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 ~~June 30, 2019~~March 31, 2020



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

For the transition period from ____________ to ____________

Commission File Number

000-50056

MARTIN MIDSTREAM PARTNERS L.P.

(Exact name of registrant as specified in its charter)



Delaware		05-0527861
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

4200 Stone Road

Kilgore, Texas 75662

(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code: (903) 983-6200

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units representing limited partnership interests	MMLP	The NASDAQ Global Select Market

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	☒	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 such files).



Yes	☒	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 definition of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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

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



Yes	☐	No	☒

The number of the registrant’s Common Units outstanding at ~~July 24, 2019,~~May 11, 2020, was ~~38,863,389.~~38,852,507.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements included in this quarterly report that are not historical facts (including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto), including, without limitation, the information set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements. These statements can be identified by the use of forward-looking terminology including "forecast," "may," "believe," "will," "expect," "anticipate," "estimate," "continue," or other similar words. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other "forward-looking" information. We and our representatives may from time to time make other oral or written statements that are also forward-looking statements.

These forward-looking statements are made based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons, including those discussed under "Item 1A. Risk Factors" of our Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020, as updated and supplemented in Part II, Item 1A of this Quarterly Report on Form 10-Q, and as may be updated and supplemented from time to time in our future Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.



	Page

PART I – FINANCIAL INFORMATION	24

Item 1. Financial Statements	24
Consolidated and Condensed Balance Sheets as of ~~June 30, 2019~~March 31, 2020 (unaudited) and December 31, ~~2018 (unaudited)~~2019 (audited)	24
Consolidated and Condensed Statements of Operations for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	35
Consolidated and Condensed Statements of Capital (Deficit) for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	68
Consolidated and Condensed Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	79
Notes to Consolidated and Condensed Financial Statements (unaudited)	810

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3432

Item 3. Quantitative and Qualitative Disclosures About Market Risk	5448

Item 4. Controls and Procedures	5549

PART II. OTHER INFORMATION	5650

Item 1. Legal Proceedings	5650

Item 1A. Risk Factors	5650

Item 6. Exhibits	5650

PART I – FINANCIAL INFORMATION



Item 1.	Financial Statements

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(Dollars in thousands)

June 30, 2019
December 31, 2018¹
(Unaudited) (Unaudited)
Assets
Cash $ 2,521
$ 300
Accounts and other receivables, less allowance for doubtful accounts of $618 and $576, respectively 64,606
83,488
Product exchange receivables 107
166
Inventories (Note 6) 81,220
84,265
Due from affiliates 35,598
18,845
Fair value of derivatives (Note 11) —
4
Other current assets 9,638
5,889
Assets held for sale (Note 4) 5,132
5,652
Current assets - Natural Gas Storage Assets (Note 4) —
9,428
Total current assets 198,822
208,037

Property, plant and equipment, at cost 880,603
886,435
Accumulated depreciation (451,359 ) (438,602 )
Property, plant and equipment, net 429,244
447,833

Goodwill 17,785
17,785
Right-of-use assets (Note 9) 25,682
—
Deferred income taxes, net (Note 19) 23,925
—
Other assets, net (Note 10) 5,050
4,584
Non current assets - Natural Gas Storage Assets (Note 4) —
395,389
Total assets $ 700,508
$ 1,073,628

Liabilities and Partners’ Capital

Current installments of finance lease obligations (Note 9) $ 6,059
$ 5,409
Trade and other accounts payable 61,357
64,041
Product exchange payables 7,717
12,103
Due to affiliates 3,367
2,133
Income taxes payable 576
445
Fair value of derivatives (Note 11) 2,069
—
Other accrued liabilities (Note 10) 29,160
24,380
Current liabilities - Natural Gas Storage Assets (Note 4) —
3,240
Total current liabilities 110,305
111,751

Long-term debt, net (Note 8 ) 596,398
656,459
Finance lease obligations (Note 9) 4,259
6,272
Operating lease liabilities (Note 9) 17,913
—
Other long-term obligations 8,747
10,045
Non current liabilities - Natural Gas Storage Assets (Note 4) —
669
Total liabilities 737,622
785,196

Commitments and contingencies (Note 16)

Partners’ capital (deficit) (Note 12) (37,114 ) 288,432
Total partners’ capital (deficit) (37,114 ) 288,432
Total liabilities and partners' capital $ 700,508
$ 1,073,628



	March 31, 2020			December 31, 2019
	(Unaudited)			(Audited)
Assets
Cash	$	68		$	2,856
Accounts and other receivables, less allowance for doubtful accounts of $498 and $532, respectively	59,073			87,254
Inventories	46,830			62,540
Due from affiliates	15,100			17,829
Fair value of derivatives	2			—
Other current assets	6,396			5,833
Assets held for sale	—			5,052
Total current assets	127,469			181,364

Property, plant and equipment, at cost	893,619			884,728
Accumulated depreciation	(479,301		)	(467,531		)
Property, plant and equipment, net	414,318			417,197

Goodwill	17,705			17,705
Right-of-use assets	25,771			23,901
Deferred income taxes, net	23,136			23,422
Other assets, net	3,800			3,567
Total assets	$	612,199		$	667,156

Liabilities and Partners’ Capital (Deficit)
Current installments of long-term debt and finance lease obligations	$	369,238		$	6,758
Trade and other accounts payable	52,713			64,802
Product exchange payables	4,772			4,322
Due to affiliates	1,304			1,470
Income taxes payable	605			472
Fair value of derivatives	—			667
Other accrued liabilities	20,282			28,789
Total current liabilities	448,914			107,280

Long-term debt, net	165,543			569,788
Finance lease obligations	526			717
Operating lease liabilities	17,810			16,656
Other long-term obligations	8,907			8,911
Total liabilities	641,700			703,352

Commitments and contingencies
Partners’ capital (deficit)	(29,501		)	(36,196		)
Total partners’ capital (deficit)	(29,501		)	(36,196		)
Total liabilities and partners' capital (deficit)	$	612,199		$	667,156

See accompanying notes to consolidated and condensed financial statements.

Financial information for 2018 has been revised to include results attributable to MTI acquired from Martin Resource Management Corporation. See Note 1 – Nature of Operations and Basis of Presentation.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars and units in thousands, except per unit amounts)


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018¹			2019			2018¹			2020			2019
Revenues:
Terminalling and storage *	$	21,377		$	24,068		$	44,481		$	48,115		$	20,474		$	23,104
Transportation *	41,321			37,206			79,116			71,565			38,941			37,795
Sulfur services	2,858			2,787			5,717			5,574			2,915			2,859
Product sales: *
Natural gas liquids	57,398			90,625			173,872			249,787			82,211			116,474
Sulfur services	32,998			35,684			61,732			70,584			25,408			28,734
Terminalling and storage	31,371			36,794			62,438			73,257			28,934			31,067
	121,767			163,103			298,042			393,628			136,553			176,275
Total revenues	187,323			227,164			427,356			518,882			198,883			240,033

Costs and expenses:
Cost of products sold: (excluding depreciation and amortization)
Natural gas liquids *	53,546			84,542			159,736			223,165			69,835			106,190
Sulfur services *	22,124			26,886			41,820			49,104			15,295			19,696
Terminalling and storage *	26,118			32,286			52,989			64,266			23,680			26,871
	101,788			143,714			254,545			336,535			108,810			152,757
Expenses:
Operating expenses *	53,579			52,915			105,428			105,741			51,282			51,849
Selling, general and administrative *	10,226			8,894			20,426			18,833			10,462			10,200
Depreciation and amortization	15,087			16,946			29,988			32,258			15,239			14,901
Total costs and expenses	180,680			222,469			410,387			493,367			185,793			229,707

Other operating loss	(1,633		)	(206		)	(2,353		)	(198		)
Other operating income (loss), net													2,510			(720		)
Operating income	5,010			4,489			14,616			25,317			15,600			9,606

Other income (expense):
Interest expense, net	(14,986		)	(13,815		)	(28,657		)	(26,545		)	(9,925		)	(13,671		)
Gain on retirement of senior unsecured notes													3,484			—
Other, net	1			5			4			5			3			3
Total other expense	(14,985		)	(13,810		)	(28,653		)	(26,540		)	(6,438		)	(13,668		)

Net loss before taxes	(9,975		)	(9,321		)	(14,037		)	(1,223		)
Net income (loss) before taxes													9,162			(4,062		)
Income tax expense	(639		)	(132		)	(1,335		)	(281		)	(347		)	(696		)
Loss from continuing operations	(10,614		)	(9,453		)	(15,372		)	(1,504		)
Income (loss) from discontinued operations, net of income taxes	(180,568		)	4,927			(179,466		)	12,014
Income (loss) from continuing operations													8,815			(4,758		)
Income from discontinued operations, net of income taxes													—			1,102
Net income (loss)	(191,182		)	(4,526		)	(194,838		)	10,510			8,815			(3,656		)
Less general partner's interest in net (income) loss	3,824			145			3,897			(111		)	(176		)	73
Less pre-acquisition (income) allocated to the general partner	—			(2,720		)	—			(4,938		)
Less (income) loss allocable to unvested restricted units	65			6			67			(2		)	(55		)	2
Limited partners' interest in net income (loss)	$	(187,293	)	$	(7,095	)	$	(190,874	)	$	5,459		$	8,584		$	(3,581	)

See accompanying notes to consolidated and condensed financial statements.

¹ Financial information for 2018 has been revised to include results attributable to MTI acquired from Martin Resource Management Corporation. See Note 1 – Nature of Operations and Basis of Presentation.

*Related Party Transactions Shown Below

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars and units in thousands, except per unit amounts)

*Related Party Transactions Included Above


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2019		2018¹		2019		2018¹		2020		2019
Revenues:*
Terminalling and storage	$	17,477	$	20,485	$	36,449	$	40,493	$	15,874	$	18,972
Transportation	5,856		7,066		11,499		13,759		5,894		5,643
Product Sales	286		377		707		1,001		92		421
Costs and expenses:*
Cost of products sold: (excluding depreciation and amortization)
Sulfur services	2,884		2,492		5,458		5,340		2,767		2,574
Terminalling and storage	7,203		7,089		13,112		12,668		5,777		5,909
Expenses:
Operating expenses	24,407		23,758		46,943		46,846		21,771		22,536
Selling, general and administrative	8,558		6,692		17,093		14,618		8,312		8,535

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars and units in thousands, except per unit amounts)


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2019			2018¹			2019			2018¹			2020		2019
Allocation of net income (loss) attributable to:
Limited partner interest:
Continuing operations	$	(10,398	)	$	(11,857	)	$	(15,060	)	$	(6,426	)	$	8,584	$	(4,660	)
Discontinued operations	(176,895		)	4,762			(175,814		)	11,885			—		1,079
	$	(187,293	)	$	(7,095	)	$	(190,874	)	$	5,459		$	8,584	$	(3,581	)
General partner interest:
Continuing operations	$	(212	)	$	(303	)	$	(307	)	$	(16	)	$	176	$	(95	)
Discontinued operations	(3,612		)	158			(3,590		)	127			—		22
	$	(3,824	)	$	(145	)	$	(3,897	)	$	111		$	176	$	(73	)

Net income (loss) per unit attributable to limited partners:
Basic:
Continuing operations	$	(0.27	)	$	(0.31	)	$	(0.39	)	$	(0.17	)	$	0.22	$	(0.12	)
Discontinued operations	(4.55		)	0.13			(4.52		)	0.31			—		0.03
	$	(4.82	)	$	(0.18	)	$	(4.91	)	$	0.14		$	0.22	$	(0.09	)
Weighted average limited partner units - basic	38,871			38,722			38,912			38,829			38,641		38,682
Diluted:
Continuing operations	$	(0.27	)	$	(0.31	)	$	(0.39	)	$	(0.17	)	$	0.22	$	(0.12	)
Discontinued operations	(4.55		)	0.13			(4.52		)	0.31			—		0.03
	$	(4.82	)	$	(0.18	)	$	(4.91	)	$	0.14		$	0.22	$	(0.09	)
Weighted average limited partner units - diluted	38,871			38,722			38,912			38,834			38,644		38,682

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF CAPITAL (DEFICIT)

(Unaudited)

(Dollars in thousands)


				Partners’ Capital																Partners’ Capital (Deficit)
	Parent Net Investment¹			Common Limited					General Partner Amount							Parent Net Investment				Common Limited						General Partner Amount
	Parent Net Investment¹			Units		Amount						Total				Parent Net Investment			Units			Amount				General Partner Amount			Total
Balances - January 1, 2018	$	24,240		38,444,612		$	290,927		General Partner Amount	$	7,314			$	322,481
Net income	4,938			—		5,461			111				10,510
Issuance of common units, net	—			—		(118		)	—				(118		)
Issuance of restricted units	—			633,425		—			—				—
Forfeiture of restricted units	—			(7,000	)	—			—				—
Cash distributions	—			—		(38,433		)	(784		)		(39,217		)
Deemed contribution to Martin Resource Management Corporation	(8,857		)	—		—			—				(8,857		)
Unit-based compensation	—			—		520			—				520
Purchase of treasury units	—			(18,800	)	(273		)	—				(273		)
Excess purchase price over carrying value of acquired assets	—			—		(26		)	—				(26		)
Balances - June 30, 2018	$	20,321		39,052,237		$	258,058		$	6,641			$	285,020

Balances - January 1, 2019	$	23,720		39,032,237		$	258,085		$	6,627			$	288,432		$	23,720			39,032,237			$	258,085		$	6,627			$	288,432
Net loss	—			—		(190,941		)	(3,897		)		(194,838		)	—				—			(3,583		)	(73		)		(3,656		)
Issuance of common units, net of issuance related costs	—			—		(259		)	—				(259		)
Issuance of restricted units	—			16,944		—			—				—			—				16,944			—			—				—
Forfeiture of restricted units	—			(154,288	)	—			—				—			—				(118,087	)		—			—				—
Cash distributions	—			—		(28,851		)	(589		)		(29,440		)	—				—			(19,221		)	(392		)		(19,613		)
Unit-based compensation	—			—		715			—				715			—				—			352			—				352
Purchase of treasury units																—				(31,504	)		(392		)	—				(392		)
Excess purchase price over carrying value of acquired assets	—			—		(102,393		)	—				(102,393		)	—				—			(102,393		)	—				(102,393		)
Deferred taxes on acquired assets and liabilities	—			—		24,781			—				24,781			—				—			24,781			—				24,781
Contribution to parent	(23,720		)	—		—			—				(23,720		)	(23,720		)		—			—			—				(23,720		)
Balances - March 31, 2019																$	—			38,899,590			$	157,629		$	6,162			$	163,791

Balances - January 1, 2020																$	—			38,863,389			$	(38,342	)	$	2,146			$	(36,196	)
Net income																—				—			8,639			176				8,815
Issuance of restricted units																—				81,000			—			—				—
Forfeiture of restricted units																—				(84,134	)		—			—				—
Cash distributions																—				—			(2,408		)	(49		)		(2,457		)
Unit-based compensation																—				—			346			—				346
Purchase of treasury units	—			(31,504	)	(392		)	—				(392		)	—				(7,748	)		(9		)	—				(9		)
Balances - June 30, 2019	$	—		38,863,389		$	(39,255	)	$	2,141			$	(37,114	)
Balances - March 31, 2020																$	—			38,852,507			$	(31,774	)	$	2,273			$	(29,501	)

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2019			2018¹			2020			2019
Cash flows from operating activities:
Net income (loss)	$	(194,838	)	$	10,510		$	8,815		$	(3,656	)
Less: (Income) loss from discontinued operations, net of income taxes	179,466			(12,014		)
Net loss from continuing operations	(15,372		)	(1,504		)
Less: (Income) from discontinued operations, net of income taxes							—			(1,102		)
Net income (loss) from continuing operations							8,815			(4,758		)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	29,988			32,258			15,239			14,901
Amortization of deferred debt issuance costs	2,478			1,689
Amortization and write-off of deferred debt issuance costs							492			895
Amortization of premium on notes payable	(153		)	(153		)	(77		)	(77		)
Deferred taxes	856			—
Loss on sale of property, plant and equipment	2,353			198
Derivative loss (gain)	2,322			(2,069		)
Net cash received (paid) for commodity derivatives	(249		)	2,569
Deferred income tax expense							286			369
Loss on sale of property, plant and equipment, net							190			720
Gain on retirement of senior unsecured notes							(3,484		)	—
Derivative (income) loss							(33		)	239
Net cash paid for commodity derivatives							(636		)	(385		)
Unit-based compensation	715			520			346			352
Change in current assets and liabilities, excluding effects of acquisitions and dispositions:
Accounts and other receivables	28,073			44,772			26,413			13,451
Product exchange receivables	59			(145		)	—			(15		)
Inventories	3,044			(15,482		)	15,710			15,235
Due from affiliates	(15,947		)	3,241			2,729			(7,384		)
Other current assets	(3,061		)	60			(1,413		)	(102		)
Trade and other accounts payable	(2,800		)	(16,155		)	(10,440		)	10,881
Product exchange payables	(4,386		)	1,196			450			1,930
Due to affiliates	428			(495		)	(166		)	1,154
Income taxes payable	131			(103		)	133			544
Other accrued liabilities	(3,043		)	(6,158		)	(9,118		)	(11,177		)
Change in other non-current assets and liabilities	(693		)	931			(547		)	(1,351		)
Net cash provided by continuing operating activities	24,743			45,170			44,889			35,422
Net cash provided by discontinued operating activities	7,770			23,999			—			5,181
Net cash provided by operating activities	32,513			69,169			44,889			40,603

Cash flows from investing activities:
Payments for property, plant and equipment	(14,102		)	(22,450		)	(12,260		)	(6,637		)
Acquisitions	(23,720		)	—			—			(23,720		)
Payments for plant turnaround costs	(4,742		)	—			(150		)	(3,827		)
Proceeds from involuntary conversion of property, plant and equipment							1,768			—
Proceeds from sale of property, plant and equipment	659			500			4,347			574
Net cash used in continuing investing activities	(41,905		)	(21,950		)	(6,295		)	(33,610		)
Net cash provided by (used in) discontinued investing activities	209,155			(15,139		)
Net cash provided by (used in) investing activities	167,250			(37,089		)
Net cash used in discontinued investing activities							—			(336		)
Net cash used in investing activities							(6,295		)	(33,946		)

Cash flows from financing activities:
Payments of long-term debt and finance lease obligations	(362,672		)	(199,765		)	(114,724		)	(89,255		)
Proceeds from long-term debt	298,000			218,000			76,000			205,000
Proceeds from issuance of common units, net of issuance related costs	(259		)	(118		)
Purchase of treasury units	(392		)	(273		)	(9		)	(392		)
Deemed distribution to Martin Resource Management Corporation	—			(8,857		)
Payment of debt issuance costs	(386		)	(1,240		)	(192		)	(77		)
Excess purchase price over carrying value of acquired assets	(102,393		)	(26		)	—			(102,393		)
Cash distributions paid	(29,440		)	(39,217		)	(2,457		)	(19,613		)
Net cash used in financing activities	(197,542		)	(31,496		)	(41,382		)	(6,730		)

Net increase in cash	2,221			584
Net decrease in cash							(2,788		)	(73		)
Cash at beginning of period	300			89			2,856			300
Cash at end of period	$	2,521		$	673		$	68		$	227
Non-cash additions to property, plant and equipment	$	2,248		$	1,811		$	2,142		$	2,001

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

~~June 30, 2019~~March 31, 2020

(Unaudited)

NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Martin Midstream Partners L.P. (the "Partnership") is a publicly traded limited partnership with a diverse set of operations focused primarily in the United States ("U.S.") Gulf Coast region. Its ~~four~~4 primary business lines include: terminalling, processing, storage and packaging services for petroleum products and by-products including the refining of naphthenic crude oil; land and marine transportation services for petroleum products and by-products, chemicals, and specialty products; sulfur and sulfur-based products processing, manufacturing, marketing and distribution; and natural gas liquids marketing, distribution, and transportation services.

The Partnership’s unaudited consolidated and condensed financial statements have been prepared in accordance with the requirements of Form 10-Q and U.S. Generally Accepted Accounting Principles ("U.S. GAAP") for interim financial reporting. Accordingly, these financial statements have been condensed and do not include all of the information and footnotes required by U.S. GAAP for annual audited financial statements of the type contained in the Partnership’s annual reports on Form 10-K. In the opinion of the management of the Partnership’s general partner, all adjustments and elimination of significant intercompany balances necessary for a fair presentation of the Partnership’s financial position, results of operations, and cash flows for the periods shown have been made. All such adjustments are of a normal recurring nature. Results for such interim periods are not necessarily indicative of the results of operations for the full year. These financial statements should be read in conjunction with the Partnership’s audited consolidated financial statements and notes thereto included in the Partnership’s annual report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the Securities and Exchange Commission (the "SEC") on February 19, 2019. On May 21, 2019, Part II, Items 6, 7, and 8 of the Partnership's Form 10-K for the year ended December 31, 2018, filed with the SEC on February 19, 2019, was updated on Form 8-K/A to reflect the acquisition of Martin Transport, Inc. ("MTI") as if the Partnership owned these assets for the periods presented. See below "Acquisition of Martin Transport, Inc." within this Note 1 for more information.14, 2020.

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated and condensed financial statements in conformity with U.S. GAAP. Actual results could differ from those estimates.

Divestiture of Natural Gas Storage Assets. On June 28, 2019, the Partnership completed the sale of its membership interests in Arcadia Gas Storage, LLC, Cadeville Gas Storage LLC, Monroe Gas Storage Company, LLC and Perryville Gas Storage LLC (the ~~“Natural~~"Natural Gas Storage ~~Assets”~~Assets") to Hartree Cardinal Gas, LLC ("Hartree"), a subsidiary of Hartree Bulk Storage, LLC. The Natural Gas Storage Assets consist of approximately 50 billion cubic feet of working capacity located in northern Louisiana and Mississippi. In consideration of the sale of the Natural Gas Storage Assets, the Partnership received cash proceeds of $210,067 after transaction fees and ~~expenses, subject to final post closing adjustments.~~expenses. The net proceeds were used to reduce outstanding borrowings under the Partnership's revolving credit facility. The Partnership ~~has~~ concluded the disposition ~~represents~~represented a strategic shift ~~and will have~~which had a major effect on its financial results going forward. As a result, the Partnership has presented the results of operations and cash flows relating to the Natural Gas Storage Assets as discontinued operations for the three ~~and six~~ months ended ~~June 30, 2019 and 2018.~~March 31, 2019. See Note 43 for more information.

~~Acquisition~~Impact of ~~Martin Transport, Inc.~~COVID-19 Pandemic. ~~On January 2,~~A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the ~~Partnership acquired all~~world, including to the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic. Due to the economic impacts of the ~~issued and outstanding equity interests~~COVID-19 pandemic, the markets have experienced a decline in oil prices in response to oil demand concerns. These concerns have been further exacerbated by the price war among members of ~~MTI from Martin Resource Management Corporation. MTI operates a fleet~~the Organization of ~~tank trucks providing transportation of petroleum products, liquid petroleum gas, chemicals, sulfur~~Petroleum Exporting Countries and other ~~products, as well as owns 23 terminals located throughout~~non-OPEC producer nations during the ~~Gulf Coast~~first quarter 2020 and ~~Southeastern~~global storage considerations. Travel restrictions and stay-at-home orders implemented by governments in many regions ofand countries across the globe, including the United ~~States.~~States, have greatly impacted the demand for refined products resulting in a significant reduction in refinery utilization.

The ~~acquisition of MTI was considered a transfer of net assets between entities under common control. As a result,~~COVID-19 pandemic has impacted the ~~acquisition of MTI was recorded at amounts based on the historical carrying value of these assets at January 1, 2019,~~Partnership's 2020 performance to date, and the Partnership ~~is required~~expects to ~~update its historical financial statements~~continue to ~~include~~experience the ~~activities~~impacts of ~~MTI~~COVID-19 throughout the remainder of 2020 as a result of continued reduction in refined product demand across the industries the Partnership serves. The extent to which the duration and severity of the date of common control. See Note 3 for more information. The Partnership’s accompanying historical financial statements have been retrospectively updated to reflect the effects on financial position, cash flows andpandemic impacts our business, results of operations, ~~attributable to~~and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted at this time. Accordingly, it is possible that the ~~activities~~impact of ~~MTI as if~~ the ~~Partnership owned these assets~~COVID-19 pandemic could have a material adverse effect on the Partnership's results of operations, financial position and cash flows for the ~~periods presented. See Note 3 for separate results~~year ended December 31, 2020, including the recoverability of ~~MTI for~~long-lived assets and goodwill, the ~~three~~valuation of inventory, and ~~six months ended June 30, 2018. Net income attributable to MTI for periods prior to~~ the ~~Partnership’s acquisition~~amount of ~~the assets is not allocated to the limited partners for purposes of calculating net income per limited partner unit. See Note 12.~~expected credit losses.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

~~June 30, 2019~~March 31, 2020

(Unaudited)

~~Divestiture of WTLPG Partnership Interest.On July 31, 2018,~~Management considered the Partnership completed the sale of its 20 percent non-operating interest in West Texas LPG Pipeline L.P. ("WTLPG") to ONEOK, Inc. (“ONEOK”). WTLPG owns an approximate 2,300 mile common-carrier pipeline system that primarily transports NGLs from New Mexico and Texas to Mont Belvieu, Texas for fractionation. A wholly-owned subsidiary of ONEOK, Inc. is the operatorimpact of the ~~assets. The Partnership has concluded~~COVID-19 pandemic on the ~~disposition represents a strategic shift~~assumptions and ~~will have a major effect on its~~estimates used in the preparation of the financial ~~results going forward.~~statements. Management identified triggering events requiring the performance of impairment testing of long-lived assets and goodwill related to both the performance the Partnership's unit price during the first quarter of 2020 and certain of the Partnership's businesses that are sensitive to reductions in refined product demand and refinery utilization. As a result, the Partnership ~~has presented~~recorded impairment charges of $4.4 million related to long-lived assets. See Note 3 for more information. No impairments were identified related to goodwill. A sustained reduction in refinery demand and utilization could lead to future asset impairments as well as adversely affect access to capital and financing to be able to meet future obligations. Management also assessed the extent to which the current macroeconomic events brought about by COVID-19 and significant declines in refined product demand impacted the valuation of expected credit losses on accounts receivable and certain inventory items or resulted in modifications to any significant contracts. Ultimately the results of ~~operations and cash flows relating to its equity method investment in WTLPG~~these assessments did not have a material impact on the Partnership's results as ~~discontinued operations for the three and six months ended June 30, 2018. See Note 4 for more information.~~of March 31, 2020.

NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS

~~In June 2018,~~During the ~~FASB issued ASU 2018-07, Compensation - Stock Compensation: Improvements to Non-employee Share-Based Payment Accounting, which will expand~~first quarter of 2020, the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The standard is effective for Partnership's financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Partnership adopted ~~this~~Accounting Standards Update (“ASU”) 2016-13, "Financial Instruments - Credit Losses," which required the Partnership to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaced the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. Adoption of the new standard ~~effective January 1, 2019. The result of this adoption~~ did not have a material impact on the ~~Partnership's~~Partnership’s consolidated ~~and condensed~~ financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. Lessor accounting under the new standard is substantially unchanged and the Partnership believes substantially all of our leases will continue to be classified as operating leases under the new standard. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. The update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those reporting periods, with early adoption permitted. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, ~~Targeted Improvements to Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 842~~, which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the date of initial application of transition. The Partnership adopted this ASU on January 1, 2019, electing the transition option provided under ASU 2018-11. Consequently, financial information was not updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019.

The new standard provides a number of optional practical expedients in transition. The Partnership elected the "package of practical expedients", which permits the Partnership not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The new standard also provides practical expedients for an entity’s ongoing accounting. The Partnership elected the short-term lease recognition exemption for all leases that qualify. This means, for those assets that qualify, the Partnership did not recognize Right-of-Use ("ROU") assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. See Note 9 for more information.

~~NOTE 3. ACQUISITIONS~~

~~Martin Transport, Inc. Stock Purchase Agreement.~~ On January 2, 2019, the Partnership acquired all of the issued and outstanding equity interests of MTI, a wholly-owned subsidiary of Martin Resource Management Corporation which operates a fleet of tank trucks providing transportation of petroleum products, liquid petroleum gas, chemicals, sulfur and other products, as well as owns 23 terminals located throughout the Gulf Coast and Southeastern regions of the United States for total consideration as follows:

Purchase price¹
$ 135,000
Plus: Working Capital Adjustment 2,795
Less: Finance lease obligations assumed (11,682 )
Cash consideration paid $ 126,113

¹~~The stock purchase agreement also includes a $10,000 earn-out based on certain performance thresholds.~~

~~The transaction closed on January 2, 2019 and was effective as of January 1, 2019 and was funded with borrowings under the Partnership's revolving credit facility.~~

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

This acquisition is considered a transfer of net assets between entities under common control. The acquisition of MTI was recorded at the historical carrying value of the assets at the acquisition date, which were as follows:

Accounts receivable, net $ 11,724
Inventories 1,138
Due from affiliates 1,042
Other current assets 897
Property, plant and equipment, net 25,383
Goodwill 489
Other noncurrent assets 362
Current installments of finance lease obligations (5,409 )
Accounts payable (2,564 )
Due to affiliates (482 )
Other accrued liabilities (2,588 )
Finance lease obligations, net of current installments (6,272 )
Historical carrying value of assets acquired $ 23,720

~~The excess purchase price over the historical carrying value of the assets at the acquisition date was $102,393 and was recorded as an adjustment to "Partners' capital".~~

The separate results of operations related to MTI for the three and six months ended June 30, 2018 which were recast as part of the Partnership's consolidated and condensed statements of operations were as follows:

Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
Transportation revenue $ 30,385
$ 60,294

Operating expenses 25,681
51,217
Selling, general and administrative 1,364
2,704
Depreciation and amortization 739
1,519
Total costs and expenses 27,784
55,440

Other operating income, net 164
174
Operating income 2,765
5,028

Other income:
Interest expense (49 ) (94 )
Other, net 4
4

Income before income taxes 2,720
4,938
Income taxes —
—
Net income $ 2,720
$ 4,938

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

NOTE 4.3. DIVESTITURES AND DISCONTINUED OPERATIONS

~~Discontinued Operations~~

Divestiture of Natural Gas Storage Assets. On June 28, 2019, the Partnership completed the sale of the Natural Gas Storage Assets to Hartree, a subsidiary of Hartree Bulk Storage, LLC. The Natural Gas Storage Assets consist of approximately 50 billion cubic feet of working capacity located in northern Louisiana and Mississippi. In consideration of the sale of these assets, the Partnership received cash proceeds of $210,067 after transaction fees and ~~expenses, subject to final post closing adjustments.~~expenses. The net proceeds were used to reduce outstanding borrowings under the Partnership's revolving credit facility. The Partnership has concluded the disposition represents a strategic shift and will have a major effect on its financial results going forward. As a result, the Partnership has presented the results of operations and cash flows relating to the Natural Gas Storage Assets as discontinued operations for the three ~~and six~~ months ended ~~June 30, 2019 and 2018.~~March 31, 2019.

The operating results, which are included in income ~~(loss)~~ from discontinued operations, were as follows:



	Three Months Ended March 31, 2019

Total revenues	$	10,934
Total costs and expenses and other, net, excluding depreciation and amortization	(5,751		)
Depreciation and amortization	(4,081		)
Income from discontinued operations before income taxes	1,102
Income tax expense	—
Income from discontinued operations, net of income taxes	$	1,102

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018

Total revenues $ 11,902
$ 13,804
$ 22,836
$ 29,160
Total costs and expenses and other, net, excluding depreciation and amortization (9,609 ) (5,110 ) (15,360 ) (10,233 )
Depreciation and amortization (4,080 ) (4,684 ) (8,161 ) (9,362 )
Other operating income¹
(178,781 ) (120 ) (178,781 ) (120 )
Income (loss) from discontinued operations before income taxes (180,568 ) 3,890
(179,466 ) 9,445
Income tax expense —
—
—
—
Income (loss) from discontinued operations, net of income taxes $ (180,568 ) $ 3,890
$ (179,466 ) $ 9,445

¹~~The three and six months ended June 30, 2019 includes a loss on the disposition of the Natural Gas Storage Assets of $178,781.~~

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

~~June 30, 2019~~March 31, 2020

(Unaudited)

As the disposition of the Natural Gas Storage Assets was completed prior to meeting the criteria in ASC 210-20-14 to be classified as held for sale, the Partnership has adjusted the Balance Sheet as of December 31, 2018 to present separately the assets and liabilities of the Natural Gas Storage Assets. See table below for more information.

December 31, 2018

Accounts and other receivables $ 7,269
Inventories 1,942
Other current assets 217
Current assets - Natural Gas Storage Assets $ 9,428

Property, plant and equipment, at cost $ 425,138
Accumulated depreciation (49,238 )
Intangibles and other assets, net 19,489
Non-current assets - Natural Gas Storage Assets $ 395,389

Trade and other accounts payable $ 1,682
Product exchange payable 1,134
Due to affiliates 2
Other accrued liabilities 422
Current liabilities - Natural Gas Storage Assets $ 3,240

Other long-term obligations $ 669
Non-current liabilities - Natural Gas Storage Assets $ 669

~~Divestiture of WTLPG Partnership Interest.~~ On July 31, 2018, the Partnership completed the sale of its 20 percent non-operating interest in WTLPG to ONEOK. WTLPG owns an approximate 2,300 mile common-carrier pipeline system that primarily transports NGLs from New Mexico and Texas to Mont Belvieu, Texas for fractionation. A wholly-owned subsidiary of ONEOK, Inc. is the operator of the assets. In consideration for the sale of the Natural Gas Storage Assets, the Partnership received cash proceeds of $193,705, after transaction fees and expenses. The proceeds from the sale were used to reduce outstanding borrowings under the Partnership's revolving credit facility. The Partnership has concluded the disposition represents a strategic shift and will have a major effect on its financial results going forward. As a result, the Partnership has presented the results of operations and cash flows relating to its equity method investment in WTLPG as discontinued operations for the three and six months ended June 30, 2018.

~~The operating results, which are included in income from discontinued operations, were as follows:~~

Three Months Ended June 30, 2018 Six Months Ended June 30, 2018

Total costs and expenses and other, net, excluding depreciation and amortization¹
$ (94 ) $ (157 )
Equity in earnings 1,131
2,726
Income from discontinued operations before income taxes 1,037
2,569
Income tax expense —
—
Income from discontinued operations, net of income taxes $ 1,037
$ 2,569

¹ ~~These expenses represent direct operating expenses as a result of the Partnership's ownership interest in WTLPG.~~

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

Long-Lived Assets Held for Sale

At ~~June 30, 2019 and~~ December 31, ~~2018,~~2019, certain terminalling and storage and ~~marine~~ transportation assets met the criteria to be classified as held for sale in accordance with ASC 360-10 and are presented at the lower of the assets' carrying amount or fair value less cost to sell by segment in current assets ~~as follows:~~

June 30, 2019 December 31, 2018

Terminalling and storage $ 3,552
$ 3,552
Transportation 1,580
2,100
Assets held for sale $ 5,132
$ 5,652

in the table below. These assets are considered non-core assets to the Partnership's operations and did not qualify for discontinued operations presentation under the guidance of ASC 205-20.



	March 31, 2020		December 31, 2019

Terminalling and storage	$	—	$	3,552
Transportation	—		1,500
Assets held for sale	$	—	$	5,052

In the first quarter of 2020, the Partnership identified a triggering event related to a decline in the fair value related to the assets classified as held for sale at December 31, 2019. As a result, an impairment charge of $3,052 and $1,300 was recorded in the Terminalling and Storage and Transportation segments, respectively, in the first quarter of 2020 and was recorded in "Other operating income (loss)" in the Partnership's Consolidated and Condensed Statements of Operations. At March 31, 2020, the assets previously classified as held for sale no longer met the criteria to be classified as held for sale in accordance with ASC 360-10.

NOTE 5.4. REVENUE

The following table disaggregates our revenue by major source:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Terminalling and storage segment
Lubricant product sales	$	31,371	$	36,794	$	62,438	$	73,257	$	28,934	$	31,067
Throughput and storage	21,377		24,068		44,481		48,115		20,474		23,104
	$	52,748	$	60,862	$	106,919	$	121,372	$	49,408	$	54,171
Natural gas liquids segment
Natural gas liquids product sales	$	57,398	$	90,625	$	173,872	$	249,787	$	82,211	$	116,474
	$	57,398	$	90,625	$	173,872	$	249,787	$	82,211	$	116,474
Sulfur services segment
Sulfur product sales	$	8,204	$	10,479	$	18,156	$	22,316	$	6,481	$	9,952
Fertilizer product sales	24,794		25,205		43,576		48,268		18,927		18,782
Sulfur services	2,858		2,787		5,717		5,574		2,915		2,859
	$	35,856	$	38,471	$	67,449	$	76,158	$	28,323	$	31,593
Transportation segment
Land transportation	$	25,497	$	24,467	$	49,616	$	47,372	$	24,234	$	24,119
Inland transportation	14,188		11,206		26,665		20,898		13,706		12,477
Offshore transportation	1,636		1,533		2,835		3,295		1,001		1,199
	$	41,321	$	37,206	$	79,116	$	71,565	$	38,941	$	37,795

Revenue is measured based on a consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties where the Partnership is acting as an agent. The Partnership recognizes revenue when the Partnership satisfies a performance obligation, which typically occurs when the Partnership transfers control over a product to a customer or as the Partnership delivers a service.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

The following is a description of the principal activities - separated by reportable segments - from which the Partnership generates revenue.

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

Terminalling and Storage Segment

Revenue is recognized for storage contracts based on the contracted monthly tank fixed fee. For throughput contracts, revenue is recognized based on the volume moved through the Partnership’s terminals at the contracted rate. For the Partnership’s tolling agreement, revenue is recognized based on the contracted monthly reservation fee and throughput volumes moved through the facility. When lubricants and drilling fluids are sold by truck or rail, revenue is recognized when title is ~~transfered,~~transferred, which is either upon delivering product to the customer or when the product leaves the Partnership's facility, depending on the specific terms of the contract. Delivery of product is invoiced as the transaction occurs and is generally paid within a month. Throughput and storage revenue in the table above includes non-cancelable revenue arrangements that are under the scope of ASC 842, whereby the Partnership has committed certain Terminalling and Storage assets in exchange for a minimum fee.

Natural Gas Liquids Segment

~~Natural Gas Liquids ("NGL")~~NGL distribution revenue is recognized when product is delivered by truck, rail, or pipeline to the Partnership's NGL customers. Revenue is recognized on title transfer of the product to the customer. Delivery of product is invoiced as the transaction occurs and ~~are~~is generally paid within a month.

Sulfur Services Segment

Revenue from sulfur and fertilizer product sales is recognized when the customer takes title to the product. Delivery of product is invoiced as the transaction occurs and ~~are~~is generally paid within a month. Revenue from sulfur services is recognized as services are performed during each monthly period. The performance of the service is invoiced as the transaction occurs and is generally paid within a month.

Transportation Segment

Revenue related to land transportation is recognized for line hauls based on a mileage rate. For contracted trips, revenue is recognized upon completion of the particular trip. The performance of the service is invoiced as the transaction occurs and is generally paid within a month.

Revenue related to marine transportation is recognized for time charters based on a per day rate. For contracted trips, revenue is recognized upon completion of the particular trip. The performance of the service is invoiced as the transaction occurs and is generally paid within a month.

The table includes estimated minimum revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period. The Partnership applies the practical expedient in ASC 606-10-50-14(a) and does not disclose information about remaining performance obligations that have original expected durations of one year or less.


	2019		2020		2021		2022		2023		Thereafter		Total		2020		2021		2022		2023		2024		Thereafter		Total
Terminalling and storage
Throughput and storage	$	25,189	$	49,355	$	46,642	$	42,735	$	42,854	$	392,624	$	599,399	$	34,599	$	43,273	$	40,394	$	41,605	$	42,854	$	338,339	$	541,064
Sulfur services
Sulfur product sales	8,541		4,898		1,181		295		—		—		14,915		4,236		5,366		3,220		2,175		975		975		16,947
Transportation
Offshore transportation	3,128		—		—		—		—		—		3,128
Total	$	36,858	$	54,253	$	47,823	$	43,030	$	42,854	$	392,624	$	617,442	$	38,835	$	48,639	$	43,614	$	43,780	$	43,829	$	339,314	$	558,011

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

~~June 30, 2019~~March 31, 2020

(Unaudited)

NOTE 6.5. INVENTORIES

Components of inventories at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 were as follows:


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Natural gas liquids	$	35,909	$	30,446	$	3,687	$	19,097
Sulfur	7,648		12,818		4,443		4,586
Fertilizer	11,749		14,208		14,549		15,852
Lubricants	21,817		22,887		20,126		18,925
Other	4,097		3,906		4,025		4,080
	$	81,220	$	84,265	$	46,830	$	62,540

NOTE ~~7. INVESTMENT IN WEST TEXAS LPG PIPELINE L.P.~~

As discussed in Note 4, on July 31, 2018, the Partnership completed the sale of its 20% non-operating interest in WTLPG. Prior to the sale, the Partnership owned a 19.8% limited partnership and 0.2% general partnership interest in WTLPG. A wholly-owned subsidiary of ONEOK is the operator of the assets. WTLPG owns an approximate 2,300 mile common-carrier pipeline system that primarily transports NGLs from New Mexico and Texas to Mont Belvieu, Texas for fractionation. The Partnership recognized its 20% interest in WTLPG as "Investment in WTLPG" on its Consolidated and Condensed Balance Sheets. The Partnership accounted for its ownership interest in WTLPG under the equity method of accounting. As discussed in Note 4, the Partnership sold its 20% non-operating partnership interest to ONEOK on July 31, 2018.

~~Selected financial information for WTLPG during the period of ownership is as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
2018 Revenues Net Income Revenues Net Income
WTLPG $ 23,390
$ 5,653
$ 46,431
$ 13,359

~~NOTE 8. LONG-TERM~~6. DEBT

At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, long-term debt consisted of the following:


	June 30, 2019		December 31, 2018		March 31, 2020			December 31, 2019
$500,000 Revolving credit facility at variable interest rate (5.65%¹ weighted average at June 30, 2019), due March 2020⁴secured by substantially all of the Partnership’s assets, including, without limitation, inventory, accounts receivable, vessels, equipment, fixed assets and the interests in the Partnership’s operating subsidiaries and equity method investees, net of unamortized debt issuance costs of $1,787 and $3,537, respectively²	$	223,213	$	283,463
$400,000 Senior notes, 7.25% interest, net of unamortized debt issuance costs of $1,112 and $1,454, respectively, including unamortized premium of $497 and $650, respectively, issued $250,000 February 2013 and $150,000 April 2014, $26,200 repurchased during 2015, due February 2021, unsecured^2,3	373,185		372,996
$400,000 Revolving credit facility at variable interest rate (3.93%¹ weighted average at March 31, 2020), due August 2023⁴secured by substantially all of the Partnership’s assets, including, without limitation, inventory, accounts receivable, vessels, equipment, fixed assets and the interests in the Partnership’s operating subsidiaries, net of unamortized debt issuance costs of $4,457 and $4,586, respectively²					$	165,543		$	196,414
$400,000 Senior notes, 7.25% interest, net of unamortized debt issuance costs of $599 and $770, respectively, including unamortized premium of $267 and $344, respectively, issued $250,000 February 2013 and $150,000 April 2014, $26,200 repurchased during 2015, $9,344 repurchased during 2020, due February 2021, unsecured^2,3,4,5					364,124			373,374
Total	596,398		656,459		529,667			569,788
Less: current portion	—		—		(364,124		)	—
Total long-term debt, net of current portion	$	596,398	$	656,459	$	165,543		$	569,788

Current installments of finance lease obligations					$	5,114		$	6,758
Finance lease obligations					526			717
Total finance lease obligations					$	5,640		$	7,475

¹ Interest rate fluctuates based on the LIBOR rate plus an applicable margin set on the date of each advance. The margin above LIBOR is set every three months. Indebtedness under the credit facility bears interest at LIBOR plus an applicable margin or the base prime rate plus an applicable margin. All amounts outstanding at ~~June 30, 2019~~March 31, 2020 and December

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30,~~ 31, 2019

~~(Unaudited)~~

~~31, 2018~~ were at LIBOR plus an applicable margin. The applicable margin for revolving loans that are LIBOR loans ranges from ~~2.00%~~2.25% to ~~3.25%~~3.50% and the applicable margin for revolving loans that are base prime rate loans ranges from ~~1.00%~~1.25% to ~~2.25%~~2.50%. The applicable margin for existing LIBOR borrowings at ~~June 30, 2019~~March 31, 2020 is 3.25%. The credit facility contains various covenants which limit the Partnership’s ability to make certain investments and acquisitions; enter into certain agreements; incur indebtedness; sell assets; and make certain amendments to the Partnership's omnibus agreement with Martin Resource Management Corporation (the "Omnibus Agreement"). The Partnership is permitted to make quarterly distributions so long as no event of default exists.

² The Partnership is in compliance with all debt covenants as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.

³The 2021 indenture restricts the Partnership’s ability to sell assets; pay distributions or repurchase units or redeem or repurchase subordinated debt; make investments; incur or guarantee additional indebtedness or issue preferred units; and consolidate, merge or transfer all or substantially all of its assets.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

⁴~~On July 18, 2019,~~As of March 31, 2020, the Partnership’s 7.25% senior unsecured notes due 2021 (the "2021 Notes") were due within twelve months and have therefore been presented as a current liability on the Consolidated and Condensed Balance Sheets at March 31, 2020. The Partnership's amended revolving credit facility includes a provision which accelerates the maturity date to August 19, 2020 if the 2021 Notes are not refinanced in a manner not prohibited by the facility. If the Partnership ~~amended~~is unable to refinance the 2021 Notes and is unable to repay the outstanding borrowings under its revolving credit facility on August 19, 2020, the Partnership's ability to ~~among~~meet its obligations would be adversely affected. Failure to comply with this provision, if not waived, would result in an event of default under the Partnership's revolving credit facility, the potential acceleration of outstanding debt thereunder, and the potential foreclosure on the collateral securing such debt, and could cause a cross-default under other ~~things, extend~~agreements, which could also result in the ~~maturity date~~acceleration of those obligations by the counterparties to those agreements. The Partnership, with support from the Board of Directors, is actively pursuing a variety of strategic alternatives to strengthen the balance sheet and address near term maturities and accordingly, announced on April 6, 2020, the hiring of Stephens Inc. as a financial advisor to assist in the process. Pending the successful implementation of the refinancing, the conditions described above have raised substantial doubt about the Partnership’s ability to continue as a going concern. The Partnership’s management is engaged in ongoing communication with credit providers and presently believes the measures being taken will enable the Partnership to successfully refinance the 2021 Notes and comply with covenants under its revolving credit facility, although no assurance can be given.

⁵ In March 2020, ~~to August 2023 and reduce commitments from $500,000 to $400,000.~~the Partnership repurchased on the open market an aggregate $9,344 of the 2021 Notes. These transactions resulted in a gain on retirement of $3,484.

The Partnership paid cash interest, net of capitalized interest, in the amount of ~~$7,330~~$16,736 and ~~$6,077~~$19,363 for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively. The Partnership paid cash interest, net of capitalized interest, in the amount of $26,693 and $24,955 for the six months ended June 30, 2019 and 2018,~~ respectively. Capitalized interest was $0$4 and ~~$167~~$2 for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively. Capitalized interest was $2 and $328 for the six months ended June 30, 2019 and 2018,~~ respectively.

NOTE 9.7. LEASES

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. In August 2018, the FASB issued ASU 2018-11, ~~Targeted Improvements to ASC 842~~, which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the date of initial application of transition. The Partnership elected the effective date transition method in ASC 842 and adopted the standard beginning January 1, 2019.

The new standard provides a number of optional practical expedients in transition. The Partnership elected the "package of practical expedients", which permits the Partnership not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Partnership also elected the short-term lease recognition exemption, meaning the Partnership does not recognize ROU assets or lease liabilities for all leases that qualify. Lease agreements with lease and non-lease components are combined as a single lease component. Variable lease payments are generally expensed as incurred and include certain index-based changes in rent, certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease.

The adoption of this standard resulted in the recording of approximately $19,047 of additional assets and liabilities on its Consolidated Balance Sheet as of January 1, 2019. The Partnership also acquired certain operating leases in the MTI transaction that resulted in additional assets and liabilities being recorded at the transaction date in accordance with ASU 2016-02 in the amount of $6,505.

The Partnership has numerous operating leases primarily for terminal facilities and transportation and other equipment. The leases generally provide that all expenses related to the equipment are to be paid by the lessee.

Operating lease Right-of-Use ("ROU") assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Partnership's leases do not provide an implicit rate of return, the Partnership uses its imputed collateralized rate based on the information available at commencement date in determining the present value of lease payments. The estimated rate is based on a risk-free rate plus a risk-adjusted margin.

Our leases have remaining lease terms of 1 year to 17 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. The Partnership includes extension periods and excludes termination periods from its lease term if, at commencement, it is reasonably likely that the Partnership will exercise the option.

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

~~The Partnership's future minimum lease obligations as of December 31, 2018 consisted of the following:~~

Operating Leases Finance Leases
Year 1 $ 13,126
$ 6,022
Year 2 7,194
6,068
Year 3 4,262
223
Year 4 2,642
260
Year 5 1,749
—
Thereafter 7,823
—
Total $ 36,796
12,573
Less amounts representing interest costs (892 )
Present value of net minimum capital lease payments 11,681
Less current portion (5,409 )
Present value of net minimum capital lease payments, excluding current portion $ 6,272

The components of lease expense for the three months ~~and six months~~ ended ~~June 30,~~March 31, 2020 and 2019 were as follows:


					Three Months Ended March 31,
	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019		2020		2019
Operating lease cost	$	5,363	$	10,653	$	6,296	$	5,177

Finance lease cost:
Amortization of right-of-use assets	$	688	$	1,310	589		622
Interest on lease liabilities	185		368		110		183
Total finance lease cost	$	873	$	1,678
Short-term lease cost					3,423		2,551
Total lease cost					$	10,418	$	8,533

~~Supplemental cash flow information for the six months ended June 30, 2019 related to leases was as follows:~~

June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases $ 10,631
     Operating cash flows from finance leases 368
     Financing cash flows from finance leases 2,672

Right-of-use assets obtained in exchange for lease obligations:
     Operating leases $ 5,317
     Finance leases 1,309

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

~~June 30, 2019~~March 31, 2020

(Unaudited)

Supplemental balance sheet information related to leases was as follows:


				Three Months Ended March 31,
	June 30, 2019			2020			2019
Operating Leases
Operating lease right-of-use assets	$	25,682		$	25,771		$	23,901

Current portion of operating lease liabilities included in "Other accrued liabilities"	$	8,141		$	8,358		$	7,722
Operating lease liabilities	17,913			17,810			16,656
Total operating lease liabilities	$	26,054		$	26,168		$	24,378

Finance Leases
Property, plant and equipment, at cost	$	15,367		$	13,163		$	14,058
Accumulated depreciation	(2,576		)	(3,634		)	(1,888		)
Property, plant and equipment, net	$	12,791		$	9,529		$	12,170

Current portion finance lease obligations	$	6,059
Current installments of finance lease obligations				$	5,114		$	5,540
Finance lease obligations	4,259			526			4,886
Total finance lease obligations	$	10,318		$	5,640		$	10,426

Weighted Average Remaining Lease Term (years)
Operating leases	6.33
Finance leases	1.39
Weighted Average Discount Rate
Operating leases	5.26		%
Finance leases	6.89		%

The Partnership’s future minimum lease obligations as of ~~June 30, 2019~~March 31, 2020 consist of the following:


	Operating Leases			Finance Leases			Operating Leases			Finance Leases
Year 1	$	9,351		$	6,558		$	9,519		$	5,307
Year 2	6,426			4,015			7,113			336
Year 3	4,196			223			4,379			213
Year 4	2,594			149			1,978			—
Year 5	1,393			—			1,115			—
Thereafter	7,330			—			6,564			—
Total	$	31,290		$	10,945		$	30,668		$	5,856
Less amounts representing interest costs	(5,236		)	(627		)	(4,500		)	(216		)
Total lease liability	$	26,054		$	10,318		$	26,168		$	5,640

As of June 30, 2019, we have additional operating leases, primarily for railcars, that have not yet commenced of $2,003. These operating leases will commence during the third quarter of 2019 with lease terms of 3-5 years.

~~Rent expense for continuing operating leases for the three and six months ended June 30, 2018 was $5,869 and $12,235, respectively.~~

~~Lessor accounting under the new standard is substantially unchanged and all of the Partnership's leases will continue to be classified as operating leases under the new standard.~~

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

The Partnership has non-cancelable revenue arrangements that are under the scope of ASC 842 whereby we have committed certain terminalling and storage assets in exchange for a minimum fee. Future minimum revenues the Partnership expects to receive under these non-cancelable arrangements as of ~~June 30, 2019,~~March 31, 2020 are as follows: ~~2019 - $11,003;~~ 2020 - ~~$15,434;~~$14,386; 2021 - ~~$11,986;~~$14,019; 2022 - ~~$10,971;~~$13,004; 2023 - ~~$10,576;~~$12,609; 2024 - $12,609; subsequent years - ~~$58,128.~~$49,414.

NOTE ~~10.~~8. SUPPLEMENTAL BALANCE SHEET INFORMATION

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

Components of "Other accrued liabilities" were as follows:


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Accrued interest	$	10,467	$	10,735	$	3,538	$	10,761
Asset retirement obligations	—		2,721		—		25
Property and other taxes payable	4,523		5,751		2,803		5,411
Accrued payroll	3,703		3,110		3,944		3,011
Operating lease liabilities	8,141		—		8,358		7,722
Other	2,326		2,063		1,639		1,859
	$	29,160	$	24,380	$	20,282	$	28,789

The schedule below summarizes the changes in our asset retirement obligations:


	June 30, 2019			March 31, 2020

Beginning asset retirement obligations	$	12,429		$	8,936
Additions to asset retirement obligations				379
Accretion expense	218			102
Liabilities settled	(3,900		)	(510		)
Ending asset retirement obligations	8,747			8,907
Current portion of asset retirement obligations¹	—			—
Long-term portion of asset retirement obligations²	$	8,747		$	8,907

¹The current portion of asset retirement obligations is included in "Other accrued liabilities" on the Partnership's Consolidated and Condensed Balance Sheets.

²The non-current portion of asset retirement obligations is included in "Other long-term obligations" on the Partnership's Consolidated and Condensed Balance Sheets.

NOTE ~~11.~~9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Partnership’s revenues and cost of products sold are materially impacted by changes in NGL prices. Additionally, the Partnership's results of operations are materially impacted by changes in interest rates. In an effort to manage its exposure to these risks, the Partnership periodically enters into various derivative instruments, including commodity and interest rate hedges. All derivatives and hedging instruments are non-hedge derivatives and are included on the balance sheet as an asset or a liability measured at fair value and changes in fair value are recognized as gains and losses in earnings of the periods in which they occur.

(a) Commodity Derivative Instruments

The Partnership from time to time has used derivatives to manage the risk of commodity price fluctuation. Commodity risk is the adverse effect on the value of a liability or future purchase that results from a change in commodity price. The Partnership monitors and manages the commodity market risk associated with potential commodity risk

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

exposure. In addition, the Partnership has focused on utilizing counterparties for these transactions whose financial condition is appropriate for the credit risk involved in each specific transaction. The Partnership has entered into hedging transactions as of ~~June 30, 2019~~March 31, 2020 to protect a portion of its commodity price risk exposure. These hedging arrangements are in the form of swaps for NGLs. At ~~June 30, 2019,~~March 31, 2020, the Partnership has instruments totaling a gross notional quantity of ~~370,000~~25,000 barrels settling during the ~~period from July 1, 2019 through September 30, 2019.~~month of April 2020. At December 31, ~~2018,~~2019, the Partnership had instruments totaling a gross notional quantity of ~~55,000~~452,000 barrels settling during the period from January 31, ~~2019~~2020 through February ~~28, 2019.~~29, 2020. These instruments settle against the applicable pricing source for each grade and location.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

(b) Interest Rate Derivative Instruments

The Partnership is exposed to market risks associated with interest rates. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. From time to time, the Partnership enters into interest rate swaps to manage interest rate risk associated with the Partnership’s variable rate credit facility and its ~~fixed rate senior unsecured notes.~~2021 Notes. At ~~June 30,~~March 31, 2020 and December 31, 2019, ~~and 2018,~~ the Partnership did not have any outstanding interest rate derivative instruments.

For information regarding gains and losses on interest rate derivative instruments, see "Tabular Presentation of Gains and Losses on Derivative Instruments" below.

The following table summarizes the fair value and classification of the Partnership’s derivative instruments in its Consolidated and Condensed Balance Sheets:


	Fair Values of Derivative Instruments in the Consolidated and Condensed Balance Sheets										Fair Values of Derivative Instruments in the Consolidated and Condensed Balance Sheets
	Derivative Assets					Derivative Liabilities					Derivative Assets					Derivative Liabilities
		Fair Values					Fair Values					Fair Values					Fair Values
	Balance Sheet Location	June 30, 2019		December 31, 2018		Balance Sheet Location	June 30, 2019		December 31, 2018		Balance Sheet Location	March 31, 2020		December 31, 2019		Balance Sheet Location	March 31, 2020		December 31, 2019
Derivatives not designated as hedging instruments:	Current:										Current:
Commodity contracts	Fair value of derivatives	$	—	$	4	Fair value of derivatives	$	2,069	$	—	Fair value of derivatives	$	2	$	—	Fair value of derivatives	$	—	$	667
Total derivatives not designated as hedging instruments		$	—	$	4		$	2,069	$	—		$	2	$	—		$	—	$	667

Effect of Derivative Instruments on the Consolidated and Condensed Statements of Operations

For the Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~

Location of Gain (Loss)
Recognized in Income on
Derivatives
Amount of Gain (Loss) Recognized in
Income on Derivatives
2019 2018
Derivatives not designated as hedging instruments:
Commodity contracts Cost of products sold $ (2,083 ) $ (401 )
Total effect of derivatives not designated as hedging instruments $ (2,083 ) $ (401 )

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

~~Effect of Derivative Instruments on the Consolidated and Condensed Statements of Operations~~

~~For the Six Months Ended June 30, 2019 and 2018~~


	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives					Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
		2019			2018			2020		2019
Derivatives not designated as hedging instruments:
Commodity contracts	Cost of products sold	$	(2,322	)	$	2,069	Cost of products sold	$	33	$	(239	)
Total effect of derivatives not designated as hedging instruments	Total effect of derivatives not designated as hedging instruments	$	(2,322	)	$	2,069	Total effect of derivatives not designated as hedging instruments	$	33	$	(239	)

NOTE ~~12.~~10. PARTNERS' CAPITAL

As of ~~June 30, 2019,~~March 31, 2020, Partners’ capital consisted of ~~38,863,389~~38,852,507 common limited partner units, representing a 98% partnership interest, and a 2% general partner interest. Martin Resource Management Corporation, through subsidiaries, owns 6,114,532 of the Partnership's common limited partner units representing approximately 15.7% of the Partnership's outstanding common limited partner units. Martin Midstream GP LLC ("MMGP"), the Partnership's general partner, owns the 2% general partnership interest. Martin Resource Management Corporation controls the Partnership's general partner, by virtue of its 51% voting interest in MMGP Holdings, LLC ("Holdings"), the sole member of the Partnership's general partner.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

The partnership agreement of the Partnership (the "Partnership Agreement") contains specific provisions for the allocation of net income and losses to each of the partners for purposes of maintaining their respective partner capital accounts.

Incentive Distribution Rights

MMGP holds a 2% general partner interest and certain incentive distribution rights ("IDRs") in the Partnership. IDRs are a separate class of non-voting limited partner interest that may be transferred or sold by the general partner under the terms of the Partnership Agreement, and represent the right to receive an increasing percentage of cash distributions after the minimum quarterly distribution and any cumulative arrearages on common units once certain target distribution levels have been achieved. The Partnership is required to distribute all of its available cash from operating surplus, as defined in the Partnership Agreement. The general partner was allocated no0 incentive distributions during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018.~~2019.

The target distribution levels entitle the general partner to receive 2% of quarterly cash distributions from the minimum of $0.50 per unit up to $0.55 per unit, 15% of quarterly cash distributions in excess of $0.55 per unit until all unitholders have received $0.625 per unit, 25% of quarterly cash distributions in excess of $0.625 per unit until all unitholders have received $0.75 per unit and 50% of quarterly cash distributions in excess of $0.75 per unit.

Distributions of Available Cash

The Partnership distributes all of its available cash (as defined in the Partnership Agreement) within 45 days after the end of each quarter to unitholders of record and to the general partner. Available cash is generally defined as all cash and cash equivalents of the Partnership on hand at the end of each quarter less the amount of cash reserves its general partner determines in its reasonable discretion is necessary or appropriate to: (i) provide for the proper conduct of the Partnership’s business; (ii) comply with applicable law, any debt instruments or other agreements; or (iii) provide funds for distributions to unitholders and the general partner for any one or more of the next four quarters, plus all cash on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter.

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

Net Income per Unit

The Partnership follows the provisions of the FASB ASC 260-10 related to earnings per share, which addresses the application of the two-class method in determining income per unit for master limited partnerships having multiple classes of securities that may participate in partnership distributions accounted for as equity distributions. Undistributed earnings are allocated to the general partner and limited partners utilizing the contractual terms of the Partnership Agreement. Distributions to the general partner pursuant to the IDRs are limited to available cash that will be distributed as defined in the Partnership Agreement. Accordingly, the Partnership does not allocate undistributed earnings to the general partner for the IDRs because the general partner's share of available cash is the maximum amount that the general partner would be contractually entitled to receive if all earnings for the period were distributed. When current period distributions are in excess of earnings, the excess distributions for the period are to be allocated to the general partner and limited partners based on their respective sharing of income and losses specified in the Partnership Agreement. Additionally, as required under FASB ASC 260-10-45-61A, unvested share-based payments that entitle employees to receive non-forfeitable distributions are considered participating securities, as defined in FASB ASC 260-10-20, for earnings per unit calculations.

For purposes of computing diluted net income per unit, the Partnership uses the more dilutive of the two-class and if-converted methods. Under the if-converted method, the weighted-average number of subordinated units outstanding for the period is added to the weighted-average number of common units outstanding for purposes of computing basic net income per unit and the resulting amount is compared to the diluted net income per unit computed using the two-class method. The following is a reconciliation of net income from continuing operations and net income from discontinued operations allocated to the general partner and limited partners for purposes of calculating net income attributable to limited partners per unit:

MARTIN MIDSTREAM PARTNERS L.P.

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Continuing operations:
Loss from continuing operations $ (10,614 ) $ (9,453 ) $ (15,372 ) $ (1,504 )
Less pre-acquisition income allocated to the general partner —
(2,720 ) —
(4,938 )
Less general partner’s interest in net income (loss):
Distributions payable on behalf of general partner interest 11
819
31
(112 )
General partner interest in undistributed loss (223 ) (1,122 ) (338 ) 96
Less loss allocable to unvested restricted units (4 ) (13 ) (5 ) —
Limited partners’ interest in net loss $ (10,398 ) $ (11,857 ) $ (15,060 ) $ (6,426 )
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Discontinued operations:
Income (loss) from discontinued operations $ (180,568 ) $ 4,927
$ (179,466 ) $ 12,014
Less general partner’s interest in net income (loss):
Distributions payable on behalf of general partner interest 185
(427 ) 362
896
General partner interest in undistributed loss (3,797 ) 585
(3,952 ) (769 )
Less income (loss) allocable to unvested restricted units (61 ) 7
(62 ) 2
Limited partners’ interest in net income (loss) $ (176,895 ) $ 4,762
$ (175,814 ) $ 11,885



	Three Months Ended March 31,
	2020		2019
Continuing operations:
Income (loss) from continuing operations	$	8,815	$	(4,758	)
Less general partner’s interest in net income (loss):
Distributions payable on behalf of general partner interest	49		256
General partner interest in undistributed income (loss)	127		(351		)
Less income (loss) allocable to unvested restricted units	55		(3		)
Limited partners’ interest in net income (loss)	$	8,584	$	(4,660	)



	Three Months Ended March 31,
	2020		2019
Discontinued operations:
Income from discontinued operations	$	—	$	1,102
Less general partner’s interest in net income (loss):
Distributions payable on behalf of general partner interest	—		(59		)
General partner interest in undistributed income	—		81
Less income allocable to unvested restricted units	—		1
Limited partners’ interest in net income	$	—	$	1,079

The Partnership allocates the general partner's share of earnings between continuing and discontinued operations as a proportion of net income from continuing and discontinued operations to total net income.

The following are the unit amounts used to compute the basic and diluted earnings per limited partner unit for the periods presented:

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~


	Three Months Ended June 30,		Six Months Ended June 30,		Three Months Ended March 31,
	2019	2018	2019	2018	2020	2019
Basic weighted average limited partner units outstanding	38,871,420	38,722,037	38,912,250	38,828,845	38,640,862	38,681,925
Dilutive effect of restricted units issued	—	—	—	5,576	3,605	—
Total weighted average limited partner diluted units outstanding	38,871,420	38,722,037	38,912,250	38,834,421	38,644,467	38,681,925

All outstanding units were included in the computation of diluted earnings per unit and weighted based on the number of days such units were outstanding during the periods presented. All common unit equivalents were antidilutive for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 ~~and the three months ended June 30, 2018~~ because the limited partners were allocated a net loss in this period.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

NOTE ~~13.~~11. UNIT BASED AWARDS

The Partnership recognizes compensation cost related to unit-based awards to both employees and non-employees in its consolidated and condensed financial statements in accordance with certain provisions of ASC 718. Amounts recognized in selling, general, and administrative expense in the consolidated and condensed financial statements with respect to these plans are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Employees	$	300	$	345	$	629	$	441	$	301	$	329
Non-employee directors	63		43		86		79		45		23
Total unit-based compensation expense	$	363	$	388	$	715	$	520	$	346	$	352

All of the Partnership's outstanding awards at ~~June 30, 2019~~March 31, 2020 met the criteria to be treated under equity classification.

Long-Term Incentive Plans

The Partnership's general partner has a long-term incentive plan for employees and directors of the general partner and its affiliates who perform services for the Partnership.

On May 26, 2017, the unitholders of the Partnership approved the Martin Midstream Partners L.P. 2017 Restricted Unit Plan (the "2017 LTIP"). The plan currently permits the grant of awards covering an aggregate of 3,000,000 common units, all of which can be awarded in the form of restricted units. The plan is administered by the compensation committee of the general partner’s board of directors (the "Compensation Committee").

A restricted unit is a unit that is granted to grantees with certain vesting restrictions, which may be time-based and/or performance-based. Once these restrictions lapse, the grantee is entitled to full ownership of the unit without restrictions. The Compensation Committee may determine to make grants under the plan containing such terms as the Compensation Committee shall determine under the plan. With respect to time-based restricted units ("TBRU's"), the Compensation Committee will determine the time period over which restricted units granted to employees and directors will vest. The Compensation Committee may also award a percentage of restricted units with vesting requirements based upon the achievement of specified pre-established performance targets ("Performance Based Restricted Units" or "PBRU's"). The performance targets may include, but are not limited to, the following: revenue and income measures, cash flow measures, net income before interest expense and income tax expense ("EBIT"), net income before interest expense, income tax expense, and depreciation and amortization ("EBITDA"), distribution coverage metrics, expense measures, liquidity measures, market measures, corporate sustainability metrics, and other measures related to acquisitions, dispositions, operational objectives and succession planning objectives. PBRU's are earned only upon our achievement of an objective performance measure for the performance period. PBRU's which vest are payable in common units. Unvested units granted under the 2017 LTIP may or may not participate in cash distributions depending on the terms of each individual award agreement.

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

The restricted units issued to directors generally vest in equal annual installments over a four-year period. Restricted units issued to employees generally vest in equal annual installments over three years of service.

OnIn February ~~11, 2019,~~2020, the Partnership issued ~~5,648~~27,000 TBRU's to each of the Partnership's ~~three~~3 independent directors under the 2017 LTIP. These restricted common units vest in equal installments of ~~1,412~~6,750 units on January 24, ~~2020,~~ 2021, 2022, 2023, and ~~2023.~~2024.

On March 1, 2018, the Partnership issued 301,550 TBRU's and 317,925 PBRU's to certain employees of Martin Resource Management Corporation. The TBRU's vest in equal installments over a three-year service period. The PBRU's will vest at the conclusion of a three-year performance period based on certain performance targets. In addition, the PBRU's awarded on March 1, 2018 that are achieved will only vest if the grantee is employed by Martin Resource Management Corporation on March 31, 2021. As of ~~June 30, 2019,~~March 31, 2020, the Partnership is unable to ascertain if certain performance conditions will be achieved and, as such, has not recognized compensation expense for the vesting of the units. The Partnership will record

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

compensation expense for the vested portion of the units once the achievement of the performance condition is deemed probable.

The restricted units are valued at their fair value at the date of grant which is equal to the market value of common units on such date. A summary of the restricted unit activity for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 is provided below:


	Number of Units			Weighted Average Grant-Date Fair Value Per Unit		Number of Units			Weighted Average Grant-Date Fair Value Per Unit
Non-vested, beginning of period	624,125			$	13.78	379,019			$	13.91
Granted (TBRU)	16,944			$	12.45	81,000			$	2.53
Vested	(107,762		)	$	13.82	(101,128		)	$	13.95
Forfeited	(154,288		)	$	13.90	(84,134		)	$	13.90
Non-Vested, end of period	379,019			$	13.91	274,757			$	10.54

Aggregate intrinsic value, end of period	$	2,706				$	302

A summary of the restricted units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) during the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ is provided below:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Aggregate intrinsic value of units vested	$	—	$	—	$	1,351	$	1,188	$	151	$	1,351
Fair value of units vested	—		—		1,551		2,232		1,427		1,551

As of ~~June 30, 2019,~~March 31, 2020, there was ~~$2,462~~$1,613 of unrecognized compensation cost related to non-vested restricted units. That cost is expected to be recognized over a weighted-average period of ~~2.01~~1.51 years.

NOTE ~~14.~~12. RELATED PARTY TRANSACTIONS

As of ~~June 30, 2019,~~March 31, 2020, Martin Resource Management Corporation owns 6,114,532 of the Partnership’s common units representing approximately 15.7% of the Partnership’s outstanding limited partner units. Martin Resource Management Corporation controls the Partnership's general partner by virtue of its 51% voting interest in Holdings, the sole member of the Partnership's general partner. The Partnership’s general partner, MMGP, owns a 2% general partner interest in the Partnership and the Partnership’s IDRs. The Partnership’s general partner’s ability, as general partner, to manage and operate the Partnership, and Martin Resource Management Corporation’s ownership as of ~~June 30, 2019, of approximately 15.7% of the~~

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

~~Partnership’s outstanding limited partner units,~~March 31, 2020, effectively gives Martin Resource Management Corporation the ability to veto some of the Partnership’s actions and to control the Partnership’s management.

The following is a description of the Partnership’s material related party agreements and transactions:

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

Omnibus Agreement

Omnibus Agreement. The Partnership and its general partner are parties to the Omnibus Agreement dated November 1, 2002, with Martin Resource Management Corporation that governs, among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision of general administration and support services by Martin Resource Management Corporation and the Partnership’s use of certain Martin Resource Management Corporation trade names and trademarks. The Omnibus Agreement was amended on November 25, 2009, to include processing crude oil into finished products including naphthenic lubricants, distillates, asphalt and other intermediate cuts. The Omnibus Agreement was amended further on October 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management Corporation.

Non-Competition Provisions. Martin Resource Management Corporation has agreed for so long as it controls the general partner of the Partnership, not to engage in the business of:

providing terminalling and storage services for petroleum products and by-products including the refining, blending and packaging of finished lubricants;

•providing land and marine transportation of petroleum products, by-products, and chemicals;

•distributing NGLs; and

•manufacturing and selling sulfur-based fertilizer products and other sulfur-related products.

This restriction does not apply to:

the ownership and/or operation on the Partnership’s behalf of any asset or group of assets owned by it or its affiliates;

any business operated by Martin Resource Management Corporation, including the following:


◦	distributing fuel oil, marine fuel and other liquids;


◦	providing marine bunkering and other shore-based marine services in Texas, Louisiana, Mississippi, Alabama, and Florida;


◦	operating a crude oil gathering business in Stephens, Arkansas;


◦	providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;


◦	providing crude oil marketing and transportation from the well head to the end market;


◦	operating an environmental consulting company;


◦	~~operating an engineering services company;~~


◦	supplying employees and services for the operation of the Partnership's business; and


◦	operating, solely for ~~the Partnership's~~our account, the asphalt facilities in ~~Omaha, Nebraska,~~each of Hondo, South Houston and Port Neches, Texas ~~Hondo, Texas,~~ and ~~South Houston, Texas.~~Omaha, Nebraska.

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of less than $5,000;

any business that Martin Resource Management Corporation acquires or constructs that has a fair market value of $5,000 or more if the Partnership has been offered the opportunity to purchase the business for fair market value and the Partnership declines to do so with the concurrence of the conflicts committee of the board of directors of the general partner of the Partnership (the "Conflicts Committee"); and

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

any business that Martin Resource Management Corporation acquires or constructs where a portion of such business includes a restricted business and the fair market value of the restricted business is $5,000 or more and represents less than 20% of the aggregate value of the entire business to be acquired or constructed; provided that, following completion of the acquisition or construction, the Partnership will be provided the opportunity to purchase the restricted business.

Services. Under the Omnibus Agreement, Martin Resource Management Corporation provides the Partnership with corporate staff, support services, and administrative services necessary to operate the Partnership’s business. The Omnibus Agreement requires the Partnership to reimburse Martin Resource Management Corporation for all direct expenses it incurs or payments it makes on the Partnership’s behalf or in connection with the operation of the Partnership’s business. There is no monetary limitation on the amount the Partnership is required to reimburse Martin Resource Management Corporation for direct expenses. In addition to the direct expenses, under the Omnibus Agreement, the Partnership is required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses.

Effective January 1, ~~2019,~~2020, through December 31, ~~2019,~~2020, the Conflicts Committee approved an annual reimbursement amount for indirect expenses of ~~$16,657.~~$16,410. The Partnership reimbursed Martin Resource Management Corporation for ~~$4,164~~$4,103 and ~~$4,104~~$4,164 of indirect expenses for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018, respectively. The Partnership reimbursed Martin Resource Management Corporation for $8,328 and $8,208 of indirect expenses for the six months ended June 30, 2019 and 2018,~~ respectively. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.

These indirect expenses are intended to cover the centralized corporate functions Martin Resource Management Corporation provides ~~for~~to the Partnership, such as accounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit plans and other general corporate overhead functions the Partnership shares with Martin Resource Management Corporation retained businesses. The provisions of the Omnibus Agreement regarding Martin Resource Management Corporation’s services will terminate if Martin Resource Management Corporation ceases to control the general partner of the Partnership.

Related Party Transactions. The Omnibus Agreement prohibits the Partnership from entering into any material agreement with Martin Resource Management Corporation without the prior approval of the Conflicts Committee. For purposes of the Omnibus Agreement, the term "material agreements" means any agreement between the Partnership and Martin Resource Management Corporation that requires aggregate annual payments in excess of the then-applicable agreed upon reimbursable amount of indirect general and administrative expenses. Please read "Services" above.

License Provisions. Under the Omnibus Agreement, Martin Resource Management Corporation has granted the Partnership a nontransferable, nonexclusive, royalty-free right and license to use certain of its trade names and marks, as well as the trade names and marks used by some of its affiliates.

Amendment and Termination. The Omnibus Agreement may be amended by written agreement of the parties; provided, however, that it may not be amended without the approval of the Conflicts Committee if such amendment would adversely affect the unitholders. The Omnibus Agreement was first amended on November 25, 2009, to permit the Partnership to provide refining services to Martin Resource Management Corporation. The Omnibus Agreement was amended further on October 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management Corporation. Such amendments were approved by the Conflicts Committee. The Omnibus Agreement, other than the indemnification provisions and the provisions limiting the amount for which the Partnership will reimburse Martin Resource Management Corporation for general and administrative services performed on its behalf, will terminate if the Partnership is no longer an affiliate of Martin Resource Management Corporation.

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

Master Transportation Services Agreement

Master Transportation Agreement. ~~MTI,~~Martin Transport, Inc. ("MTI"), a wholly owned subsidiary of the Partnership, is a party to a master transportation services agreement effective January 1, 2019, with certain wholly owned subsidiaries of Martin Resource Management Corporation. Under the agreement, MTI agreed to transport Martin Resource Management Corporation's petroleum products and by-products.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

Term and Pricing. The agreement will continue unless either party terminates the agreement by giving at least 30 days' written notice to the other party. These rates are subject to any adjustments which are mutually agreed upon or in accordance with a price index. Additionally, shipping charges are also subject to fuel surcharges determined on a weekly basis in accordance with the U.S. Department of Energy’s national diesel price list.

Indemnification. MTI has agreed to indemnify Martin Resource Management Corporation against all claims arising out of the negligence or willful misconduct of MTI and its officers, employees, agents, representatives and subcontractors. Martin Resource Management Corporation has agreed to indemnify MTI against all claims arising out of the negligence or willful misconduct of Martin Resource Management Corporation and its officers, employees, agents, representatives and subcontractors. In the event a claim is the result of the joint negligence or misconduct of MTI and Martin Resource Management Corporation, indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligence or misconduct.

Marine Agreements

Marine Transportation Agreement. The Partnership is a party to a marine transportation agreement effective January 1, 2006, as amended, under which the Partnership provides marine transportation services to Martin Resource Management Corporation on a spot-contract basis at applicable market rates. Effective each January 1, this agreement automatically renews for consecutive one year periods unless either party terminates the agreement by giving written notice to the other party at least 60 days prior to the expiration of the then applicable term. The fees the Partnership charges Martin Resource Management Corporation are based on applicable market rates.

Marine Fuel. The Partnership is a party to an agreement with Martin Resource Management Corporation dated November 1, 2002, under which Martin Resource Management Corporation provides the Partnership with marine fuel from its locations in the Gulf of Mexico at a fixed rate in excess of the Platt’s U.S. Gulf Coast Index for #2 Fuel Oil. Under this agreement, the Partnership agreed to purchase all of its marine fuel requirements that occur in the areas serviced by Martin Resource Management Corporation.

Terminal Services Agreements

Diesel Fuel Terminal Services Agreement. Effective January 1, 2016, the Partnership entered into a second amended and restated terminalling services agreement under which the Partnership provides terminal services to Martin Resource Management Corporation for marine fuel distribution. At such time, the ~~per gallon~~per-gallon throughput fee the Partnership charged under this agreement was increased when compared to the previous agreement and may be adjusted annually based on a price index. This agreement was further amended on January 1, 2017, October 1, 2017, and April 1, 2019 to modify its minimum throughput requirements and throughput fees. The term of this agreement is currently evergreen and it will continue on a month to month basis until terminated by either party by giving 60 days’ written notice.

Miscellaneous Terminal Services Agreements. The Partnership is currently party to several terminal services agreements and from time to time the Partnership may enter into other terminal service agreements for the purpose of providing terminal services to related parties. Individually, each of these agreements is immaterial but when considered in the aggregate they could be deemed material. These agreements are throughput based with a minimum volume commitment. Generally, the fees due under these agreements are adjusted annually based on a price index.

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

Other Agreements

Cross Tolling Agreement. The Partnership is a party to an amended and restated tolling agreement with Cross Oil Refining and Marketing, Inc. ("Cross") dated October 28, 2014, under which the Partnership processes crude oil into finished products, including naphthenic lubricants, distillates, asphalt and other intermediate cuts for Cross. The tolling agreement expires November 25, 2031. Under this tolling agreement, Cross agreed to process a minimum of 6,500 barrels per day of crude oil at the facility at a fixed price per barrel. Any additional barrels are processed at a modified price per barrel. In addition, Cross agreed to pay a monthly reservation fee and a periodic fuel surcharge fee based on certain parameters specified in the tolling agreement. Further, certain capital improvements, to the extent requested by Cross, are reimbursed through a capital recovery fee. As of December 31, 2019, annual capital recovery fee reimbursement of $2,088 expired. An additional $2,586 of capital recovery fee reimbursement will expire on December 31, 2020. All of these fees (other than the fuel ~~surcharge)~~

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

surcharge and capital recovery fee) are subject to escalation annually based upon the greater of 3% or the increase in the Consumer Price Index for a specified annual period. In addition, on the third, sixth and ninth anniversaries of the agreement, the parties can negotiate an upward or downward adjustment in the fees subject to their mutual agreement.

~~Sulfuric Acid Sales Agency Agreement~~. The Partnership was previously a party to a third amended and restated sulfuric acid sales agency agreement dated August 2, 2017 but effective October 1, 2017, under which a successor in interest to the agreement from Martin Resource Management Corporation, Saconix LLC ("Saconix"), a limited liability company in which Martin Resource Management Corporation held a minority equity interest, purchased and marketed the sulfuric acid produced by the Partnership’s sulfuric acid production plant at Plainview, Texas, that was not consumed by the Partnership’s internal operations. This agreement, as amended, was to remain in place until September 30, 2020 and automatically renew year to year thereafter until either party provided 90 days’ written notice of termination prior to the expiration of the then existing term. Under this agreement, Also, the Partnership ~~sold all of its excess sulfuric acid~~renegotiated a crude transportation contract set to ~~Saconix, who then marketed and sold such acid to third-parties. The Partnership shared~~expire in the ~~profit~~first half of ~~such sales. Effective May 31, 2018, Martin Resource Management Corporation no longer holds an equity interest~~2022 resulting in Saconix. These transactions are reported below as related party transactions during the period the equity interest was held. Transactions subsequent to Martin Resource Management Corporation's dispositiona reduction in revenue of ~~the equity interest will be reported as third party transactions.~~$2,145 annually beginning January 1, 2020.

Other Miscellaneous Agreements. From time to time the Partnership enters into other miscellaneous agreements with Martin Resource Management Corporation for the provision of other services or the purchase of other goods.

The tables below summarize the related party transactions that are included in the related financial statement captions on the face of the Partnership’s Consolidated and Condensed Statements of Operations. The revenues, costs and expenses reflected in these tables are tabulations of the related party transactions that are recorded in the corresponding captions of the consolidated and condensed financial statements and do not reflect a statement of profits and losses for related party transactions.

The impact of related party revenues from sales of products and services is reflected in the consolidated and condensed financial statements as follows:

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Revenues:
Terminalling and storage $ 17,477
$ 20,485
$ 36,449
$ 40,493
Transportation 5,856
7,066
11,499
13,759
Product sales:
Sulfur services 9
226
16
612
Terminalling and storage 277
151
691
389
286
377
707
1,001
$ 23,619
$ 27,928
$ 48,655
$ 55,253

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~



	Three Months Ended March 31,
	2020		2019
Revenues:
Terminalling and storage	$	15,874	$	18,972
Transportation	5,894		5,643
Product sales:
Sulfur services	19		7
Terminalling and storage	73		414
	92		421
	$	21,860	$	25,036

The impact of related party cost of products sold is reflected in the consolidated and condensed financial statements as follows:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Cost of products sold:
Sulfur services	2,884		2,492		$	5,458	$	5,340	$	2,767	$	2,574
Terminalling and storage	7,203		7,089		13,112		12,668		5,777		5,909
	$	10,087	$	9,581	$	18,570	$	18,008	$	8,544	$	8,483

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

The impact of related party operating expenses is reflected in the consolidated and condensed financial statements as follows:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Operating expenses:
Transportation	$	16,319	$	15,445	$	31,299	$	30,492	$	15,553	$	14,980
Natural gas liquids	2,054		2,232		4,079		4,431		497		2,025
Sulfur services	1,402		1,492		2,326		2,831		1,146		924
Terminalling and storage	4,632		4,589		9,239		9,092		4,575		4,607
	$	24,407	$	23,758	$	46,943	$	46,846	$	21,771	$	22,536

The impact of related party selling, general and administrative expenses is reflected in the consolidated and condensed financial statements as follows:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Selling, general and administrative:
Transportation	$	1,729	$	229	$	3,457	$	442	$	1,839	$	1,728
Natural gas liquids	1,128		1,025		2,317		3,279		704		1,189
Sulfur services	710		660		1,426		1,319		743		716
Terminalling and storage	737		662		1,454		1,343		838		717
Indirect, including overhead allocation	4,254		4,116		8,439		8,235		4,188		4,185
	$	8,558	$	6,692	$	17,093	$	14,618	$	8,312	$	8,535

NOTE ~~15.~~13. BUSINESS SEGMENTS

The Partnership has ~~four~~4 reportable segments: ~~natural gas liquids,~~ terminalling and storage, transportation, sulfur services and ~~transportation.~~natural gas liquids. The Partnership’s reportable segments are strategic business units that offer different products and services. The operating income of these segments is reviewed by the chief operating decision maker to assess performance and make business decisions.

The accounting policies of the operating segments are the same as those described in Note 2 in the Partnership’s Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC on February ~~19, 2019, as amended on Form 8-K/A on May 21, 2019.~~14, 2020. The Partnership evaluates the performance of its reportable segments based on operating income. There is no allocation of administrative expenses or interest expense.

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

Three Months Ended June 30, 2019 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs
Terminalling and storage $ 54,351
$ (1,603 ) $ 52,748
$ 7,826
$ 4,254
$ 3,668
Transportation 47,233
(5,912 ) 41,321
3,778
(2,629 ) 746
Sulfur services 35,856
—
35,856
2,854
7,528
3,273
Natural gas liquids 57,398
—
57,398
629
456
940
Indirect selling, general and administrative —
—
—
—
(4,599 ) —
Total $ 194,838
$ (7,515 ) $ 187,323
$ 15,087
$ 5,010
$ 8,627

Three Months Ended June 30, 2018 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs
Terminalling and storage $ 62,314
$ (1,452 ) $ 60,862
$ 11,690
$ 2,653
$ 2,471
Transportation 43,553
(6,347 ) 37,206
2,550
(3,087 ) 2,883
Sulfur services 38,471
—
38,471
2,086
6,257
966
Natural gas liquids 90,643
(18 ) 90,625
620
3,012
258
Indirect selling, general and administrative —
—
—
—
(4,346 ) —
Total $ 234,981
$ (7,817 ) $ 227,164
$ 16,946
$ 4,489
$ 6,578

Six Months Ended June 30, 2019 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs
Terminalling and storage $ 110,243
$ (3,324 ) $ 106,919
$ 15,663
$ 9,069
$ 9,013
Transportation 92,419
(13,303 ) 79,116
7,348
(6,509 ) 3,207
Sulfur services 67,449
—
67,449
5,722
13,908
5,479
Natural gas liquids 173,872
—
173,872
1,255
7,314
1,227
Indirect selling, general and administrative —
—
—
—
(9,166 ) —
Total $ 443,983
$ (16,627 ) $ 427,356
$ 29,988
$ 14,616
$ 18,926

Six Months Ended June 30, 2018 Operating Revenues Intersegment Revenues Eliminations Operating Revenues after Eliminations Depreciation and Amortization Operating Income (Loss) after Eliminations Capital Expenditures and Plant Turnaround Costs
Terminalling and storage $ 124,297
$ (2,925 ) $ 121,372
$ 21,849
$ 6,349
$ 4,592
Transportation 85,490
(13,925 ) 71,565
5,016
(8,126 ) 12,566
Sulfur services 76,158
—
76,158
4,150
16,423
2,514
Natural gas liquids 249,806
(19 ) 249,787
1,243
19,248
488
Indirect selling, general and administrative —
—
—
—
(8,577 ) —
Total $ 535,751
$ (16,869 ) $ 518,882
$ 32,258
$ 25,317
$ 20,160

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

~~June 30, 2019~~March 31, 2020

(Unaudited)



Three Months Ended March 31, 2020	Operating Revenues		Intersegment Revenues Eliminations			Operating Revenues after Eliminations		Depreciation and Amortization		Operating Income (Loss) after Eliminations			Capital Expenditures and Plant Turnaround Costs
Terminalling and storage	$	51,134	$	(1,726	)	$	49,408	$	7,456	$	758		$	3,745
Transportation	45,174		(6,233		)	38,941		4,280		(5,021		)	3,926
Sulfur services	28,336		(13		)	28,323		2,894		13,858			2,985
Natural gas liquids	82,215		(4		)	82,211		609		10,377			105
Indirect selling, general and administrative	—		—			—		—		(4,372		)	—
Total	$	206,859	$	(7,976	)	$	198,883	$	15,239	$	15,600		$	10,761



Three Months Ended March 31, 2019	Operating Revenues		Intersegment Revenues Eliminations			Operating Revenues after Eliminations		Depreciation and Amortization		Operating Income (Loss) after Eliminations			Capital Expenditures and Plant Turnaround Costs
Terminalling and storage	$	55,892	$	(1,721	)	$	54,171	$	7,837	$	4,815		$	5,345
Transportation	45,186		(7,391		)	37,795		3,570		(3,880		)	2,461
Sulfur services	31,593		—			31,593		2,868		6,380			2,206
Natural gas liquids	116,474		—			116,474		626		6,858			287
Indirect selling, general and administrative	—		—			—		—		(4,567		)	—
Total	$	249,145	$	(9,112	)	$	240,033	$	14,901	$	9,606		$	10,299

The Partnership's assets by reportable segment as of ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, are as follows:


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Total assets:
Terminalling and storage	$	317,325	$	298,784	$	288,915	$	292,136
Transportation	180,821		146,529		170,274		170,045
Sulfur services	118,384		115,498		112,709		110,780
Natural gas liquids	83,978		512,817		40,301		94,195
Total assets	$	700,508	$	1,073,628	$	612,199	$	667,156

NOTE ~~16.~~14. COMMITTMENTS AND CONTINGENCIES

Contingencies

From time to time, the Partnership is subject to various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Partnership.

On December 31, 2015, the Partnership received a demand from a customer in its lubricants packaging business for defense and indemnity in connection with lawsuits filed against it in various United States District Courts, which generally allege that the customer engaged in unlawful and deceptive business practices in connection with its marketing and advertising of its private label motor oil. The Partnership disputes that it has any obligation to defend or indemnify the customer for its conduct. Accordingly, on January 7, 2016, the Partnership filed a Complaint for Declaratory Judgment in the Chancery Court of Davidson County, Tennessee requesting a judicial determination that the Partnership does not owe the customer the demanded defense and indemnity obligations. The lawsuits against the customer have been transferred to the United States

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

District Court for the Western District of Missouri for consolidated pretrial proceedings. On March 1, 2017, at the request of the parties, the Chancery Court of Davidson County, Tennessee administratively closed the Partnership's lawsuit pending rulings in the United States District Court for the Western District of Missouri. In the event that either party moves the Chancery Court of Davidson County, Tennessee to reopen the case, we expect the Court would grant such motion and reopen the case. Further, the same customer has made a claim under the Partnership’s insurance policy. The insurer has denied the claim. However, in the event that the customer is successful in pursuing the claim, such action would negatively impact the Partnership because the Partnership has certain reimbursement obligations it would owe the insurance company. If the case is reopened or the insurance claim by the customer is successful, we are currently unable to determine the exposure we may have in this matter, if any.

NOTE ~~17.~~15. FAIR VALUE MEASUREMENTS

The Partnership uses a valuation framework based upon inputs that market participants use in pricing certain assets and liabilities. These inputs are classified into two categories: observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources. Unobservable inputs represent the Partnership's own market assumptions. Unobservable inputs are used only if observable inputs are unavailable or not reasonably available without undue cost and effort. The two types of inputs are further prioritized into the following hierarchy:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that reflect the entity's own assumptions and are not corroborated by market data.

Assets and liabilities measured at fair value on a recurring basis are summarized below:

Level 2
June 30, 2019 December 31, 2018
Commodity derivative contracts, net $ (2,069 ) $ 4



	Level 2
	March 31, 2020		December 31, 2019
Commodity derivative contracts, net	$	2	$	(667	)

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

The Partnership is required to disclose estimated fair values for its financial instruments. Fair value estimates are set forth below for these financial instruments. The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Accounts and other receivables, trade and other accounts payable, accrued interest payable, other accrued liabilities, income taxes payable and due from/to affiliates: The carrying amounts approximate fair value due to the short maturity and highly liquid nature of these instruments, and as such these have been excluded from the table below. There is negligible credit risk associated with these instruments.

Current and noncurrent portion of long-term debt: The carrying amount of the revolving credit facility approximates fair value due to the debt having a variable interest rate and is in Level 2. The Partnership has not had any indicators which represent a change in the market spread associated with its variable interest rate debt. The estimated fair value of the ~~senior unsecured notes~~2021 Notes is considered Level 1, as the fair value is based on quoted market prices in active markets.

June 30, 2019 December 31, 2018

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
2021 Senior unsecured notes $ 373,185
$ 371,534
$ 372,996
$ 360,138



	March 31, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
2021 Notes	$	364,124	$	146,825	$	373,374	$	343,470

NOTE ~~18.~~16. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The Partnership's operations are conducted by its operating subsidiaries as it has no independent assets or operations. Martin Operating Partnership L.P. (the "Operating Partnership"), the Partnership’s wholly-owned subsidiary, and the Partnership's other operating subsidiaries have issued in the past, and may issue in the future, unconditional guarantees of senior or subordinated debt securities of the Partnership. The guarantees that have been issued are full, irrevocable and unconditional

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

and joint and several. In addition, the Operating Partnership may also issue senior or subordinated debt securities which, if issued, will be fully, irrevocably and unconditionally guaranteed by the Partnership. Substantially all of the Partnership's operating subsidiaries are subsidiary guarantors of its ~~outstanding senior unsecured notes~~2021 Notes and any subsidiaries other than the subsidiary guarantors are minor.

NOTE ~~19.~~17. INCOME TAXES

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Provision for income taxes $ 639
$ 132
$ 1,335
$ 281



	Three Months Ended March 31,
	2020		2019
Provision for income taxes	$	347	$	696

The operations of a partnership are generally not subject to income taxes, except for Texas margin tax, because its income is taxed directly to its partners. MTI is subject to income taxes due to its corporate structure. Total income tax expense of ~~$429 and $877,~~$347, related to the operation of the subsidiary, for the three ~~and six~~ months ended ~~June 30, 2019, respectively,~~March 31, 2020, resulted in an effective income tax rate of ~~26.30% and 25.49%, respectively.~~32.17%.

Total income tax expense ~~(benefit)~~ of ~~$0 and $0,~~$448, related to the operation of the subsidiary, for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, resulted in an effective income tax rate of ~~0% and 0%, respectively.~~24.79%. The increase in the effective income tax rate for income taxes during the three months ended March 31, 2020, compared to the three months ended March 31, 2019, is primarily due to an increase in permanent differences and a decrease in income before income taxes. The decrease in the provision for income taxes during the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, compared to the ~~three and six months ended June 30, 2018, is~~similar period in 2019, was primarily due to the impact of a ~~change~~decrease in ~~MTI’s~~income before income taxes in the current period.

The Coronavirus Aid, Relief, and Economic Security ("CARES") Act was enacted on March 27, 2020, in response to the market volatility and instability resulting from the COVID-19 pandemic, and includes changes to various income tax ~~status~~provisions including, but not limited to, providing for a five-year carryback of net operating losses generated in taxable years beginning after December 31, 2017, and before January 1, 2021, suspension of the 80% taxable income limitation for net operating losses generated after December 31, 2017, and before January 1, 2021, and relaxation of the limitation of adjusted taxable income as determined under Internal Revenue Code Section 163(j) from 30% to 50% when determining the deduction for business interest expense for 2019 and 2020. Since, prior to its acquisition by the Partnership, MTI was a ~~non-taxable~~ Qualified Subchapter S subsidiary ~~(“QSub”~~("QSub") ~~to a taxable C Corporation upon acquisition.~~

~~Prior to the acquisition, MTI was a QSub~~ of Martin Resource Management Corporation, ~~a qualifying S Corporation. A QSub is not treated as a separate corporation for federal income tax purposes as~~ it is ~~deemed liquidated into~~precluded from carrying back net operating losses to its ~~S Corporation parent. S Corporations are generally not subject to income~~QSub taxable years. The other applicable provisions of the CARES Act have no material impact on the annual effective tax rate ("AETR"), deferred taxes, ~~because income and losses flow through to shareholders and are reported on their individual returns. Subsequent to the acquisition, MTI will file stand-alone C Corporation returns.~~

~~MARTIN MIDSTREAM PARTNERS L.P.~~

~~NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS~~

~~(Dollars in thousands, except where otherwise indicated)~~

~~June 30, 2019~~

~~(Unaudited)~~

or valuation allowances.

A current federal income tax expense (benefit) of ~~$(78)~~$133 and ~~$218,~~$297, related to the operation of the subsidiary, were recorded for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~and $0 and $0 for the three and six months ended June 30, 2018,~~ respectively. A current state income tax expense (benefit) of ~~$20~~$(72) and ~~$(198)~~$(218), related to the operation of the subsidiary, were recorded for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, and $0 and $0 for the three and six months ended June 30, 2018, respectively. In connection with the MTI acquisition, the Partnership also established deferred income taxes of $24,781 associated with book and tax basis differences of the acquired assets and liabilities. The basis differences are primarily related to property, plant and equipment and deductible tax goodwill. Equity of MTI was adjusted for the deferred tax consequences of the basis differences caused by the transaction between entities under common control.respectively

With respect to MTI, income taxes are accounted for under the asset and liability method pursuant to the provisions of ASC 740 related to income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A deferred tax expense related to the MTI temporary differences of ~~$487~~$286 and ~~$856~~$369 was recorded for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, ~~respectively, and $0 and $0 was recorded for the three and six months ended June 30, 2018,~~ respectively. A deferred tax asset of ~~$23,925~~$23,136 and ~~$0,~~$23,422, related to the cumulative book and tax temporary differences, existed at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.

All income tax positions taken for all open years are more likely than not to be sustained based upon their technical merit under applicable tax laws.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

March 31, 2020

(Unaudited)

NOTE ~~20.~~18. SUBSEQUENT EVENTS

Quarterly Distribution. On ~~July 18, 2019,~~April 22, 2020, the Partnership declared a quarterly cash distribution of ~~$0.25~~$0.0625 per common unit for the ~~second~~first quarter of ~~2019,~~2020, or ~~$1.00~~$0.25 per common unit on an annualized basis, which will be paid on ~~August 14, 2019~~May 15, 2020 to unitholders of record as of ~~August 7, 2019.~~May 8, 2020.

~~Credit Facility Amendment and Extension.~~ On July 18, 2019, the Partnership amended its revolving credit facility to, among other things, extend the maturity date from March 2020 to August 2023 and reduce commitments from $500,000 to $400,000.



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

~~Forward-Looking Statements~~

This quarterly report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements included in this quarterly report that are not historical facts (including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto), including, without limitation, the information set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements. These statements can be identified by the use of forward-looking terminology including "forecast," "may," "believe," "will," "expect," "anticipate," "estimate," "continue," or other similar words. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other "forward-looking" information. We and our representatives may from time to time make other oral or written statements that are also forward-looking statements.

Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons, including those discussed under "Item 1A. Risk Factors" of our Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (the "SEC") on February 19, 2019 and in this report.

Overview

We are a publicly traded limited partnership with a diverse set of operations focused primarily in the ~~United States ("~~U.S.") Gulf Coast region. Our four primary business lines include:

Terminalling, processing, storage and packaging services for petroleum products and by-products including the refining of naphthenic crude oil;

Land and marine transportation services for petroleum products and by-products, chemicals, and specialty products;

Sulfur and sulfur-based products processing, manufacturing, marketing, and distribution; and

~~Natural gas liquids~~NGL marketing, distribution, and transportation services.

The petroleum products and by-products we collect, transport, store and market are produced primarily by major and independent oil and gas companies who often turn to third parties, such as us, for the transportation and disposition of these products. In addition to these major and independent oil and gas companies, our primary customers include independent refiners, large chemical companies, ~~fertilizer manufacturers~~ and other wholesale purchasers of these products. We operate primarily in the U.S. Gulf Coast region. This region is a major hub for petroleum refining, natural gas gathering and processing, and support services for the exploration and production industry.

We were formed in 2002 by Martin Resource Management Corporation, a privately-held company whose initial predecessor was incorporated in 1951 as a supplier of products and services to drilling rig contractors. Since then, Martin Resource Management Corporation has expanded its operations through acquisitions and internal expansion initiatives as its management identified and capitalized on the needs of producers and purchasers of petroleum products and by-products and other bulk liquids. Martin Resource Management Corporation is an important supplier and customer of ours. As of ~~June 30, 2019,~~March 31, 2020, Martin Resource Management Corporation owned 15.7% of our total outstanding common limited partner units. Furthermore, Martin Resource Management Corporation controls Martin Midstream GP LLC ("MMGP"), our general partner, by virtue of its 51% voting interest in MMGP Holdings, LLC ("Holdings"), the sole member of MMGP. MMGP owns a 2.0%

general partner interest in us and all of our incentive distribution rights. Martin Resource Management Corporation directs our business operations through its ownership interests in and control of our general partner.

We entered into an omnibus agreement dated November 1, 2002, with Martin Resource Management Corporation (the "Omnibus Agreement") that governs, among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision of general administration and support services by Martin Resource Management Corporation and our use of certain of Martin Resource Management Corporation’s trade names and trademarks. Under the terms of the Omnibus Agreement, the employees of Martin Resource Management Corporation are responsible for conducting our business and operating our assets.

Martin Resource Management Corporation has operated our business since 2002. Martin Resource Management Corporation began operating our ~~natural gas liquids~~NGL business in the 1950s and our sulfur business in the 1960s. It began our land transportation business in the early 1980s and our marine transportation business in the late ~~1980s and our land transportation business in the early~~ 1980s. It entered into our fertilizer and terminalling and storage businesses in the early 1990s. ~~In recent years, Martin Resource Management Corporation has increased the size of our asset base through expansions and strategic acquisitions.~~

Significant Recent Developments

COVID-19 Pandemic

The Partnership prioritizes the health and safety of our employees, the businesses we serve, and the communities where we live and work. To support the safety of all of our employees and operations, precautionary measures have been implemented to prevent the COVID-19 virus from spreading in our workplace or the locations we serve, including suspending non-essential travel, limiting the number of employees attending meetings, reducing the number of people at our locations at any one time, monitoring the health of all employees, and implementing work-from-home initiatives for all eligible employees.

Further, we began awareness training for all of our drivers, vessel crews, blending operators and other affected personnel regarding preventative measures in or around our docks, vessels, and trucks and locations to which they are delivering. Our communication lines are open 24/7 for the environmental health and safety division, land and marine logistics, and sales and marketing teams.

Due to the economic impacts of the COVID-19 pandemic, the markets have experienced a decline in oil prices in response to oil demand concerns. These concerns have been further exacerbated by the price war among members of the Organization of Petroleum Exporting Countries and other non-OPEC producer nations during the first quarter 2020 and global storage considerations. Travel restrictions and stay-at-home orders implemented by governments in many regions and countries across the globe, including the United States, have greatly impacted the demand for refined products resulting in a significant reduction in refinery utilization. The COVID-19 pandemic has impacted our 2020 performance to date. The impact of this outbreak started in February and was more significant in March, during which time we have seen unfavorable trends in certain key metrics across several of our business lines compared to recent periods.

~~Divestiture~~We expect to continue to experience the adverse impacts of COVID-19 on our business throughout the remainder of 2020 as a result of an expected continued reduction in refined product demand across the industries we serve. As we look forward in our Terminalling and Storage segment, there should be minimal impact on the storage component of this business due to minimum volume commitment contracts. However, there is downside risk in our packaged lubricant and grease businesses due to anticipated reduced demand from our oil and gas production customers and our construction customers. In our Transportation segment, reduced demand for refined products is expected to continue to impact our daily load count specific to our refinery customers in our land transportation business. Our near-term outlook currently remains cautiously optimistic for marine transportation as we are now seeing demand for the use of barges as floating storage for crude oil, which should support barge utilization if refinery barge demand decreases. In our Natural Gas ~~Storage Assets.~~ Liquids segment, our butane optimization business could be impacted by reduced butane production out of third-party refineries as they run at lower utilization rates during the economic shutdown. As a result, we are unable to predict the amount of butane volume we are able to purchase and store this summer in order to sell back to refiners during the winter blending season. However, we believe working capital invested in this business will be significantly less than last year, primarily due to depressed energy prices which translates to lower debt levels supporting our butane business in 2020. Looking forward in our Sulfur Services segment, we believe our molten sulfur business will not be affected as we are paid a monthly logistics fee by our primary customer. However, we do believe there will be reduced overall sulfur volumes from third-party refineries, which will negatively impact our prilling volume, reducing our operating fee revenue. We expect, however, to continue to receive our reservation fees regardless of the amount of sulfur volume processed through our prillers.

The extent to which the duration and severity of the pandemic impacts our business, results of operations, and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted at this time. Accordingly, the full impact of COVID-19 will not be reflected in our results of operations and overall financial performance until future periods. In an effort to conserve capital in the near-term, we are actively considering, planning and executing expense reduction initiatives and have elected to defer certain maintenance and growth capital expenditures until 2021.

Management also assessed the extent to which the current macroeconomic events brought about by COVID-19 and significant declines in refined product demand impacted the valuation of expected credit losses on accounts receivable and certain inventory items or resulted in modifications to any significant contracts. Ultimately the results of these assessments did not have a material impact on our results as of March 31, 2020.

Other Recent Developments

Beginning in July of 2018, we committed to strengthening our balance sheet through strategic initiatives aimed at reducing leverage by divesting non-core assets and businesses, creating the ability to focus on a streamlined corporate strategy and position the Partnership for growth.

The first set of initiatives was executed in 2018 with the divestiture of our 20% interest in West Texas LPG Pipeline Limited Partnership for $195.0 million and the sale of a non-strategic terminal asset located in Nevada for $8.0 million. On ~~June 28,~~January 1, 2019, we completed the next initiative with the acquisition of Martin Transport, Inc. from Martin Resource Management Corporation for $135.0 million, positioning us for cash flow growth. On July 1, 2019, we completed the sale of our ~~membership interests in Arcadia Gas Storage, LLC, Cadeville Gas Storage LLC, Monroe Gas Storage Company, LLC~~natural gas storage assets for $215.0 million, which was an important piece of the Partnership’s strategy to strengthen the balance sheet and Perryville Gas Storage LLC (the “Natural Gas Storage Assets”) to Hartree Cardinal Gas, LLC ("Hartree"), a subsidiary of Hartree Bulk Storage, LLC. The Natural Gas Storage Assets consist of approximately 50 billion cubic feet of working capacity located in northern Louisiana and Mississippi. In consideration ofre-focus our operational expertise on the refinery services industry. On August 12, 2019, we completed the sale of the Natural Gas Storage Assets, we received cash proceeds of $210.1 million after transaction fees and expenses, subject to final post closing adjustments. The proceeds were used to reduce outstanding borrowings under our ~~revolving credit facility.~~East Texas Pipeline for $17.5 million.

~~Martin Transport Inc. Stock Purchase Agreement.~~ ~~On October 22, 2018,~~

As a result of dispositions, offset by acquisitions, we ~~entered into~~were able to pay down $300.5 million of outstanding debt while incurring only a ~~stock purchase agreement (the “Stock Purchase Agreement”)~~slight reduction to projected EBITDA. Consistent with ~~Martin Resource Management Corporation to acquire all~~our strategy of ~~the issued~~reducing leverage and outstanding equity interests of Martin Transport, Inc. (“MTI”), a wholly-owned subsidiary of Martin Resource Management Corporation which operates a fleet of tank trucks providing transportation of petroleum products, liquid petroleum gas, chemicals, sulfur and other products, as well as owns twenty-three terminals located throughout the Gulf Coast and Southeastern regions of the United States for total consideration of $135.0 million with a $10.0 million earn-out based on certain performance thresholds. Additionally, a post-closing working capital adjustment was finalizedimproving liquidity, on January 28, ~~2019 which included additional consideration paid~~2020, we announced a $0.75 per unit reduction of our cash distribution on an annual basis, allowing us to Martin Resource Management Corporation of $2.8 million. The Stock Purchase Agreement contained customary representations and warranties. Martin Resource Management Corporation has owned and operated MTI or its predecessor for over 40 years and MTI is integralretain $29.2 million to continue to strengthen our routine movements of sulfur and NGL’s. Based on operational estimates and current transportation market conditions, this drop-down from our general partner will provide strategic long-term growth for the Partnership. This transaction closed January 2, 2019 and was effective as of January 1, 2019. As of January 1, 2019, Martin Resource Management Corporation will no longer provide land transportation services. balance sheet.

Subsequent Events

Quarterly Distribution. On ~~July 18, 2019,~~April 22, 2020, we declared a quarterly cash distribution of ~~$0.25~~$0.0625 per common unit for the ~~second~~first quarter of ~~2019,~~2020, or ~~$1.00~~$0.25 per common unit on an annualized basis, which will be paid on ~~August 14, 2019~~May 15, 2020 to unitholders of record as of ~~August 7, 2019.~~

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on the historical consolidated and condensed financial statements included elsewhere herein. We prepared these financial statements in conformity with United States generally accepted accounting principles ("U.S. ~~GAAP" or "GAAP").~~GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. We routinely evaluate these estimates, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Our results may differ from these estimates, and any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Changes in these estimates could materially affect our financial position, results of operations or cash flows. See the "Critical Accounting Policies and Estimates" section in ~~"Managements~~"Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2, "Significant Accounting Policies" in Notes to Consolidated Financial Statements included within our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the ~~Securities and Exchange Commission (the "SEC")~~SEC on February ~~19, 2019, as amended.~~14, 2020.

Our Relationship with Martin Resource Management Corporation

Martin Resource Management Corporation is engaged in the following principal business activities:

distributing fuel oil, ~~ammonia,~~ asphalt, marine fuel and other liquids;

providing marine bunkering and other shore-based marine services in Texas, Louisiana, Mississippi, Alabama, and Florida;

operating a crude oil gathering business in Stephens, Arkansas;

providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas;

providing crude oil marketing and transportation from the well head to the end market;

operating an environmental consulting company;

~~operating an engineering services company;~~

supplying employees and services for the operation of our business; and

operating, solely for our account, the asphalt facilities in ~~Omaha, Nebraska,~~each of Hondo, South Houston and Port Neches, Texas ~~Hondo, Texas,~~ and ~~South Houston, Texas.~~Omaha, Nebraska.

We are and will continue to be closely affiliated with Martin Resource Management Corporation as a result of the following relationships.

Ownership

Martin Resource Management Corporation owns approximately 15.7% of the outstanding limited partner units. In addition, Martin Resource Management Corporation controls MMGP, our general partner, by virtue of its 51% voting interest in Holdings, the sole member of MMGP. MMGP owns a 2% general partner interest in us and all of our incentive distribution rights.

Management

Martin Resource Management Corporation directs our business operations through its ownership interests in and control of our general partner. We benefit from our relationship with Martin Resource Management Corporation through access to a significant pool of management expertise and established relationships throughout the energy industry. We do not have employees. Martin Resource Management Corporation employees are responsible for conducting our business and operating our assets on our behalf.

Related Party Agreements

The Omnibus Agreement requires us to reimburse Martin Resource Management Corporation for all direct expenses it incurs or payments it makes on our behalf or in connection with the operation of our business. We reimbursed Martin Resource Management Corporation for ~~$38.8~~$34.4 million of direct costs and expenses for the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$35.9~~$35.4 million for the three months ended June 30, 2018. We reimbursed Martin Resource Management Corporation for $74.2 million of direct costs and expenses for the six months ended June 30, 2019 compared to $71.2 million for the six months ended June 30, 2018.March 31, 2019. There is no monetary limitation on the amount we are required to reimburse Martin Resource Management Corporation for direct expenses.

In addition to the direct expenses, under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses. ~~For~~In each of the three months ended ~~June 30,~~March 31, 2020 and 2019, and 2018, the conflicts committee of the board of directors of the general partner of the Partnership (the "Conflicts Committee") approved reimbursement amounts of $4.3 million and $4.1 million, respectively. For the six months ended June 30, 2019 and 2018, the Conflicts Committee approved reimbursement amounts of ~~$8.4~~$4.2 million and ~~$8.2~~$4.2 million, respectively. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually. These indirect expenses covered the centralized corporate functions Martin Resource Management Corporation provides for us, such as accounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit plans and other general corporate overhead functions we share with Martin Resource Management Corporation’s retained businesses. The Omnibus Agreement also contains significant non-compete provisions and indemnity obligations. Martin Resource Management Corporation also licenses certain of its trademarks and trade names to us under the Omnibus Agreement.

The agreements include, but are not limited to, ~~motor carrier agreements,~~a master transportation services agreement, marine transportation agreements, terminal services agreements, a tolling agreement, and a sulfuric acid ~~agreement, and various other miscellaneous agreements.~~sales agency agreement. Pursuant to the terms of the Omnibus Agreement, we are prohibited from entering into certain material agreements with Martin Resource Management Corporation without the approval of the Conflicts Committee.

For a more comprehensive discussion concerning the Omnibus Agreement and the other agreements that we have entered into with Martin Resource Management Corporation, please refer to "Item 13. Certain Relationships and Related Transactions, and Director Independence" set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the ~~Securities and Exchange Commission (the "SEC")~~SEC on February ~~19, 2019.~~14, 2020.

Commercial

We have been and anticipate that we will continue to be both a significant customer and supplier of products and services offered by Martin Resource Management Corporation. In the aggregate, the impact of related party transactions included in ~~cost of products sold~~total costs and expenses accounted for approximately ~~10%~~21% and 7%17% of our total ~~cost of products sold~~costs and expenses during the three months ended ~~June 30,~~March 31, 2020 and 2019, and 2018. In the aggregate, the impact of related party transactions included in cost of products sold accounted for approximately 7% and 5% of our total cost of products sold during the six months ended June 30, 2019 and 2018, respectively. ~~We also purchase marine fuel from Martin Resource Management Corporation, which we account for as an operating expense.~~

Correspondingly, Martin Resource Management Corporation is one of our significant customers. Our sales to Martin Resource Management Corporation accounted for approximately ~~13%~~11% and ~~12% of our total revenues for the three months ended June 30, 2019 and 2018, respectively. Our sales to Martin Resource Management Corporation accounted for approximately 11%~~10% of our total revenues for both the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. We have entered into certain agreements with Martin Resource Management Corporation pursuant to which we provide terminalling and storage and marine transportation services to its subsidiary, Martin Energy Services, LLC ("MES"), and MES provides terminal services to us to handle lubricants, greases and drilling fluids. Additionally, we have entered into a long-term, fee for services-based tolling agreement with Martin Resource Management Corporation where Martin Resource Management Corporation agrees to pay us for the processing of its crude oil into finished products, including naphthenic lubricants, distillates, asphalt and other intermediate cuts.

For a more comprehensive discussion concerning the agreements that we have entered into with Martin Resource Management Corporation, please refer to "Item 13. Certain Relationships and Related Transactions, and Director Independence" set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the ~~Securities and Exchange Commission (the "SEC")~~SEC on February ~~19, 2019.~~14, 2020.

Approval and Review of Related Party Transactions

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

How We Evaluate Our Operations

Our management uses a variety of financial and operational measurements other than our financial statements prepared in accordance with U.S. GAAP to analyze our performance. These include: (1) net income before interest expense, income tax expense, and depreciation and amortization ("EBITDA"), (2) adjusted EBITDA and (3) distributable cash flow. Our management views these measures as important performance measures of core profitability for our operations and the ability to generate and distribute cash flow, and as key components of our internal financial reporting. We believe investors benefit from having access to the same financial measures that our management uses.

EBITDA and Adjusted EBITDA. Certain items excluded from EBITDA and adjusted EBITDA are significant components in understanding and assessing an entity's financial performance, such as cost of capital and historical costs of depreciable assets. We have included information concerning EBITDA and adjusted EBITDA because they provide investors and management with additional information to better understand the following: financial performance of our assets without regard to financing methods, capital structure or historical cost basis; our operating performance and return on capital as compared to those of other similarly situated entities; and the viability of acquisitions and capital expenditure projects. Our method of computing adjusted EBITDA may not be the same method used to compute similar measures reported by other entities. The economic substance behind our use of adjusted EBITDA is to measure the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness and make distributions to our unit holders.

Distributable Cash Flow. Distributable cash flow is a significant performance measure used by our management and by external users of our financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by us to the cash distributions we expect to pay our unitholders. Distributable cash flow is also an important financial measure for our unitholders since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Distributable cash flow is also a quantitative standard used throughout the investment community with respect to publicly-traded partnerships because the value of a unit of such an entity is generally determined by the unit's yield, which in turn is based on the amount of cash distributions the entity pays to a unitholder.

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

Non-GAAP Financial Measures

The following table reconciles the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the ~~three and~~ ~~six~~three months ended ~~June 30,~~March 31, ~~2019~~2020 and ~~2018~~2019.

Reconciliation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow

Three Months Ended Six Months Ended
June 30, June 30,
2019
2018¹
2019
2018¹
(in thousands) (in thousands)
Net income (loss) $ (191,182 ) $ (4,526 ) $ (194,838 ) $ 10,510
Less: (Income) loss from discontinued operations, net of income taxes 180,568
(4,927 ) 179,466
(12,014 )
Loss from continuing operations (10,614 ) (9,453 ) (15,372 ) (1,504 )
Adjustments:
Interest expense, net 14,986
13,815
28,657
26,545
Income tax expense 639
132
1,335
281
Depreciation and amortization 15,087
16,946
29,988
32,258
EBITDA from Continuing Operations 20,098
21,440
44,608
57,580
Adjustments:
Loss on sale of property, plant and equipment 1,633
206
2,353
198
Unrealized mark-to-market on commodity derivatives 2,220
654
2,073
500
Transaction costs associated with acquisitions 40
—
224
—
Non-cash insurance related accruals 500
—
500
—
Lower of cost or market adjustments 303
—
303
—
Unit-based compensation 363
388
715
520
Adjusted EBITDA from Continuing Operations 25,157
22,688
50,776
58,798
Adjustments:
Interest expense, net (14,986 ) (13,815 ) (28,657 ) (26,545 )
Income tax expense (639 ) (132 ) (1,335 ) (281 )
Amortization of debt premium (76 ) (76 ) (153 ) (153 )
Amortization of deferred debt issuance costs 1,583
870
2,478
1,689
Deferred income taxes 487
—
856
—
Payments for plant turnaround costs (915 ) —
(4,742 ) —
Maintenance capital expenditures (2,628 ) (4,857 ) (6,487 ) (10,100 )
Distributable Cash Flow from Continuing Operations $ 7,983
$ 4,678
$ 12,736
$ 23,408

Income (loss) from discontinued operations, net of income taxes $ (180,568 ) $ 4,927
$ (179,466 ) $ 12,014
Adjustments:
Depreciation and amortization 4,080
4,684
8,161
9,362
EBITDA from Discontinued Operations (176,488 ) 9,611
(171,305 ) 21,376
Equity in earnings of unconsolidated entities —
(1,131 ) —
(2,726 )
Distributions from unconsolidated entities —
1,500
—
3,000
Loss on sale of property, plant and equipment 178,781
120
178,781
120
Non-cash insurance related accruals 3,213
—
3,213
—
Adjusted EBITDA from Discontinued Operations 5,506
10,100
10,689
21,770
Maintenance capital expenditures (576 ) (512 ) (912 ) (1,271 )
Distributable Cash Flow from Discontinued Operations $ 4,930
$ 9,588
$ 9,777
$ 20,499



	Three Months Ended
	March 31,
	2020			2019
	(in thousands)
Net income (loss)	$	8,815		$	(3,656	)
Less: (Income) from discontinued operations, net of income taxes	—			(1,102		)
Income (loss) from continuing operations	8,815			(4,758		)
Adjustments:
Interest expense, net	9,925			13,671
Income tax expense	347			696
Depreciation and amortization	15,239			14,901
EBITDA from Continuing Operations	34,326			24,510
Adjustments:
Loss on sale of property, plant and equipment, net	190			720
Unrealized mark-to-market on commodity derivatives	(669		)	(147		)
Transaction costs associated with acquisitions	—			184
Lower of cost or market adjustments	335			—
Gain on repurchase of senior unsecured notes	(3,484		)	—
Unit-based compensation	346			352
Adjusted EBITDA from Continuing Operations	31,044			25,619
Adjustments:
Interest expense, net	(9,925		)	(13,671		)
Income tax expense	(347		)	(696		)
Amortization of debt premium	(77		)	(77		)
Amortization of deferred debt issuance costs	492			895
Deferred income tax expense	286			369
Payments for plant turnaround costs	(150		)	(3,827		)
Maintenance capital expenditures	(3,026		)	(3,859		)
Distributable Cash Flow from Continuing Operations	$	18,297		$	4,753

Income from discontinued operations, net of income taxes	$	—		$	1,102
Adjustments:
Depreciation and amortization	—			4,081
EBITDA and Adjusted EBITDA from Discontinued Operations	—			5,183
Maintenance capital expenditures	—			(336		)
Distributable Cash Flow from Discontinued Operations	$	—		$	4,847

Results of Operations

The results of operations for the ~~three and~~ ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018~~2019 have been derived from our consolidated and condensed financial statements.

We evaluate segment performance on the basis of operating income, which is derived by subtracting cost of products sold, operating expenses, selling, general and administrative expenses, and depreciation and amortization expense from revenues. The following table sets forth our operating revenues and operating income by segment for the ~~three and~~ ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018~~2019. The results of operations for these interim periods are not necessarily indicative of the results of operations which might be expected for the entire year.

Our consolidated and condensed results of operations are presented on a comparative basis below. There are certain items of income and expense which we do not allocate on a segment basis. These items, including ~~equity in earnings (loss) of unconsolidated entities,~~ interest expense and indirect selling, general and administrative expenses, are discussed following the comparative discussion of our results within each segment.

Three Months Ended ~~June 30, 2019 Compared to the Three Months Ended June 30, 2018~~

Operating Revenues Intersegment Revenues Eliminations
Operating Revenues
after Eliminations
Operating Income (Loss) Operating Income (Loss) Intersegment Eliminations
Operating
Income (Loss)
after
Eliminations
Three Months Ended June 30, 2019 (in thousands)
Terminalling and storage $ 54,351
$ (1,603 ) $ 52,748
$ 4,400
$ (146 ) $ 4,254
Transportation 47,233
(5,912 ) 41,321
3,314
(5,943 ) (2,629 )
Sulfur services 35,856
—
35,856
5,285
2,243
7,528
Natural gas liquids 57,398
—
57,398
(3,390 ) 3,846
456
Indirect selling, general and administrative —
—
—
(4,599 ) —
(4,599 )
Total $ 194,838
$ (7,515 ) $ 187,323
$ 5,010
$ —
$ 5,010

Operating Revenues Intersegment Revenues Eliminations
Operating Revenues
after Eliminations
Operating Income (Loss) Operating Income (Loss) Intersegment Eliminations
Operating
Income (Loss)
after
Eliminations
Three Months Ended June 30, 2018 (in thousands)
Terminalling and storage $ 62,314
$ (1,452 ) $ 60,862
$ 2,749
$ (96 ) $ 2,653
Transportation 43,553
(6,347 ) 37,206
3,310
(6,397 ) (3,087 )
Sulfur services 38,471
—
38,471
3,597
2,660
6,257
Natural gas liquids 90,643
(18 ) 90,625
(821 ) 3,833
3,012
Indirect selling, general and administrative —
—
—
(4,346 ) —
(4,346 )
Total $ 234,981
$ (7,817 ) $ 227,164
$ 4,489
$ —
$ 4,489

~~Six Months Ended June 30, 2019~~March 31, 2020 Compared to the ~~Six~~Three Months Ended ~~June 30, 2018~~March 31, 2019


	Operating Revenues		Intersegment Revenues Eliminations			Operating Revenues after Eliminations		Operating Income (Loss)			Operating Income (Loss) Intersegment Eliminations			Operating Income (Loss) after Eliminations			Operating Revenues		Intersegment Revenues Eliminations			Operating Revenues after Eliminations		Operating Income (Loss)			Operating Income (Loss) Intersegment Eliminations			Operating Income (Loss) after Eliminations
Six Months Ended June 30, 2019	(in thousands)
Three Months Ended March 31, 2020																	(in thousands)
Terminalling and storage	$	110,243	$	(3,324	)	$	106,919	$	9,486		$	(417	)	$	9,069		$	51,134	$	(1,726	)	$	49,408	$	1,029		$	(271	)	$	758
Transportation	92,419		(13,303		)	79,116		6,844			(13,353		)	(6,509		)	45,174		(6,233		)	38,941		2,389			(7,410		)	(5,021		)
Sulfur services	67,449		—			67,449		9,103			4,805			13,908			28,336		(13		)	28,323		11,296			2,562			13,858
Natural gas liquids	173,872		—			173,872		(1,651		)	8,965			7,314			82,215		(4		)	82,211		5,258			5,119			10,377
Indirect selling, general and administrative	—		—			—		(9,166		)	—			(9,166		)	—		—			—		(4,372		)	—			(4,372		)
Total	$	443,983	$	(16,627	)	$	427,356	$	14,616		$	—		$	14,616		$	206,859	$	(7,976	)	$	198,883	$	15,600		$	—		$	15,600


	Operating Revenues		Intersegment Revenues Eliminations			Operating Revenues after Eliminations		Operating Income (Loss)			Operating Income (Loss) Intersegment Eliminations			Operating Income (Loss) after Eliminations			Operating Revenues		Intersegment Revenues Eliminations			Operating Revenues after Eliminations		Operating Income (Loss)			Operating Income (Loss) Intersegment Eliminations			Operating Income (Loss) after Eliminations
Six Months Ended June 30, 2018	(in thousands)
Three Months Ended March 31, 2019																	(in thousands)
Terminalling and storage	$	124,297	$	(2,925	)	$	121,372	$	6,368		$	(19	)	$	6,349		$	55,892	$	(1,721	)	$	54,171	$	5,086		$	(271	)	$	4,815
Transportation	85,490		(13,925		)	71,565		5,935			(14,061		)	(8,126		)	45,186		(7,391		)	37,795		3,530			(7,410		)	(3,880		)
Sulfur services	76,158		—			76,158		11,284			5,139			16,423			31,593		—			31,593		3,818			2,562			6,380
Natural gas liquids	249,806		(19		)	249,787		10,307			8,941			19,248			116,474		—			116,474		1,739			5,119			6,858
Indirect selling, general and administrative	—		—			—		(8,577		)	—			(8,577		)	—		—			—		(4,567		)	—			(4,567		)
Total	$	535,751	$	(16,869	)	$	518,882	$	25,317		$	—		$	25,317		$	249,145	$	(9,112	)	$	240,033	$	9,606		$	—		$	9,606

Terminalling and Storage Segment

Comparative Results of Operations for the Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~


	Three Months Ended June 30,					Variance				Percent Change		Three Months Ended March 31,					Variance			Percent Change
	2019		2018						2020				2019				Variance			Percent Change
	(In thousands, except BBL per day)									Percent Change				(In thousands, except BBL per day)
Revenues:						Variance
Services	$	22,966	$	25,491		$	(2,525	)		(10	)%	$	22,167		$	24,800	$	(2,633	)	(11	)%
Products	31,385		36,823			(5,438		)		(15	)%	28,967			31,092		(2,125		)	(7	)%
Total revenues	54,351		62,314			(7,963		)		(13	)%	51,134			55,892		(4,758		)	(9	)%

Cost of products sold	27,497		33,596			(6,099		)		(18	)%	24,988			28,277		(3,289		)	(12	)%
Operating expenses	13,257		12,909			348				3	%	12,951			13,353		(402		)	(3	)%
Selling, general and administrative expenses	1,378		1,334			44				3	%	1,659			1,349		310			23	%
Depreciation and amortization	7,826		11,690			(3,864		)		(33	)%	7,456			7,837		(381		)	(5	)%
	4,393		2,785			1,608				58	%	4,080			5,076		(996		)	(20	)%
Other operating income (loss)	7		(36		)	43				119	%
Other operating income (loss), net												(3,051		)	10		(3,061		)	(30,610	)%
Operating income	$	4,400	$	2,749		$	1,651			60	%	$	1,029		$	5,086	$	(4,057	)	(80	)%

Shore-based throughput volumes (guaranteed minimum) (gallons)	20,000		20,000			—				—	%	20,000			20,000		—			—	%
Smackover refinery throughput volumes (guaranteed minimum BBL per day)	6,500		6,500			—				—	%
Smackover refinery throughput volumes (guaranteed minimum) (BBL per day)												6,500			6,500		—			—	%

Services revenues. S~~ervices~~Services revenue decreased ~~$2.5~~$2.6 million, of which ~~$1.7~~$1.8 million was primarily a result of decreased throughput fees at our shore-based terminals combined with a ~~$0.8~~$0.9 million decrease as a result of a decrease in minimum throughput revenue and pipeline fees at our ~~specialty terminals.~~Smackover refinery.

Products revenues. A ~~36% decrease in sales volumes combined with a 29%~~27% decrease in average sales price at our ~~shore based~~shore-based terminals resulted in ~~an $8.3~~a $2.9 million decrease toin products revenues. Offsetting this decrease was a ~~13%~~4% increase in sales volumes ~~combined with a 1% increase in average sales price~~ at our blending and packaging facilities, resulting in a ~~$3.1~~$0.9 million increase to products revenues.

Cost of products sold. A ~~36% decrease in sales volumes combined with a 31%~~28% decrease in average cost per gallon at our ~~shore based~~shore-based terminals resulted in ~~an $8.0~~a $2.8 million decrease in cost of products sold. ~~Offsetting this decrease was~~In addition, a ~~13% increase in sales volumes, offset by a 1%~~6% decrease in average cost per gallon, offset with a 4% increase in sales volumes at our blending and packaging facilities ~~resulting~~resulted in a ~~$2.2~~$0.4 million ~~increase~~decrease in cost of products sold.

Operating expenses. Operating expenses ~~increased $0.3 million~~decreased primarily ~~due to increased repairs and maintenance~~as a result of ~~$0.2 million and increased compensation expense of $0.1 million.~~decreased utilities across our terminals.

Selling, general and administrative expenses. Selling, general and administrative expenses ~~remained relatively consistent.~~increased primarily due to an increase in professional fees across our terminals.

Depreciation and amortization. The decrease in depreciation and amortization is due to the disposition of assets at several ~~closed~~ shore-based ~~facilities~~ and ~~our sulfuric acid terminal in Elko, Nevada,~~specialty terminals, offset by recent capital expenditures.

Other operating income (loss)., net. Other operating ~~loss represents gains and losses from the disposition of property, plant and equipment.~~

~~Comparative Results of Operations for the Six Months Ended June 30, 2019 and 2018~~

Six Months Ended June 30, Variance Percent Change
2019 2018
(In thousands, except BBL per day)
Revenues:
Services $ 47,766
$ 50,994
$ (3,228 ) (6 )%
Products 62,477
73,303
(10,826 ) (15 )%
Total revenues 110,243
124,297
(14,054 ) (11 )%

Cost of products sold 55,774
67,098
(11,324 ) (17 )%
Operating expenses 26,610
26,356
254
1 %
Selling, general and administrative expenses 2,727
2,590
137
5 %
Depreciation and amortization 15,663
21,849
(6,186 ) (28 )%
9,469
6,404
3,065
48 %
Other operating income (loss) 17
(36 ) 53
147 %
Operating income $ 9,486
$ 6,368
$ 3,118
49 %

Shore-based throughput volumes (guaranteed minimum) (gallons) 40,000
40,000
—
— %
Smackover refinery throughput volumes (guaranteed minimum) (BBL per day) 6,500
6,500
—
— %

~~Services revenues.~~ Services revenue decreased $3.2 million, of which $1.7 million was primarily a result of decreased throughput fees at our shore-based terminals combined with a $0.9 million decrease as a result of the disposition of our sulfuric acid terminal in Elko, Nevada. In addition, $1.0 million was a result of decreased throughput at our Tampa specialty terminal. Offsetting these decreases, was an increase of $0.5 million across our specialty terminals.

~~Products revenues.~~ A 33% decrease in sales volumes combined with a 24% decrease in average sales price at our shore based terminals resulted in a $16.7 million decrease in products revenues. Offsetting this decrease was a 13% increase in sales volumes combined with a 3% increase in average sales price at our blending and packaging facilities resulting in a $6.3 million increase to products revenues.

~~Cost of products sold.~~ A 33% decrease in sales volumes combined with a 25% decrease in average sales price at our shore based terminals resulting in a $15.8 million decrease in cost of products sold. Offsetting this decrease was a 13% increase in sales volumes combined with a 2% increase in average cost per gallon at our blending and packaging facilities resulting in a $4.9 million increase in cost of products sold.

~~Operating expenses.~~ Operating expenses increased $0.3 million primarily due to increased labor and burden of $0.5 million, $0.2 million related to increased wharfage and dockage out our Tampa facility, offset by a decrease of $0.4 million as result of the disposition of our sulfuric acid terminal in Elko, Nevada.

~~Selling, general and administrative expenses.~~ ~~Selling, general and administrative expenses remained relatively consistent.~~

~~Depreciation and amortization.~~ The decrease in depreciation and amortization is due to the disposition of assets at several closed shore-based facilities and our sulfuric acid terminal in Elko, Nevada, offset by recent capital expenditures.

~~Other operating~~ income (loss). ~~Other operating income~~, net represents gains and losses from the disposition of property, plant and equipment.

Transportation Segment

Comparative Results of Operations for the Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~


	Three Months Ended June 30,						Variance				Percent Change		Three Months Ended March 31,						Variance				Percent Change
	2019			2018						2020				2019					Variance				Percent Change
	(In thousands)										Percent Change				(In thousands)
Revenues	$	47,233		$	43,553		Variance	$	3,680			8	%	$	45,174		$	45,186		$	(12	)		—	%
Operating expenses	36,512			36,055			457				1	%	35,162			35,265			(103		)		—	%
Selling, general and administrative expenses	1,980			1,452			528				36	%	2,135			2,085			50				2	%
Depreciation and amortization	3,778			2,550			1,228				48	%	4,280			3,570			710				20	%
	4,963			3,496			1,467				42	%	$	3,597		$	4,266		$	(669	)		(16	)%
Other operating loss	(1,649		)	(186		)	(1,463		)		(787	)%
Other operating loss, net													(1,208		)	(736		)	(472		)		(64	)%
Operating income	$	3,314		$	3,310		$	4			—	%	$	2,389		$	3,530		$	(1,141	)		(32	)%

Marine Transportation Revenues. ~~Inland~~An increase of $0.9 million in inland revenue ~~increased $2.9 million, primarily related~~is attributable to increased utilization and ~~additional leased equipment being placed in service. Additionally, ancillary~~transportation rates. Offsetting these increases, offshore revenue ~~(primarily fuel)~~decreased $0.2 million primarily due to decreased rates of $0.5 million, offset by increased utilization of $0.3 million.

Land Transportation Revenues. Freight revenue ~~increased $0.5 million. Transportation rates increased~~decreased $0.6 million primarily due to a 3% ~~resulting~~decrease in ~~an increase to freight revenue of $0.6 million. Miles~~transportation rates. Additionally, fuel surcharge decreased ~~1% resulting in an offsetting decrease of $0.1~~$0.4 million.

Operating expenses. ~~The increase in operating~~Operating expenses is primarily a result of increased compensation expense of $1.3 million, outside towing of $0.8 million, and repairs and maintenance of $0.4 million. These increases were offset by a decrease in lease expense of $1.0 million, a reclassification of expenses from operating to selling, general and administrative expense of $0.4 million and pass through expenses (primarily fuel) of $0.3 million.remained relatively consistent.

Selling, general and administrative expenses. Selling, general and administrative expenses ~~increased primarily due to the reclassification of expenses from operating expense to selling, general and administration expense of $0.4 million.~~remained relatively consistent.

Depreciation and amortization. Depreciation and amortization increased as a result of recent capital expenditures, offset by asset disposals.

Other operating ~~loss.~~loss, net. Other operating loss, ~~represents losses from the disposition of property, plant and equipment.~~

~~Comparative Results of Operations for the Six Months Ended June 30, 2019 and 2018~~

Six Months Ended June 30, Variance Percent Change
2019 2018
(In thousands)
Revenues $ 92,419
$ 85,490
$ 6,929
8 %
Operating expenses 71,777
71,495
282
— %
Selling, general and administrative expenses 4,065
2,868
1,197
42 %
Depreciation and amortization 7,348
5,016
2,332
46 %
$ 9,229
$ 6,111
$ 3,118
51 %
Other operating loss (2,385 ) (176 ) (2,209 ) (1,255 )%
Operating income $ 6,844
$ 5,935
$ 909
15 %

~~Marine Transportation Revenues~~. An increase of $5.8 million in inland revenue is attributable to increased utilization and transportation rates. Additionally, ancillary revenue (primarily fuel) increased $0.2 million. Offsetting these increases, offshore revenue decreased $0.5 million primarily due to equipment being down for regulatory inspections and maintenance.

~~Land Transportation Revenues.~~ Freight revenue increased $1.2 million. Transportation rates increased 6% resulting in an increase to freight revenue of $2.8 million. Additionally, ancillary revenue (fuel), increased $0.2 million. Miles decreased 3% resulting in an offsetting decrease of $1.6 million.

~~Operating expenses~~. The increase in operating expenses is primarily a result of increased outside towing of $1.7 million, compensation expense of $1.7 million, and repairs and maintenance of $0.8 million. These increases were offset by a decrease in lease expense of $2.6 million, reclassification of expenses from operating expense to selling, general and administrative expense of $0.8 million and pass through expenses (primarily fuel) of $0.6 million.

~~Selling, general and administrative expenses. Selling, general and administrative expenses increased primarily due to the reclassification of expenses from operating expense to selling, general and administration expense of $0.8 million.~~

~~Depreciation and amortization. Depreciation and amortization increased as a result of recent capital expenditures offset by asset disposals.~~

~~Other operating loss.~~ ~~Other operating loss~~net represents losses from the disposition of property, plant and equipment.

Sulfur Services Segment

Comparative Results of Operations for the Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~


	Three Months Ended June 30,					Variance				Percent Change		Three Months Ended March 31,					Variance			Percent Change
	2019			2018					2020				2019				Variance			Percent Change
	(In thousands)									Percent Change				(In thousands)
Revenues:						Variance
Services	$	2,858		$	2,787	$	71			3	%	$	2,915		$	2,859	$	56		2	%
Products	32,998			35,684		(2,686		)		(8	)%	25,421			28,734		(3,313		)	(12	)%
Total revenues	35,856			38,471		(2,615		)		(7	)%	28,336			31,593		(3,257		)	(10	)%

Cost of products sold	23,676			28,829		(5,153		)		(18	)%	16,804			21,566		(4,762		)	(22	)%
Operating expenses	2,789			2,929		(140		)		(5	)%	2,910			2,163		747			35	%
Selling, general and administrative expenses	1,251			1,046		205				20	%	1,203			1,178		25			2	%
Depreciation and amortization	2,854			2,086		768				37	%	2,894			2,868		26			1	%
	5,286			3,581		1,705				48	%	4,525			3,818		707			19	%
Other operating income (loss)	(1		)	16		(17		)		(106	)%
Other operating income, net												6,771			—		6,771
Operating income	$	5,285		$	3,597	$	1,688			47	%	$	11,296		$	3,818	$	7,478		196	%

Sulfur (long tons)	182			178		4				2	%	183			109		74			68	%
Fertilizer (long tons)	88			93		(5		)		(5	)%	74			67		7			10	%
Total sulfur services volumes (long tons)	270			271		(1		)		—	%	257			176		81			46	%

Services revenues. Services revenues increased ~~$0.1 million~~slightly as a result of renegotiation of contract terms effective January ~~2019.~~

~~Products revenues.~~ ~~Products revenues decreased $2.6 million as a result of a 7% decrease in average sales price. Sales volumes remained consistent.~~

~~Cost of products sold.~~ ~~An 18% decrease in average cost of products sold per ton resulted in a decrease of $5.1 million. Sales volumes remained consistent. Margin per ton increased $9.23, or 36%.~~

~~Operating expenses.~~ Our operating expenses decreased primarily as a result of a $0.1 million decline in insurance claims, $0.1 million reduction in lease expense, and a $0.1 million decrease in marine fuel expense offset by a $0.1 million increase in compensation expense.

~~Selling, general and administrative expenses.~~ ~~Selling, general and administrative expenses increased $0.1 million due to increased compensation expense and $0.1 million related to professional fees.~~

~~Depreciation and amortization.~~ ~~Depreciation and amortization increased as a result of recent capital expenditures.~~

~~Other operating income (loss).~~ ~~Other operating income (loss) represents gains and losses from the disposition of property, plant and equipment.~~

~~Comparative Results of Operations for the Six Months Ended June 30, 2019 and 2018~~

Six Months Ended June 30, Variance Percent Change
2019 2018
(In thousands)
Revenues:
Services $ 5,717
$ 5,574
$ 143
3 %
Products 61,732
70,584
(8,852 ) (13 )%
Total revenues 67,449
76,158
(8,709 ) (11 )%

Cost of products sold 45,242
52,816
(7,574 ) (14 )%
Operating expenses 4,952
5,841
(889 ) (15 )%
Selling, general and administrative expenses 2,429
2,081
348
17 %
Depreciation and amortization 5,722
4,150
1,572
38 %
9,104
11,270
(2,166 ) (19 )%
Other operating income (loss) (1 ) 14
(15 ) (107 )%
Operating income $ 9,103
$ 11,284
$ (2,181 ) (19 )%

Sulfur (long tons) 291
354
(63 ) (18 )%
Fertilizer (long tons) 155
181
(26 ) (14 )%
Total sulfur services volumes (long tons) 446
535
(89 ) (17 )%

~~Services revenues.~~ ~~Services revenues increased $0.1 million as a result of renegotiation of contract terms effective January 2019.~~2020.

Products revenues. Products revenue decreased ~~$12.3~~$11.3 million as a result of a ~~17% decline~~39% decrease in average sales price. A 46% increase in sales volumes, primarily attributable to ~~an 18% decrease~~a 68% increase in sulfur ~~volumes. A 5% increase in average sales price~~volumes, resulted in an offsetting increase of ~~$3.5~~$8.0 million.

Cost of products sold. A ~~17%~~47% decrease in ~~sales volumes~~average cost of products sold per ton reduced ~~our~~ cost of products sold by ~~$9.0~~$10.1 million. ~~Offsetting this decrease was~~A 46% increase in sales volumes resulted in an offsetting increase in cost of products sold of ~~$1.5 million as a result of a 3% increase in average cost of products sold per ton.~~$5.3 million. Margin per ton ~~increased $3.76,~~decreased $7.20, or ~~11%~~18%.

Operating expenses. Operating expenses ~~decreased~~increased primarily as a result of ~~a $0.4~~increases of $0.2 million ~~reduction~~in outside towing, $0.2 million in assist tugs, $0.2 million in marine fuel and lube, and ~~$0.2~~$0.1 million in ~~lower repairs and maintenance of marine vessels. An additional combined decrease of $0.2 million is due to a reduction in leases, insurance claims and other marine operating~~employee related expenses.

Selling, general and administrative expenses. Selling, general and administrative expenses ~~increased $0.2 million due to compensation expense and $0.1 million due to professional fees.~~remained relatively consistent.

Depreciation and amortization. Depreciation and amortization increased slightly as a result of recent capital expenditures.

Other operating income, ~~(loss).~~net. Other operating income, ~~(loss) represents gains and losses~~net increased $2.7 million as a result of business interruption recoveries related to the Neches ship-loader insurance claim received in the first quarter of 2020. An additional $4.1 million increase is related to a net gain from the disposition of property, plant and equipment.

Natural Gas Liquids Segment

Comparative Results of Operations for the Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~


	Three Months Ended June 30,						Variance				Percent Change		Three Months Ended March 31,						Variance				Percent Change
	2019			2018						2020				2019					Variance				Percent Change
	(In thousands)										Percent Change				(In thousands)
Products Revenues	$	57,398		$	90,643		Variance	$	(33,245	)		(37	)%	$	82,215		$	116,474		$	(34,259	)		(29	)%
Cost of products sold	57,392			88,389			(30,997		)		(35	)%	74,260			111,309			(37,049		)		(33	)%
Operating expenses	1,680			1,717			(37		)		(2	)%	939			1,706			(767		)		(45	)%
Selling, general and administrative expenses	1,097			738			359				49	%	1,147			1,100			47				4	%
Depreciation and amortization	629			620			9				1	%	609			626			(17		)		(3	)%
	(3,400		)	(821		)	(2,579		)		(314	)%	5,260			1,733			3,527				204	%
Other operating income	10			—			10
Operating loss	$	(3,390	)	$	(821	)	$	(2,569	)		(313	)%
Other operating income (loss), net													(2		)	6			(8		)		(133	)%
Operating income													$	5,258		$	1,739		$	3,519			202	%

NGL sales volumes (Bbls)	1,457			1,743			(286		)		(16	)%	2,445			2,907			(462		)		(16	)%

Products Revenues. Our average sales price per barrel decreased ~~$12.61,~~$6.44, or ~~24%~~16%, resulting in a decrease to revenues of ~~$22.0~~$18.7 million. The decrease in average sales price per barrel was a result of a decrease in market prices. Sales volumes decreased 16%, decreasing revenues by ~~$11.2~~$15.5 million.

Cost of products sold. Our average cost per barrel decreased ~~$11.32,~~$7.92, or ~~22%~~21%, decreasing cost of products sold by $19.7 million. The decrease in average cost per barrel was a result of a decrease in market prices. The decrease in sales volume of 16% resulted in an $11.3 million decrease to cost of products sold. Our margins decreased $1.29 per barrel, or 99%, during the period.

~~Operating expenses. Operating expenses remained relatively consistent.~~

~~Selling, general and administrative expenses~~. Selling, general and administrative expenses increased primarily due to $0.1 million of increased property tax expense, $0.1 million of increased insurance claims expense and $0.1 million of increased compensation expense.

~~Depreciation and amortization.~~ ~~Depreciation and amortization remained relatively consistent.~~

~~Other operating income.~~ ~~Other operating income represents gains and losses from the disposition of property, plant and equipment.~~

~~Comparative Results of Operations for the Six Months Ended June 30, 2019 and 2018~~

Six Months Ended June 30, Variance Percent Change
2019 2018
(In thousands)
Products Revenues $ 173,872
$ 249,806
$ (75,934 ) (30 )%
Cost of products sold 168,701
232,122
(63,421 ) (27 )%
Operating expenses 3,386
3,389
(3 ) — %
Selling, general and administrative expenses 2,197
2,745
(548 ) (20 )%
Depreciation and amortization 1,255
1,243
12
1 %
(1,667 ) 10,307
(11,974 ) (116 )%
Other operating income 16
—
16

Operating income (loss) $ (1,651 ) $ 10,307
$ (11,958 ) (116 )%

NGL sales volumes (Bbls) 4,364
5,184
(820 ) (16 )%

~~Products Revenues.~~ Our average sales price per barrel decreased $8.35, or 17%, resulting in a decrease to revenues of $43.2 million. The decrease in average sales price per barrel was a result of a decrease in market prices. Sales volumes decreased 16%, decreasing revenues by $32.7 million.

~~Cost of products sold. Our average cost per barrel decreased $6.12, or 14%, decreasing cost of products sold by $31.7~~$23.0 million. The decrease in average cost per barrel was a result of a decrease in market prices. The decrease in sales volume of 16% resulted in a ~~$31.7~~$14.0 million decrease to cost of products sold. Our margins ~~decreased $2.23~~increased $1.48 per barrel, or ~~65%~~83%, during the period.

Operating expenses. Operating expenses ~~remained relatively consistent.~~decreased $0.8 million related to the divestiture of assets and the elimination of the associated expenses.

Selling, general and administrative expenses. Selling, general and administrative expenses ~~decreased primarily due to decreased compensation expense.~~remained relatively consistent.

Depreciation and amortization. Depreciation and amortization remained relatively consistent.

Other operating ~~income.~~income (loss), net. Other operating income, net represents gains and losses from the disposition of property, plant and equipment.

Interest Expense, Net

Comparative Components of Interest Expense, Net for the Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~

Three Months Ended June 30, Variance Percent Change
2019 2018
(In thousands)
Revolving loan facility $ 6,142
$ 5,867
$ 275
5 %
7.25% Senior notes 6,850
6,850
—
— %
Amortization of deferred debt issuance costs 1,583
870
713
82 %
Amortization of debt discount (76 ) (76 ) —
— %
Other 379
422
(43 ) (10 )%
Finance leases 186
49
137
280 %
Capitalized interest —
(167 ) 167
100 %
Interest income (78 ) —
(78 )

Total interest expense, net $ 14,986
$ 13,815
$ 1,171
8 %

~~Comparative Components of Interest Expense, Net for the Six Months Ended June 30, 2019 and 2018~~


	Six Months Ended June 30,						Variance				Percent Change		Three Months Ended March 31,						Variance				Percent Change
	2019			2018						2020				2019					Variance				Percent Change
	(In thousands)										Percent Change				(In thousands)
Revolving loan facility	$	11,790		$	10,977		Variance	$	813			7	%	$	2,444		$	5,648		$	(3,204	)		(57	)%
7.25% Senior notes	13,324			13,324			—				—	%	6,531			6,474			57				1	%
Amortization of deferred debt issuance costs	2,478			1,689			789				47	%	492			895			(403		)		(45	)%
Amortization of debt premium	(153		)	(153		)	—				—	%	(77		)	(77		)	—				—	%
Other	941			943			(2		)		—	%	425			562			(137		)		(24	)%
Finance leases	369			93			276				297	%	114			183			(69		)		(38	)%
Capitalized interest	(2		)	(328		)	326				99	%	(4		)	(2		)	(2		)		(100	)%
Interest income	(90		)	—			(90		)				—			(12		)	12				100	%
Total interest expense, net	$	28,657		$	26,545		$	2,112			8	%	$	9,925		$	13,671		$	(3,746	)		(27	)%

Indirect Selling, General and Administrative Expenses

Three Months Ended June 30, Variance Percent Change Six Months Ended June 30, Variance Percent Change
2019 2018 2019 2018
(In thousands) (In thousands)
Indirect selling, general and administrative expenses $ 4,599
$ 4,346
$ 253
6 % $ 9,166
$ 8,577
$ 589
7 %



	Three Months Ended March 31,				Variance			Percent Change
	2020		2019		Variance			Percent Change
	(In thousands)
Indirect selling, general and administrative expenses	$	4,372	$	4,567	$	(195	)	(4	)%

Indirect selling, general and administrative expenses ~~increased~~decreased for the three months ended ~~June 30, 2019~~March 31, 2020 compared to the three months ended ~~June 30, 2018~~March 31, 2019 primarily due to increased unit based compensation expense of $0.2 million. Indirect selling, general and administrative expenses increased for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 primarily due to increased unit based compensation expense of $0.2 million and transaction expenses incurred in the first quarter of ~~$0.2 million~~2019 related to the acquisition of MTI.

Martin Resource Management Corporation allocates to us a portion of its indirect selling, general and administrative expenses for services such as accounting, legal, treasury, clerical, billing, information technology, administration of insurance, engineering, general office expense and employee benefit plans and other general corporate overhead functions we share with Martin Resource Management Corporation retained businesses. This allocation is based on the percentage of time spent by Martin Resource Management Corporation personnel that provide such centralized services. GAAP also permits other methods for allocation of these expenses, such as basing the allocation on the percentage of revenues contributed by a segment. The allocation

of these expenses between Martin Resource Management Corporation and us is subject to a number of judgments and estimates, regardless of the method used. We can provide no assurances that our method of allocation, in the past or in the future, is or will be the most accurate or appropriate method of allocation for these expenses. Other methods could result in a higher allocation of selling, general and administrative expense to us, which would reduce our net income.

Under the Omnibus Agreement, we are required to reimburse Martin Resource Management Corporation for indirect general and administrative and corporate overhead expenses. The Conflicts Committee of our general partner approved the following reimbursement amounts during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

Three Months Ended June 30, Variance Percent Change Six Months Ended June 30, Variance Percent Change
2019 2018 2019 2018
(In thousands) (In thousands)
Conflicts Committee approved reimbursement amount $ 4,164
$ 4,104
$ 60
1 % $ 8,328
$ 8,208
$ 120
1 %



	Three Months Ended March 31,				Variance			Percent Change
	2020		2019		Variance			Percent Change
	(In thousands)
Conflicts Committee approved reimbursement amount	$	4,103	$	4,164	$	(61	)	(1	)%

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

Liquidity and Capital Resources

General

Our primary sources of liquidity to meet operating expenses, service our indebtedness, pay distributions to our unitholders and fund capital expenditures have historically been cash flows generated by our operations, borrowings under our revolving credit facility and access to debt and equity capital markets, both public and private. ~~Management believes that expenditures for~~Set forth below is a description of our ~~current capital projects will be funded with~~ cash flows ~~from operations, current cash balances and our current borrowing capacity under the revolving credit facility.~~

~~Recent Debt Financing Activity~~

We believe that cash generated from operations and our borrowing capacity under our credit facility will be sufficient to meet our working capital requirements and anticipated maintenance capital expenditures in 2019. Finally, our ability to satisfy our working capital requirements, to fund planned capital expenditures and to satisfy our debt service obligations will also depend upon our future operating performance, which is subject to certain risks. Please read "Item 1A. Risk Factors" of our Form 10-K for the ~~year ended December 31, 2018, for the year ended December 31, 2018, filed with the Securities and Exchange Commission (the "SEC") on February 19, 2019, for a discussion of such risks.~~periods indicated.

Cash Flows - ~~Six~~Three Months Ended ~~June 30, 2019~~March 31, 2020 Compared to ~~Six~~Three Months Ended ~~June 30, 2018~~March 31, 2019

The following table details the cash flow changes between the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Six Months Ended June 30,						Variance				Percent Change		Three Months Ended March 31,							Variance			Percent Change
	2019			2018						2020				2019						Variance			Percent Change
	(In thousands)						Variance				Percent Change					(In thousands)
Net cash provided by (used in):
Operating activities	$	32,513		$	69,169		$	(36,656	)		(53	)%	$	44,889			$	40,603		$	4,286		11	%
Investing activities	167,250			(37,089		)	204,339				551	%	(6,295		)		(33,946		)	27,651			81	%
Financing activities	(197,542		)	(31,496		)	(166,046		)		(527	)%	(41,382		)		(6,730		)	(34,652		)	(515	)%
Net increase (decrease) in cash and cash equivalents	$	2,221		$	584		$	1,637			280	%	$	(2,788	)		$	(73	)	$	(2,715	)	(3,719	)%

Net cash provided by operating activities. The ~~decrease~~increase in net cash provided by operating activities for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 includes ~~a decrease~~an increase in operating results of ~~$13.9~~$13.6 million and ~~an unfavorable~~a favorable variance in other non-current

assets and liabilities of ~~$1.6~~$0.8 million. ~~Net~~Offsetting this increase was a $5.2 million decrease in net cash received from discontinued operating activities, ~~decreased $16.2~~a $4.7 million ~~as well as an $8.2~~decrease in other non-cash charges, and a $0.2 million unfavorable variance in working capital. ~~Offsetting was a $3.3 million increase in other non-cash charges.~~

Net cash ~~provided by~~used in investing activities. Net cash ~~provided by~~used in investing activities for the ~~six~~three months ended ~~June 30, 2019 increased primarily~~March 31, 2020 decreased $23.7 million as a result of ~~$224.3 million related to discontinued investing activities.~~assets acquired from MTI in January of 2019. Also contributing to the increase was ~~a $0.2~~$3.8 million ~~increase~~ in proceeds received as a result of higher sales of property, plant and equipment in ~~2019,~~2020, as well as, an increase of ~~$3.6~~$1.8 million due to ~~lower~~proceeds received from the involuntary conversion of property, plant and equipment. A decrease of $0.3 million resulted from cash used in discontinued investing activities. Offsetting these decreases was an increase of $1.9 million due to higher payments for capital expenditures and plant turnaround costs in ~~2019. Offsetting was an increase in cash used of $23.7 million as a result of net assets acquired from MTI.~~2020.

Net cash used in financing activities. Net cash used in financing activities for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 increased primarily as a result of $154.5 million related to net payments of long-term borrowings. Offsetting the increase was a $102.4 million decrease in cash used related to excess purchase price over the carrying value of acquired assets in common control ~~transactions. Further, net repayments of long-term borrowings increased $82.9 million. Offsetting was~~transactions during 2019 and a ~~decrease in costs associated with our credit facility amendment of $0.9~~$17.2 million a decrease in cash distributions ~~paid of $9.8 million, and a decrease in distributions paid of $8.9 million related to the 2018 period including a preacquisition distribution to Martin Resource Management Corporation.~~paid.

~~Capital Resources~~Total Contractual Obligations

Historically, we have generally satisfied our working capital requirements and funded our capital expenditures with cash generated from operations and borrowings. We expect our primary sources of funds for short-term liquidity will be cash flows from operations and borrowings under our credit facility.

~~Total Contractual Cash Obligations.~~ A summary of our total contractual cash obligations as of ~~June 30, 2019~~March 31, 2020, is as follows:


	Payments due by period										Payments due by period
Type of Obligation	Total Obligation		Less than One Year		1-3 Years		3-5 Years		Due Thereafter		Total Obligation		Less than One Year		1-3 Years		3-5 Years		Due Thereafter
Revolving credit facility(1)	$	225,000	$	—	$	—	$	225,000	$	—	$	170,000	$	—	$	—	$	170,000	$	—
2021 Senior unsecured notes	373,800		—		373,800		—		—
7.25% senior unsecured notes, due 2021											364,456		364,456		—		—		—
Throughput commitment	12,513		6,275		6,238		—		—		9,081		6,289		2,792		—		—
Operating leases	31,290		9,351		10,622		3,987		7,330		30,668		9,519		11,492		3,093		6,564
Finance lease obligations	10,945		6,558		4,238		149		—		5,640		5,114		526		—		—
Interest payable on finance lease obligations	627		499		126		2		—		216		193		23		—		—
Interest payable on fixed long-term debt obligations	44,039		27,101		16,938		—		—		23,713		23,713		—		—		—
Total contractual cash obligations	$	698,214	$	49,784	$	411,962	$	229,138	$	7,330	$	603,774	$	409,284	$	14,833	$	173,093	$	6,564

(1) The revolving credit facility matures on (a) August 31, 2023, or (b) August 19, 2020 if the 2021 Notes have not been voluntarily refinanced on or prior to August 19, 2020.

The interest payable under our credit facility is not reflected in the above table because such amounts depend on the outstanding balances and interest rates, which vary from time to time.

Letters of Credit. At ~~June 30, 2019,~~March 31, 2020, we had outstanding irrevocable letters of credit in the amount of ~~$26.1~~$17.1 million, which were issued under our revolving credit facility.

Off Balance Sheet Arrangements. We do not have any off-balance sheet financing arrangements.

Description of Our Long-Term Debt

2021 Senior Notes

For a description of our 7.25% senior unsecured notes due 2021, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Description of Our Long-Term Debt" in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, as amended.

Revolving Credit Facility

At ~~June 30, 2019,~~March 31, 2020, we maintained a ~~$500.0~~$400.0 million revolving credit facility. ~~This~~The revolving credit facility ~~was most recently amended~~matures on ~~July 18, 2019 to, among other things, extend~~(a) August 31, 2023, or (b) August 19, 2020 if the ~~maturity date to from March 2020~~2021 Notes have not been voluntarily refinanced on or prior to August ~~2023 and reduce commitments from $500.0 million to $400.0 million.~~19, 2020.

As of ~~June 30, 2019,~~March 31, 2020, we had ~~$225.0~~$170.0 million outstanding under the revolving credit facility and ~~$26.1~~$17.1 million of outstanding irrevocable letters of credit, leaving a maximum available to be borrowed under our credit facility for future revolving credit borrowings and letters of credit of ~~$248.9~~$212.9 million. ~~Subject~~After giving effect to our then current borrowings, outstanding letters of credit and the financial covenants contained in our revolving credit facility, ~~and based on our existing EBITDA (as defined in our credit facility) calculations, as of June 30, 2019,~~ we ~~have~~had the ability to borrow approximately ~~$49.8~~$46.2 million in additional amounts thereunder as of ~~that amount.~~March 31, 2020.

The revolving credit facility is used for ongoing working capital needs and general partnership purposes, and to finance permitted investments, acquisitions and capital expenditures. During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, the level of outstanding draws on our credit facility has ranged from a low of ~~$225.0~~$170.0 million to a high of ~~$455.0~~$223.0 million.

The credit facility is guaranteed by substantially all of our subsidiaries. Obligations under the credit facility are secured by first priority liens on substantially all of our assets and those of the guarantors, including, without limitation, inventory, accounts receivable, bank accounts, marine vessels, equipment, fixed assets and the interests in our ~~subsidiaries and certain of our equity method investees.~~subsidiaries.

We may prepay all amounts outstanding under the credit facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements. The credit facility requires mandatory prepayments of amounts outstanding thereunder with the net proceeds of certain asset sales, equity issuances and debt incurrences.

Indebtedness under the credit facility bears interest at our option at the Eurodollar Rate (the British Bankers Association LIBOR Rate) plus an applicable margin or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0%, or the administrative agent’s prime rate) plus an applicable margin. We pay a per annum fee on all letters of credit issued under the credit facility, and we pay a commitment fee per annum on the unused revolving credit availability under the credit facility. The letter of credit fee, the commitment fee and the applicable margins for our interest rate vary quarterly based on our leverage ratio (as defined in the credit facility, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) and are as follows as of ~~June 30, 2019:~~March 31, 2020:


Leverage Ratio	Base Rate Loans		Eurodollar Rate Loans		Letters of Credit		Base Rate Loans		Eurodollar Rate Loans		Letters of Credit
Less than 3.00 to 1.00	1.00	%	2.00	%	2.00	%	1.25	%	2.25	%	2.25	%
Greater than or equal to 3.00 to 1.00 and less than 3.50 to 1.00	1.25	%	2.25	%	2.25	%	1.50	%	2.50	%	2.50	%
Greater than or equal to 3.50 to 1.00 and less than 4.00 to 1.00	1.50	%	2.50	%	2.50	%	1.75	%	2.75	%	2.75	%
Greater than or equal to 4.00 to 1.00 and less than 4.50 to 1.00	1.75	%	2.75	%	2.75	%	2.00	%	3.00	%	3.00	%
Greater than or equal to 4.50 to 1.00 and less than 5.00 to 1.00	2.00	%	3.00	%	3.00	%	2.25	%	3.25	%	3.25	%
Greater than or equal to 5.00 to 1.00	2.25	%	3.25	%	3.25	%	2.50	%	3.50	%	3.50	%

At ~~June 30, 2019,~~March 31, 2020, the applicable margin for revolving loans that are LIBOR loans ranges from ~~2.00%~~2.25% to ~~3.25%~~3.50% and the applicable margin for revolving loans that are base prime rate loans ranges from ~~1.00%~~1.25% to ~~2.25%~~2.50%. The applicable margin for LIBOR borrowings at ~~June 30, 2019~~March 31, 2020 is 3.25%.

The credit facility includes financial covenants that are tested on a quarterly basis, based on the rolling four quarter period that ends on the last day of each fiscal quarter.

In addition, the credit facility contains various covenants, which, among other things, limit our and our subsidiaries’ ability to: (i) grant or assume liens; (ii) make investments (including investments in our joint ventures) and acquisitions; (iii) enter into certain types of hedging agreements; (iv) incur or assume indebtedness; (v) sell, transfer, assign or convey assets; (vi) repurchase our equity, make distributions and certain other restricted payments, but the credit facility permits us to make quarterly distributions to unitholders so long as no default or event of default exists under the credit facility; (vii) change the nature of our business; (viii) engage in transactions with affiliates; (ix) enter into certain burdensome agreements; (x) make

certain amendments to the Omnibus Agreement and our material agreements; (xi) make capital expenditures; and (xii) permit our joint ventures to incur indebtedness or grant certain liens.

The credit facility contains customary events of default, including, without limitation: (i) failure to pay any principal, interest, fees, expenses or other amounts when due; (ii) failure to meet the quarterly financial covenants; (iii) failure to observe any other agreement, obligation, or covenant in the credit facility or any related loan document, subject to cure periods for certain failures; (iv) the failure of any representation or warranty to be materially true and correct when made; (v) our, or any of our subsidiaries’ default under other indebtedness that exceeds a threshold amount; (vi) bankruptcy or other insolvency events involving us or any of our subsidiaries; (vii) judgments against us or any of our subsidiaries, in excess of a threshold amount; (viii) certain ERISA events involving us or any of our subsidiaries, in excess of a threshold amount; (ix) a change in control (as defined in the credit facility); and (x) the invalidity of any of the loan documents or the failure of any of the collateral documents to create a lien on the collateral.

The credit facility also contains certain default provisions relating to Martin Resource Management Corporation. If Martin Resource Management Corporation no longer controls our general partner, the lenders under the credit facility may declare all amounts outstanding thereunder immediately due and payable. In addition, an event of default by Martin Resource Management Corporation under its credit facility could independently result in an event of default under our credit facility if it is deemed to have a material adverse effect on us.

If an event of default relating to bankruptcy or other insolvency events occurs with respect to us or any of our subsidiaries, all indebtedness under our credit facility will immediately become due and payable. If any other event of default exists under our credit facility, the lenders may terminate their commitments to lend us money, accelerate the maturity of the indebtedness outstanding under the credit facility and exercise other rights and remedies. In addition, if any event of default exists under our credit facility, the lenders may commence foreclosure or other actions against the collateral.

Capital Resources and Liquidity

Historically, we have generally satisfied our working capital requirements and funded our debt service obligations and capital expenditures with cash generated from operations and borrowings under our revolving credit facility.

At March 31, 2020, we had cash and cash equivalents of $0.1 million and available borrowing capacity of $46.2 million in additional amounts under our revolving credit facility with $170.0 million of borrowings outstanding. Our revolving credit facility matures on August 31, 2023, or August 19, 2020 if our 2021 Notes have not been refinanced on or before such date. We are currently seeking to refinance the 2021 Notes, although no assurance can be given.

Upon the successful refinancing of the 2021 Notes, we expect that our primary sources of liquidity to meet operating expenses, service our indebtedness, pay distributions to our unitholders and fund capital expenditures will be provided by cash flows generated by our operations, borrowings under our revolving credit facility and access to the debt and equity capital markets. Our ability to generate cash from operations will depend upon our future operating performance, which is subject to certain risks. For a discussion of such risks, please read "Item 1A. Risk Factors" of our Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020, as updated and supplemented in Part II, Item 1A of this Quarterly Report on Form 10-Q, as may be further updated and supplemented from time to time in our future Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. In addition, due to the covenants in our revolving credit facility, our financial and operating performance impacts the amount we are permitted to borrow under that facility.

To address these challenges, since July of 2018, we have taken a number of strategic actions to strengthen our balance sheet and reduce leverage, such as asset dispositions and acquisitions, reductions in the distributions payable to our unitholders and efforts to focus our growth on business segments with a stronger economic outlook. For example, in an effort to preserve liquidity, we recently reduced the quarterly cash distribution per common unit to $0.0625 beginning with the distribution payable for the fourth quarter of 2019. We expect this distribution reduction, along with the reduction announced in 2019, to result in approximately $68.2 million in cash we can retain annually for debt reduction and investment in higher return opportunities.

If we are unable to refinance the 2021 Notes and are unable to repay the outstanding borrowings under our revolving credit facility on August 19, 2020, we would be in default under our revolving credit facility. An event of default under our revolving credit facility would allow the lenders to declare the balance outstanding thereunder due and payable in full, which could trigger cross-defaults under other agreements, which could also result in the acceleration of those obligations by the counterparties to those agreements.

We are in compliance with all debt covenants as of March 31, 2020 and expect to be in compliance for the next twelve months provided the Partnership successfully completes the refinancing of the 2021 Notes.

Interest Rate Risk

We are subject to interest rate risk on our credit facility due to the variable interest rate and may enter into interest rate swaps to reduce this variable rate risk.

~~We are in compliance with all debt covenants as of June 30, 2019 and expect to be in compliance for the next twelve months.~~

Seasonality

A substantial portion of our revenues ~~are~~is dependent on sales prices of products, particularly NGLs and fertilizers, which fluctuate in part based on winter and spring weather conditions. The demand for NGLs is strongest during the winter heating season and the refinery blending season. The demand for fertilizers is strongest during the early spring planting season. However, our ~~terminalling~~Terminalling and ~~storage~~Storage and ~~transportation~~Transportation business segments and the molten sulfur business are typically not impacted by seasonal fluctuations and a significant portion of our net income is derived from our ~~terminalling~~Terminalling and ~~storage, sulfur~~Storage, Sulfur Services and ~~transportation businesses.~~Transportation business segments. Further, extraordinary weather events, such as hurricanes, have in the past, and could in the future, impact our Terminalling and Storage and Transportation business segments.

Impact of Inflation

Inflation did not have a material impact on our results of operations for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 or ~~2018.~~2019. Although the impact of inflation has been insignificant in recent years, it is still a factor in the U.S. economy and may increase the cost to acquire or replace property, plant and equipment. It may also increase the costs of labor and supplies. In the future, increasing energy prices could adversely affect our results of operations. Diesel fuel, natural gas, chemicals and other supplies are recorded in operating expenses. An increase in price of these products would increase our operating expenses which could adversely affect net income. We cannot provide assurance that we will be able to pass along increased operating expenses to our customers.

Environmental Matters

Our operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which these operations are conducted. We incurred no material environmental costs, liabilities or expenditures to mitigate or eliminate environmental contamination during the ~~six~~three months ended ~~June 30,~~March 31, ~~2019~~2020 or ~~2018.~~2019.



Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Commodity Risk. The Partnership from time to time uses derivatives to manage the risk of commodity price fluctuation. Commodity risk is the adverse effect on the value of a liability or future purchase that results from a change in commodity price. We monitor and manage the commodity market risk associated with potential commodity risk exposure. In addition, we focus on utilizing counterparties for these transactions whose financial condition is appropriate for the credit risk involved in each specific transaction.

We have entered into hedging transactions as of ~~June 30, 2019~~March 31, 2020 to protect a portion of our commodity price risk exposure. These hedging arrangements are in the form of swaps and options for NGLs. We have instruments totaling a gross notional quantity of ~~370,000~~25,000 barrels settling during the ~~period from July 1, 2019 through September 30, 2019.~~month of April 2020. These instruments settle against the applicable pricing source for each grade and location. These instruments are recorded on our Consolidated and Condensed Balance Sheets at ~~June 30, 2019~~March 31, 2020 in "Fair value of derivatives" as a current ~~liability~~asset of ~~$2.1~~$0.002 million. Based on the current net notional volume hedged as of ~~June 30, 2019,~~March 31, 2020, a $0.10 change in the expected settlement price of these contracts would result in an impact to our net income of approximately ~~$1.6~~$0.1 million.

Interest Rate Risk. We are exposed to changes in interest rates as a result of our credit facility, which had a weighted-average interest rate of ~~5.65%~~3.93% as of ~~June 30, 2019.~~March 31, 2020. Based on the amount of unhedged floating rate debt owed by us on ~~June 30, 2019,~~March 31, 2020, the impact of a 100 basis point increase in interest rates on this amount of debt would result in an increase in interest expense and a corresponding decrease in net income of approximately ~~$2.3~~$1.7 million annually.

We are not exposed to changes in interest rates with respect to our ~~senior unsecured notes~~2021 Notes as these obligations are fixed rate. The estimated fair value of the ~~senior unsecured notes~~2021 Notes was approximately ~~$371.5~~$146.8 million as of ~~June 30, 2019,~~March 31, 2020, based on market prices of similar debt at ~~June 30, 2019.~~March 31, 2020. Market risk is estimated as the potential decrease in fair value of our long-term debt resulting from a hypothetical increase of a 100 basis point increase in interest rates. Such an increase in interest rates would result in approximately a ~~$2.2~~$0.7 million decrease in the fair value of our long-term debt at ~~June 30, 2019.~~March 31, 2020.



Item 4.	Controls and Procedures

Evaluation of disclosure controls and procedures. In accordance with Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of our general partner, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of our general partner concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report, to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in our internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION



Item 1.	Legal Proceedings

From time to time, we are subject to certain legal proceedings claims and disputes that arise in the ordinary course of our business. Although we cannot predict the outcomes of these legal proceedings, we do not believe these actions, in the aggregate, will have a material adverse impact on our financial position, results of operations or liquidity. Information regarding legal proceedings is set forth in Note 1614 in Part I of this Form 10-Q.



Item 1A.	Risk Factors

~~There~~Except as stated below, there have been no material changes to the Partnership's risk factors ~~disclosed in~~since our ~~annual report~~Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the ~~Securities and Exchange Commission (the "SEC")~~SEC on February ~~19, 2019.~~14, 2020.

The reduction in demand for refined products resulting from measures taken to prevent the spread of the COVID-19 virus has and is likely to continue to adversely affect our results of operations, cash flows and financial condition for an indeterminate amount of time.

The markets have experienced a decline in oil prices in response to oil demand concerns due to the economic impacts of the COVID-19 pandemic, greatly impacting the demand for refined products resulting in a significant reduction in refinery utilization. As demand for our services and products decline, we could experience a reduction in the utilization of our assets. The continued spread of COVID-19 or a similar pandemic could result in further instability in the markets and decreases in commodity prices resulting in further adverse impacts on our results of operations, cash flows, and financial condition. In addition, the continued spread of the COVID-19 virus, or similar pandemic, and the continuation of the measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, may further impact our workforce and operations, the operations of our customers, and those of our vendors and suppliers. There is considerable uncertainty regarding such measures and potential future measures, which would have a material adverse effect on our results of operations, cash flows, and financial condition.



Item 6.	Exhibits

The information required by this Item 6 is set forth in the Index to Exhibits accompanying this quarterly report and is incorporated herein by reference.

INDEX TO EXHIBITS



Exhibit Number		Exhibit Name

10.1*3.1		Certificate of Limited Partnership of Martin Midstream Partners L.P. (the "Partnership"), dated June 21, 2002 (filed as Exhibit 3.1 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.2		Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated November 25, 2009 (filed as Exhibit 10.1 to the Partnership's Amendment to Current Report on Form 8-K/A (SEC File No. 000-50056), filed January 19, 2010, and incorporated herein by reference).
3.3		Amendment No. 2 to the Second Amended and Restated Agreement of Limited Partnership of the Partnership dated January 31, 2011 (filed as Exhibit 3.1 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed February 1, 2011, and incorporated herein by reference).
3.4		Amendment No. 3 to the Second Amended and Restated Agreement of Limited Partnership of the Partnership dated October 2, 2012 (filed as Exhibit 10.5 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed October 9, 2012, and incorporated herein by reference).
3.5		Certificate of Limited Partnership of Martin Operating Partnership L.P. (the "Operating Partnership"), dated June 21, 2002 (filed as Exhibit 3.3 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.6		Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated November 6, 2002 (filed as Exhibit 3.2 to the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed November 19, 2002, and incorporated herein by reference).
3.7		Certificate of Formation of Martin Midstream GP LLC (the "General Partner"), dated June 21, 2002 (filed as Exhibit 3.5 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.8		Amended and Restated Limited Liability Company Agreement of the General Partner, dated August 30, 2013 (filed as Exhibit 3.1 to the Partnership's Current Report on Form 8-K (Reg. No. 000-50056), filed September 3, 2013, and incorporated herein by reference).
3.9		Certificate of Formation of Martin Operating GP LLC (the "Operating General Partner"), dated June 21, 2002 (filed as Exhibit 3.7 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.10		Limited Liability Company Agreement of the Operating General Partner, dated June 21, 2002 (filed as Exhibit 3.8 to the Partnership's Registration Statement on Form S-1 (Reg. No. 333-91706), filed July 1, 2002, and incorporated herein by reference).
3.11		Certificate of Formation of Arcadia Gas Storage, LLC, dated June 26, 2006 (filed as Exhibit 3.11 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.12		Company Agreement of Arcadia Gas Storage, LLC, dated December 27, 2006 (filed as Exhibit 3.12 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.13		Amendment to the Company Agreement of Arcadia Gas Storage, LLC, dated September 5, 2014 (filed as Exhibit 3.13 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.14		Certificate of Formation of Cadeville Gas Storage LLC, dated May 23, 2008 (filed as Exhibit 3.14 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.15		Limited Liability Company Agreement of Cadeville Gas Storage LLC, dated May 23, 2008 (filed as Exhibit 3.15 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.16		First Amendment to ~~Second Amended Terminalling Services~~the Limited Liability Company Agreement of Cadeville Gas Storage LLC, dated April 1, 2019**16, 2012 (filed as Exhibit 3.16 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
10.2*3.17		~~Ninth~~Second Amendment to the Limited Liability Company Agreement of Cadeville Gas Storage LLC, dated September 5, 2014 (filed as Exhibit 3.17 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.18		Certificate of Formation of Monroe Gas Storage Company, LLC, dated June 14, 2006 (filed as Exhibit 3.18 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).



3.19		Amended and Restated Limited Liability Company Agreement of Monroe Gas Storage Company, LLC, dated May 31, 2011 (filed as Exhibit 3.19 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.20		First Amendment to the Amended and Restated Limited Liability Company Agreement of Monroe Gas Storage Company, LLC, dated September 5, 2014 (filed as Exhibit 3.20 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.21		Certificate of Formation of Perryville Gas Storage LLC, dated May 23, 2008.(filed as Exhibit 3.21 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.22		Limited Liability Company Agreement of Perryville Gas Storage LLC, dated June 16, 2008 (filed as Exhibit 3.22 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.23		First Amendment to the Limited Liability Company Agreement of Perryville Gas Storage LLC, dated April 14, 2010 (filed as Exhibit 3.23 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.24		Second Amendment to the Limited Liability Company Agreement of Perryville Gas Storage LLC, dated September 5, 2014 (filed as Exhibit 3.24 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.25		Certificate of Formation of Cardinal Gas Storage Partners LLC, dated April 2, 2008 (filed as Exhibit 3.25 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.26		Third Amended and Restated Limited Liability Company Agreement of Cardinal Gas Storage Partners LLC (F/K/A Redbird Gas Storage LLC) dated October 27, 2014 (filed as Exhibit 3.26 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
3.27		Certificate of Formation of Redbird Gas Storage LLC, dated May 24, 2011 (filed as Exhibit 3.27 to the Partnership's Annual Report on Form 10-K (SEC File No. 000-50056), filed March 2, 2015, and incorporation herein by reference).
3.28		Second Amended and Restated LLC Agreement of Redbird Gas Storage LLC, dated as of October 2, 2012. (filed as Exhibit 10.6 to the Partnership's Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed November 5, 2012, and incorporated herein by reference).
3.29		Certificate of Merger of Cardinal Gas Storage Partners LLC with and into Redbird Gas Storage LLC, dated October 27, 2014 (filed as Exhibit 3.27 to the Partnership’s Quarterly Report on Form 10-Q (SEC File No. 000-50056), filed October 29, 2014, and incorporated herein by reference).
10.1		Tenth Amendment to Third Amended and Restated Credit Agreement, ~~dated July 18, 2019~~
10.3*		~~Annex I~~executed as of March 2, 2020, by and among Martin Operating Partnership L.P., a ‎Delaware limited partnership, as borrower, Martin Midstream ‎Partners L.P., a Delaware limited partnership, the other Loan Parties party t‎hereto, the Lenders party thereto, and Royal Bank Of Canada, as ‎administrative agent and collateral agent for the Lenders and as an ‎L/C Issuer and a Lender (filed as Exhibit 10.1 to ~~Ninth Amendment to Third Amended~~the Partnership's Current Report on Form 8-K (SEC File No. 000-50056), filed March 6, 2020, and ~~Restated Credit Agreement, dated July 18, 2019~~incorporated herein by reference).‎
31.1*		Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be "filed."
32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Pursuant to SEC Release 34-47551, this Exhibit is furnished to the SEC and shall not be deemed to be "filed."
101		Interactive Data: the following financial information from Martin Midstream Partners L.P.’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~June 30, 2019,~~March 31, 2020, formatted in Extensible Business Reporting Language: (1) the Consolidated and Condensed Balance Sheets; (2) the Consolidated and Condensed Statements of Income; (3) the Consolidated and Condensed Statements of Cash Flows; (4) the Consolidated and Condensed Statements of Capital; and (5) the Notes to Consolidated and Condensed Financial Statements.

* Filed or furnished herewith

** Confidential portions of this Exhibit were redacted pursuant to Item 601(b)(2) of Regulation S-K and the Partnership agrees to furnish supplementally to the SEC a copy of any omitted schedule and/or exhibit upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.



	Martin Midstream Partners L.P.

	By:	Martin Midstream GP LLC
		Its General Partner

Date: ~~7/24/2019~~5/11/2020	By:	/s/ Robert D. Bondurant
		Robert D. Bondurant
		Executive Vice President, Treasurer, Chief Financial Officer, and Principal Accounting Officer

5753



	June 30, 2019			December 31, 2018¹
	(Unaudited)			(Unaudited)
Assets
Cash	$	2,521		$	300
Accounts and other receivables, less allowance for doubtful accounts of $618 and $576, respectively	64,606			83,488
Product exchange receivables	107			166
Inventories (Note 6)	81,220			84,265
Due from affiliates	35,598			18,845
Fair value of derivatives (Note 11)	—			4
Other current assets	9,638			5,889
Assets held for sale (Note 4)	5,132			5,652
Current assets - Natural Gas Storage Assets (Note 4)	—			9,428
Total current assets	198,822			208,037

Property, plant and equipment, at cost	880,603			886,435
Accumulated depreciation	(451,359		)	(438,602		)
Property, plant and equipment, net	429,244			447,833

Goodwill	17,785			17,785
Right-of-use assets (Note 9)	25,682			—
Deferred income taxes, net (Note 19)	23,925			—
Other assets, net (Note 10)	5,050			4,584
Non current assets - Natural Gas Storage Assets (Note 4)	—			395,389
Total assets	$	700,508		$	1,073,628

Liabilities and Partners’ Capital
Current installments of finance lease obligations (Note 9)	$	6,059		$	5,409
Trade and other accounts payable	61,357			64,041
Product exchange payables	7,717			12,103
Due to affiliates	3,367			2,133
Income taxes payable	576			445
Fair value of derivatives (Note 11)	2,069			—
Other accrued liabilities (Note 10)	29,160			24,380
Current liabilities - Natural Gas Storage Assets (Note 4)	—			3,240
Total current liabilities	110,305			111,751

Long-term debt, net (Note 8 )	596,398			656,459
Finance lease obligations (Note 9)	4,259			6,272
Operating lease liabilities (Note 9)	17,913			—
Other long-term obligations	8,747			10,045
Non current liabilities - Natural Gas Storage Assets (Note 4)	—			669
Total liabilities	737,622			785,196

Commitments and contingencies (Note 16)
Partners’ capital (deficit) (Note 12)	(37,114		)	288,432
Total partners’ capital (deficit)	(37,114		)	288,432
Total liabilities and partners' capital	$	700,508		$	1,073,628



Purchase price¹	$	135,000
Plus: Working Capital Adjustment	2,795
Less: Finance lease obligations assumed	(11,682		)
Cash consideration paid	$	126,113



Accounts receivable, net	$	11,724
Inventories	1,138
Due from affiliates	1,042
Other current assets	897
Property, plant and equipment, net	25,383
Goodwill	489
Other noncurrent assets	362
Current installments of finance lease obligations	(5,409		)
Accounts payable	(2,564		)
Due to affiliates	(482		)
Other accrued liabilities	(2,588		)
Finance lease obligations, net of current installments	(6,272		)
Historical carrying value of assets acquired	$	23,720



	Three Months Ended June 30, 2018			Six Months Ended June 30, 2018
Transportation revenue	$	30,385		$	60,294

Operating expenses	25,681			51,217
Selling, general and administrative	1,364			2,704
Depreciation and amortization	739			1,519
Total costs and expenses	27,784			55,440

Other operating income, net	164			174
Operating income	2,765			5,028

Other income:
Interest expense	(49		)	(94		)
Other, net	4			4

Income before income taxes	2,720			4,938
Income taxes	—			—
Net income	$	2,720		$	4,938



	December 31, 2018

Accounts and other receivables	$	7,269
Inventories	1,942
Other current assets	217
Current assets - Natural Gas Storage Assets	$	9,428

Property, plant and equipment, at cost	$	425,138
Accumulated depreciation	(49,238		)
Intangibles and other assets, net	19,489
Non-current assets - Natural Gas Storage Assets	$	395,389

Trade and other accounts payable	$	1,682
Product exchange payable	1,134
Due to affiliates	2
Other accrued liabilities	422
Current liabilities - Natural Gas Storage Assets	$	3,240

Other long-term obligations	$	669
Non-current liabilities - Natural Gas Storage Assets	$	669



	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,631
Operating cash flows from finance leases	368
Financing cash flows from finance leases	2,672

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	5,317
Finance leases	1,309