UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No.: 1-16335

__________________________________

Magellan Midstream Partners, L.P.

(Exact name of registrant as specified in its charter)


Delaware						73-1599053
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

One Williams Center, P.O. Box 22186, Tulsa, Oklahoma 74121-2186

(Address of principal executive offices and zip code)

(918) 574-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units

MMP

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

As of ~~November 1, 2021,~~May 4, 2022, there were ~~213,445,238~~211,561,364 common units outstanding.

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION


ITEM 1.	ITEM 1.		CONSOLIDATED FINANCIAL STATEMENTS		ITEM 1.		CONSOLIDATED FINANCIAL STATEMENTS
		CONSOLIDATED STATEMENTS OF INCOME		4		CONSOLIDATED STATEMENTS OF INCOME		4
		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		5		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		5
		CONSOLIDATED BALANCE SHEETS		6		CONSOLIDATED BALANCE SHEETS		6
		CONSOLIDATED STATEMENTS OF CASH FLOWS		7		CONSOLIDATED STATEMENTS OF CASH FLOWS		7
		CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL		8		CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL		8
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:				NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
		1.	Organization, Description of Business and Basis of Presentation	10		1.	Organization, Description of Business and Basis of Presentation	9
		2.	Discontinued Operations and Assets Held for Sale	12		2.	Discontinued Operations and Assets Held for Sale	11
		3.	Segment Disclosures	13		3.	Segment Disclosures	12
		4.	Revenue	16		4.	Revenue	13
		5.	Investments in Non-Controlled Entities	19		5.	Investments in Non-Controlled Entities	15
		6.	Inventory	21		6.	Inventory	17
		7.	Debt	22		7.	Debt	18
		8.	Leases	23		8.	Leases	19
		9.	Employee Benefit Plans	23		9.	Employee Benefit Plans	20
		10.	Long-Term Incentive Plan	25		10.	Long-Term Incentive Plan	20
		11.	Derivative Financial Instruments	26		11.	Derivative Financial Instruments	21
		12.	Fair Value	29		12.	Fair Value	23
		13.	Commitments and Contingencies	31		13.	Commitments and Contingencies	25
		14.	Related Party Transactions	32		14.	Related Party Transactions	26
		15.	Partners’ Capital and Distributions	32		15.	Partners’ Capital and Distributions	27
		16.	Subsequent Events	33		16.	Subsequent Events	28
ITEM 2.	ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
		Introduction		34		Introduction		29
		Recent Developments		34		Recent Developments		29
		Results of Operations		35		Results of Operations		29
		Adjusted EBITDA, Distributable Cash Flow and Free Cash Flow		41		Adjusted EBITDA, Distributable Cash Flow and Free Cash Flow		32
		Liquidity and Capital Resources		43		Liquidity and Capital Resources		34
		Off-Balance Sheet Arrangements		44		Off-Balance Sheet Arrangements		35
		Other Items		44		Other Items		35
ITEM 3.	ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45	ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
ITEM 4.	ITEM 4.		CONTROLS AND PROCEDURES	46	ITEM 4.		CONTROLS AND PROCEDURES	37
PART II OTHER INFORMATION	PART II OTHER INFORMATION				PART II OTHER INFORMATION
ITEM 1.	ITEM 1.		LEGAL PROCEEDINGS	47	ITEM 1.		LEGAL PROCEEDINGS	38
ITEM 1A.	ITEM 1A.		RISK FACTORS	47	ITEM 1A.		RISK FACTORS	38
ITEM 2.	ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	48	ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	39
ITEM 3.	ITEM 3.		DEFAULTS UPON SENIOR SECURITIES	48	ITEM 3.		DEFAULTS UPON SENIOR SECURITIES	39
ITEM 4.	ITEM 4.		MINE SAFETY DISCLOSURES	48	ITEM 4.		MINE SAFETY DISCLOSURES	39
ITEM 5.	ITEM 5.		OTHER INFORMATION	48	ITEM 5.		OTHER INFORMATION	39
ITEM 6.	ITEM 6.		EXHIBITS	49	ITEM 6.		EXHIBITS	39
INDEX TO EXHIBITS	INDEX TO EXHIBITS			50	INDEX TO EXHIBITS			40
SIGNATURES	SIGNATURES			51	SIGNATURES			41

Forward-Looking Statements

Except for statements of historical fact, all statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may be identified by words like “anticipates,” “believes,” “cause,” “continue,” “could,” “depend,” “develop,” “estimates,” “expects,” “forecasts,” “goal,” “guidance,” “have,” “impact,” “implement,” “increase,” “intends,” “lead,” “maintain,” “may,” “might,” “plans,” “potential,” “possible,” “projected,” “reduce,” “remain,” “result,” “scheduled,” “seek,” “should,” ~~“will”~~“will,” “would” and other similar words or expressions. The absence of such words or expressions does not necessarily mean the statements are not forward-looking. Although we believe our forward-looking statements are reasonable, statements made regarding future results are not guarantees of future performance and are subject to numerous assumptions, uncertainties and risks that are difficult to predict, including those described in Part ~~II,~~I, Item 1A – Risk Factors of ~~this Quarterly~~our Annual Report on Form ~~10-Q.~~10-K. Actual outcomes and results may be materially different from the results stated or implied in such forward-looking statements included in this report. You should not put any undue reliance on any forward-looking statement.

The following are among the important factors that could cause future results to differ materially from any expected, projected, forecasted ~~estimated~~ or ~~budgeted~~estimated amounts, events or circumstances we have discussed in this report:

•changes in ~~overall~~ demand for refined products, crude oil ~~and~~or liquefied petroleum ~~gases;~~gases (“LPGs”);

•price fluctuations for refined products, crude oil ~~and liquefied petroleum gases~~or LPGs and expectations about future prices for these products;

•changes in the production of crude oil in the basins served by our ~~pipelines;~~pipelines or terminals;

•changes in general economic conditions, including market and macro-economic disruptions resulting from pandemics and related governmental responses;

•changes in the financial condition of our customers, vendors, derivatives counterparties, lenders or joint venture co-owners;

•our ability to secure financing in the credit and capital markets in amounts and on terms that will allow us to execute our business strategy, refinance our existing obligations when due and maintain adequate liquidity;

•development and increasing use of alternative sources of energy, ~~sources,~~ including but not limited to ~~natural gas, solar power, wind power,~~ electric and battery-powered ~~engines~~motors, natural gas, hydrogen and ~~geothermal energy, increased use of~~ renewable fuels such as ethanol, biodiesel and renewable diesel, as well as increased conservation or fuel efficiency ~~increased use of electric vehicles, as well as~~and regulatory ~~developments,~~or technological developments ~~or other trends~~ that could affect demand for our services;

•changes in population in the markets served by our refined products pipeline system and changes in consumer preferences, driving patterns or rates of automobile ownership;

•changes in the product quality, throughput or interruption in service of refined products or crude oil pipelines owned and operated by third parties and connected to our assets;

•changes in demand for transportation, ~~and~~ storage ofor other services we provide for refined products ~~and~~or crude ~~oil services we provide;~~oil;

•changes in supply and demand patterns for our facilities due to geopolitical events, the activities of the Organization of the Petroleum Exporting Countries (“OPEC”) and other non-OPEC oil producing countries with large production ~~capacity,~~ capacity;

•changes in United States (“U.S.”) trade policies or in laws governing the importing ~~and~~or exporting of petroleum products;

•our ability to manage interest rate and commodity price exposures;

•changes in our tariff rates or other terms of service required by the Federal Energy Regulatory Commission or state regulatory agencies;

•shut-downs or cutbacks at refineries, oil fields, petrochemical plants or other customers or businesses that use or supply our ~~services;~~assets;

•the effect of weather patterns ~~and~~or other natural phenomena, including climate change, on our operations and demand for our services;

•an increase in the competition our operations encounter, including the effects of capacity over-build in the areas where we operate;

•the occurrence of wars, natural disasters, epidemics, terrorism, cyberattacks, sabotage, protests, or activism, operational hazards, equipment failures, system failures or other unforeseen ~~interruptions;~~interruptions, as well as global and domestic repercussions from and any government responses to any such events;

•our ability to obtain adequate levels of insurance at a reasonable cost, and the potential for losses to exceed the insurance coverage we do obtain;

•the treatment of us as a corporation for federal or state income tax purposes or if we become subject to significant forms of other taxation or more aggressive interpretation or increased assessments under existing forms of taxation;

•our ability to identify expansion projects, accretive acquisitions and joint ventures with acceptable expected returns and to complete these projects on time and at projected costs;

•our ability to consummate announced divestitures;

•our ability to successfully execute our capital allocation priorities, including unit repurchases, with acceptable expected returns;

•the effect of changes in accounting policies and uncertainty of estimates, including accruals and costs of environmental remediation;

•our ability to cooperate with and rely on our joint venture co-owners;

•actions by rating agencies concerning our credit ratings;

•our ability to timely obtain and maintain all necessary approvals, consents and permits required to operate our existing assets and to construct, acquire and operate any new or modified assets;

•our ability to promptly obtain all necessary services, materials, labor, supplies and rights-of-way required for maintenance and operation of our current assets and construction of our growth projects, without significant delays, disputes or cost overruns;

•risks inherent in the use and security of information systems in our business and implementation of new software and hardware;

•changes in laws and regulations or the ~~interpretations~~interpretation of ~~such~~ laws and regulations that govern our gas liquids blending activities or changes regarding product quality specifications or renewable fuel obligations that impact our ability to produce gasoline volumes through our gas liquids blending activities or that require significant capital outlays for compliance;

•changes in laws and regulations or the interpretation of laws and regulations to which we or our customers are or could become subject, including those related to tax withholding requirements, safety, security, employment, hydraulic fracturing, derivatives transactions, trade and ~~environmental,~~the environment, including laws and regulations designed to address climate change;

•the cost and effects of legal and administrative claims and proceedings against us, our subsidiaries or our joint ventures;

•the amount of our indebtedness, which could make us vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds, place us at competitive disadvantages compared to our competitors that have less debt or have other adverse consequences;

•the potential that our internal controls may not be adequate, weaknesses may be discovered or remediation of any identified weaknesses may not be successful;

•the ability and intent of our customers, vendors, lenders, joint venture co-owners or other third parties to perform their contractual obligations to us;

•petroleum ~~product~~products supply ~~disruptions;~~

•~~global and domestic repercussions from terrorist activities, including cyberattacks, and the government’s response thereto;~~disruptions whether due to international military conflicts or otherwise; and

•other factors and uncertainties inherent in the transportation, storage and distribution of petroleum products and the operation, acquisition and construction of assets related to such activities.

This list of important factors is not exhaustive. The forward-looking statements in this Quarterly Report speak only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise, unless required by law.

PART I

FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(In ~~thousands,~~millions, except per unit amounts)

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2021 2020 2021
Transportation and terminals revenue $ 459,940 $ 464,910 $ 1,305,217 $ 1,332,271
Product sales revenue 111,220 168,815 443,127 575,575
Affiliate management fee revenue 5,288 5,329 15,895 15,925
Total revenue 576,448 639,054 1,764,239 1,923,771
Costs and expenses:
Operating 157,716 146,556 446,102 422,907
Cost of product sales 89,375 145,855 364,916 488,614
Depreciation, amortization and impairment 68,439 61,401 183,226 168,304
General and administrative 37,497 46,632 115,480 148,671
Total costs and expenses 353,027 400,444 1,109,724 1,228,496
Other operating income (expense) (2,863) 2,591 539 4,033
Earnings of non-controlled entities 39,135 36,466 116,484 116,107
Operating profit 259,693 277,667 771,538 815,415
Interest expense 54,212 57,016 179,371 170,976
Interest capitalized (1,272) (315) (10,451) (1,240)
Interest income (260) (138) (903) (439)
Gain on disposition of assets — (3,231) (12,887) (72,933)
Other (income) expense 1,455 2,224 3,708 18,111
Income from continuing operations before provision for
income taxes 205,558 222,111 612,700 700,940
Provision for income taxes 824 821 2,169 2,044
Income from continuing operations 204,734 221,290 610,531 698,896
Income from discontinued operations 6,904 15,309 22,514 39,438
Net income $ 211,638 $ 236,599 $ 633,045 $ 738,334
Basic and diluted income from continuing operations per
common unit $ 0.91 $ 1.01 $ 2.70 $ 3.15
Basic and diluted income from discontinued operations per common unit 0.03 0.07 0.10 0.18
Basic and diluted net income per common unit $ 0.94 $ 1.08 $ 2.80 $ 3.33
Weighted average number of common units outstanding used for basic net income per unit calculation 225,222 218,637 226,045 221,637
Weighted average number of common units outstanding used for diluted net income per unit calculation 225,222 218,788 226,045 221,730


	Three Months Ended
	March 31,
	2021		2022
Transportation and terminals revenue	$	412.0	$	422.9
Product sales revenue	213.7		246.1
Affiliate management fee revenue	5.4		5.7
Total revenue	631.1		674.7
Costs and expenses:
Operating	127.3		124.2
Cost of product sales	170.9		243.4
Depreciation, amortization and impairment	54.6		57.7
General and administrative	46.0		62.8
Total costs and expenses	398.8		488.1
Other operating income (expense)	(0.4)		(2.0)
Earnings of non-controlled entities	39.1		35.4
Operating profit	271.0		220.0
Interest expense	57.0		57.3
Interest capitalized	(0.5)		(0.4)
Interest income	(0.1)		(0.1)

Gain on disposition of assets	—		(0.2)
Other (income) expense	1.1		0.6
Income from continuing operations before provision for income taxes	213.5		162.8
Provision for income taxes	0.8		0.8
Income from continuing operations	212.7		162.0
Income from discontinued operations	8.6		3.5
Net income	$	221.3	$	165.5





Earnings per common unit
Basic:
Continuing operations	$	0.95	$	0.76
Discontinued operations	0.04		0.02
Net income per common unit	$	0.99	$	0.78
Weighted average number of common units outstanding	223.6		212.9

Diluted:
Continuing operations	$	0.95	$	0.76
Discontinued operations	0.04		0.02
Net income per common unit	$	0.99	$	0.78
Weighted average number of common units outstanding	223.6		212.9

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in ~~thousands)~~millions)

Three Months Ended September 30, Nine Months Ended September 30,
2020 2021 2020 2021
Net income $ 211,638 $ 236,599 $ 633,045 $ 738,334
Other comprehensive income (loss):
Derivative activity:
Net loss on cash flow hedges — — (10,444) —
Reclassification of net loss on cash flow hedges to income
896 887 2,552 2,662
Changes in employee benefit plan assets and benefit obligations
recognized in other comprehensive income:
Net actuarial gain (loss) — — (333) 10,801
Curtailment gain — — 1,703 —
Recognition of prior service credit amortization in income (46) (46) (136) (136)
Recognition of actuarial loss amortization in income 1,473 1,433 4,462 4,536
Recognition of settlement cost in income — 1,300 969 2,751
Total other comprehensive income (loss) 2,323 3,574 (1,227) 20,614
Comprehensive income $ 213,961 $ 240,173 $ 631,818 $ 758,948


	Three Months Ended March 31,
	2021		2022
Net income	$	221.3	$	165.5
Other comprehensive income:
Derivative activity:

Reclassification of net loss on cash flow hedges to income	0.9		0.9
Changes in employee benefit plan assets and benefit obligations recognized in other comprehensive income:




Recognition of actuarial loss amortization in income	1.6		1.2

Total other comprehensive income	2.5		2.1
Comprehensive income	$	223.8	$	167.6

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS

(In ~~thousands)~~millions)


		December 31, 2020		September 30, 2021			December 31, 2021		March 31, 2022
ASSETS	ASSETS			(Unaudited)		ASSETS			(Unaudited)
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	13,036	$	12,593	Cash and cash equivalents	$	2.0	$	4.6

Trade accounts receivable	Trade accounts receivable	103,568		134,281		Trade accounts receivable	135.2		129.8
Other accounts receivable	Other accounts receivable	37,075		33,735		Other accounts receivable	34.6		35.0
Inventory	Inventory	158,204		222,567		Inventory	281.1		308.2
Commodity derivatives contracts, net	Commodity derivatives contracts, net	—		4,469		Commodity derivatives contracts, net	1.4		3.1
Commodity derivatives deposits	Commodity derivatives deposits	34,165		47,609		Commodity derivatives deposits	46.3		130.8

Assets held for sale	Assets held for sale	15,059		299,304		Assets held for sale	299.5		304.0
Other current assets	Other current assets	44,086		44,738		Other current assets	43.1		35.7
Total current assets	Total current assets	405,193		799,296		Total current assets	843.2		951.2
Property, plant and equipment	Property, plant and equipment	7,943,760		8,021,353		Property, plant and equipment	8,045.9		8,081.9
Less: accumulated depreciation	Less: accumulated depreciation	1,956,926		2,088,990		Less: accumulated depreciation	2,141.2		2,195.4
Net property, plant and equipment	Net property, plant and equipment	5,986,834		5,932,363		Net property, plant and equipment	5,904.7		5,886.5
Investments in non-controlled entities	Investments in non-controlled entities	1,213,856		993,290		Investments in non-controlled entities	980.8		978.6
Right-of-use asset, operating leases	Right-of-use asset, operating leases	166,078		180,470		Right-of-use asset, operating leases	174.2		168.3
Long-term receivables	Long-term receivables	22,755		22,768		Long-term receivables	10.1		9.8
Goodwill	Goodwill	50,121		50,121		Goodwill	50.1		50.1
Other intangibles (less accumulated amortization of $9,228 and $11,186 at December 31, 2020 and September 30, 2021, respectively)		44,925		42,967
Other intangibles (less accumulated amortization of $11.9 and $12.6 at December 31, 2021 and March 31, 2022, respectively)						Other intangibles (less accumulated amortization of $11.9 and $12.6 at December 31, 2021 and March 31, 2022, respectively)	43.2		42.5
Restricted cash	Restricted cash	9,411		7,847		Restricted cash	7.0		6.7
Noncurrent assets held for sale		277,566		—

Other noncurrent assets	Other noncurrent assets	20,243		17,543		Other noncurrent assets	16.7		17.3
Total assets	Total assets	$	8,196,982	$	8,046,665	Total assets	$	8,030.0	$	8,111.0

LIABILITIES AND PARTNERS’ CAPITAL	LIABILITIES AND PARTNERS’ CAPITAL					LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	97,988	$	129,088	Accounts payable	$	109.5	$	98.0
Accrued payroll and benefits	Accrued payroll and benefits	52,055		63,321		Accrued payroll and benefits	74.9		43.9
Accrued interest payable	Accrued interest payable	58,998		49,992		Accrued interest payable	59.0		50.0
Accrued taxes other than income	Accrued taxes other than income	67,710		68,740		Accrued taxes other than income	76.5		51.7

Deferred revenue	Deferred revenue	98,635		101,800		Deferred revenue	92.5		106.4
Accrued product liabilities	Accrued product liabilities	75,180		117,126		Accrued product liabilities	153.5		126.6
Commodity derivatives contracts, net	Commodity derivatives contracts, net	21,621		22,350		Commodity derivatives contracts, net	18.6		50.5

Current portion of operating lease liability	Current portion of operating lease liability	27,533		25,618		Current portion of operating lease liability	25.8		30.7

Liabilities held for sale	Liabilities held for sale	8,423		15,516		Liabilities held for sale	15.8		23.5
Other current liabilities	Other current liabilities	50,431		63,741		Other current liabilities	53.5		54.5
Total current liabilities	Total current liabilities	558,574		657,292		Total current liabilities	679.6		635.8
Long-term debt, net	Long-term debt, net	4,978,691		5,103,226		Long-term debt, net	5,088.8		5,317.2
Long-term operating lease liability	Long-term operating lease liability	137,483		151,650		Long-term operating lease liability	147.3		138.5
Long-term pension and benefits	Long-term pension and benefits	163,776		151,922		Long-term pension and benefits	145.0		145.8
Long-term liabilities held for sale		1,508		—

Other noncurrent liabilities	Other noncurrent liabilities	53,144		68,622		Other noncurrent liabilities	69.5		71.0

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0

Partners’ capital:	Partners’ capital:					Partners’ capital:
Common unitholders (223,120 units and 213,445 units outstanding at December 31, 2020 and September 30, 2021, respectively)		2,486,996		2,076,529
Common unitholders (212.4 units and 211.6 units outstanding at December 31, 2021 and March 31, 2022, respectively)						Common unitholders (212.4 units and 211.6 units outstanding at December 31, 2021 and March 31, 2022, respectively)	2,054.8		1,955.6
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(183,190)		(162,576)		Accumulated other comprehensive loss	(155.0)		(152.9)
Total partners’ capital	Total partners’ capital	2,303,806		1,913,953		Total partners’ capital	1,899.8		1,802.7

Total liabilities and partners’ capital	Total liabilities and partners’ capital	$	8,196,982	$	8,046,665	Total liabilities and partners’ capital	$	8,030.0	$	8,111.0

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in ~~thousands)~~millions)


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2020		2021			2021		2022
Operating Activities:	Operating Activities:					Operating Activities:
Net income	Net income	$	633,045	$	738,334	Net income	$	221.3	$	165.5
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations	Income from discontinued operations	(22,514)		(39,438)		Income from discontinued operations	(8.6)		(3.5)
Depreciation, amortization and impairment expense	Depreciation, amortization and impairment expense	183,226		168,304		Depreciation, amortization and impairment expense	54.6		57.7
Gain on disposition of assets	Gain on disposition of assets	(13,330)		(72,933)		Gain on disposition of assets	—		(0.2)
Earnings of non-controlled entities	Earnings of non-controlled entities	(116,484)		(116,107)		Earnings of non-controlled entities	(39.1)		(35.4)
Distributions from operations of non-controlled entities	Distributions from operations of non-controlled entities	152,645		140,616		Distributions from operations of non-controlled entities	51.4		38.4
Equity-based incentive compensation expense	Equity-based incentive compensation expense	5,580		15,686		Equity-based incentive compensation expense	4.7		14.4
Settlement cost, amortization of prior service credit and actuarial loss	Settlement cost, amortization of prior service credit and actuarial loss	3,953		7,151		Settlement cost, amortization of prior service credit and actuarial loss	1.6		1.2

Debt extinguishment costs		12,893		—

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:

Trade accounts receivable and other accounts receivable	Trade accounts receivable and other accounts receivable	8,954		(24,245)		Trade accounts receivable and other accounts receivable	(31.3)		5.0
Inventory	Inventory	49,802		(64,363)		Inventory	(46.5)		(27.1)

Accounts payable	Accounts payable	9,056		23,405		Accounts payable	10.1		(9.3)
Accrued payroll and benefits	Accrued payroll and benefits	(34,239)		11,266		Accrued payroll and benefits	(12.3)		(31.0)
Accrued interest payable	Accrued interest payable	(14,775)		(9,006)		Accrued interest payable	(9.0)		(9.0)

Accrued taxes other than income						Accrued taxes other than income	(19.9)		(24.8)
Accrued product liabilities	Accrued product liabilities	(8,352)		41,946		Accrued product liabilities	58.9		(26.9)
Deferred revenue	Deferred revenue	(17,342)		3,165		Deferred revenue	(0.6)		13.9

Other current and noncurrent assets and liabilities	Other current and noncurrent assets and liabilities	(23,523)		17,206		Other current and noncurrent assets and liabilities	(7.1)		(36.3)
Net cash provided by operating activities of continuing operations	Net cash provided by operating activities of continuing operations	808,595		840,987		Net cash provided by operating activities of continuing operations	228.2		92.6
Net cash provided by operating activities of discontinued operations	Net cash provided by operating activities of discontinued operations	31,510		38,090		Net cash provided by operating activities of discontinued operations	12.2		7.8
Net cash provided by operating activities	Net cash provided by operating activities	840,105		879,077		Net cash provided by operating activities	240.4		100.4
Investing Activities:	Investing Activities:					Investing Activities:
Additions to property, plant and equipment, net(1)	Additions to property, plant and equipment, net(1)	(357,093)		(106,458)		Additions to property, plant and equipment, net(1)	(29.7)		(44.9)

Proceeds from sale and disposition of assets	Proceeds from sale and disposition of assets	334,583		271,964		Proceeds from sale and disposition of assets	0.7		0.2

Investments in non-controlled entities	Investments in non-controlled entities	(73,678)		(5,616)		Investments in non-controlled entities	(1.9)		(0.8)

Net cash provided (used) by investing activities of continuing operations		(96,188)		159,890
Net cash provided (used) by investing activities of discontinued operations		(14,077)		254
Net cash provided (used) by investing activities		(110,265)		160,144
Net cash used by investing activities of continuing operations						Net cash used by investing activities of continuing operations	(30.9)		(45.5)
Net cash used by investing activities of discontinued operations						Net cash used by investing activities of discontinued operations	(0.3)		(1.1)
Net cash used by investing activities						Net cash used by investing activities	(31.2)		(46.6)
Financing Activities:	Financing Activities:					Financing Activities:
Distributions paid	Distributions paid	(697,264)		(685,018)		Distributions paid	(229.4)		(220.6)
Repurchases of common units	Repurchases of common units	(251,950)		(473,059)		Repurchases of common units	—		(50.0)
Net commercial paper borrowings		248,000		123,000

Borrowings under long-term notes		499,400		—
Payments on notes		(550,000)		—
Debt placement costs		(4,255)		—
Net payment on financial derivatives		(10,444)		—
Net borrowings under revolver						Net borrowings under revolver	17.0		228.0

Payments associated with settlement of equity-based incentive compensation	Payments associated with settlement of equity-based incentive compensation	(14,700)		(6,151)		Payments associated with settlement of equity-based incentive compensation	(6.2)		(8.9)
Debt extinguishment costs		(12,893)		—

Net cash used by financing activities	Net cash used by financing activities	(794,106)		(1,041,228)		Net cash used by financing activities	(218.6)		(51.5)
Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	(64,266)		(2,007)		Change in cash, cash equivalents and restricted cash	(9.4)		2.3
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	84,599		22,447		Cash, cash equivalents and restricted cash at beginning of period	22.4		9.0
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	20,333	$	20,440	Cash, cash equivalents and restricted cash at end of period	$	13.0	$	11.3

Supplemental non-cash investing activities:	Supplemental non-cash investing activities:					Supplemental non-cash investing activities:

(1) Additions to property, plant and equipment	(1) Additions to property, plant and equipment	$	(304,321)	$	(110,505)	(1) Additions to property, plant and equipment	$	(20.4)	$	(39.4)
Changes in accounts payable and other current liabilities related to capital expenditures	Changes in accounts payable and other current liabilities related to capital expenditures	(52,772)		4,047		Changes in accounts payable and other current liabilities related to capital expenditures	(9.3)		(5.5)
Additions to property, plant and equipment, net	Additions to property, plant and equipment, net	$	(357,093)	$	(106,458)	Additions to property, plant and equipment, net	$	(29.7)	$	(44.9)

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(Unaudited, in ~~thousands)~~millions)

Common Unitholders Accumulated Other Comprehensive Loss Total Partners’ Capital
Balance, July 1, 2020 $ 2,620,365 $ (165,627) $ 2,454,738
Comprehensive income:
Net income 211,638 — 211,638
Total other comprehensive income — 2,323 2,323
Total comprehensive income 211,638 2,323 213,961
Distributions (231,245) — (231,245)
Equity-based incentive compensation expense 1,169 — 1,169
Repurchases of common units (49,968) — (49,968)
Other (211) — (211)
Three Months Ended September 30, 2020 $ 2,551,748 $ (163,304) $ 2,388,444
Balance, July 1, 2021 $ 2,451,939 $ (166,150) $ 2,285,789
Comprehensive income:
Net income 236,599 — 236,599
Total other comprehensive income — 3,574 3,574
Total comprehensive income 236,599 3,574 240,173
Distributions (226,633) — (226,633)
Equity-based incentive compensation expense 5,626 — 5,626
Repurchases of common units (390,735) — (390,735)
Other (267) — (267)
Three Months Ended September 30, 2021 $ 2,076,529 $ (162,576) $ 1,913,953

MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (Continued)
(Unaudited, in thousands)
Common Unitholders Accumulated Other Comprehensive Loss Total Partners’ Capital
Balance, January 1, 2020 $ 2,877,105 $ (162,077) $ 2,715,028
Comprehensive income:
Net income 633,045 — 633,045
Total other comprehensive loss — (1,227) (1,227)
Total comprehensive income (loss) 633,045 (1,227) 631,818
Distributions (697,264) — (697,264)
Equity-based incentive compensation expense 5,580 — 5,580
Repurchases of common units (251,950) — (251,950)
Issuance of common units in settlement of equity-based incentive plan awards 600 — 600
Payments associated with settlement of equity-based incentive compensation (14,700) — (14,700)
Other (668) — (668)
Nine Months Ended September 30, 2020 $ 2,551,748 $ (163,304) $ 2,388,444
Balance, January 1, 2021 $ 2,486,996 $ (183,190) $ 2,303,806
Comprehensive income:
Net income 738,334 — 738,334
Total other comprehensive income — 20,614 20,614
Total comprehensive income 738,334 20,614 758,948
Distributions (685,018) — (685,018)
Equity-based incentive compensation expense 15,686 — 15,686
Repurchases of common units (473,059) — (473,059)
Issuance of common units in settlement of equity-based incentive plan awards 520 — 520
Payments associated with settlement of equity-based incentive compensation (6,151) — (6,151)
Other (779) — (779)
Nine Months Ended September 30, 2021 $ 2,076,529 $ (162,576) $ 1,913,953


	Common Unitholders		Accumulated Other Comprehensive Loss			Total Partners’ Capital
Balance, January 1, 2021	$	2,487.0		$	(183.2)	$	2,303.8
Comprehensive income:
Net income	221.3			—		221.3
Total other comprehensive income	—			2.5		2.5
Total comprehensive income	221.3			2.5		223.8
Distributions	(229.4)			—		(229.4)
Equity-based incentive compensation expense	4.7			—		4.7

Issuance of common units in settlement of equity-based incentive plan awards	0.5			—		0.5
Payments associated with settlement of equity-based incentive compensation	(6.2)			—		(6.2)

Other	(0.2)			—		(0.2)
Three Months Ended March 31, 2021	$	2,477.7		$	(180.7)	$	2,297.0

Balance, January 1, 2022	$	2,054.8		$	(155.0)	$	1,899.8
Comprehensive income:
Net income	165.5			—		165.5
Total other comprehensive income	—			2.1		2.1
Total comprehensive income	165.5			2.1		167.6
Distributions	(220.6)			—		(220.6)
Repurchase of common units	(50.0)			—		(50.0)
Equity-based incentive compensation expense	14.4			—		14.4
Issuance of common units in settlement of equity-based incentive plan awards	0.7			—		0.7
Payments associated with settlement of equity-based incentive compensation	(8.9)			—		(8.9)
Other	(0.3)			—		(0.3)
Three Months Ended March 31, 2022	$	1,955.6		$	(152.9)	$	1,802.7

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Organization, Description of Business and Basis of Presentation

Organization

Unless indicated otherwise, the terms “our,” “we,” “us” and similar language refer to Magellan Midstream Partners, L.P. together with its subsidiaries. Magellan Midstream Partners, L.P. is a Delaware limited partnership, and ~~its~~our common units are traded on the New York Stock Exchange under the ticker symbol “MMP.” Magellan GP, LLC, a ~~wholly-owned~~wholly owned Delaware limited liability company, serves as ~~its~~our general partner. The board of directors of our general partner is referred to herein as our “board.”

Description of Business

We are principally engaged in the transportation, storage and distribution of refined petroleum products and crude oil. As of ~~September 30, 2021,~~March 31, 2022, our asset portfolio, excluding assets associated with discontinued operations, consisted of:

•our refined products segment, comprised of our approximately 9,800-mile refined petroleum products pipeline system with 54 ~~connected~~ terminals and 2 marine storage terminals (1 of which is owned through a joint venture); and

•our crude oil segment, comprised of approximately 2,200 miles of crude oil pipelines, a condensate splitter and 3739 million barrels of aggregate storage capacity, of which approximately 2729 million barrels are used for contract storage. Approximately 1,000 miles of these pipelines, the condensate splitter and 3031 million barrels of this storage capacity (including 2425 million barrels used for contract storage) are wholly-owned, with the remainder owned through joint ventures.

The following terms are commonly used in our industry to describe products that we transport, store, distribute or otherwise handle through our petroleum pipelines and terminals:

•refined productsare the output from crude oil refineries that are primarily used as fuels by consumers. Refined products include gasoline, diesel fuel, aviation fuel, kerosene and heating oil. Diesel fuel, kerosene and heating oil are also referred to as distillates;

•transmix is a mixture that forms when different refined products are transported in pipelines. Transmix is fractionated and blended into usable refined products;

•~~liquefied petroleum gases, or~~ LPGs are liquids produced as by-products of the crude oil refining process and in connection with natural gas production. LPGs include gas liquids such as butane, natural gasoline and propane;

•blendstocksare products blended with refined products to change or enhance their characteristics such as increasing a gasoline’s octane or oxygen content. Blendstocks include alkylates ~~oxygenates~~ and ~~natural gasoline;~~oxygenates; and

•crude oil,, which includes condensate, is a naturally occurring unrefined petroleum product recovered from underground that is used as feedstock by refineries, splitters and petrochemical ~~facilities; and~~

•~~renewable fuels, such as ethanol, biodiesel and renewable diesel, are fuels derived from living materials and typically blended with other refined products as required by government mandates.~~facilities.

We use the term petroleum products to describe any, or a combination, of the above-noted products. In addition, we handle, store and distribute renewable fuels, such as ethanol and biodiesel.

109

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation

In the opinion of management, our accompanying consolidated financial statements which are unaudited, except for the consolidated balance sheet as of December 31, ~~2020,~~2021, which is derived from our audited financial statements, include all normal and recurring adjustments necessary to present fairly our financial position as of ~~September 30, 2021,~~March 31, 2022, the results of operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022 and cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021.~~2022. The results of operations for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, ~~2021~~2022 for several reasons. Profits from our gas liquids blending activities are realized largely during the first and fourth quarters of each year. Additionally, gasoline demand, which drives transportation volumes and revenues on our refined products pipeline system, generally trends higher during the summer driving months. Further, the volatility of commodity prices impacts the profits from our commodity activities and the volume of petroleum products we transport on our pipelines.

Pursuant to the rules and regulations of the Securities and Exchange Commission, the financial statements in

this report have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) ~~in the U.S.~~ for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Discontinued Operations

In June 2021, we entered into an agreement to sell our independent terminals network comprised of 26 refined petroleum products terminals with approximately 6000000 barrels of storage located primarily in the southeastern ~~United States.~~U.S. to Buckeye Partners, L.P. (“Buckeye”). The sale is expected to close upon the receipt of required regulatory ~~approvals.~~approval. The related results of operations, financial position and cash flows have been classified as discontinued operations for all periods ~~presented. See~~presented (see Note 2 -– Discontinued Operations and Assets Held for Sale for ~~further details.~~

additional details). Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to continuing operations.

Reclassifications

Certain prior period amounts have been reclassified to conform with the current period’s presentation, including amounts related to our discontinued operations.

Use of Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities that exist at the date of our consolidated financial statements, as well as their impact on the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

New Accounting Pronouncements

We evaluate new Accounting Standards ~~Updates~~Codifications (“ASC”) and updates issued by the Financial Accounting Standards Board on an ongoing basis. There are no new accounting pronouncements that we anticipate will have a material impact on our financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.Discontinued Operations and Assets Held for Sale

On June 10, 2021, we announced an agreement to sell our independent terminals network comprised of 26 refined petroleum products terminals with approximately 6 million barrels of storage located primarily in the southeastern U.S. to Buckeye Partners, L.P. (“Buckeye”) for $435 million. The sale is expected to close upon the receipt of required regulatory approvals. The related results of operations, which were previously included in our refined products segment, have been classified as discontinued operations.

Summarized Results of Discontinued Operations

The following table provides the summarized results that have been reclassified from continuing operations to discontinued operations on the consolidated statements of income (in ~~thousands)~~millions):

Three Months Ended September 30, Nine Months Ended September 30,
2020 2021 2020 2021
Transportation and terminals revenue $ 13,591 $ 13,119 $ 38,524 $ 39,946
Product sales revenue 8,225 14,550 38,715 59,141
Total revenue 21,816 27,669 77,239 99,087
Costs and expenses:
Operating 4,266 2,814 11,495 10,070
Cost of product sales 6,744 8,846 30,948 40,620
Depreciation, amortization and impairment 3,383 57 10,670 7,059
General and administrative 519 643 1,612 1,900
Total costs and expenses 14,912 12,360 54,725 59,649
Income from discontinued operations $ 6,904 $ 15,309 $ 22,514 $ 39,438

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~


	Three Months Ended March 31,
	2021		2022
Transportation and terminals revenue	$	13.1	$	12.1
Product sales revenue	16.9		6.3
Total revenue	30.0		18.4
Costs and expenses:
Operating	3.4		3.8
Cost of product sales	13.9		10.5
Depreciation, amortization and impairment	3.5		—
General and administrative	0.6		0.6
Total costs and expenses	21.4		14.9


Income from discontinued operations	$	8.6	$	3.5

Summarized Assets and Liabilities of Discontinued Operations

The following table provides the summarized assets and liabilities classified as held for sale on the consolidated balance sheets (in ~~thousands)~~millions):


		December 31, 2020		September 30, 2021			December 31, 2021		March 31, 2022
Assets:	Assets:					Assets:
Trade accounts receivable	Trade accounts receivable	$	5,568	$	7,013	Trade accounts receivable	$	6.3	$	5.9
Inventory	Inventory	9,185		12,641		Inventory	17.0		20.1

Net property, plant and equipment	Net property, plant and equipment	274,857		269,468		Net property, plant and equipment	272.0		274.0
Goodwill	Goodwill	2,709		2,709		Goodwill	2.7		2.7
Other assets	Other assets	306		7,473		Other assets	1.5		1.3
Total assets classified as held for sale	Total assets classified as held for sale	$	292,625	$	299,304	Total assets classified as held for sale	$	299.5	$	304.0

Liabilities:	Liabilities:					Liabilities:
Accounts payable	Accounts payable	$	2,034	$	4,087	Accounts payable	$	3.7	$	4.7
Accrued product liabilities	Accrued product liabilities	3,986		7,123		Accrued product liabilities	8.4		13.4
Other liabilities	Other liabilities	3,911		4,306		Other liabilities	3.7		5.4
Total liabilities classified as held for sale	Total liabilities classified as held for sale	$	9,931	$	15,516	Total liabilities classified as held for sale	$	15.8	$	23.5

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.Segment Disclosures

Our reportable segments are strategic business units that offer different products and services. Our segments are managed separately because each segment requires different marketing strategies and business knowledge. Management evaluates performance based on segment operating margin, which includes revenue from affiliates and third-party customers, intersegment transactions, operating expense, cost of product sales, other operating (income) expense and earnings of non-controlled entities.

We believe that investors benefit from having access to the same financial measures used by management. Operating margin, which is presented in the following tables, is an important measure used by management to evaluate the economic performance of our core operations. Operating margin is not a GAAP measure, but the components of operating margin are computed using amounts that are determined in accordance with GAAP. A reconciliation of operating margin to operating profit, which is ~~the~~its nearest comparable GAAP financial measure, is included in the tables ~~below (presented in thousands).~~below. Operating profit includes depreciation, amortization and impairment expense and general and administrative (“G&A”) expense that management does not consider when evaluating the core profitability of our separate operating segments.


	Three Months Ended March 31, 2021
	(in millions)
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	$	297.6	$	116.2	$	(1.8)	$	412.0
Product sales revenue	184.5		29.2		—		213.7
Affiliate management fee revenue	1.6		3.8		—		5.4
Total revenue	483.7		149.2		(1.8)		631.1
Operating expense	91.5		39.2		(3.4)		127.3
Cost of product sales	140.8		30.1		—		170.9
Other operating (income) expense	(0.3)		0.7		—		0.4
Earnings of non-controlled entities	(9.2)		(29.9)		—		(39.1)
Operating margin	260.9		109.1		1.6		371.6
Depreciation, amortization and impairment expense	36.1		16.9		1.6		54.6
G&A expense	33.0		13.0		—		46.0
Operating profit	$	191.8	$	79.2	$	—	$	271.0

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Three Months Ended March 31, 2022
	(in millions)
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	$	309.5	$	114.7	$	(1.3)	$	422.9
Product sales revenue	241.6		4.5		—		246.1
Affiliate management fee revenue	1.8		3.9		—		5.7
Total revenue	552.9		123.1		(1.3)		674.7
Operating expense	88.2		38.8		(2.8)		124.2
Cost of product sales	233.1		10.3		—		243.4
Other operating (income) expense	(0.1)		2.1		—		2.0
Earnings of non-controlled entities	(3.7)		(31.7)		—		(35.4)
Operating margin	235.4		103.6		1.5		340.5
Depreciation, amortization and impairment expense	39.6		16.6		1.5		57.7
G&A expense	45.7		17.1		—		62.8
Operating profit	$	150.1	$	69.9	$	—	$	220.0

4. Revenue

Statements of Income Disclosures

The following tables provide details of our revenue disaggregated by key activities that comprise our performance obligations by operating segment (in millions):

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended September 30, 2020
Refined Products Crude Oil Intersegment
Eliminations Total
Transportation and terminals revenue $ 307,218 $ 154,652 $ (1,930) $ 459,940
Product sales revenue 106,027 5,193 — 111,220
Affiliate management fee revenue 1,579 3,709 — 5,288
Total revenue 414,824 163,554 (1,930) 576,448
Operating expense 114,313 46,956 (3,553) 157,716
Cost of product sales 79,612 9,763 — 89,375
Other operating (income) expense (193) 3,056 — 2,863
Earnings of non-controlled entities (7,134) (32,001) — (39,135)
Operating margin 228,226 135,780 1,623 365,629
Depreciation, amortization and impairment expense 38,237 28,579 1,623 68,439
G&A expense 26,968 10,529 — 37,497
Operating profit $ 163,021 $ 96,672 $ — $ 259,693

Three Months Ended September 30, 2021
Refined Products Crude Oil Intersegment
Eliminations Total
Transportation and terminals revenue $ 349,430 $ 116,920 $ (1,440) $ 464,910
Product sales revenue 153,352 15,463 — 168,815
Affiliate management fee revenue 1,643 3,686 — 5,329
Total revenue 504,425 136,069 (1,440) 639,054
Operating expense 114,612 35,042 (3,098) 146,556
Cost of product sales 128,372 17,483 — 145,855
Other operating (income) expense (2,873) 282 — (2,591)
Earnings of non-controlled entities (8,160) (28,306) — (36,466)
Operating margin 272,474 111,568 1,658 385,700
Depreciation, amortization and impairment expense 42,552 17,191 1,658 61,401
G&A expense 33,478 13,154 — 46,632
Operating profit $ 196,444 $ 81,223 $ — $ 277,667


	Three Months Ended March 31, 2021
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation	$	193.4	$	55.0	$	—	$	248.4

Terminalling	22.6		6.1		—		28.7
Storage	49.0		29.3		(1.8)		76.5
Ancillary services	28.5		8.0		—		36.5
Lease revenue	4.1		17.8		—		21.9
Transportation and terminals revenue	297.6		116.2		(1.8)		412.0
Product sales revenue	184.5		29.2		—		213.7
Affiliate management fee revenue	1.6		3.8		—		5.4
Total revenue	483.7		149.2		(1.8)		631.1
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue	(4.1)		(17.8)		—		(21.9)
(Gains) losses from futures contracts included in product sales revenue	47.3		5.4		—		52.7
Affiliate management fee revenue	(1.6)		(3.8)		—		(5.4)
Total revenue from contracts with customers under ASC 606	$	525.3	$	133.0	$	(1.8)	$	656.5


	Three Months Ended March 31, 2022
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation	$	213.3	$	55.0	$	—	$	268.3
Terminalling	23.3		6.3		—		29.6
Storage	39.5		27.0		(1.3)		65.2
Ancillary services	27.6		7.9		—		35.5
Lease revenue	5.8		18.5		—		24.3
Transportation and terminals revenue	309.5		114.7		(1.3)		422.9
Product sales revenue	241.6		4.5		—		246.1
Affiliate management fee revenue	1.8		3.9		—		5.7
Total revenue	552.9		123.1		(1.3)		674.7
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue	(5.8)		(18.5)		—		(24.3)
(Gains) losses from futures contracts included in product sales revenue	108.2		8.2		—		116.4
Affiliate management fee revenue	(1.8)		(3.9)		—		(5.7)
Total revenue from contracts with customers under ASC 606	$	653.5	$	108.9	$	(1.3)	$	761.1

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended September 30, 2020
Refined Products Crude Oil Intersegment
Eliminations Total
Transportation and terminals revenue $ 876,363 $ 433,947 $ (5,093) $ 1,305,217
Product sales revenue 422,986 20,141 — 443,127
Affiliate management fee revenue 4,676 11,219 — 15,895
Total revenue 1,304,025 465,307 (5,093) 1,764,239
Operating expense 316,371 139,645 (9,914) 446,102
Cost of product sales 334,366 30,550 — 364,916
Other operating (income) expense (2,223) 1,684 — (539)
Earnings of non-controlled entities (25,946) (90,538) — (116,484)
Operating margin 681,457 383,966 4,821 1,070,244
Depreciation, amortization and impairment expense 118,038 60,367 4,821 183,226
G&A expense 83,190 32,290 — 115,480
Operating profit $ 480,229 $ 291,309 $ — $ 771,538

Nine Months Ended September 30, 2021
Refined Products Crude Oil Intersegment
Eliminations Total
Transportation and terminals revenue $ 984,895 $ 351,817 $ (4,441) $ 1,332,271
Product sales revenue 487,551 88,024 — 575,575
Affiliate management fee revenue 4,802 11,123 — 15,925
Total revenue 1,477,248 450,964 (4,441) 1,923,771
Operating expense 314,241 118,072 (9,406) 422,907
Cost of product sales 394,316 94,298 — 488,614
Other operating (income) expense (6,279) 2,246 — (4,033)
Earnings of non-controlled entities (25,528) (90,579) — (116,107)
Operating margin 800,498 326,927 4,965 1,132,390
Depreciation, amortization and impairment expense 112,754 50,585 4,965 168,304
G&A expense 106,749 41,922 — 148,671
Operating profit $ 580,995 $ 234,420 $ — $ 815,415

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

4.~~Revenue~~

~~Statement of Income Disclosures~~

~~The following tables provide details of our revenue disaggregated by key activities that comprise our performance obligations by operating segment (in thousands):~~

Three Months Ended September 30, 2020
Refined Products Crude Oil Intersegment Eliminations Total
Transportation $ 192,194 $ 90,156 $ — $ 282,350
Terminalling 30,650 5,651 — 36,301
Storage 49,104 32,876 (1,930) 80,050
Ancillary services 29,955 6,828 — 36,783
Lease revenue 5,315 19,141 — 24,456
Transportation and terminals revenue 307,218 154,652 (1,930) 459,940
Product sales revenue 106,027 5,193 — 111,220
Affiliate management fee revenue 1,579 3,709 — 5,288
Total revenue 414,824 163,554 (1,930) 576,448
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)
(5,315) (19,141) — (24,456)
(Gains) losses from futures contracts included in product sales revenue(2)
6,560 884 — 7,444
Affiliate management fee revenue (1,579) (3,709) — (5,288)
Total revenue from contracts with customers under ASC 606 $ 414,490 $ 141,588 $ (1,930) $ 554,148

~~(1)Lease revenue is accounted for under Accounting Standards Codification (“ASC”) 842,~~ ~~Leases~~.

~~(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815,~~ ~~Derivatives and Hedging~~.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

Three Months Ended September 30, 2021
Refined Products Crude Oil Intersegment Eliminations Total
Transportation $ 241,685 $ 58,172 $ — $ 299,857
Terminalling 26,468 3,280 — 29,748
Storage 42,316 28,199 (1,440) 69,075
Ancillary services 34,157 7,667 — 41,824
Lease revenue 4,804 19,602 — 24,406
Transportation and terminals revenue 349,430 116,920 (1,440) 464,910
Product sales revenue 153,352 15,463 — 168,815
Affiliate management fee revenue 1,643 3,686 — 5,329
Total revenue 504,425 136,069 (1,440) 639,054
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)
(4,804) (19,602) — (24,406)
(Gains) losses from futures contracts included in product sales revenue(2)
26,992 2,634 — 29,626
Affiliate management fee revenue (1,643) (3,686) — (5,329)
Total revenue from contracts with customers under ASC 606 $ 524,970 $ 115,415 $ (1,440) $ 638,945

~~(1)~~ ~~Lease revenue is accounted for under ASC 842,~~ ~~Leases~~.

~~(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815,~~ ~~Derivatives and Hedging~~.

Nine Months Ended September 30, 2020
Refined Products Crude Oil Intersegment Eliminations Total
Transportation $ 533,451 $ 244,155 $ — $ 777,606
Terminalling 88,038 14,702 — 102,740
Storage 152,186 97,103 (5,093) 244,196
Ancillary services 85,441 20,745 — 106,186
Lease revenue 17,247 57,242 — 74,489
Transportation and terminals revenue 876,363 433,947 (5,093) 1,305,217
Product sales revenue 422,986 20,141 — 443,127
Affiliate management fee revenue 4,676 11,219 — 15,895
Total revenue 1,304,025 465,307 (5,093) 1,764,239
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)
(17,247) (57,242) — (74,489)
(Gains) losses from futures contracts included in product sales revenue(2)
(82,109) 483 — (81,626)
Affiliate management fee revenue (4,676) (11,219) — (15,895)
Total revenue from contracts with customers under ASC 606 $ 1,199,993 $ 397,329 $ (5,093) $ 1,592,229

~~(1)~~ ~~Lease revenue is accounted for under ASC 842,~~ ~~Leases~~.

~~(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815,~~ ~~Derivatives and Hedging~~.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

Nine Months Ended September 30, 2021
Refined Products Crude Oil Intersegment Eliminations Total
Transportation $ 667,148 $ 172,922 0 $ 840,070
Terminalling 74,223 12,615 0 86,838
Storage 135,938 87,237 (4,441) 218,734
Ancillary services 94,640 23,224 0 117,864
Lease revenue 12,946 55,819 0 68,765
Transportation and terminals revenue 984,895 351,817 (4,441) 1,332,271
Product sales revenue 487,551 88,024 — 575,575
Affiliate management fee revenue 4,802 11,123 — 15,925
Total revenue 1,477,248 450,964 (4,441) 1,923,771
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)
(12,946) (55,819) — (68,765)
(Gains) losses from futures contracts included in product sales revenue(2)
108,595 14,165 — 122,760
Affiliate management fee revenue (4,802) (11,123) — (15,925)
Total revenue from contracts with customers under ASC 606 $ 1,568,095 $ 398,187 $ (4,441) $ 1,961,841

~~(1)~~ ~~Lease revenue is accounted for under ASC 842,~~ ~~Leases~~.

~~(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815,~~ ~~Derivatives and Hedging~~.

Balance Sheet Disclosures

The following table summarizes our accounts receivable, contract assets and contract liabilities resulting from contracts with customers (in ~~thousands)~~millions):


		December 31, 2020		September 30, 2021			December 31, 2021		March 31, 2022
Accounts receivable from contracts with customers	Accounts receivable from contracts with customers	$	103,275	$	132,586	Accounts receivable from contracts with customers	$	134.8	$	125.1
Contract assets	Contract assets	$	12,220	$	12,284	Contract assets	$	12.5	$	13.8
Contract liabilities	Contract liabilities	$	102,702	$	106,879	Contract liabilities	$	100.1	$	112.4

For the ~~respective~~ three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, we recognized ~~$2.9 million and $76.7~~$67.7 million of transportation and terminals revenue that was recorded in deferred revenue as of December 31, ~~2020.~~2021.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

Unfulfilled Performance Obligations

The following table provides the aggregate amount of the transaction price allocated to our unfulfilled performance obligations (“UPOs”) as of ~~September 30, 2021~~March 31, 2022 by operating segment, including the range of years remaining on our contracts with customers and an estimate of revenues expected to be recognized over the next 12 months (dollars in ~~thousands)~~millions):


		Refined Products		Crude Oil		Total			Refined Products		Crude Oil		Total
Balances at September 30, 2021		$	1,937,717	$	1,111,166	$	3,048,883
Balances at March 31, 2022								Balances at March 31, 2022	$	1,800.9	$	1,023.5	$	2,824.4
Remaining terms	Remaining terms	1 - 17 years		1 - 10 years				Remaining terms	1 - 17 years		1 - 10 years
Estimated revenues from UPOs to be recognized in the next 12 months	Estimated revenues from UPOs to be recognized in the next 12 months	$	365,383	$	263,798	$	629,181	Estimated revenues from UPOs to be recognized in the next 12 months	$	370.4	$	249.5	$	619.9

5.Investments in Non-Controlled Entities

Our equity investments in non-controlled entities at ~~September 30, 2021~~March 31, 2022 were comprised of:


Entity						Ownership Interest
BridgeTex Pipeline Company, LLC (“BridgeTex”)						30%
Double Eagle Pipeline LLC (“Double Eagle”)						50%
HoustonLink Pipeline Company, LLC (“HoustonLink”)						50%
MVP Terminalling, LLC (“MVP”)						25%
Powder Springs Logistics, LLC (“Powder Springs”)						50%
Saddlehorn Pipeline Company, LLC (“Saddlehorn”)						30%
Seabrook Logistics, LLC (“Seabrook”)						50%
Texas Frontera, LLC (“Texas Frontera”)						50%

In April 2021, we sold nearly half of our membership interest in MVP. As a result of the sale, we received proceeds of $272.1 million and recorded a gain of $70.4 million on our consolidated statements of income. Following the sale, we own approximately 25% of MVP and remain the operator of the facility.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We serve as operator of BridgeTex, HoustonLink, MVP, Powder Springs, Saddlehorn, Texas Frontera and the pipeline activities of Seabrook. We receive fees for management services as well as reimbursement or payment to us for certain direct operational payroll and other overhead costs. The management fees we receive are reported as affiliate management fee revenue on our consolidated statements of income. Cost reimbursements we receive from these entities in connection with our operating services are included as reductions to costs and expenses on our consolidated statements of income and totaled ~~$0.7~~$0.5 million and ~~$0.9~~$1.9 million during the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021, respectively, and $2.9 million and $2.1 million during the nine months ended September 30, 2020 and 2021,~~2022, respectively.

We recorded the following revenue and expense transactions from certain of these non-controlled entities in our consolidated statements of income (in millions):


	Three Months Ended March 31,
	2021		2022
Transportation and terminals revenue:
BridgeTex, pipeline capacity and storage	$	10.7	$	11.0
Double Eagle, throughput revenue	$	1.0	$	0.7
Saddlehorn, storage revenue	$	0.6	$	0.6
Operating expense:
Seabrook, storage lease and ancillary services	$	5.3	$	4.2

Our consolidated balance sheets reflected the following balances related to transactions with our non-controlled entities (in millions):


	December 31, 2021
	Trade Accounts Receivable		Other Accounts Receivable		Other Accounts Payable
BridgeTex	$	1.2	$	—	$	0.3
Double Eagle	$	0.2	$	—	$	—
HoustonLink	$	—	$	—	$	0.2
MVP	$	—	$	0.6	$	2.2

Saddlehorn	$	—	$	0.2	$	—
Seabrook	$	—	$	0.1	$	3.2


	March 31, 2022
	Trade Accounts Receivable		Other Accounts Receivable		Other Accounts Payable
BridgeTex	$	1.9	$	—	$	—
Double Eagle	$	0.2	$	—	$	—
HoustonLink	$	—	$	—	$	0.2
MVP	$	—	$	0.9	$	5.2

Saddlehorn	$	0.2	$	0.2	$	—
Seabrook	$	0.2	$	0.2	$	0.9

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~We recorded the following revenue and expense transactions from certain of these non-controlled entities in our consolidated statements of income (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2021 2020 2021
Transportation and terminals revenue:
BridgeTex, pipeline capacity and storage $ 9,323 $ 10,669 $ 32,748 $ 34,367
Double Eagle, throughput revenue $ 995 $ 631 $ 4,016 $ 2,464
Saddlehorn, storage revenue $ 580 $ 594 $ 1,711 $ 1,753
Operating expense:
Seabrook, storage lease and ancillary services $ 7,175 $ 4,477 $ 21,553 $ 15,336
Other operating income:
Seabrook, gain on sale of air emission credits $ — $ — $ 1,410 $ 434

~~Our consolidated balance sheets reflected the following balances related to transactions with our non-controlled entities (in thousands):~~

December 31, 2020
Trade Accounts Receivable Other Accounts Receivable Other Accounts Payable Long-Term Receivables
BridgeTex $ 355 $ 27 $ 970 $ —
Double Eagle $ 277 $ — $ — $ —
HoustonLink $ — $ — $ 144 $ —
MVP $ — $ 467 $ 2,297 $ —
Powder Springs $ — $ — $ — $ 10,223
Saddlehorn $ — $ 121 $ — $ —
Seabrook $ — $ — $ 7,274 $ —

September 30, 2021
Trade Accounts Receivable Other Accounts Receivable Other Accounts Payable Long-Term Receivables
BridgeTex $ 2,310 $ 15 $ — $ —
Double Eagle $ 213 $ — $ — $ —
HoustonLink $ — $ — $ 96 $ —
MVP $ — $ 542 $ — $ —
Powder Springs $ 8 $ — $ — $ 12,429
Saddlehorn $ — $ 187 $ — $ —
Seabrook $ — $ 11 $ 810 $ —

We entered into a long-term terminalling and storage contract with Seabrook for our exclusive use of dedicated tankage that provides our customers with crude oil storage capacity and dock access for crude oil imports and exports on the Texas Gulf Coast (see Note 8 – Leases for more details regarding this lease).

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

The financial results from MVP, Powder Springs and Texas Frontera are included in our refined products segment and the financial results from BridgeTex, Double Eagle, HoustonLink, Saddlehorn and Seabrook are included in our crude oil segment, each as earnings of non-controlled entities.

A summary of our investments in non-controlled entities (representing only our proportionate interest) follows (in ~~thousands)~~millions):



Investments at December 31, ~~2020~~2021	$	~~1,213,856~~980.8
Additional investment	~~5,616~~0.8
~~Sale of ownership interest in MVP~~	~~(201,673)~~

Earnings of non-controlled entities:
Proportionate share of earnings	~~117,413~~35.8

Amortization of excess investment and capitalized interest	~~(1,306)~~(0.4)
Earnings of non-controlled entities	~~116,107~~35.4
Less:
Distributions from operations of non-controlled entities	~~140,616~~38.4

Investments at ~~September 30, 2021~~March 31, 2022	$	~~993,290~~978.6

6.Inventory

Inventory at December 31, ~~2020~~2021 and ~~September 30, 2021~~March 31, 2022 was as follows (in ~~thousands)~~millions):


		December 31, 2020		September 30, 2021			December 31, 2021		March 31, 2022
Refined products	Refined products	$	71,982	$	86,362	Refined products	$	138.0	$	181.6
Transmix						Transmix	72.4		64.5
LPGs						LPGs	42.0		27.9
Crude oil	Crude oil	32,431		28,269		Crude oil	25.4		29.7
Liquefied petroleum gases		25,040		54,604
Transmix		23,397		47,978
Additives	Additives	5,354		5,354		Additives	3.3		4.5
Total inventory	Total inventory	$	158,204	$	222,567	Total inventory	$	281.1	$	308.2

2117

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.Debt

Long-term debt at December 31, ~~2020~~2021 and ~~September 30, 2021~~March 31, 2022 was as follows (in ~~thousands)~~millions):

December 31,
2020 September 30,
2021
Commercial paper $ — $ 123,000
3.20% Notes due 2025 250,000 250,000
5.00% Notes due 2026 650,000 650,000
3.25% Notes due 2030 500,000 500,000
6.40% Notes due 2037 250,000 250,000
4.20% Notes due 2042 250,000 250,000
5.15% Notes due 2043 550,000 550,000
4.20% Notes due 2045 250,000 250,000
4.25% Notes due 2046 500,000 500,000
4.20% Notes due 2047 500,000 500,000
4.85% Notes due 2049 500,000 500,000
3.95% Notes due 2050 800,000 800,000
Face value of long-term debt 5,000,000 5,123,000
Unamortized debt issuance costs(1)
(40,143) (38,419)
Net unamortized debt premium(1)
18,834 18,645
Long-term debt, net $ 4,978,691 $ 5,103,226


	December 31, 2021		March 31, 2022
Commercial paper	$	108.0	$	336.0

3.20% Notes due 2025	250.0		250.0
5.00% Notes due 2026	650.0		650.0
3.25% Notes due 2030	500.0		500.0
6.40% Notes due 2037	250.0		250.0
4.20% Notes due 2042	250.0		250.0
5.15% Notes due 2043	550.0		550.0
4.20% Notes due 2045	250.0		250.0
4.25% Notes due 2046	500.0		500.0
4.20% Notes due 2047	500.0		500.0
4.85% Notes due 2049	500.0		500.0
3.95% Notes due 2050	800.0		800.0
Face value of long-term debt	5,108.0		5,336.0
Unamortized debt issuance costs(1)	(37.8)		(37.2)
Net unamortized debt premium(1)	18.6		18.4



Long-term debt, net	$	5,088.8	$	5,317.2

(1) Debt issuance costs and note discounts and premiums are being amortized or accreted to the applicable notes over the respective lives of those notes.

All of the instruments detailed in the table above are senior indebtedness.

Other Debt

Revolving Credit Facility. At ~~September 30, 2021,~~March 31, 2022, the total borrowing capacity under our revolving credit facility maturing in May 2024 was $1.0 billion. Any borrowings outstanding under this facility are classified as long-term debt on our consolidated balance sheets. Borrowings under the facility are unsecured and bear interest at LIBOR plus a spread ranging from 0.875% to 1.500% based on our credit ratings. Additionally, an unused commitment fee is assessed at a rate between 0.075% and 0.200% depending on our credit ratings. The unused commitment fee was 0.125% at ~~September 30, 2021.~~March 31, 2022. Borrowings under this facility may be used for general purposes, including capital expenditures. As of December 31, ~~2020~~2021 and ~~September 30, 2021,~~March 31, 2022, there were no borrowings outstanding under this facility and $3.5 million was obligated for letters of credit. Amounts obligated for letters of credit are not reflected as debt on our consolidated balance sheets, but decrease our borrowing capacity under this facility.

Our revolving credit facility requires us to maintain a specified ratio of consolidated debt to EBITDA (as defined in the credit agreement) of no greater than 5.0 to 1.0. In addition, the revolving credit facility and the indentures under which our senior notes were issued contain covenants that limit our ability to, among other things, incur indebtedness secured by certain liens or encumber our assets, engage in certain sale-leaseback transactions and consolidate, merge or dispose of all or substantially all of our assets. We were in compliance with these covenants as of and during the three months ended March 31, 2022.

Commercial Paper Program. We have a commercial paper program under which we may issue commercial paper notes in an amount up to the available capacity under our $1.0 billion revolving credit facility. The maturities of the commercial paper notes vary, but may not exceed 397 days from the date of issuance. Because the commercial paper we can issue is limited to amounts available under our revolving credit facility, amounts

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

outstanding under the program are classified as long-term debt. The commercial paper notes are sold under customary terms in the commercial paper market and are issued at a discount from par, or alternatively, are sold at par and bear varying interest rates on a fixed or floating basis. Commercial paper borrowings outstanding at ~~September 30, 2021~~March 31, 2022 were ~~$123.0~~$336.0 million. The ~~weighted-average~~weighted average interest rate for commercial paper borrowings based on the number of days outstanding was ~~0.2%~~0.5% for the ~~nine~~three months ended ~~September 30, 2021.~~

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

March 31, 2022.

8.Leases

~~Operating Leases – Lessee~~

~~Related-Party Operating Lease~~. We entered into a long-term terminalling and storage contract with Seabrook for our exclusive use of dedicated tankage that provides our customers with crude oil storage capacity and dock access for crude oil imports and exports on the Texas Gulf Coast.

The following tables provide information about our third-party and Seabrook operating leases (in ~~thousands)~~millions):

Three Months Ended September 30, 2020 Three Months Ended September 30, 2021
Third-Party Leases Seabrook Lease All Leases Third-Party Leases Seabrook Lease All Leases
Total lease expense $ 6,474 $ 7,175 $ 13,649 $ 6,321 $ 4,288 $ 10,609
Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2021
Third-Party Leases Seabrook Lease All Leases Third-Party Leases Seabrook Lease All Leases
Total lease expense $ 18,173 $ 21,553 $ 39,726 $ 20,266 $ 15,147 $ 35,413


	Three Months Ended March 31, 2021						Three Months Ended March 31, 2022
	Third-Party Leases		Seabrook Lease		All Leases		Third-Party Leases		Seabrook Lease		All Leases
Total lease expense	$	7.0	$	5.3	$	12.3	$	6.2	$	4.2	$	10.4


		December 31, 2020						September 30, 2021							December 31, 2021						March 31, 2022
		Third-Party Leases		Seabrook Lease		All Leases		Third-Party Leases		Seabrook Lease		All Leases			Third-Party Leases		Seabrook Lease		All Leases		Third-Party Leases		Seabrook Lease		All Leases
Current lease liability	Current lease liability	$	17,099	$	10,434	$	27,533	$	17,733	$	7,885	$	25,618	Current lease liability	$	17.8	$	8.0	$	25.8	$	21.0	$	9.7	$	30.7
Long-term lease liability	Long-term lease liability	$	84,982	$	52,501	$	137,483	$	105,095	$	46,555	$	151,650	Long-term lease liability	$	102.8	$	44.5	$	147.3	$	97.7	$	40.8	$	138.5
Right-of-use asset	Right-of-use asset	$	103,142	$	62,936	$	166,078	$	126,029	$	54,441	$	180,470	Right-of-use asset	$	121.7	$	52.5	$	174.2	$	117.8	$	50.5	$	168.3

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.Employee Benefit Plans

We sponsor a defined contribution plan in which we match our employees’ qualifying contributions, resulting in additional expense to us. Expenses related to the defined contribution plan, including expense related to discontinued operations, were ~~$2.8~~$3.1 million and ~~$2.7~~$4.1 million for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021, respectively, and $9.7 million and $8.1 million for the nine months ended September 30, 2020 and 2021,~~2022, respectively.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

In addition, we sponsor 2 pension plans, including 1 for ~~all~~ non-union employees and 1 that covers union employees, and a postretirement benefit plan for certain employees. The following disclosures related to these plans include amounts related to discontinued operations. Net periodic benefit expense for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022 were as follows (in ~~thousands)~~millions):

Three Months Ended Three Months Ended
September 30, 2020 September 30, 2021
Pension
Benefits Other Postretirement
Benefits Pension
Benefits Other Postretirement
Benefits
Components of net periodic benefit costs:
Service cost $ 6,898 $ 64 $ 6,953 $ 75
Interest cost 2,738 121 2,395 103
Expected return on plan assets (2,829) — (2,960) —
Amortization of prior service credit (46) — (46) —
Amortization of actuarial loss 1,346 127 1,273 160
Settlement cost — — 1,300 —
Net periodic benefit cost $ 8,107 $ 312 $ 8,915 $ 338


		Nine Months Ended				Nine Months Ended					Three Months Ended				Three Months Ended
		September 30, 2020				September 30, 2021					March 31, 2021				March 31, 2022
		Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits			Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits
Components of net periodic benefit costs:	Components of net periodic benefit costs:									Components of net periodic benefit costs:
Service cost	Service cost	$	20,836	$	193	$	21,269	$	225	Service cost	$	7.4	$	0.1	$	7.1	$	0.1
Interest cost	Interest cost	8,251		360		7,078		310		Interest cost	2.4		0.1		2.7		0.1
Expected return on plan assets	Expected return on plan assets	(8,524)		—		(8,927)		—		Expected return on plan assets	(3.1)		—		(3.4)		—
Amortization of prior service credit		(136)		—		(136)		—

Amortization of actuarial loss	Amortization of actuarial loss	4,080		382		4,058		478		Amortization of actuarial loss	1.5		0.1		1.1		0.1
Settlement cost		969		—		2,751		—
Settlement gain on disposition of assets		(1,342)		—		—		—

Net periodic benefit cost	Net periodic benefit cost	$	24,134	$	935	$	26,093	$	1,013	Net periodic benefit cost	$	8.2	$	0.3	$	7.5	$	0.3

The service component of our net periodic benefit costs is presented in operating expense and G&A expense, and the non-service components are presented in other (income) expense in our consolidated statements of income.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

The changes in accumulated other comprehensive loss (“AOCL”) related to employee benefit plan assets and benefit obligations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022 were as follows (in ~~thousands)~~millions):


		Three Months Ended				Three Months Ended					Three Months Ended				Three Months Ended
		September 30, 2020				September 30, 2021					March 31, 2021				March 31, 2022
Gains (Losses) Included in AOCL	Gains (Losses) Included in AOCL	Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits		Gains (Losses) Included in AOCL	Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits
Beginning balance	Beginning balance	$	(98,610)	$	(9,269)	$	(101,270)	$	(11,656)	Beginning balance	$	(117.8)	$	(10.4)	$	(92.8)	$	(10.7)

Recognition of prior service credit amortization in income		(46)		—		(46)		—

Recognition of actuarial loss amortization in income	Recognition of actuarial loss amortization in income	1,346		127		1,273		160		Recognition of actuarial loss amortization in income	1.5		0.1		1.1		0.1
Recognition of settlement cost in income		—		—		1,300		—

Ending balance	Ending balance	$	(97,310)	$	(9,142)	$	(98,743)	$	(11,496)	Ending balance	$	(116.3)	$	(10.3)	$	(91.7)	$	(10.6)

Nine Months Ended Nine Months Ended
September 30, 2020 September 30, 2021
Gains (Losses) Included in AOCL Pension Benefits Other Postretirement Benefits Pension Benefits Other Postretirement Benefits
Beginning balance $ (104,739) $ (8,378) $ (117,782) $ (10,409)
Net actuarial gain (loss) 813 (1,146) 12,366 (1,565)
Curtailment gain 1,703 — — —
Recognition of prior service credit amortization in income (136) — (136) —
Recognition of actuarial loss amortization in income 4,080 382 4,058 478
Recognition of settlement cost in income 969 — 2,751 —
Ending balance $ (97,310) $ (9,142) $ (98,743) $ (11,496)

Contributions estimated to be paid into the plans in ~~2021~~2022 are ~~$27.6~~$37.2 million and ~~$0.9~~$0.5 million for the pension plans and other postretirement benefit plan, respectively.

10.Long-Term Incentive Plan

The compensation committee of our ~~general partner’s~~ board ~~of directors~~ administers our long-term incentive plan (“LTIP”) covering certain of our employees and the independent directors of our general partner. In April 2021, our compensation committee and our limited partners approved an amendment to the LTIP increasing the number of common units available for issuance from 11.9 million to 13.7 million.board. The LTIP primarily consists of phantom units and permits the grant of awards covering an aggregate payout of 13.7 million of our common units. The estimated units remaining available under the LTIP at ~~September 30, 2021~~March 31, 2022 totaled approximately ~~2.4~~1.8 million.

2520

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equity-based incentive compensation expense for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021,~~2022, primarily recorded as G&A expense on our consolidated statements of income, was as follows (in ~~thousands)~~millions):

Three Months Ended September 30, Nine Months Ended September 30,
2020 2021 2020 2021
Performance-based awards $ (1,121) $ 3,053 $ (1,247) $ 7,923
Time-based awards 2,290 2,573 6,827 7,763
Total $ 1,169 $ 5,626 $ 5,580 $ 15,686

~~During 2020, LTIP expense related to performance-based awards was reduced due to the impacts of COVID-19 and the significant decline in commodity prices on our financial results.~~


	Three Months Ended March 31,
	2021		2022
Performance-based awards	$	2.2	$	8.0
Time-based awards	2.5		6.4
Total	$	4.7	$	14.4

On February ~~5, 2021, 558,516~~9, 2022, 622,986 unit awards were granted pursuant to our LTIP. These awards included both performance-based and time-based awards and have a three-year vesting period that will end on December 31, ~~2023.~~2024.

Basic and Diluted Net Income Per Common Unit

The difference between our actual common units outstanding and our ~~weighted-average~~weighted average number of common units outstanding used to calculate ~~basic~~ net income per common unit is due to the impact of: (i) the phantom units issued to our independent directors, (ii) unit awards ~~issued~~granted to ~~non-employee directors~~retirees or employees of retirement age and ~~(ii)~~(iii) the weighted average effect of units actually issued or repurchased during a period. The difference between the ~~weighted-average~~weighted average number of common units outstanding used for basic and diluted net income per unit calculations on our consolidated statements of income is primarily ~~due to~~ the dilutive effect of phantom unit awards ~~associated with~~granted pursuant to our ~~LTIP that~~long-term incentive plan, which have not yet ~~vested.~~vested in periods where contingent performance metrics have been met.

11.Derivative Financial Instruments

Commodity Derivatives

Our open futures contracts at ~~September 30, 2021~~March 31, 2022 were as follows:

Type of Contract/Accounting Methodology

Product Represented by the Contract and Associated Barrels

Maturity Dates

~~Futures~~Commodity derivatives contract - Economic ~~Hedges~~hedges

~~4.9~~5.3 million barrels of refined products and crude oil

Between ~~October 2021~~April 2022 and ~~November 2022~~February 2023

~~Futures~~Commodity derivatives contract - Economic ~~Hedges~~hedges

~~1.2~~0.7 million barrels of gas liquids

Between ~~October 2021~~April 2022 and ~~April 2022~~February 2023

Commodity Derivatives Contracts and Deposits Offsets

At December 31, ~~2020~~2021 and ~~September 30, 2021,~~March 31, 2022, we had made margin deposits of ~~$34.2~~$46.3 million and ~~$47.6~~$130.8 million, respectively, for our ~~futures~~commodity derivatives contracts with our counterparties, which were recorded as current assets under commodity derivatives deposits on our consolidated balance sheets. We have the right to offset the combined fair values of our open ~~futures~~derivatives contracts against our margin deposits under a master netting arrangement for each counterparty; however, we have elected to present the combined fair values of our open ~~futures~~derivatives contracts separately from the related margin deposits on our consolidated balance sheets. Additionally, we have the right to offset the fair values of our ~~futures~~derivatives contracts together for each counterparty, which we have elected to do, and we report the combined net balances on our consolidated balance sheets. A schedule of the ~~derivative amounts we have offset and~~

2621

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

derivative amounts we have offset and the deposit amounts we could offset under a master netting ~~arrangement~~arrangements are provided below as of December 31, ~~2020~~2021 and ~~September 30, 2021~~March 31, 2022 (in ~~thousands)~~millions):

Description Gross Amounts of Recognized Liabilities Gross Amounts of Assets Offset in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets Margin Deposit Amounts Not Offset in the Consolidated Balance Sheets
Net Asset Amount(1)
As of December 31, 2020 $ (21,748) $ 1,201 $ (20,547) $ 34,165 $ 13,618
As of September 30, 2021 $ (44,605) $ 22,325 $ (22,280) $ 47,609 $ 25,329


Description	Gross Amounts of Recognized Liabilities		Gross Amounts of Assets Offset in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets		Margin Deposit Amounts Not Offset in the Consolidated Balance Sheets		Net Asset Amount(1)
As of December 31, 2021	$	(22.3)	$	5.1	$	(17.2)	$	46.3	$	29.1
As of March 31, 2022	$	(59.2)	$	11.8	$	(47.4)	$	130.8	$	83.4

(1) Amount represents the maximum loss we would incur if all of our counterparties failed to perform on their derivative contracts.

Basis Derivative Agreement

During 2019, we entered into a basis derivative agreement with a joint venture co-owner’s affiliate, and, contemporaneously, that affiliate entered into an intrastate transportation services agreement with the joint venture. Settlements under the basis derivative agreement are determined based on the basis differential of crude oil prices at different market locations and a notional volume of 30,000 barrels per day. As a result, we account for this agreement as a ~~derivative. The agreement will expire in early 2022. We~~derivative and recognize the changes in fair value ~~of this agreement~~ based on forward price curves for crude oil in West Texas and the Houston Gulf Coast in other operating income (expense) in our consolidated statements of income. The liability for this agreement at December 31, ~~2020 and September 30,~~ 2021 was ~~$10.2 million and $3.1 million, respectively.~~$1.5 million.

Impact of Derivatives on Our Financial Statements

Comprehensive Income

The changes in derivative activity included in AOCL for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022 were as follows (in ~~thousands)~~millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
Derivative Losses Included in AOCL	Derivative Losses Included in AOCL	2020		2021		2020		2021		Derivative Losses Included in AOCL	2021		2022
Beginning balance	Beginning balance	$	(57,748)	$	(53,224)	$	(48,960)	$	(54,999)	Beginning balance	$	(55.0)	$	(51.5)
Net loss on cash flow hedges		—		—		(10,444)		—

Reclassification of net loss on cash flow hedges to income	Reclassification of net loss on cash flow hedges to income	896		887		2,552		2,662		Reclassification of net loss on cash flow hedges to income	0.9		0.9
Ending balance	Ending balance	$	(56,852)	$	(52,337)	$	(56,852)	$	(52,337)	Ending balance	$	(54.1)	$	(50.6)

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

The following is a summary of the effect on our consolidated statements of income for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022 of derivatives that were designated as cash flow hedges (in ~~thousands)~~millions):

Interest Rate Contracts
Amount of Loss Recognized in AOCL on Derivatives Location of Loss Reclassified from AOCL into Income Amount of Loss Reclassified from AOCL into Income
Three Months Ended September 30, 2020 $ — Interest expense $ (896)
Three Months Ended September 30, 2021 $ — Interest expense $ (887)
Nine Months Ended September 30, 2020 $ (10,444) Interest expense $ (2,552)
Nine Months Ended September 30, 2021 $ — Interest expense $ (2,662)

Interest Rate Contracts

Location of Loss Reclassified from AOCL into Income

Amount of Loss Reclassified from AOCL into Income

Three Months Ended March 31, 2021

Interest expense

(0.9)

Three Months Ended March 31, 2022

Interest expense

(0.9)

As of ~~September 30, 2021,~~March 31, 2022, the net loss estimated to be classified to interest expense over the next twelve months from AOCL is approximately $3.5 million. This amount relates to the amortization of losses on interest rate contracts over the life of the related debt instruments.

The following table provides a summary of the effect on our consolidated statements of income for the three and nine months ended September 30, 2020 and 2021 of derivatives that were not designated as hedging instruments (in thousands):

Amount of Gain (Loss) Recognized on Derivatives
Three Months Ended Nine Months Ended
Location of Gain (Loss)
Recognized on Derivatives September 30, September 30,
Derivative Instrument 2020 2021 2020 2021
Futures contracts Product sales revenue $ (7,444) $ (29,626) $ 81,626 $ (122,760)
Futures contracts Cost of product sales 1,261 19,303 (2,756) 26,910
Basis derivative agreement Other operating income (expense) (3,155) (1,702) (2,654) (3,629)
Total $ (9,338) $ (12,025) $ 76,216 $ (99,479)

~~The impact of the derivatives in the above table was reflected as cash from operations on our consolidated statements of cash flows.~~

2822

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a summary of the effect on our consolidated statements of income for the three months ended March 31, 2021 and 2022 of derivatives that were not designated as hedging instruments (in millions):


		Amount of Gain (Loss) Recognized on Derivatives
		Three Months Ended
	Location of Gain (Loss) Recognized on Derivatives	March 31,
Derivative Instrument		2021		2022
Commodity derivatives contracts	Product sales revenue	$	(52.7)	$	(116.4)

Commodity derivatives contracts	Cost of product sales	$	1.4	$	8.6
Basis derivative agreement	Other operating income (expense)	$	(0.7)	$	(2.1)
	Total	$	(52.0)	$	(109.9)

The impact of the derivatives in the above table was reflected as cash from operations on our consolidated statements of cash flows.

Balance Sheets

The following tables provide a summary of the fair value of derivatives, which are presented on a net basis in our consolidated balance sheets, that were not designated as hedging instruments as of December 31, ~~2020~~2021 and ~~September 30, 2021~~March 31, 2022 (in ~~thousands)~~millions):

December 31, 2020

December 31, 2021

Asset Derivatives

Liability Derivatives

Asset Derivatives

Liability Derivatives

Derivative Instrument

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivative Instrument

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Futures contracts

Commodity derivatives contracts, net

127

Commodity derivatives contracts, net

21,748

Future contracts

Other noncurrent assets

1,074

Other noncurrent liabilities

—

Basis derivative agreement

Other current assets

—

Other current liabilities

8,774

Commodity derivatives contracts

Commodity derivatives contracts, net

5.1

Commodity derivatives contracts, net

22.3

Basis derivative agreement

Other noncurrent assets

—

Other noncurrent liabilities

1,468

Basis derivative agreement

Other current assets

—

Other current liabilities

1.5

Total

1,201

Total

31,990

Total

5.1

Total

23.8

September 30, 2021

Asset Derivatives

Liability Derivatives

March 31, 2022

Asset Derivatives

Liability Derivatives

Derivative Instrument

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivative Instrument

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Futures contracts

Commodity derivatives contracts, net

22,325

Commodity derivatives contracts, net

40,206

Futures contracts

Other noncurrent assets

—

Other noncurrent liabilities

4,399

Basis derivative agreement

Other current assets

—

Other current liabilities

3,120

Commodity derivatives contracts

Commodity derivatives contracts, net

11.8

Commodity derivatives contracts, net

59.2

Total

22,325

Total

47,725

12.Fair Value

Fair Value Methods and Assumptions - Financial Assets and Liabilities

We used the following methods and assumptions in estimating fair value of our financial assets and liabilities:

•Commodity derivatives contracts. These include exchange-traded ~~futures~~and over-the-counter derivative contracts related to petroleum products. These contracts are carried at fair value on our consolidated balance ~~sheets and~~sheets. The exchange-traded contracts are valued based on quoted prices in active ~~markets.~~markets, while the over-the-counter contracts are valued based on observable market data inputs including published commodity pricing data. See Note 11 – Derivative Financial Instruments for further disclosures regarding these contracts.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

•Basis derivative agreement. During 2019, we entered into a basis derivative agreement with a joint venture co-owner’s affiliate, and, contemporaneously, that affiliate entered into an intrastate transportation services agreement with the joint venture. Settlements under the basis derivative agreement are determined based on the basis differential of crude oil prices at different market locations and a notional volume of 30,000 barrels per day (see Note 11 - Derivative Financial Instruments for further disclosures regarding this agreement). The fair value of this derivative was calculated based on observable market data inputs, including published commodity pricing data and market interest rates. The key inputs in the fair value calculation include the forward price curves for crude oil, the implied forward correlation in crude oil prices between West Texas and the Houston Gulf Coast, and the implied forward volatility for crude oil futures contracts.

•Long-term receivables. These include payments receivable under a sales-type leasing arrangement and ~~cost reimbursement agreements.~~payments due to us for environmental liability insurance. These receivables were recorded at fair value on our

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

consolidated balance sheets, using then-current market rates to estimate the present value of future cash flows.

•Contractual obligations. At ~~September 30, 2021,~~March 31, 2022, these primarily ~~include~~included a long-term contractual obligation we entered into in connection with the 2020 sale of 3 marine terminals to a subsidiary of Buckeye. This obligation requires us to perform certain environmental remediation work on Buckeye’s behalf at the New Haven, Connecticut terminal. This contractual obligation was recorded at fair value on our consolidated balance sheets upon initial recognition and was calculated using our best estimate of potential outcome scenarios to determine our liability for the remediation costs required in this agreement.

•Debt. The fair value of our publicly traded notes was based on the prices of those notes at December 31, ~~2020~~2021 and ~~September 30, 2021;~~March 31, 2022; however, where recent observable market trades were not available, prices were determined using adjustments to the last traded value for that debt issuance or by adjustments to the prices of similar debt instruments of peer entities that are actively traded. The carrying amount of borrowings, if any, under our revolving credit facility and our commercial paper program approximates fair value due to the frequent repricing of these obligations.

Fair Value Measurements - Financial Assets and Liabilities

The following tables summarize the carrying amounts, fair values and fair value measurements recorded or disclosed as of December 31, ~~2020~~2021 and ~~September 30, 2021~~March 31, 2022 based on the three levels established by ASC 820, Fair Value Measurements and Disclosures (in ~~thousands)~~millions):


Assets (Liabilities)	Assets (Liabilities)					Fair Value Measurements as of December 31, 2020 using:						Assets (Liabilities)					Fair Value Measurements as of December 31, 2021 using:
		Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Commodity derivatives contracts	Commodity derivatives contracts	$	(20,547)	$	(20,547)	$	(20,547)	$	—	$	—	Commodity derivatives contracts	$	(17.2)	$	(17.2)	$	(18.6)	$	1.4	$	—

Basis derivative agreement	Basis derivative agreement	$	(10,242)	$	(10,242)	$	—	$	(10,242)			Basis derivative agreement	$	(1.5)	$	(1.5)	$	—	$	(1.5)	0
Long-term receivables	Long-term receivables	$	22,755	$	22,755	$	—	$	—	$	22,755	Long-term receivables	$	10.1	$	10.1	$	—	$	—	$	10.1
Contractual obligations	Contractual obligations	$	(11,207)	$	(11,207)	$	—	$	—	$	(11,207)	Contractual obligations	$	(9.8)	$	(9.8)	$	—	$	—	$	(9.8)
Debt	Debt	$	(4,978,691)	$	(5,880,850)	$	—	$	(5,880,850)	$	—	Debt	$	(5,088.8)	$	(5,711.5)	$	—	$	(5,711.5)	$	—

Assets (Liabilities) Fair Value Measurements as of
September 30, 2021 using:
Carrying Amount Fair Value Quoted Prices in Active Markets
for Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Commodity derivatives contracts $ (22,280) $ (22,280) $ (22,280) $ — $ —
Basis derivative agreement $ (3,120) $ (3,120) $ — $ (3,120) $ —
Long-term receivables $ 22,768 $ 22,768 $ — $ — $ 22,768
Contractual obligations $ (9,806) $ (9,806) $ — $ — $ (9,806)
Debt $ (5,103,226) $ (5,786,692) $ — $ (5,786,692) $ —

3024

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Assets (Liabilities)					Fair Value Measurements as of March 31, 2022 using:
	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Commodity derivatives contracts	$	(47.4)	$	(47.4)	$	(50.5)	$	3.1	$	—




Long-term receivables	$	9.8	$	9.8	$	—	$	—	$	9.8
Contractual obligations	$	(9.6)	$	(9.6)	$	—	$	—	$	(9.6)
Debt	$	(5,317.2)	$	(5,409.5)	$	—	$	(5,409.5)	$	—

13.Commitments and Contingencies

Corpus Christi Terminal Proceeding. On April 11, 2022, the State of Texas, through its Attorney General on behalf of the Texas Commission on Environmental Quality (“TCEQ”), brought an action for alleged violations of the Texas Clean Air Act in connection with a December 2020 fire at our Corpus Christi, Texas terminal. The TCEQ is seeking statutory civil penalties and statutory attorney’s fees over $0.3 million but not more than $1.0 million. While the outcome cannot be predicted with certainty, we believe the ultimate resolution of this matter will not have a material adverse effect on our business.

Hurricane Harvey Enforcement Proceeding. In July 2018, we received a Notice of Enforcement letter from the TCEQ alleging two air emission violations at our Galena Park, Texas terminal that occurred during Hurricane Harvey in third quarter 2017. The penalties associated with these alleged violations are expected to be approximately $0.4 million. While the outcome cannot be predicted with certainty, we believe the ultimate resolution of this matter will not have a material adverse effect on our business.

Butane Blending Patent Infringement ~~Proceeding~~

Proceeding.

OnIn October 4, 2017, Sunoco Partners Marketing & Terminals L.P. (“Sunoco”) brought an action for patent infringement in the U.S. District Court for the District of Delaware alleging Magellan Midstream Partners, L.P. (“Magellan”) and Powder Springs Logistics, LLC (“Powder Springs”) ~~have infringed~~were infringing patents ~~related~~relating to butane blending at the Powder Springs facility located in Powder Springs, Georgia. Sunoco subsequently submitted pleadings alleging that Magellan iswas also infringing various patents related to butane blending at 98 Magellan facilities, in addition to Powder Springs. Sunoco ~~is seeking~~sought monetary damages, attorneys’ fees and a permanent injunction enjoining ~~Magellan and~~ Powder Springs from infringing the subject patents. ~~We deny~~A jury trial concluded on December 6, 2021, at which the jury found Magellan willfully infringed the 3 patents in suit and ~~are vigorously defending~~awarded damages of approximately $9.4 million against ~~all claims asserted~~Magellan relating to the 8 Magellan facilities at issue. The jury further found that Powder Springs willfully infringed the 1 patent at issue relating to the Powder Springs facility and awarded approximately $2.8 million against Magellan and Powder Springs relating to that facility. Sunoco requested that the court enhance the damages award based upon the jury’s finding of willfulness, and that the court award additional damages and pre- and post-judgment interest. Magellan and Powder Springs have filed post-trial pleadings opposing Sunoco’s request for enhanced damages and challenging the findings of liability and willfulness. The final determination of the trial court is subject to potential future appeals by ~~Sunoco.~~either or both parties to the litigation. The amounts we have accrued in relation to the claims are immaterial, and although it is not possible to predict the ultimate outcome, we believe the ~~ultimate~~final resolution of this matter will not have a material adverse ~~impact~~effect on our ~~results of operations, financial position or cash flows.~~business.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Environmental Liabilities

Liabilities recognized for estimated environmental costs were ~~$14.3~~$9.8 million and ~~$11.8~~$9.7 million at December 31, ~~2020~~2021 and ~~September 30, 2021,~~March 31, 2022, respectively. We have classified environmental liabilities as ~~other~~ current or noncurrent based on management’s estimates regarding the timing of actual payments. Environmental expenses recognized as a result of changes in our environmental liabilities are included in operating ~~expense~~expenses on our consolidated statements of income. Environmental expenses were ~~$0.1~~$1.1 million and ~~$0.4~~$0.9 million for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021, respectively, and $1.3 million and $2.4 million for the nine months ended September 30, 2020 and 2021,~~2022, respectively.

Other

In first quarter 2020, we entered into a long-term contractual obligation in connection with the sale of 3 marine terminals to Buckeye. This obligation requires us to perform certain environmental remediation work on Buckeye’s behalf at the New Haven, Connecticut terminal. At December 31, ~~2020~~2021, our balance sheet ~~includes~~included a current liability of ~~$0.6~~$0.5 million and a noncurrent liability of ~~$10.2~~$8.9 million, and as of ~~September 30, 2021~~March 31, 2022, our balance sheet ~~includes~~included a current liability of ~~$0.5~~$0.3 million and a noncurrent liability of $8.9 million, reflecting the fair values of these obligations.

We have entered into an agreement to guarantee our 50% pro rata share, up to $25.0 million, of contractual obligations under the Powder Springs’ credit facility. As of ~~September 30, 2021,~~March 31, 2022, our consolidated balance sheets reflected a $0.4 million other current liability and a corresponding increase in ~~investments~~our investment in non-controlled entities on our consolidated balance sheets to reflect the fair value of this guarantee.

We and the non-controlled entities in which we own an interest are a party to various other claims, legal actions and complaints. While the results cannot be predicted with certainty, management believes the ultimate resolution of these claims, legal actions and complaints after consideration of amounts accrued, insurance coverage or other indemnification arrangements will not have a material adverse effect on our ~~results of operations, financial position or cash flows.~~business.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

14.Related Party Transactions

Stacy Methvin is an independent member of our ~~general partner’s~~ board ~~of directors~~ and also serves as a director of one of our customers. We received tariff, terminalling and other ancillary revenue from this customer of ~~$8.6~~$11.1 million and ~~$23.2~~$15.1 million for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021, respectively, and $24.3 million and $51.6 million for the nine months ended September 30, 2020 and 2021,~~2022, respectively. ~~We occasionally have transmix settlements with this customer as well.~~ We recorded receivables of ~~$3.9~~$5.4 million and ~~$2.3~~$5.1 million from this customer at December 31, ~~2020~~2021 and ~~September 30, 2021,~~March 31, 2022, respectively.

See Note 5 – Investments in Non-Controlled Entities and Note 8 – Leases for details of transactions with our joint ventures.

~~15.Partners’ Capital and Distributions~~

~~Partners~~’ ~~Capital~~

In 2020, we announced that our general partner’s board of directors had authorized the repurchase of up to $750 million of our common units through 2022. During the third quarter of 2021, we completed the repurchases authorized under this program (see Note 16 - ~~Subsequent Events~~ ~~regarding a subsequent expansion of this program).~~

~~The following table details the changes in the number of our common units outstanding from December 31, 2020 through September 30, 2021:~~


~~Common units outstanding on December 31, 2020~~						~~223,119,811~~
~~Units repurchased during 2021~~						~~(9,837,580)~~
~~January 2021–Settlement of employee LTIP awards~~						~~150,435~~
~~During 2021–Other(1)~~						~~12,572~~
~~Common units outstanding on September 30, 2021~~						~~213,445,238~~

~~(1) Common units issued to settle the equity-based retainers paid to independent directors of our~~

~~general partner.~~

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15.Partners’ Capital and Distributions

~~Distributions we paid during 2020~~Partners’ Capital

Our board authorized the repurchase of up to $1.5 billion of our common units through 2024. The timing, price and ~~2021 were as follows (in thousands, except per unit amounts):~~

Payment Date Per Unit
Distribution Amount Total Distribution
02/14/2020 $ 1.0275 $ 234,774
05/15/2020 1.0275 231,245
08/14/2020 1.0275 231,245
Through 09/30/2020 3.0825 697,264
11/13/2020 1.0275 229,853
Total $ 4.1100 $ 927,117
02/12/2021 $ 1.0275 229,423
05/14/2021 1.0275 228,962
08/13/2021 1.0275 226,633
Through 09/30/2021 3.0825 685,018
11/12/2021(1)
1.0375 221,449
Total $ 4.1200 $ 906,467

(1) Our general partner’s board of directors declared this distribution in October 2021 to be paid on November 12, 2021 to unitholders of record at the close of business on November 5, 2021. The estimated total distribution is based upon theactual number of common units ~~currently outstanding.~~

~~16.Subsequent Events~~

~~Recognizable events~~

~~No recognizable events occurred subsequent to September 30, 2021.~~

~~Non-recognizable events~~

~~Distribution.~~ In October 2021, our general partner’s board of directors declared a quarterly distribution of $1.0375 per unit for the period of July 1, 2021 through September 30, 2021. This quarterly distribution will be paid on November 12, 2021 to unitholders of record on November 5, 2021.

~~Unit Repurchase Program.~~ Following the completion of the $750 million repurchase program announced in 2020, our general partner’s board of directors in October 2021 authorized the expansion of our unit repurchase program by $750 million for a total of $1.5 billion and extended the program through 2024. The expanded program allows unit repurchases in compliance with Securities Exchange Act Rules 10b-18, 10b5-1 or both. Our unit repurchase program does not obligate us to acquire a specific number of units during any period, and our decision to commence, discontinue or resume repurchases in any periodrepurchased will depend on a number of factors including our expected expansion capital spending needs, excess cash available, balance sheet metrics, legal and regulatory requirements, market conditions and the trading price of our common units. The repurchase program does not obligate us to acquire any particular amount of common units and may be suspended or discontinued at any time.

The following table details the changes in the number of our common units outstanding from December 31, 2021 through March 31, 2022:


Common units outstanding on December 31, 2021						212,387,990
Units repurchased during 2022						(1,042,035)
January 2022—Settlement of employee LTIP awards						200,949
During 2022—Other(1)						14,460
Common units outstanding on March 31, 2022						211,561,364

(1) Common units issued to settle the equity-based retainers paid to certain independent directors of our board.

Distributions

Distributions we paid during 2021 and 2022 were as follows (in millions, except per unit amounts):


Payment Date	Per Unit Distribution Amount			Total Distribution
2/12/2021		$	1.0275		$	229.4
5/14/2021		1.0275			229.0
8/13/2021		1.0275			226.6
11/12/2021		1.0375			221.4
Total		$	4.1200		$	906.4

2/14/2022		$	1.0375		$	220.6
5/13/2022(a)		1.0375			219.5


Total		$	2.0750		$	440.1

(a) Our board declared this distribution in April 2022 to be paid on May 13, 2022 to unitholders of record at the close of business on May 2, 2022.

3327

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16.Subsequent Events

Recognizable events

No recognizable events occurred subsequent to March 31, 2022.

Non-recognizable events

On April 21, 2022, Robert G. Croyle notified the board of his decision to retire effective April 30, 2022 after 13 years of service. Following Mr. Croyle’s retirement, Sivasankaran Somasundaram was elected as an independent board member beginning May 1, 2022.

Distribution. In April 2022, our board declared a quarterly distribution of $1.0375 per unit for the period of January 1, 2022 through March 31, 2022. This quarterly distribution will be paid on May 13, 2022 to unitholders of record on May 2, 2022.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

We are a publicly traded limited partnership principally engaged in the transportation, storage and distribution of refined petroleum products and crude oil. As of ~~September 30, 2021,~~March 31, 2022, our asset portfolio, excluding assets associated with discontinued operations, consisted of:

•our refined products segment, comprised of our approximately 9,800-mile refined petroleum products pipeline system with 54 ~~connected~~ terminals and two marine storage terminals (one of which is owned through a joint venture); and

The following discussion provides an analysis of the results for each of our operating segments, an overview of our liquidity and capital resources and other items related to our partnership. The following discussion and analysis should be read in conjunction with (i) our accompanying interim consolidated financial statements and related notes and (ii) our consolidated financial statements, related notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Recent Developments

~~Discontinued Operations.~~Tariff Rate Reduction. In ~~June~~January 2022, the FERC issued an order on rehearing lowering the previously approved 5-year index methodology, which began July 1, 2021, ~~we entered into an agreement~~from the producer price index for finished goods (“PPI-FG”) plus 0.78% to sell our independent terminals network comprised of 26 refined petroleum products terminals with approximately six million barrels of storage located primarily in the southeastern United States. The sale is expected to close upon the receipt of required regulatory approvals. The related results of operations, financial position and cash flows have been classified as discontinued operations for all periods presented. See Note 2 - ~~Discontinued Operations and Assets Held for Sale~~ ~~in Item~~PPI-FG minus 0.21% effective March 1, ~~of Part I~~2022. As a result of this ~~report for further details.~~

~~Sale of Partial Interest in MVP Terminalling, LLC.~~ ~~In April 2021,~~order, on March 1, 2022, we ~~sold nearly half~~reduced the tariff rates on the portion of our ~~membership interest in MVP and received proceeds~~refined products shipments that are regulated by this index methodology representing approximately 30% of ~~$272.1 million. Following the sale, we own approximately 25% of MVP and remain the operator of the facility.~~our total refined products shipments.

Distribution. In ~~October 2021,~~April 2022, our ~~general partner’s~~ board ~~of directors~~ declared a quarterly distribution of $1.0375 per unit for the period of ~~July~~January 1, ~~2021~~2022 through ~~September 30, 2021.~~March 31, 2022. This quarterly distribution will be paid on ~~November 12, 2021~~May 13, 2022 to unitholders of record on ~~November 5, 2021.~~May 2, 2022.

Results of Operations

We believe that investors benefit from having access to the same financial measures utilized by management. Operating margin, which is presented in the following ~~tables,~~table, is an important measure used by management to evaluate the economic performance of our core operations. Operating margin is not a U.S. generally accepted accounting principles (“GAAP”) measure, but the components of operating margin are computed using amounts that are determined in accordance with GAAP. A reconciliation of operating margin to operating profit, which is ~~the~~its nearest comparable GAAP financial measure, is included in the following ~~tables.~~table. Operating profit includes expense items, such as depreciation, amortization and impairment expense and general and administrative (“G&A”) expense, which management does not focus on when evaluating the core profitability of our ~~separate~~ operating segments. Additionally, product margin, which management primarily uses to evaluate the profitability of our commodity-related activities, is provided in ~~these tables.~~this table. Product margin is a non-GAAP measure but the components of product sales revenue and cost of product sales are determined in accordance with GAAP. Our gas liquids blending, fractionation and other commodity-related activities generate significant revenue. However, we believe the product margin from these activities, which takes into account the related cost of product sales, better represents ~~the~~its importance to our results of operations.

3529

Three Months Ended ~~September 30, 2020~~March 31, 2021 compared to Three Months Ended ~~September 30, 2021~~March 31, 2022


		Three Months Ended September 30,				Variance Favorable (Unfavorable)				Three Months Ended March 31,				Variance Favorable (Unfavorable)
		2020		2021		$ Change		% Change		2021		2022		$ Change		% Change
Financial Highlights ($ in millions, except operating statistics)	Financial Highlights ($ in millions, except operating statistics)								Financial Highlights ($ in millions, except operating statistics)
Transportation and terminals revenue:	Transportation and terminals revenue:								Transportation and terminals revenue:
Refined products	Refined products	$	307.2	$	349.4	$	42.2	14	Refined products	$	297.6	$	309.5	$	11.9	4
Crude oil	Crude oil	154.6		116.9		(37.7)		(24)	Crude oil	116.2		114.7		(1.5)		(1)
Intersegment eliminations	Intersegment eliminations	(1.9)		(1.4)		0.5		26	Intersegment eliminations	(1.8)		(1.3)		0.5		28
Total transportation and terminals revenue	Total transportation and terminals revenue	459.9		464.9		5.0		1	Total transportation and terminals revenue	412.0		422.9		10.9		3
Affiliate management fee revenue	Affiliate management fee revenue	5.3		5.3		—		—	Affiliate management fee revenue	5.4		5.7		0.3		6
Operating expenses:	Operating expenses:								Operating expenses:
Refined products	Refined products	114.2		114.6		(0.4)		—	Refined products	91.5		88.2		3.3		4
Crude oil	Crude oil	47.0		35.1		11.9		25	Crude oil	39.2		38.8		0.4		1
Intersegment eliminations	Intersegment eliminations	(3.5)		(3.1)		(0.4)		(11)	Intersegment eliminations	(3.4)		(2.8)		(0.6)		(18)
Total operating expenses	Total operating expenses	157.7		146.6		11.1		7	Total operating expenses	127.3		124.2		3.1		2
Product margin:	Product margin:								Product margin:
Product sales revenue	Product sales revenue	111.2		168.8		57.6		52	Product sales revenue	213.7		246.1		32.4		15
Cost of product sales	Cost of product sales	89.4		145.8		(56.4)		(63)	Cost of product sales	170.9		243.4		(72.5)		(42)
Product margin	Product margin	21.8		23.0		1.2		6	Product margin	42.8		2.7		(40.1)		(94)
Other operating income (expense)	Other operating income (expense)	(2.9)		2.6		5.5		n/a	Other operating income (expense)	(0.4)		(2.0)		(1.6)		(400)
Earnings of non-controlled entities	Earnings of non-controlled entities	39.2		36.5		(2.7)		(7)	Earnings of non-controlled entities	39.1		35.4		(3.7)		(9)
Operating margin	Operating margin	365.6		385.7		20.1		5	Operating margin	371.6		340.5		(31.1)		(8)
Depreciation, amortization and impairment expense	Depreciation, amortization and impairment expense	68.4		61.4		7.0		10	Depreciation, amortization and impairment expense	54.6		57.7		(3.1)		(6)
G&A expense	G&A expense	37.5		46.7		(9.2)		(25)	G&A expense	46.0		62.8		(16.8)		(37)
Operating profit	Operating profit	259.7		277.6		17.9		7	Operating profit	271.0		220.0		(51.0)		(19)
Interest expense (net of interest income and interest capitalized)	Interest expense (net of interest income and interest capitalized)	52.7		56.6		(3.9)		(7)	Interest expense (net of interest income and interest capitalized)	56.4		56.8		(0.4)		(1)
Gain on disposition of assets	Gain on disposition of assets	—		(3.2)		3.2		—	Gain on disposition of assets	—		(0.2)		0.2		—
Other (income) expense	Other (income) expense	1.4		2.1		(0.7)		(50)	Other (income) expense	1.1		0.6		0.5		45
Income from continuing operations before provision for income taxes	Income from continuing operations before provision for income taxes	205.6		222.1		16.5		8	Income from continuing operations before provision for income taxes	213.5		162.8		(50.7)		(24)
Provision for income taxes	Provision for income taxes	0.9		0.8		0.1		11	Provision for income taxes	0.8		0.8		—		—
Income from continuing operations	Income from continuing operations	204.7		221.3		16.6		8	Income from continuing operations	212.7		162.0		(50.7)		(24)
Income from discontinued operations	Income from discontinued operations	6.9		15.3		8.4		122	Income from discontinued operations	8.6		3.5		(5.1)		(59)
Net income	Net income	$	211.6	$	236.6	$	25.0	12	Net income	$	221.3	$	165.5	$	(55.8)	(25)

Operating Statistics:
Operating Statistics									Operating Statistics
Refined products:	Refined products:								Refined products:
Transportation revenue per barrel shipped	Transportation revenue per barrel shipped	$	1.719	$	1.724				Transportation revenue per barrel shipped	$	1.672	$	1.635
Volume shipped (million barrels):	Volume shipped (million barrels):								Volume shipped (million barrels):
Gasoline	Gasoline	71.9		80.3					Gasoline	65.0		75.6
Distillates	Distillates	42.5		53.0					Distillates	46.5		47.6
Aviation fuel	Aviation fuel	4.7		8.4					Aviation fuel	6.1		7.4
Liquefied petroleum gases		0.1		0.1
LPGs									LPGs	0.5		0.6
Total volume shipped	Total volume shipped	119.2		141.8					Total volume shipped	118.1		131.2
Crude oil:	Crude oil:								Crude oil:
Magellan 100%-owned assets:	Magellan 100%-owned assets:								Magellan 100%-owned assets:
Transportation revenue per barrel shipped(1)	Transportation revenue per barrel shipped(1)	$	1.401	$	0.803				Transportation revenue per barrel shipped(1)	$	0.789	$	0.843
Volume shipped (million barrels)(1)	Volume shipped (million barrels)(1)	45.1		49.2					Volume shipped (million barrels)(1)	46.5		41.9
Terminal average utilization (million barrels per month)	Terminal average utilization (million barrels per month)	25.9		24.9					Terminal average utilization (million barrels per month)	25.5		25.2
Select joint venture pipelines:	Select joint venture pipelines:								Select joint venture pipelines:
BridgeTex - volume shipped (million barrels)(2)	BridgeTex - volume shipped (million barrels)(2)	30.6		29.1					BridgeTex - volume shipped (million barrels)(2)	26.9		25.5
Saddlehorn - volume shipped (million barrels)(3)	Saddlehorn - volume shipped (million barrels)(3)	15.1		19.9					Saddlehorn - volume shipped (million barrels)(3)	16.1		20.0

(1) ~~Volume shipped includes~~Includes shipments related to our crude oil marketing activities.

(2) These volumes reflect the total shipments for the BridgeTex pipeline, which is owned 30% by us.

(3) These volumes reflect the total shipments for the Saddlehorn pipeline, which is owned 30% by us.

3630

Transportation and terminals revenue increased ~~$5.0~~$10.9 million primarily resulting from:

•an increase in refined products revenue of ~~$42.2~~$11.9 million primarily due to increased transportation ~~revenue~~volumes as a result of ~~higher volumes versus~~ the continued demand recovery from pandemic levels ~~of 2020 due to the recovery in travel, economic and drilling activity~~ as well as additional contributions from our Texas pipeline expansion projects. ~~Transportation revenues for~~Average transportation rates were slightly lower as a higher proportion of short-haul shipments, which move at a lower tariff, more than offset the ~~current period also benefited from our~~ mid-year 2021 overall tariff increase. ~~These favorable items were partially offset by lower~~We also earned less storage ~~revenues~~revenue due to lower utilization and rates following recent contract expirations; and

•a decrease in crude oil revenue of ~~$37.7~~$1.5 million primarily due to less storage revenue due to lower utilization and rates following recent contract expirations. Otherwise, higher average ~~tariff~~ rates on our Longhorn pipeline and ~~reduced storage revenues. Average tariff rates decreased primarily~~higher terminal throughput fees as a result of more customers utilizing a simplified pricing structure for services in the ~~late 2020 expiration of several higher-priced contracts~~Houston area offset fewer tariff movements on our Longhorn pipeline, with much of this volume replaced by activities of our marketing affiliate. In addition, deficiency revenue recognized in the year-ago period did not recur in third quarter 2021. Storage revenues decreased primarily due to the 2020 period benefiting from increased short-term storage utilization at higher rates, with recent contract renewals at lower rates in the current period.Houston distribution system.

Operating expenses decreased ~~by $11.1~~$3.1 million primarily resulting from:

•~~an increase~~a decrease in refined products expenses of ~~$0.4~~$3.3 million. ~~An increase~~More favorable product overages (which reduce operating expenses), related in part to higher commodity prices in the current period, more than offset higher property taxes as a result of recent expansion projects, higher integrity spending related to the timing of maintenance work and higher power costs, primarily due to ~~higher volume shipped and higher property taxes were mainly offset~~the benefit of gains on our power hedges in the prior year driven by ~~favorable product overages (which reduce operating expenses);~~the 2021 winter storms; and

•a decrease in crude oil expenses of ~~$11.9 million primarily due to a decrease in~~$0.4 million. Lower integrity spending related to the timing of maintenance work and lower ~~fees paid to Seabrook for ancillary services and favorable product overages.~~pipeline rental costs resulting from new agreements were mostly offset by higher power costs, as the prior year benefited from gains on power hedges during the 2021 winter storms.

Product margin ~~increased $1.2~~decreased $40.1 million primarily due to recognition of losses on futures contracts in ~~third quarter 2020~~the current year versus gains in the prior year, slightly offset by ~~lower~~higher margins ~~and lower sales volumes~~ on our gas liquids blending ~~and fractionation~~ activities in the current period.

Other operating ~~income (expense)~~expense was ~~$5.5~~$1.6 million ~~favorable~~unfavorable in part due to ~~reduced estimates for retained liabilities related to our 2020 marine terminals sale and lower~~higher losses recognized on a basis derivative agreement during the current period.

Earnings of non-controlled entities decreased ~~$2.7~~$3.7 million primarily due to the sale of a portion of our interest in MVP during second quarter 2021. We also earned less from Seabrook due to lower throughput fees and additional depreciation for recently-constructed assets and BridgeTex due to less favorable product overages. These decreases were partially offset by additional earnings from Powder Springs due to gains on futures contracts in the current quarter.

Depreciation, amortization and impairment expense ~~decreased $7.0~~increased $3.1 million primarily due to ~~the impairment in third quarter 2020 of certain terminalling assets.~~asset additions.

G&A expense increased ~~$9.2~~$16.8 million primarily due to higher incentive compensation costs as a result of expenses related to the retirement agreement for our former chief executive officer as well as overall improved financial ~~results in 2021.~~results.

Interest expense, net of interest income and interest capitalized, increased ~~$3.9~~$0.4 million primarily due to ~~lower capitalized interest as a result of reduced ongoing expansion capital spending and~~ higher debt outstanding. Our ~~weighted-average~~weighted average debt outstanding was $5.3 billion in first quarter 2022 compared to $5.1 billion in ~~third~~first quarter ~~2021 compared to $4.9 billion in third quarter 2020.~~2021. The weighted average interest rate was 4.2% in first quarter 2022 compared to 4.4% in ~~third~~first quarter ~~2021 compared to 4.3% in third quarter 2020.~~

Gain on disposition of assets of $3.2 million in the current period resulted from true-ups for previous asset sales, including the final working capital adjustments related to the sale of a portion of our interest in MVP.2021.

Income from discontinued operations ~~increased~~decreased by ~~$8.4~~$5.1 million primarily due to ~~improved product margin for our independent terminals as a result of higher~~unrealized losses on futures contracts associated with gas liquids blending ~~volume sold~~hedges at ~~increased pricing and less depreciation now that~~ the ~~assets are classified as held for sale.~~independent terminals.

3831

~~Nine Months Ended September 30, 2020 compared to Nine Months Ended September 30, 2021~~

Nine Months Ended September 30, Variance
Favorable (Unfavorable)
2020 2021 $ Change % Change
Financial Highlights ($ in millions, except operating statistics)
Transportation and terminals revenue:
Refined products $ 876.4 $ 984.9 $ 108.5 12
Crude oil 433.9 351.8 (82.1) (19)
Intersegment eliminations (5.1) (4.4) 0.7 14
Total transportation and terminals revenue 1,305.2 1,332.3 27.1 2
Affiliate management fee revenue 15.9 15.9 — —
Operating expenses:
Refined products 316.3 314.2 2.1 1
Crude oil 139.7 118.1 21.6 15
Intersegment eliminations (9.9) (9.4) (0.5) (5)
Total operating expenses 446.1 422.9 23.2 5
Product margin:
Product sales revenue 443.1 575.6 132.5 30
Cost of product sales 364.9 488.6 (123.7) (34)
Product margin 78.2 87.0 8.8 11
Other operating income (expense) 0.5 4.0 3.5 700
Earnings of non-controlled entities 116.5 116.1 (0.4) —
Operating margin 1,070.2 1,132.4 62.2 6
Depreciation, amortization and impairment expense 183.2 168.3 14.9 8
G&A expense 115.5 148.7 (33.2) (29)
Operating profit 771.5 815.4 43.9 6
Interest expense (net of interest income and interest capitalized) 168.0 169.3 (1.3) (1)
Gain on disposition of assets (12.9) (72.9) 60.0 465
Other (income) expense 3.7 18.1 (14.4) (389)
Income from continuing operations before provision for income taxes 612.7 700.9 88.2 14
Provision for income taxes 2.2 2.0 0.2 9
Income from continuing operations 610.5 698.9 88.4 14
Income from discontinued operations 22.5 39.4 16.9 75
Net income $ 633.0 $ 738.3 $ 105.3 17
Operating Statistics:
Refined products:
Transportation revenue per barrel shipped $ 1.658 $ 1.697
Volume shipped (million barrels):
Gasoline 199.4 224.1
Distillates 127.6 152.4
Aviation fuel 16.8 21.7
Liquefied petroleum gases 0.5 0.6
Total volume shipped 344.3 398.8
Crude oil:
Magellan 100%-owned assets:
Transportation revenue per barrel shipped $ 1.145 $ 0.803
Volume shipped (million barrels)(1)
167.9 145.3
Terminal average utilization (million barrels per month) 24.7 25.1
Select joint venture pipelines:
BridgeTex - volume shipped (million barrels)(2)
99.9 84.6
Saddlehorn - volume shipped (million barrels)(3)
46.5 56.0

~~(1) Volume shipped includes shipments related to our crude oil marketing activities.~~

~~(2) These volumes reflect the total shipments for the BridgeTex pipeline, which is owned 30% by us.~~

~~(3) These volumes reflect the total shipments for the Saddlehorn pipeline, which was owned 40% by us through January 31, 2020 and 30% thereafter.~~

~~Transportation and terminals revenue increased $27.1 million resulting from:~~

•an increase in refined products revenue of $108.5 million primarily due to increased transportation revenue as a result of higher volumes versus the pandemic levels of 2020 due to the recovery in travel, economic and drilling activity as well as additional contributions from our Texas pipeline expansion projects. Revenues also benefited from an increase in the average tariff rate in the current period as a result of the 2020 and 2021 mid-year adjustments. These favorable items were partially offset by the absence of revenues in the current period associated with the three marine terminals we sold in March 2020 and lower storage revenues due to lower utilization and lower rates following recent contract expirations; and

•a decrease in crude oil revenue of $82.1 million primarily due to lower average tariff rates, less volume shipped and reduced storage revenues. Average tariff rates decreased primarily as a result of the late 2020 expiration of several higher-priced contracts on our Longhorn pipeline. In addition, deficiency revenue recognized in the year-ago period did not recur in 2021. Transportation volumes also declined partially due to those Longhorn contract expirations, with much of this volume replaced by activities of our marketing affiliate, as well as short-term supply disruptions caused by the 2021 winter storm that negatively impacted shipments mainly on our Houston distribution system. Storage revenues decreased primarily due to the 2020 period benefiting from increased short-term storage utilization at higher rates and contract renewals at lower rates in the current period.

~~Operating expenses decreased by $23.2 million primarily resulting from:~~

•a decrease in refined products expenses of $2.1 million. Favorable product overages and the absence of costs in the current period associated with the divested marine terminals were partially offset by higher compensation costs and more integrity spending due to timing of project work; and

•a decrease in crude oil expenses of $21.6 million primarily due to lower power costs as a result of our recent optimization efforts as well as gains on power hedges driven by the winter storm in first quarter 2021, lower fees paid to Seabrook for ancillary services and lower integrity spending.

Product margin increased $8.8 million primarily due to lower of cost or net realizable value adjustments that negatively impacted 2020 as a result of the significant decrease in commodity prices that year and higher margins on our fractionator and crude over/short activities, partially offset by reduced margins on our gas liquids blending activities in the current year.

Other operating income (expense) was $3.5 million favorable primarily due to sales of unused air emission credits and reduced estimates for retained liabilities related to our 2020 marine terminals sale.

Earnings of non-controlled entities decreased $0.4 million. Lower earnings from MVP following the sale of a portion of our interest during second quarter 2021 and from Powder Springs due to lower gains recognized in the current year on futures contracts were mostly offset by contributions from expansion projects at MVP and Saddlehorn.

~~Depreciation, amortization and impairment expense decreased $14.9 million primarily due to impairment losses recognized in 2020 related to certain terminalling assets.~~

~~G&A expense increased $33.2 million primarily due to higher incentive compensation costs as a result of improved financial results, as well as higher benefits costs in 2021.~~

Interest expense, net of interest income and interest capitalized, increased $1.3 million primarily due to lower capitalized interest in the current year as a result of reduced ongoing expansion capital spending. Our weighted-average debt outstanding was $5.1 billion in the 2021 period compared to $4.9 billion in 2020. The weighted average interest rate was 4.4% in 2021 compared to 4.5% in 2020.

Gain on disposition of assets of $72.9 million in 2021 was primarily the result of the sale of a portion of our interest in MVP and $12.9 million recognized in 2020 was due to the sale of a portion of our interest in Saddlehorn.

~~Other expense was $14.4 million unfavorable primarily due to amounts recognized in second quarter 2021 related to certain legal matters.~~

Income from discontinued operations increased by $16.9 million due to improved product margin for our independent terminals as a result of higher gas liquids blending volume sold at increased pricing and less depreciation now that the assets are classified as held for sale.

Adjusted EBITDA, Distributable Cash Flow and Free Cash Flow

~~We believe that investors benefit from having access to the same financial measures utilized by management.~~ In the following tables, we present the financial measures of adjusted EBITDA, distributable cash flow (“DCF”) and free cash flow (“FCF”), which are non-GAAP measures. These measures include the results of our discontinued operations.

Adjusted EBITDA is an important measure utilized by management and the investment community to assess the financial results of a company. A reconciliation of adjusted EBITDA to net income, the nearest comparable GAAP measure, is included in the table below.

Our partnership agreement requires that all of our available cash, less amounts reserved by our ~~general partner’s~~ board, ~~of directors,~~ be distributed to our unitholders. DCF is used by management to determine the amount of cash that our operations generated, after maintenance capital spending, that is available for distribution to our unitholders, as well as a basis for recommending to our ~~general partner’s~~ board ~~of directors~~ the amount of distributions to be paid each period. We also use DCF as the basis for calculating our performance-based equity long-term incentive compensation. A reconciliation of DCF to net income, the nearest comparable GAAP measure, is included in the table below.

FCF is a financial metric used by many investors and others in the financial community to measure the amount of cash generated by a company during a period after accounting for all investing activities, including both maintenance and expansion capital spending, as well as proceeds from divestitures. We believe FCF is important to the financial community as it reflects the amount of cash available for distributions, ~~unit~~additional expansion capital opportunities, equity repurchases, debt reduction ~~additional investments~~ or other partnership uses. A reconciliation of FCF to net income and to net cash provided by operating activities, which is the nearest comparable GAAP measure, is included in the following tables.

Since the non-GAAP measures presented here include adjustments specific to us, they may not be comparable to similarly-titled measures of other companies.

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Adjusted EBITDA, DCF and FCF are non-GAAP measures. A reconciliation of each of these measures to net income for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022 is as follows (in millions):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2021			2021		2022
Net income	Net income	$	633.0	$	738.3	Net income	$	221.3	$	165.5
Interest expense, net	Interest expense, net	168.0		169.3		Interest expense, net	56.3		56.8
Depreciation, amortization and impairment(1)	Depreciation, amortization and impairment(1)	193.4		174.4		Depreciation, amortization and impairment(1)	59.2		57.7
Equity-based incentive compensation(2)	Equity-based incentive compensation(2)	(9.1)		9.5		Equity-based incentive compensation(2)	(1.5)		5.5

Gain on disposition of assets(3)	Gain on disposition of assets(3)	(10.5)		(68.5)		Gain on disposition of assets(3)	—		(0.2)

Commodity-related adjustments:	Commodity-related adjustments:					Commodity-related adjustments:
Derivative (gains) losses recognized in the period associated with future transactions(4)	Derivative (gains) losses recognized in the period associated with future transactions(4)	6.7		21.1		Derivative (gains) losses recognized in the period associated with future transactions(4)	17.4		56.7
Derivative gains (losses) recognized in previous periods associated with transactions completed in the period(4)	Derivative gains (losses) recognized in previous periods associated with transactions completed in the period(4)	(18.9)		(32.2)		Derivative gains (losses) recognized in previous periods associated with transactions completed in the period(4)	(22.4)		(11.2)
Inventory valuation adjustments(5)	Inventory valuation adjustments(5)	9.6		2.4		Inventory valuation adjustments(5)	1.4		2.8
Total commodity-related adjustments	Total commodity-related adjustments	(2.6)		(8.7)		Total commodity-related adjustments	(3.6)		48.3
Distributions from operations of non-controlled entities in excess of earnings	Distributions from operations of non-controlled entities in excess of earnings	36.2		24.5		Distributions from operations of non-controlled entities in excess of earnings	12.3		3.0

Adjusted EBITDA	Adjusted EBITDA	1,008.4		1,038.8		Adjusted EBITDA	344.0		336.6
Interest expense, net, excluding debt issuance cost amortization~~(6)~~	Interest expense, net, excluding debt issuance cost amortization~~(6)~~	(152.4)		(167.0)		Interest expense, net, excluding debt issuance cost amortization~~(6)~~	(55.5)		(56.0)
Maintenance capital~~(7)~~(6)	Maintenance capital~~(7)~~(6)	(81.2)		(50.2)		Maintenance capital~~(7)~~(6)	(12.1)		(15.2)
Distributable cash flow	Distributable cash flow	774.8		821.6		Distributable cash flow	$	276.4	$	265.4
Expansion capital~~(8)~~(7)	Expansion capital~~(8)~~(7)	(310.0)		(67.6)		Expansion capital~~(8)~~(7)	(10.5)		(26.1)
Proceeds from asset sales		334.6		270.7
Proceeds from disposition of assets(3)						Proceeds from disposition of assets(3)	0.6		0.2
Free cash flow	Free cash flow	799.4		1,024.7		Free cash flow	$	266.5	$	239.5
Distributions paid	Distributions paid	(697.3)		(685.0)		Distributions paid	(229.4)		(220.6)
Free cash flow after distributions	Free cash flow after distributions	$	102.1	$	339.7	Free cash flow after distributions	$	37.1	$	18.9

(1) Depreciation, amortization and impairment expense is excluded from DCF to the extent it represents a non-cash expense.

(2) Because we intend to satisfy vesting of unit awards under our equity-based long-term incentive compensation plan with the issuance of common units, expenses related to this plan generally are deemed non-cash and excluded for DCF purposes. The amounts above have been reduced by cash payments associated with the plan, which are primarily related to tax withholdings.

(3) Gains on disposition of assets are excluded from DCF to the extent they are not related to our ongoing ~~operations.~~operations, while proceeds from disposition of assets exclude the related gains to the extent they are already included in our calculation of DCF.

(4) Certain derivatives have not been designated as hedges for accounting purposes and the mark-to-market changes of these derivatives are recognized currently in net income. We exclude the net impact of these derivatives from our determination of DCF until the transactions are settled and, where applicable, the related products are sold. ~~In the period in which these transactions are settled and any related products are sold, the net impact of the derivatives is included in DCF.~~

(5) We adjust DCF for lower of average cost or net realizable value adjustments related to inventory and firm purchase commitments as well as market valuation of short positions recognized each period as these are non-cash items. In subsequent periods when we ~~physically~~ sell or purchase the related products, we ~~adjust DCF for the~~recognize these valuation adjustments ~~previously recognized.~~in DCF.

(6) Interest expense includes debt prepayment costs of $12.9 million in the nine months ended September 30, 2020, which are excluded from DCF as they are financing activities and not related to our ongoing operations.

~~(7)~~ Maintenance capital expenditures maintain our existing assets and do not generate incremental DCF (i.e. incremental returns to our unitholders). For this reason, we deduct maintenance capital expenditures to determine DCF.

~~(8)~~(7) Includes additions to property, plant and equipment (excluding maintenance capital and capital-related changes in accounts payable and other current liabilities), acquisitions and investments in non-controlled entities, net of distributions from returns of investments in non-controlled entities and deposits from undivided joint interest third parties.

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A reconciliation of FCF to net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022 is as follows (in millions):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2021			2021		2022
Net cash provided by operating activities	Net cash provided by operating activities	$	840.1	$	879.1	Net cash provided by operating activities	$	240.4	$	100.4
Changes in operating assets and liabilities	Changes in operating assets and liabilities	30.4		0.6		Changes in operating assets and liabilities	57.7		145.5
Net cash provided (used) in investing activities	Net cash provided (used) in investing activities	(110.3)		160.1		Net cash provided (used) in investing activities	(31.2)		(46.6)
Payments associated with settlement of equity-based incentive compensation	Payments associated with settlement of equity-based incentive compensation	(14.7)		(6.2)		Payments associated with settlement of equity-based incentive compensation	(6.2)		(8.9)
Settlement gain, amortization of prior service credit and actuarial loss		(4.0)		(7.2)
Settlement cost, amortization of prior service credit and actuarial loss						Settlement cost, amortization of prior service credit and actuarial loss	(1.6)		(1.2)
Changes in accrued capital items	Changes in accrued capital items	52.8		(4.0)		Changes in accrued capital items	9.3		5.5
Commodity-related adjustments(1)	Commodity-related adjustments(1)	(2.6)		(8.7)		Commodity-related adjustments(1)	(3.6)		48.3
Other	Other	7.7		11.0		Other	1.7		(3.5)
Free cash flow	Free cash flow	799.4		1,024.7		Free cash flow	$	266.5	$	239.5
Distributions paid	Distributions paid	(697.3)		(685.0)		Distributions paid	(229.4)		(220.6)
Free cash flow after distributions	Free cash flow after distributions	$	102.1	$	339.7	Free cash flow after distributions	$	37.1	$	18.9

(1) Please refer to the preceding table for a description of these commodity-related adjustments.

Liquidity and Capital Resources

Cash Flows and Capital Expenditures

Operating Activities. Net cash provided by operating activities was ~~$840.1~~$240.4 million and ~~$879.1~~$100.4 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021,~~2022, respectively. The ~~$39.0~~$140.0 million ~~increase~~decrease in ~~2021~~2022 was due to ~~higher~~changes in our working capital and lower net income as previously described, ~~and changes in our working capital, partially~~slightly offset by adjustments for non-cash items and distributions in excess of earnings of our non-controlled entities.

Investing Activities. Net cash used by investing activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and 2022 was ~~$110.3~~$31.2 million and ~~net cash provided by investing activities for the nine months ended September 30, 2021 was $160.1 million. During the 2021 period, we~~$46.6 million, respectively, including $29.7 million and $44.9 million used ~~$106.5 million~~ for capital ~~expenditures. Also, during~~expenditures for those same periods in 2021 we sold a portion of our interest in MVP for cash proceeds of $271.0 million. During the 2020 period, we used $357.1 million for capital expenditures. Also during 2020, we sold three marine terminals for cash proceeds of $251.8 million and sold a portion of our interest in Saddlehorn for cash proceeds of $79.9 million. Additionally, we contributed capital of $73.7 million in conjunction with our joint venture capital projects, which we account for as investments in non-controlled entities.2022, respectively.

Financing Activities. Net cash used by financing activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022 was ~~$794.1~~$218.6 million and ~~$1,041.2~~$51.5 million, respectively. During the ~~2021~~2022 period, we paid distributions of ~~$685.0~~$220.6 million to our unitholders and repurchased common units for ~~$473.1~~$50.0 million. Additionally, we had net commercial paper borrowings of ~~$123.0~~$228.0 million. Also, in January 2022, our equity-based incentive compensation awards that vested December 31, 2021 were settled by issuing 215,409 common units and distributing those units to the long-term incentive plan (“LTIP”) participants, resulting in payments primarily associated with tax withholdings of $8.9 million. During the 2021 period, we paid distributions of $229.4 million to our unitholders and had net commercial paper borrowings of $17.0 million. Also, in January 2021, our equity-based incentive compensation awards that vested December 31, 2020 were settled by issuing 163,007 common units and distributing those units to the ~~long-term incentive plan (“LTIP”)~~LTIP participants, resulting in payments primarily associated with tax withholdings of $6.2 million. During the 2020 period, we paid distributions of $697.3 million to our unitholders and repurchased common units for $252.0 million. Additionally, we received net proceeds of $499.4 million from the issuance of long-term senior notes and had net commercial paper borrowings of $248.0 million, which collectively were used to repay our $550.0 million of 4.25% notes due 2021. Also, in January 2020, our equity-based incentive compensation awards that vested December 31, 2019 were settled by issuing 284,643 common units and distributing those units to the LTIP participants, resulting in payments primarily associated with tax withholdings of $14.7 million.

The quarterly distribution amount related to ~~third~~first quarter ~~2021~~2022 earnings is $1.0375 per unit (to be paid in ~~fourth~~second quarter ~~2021)~~2022). If we were to continue paying distributions at this level on the number of common units

currently outstanding, total distributions of approximately ~~$898~~$878 million would be paid to our unitholders related to ~~2021~~2022 earnings. Management believes we will have sufficient DCF to fund these distributions.

Capital Requirements

Capital spending for our business consists primarily of:

•Maintenance capital expenditures. These expenditures include costs required to maintain equipment reliability and safety and to address environmental orand other regulatory requirements rather than to generate incremental DCF; and

•Expansion capital expenditures. These expenditures are undertaken primarily to generate incremental DCF and include costs to acquire additional assets to grow our business and to expand or upgrade our existing facilities and to construct new assets, which we refer to collectively as organic growth projects. Organic growth projects include, for example, capital expenditures that increase storage or throughput volumes or develop pipeline connections to new supply sources.

For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, our maintenance capital spending was ~~$50.2~~$15.2 million, including ~~$1.5~~$1.1 million for discontinued operations. For ~~2021,~~2022, we expect to spend approximately $80 million on maintenance capital.

During the first ~~nine~~three months of ~~2021,~~2022, we spent ~~$62.0~~$25.3 million for our expansion capital projects ~~including $0.2 million for discontinued operations,~~ and contributed ~~$5.6~~$0.8 million for expansion capital projects in conjunction with our joint ventures. Based on the progress of ~~expansion~~ projects already ~~underway,~~committed, we expect to spend approximately ~~$80 million in 2021 and $20~~$70 million in 2022 to complete our current slate of expansion capital projects.

In addition, we may repurchase our common units through our unit repurchase program (see Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds of Part II of this report for additional details). We may also repurchase portions of our existing long-term debt from time-to-time through open market transactions, tender offers or privately-negotiated transactions.

Liquidity

Cash generated from operations is a key source of liquidity for funding debt service, maintenance capital expenditures, quarterly distributions and repurchases of ~~our~~ common units. Additional liquidity for purposes other than quarterly distributions, such as expansion capital expenditures, is available through borrowings under our commercial paper program and revolving credit facility, as well as from other borrowings or issuances of debt or common units (see Note 7 – Debtand Note 15 – ~~Partners~~’Partners’ Capital and Distributions ~~of the consolidated financial statements included~~ in Item 1I of Part Iof this report for detail of our borrowings and changes in partners’ capital).

Off-Balance Sheet Arrangements

None.

Other Items

~~Executive Officer Promotions.~~Board of Director Changes. ~~Mark B. Roles, who previously held~~On April 21, 2022, Robert G. Croyle notified the ~~position~~board of ~~Vice President, Business Optimization,~~his decision to retire effective April 30, 2022 after 13 years of service. Following Mr. Croyle’s retirement, Sivasankaran Somasundaram was elected as an independent board member beginning May 1, 2022.

Collective Bargaining Agreement. Approximately 13% of our employees are represented by the United Steel Workers (“USW”) and covered by a collective bargaining agreement that expired at the end of January 2022. We are operating under a 24-hour rolling extension of this agreement while negotiations for a new agreement continue. We continue to make progress on these negotiations and expect that we will reach a new long-term agreement with the USW; however, a prolonged work stoppage by a majority of these employees could have a material adverse effect on our general partner’s board of directors as Senior Vice President, Commercial - Refined Products effective May 22, 2021. He has served in various positions of increasing responsibilities in commercial and operations since joining us and our predecessor company in 1998.business.

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~~Pipeline Tariff Changes.~~ Historically, the tariff rates on approximately 40% of our refined products shipments have been regulated by the Federal Energy Regulatory Commission (“FERC”) primarily through an annual index methodology, and nearly all the remaining rates are adjustable at our discretion based on market factors. Due to the recent expansion of our Texas refined products pipeline system, for which rates are not regulated by the FERC, we expect a smaller percent of our total refined products shipments to be subject to the index methodology in the future. The new 5-year FERC index beginning July 2021 is based on the change in the producer price index for finished goods plus 0.78%. Based on this methodology, we decreased our index rates by approximately 0.6% on July 1, 2021, with an average increase of more than 4% on the remainder of our refined products tariff rates, resulting in an overall average refined products mid-year tariff increase of nearly 3%. Most of the tariffs on our long-haul crude oil pipelines are established at negotiated rates that generally provide for annual adjustments in line with changes in the FERC index, subject to certain modifications. As a result, we also changed the rates on our crude oil pipelines between 0% and 2% in July 2021.

Commodity Derivative Agreements. Certain of our business activities result in our owning various commodities, which exposes us to commodity price risk. We ~~generally~~ use forward physical commodity contracts and ~~exchange-traded futures contracts~~derivative instruments to hedge against changes in prices of ~~the~~ commodities that we expect to sell or purchase in future periods. ~~We are a party to a basis derivative agreement for which settlements are determined based on the basis differential of crude oil prices at different market locations.~~

See Item 3. Quantitative and Qualitative Disclosures about Market Risk for further information regarding the quantities of refined products and crude oil hedged at ~~September 30, 2021~~March 31, 2022 and the fair value of open hedge and basis derivative contracts at that date.

Related Party Transactions. See Note 14 – Related Party Transactions in Item 1 of Part I of this report for detail of our related party transactions.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We may be exposed to market risk through changes in commodity prices and interest rates and have established policies to monitor and mitigate these market risks. We use derivative agreements to help manage our exposure to commodity price and interest rate risks.

Commodity Price Risk

Our commodity price risk primarily arises from our gas liquids blending, fractionation and ~~fractionation~~petroleum products marketing activities, ~~and~~as well as from managing product overages and shortages associated with our refined products and crude oil pipelines and terminals. We ~~generally~~ use ~~derivatives such as~~ forward physical contracts and ~~exchange-traded futures contracts~~derivative instruments to help us manage ~~our~~ commodity price risk.

Forward physical contracts that qualify for and are elected as normal purchases and sales are accounted for using traditional accrual accounting. As of ~~September 30, 2021,~~March 31, 2022, we had commitments under forward purchase and sale contracts as follows (in millions):


		Total		2021		2022-2025		Beyond 2025			Total		2022		2023-2026		Beyond 2026
Forward purchase contracts – notional value	Forward purchase contracts – notional value	$	516.8	$	172.2	$	205.0	$	139.6	Forward purchase contracts – notional value	$	519.0	$	238.2	$	160.0	$	120.8
Forward purchase contracts – barrels	Forward purchase contracts – barrels	11.4		2.6		4.3		4.5		Forward purchase contracts – barrels	10.6		3.3		3.7		3.6
Forward sales contracts – notional value	Forward sales contracts – notional value	$	78.2	$	72.5	$	5.7	$	—	Forward sales contracts – notional value	$	49.4	$	49.4	$	—	$	—
Forward sales contracts – barrels	Forward sales contracts – barrels	0.9		0.8		0.1		—		Forward sales contracts – barrels	0.4		0.4		—		—

We generally use derivative instruments including exchange-traded futures contracts and over-the-counter forward contracts to hedge against changes in the price of ~~the~~ petroleum products we expect to sell or purchase. We did not elect hedge accounting treatment under ~~ASC~~Accounting Standards Codification 815, Derivatives

and Hedging, for our open contracts and as a result we accounted for these contracts as economic hedges, with changes in fair value recognized currently in earnings. The fair value of these open ~~futures~~ contracts, representing ~~4.9~~5.3 million barrels of petroleum products we expect to sell and ~~1.2~~0.7 million barrels of gas liquids we expect to purchase, was a net liability of ~~$22.3 million.~~$47.4 million as of March 31, 2022. With respect to these contracts, a $10.00 per barrel increase (decrease) in the prices of petroleum products we expect to sell would result in a ~~$49.0~~$53.0 million decrease (increase) in our operating profit, while a $10.00 per barrel increase (decrease) in the price of gas liquids we expect to purchase would result in a ~~$12.0~~$7.0 million increase (decrease) in our operating profit. These increases or decreases in operating profit would be substantially offset by higher or lower product sales revenue or cost of product sales when the physical sale or purchase of those products occurs, respectively. These contracts may be for the purchase or sale of products in markets different from those in which we are attempting to hedge our exposure, and the related hedges may not eliminate all price risks.

Interest Rate Risk

Our use of variable rate debt and any future issuances of fixed rate debt expose us to interest rate risk. As of ~~September 30, 2021,~~March 31, 2022, we ~~did not have any~~had $336.0 million of variable rate ~~debt~~commercial paper outstanding.

ITEM 4.CONTROLS AND PROCEDURES

We performed an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. We performed this evaluation under the supervision and with the participation of our management, including our ~~general partner’s~~ Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon that evaluation, our ~~general partner’s~~ CEO and CFO concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed so that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There has been no change in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2021~~March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Hurricane Harvey Enforcement Proceeding. In July 2018, we received a Notice of Enforcement letter from the TCEQ alleging two air emission violations at our Galena Park, Texas terminal that occurred during Hurricane Harvey in third quarter 2017. The penalties associated with these alleged violations are expected to be $0.4 million. While the outcome cannot be predicted with certainty, we believe the ultimate resolution of this matter will not have a material adverse effect on our business.

Butane Blending Patent Infringement Proceeding. On October 4, 2017, Sunoco Partners Marketing & Terminals L.P. (“Sunoco”) brought an action for patent infringement in the U.S. District Court for the District of Delaware alleging Magellan Midstream Partners, L.P. (“Magellan”) and Powder Springs Logistics, LLC (“Powder Springs”) ~~are~~were infringing patents ~~related~~relating to butane blending at the Powder Springs facility located in Powder Springs, Georgia. Sunoco subsequently submitted pleadings alleging that Magellan iswas also infringing various patents related to butane blending at ~~nine~~eight Magellan facilities, in addition to Powder Springs. Sunoco ~~is seeking~~sought monetary damages, attorneys’ fees and a permanent injunction enjoining ~~Magellan and~~ Powder Springs from infringing the subject patents. ~~We deny~~A jury trial concluded on December 6, 2021, at which the jury found Magellan willfully infringed the three patents in suit and awarded damages of approximately $9.4 million against Magellan relating to the eight Magellan facilities at issue. The jury further found that Powder Springs willfully infringed the one patent at issue relating to the Powder Springs facility and awarded approximately $2.8 million against Magellan and Powder Springs relating to that facility. Sunoco requested that the court enhance the damages award based upon the jury’s finding of willfulness, and that the court award additional damages and pre- and post-judgment interest. Magellan and Powder Springs have filed post-trial pleadings opposing Sunoco’s request for enhanced damages and challenging the findings of liability and willfulness. The final determination of the trial court is subject to potential future appeals by either or both parties to the litigation. The amounts we have accrued in relation to the claims are ~~vigorously defending against all claims asserted by Sunoco. Although~~immaterial, and although it is not possible to predict the ultimate outcome, we believe the ~~ultimate~~final resolution of this matter will not have a material adverse ~~impact~~effect on our ~~results of operations, financial position or cash flows.~~business.

We and the non-controlled entities in which we own an interest are a party to various other claims, legal actions and complaints. While the results cannot be predicted with certainty, management believes the ultimate resolution of these claims, legal actions and complaints after consideration of amounts accrued, insurance coverage or other indemnification arrangements will not have a material adverse effect on our ~~future results of operations, financial position or cash flows.~~business.

ITEM 1A.RISK FACTORS

In addition to the information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not our only risks. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also could materially adversely affect our business, financial condition or operating results.

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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~In 2020, we initiated a $750 million common unit~~Our board authorized the repurchase ~~program, which allowed us~~of up to repurchase units through 2022. We completed the repurchases authorized under this program in September 2021. In October 2021, this program was expanded by $750 million to allow unit repurchases totaling $1.5 billion of our common units through ~~December 31,~~ 2024. We intend to purchase our common units from time-to-time through a variety of methods, including open market purchases and negotiated transactions, all in compliance with Securities Exchange Act Rules 10b-18, 10b5-1 or both and other applicable legal requirements. The timing, price and actual number of common units repurchased will depend on a number of factors including our expected expansion capital spending, excess cash available, balance sheet metrics, legal and regulatory requirements, market conditions and the trading price of our common units. The program does not obligate us to acquire any particular amount of common units and ~~the repurchase program~~ may be suspended or discontinued at any time.

The ~~following~~ table ~~provides details of~~below reflects our ~~unit repurchases in~~common units repurchased during 2020, 2021, ~~under our initial $750 million program:~~2022 and inception-to-date.

Period Total Number of Common Units Purchased Average Price Paid Per Unit Total Number of Units Purchased as Part of Publicly Announced Program Approximate Dollar Value of Units That May Yet Be Purchased under the Program (in millions)
Year Ended 2020 5,568,260 $ 49.74 5,568,260 $ 473.1
January 1-31, 2021 — — $ 473.1
February 1-28, 2021 — — $ 473.1
March 1-31, 2021 — — $ 473.1
First Quarter 2021 — —
April 1-30, 2021 — — $ 473.1
May 1-31, 2021 1,723,188 $ 47.77 1,723,188 $ 390.7
June 1-30, 2021 — — $ 390.7
Second Quarter 2021 1,723,188 $ 47.77 1,723,188
July 1-31, 2021 251,947 $ 47.24 251,947 $ 378.8
August 1-31, 2021 6,289,504 $ 47.94 6,289,504 $ 77.3
September 1-30, 2021 1,572,941 $ 49.14 1,572,941 $ —
Third Quarter 2021 8,114,392 $ 48.15 8,114,392
Year-to-Date 2021 9,837,580 $ 48.09 9,837,580
Total Inception-to-Date 15,405,840 $ 48.68 15,405,840 $ —


Period	Total Number of Common Units Purchased	Average Price Paid Per Unit		Total Number of Units Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Units That May Yet Be Purchased under the Program (in millions)(1)
Year Ended 2020	5,568,260	$	49.74	5,568,260	$	1,223.1
Year Ended 2021	10,894,828	$	48.01	10,894,828	$	700.0
January 1-31, 2022	—	—		—	$	700.0
February 1-28, 2022	430,670	$	47.87	430,670	$	679.4
March 1-31, 2022	611,365	$	48.06	611,365	$	650.0









Year-to-Date 2022	1,042,035	$	47.98	1,042,035
Total Inception-to-Date	17,505,123			17,505,123

(1) Our program has $1.5 billion authorized for unit repurchases, which includes $750 million approved in 2020 and an additional $750 million approved in October 2021. Our program will expire on December 31, 2024.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

The exhibits listed below on the Index to Exhibits are filed or incorporated by reference as part of this report.

4939

INDEX TO EXHIBITS



Exhibit Number		Description

Exhibit 3.1	—	Amendment No. 2 dated January 25, 2022 to Third Amended and Restated Limited Liability Company Agreement of Magellan GP, LLC dated September 28, 2009 (filed as Exhibit 3.1 to Form 8-K filed January 31, 2022).

Exhibit 10.1	—	Retirement Agreement between Magellan GP, LLC and Michael N. Mears dated January 28, 2022 (filed as Exhibit 10.1 to Form 8-K filed January 31, 2022).

Exhibit 31.1	—	Certification of ~~Michael N. Mears,~~Aaron L. Milford, principal executive officer.

Exhibit 31.2	—	Certification of Jeff Holman, principal financial officer.

Exhibit 32.1	—	Section 1350 Certification of ~~Michael N. Mears,~~Aaron L. Milford, Chief Executive Officer.

Exhibit 32.2	—	Section 1350 Certification of Jeff Holman, Chief Financial Officer.

Exhibit 101.INS	—	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Exhibit 101.SCH	—	XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL	—	XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.DEF	—	XBRL Taxonomy Extension Definition Linkbase Document.

Exhibit 101.LAB	—	XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE	—	XBRL Taxonomy Extension Presentation Linkbase Document.

5040

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized in Tulsa, Oklahoma on ~~November 2, 2021.~~May 5, 2022.


MAGELLAN MIDSTREAM PARTNERS, L.P.

By:						Magellan GP, LLC,
						its general partner

/s/ Jeff Holman
Jeff Holman
Chief Financial Officer
(Principal Accounting and Financial Officer)

5141


	Three Months Ended September 30, 2020
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	$	307,218	$	154,652	$	(1,930)	$	459,940
Product sales revenue	106,027		5,193		—		111,220
Affiliate management fee revenue	1,579		3,709		—		5,288
Total revenue	414,824		163,554		(1,930)		576,448
Operating expense	114,313		46,956		(3,553)		157,716
Cost of product sales	79,612		9,763		—		89,375
Other operating (income) expense	(193)		3,056		—		2,863
Earnings of non-controlled entities	(7,134)		(32,001)		—		(39,135)
Operating margin	228,226		135,780		1,623		365,629
Depreciation, amortization and impairment expense	38,237		28,579		1,623		68,439
G&A expense	26,968		10,529		—		37,497
Operating profit	$	163,021	$	96,672	$	—	$	259,693


	Three Months Ended September 30, 2021
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	$	349,430	$	116,920	$	(1,440)	$	464,910
Product sales revenue	153,352		15,463		—		168,815
Affiliate management fee revenue	1,643		3,686		—		5,329
Total revenue	504,425		136,069		(1,440)		639,054
Operating expense	114,612		35,042		(3,098)		146,556
Cost of product sales	128,372		17,483		—		145,855
Other operating (income) expense	(2,873)		282		—		(2,591)
Earnings of non-controlled entities	(8,160)		(28,306)		—		(36,466)
Operating margin	272,474		111,568		1,658		385,700
Depreciation, amortization and impairment expense	42,552		17,191		1,658		61,401
G&A expense	33,478		13,154		—		46,632
Operating profit	$	196,444	$	81,223	$	—	$	277,667


	Nine Months Ended September 30, 2020
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	$	876,363	$	433,947	$	(5,093)	$	1,305,217
Product sales revenue	422,986		20,141		—		443,127
Affiliate management fee revenue	4,676		11,219		—		15,895
Total revenue	1,304,025		465,307		(5,093)		1,764,239
Operating expense	316,371		139,645		(9,914)		446,102
Cost of product sales	334,366		30,550		—		364,916
Other operating (income) expense	(2,223)		1,684		—		(539)
Earnings of non-controlled entities	(25,946)		(90,538)		—		(116,484)
Operating margin	681,457		383,966		4,821		1,070,244
Depreciation, amortization and impairment expense	118,038		60,367		4,821		183,226
G&A expense	83,190		32,290		—		115,480
Operating profit	$	480,229	$	291,309	$	—	$	771,538


	Nine Months Ended September 30, 2021
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	$	984,895	$	351,817	$	(4,441)	$	1,332,271
Product sales revenue	487,551		88,024		—		575,575
Affiliate management fee revenue	4,802		11,123		—		15,925
Total revenue	1,477,248		450,964		(4,441)		1,923,771
Operating expense	314,241		118,072		(9,406)		422,907
Cost of product sales	394,316		94,298		—		488,614
Other operating (income) expense	(6,279)		2,246		—		(4,033)
Earnings of non-controlled entities	(25,528)		(90,579)		—		(116,107)
Operating margin	800,498		326,927		4,965		1,132,390
Depreciation, amortization and impairment expense	112,754		50,585		4,965		168,304
G&A expense	106,749		41,922		—		148,671
Operating profit	$	580,995	$	234,420	$	—	$	815,415


	Interest Rate Contracts
	Amount of Loss Recognized in AOCL on Derivatives		Location of Loss Reclassified from AOCL into Income	Amount of Loss Reclassified from AOCL into Income
Three Months Ended September 30, 2020	$	—	Interest expense	$	(896)
Three Months Ended September 30, 2021	$	—	Interest expense	$	(887)
Nine Months Ended September 30, 2020	$	(10,444)	Interest expense	$	(2,552)
Nine Months Ended September 30, 2021	$	—	Interest expense	$	(2,662)


Assets (Liabilities)					Fair Value Measurements as of September 30, 2021 using:
	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Commodity derivatives contracts	$	(22,280)	$	(22,280)	$	(22,280)	$	—	$	—



Basis derivative agreement	$	(3,120)	$	(3,120)	$	—	$	(3,120)	$	—
Long-term receivables	$	22,768	$	22,768	$	—	$	—	$	22,768
Contractual obligations	$	(9,806)	$	(9,806)	$	—	$	—	$	(9,806)
Debt	$	(5,103,226)	$	(5,786,692)	$	—	$	(5,786,692)	$	—