Martin Midstream Partners(US:MMLP)2025-07-21 20:09markdown [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements based on management's current plans and expectations, with actual results potentially differing due to various risks and uncertainties - The report contains forward-looking statements, identifiable by terms like 'forecast,' 'may,' 'believe,' 'will,' 'expect,' 'anticipate,' and 'estimate.' These statements are based on management's current plans and expectations, but actual results may differ materially due to various risks and uncertainties[8](index=8&type=chunk)[9](index=9&type=chunk) - Potential risks and uncertainties that could cause actual results to differ are discussed in 'Item 1A. Risk Factors' of the Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent quarterly and current reports[10](index=10&type=chunk) PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated and condensed financial statements for Martin Midstream Partners L.P., including balance sheets, statements of operations, capital (deficit), and cash flows, along with accompanying notes [Consolidated and Condensed Balance Sheets](index=4&type=section&id=Consolidated%20and%20Condensed%20Balance%20Sheets) - Total assets decreased by **$22.877 million** from December 31, 2024, to June 30, 2025, primarily driven by decreases in current assets and net property, plant and equipment[14](index=14&type=chunk) - Partners' capital (deficit) worsened, decreasing from **$(70,439) thousand** at December 31, 2024, to **$(74,187) thousand** at June 30, 2025[14](index=14&type=chunk) Consolidated and Condensed Balance Sheets Summary | Metric (in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :-------------------- | :------------------------ | :-------------------------- | | **Assets** | | | | Total current assets | $121,603 | $130,479 | | Property, plant and equipment, net | $294,824 | $305,450 | | Total assets | $515,632 | $538,509 | | **Liabilities & Capital** | | | | Total current liabilities | $107,689 | $115,501 | | Long-term debt, net | $427,821 | $437,635 | | Total liabilities | $589,819 | $608,948 | | Partners' capital (deficit) | $(74,187) | $(70,439) | | Total liabilities and partners' capital (deficit) | $515,632 | $538,509 | [Consolidated and Condensed Statements of Operations](index=5&type=section&id=Consolidated%20and%20Condensed%20Statements%20of%20Operations) - For the three months ended June 30, 2025, total revenues decreased by **$3.855 million (2.1%)** year-over-year, while net income shifted from a profit of **$3.780 million** in 2024 to a loss of **$2.407 million** in 2025[16](index=16&type=chunk) - For the six months ended June 30, 2025, total revenues increased by **$7.858 million (2.1%)** year-over-year, but net income shifted from a profit of **$7.053 million** in 2024 to a loss of **$3.440 million** in 2025[16](index=16&type=chunk) Consolidated and Condensed Statements of Operations Summary | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $180,676 | $184,531 | $373,219 | $365,361 | | Total costs and expenses | $166,406 | $165,557 | $345,026 | $328,700 | | Operating income | $14,883 | $19,927 | $29,285 | $37,822 | | Net income (loss) | $(2,407) | $3,780 | $(3,440) | $7,053 | | Net income (loss) per unit attributable to limited partners - basic | $(0.06) | $0.09 | $(0.09) | $0.18 | [Consolidated and Condensed Statements of Capital (Deficit)](index=7&type=section&id=Consolidated%20and%20Condensed%20Statements%20of%20Capital%20(Deficit)) - Total Partners' Capital (Deficit) decreased from **$(70,439) thousand** at December 31, 2024, to **$(74,187) thousand** at June 30, 2025, primarily due to net loss and cash distributions[20](index=20&type=chunk) - The number of common limited units outstanding remained at **39,055,086** from March 31, 2025, to June 30, 2025, after an issuance of **54,000** restricted units since December 31, 2024[20](index=20&type=chunk) Consolidated and Condensed Statements of Capital (Deficit) Summary | Metric (in thousands) | Balances - March 31, 2025 | Balances - June 30, 2025 | Balances - December 31, 2024 | Balances - June 30, 2024 | | :-------------------- | :------------------------ | :----------------------- | :--------------------------- | :----------------------- | | Common Limited Units | 39,055,086 | 39,055,086 | 39,001,086 | 39,001,086 | | Partners' Capital (Deficit) - Common Limited Units Amount | $(73,041) | $(75,548) | $(71,877) | $(59,557) | | Partners' Capital (Deficit) - General Partner Amount | $1,413 | $1,361 | $1,438 | $1,691 | | Total Partners' Capital (Deficit) | $(71,628) | $(74,187) | $(70,439) | $(57,866) | [Consolidated and Condensed Statements of Cash Flows](index=8&type=section&id=Consolidated%20and%20Condensed%20Statements%20of%20Cash%20Flows) - Net cash provided by operating activities increased by **$2.959 million (13%)** for the six months ended June 30, 2025, compared to the same period in 2024[23](index=23&type=chunk) - Net cash used in investing activities significantly decreased by **$25.170 million (68%)** for the six months ended June 30, 2025, primarily due to lower capital expenditures and reduced investment in DSM Semichem LLC[23](index=23&type=chunk) - Net cash from financing activities shifted from a **$15.163 million** inflow in 2024 to a **$12.975 million** outflow in 2025, mainly due to increased debt repayments and decreased new borrowings[23](index=23&type=chunk) Consolidated and Condensed Statements of Cash Flows Summary | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $24,896 | $21,937 | | Net cash used in investing activities | $(11,929) | $(37,099) | | Net cash provided by (used in) financing activities | $(12,975) | $15,163 | | Net increase (decrease) in cash | $(8) | $1 | | Cash at end of period | $47 | $55 | [Notes to Consolidated and Condensed Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20and%20Condensed%20Financial%20Statements) This section provides detailed disclosures and explanations for the figures presented in the consolidated financial statements, covering operations, accounting policies, revenue, inventory, debt, leases, capital, compensation, related parties, segments, commitments, fair value, investments, income taxes, and subsequent events [NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201.%20NATURE%20OF%20OPERATIONS%20AND%20BASIS%20OF%20PRESENTATION) - Martin Midstream Partners L.P. operates primarily in the Gulf Coast region of the U.S. with four main business lines: terminalling, processing, and storage; land and marine transportation; sulfur and sulfur-based products; and marketing, distribution, and transportation of NGLs and specialty lubricants/grease[24](index=24&type=chunk) - The unaudited financial statements are prepared in accordance with Form 10-Q and U.S. GAAP for interim reporting, with all necessary adjustments for fair presentation being of a normal recurring nature[25](index=25&type=chunk) [NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS](index=9&type=section&id=NOTE%202.%20NEW%20ACCOUNTING%20PRONOUNCEMENTS) - The Partnership adopted ASU 2023-07 (Segment Reporting) in compliance with required adoption guidelines, which enhances disclosures about significant segment expenses[27](index=27&type=chunk) - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for annual reporting periods beginning after December 15, 2024, and will require disaggregated information about effective tax rate reconciliation and income taxes paid[28](index=28&type=chunk) [NOTE 3. REVENUE](index=10&type=section&id=NOTE%203.%20REVENUE) - The Partnership expects to receive **$425.944 million** in future minimum revenues from unsatisfied performance obligations as of June 30, 2025, with the largest portion from terminalling and storage[38](index=38&type=chunk) NOTE 3. REVENUE Summary | Revenue Source (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Terminalling and storage | $22,404 | $22,375 | $43,953 | $44,892 | | Transportation | $53,826 | $57,676 | $106,811 | $115,983 | | Sulfur services | $44,128 | $37,192 | $92,832 | $70,873 | | Specialty products | $60,318 | $67,288 | $129,623 | $133,613 | | **Total Revenues** | **$180,676** | **$184,531** | **$373,219** | **$365,361** | NOTE 3. REVENUE Summary | Future Minimum Revenue (in thousands) | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | | :------------------------------------ | :-------- | :-------- | :-------- | :-------- | :-------- | :--------- | :--------- | | Terminalling and storage | $22,475 | $46,117 | $47,500 | $48,990 | $50,393 | $105,367 | $320,842 | | Sulfur services (Product sales) | $7,118 | $14,237 | $14,237 | — | — | — | $35,592 | | Sulfur services (Service revenues) | $5,174 | $9,374 | $3,153 | $2,655 | $2,655 | $39,161 | $62,172 | | Specialty Products (NGL product sales)| $3,404 | $3,934 | — | — | — | — | $7,338 | | **Total** | **$38,171** | **$73,662** | **$64,890** | **$51,645** | **$53,048** | **$144,528** | **$425,944** | [NOTE 4. INVENTORIES](index=11&type=section&id=NOTE%204.%20INVENTORIES) - Total inventories decreased by **$5.583 million** from December 31, 2024, to June 30, 2025, primarily driven by reductions in natural gas liquids, lubricants, and fertilizer inventories[39](index=39&type=chunk) NOTE 4. INVENTORIES Summary | Inventory Component (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Natural gas liquids | $1,500 | $2,814 | | Lubricants | $22,042 | $23,227 | | Sulfur | $1,327 | $1,440 | | Fertilizer | $15,406 | $18,463 | | Other | $5,849 | $5,763 | | **Total Inventories** | **$46,124** | **$51,707** | [NOTE 5. DEBT](index=12&type=section&id=NOTE%205.%20DEBT) - Total long-term debt, net, decreased by **$9.814 million** from December 31, 2024, to June 30, 2025, primarily due to a reduction in the credit facility balance[40](index=40&type=chunk) - The credit facility has a variable interest rate (**7.94%** weighted average at June 30, 2025) and matures in February 2027, while the **$400 million** Senior Notes bear **11.5%** interest and are due in February 2028[40](index=40&type=chunk) - The Partnership was in compliance with all debt covenants as of June 30, 2025, and December 31, 2024[40](index=40&type=chunk) NOTE 5. DEBT Summary | Long-Term Debt (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Credit facility (net) | $39,235 | $51,258 | | Senior notes (net) | $388,586 | $386,377 | | **Total long-term debt, net** | **$427,821** | **$437,635** | [NOTE 6. LEASES](index=12&type=section&id=NOTE%206.%20LEASES) - Total lease cost increased by **$1.349 million (20.6%)** for the three months ended June 30, 2025, and by **$2.881 million (22.7%)** for the six months ended June 30, 2025, primarily driven by higher operating lease costs[44](index=44&type=chunk) NOTE 6. LEASES Summary | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $6,499 | $5,181 | $12,634 | $10,120 | | Finance lease cost | $5 | $4 | $10 | $4 | | Short-term lease cost | $1,357 | $1,333 | $2,856 | $2,499 | | Variable lease cost | $47 | $41 | $91 | $87 | | **Total lease cost** | **$7,908** | **$6,559** | **$15,591** | **$12,710** | NOTE 6. LEASES Summary | Lease Balance Sheet Info (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Operating lease right-of-use assets | $64,815 | $67,140 | | Operating lease liabilities | $65,078 | $67,522 | | Finance lease obligations | $62 | $69 | NOTE 6. LEASES Summary | Future Minimum Operating Lease Obligations (in thousands) | | :---------------------------------------- | :------------ | | Year 1 | $25,742 | | Year 2 | $22,080 | | Year 3 | $16,739 | | Year 4 | $9,068 | | Year 5 | $4,203 | | Thereafter | $3,748 | | **Total lease liability** | **$65,078** | [NOTE 7. SUPPLEMENTAL BALANCE SHEET INFORMATION](index=15&type=section&id=NOTE%207.%20SUPPLEMENTAL%20BALANCE%20SHEET%20INFORMATION) NOTE 7. SUPPLEMENTAL BALANCE SHEET INFORMATION Summary | Other Accrued Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------- | :------------ | :---------------- | | Accrued interest | $17,502 | $17,899 | | Property and other taxes payable | $3,074 | $4,043 | | Accrued payroll | $5,956 | $5,187 | | Operating lease liabilities | $20,316 | $19,707 | | Other | $30 | $44 | | **Total Other accrued liabilities** | **$46,878** | **$46,880** | NOTE 7. SUPPLEMENTAL BALANCE SHEET INFORMATION Summary | Asset Retirement Obligations (in thousands) | | :---------------------------------------- | :------------ | | As of December 31, 2024 | $5,313 | | Accretion expense | $67 | | **Ending asset retirement obligations** | **$5,380** | [NOTE 8. PARTNERS' CAPITAL (DEFICIT)](index=16&type=section&id=NOTE%208.%20PARTNERS%27%20CAPITAL%20(DEFICIT)) - As of June 30, 2025, Partners' capital (deficit) consisted of **39,055,086** common limited partner units (**98%** interest) and a **2%** general partner interest held by MMGP[49](index=49&type=chunk) - Martin Resource Management Corporation owned approximately **19.6%** of the Partnership's outstanding common limited partner units[49](index=49&type=chunk) NOTE 8. PARTNERS' CAPITAL (DEFICIT) Summary | Net Income (Loss) Allocation (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(2,407) | $3,780 | $(3,440) | $7,053 | | Less general partner's interest | $(48) | $76 | $(77) | $133 | | Less income (loss) allocable to unvested restricted units | $(10) | $16 | $(14) | $28 | | **Limited partners' interest in net income (loss)** | **$(2,349)** | **$3,688** | **$(3,357)** | **$6,884** | NOTE 8. PARTNERS' CAPITAL (DEFICIT) Summary | Weighted Average Limited Partner Units | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | 38,892,347 | 38,832,222 | 38,887,692 | 38,833,039 | | Diluted | 38,892,347 | 38,891,375 | 38,887,692 | 38,872,192 | [NOTE 9. UNIT BASED AWARDS - LONG-TERM INCENTIVE PLANS](index=17&type=section&id=NOTE%209.%20UNIT%20BASED%20AWARDS%20-%20LONG-TERM%20INCENTIVE%20PLANS) - Total unit-based compensation expense decreased significantly for the three months ended June 30, 2025, by **$1.084 million (75%)** and for the six months ended June 30, 2025, by **$0.128 million (9.7%)** compared to the prior year, primarily due to lower phantom unit awards for employees[56](index=56&type=chunk) - The 2025 Phantom Unit Plan superseded the 2021 Plan, granting **1,210,000** phantom units and **425,000** phantom unit appreciation rights on February 11, 2025, with awards settling in cash and treated as liability classification[62](index=62&type=chunk)[64](index=64&type=chunk) - As of June 30, 2025, the total liability for outstanding phantom unit awards was **$4.585 million**, with **$5.009 million** in unrecognized compensation costs expected to be recognized over **1.74 years**[65](index=65&type=chunk) NOTE 9. UNIT BASED AWARDS - LONG-TERM INCENTIVE PLANS Summary | Unit-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restricted unit Awards (Non-employee directors) | $47 | $49 | $90 | $103 | | Phantom unit Awards (Employees) | $313 | $1,395 | $1,106 | $1,221 | | **Total unit-based compensation expense** | **$360** | **$1,444** | **$1,196** | **$1,324** | [NOTE 10. RELATED PARTY TRANSACTIONS](index=20&type=section&id=NOTE%2010.%20RELATED%20PARTY%20TRANSACTIONS) - Martin Resource Management Corporation (MRMC) controls the Partnership's general partner and owns approximately **19.6%** of the Partnership's common units, giving it significant influence over management[72](index=72&type=chunk) - The Omnibus Agreement governs competition, indemnification, related party transactions, and administrative services, requiring the Partnership to reimburse MRMC for direct and indirect expenses[73](index=73&type=chunk)[76](index=76&type=chunk) NOTE 10. RELATED PARTY TRANSACTIONS Summary | Related Party Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Terminalling and storage | $18,221 | $18,078 | $35,483 | $36,627 | | Transportation | $7,320 | $8,318 | $15,290 | $16,919 | | Product sales | $1,040 | $123 | $2,340 | $252 | | **Total Related Party Revenues** | **$26,581** | **$26,519** | **$53,113** | **$53,798** | NOTE 10. RELATED PARTY TRANSACTIONS Summary | Related Party Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of products sold | $10,464 | $11,311 | $19,595 | $20,895 | | Operating expenses | $27,823 | $26,501 | $55,388 | $52,924 | | Selling, general and administrative | $8,135 | $8,638 | $16,027 | $15,501 | | **Total Related Party Expenses** | **$46,422** | **$46,450** | **$91,010** | **$89,320** | [NOTE 11. BUSINESS SEGMENTS](index=25&type=section&id=NOTE%2011.%20BUSINESS%20SEGMENTS) - The Partnership operates in four reportable segments: Terminalling and Storage, Transportation, Sulfur Services, and Specialty Products, with performance evaluated based on operating income[99](index=99&type=chunk) - Total operating income decreased by **$5.044 million (25.3%)** for the three months ended June 30, 2025, and by **$8.537 million (22.6%)** for the six months ended June 30, 2025, compared to the prior year, with significant declines in Transportation and Terminalling and Storage segments[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) NOTE 11. BUSINESS SEGMENTS Summary | Segment Operating Income (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Terminalling and Storage | $3,000 | $3,302 | $5,110 | $6,959 | | Transportation | $6,217 | $8,036 | $11,723 | $17,867 | | Sulfur Services | $5,969 | $7,463 | $13,685 | $11,148 | | Specialty Products | $3,634 | $4,945 | $7,379 | $9,503 | | Indirect selling, general and administrative | $(3,937) | $(3,819) | $(8,612) | $(7,655) | | **Total Operating Income** | **$14,883** | **$19,927** | **$29,285** | **$37,822** | NOTE 11. BUSINESS SEGMENTS Summary | Segment Assets (in thousands) | June 30, 2025 | June 30, 2024 | | :---------------------------- | :------------ | :------------ | | Terminalling and Storage | $159,001 | $179,047 | | Transportation | $162,974 | $164,571 | | Sulfur Services | $128,266 | $112,644 | | Specialty Products | $65,391 | $78,816 | | **Total Segment Assets** | **$515,632** | **$535,078** | [NOTE 12. COMMITMENTS AND CONTINGENCIES](index=30&type=section&id=NOTE%2012.%20COMMITMENTS%20AND%20CONTINGENCIES) - The Partnership is involved in a legal proceeding (Marketing Lawsuits) where a customer is seeking defense and indemnity related to alleged unlawful business practices concerning private label motor oil[110](index=110&type=chunk) - The Litigation, administratively closed in 2017 and reopened in 2021, involves counterclaims against the Partnership, with a trial expected in 2026. The ultimate exposure is currently undeterminable[110](index=110&type=chunk) [NOTE 13. FAIR VALUE MEASUREMENTS](index=30&type=section&id=NOTE%2013.%20FAIR%20VALUE%20MEASUREMENTS) - The Partnership uses a valuation framework based on observable and unobservable market inputs, categorized into Level 1, Level 2, and Level 3 hierarchy[111](index=111&type=chunk)[112](index=112&type=chunk) - The fair value of the 2028 Notes is considered Level 2, based on quoted prices for identical liabilities in markets that are not active[114](index=114&type=chunk) NOTE 13. FAIR VALUE MEASUREMENTS Summary | Financial Instrument (in thousands) | June 30, 2025 Carrying Value | June 30, 2025 Fair Value | December 31, 2024 Carrying Value | December 31, 2024 Fair Value | | :-------------------------------- | :----------------------------- | :----------------------- | :------------------------------- | :--------------------------- | | 2028 Notes | $388,586 | $422,684 | $386,377 | $436,172 | [NOTE 14. INVESTMENT IN DSM SEMICHEM LLC](index=31&type=section&id=NOTE%2014.%20INVESTMENT%20IN%20DSM%20SEMICHEM%20LLC) - The Partnership holds a **10%** non-controlling interest in DSM Semichem LLC, a joint venture formed to produce and distribute electronic level sulfuric acid (ELSA), and is the exclusive feedstock provider and land transportation service provider for ELSA[115](index=115&type=chunk) - DSM Semichem LLC reported a net loss of **$(7,999) thousand** for the six months ended June 30, 2025, significantly higher than the **$(1,880) thousand** loss in the prior year[116](index=116&type=chunk)[117](index=117&type=chunk) NOTE 14. INVESTMENT IN DSM SEMICHEM LLC Summary | DSM Semichem LLC Financials (in thousands) | As of June 30, 2025 | As of December 31, 2024 | Six Months Ended June 30, 2025 Net Income (Loss) | Six Months Ended June 30, 2024 Net Income (Loss) | | :----------------------------------------- | :------------------ | :---------------------- | :------------------------------------------------ | :------------------------------------------------ | | Total Assets | $105,437 | $105,773 | N/A | N/A | | Long-Term Debt | $28,530 | $31,700 | N/A | N/A | | Members' Equity/Partners' Capital | $60,515 | $68,513 | N/A | N/A | | Revenues | N/A | N/A | $0 | $0 | | Net Income (Loss) | N/A | N/A | $(7,999) | $(1,880) | [NOTE 15. CONDENSED CONSOLIDATED FINANCIAL INFORMATION](index=32&type=section&id=NOTE%2015.%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20INFORMATION) - The Partnership's operations are conducted by its operating subsidiaries, which have issued and may issue unconditional guarantees of the Partnership's senior or subordinated debt securities[118](index=118&type=chunk) - Substantially all operating subsidiaries are subsidiary guarantors of the Senior Notes, with any non-guarantor subsidiaries being minor[118](index=118&type=chunk) [NOTE 16. INCOME TAXES](index=32&type=section&id=NOTE%2016.%20INCOME%20TAXES) - The effective income tax rate (ETR) for the Taxable Subsidiary increased significantly to **64.50%** for the three months ended June 30, 2025 (from **30.68%** in 2024) and to **50.84%** for the six months ended June 30, 2025 (from **22.94%** in 2024)[120](index=120&type=chunk) - The increase in ETR and provision for income taxes was primarily due to an increase in permanent differences and a decrease in income before income taxes[121](index=121&type=chunk) NOTE 16. INCOME TAXES Summary | Income Tax Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $2,084 | $1,772 | $3,201 | $2,568 | [NOTE 17. SUBSEQUENT EVENTS](index=33&type=section&id=NOTE%2017.%20SUBSEQUENT%20EVENTS) - On July 16, 2025, the Partnership declared a quarterly cash distribution of **$0.005** per common unit for Q2 2025, payable on August 14, 2025[127](index=127&type=chunk) - The 'One Big Beautiful Bill Act' enacted on July 4, 2025, is expected to result in an immaterial net increase in income tax expense for the Taxable Subsidiary in Q3 2025[128](index=128&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Partnership's financial condition, results of operations, and cash flows, covering business overview, recent developments, accounting policies, related party relationships, non-GAAP measures, segment performance, liquidity, and market risks [Overview](index=34&type=section&id=Overview) - The Partnership is a publicly traded limited partnership operating primarily in the U.S. Gulf Coast, with four core business lines: terminalling, processing, and storage; land and marine transportation; sulfur services; and NGL marketing/distribution and specialty lubricants/grease blending[130](index=130&type=chunk)[134](index=134&type=chunk) - Martin Resource Management Corporation (MRMC), the Partnership's founder, is a significant supplier and customer, owning **19.6%** of common units and controlling the general partner[131](index=131&type=chunk) [Significant Recent Developments](index=35&type=section&id=Significant%20Recent%20Developments) - In April 2025, the U.S. government announced new tariffs, including a **10%** baseline tariff and individualized reciprocal tariffs, which may affect raw material costs and availability or contribute to inflation[135](index=135&type=chunk) - On February 13, 2025, the Partnership amended its credit facility to modify interest coverage and first lien leverage ratios for fiscal quarters ending March 31, June 30, and September 30, 2025[136](index=136&type=chunk) [Critical Accounting Policies and Estimates](index=35&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The preparation of financial statements requires management to make estimates and assumptions, which are routinely evaluated based on historical experience and other reasonable factors[139](index=139&type=chunk) - Changes in these estimates could materially affect the Partnership's financial position, results of operations, or cash flows[139](index=139&type=chunk) [Our Relationship with Martin Resource Management Corporation](index=35&type=section&id=Our%20Relationship%20with%20Martin%20Resource%20Management%20Corporation) - Martin Resource Management Corporation (MRMC) owns **19.6%** of the Partnership's limited partner units and **100%** of the general partner, directing business operations and providing management expertise[142](index=142&type=chunk)[143](index=143&type=chunk) - The Partnership reimbursed MRMC **$42.8 million** for direct costs and expenses for the three months ended June 30, 2025 (vs. **$42.9 million** in 2024), and **$83.9 million** for the six months ended June 30, 2025 (vs. **$82.2 million** in 2024)[144](index=144&type=chunk) - Indirect general and administrative expenses reimbursed to MRMC were **$3.4 million** for the three months and **$6.8 million** for the six months ended June 30, 2025 and 2024, respectively, covering centralized corporate functions[145](index=145&type=chunk) - Related party transactions accounted for approximately **28%** of total costs and expenses for the three months ended June 30, 2025, and **26%** for the six months ended June 30, 2025. Sales to MRMC represented **15%** and **14%** of total revenues for the respective periods[149](index=149&type=chunk)[150](index=150&type=chunk) [Non-GAAP Financial Measures](index=38&type=section&id=Non-GAAP%20Financial%20Measures) - Management uses non-GAAP financial measures such as EBITDA, Adjusted EBITDA, Distributable Cash Flow, and Adjusted Free Cash Flow to assess business performance and liquidity[154](index=154&type=chunk) - Adjusted EBITDA decreased by **$4.564 million (14.4%)** for the three months ended June 30, 2025, and by **$7.142 million (11.5%)** for the six months ended June 30, 2025, compared to the prior year[163](index=163&type=chunk) - Adjusted Free Cash Flow improved significantly, increasing from a deficit of **$(2,855) thousand** to a positive **$5,877 thousand** for the three months, and from **$(3,440) thousand** to **$14,032 thousand** for the six months ended June 30, 2025, primarily due to lower investing activities[165](index=165&type=chunk) Non-GAAP Financial Measures Summary | Non-GAAP Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | EBITDA | $26,923 | $32,616 | $53,930 | $63,176 | | Adjusted EBITDA | $27,148 | $31,712 | $54,976 | $62,118 | | Distributable Cash Flow | $6,672 | $9,534 | $15,760 | $15,180 | | Adjusted Free Cash Flow | $5,877 | $(2,855) | $14,032 | $(3,440) | [Results of Operations](index=41&type=section&id=Results%20of%20Operations) [Terminalling and Storage Segment](index=43&type=section&id=Terminalling%20and%20Storage%20Segment) - Operating income for the Terminalling and Storage segment decreased by **$0.302 million (9%)** for the three months and **$1.849 million (27%)** for the six months ended June 30, 2025, compared to the prior year[171](index=171&type=chunk)[174](index=174&type=chunk) - The decrease in operating income was primarily due to lower throughput fees and volumes at the underground storage terminal, and a significant reduction in gain on disposition of property, plant and equipment[171](index=171&type=chunk)[174](index=174&type=chunk) Terminalling and Storage Segment Summary | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $24,228 | $24,402 | $47,642 | $48,687 | | Operating income | $3,000 | $3,302 | $5,110 | $6,959 | [Transportation Segment](index=44&type=section&id=Transportation%20Segment) - Operating income for the Transportation segment decreased by **$1.819 million (23%)** for the three months and **$6.144 million (34%)** for the six months ended June 30, 2025, compared to the prior year[177](index=177&type=chunk)[181](index=181&type=chunk) - Revenue declines were driven by lower land transportation freight revenue (**5-6%** decrease in total miles) and inland marine transportation rates, partially offset by higher offshore marine rates[178](index=178&type=chunk)[181](index=181&type=chunk) Transportation Segment Summary | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $57,701 | $61,467 | $115,176 | $123,509 | | Operating income | $6,217 | $8,036 | $11,723 | $17,867 | [Sulfur Services Segment](index=46&type=section&id=Sulfur%20Services%20Segment) - Operating income for the Sulfur Services segment decreased by **$1.494 million (20%)** for the three months ended June 30, 2025, but increased by **$2.537 million (23%)** for the six months ended June 30, 2025, compared to the prior year[184](index=184&type=chunk)[189](index=189&type=chunk) - Product revenues increased significantly due to a **40-41%** increase in sales volumes (especially sulfur), despite a **6-15%** reduction in average sales prices. Cost of products sold also increased due to higher volumes[185](index=185&type=chunk)[186](index=186&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) Sulfur Services Segment Summary | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $44,128 | $37,193 | $92,832 | $70,874 | | Operating income | $5,969 | $7,463 | $13,685 | $11,148 | | Total sulfur services volumes (long tons) | 217 | 155 | 447 | 318 | [Specialty Products Segment](index=48&type=section&id=Specialty%20Products%20Segment) - Operating income for the Specialty Products segment decreased by **$1.311 million (27%)** for the three months and **$2.124 million (22%)** for the six months ended June 30, 2025, compared to the prior year[194](index=194&type=chunk)[198](index=198&type=chunk) - Revenue decreased despite a **4-5%** increase in sales volumes (driven by NGLs), primarily due to a significant decline in average sales prices per barrel (**8-15%**)[194](index=194&type=chunk)[198](index=198&type=chunk) Specialty Products Segment Summary | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Products revenues | $60,341 | $67,317 | $129,669 | $133,663 | | Operating income | $3,634 | $4,945 | $7,379 | $9,503 | | Total specialty products volumes (Bbls) | 661 | 633 | 1,406 | 1,334 | [Interest Expense](index=50&type=section&id=Interest%20Expense) - Total interest expense, net, increased by **$0.231 million (2%)** for the three months and **$0.496 million (2%)** for the six months ended June 30, 2025, compared to the prior year[201](index=201&type=chunk)[202](index=202&type=chunk) - The increase was primarily driven by higher interest on the credit facility for the six-month period and a significant decrease in capitalized interest[202](index=202&type=chunk) Interest Expense Summary | Interest Expense, Net (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Credit facility | $1,382 | $1,398 | $2,854 | $2,568 | | Senior notes | $11,627 | $11,627 | $22,616 | $22,744 | | Amortization of deferred debt issuance costs | $779 | $773 | $1,556 | $1,539 | | Amortization of debt discount | $600 | $600 | $1,200 | $1,200 | | Capitalized interest | $(45) | $(291) | $(45) | $(433) | | **Total interest expense, net** | **$14,608** | **$14,377** | **$28,715** | **$28,219** | [Indirect Selling, General and Administrative Expenses](index=50&type=section&id=Indirect%20Selling,%20General%20and%20Administrative%20Expenses) - Indirect SG&A expenses increased by **$0.118 million (3%)** for the three months and **$0.957 million (13%)** for the six months ended June 30, 2025, compared to the prior year[203](index=203&type=chunk)[204](index=204&type=chunk) - The six-month increase was primarily due to **$0.8 million** in transaction expenses related to the terminated Merger with Martin Resource Management Corporation, in addition to higher allocated overhead expenses[204](index=204&type=chunk) Indirect Selling, General and Administrative Expenses Summary | Indirect SG&A (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Indirect selling, general and administrative expenses | $3,937 | $3,819 | $8,612 | $7,655 | [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) [Cash Flows - Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=52&type=section&id=Cash%20Flows%20-%20Six%20Months%20Ended%20June%2030,%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202024) - Net cash provided by operating activities increased by **$2.959 million (13%)** due to a favorable variance in working capital changes, offsetting a decrease in operating results[210](index=210&type=chunk) - Net cash used in investing activities decreased by **$25.170 million (68%)** due to lower capital expenditures, plant turnaround costs, and reduced investment in DSM Semichem LLC[211](index=211&type=chunk) - Net cash from financing activities shifted from a **$15.163 million** inflow to a **$12.975 million** outflow, primarily due to increased debt repayments and decreased new borrowings[212](index=212&type=chunk) Cash Flows - Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance | | :-------------------------------- | :----------------------------- | :----------------------------- | :------- | | Operating activities | $24,896 | $21,937 | $2,959 | | Investing activities | $(11,929) | $(37,099) | $25,170 | | Financing activities | $(12,975) | $15,163 | $(28,138)| | **Net increase (decrease) in cash** | **$(8)** | **$1** | **$(9)** | [Total Contractual Obligations](index=52&type=section&id=Total%20Contractual%20Obligations) - As of June 30, 2025, total contractual cash obligations amounted to **$642.576 million**, with the majority (**$553.781 million**) due within 1-3 years, primarily from the credit facility and senior secured notes[213](index=213&type=chunk) Total Contractual Obligations Summary | Type of Obligation (in thousands) | Total Obligation | Less than One Year | 1-3 Years | 3-5 Years | Due Thereafter | | :-------------------------------- | :--------------- | :----------------- | :-------- | :-------- | :------------- | | Credit facility | $41,000 | — | $41,000 | — | — | | 11.5% senior secured notes, due 2028 | $400,000 | — | $400,000 | — | — | | Operating leases | $81,580 | $25,742 | $38,819 | $13,271 | $3,748 | | Finance lease obligations | $62 | $15 | $32 | $15 | — | | Interest payable on fixed long-term debt obligations | $119,926 | $46,000 | $73,926 | — | — | | **Total contractual cash obligations** | **$642,576** | **$71,761** | **$553,781**| **$13,286** | **$3,748** | [Description of Our Indebtedness](index=53&type=section&id=Description%20of%20Our%20Indebtedness) - As of June 30, 2025, the Partnership had **$41.0 million** outstanding under its **$150.0 million** credit facility (maturing Feb 2027) and **$0.7 million** in outstanding letters of credit, leaving **$31.3 million** in additional borrowing capacity after covenants[216](index=216&type=chunk)[222](index=222&type=chunk) - The credit facility's financial covenants require a minimum Interest Coverage Ratio of **1.75:1.00** and a maximum First Lien Leverage Ratio of **1.25:1.00** for Q2 and Q3 2025, tightening thereafter[218](index=218&type=chunk) [Capital Resources and Liquidity](index=53&type=section&id=Capital%20Resources%20and%20Liquidity) - Primary liquidity sources include cash flows from operations, borrowings under the credit facility, and access to debt and equity capital markets[209](index=209&type=chunk)[223](index=223&type=chunk) - The Partnership was in compliance with all debt covenants as of June 30, 2025, and expects to remain so for the next twelve months[224](index=224&type=chunk) [Interest Rate Risk](index=54&type=section&id=Interest%20Rate%20Risk) - The Partnership is exposed to interest rate risk on its variable-rate credit facility (**7.94%** weighted-average at June 30, 2025). A **100** basis point increase in interest rates would increase annual interest expense by approximately **$0.4 million**[225](index=225&type=chunk)[234](index=234&type=chunk) - The 2028 Notes are at a fixed rate, but a hypothetical **100** basis point increase in interest rates would result in a **$6.7 million** decrease in their fair value[235](index=235&type=chunk) [Seasonality](index=54&type=section&id=Seasonality) - Revenues are partially dependent on seasonal sales prices of NGLs (strongest in winter) and fertilizers (strongest in early spring)[226](index=226&type=chunk) - Terminalling and Storage, Transportation, and molten sulfur businesses are typically not impacted by seasonal fluctuations, contributing significantly to net income[226](index=226&type=chunk) [Impact of Inflation](index=54&type=section&id=Impact%20of%20Inflation) - Inflation did not materially impact results for the six months ended June 30, 2025 or 2024[227](index=227&type=chunk) - Future increases in energy prices (diesel, natural gas, chemicals) could raise operating expenses and adversely affect net income if not passed on to customers[227](index=227&type=chunk) [Environmental Matters](index=54&type=section&id=Environmental%20Matters) - On June 15, 2024, the Partnership experienced a crude oil spill (less than **2,500** barrels) from its Sandyland Terminal pipeline, incurring a **$1.5 million** deductible expense in Q2 2024[229](index=229&type=chunk) - Remedial actions for the spill were completed under ADEE oversight by October 2024, with no fines or penalties assessed as of July 21, 2025[229](index=229&type=chunk) - The SEC's climate disclosure regulations are voluntarily delayed due to litigation, with the SEC ending its defense of the rules and the Eighth Circuit holding cases in abeyance[231](index=231&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section updates the Partnership's exposure to market risks, specifically commodity risk and interest rate risk, building upon disclosures in the annual report - The Partnership manages commodity price fluctuation risk using derivatives, but had no outstanding hedging positions as of June 30, 2025[233](index=233&type=chunk) - Interest rate risk primarily stems from the variable-rate credit facility. A **100** basis point increase in interest rates would increase annual interest expense by approximately **$0.4 million**[234](index=234&type=chunk) - The fixed-rate 2028 Notes are not exposed to interest rate changes, but a **100** basis point increase would decrease their fair value by **$6.7 million**[235](index=235&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the Partnership's disclosure controls and procedures and internal controls over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Partnership's disclosure controls and procedures were effective as of June 30, 2025[237](index=237&type=chunk) - There were no material changes in internal controls over financial reporting during the most recent fiscal quarter[238](index=238&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=58&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed discussion of legal proceedings, claims, and disputes in the notes to the financial statements - The Partnership is subject to various legal proceedings in the ordinary course of business, with details incorporated by reference from 'Item 1. Financial Statements, Note 12. Commitments and Contingencies'[240](index=240&type=chunk) [Item 1A. Risk Factors](index=58&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the Partnership's annual report - No material changes to the Partnership's risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024[241](index=241&type=chunk) [Item 5. Other Information](index=58&type=section&id=Item%205.%20Other%20Information) This section provides information regarding trading arrangements by directors and officers - No director or officer adopted, modified, or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2025[242](index=242&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the quarterly report, including organizational documents, debt indentures, certifications, and interactive data files - The report includes an Index to Exhibits, detailing various documents such as the Certificate of Limited Partnership, Amended and Restated Agreement of Limited Partnership, Indenture for Senior Secured Second Lien Notes, and Certifications of Chief Executive and Financial Officers[243](index=243&type=chunk)[245](index=245&type=chunk)