April 26, 2017

Martin Midstream Partners Reports 2017 First Quarter Financial Results

  • Net Income of $13.6 million
  • Quarterly Distribution Coverage Ratio of 1.68 times
  • Balance Sheet Improvement & De-levering.  Leverage at 4.42x as of March 31, 2017

KILGORE, Texas, April 26, 2017 (GLOBE NEWSWIRE) -- Martin Midstream Partners L.P. (Nasdaq:MMLP) (the "Partnership") announced today its financial results for the quarter ended March 31, 2017.

Ruben Martin, President and Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership said, "We continue to execute on our stated path of improved distribution coverage and balance sheet leverage; and we delivered strong first quarter 2017 results, including net income of $13.6 million.  We followed up our highest distribution coverage quarter ever at the end of 2016 with another strong cash flow and distribution coverage quarter.  Based on actual distributions paid during the quarter, we generated a 1.68 times coverage ratio.

"I'm pleased with our performance as Adjusted EBITDA for the quarter ended March 31, 2017 was $46.8 million, approximately 5% ahead of our guidance level as shown on our first quarter earnings slide.  Looking across our business segments, Sulfur Services was our strongest performer compared to guidance, beating our estimate by approximately 30%.  Fertilizer exceeded expectations on both volume and margin benefiting from favorable market and weather conditions.  Also, Marine Transportation outperformed versus plan due to improved efficiency and reduced operating costs.  Our Natural Gas Services segment performed below expectation as a result of warmer weather adversely impacting our wholesale propane business.  Also, we experienced reduced distributions from our West Texas LPG pipeline joint-venture as a result of lower system throughput in the quarter and the continued rollback of the posted tariff rates by the Railroad Commission of Texas during the ongoing rate proceeding.

"Looking at our balance sheet, I'm pleased with the continued trend toward lower leverage.  For the first quarter our bank compliant total leverage ratio which includes certain pro forma adjustments and the positive impact of debt reduction from the follow-on equity offering completed in February, was 4.42 times.  This is the Partnership's lowest leverage since the second quarter of 2013 and represents an improvement of approximately 0.50 times from our year end 2016 level.  This debt reduction coincides with cash flow generation and reduced working capital levels primarily concentrated in our Natural Gas Services segment.

Finally, during the quarter we successfully executed the drop down acquisition of the Hondo, Texas asphalt terminal currently under construction from MRMC.  Upon completion, which is expected mid-year, the total investment will be $36.0 million and we expect to generate approximately $5.0 million of cash flow on an annual basis.  We funded the entire acquisition with proceeds from the follow-on equity offering completed in February."

The Partnership had net income for the first quarter of 2017 of $13.6 million, or $0.36 per limited partner unit.  The Partnership had net income for the first quarter of 2016 of $15.9 million, or $0.33 per limited partner unit.  The Partnership's adjusted EBITDA for the first quarter of 2017 was $46.8 million compared to adjusted EBITDA from for the first quarter of 2016 of $49.3 million.

The Partnership's distributable cash flow for the first quarter of 2017 was $30.3 million compared to distributable cash flow for the first quarter of 2016 of $32.5 million.

Revenues for the first quarter of 2017 were $253.3 million compared to the first quarter of 2016 of $225.6 million.

Distributable cash flow, EBITDA and adjusted EBITDA are non-GAAP financial measures which are explained in greater detail below under the heading "Use of Non-GAAP Financial Information." The Partnership has also included below a table entitled "Reconciliation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow" in order to show the components of these non-GAAP financial measures and their reconciliation to the most comparable GAAP measurement.

Included with this press release are the Partnership's consolidated and condensed financial statements as of and for the three months ended March 31, 2017 and certain prior periods.  These financial statements should be read in conjunction with the information contained in the Partnership's Quarterly Report on Form 10-Q, to be filed with the Securities and Exchange Commission on April 26, 2017.

An attachment accompanying this announcement is available at 
http://www.globenewswire.com/NewsRoom/AttachmentNg/f388b630-6c52-43fa-a1a9-43909c676d22 .

Investors' Conference Call

An investors' conference call to review the first quarter results will be held on Thursday, April 27, 2017, at 8:00 a.m. Central Time.  The conference call can be accessed by calling (877) 878-2695.  An audio replay of the conference call will be available by calling (855) 859-2056 from 11:00 a.m. Central Time on April 27, 2017 through 10:59 p.m. Central Time on May 8, 2017.  The access code for the conference call and the audio replay is Conference ID No. 5945983.  The audio replay of the conference call will also be archived on Martin Midstream Partners' website at www.martinmidstream.com.

About Martin Midstream Partners
           
The Partnership is a publicly traded limited partnership with a diverse set of operations focused primarily in the United States Gulf Coast region. The Partnership's primary business segments include: (1) terminalling, storage and packaging services for petroleum products and by-products; (2) natural gas services, including liquids transportation and distribution services and natural gas storage; (3) sulfur and sulfur-based products processing, manufacturing, marketing and distribution; and (4) marine transportation services for petroleum products and by-products.

Forward-Looking Statements

Statements about the Partnership's outlook and all other statements in this release other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements and all references to financial estimates rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside the Partnership's control, which could cause actual results to differ materially from such statements.  While the Partnership believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in anticipating or predicting certain important factors.  A discussion of these factors, including risks and uncertainties, is set forth in the Partnership's annual and quarterly reports filed from time to time with the Securities and Exchange Commission.  The Partnership disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events, or otherwise.

Use of Non-GAAP Financial Information

The Partnership's management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP") to analyze its 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.  The Partnership's management views these measures as important performance measures of core profitability for its operations and the ability to generate and distribute cash flow, and as key components of its internal financial reporting. The Partnership's management believes investors benefit from having access to the same financial measures that 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. The Partnership has included information concerning EBITDA and adjusted EBITDA because it provides investors and management with additional information to better understand the following: financial performance of the Partnership's assets without regard to financing methods, capital structure or historical cost basis; the Partnership's operating performance and return on capital as compared to those of other similarly situated entities; and the viability of acquisitions and capital expenditure projects.  The Partnership's method of computing adjusted EBITDA may not be the same method used to compute similar measures reported by other entities. The economic substance behind the Partnership's use of adjusted EBITDA is to measure the ability of the Partnership's assets to generate cash sufficient to pay interest costs, support its indebtedness and make distributions to its unitholders.

Distributable Cash Flow.  Distributable cash flow is a significant performance measure used by the Partnership's management and by external users of its financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by the Partnership to the cash distributions it expects to pay unitholders.  Distributable cash flow is also an important financial measure for the Partnership's unitholders since it serves as an indicator of the Partnership's success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not the Partnership is generating cash flow at a level that can sustain or support an increase in its 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 GAAP. The Partnership's method of computing these measures may not be the same method used to compute similar measures reported by other entities.

Additional information concerning the Partnership is available on the Partnership's website at www.martinmidstream.com or by contacting:

Joe McCreery, IRC - Vice President - Finance & Head of Investor Relations
(903) 988-6425

MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSE BALANCE SHEETS
(Dollars in thousands)
     
  March 31,
2017
 December 31,
2016
  (Unaudited) (Audited)
Assets    
Cash $39  $15 
Accounts and other receivables, less allowance for doubtful accounts of $239 and $372, respectively 61,398  80,508 
Product exchange receivables 297  207 
Inventories 62,051  82,631 
Due from affiliates 12,044  11,567 
Fair value of derivatives 97   
Other current assets 3,930  3,296 
Assets held for sale 14,264  15,779 
Total current assets 154,120  194,003 
     
Property, plant and equipment, at cost 1,251,496  1,224,277 
Accumulated depreciation (400,139) (378,593)
Property, plant and equipment, net 851,357  845,684 
     
Goodwill 17,296  17,296 
Investment in WTLPG 129,211  129,506 
Note receivable - affiliate 15,000  15,000 
Other assets, net 42,176  44,874 
Total assets $1,209,160  $1,246,363 
      
Liabilities and Partners' Capital    
Trade and other accounts payable $69,132   $70,249 
Product exchange payables 7,260  7,360 
Due to affiliates 3,288  8,474 
Income taxes payable 1,050  870 
Fair value of derivatives 164  3,904 
Other accrued liabilities 18,322  26,717 
Total current liabilities 99,216  117,574 
     
Long-term debt, net 750,735   808,107 
Other long-term obligations 5,997  8,676 
Total liabilities 855,948  934,357 
     
Commitments and contingencies (Note 17)     
Partners' capital 353,212  312,006 
Total partners' capital 353,212  312,006 
Total liabilities and partners' capital $1,209,160  $1,246,363 
         

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on April 26, 2017.

 
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit amounts)
   
  Three Months Ended
  March 31,
  2017 2016
Revenues:    
Terminalling and storage * $24,658  $31,705 
Marine transportation * 12,821  16,346 
Natural gas services* 14,665  16,097 
Sulfur services 2,850  2,700 
Product sales: *    
Natural gas services 126,657  91,091 
Sulfur services 39,527  39,475 
Terminalling and storage 32,147  28,191 
  198,331  158,757 
Total revenues 253,325  225,605 
     
Costs and expenses:    
Cost of products sold: (excluding depreciation and amortization)    
Natural gas services * 108,179  78,544 
Sulfur services * 24,483  27,524 
Terminalling and storage * 26,446  23,832 
  159,108  129,900 
Expenses:    
Operating expenses * 35,057  41,232 
Selling, general and administrative * 9,921  8,171 
Depreciation and amortization 25,336  22,048 
Total costs and expenses 229,422  201,351 
     
Other operating income (loss) (155) 84 
Operating income 23,748  24,338 
     
Other income (expense):     
Equity in earnings of WTLPG 905  1,677 
Interest expense, net (10,920) (10,112)
Other, net 30  62 
Total other expense (9,985) (8,373)
     
Net income before taxes 13,763  15,965 
Income tax expense (180) (51)
Net income 13,583  15,914 
Less general partner's interest in net income (272) (4,211)
Less income allocable to unvested restricted units (35) (43)
Limited partners' interest in net income $13,276  $11,660 
     
Net income per unit attributable to limited partners - basic $0.36  $0.33 
Net income per unit attributable to limited partners - diluted $0.36  $0.33 
Weighted average limited partner units - basic 37,321  35,354 
Weighted average limited partner units - diluted 37,367  35,366 

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on April 26, 2017.

*Related Party Transactions Shown Below

MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit amounts)
 
*Related Party Transactions Included Above
   
  Three Months Ended
  March 31,
  2017 2016
Revenues:*    
Terminalling and storage $19,704  $20,958 
Marine transportation 4,325  6,411  
Natural gas services 112  313 
Product Sales 1,430  700 
Costs and expenses:*    
Cost of products sold: (excluding depreciation and amortization)    
Natural gas services 8,894  3,385 
Sulfur services 3,675  3,812 
Terminalling and storage 5,067  3,385 
Expenses:    
Operating expenses  16,376  17,357 
Selling, general and administrative 7,568  5,432 

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on April 26, 2017.

MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED STATEMENTS OF CAPITAL
(Dollars in thousands)
 
  Partners' Capital  
  Common Limited General
Partner
Amount
  
  Units Amount  Total
Balances - January 1, 2016 35,456,612  $380,845  $13,034  $393,879 
Net income   11,703  4,211  15,914 
Issuance of restricted units 13,800       
Forfeiture of restricted units (250)      
Cash distributions    (28,795) (4,560) (33,355)
Reimbursement of excess purchase price over carrying value of acquired assets   750    750 
Unit-based compensation   222    222 
Purchase of treasury units (15,200) (330)   (330)
Balances - March 31, 2016 35,454,962  $364,395  $12,685  $377,080 
         
Balances - January 1, 2017 35,452,062  $304,594  $7,412  $312,006 
Net income   13,311  272  13,583 
Issuance of common units, net of issuance related costs 2,990,000  51,188     51,188 
Issuance of restricted units 12,000       
Forfeiture of restricted units (1,500)      
General partner contribution     1,098  1,098 
Cash distributions   (17,725) (362) (18,087)
Unit-based compensation   186     186 
Excess purchase price over carrying value of acquired assets   (7,887)   (7,887)
Reimbursement of excess purchase price over carrying value of acquired assets   1,125    1,125 
Balances - March 31, 2017 38,452,562  $344,792  $8,420  $353,212 

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on April 26, 2017.

MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
   
   Three Months Ended
  March 31,
  2017 2016
Cash flows from operating activities:    
Net income $13,583  $15,914 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 25,336  22,048 
Amortization of deferred debt issuance costs 721  715 
Amortization of premium on notes payable (77) (77)
(Gain) loss on sale of property, plant and equipment 155  (84)
Equity in earnings of unconsolidated entities (905) (1,677)
Derivative (income) loss 2,495  (2,001)
Net cash (paid) received for commodity derivatives (6,332) 1,215 
Net cash received for interest rate derivatives   160 
Net premiums received on derivatives that settled during the year on interest rate swaption contracts   630 
Unit-based compensation 186  222 
Cash distributions from WTLPG  1,200  2,500 
Change in current assets and liabilities, excluding effects of acquisitions and dispositions:    
Accounts and other receivables 19,110  15,136 
Product exchange receivables (90) 49 
Inventories 20,580  17,966 
Due from affiliates (477) (1,432)
Other current assets (491) 1,142 
Trade and other accounts payable (2,560) (13,078)
Product exchange payables (100) (2,811)
Due to affiliates (5,186) (2,640)
Income taxes payable 180  51 
Other accrued liabilities (11,083) (8,223)
Change in other non-current assets and liabilities 281  (419)
Net cash provided by operating activities 56,526  45,306 
     
Cash flows from investing activities:     
Payments for property, plant and equipment (6,477) (17,298)
Acquisitions (19,533)  
Acquisition of intangible assets   (2,150)
Payments for plant turnaround costs (1,394) (991)
Proceeds from sale of property, plant and equipment 1,481  113 
Net cash used in investing activities (25,923) (20,326)
     
Cash flows from financing activities:    
Payments of long-term debt (133,000) (86,200)
Proceeds from long-term debt 75,000  94,200 
Proceeds from issuance of common units, net of issuance related costs 51,188   
General partner contribution 1,098   
Purchase of treasury units   (330)
Payment of debt issuance costs (16) (30)
Excess purchase price over carrying value of acquired assets (7,887)  
Reimbursement of excess purchase price over carrying value of acquired assets 1,125  750 
Cash distributions paid (18,087)  (33,355)
Net cash used in financing activities (30,579) (24,965)
     
Net increase (decrease) in cash 24  15 
Cash at beginning of period 15   31 
Cash at end of period $39  $46 
Non-cash additions to property, plant and equipment $3,262  $3,292 

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on April 26, 2017.

MARTIN MIDSTREAM PARTNERS L.P.
SEGMENT OPERATING INCOME
(Dollars and volumes in thousands, except BBL per day)
 
Terminalling and Storage Segment
 
Comparative Results of Operations for the Three Months Ended March 31, 2017 and 2016
      
 Three Months Ended
March 31,
 Variance Percent
Change

 2017 2016  
               
 (In thousands, except BBL per day)  
Revenues:       
Services$26,431  $33,157  $(6,726) (20)%
Products32,147  28,193  3,954  14%
Total revenues58,578  61,350  (2,772) (5)%
        
Cost of products sold27,011  24,350  2,661  11%
Operating expenses15,645  18,716  (3,071) (16)%
Selling, general and administrative expenses1,325  1,100  225  20%
Depreciation and amortization15,477  9,998  5,479  55%
 (880) 7,186  (8,066) (112)%
Other operating income (loss)(13) 100  (113) (113)%
Operating income (loss)$(893) $7,286  $(8,179) (112)%
        
Lubricant sales volumes (gallons)5,334  5,146  188  4%
Shore-based throughput volumes (guaranteed minimum) (gallons)41,667  50,000  (8,333) (17)%
Smackover refinery throughput volumes (guaranteed minimum) (BBL per day)6,500  6,500    %
Corpus Christi crude terminal (BBL per day)  92,635  (92,635) (100)%
             


Natural Gas Services Segment
      
Comparative Results of Operations for the Three Months Ended March 31, 2017 and 2016
      
 Three Months Ended
March 31,
 Variance  Percent
Change

 2017 2016  
               
 (In thousands)  
Revenues:       
Services$14,665  $16,097  $(1,432) (9)%
Products126,657  91,091  35,566  39%
Total revenues141,322  107,188  34,134  32%
        
Cost of products sold109,303  79,348  29,955  38%
Operating expenses5,658  5,519  139  3%
Selling, general and administrative expenses3,051  2,304  747  32%
Depreciation and amortization6,161  6,974   (813) (12)%
Operating income$17,149  $13,043  $4,106  31%
        
Distributions from unconsolidated entities$1,200  $2,500  $(1,300) (52)%
        
NGL sales volumes (Bbls)2,810  3,202  (392) (12)%
             


MARTIN MIDSTREAM PARTNERS L.P.
SEGMENT OPERATING INCOME
(Dollars and volumes in thousands, except BBL per day)
      
Sulfur Services Segment     
      
Comparative Results of Operations for the Three Months Ended March 31, 2017 and 2016
      
 Three Months Ended
March 31,
 Variance Percent
Change

 2017 2016  
               
 (In thousands)  
Revenues:       
Services$2,850   $2,700  $150  6%
Products39,527  39,475  52  %
Total revenues42,377  42,175  202  %
        
Cost of products sold24,574  27,615  (3,041) (11)%
Operating expenses3,247  2,757  490  18%
Selling, general and administrative expenses1,021  958  63  7%
Depreciation and amortization2,033   1,970  63  3%
 11,502  8,875  2,627  30%
Other operating loss(22)  (16) (6) 38%
Operating income$11,480  $8,859  $2,621  30%
         
Sulfur (long tons)217  157  60  38%
Fertilizer (long tons)94  83  11  13%
Total sulfur services volumes (long tons)311  240  71  30%
            


Marine Transportation Segment     
      
Comparative Results of Operations for the Three Months Ended March 31, 2017 and 2016
      
 Three Months Ended
March 31,
 Variance Percent
Change

 2017 2016  
               
 (In thousands)    
Revenues$13,414  $16,902  $(3,488) (21)%
Operating expenses11,093  14,837  (3,744) (25)%
Selling, general and administrative expenses104  (419) 523   (125)%
Depreciation and amortization1,665  3,106  (1,441) (46)%
 552  (622)  1,174  (189)%
Other operating loss(120)    (120)  
Operating income (loss)$432  $(622) $1,054  (169)%
                

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 months ended March 31, 2017 and 2016, which represents EBITDA, Adjusted EBITDA and Distributable Cash Flow.

Reconciliation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow
  
 Three Months Ended
 March 31,
 2017 2016
        
 (in thousands)
Net income$13,583  $15,914 
Adjustments:   
Interest expense10,920  10,112 
Income tax expense180  51 
Depreciation and amortization25,336  22,048 
EBITDA50,019  48,125 
Adjustments:   
Equity in earnings of unconsolidated entities(905) (1,677)
(Gain) loss on sale of property, plant and equipment155  (84)
Unrealized mark-to-market on commodity derivatives(3,837) 210 
Distributions from unconsolidated entities1,200  2,500 
Unit-based compensation186  222 
Adjusted EBITDA46,818  49,296 
Adjustments:   
Interest expense(10,920) (10,112)
Income tax expense (180) (51)
Amortization of debt premium(77) (77)
Amortization of deferred debt issuance costs721  715 
Non-cash mark-to-market on interest rate derivatives  (206)
Payments for plant turnaround costs(1,394)  (991)
Maintenance capital expenditures(4,668) (6,044)
Distributable Cash Flow$30,300  $32,530 

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Source: Martin Midstream Partners L.P.

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