Good morning, ladies and gentlemen and welcome to Martin Midstream First Quarter 2019 Earnings Conference Call and Webcast. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Ms. Sharon Taylor, Director of Investor Relations. Please go ahead..

Thank you, Charlie. Good morning, everyone. In the room today we have Ruben Martin, President and Chief Executive Officer; Bob Bondurant, Chief Financial Officer; Scott Southard, Vice President of Commercial Development; Danny Cavin, Director of FP&A, and David Cannon, Director of Financial Reporting..

Good morning, thank you for joining the call today. By the time you've all read this, I’m sure you read the press release announcing the reset of our distribution to $0.25 per quarter or $1 per year, so I will address that first.

As our investors are all aware that Partnership's 2018 results were negatively affected by the speed of the collapse and commodity prices specifically normal butane pricing that occurred from mid-October through December of last year.

That same week, butane pricing environment carried over into the first months of 2019 resulting in a missed guidance in our natural gas services segment for the first quarter. Also in 2018, we dealt with weakness in our fertilizer business due to collapsing margins.

Although margins have improved, the first quarter of 2019 brought raining weather patterns through mid-March that affected our fertilizer and lubricant business as demand from agricultural, timber and construction base customers have been lower than forecast.

While activity began to increase in late in the first quarter and accelerate into the second quarter, it became clear that in order to meet our stated coverage goal, we would no longer wait for clarity around the sale of our gas storage assets and a distribution would need to be reset to achieve greater than 1.3 coverage for 2019 and continued increases going forward.

We also feel in this challenging environment is important to increase our liquidity so we were forced to make the tough but wise decisions to right-size our cash distribution. Rightsizing means that the partnership can focus on the best use of this cash flow.

Rightsizing means greater financial flexibility when we experience headwinds in our margins business, and provides a buffer in the event of further turbulence in commodity prices.

Rightsizing means we could build value over the long-term not just over the next few quarters and rightsizing provide greater security and opportunity for the distribution going forward for our current and future investors..

Okay, thank you, Ruben. Now I’d like to discuss our first quarter performance compared to our first quarter guidance. For the first quarter we had adjusted EBITDA of $30.8 million compared to adjusted guidance of $37.9 million.

The mix in adjusted EBITDA compared to adjusted guidance was primarily on our Sulfur Services segment and our Natural Gas Services segment. Our Sulfur Services segment missed guidance by $3 million of which $2.9 million was in our fertilizer business.

Unfortunately wet weather patterns which began in December in our market area continued throughout the first quarter. These heavy rain patterns have caused demand for fertilizer to be delayed until drier conditions will allow farmers to work in their fields.

During the first quarter we missed our tonnage volume forecast by 24% due to these wet conditions. Now we believe a good portion of these sales will carry over to the second quarter provided excess rainfall ends.

So far in April, we are seeing an increase in tonnage sold related to our original April forecast, so there are early indications of a stronger second quarter.

Our Natural Gas services segment missed forecasts by $2.8 million, as we saw continued weak pricing in the butane market, which negatively impact our margins on the inventory we carried over from the fourth quarter to the first quarter.

As we exit the first quarter, butane sales refineries have essentially ended and we are now gathering excess butane production and moving it to storage.

At current pricing we're storing inventory at lower price levels than what we did a year ago, which should give us the opportunity to return to historical levels of cash flow achieved in this business with previous four years..

Thank you, Bob. On March 31, the partnership's balance sheet reflected both long-term and short-term funded debt as our revolving credit facility was due within 12 months.

Now although this is unusual, this positioning with the tactical maneuver as we determined that the proceeds from the sale of our natural gas storage assets, which is expected to occur prior to second quarter close was an important consideration when determining both the commitment amount and the maturity date of the new facility.

As such, at the end of the first quarter 2019, total funded debt was $785 million, an increase of approximately $127 million, the majority of which is attributable to the acquisition of Martin Transport Inc. on January 1. Long-term funded debt with approximately $378 million and short term funded debt was approximately $407 million.

Our balance sheet funded debt is shown net of unamortized debt issuance cost and unamortized issuance premiums and is increased by finance leased obligations as actual funded debt outstanding was $788 million..

We do have our first question from Selman Akyol from Stifel. Your line is open..

You guys also talked about in the press release active negotiation sales of certain non-core assets and I presume that's beyond cargo, so that was already disclosed.

So can you talk about what other assets you may be looking at?.

Yes. This is Sharon. We’re not going to be able to speak to specific assets but I would like to give an example. We have currently assigned contract to sell a negative cash flowing asset subject to due diligence, which of course makes it immediately accretive. So those are the types of transactions we’re currently exploring..

And then I guess you had talked about sort of a more refinery-centric business model on a go forward basis.

Is there any additional disclosures around that or any thoughts around that?.

No. We don't have any other disclosures around that..

And then in terms of just, I know you made your comments on the transportation and the trucking, some refinery turnarounds I guess impacting that.

Do you see additional turnarounds coming in Q2, understanding is that may have been higher turnaround quarter upcoming, so just wondering if you expect further pressure from that at all?.

The overall system may have turnarounds but the customers were operating with our all up and running and that issue is behind us currently..

Our next question comes from the line of Kyle May from Capital One Securities. Your line is open..

Just wondering, you pointed to several different factors that kind of affected your first quarter results.

As we think about the second quarter, are you comfortable with the guidance that was provided in February or should we think about some of these issues from the first quarter having an effect on the second quarter?.

What we're seeing that the issues we experienced in the first quarter were abating towards the end mid-March and forward, so we expect to see some of the first quarter move into our second quarter. So we view it positively for the second quarter at this time..

And I’ll add additional comment and specifically on the fertilizer refilled confident there and then also as Sharon mentioned, we had - we spread up our maintenance capital item which was partially $2 million that we had in our forecast in Q2 as showed up in Q1, so we believe our maintenance CapEx will be lower in Q2..

And then maybe following up from one of the earlier questions, you already talked about a number of changes to the portfolio, you already did some things last year.

How do you think about maybe the vision for the company going forward and what direction should we think of Martin Midstream?.

Well this is Ruben. As we look we're downsizing the company obviously from several aspects but as we get back closer it's more as we like to say refinery centric from the standpoint of our services and all the things that we're providing the services for are basically related to the refinery type operations.

Now with that said, our fertilizer businesses is separate from that, but we do depend a lot on it and it doesn't have the same drivers as a lot of those same types of businesses.

So, we still have a little bit of a diverse portfolio of servicing refinery with all of their hard to handle products, heated type products, bottom of the barrel and so forth is something that we do best and we’re getting back to that basics that we started with 20 plus years ago.

And so that’s kind of where we are focusing on all the businesses that are round us such as dropping in the trucking business, services that type of businesses, and all those businesses seem to be very good performing well and growing..

Got it, okay that’s helpful. That's all from me. Thank you..

You want to add anything on that Scott so from the standpoint of refinery. We’re looking at lot of other things that will continue to service refineries and service of producers that are tied into the refineries also above our growth CapEx in the future if we can get our costs of capital at the levels we wanted..

We have no question at this time. Presenters please continue..

Thank you, Operator. In closing we believe that the actions we have taken are in the process of taking will allow us to achieve in the near future are stated objectives of reducing leverage, improving our distribution coverage ratio, and providing the means to go back to our long-term growth strategy.

We will now have the ability to allocate capital to the many viable prospects that we have surrounding our existing portfolio of assets and in doing so maximize profitability.

We look forward to a future where Martin transitions back into the company that it has over the course of its history returned over 1 billion in cash distributions to our unitholders. We thank you for your interest and support of our company. Have a nice day..

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. Have wonderful day. You may disconnect..