General | Quarterly / Earnings Reports

Martin Midstream Takes Hit from Failed A&D Deal

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Martin Midstream Partners L.P. has reported its financial results for the fourth quarter and year ended December 31, 2013.

The Partnership's adjusted EBITDA for the fourth quarter of 2013 was $38.6 million. This compared to adjusted EBITDA for the fourth quarter of 2012 of $32.0 million. The Partnership's adjusted EBITDA for the year ended December 31, 2013 was $138.0 million. This compared to adjusted EBITDA for the year ended December 31, 2012 of $121.3 million. EBITDA and adjusted EBITDA are non-GAAP financial measures which are explained in greater detail below under the heading "Use of Non-GAAP Financial Information." The Partnership has also included below a table entitled "Reconciliation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow" in order to show the components of these non-GAAP financial measures and their reconciliation to the most comparable GAAP measurement.

The Partnership's distributable cash flow for the fourth quarter of 2013 was $24.2 million. This compared to distributable cash flow for the fourth quarter of 2012 of $20.6 million. The Partnership's distributable cash flow for the year ended December 31, 2013 was $87.0 million. This compared to distributable cash flow for the year ended December 31, 2012 of $80.3 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 "Reconciliation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow" in order to show the components of this non-GAAP financial measure and its reconciliation to the most comparable GAAP measurement.

The Partnership reported a loss for the fourth quarter of 2013 of $39.3 million, or $1.44 per limited partner unit. This compared to net income for the fourth quarter of 2012 of $7.2 million, or $0.29 per limited partner unit. Results for the fourth quarter of 2013 were negatively impacted by the $54.1 million non-cash charge related to the Partnership's share of an impairment of the Monroe Gas Storage Company LLC assets at Cardinal Gas Storage Partners, LLC, an equity method investment of the Partnership. Net income from continuing operations for the fourth quarter of 2012 was $9.7 million, $0.38 per limited partner unit. The Partnership reported a net loss from discontinued operations for the fourth quarter of 2012 of $2.5 million, or $0.09 per limited partner unit. The Partnership reported no income from discontinued operations for the fourth quarter of 2013. Revenues for the fourth quarter of 2013 were $482.0 million compared to $454.1 million for the fourth quarter of 2012.

The Partnership reported a loss from continuing operations for the year ended December 31, 2013 of $13.4 million, or $0.49 per limited partner unit. Results for the year ended December 31, 2013 were negatively impacted by the $54.1 million non-cash charge related to the Partnership's share of an impairment of the Monroe assets at Cardinal. Net income from continuing operations for the year ended December 31, 2012 was $37.1 million, or $1.32 per limited partner unit. The Partnership reported no income from discontinued operations for the year ended December 31, 2013. This compared to net income from discontinued operations for the year ended December 31, 2012 of $64.9 million, or $2.64 per limited partner unit. Income from discontinued operations was positively impacted by a gain on the sale of certain gas gathering and processing assets of $61.8 million for the year ended December 31, 2012. Revenues for the year ended December 31, 2013 were $1.6 billion compared to $1.5 billion for the year ended December 31, 2012.

Included with this press release are the Partnership's consolidated financial statements as of and for the quarter and year ended December 31, 2013 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, to be filed with the SEC on March 3, 2014.

Ruben Martin, President and Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership, said "I am pleased with our performance in the fourth quarter of 2013 and the Partnership's recovery from our seasonally weak third quarter. For the quarter, our distributable cash flow (DCF) coverage ratio was 1.14 times the distribution paid to our unitholders. Likewise, our DCF coverage ratio was 1.03 times for the year ended 2013. Our overall business and asset performance was strong during the quarter, however, DCF was offset by due diligence expenses associated with unsuccessful acquisition opportunities of approximately $1.9 million and increased maintenance capital expenditures. That being said, based on our strong performance and coverage during the fourth quarter we were again able to increase our quarterly distribution. This marks the fifth consecutive quarter we have provided increased distributions to our unitholders.

"Looking at our fourth quarter by segment, and starting with Terminalling and Storage, in late November 2013, we put in service a newly constructed dock facility dedicated solely to our Corpus Christi Crude Terminal and its customer. With the addition of our second docking system and related infrastructure, all of which was completed ahead of schedule, we more than doubled our crude loading capacity. Additionally, as increased Eagle Ford Shale crude oil production drives terminal through-put increases, we are well-positioned with additional tankage under construction. Once fully completed in the second quarter of this year, we expect year over year cash flow from the terminal to increase by over 25%. Partially offsetting the strong results surrounding our Corpus Christi assets were lower than forecasted through-put at the Smackover refinery and weaker than forecasted lubricant sales within our Martin Lubricants platform. However, we continue to view Martin Lubricants as a solid growth platform for the Partnership and are currently exploring several growth initiatives.

"In the Natural Gas Services segment, our wholesale propane and butane distribution services had a strong fourth quarter. Improved market conditions allowed us to capture greater than forecasted volume and margins in our legacy businesses. Additionally, in our refinery grade butane service we again successfully benefited by capturing seasonal margin differentials from butane inventories we placed in storage during the second and third quarters. As fuel blending continues today, butane sales will continue through the end the first quarter, thus completing the seasonal cycle. To date, margins have remained favorable mid-way through the first quarter.

"On the natural gas storage side, prolonged weakness in demand for storage capacity and financing covenants that restrict cash flow have negatively impacted the distributions we have received from our Cardinal investment. Specific to the Monroe facility, our cash flow available for distributions from that asset was $1.7 million in 2013. Based on this weakness, and the unlikelihood of near-term cash flow improvement, Cardinal recorded an impairment charge specific to the Monroe Gas Storage facility of $129.4 million. The Partnership's share of this charge was $54.1 million recorded in "Equity in Earnings in Unconsolidated Entities" in the Consolidated Statements of Operations in the year end results. Looking ahead, this non-cash asset impairment will have minimal impact on our DCF and our ability to pay distributions to unitholders at the current level as projected cash flow from Monroe is approximately $0.2 million for 2014.

"Lastly, I note that our Partnership's Redbird ownership interests in the other Cardinal projects at Arcadia, Cadeville and Perryville, Louisiana are operating and generating cash flow at projected levels. Because of current contracted levels of cash flow and operational performance, no asset write-downs are contemplated with any of these three projects. However, because each of those projects has an asset level project financing in place, upstream distributions are prohibited until certain leverage metrics are achieved.

"Our Sulfur Services segment rebounded from our seasonally weaker third quarter and posted stronger than forecasted performance. Fertilizer volume returned from seasonal lows sooner than we anticipated. Historically, the fourth quarter typically shows improvement as production volume begins delivery and deployment toward the field. Likewise, our pure sulfur businesses showed a recovery from the third quarter and exceeded planned performance. Our fee-based prilling and formed sulfur businesses met expectations for the fourth quarter and full year target performance.

"Finally, our Marine Transportation segment posted solid performance during the fourth quarter and finished the year ahead of the forecasted plan. Both our inland and offshore fleets had near full utilization. The inland fleet in particular had one of its best quarters since 2010. As we forecasted, the incremental demand for liquids transportation connected to shale play off-take was strong during 2013. Accordingly, the Partnership has been able to rely on the stability of cash flow from the Marine Transportation. For 2014, however, we are forecasting a slight reduction in cash flow compared to 2013 for this segment. This is primarily attributed to a disproportionate amount of regulatory dry-docking that will include our entire offshore marine fleet.

"Looking ahead, we have multiple organic growth platforms and projects across our business segments that should render continued near-term and long-term distribution growth. Additionally, we continue to pursue accretive acquisitions."