Martin Midstream Partners Reports Third Quarter 2021 Financial Results and Declares Quarterly Cash Distribution

·21 min read
  • Third quarter 2021 financial performance beats internal projections despite impact from Hurricane Ida

  • Reported net loss of $6.9 million and $11.0 million for the three and nine months ended September 30, 2021, respectively

  • Reported adjusted EBITDA of $21.5 million and $74.9 million for the three and nine months ended September 30, 2021, respectively

  • Generated distributable cash flow of $5.2 and $25.3 million for the three and nine months ended September 30, 2021, respectively

  • Declares quarterly distribution of $0.005 or $0.02 per unit annually

KILGORE, Texas, October 20, 2021--(BUSINESS WIRE)--Martin Midstream Partners L.P. (Nasdaq:MMLP) (the "Partnership") today announced its financial results for the third quarter of 2021.

Bob Bondurant, President and Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership stated, "The Partnership’s third quarter performance exceeded our expectations, and we now expect to meet the top end of the range of our 2021 financial guidance for adjusted EBITDA of $95 to $102 million.

"On August 29, 2021, Hurricane Ida made landfall in Louisiana as a Category 4 storm with sustained winds of 150 miles per hour. Despite this extremely dangerous event, I am happy to report there were no injuries to our employees, although some did suffer damage to homes and property. The Partnership sustained minimal damage to assets in and around Port Fourchon. Further, in the days and weeks following the storm we were able to provide alternative storage and terminalling services from our Galveston terminal as needed.

"Turning to our results, in the Terminalling and Storage segment, demand for lubricants and grease products remains strong and our distribution lanes have been able to fulfill customer requirements even as the supply chain has been disordered. Within the Sulfur Services segment, the pure sulfur business continues to improve along with increased refinery utilization. Further downstream fertilizer sales and margins are outperforming as commodity prices remain strong for corn and cotton. In Transportation, our marine equipment utilization continues to increase as fundamentals in the industry improve and demand for trucking services remains elevated resulting in improved economics for the business segment.

"Finally, as is typical, the Natural Gas Liquids segment substantially increased butane inventory volumes in the third quarter to meet our customers' requirements throughout the winter gasoline blending season. Since this inventory build is concurrent with our weakest cash flow quarter due to the seasonality of both the fertilizer and butane businesses, a temporary rise in leverage occurs. Accordingly, at September 30, 2021, leverage increased to 5.5 times from 5.3 times at June 30, 2021. However, this increase is transitory and leverage is expected to significantly decrease by year-end, driven by the Partnership’s reduced working capital needs and strong financial performance."

THIRD QUARTER 2021 OPERATING RESULTS BY BUSINESS SEGMENT

TERMINALLING AND STORAGE ("T&S")

T&S Operating Income for the three months ended September 30, 2021 and 2020 was $4.4 million and $7.0 million, respectively.

Adjusted segment EBITDA for T&S was $11.2 million and $14.2 million, for the three month periods ended September 30, 2021 and 2020, respectively, reflecting increased utilities expense coupled with expired capital recovery fees at the Smackover Refinery, the disposition of our Mega Lubricants business in the 4th quarter of 2020, and increased utilities and repairs and maintenance expense at our Specialty Terminals.

TRANSPORTATION

Transportation Operating Income for the three months ended September 30, 2021 and 2020 was $3.9 million and $1.1 million, respectively.

Adjusted segment EBITDA for Transportation was $7.6 million and $5.5 million for the three months ended September 30, 2021 and 2020, respectively, reflecting higher rates counterbalanced by rising labor and operating costs along with increased land transportation load count, offset by lower marine day rates coupled with a reduction in marine equipment.

SULFUR SERVICES

Sulfur Services Operating Income for the three months ended September 30, 2021 and 2020 was $2.3 million and $5.6 million, respectively.

Adjusted segment EBITDA for Sulfur Services was $4.9 million and $4.2 million for the three months ended September 30, 2021 and 2020, respectively, reflecting increased fertilizer volumes and margins offset by lower sulfur volumes during the third quarter of 2021.

NATURAL GAS LIQUIDS ("NGL")

NGL Operating Income for the three months ended September 30, 2021 and 2020 was $1.6 million and $1.8 million, respectively.

Adjusted segment EBITDA for NGL was $1.8 million and $2.8 million for the three months ended September 30, 2021 and 2020, respectively, primarily reflecting a decrease in volumes as 2020 benefited from an increased seasonal demand, offset by higher NGL margins.

UNALLOCATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSE ("USGA")

USGA expenses included in operating income for the three months ended September 30, 2021 and 2020 were $4.0 million and $4.5 million, respectively.

USGA expenses included in adjusted EBITDA for the three months ended September 30, 2021 and 2020 were $4.0 million and $4.2 million, respectively, primarily reflecting a reduction in overhead allocated from Martin Resource Management.

LIQUIDITY

At September 30, 2021, the Partnership had $208.5 million drawn on its $275 million revolving credit facility, an increase of $29 million from June 30, 2021. The Partnership’s leverage ratio, as calculated under the revolving credit facility, was 5.5 times and 5.3 times on September 30, 2021 and June 30, 2021, respectively. The Partnership was in compliance with all debt covenants as of September 30, 2021.

QUARTERLY CASH DISTRIBUTION

The Partnership has declared a quarterly cash distribution of $0.005 per unit for the quarter ended September 30, 2021. The distribution is payable on November 12, 2021 to common unitholders of record as of the close of business on November 5, 2021. The ex-dividend date for the cash distribution is November 4, 2021.

QUALIFIED NOTICE TO NOMINEES

This release serves as qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b)(4) and (d). Please note that 100 percent of the Partnership's distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of the Partnership's distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate for individuals or corporations, as applicable. Nominees, and not the Partnership, are treated as withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.

COVID-19 RESPONSE

The Partnership continues to evaluate protocols in response to the COVID-19 pandemic, including the impact of variants of COVID-19, such as the Delta variant. Where possible, employee work from home initiatives remain and travel restrictions have been lifted. Employees are encouraged to continue to exercise safety measures to protect the welfare of each other and the communities they serve.

RESULTS OF OPERATIONS

The Partnership had a net loss for the three months ended September 30, 2021 of $6.9 million, a loss of $0.17 per limited partner unit. The Partnership had a net loss for the three months ended September 30, 2020 of $10.8 million, a loss of $0.27 per limited partner unit. Adjusted EBITDA for the three months ended September 30, 2021 was $21.5 million compared to the three months ended September 30, 2020 of $22.5 million. Distributable cash flow for the three months ended September 30, 2021 was $5.2 million compared to the three months ended September 30, 2020 of $8.1 million.

The Partnership had a net loss for the nine months ended September 30, 2021 of $11.0 million, a loss of $0.28 per limited partner unit. The Partnership had a net loss for the nine months ended September 30, 2020 of $4.2 million, a loss of $0.11 per limited partner unit. Adjusted EBITDA for the nine months ended September 30, 2021 was $74.9 million compared to the nine months ended September 30, 2020 of $77.5 million. Distributable cash flow for the nine months ended September 30, 2021 was $25.3 million compared to the nine months ended September 30, 2020 of $38.9 million.

Revenues for the three months ended September 30, 2021 were $211.3 million compared to the three months ended September 30, 2020 of $152.5 million. Revenues for the nine months ended September 30, 2021 were $596.5 million compared to the nine months ended September 30, 2020 of $492.1 million.

EBITDA, adjusted EBITDA, distributable cash flow and adjusted free cash flow are non-GAAP financial measures which are explained in greater detail below under the heading "Use of Non-GAAP Financial Information." The Partnership has also included below a table entitled "Reconciliation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Adjusted Free Cash Flow" in order to show the components of these non-GAAP financial measures and their reconciliation to the most comparable GAAP measurement.

An attachment included in the Current Report on Form 8-K to which this announcement is included, contains a comparison of the Partnership’s adjusted EBITDA for the third quarter 2021 to the Partnership's adjusted EBITDA for the third quarter 2020.

Investors' Conference Call

Date: Thursday, October 21, 2021

Time: 8:00 a.m. CT (please dial in by 7:55 a.m.)

Dial In #: (833) 900-2251

Conference ID: 8571037

Replay Dial In # (800) 585-8367 – Conference ID: 8571037

A webcast of the conference call will also be available by visiting the Events and Presentations section under Investor Relations on our website at www.MMLP.com.

About Martin Midstream Partners

Martin Midstream Partners L.P., headquartered in Kilgore, Texas, is a publicly traded limited partnership with a diverse set of operations focused primarily in the United States Gulf Coast region. The Partnership's primary business lines include: (1) terminalling, processing, storage, and packaging services for petroleum products and by-products; (2) land and marine transportation services for petroleum products and by-products, chemicals, and specialty products; (3) sulfur and sulfur-based products processing, manufacturing, marketing and distribution; and (4) natural gas liquids marketing, distribution and transportation services. To learn more, visit www.MMLP.com. Follow Martin Midstream Partners L.P. on LinkedIn and Facebook.

Forward-Looking Statements

Statements about the Partnership’s outlook and all other statements in this release other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all references to guidance or to financial or operational estimates or projections rely on a number of assumptions concerning future events and are subject to a number of uncertainties, including (i) the current and potential impacts of the COVID-19 pandemic generally, on an industry-specific basis, and on the Partnership’s specific operations and business, (ii) the effects of the continued volatility of commodity prices and the related macroeconomic and political environment, and (iii) other factors, many of which are outside its control, which could cause actual results to differ materially from such statements. While the Partnership believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in anticipating or predicting certain important factors. A discussion of these factors, including risks and uncertainties, is set forth in the Partnership’s annual and quarterly reports filed from time to time with the Securities and Exchange Commission. The Partnership disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events, or otherwise except where required to do so by law.

Use of Non-GAAP Financial Information

The Partnership's management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP") to analyze its performance. These include: (1) net income before interest expense, income tax expense, and depreciation and amortization ("EBITDA"), (2) adjusted EBITDA, (3) distributable cash flow and (4) adjusted free cash flow. The Partnership's management views these measures as important performance measures of core profitability for its operations and the ability to generate and distribute cash flow, and as key components of its internal financial reporting. The Partnership's management believes investors benefit from having access to the same financial measures that management uses.

EBITDA and Adjusted EBITDA. The Partnership defines 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. 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. The Partnership has included information concerning EBITDA and adjusted EBITDA because it provides investors and management with additional information to better understand the following: financial performance of the Partnership's assets without regard to financing methods, capital structure or historical cost basis; the Partnership's operating performance and return on capital as compared to those of other similarly situated entities; and the viability of acquisitions and capital expenditure projects. The Partnership's method of computing adjusted EBITDA may not be the same method used to compute similar measures reported by other entities. The economic substance behind the Partnership's use of adjusted EBITDA is to measure the ability of the Partnership's assets to generate cash sufficient to pay interest costs, support its indebtedness and make distributions to its unitholders.

Distributable Cash Flow. The Partnership defines Distributable Cash Flow as Adjusted EBITDA less cash paid for interest, cash paid for income taxes, maintenance capital expenditures, and plant turnaround costs. Distributable cash flow is a significant performance measure used by the Partnership's management and by external users of its financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by the Partnership to the cash distributions it expects to pay unitholders. Distributable cash flow is also an important financial measure for the Partnership's unitholders since it serves as an indicator of the Partnership's success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not the Partnership is generating cash flow at a level that can sustain or support an increase in its 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.

Adjusted Free Cash Flow. Adjusted free cash flow is defined 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 the Partnership's 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. The Partnership believes 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. The Partnership's calculation of adjusted free cash flow may or may not be comparable to similarly titled measures used by other entities.

EBITDA, adjusted EBITDA, distributable cash flow, and adjusted free cash flow should not be considered alternatives to, or more meaningful than, net income, cash flows from operating activities, or any other measure presented in accordance with GAAP. The Partnership's method of computing these measures may not be the same method used to compute similar measures reported by other entities.

MMLP-F

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(Dollars in thousands)

September 30,
2021

December 31,
2020

(Unaudited)

(Audited)

Assets

Cash

$

6,783

$

4,958

Accounts and other receivables, less allowance for doubtful accounts of $272 and $261, respectively

75,676

52,748

Inventories

98,139

54,122

Due from affiliates

10,133

14,807

Other current assets

10,441

8,991

Total current assets

201,172

135,626

Property, plant and equipment, at cost

894,767

889,108

Accumulated depreciation

(543,309)

(509,237)

Property, plant and equipment, net

351,458

379,871

Goodwill

16,823

16,823

Right-of-use assets

21,267

22,260

Deferred income taxes, net

20,834

22,253

Other assets, net

2,684

2,805

Total assets

$

614,238

$

579,638

Liabilities and Partners’ Capital (Deficit)

Current installments of long-term debt and finance lease obligations

$

240

$

31,497

Trade and other accounts payable

73,273

51,900

Product exchange payables

1,387

373

Due to affiliates

5,469

435

Income taxes payable

401

556

Fair value of derivatives

5,049

207

Other accrued liabilities

21,696

34,407

Total current liabilities

107,515

119,375

Long-term debt, net

547,090

484,597

Finance lease obligations

108

289

Operating lease liabilities

14,960

15,181

Other long-term obligations

8,721

7,067

Total liabilities

678,394

626,509

Commitments and contingencies

Partners’ capital (deficit)

(58,157)

(46,871)

Accumulated other comprehensive loss

(5,999)

Total partners’ capital (deficit)

(64,156)

(46,871)

Total liabilities and partners' capital (deficit)

$

614,238

$

579,638

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per unit amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Revenues:

Terminalling and storage *

$

18,980

$

20,706

$

56,060

$

61,088

Transportation *

39,079

31,938

103,820

102,364

Sulfur services

2,950

2,915

8,849

8,744

Product sales: *

Natural gas liquids

91,764

52,350

257,081

164,860

Sulfur services

27,887

18,965

95,109

74,879

Terminalling and storage

30,598

25,659

75,606

80,119

150,249

96,974

427,796

319,858

Total revenues

211,258

152,533

596,525

492,054

Costs and expenses:

Cost of products sold: (excluding depreciation and amortization)

Natural gas liquids *

85,137

44,908

225,862

139,036

Sulfur services *

20,266

13,313

65,657

46,167

Terminalling and storage *

24,167

19,124

58,895

64,242

129,570

77,345

350,414

249,445

Expenses:

Operating expenses *

50,098

43,105

142,045

138,589

Selling, general and administrative *

9,739

10,339

29,308

30,659

Depreciation and amortization

13,945

15,276

42,862

45,858

Total costs and expenses

203,352

146,065

564,629

464,551

Other operating income (loss), net

61

23

(610)

2,548

Gain on involuntary conversion of property, plant and equipment

186

4,522

186

4,522

Operating income

8,153

11,013

31,472

34,573

Other income (expense):

Interest expense, net

(14,110)

(12,943)

(40,372)

(32,245)

Gain on retirement of senior unsecured notes

3,484

Loss on exchange of senior unsecured notes

(8,516)

(8,516)

Other, net

(1)

7

Total other expense

(14,110)

(21,459)

(40,373)

(37,270)

Net loss before taxes

(5,957)

(10,446)

(8,901)

(2,697)

Income tax expense

(954)

(373)

(2,111)

(1,510)

Net loss

(6,911)

(10,819)

(11,012)

(4,207)

Less general partner's interest in net loss

138

216

220

84

Less loss allocable to unvested restricted units

20

53

30

8

Limited partners' interest in net loss

$

(6,753)

$

(10,550)

$

(10,762)

$

(4,115)

Net loss per unit attributable to limited partners - basic

$

(0.17)

$

(0.27)

$

(0.28)

$

(0.11)

Net loss per unit attributable to limited partners - diluted

$

(0.17)

$

(0.27)

$

(0.28)

$

(0.11)

Weighted average limited partner units - basic

38,687,874

38,661,852

38,689,434

38,654,891

Weighted average limited partner units - diluted

38,687,874

38,661,852

38,689,434

38,654,891

*Related Party Transactions Shown Below

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per unit amounts)

*Related Party Transactions Included Above

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Revenues:*

Terminalling and storage

$

15,866

$

15,902

$

46,741

$

47,718

Transportation

5,564

5,514

14,463

16,801

Product Sales

68

69

253

199

Costs and expenses:*

Cost of products sold: (excluding depreciation and amortization)

Sulfur services

2,441

2,512

7,379

7,833

Terminalling and storage

7,259

4,303

18,863

14,329

Expenses:

Operating expenses

20,088

18,915

58,046

60,126

Selling, general and administrative

7,659

8,356

23,624

24,723

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Dollars in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Net loss

$

(6,911)

$

(10,819)

$

(11,012)

$

(4,207)

Changes in fair values of commodity cash flow hedges

(5,999)

(5,999)

Comprehensive loss

$

(12,910)

$

(10,819)

$

(17,011)

$

(4,207)

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF CAPITAL (DEFICIT)

(Unaudited)

(Dollars in thousands)

Partners’ Capital (Deficit)

Common Limited

General
Partner
Amount

Accumulated
Other
Comprehensive
Income (Loss)

Units

Amount

Total

Balances - January 1, 2020

38,863,389

$

(38,342)

$

2,146

$

$

(36,196)

Net loss

(4,123)

(84)

(4,207)

Issuance of restricted units

81,000

Forfeiture of restricted units

(84,134)

Cash distributions

(5,019)

(102)

(5,121)

Unit-based compensation

1,070

1,070

Purchase of treasury units

(7,748)

(9)

(9)

Balances - September 30, 2020

38,852,507

$

(46,423)

$

1,960

$

$

(44,463)

Balances - January 1, 2021

38,851,174

$

(48,776)

$

1,905

$

$

(46,871)

Net loss

(10,792)

(220)

(11,012)

Issuance of restricted units

42,168

Forfeiture of restricted units

(83,436)

Cash distributions

(581)

(12)

(593)

Unit-based compensation

336

336

Changes in fair values of commodity cash flow hedges

(5,999)

(5,999)

Purchase of treasury units

(7,156)

(17)

(17)

Balances - September 30, 2021

38,802,750

$

(59,830)

$

1,673

$

(5,999)

$

(64,156)

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

Nine Months Ended

September 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(11,012)

$

(4,207)

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

Depreciation and amortization

42,862

45,858

Amortization of deferred debt issuance costs

2,585

2,674

Amortization of premium on notes payable

(191)

Deferred income tax expense

1,419

1,202

Loss on sale of property, plant and equipment, net

610

153

Gain on involuntary conversion of property, plant and equipment

(186)

(4,522)

Non-cash impact related to exchange of senior unsecured notes

(749)

Gain on retirement of senior unsecured notes

(3,484)

Derivative (income) loss

1,825

(815)

Net cash received (paid) for commodity derivatives

(2,982)

539

Non-cash unit-based compensation

336

1,070

Change in current assets and liabilities, excluding effects of acquisitions and dispositions:

Accounts and other receivables

(22,924)

30,012

Product exchange receivables

(212)

Inventories

(44,353)

(15,184)

Due from affiliates

4,674

(1,103)

Other current assets

(1,912)

(6,130)

Trade and other accounts payable

21,092

(17,117)

Product exchange payables

1,014

(1,278)

Due to affiliates

5,034

(1,003)

Income taxes payable

(155)

(137)

Other accrued liabilities

(10,536)

(5,534)

Change in other non-current assets and liabilities

203

(692)

Net cash provided by (used in) operating activities

(12,406)

19,150

Cash flows from investing activities:

Payments for property, plant and equipment

(11,449)

(23,705)

Payments for plant turnaround costs

(2,679)

(637)

Proceeds from involuntary conversion of property, plant and equipment

274

7,203

Proceeds from sale of property, plant and equipment

225

4,392

Net cash used in investing activities

(13,629)

(12,747)

Cash flows from financing activities:

Payments of long-term debt

(211,790)

(253,637)

Payments under finance lease obligations

(2,648)

(4,021)

Proceeds from long-term debt

243,500

259,019

Purchase of treasury units

(17)

(9)

Payment of debt issuance costs

(592)

(3,628)

Cash distributions paid

(593)

(5,121)

Net cash provided by (used in) financing activities

27,860

(7,397)

Net increase (decrease) in cash

1,825

(994)

Cash at beginning of period

4,958

2,856

Cash at end of period

$

6,783

$

1,862

Non-cash additions to property, plant and equipment

$

749

$

1,432

MARTIN MIDSTREAM PARTNERS L.P.

SEGMENT OPERATING INCOME

(Unaudited)

(Dollars and volumes in thousands, except BBL per day)

Terminalling and Storage Segment

Comparative Results of Operations for the Three Months Ended September 30, 2021 and 2020

Three Months Ended
September 30,

Variance

Percent
Change

2021

2020

(In thousands, except BBL per day)

Revenues:

Services

$

20,628

$

22,512

$

(1,884)

(8)

%

Products

30,598

25,676

4,922

19

%

Total revenues

51,226

48,188

3,038

6

%

Cost of products sold

24,618

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