Martin Midstream Partners L.P. (MMLP)

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Martin Midstream Partners LP (MMLP)

Q4 2012 Earnings Call

February 28, 2013 9:00 am ET


Robert D. Bondurant - Chief Financial Officer of Martin Midstream GP LLC, Executive Vice President of Martin Midstream GP LLC, Chief Financial Officer of Martin Resource Management and Director of Martin Resource Management

Joe McCreery - Head of Investor Relations of Martin Midstream GP LLC and Vice President of Finance of Martin Midstream GP LLC

Ruben S. Martin - Chief Executive Officer of Martin Midstream GP LLC, President of Martin Midstream GP LLC, Director of Martin Midstream GP LLC and President of Martin Resource Management

Wes Martin


Edward Rowe

TJ Schultz - RBC Capital Markets, LLC, Research Division

Ethan H. Bellamy - Robert W. Baird & Co. Incorporated, Research Division

James Spicer - Wells Fargo Securities, LLC, Research Division



Good day, ladies and gentlemen, and welcome to the Martin Midstream Partners LP Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to your host for today, Mr. Bob Bondurant, Chief Financial Officer. Sir, you may begin.

Robert D. Bondurant

Thank you, Ben. And to let everyone know who's on the call today, we have Ruben Martin, President and Chief Executive Officer; Joe McCreery, Vice President of Finance and Head of our Investor Relations; and Wes Martin, VP of Business Development.

Before we get started with the financial and operational results of the fourth quarter, I need to make this disclaimer.

Certain statements made during this conference call may be forward-looking statements relating to financial forecast, future performance and our ability to make distributions to unitholders. We report our financial results in accordance with Generally Accepted Accounting Principles and use certain non-GAAP financial measures within the meanings of the SEC Regulation G, such as distributable cash flow, or DCF, earnings before interest, tax, depreciation and amortization, or EBITDA.

We use these measures because we believe it provides users of our financial information with meaningful comparisons between current results and prior reported results, and it can be a meaningful measure of the partnership's ability to pay distributions.

Distributable cash flow should not be considered an alternative to cash flow from operating activities. Furthermore, DCF is not a measure of financial performance or liquidity under GAAP and should not be considered in isolation as an indicator of our performance. We also included in our press release issued yesterday a reconciliation of DCF to the most comparable GAAP financial measure.

Our earnings press release is available at our website, We also issued a press release this morning that furnishes all fourth quarter business segment information for 2012.

Now before I begin my discussion on our fourth quarter performance, I want to point out the financial statement reporting impact of our acquisition of the Cross Oil lubricant packaging business and the remainder of the Class A interest in Redbird Gas Storage from our general partner.

On October 2, 2012, the partnership effectively redeployed cash generated from the sale of our discontinued operations by acquiring the Cross lubricant packaging business for $122.7 million and the remaining Class A interest in Redbird Gas Storage for $150 million. The partnership accounting for these transactions as a transfer of net assets between entities under common control pursuant to FASB accounting rules. These net assets were recorded at the amounts reflected in our general partner's historical consolidated financial statements.

These same FASB rules also require that all historical quarterly and year-end income statements be revised to include the results of the acquired assets as the date of common control. Accordingly, the partnership's historical financial statements have been recast back to 2007. On a segment basis, the recast effect of the lubricant packaging acquisition shows up in our Terminalling segment, and the recast effect of the acquisition to Class A interest in Redbird Gas Storage shows up in the equity and earnings of unconsolidated entities line of the income state.

The financial impact of recasting the lubricant packaging acquisition for the first 3 quarters was to increase EBITDA of the Terminalling segment by $8.5 million. The financial impact of the acquisition of the Class A interest in Redbird for the first 3 quarters was to increase equity and earnings of unconsolidated entities by $0.8 million.

With that background behind our numbers, we had fourth quarter 2012 net income from continuing operations of $9.2 million compared to a recast $8.7 million for the third quarter. And for the year of 2012, we had net income from continuing operations of $37.1 million, compared to a recast $13.4 million for the prior year.

Now as with other MLPs, we believe the most important measure of performance is distributable cash flow. Our total distributable cash flow from continuing operations, or DCF, for the fourth quarter was $20.1 million, a distribution coverage of 1.1x. This coverage calculation is based on our actual distribution paid in the fourth quarter and does not include the impact of the 3.5 million shares we issued in late November 2012. It also does not include any IDR payments to the general partner as we have suspended IDR payments until a cumulative suspension of $18 million is met.

At December 31, 2012, our cumulative suspension amount was $1.6 million. And as of today, is $3.4 million.

For the year, our actual DCF was $83.8 million, a distribution coverage of 1.1x based on the actual cash distributions paid in 2012.

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