MARTIN MIDSTREAM PARTNERS L.P. [MMLP] Filings

10-Q 1 mmlp-20230930.htm 10-Q mmlp-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2023


☐						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 October 24, 2023, was 38,914,806.

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 (the "Exchange Act"). 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 Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the "SEC") on March 2, 2023, 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			4

Item 1. Financial Statements			4
Consolidated and Condensed Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 (audited)			4
Consolidated and Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)			5
Consolidated and Condensed Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)			7
Consolidated and Condensed Statements of Capital (Deficit) for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)			8
Consolidated and Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited)			9
Notes to Consolidated and Condensed Financial Statements (unaudited)			10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			33

Item 3. Quantitative and Qualitative Disclosures About Market Risk			57

Item 4. Controls and Procedures			58

PART II. OTHER INFORMATION			59

Item 1. Legal Proceedings			59

Item 1A. Risk Factors			59

Item 5. Other Information			59

Item 6. Exhibits			59

PART I – FINANCIAL INFORMATION


Item 1.			Financial Statements

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(Dollars in thousands)


	September 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
Assets
Cash	$	54	$	45
Accounts and other receivables, less allowance for doubtful accounts of $496 and $496, respectively	60,451		79,641

Inventories	41,699		109,798
Due from affiliates	2,096		8,010

Other current assets	7,647		13,633

Total current assets	111,947		211,127

Property, plant and equipment, at cost	909,946		903,535
Accumulated depreciation	(602,834)		(584,245)
Property, plant and equipment, net	307,112		319,290

Goodwill	16,671		16,671
Right-of-use assets	58,174		34,963
Deferred income taxes, net	12,064		14,386
Other assets, net	1,933		2,414
Total assets	$	507,901	$	598,851

Liabilities and Partners’ Capital (Deficit)
Current installments of long-term debt and finance lease obligations	$	—	$	9
Trade and other accounts payable	43,909		68,198
Product exchange payables	775		32
Due to affiliates	8,143		8,947
Income taxes payable	461		665

Other accrued liabilities	27,687		33,074
Total current liabilities	80,975		110,925

Long-term debt, net	439,824		512,871

Operating lease liabilities	44,108		26,268
Other long-term obligations	7,973		8,232
Total liabilities	572,880		658,296

Commitments and contingencies
Partners’ capital (deficit)	(64,979)		(59,445)

Total liabilities and partners' capital (deficit)	$	507,901	$	598,851

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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenues:
Terminalling and storage *	$	22,202	$	19,988	$	64,744	$	59,808
Transportation *	55,223		58,993		165,696		161,535
Sulfur services	3,358		3,085		10,073		9,253
Product sales: *
Specialty products	66,695		121,456		277,836		409,215
Sulfur services	29,219		25,783		98,513		135,691

	95,914		147,239		376,349		544,906
Total revenues	176,697		229,305		616,862		775,502

Costs and expenses:
Cost of products sold: (excluding depreciation and amortization)
Specialty products *	56,298		126,951		245,863		380,602
Sulfur services *	19,461		25,230		66,932		100,078
Terminalling and storage *	23		6		54		15
	75,782		152,187		312,849		480,695
Expenses:
Operating expenses *	64,375		66,158		187,857		186,735
Selling, general and administrative *	10,424		10,273		30,043		31,420


Depreciation and amortization	12,223		13,721		37,671		43,007
Total costs and expenses	162,804		242,339		568,420		741,857

Other operating income, net	811		790		1,096		1,050

Operating income (loss)	14,704		(12,244)		49,538		34,695

Other income (expense):
Interest expense, net	(14,994)		(13,906)		(45,914)		(39,181)

Loss on extinguishment of debt	—		—		(5,121)		—

Other, net	17		(2)		50		(4)
Total other expense	(14,977)		(13,908)		(50,985)		(39,185)

Net loss before taxes	(273)		(26,152)		(1,447)		(4,490)
Income tax expense	(788)		(1,891)		(3,619)		(5,469)


Net loss	(1,061)		(28,043)		(5,066)		(9,959)
Less general partner's interest in net loss	21		561		101		199

Less loss allocable to unvested restricted units	4		90		16		39
Limited partners' interest in net loss	$	(1,036)	$	(27,392)	$	(4,949)	$	(9,721)

Net loss per unit attributable to limited partners - basic	$	(0.03)	$	(0.71)	$	(0.13)	$	(0.25)
Net loss per unit attributable to limited partners - diluted	$	(0.03)	$	(0.71)	$	(0.13)	$	(0.25)
Weighted average limited partner units - basic	38,772,266		38,726,388		38,771,451		38,725,933
Weighted average limited partner units - diluted	38,772,266		38,726,388		38,771,451		38,725,933

See accompanying notes to consolidated and condensed financial statements.

*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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenues:*
Terminalling and storage	$	18,542	$	16,065	$	54,121	$	49,685
Transportation	7,426		7,111		20,214		20,862

Product Sales	122		63		8,544		486
Costs and expenses:*
Cost of products sold: (excluding depreciation and amortization)
Specialty products	9,896		10,196		27,324		30,047
Sulfur services	2,787		2,616		8,139		7,884
Terminalling and storage	23		5		54		14
Expenses:
Operating expenses	25,606		23,856		74,491		68,682
Selling, general and administrative	8,477		7,627		23,549		23,933

See accompanying notes to consolidated and condensed financial statements.

MARTIN MIDSTREAM PARTNERS L.P.

CONSOLIDATED AND CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022

Net loss	$	(1,061)	$	(28,043)	$	(5,066)	$	(9,959)

Commodity cash flow hedging (gains) reclassified to earnings	—		(167)		—		(816)
Comprehensive loss	$	(1,061)	$	(28,210)	$	(5,066)	$	(10,775)

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 (Deficit)
		Common Limited				General Partner Amount		Accumulated Other Comprehensive Income (Loss)
	Units		Amount							Total
Balances - June 30, 2023		38,914,806		$	(65,334)	$	1,577	$	—		$	(63,757)
Net loss		—		(1,040)		(21)		—			(1,061)




Cash distributions		—		(194)		(4)		—			(198)
Unit-based compensation		—		37		—		—			37




Balances - September 30, 2023		38,914,806		(66,531)		1,552		—			$	(64,979)

Balances - December 31, 2022		38,850,750		$	(61,110)	$	1,665	$	—		$	(59,445)
Net loss		—		(4,965)		(101)		—			(5,066)

Issuance of restricted units		64,056		—		—		—			—


Cash distributions		—		(583)		(12)		—			(595)
Unit-based compensation		—		127		—		—			127




Balances - September 30, 2023		38,914,806		$	(66,531)	$	1,552	$	—		$	(64,979)


	Partners’ Capital (Deficit)
	Common Limited			General Partner Amount		Accumulated Other Comprehensive Income (Loss)
	Units	Amount						Total
Balances - June 30, 2022	38,850,750	$	(33,263)	$	2,242	$	167	$	(30,854)
Net loss	—	(27,482)		(561)		—		(28,043)

Issuance of restricted units	—	—		—		—		—


Cash distributions	—	(195)		(4)		—		(199)
Unit-based compensation	—	46		—		—		46



Gain recognized in AOCI on commodity cash flow hedges	—	—		—		(167)		(167)
Balances - September 30, 2022	38,850,750	$	(60,894)	$	1,677	$	—	$	(59,217)

Balances - December 31, 2021	38,802,750	$	(50,741)	$	1,888	$	816	$	(48,037)
Net income	—	(9,760)		(199)		—		(9,959)

Issuance of restricted units	48,000	—		—		—		—


Cash distributions	—	(583)		(12)		—		(595)
Unit-based compensation	—	125		—		—		125

Excess purchase price over carrying value of acquired assets	—	65		—		—		65
Gain reclassified from AOCI into income on commodity cash flow hedges	—	—		—		(816)		(816)

Balances - September 30, 2022	38,850,750	$	(60,894)	$	1,677	$	—	$	(59,217)

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)


	Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(5,066)	$	(9,959)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	37,671		43,007
Amortization of deferred debt issuance costs	3,206		2,356
Amortization of debt discount	1,600		—

Deferred income tax expense	2,322		3,611
Gain on disposition or sale of property, plant and equipment, net	(1,096)		(1,050)



Loss on extinguishment of debt	5,121		—

Derivative income	—		(901)
Net cash paid for commodity derivatives	—		85
Non cash unit-based compensation	127		125
Change in current assets and liabilities, excluding effects of acquisitions and dispositions:
Accounts and other receivables	19,190		7,076

Inventories	68,099		(73,518)
Due from affiliates	5,914		12,016
Other current assets	5,282		(4,824)
Trade and other accounts payable	(24,709)		6,053
Product exchange payables	743		(695)
Due to affiliates	(804)		11,953
Income taxes payable	(204)		228
Other accrued liabilities	(10,311)		(13,435)
Change in other non-current assets and liabilities	(1,020)		1,116


Net cash provided by (used in) operating activities	106,065		(16,756)

Cash flows from investing activities:
Payments for property, plant and equipment	(25,294)		(21,019)

Payments for plant turnaround costs	(2,367)		(4,262)

Proceeds from sale of property, plant and equipment	5,183		2,209


Net cash used in investing activities	(22,478)		(23,072)

Cash flows from financing activities:
Payments of long-term debt	(579,197)		(299,089)
Payments under finance lease obligations	(9)		(180)
Proceeds from long-term debt	510,489		341,000




Payment of debt issuance costs	(14,266)		(30)
Excess purchase price over carrying value of acquired assets	—		(1,285)
Cash distributions paid	(595)		(595)
Net cash provided by (used in) financing activities	(83,578)		39,821

Net increase (decrease) in cash	9		(7)
Cash at beginning of period	45		52
Cash at end of period	$	54	$	45
Non-cash additions to property, plant and equipment	$	2,369	$	2,240

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)

September 30, 2023

(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 Gulf Coast region of the United States ("U.S."). Its four primary business lines include: terminalling, processing, and storage 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 marketing, distribution, and transportation services for natural gas liquids and blending and packaging services for specialty lubricants and grease.

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, 2022, filed with the SEC on March 2, 2023.

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.

NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS

There were no new accounting pronouncements applicable to the Partnership during the nine months ended September 30, 2023.

NOTE 3. EXIT OF BUTANE OPTIMIZATION BUSINESS

During the second quarter of 2023, the Partnership completed its previously announced exit from its butane optimization business at the conclusion of the butane selling season. This exit did not qualify as discontinued operations in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 205. Going forward, with respect to butane, the Partnership will operate as a fee-based butane logistics business, primarily continuing to utilize its north Louisiana underground storage assets, which have both truck and rail capability. This logistics business will also utilize the Partnership's truck transportation assets for fee-based product movements. As a result of this new business model, the Partnership will no longer carry butane inventory, enabling the Partnership to reduce commodity risk exposure, cash flow and earnings volatility, and working capital requirements. The following revenues and costs, which are included in the financial results for all periods presented, are not expected to be incurred under the new fee-based butane logistics business model. The butane optimization business has historically been included in the Partnership's Specialty Products operating segment.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Products revenue	$	—	$	28,397	$	70,539	$	116,844
Cost of products sold	—		47,925		72,282		130,339
Selling, general and administrative expenses	—		504		512		1,785
	$	—	$	(20,032)	$	(2,255)	$	(15,280)

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

NOTE 4. REVENUE

The following table disaggregates our revenue by major source:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Terminalling and storage segment
Throughput and storage	$	22,202	$	19,988	$	64,744	$	59,808
	$	22,202	$	19,988	$	64,744	$	59,808

Transportation segment
Land transportation	$	40,965	$	45,604	$	124,064	$	124,089
Inland marine transportation	12,658		11,542		37,093		31,997
Offshore marine transportation	1,600		1,847		4,539		5,449
	$	55,223	$	58,993	$	165,696	$	161,535

Sulfur services segment
Sulfur product sales	$	8,453	$	10,341	$	22,191	$	33,975
Fertilizer product sales	20,766		15,442		76,322		101,716
Sulfur services	3,358		3,085		10,073		9,253
	$	32,577	$	28,868	$	108,586	$	144,944
Specialty products segment
Natural gas liquids product sales	$	31,225	$	81,361	$	175,125	$	299,085
Lubricant product sales	35,470		40,095		102,711		110,130
	$	66,695	$	121,456	$	277,836	$	409,215

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.

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

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 storage and throughput contracts at the Partnership's underground NGL storage facility, revenue is recognized based on the volume stored and moved through the facility 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. 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.

Specialty Products Segment

Natural Gas Liquids ("NGL") revenue is recognized when title is transferred, which is generally when the product is delivered by truck, rail, or pipeline to the Partnership's NGL customers or when the customer picks up the product from our

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

facilities. When lubricants are sold by truck or rail, revenue is recognized when title is transferred, which is generally 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.

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 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 below 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.


	2023		2024		2025		2026		2027		Thereafter		Total
Terminalling and storage
Throughput and storage	$	10,603	$	43,571	$	44,879	$	46,164	$	47,549	$	204,927	$	397,693
Specialty Products
NGL product sales	1,621		6,449		6,431		3,736		—		—		18,237
Sulfur services
Sulfur product sales	4,699		18,796		18,796		4,391		296		—		46,978
Total	$	16,923	$	68,816	$	70,106	$	54,291	$	47,845	$	204,927	$	462,908

NOTE 5. INVENTORIES

Components of inventories at September 30, 2023 and December 31, 2022 were as follows:


	September 30, 2023		December 31, 2022
Natural gas liquids	$	3,317	$	52,462
Lubricants	19,801		28,190
Sulfur	509		1,541
Fertilizer	12,075		21,691
Other	5,997		5,914
	$	41,699	$	109,798

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

NOTE 6. DEBT

At September 30, 2023 and December 31, 2022, long-term debt consisted of the following:


	September 30, 2023		December 31, 2022
$175,000 Credit facility at variable interest rate (8.93%1 weighted average at September 30, 2023), due February 2027 secured 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 $3,535 and $1,086, respectively 2,4	$	58,965	$	169,914
$400,000 Senior notes, 11.5% interest, net of unamortized debt issuance costs of $8,741 and $0, respectively, including unamortized premium of $10,400 and $0, respectively, due February 2028, secured 2,3,4	380,859		—
$53,750 Senior notes due February 2024, 10.0% interest, net of unamortized debt issuance costs of $0 and $1,288, respectively, secured 2,3	—		52,462
$291,381 Senior notes due February 2025, 11.5% interest, net of unamortized debt issuance costs of $0 and $886, respectively, secured 2,3	—		290,495
Total	439,824		512,871
Less: current portion	—		—
Total long-term debt, net of current portion	$	439,824	$	512,871

Current installments of finance lease obligations	$	—	$	9
Finance lease obligations	—		—
Total finance lease obligations	$	—	$	9

1 Effective February 8, 2023, the interest rate fluctuates based on Adjusted Term SOFR (set on the date of each advance) or the alternate base rate plus an applicable margin. The margin is set every three months. All amounts outstanding at September 30, 2023 were at Adjusted Term SOFR plus an applicable margin. The applicable margin for revolving loans that are SOFR loans currently ranges from 2.75% to 3.75%, and the applicable margin for revolving loans that are alternate base rate loans currently ranges from 1.75% to 2.75%. The applicable margin for SOFR borrowings at September 30, 2023 is 3.50%. The applicable margin for SOFR borrowings effective October 18, 2023 is 3.25%. The credit facility contains various covenants that limit the Partnership’s ability to make distributions; 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").

2 The Partnership was in compliance with all debt covenants as of September 30, 2023 and December 31, 2022, respectively.

3 On February 8, 2023, the Partnership completed the sale of $400,000 in aggregate principal amount of 11.500% senior secured second lien notes due 2028 (the “2028 Notes”). The Partnership used the proceeds of the 2028 Notes to repurchase, through a tender offer and then redemption, all of the Partnership’s 10.00% senior secured 1.5 lien notes due 2024 (the “2024 Notes”) and 11.50% senior secured second lien notes due 2025 (the “2025 Notes”), repay a portion of the indebtedness under the credit facility, and pay fees and expenses in connection with the foregoing. The indenture for the 2028 Notes 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.

4 Effective February 8, 2023, in connection with the completion of our sale of the 2028 Notes, we amended our credit facility to, among other things, reduce the commitments thereunder from $275,000 to $200,000 (with further scheduled reductions to $175,000 on June 30, 2023 and $150,000 on June 30, 2024) and extend the scheduled maturity date of the amended credit facility to February 8, 2027. In conjunction with the issuance of the 2028 Notes, the Partnership recognized a loss on extinguishment of debt of $5,121 comprised of $2,827 in tender premium, $2,044 of unamortized debt costs and $250 in other expense.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

The Partnership paid cash interest in the amount of $25,291 and $22,628 for the three months ended September 30, 2023 and 2022, respectively. Capitalized interest was $18 and $0 for the three months ended September 30, 2023 and 2022, respectively. The Partnership paid cash interest in the amount of $50,099 and $46,738 for the nine months ended September 30, 2023 and 2022, respectively. Capitalized interest was $29 and $0 for the nine months ended September 30, 2023 and 2022, respectively.

NOTE 7. LEASES

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 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 13 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.

The components of lease expense for the three and nine months ended September 30, 2023 and 2022 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	4,602	$	2,760	$	11,393	$	7,571
Finance lease cost:
Amortization of right-of-use assets	$	—	$	24	$	6	74
Interest on lease liabilities	—		1		—		8
Short-term lease cost	1,256		3,157		4,331		8,662
Variable lease cost	48		48		143		132
Total lease cost	$	5,906	$	5,990	$	15,873	$	16,447

Supplemental balance sheet information related to leases at September 30, 2023 and December 31, 2022 was as follows:

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)


	September 30, 2023		December 31, 2022
Operating Leases
Operating lease right-of-use assets	$	58,174	$	34,963

Current portion of operating lease liabilities included in "Other accrued liabilities"	$	14,280	$	9,084
Operating lease liabilities	44,108		26,268
Total operating lease liabilities	$	58,388	$	35,352

Finance Leases
Property, plant and equipment, at cost	$	—	$	83
Accumulated depreciation	—		(44)
Property, plant and equipment, net	$	—	$	39

Current installments of finance lease obligations	$	—	$	9
Finance lease obligations	—		—
Total finance lease obligations	$	—	$	9

For the nine months ended September 30, 2023, the Partnership incurred new operating leases, primarily related to land and marine transportation assets and renewed existing operating leases set to expire, primarily related to marine transportation assets.

The Partnership’s future minimum lease obligations as of September 30, 2023 consist of the following:


	Operating Leases		Finance Leases
Year 1	$	18,175	$	—
Year 2	16,098		—
Year 3	13,855		—
Year 4	10,419		—
Year 5	6,017		—
Thereafter	5,838		—
Total	70,402		—
Less amounts representing interest costs	(12,014)		—
Total lease liability	$	58,388	$	—

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 September 30, 2023 are as follows: 2023 - $6,646; 2024 - $21,059; 2025 - $15,696; 2026 - $11,741; 2027 - $11,552; subsequent years - $29,620.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

NOTE 8. SUPPLEMENTAL BALANCE SHEET INFORMATION

Components of "Other accrued liabilities" were as follows:


	September 30, 2023		December 31, 2022
Accrued interest	$	6,173	$	15,131
Asset retirement obligations	25		298
Property and other taxes payable	4,329		4,562
Accrued payroll	2,661		3,504
Operating lease liabilities	14,280		9,084
Other	219		495
	$	27,687	$	33,074

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


	September 30, 2023

Asset retirement obligations as of December 31, 2022	$	4,992

Additions to asset retirement obligations	—
Accretion expense	159
Liabilities settled	—
Ending asset retirement obligations	5,151
Current portion of asset retirement obligations1	(25)
Long-term portion of asset retirement obligations2	$	5,126

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.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

NOTE 9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Partnership’s results of operations could be materially impacted by changes in commodity prices and 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. At the time derivative contracts are entered into, the Partnership assesses whether the nature of the instrument qualifies for hedge accounting treatment according to the requirements of ASC 815 – Derivatives and Hedging. For those transactions designated as hedging instruments for accounting purposes, the Partnership documents all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge transactions. The Partnership also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows or fair value of hedged items. All derivatives and hedging instruments are included on the balance sheet as an asset or a liability measured at fair value. Changes in fair value for hedging instruments are recognized on the balance sheet through Accumulated Other Comprehensive Income ("AOCI"). Settlements related to effective hedging relationships will be reclassified from AOCI to earnings during the period in which the hedged transactions are reflected on the income statement.

From time to time, derivatives designated for hedge accounting may be closed prior to contract expiration. The accounting treatment of closed positions depends on whether the closure occurred due to the hedged transaction occurring early or if the hedged transaction is still expected to occur as originally forecasted. For hedged transactions that occur early, the closure results in the realized gain or loss from closure being recognized in the same period the accelerated hedged transaction affects earnings. For hedged transactions that are still expected to occur as originally forecasted, the closure results in the realized gain or loss being deferred until the hedged transaction affects earnings.

If it is determined that hedged transactions associated with cash flow hedges are no longer probable of occurring, the gain or loss associated with the instrument is recognized immediately into earnings.

From time to time, we may have derivative financial instruments for which we do not elect hedge accounting. Changes in fair value for derivatives not designated as hedges are recognized as gains and losses in the 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 has established a hedging policy and monitors and manages the commodity market risk associated with potential commodity risk 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 enters into hedging transactions to protect a portion of its commodity price risk exposure. These hedging arrangements are in the form of swaps for NGLs. At September 30, 2023 and December 31, 2022, there were no outstanding derivatives.

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

(b) Tabular Presentation of Gains and Losses on Derivative Instruments

The following table summarizes the gain (loss) recognized in AOCI at September 30, 2023 and December 31, 2022, respectively, and the gain reclassified from AOCI into earnings during the three months ended September 30, 2023 and 2022, respectively, for derivative financial instruments designated as cash flow hedges:

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)


	Amount of Gain (Loss) Recognized in AOCI				Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income
	2023		2022			2023		2022
Commodity contracts	$	—	$	—	Cost of products sold	$	—	$	167
Total	$	—	$	—		$	—	$	167

The following table summarizes the gain (loss) recognized in AOCI at September 30, 2023 and December 31, 2022, respectively, and the gain reclassified from AOCI into earnings during the nine months ended September 30, 2023 and 2022, respectively, for derivative financial instruments designated as cash flow hedges:


	Amount of Gain (Loss) Recognized in AOCI				Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income
	2023		2022			2023		2022
Commodity contracts	$	—	$	—	Cost of products sold	$	—	$	816
Total	$	—	$	—		$	—	$	816

NOTE 10. PARTNERS' CAPITAL (DEFICIT)

As of September 30, 2023, Partners’ capital (deficit) consisted of 38,914,806 common limited partner units, representing a 98% partnership interest, and a 2% general partner interest. Martin Resource Management Corporation, through subsidiaries, owned 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.

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.

Impact on Partners' Capital (Deficit) Related to Transactions Between Entities Under Common Control

Under ASC 805, assets and liabilities transferred between entities under common control are accounted for at the historical cost of those entities' ultimate parent, in a manner similar to a pooling of interests. Any difference in the amount paid by the transferee versus the historical cost of the assets transferred is recorded as an adjustment to equity (contribution or distribution) by the transferee. This is in contrast with a business combination between unrelated parties, where assets and liabilities are recorded at their fair values at the acquisition date, with any excess of amounts paid over the fair value representing goodwill. From time to time, the most recent being in 2019, the Partnership has entered into common control acquisitions from Martin Resource Management Corporation. The consideration transferred totaling $552,058 exceeds the historical cost of the net assets received. This excess of the purchase price over the historical cost of the net assets received has resulted in cumulative distributions of $289,019 reflected as reductions to Partners' capital.

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

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.

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. 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 allocated to the general partner and limited partners for purposes of calculating net income attributable to limited partners per unit:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Net loss	$	(1,061)	$	(28,043)	$	(5,066)	$	(9,959)

Less general partner’s interest in net income (loss):

Distributions payable on behalf of general partner interest	4		4		12		12
General partner interest in undistributed income (loss)	(25)		(565)		(113)		(211)
Less loss allocable to unvested restricted units	(4)		(90)		(16)		(39)
Limited partners’ interest in net loss	$	(1,036)	$	(27,392)	$	(4,949)	$	(9,721)

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


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Basic weighted average limited partner units outstanding	38,772,266	38,726,388	38,771,451	38,725,933
Dilutive effect of restricted units issued	—	—	—	—
Total weighted average limited partner diluted units outstanding	38,772,266	38,726,388	38,771,451	38,725,933

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

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 nine months ended September 30, 2023 and 2022 because the limited partners were allocated a net loss in this period.

NOTE 11. UNIT BASED AWARDS - LONG-TERM INCENTIVE PLANS

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 operating expense and selling, general, and administrative expense in the consolidated and condensed financial statements with respect to these plans are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Restricted unit Awards
Employees	$	—	$	—	$	—	$	—
Non-employee directors	37		46		127		125
Phantom unit Awards
Employees	484		950		(691)		2,931
Non-employee directors	—		—		—		—
Total unit-based compensation expense	$	521	$	996	$	(564)	$	3,056

Long-Term Incentive Plans

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

Phantom Unit Plan

On July 21, 2021, the board of directors of the general partner of the Partnership and the compensation committee of the general partner's board of directors (the "Compensation Committee") approved the Martin Midstream Partners L.P. 2021 Phantom Unit Plan (the “Plan”), effective as of the same date. The Plan permits the awards of phantom units and phantom unit appreciation rights (collectively, "phantom unit awards") to any employee or non-employee director of the Partnership, including its executive officers. The awards may be time-based or performance-based and will be paid, if at all, in cash.

The award of a phantom unit entitles the participant to a cash payment equal to the value of the phantom unit on the vesting date or dates, which value is the fair market value of a common unit of the Partnership (a “Unit”) on such vesting date or dates. The award of a phantom unit appreciation right entitles the recipient to a cash payment equal to the difference between the value of a phantom unit on the vesting date or dates in excess of the value assigned by the Compensation Committee to the phantom unit as of the grant date. Phantom units and phantom unit appreciation rights granted to participants do not confer upon participants any right to a Unit.

On July 21, 2021, the Compensation Committee approved forms of time-based award agreements for phantom units and phantom unit appreciation rights, both of which awards vest in full on the third anniversary of the grant date. The grant date value of a phantom unit under a phantom unit appreciation right award is equal to the average of the closing price for a Unit during the 20 trading days immediately preceding the grant date of the award.

Generally, vesting of an award is subject to a participant remaining continuously employed with the Partnership through the vesting date. However, if prior to the vesting date (i) a participant is terminated without cause (as defined in the award agreement) or terminates employment after the participant has attained both the age of 65 and ten years of employment (“retirement-eligible”), a prorated portion of the award will vest and be paid in cash no later than the 30th day following such termination date (subject to a six-month delay in payment for certain retirement-eligible participants) or (ii) there is a change in

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

control of the Partnership (as defined in the Plan), the award will vest in full and be paid in cash no later than the 30th day following the date of the change of control; provided, that the participant has been in continuous employment through the termination or change in control date, as applicable.

On July 21, 2021, 620,000 phantom units and 1,245,000 phantom unit appreciation rights were granted to employees of the general partner and its affiliates who perform services for the Partnership. On April 20, 2022, the board of directors of the general partner of the Partnership and the Compensation Committee approved the First Amendment to the Plan, effective as of the same date, which amendment increased the total number of phantom units available for grant under the Plan from 2,000,000 units to 5,000,000 units. On April 20, 2022, 365,000 phantom units and 1,097,500 phantom unit appreciation rights were granted to employees of the general partner and its affiliates who perform services for the Partnership. On July 19, 2023, 1,179,500 phantom units and 505,500 phantom unit appreciation rights were granted to employees of the general partner and its affiliates who perform services for the Partnership.

Phantom unit awards are recorded in operating expense and selling, general and administrative expense based on the fair value of the vested portion of the awards on the balance sheet date. The fair value of these awards is updated at each balance sheet date and changes in the fair value of the vested portions of the awards are recorded as increases or decreases to compensation expense within operating expense and selling, general and administrative expense in the Consolidated and Condensed Statements of Operations. All of the Partnership's outstanding phantom unit awards at September 30, 2023 met the criteria to be treated under liability classification in accordance with ASC 718, given that these awards will settle in cash on the vesting date.

Compensation expense for the phantom awards is based on the fair value of the units as of the balance sheet date as further discussed below, and such costs are recognized ratably over the service period of the awards. As the fair value of liability awards is required to be re-measured each period end, stock compensation expense amounts recognized in future periods for these awards will vary. The estimated future cash payments of these awards are presented as liabilities within "Other current liabilities" and "Other long-term obligations" in the Consolidated and Condensed Balance Sheets. As of September 30, 2023, there was a total of $5,241 of unrecognized compensation costs related to non-vested phantom unit awards. These costs are expected to be recognized over a remaining life of 2.37 years.

The fair value of the phantom unit awards was estimated using a Monte Carlo valuation model as of the balance sheet date. The Monte Carlo valuation model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility was calculated based on the historical volatility of the Partnership’s common units as well as set of peer companies.

Restricted Unit Plan

On May 26, 2017, the unitholders of the Partnership approved the Martin Midstream Partners L.P. 2017 Restricted Unit Plan (the "2017 LTIP"). The 2017 LTIP 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 2017 LTIP is administered by 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 2017 LTIP containing such terms as the Compensation Committee shall determine under the 2017 LTIP. With respect to time-based restricted units ("TBRUs"), 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 "PBRUs"). 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. PBRUs are earned only upon our achievement of an objective performance measure for the

MARTIN MIDSTREAM PARTNERS L.P.

NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except where otherwise indicated)

September 30, 2023

(Unaudited)

performance period. PBRUs 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.

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. All of the Partnership's outstanding restricted unit awards at September 30, 2023 met the criteria to be treated under equity classification.

In February 2023, the Partnership issued 21,352 TBRUs to each of the Partnership's three independent directors under the 2017 LTIP. These restricted common units vest in equal installments of 5,338 units on January 24, 2024, 2025, 2026, and 2027.

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 nine months ended September 30, 2023 is provided below:


	Number of Units		Weighted Average Grant-Date Fair Value Per Unit
Non-vested, beginning of period	124,362		$	3.36
Granted (TBRU)	64,056		$	2.81

Vested	(45,878)		$	3.74
Forfeited	—		$	—
Non-Vested, end of period	142,540		$	2.99

Aggregate intrinsic value, end of period	$	396

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 three and nine months ended September 30, 2023 and 2022 is provided below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Aggregate intrinsic value of units vested	$	—	$	—	$	89	$	92
Fair value of units vested	—		—		178		188

As of September 30, 2023, there was $321 of unrecognized compensation cost related to non-vested restricted units. That cost is expected to be recognized over a weighted-average period of 2.44 years.

NOTE 12. RELATED PARTY TRANSACTIONS

As of September 30, 2023, 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 100% voting interest in MMGP Holdings, LLC ("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. 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 September 30, 2023 of approximately 15.7% of the Partnership’s outstanding limited partnership units, 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)

September 30, 2023

(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; 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 affiliat