Martin Midstream Partners LP (NASDAQ:MMLP) Q3 2018 Earnings Conference Call Transcript
Oct 25, 2018 • 09:00 am ET
Good morning, ladies and gentlemen, and welcome to the Martin Midstream Partners' Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this call will be recorded.
I would now like to introduce your host for today's conference, Ms. Sharon Taylor, Head of IR. You may begin.
Thank you, Catherine, and good morning. In the room with me today is Ruben Martin, our CEO; Bob Bondurant, our CFO; Chris Booth, General Counsel; and Michael Newton, Director of Strategic Development.
Before we get started with the financial and operational results for the third quarter, I need to make this disclaimer.
(Forward-Looking Cautionary Statements)
We report our financial results in accordance with Generally Accepted Accounting Principles and use certain non-GAAP financial measures within the meanings of the SEC Regulation G such as distributable cash flow, 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, and further in the press release is a link to a slide deck that will provide further details of the announced Martin Transport acquisition.
Now I'll turn it over to Bob Bondurant, our CFO.
Thank you, Sharon.
First, I would like to discuss our recently announced acquisition of Martin Transport from our general partner and our reasoning behind this transaction. As we thought about our investment in West Texas LPG and its significant demand for growth capital, combined with our current elevated cost of capital, we decided to sell our ownership interest in West Texas LPG in order to deleverage our balance sheet. We accomplished this by selling a trailing 12-month cash flow of $5.9 million from West Texas LPG for $195 million. This put us in a much better leverage position, but it basically eliminated any significant growth potential for our Company. So we found ourselves in a position of needing to redeploy capital at a good cash flow multiple in a business we understand well that was also a strategic fit with our existing businesses and moves us toward our goal of becoming a more refinery services-focused Company. The Martin Transport acquisition fit all these requirements.
Strategically, this is a business we have been in over 40 years, so we have great relationships with customers, understand their needs and in some cases, are integrated in their operations. This acquisition also supports our continued emphasis on refinery services and lengthens the value chain of our other businesses, including