MARTIN MIDSTREAM PARTNERS REPORTS
2018 THIRD QUARTER FINANCIAL RESULTS
Third Quarter Net Income of $39.4 Million including $48.6 Million Gain from Sale of Interest in WTLPG
Agreement to Acquire Martin Transport, Inc. for $135.0 Million Plus a Potential $10.0 Million Earn-Out
Acquisition is Expected to Strengthen Distribution Coverage Ratio
Management Reiterates Support for Current Distribution Level
KILGORE, Texas, October 24, 2018 (GlobeNewswire) -- Martin Midstream Partners L.P. (Nasdaq: MMLP) (the "Partnership") announced today its financial results for the quarter ended September 30, 2018.
Ruben Martin, President and Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership said, “I am excited to announce the Partnership has reached an agreement with Martin Resource Management Corporation (“MRMC”) to acquire Martin Transport, Inc. (“MTI”) for $135.0 million plus a potential additional $10.0 million earn-out based on a performance threshold. The price reflects an EBITDA multiple between 5.7 times and 6.0 times based on MTI's forecasted 2019 net income of $9.3 million and EBITDA of $23.6 million. This acquisition will be funded from the Partnership’s revolving credit facility allowing it to redeploy much of the $193.7 million in net proceeds received when we sold our interest in the West Texas LPG Pipeline Limited Partnership (“WTLPG”) on July 31, 2018. Despite redeploying capital of only 70% of the net proceeds received for the WTLPG interest, the acquisition is estimated to generate roughly $16.0 million of additional incremental EBITDA in 2019 over the average historical cash flows received from WTLPG.
“MTI transports petroleum products, liquid petroleum gas, chemicals, sulfur and other products, as well as owns twenty-three terminals located throughout the Gulf Coast and Midwest. MRMC has owned and operated MTI or its predecessor for over 40 years and is integral to MMLP’s routine movements of sulfur and NGL’s. Based on operational estimates and current transportation market conditions, this acquisition from our general partner will provide strategic long-term growth for the Partnership.
“In the first twelve months of operation, the acquisition is expected to contribute approximately $23.6 million and $14.7 million of EBITDA and distributable cash flow, respectively, to the Partnership. This will drive our estimated distribution coverage ratio to approximately 1.20 times by year-end 2019, which forms the basis for management's continued support of the current distribution level. Further, due to continued rising line haul rates combined with MTI’s available truck capacity, we estimate, net income, EBITDA and distributable cash flow attributable to MTI to grow to approximately $17.0 million, $33.2 million and $20.9 million, respectively, for the year of 2022. In addition, this drop down will provide stability in our quarterly cash flows to offset the seasonal nature of our fertilizer and butane businesses. We expect this transaction to close in January of 2019.
“For the twelve months ended September 30, 2018 our proforma distribution coverage ratio was 1.04 times when taking into effect the WTLPG sale. Historically the third quarter is our weakest due to seasonal timing in the fertilizer and natural gas liquids businesses which is reflected in our guidance. Further, for the third quarter of 2018 our distributable cash flow fell short of guidance due to compressed margins from rising fertilizer raw materials costs and the sale of WTLPG, slightly offset by lower than forecasted maintenance capital expenditures coupled with continued outperformance in our Marine Transportation segment due to improved day rates and fleet utilization.
“As expected during the third quarter, our debt level rose due to the seasonal butane inventory build in our Natural Gas Services segment. Anticipating this annual occurrence, the Partnership amended its revolving credit facility in February of 2018 to include an inventory financing sublimit tranche related to eligible inventory volumes that are under sales or swap contracts when calculating consolidated funded debt. Accordingly, the Partnership’s calculated leverage ratio of 4.29 times includes a $74.0 million reduction of consolidated funded debt under this provision. Further, the applicable interest rate under our credit facility is reduced twenty-five basis points due to obtaining a leverage ratio under 4.50 times.
The following information was filed by Martin Midstream Partners Lp (MMLP) on Wednesday, October 24, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.