Exhibit 99.2
MARTIN MIDSTREAM PARTNERS L.P.
UNAUDITED PRO FORMA CONSOLIDATED AND CONDENSED FINANCIAL INFORMATION
INTRODUCTION
The following unaudited pro forma financial statements have been derived from the historical consolidated financial statements of Martin Midstream Partners L.P. ("MMLP" or "the Partnership") and the historical financial statements of Martin Transport, Inc. ("MTI"). The pro forma financial statements should be read in conjunction with the accompanying notes to pro forma financial statements and with the historical financial statements and related notes for both the Partnership and MTI filed with the Securities and Exchange Commission.
The pro forma consolidated and condensed balance sheet assumes that the MTI acquisition and the related borrowings under our credit facility occurred as of December 31, 2018. The pro forma statement of operations assumes that the MTI acquisition and the related borrowings under our credit facility occurred on January 1, 2018. The pro forma financial statements give pro forma effect to the acquisition of MTI for consideration (in millions) as follows:
|
| | | |
Purchase price1 | $ | 135.0 |
|
| Plus: Working Capital Adjustment | 2.8 |
|
| Less: Capital leases assumed | (11.7 | ) |
| Cash consideration paid | $ | 126.1 |
|
1The purchase agreement also includes a $10.0 million earn-out based on certain performance thresholds.
The pro forma adjustments are based upon currently available information and certain estimates and assumptions, and therefore the actual adjustments will differ from the pro forma adjustments. However, management believes that the assumptions used provide a reasonable basis for presenting the significant effects of the acquisition as contemplated and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the pro forma financial statements. The pro forma financial statements may not be indicative of the results that actually would have occurred if we had completed the acquisition on the date indicated. In addition, the pro forma financial statements are not necessarily indicative of the results of our future operations.
|
| |
| | Page |
| Pro Forma Consolidated and Condensed Balance Sheet as of December 31, 2018 (unaudited) | |
| Pro Forma Consolidated and Condensed Statement of Operations for the year ended December 31, 2018 (unaudited) | |
| Notes to Consolidated and Condensed Financial Statements | |
MARTIN MIDSTREAM PARTNERS L.P.
UNAUDITED PRO FORMA CONSOLIDATED AND CONDENSED BALANCE SHEET
As of December 31, 2018
(Dollars in thousands)
|
| | | | | | | | | | | | | | | |
| | MMLP | | MTI | | Pro Forma Adjustments | | Pro Forma Consolidated |
| Assets | | | | | | | |
| Cash | $ | 237 |
| | $ | 63 |
| | $ | — |
| | $ | 300 |
|
| Accounts and other receivables, less allowance for doubtful accounts of $291 | 79,031 |
| | 11,726 |
| | — |
| | 90,757 |
|
| Product exchange receivables | 166 |
| | — |
| | — |
| | 166 |
|
| Inventories | 85,068 |
| | 1,138 |
| | — |
| | 86,206 |
|
| Due from affiliates | 18,609 |
| | 1,042 |
| | (805 | ) | (e) | 18,846 |
|
| Fair value of derivatives | 4 |
| | — |
| | — |
| | 4 |
|
| Other current assets | 5,275 |
| | 831 |
| | — |
| | 6,106 |
|
| Assets held for sale | 5,652 |
| | — |
| | — |
| | 5,652 |
|
| Total current assets | 194,042 |
| | 14,800 |
| | (805 | ) | | 208,037 |
|
| | | | | | | | |
| Property, plant and equipment, at cost | 1,264,730 |
| | 46,843 |
| | — |
| | 1,311,573 |
|
| Accumulated depreciation | (466,381 | ) | | (21,459 | ) | | — |
| | (487,840 | ) |
| Property, plant and equipment, net | 798,349 |
| | 25,384 |
| | — |
| | 823,733 |
|
| | | | | | | | |
| Goodwill | 17,296 |
| | 489 |
| | — |
| | 17,785 |
|
| Deferred tax asset | — |
| | — |
| | 25,208 |
| (c) | 25,208 |
|
| Intangibles and other assets, net | 23,711 |
| | 362 |
| | — |
| | 24,073 |
|
| | $ | 1,033,398 |
| | $ | 41,035 |
| | $ | 24,403 |
| | $ | 1,098,836 |
|
| | | | | | | | |
| Liabilities and Partners’ Capital | |
| | | | | | |
|
| Current installments of long-term debt and capital lease obligations | $ | — |
| | $ | 5,409 |
| | $ | — |
| | 5,409 |
|
| Trade and other accounts payable | 63,157 |
| | 2,563 |
| | — |
| | 65,720 |
|
| Product exchange payables | 13,237 |
| | — |
| | — |
| | 13,237 |
|
| Due to affiliates | 2,459 |
| | 482 |
| | (805 | ) | (e) | 2,136 |
|
| Income taxes payable | 445 |
| | — |
| | — |
| | 445 |
|
| Other accrued liabilities | 22,215 |
| | 2,588 |
| | — |
| | 24,803 |
|
| Total current liabilities | 101,513 |
| | 11,042 |
| | (805 | ) | | 111,750 |
|
| | | | | | | | |
| Long-term debt and capital lease obligations, less current installments | 656,459 |
| | 6,272 |
| | 126,114 |
| (a) | 788,845 |
|
| Deferred income taxes | — |
| | 30 |
| | (30 | ) | (c) | — |
|
| Other long-term obligations | 10,714 |
| | — |
| | — |
| | 10,714 |
|
| Total liabilities | 768,686 |
| | 17,344 |
| | 125,279 |
| | 911,309 |
|
| | | | | | | | |
| Commitments and contingencies | | | | | | | |
| Partners’ capital | 264,712 |
| | 23,691 |
| | — |
| | 288,403 |
|
| | — |
| | — |
| | 25,238 |
| (c) | 25,238 |
|
| | — |
| | — |
| | (126,114 | ) | (a) | (126,114 | ) |
| Total partners’ capital | 264,712 |
| | 23,691 |
| | — |
| | 187,527 |
|
| | $ | 1,033,398 |
| | $ | 41,035 |
| | $ | 24,403 |
| | $ | 1,098,836 |
|
See accompanying notes to the unaudited consolidated and condensed pro forma financial statements.
MARTIN MIDSTREAM PARTNERS L.P.
UNAUDITED PRO FORMA CONSOLIDATED AND CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 2018
(Dollars in thousands)
|
| | | | | | | | | | | | | | | |
| | MMLP | | MTI | | Pro Forma Adjustments | | Pro Forma Consolidated |
| Revenues: | | | | | | | |
| Terminalling and storage | $ | 96,287 |
| | $ | — |
| | $ | (83 | ) | (e) | $ | 96,204 |
|
| Transportation | 50,370 |
| | 125,333 |
| | (25,582 | ) | (e) | 150,121 |
|
| Natural gas storage services | 52,109 |
| | — |
| | — |
| | 52,109 |
|
| Sulfur services | 11,148 |
| | — |
| | — |
| | 11,148 |
|
| Product sales: | | | | | | |
|
|
| Natural gas services | 496,026 |
| | — |
| | (19 | ) | (e) | 496,007 |
|
| Sulfur services | 121,388 |
| | — |
| | — |
| | 121,388 |
|
| Terminalling and storage | 145,327 |
| | — |
| | (91 | ) | (e) | 145,236 |
|
| | 762,741 |
| | — |
| | (110 | ) | | 762,631 |
|
| Total revenues | 972,655 |
| | 125,333 |
| | (25,775 | ) | | 1,072,213 |
|
| | | | | | | | |
| Costs and expenses: | | | | | | | |
| Cost of products sold: (excluding depreciation and amortization) | | | | | | | |
| Natural gas services | 463,939 |
| | — |
| | (14,816 | ) | (e) | 449,123 |
|
| Sulfur services | 90,418 |
| | — |
| | (6,778 | ) | (e) | 83,640 |
|
| Terminalling and storage | 130,253 |
| | — |
| | (3,691 | ) | (e) | 126,562 |
|
| | 684,610 |
| | — |
| | (25,285 | ) | | 659,325 |
|
| Expenses: | | | | | | | |
| Operating expenses | 128,337 |
| | 105,212 |
| | (409 | ) | (e) | 233,140 |
|
| Selling, general and administrative | 37,677 |
| | 5,246 |
| | (81 | ) | (e) | 42,842 |
|
| Depreciation and amortization | 76,866 |
| | 3,511 |
| | — |
| | 80,377 |
|
| Total costs and expenses | 927,490 |
| | 113,969 |
| | (25,775 | ) | | 1,015,684 |
|
| Other operating income | (379 | ) | | 596 |
| | 202 |
| (d) | 419 |
|
| Operating income (loss) | 44,786 |
| | 11,960 |
| | 202 |
| | 56,948 |
|
| | | | | | | | |
| Other income (expense): | | | | | | | |
| Interest expense | (52,037 | ) | | (312 | ) | | (6,110 | ) | (b) | (58,459 | ) |
| Other, net | 25 |
| | 13 |
| | — |
| | 38 |
|
| Total other income (expense) | (52,012 | ) | | (299 | ) | | (6,110 | ) | | (58,421 | ) |
| Net income (loss) before taxes | (7,226 | ) | | 11,661 |
| | (5,908 | ) | | (1,473 | ) |
| Income tax expense | (369 | ) | | (208 | ) | | (2,720 | ) | (c) | (3,297 | ) |
| Income (loss) from continuing operations | (7,595 | ) | | 11,453 |
| | (8,628 | ) | | (4,770 | ) |
| Income from discontinued operations, net of income taxes | 51,700 |
| | — |
| | — |
| | 51,700 |
|
| Net income | 44,105 |
| | 11,453 |
| | (8,628 | ) | | 46,930 |
|
| Less general partner's interest in net (income) loss | (882 | ) | | — |
| | — |
| | (882 | ) |
| Less loss allocable to unvested restricted units | (28 | ) | | — |
| | — |
| | (28 | ) |
| Limited partner's interest in net income (loss) | $ | 43,195 |
| | $ | 11,453 |
| | $ | (8,628 | ) | | $ | 46,020 |
|
| | | | | | | | |
| Net loss per unit attributable to limited partners - basic | $ | 1.11 |
| |
|
| | | | $ | 1.18 |
|
| Weighted average limited partner units - basic | 38,907 |
| | | | | | 38,907 |
|
| Net loss per unit attributable to limited partners - diluted | $ | 1.11 |
| | | | | | $ | 1.18 |
|
| Weighted average limited partner units - diluted | 38,923 |
| | | | | | 38,923 |
|
See accompanying notes to the unaudited consolidated and condensed pro forma financial statements.
MARTIN MIDSTREAM PARTNERS L.P.
NOTES TO UNAUDITED CONSOLIDATED AND CONDENSED PRO FORMA FINANCIAL STATEMENTS
Pro Forma Adjustments and Assumptions:
| |
| (a) | Reflects the purchase of MTI financed by proceeds from long-term debt and the corresponding reduction in Partner's Capital related to the excess of the purchase price over the carrying value of assets acquired resulting from an acquisition between entities under common control. |
| |
| (b) | Reflects the additional interest expense resulting from the $126.1 million in borrowings under the Partnership's credit facility. The interest rate used for the pro forma adjustment was 4.85%, which represents the Partnership's weighted average rate on the facility effective throughout 2018. The interest rate can vary and an increase of 1/8% would increase interest expense and decrease income before income taxes by $0.2 million annually. |
| |
| (c) | Subsequent to the acquisition of MTI, the Qualified Subchapter S Subsidiary (“QSub”) election will be terminated resulting in MTI being taxed as a C Corporation. Therefore, balances reflect the incremental amount of current and deferred income tax assets and liabilities and current and deferred income tax expense pursuant to C Corporation taxation. Income tax expense is recorded based on an overall effective tax rate of 24.48%. |
| |
| (d) | To eliminate transaction related expenses associated with the acquisition of MTI. |
| |
| (e) | To eliminate intercompany transactions between the Partnership and MTI. |
