Bob Bondurant - EVP and Chief Financial Officer Joe McCreery - VP Finance and Head of IR Wes Martin - VP, Corporate Development.

Gabe Moreen - Bank of America Merrill Lynch TJ Schultz - RBC Capital Markets.

Good day, ladies and gentlemen, and welcome to the Martin Midstream Partners’ Third Quarter 2015 Earnings Conference Call Webcast. At this time all participant lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder this call is being recorded. I would now like to introduce your host for today’s conference, Bob Bondurant. Please go ahead, sir..

Thank you, Mallory [ph]. And I want to apologize to everyone for the late start. We had few technical difficulties but hopefully they’ve been earned out and we’ll go forward from here.

And I want to let everyone, those on the call today beside myself we have Joe McCreery, our VP of Finance and Head of Investor Relations; and Wes Martin, our VP of Corporate Development. And before we get started with the financial and operational results for the third quarter, I need to make this disclaimer.

Certain statements made during this conference call may be forward-looking statements relating to financial forecasts, future performance, and our ability to make distributions to unit holders.

We report our financial results in accordance with Generally Accepted Accounting Principles, and use certain non-GAAP financial measures within the meanings of SEC Reg G, such as distributable cash flow, or DCF; and earnings before interest, taxes, depreciation, and amortization, or EBITDA; and we also use adjusted 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 cash available to pay distributions.

We also included in our press release issued yesterday a reconciliation of EBITDA, adjusted EBITDA and distributable cash flow to the most comparable GAAP financial measure. Earnings press release is available at our website, martinmidstream.com. Now I’d like to discuss our third quarter 2015 performance compared to the second quarter of 2015.

For the third quarter we had adjusted EBITDA of $41.4 million compared to $45 million in the second quarter. As will be discussed in more detail later this decline was primarily driven by seasonality in our NGL and fertilizer businesses.

Our distributable cash flow for the third quarter was $29.1 million, distribution coverage of 0.87 times based on our distribution of $33.4 million paid out in the third quarter. The third quarter distribution paid in August of ‘15 also included IDR distributions of $3.9 million.

This year’s third quarter distribution coverage compares favorably to last year’s third quarter distribution coverage of 0.78 times. As a reminder, there were no IDR distributions made last year, so this year-over-year improvement in our third quarter coverage is even stronger than it initially appears.

Our nine months distributable cash flow has been $98.1 million, distribution coverage of 0.98 times based on total distributions of $99.9 million paid this year. Our trailing 12-month distribution coverage through the third quarter of ‘15 is 1.02 times. Now I’d like to discuss our third quarter performance compared to the second quarter by segment.

In our Terminalling segment, our third quarter EBITDA was $18.4 million compared to $15.9 million in the second quarter, an increase of $2.5 million. This increase was primarily associated with the fee based portion of our Terminalling segment, which includes our specialty and shore based terminals and the cross refinery.

These fee-based Terminals had cash flow of $16 million compared to $13.7 million in the second quarter. The increase in cash flow from our fee-based terminals was primarily driven by $2.1 million reduction in operating expenses primarily associated with repairs and maintenance.

These third quarter operating expense levels in our Terminalling segment were more normal as we had unusually high maintenance cost in this segment in the second quarter.

Our margin based packaged lubricant business which is also in our Terminalling segment provided cash flow of $2.5 million in the third quarter compared to $2.2 million in the second quarter. Although our sales volumes remain below our forecast, our margins have continued to improve as we are working through our higher cost inventory.

We should continue to see cash flow improvement in this business through an incremental increase in lubricant volume sales and a continued incremental increase in our lubricant sales margins. We’re also rationalizing our fixed cost in our plastics and blending plants and we continue to lower our cost structure in this business.

In our natural gas services segment, our third quarter EBITDA was $14 million compared to $17.2 million in the second quarter. The primary contribution to our natural gas services segment’s cash flow is from Cardinal Gas Storage. Cardinal had EBITDA of $11.2 million in the third quarter compared to $11.1 million in the second quarter.

Cardinal continues to demonstrate consistent cash flow for us as a result of its firm contracting business model. This consistent performance should continue in the fourth quarter.

The decrease in the cash flow from a natural gas services segment was from our NGL margin business as it experienced its normal seasonal decline in our refinery grade butane business and in our wholesale propane business. This seasonal decline was anticipated and forecasted.

However, as a result of our new rail facility at our underground storage location in North Louisiana, we believe we are very well positioned for the fourth quarter and our refinery grade butane business based on our third quarter ending butane inventory volumes and the per gallon curing value of that inventory.

In addition to the cash flow generated in our natural gas services segment, we received a $3.4 million distribution from our West Texas LPG pipeline joint venture in the third quarter of ‘15 compared to $2.3 million distribution in the second quarter.

As you may know, WTLPG raised their tariff rates effective July 1, 2015 and based on current throughput volume and these new tariff rates, we should receive annual distributions from WTLPG of $14 million to $15 million on an annual basis.

Moving to our Sulfur Services segment, our EBITDA was $5.7 million in the third quarter compared to $9.9 million in the second quarter of ‘15. The decline in cash flow was expected due to the seasonal nature of our fertilizer business. Our fertilizer EBITDA was $2.3 million in the third quarter compared to a $6 million in the second quarter.

As we have disclosed previously, the third quarter is always the weakest in our fertilizer business as it is harvesting season for the U.S. farmer. Our sales volume was expectedly down 38% due to the seasonality of the business.

Looking towards the fourth quarter, we expect farmers to begin their winter field programs so fertilizer volume sales should increase when compared to the third quarter. On the refinery byproduct Sulfur side of the business, third quarter EBITDA was $3.3 million compared to $3.9 million in the second quarter of this year.

This decrease in cash flow was due to a 12% reduction in margin per tons sold at the Tampa posted Sulfur price, fell 20% at the end of the third quarter. However, these lower sulfur prices should benefit our fertilizer business going forward through reduced feedstock cost.

In our Marine transportation segment, we had EBITDA of $3.7 million in the third quarter, compared to $4 million in the second quarter. This decline in cash flow was from our offshore side-up of marine transportation business as we had decreased utilization from our one offshore NGL tow that was off charter in the third quarter.

This offshore NGL tow is now in the spot market. Although our Inland Marine business cash flow was flat in the third quarter when compared to the second quarter, both periods were below normal due to decreased utilization and increased repairs and maintenance as a result of dry-docking of certain inland vessels.

There are no scheduled inland dry-dockings in the fourth quarter. So, borrowing any unforeseen operating issues, inland cash flow should significantly increase, and overall Marine cash flow should increase 40% to 50% in the fourth quarter when compared to the third quarter.

Our Partnerships’ unallocated SG&A cost, excluding non-cash unit compensation expense was $4.6 million in the third quarter compared to $4.1 million in the second quarter of 2015. This cost increase was a result of a one-time write-off of unsuccessful project cost of $0.4 million.

We continue to hold a $15 million note receivable due from Martin Energy Trading, an affiliate of our general partner. This investment generated $0.6 million of interest income in each of the first three quarters of ‘15 and should continue at that rate in the fourth quarter of 2015.

We have amended our bank definition of EBITDA to include this interest income as EBITDA. Our maintenance capital expenditures and turnaround cost for the third quarter were $2.4 million and have been $9.4 million for the first nine months. For the year we should have a total of $12 million to $14 million of capitalized maintenance and turnaround cost.

So to summarize, the partnership experienced its normal seasonal trough of quarterly distribution coverage in the third quarter. However, the typical third quarter weakness due to seasonality was more muted than recent history as Cardinal and WTLPG continue to provide us consistent, stable fee-based cash flows each quarter.

As a result of these two acquisitions made in 2014, our partnership now derives over 70% of its cash flow from fee-based contracts helping to dampen seasonal volatility. Now I’d like to turn the call over to Joe McCreery, who will speak on our balance sheet, liquidity, and capital resources..

Thanks Bob. I’ll start with our normal walk through of the debt components of the balance sheet and our bank ratios. I’ll then provide some third quarter ended benchmarks against the cash flow guidance we gave early in 2015. On September 30, 2015, the Partnerships’ balance sheet reflected total long-term funded debt of approximately $876 million.

This funded debt level is before unamortized debt issuance and unamortized issuance premiums as actual funded debt was $884 million. At quarter end our revolving credit facility balance was $500 million and the notional amount of our senior unsecured notes was $384 million.

Thus the Partnership’s total available liquidity under the revolving credit facility on September 30 was $200 million based on our new revolving credit facility commitment amount of $700 million.

During the quarter, the Partnership voluntarily reduced debt amount from $900 million in order to create annual savings of approximately $1 million on unfunded commitment fees.

For the third quarter of 2015 our bank compliant leverage ratios, defined as senior secured indebtedness-to-adjusted EBITDA and total indebtedness-to-adjusted EBITDA were 2.75 times and 4.85 times respectively. Our bank compliant interest coverage ratio, as defined by adjusted EBITDA-to-consolidated interest expense was 5.07 times.

Looking at the balance sheet, total debt-to-total capitalization at September 30 was 67.6%. Our funded debt increased during the quarter as we experienced working capital increases of approximately $22 million associated with the seasonal inventory build-up of butane within our natural gas services segment.

In all at September 30, 2015 the Partnership was in full compliance with all banking covenants financial or otherwise. Additionally, as we do every third quarter, the Partnership completed its annual goodwill impairment testing. We’re pleased to report that we had no goodwill impairments of any kind in any of our segments.

Next, let’s move to capital raises. The Partnership did not raise any debt or equity during the third quarter. Simply put, we elected not to issue any equity under our ATM program into the predominantly weak market conditions that existed during the quarter. Likewise, we did not raise any debt capital.

In fact, as previously mentioned, we elected to reduce significant amount of our revolving credit facility as a cost cutting measure. A note however, that should we need additional bank liquidity, we have an according feature built into our agreement which provides for an up to additional $300 million capacity.

Staying on the debt side of the balance sheet, during the third quarter, we initiated a liabilities management program strategy for the Partnership, an effort to reduce our debt service cost and cost to capital. Accordingly, we were active in purchasing our own senior unsecured notes due 2021 at a discount in the open market.

At opportunistic intervals we purchased approximately $16 million of our own notes which we immediately retired from circulation.

In a leverage neutral transaction, that is a debt-for-debt trade, we immediately save approximately 400 basis points of interest expense because we purchased the notes at a discount, we show gain on our income statement representing a difference between the discount paid and the face amounts of the bond’s purchase.

Should opportunistic market conditions arise, we anticipate continuing to make similar open market purchases in the future. Now let’s discuss our year-to-date nine-month performance compared to the full-year 2015 cash flow guidance provided earlier in the year.

For comparative purposes I’m going to ignore the seasonal implications of our business even as most know and are typically aware that third quarters are weakest based on the timing of our fertilizer and natural gas liquids businesses. Accordingly let’s assume that we should be at 75% of our projected EBITDA for the year at September 30.

Through nine months 2015 EBITDA before SG&A was $148.9 million this is approximately 73.5% of our guidance number for the year. So, in essence after three quarters including our seasonally weakest quarter of the year, we trail our guidance cash flow by just 2%.

Looking at our four segments individually, EBITDA from Terminalling and Storage was $52 million compared to a year-to-date guidance of $54 million. As we mentioned back in the second quarter call, our assets in this segment have performed well, the only exception being Martin Lubricants.

Through nine months, the lubricants business has achieved only 48% of its guided level of EBITDA for the year and a weak market for base oil lubricant products continues to exist. Our natural gas services segment, we were on $55.8 million of EBITDA before SG&A through nine months.

This is approximately 70% of its guided level of cash flow year-to-date. In this segment we note that both, the 2014 acquisitions, the West Texas LPG pipeline and Cardinal Gas Storage have exceeded cash flow guidance to date.

West Texas LPG now benefiting from the improved tariffs that were put in place to being in the third quarter, and Cardinal favorably executing on internet services side of the business. Butane however, is behind year-to-date guidance which would be expected at this point in time given the seasonal timing and structure of that business.

Now that we have commenced delivery in butane volumes back to the refineries, margins are being realized and cash flow is being generated as we expect this time of the year. Those results will appear in our fourth quarter earnings.

One final butane related comment, remember this would be the first sale season with the additional capabilities of our Arcadia rail terminal. As we previously discussed this asset allowed us to source income and volume during the summer storage season and will likewise enable us to sell back into a much broader domestic market this winter.

Moving next to Sulfur Services, this segment continues to outperform, through nine months we have met our EBITDA guidance for the full-year. At September 30, we were on $27.3 million of adjusted EBITDA before SG&A compared to year-to-date guidance of $20.6 million.

We mentioned the strong second quarter performance and prolonged fertilizer application period earlier this year. We are similarly optimistic about the volumes moving during the fourth quarter as winter fill season begins and we deploy product for next spring.

Additionally on the pure sulfur improving side of the business, we’ve also had strong nine-month year-to-date performances, both very close to full-year guidance, even as we experienced decline in margins and a reduced sulfur price per ton during the third quarter.

And finally, Marine transportation, remember for this segment we gave guidance of $22.2 million of EBITDA after deducting the Marine only SG&A at $7.1 million. So comparatively speaking for the first nine months of 2015 after subtracting Marine-only SG&A we have earned $13.8 million of EBITDA compared to year-to-date guidance of $16.7 million.

Our shortfall is primarily attributed to the higher anticipated repair and maintenance cost incurred during the first half of the year and the underutilization of our offshore fleet.

As Bob mentioned, with no scheduled maintenance, we expect to reduce our RM cost and significantly stronger cash flow from both the inland and offshore fleets during the fourth quarter.

We realize we’ve just thrown a lot of numbers at you, so for your convenience, we have again posted a slide on our website reconciling the nine-month actual results by segment and further by operating division to our full-year 2015 EBITDA guidance.

So, what about the fourth quarter and our ability to meet EBITDA and DCF guidance for the year? I’m pleased to say we’re sticking with our original guidance levels as we handicap the fourth quarter at more granular level, we know throughput our Corpus Christi Terminal will likely fall short of the 175,000 barrels a day we originally projected.

And further we know that softness within the Martin Lubricants platform is likely to continue. That said however, we see potential upside in the winter fill volumes from our fertilizer division and the cash flow from the butane division of our natural gas services segment could be very strong across the next two quarters.

The interruptible services revenue at Cardinal Gas Storage continues to look promising. And as we mentioned, we see a stronger quarter ahead for Marine Transportation segment. There are enough reasons for optimism and that’s why we’re staying behind our full-year guidance.

In the end, I think it really does come back to the benefit we are continuing to enjoy having such a diverse nature of cash flows. Mallory that concludes our prepared remarks this morning, we’d now like to open the lines for question and answers..

[Operator Instructions]. Our first question comes from the line of Gabe Moreen with Bank of America Merrill Lynch. Your line is now open..

Hi, good morning everyone..

Good morning, Gabe..

Couple of quick questions from me, just on the debt repurchases, I’m just curious because I don’t think you talked about that at the Analyst Day. I’m curious if you can talk about kind of what level of discount is attractive to you on the notes.

And then also in terms of, I guess, are there limits to how much you could potentially buy back within your credit facilities? And then the third part of the question, sorry, it’s a three-part, is that it looks like the DCF - the gain from the repurchase at the discount is not included in DCF, but I assume the interest expense savings going forward will be included in DCF.

Is that fair?.

Yes, let me take number three first that is correct. And you’re exactly right with respect to initial forecast on the note repurchases. If you recall back in the second quarter we amended our revolving credit facility Gabe to allow for the provision to buy both debt and equity securities on the open market.

And given sort of the choppiness and weakness we’ve seen in the high-yield market, which has been opportunistic. And we’ve seen levels in kind of in the low 90s that were attractive to us. Most of the purchases made during the third quarter were in the kind of the 94 price range. And we thought it appropriate given that capability.

The sub-limit under the basket of the revolving credit facility is $25 million, and so that would be the outside limit of how much we could actually buy back..

Got it.

And so, you’re through ‘16 of that, so you’ve got another nine remaining?.

Correct..

Great. And then larger picture question, just thoughts in terms of an update on growth projects, where particularly the Asphalt Project that I think had been discussed previous quarters.

And any thoughts on, I guess, 2016 growth capital levels in general?.

Yes Gabe, excuse me, this is Wes I’ll take that. With respect to the Asphalt Terminal project that still has not come to the board for approval. We would expect that to happen sometime in the fourth quarter.

I will say that we are looking at a potential sort of alternative financing or I guess, sort of a different mechanism if you will by which we would finance idea. There is a chance that we may be able to do it up at the parent company and do it under a drop-down type structure over the long-term.

So, we’re looking at that in the meantime to see if that’s a more feasible and capitally prudent transaction for the public company as well as the private company. But if it does come to the board, we would expect that to happen sometime in the fourth quarter. The size of that specifically is still in that plus or minus $30 million range.

And then with respect to the broader capital budget, looking ahead into 2016, we’re going through that process right now. So I hesitate to give any real specific guidance other than to say sometime here in the next several weeks, we’ll have a better handle on what that looks like for 2016.

But I would say as we sit here today looking out really into ‘16, we’re talking about something probably less than the $50 million range, given sort of all the different small projects that we may have coming up. But overall I don’t think it’s going to be a large number for 2016..

Got it. Thanks a lot..

Gabe, this is Joe. I think what we’ll do on that is once we get past the internal budget process we’ll come back to you before, certainly before the next earnings call and provide a guidance update on that number..

Thanks Joe..

Yes..

[Operator Instructions]. Our next question comes from the line of TJ Schultz with RBC Capital Markets. Your line is now open..

Hi, just one thing. If you could just kind of expand on the rail terminal. It sounded like there is some near-term benefit that we should expect. I think you mentioned some of the kind of butane volumes and carrying value at the end of the quarter.

But just kind of help me understand what the opportunity is there and how we should see that flow through? Thanks..

Yes, just big picture to understand the business model is we’re gathering really if you will distress normal butane, refiner grade butanes during the summer time. We now have a rail facility in North Louisiana with underground storage area. So our geographic footprint profile has increased significantly.

So we’ve been bringing in volumes from all over the country, a lot of Northeast volumes at very low inventory values being carried. So, now obviously the refiners are demanding that butane in the fourth quarter, in the first quarter.

So, we’ll just turn around and railcars will now be outbound back to refineries, some on the Gulf Coast some in the Midwest. So, it’s all about revenue recognition timing. Obviously the sales are primarily made in the fourth and first quarter and the inventory-build in the second and third quarter.

But we know our position on volume we know our position on price. And there are significant margins that will be realized in the fourth quarter and first quarter..

Okay, thanks..

Thank you. I’m not showing any further questions. I would like to turn the call back to management for any further remarks..

Sure, thank you, Mallory. And just to summarize, we did experience our typical seasonal drop in the third quarter. But as you know our WTLPG and Cardinal acquisitions have allowed us to mute the more extreme nature of it. It’s much more muted now and going forward.

We also believe in the staying power of our refinery facing businesses, even though growth is challenged. And the continued high levels of refinery utilization continue to bode well for MMLP, that’s why we feel very strong in being able to affirm our guidance and that is exactly what we’re doing with this call.

We again, appreciate your patience with the delay in the phone call in the front-end. And we appreciate your continued coverage of us and support of us. Thanks everyone..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day..