Related Party Transactions | Related Party Transactions As of June 30, 2015 , Martin Resource Management owned 6,264,532 of the Partnership’s common units representing approximately 17.7% of the Partnership’s outstanding limited partnership units. Martin Resource Management controls the Partnership's general partner by virtue of its 51% voting interest in Holdings, the sole member of the Partnership's general partner. The Partnership’s general partner, MMGP, owns a 2% general partner interest in the Partnership and the Partnership’s IDRs. The Partnership’s general partner’s ability, as general partner, to manage and operate the Partnership, and Martin Resource Management’s ownership as of June 30, 2015 , of approximately 17.7% of the Partnership’s outstanding limited partnership units, effectively gives Martin Resource Management the ability to veto some of the Partnership’s actions and to control the Partnership’s management. The following is a description of the Partnership’s material related party agreements and transactions: Omnibus Agreement Omnibus Agreement . The Partnership and its general partner are parties to the Omnibus Agreement dated November 1, 2002, with Martin Resource Management that governs, among other things, potential competition and indemnification obligations among the parties to the agreement, related party transactions, the provision of general administration and support services by Martin Resource Management and the Partnership’s use of certain Martin Resource Management trade names and trademarks. The Omnibus Agreement was amended on November 25, 2009, to include processing crude oil into finished products including naphthenic lubricants, distillates, asphalt and other intermediate cuts. The Omnibus Agreement was amended further on October 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management. Non-Competition Provisions . Martin Resource Management has agreed for so long as it controls the general partner of the Partnership, not to engage in the business of: • providing terminalling and storage services for petroleum products and by-products including the refining, blending and packaging of finished lubricants; • providing marine transportation of petroleum products and by-products; • distributing NGLs; and • manufacturing and selling sulfur-based fertilizer products and other sulfur-related products. This restriction does not apply to: • the ownership and/or operation on the Partnership’s behalf of any asset or group of assets owned by it or its affiliates; • any business operated by Martin Resource Management, including the following: ◦ providing land transportation of various liquids; ◦ distributing fuel oil, ammonia, asphalt, sulfuric acid, marine fuel and other liquids; ◦ providing marine bunkering and other shore-based marine services in Alabama, Florida, Louisiana, Mississippi and Texas; ◦ operating a crude oil gathering business in Stephens, Arkansas; ◦ providing crude oil gathering, refining, and marketing services of base oils, asphalt, and distillate products in Smackover, Arkansas; ◦ providing crude oil marketing and transportation from the well head to the end market; ◦ operating an environmental consulting company; ◦ operating an engineering services company; ◦ supplying employees and services for the operation of the Partnership's business; ◦ operating a natural gas optimization business; and ◦ operating, solely for the Partnership's account, the asphalt facilities in Omaha, Nebraska, Port Neches, Texas and South Houston, Texas. • any business that Martin Resource Management acquires or constructs that has a fair market value of less than $5,000 ; • any business that Martin Resource Management acquires or constructs that has a fair market value of $5,000 or more if the Partnership has been offered the opportunity to purchase the business for fair market value and the Partnership declines to do so with the concurrence of the conflicts committee of the board of directors of the general partner of the Partnership (the "Conflicts Committee"); and • any business that Martin Resource Management acquires or constructs where a portion of such business includes a restricted business and the fair market value of the restricted business is $5,000 or more and represents less than 20% of the aggregate value of the entire business to be acquired or constructed; provided that, following completion of the acquisition or construction, the Partnership will be provided the opportunity to purchase the restricted business. Services. Under the Omnibus Agreement, Martin Resource Management provides the Partnership with corporate staff, support services, and administrative services necessary to operate the Partnership’s business. The Omnibus Agreement requires the Partnership to reimburse Martin Resource Management for all direct expenses it incurs or payments it makes on the Partnership’s behalf or in connection with the operation of the Partnership’s business. There is no monetary limitation on the amount the Partnership is required to reimburse Martin Resource Management for direct expenses. In addition to the direct expenses, under the Omnibus Agreement, the Partnership is required to reimburse Martin Resource Management for indirect general and administrative and corporate overhead expenses. Effective January 1, 2015, through December 31, 2015, the Conflicts Committee approved an annual reimbursement amount for indirect expenses of $13,679 . The Partnership reimbursed Martin Resource Management for $3,419 and $3,134 of indirect expenses for the three months ended June 30, 2015 and 2014 , respectively. The Partnership reimbursed Martin Resource Management for $6,839 and $6,268 of indirect expenses for the six months ended June 30, 2015 and 2014 , respectively. The Conflicts Committee will review and approve future adjustments in the reimbursement amount for indirect expenses, if any, annually. These indirect expenses are intended to cover the centralized corporate functions Martin Resource Management provides for the Partnership, such as accounting, treasury, clerical, engineering, legal, billing, information technology, administration of insurance, general office expenses and employee benefit plans and other general corporate overhead functions the Partnership shares with Martin Resource Management retained businesses. The provisions of the Omnibus Agreement regarding Martin Resource Management’s services will terminate if Martin Resource Management ceases to control the general partner of the Partnership. Related Party Transactions . The Omnibus Agreement prohibits the Partnership from entering into any material agreement with Martin Resource Management without the prior approval of the Conflicts Committee. For purposes of the Omnibus Agreement, the term "material agreements" means any agreement between the Partnership and Martin Resource Management that requires aggregate annual payments in excess of the then-applicable agreed upon reimbursable amount of indirect general and administrative expenses. Please read "Services" above. License Provisions. Under the Omnibus Agreement, Martin Resource Management has granted the Partnership a nontransferable, nonexclusive, royalty-free right and license to use certain of its trade names and marks, as well as the trade names and marks used by some of its affiliates. Amendment and Termination. The Omnibus Agreement may be amended by written agreement of the parties; provided, however, that it may not be amended without the approval of the Conflicts Committee if such amendment would adversely affect the unitholders. The Omnibus Agreement was first amended on November 25, 2009, to permit the Partnership to provide refining services to Martin Resource Management. The Omnibus Agreement was amended further on October 1, 2012, to permit the Partnership to provide certain lubricant packaging products and services to Martin Resource Management. Such amendments were approved by the Conflicts Committee. The Omnibus Agreement, other than the indemnification provisions and the provisions limiting the amount for which the Partnership will reimburse Martin Resource Management for general and administrative services performed on its behalf, will terminate if the Partnership is no longer an affiliate of Martin Resource Management. Motor Carrier Agreement Motor Carrier Agreement. The Partnership is a party to a motor carrier agreement effective January 1, 2006, as amended, with Martin Transport, Inc., a wholly owned subsidiary of Martin Resource Management through which Martin Transport, Inc. operates its land transportation operations. Under the agreement, Martin Transport, Inc. agreed to transport the Partnership's NGLs as well as other liquid products. Term and Pricing. The agreement has an initial term that expired in December 2007 but automatically renews for consecutive one year periods unless either party terminates the agreement by giving written notice to the other party at least 30 days prior to the expiration of the then-applicable term. The Partnership has the right to terminate this agreement at any time by providing 90 days prior notice. These rates are subject to any adjustments which are mutually agreed upon or in accordance with a price index. Additionally, during the term of the agreement, shipping charges are also subject to fuel surcharges determined on a weekly basis in accordance with the U.S. Department of Energy’s national diesel price list. Indemnification. Martin Transport, Inc. has indemnified the Partnership against all claims arising out of the negligence or willful misconduct of Martin Transport, Inc. and its officers, employees, agents, representatives and subcontractors. The Partnership indemnified Martin Transport, Inc. against all claims arising out of the negligence or willful misconduct of the Partnership and its officers, employees, agents, representatives and subcontractors. In the event a claim is the result of the joint negligence or misconduct of Martin Transport, Inc. and the Partnership, indemnification obligations will be shared in proportion to each party’s allocable share of such joint negligence or misconduct. Marine Agreements Marine Transportation Agreement. The Partnership is a party to a marine transportation agreement effective January 1, 2006, as amended, under which the Partnership provides marine transportation services to Martin Resource Management on a spot-contract basis at applicable market rates. Effective each January 1, this agreement automatically renews for consecutive one year periods unless either party terminates the agreement by giving written notice to the other party at least 60 days prior to the expiration of the then applicable term. The fees the Partnership charges Martin Resource Management are based on applicable market rates. Marine Fuel. The Partnership is a party to an agreement with Martin Resource Management dated November 1, 2002, under which Martin Resource Management provides the Partnership with marine fuel from its locations in the Gulf of Mexico at a fixed rate in excess of the Platt’s U.S. Gulf Coast Index for #2 Fuel Oil. Under this agreement, the Partnership agreed to purchase all of its marine fuel requirements that occur in the areas serviced by Martin Resource Management. Terminal Services Agreements Diesel Fuel Terminal Services Agreement. Effective January 1, 2015, the Partnership entered into a new terminalling services agreement under which the Partnership provides terminal services to Martin Resource Management for marine fuel distribution. This agreement replaced the prior agreement that was in place concerning the same services which was dated October 27, 2004 and consolidated it with the (i) terminalling services agreement entered into in connection with the acquisition of Talen's Marine & Fuel, LLC ("Talen's") and (ii) terminalling services agreement entered into in connection with the acquisition of L&L Holdings LLC ("L&L") into a single agreement. The minimum throughput requirements of the three superseded agreements were aggregated in the new agreement. The per gallon throughput fee the Partnership charges under this agreement may be adjusted annually based on a price index. Miscellaneous Terminal Services Agreements. The Partnership is a party to several terminal services agreements and from time to time the Partnership may enter into other terminal service agreements for the purpose of providing terminal services to related parties. Individually, each of these agreements is immaterial but when considered in the aggregate they could be deemed material. These agreements are throughput based with a minimum volume commitment. Generally, the fees due under these agreements are adjusted annually based on a price index. Other Agreements Cross Tolling Agreement. The Partnership is a party to an amended and restated tolling agreement with Cross Oil Refining and Marketing, Inc. ("Cross") dated October 28, 2014, under which the Partnership processes crude oil into finished products, including naphthenic lubricants, distillates, asphalt and other intermediate cuts for Cross. The tolling agreement expires November 25, 2031. Under this tolling agreement, Cross agreed to process a minimum of 6,500 barrels per day of crude oil at the facility at a fixed price per barrel. Any additional barrels are processed at a modified price per barrel. In addition, Cross agreed to pay a monthly reservation fee and a periodic fuel surcharge fee based on certain parameters specified in the tolling agreement. All of these fees (other than the fuel surcharge) are subject to escalation annually based upon the greater of 3% or the increase in the Consumer Price Index for a specified annual period. In addition, on the third, sixth and ninth anniversaries of the agreement, the parties can negotiate an upward or downward adjustment in the fees subject to their mutual agreement. Sulfuric Acid Sales Agency Agreement . The Partnership is party to a second amended and restated sulfuric acid sales agency agreement dated August 5, 2013, under which Martin Resource Management purchases and markets the sulfuric acid produced by the Partnership’s sulfuric acid production plant at Plainview, Texas, that is not consumed by the Partnership’s internal operations. This agreement, as amended, will remain in place until the Partnership terminates it by providing 180 days written notice. Under this agreement, the Partnership sells all of its excess sulfuric acid to Martin Resource Management. Martin Resource Management then markets such acid to third parties and the Partnership shares in the profit of Martin Resource Management’s sales of the excess acid to such third parties. Other Miscellaneous Agreements. From time to time, the Partnership enters into other miscellaneous agreements with Martin Resource Management for the provision of other services or the purchase of other goods. The tables below summarize the related party transactions that are included in the related financial statement captions on the face of the Partnership’s Consolidated and Condensed Statements of Operations. The revenues, costs and expenses reflected in these tables are tabulations of the related party transactions that are recorded in the corresponding captions of the consolidated and condensed financial statements and do not reflect a statement of profits and losses for related party transactions. The impact of related party revenues from sales of products and services is reflected in the consolidated and condensed financial statements as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Revenues: Terminalling and storage $ 23,061 $ 18,743 $ 43,535 $ 36,753 Marine transportation 6,622 6,415 13,367 12,264 Product sales: Natural gas services 286 2,217 300 3,046 Sulfur services 970 1,268 2,044 2,223 Terminalling and storage 503 224 1,004 332 1,759 3,709 3,348 5,601 $ 31,442 $ 28,867 $ 60,250 $ 54,618 The impact of related party cost of products sold is reflected in the consolidated and condensed financial statements as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Cost of products sold: Natural gas services $ 6,810 $ 10,808 $ 13,728 $ 19,261 Sulfur services 3,618 4,452 7,242 9,317 Terminalling and storage 5,632 6,553 11,034 16,397 $ 16,060 $ 21,813 $ 32,004 $ 44,975 The impact of related party operating expenses is reflected in the consolidated and condensed financial statements as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Operating expenses: Marine transportation $ 8,038 $ 8,823 $ 16,598 $ 18,487 Natural gas services 1,992 798 4,155 1,404 Sulfur services 2,036 2,034 3,699 3,520 Terminalling and storage 6,849 7,593 14,863 14,076 $ 18,915 $ 19,248 $ 39,315 $ 37,487 The impact of related party selling, general and administrative expenses is reflected in the consolidated and condensed financial statements as follows: Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Selling, general and administrative: Marine transportation $ 8 $ 7 $ 16 $ 15 Natural gas services 1,238 1,146 2,401 2,104 Sulfur services 642 820 1,438 1,663 Terminalling and storage 542 343 1,149 728 Indirect overhead allocation, net of reimbursement 3,419 3,173 6,839 6,363 $ 5,849 $ 5,489 $ 11,843 $ 10,873 Other Related Party Transactions As discussed in Note 6, during March 2013, the Partnership acquired 100% of the preferred interests in MET, a subsidiary of Martin Resource Management, for $15,000 . On August 31, 2014, MET converted its preferred equity to subordinated debt. The resulting $15,000 note receivable from MET bears an annual interest rate of 15% and matures August 31, 2026. MET may prepay any or all of the note balance on or after September 1, 2016. The note is recorded in "Note receivable - Martin Energy Trading LLC" on the Partnership's Consolidated and Condensed Balance Sheet. Interest income for the three and six months ended June 30, 2015 was $561 and $1,116 , respectively, and is included in "Interest expense, net" in the Consolidated and Condensed Statements of Operations. |