UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10‑Q10-Q
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(Mark One) |
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☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended | |
OR | |
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 001‑32505
TRANSMONTAIGNE PARTNERS L.P.LLC
(Exact name of registrant as specified in its charter)
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Delaware | 34‑2037221 |
1670 Broadway
Suite 3100
Denver, Colorado 80202
(Address, including zip code, of principal executive offices)
(303) 626‑8200
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
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Large accelerated filer ☐ Non‑accelerated filer ☐ | Accelerated filer ☒ |
| Smaller reporting company ☐ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
As of October 31, 2017, there were 16,177,353June 30, 2019, the registrant has no common units outstanding.
* The registrant is a voluntary filer of reports required to be filed by certain companies under Section 13 or 15(d) of the registrant’s Common Limited Partner Units outstanding.Securities Exchange Act of 1934 and has filed all reports that would have been required to have been filed by the registrant during the preceding 12 months had it been subject to such filing requirements during the entirety of such period.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2
CAUTIONARY STATEMENT REGARDING FORWARD‑LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward‑looking statements“forward-looking statements” within the meaning of Section 27Afederal securities laws. Forward-looking statements give our current expectations, contain projections of results of operations or of financial condition, or forecasts of future events. When used in this Quarterly Report, the words “could,” “may,” “should,” “will,” “seek,” “believe,” “expect,” “anticipate,” “intend,” “continue,” “estimate,” “plan,” “target,” “predict,” “project,” “attempt,” “is scheduled,” “likely,” “forecast,” the negatives thereof and other similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. You are cautioned not to place undue reliance on any forward-looking statements.
When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2018 and the risk factors and other cautionary statements contained in our other filings with the United States Securities Actand Exchange Commission.
You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of 1933all potential risks and Section 21E ofuncertainties. Factors that could cause our actual results to differ materially from the Securities Exchange Act of 1934, including the following:results contemplated by such forward-looking statements include:
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· | pending legal or |
· | costs of conducting our operations; |
· | our ability to complete internal growth projects on time and on budget; |
· | general economic conditions; |
· | the |
· | the price and availability of financing; |
· | large customer defaults; |
· | interest rates; |
· | operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control; |
· | uncertainty regarding our future operating results; |
· | changes in tax status; |
· | effects of existing and future laws and governmental regulations; |
· | the effects of future litigation; and |
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Our business and results of operationsAll forward-looking statements, expressed or implied, included in this Quarterly Report are subjectexpressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.
Except as otherwise required by applicable law, we disclaim any duty to risks and uncertainties, manyupdate any forward-looking statements, all of which are beyond our abilityexpressly qualified by the statements in this section, to controlreflect events or predict. Because of these risks and uncertainties, actual results may differ materially from those expressed or implied by forward‑looking statements, and investors are cautioned not to place undue reliance on such statements, which speak only as ofcircumstances after the date thereof. Important factors that could cause actual results to differ materially from our expectations and may adversely affect our business and results of operations, include, but are not limited to those risk factors set forth in this report in Part II. Other Information under the heading “Item 1A. Risk Factors.”Quarterly Report.
3
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The interim unaudited consolidated financial statements of TransMontaigne Partners L.P.LLC as of and for the three and ninesix months ended SeptemberJune 30, 20172019 are included herein beginning on the following page. The accompanying unaudited interim consolidated financial statements should be read in conjunction with our consolidated financial statements and related notes for the year ended December 31, 2016,2018, together with our discussion and analysis of financial condition and results of operations, included in our Annual Report on Form 10‑K, filed on March 14, 201715, 2019 with the Securities and Exchange Commission (File No. 001‑32505).
TransMontaigne Partners L.P.LLC is a holding company with the following 100% owned operating subsidiaries during the three and ninesix months ended SeptemberJune 30, 2017:2019:
· | TransMontaigne Operating GP L.L.C. |
· | TransMontaigne Operating Company L.P. |
· | TransMontaigne Terminals L.L.C. |
· | Razorback L.L.C. (d/b/a Diamondback Pipeline L.L.C.) |
· | TPSI Terminals L.L.C. |
· | TLP Finance Corp. |
· | TLP Operating Finance Corp. |
· | TPME L.L.C. |
· | TLP Management Services LLC |
We do not have off‑balance‑sheet arrangements (other than operating leases) or special‑purpose entities.
34
TransMontaigne Partners L.P.LLC and subsidiaries
Consolidated balance sheets (unaudited)
(Dollars in thousands)
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| September 30, |
| December 31, |
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| June 30, |
| December 31, |
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| 2017 |
| 2016 |
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| 2019 |
| 2018 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 4,853 |
| $ | 593 |
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| $ | 612 |
| $ | 1,026 |
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Trade accounts receivable, net |
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| 10,303 |
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| 9,297 |
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| 15,924 |
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| 14,049 |
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Due from affiliates |
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| 1,458 |
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| 653 |
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| 1,925 |
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| 1,953 |
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Other current assets |
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| 6,458 |
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| 9,903 |
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| 7,400 |
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| 8,097 |
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Total current assets |
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| 23,072 |
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| 20,446 |
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| 25,861 |
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| 25,125 |
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Property, plant and equipment, net |
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| 426,467 |
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| 416,748 |
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| 698,926 |
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| 689,170 |
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Goodwill |
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| 8,485 |
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| 8,485 |
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| 9,428 |
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| 9,428 |
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Investments in unconsolidated affiliates |
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| 236,706 |
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| 241,093 |
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| 224,683 |
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| 227,031 |
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Right-of-use assets, operating leases |
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| 36,633 |
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| — |
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Other assets, net |
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| 7,165 |
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| 2,922 |
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| 50,389 |
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| 51,254 |
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| $ | 701,895 |
| $ | 689,694 |
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| $ | 1,045,920 |
| $ | 1,002,008 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Trade accounts payable |
| $ | 9,073 |
| $ | 7,928 |
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| $ | 11,123 |
| $ | 28,212 |
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Operating lease liabilities |
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| 3,011 |
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| — |
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Accrued liabilities |
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| 18,002 |
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| 13,998 |
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| 32,635 |
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| 31,946 |
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Total current liabilities |
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| 27,075 |
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| 21,926 |
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| 46,769 |
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| 60,158 |
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Other liabilities |
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| 3,411 |
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| 3,234 |
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| 4,962 |
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| 4,643 |
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Long-term operating lease liabilities |
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| 35,541 |
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| — |
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Long-term debt |
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| 302,000 |
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| 291,800 |
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| 632,736 |
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| 598,622 |
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Total liabilities |
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| 332,486 |
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| 316,960 |
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| 720,008 |
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| 663,423 |
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Commitments and contingencies (Note 16) |
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Partners’ equity: |
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Common unitholders (16,170,855 units issued and outstanding at September 30, 2017 and 16,137,650 units issued and outstanding at December 31, 2016) |
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| 316,090 |
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| 320,042 |
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General partner interest (2% interest with 330,017 equivalent units outstanding at September 30, 2017 and 329,339 equivalent units outstanding at December 31, 2016) |
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| 53,319 |
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| 52,692 |
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Total partners’ equity |
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| 369,409 |
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| 372,734 |
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Commitments and contingencies (Note 13) |
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Equity: |
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Common units - 16,229,123 issued and outstanding at December 31, 2018 |
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| — |
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| 285,095 |
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General partner interest - 2% interest with 331,206 equivalent units outstanding at December 31, 2018 |
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| — |
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| 53,490 |
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Member interest |
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| 325,912 |
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| — |
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Total equity |
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| 325,912 |
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| 338,585 |
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| $ | 701,895 |
| $ | 689,694 |
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| $ | 1,045,920 |
| $ | 1,002,008 |
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See accompanying notes to consolidated financial statements (unaudited)statements. Prior periods have been recast as a result of the TMS Contribution (See Note 1 of Notes to consolidated financial statements).
45
TransMontaigne Partners L.P.LLC and subsidiaries
Consolidated statements of operations (unaudited)
(In thousands, except per unit amounts)thousands)
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| Three months ended |
| Nine months ended |
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| Three months ended |
| Six months ended |
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| September 30, |
| September 30, |
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| June 30, |
| June 30, |
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| 2017 |
| 2016 |
| 2017 |
| 2016 |
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| 2019 |
| 2018 |
| 2019 |
| 2018 |
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Revenue: |
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External customers |
| $ | 43,512 |
| $ | 39,328 |
| $ | 130,442 |
| $ | 115,570 |
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| $ | 57,837 |
| $ | 51,379 |
| $ | 111,604 |
| $ | 103,493 |
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Affiliates |
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| 1,937 |
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| 1,310 |
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| 5,221 |
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| 6,830 |
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| 7,132 |
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| 4,769 |
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| 14,633 |
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| 10,060 |
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Total revenue |
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| 45,449 |
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| 40,638 |
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| 135,663 |
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| 122,400 |
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| 64,969 |
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| 56,148 |
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| 126,237 |
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| 113,553 |
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Operating costs and expenses and other: |
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Direct operating costs and expenses |
|
| (17,719) |
|
| (17,048) |
|
| (50,214) |
|
| (50,657) |
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Costs and expenses: |
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Operating |
|
| (26,464) |
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| (23,562) |
|
| (51,789) |
|
| (48,064) |
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General and administrative expenses |
|
| (5,247) |
|
| (3,605) |
|
| (13,298) |
|
| (10,929) |
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|
| (5,212) |
|
| (5,320) |
|
| (13,376) |
|
| (11,499) |
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Insurance expenses |
|
| (999) |
|
| (969) |
|
| (3,007) |
|
| (2,776) |
|
|
| (1,218) |
|
| (1,271) |
|
| (2,579) |
|
| (2,517) |
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Equity-based compensation expense |
|
| (544) |
|
| (251) |
|
| (2,713) |
|
| (2,664) |
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Deferred compensation expense |
|
| (294) |
|
| (441) |
|
| (1,093) |
|
| (2,458) |
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Depreciation and amortization |
|
| (8,882) |
|
| (8,169) |
|
| (26,379) |
|
| (24,168) |
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|
| (13,107) |
|
| (13,225) |
|
| (25,759) |
|
| (25,096) |
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Total costs and expenses |
|
| (46,295) |
|
| (43,819) |
|
| (94,596) |
|
| (89,634) |
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Earnings from unconsolidated affiliates |
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| 1,884 |
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| 2,960 |
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| 6,564 |
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| 6,940 |
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| 1,225 |
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| 2,444 |
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| 2,365 |
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| 5,333 |
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Total operating costs and expenses and other |
|
| (31,507) |
|
| (27,082) |
|
| (89,047) |
|
| (84,254) |
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Gain from insurance proceeds |
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| 3,351 |
|
| — |
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| 3,351 |
|
| — |
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Operating income |
|
| 13,942 |
|
| 13,556 |
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| 46,616 |
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| 38,146 |
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|
| 23,250 |
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| 14,773 |
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| 37,357 |
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| 29,252 |
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Other expenses: |
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Interest expense |
|
| (2,656) |
|
| (1,467) |
|
| (7,333) |
|
| (6,627) |
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|
| (9,708) |
|
| (8,273) |
|
| (18,550) |
|
| (14,734) |
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Amortization of deferred financing costs |
|
| (320) |
|
| (204) |
|
| (885) |
|
| (614) |
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Amortization of deferred debt issuance costs |
|
| (632) |
|
| (1,289) |
|
| (1,382) |
|
| (1,790) |
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Total other expenses |
|
| (2,976) |
|
| (1,671) |
|
| (8,218) |
|
| (7,241) |
|
|
| (10,340) |
|
| (9,562) |
|
| (19,932) |
|
| (16,524) |
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Net earnings |
|
| 10,966 |
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| 11,885 |
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| 38,398 |
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| 30,905 |
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| $ | 12,910 |
| $ | 5,211 |
| $ | 17,425 |
| $ | 12,728 |
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Less—earnings allocable to general partner interest including incentive distribution rights |
|
| (3,270) |
|
| (2,429) |
|
| (9,218) |
|
| (6,727) |
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Net earnings allocable to limited partners |
| $ | 7,696 |
| $ | 9,456 |
| $ | 29,180 |
| $ | 24,178 |
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Net earnings per limited partner unit—basic |
| $ | 0.47 |
| $ | 0.58 |
| $ | 1.79 |
| $ | 1.49 |
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Net earnings per limited partner unit—diluted |
| $ | 0.47 |
| $ | 0.58 |
| $ | 1.79 |
| $ | 1.49 |
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See accompanying notes to consolidated financial statements (unaudited)statements. Prior periods have been recast as a result of the TMS Contribution (See Note 1 of Notes to consolidated financial statements).
56
TransMontaigne Partners L.P.LLC and subsidiaries
Consolidated statements of partners’ equity (unaudited)
Year ended December 31, 2016 and nine months ended September 30, 2017
(Dollars (Dollars in thousands)
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| General |
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| Common |
| partner |
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| units |
| interest |
| Total |
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Balance December 31, 2015 |
| $ | 326,224 |
| $ | 57,747 |
| $ | 383,971 |
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Distributions to unitholders |
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| (44,211) |
|
| (8,898) |
|
| (53,109) |
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Equity-based compensation |
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| 3,128 |
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| — |
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| 3,128 |
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Issuance of 19,008 common units pursuant to our long-term incentive plan |
|
| 135 |
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| — |
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| 135 |
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Issuance of 2,094 common units pursuant to our savings and retention program |
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| — |
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| — |
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| — |
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TransMontaigne GP to maintain its 2% general partner interest |
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| — |
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| 9 |
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| 9 |
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Excess of $12.0 million purchase price of hydrant system from TransMontaigne LLC over the carryover basis of the net assets |
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| — |
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| (5,506) |
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| (5,506) |
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Net earnings for year ended December 31, 2016 |
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| 34,766 |
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| 9,340 |
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| 44,106 |
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Balance December 31, 2016 |
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| 320,042 |
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| 52,692 |
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| 372,734 |
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Distributions to unitholders |
|
| (35,134) |
|
| (8,621) |
|
| (43,755) |
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Equity-based compensation |
|
| 2,713 |
|
| — |
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| 2,713 |
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Settlement of tax withholdings on equity-based compensation |
|
| (711) |
|
| — |
|
| (711) |
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Issuance of 33,205 common units pursuant to our savings and retention program |
|
| — |
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| — |
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| — |
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TransMontaigne GP to maintain its 2% general partner interest |
|
| — |
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| 30 |
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| 30 |
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Net earnings for nine months ended September 30, 2017 |
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| 29,180 |
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| 9,218 |
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| 38,398 |
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Balance September 30, 2017 |
| $ | 316,090 |
| $ | 53,319 |
| $ | 369,409 |
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| General |
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| Common |
| partner |
| Member |
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| units |
| interest |
| interest |
| Total |
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Balance April 1, 2018 |
| $ | 305,668 |
| $ | 53,627 |
| $ | — |
| $ | 359,295 |
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Distributions to unitholders |
|
| (12,735) |
|
| (3,859) |
|
| — |
|
| (16,594) |
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Equity-based compensation |
|
| 441 |
|
| — |
|
| — |
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| 441 |
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Issuance of 21,666 common units pursuant to our savings and retention program |
|
| — |
|
| — |
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| — |
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| — |
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Settlement of tax withholdings on equity-based compensation |
|
| (317) |
|
| — |
|
| — |
|
| (317) |
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Contribution of cash by TransMontaigne GP to maintain its 2% general partner interest |
|
| — |
|
| 16 |
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| — |
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| 16 |
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Contribution from TLP Holdings |
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| 3,844 |
|
| — |
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| — |
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| 3,844 |
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Net earnings for three months ended June 30, 2018 |
|
| 1,339 |
|
| 3,872 |
|
| — |
|
| 5,211 |
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Balance June 30, 2018 |
| $ | 298,240 |
| $ | 53,656 |
| $ | — |
| $ | 351,896 |
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Balance April 1, 2019 |
| $ | — |
| $ | — |
| $ | 327,378 |
| $ | 327,378 |
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Distributions to TLP Finance |
|
| — |
|
| — |
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| (14,376) |
|
| (14,376) |
|
Net earnings for the three months ended June 30, 2019 |
|
| — |
|
| — |
|
| 12,910 |
|
| 12,910 |
|
Balance June 30, 2019 |
| $ | — |
| $ | — |
| $ | 325,912 |
| $ | 325,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2018 |
| $ | 308,495 |
| $ | 53,448 |
| $ | — |
| $ | 361,943 |
|
Distributions to unitholders |
|
| (25,193) |
|
| (7,464) |
|
| — |
|
| (32,657) |
|
Equity-based compensation |
|
| 2,458 |
|
| — |
|
| — |
|
| 2,458 |
|
Issuance of 44,798 common units pursuant to our savings and retention program |
|
| — |
|
| — |
|
| — |
|
| — |
|
Settlement of tax withholdings on equity-based compensation |
|
| (658) |
|
| — |
|
| — |
|
| (658) |
|
Contribution of cash by TransMontaigne GP to maintain its 2% general partner interest |
|
| — |
|
| 34 |
|
| — |
|
| 34 |
|
Contribution from TLP Holdings |
|
| 8,048 |
|
| — |
|
| — |
|
| 8,048 |
|
Net earnings for six months ended June 30, 2018 |
|
| 5,090 |
|
| 7,638 |
|
| — |
|
| 12,728 |
|
Balance June 30, 2018 |
| $ | 298,240 |
| $ | 53,656 |
| $ | — |
| $ | 351,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2019 |
| $ | 285,095 |
| $ | 53,490 |
| $ | — |
| $ | 338,585 |
|
Distributions to unitholders |
|
| (13,064) |
|
| (4,186) |
|
| — |
|
| (17,250) |
|
Purchase of common units and conversion to member interest |
|
| (279,895) |
|
| (51,978) |
|
| 331,873 |
|
| — |
|
Reclassification of outstanding equity-based compensation to liability |
|
| — |
|
| — |
|
| (3,346) |
|
| (3,346) |
|
Contribution from TLP Holdings |
|
| 4,829 |
|
| — |
|
| — |
|
| 4,829 |
|
Equity-based compensation |
|
| 45 |
|
| — |
|
| — |
|
| 45 |
|
Distributions to TLP Finance |
|
| — |
|
| — |
|
| (14,376) |
|
| (14,376) |
|
Net earnings for the six months ended June 30, 2019 |
|
| 2,990 |
|
| 2,674 |
|
| 11,761 |
|
| 17,425 |
|
Balance June 30, 2019 |
| $ | — |
| $ | — |
| $ | 325,912 |
| $ | 325,912 |
|
See accompanying notes to consolidated financial statements (unaudited)statements. Prior periods have been recast as a result of the TMS Contribution (See Note 1 of Notes to consolidated financial statements).
67
TransMontaigne Partners L.P.LLC and subsidiaries
Consolidated statements of cash flows (unaudited) (In thousands)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Nine months ended |
|
|
| Three months ended |
| Six months ended |
| ||||||||||||||||
|
| September 30, |
| September 30, |
|
|
| June 30, |
| June 30, |
| ||||||||||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
| $ | 10,966 |
| $ | 11,885 |
| $ | 38,398 |
| $ | 30,905 |
|
|
| $ | 12,910 |
| $ | 5,211 |
| $ | 17,425 |
| $ | 12,728 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 8,882 |
|
| 8,169 |
|
| 26,379 |
|
| 24,168 |
|
|
|
| 13,107 |
|
| 13,225 |
|
| 25,759 |
|
| 25,096 |
|
Earnings from unconsolidated affiliates |
|
| (1,884) |
|
| (2,960) |
|
| (6,564) |
|
| (6,940) |
|
|
|
| (1,225) |
|
| (2,444) |
|
| (2,365) |
|
| (5,333) |
|
Distributions from unconsolidated affiliates |
|
| 4,201 |
|
| 4,457 |
|
| 13,096 |
|
| 12,663 |
|
|
|
| 3,102 |
|
| 3,971 |
|
| 6,014 |
|
| 7,161 |
|
Equity-based compensation |
|
| 544 |
|
| 251 |
|
| 2,713 |
|
| 2,664 |
|
|
|
| — |
|
| 441 |
|
| 45 |
|
| 2,458 |
|
Amortization of deferred financing costs |
|
| 320 |
|
| 204 |
|
| 885 |
|
| 614 |
|
| |||||||||||||
Amortization of deferred debt issuance costs |
|
| 632 |
|
| 1,289 |
|
| 1,382 |
|
| 1,790 |
| ||||||||||||||
Amortization of deferred revenue |
|
| (170) |
|
| (108) |
|
| (211) |
|
| (428) |
|
|
|
| (180) |
|
| (149) |
|
| (207) |
|
| (336) |
|
Unrealized (gain) loss on derivative instruments |
|
| 65 |
|
| (578) |
|
| (155) |
|
| 557 |
|
| |||||||||||||
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Unrealized loss on derivative instruments |
|
| 511 |
|
| 85 |
|
| 654 |
|
| 127 |
| ||||||||||||||
Gain from insurance proceeds |
|
| (3,351) |
|
| — |
|
| (3,351) |
|
| — |
| ||||||||||||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Trade accounts receivable, net |
|
| (1,020) |
|
| (1,950) |
|
| (879) |
|
| (2,949) |
|
|
|
| 668 |
|
| (1,078) |
|
| (1,875) |
|
| 495 |
|
Due from affiliates |
|
| (49) |
|
| (640) |
|
| (805) |
|
| (76) |
|
|
|
| 565 |
|
| 421 |
|
| 138 |
|
| (1,688) |
|
Other current assets |
|
| 1,146 |
|
| (788) |
|
| 3,905 |
|
| (793) |
|
|
|
| 1,295 |
|
| 4,190 |
|
| (1,206) |
|
| 2,269 |
|
Amounts due under long-term terminaling services agreements, net |
|
| 772 |
|
| (121) |
|
| 447 |
|
| (193) |
|
|
|
| 165 |
|
| 176 |
|
| 587 |
|
| 204 |
|
Right-of-use assets, operating leases |
|
| 654 |
|
| — |
|
| 1,248 |
|
| — |
| ||||||||||||||
Deposits |
|
| (4) |
|
| 11 |
|
| 50 |
|
| 11 |
|
|
|
| — |
|
| — |
|
| 10 |
|
| (1) |
|
Other assets, net |
|
| 252 |
|
| — |
|
| 436 |
|
| — |
| ||||||||||||||
Trade accounts payable |
|
| 2,095 |
|
| 266 |
|
| 2,526 |
|
| (1,570) |
|
|
|
| (5,061) |
|
| (2,420) |
|
| (4,242) |
|
| (795) |
|
Due to affiliates |
|
| — |
|
| (107) |
|
| — |
|
| — |
|
| |||||||||||||
Accrued liabilities |
|
| 1,537 |
|
| 3,926 |
|
| 4,004 |
|
| 7,176 |
|
|
|
| 3,959 |
|
| 8,703 |
|
| (3,166) |
|
| 7,647 |
|
Operating lease liabilities |
|
| (238) |
|
| — |
|
| (993) |
|
| — |
| ||||||||||||||
Net cash provided by operating activities |
|
| 27,401 |
|
| 21,917 |
|
| 83,789 |
|
| 65,809 |
|
|
|
| 27,765 |
|
| 31,621 |
|
| 36,293 |
|
| 51,822 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of terminal assets |
|
| — |
|
| — |
|
| — |
|
| (12,000) |
|
| |||||||||||||
Investments in unconsolidated affiliates |
|
| — |
|
| — |
|
| (2,145) |
|
| (2,225) |
|
|
|
| (1,076) |
|
| (114) |
|
| (1,301) |
|
| (1,264) |
|
Return of investment in unconsolidated affiliates |
|
| — |
|
| 850 |
|
| — |
|
| 850 |
| ||||||||||||||
Capital expenditures |
|
| (8,682) |
|
| (10,139) |
|
| (37,327) |
|
| (34,105) |
|
|
|
| (16,955) |
|
| (15,461) |
|
| (47,297) |
|
| (21,988) |
|
Proceeds from sale of assets |
|
| — |
|
| — |
|
| — |
|
| 10,025 |
| ||||||||||||||
Proceeds from insurance claims |
|
| 4,988 |
|
| — |
|
| 4,988 |
|
| — |
| ||||||||||||||
Net cash used in investing activities |
|
| (8,682) |
|
| (10,139) |
|
| (39,472) |
|
| (48,330) |
|
|
|
| (13,043) |
|
| (14,725) |
|
| (43,610) |
|
| (12,377) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of debt under credit facility |
|
| 14,600 |
|
| 35,400 |
|
| 101,700 |
|
| 140,200 |
|
| |||||||||||||
Repayments of debt under credit facility |
|
| (14,600) |
|
| (33,100) |
|
| (91,500) |
|
| (117,900) |
|
| |||||||||||||
Deferred financing costs |
|
| — |
|
| (228) |
|
| (5,361) |
|
| (680) |
|
| |||||||||||||
Deferred issuance costs |
|
| (457) |
|
| — |
|
| (460) |
|
| — |
|
| |||||||||||||
Settlement of tax withholdings on equity-based compensation |
|
| (304) |
|
| — |
|
| (711) |
|
| — |
|
| |||||||||||||
Proceeds from senior notes |
|
| — |
|
| — |
|
| — |
|
| 300,000 |
| ||||||||||||||
Borrowings under revolving credit facility |
|
| 40,000 |
|
| 38,900 |
|
| 97,200 |
|
| 85,500 |
| ||||||||||||||
Repayments under revolving credit facility |
|
| (40,100) |
|
| (42,800) |
|
| (63,500) |
|
| (392,400) |
| ||||||||||||||
Debt issuance costs |
|
| — |
|
| (505) |
|
| — |
|
| (7,871) |
| ||||||||||||||
Taxes paid for equity compensation awards |
|
| — |
|
| (317) |
|
| — |
|
| (658) |
| ||||||||||||||
Distributions paid to unitholders |
|
| (15,078) |
|
| (13,438) |
|
| (43,755) |
|
| (39,345) |
|
|
|
| — |
|
| (16,594) |
|
| (17,250) |
|
| (32,657) |
|
Contribution of cash by TransMontaigne GP |
|
| 8 |
|
| 1 |
|
| 30 |
|
| 6 |
|
| |||||||||||||
Net cash used in financing activities |
|
| (15,831) |
|
| (11,365) |
|
| (40,057) |
|
| (17,719) |
|
| |||||||||||||
Distributions to TLP Finance |
|
| (14,376) |
|
| — |
|
| (14,376) |
|
| — |
| ||||||||||||||
Contribution from TLP Holdings and TransMontaigne GP |
|
| — |
|
| 3,860 |
|
| 4,829 |
|
| 8,082 |
| ||||||||||||||
Net cash provided by (used in) financing activities |
|
| (14,476) |
|
| (17,456) |
|
| 6,903 |
|
| (40,004) |
| ||||||||||||||
Increase (decrease) in cash and cash equivalents |
|
| 2,888 |
|
| 413 |
|
| 4,260 |
|
| (240) |
|
|
|
| 246 |
|
| (560) |
|
| (414) |
|
| (559) |
|
Cash and cash equivalents at beginning of period |
|
| 1,965 |
|
| 28 |
|
| 593 |
|
| 681 |
|
|
|
| 366 |
|
| 970 |
|
| 1,026 |
|
| 969 |
|
Cash and cash equivalents at end of period |
| $ | 4,853 |
| $ | 441 |
| $ | 4,853 |
| $ | 441 |
|
|
| $ | 612 |
| $ | 410 |
| $ | 612 |
| $ | 410 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 2,688 |
| $ | 2,049 |
| $ | 7,279 |
| $ | 6,048 |
|
|
| $ | 4,752 |
| $ | 3,265 |
| $ | 17,962 |
| $ | 7,631 |
|
Property, plant and equipment acquired with accounts payable |
| $ | 3,733 |
| $ | 9,295 |
| $ | 3,733 |
| $ | 9,295 |
|
|
| $ | 6,528 |
| $ | 6,546 |
| $ | 6,528 |
| $ | 6,546 |
|
See accompanying notes to consolidated financial statements (unaudited)statements. Prior periods have been recast as a result of the TMS Contribution (See Note 1 of Notes to consolidated financial statements).
78
TransMontaigne Partners L.P.LLC and subsidiariesSubsidiaries
Notes to consolidated financial statements (unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of business
TransMontaigne Partners L.P.LLC (“we,” “us,” “our,” “the Partnership”Company”) was formed in February 2005 as a Delaware limited partnership. We provideprovides integrated terminaling, storage, transportation and related services for companies engaged in the trading, distribution and marketing of light refined petroleum products, heavy refined petroleum products, crude oil, chemicals, fertilizers and other liquid products. We conduct our operations in the United States along the Gulf Coast, in the Midwest, in Houston and Brownsville, Texas, along the Mississippi and Ohio rivers, and in the Southeast.Southeast and along the West Coast.
We arewere originally formed as TransMontaigne Partners L.P. (“the Partnership”) in February 2005 as a Delaware limited partnership. Through February 26, 2019, the Partnership’s common units were listed and publicly traded on the New York Stock Exchange under the symbol “TLP”. The Partnership was controlled by oura general partner, TransMontaigne GP L.L.C. (“TransMontaigne GP”), which as of February 1, 2016 is a wholly‑ownedwas an indirect, controlled subsidiary of ArcLight Energy Partners Fund VI, L.P. (“ArcLight”). PriorTransMontaigne GP also held the Partnership’s incentive distribution rights, which were non‑voting limited partner interests with the rights set forth in the First Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of May 27, 2005, as amended from time to time.
On February 1, 2016, TransMontaigne26, 2019, an affiliate of ArcLight completed its previously announced acquisition of all of the Partnership’s outstanding publicly traded common units not already held by ArcLight and its affiliates by way of our merger (the “Merger”) with a wholly owned subsidiary of TLP Finance Holdings, LLC (“TLP Finance”), an indirect controlled subsidiary of Arclight. At the effective time of the Merger, each of the Partnership’s general partner units issued and outstanding immediately prior to the acquisition effective time was converted into (i)(a) one Partnership common unit, and (b) in aggregate, a non-economic general partner interest in the Partnership, (ii) each of the Partnership’s incentive distribution rights issued and outstanding immediately prior to the acquisition effective time was converted into 100 Partnership common units, (iii) our general partner distributed its common units in the Partnership (the “Transferred GP Units”) to TLP Acquisition Holdings, LLC, a wholly-owned subsidiaryDelaware limited liability company (“TLP Holdings”), and TLP Holdings contributed the Transferred GP Units to TLP Finance, (iv) the Partnership converted into the Company (a Delaware limited liability company) pursuant to Section 17-219 of NGL Energythe Delaware Limited Partnership Act and changed its name to “TransMontaigne Partners LPLLC”, and all of our common units owned by TLP Finance were converted into limited liability company interests (“NGL”member interest”), (v) the non-economic interest in the Company owned by our general partner was automatically cancelled and ceased to exist and our general partner merged with and into the Company with the Company surviving, and (vi) the Company became 100% owned by TLP Finance (the transactions described in the foregoing clauses (i) through (vi), collectively with the Merger, the “Take-Private Transaction”).
As a result of the Take-Private Transaction, our common units ceased to be publicly traded, and our common units are no longer listed on the New York Stock Exchange. Our currently outstanding 6.125% senior unsecured notes due in 2026 remain outstanding, and we are voluntarily filing with the Securities and Exchange Commission pursuant to the covenants contained in those notes.
Effective June 1, 2019, TLP Finance contributed all of the issued and outstanding ownership interestsequity of its wholly-owned subsidiary, TLP Management Services LLC (“TMS” and such interest, the “TMS Interest”) to the Company, and the Company immediately contributed the TMS Interest to its 100% owned operating company subsidiary TransMontaigne GP.Operating Company L.P. (the “TMS Contribution”). Prior to the TMS Contribution, we had no employees and all of our management and operational activities were provided by TMS. Further, TMS provided all payroll programs and maintained all employee benefit programs on behalf of our Company with respect to applicable TMS employees (as well as on behalf of certain other Arclight affiliates). As a result of the TMS Contribution, we have assumed the employees and management and operational activities previously provided by TMS. The TMS Contribution has been recorded at carryover basis as a reorganization of entities under common control. As such, prior periods include the assets, liabilities, and results of operations of TMS for all periods presented.
9
TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
As a result of the TMS Contribution, the omnibus agreement in place in various forms since the inception of the Partnership, and immediately prior to the TMS Contribution between TMS and us, which, among other things, governed the provision of management and operational services provided for us by TMS, is no longer relevant and was terminated. Further, in connection with the TMS Contribution, we entered into the Consent and Third Amendment to Third Amended and Restated Senior Secured Credit Facility (the “Third Amendment”), which amends the Third Amended and Restated Senior Secured Credit Facility (“revolving credit facility”), dated as of March 13, 2017, among the Borrower, Wells Fargo Bank, National Association, as administrative agent, the financial institutions party thereto as lenders and the other parties thereto. The Third Amendment amends the revolving credit facility primarily to reflect the TMS Contribution and the resulting termination of the omnibus agreement.
Our basis in the assets and liabilities of TMS at December 31, 2018 was as follows (in thousands):
|
|
|
|
Cash |
| $ | 694 |
Trade accounts receivable |
|
| 7 |
Due from affiliates |
|
| 456 |
Other current assets |
|
| 456 |
Property, plant and equipment, net |
|
| 991 |
Other assets, net |
|
| 484 |
Trade accounts payable |
|
| (1,205) |
Accrued and other liabilities |
|
| (3,025) |
Equity |
|
| (1,142) |
(b) Basis of presentation and use of estimates
Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the accounts of TransMontaigne Partners L.P.LLC and its controlled subsidiaries. Investments where we do not have the ability to exercise control, but do have the ability to exercise significant influence, are accounted for using the equity method of accounting. All inter‑company accounts and transactions have been eliminated in the preparation of the accompanying consolidated financial statements. The accompanying consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly our financial position as of SeptemberJune 30, 20172019 and December 31, 20162018 and our results of operations for the three and ninesix months ended SeptemberJune 30, 20172019 and 2016.2018. Certain reclassifications of previously reported amounts have been made to conform to the current year presentation.
The preparation of financial statements in conformity with “GAAP”GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. The following estimates, in management’s opinion, are subjective in nature, require the exercise of judgment, and/or involve complex analyses: useful lives of our plant and equipment and accrued environmental obligations. Changes in these estimates and assumptions will occur as a result of the passage of time and the occurrence of future events. Actual results could differ from these estimates.
(c) Accounting for terminaloperations
Effective January 1, 2019, we adopted Accounting Standards Codification (“ASC”) Topic 842, Leases and pipeline operationsthe series of related Accounting Standards Updates that followed (collectively referred to as “ASC 842”). The most significant changes under the new guidance include clarification of the definition of a lease, and the requirements for lessees to recognize a right-of-use asset and a lease liability for all qualifying leases in the consolidated balance sheet. Further, under ASC 842, additional disclosures are required to meet the objective of enabling users of financial
10
In connectionTransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
statements to assess the amount, timing and uncertainty of cash flows arising from leases. We used the modified retrospective transition method applied at the effective date of the standard. By electing this optional transition method, information prior to January 1, 2019 has not been restated and continues to be reported under the accounting standards in effect for the period (“ASC 840”) (See Note 13 of Notes to consolidated financial statements).
Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), applying the modified retrospective transition method, which required us to apply the new standard to (i) all new revenue contracts entered into after January 1, 2018, and (ii) revenue contracts which were not completed as of January 1, 2018. ASC 606 replaces existing revenue recognition requirements in GAAP and requires entities to recognize revenue at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer. ASC 606 also requires certain disclosures regarding qualitative and quantitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of ASC 606 did not result in a transition adjustment nor did it have an impact on the timing or amount of our terminal and pipeline operations, we utilize the accrual methodrevenue recognition (See Note 15 of Notes to consolidated financial statements).
The adoption of ASC 606 did not result in changes to our accounting for trade accounts receivable (see Note 3 of Notes to consolidated financial statements), contract assets or contract liabilities. We recognize contract assets in situations where revenue recognition under ASC 606 occurs prior to billing the customer based on our rights under the contract. Contract assets are transferred to accounts receivable when the rights become unconditional. At June 30, 2019, we did not have any contract assets related to ASC 606.
Contract liabilities primarily relate to consideration received from customers in advance of completing the performance obligation. A performance obligation is a promise in a contract to transfer goods or services to the customer. We recognize contract liabilities under these arrangements as revenue once all contingencies or potential performance obligations have been satisfied by the (i) performance of services or (ii) expiration of the customer’s rights under the contract. Short-term contract liabilities include customer advances and expenses. deposits (see Note 9 of Notes to consolidated financial statements). Long-term contract liabilities include deferred revenue (See Note 10 of Notes to consolidated financial statements).
We generate revenue from terminaling services fees, pipeline transportation fees and management fees. Under ASC 606 and ASC 842, we recognize revenue over time or at a point in time, depending on the nature of the performance obligations contained in the respective contract with our customer. The contract transaction price is allocated to each performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our revenue is recognized pursuant to ASC 842. The following is an overview of our significant revenue streams, including a description of the respective performance obligations and related method of revenue recognition.
Terminaling services fees. Our terminaling services agreements are structured as either throughput agreements or storage agreements. Our throughput agreements contain provisions that require our customers to make minimum payments, which are based on contractually established minimum volumes of throughput of the customer’s product at our facilities, over a stipulated period of time. Due to this minimum payment arrangement, we recognize a fixed amount of revenue from the customer over a certain period of time, even if the customer throughputs less than the minimum volume of product during that period. In addition, if a customer throughputs a volume of product exceeding the minimum volume, we would recognize additional revenue on this incremental volume. Our storage agreements require our customers to make minimum payments based on the volume of storage capacity available to the customer under the agreement, which results in a fixed amount of recognized revenue. We refer to the fixed amount of revenue recognized pursuant to our terminaling services agreements as being “firm commitments.” The majority of our firm commitments under our terminaling services agreements are accounted for in accordance with ASC 842 (“ASC 842 revenue”). The remainder is recognized in accordance with ASC 606 (“ASC 606 revenue”) where the minimum payment arrangement in each contract is a single performance obligation that is primarily satisfied over time through the contract term.
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Notes to consolidated financial statements (unaudited) (continued)
Revenue recognized in excess of firm commitments and revenue recognized based solely on the volume of product distributed or injected are referred to as ancillary. The ancillary revenue associated with terminaling services include volumes of product throughput that exceed the contractually established minimum volumes, injection fees based on the volume of product injected with additive compounds, heating and cost reimbursements, fees from other ancillary services and gainsmixing of stored products, product transfer, railcar handling, butane blending, proceeds from the sale of refined products. Terminalingproduct gains, wharfage and vapor recovery. The revenue generated by these services is required to be estimated under ASC 606 for any uncertainty that is not resolved in the period of the service. We account for the majority of ancillary revenue at individual points in time when the services are delivered to the customer. The majority of our ancillary revenue is recognized in accordance with ASC 606.
Pipeline transportation fees. We earn pipeline transportation fees at our Diamondback pipeline either based on the volume of product transported or under capacity reservation agreements. Revenue associated with the capacity reservation is recognized ratably over the respective term, regardless of whether the capacity is actually utilized. We earn pipeline transportation fees at our Razorback pipeline based on an allocation of the aggregate fees charged under the capacity agreement with our customer who has contracted for storage fees and minimum revenue commitments that are fixed at the inception100% of the agreement and when product is delivered to the customer for fees based on a rate per barrel of throughput;our Razorback system. Pipeline transportation revenue is recognized whenprimarily accounted for in accordance with ASC 842.
Management fees. We manage and operate certain tank capacity at our Port Everglades South terminal for a major oil company and receive a reimbursement of its proportionate share of operating and maintenance costs. We manage and operate the product has been delivered to the customer at the specified delivery location;Frontera joint venture and receive a management fee based on our costs incurred. We manage and operate two terminals for SeaPort Midstream Partners, LLC in Seattle, Washington and Portland, Oregon and we manage another terminal for SeaPort Sound Terminal, LLC in Tacoma, Washington and, in each case, receive a management fee based on our costs incurred plus an annual fee. We also manage additional terminal facilities that are owned by affiliates of ArcLight, including a terminal in Baltimore, Maryland (the “Baltimore Terminal”) and Lucknow-Highspire Terminals, LLC (“LHT”), which operates terminals throughout Pennsylvania encompassing approximately 9.8 million barrels of storage capacity. We manage and operate rail sites at certain Southeast terminals on behalf of a major oil company and receive reimbursement for operating and maintenance costs. We lease land under operating leases as the lessor or sublessor with third parties and affiliates. We also managed and operated for an affiliate of PEMEX, Mexico’s state-owned petroleum company, a products pipeline connected to our Brownsville terminal facility and received a management fee through August 23, 2018. Management fee revenue and cost reimbursements areis recognized at individual points in time as the services are performed or as the costs are incurred; ancillary serviceincurred and is primarily accounted for in accordance with ASC 606. Management fees related to lease revenue is recognized as the services are performed; and gains from the sale of refined products are recognized when the title to the product is transferred.accounted for in accordance with ASC 842.
Pursuant to terminaling services agreements with certain of our throughput customers, we are entitled to the volume of product gained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities. Consistent with recognized industry practices, measurement differentials occur as the result of the inherent variances in measurement devices and methodology. We recognize as revenue the net proceeds from the sale of the product gained. For the three months ended September 30, 2017 and 2016, we recognized revenue of
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Notes to consolidated financial statements (unaudited) (continued)
approximately $2.4 million and $1.6 million, respectively, for net product gained. Within these amounts, approximately $nil for both the three months ended September 30, 2017 and 2016, were pursuant to terminaling services agreements with affiliate customers. For the nine months ended September 30, 2017 and 2016, we recognized revenue of approximately $7.5 million and $4.2 million, respectively, for net product gained. Within these amounts, approximately $nil and $0.3 million for the nine months ended September 30, 2017 and 2016, respectively, were pursuant to terminaling services agreements with affiliate customers.
(d) Cash and cash equivalents
We consider all short‑term investments with a remaining maturity of three months or less at the date of purchase to be cash equivalents.
(e) Property, plant and equipment
Depreciation is computed using the straight‑line method. Estimated useful lives are 15 to 25 years for terminals and pipelines and 3 to 25 years for furniture, fixtures and equipment. All items of property, plant and equipment are carried at cost. Expenditures that increase capacity or extend useful lives are capitalized. Repairs and maintenance are expensed as incurred.
We evaluate long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable based on expected undiscounted future cash flows attributable to that asset group. If an asset group is impaired, the impairment loss to be recognized is the excess of the carrying amount of the asset group over its estimated fair value.
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Notes to consolidated financial statements (unaudited) (continued)
(f) Investments in unconsolidated affiliates
We account for our investments in unconsolidated affiliates, which we do not control but do have the ability to exercise significant influence over, using the equity method of accounting. Under this method, the investment is recorded at acquisition cost, increased by our proportionate share of any earnings and additional capital contributions and decreased by our proportionate share of any losses, distributions received and amortization of any excess investment. Excess investment is the amount by which our total investment exceeds our proportionate share of the book value of the net assets of the investment entity. We evaluate our investments in unconsolidated affiliates for impairment whenever events or circumstances indicate there is a loss in value of the investment that is other than temporary. In the event of impairment, we would record a charge to earnings to adjust the carrying amount to estimated fair value.
(g) Environmental obligations
We accrue for environmental costs that relate to existing conditions caused by past operations when probable and reasonably estimable (see Note 109 of Notes to consolidated financial statements). Environmental costs include initial site surveys and environmental studies of potentially contaminated sites, costs for remediation and restoration of sites determined to be contaminated and ongoing monitoring costs, as well as fines, damages and other costs, including direct legal costs. Liabilities for environmental costs at a specific site are initially recorded, on an undiscounted basis, when it is probable that we will be liable for such costs, and a reasonable estimate of the associated costs can be made based on available information. Such an estimate includes our share of the liability for each specific site and the sharing of the amounts related to each site that will not be paid by other potentially responsible parties, based on enacted laws and adopted regulations and policies. Adjustments to initial estimates are recorded, from time to time, to reflect changing circumstances and estimates based upon additional information developed in subsequent periods. Estimates of our ultimate liabilities associated with environmental costs are difficult to make with certainty due to the number of variables involved, including the early stage of investigation at certain sites, the lengthy time frames required to complete remediation, technology changes, alternatives available and the evolving nature of environmental laws and regulations. We periodically file claims for insurance recoveries of certain environmental remediation costs with our insurance carriers under our comprehensive liability policies (see Note 54 of Notes to consolidated financial statements).
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Notes to consolidated financial statements (unaudited) (continued)
We recognize our insurance recoveries as a credit to income in the period that we assess the likelihood of recovery as being probable (i.e., likely to occur).
In connection with our previous acquisitions of certain terminals from TransMontaigne LLC, a wholly owned subsidiary of NGL Energy Partners LP and the previous owner of our general partner, TransMontaigne LLC has agreed to indemnify us against certain potential environmental claims, losses and expenses at those terminals. Pursuant to the acquisition agreements for each of the Florida (except Pensacola) and Midwest terminals, (see Note 2the Southeast terminals, the Brownsville and River terminals, and the Pensacola, Florida Terminal, TransMontaigne LLC is obligated to indemnify us against environmental claims, losses and expenses that were associated with the ownership or operation of Notesthe terminals prior to consolidated financial statements).the purchase by the Company. In each acquisition agreement, TransMontaigne LLC’s maximum indemnification liability is subject to a specified time period for indemnification, cap on indemnification and satisfaction of a deductible amount before indemnification, in each case subject to certain exceptions, limitations and conditions specified therein. TransMontaigne LLC has no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after certain specified dates. The environmental indemnification obligations remain in place and were not affected by the Take-Private Transaction.
(h) Asset retirement obligations
Asset retirement obligations are legal obligations associated with the retirement of long‑lived assets that result from the acquisition, construction, development or normal use of the asset. Generally accepted accounting principles require that the fair value of a liability related to the retirement of long‑lived assets be recorded at the time a legal obligation is incurred. Once an asset retirement obligation is identified and a liability is recorded, a corresponding asset is recorded, which is depreciated over the remaining useful life of the asset. After the initial measurement, the liability is adjusted to reflect changes in the asset retirement obligation. If and when it is determined that a legal obligation has been incurred, the fair value of any liability is determined based on estimates and assumptions related to retirement costs,
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Notes to consolidated financial statements (unaudited) (continued)
future inflation rates and interest rates. Our long‑lived assets consist of above‑ground storage facilities and underground pipelines. We are unable to predict if and when these long‑lived assets will become completely obsolete and require dismantlement. We have not recorded an asset retirement obligation, or corresponding asset, because the future dismantlement and removal dates of our long‑lived assets is indeterminable and the amount of any associated costs are believed to be insignificant. Changes in our assumptions and estimates may occur as a result of the passage of time and the occurrence of future events.
(i) Equity-basedDeferred compensation expense
Generally accepted accounting principles require usWe have a savings and retention program to measurecompensate certain employees who provide services to the cost of services receivedCompany. Prior to the Take-Private Transaction, we had the ability to settle the awards in exchange for an award of equity instruments based on the measurement‑date fair value of the award. That cost is recognized during the period services are provided in exchangeour common units, and accordingly, we accounted for the awardawards as an equity award. Following the Take-Private Transaction, we index the awards to other forms of investments, and have the intent and ability to settle the awards in cash, and accordingly, we account for the awards as liability awards (see Note 1412 of Notes to consolidated financial statements).
(j) Accounting for derivative instruments
Generally accepted accounting principles require us to recognize all derivative instruments at fair value in the consolidated balance sheets as assets or liabilities (see Note 9 of Notes to consolidated financial statements).liabilities. Changes in the fair value of our derivative instruments are recognized in earnings.
At both SeptemberJune 30, 2017 and December 31, 2016,2019 our derivative instruments were limited to interest rate swap agreements with an aggregate notional amount of $125.0 million. Our$300 million with the agreements expiring in June 2020. The derivative instruments expire between March 25,instrument outstanding at December 31, 2018 andexpired on March 11, 2019. Pursuant to the terms of the current outstanding interest rate swap agreements, we pay a blended fixed rate of approximately 1.01%2.04% and receive interest payments based on the one-month LIBOR. The net difference to be paid or received under the interest rate swap agreements is settled monthly and is recognized as an adjustment to interest expense. The fair value of our interest rate swap agreements arewere determined using a pricing model based on the LIBOR swap rate and other observable market data.
(k) Income taxes
No provision for U.S. federal income taxes has been reflected in the accompanying consolidated financial statements because we are treated as a partnership for federal income tax purposes. As a partnership, all income, gains, losses, expenses, deductions and tax credits generated by us flow throughup to our unitholders.owners.
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Notes to consolidated financial statements (unaudited) (continued)
(l) Net earnings per limited partner unit
Net earnings allocable to the limited partners, for purposes of calculating net earnings per limited partner unit, are calculated under the two-class method and accordingly are net of the earnings allocable to the general partner interest and distributions payable to any restricted phantom units granted under our equity-based compensation plans that participate in our distributions. The earnings allocable to the general partner interest include the distributions of available cash (as defined by our partnership agreement) attributable to the period to the general partner interest, net of adjustments for the general partner’s share of undistributed earnings, and the incentive distribution rights. Undistributed earnings are the difference between the earnings and the distributions attributable to the period. Undistributed earnings are allocated to the limited partners and general partner interest based on their respective sharing of earnings or losses specified in the partnership agreement, which is based on their ownership percentages of 98% and 2%, respectively. The incentive distribution rights are not allocated a portion of the undistributed earnings given they are not entitled to distributions other than from available cash. Further, the incentive distribution rights do not share in losses under our partnership agreement. Basic net earnings per limited partner unit is computed by dividing net earnings allocable to the limited partners by the weighted average number of limited partner units outstanding during the period. Diluted net earnings per limited partner unit is computed by dividing net earnings allocable to the limited partners by the weighted average number of limited partner units outstanding during the period and any potential dilutive securities outstanding during the period.
(m) Comprehensive income
Entities that report items of other comprehensive income have the option to present the components of net earnings and comprehensive income in either one continuous financial statement, or two consecutive financial statements. As the PartnershipCompany has no components of comprehensive income other than net earnings, no statement of comprehensive income has been presented.
(n) (m) Recent accounting pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The objective of this update is to clarify the principles for recognizing revenue and to develop a common revenue standard. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.
We expect to adopt the new standard on January 1, 2018 using the modified retrospective method described within the ASU. This approach requires us to apply the new revenue standard to (i) all new revenue contracts entered into after January 1, 2018 and (ii) all existing revenue contracts as of January 1, 2018 through a cumulative adjustment to equity. We have established a working group to evaluate the impact of ASU 2014-09 and all related ASU’s. The working group is in the late stages of reviewing contracts in order to determine the impact the ASU will have on our disclosures and financial statements. We have also begun designing required disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases. The objective of this update is to improve financial reporting about leasing transactions. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. We are currently evaluating the potential impact that the adoption will have on our disclosures and financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipt and Cash Payments, to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. We are currently evaluating the potential impact that the adoption will have on our disclosures and financial statements.
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Notes to consolidated financial statements (unaudited) (continued)
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment, to simplify the accounting for goodwill impairment by eliminating step 2 from the goodwill impairment test. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. We are currently evaluating the potential impact that the adoption will have on our disclosures and financial statements.
(2) TRANSACTIONS WITH AFFILIATES
Omnibus agreement. On May 27, 2005 we entered into an omnibus agreement with TransMontaigne LLC and our general partner, which agreement has been subsequently amended from time to time. In connection with the ArcLight acquisition of our general partner, effective February 1, 2016, we entered into the second amended and restated omnibus agreement to consent to the assignment of the omnibus agreement from TransMontaigne LLC to Gulf TLP Holdings LLC, an ArcLight subsidiary, to waive the automatic termination that would have occurred at such time as TransMontaigne LLC ceased to control our general partner and to remove certain legacy provisions that were no longer applicable to the Partnership. The omnibus agreement will continue in effect until the earlier of (i) ArcLight ceasing to control our general partner or (ii) the election of either us or the owner of TransMontaigne GP, following at least 24 months prior written notice to the other parties.
Under the omnibus agreement we pay Gulf TLP Holdings, the owner of TransMontaigne GP, an administrative fee for the provision of various general and administrative services for our benefit. The administrative fee paid for the three months ended September 30, 2017 and 2016 was approximately $3.4 million and $2.8 million, respectively. For the nine months ended September 30, 2017 and 2016, the administrative fee paid was approximately $9.4 million and $8.5 million, respectively. The administrative fee is recognized as a component of general and administrative expenses and encompasses services to perform centralized corporate functions, such as legal, accounting, treasury, insurance administration and claims processing, health, safety and environmental, information technology, human resources, credit, payroll, taxes, engineering and other corporate services. The Partnership has no officers or employees and all of our management and operational activities are provided by officers and employees of TLP Management Services, a wholly owned subsidiary of Gulf TLP Holdings.
If we acquire or construct additional facilities, the owner of TransMontaigne GP may propose a revised administrative fee covering the provision of services for such additional facilities, subject to approval by the conflicts committee of our general partner. Effective May 3, 2017 the board of TransMontaigne GP, with the concurrence of the conflicts committee, approved a $1.8 million annual increase (or $150,000 monthly) to the administrative fee related to the construction of approximately 2.0 million barrels of new tank capacity at our Collins, Mississippi bulk storage terminal. The increase will be ratably applied monthly beginning May 3, 2017 based on the percentage of the approximately 2.0 million barrels of new tank capacity that has been placed into service.
The omnibus agreement further provides that we pay the owner of TransMontaigne GP for insurance policies purchased on our behalf to cover our facilities and operations. For the three months ended September 30, 2017 and 2016, the insurance reimbursement paid was approximately $nil and $1.0 million, respectively. For the nine months ended September 30, 2017 and 2016, the insurance reimbursement paid was approximately $nil and $2.8 million, respectively. Beginning October 31, 2016, we contracted directly with insurance carriers for the majority of our insurance requirements. For the three months ended September 30, 2017 and 2016, the expense associated with insurance contracted directly by us was approximately $1.0 million and $nil, respectively. For the nine months ended September 30, 2017 and 2016, the expense associated with insurance contracted directly by us was approximately $3.0 million and $nil, respectively. We also pay the owner of TransMontaigne GP for direct operating costs and expenses, such as salaries of operational personnel performing services on‑site at our terminals and pipelines and the cost of their employee benefits, including 401(k) and health insurance benefits.
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Notes to consolidated financial statements (unaudited) (continued)
Under the omnibus agreement we have agreed to reimburse the owner of TransMontaigne GP for bonus awards made to key employees under the owner of TransMontaigne GP’s savings and retention program, provided the compensation committee and the conflicts committee of our general partner approve the annual awards granted under the program. We have the option to provide the reimbursement in either a cash payment or the delivery of our common units to the owner of TransMontaigne GP or directly to the award recipients, with the reimbursement made in accordance with the underlying vesting and payment schedule of the savings and retention program (see Note 14 of Notes to the consolidated financial statements).
Environmental indemnification. In connection with our acquisition of the Florida and Midwest terminals on May 27, 2005, TransMontaigne LLC agreed to indemnify us against certain potential environmental claims, losses and expenses that were identified on or before May 27, 2010, and that were associated with the ownership or operation of the Florida and Midwest terminals prior to May 27, 2005. TransMontaigne LLC’s maximum liability for this indemnification obligation is $15.0 million. TransMontaigne LLC has no obligation to indemnify us for losses until such aggregate losses exceed $250,000. TransMontaigne LLC has no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after May 27, 2005.
In connection with our acquisition of the Brownsville, Texas and River terminals on December 31, 2006, TransMontaigne LLC agreed to indemnify us against potential environmental claims, losses and expenses that were identified on or before December 31, 2011, and that were associated with the ownership or operation of the Brownsville and River facilities prior to December 31, 2006. TransMontaigne LLC’s maximum liability for this indemnification obligation is $15.0 million. TransMontaigne LLC has no obligation to indemnify us for losses until such aggregate losses exceed $250,000. The deductible amount, cap amount and limitation of time for indemnification do not apply to any environmental liabilities known to exist as of December 31, 2006. TransMontaigne LLC has no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after December 31, 2006.
In connection with our acquisition of the Southeast terminals on December 31, 2007, TransMontaigne LLC agreed to indemnify us against potential environmental claims, losses and expenses that were identified on or before December 31, 2012, and that were associated with the ownership or operation of the Southeast terminals prior to December 31, 2007. TransMontaigne LLC’s maximum liability for this indemnification obligation is $15.0 million. TransMontaigne LLC has no obligation to indemnify us for losses until such aggregate losses exceed $250,000. The deductible amount, cap amount and limitation of time for indemnification do not apply to any environmental liabilities known to exist as of December 31, 2007. TransMontaigne LLC has no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after December 31, 2007.
In connection with our acquisition of the Pensacola terminal on March 1, 2011, TransMontaigne LLC agreed to indemnify us against potential environmental claims, losses and expenses that were identified on or before March 1, 2016, and that were associated with the ownership or operation of the Pensacola terminal prior to March 1, 2011. TransMontaigne LLC’s maximum liability for this indemnification obligation is $2.5 million. TransMontaigne LLC has no obligation to indemnify us for losses until such aggregate losses exceed $200,000. The deductible amount, cap amount and limitation of time for indemnification do not apply to any environmental liabilities known to exist as of March 1, 2011. TransMontaigne LLC has no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after March 1, 2011.
The forgoing environmental indemnification obligations of TransMontaigne LLC to us remain in place and were not affected by ArcLight’s acquisition of our general partner. (2) TRANSACTIONS WITH AFFILIATES
Operations and reimbursement agreement—Frontera. We have a 50% ownership interest in the Frontera Brownsville LLC joint venture or “Frontera”(“Frontera”). We operate Frontera, in accordance with an operations and reimbursement agreement executed between us and Frontera, for a management fee that is based on our costs incurred. Our agreement with Frontera stipulates that we may resign as the operator at any time with the prior written consent of Frontera, or that
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Notes to consolidated financial statements (unaudited) (continued)
we may be removed as the operator for good cause, which includes material noncompliance with laws and material failure to adhere to good industry practice regarding health, safety or environmental matters. We recognized revenue related to this operations and reimbursement agreement of approximately $1.3$1.4 million and $1.2$1.3 million for the three months ended SeptemberJune 30, 20172019 and 2016, respectively,2018 and approximately $3.9$3.0 million and $3.8$2.8 million for the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, respectively.
Terminaling services agreement—agreements—Brownsville terminals. In September 2016, we entered into aWe have two terminaling services agreementagreements with Frontera relating to our Brownsville, Texas facility that will expire in June 2019,2020, subject to automatic renewals unless terminated by either party upon 90 days’ to 180 days’ prior notice. In exchange for its minimum throughput commitments, we have agreed to provide Frontera with approximately 301,000 barrels of storage capacity. We recognized revenue related to these agreements of approximately $0.7 million and $0.6 million for the three months ended June 30, 2019 and 2018, respectively and approximately $1.4 million and $1.2 million for the six months ended June 30, 2019 and 2018, respectively.
Terminaling services agreement—Gulf Coast terminals. Associated Asphalt Marketing, LLC is a wholly-owned indirect subsidiary of ArcLight. Effective January 1, 2018, a third party customer assigned their terminaling services agreement relating to our Gulf Coast terminals to Associated Asphalt Marketing, LLC. The agreement will expire in April 2021, subject to two, two-year automatic renewalrenewals unless terminated by either party upon 180 days’ prior notice. In exchange for its minimum throughput commitment, we have agreed to provide FronteraAssociated Asphalt Marketing, LLC with approximately 151,000750,000 barrels of storage capacity.
We recognized revenue related to this agreement of approximately $0.4$2.2 million and $0.1$2.1 million for the three months ended SeptemberJune 30, 20172019 and 2016,2018, respectively and approximately $1.1$4.5 million and $0.1$4.3 million for the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, respectively.
Terminaling servicesOperating and administrative agreement—Brownsville terminals.SeaPort Midstream Partners, LLC (“SMP”)- Central services. In June 2017, we entered intoWe operate two refined products terminals in Seattle, Washington and Portland, Oregon, on behalf of SMP, in accordance with an operating and administrative agreement executed between us and SMP, for a terminaling servicesmanagement fee that is based on our costs incurred plus an annual fee. SMP is a joint venture between SeaPort Midstream Holdings LLC, an ArcLight subsidiary, and BP West Coast Products LLC. SeaPort Midstream Holdings LLC owns 51% of SMP. The operating and administrative agreement with Frontera relating to our Brownsville, Texas facility that will expire in June 2018,November 2020, subject to a one-year automatic renewalrenewals unless terminated by either party upon 90180 days’ prior notice. In exchangeOur agreement with SMP stipulates that we may resign as the operator at any time with the prior written consent of SMP, or that we may be removed as the operator for its minimum throughput commitment, we have agreedgood cause, which includes material noncompliance with laws and material failure to provide Frontera with approximately 90,000 barrels of storage capacity.
adhere to good industry practice regarding health, safety or environmental matters. We recognized revenue related to this operations and administrative agreement of approximately $0.2$0.8 million for both the three months ended June 30, 2019 and 2018 and approximately $1.7 million and $1.8 million for the six months ended June 30, 2019 and 2018, respectively.
Operations and reimbursement agreement—SeaPort Sound Terminal, LLC (“SeaPort Sound”)- Central services. Our subsidiary, TMS, manages a refined products terminal in Tacoma, Washington on behalf of SeaPort Midstream Holdings LLC, an ArcLight subsidiary. We receive a management fee based on our costs incurred plus an annual fee. We recognized revenue related to this operations and reimbursement agreement of approximately $1.6 million and $nil for the three months ended SeptemberJune 30, 20172019 and 2016,2018, respectively and approximately $0.2$3.2 million and $nil for the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, respectively.
TerminalingOther affiliates – Central services agreement—Southeast terminals. In connection with. We manage additional terminal facilities that are owned by affiliates of ArcLight, including the ArcLight acquisition of our general partner, our Southeast terminaling services agreement with NGL was amendedBaltimore Terminal and LHT. We recognized revenue related to extend the term of the agreement through July 31, 2040 at the prevailing contract rate terms contained within the agreement. Subsequent to January 31, 2023, NGL has the ability to terminate the agreement at any time upon at least 24 months’ prior notice of its intent to terminate the agreement. Subsequent to the ArcLight acquisition, effective February 1, 2016, revenue associated with the Southeast terminaling services agreement is recorded as revenuereimbursements from external customers as opposed to revenue from affiliates.these
Under this agreement, NGL is obligated to throughput a volume of refined product that, at the fee schedule contained in the agreement, resulted in minimum throughput payments to us of approximately $7.0 million and $6.8 million for the three months ended September 30, 2017 and 2016, respectively, and approximately $20.7 million and $20.3 million for the nine months ended September 30, 2017 and 2016, respectively. The agreement contains stipulated annual increases in throughput payments based on increases in the United States Consumer Price Index. The minimum annual throughput payment is reduced proportionately for any decrease in storage capacity due to out‑of‑service tank capacity.
If a force majeure event occurs that renders us unable to perform our obligations with respect to an asset, the obligations would be temporarily suspended with respect to that asset. If a force majeure event continues for 30 consecutive days or more and results in a diminution in the storage capacity we make available, the counterparty may terminate its obligations with respect to the asset affected by the force majeure event and their minimum revenue commitment would be reduced proportionately for the duration of the agreement.
(3) ACQUISITION OF TERMINAL ASSETS FROM AFFILIATE
Effective January 28, 2016, we acquired from TransMontaigne LLC its Port Everglades, Florida hydrant system for a cash payment of $12.0 million. The hydrant system encompasses a system for fueling cruise ships. The acquisition of the hydrant system from TransMontaigne LLC has been recorded at the carryover basis as a reorganization of entities under common control. Accordingly, we recorded the assets at their net book value of $6.5 million with the remaining purchase price of $5.5 million recorded as a reduction to the general partner interest. TransMontaigne LLC controlled
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TransMontaigne Partners L.P.LLC and subsidiariesSubsidiaries
Notes to consolidated financial statements (unaudited) (continued)
our general partner onaffiliates of approximately $0.4 million and $nil for the acquisition date; therefore,three months ended June 30, 2019 and 2018, respectively and approximately $0.8 million and $nil for the difference between the consideration we paid to TransMontaigne LLCsix months ended June 30, 2019 and the carryover basis2018, respectively. Our management of the net assets purchased has been reflected inBaltimore Terminal terminated on July 1, 2019.
See also Note 1(a), Nature of business, for information regarding the accompanying consolidated balance sheets and statements of partners’ equity as a decrease to the general partner interest. The accompanying consolidated financial statements include the assets, liabilities and results of operations of the hydrant system from January 28, 2016. As this transaction is not considered material to our consolidated financial statements we did not recast prior period consolidated financial statements.TMS Contribution.
(4)(3) CONCENTRATION OF CREDIT RISK AND TRADE ACCOUNTS RECEIVABLE
Our primary market areas are located in the United States along the Gulf Coast, in the Southeast, in Brownsville, Texas, along the Mississippi and Ohio Rivers, and in the Midwest.Midwest and along the West Coast. We have a concentration of trade receivable balances due from companies engaged in the trading, distribution and marketing of refined products and crude oil. These concentrations of customers may affect our overall credit risk in that the customers may be similarly affected by changes in economic, regulatory or other factors. Our customers’ historical financial and operating information is analyzed prior to extending credit. We manage our exposure to credit risk through credit analysis, credit approvals, credit limits and monitoring procedures, and for certain transactions we may request letters of credit, prepayments or guarantees. Amounts included in trade accounts receivable that are accounted for as revenue in accordance with ASC 606 approximate $4.1 million at June 30, 2019. We maintain allowances for potentially uncollectible accounts receivable.
Trade accounts receivable, net consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| June 30, |
| December 31, |
| ||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Trade accounts receivable |
| $ | 10,422 |
| $ | 9,416 |
|
| $ | 16,033 |
| $ | 14,158 |
|
Less allowance for doubtful accounts |
|
| (119) |
|
| (119) |
|
|
| (109) |
|
| (109) |
|
|
| $ | 10,303 |
| $ | 9,297 |
|
| $ | 15,924 |
| $ | 14,049 |
|
The following customers accounted for at least 10% of our consolidated revenue in at least one of the periods presented in the accompanying consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
|
| Nine months ended |
|
| Three months ended |
|
| Six months ended |
| ||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||
|
| 2017 |
| 2016 |
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
|
| 2019 |
| 2018 |
|
NGL Energy Partners LP |
| 27 | % | 22 | % |
| 26 | % | 21 | % |
| 19 | % | 23 | % |
| 20 | % | 22 | % |
RaceTrac Petroleum Inc. |
| 9 | % | 12 | % |
| 10 | % | 11 | % | ||||||||||
Castleton Commodities International LLC |
| 13 | % | 15 | % |
| 13 | % | 14 | % |
| 9 | % | 9 | % |
| 9 | % | 10 | % |
RaceTrac Petroleum Inc. |
| 13 | % | 13 | % |
| 13 | % | 12 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets arewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| June 30, |
| December 31, |
| ||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Amounts due from insurance companies |
| $ | 2,054 |
| $ | 1,810 |
|
| $ | 1,384 |
| $ | 2,861 |
|
Prepaid insurance |
|
| 3,422 |
|
| 1,371 |
| |||||||
Additive detergent |
|
| 1,249 |
|
| 1,364 |
|
|
| 1,284 |
|
| 1,218 |
|
Prepaid insurance |
|
| 2,075 |
|
| 4,684 |
| |||||||
Deposits and other assets |
|
| 1,080 |
|
| 2,045 |
|
|
| 1,310 |
|
| 2,647 |
|
|
| $ | 6,458 |
| $ | 9,903 |
|
| $ | 7,400 |
| $ | 8,097 |
|
Amounts due from insurance companies. We periodically file claims for recovery of environmental remediation costs and property claims with our insurance carriers under our comprehensive liability policies. We
16
TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
recognize our insurance recoveries in the period that we assess the likelihood of recovery as being probable (i.e., likely to occur).probable. At SeptemberJune 30, 20172019 and December 31, 2016,2018, we have recognized amounts due from insurance companies of approximately $2.1$1.4 million and $1.8$2.9 million, respectively, representing our best estimate of our probable insurance recoveries. During
15
TransMontaigne Partners L.P. and subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
the ninesix months ended SeptemberJune 30, 2017,2019, we received reimbursements from insurance companies of approximately $1.0$2.2 million. During the ninesix months ended SeptemberJune 30, 2017,2019, we increased our estimate of probable future insurance recoveries by approximately $1.2$0.7 million.
(6)(5) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net iswas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| June 30, |
| December 31, | ||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 | ||||
Land |
| $ | 53,079 |
| $ | 53,079 |
|
| $ | 83,451 |
| $ | 83,451 |
Terminals, pipelines and equipment |
|
| 679,801 |
|
| 651,783 |
|
|
| 982,117 |
|
| 918,537 |
Furniture, fixtures and equipment |
|
| 4,386 |
|
| 4,100 |
|
|
| 7,170 |
|
| 7,289 |
Construction in progress |
|
| 19,361 |
|
| 11,715 |
|
|
| 35,643 |
|
| 64,763 |
|
|
| 756,627 |
|
| 720,677 |
|
|
| 1,108,381 |
|
| 1,074,040 |
Less accumulated depreciation |
|
| (330,160) |
|
| (303,929) |
|
|
| (409,455) |
|
| (384,870) |
|
| $ | 426,467 |
| $ | 416,748 |
|
| $ | 698,926 |
| $ | 689,170 |
Goodwill iswas as follows (in thousands):
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
| ||
|
| 2017 |
| 2016 |
| ||
Brownsville terminals |
| $ | 8,485 |
| $ | 8,485 |
|
|
|
|
|
|
|
|
|
|
| June 30, |
| December 31, |
| ||
|
| 2019 |
| 2018 |
| ||
Brownsville terminals |
| $ | 8,485 |
| $ | 8,485 |
|
West Coast terminals |
|
| 943 |
|
| 943 |
|
|
| $ | 9,428 |
| $ | 9,428 |
|
Goodwill is required to be tested for impairment annually unless events or changes in circumstances indicate it is more likely than not that an impairment loss has been incurred at an interim date. Our annual test for the impairment of goodwill is performed as of December 31. The impairment test is performed at the reporting unit level. Our reporting units are our operatingbusiness segments (see Note 1816 of Notes to consolidated financial statements). The fair value of each reporting unit is determined on a stand‑alone basis from the perspective of a market participant and represents an estimate of the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired.
At SeptemberJune 30, 20172019 and December 31, 2016, our only reporting unit that contained goodwill was2018, our Brownsville terminals.and West Coast terminals contained goodwill. We did not recognize any goodwill impairment charges during the ninesix months ended SeptemberJune 30, 20172019 or during the year ended December 31, 20162018 for thisthese reporting unit.units. However, a significant decline in the price of our common units with a resultingan increase in the assumed market participants’ weighted average cost of capital, the loss of a significant customer, the disposition of significant assets, or an unforeseen increase in the costs to operate and maintain the Brownsville or West Coast terminals could result in the recognition of an impairment charge in the future.
17
TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
(7) INVESTMENTS IN UNCONSOLIDATED AFFILIATES
At SeptemberJune 30, 20172019 and December 31, 2016,2018, our investments in unconsolidated affiliates include a 42.5% Class A ownership interest in Battleground Oil Specialty Terminal Company LLC (“BOSTCO”) and a 50% ownership interest in Frontera Brownsville LLC (“Frontera”). BOSTCO is a terminal facility located on the Houston Ship Channel that encompasses approximately 7.1 million barrels of distillate, residual and other black oil product storage. Class A and Class B ownership interests share in cash distributions on a 96.5% and 3.5% basis, respectively. Class B ownership interests do not have voting rights and are not required to make capital investments. Frontera is a terminal facility located in Brownsville, Texas that encompasses approximately 1.51.7 million barrels of light petroleum product storage, as well as related ancillary facilities.
16
TransMontaigne Partners L.P. and subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
The following table summarizes our investments in unconsolidated affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Percentage of |
|
| Carrying value |
|
|
| Percentage of |
| Carrying value |
| ||||||||||||
|
| ownership |
|
| (in thousands) |
|
|
| ownership |
| (in thousands) |
| ||||||||||||
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
|
|
| June 30, |
| December 31, |
| June 30, |
| December 31, |
| ||||
|
| 2017 |
| 2016 |
|
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
BOSTCO |
| 42.5 | % | 42.5 | % |
| $ | 212,518 |
| $ | 217,941 |
|
|
| 42.5 | % | 42.5 | % | $ | 200,523 |
| $ | 203,005 |
|
Frontera |
| 50 | % | 50 | % |
|
| 24,188 |
|
| 23,152 |
|
|
| 50 | % | 50 | % |
| 24,160 |
|
| 24,026 |
|
Total investments in unconsolidated affiliates |
|
|
|
|
|
| $ | 236,706 |
| $ | 241,093 |
|
|
|
|
|
|
| $ | 224,683 |
| $ | 227,031 |
|
At SeptemberJune 30, 20172019 and December 31, 2016,2018, our investment in BOSTCO includes approximately $7.1$6.7 million and $7.2$6.8 million, respectively, of excess investment related to a one time buy-in fee to acquire our 42.5% interest and capitalization of interest on our investment during the construction of BOSTCO amortized over the useful life of the assets. Excess investment is the amount by which our investment exceeds our proportionate share of the book value of the net assets of the BOSTCO entity.
Earnings from investments in unconsolidated affiliates werewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Nine months ended |
|
|
| Three months ended |
| Six months ended | ||||||||||||||||
|
| September 30, |
| September 30, |
|
|
| June 30, |
| June 30, | ||||||||||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||
BOSTCO |
| $ | 923 |
| $ | 1,885 |
| $ | 3,904 |
| $ | 4,794 |
|
|
| $ | 563 |
| $ | 1,848 |
| $ | 1,139 |
| $ | 3,839 |
Frontera |
|
| 961 |
|
| 1,075 |
|
| 2,660 |
|
| 2,146 |
|
|
|
| 662 |
|
| 596 |
|
| 1,226 |
|
| 1,494 |
Total earnings from investments in unconsolidated affiliates |
| $ | 1,884 |
| $ | 2,960 |
| $ | 6,564 |
| $ | 6,940 |
|
|
| $ | 1,225 |
| $ | 2,444 |
| $ | 2,365 |
| $ | 5,333 |
Additional capital investments in unconsolidated affiliates werewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Nine months ended |
|
|
| Three months ended |
| Six months ended | ||||||||||||||||
|
| September 30, |
| September 30, |
|
|
| June 30, |
| June 30, | ||||||||||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||
BOSTCO |
| $ | — |
| $ | — |
| $ | 145 |
| $ | 2,125 |
|
|
| $ | 1,076 |
| $ | — |
| $ | 1,076 |
| $ | — |
Frontera |
|
| — |
|
| — |
|
| 2,000 |
|
| 100 |
|
|
|
| — |
|
| 114 |
|
| 225 |
|
| 1,264 |
Additional capital investments in unconsolidated affiliates |
| $ | — |
| $ | — |
| $ | 2,145 |
| $ | 2,225 |
|
|
| $ | 1,076 |
| $ | 114 |
| $ | 1,301 |
| $ | 1,264 |
Cash distributions received from unconsolidated affiliates were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Nine months ended |
|
| ||||||||
|
| September 30, |
| September 30, |
|
| ||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
| ||||
BOSTCO |
| $ | 3,074 |
| $ | 3,546 |
| $ | 9,472 |
| $ | 10,487 |
|
|
Frontera |
|
| 1,127 |
|
| 911 |
|
| 3,624 |
|
| 2,176 |
|
|
Cash distributions received from unconsolidated affiliates |
| $ | 4,201 |
| $ | 4,457 |
| $ | 13,096 |
| $ | 12,663 |
|
|
1718
TransMontaigne Partners L.P.LLC and subsidiariesSubsidiaries
Notes to consolidated financial statements (unaudited) (continued)
Cash distributions received from unconsolidated affiliates was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Six months ended | ||||||||
|
| June 30, |
| June 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
BOSTCO |
| $ | 2,289 |
| $ | 3,491 |
| $ | 4,697 |
| $ | 5,585 |
Frontera |
|
| 813 |
|
| 1,330 |
|
| 1,317 |
|
| 2,426 |
Cash distributions received from unconsolidated affiliates |
| $ | 3,102 |
| $ | 4,821 |
| $ | 6,014 |
| $ | 8,011 |
The summarized financial information of our unconsolidated affiliates was as follows (in thousands):
Balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| BOSTCO |
| Frontera |
|
| BOSTCO |
| Frontera | ||||||||||||||||
|
| September 30, |
| December 31, |
| September 30, |
| December 31, |
|
| June 30, |
| December 31, |
| June 30, |
| December 31, | ||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||
Current assets |
| $ | 21,827 |
| $ | 23,237 |
| $ | 8,119 |
| $ | 5,779 |
|
| $ | 16,700 |
| $ | 19,299 |
| $ | 5,244 |
| $ | 5,866 |
Long-term assets |
|
| 472,477 |
|
| 485,331 |
|
| 42,603 |
|
| 41,966 |
|
|
| 457,793 |
|
| 455,984 |
|
| 44,596 |
|
| 45,115 |
Current liabilities |
|
| (10,950) |
|
| (12,799) |
|
| (2,146) |
|
| (1,172) |
|
|
| (12,235) |
|
| (12,471) |
|
| (1,484) |
|
| (2,845) |
Long-term liabilities |
|
| — |
|
| — |
|
| (200) |
|
| (269) |
|
|
| (6,314) |
|
| (1,259) |
|
| (36) |
|
| (84) |
Net assets |
| $ | 483,354 |
| $ | 495,769 |
| $ | 48,376 |
| $ | 46,304 |
|
| $ | 455,944 |
| $ | 461,553 |
| $ | 48,320 |
| $ | 48,052 |
Statements of operations:income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| BOSTCO |
| Frontera |
|
|
| BOSTCO |
| Frontera | ||||||||||||||||
|
|
| Three months ended |
| Three months ended |
|
|
| Three months ended |
| Three months ended | ||||||||||||||||
|
|
| September 30, |
| September 30, |
|
|
| June 30, |
| June 30, | ||||||||||||||||
|
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||
Revenue |
|
| $ | 16,066 |
| $ | 17,033 |
| $ | 5,807 |
| $ | 5,232 |
|
|
| $ | 14,864 |
| $ | 16,908 |
| $ | 5,011 |
| $ | 6,009 |
Expenses |
|
|
| (13,517) |
|
| (12,178) |
|
| (3,885) |
|
| (3,082) |
|
|
|
| (13,229) |
|
| (11,515) |
|
| (3,687) |
|
| (4,817) |
Net earnings |
|
| $ | 2,549 |
| $ | 4,855 |
| $ | 1,922 |
| $ | 2,150 |
|
| ||||||||||||
Net income |
| $ | 1,635 |
| $ | 5,393 |
| $ | 1,324 |
| $ | 1,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| BOSTCO |
| Frontera |
|
| BOSTCO |
| Frontera | |||||||||||||||||
|
|
| Nine months ended |
| Nine months ended |
|
| Six months ended |
| Six months ended | |||||||||||||||||
|
|
| September 30, |
| September 30, |
|
| June 30, |
| June 30, | |||||||||||||||||
|
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | |||||||||
Revenue |
|
| $ | 49,724 |
| $ | 49,907 |
| $ | 16,398 |
| $ | 13,608 |
|
| $ | 31,470 |
| $ | 33,735 |
| $ | 10,109 |
| $ | 11,921 | |
Expenses |
|
|
| (39,383) |
|
| (36,668) |
|
| (11,078) |
|
| (9,316) |
|
|
| (27,283) |
|
| (24,064) |
|
| (7,657) |
|
| (8,933) | |
Net earnings |
|
| $ | 10,341 |
| $ | 13,239 |
| $ | 5,320 |
| $ | 4,292 |
| |||||||||||||
Net income |
| $ | 4,187 |
| $ | 9,671 |
| $ | 2,452 |
| $ | 2,988 |
19
TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
Other assets, net arewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
| ||
|
| 2017 |
| 2016 |
| ||
Deferred financing costs, net of accumulated amortization of $5,648 and $4,763, respectively |
| $ | 5,774 |
| $ | 1,298 |
|
Amounts due under long-term terminaling services agreements |
|
| 470 |
|
| 656 |
|
Customer relationships, net of accumulated amortization of $2,244 and $2,092, respectively |
|
| 186 |
|
| 338 |
|
Unrealized gain on derivative instruments |
|
| 499 |
|
| 344 |
|
Deposits and other assets |
|
| 236 |
|
| 286 |
|
|
| $ | 7,165 |
| $ | 2,922 |
|
|
|
|
|
|
|
|
|
|
| June 30, |
| December 31, |
| ||
|
| 2019 |
| 2018 |
| ||
Customer relationships, net of accumulated amortization of $6,062 and $4,887, respectively |
| $ | 43,368 |
| $ | 44,543 |
|
Revolving credit facility unamortized deferred issuance costs, net of accumulated amortization of $8,504 and $7,656, respectively |
|
| 4,667 |
|
| 5,515 |
|
Amounts due under long-term terminaling services agreements |
|
| 361 |
|
| 422 |
|
Deposits and other assets |
|
| 1,993 |
|
| 774 |
|
|
| $ | 50,389 |
| $ | 51,254 |
|
Deferred financingCustomer relationships. Other assets, net include certain customer relationships primarily at our West Coast terminals. These customer relationships are being amortized on a straight‑line basis over twenty years.
Revolving credit facility unamortized deferred issuance costs. Deferred financingissuance costs are amortized using the effective interest method over the term of the related revolving credit facility.
18
TransMontaigne Partners L.P. and subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
Amounts due under long‑term terminaling services agreements. We have long‑term terminaling services agreements with certain of our customers that provide for minimum payments that increase at stated amounts over the terms of the respective agreements. We recognize as revenue under ASC 842 the minimum payments under the long‑term terminaling services agreements on a straight‑line basis over the terms of the respective agreements. At Septemberboth June 30, 20172019 and December 31, 2016,2018, we have recognized revenue in excess of the minimum payments that was due through those respective dates under the long‑term terminaling services agreements resulting in an asset of approximately $0.5 million and $0.7 million, respectively.$0.4 million.
Customer relationships. Other assets, net include certain customer relationships at our River terminals. These customer relationships are being amortized on a straight‑line basis over twelve years.
Accrued liabilities arewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| June 30, |
| December 31, |
| ||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Customer advances and deposits |
| $ | 8,720 |
| $ | 8,710 |
|
| $ | 11,695 |
| $ | 11,927 |
|
Accrued property taxes |
|
| 4,120 |
|
| 1,061 |
|
|
| 4,325 |
|
| 3,003 |
|
Accrued environmental obligations |
|
| 1,772 |
|
| 2,107 |
|
|
| 1,746 |
|
| 1,556 |
|
Interest payable |
|
| 564 |
|
| 232 |
|
|
| 7,838 |
|
| 7,814 |
|
Accrued expenses and other |
|
| 2,826 |
|
| 1,888 |
|
|
| 7,031 |
|
| 7,646 |
|
|
| $ | 18,002 |
| $ | 13,998 |
|
| $ | 32,635 |
| $ | 31,946 |
|
Customer advances and deposits. We bill certain of our customers one month in advance for terminaling services to be provided in the following month. At both SeptemberJune 30, 20172019 and December 31, 2016,2018, we have billed and collected from certain of our customers approximately $8.7$11.7 million and $11.9 million, respectively, in advance of the terminaling services being provided. At June 30, 2019 and 2018, approximately $1.0 million and $0.4 million, respectively, of the customer advances and deposits balance is considered contract liabilities under ASC 606. Revenue recognized during the six months ended June 30, 2019 and 2018 from amounts included in contract liabilities at the beginning of the period was approximately $0.8 million and $0.5 million, respectively.
20
TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
Accrued environmental obligations. At SeptemberJune 30, 20172019 and December 31, 2016,2018, we have accrued environmental obligations of approximately $1.8$1.7 million and $2.1$1.6 million, respectively, representing our best estimate of our remediation obligations. During the ninesix months ended SeptemberJune 30, 2017,2019, we made payments of approximately $1.0$0.5 million towards our environmental remediation obligations. During the ninesix months ended SeptemberJune 30, 2017,2019, we increased our estimate of our future environmental remediation costs by approximately $0.7$0.6 million. Changes in our estimates of our future environmental remediation obligations may occur as a result of the passage of time and the occurrence of future events.
Other liabilities arewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, |
|
| June 30, |
| December 31, |
| ||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Advance payments received under long-term terminaling services agreements |
| $ | 1,255 |
| $ | 994 |
|
| $ | 3,247 |
| $ | 2,721 |
|
Deferred revenue—ethanol blending fees and other projects |
|
| 2,156 |
|
| 2,240 |
| |||||||
Deferred revenue |
|
| 1,715 |
|
| 1,922 |
| |||||||
|
| $ | 3,411 |
| $ | 3,234 |
|
| $ | 4,962 |
| $ | 4,643 |
|
Advance payments received under long‑term terminaling services agreements. We have long‑term terminaling services agreements with certain of our customers that provide for advance minimum payments. We recognize the advance minimum payments as revenue eitherunder ASC 842 on a straight‑line basis over the term of the respective agreements or when services have been provided based on volumes of product distributed.agreements. At SeptemberJune 30, 20172019 and December 31, 2016,2018, we have received advance minimum payments in excess of revenue recognized under these
19
TransMontaigne Partners L.P. and subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
long‑term terminaling services agreements resulting in a liability of approximately $1.3$3.2 million and $1.0$2.7 million, respectively.
Deferred revenue—ethanol blending fees and other projects.revenue. Pursuant to agreements with our customers, we agreed to undertake certain capital projects that primarily pertain to providing ethanol blending functionality at certain of our Southeast terminals.projects. Upon completion of the projects, our customers have paid us lump‑sum amounts that will be recognized as revenue on a straight‑line basis over the remaining term of the agreements. At both SeptemberJune 30, 20172019 and December 31, 2016,2018, we have unamortized deferred revenue for completed projects of approximately $2.2 million.$1.7 million and $1.9 million, respectively. During the ninesix months ended SeptemberJune 30, 20172019, we billed customers approximately $0.3 million for completed projects and 2016, we recognized revenue for completed projects on a straight‑line basis of approximately $0.2$0.5 million. At June 30, 2019 and 2018, approximately $0.1 million and $0.4$nil, respectively, of the deferred revenue balance is considered contract liabilities under ASC 606. Revenue recognized during the six months ended June 30, 2019 and 2018 from amounts included in contract liabilities under ASC 606 at the beginning of the period was approximately $0.1 million and $0.2 million, respectively.
(12)(11) LONG‑TERM DEBT
Long-term debt was as follows (in thousands):
|
|
|
|
|
|
|
|
|
| June 30, |
| December 31, |
| ||
|
| 2019 |
| 2018 |
| ||
Revolving credit facility due in 2022 |
| $ | 339,700 |
| $ | 306,000 |
|
6.125% senior notes due in 2026 |
|
| 300,000 |
|
| 300,000 |
|
Senior notes unamortized deferred issuance costs, net of accumulated amortization of $1,118 and $704, respectively |
|
| (6,964) |
|
| (7,378) |
|
|
| $ | 632,736 |
| $ | 598,622 |
|
On March 13, 2017,February 12, 2018, the Company and TLP Finance Corp., our wholly owned subsidiary, issued at par $300 million of 6.125% senior notes. Net proceeds after $8.1 million of issuance costs, were used to repay indebtedness under our revolving credit facility. The senior notes are due in 2026 and are guaranteed on a senior unsecured basis by each of
21
TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
our 100% owned domestic subsidiaries that guarantee obligations under our revolving credit facility. TransMontaigne Partners LLC has no independent assets or operations unrelated to its investments in its consolidated subsidiaries. TLP Finance Corp. has no assets or operations. Our operations are conducted by subsidiaries of TransMontaigne Partners LLC through our 100% owned operating company subsidiary, TransMontaigne Operating Company L.P. None of the assets of TransMontaigne Partners LLC or a guarantor represent restricted net assets pursuant to the guidelines established by the SEC.
In connection with the TMS Contribution, we entered into the third amendedConsent and restated senior securedThird Amendment to our Third Amended and Restated Senior Secured Credit Facility (“revolving credit facility”), primarily to reflect the TMS Contribution and the resulting termination of the omnibus agreement. Our revolving credit facility or the “credit facility”, thatas amended provides for a maximum borrowing line of credit equal to $600$850 million. At our request, the maximum borrowing line of credit may be increased by an additional $250 million, subject to the approval of the administrative agent and the receipt of additional commitments from one or more lenders. The terms of theour revolving credit facility include covenants that restrict our ability to make cash distributions, acquisitions and investments, including investments in joint ventures. We may make distributions of cash to the extent of our “available cash” as defined in our partnershipLLC agreement. We may make acquisitions and investments that meet the definition of “permitted acquisitions”; “other investments” which may not exceed 5% of “consolidated net tangible assets”; and additional future “permitted JV investments” up to $175 million, which may include additional investments in BOSTCO. The primary financial covenants contained in our revolving credit facility are (i) a total leverage ratio test (not to exceed 5.25 to 1.0), (ii) a senior secured leverage ratio test (not to exceed 3.75 to 1.0), and (iii) a minimum interest coverage ratio test (not less than 2.75 to 1.0). The principal balance of loans and any accrued and unpaid interest are due and payable in full on the maturity date, in March 13, 2022. We were in compliance with all financial covenants as of and during the ninesix months ended SeptemberJune 30, 20172019 and the year ended December 31, 2016.2018.
We may elect to have loans under theour revolving credit facility bear interest either (i) at a rate of LIBOR plus a margin ranging from 1.75% to 2.75% depending on the total leverage ratio then in effect, or (ii) at the base rate plus a margin ranging from 0.75% to 1.75% depending on the total leverage ratio then in effect. We also pay a commitment fee on the unused amount of commitments, ranging from 0.375% to 0.5% per annum, depending on the total leverage ratio then in effect. Our obligations under theour revolving credit facility are secured by a first priority security interest in favor of the lenders in the majority of our assets, including our investments in unconsolidated affiliates. For the threesix months ended SeptemberJune 30, 20172019 and 2016,2018, the weighted average interest rate on borrowings under theour revolving credit facility was approximately 3.5%5.8% and 3.2%, respectively. For the nine months ended September 30, 2017 and 2016, the weighted average interest rate on borrowings under the credit facility was approximately 3.4% and 3.1%4.7%, respectively. At SeptemberJune 30, 20172019 and December 31, 2016,2018, our outstanding borrowings under theour revolving credit facility were $302.0$339.7 million and $291.8$306 million, respectively. At both SeptemberJune 30, 20172019 and December 31, 20162018 our outstanding letters of credit were $0.4 million.
(12) DEFERRED COMPENSATION EXPENSE
We have an effective universal shelf‑registration statement and prospectus on Form S‑3 with the Securities and Exchange Commission that expires in September 2019. TLP Finance Corp., our 100% owned subsidiary, may act as a co‑issuer of any debt securities issued pursuant to that registration statement. TransMontaigne Partners L.P. has no independent assets or operations. TLP Finance Corp. has no assets or operations. Our operations are conducted by subsidiaries of TransMontaigne Partners L.P. through our 100% owned operating company subsidiary, TransMontaigne Operating Company L.P. Each of TransMontaigne Operating Company L.P.s’ and our other 100% owned subsidiaries (other than TLP Finance Corp., whose sole purpose is to act as co‑issuer of any debt securities) may guarantee the debt securities. We expect that any guarantees will be full and unconditional and joint and several, subject to certain automatic customary releases, including sale, disposition, or transfer of the capital stock or substantially all of the assets of a subsidiary guarantor, exercise of legal defeasance option or covenant defeasance option, and designation of a subsidiary guarantor as unrestricted in accordance with the indenture. There are no significant restrictions on the ability of TransMontaigne Partners L.P. or any guarantor to obtain funds from its subsidiaries by dividend or loan. None of the assets of TransMontaigne Partners L.P. or a guarantor represent restricted net assets pursuant to the guidelines established by the Securities and Exchange Commission.
20
TransMontaigne Partners L.P. and subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
The number of units outstanding is as follows:
|
|
|
|
|
|
|
|
|
| General |
|
|
| Common |
| partner |
|
|
| units |
| equivalent units |
|
Units outstanding at December 31, 2016 |
| 16,137,650 |
| 329,339 |
|
Issuance of common units pursuant to our savings and retention program |
| 33,205 |
| — |
|
TransMontaigne GP to maintain its 2% general partner interest |
| — |
| 678 |
|
Units outstanding at September 30, 2017 |
| 16,170,855 |
| 330,017 |
|
(14) EQUITY-BASED COMPENSATION
TransMontaigne GP is our general partner and manages our operations and activities. Prior to February 1, 2016, TransMontaigne GP was a wholly owned subsidiary of TransMontaigne LLC, which is a wholly owned subsidiary of NGL. TransMontaigne Services LLC, which is a wholly owned subsidiary of TransMontaigne LLC, had a long‑term incentive plan and a savings and retention program to compensate through bonus awards certain employees and independent directors of our general partner who provided services with respect to the business of our general partner.
Long-term incentive plan. On February 26, 2016, the board of our general partner approved, subject to the approval of our common unitholders, the TLP Management Services 2016 long-term incentive plan and the TLP Management Services savings and retention program (discussed further below) which constitutes a program under, and is subject to, the TLP Management Services long-term incentive plan, which replaced the TransMontaigne Services LLC long-term incentive plan and the TransMontaigne Services LLC savings and retention program. TLP Management Services is a wholly owned indirect subsidiary of ArcLight and employs all the officers and employees who provide services to the Partnership and such entity provides payroll and maintains all employee benefits programs on behalf of the Partnership. On July 12, 2016, we held a special meeting of our common unitholders at which time the TLP Management Services long-term incentive plan and savings and retention program were approved by the Partnership’s unitholders.
The TLP Management Services long-term incentive plan operates in a manner similarCompany. Prior to the TransMontaigne Services LLC long-term incentive plan used previously. The TLP Management Services long-term incentive plan reserves 750,000 common units to be granted as awards under the plan, with such amount subject to adjustment as provided for under the terms of the plan if there isTake-Private Transaction, we also had a change in our common units, such as a unit split or other reorganization. The common units authorized to be granted under the TLP Management Services long-term incentive plan are registered pursuant to a registration statement on Form S-8.
The TLP Management Services long‑term incentive plan is administered by the compensation committee of the board of directors of our general partner and is used for grants of units to compensate the independent directors of our general partner. The grants to the independent directors of our general partnerAwards under the TransMontaigne Services LLC long-term incentive plan had historically vestedwere settled in our common units, and were payable annually in equal tranches over a four-year period, subject to accelerated vesting upon a change in control of TransMontaigne GP. Ownership inaccordingly, we accounted for the awards was subject to forfeiture until the vesting date, but recipients had distribution and voting rights from the date of the grant. The grants to the independent directors of our general partner under the TLP Management Services long-term incentive plan are immediately vested and not subject to forfeiture. Accordingly there are no long-term incentive plan grants outstanding as of September 30, 2017.
Generally accepted accounting principles require us to measure the cost of board member services received in exchange for an award of equity instruments based on the grant‑date fair value of the award. That cost is recognized over the vesting period on a straight line basis during which a board member is required to provide services in exchange for the award with the costs being accelerated upon the occurrence of accelerated vesting events, such as a change in control
21
TransMontaigne Partners L.P. and subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
of our general partner. In connection with the ArcLight acquisition of our general partner, effective February 1, 2016, 15,750 restricted phantom units previously granted to the independent directors vested and were satisfied via the delivery of our common units.
Effective as of October 18, 2016, the board of directors of our general partner, with the concurrence of the compensation committee, adopted a revised independent director annual compensation program, which includes the grant of common units valued at $90,000 annually and issued pursuant to the TLP Management Services long-term incentive plan, which common units are immediately vested and are not subject to forfeiture. On October 20, 2017, we granted and issued 6,498 common units to our independent directors under the TLP Management Services long‑term incentive plan. On October 21, 2016, we granted and issued 3,258 common units to our independent directors under the TLP Management Services long‑term incentive plan. The annual common unit award for 2016 was prorated for Mr. Wiese and Mr. Welch, who were each appointed to the board in July 2016, based on their length of service on the board of our general partner.
For awards to the independent directors, of our general partner, equity-based compensation of approximately $68,000 and $nil is included in equity-baseddeferred compensation expense was approximately $nil and $0.1 million for the threesix months ended SeptemberJune 30, 2017 2016, respectively2019 and approximately $203,000 and $520,000 is included in equity-based compensation expense for the nine months ended September 30, 2017 and 2016,2018, respectively.
Savings and retention program. On February 26, 2016, the board of our general partner unanimously approved the TLP Management Services savings and retention program for employees who provide services with respect to our business. This plan is intended to constitute a program under, and be subject to, the TLP Management Services 2016 long-term incentive plan described above. The savings and retention program is used for awards to employees of TLP Management Services who provide services to the Partnership. The savings and retention program operates in a manner substantially similar to the TransMontaigne Services LLC savings and retention program used previously.
The restricted phantom units awarded and accrued under the savings and retention program are subject to forfeiture until the vesting date. Recipients have distribution equivalent rights from the date of grant that accrue additional restricted phantom units equivalent to the value of quarterly distributions paid by us on each of our outstanding common units. Recipients of restricted phantom units under the savings and retention program do not have voting rights.
The purpose of the savings and retention program is to provide for the reward and retention of participants by providing them with bonus awards that vest over future service periods. Awards under the program with respect to individuals providing services to the Company generally become vested as to 50% of a participant’s annual award as of the first day of the month that falls closest to the second anniversary of the grant date, and the remaining 50% as of the first day of the month that falls closest to the third anniversary of the grant date, subject to earlier vesting upon a participant’s attainment of the age and length of service thresholds, retirement, death or disability, involuntary termination without cause, or termination of a participant’s employment following a change in control of the Partnership, our general partner or TLP Management Services,Company as specified in the program. For certain senior level employees, includingThe awards are increased for the executive officersvalue of our general partner, all prior grants underany accrued growth based on underlying investments deemed made with
22
TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
respect to the TransMontaigne Services LLC savings and retention program vested uponawards. The awards (including any accrued growth relating thereto) are subject to forfeiture until the change in controlvesting date. The Take-Private Transaction did not accelerate the vesting of our general partner as a resultany of the ArcLight acquisition that occurred on February 1, 2016.awards.
A person will satisfy the age and length of service thresholds of the program upon the attainment of the earliest of (a) age sixty, (b) age fifty fivefifty-five and ten years of service as an officer of TLP Management Services or any of its affiliates or predecessors, or (c) age fifty and twenty years of service as an employee of TLP Management Services or any of its affiliates or predecessors.
UnderPrior to the omnibus agreementTake-Private Transaction, we had the ability to settle the awards in our common units, and accordingly, we accounted for the awards as an equity award. Following the Take-Private Transaction, we index the awards to other forms of investments, and have agreedthe intent and ability to reimbursesettle the ownerawards in cash, and accordingly, we account for the awards as accrued liabilities.
For awards to employees, approximately $1.1 million and $2.3 million is included in deferred compensation expense for the six months ended June 30, 2019 and 2018, respectively.
(13) COMMITMENTS AND CONTINGENCIES
Effective January 1, 2019, we adopted Accounting Standards Codification (“ASC”) Topic 842, Leases and the series of TransMontaigne GP for bonus awards maderelated Accounting Standards Updates that followed (collectively referred to key employeesas “ASC 842”), using the modified retrospective transition method applied at the effective date of the standard. By electing this optional transition method, information prior to January 1, 2019 has not been restated and continues to be reported under the savings and retention program, providedaccounting standards in effect for that period (ASC 840).
The Company elected the compensation committee and the conflicts committeepackage of our general partner approve the annual awards grantedpractical expedients permitted under the program (see Note 2 oftransition guidance within the Notes to consolidated financial statements). We havenew standard, including the option to providecarry forward the reimbursementhistorical lease classifications and assessment of initial direct costs, to not include leases with an initial term of less than twelve months in eitherthe lease assets and liabilities and to account for lease and non-lease components as a cash paymentsingle lease.
We lease property including corporate offices, vehicles and land. We determine if an arrangement is a lease at inception and evaluate identified leases for operating or finance lease treatment. Operating or finance lease right-of-use assets and liabilities are recognized at the deliverycommencement date based on the present value of lease payments over the lease term. Our leases have remaining lease terms of less than one year to 42 years, some of which have options to extend or terminate the lease. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
The impact of ASC 842 on our common units toconsolidated balance sheet beginning January 1, 2019 was the savingsrecognition of right-of-use assets and retention program or alternatively directly to the award recipients, withlease liabilities for operating leases. Unamortized lease incentives were reclassified into right-of-
2223
TransMontaigne Partners L.P.LLC and subsidiariesSubsidiaries
Notes to consolidated financial statements (unaudited) (continued)
use assets on January 1, 2019. Amounts recognized at January 1, 2019 and June 30, 2019 for operating leases was as follows (in thousands):
|
|
|
|
Right-of-use assets, operating leases - January 1, 2019 |
| $ | 37,881 |
Amortization of right-of-use assets, January 1, 2019-March 31, 2019 |
|
| (594) |
Right-of-use assets, operating leases - March 31, 2019 |
|
| 37,287 |
Amortization of right-of-use assets, April 1, 2019-June 30, 2019 |
|
| (654) |
Right-of-use assets, operating leases - June 30, 2019 |
| $ | 36,633 |
|
|
|
|
Operating lease liabilities - January 1, 2019 |
| $ | 39,545 |
Liability reduction, net January 1, 2019-March 31, 2019 |
|
| (755) |
Operating lease liabilities - March 31, 2019 |
|
| 38,790 |
Liability reduction, net April 1, 2019-June 30, 2019 |
|
| (238) |
Operating lease liabilities - June 30, 2019 |
| $ | 38,552 |
Current portion of operating lease liabilities |
| $ | 3,011 |
Long-term operating lease liabilities |
| $ | 35,541 |
No impact was recorded to the reimbursement madestatement of operations or beginning equity for ASC 842.
Beginning January 1, 2019, operating right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Operating leases in accordance witheffect prior to January 1, 2019 were recognized at the underlying vesting and payment schedulepresent value of the savings and retention program. Our reimbursement forremaining payments on the bonus awards is reduced for forfeitures and is increased forremaining lease term as of January 1, 2019. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of quarterly distributions accrued under the distribution equivalent rights.lease payments. We have certain land and vehicle lease agreements with lease and non-lease components, which are accounted for separately. We have elected the intent and abilitypractical expedient to settle our reimbursement for the bonus awards in our common units, and accordingly, we account for the bonus awards as an equity award.
Given that we do not have any employees to provide corporateremainder of our lease agreements and support services and instead we contract for such services under the omnibus agreement, generally accepted accounting principles require us to classify the savings and retention program awardsnon-lease components as a non-employee awardsingle lease component. Non-lease payments include payments for taxes and measureother operating and maintenance expenses incurred by the costlessor but payable by us in connection with the leasing arrangement. As of services received in exchange for an award of equity instruments basedJune 30, 2019, the Company was party to certain subleasing arrangements whereby the Company, as the primary obligor on the vesting‑date fair valuelease, has recognized sublease income for lease payments made by affiliates to the lessor.
Following are components of the award. That cost, or an estimate of that cost in the case of unvested restricted phantom units, is recognized over the period during which services are provided in exchange for the award. As of September 30, 2017, there was approximately $1.4 million of total unrecognized equity-based compensation expense related to unvested restricted phantom units, which is expected to be recognized over the remaining weighted average period of 1.41 years.
For bonus awards to employees of TLP Management Services, approximately $476,000 and $251,000, is included in equity-based compensation expense for the three months ended September 30, 2017 and 2016, respectively, and approximately $2,510,000 and $2,144,000 is included in equity-based compensation expense for the nine months ended September 30, 2017 and 2016, respectively.
Activity related to our equity-based awards granted under the savings and retention program for services performed under the omnibus agreement for the nine months ended September 30, 2017 is as follows:lease costs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
| Weighted | ||
|
|
|
| average |
|
|
| average | ||
|
| Vested |
| price |
| Unvested |
| price | ||
Restricted phantom units outstanding at December 31, 2016 |
| 88,118 |
| $ | 35.82 |
| 38,438 |
| $ | 34.90 |
Issuance of units |
| (33,205) |
| $ | 44.50 |
| — |
| $ | — |
Units withheld for settlement of withholding taxes |
| (15,734) |
| $ | 44.12 |
| — |
| $ | — |
Unit accrual for distributions paid |
| 4,334 |
| $ | 43.86 |
| 2,377 |
| $ | 43.85 |
Vesting of units |
| 9,413 |
| $ | 44.35 |
| (9,413) |
| $ | 44.35 |
Grant of units |
| 37,312 |
| $ | 45.02 |
| 21,875 |
| $ | 45.17 |
Restricted phantom units outstanding at September 30, 2017 |
| 90,238 |
| $ | 38.97 |
| 53,277 |
| $ | 38.71 |
Vested and expected to vest at September 30, 2017 |
| 143,515 |
| $ | 38.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Six months ended | ||
|
| June 30, |
| June 30, | ||
|
| 2019 |
| 2019 | ||
|
|
|
|
|
|
|
Operating leases |
| $ | 1,157 |
| $ | 2,226 |
Short-term and variable leases |
|
| 233 |
|
| 505 |
Total lease costs |
| $ | 1,390 |
| $ | 2,731 |
2324
TransMontaigne Partners L.P.LLC and subsidiariesSubsidiaries
Notes to consolidated financial statements (unaudited) (continued)
(15) NET EARNINGS PER LIMITED PARTNER UNIT
The following table reconciles net earningsOther information related to net earnings allocable to limited partners and sets forth the computation of basic and diluted net earnings per limited partner unitour operating leases was as follows (in thousands, except per unit amounts)lease term and discount rate):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Nine months ended |
|
| ||||||||
|
| September 30, |
| September 30, |
|
| ||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
|
| ||||
Net earnings |
| $ | 10,966 |
| $ | 11,885 |
| $ | 38,398 |
| $ | 30,905 |
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions payable on behalf of incentive distribution rights |
|
| (3,113) |
|
| (2,236) |
|
| (8,622) |
|
| (6,234) |
|
|
Distributions payable on behalf of general partner interest |
|
| (249) |
|
| (231) |
|
| (732) |
|
| (682) |
|
|
Earnings allocable to general partner interest less than distributions payable to general partner interest |
|
| 92 |
|
| 38 |
|
| 136 |
|
| 189 |
|
|
Earnings allocable to general partner interest including incentive distribution rights |
|
| (3,270) |
|
| (2,429) |
|
| (9,218) |
|
| (6,727) |
|
|
Net earnings allocable to limited partners per the consolidated statements of operations |
| $ | 7,696 |
| $ | 9,456 |
| $ | 29,180 |
| $ | 24,178 |
|
|
Basic weighted average units |
|
| 16,263 |
|
| 16,217 |
|
| 16,257 |
|
| 16,204 |
|
|
Diluted weighted average units |
|
| 16,286 |
|
| 16,232 |
|
| 16,279 |
|
| 16,221 |
|
|
Net earnings per limited partner unit—basic |
| $ | 0.47 |
| $ | 0.58 |
| $ | 1.79 |
| $ | 1.49 |
|
|
Net earnings per limited partner unit—diluted |
| $ | 0.47 |
| $ | 0.58 |
| $ | 1.79 |
| $ | 1.49 |
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Six months ended | ||
|
| June 30, |
| June 30, | ||
|
| 2019 |
| 2019 | ||
|
|
|
|
|
|
|
Cash outflows for operating leases |
| $ | 756 |
| $ | 1,970 |
Sublease income as primary obligor |
| $ | 247 |
| $ | 493 |
|
|
|
|
|
|
|
|
|
|
|
| June 30, | |
|
|
|
|
| 2019 | |
Weighted average remaining lease term (years) |
|
|
|
|
| 19.61 |
Weighted average discount rate |
|
|
|
|
| 5.2% |
PursuantUndiscounted cash flows owed by the Company to our partnership agreement we are requiredlessors pursuant to distribute available cash (as defined by our partnership agreement)contractual agreements in effect as of the end of the reporting period. Such distributions are declared within 45 days after period end. The following table sets forth the distribution declared per common unit attributable to the periods indicated:June 30, 2019 and related imputed interest was as follows (in thousands):
|
|
|
|
|
|
| Distribution |
| |
January 1, 2016 through March 31, 2016 |
| $ | 0.680 |
|
April 1, 2016 through June 30, 2016 |
| $ | 0.690 |
|
July 1, 2016 through September 30, 2016 |
| $ | 0.700 |
|
October 1, 2016 through December 31, 2016 |
| $ | 0.710 |
|
January 1, 2017 through March 31, 2017 |
| $ | 0.725 |
|
April 1, 2017 through June 30, 2017 |
| $ | 0.740 |
|
July 1, 2017 through September 30, 2017 |
| $ | 0.755 |
|
|
|
|
|
2019 (remainder of the year) |
| $ | 2,032 |
2020 |
|
| 4,529 |
2021 |
|
| 4,423 |
2022 |
|
| 4,413 |
2023 |
|
| 3,883 |
Thereafter |
|
| 43,474 |
Total lease payments |
|
| 62,754 |
Less imputed interest |
|
| (24,202) |
Present value of operating lease liabilities |
| $ | 38,552 |
At December 31, 2018, future minimum lease payments under operating leases accounted for under ASC 840 was as follows (in thousands):
|
|
|
|
|
Years ending December 31: |
|
|
|
|
2019 |
| $ | 4,050 |
|
2020 |
|
| 4,308 |
|
2021 |
|
| 3,973 |
|
2022 |
|
| 3,050 |
|
2023 |
|
| 2,508 |
|
Thereafter |
|
| 6,287 |
|
|
| $ | 24,176 |
|
(16) COMMITMENTS AND CONTINGENCIES
Contract commitments. At SeptemberJune 30, 2017,2019, we have contractual commitments of approximately $14.0$28.0 million for the supply of services, labor and materials related to capital projects that currently are under development. We expect that these contractual commitments will primarily be paid withinduring the next twelve months.year ending December 31, 2019.
24
TransMontaigne Partners L.P. and subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
Operating leases. We lease property and equipment under non‑cancelable operating leases that extend through August 2061. At September 30, 2017, future minimum lease payments under these non‑cancelable operating leases are as follows (in thousands):
|
|
|
|
|
Years ending December 31: |
|
|
|
|
2017 (remainder of the year) |
| $ | 951 |
|
2018 |
|
| 1,663 |
|
2019 |
|
| 1,663 |
|
2020 |
|
| 1,513 |
|
2021 |
|
| 1,430 |
|
Thereafter |
|
| 3,530 |
|
|
| $ | 10,750 |
|
Included in the above non‑cancelable operating lease commitments are amounts for property rentals that we have sublet under non‑cancelable sublease agreements, for which we expect to receive minimum rentals of approximately $2.3 million in future periods.
Rental expense under operating leases was approximately $0.9 million for both the three months ended September 30, 2017 and 2016. Rental expense under operating leases was approximately $2.6 million for both the nine months ended September 30, 2017 and 2016.
Legal proceedings. We are party to various legal, regulatory and other matters arising from the day-to-day operations of our business that may result in claims against us. While the ultimate impact of any proceedings cannot be predicted with certainty, our management believes that the resolution of any of our pending legal proceedings will not have a material adverse effect on our business, financial position, results of operations or cash flows.
25
(17)TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
(14) DISCLOSURES ABOUT FAIR VALUE
“GAAP”GAAP defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. GAAP also establishes a fair value hierarchy that prioritizes the use of higher‑level inputs for valuation techniques used to measure fair value. The three levels of the fair value hierarchy are: (1) Level 1 inputs, which are quoted prices (unadjusted) in active markets for identical assets or liabilities; (2) Level 2 inputs, which are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and (3) Level 3 inputs, which are unobservable inputs for the asset or liability.
The fair values of the following financial instruments represent our best estimate of the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Our fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects our judgments about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. The following methods and assumptions were used to estimate the fair value of financial instruments at SeptemberJune 30, 20172019 and December 31, 2016.2018.
Cash equivalents. The carrying amount approximates fair value because of the short‑term maturity of these instruments. The fair value is categorized in Level 1 of the fair value hierarchy.
Derivative instruments. The carrying amount of our interest rate swaps was determined using a pricing model based on the LIBOR swap rate and other observable market data. The fair value is categorized in Level 2 of the fair value hierarchy.
Debt. The carrying amount of our revolving credit facility debt approximates fair value since borrowings under the facility bear interest at current market interest rates. The estimated fair value of our $300 million publicly traded senior notes at June 30, 2019 was approximately $290.5 million based on observable market trades. The fair value of our debt is categorized in Level 2 of the fair value hierarchy.
2526
TransMontaigne Partners L.P.LLC and subsidiariesSubsidiaries
Notes to consolidated financial statements (unaudited) (continued)
(15) REVENUE FROM CONTRACTS WITH CUSTOMERS
The majority of our terminaling services agreements contain minimum payment arrangements, resulting in a fixed amount of revenue recognized, which we refer to as “firm commitments” and are accounted for in accordance with ASC 842, Leases (“ASC 842 revenue”). The remainder is recognized in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606 revenue”).
The following table provides details of our revenue disaggregated by category of revenue (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended June 30, |
| Six months ended June 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Terminaling services fees: |
|
|
|
|
|
|
|
|
|
|
|
|
Firm commitments (ASC 842/840 revenue) |
| $ | 44,493 |
| $ | 39,149 |
| $ | 85,177 |
| $ | 77,855 |
Firm commitments (ASC 606 revenue) |
|
| 3,953 |
|
| 3,549 |
|
| 7,438 |
|
| 6,976 |
Total firm commitments revenue |
|
| 48,446 |
|
| 42,698 |
|
| 92,615 |
|
| 84,831 |
Ancillary revenue (ASC 606 revenue) |
|
| 9,616 |
|
| 9,390 |
|
| 20,147 |
|
| 18,820 |
Ancillary revenue (ASC 842/840 revenue) |
|
| 1,502 |
|
| 290 |
|
| 2,477 |
|
| 1,918 |
Total ancillary revenue |
|
| 11,118 |
|
| 9,680 |
|
| 22,624 |
|
| 20,738 |
Total terminaling services fees |
|
| 59,564 |
|
| 52,378 |
|
| 115,239 |
|
| 105,569 |
Pipeline transportation fees (ASC 842/840 revenue) |
|
| 853 |
|
| 794 |
|
| 1,702 |
|
| 1,663 |
Management fees (ASC 606 revenue) |
|
| 4,207 |
|
| 2,890 |
|
| 8,294 |
|
| 6,081 |
Management fees (ASC 842/840 revenue) |
|
| 345 |
|
| 86 |
|
| 1,002 |
|
| 240 |
Total management fees |
|
| 4,552 |
|
| 2,976 |
|
| 9,296 |
|
| 6,321 |
Total revenue |
| $ | 64,969 |
| $ | 56,148 |
| $ | 126,237 |
| $ | 113,553 |
The following table includes our estimated future revenue associated with our firm commitments under terminaling services fees which is expected to be recognized as ASC 606 revenue in the specified period related to our future performance obligations as of the end of the reporting period (in thousands):
Estimated Future ASC 606 Revenue by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
| Gulf Coast |
| Midwest |
|
| Brownsville |
| River |
| Southeast |
| West Coast |
| Central |
|
|
| |||||||
| Terminals |
| Terminals |
|
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Services |
| Total | ||||||||
2019 (remainder of the year) | $ | 2,325 |
| $ | 280 |
| $ | — |
| $ | 573 |
| $ | — |
| $ | 2,672 |
| $ | — |
| $ | 5,850 |
|
2020 |
| 1,809 |
|
| 560 |
|
| — |
|
| 1,039 |
|
| — |
|
| 3,876 |
|
| — |
|
| 7,284 |
|
2021 |
| 1,391 |
|
| 47 |
|
| — |
|
| 519 |
|
| — |
|
| 3,748 |
|
| — |
|
| 5,705 |
|
2022 |
| 959 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,033 |
|
| — |
|
| 1,992 |
|
2023 |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Thereafter |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total estimated future ASC 606 revenue | $ | 6,484 |
| $ | 887 |
| $ | — |
| $ | 2,131 |
| $ | — |
| $ | 11,329 |
| $ | — |
| $ | 20,831 |
|
Our estimated future ASC 606 revenue, for purposes of the tabular presentation above, excludes estimates of future rate changes due to changes in indices or contractually negotiated rate escalations and is generally limited to contracts that have minimum payment arrangements. The balances disclosed include the full amount of our customer commitments accounted for as ASC 606 revenue as of June 30, 2019 through the expiration of the related contracts. The balances disclosed exclude all performance obligations for which the original expected term is one year or less, the term of the contract with the customer is open and cannot be estimated, the contract includes options for future purchases or the consideration is variable.
27
TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
Estimated future ASC 606 revenue in the table above excludes revenue arrangements accounted for in accordance with ASC 842 in the amount of $94.7 million for the remainder of 2019, $157.2 million for 2020, $124.5 million for 2021, $93.5 million for 2022, $79.5 million for 2023 and $526.7 million thereafter.
We provide integrated terminaling, storage, transportation and related services to companies engaged in the trading, distribution and marketing of refined petroleum products, crude oil, chemicals, fertilizers and other liquid products. Our chief operating decision maker is our general partner’sthe Company’s chief executive officer. Our general partner’sThe Company’s chief executive officer reviews the financial performance of our business segments using disaggregated financial information about “net margins” for purposes of making operating decisions and assessing financial performance. “Net margins” is composed of revenue less direct operating costs and expenses. Accordingly, we present “net margins” for each of our business segments: (i) Gulf Coast terminals, (ii) Midwest terminals, and pipeline system, (iii) Brownsville terminals, (iv) River terminals, and (v) Southeast terminals.
The financial performanceterminals, (vi) West Coast terminals and (vii) Central services. Our Central services segment primarily represents the costs of employees performing operating oversight functions, engineering, health, safety and environmental services to our business segments is as follows (in thousands):terminals and terminals that we operate or manage, including for affiliate terminals owned by ArcLight. In addition, Central services represent the cost of employees at affiliate terminals owned by ArcLight that we operate. We receive a fee from these affiliates based on our costs incurred.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Nine months ended |
| ||||||||
|
| September 30, |
| September 30, |
| ||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| ||||
Gulf Coast Terminals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
| $ | 12,190 |
| $ | 11,259 |
| $ | 38,321 |
| $ | 33,958 |
|
Other |
|
| 3,147 |
|
| 3,539 |
|
| 9,102 |
|
| 7,869 |
|
Revenue |
|
| 15,337 |
|
| 14,798 |
|
| 47,423 |
|
| 41,827 |
|
Direct operating costs and expenses |
|
| (5,805) |
|
| (6,013) |
|
| (16,785) |
|
| (16,750) |
|
Net margins |
|
| 9,532 |
|
| 8,785 |
|
| 30,638 |
|
| 25,077 |
|
Midwest Terminals and Pipeline System: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
|
| 1,772 |
|
| 2,207 |
|
| 6,176 |
|
| 6,427 |
|
Pipeline transportation fees |
|
| 433 |
|
| 433 |
|
| 1,299 |
|
| 1,299 |
|
Other |
|
| 110 |
|
| 200 |
|
| 574 |
|
| 697 |
|
Revenue |
|
| 2,315 |
|
| 2,840 |
|
| 8,049 |
|
| 8,423 |
|
Direct operating costs and expenses |
|
| (718) |
|
| (858) |
|
| (2,123) |
|
| (2,422) |
|
Net margins |
|
| 1,597 |
|
| 1,982 |
|
| 5,926 |
|
| 6,001 |
|
Brownsville Terminals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
|
| 1,923 |
|
| 1,948 |
|
| 6,003 |
|
| 6,176 |
|
Pipeline transportation fees |
|
| 658 |
|
| 1,223 |
|
| 3,304 |
|
| 3,691 |
|
Other |
|
| 2,310 |
|
| 2,367 |
|
| 6,740 |
|
| 9,909 |
|
Revenue |
|
| 4,891 |
|
| 5,538 |
|
| 16,047 |
|
| 19,776 |
|
Direct operating costs and expenses |
|
| (2,746) |
|
| (2,573) |
|
| (8,200) |
|
| (8,742) |
|
Net margins |
|
| 2,145 |
|
| 2,965 |
|
| 7,847 |
|
| 11,034 |
|
River Terminals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
|
| 2,550 |
|
| 2,591 |
|
| 7,501 |
|
| 7,053 |
|
Other |
|
| 155 |
|
| 221 |
|
| 614 |
|
| 2,559 |
|
Revenue |
|
| 2,705 |
|
| 2,812 |
|
| 8,115 |
|
| 9,612 |
|
Direct operating costs and expenses |
|
| (1,710) |
|
| (1,753) |
|
| (4,895) |
|
| (6,034) |
|
Net margins |
|
| 995 |
|
| 1,059 |
|
| 3,220 |
|
| 3,578 |
|
Southeast Terminals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
|
| 17,627 |
|
| 13,287 |
|
| 49,644 |
|
| 39,864 |
|
Other |
|
| 2,574 |
|
| 1,363 |
|
| 6,385 |
|
| 2,898 |
|
Revenue |
|
| 20,201 |
|
| 14,650 |
|
| 56,029 |
|
| 42,762 |
|
Direct operating costs and expenses |
|
| (6,740) |
|
| (5,851) |
|
| (18,211) |
|
| (16,709) |
|
Net margins |
|
| 13,461 |
|
| 8,799 |
|
| 37,818 |
|
| 26,053 |
|
Total net margins |
|
| 27,730 |
|
| 23,590 |
|
| 85,449 |
|
| 71,743 |
|
General and administrative expenses |
|
| (5,247) |
|
| (3,605) |
|
| (13,298) |
|
| (10,929) |
|
Insurance expenses |
|
| (999) |
|
| (969) |
|
| (3,007) |
|
| (2,776) |
|
Equity-based compensation expense |
|
| (544) |
|
| (251) |
|
| (2,713) |
|
| (2,664) |
|
Depreciation and amortization |
|
| (8,882) |
|
| (8,169) |
|
| (26,379) |
|
| (24,168) |
|
Earnings from unconsolidated affiliates |
|
| 1,884 |
|
| 2,960 |
|
| 6,564 |
|
| 6,940 |
|
Operating income |
|
| 13,942 |
|
| 13,556 |
|
| 46,616 |
|
| 38,146 |
|
Other expenses |
|
| (2,976) |
|
| (1,671) |
|
| (8,218) |
|
| (7,241) |
|
Net earnings |
| $ | 10,966 |
| $ | 11,885 |
| $ | 38,398 |
| $ | 30,905 |
|
2628
TransMontaigne Partners L.P.LLC and subsidiariesSubsidiaries
Notes to consolidated financial statements (unaudited) (continued)
The financial performance of our business segments was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended |
| Six months ended | ||||||||
|
| June 30, |
| June 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Gulf Coast Terminals: |
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
| $ | 16,978 |
| $ | 16,465 |
| $ | 33,144 |
| $ | 32,638 |
Management fees |
|
| 5 |
|
| 86 |
|
| 14 |
|
| 183 |
Revenue |
|
| 16,983 |
|
| 16,551 |
|
| 33,158 |
|
| 32,821 |
Operating costs and expenses |
|
| (5,458) |
|
| (5,413) |
|
| (10,907) |
|
| (11,245) |
Net margins |
|
| 11,525 |
|
| 11,138 |
|
| 22,251 |
|
| 21,576 |
Midwest Terminals |
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
|
| 2,751 |
|
| 2,405 |
|
| 5,241 |
|
| 4,824 |
Pipeline transportation fees |
|
| 453 |
|
| 433 |
|
| 906 |
|
| 866 |
Revenue |
|
| 3,204 |
|
| 2,838 |
|
| 6,147 |
|
| 5,690 |
Operating costs and expenses |
|
| (821) |
|
| (743) |
|
| (1,406) |
|
| (1,455) |
Net margins |
|
| 2,383 |
|
| 2,095 |
|
| 4,741 |
|
| 4,235 |
Brownsville Terminals: |
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
|
| 2,566 |
|
| 1,977 |
|
| 4,863 |
|
| 4,043 |
Pipeline transportation fees |
|
| 400 |
|
| 361 |
|
| 796 |
|
| 797 |
Management fees |
|
| 1,439 |
|
| 1,892 |
|
| 3,098 |
|
| 3,996 |
Revenue |
|
| 4,405 |
|
| 4,230 |
|
| 8,757 |
|
| 8,836 |
Operating costs and expenses |
|
| (2,304) |
|
| (2,135) |
|
| (4,490) |
|
| (4,176) |
Net margins |
|
| 2,101 |
|
| 2,095 |
|
| 4,267 |
|
| 4,660 |
River Terminals: |
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
|
| 2,392 |
|
| 2,589 |
|
| 4,754 |
|
| 5,343 |
Revenue |
|
| 2,392 |
|
| 2,589 |
|
| 4,754 |
|
| 5,343 |
Operating costs and expenses |
|
| (1,523) |
|
| (1,805) |
|
| (3,009) |
|
| (3,641) |
Net margins |
|
| 869 |
|
| 784 |
|
| 1,745 |
|
| 1,702 |
Southeast Terminals: |
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
|
| 21,752 |
|
| 19,510 |
|
| 43,128 |
|
| 39,749 |
Management fees |
|
| 257 |
|
| 194 |
|
| 478 |
|
| 377 |
Revenue |
|
| 22,009 |
|
| 19,704 |
|
| 43,606 |
|
| 40,126 |
Operating costs and expenses |
|
| (5,968) |
|
| (5,714) |
|
| (12,092) |
|
| (12,333) |
Net margins |
|
| 16,041 |
|
| 13,990 |
|
| 31,514 |
|
| 27,793 |
West Coast Terminals: |
|
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees |
|
| 13,125 |
|
| 9,432 |
|
| 24,109 |
|
| 18,972 |
Management fees |
|
| 8 |
|
| — |
|
| 17 |
|
| — |
Revenue |
|
| 13,133 |
|
| 9,432 |
|
| 24,126 |
|
| 18,972 |
Operating costs and expenses |
|
| (4,534) |
|
| (3,465) |
|
| (8,504) |
|
| (6,570) |
Net margins |
|
| 8,599 |
|
| 5,967 |
|
| 15,622 |
|
| 12,402 |
Central Services: |
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
| 2,843 |
|
| 804 |
|
| 5,689 |
|
| 1,765 |
Revenue |
|
| 2,843 |
|
| 804 |
|
| 5,689 |
|
| 1,765 |
Operating costs and expenses |
|
| (5,856) |
|
| (4,287) |
|
| (11,381) |
|
| (8,644) |
Net margins |
|
| (3,013) |
|
| (3,483) |
|
| (5,692) |
|
| (6,879) |
Total net margins |
|
| 38,505 |
|
| 32,586 |
|
| 74,448 |
|
| 65,489 |
General and administrative expenses |
|
| (5,212) |
|
| (5,320) |
|
| (13,376) |
|
| (11,499) |
Insurance expenses |
|
| (1,218) |
|
| (1,271) |
|
| (2,579) |
|
| (2,517) |
Deferred compensation expense |
|
| (294) |
|
| (441) |
|
| (1,093) |
|
| (2,458) |
Depreciation and amortization |
|
| (13,107) |
|
| (13,225) |
|
| (25,759) |
|
| (25,096) |
Earnings from unconsolidated affiliates |
|
| 1,225 |
|
| 2,444 |
|
| 2,365 |
|
| 5,333 |
Gain from insurance proceeds |
|
| 3,351 |
|
| — |
|
| 3,351 |
|
| — |
Operating income |
|
| 23,250 |
|
| 14,773 |
|
| 37,357 |
|
| 29,252 |
Other expenses |
|
| (10,340) |
|
| (9,562) |
|
| (19,932) |
|
| (16,524) |
Net earnings |
| $ | 12,910 |
| $ | 5,211 |
| $ | 17,425 |
| $ | 12,728 |
29
TransMontaigne Partners LLC and Subsidiaries
Notes to consolidated financial statements (unaudited) (continued)
Supplemental information about our business segments is summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
|
| Three months ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
| Midwest |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended June 30, 2019 |
| |||||||||||||||||||||||
|
|
|
|
| Terminals and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Gulf Coast |
| Pipeline |
| Brownsville |
| River |
| Southeast |
|
|
|
| Gulf Coast |
| Midwest |
| Brownsville |
| River |
| Southeast |
| West Coast |
| Central |
|
|
|
| |||||||||||||
|
| Terminals |
| System |
| Terminals |
| Terminals |
| Terminals |
| Total |
|
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Services |
| Total |
| ||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
External customers |
| $ | 15,337 |
| $ | 2,315 |
| $ | 2,954 |
| $ | 2,705 |
| $ | 20,201 |
| $ | 43,512 |
|
| $ | 14,743 |
| $ | 3,204 |
| $ | 2,356 |
| $ | 2,392 |
| $ | 22,009 |
| $ | 13,133 |
| $ | — |
| $ | 57,837 |
|
Frontera |
|
| — |
|
| — |
|
| 1,937 |
|
| — |
|
| — |
|
| 1,937 |
| |||||||||||||||||||||||||
Affiliate customers |
|
| 2,240 |
|
| — |
|
| 2,049 |
|
| — |
|
| — |
|
| — |
|
| 2,843 |
|
| 7,132 |
| |||||||||||||||||||
Revenue |
| $ | 15,337 |
| $ | 2,315 |
| $ | 4,891 |
| $ | 2,705 |
| $ | 20,201 |
| $ | 45,449 |
|
| $ | 16,983 |
| $ | 3,204 |
| $ | 4,405 |
| $ | 2,392 |
| $ | 22,009 |
| $ | 13,133 |
| $ | 2,843 |
| $ | 64,969 |
|
Capital expenditures |
| $ | 1,208 |
| $ | — |
| $ | 285 |
| $ | 389 |
| $ | 6,800 |
| $ | 8,682 |
|
| $ | 1,614 |
| $ | 108 |
| $ | 3,623 |
| $ | 679 |
| $ | 8,788 |
| $ | 1,885 |
| $ | 258 |
| $ | 16,955 |
|
Identifiable assets |
| $ | 124,003 |
| $ | 20,877 |
| $ | 42,269 |
| $ | 50,232 |
| $ | 212,901 |
| $ | 450,282 |
|
| $ | 128,771 |
| $ | 19,292 |
| $ | 78,474 |
| $ | 44,777 |
| $ | 247,649 |
| $ | 279,742 |
| $ | 12,578 |
| $ | 811,283 |
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
| 4,853 |
| Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 612 |
| ||||||||||
Investments in unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
| 236,706 |
| Investments in unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 224,683 |
| ||||||||||
Deferred financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
| 5,774 |
| |||||||||||||||||||||||||||||
Revolving credit facility unamortized deferred issuance costs, net | Revolving credit facility unamortized deferred issuance costs, net |
|
|
|
|
|
|
|
|
|
| 4,667 |
| |||||||||||||||||||||||||||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,675 |
| ||||
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 701,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,045,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| Three months ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
| Midwest |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended June 30, 2018 |
| |||||||||||||||||||||||
|
|
|
|
| Terminals and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Gulf Coast |
| Pipeline |
| Brownsville |
| River |
| Southeast |
|
|
|
| Gulf Coast |
| Midwest |
| Brownsville |
| River |
| Southeast |
| West Coast |
| Central |
|
|
|
| |||||||||||||
|
| Terminals |
| System |
| Terminals |
| Terminals |
| Terminals |
| Total |
|
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Services |
| Total |
| ||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
External customers |
| $ | 14,798 |
| $ | 2,840 |
| $ | 4,228 |
| $ | 2,812 |
| $ | 14,650 |
| $ | 39,328 |
|
| $ | 14,480 |
| $ | 2,838 |
| $ | 2,336 |
| $ | 2,589 |
| $ | 19,704 |
| $ | 9,432 |
| $ | — |
| $ | 51,379 |
|
Frontera |
|
| — |
|
| — |
|
| 1,310 |
|
| — |
|
| — |
|
| 1,310 |
| |||||||||||||||||||||||||
Affiliate customers |
|
| 2,071 |
|
| — |
|
| 1,894 |
|
| — |
|
| — |
|
| — |
|
| 804 |
|
| 4,769 |
| |||||||||||||||||||
Revenue |
| $ | 14,798 |
| $ | 2,840 |
| $ | 5,538 |
| $ | 2,812 |
| $ | 14,650 |
| $ | 40,638 |
|
| $ | 16,551 |
| $ | 2,838 |
| $ | 4,230 |
| $ | 2,589 |
| $ | 19,704 |
| $ | 9,432 |
| $ | 804 |
| $ | 56,148 |
|
Capital expenditures |
| $ | 1,465 |
| $ | 145 |
| $ | 126 |
| $ | 209 |
| $ | 8,194 |
| $ | 10,139 |
|
| $ | 1,814 |
| $ | 35 |
| $ | 2,024 |
| $ | 345 |
| $ | 9,152 |
| $ | 2,082 |
| $ | 9 |
| $ | 15,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
| Nine months ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
| Midwest |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2019 |
| |||||||||||||||||||||||
|
|
|
|
| Terminals and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Gulf Coast |
| Pipeline |
| Brownsville |
| River |
| Southeast |
|
|
|
|
| Gulf Coast |
| Midwest |
| Brownsville |
| River |
| Southeast |
| West Coast |
| Central |
|
|
|
| ||||||||||||
|
| Terminals |
| System |
| Terminals |
| Terminals |
| Terminals |
| Total |
|
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Services |
| Total |
| ||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers |
| $ | 47,423 |
| $ | 8,049 |
| $ | 10,826 |
| $ | 8,115 |
| $ | 56,029 |
| $ | 130,442 |
|
| $ | 28,616 |
| $ | 6,147 |
| $ | 4,355 |
| $ | 4,754 |
| $ | 43,606 |
| $ | 24,126 |
| $ | — |
| $ | 111,604 |
|
Frontera |
|
| — |
|
| — |
|
| 5,221 |
|
| — |
|
| — |
|
| 5,221 |
| |||||||||||||||||||||||||
Affiliate customers |
|
| 4,542 |
|
| — |
|
| 4,402 |
|
| — |
|
| — |
|
| — |
|
| 5,689 |
|
| 14,633 |
| |||||||||||||||||||
Revenue |
| $ | 47,423 |
| $ | 8,049 |
| $ | 16,047 |
| $ | 8,115 |
| $ | 56,029 |
| $ | 135,663 |
|
| $ | 33,158 |
| $ | 6,147 |
| $ | 8,757 |
| $ | 4,754 |
| $ | 43,606 |
| $ | 24,126 |
| $ | 5,689 |
| $ | 126,237 |
|
Capital expenditures |
| $ | 3,794 |
| $ | 267 |
| $ | 657 |
| $ | 1,435 |
| $ | 31,174 |
| $ | 37,327 |
|
| $ | 3,068 |
| $ | 387 |
| $ | 11,451 |
| $ | 1,166 |
| $ | 24,437 |
| $ | 6,468 |
| $ | 320 |
| $ | 47,297 |
|
Identifiable assets |
| $ | 128,771 |
| $ | 19,292 |
| $ | 78,474 |
| $ | 44,777 |
| $ | 247,649 |
| $ | 279,742 |
| $ | 12,578 |
| $ | 811,283 |
| |||||||||||||||||||
Cash and cash equivalents | Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 612 |
| |||||||||||||||||||||||||
Investments in unconsolidated affiliates | Investments in unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 224,683 |
| ||||||||||||||||||||||||
Revolving credit facility unamortized deferred issuance costs, net | Revolving credit facility unamortized deferred issuance costs, net |
|
|
|
|
|
|
|
|
|
|
| 4,667 |
| ||||||||||||||||||||||||||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,675 |
| |||||||||||||||||||
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,045,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, 2016 |
| ||||||||||||||||
|
|
|
|
| Midwest |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| Terminals and |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Gulf Coast |
| Pipeline |
| Brownsville |
| River |
| Southeast |
|
|
|
| |||||
|
| Terminals |
| System |
| Terminals |
| Terminals |
| Terminals |
| Total |
| ||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers |
| $ | 41,703 |
| $ | 8,423 |
| $ | 15,907 |
| $ | 9,612 |
| $ | 39,925 |
| $ | 115,570 |
|
NGL Energy Partners LP |
|
| 124 |
|
| — |
|
| — |
|
| — |
|
| 2,837 |
|
| 2,961 |
|
Frontera |
|
| — |
|
| — |
|
| 3,869 |
|
| — |
|
| — |
|
| 3,869 |
|
Revenue |
| $ | 41,827 |
| $ | 8,423 |
| $ | 19,776 |
| $ | 9,612 |
| $ | 42,762 |
| $ | 122,400 |
|
Capital expenditures |
| $ | 4,894 |
| $ | 576 |
| $ | 759 |
| $ | 1,565 |
| $ | 26,311 |
| $ | 34,105 |
|
2730
TransMontaigne Partners L.P.LLC and subsidiariesSubsidiaries
Notes to consolidated financial statements (unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, 2018 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Gulf Coast |
| Midwest |
| Brownsville |
| River |
| Southeast |
| West Coast |
| Central |
|
|
|
| |||||||
|
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Terminals |
| Services |
| Total |
| ||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers |
| $ | 28,538 |
| $ | 5,690 |
| $ | 4,824 |
| $ | 5,343 |
| $ | 40,126 |
| $ | 18,972 |
| $ | — |
| $ | 103,493 |
|
Affiliate customers |
|
| 4,283 |
|
| — |
|
| 4,012 |
|
| — |
|
| — |
|
| — |
|
| 1,765 |
|
| 10,060 |
|
Revenue |
| $ | 32,821 |
| $ | 5,690 |
| $ | 8,836 |
| $ | 5,343 |
| $ | 40,126 |
| $ | 18,972 |
| $ | 1,765 |
| $ | 113,553 |
|
Capital expenditures |
| $ | 3,180 |
| $ | 336 |
| $ | 2,467 |
| $ | 892 |
| $ | 12,435 |
| $ | 2,645 |
| $ | 33 |
| $ | 21,988 |
|
r
(19)(17) SUBSEQUENT EVENT
West Coast Facilities Acquisition.On November 2, 2017, one of our wholly owned subsidiaries entered into an Asset Purchase Agreement (the “Purchase Agreement”) pursuant to which we will purchase the Martinez Terminal and Richmond Terminal (collectively, the “West Coast Facilities”) from Plains Products Terminals LLC, a wholly owned subsidiary of Plains All American Pipeline, L.P., for a total purchase price of $275 million. The West Coast Facilities include two waterborne refined product and crude oil terminals with a total of 64 storage tanks with approximately 5.4 million barrels of storage capacity. The facilities have extensive connectivity to domestic and international refined product and crude oil markets through significant marine, pipeline, truck and rail capabilities. The facilities are supported by multi-year, fee-based agreements with contract terms of up to 5 years. The acquisition will be financed with the proceeds of a common unit offering and cash available from other sources. The closing of the acquisition is expected to occur onNo subsequent transactions or about January 1, 2018, subject to customary closing conditions.
Our obligation to consummate the West Coast Facilities Acquisition is subject to certain conditions, including, among others, (i) the expirationevents warranted recognition or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) the absence of any order or legal restraint prohibiting the consummation of the West Coast Acquisition, (iii) delivery of certificates and certain ancillary transaction agreements (as described further below), (iv) the absence of a material adverse effect (as defineddisclosure in the Purchase Agreement) and (v) receipt of certain governmental authorizations and third party consents.
Quarterly distribution. On October 13, 2017, we announced a distribution of $0.755 per unit for the period from July 1, 2017 through September 30, 2017. This distribution was paid on October 31, 2017 to unitholders of record on October 23, 2017. accompanying financials or notes thereto.
2831
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
West Coast Facilities Acquisition.Take-Private Transaction
On November 2, 2017, oneFebruary 26, 2019, an affiliate of ArcLight completed its previously announced acquisition of all of the Partnership’s outstanding publicly traded common units not already held by ArcLight and its affiliates by way of our wholly owned subsidiaries entered into an Asset Purchase Agreementmerger (the “Purchase Agreement”“Merger”) pursuant to which we will purchase the Martinez Terminal and Richmond Terminal (collectively, the “West Coast Facilities”) from Plains Products Terminals LLC,with a wholly owned subsidiary of Plains All American Pipeline, L.P.TLP Finance Holdings, LLC (“TLP Finance”), foran indirect controlled subsidiary of Arclight. At the effective time of the Merger, each of the Partnership’s general partner units issued and outstanding immediately prior to the acquisition effective time was converted into (i)(a) one Partnership common unit, and (i)(b) in aggregate, a total purchase pricenon-economic general partner interest in the Partnership, (ii) each of $275 million. The West Coast Facilities include two waterborne refined productthe Partnership’s incentive distribution rights issued and crude oil terminalsoutstanding immediately prior to the acquisition effective time was converted into 100 Partnership common units, (iii) our general partner distributed its common units in the Partnership (the “Transferred GP Units”) to TLP Acquisition Holdings, LLC, a Delaware limited liability company (“TLP Holdings”), and TLP Holdings contributed the Transferred GP Units to TLP Finance, (iv) the Partnership converted into the Company (a Delaware limited liability company) pursuant to Section 17-219 of the Delaware Limited Partnership Act and changed its name to “TransMontaigne Partners LLC”, and all of our common units owned by TLP Finance were converted into limited liability company interests, (v) the non-economic interest in the Company owned by our general partner was automatically cancelled and ceased to exist and our general partner merged with a total of 64 storage tanks with approximately 5.4 million barrels of storage capacity. The facilities have extensive connectivity to domestic and international refined product and crude oil markets through significant marine, pipeline, truck and rail capabilities. The facilities are supported by multi-year, fee-based agreements with contract terms of up to 5 years. The acquisition will be financedinto the Company with the proceeds ofCompany surviving, and (vi) the Company became 100% owned by TLP Finance (the transactions described in the foregoing clauses (i) through (vi), collectively with the Merger, the “Take-Private Transaction”).
As a common unit offering and cash available from other sources. The closingresult of the acquisitionTake-Private Transaction, our common units ceased to be publicly traded and our common units are no longer listed on the New York Stock Exchange. In connection with the Take-Private Transaction, the Company prepared and filed a post-effective amendment to its Form S-3 registration statement in effect to deregister all securities of the Partnership that had been registered for issuance and remained unsold as of the effectiveness of the Take-Private Transaction. Our currently outstanding 6.125% senior unsecured notes due in 2026 remain outstanding, and the Company is expectedvoluntarily filing with the Securities and Exchange Commission pursuant to occurthe covenants contained in those notes.
Further, as a result of the Take-Private Transaction, effective June 1, 2019, TLP Finance contributed all of the issued and outstanding equity of its wholly-owned subsidiary, TLP Management Services LLC (“TMS,” and such interest, the “TMS Interest”) to the Company, and the Company immediately contributed the TMS Interest to its 100% owned operating company subsidiary, TransMontaigne Operating Company L.P. (the “TMS Contribution”). Prior to the TMS Contribution, we had no employees and all of our management and operational activities were provided by TMS. Further, TMS provided all payroll programs and maintained all employee benefit programs on or about January 1, 2018, subjectbehalf of our Company with respect to customary closing conditions.applicable TMS employees (as well as on behalf of certain other Arclight affiliates). As a result of the TMS Contribution, we have assumed the employees and management and operational activities previously provided by TMS. The TMS Contribution has been recorded at carryover basis as a reorganization of entities under common control. As such, prior periods include the assets, liabilities, and results of operations of TMS for all periods presented.
As a result of the TMS Contribution, the omnibus agreement in place in various forms since the inception of the Partnership, and immediately prior to the TMS Contribution between TMS and us, which, among other things, governed the provision of management and operational services provided for us by TMS, is no longer relevant and was terminated.
Our obligationFurther, in connection with the TMS Contribution, we entered into the Consent and Third Amendment to consummateThird Amended and Restated Senior Secured Credit Facility (the “Third Amendment”), which amends the West Coast Facilities Acquisition is subjectThird Amended and Restated Senior Secured Credit Facility (“revolving credit facility”), dated as of March 13, 2017, among the Borrower, Wells Fargo Bank, National Association, as administrative agent, the financial institutions party thereto as lenders and the other parties thereto. The Third Amendment amends the revolving credit facility primarily to certain conditions, including, among others, (i)reflect the expiration orTMS Contribution and the resulting termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) the absence of any order or legal restraint prohibiting the consummation of the West Coast Acquisition, (iii) delivery of certificates and certain ancillary transaction agreements (as described further below), (iv) the absence of a material adverse effect (as defined in the Purchase Agreement) and (v) receipt of certain governmental authorizations and third party consents.omnibus agreement.
Eighth consecutive increase in quarterly distribution.On October 13, 2017, we announced a quarterly distribution of $0.755 per unit for the three months ended September 30, 2017. This $0.015 increase over the previous quarter reflects the eighth consecutive increase in our distribution and represents annual growth of 7.9% over the third quarter of last year. This distribution was paid on October 31, 2017 to unitholders of record on October 23, 2017.
Commercial activity.On September 12, 2017 we entered into a right of first Offer Agreement (the “Olympic ROFO Agreement”) with Pike West Coast Holdings, LLC, or Pike, a subsidiary of ArcLight. Pike owns 100% of the outstanding membership interests of SeaPort Pipeline Holdings, LLC, or SPH. Previously, on September 1, 2017, SPH and ARCO Midcon LLC, an affiliate of BP Pipelines (North America) Inc., or BP, entered into an agreement whereby SPH purchased a 30% interest in Olympic Pipe Line Company LLC from BP. The Olympic Pipeline is a regulated interstate refined products pipeline system that spans approximately 400 miles across the states of Washington and Oregon. Pursuant to the Olympic ROFO Agreement, and in exchange for $100 and other good and valuable consideration, Pike granted us a right of first offer to acquire the SPH membership interests held by Pike. In the event that Pike intends to sell, assign, transfer or convey, by merger, consolidation or otherwise, all or any portion of the SPH membership interests to any third party, then Pike shall give written notice thereof to us. For a period of 30 days after delivery of such notice to us, we shall have the right, but not the obligation, to submit a written offer to purchase the subject SPH membership interests. In the event that Pike elects to accept our purchase offer, then Pike shall be bound to transfer to us, and we shall be bound to purchase from Pike, the subject SPH membership interests on the terms and conditions set forth in our offer notice, with such modifications as may be mutually agreed upon by us and Pike. In the event that either (i) an offer is made and Pike rejects such offer or (ii) no offer is made by us within the 30-day period, then for a 120-day period after the date on which Pike rejects our offer or the first date after the last day on which we were permitted to make an offer, as applicable, Pike may solicit an offer to purchase the subject SPH membership interests from one or more third parties as Pike may determine in its discretion, subject to the terms and conditions in the Olympic ROFO Agreement.
Our rights under the Olympic ROFO Agreement shall expire on September 3, 2021. In addition, Pike shall have the right, but not the obligation, to terminate the Olympic ROFO Agreement upon written notice to us at any time after we cease to be controlled by ArcLight.
On August 4, 2017 we entered into a right of first offer agreement with Pike. Pike owns 100% of the outstanding membership interests in SeaPort Midstream Holdings, LLC, or SMH, and SMH owns an equity interest in SeaPort Midstream Partners, LLC, or SMP. SMH previously signed definitive agreements with BP West Coast Products LLC as
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a result of which they agreed to form SMP, a joint venture between SMH and BP West Coast Products LLC across refined product logistics infrastructure assets in the US Pacific Northwest; including as of the date hereof, the acquisition of two refined product terminals in Seattle, Washington and Portland, Oregon. The transaction closed on November 1, 2017. TLP Management Services, LLC an ArcLight subsidiary, will operate the terminals under a multi-year operating agreement.
Pursuant to the rightExpansion of first offer agreement and in exchange for $100 and other good and valuable consideration, Pike granted us a right of first offer to acquire the SMH membership interests held by Pike, subject to the closing of the joint venture transaction between SMH and BP West Coast Products LLC. In the event that Pike intends to sell, assign, transfer or convey, by merger, consolidation or otherwise, all or any portion of the SMH membership interests to any third party, then Pike shall give written notice thereof to us. For a period of 30 days after delivery of such notice to us, we shall have the right, but not the obligation, to submit a written offer to purchase the subject SMH membership interests. In the event that Pike elects to accept our purchase offer, then Pike shall be bound to transfer to us, and we shall be bound to purchase from Pike, the subject SMH membership interests on the terms and conditions set forth in our offer notice, with such modifications as may be mutually agreed upon by us and Pike. In the event that either (i) an offer is made and Pike rejects such offer or (ii) no offer is made by us within the 30-day period, then for a 120-day period after the date on which Pike rejects our offer or the first date after the last day on which we were permitted to make an offer, as applicable, Pike may solicit an offer to purchase the subject SMH membership interests from one or more third parties as Pike may determine in its discretion, subject to the terms and conditions in the right of first offer agreement.Assets
The right of first offer agreement will automatically terminate without action by either party if the SMP joint venture transaction is terminated in accordance with its terms prior to closing. Our rights under the right of first offer agreement shall expire on the fourth anniversary of the closing of the SMP joint venture transaction. In addition, Pike shall have the right, but not the obligation, to terminate the right of first offer agreement upon written notice to us at any time after we cease to be controlled by ArcLight.
Expansion of the Collins bulk storage terminal.our Brownsville operations. We previously entered intoOur Brownsville expansion project, which is underpinned by new long-term terminaling services agreements, with various customers for approximately 2.0 million barrels of new tank capacity at our Collins, Mississippi bulk storage terminal. The revenue associated with these agreements came on-line upon completion ofincludes the construction of the new tank capacity. We placed approximately 2.0 million630,000 barrels of new tankadditional liquids storage capacity and the conversion of our Diamondback pipeline to transport diesel and gasoline to the U.S./Mexico border. The Diamondback pipeline is comprised of an 8” pipeline that previously transported propane approximately 16 miles from our Brownsville facilities to the U.S./Mexico border, as well as a 6” pipeline, which runs parallel to the 8” pipeline, that has been idle and can be used to transport additional refined products. The first tanks of the additional liquids storage capacity were placed into commercial service in various stages beginning induring the fourthfirst quarter of 2016 through2019. We expect to recommission the second quarterDiamondback pipeline and resume operations on both the 8” pipeline and the previously idle 6” pipeline by the end of 2017.2019, with the remaining additional liquids storage capacity being placed into commercial service at the same time. The anticipated aggregate cost of the terminal expansion and pipeline recommissioning is estimated to be approximately 2.0 million barrels of new tank capacity is approximately $75$55 million. Construction of the new tank capacity commenced in the first quarter of 2016, and through the end of the third quarter 2017, we have spent a total of approximately $62 million on the project. While the new tank capacity has been placed into service and is generating revenue, completion of certain items associated with the new tank capacity remains and will be completed between now and the end of the first quarter of 2018.
Expansion of our Collins terminal.Our Collins/PurvisCollins, Mississippi terminal complex is strategically located for the bulk storage market and is the only independent terminal capable of receiving from, delivering to, and transferring refined petroleum products between the Colonial and Plantation pipeline systems. Our facility has current activeDuring the first quarter of 2019 we completed construction of approximately 870,000 barrels of new storage capacity of approximately 5.4 million barrels, and we previously obtained an air permit for an additional 5.0 million barrels of capacity for future construction at our Collins terminal.terminal, which is supported by a new long-term, fee-based terminaling services agreement with a third party customer. To facilitate our further expansion of tankage at our Collins terminal, we also entered into an agreement with Colonial Pipeline Company for significant improvements to the Colonial Pipeline receipt and delivery manifolds and our related receipt and delivery facilities. The improvements are expected to come online in the second half of 2019. The improvements will result in significant increased flexibility for our Collins terminal customers including the simultaneous receipt and delivery of gasoline from and to Colonial’s Line 1 at full line rates including the ability to receive and deliver segregated batches at these rates; a dedicated and segregated line for the receipt and delivery of distillates from and to Colonial’s Line 2; and a dedicated and segregated line for the receipt and delivery of jet fuel from and to Colonial’s Line 2. The anticipated cost of the approximately 870,000 barrels of new storage capacity and our share of the improvements to the pipeline connections is approximately $60 million. We are currently in active discussions with several other existing and prospective customers regarding this potentialadditional future capacity.capacity at our Collins terminal.
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our West Coast terminals. During the first quarter of 2019 and pursuant to a new long-term terminaling services agreement, we completed the construction of an additional 125,000 barrels of storage capacity at our Richmond West Coast terminal. The cost of constructing this new capacity was approximately $8 million. We are also pursuing other high-return investment opportunities similar to this at these terminals.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
A summary of the significant accounting policies that we have adopted and followed in the preparation of our consolidated financial statements is detailed in ourNote 1 of Notes to consolidated financial statements as of and for the yearthree and six months ended December 31, 2016, included in our Annual Report on Form 10‑K, filed on March 14, 2017.June 30, 2019. Certain of these accounting policies require the use of estimates. The following estimates, in management’s opinion, are subjective in nature, require the exercise of judgment, and involve complex analyses: useful lives of our plant and equipment and accrued environmental obligations. These estimates are based on our knowledge and understanding of current conditions and actions we may take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequent changes in these estimates may have a significant impact on our financial condition and results of operations (see Note 1operations.
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RESULTS OF OPERATIONS—THREE MONTHS ENDED SEPTEMBERJUNE 30, 20172019 AND 2016
2018
The following discussion and analysis of the results of operations and financial condition should be read in conjunction with the accompanying unaudited consolidated financial statements.
ANALYSIS OF REVENUE
Total revenue. We derive revenue from our terminal and pipeline transportation operations by charging fees for providing integrated terminaling, transportation and related services. Our total revenue by category was as follows (in thousands):
Total Revenue by Category
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|
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|
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| Three months ended September 30, |
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| Three months ended June 30, | ||||||||
|
|
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 | ||||
Terminaling services fees |
|
| $ | 36,062 |
| $ | 31,292 |
|
|
| $ | 59,564 |
| $ | 52,378 |
Pipeline transportation fees |
|
|
| 1,091 |
|
| 1,656 |
|
|
|
| 853 |
|
| 794 |
Management fees and reimbursed costs |
|
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| 2,378 |
|
| 2,340 |
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Other |
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| 5,918 |
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| 5,350 |
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Management fees |
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| 4,552 |
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| 2,976 | ||||||||
Revenue |
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| $ | 45,449 |
| $ | 40,638 |
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| $ | 64,969 |
| $ | 56,148 |
See discussion below for a detailed analysis of terminaling services fees, pipeline transportation fees and management fees and reimbursed costs, and other revenue included in the table above.
We operate our business and report our results of operations in fiveseven principal business segments: (i) Gulf Coast terminals, (ii) Midwest terminals, and pipeline system, (iii) Brownsville terminals, (iv) River terminals, and (v) Southeast terminals.terminals, (vi) West Coast terminals and (vii) Central services. Our Central services segment primarily represents the costs of employees performing operating oversight functions, engineering, health, safety and environmental services to our terminals and other terminals, including affiliate terminals, we manage or operate, and reimbursement fees received from the other terminals, including affiliate terminals, we manage or operate. The aggregate revenue of each of our business segments was as follows (in thousands):
Total Revenue by Business Segment
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| Three months ended September 30, |
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| Three months ended June 30, | ||||||||
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| 2017 |
| 2016 |
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| 2019 |
| 2018 | ||||
Gulf Coast terminals |
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| $ | 15,337 |
| $ | 14,798 |
|
| $ | 16,983 |
| $ | 16,551 |
Midwest terminals and pipeline system |
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|
| 2,315 |
|
| 2,840 |
| ||||||
Midwest terminals |
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| 3,204 |
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| 2,838 | ||||||||
Brownsville terminals |
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| 4,891 |
|
| 5,538 |
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|
| 4,405 |
|
| 4,230 |
River terminals |
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| 2,705 |
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| 2,812 |
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| 2,392 |
|
| 2,589 |
Southeast terminals |
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| 20,201 |
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| 14,650 |
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| 22,009 |
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| 19,704 |
West Coast terminals |
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| 13,133 |
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| 9,432 | ||||||||
Central services |
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| 2,843 |
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| 804 | ||||||||
Revenue |
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| $ | 45,449 |
| $ | 40,638 |
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| $ | 64,969 |
| $ | 56,148 |
Total revenue by business segment is presented and further analyzed below by category of revenue.
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Terminaling services fees. Pursuant to terminaling services agreements with our customers, which range from one month to approximately ten years in duration, we generate fees by distributing and storing products for our customers. Terminaling services fees include throughput fees based on the volume of product distributed from the facility, injection fees based on the volume of product injected with additive compounds and storage fees based on a rate per barrel of storage capacity per month. The terminaling services fees by business segments were as follows (in thousands):
Terminaling Services Fees by Business Segment
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| Three months ended September 30, |
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| 2017 |
| 2016 |
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Gulf Coast terminals |
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| $ | 12,190 |
| $ | 11,259 |
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Midwest terminals and pipeline system |
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| 1,772 |
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| 2,207 |
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Brownsville terminals |
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| 1,923 |
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| 1,948 |
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River terminals |
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| 2,550 |
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| 2,591 |
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Southeast terminals |
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| 17,627 |
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| 13,287 |
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Terminaling services fees |
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| $ | 36,062 |
| $ | 31,292 |
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The increase in terminaling services fees at our Southeast terminals includes an increase of approximately $4.1 million resulting from us entering into long-term agreements with third party customers for approximately 2.0 million barrels of new tank capacity at our Collins, Mississippi bulk storage terminal that was placed into service in various stages beginning in the fourth quarter of 2016 through the second quarter of 2017.
Included in terminaling services fees for the three months ended September 30, 2017 and 2016 are fees charged to affiliates of approximately $0.5 million and $0.1 million, respectively.
Our terminaling services agreements are structured as either throughput agreements or storage agreements. Most of ourOur throughput agreements contain provisions that require our customers to throughput amake minimum payments, which are based on contractually established minimum volume of throughput of the customer’s product at our facilities over a stipulated period of time, which results intime. Due to this minimum payment arrangement, we recognize a minimumfixed amount of revenue.revenue from the customer over a certain period of time, even if the customer throughputs less than the minimum volume of product during that period. In addition, if a customer throughputs a volume of product exceeding the minimum volume, we would recognize additional revenue on this incremental volume. Our storage agreements require our customers to make minimum payments based on the volume of storage capacity made available to the customer under the agreement, which results in a minimumfixed amount of recognized revenue.
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We refer to these minimum amountsthe fixed amount of revenue recognized pursuant to our terminaling services agreements as being “firm commitments.” Revenue recognized in excess of firm commitments and revenue recognized based solely on the volume of product distributed or injected are referred to as “variable.“ancillary.” In addition, “ancillary” revenue also includes fees received from ancillary services including heating and mixing of stored products, product transfer, railcar handling, butane blending, proceeds from the sale of product gains, wharfage and vapor recovery.
The terminaling services fees by business segments were as follows (in thousands):
Terminaling Services Fees by Business Segment
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| Three months ended June 30, | ||||
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| 2019 |
| 2018 | ||
Gulf Coast terminals |
| $ | 16,978 |
| $ | 16,465 |
Midwest terminals |
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| 2,751 |
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| 2,405 |
Brownsville terminals |
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| 2,566 |
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| 1,977 |
River terminals |
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| 2,392 |
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| 2,589 |
Southeast terminals |
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| 21,752 |
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| 19,510 |
West Coast terminals |
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| 13,125 |
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| 9,432 |
Central services |
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| — |
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| — |
Terminaling services fees |
| $ | 59,564 |
| $ | 52,378 |
The increase in terminaling services fees at our Brownsville terminals is primarily a result of placing into service new tank capacity. The increase in terminaling services fees at our Southeast terminals is primarily a result of placing into service new tank capacity at our Collins, Mississippi terminal. The increase in terminaling services fees at our West Coast terminals is primarily a result of contracting available capacity to third-party customers and placing into service new tank capacity.
Included in terminaling services fees for the three months ended June 30, 2019 and 2018 are fees charged to affiliates of approximately $2.9 million and $2.7 million, respectively.
The “firm commitments” and “variable”“ancillary” revenue included in terminaling services fees were as follows (in thousands):
Firm Commitments and VariableAncillary Revenue
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| Three months ended September 30, |
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| Three months ended June 30, | ||||||||
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| 2017 |
| 2016 |
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| 2019 |
| 2018 | ||||
Firm commitments |
| $ | 33,857 |
| $ | 29,274 |
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| $ | 48,446 |
| $ | 42,698 |
Variable |
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| 2,205 |
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| 2,018 |
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Ancillary |
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| 11,118 |
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| 9,680 | |||||||
Terminaling services fees |
| $ | 36,062 |
| $ | 31,292 |
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| $ | 59,564 |
| $ | 52,378 |
The remaining terms on the terminaling services agreements that generated “firm commitments” for the three months ended SeptemberJune 30, 20172019 are as follows (in thousands):
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Less than 1 year remaining |
| $ | 4,371 |
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| $ | 11,798 |
| 24% |
1 year or more, but less than 3 years remaining |
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| 6,292 |
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|
| 17,747 |
| 37% |
3 years or more, but less than 5 years remaining |
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| 14,533 |
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| 8,872 |
| 18% |
5 years or more remaining |
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| 8,661 |
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| 10,029 |
| 21% |
Total firm commitments for the three months ended September 30, 2017 |
| $ | 33,857 |
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Total firm commitments for the three months ended June 30, 2019 |
| $ | 48,446 |
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_____________________________
(1) We have a terminaling services agreement with a third party relating to our Southeast terminals that will continue in effect through February 1, 2023, after which it shall automatically continue unless and until the third party
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provides at least 24 months’ prior notice of its intent to terminate the agreement. Effective at any time from and after July 31, 2040, we have the right to terminate the agreement by providing at least 24 months’ prior notice of our intent to terminate the agreement. We do not believe the third party will terminate the agreement prior to July 31, 2040; therefore, we have presented the firm commitments related to this terminaling services agreement in the 5 years or more remaining category in the table above.
Pipeline transportation fees. We earned pipeline transportation fees at our Diamondback pipeline under a capacity reservation agreement. Revenue associated with the capacity reservation agreement is recognized ratably over the respective term, regardless of whether the capacity is actually utilized. Once our Brownsville terminal expansion efforts are complete, including the conversion of our Diamondback pipeline to transport diesel and gasoline, we then expect to earn pipeline transportation fees at our Diamondback and Ella‑Brownsville pipelinespipeline based on the volume of product transported and the distance from the origin pointsubject to the delivery point. In Missouri and Arkansas we own and operate the Razorback pipeline and terminals in Mount Vernon, Missouri, at the origin of the pipeline and in Rogers, Arkansas, at the terminus of the pipeline. We refer to these terminals and the related pipeline as the Razorback system.minimum volume commitments. We earn pipeline transportation fees at our Razorback pipeline based on an allocation of the aggregate fees charged under the capacity agreement with our customer who has contracted for 100% of our Razorback system. We own the Razorback and Diamondback pipelines, and we lease the Ella‑Brownsville pipeline from a third party. The Federal Energy Regulatory Commission regulates the tariff on our pipelines. The pipeline transportation fees by business segments were as follows (in thousands):
Pipeline Transportation Fees by Business Segment
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| Three months ended September 30, |
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| Three months ended June 30, | ||||||||
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| 2017 |
| 2016 |
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| 2019 |
| 2018 | ||||
Gulf Coast terminals |
| $ | — |
| $ | — |
|
| $ | — |
| $ | — |
Midwest terminals and pipeline system |
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| 433 |
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| 433 |
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Midwest terminals |
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| 453 |
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| 433 | |||||||
Brownsville terminals |
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| 658 |
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| 1,223 |
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| 400 |
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| 361 |
River terminals |
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| — |
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| — |
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| — |
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| — |
Southeast terminals |
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| — |
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| — |
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| — |
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| — |
West Coast terminals |
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| — |
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| — | |||||||
Central services |
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| — |
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| — | |||||||
Pipeline transportation fees |
| $ | 1,091 |
| $ | 1,656 |
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| $ | 853 |
| $ | 794 |
Management fees and reimbursed costs.fees. We manage and operate for a major oil company certain tank capacity at our Port Everglades (South)South terminal for a major oil company and receive a reimbursement of theirits proportionate share of operating and maintenance costs. We manage and operate for an affiliate of Mexico’s state‑owned petroleum company a bi‑directional products pipeline connected to our Brownsville, Texas terminal facilitythe Frontera joint venture and receive a management fee and reimbursement of costs. We manage and operate the Frontera terminal facility located in Brownsville, Texas for a management fee based on our costs incurred. Frontera isWe manage and operate two terminals for SeaPort Midstream Partners, LLC in Seattle, Washington and Portland, Oregon and we manage and operate another terminal for SeaPort Sound in Tacoma, Washington and, in each case, receive a management fee based on our costs incurred plus an unconsolidated affiliate forannual fee. We also manage additional terminal facilities that are owned by affiliates of ArcLight, including a terminal in Baltimore, Maryland (the “Baltimore Terminal”)and Lucknow-Highspire Terminals, LLC, (“LHT”), which we have a 50% ownership interest.operates terminals throughout Pennsylvania encompassing approximately 9.8 million barrels of storage capacity. We manage and operate rail sites at certain Southeast terminals on behalf of a major oil company and receive reimbursement for operating and maintenance costs. We lease land under operating leases as the lessor or sublessor with third parties and affiliates. We also managed and operated for an affiliate of PEMEX, Mexico’s state-owned petroleum company, a products pipeline connected to our Brownsville terminal facility and received a management fee through August 23, 2018.
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The management fees and reimbursed costs by business segments were as follows (in thousands):
Management Fees and Reimbursed Costs by Business Segment
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| Three months ended September 30, |
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| Three months ended June 30, | ||||||||
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| 2017 |
| 2016 |
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| 2019 |
| 2018 | ||||
Gulf Coast terminals |
| $ | 261 |
| $ | 261 |
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| $ | 5 |
| $ | 86 |
Midwest terminals and pipeline system |
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| — |
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| — |
| ||||||
Midwest terminals |
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| — |
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| — | |||||||
Brownsville terminals |
|
| 1,934 |
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| 1,835 |
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| 1,439 |
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| 1,892 |
River terminals |
|
| — |
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| — |
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|
| — |
|
| — |
Southeast terminals |
|
| 183 |
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| 244 |
|
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| 257 |
|
| 194 |
Management fees and reimbursed costs |
| $ | 2,378 |
| $ | 2,340 |
| ||||||
West Coast terminals |
|
| 8 |
|
| — | |||||||
Central services |
|
| 2,843 |
|
| 804 | |||||||
Management fees |
| $ | 4,552 |
| $ | 2,976 |
The increase in Central services management fees is a result of operating and managing additional terminal facilities that are owned by affiliates of ArcLight including SeaPort Sound, Baltimore Terminal and LHT. We began to operate SeaPort Sound and the Baltimore Terminal in November 2018, and we began to manage LHT starting January 1, 2019.
Included in management fees and reimbursed costs for the three months ended SeptemberJune 30, 20172019 and 20162018 are fees charged to affiliates of approximately $1.3$4.2 million and $1.2$2.1 million, respectively.
33
Other revenue. We provide ancillary services including heating and mixing of stored products, product transfer, railcar handling, butane blending, wharfage and vapor recovery. Pursuant to terminaling services agreements with certain throughput customers, we are entitled to the volume of product gained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities. Consistent with recognized industry practices, measurement differentials occur as the result of the inherent variances in measurement devices and methodology. We recognize as revenue the net proceeds from the sale of the product gained. Other revenue is composed of the following (in thousands):
Principal Components of Other Revenue
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, |
|
| ||||
|
| 2017 |
| 2016 |
|
| ||
Product gains |
| $ | 2,369 |
| $ | 1,586 |
|
|
Steam heating fees |
|
| 719 |
|
| 583 |
|
|
Product transfer services |
|
| 207 |
|
| 336 |
|
|
Butane blending fees |
|
| 1,333 |
|
| 583 |
|
|
Railcar handling |
|
| 77 |
|
| 69 |
|
|
Other |
|
| 1,213 |
|
| 2,193 |
|
|
Other revenue |
| $ | 5,918 |
| $ | 5,350 |
|
|
For the three months ended September 30, 2017 and 2016, we sold approximately 41,200 and 26,950 barrels, respectively, of product gained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities at average prices of approximately $73 and $59 per barrel, respectively. Pursuant to our terminaling services agreement related to the Southeast terminals, we agreed to rebate our customer 50% of the proceeds we receive annually in excess of $4.2 million from the sale of product gains at our Southeast terminals. For the three months ended September 30, 2017 and 2016, we have accrued a liability due to our customer of approximately $0.6 million and $nil, respectively, representing our rebate liability.
For the three months ended September 30, 2016 other, included in other revenue, includes an approximately $0.9 million one-time payment to us at our Gulf Coast terminals related to property damage caused by a customer.
Included in other revenue for the three months ended September 30, 2017 and 2016 are amounts charged to affiliates of approximately $0.1 million and $nil, respectively.
The other revenue by business segments were as follows (in thousands):
Other Revenue by Business Segment
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, |
|
| ||||
|
| 2017 |
| 2016 |
|
| ||
Gulf Coast terminals |
| $ | 2,886 |
| $ | 3,278 |
|
|
Midwest terminals and pipeline system |
|
| 110 |
|
| 200 |
|
|
Brownsville terminals |
|
| 376 |
|
| 532 |
|
|
River terminals |
|
| 155 |
|
| 221 |
|
|
Southeast terminals |
|
| 2,391 |
|
| 1,119 |
|
|
Other revenue |
| $ | 5,918 |
| $ | 5,350 |
|
|
34
ANALYSIS OF COSTS AND EXPENSES
The direct operating costs and expenses of our operations include the directly related wages and employee benefits, utilities, communications, repairs and maintenance, rent, property taxes, vehicle expenses, environmental compliance costs, materials and supplies. Consistent with historical trends across our terminaling and transportation facilities, we anticipate an increase in repairs and maintenance expenses in the later months of the yearcan vary from period to period based on project maintenance schedules and other factors such as the weather becomes more conducive to these types of projects.weather. The direct operating costs and expenses of our operations were as follows (in thousands):
Direct Operating Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Three months ended September 30, |
|
| Three months ended June 30, |
| |||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| |||||
Wages and employee benefits |
| $ | 6,163 |
| $ | 6,197 |
|
| $ | 12,755 |
| $ | 10,515 |
| |
Utilities and communication charges |
|
| 2,059 |
|
| 1,870 |
|
|
| 2,550 |
|
| 2,123 |
| |
Repairs and maintenance |
|
| 3,409 |
|
| 3,005 |
|
|
| 3,493 |
|
| 2,205 |
| |
Office, rentals and property taxes |
|
| 2,531 |
|
| 2,375 |
|
|
| 3,627 |
|
| 3,407 |
| |
Vehicles and fuel costs |
|
| 201 |
|
| 218 |
|
|
| 263 |
|
| 253 |
| |
Environmental compliance costs |
|
| 855 |
|
| 1,712 |
|
|
| 1,076 |
|
| 923 |
| |
Other |
|
| 2,501 |
|
| 1,671 |
|
|
| 2,700 |
|
| 4,136 |
| |
Direct operating costs and expenses |
| $ | 17,719 |
| $ | 17,048 |
| ||||||||
Operating costs and expenses |
| $ | 26,464 |
| $ | 23,562 |
|
37
The direct operating costs and expenses of our business segments were as follows (in thousands):
Direct Operating Costs and Expenses by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Three months ended September 30, |
|
| Three months ended June 30, | |||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 | |||||
Gulf Coast terminals |
| $ | 5,805 |
| $ | 6,013 |
|
| $ | 5,458 |
| $ | 5,413 | |
Midwest terminals and pipeline system |
|
| 718 |
|
| 858 |
| |||||||
Midwest terminals |
|
| 821 |
|
| 743 | ||||||||
Brownsville terminals |
|
| 2,746 |
|
| 2,573 |
|
|
| 2,304 |
|
| 2,135 | |
River terminals |
|
| 1,710 |
|
| 1,753 |
|
|
| 1,523 |
|
| 1,805 | |
Southeast terminals |
|
| 6,740 |
|
| 5,851 |
|
|
| 5,968 |
|
| 5,714 | |
Direct operating costs and expenses |
| $ | 17,719 |
| $ | 17,048 |
| |||||||
West Coast terminals |
|
| 4,534 |
|
| 3,465 | ||||||||
Central services |
|
| 5,856 |
|
| 4,287 | ||||||||
Operating costs and expenses |
| $ | 26,464 |
| $ | 23,562 |
The increase in Central services operating costs and expenses is a result of operating additional terminal facilities that are owned by affiliates of ArcLight including SeaPort Sound and the Baltimore Terminal. We began to operate these terminals in November 2018.
General and administrative expenses include an administrative fee paid tocover the owner of TransMontaigne GP under the omnibus agreement for indirect corporate overhead to cover costs of centralized corporate functions such as legal, accounting, treasury, insurance administration and claims processing, health, safety and environmental, information technology, human resources, credit, payroll, taxes engineering and other corporate services. The administrative fee paid to the owner of TransMontaigne GP was approximately $3.4 million and $2.8 million for the three months ended September 30, 2017 and 2016, respectively. General and administrative expenses also include direct general and administrative expenses for third party accounting costs associated with annual and quarterly reports and tax return and Schedule K‑1 preparation and distribution, legal fees and independent directorlegal fees. The direct general and administrative expenses were approximately $1.8$5.2 million and $0.8$5.3 million for the three months ended SeptemberJune 30, 20172019 and 2016,2018, respectively.
Insurance expenses include charges for insurance premiums to cover costs of insuring activities such as property, casualty, pollution, automobile, directors’ and officers’ liability, and other insurable risks. Prior to October 31, 2016, we paid the owner of TransMontaigne GP for insurance policies purchased on our behalf pursuant to the omnibus agreement to cover our facilities and operations. For the three months ended SeptemberJune 30, 20172019 and 2016, the insurance expense paid to the owner of TransMontaigne GP was approximately $nil and $1.0 million, respectively. On October 31, 2016, we contracted directly with insurance carriers for the majority of our insurance requirements. For the three months
35
ended September 30, 2017 and 2016,2018, the expense associated with insurance contracted directly by us was approximately $1.0$1.2 million and $nil,$1.3 million, respectively.
Equity-basedDeferred compensation expense includes expense associated with our partnership reimbursing an affiliate of TransMontaigne GP for awards granted by them to the independent directors of our general partner and to certain key officers and employees who provide service to us that vest over future service periods. Weperiods and, prior to the Take-Private Transaction, grants to the independent directors of our general partner under our long-term incentive plan (which was terminated in connection with the Take-Private Transaction). Prior to the Take-Private Transaction, we had the intent and ability to settle the deferred compensation awards in our common units, and accordingly, we accounted for the awards as an equity award; following the Take-Private Transaction, we have the intent and ability to settle our reimbursement for the bonus awards by issuing additional common units, and accordingly, we account for the bonus awards as an equity award.in cash. The expenses associated with these reimbursementsdeferred compensation awards were approximately $0.5$0.3 million and $0.3$0.4 million for the three months ended SeptemberJune 30, 20172019 and 2016,2018, respectively.
For the three months ended SeptemberJune 30, 20172019 and 2016,2018, depreciation and amortization expense was approximately $8.9$13.1 million and $8.2$13.2 million, respectively.
For the three months ended SeptemberJune 30, 20172019 and 2016,2018, interest expense was approximately $2.7$9.7 million and $1.5$8.3 million, respectively. The increase in interest expense is primarily attributable to unrealized gainsfinancing our growth capital projects with additional debt and increases in the fair valueLIBOR based interest rates.
38
ANALYSIS OF INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Our investments in unconsolidated affiliates include a 42.5% Class A ownership interest in BOSTCO and a 50% ownership interest in Frontera. BOSTCO is a terminal facility located on the Houston Ship Channel that encompasses approximately 7.1 million barrels of distillate, residual and other black oil product storage. Class A and Class B ownership interests share in cash distributions on a 96.5% and 3.5% basis, respectively. Class B ownership interests do not have voting rights and are not required to make capital investments. Frontera is a terminal facility located in Brownsville, Texas that encompasses approximately 1.51.7 million barrels of light petroleum product storage, as well as related ancillary facilities.
Earnings from investments in unconsolidated affiliates werewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Three months ended September 30, |
|
| Three months ended June 30, | |||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 | |||||
BOSTCO |
| $ | 923 |
| $ | 1,885 |
|
| $ | 563 |
| $ | 1,848 | |
Frontera |
|
| 961 |
|
| 1,075 |
|
|
| 662 |
|
| 596 | |
Total earnings from investments in unconsolidated affiliates |
| $ | 1,884 |
| $ | 2,960 |
|
| $ | 1,225 |
| $ | 2,444 |
Additional capital investments in unconsolidated affiliates werewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Three months ended September 30, |
|
| Three months ended June 30, | |||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 | |||||
BOSTCO |
| $ | — |
| $ | — |
|
| $ | 1,076 |
| $ | — | |
Frontera |
|
| — |
|
| — |
|
|
| — |
|
| 114 | |
Additional capital investments in unconsolidated affiliates |
| $ | — |
| $ | — |
|
| $ | 1,076 |
| $ | 114 |
Cash distributions received from unconsolidated affiliates werewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Three months ended September 30, |
|
| Three months ended June 30, | |||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 | |||||
BOSTCO |
| $ | 3,074 |
| $ | 3,546 |
|
| $ | 2,289 |
| $ | 3,491 | |
Frontera |
|
| 1,127 |
|
| 911 |
|
|
| 813 |
|
| 1,330 | |
Cash distributions received from unconsolidated affiliates |
| $ | 4,201 |
| $ | 4,457 |
|
| $ | 3,102 |
| $ | 4,821 |
3639
RESULTS OF OPERATIONS—NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20172019 AND 20162018
The following discussion and analysis of the results of operations and financial condition should be read in conjunction with the accompanying unaudited consolidated financial statements.
ANALYSIS OF REVENUE
Total revenue. We derive revenue from our terminal and pipeline transportation operations by charging fees for providing integrated terminaling, transportation and related services. Our total revenue by category was as follows (in thousands):
Total Revenue by Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
|
|
| Six months ended June 30, |
| ||||||||
|
|
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 |
| ||||
Terminaling services fees |
|
| $ | 107,645 |
| $ | 93,478 |
|
|
| $ | 115,239 |
| $ | 105,569 |
|
Pipeline transportation fees |
|
|
| 4,603 |
|
| 4,990 |
|
|
|
| 1,702 |
|
| 1,663 |
|
Management fees and reimbursed costs |
|
|
| 6,830 |
|
| 6,560 |
| ||||||||
Other |
|
|
| 16,585 |
|
| 17,372 |
| ||||||||
Management fees |
|
|
| 9,296 |
|
| 6,321 |
| ||||||||
Revenue |
|
| $ | 135,663 |
| $ | 122,400 |
|
|
| $ | 126,237 |
| $ | 113,553 |
|
See discussion below for a detailed analysis of terminaling services fees, pipeline transportation fees and management fees and reimbursed costs, and other revenue included in the table above.
We operate our business and report our results of operations in fiveseven principal business segments: (i) Gulf Coast terminals, (ii) Midwest terminals, and pipeline system, (iii) Brownsville terminals, (iv) River terminals, and (v) Southeast terminals.terminals, (vi) West Coast terminals and (vii) Central services. Our Central services segment primarily represents the costs of employees performing operating oversight functions, engineering, health, safety and environmental services to our terminals and other terminals, including affiliate terminals, we manage or operate, and reimbursement fees received from the other terminals, including affiliate terminals, we manage or operate. The aggregate revenue of each of our business segments was as follows (in thousands):
Total Revenue by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
|
| Six months ended June 30, |
| ||||||||
|
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Gulf Coast terminals |
|
| $ | 47,423 |
| $ | 41,827 |
|
| $ | 33,158 |
| $ | 32,821 |
|
Midwest terminals and pipeline system |
|
|
| 8,049 |
|
| 8,423 |
| |||||||
Midwest terminals |
|
| 6,147 |
|
| 5,690 |
| ||||||||
Brownsville terminals |
|
|
| 16,047 |
|
| 19,776 |
|
|
| 8,757 |
|
| 8,836 |
|
River terminals |
|
|
| 8,115 |
|
| 9,612 |
|
|
| 4,754 |
|
| 5,343 |
|
Southeast terminals |
|
|
| 56,029 |
|
| 42,762 |
|
|
| 43,606 |
|
| 40,126 |
|
West Coast terminals |
|
| 24,126 |
|
| 18,972 |
| ||||||||
Central services |
|
| 5,689 |
|
| 1,765 |
| ||||||||
Revenue |
|
| $ | 135,663 |
| $ | 122,400 |
|
| $ | 126,237 |
| $ | 113,553 |
|
Total revenue by business segment is presented and further analyzed below by category of revenue.
Terminaling services fees. Pursuant to terminaling services agreements with our customers, which range from one month to approximately ten years in duration, we generate fees by distributing and storing products for our customers. Terminaling services fees include throughput fees based on the volume of product distributed from the facility, injection fees based on the volume of product injected with additive compounds and storage fees based on a rate per barrel of storage capacity per month. The terminaling services fees by business segments were as follows (in thousands):
Terminaling Services Fees by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, | ||||
|
|
|
| 2017 |
|
| 2016 |
|
Gulf Coast terminals |
|
| $ | 38,321 |
| $ | 33,958 |
|
Midwest terminals and pipeline system |
|
|
| 6,176 |
|
| 6,427 |
|
Brownsville terminals |
|
|
| 6,003 |
|
| 6,176 |
|
River terminals |
|
|
| 7,501 |
|
| 7,053 |
|
Southeast terminals |
|
|
| 49,644 |
|
| 39,864 |
|
Terminaling services fees |
|
| $ | 107,645 |
| $ | 93,478 |
|
37
The increase in terminaling services fees at our Gulf Coast terminals includes an increase of approximately $1.8 million resulting from us re-contracting our bunker fuel capacity at Port Manatee, vacant since May 31, 2014, to third party customers in June and July 2016.
The increase in terminaling services fees at our Southeast terminals includes an increase of approximately $9.3 million resulting from us entering into long-term agreements with third party customers for approximately 2.0 million barrels of new tank capacity at our Collins, Mississippi bulk storage terminal that was placed into service in various stages beginning in the fourth quarter of 2016 through the second quarter of 2017.
Included in terminaling services fees for the nine months ended September 30, 2017 and 2016 are fees charged to affiliates of approximately $1.1 million and $2.7 million, respectively.
Our terminaling services agreements are structured as either throughput agreements or storage agreements. Most of ourOur throughput agreements contain provisions that require our customers to throughput amake minimum payments, which are based on contractually established minimum volume of throughput of the customer’s product at our facilities over a stipulated period of time, which results intime. Due to this minimum payment arrangement, we recognize a minimumfixed amount of revenue.revenue from the customer over a certain period of time, even if the customer throughputs less than the minimum volume of product during that period. In addition, if a customer throughputs a volume of product exceeding the minimum volume, we would recognize additional revenue on this incremental volume. Our storage agreements require our customers to make minimum payments based on the volume of storage capacity made available to the customer under the agreement, which results in a minimumfixed amount of recognized revenue.
40
We refer to these minimum amountsthe fixed amount of revenue recognized pursuant to our terminaling services agreements as being “firm commitments.” Revenue recognized in excess of firm commitments and revenue recognized based solely on the volume of product distributed or injected are referred to as “variable.“ancillary.” In addition, “ancillary” revenue also includes fees received from ancillary services including heating and mixing of stored products, product transfer, railcar handling, butane blending, proceeds from the sale of product gains, wharfage and vapor recovery.
The terminaling services fees by business segments were as follows (in thousands):
Terminaling Services Fees by Business Segment
|
|
|
|
|
|
|
|
|
|
| Six months ended June 30, | ||||
|
|
| 2019 |
|
| 2018 |
|
Gulf Coast terminals |
| $ | 33,144 |
| $ | 32,638 |
|
Midwest terminals |
|
| 5,241 |
|
| 4,824 |
|
Brownsville terminals |
|
| 4,863 |
|
| 4,043 |
|
River terminals |
|
| 4,754 |
|
| 5,343 |
|
Southeast terminals |
|
| 43,128 |
|
| 39,749 |
|
West Coast terminals |
|
| 24,109 |
|
| 18,972 |
|
Central services |
|
| — |
|
| — |
|
Terminaling services fees |
| $ | 115,239 |
| $ | 105,569 |
|
The increase in terminaling services fees at our Brownsville terminals is primarily a result of placing into service new tank capacity. The increase in terminaling services fees at our Southeast terminals is primarily a result of placing into service new tank capacity at our Collins, Mississippi terminal. The increase in terminaling services fees at our West Coast terminals is primarily a result of contracting available capacity to third-party customers and placing into service new tank capacity.
Included in terminaling services fees for the six months ended June 30, 2019 and 2018 are fees charged to affiliates of approximately $5.9 million and $5.5 million, respectively.
The “firm commitments” and “variable”“ancillary” revenue included in terminaling services fees were as follows (in thousands):
Firm Commitments and VariableAncillary Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
|
| Six months ended June 30, |
| ||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Firm commitments |
| $ | 99,590 |
| $ | 86,134 |
|
| $ | 92,615 |
| $ | 84,831 |
|
Variable |
|
| 8,055 |
|
| 7,344 |
| |||||||
Ancillary |
|
| 22,624 |
|
| 20,738 |
| |||||||
Terminaling services fees |
| $ | 107,645 |
| $ | 93,478 |
|
| $ | 115,239 |
| $ | 105,569 |
|
The remaining terms on the terminaling services agreements that generated “firm commitments” for the ninesix months ended SeptemberJune 30, 20172019 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Less than 1 year remaining |
| $ | 14,058 |
|
| $ | 21,898 |
| 24% |
1 year or more, but less than 3 years remaining |
|
| 18,835 |
|
|
| 35,524 |
| 38% |
3 years or more, but less than 5 years remaining |
|
| 40,169 |
|
|
| 14,434 |
| 16% |
5 years or more remaining |
|
| 26,528 |
|
|
| 20,759 |
| 22% |
Total firm commitments for the nine months ended September 30, 2017 |
| $ | 99,590 |
| |||||
Total firm commitments for the six months ended June 30, 2019 |
| $ | 92,615 |
|
| ||||
|
|
|
|
|
|
_____________________________
(1) We have a terminaling services agreement with a third party relating to our Southeast terminals that will continue in effect through February 1, 2023, after which it shall automatically continue unless and until the third party
3841
provides at least 24 months’ prior notice of its intent to terminate the agreement. Effective at any time from and after July 31, 2040, we have the right to terminate the agreement by providing at least 24 months’ prior notice of our intent to terminate the agreement. We do not believe the third party will terminate the agreement prior to July 31, 2040; therefore, we have presented the firm commitments related to this terminaling services agreement in the 5 years or more remaining category in the table above.
Pipeline transportation fees. We earned pipeline transportation fees at our Diamondback pipeline under a capacity reservation agreement. Revenue associated with the capacity reservation agreement is recognized ratably over the respective term, regardless of whether the capacity is actually utilized. Once our Brownsville terminal expansion efforts are complete, including the conversion of our Diamondback pipeline to transport diesel and gasoline, we then expect to earn pipeline transportation fees at our Diamondback and Ella‑Brownsville pipelinespipeline based on the volume of product transported and the distance from the origin pointsubject to the delivery point.minimum volume commitments. We earn pipeline transportation fees at our Razorback pipeline based on an allocation of the aggregate fees charged under the capacity agreement with our customer who has contracted for 100% of our Razorback system. We own the Razorback and Diamondback pipelines, and we lease the Ella‑Brownsville pipeline from a third party. The Federal Energy Regulatory Commission regulates the tariff on our pipelines. The pipeline transportation fees by business segments were as follows (in thousands):
Pipeline Transportation Fees by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
|
| Six months ended June 30, |
| ||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Gulf Coast terminals |
| $ | — |
| $ | — |
|
| $ | — |
| $ | — |
|
Midwest terminals and pipeline system |
|
| 1,299 |
|
| 1,299 |
| |||||||
Midwest terminals |
|
| 906 |
|
| 866 |
| |||||||
Brownsville terminals |
|
| 3,304 |
|
| 3,691 |
|
|
| 796 |
|
| 797 |
|
River terminals |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Southeast terminals |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
West Coast terminals |
|
| — |
|
| — |
| |||||||
Central services |
|
| — |
|
| — |
| |||||||
Pipeline transportation fees |
| $ | 4,603 |
| $ | 4,990 |
|
| $ | 1,702 |
| $ | 1,663 |
|
Management fees and reimbursed costs.fees. We manage and operate for a major oil company certain tank capacity at our Port Everglades (South)South terminal for a major oil company and receive a reimbursement of theirits proportionate share of operating and maintenance costs. We manage and operate for an affiliate of Mexico’s state‑owned petroleum company a bi‑directional products pipeline connected to our Brownsville, Texas terminal facilitythe Frontera joint venture and receive a management fee and reimbursement of costs. We manage and operate the Frontera terminal facility located in Brownsville, Texas for a management fee based on our costs incurred. Frontera isWe manage and operate two terminals for SeaPort Midstream Partners, LLC in Seattle, Washington and Portland, Oregon and we manage and operate another terminal for SeaPort Sound in Tacoma, Washington and, in each case, receive a management fee based on our costs incurred plus an unconsolidated affiliate forannual fee. We also manage additional terminal facilities that are owned by affiliates of ArcLight, including the Baltimore Terminal and LHT, which we have a 50% ownership interest.operates terminals throughout Pennsylvania encompassing approximately 9.8 million barrels of storage capacity. We manage and operate rail sites at certain Southeast terminals on behalf of a major oil company and receive reimbursement for operating and maintenance costs. We lease land under operating leases as the lessor or sublessor with third parties and affiliates. We also managed and operated for an affiliate of PEMEX, Mexico’s state-owned petroleum company, a products pipeline connected to our Brownsville terminal facility and received a management fee through August 23, 2018.
42
The management fees and reimbursed costs by business segments were as follows (in thousands):
Management Fees and Reimbursed Costs by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
|
| Six months ended June 30, |
| ||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Gulf Coast terminals |
| $ | 807 |
| $ | 861 |
|
| $ | 14 |
| $ | 183 |
|
Midwest terminals and pipeline system |
|
| — |
|
| — |
| |||||||
Midwest terminals |
|
| — |
|
| — |
| |||||||
Brownsville terminals |
|
| 5,472 |
|
| 5,455 |
|
|
| 3,098 |
|
| 3,996 |
|
River terminals |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Southeast terminals |
|
| 551 |
|
| 244 |
|
|
| 478 |
|
| 377 |
|
Management fees and reimbursed costs |
| $ | 6,830 |
| $ | 6,560 |
| |||||||
West Coast terminals |
|
| 17 |
|
| — |
| |||||||
Central services |
|
| 5,689 |
|
| 1,765 |
| |||||||
Management fees |
| $ | 9,296 |
| $ | 6,321 |
|
The increase in Central services management fees is a result of operating and managing additional terminal facilities that are owned by affiliates of ArcLight including SeaPort Sound, Baltimore Terminal and LHT. We began to operate SeaPort Sound and the Baltimore Terminal in November 2018, and we began to manage LHT starting January 1, 2019.
Included in management fees and reimbursed costs for the ninesix months ended SeptemberJune 30, 20172019 and 20162018 are fees charged to affiliates of approximately $3.9$8.7 million and $3.8$4.6 million, respectively.
39
Other revenue. We provide ancillary services including heating and mixing of stored products, product transfer, railcar handling, butane blending, wharfage and vapor recovery. Pursuant to terminaling services agreements with certain throughput customers, we are entitled to the volume of product gained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities. Consistent with recognized industry practices, measurement differentials occur as the result of the inherent variances in measurement devices and methodology. We recognize as revenue the net proceeds from the sale of the product gained. Other revenue is composed of the following (in thousands):
Principal Components of Other Revenue
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
| ||||
|
| 2017 |
| 2016 |
| ||
Product gains |
| $ | 7,513 |
| $ | 4,173 |
|
Steam heating fees |
|
| 2,385 |
|
| 2,030 |
|
Product transfer services |
|
| 652 |
|
| 880 |
|
Butane blending fees |
|
| 2,037 |
|
| 940 |
|
Railcar handling |
|
| 218 |
|
| 229 |
|
Other |
|
| 3,780 |
|
| 9,120 |
|
Other revenue |
| $ | 16,585 |
| $ | 17,372 |
|
For the nine months ended September 30, 2017 and 2016, we sold approximately 120,340 and 77,650 barrels, respectively, of product gained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities at average prices of approximately $67 and $54 per barrel, respectively. Pursuant to our terminaling services agreement related to the Southeast terminals, we agreed to rebate our customer 50% of the proceeds we receive annually in excess of $4.2 million from the sale of product gains at our Southeast terminals. For the nine months ended September 30, 2017 and 2016, we have accrued a liability due to our customer of approximately $0.6 million and $nil, respectively, representing our rebate liability.
For the nine months ended September 30, 2016 other, included in other revenue, includes an approximately $1.9 million one-time payment to us at our Brownsville terminals related to the settlement of litigation with our LPG customer, an approximately $1.7 million one-time payment to us at our River terminals related to property damage caused by a customer and an approximately $0.9 million one-time payment to us at our Gulf Coast terminals related to property damage caused by a customer.
Included in other revenue for the nine months ended September 30, 2017 and 2016 are amounts charged to affiliates of approximately $0.2 million and $0.3 million, respectively.
The other revenue by business segments were as follows (in thousands):
Other Revenue by Business Segment
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
| ||||
|
| 2017 |
| 2016 |
| ||
Gulf Coast terminals |
| $ | 8,295 |
| $ | 7,008 |
|
Midwest terminals and pipeline system |
|
| 574 |
|
| 697 |
|
Brownsville terminals |
|
| 1,268 |
|
| 4,454 |
|
River terminals |
|
| 614 |
|
| 2,559 |
|
Southeast terminals |
|
| 5,834 |
|
| 2,654 |
|
Other revenue |
| $ | 16,585 |
| $ | 17,372 |
|
40
ANALYSIS OF COSTS AND EXPENSES
The direct operating costs and expenses of our operations include the directly related wages and employee benefits, utilities, communications, repairs and maintenance, rent, property taxes, vehicle expenses, environmental compliance costs, materials and supplies. Consistent with historical trends across our terminaling and transportation facilities, we anticipate an increase in repairs and maintenance expenses in the later months of the yearcan vary from period to period based on project maintenance schedules and other factors such as the weather becomes more conducive to these types of projects.weather. The direct operating costs and expenses of our operations were as follows (in thousands):
Direct Operating Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
|
| Six months ended June 30, |
| ||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Wages and employee benefits |
| $ | 18,433 |
| $ | 17,877 |
|
| $ | 24,966 |
| $ | 21,620 |
|
Utilities and communication charges |
|
| 6,288 |
|
| 5,719 |
|
|
| 5,385 |
|
| 4,548 |
|
Repairs and maintenance |
|
| 8,991 |
|
| 11,118 |
|
|
| 6,547 |
|
| 6,751 |
|
Office, rentals and property taxes |
|
| 7,640 |
|
| 7,093 |
|
|
| 7,064 |
|
| 6,706 |
|
Vehicles and fuel costs |
|
| 534 |
|
| 610 |
|
|
| 542 |
|
| 492 |
|
Environmental compliance costs |
|
| 2,098 |
|
| 2,951 |
|
|
| 1,950 |
|
| 1,710 |
|
Other |
|
| 6,230 |
|
| 5,289 |
|
|
| 5,335 |
|
| 6,237 |
|
Direct operating costs and expenses |
| $ | 50,214 |
| $ | 50,657 |
| |||||||
Operating costs and expenses |
| $ | 51,789 |
| $ | 48,064 |
|
43
The direct operating costs and expenses of our business segments were as follows (in thousands):
Direct Operating Costs and Expenses by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
|
| Six months ended June 30, |
| ||||||||
|
| 2017 |
| 2016 |
|
| 2019 |
| 2018 |
| ||||
Gulf Coast terminals |
| $ | 16,785 |
| $ | 16,750 |
|
| $ | 10,907 |
| $ | 11,245 |
|
Midwest terminals and pipeline system |
|
| 2,123 |
|
| 2,422 |
| |||||||
Midwest terminals |
|
| 1,406 |
|
| 1,455 |
| |||||||
Brownsville terminals |
|
| 8,200 |
|
| 8,742 |
|
|
| 4,490 |
|
| 4,176 |
|
River terminals |
|
| 4,895 |
|
| 6,034 |
|
|
| 3,009 |
|
| 3,641 |
|
Southeast terminals |
|
| 18,211 |
|
| 16,709 |
|
|
| 12,092 |
|
| 12,333 |
|
Direct operating costs and expenses |
| $ | 50,214 |
| $ | 50,657 |
| |||||||
West Coast terminals |
|
| 8,504 |
|
| 6,570 |
| |||||||
Central services |
|
| 11,381 |
|
| 8,644 |
| |||||||
Operating costs and expenses |
| $ | 51,789 |
| $ | 48,064 |
|
The increase in Central services operating costs and expenses is a result of operating additional terminal facilities that are owned by affiliates of ArcLight including SeaPort Sound and the Baltimore Terminal. We began to operate these terminals in November 2018.
General and administrative expenses include an administrative fee paid tocover the owner of TransMontaigne GP under the omnibus agreement for indirect corporate overhead to cover costs of centralized corporate functions such as legal, accounting, treasury, insurance administration and claims processing, health, safety and environmental, information technology, human resources, credit, payroll, taxes engineering and other corporate services. The administrative fee paid to the owner of TransMontaigne GP was approximately $9.4 million and $8.5 million for the nine months ended September 30, 2017 and 2016, respectively. General and administrative expenses also include direct general and administrative expenses for third party accounting costs associated with annual and quarterly reports and tax return and Schedule K‑1 preparation and distribution, legal fees and independent directorlegal fees. The direct general and administrative expenses were approximately $3.9$13.4 million and $2.4$11.5 million for the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, respectively.
Insurance expenses include charges for insurance premiums to cover costs of insuring activities such as property, casualty, pollution, automobile, directors’ and officers’ liability, and other insurable risks. Prior to October 31, 2016, we paid the owner of TransMontaigne GP for insurance policies purchased on our behalf pursuant to the omnibus agreement to cover our facilities and operations. For the ninesix months ended SeptemberJune 30, 20172019 and 2016, the insurance expense paid to the owner of TransMontaigne GP was approximately $nil and $2.8 million, respectively. On October 31, 2016, we contracted directly with insurance carriers for the majority of our insurance requirements. For the nine months ended September 30, 2017 and 2016,2018, the expense associated with insurance contracted directly by us was approximately $3.0$2.6 million and $nil,$2.5 million, respectively.
41
Equity-basedDeferred compensation expense includes expense associated with our partnership reimbursing an affiliate of TransMontaigne GP for awards granted by them to the independent directors of our general partner and to certain key officers and employees who provide service to us that vest over future service periods. Weperiods and, prior to the Take-Private Transaction, grants to the independent directors of our general partner under our long-term incentive plan (which was terminated in connection with the Take-Private Transaction). Prior to the Take-Private Transaction, we had the intent and ability to settle the deferred compensation awards in our common units, and accordingly, we accounted for the awards as an equity award; following the Take-Private Transaction, we have the intent and ability to settle our reimbursement for the bonus awards by issuing additional common units, and accordingly, we account for the bonus awards as an equity award.in cash. The expenses associated with these reimbursementsdeferred compensation awards were approximately $2.7$1.1 million and $2.5 million for both the ninesix months ended SeptemberJune 30, 20172019 and 2016.2018, respectively.
For the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, depreciation and amortization expense was approximately $26.4$25.8 million and $24.2$25.1 million, respectively.
For the six months ended June 30, 2019 and 2018, interest expense was approximately $18.6 million and $14.7 million, respectively. The increase in depreciation and amortizationinterest expense is primarily attributable to the new tanks placed into service at the Collins, Mississippi bulk storage terminal.financing our growth capital projects with additional debt and increases in LIBOR based interest rates.
For the nine months ended September 30, 2017 and 2016, interest expense was approximately $7.3 million and $6.6 million, respectively.
44
ANALYSIS OF INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Our investments in unconsolidated affiliates include a 42.5% Class A ownership interest in BOSTCO and a 50% ownership interest in Frontera. BOSTCO is a terminal facility located on the Houston Ship Channel that encompasses approximately 7.1 million barrels of distillate, residual and other black oil product storage. Class A and Class B ownership interests share in cash distributions on a 96.5% and 3.5% basis, respectively. Class B ownership interests do not have voting rights and are not required to make capital investments. Frontera is a terminal facility located in Brownsville, Texas that encompasses approximately 1.51.7 million barrels of light petroleum product storage, as well as related ancillary facilities.
Earnings from investments in unconsolidated affiliates werewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Nine months ended September 30, |
|
|
| Six months ended June 30, | ||||||||
|
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 | ||||
BOSTCO |
| $ | 3,904 |
| $ | 4,794 |
|
|
| $ | 1,139 |
| $ | 3,839 |
Frontera |
|
| 2,660 |
|
| 2,146 |
|
|
|
| 1,226 |
|
| 1,494 |
Total earnings from investments in unconsolidated affiliates |
| $ | 6,564 |
| $ | 6,940 |
|
|
| $ | 2,365 |
| $ | 5,333 |
Additional capital investments in unconsolidated affiliates werewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Nine months ended September 30, |
|
|
| Six months ended June 30, | ||||||||
|
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 | ||||
BOSTCO |
| $ | 145 |
| $ | 2,125 |
|
|
| $ | 1,076 |
| $ | — |
Frontera |
|
| 2,000 |
|
| 100 |
|
|
|
| 225 |
|
| 1,264 |
Additional capital investments in unconsolidated affiliates |
| $ | 2,145 |
| $ | 2,225 |
|
|
| $ | 1,301 |
| $ | 1,264 |
Cash distributions received from unconsolidated affiliates werewas as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Nine months ended September 30, |
|
|
| Six months ended June 30, | ||||||||
|
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 | ||||
BOSTCO |
| $ | 9,472 |
| $ | 10,487 |
|
|
| $ | 4,697 |
| $ | 5,585 |
Frontera |
|
| 3,624 |
|
| 2,176 |
|
|
|
| 1,317 |
|
| 2,426 |
Cash distributions received from unconsolidated affiliates |
| $ | 13,096 |
| $ | 12,663 |
|
|
| $ | 6,014 |
| $ | 8,011 |
42
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs are to fund our debt service obligations, working capital requirements distributions to unitholders, approved investments, approvedand capital projects, including additional investments and approved future expansion, development and acquisition opportunities. We expect to initially fund any additional investments, capital projects and future expansion, development and acquisition opportunities with undistributed cash flows from operations and additional borrowings under our credit facility. After initially funding expenditures with borrowings under our credit facility, we may raise funds through additional equity offerings and debt financings. The proceeds of such equity offerings and debt financings may then be used to reduce our outstanding borrowings under ourrevolving credit facility.
Net cash provided by (used in) operating activities, investing activities and financing activities were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
|
| Six months ended June 30, | |||||||||
|
| 2017 |
| 2016 |
|
|
| 2019 |
| 2018 | ||||
Net cash provided by operating activities |
| $ | 83,789 |
| $ | 65,809 |
|
|
| $ | 36,293 |
| $ | 51,822 |
Net cash used in investing activities |
| $ | (39,472) |
| $ | (48,330) |
|
|
| $ | (43,610) |
| $ | (12,377) |
Net cash used in financing activities |
| $ | (40,057) |
| $ | (17,719) |
|
| ||||||
Net cash provided by (used in) financing activities |
| $ | 6,903 |
| $ | (40,004) |
The increasedecrease in net cash provided by operating activities is primarily attributable to increased revenue related to placing 2.0 million barrels of new tank capacity at our Collins, Mississippi bulk storage terminal into service in various stages beginning in the fourth quarter of 2016 through the second quarter of 2017, recontracting of available storage capacity throughout the past year and the timing of working capital requirements.
45
The decreaseincrease in net cash used in investing activities includes a decrease of $12.0 millionis primarily related to additional construction spend in 2019. In addition for the acquisition of the Port Everglades, Florida hydrant system in the prior period. Management and the board of directors ofthree months ended June 30, 2019 we received an approximately $5.0 million one-time insurance settlement related to a tank at our general partner have approved additionalGulf Coast terminals that was damaged by fire.
Additional investments and expansion capital projects at our terminals thathave been approved and currently are, or will be, under construction with estimated completion dates that extend primarily through the firstfourth quarter of 2018.2019. At SeptemberJune 30, 2017,2019, the remaining expenditures to complete the approved projects are estimated to be approximately $15 million, which$51 million. These expenditures primarily relatesrelate to the remaining construction costs associated with the approximately 2.0 million barrels of new tank capacity at our Collins, Mississippi bulk storage terminal.terminal expansion and our expansion of the Brownsville operations.
The increasechange in net cash used inprovided by (used in) financing activities includes a decreasean increase of $12.1approximately $40.6 million in net borrowings under our credit facilitydebt agreements primarily related to the acquisition of the Port Everglades, Florida hydrant systemfund additional growth capital projects and $7.9 million in debt issuance costs in the prior period, an increase of $4.7 million in deferred financing costs related to upsizing and extending our credit facility in March 2017 and an increase of $4.4 million in distributions paid as a result of increasing our distribution 7.9% over the thirdfirst quarter of last year.year related to issuing senior notes in February 2018.
Third amended and restated senior secured credit facility. On March 13, 2017,In connection with the TMS contribution, we entered into the third amendedConsent and restated senior securedThird Amendment to our Third Amended and Restated Senior Secured Credit Facility (“revolving credit facility, orfacility”), primarily to reflect the ��TMS Contribution and the resulting termination of the omnibus agreement. Our revolving credit facility”, thatfacility provides for a maximum borrowing line of credit equalof up to $600$850 million. At our request, the maximum borrowing line of credit may be increased by an additional $250 million, subject to the approval of the administrative agent and the receipt of additional commitments from one or more lenders. The terms of theour revolving credit facility include covenants that restrict our ability to make cash distributions, acquisitions and investments, including investments in joint ventures. We may make distributions of cash to the extent of our “available cash” as defined in our partnershipLLC agreement. We may make acquisitions and investments that meet the definition of “permitted acquisitions”; “other investments” which may not exceed 5% of “consolidated net tangible assets”; and additional future “permitted JV investments” up to $175 million, which may include additional investments in BOSTCO. The principal balance of loans and any accrued and unpaid interest are due and payable in full on the maturity date, in March 13, 2022.
We may elect to have loans under theour revolving credit facility bear interest either (i) at a rate of LIBOR plus a margin ranging from 1.75% to 2.75% depending on the total leverage ratio then in effect, or (ii) at the base rate plus a margin ranging from 0.75% to 1.75% depending on the total leverage ratio then in effect. We also pay a commitment fee on the unused amount of commitments, ranging from 0.375% to 0.5% per annum, depending on the total leverage ratio then in effect. Our obligations under theour revolving credit facility are secured by a first priority security interest in favor of the lenders in
43
the majority of our assets, including our investments in unconsolidated affiliates. At SeptemberJune 30, 2017,2019, our outstanding borrowings under theour revolving credit facility were $302.0$339.7 million.
TheOur revolving credit facility also contains customary representations and warranties (including those relating to organization and authorization, compliance with laws, absence of defaults, material agreements and litigation) and customary events of default (including those relating to monetary defaults, covenant defaults, cross defaults and bankruptcy events). The primary financial covenants contained in theour revolving credit facility are (i) a total leverage ratio test (not to exceed 4.75 times)5.25 to 1.0), (ii) a senior secured leverage ratio test (not to exceed 3.75 times) in the event we issue senior unsecured notes,to 1.0), and (iii) a minimum interest coverage ratio test (not less than 3.0 times)2.75 to 1.0). These financial covenants are based on a non-GAAP, defined financial performance measure within theour revolving credit facility known as “Consolidated EBITDA.” The calculationWe were in compliance with all financial covenants as of and during the “total leverage ratio”six months ended June 30, 2019 and “interest coverage ratio” contained in the credit facility is as follows (in thousands, except ratios):year ended December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Twelve months |
| |
|
| Three months ended |
| ended |
| |||||||||||
|
| December 31, |
| March 31, |
| June 30, |
| September 30, |
| September 30, |
| |||||
|
| 2016 |
| 2017 |
| 2017 |
| 2017 |
| 2017 |
| |||||
Financial performance debt covenant test: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA for the total leverage ratio, as stipulated in the credit facility |
| $ | 25,488 |
| $ | 27,329 |
| $ | 28,819 |
| $ | 25,381 |
| $ | 107,017 |
|
Consolidated funded indebtedness |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 302,000 |
|
Total leverage ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2.82 | x |
Consolidated EBITDA for the interest coverage ratio |
| $ | 25,488 |
| $ | 27,329 |
| $ | 28,819 |
| $ | 25,381 |
| $ | 107,017 |
|
Consolidated interest expense, as stipulated in the credit facility (1) |
| $ | 2,061 |
| $ | 2,410 |
| $ | 2,487 |
| $ | 2,591 |
| $ | 9,549 |
|
Interest coverage ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11.21 | x |
Reconciliation of consolidated EBITDA to cash flows provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA |
| $ | 25,488 |
| $ | 27,329 |
| $ | 28,819 |
| $ | 25,381 |
| $ | 107,017 |
|
Consolidated interest expense |
|
| (1,160) |
|
| (2,152) |
|
| (2,525) |
|
| (2,656) |
|
| (8,493) |
|
Unrealized loss (gain) on derivative instruments |
|
| (901) |
|
| (258) |
|
| 38 |
|
| 65 |
|
| (1,056) |
|
Amortization of deferred revenue |
|
| 180 |
|
| (51) |
|
| 10 |
|
| (170) |
|
| (31) |
|
Settlement of tax withholdings on equity-based compensation |
|
| — |
|
| 382 |
|
| 25 |
|
| 304 |
|
| 711 |
|
Change in operating assets and liabilities |
|
| (10,309) |
|
| 5,113 |
|
| (342) |
|
| 4,477 |
|
| (1,061) |
|
Cash flows provided by operating activities |
| $ | 13,298 |
| $ | 30,363 |
| $ | 26,025 |
| $ | 27,401 |
| $ | 97,087 |
|
(1)Consolidated interest expense, used in the calculation
46
If we were to fail either financial performance covenant, or any other covenant contained in theour revolving credit facility, we would seek a waiver from our lenders under such facility. If we were unable to obtain a waiver from our lenders and the default remained uncured after any applicable grace period, we would be in breach of theour revolving credit facility, and the lenders would be entitled to declare all outstanding borrowings immediately due and payable. We were in compliance with all financial covenants as of and during the nine months ended September 30, 2017 and the year ended December 31, 2016.
Common unit offeringprogram. On September 2, 2016, the Securities and Exchange Commission declared effective a new shelf registration statement, which replaced our prior shelf registration statement that previously expired. As with the prior shelf registration statement, the new shelf registration statement allows us to issue common units and debt securities. In connection with the shelf registration statement, we established a common unit offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $50 million. We intend to use the net proceeds from any equity sales pursuant to the common unit offering program, after deducting the agent’s commissions and the Partnership’s offering expenses, for general
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| |
|
| Three months ended |
| Twelve months ending | |||||||||||
|
| September 30, |
| December 31, |
| March 31, |
| June 30, |
| June 30, | |||||
|
| 2018 |
| 2018 |
| 2019 |
| 2019 |
| 2019 | |||||
Financial performance covenant tests: |
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|
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|
|
|
|
|
|
|
Consolidated EBITDA (1) |
| $ | 36,063 |
| $ | 31,564 |
| $ | 31,474 |
| $ | 38,234 |
| $ | 137,335 |
Material Project credit (2) |
|
| 663 |
|
| 8,220 |
|
| 765 |
|
| — |
|
| 9,648 |
Consolidated EBITDA for the leverage ratios (1) |
| $ | 36,726 |
| $ | 39,784 |
| $ | 32,239 |
| $ | 38,234 |
| $ | 146,983 |
Revolving credit facility debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 339,700 |
6.125% senior notes due in 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 300,000 |
Consolidated funded indebtedness |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 639,700 |
Senior secured leverage ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2.31 |
Total leverage ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4.35 |
Consolidated EBITDA for the interest coverage ratio (1) |
| $ | 36,063 |
| $ | 31,564 |
| $ | 31,474 |
| $ | 38,234 |
| $ | 137,335 |
Consolidated interest expense (1) (3) |
| $ | 8,464 |
| $ | 8,396 |
| $ | 8,699 |
| $ | 9,197 |
| $ | 34,756 |
Interest coverage ratio |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3.95 |
Reconciliation of consolidated EBITDA to cash flows provided by operating activities: |
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|
|
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|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA for the total leverage ratio (1) |
| $ | 36,726 |
| $ | 39,784 |
| $ | 32,239 |
| $ | 38,234 |
| $ | 146,983 |
Material Project credit (2) |
|
| (663) |
|
| (8,220) |
|
| (765) |
|
| — |
|
| (9,648) |
Interest expense |
|
| (8,608) |
|
| (8,558) |
|
| (8,842) |
|
| (9,708) |
|
| (35,716) |
Unrealized loss on derivative instruments |
|
| 144 |
|
| 162 |
|
| 143 |
|
| 511 |
|
| 960 |
Gain from insurance proceeds |
|
| — |
|
| — |
|
| — |
|
| (3,351) |
|
| (3,351) |
Amortization of deferred revenue |
|
| (119) |
|
| 131 |
|
| (27) |
|
| (180) |
|
| (195) |
Change in operating assets and liabilities |
|
| 3,122 |
|
| 4,819 |
|
| (8,824) |
|
| 2,259 |
|
| 1,376 |
Cash flows provided by operating activities |
| $ | 30,602 |
| $ | 28,118 |
| $ | 13,924 |
| $ | 27,765 |
| $ | 100,409 |
44
(1) | Reflects the calculation of Consolidated EBITDA and Consolidated interest expense in accordance with the definition for such financial metrics in our revolving credit facility. |
(2) | Reflects percentage of completion pro forma credit related to the Collins terminal expansion and the Brownsville operations expansion that qualify as a “Material Project” under the terms of our revolving credit facility. |
(3) | Consolidated interest expense, used in the calculation of the interest coverage ratio, excludes unrealized gains and losses recognized on our derivative instruments. |
partnership purposes, which may include, among other things, repayment of indebtedness, capital expenditures, working capital or acquisitions. To date we have issued no common units or debt securities under the common unit offering program or the registration statement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information contained in this Item 3 updates, and should be read in conjunction with, information set forth in Part II, Item 7A of our Annual Report on Form 10‑K, filed on March 14, 2017,15, 2019, in addition to the interim unaudited consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations presented in Part 1, Items 1 and 2 of this Quarterly Report on Form 10‑Q. There are no material changes in the market risks faced by us from those reported in our Annual Report on Form 10‑K for the year ended December 31, 2016.2018.
Market risk is the risk of loss arising from adverse changes in market rates and prices. A principal market risk to which we are exposed is interest rate risk associated with borrowings under our revolving credit facility. Borrowings
47
under our revolving credit facility bear interest at a variable rate based on LIBOR or the lender’s base rate. We manage a portion of our interest rate risk with interest rate swaps, which reduce our exposure to changes in interest rates by converting variable interest rates to fixed interest rates. At SeptemberJune 30, 2017, we are party2019 our derivative instruments were limited to interest rate swap agreements with an aggregate notional amount of $125.0$300 million that expire between March 25, 2018 and March 11, 2019.with the agreements expiring in June 2020. Pursuant to the terms of the current outstanding interest rate swap agreements, we pay a blended fixed rate of approximately 1.01%2.04% and receive interest payments based on the one-month LIBOR. The net difference to be paid or received under the interest rate swap agreementsagreement is settled monthly and is recognized as an adjustment to interest expense. At SeptemberJune 30, 2017,2019, we had outstanding borrowings of $302.0$339.7 million under our revolving credit facility. Based on the outstanding balance of our variable‑interest‑rate debt at SeptemberJune 30, 2017,2019, the terms of our interest rate swap agreements and assuming market interest rates increase or decrease by 100 basis points, the potential annual increase
e or decrease in interest expense is approximately $1.8$0.4 million.
We do not purchase or market products that we handle or transport and, therefore, we do not have material direct exposure to changes in commodity prices, except for the value of product gains arising from certain of our terminaling services agreements with our customers. We do not use derivative commodity instruments to manage the commodity risk associated with the product we may own at any given time. Generally, to the extent we are entitled to retain product pursuant to terminaling services agreements with our customers, we sell the product to our customers on a contractually established periodic basis; the sales price is based on industry indices. For the nine months ended September 30, 2017 and 2016, we sold approximately 120,340 and 77,650 barrels, respectively, of product gained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities at average prices of approximately $67 and $54 per barrel, respectively.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Commission’s rules and forms, and that information is accumulated and communicated to the management of our general partner,the Company, including our general partner’sthe Company’s principal executive and principal financial officer (whom we refer to as the Certifying Officers), as appropriate to allow timely decisions regarding required disclosure. The management of our general partnerthe Company evaluated, with the participation of the Certifying Officers, the effectiveness of our disclosure controls and procedures as of SeptemberJune 30, 2017,2019, pursuant to Rule 13a‑15(b) under the Exchange Act. Based upon that evaluation, the Certifying Officers concluded that, as of SeptemberJune 30, 2017,2019, our disclosure controls and procedures were effective. There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
45
See Part I, Item 1 Note 1613 to our unaudited consolidated financial statements entitled “Legal proceedings” which is incorporated into this item by reference.
The followingIn addition to the other information set forth in this report, you should carefully consider the risk factors discussed in more detail below and inother cautionary statements described under the heading “Item 1A. Risk Factors,”Factors” included in our Annual Report on Form 10‑K, 10-K filed on March 14, 2017, are expressly incorporated into this report by reference, are important factors15, 2019, which could materially affect our businesses, financial condition, or future results. Additional risks and uncertainties not currently known to us or that could cause actual resultswe currently deem to differbe immaterial also may materially from our expectations and may adversely affect our business, and results of operations, include, but are not limited to:
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47
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There have been no material changes from risk factors as previously disclosed in our Annual Report on Form 10‑K for the year ended December 31, 2016,2018, filed on March 14, 2017.15, 2019.
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| Description of exhibits | ||
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49
10.1 |
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| June 3, 2019, by and among TransMontaigne Operating Company L.P., as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto. | |
31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002. | |
31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002. | |
32.1 |
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32.2 |
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101 |
| The following financial information from the Quarterly Report on Form 10‑Q of TransMontaigne Partners |
5049
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Date: | TransMontaigne Partners | |
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| By: | /s/ Frederick W. Boutin Frederick W. Boutin |
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| By: | /s/ Robert T. Fuller Robert T. Fuller |
5150