UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No.: 1-16335

__________________________________

Magellan Midstream Partners, L.P.

(Exact name of registrant as specified in its charter)


Delaware						73-1599053
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

One Williams Center, P.O. Box 22186, Tulsa, Oklahoma 74121-2186

(Address of principal executive offices and zip code)

(918) 574-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units

MMP

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

As of ~~October 29, 2020,~~November 1, 2021, there were ~~223,700,943~~213,445,238 common units outstanding.

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION


ITEM 1.	ITEM 1.		CONSOLIDATED FINANCIAL STATEMENTS		ITEM 1.		CONSOLIDATED FINANCIAL STATEMENTS
						CONSOLIDATED STATEMENTS OF INCOME		4
		CONSOLIDATED STATEMENTS OF INCOME		4		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		5
		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		5		CONSOLIDATED BALANCE SHEETS		6
		CONSOLIDATED BALANCE SHEETS		6		CONSOLIDATED STATEMENTS OF CASH FLOWS		7
		CONSOLIDATED STATEMENTS OF CASH FLOWS		7		CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL		8
		CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL		8		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:				1.	Organization, Description of Business and Basis of Presentation	10
		1.	Organization, Description of Business and Basis of Presentation	10		2.	Discontinued Operations and Assets Held for Sale	12
		2.	Segment Disclosures	12		3.	Segment Disclosures	13
		3.	Revenue from Contracts with Customers	15		4.	Revenue	16
		4.	Investments in Non-Controlled Entities	18		5.	Investments in Non-Controlled Entities	19
		5.	Inventory	20		6.	Inventory	21
		6.	Debt	21		7.	Debt	22
		7.	Leases	22		8.	Leases	23
		8.	Employee Benefit Plans	22		9.	Employee Benefit Plans	23
		9.	Long-Term Incentive Plan	24		10.	Long-Term Incentive Plan	25
		10.	Derivative Financial Instruments	25		11.	Derivative Financial Instruments	26
		11.	Fair Value	28		12.	Fair Value	29
		12.	Commitments and Contingencies	30		13.	Commitments and Contingencies	31
		13.	Related Party Transactions	31		14.	Related Party Transactions	32
		14.	Partners’ Capital and Distributions	31		15.	Partners’ Capital and Distributions	32
		15.	Subsequent Events	33		16.	Subsequent Events	33
ITEM 2.	ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
		Introduction		34		Introduction		34
		Recent Developments		34		Recent Developments		34
		Results of Operations		35		Results of Operations		35
		Distributable Cash Flow		41		Adjusted EBITDA, Distributable Cash Flow and Free Cash Flow		41
		Liquidity and Capital Resources		42		Liquidity and Capital Resources		43
		Off-Balance Sheet Arrangements		43		Off-Balance Sheet Arrangements		44
		Other Items		43		Other Items		44
ITEM 3.	ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	44	ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45
ITEM 4.	ITEM 4.		CONTROLS AND PROCEDURES	45	ITEM 4.		CONTROLS AND PROCEDURES	46
PART II OTHER INFORMATION	PART II OTHER INFORMATION				PART II OTHER INFORMATION
ITEM 1.	ITEM 1.		LEGAL PROCEEDINGS	46	ITEM 1.		LEGAL PROCEEDINGS	47
ITEM 1A.	ITEM 1A.		RISK FACTORS	47	ITEM 1A.		RISK FACTORS	47
ITEM 2.	ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	47	ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	48
ITEM 3.	ITEM 3.		DEFAULTS UPON SENIOR SECURITIES	48	ITEM 3.		DEFAULTS UPON SENIOR SECURITIES	48
ITEM 4.	ITEM 4.		MINE SAFETY DISCLOSURES	48	ITEM 4.		MINE SAFETY DISCLOSURES	48
ITEM 5.	ITEM 5.		OTHER INFORMATION	48	ITEM 5.		OTHER INFORMATION	48
ITEM 6.	ITEM 6.		EXHIBITS	48	ITEM 6.		EXHIBITS	49
INDEX TO EXHIBITS	INDEX TO EXHIBITS			49	INDEX TO EXHIBITS			50
SIGNATURES	SIGNATURES			50	SIGNATURES			51

Forward-Looking Statements

Except for statements of historical fact, all statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may be identified by words like “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “plans,” “potential,” “projected,” “scheduled,” “should,” “will” and other similar expressions. The absence of such words or expressions does not necessarily mean the statements are not forward-looking. Although we believe our forward-looking statements are reasonable, statements made regarding future results are not guarantees of future performance and are subject to numerous assumptions, uncertainties and risks that are difficult to predict, including those described in Part II, Item 1A – Risk Factors of this Quarterly Report on Form 10-Q. Actual outcomes and results may be materially different from the results stated or implied in such forward-looking statements included in this report. You should not put any undue reliance on any forward-looking statement.

The following are among the important factors that could cause future results to differ materially from any expected, projected, forecasted, estimated or budgeted amounts, events or circumstances we have discussed in this report:

•changes in overall demand for refined products, crude oil and liquefied petroleum gases;

•price fluctuations for refined products, crude oil and liquefied petroleum gases and expectations about future prices for these products;

•changes in the production of crude oil in the basins served by our pipelines;

•changes in general economic conditions, ~~interest rates~~including market and ~~price levels;~~macro-economic disruptions resulting from pandemics and related governmental responses;

•changes in the financial condition of our customers, vendors, derivatives counterparties, lenders or joint venture co-owners;

•our ability to secure financing in the credit and capital markets in amounts and on terms that will allow us to execute our business strategy, refinance our existing obligations when due and maintain adequate liquidity;

•development and increasing use of alternative energy sources, including but not limited to natural gas, solar power, wind power, electric and battery-powered engines and geothermal energy, increased use of ~~biofuels~~renewable fuels such as ethanol, biodiesel and renewable diesel, increased conservation or fuel efficiency, increased use of electric vehicles, as well as regulatory developments, technological developments or other trends that could affect demand for our services;

•changes in population in the markets served by our refined products pipeline system and changes in consumer preferences, driving patterns or rates of automobile ownership;

•changes in the product quality, throughput or interruption in service of refined products or crude oil pipelines owned and operated by third parties and connected to our assets;

•changes in demand for transportation orand storage ~~in our~~of refined products orand crude oil ~~segments;~~services we provide;

•changes in supply and demand patterns for our facilities due to geopolitical events, the activities of the Organization of the Petroleum Exporting Countries (“OPEC”) and other non-OPEC oil producing countries with large production capacity, changes in U.S. trade policies or in laws governing the importing and exporting of petroleum ~~products, technological developments or other factors;~~products;

•our ability to manage interest rate and commodity price exposures;

•changes in our tariff rates or other terms of service ~~implemented~~required by the Federal Energy Regulatory Commission or state regulatory agencies;

•shut-downs or cutbacks at refineries, oil ~~wells,~~fields, petrochemical plants or other customers or businesses that use or supply our services;

•the effect of weather patterns and other natural phenomena, including climate change, on our operations and demand for our services;

•an increase in the competition our operations encounter, including the effects of capacity over-build in the areas where we operate;

•the occurrence of natural disasters, epidemics, terrorism, sabotage, protests or activism, operational hazards, equipment failures, system failures or unforeseen interruptions;

•~~changes in general economic conditions, including market and macro-economic disruptions resulting from the COVID-19 pandemic and related governmental responses;~~

•our ability to obtain adequate levels of insurance at a reasonable cost, and the potential for losses to exceed the insurance coverage we do obtain;

•the treatment of us as a corporation for federal or state income tax purposes or if we become subject to significant forms of other taxation or more aggressive ~~enforcement~~interpretation or increased assessments under existing forms of taxation;

•our ability to identify expansion projects, accretive acquisitions and joint ventures with acceptable expected returns orand to complete ~~identified expansion~~these projects on time and at projected costs;

•our ability to ~~make and integrate accretive acquisitions and joint ventures and~~ successfully execute our ~~business strategy;~~capital allocation priorities including unit repurchases with acceptable expected returns;

•the effect of changes in accounting policies and uncertainty of estimates, including accruals and costs of environmental remediation;

•our ability to cooperate with and rely on our joint venture co-owners;

•actions by rating agencies concerning our credit ratings;

•our ability to timely obtain and maintain all necessary approvals, consents and permits required to operate our existing assets and to construct, acquire and operate any new or modified assets;

•our ability to promptly obtain all necessary services, materials, labor, supplies and rights-of-way required for maintenance and operation of our current assets and construction of our growth projects, without significant delays, disputes or cost overruns;

•risks inherent in the use and security of information systems in our business and implementation of new software and hardware;

•changes in laws and regulations or the interpretations of such laws that govern our gas liquids blending activities ~~including the potential applicability of the Carmack Amendment, which broadly covers claims for damage or loss incurred to goods transported by a carrier in interstate commerce, to such activities,~~ or changes regarding product quality specifications or renewable fuel obligations that impact our ability to produce gasoline volumes through our gas liquids blending activities or that require significant capital outlays for compliance;

•changes in laws and regulations to which we or our customers are or could become subject, including tax withholding requirements, safety, security, employment, hydraulic fracturing, derivatives transactions, trade and environmental, ~~laws and regulations,~~ including laws and regulations designed to address climate change;

•the cost and effects of legal and administrative claims and proceedings against us, our subsidiaries or our joint ventures;

•the amount of our indebtedness, which could make us vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds, place us at competitive disadvantages compared to our competitors that have less debt or have other adverse consequences;

•~~the effect of changes in accounting policies;~~

•the potential that our internal controls may not be adequate, weaknesses may be discovered or remediation of any identified weaknesses may not be successful;

•the ability and intent of our customers, vendors, lenders, joint venture co-owners or other third parties to perform their contractual obligations to us;

•petroleum product supply disruptions;

•global and domestic repercussions from terrorist activities, including cyberattacks, and the government’s response thereto; and

•other factors and uncertainties inherent in the transportation, storage and distribution of petroleum products and the operation, acquisition and construction of assets related to such activities.

This list of important factors is not exhaustive. The forward-looking statements in this Quarterly Report speak only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise, unless required by law.

PART I

FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per unit amounts)

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2020 2019 2020
Transportation and terminals revenue $ 506,432 $ 473,531 $ 1,473,629 $ 1,343,741
Product sales revenue 144,807 119,445 497,791 481,842
Affiliate management fee revenue 5,357 5,288 15,810 15,895
Total revenue 656,596 598,264 1,987,230 1,841,478
Costs and expenses:
Operating 169,387 161,982 484,341 457,597
Cost of product sales 108,757 96,119 430,727 395,864
Depreciation, amortization and impairment 56,627 71,822 181,028 193,896
General and administrative 51,156 38,016 149,534 117,092
Total costs and expenses 385,927 367,939 1,245,630 1,164,449
Other operating income (expense) (379) (2,863) 1,538 539
Earnings of non-controlled entities 50,189 39,135 122,229 116,484
Operating profit 320,479 266,597 865,367 794,052
Interest expense 53,750 54,212 165,322 179,371
Interest capitalized (5,831) (1,272) (14,419) (10,451)
Interest income (648) (260) (2,646) (903)
Gain on disposition of assets (2,532) 0 (28,966) (12,887)
Other (income) expense 2,602 1,455 9,222 3,708
Income before provision for income taxes 273,138 212,462 736,854 635,214
Provision for income taxes 100 824 2,450 2,169
Net income $ 273,038 $ 211,638 $ 734,404 $ 633,045
Basic net income per common unit $ 1.19 $ 0.94 $ 3.21 $ 2.80
Diluted net income per common unit $ 1.19 $ 0.94 $ 3.21 $ 2.80
Weighted average number of common units outstanding used for basic net income per unit calculation 228,720 225,222 228,642 226,045
Weighted average number of common units outstanding used for diluted net income per unit calculation 228,754 225,222 228,667 226,045


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2021		2020		2021
Transportation and terminals revenue	$	459,940	$	464,910	$	1,305,217	$	1,332,271
Product sales revenue	111,220		168,815		443,127		575,575
Affiliate management fee revenue	5,288		5,329		15,895		15,925
Total revenue	576,448		639,054		1,764,239		1,923,771
Costs and expenses:
Operating	157,716		146,556		446,102		422,907
Cost of product sales	89,375		145,855		364,916		488,614
Depreciation, amortization and impairment	68,439		61,401		183,226		168,304
General and administrative	37,497		46,632		115,480		148,671
Total costs and expenses	353,027		400,444		1,109,724		1,228,496
Other operating income (expense)	(2,863)		2,591		539		4,033
Earnings of non-controlled entities	39,135		36,466		116,484		116,107
Operating profit	259,693		277,667		771,538		815,415
Interest expense	54,212		57,016		179,371		170,976
Interest capitalized	(1,272)		(315)		(10,451)		(1,240)
Interest income	(260)		(138)		(903)		(439)

Gain on disposition of assets	—		(3,231)		(12,887)		(72,933)
Other (income) expense	1,455		2,224		3,708		18,111
Income from continuing operations before provision for income taxes	205,558		222,111		612,700		700,940
Provision for income taxes	824		821		2,169		2,044
Income from continuing operations	204,734		221,290		610,531		698,896
Income from discontinued operations	6,904		15,309		22,514		39,438
Net income	$	211,638	$	236,599	$	633,045	$	738,334




Basic and diluted income from continuing operations per common unit	$	0.91	$	1.01	$	2.70	$	3.15
Basic and diluted income from discontinued operations per common unit	0.03		0.07		0.10		0.18
Basic and diluted net income per common unit	$	0.94	$	1.08	$	2.80	$	3.33
Weighted average number of common units outstanding used for basic net income per unit calculation	225,222		218,637		226,045		221,637
Weighted average number of common units outstanding used for diluted net income per unit calculation	225,222		218,788		226,045		221,730

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2020		2019		2020			2020		2021		2020		2021
Net income	Net income	$	273,038	$	211,638	$	734,404	$	633,045	Net income	$	211,638	$	236,599	$	633,045	$	738,334
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Derivative activity:	Derivative activity:									Derivative activity:
Net loss on cash flow hedges	Net loss on cash flow hedges	(14,181)		0		(25,216)		(10,444)		Net loss on cash flow hedges	—		—		(10,444)		—
Reclassification of net loss on cash flow hedges to income	Reclassification of net loss on cash flow hedges to income	699		896		1,927		2,552		Reclassification of net loss on cash flow hedges to income	896		887		2,552		2,662
Changes in employee benefit plan assets and benefit obligations recognized in other comprehensive income:	Changes in employee benefit plan assets and benefit obligations recognized in other comprehensive income:									Changes in employee benefit plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial loss		0		0		(10,913)		(333)
Net actuarial gain (loss)										Net actuarial gain (loss)	—		—		(333)		10,801
Curtailment gain	Curtailment gain	0		0		0		1,703		Curtailment gain	—		—		1,703		—

Recognition of prior service credit amortization in income	Recognition of prior service credit amortization in income	(46)		(46)		(136)		(136)		Recognition of prior service credit amortization in income	(46)		(46)		(136)		(136)
Recognition of actuarial loss amortization in income	Recognition of actuarial loss amortization in income	1,412		1,473		4,385		4,462		Recognition of actuarial loss amortization in income	1,473		1,433		4,462		4,536
Recognition of settlement cost in income	Recognition of settlement cost in income	439		0		2,499		969		Recognition of settlement cost in income	—		1,300		969		2,751
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(11,677)		2,323		(27,454)		(1,227)		Total other comprehensive income (loss)	2,323		3,574		(1,227)		20,614
Comprehensive income	Comprehensive income	$	261,361	$	213,961	$	706,950	$	631,818	Comprehensive income	$	213,961	$	240,173	$	631,818	$	758,948

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands)

December 31,
2019 September 30,
2020
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 58,030 $ 8,541
Trade accounts receivable 125,440 109,051
Other accounts receivable 23,887 27,735
Inventory 184,399 129,033
Commodity derivatives deposits 27,415 14,031
Reimbursable costs 7,878 17,065
Other current assets 32,359 35,787
Total current assets 459,408 341,243
Property, plant and equipment 8,431,227 8,319,400
Less: accumulated depreciation 2,027,193 2,036,351
Net property, plant and equipment 6,404,034 6,283,049
Investments in non-controlled entities 1,240,551 1,211,079
Right-of-use asset, operating leases 171,868 152,082
Long-term receivables 20,782 21,850
Goodwill 53,260 52,830
Other intangibles (less accumulated amortization of $6,255 and $8,575 at December 31, 2019 and September 30, 2020, respectively) 47,898 45,578
Restricted cash 26,569 11,792
Other noncurrent assets 13,359 20,693
Total assets $ 8,437,729 $ 8,140,196
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable $ 150,992 $ 124,612
Accrued payroll and benefits 75,511 40,285
Accrued interest payable 64,276 49,501
Accrued taxes other than income 66,007 65,283
Deferred revenue 109,654 92,227
Accrued product liabilities 90,788 79,388
Commodity derivatives contracts, net 10,222 2,888
Current portion of operating lease liability 26,221 27,177
Other current liabilities 73,205 50,258
Total current liabilities 666,876 531,619
Long-term operating lease liability 144,023 121,764
Long-term debt, net 4,706,075 4,900,311
Long-term pension and benefits 145,992 142,154
Other noncurrent liabilities 59,735 55,904
Commitments and contingencies
Partners’ capital:
Common unitholders (228,403 units and 223,701 units outstanding at December 31, 2019 and September 30, 2020, respectively) 2,877,105 2,551,748
Accumulated other comprehensive loss (162,077) (163,304)
Total partners’ capital 2,715,028 2,388,444
Total liabilities and partners’ capital $ 8,437,729 $ 8,140,196


	December 31, 2020		September 30, 2021
ASSETS			(Unaudited)
Current assets:
Cash and cash equivalents	$	13,036	$	12,593

Trade accounts receivable	103,568		134,281
Other accounts receivable	37,075		33,735
Inventory	158,204		222,567
Commodity derivatives contracts, net	—		4,469
Commodity derivatives deposits	34,165		47,609

Assets held for sale	15,059		299,304
Other current assets	44,086		44,738
Total current assets	405,193		799,296
Property, plant and equipment	7,943,760		8,021,353
Less: accumulated depreciation	1,956,926		2,088,990
Net property, plant and equipment	5,986,834		5,932,363
Investments in non-controlled entities	1,213,856		993,290
Right-of-use asset, operating leases	166,078		180,470
Long-term receivables	22,755		22,768
Goodwill	50,121		50,121
Other intangibles (less accumulated amortization of $9,228 and $11,186 at December 31, 2020 and September 30, 2021, respectively)	44,925		42,967
Restricted cash	9,411		7,847
Noncurrent assets held for sale	277,566		—
Other noncurrent assets	20,243		17,543
Total assets	$	8,196,982	$	8,046,665

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	97,988	$	129,088
Accrued payroll and benefits	52,055		63,321
Accrued interest payable	58,998		49,992
Accrued taxes other than income	67,710		68,740

Deferred revenue	98,635		101,800
Accrued product liabilities	75,180		117,126
Commodity derivatives contracts, net	21,621		22,350

Current portion of operating lease liability	27,533		25,618

Liabilities held for sale	8,423		15,516
Other current liabilities	50,431		63,741
Total current liabilities	558,574		657,292
Long-term debt, net	4,978,691		5,103,226
Long-term operating lease liability	137,483		151,650
Long-term pension and benefits	163,776		151,922
Long-term liabilities held for sale	1,508		—
Other noncurrent liabilities	53,144		68,622

Commitments and contingencies	0		0

Partners’ capital:
Common unitholders (223,120 units and 213,445 units outstanding at December 31, 2020 and September 30, 2021, respectively)	2,486,996		2,076,529
Accumulated other comprehensive loss	(183,190)		(162,576)
Total partners’ capital	2,303,806		1,913,953


Total liabilities and partners’ capital	$	8,196,982	$	8,046,665

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Nine Months Ended
September 30,
2019 2020
Operating Activities:
Net income $ 734,404 $ 633,045
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairment expense 181,028 193,896
Gain on sale and retirement of assets (29,227) (13,330)
Earnings of non-controlled entities (122,229) (116,484)
Distributions from operations of non-controlled entities 138,140 152,645
Equity-based incentive compensation expense 22,577 5,580
Settlement gain, amortization of prior service credit and actuarial loss 6,748 3,953
Debt prepayment costs 8,270 12,893
Changes in operating assets and liabilities:
Trade accounts receivable and other accounts receivable (24,954) 8,253
Inventory (20,217) 54,127
Accounts payable 29,014 9,040
Accrued payroll and benefits (13,599) (35,226)
Accrued interest payable (15,060) (14,775)
Accrued taxes other than income 10,282 1,101
Accrued product liabilities 33,402 (11,400)
Deferred revenue (13,233) (17,427)
Other current and noncurrent assets and liabilities (2,749) (25,786)
Net cash provided by operating activities 922,597 840,105
Investing Activities:
Additions to property, plant and equipment, net(1)
(718,605) (371,170)
Proceeds from sale and disposition of assets 65,574 334,583
Investments in non-controlled entities (158,145) (73,678)
Distributions from returns of investments in non-controlled entities 7,500 0
Deposits received from undivided joint interest third party 68,928 0
Net cash used by investing activities (734,748) (110,265)
Financing Activities:
Distributions paid (688,635) (697,264)
Net commercial paper borrowings 0 248,000
Borrowings under long-term notes 996,405 499,400
Payments on long-term notes (550,000) (550,000)
Debt placement costs (12,012) (4,255)
Net payment on financial derivatives (33,342) (10,444)
Payments associated with settlement of equity-based incentive compensation (9,764) (14,700)
Debt prepayment costs (8,270) (12,893)
Repurchases of common units 0 (251,950)
Net cash used by financing activities (305,618) (794,106)
Change in cash, cash equivalents and restricted cash (117,769) (64,266)
Cash, cash equivalents and restricted cash at beginning of period 309,261 84,599
Cash, cash equivalents and restricted cash at end of period $ 191,492 $ 20,333
Supplemental non-cash investing activities:
(1) Additions to property, plant and equipment
$ (775,109) $ (317,680)
Changes in accounts payable and other current liabilities related to capital expenditures 56,504 (53,490)
Additions to property, plant and equipment, net $ (718,605) $ (371,170)


	Nine Months Ended
	September 30,
	2020		2021
Operating Activities:
Net income	$	633,045	$	738,334
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations	(22,514)		(39,438)
Depreciation, amortization and impairment expense	183,226		168,304
Gain on disposition of assets	(13,330)		(72,933)
Earnings of non-controlled entities	(116,484)		(116,107)
Distributions from operations of non-controlled entities	152,645		140,616
Equity-based incentive compensation expense	5,580		15,686
Settlement cost, amortization of prior service credit and actuarial loss	3,953		7,151


Debt extinguishment costs	12,893		—
Changes in operating assets and liabilities:

Trade accounts receivable and other accounts receivable	8,954		(24,245)
Inventory	49,802		(64,363)


Accounts payable	9,056		23,405
Accrued payroll and benefits	(34,239)		11,266
Accrued interest payable	(14,775)		(9,006)

Accrued product liabilities	(8,352)		41,946
Deferred revenue	(17,342)		3,165


Other current and noncurrent assets and liabilities	(23,523)		17,206
Net cash provided by operating activities of continuing operations	808,595		840,987
Net cash provided by operating activities of discontinued operations	31,510		38,090
Net cash provided by operating activities	840,105		879,077
Investing Activities:
Additions to property, plant and equipment, net(1)	(357,093)		(106,458)

Proceeds from sale and disposition of assets	334,583		271,964



Investments in non-controlled entities	(73,678)		(5,616)



Net cash provided (used) by investing activities of continuing operations	(96,188)		159,890
Net cash provided (used) by investing activities of discontinued operations	(14,077)		254
Net cash provided (used) by investing activities	(110,265)		160,144
Financing Activities:
Distributions paid	(697,264)		(685,018)
Repurchases of common units	(251,950)		(473,059)
Net commercial paper borrowings	248,000		123,000

Borrowings under long-term notes	499,400		—
Payments on notes	(550,000)		—
Debt placement costs	(4,255)		—
Net payment on financial derivatives	(10,444)		—

Payments associated with settlement of equity-based incentive compensation	(14,700)		(6,151)
Debt extinguishment costs	(12,893)		—

Net cash used by financing activities	(794,106)		(1,041,228)
Change in cash, cash equivalents and restricted cash	(64,266)		(2,007)
Cash, cash equivalents and restricted cash at beginning of period	84,599		22,447
Cash, cash equivalents and restricted cash at end of period	$	20,333	$	20,440

Supplemental non-cash investing activities:



(1) Additions to property, plant and equipment	$	(304,321)	$	(110,505)
Changes in accounts payable and other current liabilities related to capital expenditures	(52,772)		4,047
Additions to property, plant and equipment, net	$	(357,093)	$	(106,458)

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF PARTNERS’ CAPITAL

(Unaudited, in thousands)


		Common Unitholders		Accumulated Other Comprehensive Loss			Total Partners’ Capital
Balance, July 1, 2019		$	2,774,047		$	(136,268)	$	2,637,779
Comprehensive income:
Net income		273,038			—		273,038
Total other comprehensive loss		—			(11,677)		(11,677)
Total comprehensive income (loss)		273,038			(11,677)		261,361
Distributions		(231,258)			—		(231,258)
Equity-based incentive compensation expense		6,773			—		6,773

Other		(199)			—		(199)
Three Months Ended September 30, 2019		$	2,822,401		$	(147,945)	$	2,674,456
										Common Unitholders		Accumulated Other Comprehensive Loss			Total Partners’ Capital
Balance, July 1, 2020	Balance, July 1, 2020	$	2,620,365		$	(165,627)	$	2,454,738	Balance, July 1, 2020	$	2,620,365		$	(165,627)	$	2,454,738
Comprehensive income:	Comprehensive income:								Comprehensive income:
Net income	Net income	211,638			—		211,638		Net income	211,638			—		211,638
Total other comprehensive income	Total other comprehensive income	—			2,323		2,323		Total other comprehensive income	—			2,323		2,323
Total comprehensive income	Total comprehensive income	211,638			2,323		213,961		Total comprehensive income	211,638			2,323		213,961
Distributions	Distributions	(231,245)			—		(231,245)		Distributions	(231,245)			—		(231,245)
Equity-based incentive compensation expense	Equity-based incentive compensation expense	1,169			—		1,169		Equity-based incentive compensation expense	1,169			—		1,169
Repurchases of common units	Repurchases of common units	(49,968)			—		(49,968)		Repurchases of common units	(49,968)			—		(49,968)

Other	Other	(211)			—		(211)		Other	(211)			—		(211)
Three Months Ended September 30, 2020	Three Months Ended September 30, 2020	$	2,551,748		$	(163,304)	$	2,388,444	Three Months Ended September 30, 2020	$	2,551,748		$	(163,304)	$	2,388,444

Balance, July 1, 2021									Balance, July 1, 2021	$	2,451,939		$	(166,150)	$	2,285,789
Comprehensive income:									Comprehensive income:
Net income									Net income	236,599			—		236,599
Total other comprehensive income									Total other comprehensive income	—			3,574		3,574
Total comprehensive income									Total comprehensive income	236,599			3,574		240,173
Distributions									Distributions	(226,633)			—		(226,633)
Equity-based incentive compensation expense									Equity-based incentive compensation expense	5,626			—		5,626
Repurchases of common units									Repurchases of common units	(390,735)			—		(390,735)

Other									Other	(267)			—		(267)
Three Months Ended September 30, 2021									Three Months Ended September 30, 2021	$	2,076,529		$	(162,576)	$	1,913,953

MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL (Continued)
(Unaudited, in thousands)

Common Unitholders Accumulated Other Comprehensive Loss Total Partners’ Capital
Balance, January 1, 2019 $ 2,763,925 $ (120,491) $ 2,643,434
Comprehensive income:
Net income 734,404 — 734,404
Total other comprehensive loss — (27,454) (27,454)
Total comprehensive income (loss) 734,404 (27,454) 706,950
Distributions (688,635) — (688,635)
Equity-based incentive compensation expense 22,577 — 22,577
Issuance of limited partner units in settlement of equity-based incentive plan awards 480 — 480
Payments associated with settlement of equity-based incentive compensation (9,764) — (9,764)
Other (586) — (586)
Nine Months Ended September 30, 2019 $ 2,822,401 $ (147,945) $ 2,674,456
Balance, January 1, 2020 $ 2,877,105 $ (162,077) $ 2,715,028
Comprehensive income:
Net income 633,045 — 633,045
Total other comprehensive loss — (1,227) (1,227)
Total comprehensive income (loss) 633,045 (1,227) 631,818
Distributions (697,264) — (697,264)
Equity-based incentive compensation expense 5,580 — 5,580
Repurchases of common units (251,950) — (251,950)
Issuance of limited partner units in settlement of equity-based incentive plan awards 600 — 600
Payments associated with settlement of equity-based incentive compensation (14,700) — (14,700)
Other (668) — (668)
Nine Months Ended September 30, 2020 $ 2,551,748 $ (163,304) $ 2,388,444



MAGELLAN MIDSTREAM PARTNERS, L.P. CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (Continued) (Unaudited, in thousands)

	Common Unitholders		Accumulated Other Comprehensive Loss			Total Partners’ Capital
Balance, January 1, 2020	$	2,877,105		$	(162,077)	$	2,715,028
Comprehensive income:
Net income	633,045			—		633,045
Total other comprehensive loss	—			(1,227)		(1,227)
Total comprehensive income (loss)	633,045			(1,227)		631,818
Distributions	(697,264)			—		(697,264)
Equity-based incentive compensation expense	5,580			—		5,580
Repurchases of common units	(251,950)			—		(251,950)
Issuance of common units in settlement of equity-based incentive plan awards	600			—		600
Payments associated with settlement of equity-based incentive compensation	(14,700)			—		(14,700)

Other	(668)			—		(668)
Nine Months Ended September 30, 2020	$	2,551,748		$	(163,304)	$	2,388,444

Balance, January 1, 2021	$	2,486,996		$	(183,190)	$	2,303,806
Comprehensive income:
Net income	738,334			—		738,334
Total other comprehensive income	—			20,614		20,614
Total comprehensive income	738,334			20,614		758,948
Distributions	(685,018)			—		(685,018)
Equity-based incentive compensation expense	15,686			—		15,686
Repurchases of common units	(473,059)			—		(473,059)
Issuance of common units in settlement of equity-based incentive plan awards	520			—		520
Payments associated with settlement of equity-based incentive compensation	(6,151)			—		(6,151)
Other	(779)			—		(779)
Nine Months Ended September 30, 2021	$	2,076,529		$	(162,576)	$	1,913,953

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Organization, Description of Business and Basis of Presentation

Organization

Unless indicated otherwise, the terms “our,” “we,” “us” and similar language refer to Magellan Midstream Partners, L.P. together with its subsidiaries. Magellan Midstream Partners, L.P. is a Delaware limited partnership, and its common units are traded on the New York Stock Exchange under the ticker symbol “MMP.” Magellan GP, LLC, a wholly-owned Delaware limited liability company, serves as its general partner.

During first quarter 2020, we completed a reorganization of our reportable segments. This reorganization was effected to reflect changes in the management of our business in conjunction with the sale of 3 of our marine terminals. Following this sale, 2 of our remaining marine terminals were combined with our refined products segment and 1 terminal was combined with our crude oil segment based on the predominant types of product stored at the facilities. Accordingly, we have restated our segment disclosures for all previous periods included in this report.

Description of Business

On March 20, 2020, we sold 3 marine terminals to a subsidiary of Buckeye Partners, L.P. (“Buckeye”) for $251.8 million, net of working capital adjustments. These terminals are located in New Haven, Connecticut, Wilmington, Delaware and Marrero, Louisiana. We recognized a $6.2 million impairment loss related to the sale on our consolidated statements of income.

We are principally engaged in the transportation, storage and distribution of refined petroleum products and crude oil. As of September 30, ~~2020,~~2021, our asset portfolio, excluding assets associated with discontinued operations, consisted of:

•our refined products segment, comprised of our approximately 9,800-mile refined petroleum products pipeline system with 54 connected terminals ~~as well as 25 independent terminals not connected to our pipeline system~~ and 2 marine storage terminals (1 of which is owned through a joint venture); and

•our crude oil segment, comprised of approximately 2,200 miles of crude oil pipelines, a condensate splitter and 37 million barrels of aggregate storage capacity, of which approximately 2527 million barrels are used for contract storage. Approximately 1,000 miles of these pipelines, the condensate splitter and 30 million barrels of this storage capacity (including 2224 million barrels used for contract storage) are wholly-owned, with the remainder owned through joint ventures.

~~Terminology common~~The following terms are commonly used in our industry ~~includes the following terms, which~~to describe products that we transport, store, ~~and~~ distribute or otherwise handle through our petroleum pipelines and terminals:

•refined products are the output from crude oil refineries that are primarily used as fuels by consumers. Refined products include gasoline, diesel fuel, aviation fuel, kerosene and heating oil. Diesel fuel, kerosene and heating oil are also referred to as distillates;

•transmix is a mixture ofthat forms when different refined products ~~that forms when~~are transported in pipelines. Transmix is fractionated and blended into usable refined products;

•liquefied petroleum gases, or LPGs, are liquids produced as by-products of the crude oil refining process and in connection with natural gas production. LPGs include butane and propane;

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

•blendstocks are products blended with refined products to change or enhance their characteristics such as increasing a gasoline’s octane or oxygen content. Blendstocks include alkylates, oxygenates and natural gasoline;

•~~heavy oils and feedstocks~~ ~~are products used as burner fuels or feedstocks for further processing by refineries and petrochemical facilities. Heavy oils and feedstocks include No. 6 fuel oil and vacuum gas oil;~~

•crude oil, which includes condensate, is a naturally occurring unrefined petroleum product recovered from underground that is used as feedstock by refineries, splitters and petrochemical facilities; and

•~~biofuels~~renewable fuels, such as ethanol, biodiesel and ~~biodiesel,~~renewable diesel, are fuels derived from living materials and typically blended with other refined products as required by government mandates.

We use the term petroleum products to describe any, or a combination, of the above-noted products.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basis of Presentation

In the opinion of management, our accompanying consolidated financial statements which are unaudited, except for the consolidated balance sheet as of December 31, ~~2019,~~2020, which is derived from our audited financial statements, include all normal and recurring adjustments necessary to present fairly our financial position as of September 30, ~~2020,~~2021, the results of operations for the three and nine months ended September 30, ~~2019~~2020 and ~~2020~~2021 and cash flows for the nine months ended September 30, ~~2019~~2020 and ~~2020.~~2021. The results of operations for the nine months ended September 30, ~~2020~~2021 are not necessarily indicative of the results to be expected for the full year ending December 31, ~~2020~~2021 for several reasons. Profits from our gas liquids blending activities are realized largely during the first and fourth quarters of each year. Additionally, gasoline demand, which drives transportation volumes and revenues on our refined products pipeline system, generally trends higher during the summer driving months. Further, the volatility of commodity prices impacts the profits from our commodity activities and the volume of petroleum products we transport on our pipelines. Finally, we expect the impact of COVID-19 on demand for petroleum products and the decline in commodity prices to continue to affect our results of operations in the remaining quarter of 2020, resulting in decreased transportation and terminalling revenues and reduced profits from our gas liquids blending activities.

Pursuant to the rules and regulations of the Securities and Exchange Commission, the financial statements in

this report have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. for interim financial information. Accordingly, they do not include all of the information and ~~notes normally included with~~footnotes required by GAAP for complete financial ~~statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).~~statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our ~~Form 8-K filed with the Securities and Exchange Commission on May 4, 2020, which reflects changes in our reporting segments since the filing of our~~ Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Discontinued Operations

In June 2021, we entered into an agreement to sell our independent terminals network comprised of 26 refined petroleum products terminals with approximately 6000000 barrels of storage located primarily in the southeastern United States. The sale is expected to close upon the receipt of required regulatory approvals. The related results of operations, financial position and cash flows have been classified as discontinued operations for all periods presented. See Note 2 - Discontinued Operations and Assets Held for Sale for further details.

Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to continuing operations.

Reclassifications

~~Prior~~Certain prior period amounts ~~related to intrastate crude oil volumes shipped by our marketing affiliate~~ have been reclassified ~~from product sales revenue to transportation revenue~~ to conform with the current period’s ~~presentation.~~presentation, including amounts related to our discontinued operations.

Use of Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities that exist at the date of our consolidated financial statements, as well as their impact on the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~on the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.~~

New Accounting Pronouncements

~~In June 2016,~~We evaluate Accounting Standards Updates issued by the Financial Accounting Standards Board ~~issued Accounting Standards Update (“ASU”) 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326). The~~on an ongoing basis. There are no new ~~guidance is effective for reporting periods beginning after December 15, 2019. The standard replaces the incurred loss impairment methodology under current GAAP with a methodology~~accounting pronouncements that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivables, loans and other financial instruments. The standard requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We adopted the new guidance as of January 1, 2020 using the modified retrospective approach related to our accounts receivables and contract assets, resulting in no cumulative adjustment to retained earnings. The adoption of this guidance did notwe anticipate will have a material impact on our financial statements.

2.Discontinued Operations and Assets Held for Sale

On June 10, 2021, we announced an agreement to sell our independent terminals network comprised of 26 refined petroleum products terminals with approximately 6 million barrels of storage located primarily in the southeastern U.S. to Buckeye Partners, L.P. (“Buckeye”) for $435 million. The sale is expected to close upon the receipt of required regulatory approvals. The related results of operations, which were previously included in our refined products segment, have been classified as discontinued operations.

Summarized Results of Discontinued Operations

The following table provides the summarized results that have been reclassified from continuing operations to discontinued operations on the consolidated statements of income ~~for the three and nine month periods ended September 30, 2020.~~ (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2021		2020		2021
Transportation and terminals revenue	$	13,591	$	13,119	$	38,524	$	39,946
Product sales revenue	8,225		14,550		38,715		59,141
Total revenue	21,816		27,669		77,239		99,087
Costs and expenses:
Operating	4,266		2,814		11,495		10,070
Cost of product sales	6,744		8,846		30,948		40,620
Depreciation, amortization and impairment	3,383		57		10,670		7,059
General and administrative	519		643		1,612		1,900
Total costs and expenses	14,912		12,360		54,725		59,649


Income from discontinued operations	$	6,904	$	15,309	$	22,514	$	39,438

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Summarized Assets and Liabilities of Discontinued Operations

The following table provides the summarized assets and liabilities classified as held for sale on the consolidated balance sheets (in thousands):


	December 31, 2020		September 30, 2021
Assets:
Trade accounts receivable	$	5,568	$	7,013
Inventory	9,185		12,641

Net property, plant and equipment	274,857		269,468
Goodwill	2,709		2,709
Other assets	306		7,473
Total assets classified as held for sale	$	292,625	$	299,304

Liabilities:
Accounts payable	$	2,034	$	4,087
Accrued product liabilities	3,986		7,123
Other liabilities	3,911		4,306
Total liabilities classified as held for sale	$	9,931	$	15,516

3.Segment Disclosures

Our reportable segments are strategic business units that offer different products and services. Our segments are managed separately asbecause each segment requires different marketing strategies and business knowledge. Management evaluates performance based on segment operating margin, which includes revenue from affiliates and third-party customers, operating ~~expenses,~~expense, cost of product sales, other operating (income) expense and earnings of non-controlled entities.

We believe that investors benefit from having access to the same financial measures used by management. Operating margin, which is presented in the following tables, is an important measure used by management to evaluate the economic performance of our core operations. Operating margin is not a GAAP measure, but the components of operating margin are computed using amounts that are determined in accordance with GAAP. A reconciliation of operating margin to operating profit, which is ~~its~~the nearest comparable GAAP financial measure, is included in the tables below (presented in thousands). Operating profit includes depreciation, amortization and impairment expense and general and administrative (“G&A”) expense that management does not consider when evaluating the core profitability of our separate operating segments.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

Three Months Ended September 30, 2019
Refined Products Crude Oil Intersegment
Eliminations Total
Transportation and terminals revenue $ 352,611 $ 155,377 $ (1,556) $ 506,432
Product sales revenue 136,464 8,343 0 144,807
Affiliate management fee revenue 1,764 3,593 0 5,357
Total revenue 490,839 167,313 (1,556) 656,596
Operating expenses 127,328 44,961 (2,902) 169,387
Cost of product sales 100,416 8,341 0 108,757
Other operating (income) expense (3,249) 3,628 0 379
Earnings of non-controlled entities (4,142) (46,047) 0 (50,189)
Operating margin 270,486 156,430 1,346 428,262
Depreciation, amortization and impairment expense 39,660 15,621 1,346 56,627
G&A expense 36,806 14,350 0 51,156
Operating profit $ 194,020 $ 126,459 $ 0 $ 320,479

Three Months Ended September 30, 2020
Refined Products Crude Oil Intersegment
Eliminations Total
Transportation and terminals revenue $ 320,809 $ 154,652 $ (1,930) $ 473,531
Product sales revenue 114,252 5,193 0 119,445
Affiliate management fee revenue 1,579 3,709 0 5,288
Total revenue 436,640 163,554 (1,930) 598,264
Operating expenses 118,579 46,956 (3,553) 161,982
Cost of product sales 86,356 9,763 0 96,119
Other operating (income) expense (193) 3,056 0 2,863
Earnings of non-controlled entities (7,134) (32,001) 0 (39,135)
Operating margin 239,032 135,780 1,623 376,435
Depreciation, amortization and impairment expense 41,620 28,579 1,623 71,822
G&A expense 27,487 10,529 0 38,016
Operating profit $ 169,925 $ 96,672 $ 0 $ 266,597

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		Nine Months Ended September 30, 2019						Three Months Ended September 30, 2020
		Refined Products		Crude Oil		Intersegment Eliminations			Total			Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	Transportation and terminals revenue	$	1,009,812	$	467,652	$	(3,835)		$	1,473,629	Transportation and terminals revenue	$	307,218	$	154,652	$	(1,930)	$	459,940
Product sales revenue	Product sales revenue	478,441		19,350		0			497,791		Product sales revenue	106,027		5,193		—		111,220
Affiliate management fee revenue	Affiliate management fee revenue	5,085		10,725		0			15,810		Affiliate management fee revenue	1,579		3,709		—		5,288
Total revenue	Total revenue	1,493,338		497,727		(3,835)			1,987,230		Total revenue	414,824		163,554		(1,930)		576,448
Operating expenses		362,870		129,431		(7,960)			484,341
Operating expense											Operating expense	114,313		46,956		(3,553)		157,716
Cost of product sales	Cost of product sales	411,012		19,715		0			430,727		Cost of product sales	79,612		9,763		—		89,375
Other operating (income) expense	Other operating (income) expense	(9,648)		8,110		0			(1,538)		Other operating (income) expense	(193)		3,056		—		2,863
Earnings of non-controlled entities	Earnings of non-controlled entities	(145)		(122,084)		0			(122,229)		Earnings of non-controlled entities	(7,134)		(32,001)		—		(39,135)
Operating margin	Operating margin	729,249		462,555		4,125			1,195,929		Operating margin	228,226		135,780		1,623		365,629
Depreciation, amortization and impairment expense	Depreciation, amortization and impairment expense	128,724		48,179		4,125			181,028		Depreciation, amortization and impairment expense	38,237		28,579		1,623		68,439
G&A expense	G&A expense	107,179		42,355		0			149,534		G&A expense	26,968		10,529		—		37,497
Operating profit	Operating profit	$	493,346	$	372,021	$	0		$	865,367	Operating profit	$	163,021	$	96,672	$	—	$	259,693


		Nine Months Ended September 30, 2020						Three Months Ended September 30, 2021
		Refined Products		Crude Oil		Intersegment Eliminations			Total			Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	Transportation and terminals revenue	$	914,887	$	433,947	$	(5,093)		$	1,343,741	Transportation and terminals revenue	$	349,430	$	116,920	$	(1,440)	$	464,910
Product sales revenue	Product sales revenue	461,701		20,141		0			481,842		Product sales revenue	153,352		15,463		—		168,815
Affiliate management fee revenue	Affiliate management fee revenue	4,676		11,219		0			15,895		Affiliate management fee revenue	1,643		3,686		—		5,329
Total revenue	Total revenue	1,381,264		465,307		(5,093)			1,841,478		Total revenue	504,425		136,069		(1,440)		639,054
Operating expenses		327,866		139,645		(9,914)			457,597
Operating expense											Operating expense	114,612		35,042		(3,098)		146,556
Cost of product sales	Cost of product sales	365,314		30,550		0			395,864		Cost of product sales	128,372		17,483		—		145,855
Other operating (income) expense	Other operating (income) expense	(2,223)		1,684		0			(539)		Other operating (income) expense	(2,873)		282		—		(2,591)
Earnings of non-controlled entities	Earnings of non-controlled entities	(25,946)		(90,538)		0			(116,484)		Earnings of non-controlled entities	(8,160)		(28,306)		—		(36,466)
Operating margin	Operating margin	716,253		383,966		4,821			1,105,040		Operating margin	272,474		111,568		1,658		385,700
Depreciation, amortization and impairment expense	Depreciation, amortization and impairment expense	128,708		60,367		4,821			193,896		Depreciation, amortization and impairment expense	42,552		17,191		1,658		61,401
G&A expense	G&A expense	84,802		32,290		0			117,092		G&A expense	33,478		13,154		—		46,632
Operating profit	Operating profit	$	502,743	$	291,309	$	0		$	794,052	Operating profit	$	196,444	$	81,223	$	—	$	277,667

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Nine Months Ended September 30, 2020
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	$	876,363	$	433,947	$	(5,093)	$	1,305,217
Product sales revenue	422,986		20,141		—		443,127
Affiliate management fee revenue	4,676		11,219		—		15,895
Total revenue	1,304,025		465,307		(5,093)		1,764,239
Operating expense	316,371		139,645		(9,914)		446,102
Cost of product sales	334,366		30,550		—		364,916
Other operating (income) expense	(2,223)		1,684		—		(539)
Earnings of non-controlled entities	(25,946)		(90,538)		—		(116,484)
Operating margin	681,457		383,966		4,821		1,070,244
Depreciation, amortization and impairment expense	118,038		60,367		4,821		183,226
G&A expense	83,190		32,290		—		115,480
Operating profit	$	480,229	$	291,309	$	—	$	771,538


	Nine Months Ended September 30, 2021
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation and terminals revenue	$	984,895	$	351,817	$	(4,441)	$	1,332,271
Product sales revenue	487,551		88,024		—		575,575
Affiliate management fee revenue	4,802		11,123		—		15,925
Total revenue	1,477,248		450,964		(4,441)		1,923,771
Operating expense	314,241		118,072		(9,406)		422,907
Cost of product sales	394,316		94,298		—		488,614
Other operating (income) expense	(6,279)		2,246		—		(4,033)
Earnings of non-controlled entities	(25,528)		(90,579)		—		(116,107)
Operating margin	800,498		326,927		4,965		1,132,390
Depreciation, amortization and impairment expense	112,754		50,585		4,965		168,304
G&A expense	106,749		41,922		—		148,671
Operating profit	$	580,995	$	234,420	$	—	$	815,415

1415

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.4.Revenue ~~from Contracts with Customers~~

Statement of Income Disclosures

The following tables provide details of our ~~revenues~~revenue disaggregated by key activities that comprise our performance obligations by operating segment (in thousands):


		Three Months Ended September 30, 2019								Three Months Ended September 30, 2020
		Refined Products		Crude Oil		Intersegment Eliminations		Total				Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation	Transportation	$	208,073	$	95,530	$	0	$	303,603		Transportation	$	192,194	$	90,156	$	—	$	282,350

Terminalling	Terminalling	48,428		3,176		0		51,604			Terminalling	30,650		5,651		—		36,301
Storage	Storage	53,433		30,037		(1,556)		81,914			Storage	49,104		32,876		(1,930)		80,050
Ancillary services	Ancillary services	36,375		7,278		0		43,653			Ancillary services	29,955		6,828		—		36,783
Lease revenue	Lease revenue	6,302		19,356		0		25,658			Lease revenue	5,315		19,141		—		24,456
Transportation and terminals revenue	Transportation and terminals revenue	352,611		155,377		(1,556)		506,432			Transportation and terminals revenue	307,218		154,652		(1,930)		459,940
Product sales revenue	Product sales revenue	136,464		8,343		0		144,807			Product sales revenue	106,027		5,193		—		111,220
Affiliate management fee revenue	Affiliate management fee revenue	1,764		3,593		0		5,357			Affiliate management fee revenue	1,579		3,709		—		5,288
Total revenue	Total revenue	490,839		167,313		(1,556)		656,596			Total revenue	414,824		163,554		(1,930)		576,448
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:											Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)	Lease revenue(1)	(6,302)		(19,356)		0		(25,658)			Lease revenue(1)	(5,315)		(19,141)		—		(24,456)
(Gains) losses from futures contracts included in product sales revenue(2)	(Gains) losses from futures contracts included in product sales revenue(2)	(17,061)		(564)		0		(17,625)			(Gains) losses from futures contracts included in product sales revenue(2)	6,560		884		—		7,444
Affiliate management fee revenue	Affiliate management fee revenue	(1,764)		(3,593)		0		(5,357)			Affiliate management fee revenue	(1,579)		(3,709)		—		(5,288)
Total revenue from contracts with customers under ASC 606	Total revenue from contracts with customers under ASC 606	$	465,712	$	143,800	$	(1,556)	$	607,956		Total revenue from contracts with customers under ASC 606	$	414,490	$	141,588	$	(1,930)	$	554,148

(1) Lease revenue is accounted for under Accounting Standards Codification (“ASC”) 842, Leases.

(2) ~~The impact on product sales revenue from futures contracts falls under the guidance of ASC 815,~~ ~~Derivatives and Hedging~~.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

Three Months Ended September 30, 2020
Refined Products Crude Oil Intersegment Eliminations Total
Transportation $ 192,194 $ 90,156 $ 0 $ 282,350
Terminalling 41,227 5,651 0 46,878
Storage 49,366 32,876 (1,930) 80,312
Ancillary services 32,707 6,828 0 39,535
Lease revenue 5,315 19,141 0 24,456
Transportation and terminals revenue 320,809 154,652 (1,930) 473,531
Product sales revenue 114,252 5,193 0 119,445
Affiliate management fee revenue 1,579 3,709 0 5,288
Total revenue 436,640 163,554 (1,930) 598,264
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)
(5,315) (19,141) 0 (24,456)
(Gains) losses from futures contracts included in product sales revenue(2)
6,850 884 0 7,734
Affiliate management fee revenue (1,579) (3,709) 0 (5,288)
Total revenue from contracts with customers under ASC 606 $ 436,596 $ 141,588 $ (1,930) $ 576,254

~~(1)~~ ~~Lease revenue is accounted for under ASC 842,~~ ~~Leases~~.

~~(2)~~ ~~The impact on product sales revenue from futures contracts falls under the guidance of ASC 815,~~ ~~Derivatives and Hedging~~.

Nine Months Ended September 30, 2019
Refined Products Crude Oil Intersegment Eliminations Total
Transportation $ 584,662 $ 290,754 $ 0 $ 875,416
Terminalling 138,968 13,146 0 152,114
Storage 162,139 89,313 (3,835) 247,617
Ancillary services 103,287 20,488 0 123,775
Lease revenue 20,756 53,951 0 74,707
Transportation and terminals revenue 1,009,812 467,652 (3,835) 1,473,629
Product sales revenue 478,441 19,350 0 497,791
Affiliate management fee revenue 5,085 10,725 0 15,810
Total revenue 1,493,338 497,727 (3,835) 1,987,230
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)
(20,756) (53,951) 0 (74,707)
(Gains) losses from futures contracts included in product sales revenue(2)
39,761 1,743 0 41,504
Affiliate management fee revenue (5,085) (10,725) 0 (15,810)
Total revenue from contracts with customers under ASC 606 $ 1,507,258 $ 434,794 $ (3,835) $ 1,938,217

~~(1)~~ ~~Lease revenue is accounted for under ASC 842,~~ ~~Leases~~.

~~(2)~~ The impact on product sales revenue from futures contracts falls under the guidance of ASC 815, Derivatives and Hedging.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		Nine Months Ended September 30, 2020								Three Months Ended September 30, 2021
		Refined Products		Crude Oil		Intersegment Eliminations		Total				Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation	Transportation	$	533,451	$	244,154	$	0	$	777,605		Transportation	$	241,685	$	58,172	$	—	$	299,857
Terminalling	Terminalling	117,916		14,702		0		132,618			Terminalling	26,468		3,280		—		29,748
Storage	Storage	152,933		97,103		(5,093)		244,943			Storage	42,316		28,199		(1,440)		69,075
Ancillary services	Ancillary services	93,340		20,746		0		114,086			Ancillary services	34,157		7,667		—		41,824
Lease revenue	Lease revenue	17,247		57,242		0		74,489			Lease revenue	4,804		19,602		—		24,406
Transportation and terminals revenue	Transportation and terminals revenue	914,887		433,947		(5,093)		1,343,741			Transportation and terminals revenue	349,430		116,920		(1,440)		464,910
Product sales revenue	Product sales revenue	461,701		20,141		0		481,842			Product sales revenue	153,352		15,463		—		168,815
Affiliate management fee revenue	Affiliate management fee revenue	4,676		11,219		0		15,895			Affiliate management fee revenue	1,643		3,686		—		5,329
Total revenue	Total revenue	1,381,264		465,307		(5,093)		1,841,478			Total revenue	504,425		136,069		(1,440)		639,054
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:											Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)	Lease revenue(1)	(17,247)		(57,242)		0		(74,489)			Lease revenue(1)	(4,804)		(19,602)		—		(24,406)
(Gains) losses from futures contracts included in product sales revenue(2)	(Gains) losses from futures contracts included in product sales revenue(2)	(89,763)		483		0		(89,280)			(Gains) losses from futures contracts included in product sales revenue(2)	26,992		2,634		—		29,626
Affiliate management fee revenue	Affiliate management fee revenue	(4,676)		(11,219)		0		(15,895)			Affiliate management fee revenue	(1,643)		(3,686)		—		(5,329)
Total revenue from contracts with customers under ASC 606	Total revenue from contracts with customers under ASC 606	$	1,269,578	$	397,329	$	(5,093)	$	1,661,814		Total revenue from contracts with customers under ASC 606	$	524,970	$	115,415	$	(1,440)	$	638,945

(1) Lease revenue is accounted for under ASC 842, Leases.

(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815, Derivatives and Hedging.


	Nine Months Ended September 30, 2020
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation	$	533,451	$	244,155	$	—	$	777,606
Terminalling	88,038		14,702		—		102,740
Storage	152,186		97,103		(5,093)		244,196
Ancillary services	85,441		20,745		—		106,186
Lease revenue	17,247		57,242		—		74,489
Transportation and terminals revenue	876,363		433,947		(5,093)		1,305,217
Product sales revenue	422,986		20,141		—		443,127
Affiliate management fee revenue	4,676		11,219		—		15,895
Total revenue	1,304,025		465,307		(5,093)		1,764,239
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)	(17,247)		(57,242)		—		(74,489)
(Gains) losses from futures contracts included in product sales revenue(2)	(82,109)		483		—		(81,626)
Affiliate management fee revenue	(4,676)		(11,219)		—		(15,895)
Total revenue from contracts with customers under ASC 606	$	1,199,993	$	397,329	$	(5,093)	$	1,592,229

(1) Lease revenue is accounted for under ASC 842, Leases.

(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815, Derivatives and Hedging.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Nine Months Ended September 30, 2021
	Refined Products		Crude Oil		Intersegment Eliminations		Total
Transportation	$	667,148	$	172,922	0		$	840,070
Terminalling	74,223		12,615		0		86,838
Storage	135,938		87,237		(4,441)		218,734
Ancillary services	94,640		23,224		0		117,864
Lease revenue	12,946		55,819		0		68,765
Transportation and terminals revenue	984,895		351,817		(4,441)		1,332,271
Product sales revenue	487,551		88,024		—		575,575
Affiliate management fee revenue	4,802		11,123		—		15,925
Total revenue	1,477,248		450,964		(4,441)		1,923,771
Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
Lease revenue(1)	(12,946)		(55,819)		—		(68,765)
(Gains) losses from futures contracts included in product sales revenue(2)	108,595		14,165		—		122,760
Affiliate management fee revenue	(4,802)		(11,123)		—		(15,925)
Total revenue from contracts with customers under ASC 606	$	1,568,095	$	398,187	$	(4,441)	$	1,961,841

(1) Lease revenue is accounted for under ASC 842, Leases.

(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815, Derivatives and Hedging.

Balance Sheet Disclosures

The following table summarizes our accounts receivable, contract assets and contract liabilities resulting from contracts with customers (in thousands):


		December 31, 2019		September 30, 2020			December 31, 2020		September 30, 2021
Accounts receivable from contracts with customers	Accounts receivable from contracts with customers	$	124,701	$	107,317	Accounts receivable from contracts with customers	$	103,275	$	132,586
Contract assets	Contract assets	$	8,071	$	13,834	Contract assets	$	12,220	$	12,284
Contract liabilities	Contract liabilities	$	111,670	$	94,865	Contract liabilities	$	102,702	$	106,879

For the respective three and nine months ended September 30, ~~2020, respectively,~~2021, we recognized ~~$9.3~~$2.9 million and ~~$89.3~~$76.7 million of transportation and terminals revenue that was recorded in deferred revenue as of December 31, ~~2019.~~2020.

1718

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unfulfilled Performance Obligations

The following table provides the aggregate amount of the transaction price allocated to our unfulfilled performance obligations (“UPOs”) as of September 30, ~~2020~~2021 by operating segment, including the range of years remaining on our contracts with customers and an estimate of revenues expected to be recognized over the next 12 months (dollars in thousands):

Refined Products Crude Oil Total
Balances at September 30, 2020 $ 2,137,259 $ 1,276,836 $ 3,414,095
Remaining terms 1 - 18 years 1 - 11 years
Estimated revenues from UPOs to be recognized in the next 12 months $ 407,914 $ 269,156 $ 677,070


	Refined Products		Crude Oil		Total
Balances at September 30, 2021	$	1,937,717	$	1,111,166	$	3,048,883
Remaining terms	1 - 17 years		1 - 10 years
Estimated revenues from UPOs to be recognized in the next 12 months	$	365,383	$	263,798	$	629,181

4.5.Investments in Non-Controlled Entities

Our equity investments in non-controlled entities at September 30, ~~2020~~2021 were comprised of:


Entity						Ownership Interest
BridgeTex Pipeline Company, LLC (“BridgeTex”)						30%
Double Eagle Pipeline LLC (“Double Eagle”)						50%
HoustonLink Pipeline Company, LLC (“HoustonLink”)						50%
MVP Terminalling, LLC (“MVP”)						~~50%~~25%
Powder Springs Logistics, LLC (“Powder Springs”)						50%
Saddlehorn Pipeline Company, LLC (“Saddlehorn”)						30%
Seabrook Logistics, LLC (“Seabrook”)						50%
Texas Frontera, LLC (“Texas Frontera”)						50%

In ~~the first quarter of 2020,~~April 2021, we sold ~~a 10%~~nearly half of our membership interest in ~~Saddlehorn to an affiliate~~MVP. As a result of ~~Black Diamond Gathering LLC, which is majority-owned by Noble Midstream Partners LP, reducing our ongoing investment in Saddlehorn to a 30% interest. We received $79.9 million in cash from~~ the sale, we received proceeds of $272.1 million and we recorded a gain of ~~$12.9~~$70.4 million on our consolidated statements of ~~income for~~income. Following the ~~nine month period ended September 30, 2020.~~sale, we own approximately 25% of MVP and remain the operator of the facility.

We serve as operator of BridgeTex, HoustonLink, MVP, Powder Springs, Saddlehorn, Texas Frontera and the pipeline activities of Seabrook. We receive fees for management services as well as reimbursement or payment to us for certain direct operational payroll and other overhead costs. The management fees we receive are reported as affiliate management fee revenue on our consolidated statements of income. Cost reimbursements we receive from these entities in connection with our operating services are included as reductions to costs and expenses on our consolidated statements of income and totaled ~~$1.2~~$0.7 million and ~~$0.7~~$0.9 million during the three months ended September 30, ~~2019~~2020 and ~~2020,~~2021, respectively, and ~~$3.8~~$2.9 million and ~~$2.9~~$2.1 million during the nine months ended September 30, ~~2019~~2020 and ~~2020,~~2021, respectively.

1819

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We recorded the following revenue and expense transactions ~~with~~from certain of these non-controlled entities in our consolidated statements of income (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2020		2019		2020			2020		2021		2020		2021
Transportation and terminals revenue:	Transportation and terminals revenue:									Transportation and terminals revenue:
BridgeTex, pipeline capacity and storage	BridgeTex, pipeline capacity and storage	$	10,737	$	9,323	$	31,063	$	32,748	BridgeTex, pipeline capacity and storage	$	9,323	$	10,669	$	32,748	$	34,367
Double Eagle, throughput revenue	Double Eagle, throughput revenue	$	1,582	$	995	$	4,813	$	4,016	Double Eagle, throughput revenue	$	995	$	631	$	4,016	$	2,464
Saddlehorn, storage revenue	Saddlehorn, storage revenue	$	566	$	580	$	1,669	$	1,711	Saddlehorn, storage revenue	$	580	$	594	$	1,711	$	1,753
Operating expenses:
Operating expense:										Operating expense:
Seabrook, storage lease and ancillary services	Seabrook, storage lease and ancillary services	$	6,267	$	7,175	$	19,417	$	21,553	Seabrook, storage lease and ancillary services	$	7,175	$	4,477	$	21,553	$	15,336

Other operating income:	Other operating income:									Other operating income:
Seabrook, gain on sale of air emission credits	Seabrook, gain on sale of air emission credits	$	0	$	0	$	0	$	1,410	Seabrook, gain on sale of air emission credits	$	—	$	—	$	1,410	$	434
MVP, easement sale		$	289	$	0	$	289	$	0

Our consolidated balance sheets reflected the following balances related to transactions with our ~~investments in~~ non-controlled entities (in thousands):


		December 31, 2019									December 31, 2020
		Trade Accounts Receivable		Other Accounts Receivable		Other Accounts Payable		Long-Term Receivables			Trade Accounts Receivable		Other Accounts Receivable		Other Accounts Payable		Long-Term Receivables
BridgeTex	BridgeTex	$	392	$	26	$	—	$	—	BridgeTex	$	355	$	27	$	970	$	—
Double Eagle	Double Eagle	$	445	$	—	$	—	$	—	Double Eagle	$	277	$	—	$	—	$	—
HoustonLink	HoustonLink	$	60	$	—	$	—	$	—	HoustonLink	$	—	$	—	$	144	$	—
MVP	MVP	$	—	$	418	$	—	$	—	MVP	$	—	$	467	$	2,297	$	—
Powder Springs	Powder Springs	$	161	$	—	$	—	$	6,006	Powder Springs	$	—	$	—	$	—	$	10,223
Saddlehorn	Saddlehorn	$	—	$	126	$	—	$	—	Saddlehorn	$	—	$	121	$	—	$	—
Seabrook	Seabrook	$	941	$	—	$	1,349	$	—	Seabrook	$	—	$	—	$	7,274	$	—

September 30, 2020
Trade Accounts Receivable Other Accounts Receivable Other Accounts Payable Long-Term Receivables
BridgeTex $ 382 $ 441 $ 225 $ —
Double Eagle $ 286 $ — $ — $ —
MVP $ — $ 460 $ — $ —
Powder Springs $ — $ — $ — $ 8,970
Saddlehorn $ — $ 142 $ — $ —
Seabrook $ 497 $ — $ 4,267 $ —


	September 30, 2021
	Trade Accounts Receivable		Other Accounts Receivable		Other Accounts Payable		Long-Term Receivables
BridgeTex	$	2,310	$	15	$	—	$	—
Double Eagle	$	213	$	—	$	—	$	—
HoustonLink	$	—	$	—	$	96	$	—
MVP	$	—	$	542	$	—	$	—
Powder Springs	$	8	$	—	$	—	$	12,429
Saddlehorn	$	—	$	187	$	—	$	—
Seabrook	$	—	$	11	$	810	$	—

We ~~are a party to~~entered into a long-term terminalling and storage contract with Seabrook for our exclusive use of dedicated tankage that provides our customers with crude oil storage capacity and dock access for crude oil imports and exports on the Texas Gulf Coast (see Note 78 – Leases for more details regarding this lease).

1920

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The financial results from MVP, Powder Springs and Texas Frontera are included in our refined products segment and the financial results from BridgeTex, Double Eagle, HoustonLink, Saddlehorn and Seabrook are included in our crude oil segment, each as earnings of non-controlled entities.

A summary of our investments in non-controlled entities (representing only our proportionate interest) follows (in thousands):



Investments at ~~12/31/2019~~December 31, 2020	$	~~1,240,551~~1,213,856
Additional investment	~~73,678~~5,616
Sale of ownership interest in ~~Saddlehorn~~MVP	~~(66,989)~~(201,673)

Earnings of non-controlled entities:
Proportionate share of earnings	~~117,848~~117,413

Amortization of excess investment and capitalized interest	~~(1,364)~~(1,306)
Earnings of non-controlled entities	~~116,484~~116,107
Less:
Distributions from operations of non-controlled entities	~~152,645~~140,616

Investments at ~~9/30/2020~~September 30, 2021	$	~~1,211,079~~993,290

5.6.Inventory

Inventory at December 31, ~~2019~~2020 and September 30, ~~2020~~2021 was as follows (in thousands):

December 31, 2019 September 30,
2020
Refined products $ 96,128 $ 60,515
Liquefied petroleum gases 29,982 30,155
Transmix 39,546 20,821
Crude oil 12,714 12,872
Additives 6,029 4,670
Total inventory $ 184,399 $ 129,033


	December 31, 2020		September 30, 2021
Refined products	$	71,982	$	86,362
Crude oil	32,431		28,269
Liquefied petroleum gases	25,040		54,604
Transmix	23,397		47,978
Additives	5,354		5,354
Total inventory	$	158,204	$	222,567

2021

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.7.Debt

Long-term debt at December 31, ~~2019~~2020 and September 30, ~~2020~~2021 was as follows (in thousands):


		December 31, 2019		September 30, 2020			December 31, 2020		September 30, 2021
Commercial paper	Commercial paper	$	0	$	248,000	Commercial paper	$	—	$	123,000

4.25% Notes due 2021		550,000		0
3.20% Notes due 2025	3.20% Notes due 2025	250,000		250,000		3.20% Notes due 2025	250,000		250,000
5.00% Notes due 2026	5.00% Notes due 2026	650,000		650,000		5.00% Notes due 2026	650,000		650,000
3.25% Notes due 2030	3.25% Notes due 2030	0		500,000		3.25% Notes due 2030	500,000		500,000
6.40% Notes due 2037	6.40% Notes due 2037	250,000		250,000		6.40% Notes due 2037	250,000		250,000
4.20% Notes due 2042	4.20% Notes due 2042	250,000		250,000		4.20% Notes due 2042	250,000		250,000
5.15% Notes due 2043	5.15% Notes due 2043	550,000		550,000		5.15% Notes due 2043	550,000		550,000
4.20% Notes due 2045	4.20% Notes due 2045	250,000		250,000		4.20% Notes due 2045	250,000		250,000
4.25% Notes due 2046	4.25% Notes due 2046	500,000		500,000		4.25% Notes due 2046	500,000		500,000
4.20% Notes due 2047	4.20% Notes due 2047	500,000		500,000		4.20% Notes due 2047	500,000		500,000
4.85% Notes due 2049	4.85% Notes due 2049	500,000		500,000		4.85% Notes due 2049	500,000		500,000
3.95% Notes due 2050	3.95% Notes due 2050	500,000		500,000		3.95% Notes due 2050	800,000		800,000
Face value of long-term debt	Face value of long-term debt	4,750,000		4,948,000		Face value of long-term debt	5,000,000		5,123,000
Unamortized debt issuance costs(1)	Unamortized debt issuance costs(1)	(35,263)		(37,407)		Unamortized debt issuance costs(1)	(40,143)		(38,419)
Net unamortized debt discount(1)		(8,662)		(10,282)
Net unamortized debt premium(1)						Net unamortized debt premium(1)	18,834		18,645

Long-term debt, net	Long-term debt, net	$	4,706,075	$	4,900,311	Long-term debt, net	$	4,978,691	$	5,103,226

(1) Debt issuance costs and note discounts and premiums ~~and realized gains and losses of historical fair value hedges~~ are being amortized or accreted to the applicable notes over the respective lives of those notes.

All of the instruments detailed in the table above are senior indebtedness.

~~2020 Debt Issuance~~

In May 2020, we issued $500.0 million of 3.25% senior notes due 2030 in an underwritten public offering. The notes were issued at 99.88% of par. Net proceeds from this offering were approximately $495.2 million after underwriting discounts and offering expenses. The net proceeds from this offering, along with commercial paper borrowings and cash on hand, were used to redeem our $550 million senior notes due in 2021. We recognized $12.9 million of debt prepayment costs as interest expense in our consolidated statements of income related to this early redemption, partially offset by the recognition of a $0.7 million unamortized debt premium, for the nine months ended September 30, 2020.

Other Debt

Revolving Credit Facility. At September 30, ~~2020,~~2021, the total borrowing capacity under our revolving credit facility maturing in May 2024 was $1.0 billion. Any borrowings outstanding under this facility are classified as long-term debt on our consolidated balance sheets. Borrowings under ~~this~~the facility are unsecured and bear interest at LIBOR plus a spread ranging from 0.875% to 1.500% based on our credit ratings. Additionally, an unused commitment fee is assessed at a rate between 0.075% and 0.200% depending on our credit ratings. The unused commitment fee was 0.125% at September 30, ~~2020.~~2021. Borrowings under this facility may be used for general ~~partnership~~ purposes, including capital expenditures. As of December 31, ~~2019~~2020 and September 30, ~~2020,~~2021, there were 0no borrowings outstanding under this facility and $3.5 million was obligated for letters of credit. Amounts obligated for letters of credit are not reflected as debt on our consolidated balance sheets, but decrease our borrowing capacity

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

under this facility.

Commercial Paper Program. We have a commercial paper program under which we may issue commercial paper notes in an amount up to the available capacity under our $1.0 billion revolving credit facility. The maturities of the commercial paper notes vary, but may not exceed 397 days from the date of issuance. Because the commercial paper we can issue is limited to amounts available under our revolving credit facility, amounts outstanding under the program are classified as long-term debt. The commercial paper notes are sold under customary terms in the commercial paper market and are issued at a discount from par, or alternatively, are sold at par and bear varying interest rates on a fixed or floating basis. Commercial paper borrowings outstanding at September 30, ~~2020~~2021 were ~~$248.0~~$123.0 million. The weighted-average interest rate for commercial paper borrowings based on the number of days outstanding was ~~0.6%~~0.2% for the nine months ended September 30, ~~2020.~~2021.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.Leases

Operating Leases – Lessee

Related-Party Operating Lease. We ~~have~~entered into a long-term terminalling and storage contract with Seabrook for our exclusive use of dedicated tankage that provides our customers with crude oil storage capacity and dock access for crude oil imports and exports on the Texas Gulf Coast.

The following tables provide information about our third-party and Seabrook operating leases ~~(dollars in~~(in thousands):


		Three Months Ended September 30, 2019						Three Months Ended September 30, 2020							Three Months Ended September 30, 2020						Three Months Ended September 30, 2021
		Third-Party Leases		Seabrook Lease		All Leases		Third-Party Leases		Seabrook Lease		All Leases			Third-Party Leases		Seabrook Lease		All Leases		Third-Party Leases		Seabrook Lease		All Leases
Total lease expense	Total lease expense	$	6,206	$	6,267	$	12,473	$	6,474	$	7,175	$	13,649	Total lease expense	$	6,474	$	7,175	$	13,649	$	6,321	$	4,288	$	10,609

		Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2020							Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2021
		Third-Party Leases		Seabrook Lease		All Leases		Third-Party Leases		Seabrook Lease		All Leases			Third-Party Leases		Seabrook Lease		All Leases		Third-Party Leases		Seabrook Lease		All Leases
Total lease expense	Total lease expense	$	17,631	$	19,417	$	37,048	$	18,173	$	21,553	$	39,726	Total lease expense	$	18,173	$	21,553	$	39,726	$	20,266	$	15,147	$	35,413

December 31, 2019 September 30, 2020
Third-Party Leases Seabrook Lease All Leases Third-Party Leases Seabrook Lease All Leases
Current lease liability $ 15,136 $ 11,085 $ 26,221 $ 15,721 $ 11,456 $ 27,177
Long-term lease liability $ 81,508 $ 62,515 $ 144,023 $ 67,323 $ 54,441 $ 121,764
Right-of-use asset $ 98,268 $ 73,600 $ 171,868 $ 86,185 $ 65,897 $ 152,082


	December 31, 2020						September 30, 2021
	Third-Party Leases		Seabrook Lease		All Leases		Third-Party Leases		Seabrook Lease		All Leases
Current lease liability	$	17,099	$	10,434	$	27,533	$	17,733	$	7,885	$	25,618
Long-term lease liability	$	84,982	$	52,501	$	137,483	$	105,095	$	46,555	$	151,650
Right-of-use asset	$	103,142	$	62,936	$	166,078	$	126,029	$	54,441	$	180,470

8.9.Employee Benefit Plans

We sponsor a defined contribution plan in which we match our employees’ qualifying contributions, resulting in additional expense to us. Expenses related to the defined contribution plan, including expense related to discontinued operations, were $2.8 million and $2.7 million for ~~each of~~ the three months ended September 30, ~~2019 and~~ 2020 and ~~$9.3~~2021, respectively, and $9.7 million and ~~$9.7~~$8.1 million for the nine months ended September 30, ~~2019~~2020 and ~~2020,~~2021, respectively.

2223

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In addition, we sponsor 2 pension plans, including 1 for all non-union employees and 1 that covers union employees, and a postretirement benefit plan for certain employees. ~~Prior~~The following disclosures related to ~~the March 2020 sale of our New Haven terminal (See Note 1 –~~ ~~Organization, Description of Business and Basis of Presentation), we sponsored an additional union pension plan that covered union employees at that terminal.~~these plans include amounts related to discontinued operations. Net periodic benefit expense for the three and nine months ended September 30, ~~2019~~2020 and ~~2020 was~~2021 were as follows (in thousands):

Three Months Ended Three Months Ended
September 30, 2019 September 30, 2020
Pension
Benefits Other Postretirement
Benefits Pension
Benefits Other Postretirement
Benefits
Components of net periodic benefit costs:
Service cost $ 6,260 $ 48 $ 6,898 $ 64
Interest cost 3,026 126 2,738 121
Expected return on plan assets (2,354) 0 (2,829) 0
Amortization of prior service credit (46) 0 (46) 0
Amortization of actuarial loss 1,352 60 1,346 127
Settlement cost 439 0 0 0
Net periodic benefit cost $ 8,677 $ 234 $ 8,107 $ 312

Nine Months Ended Nine Months Ended
September 30, 2019 September 30, 2020
Pension
Benefits Other Postretirement
Benefits Pension
Benefits Other Postretirement
Benefits
Components of net periodic benefit costs:
Service cost $ 19,145 $ 145 $ 20,836 $ 193
Interest cost 9,136 380 8,251 360
Expected return on plan assets (7,045) 0 (8,524) 0
Amortization of prior service credit (136) 0 (136) 0
Amortization of actuarial loss 4,137 248 4,080 382
Settlement cost 2,499 0 969 0
Settlement gain on disposition of assets 0 0 (1,342) 0
Net periodic benefit cost $ 27,736 $ 773 $ 24,134 $ 935


	Three Months Ended				Three Months Ended
	September 30, 2020				September 30, 2021
	Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits
Components of net periodic benefit costs:
Service cost	$	6,898	$	64	$	6,953	$	75
Interest cost	2,738		121		2,395		103
Expected return on plan assets	(2,829)		—		(2,960)		—
Amortization of prior service credit	(46)		—		(46)		—
Amortization of actuarial loss	1,346		127		1,273		160
Settlement cost	—		—		1,300		—


Net periodic benefit cost	$	8,107	$	312	$	8,915	$	338


	Nine Months Ended				Nine Months Ended
	September 30, 2020				September 30, 2021
	Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits
Components of net periodic benefit costs:
Service cost	$	20,836	$	193	$	21,269	$	225
Interest cost	8,251		360		7,078		310
Expected return on plan assets	(8,524)		—		(8,927)		—
Amortization of prior service credit	(136)		—		(136)		—
Amortization of actuarial loss	4,080		382		4,058		478
Settlement cost	969		—		2,751		—
Settlement gain on disposition of assets	(1,342)		—		—		—
Net periodic benefit cost	$	24,134	$	935	$	26,093	$	1,013

The service component of our net periodic benefit costs is presented in operating expense and G&A expense, and the non-service components are presented in other (income) expense in our consolidated statements of income.

2324

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The changes in accumulated other comprehensive loss (“AOCL”) related to employee benefit plan assets and benefit obligations for the three and nine months ended September 30, ~~2019~~2020 and ~~2020~~2021 were as follows (in thousands):

Three Months Ended Three Months Ended
September 30, 2019 September 30, 2020
Gains (Losses) Included in AOCL Pension Benefits Other Postretirement Benefits Pension Benefits Other Postretirement Benefits
Beginning balance $ (93,876) $ (6,105) $ (98,610) $ (9,269)
Recognition of prior service credit amortization in income (46) 0 (46) 0
Recognition of actuarial loss amortization in income 1,352 60 1,346 127
Recognition of settlement cost in income 439 0 0 0
Ending balance $ (92,131) $ (6,045) $ (97,310) $ (9,142)


	Three Months Ended				Three Months Ended
	September 30, 2020				September 30, 2021
Gains (Losses) Included in AOCL	Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits
Beginning balance	$	(98,610)	$	(9,269)	$	(101,270)	$	(11,656)


Recognition of prior service credit amortization in income	(46)		—		(46)		—
Recognition of actuarial loss amortization in income	1,346		127		1,273		160
Recognition of settlement cost in income	—		—		1,300		—
Ending balance	$	(97,310)	$	(9,142)	$	(98,743)	$	(11,496)

Nine Months Ended Nine Months Ended
September 30, 2019 September 30, 2020
Gains (Losses) Included in AOCL Pension Benefits Other Postretirement Benefits Pension Benefits Other Postretirement Benefits
Beginning balance $ (88,602) $ (5,409) $ (104,739) $ (8,378)
Net actuarial gain (loss) (10,029) (884) 813 (1,146)
Curtailment gain 0 0 1,703 0
Recognition of prior service credit amortization in income (136) 0 (136) 0
Recognition of actuarial loss amortization in income 4,137 248 4,080 382
Recognition of settlement cost in income 2,499 0 969 0
Ending balance $ (92,131) $ (6,045) $ (97,310) $ (9,142)


	Nine Months Ended				Nine Months Ended
	September 30, 2020				September 30, 2021
Gains (Losses) Included in AOCL	Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits
Beginning balance	$	(104,739)	$	(8,378)	$	(117,782)	$	(10,409)
Net actuarial gain (loss)	813		(1,146)		12,366		(1,565)
Curtailment gain	1,703		—		—		—
Recognition of prior service credit amortization in income	(136)		—		(136)		—
Recognition of actuarial loss amortization in income	4,080		382		4,058		478
Recognition of settlement cost in income	969		—		2,751		—
Ending balance	$	(97,310)	$	(9,142)	$	(98,743)	$	(11,496)

Contributions estimated to be paid into the plans in ~~2020~~2021 are ~~$29.3~~$27.6 million and $0.9 million for the pension plans and other postretirement benefit plan, respectively.

9.10.Long-Term Incentive Plan

The compensation committee of our general partner’s board of directors administers our long-term incentive plan (“LTIP”) covering certain of our employees and the independent directors of our general partner. In April 2021, our compensation committee and our limited partners approved an amendment to the LTIP increasing the number of common units available for issuance from 11.9 million to 13.7 million. The LTIP primarily consists of phantom ~~units and permits the grant of awards covering an aggregate payout of 11.9 million of our common~~ units. The estimated units remaining available under the LTIP at September 30, ~~2020 total 1.0~~2021 totaled approximately 2.4 million.

Equity-based incentive compensation expense for the three and nine months ended September 30, 2019 and 2020, primarily recorded as G&A expense on our consolidated statements of income, was as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2019 2020 2019 2020
Performance-based awards $ 5,162 $ (1,121) $ 18,123 $ (1,247)
Time-based awards 1,611 2,290 4,454 6,827
Total $ 6,773 $ 1,169 $ 22,577 $ 5,580

2425

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equity-based incentive compensation expense for the three and nine months ended September 30, 2020 and 2021, primarily recorded as G&A expense on our consolidated statements of income, was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2021		2020		2021
Performance-based awards	$	(1,121)	$	3,053	$	(1,247)	$	7,923
Time-based awards	2,290		2,573		6,827		7,763
Total	$	1,169	$	5,626	$	5,580	$	15,686

During 2020, ~~we reduced our~~ LTIP ~~accruals~~expense related to ~~performance~~performance-based awards ~~vesting in 2020 and 2021~~was reduced due to ~~reflect~~ the ~~estimated~~ impacts of COVID-19 ~~related reductions in economic activity~~ and the significant decline in commodity ~~prices.~~prices on our financial results.

On ~~January 31, 2020, 378,144~~February 5, 2021, 558,516 unit awards were granted pursuant to our LTIP. These awards included both performance-based and time-based awards and have a three-year vesting period that will end on December 31, ~~2022.~~2023.

Basic and Diluted Net Income Per Common Unit

The difference between our actual common units outstanding and our weighted-average number of common units outstanding used to calculate basic net income per unit is due to the impact of: (i) the unit awards issued to non-employee directors and (ii) the weighted average effect of units actually issued or repurchased during a period. The difference between the weighted-average number of common units outstanding used for basic and diluted net income per unit calculations on our consolidated statements of income is primarily due to the dilutive effect of unit awards associated with our LTIP that have not yet vested.

~~10.~~11.Derivative Financial Instruments

~~Interest Rate Derivatives~~

In second quarter 2020, upon issuance of $500.0 million of 3.25% notes due 2030, we terminated and settled $100.0 million of treasury lock agreements that we had previously entered into to protect against the variability of future interest payments for a loss of $10.4 million, which was included in our statements of cash flows as a net payment on financial derivatives. These agreements were accounted for as cash flow hedges. The loss was recorded to other comprehensive income and will be recognized into earnings as an adjustment to our periodic interest expense over the term of the hedged transaction in accordance with our hedging strategy.

Commodity Derivatives

Our open futures contracts at September 30, ~~2020~~2021 were as follows:

Type of Contract/Accounting Methodology

Product Represented by the Contract and Associated Barrels

Maturity Dates

Futures - Economic Hedges

~~3.1~~4.9 million barrels of refined products and crude oil

Between October ~~2020~~2021 and November 2022

Futures - Economic Hedges

~~0.6~~1.2 million barrels of gas liquids

Between October 2021 and ~~December 2020~~April 2022

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

Commodity Derivatives Contracts and Deposits Offsets

At December 31, ~~2019~~2020 and September 30, ~~2020,~~2021, we had made margin deposits of ~~$27.4~~$34.2 million and ~~$14.0~~$47.6 million, respectively, for our futures contracts with our counterparties, which were recorded as current assets under commodity derivatives deposits on our consolidated balance sheets. We have the right to offset the combined fair values of our open futures contracts against our margin deposits under a master netting arrangement for each counterparty; however, we have elected to present the combined fair values of our open futures contracts separately from the related margin deposits on our consolidated balance sheets. Additionally, we have the right to offset the fair values of our futures contracts together for each counterparty, which we have elected to do, and we report the combined net balances on our consolidated balance sheets. A schedule of the derivative amounts we have offset and

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the deposit amounts we could offset under a master netting arrangement are provided below as of December 31, ~~2019~~2020 and September 30, ~~2020~~2021 (in thousands):

Description Gross Amounts of Recognized Liabilities Gross Amounts of Assets Offset in the Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Consolidated Balance Sheets Margin Deposit Amounts Not Offset in the Consolidated Balance Sheets
Net Asset Amount(1)
As of 12/31/2019 $ (11,033) $ 811 $ (10,222) $ 27,415 $ 17,193
As of 9/30/2020 $ (4,386) $ 2,740 $ (1,646) $ 14,031 $ 12,385


Description	Gross Amounts of Recognized Liabilities		Gross Amounts of Assets Offset in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets		Margin Deposit Amounts Not Offset in the Consolidated Balance Sheets		Net Asset Amount(1)
As of December 31, 2020	$	(21,748)	$	1,201	$	(20,547)	$	34,165	$	13,618
As of September 30, 2021	$	(44,605)	$	22,325	$	(22,280)	$	47,609	$	25,329

(1) Amount represents the maximum loss we would incur if all of our counterparties failed to perform on their derivative contracts.

Basis Derivative Agreement

During 2019, we entered into a basis derivative agreement with a joint venture co-owner’s affiliate, and, contemporaneously, that affiliate entered into an intrastate transportation services agreement with the joint venture. Settlements under the basis derivative agreement are determined based on the basis differential of crude oil prices at different market locations and a notional volume of 30,000 barrels per day. As a result, we account for this agreement as a derivative. The agreement will expire in early 2022. We recognize the changes in fair value of this agreement based on forward price curves for crude oil in West Texas and the Houston Gulf Coast in other operating income (expense) in our consolidated statements of income. The liability for this agreement at December 31, ~~2019~~2020 and September 30, ~~2020~~2021 was ~~$17.3~~$10.2 million and ~~$12.3~~$3.1 million, respectively.

Impact of Derivatives on Our Financial Statements

Comprehensive Income

The changes in derivative activity included in AOCL for the three and nine months ended September 30, ~~2019~~2020 and ~~2020~~2021 were as follows (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
Derivative Losses Included in AOCL	Derivative Losses Included in AOCL	2019		2020		2019		2020		Derivative Losses Included in AOCL	2020		2021		2020		2021
Beginning balance	Beginning balance	$	(36,287)	$	(57,748)	$	(26,480)	$	(48,960)	Beginning balance	$	(57,748)	$	(53,224)	$	(48,960)	$	(54,999)
Net loss on cash flow hedges	Net loss on cash flow hedges	(14,181)		0		(25,216)		(10,444)		Net loss on cash flow hedges	—		—		(10,444)		—
Reclassification of net loss on cash flow hedges to income	Reclassification of net loss on cash flow hedges to income	699		896		1,927		2,552		Reclassification of net loss on cash flow hedges to income	896		887		2,552		2,662
Ending balance	Ending balance	$	(49,769)	$	(56,852)	$	(49,769)	$	(56,852)	Ending balance	$	(56,852)	$	(52,337)	$	(56,852)	$	(52,337)

2627

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following is a summary of the effect on our consolidated statements of income for the three and nine months ended September 30, ~~2019~~2020 and ~~2020~~2021 of derivatives that were designated as cash flow hedges (in thousands):


		Interest Rate Contracts						Interest Rate Contracts
		Amount of Loss Recognized in AOCL on Derivatives		Location of Loss Reclassified from AOCL into Income	Amount of Loss Reclassified from AOCL into Income			Amount of Loss Recognized in AOCL on Derivatives		Location of Loss Reclassified from AOCL into Income	Amount of Loss Reclassified from AOCL into Income
Three Months Ended September 30, 2019		$	(14,181)	Interest expense	$	(699)
Three Months Ended September 30, 2020	Three Months Ended September 30, 2020	$	0	Interest expense	$	(896)	Three Months Ended September 30, 2020	$	—	Interest expense	$	(896)
Nine Months Ended September 30, 2019		$	(25,216)	Interest expense	$	(1,927)
Three Months Ended September 30, 2021							Three Months Ended September 30, 2021	$	—	Interest expense	$	(887)
Nine Months Ended September 30, 2020	Nine Months Ended September 30, 2020	$	(10,444)	Interest expense	$	(2,552)	Nine Months Ended September 30, 2020	$	(10,444)	Interest expense	$	(2,552)
Nine Months Ended September 30, 2021							Nine Months Ended September 30, 2021	$	—	Interest expense	$	(2,662)

As of September 30, ~~2020,~~2021, the net loss estimated to be classified to interest expense over the next twelve months from AOCL is approximately ~~$3.3~~$3.5 million. This amount relates to the amortization of losses on interest rate contracts over the life of the related debt instruments.

The following table provides a summary of the effect on our consolidated statements of income for the three and nine months ended September 30, ~~2019~~2020 and ~~2020~~2021 of derivatives that were not designated as hedging instruments (in thousands):


				Amount of Gain (Loss) Recognized on Derivatives																			Amount of Gain (Loss) Recognized on Derivatives
				Three Months Ended								Nine Months Ended											Three Months Ended								Nine Months Ended
		Location of Gain (Loss) Recognized on Derivatives		September 30,								September 30,									Location of Gain (Loss) Recognized on Derivatives		September 30,								September 30,
Derivative Instrument	Derivative Instrument		2019			2020				2019				2020		Derivative Instrument						2020			2021				2020				2021
Futures contracts	Futures contracts		Product sales revenue			$	17,626			$	(7,734)			$	(41,504)			$	89,280	Futures contracts		Product sales revenue			$	(7,444)			$	(29,626)			$	81,626			$	(122,760)

Futures contracts	Futures contracts	Cost of product sales		(5,581)				1,815				(9,456)				(2,529)		Futures contracts			Cost of product sales		1,261				19,303				(2,756)				26,910
Basis derivative agreement	Basis derivative agreement	Other operating income (expense)		(3,910)				(3,155)				(8,869)				(2,654)		Basis derivative agreement			Other operating income (expense)		(3,155)				(1,702)				(2,654)				(3,629)
		Total		$	8,135			$	(9,074)			$	(59,829)			$	84,097				Total		$	(9,338)			$	(12,025)			$	76,216			$	(99,479)

The impact of the derivatives in the above table was reflected as cash from operations on our consolidated statements of cash flows.

2728

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Balance Sheets

The following tables provide a summary of the fair value of derivatives, which are presented on a net basis in our consolidated balance sheets, that were not designated as hedging instruments as of December 31, ~~2019~~2020 and September 30, ~~2020~~2021 (in thousands):

December 31, 2019
Asset Derivatives Liability Derivatives
Derivative Instrument Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Futures contracts Commodity derivatives contracts, net $ 811 Commodity derivatives contracts, net $ 11,033
Basis derivative agreement Other current assets 0 Other current liabilities 8,457
Basis derivative agreement Other noncurrent assets 0 Other noncurrent liabilities 8,847
Total $ 811 Total $ 28,337
September 30, 2020
Asset Derivatives Liability Derivatives
Derivative Instrument Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Futures contracts Commodity derivatives contracts, net $ 1,095 Commodity derivatives contracts, net $ 3,983
Futures contracts Other noncurrent assets 1,645 Other noncurrent assets 403
Basis derivative agreement Other current assets 0 Other current liabilities 9,280
Basis derivative agreement Other noncurrent assets 0 Other noncurrent liabilities 2,994
Total $ 2,740 Total $ 16,660

December 31, 2020

Asset Derivatives

Liability Derivatives

Derivative Instrument

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Futures contracts

Commodity derivatives contracts, net

127

Commodity derivatives contracts, net

21,748

Future contracts

Other noncurrent assets

1,074

Other noncurrent liabilities

—

Basis derivative agreement

Other current assets

—

Other current liabilities

8,774

Basis derivative agreement

Other noncurrent assets

—

Other noncurrent liabilities

1,468

Total

1,201

Total

31,990

September 30, 2021

Asset Derivatives

Liability Derivatives

Derivative Instrument

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Futures contracts

Commodity derivatives contracts, net

22,325

Commodity derivatives contracts, net

40,206

Futures contracts

Other noncurrent assets

—

Other noncurrent liabilities

4,399

Basis derivative agreement

Other current assets

—

Other current liabilities

3,120

Total

22,325

Total

47,725

~~11.~~12.Fair Value

Fair Value Methods and Assumptions - Financial Assets and Liabilities

We used the following methods and assumptions in estimating fair value of our financial assets and liabilities:

•Commodity derivatives contracts. These include exchange-traded futures contracts related to petroleum products. These contracts are carried at fair value on our consolidated balance sheets and are valued based on quoted prices in active markets. See Note 1011 – Derivative Financial Instruments for further disclosures regarding these contracts.

•Basis derivative agreement. During 2019, we entered into a basis derivative agreement with a joint venture co-owner’s affiliate, and, contemporaneously, that affiliate entered into an intrastate transportation services agreement with the joint venture. Settlements under the basis derivative agreement are determined based on the basis differential of crude oil prices at different market locations and a notional volume of 30,000 barrels per day (see Note 1011 - Derivative Financial Instruments for further disclosures regarding this agreement). The fair value of this derivative was calculated based on observable market data inputs, including published commodity pricing data and market interest rates. The key inputs in the fair value calculation include the forward price curves for crude oil, the implied forward correlation in crude oil prices between West Texas and the Houston Gulf Coast, and the implied forward volatility for crude oil futures contracts.

•Long-term receivables. These include payments receivable under a sales-type leasing arrangement and cost reimbursement agreements. These receivables were recorded at fair value on our

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

•~~Long-term receivables.~~ ~~These primarily include payments receivable under a sales-type leasing arrangement and cost reimbursement payments receivable. These receivables were recorded at fair value on our~~ consolidated balance sheets, using then-current market rates to estimate the present value of future cash flows.

•~~Guarantees and contractual~~Contractual obligations. At September 30, ~~2020,~~2021, these primarily include a long-term contractual obligation we entered into in connection with the 2020 sale of ~~our~~ 3 marine terminals to a subsidiary of Buckeye. This obligation requires us to perform certain environmental remediation work on Buckeye’s behalf at the New Haven, Connecticut terminal. ~~The~~This contractual obligation was recorded at fair value on our consolidated balance sheets upon initial recognition and was calculated using our best estimate of potential outcome scenarios to determine our liability for the remediation costs required in this agreement.

•Debt. The fair value of our publicly traded notes was based on the prices of those notes at December 31, ~~2019~~2020 and September 30, ~~2020;~~2021; however, where recent observable market trades were not available, prices were determined using adjustments to the last traded value for that debt issuance or by adjustments to the prices of similar debt instruments of peer entities that are actively traded. The carrying amount of borrowings, if any, under our revolving credit facility and our commercial paper program approximates fair value due to the frequent repricing of these obligations.

Fair Value Measurements - Financial Assets and Liabilities

The following tables summarize the carrying amounts, fair values and fair value measurements recorded or disclosed as of December 31, ~~2019~~2020 and September 30, ~~2020~~2021 based on the three levels established by ASC 820, Fair Value Measurements and Disclosures (in thousands):


		December 31, 2019
Assets (Liabilities)	Assets (Liabilities)					Fair Value Measurements using:						Assets (Liabilities)					Fair Value Measurements as of December 31, 2020 using:
		Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Commodity derivatives contracts	Commodity derivatives contracts	$	(10,222)	$	(10,222)	$	(10,222)	$	—	$	—	Commodity derivatives contracts	$	(20,547)	$	(20,547)	$	(20,547)	$	—	$	—

Basis derivative agreement	Basis derivative agreement	$	(17,304)	$	(17,304)	$	—	$	(17,304)			Basis derivative agreement	$	(10,242)	$	(10,242)	$	—	$	(10,242)
Long-term receivables	Long-term receivables	$	20,782	$	20,782	$	—	$	—	$	20,782	Long-term receivables	$	22,755	$	22,755	$	—	$	—	$	22,755
Guarantees and contractual obligations		$	(408)	$	(408)	$	—	$	—	$	(408)
Contractual obligations												Contractual obligations	$	(11,207)	$	(11,207)	$	—	$	—	$	(11,207)
Debt	Debt	$	(4,706,075)	$	(5,192,685)	$	—	$	(5,192,685)	$	—	Debt	$	(4,978,691)	$	(5,880,850)	$	—	$	(5,880,850)	$	—


Assets (Liabilities)					Fair Value Measurements as of September 30, 2021 using:
	Carrying Amount		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Commodity derivatives contracts	$	(22,280)	$	(22,280)	$	(22,280)	$	—	$	—



Basis derivative agreement	$	(3,120)	$	(3,120)	$	—	$	(3,120)	$	—
Long-term receivables	$	22,768	$	22,768	$	—	$	—	$	22,768
Contractual obligations	$	(9,806)	$	(9,806)	$	—	$	—	$	(9,806)
Debt	$	(5,103,226)	$	(5,786,692)	$	—	$	(5,786,692)	$	—

2930

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2020
Assets (Liabilities) Fair Value Measurements using:
Carrying Amount Fair Value Quoted Prices in Active Markets
for Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Commodity derivatives contracts $ (1,646) $ (1,646) $ (1,646) $ — $ —
Basis derivative agreement $ (12,274) $ (12,274) $ — $ (12,274) $ —
Long-term receivables $ 21,850 $ 21,850 $ — $ — $ 21,850
Guarantees and contractual obligations $ (11,239) $ (11,239) $ — $ — $ (11,239)
Debt $ (4,900,311) $ (4,872,340) $ — $ (4,872,340) $ —

~~12.~~13.Commitments and Contingencies

Butane Blending Patent Infringement Proceeding

On October 4, 2017, Sunoco Partners Marketing & Terminals L.P. (“Sunoco”) brought an action for patent infringement in the U.S. District Court for the District of Delaware alleging Magellan Midstream Partners, L.P. (“Magellan”) and Powder Springs Logistics, LLC (“Powder Springs”) ~~are infringing~~have infringed patents related to butane blending at the Powder Springs facility located in Powder Springs, Georgia. Sunoco subsequently submitted pleadings alleging that Magellan is also infringing various patents related to butane blending at 9 Magellan facilities, in addition to Powder Springs. Sunoco is seeking monetary damages, attorneys’ fees and a permanent injunction enjoining Magellan and Powder Springs from infringing the subject patents. We deny and are vigorously defending against all claims asserted by Sunoco. ~~Although~~The amounts we have accrued in relation to the claims are immaterial, and although it is not possible to predict the ultimate outcome, we believe the ultimate resolution of this matter will not have a material adverse impact on our results of operations, financial position or cash flows.

Environmental Liabilities

Liabilities recognized for estimated environmental costs were ~~$14.9~~$14.3 million and ~~$11.9~~$11.8 million at December 31, ~~2019~~2020 and September 30, ~~2020,~~2021, respectively. We have classified environmental liabilities as other current or noncurrent based on management’s estimates regarding the timing of actual payments. Environmental expenses recognized as a result of changes in our environmental liabilities are ~~generally~~ included in operating ~~expenses~~expense on our consolidated statements of income. Environmental expenses were ~~$0.8~~$0.1 million and ~~$0.1~~$0.4 million for the three months ended September 30, ~~2019~~2020 and ~~2020,~~2021, respectively, and ~~$4.2~~$1.3 million and ~~$1.3~~$2.4 million for the nine months ended September 30, ~~2019~~2020 and ~~2020,~~2021, respectively.

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Environmental Receivables~~

Receivables from insurance carriers and other third parties related to environmental matters were $2.9 million at December 31, 2019, of which $1.8 million and $1.1 million were recorded to other accounts receivable and long-term receivables, respectively, on our consolidated balance sheets. Receivables from insurance carriers and other third parties related to environmental matters were $1.8 million at September 30, 2020, of which $1.0 million and $0.8 million were recorded to other accounts receivable and long-term receivables, respectively, on our consolidated balance sheets.

Other

In first quarter 2020, we entered into a long-term contractual obligation in connection with the sale of 3 marine terminals to Buckeye. This obligation requires us to perform certain environmental remediation work on Buckeye’s behalf at the New Haven, Connecticut terminal. ~~As of September 30,~~At December 31, 2020 our ~~consolidated~~ balance ~~sheets reflected~~sheet includes a current liability of $0.6 million and a noncurrent liability of $10.2 million, ~~to reflect~~and as of September 30, 2021 our balance sheet includes a current liability of $0.5 million and a noncurrent liability of $8.9 million, reflecting the fair ~~value~~values of ~~this obligation.~~these obligations.

We have entered into an agreement to guarantee our 50% pro rata share, up to $25.0 million, of contractual obligations under the Powder Springs’ credit facility. As of September 30, ~~2020,~~2021, our consolidated balance sheets reflected a $0.4 million other current liability and a corresponding increase in ~~our investment~~investments in non-controlled entities ~~on our consolidated balance sheets~~ to reflect the fair value of this guarantee.

We and the non-controlled entities in which we own an interest are a party to various other claims, legal actions and complaints. While the results cannot be predicted with certainty, management believes the ultimate resolution of these claims, legal actions and complaints after consideration of amounts accrued, insurance coverage or other indemnification arrangements will not have a material adverse effect on our results of operations, financial position or cash flows.

~~13.Related Party Transactions~~

Stacy Methvin is an independent member of our general partner’s board of directors and is also a director of one of our customers. We received tariff, terminalling and other ancillary revenue from this customer of $7.1 million and $8.6 million for the three months ended September 30, 2019 and 2020, respectively, and $21.4 million and $24.3 million for the nine months ended September 30, 2019 and 2020, respectively. We recorded receivables of $3.8 million and $3.7 million from this customer at December 31, 2019 and September 30, 2020, respectively. We also received storage and other miscellaneous revenue of $0.1 million and $0.3 million for the three and nine months ended September 30, 2020, respectively, from a subsidiary of a separate company for which Stacy Methvin serves as a director.

~~See Note 4 –~~ ~~Investments in Non-Controlled Entities~~ ~~and Note 7~~ –~~Leases~~ ~~for details of transactions with our joint ventures.~~

~~14.Partners’ Capital and Distributions~~

~~Partners’ Capital~~

Our general partner’s board of directors authorized the repurchase of up to $750 million of our common units through 2022. The timing, price and actual number of common units repurchased will depend on a number of factors including our expected expansion capital spending needs, excess cash available, balance sheet metrics, legal and

~~MAGELLAN MIDSTREAM PARTNERS, L.P.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

regulatory requirements, market conditions and the trading price of our common units. The repurchase program does not obligate us to acquire any particular amount of common units, and the repurchase program may be suspended or discontinued at any time.

~~The following table details the changes in the number of our common units outstanding from December 31, 2019 through September 30, 2020:~~


~~Common units outstanding on December 31, 2019~~						~~228,403,428~~
~~Units repurchased during 2020~~						~~(4,987,128)~~
~~January 2020–Settlement of employee LTIP awards~~						~~275,093~~
~~During 2020–Other(a)~~						~~9,550~~
~~Common units outstanding on September 30, 2020~~						~~223,700,943~~

~~(a) Common units issued to settle the equity-based retainers paid to independent directors of our general partner.~~

~~Distributions~~

~~Distributions we paid during 2019 and 2020 were as follows (in thousands, except per unit amounts):~~

Payment Date Per Unit Cash
Distribution
Amount Total Cash Distribution
02/14/2019 $ 0.9975 $ 227,832
05/15/2019 1.0050 229,545
08/14/2019 1.0125 231,258
Through 09/30/2019 3.0150 688,635
11/14/2019 1.0200 232,971
Total $ 4.0350 $ 921,606
02/14/2020 $ 1.0275 $ 234,774
05/15/2020 1.0275 231,245
08/14/2020 1.0275 231,245
Through 09/30/2020 3.0825 697,264
11/13/2020(a)
1.0275 229,853
Total $ 4.1100 $ 927,117

~~(a) Our general partner’s board of directors declared this cash distribution in October 2020 to be paid on November 13, 2020 to unitholders of record at the close of business on November 6, 2020.~~

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.Related Party Transactions

Stacy Methvin is an independent member of our general partner’s board of directors and also serves as a director of one of our customers. We received tariff, terminalling and other ancillary revenue from this customer of $8.6 million and $23.2 million for the three months ended September 30, 2020 and 2021, respectively, and $24.3 million and $51.6 million for the nine months ended September 30, 2020 and 2021, respectively. We occasionally have transmix settlements with this customer as well. We recorded receivables of $3.9 million and $2.3 million from this customer at December 31, 2020 and September 30, 2021, respectively.

See Note 5 – Investments in Non-Controlled Entities and Note 8 –Leases for details of transactions with our joint ventures.

15.Partners’ Capital and Distributions

Partners’ Capital

In 2020, we announced that our general partner’s board of directors had authorized the repurchase of up to $750 million of our common units through 2022. During the third quarter of 2021, we completed the repurchases authorized under this program (see Note 16 - Subsequent Events regarding a subsequent expansion of this program).

The following table details the changes in the number of our common units outstanding from December 31, 2020 through September 30, 2021:


Common units outstanding on December 31, 2020						223,119,811
Units repurchased during 2021						(9,837,580)
January 2021–Settlement of employee LTIP awards						150,435
During 2021–Other(1)						12,572
Common units outstanding on September 30, 2021						213,445,238

(1) Common units issued to settle the equity-based retainers paid to independent directors of our

general partner.

MAGELLAN MIDSTREAM PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Distributions

Distributions we paid during 2020 and 2021 were as follows (in thousands, except per unit amounts):


Payment Date	Per Unit Distribution Amount			Total Distribution
02/14/2020		$	1.0275		$	234,774
05/15/2020		1.0275			231,245
08/14/2020		1.0275			231,245
Through 09/30/2020		3.0825			697,264
11/13/2020		1.0275			229,853
Total		$	4.1100		$	927,117

02/12/2021		$	1.0275		229,423
05/14/2021		1.0275			228,962
08/13/2021		1.0275			226,633
Through 09/30/2021		3.0825			685,018
11/12/2021(1)		1.0375			221,449
Total		$	4.1200		$	906,467

(1) Our general partner’s board of directors declared this distribution in October 2021 to be paid on November 12, 2021 to unitholders of record at the close of business on November 5, 2021. The estimated total distribution is based upon the number of common units currently outstanding.

16.Subsequent Events

Recognizable events

No recognizable events occurred subsequent to September 30, ~~2020.~~2021.

Non-recognizable events

~~Cash~~ Distribution. In October ~~2020,~~2021, our general partner’s board of directors declared a quarterly ~~cash~~ distribution of ~~$1.0275~~$1.0375 per unit for the period of July 1, ~~2020~~2021 through September 30, ~~2020.~~2021. This quarterly ~~cash~~ distribution will be paid on November ~~13, 2020~~12, 2021 to unitholders of record on November ~~6, 2020.~~5, 2021.

Unit Repurchase Program. Following the completion of the $750 million repurchase program announced in 2020, our general partner’s board of directors in October 2021 authorized the expansion of our unit repurchase program by $750 million for a total of $1.5 billion and extended the program through 2024. The expanded program allows unit repurchases in compliance with Securities Exchange Act Rules 10b-18, 10b5-1 or both. Our unit repurchase program does not obligate us to acquire a specific number of units during any period, and our decision to commence, discontinue or resume repurchases in any period will depend on a number of factors, including our expected expansion capital spending needs, excess cash available, balance sheet metrics, legal and regulatory requirements, market conditions and the trading price of our units.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

We are a publicly traded limited partnership principally engaged in the transportation, storage and distribution of refined petroleum products and crude oil. As of September 30, ~~2020,~~2021, our asset portfolio, excluding assets associated with discontinued operations, consisted of:

•our refined products segment, comprised of our approximately 9,800-mile refined petroleum products pipeline system with 54 connected terminals ~~as well as 25 independent terminals not connected to our pipeline system~~ and two marine storage terminals (one of which is owned through a joint venture); and

During first quarter 2020, we completed a reorganization of our reportable segments. This reorganization was effected to reflect changes in the management of our business in conjunction with the sale of three of our marine terminals. Following this sale, two of our remaining marine terminals were combined with our refined products segment and one terminal was combined with our crude oil segment based on the types of product stored at the facilities. Accordingly, we have restated our segment disclosures for all previous periods included in this report.

The following discussion provides an analysis of the results for each of our operating segments, an overview of our liquidity and capital resources and other items related to our partnership. The following discussion and analysis should be read in conjunction with (i) our accompanying interim consolidated financial statements and related notes and (ii) our consolidated financial statements, related notes and management’s discussion and analysis of financial condition and results of operations included in our ~~Form 8-K filed with the Securities and Exchange Commission on May 4, 2020, which reflects changes in our reporting segments since the filing of our~~ Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

2020.

Recent Developments

~~COVID-19 and Decline in Commodity Prices~~Discontinued Operations. ~~. This year’s unprecedented events impacting travel and economic activity have significantly reduced demand for~~In June 2021, we entered into an agreement to sell our independent terminals network comprised of 26 refined petroleum products terminals with approximately six million barrels of storage located primarily in the ~~markets we serve.~~southeastern United States. The ~~related declines in commodity prices have also significantly reduced~~sale is expected to close upon the ~~value~~receipt of ~~tender barrels we receive from our transportation customers and the margins we earn from our gas liquids blending activities.~~required regulatory approvals. The reduction in refined products demand and lower crude oil prices have combined to put significant downward pressure on domestic crude oil production. While we benefit from take-or-pay commitments for the majority of the capacity of our long-haul crude oil pipelines, a sustained reduction in crude oil production could cause delays in the timing of our recognition of revenue from these commitments. These factors have also significantly decreased the creditworthiness of certain of our crude oil transportation customers, resulting in an increased risk of customer defaults. To date, our operations and our employees have successfully adapted to the current environment, enabling our customers to continue benefiting from the services they rely on from our critical infrastructure, and our customers have continued to meet their obligations to us. Given the uncertain timing of a return of refined products demand to historical levels and a recovery in commodity prices, the extent of the impact these events will continue to have on ourrelated results of operations, ~~is unclear~~financial position and ~~could be material. However, we do not believe these events will impact our ability to meet any~~cash flows have been classified as discontinued operations for all periods presented. See Note 2 - Discontinued Operations and Assets Held for Sale in Item 1 of ~~our financial obligations or result in any significant impairments to our assets.~~Part I of this report for further details.

~~Cash~~ Sale of Partial Interest in MVP Terminalling, LLC. In April 2021, we sold nearly half of our membership interest in MVP and received proceeds of $272.1 million. Following the sale, we own approximately 25% of MVP and remain the operator of the facility.

Distribution. In October ~~2020,~~2021, our general partner’s board of directors declared a quarterly ~~cash~~ distribution of ~~$1.0275~~$1.0375 per unit for the period of July 1, ~~2020~~2021 through September 30, ~~2020.~~2021. This quarterly ~~cash~~ distribution will be paid on November ~~13, 2020~~12, 2021 to unitholders of record on November ~~6, 2020.~~5, 2021.

Results of Operations

We believe that investors benefit from having access to the same financial measures utilized by management. Operating margin, which is presented in the following tables, is an important measure used by management to evaluate the economic performance of our core operations. Operating margin is not a generally accepted accounting principles (“GAAP”) measure, but the components of operating margin are computed using amounts that are determined in accordance with GAAP. A reconciliation of operating margin to operating profit, which is ~~its~~the nearest comparable GAAP financial measure, is included in the following tables. Operating profit includes expense items, such as depreciation, amortization and impairment expense and general and administrative (“G&A”) expense, which management does not focus on when evaluating the core profitability of our separate operating segments. Additionally, product margin, which management primarily uses to evaluate the profitability of our commodity-related activities, is provided in these tables. Product margin is a non-GAAP measure but ~~its~~the components of product sales revenue and cost of product sales are determined in accordance with GAAP. Our gas liquids blending, fractionation and other commodity-related activities generate significant revenue. However, we believe the product margin from these activities, which takes into account the related cost of product sales, better represents ~~its~~the importance to our results of operations.

~~During first quarter 2020, we revised our reporting segments. See Note 1 –~~ ~~Organization, Description of Business and Basis of Presentation~~ ~~of the consolidated financial statements included in Item 1 of Part I of this report for a discussion of this matter.~~

Three Months Ended September 30, ~~2019~~2020 compared to Three Months Ended September 30, ~~2020~~2021


		Three Months Ended September 30,				Variance Favorable (Unfavorable)				Three Months Ended September 30,				Variance Favorable (Unfavorable)
		2019		2020		$ Change		% Change		2020		2021		$ Change		% Change
Financial Highlights ($ in millions, except operating statistics)	Financial Highlights ($ in millions, except operating statistics)								Financial Highlights ($ in millions, except operating statistics)
Transportation and terminals revenue:	Transportation and terminals revenue:								Transportation and terminals revenue:
Refined products	Refined products	$	352.6	$	320.8	$	(31.8)	(9)	Refined products	$	307.2	$	349.4	$	42.2	14
Crude oil	Crude oil	155.3		154.6		(0.7)		—	Crude oil	154.6		116.9		(37.7)		(24)
Intersegment eliminations	Intersegment eliminations	(1.5)		(1.9)		(0.4)		(27)	Intersegment eliminations	(1.9)		(1.4)		0.5		26
Total transportation and terminals revenue	Total transportation and terminals revenue	506.4		473.5		(32.9)		(6)	Total transportation and terminals revenue	459.9		464.9		5.0		1
Affiliate management fee revenue	Affiliate management fee revenue	5.3		5.3		—		—	Affiliate management fee revenue	5.3		5.3		—		—
Operating expenses:	Operating expenses:								Operating expenses:
Refined products	Refined products	127.4		118.5		8.9		7	Refined products	114.2		114.6		(0.4)		—
Crude oil	Crude oil	44.9		47.0		(2.1)		(5)	Crude oil	47.0		35.1		11.9		25
Intersegment eliminations	Intersegment eliminations	(3.0)		(3.5)		0.5		17	Intersegment eliminations	(3.5)		(3.1)		(0.4)		(11)
Total operating expenses	Total operating expenses	169.3		162.0		7.3		4	Total operating expenses	157.7		146.6		11.1		7
Product margin:	Product margin:								Product margin:
Product sales revenue	Product sales revenue	144.8		119.4		(25.4)		(18)	Product sales revenue	111.2		168.8		57.6		52
Cost of product sales	Cost of product sales	108.7		96.0		12.7		12	Cost of product sales	89.4		145.8		(56.4)		(63)
Product margin	Product margin	36.1		23.4		(12.7)		(35)	Product margin	21.8		23.0		1.2		6
Other operating income (expense)	Other operating income (expense)	(0.4)		(3.0)		(2.6)		(650)	Other operating income (expense)	(2.9)		2.6		5.5		n/a
Earnings of non-controlled entities	Earnings of non-controlled entities	50.1		39.2		(10.9)		(22)	Earnings of non-controlled entities	39.2		36.5		(2.7)		(7)
Operating margin	Operating margin	428.2		376.4		(51.8)		(12)	Operating margin	365.6		385.7		20.1		5
Depreciation, amortization and impairment expense	Depreciation, amortization and impairment expense	56.6		71.8		(15.2)		(27)	Depreciation, amortization and impairment expense	68.4		61.4		7.0		10
G&A expense	G&A expense	51.1		38.0		13.1		26	G&A expense	37.5		46.7		(9.2)		(25)
Operating profit	Operating profit	320.5		266.6		(53.9)		(17)	Operating profit	259.7		277.6		17.9		7
Interest expense (net of interest income and interest capitalized)	Interest expense (net of interest income and interest capitalized)	47.3		52.7		(5.4)		(11)	Interest expense (net of interest income and interest capitalized)	52.7		56.6		(3.9)		(7)
Gain on disposition of assets	Gain on disposition of assets	(2.6)		—		(2.6)		(100)	Gain on disposition of assets	—		(3.2)		3.2		—
Other expense		2.6		1.5		1.1		42
Income before provision for income taxes		273.2		212.4		(60.8)		(22)
Other (income) expense									Other (income) expense	1.4		2.1		(0.7)		(50)
Income from continuing operations before provision for income taxes									Income from continuing operations before provision for income taxes	205.6		222.1		16.5		8
Provision for income taxes	Provision for income taxes	0.2		0.8		(0.6)		(300)	Provision for income taxes	0.9		0.8		0.1		11
Income from continuing operations									Income from continuing operations	204.7		221.3		16.6		8
Income from discontinued operations									Income from discontinued operations	6.9		15.3		8.4		122
Net income	Net income	$	273.0	$	211.6	$	(61.4)	(22)	Net income	$	211.6	$	236.6	$	25.0	12

Operating Statistics:	Operating Statistics:								Operating Statistics:
Refined products:	Refined products:								Refined products:
Transportation revenue per barrel shipped	Transportation revenue per barrel shipped	$	1.618	$	1.719				Transportation revenue per barrel shipped	$	1.719	$	1.724
Volume shipped (million barrels):	Volume shipped (million barrels):								Volume shipped (million barrels):
Gasoline	Gasoline	74.5		71.9					Gasoline	71.9		80.3
Distillates	Distillates	47.0		42.5					Distillates	42.5		53.0
Aviation fuel	Aviation fuel	11.1		4.7					Aviation fuel	4.7		8.4
Liquefied petroleum gases	Liquefied petroleum gases	3.8		0.1					Liquefied petroleum gases	0.1		0.1
Total volume shipped	Total volume shipped	136.4		119.2					Total volume shipped	119.2		141.8
Crude oil:	Crude oil:								Crude oil:
Magellan 100%-owned assets:	Magellan 100%-owned assets:								Magellan 100%-owned assets:
Transportation revenue per barrel shipped	Transportation revenue per barrel shipped	$	0.935	$	1.401				Transportation revenue per barrel shipped	$	1.401	$	0.803
Volume shipped (million barrels)(1)	Volume shipped (million barrels)(1)	79.2		45.1					Volume shipped (million barrels)(1)	45.1		49.2
Terminal average utilization (million barrels per month)	Terminal average utilization (million barrels per month)	22.9		25.9					Terminal average utilization (million barrels per month)	25.9		24.9
Select joint venture pipelines:	Select joint venture pipelines:								Select joint venture pipelines:
BridgeTex - volume shipped (million barrels)(2)	BridgeTex - volume shipped (million barrels)(2)	40.8		30.6					BridgeTex - volume shipped (million barrels)(2)	30.6		29.1
Saddlehorn - volume shipped (million barrels)(3)	Saddlehorn - volume shipped (million barrels)(3)	17.0		15.1					Saddlehorn - volume shipped (million barrels)(3)	15.1		19.9

(1) Volume shipped includes shipments related to our crude oil marketing activities.

(2) These volumes reflect the total shipments for the BridgeTex pipeline, which is owned 30% by us.

(3) These volumes reflect the total shipments for the Saddlehorn pipeline, which is owned 30% by us.

Transportation and terminals revenue increased $5.0 million resulting from:

•an increase in refined products revenue of $42.2 million primarily due to increased transportation revenue as a result of higher volumes versus the pandemic levels of 2020 due to the recovery in travel, economic and drilling activity as well as additional contributions from our Texas pipeline expansion projects. Transportation revenues for the current period also benefited from our mid-year 2021 tariff increase. These favorable items were partially offset by lower storage revenues due to lower utilization and rates following recent contract expirations; and

•a decrease in crude oil revenue of $37.7 million primarily due to lower average tariff rates and reduced storage revenues. Average tariff rates decreased primarily as a result of the late 2020 expiration of several higher-priced contracts on our Longhorn pipeline, with much of this volume replaced by activities of our marketing affiliate. In addition, deficiency revenue recognized in the year-ago period did not recur in third quarter 2021. Storage revenues decreased primarily due to the 2020 period benefiting from increased short-term storage utilization at higher rates, with recent contract renewals at lower rates in the current period.

Operating expenses decreased by $11.1 million primarily resulting from:

•an increase in refined products expenses of $0.4 million. An increase in integrity spending related to the timing of maintenance work, higher power costs due to higher volume shipped and higher property taxes were mainly offset by favorable product overages (which reduce operating expenses); and

•a decrease in crude oil expenses of $11.9 million primarily due to a decrease in integrity spending related to the timing of maintenance work, lower fees paid to Seabrook for ancillary services and favorable product overages.

Product margin increased $1.2 million primarily due to recognition of losses on futures contracts in third quarter 2020 offset by lower margins and lower sales volumes on our gas liquids blending and fractionation activities in the current period.

Other operating income (expense) was $5.5 million favorable in part due to reduced estimates for retained liabilities related to our 2020 marine terminals sale and lower losses recognized on a basis derivative agreement during the current period.

Earnings of non-controlled entities decreased $2.7 million primarily due to the sale of a portion of our interest in MVP during second quarter 2021. We also earned less from Seabrook due to lower throughput fees and additional depreciation for recently-constructed assets and BridgeTex due to less favorable product overages. These decreases were partially offset by additional earnings from Powder Springs due to gains on futures contracts in the current quarter.

Depreciation, amortization and impairment expense decreased $7.0 million primarily due to the impairment in third quarter 2020 of certain terminalling assets.

G&A expense increased $9.2 million primarily due to higher incentive compensation costs as a result of improved financial results in 2021.

Interest expense, net of interest income and interest capitalized, increased $3.9 million due to lower capitalized interest as a result of reduced ongoing expansion capital spending and higher debt outstanding. Our weighted-average debt outstanding was $5.1 billion in third quarter 2021 compared to $4.9 billion in third quarter 2020. The weighted average interest rate was 4.4% in third quarter 2021 compared to 4.3% in third quarter 2020.

Gain on disposition of assets of $3.2 million in the current period resulted from true-ups for previous asset sales, including the final working capital adjustments related to the sale of a portion of our interest in MVP.

Income from discontinued operations increased by $8.4 million due to improved product margin for our independent terminals as a result of higher gas liquids blending volume sold at increased pricing and less depreciation now that the assets are classified as held for sale.

Nine Months Ended September 30, 2020 compared to Nine Months Ended September 30, 2021


	Nine Months Ended September 30,				Variance Favorable (Unfavorable)
	2020		2021		$ Change		% Change
Financial Highlights ($ in millions, except operating statistics)
Transportation and terminals revenue:
Refined products	$	876.4	$	984.9	$	108.5	12
Crude oil	433.9		351.8		(82.1)		(19)
Intersegment eliminations	(5.1)		(4.4)		0.7		14
Total transportation and terminals revenue	1,305.2		1,332.3		27.1		2
Affiliate management fee revenue	15.9		15.9		—		—
Operating expenses:
Refined products	316.3		314.2		2.1		1
Crude oil	139.7		118.1		21.6		15
Intersegment eliminations	(9.9)		(9.4)		(0.5)		(5)
Total operating expenses	446.1		422.9		23.2		5
Product margin:
Product sales revenue	443.1		575.6		132.5		30
Cost of product sales	364.9		488.6		(123.7)		(34)
Product margin	78.2		87.0		8.8		11
Other operating income (expense)	0.5		4.0		3.5		700
Earnings of non-controlled entities	116.5		116.1		(0.4)		—
Operating margin	1,070.2		1,132.4		62.2		6
Depreciation, amortization and impairment expense	183.2		168.3		14.9		8
G&A expense	115.5		148.7		(33.2)		(29)
Operating profit	771.5		815.4		43.9		6
Interest expense (net of interest income and interest capitalized)	168.0		169.3		(1.3)		(1)
Gain on disposition of assets	(12.9)		(72.9)		60.0		465
Other (income) expense	3.7		18.1		(14.4)		(389)
Income from continuing operations before provision for income taxes	612.7		700.9		88.2		14
Provision for income taxes	2.2		2.0		0.2		9
Income from continuing operations	610.5		698.9		88.4		14
Income from discontinued operations	22.5		39.4		16.9		75
Net income	$	633.0	$	738.3	$	105.3	17

Operating Statistics:
Refined products:
Transportation revenue per barrel shipped	$	1.658	$	1.697
Volume shipped (million barrels):
Gasoline	199.4		224.1
Distillates	127.6		152.4
Aviation fuel	16.8		21.7
Liquefied petroleum gases	0.5		0.6
Total volume shipped	344.3		398.8
Crude oil:
Magellan 100%-owned assets:
Transportation revenue per barrel shipped	$	1.145	$	0.803
Volume shipped (million barrels)(1)	167.9		145.3
Terminal average utilization (million barrels per month)	24.7		25.1
Select joint venture pipelines:
BridgeTex - volume shipped (million barrels)(2)	99.9		84.6
Saddlehorn - volume shipped (million barrels)(3)	46.5		56.0

(1) Volume shipped ~~in 2020 reflects a change in the way~~includes shipments related to our ~~customers contract for our services pursuant to which customers are able to utilize~~ crude oil storage capacity at East Houston and dock access at Seabrook. Subsequent to this change, the services we provide no longer include a transportation element. Therefore, revenues related to these services are reflected entirely as terminalling revenues and the related volumes are no longer reflected in our calculation of transportation volumes.marketing activities.

(2) These volumes reflect the total shipments for the BridgeTex pipeline, which is owned 30% by us.

(3) These volumes reflect the total shipments for the Saddlehorn pipeline, which was owned 40% by us through January 31, 2020 and 30% thereafter.

~~Transportation and terminals revenue decreased $32.9 million resulting from:~~

•a decrease in refined products revenue of $31.8 million. Transportation volumes decreased primarily due to lower demand in the current year associated with the ongoing impact from COVID-19 and related restrictions as well as reduced drilling activity in response to the lower commodity price environment. Revenues also decreased due to the sale of three marine terminals in first quarter 2020 and discontinuation of the ammonia pipeline operations in late 2019. These declines were partially offset by an increase in the average tariff rate in the current period as well as contributions from the recently-constructed East Houston-to-Hearne pipeline segment that became operational in late 2019 and the West Texas expansion that began operations in the third quarter of 2020. Average tariff rates increased as a result of the 2020 mid-year adjustment as well as reduced short-haul shipments on the South Texas pipelines, which move at a lower rate; and

•a decrease in crude oil revenue of $0.7 million. Lower third-party spot shipments on our Longhorn pipeline due to less favorable differentials between the Permian Basin and Houston were largely offset by the activities of our marketing affiliate. Average tariff rates increased as a result of lower shipments on our Houston distribution system, which move at a lower rate than longer-haul shipments. Lower transportation volume on our Houston distribution system resulted primarily from a change in the way customers now contract for services at our Seabrook export facility, and was offset by incremental revenue from the related terminal transfer fee. Tender deduction revenues also decreased due to lower crude oil prices. These declines were partially offset by increased storage revenues as more contract storage was utilized at higher rates.

~~Operating expenses decreased by $7.3 million primarily resulting from:~~

•a decrease in refined products expenses of $8.9 million primarily due to timing of planned integrity spending as well as no costs in the current period associated with the sold or discontinued assets, partially offset by less favorable product overages (which reduce operating expenses); and

•~~an increase in crude oil expenses of $2.1 million due to the timing of integrity spending and less favorable product overages.~~

Product margin decreased $12.7 million primarily due to recognition of losses on futures contracts in third quarter 2020 compared to gains in 2019, partially offset by higher sales volume related to our fractionation activities.

~~Other operating income (expense) was $2.6 million unfavorable primarily due to insurance proceeds received in third quarter 2019 related to Hurricane Harvey.~~

Earnings of non-controlled entities decreased $10.9 million primarily due to decreased earnings from BridgeTex Pipeline Company, LLC (“BridgeTex”) mainly due to lower volume resulting from less spot shipments based on unfavorable market conditions and customer use of previously earned credits. We also earned less from Saddlehorn Pipeline Company, LLC (“Saddlehorn”) due to our reduced ownership interest. These decreases were partially offset by additional earnings from MVP Terminalling, LLC (“MVP”) from the recent start-up of newly-constructed storage and dock assets.

~~Depreciation, amortization and impairment expense increased $15.2 million primarily due to the impairment in third quarter 2020 of certain terminalling assets and more assets placed into service.~~

G&A expense decreased $13.1 million primarily due to lower incentive compensation accruals to reflect the impacts of COVID-19 related reductions in economic activity and the significant decline in commodity prices.

Interest expense, net of interest income and interest capitalized, increased $5.4 million primarily due to lower capitalized interest as a result of lower ongoing construction project spending and higher outstanding debt. Our weighted-average debt outstanding was $4.9 billion in third quarter 2020 compared to $4.6 billion in third quarter 2019. The weighted average interest rate was 4.3% in third quarter 2020 compared to 4.6% in third quarter 2019.

Gain on disposition of assets was $2.6 million unfavorable due to additional gain recorded in third quarter 2019 related to our discontinued Delaware Basin pipeline construction project that was subsequently sold to a third party.

~~Other expense was $1.1 million favorable due to lower pension-related costs in the current period.~~

~~Nine Months Ended September 30, 2019 compared to Nine Months Ended September 30, 2020~~

Nine Months Ended September 30, Variance
Favorable (Unfavorable)
2019 2020 $ Change % Change
Financial Highlights ($ in millions, except operating statistics)
Transportation and terminals revenue:
Refined products $ 1,009.8 $ 914.9 $ (94.9) (9)
Crude oil 467.6 433.9 (33.7) (7)
Intersegment eliminations (3.8) (5.1) (1.3) (34)
Total transportation and terminals revenue 1,473.6 1,343.7 (129.9) (9)
Affiliate management fee revenue 15.8 15.9 0.1 1
Operating expenses:
Refined products 362.9 327.8 35.1 10
Crude oil 129.4 139.7 (10.3) (8)
Intersegment eliminations (8.0) (9.9) 1.9 24
Total operating expenses 484.3 457.6 26.7 6
Product margin:
Product sales revenue 497.8 481.8 (16.0) (3)
Cost of product sales 430.7 395.8 34.9 8
Product margin 67.1 86.0 18.9 28
Other operating income (expense) 1.5 0.5 (1.0) (67)
Earnings of non-controlled entities 122.2 116.5 (5.7) (5)
Operating margin 1,195.9 1,105.0 (90.9) (8)
Depreciation, amortization and impairment expense 181.0 193.9 (12.9) (7)
G&A expense 149.5 117.0 32.5 22
Operating profit 865.4 794.1 (71.3) (8)
Interest expense (net of interest income and interest capitalized) 148.3 168.0 (19.7) (13)
Gain on disposition of assets (29.0) (12.9) (16.1) (56)
Other expense 9.2 3.8 5.4 59
Income before provision for income taxes 736.9 635.2 (101.7) (14)
Provision for income taxes 2.5 2.2 0.3 12
Net income $ 734.4 $ 633.0 $ (101.4) (14)
Operating Statistics:
Refined products:
Transportation revenue per barrel shipped $ 1.600 $ 1.658
Volume shipped (million barrels):
Gasoline 207.4 199.4
Distillates 138.8 127.6
Aviation fuel 29.8 16.8
Liquefied petroleum gases 8.9 0.5
Total volume shipped 384.9 344.3
Crude oil:
Magellan 100%-owned assets:
Transportation revenue per barrel shipped $ 0.952 $ 1.145
Volume shipped (million barrels)(1)
239.1 167.9
Terminal average utilization (million barrels per month) 22.7 24.7
Select joint venture pipelines:
BridgeTex - volume shipped (million barrels)(2)
117.3 99.9
Saddlehorn - volume shipped (million barrels)(3)
39.4 46.5

(1) Volume shipped includes shipments related to our crude oil marketing activities. Volume shipped in 2020 reflects a change in the way our customers contract for our services pursuant to which customers are able to utilize crude oil storage capacity at East Houston and dock access at Seabrook. Subsequent to this change, the services we provide no longer include a transportation element. Therefore, revenues related to these services are reflected entirely as terminalling revenues and the related volumes are no longer reflected in our calculation of transportation volumes.

~~(2) These volumes reflect the total shipments for the BridgeTex pipeline, which is owned 30% by us.~~

~~(3) These volumes reflect the total shipments for the Saddlehorn pipeline, which was owned 40% by us through January 31, 2020 and 30% thereafter.~~

Transportation and terminals revenue ~~decreased $129.9~~increased $27.1 million resulting from:

•~~a decrease~~an increase in refined products revenue of ~~$94.9 million. Transportation volumes decreased~~$108.5 million primarily due to ~~lower demand during~~increased transportation revenue as a result of higher volumes versus the pandemic levels of 2020 ~~associated with~~due to the ~~ongoing impact from COVID-19~~recovery in travel, economic and ~~related restrictions~~drilling activity as well as ~~reduced drilling activity in response to the lower commodity price environment.~~additional contributions from our Texas pipeline expansion projects. Revenues also ~~decreased due to the sale of three marine terminals in first quarter 2020 and discontinuation of the ammonia pipeline operations in late 2019. These declines were partially offset by~~benefited from an increase in the average tariff rate in the current period as a result of the ~~2019~~2020 and ~~2020~~2021 mid-year ~~adjustments, as well as contributions from~~adjustments. These favorable items were partially offset by the ~~recently-constructed East Houston-to-Hearne pipeline segment that became operational in late 2019 and the West Texas expansion that began operations~~absence of revenues in the ~~third quarter of 2020;~~current period associated with the three marine terminals we sold in March 2020 and lower storage revenues due to lower utilization and lower rates following recent contract expirations; and

•a decrease in crude oil revenue of ~~$33.7 million. Lower third-party spot shipments~~$82.1 million primarily due to lower average tariff rates, less volume shipped and reduced storage revenues. Average tariff rates decreased primarily as a result of the late 2020 expiration of several higher-priced contracts on our Longhorn ~~pipeline~~pipeline. In addition, deficiency revenue recognized in the year-ago period did not recur in 2021. Transportation volumes also declined partially due to ~~less favorable differentials between the Permian Basin and Houston were partially offset~~those Longhorn contract expirations, with much of this volume replaced by ~~the~~ activities of our marketing ~~affiliate. Average tariff rates increased~~affiliate, as ~~a result of lower~~well as short-term supply disruptions caused by the 2021 winter storm that negatively impacted shipments mainly on our Houston distribution ~~system, which move~~system. Storage revenues decreased primarily due to the 2020 period benefiting from increased short-term storage utilization at ahigher rates and contract renewals at lower ~~rate than longer-haul shipments. Lower transportation volume on our Houston distribution system resulted primarily from a change~~rates in the way customers now contract for services at our Seabrook export facility, and was offset by incremental revenue from the related terminal transfer fee. Tender deduction revenues also decreased due to lower crude oil prices. These declines were partially offset by increased storage revenues as more contract storage was utilized at higher rates.current period.

Operating expenses decreased by ~~$26.7~~$23.2 million primarily resulting from:

•a decrease in refined products expenses of ~~$35.1 million primarily due to timing~~$2.1 million. Favorable product overages and the absence of ~~planned integrity spending as well as no~~ costs in the current period associated with the ~~sold or discontinued assets,~~divested marine terminals were partially offset by ~~less favorable product overages;~~higher compensation costs and more integrity spending due to timing of project work; and

•~~an increase~~a decrease in crude oil expenses of ~~$10.3~~$21.6 million primarily due to lower power costs as a result of our recent optimization efforts as well as gains on power hedges driven by the ~~timing of~~winter storm in first quarter 2021, lower fees paid to Seabrook for ancillary services and lower integrity ~~spending and less favorable product overages.~~spending.

Product margin increased ~~$18.9~~$8.8 million primarily due to ~~recognition~~lower of gains on futures contracts in the current period compared to losses in 2019, partially offset by lower gas liquids blending margins driven by lower sales volumes and lower commodity prices and unfavorable lower-of-cost-or-net-realizable-valuecost or net realizable value adjustments ~~during~~that negatively impacted 2020 ~~due to~~as a result of the significant decrease in commodity ~~prices.~~prices that year and higher margins on our fractionator and crude over/short activities, partially offset by reduced margins on our gas liquids blending activities in the current year.

Other operating income (expense) was ~~$1.0~~$3.5 million ~~unfavorable in 2020~~favorable primarily due to ~~insurance settlements received in 2019~~sales of unused air emission credits and reduced estimates for retained liabilities related to ~~Hurricane Harvey, partially offset by less losses recognized on a basis derivative agreement during the current period.~~our 2020 marine terminals sale.

Earnings of non-controlled entities decreased ~~$5.7 million primarily~~$0.4 million. Lower earnings from MVP following the sale of a portion of our interest during second quarter 2021 and from Powder Springs due to lower ~~earnings from BridgeTex and Saddlehorn~~gains recognized in ~~2020, partially~~the current year on futures contracts were mostly offset by ~~additional earnings~~contributions from expansion projects at MVP ~~from the recent start-up of newly-constructed storage~~ and ~~dock assets and increased earnings from Powder Springs Logistics, LLC (“Powder Springs”).~~Saddlehorn.

Depreciation, amortization and impairment expense ~~increased $12.9~~decreased $14.9 million primarily due to ~~the~~ impairment oflosses recognized in 2020 related to certain terminalling ~~assets in 2020 and more assets placed into service.~~assets.

G&A expense ~~decreased $32.5~~increased $33.2 million primarily due to ~~lower~~higher incentive compensation ~~accruals to reflect the impacts~~costs as a result of ~~COVID-19 related reductions~~improved financial results, as well as higher benefits costs in ~~economic activity and the significant decline in commodity prices.~~2021.

Interest expense, net of interest income and interest capitalized, increased ~~$19.7~~$1.3 million primarily due to ~~higher outstanding debt and higher costs associated with early debt retirement, as well as~~ lower capitalized interest ~~(due to lower~~in the current year as a result of reduced ongoing ~~construction project spending in 2020).~~expansion capital spending. Our ~~average~~weighted-average debt outstanding ~~debt increased from $4.5~~was $5.1 billion in ~~2019~~the 2021 period compared to $4.9 billion in 2020. ~~Our weighted-average~~The weighted average interest rate ~~decreased from 4.6%~~was 4.4% in ~~2019~~2021 compared to 4.5% in 2020.

Gain on disposition of assets of $72.9 million in 2021 was ~~$16.1 million unfavorable. In 2020, we recognized a gain on~~primarily the result of the sale of a portion of our interest in ~~Saddlehorn of~~MVP and $12.9 ~~million. In 2019, we~~million recognized ~~a deferred gain of $11.0 million related~~in 2020 was due to the ~~2018~~ sale of a portion of our ~~investment~~interest in BridgeTex, a gain of $12.7 million related to our discontinued Delaware Basin crude oil pipeline construction project that was sold to a third party and a gain of $5.3 million resulting from the sale of an inactive terminal along our refined products pipeline system.

Saddlehorn.

Other expense was ~~$5.4~~$14.4 million ~~favorable~~unfavorable primarily due to ~~lower pension-related costs~~amounts recognized in second quarter 2021 related to certain legal matters.

Income from discontinued operations increased by $16.9 million due to improved product margin for our independent terminals as a result of higher gas liquids blending volume sold at increased pricing and less depreciation now that the ~~current period.~~

assets are classified as held for sale.

Adjusted EBITDA, Distributable Cash Flow and Free Cash Flow

We ~~calculate~~believe that investors benefit from having access to the ~~non-GAAP~~same financial measures utilized by management. In the following tables, we present the financial measures of adjusted EBITDA, distributable cash flow (“DCF”) and free cash flow (“FCF”), which are non-GAAP measures. These measures include the results of our discontinued operations.

Adjusted EBITDA is an important measure utilized by management and the investment community to assess the financial results of a company. A reconciliation of adjusted EBITDA to net income, the nearest comparable GAAP measure, is included in the table below. ~~Management uses~~

Our partnership agreement requires that all of our available cash, less amounts reserved by our general partner’s board of directors, be distributed to our unitholders. DCF is used by management to determine the amount of cash that our operations generated, after maintenance capital spending, that is available for distribution to our unitholders, as well as a basis for recommending to our general partner’s board of directors the amount of ~~cash~~ distributions to be paid ~~to our common unitholders~~ each period. ~~Management~~We also ~~uses~~use DCF as athe basis for ~~determining the payouts for the~~calculating our performance-based awards issued under our equity-based compensation plan. Adjusted EBITDA is an important measure that we and the investment community use to assess the financial results of an entity. We believe that investors benefit from having access to the same financial measures utilized by management for these evaluations.equity long-term incentive compensation. A reconciliation of DCF to net income, the nearest comparable GAAP measure, is included in the table below.

FCF is a financial metric used by many investors and ~~adjusted~~others in the financial community to measure the amount of cash generated by a company during a period after accounting for all investing activities, including both maintenance and expansion capital spending, as well as proceeds from divestitures. We believe FCF is important to the financial community as it reflects the amount of cash available for distributions, unit repurchases, debt reduction, additional investments or other partnership uses. A reconciliation of FCF to net income and to net cash provided by operating activities, the nearest comparable GAAP measure, is included in the following tables.

Since the non-GAAP measures presented here include adjustments specific to us, they may not be comparable to similarly-titled measures of other companies.

Adjusted EBITDA, DCF and FCF are non-GAAP measures. A reconciliation of each of these measures to net income for the nine months ended September 30, ~~2019~~2020 and ~~2020 to net income, which~~2021 is ~~its nearest comparable GAAP financial measure,~~as follows (in millions):


		Nine Months Ended September 30,				Increase (Decrease)			Nine Months Ended September 30,
		2019		2020					2020		2021
Net income	Net income	$	734.4	$	633.0	$	(101.4)	Net income	$	633.0	$	738.3
Interest expense, net	Interest expense, net	148.3		168.0		19.7		Interest expense, net	168.0		169.3
Depreciation, amortization and impairment(1)	Depreciation, amortization and impairment(1)	176.9		193.4		16.5		Depreciation, amortization and impairment(1)	193.4		174.4
Equity-based incentive compensation(2)	Equity-based incentive compensation(2)	12.8		(9.1)		(21.9)		Equity-based incentive compensation(2)	(9.1)		9.5

Gain on disposition of assets(3)	Gain on disposition of assets(3)	(16.3)		(10.5)		5.8		Gain on disposition of assets(3)	(10.5)		(68.5)

Commodity-related adjustments:	Commodity-related adjustments:							Commodity-related adjustments:
Derivative (gains) losses recognized in the period associated with future transactions(4)	Derivative (gains) losses recognized in the period associated with future transactions(4)	13.7		6.7		(7.0)		Derivative (gains) losses recognized in the period associated with future transactions(4)	6.7		21.1
Derivative gains (losses) recognized in previous periods associated with transactions completed in the period(4)	Derivative gains (losses) recognized in previous periods associated with transactions completed in the period(4)	71.2		(18.9)		(90.1)		Derivative gains (losses) recognized in previous periods associated with transactions completed in the period(4)	(18.9)		(32.2)
Inventory valuation adjustments(5)	Inventory valuation adjustments(5)	(9.7)		9.5		19.2		Inventory valuation adjustments(5)	9.6		2.4
Total commodity-related adjustments	Total commodity-related adjustments	75.2		(2.7)		(77.9)		Total commodity-related adjustments	(2.6)		(8.7)
Distributions from operations of non-controlled entities in excess of earnings	Distributions from operations of non-controlled entities in excess of earnings	15.9		36.2		20.3		Distributions from operations of non-controlled entities in excess of earnings	36.2		24.5

Adjusted EBITDA	Adjusted EBITDA	1,147.2		1,008.3		(138.9)		Adjusted EBITDA	1,008.4		1,038.8
Interest expense, net, excluding debt issuance cost amortization(6)	Interest expense, net, excluding debt issuance cost amortization(6)	(137.5)		(152.3)		(14.8)		Interest expense, net, excluding debt issuance cost amortization(6)	(152.4)		(167.0)
Maintenance capital(7)	Maintenance capital(7)	(70.1)		(81.2)		(11.1)		Maintenance capital(7)	(81.2)		(50.2)
DCF		$	939.6	$	774.8	$	(164.8)
Distributable cash flow								Distributable cash flow	774.8		821.6
Expansion capital(8)								Expansion capital(8)	(310.0)		(67.6)
Proceeds from asset sales								Proceeds from asset sales	334.6		270.7
Free cash flow								Free cash flow	799.4		1,024.7
Distributions paid								Distributions paid	(697.3)		(685.0)
Free cash flow after distributions								Free cash flow after distributions	$	102.1	$	339.7

(1) Depreciation, amortization and impairment expense is excluded from DCF to the extent it represents a non-cash expense.

(2) Because we intend to satisfy vesting of unit awards under our equity-based long-term incentive compensation plan with the issuance of common units, expenses related to this plan generally are deemed non-cash and ~~added back~~excluded for DCF purposes. The amounts above have been reduced by cash payments associated with the plan, which are primarily related to tax withholdings.

(3) Gains on disposition of assets are excluded from DCF to the extent they are not related to our ongoing operations.

(4) Certain derivatives have not been designated as hedges for accounting purposes and the mark-to-market changes of these derivatives are recognized currently in net income. We exclude the net impact of these derivatives from our determination of DCF until the

transactions are settled and, where applicable, the related products are sold. In the period in which these transactions are settled and any related products are sold, the net impact of the derivatives is included in DCF.

(5) We adjust DCF for lower of average cost or net realizable value adjustments related to inventory and firm purchase commitments as well as market valuation of short positions recognized each period as these are non-cash items. In subsequent periods when we physically sell or purchase the related products, we adjust DCF for the valuation adjustments previously recognized.

(6) Interest expense includes ~~$8.3 million of~~ debt prepayment costs ~~in 2019 and~~of $12.9 million in the nine months ended September 30, 2020, which are excluded from DCF as they are financing activities and not related to our ongoing operations.

(7) Maintenance capital expenditures maintain our existing assets and do not generate incremental DCF (i.e. incremental returns to our unitholders). For this reason, we deduct maintenance capital expenditures to determine DCF.

(8) Includes additions to property, plant and equipment (excluding maintenance capital and capital-related changes in accounts payable and other current liabilities), acquisitions and investments in non-controlled entities, net of distributions from returns of investments in non-controlled entities and deposits from undivided joint interest third parties.

A reconciliation of FCF to net cash provided by operating activities for the nine months ended September 30, 2020 and 2021 is as follows (in millions):


	Nine Months Ended September 30,
	2020		2021
Net cash provided by operating activities	$	840.1	$	879.1
Changes in operating assets and liabilities	30.4		0.6
Net cash provided (used) in investing activities	(110.3)		160.1
Payments associated with settlement of equity-based incentive compensation	(14.7)		(6.2)
Settlement gain, amortization of prior service credit and actuarial loss	(4.0)		(7.2)
Changes in accrued capital items	52.8		(4.0)
Commodity-related adjustments(1)	(2.6)		(8.7)
Other	7.7		11.0
Free cash flow	799.4		1,024.7
Distributions paid	(697.3)		(685.0)
Free cash flow after distributions	$	102.1	$	339.7

(1) Please refer to the preceding table for a description of these commodity-related adjustments.

Liquidity and Capital Resources

Cash Flows and Capital Expenditures

Operating Activities. Net cash provided by operating activities was ~~$922.6~~$840.1 million and ~~$840.1~~$879.1 million for the nine months ended September 30, ~~2019~~2020 and ~~2020,~~2021, respectively. The ~~$82.5~~$39.0 million ~~decrease~~increase in ~~2020~~2021 was due to ~~lower~~higher net income as previously described and changes in our working capital, partially offset by adjustments for non-cash items and distributions in excess of earnings of our non-controlled entities.

Investing Activities. Net cash used by investing activities for the nine months ended September 30, ~~2019 and~~ 2020 was ~~$734.7~~$110.3 million and ~~$110.3~~net cash provided by investing activities for the nine months ended September 30, 2021 was $160.1 million. During the 2021 period, we used $106.5 million ~~respectively.~~for capital expenditures. Also, during 2021, we sold a portion of our interest in MVP for cash proceeds of $271.0 million. During the 2020 period, we used ~~$371.2~~$357.1 million for capital ~~expenditures, which included $0.2 million for undivided joint interest projects for which cash was received from a third party.~~expenditures. Also during 2020, we sold three marine terminals for cash proceeds of $251.8 million and sold a portion of our interest in Saddlehorn for cash proceeds of $79.9 million. Additionally, we contributed capital of $73.7 million in conjunction with our joint venture capital projects, which we account for as investments in non-controlled entities. During the 2019 period, we used $718.6 million for capital expenditures, which included $87.9 million for undivided joint interest projects for which cash was received from a third party. Additionally, we contributed net capital of $150.6 million in conjunction with our joint ventures, of which $145.6 million related to capital projects.

Financing Activities. Net cash used by financing activities for the nine months ended September 30, ~~2019~~2020 and ~~2020~~2021 was ~~$305.6~~$794.1 million and ~~$794.1~~$1,041.2 million, respectively. During the 2021 period, we paid distributions of $685.0 million to our unitholders and repurchased common units for $473.1 million. Additionally, we had net commercial paper borrowings of $123.0 million. Also, in January 2021, our equity-based incentive compensation awards that vested December 31, 2020 were settled by issuing 163,007 common units and distributing those units to the long-term incentive plan (“LTIP”) participants, resulting in payments primarily associated with tax withholdings of $6.2 million. During the 2020 period, we paid ~~cash~~ distributions of $697.3 million to our unitholders and ~~made~~repurchased common ~~unit repurchases of~~units for $252.0 million. Additionally, we received net proceeds of $499.4 million from the issuance of long-term senior notes and had net commercial paper borrowings of $248.0 million, which collectively were used to repay our $550.0 million of 4.25% notes due 2021. Also, in January 2020, our equity-based incentive compensation awards that vested December 31, 2019 were settled by issuing 284,643 common units and distributing those units to the ~~long-term incentive plan (“LTIP”)~~LTIP participants, resulting in payments primarily associated with tax withholdings of $14.7 million. During the 2019 period, we paid cash distributions of $688.6 million to our unitholders. Additionally, we received net proceeds of $996.4 million from borrowings under long-term notes, which were used to repay our $550.0 million of 6.55% notes due 2019 and outstanding commercial borrowings at that time. Also, in January 2019, our equity-based incentive compensation awards that vested December 31, 2018 were settled by issuing 208,268 common units and distributing those units to the LTIP participants, resulting in payments primarily associated with tax withholdings of $9.8 million.

The quarterly distribution amount related to ~~our third-quarter 2020 financial results~~third quarter 2021 earnings is $1.0375 per unit (to be paid in fourth quarter ~~2020) is $1.0275 per unit.~~2021). If we were to continue paying ~~cash~~ distributions at this level on the number of common units

currently outstanding, total ~~cash~~ distributions of approximately ~~$922~~$898 million would be paid to our unitholders related to ~~2020~~2021 earnings. Management believes we will have sufficient DCF to fund these distributions.

During 2020, we initiated our common unit repurchase program, with authorization to repurchase up to $750 million of our common units through 2022. During the nine months ended September 30, 2020, we repurchased 5.0 million of our common units for $252 million. The timing, price and actual number of common units repurchased will depend on a number of factors including our expected expansion capital spending needs, excess cash available,

~~balance sheet metrics, legal and regulatory requirements, market conditions and the trading price of our common units.~~

Capital Requirements

~~Our businesses require continual investments to maintain, upgrade or enhance existing operations and to ensure compliance with safety and environmental regulations.~~ Capital spending for our business consists primarily of:

•Maintenance capital expenditures. These expenditures include costs required to maintain equipment reliability and safety and to address environmental or other regulatory requirements rather than to generate incremental DCF; and

•Expansion capital expenditures. These expenditures are undertaken primarily to generate incremental DCF and include costs to acquire additional assets to grow our business and to expand or upgrade our existing facilities and to construct new assets, which we refer to collectively as organic growth projects. Organic growth projects include, for example, capital expenditures that increase storage or throughput volumes or develop pipeline connections to new supply sources.

For the nine months ended September 30, ~~2020,~~2021, our maintenance capital spending was ~~$81.2 million.~~$50.2 million, including $1.5 million for discontinued operations. For ~~2020,~~2021, we expect to spend approximately ~~$95~~$80 million on maintenance capital.

During the first nine months of ~~2020,~~2021, we spent ~~$236.3~~$62.0 million for our expansion capital projects, including $0.2 million for discontinued operations, and contributed ~~$73.7~~$5.6 million for expansion capital projects in conjunction with our joint ventures. Based on the progress of expansion projects already underway, we expect to spend approximately ~~$400~~$80 million in ~~2020~~2021 and ~~$40~~$20 million in ~~2021~~2022 to complete our current slate of expansion capital projects.

In addition, we may repurchase our common units through our unit repurchase program (see Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds of Part II of this report for additional details). We may also repurchase portions of our existing long-term debt from time-to-time through open market transactions, tender offers or privately-negotiated transactions.

Liquidity

Cash generated from operations is a key source of liquidity for funding debt service, maintenance capital expenditures, quarterly distributions and ~~unit repurchases.~~repurchases of our common units. Additional liquidity for purposes other than quarterly distributions, such as expansion capital expenditures, ~~and debt repayments,~~ is available through borrowings under our commercial paper program and revolving credit facility, as well as from other borrowings or issuances of debt or common units (see Note 67 – Debt and Note 1415 – ~~Partners’~~Partners’ Capital and Distributions of the consolidated financial statements included in Item 1 of Part I of this report for detail of our borrowings and changes in partners’ capital). If capital markets do not provide us access to capital or the ability to issue additional debt or equity securities on acceptable terms, our business may be adversely affected, and we may not be able to acquire additional assets and businesses, fund organic growth projects or continue paying cash distributions at the current level.

Off-Balance Sheet Arrangements

None.

Other Items

Executive Officer Promotions. Mark B. Roles, who previously held the position of Vice President, Business Optimization, was elected by our general partner’s board of directors as Senior Vice President, Commercial - Refined Products effective May 22, 2021. He has served in various positions of increasing responsibilities in commercial and operations since joining us and our predecessor company in 1998.

Pipeline Tariff Changes. ~~The~~Historically, the tariff rates on approximately 40% of our refined products shipments have been regulated by the Federal Energy Regulatory Commission (“FERC”) ~~regulates~~primarily through an annual index methodology, and nearly all the remaining rates ~~charged~~are adjustable at our discretion based on market factors. Due to the recent expansion of our ~~interstate common carrier pipelines. We increased~~Texas refined products pipeline system, for which rates are not regulated by the FERC, we expect a smaller percent of our total refined products shipments to be subject to the index methodology in the future. The new 5-year FERC index beginning July 2021 is based on the change in the producer price index for finished goods plus 0.78%. Based on this methodology, we decreased our index rates by approximately ~~2.0% in~~0.6% on July 1, 2021, with an average increase of more than 4% on the ~~40%~~remainder of our refined products ~~markets that are subject to the FERC’s index methodology on July 1, 2020. In the 60% of our remaining refined products markets, we increased our~~tariff rates, ~~by an average of nearly 4.5%, for~~resulting in an overall average refined products ~~rate~~mid-year tariff increase of ~~3.5%~~nearly 3%. Most of the tariffs on our long-haul crude oil pipelines are established at negotiated rates that generally provide for annual adjustments in line with changes in the FERC index, subject to certain modifications. As a result, we also ~~increased~~changed the rates on ~~the majority of~~ our crude oil pipelines ~~by approximately 2.0%~~between 0% and 2% in July ~~2020.~~

The FERC-approved indexing method for the past five years has been the annual change in the producer price index for finished goods plus 1.23%. In June 2020, the FERC issued a Notice of Inquiry (“NOI”) to initiate a review of the rate index to be utilized over the next five-year period beginning July 1, 2021. ~~The FERC’s~~proposal in the NOI preliminarily recommends the use of the producer price index for finished goods plus 0.09% as the new index level to calculate annual tariff changes. The FERC has received comments from industry participants on the NOI and is in the process of finalizing the new index level.

Commodity Derivative Agreements. Certain of our business activities result in our owning various commodities, which exposes us to commodity price risk. We generally use forward physical commodity contracts and exchange-traded futures contracts to hedge against changes in prices of the commodities that we expect to sell or purchase in future periods. We ~~also entered into~~are a party to a basis derivative agreement for which settlements are determined based on the basis differential of crude oil prices at different market locations.

~~For~~See Item 3. Quantitative and Qualitative Disclosures about Market Risk for further information regarding the quantities of refined products and crude oil hedged at September 30, ~~2020~~2021 and the fair value of open hedge and basis derivative contracts at that ~~date, please see~~ ~~Item 3. Quantitative and Qualitative Disclosures about Market Risk~~.date.

Related Party Transactions. See Note 1314 – Related Party Transactions in Item 1 of Part I of this report for detail of our related party transactions.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We may be exposed to market risk through changes in commodity prices and interest rates and have established policies to monitor and mitigate these market risks. We use derivative agreements to help manage our exposure to commodity price and interest rate risks.

Commodity Price Risk

Our commodity price risk primarily arises from our gas liquids blending and fractionation activities, and from managing product overages and shortages associated with our refined products and crude oil pipelines and terminals. We generally use derivatives such as forward physical contracts and exchange-traded futures contracts to help us manage our commodity price risk.

Forward physical contracts that qualify for and are elected as normal purchases and sales are accounted for using traditional accrual accounting. As of September 30, ~~2020,~~2021, we had commitments under forward purchase and sale contracts as follows (in millions):


		Total		2020		2021-2022			Total		2021		2022-2025		Beyond 2025
Forward purchase contracts – notional value	Forward purchase contracts – notional value	$	53.5	$	30.1	$	23.4	Forward purchase contracts – notional value	$	516.8	$	172.2	$	205.0	$	139.6
Forward purchase contracts – barrels	Forward purchase contracts – barrels	1.4		0.8		0.6		Forward purchase contracts – barrels	11.4		2.6		4.3		4.5
Forward sales contracts – notional value	Forward sales contracts – notional value	$	19.5	$	18.4	$	1.1	Forward sales contracts – notional value	$	78.2	$	72.5	$	5.7	$	—
Forward sales contracts – barrels	Forward sales contracts – barrels	0.4		0.4		—		Forward sales contracts – barrels	0.9		0.8		0.1		—

We generally use exchange-traded futures contracts to hedge against changes in the price of the petroleum products we expect to sell or purchase. We did not elect hedge accounting treatment under ASC 815, Derivatives

and Hedging, for our open contracts and as a result we accounted for these contracts as economic hedges, with changes in fair value recognized currently in earnings. The fair value of these open futures contracts, representing ~~3.1~~4.9 million barrels of petroleum products we expect to sell and ~~0.6~~1.2 million barrels of gas liquids we expect to purchase, was a net liability of ~~$1.6~~$22.3 million. With respect to these contracts, a $10.00 per barrel increase (decrease) in the prices of petroleum products we expect to sell would result in a ~~$31.0~~$49.0 million decrease (increase) in our operating profit, while a $10.00 per barrel increase (decrease) in the price of gas liquids we expect to purchase

would result in a ~~$6.0~~$12.0 million increase (decrease) in our operating profit. These increases or decreases in operating profit would be substantially offset by higher or lower product sales revenue or cost of product sales when the physical sale or purchase of those products ~~occurs.~~occurs, respectively. These contracts may be for the purchase or sale of products in markets different from those in which we are attempting to hedge our exposure, and the ~~resulting~~related hedges may not eliminate all price risks.

During 2019, we entered into a basis derivative agreement with a joint venture co-owner’s affiliate, and, contemporaneously, that affiliate entered into an intrastate transportation services agreement with the joint venture. Settlements under the basis derivative agreement are determined based on the basis differential of crude oil prices at different market locations and a notional volume of 30,000 barrels per day. As a result, we are exposed to the differential in the forward price curves for crude oil in West Texas and the Houston Gulf Coast. With respect to this agreement, a $0.50 per barrel increase (decrease) in the differential would result in an approximately $2.0 million increase (decrease) in our operating profit.

Interest Rate Risk

Our use of variable rate debt and any future issuances of fixed rate debt expose us to interest rate risk. As of September 30, ~~2020,~~2021, we did not have any variable rate debt outstanding.

ITEM 4.CONTROLS AND PROCEDURES

We performed an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. We performed this evaluation under the supervision and with the participation of our management, including our general partner’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon that evaluation, our general partner’s CEO and CFO concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed so that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. There has been no change in our internal control over financial reporting that occurred during the quarter ended September 30, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

4546

PART II

OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Butane Blending Patent Infringement Proceeding. On October 4, 2017, Sunoco Partners Marketing & Terminals L.P. (“Sunoco”) brought an action for patent infringement in the U.S. District Court for the District of Delaware alleging Magellan Midstream Partners, L.P. (“Magellan”) and Powder Springs Logistics, LLC (“Powder Springs”) are infringing patents related to butane blending at the Powder Springs facility located in Powder Springs, Georgia. Sunoco subsequently submitted pleadings alleging that Magellan is also infringing various patents related to butane blending at nine Magellan facilities, in addition to Powder Springs. Sunoco is seeking monetary damages, attorneys’ fees and a permanent injunction enjoining Magellan and Powder Springs from infringing the subject patents. We deny and are vigorously defending against all claims asserted by Sunoco. Although it is not possible to predict the ultimate outcome, we believe the ultimate resolution of this matter will not have a material adverse impact on our results of operations, financial position or cash flows.

~~New Tank Construction Proceeding.~~ In May 2020, we received a Notice of Probable Violation and Proposed Civil Penalty from the Pipeline and Hazardous Materials Safety Administration alleging a violation related to a new tank construction project and associated release of product at our terminal in Cushing, Oklahoma. The matter was resolved in September 2020 for approximately $125,000.

~~Valves and Overfill Protection Systems Proceeding.~~ In October 2019, we received a Notice of Probable Violation, Proposed Civil Penalty and Proposed Compliance Order from the Pipeline and Hazardous Materials Safety Administration alleging violations related to the records and maps necessary for the safe operation of remotely controlled valves at two facilities and the failure to inspect the overfill protection system on four breakout tanks at our terminal in Des Moines, Iowa. The penalties associated with these alleged violations could exceed $100,000. While the results cannot be predicted with certainty, we believe the ultimate resolution of this matter will not have a material impact on our results of operations, financial position or cash flows.

~~Hurricane Harvey Enforcement Proceeding.~~ In July 2018, we received a Notice of Enforcement letter from the Texas Commission on Environmental Quality alleging two air emission violations at our Galena Park, Texas terminal that occurred during Hurricane Harvey in third quarter 2017. The penalties associated with these alleged violations could exceed $100,000. While the results cannot be predicted with certainty, we believe the ultimate resolution of this matter will not have a material impact on our results of operations, financial position or cash flows.

~~U.S. Oil Recovery, EPA ID No.: TXN000607093 Superfund Site~~. We have liability at the U.S. Oil Recovery Superfund Site in Pasadena, Texas as a potential responsible party (“PRP”) under Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). As a result of the EPA’s Administrative Settlement Agreement and Order on Consent for Removal Action, filed August 25, 2011, EPA Region 6, CERCLA Docket No. 06-10-11, we voluntarily entered into the PRP group responsible for the site investigation, stabilization and subsequent site cleanup. We have paid approximately $42,000 associated with the assessment phase. Until this assessment phase has been completed, we cannot reasonably estimate our proportionate share of the remediation costs associated with this site. While the results cannot be reasonably estimated, we believe the ultimate resolution of this matter will not have a material impact on our results of operations, financial position or cash flows.

~~Lake Calumet Cluster Site, EPA ID No.: ILD000716852 Superfund Site~~. We have liability at the Lake Calumet Cluster Superfund Site in Chicago, Illinois as a PRP under Sections 107(a) and 113(f)(1) of CERCLA. As a result of the EPA’s Administrative Settlement Agreement and Order for Remedial Investigation/Feasibility Study of June 2013, we voluntarily entered into the PRP group responsible for the investigation, cleanup and installation of an appropriate clay cap over the site. We have paid approximately $9,000 associated with the Remedial

Investigation/Feasibility Study and cleanup costs to date. Our projected portion of the estimated cap installation is $55,000. While the results cannot be predicted with certainty, we believe the ultimate resolution of this matter will not have a material impact on our results of operations, financial position or cash flows.

We and the non-controlled entities in which we own an interest are a party to various other claims, legal actions and complaints. While the results cannot be predicted with certainty, management believes the ultimate resolution of these claims, legal actions and complaints after consideration of amounts accrued, insurance coverage or other indemnification arrangements will not have a material adverse effect on our future results of operations, financial position or cash flows.

ITEM 1A.RISK FACTORS

In addition to the information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not our only risks. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also could materially adversely affect our business, financial condition or operating results.

~~The COVID-19 pandemic has adversely affected, and could continue to adversely affect, our business.~~

The COVID-19 pandemic has negatively impacted the global economy. In response to the pandemic, governments around the world have implemented stringent measures to help reduce the spread of the virus, including stay-at-home orders, travel restrictions and other measures. Due to reductions in economic activity, the world is experiencing reduced demand for petroleum products and depressed petroleum products commodity prices, which has adversely affected our business. Continuing uncertainty regarding the global impact of COVID-19 is likely to result in continued weakness in demand for the services we provide. The reduction in refined products demand and lower crude oil prices have combined to put significant downward pressure on domestic crude oil production, and a sustained reduction in crude oil production could cause delays in the timing of our recognition of revenue from take-or-pay pipeline transportation commitments. These factors have also significantly decreased the creditworthiness of certain of our crude oil transportation customers, resulting in an increased risk of customer defaults. Customers and vendors could also seek to assert claims for relief from some of their obligations on the basis of force majeure. We may also experience disruptions to supply chains and the availability and efficiency of our workforce as a result of the pandemic, which could adversely affect our ability to conduct our business and operations. The extent and duration of the impacts these events will have on our results of operations is unclear but will likely be material and may impact our ability to pay cash distributions.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Issuer Purchases of Common Units~~

In ~~first quarter~~ 2020, we ~~announced that our general partner’s board of directors authorized the repurchase of up to~~initiated a $750 million ~~of our~~ common unit repurchase program, which allowed us to repurchase units through 2022. We completed the repurchases authorized under this program in September 2021. In October 2021, this program was expanded by $750 million to allow unit repurchases totaling $1.5 billion through December 31, 2024. We intend to purchase our ~~common~~ units from time-to-time through a variety of methods, including open market purchases and negotiated transactions, all in compliance with ~~the rules of the~~ Securities ~~and~~ Exchange ~~Commission~~Act Rules 10b-18, 10b5-1 or both and other applicable legal requirements. The timing, price and actual number of ~~common~~ units repurchased will depend on a number of factors including our expected expansion capital spending, ~~needs,~~ excess cash available, balance sheet metrics, legal and regulatory requirements, market conditions and the trading price of our ~~common~~ units. The ~~repurchase~~ program does not obligate us to acquire any particular amount of ~~common~~ units, and the repurchase program may be suspended or discontinued at any time.

47The following table provides details of our unit repurchases in 2021 under our initial $750 million program:

~~Activity during 2020 is detailed in the following table:~~

Period Total Number of Common Units Purchased Average Price Paid Per Unit Total Number of Units Purchased as Part of Publicly Announced Program Approximate Dollar Value of Units That May Yet Be Purchased under the Program (in millions)
January 1-31, 2020 — $ — — $ 750.0
February 1-29, 2020 1,514,719 $ 59.19 1,514,719 $ 660.4
March 1-31, 2020 2,117,065 $ 53.06 2,117,065 $ 548.1
First Quarter 2020 3,631,784 $ 55.62 3,631,784
April 1-30, 2020 — — $ 548.1
May 1-31, 2020 — — $ 548.1
June 1-30, 2020 — — $ 548.1
Second Quarter 2020 — —
July 1-31, 2020 — — $ 548.1
August 1-31, 2020 — — $ 548.1
September 1-30, 2020 1,355,344 $ 36.87 1,355,344 $ 498.0
Third Quarter 2020 1,355,344 $ 36.87 1,355,344
Year-to-Date 2020 4,987,128 $ 50.52 4,987,128


Period	Total Number of Common Units Purchased	Average Price Paid Per Unit		Total Number of Units Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Units That May Yet Be Purchased under the Program (in millions)
Year Ended 2020	5,568,260	$	49.74	5,568,260	$	473.1
January 1-31, 2021	—			—	$	473.1
February 1-28, 2021	—			—	$	473.1
March 1-31, 2021	—			—	$	473.1
First Quarter 2021	—			—
April 1-30, 2021	—			—	$	473.1
May 1-31, 2021	1,723,188	$	47.77	1,723,188	$	390.7
June 1-30, 2021	—			—	$	390.7
Second Quarter 2021	1,723,188	$	47.77	1,723,188
July 1-31, 2021	251,947	$	47.24	251,947	$	378.8
August 1-31, 2021	6,289,504	$	47.94	6,289,504	$	77.3
September 1-30, 2021	1,572,941	$	49.14	1,572,941	$	—
Third Quarter 2021	8,114,392	$	48.15	8,114,392
Year-to-Date 2021	9,837,580	$	48.09	9,837,580
Total Inception-to-Date	15,405,840	$	48.68	15,405,840	$	—

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

The exhibits listed below on the Index to Exhibits are filed or incorporated by reference as part of this report.

4849

INDEX TO EXHIBITS



Exhibit Number		Description

~~Exhibit 3.1~~	—	Amendment No. 4, effective as of September 25, 2020, to the Fifth Amended and Restated Agreement of Limited Partnership of Magellan Midstream Partners, L.P. dated as of September 28, 2009 (filed as Exhibit 3.1 to Form 8-K filed September 25, 2020).

Exhibit 31.1	—	Certification of Michael N. Mears, principal executive officer.

Exhibit 31.2	—	Certification of Jeff Holman, principal financial officer.

Exhibit 32.1	—	Section 1350 Certification of Michael N. Mears, Chief Executive Officer.

Exhibit 32.2	—	Section 1350 Certification of Jeff Holman, Chief Financial Officer.

Exhibit 101.INS	—	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Exhibit 101.SCH	—	XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL	—	XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.DEF	—	XBRL Taxonomy Extension Definition Linkbase Document.

Exhibit 101.LAB	—	XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE	—	XBRL Taxonomy Extension Presentation Linkbase Document.

4950

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized in Tulsa, Oklahoma on ~~October 30, 2020.~~November 2, 2021.


MAGELLAN MIDSTREAM PARTNERS, L.P.

By:						Magellan GP, LLC,
						its general partner

/s/ Jeff Holman
Jeff Holman
Chief Financial Officer
(Principal Accounting and Financial Officer)

5051


	Three Months Ended				Three Months Ended
	September 30, 2019				September 30, 2020
	Pension Benefits		Other Postretirement Benefits		Pension Benefits		Other Postretirement Benefits
Components of net periodic benefit costs:
Service cost	$	6,260	$	48	$	6,898	$	64
Interest cost	3,026		126		2,738		121
Expected return on plan assets	(2,354)		0		(2,829)		0
Amortization of prior service credit	(46)		0		(46)		0
Amortization of actuarial loss	1,352		60		1,346		127
Settlement cost	439		0		0		0


Net periodic benefit cost	$	8,677	$	234	$	8,107	$	312


Payment Date	Per Unit Cash Distribution Amount			Total Cash Distribution
02/14/2019		$	0.9975		$	227,832
05/15/2019		1.0050			229,545

08/14/2019		1.0125			231,258
Through 09/30/2019		3.0150			688,635
11/14/2019		1.0200			232,971
Total		$	4.0350		$	921,606

02/14/2020		$	1.0275		$	234,774
05/15/2020		1.0275			231,245

08/14/2020		1.0275			231,245
Through 09/30/2020		3.0825			697,264
11/13/2020(a)		1.0275			229,853
Total		$	4.1100		$	927,117