2014.6.30 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
FORM 10-Q
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| | | |
ý | | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended June 30, 2014
OR
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| | | |
o | | 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)
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| | |
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
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.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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| |
Large accelerated filer x | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The number of the registrant’s Common Units outstanding at July 31, 2014, was 30,639,432.
PART I – FINANCIAL INFORMATION
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| |
Item 1. | Financial Statements |
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(Dollars in thousands)
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
| (Unaudited) | | (Audited) |
Assets | | | |
Cash | $ | 2,704 |
| | $ | 16,542 |
|
Accounts and other receivables, less allowance for doubtful accounts of $1,807 and $2,492, respectively | 145,418 |
| | 163,855 |
|
Product exchange receivables | 4,164 |
| | 2,727 |
|
Inventories | 113,346 |
| | 94,902 |
|
Due from affiliates | 21,915 |
| | 12,099 |
|
Other current assets | 11,173 |
| | 7,353 |
|
Total current assets | 298,720 |
| | 297,478 |
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| | | |
Property, plant and equipment, at cost | 970,170 |
| | 929,183 |
|
Accumulated depreciation | (329,772 | ) | | (304,808 | ) |
Property, plant and equipment, net | 640,398 |
| | 624,375 |
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| | | |
Goodwill | 23,802 |
| | 23,802 |
|
Investment in unconsolidated entities | 266,445 |
| | 128,662 |
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Debt issuance costs, net | 14,191 |
| | 15,659 |
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Fair value of derivatives | 547 |
| | — |
|
Other assets, net | 6,653 |
| | 7,943 |
|
| $ | 1,250,756 |
| | $ | 1,097,919 |
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| | | |
Liabilities and Partners’ Capital | |
| | |
|
Trade and other accounts payable | $ | 121,578 |
| | $ | 142,951 |
|
Product exchange payables | 22,078 |
| | 9,595 |
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Due to affiliates | 6,555 |
| | 2,596 |
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Income taxes payable | 818 |
| | 1,204 |
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Other accrued liabilities | 18,806 |
| | 20,242 |
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Total current liabilities | 169,835 |
| | 176,588 |
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| | | |
Long-term debt | 692,168 |
| | 658,695 |
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Other long-term obligations | 2,020 |
| | 2,219 |
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Total liabilities | 864,023 |
| | 837,502 |
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| | | |
Commitments and contingencies |
|
| |
|
|
Partners’ capital | 386,733 |
| | 260,417 |
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| $ | 1,250,756 |
| | $ | 1,097,919 |
|
See accompanying notes to consolidated and condensed financial statements.
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per unit amounts)
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| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Revenues: | | | | | | | |
Terminalling and storage * | $ | 34,167 |
| | $ | 27,420 |
| | $ | 65,968 |
| | $ | 56,311 |
|
Marine transportation * | 22,153 |
| | 25,497 |
| | 45,563 |
| | 50,477 |
|
Sulfur services | 3,038 |
| | 3,001 |
| | 6,075 |
| | 6,002 |
|
Product sales: * | | | | | | | |
Natural gas services | 248,601 |
| | 187,200 |
| | 581,938 |
| | 446,309 |
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Sulfur services | 59,543 |
| | 57,895 |
| | 110,713 |
| | 125,279 |
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Terminalling and storage | 51,443 |
| | 57,175 |
| | 105,716 |
| | 107,496 |
|
| 359,587 |
| | 302,270 |
| | 798,367 |
| | 679,084 |
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Total revenues | 418,945 |
| | 358,188 |
| | 915,973 |
| | 791,874 |
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| | | | | | | |
Costs and expenses: | |
| | |
| | |
| | |
|
Cost of products sold: (excluding depreciation and amortization) | |
| | |
| | |
| | |
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Natural gas services * | 238,622 |
| | 181,523 |
| | 559,320 |
| | 430,301 |
|
Sulfur services * | 45,315 |
| | 44,786 |
| | 83,168 |
| | 97,583 |
|
Terminalling and storage * | 46,806 |
| | 50,273 |
| | 94,835 |
| | 94,088 |
|
| 330,743 |
| | 276,582 |
| | 737,323 |
| | 621,972 |
|
Expenses: | |
| | |
| | |
| | |
|
Operating expenses * | 48,256 |
| | 43,035 |
| | 92,152 |
| | 86,395 |
|
Selling, general and administrative * | 8,745 |
| | 6,383 |
| | 17,351 |
| | 13,413 |
|
Depreciation and amortization | 14,594 |
| | 12,353 |
| | 28,586 |
| | 24,246 |
|
Total costs and expenses | 402,338 |
| | 338,353 |
| | 875,412 |
| | 746,026 |
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| | | | | | | |
Other operating income | 99 |
| | 424 |
| | 54 |
| | 796 |
|
Operating income | 16,706 |
| | 20,259 |
| | 40,615 |
| | 46,644 |
|
| | | | | | | |
Other income (expense): | |
| | |
| | |
| | |
|
Equity in earnings (loss) of unconsolidated entities | 1,938 |
| | 73 |
| | 1,642 |
| | (301 | ) |
Interest expense | (11,441 | ) | | (10,940 | ) | | (22,892 | ) | | (19,998 | ) |
Debt prepayment premium | (7,767 | ) | | — |
| | (7,767 | ) | | — |
|
Other, net | (50 | ) | | (14 | ) | | (117 | ) | | (23 | ) |
Total other expense | (17,320 | ) | | (10,881 | ) | | (29,134 | ) | | (20,322 | ) |
| | | | | | | |
Net income (loss) before taxes | (614 | ) | | 9,378 |
| | 11,481 |
| | 26,322 |
|
Income tax expense | (354 | ) | | (300 | ) | | (654 | ) | | (607 | ) |
Net income (loss) | (968 | ) | | 9,078 |
| | 10,827 |
| | 25,715 |
|
Less general partner's interest in net (income) loss | 19 |
| | (181 | ) | | (217 | ) | | (514 | ) |
Less (income) loss allocable to unvested restricted units | 3 |
| | (23 | ) | | (29 | ) | | (66 | ) |
Limited partners' interest in net income (loss) | $ | (946 | ) | | $ | 8,874 |
| | $ | 10,581 |
| | $ | 25,135 |
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| | | | | | | |
Net income (loss) per unit attributable to limited partners - basic | $ | (0.03 | ) | | $ | 0.33 |
| | $ | 0.38 |
| | $ | 0.95 |
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Weighted average limited partner units - basic | 28,924 |
| | 26,558 |
| | 27,757 |
| | 26,561 |
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| | | | | | | |
Net income (loss) per unit attributable to limited partners - diluted | $ | (0.03 | ) | | $ | 0.33 |
| | $ | 0.38 |
| | $ | 0.95 |
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Weighted average limited partner units - diluted | 28,924 |
| | 26,579 |
| | 27,791 |
| | 26,577 |
|
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 in thousands, except per unit amounts)
*Related Party Transactions Included Above
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| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Revenues: | | | | | | | |
Terminalling and storage | $ | 18,743 |
| | $ | 17,485 |
| | $ | 36,753 |
| | $ | 34,813 |
|
Marine transportation | 6,415 |
| | 6,042 |
| | 12,264 |
| | 12,885 |
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Product Sales | 3,709 |
| | 1,839 |
| | 5,601 |
| | 3,048 |
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Costs and expenses: | |
| | |
| | |
| | |
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Cost of products sold: (excluding depreciation and amortization) | |
| | |
| | |
| | |
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Natural gas services | 10,808 |
| | 7,036 |
| | 19,261 |
| | 15,592 |
|
Sulfur services | 4,452 |
| | 4,441 |
| | 9,317 |
| | 8,975 |
|
Terminalling and storage | 6,553 |
| | 14,189 |
| | 16,397 |
| | 26,150 |
|
Expenses: | |
| | |
| | |
| | |
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Operating expenses | 19,248 |
| | 17,534 |
| | 37,487 |
| | 35,508 |
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Selling, general and administrative | 5,489 |
| | 4,170 |
| | 10,873 |
| | 8,588 |
|
See accompanying notes to consolidated and condensed financial statements.
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED STATEMENTS OF CAPITAL
(Unaudited)
(Dollars in thousands)
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| | | | | | | | | | | | | | |
| Partners’ Capital | | |
| Common Limited | | General Partner Amount | | |
| Units | | Amount | | | Total |
Balances - January 1, 2013 | 26,566,776 |
| | $ | 349,490 |
| | $ | 8,472 |
| | $ | 357,962 |
|
Net income | — |
| | 25,201 |
| | 514 |
| | 25,715 |
|
Issuance of restricted units | 63,750 |
| | — |
| | — |
| | — |
|
Forfeiture of restricted units | (250 | ) | | — |
| | — |
| | — |
|
General partner contribution | — |
| | — |
| | 37 |
| | 37 |
|
Cash distributions | — |
| | (41,135 | ) | | (917 | ) | | (42,052 | ) |
Unit-based compensation | — |
| | 479 |
| | — |
| | 479 |
|
Purchase of treasury units | (6,000 | ) | | (250 | ) | | — |
| | (250 | ) |
Balances - June 30, 2013 | 26,624,276 |
| | $ | 333,785 |
| | $ | 8,106 |
| | $ | 341,891 |
|
| | | | | | | |
Balances - January 1, 2014 | 26,625,026 |
| | $ | 254,028 |
| | $ | 6,389 |
| | $ | 260,417 |
|
Net income | — |
| | 10,610 |
| | 217 |
| | 10,827 |
|
Issuance of common units | 4,017,156 |
| | 160,514 |
| | — |
| | 160,514 |
|
Issuance of restricted units | 6,900 |
| | — |
| | — |
| | — |
|
Forfeiture of restricted units | (3,250 | ) | | — |
| | — |
| | — |
|
General partner contribution | — |
| | — |
| | 3,407 |
| | 3,407 |
|
Cash distributions | — |
| | (42,192 | ) | | (953 | ) | | (43,145 | ) |
Unit-based compensation | — |
| | 387 |
| | — |
| | 387 |
|
Excess purchase price over carrying value of acquired assets | — |
| | (5,397 | ) | | — |
| | (5,397 | ) |
Purchase of treasury units | (6,400 | ) | | (277 | ) | | — |
| | (277 | ) |
Balances - June 30, 2014 | 30,639,432 |
| | $ | 377,673 |
| | $ | 9,060 |
| | $ | 386,733 |
|
See accompanying notes to consolidated and condensed financial statements.
MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
|
| | | | | | | |
| Six Months Ended |
| June 30, |
| 2014 | | 2013 |
Cash flows from operating activities: | | | |
Net income | $ | 10,827 |
| | $ | 25,715 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
|
Depreciation and amortization | 28,586 |
| | 24,246 |
|
Amortization of deferred debt issuance costs | 4,588 |
| | 2,075 |
|
Amortization of debt discount | 1,305 |
| | 153 |
|
Amortization of premium on notes payable | (82 | ) | | — |
|
Gain on sale of property, plant and equipment | (54 | ) | | (796 | ) |
Equity in (earnings) loss of unconsolidated entities | (1,642 | ) | | 301 |
|
Non-cash mark-to-market on derivatives | (547 | ) | | — |
|
Unit-based compensation | 387 |
| | 479 |
|
Preferred dividends on MET investment | 1,116 |
| | — |
|
Other | — |
| | 6 |
|
Change in current assets and liabilities, excluding effects of acquisitions and dispositions: | |
| | |
|
Accounts and other receivables | 15,962 |
| | 66,658 |
|
Product exchange receivables | (1,437 | ) | | 1,694 |
|
Inventories | (18,444 | ) | | 4,946 |
|
Due from affiliates | (9,816 | ) | | (17,657 | ) |
Other current assets | (1,430 | ) | | (3,530 | ) |
Trade and other accounts payable | (23,574 | ) | | (29,256 | ) |
Product exchange payables | 12,483 |
| | (1,211 | ) |
Due to affiliates | 3,959 |
| | 89 |
|
Income taxes payable | (386 | ) | | 53 |
|
Other accrued liabilities | (1,449 | ) | | 7,694 |
|
Change in other non-current assets and liabilities | 597 |
| | (563 | ) |
Net cash provided by continuing operating activities | 20,949 |
| | 81,096 |
|
Net cash used in discontinued operating activities | — |
| | (8,678 | ) |
Net cash provided by operating activities | 20,949 |
| | 72,418 |
|
Cash flows from investing activities: | |
| | |
|
Payments for property, plant and equipment | (41,237 | ) | | (28,621 | ) |
Acquisitions | (1,991 | ) | | (63,004 | ) |
Payments for plant turnaround costs | (3,910 | ) | | — |
|
Proceeds from sale of property, plant and equipment | 702 |
| | 4,719 |
|
Proceeds from involuntary conversion of property, plant and equipment | 2,475 |
| | — |
|
Investment in unconsolidated entities | (134,413 | ) | | (15,000 | ) |
Return of investments from unconsolidated entities | 2,425 |
| | 1,357 |
|
Contributions to unconsolidated entities | (3,070 | ) | | (15,578 | ) |
Net cash used in investing activities | (179,019 | ) | | (116,127 | ) |
Cash flows from financing activities: | |
| | |
|
Payments of long-term debt | (885,000 | ) | | (439,000 | ) |
Payments of notes payable and capital lease obligations | — |
| | (160 | ) |
Proceeds from long-term debt | 917,250 |
| | 529,000 |
|
Net proceeds from issuance of common units | 160,514 |
| | — |
|
General partner contribution | 3,407 |
| | 37 |
|
Purchase of treasury units | (277 | ) | | (250 | ) |
Payment of debt issuance costs | (3,120 | ) | | (9,011 | ) |
Excess purchase price over carrying value of acquired assets | (5,397 | ) | | — |
|
Cash distributions paid | (43,145 | ) | | (42,052 | ) |
Net cash provided by financing activities | 144,232 |
| | 38,564 |
|
Net decrease in cash | (13,838 | ) | | (5,145 | ) |
Cash at beginning of period | 16,542 |
| | 5,162 |
|
Cash at end of period | $ | 2,704 |
| | $ | 17 |
|
Non-cash additions to property, plant and equipment | $ | 3,111 |
| | $ | — |
|
See accompanying notes to consolidated and condensed financial statements.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
Martin Midstream Partners L.P. (the “Partnership”) is a publicly traded limited partnership with a diverse set of operations focused primarily in the United States “U.S.” Gulf Coast region. Its four primary business lines include: terminalling and storage services for petroleum products and by-products including the refining, blending and packaging of finished lubricants; natural gas services, including liquids distribution services and natural gas storage; sulfur and sulfur-based products processing, manufacturing, marketing and distribution; and marine transportation services for petroleum products and by-products.
The Partnership’s unaudited consolidated and condensed financial statements have been prepared in accordance with the requirements of Form 10-Q and United States 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, 2013, filed with the Securities and Exchange Commission (the “SEC”) on March 3, 2014, as amended by Amendment No. 1 on Form 10-K/A for the year ended December 31, 2013 filed on March 28, 2014.
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.
Prior to August 30, 2013, Martin Resource Management owned 100% of the Partnership's general partner. On August 30, 2013, Martin Resource Management completed the sale of a 49% non-controlling voting interest (50% economic interest) in MMGP Holdings, LLC (“Holdings”), the newly-formed sole member of Martin Midstream GP LLC (“MMGP”), the general partner of the Partnership, to certain affiliated investment funds managed by Alinda Capital Partners (“Alinda”). Upon closing the transaction, Alinda appointed two representatives to serve as directors of the general partner.
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(2) | New Accounting Pronouncements |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Partnership on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Partnership is evaluating the effect that ASU 2014-09 will have on its consolidated and condensed financial statements and related disclosures. The Partnership has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
In April 2014, the FASB issued No. ASU 2014-08, Presentation of Financial Statements and Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The ASU changes the requirements for reporting discontinued operations. A discontinued operation may include a component of an entity or a group of components of an entity, or a business. A disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. Examples include a disposal of a major geographic area, a major line of business or a major equity method investment. Additionally, the update requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income and expenses of discontinued operations. This update is effective prospectively for the Partnership's fiscal year beginning January 1, 2015 and early adoption is permitted. The standard primarily involves presentation and disclosure and therefore is not expected to have a material impact on the Partnership's financial condition, results of operations or cash flows.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
NGL Storage Assets
On May 31, 2014, the Partnership acquired certain NGL storage assets from a subsidiary of Martin Resource Management for $7,388. This acquisition is considered a transfer of net assets between entities under common control. The acquisition of these assets was recorded at the historical carrying value of the assets at the acquisition date. The Partnership recorded the purchase in the following allocation:
|
| | | |
Property, plant and equipment | 2,004 |
|
Current liabilities | (13 | ) |
| $ | 1,991 |
|
The excess of the purchase price over the carrying value of the assets of $5,397 was recorded as an adjustment to "Partners' capital". This transaction was funded with borrowings under the Partnership's revolving credit facility. As no individual line item of the historical financial statements of the assets was in excess of 3% of the Partnership's relative financial statement captions, the Partnership elected not to retrospectively recast the historical financial information of these assets.
West Texas LPG Pipeline Limited Partnership
On May 14, 2014, the Partnership acquired from a subsidiary of Atlas Pipeline Partners L.P. ("Atlas"), all of the outstanding membership interests in Atlas Pipeline NGL Holdings, LLC and Atlas Pipeline NGL Holdings II, LLC (collectively, "Atlas Holdings") for cash of approximately $134,400, subject to certain post-closing adjustments. This transaction was recorded in "Investments in unconsolidated entities" in the Partnership's Consolidated and Condensed Balance Sheet through a preliminary purchase price allocation. The final allocation is expected to be completed by December 31, 2014. Atlas Holdings owns a 19.8% limited partnership interest and a 0.2% general partnership interest in West Texas LPG Pipeline L.P. ("WTLPG"). WTLPG is operated by Chevron Pipe Line Company, which owns the remaining 80.0% interest. WTLPG owns an approximate 2,300 mile common-carrier pipeline system that transports NGLs from New Mexico and Texas to Mont Belvieu, Texas for fractionation. This acquisition will enable the Partnership to participate in the transportation of the growing NGL production of West Texas and other basins along the WTLPG pipeline route. This acquisition of the WTLPG business complements the Partnership's existing East Texas NGL pipeline that delivers Y-grade NGLs from East Texas production areas into Beaumont, Texas on a smaller scale. This transaction was funded with borrowings under the Partnership's revolving credit facility.
The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of WTLPG occurred at the beginning of fiscal 2013:
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Revenue: | | | | | | | |
As reported | $ | 418,945 |
| | $ | 358,188 |
| | $ | 915,973 |
| | $ | 791,874 |
|
Pro forma | $ | 418,945 |
| | $ | 358,188 |
| | $ | 915,973 |
| | $ | 791,874 |
|
Net income attributable to limited partners: | | | | | | | |
As reported | $ | (946 | ) | | $ | 8,874 |
| | $ | 10,581 |
| | $ | 25,135 |
|
Pro forma | $ | (334 | ) | | $ | 9,719 |
| | $ | 11,897 |
| | $ | 26,815 |
|
Net income per unit attributable to limited partners - basic | | | | | | | |
As reported | $ | (0.03 | ) | | $ | 0.33 |
| | $ | 0.38 |
| | $ | 0.95 |
|
Pro forma | $ | (0.01 | ) | | $ | 0.37 |
| | $ | 0.43 |
| | $ | 1.01 |
|
Net income per unit attributable to limited partners - diluted | | | | | | | |
As reported | $ | (0.03 | ) | | $ | 0.33 |
| | $ | 0.38 |
| | $ | 0.95 |
|
Pro forma | $ | (0.01 | ) | | $ | 0.37 |
| | $ | 0.43 |
| | $ | 1.01 |
|
The pro forma amounts have been determined by calculating the Partnership's equity in earnings WTLPG and adjusting the results to reflect additional interest expense and amortization of the investment in excess of the underlying net assets.
Marine Transportation Equipment Purchase
On September 30, 2013, the Partnership acquired two previously leased inland tank barges from Martin Resource Management for $7,100. This acquisition is considered a transfer of net assets between entities under common control. The acquisition of these assets was recorded at the historical carrying value of the assets at the acquisition date. The Partnership recorded $6,799 to property, plant and equipment in the Marine Transportation segment and the excess of the purchase price over the carrying value of the assets of $301 was recorded as an adjustment to "Partners' capital". This transaction was funded with borrowings under the Partnership's revolving credit facility.
Sulfur Production Facility
On August 5, 2013, the Partnership acquired a plant nutrient sulfur production facility in Cactus, Texas (“Cactus”) for $4,118. The transaction was accounted for under the acquisition method of accounting in accordance with ASC 805 relating to business combinations. This transaction was funded by borrowings under the Partnership's revolving credit facility. Assets acquired and liabilities assumed were recorded in the Sulfur Services segment at fair value as follows:
|
| | | |
Inventory | $ | 162 |
|
Property, plant and equipment | 4,000 |
|
Current liabilities | (44 | ) |
Total | $ | 4,118 |
|
The Partnership's results of operations from these assets included revenues of $479 and net income of $43 for the three months ended June 30, 2014 and revenues of $1,146 and net income of $234 for the six months ended June 30, 2014.
NL Grease, LLC
On June 13, 2013, the Partnership acquired certain assets of NL Grease, LLC (“NLG”) for $12,148. NLG is a Kansas City, Missouri based grease manufacturer that specializes in private-label packaging of commercial and industrial greases. The transaction was accounted for under the acquisition method of accounting in accordance with ASC 805 relating to business combinations. This transaction was funded by borrowings under the Partnership's revolving credit facility. The assets acquired
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
by the Partnership were recorded in the Terminalling and Storage segment at fair value of $12,148 in the following purchase price allocation:
|
| | | |
Inventory and other current assets | $ | 1,513 |
|
Property, plant and equipment | 6,136 |
|
Other assets | 5,113 |
|
Other accrued liabilities | (168 | ) |
Other long-term obligations | (446 | ) |
Total | $ | 12,148 |
|
The purchase price allocation resulted in the recognition of $5,113 in definite-lived intangible assets with no residual value, including $2,418 of technology, $2,218 attributable to a customer list, and $477 attributable to a non-compete agreement. The amounts assigned to technology, the customer list, and the non-compete agreement are amortized over the estimated useful life of ten years, three years, and five years, respectively. The weighted average life over which these acquired intangibles will be amortized is approximately six years.
The Partnership completed the purchase price allocation during the third quarter of 2013, which resulted in an adjustment to working capital from the preliminary purchase price allocation in the amount of $55.
The Partnership's results of operations from the NLG acquisition included revenues of $4,111 and net income of $112 for the three months ended June 30, 2014 and revenues of $521 and net loss of $156 for the three months ended June 30, 2013. Results of operations included revenues of $7,763 and net income of $130 for the six months ended June 30, 2014 and revenues of $521 and net loss of $156 for the six months ended June 30, 2013.
NGL Marine Equipment Purchase
On February 28, 2013, the Partnership purchased from affiliates of Florida Marine Transporters, Inc. six liquefied petroleum gas pressure barges and two commercial push boats for approximately $50,801, of which the commercial push boats totaling $8,201 were allocated to property, plant and equipment in the Partnership's Marine Transportation segment and the six pressure barges totaling $42,600 were allocated to property, plant and equipment in the Partnership's Natural Gas Services segment. This transaction was funded with borrowings under the Partnership's revolving credit facility.
| |
(4) | Discontinued operations and divestitures |
On July 31, 2012, the Partnership completed the sale of its East Texas and Northwest Louisiana natural gas gathering and processing assets owned by Prism Gas and other natural gas gathering and processing assets also owned by the Partnership to a subsidiary of CenterPoint Energy Inc. (NYSE: CNP) (“CenterPoint”). The Partnership received net cash proceeds from the sale of $273,269. The asset sale includes the Partnership’s 50% operating interest in Waskom Gas Processing Company (“Waskom”). A subsidiary of CenterPoint owned the other 50% percent interest.
Additionally, on September 18, 2012, the Partnership completed the sale of its interest in Matagorda Offshore Gathering System (“Matagorda”) and Panther Interstate Pipeline Energy LLC (“PIPE”) to a private investor group for $1,530.
Cash flows resulting from balances existing at December 31, 2012 were reported in the Consolidated and Condensed Statements of Cash Flows as discontinued operations for the six months ended June 30, 2013.
Components of inventories at June 30, 2014 and December 31, 2013 were as follows:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
Natural gas liquids | $ | 46,693 |
| | $ | 31,859 |
|
Sulfur | 14,398 |
| | 8,912 |
|
Sulfur based products | 14,603 |
| | 17,584 |
|
Lubricants | 34,594 |
| | 33,847 |
|
Other | 3,058 |
| | 2,700 |
|
| $ | 113,346 |
| | $ | 94,902 |
|
| |
(6) | Investments in Unconsolidated Entities and Joint Ventures |
On May 14, 2014, the Partnership acquired from a subsidiary of Atlas, all of the outstanding membership interests in Atlas Holdings for cash of approximately $134,400, subject to certain post-closing adjustments. Atlas Holdings owns a 19.8% limited partnership interest and a 0.2% general partnership interest in WTLPG. WTLPG is operated by Chevron Pipe Line Company, which owns the remaining 80.0% interest. WTLPG owns an approximate 2,300 mile common-carrier pipeline system that transports NGLs from New Mexico and Texas to Mont Belvieu, Texas for fractionation. At the acquisition date, the carrying value of the 20% interest in WTLPG exceeded the Partnership’s share of the underlying net assets of WTLPG by approximately $96,000. The Partnership’s preliminary analysis determined that approximately $48,000 of the difference is attributable to property plant and equipment and the remaining $48,000 to equity method goodwill. The Partnership expects to complete its final analysis by December 31, 2014. The excess attributable to property, plant and equipment will be amortized over approximately 35 years. Such amortization amounted to $171 for the three and six months ended June 30, 2014. The Partnership recognizes its 20% interest in WTLPG as "Investment in unconsolidated entities" on its Consolidated and Condensed Balance Sheets. The Partnership accounts for its ownership interest in WTLPG under the equity method of accounting, with recognition of its ownership interest in the income of WTLPG as "Equity in earnings of unconsolidated entities" on its Consolidated and Condensed Statements of Operations.
At June 30, 2014, the Partnership owned an unconsolidated 42.17% interest in Cardinal Gas Storage Partners LLC (“Cardinal”).
During the fourth quarter of 2013, the Partnership sold its unconsolidated 50% interest in Caliber Gathering, LLC (“Caliber”).
During March 2013, the Partnership acquired 100% of the preferred interests in Martin Energy Trading LLC (“MET”), a subsidiary of Martin Resource Management, for $15,000.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
These investments are accounted for by the equity method.
The following tables summarize the components of the investment in unconsolidated entities on the Partnership’s Consolidated and Condensed Balance Sheets and the components of equity in earnings of unconsolidated entities included in the Partnership’s Consolidated and Condensed Statements of Operations:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
WTLPG | $ | 135,182 |
| | $ | — |
|
Cardinal | 116,263 |
| | 113,662 |
|
MET | 15,000 |
| | 15,000 |
|
Total investment in unconsolidated entities | $ | 266,445 |
| | $ | 128,662 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Equity in earnings of WTLPG | $ | 769 |
| | $ | — |
| | $ | 769 |
| | $ | — |
|
Equity in earnings (loss) of Cardinal | 608 |
| | (362 | ) | | (243 | ) | | (578 | ) |
Equity in earnings of MET | 561 |
| | 594 |
| | 1,116 |
| | 594 |
|
Equity in loss of Caliber | — |
| | (159 | ) | | — |
| | (317 | ) |
Equity in earnings of unconsolidated entities | $ | 1,938 |
| | $ | 73 |
| | $ | 1,642 |
| | $ | (301 | ) |
Selected financial information for significant unconsolidated equity-method investees is as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| Total Assets | | Members' Equity | | Revenues | | Net Income | | Revenues | | Net Income (Loss) |
2014 | | | | | | | | | | | |
WTLPG | $ | 208,657 |
| | $ | 195,693 |
| | $ | 25,950 |
| | $ | 10,071 |
| | $ | 47,914 |
| | $ | 20,601 |
|
Cardinal | $ | 646,424 |
| | $ | 353,511 |
| | $ | 16,914 |
| | $ | 2,353 |
| | $ | 35,343 |
| | $ | (605 | ) |
| As of December 31, | | |
| | |
| | |
| | |
|
2013 | |
| | |
| | |
| | |
| | |
| | |
|
Cardinal | $ | 661,816 |
| | $ | 346,584 |
| | $ | 10,708 |
| | $ | (392 | ) | | $ | 18,795 |
| | $ | 59 |
|
As of June 30, 2014 and December 31, 2013, the Partnership’s interest in cash of the unconsolidated equity-method investees was $8,652 and $3,703, respectively.
| |
(7) | Derivative Instruments and Hedging Activities |
The Partnership’s results of operations are materially impacted by changes in crude oil, natural gas and NGL 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. The Partnership is required to recognize all derivative instruments as either assets or liabilities at fair value on the Partnership’s Consolidated and Condensed Balance Sheets and to recognize certain changes in the fair value of derivative instruments on the Partnership’s Consolidated and Condensed Statements of Operations.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
(a) Commodity Derivative Instruments
The Partnership has from time to time used derivatives to manage the risk of commodity price fluctuation. The Partnership has established a hedging policy and monitors and manages the commodity market risk associated with potential commodity risk exposure. These hedging arrangements have been in the form of swaps for crude oil, natural gas and natural gasoline. 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 did not have any commodity derivative instruments outstanding during the six months ended June 30, 2014 or 2013.
(b) Interest Rate Derivative Instruments
The Partnership is exposed to market risks associated with interest rates. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. We minimize this market risk by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. The Partnership enters into interest rate swaps to manage interest rate risk associated with the Partnership’s variable rate credit facility and it's senior unsecured notes. All derivatives and hedging instruments are included on the balance sheet as an asset or a liability measured at fair value and changes in fair value are recognized currently in earnings.
As of June 30, 2014, we had a combined notional principal amount of $200,000 of fixed-to-variable interest rate swap agreements, effectively converting the interest expense associated with a portion of the Partnership's 2021 senior unsecured notes from fixed rates to variable rates based on an interest rate of LIBOR plus a spread. Each of the Partnership's swap agreements have a termination date that corresponds to the maturity date of the 2021 senior unsecured notes and, as of June 30, 2014, the maximum length of time over which the Partnership has hedged a portion of its exposure to the variability in the value of this debt due to interest rate risk is through February of 2021.
For information regarding fair value amounts and gains and losses on interest rate derivative instruments, see “Tabular Presentation of Fair Value Amounts, and Gains and Losses on Derivative Instruments” below.
(c) Tabular Presentation of Fair Value Amounts, and Gains and Losses on Derivative Instruments
The following table summarizes the fair values and classification of the Partnership’s derivative instruments in its Consolidated and Condensed Balance Sheet:
|
| | | | | | | | | | | | | | | | |
| Fair Values of Derivative Instruments in the Consolidated Balance Sheet |
| Derivative Assets | Derivative Liabilities |
| | Fair Values | | Fair Values |
| Balance Sheet Location | June 30, 2014 | | December 31, 2013 | Balance Sheet Location | June 30, 2013 | | December 31, 2013 |
Derivatives not designated as hedging instruments: | Non Current: | |
| | |
| Non Current: | | | |
|
Interest rate contracts | Fair value of derivatives | $ | 547 |
| | $ | — |
| Fair value of derivatives | $ | — |
| | $ | — |
|
Total derivatives not designated as hedging instruments | | $ | 547 |
| | $ | — |
| | $ | — |
| | $ | — |
|
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
Effect of Derivative Instruments on the Consolidated and Condensed Statement of Operations
For the Three Months Ended June 30, 2014 and 2013
|
| | | | | | | | |
| Location of Gain Recognized in Income on Derivatives | Amount of Gain Recognized in Income on Derivatives |
| | 2014 | | 2013 |
Derivatives not designated as hedging instruments: | | |
Interest rate contracts | Interest expense | $ | 2,927 |
| | $ | — |
|
Total derivatives not designated as hedging instruments | $ | 2,927 |
| | $ | — |
|
Effect of Derivative Instruments on the Consolidated and Condensed Statement of Operations
For the Six Months Ended June 30, 2014 and 2013
|
| | | | | | | | |
| Location of Gain Recognized in Income on Derivatives | Amount of Gain Recognized in Income on Derivatives |
| | 2014 | | 2013 |
Derivatives not designated as hedging instruments: | | |
Interest rate contracts | Interest expense | $ | 2,927 |
| | $ | — |
|
Total derivatives not designated as hedging instruments | $ | 2,927 |
| | $ | — |
|
On April 1, 2014, the Partnership entered into two fixed-to-variable interest rate swap agreements with an aggregate notional amount of $100,000 each to hedge its exposure to changes in the fair value of its senior unsecured notes. On May 14, the Partnership terminated these swaps and received a termination benefit of $2,380 upon cancellation of these swap agreements. Additionally, subsequent to the termination on May 14, 2014, the Partnership entered into two fixed-to-variable interest rate swap agreements on May 14, 2014 with an aggregate notional amount of $100,000 each to hedge its exposure to changes in the fair value of its senior unsecured notes.
| |
(8) | Fair Value Measurements |
The Partnership follows the provisions of ASC 820 related to fair value measurements and disclosures, which established a framework for measuring fair value and expanded disclosures about fair value measurements. The adoption of this guidance had no impact on the Partnership’s financial position or results of operations.
ASC 820 applies to all assets and liabilities that are being measured and reported on a fair value basis. This statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value of each asset and liability carried at fair value into one of the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
The following items are measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 at June 30, 2014 and December 31, 2013:
|
| | | | | | | | | | | | | | | |
| Fair Value Measurements at Reporting Date Using |
| | | Quoted Prices in Active Markets for Identical Assets | | Significant Other Observable Inputs | | Significant Unobservable Inputs |
Description | June 30, 2014 | | (Level 1) | | (Level 2) | | (Level 3) |
Assets | | | | | | | |
Interest rate contracts | $ | 547 |
| | $ | — |
| | $ | 547 |
| | $ | — |
|
Total assets | $ | 547 |
| | $ | — |
| | $ | 547 |
| | $ | — |
|
| | | | | | | |
Liabilities | |
| | |
| | |
| | |
|
2021 Senior unsecured notes | $ | 424,876 |
| | $ | — |
| | $ | 424,876 |
| | $ | — |
|
Total liabilities | $ | 424,876 |
| | $ | — |
| | $ | 424,876 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | |
| Fair Value Measurements at Reporting Date Using |
| | | Quoted Prices in Active Markets for Identical Assets | | Significant Other Observable Inputs | | Significant Unobservable Inputs |
Description | December 31, 2013 | | (Level 1) | | (Level 2) | | (Level 3) |
Liabilities | |
| | |
| | |
| | |
|
2018 Senior unsecured notes | $ | 185,816 |
| | $ | — |
| | $ | 185,816 |
| | $ | — |
|
2021 Senior unsecured notes | 258,004 |
| | — |
| | 258,004 |
| | — |
|
Total liabilities | $ | 443,820 |
| | $ | — |
| | $ | 443,820 |
| | $ | — |
|
FASB ASC 825-10-65, Disclosures about Fair Value of Financial Instruments, requires that the Partnership disclose estimated fair values for its financial instruments. Fair value estimates are set forth below for the Partnership’s financial instruments. The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
| |
• | Accounts and other receivables, trade and other accounts payable, accrued interest payable, other accrued liabilities, income taxes payable and due from/to affiliates: The carrying amounts approximate fair value due to the short maturity and highly liquid nature of these instruments, and as such these have been excluded from the table above. |
| |
• | Long-term debt including current portion: The carrying amount of the revolving credit facility approximates fair value due to the debt having a variable interest rate and is in Level 2. The estimated fair value of the senior unsecured notes is based on market prices of similar debt. |
| |
(9) | Other Accrued Liabilities |
Components of other accrued liabilities were as follows:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
Accrued interest | $ | 10,966 |
| | $ | 11,038 |
|
Property and other taxes payable | 5,402 |
| | 6,785 |
|
Accrued payroll | 2,169 |
| | 2,186 |
|
Other | 269 |
| | 233 |
|
| $ | 18,806 |
| | $ | 20,242 |
|
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
At June 30, 2014 and December 31, 2013, long-term debt consisted of the following:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
$900,0003 Revolving credit facility at variable interest rate (2.97%1 weighted average at June 30, 2014), due March 2018 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 and equity method investees | $ | 290,000 |
| | $ | 235,000 |
|
$200,0002 Senior notes, 8.875% interest, net of unamortized discount of $0 and $1,305, respectively, issued March 2010 and due April 2018, unsecured | — |
| | 173,695 |
|
$400,000 Senior notes, 7.250% interest, including unamortized premium of $2,168 and $0, issued $250,000 February 2013 and $150,000 April 2014, due February 2021, unsecured2 | 402,168 |
| | 250,000 |
|
Total long-term debt | 692,168 |
| | 658,695 |
|
Less current installments | — |
| | — |
|
Long-term debt, net of current installments | $ | 692,168 |
| | $ | 658,695 |
|
1 Interest rate fluctuates based on the LIBOR rate plus an applicable margin set on the date of each advance. The margin above LIBOR is set every three months. Indebtedness under the credit facility bears interest at LIBOR plus an applicable margin or the base prime rate plus an applicable margin. The applicable margin for revolving loans that are LIBOR loans ranges from 2.00% to 3.00% and the applicable margin for revolving loans that are base prime rate loans ranges from 1.00% to 2.00%. The applicable margin for existing LIBOR borrowings at June 30, 2014 is 2.75%. The credit facility contains various covenants which limit the Partnership’s ability to make certain investments and acquisitions; enter into certain agreements; incur indebtedness; sell assets; and make certain amendments to the Partnership's omnibus agreement with Martin Resource Management (the "Omnibus Agreement"). The Partnership is permitted to make quarterly distributions so long as no event of default exists.
2 Pursuant to the Indenture under which the Senior Notes due in 2018 were issued, the Partnership had the option to redeem up to 35% of the aggregate principal amount at a redemption price of 108.875% of the principal amount, plus accrued and unpaid interest with the proceeds of certain equity offerings. On April 1, 2014, the Partnership redeemed the remaining $175,000 of the 8.875% senior unsecured notes due in 2018 from all holders. On April 1, 2014, the Partnership completed a private placement add-on of $150,000 in aggregate principal amount of 7.250% senior unsecured notes due February 2021 to qualified institutional buyers under Rule 144A. The Partnership filed with the SEC a registration statement to exchange these notes for substantially identical notes that are registered under the Securities Act and commenced an exchange offer on April 28, 2014. The exchange offer was completed during the second quarter of 2014. In conjunction with this redemption, the Partnership incurred a debt prepayment premium of $7,767, on the Partnership's Consolidated and Condensed Statement of Operations for the three and six months ended June 30, 2014. Also in conjunction with the redemption, the Partnership expensed $2,643 and $1,228 of unamortized debt issuance costs and unamortized discount on notes payable, respectively, which is included in "Interest expense" on the Partnership's Consolidated and Condensed Statement of Operations for the three and six months ended June 30, 2014.
3 On June 27, 2014, the Partnership increased the maximum amount of borrowings and letters of credit available under the Partnership's revolving credit facility from $637,500 to $900,000.
The Partnership paid cash interest in the amount of $6,735 and $9,391 for the three months ended June 30, 2014 and 2013, respectively. The Partnership paid cash interest in the amount of $18,424 and $11,608 for the six months ended June 30, 2014 and 2013, respectively. Capitalized interest was $335 and $238 for the three months ended June 30, 2014 and 2013, respectively. Capitalized interest was $723 and $418 for the six months ended June 30, 2014 and 2013, respectively.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
As of June 30, 2014, partners’ capital consisted of 30,639,432 common limited partner units, representing a 98% partnership interest and a 2% general partner interest. Martin Resource Management, through subsidiaries, owned 5,093,267 of the Partnership's common limited partnership units representing approximately 16.6% of the Partnership's outstanding common limited partnership units. MMGP, the Partnership's general partner, owns the 2% general partnership interest. Martin Resource Management controls the Partnership's general partner, by virtue of its 51% voting interest in Holdings, the sole member of the Partnership's general partner.
The partnership 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.
Issuance of Common Units
On May 12, 2014, the Partnership completed a public offering of 3,600,000 common units at a price of $41.51 per common unit, before the payment of underwriters' discounts, commissions and offering expenses (per unit value is in dollars, not thousands). Total proceeds from the sale of the 3,600,000 common units, net of underwriters' discounts, commissions and offering expenses were $143,431. The Partnership's general partner contributed $3,049 in cash to the Partnership in conjunction with the issuance in order to maintain its 2% general partner interest in the Partnership. All of the net proceeds were used to pay down outstanding amounts under the Partnership's revolving credit facility.
In March 2014, the Partnership entered into an equity distribution agreement with multiple underwriters (the “Sales Agents”) for the ongoing distribution of the Partnership's common units. Pursuant to this program, the Partnership offered and sold common unit equity through the Sales Agents for aggregate proceeds of $11,848 and $17,083 during the three and six months ended June 30, 2014, respectively. Common units issued were at market prices prevailing at the time of the sale. The Partnership also received capital contributions from the general partner of $243 and $356 during the three and six months ended June 30, 2014, respectively, to maintain its 2.0% general partner interest in the Partnership. The net proceeds from the common unit issuances were used to pay down outstanding amounts under the Partnership's revolving credit facility.
Incentive Distribution Rights
The Partnership’s general partner, MMGP, holds a 2% general partner interest and certain incentive distribution rights (“IDRs”) in the Partnership. IDRs are a separate class of non-voting limited partner interest that may be transferred or sold by the general partner under the terms of the Partnership Agreement, and represent the right to receive an increasing percentage of cash distributions after the minimum quarterly distribution and any cumulative arrearages on common units once certain target distribution levels have been achieved. The Partnership is required to distribute all of its available cash from operating surplus, as defined in the Partnership Agreement. On October 2, 2012, the Partnership Agreement was amended to provide that the general partner shall forego the next $18,000 in incentive distributions that it would otherwise be entitled to receive. Additionally, on May 5, 2014, the owner of our general partner agreed to forego an additional $3,000 in incentive distributions. No incentive distributions were allocated to the general partner from July 1, 2012 through June 30, 2014. As of June 30, 2014, the amount of incentive distributions the general partner has foregone is $14,187, resulting in an amount remaining of $6,813.
The target distribution levels entitle the general partner to receive 2% of quarterly cash distributions up to $0.55 per unit, 15% of quarterly cash distributions in excess of $0.55 per unit until all unitholders have received $0.625 per unit, 25% of quarterly cash distributions in excess of $0.625 per unit until all unitholders have received $0.75 per unit and 50% of quarterly cash distributions in excess of $0.75 per unit.
Distributions of Available Cash
The Partnership distributes all of its available cash (as defined in the Partnership Agreement) within 45 days after the end of each quarter to unitholders of record and to the general partner. Available cash is generally defined as all cash and cash equivalents of the Partnership on hand at the end of each quarter less the amount of cash reserves its general partner determines in its reasonable discretion is necessary or appropriate to: (i) provide for the proper conduct of the Partnership’s business; (ii) comply with applicable law, any debt instruments or other agreements; or (iii) provide funds for distributions to unitholders and the general partner for any one or more of the next four quarters, plus all cash on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
Net Income per Unit
The Partnership follows the provisions of the FASB ASC 260-10 related to earnings per share, which addresses the application of the two-class method in determining income per unit for master limited partnerships having multiple classes of securities that may participate in partnership distributions accounted for as equity distributions. Undistributed earnings are allocated to the general partner and limited partners utilizing the contractual terms of the Partnership Agreement. Distributions to the general partner pursuant to the IDRs are limited to available cash that will be distributed as defined in the Partnership Agreement. Accordingly, the Partnership does not allocate undistributed earnings to the general partner for the IDRs because the general partner's share of available cash is the maximum amount that the general partner would be contractually entitled to receive if all earnings for the period were distributed. When current period distributions are in excess of earnings, the excess distributions for the period are to be allocated to the general partner and limited partners based on their respective sharing of 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 June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Net income (loss) attributable to Martin Midstream Partners L.P. | $ | (968 | ) | | $ | 9,078 |
| | $ | 10,827 |
| | $ | 25,715 |
|
Less general partner’s interest in net income: | | | | | | | |
Distributions payable on behalf of general partner interest | 482 |
| | 461 |
| | 954 |
| | 917 |
|
Distributions payable to the general partner interest in excess of earnings allocable to the general partner interest | (501 | ) | | (280 | ) | | (737 | ) | | (403 | ) |
Less income allocable to unvested restricted units | (3 | ) | | 23 |
| | 29 |
| | 66 |
|
Limited partners’ interest in net income (loss) | $ | (946 | ) | | $ | 8,874 |
| | $ | 10,581 |
| | $ | 25,135 |
|
The weighted average units outstanding for basic net income per unit were 28,923,513 and 27,757,304 for the three and six months ended June 30, 2014, respectively, and 26,558,028 and 26,561,218 for the three and six months ended June 30, 2013, respectively. 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 period presented. All common unit equivalents were antidilutive for the three months ended June 30, 2014 because the limited partners were allocated a net loss in this period. For diluted net income per unit, the weighted average units outstanding were increased by 33,350 for the six months ended June 30, 2014, and 21,284 and 15,496 for the three and six months ended June 30, 2013, respectively, due to the dilutive effect of restricted units granted under the Partnership’s long-term incentive plan.
| |
(12) | Related Party Transactions |
As of June 30, 2014, Martin Resource Management owned 5,093,267 of the Partnership’s common units representing approximately 16.6% of the Partnership’s outstanding limited partnership units. Martin Resource Management controls the Partnership's general partner by virtue of its 51% voting interest in Holdings, the sole member of the Partnership's general partner. The Partnership’s general partner, MMGP, owns a 2.0% general partner interest in the Partnership and the Partnership’s IDRs. The Partnership’s general partner’s ability, as general partner, to manage and operate the Partnership, and Martin Resource Management’s ownership as of June 30, 2014, of approximately 16.6% of the Partnership’s outstanding limited partnership units, effectively gives Martin Resource Management 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)
June 30, 2014
(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 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 and the Partnership’s use of certain Martin Resource Management 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.
Non-Competition Provisions. Martin Resource Management 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 marine transportation of petroleum products and by-products;
•distributing NGLs; and
•manufacturing and selling sulfur-based fertilizer products and other sulfur-related products.
This restriction does not apply to:
| |
• | the ownership and/or operation on the Partnership’s behalf of any asset or group of assets owned by it or its affiliates; |
| |
• | any business operated by Martin Resource Management, including the following: |
| |
◦ | providing land transportation of various liquids; |
| |
◦ | distributing fuel oil, sulfuric acid, marine fuel and other liquids; |
| |
◦ | providing marine bunkering and other shore-based marine services in Alabama, Florida, Louisiana, Mississippi and Texas; |
| |
◦ | operating a crude oil gathering business in Stephens, Arkansas; |
| |
◦ | providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas; |
| |
◦ | operating an environmental consulting company; |
| |
◦ | operating an engineering services company; |
| |
◦ | supplying employees and services for the operation of the Partnership's business; |
| |
◦ | operating a natural gas optimization business; |
| |
◦ | operating, for its account and the Partnership's account, the docks, roads, loading and unloading facilities and other common use facilities or access routes at the Partnership's Stanolind terminal; and |
| |
◦ | operating, solely for the Partnership's account, the asphalt facilities in Omaha, Nebraska, Port Neches, Texas and South Houston, Texas. |
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
| |
• | any business that Martin Resource Management acquires or constructs that has a fair market value of less than $5,000; |
| |
• | any business that Martin Resource Management acquires or constructs that has a fair market value of $5,000 or more if the Partnership has been offered the opportunity to purchase the business for fair market value and the Partnership declines to do so with the concurrence of the conflicts committee of the board of directors of the general partner of the Partnership (the "Conflicts Committee"); and |
| |
• | any business that Martin Resource Management acquires or constructs where a portion of such business includes a restricted business and the fair market value of the restricted business is $5,000 or more and represents less than 20% of the aggregate value of the entire business to be acquired or constructed; provided that, following completion of the acquisition or construction, the Partnership will be provided the opportunity to purchase the restricted business. |
Services. Under the Omnibus Agreement, Martin Resource Management provides the Partnership with corporate staff, support services, and administrative services necessary to operate the Partnership’s business. The Omnibus Agreement requires the Partnership to reimburse Martin Resource Management for all direct expenses it incurs or payments it makes on the Partnership’s behalf or in connection with the operation of the Partnership’s business. There is no monetary limitation on the amount the Partnership is required to reimburse Martin Resource Management for direct expenses. In addition to the direct expenses, under the Omnibus Agreement, the Partnership is required to reimburse Martin Resource Management for indirect general and administrative and corporate overhead expenses.
Effective January 1, 2014, through December 31, 2014, the Conflicts Committee approved an annual reimbursement amount for indirect expenses of $12,535. The Partnership reimbursed Martin Resource Management for $3,134 and $2,655 of indirect expenses for the three months ended June 30, 2014 and 2013, respectively. The Partnership reimbursed Martin Resource Management for $6,268 and $5,311 of indirect expenses for the six months ended June 30, 2014 and 2013, respectively. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually.
These indirect expenses are intended to cover the centralized corporate functions Martin Resource Management provides for the Partnership, such as accounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit plans and other general corporate overhead functions the Partnership shares with Martin Resource Management retained businesses. The provisions of the Omnibus Agreement regarding Martin Resource Management’s services will terminate if Martin Resource Management ceases to control the general partner of the Partnership.
Related Party Transactions. The Omnibus Agreement prohibits the Partnership from entering into any material agreement with Martin Resource Management without the prior approval of the Conflicts Committee. For purposes of the Omnibus Agreement, the term material agreements means any agreement between the Partnership and Martin Resource Management that requires aggregate annual payments in excess of then-applicable agreed upon reimbursable amount of indirect general and administrative expenses. Please read “Services” above.
License Provisions. Under the Omnibus Agreement, Martin Resource Management has granted the Partnership a nontransferable, nonexclusive, royalty-free right and license to use certain of its trade names and marks, as well as the trade names and marks used by some of its affiliates.
Amendment and Termination. The Omnibus Agreement may be amended by written agreement of the parties; provided, however, that it may not be amended without the approval of the Conflicts Committee if such amendment would adversely affect the unitholders. The Omnibus Agreement was first amended on November 25, 2009, to permit the Partnership to provide refining services to Martin Resource Management. 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. Such amendments were approved by the Conflicts Committee. The Omnibus Agreement, other than the indemnification provisions and the provisions limiting the amount for which the Partnership will reimburse Martin Resource Management for general and administrative services performed on its behalf, will terminate if the Partnership is no longer an affiliate of Martin Resource Management.
Motor Carrier Agreement
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
Motor Carrier Agreement. The Partnership is a party to a motor carrier agreement effective January 1, 2006 as amended, with Martin Transport, Inc., a wholly owned subsidiary of Martin Resource Management through which Martin Transport, Inc. operates its land transportation operations. Under the agreement, Martin Transport, Inc. agreed to transport the Partnership's NGL's as well as other liquid products.
Term and Pricing. The agreement has an initial term that expired in December 2007 but automatically renews for consecutive one year periods unless either party terminates the agreement by giving written notice to the other party at least 30 days prior to the expiration of the then-applicable term. The Partnership has the right to terminate this agreement at any time by providing 90 days prior notice. These rates are subject to any adjustments which are mutually agreed upon or in accordance with a price index. Additionally, during the term of the agreement, shipping charges are also subject to fuel surcharges determined on a weekly basis in accordance with the U.S. Department of Energy’s national diesel price list.
Indemnification. Martin Transport, Inc. has indemnified the Partnership against all claims arising out of the negligence or willful misconduct of Martin Transport, Inc. and its officers, employees, agents, representatives and subcontractors. The Partnership indemnified Martin Transport, Inc. against all claims arising out of the negligence or willful misconduct of us and our officers, employees, agents, representatives and subcontractors. In the event a claim is the result of the joint negligence or misconduct of Martin Transport, Inc. and the Partnership, our indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligence or misconduct.
Marine Agreements
Marine Transportation Agreement. The Partnership is a party to a marine transportation agreement effective January 1, 2006, which was amended January 1, 2007, under which the Partnership provides marine transportation services to Martin Resource Management on a spot-contract basis at applicable market rates. Effective each January 1, this agreement automatically renews for consecutive one year periods unless either party terminates the agreement by giving written notice to the other party at least 60 days prior to the expiration of the then applicable term. The fees the Partnership charges Martin Resource Management are based on applicable market rates.
Marine Fuel. The Partnership is a party to an agreement with Martin Resource Management dated November 1, 2002 under which Martin Resource Management provides the Partnership with marine fuel from its locations in the Gulf of Mexico at a fixed rate in excess of the Platt’s U.S. Gulf Coast Index for #2 Fuel Oil. Under this agreement, the Partnership agreed to purchase all of its marine fuel requirements that occur in the areas serviced by Martin Resource Management.
Terminal Services Agreements
Diesel Fuel Terminal Services Agreement. The Partnership is a party to an agreement under which the Partnership provides terminal services to Martin Resource Management. This agreement was amended and restated as of October 27, 2004, and was set to expire in December 2006, but automatically renewed and will continue to automatically renew on a month-to-month basis until either party terminates the agreement by giving 60 days written notice. The per gallon throughput fee the Partnership charges under this agreement may be adjusted annually based on a price index.
Miscellaneous Terminal Services Agreements. The Partnership is a party to several terminal services agreements and from time to time the Partnership may enter into other terminal service agreements for the purpose of providing terminal services to related parties. Individually, each of these agreements is immaterial but when considered in the aggregate they could be deemed material. These agreements are throughput based with a minimum volume commitment. Generally, the fees due under these agreements are adjusted annually based on a price index.
Talen's Agreements. In connection with the Talen's Marine & Fuel LLC ("Talens") acquisition, three new agreements were executed, all with effective dates of December 31, 2012. Under the terms of these contracts, Talen's provides terminal services to Martin Resource Management. The terminal services agreements both have five-year terms and provide a per gallon throughput rate, which may be adjusted annually based on a price index.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
Other Agreements
Cross Tolling Agreement. The Partnership is a party to an agreement with Cross, originally dated November 25, 2009, under which the Partnership processes crude oil into finished products, including naphthenic lubricants, distillates, asphalt and other intermediate cuts for Cross. The tolling agreement, which has subsequently been amended, has a 22 year term which expires November 25, 2031. Under this tolling agreement, Cross agreed to process a minimum of 6,500 barrels per day of crude oil at the facility at a fixed price per barrel. Any additional barrels are processed at a modified price per barrel. In addition, Cross agreed to pay a monthly reservation fee and a periodic fuel surcharge fee based on certain parameters specified in the tolling agreement. All of these fees (other than the fuel surcharge) are subject to escalation annually based upon the greater of 3% or the increase in the Consumer Price Index for a specified annual period. In addition, every three years, the parties can negotiate an upward or downward adjustment in the fees subject to their mutual agreement.
Sulfuric Acid Sales Agency Agreement. The Partnership is party to a second amended and restated sulfuric acid sales agency agreement dated August 5, 2013, under which Martin Resource Management purchases and markets the sulfuric acid produced by the Partnership’s sulfuric acid production plant at Plainview, Texas, that is not consumed by the Partnership’s internal operations. This agreement, as amended, will remain in place until the Partnership terminates it by providing 180 days written notice. Under this agreement, the Partnership sells all of its excess sulfuric acid to Martin Resource Management. Martin Resource Management then markets such acid to third-parties and the Partnership shares in the profit of Martin Resource Management’s sales of the excess acid to such third parties.
Other Miscellaneous Agreements. From time to time the Partnership enters into other miscellaneous agreements with Martin Resource Management for the provision of other services or the purchase of other goods.
The tables below summarize the related party transactions that are included in the related financial statement captions on the face of the Partnership’s Consolidated and Condensed Statements of Operations. The revenues, costs and expenses reflected in these tables are tabulations of the related party transactions that are recorded in the corresponding caption of the consolidated and condensed financial statement and do not reflect a statement of profits and losses for related party transactions.
The impact of related party revenues from sales of products and services is reflected in the consolidated and condensed financial statements as follows:
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Revenues: | | | | | | | |
Terminalling and storage | $ | 18,743 |
| | $ | 17,485 |
| | $ | 36,753 |
| | $ | 34,813 |
|
Marine transportation | 6,415 |
| | 6,042 |
| | 12,264 |
| | 12,885 |
|
Product sales: | | | | | | | |
Natural gas services | 2,217 |
| | — |
| | 3,046 |
| | 9 |
|
Sulfur services | 1,268 |
| | 1,518 |
| | 2,223 |
| | 2,651 |
|
Terminalling and storage | 224 |
| | 321 |
| | 332 |
| | 388 |
|
| 3,709 |
| | 1,839 |
| | 5,601 |
| | 3,048 |
|
| $ | 28,867 |
| | $ | 25,366 |
| | $ | 54,618 |
| | $ | 50,746 |
|
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
The impact of related party cost of products sold is reflected in the consolidated and condensed financial statements as follows:
|
| | | | | | | | | | | | | | | |
Cost of products sold: | | | | | | | |
Natural gas services | $ | 10,808 |
| | $ | 7,036 |
| | $ | 19,261 |
| | $ | 15,592 |
|
Sulfur services | 4,452 |
| | 4,441 |
| | 9,317 |
| | 8,975 |
|
Terminalling and storage | 6,553 |
| | 14,189 |
| | 16,397 |
| | 26,150 |
|
| $ | 21,813 |
| | $ | 25,666 |
| | $ | 44,975 |
| | $ | 50,717 |
|
The impact of related party operating expenses is reflected in the consolidated and condensed financial statements as follows:
|
| | | | | | | | | | | | | | | |
Operating Expenses: | | | | | | | |
Marine transportation | $ | 8,823 |
| | $ | 9,505 |
| | $ | 18,487 |
| | $ | 19,563 |
|
Natural gas services | 798 |
| | 469 |
| | 1,404 |
| | 954 |
|
Sulfur services | 2,034 |
| | 1,935 |
| | 3,520 |
| | 4,290 |
|
Terminalling and storage | 7,593 |
| | 5,625 |
| | 14,076 |
| | 10,701 |
|
| $ | 19,248 |
| | $ | 17,534 |
| | $ | 37,487 |
| | $ | 35,508 |
|
The impact of related party selling, general and administrative expenses is reflected in the consolidated and condensed financial statements as follows:
|
| | | | | | | | | | | | | | | |
Selling, general and administrative: | | | | | | | |
Marine transportation | $ | 7 |
| | $ | 15 |
| | $ | 15 |
| | $ | 30 |
|
Natural gas services | 1,146 |
| | 409 |
| | 2,104 |
| | 988 |
|
Sulfur services | 820 |
| | 806 |
| | 1,663 |
| | 1,612 |
|
Terminalling and storage | 343 |
| | 283 |
| | 728 |
| | 644 |
|
Indirect overhead allocation, net of reimbursement | 3,173 |
| | 2,657 |
| | 6,363 |
| | 5,314 |
|
| $ | 5,489 |
| | $ | 4,170 |
| | $ | 10,873 |
| | $ | 8,588 |
|
The operations of the Partnership are generally not subject to income taxes because its income is taxed directly to its partners.
The Partnership is subject to the Texas margin tax which is included in income tax expense on the Consolidated and Condensed Statements of Operations. The Texas margin tax restructured the state business tax by replacing the taxable capital and earned surplus components of the existing franchise tax with a new “taxable margin” component. Since the tax base on the Texas margin tax is derived from an income-based measure, the margin tax is construed as an income tax and, therefore, the recognition of deferred taxes applies to the margin tax. The impact on deferred taxes as a result of this provision is immaterial. State income taxes attributable to the Texas margin tax of $354 and $300 were recorded in income tax expense for the three months ended June 30, 2014 and 2013, respectively. State income taxes attributable to the Texas margin tax of $654 and $607 were recorded in income tax expense for the six months ended June 30, 2014 and 2013, respectively.
The Partnership has four reportable segments: terminalling and storage, natural gas services, sulfur services and marine transportation. The Partnership’s reportable segments are strategic business units that offer different products and services. The operating income of these segments is reviewed by the chief operating decision maker to assess performance and make business decisions.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
The accounting policies of the operating segments are the same as those described in Note 2 in the Partnership’s annual report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 3, 2014, as amended, by Amendment No. 1 on Form 10-K/A for the year ended December 31, 2013 filed on March 28, 2014. The Partnership evaluates the performance of its reportable segments based on operating income. There is no allocation of administrative expenses or interest expense.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Operating Revenues | | Intersegment Revenues Eliminations | | Operating Revenues after Eliminations | | Depreciation and Amortization | | Operating Income (Loss) after Eliminations | | Capital Expenditures |
Three Months Ended June 30, 2014 | | | | | | | | | | | |
Terminalling and storage | $ | 86,917 |
| | $ | (1,307 | ) | | $ | 85,610 |
| | $ | 9,415 |
| | $ | 8,365 |
| | $ | 13,798 |
|
Natural gas services | 248,670 |
| | — |
| | 248,670 |
| | 675 |
| | 5,815 |
| | 74 |
|
Sulfur services | 62,581 |
| | — |
| | 62,581 |
| | 2,031 |
| | 7,886 |
| | 1,633 |
|
Marine transportation | 23,282 |
| | (1,198 | ) | | 22,084 |
| | 2,473 |
| | (522 | ) | | 4,258 |
|
Indirect selling, general and administrative | — |
| | — |
| | — |
| | — |
| | (4,838 | ) | | — |
|
Total | $ | 421,450 |
| | $ | (2,505 | ) | | $ | 418,945 |
| | $ | 14,594 |
| | $ | 16,706 |
| | $ | 19,763 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Operating Revenues | | Intersegment Revenues Eliminations | | Operating Revenues after Eliminations | | Depreciation and Amortization | | Operating Income (Loss) after Eliminations | | Capital Expenditures |
Three Months Ended June 30, 2013 | |
| | |
| | |
| | |
| | |
| | |
|
Terminalling and storage | $ | 85,762 |
| | $ | (1,167 | ) | | $ | 84,595 |
| | $ | 7,297 |
| | $ | 8,635 |
| | $ | 12,319 |
|
Natural gas services | 188,715 |
| | — |
| | 188,715 |
| | 554 |
| | 4,930 |
| | — |
|
Sulfur services | 60,896 |
| | — |
| | 60,896 |
| | 1,957 |
| | 7,701 |
| | 422 |
|
Marine transportation | 25,021 |
| | (1,039 | ) | | 23,982 |
| | 2,545 |
| | 2,541 |
| | 1,165 |
|
Indirect selling, general and administrative | — |
| | — |
| | — |
| | — |
| | (3,548 | ) | | — |
|
Total | $ | 360,394 |
| | $ | (2,206 | ) | | $ | 358,188 |
| | $ | 12,353 |
| | $ | 20,259 |
| | $ | 13,906 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2014 | Operating Revenues | | Intersegment Revenues Eliminations | | Operating Revenues after Eliminations | | Depreciation and Amortization | | Operating Income (Loss) after Eliminations | | Capital Expenditures |
Terminalling and storage | $ | 174,214 |
| | $ | (2,530 | ) | | $ | 171,684 |
| | $ | 18,390 |
| | $ | 16,676 |
| | $ | 29,396 |
|
Natural gas services | 582,303 |
| | — |
| | 582,303 |
| | 1,179 |
| | 15,280 |
| | 574 |
|
Sulfur services | 116,788 |
| | — |
| | 116,788 |
| | 4,014 |
| | 15,954 |
| | 3,081 |
|
Marine transportation | 47,396 |
| | (2,198 | ) | | 45,198 |
| | 5,003 |
| | 2,440 |
| | 8,186 |
|
Indirect selling, general and administrative | — |
| | — |
| | — |
| | — |
| | (9,735 | ) | | — |
|
Total | $ | 920,701 |
| | $ | (4,728 | ) | | $ | 915,973 |
| | $ | 28,586 |
| | $ | 40,615 |
| | $ | 41,237 |
|
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2013 | Operating Revenues | | Intersegment Revenues Eliminations | | Operating Revenues after Eliminations | | Depreciation and Amortization | | Operating Income (Loss) after Eliminations | | Capital Expenditures |
Terminalling and storage | $ | 166,115 |
| | $ | (2,308 | ) | | $ | 163,807 |
| | $ | 14,393 |
| | $ | 18,618 |
| | $ | 26,368 |
|
Natural gas services | 448,154 |
| | — |
| | 448,154 |
| | 846 |
| | 13,392 |
| | 115 |
|
Sulfur services | 131,281 |
| | — |
| | 131,281 |
| | 3,923 |
| | 17,045 |
| | 623 |
|
Marine transportation | 50,253 |
| | (1,621 | ) | | 48,632 |
| | 5,084 |
| | 5,080 |
| | 1,515 |
|
Indirect selling, general and administrative | — |
| | — |
| | — |
| | — |
| | (7,491 | ) | | — |
|
Total | $ | 795,803 |
| | $ | (3,929 | ) | | $ | 791,874 |
| | $ | 24,246 |
| | $ | 46,644 |
| | $ | 28,621 |
|
The Partnership's assets by reportable segment as of June 30, 2014 and December 31, 2013, are as follows:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
Total assets: | | | |
Terminalling and storage | $ | 471,891 |
| | $ | 461,160 |
|
Natural gas services | 455,515 |
| | 320,631 |
|
Sulfur services | 159,361 |
| | 151,982 |
|
Marine transportation | 163,989 |
| | 164,146 |
|
Total assets | $ | 1,250,756 |
| | $ | 1,097,919 |
|
The Partnership recognizes compensation cost related to unit-based awards to employees in its consolidated financial statements in accordance with certain provisions of ASC 718. The Partnership recognizes compensation costs related to unit-based awards to directors under certain provisions of ASC 505-50-55 related to equity-based payments to non-employees. Amounts recognized in selling, general, and administrative expense in the consolidated and condensed financial statements with respect to these plans are as follows:
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Employees | $ | 156 |
| | $ | 155 |
| | $ | 284 |
| | $ | 351 |
|
Non-employee directors | 52 |
| | 68 |
| | 103 |
| | 128 |
|
Total unit-based compensation expense | $ | 208 |
| | $ | 223 |
| | $ | 387 |
| | $ | 479 |
|
Long-Term Incentive Plans
The Partnership's general partner has a long term incentive plan for employees and directors of the general partner and its affiliates who perform services for the Partnership.
The plan consists of two components, restricted units and unit options. The plan currently permits the grant of awards covering an aggregate of 725,000 common units, 241,667 of which may be awarded in the form of restricted units and 483,333 of which may be awarded in the form of unit options. The plan is administered by the compensation committee of the general partner’s board of directors (the "Compensation Committee").
Restricted Units. A restricted unit is a unit that is granted to grantees with certain vesting restrictions. Once these restrictions lapse, the grantee is entitled to full ownership of the unit without restrictions. In addition, the restricted units will vest upon a change of control of the Partnership, the general partner or Martin Resource Management or if the general partner
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except where otherwise indicated)
June 30, 2014
(Unaudited)
ceases to be an affiliate of Martin Resource Management. The Partnership intends the issuance of the common units upon vesting of the restricted units under the plan to serve as a means of incentive compensation for performance and not primarily as an opportunity to participate in the equity appreciation of the common units. Therefore, plan participants will not pay any consideration for the common units they receive, and the Partnership will receive no remuneration for the units. The restricted units issued to directors generally vest in equal annual installments over a four-year period. Restricted units issued to employees generally cliff vest after three years of service.
The restricted units are valued at their fair value at the date of grant which is equal to the market value of common units on such date. A summary of the restricted unit activity for the six months ended June 30, 2014 is provided below:
|
| | | | | | | |
| Number of Units | | Weighted Average Grant-Date Fair Value Per Unit |
Non-vested, beginning of period | 72,998 |
| | $ | 33.08 |
|
Granted | 6,900 |
| | $ | 41.10 |
|
Vested | (5,750 | ) | | $ | 39.67 |
|
Forfeited | (3,250 | ) | | $ | 31.06 |
|
Non-Vested, end of period | 70,898 |
| | |