Good day ladies and gentlemen and welcome to the Martin Midstream Partners LP second quarter 2018 earnings conference call and webcast. At this time, all participants are in listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. If anyone should require assistance during the conference, you may press star then zero on your touchtone telephone to speak with an operator. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Bob Bondurant, Chief Financial Officer. Sir, you may begin.

Okay, thank you, Brian. To let everyone know who else is on the call today, we have Joe McCreery, Vice President of Finance and Head of Investor Relations; Scott Southard, our VP of Commercial Development, and Sharon Taylor, who after today will become our Director of Finance and Head of Investor Relations. It is somewhat bittersweet that I am today announcing that Joe is leaving Martin after nine and a half years in order to take the Chief Financial Officer position at Copperbeck Energy Partners. His new position as CFO at Copperbeck will fulfill a long time professional goal of Joe’s. We surely regret that Joe will be leaving us but are excited that he has a great opportunity with Copperbeck to help grow a company from its infancy. Joe has been a very valuable asset at Martin, and I want to personally thank you for all you’ve provided us for these many years, and we wish you and the Copperbeck executive team much success in the future. Now I’d like to introduce Sharon Taylor, who has worked for Martin in various capacities since we acquired Prism Gas in 2005. Sharon was the CFO at Prism prior to our acquisition and after we sold Prism in 2012 has been working for our general partner, managing several IT implementation projects. Sharon also has had experience as Head of Investor Relations for a logistics management company prior to joining Prism. We’d like to publicly welcome Sharon to her new role here at Martin, and we believe she will add great insight and value to our organization in her new role. With that, I would like to turn the call over to Sharon for a few brief comments.

Thank you, Bob, and good morning. Before we get started with the financial and operational results for the second quarter, I need to make this disclaimer. Certain statements made during this conference call may be forward-looking statements relating to financial forecasts, future performance, and our ability to make distributions to unit holders. We report our financial results in accordance with generally accepted accounting principles and use certain non-GAAP financial measures within the meaning of SEC Regulation G, such as distribution c ash flow, or DCF, and earnings before interest, taxes, depreciation and amortization, or EBITDA, and also adjusted EBITDA. We use these measures because we believe it provides users of our financial information with meaningful comparisons between current results and prior reported results, and it can be a meaningful measure of the partnership’s cash available to pay distributions. We also included in our press release issued yesterday a reconciliation of EBITDA, adjusted EBITDA, distributable cash flow and quarterly adjusted EBITDA guidance to the most comparable GAAP financial measure. Our earnings press release is available at our website, martinmidstream.com. Thank you, and back to you, Bob.

Thanks Sharon. Now I’d like to discuss our second quarter performance compared to the first quarter and also discuss our second quarter performance compared to our guidance. For the second quarter, we had adjusted EBITDA of $29.4 million compared to $44.8 million in the first quarter of 2018. Our distributable cash flow for the second quarter was $11 million, which provided a quarterly distribution coverage ratio of 0.56 times which compares to second quarter guidance of 0.59 times. For the second quarter, our adjusted EBITDA of $29.4 million was below our guidance of $35.1 million primarily from a one-time write-down of inventory in our fertilizer business. By segment, I would like to discuss our second quarter operating performance compared against the first quarter and also discuss our operating performance compared to our segment guidance. In our natural gas services segment, our second quarter adjusted EBITDA was $10.5 million compared to $23.3 million in the first quarter. Included in adjusted EBITDA was $1.5 million in distributions from West Texas LPG in both the first and second quarters. The significant portion of the decrease in cash flow between quarters for our natural gas services segment was primarily from our butane logistics business. During the second quarter, sales normally decline significantly in our butane logistics business as we begin to build inventory by buying and storing butane production from refineries as they begin to have excess butane in Q2 and Q3. This is exactly what happened in Q2 as our butane logistics EBITDA decreased by $8.9 million between quarters. Moving forward, we will continue to purchase and build inventory in the third quarter to position ourselves for sales that will begin again in late September. Compared to our second quarter guidance, our natural gas services segment missed guidance by $1.5 million. This miss…

Thanks Bob. Let’s start with the normal walk-through of the debt components of our balance sheet, defining our bank ratios at quarter end, then discuss yesterday’s West Texas LPG pipeline announcement. We will then discuss our capital spending during the second quarter and revised full year 2018 capital spending estimates as it pertains to our leverage ratios and our guidance. On June 30, 2018, the partnership’s balance sheet reflected total long term funded debt of approximately $832 million. Our balance sheet funded debt is shown before unamortized debt issuance and unamortized issuance premiums, as actual funded debt outstanding was $838 million. Reconciling this amount at quarter end, our revolving credit facility balance was $464 million and the notional amount of our senior unsecured notes was $374 million, thus our total available liquidity on June 30 was $200 million based on our $664 million revolving credit facility. For the quarter ended June 30, 2018, our bank compliant leverage ratios, defined as senior secured indebtedness to adjusted EBITDA and total indebtedness to adjusted EBITDA, were 3.02 times and 5.46 times respectively. Our total debt ratio is shown without adjustments from the working capital carve-out sublimit. This sublimit allows us to exclude certain debt directly attributed to the seasonal NGL inventory build where the partnership has either forward sold or hedged inventory from our total debt to EBITDA calculation; however, during the second quarter, our seasonal NGL inventory build-up was not yet at a level where we utilized the carve-out mechanism. Our bank compliant interest coverage ratio as defined by adjusted EBITDA to consolidated interest expense was 3.06 times. Looking at the balance sheet, total debt to total capitalization on June 30 was 75.9%. In all on June 30, the partnership was in full compliance with all covenants, banking or otherwise. Now let…

[Operator instructions] Our first question comes from the line of Matt Schmid from Stephens. Your line is now open.

Hey, good morning guys, and congrats, Joe.

Thank you, Matt.

Just thinking about the WT LPG divestiture, congrats on that and getting back and hitting your leverage targets, but maybe could you just provide a little bit more color about thoughts around the distribution and coverage targets going forward? Does that really kind of remain the same, or do you have any different thoughts about that?

Matt, this is Joe. I think the goal for the partnership on those two fronts, leverage and coverage, remain the same - better than 4.5 times leverage and coverage of 1.2 times, which has been our stated goal to the street and to the rating agencies and the lenders.

Okay, thanks. You mentioned in the remarks about the possibility of drop-downs or more flexibility going forward. Maybe could you just give a little bit more color about how you’re thinking about future growth opportunities and details of what kinds of potential downstream or refining related assets, or where do you think you have the best growth opportunities around your existing assets?

I think the biggest opportunity for drop-down would be possibly our trucking company. Our trucking company is primarily focused around refineries. It would fit our new informal stated goal of becoming more of a refinery services-like business. We’re seeing significant growth in our trucking company with rate improvement, and the tightness of drivers is helping drive that rate improvement. We are not a commodity hauler in that we’re not kicking around the Permian and having some temporary increases because of a lack of pipelines. We again are focused around the refinery world, so we think it’s a very stable cash flow business that has significant growth opportunity. That’s the one obvious one that’s out there, and I’ll just keep my remarks to that one.

All right, thanks for the color.

Our next question comes from the line of Patrick Wang from Baird. Your line is now open.

Hey, good morning everyone, and congrats, Joe. Just a quick one on marine first. Are you finally seeing some progress from--you know, after we finally saw some of that progress on industry fleet attrition, are you seeing any of your competitors start to add to their fleet at this point yet?

No, I think what’s happening is a consolidation in the business. Primarily there’s been--Savage acquired Setoon Towing, I believe recently. I know Kirby’s taken--I heard at a board meeting a couple days ago, approximately I think--I may misspeak, but 50 to 80 vessels out of service because they’re older ones. So what we’re seeing is a retirement of older vessels so the fleet is shrinking, consolidation going on, and that’s really providing the tightness in the market and we are seeing as we roll over. A lot of our contracts are month to month - we do have a few that are longer term, but as those month to months are rolling over, we’re getting $100 increases, $200 increases, etc., so we feel pretty good about the growth in cash flow we are continuing.

Okay, that’s great. Thanks for that. Just shifting back to the earlier comments on the potential trucking business drop-down, could you comment just about the labor environment there? I know we’ve been hearing about the general shortness of truck drivers. Just curious about your thoughts there.

Yes, it is a tight market, and it’s not only on the energy side and bulk products that we haul, but it’s our drive van volume, etc. When you think about the Amazon world and everybody shipping product around, the demand for drivers has significantly increased, and we are seeing significant tightness. However, we recently hired several new driver recruiters that have done a good job of bringing in new drivers. We are currently maintaining the size of our driver fleet, but we’re slowly starting to see some increases. It’s very competitive right now, but again the biggest driver to that is the fact that we are getting rate increases. So with that, labor is tight but our customers, which are sophisticated refiners and chemical companies, etc., they understand that and they are not fighting rate increases because they can’t get their products hauled from any other carriers. It is a supply driven price increase, and when I’m talking about supply, I’m talking about the supply of trucks and availability of trucking. We feel it could be a great growth story longer term for the partnership if that was to come to pass.

All right, that makes a lot of sense. Thank you very much.

Our next question comes from the line of Jordan Stevens from Caspian. Your line is now open.

Hey guys, and congrats, Joe. I just wanted to see how you guys were thinking about the capital structure going forward. I know you talked about potentially coming to the bond market back over the winter until there was a little bit of a hiccup, and now with the significant reduction in leverage, is that something you’re considering again or will it be a ratings-driven decision? Just would love any color there.

Jordan, this is Joe. Thanks and good morning to you. As we think about the plan on finance going forward, we’ve got a couple of moving parts. As you’re aware, we do have a power cal date in our bonds next February - we’ve certainly got our eye on that as a potential triggering event, and also our revolving credit facility goes current next March, so we’ll be in the market, likely the bank market as well. There is some capital structure work to do. We’ve alluded to some of this potential growth. I think you have to kind of incorporate that into the plan of finance, if you will, so there are some moving parts. We are in dialog with rating agencies currently, they are certainly aware of the transaction and our pro forma leverage, and where we anticipate being on a full year and 2019 basis, so hopefully with some assistance from them, we get a favorable bounce and we can entertain activities like a bond offering and, as I said, there is some bank work to do as well.

Thanks.

Our next question comes from the line of Selman Akyol from Stifel. Your line is now open.

Thank you very much. Joe, best of luck. I guess as you think about the fertilizer business and you roll into the fall, is anything from tariffs, farmers seeing issues out there, is any of that starting to factor into your thinking? Are you seeing anything there yet at all?

We’re not seeing anything yet. The primary, I think, product that was going to have tariffs on it was soybeans, and our fertilizer that we sell is primarily focused on corn, which we’re not hearing tariffs on that. In talking with the leadership with the fertilizer group, they think it’s a non-event right now. Could that change if corn gets involved? Possibly, but again the biggest use of agriculture products that use our fertilizer is corn, so I think it’s minimal impact at this moment.

Okay, appreciate that. Thanks again, guys.

I am currently seeing no further questions. I will now turn the call over to Bob Bondurant for any further remarks.

Okay, thank you, Brian. As Joe talked about and we talked about on the call, we’re very pleased with the ability to close the West Texas LPG sale on July 31, very pleased with the transaction and the speed of execution, and with that we’ll be paying down approximately $195 million of debt, which adds annual interest savings of approximately $10 million a year, plus or minus. With that comes pro forma leverage of 4.36 times at 6/30, that puts our balance sheet in a great position for growth. We’ve talked a little bit about that, primarily looking at potential drop-downs and maybe some ones and twosies on the organic growth side as well. We have renewed optimism in marine transport, stronger day rates and higher utilization. With this fertilizer adjustment, we most likely will not hit our fertilizer guidance, but I do believe it will be offset by the strength in our marine transportation business. We want to continue to affirm our one times guidance based primarily on lower maintenance capex and lower interest expense. With that, final thoughts - Joe, appreciate it again. Good luck at Copperbeck - you’re not going to be far from here, so I appreciate it, and welcome Sharon to the team. With that, I’ll close, and appreciate everybody’s coverage. Thank you.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes today’s program and you may all disconnect. Everyone have a great day.