or to our management, 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 (the "Partnership Agreement"). If a matter is referred to the Conflicts Committee, it
obtains information regarding the proposed transaction from management and determines whether to engage independent legal counsel or an independent
financial advisor to advise the members of the committee regarding the transaction. If the Conflicts Committee retains such counsel or financial advisor, it
considers such advice and, in the case of a financial advisor, such advisor’s opinion as to whether the transaction is fair and reasonable to us and to our
unitholders.
Insurance
Our deductible for onshore physical damage resulting from named windstorms is 5% of the total value of affected properties with minimum deductible
ranges from $1.0 million to $5.0 million. Our property program currently provides $40.0 million per occurrence and annual aggregate for named windstorm
events, including business interruption coverage in connection with a named windstorm event and has a waiting period of 45 to 60 days.
For non-named windstorms or events, our onshore physical damage deductible is $1.195 million per occurrence for all properties. Business
interruption coverage in connection with a non-named windstorm or event is subject to a $200.0 million per occurrence limit as the property damage coverage
and has a waiting period of 30 to 45 days, except the Smackover Refinery which has a waiting period of 45 to 60 days.
We have various pollution liability policies, which provide coverages ranging from remediation of our property to third-party liability. The limits of
these policies vary based on our assessments of exposure at each location.
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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, commonly referred to as a P&I Club, which
provides protection and indemnity insurance, and other insurance arrangements. Such membership potentially exposes us to assessments, and/or calls, in the
event claims by us or other members exceed available funds and insurance. Except for our marine operations, we self-insure against liability exposure up to a
predetermined amount, beyond which we are covered 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 is
adequate to protect us against most accident-related risks involved in the conduct of our business. However, there can be no assurance that all risks are
adequately insured against, that any particular claim will be paid by the insurer, or that we will be able to procure adequate insurance coverage at commercially
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 of
matters, 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 or
otherwise relating to protection of human health, natural resources and the environment. These laws and regulations can impair our operations that affect the
environment in many ways, such as requiring the acquisition of permits to conduct regulated activities; restricting the manner in which we can release materials
into the environment; requiring remedial activities or capital expenditures to mitigate pollution from former or current operations; and imposing substantial
liabilities on us for pollution resulting from our operations. Many environmental laws and regulations can impose joint and several, strict liability, and any
failure to comply with environmental laws and regulations may result in the assessment of administrative, civil, and criminal penalties, the imposition of
investigatory and remedial obligations, and, in some circumstances, the issuance of injunctions that can limit or prohibit our operations.
The trend in environmental regulation in previous years has been to place more restrictions and limitations on activities that may affect the
environment, and, thus, any changes in environmental laws and regulations that result in more stringent and costly pollutant control or waste handling, storage,
transport, disposal, or remediation requirements could have a material adverse effect on our operations and financial position. Moreover, there is inherent risk
of incurring significant environmental 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 incur significant costs and liabilities as result of such handling practices, releases or spills, including those relating to claims for damage to
property and persons. In the 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 compliance with 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 or arranged for the
disposal of the hazardous substances found at such site. Under CERCLA, these responsible persons may be subject to joint and several strict liability for the
costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources, and for the costs of certain health
studies, and it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by
the release of hazardous substances into the environment. Although certain hydrocarbons are not subject to CERCLA’s reach because "petroleum" is excluded
from CERCLA’s definition of a "hazardous substance," in the course of our ordinary operations we will generate wastes that may fall within the definition of a
"hazardous substance." In addition, some state counterparts to CERCLA tie liability to a broader set of substances than does CERCLA.
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Solid Waste
We generate both hazardous and nonhazardous solid wastes, which are subject to requirements of the federal Resource Conservation and Recovery
Act, as amended ("RCRA") and comparable state statutes. From time to time, the U.S. Environmental Protection Agency ("EPA") has considered making
changes in nonhazardous waste standards that would result in stricter disposal requirements for these wastes. Furthermore, it is possible some wastes generated
by us that are currently classified as nonhazardous may in the future be designated as "hazardous wastes," resulting in the wastes being subject to more rigorous
and costly disposal requirements. Changes in applicable regulations may result in an increase in our capital expenditures or operating expenses.
We currently own or lease, and have in the past owned or leased, properties that have been used for the manufacturing, processing, transportation and
storage of petroleum products and by-products. Solid waste disposal practices within oil and gas related industries have improved over the years with the
passage and implementation of various environmental laws and regulations. Nevertheless, a possibility exists that petroleum and other solid wastes may have
been disposed of on or under various properties owned or leased by us during the operating history of those facilities. In addition, a number of these properties
have been operated by third parties over whom we had no control as to such entities’ handling of petroleum, petroleum by-products or other wastes and the
manner in which such substances may have been disposed of or released. State and federal laws and regulations applicable to oil and natural gas wastes and
properties have gradually become stricter and, under such laws and regulations, we could be required to remove or remediate previously disposed wastes or
property contamination, including groundwater contamination, even under circumstances where such contamination resulted from past operations of third
parties.
Clean Air Act
Our operations are subject to the federal Clean Air Act ("CAA"), as amended, and comparable state statutes. The CAA contains provisions that may
result in the imposition of increasingly stringent pollution control requirements with respect to air emissions from the operations of our terminal facilities,
processing and storage facilities and fertilizer and related products manufacturing and processing facilities. Such air pollution 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 regulations may lead to the assessment of
administrative, civil or criminal penalties, and/or result in the limitation or cessation of construction or operation of certain air emission sources. We believe our
operations, including our manufacturing, processing and storage facilities and terminals, are in substantial compliance with applicable requirements of the CAA
and analogous state laws.
Climate Change. Scientific studies suggest that emissions of certain gases, commonly referred to as greenhouse gases ("GHGs") and including carbon
dioxide and methane, may be contributing to warming of the Earth’s atmosphere. In response to such studies, the U.S. Congress has from time to time
considered climate change-related legislation to restrict GHG emissions. Many states have already taken legal measures to reduce emissions of GHGs,
primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. The EPA regulates GHG emissions
under existing provisions of the federal CAA.
Under the Paris Agreement, the U.S. committed to a 50 to 52 percent reduction from 2005 levels of GHG emissions by 2030 and set the goal of
reaching net-zero GHG emissions by 2050. The 2023 United Nations Climate Change Conference in Dubai issued its first global stocktake agreement, which
calls on parties, including the United States, to contribute to the transitioning away from fossil fuels, reduce methane emissions, and increase renewable energy
capacity, among other things, to achieve net zero emissions by 2050. Several states and local governments have stated their commitment to the principles of the
Paris Agreement in their effectuation of policy and regulations. On January 20, 2025, however, President Trump signed an executive order to withdraw the
United States from the Paris Agreement, marking a significant shift in federal climate policy. Pursuant to the terms of the Paris Agreement, the withdrawal will
take effect on January 27, 2026. State and local GHG initiatives may continue despite the U.S. withdrawal from the Paris Agreement.
The United States Environmental Protection Agency published strict new methane emission regulations for certain oil and gas facilities in March 2024
and the tax legislation enacted in 2022 established a charge on methane emissions above certain limits from the same facilities, which rule was finalized in
November 2024. To date, such requirements have not had a substantial effect upon our operations. Still, new legislation or regulatory programs that restrict
emissions of GHGs in areas in which we conduct business could adversely affect our operations and demand for our services. In January 2025, however,
President Trump signed a series of executive orders that call upon the EPA to submit a report on the continuing applicability of its endangerment finding for
GHGs under the Clean Air Act, direct federal executive departments and agencies to initiate a regulatory freeze for certain rules that have not taken effect,
pending review by the newly appointed agency head, direct federal
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agencies to identify and exercise emergency authorities to facilitate conventional energy production, transportation, and refining, and mandate a review of
existing regulations that may burden domestic energy development. Thus, the future of the new methane and waste emission charge rules, as well as the
regulation of GHGs by the federal government, is unclear at this time.
Climate change could have an effect on the severity of weather (including hurricanes and floods), sea levels, wildfires, the arability of farmland, and water
availability and quality. If such effects were to occur, our operations have the potential to be adversely affected. Potential adverse effects could include
disruption of our business activities, including, for example, damages to our facilities from powerful winds or floods, or increases in our costs of operation or
reductions in the efficiency of our operations, as well as potentially increased costs for insurance coverages in the aftermath of such effects. Significant
physical effects of climate change could also have an indirect effect on our financing and operations by disrupting the transportation or process related services
provided by companies or suppliers with whom we have a business relationship. In addition, the demand for and consumption of our products and services (due
to change in costs, consumer demand 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 that may result from potential physical effects of climate change.
Clean Water Act
The Federal Water Pollution Control Act of 1972, as amended, also known the Clean Water Act and comparable state laws impose restrictions and
strict controls regarding the discharge of pollutants, including hydrocarbon-bearing wastes, into state waters and waters of the U.S. Pursuant to the Clean Water
Act and similar state laws, a National Pollutant Discharge Elimination System permit, or a state permit, or both, must be obtained to discharge pollutants into
federal and state waters. In addition, the Clean Water Act and comparable state laws require that individual permits or coverage under general permits be
obtained by subject facilities for discharges of storm water runoff. Furthermore, the Clean Water Act potentially requires individual permits or qualification for
nationwide permits for activities that involve the discharge of dredged or fill material into waters of the U.S. Under the Obama administration, the EPA
promulgated a set of rules that included a comprehensive regulatory overhaul of defining “waters of the United States” for the purposes of determining federal
jurisdiction. The Trump administration signaled its intent to repeal and replace the Obama-era rules. In accordance with this intent, the EPA promulgated a rule
in early 2018 that postponed the effectiveness of the Obama-era rules until 2020. Thereafter, the EPA proposed a new set of rules that would narrow the Clean
Water Act’s jurisdiction, which were finalized on April 21, 2020. That set of rules was vacated by decisions in the U.S. federal district courts in New Mexico
and Arizona, and on November 18, 2021, the EPA released a proposal to reestablish the pre-2015 definition of “waters of the United States” which will become
effective upon finalization and publication. On December 30, 2022, the EPA and the U.S. Army Corps of Engineers announced the final “Revised Definition of
‘waters of the United States”’ rule, which was published on January 18, 2023, and became effective on March 20, 2023. However, on May 25, 2023, the U.S.
Supreme Court issued a decision limiting the scope of federal jurisdiction over wetlands, and on August 29, 2023, the EPA issued a final rule that seeks to
conform with the Supreme Court decision. To the extent that any future Supreme Court decisions or final rules expand the scope of the Clean Water Act's
jurisdiction, we could face increased costs and delays with respect to permitting. We believe that we are in substantial compliance with Clean Water Act
permitting requirements as well as the conditions imposed thereunder, and that our continued compliance 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 spills and
liability for damages resulting from such spills in U.S. waters. A "responsible party" includes the 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 each responsible party for oil removal costs and a variety of public
and private damages including natural resource damages. Under the OPA, vessels and shore facilities handling, storing, or transporting oil are required to
develop and implement oil spill response plans, and vessels greater than 300 tons in weight must 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 requires that 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 substantial compliance with all of the oil spill-related and financial
responsibility requirements. Nonetheless, in the aftermath of the Deepwater Horizon incident in 2010, Congress has from time to time considered oil spill
related legislation that could have the effect of substantially increasing financial responsibility requirements and potential fines and damages for violations and
discharges subject to the OPA, and similar legislation. Any such changes in law affecting areas where we conduct business could materially affect our
operations.
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Safety Regulation
The Partnership’s marine transportation operations are subject to regulation by the U.S. Coast Guard, federal laws, state laws and certain international
treaties. Tank ships, push boats, tugboats and barges are required to meet construction and repair standards established by the American Bureau of Shipping, a
recognized classification society, and the U.S. Coast Guard and to meet operational and safety standards presently established by the U.S. Coast Guard. We
believe our marine operations and our terminals are in substantial compliance with current applicable safety requirements.
Occupational Safety and Health Regulations
The workplaces associated with our manufacturing, processing, terminal and storage facilities are subject to the requirements of the federal
Occupational Safety and Health Act ("OSH Act") and comparable state statutes. We believe we have conducted our operations in substantial compliance with
OSH Act requirements, including general industry standards, record-keeping requirements and monitoring of occupational exposure to regulated
substances. 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 those
described 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 owned
and 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 to
ensure 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 increases
operating 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 and
American Bureau of Shipping maintain a stringent regimen of vessel inspections, which tends to result in higher regulatory compliance costs 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 a
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 or requisitioned 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 the case 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 tank barge 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 to be 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.
Transportation Regulations
Our trucking operations are subject to regulation by the U.S. Department of Transportation and by various state agencies under the Federal Motor Carrier
Safety Act and the Hazardous Materials Transportation Act and analogous state laws. These regulatory authorities exercise broad powers, governing activities
such as the authorization to engage in motor carrier operations, regulatory safety, driver licensing and insurance requirements, and the shipment and packaging
of hazardous materials. Additional regulations apply specifically to the trucking industry, including testing and specification of equipment and product handling
requirements. The trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes
in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. Some of these possible
changes include increasingly stringent environmental regulations; changes in the hours of service regulations, which govern the amount of time a driver may
drive or work in any specific period; onboard black box recorder device requirements; or limits on vehicle weight and size. Moreover, various legislative
proposals are occasionally introduced, including proposals to increase federal, state, or local taxes
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on motor fuels, among other things, which may increase our costs or adversely impact the recruitment of drivers. We cannot predict whether, or in what form,
any increase in such taxes applicable to us will be enacted.
Human Capital
We do not have any employees. Under our Omnibus Agreement with Martin Resource Management Corporation, Martin Resource Management
Corporation provides us with corporate staff and support services. These services include centralized corporate functions, such as accounting, treasury,
engineering, information technology, insurance, administration of employee benefit plans and other corporate services. Martin Resource Management
Corporation has approximately 1,679 employees of which 1,160 individuals, including 58 individuals represented by labor unions, provide direct support to our
operations as of December 31, 2024. Martin Resource Management Corporation employees are responsible for conducting our business and operating our
assets on our behalf. In addition, we benefit from our relationship with Martin Resource Management Corporation through access to a significant pool of
management expertise and established relationships throughout the energy industry.
Financial Information about Segments
Information regarding our operating revenues and identifiable assets attributable to each of our segments is presented in Note 18 to our consolidated
financial 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 these
reports filed with the U.S. Securities and Exchange Commission (the "SEC") under the Exchange Act. These documents may be accessed free of charge on our
website at the following address: www.MMLP.com. These documents are provided as soon as is reasonably practicable after their filing with the SEC. This
website address is 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 the SEC’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 subject are
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, our business,
financial condition or results of operations could be materially adversely affected. In this case, we might not be able to pay distributions on our common units,
the trading price of our common units could decline and unitholders could lose all or part of their investment. These risk factors should be read in conjunction
with the other detailed information concerning us set forth herein, including our accompanying financial statements and notes and “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” included herein.
Risk Factor Summary
The following is a summary of risk factors that could adversely impact our business, financial condition, results of operations or our ability to make
quarterly distributions to our unitholders:
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 a distribution each quarter.
Restrictions in our debt instruments could prevent us from making distributions to our unitholders or limit our ability to pursue opportunities that would increase our
distributions to unitholders.
Demand for a portion of our terminalling and storage services is substantially dependent on the level of offshore oil and gas exploration, development and production
activity.
We have a significant amount of indebtedness. Debt we owe or incur in the future could limit our flexibility to obtain financing, to pursue other business opportunities,
and to pay distributions to our unitholders.
We have significant capital needs, and our ability to access the capital and credit markets to raise capital on favorable terms is limited by our debt level, industry
conditions, and financial covenants in our debt instruments.
Fluctuations in interest rates could materially affect our financial results
We are exposed to counterparty risk in our credit facility and hedging agreements and we may not be able to access funds under our credit facility if there is a default.
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We are exposed to counterparty credit risk. Nonpayment and nonperformance by our customers, suppliers or vendors could reduce our revenues, increase our expenses
and otherwise have a negative impact on our ability to conduct our business, operating results, cash flows and ability to make distributions to our unitholders.
Our future acquisitions may not be successful, may substantially increase our indebtedness and contingent liabilities and may create integration difficulties.
Our and our customers’ operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs and reduced
demand for our services.
Subsidence and coastal erosion could damage our facilities along the U.S. Gulf Coast and offshore and the facilities of our customers, which could adversely affect our
operations and financial condition.
Adverse weather conditions, including droughts, hurricanes, tropical storms, ice storms, extreme cold weather and other severe weather, exacerbated by climate change,
could reduce our results of operations and 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 or explosions, our results
of operations and ability to make distributions to our unitholders could be adversely affected.
The price volatility of petroleum products and by-products could reduce our liquidity and results of operations and ability to make distributions to our unitholders.
We could incur losses due to impairment in the carrying value of our long-lived assets
Increasing energy prices could adversely affect our results of operations.
Decreasing energy prices could adversely affect our results of operations.
The natural decline in production in our operating regions and in other regions from which we source NGL supplies means our long-term success depends on our ability
to obtain new sources of supplies of natural gas, NGLs and crude oil, which depends on certain factors beyond our control. Any decrease in supplies of natural gas, NGLs
or crude oil could adversely affect our business and operating results.
Our NGL and sulfur-based fertilizer products are subject to seasonal demand and could cause our revenues to vary.
The highly competitive nature of our industry 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 affect our results of
operations and ability to make distributions to our unitholders.
Increasing scrutiny and changing expectations from stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or
expose us to new or additional risks.
The loss or insufficient attention of key personnel could negatively impact our results of operations and ability to make distributions to our unitholders.
Our loss of significant commercial relationships with Martin Resource Management Corporation could adversely impact our results of operations 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 significant interruptions. Our
business could also be adversely affected if the operations of our customers and suppliers experienced significant interruptions.
If third-party pipelines and other facilities interconnected to our terminals become partially or fully unavailable to transport natural gas, NGLs and crude oil, our revenues
could be adversely affected.
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.
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 or eliminated.
Our marine transportation business could be adversely affected if the U.S. Government purchases or requisitions any of our vessels under the Merchant Marine Act.
Changes in U.S. foreign trade policies, including the imposition of additional tariffs and other trade barriers, and efforts to withdraw from or materially modify
international trade agreements, may materially and adversely affect our business, operations and financial condition.
Changes in transportation regulations may increase our costs and negatively impact our results of operations.
Our interest rate swap activities could have a material adverse effect on our earnings, profitability, liquidity, cash flows and financial condition.
A downgrade of our credit ratings could impact our liquidity, access to capital and costs of doing business, and maintaining credit ratings is under the control of
independent third parties.
The industry in which we operate is highly competitive and increased competitive pressure could adversely affect our business and operating results.
Information technology systems present potential targets for cyber security attacks or security breaches, whether with us or a third party, which could adversely affect our
business and result in the compromise of confidential, sensitive or proprietary information.
Our business is subject to complex and evolving U.S. laws and regulations regarding privacy and data protection (“data protection laws”). Many of these laws and
regulations are subject to change and uncertain interpretation, and could result in claims, increased cost of operations, or otherwise harm our business.
Units 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 may develop.
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 our common
unitholders will have sufficient voting power to elect or remove our general partner without consent of Martin Resource Management Corporation and its affiliates.
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.
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Unitholders may not have limited liability if a court finds that we have not complied with applicable statutes or that unitholder action constitutes control of our business.
Our Partnership Agreement contains provisions that reduce the remedies available to unitholders for actions that might otherwise constitute a breach of fiduciary duty by
our general partner.
We may issue additional common units without unitholder approval, which would dilute unitholder ownership interests.
The control of our general partner may be transferred to a third party and that party could replace our current management team, without unitholder consent.
Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.
Our common units have a limited trading volume compared to other publicly traded securities.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our unit
price.
Cash reimbursements due to Martin Resource Management Corporation may be substantial and will reduce our cash available for distribution to our unitholders.
Martin Resource Management Corporation has conflicts of interest and limited fiduciary responsibilities, which may permit it to favor its own interest to detriment of our
unitholders.
Martin Resource Management Corporation and its affiliates may engage in limited competition with us.
If Martin Resource Management Corporation were ever to file for bankruptcy or otherwise default on its obligations under its credit facility, amounts we owe under our
credit facility may become immediately due and payable and our results of operations could be adversely affected.
The U.S. Internal Revenue Service ("IRS") could treat us as a corporation for tax purposes, which would substantially reduce the cash available for distribution to
unitholders.
The tax treatment of publicly traded partnerships or an investment in our units could be subject to potential legislative, judicial or administrative changes and differing
interpretations, possibly on a retroactive basis.
A 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 contest will be borne by
our unitholders, debt security holders and our general partner.
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, in which case our cash available for distribution to our unitholders might be substantially reduced.
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 any cash
distributions from us.
Tax gain or loss on the disposition of our common units could be different than expected.
Unitholders may be subject to limitations on their ability to deduct interest expenses incurred by us.
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.
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.
Entity level taxes on income from C Corporation subsidiaries will reduce cash available for distribution, and an individual unitholder's share of dividend and interest
income from such subsidiaries would constitute portfolio income that could not be offset by the unitholder's share of our other losses or deductions.
Unitholders may be subject to state and local taxes and return filing requirements as a result of investing in our common units.
There are limits on the deductibility of our losses that may adversely affect 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 of our units 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 could 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 no longer 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.
We have adopted certain valuation methodologies and monthly conventions for U.S. federal income tax purposes that may result in a shift of income, gain, loss and
deduction among our unitholders. The IRS may challenge this treatment, which could adversely affect the value of our units.
Risks Relating to Our Business
Important 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 are
immaterial may also impair our business operations, financial condition and results of operations.
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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 a distribution
each quarter.
We may not have sufficient available cash each quarter in the future to pay distributions on our units. Under the terms of our 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 will fluctuate 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 flow from
working capital borrowings, and not solely on profitability, which will be affected by non-cash items. Other than the requirement in our Partnership Agreement
to distribute all of our available cash each quarter, we have no legal obligation to declare quarterly cash distributions, and our general partner has considerable
discretion to determine the amount of our available cash each quarter. In addition, our general partner determines the amount and timing of asset purchases and
sales, capital expenditures, borrowings, issuances of additional partnership securities and the establishment of reserves, each of which can affect the amount of
cash available for distribution to our unitholders. As a result, we may make cash distributions during periods when we record losses and may not make cash
distributions during periods when we record net income.
Restrictions in our debt instruments could prevent us from making distributions to our unitholders or limit our ability to pursue opportunities that would
increase our distributions to unitholders.
The payment of principal and interest on our indebtedness reduces the cash available for distribution to our unitholders. In addition, our credit facility and the
indenture governing our secured notes severely restrict our ability to make distributions until our total leverage ratio (as defined in the applicable debt
instruments) is less than 3.75 to 1.00 (under the indenture) and 4.50 to 1.00 (under our credit facility), pro forma first lien leverage is less than 1.00 to 1.00, and
our pro forma liquidity is greater than or equal to 35% of the commitments under our credit facility. After deleveraging, the covenants in our debt instruments
will continue to restrict our ability to make distributions, including a prohibition in our credit facility from making cash distributions during a default or an
event of default under our credit facility or if the payment of a distribution would cause a default or an event of default thereunder. Our leverage and various
limitations in our debt instruments may reduce our ability to incur additional debt, engage in certain transactions, and capitalize on acquisition or other business
opportunities that could increase cash flows and distributions to 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 and
production 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 in the
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;
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•
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;
•
climate change;
•
environmental regulation; and
•
the ability of oil and gas companies to generate or otherwise obtain funds for exploration and production
As a result of the decline in commodity prices over the last several years, offshore development activity in the Gulf of Mexico declined substantially,
diminishing demand for our terminalling and storage services. We can offer no assurance whether or when those activity levels will improve. Even if such
activity levels improve, we expect such activity to continue to be volatile and affect demand for our terminalling and storage services.
We have a significant amount of indebtedness. Debt we owe or incur in the future could limit our flexibility to obtain financing, to pursue other business
opportunities, and to pay distributions to our unitholders.
As of December 31, 2024, we had approximately $453.5 million in principal amount of debt outstanding (including $53.5 million outstanding under our credit
facility). 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 be
impaired, 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 cash
flows 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;
•
we may be placed at a competitive disadvantage relative to competitors with lower levels of indebtedness in relation to their overall size, or
those that have less restrictive terms governing their indebtedness, thereby enabling competitors to take advantage of opportunities that our
indebtedness may prevent us from pursuing; 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 by prevailing
economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to
service any current or future indebtedness, we will be forced to take actions such as further 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 undertake any of these actions on
satisfactory terms or at all. Further, agreements we may enter into in the future governing our indebtedness could further restrict our ability to make quarterly
distributions to our unitholders.
We have significant capital needs, and our ability to access the capital and credit markets to raise capital on favorable terms is limited by our debt level,
industry conditions, and financial covenants in our debt instruments.
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Our primary sources of liquidity to meet operating expenses, service our indebtedness, pay distributions to our unitholders and fund capital
expenditures have historically been provided by cash flows generated by our operations, borrowings under our credit facility and access to the debt and equity
capital markets. Accessing capital in the capital markets has become difficult for many companies in the energy industry, in particular leveraged companies
similar to us. Low and volatile commodity prices have also caused and may continue to cause lenders to increase interest rates, enact tighter lending standards,
refuse to refinance existing debt around maturity on favorable terms or at all and may reduce or cease to provide funding to borrowers. Our inability to access
the capital or credit markets on favorable terms could have a material adverse effect on our business, financial condition, results of operations, cash flows and
liquidity and our ability to repay or refinance our debt.
The covenants in our debt instruments restrict our ability to incur additional indebtedness. For instance, while our credit facility had $150.0 million in
lender commitments at December 31, 2024, the amount we were able to borrow was limited by the financial covenants contained therein.
Fluctuations in interest rates could materially affect our financial results
Borrowings under our credit facility are at variable rates. Because a portion of our debt bears interest at variable rates, increases in interest rates could
materially increase our interest expense. Based on our floating rate debt outstanding as of December 31, 2024, a 100 basis point increase in interest rates on this
amount of debt would result in an increase in interest expense and a corresponding decrease in net income of approximately $0.5 million annually.
We are exposed to counterparty risk in our credit facility and hedging agreements, and we may not be able to access funds under our credit facility if there
is a default.
We rely on our credit facility to assist in financing a significant portion of our working capital, acquisitions and capital expenditures. Our ability to borrow
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 included
in 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 additional
funding 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 capital
requirements, using other sources. Alternative sources of liquidity may not be available on acceptable terms, if at all. If the cash generated from our operations
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 we may need to
delay or abandon capital projects or other business opportunities, which could have a material adverse effect on our business, financial condition and results of
operations.
In addition, we have from time to time entered into hedging agreements to manage our interest rate and commodity risk exposure. If the counterparties fail to
honor their commitments, we could experience higher interest rates or commodity price risk, which could have a material adverse effect on our business,
financial condition and results of operations.
We are exposed to counterparty credit risk. Nonpayment and nonperformance by our customers, suppliers or vendors could reduce our revenues, increase
our expenses and otherwise have a negative impact on our ability to conduct our business, operating results, cash flows and ability to make distributions to
our unitholders.
Weak economic conditions and widespread financial distress could reduce the liquidity of our customers, suppliers or vendors, making it more
difficult for them to meet their obligations to us. We are therefore subject to risks of loss resulting from nonpayment or nonperformance by our customers.
Severe financial problems encountered by our customers could limit our ability to collect amounts owed to us, or to enforce the performance of obligations
owed to us under contractual arrangements. In the event that any of our customers was to enter into bankruptcy, we could lose all or a portion of the amounts
owed to us by such customer, and we may be forced to cancel all or a portion of our contracts with such customer at significant expense to us.
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In addition, nonperformance by suppliers or vendors who have committed to provide us with critical products or services could raise our costs or
interfere with our ability to successfully conduct our business.
Our future acquisitions may not be successful, may substantially increase our indebtedness and contingent liabilities and may create integration
difficulties.
We may not be able to successfully integrate any future acquisitions into our existing operations or achieve the desired profitability from such acquisitions.
These acquisitions may require substantial capital expenditures and the incurrence of additional indebtedness. If we make acquisitions, our capitalization and
results of operations may change significantly. Further, any acquisition could result in:
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post-closing discovery of material undisclosed liabilities of the acquired business or assets;
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the unexpected loss of key employees or customers from the acquired businesses;
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difficulties resulting from our integration of the operations, systems and management of the acquired business; and
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an unexpected diversion of our management's attention from other operations.
If any future acquisitions are unsuccessful or result in unanticipated events or if we are unable to successfully integrate acquisitions into our existing
operations, such acquisitions could adversely affect our results of operations, cash flow and ability to make distributions to our unitholders.
Our and our customers’ operations are subject to a series of risks arising out of the threat of climate change that could result in increased operating costs
and reduced demand for our services.
The threat of climate change continues to attract considerable attention in the U.S. and in foreign countries. Numerous proposals have been made and
could continue to be made at the international, national, regional, and state levels to monitor and limit existing emissions of GHGs as well as to restrict or
eliminate such future emissions. As a result, our operations, as well as the operations of our customers, are subject to a series of regulatory, political, financial,
and litigation risks associated with the processing, terminalling, storage, and transportation of fossil fuels, petroleum products, and emission of GHGs.
In the U.S., no comprehensive climate change legislation has been implemented at the federal level. However, the EPA has adopted rules that, among
other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual
reporting of GHG emissions from certain petroleum and natural gas system sources in the U.S., and implement New Source Performance Standards directing
the reduction of methane from certain new, modified, or reconstructed facilities in the oil and natural gas sector, including midstream sources. In March 2024,
the United States Environmental Protection Agency published strict new methane emission regulations for certain oil and gas facilities and the federal tax
legislation enacted in 2022 established a charge on methane emissions above certain limits from the same facilities, which rule was finalized in November
2024. In January 2025, however, President Trump signed a series of executive orders that call upon the EPA to submit a report on the continuing applicability
of its endangerment finding for GHGs under the Clean Air Act, direct federal executive departments and agencies to initiate a regulatory freeze for certain rules
that have not taken effect, pending review by the newly appointed agency head, direct federal agencies to identify and exercise emergency authorities to
facilitate conventional energy production, transportation, and refining, and mandate a review of existing regulations that may burden domestic energy
development. Despite potential changes with respect to the federal regulation of GHGs, various states and groups of states have adopted or are considering
adopting legislation, regulations, or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and
tracking programs, and various other measures that would restrict emissions of GHGs from different industrial sectors.
At the international level, pursuant to the Paris Agreement, over 190 countries have committed to limiting their GHG emissions through individually-
determined reduction goals every five years after 2020. In November 2020, the U.S. formally withdrew from the Paris Agreement. However, the U.S. rejoined
the Paris Agreement on February 19, 2021. As part of rejoining the Paris Agreement, the former President announced that the U.S. would commit to a 50 to 52
percent reduction from 2005 levels of GHG emissions by 2030 and set the goal of reaching net-zero GHG emissions by 2050. In December 2023, the United
Nations Climate Change Conference ("COP 28") held in Dubai issued its first global stocktake agreement, which called on parties, including the United States,
to contribute to the transitioning away from fossil fuels, reduction of methane emissions, and increase in renewable energy capacity to achieve net zero
emissions by 2050. On January 20, 2025, however, President Trump signed an executive order to withdraw the United States from the Paris Agreement,
marking a significant shift in federal
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climate policy. Pursuant to the terms of the Paris Agreement, the withdrawal will take effect on January 27, 2026. State and local GHG initiatives may continue
despite the U.S. withdrawal from the Paris Agreement. State, local, and international regulatory measures continue to have the potential to increase our
operating costs through direct regulation of GHG emissions resulting from our operations and could also indirectly adversely affect our operations by
decreasing demand for our services and products.
Our business could be impacted by initiatives to address greenhouse gases and climate change and incentives to conserve energy or use alternative
energy sources. For example, the federal tax legislation enacted in 2022, includes incentives to increase renewable energy, such as wind and solar electric
generation, and encourages consumers to use these alternative energy sources. Disbursements under the IRA, however, have been paused by the Trump
Administration. Such federal tax legislation and similar state or federal initiatives to incentivize a shift away from fossil fuels could reduce demand for
hydrocarbons, thereby reducing demand for our products and services and negatively impacting our business.
Additionally, there are increasing potential financial risks for fossil fuel energy companies as environmental activists concerned about the potential
effects of climate change are focusing intensive lobbying efforts on institutional lenders, including financial institutions and institutional investors, not to
provide funding to such companies. Institutional lenders may, of their own accord, elect not to provide funding to fossil fuel energy companies based on
climate change concerns. Limitation of investments in fossil fuel energy companies could result in the restriction, delay, or cancellation of drilling programs or
development or production activities of our customers, and, consequently, reduce their demand for our services.
Separately, increased attention to climate change risks has increased the possibility of claims brought by public and private entities against energy
companies in connection with their GHG emissions and alleged damages resulting from the alleged physical impacts of climate change, such as flooding,
coastal erosion, and severe weather events. While courts have generally declined to assign direct liability for climate change to large sources of GHG
emissions, new claims for damages and increased government scrutiny, especially from state and local governments, will likely continue. While we are not
currently party to any such private litigation, we could be named in future actions making similar claims of liability. Moreover, societal pressures or political or
other factors may shape the success of such claims, without regard to the company’s causation of or contribution to the asserted damage, or to other mitigating
factors.
The adoption and implementation of new or more stringent international, federal, or state legislation, regulations, or other regulatory initiatives that
impose more stringent standards for GHG emissions from oil and natural gas producers or their midstream services providers such as us could result in
increased costs of compliance or costs of consuming, and thereby reduce demand for or erode value for, the petroleum products and by-products that we
process, store and transport. Additionally, political, financial, and litigation risks may result in our customers restricting or cancelling oil and natural gas
production activities, which could result in reduced demand for our services. We may also suffer claims for infrastructure damages allegedly caused by
climactic changes or be unable to continue to operate in an economic manner. One or more of these developments could have a material adverse effect on our
business, financial condition, results of operations and cash flows.
Subsidence and coastal erosion could damage our facilities along the U.S. Gulf Coast and offshore and the facilities of our customers, which could
adversely affect our operations and financial condition.
Our assets and operations along the U.S. Gulf Coast and offshore could be impacted by subsidence and coastal erosion. Such processes potentially
could cause serious damage to our terminal facilities, which could affect our ability to provide our processing, terminalling, storage and transportation services
in the manner presently provided or in a manner consistent with our present plans. Additionally, such processes could impact our customers who operate along
the U.S. Gulf Coast, and they may be unable to utilize our services. Subsidence and coastal erosion could also expose our operations to increased risk
associated with severe weather conditions, such as hurricanes, flooding, and rising sea levels. As a result, we may incur significant costs to repair and preserve
our facilities. Such costs could adversely affect our business, financial condition, results of operations, and cash flows.
Adverse weather conditions, including droughts, hurricanes, tropical storms, ice storms, extreme cold weather and other severe weather, exacerbated by
climate change, could reduce our results of operations and ability to make distributions to our unitholders.
Our distribution network and operations are primarily concentrated in the Gulf Coast region of the U.S. 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 marine
transportation operations can be significantly delayed, impaired or postponed by adverse weather conditions, such as fog in the winter and spring months and
certain river conditions.
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Additionally, our marine transportation operations and our assets in the Gulf of Mexico, including our barges, push boats, tugboats and terminals, can be
adversely impacted or damaged by hurricanes, tropical storms, tidal waves or other related events. Demand for our lubricants and the diesel fuel we throughput
in our Terminalling and Storage segment can be affected if offshore drilling operations are disrupted by weather in the Gulf of Mexico.
In addition, our assets are vulnerable to winter storms and extreme cold weather. For example, in February 2021, we experienced Winter Storm Uri
("Uri"), an unprecedented storm bringing extreme cold temperatures and freezing precipitation to Texas and the surrounding areas, which resulted in Gulf
Coast refineries running at reduced rates or halting operations entirely. The majority of the impact we experienced was centered around our transportation and
sulfur services segments, where we saw reduced activity due to Uri's impact on Gulf Coast refinery utilization. Additionally, our Smackover Refinery was
down approximately nine days due to Uri, during which time we began preparations for the previously scheduled turnaround in March of 2021.
National weather conditions have a substantial impact on the demand for our products. Extreme weather conditions (either wet or dry) have in recent years
decreased the demand for fertilizer. For example, an unusually wet spring can delay planting of seeds, which can leave insufficient time to apply fertilizer at the
planting stage. Conversely, drought conditions can kill or severely stunt the growth of crops, thus eliminating the need to nurture plants with fertilizer.
Likewise, unusually warm weather during the winter months can cause a significant decrease in the demand for NGL products. Any of these or similar
conditions could result 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 or
explosions, 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 of petroleum
products and by-products and other industrial products. These hazards and risks, many of which are beyond our control, include:
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accidents on rivers or at sea and other hazards that could result in releases, spills and other environmental damages, personal injuries, loss of
life and suspension of operations;
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leakage of NGLs and other petroleum products and by-products;
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fires and explosions;
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damage to transportation, terminalling and storage facilities and surrounding properties caused by natural disasters; and
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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 and property
damage, including various legal proceedings and litigation resulting from these hazards and risks. If we incur material liabilities that are not covered by
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 or expensive
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 our
unitholders.
We purchase petroleum products and by-products, such as molten sulfur, fuel oils, NGLs, lubricants, and other bulk liquids and sell these products to
wholesale and bulk customers and to other end users. We also generate revenues through the terminalling and storage of certain products for third parties. The
price and market value of petroleum products and by-products could be, and has recently been, volatile. Our liquidity and revenues have been adversely
affected by this volatility during periods of decreasing prices because of the reduction in the value and resale price of our inventory. In addition, our liquidity
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and costs have been adversely affected during periods of increasing prices because of the increased costs associated with our purchase of petroleum products
and by-products. Future price volatility could have an adverse impact on our liquidity and results of operations, cash flow and ability to make distributions to
our unitholders.
We could incur losses due to impairment in the carrying value of our long-lived assets.
We periodically evaluate goodwill and long-lived assets for impairment. Our impairment analyses for long-lived assets require management to apply
judgment in evaluating whether events and circumstances are present that indicate an impairment may have occurred. If we believe an impairment may have
occurred judgments are then applied in estimating future cash flows and useful lives, as well as assessing the probability of different outcomes. To perform the
impairment assessment for goodwill, we use a discounted cash flow analysis, supplemented by a market approach analysis. Key assumptions in the analysis
include industry and economic factors, future operating results and discount rates. In estimating cash flows, we use present economic conditions, as well as
future expectations. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information,
we may be exposed to impairment charges. Adverse changes in our business or the overall operating environment may affect our estimate of future operating
results, which could result in future impairment due to the potential impact on our operations and cash flows.
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 in operating
expenses. An increase in price of these products would increase our operating expenses, which could adversely affect our results of operations, including 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. U.S. and global markets are experiencing volatility and disruption following the
escalation of geopolitical tensions between Ukraine and Russia, which has devolved into military conflict. Commodity prices also have been impacted by
political instability in China and the Middle East (including the conflict in Israel). If commodity prices remain weak for a sustained period, our terminalling
throughput volumes may be negatively impacted, particularly as producers are curtailing or redirecting drilling, adversely affecting our 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 and storage and transportation
assets resulting in reduced utilization of these assets.
For example, in 2020, the markets experienced a decline in oil prices in response to oil demand concerns due to the economic impacts of the COVID-
19 pandemic, greatly impacting the demand for refined products resulting in a significant reduction in refinery utilization. The significant reduction in refinery
utilization as a result of reduced refined products demand significantly impacted our Transportation and NGL segments. As the volume of products produced or
purchased by refineries has been reduced, demand for our services decreased.
The natural decline in production in our operating regions and in other regions from which we source NGL supplies means our long-term success depends
on our ability to obtain new sources of supplies of natural gas, NGLs and crude oil, which depends on certain factors beyond our control. Any decrease in
supplies of natural gas, NGLs or crude oil could adversely affect our business and operating results.
Our terminalling and storage, transportation and NGL services depend on crude oil and natural gas wells from which production will naturally decline
over time, which means that the cash flows associated with these sources of natural gas and crude oil will likely also decline over time. To maintain or increase
our levels of operation, we must continually obtain new natural gas, NGL and crude oil supplies. A material decrease in natural gas or crude oil production
from producing areas on which we rely, as a result of depressed commodity prices or otherwise, could result in a decline in the volume of petroleum products
for which we provide terminalling, storage and transportation service or NGL products delivered to our facilities. Our ability to obtain additional sources of
natural gas, NGLs and crude oil depends, in part, on the level of successful drilling and production activity near our terminals and other areas from which we
source NGL and crude oil supplies. We have no control over the level of such activity in the areas of our operations, the amount of reserves associated with the
wells or the rate at which production from a well will decline. In addition, we have no control over producers or their drilling, completion or production
decisions, which are affected by, among other things, prevailing and projected energy prices, demand for hydrocarbons, the level of reserves, geological
considerations, governmental regulations, the availability of drilling rigs, other production and development costs and the availability and cost of capital.
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Fluctuations in energy prices can greatly affect production rates and investments by third parties in the development of new oil and natural gas
reserves. Drilling and production activity generally decreases as crude oil and natural gas prices decrease. Prices of crude oil and natural gas have been
historically volatile, and we expect this volatility to continue. Consequently, even if new natural gas or crude oil reserves are discovered in areas served by our
assets, producers may choose not to develop those reserves. For example, current low prices for natural gas combined with relatively high levels of natural gas
in storage could result in curtailment or shut-in of natural gas production similar to the production shut-ins we experienced in 2020 due to the impacts of the
COVID-19 pandemic. Furthermore, in response to depressed commodity prices, many operators have announced substantial reductions in their estimated
capital expenditures, rig count and completion crews. Reductions in exploration and production activity, competitor actions or shut-ins by producers in the
areas in which we operate may prevent us from obtaining supplies of natural gas or crude oil to replace the natural decline in volumes from existing wells,
which could result in reduced volumes through our facilities and reduced utilization of our assets.
Our sulfur-based fertilizer products are subject to seasonal demand and could cause our revenues to vary.
The demand for our sulfur-based fertilizer products generally experiences an increase in demand during the spring, which increases the revenue generated by
this business 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 a
quarter-to-quarter basis and thus could cause our cash available for quarterly distributions to fluctuate from period to period.
The 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 larger companies
with greater financial and other resources than we possess. We may lose customers and future business opportunities to our competitors and any such 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 affect
our 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 or otherwise
relating to protection of human health, natural resources and the environment. These laws and regulations may impose numerous obligations that are applicable
to our operations, such as: requiring the acquisition of permits to conduct regulated activities; restricting the manner in which we can release materials into the
environment; requiring remedial activities or capital expenditures to mitigate pollution from former or current operations; and imposing substantial liabilities
on us for pollution resulting from our operations. Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce
compliance with these laws and regulations and the permits issued under them, oftentimes requiring difficult and costly actions. Many environmental laws and
regulations can impose joint and several strict liability, and any failure to comply with environmental laws, regulations and permits may result in the
assessment of administrative, civil and criminal penalties, the imposition of investigatory and remedial obligations and, in some circumstances, the issuance of
injunctions that can limit or prohibit our operations. The continuing trend in environmental regulation is to place more restrictions and limitations on activities
that may affect the environment, and, thus, any changes in environmental laws and regulations that result in more stringent and costly waste handling, storage,
transport, disposal or remediation requirements could have a material adverse effect on our operations and financial position.
Increasing scrutiny and changing expectations from stakeholders with respect to our environmental, social and governance practices may impose
additional costs on us or expose us to new or additional risks.
Companies across all industries are facing increasing scrutiny from stakeholders related to their environmental, social, and governance (“ESG”)
practices. Investor advocacy groups, certain institutional investors, investment funds, and other influential investors are also increasingly focused on ESG
practices and in recent years have placed increasing importance on the implications and social cost of their investments. Regardless of the industry, investors’
increased focus and activism related to ESG and similar matters may hinder access to capital, as investors may decide to reallocate capital or to not commit
capital as a result of their assessment of a company’s ESG practices. Companies that do not adapt to or comply with investor or stakeholder expectations and
standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there
is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be
materially and adversely affected.
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Our stakeholders may require us to implement ESG procedures or standards in order to remain invested in us or before they may make further
investments in us. Additionally, we may face reputational challenges in the event our ESG procedures or standards do not meet the standards set by certain
constituencies. If we do not meet our stakeholders’ expectations, our business, ability to access capital, and/or our common unit price could be harmed.
Additionally, adverse effects upon the oil and gas industry related to the worldwide social and political environment, including uncertainty or
instability resulting from climate change, changes in political leadership and environmental policies, changes in geopolitical-social views toward fossil fuels
and renewable energy, concern about the environmental impact of climate change and investors’ expectations regarding ESG matters, may also adversely affect
demand for our services. Any long-term material adverse effect on the oil and gas industry could have a significant financial and operational adverse impact on
our business.
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 Corporation.
Those senior officers have significant experience in our businesses and have developed strong relationships with a broad range of industry participants. The
loss of any of these executives could have a material adverse effect on our relationships with these industry participants, our results of operations and our
ability to make distributions to our unitholders.
We do not have employees. We rely solely on officers and employees of Martin Resource Management Corporation to operate and manage our business.
Martin Resource Management Corporation operates businesses and conducts activities of its own in which we have no economic interest. There could be
competition for the time and effort of the officers and employees who provide services to our general partner. If these officers and employees do not or cannot
devote sufficient attention 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 Corporation could adversely impact our results of operations and
ability to make distributions to our unitholders.
Martin Resource Management Corporation provides us with various services and products pursuant to various commercial contracts. The loss of any of these
services and products provided by Martin Resource Management Corporation could have a material adverse impact on our results of operations, cash flow and
ability to make distributions to our unitholders. Additionally, we provide terminalling and storage, processing and marine transportation services to Martin
Resource Management Corporation to support its businesses under various commercial contracts. The loss of Martin Resource Management Corporation as a
customer could have a material adverse 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 significant
interruptions. 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 modes of transportation. We are also dependent upon the uninterrupted
operations of certain facilities owned or operated by our suppliers and customers. Any significant interruption at these facilities or inability to transport
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 ability to make
distributions to our unitholders. Operations at our facilities and at the facilities owned or operated by our suppliers and customers could be partially or
completely shut down, temporarily or permanently, as the result of any number of circumstances that are not within our control, such as:
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catastrophic events, including hurricanes;
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environmental remediation;
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labor difficulties; and
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disruptions in the supply of our products to our facilities or modes of transportation.
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Additionally, terrorist attacks and acts of sabotage could target oil and gas production facilities, refineries, processing plants, terminals and other
infrastructure facilities. Any significant interruptions at our facilities, facilities owned or operated by our suppliers or customers, or in the oil and gas industry
as 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 our
unitholders.
If third-party pipelines and other facilities interconnected to our terminals become partially or fully unavailable to transport natural gas, NGLs and crude
oil, our revenues could be adversely affected.
We depend upon third-party pipelines, storage and other facilities that provide delivery options to and from our terminals. Since we do not own or
operate these pipelines, storage, or other facilities, their continuing operation in their current manner is not within our control. If any of these third-party
facilities become partially or fully unavailable, or if the quality specifications for their facilities change so as to restrict our ability to utilize them, our revenues
could be adversely affected.
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 majority of
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 governance requirements.
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 or
eliminated.
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, the Jones 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 to engage 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 Guard and 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 the past
several years, certain interest groups have lobbied Congress to repeal the Jones Act to facilitate foreign flag competition for trades and cargoes reserved for
U.S. flagged vessels under the Jones Act and cargo preference laws. If the Jones Act were to be modified or eliminated to permit foreign competition that
would not be subject 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 Merchant
Marine Act.
We are subject to the Merchant Marine Act of 1936, which provides that, upon proclamation by the U.S. President of a national emergency or a 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 or requisitioned 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 the case 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 tank barge 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 to be 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 of our vessels are purchased
or requisitioned for an extended period of time by the U.S. government, such transactions could have a material adverse effect on our results of operations, cash
flow and ability to make distributions to our unitholders.
Changes in U.S. foreign trade policies, including the imposition of additional tariffs and other trade barriers, and efforts to withdraw from or materially
modify international trade agreements, may materially and adversely affect our business, operations and financial condition.
Changes in U.S. foreign trade policies, including as a result of the Trump administration, could lead to the imposition of additional trade barriers and
tariffs on the foreign import of certain materials and products. For example, effective February
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4, 2025, the U.S. government implemented an additional tariff on goods being imported from China and announced additional tariffs for goods imported into
the U.S. from Mexico and Canada beginning in March 2025. In addition, from time to time, certain leaders in the U.S. government, including in the Trump
administration, have indicated a willingness to revise, renegotiate or terminate various existing bilateral and multilateral trade agreements. We cannot predict
what additional changes to trade policy will be made by the Trump administration or Congress, including whether existing tariff policies will be maintained or
modified, what products may be subject to such policies, or whether the entry into new bilateral or multilateral trade agreements will occur, nor can we predict
the effects that any such changes would have on our business. However, such steps, if adopted, could increase our costs and adversely impact our business and
operations. In addition, changes in U.S. trade policy have resulted, and could again result, in reactions from U.S. trading partners, including adopting
responsive trade policies. For example, in response to the U.S. government’s additional tariff on imports from China, on February 4, 2025, the Chinese
government announced that it would implement a tariff on certain goods being imported into China from the U.S. There can be no assurance that such changes
in U.S. or foreign trade policy or in laws and policies governing foreign trade, and any resulting negative sentiments towards the United States as a result of
such changes, would not materially and adversely affect our business, financial condition and results of operations.
Changes in transportation regulations may increase our costs and negatively impact our results of operations.
We are subject to various transportation regulations by the U.S. Department of Transportation and analogous state agencies, whose regulations include
certain permit requirements of highway and safety authorities. These regulatory authorities exercise broad powers over our trucking operations, generally
governing such matters as the authorization to engage in motor carrier operations, safety, equipment testing, driver requirements and specifications, and
insurance requirements. The trucking industry is subject to possible regulatory and legislative changes that may impact our operations, such as changes in fuel
emissions limits, hours of service regulations that govern the amount of time a driver may drive or work in any specific period, and limits on vehicle weight
and size. As the federal government continues to develop and propose regulations relating to fuel quality, engine efficiency and GHG emissions, we may
experience an increase in costs related to truck purchases and maintenance, impairment of equipment productivity, a decrease in the residual value of vehicles,
and an increase in operating expenses. Increased truck traffic may contribute to deteriorating road conditions in some areas where we operate. Our operations
could also be affected by road construction, road repairs, detours and state and local regulations and ordinances restricting access to certain roads. Proposals to
increase federal, state, or local taxes, including taxes on motor fuels, are also made from time to time, and any such increase could increase our operating costs.
Additionally, state and local regulation of permitted routes and times on specific roadways could adversely affect our operations. We cannot predict whether, or
in what form, any legislative or regulatory changes or municipal ordinances applicable to our trucking operations will be enacted or to what extent any such
legislation or regulations could increase our costs or otherwise adversely affect our business or operations.
Our 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 agreements involve
risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may not be effective 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 the long-term
borrowing against which the swap is intended to hedge. If such events occur, our results of operations may be adversely affected.
A downgrade of our credit ratings could impact our liquidity, access to capital and costs of doing business, and maintaining credit ratings is under the
control of independent third parties.
A downgrade of our credit ratings may increase our cost of borrowing and could require us to post collateral with third parties, negatively impacting
our available liquidity. Our and our subsidiaries’ ability to access capital markets could also be limited by a downgrade of our credit ratings.
Credit rating agencies perform independent analysis when assigning credit ratings. The analysis includes a number of criteria including, but not
limited to, business composition, market and operational risks, as well as various financial tests. Credit rating agencies continue to review the criteria for
industry sectors and various debt ratings and may make changes to those criteria from time to time. Credit ratings are not recommendations to buy, sell or hold
investments in the rated entity. Ratings are subject to revision or withdrawal at any time by the rating agencies, and we cannot assure you that we will maintain
our current credit ratings.
The industry in which we operate is highly competitive and increased competitive pressure could adversely affect our business and operating results.
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We compete with similar enterprises in our respective areas of operation. Some of our competitors are large oil, natural gas and petrochemical companies
that have greater financial resources and access to supplies of NGLs than we do. Our customers who produce NGLs may develop their own systems to
transport NGLs in lieu of using ours. Our ability to renew or replace existing contracts with our customers at rates sufficient to maintain current revenues and
cash flows could be adversely affected by the activities of our competitors and our customers. All of these competitive pressures could have a material adverse
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 or security breaches, whether with us or a third party, which could
adversely affect our business and result in the compromise of confidential, sensitive or proprietary information.
We are reliant on technology to improve efficiency in our business. Information technology systems are critical to our operations and those of our
third-party providers with whom we are connected. These systems could 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. Dependence on automated systems
may increase the risks related to operational systems failures and breaches of critical operational or financial controls, and tampering or deliberate manipulation
of such systems may result in losses that are difficult to detect. Any material failure, interruption of service, compromise of data security, or cybersecurity
threat or attack could adversely affect our relations with suppliers, customers, and regulators, and resulting in negative impacts to our market share, operations,
and profitability. We will have to continually upgrade our infrastructure and applications to reduce or mitigate these risks. Security breaches in our information
technology systems could result in theft, destruction, loss, misappropriation, or release of protected, confidential or other sensitive data including personal
information of our employees, trade secrets, or other proprietary intellectual property that could adversely impact our future results. While we take the utmost
precautions, we cannot guarantee safety from all threats and attacks. Some individuals and groups, including criminal organizations and state-sponsored
groups, have attempted to gain unauthorized access to computer networks of U.S. businesses and mounted so-called “cyberattacks” to disable or disrupt
computer systems, disrupt operations, and steal funds or data including through so-called “phishing” or social engineering schemes, which are attempts to
obtain unauthorized access by targeted acts of deception against individuals with legitimate access to physical locations or information. For example, in 2021, a
company in the midstream industry suffered a ransomware cyberattack that impacted computerized equipment managing a pipeline and resulted in the halt of
the pipeline’s operations in order to contain the attack.
Any successful breach of security with respect to us or our third-party providers 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 effect on our business, financial conditions
and operations. Many of our employees and those of our service providers, vendors and customers may access computer systems remotely where their
cybersecurity protections may be less robust and our cybersecurity procedures and safeguards may be less effective. While we make significant investments in
technology security and we carefully evaluate the security of selected cloud system providers and cloud storage providers, there can be no guarantee that
information security efforts will be totally effective.
Moreover, as cyberattacks continue to evolve, we may be required to expend significant additional resources to further enhance our digital security or
to remediate vulnerabilities. In addition, cyberattacks against us or others in our industry could result in additional regulations, which could lead to increased
regulatory compliance costs, insurance coverage cost, or capital expenditures and any failure by us to comply with these additional regulations could result in
significant penalties and liability to us. In May and July 2021, following ransomware attacks on a major petroleum pipeline, the Department of Homeland
Security issued security directives to certain midstream pipeline companies that require such companies to appoint cybersecurity personnel, perform
cybersecurity assessments and complete specific network enhancements, and report incidents and other information to the Department’s Cybersecurity and
Infrastructure Security Agency. We cannot predict the potential impact to our business or the energy industry resulting from additional regulations.
Our business is subject to complex and evolving U.S. laws and regulations regarding privacy and data protection (“data protection laws”). Many of these
laws and regulations are subject to change and uncertain interpretation, and could result in claims, increased cost of operations, or otherwise harm our
business.
The regulatory environment surrounding data privacy and protection is constantly evolving and can be subject to significant change. New data
protection laws pose increasingly complex compliance challenges and potentially elevate our costs. Complying with varying jurisdictional requirements could
increase the costs and complexity of compliance, and violations of applicable data protection laws can result in significant penalties. Any failure, or perceived
failure, by us to adequately address privacy and cybersecurity concerns or comply with applicable data protection laws could result in
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proceedings or actions against us by governmental entities or others, subject us to significant fines, penalties, judgments, and negative publicity, require us to
change our business practices, increase the costs and complexity of compliance, or adversely affect our business. As noted above, we are also subject to the
possibility of cyberattacks, which themselves may result in a violation of these laws.
Risks Relating to an Investment in the Common Units
Units 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 may
develop.
Common units will generally be freely transferable without restriction or further registration under the Securities Act, except that any common units held by
an "affiliate" of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemption under 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 common 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 a pro 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 as a result of the withdrawal 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 of additional
common units or other equity securities would result in a corresponding decrease in the proportionate ownership interest in us represented by and could
adversely affect the cash distributions to and market price of, common units then outstanding.
Under our Partnership Agreement, our general partner and its affiliates have the right to cause us to register under the Securities Act and applicable state
securities laws the offer and sale of any units that they hold. Subject to the terms and conditions of our Partnership Agreement, these registration rights allow
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 in a
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 for two
years following its withdrawal or removal as a general partner. In connection with any registration of this kind, we will indemnify each unitholder participating
in the registration and its officers, directors, and controlling persons from and against any liabilities under the Securities Act or any applicable state securities
laws arising from the registration statement or prospectus. Except as described below, the general partner and its affiliates may sell their units in private
transactions at any time, subject to compliance with applicable laws. Our general partner and its affiliates, with our concurrence, have granted comparable
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 may develop.
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 our
common unitholders will have sufficient voting power to elect or remove our general partner without the consent of Martin Resource Management
Corporation and its affiliates.
Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and therefore limited
ability to influence management's decisions regarding our business. Unitholders did not elect our general partner or its directors and will have no right 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.
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If unitholders are dissatisfied with the performance of our general partner, they will have a limited ability to remove our general partner. Our general partner
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 of
December 31, 2024, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units and all of the ownership
interests in MMGP, our general partner.
Unitholders' voting rights are further restricted by our Partnership Agreement provision prohibiting any units held by a person owning 20% or more of any
class of units then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of our
general partner's directors, from voting on any matter. In addition, our Partnership Agreement contains provisions limiting the ability of unitholders to call
meetings or to acquire information about our operations, as well as other provisions limiting the unitholders' ability to influence the manner 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 our general
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 discretion to be
necessary to fund our future operating expenditures. In addition, our Partnership Agreement permits our general partner to reduce available cash by establishing
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 for future
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 control of
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 in some
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 a court
were to determine that:
•
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 to
our 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 contractual
obligations that are expressly made without recourse to our general partner. In addition, under some circumstances, a unitholder may be liable to us for the
amount 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 of
fiduciary 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 Agreement also
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 the
interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our
affiliates or any limited partner;
•
provides that our general partner is entitled to make other decisions in its "reasonable discretion," which may reduce the obligations to which
our general partner would otherwise be held;
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•
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 may consider 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 or assignees
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 might
otherwise 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 the
common 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 a
pro 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 as a result of the withdrawal 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 does
not give our unitholders the right to approve our issuance of equity securities ranking junior to the common units at any time.
The 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 minimum
quarterly 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 unitholder
consent.
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 the consent
of the unitholders. Furthermore, there is no restriction in our Partnership Agreement on the ability of the owner of our general partner to transfer its ownership
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 partner with 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.
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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 the obligation,
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 persons at 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 and may not receive
any return on their investment. Unitholders may also incur a tax liability upon a sale of their units. No provision in our Partnership Agreement, or in any other
agreement we have with our general partner or Martin Resource Management Corporation, prohibits our general partner or its affiliates from acquiring more
than 80% of our common units. For additional information about this call right and unitholders' potential tax liability, please see "Risk Factors-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 may continue 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 effect
on 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 of the
Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal controls over financial reporting addressing these
assessments. 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 the
Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to maintain the adequacy of our internal controls, as such
standards 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 have
effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective
internal control environment could have a material adverse effect on the price of our common units.
Risks Relating to Our Relationship with Martin Resource Management Corporation
Cash reimbursements due to Martin Resource Management Corporation may be substantial and will reduce our cash available for distribution to our
unitholders.
Under our Omnibus Agreement with Martin Resource Management Corporation, Martin Resource Management Corporation provides us with corporate staff
and support services on behalf of our general partner that are substantially identical in nature and quality to the services it conducted for our business prior to
our formation. The Omnibus Agreement requires us to reimburse Martin Resource Management Corporation for the costs and expenses it incurs in rendering
these services, including an overhead allocation to us of Martin Resource Management Corporation's indirect general and administrative expenses from its
corporate allocation pool. These payments may be substantial. Payments to Martin Resource Management Corporation will reduce the amount of available cash
for distribution to our unitholders.
Martin Resource Management Corporation has conflicts of interest and limited fiduciary responsibilities, which may permit it to favor its own interests to
the detriment of our unitholders.
As of December 31, 2024, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units and 100% of the
ownership interests in MMGP. MMGP owns a 2% general partnership interest in us. Conflicts of interest may arise between Martin Resource Management
Corporation and our general partner, on the one hand, and our unitholders, on the other hand. As a result of these conflicts, our general partner may favor its
own interests and the interests of Martin Resource Management Corporation over the interests of our unitholders. Potential conflicts of interest between us,
Martin Resource Management Corporation and our general partner could occur in many of our day-to-day operations including, among others, the following
situations:
•
Officers of Martin Resource Management Corporation who provide services to us also devote significant time to the businesses of Martin Resource
Management Corporation and are compensated by Martin Resource Management Corporation for that time;
•
Neither our Partnership Agreement nor any other agreement requires Martin Resource Management Corporation to pursue a business strategy
that favors us or utilizes our assets or services. Martin Resource
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Management Corporation's directors and officers have a fiduciary duty to make these decisions in the best interests of the shareholders of
Martin Resource Management Corporation without regard to the best interests of the unitholders;
•
Martin Resource Management Corporation 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 Corporation,
in resolving conflicts 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 the
remedies 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, without such
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 Corporation 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 terms
that 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 Corporation;
•
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;
•
In some instances, our general partner may cause us to borrow funds to permit us to pay cash distributions; and
•
Our general partner has broad discretion to establish financial reserves for the proper conduct of our business. These reserves also will affect
the amount of cash available for distribution.
Martin Resource Management Corporation and its affiliates may engage in limited competition with us.
Martin Resource Management Corporation and its affiliates may engage in limited competition with us. For a discussion of the non-competition provisions
of the Omnibus Agreement, please see "Item 13. Certain Relationships and Related Transactions, and Director Independence." If Martin Resource Management
Corporation does engage in competition with us, we may lose customers or business opportunities, which could have an adverse impact on our results of
operations, cash flow and ability to make distributions to our unitholder allocations.
If Martin Resource Management Corporation were ever to file for bankruptcy or otherwise default on its obligations under its credit facility, amounts we
owe under our credit facility may become immediately due and payable and our results of operations could be adversely affected.
If Martin Resource Management Corporation were ever to commence or consent to the commencement of a bankruptcy proceeding or otherwise default on
its obligations 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. If
Martin Resources Management no longer controls our general partner, the lenders under our credit facility may declare all amounts outstanding thereunder
immediately due and payable. In addition, either a judgment against Martin Resource Management Corporation or a bankruptcy filing by or against Martin
Resource Management Corporation could independently result in an event of default under our credit facility if it could reasonably be expected to have a
material adverse effect on us. If our lenders do declare us in default and accelerate repayment, we may be required to refinance our debt on unfavorable terms,
which could negatively impact our results of operations and our ability to make distributions to our unitholders. A bankruptcy filing by or against Martin
Resource Management Corporation could also result in the termination or material breach of some or all of the various commercial contracts between us and
Martin
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Resource Management Corporation, which could have a material adverse impact on our results of operations, cash flow and ability to make distributions to our
unitholders.
Tax Risks
The U.S. Internal Revenue Service ("IRS") could treat us as a corporation for tax purposes, which would substantially reduce the cash available for
distribution to unitholders.
The anticipated after-tax economic benefit of an investment in us depends largely on our classification as a partnership for federal income tax purposes. 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 as ours
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, more than
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 include interest (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 held for 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 income requirement 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 IRS does 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, which is
currently a maximum of 21%, and would likely owe state income tax at varying rates. Distributions would generally be taxed again to unitholders as corporate
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 for distribution 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 to unitholders and therefore would likely result in a reduction in the value of the common units.
The tax treatment of publicly traded partnerships or an investment in our units could be subject to potential legislative, judicial or administrative changes
and 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 modified by
administrative, legislative or judicial interpretation at any time.
At the federal level, members of Congress and the President of the U.S. have periodically considered substantive changes to the existing U.S. tax laws that
would have affected certain publicly traded partnerships, including the elimination of partnership tax treatment for publicly traded partnerships. At the state
level, because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-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 at a 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 will reduce 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 impossible to 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 cause us to
change our business activities, affect the tax considerations of an investment in us, change the character or treatment of portions of our income and adversely
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.
In 2017, the U.S. Department of the Treasury issued final regulations (the "QI Regulations") regarding qualifying income under Section 7704(d)(1)(E)
of the Code which relates to the qualifying income exception upon which we rely for partnership tax treatment. The QI Regulations include "reserved"
paragraphs for fertilizer and hedging, which the U.S. Department of the Treasury plans to address in future proposed and final Treasury regulations. We are
unable to predict how such future regulations may treat fertilizer or hedging activities, but such regulations could impact our ability to treat certain
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activities as generating qualifying income. The QI Regulations provide for a ten-year transition period during which certain taxpayers that either obtained a
favorable private letter ruling or treated income under 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 QI Regulations. With respect to some of these private letter rulings, the income that we derived from certain affected activities will be treated
as qualifying income only until the end of the ten-year transition period which, in our case, is December 31, 2027. Thus, at this time and through the end of
2027, we believe that the QI Regulations will not significantly impact the amount of our gross income that we are able to treat as qualifying income.
A 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 contest
will 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 matter affecting 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 administrative or 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's conclusions 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 which they 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 our general partner.
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, in which case our cash available for distribution to our unitholders might be substantially reduced.
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 makes audit 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 penalties and interest) resulting from such audit adjustment directly
from such entity. Generally, we expect to elect to have our unitholders take such audit adjustment into 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 all circumstances. If we are unable to have our unitholders take
such audit adjustment into account in accordance with their interests in us during the tax year under 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 units in 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 result of audit adjustments cash available for distribution to our
unitholders may be substantially reduced.
Additionally, we are required to designate a partner, or other person, with a substantial presence in the U.S. as the partnership representative
("Partnership Representative"). The Partnership Representative will have the sole authority to act on our behalf for purposes of, among other things, U.S.
federal income tax audits and judicial review of administrative adjustments by the IRS. We have designated our general partner as our Partnership
Representative. Further, any actions taken by us or by the Partnership Representative on our behalf with respect to, among other things, federal income tax
audits and judicial review of administrative adjustments by the IRS, will be binding on us and all of our unitholders.
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 any
cash 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 taxable income 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 or even the tax
liability that results from the taxation of their share of our taxable income.
A unitholder’s share of our taxable income, and its relationship to any distributions we make, may be affected by a variety of factors, including our
economic performance, which may be affected by numerous business, economic, regulatory, legislative, competitive and political uncertainties beyond our
control. Additionally, we may engage in transactions to delever the partnership and manage our liquidity that may result in income to our unitholders without a
corresponding cash distribution. For example, if we sell assets and use the proceeds to repay existing debt or fund capital expenditures, you may be allocated
taxable 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
40
"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 therefrom may exceed cash distributions or the value of the units. The ultimate effect of any such allocations
will depend on the unitholder's individual tax position with respect to its units. Unitholders are encouraged to consult their tax advisor with respect to the
consequences to them of COD income.
Tax 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 in those
common units. Prior distributions in excess of the total net taxable income unitholders were allocated for a common unit, which decreased unitholder tax 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 that common
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, may be
ordinary income to our unitholders. Should the IRS successfully contest some positions we take, our unitholders could recognize more gain on the sale of units
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, they may
incur a tax liability in excess of the amount of cash they receive from the sale.
Unitholders may be subject to limitations on their ability to deduct interest expenses incurred by us.
In general, the Partnership is entitled to a deduction for interest paid or accrued on indebtedness properly allocable to our trade or business during its
taxable year. However, the deduction for "business interest" is limited to the sum of the Partnership’s business interest income and 30% of its "adjusted taxable
income." For the purposes of this limitation, the Partnership’s adjusted taxable income is computed without regard to any business interest expense or business
interest income and by taking into account any deduction allowable for depreciation, amortization, or depletion to the extent such depreciation, amortization, or
depletion is not capitalized into cost of goods sold with respect to inventory. If the Partnership’s "business interest" is subject to limitation under these rules,
unitholders will be limited in their ability to deduct their share of any interest expense that has been allocated to them. As a result, unitholders may be subject to
limitation on their ability to deduct interest expenses incurred by the Partnership.
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 plans and other
retirement plans, regulated investment companies, real estate investment trusts, mutual funds and non-U.S. persons raises issues unique to them. For example,
virtually all of our income allocated to organizations exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business
taxable income (“UBTI”) and will be taxable to them. An exempt organization is required to independently compute its UBTI from each separate unrelated
trade or business which may prevent an exempt organization from utilizing losses we allocate to the organization against the organization’s UBTI from other
sources and vice versa.
Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, 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. Distributions to non-U.S. persons will also be subject to a 10%
withholding tax on the amount realized with respect to any distribution, and in the case of a distribution effected through a broker, the amount realized is the
amount of any distribution in excess of our “cumulative net income.” As we do not compute our cumulative net income for such purposes due to the
complexity of the calculation and lack of clarity in how it would apply to us, we intend to treat all of our distributions as being in excess of our cumulative net
income for such purposes and subject to such 10% withholding tax.
If a unitholder sells or otherwise disposes of a unit, the transferee is required to withhold 10% of the amount realized by the transferor unless the
transferor certifies that it is not a foreign person, and we are required to deduct and withhold from the transferee amounts that should have been withheld by the
transferee but were not withheld. Under the Treasury Regulations, such withholding will be required on open market transactions, but in the case of a transfer
made through a broker, a partner’s share of liabilities will be excluded from the amount realized. In addition, the obligation to withhold will be imposed on the
broker instead of the transferee (and we will generally not be required to withhold from the transferee amounts that should have been withheld by the transferee
but were not withheld). Current and prospective non-U.S. unitholders should consult their tax advisors regarding the impact of these rules on an investment in
our common units.
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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 that may not
conform to all aspects of the Treasury regulations. Any position we take that is inconsistent with applicable Treasury regulations may have to be disclosed on
our federal income tax return. This disclosure increases the likelihood that the IRS will challenge our positions and propose adjustments to some or all of our
unitholders. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our unitholders. It also could 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 our common units or result
in audit adjustments to our unitholders' tax returns.
Entity level taxes on income from C corporation subsidiaries will reduce cash available for distribution, and an individual unitholder’s share of dividend
and interest income from such subsidiaries would constitute portfolio income that could not be offset by the unitholder’s share of our other losses or
deductions.
A portion of our taxable income is earned through MTI, which is a C corporation for federal tax purposes. C corporations are subject to federal income tax on
their taxable income at the corporate tax rate, which is currently 21%, and will likely pay state (and possibly local) income tax at varying rates on their taxable
income. Any such entity level taxes will reduce the cash available for distribution to our unitholders. Distributions from any such C corporation are generally
taxed again to unitholders as dividend income to the extent of current and accumulated earnings and profits of such C corporation. As of December 31, 2024,
the maximum federal income tax rate applicable to such qualified dividend income that is allocable to individuals was 20% (plus a 3.8% net investment income
tax that applies to certain net investment income earned by individuals, estates and trusts). An individual unitholders’ share of dividend and interest income
from MTI or other C corporation subsidiaries would constitute portfolio income that could not be offset by the unitholders’ share of our other losses or
deductions.
Unitholders may be subject to state and local 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 and local income taxes, unincorporated business taxes and estate,
inheritance, or intangible taxes that are imposed by the various jurisdictions in which we do business or own property. Unitholders may be required to file state
and local income tax returns and pay state and local income taxes in some or all of the various jurisdictions in which we do business or own property and may
be subject to penalties for failure to comply with those requirements. We own property and/or conduct business in several states, many of which impose a
personal income tax and also impose income taxes on corporations and other entities. We may do business or own property in other states in the future. It is the
unitholder's responsibility to file all federal, state and local tax returns. Our counsel has not rendered an opinion on the state, local or foreign 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 unrelated income. In
cases when our unitholders are subject to the passive loss rules (generally, individuals and closely-held corporations), any losses generated by us will 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. A unitholder'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 passive activities, including losses from other
publicly traded partnerships. Other limitations that may further restrict the deductibility 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 our
units 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 could
change 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 of our 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 traded partnerships to use
a monthly simplifying convention that is similar to ours, but they do not specifically authorize all aspects of the proration method we have adopted. Therefore,
the use of our
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proration method may not be permitted under existing Treasury regulations, and, accordingly, our counsel is unable to 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
no longer 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 loaned units, 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 unitholder may
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 with respect
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 as ordinary
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 a short 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 seller are urged to
modify any applicable brokerage account agreements to prohibit their brokers from borrowing their units.
We have adopted certain valuation methodologies and monthly conventions for U.S. federal income tax purposes that may result in a shift of income, gain,
loss and deduction among our unitholders. The IRS may challenge this treatment, which could adversely affect the value of our units.
When we issue additional units or engage in certain other transactions, we will determine the fair market value of our assets. Although we may from
time to time consult with professional appraisers regarding valuation matters, we make many fair market value estimates using a methodology based on the
market value of our units as a means to measure the fair market value of our assets. The IRS may challenge these valuation methods and the resulting
allocations of income, gain, loss and deduction.
A successful IRS challenge to these methods or allocations could adversely affect the amount, character and timing of taxable income or loss being
allocated to our unitholders. It also could affect the amount of taxable gain from our unitholders' sale of units and could have a negative impact on the value of
the units or result in audit adjustments to our unitholders' tax returns without the benefit of additional deductions.
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Item 1B.
Unresolved Staff Comments
None.
Item 1C – Cybersecurity
Cybersecurity Risk Management and Strategy
The Partnership recognizes the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information
systems and protect the confidentiality, integrity, and availability of our data.
Managing Material Risks & Integrated Overall Risk Management
The Partnership has strategically integrated cybersecurity risk management into our broader risk management framework to promote an entity-wide culture of
cybersecurity risk management. Our information technology department works closely with our internal audit, risk, and legal teams to continuously evaluate
and address cybersecurity risks and ensure cybersecurity measures are in alignment with our business objectives and operational needs.
Our cybersecurity measures are designed to identify, protect, detect, and respond to and manage reasonably foreseeable cybersecurity risks and threats. To
protect our information systems from cybersecurity threats, we use multiple monitoring and detection tools to safeguard network and endpoint devices. We
have implemented measures that proactively and continuously assess and monitor our information systems for vulnerabilities and cybersecurity exposure.
Engage Third Parties on Risk Management
Recognizing the complexity and evolving nature of cybersecurity threats, the Partnership engages with a range of external experts, including cybersecurity
consultants in evaluating and testing our risk management systems. Our collaboration with these third parties includes regular audits, network penetration
testing, threat assessments, and consultation on security enhancements.
We provide awareness training to our employees to help identify, avoid, and mitigate cybersecurity threats. Our employees with network access are required to
complete annual security awareness training and quarterly spear phishing exercises.
Oversee Third-Party Risk
Because we are aware of the risks associated with third-party vendors, service providers and business partners, we have implemented stringent processes to
oversee and manage these risks. We conduct thorough and annual security assessments of all third-party file transfer protocols, and we perform in-depth
reviews of hosted applications including, but not limited to, confirmation of SOC 2, ISO 27001, or other relevant security certifications.
Risks from Cybersecurity Threats
We have not been subject to cybersecurity challenges that have materially impaired or are reasonably likely to materially impair our operations or financial
standing.
Governance
The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats. The Board of Directors has established
robust oversight mechanisms and is willing to cause the Partnership to expend significant resources to further enhance digital security or to remediate
vulnerabilities to ensure effective governance in managing risks associated with cybersecurity threats. The Board of Directors recognizes the significance of
these cybersecurity threats to our operational integrity and stakeholder confidence.
Board of Directors Oversight
The Partnership’s Board of Directors has oversight of cybersecurity risks. The Board of Directors is composed of board members with diverse expertise
including, risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively.
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Management’s Role Managing Risk
The Director of Internal Audit and the Chief Financial Officer (“CFO”) play a pivotal role in informing the Board of Directors on cybersecurity risks. They
provide comprehensive briefings to the Board of Directors on a regular basis, with a minimum frequency of once per year. These briefings encompass a broad
range of topics, including:
•
Current cybersecurity landscape and emerging threats;
•
Status of ongoing cybersecurity initiatives and strategies;
•
Incident reports and learnings from any cybersecurity events; and
•
Compliance with regulatory requirements and industry standards.
In addition to our scheduled meetings, the Board of Directors, Director of Internal Audit, Director of Information Technology and CFO maintain an ongoing
dialogue regarding emerging or potential cybersecurity risks. Together, they receive updates on significant developments in the cybersecurity domain, ensuring
the Board of Directors' oversight is proactive and responsive. The Board of Directors actively participates in strategic decisions related to cybersecurity,
offering guidance and approval for major initiatives. This involvement ensures that cybersecurity considerations are integrated into the broader strategic
objectives of the Partnership. The Board of Directors conducts an annual review of the Partnership’s cybersecurity posture and the effectiveness of its risk
management strategies. This review helps in identifying areas for improvement and ensuring the alignment of cybersecurity efforts with the overall risk
management framework.
Reporting to the Board of Directors
The Directors of Information Technology and Internal Audit regularly inform executive management of all aspects related to cybersecurity risks and incidents.
This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing the Partnership. Furthermore,
significant cybersecurity matters, and strategic risk management decisions are escalated to the Board of Directors, ensuring that they have comprehensive
oversight and can provide guidance on critical cybersecurity issues.
Monitor Cybersecurity Incidents
The Director of Information Technology is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk
management techniques. The Director of Information Technology implements and oversees processes for the regular monitoring of our information systems.
This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a cybersecurity
incident, the Partnership's information technology team is equipped with an incident response plan. This plan includes immediate actions to mitigate and
contain the impact and strategies for remediation and prevention of future incidents.
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 of the
properties that have been transferred to us in connection with our initial public offering and the assets we acquired in our acquisitions, required the consent of
third parties, which in some cases is a governmental entity. We believe we have obtained sufficient third-party consents, permits and authorizations for the
transfer of assets necessary for us to operate our business in all material respects. With respect to any third-party consents, permits or authorizations that have
not been obtained, we believe the failure to obtain these consents, permits or authorizations will not have a material adverse effect on 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 of these encumbrances
materially detract from the value of our properties or our interest in these properties or materially interfere with their use in the operation of our business.
Item 3.
Legal Proceedings
From time to time, we are subject to certain legal proceedings, claims and disputes that arise in the ordinary course of our business. Although we cannot
predict the outcomes of these legal proceedings, these actions, in the aggregate, could have a material adverse impact on our financial position, results of
operations or liquidity. A description of our legal proceedings is included in "Item 8. Financial Statements and Supplementary Data, Note 19. Commitments
and Contingencies" and is incorporated herein by reference.
45
Item 4.
Mine Safety Disclosures
Not applicable.
46
PART II
Item 5.
Market for Our Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders
Our common units are traded on the NASDAQ under the symbol "MMLP." As of February 24, 2025, there were approximately 167 holders of record
and approximately 7,200 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 record
on the applicable record date. Our general partner has broad discretion to establish cash reserves that it determines are necessary or appropriate to properly
conduct our business. These can include cash reserves for future capital and maintenance expenditures, reserves to stabilize distributions of cash to the
unitholders and our general partner, reserves to reduce debt, or, as necessary, reserves to comply with the terms of any of our agreements or obligations. Our
distributions are made 98% to unitholders and 2% to our general partner.
Our ability to distribute available cash is contractually restricted by the terms of our credit facility. Our credit facility contains covenants requiring us
to maintain certain financial ratios. We are prohibited from making any distributions to unitholders if the distribution would cause a default or an event of
default, or a default or an event of default exists, under our credit facility. Please read "Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Liquidity and Capital Resources — Description of Our Indebtedness - Credit Facility."
Quarterly Distribution. On January 21, 2025, we declared a quarterly cash distribution of $0.005 per common unit for the fourth quarter of 2024, or $0.02
per common unit on an annualized basis, which was paid on February 14, 2025 to unitholders of record as of February 7, 2025.
Item 6.
[Reserved]
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Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a publicly traded limited partnership with a diverse set of operations focused primarily in the Gulf Coast region of the U.S. Our four primary
business lines include:
•
Terminalling, processing, and storage services for petroleum products and by-products;
•
Land and marine transportation services for petroleum products and by-products, chemicals, and specialty products;
•
Sulfur and sulfur-based products processing, manufacturing, marketing, and distribution; and
•
Marketing, distribution, and transportation services for NGLs and blending and packaging services for specialty lubricants and grease.
The petroleum products and by-products we collect, transport, store and market are produced primarily by major and independent oil and gas
companies who often turn to third parties, such as us, for the transportation and disposition of these products. In addition to these major and independent oil
and gas companies, our primary customers include independent refiners, large chemical companies, and other wholesale purchasers of these products. We
operate primarily in the Gulf Coast region of the U.S. This region is a major hub for petroleum refining, natural gas gathering and processing, and support
services for the exploration and production industry.
Significant Recent Developments
Termination of Merger Agreement. On October 3, 2024, the Partnership, Martin Resource Management Corporation, MMGP, and Merger Sub, entered
into the Merger Agreement pursuant to which Merger Sub agreed to merge with and into the Partnership, with the Partnership surviving as a wholly owned
subsidiary of Parent (the “Merger”).
On December 26, 2024, Martin Resource Management Corporation and the Partnership (with the approval of the Conflicts Committee) entered into
the Termination Agreement, pursuant to which the Merger Agreement was terminated. As a result, the Merger Agreement has no further force and effect. As a
result of the termination of the Merger Agreement, the special meeting of the unitholders of the Partnership, which was to be held on December 30, 2024 for
the purpose of voting on the Merger Agreement and the Merger, was cancelled.
Electronic Level Sulfuric Acid Joint Venture. On October 19, 2022, Martin ELSA Investment LLC, our affiliate, entered into definitive agreements
with Samsung C&T America, Inc. and Dongjin USA, Inc., an affiliate of Dongjin Semichem Co., Ltd., to form DSM. DSM will produce and distribute ELSA.
By leveraging our existing assets located in Plainview, Texas and installing the ELSA Facility as required, DSM will produce ELSA that meets the strict quality
standards required by the recent advances in semiconductor manufacturing. In addition to owning a 10% non-controlling interest in DSM, we will be the
exclusive provider of feedstock to the ELSA Facility. We, through our affiliate MTI, will also provide land transportation services for the ELSA produced by
DSM. On April 1, 2024, we contributed $6.5 million to DSM, which represents the cash contribution required pursuant to DSM's limited liability agreement for
our 10% non-controlling interest. Also, in conjunction with the formation of DSM, we contributed approximately 22 acres of land. As of December 31, 2024,
we have funded approximately $27.6 million toward ELSA related project costs.
For more information about the potential physical effects of climate change and environmental regulation on our business, see our environmental and
climate change related risk factors in Section 1A “Risk Factors.”
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Subsequent Events
Quarterly Distribution. On January 21, 2025, we declared a quarterly cash distribution of $0.005 per common unit for the fourth quarter of 2024, or
$0.02 per common unit on an annualized basis, which was paid on February 14, 2025 to unitholders of record as of February 7, 2025.
Amendment to Credit Facility. On February 13, 2025, we entered into an amendment (the “credit facility amendment”) to the credit facility (as defined
below) to amended the interest coverage ratio and first lien leverage ratios for the fiscal quarters ending March 31, 2025, June 30, 2025 and September 30,
2025. See “Liquidity and Capital Resources — Description of Our Indebtedness — Credit Facility” below.
2025 Phantom Unit Plan. On February 11, 2025, the Board of Directors and the Compensation Committee approved the 2025 Plan, effective as of the
same date. The 2025 Plan permits the awards of phantom units and phantom unit appreciation rights to any employee or non-employee director of the
Partnership, including its executive officers. The awards may be time-based or performance-based and will be paid, if at all, in cash.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on the historical consolidated financial statements included
elsewhere herein. We prepared these financial statements in conformity with U.S. 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 and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses during the reporting periods. We based our estimates on historical experience and
on various other assumptions we believe to be reasonable under the circumstances. We routinely evaluate these estimates, utilizing historical experience,
consultation with experts and other methods we consider reasonable in the particular circumstances. Our results may differ from these estimates, and any
effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that
give rise to the revision become known. Changes in these estimates could materially affect our financial position, results of operations or cash flows. You
should also read Note 2, "Significant Accounting Policies" in Notes to Consolidated Financial Statements. The following table evaluates the potential impact of
estimates utilized during the periods ended December 31, 2024 and 2023:
49
Description
Judgments and Uncertainties
Effect if Actual Results Differ from Estimates
and Assumptions
Impairment of Long-Lived Assets
We periodically evaluate whether the carrying
value of long-lived assets has been impaired when
circumstances indicate the carrying value of the
assets may not be recoverable. These evaluations
are based on undiscounted cash flow projections
over the remaining useful life of the asset. The
carrying value is not recoverable if it exceeds the
sum of the undiscounted cash flows. Any
impairment loss is measured as the excess of the
asset's carrying value over its fair value.
Our impairment analyses require management to
use judgment in estimating future cash flows and
useful lives, as well as assessing the probability of
different outcomes.
Applying this impairment review methodology, no
impairment was recorded during the years ended
December 31, 2024 or 2023.
Impairment of Goodwill
Goodwill is subject to a fair-value based
impairment test on an annual basis, or more
frequently if events or changes in circumstances
indicate that the fair value of any of our reporting
units is less than its carrying amount. When
assessing the recoverability of goodwill, we may
first assess qualitative factors in determining
whether it is more likely than not that the fair value
of a reporting unit is less than its carrying amount.
After assessing qualitative factors, if we determine
that it is not more likely than not that the fair value
of a reporting unit 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
amount exceeds the fair value of a reporting unit, a
quantitative analysis will be performed. We may
also elect to bypass the qualitative assessment and
proceed directly to a quantitative analysis
depending on the facts and circumstances.
As part of the quantitative evaluation, we
determine fair value using accepted valuation
techniques, including discounted cash flow, the
guideline public company method and the
guideline transaction method. These analyses
require management to make assumptions and
estimates regarding industry and economic factors,
future operating results and discount rates. We
conduct impairment testing using present economic
conditions, as well as future expectations.
Based upon the most recent annual review as of
August 31, 2024, no goodwill impairment exists
within our reporting units for the year ended
December 31, 2024. No goodwill impairment was
recorded during the year ended December 31,
2023.
Our Relationship with Martin Resource Management Corporation
Martin Resource Management Corporation directs our business operations through its ownership of our general partner and under the Omnibus
Agreement. In addition to the direct expenses payable to Martin Resource Management Corporation under the Omnibus Agreement, we are required to
reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses. For the years ended December
31, 2024 and 2023, the Board of Directors approved reimbursement amounts of $13.5 million and $14.0 million, respectively, reflecting our allocable share of
such expenses. The Board of Directors will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.
We are required to reimburse Martin Resource Management Corporation for all direct expenses it incurs or payments it makes on our behalf or in
connection with the operation of our business. Martin Resource Management Corporation 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 Corporation. All of these services and goods are purchased and
sold pursuant to the terms of a number of agreements between us and Martin Resource Management Corporation. For a more comprehensive discussion
concerning the Omnibus Agreement and the other agreements that we have entered into with Martin Resource Management Corporation, please see "Item 13.
Certain Relationships and Related Transactions, and Director Independence."
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Non-GAAP Financial Measures
To assist management in assessing our business, we use the following non-GAAP financial measures: earnings before interest, taxes, and depreciation
and amortization ("EBITDA"), Adjusted EBITDA (as defined below), Credit Adjusted EBITDA (as defined below), distributable cash flow available to
common unitholders (“Distributable Cash Flow”), and free cash flow after growth capital expenditures and principal payments under finance lease obligations
("Adjusted Free Cash Flow"). Our 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.
Certain items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing an entity's financial
performance, such as cost of capital and historical costs of depreciable assets.
Adjusted EBITDA and Credit Adjusted EBITDA. We define Adjusted EBITDA as EBITDA before unit-based compensation expenses, gains and losses
on the disposition of property, plant and equipment, impairment and other similar non-cash adjustments, and transaction costs associated with business
combination, merger, and divestiture activities. Adjusted EBITDA is used as a supplemental performance and liquidity measure by our management and by
external users of our financial statements, such as investors, commercial banks, research analysts, and others, to assess:
•
the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;
•
the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness, and make cash distributions to our unitholders; and
•
our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing
methods or capital structure.
We define Credit Adjusted EBITDA as Adjusted EBITDA excluding net income (loss) and the lower of cost or net realizable value and other non-cash
adjustments associated with the butane optimization business, which we exited during the second quarter of 2023. Credit Adjusted EBITDA is used as a
supplemental performance and liquidity measure by our management and by external users of our financial statements, such as investors, commercial banks,
research analysts, and others to provide additional information regarding the calculation of, and compliance with, certain financial covenants in the
Partnership’s Third Amended and Restated Credit Agreement.
The GAAP measures most directly comparable to Adjusted EBITDA and Credit Adjusted EBITDA are net income (loss) and net cash provided by
(used in) operating activities. Adjusted EBITDA and Credit Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income
(loss), operating income (loss), net cash provided by (used in) operating activities, or any other measure of financial performance presented in accordance with
GAAP. Adjusted EBITDA and Credit Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may
not calculate Adjusted EBITDA in the same manner.
Adjusted EBITDA does not include interest expense, income tax expense, and depreciation and amortization. Because we have borrowed money to
finance our operations, interest expense is a necessary element of our costs and our ability to generate cash available for distribution. Because we have capital
assets, depreciation and amortization are also necessary elements of our costs. Therefore, any measures that exclude these elements have material limitations.
To compensate for these limitations, we believe that it is important to consider net income (loss) and net cash provided by (used in) operating activities as
determined under GAAP, as well as Adjusted EBITDA, to evaluate our overall performance.
Distributable Cash Flow. We define Distributable Cash Flow as Net Cash Provided by (Used in) Operating Activities less cash received (plus cash
paid) for closed commodity derivative positions included in Accumulated Other Comprehensive Income (Loss), plus changes in operating assets and liabilities
which (provided) used cash, less maintenance capital expenditures and plant turnaround costs. Distributable Cash Flow is a significant performance measure
used by our management and by external users of our financial statements, such as investors, commercial banks and research analysts, to compare basic cash
flows generated by us to the cash distributions we expect to pay unitholders. Distributable Cash Flow is also an important financial measure for our unitholders
since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not
we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Distributable Cash Flow is also a quantitative
standard used throughout the investment community 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 turn is based on the amount of cash distributions the entity pays to a unitholder.
51
Adjusted Free Cash Flow. We define Adjusted Free Cash Flow as Distributable Cash Flow less growth capital expenditures and principal payments
under finance lease obligations. Adjusted Free Cash Flow is a significant performance measure used by our management and by external users of our financial
statements and represents how much cash flow a business generates during a specified time period after accounting for all capital expenditures, including
expenditures for growth and maintenance capital projects. We believe that Adjusted Free Cash Flow is important to investors, lenders, commercial banks and
research analysts since it reflects the amount of cash available for reducing debt, investing in additional capital projects, paying distributions, and similar
matters. Our calculation of Adjusted Free Cash Flow may or may not be comparable to similarly titled measures used by other entities.
The GAAP measure most directly comparable to Distributable Cash Flow and Adjusted Free Cash Flow is Net Cash Provided by (Used in) Operating
Activities. Distributable Cash Flow and Adjusted Free Cash Flow should not be considered alternatives to, or more meaningful than, Net Income (Loss),
Operating Income (Loss), Net Cash Provided by (Used in) Operating Activities, or any other measure of liquidity presented in accordance with GAAP.
Distributable Cash Flow and Adjusted Free Cash Flow have important limitations because they exclude some items that affect Net Income (Loss), Operating
Income (Loss), and Net Cash Provided by (Used in) Operating Activities. Distributable Cash Flow and Adjusted Free Cash Flow may not be comparable to
similarly titled measures of other companies because other companies may not calculate these non-GAAP metrics in the same manner. To compensate for these
limitations, we believe that it is important to consider Net Cash Provided by (Used in) Operating Activities determined under GAAP, as well as Distributable
Cash Flow and Adjusted Free Cash Flow, to evaluate our overall liquidity.
The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the
years ended December 31, 2024 and 2023, which represents EBITDA, Adjusted EBITDA, Credit Adjusted EBITDA, Distributable Cash Flow, and Adjusted
Free Cash Flow:
Reconciliation of Net Loss to EBITDA, Adjusted EBITDA, and Credit Adjusted EBITDA
Year Ended December 31,
2024
2023
(in thousands)
Net loss
$
(5,207)
$
(4,549)
Adjustments:
Interest expense
57,706
60,290
Income tax expense
4,197
5,918
Depreciation and amortization
50,787
49,895
EBITDA
107,483
111,554
Adjustments:
Gain on disposition of property, plant and equipment
(1,584)
(1,373)
Loss on extinguishment of debt
—
5,121
Transaction expenses related to the terminated Merger with Martin Resource Management Corporation
3,674
—
Equity in loss of DSM Semichem LLC
624
—
Non-cash contractual revenue deferral adjustment
221
—
Lower of cost or net realizable value and other non-cash adjustments
—
(12,850)
Unit-based compensation
187
163
Adjusted EBITDA
110,605
102,615
Adjustments:
Pro-forma adjustment related to ELSA project
2,655
—
Capitalized interest
1,153
310
Net loss associated with butane optimization business
—
2,256
Lower of cost or net realizable value and other non-cash adjustments
—
12,850
Credit Adjusted EBITDA
$
114,413
$
118,031
52
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA, Credit Adjusted EBITDA, Distributable Cash Flow, and Adjusted
Free Cash Flow
Year Ended December 31,
2024
2023
(in thousands)
Net cash provided by operating activities
$
48,351
$
137,468
Interest expense
52,221
54,112
Current income tax expense
3,943
1,732
Transaction expenses related to the terminated Merger with Martin Resource Management Corporation
3,674
—
Non-cash contractual revenue deferral adjustment
221
—
Lower of cost or market and other non-cash adjustments
—
(12,850)
Changes in operating assets and liabilities which (provided) used cash:
Accounts and other receivables, inventories, and other current assets
14,037
(97,149)
Trade, accounts and other payables, and other current liabilities
(10,424)
16,891
Other
(1,418)
2,411
Adjusted EBITDA
110,605
102,615
Pro-forma adjustment related to ELSA project
2,655
—
Capitalized interest
1,153
310
Net loss associated with butane optimization business
—
2,256
Lower of cost or net realizable value and other non-cash adjustments
—
12,850
Credit Adjusted EBITDA
114,413
118,031
Adjustments:
Interest expense
(57,706)
(60,290)
Income tax expense
(4,197)
(5,918)
Deferred income taxes
254
4,186
Amortization of deferred debt issuance costs
3,085
3,978
Amortization of discount on notes payable
2,400
2,200
Payments for plant turnaround costs
(10,897)
(4,825)
Maintenance capital expenditures
(23,233)
(24,277)
Distributable Cash Flow
24,119
33,085
Principal payments under finance lease obligations
(9)
(9)
Investment in DSM Semichem LLC
(6,938)
—
Expansion capital expenditures
(18,493)
(11,034)
Adjusted Free Cash Flow
$
(1,321)
$
22,042
Net of amortization of debt issuance costs and discount, which are included in interest expense but not included in net cash provided by operating activities.
1
1
53
Results of Operations
The results of operations for the years ended December 31, 2024 and 2023 have been derived from our consolidated financial statements. Discussions of the
year ended December 31, 2022 that are not included in this Annual Report on Form 10-K and year-to-year comparisons of the year ended December 31, 2023
and the year ended December 31, 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and the Results of Operations” in Part
II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.
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 not
allocate on a segment basis. These items, including interest expense, and indirect selling, general and administrative expenses, are discussed after the
comparative discussion of our results within each segment.
The following table sets forth our operating revenues and operating income by segment for the years ended December 31, 2024 and 2023.
Operating
Revenues
Revenues
Intersegment
Eliminations
Operating
Revenues
after
Eliminations
Operating
Income (loss)
Operating
Income
Intersegment
Eliminations
Operating
Income (loss)
after
Eliminations
(In thousands)
Year Ended December 31, 2024:
Terminalling and storage
$
96,555
$
(7,488)
$
89,067
$
11,098
$
(7,213)
$
3,885
Specialty products
264,945
(95)
264,850
17,038
8,736
25,774
Sulfur services
129,772
(1)
129,771
18,531
14,491
33,022
Transportation
239,807
(15,873)
223,934
30,184
(16,014)
14,170
Indirect selling, general and
administrative
—
—
—
(19,556)
—
(19,556)
Total
$
731,079
$
(23,457)
$
707,622
$
57,295
$
—
$
57,295
Year Ended December 31, 2023:
Terminalling and storage
$
95,459
$
(8,945)
$
86,514
$
14,532
$
(8,856)
$
5,676
Specialty products
346,863
(86)
346,777
17,109
13,226
30,335
Sulfur services
140,995
—
140,995
17,412
13,024
30,436
Transportation
240,926
(17,249)
223,677
33,701
(17,394)
16,307
Indirect selling, general and
administrative
—
—
—
(16,030)
—
(16,030)
Total
$
824,243
$
(26,280)
$
797,963
$
66,724
$
—
$
66,724
54
Terminalling and Storage Segment
Comparative Results of Operations for the Years Ended December 31, 2024 and 2023
Year Ended December 31,
Variance
Percent
Change
2024
2023
(In thousands)
Revenues
$
96,555
$
95,459
$
1,096
1%
Cost of products sold
72
75
(3)
(4)%
Operating expenses
60,409
57,393
3,016
5%
Selling, general and administrative expenses
3,324
2,070
1,254
61%
Depreciation and amortization
22,757
21,030
1,727
8%
9,993
14,891
(4,898)
(33)%
Other operating income (loss), net
1,105
(359)
1,464
408%
Operating income
$
11,098
$
14,532
$
(3,434)
(24)%
Shore-based throughput volumes (gallons)
170,407
162,363
8,044
5%
Smackover refinery throughput volumes (guaranteed minimum BBL per day)
6,500
6,500
—
—%
Revenues. Revenues increased $1.1 million. Revenue at our shore-based terminals increased $2.7 million, including $1.9 million in fuel throughput
and $0.8 million in space rent. In addition, revenue at our specialty terminals increased $1.8 million primarily as a result of higher throughput and service
revenue. Revenue at our Smackover refinery decreased $3.2 million as a result of decreases in natural gas surcharge of $3.3 million due to a reduction in usage,
throughput revenue of $0.2 million and pipeline revenue of $0.1 million, offset by an increase in reservation fees of $0.3 million.
Cost of products sold. Cost of products sold remained relatively consistent.
Operating expenses. Operating expenses increased $3.0 million. Expenses at our specialty terminals increased $3.6 million due to increases in
insurance premiums of $1.1 million (higher rates), employee-related expenses of $1.0 million, repairs and maintenance of $1.0 million and hurricane expenses
of $0.2 million. Expenses at our Smackover refinery decreased $0.4 million, primarily due to a decrease in natural gas utilities of $3.7 million due to a
reduction in usage. This was offset by increases in insurance claims of $1.5 million (crude pipeline spill), operating supplies of $0.7 million, repairs and
maintenance of $0.5 million, lease expense of $0.3 million related to operating equipment, and insurance premiums of $0.2 million (higher rates).
Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily as a result of increased employee-
related expenses.
Depreciation and amortization. The increase in depreciation and amortization is primarily the result of capital expenditures, offset by recent disposals.
Other operating income (loss), net. Other operating income (loss), net represents gains and losses from the disposition of property, plant and
equipment.
55
Transportation Segment
Comparative Results of Operations for the Years Ended December 31, 2024 and 2023
Year Ended December 31,
Variance
Percent
Change
2024
2023
(In thousands)
Revenues
$
239,807
$
240,926
$
(1,119)
—%
Operating expenses
185,813
184,334
1,479
1%
Selling, general and administrative expenses
11,496
9,787
1,709
17%
Depreciation and amortization
13,027
14,879
(1,852)
(12)%
29,471
31,926
(2,455)
(8)%
Other operating income, net
713
1,775
(1,062)
(60)%
Operating income
$
30,184
$
33,701
$
(3,517)
(10)%
Revenues. Revenues decreased $1.1 million. In our marine transportation division, inland revenues increased $2.0 million, primarily related to higher
transportation rates, offset by a decrease in utilization associated with equipment repairs and regulatory inspections. Offshore revenues increased $0.8 million,
primarily related to higher transportation rates, offset by a decrease in utilization associated with regulatory inspections. Pass-through revenue (primarily fuel)
decreased $1.1 million. In our land transportation division, freight revenue increased $4.2 million, primarily due to a 3% increase in total miles. Ancillary
revenue (primarily fuel) decreased $6.9 million.
Operating expenses. The increase in operating expenses is primarily a result of increased lease expense of $5.1 million related to new equipment,
employee-related expenses of $1.2 million, insurance premiums and claims of $1.2 million, and outside hauls and towing of $0.5 million, offset by decreases in
repairs and maintenance of $4.0 million and pass through expenses (primarily fuel) of $2.8 million.
Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to higher employee-related
expenses.
Depreciation and amortization. The decrease in depreciation and amortization is primarily the result of recent disposals, offset by capital expenditures.
Other operating income, net. Other operating income, net represents gains from the disposition of property, plant and equipment.
56
Sulfur Services Segment
Comparative Results of Operations for the Years Ended December 31, 2024 and 2023
Year Ended December 31,
Variance
Percent
Change
2024
2023
(In thousands)
Revenues:
Services
$
14,572
$
13,430
$
1,142
9%
Products
115,200
127,565
(12,365)
(10)%
Total revenues
129,772
140,995
(11,223)
(8)%
Cost of products sold
79,984
93,842
(13,858)
(15)%
Operating expenses
12,178
13,143
(965)
(7)%
Selling, general and administrative expenses
7,012
5,925
1,087
18%
Depreciation and amortization
11,769
10,690
1,079
10%
18,829
17,395
1,434
8%
Other operating income (loss), net
(298)
17
(315)
(1,853)%
Operating income
$
18,531
$
17,412
$
1,119
6%
Sulfur (long tons)
407.0
478.0
(71.0)
(15)%
Fertilizer (long tons)
223.0
254.0
(31.0)
(12)%
Sulfur services volumes (long tons)
630.0
732.0
(102.0)
(14)%
Services revenues. Services revenues increased $0.7 million associated with reservation revenue from the ELSA joint venture beginning in the fourth quarter
2024. Additional increases were the result of a contractually prescribed, index-based fee adjustment.
Products revenues. Products revenues decreased $18.7 million as a result of a 14% drop in sales volumes, primarily related to a 15% decrease in
sulfur volumes. Products revenues increased an offsetting $6.3 million due to a 5% rise in average sales prices.
Cost of products sold. A 14% decrease in sales volumes resulted in a decrease in cost of products sold of $12.9 million. A 1% decrease in product cost
impacted cost of products sold by $0.9 million, resulting from reduced commodity prices. Margin per ton increased $9.83, or 21%.
Operating expenses. Operating expenses decreased due to reductions of $0.7 million in marine pass-through expense, $0.4 million in utilities
expenses, $0.2 million in outside services, $0.1 million in contract labor, and $0.1 million in marine operating expense. These reductions were offset by an
increase of $0.4 million in repairs and maintenance and $0.2 million in employment expenses.
Selling, general and administrative expenses. Selling, general and administrative expenses increased $1.1 million due to higher employee-related
costs.
Depreciation and amortization. Depreciation and amortization increased $1.1 million largely due to the amortization of higher turnaround costs offset
by lower depreciation associated with certain assets becoming fully depreciated.
Other operating income (loss), net. Other operating income (loss), net represents gains and losses from the disposition of property, plant and equipment.
57
Specialty Products Segment
Comparative Results of Operations for the Years Ended December 31, 2024 and 2023
Year Ended December 31,
Variance
Percent
Change
2024
2023
(In thousands)
Products revenues
$
264,945
$
346,863
(81,918)
(24)%
Cost of products sold
237,403
319,200
(81,797)
(26)%
Operating expenses
102
78
24
31%
Selling, general and administrative expenses
7,232
7,120
112
2%
Depreciation and amortization
3,234
3,296
(62)
(2)%
16,974
17,169
(195)
(1)%
Other operating income (loss), net
64
(60)
124
207%
Operating income
$
17,038
$
17,109
$
(71)
—%
NGL sales volumes (Bbls)
2,307
3,681
(1,374)
(37)%
Other specialty products volumes (Bbls)
346
367
(21)
(6)%
Total specialty products volumes (Bbls)
2,653
4,048
(1,395)
(34)%
Products revenues. Product revenues decreased $70.5 million due to the exit of the butane optimization business in the second quarter 2023. For the
remaining products, sales volumes decreased 3%, lowering revenues by $7.6 million, primarily related to a 6% decrease in other specialty products sales
volume. Our average sales price per barrel decreased $1.37, or 1%, decreasing revenues by $3.7 million.
Cost of products sold. Cost of products sold decreased $72.3 million due to the exit of the butane optimization business in the second quarter 2023. For the
remaining products, the decrease in sales volumes of 3% resulted in a $6.8 million reduction to cost of products sold. Our average cost per barrel decreased
$0.98, or 1%, decreasing cost of products sold by $2.7 million. Our margins decreased $0.39 per barrel, or 4%, during the period.
Operating expenses. Operating expenses remained relatively consistent.
Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to higher employee-related costs.
Depreciation and amortization. Depreciation and amortization decreased due to certain assets becoming fully depreciated during the third quarter of
2023.
Other operating income (loss), net. Other operating income (loss), net represents gains and losses from the disposition of property, plant and equipment.
58
Interest Expense
Comparative Components of Interest Expense, Net for the Years Ended December 31, 2024 and 2023
Year Ended December 31,
Variance
Percent
Change
2024
2023
(In thousands)
Credit facility
$
6,332
$
7,587
$
(1,255)
(17)%
Senior notes
46,000
45,352
648
1%
Amortization of deferred debt issuance costs
3,085
3,978
(893)
(22)%
Amortization of debt discount
2,400
2,200
200
9%
Other
1,042
1,483
(441)
(30)%
Finance leases
4
1
—
(100)%
Capitalized interest
(1,153)
(310)
(843)
(272)%
Total interest expense, net
$
57,706
$
60,290
$
(2,584)
(4)%
Indirect Selling, General and Administrative Expenses
Year Ended December 31,
Variance
Percent Change
2024
2023
(In thousands)
Indirect selling, general and administrative expenses
$
19,556
$
16,030
$
3,526
22%
Indirect selling, general and administrative expenses increased primarily due to transaction expenses associated with the terminated Merger with Martin
Resource Management Corporation of $3.7 million and increased insurance claims expense of $0.8 million, offset by a $0.5 million decrease in the indirect
expenses allocated from Martin Resource Management Corporation.
Martin Resource Management Corporation allocates to us a portion of its indirect selling, general and administrative expenses for services such as
accounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit
plans and other general corporate overhead functions we share with Martin Resource Management Corporation's retained businesses. This allocation is based
on the percentage of time spent by Martin Resource Management Corporation personnel that provide such centralized services. GAAP also permits other
methods for allocation of these expenses, such as basing the allocation on the percentage of revenues contributed by a segment. The allocation of these
expenses between Martin Resource Management Corporation and us is subject to a number of judgments and estimates, regardless of the method used. We can
provide no assurances that our method of allocation, in the past or in the future, is or will be the most accurate or appropriate method of allocation for these
expenses. Other methods could result in a higher allocation of selling, general and administrative expense to us, which would reduce our net income.
Under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and
corporate overhead expenses. The Board of Directors approved the following reimbursement amounts:
Year Ended December 31,
Variance
Percent Change
2024
2023
(In thousands)
Board of Directors approved reimbursement amount
$
13,508
$
13,982
$
(474)
(3)%
The amounts reflected above represent our allocable share of such expenses. The Board of Directors will review and approve future adjustments in the
reimbursement amount for indirect expenses, if any, annually.
59
Liquidity and Capital Resources
General
Our primary sources of liquidity to meet operating expenses, service our indebtedness, fund capital expenditures and pay distributions to our unitholders
have historically been cash flows generated by our operations, borrowings under our credit facility and access to debt and equity capital markets, both public
and private. Set forth below is a description of our cash flows for the periods indicated.
Cash Flows - Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
The following table details the cash flow changes between the years ended December 31, 2024 and 2023:
Year Ended December 31,
Variance
Percent
Change
2024
2023
(In thousands)
Net cash provided by (used in):
Operating activities
$
48,351
$
137,468
$
(89,117)
(65)%
Investing activities
(58,601)
(33,660)
(24,941)
(74)%
Financing activities
10,251
(103,799)
114,050
110%
Net increase (decrease) in cash and cash equivalents
$
1
$
9
$
(8)
(89)%
Net cash provided by operating activities. Net cash provided by operating activities for the year ended December 31, 2024 decreased $89.1 million,
primarily as a result of an unfavorable variance in changes in working capital of $80.0 million, primarily resulting from the exit of the butane optimization
business in May of 2023, combined with a decrease in operating results and non-cash items of $9.1 million.
Net cash used in investing activities. Net cash used in investing activities for the year ended December 31, 2024 increased $24.9 million. An increase in cash
used of $13.8 million resulted from higher payments for capital expenditures and plant turnaround costs, cash used to make the initial contribution in DSM of
$6.9 million, and a decrease of $4.2 million in net proceeds received from the sale of property, plant and equipment.
Net cash provided by (used in) financing activities. Net cash provided by financing activities for the year ended December 31, 2024 increased $114.1 million
primarily as a result of the 2023 period, including net pay downs of long-term debt of $88.7 million, primarily resulting from the exit of the butane
optimization business, combined with decreased debt issuance costs of $14.3 million.
Total Contractual Obligations
A summary of our total contractual cash obligations as of December 31, 2024 is as follows (dollars in thousands):
Payments due by period
Type of Obligation
Total
Obligation
Less than
One Year
1-3
Years
3-5
Years
Due
Thereafter
Credit facility
$
53,500
$
—
$
53,500
$
—
$
—
11.5% senior secured notes, due 2028
400,000
—
—
400,000
—
Operating leases
78,479
24,137
36,698
13,289
4,355
Finance leases
69
14
31
24
—
Interest payable on finance lease obligations
9
4
5
—
—
Interest payable on fixed long-term debt obligations
142,926
46,000
92,000
4,926
—
Total contractual cash obligations
$
674,983
$
70,155
$
182,234
$
418,239
$
4,355
60
The interest payable under our credit facility is not reflected in the above table because such amounts depend on the outstanding balances and interest
rates, which vary from time to time.
Letters of Credit. At December 31, 2024, we had outstanding irrevocable letters of credit in the amount of $9.2 million, which were issued under our
credit facility.
Off Balance Sheet Arrangements. We do not have any off-balance sheet financing arrangements.
Description of Our Indebtedness
Credit Facility
At December 31, 2024, we maintained a $150.0 million credit facility that matures February 8, 2027. As of December 31, 2024, we had $53.5 million
outstanding under the credit facility and $9.2 million of outstanding irrevocable letters of credit, leaving a maximum amount available to be borrowed under
our credit facility for future borrowings and letters of credit of $87.3 million. After giving effect to our then current borrowings, outstanding letters of credit
and the financial covenants contained in our credit facility, we had the ability to borrow approximately $80.7 million in additional amounts thereunder as of
December 31, 2024.
Effective February 8, 2023, in connection with the completion of our sale of the 2028 Notes, we amended our credit facility (as further amended from
time to time, the "credit facility”) to, among other things, reduce the commitments thereunder from $275.0 million to $200.0 million (with further scheduled
reductions to $175.0 million on June 30, 2023 and $150.0 million on June 30, 2024) and extend the scheduled maturity date of the credit facility to February 8,
2027. The commitments under the credit facility can be increased from time to time upon our request, subject to certain conditions (including the consent of the
increasing lenders), up to an additional $50.0 million.
The credit facility is used for ongoing working capital needs and general partnership purposes, including to finance permitted investments,
acquisitions and capital expenditures. The level of outstanding draws on our credit facility from January 1, 2024 through December 31, 2024, ranged from a
low of $40.5 million to a high of $102.5 million.
The credit facility is guaranteed by substantially all of our subsidiaries, other than Martin ELSA Investment LLC. Obligations under the credit facility
are secured by first priority liens on substantially all of our assets and those of the guarantors, including, without limitation, inventory, accounts receivable,
bank accounts, marine vessels, equipment, fixed assets and the interests in certain subsidiaries.
We may prepay all amounts outstanding under the credit facility at any time without premium or penalty (other than customary breakage costs associated with
Term SOFR (as defined in the credit facility), subject to certain notice requirements. The credit facility requires mandatory prepayments of amounts
outstanding thereunder with excess cash that exceeds $25.0 million and the net proceeds of certain asset sales.
Indebtedness under the credit facility bears interest at our option at the Adjusted Term SOFR (as defined in the credit facility), plus an applicable
margin, or the Alternate Base Rate (the highest of the Federal Funds Rate plus 0.50%, the one-month Adjusted Term SOFR plus 1.0%, or the administrative
agent’s prime rate) plus an applicable margin. We pay a per annum fee on all letters of credit issued under the credit facility, and we pay a commitment fee per
annum on the unused revolving credit commitments under the credit facility. The letter of credit fee, the commitment fee and the applicable margins for our
interest rate vary quarterly based on our Total Leverage Ratio (as defined in the credit facility, being generally computed as the ratio of total funded debt to
consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) and are as follows:
61
Leverage Ratio
ABR Loans
Term SOFR Rate
Loans and
Letters of Credit
Less than 3.00 to 1.00
1.75 %
2.75 %
Greater than or equal to 3.00 to 1.00 and less than 3.50 to 1.00
2.00 %
3.00 %
Greater than or equal to 3.50 to 1.00 and less than 4.00 to 1.00
2.25 %
3.25 %
Greater than or equal to 4.00 to 1.00 and less than 4.50 to 1.00
2.50 %
3.50 %
Greater than or equal to 4.50 to 1.00
2.75 %
3.75 %
The applicable margin for Adjusted Term SOFR borrowings at December 31, 2024 was 3.50%. The applicable margin for Adjusted Term SOFR borrowings
at February 24, 2025 is 3.25%.
Effective February 13, 2025, we entered into the credit facility amendment to modify the financial covenants in our credit facility. The credit facility
amendment includes financial covenants that are tested on a quarterly basis, based on the rolling four quarter period that ends on the last day of each fiscal
quarter, that require maintenance of:
• a minimum Interest Coverage Ratio (as defined in the credit facility) of at least 2.00:1.00 for the fiscal quarter ended December 31, 2024, stepping
down to 1.75:1.00 for the fiscal quarters ending March 31, 2025, June 30, 2025 and September 30, 2025, and stepping back up to 2.00:1.00 for the fiscal
quarter ending December 31, 2025 and each fiscal quarter thereafter;
• a maximum First Lien Leverage Ratio (as defined in the credit facility) of not more than 1.50:1.00 for the fiscal quarter ended December 31, 2024,
stepping down to 1.25:1.00 for the fiscal quarters ending March 31, 2025, June 30, 2025 and September 30, 2025, and stepping back up to 1.50:1.00 for the
fiscal quarter ending December 31, 2025 and each fiscal quarter thereafter.
In addition, the credit facility contains various covenants, which, among other things, limit our and our subsidiaries’ ability to: (i) grant or assume
liens; (ii) make investments (including investments in our joint ventures) and acquisitions; (iii) enter into certain types of hedging agreements; (iv) incur or
assume indebtedness; (v) sell, transfer, assign or convey assets; (vi) repurchase our equity, make distributions (including a limit on our ability to make quarterly
distributions to unitholders in excess of $0.005 per unit unless our Total Leverage Ratio is below 3.75:1:00, pro forma first lien leverage is less than 1.00 to
1.00, and our pro forma liquidity is greater than or equal to 35% of the commitments under our credit facility) and certain other restricted payments; (vii)
change the nature of our business; (viii) engage in transactions with affiliates; (ix) enter into certain burdensome agreements; (x) make certain amendments to
the Omnibus Agreement and our material agreements; and (xi) permit our joint ventures to incur indebtedness or grant certain liens.
The credit facility contains customary events of default, including, without limitation: (i) failure to pay any principal, interest, fees, expenses or other amounts
when due; (ii) failure to meet the quarterly financial covenants; (iii) failure to observe any other agreement, obligation, or covenant in the credit facility or any
related loan document, subject to cure periods for certain failures; (iv) the failure of any representation or warranty to be materially true and correct when
made; (v) our, or any of our subsidiaries’ default under other indebtedness that exceeds a threshold amount; (vi) bankruptcy or other insolvency events
involving us or any of our subsidiaries; (vii) judgments against us or any of our subsidiaries, in excess of a threshold amount; (viii) certain ERISA events
involving us or any of our subsidiaries, in excess of a threshold amount; (ix) a change in control (as defined in the credit facility); and (x) the invalidity of any
of the loan documents or the failure of any of the collateral documents to create a lien on the collateral.
The credit facility also contains certain default provisions relating to Martin Resource Management Corporation. If Martin Resource Management Corporation
no longer controls our general partner, the lenders under the credit facility may declare all amounts outstanding thereunder immediately due and payable. In
addition, an event of default by Martin Resource Management Corporation under its credit facility could independently result in an event of default under our
credit facility if it is deemed to have a material adverse effect on us.
If an event of default relating to bankruptcy or other insolvency events occurs with respect to us or any of our subsidiaries, all indebtedness under our
credit facility will immediately become due and payable. If any other event of default exists under our credit facility, the lenders may terminate their
commitments to lend us money, accelerate the maturity of the indebtedness outstanding under the credit facility and exercise other rights and remedies. In
addition, if any event of default exists under our credit facility, the lenders may commence foreclosure or other actions against the collateral.
62
2028 Senior Secured Notes and Indenture
General
On February 8, 2023, the Issuers issued $400.0 million aggregate principal amount of their 11.50% senior secured second lien notes due 2028 (the
"2028 Notes"). The 2028 Notes were issued under an indenture, dated as of February 8, 2023 (the "2028 Notes Indenture"), among the Issuers, the guarantors
party thereto, and U.S. Bank Trust Company, National Association, as trustee and as collateral trustee.
The 2028 Notes are guaranteed on a full, joint and several basis by each of the Partnership’s domestic restricted subsidiaries (other than Martin
Midstream Finance Corp.). The 2028 Notes will be guaranteed in the future by each of our domestic restricted subsidiaries, in each case, if and so long as such
entity guarantees (or is an obligor with respect to) any other indebtedness for borrowed money of either the Issuers or any guarantor. The 2028 Notes and the
guarantees thereof are secured on a second-priority basis by a lien on substantially all assets of the Issuers and the guarantors, subject to the terms of an
intercreditor agreement (the “Intercreditor Agreement”) and certain exceptions.
The 2028 Notes and the guarantees thereof are, pursuant to the Intercreditor Agreement, secured by second-priority liens and thus are effectively
junior to any obligations under our credit facility, which are secured on a "first-lien" basis, to the extent of the value of the collateral securing such first-lien and
second-lien obligations. The 2028 Notes and the guarantees thereof rank effectively senior to all of the Issuers’ existing and future unsecured indebtedness to
the extent of the value of the collateral securing the 2028 Notes and such guarantees.
Maturity and Interest
The 2028 Notes will mature on February 15, 2028. Interest on the 2028 Notes accrues at a rate of 11.50% per annum and is payable semi-annually in
cash in arrears on February 15 and August 15 of each year, commencing on August 15, 2023.
Redemption
At any time prior to August 15, 2025, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2028
Notes at a redemption price of 111.50% of the principal amount of the 2028 Notes redeemed, plus accrued and unpaid interest to the redemption date, with an
amount not greater than the net cash proceeds of one or more equity offerings by the Partnership, so long as the redemption occurs within 180 days of
completing such equity offering and 65% of the aggregate principal amount of the 2028 Notes remains outstanding immediately after such redemption. In
addition, at any time prior to August 15, 2025, the Issuers may redeem all or a portion of the 2028 Notes at a redemption price equal to 100% of the principal
amount of the 2028 Notes redeemed, plus an applicable make-whole premium and accrued and unpaid interest to the redemption date.
On and after August 15, 2025, the Issuers may redeem all or a portion of the 2028 Notes at redemption prices set forth in the 2028 Indenture, plus
accrued and unpaid interest to the redemption date.
If a Change of Control (as defined in the 2028 Indenture) occurs, the Partnership must offer to repurchase the 2028 Notes at a price equal to 101% of
the aggregate principal amount of the 2028 Notes, plus accrued and unpaid interest to the date of repurchase.
Certain Covenants and Events of Default
The terms of the 2028 Notes Indenture, among other things, limit the ability of the Partnership and certain of its subsidiaries to make distributions and
other restricted payments, sell assets, make investments, create liens on assets, enter into sale and leaseback transactions, and consolidate, merge or transfer all
or substantially all of its assets and the assets of its subsidiaries.
The 2028 Notes Indenture provides for customary events of default, which include (subject in certain cases to customary grace and cure periods),
among others: nonpayment of principal or interest; breach of other agreements in the Indenture; defaults in failure to pay certain other indebtedness; the failure
to pay final judgments of certain amounts of money against the Partnership or certain of its subsidiaries; the failure of certain guarantees to be enforceable; and
certain events of bankruptcy or insolvency. Generally, if an event of default occurs and is not cured within the time periods specified, the trustee under the 2028
Notes Indenture or the holders of at least 25% in principal amount of the 2028 Notes may declare all the 2028 Notes to be due and payable immediately.
63
Capital Resources and Liquidity
Historically, we have generally satisfied our working capital requirements and funded our debt service obligations and capital expenditures with cash
generated from operations and borrowings under our revolving credit facility.
At December 31, 2024, we had cash and cash equivalents of $0.05 million and available borrowing capacity of $87.3 million under our credit facility with
$53.5 million of borrowings outstanding. After giving effect to our then current borrowings, letters of credit, and the financial covenants contained in our credit
facility, we had the ability to borrow approximately $80.7 million in additional amounts thereunder as of December 31, 2024.
We expect that our primary sources of liquidity to meet operating expenses, service our indebtedness, pay distributions to our unitholders and fund capital
expenditures will be provided by cash flows generated by our operations, borrowings under our credit facility and access to the debt and equity capital markets.
Our ability to generate cash from operations will depend upon our future operating performance, which is subject to certain risks. For a discussion of such
risks, please read "Item 1A. Risk Factors" of this Form 10-K. In addition, due to the covenants in our credit facility, our financial and operating performance
impacts the amount we are permitted to borrow under that facility.
The Partnership is in compliance with all debt covenants as of December 31, 2024 and expects to be in compliance for the next twelve months.
Interest Rate Risk
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 variable
rate risk.
Seasonality
A substantial portion of our revenues is dependent on sales prices of products, particularly NGLs and fertilizers, which fluctuate in part based on
winter and spring weather conditions. The demand for NGLs is strongest during the winter heating season. The demand for fertilizers is strongest during the
early spring planting season. However, our Terminalling and Storage and Transportation business segments and the molten sulfur business are typically not
impacted by seasonal fluctuations and a significant portion of our net income is derived from our Terminalling and Storage, Sulfur Services and Transportation
business segments. Further, extraordinary weather events, such as hurricanes, have in the past, and could in the future, impact our Terminalling and Storage,
Sulfur Services, and Transportation business segments.
Impact of Inflation
Inflation did not have a material impact on our results of operations in 2024, 2023 or 2022. Inflation may increase the cost to acquire or replace
property, plant and equipment. It may also increase the costs of labor and supplies. In the future, increasing energy prices for products consumed by our
operations, such as diesel fuel, natural gas, chemicals, and other supplies, could adversely affect our results of operations. An increase in price of these products
would increase our operating expenses which could adversely affect net income. We cannot provide assurance that we will be able to pass along increased
operating expenses to our customers.
Environmental Matters
Our operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which these operations
are conducted. We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during 2024, 2023
or 2022.
64
On June 15, 2024, the Partnership experienced a spill of less than 2,500 barrels of crude oil from its transfer pipeline connecting the Sandyland
Terminal to the refinery in Smackover, Union County, Arkansas. The Partnership promptly coordinated with the U.S Environmental Protection Agency (the
“EPA”), Arkansas Department of Energy and Environment (the “ADEE”), and Arkansas Game and Fish Commission, dedicating the necessary resources,
equipment, and personnel to expedite oil recovery and cleanup activities. In October 2024, the EPA transitioned the Partnership’s response from emergency
response status to remediation status under ADEE oversight. On October 11, 2024, the ADEE notified the Partnership that documentation, observations, and
data indicated the Partnership completed all remedial actions to the maximum practical extent, apart from providing additional water samples. No further
remediation is required at this time. The Partnership submitted a claim related to the spill, which was accepted by its insurance carriers, subject to a reservation
of rights. The Partnership’s deductibles under the applicable insurance policies total $1.5 million and such deductible expense has been recorded by the
Partnership in the Consolidated Statements of Operations for the year ended December 31, 2024. As of February 24, 2025, no fines or penalties have been
assessed in relation to the spill.
65
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Commodity Risk. The Partnership from time to time uses derivatives to manage the risk of commodity price fluctuation. Commodity risk is the adverse
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 monitor and
manage the commodity market risk associated with potential commodity risk exposure. In addition, we focus on utilizing counterparties for these transactions
whose financial condition is appropriate for the credit risk involved in each specific transaction.
Our hedging strategy is designed to protect us from excessive pricing volatility. However, since we do not typically hedge 100% of our exposure,
abnormal price volatility in any of these commodity markets could influence operating income.
For derivatives designated in cash flow hedging relationships, we record the gains and losses from the use of these instruments in accumulated other
comprehensive income (loss) on the consolidated balance sheets and subsequently recognize the accumulated gains and losses into cost of products sold in the
same period when the associated underlying transactions occur. At December 31, 2024, we had no outstanding hedge positions. See Note 11, "Derivative
Instruments and Hedging Activities," in Item 8 for further information on our outstanding derivatives.
All outstanding commodity derivative positions were closed prior to December 31, 2024.
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 8.18% as
of December 31, 2024. Based on the amount of unhedged floating rate debt owed by us on December 31, 2024, the impact of a 100 basis point increase in
interest rates on this amount of debt would result in an increase in interest expense and a corresponding decrease in net income of approximately $0.5 million
annually.
We are not exposed to changes in interest rates with respect to our 2028 Notes as these obligations are at a fixed rate. Based on the quoted prices for
identical liabilities in markets that are not active at December 31, 2024, the estimated fair value of the 2028 Notes was $436.2 million. 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 point increase in interest rates. Such an
increase in interest rates at December 31, 2024 would result in a $9.1 million decrease in the fair value of our 2028 Notes.
66
Item 8.
Financial Statements and Supplementary Data
The following financial statements of Martin Midstream Partners L.P. (Partnership) are listed below:
Page
Report of Independent Registered Public Accounting Firm (KPMG LLP, Dallas, TX, Auditor Firm ID 185)
68
Consolidated Balance Sheets as of December 31, 2024 and 2023
71
Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022
72
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022
74
Consolidated Statements of Changes in Capital (Deficit) for the years ended December 31, 2024, 2023 and 2022
75
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
76
Notes to Consolidated Financial Statements
77
67
Report of Independent Registered Public Accounting Firm
To the Unitholders and Board of Directors
Martin Midstream Partners L.P. and Martin Midstream GP LLC:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Martin Midstream Partners L.P. and subsidiaries (the Partnership) as of December 31, 2024
and 2023, the related consolidated statements of operations, comprehensive income (loss), changes in capital (deficit), and cash flows for each of the years in
the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2024 and 2023, and the results of its
operations and its cash flows for each of the years in the three-year period ended December 31, 2024, 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’s
internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2025 expressed an unqualified opinion on the
effectiveness of the Partnership’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission 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 reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Sufficiency of audit evidence over revenue
As discussed in Note 5 to the consolidated financial statements, the Partnership recorded approximately $708 million of revenue for the year ended December
31, 2024. Revenue is derived from various revenue streams including throughput and storage; land transportation, inland marine transportation and offshore
marine transportation; sulfur and fertilizer product sales, sulfur services, and natural gas liquids and lubricant product sales. The Partnership’s processes used to
record revenue differ for each of these revenue streams, as do the related information technology (IT) systems for certain of these revenue streams.
We identified the evaluation of the sufficiency of audit evidence obtained over revenue as a critical audit matter. A high degree of subjective auditor judgment
was required to evaluate such evidence due to the number of revenue streams and IT systems involved. This included determining the revenue streams over
which procedures would be performed and evaluating the nature and extent of audit evidence obtained over each revenue stream. The audit effort also required
specialized skills and knowledge to evaluate the various IT systems.
68
The following are the primary procedures we performed to address this critical audit matter. We, with the assistance of IT professionals, applied auditor
judgment to determine the nature and extent of procedures to be performed over revenue, including the determination of the revenue streams over which those
procedures were performed. For each revenue stream where procedures were performed, we evaluated the design and tested the operating effectiveness of
certain internal controls over the Partnership’s process to record revenue, and involved IT professionals, who assisted in testing certain IT applications. For
certain revenue streams where procedures were performed, we assessed the recorded revenue by selecting a sample of transactions and comparing the revenue
recorded for consistency with the underlying contractual documentation and comparing with the related customer payment received associated with the
transactions. For other revenue streams where procedures were performed, we performed a software-assisted data analysis to test relationships among certain
revenue transactions. Through these procedures we then compared the amounts recognized for consistency with underlying documentation, including contracts
or payment and transaction support. We evaluated the sufficiency of audit evidence obtained over revenue by assessing the results of procedures performed,
including the appropriateness of the nature and extent of such evidence.
/s/ KPMG LLP
We have served as the Partnership’s auditor since 2002.
Dallas, Texas
February 24, 2025
69
Report of Independent Registered Public Accounting Firm
To the Unitholders and Board of Directors
Martin Midstream Partners L.P. and Martin Midstream GP LLC:
Opinion on Internal Control Over Financial Reporting
We have audited Martin Midstream Partners L.P. and subsidiaries' (the Partnership) internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In
our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Partnership as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), changes
in capital (deficit), and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated
financial statements), and our report dated February 24, 2025 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Partnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable 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 reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
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 Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely 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 of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ KPMG LLP
Dallas, Texas
February 24, 2025
70
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31,
2024
2023
Assets
Cash
$
55
$
54
Trade and accrued accounts receivable, less allowance for doubtful accounts of $940 and $530, respectively
53,569
53,293
Inventories
51,707
43,822
Due from affiliates
13,694
7,924
Other current assets
11,454
9,220
Total current assets
130,479
114,313
Property, plant and equipment, at cost
954,059
918,786
Accumulated depreciation
(648,609)
(612,993)
Property, plant and equipment, net
305,450
305,793
Goodwill
16,671
16,671
Right-of-use assets
67,140
60,359
Investment in DSM Semichem LLC
7,314
—
Deferred income taxes, net
9,946
10,200
Intangibles and other assets, net
1,509
2,039
$
538,509
$
509,375
Liabilities and Partners’ Capital (Deficit)
Current portion of long term debt and finance lease obligations
$
14
$
—
Trade and other accounts payable
61,599
51,653
Product exchange payables
798
426
Due to affiliates
4,927
6,334
Income taxes payable
1,283
652
Other accrued liabilities
46,880
41,499
Total current liabilities
115,501
100,564
Long-term debt, net
437,635
421,173
Finance lease obligations
55
—
Operating lease liabilities
47,815
45,684
Other long-term obligations
7,942
6,578
Total liabilities
608,948
573,999
Commitments and contingencies
Partners’ capital (deficit)
(70,439)
(64,624)
Total partners’ capital (deficit)
(70,439)
(64,624)
$
538,509
$
509,375
See accompanying notes to consolidated financial statements.
71
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit amounts)
Year Ended December 31,
2024
2023
2022
Revenues:
Terminalling and storage *
$
89,067
$
86,514
$
80,193
Transportation *
223,934
223,677
219,008
Sulfur services
14,572
13,430
12,337
Product sales: *
Specialty products
264,850
346,777
540,513
Sulfur services
115,199
127,565
166,827
380,049
474,342
707,340
Total revenues
707,622
797,963
1,018,878
Costs and expenses:
Cost of products sold: (excluding depreciation and amortization)
Specialty products *
228,600
305,903
503,225
Sulfur services *
68,364
83,702
120,062
Terminalling and storage *
72
75
19
297,036
389,680
623,306
Expenses:
Operating expenses *
255,586
252,211
251,886
Selling, general and administrative *
48,502
40,826
41,812
Depreciation and amortization
50,787
49,895
56,280
Total costs and expenses
651,911
732,612
973,284
Other operating income (loss), net
1,584
1,373
5,669
Operating income
57,295
66,724
51,263
Other income (expense):
Interest expense, net
(57,706)
(60,290)
(53,665)
Equity in loss of DSM Semichem LLC
(624)
—
—
Loss on extinguishment of debt
—
(5,121)
—
Other, net
25
56
(5)
Total other income (expense)
(58,305)
(65,355)
(53,670)
Net income (loss) before taxes
(1,010)
1,369
(2,407)
Income tax expense
(4,197)
(5,918)
(7,927)
Net loss
(5,207)
(4,549)
(10,334)
Less general partner's interest in net loss
104
91
207
Less loss allocable to unvested restricted units
25
14
40
Limited partners' interest in net loss
$
(5,078)
$
(4,444)
$
(10,087)
Net loss per unit attributable to limited partners - basic and diluted
$
(0.13)
$
(0.11)
$
(0.26)
Weighted average limited partner units - basic and diluted
38,831,355
38,771,657
38,726,048
*Related Party Transactions Shown Below
See accompanying notes to consolidated financial statements.
72
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit amounts)
*Related Party Transactions Included Above
Year Ended December 31,
2024
2023
2022
Revenues:
Terminalling and storage
$
71,799
$
72,138
$
66,867
Transportation
33,250
29,276
28,393
Sulfur Services
664
—
—
Product sales
457
8,767
554
Costs and expenses:
Cost of products sold: (excluding depreciation and amortization)
Specialty products
31,789
35,930
39,356
Sulfur services
11,915
11,182
10,717
Terminalling and storage
72
75
19
Expenses:
Operating expenses
106,831
100,851
93,630
Selling, general and administrative
39,385
32,021
31,758
See accompanying notes to consolidated financial statements.
73
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars and units in thousands, except per unit amounts)
Year Ended December 31,
2024
2023
2022
Net loss
$
(5,207)
$
(4,549)
$
(10,334)
Changes in fair values of commodity cash flow hedges
—
—
(816)
Comprehensive loss
$
(5,207)
$
(4,549)
$
(11,150)
See accompanying notes to consolidated financial statements.
74
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (DEFICIT)
(Dollars in thousands)
Partners’ Capital (Deficit)
Common
General Partner
Amount
Accumulated Other
Comprehensive
Income
Units
Amount
Total
Balances – December 31, 2021
38,802,750
$
(50,741)
$
1,888
$
816
(48,037)
Net loss
—
(10,127)
(207)
—
(10,334)
Issuance of time-based restricted units
48,000
—
—
—
—
Cash distributions
—
(777)
(16)
—
(793)
Changes in fair values of commodity cash flow
hedges
—
—
—
(816)
(816)
Excess carrying value of the assets over the purchase
price paid by Martin Resource Management
—
374
—
—
374
Unit-based compensation
—
161
—
—
161
Balances – December 31, 2022
38,850,750
(61,110)
1,665
—
(59,445)
Net loss
—
(4,458)
(91)
—
(4,549)
Issuance of time-based restricted units
64,056
—
—
—
—
Cash distributions
—
(777)
(16)
—
(793)
Unit-based compensation
—
163
—
—
163
Balances – December 31, 2023
38,914,806
(66,182)
1,558
—
(64,624)
Net loss
—
(5,103)
(104)
—
(5,207)
Issuance of time-based restricted units
86,280
—
—
—
—
Cash distributions
—
(779)
(16)
—
(795)
Unit-based compensation
—
187
—
—
187
Balances – December 31, 2024
39,001,086
$
(71,877)
$
1,438
$
—
$
(70,439)
See accompanying notes to consolidated financial statements.
75
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Year Ended December 31,
2024
2023
2022
Cash flows from operating activities:
Net loss
$
(5,207)
$
(4,549)
$
(10,334)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
50,787
49,895
56,280
Amortization and write-off of deferred debt issue costs
3,085
3,978
3,152
Amortization of discount on notes payable
2,400
2,200
—
Deferred income tax expense
254
4,186
5,744
Gain on disposition or sale of property, plant, and equipment
(1,584)
(1,373)
(5,669)
Loss on extinguishment of debt
—
5,121
—
Equity in loss of DSM Semichem LLC
624
—
—
Derivative income
—
—
(901)
Net cash received for commodity derivatives
—
—
85
Unit-based compensation
187
163
161
Change in current assets and liabilities, excluding effects of acquisitions and dispositions:
Accounts and other receivables
(276)
26,348
4,579
Inventories
(8,079)
65,976
(47,678)
Due from affiliates
(5,770)
86
6,399
Other current assets
88
4,739
(1,479)
Trade and other accounts payable
10,228
(17,539)
486
Product exchange payables
372
394
(1,374)
Due to affiliates
(1,407)
(2,613)
7,123
Income taxes payable
631
(13)
280
Other accrued liabilities
600
2,880
(2,087)
Change in other non-current assets and liabilities
1,418
(2,411)
1,381
Net cash provided by operating activities
48,351
137,468
16,148
Cash flows from investing activities:
Payments for property, plant, and equipment
(42,008)
(34,317)
(27,237)
Payments for plant turnaround costs
(10,897)
(4,825)
(5,176)
Investment in DSM Semichem LLC
(6,938)
—
—
Proceeds from sale of property, plant, and equipment
1,242
5,482
7,769
Net cash used in investing activities
(58,601)
(33,660)
(24,644)
Cash flows from financing activities:
Payments of long-term debt
(244,500)
(632,197)
(393,740)
Payments under finance lease obligations
(9)
(9)
(279)
Proceeds from long-term debt
255,578
543,489
404,650
Excess purchase price over carrying value of acquired assets
—
—
(1,285)
Payments of debt issuance costs
(23)
(14,289)
(64)
Cash distributions paid
(795)
(793)
(793)
Net cash provided by (used in) financing activities
10,251
(103,799)
8,489
Net increase (decrease) in cash
1
9
(7)
Cash at beginning of year
54
45
52
Cash at end of year
$
55
$
54
$
45
See accompanying notes to consolidated financial statements.
76
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Martin Midstream Partners L.P. (the "Partnership") is a publicly traded limited partnership with a diverse set of operations focused primarily in the
Gulf Coast region of the U.S. Its four primary business lines include: terminalling, processing, and storage services for petroleum products and by-products;
land and marine transportation services for petroleum products and by-products, chemicals, and specialty products; sulfur and sulfur-based products processing,
manufacturing, marketing and distribution; and marketing, distribution, and transportation services for natural gas liquids ("NGL") and blending and packaging
services for specialty lubricants and grease.
The Partnership provides specialty services to major and independent oil and gas companies, independent refiners, large chemical companies, and other
wholesale purchasers of certain petroleum products and by-products, with significant business concentrated around the U.S. Gulf Coast refinery complex,
which is a major hub for petroleum refining, natural gas gathering and processing, and support services for the exploration and production industry. The
petroleum products and by-products the Partnership gathers, transports, stores and markets are produced primarily by major and independent oil and gas
companies who often rely on third parties, such as the Partnership, for the transportation and disposition of these products.
Martin Resource Management Corporation indirectly owns, through its wholly owned subsidiary, Martin Resource LLC, 100% of MMGP Holdings, LLC
("Holdings"), which is the sole member of Martin Midstream GP LLC ("MMGP"), the general partner of the Partnership. As a result, Martin Resource
Management Corporation indirectly owns 100% of MMGP.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
(a) Principles of Presentation and Consolidation
The consolidated financial statements include the financial statements of the Partnership and its wholly owned subsidiaries and equity method investees. In
the opinion of the management of the Partnership’s general partner, all adjustments and elimination of significant intercompany balances necessary for a fair
presentation of the Partnership’s results of operations, financial position and cash flows for the periods shown have been made. All such adjustments are of a
normal recurring nature. In addition, the Partnership evaluates its relationships with other entities to identify whether they are variable interest entities under
certain provisions of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), 810-10 and to assess whether it is the
primary beneficiary of such entities. If the determination is made that the Partnership is the primary beneficiary, then that entity is included in the consolidated
financial statements in accordance with ASC 810-10. No such variable interest entities existed as of December 31, 2024 or 2023.
(b) Product Exchanges
The Partnership enters into product exchange agreements with third parties, whereby the Partnership agrees to exchange NGLs and sulfur with third
parties. The Partnership records the balance of exchange products due to other companies under these agreements at quoted market product 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 related to 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 net realizable value. Cost is generally determined by using the FIFO method for all inventories except
lubricants, greases, lubricants packaging, and fertilizer inventories. Lubricants, greases, and lubricants packaging inventories cost is determined using standard
cost, which approximates actual cost. Fertilizer inventory is determined using weighted average cost, which approximates actual cost.
77
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
(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 storage and throughput contracts at the
Partnership's underground NGL storage facility, revenue is recognized based on the volume stored and moved through the facility at the contracted rate. For the
Partnership’s tolling agreement, revenue is recognized based on the contracted monthly reservation fee and throughput volumes moved through the facility.
Specialty Products – NGL revenue is recognized when title is transferred, which is generally when the product is delivered by truck, rail, or pipeline to
the Partnership's NGL customers or when the customer collects the product from our facilities. When lubricants are sold by truck or rail, revenue is recognized
when title is transferred, which is generally when the product leaves the Partnership's facility, but can vary based on the specific terms of the contract. Delivery
of product is invoiced as the transaction occurs and is generally paid within a month.
Sulfur Services – Revenue from sulfur and fertilizer product sales is recognized when the customer takes title to the product. Delivery of product is
invoiced as the transaction occurs and is generally paid within a month. Revenue from sulfur services is recognized as services are performed during each
monthly period. The performance of the service is invoiced as the transaction occurs and is generally paid within a month.
Transportation – Revenue related to land transportation is recognized for line hauls based on a mileage 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.
Revenue related to marine transportation 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.
(e) Equity Method Investments
The Partnership uses the equity method of accounting for investments in unconsolidated entities where the ability to exercise significant influence
over such entities exists. Investments in unconsolidated entities consist of capital contributions and advances plus the Partnership’s share of accumulated
earnings as of the entities’ latest fiscal year-ends, less capital withdrawals and distributions. Equity method investments are subject to impairment under the
provisions of ASC 323-10, which relates to the equity method of accounting for investments in common stock. No portion of the net income from these entities
is included in the Partnership’s operating income.
(f) Property, Plant, and Equipment
Owned property, plant, and equipment is stated at cost, less accumulated depreciation. Owned buildings and equipment are depreciated using the
straight-line method over the estimated lives of the respective assets.
Equipment under finance leases is stated at the present value of minimum lease payments less accumulated amortization. Equipment under finance
leases is amortized on a straight-line basis over the estimated useful life of the asset.
Routine maintenance and repairs are charged to expense while costs of betterments and renewals are capitalized. When an asset is retired or sold, its
cost and related accumulated depreciation are removed from the accounts, and the difference between net book value of the asset and proceeds from disposition
is recognized as gain or loss.
(g) Goodwill and Other Intangible Assets
Goodwill is subject to a fair-value based impairment test on an annual basis, or more often if events or circumstances indicate there may be
impairment. The Partnership is required to identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intangible assets. The Partnership is required to determine the fair value of each reporting unit and compare it to
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 Partnership will
record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill
allocated to the reporting unit.
78
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
When assessing the recoverability of goodwill and other intangible assets, the Partnership may first assess qualitative factors in determining whether it is
more likely than not that the fair value of a reporting unit or other intangible asset is less than its carrying amount. After assessing qualitative factors, if the
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 amount exceeds the
fair value of a reporting unit or other intangible asset, a quantitative analysis will be performed. The Partnership may also elect to bypass the qualitative
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, transportation, specialty products and sulfur services reporting units all contain
goodwill.
In performing a quantitative analysis, recoverability of goodwill for each reporting unit is measured using a weighting of the discounted cash flow method
and two market approaches (the guideline public company method and the guideline transaction method). The discounted cash flow model incorporates
discount rates commensurate with the risks involved. Use of a discounted cash flow model is common practice in assessing impairment in the absence of
available transactional market evidence to determine the fair value. The key assumptions used in the discounted cash flow valuation model include discount
rates, growth rates, cash flow projections and terminal value rates. Discount rates, growth rates and cash flow projections are the most sensitive and susceptible
to change as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital ("WACC"). The WACC
considers market and industry data as well as company-specific risk factors for each reporting unit in determining the appropriate discount rate to be used. The
discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Management,
considering industry and company specific historical and projected data, develops growth rates and cash flow projections for each reporting unit. Terminal
value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period
assuming a constant WACC and low long-term growth rates. If the calculated fair value is less than the current carrying 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 to exceed 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 could give
rise to future impairment. Changes to these estimates and assumptions can include, but may not be limited to, varying commodity prices, volume changes and
operating costs due to market conditions and/or alternative providers of services.
Based upon the most recent annual review as of August 31, 2024, no goodwill impairment exists within the Partnership's reporting units for the year
ended December 31, 2024. No goodwill impairment was recorded for the years ended December 31, 2023 or 2022.
Other intangible assets that have finite lives are tested for impairment when events or circumstances indicate that the carrying value may not be
recoverable. An impairment is indicated if the carrying amount of a long-lived intangible asset exceeds the sum of the undiscounted future cash flows expected
to result from the use and eventual disposition of the asset. If impairment is indicated, the Partnership would record an impairment loss equal to the difference
between the carrying value and the fair value of the asset. There were no intangible asset impairments for the years ended December 31, 2024, 2023 or 2022.
(h) Debt Issuance Costs
Debt issuance costs relating to the Partnership’s credit facility and senior notes are deferred and amortized over the terms of the debt 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 $23,
$14,289 and $64 in the years ended December 31, 2024, 2023 and 2022, respectively.
Amortization and write-off of debt issuance costs, which is included in interest expense, totaled $3,085, $3,978 and $3,152 for the years ended
December 31, 2024, 2023 and 2022, respectively. Accumulated amortization amounted to $32,397 and $29,313 at December 31, 2024 and 2023, respectively.
79
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
(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 for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying
amount 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 lower of
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 for sale
would be presented separately in the appropriate asset and liability sections of the balance sheet.
The Partnership identified a triggering event related to a certain asset group in its transportation segment in 2022. The Partnership performed a
recoverability test and concluded the estimated undiscounted cash flows expected to be generated by the asset group exceeded the carrying value of the asset
group and no impairment was recorded.
(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, the
Partnership records an asset retirement obligation at present value based upon estimated costs to retire the asset in the period in which it is incurred by
increasing the carrying amount of the related long-lived asset. In each subsequent period, the liability is accreted over time towards the ultimate obligation
amount and the capitalized costs are depreciated 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 and
hedging instruments are included in the Consolidated Balance Sheets as an asset or liability measured at fair value and changes in fair value are recognized
currently in earnings unless specific hedge accounting criteria are met. If a derivative qualifies for hedge accounting, changes in the fair value can be offset
against 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 is
recognized in earnings.
Derivative instruments not designated as hedges are marked to market with all market value adjustments being recorded in the Consolidated
Statements of Operations.
(l) Use of Estimates
Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the U.S. Actual results could
differ from those estimates.
(m) Environmental Liabilities and Litigation
The Partnership’s policy is to accrue for losses associated with environmental remediation obligations when such losses are probable and reasonably
estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial
feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental
remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when
their receipt is deemed probable.
80
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
(n) 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’s best
estimate of the amount of probable credit losses in the Partnership’s existing accounts receivable.
(o) Deferred Catalyst Costs
The cost of the periodic replacement of catalysts is deferred and amortized over the catalyst’s estimated useful life, which ranges from 12 to 36
months.
(p) Deferred Turnaround Costs
The Partnership capitalizes the cost of major turnarounds and amortizes these costs over the estimated period to the next turnaround, which ranges
from 12 to 36 months.
(q) 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 the Consolidated
Statements of Operations. Since the tax base on the Texas margin tax is derived from an income-based measure, the margin tax is construed as an income tax
and, therefore, the recognition of deferred taxes applies to the margin tax. The impact on deferred taxes as a result of this provision is immaterial.
The Partnership's financial statements recognize the current and deferred income tax consequences that result from the activities of its wholly owned
C-Corporation subsidiary, Martin Transport, Inc. ("MTI"), during the current period pursuant to the provisions of the FASB ASC 740 related to income taxes.
As a result of the common control transaction with the Partnership, the deferred tax consequences of the changes in the tax bases of MTI’s assets and liabilities
were included in equity under the provisions of ASC 740-20-45-11.
With respect to MTI, income taxes are accounted for under the asset and liability method, whereby deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
In the ordinary course of business, there may be many transactions and calculations where the ultimate tax outcome is uncertain. The calculation of tax
liabilities involves dealing with uncertainties in the application of complex tax laws. In accordance with the provisions of ASC 740, we use a two-step approach
for recognizing and measuring tax benefits taken or expected to be taken in a tax return. In the first step, “recognition”, the Partnership determines whether it is
more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the
technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Partnership presumes that the
position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. In the second step, “measurement”, a tax
position that meets the more-likely-than-not threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position
is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement based upon management’s intent
regarding negotiation and litigation. In evaluating all income tax positions for all open years, management has determined all positions are more likely than not
to be sustained at full benefit based upon their technical merit under applicable tax laws.
(r) Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) for the
Partnership includes unrealized gains and losses on derivative instruments. In accordance with ASC 815-10, the Partnership records deferred hedge gains and
losses on its derivative instruments that qualify as cash flow hedges as other comprehensive income (loss).
81
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-
07"). ASU 2023-07 requires annual and interim disclosures that are expected to improve reportable segment disclosures, primarily through enhanced
disclosures about significant segment expenses. The provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim
periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Partnership adopted ASU 2023-07 and its expanded segment
disclosure requirements in compliance with the required adoption guidelines.
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” ("ASU 2023-09"), which requires disaggregated
information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The provisions of ASU 2023-09
are effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or
retroactive basis. ASU 2023-09 will result in the required additional disclosures being included in the Partnership's consolidated financial statements, once
adopted.
NOTE 4. EXIT ACTIVITIES AND DIVESTITURES
During the second quarter of 2023, the Partnership completed its previously announced exit from its butane optimization business at the conclusion of the
butane selling season. This exit did not qualify as discontinued operations in accordance with ASC 205. Going forward, with respect to butane, the Partnership
will operate as a fee-based butane logistics business, primarily continuing to utilize its north Louisiana underground storage assets, which have both truck and
rail capability. This logistics business will also utilize the Partnership's truck transportation assets for fee-based product movements. As a result of this new
business model, the Partnership will no longer carry butane inventory, enabling the Partnership to reduce commodity risk exposure, cash flow and earnings
volatility, and working capital requirements. The following revenues and costs, which are included in the financial results for all periods presented, are not
expected to be incurred under the new fee-based butane logistics business model. The butane optimization business has historically been included in the
Partnership's Specialty Products operating segment.
2024
2023
2022
Products revenue
$
— $
70,539 $
172,756
Cost of products sold
—
72,283
190,677
Selling, general and administrative expenses
—
512
2,094
$
— $
(2,256) $
(20,015)
Divestiture of Stockton, California Sulfur Terminal. On October 7, 2022, the Partnership closed on the sale of its Stockton Sulfur Terminal to Gulf
Terminals LLC for net proceeds of approximately $5,250, which were used to reduce outstanding borrowings under the Partnership's credit facility. The
divestiture of the Stockton Sulfur Terminal did not qualify for discontinued operations presentation under the guidance of ASC 205-20.
82
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
NOTE 5. REVENUE
The following table disaggregates our revenue by major source:
2024
2023
2022
Terminalling and storage segment
Throughput and storage
$
89,067
$
86,514
$
80,193
$
89,067
$
86,514
$
80,193
Transportation segment
Land transportation
$
165,353
$
166,717
$
166,631
Inland transportation
51,826
50,890
45,050
Offshore transportation
6,755
6,070
7,327
$
223,934
$
223,677
$
219,008
Sulfur service segment
Sulfur product sales
$
31,347
$
30,170
$
42,247
Fertilizer product sales
83,852
97,395
124,580
Sulfur services
14,572
13,430
12,337
$
129,771
$
140,995
$
179,164
Specialty products segment
Natural gas liquids product sales
$
144,238
$
214,713
$
398,422
Lubricant product sales
120,612
132,064
142,091
$
264,850
$
346,777
$
540,513
Total revenues
$
707,622
$
797,963
$
1,018,878
Revenue is measured based on a consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties where the
Partnership is acting as an agent. The Partnership recognizes revenue when the Partnership satisfies a performance obligation, which typically occurs when the
Partnership transfers control over a product to a customer or as the Partnership delivers a service.
The following is a description of the principal activities - separated by reportable segments - from which the Partnership generates revenue.
Terminalling and Storage Segment
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 storage and throughput contracts at the Partnership's underground NGL storage
facility, revenue is recognized based on the volume stored and moved through the facility at the contracted rate. For the Partnership’s tolling agreement,
revenue is recognized based on the contracted monthly reservation fee and throughput volumes moved through the facility. Throughput and storage revenue in
the table above includes non-cancelable revenue arrangements that are under the scope of ASC 842, whereby the Partnership has committed certain
Terminalling and Storage assets in exchange for a minimum fee.
Transportation Segment
Revenue related to land transportation is recognized for line hauls based on a mileage 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.
83
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
Revenue related to marine transportation 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.
Sulfur Services Segment
Revenue from sulfur and fertilizer product sales is recognized when the customer takes title to the product. Delivery of product is invoiced as the transaction
occurs and is generally paid within a month. Revenue from sulfur services is recognized as services are performed during each monthly period. The
performance of the service is invoiced as the transaction occurs and is generally paid within a month.
Specialty Products Segment
NGL revenue is recognized when title is transferred, which is generally when the product is delivered by truck, rail, or pipeline to the Partnership's NGL
customers or when the customer picks up the product from our facilities. When lubricants are sold by truck or rail, revenue is recognized when title is
transferred, which is generally when the product leaves the Partnership's facility, but can vary based on the specific terms of the contract. Delivery of product is
invoiced as the transaction occurs and is generally paid within a month.
The table below includes estimated minimum revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the
end of the reporting period. The Partnership applies the practical expedient in ASC 606-10-50-14(a) and does not disclose information about remaining
performance obligations that have original expected durations of one year or less.
2025
2026
2027
2028
2029
Thereafter
Total
Terminalling and Storage
Throughput and storage
$
44,774
$
46,117
$
47,500
$
48,990
$
50,393
$
105,367
$
343,141
Specialty Products
Natural Gas Liquids
6,657
3,867
—
—
—
—
10,524
Sulfur Services
Product sales
14,237
14,237
14,237
—
—
—
42,711
Service revenues
11,234
10,259
4,038
3,540
3,540
34,515
67,126
Total
$
76,902
$
74,480
$
65,775
$
52,530
$
53,933
$
139,882
$
463,502
NOTE 6. INVENTORIES
Components of inventories at December 31, 2024 and 2023 were as follows:
2024
2023
Natural Gas Liquids
$
2,814
$
3,679
Sulfur
1,440
817
Fertilizer
18,463
13,411
Lubricants
23,227
20,057
Other
5,763
5,858
$
51,707
$
43,822
84
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
NOTE 7. PROPERTY, PLANT, AND EQUIPMENT
At December 31, 2024 and 2023, property, plant and equipment consisted of the following:
Depreciable Lives
2024
2023
Land
—
$
18,812
$
18,818
Improvements to land and buildings
10-25 years
136,609
133,440
Storage equipment
5-50 years
130,663
129,456
Marine vessels
4-25 years
194,406
187,182
Operating plant and equipment
3-50 years
396,631
376,170
Furniture, fixtures and other equipment
3-20 years
7,908
7,527
Transportation equipment
3-7 years
43,807
47,017
Construction in progress
25,223
19,176
$
954,059
$
918,786
Depreciation expense for the years ended December 31, 2024, 2023 and 2022 was $41,604, $44,700 and $50,186, respectively, which includes
amortization of fixed assets acquired under finance ease obligations of $11, $6, and $92. Gross assets under finance leases were $77 and $0 at December 31,
2024 and 2023, respectively. Accumulated amortization associated with finance leases was $10 and $0 at December 31, 2024 and 2023, respectively.
Additions to property, plant and equipment included in accounts payable at December 31, 2024, 2023 and 2022 were $2,661, $2,943, and $1,949,
respectively. No equipment was purchased under finance lease obligations for the years ended December 31, 2024, 2023, and 2022.
NOTE 8. GOODWILL
The following table represents the goodwill balance by reporting unit at December 31, 2024 and 2023 as follows:
2024
2023
Carrying amount of goodwill:
Terminalling and storage
$
6,756 $
6,756
Specialty products
4,229
4,229
Sulfur services
5,197
5,197
Transportation
489
489
Total goodwill
$
16,671 $
16,671
NOTE 9. LEASES
The Partnership has numerous operating leases primarily for terminal facilities and transportation and other equipment. The leases generally provide that all
expenses related to the equipment are to be paid by the lessee.
Operating lease right of use ("ROU") assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at
commencement date. Because most of the Partnership's leases do not provide an implicit rate of return, the Partnership uses its imputed collateralized rate
based on the information available at commencement date in determining the present value of lease payments. The estimated rate is based on a risk-free rate
plus a risk-adjusted margin.
The Partnership's leases have remaining lease terms of 1 year to 12 years, some of which include options to extend the leases for up to 5 years, and
some of which include options to terminate the leases within 1 year. The Partnership includes extension periods and excludes termination periods from its lease
term if, at commencement, it is reasonably likely that the Partnership will exercise the option.
85
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
The components of lease expense for the years ended December 31, 2024, 2023, and 2022 were as follows:
2024
2023
2022
Operating lease cost
$
22,256 $
16,198 $
10,752
Finance lease cost:
Amortization of right-of-use assets
11
6
92
Interest on lease liabilities
3
—
9
Short-term lease cost
4,748
5,415
11,546
Variable lease cost
163
191
185
Total lease cost
$
27,181 $
21,810 $
22,584
Supplemental cash flow information for the years ended December 31, 2024, 2023, and 2022 related to leases were as follows:
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
39,763 $
29,820 $
20,153
Operating cash flows from finance leases
3
—
9
Financing cash flows from finance leases
9
9
279
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
$
21,133 $
38,935 $
22,433
Finance leases
77
—
—
86
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
Supplemental balance sheet information related to leases was as follows at December 31, 2024 and 2023:
2024
2023
Operating Leases
Operating lease right-of-use assets
$
67,140
$
60,359
Current portion of operating lease liabilities included in "Other accrued liabilities"
$
19,707
$
14,901
Operating lease liabilities
47,815
45,684
Total operating lease liabilities
$
67,522
$
60,585
Finance Leases
Property, plant and equipment, at cost
$
77
$
—
Accumulated depreciation
(10)
—
Property, plant and equipment, net
$
67
$
—
Current installments of finance lease obligations
$
14
$
—
Finance lease obligations
$
55
$
—
Total finance lease obligations
$
69
$
—
Weighted Average Remaining Lease Term (years)
Operating leases
4.07
4.72
Finance leases
4.32
—
Weighted Average Discount Rate
Operating leases
7.28 %
6.56 %
Finance leases
7.00 %
—
The Partnership’s future minimum lease obligations as of December 31, 2024 consist of the following:
Operating Leases
Finance Leases
Year 1
$
24,137
$
18
Year 2
20,512
18
Year 3
16,186
18
Year 4
9,714
18
Year 5
3,575
6
Thereafter
4,355
—
Total
78,479
78
Less amounts representing interest costs
(10,957)
(9)
Total lease liability
$
67,522
$
69
The Partnership has non-cancelable revenue arrangements that are under the scope of ASC 842 whereby we have committed certain terminalling and
storage assets in exchange for a minimum fee. Future minimum revenues the Partnership expects to receive under these non-cancelable arrangements as of
December 31, 2024 are as follows: 2025 - $20,385; 2026 - $11,826; 2027 - $11,631; 2028 - $11,435; 2029 - $9,860; subsequent years - $8,538.
87
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
NOTE 10. FAIR VALUE MEASUREMENTS
The Partnership uses a valuation framework based upon inputs that market participants use in pricing certain assets and liabilities. These inputs are classified
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 not reasonably 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.
There were no assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 or 2023.
The Partnership is required to disclose estimated fair values for its financial instruments. Fair value estimates are set forth below for these financial
instruments. 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 due
from/to affiliates: The carrying amounts approximate fair value due to the short maturity and highly liquid nature of these instruments, and as such
these have been excluded from the table below. There is negligible credit risk associated with these instruments.
•
Current and non-current portion of long-term debt: The carrying amount of the credit facility approximates fair value due to the debt having a variable
interest rate and is in Level 2. The estimated fair value of the 2028 Notes is considered Level 2, as the fair value is based upon quoted prices for
identical liabilities in markets that are not active.
December 31, 2024
December 31, 2023
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
2028 Notes
386,377
436,172
381,965
414,453
Total
$
386,377
$
436,172
$
381,965
$
414,453
NOTE 11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Partnership’s results of operations could be materially impacted by changes in commodity prices and interest rates. In an effort to manage its
exposure to these risks, the Partnership periodically enters into various derivative instruments, including commodity and interest rate hedges. At the time
derivative contracts are entered into, the Partnership assesses whether the nature of the instrument qualifies for hedge accounting treatment according to the
requirements of ASC 815 – Derivatives and Hedging. For those transactions designated as hedging instruments for accounting purposes, the Partnership
documents all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various
hedge transactions. The Partnership also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions
are highly effective in offsetting changes in cash flows or fair value of hedged items. All derivatives and hedging instruments are included on the balance sheet
as an asset or a liability measured at fair value. Changes in fair value for hedging instruments are recognized on the balance sheet through Accumulated Other
Comprehensive Income ("AOCI"). Settlements related to effective hedging relationships will be reclassified from AOCI to earnings during the period in which
the hedged transactions are reflected on the income statement.
From time to time, derivatives designated for hedge accounting may be closed prior to contract expiration. The accounting treatment of closed
positions depends on whether the closure occurred due to the hedged transaction occurring early or if the hedged transaction is still expected to occur as
originally forecasted. For hedged transactions that occur early, the closure results in the realized gain or loss from closure being recognized in the same period
the accelerated hedged transaction affects earnings. For hedged transactions that are still expected to occur as originally forecasted, the closure results in the
realized gain or loss being deferred until the hedged transaction affects earnings.
88
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
If it is determined that hedged transactions associated with cash flow hedges are no longer probable of occurring, the gain or loss associated with the
instrument is recognized immediately into earnings.
From time to time, we may have derivative financial instruments for which we do not elect hedge accounting. Changes in fair value for derivatives not
designated as hedges are recognized as gains and losses in the earnings of the periods in which they occur.
(a) Commodity Derivative Instruments
The Partnership from time to time has used derivatives to manage the risk of commodity price fluctuation. Commodity risk is the adverse effect on the value
of a liability or future purchase that results from a change in commodity price. The Partnership has established a hedging policy and monitors and manages the
commodity market risk associated with potential commodity risk exposure. In addition, the Partnership has focused on utilizing counterparties for these
transactions whose financial condition is appropriate for the credit risk involved in each specific transaction. The Partnership enters into hedging transactions to
protect a portion of its commodity price risk exposure. These hedging arrangements are in the form of swaps for NGLs. At December 31, 2024 and 2023, there
were no outstanding derivatives.
For information regarding gains and losses on commodity derivative instruments, see "Tabular Presentation of Gains and Losses on Derivative
Instruments" below.
(b) Tabular Presentation of Gains and Losses on Derivative Instruments
The following table summarizes the loss recognized in AOCI at December 31, 2024 and 2023, respectively, and the gain (loss) reclassified from
accumulated other comprehensive loss into earnings during the years ended December 31, 2024, 2023 and 2022, respectively, for derivative financial
instruments designated as cash flow hedges:
Amount of Gain (Loss)
Recognized in AOCI
Location of Gain (Loss)
Reclassified from AOCI into
Income
Amount of Gain (Loss) Reclassified from
AOCI into Income
2024
2023
2024
2023
2022
Commodity contracts
$
—
$
— Cost of products sold
$
—
$
— $
816
Total
$
—
$
—
$
—
$
— $
816
NOTE 12. RELATED PARTY TRANSACTIONS
As of December 31, 2024, Martin Resource Management Corporation owned 6,114,532 of the Partnership’s common units representing approximately
15.7% of the Partnership’s outstanding limited partnership units. Martin Resource Management Corporation controls the Partnership's general partner by virtue
of owning 100% of the membership interests in Holdings, the sole member of the Partnership's general partner. The Partnership’s general partner, MMGP,
owns a 2% general partner interest in the Partnership. The Partnership’s general partner’s ability, as general partner, to manage and operate the Partnership, and
Martin Resource Management Corporation’s ownership as of December 31, 2024 of approximately 15.7% of the Partnership’s outstanding limited partnership
units, effectively gives Martin Resource Management Corporation the ability to veto some of the Partnership’s actions and to control the Partnership’s
management.
The following is a description of the Partnership’s material related party agreements:
Omnibus Agreement
Omnibus Agreement. The Partnership and its general partner are parties to the Omnibus Agreement dated November 1, 2002, with Martin Resource
Management Corporation that governs, among other things, potential competition and indemnification obligations among the parties to the agreement, related
party transactions, the provision of general administration and support services by Martin Resource Management Corporation and the Partnership’s use of
certain Martin Resource Management Corporation trade names and trademarks. The Omnibus Agreement was amended on November 25, 2009, to include
processing crude oil into finished products including naphthenic lubricants, distillates, asphalt and other intermediate cuts. The Omnibus Agreement was
amended further on October 1, 2012, to permit the Partnership to provide
89
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
certain lubricant packaging products and services to Martin Resource Management Corporation. The Omnibus Agreement was amended further on October 17,
2023 to include lubricants and packing in the Partnership’s definition of business.
Non-Competition Provisions. Martin Resource Management Corporation has agreed for so long as it controls the general partner of the Partnership, not to
engage in the business of:
•
providing terminalling and storage services for petroleum products and by-products including the refining, blending and packaging of finished
lubricants;
•
providing land and marine transportation of petroleum products, by-products, and chemicals; 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 Corporation, including the following:
◦
distributing asphalt, marine fuel and other liquids;
◦
providing shore-based marine services in Texas, Louisiana, Mississippi, and Alabama;
◦
operating a crude oil gathering business in Stephens, Arkansas;
◦
providing crude oil gathering 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 a butane optimization business;
◦
supplying employees and services for the operation of the Partnership's business; and
◦
operating, solely for our account, the asphalt facilities owned by the Partnership in each of Hondo, South Houston and Port Neches, Texas
and Omaha, Nebraska.
•
any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of less than $5,000;
•
any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of $5,000 or more if the Partnership
has been offered the opportunity to purchase the business for fair market value and the Partnership declines to do so with the concurrence of the
Conflicts Committee; and
•
any business that Martin Resource Management Corporation acquires or constructs where a portion of such business includes a restricted business and
the fair market 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 or constructed; provided that, following completion of the acquisition or construction, the Partnership will be provided the opportunity to
purchase the restricted business.
Services. Under the Omnibus Agreement, Martin Resource Management Corporation provides the Partnership with corporate staff, support services, and
administrative services necessary to operate the Partnership’s business. The Omnibus Agreement requires the Partnership to reimburse Martin Resource
Management Corporation for all direct expenses it incurs or payments it makes on the Partnership’s behalf or in connection with the operation of the
Partnership’s business. There is no
90
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
monetary limitation on the amount the Partnership is required to reimburse Martin Resource Management Corporation for direct expenses. In addition to the
direct expenses, under the Omnibus Agreement, the Partnership is required to reimburse Martin Resource Management Corporation for indirect general and
administrative and corporate overhead expenses.
Effective January 1, 2024, through December 31, 2024, the Board of Directors approved an annual reimbursement amount for indirect expenses of
$13,508. The Partnership reimbursed Martin Resource Management Corporation for $13,508, $13,982 and $13,491 of indirect expenses for the years ended
December 31, 2024, 2023 and 2022, respectively. The Board of Directors 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 Corporation provides to the Partnership,
such as accounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee
benefit plans and other general corporate overhead functions the Partnership shares with Martin Resource Management Corporation retained businesses. The
provisions of the Omnibus Agreement regarding Martin Resource Management Corporation’s services will terminate if Martin Resource Management
Corporation ceases to control the general partner of the Partnership.
Related Party Transactions. The Omnibus Agreement prohibits the Partnership from entering into any material agreement with Martin Resource
Management Corporation without the prior approval of the Conflicts Committee. For purposes of the Omnibus Agreement, the term "material agreements"
means any agreement between the Partnership and Martin Resource Management Corporation that requires aggregate annual payments in excess of the then-
applicable agreed upon reimbursable amount of indirect general and administrative expenses. Please read "Services" above.
License Provisions. Under the Omnibus Agreement, Martin Resource Management Corporation 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 be amended
without the approval of the Conflicts Committee if such amendment would adversely affect the unitholders. The Omnibus Agreement was first amended on
November 25, 2009, to permit the Partnership to provide refining services to Martin Resource Management Corporation. The Omnibus Agreement was
amended further on October 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management
Corporation. The Omnibus Agreement was amended further on October 17, 2023 to include lubricants and packaging in the Partnership’s definition of
business. Such amendments were approved by the Conflicts Committee. The Omnibus Agreement, other than the indemnification provisions and the provisions
limiting the amount for which the Partnership will reimburse Martin Resource Management Corporation for general and administrative services performed on
its behalf, will terminate if the Partnership is no longer an affiliate of Martin Resource Management Corporation.
Master Transportation Services Agreement
Master Transportation Services Agreement. MTI, a wholly owned subsidiary of the Partnership, is a party to a master transportation services agreement
effective January 1, 2019, with certain wholly owned subsidiaries of Martin Resource Management Corporation. Under the agreement, MTI agreed to transport
Martin Resource Management Corporation's petroleum products and by-products.
Term and Pricing. The agreement will continue unless either party terminates the agreement by giving at least 30 days' written notice to the other party. The
rates under the agreement are subject to any adjustments which are mutually agreed upon or in accordance with a price index. Additionally, shipping charges
are also subject to fuel surcharges determined on a weekly basis in accordance with the U.S. Department of Energy’s national diesel price list.
Indemnification. MTI has agreed to indemnify Martin Resource Management Corporation against all claims arising out of the negligence or willful
misconduct of MTI and its officers, employees, agents, representatives and subcontractors. Martin Resource Management Corporation has agreed to indemnify
MTI against all claims arising out of the negligence or willful misconduct of Martin Resource Management Corporation and its officers, employees, agents,
representatives and subcontractors. In the event a claim is the result of the joint negligence or misconduct of MTI and Martin Resource Management
Corporation, indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligence or misconduct.
91
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
Terminal Services Agreements
Diesel Fuel Terminal Services Agreement. Effective October 1, 2022, The Partnership entered into a third amended and restated terminalling services
agreement under which it provides terminal services to Martin Energy Services LLC (“MES”), a wholly owned subsidiary of Martin Resource Management
Corporation, for fuel distribution utilizing marine shore-based terminals owned by the Partnership. This agreement amended the existing arrangement between
the Partnership and MES by eliminating any minimum throughput volume requirements and increasing the per gallon throughput fee. The term of this
agreement expired on December 31, 2023 but will continue on a year-to-year basis until terminated by either party by giving at least 90 days’ written notice
prior to the end of any term. Effective January 1, 2024, this agreement was amended to increase the throughput rate and to establish a minimum throughput
volume.
Miscellaneous Terminal Services Agreements. The Partnership is currently party to several terminal services agreements and from time to time the
Partnership may enter into other terminal service agreements for the purpose of providing terminal services to related parties. Individually, each of these
agreements is immaterial but 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 Agreements
Marine Transportation Agreement. The Partnership is a party to a marine transportation agreement effective January 1, 2006, as amended, under which the
Partnership provides marine transportation services to Martin Resource Management Corporation on a spot-contract basis at applicable market rates. Effective
each January 1, this agreement automatically renews for consecutive one-year periods unless either party terminates the agreement by giving written notice to
the other party at least 60 days prior to the expiration of the then applicable term. The fees the Partnership charges Martin Resource Management Corporation
are based on applicable market rates.
Marine Fuel. The Partnership is a party to an agreement with Martin Resource Management Corporation dated November 1, 2002, under which Martin
Resource Management Corporation provides the Partnership with marine fuel from its locations in the Gulf of Mexico at a fixed rate in excess of the Platt's
U.S. Gulf Coast Index for #2 Fuel Oil. Under this agreement, the Partnership agreed to purchase all of its marine fuel requirements that occur in the areas
serviced by Martin Resource Management Corporation.
Other Agreements
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, asphalt and other
intermediate cuts for Cross. The tolling agreement expires November 25, 2031. Under this tolling agreement, Cross agreed to process a minimum of 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. Further, certain capital
improvements, to the extent requested by Cross, are reimbursed through a capital recovery fee. All of these fees (other than the fuel surcharge) are subject to
escalation annually based upon the greater of 3% or the increase in the Consumer Price Index for a specified annual period.
East Texas Mack Leases. MTI leases equipment, including tractors and trailers, from East Texas Mack Sales ("East Texas Mack"). Certain of our
directors or officers are owners of East Texas Mack, including entities affiliated with Ruben Martin, who owns approximately 46% of the issued and
outstanding stock of East Texas Mack. Amounts paid to East Texas Mack for tractor and trailer lease payments and lease residuals for the fiscal years ended
December 31, 2024, 2023 and 2022 were approximately $4,998, $3,256, and $1,935, respectively.
Consulting Services Agreement. Martin Operating Partnership L.P. (the “Operating Partnership”) is a party to a Consulting Services Agreement with
Ruben S. Martin (the “Consulting Services Agreement”). Pursuant to the terms of the Consulting Services Agreement, Mr. Martin has agreed to provide
business and strategic development support to the Operating Partnership, and the Operating Partnership has agreed to pay Mr. Martin $263 per year for such
services, which amount was paid to Mr. Martin for the fiscal year ended December 31, 2022. The Consulting Services Agreement expired on December 31,
2022.
92
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
Storage and Services Agreement. The Partnership is a party to a storage and services agreement with Martin Butane, a division of Martin Product
Sales LLC (a subsidiary of Martin Resource Management Corporation), dated May 1, 2023, under which the Partnership provides storage and other services
for NGLs at the Partnership's underground storage facility located in Arcadia, Louisiana. The primary term of the agreement expired on April 30, 2024, but will
continue on a year to year basis until terminated by either party by giving at least 90 days’ written notice prior to the end of any term.
Other Miscellaneous Agreements. From time to time the Partnership enters into other miscellaneous agreements with Martin Resource Management
Corporation for 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 the Partnership’s
Consolidated Statements of Operations. The revenues, costs and expenses reflected in these tables are tabulations of the related party transactions that are
recorded in the corresponding caption of the Consolidated Statements of Operations and do not reflect a statement of profits and losses for 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:
2024
2023
2022
Terminalling and storage
$
71,799
$
72,138
$
66,867
Transportation
33,250
29,276
28,393
Sulfur services
664
—
—
Product sales:
Specialty products
352
8,547
150
Sulfur services
105
220
404
457
8,767
554
$
106,170
$
110,181
$
95,814
The impact of related party cost of products sold is reflected in the Consolidated Statements of Operations as follows:
Cost of products sold:
Specialty products
$
31,789
$
35,930
$
39,356
Sulfur services
11,915
11,182
10,717
Terminalling and storage
72
75
19
$
43,776
$
47,187
$
50,092
The impact of related party operating expenses is reflected in the Consolidated Statements of Operations as follows:
Operating expenses:
Transportation
$
79,441
$
73,866
$
66,682
Sulfur services
4,888
5,738
6,165
Terminalling and storage
22,502
21,247
20,783
$
106,831
$
100,851
$
93,630
93
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
The impact of related party selling, general and administrative expenses is reflected in the Consolidated Statements of Operations as follows:
Selling, general and administrative:
Transportation
$
11,218
$
8,927
$
7,553
Specialty products
5,454
4,152
5,565
Sulfur services
5,427
3,714
3,917
Terminalling and storage
3,051
780
804
Indirect overhead allocation, net of reimbursement
14,235
14,448
13,919
$
39,385
$
32,021
$
31,758
NOTE 13. SUPPLEMENTAL BALANCE SHEET INFORMATION
Components of "Intangibles and other assets, net" at December 31, 2024 and 2023 were as follows:
2024
2023
Catalyst and turnaround costs
$
254
$
701
Other intangible assets
26
55
Other
1,229
1,283
$
1,509
$
2,039
Other intangible assets consist of technology-based assets.
Amortization expense, included in "Depreciation and amortization" on the Partnership's Consolidated Statements of Operations includes amortization
of intangible assets, turnaround expenses, and deferred charges. Aggregate amortization expense was $9,050, $5,006, and $5,713, for the years ended
December 31, 2024, 2023 and 2022, respectively.
Estimated amortization expense for the years subsequent to December 31, 2024 are as follows: 2025 - $9,181; 2026 - $243; 2027 - $0; 2028 - $0; 2029
- $0; subsequent years - $0.
94
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
Components of "Other accrued liabilities" at December 31, 2024 and 2023 were as follows:
2024
2023
Accrued interest
$
17,899
$
17,956
Asset retirement obligations
—
25
Property and other taxes payable
4,043
4,348
Accrued payroll
5,187
4,136
Operating lease liabilities
19,707
14,901
Other
44
133
$
46,880
$
41,499
The schedule below summarizes the changes in our asset retirement obligations:
Year Ended December 31,
2024
2023
(In thousands)
Beginning asset retirement obligations
$
5,182
$
4,992
Revisions to existing liabilities
—
—
Accretion expense
131
191
Liabilities settled
—
(1)
Ending asset retirement obligations
5,313
5,182
Current portion of asset retirement obligations
—
(25)
Long-term portion of asset retirement obligations
$
5,313
$
5,157
Several factors are considered in the annual review process, including inflation rates, current estimates for removal cost, discount rates, and the
estimated remaining useful life of the assets.
The current portion of asset retirement obligations is included in "Other accrued liabilities" on the Partnership's Consolidated Balance Sheets.
The non-current portion of asset retirement obligations is included in "Other long-term obligations" on the Partnership's Consolidated Balance
Sheets.
1
2
3
1
2
3
95
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
NOTE 14. LONG-TERM DEBT
At December 31, 2024 and 2023, long-term debt consisted of the following:
2024
2023
$150,000 Credit facility at variable interest rate (8.18% weighted average at December 31, 2024), due February
2027 secured by substantially all of the Partnership’s assets, net of unamortized debt issuance costs of $2,242 and
$3,292, respectively
$
51,258
$
39,208
$400,000 Senior notes, 11.5% interest, net of unamortized debt issuance costs of $6,223 and $8,235, respectively,
including unamortized premium of $7,400 and $9,800, respectively, due February 2028, secured
386,377
381,965
Total
437,635
421,173
Less: current portion
—
—
Total long-term debt, net of current portion
$
437,635
$
421,173
The interest rate fluctuates based on Adjusted Term SOFR (set on the date of each advance) or the alternate base rate plus an applicable margin. The margin
is set every three months. All amounts outstanding at December 31, 2024 were at Adjusted Term SOFR plus an applicable margin. The applicable margin for
revolving loans that are SOFR loans currently ranges from 2.75% to 3.75%, and the applicable margin for revolving loans that are alternate base rate loans
currently ranges from 1.75% to 2.75%. The applicable margin for SOFR borrowings at December 31, 2024 is 3.50%. The applicable margin for SOFR
borrowings effective February 24, 2025 is 3.25%. The credit facility contains various covenants that limit the Partnership’s ability to make distributions; make
certain investments and acquisitions; enter into certain agreements; incur indebtedness; sell assets; and make certain amendments to the Partnership's omnibus
agreement with Martin Resource Management Corporation (the "Omnibus Agreement").
The Partnership was in compliance with all debt covenants as of December 31, 2024.
On February 8, 2023, the Partnership completed the sale of $400,000 in aggregate principal amount of 11.50% senior secured second lien notes due
2028 (the “2028 Notes”). The Partnership used the proceeds of the 2028 Notes to repurchase, through a tender offer and then redemption, all of the
Partnership’s 10.00% senior secured 1.5 lien notes due 2024 and 11.50% senior secured second lien notes due 2025, repay a portion of the indebtedness under
the credit facility, and pay fees and expenses in connection with the foregoing. The indenture for the 2028 Notes restricts 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.
Effective February 8, 2023, in connection with the completion of our sale of the 2028 Notes, we amended our credit facility to, among other things,
reduce the commitments thereunder from $275,000 to $200,000 (with further scheduled reductions to $175,000 on June 30, 2023 and $150,000 on June 30,
2024) and extend the scheduled maturity date of the credit facility to February 8, 2027. In conjunction with the issuance of the 2028 Notes, the Partnership
recognized a loss on extinguishment of debt of $5,121 comprised of $2,827 in tender premium, $2,044 of unamortized debt costs and $250 in other expense.
The Partnership paid cash interest, net of capitalized interest, in the amount of $53,449, $51,607, and $50,518 for the years ended December 31, 2024,
2023 and 2022, respectively. Capitalized interest was $1,153, $310, and $0 for the years ended December 31, 2024, 2023 and 2022, respectively.
As of December 31, 2024, the Partnership had irrevocable letters of credit outstanding totaling $9,150.
1
1
4
2
2,3,4
1
2
3
4
96
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
NOTE 15. PARTNERS' CAPITAL (DEFICIT)
As of December 31, 2024, partners’ capital consisted of 39,001,086 common limited partner units, representing a 98% partnership interest, and a 2% general
partner interest. Martin Resource Management Corporation, through subsidiaries, owned 6,114,532 of the Partnership's common limited partner units
representing approximately 15.7% of the Partnership's outstanding common limited partner units. MMGP, the Partnership's general partner, owns
the 2% general partner interest.
The Partnership Agreement contains specific provisions for the allocation of net income and losses to each of the partners for purposes of maintaining
their respective partner capital accounts.
Impact on Partners' Capital (Deficit) Related to Transactions Between Entities Under Common Control
Under ASC 805, assets and liabilities transferred between entities under common control are accounted for at the historical cost of those entities'
ultimate parent, in a manner similar to a pooling of interests. Any difference in the amount paid by the transferee versus the historical cost of the assets
transferred is recorded as an adjustment to equity (contribution or distribution) by the transferee. This is in contrast with a business combination between
unrelated parties, where assets and liabilities are recorded at their fair values at the acquisition date, with any excess of amounts paid over the fair value
representing goodwill. From time to time, the most recent being in 2019, the Partnership has entered into common control acquisitions from Martin Resource
Management Corporation. The consideration transferred totaling $552,058 exceeds the historical cost of the net assets received. This excess of the purchase
price over the historical cost of the net assets received has resulted in cumulative distributions of $289,019 reflected as reductions to Partners' capital (deficit).
Distributions of Available Cash
The Partnership distributes all of its available cash (as defined in the Partnership Agreement) within 45 days after the end of each quarter to
unitholders 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 of
each quarter less the amount of cash reserves its general partner determines in its reasonable discretion is necessary or appropriate to: (i) provide for the proper
conduct of the Partnership’s business; (ii) comply with applicable law, any debt instruments or other agreements; or (iii) provide funds for distributions to
unitholders 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 quarter
resulting from working capital borrowings made after the end of the quarter.
Net Income per Unit
The Partnership follows the provisions of the FASB ASC 260-10 related to earnings per share, which addresses the application of the two-class
method in determining income per unit for master limited partnerships having multiple classes of securities that may participate in partnership distributions
accounted for as equity distributions. Undistributed earnings are allocated to the general partner and limited partners utilizing the contractual terms of the
Partnership Agreement. Distributions to the general partner pursuant to certain incentive distribution rights ("IDRs") held by the general partner are limited to
available cash that will be distributed as defined in the Partnership Agreement. Accordingly, the Partnership does not allocate undistributed earnings to the
general partner for the IDRs because the general partner's share of available cash is the maximum amount that the general partner would be contractually
entitled to receive if all earnings for the period were distributed. When current period distributions are in excess of earnings, the excess distributions for the
period are to be allocated to the general partner and limited 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 in FASB 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 the if-
converted method, the weighted-average number of subordinated units outstanding for the period is added to the weighted-average number of common units
outstanding for purposes of computing basic net income per unit and the resulting amount is compared to the diluted net income per unit computed using the
two-class method. The following is a reconciliation of net income (loss) allocated to the general partner and limited partners for purposes of calculating net
income (loss) attributable to limited partners per unit:
97
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
Years Ended December 31,
2024
2023
2022
Net loss
$
(5,207)
$
(4,549)
$
(10,334)
Less general partner’s interest in net loss:
Distributions payable on behalf of general partner interest
16
16
16
General partner interest in undistributed loss
(120)
(107)
(223)
Less loss allocable to unvested restricted units
(25)
(14)
(40)
Limited partners’ interest in net loss
$
(5,078)
$
(4,444)
$
(10,087)
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,
2024
2023
2022
Basic weighted average limited partner units outstanding
38,831,355
38,771,657
38,726,048
Dilutive effect of restricted units issued
—
—
—
Total weighted average limited partner diluted units outstanding
38,831,355
38,771,657
38,726,048
All outstanding units were included in the computation of diluted earnings per unit and weighted based on the number of days such units were outstanding
during the period presented. All common unit equivalents were antidilutive for the years ended December 31, 2024, 2023 and 2022 because the limited partners
were allocated a net loss in these periods.
98
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
NOTE 16. UNIT BASED AWARDS - LONG-TERM INCENTIVE PLANS
The Partnership recognizes compensation cost related to unit-based awards to both employees and non-employees in its consolidated financial statements in
accordance with certain provisions of ASC 718. Amounts recognized in operating expense and selling, general, and administrative expense in the consolidated
financial statements with respect to these plans are as follows:
For the Year Ended December 31,
2024
2023
2022
Restricted unit awards
Employees
$
—
$
—
$
—
Non-employee directors
187
163
161
Phantom unit Awards
Employees
3,070
(177)
3,124
Non-employee directors
—
—
—
Total unit-based compensation expense
$
3,257
$
(14)
$
3,285
Long-Term Incentive Plans
The Partnership's general partner has long-term incentive plans for employees and directors of the general partner and its affiliates who perform services for
the Partnership.
2021 Phantom Unit Plan
On July 21, 2021, the Board of Directors and the Compensation Committee approved the Martin Midstream Partners L.P. 2021 Phantom Unit Plan
(the “2021 Plan”), effective as of the same date. The 2021 Plan permits granting the awards of phantom units and phantom unit appreciation rights
(collectively, "phantom unit awards") to any employee or non-employee director of the Partnership, including its executive officers. The awards may be time-
based or performance-based and will be paid, if at all, in cash.
The award of a phantom unit under the 2021 Plan entitles the participant to a cash payment equal to the value of the phantom unit on the vesting date
or dates, which value is the fair market value of a common unit of the Partnership (a “Unit”) on such vesting date or dates. The award of a phantom unit
appreciation right entitles the recipient to a cash payment equal to the difference between the value of a phantom unit on the vesting date or dates in excess of
the value assigned by the Compensation Committee to the phantom unit as of the grant date. Phantom units and phantom unit appreciation rights granted to
participants do not confer upon participants any right to a Unit.
On July 21, 2021, the Compensation Committee approved forms of time-based award agreements for phantom units and phantom unit appreciation
rights, both of which awards vest in full on the third anniversary of the grant date. The grant date value of a phantom unit under a phantom unit appreciation
right award is equal to the average of the closing price for a Unit during the 20 trading days immediately preceding the grant date of the award.
Generally, vesting of an award is subject to a participant remaining continuously employed with the Partnership through the vesting date. However, if
prior to the vesting date (i) a participant is terminated without cause (as defined in the award agreement) or terminates employment after the participant has
attained both the age of 65 and ten years of employment (“retirement-eligible”), a prorated portion of the award will vest and be paid in cash no later than the
30 day following such termination date (subject to a six-month delay in payment for certain retirement-eligible participants) or (ii) there is a change in control
of the Partnership (as defined in the 2021 Plan), the award will vest in full and be paid in cash no later than the 30 day following the date of the change of
control; provided, that the participant has been in continuous employment through the termination or change in control date, as applicable.
On April 20, 2022, the Board of Directors and the Compensation Committee approved the First Amendment to the 2021 Plan, effective as of the same
date, which amendment increased the total number of phantom units available for grant
th
th
99
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
under the 2021 Plan from 2,000,000 units to 5,000,000 units. On April 20, 2022, 365,000 phantom units and 1,097,500 phantom unit appreciation rights were
granted to employees of the general partner and its affiliates who perform services for the Partnership. On July 19, 2023, 1,179,500 phantom units and 505,500
phantom unit appreciation rights were granted to employees of the general partner and its affiliates who perform services for the Partnership.
2025 Phantom Unit Plan
On February 11, 2025, the Board of Directors and the Compensation Committee approved the Martin Midstream Partners L.P. 2025 Phantom Unit
Plan (the “2025 Plan”) to supersede the 2021 Plan, effective as of the same date. The 2025 Plan contains substantially the same terms and conditions as the
2021 Plan. On February 11, 2025, 1,210,000 phantom units and 425,000 phantom unit appreciation rights were granted to employees of the general partner and
its affiliates who perform services for the Partnership. See “Item 11. Executive Compensation – Martin Midstream Partners L.P. Long-Term Incentive Plans –
Phantom Unit Plan.”
Phantom unit awards are recorded in operating expense and selling, general and administrative expense based on the fair value of the vested portion of
the awards on the balance sheet date. The fair value of these awards is updated at each balance sheet date and changes in the fair value of the vested portions of
the awards are recorded as increases or decreases to compensation expense within operating expense and selling, general and administrative expense in the
Consolidated Statements of Operations. All of the Partnership's outstanding phantom unit awards at December 31, 2024 met the criteria to be treated under
liability classification in accordance with ASC 718, given that these awards will settle in cash on the vesting date.
Compensation expense for the phantom awards is based on the fair value of the units as of the balance sheet date as further discussed below, and such
costs are recognized ratably over the service period of the awards. As the fair value of liability awards is required to be re-measured each period end, stock
compensation expense amounts recognized in future periods for these awards will vary. The estimated future cash payments of these awards are presented as
liabilities within "Trade and other accounts payable" and "Other long-term obligations" in the Consolidated Balance Sheets. As of December 31, 2024, there
was a total of $2,783 of unrecognized compensation costs related to non-vested phantom unit awards. These costs are expected to be recognized over a
remaining life of 1.47 years.
The fair value of the phantom unit awards was estimated using a Monte Carlo valuation model as of the balance sheet date. The Monte Carlo valuation
model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility was
calculated based on the historical volatility of the Partnership’s common units as well as a set of peer companies.
Restricted Unit Plan
On May 26, 2017, the unitholders of the Partnership approved the Martin Midstream Partners L.P. 2017 Restricted Unit Plan (the “2017 LTIP”). The 2017
LTIP 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. The
2017 LTIP is administered by the Compensation Committee.
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 to make grants under
the 2017 LTIP containing such terms as the Compensation Committee shall determine under the 2017 LTIP. With respect to time-based restricted units
("TBRUs"), the Compensation Committee will determine the time period over which restricted units granted to employees and directors will vest. The
Compensation Committee may also award a percentage of restricted units with vesting requirements based upon the achievement of specified pre-established
performance targets ("PBRUs"). The performance targets may include, but are not limited to, the following: revenue and income measures, 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, corporate sustainability metrics, and other
measures related to acquisitions, dispositions, operational objectives and succession planning objectives. PBRUs are earned only upon our achievement of an
objective performance measure for the performance period. PBRUs which vest are payable in common units. Unvested units granted under the 2017 LTIP may
or may not participate in cash distributions depending on the terms of each individual award agreement.
100
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
The restricted units issued to directors generally vest in equal annual installments over a four-year period.
In February 2024, the Partnership issued 28,760 TBRUs to each of the Partnership's three independent directors under the 2017 LTIP. These restricted
common units vest in equal installments of 7,190 units on January 24, 2025, 2026, 2027, and 2028.
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 of the
restricted unit activity for the year ended December 31, 2024 is provided below:
Number of Units
Weighted Average
Grant-Date Fair
Value Per Unit
Non-vested, beginning of year
141,390
$
2.99
Granted (TBRU)
86,280
$
2.26
Vested
(58,806)
$
2.86
Forfeited
—
$
—
Non-Vested, end of year
168,864
$
2.65
Aggregate intrinsic value, end of year
$
606
A summary of the restricted units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) during
the years ended December 31, 2024, 2023 and 2022 is provided below:
For the Year Ended
December 31,
2024
2023
2022
Aggregate intrinsic value of units vested
$
46
$
89
$
92
Fair value of units vested
$
168
$
178
$
188
As of December 31, 2024, there was $292 of unrecognized compensation cost related to non-vested time-based restricted units. That cost is expected to be
recognized over a weighted-average period of 2.40 years.
NOTE 17. INCOME TAXES
The components of income tax expense from operations for the years ended December 31, 2024, 2023 and 2022 are as follows:
2024
2023
2022
Current:
Federal
$
2,318
$
904
$
1,179
State
1,625
828
1,004
3,943
1,732
2,183
Deferred:
Federal
595
3,051
4,815
State
(341)
1,135
929
254
4,186
5,744
Total income tax expense
$
4,197
$
5,918
$
7,927
The operations of a partnership are generally not subject to income taxes, except for Texas margin tax, because its income is taxed directly to its partners.
The Texas margin tax is considered a state income tax and is included in income tax expense on the Consolidated Statements of Operations. Since the tax base
on the Texas margin tax is derived from an income-based measure, the margin tax is construed as income tax, and therefore, the recognition of deferred taxes
applies to the margin
101
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
tax. The impact on deferred taxes as a result of this provision is immaterial. State income taxes attributable to the Texas margin tax relating to the operation of
the Partnership of $925, $440 and $496 were recorded in income tax expense for the years ended December 31, 2024, 2023 and 2022, respectively.
Total income tax expense relating to the operation of MTI, a wholly owned C-Corporation subsidiary of the Partnership (“Taxable Subsidiary”), of
$3,272, $5,478 and $7,431 was recorded in income tax expense for the years ended December 31, 2024, 2023 and 2022, respectively.
The income tax expense from the Taxable Subsidiary operations for the years ended December 31, 2024, 2023, and 2022 differs from the "expected"
tax expense (computed by applying the federal corporate rate of 21% to income before income taxes of the Taxable Subsidiary) as follows:
2024
2023
2022
"Expected" tax expense
$
2,669 $
3,880 $
6,702
Increase in income taxes resulting from:
State income taxes, net of federal income tax expense
913
1,357
1,135
Other non-deductible (non-taxable) items
299
306
(86)
Other, net
(609)
(65)
(320)
Actual tax expense
$
3,272 $
5,478 $
7,431
Cash paid for income taxes was $3,356, $1,404 and $2,250 for the years ended December 31, 2024, 2023 and 2022, respectively.
Deferred taxes are the result of differences between the bases of assets and liabilities for financial reporting and income tax purposes. Significant
components of deferred tax assets and liabilities at December 31, 2024 and 2023 are as follows:
2024
2023
Deferred tax assets:
Bad debt reserves
$
130
$
49
Goodwill and intangibles
9,216
10,532
Employee benefits
12
4
Operating leases
30
—
Interest expense
1,186
334
Tax loss carryforwards
118
861
Other
150
178
Subtotal
10,842
11,958
Less: Valuation allowance
—
—
Total net deferred tax assets
10,842
11,958
Deferred tax liabilities:
Property and equipment
(896)
(1,747)
Operating leases
—
(11)
Total deferred tax liabilities
(896)
(1,758)
Net deferred tax assets
$
9,946
$
10,200
Deferred tax assets are regularly reviewed for recoverability and a valuation allowance is provided when it is more likely than not that some portion or
all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon future taxable income during the periods in
which those temporary differences become deductible. In assessing the need for a valuation allowance, management considers all available positive and
negative evidence, including the ability to carryback operating losses to prior periods and the expected future utilization of net operating loss carryforwards, the
reversal of deferred tax liabilities, projected taxable income, and tax-planning strategies. On the basis of these considerations, as of December 31, 2024,
management believes it is more likely than not that the Taxable Subsidiary will realize the benefit of the existing deferred tax assets.
102
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
Federal income taxes refundable related to the operation of the Taxable Subsidiary of $44 and $29 for the years ended December 31, 2024 and 2023,
respectively, are included in “Other current assets”. "Income taxes payable" includes a state income tax liability related to the operation of the Partnership of
$931 and $567 for the years ended December 31, 2024 and 2023, respectively. Also included in "Income taxes payable" are state income tax liabilities related
to the operation of the Taxable Subsidiary of $352 and $85 for the years ended December 31, 2024 and 2023, respectively.
At December 31, 2024, MTI had net operating loss carryforwards for income tax purposes of approximately $2,546 related to state taxes. Of these net
operating loss carryforwards, approximately $2,445 will expire between 2031 and 2041 and approximately $101 may be carried forward indefinitely. The
federal net operating loss carryforwards were fully utilized in 2024.
The operations of the Partnership are generally not subject to income taxes, except as discussed above, because its income is taxed directly to its partners.
The net tax basis in the Partnership's assets and liabilities is greater (less) than the reported amounts on the financial statements by approximately $69,103 and
$124,695 as of December 31, 2024 and 2023, respectively.
As of December 31, 2024, the tax years that remain open to assessment are 2021, 2022 and 2023.
NOTE 18. BUSINESS SEGMENTS
The Chief Operating Decision Maker ("CODM") is a group of executives, comprised of the Chief Executive Officer, Chief Financial Officer and
Chief Operating Officer of the Partnership's general partner. CODM may use different operating measures to assess operating results and allocate resources
among the Partnership's four segments (outlined below), however the measure that is most consistent with the amounts included in the consolidated financial
statements is operating income. The CODM utilizes this measure to evaluate the current financial performance and project the future financial performance of
each segment to determine the allocation of capital resources.
The Partnership's four reportable segments are comprised of (1) Terminalling and Storage, (2) Transportation, (3) Sulfur Services and (4) Specialty
Products. The operating segments within each of our reportable segments have been aggregated based on the similarity of their economic and other
characteristics, including different product type and services.
The Terminalling and Storage segment generates revenue by providing terminalling, processing, and storage services for petroleum products and by-
products. Storage revenue is earned through contracted monthly tank fixed fees, while throughput revenue is based on the volume moved through the
Partnership’s terminals at contracted rates. Tolling revenue is derived from contracted monthly reservation fees and throughput volumes processed at the
facility.
The Transportation segment earns revenue by offering land and marine transportation services for petroleum products, by-products, chemicals, and
specialty products. Land transportation revenue is based on mileage rates for line hauls or completion of contracted trips. Marine transportation revenue comes
from time charters, calculated on a per-day basis, or from the completion of contracted trips.
The Sulfur Services segment generates revenue by providing processing, manufacturing, marketing, and distribution services for sulfur and sulfur-
based products. Revenue from sulfur and fertilizer product sales is recognized when the customer takes title to the product. Revenue from sulfur services is
earned as services are performed during each monthly period.
The Specialty Products segment earns revenue by providing marketing, distribution, and transportation services for NGLs as well as blending and
packaging services for specialty lubricants and greases. NGL revenue is recognized upon the sale of products via truck, rail, or pipeline. For lubricants and
greases, revenue is recognized upon their sale by truck or rail.
103
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
The following tables present selected financial information with respect to the Partnership's operating segments for the years ended December 31,
2024, 2023 and 2022.
Terminalling and
Storage
Transportation
Sulfur Services
Specialty
Products
Indirect selling,
general and
administrative
Total
Year Ended December 31, 2024:
Operating revenues from external customers
$
89,067
$
223,934
$
129,771
$
264,850
$
—
$
707,622
Intersegment operating revenues
7,488
15,873
1
95
—
23,457
Total segment revenues
96,555
239,807
129,772
264,945
—
731,079
Reconciliation of revenues:
Elimination of intersegment revenues
(7,488)
(15,873)
(1)
(95)
—
(23,457)
Total consolidated revenues
89,067
223,934
129,771
264,850
—
707,622
Less: cost of products sold:
Direct product costs
—
—
58,102
217,866
—
275,968
Manufacturing costs (plant, labor, transportation,
and other)
72
—
21,882
19,536
—
41,490
Segment gross margin
96,483
239,807
49,788
27,543
—
413,621
Less:
Employment related expenses
25,714
60,882
9,148
5,941
12,267
113,952
Driver pay
—
50,573
—
—
—
50,573
Pass-through expenses
—
24,454
2,925
—
—
27,379
Utilities, materials, and supplies
13,591
2,254
794
137
—
16,776
Repairs and maintenance
5,776
18,219
706
15
—
24,716
Insurance related expenses
6,914
15,083
730
125
825
23,677
Lease expenses
4,268
16,548
414
121
—
21,351
Other segment expenses
7,470
9,296
4,473
996
6,464
28,699
Depreciation and amortization
22,757
13,027
11,769
3,234
—
50,787
(Gain) loss on sale or disposition of property,
plant and equipment
(1,105)
(713)
298
(64)
—
(1,584)
85,385
209,623
31,257
10,505
19,556
356,326
Operating income (loss)
$
11,098
$
30,184
$
18,531
$
17,038
$
(19,556)
$
57,295
Segment assets
$
180,769
$
165,093
$
126,074
$
66,573
$
—
$
538,509
Capital expenditures and plant turnaround costs
$
13,764
$
9,188
$
26,380
$
3,291
$
—
$
52,623
Other segment expenses include outside services, property taxes, terminalling fees, regulatory expenses, professional fees, communications expenses, and
many other less significant expense categories used in operations. The Unallocated SG&A amount includes $3,674 in transaction expenses associated with the
terminated Merger with Martin Resource Management Corporation. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Significant Recent Developments – Termination of Merger Agreement.”
These employment expenses include allocated overhead from Martin Resource Management Corporation and exclude those that are part of our manufacturing
operations. Payroll expenses in our manufacturing operations are included in cost of products sold.
2
1
1
2
104
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
Terminalling and
Storage
Transportation
Sulfur Services
Specialty
Products
Indirect selling,
general and
administrative
Total
Year Ended December 31, 2023:
Operating revenues from external customers
$
86,514
$
223,677
$
140,995
$
346,777
$
—
$
797,963
Intersegment operating revenues
8,945
17,249
—
86
—
26,280
Total segment revenues
95,459
240,926
140,995
346,863
—
824,243
Reconciliation of revenues:
Elimination of intersegment revenues
(8,945)
(17,249)
—
(86)
—
(26,280)
Total consolidated revenues
86,514
223,677
140,995
346,777
—
797,963
—
Less: cost of products sold:
Direct product costs
—
—
75,002
294,005
—
369,007
Manufacturing costs (plant, labor, transportation,
and other)
75
—
18,839
25,195
—
44,109
Segment gross margin
95,384
240,926
47,154
27,663
—
411,127
Less:
Employment related expenses
23,018
56,244
7,997
5,463
12,755
105,477
Driver pay
—
52,650
—
—
52,650
Pass-through expenses
—
27,196
3,657
—
30,853
Utilities, materials, and supplies
16,863
2,134
1,225
157
20,379
Repairs and maintenance
4,259
22,582
340
45
27,226
Insurance related expenses
4,525
14,056
759
122
19,462
Lease expenses
3,779
11,544
375
135
15,833
Other segment expenses
7,019
7,715
4,716
1,276
3,275
24,001
Depreciation and amortization
21,030
14,879
10,690
3,296
—
49,895
(Gain) loss on sale or disposition of property,
plant and equipment
359
(1,775)
(17)
60
—
(1,373)
80,852
207,225
29,742
10,554
16,030
344,403
Operating income (loss)
$
14,532
$
33,701
$
17,412
$
17,109
$
(16,030)
$
66,724
Segment assets
$
171,320
$
161,506
$
103,779
$
72,770
$
—
$
509,375
Capital expenditures and plant turnaround costs
$
13,168
$
7,598
$
16,851
$
2,519
$
—
$
40,136
Other segment expenses include outside services, property taxes, terminalling fees, regulatory expenses, professional fees, communications expenses, and
many other less significant expense categories used in operations.
These employment expenses include allocated overhead from Martin Resource Management Corporation and exclude those that are part of our manufacturing
operations. Payroll expenses in our manufacturing operations are included in cost of products sold.
2
1
1
2
105
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
Terminalling and
Storage
Transportation
Sulfur Services
Specialty
Products
Indirect selling,
general and
administrative
Total
Year Ended December 31, 2022:
Operating revenues from external customers
$
80,193
$
219,008
$
179,164
$
540,513
$
—
$
1,018,878
Intersegment operating revenues
12,419
20,267
—
123
—
32,809
Total segment revenue
92,612
239,275
179,164
540,636
—
1,051,687
Reconciliation of revenues:
Elimination of intersegment revenues
(12,419)
(20,267)
—
(123)
—
(32,809)
Total consolidated revenues
80,193
219,008
179,164
540,513
—
1,018,878
—
Less: cost of products sold:
Direct product costs
—
—
96,793
479,301
—
576,094
Manufacturing costs (plant, labor, transportation,
and other)
19
—
30,225
46,742
—
76,986
Segment gross margin
92,593
239,275
52,146
14,593
—
398,607
Less:
Employment related expenses
22,612
50,626
8,137
7,200
13,715
102,290
Driver pay
—
52,178
—
—
52,178
Pass-through expenses
13
33,998
4,332
—
38,343
Utilities, materials, and supplies
17,996
2,172
1,131
180
21,479
Repairs and maintenance
3,937
20,900
613
61
25,511
Insurance related expenses
4,964
10,499
1,115
194
2
16,774
Lease expenses
8,432
6,352
303
143
15,230
Other segment expenses
7,190
7,688
5,785
1,068
3,197
24,928
Depreciation and amortization
26,094
14,567
11,099
4,520
—
56,280
(Gain) loss on sale of property, plant and
equipment
166
(1,062)
(4,555)
(218)
—
(5,669)
91,404
197,918
27,960
13,148
16,914
347,344
Operating income (loss)
$
1,189
$
41,357
$
24,186
$
1,445
$
(16,914)
$
51,263
Segment assets
$
184,537
$
153,451
$
110,688
$
150,175
$
—
$
598,851
Capital expenditures and plant turnaround costs
$
15,308
$
7,619
$
6,857
$
1,349
$
—
$
31,133
Other segment expenses include outside services, property taxes, terminalling fees, regulatory expenses, professional fees, communications expenses, and
many other less significant expense categories used in operations.
These employment expenses include allocated overhead from Martin Resource Management Corporation and exclude those that are part of our manufacturing
operations. Payroll expenses in our manufacturing operations are included in cost of products sold.
Revenues from one customer in the specialty products segment was $122,105, $120,171 and $177,062 for the years ended December 31, 2024, 2023
and 2022, respectively.
2
1
1
2
106
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
NOTE 19. COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Partnership is subject to various claims and legal actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material adverse effect on the Partnership.
On December 31, 2015, the Partnership received a demand from a customer in its lubricants packaging business for defense and indemnity in
connection with various lawsuits filed against it, which generally alleged that the customer engaged in unlawful and deceptive business practices in connection
with its marketing and advertising of its private label motor oil (the “Marketing Lawsuits”). The Partnership disputed and continues to dispute that it has any
obligation to defend or indemnify the customer for the customer’s conduct. Accordingly, on January 7, 2016, the Partnership filed a Complaint for Declaratory
Judgment in the Chancery Court of Davidson County, Tennessee (the “Tennessee Court”), under Case No. 16-0018-BC, requesting a judicial determination that
the Partnership did not owe the customer the demanded defense and indemnity obligations (the “Litigation”). The Marketing Lawsuits pending in federal court
against the customer were transferred to the U.S. District Court for the Western District of Missouri under the consolidated case MDL No. 2709 for pretrial
proceedings (the “Consolidated Lawsuits”). On March 1, 2017, at the joint request of the customer and the Partnership, the Tennessee Court administratively
closed the Litigation. In 2021, the customer settled the Consolidated Lawsuits. On December 17, 2021, at the request of the customer, the Tennessee Court
reopened the Litigation and the customer asserted various counterclaims against the Partnership seeking, among other things, to recover its costs of defending
and settling the Consolidated Lawsuits. At this time, we are unable to determine what ultimate exposure we may have in this matter, if any. The Partnership
intends to vigorously defend the counterclaims asserted by the customer in the Litigation. The trial for the Litigation is expected to be held in the first half of
2026.
NOTE 20. INVESTMENT IN DSM SEMICHEM LLC
On October 19, 2022, Martin ELSA Investment LLC, the Partnership's affiliate, entered into definitive agreements with Samsung C&T America, Inc.
and Dongjin USA, Inc., an affiliate of Dongjin Semichem Co., Ltd., to form DSM Semichem LLC (“DSM”). DSM will produce and distribute electronic level
sulfuric acid (“ELSA”). By leveraging the Partnership's existing assets located in Plainview, Texas and installing additional facilities (the “ELSA Facility”) as
required, DSM will produce ELSA that meets the strict quality standards required by the recent advances in semiconductor manufacturing. In addition to
owning a 10% non-controlling interest in DSM, the Partnership will be the exclusive provider of feedstock to the ELSA Facility. The Partnership, through its
affiliate MTI, will also provide land transportation services for the ELSA produced by DSM. On April 1, 2024, the Partnership contributed $6,500 in cash to
DSM, which represents the cash contribution required pursuant to DSM's limited liability agreement for the Partnership's 10% non-controlling interest. Also, in
conjunction with the formation of DSM, we contributed approximately 22 acres of land. The Partnership recognizes its 10% interest in DSM as "Investment in
DSM Semichem LLC" on its Consolidated Balance Sheets. The Partnership accounts for its ownership interest in DSM under the equity method of accounting.
Selected financial information for DSM is as follows:
As of December 31,
Year ended December 31,
Total Assets
Long-Term Debt
Members'
Equity/Partners'
Capital
Revenues
Net Income (Loss)
2024
DSM Semichem LLC
$
105,773
$
31,700
$
68,513
$—
$(6,240)
NOTE 21. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The Partnership's operations are conducted by its operating subsidiaries as it has no independent assets or operations. The Operating Partnership, the
Partnership’s wholly owned subsidiary, and the Partnership's other operating subsidiaries have issued in the past, and may issue in the future, unconditional
guarantees of senior or subordinated debt securities of the Partnership. 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, if issued, will be fully, irrevocably and
107
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
unconditionally guaranteed by the Partnership. Substantially all of the Partnership's operating subsidiaries are subsidiary guarantors of its outstanding 2028
Notes and any subsidiaries other than the subsidiary guarantors are minor.
NOTE 22. SUBSEQUENT EVENTS
Quarterly Distribution. On January 21, 2025, the Partnership declared a quarterly cash distribution of $0.005 per common unit for the fourth quarter
of 2024, or $0.02 per common unit on an annualized basis, which was paid on February 14, 2025 to unitholders of record as of February 7, 2025.
Amendment to Credit Facility. On February 13, 2025, we amended the interest coverage ratio and first lien leverage ratios in the credit facility for the
fiscal quarters ending March 31, 2025, June 30, 2025 and September 30, 2025. See “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations — Liquidity and Capital Resources — Description of Our Indebtedness — Credit Facility.”
2025 Phantom Unit Plan. On February 11, 2025, the Board of Directors and the Compensation Committee approved the Martin Midstream Partners
L.P. 2025 Phantom Unit Plan (the “2025 Plan”), effective as of the same date. The 2025 Plan permits the awards of phantom units and phantom unit
appreciation rights to any employee or non-employee director of the Partnership, including its executive officers. The awards may be time-based or
performance-based and will be paid, if at all, in cash.
108
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. In accordance with Rules 13a-15 and 15d-15 of the Exchange Act, we, under the
supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of our general partner, 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 the Exchange Act) as of December 31, 2024. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer of our general partner concluded that our disclosure controls and procedures were
effective as of December 31, 2024 to provide reasonable assurance that information required to be disclosed by the Partnership in reports that it files or submits
under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated
and communicated to the Partnership’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
(b) Management’s Report on Internal Control Over Financial Reporting. Management is responsible for establishing and maintaining adequate
internal control over financial reporting. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely 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 of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of 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 the
effectiveness of our internal control over financial reporting based on criteria established in the Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under the framework in Internal Control — Integrated
Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2024. The effectiveness of
our internal control over financial reporting as of December 31, 2024 has been audited by KPMG LLP, our independent registered public accounting firm, as
stated in their report appearing in "Item 8 - Financial Statements and Supplementary Data."
(c) Changes in Internal Control Over Financial Reporting. There were no changes in our internal controls over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
109
Item 9B.
Other Information
Insider Trading Plans.
During the three months ended December 31, 2024, no director or officer of our general partner adopted or terminated a "Rule 10b5-1 trading
arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
110
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Management of Martin Midstream Partners L.P.
MMGP, as our general partner, manages our operations and activities on our behalf. Our general partner was not elected by our unitholders and will not be
subject to re-election in the future. Unitholders do not directly or indirectly participate in our management or operation. Our general 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 our assets), except for indebtedness or
other obligations that are made specifically non-recourse to it. However, whenever possible, our general partner seeks to provide that our indebtedness or other
obligations are non-recourse to our general partner.
Three directors of our general partner serve on the Conflicts Committee to review specific matters that the directors believe may involve conflicts of interest.
The Conflicts Committee determines if the resolution of the conflict 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 established by
NASDAQ to serve on an audit committee of a board of directors. 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. 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.
The Audit Committee reviews our external financial reporting, recommends engagement of our independent auditors and reviews procedures for internal
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 described
below. 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 Resource
Management Corporation. All of the officers of our general partner will spend a substantial amount of time managing the business and affairs of Martin
Resource Management Corporation and its other affiliates. These officers may face a conflict regarding the allocation of their time between our business and
the other business interests of Martin Resource Management Corporation. Our general partner intends to cause its officers to devote as much time to the
management of our business and affairs as is necessary for the proper conduct of our business and affairs.
111
Directors and Executive Officers of Martin Midstream
The following table shows information for the directors and executive officers of our general partner. Directors and executive officers are elected for
one-year terms.
Name
Age
Position with the General Partner
Ruben S. Martin
73
Chairman of the Board of Directors
Robert D. Bondurant
66
President and Chief Executive Officer and Director
Randall L. Tauscher
59
Executive Vice President and Chief Operating Officer
Sharon L. Taylor
60
Executive Vice President and Chief Financial Officer
Chris H. Booth
55
Executive Vice President, Chief Legal Officer, General Counsel and Secretary
Scot A. Shoup
64
Senior Vice President of Operations
C. Scott Massey
72
Director
James M. Collingsworth
70
Director
Byron R. Kelley
77
Director
Ruben S. Martin was appointed to Chairman of the Board of Directors effective January 1, 2021. From 2002 to 2020, Mr. Martin served as President and
Chief Executive Officer and a member of the Board of Directors. Mr. Martin has served as President of Martin Resource Management Corporation since 1981
and has served in various capacities within the company since 1974. Mr. Martin holds a Bachelor of Science degree in industrial management from the
University of Arkansas. Mr. Martin was selected to serve as a director on the Board of Directors due to his depth of knowledge of the Partnership, including its
strategies and operations and his business judgment and his previous experience as Chief Executive Officer of the Partnership.
Robert D. Bondurant serves as President and Chief Executive Officer of our general partner. Prior to being appointed to this position effective January
1, 2021, Mr. Bondurant served as Executive Vice President and Chief Financial Officer and has served on the Board of Directors since 2014. Mr. Bondurant
joined Martin Resource Management Corporation in 1983 as Controller and subsequently was 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 a Certified Public Accountant, licensed in the state of Texas. Mr. Bondurant
was selected to serve as a director on the Board of Directors due to his depth of knowledge of the Partnership, including its strategies and operations and his
business judgment, as well as his extensive financial and accounting background.
Randall L. Tauscher serves as Executive Vice President and Chief Operating Officer of our general partner. Mr. Tauscher has served as an officer of our
general partner since September 2007. Prior to joining Martin Resource Management Corporation, Mr. Tauscher was employed by Koch Industries for over 18
years, most recently as Senior Vice President of the Koch Carbon Division. Mr. Tauscher earned a Bachelor of Business 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 served as an
officer of our general partner since February 2006. Mr. Booth joined Martin Resource Management Corporation in October 2005. Prior to joining Martin
Resource Management Corporation, Mr. Booth was an attorney with the law firm of Mehaffy Weber located in Beaumont, Texas. Mr. Booth holds a Doctor of
Jurisprudence degree and a Masters of Business Administration degree from the University of Houston. Additionally, Mr. Booth holds a Bachelor of Science
degree in business management from LeTourneau University. Mr. Booth is an attorney licensed to practice in the State of Texas.
Sharon L. Taylor serves as Executive Vice President and Chief Financial Officer of our general partner. Prior to being appointed to this position on
January 1, 2021, Ms. Taylor served as Director of Finance and Head of Investor Relations since March 2018. Ms. Taylor was a member of the management
group of Prism Gas Systems, Inc. serving as Vice President and Chief Financial Officer, where she continued as Controller after Martin's acquisition of Prism
in November 2005. Prior to Prism, Ms. Taylor served as Director of Finance and Investor Relations for Dynamex Inc., a North American logistics company.
She has held finance and accounting positions with Union Pacific Resources and UP Fuels. Ms. Taylor holds a Bachelor of Business Administration in
accounting from Harding University.
Scot A. Shoup serves as Senior Vice President of Operations for our general partner. Mr. Shoup joined Martin Resource Management Corporation in May
2011. Prior to joining Martin, Mr. Shoup was employed by Exline, Inc. as
112
Executive Vice President from 2005 to 2011 and was employed by Koch Industries in various capacities for 18 years. 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. Mr. Massey has served as a Director since June 2002. Mr. Massey has been self employed as
a Certified Public Accountant since 1998. From 1977 to 1998, Mr. Massey worked for KPMG Peat Marwick, LLP in various positions, 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 of Business Administration
degree from the University of Texas at Austin and a Doctor of Jurisprudence degree from the University of Houston. Mr. Massey is a Certified Public
Accountant, licensed in the States of Louisiana and Texas. Mr. Massey was selected to serve as a director on the Board of Directors due to his extensive
background in public accounting and taxation. Mr. Massey qualifies as an "audit committee financial expert" under the SEC guidelines.
James M. Collingsworth serves as a member of the Board of Directors. Mr. Collingsworth has spent 45 years in all facets of the midstream and
petrochemical industry. In 2013, Mr. Collingsworth retired from Enterprise Products Company as a Sr. Vice President of Regulated NGL Pipelines & Natural
Gas Storage. Mr. Collingsworth currently serves on the board of directors of NGL Energy Partners LP and has served on the board of directors 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 State University. Mr. Collingsworth
was selected to serve as a director on the Board of Directors due to his extensive corporate business experience.
Byron R. Kelley serves as a member of the Board of Directors and also served as an Advisory Director from April 2011 to August 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 company engaged in the production of
nitrogen based fertilizers and served in this position from June 2011 through December 2013. Prior to joining CVR Partners 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 Paso Energy International. Mr. Kelley is a past
member and Chairman of the board of directors of the Interstate National Gas Association and previously served as one of the association's representatives on
the U.S. Natural Gas Council of America. Mr. Kelley received a Bachelor of Science degree in civil engineering from Auburn University. Mr. Kelley was
selected to serve as a director on the Board of Directors due to his extensive corporate business experience.
Independence of Directors
Messrs. Massey, Collingsworth, and Kelley qualify as "independent" in accordance with the published listing requirements of NASDAQ and applicable
securities laws. The NASDAQ independence definition includes a series of objective tests, such as that the director is not an employee of us and has 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 a subjective
determination as to each independent director that no relationships exist which, in the opinion of the Board of Directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. In making these determinations, the directors reviewed and discussed information
provided 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, 2024 to December 31, 2024, the Board of Directors held 5 meetings. All directors then in office attended each of these meetings,
either in person or by teleconference, with the exception of: Ruben S. Martin, III, who was not in attendance at the meeting of the Board of Directors on the
date of April 16, 2024. We have standing conflicts, audit, compensation and nominating committees of the Board of Directors. The Board of Directors appoints
the members of the Audit, Compensation, Nominating and Conflicts Committees. Each member of the Audit Committee is an independent director in
accordance with NASDAQ and applicable securities laws. Each of the Board of Directors committees has a written charter approved by the Board of Directors.
Copies of each charter are posted on our website at www.MMLP.com under the "Corporate Governance" section. The current members of the committees, the
number of meetings held by each committee from January 1, 2024 to December 31, 2024, and a brief description of the functions performed by each committee
are set forth below:
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Conflicts Committee (30 meetings). The members of the Conflicts Committee are: Messrs. Kelley (chairman), Massey and Collingsworth. All of the
members of the Conflicts Committee attended all meetings of the committee for the period noted above. The primary responsibility of the Conflicts Committee
is to review matters that the directors believe may involve conflicts of interest. The Conflicts Committee determines if the resolution of the conflict 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 by NASDAQ. 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 members
attended all meetings of the Audit Committee for the period noted. The primary responsibilities of the Audit Committee are to assist the Board of Directors in
its 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 each qualify as "independent" under
standards established by the SEC for members of audit committees, and the Audit Committee includes at least one member 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 to be an audit committee financial expert.
Unitholders should understand that this designation is a disclosure requirement of the SEC related to Mr. Massey's experience 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 as an audit committee financial expert pursuant to
this SEC requirement does not affect the duties, obligations or liability of any other member of the Audit Committee or Board of Directors.
Compensation Committee (1 meeting). 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 Committee is 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 be paid by
our general partner) as well as our long-term incentive plans.
Nominating Committee (1 meeting). The members of the Nominating Committee are Messrs. Collingsworth (chairman), Massey, and Kelley. All of
the members attended the meeting of the Nominating Committee for the period noted above. The primary responsibility of the nominating committee is to
select and recommend nominees for election to the Board of Directors.
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 any employees of
Martin Resource Management Corporation who undertake actions with respect to us or on our behalf), including all officers, and including our general partner's
independent directors, who are not employees of our general partner, with regard to their activities relating to us. The Code of Ethics and Business Conduct
incorporate guidelines designed to deter wrongdoing and to promote honest and ethical conduct and compliance with applicable laws and regulations. They
also incorporate our expectations of our general partner's employees (including any employees of Martin Resource Management Corporation who undertake
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 Exchange Commission
and other public communications. The Code of Ethics and Business Conduct is publicly available on our website under the "Corporate Governance" section (at
www.MMLP.com). This website address is intended to be an inactive, textual reference only, and none of the material on this 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 grant any 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 the nature of such amendment or waiver
on that website or in a report on Form 8-K.
Insider Trading Policy
We have adopted an insider trading policy and procedures governing the purchase, sale and other disposition of our securities by directors, officers and
employees that is reasonably designed to promote compliance with insider trading laws, rules and regulations and applicable NASDAQ listing standards. A
copy of our insider trading policy is filed as an exhibit to this Annual Report on Form 10-K.
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Item 11.
Executive Compensation
Compensation Discussion and Analysis
Background
We are required to provide information regarding the compensation program in place as of December 31, 2024, for the CEO, CFO and the three other
most highly-compensated executive officers of our general partner as reflected in the summary compensation table set forth below (the "Named Executive
Officers"). 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 executive officers
are employed by Martin Resource Management Corporation, a private corporation that has significant operations that are separate from ours. With the
exception of our President and Chief Executive Officer, the executive officers of our general partner are also the executive officers of Martin Resource
Management Corporation and devote significant time to the management of Martin Resource Management Corporation’s operations. We reimburse Martin
Resource Management Corporation for a portion of the indirect general and administrative expenses, including compensation expense relating to the service of
these individuals that are allocated to us pursuant to the Omnibus Agreement. Under the Omnibus Agreement, we are required to reimburse Martin Resource
Management Corporation for indirect general and administrative and corporate overhead expenses. For the years ended December 31, 2024, 2023 and 2022 the
Board of Directors approved reimbursement amounts of $13.5 million, $14.0 million and $13.5 million, respectively, reflecting our allocable 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 Objectives
As we do not directly compensate the executive officers of our general partner, we do not have any set compensation programs. The elements of
Martin Resource Management Corporation’s compensation program discussed below, along with Martin Resource Management Corporation’s other rewards,
are intended to provide a total rewards package designed to yield competitive total cash compensation, drive performance and reward contributions in support
of the businesses of Martin Resource Management Corporation and other Martin Resource Management Corporation affiliates, including us, for which the
Named Executive Officers perform services. Although we bear an allocated portion of Martin Resource Management Corporation’s costs of providing
compensation and benefits to the Named Executive Officers, we do not have control over such costs and do not establish or direct the compensation policies or
practices of Martin Resource Management Corporation. During 2024, Martin Resource Management Corporation paid compensation based on the performance
of Martin Resource Management Corporation but did not set any specific performance-based criteria and did not have any other specific performance-based
objectives.
Elements of Compensation
Martin Resource Management Corporation’s executive officer compensation package includes a combination of annual cash, long-term incentive
compensation and other compensation. Elements of compensation which the Named Executive Officers may be eligible to receive from Martin Resource
Management Corporation consist of the following: (1) annual base salary; (2) discretionary annual cash awards; (3) awards pursuant to the 2021 and 2025
Phantom Unit Plans, the 2017 LTIP and Martin Resource Management Corporation 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 duties with
respect to Martin Resource Management Corporation and its affiliates, including us, and to compensate for experience levels, scope of responsibility and future
potential. Base salaries are not intended to compensate individuals for extraordinary performance or for above average company performance. The base salaries
of the Named Executive Officers are generally reviewed on an annual basis, as well as at the time of promotion and other changes in responsibilities or market
conditions.
Discretionary Annual Cash Awards. In addition to the annual base salary, the Named Executive Officers may be eligible to receive discretionary
annual 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 the
Named Executive Officers with competitive incentives to help
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drive performance and promote achievement of Martin Resource Management Corporation’s business objectives. 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 Named Executive Officer has devoted a significant amount
of their time to working for us. Any such award is determined in accordance with the same methodologies as the discretionary annual cash awards for Martin
Resource Management Corporation, 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.
2021 Phantom Unit Plan (the "2021 Plan"), the 2017 LTIP and Martin Resource Management Corporation employee benefit plans. These employee benefit
plan awards are designed to reward the performance of the Named Executive Officers by providing annual incentive opportunities tied to the annual
performance of Martin Resource Management Corporation. In particular, these awards are provided to the Named Executive Officers in order to provide
competitive incentives to these executives who can significantly impact performance and promote achievement of the business objectives of Martin Resource
Management Corporation.
Other Compensation. Martin Resource Management Corporation generally does not pay for perquisites for any of the Named Executive Officers,
other than general recreational activities at certain Martin Resource Management Corporation’s properties and use of Martin Resource Management
Corporation vehicles. No perquisites are paid for services rendered to us. Martin Resource Management Corporation provides an executive life insurance
policy and long-term disability policy for the Named Executive Officers with the annual premiums being paid by Martin Resource Management
Corporation. Martin Resource Management Corporation does not provide any greater allocation toward employee health insurance premiums than is provided
for all other employees covered on the health benefits plan.
Compensation Methodology
The compensation policies and philosophy of Martin Resource Management Corporation govern the types and amount of compensation granted to
each of the Named Executive Officers. The Board of Directors has responsibility for evaluating and determining the reasonableness of the total amount we are
charged under the Omnibus Agreement for managerial, administrative and operational support, including compensation of the Named Executive Officers,
provided by Martin Resource Management Corporation.
Our allocation for the costs incurred by Martin Resource Management Corporation in providing compensation and benefits to its employees who serve
as the Named Executive Officers is governed by the Omnibus Agreement. In general, this allocation is based upon estimates of the relative amounts of time that
these employees devote to the business and affairs of our general partner and to the business and affairs of Martin Resource Management Corporation.
When setting compensation for the Named Executive Officers, the elements of compensation above are considered holistically to provide an
appropriate combination of compensation. Annual base salaries for the Named Executive Officers, other than our President and Chief Executive Officer, are
determined by the Management Compensation Committee of Martin Resource Management Corporation comprised of its Chief Executive Officer, Mr. Ruben
Martin, Chief Operating Officer, Mr. Randall Tauscher, and Vice President-Human Resources, Mrs. Melanie Mathews (collectively, the "Management
Compensation Committee of Martin Resource Management Corporation") based on a periodic performance review of each Named Executive Officer.
The Compensation Committee of the Board of Directors is responsible for setting the compensation of our President and Chief Executive Officer. This
includes determining the base salary, bonus compensation, long-term incentive compensation and other compensation of our President and Chief Executive
Officer. The Compensation Committee's responsibility for the development of the compensation objectives and methodology applicable to the President and
Chief Executive Officer are based on objectives, elements and methodologies discussed herein.
Except in the case of an exceptional amount of time devoted to us, discretionary annual cash awards are based on the performance of Martin Resource
Management Corporation. Annual discretionary cash awards, if any, are calculated first by allocating a portion of Martin Resource Management Corporation’s
earnings as determined by the Management Compensation Committee of Martin Resource Management Corporation for distribution to key employees of
Martin Resource Management Corporation. Upon such allocation, the Management Compensation Committee of Martin Resource Management Corporation,
with input from appropriate business leaders determines the allocation and distribution of the bonus pool among such employees, including the Named
Executive Officers. All decisions of the Management Compensation Committee of Martin Resource Management Corporation concerning the compensation of
the Named Executive Officers are reviewed and approved by the Compensation Committee of the Board of Directors of Martin Resource Management
Corporation. With respect to employee benefit plan awards pursuant to plans maintained by the Partnership, the Management Compensation Committee of
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Martin Resource Management Corporation makes a recommendation as to whether such awards should be awarded to any employees. Any such employee plan
awards are then considered and must be approved by the Compensation Committee and then are distributed to the employees, including Named Executive
Officers, accordingly. Further, Martin Resource Management Corporation, with the approval of the Compensation Committee of the Board of Directors of
Martin Resource Management Corporation or the Compensation Committee regularly reviews market data and relevant compensation surveys when setting
base compensation and, when appropriate, engages compensation consultants. Because he serves on both the Management Compensation Committee of Martin
Resource Management Corporation and on the Compensation Committee of the Board of Directors of Martin Resource Management Corporation, Mr. Martin,
as Chief Executive Officer of Martin Resource Management Corporation, has significant authority in setting base salaries, discretionary annual cash award
allocations and amounts and employee benefit award distributions.
Any awards granted to the independent directors and employees of our general partner under our long-term incentive plans are described in Item 8,
Note 16, "Unit Based Awards - Long-Term Incentive Plans," and are approved by the Compensation Committee.
Determination of 2024 Compensation Amounts
During 2024, elements of all compensation paid to the Named Executive Officers by Martin Resource Management Corporation consisted of the
following: (1) annual base salary; (2) discretionary annual cash awards; (3) awards pursuant to the 2021 Plan or the 2017 LTIP; (4) other Martin Resource
Management Corporation employee benefit plans; and (5) 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 Corporation to the Named Executive Officers,
which are allocable to us under our Omnibus Agreement with Martin Resource Management Corporation, are reflected in the summary compensation table
below. Based upon the agreement of our general partner with Martin Resource Management Corporation, we have reimbursed Martin Resource Management
Corporation for approximately 67.9% of the aggregate annual base salaries paid to the Named Executive Officers by Martin Resource Management
Corporation during 2024. The foregoing agreement has been developed based on an assessment of the estimated percentage of the time spent by the Named
Executive Officers managing our affairs, relative to the affairs of Martin Resource Management Corporation ranging from approximately 50% to 100%. During
2024, our Named Executive Officers were Mr. Robert D. Bondurant, the President and Chief Executive Officer of our general partner, Ms. Sharon L. Taylor, an
Executive Vice President and Chief Financial Officer of our general partner, Mr. Randall Tauscher, an Executive Vice President and Chief Operating Officer of
our general partner, Mr. Chris Booth, the Executive Vice President, General Counsel and Secretary of our general partner, and Mr. Scot A. Shoup, Senior Vice
President of Operations.
Discretionary Annual Cash Awards. Discretionary annual cash awards paid to the Named Executive Officers which are allocable to us are reflected in
the summary compensation table below.
Martin Midstream Partners L.P. Long-Term Incentive Plans
Phantom Unit Plan
On July 21, 2021, the Board of Directors of the Partnership and the Compensation Committee approved the 2021 Plan, effective as of the same date.
The 2021 Plan permits the awards of phantom units and phantom unit appreciation rights to any employee or non-employee director of the Partnership,
including its executive officers. The awards may be time-based or performance-based and will be paid, if at all, in cash.
The award of a phantom unit under the 2021 Plan entitles the participant to a cash payment equal to the value of the phantom unit on the vesting date
or dates, which value is the fair market value of a common unit of the Partnership on such vesting date or dates. The award of a phantom unit appreciation right
entitles the recipient to a cash payment equal to the difference between the value of a phantom unit on the vesting date or dates in excess of the value assigned
by the Compensation Committee to the phantom unit as of the grant date. Phantom units and phantom unit appreciation rights granted to participants do not
confer upon participants any right to a common unit.
On July 21, 2021, the Compensation Committee approved forms of time-based award agreements for phantom units and phantom unit appreciation
rights, both of which awards vest in full on the third anniversary of the grant date. The grant date value of a phantom unit under a phantom unit appreciation
right award is equal to the average of the closing price for a common unit during the 20 trading days immediately preceding the grant date of the award.
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Generally, vesting of an award is subject to a participant remaining continuously employed with the Partnership through the vesting date. However, if
prior to the vesting date: (i) a participant is terminated without cause (as defined in the award agreement) or terminates employment after the participant has
attained both the age of 65 and ten years of employment (“retirement-eligible”), a prorated portion of the award will vest and be paid in cash no later than the
30 day following such termination date (subject to a six-month delay in payment for certain retirement-eligible participants); or (ii) there is a change in control
of the Partnership (as defined in the 2021 Plan), the award will vest in full and be paid in cash no later than the 30 day following the date of the change of
control; provided, that the participant has been in continuous employment through the termination or change in control date, as applicable.
On February 11, 2025, the Board of Directors and the Compensation Committee approved the Martin Midstream Partners L.P. 2025 Phantom Unit
Plan (the “2025 Plan”), effective as of the same date. The 2025 Plan permits the awards of phantom units and phantom unit appreciation rights to any employee
or non-employee director of the Partnership, including its executive officers. The awards may be time-based or performance-based and will be paid, if at all, in
cash.
The award of a phantom unit under the 2025 Plan entitles the participant to a cash payment equal to the value of the phantom unit on the vesting date
or dates, which value is the fair market value of a common unit of the Partnership on such vesting date or dates. The award of a phantom unit appreciation right
entitles the recipient to a cash payment equal to the difference between the value of a phantom unit on the vesting date or dates in excess of the value assigned
by the Compensation Committee to the phantom unit as of the grant date. Phantom units and phantom unit appreciation rights granted to participants do not
confer upon participants any right to a common unit.
On February 11, 2025, the Compensation Committee approved forms of time-based award agreements for phantom units and phantom unit
appreciation rights, both of which awards vest in full on the third anniversary of the grant date. The grant date value of a phantom unit under a phantom unit
appreciation right award is equal to the average of the closing price for a common unit during the 20 trading days immediately preceding the grant date of the
award.
Generally, vesting of an award is subject to a participant remaining continuously employed with the Partnership through the vesting date. However, if
prior to the vesting date: (i) a participant is terminated without cause (as defined in the award agreement) or terminates employment after the participant has
attained both the age of 65 and ten years of employment (“retirement-eligible”), a prorated portion of the award will vest and be paid in cash no later than the
30 day following such termination date (subject to a six-month delay in payment for certain retirement-eligible participants); or (ii) there is a change in control
of the Partnership (as defined in the 2025 Plan), the award will vest in full and be paid in cash no later than the 30th day following the date of the change of
control; provided, that the participant has been in continuous employment through the termination or change in control date, as applicable.
Restricted Unit Plan
On May 26, 2017, the unitholders of the Partnership approved the Martin Midstream Partners L.P. 2017 Restricted Unit Plan (the "2017 LTIP"). The
plan 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. The
plan is administered by the Compensation Committee of the Board of Directors. The purpose of the 2017 LTIP is designed to enhance our ability to attract,
retain, reward and motivate the services of certain key employees, officers, and directors of the general partner and Martin Resource Management Corporation.
The Board of Directors or the Compensation Committee, in their discretion, may terminate or amend the 2017 LTIP at any time with respect to any
units for which a grant has not yet been made. The Board of Directors or the Compensation Committee also have the right to alter 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 the plan subject to any applicable
unitholder approval. However, no change in any outstanding grant may be made that would materially impair the rights of the participant without the consent
of the participant. In addition, the restricted units will vest upon a change of control of us, our general partner or Martin Resource Management Corporation or
if our general partner ceases to be an affiliate of Martin Resource Management Corporation.
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 to
make grants under the plan containing such terms as the Compensation Committee shall determine under the plan. With respect to time-based restricted units
("TBRUs"), the Compensation Committee will determine the time period over which restricted units granted to employees and directors will vest. The
Compensation Committee may also award a percentage of restricted units with vesting requirements based upon the achievement of specified pre-established
performance targets ("PBRUs"). The performance targets may include, but are not
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limited to, the following: revenue and income measures, cash flow measures, EBIT, EBITDA, distribution coverage metrics, expense measures, liquidity
measures, market measures, corporate sustainability metrics, and other measures related to acquisitions, dispositions, operational objectives and succession
planning objectives. PBRUs are earned only upon our achievement of an objective performance measure for the performance period. PBRUs which vest are
payable in common units. The Compensation Committee believes this type of incentive award strengthens the tie between each grantee's pay and our financial
performance. We intend the issuance of the common units upon vesting of the restricted units under the plan to serve as a means of incentive compensation for
performance and not primarily as an opportunity to participate 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 on the 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 the extent,
the Compensation Committee provides otherwise. Common units to be delivered upon the vesting of restricted units may be common units acquired by our
general partner in the open market, common units already owned by our general partner, common units acquired by our general partner directly from us or any
affiliate of our general partner, newly issued common units under the 2017 LTIP, or any combination of the foregoing. Our general partner will be entitled to
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 number of
common units outstanding will increase.
Clawback Policy
We previously adopted a compensation recovery or “clawback” policy in accordance with applicable Nasdaq listing rules, a copy of which is filed as
an exhibit to this Annual Report on Form 10-K. It is generally our policy that our general partner will recoup any incentive compensation erroneously awarded
to any current or former executive officers due to material noncompliance with any financial reporting requirement under applicable securities laws during the
three completed fiscal years immediately preceding the date our general partner determines that an accounting restatement is required. Such recoupment would
be undertaken by our general partner whether or not the executive’s actions contributed to the accounting restatement.
Martin Resource Management Corporation Employee Benefit Plans
Martin Resource Management Corporation has employee benefit plans for its employees who perform services for us. The following summary of
these plans is not complete but outlines the material provisions of these plans.
Martin Resource Management Corporation Purchase Plan for Units of Martin Midstream Partners L.P. Martin Resource Management Corporation
maintains a purchase plan for our units to provide employees of Martin Resource Management Corporation and its affiliates who perform services for us the
opportunity to acquire an equity interest in us through the purchase of our common units. Each individual employed by Martin Resource Management
Corporation or an affiliate of Martin Resource Management Corporation that 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 by Martin Resource Management Corporation to the employee of the right to purchase
common units under the purchase plan. The right to purchase common units granted by the Partnership 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 an amount
not less than one percent of his compensation and not more than fifteen percent of his compensation. The rate of contribution shall be designated by the
employee at the time of enrollment. On each purchase date (the last day of such purchase period), units will be purchased for each participating employee at the
fair market value of such units. The fair market value of the common units to be purchased during such purchase period shall mean the closing sales price of a
unit on the purchase date.
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MRMC ESOP Trust ("ESOP"). Martin Resource Management Corporation maintains an employee stock ownership plan that covers employees who
satisfy certain minimum age and service requirements. Under the terms of the ESOP, Martin Resource Management Corporation has the discretion to make
contributions in an amount determined by its Board of Directors. Those contributions are allocated under the terms of the ESOP and invested primarily in the
common stock of Martin Resource Management Corporation. Participants in the ESOP become 100% vested upon completing six years of vesting service or
upon their attainment of Normal Retirement Age (as defined in the plan document), permanent disability or death during employment. Any forfeitures of non-
vested accounts 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 including
rollover contributions to the ESOP.
Martin Employee's Stock Profit Sharing Trust (the "SPS Plan"). Martin Resource Management Corporation maintains an employee stock ownership
plan that covers employees who satisfied certain minimum age and service requirements but no employee shall become eligible to participate in the SPS Plan
on or after January 1, 2013. This SPS Plan is referred to as the "Martin Employee Stock Ownership Plan". Under the terms of the SPS Plan, Martin Resource
Management Corporation has the discretion to make contributions in an amount determined by its Board of Directors. Those contributions are allocated under
the terms of the SPS Plan and invested primarily in the common stock of Martin Resource Management Corporation. No contributions will be made to the SPS
Plan for any plan year commencing on or after January 1, 2013. The account balances of any participant who was employed by Martin Resource Management
Corporation on December 31, 2012 are fully vested and non-forfeitable. The SPS Plan converted to an employee stock ownership plan on January 1, 2013.
Martin Resource Management Corporation 401(k) Profit Sharing Plan. Martin Resource Management Corporation maintains a profit sharing plan
that covers employees who satisfy certain minimum age and service requirements. This profit sharing plan is referred to as the "401(k) Plan." Eligible
employees may elect to participate in the 401(k) Plan by electing pre-tax contributions up to 30% of their regular compensation. Martin Resource Management
Corporation may make annual discretionary profit sharing contributions in an amount at the plan year end as determined by the Board of Directors of Martin
Resource Management Corporation. Participants in the 401(k) Plan prior to January 1, 2017 are 100% vested in matching contributions, while those employed
after January 1, 2017 become vested upon completion of the five years of vesting service schedule or upon their attainment of age 65, permanent disability or
death during employment. The five-year vesting service schedule is also applicable to discretionary contributions made to the plan.
Other Compensation
Martin Resource Management Corporation generally does not pay for perquisites for any of our Named Executive Officers other than general recreational
activities at certain Martin Resource Management Corporation’s properties located in Texas and use of Martin Resource Management Corporation vehicles,
including aircraft.
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SUMMARY COMPENSATION TABLE
The following table sets forth the compensation expense that was allocated to us for the services of the Named Executive Officers for the years ended
December 31, 2024, 2023 and 2022.
Name and Principal Position
Year
Salary
Discretionary
Annual Awards
Phantom Unit
Awards (Grant
Date Value) (a)
Total
Compensation
Robert D. Bondurant, President and Chief Executive Officer
2024
$
612,950
$
775,000
$
—
$
1,387,950
2023
$
598,000
$
775,000
$
267,925
$
1,640,925
2022
$
575,000
$
775,000
$
243,250
$
1,593,250
Randall L. Tauscher, Executive Vice President and Chief
Operating Officer
2024
$
280,000
$
—
$
—
$
280,000
2023
$
354,250
$
—
$
229,650
$
583,900
2022
$
367,500
$
—
$
217,000
$
584,500
Sharon L. Taylor, Executive Vice President and Chief
Financial Officer
2024
$
219,000
$
—
$
—
$
219,000
2023
$
224,250
$
—
$
199,030
$
423,280
2022
$
189,000
$
—
$
185,500
$
374,500
Chris H. Booth, Executive Vice President, General Counsel
and Secretary
2024
$
268,500
$
—
$
—
$
268,500
2023
$
261,000
$
—
$
199,030
$
460,030
2022
$
231,000
$
—
$
185,500
$
416,500
Scot A. Shoup, Senior Vice President of Operations
2024
$
242,400
$
—
$
—
$
242,400
2023
$
317,600
$
—
$
76,550
$
394,150
2022
$
365,750
$
—
$
92,750
$
458,500
(a) On each of July 19, 2023 and April 20, 2022, the Compensation Committee approved forms of time-based award agreements for phantom units and
phantom unit appreciation rights, both of which awards vest in full on the third anniversary of the grant date, or July 19, 2026 and July 21, 2025, respectively.
The grant date value of a phantom unit under a phantom unit appreciation right award is equal to the average of the closing price for a common unit during the
20 trading days immediately preceding the grant date of the award.
GRANTS OF PLAN-BASED AWARDS
No plan-based awards were granted to any of our Named Executive Officers during the fiscal year ended December 31, 2024.
121
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2024
Option Awards
Unit Awards
Name and Award Type
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
Unexercisable (a)
Option
Exercise
Price ($)
Option
Expiration
Date
Number of Shares
or Units of Stock
That Have Not
Vested (#)(a)
Market Value of
Shares or Units of
Stock That Have
Not Vested ($)(b)
Robert D. Bondurant
Phantom Units - 2022 Award
—
—
—
—
20,000 $
71,800
Phantom Units - 2023 Award
—
—
—
—
122,500 $
439,775
Phantom Unit Appreciation Rights - 2022
Award
—
125,000
$
4.55
N/A
— $
—
Phantom Unit Appreciation Rights - 2023
Award
—
52,500
$
2.13
N/A
— $
76,650
Randall L. Tauscher
Phantom Units - 2022 Award
—
—
—
—
20,000 $
71,800
Phantom Units - 2023 Award
—
—
—
—
105,000 $
376,950
Phantom Unit Appreciation Rights - 2022
Award
—
100,000
$
4.55
N/A
— $
—
Phantom Unit Appreciation Rights - 2023
Award
—
45,000
$
2.13
N/A
— $
65,700
Sharon L. Taylor
Phantom Units - 2022 Award
—
—
—
—
20,000 $
71,800
Phantom Units - 2023 Award
—
—
—
—
91,000 $
326,690
Phantom Unit Appreciation Rights - 2022
Award
—
70,000
$
4.55
N/A
— $
—
Phantom Unit Appreciation Rights - 2023
Award
—
39,000
$
2.13
N/A
— $
56,940
Chris H. Booth
Phantom Units - 2022 Award
—
—
—
—
20,000 $
71,800
Phantom Units - 2023 Award
—
—
—
—
91,000 $
326,690
Phantom Unit Appreciation Rights - 2022
Award
—
70,000
$
4.55
N/A
— $
—
Phantom Unit Appreciation Rights - 2023
Award
—
39,000
$
2.13
N/A
— $
56,940
Scot A. Shoup
Phantom Units - 2022 Award
—
—
—
—
10,000 $
35,900
Phantom Units - 2023 Award
—
—
—
—
35,000 $
125,650
Phantom Unit Appreciation Rights - 2022
Award
—
35,000
$
4.55
N/A
— $
—
Phantom Unit Appreciation Rights - 2023
Award
—
15,000
$
2.13
N/A
— $
21,900
(a) The 2022 Award vests in full on July 21, 2025, and the 2023 Award vests in full on July 19, 2026.
(b) The market value of unvested phantom units is calculated by multiplying the number of unvested phantom units held by the NEOs by the closing price of our common stock
on December 31, 2024. Because our closing stock price on December 31, 2024 was less than the strike price of the phantom unit appreciation rights 2022 awards, a $0 market
value was included for the unvested phantom unit appreciation rights.
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EQUITY VESTED TABLE FOR THE YEAR ENDED DECEMBER 31, 2024
Restricted Unit Plan
Unit Awards (a)
Name
Number of Common
Units Acquired on
Vesting
Value Realized on
Vesting
Robert D. Bondurant
—
$
—
Randall L. Tauscher
—
$
—
Sharon L. Taylor
—
$
—
Chris H. Booth
—
$
—
Scot A. Shoup
—
$
—
(a) As of December 31, 2024, there were no outstanding awards under the 2017 LTIP for the Named Executive Officers.
Director Compensation
As a partnership, we are managed by our general partner. The Board of Directors performs for us the functions of a board of directors of a business
corporation. Directors of our general partner who are not employees of Martin Resource Management Corporation are entitled to receive total quarterly retainer
fees of $27,500 each. In 2024, each non-employee director received $65,000 in additional fees related to efforts with respect to the terminated Merger with
Martin Resource Management Corporation. Martin Resource Management Corporation employees who are a member of the Board of Directors do not receive
any additional compensation for serving in such capacity. Officers of our general partner who also serve as directors will not receive additional compensation.
All directors of 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 the extent permitted under Delaware law.
The following table sets forth the compensation of the Board of Directors for the period from January 1, 2024 through December 31, 2024.
Name
Fees Earned
Paid in
Cash
Stock
Awards (a)
Total
Ruben S. Martin
$
—
$
—
$
—
Robert D. Bondurant
$
—
$
—
$
—
C. Scott Massey (b)
$
175,000
$
64,998
$
239,998
Byron R. Kelley (b)
$
175,000
$
64,998
$
239,998
James M. Collingsworth (b)
$
175,000
$
64,998
$
239,998
(a) 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 for TBRUs and PBRUs which have not been met as it relates to the 2018 stock award. See Note 16 included in Item 8 herein for the assumptions
made in our valuation of such awards.
(b) In February 2024, the Partnership issued 28,760 TBRUs to each of the Partnership's three independent directors, C. Scott Massey, Byron R. Kelley, and
James M. Collingsworth under the 2017 LTIP. These restricted common units vest in equal installments of 7,190 units on January 24, 2025, 2026, 2027 and
2028. In calculating the fair value of the award, we multiplied the closing price of our common units on the NASDAQ on the date of grant by the number of
restricted common units granted to each director.
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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 Discussion and
Analysis section of this report with management of the general partner of Martin Midstream Partners L.P. and, based on that review and discussions, has
recommended that the Compensation Discussion and Analysis be included in this report.
Members of the Compensation Committee:
/s/ James M. Collingsworth
James M. Collingsworth, Committee Chair
/s/ Byron R. Kelley
Byron R. Kelley
/s/ C. Scott Massey
C. Scott Massey
Compensation Committee Interlocks and Insider Participation
Other than these independent directors, no other officer or employee of our general partner or its subsidiaries is a member of the Compensation
Committee. Employees of Martin Resource Management Corporation, through our general partner, are the individuals who work on our matters.
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Item 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 24, 2025 held by beneficial owners of 5% or more of the units
outstanding, 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
Common Units
Beneficially
Owned
Percentage of
Common Units
Beneficially
Owned
MRMC ESOP Trust
6,187,683
15.8%
Martin Resource Management Corporation
6,187,683
15.8%
Martin Resource LLC
4,203,823
10.8%
Martin Product Sales LLC
1,094,416
2.8%
Cross Oil Refining & Marketing Inc.
889,444
2.3%
Invesco Ltd.
7,212,745
18.5%
The Goldman Sachs Group, Inc. and Goldman Sachs & Co. LLC
2,970,118
7.6%
Senterfitt Holdings Inc.
3,726,607
9.5%
Ruben S. Martin
10,073,682
25.8%
Robert D. Bondurant
149,511
—%
Randall L. Tauscher
118,235
—%
Chris H. Booth
48,225
—%
Sharon L. Taylor
24,813
—%
Scot A. Shoup
28,113
—%
C. Scott Massey
169,978
—%
Byron R. Kelley
152,066
—%
James M. Collingsworth
150,241
—%
All directors and executive officers as a group (9 persons)
10,914,864
27.9%
The address for Martin Resource Management Corporation and all of the individuals listed in this table, unless otherwise indicated, is c/o Martin Midstream
Partners L.P., 4200 Stone Road, Kilgore, Texas, 75662.
Based solely upon the Form 13F Holdings Report filed on February 13, 2025 with the SEC by the beneficial owner as of December 31, 2024. According to
the Schedule 13G/A filed on February 12, 2024, Invesco Ltd. has sole voting power and sole dispositive power over 7,212,745 of common units. The address
for Invesco Ltd. is 1331 Spring Street NW, Suite 2500, Atlanta, Georgia, 30309.
The percent of class shown is less than one percent unless otherwise noted.
By virtue of its ownership of 89.02% of the outstanding common stock of Martin Resource Management Corporation, the MRMC ESOP Trust (the "MRMC
ESOP") is the controlling shareholder of Martin Resource Management Corporation, and may be deemed to beneficially own the 6,187,683 MMLP Common
Units held by Martin Resource LLC, Cross Oil Refining & Marketing Inc., and Martin Product Sales LLC. Robert D. Bondurant, Randall L. Tauscher, and
Melanie Mathews, Vice President - Human Resources (the "MRMC ESOP Co-Trustees") serve as co-trustees of the MRMC ESOP but all of its voting and
investment decisions are directed by the Board of Directors of Martin Resource Management Corporation. The MRMC ESOP expressly disclaims beneficial
ownership of the MMLP Common Units as voting and investment decisions are directed by the Board of Directors of Martin Resource Management
Corporation.
Martin Resource Management Corporation is the owner of Martin Resource LLC, Martin Product Sales LLC, and Cross Oil Refining & Marketing Inc., and
as such may be deemed to beneficially own the common units held by Martin Resource LLC, Cross Oil Refining & Marketing Inc, and Martin Product Sales
LLC. The 4,203,823 common units beneficially owned by Martin Resource Management Corporation through its ownership of Martin Resource LLC have
been pledged as security to a third party to secure payment for a loan made by such third party. The 1,094,416 common units beneficially owned by Martin
Resource Management Corporation through its ownership of Martin Product Sales LLC have been pledged as security to a third party to secure payment for a
loan made by such third party. The 889,444 common units beneficially owned by Martin
1
3
4
5
5
5
5
2
13
6
7
8
9
10
11
12
1
2
3
4
5
125
Resource Management Corporation through its ownership of Cross Oil Refining & Marketing Inc. have been pledged as security to a third party to secure
payment for a loan made by such third party.
Mr. Martin is the sole shareholder and sole director and has sole voting and investment power of Senterfitt Holdings Inc., and as such may be deemed to
beneficially own the common units held by Senterfitt Holdings Inc.
Includes: (i) 159,392 common units held of record directly by Mr. Martin and (ii) 3,726,607 Common Units held of record by Senterfitt Holdings Inc., for
which Mr. Martin is the sole shareholder and sole director and has sole voting and investment power. By virtue of serving as the Chairman of the Board of
Directors and President of Martin Resource Management Corporation, Ruben S. Martin may exercise control over the voting and disposition of the securities
owned by Martin Resource Management Corporation, and therefore, may be deemed the beneficial owner of the common units owned by Martin Resource
Management Corporation, which include 6,187,683 common units beneficially owned through its ownership of Martin Resource LLC, Cross Oil Refining &
Marketing Inc. and Martin Product Sales LLC.
Mr. Booth is the sole member and sole manager of Mibech Holdings LLC. Mr. Booth may be deemed to be the beneficial owner of 22,375 common units held
by Mibech Holdings LLC.
Ms. Taylor may be deemed to be the beneficial owner of the 1,450 common units held by her husband.
Mr. Massey may be deemed to be the beneficial owner of 1,500 common units held by his wife.
Mr. Collingsworth may be deemed to be the beneficial owner of 775 common units held by his wife.
The total for all directors and executive officers as a group includes the common units directly owned by such directors and executive officers as well as the
common units beneficially owned by Martin Resource Management Corporation as Ruben S. Martin may be deemed to be the beneficial owner thereof.
Based solely upon the Schedule 13G/A, jointly filed on February 11, 2025 with the SEC by the beneficial owners as of December 31, 2024. The Goldman
Sachs Group, Inc. and Goldman Sachs & Co. LLC (collectively, "Goldman Sachs") have shared voting power and shared dispositive power over 2,970,118 of
common units. The address for Goldman Sachs is 200 West Street, New York, New York, 10282.
Martin Resource Management Corporation indirectly owns 100% of the membership interests in the holding company that is the sole member of our
general partner and, together with our general partner, owned approximately 15.7% of our outstanding common limited partner units as of December 31,
2024. The table below sets forth information as of December 31, 2024 concerning (i) each person owning beneficially in excess of 5% of the voting common
stock of Martin Resource Management Corporation, and (ii) the beneficial common stock ownership of (a) each director of Martin Resource Management
Corporation, (b) each executive officer of Martin Resource Management Corporation, and (c) all such executive officers and directors of Martin Resource
Management Corporation as a group. Except as indicated, each individual has sole voting and investment power over all shares listed opposite his or her name.
Beneficial Ownership of
Voting Common Stock
Name of Beneficial Owner
Number of
Shares
Percent of
Outstanding Voting
Stock
MRMC ESOP Trust
105,420.02
89.02 %
Martin ESOP Trust
13,001.57
10.98 %
Robert D. Bondurant
13,001.57
10.98 %
Randall Tauscher
13,001.57
10.98 %
The business address of each shareholder, director and executive officer of Martin Resource Management Corporation is c/o Martin Resource Management
Corporation, 4200 Stone Road, Kilgore, Texas 75662.
The MRMC ESOP owns 118,421.59 shares of common stock of Martin Resource Management Corporation. The MRMC ESOP Co-Trustees serve as trustees
of the MRMC ESOP but all of its voting and investment decisions related to the unallocated shares of common stock are directed by the Board of Directors of
Martin Resource Management Corporation. Of
6
7
8
9
10
11
12
13
1
2
3
3
3
1
2
126
the common stock held by the MRMC ESOP, 101,889.89 shares of common stock are allocated to participant accounts, and 16,531.70 shares of common stock
are unallocated.
Robert D. Bondurant and Randall Tauscher (the "Martin ESOP Co-Trustees") are co-trustees of the Martin Employee Stock Ownership Trust which converted
from a profit sharing plan known as the Martin Employees' Stock Profit Sharing Plan on January 1, 2014. The Martin ESOP Co-Trustees exercise shared
control over the voting and disposition of the securities owned by this trust. As a result, the Martin ESOP Co-Trustees may be deemed to be the beneficial
owner of the securities held by such trust; thus, the number of shares of common stock reported herein as beneficially owned by the Martin ESOP Co-Trustees
includes the 13,001.57 shares owned by such trust. The Martin ESOP Co-Trustees disclaim beneficial ownership of these 13,001.57 shares.
The following table sets forth information regarding securities authorized for issuance under our equity compensation plans as of December 31, 2024:
Equity Compensation Plan Information
Number of
securities to be
issued upon exercise
of outstanding
options, Warrants
and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available
for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
Plan Category
(a)
(b)
(c)
Equity compensation plans approved by security holders
N/A
N/A
2,432,226
Total
—
$
—
2,432,226
Our general partner has adopted and maintains the 2025 Plan and the 2017 LTIP. Effective as of February 11, 2025, the 2021 Plan was superseded by
the 2025 Plan. For a description of the material features of these plans, please see "Item 11. Executive Compensation – Employee Benefit Plans – Martin
Midstream Partners L.P. Long-Term Incentive Plans".
3
127
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Martin Resource Management Corporation owns 6,187,683 of our common limited partnership units representing approximately 15.8% of our
outstanding common limited partnership units as of February 24, 2025. Martin Resource Management Corporation indirectly holds 100% of the membership
interests in MMGP, our general partner, by virtue of its 100% ownership interest in MMGP Holdings, LLC, the sole member of our general partner. Our
general partner owns a 2% general partner interest in us. Our general partner’s ability to manage and operate us and Martin Resource Management
Corporation’s ownership of approximately 15.8% of our outstanding common limited partner units effectively gives Martin Resource Management Corporation
the ability to veto some of our actions 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. These distributions and
payments were determined by and among affiliated entities and, consequently, are not the result of arm’s-length negotiations.
Operational Stage
Distributions of available cash to our general
partner
We will generally make cash distributions 98% to our unitholders and 2% to our general partner.
Payments to our general partner and its
affiliates
Martin Resource Management Corporation is entitled to reimbursement for all direct expenses it or our general
partner incurs on our behalf. The direct expenses include the salaries and benefit costs employees of Martin
Resource Management Corporation who provide services to us. Our general partner has sole discretion in
determining the amount of these expenses. In addition to the direct expenses, Martin Resource Management
Corporation is entitled 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
Corporation for indirect general and administrative and corporate overhead expenses. The Board of Directors
will review 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 will either be sold to the new general
partner for cash or converted into common units, in each case for an amount 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 liquidating
distributions according to their particular capital account balances.
Agreements
Omnibus Agreement
We and our general partner are parties to the Omnibus Agreement with Martin Resource Management Corporation that governs, among other things,
potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision of general administration
and support services by Martin Resource Management Corporation and our use of certain of Martin Resource Management Corporation’s trade names and
trademarks. The Omnibus Agreement was amended on November 25, 2009, to include processing crude oil into finished products including naphthenic
lubricants, distillates, asphalt and other intermediate cuts. The Omnibus Agreement was amended further on October 1, 2012, to permit the Partnership to
provide certain lubricant packaging products and services to Martin Resource Management Corporation. The Omnibus Agreement was amended further on
October 17, 2023 to include lubricants and packing in the Partnership’s definition of business.
Non-Competition Provisions. Martin Resource Management Corporation has agreed for so long as it controls the general partner of the Partnership,
not to engage in the business of:
•
providing terminalling and storage services for petroleum products and by-products including the refining, blending and packaging of finished
lubricants;
•
providing land and marine transportation of petroleum products, by-products, and chemicals; and
128
•
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 Corporation, including the following:
◦
distributing asphalt, marine fuel and other liquids;
◦
providing shore-based marine services in Texas, Louisiana, and Alabama;
◦
operating a crude oil gathering business in Stephens, Arkansas;
◦
providing crude oil gathering 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 a butane optimization business;
•
supplying employees and services for the operation of the Partnership's business; and
•
operating, solely for our account, the asphalt facilities owned by the Partnership in each of Hondo, South Houston and Port Neches, Texas
and Omaha, Nebraska.
•
any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of less than $5,000;
•
any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of $5,000 or more if the Partnership
has been offered the opportunity to purchase the business for fair market value and the Partnership declines to do so with the concurrence of the
Conflicts Committee; and
•
any business that Martin Resource Management Corporation acquires or constructs where a portion of such business includes a restricted business and
the fair market 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 or constructed; provided that, following completion of the acquisition or construction, the Partnership will be provided the opportunity to
purchase the restricted business.
Services. Under the Omnibus Agreement, Martin Resource Management Corporation provides us with corporate staff and support services that are
substantially identical in nature and quality to the services previously provided by Martin Resource Management Corporation in connection with its
management and operation of our assets during the one-year period prior to the date of the agreement. The Omnibus Agreement requires us to reimburse Martin
Resource Management Corporation for all direct expenses it incurs or payments it makes on our behalf or in connection with the operation of our business.
There is no monetary limitation on the amount we are required to reimburse Martin Resource Management Corporation for direct expenses. In addition to the
direct expenses, Martin Resource Management Corporation is entitled 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 Corporation for indirect general and administrative and
corporate overhead expenses. For the years ended December 31, 2024, 2023 and 2022, the Board of Directors approved and we reimbursed Martin Resource
Management Corporation of $13.5 million, $14.0 million and $13.5 million, respectively, reflecting our allocable share of such expenses. The Board of
Directors will review 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 Corporation provides for us, such as
accounting, treasury, clerical billing, information technology, administration of insurance, general
129
office expenses and employee benefit plans and other general corporate overhead functions we share with Martin Resource Management Corporation retained
businesses. The provisions of the Omnibus Agreement regarding Martin Resource Management Corporation’s services will terminate if Martin Resource
Management Corporation ceases to control our general partner.
Related Party Transactions. The Omnibus Agreement prohibits us from entering into any material agreement with Martin Resource Management
Corporation without the prior approval of the Conflicts Committee. For purposes of the Omnibus Agreement, the term "material agreements" means any
agreement between us and Martin Resource Management Corporation that requires aggregate annual payments in excess of then-applicable limitation on the
reimbursable amount of indirect general and administrative expenses. Please read "Services" above.
License Provisions. Under the Omnibus Agreement, Martin Resource Management Corporation has granted us 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 be amended
without the approval of the Conflicts Committee if such amendment would adversely affect the unitholders. The Omnibus Agreement was first amended on
November 25, 2009, to permit us to provide refining services to Martin Resource Management Corporation. The Omnibus Agreement was amended further on
October 1, 2012, to permit us to provide certain lubricant packaging products and services to Martin Resource Management Corporation. The Omnibus
Agreement was amended further on October 17, 2023 to include lubricants and packing in the Partnership’s definition of business. Such amendments were
approved by the Conflicts Committee. The Omnibus Agreement, other than the indemnification provisions and the provisions limiting the amount for which we
will reimburse Martin Resource Management Corporation for general and administrative services performed on our behalf, will terminate if we are no longer
an affiliate of Martin Resource Management Corporation.
Master Transportation Services Agreement
Master Transportation Services Agreement. MTI, a wholly owned subsidiary of us, is a party to a master transportation services agreement effective January
1, 2019, with certain wholly owned subsidiaries of Martin Resource Management Corporation. Under the agreement, MTI agreed to transport Martin Resource
Management Corporation's petroleum products and by-products.
Term and Pricing. The agreement will continue unless either party terminates the agreement by giving at least 30 days' written notice to the other party. The
rates under the agreement are subject to any adjustments which are mutually agreed upon or in accordance with a price index. Additionally, shipping charges
are also subject to fuel surcharges determined on a weekly basis in accordance with the U.S. Department of Energy’s national diesel price list.
Indemnification. MTI has agreed to indemnify Martin Resource Management Corporation against all claims arising out of the negligence or willful
misconduct of MTI and its officers, employees, agents, representatives and subcontractors. Martin Resource Management Corporation has agreed to indemnify
MTI against all claims arising out of the negligence or willful misconduct of Martin Resource Management Corporation and its officers, employees, agents,
representatives and subcontractors. In the event a claim is the result of the joint negligence or misconduct of MTI and Martin Resource Management
Corporation, indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligence or misconduct.
Terminal Services Agreements
Diesel Fuel Terminal Services Agreement. Effective October 1, 2022, we entered into a third amended and restated terminalling services agreement under
which we provide terminal services to Martin Energy Services LLC (“MES”), a wholly owned subsidiary of Martin Resource Management Corporation, for
fuel distribution utilizing marine shore-based terminals owned by the Partnership. This agreement amended the existing arrangement between the Partnership
and MES by eliminating any minimum throughput volume requirements and increasing the per gallon throughput fee. The term of this agreement expired on
December 31, 2023 but will continue on a year to year basis until terminated by either party by giving at least 90 days’ written notice prior to the end of any
term. Effective January 1, 2024, this agreement was amended to increase the throughput rate and to establish a minimum throughput volume.
Miscellaneous Terminal Services Agreements. We are currently party to several terminal services agreements and from time to time we may enter into other
terminal service agreements for the purpose of providing terminal services to related parties. Individually, each of these agreements is immaterial but when
considered in the aggregate they could be deemed
130
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 Agreements
Marine Transportation Agreement. We are a party to a marine transportation agreement effective January 1, 2006, as amended, under which we
provide marine transportation services to Martin Resource Management Corporation on a spot-contract basis at applicable market rates. Effective each
January 1, this agreement automatically renews for consecutive one-year periods unless either party terminates the agreement by giving written notice to the
other party at least 60 days prior to the expiration of the then- applicable term. The fees we charge Martin Resource Management Corporation are based on
applicable market rates.
Marine Fuel. We are a party to an agreement with Martin Resource Management Corporation dated November 1, 2002 as amended, under which
Martin Resource Management Corporation provides us with marine fuel from its locations in the Gulf of Mexico at a fixed rate in excess of the Platt’s U.S.
Gulf Coast Index for #2 Fuel Oil. Under this agreement, we agreed to purchase all of its marine fuel requirements that occur in the areas serviced by Martin
Resource Management Corporation.
Other Agreements
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, asphalt
and other intermediate cuts for Cross. The tolling agreement expires November 25, 2031. Under this tolling agreement, Cross agreed to process a minimum of
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. Further, certain capital
improvements, to the extent requested by Cross, are reimbursed through a capital recovery fee. All of these fees (other than the fuel surcharge) are subject to
escalation annually based upon the greater of 3% or the increase in the Consumer Price Index for a specified annual period.
Other Miscellaneous Agreements. From time to time, we enter into other miscellaneous agreements with Martin Resource Management Corporation for the
provision of other services or the purchase of other goods.
Other Related Party Transactions
East Texas Mack Leases. MTI leases equipment, including tractors and trailers, from East Texas Mack Sales. Certain of our directors and officers are
owners of East Texas Mack, including entities affiliated with Ruben Martin, who owns approximately 46% of the issued and outstanding stock of East Texas
Mack. Amounts paid to East Texas Mack for tractor and trailer lease payments and lease residuals for the fiscal years ended December 31, 2024, 2023 and 2022
were approximately $5.0 million, $3.3 million, and $1.9 million, respectively.
Consulting Services Agreement. The Operating Partnership is a party to the Consulting Services Agreement. Pursuant to the terms of the Consulting
Services Agreement, Ruben S. Martin has agreed to provide business and strategic development support to the Operating Partnership, and the Operating
Partnership has agreed to pay Mr. Martin $0.3 million per year for such services, which amount was paid to Mr. Martin for the fiscal year ended December 31,
2022. The Consulting Services Agreement expired on December 31, 2022.
Storage and Services Agreement. The Partnership is a party to a storage and services agreement with Martin Butane, a division of Martin Product
Sales LLC (a subsidiary of Martin Resource Management Corporation), dated May 1, 2023, under which the Partnership provides storage and other services
for NGLs at the Partnership's underground storage facility located in Arcadia, Louisiana. The primary term of the agreement expired on April 30, 2024, but will
continue on a year to year basis until terminated by either party by giving at least 90 days’ written notice prior to the end of any term.
Miscellaneous
Certain of directors, officers and employees of our general partner and Martin Resource Management Corporation maintain margin accounts with
broker-dealers with respect to our common units held by such persons. Margin account transactions for such directors, officers and employees were conducted
by such broker-dealers in the ordinary course of business.
131
For information regarding amounts of related party transactions that are included in the Partnership's Consolidated Statements of Operations, please
see Note 12, "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 or as permitted under the Omnibus
Agreement, in which a related person will have a direct or indirect material interest, the proposed transaction is submitted for consideration to the Board of
Directors or to our management, 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 proposed transaction from management and determines whether to engage independent legal counsel or an independent financial advisor to
advise the members of the committee regarding the transaction. If the Conflicts Committee retains such counsel or financial advisor, it considers such advice
and, in the case of a financial advisor, such advisor’s opinion as to whether the transaction is fair and reasonable to us and to our unitholders.
132
Item 14.
Principal Accounting Fees and Services
KPMG LLP served as our independent auditors for the fiscal years ended December 31, 2024 and 2023. The following fees were paid to KPMG LLP for
services rendered during our last two fiscal years:
2024
2023
Audit fees
$
1,325,000 (1) $
1,300,000 (1)
Audit related fees
9,000
—
Audit and audit related fees
1,334,000
1,300,000
Tax fees
100,000 (2)
90,000 (2)
All other fees
—
—
Total fees
$
1,434,000
$
1,390,000
(1) 2024 and 2023 audit fees include fees for the annual financial statement audit, audit of internal controls over financial reporting, and interim reviews
included in our quarterly reports on Form 10-Q. In both periods these amounts also include fees related to services in connection with transactions,
regulatory filings, and consents.
(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.
Under policies and procedures established by the Board of Directors and the Audit Committee, the Audit Committee is required to pre-approve all audit and
non-audit services performed by our independent auditor to ensure that the provisions of such services do not impair the auditor’s independence. All of the
services described above that were provided by KPMG LLP in years ended December 31, 2024 and December 31, 2023 were approved in advance by the Audit
Committee.
133
PART IV
Item 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 not
applicable or the information called for therein appears in the footnotes of our Consolidated Financial Statements.
134
(b) Exhibits
INDEX TO EXHIBITS
Exhibit
Number
Exhibit Name
2.1
Agreement and Plan of Merger, dated October 3, 2024, by and among Martin Resource Management Corporation, MRMC Merger Sub LLC,
Martin Midstream GP LLC and Martin Midstream Partners L.P. (filed as Exhibit 2.1 to the Partnership's Current Report on Form 8-K (SEC File
No. 000-50056), filed October 3, 2024, and incorporated herein by reference).
3.1
Certificate of Limited Partnership of Martin Midstream Partners L.P. (the "Partnership"), dated June 21, 2002 (filed as Exhibit 3.1 to the
Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.2
Third Amended and Restated Agreement of Limited Partnership of the Partnership, dated November 23, 2021 (filed as Exhibit 3.1 to the
Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed November 29, 2021, and incorporated herein by reference).
3.3
Certificate of Limited Partnership of Martin Operating Partnership L.P. (the "Operating Partnership"), dated June 21, 2002 (filed as Exhibit 3.3
to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.4
Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated November 6, 2002 (filed as Exhibit 3.2 to the
Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed November 19, 2002, and incorporated herein by reference).
3.5
Certificate of Formation of Martin Midstream GP LLC (the "General Partner"), dated June 21, 2002 (filed as Exhibit 3.5 to the Partnership's
Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.6
Second Amended and Restated Limited Liability Company Agreement of the General Partner, dated November 23, 2021 (filed as Exhibit 3.1 to
the Partnership's Current Report on Form 8-K (Reg. No. 000-50056), filed November 29, 2021, and incorporated herein by reference).
3.7
Certificate of Formation of Martin Operating GP LLC (the "Operating General Partner"), dated June 21, 2002 (filed as Exhibit 3.7 to the
Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.8
Limited Liability Company Agreement of the Operating General Partner, dated June 21, 2002 (filed as Exhibit 3.8 to the Partnership's
Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
4.1
Indenture (including form of 11.500% Senior Secured Second Lien Notes due 2028), dated February 8, 2023, by and among the Partnership,
Martin Midstream Finance Corp., the guarantors named therein, U.S. Bank Trust Company, National Association, as trustee and collateral agent
(filed as Exhibit 4.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed February 8, 2023 and incorporated herein
by reference).
4.2
Description of Securities (filed as Exhibit 4.2 to the Partnership’s Annual Report on Form 10-L (SEC File No. 000-50056), filed March 2, 2023,
and incorporated herein by reference).
10.1
Omnibus Agreement, dated November 1, 2002, by and among Martin Resource Management Corporation, the General Partner, the Partnership
and the Operating Partnership (filed as Exhibit 10.3 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed
November 19, 2002, and incorporated herein by reference).
10.2
Amendment No. 1 to Omnibus Agreement, dated as of November 25, 2009, by and among Martin Resource Management Corporation, the
General Partner, the Partnership and the Operating Partnership (filed as Exhibit 10.3 to the Partnership’s Current Report on Form 8-K (SEC File
No. 000-50056), filed December 1, 2009, and incorporated herein by reference).
10.3
Amendment No. 2 to Omnibus Agreement, dated October 1, 2012, by Martin Resource Management Corporation, the General Partner, the
Partnership 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).
10.4
Amendment No. 3 to Omnibus Agreement, dated October 22, 2018, by Martin Resource Management Corporation, the General Partner, the
Partnership and the Operating Partnership (filed as Exhibit 10.1 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056),
filed October 24, 2018, and incorporated herein by reference).
10.5
Amendment No. 4 to Omnibus Agreement, dated October 17, 2023, by Martin Resource Management Corporation, the General Partner, the
Partnership and the Operating Partnership (filed as Exhibit 10.1 to the Partnership's Quarterly Report on Form 10-Q (SEC File No. 000-50056),
filed September 30, 2023, and incorporated herein by reference).
10.6
Motor Carrier Agreement, dated January 1, 2006, as amended, by and between the Operating Partnership and Martin Transport, Inc. (filed as
Exhibit 10.9 to the Partnership’s Annual Report on Form 10-K (SEC File No. 000-50056), filed March 2, 2011, and incorporated herein by
reference).
135
10.7
2021 Amended and Restated Tolling Agreement, dated October 20, 2021, by and between the Operating Partnership and Cross Oil Refining &
Marketing, Inc. (filed as Exhibit 10.20 to the Partnership’s Annual Report on Form 10-K (SEC File No. 000-50056), filed March 1, 2022, and
incorporated herein by reference).
10.8
Marine Transportation Agreement, dated January 1, 2006, as amended, by and between the Operating Partnership and Midstream Fuel Service,
L.L.C. (filed as 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 by reference).
10.9
Marine Fuel Agreement, dated November 1, 2002, by and between Midstream Fuel Service LLC and the Operating Partnership (filed as Exhibit
10.9 to the Partnership’s Current Report on Form 8-K (SEC No. 000-50056), filed November 19, 2002, and incorporated herein by reference).
10.10
Purchaser Use Easement, Ingress-Egress Easement, and Utility Facilities Easement dated November 1, 2002, by and between MGS LLC and
the Operating 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).
10.11+
First Amendment to the Third Amended and Restated Terminal Services Agreement by and between the Operating Partnership and Martin
Energy Services LLC, dated December 26, 2023.
10.12*+
Second Amendment to the Third Amended and Restated Terminal Services Agreement by and between the Operating Partnership and Martin
Energy Services LLC, dated January 1, 2025.
10.13
Lubricants and Drilling Fluids Terminal Services Agreement by and between the Operating Partnership and MFS LLC, dated December 23,
2003, as amended, (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).
10.14
Form 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).
10.15†
Martin 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).
10.16†
Restricted Unit Agreement under the Martin Midstream Partners L.P. 2017 Restricted Unit Plan (filed as Exhibit 10.34 to the Partnership's
Annual Report on Form 10-K (SEC File No. 000-50056), filed February 16, 2018).
10.17
Master Transportation Services Agreement by and among Martin Resource Management Corporation, Cross Oil Refining & Marketing, Inc.,
Martin Energy Services LLC, and Martin Product Sales LLC (filed as Exhibit 10.1 on the Partnership’s Quarterly Report on Form 10-Q (SEC
File No. 000-50056), filed April 26, 2019 and incorporated herein by reference.
10.18†
Employment Agreement, dated October 20, 2020, between Martin Resource Management Corporation and Robert D. Bondurant (filed as
Exhibit 10.1 on the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed October 22, 2020 and incorporated herein by
reference).
10.19†
Martin Midstream Partners L.P. 2021 Phantom Unit Plan, effective as of July 21, 2021 (filed as Exhibit 10.1 to the Partnership’s Quarterly
Report on Form 10-Q (SEC File No. 000-50056), filed July 26, 2021, and incorporated herein by reference).
10.20†
First Amendment to Martin Midstream Partners L.P. 2021 Phantom Unit Plan, effective as of April 20, 2022 (filed as Exhibit 10.1 to the
Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed April 26, 2022, and incorporated herein by reference).
10.21†
Form of Phantom Unit Award Agreement for the Martin Midstream Partners L.P. 2021 Phantom Unit Plan (filed as Exhibit 10.2 to the
Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed July 26, 2021, and incorporated herein by reference).
10.22†
Form of Phantom Unit Appreciation Right Award Agreement for the Martin Midstream Partners L.P. 2021 Phantom Unit Plan (filed as Exhibit
10.3 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed July 26, 2021, and incorporated herein by reference).
10.23†
Martin Midstream Partners L.P. 2025 Phantom Unit Plan, effective as of February 11, 2025 (filed as Exhibit 10.2 to the Partnership's Current
Report on Form 8-K (SEC File No. 000-50056), filed February 18, 2025, and incorporated herein by reference).
10.24†
Form of Phantom Unit Award Agreement for the Martin Midstream Partners L.P. 2025 Phantom Unit Plan (filed as Exhibit 10.3 to the
Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed February 18, 2025, and incorporated herein by reference).
10.25†
Form of Phantom Unit Appreciation Right Award Agreement for the Martin Midstream Partners L.P. 2025 Phantom Unit Plan (filed as Exhibit
10.4 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed February 18, 2025, and incorporated herein by
reference).
10.26†
First Amendment to Employment Agreement, dated July 26, 2022, by and between Martin Resource Management Corporation and Robert D.
Bondurant (filed as Exhibit 10.1 to the Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed August 1, 2022, and
incorporated herein by reference).
136
10.27‡
Amendment and Restatement Agreement, dated as of January 30, 2023, by and among Martin Operating Partnership L.P., as borrower, the
Partnership, as guarantor, the other guarantors party thereto, the financial institutions party thereto as lenders, Royal Bank of Canada, as
administrative agent and collateral agent, and Wells Fargo Bank, N.A., as syndication agent and L/C Issuer (filed as Exhibit 10.1 to the
Partnership’s Current Report on Form 8-K (SEC File No. 000-50056), filed January 30, 2023, and incorporated herein by reference).
10.28
First Amendment to Fourth Amended and Restated Credit Agreement, dated as of February 13, 2025, by and among Martin Operating
Partnership L.P., as borrower, Martin Midstream Partners L.P., as guarantor, the other guarantors party thereto, the financial institutions party
thereto as lenders and Royal Bank of Canada, as administrative agent and collateral agent (filed as Exhibit 10.1 to the Partnership's Current
Report on Form 8-K (SEC File No. 000-50056), filed February 18, 2025, and incorporated herein by reference).
10.29
Termination Agreement between Martin Resource Management Corporation and Martin Midstream Partners L.P., dated December 26, 2024
(filed as Exhibit 10.1 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed December 26, 2024, and incorporated
herein by reference).
10.30
Support Agreement, dated October 3, 2024, by and among Martin Midstream Partners L.P. and Martin Resource Management Corporation,
Martin Product Sales LLC, Martin Resource LLC and Cross Oil Refining & Marketing, Inc. (filed as Exhibit 10.1 to the Partnership's Current
Report on Form 8-K (SEC File No. 000-50056), filed October 3, 2024, and incorporated herein by reference).
10.31
Support Agreement, dated October 3, 2024, by and between Martin Midstream Partners L.P. and Senterfitt Holdings Inc. (filed as Exhibit 10.2
to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed October 3, 2024, and incorporated herein by reference).
10.32
Support Agreement, dated October 3, 2024, by and between Martin Midstream Partners L.P. and Ruben S. Martin III (filed as Exhibit 10.3 to
the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed October 3, 2024, and incorporated herein by reference).
10.33
Support Agreement, dated October 3, 2024, by and between Martin Midstream Partners L.P. and Robert D. Bondurant (filed as Exhibit 10.4 to
the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed October 3, 2024, and incorporated herein by reference).
19*
Insider Trading Policy.
21.1*
List of Subsidiaries.
23.1*
Consent of KPMG LLP.
31.1*
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 of
2002. 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 of
2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be "filed."
97
Martin Midstream Partners L.P.’s Policy for the Recovery of Erroneously Awarded Compensation (filed as Exhibit 97 to the Partnership's
Annual Report on Form 10-K (SEC File No. 000-50056), filed February 21, 2024).
101
Inline Interactive Data: the following financial information from Martin Midstream Partners L.P.’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2024, formatted in Extensible Business Reporting Language: (1) the Consolidated Balance Sheets; (2) the
Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income; (4) the Consolidated Statements of Cash Flows;
(5) the Consolidated Statements of Capital; and (6) the Notes to Consolidated Financial Statements.
104
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (contained in Exhibit 101).
*
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.
‡ This filing excludes certain schedules and exhibits pursuant to Item 601(a)(5) of Regulation S-K, which the registrant agrees to furnish supplementally to the
Securities and Exchange Commission upon request by the Commission; provided, however, that the registrant may request confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules or exhibits so furnished.
+ Information in this exhibit identified by the mark “[***]” is confidential and has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it
(i) is not material and (ii) would likely cause competitive harm to the Registrant if disclosed.
Item 16.
Form 10-K Summary
137
Not applicable.
SIGNATURES
Pursuant 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 our
behalf by the undersigned, thereunto duly authorized representative.
Martin Midstream Partners L.P
(Registrant)
By:
Martin Midstream GP LLC
It's General Partner
February 24, 2025
By:
/s/ Robert D. Bondurant
Robert D. Bondurant
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 the registrant
and in the capacities indicated on February 24, 2025.
138
Signature
Title
/s/ Robert D. Bondurant
President, Director, and Chief Executive Officer of Martin Midstream GP
LLC (Principal Executive Officer)
Robert D. Bondurant
/s/Sharon L. Taylor
Executive Vice President and Chief Financial Officer of Martin Midstream
GP LLC (Principal Financial Officer and Principal Accounting Officer)
Sharon L. Taylor
/s/Ruben S. Martin
Chairman of the Board of Directors of Martin Midstream GP LLC
Ruben S. Martin
/s/James M. Collingsworth
Director of Martin Midstream GP LLC
James M. Collingsworth
/s/Byron R. Kelley
Director of Martin Midstream GP LLC
Byron R. Kelley
/s/C. Scott Massey
Director of Martin Midstream GP LLC
C. Scott Massey
139
SECOND AMENDMENT TO THIRD AMENDED
AND RESTATED TERMINALLING SERVICES AGREEMENT
This SECOND AMENDMENT TO THIRD AMENDED AND RESTATED TERMINALLING SERVICES AGREEMENT
(this “Amendment”) is made and executed effective as of January 1, 2025 by and between MARTIN OPERATING
PARTNERSHIP L.P., a Delaware limited partnership (“Operator”) and MARTIN ENERGY SERVICES LLC, an Alabama
limited liability company (“Customer”). Operator and Customer are referred to herein collectively as the “Parties”.
WHEREAS, Operator and Customer are Parties to that certain Third Amended and Restated Terminalling Services Agreement
dated October 1, 2022, as amended by First Amendment to Third Amended and Restated Terminalling Services Agreement dated
December 26, 2023 (the “Agreement”); and
WHEREAS, the Parties mutually desire to amend certain terms of the Agreement as hereinafter provided.
NOW, THEREFORE, in consideration of the covenants and agreements herein and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Capitalized terms used but not defined herein, if any, shall have the meaning given to such terms in the Agreement.
2. Amendment to the Agreement. The definition of “Throughput Fee” as defined in Section 1 is hereby amended and replaced as
follows:
‘Throughput Fee’ means the following variable rate for Product in-loaded and out-loaded from the Terminal per
Month: $*** for the first *** Gallons, $*** between *** and *** Gallons, and $*** for over *** Gallons.”
3. Affirmation of the Agreement. Except as expressly amended herein, the terms, covenants and conditions of the
Agreement shall remain in full force and effect without modification or amendment, and the Parties ratify and reaffirm the same in
its entirety.
4. Entire Agreement; Amendments. This Amendment and the Agreement, as previously amended, constitute the entire agreement
between the Parties as of the date hereof and supersede any prior or contemporaneous understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they have related in any way to the subject matter hereof. This Amendment
may be amended, modified or superseded only by a written instrument executed by both of the Parties.
5. Counterparts. This Amendment may be executed simultaneously in two or more counterparts, each of which shall be deemed
an original, but all of which shall constitute one agreement.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be effective on the day and year first written above.
CUSTOMER:
MARTIN ENERGY SERVICES LLC
By: /s/Damon King
Damon King, Vice President
OPERATOR:
MARTIN OPERATING PARTNERSHIP L.P.
By: Martin Operating GP, LLC, Its General Partner
By: Martin Midstream Partners, L.P., Its Sole Member
By: Martin Midstream GP, LLC, Its General Partner
By: /s/Robert D. Bondurant
Robert D. Bondurant, President and Chief
Executive Officer
Exhibit 19
February 11, 2025
MEMORANDUM
TO: All directors, officers, employees and agents of Martin Resource Management Corporation, Martin Midstream GP LLC, or any of their
subsidiaries
FROM: The Board of Directors of Martin Resource Management Corporation and the Board of Directors of Martin Midstream GP LLC
RE: Policy on the Prevention of Insider Trading and Misuse of Confidential Information of Martin Midstream Partners L.P.
In the normal course of business, officers, directors, employees (each referred to herein as a “Insider” or “you”) and Related Persons (as
defined below) of Martin Resource Management Corporation, Martin Midstream Partners L.P., Martin Midstream GP LLC, as general partner of
Martin Midstream Partners L.P., and their subsidiaries (collectively, the “Company”) may come into possession of significant, sensitive
information. In the eyes of the law, this information is considered the Company’s property; persons affiliated with the Company are entrusted
with this information. As a “publicly held” company, federal insider trading laws generally prohibit any Insider or Related Person of the
Company who possesses material nonpublic information concerning the Company from buying or selling common units representing limited
partnership interests in the Company (the “common units”) or any other Company securities (collectively with the common units, the “Company
Securities”) or passing on such information to others who do so. Substantial legal penalties can be imposed for violation of such laws. The
purpose of this Policy on the Prevention of Insider Trading and Misuse of Confidential Information (this “Policy”) is to: (i) inform Insiders of
their responsibilities in this area under the law; (ii) establish procedures for Insiders to follow before trading in Company Securities; (iii)
establish a policy for Insiders to follow with respect to maintaining confidentiality of information related to the Company and (iv) explain the
consequences of violating the law and this Policy. This prohibition against trading while in possession of material nonpublic information
continues even after separation from the Company so long as the information remains material and nonpublic. In order to facilitate compliance
with applicable law regarding insider purchases and sales of the securities of the Company, the Company is implementing the following policies.
I.
Federal Insider Trading Laws
The Law. Federal insider trading laws generally prohibit any Insider (or any Related Person) of the Company who possesses material,
nonpublic information (also referred to as “inside information”) relating to the Company from buying or selling securities of the Company or any
publicly traded options on Company Securities, or engaging in any other action to take advantage of, or pass on to others, that information. The
Securities and Exchange Commission (“SEC”), which is the primary United States (“U.S.”) regulator under the federal securities laws, takes the
view that the mere fact that a person knows the information is enough to bar him or her from trading, even if the reasons for the potential trade
are not based on that information.
Materiality. In applying the policies set forth in this statement, it is often important for you to determine whether certain information is
material nonpublic information. Information may be considered “material” when the information, whether positive or negative, might be of
possible significance to an
{00042535v.}
investor in a decision to purchase, sell or hold stock or other securities. Information may be significant for this purpose even if it would not alone
determine the investor’s decision. Chances are, if a person learns something that leads that person to want to buy or sell securities, the
information will be considered material. Thus, even speculative information can be material; information that something is likely to happen, or
even that it may happen, can be considered material. In short, any information which could reasonably be expected to affect the price of the
security is material information. By way of example, it is probable that the following information, in most circumstances, would be deemed
material:
•
annual, quarterly or monthly financial results;
•
a change in earnings or earnings projections;
•
negotiations and agreements regarding a significant pending or proposed merger, acquisition, business combination, joint
venture or tender offer;
•
a significant sale of assets or the disposition of a subsidiary;
•
significant changes in prices, customers or suppliers;
•
planned changes in dividend policies;
•
declaration of a unit split or the offering of additional debt or equity securities;
•
entering into of significant new contracts or the non-performance by a party under a significant existing contract;
•
significant threatened litigation or significant developments in existing litigation;
•
significant labor disputes;
•
top management changes; and
•
significant new services offered.
This list is not intended to be exhaustive; other types of information may also be material. Insiders must not engage in any transaction that is
described above until after this type of information becomes public.
When Information is Public. Information is considered “public” and no longer “inside” only after it has been effectively disclosed in a
manner sufficient to ensure its availability to the investing public. Selective disclosure to a few persons does not make information public.
Furthermore, adequate dissemination requires allowing enough time after the announcement for the market to react to the information. Once the
Company releases information through public channels, it may take a few additional days for it to be considered broadly disseminated. As a
general rule, information should not be considered fully absorbed by the marketplace until after the first business day after the day on which the
information is released. Depending on the particular circumstances, the Company may determine that a longer or shorter period should apply to
the release of specific material nonpublic information.
Tipping. Information that could have an impact on Company Securities or sensitive information relating to other companies, including
customers, suppliers or potential parties to contracts, must not be passed on to other companies or Related Persons. When “tipping” occurs, both
the “tipper” and the “tippee” may be held liable, and this liability may extend to all those to whom the tippee gives the information. The legal
penalties described in this Policy are applicable whether or not a person derives any benefit from another’s actions.
Related Persons. As used in this Policy, “Related Persons” refers to an individual’s spouse, minor children, other family members who
reside with them, anyone else who lives in the same
2
household as the individual, any family members who do not live in the same household, but whose transactions in the Company Securities are
directed by or are subject to the individual’s influence or control (such as parents or children who consult with the individual before they trade in
Company Securities), and entities that are directed by or are subject to the individual’s influence or control, including family limited partnerships
and trusts. Insiders are responsible under this Policy for the transactions of these other parties and, therefore, should make them aware of the
restrictions in this Policy.
II.
Restrictions on Purchases and Sales
General Policy. It is the Company’s policy that if you possess material nonpublic information concerning the Company, neither you nor
any Related Person to you may (i) buy or sell Company Securities or (ii) pass on such information to others. This Policy also extends to all
material inside information that may be acquired in the course of a person’s employment or relationship with the Company relating to the
securities issued by other companies (e.g., customers, suppliers, competitors, joint venture partners or potential business combination parties)
and prohibits trading in securities issued by other companies (or options relating to such securities) or tipping such information to others.
All Insiders are required to maintain the confidentiality of information relating to the Company and its respective business operations.
Furthermore, specific policies governing the public disclosure of information about the Company or its business operations are found in the
Company’s Code of Ethics and Business Conduct (the “Code of Conduct”). As a general matter, only certain designated persons are authorized
to make public disclosures on behalf of any of the Company.
The Company expects all Insiders to act in accordance with the highest standards of personal and professional integrity, to comply with
all applicable laws, rules and regulations, to deter wrongdoing and abide by this Policy, the Code of Conduct and all other policies and
procedures adopted by the Company that govern the conduct of Insiders. Insiders shall report all suspected violations of the Code of Conduct,
securities laws or regulations, or this Policy. Failure to report suspected violations or to comply with Company policies may result in disciplinary
action, up to and including termination, and such person may be liable for civil or criminal penalties under the securities laws.
If you have any questions about whether a proposed transaction in Company Securities would violate this Policy, you should contact
Chris Booth, who has been designated as our compliance officer for purposes of this Policy (or any successor, the “Compliance Officer”) prior to
proceeding with any proposed transaction.
Blackout Periods. In addition to the general policy prohibiting trading while in possession of material nonpublic information, it is the
Company’s policy that all Insiders who regularly have access to internal financial information, and all Related Persons, are prohibited from
purchasing or selling Company Securities during the period beginning on the 15th day of the last month of each fiscal quarter and ending one
full trading day after earnings have been released with respect to such quarter or fiscal year. Therefore, a “blackout” period will begin on each
March 15, June 15, September 15 and December 15, and will end on the next trading day after one full trading day has elapsed after earnings
have been released in respect of the prior quarter or prior year, as applicable.
Additional restrictions in specific circumstances. From time to time, the Company may recommend, or require, that certain Insiders and
others refrain from trading because of developments known to the Company and not yet disclosed to the public. In such a case, the persons so
advised should
3
not engage in any transaction involving the purchase or sale of Company Securities until advised that the restriction has been terminated and
should not disclose to others inside or outside of the Company the fact that the Company has imposed a trading restriction.
No Short Sales, Pledging, Derivative Transactions, Etc. You should not make any short sales of Company Securities, purchase Company
Securities on margin, or buy or sell puts or calls relating to Company Securities. You should not place limit orders for Company Securities that
remain effective after the day on which they are placed (such as “good until cancelled” orders).
NOTE: For those persons who are subject to either or both of the blackout periods and situation-specific trading restrictions, the
existence of such blackout periods and situation-specific trading restrictions should not be considered a safe harbor for trading during other
periods, and all officers, directors, other employees and agents should use good judgment at all times. For example, occasions may arise when
individuals covered by this Policy become aware prior to the blackout period that earnings for that quarter are likely to exceed, or fall below,
market expectations to an extent that is material. In such a case, the general policy would still prohibit trading even though the time period is not
within the blackout period or even if you are not subject to the blackout periods in the normal course of business.
These restrictions are not applicable to transactions under a previously established contract or plan which (i) satisfies the requirements of
the SEC’s Rule 10b5-1 and (ii) is approved by the Company. Once established in compliance with SEC rules and this Policy, no further pre-
approval of transactions conducted pursuant to the Rule 10b5-1 plan will be required. In addition, these restrictions do not relate to “direct” (as
opposed to “cashless”) exercises of options to purchase common units, for example, unit purchases pursuant to the exercise of unit options where
no sale of the underlying units is involved.
III.
Additional Rules for “Section 16 Insiders”
In addition to the rules set forth above, all directors, executive officers and stockholders/unitholders holding more than 10 percent of the
outstanding shares of any class of stock/units (collectively, “Section 16 Insiders”) of public companies are subject to certain additional rules
governing transactions in company securities. Section 16 of the Exchange Act (“Section 16”), as amended, prohibits Section 16 Insiders from
buying any Company Securities within six months before or after a sale, or selling any Company Securities within six months before or after a
purchase. Although Section 16 is designed to prevent the abuse of inside information, it is an absolute rule, and therefore it applies whether or
not the Section 16 Insider actually possesses any material nonpublic information. Additionally, Section 16 Insiders are required to report their
ownership and transactions in Company Securities to the SEC on certain forms. Section 16 Insiders should contact the Compliance Officer, who
has been designated as our Section 16 compliance officer (or any successor), before they engage in any transaction, so that the information
necessary to prepare these forms may be obtained and it can be determined if there is any reason why the Section 16 Insider should not be
trading in Company Securities.
IV.
Policy on Maintaining Confidentiality
All Insiders and Related Persons should avoid communicating nonpublic Company information to any person unless the person has a
need to know the information for Company-related reasons. This Policy applies without regard to the materiality of the information. Consistent
with the foregoing, all Insiders and Related Persons should be discreet with nonpublic information and refrain from discussing it in public places
where it can be overheard, such as elevators, restaurants and on public transportation. To
4
avoid even the appearance of impropriety, you should at all times refrain from providing advice or making recommendations regarding the
purchase or sale of Company Securities or the securities of other companies of which you have knowledge as a result of employment or
association with the Company. If an Insider or Related Person communicates information that someone else uses to trade illegally in securities,
the legal penalties described in this Policy are applicable, whether or not any personal benefit was derived from the illegal trading.
V.
Compliance and Penalties
Surveillance. The SEC and the national securities exchanges in the U.S. and the NASDAQ Stock Market have extensive surveillance
facilities that are used to monitor trading in stocks and stock options. Frequently, these institutions have cooperative arrangements with
comparable institutions outside the U.S. If a security transaction becomes the subject of scrutiny, the transaction will be viewed after the fact. As
a result, before engaging in any transaction, all persons covered by this Policy should carefully consider how regulators and others might view
the transaction in hindsight.
Exceptions. Personal trading transactions that may be necessary or justifiable for independent reasons (such as the need to raise money
for an emergency expenditure) are not an exception to this Policy. Certain exceptions to this Policy or its procedures may be made only by the
Compliance Officer on a case by case basis, but in no case will an exception be granted in violation of applicable law or if such exception
introduces, in the sole estimation of the Compliance Officer, an unacceptable risk to the Company.
Compliance and Consequences of Violations. The purchase or sale of securities while aware of material nonpublic information, or the
disclosure of material nonpublic information to others who then engage in transactions in the Company’s Securities, is prohibited by federal and
state laws. Punishment for insider trading violations is severe and could include significant fines and imprisonment. While regulators concentrate
their efforts on the individuals who trade or tip inside information to others who trade, the federal securities laws also impose potential liability
on companies and other controlling or supervisory persons if they fail to take reasonable steps to prevent insider trading by company personnel.
Each Insider is responsible for ensuring that he or she complies with this Policy and that any Related Persons controlled or influenced by
them also comply with this Policy. In all cases, the responsibility for determining whether an individual is in possession of material nonpublic
information rests with that individual. Moreover, no person should engage in any transaction in which he or she may even appear to be trading
while in possession of material nonpublic information. Failure to observe this Policy may result in serious legal difficulties for the Insider and/or
Related Person, as well as for the Company, including the possibility of civil suits by unitholders. Furthermore, a violation of this Policy or
applicable securities law will be viewed seriously and provides grounds for disciplinary action, including termination for cause.
5
Exhibit 21.1
SUBSIDIARIES OF
MARTIN MIDSTREAM PARTNERS L.P.
Subsidiary
Jurisdiction of Organization
Martin Operating GP LLC
Delaware
Martin Operating Partnership L.P.
Delaware
Martin Midstream Finance Corp.
Delaware
Martin Transport, Inc.
Texas
Talen's Marine & Fuel, LLC
Louisiana
Martin ELSA Investment LLC
Delaware
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statement (No. 333-265484) on Form S-3 and in the registration statements (Nos.
333-218693, 333-203857, and 333-140152) on Form S-8 of our reports dated February 24, 2025, with respect to the consolidated financial
statements of Martin Midstream Partners L.P. and the effectiveness of internal control over financial reporting.
/s/ KPMG LLP
Dallas, Texas
February 24, 2025
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant 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 the statements
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 the financial
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 Exchange
Act 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 registrant
and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
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 our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes 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 the
effectiveness 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 recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, 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 the
registrant’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 reasonably
likely 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 control
over financial reporting.
February 24, 2025
/s/ Robert D. Bondurant
Robert D. Bondurant, 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 OFFICER
Pursuant to 17 CFR 240.13a-14(a)/15d-14(a)
(Section 302 of the Sarbanes-Oxley Act of 2002)
I, Sharon L. Taylor, 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 the statements
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 the financial
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 Exchange
Act 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 registrant
and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
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 our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes 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 the
effectiveness 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 recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, 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 the
registrant’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 reasonably
likely 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 control
over financial reporting.
February 24, 2025
/s/ Sharon L. Taylor
Sharon L. Taylor, Executive Vice President and
Chief Financial Officer of
Martin Midstream GP LLC,
the General Partner of Martin Midstream Partners L.P.
Exhibit 32.1
CERTIFICATION 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 the year
ended December 31, 2024, as filed with the Securities and Exchange Commission (the “Report”), I, Robert D. Bondurant, Chief Executive Officer of Martin
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. Section 1350), 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 Executive Officer of Martin Midstream GP LLC,
General Partner of Martin Midstream Partners L.P.
February 24, 2025
*A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished
to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION 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 the year
ended December 31, 2024, as filed with the Securities and Exchange Commission (the “Report”), I, Sharon L. Taylor, Chief Financial Officer of Martin
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. Section 1350), 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/ Sharon L. Taylor
Sharon L. Taylor,
Chief Financial Officer
of Martin Midstream GP LLC,
General Partner of Martin Midstream Partners L.P.
February 24, 2025
*A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished
to the Securities and Exchange Commission or its staff upon request.