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Martin Midstream Partners Reports Third Quarter 2019 Financial Results and Revised Guidance

Martin Midstream Partners Reports Third Quarter 2019 Financial Results and Revised Guidance
  • Execution of Strategic Initiatives Continues with Sale of East Texas Pipeline
  • Quarterly Distribution Coverage Ratio Above Internal Forecast
  • Update on Structure Damage at Neches Terminal

KILGORE, Texas, Oct. 23, 2019 (GLOBE NEWSWIRE) -- Martin Midstream Partners L.P. (MMLP) (the "Partnership") announced today its financial results for the third quarter of 2019.

Ruben Martin, President and Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership said, "The sale of the East Texas Pipeline in the third quarter was the latest action in our strategic initiative plan designed to strengthen the balance sheet by reducing leverage.  The transaction closed on August 12, 2019 for net proceeds of $17.5 million which were used to reduce borrowings under our revolving credit facility.

"Highlighting the third quarter, which annually is our weakest due to seasonal troughs in the fertilizer and butane businesses, was the Natural Gas Liquids and Terminalling and Storage segments, as early season butane sales were above expectations and the lubricants business outperformed guidance as a result of increased margins.  This was offset by the Transportation and Sulfur Services segments as ongoing turnarounds and unplanned maintenance related to third party refineries continue to negatively impact sulfur tank truck hauling, and fertilizer margins and sales volumes were depressed due to higher fertilizer inventories caused by the delay in fall fertilizer application as a result of the late harvest season.

"For the third quarter, the Partnership generated a distribution coverage ratio of 0.84 times, well above our internal forecast of 0.47 times.  Although cash flow from operations was below our guidance level, maintenance capital spending was lower than anticipated at approximately $2.8 million, offsetting the impact to distributable cash flow.  Accordingly, we are reducing our maintenance capital expenditure guidance to approximately $19.6 million for the full year 2019.

"In May 2019, we announced the service disruption and structural damage to the mobile ship-loader at our Neches facility.  The damage rendered the terminal unable to load prilled sulfur onto ocean-going vessels.   We are now estimating that the terminal will be fully operational by February 2020 and anticipate the negative cash flow impact will be relieved with proceeds from our property and business interruption insurance policies, which receipt is expected during fourth quarter 2019 and first quarter 2020.

"Finally, we are revising our fourth quarter guidance to address lower expectations in the Natural Gas Liquids and Transportation segments.  Regarding the butane optimization business, we expect a lower seasonal uplift in pricing due to higher than normal inventories, which may be relieved by recently commissioned export capacity.  And while we are experiencing an improved number of scheduled tank truck loads in the fourth quarter, extended third party refinery turnarounds continue to create headwinds in our land transportation business.  With these revisions we expect the Partnership to generate a distribution coverage ratio of 1.71 times in the fourth quarter of 2019."

The Partnership reported net income from continuing operations for the third quarter 2019 of $13.3 million, or $0.33 per limited partner unit.  The Partnership had a net loss from continuing operations for the third quarter 2018 of $7.9 million, a loss of $0.28 per limited partner unit.  The Partnership had a net loss from continuing operations for the nine months ended September 30, 2019 of $2.1 million, a loss of $0.05 per limited partner unit.  The Partnership had a net loss from continuing operations for the nine months ended September 30, 2018 of $9.4 million, a loss of $0.45 per limited partner unit.

Adjusted EBITDA from continuing operations for the third quarter of 2019 was $22.0 million compared to the third quarter of 2018 of $22.9 million.  Adjusted EBITDA from continuing operations for the nine months ended September 30, 2019 was $72.8 million compared to the nine months ended September 30, 2018 of $81.7 million.

Distributable cash flow from continuing operations for the third quarter of 2019 was $8.3 million compared to the third quarter of 2018 of $4.4 million.  Distributable cash flow from continuing operations for the nine months ended September 30, 2019 was $21.0 million compared to the nine months ended September 30, 2018 of $27.8 million.

The Partnership had net income from discontinued operations for the three months ended September 30, 2019 of $0.0 million, or $0.00 per limited partner unit.  The Partnership had net income from discontinued operations for the three months ended September 30, 2018 of $50.4 million, or $1.28 per limited partner unit.   The Partnership's income from discontinued operations for the three months ended September 30, 2018 includes a non-cash gain related to the disposition of its West Texas LPG Pipeline Limited Partnership interests of $48.6 million.  The Partnership had a net loss from discontinued operations for the nine months ended September 30, 2019 of $179.5 million, a loss of $4.55 per limited partner unit.  The Partnership's loss from discontinued operations for the nine months ended September 30, 2019 includes a non-cash charge related to the disposition of its natural gas storage assets of $178.8 million.  The Partnership had net income from discontinued operations for the nine months ended September 30, 2018 of $62.5 million, or $1.58 per limited partner unit.  The Partnership's income from discontinued operations for the nine months ended September 30, 2018 includes a non-cash gain related to the disposition of its West Texas LPG Pipeline Limited Partnership interests of $48.6 million.

Adjusted EBITDA from discontinued operations for the third quarter of 2019 was $0.0 million compared to the third quarter 2018 of $6.4 million.  Adjusted EBITDA from discontinued operations for the nine months ended September 30, 2019 was $10.7 million compared to the nine months ended September 30, 2018 of $28.2 million.

Distributable cash flow from discontinued operations for the third quarter of 2019 was $0.0 million compared to the third quarter of 2018 of $6.2 million.  Distributable cash flow from discontinued operations for the nine months ended September 30, 2019 was $9.8 million compared to the nine months ended September 30, 2018 of $26.7 million.

Revenues for the third quarter of 2019 were $177.9 million compared to the third quarter of 2018 of $234.0 million.  Revenues for the nine months ended September 30, 2019 were $605.3 million compared to the nine months ended September 30, 2018 of $752.9 million.

Distributable cash flow, distributable cash flow from discontinued operations, EBITDA, adjusted EBITDA, and adjusted EBITDA from discontinued operations are non-GAAP financial measures which are explained in greater detail below under the heading "Use of Non-GAAP Financial Information." The Partnership has also included below a table entitled "Reconciliation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow" in order to show the components of these non-GAAP financial measures and their reconciliation to the most comparable GAAP measurement.

Included with this press release are the Partnership's consolidated and condensed financial statements as of and for the three and nine months ended September 30, 2019 and certain prior periods.  These financial statements should be read in conjunction with the information contained in the Partnership's Quarterly Report on Form 10-Q, to be filed with the Securities and Exchange Commission on October 23, 2019.

An attachment accompanying this announcement is available at http://ml.globenewswire.com/Resource/Download/21e1a421-9e45-45d6-b8c8-334b37f520d9.

Investors' Conference Call

An investors conference call to review the third quarter results will be held on Thursday, October 24, 2019 at 8:00 a.m. Central Time. The live conference call will be available by calling (877) 878-2695.  For a limited time, an audio replay of the conference call will be available by calling (855) 859-2056. The conference ID is 6381517. An archive of the replay will be on Martin Midstream Partners’ website at www.MMLP.com.

About Martin Midstream Partners

Martin Midstream Partners L.P. is a publicly traded limited partnership with a diverse set of operations focused primarily in the United States Gulf Coast region.  The Partnership's primary business lines include: (1) terminalling, processing, storage, and packaging services for petroleum products and by-products; (2) land and marine transportation services for petroleum products and by-products, chemicals, and specialty products; (3) sulfur and sulfur-based products processing, manufacturing, marketing and distribution; and (4) natural gas liquids marketing, distribution and transportation services.

Forward-Looking Statements

Statements about the Partnership's outlook and all other statements in this release other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements and all references to financial estimates rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside the Partnership's control, which could cause actual results to differ materially from such statements.  While the Partnership believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in anticipating or predicting certain important factors.  A discussion of these factors, including risks and uncertainties, is set forth in the Partnership's annual and quarterly reports filed from time to time with the Securities and Exchange Commission.  The Partnership disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events, or otherwise except where required to do so by law.

Use of Non-GAAP Financial Information

The Partnership's management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP") to analyze its performance. These include: (1) net income before interest expense, income tax expense, and depreciation and amortization ("EBITDA"), (2) adjusted EBITDA and (3) distributable cash flow.  The Partnership's management views these measures as important performance measures of core profitability for its operations and the ability to generate and distribute cash flow, and as key components of its internal financial reporting. The Partnership's management believes investors benefit from having access to the same financial measures that management uses.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA from Discontinued Operations.  Certain items excluded from EBITDA, adjusted EBITDA, and adjusted EBITDA from discontinued operations are significant components in understanding and assessing an entity's financial performance, such as cost of capital and historical costs of depreciable assets. The Partnership has included information concerning EBITDA, adjusted EBITDA, and adjusted EBITDA from discontinued operations because it provides investors and management with additional information to better understand the following: financial performance of the Partnership's assets without regard to financing methods, capital structure or historical cost basis; the Partnership's operating performance and return on capital as compared to those of other similarly situated entities; and the viability of acquisitions and capital expenditure projects.  The Partnership's method of computing adjusted EBITDA may not be the same method used to compute similar measures reported by other entities. The economic substance behind the Partnership's use of adjusted EBITDA is to measure the ability of the Partnership's assets to generate cash sufficient to pay interest costs, support its indebtedness and make distributions to its unitholders.

Distributable Cash Flow and Distributable Cash Flow from Discontinued Operations.  Distributable cash flow is a significant performance measure used by the Partnership's management and by external users of its financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by the Partnership to the cash distributions it expects to pay unitholders.  Distributable cash flow is also an important financial measure for the Partnership's unitholders since it serves as an indicator of the Partnership's success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not the Partnership is generating cash flow at a level that can sustain or support an increase in its quarterly distribution rates.  Distributable cash flow is also a quantitative standard used throughout the investment community with respect to publicly-traded partnerships because the value of a unit of such an entity is generally determined by the unit's yield, which in turn is based on the amount of cash distributions the entity pays to a unitholder.

EBITDA, adjusted EBITDA, adjusted EBITDA from discontinued operations, distributable cash flow, and distributable cash flow from discontinued operations, should not be considered alternatives to, or more meaningful than, net income, cash flows from operating activities, or any other measure presented in accordance with GAAP. The Partnership's method of computing these measures may not be the same method used to compute similar measures reported by other entities.

Additional information concerning the Partnership is available on the Partnership's website at www.MMLP.com or by contacting:

Sharon Taylor - Head of Investor Relations
(877) 256-6644

MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(Dollars in thousands)

  September 30, 2019   December 31, 20181
  (Unaudited)   (Unaudited)
Assets      
Cash $ 1,802     $ 300  
Accounts and other receivables, less allowance for doubtful accounts of $512 and $576, respectively 65,927     83,488  
Product exchange receivables 2     166  
Inventories (Note 6) 95,971     84,265  
Due from affiliates 18,501     18,845  
Fair value of derivatives (Note 11) 1,616     4  
Other current assets 8,637     5,889  
Assets held for sale (Note 4) 5,052     5,652  
Current assets - Natural Gas Storage Assets (Note 4)     9,428  
Total current assets 197,508     208,037  
       
Property, plant and equipment, at cost 881,793     886,435  
Accumulated depreciation (459,822 )   (438,602 )
Property, plant and equipment, net 421,971     447,833  
       
Goodwill 17,785     17,785  
Right-of-use assets (Note 9) 25,691      
Deferred income taxes, net (Note 19) 23,681      
Other assets, net (Note 10) 4,495     4,584  
Non current assets - Natural Gas Storage Assets (Note 4)     395,389  
Total assets $ 691,131     $ 1,073,628  
       
Liabilities and Partners’ Capital      
Current installments of finance lease obligations (Note 9) $ 5,975     $ 5,409  
Trade and other accounts payable 52,377     64,041  
Product exchange payables 4,846     12,103  
Due to affiliates 1,471     2,133  
Income taxes payable 510     445  
Other accrued liabilities (Note 10) 23,675     24,380  
Current liabilities - Natural Gas Storage Assets (Note 4)     3,240  
Total current liabilities 88,854     111,751  
       
Long-term debt, net (Note 8 ) 606,293     656,459  
Finance lease obligations (Note 9) 2,906     6,272  
Operating lease liabilities (Note 9) 17,606      
Other long-term obligations 8,842     10,045  
Non current liabilities - Natural Gas Storage Assets (Note 4)     669  
Total liabilities 724,501     785,196  
       
Commitments and contingencies (Note 16)      
Partners’ capital (deficit) (Note 12) (33,370 )   288,432  
Total partners’ capital (deficit) (33,370 )   288,432  
Total liabilities and partners' capital $ 691,131     $ 1,073,628  
               

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on October 23, 2019.

1 Financial information for 2018 has been revised to include results attributable to Martin Transport, Inc. ("MTI") acquired from Martin Resource Management Corporation. See Note 1 – Nature of Operations and Basis of Presentation.


MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit amounts)

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   20181   2019   20181
Revenues:              
Terminalling and storage * $ 21,193     $ 24,332     $ 65,674     $ 72,447  
Transportation * 40,211     39,013     119,327     110,578  
Sulfur services 2,859     2,787     8,576     8,361  
Product sales: *              
Natural gas liquids 60,871     101,919     234,743     351,706  
Sulfur services 20,213     27,981     81,945     98,565  
Terminalling and storage 32,553     38,015     94,991     111,272  
  113,637     167,915     411,679     561,543  
Total revenues 177,900     234,047     605,256     752,929  
               
Costs and expenses:              
Cost of products sold: (excluding depreciation and amortization)              
Natural gas liquids * 51,736     96,486     211,472     319,651  
Sulfur services * 14,442     19,720     56,262     68,824  
Terminalling and storage * 26,009     32,886     78,998     97,152  
  92,187     149,092     346,732     485,627  
Expenses:              
Operating expenses * 51,071     55,200     156,499     160,941  
Selling, general and administrative * 10,474     9,673     30,900     28,506  
Depreciation and amortization 15,009     14,962     44,997     47,220  
Total costs and expenses 168,741     228,927     579,128     722,294  
               
Other operating income, net 16,302     311     13,949     113  
Operating income 25,461     5,431     40,077     30,748  
               
Other income (expense):              
Interest expense, net (11,973 )   (13,238 )   (40,630 )   (39,783 )
Other, net (1 )   25     3     30  
Total other expense (11,974 )   (13,213 )   (40,627 )   (39,753 )
               
Net income (loss) before taxes 13,487     (7,782 )   (550 )   (9,005 )
Income tax expense (237 )   (98 )   (1,572 )   (379 )
Income (loss) from continuing operations 13,250     (7,880 )   (2,122 )   (9,384 )
Income (loss) from discontinued operations, net of income taxes     50,443     (179,466 )   62,457  
Net income (loss) 13,250     42,563     (181,588 )   53,073  
Less general partner's interest in net (income) loss (265 )   (789 )   3,632     (900 )
Less pre-acquisition (income) allocated to the general partner     (3,117 )       (8,055 )
Less income allocable to unvested restricted units (72 )   (27 )   (5 )   (29 )
Limited partners' interest in net income (loss) $ 12,913     $ 38,630     $ (177,961 )   $ 44,089  
                               

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on October 23, 2019.

1 Financial information for 2018 has been revised to include results attributable to MTI acquired from Martin Resource Management Corporation. See Note 1 – Nature of Operations and Basis of Presentation.

*Related Party Transactions Shown Below

MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit amounts)

*Related Party Transactions Included Above

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   20181   2019   20181
Revenues:*              
Terminalling and storage $ 17,538     $ 19,597     $ 53,987     $ 60,090  
Transportation 6,442     7,089     17,941     20,848  
Product Sales 122     149     829     1,150  
Costs and expenses:*              
Cost of products sold: (excluding depreciation and amortization)              
Sulfur services 2,620     2,694     8,078     8,034  
Terminalling and storage 6,300     6,476     19,412     19,144  
Expenses:              
Operating expenses 21,745     20,889     66,409     67,735  
Selling, general and administrative 8,358     5,032     24,148     19,650  

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on October 23, 2019.

1 Financial information for 2018 has been revised to include results attributable to MTI acquired from Martin Resource Management Corporation. See Note 1 – Nature of Operations and Basis of Presentation.

MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit amounts)

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   20181   2019   20181
Allocation of net income (loss) attributable to:              
Limited partner interest:              
Continuing operations $ 12,913     $ (10,846 )   $ (2,080 )   $ (17,275 )
Discontinued operations     49,476     (175,881 )   61,364  
  $ 12,913     $ 38,630     $ (177,961 )   $ 44,089  
General partner interest:              
Continuing operations $ 265     $ (146 )   $ (42 )   $ (159 )
Discontinued operations     935     (3,590 )   1,059  
  $ 265     $ 789     $ (3,632 )   $ 900  
               
Net income (loss) per unit attributable to limited partners:              
Basic:              
Continuing operations $ 0.33     $ (0.28 )   $ (0.05 )   $ (0.45 )
Discontinued operations     1.28     (4.55 )   1.58  
  $ 0.33     $ 1.00     $ (4.60 )   $ 1.13  
Weighted average limited partner units - basic 38,653     38,712     38,661     38,877  
Diluted:              
Continuing operations $ 0.33     $ (0.28 )   $ (0.05 )   $ (0.45 )
Discontinued operations     1.28     (4.55 )   1.58  
  $ 0.33     $ 1.00     $ (4.60 )   $ 1.13  
Weighted average limited partner units - diluted 38,653     38,738     38,661     38,889  
                       

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on October 23, 2019.

1 Financial information for 2018 has been revised to include results attributable to MTI acquired from Martin Resource Management Corporation. See Note 1 – Nature of Operations and Basis of Presentation.


MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED STATEMENTS OF CAPITAL (DEFICIT)
(Dollars in thousands)

      Partners’ Capital    
  Parent Net
  Common Limited   General
Partner

   
  Investment1   Units   Amount   Amount   Total
Balances - January 1, 2018 $ 24,240     38,444,612     $ 290,927     $ 7,314     $ 322,481  
Net income 8,055         44,118     900     53,073  
Issuance of common units, net         (118 )       (118 )
Issuance of restricted units     633,425              
Forfeiture of restricted units     (23,000 )            
Cash distributions         (57,653 )   (1,176 )   (58,829 )
Deemed contribution to Martin Resource Management Corporation (10,800 )               (10,800 )
Unit-based compensation         872         872  
Purchase of treasury units     (18,800 )   (273 )       (273 )
Excess purchase price over carrying value of acquired assets         (26 )       (26 )
Balances - September 30, 2018 $ 21,495     39,036,237     $ 277,847     $ 7,038     $ 306,380  
                   
Balances - January 1, 2019 $ 23,720     39,032,237     $ 258,085     $ 6,627     $ 288,432  
Net loss         (177,956 )   (3,632 )   (181,588 )
Issuance of common units, net of issuance related costs         (289 )       (289 )
Issuance of restricted units     16,944              
Forfeiture of restricted units     (154,288 )            
Cash distributions         (38,480 )   (785 )   (39,265 )
Unit-based compensation         1,064         1,064  
Excess purchase price over carrying value of acquired assets         (102,393 )       (102,393 )
Deferred taxes on acquired assets and liabilities         24,781         24,781  
Contribution to parent (23,720 )               (23,720 )
Purchase of treasury units     (31,504 )   (392 )       (392 )
Balances - September 30, 2019 $     38,863,389     $ (35,580 )   $ 2,210     $ (33,370 )
                                     

These financial statements should be read in conjunction with the financial statements and the accompanying notes and other information included in the Partnership's Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on October 23, 2019.

1 Financial information for 2018 has been revised to include results attributable to MTI acquired from Martin Resource Management Corporation. See Note 1 – Nature of Operations and Basis of Presentation.

MARTIN MIDSTREAM PARTNERS L.P.
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

null
  Nine Months Ended
  September 30,
  2019   20181
Cash flows from operating activities:      
Net income (loss) $ (181,588 )   $ 53,073  
Less:  (Income) loss from discontinued operations, net of income taxes 179,466     (62,457 )
Net loss from continuing operations (2,122 )   (9,384 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 44,997     47,220  
Amortization and write-off of deferred debt issuance costs 3,558     2,563  
Amortization of premium on notes payable (230 )   (230 )
Deferred taxes 1,100      
Gain on sale of property, plant and equipment, net (13,949 )   (113 )
Derivative loss (gain) (280 )   198  
Net cash received (paid) for commodity derivatives (249 )   2,698  
Unit-based compensation 1,064     872  
Change in current assets and liabilities, excluding effects of acquisitions and dispositions:      
Accounts and other receivables 25,748     37,308  
Product exchange receivables 164     (156 )
Inventories (11,707 )   (36,434 )
Due from affiliates 1,150     434  
Other current assets (2,654 )   523  
Trade and other accounts payable (10,577 )   (16,889 )
Product exchange payables (7,257 )   (2,018 )
Due to affiliates (1,468 )   2,325  
Income taxes payable 65     (52 )
Other accrued liabilities (8,904 )   (11,123 )
Change in other non-current assets and liabilities (600 )   828  
Net cash provided by continuing operating activities 17,849     18,570  
Net cash provided by discontinued operating activities 7,770     26,006  
Net cash provided by operating activities 25,619     44,576  
       
Cash flows from investing activities:      
Payments for property, plant and equipment (22,797 )   (29,986 )
Acquisitions (23,720 )    
Payments for plant turnaround costs (5,117 )   (879 )
Proceeds from sale of property, plant and equipment 18,303     3,564  
Net cash used in continuing investing activities (33,331 )   (27,301 )
Net cash provided by discontinued investing activities 209,155     173,873  
Net cash provided by investing activities 175,824     146,572  
       
Cash flows from financing activities:      
Payments of long-term debt and finance lease obligations (639,308 )   (461,657 )
Proceeds from long-term debt 586,000     345,000  
Proceeds from issuance of common units, net of issuance related costs (289 )   (118 )
Purchase of treasury units (392 )   (273 )
Deemed distribution to Martin Resource Management Corporation     (10,800 )
Payment of debt issuance costs (4,294 )   (1,285 )
Excess purchase price over carrying value of acquired assets (102,393 )   (26 )
Cash distributions paid (39,265 )   (58,829 )
Net cash used in financing activities (199,941 )   (187,988 )
       
Net increase in cash 1,502