Martin Midstream Partners Reports 2016 Fourth Quarter Financial Results And Hondo, Texas Asphalt Terminal Acquisition

• Record Quarterly Cash Flow and Distribution Coverage Ratio of 1.98 times in Q4 2016
  
• Announcement of the Hondo, Texas Asphalt Terminal Acquisition from MRMC
  
• Net income of $31.7 million for 2016 compared to $38.4 million for 2015
  

KILGORE, Texas, Feb. 15, 2017 (GLOBE NEWSWIRE) -- Martin Midstream Partners L.P. (Nasdaq:MMLP) (the "Partnership") announced today its financial results for the year ended December 31, 2016. 

Ruben Martin, President and Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership said, "I am pleased to announce the acquisition of the Hondo, Texas asphalt terminal facility for $27.4 million from Martin Resource Management Corporation (“MRMC”).  In addition, the Partnership expects to spend $8.6 million to complete construction.  The terminal will be supported by long-term contractual agreements with MRMC whereby the Partnership expects to receive cash flow of approximately $5.0 million annually.   The acquisition of a newly constructed asset at an accretive multiple of cash flow restores growth at the Partnership.

“During the fourth quarter, the Partnership continued to execute on its stated goals to create balance sheet improvement and strengthen our distribution coverage ratio.  The Partnership made a strategic decision in the second half of the year to divest of the Corpus Christi terminal assets as throughput at the facility continued to decline commensurate with Eagle Ford crude oil production.  In addition to successfully closing the divestiture, we also saw the positive impact of working capital reductions during the quarter in our natural gas liquids businesses.  The net result of those two actions reduced leverage by approximately 0.3 turns on our debt to EBITDA leverage ratio at year end as well as providing additional liquidity.

“For the quarter ended December 31, 2016, our distribution coverage ratio was 1.98 times based on our current quarterly distribution of $0.50.  We generated the highest level of adjusted EBITDA in the Partnership’s history based on strong contributions from our Natural Gas Services segment. We performed above expectations in our Cardinal Gas Storage line of business and met forecast in our refinery grade butane division.

“Looking at our segments, the Natural Gas Services segment generated better than expected cash flow from our Cardinal Gas Storage assets.  Cardinal continues to perform exceedingly well, particularly within its interruptible services line of business.  I am especially pleased with Cardinal’s performance given the re-contracting requirements at our Arcadia, Louisiana location in mid-year 2016.   I believe the market continues to value the strategic location of our storage assets amidst the changing geographical flow of natural gas.  Additionally, our butane optimization business performed at a high level during the fourth quarter and in calendar 2016.  This performance was anticipated as the Partnership had a strong storage season during the second and third quarters of 2016.  Based on current fundamentals, we anticipate our butane business will continue to be strong during the first quarter of 2017.  The Natural Gas Services segment fell short of full year 2016 cash flow guidance by approximately $5.5 million.  However, giving effect to the previously disclosed West Texas LPG Pipeline tariff reductions and corresponding distribution to the Partnership, the segment actually outperformed our estimates by $1.4 million.

“Within our Terminalling & Storage segment, our Smackover refinery exceeded cash flow forecast in 2016 primarily as a result of increased tolling and reservation fees. Positively, within this segment, we were able to significantly reduce operating expenses within our specialty terminals which offset the decline in revenues we experienced through reduced throughput.  We experienced weaker margins in our lubricants platform throughout most of 2016, partially offset by the strengths in our grease business.  For the year, the Terminalling & Storage segment was below our cash flow guidance by approximately $2.5 million.

“Within our Sulfur Services segment, the Partnership significantly exceeded expectations. This is primarily attributed to strength in our fertilizer business in the second and fourth quarters. Margins were consistently strong as sulfur and raw material costs associated with our products fell throughout the year. Additionally, product demand preferences trended toward our higher margin products again in 2016.  For the year, the Sulfur Services segment exceeded our cash flow guidance by approximately $5.8 million.

“Lastly, our Marine Transportation segment encountered soft market conditions during 2016.  Day rates for our assets continue to be weak even as the Partnership successfully reduced operating and general and administrative expenses during the year.  Additionally, the Partnership has reduced its fleet size by divesting of non-commercially competitive equipment.  This resulted in a non-cash asset impairment of approximately $11.7 million, negatively impacting the Partnership’s net income for 2016.  These divestitures are expected to allow the Partnership to benefit from operating expense savings of approximately $1.4 million annually.  For the year, the Marine Transportation segment was below cash flow guidance by approximately $6.1 million.

“De-levering will be a top priority of the Partnership in 2017.  Based on our current annualized distribution run-rate of $2.00, the Partnership is well-positioned to continue generating strong distribution coverage while continuing to improve our balance sheet.”

The Partnership had net income for the fourth quarter of 2016 of $17.9 million, or $0.49 per limited partner unit.  For the fourth quarter of 2016, net income was positively impacted by the gain on disposition of the Partnership's terminalling assets located in Corpus Christi, Texas of $37.3 million and negatively impacted by non-cash impairment charges of $27.0 million.  Of these non-cash impairment charges, $15.3 million occurred in our Terminalling and Storage segment and was related to the discontinuation of certain organic growth projects no longer deemed economically viable.  Additionally, our Marine Transportation segment experienced an $11.7 million non-cash charge related to the planned disposal of certain inland and offshore non-core transportation assets.  The Partnership had net income for the fourth quarter of 2015 of $6.8 million, or $0.08 per limited partner unit.  For the fourth quarter of 2015, net income was negatively impacted by non-cash impairment charges of $10.6 million.  These non-cash charges impacted earnings but had no impact on distributable cash flow or adjusted EBITDA.  The Partnership's adjusted EBITDA from continuing operations for the fourth quarter of 2016 was $52.3 million compared to adjusted EBITDA from continuing operations for the fourth quarter of 2015 of $51.4 million, an increase of 2%.

Net income from continuing operations for the year ended December 31, 2016 was $31.7 million, or $0.65 per limited partner unit.  Net income for the year ended December 31, 2016 was positively impacted by the gain on disposition of the Partnership's terminalling assets located in Corpus Christi, Texas of $37.3 million and negatively impacted by non-cash impairment charges of $31.1 million.  Of these non-cash impairment charges, $15.3 million occurred in our Terminalling and Storage segment and was related to the discontinuation of certain organic growth projects no longer deemed economically viable.  Additionally, our Marine Transportation segment experienced an $11.7 million non-cash charge related to the planned disposal of certain inland and offshore non-core transportation assets and a $4.1 million non-cash goodwill impairment charge.

Net income from continuing operations for the year ended December 31, 2015 was $37.2 million, or $0.60 per limited partner unit.  Net income for the year ended December 31, 2015 was negatively impacted by non-cash impairment charges of $10.6 million in our Terminalling and Storage segment related to the discontinuation of certain organic growth projects no longer deemed economically viable.  The Partnership's adjusted EBITDA from continuing operations for the year ended December 31, 2016 was $176.6 million compared to adjusted EBITDA from continuing operations for the year ended December 31, 2015 of $188.3 million, a decrease of 6%.

The Partnership's distributable cash flow from continuing operations for both the fourth quarter of 2016 and 2015 was $35.8 million.

The Partnership's distributable cash flow from continuing operations for the year ended December 31, 2016 was $113.7 million compared to distributable cash flow from continuing operations for the year ended December 31, 2015 of $133.9 million, a decrease of 15%.

Revenues for the fourth quarter of 2016 were $236.9 million compared to $254.4 million for the fourth quarter of 2015.  Revenues for the year ended December 31, 2016 were $827.4 million compared to $1.0 billion for the year ended December 31, 2015.
           
On February 12, 2015, the Partnership exited the natural gas liquids floating storage and trans-loading businesses as a result of the sale of its six liquefied petroleum gas pressure barges, collectively referred to as the "Floating Storage Assets", for $41.3 million.  The Partnership recorded a gain on the disposition of $1.5 million.

The Partnership had no net income, distributable cash flow or adjusted EBITDA from discontinued operations related to the Floating Storage Assets for the three and twelve months ended December 31, 2016.

The Partnership had no net income, distributable cash flow or adjusted EBITDA from discontinued operations related to the Floating Storage Assets for the three months ended December 31, 2015.  The Partnership had net income from discontinued operations for the twelve months ended December 31, 2015 of $1.2 million, or $0.02 per limited partner unit.  Distributable cash flow and adjusted EBITDA from discontinued operations were negative $0.2 million for the year ended December 31, 2015.

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

Included with this press release are the Partnership's consolidated financial statements as of and for the year ended December 31, 2016 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 February 17, 2017.

An attachment accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/75b5b63e-eaca-4dce-adf1-d056da16cefb.

Investors' Conference Call

An investors’ conference call to review the fourth quarter results will be held on Thursday, February 16, 2017, at 8:00 a.m. Central Time.  The conference call can be accessed by calling (877) 878-2695.  An audio replay of the conference call will be available by calling (855) 859-2056 from 11:00 a.m. Central Time on February 16, 2017 through 10:59 p.m. Central Time on February 27, 2017.  The access code for the conference call and the audio replay is Conference ID No. 50816933.  The audio replay of the conference call will also be archived on Martin Midstream Partners’ website at www.martinmidstream.com.

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

Forward-Looking Statements

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

Use of Non-GAAP Financial Information

The Partnership's management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) to analyze its performance. These include: (1) net income before interest expense, income tax expense, and depreciation and amortization (“EBITDA”), (2) adjusted EBITDA and (3) distributable cash flow.  The Partnership's management views these measures as important performance measures of core profitability for its operations and the ability to generate and distribute cash flow, and as key components of its internal financial reporting. The Partnership's management believes investors benefit from having access to the same financial measures that management uses.

EBITDA and Adjusted EBITDA.  Certain items excluded from EBITDA and adjusted EBITDA are significant components in understanding and assessing an entity's financial performance, such as cost of capital and historical costs of depreciable assets. The Partnership has included information concerning EBITDA and adjusted EBITDA because it provides investors and management with additional information to better understand the following: financial performance of the Partnership's assets without regard to financing methods, capital structure or historical cost basis; the Partnership's operating performance and return on capital as compared to those of other similarly situated entities; and the viability of acquisitions and capital expenditure projects.  The Partnership's method of computing adjusted EBITDA may not be the same method used to compute similar measures reported by other entities. The economic substance behind the Partnership's use of adjusted EBITDA is to measure the ability of the Partnership's assets to generate cash sufficient to pay interest costs, support its indebtedness and make distributions to its unitholders.

Distributable Cash Flow.  Distributable cash flow is a significant performance measure used by the Partnership's management and by external users of its financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by the Partnership to the cash distributions it expects to pay unitholders.  Distributable cash flow is also an important financial measure for the Partnership's unitholders since it serves as an indicator of the Partnership's success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not the Partnership is generating cash flow at a level that can sustain or support an increase in its quarterly distribution rates.  Distributable cash flow is also a quantitative standard used throughout the investment community with respect to publicly-traded partnerships because the value of a unit of such an entity is generally determined by the unit's yield, which in turn is based on the amount of cash distributions the entity pays to a unitholder.

EBITDA, adjusted EBITDA and distributable cash flow should not be considered alternatives to, or more meaningful than, net income, cash flows from operating activities, or any other measure presented in accordance with GAAP. The Partnership's method of computing these measures may not be the same method used to compute similar measures reported by other entities.

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

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

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on February 15, 2017.

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on February 15, 2017.

*Related Party Transactions Shown Below

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on February 15, 2017.

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on February 15, 2017.

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on February 15, 2017.

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on February 15, 2017.                

Non-GAAP Financial Measures

The following table reconciles the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three and twelve months ended December 31, 2016 and 2015, which represents EBITDA, Adjusted EBITDA and Distributable Cash Flow from continuing operations.

The following table reconciles the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for each of the quarters in the year ended December 31, 2015, which represents Distributable Cash Flow from discontinued operations.