February 29, 2012

Martin Midstream Partners Reports 2011 Fourth Quarter and Annual Financial Results

KILGORE, Texas, Feb. 29, 2012 (GLOBE NEWSWIRE) -- Martin Midstream Partners L.P. (Nasdaq:MMLP) (the "Partnership") announced today its financial results for the fourth quarter and year ended December 31, 2011.

The Partnership reported net income for the fourth quarter of 2011 of $2.9 million, or $0.06 per limited partner unit. This compared to net income for the fourth quarter of 2010 of $6.5 million, or $0.30 per limited partner unit. Revenues for the fourth quarter of 2011 were $345.5 million compared to $262.1 million for the fourth quarter of 2010. Fourth quarter 2011 net income was positively impacted by a $0.1 million, or $0.00 per limited partner unit, non-cash derivative gain from certain commodity and interest rate swaps that are not accounted for using hedge accounting. Fourth quarter 2010 net income was negatively impacted by a $4.0 million, or $0.23 per limited partner unit, non-cash derivative loss from certain commodity and interest rate swaps that are not accounted for using hedge accounting.

The Partnership reported net income for the year ended December 31, 2011 of $24.3 million, or $0.92 per limited partner unit. This compared to net income for the year ended December 31, 2010 of $16.0 million, or $0.63 per limited partner unit. Revenues for the year ended December 31, 2011 were $1.2 billion, compared to revenues of $912.1 million for the year ended December 31, 2010. Net income for the year ended December 31, 2011 was positively impacted by a $3.3 million, or $0.17 per limited partner unit, non cash derivative gain from certain commodity and interest rate swaps that are not accounted for using hedge accounting. Net income for the year ended December 31, 2011 was positively impacted by $2.8 million, or $0.14 per limited partner unit, due to payments received in the third quarter for the early extinguishment of interest rate swaps. Net income for the year ended December 31, 2010 was negatively impacted by $4.2 million, or $0.24 per limited partner unit, due to the payment of fees for the early extinguishment of interest rate swaps in the first quarter 2010 ($3.8 million) and non-cash derivative losses from certain commodity and interest rate swaps that are not accounted for using hedge accounting ($0.4 million).

The Partnership's distributable cash flow for the three months ended December 31, 2011 was $16.1 million and for the year ended December 31, 2011 was $62.7 million. Distributable cash flow is a non-GAAP financial measure which is explained in greater detail below under "Use of Non-GAAP Financial Information." The Partnership has also included below a table entitled "Distributable Cash Flow" in order to show the components of this non-GAAP financial measure and its reconciliation to the most comparable GAAP measurement.

Ruben Martin, President and Chief Executive Officer of MMGP, the general partner of the Partnership, said, "The fourth quarter 2011 demonstrated again the effectiveness of our diverse operations. For the quarter we finished with a distribution coverage ratio of 0.98 times. For the year ended December 31, 2011 our distribution coverage was 0.97 times. While these levels are not where we need to be long-term, we have invested and will continue to invest heavily in future growth. Much of this growth is organic and requires long lead times. Accordingly, we are incurring indebtedness that impacts our coverage during the construction periods of our projects. Since the beginning of the fourth quarter, we have spent approximately $50 million of growth capital yet to realize full cash flow potential. These include previously announced projects such as our Corpus Christi crude oil terminal, the Cross vacuum tower and the Waskom rail rack and capacity expansion. We expect these projects will enhance the cash flow of the Partnership for 2012. 

"During the fourth quarter we saw one very strong segment; two segments performed at or near plan and one segment fell short of expectations. As we have seen over time, the portfolio effect of having such a diverse set of operations serves our unit holders well. 

"Our Sulfur Services segment was strong during the fourth quarter. Margins were strong in both molten sulfur handling and in our fertilizer division. Sulfur based fertilizer had its best year for the Partnership during 2011. We saw strong demand for our products that continued well beyond the normal seasonal trough we see outside of the growing season. 

"Our Terminalling and Storage segments performed close to plan during the quarter. Terminalling and Storage, as our largest and most stable segment, is itself also diverse. For most of 2011, throughput volumes at our shore-based terminals remained challenged by lower overall offshore Gulf of Mexico activity. We believe we are well positioned as drilling permits and rig count slowly begin to gain traction. For the year ended 2011, our specialty terminals division provided a stable offset to the shore-based terminal weakness. Contracts for storage of hard-to-handle products tend to be longer-term in nature providing for more stable, fee-based cash flow. This includes our naphthenic lube oil processing facility that performed well during 2011. 

"Our Marine Transportation segment was stable for the quarter and performed near expectations. We saw continued high utilization of our inland fleet, partially offset by slightly weaker conditions for our offshore assets throughout 2011. We expect our inland marine assets to be nearly fully utilized in 2012. Further, we believe liquids off-take from the shale plays like the Eagle Ford will ultimately result in increased demand and stability for offshore tows like ours which have been historically more volatile working in the spot market.

"Our Natural Gas Services segment experienced the most head wind in the fourth quarter. Like others, we are not immune to the current market conditions seen in natural gas. Continued low natural gas prices and migration of producers' capital spending to liquids-rich plays have resulted in underperformance within this segment. In addition, we recently lost a key producer whose volume was dedicated to our Waskom facility. This resulted in our processing levels at Waskom coming in below plan. In this pricing environment, we continue to believe producers will seek liquids-rich production areas which are central to our gathering systems and the Waskom facility."                                   

Included with this press release are the Partnership's consolidated financial statements as of and for the quarter and year ended December 31, 2011 and certain prior periods.  These financial statements should be read in conjunction with the information contained in the Partnership's Annual Report on Form 10-K, filed with the SEC on March 5, 2012.

Investors' Conference Call

An investors' conference call to review the fourth quarter and fiscal year results will be held on Thursday, March 1, 2012 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 March 1, 2012 through 10:59 p.m. Central Time on March 15, 2012. The access code for the conference call and the audio replay is Conference ID No. 47532709. The audio replay of the conference call will also be archived on Martin Midstream Partners' website at www.martinmidstream.com.

About Martin Midstream Partners LP

Martin Midstream Partners LP 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 lines include: terminalling and storage services for petroleum products and by-products; natural gas gathering, processing and NGL distribution; sulfur and sulfur-based products processing, manufacturing, and distribution; and marine transportation services for petroleum products and by-products.

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

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 its 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 SEC. 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 reports its financial results in accordance with United States generally accepted accounting principles (GAAP).  However, from time to time, the Partnership uses certain non-GAAP financial measures such as distributable cash flow because the Partnership's management believes that this measure may provide users of this financial information with meaningful comparisons between current results and prior reported results and a meaningful measure of the Partnership's cash available to pay distributions. Distributable cash flow should not be considered an alternative to cash flow from operating activities or any other measure of financial performance in accordance with GAAP. Distributable cash flow is not intended to represent cash flows for the period, nor is it presented as an alternative to income from continuing operations. Furthermore, it should not be seen as a measure of liquidity or a substitute for comparable metrics prepared in accordance with GAAP. This information may constitute non-GAAP financial measures within the meaning of Regulation G adopted by the SEC.  Accordingly, the Partnership has presented herein, and will present in other information it publishes that contains this non-GAAP financial measure, a reconciliation of this measure to the most directly comparable GAAP financial measure.

The Partnership has included below a table entitled "Distributable Cash Flow" in order to show the components of this non-GAAP financial measure and its reconciliation to the most comparable GAAP measure. The Partnership calculates distributable cash flow as follows: net income (as reported in statements of operations), plus depreciation and amortization, amortization of debt discount, and amortization of deferred debt issue costs (as reported in statements of cash flows), plus (less) deferred income taxes (as reported in statements of cash flows), plus costs related to the early extinguishment of interest rate swaps (as reported under the caption "Long-Term Debt and Capital Leases" in the Partnership's Annual Report on Form 10-K to be filed with the SEC on March 5, 2012), plus distribution equivalents from unconsolidated entities (as described below), plus (less) invested cash in unconsolidated entities (as described below), less equity in earnings of unconsolidated entities (as reported in statements of operations), plus non-cash mark-to-market on derivatives (as reported in statements of cash flows), less maintenance capital expenditures (as reported under the caption "Liquidity and Capital Resources" in the Partnership's Annual Report on Form 10-K to be filed with the SEC on March 5, 2012), plus (less) gain/(loss) on disposition or sale of property, plant and equipment (as reported in statements of cash flows), less payments for plant turn around costs (as reported in statements of cash flows), plus unit-based compensation (as reported in statements of changes in capital).

The Partnership's distribution equivalents from unconsolidated entities is calculated as distributions from unconsolidated entities (as reported in statements of cash flows), plus return of investments from unconsolidated entities (as reported in statements of cash flows), plus distributions in-kind from unconsolidated entities (as reported in statements of cash flows). For the quarter ended December 31, 2011, the Partnership's distributions from unconsolidated entities, return of investments from unconsolidated entities and distributions in-kind from equity investments were $0.0 million, $1.2 million and $3.7 million, respectively. For the year ended December 31, 2011, the Partnership's distributions from unconsolidated entities, return of investments from unconsolidated entities and distributions in-kind from equity investments were $0.0 million, $2.9 million and $12.7 million, respectively.

The Partnership's invested cash in unconsolidated entities is calculated as distributions from (contributions to) unconsolidated entities for operations (as reported in statements of cash flows), plus expansion capital expenditures in unconsolidated entities (as reported under the caption "Liquidity and Capital Resources" in the Partnership's Annual Report on Form 10-K to be filed with the SEC on March 5, 2012). For the quarter ended December 31, 2011, the Partnership's distributions from (contributions to) unconsolidated entities for operations and capital expenditures in unconsolidated entities were $(9.4) million and $9.0 million, respectively. For the year ended December 31, 2011, the Partnership's distributions from (contributions to) unconsolidated entities for operations and capital expenditures in unconsolidated entities were $(19.0) million and $18.8 million, respectively.

Contact:   Robert D. Bondurant, Executive Vice President and Chief Financial Officer of Martin Midstream GP LLC, the Partnership's general partner at (903) 983-6200.

MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
     
  December 31,
  2011 2010
  (Dollars in thousands)
Assets    
     
Cash  $ 266 $ 11,380
Accounts and other receivables, less allowance for doubtful accounts of $3,021 and $2,528, respectively  126,461 95,276
Product exchange receivables  17,646 9,099
Inventories  78,163 52,616
Due from affiliates  5,968 6,437
Fair value of derivatives  622 2,142
Other current assets  1,978 2,784
Total current assets  231,104 179,734
     
Property, plant and equipment, at cost  711,052 632,456
Accumulated depreciation  (233,710) (200,276)
Property, plant and equipment, net  477,342 432,180
     
Goodwill  37,268 37,268
Investment in unconsolidated entities  170,497 98,217
Debt issuance costs, net  13,330 13,497
Other assets  19,568 24,582
  $ 949,109 $ 785,478
Liabilities and Partners' Capital    
     
Current installments of long-term debt and capital lease obligations  $ 1,261 $ 1,121
Trade and other accounts payable  125,970 82,837
Product exchange payables  37,313 22,353
Due to affiliates  18,485 6,957
Income taxes payable  893 811
Fair value of derivatives  362 282
Other accrued liabilities  11,022 10,034
Total current liabilities  195,306 124,395
     
Long-term debt and capital leases, less current maturities  458,941 372,862
Deferred income taxes  7,657 8,213
Fair value of derivatives  4,100
Other long-term obligations  1,589 1,102
Total liabilities  663,493 510,672
     
Partners' capital  284,990 273,387
Accumulated other comprehensive loss  626 1,419
Total partners' capital  285,616 274,806
Commitments and contingencies     
  $ 949,109 $ 785,478
     
These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Annual Report on Form 10-K filed with the SEC on March 5, 2012.  
   
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
   
  Year Ended December 31,
  2011 2010 2009¹
  (Dollars in thousands, except per unit
amounts)
Revenues:      
Terminalling and storage *   $ 77,283 $ 67,117 $ 69,710
Marine transportation *   76,936 77,642 68,480
Sulfur services *   11,400
Product sales: *      
Natural gas services 733,087 554,482 408,982
Sulfur services 263,644 165,078 79,629
Terminalling and storage  74,723   47,799  35,584
   1,071,454  767,359  524,195
Total revenues  1,237,073  912,118  662,385
       
Costs and expenses:      
Cost of products sold: (excluding depreciation and amortization)      
Natural gas services *    704,073 527,232 382,542
Sulfur services * 219,697 122,121 43,386
Terminalling and storage  67,134  44,549  31,331
  990,904 693,902 457,259
Expenses:      
Operating expenses * 140,197 116,402 117,438
Selling, general and administrative * 22,665 21,118 19,775
Depreciation and amortization  44,957  40,656  39,506
Total costs and expenses  1,198,723  872,078  633,978
Other operating income  1,326  136  6,013
Operating income  39,676   40,176  34,420
       
Other income (expense):      
Equity in earnings of unconsolidated entities 9,536 9,792 7,044
Interest expense (24,518) (33,716) (18,995)
Other, net   233  287  326
Total other income (expense)  (14,749)  (23,637)  (11,625)
Net income before taxes 24,927 16,539 22,795
Income tax benefit (expense)    (585)  (517)  (592)
Net income  $  24,342  $   16,022  $  22,203
       
General partner's interest in net income $ 5,289 $ 3,869 $ 3,249
Limited partners' interest in net income $ 17,945 $ 11,045 $ 17,179
       
Net income per limited partner unit - basic and diluted  $  0.92    $   0.63  $     1.17
Weighted average limited partner units - basic  19,545,427  17,525,089  14,680,807
Weighted average limited partner units - diluted 19,546,705 17,525,989 14,684,775
       
¹ General and limited partner's interest in net income includes net income of the Cross assets since the date of the acquisition      
       
These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Annual Report on Form 10-K filed with the SEC on March 5, 2012.      
       
*Related Party Transactions Included Above      
Revenues:      
Terminalling and storage $ 54,211 $ 46,823 $ 19,998
Marine transportation 23,478 28,194 19,370
Product Sales 15,561 14,998 5,838
Costs and expenses:      
Cost of products sold: (excluding depreciation and amortization)      
Natural gas services  106,312 79,321 56,914
Sulfur services 18,314 16,061 12,583
Expenses:      
Operating expenses 59,134 49,286 37,284
Selling, general and administrative 12,852 10,918 7,162
   
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (Dollars in thousands)
 
   
  Year Ended December 31,
  2011 2010 2009
  (Dollars in thousands)
 Net income $ 24,342 $ 16,022 $ 22,203
 Changes in fair values of commodity cash flow hedges 1,011 143 14
 Commodity cash flow hedging (gains) losses reclassified to earnings  
(1,822)
 
(617)
 
(2,646)
 Changes in fair value of interest rate cash flow hedges (241) (1,854)
 Interest rate cash flow hedging losses reclassified to earnings  18  4,210  7,345
       
 Comprehensive income  $ 23,549  $ 19,517  $ 25,062
       
These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Annual Report on Form 10-K filed with the SEC on March 5, 2012.      
       
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
For the years ended December 31, 2011, 2010 and 2009
     
       
  Partners' Capital    
   
 
Parent Net
 
 
Common
 
 
Subordinated
 
General Partner
Accumulated
Comprehensive
Income
 
  Investment Units Amount Units Amount Amount Amount Total
  (Dollars in thousands)
Balances — December 31, 2008 $ 11,665 13,688,152 $ 239,333  850,674 $ (3,688) $ 4,004 $ (4,935) $ 246,379
                 
Net Income 1,664 16,310 980 3,249 22,203
                 
General partner contribution 1,324 1,324
                 
Units issued in connection with Cross acquisition   804,721 16,523 889,444 16,434 32,957
                 
Recognition of beneficial conversion feature (111) 111
                 
Issuance of common units 714,285 20,000 20,000
                 
Cash distributions ($3.00 per unit) (41,064) (2,552) (3,846)  (47,462)
                 
Conversion of subordinated units to common units 850,674 (5,328) (850,674)  5,328
                 
Unit-based compensation 3,000 98 98
                 
Purchase of treasury units (3,000) (78) (78)
                 
Contributions to parent (13,329) (13,329)
                 
Adjustment in fair value of derivatives  —  —  —  —  —   —  2,859  2,859
                 
Balances — December 31, 2009 $ —  16,057,832 $ 245,683  889,444 $ 16,613 $ 4,731 $ (2,076) $ 264,951
                 
Net Income 12,153 3,869 16,022
       

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