# Martin Midstream Partners L.P.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Martin Midstream Partners L.P.](/companies/mmlp.md) (CIK 1176334)
- Form: 10-Q
- Filed: 2024-10-21
- Accepted by EDGAR: Oct 21, 2024, 16:02 ET
- Period: 2024-09-30
- Accession: 0001176334-24-000134
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1176334/000117633424000134/mmlp-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1176334/000117633424000134/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $170.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $536.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $71.0m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $225.4m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $12.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $32.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $12.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $50.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $14.6m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $42.8m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $3.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$3.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $3.7m | us-gaap:NetIncomeLoss |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $6.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-07-01 to 2024-09-30 | $12.5m | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $34.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $56.0k | us-gaap:Cash |
| Current assets | at 2024-09-30 | $148.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $554.8m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $94.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $616.1m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $469.3m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $0 | us-gaap:LongTermDebtCurrent |

## Management's discussion and analysis

As filed, 63,784 characters.

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated and condensed financial statements and the notes thereto included elsewhere in this quarterly report.

### 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 natural gas liquids and blending and packaging services for specialty lubricants and grease.

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

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 September 30, 2024, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units and 100% of MMGP Holdings, LLC ("Holdings"), which is the sole member of Martin Midstream GP LLC ("MMGP"), our general partner. MMGP owns a 2.0% general partner interest in us.

We entered into the Omnibus Agreement 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. 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 our 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.

### Significant Recent Developments

*Merger Agreement.* On May 24, 2024, Martin Resource Management Corporation filed an amendment to its Schedule 13D with the SEC disclosing that Martin Resource Management Corporation made a non-binding proposal to the Board, pursuant to which Martin Resource Management Corporation would acquire all the outstanding common units of the Partnership not already owned by Martin Resource Management Corporation and its subsidiaries.

On October 3, 2024, Martin Resource Management Corporation, Merger Sub, the Partnership, and MMGP, entered into a Merger Agreement pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as a wholly owned subsidiary of Martin Resource Management Corporation. See Note 18 to our unaudited condensed consolidated financial statements for additional information.

*Galveston Bridge Allision.* During May 2024, we experienced a casualty loss of $0.5 million that represents two separate insurance deductibles under our marine transportation protection and indemnity coverage policy and our hull coverage policy stemming from a bridge allision in Galveston, Texas.

*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 MTI, will also provide land transportation services for the ELSA produced by DSM. We expect to fund approximately $27.0 million in aggregate capital expenditures in connection with this joint venture. 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. As of September 30, 2024, we have funded approximately $26.4 million toward ELSA related project costs.

### Subsequent Events

*Quarterly Distribution.* On October 16, 2024, we declared a quarterly cash distribution of $0.005 per common unit for the third quarter of 2024, or $0.020 per common unit on an annualized basis, which will be paid on November 14, 2024, to unitholders of record as of November 7, 2024.

### Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on the historical consolidated and condensed financial statements included elsewhere herein. We prepared these financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires 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 base 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. See the "Critical Accounting Policies and Estimates" section in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2, "Significant Accounting Policies" in Notes to Consolidated Financial Statements included within our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.

### 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

Martin Resource Management Corporation owns approximately 15.7% of the outstanding limited partner units and indirectly owns 100% of MMGP, our general partner, through its 100% interest in Holdings, which is the sole member of MMGP. 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 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 $46.2 million of direct costs and expenses for the three months ended September 30, 2024, compared to $43.2 million for the three months ended September 30, 2023. We reimbursed Martin Resource Management Corporation for $128.4 million of direct costs and expenses for the nine months ended September 30, 2024, compared to $122.7 million for the nine months ended September 30, 2023. 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. In each of the three months ended September 30, 2024 and 2023, the Conflicts Committee approved reimbursement amounts of $3.4 million and $3.5 million, respectively. In each of the nine months ended September 30, 2024 and 2023, the Conflicts Committee approved reimbursement amounts of $10.1 million and $10.5 million, respectively. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually. These indirect expenses covered the centralized corporate functions Martin Resource Management Corporation provides for us, 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. 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.

These additional related party 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 refer to "Item 13. Certain Relationships and Related Transactions, and Director Independence" set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.

### 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, the impact of related party transactions included in total costs and expenses accounted for approximately 31% and 29% of our total costs and expenses during the three months ended September 30, 2024 and 2023, respectively. In the aggregate, the impact of related party transactions included in total costs and expenses accounted for approximately 29% and 23% of our total costs and expenses during the nine months ended September 30, 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 15% of our total revenues for the three months ended September 30, 2024 and 2023, respectively. Our sales to Martin Resource Management Corporation accounted for approximately 15% and 13% of our total revenues for the nine months ended September 30, 2024 and 2023, respectively.

For a more comprehensive discussion concerning the agreements that we have entered into with Martin Resource Management Corporation, please refer to "Item 13. Certain Relationships and Related Transactions, and Director Independence" set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.

### Approval and Review of Related Party Transactions

If we contemplate entering into a transaction, other than a routine or in the ordinary course of business transaction, in which a related person will have a direct or indirect material interest, the proposed transaction is submitted for consideration to the board of directors of our general partner or to our management, as appropriate. If the board of directors of our general partner is involved in the approval process, it determines whether to refer the matter to the Conflicts Committee of our general partner's board of directors, as constituted under our limited partnership agreement. If a matter is referred to the Conflicts Committee, the Conflicts Committee obtains information regarding the proposed transaction from management and determines whether to engage independent legal counsel or an independent financial advisor to advise the members of the committee regarding the transaction. If 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.

### 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.

*EBITDA, 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. 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.

*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 three and nine months ended September 30, 2024 and 2023, which represents EBITDA, adjusted EBITDA, Credit Adjusted EBITDA, distributable cash flow, and adjusted free cash flow:

### Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA, and Credit Adjusted EBITDA

*(in thousands)*

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| **Net income (loss)** | $(3,319) | $(1,061) | $3,734 | $(5,066) |
| Adjustments: |  |  |  |  |
| Interest expense | 14,592 | 14,994 | 42,811 | 45,914 |
| Income tax expense | 1,066 | 788 | 3,634 | 3,619 |
| Depreciation and amortization | 12,608 | 12,223 | 37,944 | 37,671 |
| **EBITDA** | 24,947 | 26,944 | 88,123 | 82,138 |
| Adjustments: |  |  |  |  |
| Gain on disposition or sale of property, plant and equipment | (159) | (811) | (1,320) | (1,096) |
| Loss on extinguishment of debt | — | — | — | 5,121 |
| Equity in (earnings) loss of DSM Semichem LLC | 314 | — | 314 | — |
| Lower of cost or net realizable value and other non-cash adjustments | — | — | — | (12,850) |
| Unit-based compensation | 42 | 37 | 145 | 127 |
| **Adjusted EBITDA** | $25,144 | $26,170 | $87,262 | $73,440 |
| Adjustments: |  |  |  |  |
| Less: net loss associated with butane optimization business | — | — | — | 2,255 |
| Plus: lower of cost or net realizable value and other non-cash adjustments | — | $— | — | 12,850 |
| **Credit Adjusted EBITDA** | $25,144 | $26,170 | $87,262 | $88,545 |

35

**Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA, Credit Adjusted EBITDA, Distributable Cash Flow, and Adjusted Free Cash Flow**

*(in thousands)*

*(in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| **Net cash provided by (used in) operating activities** | $(15,753) | $7,291 | $6,184 | $106,065 |
| Interest expense 1 | 13,220 | 13,623 | 38,700 | 41,108 |
| Current income tax expense | 935 | 333 | 3,477 | 1,297 |
| Lower of cost or net realizable value 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 | 22,489 | (5,983) | 32,128 | (98,485) |
| Trade, accounts and other payables, and other current liabilities | 4,032 | 11,155 | 7,474 | 35,285 |
| Other | 221 | (249) | (701) | 1,020 |
| **Adjusted EBITDA** | 25,144 | 26,170 | 87,262 | 73,440 |
| Adjustments: |  |  |  |  |
| Less: net loss associated with butane optimization business | — | — | — | 2,255 |
| Plus: lower of cost or net realizable value and other non-cash adjustments | — | — | — | 12,850 |
| **Credit Adjusted EBITDA** | 25,144 | 26,170 | 87,262 | 88,545 |
| Adjustments: |  |  |  |  |
| Interest expense | (14,592) | (14,994) | (42,811) | (45,914) |
| Income tax expense | (1,066) | (788) | (3,634) | (3,619) |
| Deferred income taxes | 131 | 455 | 157 | 2,322 |
| Amortization of debt discount | 600 | 600 | 1,800 | 1,600 |
| Amortization of deferred debt issuance costs | 772 | 771 | 2,311 | 3,206 |
| Payments for plant turnaround costs | (2,894) | (1,706) | (9,599) | (2,367) |
| Maintenance capital expenditures | (5,738) | (5,516) | (17,949) | (19,588) |
| **Distributable cash flow** | 2,357 | 4,992 | 17,537 | 24,185 |
| Principal payments under finance lease obligations | (4) | — | (5) | (9) |
| Investment in DSM Semichem LLC | — | — | (6,938) | — |
| Expansion capital expenditures | (3,903) | (3,444) | (15,584) | (6,126) |
| **Adjusted free cash flow** | $(1,550) | $1,548 | $(4,990) | $18,050 |

1 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.

### Results of Operations

The results of operations for the three and nine months ended September 30, 2024 and 2023, have been derived from our consolidated and condensed financial statements.

We evaluate segment performance on the basis of operating income, which is derived by subtracting cost of products sold, operating expenses, selling, general and administrative expenses, and depreciation and amortization expense from revenues. The following table sets forth our operating revenues and operating income by segment for the three and nine months ended September 30, 2024 and 2023. The results of operations for these interim periods are not necessarily indicative of the results of operations which might be expected for the entire year.

Our consolidated and condensed 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 following the comparative discussion of our results within each segment.

### Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

*(In thousands)*

| Three Months Ended September 30, 2024 | Operating Revenues | Intersegment Revenues Eliminations | Operating Revenues after Eliminations | Operating Income (Loss) | Operating Income (Loss) Intersegment Eliminations | Operating Income (Loss) after Eliminations |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Terminalling and storage | $24,414 | $(1,852) | $22,562 | $2,675 | $(1,761) | $914 |
| Transportation | 60,196 | (3,690) | 56,506 | 8,583 | (3,725) | 4,858 |
| Sulfur services | 24,660 | — | 24,660 | 1,254 | 3,465 | 4,719 |
| Specialty products | 67,225 | (19) | 67,206 | 3,881 | 2,021 | 5,902 |
| Indirect selling, general and administrative | — | — | — | (3,742) | — | (3,742) |
| Total | $176,495 | $(5,561) | $170,934 | $12,651 | $— | $12,651 |

*(In thousands)*

| Three Months Ended September 30, 2023 | Operating Revenues | Intersegment Revenues Eliminations | Operating Revenues after Eliminations | Operating Income (Loss) | Operating Income (Loss) Intersegment Eliminations | Operating Income (Loss) after Eliminations |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Terminalling and storage | $23,973 | $(1,771) | $22,202 | $3,107 | $(1,750) | $1,357 |
| Transportation | 58,541 | (3,318) | 55,223 | 6,677 | (3,354) | 3,323 |
| Sulfur services | 32,577 | — | 32,577 | 2,743 | 3,250 | 5,993 |
| Specialty products | 66,720 | (25) | 66,695 | 6,014 | 1,854 | 7,868 |
| Indirect selling, general and administrative | — | — | — | (3,837) | — | (3,837) |
| Total | $181,811 | $(5,114) | $176,697 | $14,704 | $— | $14,704 |

37

### Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

*(In thousands)*

| Nine Months Ended September 30, 2024 | Operating Revenues | Intersegment Revenues Eliminations | Operating Revenues after Eliminations | Operating Income (Loss) | Operating Income (Loss) Intersegment Eliminations | Operating Income (Loss) after Eliminations |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Terminalling and storage | $73,101 | $(5,647) | $67,454 | $9,634 | $(5,447) | $4,187 |
| Transportation | 183,705 | (11,216) | 172,489 | 26,450 | (11,324) | 15,126 |
| Sulfur services | 95,534 | (1) | 95,533 | 12,402 | 10,218 | 22,620 |
| Specialty products | 200,888 | (69) | 200,819 | 13,384 | 6,553 | 19,937 |
| Indirect selling, general and administrative | — | — | — | (11,397) | — | (11,397) |
| Total | $553,228 | $(16,933) | $536,295 | $50,473 | $— | $50,473 |

*(In thousands)*

| Nine Months Ended September 30, 2023 | Operating Revenues | Intersegment Revenues Eliminations | Operating Revenues after Eliminations | Operating Income (Loss) | Operating Income (Loss) Intersegment Eliminations | Operating Income (Loss) after Eliminations |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Terminalling and storage | $71,798 | $(7,054) | $64,744 | $10,661 | $(7,004) | $3,657 |
| Transportation | 178,875 | (13,179) | 165,696 | 25,135 | (13,288) | 11,847 |
| Sulfur services | 108,586 | — | 108,586 | 12,582 | 9,308 | 21,890 |
| Specialty products | 277,895 | (59) | 277,836 | 13,089 | 10,984 | 24,073 |
| Indirect selling, general and administrative | — | — | — | (11,929) | — | (11,929) |
| Total | $637,154 | $(20,292) | $616,862 | $49,538 | $— | $49,538 |

38

### Terminalling and Storage Segment

### Comparative Results of Operations for the Three Months Ended September 30, 2024 and 2023

*(In thousands, except BBL per day)*

|  | Three Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $24,414 | $23,973 | $441 | 2% |
| Cost of products sold | 23 | 23 | — | —% |
| Operating expenses | 14,857 | 15,078 | (221) | (1)% |
| Selling, general and administrative expenses | 1,130 | 628 | 502 | 80% |
| Depreciation and amortization | 5,695 | 5,102 | 593 | 12% |
|  | 2,709 | 3,142 | (433) | (14)% |
| Loss on disposition or sale of property, plant and equipment | (34) | (35) | 1 | 3% |
| Operating income | $2,675 | $3,107 | $(432) | (14)% |
| Shore-based throughput volumes (gallons) | 42,242 | 40,655 | 1,587 | 4% |
| Smackover refinery throughput volumes (guaranteed minimum BBL per day) | 6,500 | 6,500 | — | —% |

*Revenues.* Revenues increased $0.4 million. Revenue at our shore-based terminals increased $0.6 million, including $0.5 million in fuel throughput and $0.1 million in space rent. In addition, revenue at our specialty terminals increased $0.7 million primarily as a result of higher throughput and service revenue. Revenue at our Smackover refinery decreased $0.8 million primarily as a result of decreased natural gas surcharge revenue due to a reduction in usage.

*Operating expenses.* Operating expenses decreased primarily due to lower natural gas utility expense of $0.9 million resulting from a reduction in usage. This decrease was offset by increases in repairs and maintenance of $0.3 million across our specialty terminals, lease expense of $0.3 million related to operating equipment at our Smackover refinery, and employee-related expenses of $0.2 million.

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

*Depreciation and amortization.* The increase in depreciation and amortization is primarily the result of capital expenditures offset by recent disposals.

### Comparative Results of Operations for the Nine Months Ended September 30, 2024 and 2023

*(In thousands, except BBL per day)*

|  | Nine Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $73,101 | $71,798 | $1,303 | 2% |
| Cost of products sold | 65 | 54 | 11 | 20% |
| Operating expenses | 45,414 | 43,318 | 2,096 | 5% |
| Selling, general and administrative expenses | 2,232 | 1,510 | 722 | 48% |
| Depreciation and amortization | 16,819 | 15,896 | 923 | 6% |
|  | 8,571 | 11,020 | (2,449) | (22)% |
| Gain (loss) on disposition or sale of property, plant and equipment | 1,063 | (359) | 1,422 | 396% |
| Operating income | $9,634 | $10,661 | $(1,027) | (10)% |
| Shore-based throughput volumes (gallons) | 130,502 | 126,438 | 4,064 | 3% |
| Smackover refinery throughput volumes (guaranteed minimum) (BBL per day) | 6,500 | 6,500 | — | —% |

*Revenues.* Revenues increased $1.3 million. Revenue at our shore-based terminals increased $2.1 million, including $1.4 million in fuel throughput and $0.7 million in space rent. In addition, revenue at our specialty terminals increased $1.6 million, primarily as a result of higher throughput and service revenue. Revenue at our Smackover refinery decreased $2.4 million, primarily as a result of decreased natural gas surcharge revenue of $2.6 million due to a decrease in usage, offset by a $0.2 million increase in reservation fees.

*Operating expenses.* Operating expenses increased primarily as a result of liability insurance claims of $1.6 million (crude pipeline spill), insurance premiums of $1.0 million, employee-related expenses of $1.0 million, repairs and maintenance of $0.7 million at our Smackover refinery, operating supplies of $0.6 million and lease expense of $0.2 million. These increases were offset by a decrease in natural gas utilities of $3.0 million.

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

*Depreciation and amortization.* The increase in depreciation and amortization is primarily the result of capital expenditures offset by recent disposals.

### Transportation Segment

### Comparative Results of Operations for the Three Months Ended September 30, 2024 and 2023

*(In thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $60,196 | $58,541 | $1,655 | 3% |
| Operating expenses | 45,138 | 46,465 | (1,327) | (3)% |
| Selling, general and administrative expenses | 3,423 | 2,571 | 852 | 33% |
| Depreciation and amortization | 3,182 | 3,674 | (492) | (13)% |
|  | 8,453 | 5,831 | 2,622 | 45% |
| Gain on disposition or sale of property, plant and equipment | 130 | 846 | (716) | (85)% |
| Operating income | $8,583 | $6,677 | $1,906 | 29% |

40

*Revenues*. Revenues increased $1.7 million. In our marine transportation division, inland revenues increased $1.8 million, primarily related to higher transportation rates and utilization. Offshore revenues increased $0.3 million, primarily related to higher transportation rates. Pass-through revenue (primarily fuel) decreased $0.4 million. In our land transportation division, freight revenue increased $1.1 million, primarily due to a 3% increase in total miles. Ancillary revenue decreased $1.1 million.

*Operating expenses*. The decrease in operating expenses is primarily a result of repairs and maintenance of $1.5 million and pass-through expenses (primarily fuel) of $1.4 million, offset by increases in lease expense of $0.9 million and insurance premiums of $0.7 million. The decrease in repairs and maintenance, as well as the increase in lease expense are related to the replacement of tractors and trailers in our land transportation division.

*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 asset disposals, offset by capital expenditures.

### Comparative Results of Operations for the Nine Months Ended September 30, 2024 and 2023

*(In thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $183,705 | $178,875 | $4,830 | 3% |
| Operating expenses | 139,562 | 136,940 | 2,622 | 2% |
| Selling, general and administrative expenses | 8,150 | 7,101 | 1,049 | 15% |
| Depreciation and amortization | 10,039 | 11,196 | (1,157) | (10)% |
|  | $25,954 | $23,638 | $2,316 | 10% |
| Gain on disposition or sale of property, plant and equipment | 496 | 1,497 | (1,001) | (67)% |
| Operating income | $26,450 | $25,135 | $1,315 | 5% |

*Revenues.* Revenues increased $4.8 million. In our marine transportation division, inland revenues increased $4.5 million, primarily related to higher transportation rates, offset by a decrease in utilization associated with equipment repairs and regulatory inspections. Offshore revenues increased $0.4 million, primarily related to higher transportation rates, offset by a decrease in utilization associated with equipment repairs and regulatory inspections. Pass-through revenue (primarily fuel) decreased $0.2 million. In our land transportation division, freight revenue increased $4.9 million, primarily due to a 4% increase in total miles. Ancillary revenue decreased $4.8 million.

*Operating expenses.* The increase in operating expenses is primarily a result of lease expense of $3.9 million, insurance premiums of $1.6 million, employee-related expenses of $1.2 million, outside hauls of $0.4 million and insurance claims of $0.3 million, offset by decreases in repairs and maintenance of $3.9 million and pass-through expenses (primarily fuel) of $1.2 million. The increase in lease expense, as well as the decrease in repairs and maintenance are related to the replacement of tractors and trailers in our land transportation division.

*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 asset disposals, offset by capital expenditures.

### Sulfur Services Segment

### Comparative Results of Operations for the Three Months Ended September 30, 2024 and 2023

*(In thousands)*

| Revenues: | Three Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Services | $3,477 | $3,358 | $119 | 4% |
| Products | 21,183 | 29,219 | (8,036) | (28)% |
| Total revenues | 24,660 | 32,577 | (7,917) | (24)% |
| Cost of products sold | 15,292 | 21,972 | (6,680) | (30)% |
| Operating expenses | 3,089 | 3,510 | (421) | (12)% |
| Selling, general and administrative expenses | 2,091 | 1,713 | 378 | 22% |
| Depreciation and amortization | 2,937 | 2,639 | 298 | 11% |
|  | 1,251 | 2,743 | (1,492) | (54)% |
| Gain on disposition or sale of property, plant and equipment | 3 | — | 3 |  |
| Operating income | $1,254 | $2,743 | $(1,489) | (54)% |
| Sulfur (long tons) | 113 | 155 | (42) | (27)% |
| Fertilizer (long tons) | 29 | 58 | (29) | (50)% |
| Total sulfur services volumes (long tons) | 142 | 213 | (71) | (33)% |

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

*Products revenues.* Product revenues decreased $7.9 million. A decrease of $10.6 million was the result of a 33% decrease in sales volumes, primarily related to a 27% decrease in sulfur volumes due to reduced product movement on the Margaret Sue related to weather activity in the Gulf of Mexico when compared to the third quarter of 2023. This decrease was offset by an increase of $2.6 million due to a 9% rise in average sulfur services sales prices.

*Cost of products sold.* Cost of products sold decreased $6.7 million. A 33% decrease in sales volumes impacted cost of products sold by $7.6 million. A 4% increase in product cost impacted cost of products sold by $1.0 million, resulting from increased commodity prices. Margin per ton increased $7.46, or 22%.

*Operating expenses.* Operating expenses decreased due to a reduction of $0.2 million in outside services, $0.1 million in utilities, $0.1 million in marine pass-through expenses (primarily fuel) and $0.1 million in marine operating expenses, offset by a $0.1 million increase in repairs and maintenance.

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

*Depreciation and amortization.* Depreciation and amortization increased due to the amortization of higher turnaround spend in 2023 as compared to 2022.

### Comparative Results of Operations for the Nine Months Ended September 30, 2024 and 2023

*(In thousands)*

| Revenues: | Nine Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Services | $10,431 | $10,073 | $358 | 4% |
| Products | 85,103 | 98,513 | (13,410) | (14)% |
| Total revenues | 95,534 | 108,586 | (13,052) | (12)% |
| Cost of products sold | 60,246 | 74,062 | (13,816) | (19)% |
| Operating expenses | 8,773 | 9,595 | (822) | (9)% |
| Selling, general and administrative expenses | 5,111 | 4,292 | 819 | 19% |
| Depreciation and amortization | 8,697 | 8,072 | 625 | 8% |
|  | 12,707 | 12,565 | 142 | 1% |
| Gain (loss) on disposition or sale of property, plant and equipment | (305) | 17 | (322) | (1,894)% |
| Operating income | $12,402 | $12,582 | $(180) | (1)% |
| Sulfur (long tons) | 296 | 352 | (56) | (16)% |
| Fertilizer (long tons) | 165 | 192 | (27) | (14)% |
| Total sulfur services volumes (long tons) | 461 | 544 | (83) | (15)% |

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

*Products revenues.* Products revenues decreased $13.4 million. A decrease of $15.3 million was primarily due to a 15% reduction in sales volumes resulting from a 16% decrease in sulfur volumes due to the Margaret Sue being out of service for regulatory inspections and maintenance. This was offset by an increase of $1.9 million related to a 2% increase in average sulfur products sales prices.

*Cost of products sold.* Cost of products sold decreased $13.8 million. A 15% decrease in sales volumes resulted in a decrease in cost of products sold of $10.8 million. A 4% decrease in product cost impacted cost of products sold by $3.0 million, resulting from reduced commodity prices. Margin per ton increased $8.97, or 20%.

*Operating expenses.* Operating expenses decreased $0.8 million due to reductions of $0.4 million in utilities expense resulting from lower natural gas prices, $0.4 million in marine pass-through expenses (primarily fuel), $0.2 million in outside services, and $0.1 million in marine operating expense. These reductions were offset by an increase of $0.2 million in repairs and maintenance and $0.1 million in employment expenses.

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

*Depreciation and amortization.* Depreciation and amortization increased due to the amortization of higher turnaround spend in 2023 as compared to 2022.

### Specialty Products Segment

### Comparative Results of Operations for the Three Months Ended September 30, 2024 and 2023

*(In thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Products revenues | $67,225 | $66,720 | $505 | 1% |
| Cost of products sold | 60,445 | 58,177 | 2,268 | 4% |
| Operating expenses | 30 | 23 | 7 | 30% |
| Selling, general and administrative expenses | 2,135 | 1,698 | 437 | 26% |
| Depreciation and amortization | 794 | 808 | (14) | (2)% |
|  | 3,821 | 6,014 | (2,193) | (36)% |
| Gain on disposition or sale of of property, plant and equipment | 60 | — | 60 |  |
| Operating income | $3,881 | $6,014 | $(2,133) | (35)% |
| NGL sales volumes (Bbls) | 582 | 509 | 73 | 14% |
| Other specialty products volumes (Bbls) | 91 | 106 | (15) | (14)% |
| Total specialty products volumes (Bbls) | 673 | 615 | 58 | 9% |

*Products Revenues.* Products revenues decreased $0.5 million. Sales volumes increased 9%, increasing revenues by $5.8 million, primarily related to a 14% increase in NGL sales volumes. Our average sales price per barrel decreased $8.60, resulting in a $5.3 million decrease to revenue.

*Cost of products sold.* Cost of products sold increased $2.3 million. The increase in sales volumes of 9% resulted in a $5.2 million increase to cost of products sold. Our average cost per barrel decreased $4.78, or 5%, decreasing cost of products sold by $2.9 million. Our margins decreased $3.82 per barrel, or 27%, during the period.

*Operating expenses.* Operating expenses remained consistent.

*Selling, general and administrative expenses.* Selling, general and administrative expenses increased $0.4 million due to employee-related expenses.

*Depreciation and amortization.* Depreciation and amortization decreased as a result of capital expenditures offset by recent disposals.

### Comparative Results of Operations for the Nine Months Ended September 30, 2024 and 2023

*(In thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Products revenues | $200,888 | $277,895 | $(77,007) | (28)% |
| Cost of products sold | 179,800 | 256,898 | (77,098) | (30)% |
| Operating expenses | 81 | 55 | 26 | 47% |
| Selling, general and administrative expenses | 5,300 | 5,287 | 13 | —% |
| Depreciation and amortization | 2,389 | 2,507 | (118) | (5)% |
|  | 13,318 | 13,148 | 170 | 1% |
| Gain (loss) on disposition or sale of property, plant and equipment | 66 | (59) | 125 | 212% |
| Operating income | $13,384 | $13,089 | $295 | 2% |
| NGL sales volumes (Bbls) | 1,744 | 3,027 | (1,283) | (42)% |
| Other specialty products volumes (Bbls) | 263 | 280 | (17) | (6)% |
| Total specialty products volumes (Bbls) | 2,007 | 3,307 | (1,300) | (39)% |

*Products Revenues.* Products revenues decreased $77.0 million. A decrease of $70.5 million was the result of the exit of the butane optimization business in the second quarter of 2023. For the remaining products, sales volumes increased 1%, increasing revenues by $1.7 million, primarily related to a 2% increase in NGL sales volumes. Products revenues decreased $8.2 million as a result of a 4% reduction in average specialty products sales prices.

*Cost of products sold.* Cost of products sold decreased $77.1 million. A decrease of $72.3 million was the result of the exit of the butane optimization business in the second quarter of 2023. For the remaining products, a 3% decrease in product cost impacted cost of products sold by $6.3 million, resulting from reduced commodity prices. A 1% increase in sales volumes resulted in an increase in cost of products sold of $1.5 million.

*Operating expenses.* Operating expenses remained consistent.

*Selling, general and administrative expenses.* Selling, general and administrative expenses decreased $0.5 million associated with the exit of the butane optimization business in the second quarter of 2023 offset by an increase of $0.5 million in employee-related expenses.

*Depreciation and amortization.* Depreciation and amortization decreased due to certain assets becoming fully depreciated during the first quarter of 2023.

### Interest Expense

### Comparative Components of Interest Expense, Net for the Three Months Ended September 30, 2024 and 2023

*(In thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Credit facility | $1,874 | $1,608 | $266 | 17% |
| Senior notes | 11,500 | 11,756 | (256) | (2)% |
| Amortization of deferred debt issuance costs | 772 | 771 | 1 | —% |
| Amortization of debt discount | 600 | 600 | — | —% |
| Other | 219 | 277 | (58) | (21)% |
| Capitalized interest | (373) | (18) | (355) | (1,972)% |
| Total interest expense, net | $14,592 | $14,994 | $(402) | (3)% |

### Comparative Components of Interest Expense, Net for the Nine Months Ended September 30, 2024 and 2023

*(In thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Credit facility | $4,442 | $6,333 | $(1,891) | (30)% |
| Senior notes | 34,244 | 33,596 | 648 | 2% |
| Amortization of deferred debt issuance costs | 2,311 | 3,206 | (895) | (28)% |
| Amortization of debt discount | 1,800 | 1,600 | 200 | 13% |
| Other | 820 | 1,208 | (388) | (32)% |
| Capitalized interest | (806) | (29) | (777) | (2,679)% |
| Total interest expense, net | $42,811 | $45,914 | $(3,103) | (7)% |

### Indirect Selling, General and Administrative Expenses

*(In thousands)*

*(In thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Variance | Percent Change 2024 | Nine Months Ended September 30, 2023 |  | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Indirect selling, general and administrative expenses | $3,742 | $3,837 | $(95) | (2)% | $11,397 | $11,929 | $(532) | (4)% |

Indirect selling, general and administrative expenses decreased for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, as a result of a decrease in overhead expenses allocated from Martin Resource Management Corporation. Indirect selling, general and administrative expenses decreased for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, as a result of decreases in overhead expenses allocated from Martin Resource Management Corporation of $0.4 million and employee-related expenses of $0.1 million.

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

Under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses. The Conflicts Committee of our general partner approved the following reimbursement amounts during the three and nine months ended September 30, 2024 and 2023:

*(In thousands)*

*(In thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Variance | Percent Change 2024 | Nine Months Ended September 30, 2023 |  | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Conflicts Committee approved reimbursement amount | $3,377 | $3,496 | $(119) | (3)% | $10,131 | $10,487 | $(356) | (3)% |

The amounts reflected above represent our allocable share of such expenses. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.

### 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 - Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

The following table details the cash flow changes between the nine months ended September 30, 2024 and 2023:

*(In thousands)*

| Net cash provided by (used in): | Nine Months Ended September 30, 2024 | 2023 | Variance | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Operating activities | $6,184 | $106,065 | $(99,881) | (94)% |
| Investing activities | (49,642) | (22,478) | (27,164) | (121)% |
| Financing activities | 43,460 | (83,578) | 127,038 | 152% |
| Net increase (decrease) in cash and cash equivalents | $2 | $9 | $(7) | (78)% |

*Net cash provided by operating activities.* The decrease in net cash provided by operating activities for the nine months ended September 30, 2024, includes an increase in operating results and other non-cash charges of $1.2 million. This increase was offset by an unfavorable variance in cash flows associated with changes in working capital of $101.1 million, primarily associated with the reduction in working capital associated with the exit of the butane optimization business.

*Net cash used in investing activities.* Net cash used in investing activities for the nine months ended September 30, 2024, increased $27.2 million. An increase in cash used of $16.0 million resulted from higher payments for capital expenditures and plant turnaround costs in 2024. Further, investments in unconsolidated entities increased $6.9 million, while net proceeds from the sale of property, plant and equipment decreased $4.2 million.

*Net cash (used in) provided by financing activities.* Net cash (used in) provided by financing activities for the nine months ended September 30, 2024, increased primarily as a result of an decrease in borrowings of long-term debt of $293.4 million, offset by a decrease in repayments of long-term debt of $406.2 million. Additionally, payments of debt issuance costs decreased $14.2 million.

### Total Contractual Obligations

A summary of our total contractual cash obligations as of September 30, 2024, is as follows:

| Type of Obligation | Payments due by period Total Obligation | Less than One Year | 1-3 Years | 3-5 Years | Due Thereafter |
| --- | ---: | ---: | ---: | ---: | ---: |
| Credit facility | $86,500 | $— | $86,500 | $— | $— |
| 11.5% senior secured notes, due 2028 | 400,000 | — | — | 400,000 | — |
| Operating leases | 71,112 | 21,084 | 33,597 | 12,006 | 4,425 |
| Finance lease obligations | 72 | 14 | 31 | 27 | — |
| Interest payable on finance lease obligations | 11 | 4 | 6 | 1 | — |
| Interest payable on fixed long-term debt obligations | 154,426 | 46,000 | 92,000 | 16,426 | — |
| Total contractual cash obligations | $712,121 | $67,102 | $212,134 | $428,460 | $4,425 |

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 September 30, 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 September 30, 2024, we maintained a $150.0 million credit facility that matures on February 8, 2027. As of September 30, 2024, we had $86.5 million outstanding under the credit facility and $9.2 million of outstanding irrevocable letters of credit, leaving a maximum available amount to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of $54.4 million. After giving effect to our then current borrowings, letters of credit, and the financial covenants contained in our credit facility, we had the ability to borrow approximately $54.4 million in additional amounts thereunder as of September 30, 2024.

The credit facility is used for ongoing working capital needs and general partnership purposes, and to finance permitted investments, acquisitions and capital expenditures. The level of outstanding draws on our credit facility from January 1, 2024 through September 30, 2024 ranged from a low of $40.5 million to a high of $102.5 million.

The applicable margin for Adjusted Term SOFR borrowings at September 30, 2024 is 3.25%. The applicable margin for Adjusted Term SOFR borrowings effective October 16, 2024 is 3.50%.

For a description of our credit facility, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.

### 2028 Notes

For a description of our 2028 Notes, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.

### 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 credit facility.

On September 30, 2024, we had cash and cash equivalents of $0.06 million and available borrowing capacity of $54.4 million under our credit facility with $86.5 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 $54.4 million in additional amounts thereunder as of September 30, 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 our Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024. In addition, due to the covenants in our credit facility, our financial and operating performance impacts the amount we are permitted to borrow under that facility.

We are in compliance with all debt covenants as of September 30, 2024, and expect 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 for the nine months ended September 30, 2024 or 2023. 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.

On June 15, 2024, the Partnership had a spill of less than 2,500 barrels of crude oil originating from the Partnership’s transfer pipeline, which connects our Sandyland Terminal to our refinery located in Smackover, Union County, Arkansas. The Partnership is working closely with the U.S Environmental Protection Agency (“EPA”), Arkansas Department of Energy and Environment (“ADEE”), and Arkansas Game and Fish Commission to respond to the spill. The Partnership has dedicated the necessary resources, equipment, and personnel to conduct and expedite oil recovery and cleanup activities. As of October 15, 2024, the Partnership’s response efforts have moved from emergency response status with the EPA to remediation status, which is to be overseen by the ADEE. A claim related to the crude oil spill has been made with and accepted by, subject to a reservation of rights, the Partnership’s insurance carriers. 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 and Condensed Statements of Operations for the three and nine months ended September 30, 2024.

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

## Market risk

As filed, 2,119 characters.

The Partnership is exposed to commodity risk and interest rate risk in its normal business activities. The following disclosures about market risk provide an update to, and should be read in conjunction with, “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.

***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. We had no outstanding hedging positions as of September 30, 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 8.44% as of September 30, 2024. Based on the amount of unhedged floating rate debt owed by us on September 30, 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 $0.9 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 September 30, 2024, the estimated fair value of the 2028 Notes was $441.6 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 September 30, 2024, would result in a $10.1 million decrease in the fair value of our 2028 Notes.

## Controls and procedures

As filed, 1,215 characters.

*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 Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. 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 the end of the period covered by this report, to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in our internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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.

## Risk factors

As filed, 4,824 characters.

There have been no material changes to the Partnership's risk factors since our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024, except as follows.

***The Merger is subject to conditions, including some conditions that may not be satisfied on a timely basis, if at all. Failure to complete the Merger, or significant delays in completing the Merger, could negatively affect our business and financial results and the trading prices of our common units.***

The completion of the Merger is not assured and is subject to certain risks, including the risk that certain conditions of the Merger Agreement, such as required regulatory approvals and the approval of our unitholders, some of which are beyond the parties’ control, are not satisfied or waived, which may prevent, delay or otherwise result in the Merger not occurring. The Merger Agreement contains conditions that, if not satisfied or waived, would result in the Merger not occurring, even though our common unitholders may have voted in favor of the Merger-related proposals presented to them. Failure to complete, or significant delays in completing, the Merger with Martin Resource Management Corporation could negatively affect the price of our common units and may have a material adverse impact on our subsequent financial condition, results of operations and cash flows.

***We may be subject to lawsuits regarding the Merger, which could materially adversely affect our operations and financial condition or prevent or delay completion of the Merger.***

Our directors and officers may be subject to lawsuits relating to the Merger. While we will evaluate and defend against any actions vigorously, the costs of the defense of such lawsuits and other effects of such litigation could have an adverse effect on our operations and financial condition. Failure to complete, or significant delays in completing, the Merger could negatively affect the price of our common units and may have a material adverse impact on our subsequent financial condition, results of operations and cash flows.

***We will be subject to business uncertainties while the Merger is pending, which could adversely affect our business.***

Uncertainty about the effect of the Merger on the Partnership, its subsidiaries and the companies that do business with us may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel and suppliers until the Merger is completed and for a period of time thereafter, and could cause those that transact with us to seek to change their existing business relationships with us.

***We may incur substantial transaction-related costs in connection with the Merger.***

We and Martin Resource Management Corporation expect to incur nonrecurring transaction-related costs associated with completing the Merger. Nonrecurring transaction costs include, but are not limited to, fees paid to legal, financial and accounting advisors, filing fees, proxy solicitation costs and printing costs.

***If the Merger Agreement is terminated, we may, under specified circumstances, be responsible for a termination fee of $2.5 million or the reimbursement of Martin Resource Management Corporation’s expenses in an amount up to $5.0 million.***

If the Merger Agreement is terminated, we may, under specified circumstances, be required to pay a termination fee of $2.5 million or make a payment of up to $5.0 million in respect of Martin Resource Management Corporation’s expenses. If such termination fee or reimbursement expenses are payable, the payment of any such amount could have an adverse consequence to the financial condition and operations of the party responsible for such payment.

***The Merger is a taxable transaction and the resulting tax liability of our common unitholders, if any, will depend on each such common unitholder’s particular situation.***

The receipt of cash in exchange for common units of the Partnership pursuant to the Merger will be treated as a taxable sale by such common unitholders for U.S. federal income tax purposes. The amount of ordinary income and capital gain or loss recognized by each common unitholder in the Merger will vary depending on each common unitholder’s particular situation, including:

- the amount of cash received by the common unitholder as consideration in the Merger;
- the adjusted tax basis of the common units exchanged by the common unitholder in the Merger;
- the amount of depreciation and amortization deductions previously allocated to the common unitholder; and
- the amount of any suspended passive losses that may be available to the common unitholder in respect of its common units to offset a portion of any income or gain recognized by the common unitholder.

Filed Oct 21, 2024.
Source: SEC EDGAR, the filing index for accession 0001176334-24-000134. Last ingested by Listed: Oct 26, 2026, 16:14 ET. No prices; not investment advice.