UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


(Mark One)
☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended ~~September 30, 2022~~March 31, 2023
OR
☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-32505

TRANSMONTAIGNE PARTNERS LLC

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)	34-2037221 (I.R.S. Employer Identification No.)

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 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 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.

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 ~~September 30, 2022,~~March 31, 2023, 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 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.

Table of Contents

TABLE OF CONTENTS

		Page No.
Part I. Financial Information
Item 1.	Unaudited Consolidated Financial Statements	4
	Consolidated balance sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	5
	Consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	6
	Consolidated statements of equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	7
	Consolidated statements of cash flows for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	8
	Notes to consolidated financial statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3128
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4435
Item 4.	Controls and Procedures	4435

Part II. Other Information
Item 1.	Legal Proceedings	4436
Item 1A.	Risk Factors	4536
Item 6.	Exhibits	4637
	Signatures	4738

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of federal 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 in this Quarterly Report under the heading “Item 1A. Risk Factors”, and under the heading “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and the risk factors and other cautionary statements contained in our other filings with the United States Securities and 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 all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

●

our ability to successfully implement our business strategy;

●

competitive conditions in our industry;

●

actions taken by third-party customers, producers, operators, processors and transporters;

●

pending legal or environmental matters;

●

costs of conducting our operations;

●

fluctuations in the price of the products that we purchase and sell;

●

our ability to complete internal growth projects on time and on budget;

●

general economic conditions, including inflation;

●

the price of oil, natural gas, natural gas liquids and other commodities in the energy industry;

●

large customer defaults;

●

rising interest rates;

●

operating hazards, global health epidemics, natural disasters, weather-related delays, cyber-security breaches, IT system outages, global or regional conflicts, casualty losses and other matters beyond our control;

●

uncertainty regarding our future operating results;

●

effects of existing and future laws and governmental regulations;

●

the effects of future litigation;

●

plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical; and

●

public health crises, epidemics and pandemics, including the ongoing ~~pandemic involving COVID-19.~~COVID-19 pandemic.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly 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.

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Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.

Part I. Financial Information

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The interim unaudited consolidated financial statements of TransMontaigne Partners LLC as of and for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 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, ~~2021,~~2022, 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 ~~31, 2022~~10, 2023 with the Securities and Exchange Commission (File No. 001-32505).

TransMontaigne Partners LLC is a holding company with the following 100% owned operating subsidiaries during the three ~~and nine~~ months ended ~~September 30, 2022:~~March 31, 2023:

●

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.

●

~~TransMontaigne~~TLP Management Services L.L.C.

●

TransMontaigne Products Company L.L.C.

●

Pike West Coast Holdings, L.L.C.

●

~~Seaport~~SeaPort Financing, L.L.C.

●

SeaPort Sound Terminal, L.L.C.

●

SeaPort Pipeline Holdings, L.L.C.

●

SeaPort Midstream Holdings, L.L.C.

We do not have off-balance-sheet arrangements or special-purpose entities.

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TransMontaigne Partners LLC and subsidiaries

Consolidated balance sheets (unaudited)

(In thousands)


	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	16,027	$	18,273	$	5,036	$	13,016
Trade accounts receivable		35,279		20,028		24,100		46,060
Due from affiliates		2,715		2,397		3,100		3,850
Inventory		12,608		5,333		9,971		6,645
Other current assets		12,243		6,492		19,514		15,699
Total current assets		78,872		52,523		61,721		85,270
Property, plant and equipment, net		835,267		851,483		829,556		835,907
Goodwill		18,586		18,586		18,586		18,586
Investments in unconsolidated affiliates		327,882		332,692		325,263		325,832
Right-of-use assets, operating leases		51,393		48,522		50,308		50,718
Other assets, net		87,722		53,146		53,516		59,710
	$	1,399,722	$	1,356,952	$	1,338,950	$	1,376,023
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable	$	15,238	$	14,568	$	23,350	$	25,349
Operating lease liabilities		3,569		3,665		3,808		3,600
Accrued liabilities		37,556		37,751		34,450		43,420
Current debt		10,000		10,000		12,947		10,000
Total current liabilities		66,363		65,984		74,555		82,369
Deferred revenue		1,354		3,334		1,237		1,220
Long-term operating lease liabilities		50,040		46,643		48,446		49,077
Long-term debt		1,288,785		1,263,940		1,324,773		1,257,219
Total liabilities		1,406,542		1,379,901		1,449,011		1,389,885
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 12)
Equity:
Member interest		(6,820)		(22,949)		(110,061)		(13,862)
Total equity		(6,820)		(22,949)		(110,061)		(13,862)
	$	1,399,722	$	1,356,952	$	1,338,950	$	1,376,023

See accompanying notes to consolidated financial statements (unaudited).

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TransMontaigne Partners LLC and subsidiaries

Consolidated statements of operations (unaudited)

(In thousands)


	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2022		2021		2022		2021		2023		2022
Revenue:
Terminal revenue	$	77,833	$	72,301	$	227,224	$	216,750	$	78,315	$	75,051
Product sales		100,840		70,083		280,714		168,172		61,429		71,679
Total revenue		178,673		142,384		507,938		384,922		139,744		146,730
Costs and expenses:
Cost of product sales		(96,173)		(65,769)		(269,335)		(157,765)		(59,326)		(69,453)
Operating		(29,705)		(26,738)		(88,701)		(82,755)		(31,905)		(30,802)
General and administrative		(6,967)		(7,425)		(22,430)		(18,575)		(8,040)		(7,755)
Insurance		(1,525)		(1,580)		(4,780)		(4,673)		(1,638)		(1,552)
Deferred compensation		(786)		(355)		(3,006)		(1,572)		(1,635)		(1,444)
Depreciation and amortization		(17,886)		(17,149)		(53,015)		(51,232)		(17,953)		(17,500)
Total costs and expenses		(153,042)		(119,016)		(441,267)		(316,572)		(120,497)		(128,506)
Earnings from unconsolidated affiliates		2,922		3,791		9,779		11,835		1,949		3,228
Operating income		28,553		27,159		76,450		80,185		21,196		21,452
Other expenses:
Interest expense		(2,599)		(10,249)		(31,519)		(30,714)		(31,154)		(14,573)
Deferred debt issuance costs		(3,712)		(982)		(5,759)		(2,916)		(1,072)		(1,008)
Total other expenses		(6,311)		(11,231)		(37,278)		(33,630)		(32,226)		(15,581)
Net earnings	$	22,242	$	15,928	$	39,172	$	46,555
Net earnings (loss)									$	(11,030)	$	5,871

See accompanying notes to consolidated financial statements (unaudited)~~. Prior periods have been recast as a result of the Pacific Northwest Contribution (See Note 3 of Notes to consolidated financial statements)~~.

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TransMontaigne Partners LLC and subsidiaries

Consolidated statements of equity (unaudited)

(In thousands)


							Member
			Member
	Predecessor		interest		Total
Balance June 30, 2021	$	78,281	$	337,060	$	415,341
Distributions to TLP Finance Holdings, LLC for debt service		—		(11,737)		(11,737)
Net earnings for the three months ended September 30, 2021		4,759		11,169		15,928
Balance September 30, 2021	$	83,040	$	336,492	$	419,532

Balance June 30, 2022	$	—	$	(20,460)	$	(20,460)
Contributions from parent entities		—		572		572
Distributions to TLP Finance Holdings, LLC for debt service		—		(9,174)		(9,174)
Net earnings for the three months ended September 30, 2022		—		22,242		22,242
Balance September 30, 2022	$	—	$	(6,820)	$	(6,820)

Balance December 31, 2020	$	73,264	$	335,293	$	408,557
Distributions to TLP Finance Holdings, LLC for debt service		—		(35,580)		(35,580)
Net earnings for the nine months ended September 30, 2021		9,776		36,779		46,555
Balance September 30, 2021	$	83,040	$	336,492	$	419,532
							interest		Total
Balance December 31, 2021	$	—	$	(22,949)	$	(22,949)	$	(22,949)	$	(22,949)
Contributions from parent entities		—		1,516		1,516		525		525
Distributions to TLP Finance Holdings, LLC for debt service		—		(24,559)		(24,559)		(7,832)		(7,832)
Net earnings for the nine months ended September 30, 2022		—		39,172		39,172
Balance September 30, 2022	$	—	$	(6,820)	$	(6,820)
Net earnings for the three months ended March 31, 2022								5,871		5,871
Balance March 31, 2022							$	(24,385)	$	(24,385)

Balance December 31, 2022							$	(13,862)	$	(13,862)
Contributions from parent entities								419		419
Distributions to TLP Finance Holdings, LLC for debt service								(85,588)		(85,588)
Net loss for the three months ended March 31, 2023								(11,030)		(11,030)
Balance March 31, 2023							$	(110,061)	$	(110,061)

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TransMontaigne Partners LLC and subsidiaries

Consolidated statements of cash flows (unaudited)

(In thousands)


	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2022		2021		2022		2021		2023		2022
Cash flows from operating activities:
Net earnings	$	22,242	$	15,928	$	39,172	$	46,555
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net earnings (loss)									$	(11,030)	$	5,871
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization		17,886		17,149		53,015		51,232		17,953		17,500
Earnings from unconsolidated affiliates		(2,922)		(3,791)		(9,779)		(11,835)		(1,949)		(3,228)
Distributions from unconsolidated affiliates		5,354		4,935		14,589		14,476		3,018		4,516
Equity-based compensation		419		—		1,257		—		419		419
Amortization of deferred debt issuance costs		1,108		982		3,155		2,916		1,072		1,008
Amortization of deferred revenue		(647)		(274)		(1,980)		(1,126)		17		(870)
Unrealized gain on derivative instruments		(15,763)		(302)		(15,763)		(1,200)
Unrealized loss on interest rate swap agreements										7,626		—
Changes in operating assets and liabilities:
Trade accounts receivable		(2,338)		13		(15,251)		(9,830)		20,842		(12,782)
Due from affiliates		(108)		32		(318)		(55)		750		(219)
Inventory		(4,331)		4,235		(7,275)		2,287		(3,326)		(8,252)
Other current assets		1,790		140		(298)		(2,159)		(6,061)		99
Long-term customer receivables		17		(225)		513		746
Right-of-use assets, operating leases		783		739		2,399		2,213		963		821
Other assets, net		(1,237)		(59)		(2,248)		(44)		(56)		363
Trade accounts payable		1,730		3,015		847		5,065		(82)		530
Accrued liabilities		(3,719)		1,393		(195)		244		(8,970)		(1,430)
Operating lease liabilities		(573)		(546)		(1,969)		(1,976)		(976)		(856)
Net cash provided by operating activities		19,691		43,364		59,871		97,509		20,210		3,490
Cash flows from investing activities:
Investments in unconsolidated affiliates		—		(527)		—		(3,349)		(500)		—
Affiliate loan		—		—		(25,000)		—		—		(25,000)
Capital expenditures		(10,688)		(22,692)		(37,080)		(46,988)		(12,720)		(13,797)
Proceeds from sale of land										1,118		—
Net cash used in investing activities		(10,688)		(23,219)		(62,080)		(50,337)		(12,102)		(38,797)
Cash flows from financing activities:
Repayments of senior secured term loan		—		—		(5,000)		—		(2,500)		(2,500)
Repayments of SeaPort Financing term loan		—		(524)		—		(1,572)
Borrowings under revolving credit facility		24,500		32,400		110,700		98,100		92,000		38,000
Repayments under revolving credit facility		(19,500)		(33,800)		(80,700)		(103,500)		(20,000)		(6,000)
Debt issuance costs		(152)		—		(737)		—		—		(542)
Contributions from parent entities		153		—		259		—		—		106
Distributions to TLP Finance Holdings, LLC for debt service		(9,174)		(11,737)		(24,559)		(35,580)		(85,588)		(7,832)
Net cash used in financing activities		(4,173)		(13,661)		(37)		(42,552)
Increase (decrease) in cash and cash equivalents		4,830		6,484		(2,246)		4,620
Net cash provided by (used in) financing activities										(16,088)		21,232
Decrease in cash and cash equivalents										(7,980)		(14,075)
Cash and cash equivalents at beginning of period		11,197		13,615		18,273		15,479		13,016		18,273
Cash and cash equivalents at end of period	$	16,027	$	20,099	$	16,027	$	20,099	$	5,036	$	4,198
Supplemental disclosures of cash flow information:
Cash paid for interest	$	23,834	$	15,103	$	51,121	$	37,047	$	28,690	$	16,118
Property, plant and equipment acquired with accounts payable	$	4,290	$	6,804	$	4,290	$	6,804	$	3,522	$	6,321
Additions to right-of-use assets obtained from new operating lease liabilities	$	36	$	125	$	5,270	$	15,820	$	553	$	2,007
Non-cash contributions from parent entities	$	572	$	—	$	1,516	$	—	$	419	$	525

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Nature of business

TransMontaigne Partners LLC (“we,” “us,” “our,” “the Company”) provides 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, renewable 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, in the Southeast and along the West Coast. In addition, we sell refined and renewable products to major fuel producers and marketers in the Pacific Northwest at our terminal ~~operations~~ in Tacoma, ~~and Seattle,~~ Washington.

~~On November 17, 2021,~~ Arclight contributed Pike West Coast Holdings, LLC (“Pike West Coast”) a portfolio company of ArcLight Energy Partners Fund VI, L.P. to the Company. Pike West Coast is an infrastructure company with significant operations across the renewable fuels supply chain in the U.S. Pacific Northwest (the “Pacific Northwest Contribution”).

Pike West Coast owns a 100% ownership interest in SeaPort Financing, LLC. SeaPort Financing, LLC owns a 100% ownership interest in SeaPort Sound Terminal, LLC, which owns a refined and renewable products terminal in Tacoma, Washington; a 51% ownership interest in SeaPort Midstream Partners, LLC (“Seaport Midstream”), which owns refined and renewable products terminals in both Seattle, Washington and Portland, Oregon; and a 30% ownership interest in Olympic Pipeline Company, LLC (“Olympic Pipeline Company”), which owns the 400-mile Olympic Pipeline between Blaine, Washington and Portland, Oregon, and a refined and renewable products terminal in Bayview, Washington.

(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 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 intercompany 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 and our results of operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

The preparation of financial statements in conformity with 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. In management’s opinion, the estimate of useful lives of our plant and equipment are subjective in nature, require the exercise of judgment and involve complex analyses. 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.

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~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

(c) Accounting for terminal ~~and pipeline~~ operations

We generate revenue from terminaling services fees, management fees, ~~pipeline transportation fees~~ and product sales. Under Topic 606, Revenue from Contracts with Customers (“ASC 606”) and Topic 842, Leases and the series of related Accounting Standards Updates that followed (collectively referred to as “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 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.”

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

Our terminaling services agreements include revenue recognized in accordance with ASC 606 and ASC 842. At the time of contract inception, we evaluate each contract to determine whether the contract contains a lease. Significant assumptions used in this process include the determination of whether substantive substitution rights exist based on the terms of the contract and available capacity at the terminal at the time of contract inception. Our terminaling services agreements do not allow our customers to purchase the underlying asset and vary in terms and conditions with respect to extension or termination options. If a contract is accounted for as a lease under ASC 842, we recognize the minimum payments as lease revenue and revenue recognized in excess of firm commitments as a variable payment of the lease. All other components of the contracts accounted for as a lease are treated as non-lease components (ancillary revenue) and are accounted for in accordance with ASC 606. The majority of our firm commitments under our terminaling services agreements are accounted for as lease revenue in accordance with ASC 842. The remaining firm commitments under our terminaling services agreements not accounted for as lease revenue are accounted for in accordance with ASC 606, where the minimum payment arrangement in each contract is considered a single performance obligation that is primarily satisfied over time through the contract term.

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 mixing of stored products, product transfer, railcar handling, butane blending, proceeds from the sale of product 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 (See Note 1514 of Notes to consolidated financial statements).

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 Frontera Brownsville LLC (“Frontera”) joint venture and receive a management fee based on our costs incurred. We lease land under operating leases as the lessor or sublessor with third parties and affiliates. 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 manage and operate SeaPort Midstream Partners, LLC (“SeaPort Midstream”) and receive a management fee based on our costs incurred. We also

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~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

manage additional terminal facilities that are owned by affiliates of ArcLight, including Lucknow-Highspire Terminals, LLC, which operates terminals throughout Pennsylvania encompassing approximately 9.9 million barrels of storage capacity and we receive a management fee based on our costs incurred.

Management fee revenue is recognized at individual points in time as the services are performed or as the costs are incurred and is primarily accounted for in accordance with ASC 606. Management fees related to lease revenue are accounted for in accordance with ASC 842.

~~Pipeline transportation fees.~~ We earned pipeline transportation fees at our Diamondback pipeline under a capacity reservation agreement that ended on May 26, 2021. Revenue associated with the capacity reservation agreement was recognized ratably over the respective term, regardless of whether the capacity was utilized.

Product sales. Our product sales revenue refers to the sale of refined and renewable products at our terminal ~~operations~~ in Tacoma, ~~and Seattle,~~ Washington. Product sales revenue pricing is contractually specified, and we have determined that each transaction represents a separate performance obligation. Product sales revenue is recognized at a point in time when our customers take control and legal title of the commodities purchased. Product sales revenue is recorded gross of cost of product sales, which includes product supply and transportation costs, as we are responsible for fulfilling the promise in the sales contract and maintain inventory risk. Product sales revenue is accounted for in accordance with ASC 606.

(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.

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

(e) Inventory

Inventory represents refined and renewable products held for resale and are recorded at the lower of cost or net realizable value. Cost is determined by using the average cost method. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our refined products inventory was approximately ~~$9.7~~$4.4 million and ~~$2.8~~$4.1 million, respectively. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our renewable products inventory was approximately ~~$2.9~~$5.6 million and $2.5 million, respectively. We did not recognize any adjustments to the lower of cost or net realizable value during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

(f) 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. We did not recognize any impairment charges during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

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~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

(g) 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. We did not recognize any impairment charges during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

(h) 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.

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

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).

In connection with our acquisition of the Florida, Midwest, Brownsville, Texas, River and Southeast terminals and facilities, a third party agreed to indemnify us against certain potential environmental claims, losses and expenses. Based on our current knowledge, we expect that the active remediation projects subject to the benefit of this indemnification obligation are winding down and will not involve material additional claims, losses, and expenses.

(i) 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. GAAP requires 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, 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.

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~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

(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 Notes 5 and 9 of Notes to consolidated financial statements).~~liabilities. Changes in the fair value of our derivative instruments are recognized in the consolidated statements of operations.

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our derivative instruments were limited to interest rate swap agreements. The fair value of our interest rate swap agreements ~~with an aggregate notional amount~~are determined using a pricing model based on the LIBOR swap rate and other observable market data. At March 31, 2023 and December 31, 2022, the fair value of ~~$500~~our interest rate swap agreements was approximately $8.3 million and ~~$nil, respectively.~~ $15.9 million, respectively (See Notes 4 and 8 of Notes to consolidated financial statements).

Pursuant to the terms of the ~~current~~ interest rate swap agreements, ~~that expire August 18, 2025,~~ we pay a blended fixed rate ~~of approximately 2.87%~~ and receive interest payments based on the one-month LIBOR through July 17, 2023. Thereafter, we will receive interest payments based on the one-month CME Term SOFR or OIS compound SOFR. The net difference to be paid or received under the interest rate swap agreements will be settled monthly and recognized as an adjustment to interest expense. ~~The fair value of our~~For the three months ended March 31, 2023 and 2022, we recognized an unrealized loss on interest rate swap agreements ~~are determined using a pricing model based on the LIBOR~~of approximately $7.6 million and $nil, respectively.

Our interest rate swap ~~rate~~agreements at March 31, 2023 were as follows:


		Aggregate	Blended
Interest rate swap agreement term		notional amount	fixed rate
		(in thousands)
August 18, 2022 - July 18, 2023	$	500,000	2.87	%
July 18, 2023 - August 18, 2025	$	500,000	2.87	%
August 18, 2023 - August 18, 2026	$	180,000	3.48	%
August 18, 2025 - August 18, 2026	$	500,000	3.31	%
August 18, 2026 - August 18, 2028	$	250,000	3.06	%

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TransMontaigne Partners LLC and ~~other observable market data.~~Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

(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 up to our owners.

(l) Comprehensive income

Entities that report items of other comprehensive income have the option to present the components of net earnings (loss) and comprehensive income in either one continuous financial statement, or two consecutive financial statements. As we have no components of comprehensive income other than net earnings (loss), no statement of comprehensive income has been presented.

(m) Recent accounting pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform—Facilitation of the Effects of Reference Rate Reform on Financial ~~Reporting.~~Reporting, ~~Further, in January 2021,~~which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This guidance was effective prospectively upon issuance through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, ~~Update No. 2021-01,~~ Reference Rate Reform (Topic 848), ~~which clarifies~~Deferral of the ~~scope~~Sunset Date of Topic 848 ~~so that derivatives affected by~~, which defers the ~~discounting transition are explicitly eligible for certain optional expedients and exceptions in~~sunset date of Topic ~~848. This ASU provides temporary optional expedients and exceptions to GAAP guidanceon contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition~~848 from~~LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). Entitiescan elect not to apply certain modification accounting requirements to contracts affected by this reference rate reform, if certaincriteria are met. An entity that makes this election would not have to re-measure the contracts at the modification date orreassess a previous accounting determination. Entities can also elect various optional expedients that would allow them tocontinue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. Theguidance is effective upon issuance and generally can be applied through~~ December 31, ~~2022.~~ 2022 to December 31, 2024. We ~~are currently reviewing~~do not expect the ~~effect~~adoption of this ~~ASU~~guidance to have an impact on our financial ~~statements.~~

~~Table~~position, results of ~~Contents~~operations or cash flows.

~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

(2) TRANSACTIONS WITH AFFILIATES

Operations and reimbursement agreement—Frontera. We have a 50% ownership interest in ~~the Frontera Brownsville LLC joint venture (“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 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 ~~$1.5~~$1.6 million and ~~$1.4~~$1.5 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, and 2021, respectively. We recognized revenue related to this operations and reimbursement agreement of approximately $4.5 million and $4.0 million for the nine months ended September 30, 2022 and 2021, respectively.

Terminaling services agreements—Brownsville terminals. We have ~~two~~ terminaling services agreements with Frontera relating to our Brownsville, Texas facility that have or will expire in ~~January~~March 2023, June 2023 and June ~~2023,~~2025 and are subject to automatic renewals unless terminated by either party ~~upon 90 days’ to 180 days’~~with prior notice. In exchange for its minimum throughput commitments, we agreed to provide Frontera with approximately ~~270,000 and~~ 301,000 barrels of storage ~~capacity during the three and nine months ended September 30, 2022 and 2021, respectively.~~capacity. We recognized revenue related to these agreements of approximately ~~$0.4~~$0.5 million and ~~$1.4~~$0.6 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. We recognized revenue related to these agreements of approximately $1.2 million and $2.6 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

Terminaling services agreement—Gulf Coast terminals. We have a terminaling services agreement with Associated Asphalt Marketing, LLC, a wholly owned indirect subsidiary of ArcLight relating to our Gulf Coast terminals. The agreement will expire in April 2026, subject to a five-year automatic renewal unless terminated by either party upon 180 days’ prior notice, after which the agreement is subject to two-year automatic renewals unless terminated by either party upon 180 days’ prior notice. In exchange for its minimum throughput commitment, we have agreed to provide Associated Asphalt Marketing, LLC with approximately 750,000 barrels of storage capacity. We recognized revenue related to this agreement of approximately ~~$2.6~~$2.4 million and ~~$2.2~~$2.5 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, respectively.

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TransMontaigne Partners LLC and ~~2021, respectively. We recognized revenue related~~Subsidiaries

Notes to ~~this agreement of approximately $7.5 million and $6.6 million for the nine months ended September 30, 2022 and 2021, respectively.~~consolidated financial statements (unaudited) (continued)

Operating and administrative agreement—SeaPort ~~Midstream Partners, LLC —Central~~Midstream—Central services. We have a 51% ownership interest in SeaPort Midstream. We operate SeaPort Midstream in accordance with an operating and administrative agreement executed between us and SeaPort Midstream, for a management fee that is based on our costs incurred. The operating and administrative agreement will expire in November ~~2023,~~2025, subject to two-year automatic renewals unless terminated by either party upon no less than twelve months’ notice prior to the end of the initial term or any successive term. Our agreement with SeaPort Midstream stipulates that we may resign as the operator at any time with the prior written consent of SeaPort Midstream, or that 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 operating and administrative agreement of approximately $1.0 million and $0.9 million for ~~both of~~ the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021. We recognized revenue related to this operating and administrative agreement of approximately $2.9 million for both of the nine months ended September 30, 2022 and 2021.~~respectively.

Terminaling services agreement—SeaPort ~~Midstream Partners, LLC.~~Midstream. We ~~have~~had a terminaling services agreement with SeaPort Midstream relating to our West Coast terminals. The agreement ~~will expire~~expired in ~~December 2022 and may be extended, at our sole discretion, for three months upon 30 days’ prior notice.~~January 2023. In exchange for our minimum throughput commitment, SeaPort Midstream ~~has~~ agreed to provide us with approximately 14,000 barrels of storage capacity. We ~~use~~used this capacity to store and sell refined and renewable products. We recognized expense related to this agreement of approximately $0.1 million ~~and~~ ~~$nil~~for both of the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021,~~

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~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

~~respectively. We recognized expense related to this agreement of approximately $0.3 million and~~ ~~$nil~~ ~~for the nine months ended September 30, 2022 and 2021, respectively.~~2022.

Other affiliates—Central services. We manage additional terminal facilities that are owned by affiliates of ArcLight, including Lucknow-Highspire Terminals, LLC. We recognized revenue related to reimbursements from these affiliates of approximately ~~$0.6~~$1.1 million and ~~$0.5~~$0.7 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. We recognized revenue related to reimbursements from these affiliates of approximately $1.8 million and $1.7 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

Services agreement—TransMontaigne Management Company, LLC. Our executive officers who provide services to the Company are employed by TransMontaigne Management Company, LLC, a wholly owned subsidiary of ArcLight, which also provides services to certain other ArcLight affiliates. Pursuant to a services agreement between ~~TMS~~TLP Management Services L.L.C. (“TMS”) and TransMontaigne Management Company, TMS continues to provide certain payroll functions and maintains all employee benefits programs on behalf of TransMontaigne Management Company. TransMontaigne Management Company is reimbursed for the payroll and benefits expenses related to the executive officers, plus a 1% administration fee. Aggregate fees paid by us to TransMontaigne Management Company with respect to the services agreement was approximately ~~$0.6~~$0.8 million and ~~$1.6~~$0.7 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, and 2021, respectively. Aggregate fees paid by us to TransMontaigne Management Company with respect to the services agreement was approximately $1.9 million and $2.7 million for the nine months ended September 30, 2022 and 2021, respectively.

~~(3) CONTRIBUTION OF TERMINAL ASSETS~~

~~Contribution of Pacific Northwest assets.~~ On November 17, 2021, Arclight contributed Pike West Coast Holdings, LLC (“Pike West Coast”), a portfolio company of ArcLight Energy Partners Fund VI, L.P. to the Company in exchange for payments to certain lenders of SeaPort Financing, LLC (a wholly owned subsidiary of Pike West Coast) in the amount of approximately $198.2 million and a distribution to Arclight in the amount of approximately $256.3 million. In addition, a $10.2 million short-term loan from the Company to an ArcLight affiliate was terminated in contemplation of the contribution. Pike West Coast is an infrastructure company with significant operations across the renewable fuels supply chain in the U.S. Pacific Northwest (the “Pacific Northwest Contribution”).

Pike West Coast owns a 100% ownership interest in SeaPort Financing, LLC. SeaPort Financing, LLC owns a 100% ownership interest in SeaPort Sound Terminal, LLC, which owns a refined and renewable products terminal in Tacoma, Washington; a 51% ownership interest in SeaPort Midstream, which owns refined and renewable products terminals in both Seattle, Washington and Portland, Oregon; and a 30% ownership interest in Olympic Pipeline Company, which owns the 400-mile Olympic Pipeline between Blaine, Washington and Portland, Oregon, and a refined and renewable products terminal in Bayview, Washington.

The Pacific Northwest 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 the Pacific Northwest Contribution for all periods presented. We recorded the assets at their net book value of $84.7 million with the remaining consideration paid of $181.8 million recorded as a reduction to member equity interest. The difference between the consideration we paid and the carryover basis of the net assets purchased has been reflected in the accompanying consolidated balance sheets and statement of equity as a decrease to the member interest.

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~~Notes to consolidated financial statements (unaudited) (continued)~~

~~Our basis in the assets and liabilities of the Pacific Northwest Contribution at the time of the contribution was as follows (in thousands):~~

Cash

$
19,078
Trade accounts receivable

8,174
Inventory

3,145
Other current assets

671
Property, plant and equipment, net

120,215
Investment in unconsolidated affiliates

108,691
Goodwill

9,158
Other assets, net

14,689
Trade accounts payable

(6,062)
Senior secured term loan

(191,510)
Accrued and other liabilities

(1,552)
Equity

$
84,697

~~(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, in the 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, renewable 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.

Trade accounts receivable consists of the following (in thousands):


	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
Trade accounts receivable	$	35,279	$	20,028	$	24,100	$	46,060

~~The following~~None of our customers accounted for ~~at least~~ 10% or more 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

September 30,

September 30,


2022

2021

2022

2021

Customer A

16
%
10
%

14
%
6
%
Customer B

7
%
11
%

8
%
11
%
Customer C

9
%
10
%

8
%
9
%

operations.

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Notes to consolidated financial statements (unaudited) (continued)

~~(5)~~(4) OTHER CURRENT ASSETS

Other current assets were as follows (in thousands):


	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
Unrealized gain on derivative instruments	$	5,526	$	—
Prepaid insurance		2,726		1,913	$	6,491	$	1,198
Unrealized gain on interest rate swap agreements						3,438		5,613
Amounts due from insurance companies						2,832		2,340
Additive detergent		1,528		1,055		1,644		1,666
Amounts due from insurance companies		376		414
Deposits and other assets		2,087		3,110		5,109		4,882
	$	12,243	$	6,492	$	19,514	$	15,699

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 recognize our insurance recoveries in the period that we assess the likelihood of recovery as being probable. At ~~both September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we have recognized amounts due from insurance companies of approximately $~~0.4~~2.8 million and $2.3 million, respectively, representing our best estimate of our probable insurance recoveries. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we ~~received reimbursements from insurance companies of approximately $0.3 million and~~ increased our estimate of our probable insurance recoveries by approximately ~~$0.3~~$0.5 million.

~~(6)~~(5) PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net was as follows (in thousands):


	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
Land	$	104,647	$	104,647	$	104,017	$	104,017
Terminals, pipelines and equipment		1,316,723		1,266,086		1,345,523		1,333,771
Furniture, fixtures and equipment		17,530		16,986		18,020		17,880
Construction in progress		16,219		32,997		16,273		17,362
		1,455,119		1,420,716		1,483,833		1,473,030
Less accumulated depreciation		(619,852)		(569,233)		(654,277)		(637,123)
	$	835,267	$	851,483	$	829,556	$	835,907

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, property, plant and equipment, net utilized by our customers in revenue operating lease arrangements consisted of approximately ~~$587.3~~$579.1 million and ~~$597.9~~$585.9 million, respectively, of terminals, pipelines and equipment. The terminals, pipelines and equipment primarily relates to our storage tanks and associated internal piping.

~~(7)~~(6) GOODWILL

Goodwill was as follows (in thousands):


	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
Brownsville terminals	$	8,485	$	8,485	$	8,485	$	8,485
West Coast terminals		10,101		10,101		10,101		10,101
	$	18,586	$	18,586	$	18,586	$	18,586

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Notes to consolidated financial statements (unaudited) (continued)

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 business segments (See Note 1615 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our Brownsville and West Coast terminals contained goodwill. We did not recognize any goodwill impairment charges during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 or during the year ended December 31, ~~2021~~2022 for these reporting units. However, an 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.

~~(8)~~(7) INVESTMENTS IN UNCONSOLIDATED AFFILIATES

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our investments in unconsolidated affiliates include a 42.5% Class A ownership interest in Battleground Oil Specialty Terminal Company LLC (“BOSTCO”), a 30% ownership interest in Olympic Pipeline Company, LLC, a 51% ownership interest in SeaPort Midstream 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 in BOSTCO 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. Olympic Pipeline Company is a 400-mile interstate refined petroleum products pipeline system running from Blaine, Washington to Portland, Oregon and a refined and renewable products terminal in Bayview, Washington. SeaPort Midstream is two terminal facilities located in Seattle, Washington and Portland, Oregon that encompasses approximately 1.3 million barrels of refined and renewable product storage. Frontera is a terminal facility located in Brownsville, Texas that encompasses approximately 1.7 million barrels of light petroleum product storage, as well as related ancillary facilities.

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,		March 31,		December 31,		March 31,		December 31,
	2022		2021		2022		2021		2023		2022		2023		2022
BOSTCO	42.5	%	42.5	%	$	198,083	$	200,301	42.5	%	42.5	%	$	193,606	$	195,770
Olympic Pipeline Company	30	%	30	%		77,789		80,941	30	%	30	%		78,649		77,934
SeaPort Midstream	51	%	51	%		30,220		29,136	51	%	51	%		31,183		30,788
Frontera	50	%	50	%		21,790		22,314	50	%	50	%		21,825		21,340
Total investments in unconsolidated affiliates					$	327,882	$	332,692					$	325,263	$	325,832

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our investment in BOSTCO includes approximately ~~$6.1~~$6.0 million and ~~$6.2~~$6.1 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.

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our investment in Olympic Pipeline Company includes approximately ~~$5.8~~$5.6 million and ~~$6.0~~$5.7 million, respectively, of excess investment related to property, plant and equipment

1816

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Notes to consolidated financial statements (unaudited) (continued)

being amortized over the useful life of the assets and approximately $20.2 million of excess investment related to goodwill. Excess investment is the amount by which our investment exceeds our proportionate share of the book value of the net assets of the Olympic Pipeline Company entity.

Earnings from investments in unconsolidated affiliates was as follows (in thousands):


	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2022		2021		2022		2021		2023		2022
BOSTCO	$	2,629	$	1,063	$	4,936	$	4,156	$	854	$	802
Olympic Pipeline Company		(407)		2,319		2,951		5,516		715		2,183
SeaPort Midstream		534		79		1,084		571		395		162
Frontera		166		330		808		1,592		(15)		81
Total earnings from investments in unconsolidated affiliates	$	2,922	$	3,791	$	9,779	$	11,835	$	1,949	$	3,228

Additional capital investments in unconsolidated affiliates for the funding of growth projects was as follows (in thousands):


	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2022		2021		2022		2021		2023		2022
BOSTCO	$	—	$	527	$	—	$	3,349	$	—	$	—
Olympic Pipeline Company		—		—		—		—		—		—
SeaPort Midstream		—		—		—		—		—		—
Frontera		—		—		—		—		500		—
Additional capital investments in unconsolidated affiliates	$	—	$	527	$	—	$	3,349	$	500	$	—

Cash distributions received from unconsolidated affiliates was as follows (in thousands):


	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2022		2021		2022		2021		2023		2022
BOSTCO	$	2,978	$	2,998	$	7,154	$	8,090	$	3,018	$	2,049
Olympic Pipeline Company		1,399		990		6,103		3,222		—		2,467
SeaPort Midstream		—		—		—		—		—		—
Frontera		977		947		1,332		3,164		—		—
Cash distributions received from unconsolidated affiliates	$	5,354	$	4,935	$	14,589	$	14,476	$	3,018	$	4,516

The summarized combined financial information of our unconsolidated affiliates was as follows (in thousands):

Balance sheets:


	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
Current assets	$	50,486	$	57,797	$	53,170	$	58,253
Long-term assets		751,391		760,169		765,490		770,715
Current liabilities		(30,754)		(38,701)		(29,957)		(41,711)
Long-term liabilities		(49,470)		(44,144)		(66,508)		(63,585)
Net assets	$	721,653	$	735,121	$	722,195	$	723,672

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Notes to consolidated financial statements (unaudited) (continued)

Statements of income:


	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2022		2021		2022		2021		2023		2022
Revenue	$	47,139	$	49,050	$	143,011	$	140,876	$	48,931	$	47,829
Expenses		(40,600)		(37,672)		(116,979)		(107,500)		(42,596)		(37,933)
Net income	$	6,539	$	11,378	$	26,032	$	33,376	$	6,335	$	9,896

~~(9)~~(8) OTHER ASSETS, NET

Other assets, net was as follows (in thousands):


	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
Customer relationships, net of accumulated amortization of $17,309 and $14,913, respectively	$	48,221	$	50,617
Affiliate loan		27,212		—
Unrealized gain on derivative instruments		10,237		—
Customer relationships, net of accumulated amortization of $18,907 and $18,108, respectively					$	46,623	$	47,422
Unrealized gain on interest rate swap agreements						4,887		10,338
SeaPort Midstream member loan		1,259		1,259		1,259		1,259
Long-term customer receivables		23		536
Deposits and other assets		770		734		747		691
	$	87,722	$	53,146	$	53,516	$	59,710

Customer relationships. Other assets, net include certain customer relationships at our West Coast terminals. These customer relationships are being amortized on a straight-line basis over approximately ten to twenty years.

~~Affiliate loan.~~ On March 30, 2022, the Company and TransMontaigne Operating Company L.P., our wholly owned subsidiary, made a $25 million affiliate loan to our indirect parent, Pike Petroleum Holdings, LLC (“PPH”). PPH is authorized to use the proceeds of the loan to cash collateralize a letter of credit facility and/or the operations of its subsidiary Gulf Operating, LLC. The outstanding principal amount of the loan bears interest at a market rate of LIBOR plus 15%. Any unpaid interest will be added to the outstanding principal at the end of each month. The outstanding principal plus any unpaid interest can be repaid at any time and becomes immediately due upon a change in control, a sale of the Company or sale of all or substantially all of the Company’s assets. With this loan we have reached our maximum allowable loans to affiliates under the Credit Agreement.

SeaPort Midstream member loan. We are party to a member revolving loan agreement with a total borrowing capacity of $5.0 million with ~~Seaport~~SeaPort Midstream due December 31, 2025. We are responsible for our proportionate share of 51% of this loan. At both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the total outstanding borrowings were $2.5 million. Accordingly, we have recorded a loan receivable of approximately $1.3 million, representing our proportionate share of the outstanding borrowings.

~~Long-term customer receivables.~~ Long-term customer receivables include amounts due under long-term terminaling services agreements, with certain of our customers; that provide for minimum annual throughput commitments. Interim billings are billed to our customers based on actual throughput volumes, whereas revenue is recognized for the minimum annual throughput commitment on a straight-line basis over the terms of the respective agreements.

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~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

~~(10)~~(9) ACCRUED LIABILITIES

Accrued liabilities were as follows (in thousands):


	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
Customer advances and deposits	$	11,209	$	10,572	$	12,668	$	11,816
Accrued compensation expense		10,770		12,497		8,318		13,384
Interest payable						2,965		8,346
Accrued property taxes		7,641		2,346		3,235		4,349
Interest payable		4,478		8,605
Accrued Washington State emissions allowances						2,493		—
Accrued environmental obligations		1,078		1,812		1,154		1,363
Accrued expenses and other		2,380		1,919		3,617		4,162
	$	37,556	$	37,751	$	34,450	$	43,420

Customer advances and deposits. Customer advances and deposits represents payments received for terminaling services in advance of the terminaling services being provided.

Accrued compensation expense. Accrued compensation expense includes our bonus, payroll, and savings and retention plan awards accruals.

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

Accrued Washington State emissions allowances. Accrued Washington State emissions allowances represent our liability to obtain allowances equal to our covered greenhouse gas emissions for certain products sold at the truck rack at our Tacoma, Washington terminal as required by the Washington State Climate Commitment Act implemented January 1, 2023.

Accrued environmental obligations. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we have accrued environmental obligations of approximately $~~1.1~~1.2 million and ~~$1.8~~$1.4 million, respectively, representing our best estimate of our remediation obligations. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we ~~made payments of approximately $1.0 million towards our environmental remediation obligations. During the nine months ended September 30, 2022, we increased~~decreased our estimate of our future environmental remediation costs by approximately ~~$0.3~~$0.2 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.

~~(11)~~(10) DEBT

Long-term debt is as follows (in thousands):

September 30,

December 31,

2022

2021
Senior secured term loan outstanding

$
992,500

$
1,000,000
Revolving credit facility outstanding

30,000

—
6.125% senior notes due in 2026

299,900

299,900
Unamortized deferred debt issuance costs ⁽¹⁾

(23,615)

(25,960)
Total debt

1,298,785

1,273,940
Current portion of senior secured term loan

(10,000)

(10,000)
Long-term debt

$
1,288,785

$
1,263,940


	March 31,		December 31,
	2023		2022
Senior secured term loan outstanding	$	987,500	$	990,000
Revolving credit facility outstanding		72,000		—
6.125% senior notes due in 2026		299,900		299,900
Unamortized deferred debt issuance costs ⁽¹⁾		(21,680)		(22,681)
Total debt		1,337,720		1,267,219
Current portion of senior secured term loan		(12,947)		(10,000)
Long-term debt	$	1,324,773	$	1,257,219

(1)

Deferred debt issuance costs are amortized using the effective interest method over the applicable term of the senior secured term loan and senior notes. ~~For the three months ended September 30, 2022 and 2021, amortization of deferred debt issuance costs was approximately $1.1 million and $1.0 million, respectively.~~

For the nine months ended September 30, 2022 and 2021, amortization of deferred debt issuance costs was approximately $3.2 million and $2.9 million, respectively. For both of the three and nine months ended September 30, 2022 and 2021, expense related to one-time debt issuance costs to secure mortgages related to the Credit Agreement was approximately $2.6 million and $nil, respectively.

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~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

Credit agreement. On November 17, 2021, the Company and TransMontaigne Operating Company L.P., our wholly owned subsidiary, entered into the Credit Agreement (“Credit Agreement”) for a $1 billion senior secured term loan and a $150 million revolving credit facility, with a letter of credit subfacility of $35 million. The senior secured term loan will mature on November 17, 2028 and the revolving credit facility will terminate (a) on November 14, 2025 in the event the 6.125% senior notes due in 2026 are not refinanced on or prior to such date or (b) in the event the senior notes have been refinanced on or prior to November 14, 2025, the earlier of (i) the new maturity date of the refinanced senior notes and (ii) November 17, 2026. Our obligations under the Credit Agreement are guaranteed by the Company, TransMontaigne Operating Company L.P. and all of its subsidiaries, and secured by a first priority security interest in favor of the lenders in substantially all of the Company’s, TransMontaigne Operating Company L.P.’s and all of its subsidiaries’ assets, including our investments in unconsolidated affiliates.

~~Proceeds from the $1 billion senior secured term loan were used as follows (in thousands):~~

Repayment of revolving credit facility

$
351,700
Payment for Pacific Northwest Contribution

256,300
Repayment of SeaPort Financing term loan

198,200
Distribution to TLP Finance Holdings, LLC for debt service

174,200
Deferred debt issuance costs

19,600
Proceeds from senior secured term loan

$
1,000,000

We may elect to have loans under the Credit Agreement bear interest, at either an adjusted LIBOR rate (subject to a 0.50% floor) plus an applicable margin of 3.50% or an alternate base rate plus an applicable margin of 2.50% per annum. We are also required to pay (i) a letter of credit fee of 3.50% per annum on the aggregate face amount of all outstanding letters of credit, (ii) to the issuing lender of each letter of credit, a fronting fee of no less than 0.125% per annum on the outstanding amount of each such letter of credit and (iii) commitment fees of 0.50% per annum on the daily unused amount of the revolving credit facility, in each case quarterly in arrears.

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

exceeds an amount equal to 35% of the aggregate revolving commitments, a consolidated senior secured net leverage ratio of no greater than 6.75 to 1.00. We were in compliance with all financial covenants as of and during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and the year ended December 31, ~~2021.~~2022.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the weighted average interest rate on borrowings was approximately ~~5.7%~~7.3% and ~~4.6%~~4.1%, respectively. At ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021,~~2022, our outstanding letters of credit were approximately $0.4 ~~million and $1.7 million, respectively.~~million.

Senior notes. On 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 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.~~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.

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~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

~~(12)~~(11) DEFERRED COMPENSATION EXPENSE

We have a savings and retention plan to compensate certain employees who provide services to the Company. The purpose of the savings and retention plan is to provide for the reward and retention of participants by providing them with awards that vest over future service periods. Awards under the plan 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 Company as specified in the plan. The awards are increased for the value of any accrued growth based on underlying investments deemed made with respect to the awards. The awards (including any accrued growth relating thereto) are subject to forfeiture until the vesting date. A person will satisfy the age and length of service thresholds of the plan upon the attainment of the earliest of (a) age sixty, (b) age fifty-five and ten years of service as an officer of the Company or any of its affiliates or predecessors, or (c) age fifty and twenty years of service as an employee of the Company or any of its affiliates or predecessors.

We have the intent and ability to settle the savings and retention plan awards in cash, and accordingly, we account for the awards as accrued liabilities. For savings and retention plan awards to employees, approximately ~~$0.4 million is included in deferred compensation expense for both of the three months ended September 30, 2022 and 2021. For savings and retention plan awards to employees, approximately $1.7~~$1.2 million and ~~$1.6~~$1.0 million is included in deferred compensation expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

On December 31, 2021, an indirect parent of the Company modified existing grants of class B units in the indirect parent of the Company to ~~the~~certain officers of TransMontaigne Management Company. For both of the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we recognized approximately $0.4 million ~~and~~ ~~$nil~~, respectively, of deferred compensation expense in our consolidated statements of operations, non-cash contribution from parent entities in our consolidated statements of equity and non-cash equity-based compensation in our consolidated statements of cash flows related to the portion of the class B units that vested on December 31, 2021. For the nine months ended September 30, 2022 and 2021, we recognized approximately $1.3 million and ~~$nil, respectively,~~ of deferred compensation expense in our consolidated statements of operations, non-cash contribution from parent entities in our consolidated statements of equity and non-cash equity-based compensation in our consolidated statements of cash flows related to the portion of the class B units that vested on December 31, 2021.

~~(13)~~(12) COMMITMENTS AND CONTINGENCIES

Lessee operating lease commitments. 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 at lease commencement. Operating or finance lease right-of-use assets and liabilities are recognized at the

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

commencement 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 4948 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.

Operating right-of-use assets and operating lease liabilities are recognized based on the present value of the lease payments over the lease term at commencement date. The additions to right-of-use assets obtained from new operating lease liabilities ~~during the three and nine months ended September 30, 2022 of approximately~~ ~~$nil~~ ~~and $5.3 million, respectively,~~ are treated as non-cash transactions that do not impact the consolidated statements of cash flows. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We determined our incremental borrowing rate using the borrowing rate of our debt agreements. The terms of our corporate offices, vehicles and land leases are in line with the Credit Agreement, our primary finance mechanism. We have certain land and vehicle lease agreements with lease and non-lease

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~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

components, which are accounted for separately. Non-lease components include payments for taxes and other operating and maintenance expenses incurred by the lessor but payable by us in connection with the leasing arrangement. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company was party to certain subleasing arrangements whereby the Company, as the primary obligor on the lease, has recognized sublease income for lease payments made by affiliates to the lessor.

Following are components of our lease costs (in thousands):


	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2022		2021		2022		2021		2023		2022
Operating leases	$	1,390	$	1,308	$	4,179	$	3,757	$	1,422	$	1,396
Variable lease costs (including insignificant short-term leases)		329		215		941		679		408		652
Sublease income as primary obligor		(277)		(253)		(810)		(752)		(270)		(263)
Total lease costs	$	1,442	$	1,270	$	4,310	$	3,684	$	1,560	$	1,785

Other information related to our operating leases was as follows (in thousands, except lease term and discount rate):


	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2022		2021		2022		2021		2023		2022
Cash outflows for operating leases	$	1,181	$	1,115	$	3,750	$	3,521	$	1,435	$	1,431
Weighted average remaining lease term (years)		27.79		28.90		27.79		28.90		27.79		29.18
Weighted average discount rate		4.5%		4.5%		4.5%		4.5%		4.5%		4.5%

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

Undiscounted cash flows owed by the Company to lessors pursuant to contractual agreements in effect as of ~~September 30, 2022~~March 31, 2023 and related imputed interest was as follows (in thousands):


Years ending December 31:
2022 (remainder of the year)	$	1,642
2023		5,492
2023 (remainder of the year)			$	4,282
2024		5,288		5,527
2025		4,850		4,916
2026		3,544		3,602
2027				3,443
Thereafter		73,140		69,703
Total lease payments		93,956		91,473
Less imputed interest		(40,347)		(39,219)
Present value of operating lease liabilities	$	53,609	$	52,254

Contract commitments. At ~~September 30, 2022,~~March 31, 2023, we have contractual commitments of approximately ~~$26.5~~$30.1 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 within a year.

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.

~~Table of Contents~~

~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

~~(14)~~(13) DISCLOSURES ABOUT FAIR VALUE

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. There were no transfers into or out of Levels 1, 2, and 3 during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. The following methods and assumptions were used to estimate the fair value of financial instruments at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

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 estimated fair value of our ~~$992.5~~$987.5 million senior secured term loan at ~~September 30, 2022~~March 31, 2023 was approximately ~~$939.2~~$971.5 million based on observable market trades. The estimated fair value of our $299.9 million publicly

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

traded senior notes at ~~September 30, 2022~~March 31, 2023 was approximately ~~$250.4~~$257.9 million based on observable market trades. 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 fair value of our debt is categorized in Level 2 of the fair value hierarchy.

Non-financial assets. The Company’s non-financial assets, which primarily consist of property and equipment, right-of-use assets, goodwill and other intangible assets, are not required by GAAP to be carried at fair value on a recurring basis and are reported at carrying value. The fair values of these assets are determined, as required by GAAP, based on Level 3 measurements, including estimates of the amount and timing of future cash flows based upon historical experience, expected market conditions, and management’s plans.

(14) 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
	March 31,
	2023		2022
Terminaling services fees:
Firm commitments (ASC 842 revenue)	$	46,614	$	45,447
Firm commitments (ASC 606 revenue)		10,356		8,822
Total firm commitments revenue		56,970		54,269
Ancillary revenue (ASC 606 revenue)		16,399		16,821
Ancillary revenue (ASC 842 revenue)		860		557
Total ancillary revenue		17,259		17,378
Total terminaling services fees		74,229		71,647
Product sales (ASC 606 revenue)		61,429		71,679
Management fees (ASC 606 revenue)		3,721		3,073
Management fees (ASC 842 revenue)		365		331
Total management fees		4,086		3,404
Total revenue	$	139,744	$	146,730

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):

2523

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TransMontaigne Partners LLC and Subsidiaries

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

Nine months ended

September 30,

September 30,


2022

2021

2022

2021
Terminaling services fees:

Firm commitments (ASC 842 revenue)

$
45,652

$
46,490

$
136,419

$
140,006
Firm commitments (ASC 606 revenue)

9,840

9,281

28,072

27,286
Total firm commitments revenue

55,492

55,771

164,491

167,292
Ancillary revenue (ASC 606 revenue)

18,404

13,050

51,235

37,887
Ancillary revenue (ASC 842 revenue)

587

326

1,448

1,457
Total ancillary revenue

18,991

13,376

52,683

39,344
Total terminaling services fees

74,483

69,147

217,174

206,636
Product sales (ASC 606 revenue)

100,840

70,083

280,714

168,172
Management fees (ASC 606 revenue)

2,990

2,817

8,997

8,480
Management fees (ASC 842 revenue)

360

337

1,053

996
Total management fees

3,350

3,154

10,050

9,476
Pipeline transportation fees (ASC 842 revenue)

—

—

—

638
Total revenue

$
178,673

$
142,384

$
507,938

$
384,922

Estimated Future ASC 606 Revenue by Segment


	Gulf Coast		Midwest		Brownsville		River		Southeast		West Coast		Central				Gulf Coast		Midwest		Brownsville		River		Southeast		West Coast		Central
	Terminals		Terminals		Terminals		Terminals		Terminals		Terminals		Services		Total		Terminals		Terminals		Terminals		Terminals		Terminals		Terminals		Services		Total
2022 (remainder of the year)	$	1,245	$	222	$	737	$	276	$	2,126	$	4,562	$	—	$	9,168
2023		1,802		514		2,247		546		6,085		8,813		—		20,007
2023 (remainder of the year)																	$	3,210	$	697	$	1,695	$	276	$	7,972	$	11,870	$	—	$	25,720
2024		—		40		2,232		—		4,870		174		—		7,316		353		77		2,259		—		7,947		1,500		—		12,136
2025		—		—		2,232		—		4,870		—		—		7,102		—		—		2,259		—		6,031		557		—		8,847
2026		—		—		546		—		4,833		—		—		5,379		—		—		552		—		6,031		—		—		6,583
2027																		—		—		—		—		5,026		—		—		5,026
Thereafter		—		—		—		—		4,003		—		—		4,003		—		—		—		—		—		—		—		—
Total estimated future ASC 606 revenue	$	3,047	$	776	$	7,994	$	822	$	26,787	$	13,549	$	—	$	52,975	$	3,563	$	774	$	6,765	$	276	$	33,007	$	13,927	$	—	$	58,312

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 ~~September 30, 2022~~March 31, 2023 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.

~~Table of Contents~~

~~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. 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 842 revenue in the specified period (in thousands):


Years ending December 31:
2022 (remainder of the year)	$	44,665
2023		151,318
2023 (remainder of the year)			$	128,016
2024		105,478		121,214
2025		77,548		88,875
2026		57,702		61,484
2027				45,545
Thereafter		469,623		439,791
Total estimated future ASC 842 revenue	$	906,334	$	884,925

BALANCE SHEET DISCLOSURES

Contract assets. Our contract assets ~~include~~are limited to trade accounts receivable and long-term customer receivables. We have long-term terminaling services agreements with certain of our customers that provide for minimum annual throughput commitments that are billed to the customers based on actual throughput volume whereas revenue is recognized under ASC 606 and ASC 842 on a straight-line basis over the terms of the respective agreements. The difference between the amount billed and revenue recognized is a contract asset. This asset is presented as other assets, net in our consolidated balance sheets (See Note 9 of Notes to consolidated financial statements).receivable.

The following tables present our contract assets resulting from contracts with customers (in thousands):

Contracts under

ASC 606

ASC 842

Total
Trade accounts receivable at December 31, 2021

$
12,792

$
7,236

$
20,028
Trade accounts receivable at September 30, 2022

$
25,630

$
9,649

$
35,279

Contracts under

ASC 606

ASC 842

Total
Long-term customer receivables at December 31, 2021

$
—

$
536

$
536
Long-term customer receivables at September 30, 2022

$
—

$
23

$
23

~~Revenue recognized during the nine months ended September 30, 2022, from amounts included in long-term customer receivables at December 31, 2021, was~~ ~~$nil~~ ~~for contracts under ASC 606 and approximately $0.5 million for contracts under ASC 842.~~


	Contracts under
	ASC 606		ASC 842			Total
Trade accounts receivable at December 31, 2022	$	33,127	$	12,933	$	46,060
Trade accounts receivable at March 31, 2023	$	15,850	$	8,250	$	24,100

Contract liabilities. Our contract liabilities include deferred revenue and customer advances and deposits. 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 on a straight-line basis over the term of the

Table of Contents

TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

respective agreements. In addition, pursuant to certain agreements with our customers, we agreed to undertake certain capital projects. Upon completion of the projects, our customers have paid us amounts that will be recognized as revenue on a straight-line basis over the remaining term of the agreements. Collectively, the differences between amounts billed and revenue recognized under ASC 606 and ASC 842 are recorded as contract liabilities. These liabilities are presented as deferred revenue in our consolidated balance sheets. We record customer advances and deposits when payments are received from customers in advance of the terminaling services being provided, resulting in a contract liability accounted for under ASC 606 and ASC 842. This liability is presented as accrued liabilities in our consolidated balance sheets (See Note 109 of Notes to consolidated financial statements).

~~Table of Contents~~

~~TransMontaigne Partners LLC and Subsidiaries~~

~~Notes to consolidated financial statements (unaudited) (continued)~~

The following table presents our contract liabilities resulting from contracts with customers (in thousands):


	Contracts under						Contracts under
	ASC 606		ASC 842		Total		ASC 606		ASC 842		Total
Contract liabilities at December 31, 2021	$	1,301	$	12,605	$	13,906
Contract liabilities at September 30, 2022	$	1,658	$	10,905	$	12,563
Contract liabilities at December 31, 2022							$	1,574	$	11,462	$	13,036
Contract liabilities at March 31, 2023							$	1,257	$	12,648	$	13,905

Revenue recognized during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, from amounts included in contract liabilities at December 31, ~~2021,~~2022, was approximately ~~$1.3~~$1.5 million for contracts under ASC 606 and approximately ~~$11.5~~$10.4 million for contracts under ASC 842.

~~(16)~~(15) BUSINESS SEGMENTS

We provide integrated terminaling, storage, transportation and related services to companies engaged in the trading, distribution and marketing of refined petroleum products, renewable products, crude oil, chemicals, fertilizers and other liquid products. In addition, we sell refined and renewable products to major fuel producers and marketers in the Pacific Northwest at our terminal ~~operations~~ in Tacoma, ~~and Seattle,~~ Washington. Our chief operating decision maker is the Company’s chief executive officer. The 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 cost of product sales and operating costs and expenses. Accordingly, we present “net margins” for each of our business segments: (i) Gulf Coast terminals, (ii) Midwest terminals, (iii) Brownsville terminals including management of the Frontera joint venture, (iv) River terminals, (v) Southeast 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 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.

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TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

The financial performance of our business segments was as follows (in thousands):


	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2022		2021		2022		2021		2023		2022
Gulf Coast Terminals:
Terminaling services fees	$	21,595	$	18,699	$	63,917	$	57,148	$	21,993	$	21,625
Management fees		17		12		47		37		15		14
Revenue		21,612		18,711		63,964		57,185		22,008		21,639
Operating costs and expenses		(5,965)		(5,422)		(16,931)		(16,484)		(6,054)		(5,963)
Net margins		15,647		13,289		47,033		40,701		15,954		15,676
Midwest Terminals:
Terminaling services fees		2,512		2,394		7,558		7,963		3,214		2,529
Revenue		2,512		2,394		7,558		7,963		3,214		2,529
Operating costs and expenses		(459)		(474)		(1,377)		(1,743)		(497)		(469)
Net margins		2,053		1,920		6,181		6,220		2,717		2,060
Brownsville Terminals:
Terminaling services fees		5,370		4,427		15,129		12,719		4,844		4,949
Management fees		1,480		1,454		4,467		4,048		1,626		1,531
Pipeline transportation fees		—		—		—		638
Revenue		6,850		5,881		19,596		17,405		6,470		6,480
Operating costs and expenses		(2,746)		(2,331)		(7,745)		(6,922)		(2,592)		(2,623)
Net margins		4,104		3,550		11,851		10,483		3,878		3,857
River Terminals:
Terminaling services fees		3,964		3,534		11,252		10,449		3,495		3,564
Revenue		3,964		3,534		11,252		10,449		3,495		3,564
Operating costs and expenses		(1,776)		(1,590)		(4,996)		(4,823)		(1,722)		(1,656)
Net margins		2,188		1,944		6,256		5,626		1,773		1,908
Southeast Terminals:
Terminaling services fees		17,581		19,465		52,243		57,715		17,134		17,441
Management fees		268		298		776		830		291		253
Revenue		17,849		19,763		53,019		58,545		17,425		17,694
Operating costs and expenses		(6,291)		(5,809)		(19,147)		(17,641)		(6,181)		(6,654)
Net margins		11,558		13,954		33,872		40,904		11,244		11,040
West Coast Terminals:
Product sales		100,840		70,083		280,714		168,172		61,429		71,679
Terminaling services fees		23,461		20,628		67,075		60,642		23,549		21,539
Management fees		10		10		31		30		11		10
Revenue		124,311		90,721		347,820		228,844		84,989		93,228
Cost of product sales		(96,173)		(65,769)		(269,335)		(157,765)		(59,326)		(69,453)
Operating costs and expenses		(8,747)		(7,304)		(26,396)		(23,906)		(10,004)		(8,991)
Costs and expenses		(104,920)		(73,073)		(295,731)		(181,671)		(69,330)		(78,444)
Net margins		19,391		17,648		52,089		47,173		15,659		14,784
Central Services:
Management fees		1,575		1,380		4,729		4,531		2,143		1,596
Revenue		1,575		1,380		4,729		4,531		2,143		1,596
Operating costs and expenses		(3,721)		(3,808)		(12,109)		(11,236)		(4,855)		(4,446)
Net margins		(2,146)		(2,428)		(7,380)		(6,705)		(2,712)		(2,850)
Total net margins		52,795		49,877		149,902		144,402		48,513		46,475
General and administrative		(6,967)		(7,425)		(22,430)		(18,575)		(8,040)		(7,755)
Insurance		(1,525)		(1,580)		(4,780)		(4,673)		(1,638)		(1,552)
Deferred compensation		(786)		(355)		(3,006)		(1,572)		(1,635)		(1,444)
Depreciation and amortization		(17,886)		(17,149)		(53,015)		(51,232)		(17,953)		(17,500)
Earnings from unconsolidated affiliates		2,922		3,791		9,779		11,835		1,949		3,228
Operating income		28,553		27,159		76,450		80,185		21,196		21,452
Other expenses (interest and deferred debt issuance costs)		(6,311)		(11,231)		(37,278)		(33,630)		(32,226)		(15,581)
Net earnings	$	22,242	$	15,928	$	39,172	$	46,555
Net earnings (loss)									$	(11,030)	$	5,871

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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 March 31, 2023

	Gulf Coast		Midwest		Brownsville		River		Southeast		West Coast		Central
	Terminals		Terminals		Terminals		Terminals		Terminals		Terminals		Services		Total
Revenue:
Terminal revenue	$	22,008	$	3,214	$	6,470	$	3,495	$	17,425	$	23,560	$	2,143	$	78,315
Product sales		—		—		—		—		—		61,429		—		61,429
Revenue	$	22,008	$	3,214	$	6,470	$	3,495	$	17,425	$	84,989	$	2,143	$	139,744
Capital expenditures	$	2,140	$	—	$	1,217	$	866	$	3,775	$	4,581	$	141	$	12,720
Identifiable assets	$	135,782	$	16,238	$	112,087	$	45,194	$	229,952	$	439,642	$	11,378	$	990,273
Cash and cash equivalents																5,036
Investments in unconsolidated affiliates																325,263
Other																18,378
Total assets															$	1,338,950

Three months ended September 30, 2022

Gulf Coast

Midwest

Brownsville

River

Southeast

West Coast

Central


Terminals

Terminals

Terminals

Terminals

Terminals

Terminals

Services

Total
Revenue:

Terminal revenue

$
21,612

$
2,512

$
6,850

$
3,964

$
17,849

$
23,471

$
1,575

$
77,833
Product sales

—

—

—

—

—

100,840

—

100,840
Revenue

$
21,612

$
2,512

$
6,850

$
3,964

$
17,849

$
124,311

$
1,575

$
178,673
Capital expenditures

$
1,676

$
256

$
1,274

$
407

$
1,634

$
5,096

$
345

$
10,688
Identifiable assets

$
138,367

$
16,317

$
113,502

$
46,565

$
234,074

$
448,007

$
11,055

$
1,007,887
Cash and cash equivalents

16,027
Investments in unconsolidated affiliates

327,882
Other

47,926
Total assets

$
1,399,722

Three months ended September 30, 2021

Gulf Coast

Midwest

Brownsville

River

Southeast

West Coast

Central


Terminals

Terminals

Terminals

Terminals

Terminals

Terminals

Services

Total
Revenue:

Terminal revenue

$
18,711

$
2,394

$
5,881

$
3,534

$
19,763

$
20,638

$
1,380

$
72,301
Product sales

—

—

—

—

—

70,083

—

70,083
Revenue

$
18,711

$
2,394

$
5,881

$
3,534

$
19,763

$
90,721

$
1,380

$
142,384
Capital expenditures

$
3,589

$
14

$
2,412

$
719

$
3,077

$
12,835

$
46

$
22,692

Nine months ended September 30, 2022

Gulf Coast

Midwest

Brownsville

River

Southeast

West Coast

Central


Terminals

Terminals

Terminals

Terminals

Terminals

Terminals

Services

Total
Revenue:

Terminal revenue

$
63,964

$
7,558

$
19,596

$
11,252

$
53,019

$
67,106

$
4,729

$
227,224
Product sales

—

—

—

—

—

280,714

—

280,714
Revenue

$
63,964

$
7,558

$
19,596

$
11,252

$
53,019

$
347,820

$
4,729

$
507,938
Capital expenditures

$
8,594

$
713

$
3,145

$
699

$
6,407

$
16,932

$
590

$
37,080


	Nine months ended September 30, 2021																Three months ended March 31, 2022

	Gulf Coast		Midwest		Brownsville		River		Southeast		West Coast		Central				Gulf Coast		Midwest		Brownsville		River		Southeast		West Coast		Central
	Terminals		Terminals		Terminals		Terminals		Terminals		Terminals		Services		Total		Terminals		Terminals		Terminals		Terminals		Terminals		Terminals		Services		Total
Revenue:
Terminal revenue	$	57,185	$	7,963	$	17,405	$	10,449	$	58,545	$	60,672	$	4,531	$	216,750	$	21,639	$	2,529	$	6,480	$	3,564	$	17,694	$	21,549	$	1,596	$	75,051
Product sales		—		—		—		—		—		168,172		—		168,172		—		—		—		—		—		71,679		—		71,679
Revenue	$	57,185	$	7,963	$	17,405	$	10,449	$	58,545	$	228,844	$	4,531	$	384,922	$	21,639	$	2,529	$	6,480	$	3,564	$	17,694	$	93,228	$	1,596	$	146,730
Capital expenditures	$	6,011	$	66	$	8,511	$	4,552	$	8,266	$	19,464	$	118	$	46,988	$	4,519	$	338	$	636	$	164	$	1,695	$	6,427	$	18	$	13,797

~~(17)~~(16) SUBSEQUENT EVENT

~~No subsequent transactions~~In April 2023, the Company and TransMontaigne Operating Company L.P., our wholly owned subsidiary, entered into interest rate swap agreements with notional amounts of $100 million and $200 million effective for periods between August 18, 2023 and 2026 through August 18, 2026 and 2028, respectively. Pursuant to the terms of the interest rate swap agreements, we will pay a blended fixed rate of approximately 3.2% and receive interest payments based on the one-month CME Term SOFR. The net difference to be paid or ~~events warranted recognition or disclosure in~~received under the ~~accompanying financials or notes thereto.~~interest rate swap agreements will be settled monthly and recognized as an adjustment to interest expense.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 Note 1 of Notes to consolidated financial statements as of and for the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. Certain of these accounting policies require the use of estimates. In management’s opinion, the estimate of useful lives of our plant and equipment are subjective in nature, require the exercise of judgment and involve complex analyses. 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.

RESULTS OF OPERATIONS—THREE MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2023 AND 2022 ~~AND 2021~~

The Pacific Northwest Contribution has been recorded at carryover basis as a reorganization of entities under common control. As such, prior periods set forth herein and under Item 1. “Unaudited Consolidated Financial Statements” of this Quarterly Report, include the assets, liabilities, and results of operations of the Pacific Northwest Contribution for all periods presented.

We operate our business and report our results of operations in seven principal business segments: (i) Gulf Coast terminals, (ii) Midwest terminals, (iii) Brownsville terminals including management of Frontera, (iv) River terminals, (v) Southeast 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 terminals that we operate. In addition, Central services represent the cost of employees at standalone affiliate terminals that we operate or manage. We receive a fee from these affiliates based on our costs incurred.

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

Terminal revenue. We derive terminal revenue from our terminal ~~and pipeline transportation~~ operations by charging fees for providing integrated terminaling, transportation and related services.

The terminal revenue by category was as follows (in thousands):

Terminal Revenue by Category


	Three months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
Terminaling services fees	$	74,483	$	69,147	$	74,229	$	71,647
Management fees		3,350		3,154		4,086		3,404
Pipeline transportation fees		—		—
Terminal revenue	$	77,833	$	72,301	$	78,315	$	75,051

Product sales, gross margin. Our product sales revenue refers to the sale of refined and renewable products at our terminal ~~operations~~ in Tacoma, ~~and Seattle,~~ Washington. Product sales revenue pricing is contractually specified and is recognized at a point in time when our customers take control and legal title of the commodities purchased. Product sales revenue is recorded gross of cost of product sales, which includes product supply and transportation costs.

~~Table of Contents~~

The product sales, gross margin was as follows (in thousands):


	Three months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
Product sales	$	100,840	$	70,083	$	61,429	$	71,679
Cost of product sales		(96,173)		(65,769)		(59,326)		(69,453)
Product sales, gross margin	$	4,667	$	4,314	$	2,103	$	2,226

Table of Contents

The ~~increase~~decrease in product sales and cost of product sales for the three months ended ~~September 30, 2022,~~March 31, 2023, is a result of ~~increased~~decreased product ~~prices and~~sales volumes in ~~2022.~~2023.

The terminal revenue by business segment is presented and further analyzed below by category of revenue.

Terminal Revenue by Business Segment


	Three months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
Gulf Coast terminals	$	21,612	$	18,711	$	22,008	$	21,639
Midwest terminals		2,512		2,394		3,214		2,529
Brownsville terminals		6,850		5,881		6,470		6,480
River terminals		3,964		3,534		3,495		3,564
Southeast terminals		17,849		19,763		17,425		17,694
West Coast terminals		23,471		20,638		23,560		21,549
Central services		1,575		1,380		2,143		1,596
Terminal revenue	$	77,833	$	72,301	$	78,315	$	75,051

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 volume 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.” 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.” 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.

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The terminaling services fees by business segments were as follows (in thousands):

Terminaling Services Fees by Business Segment



	Three months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
Gulf Coast terminals	$	21,595	$	18,699	$	21,993	$	21,625
Midwest terminals		2,512		2,394		3,214		2,529
Brownsville terminals		5,370		4,427		4,844		4,949
River terminals		3,964		3,534		3,495		3,564
Southeast terminals		17,581		19,465		17,134		17,441
West Coast terminals		23,461		20,628		23,549		21,539
Central services		—		—		—		—
Terminaling services fees	$	74,483	$	69,147	$	74,229	$	71,647

~~The increase in terminaling services fees at our Gulf Coast terminals is primarily due to contracting available capacity and increased ancillary fees.~~

The decrease in terminaling services fees at our Southeast terminals is primarily due to available capacity at our Collins, Mississippi terminal and recontracting capacity at lower rates at our Collins, Mississippi terminal.

The increase in terminaling services fees at our West Coast terminals is primarily a result of placing various growth projects into service during the first quarter of 2022 and increased ancillary fees.

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Included in terminaling services fees for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ are fees charged to affiliates of approximately ~~$3.0~~$2.9 million and ~~$3.6~~$3.1 million, respectively.

The “firm commitments” and “ancillary” revenue included in terminaling services fees were as follows (in thousands):

Firm Commitments and Ancillary Revenue


	Three months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
Firm commitments	$	55,492	$	55,771	$	56,970	$	54,269
Ancillary		18,991		13,376		17,259		17,378
Terminaling services fees	$	74,483	$	69,147	$	74,229	$	71,647

The remaining terms on the terminaling services agreements that generated “firm commitments” for the three months ended ~~September 30, 2022~~March 31, 2023 are as follows (in thousands):


Less than 1 year remaining	$	16,675	30%	$	22,451	39%
1 year or more, but less than 3 years remaining		20,147	36%		15,895	28%
3 years or more, but less than 5 years remaining		7,678	14%		8,642	15%
5 years or more remaining⁽¹⁾		10,992	20%		9,982	18%
Total firm commitments for the three months ended September 30, 2022	$	55,492
Total firm commitments for the three months ended March 31, 2023				$	56,970

_____________________________

(1)

We have a terminaling services agreement with a third party relating to our Southeast terminals that will continue unless and until the third party 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.

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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 Frontera joint venture and receive a management fee based on our costs incurred. We lease land under operating leases as the lessor or sublessor with third parties and affiliates. 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 manage and operate the SeaPort Midstream joint venture and receive a management fee based on our costs incurred. We also manage additional terminal facilities that are owned by affiliates of ArcLight, including Lucknow-Highspire Terminals, LLC, which operates terminals throughout Pennsylvania encompassing approximately 9.9 million barrels of storage capacity and we receive a management fee based on our costs incurred.

The management fees by business segments were as follows (in thousands):

Management Fees by Business Segment


	Three months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
Gulf Coast terminals	$	17	$	12	$	15	$	14
Midwest terminals		—		—		—		—
Brownsville terminals		1,480		1,454		1,626		1,531
River terminals		—		—		—		—
Southeast terminals		268		298		291		253
West Coast terminals		10		10		11		10
Central services		1,575		1,380		2,143		1,596
Management fees	$	3,350	$	3,154	$	4,086	$	3,404

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Included in management fees for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ are fees charged to affiliates of approximately ~~$3.1~~$3.8 million and ~~$2.8~~$3.1 million, respectively.

ANALYSIS OF COSTS AND EXPENSES

The operating costs and expenses of our operations include wages and employee benefits, utilities, communications, repairs and maintenance, rent, property taxes, vehicle expenses, environmental compliance costs, materials and supplies needed to operate our ~~terminals and pipelines.~~terminals. Consistent with historical trends across our terminaling and transportation facilities, repairs and maintenance expenses can vary from period to period based on project maintenance schedules and other factors such as weather.

The operating costs and expenses of our operations were as follows (in thousands):

Operating Costs and Expenses


	Three months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
Wages and employee benefits	$	13,407	$	13,055	$	14,501	$	14,397
Utilities and communication charges		3,850		2,997		4,548		3,538
Repairs and maintenance		2,796		2,656		2,682		3,649
Office, rentals and property taxes		4,809		4,479
Property taxes and rentals						4,812		4,947
Vehicles and fuel costs		326		278		393		304
Environmental compliance costs		1,147		918		954		1,123
Additive detergent costs						973		775
Contract services						717		740
Other		3,370		2,355		2,325		1,329
Operating costs and expenses	$	29,705	$	26,738	$	31,905	$	30,802

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The operating costs and expenses of our business segments were as follows (in thousands):

Operating Costs and Expenses by Business Segment


	Three months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
Gulf Coast terminals	$	5,965	$	5,422	$	6,054	$	5,963
Midwest terminals		459		474		497		469
Brownsville terminals		2,746		2,331		2,592		2,623
River terminals		1,776		1,590		1,722		1,656
Southeast terminals		6,291		5,809		6,181		6,654
West Coast terminals		8,747		7,304		10,004		8,991
Central services		3,721		3,808		4,855		4,446
Operating costs and expenses	$	29,705	$	26,738	$	31,905	$	30,802

General and administrative expenses cover the costs of corporate functions such as legal, accounting, treasury, insurance administration and claims processing, information technology, human resources, credit, payroll, taxes and other corporate services. General and administrative expenses also include third party accounting costs associated with annual and quarterly reports and tax return preparation and distribution, and legal fees. The general and administrative expenses were approximately ~~$7.0~~$8.0 million and ~~$7.4~~$7.8 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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. For both of the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the expense associated with insurance was approximately ~~$1.5 million and~~ $1.6 ~~million, respectively.~~million.

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Deferred compensation expense includes expense associated with awards granted to certain employees who provide service to us that vest over future service periods. The expense associated with these deferred compensation awards was approximately ~~$0.8~~$1.6 million and ~~$0.4~~$1.4 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

For the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ depreciation and amortization expense was approximately ~~$17.9~~$18.0 million and ~~$17.1~~$17.5 million, respectively.

For the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ interest expense was approximately ~~$2.6~~$31.2 million and ~~$10.2~~$14.6 million, respectively. The ~~decrease~~increase in interest expense is ~~primarily~~ attributable to an approximately ~~$15.8~~$7.6 million unrealized ~~gain~~loss on our ~~$500 million~~ interest rate swap ~~agreements.~~

~~ANALYSIS OF INVESTMENTS IN UNCONSOLIDATED AFFILIATES~~

~~Our investments~~agreements and increases in ~~unconsolidated affiliates include a 42.5% Class A ownership~~LIBOR based interest in BOSTCO, a 30% ownership interest in Olympic Pipeline Company, a 51% ownership interest in SeaPort Midstream 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 in BOSTCO 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. Olympic Pipeline Company is a 400-mile interstate refined petroleum products pipeline system running from Blaine, Washington to Portland, Oregon and a refined and renewable products terminal in Bayview, Washington. SeaPort Midstream is two terminal facilities located in Seattle, Washington and Portland, Oregon that encompasses approximately 1.3 million barrels of refined and

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renewable product storage. Frontera is a terminal facility located in Brownsville, Texas that encompasses approximately 1.7 million barrels of light petroleum product storage, as well as related ancillary facilities.

~~Earnings from investments in unconsolidated affiliates was as follows (in thousands):~~

Three months ended September 30,


2022

2021
BOSTCO

$
2,629

$
1,063
Olympic Pipeline Company

(407)

2,319
SeaPort Midstream

534

79
Frontera

166

330
Total earnings from investments in unconsolidated affiliates

$
2,922

$
3,791

~~Additional capital investments in unconsolidated affiliates for the funding of growth projects was as follows (in thousands):~~

Three months ended September 30,

2022

2021
BOSTCO

$
—

$
527
Olympic Pipeline Company

—

—
SeaPort Midstream

—

—
Frontera

—

—
Additional capital investments in unconsolidated affiliates

$
—

$
527

~~Cash distributions received from unconsolidated affiliates was as follows (in thousands):~~

Three months ended September 30,

2022

2021
BOSTCO

$
2,978

$
2,998
Olympic Pipeline Company

1,399

990
SeaPort Midstream

—

—
Frontera

977

947
Cash distributions received from unconsolidated affiliates

$
5,354

$
4,935

~~RESULTS OF OPERATIONS—NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021~~

~~Table of Contents~~

~~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~~

~~Terminal revenue.~~ ~~We derive terminal revenue from our terminal and pipeline transportation operations by charging fees for providing integrated terminaling, transportation and related services.~~

~~The terminal revenue by category was as follows (in thousands):~~

~~Terminal Revenue by Category~~

Nine months ended September 30,

2022

2021
Terminaling services fees

$
217,174

$
206,636
Management fees

10,050

9,476
Pipeline transportation fees

—

638
Terminal revenue

$
227,224

$
216,750

~~Product sales, gross margin.~~ Our product sales revenue refers to the sale of refined and renewable products at our terminal operations in Tacoma and Seattle, Washington. Product sales revenue pricing is contractually specified and is recognized at a point in time when our customers take control and legal title of the commodities purchased. Product sales revenue is recorded gross of cost of product sales, which includes product supply and transportation costs.

~~The product sales, gross margin was as follows (in thousands):~~

Nine months ended September 30,

2022

2021
Product sales

$
280,714

$
168,172
Cost of product sales

(269,335)

(157,765)
Product sales, gross margin

$
11,379

$
10,407

~~The increase in product sales and cost of product sales for the nine months ended September 30, 2022, is a result of increased product prices and volumes in 2022.~~

~~The terminal revenue by business segment is presented and further analyzed below by category of revenue.~~

~~Terminal Revenue by Business Segment~~

Nine months ended September 30,

2022

2021
Gulf Coast terminals

$
63,964

$
57,185
Midwest terminals

7,558

7,963
Brownsville terminals

19,596

17,405
River terminals

11,252

10,449
Southeast terminals

53,019

58,545
West Coast terminals

67,106

60,672
Central services

4,729

4,531
Terminal revenue

$
227,224

$
216,750

~~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 volume 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

~~Table of Contents~~

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.

~~The terminaling services fees by business segments were as follows (in thousands):~~

~~Terminaling Services Fees by Business Segment~~

Nine months ended September 30,

2022

2021

Gulf Coast terminals

$
63,917

$
57,148

Midwest terminals

7,558

7,963

Brownsville terminals

15,129

12,719

River terminals

11,252

10,449

Southeast terminals

52,243

57,715

West Coast terminals

67,075

60,642

Central services

—

—

Terminaling services fees

$
217,174

$
206,636

~~The increase in terminaling services fees at our Gulf Coast terminals is primarily due to contracting available capacity and increased ancillary fees.~~

The increase in terminaling services fees at our Brownsville terminals is primarily a result of placing into service approximately 0.2 million barrels of new tank capacity and construction of gasoline railcar loading capabilities during the first quarter of 2021 and increased ancillary fees.

~~Included in terminaling services fees for the nine months ended September 30, 2022 and 2021, are fees charged to affiliates of approximately $8.7 million and $9.2 million, respectively.~~

~~The “firm commitments” and “ancillary” revenue included in terminaling services fees were as follows (in thousands):~~

~~Firm Commitments and Ancillary Revenue~~

Nine months ended September 30,

2022

2021
Firm commitments

$
164,491

$
167,292
Ancillary

52,683

39,344
Terminaling services fees

$
217,174

$
206,636

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~~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 Frontera joint venture and receive a management fee based on our costs incurred. We lease land under operating leases as the lessor or sublessor with third parties and affiliates. 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 manage and operate the SeaPort Midstream joint venture and receive a management fee based on our costs incurred. We also manage additional terminal facilities that are owned by affiliates of ArcLight, including Lucknow-Highspire Terminals, LLC, which operates terminals throughout Pennsylvania encompassing approximately 9.9 million barrels of storage capacity and we receive a management fee based on our costs incurred.

~~The management fees by business segments were as follows (in thousands):~~

~~Management Fees by Business Segment~~

Nine months ended September 30,

2022

2021
Gulf Coast terminals

$
47

$
37
Midwest terminals

—

—
Brownsville terminals

4,467

4,048
River terminals

—

—
Southeast terminals

776

830
West Coast terminals

31

30
Central services

4,729

4,531
Management fees

$
10,050

$
9,476

~~Included in management fees for the nine months ended September 30, 2022 and 2021, are fees charged to affiliates of approximately $9.2 million and $8.5 million, respectively.~~

~~The pipeline transportation fees by business segments were as follows (in thousands):~~

~~Pipeline Transportation Fees by Business Segment~~

Nine months ended September 30,

2022

2021
Gulf Coast terminals

$
—

$
—
Midwest terminals

—

—
Brownsville terminals

—

638
River terminals

—

—
Southeast terminals

—

—
West Coast terminals

—

—
Central services

—

—
Pipeline transportation fees

$
—

$
638

~~ANALYSIS OF COSTS AND EXPENSES~~

The operating costs and expenses of our operations include wages and employee benefits, utilities, communications, repairs and maintenance, rent, property taxes, vehicle expenses, environmental compliance costs, materials and supplies needed to operate our terminals and pipelines. Consistent with historical trends across our terminaling and transportation facilities, repairs and maintenance expenses can vary from period to period based on

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~~project maintenance schedules and other factors such as weather.~~

~~The operating costs and expenses of our operations were as follows (in thousands):~~

~~Operating Costs and Expenses~~

Nine months ended September 30,

2022

2021
Wages and employee benefits

$
40,779

$
39,051
Utilities and communication charges

10,590

8,608
Repairs and maintenance

9,534

9,882
Office, rentals and property taxes

14,354

13,223
Vehicles and fuel costs

985

789
Environmental compliance costs

3,572

4,317
Other

8,887

6,885
Operating costs and expenses

$
88,701

$
82,755

~~The operating costs and expenses of our business segments were as follows (in thousands):~~

~~Operating Costs and Expenses by Business Segment~~

Nine months ended September 30,

2022

2021
Gulf Coast terminals

$
16,931

$
16,484
Midwest terminals

1,377

1,743
Brownsville terminals

7,745

6,922
River terminals

4,996

4,823
Southeast terminals

19,147

17,641
West Coast terminals

26,396

23,906
Central services

12,109

11,236
Operating costs and expenses

$
88,701

$
82,755

General and administrative expenses cover the costs of corporate functions such as legal, accounting, treasury, insurance administration and claims processing, information technology, human resources, credit, payroll, taxes and other corporate services. General and administrative expenses also include third party accounting costs associated with annual and quarterly reports and tax return preparation and distribution, and legal fees. The general and administrative expenses were approximately $22.4 million and $18.6 million for the nine months ended September 30, 2022 and 2021, respectively. The increase in general and administrative expenses for the nine months ended September 30, 2022 is primarily attributable to higher compensation costs and legal costs.

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. For the nine months ended September 30, 2022 and 2021, the expense associated with insurance was approximately $4.8 million and $4.7 million, respectively.

Deferred compensation expense includes expense associated with awards granted to certain employees who provide service to us that vest over future service periods. The expense associated with these deferred compensation awards was approximately $3.0 million and $1.6 million for the nine months ended September 30, 2022 and 2021, respectively.

~~For the nine months ended September 30, 2022 and 2021, depreciation and amortization expense was approximately $53.0 million and $51.2 million, respectively.~~

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~~For the nine months ended September 30, 2022 and 2021, interest expense was approximately $31.5 million and $30.7 million, respectively.~~rates.

ANALYSIS OF INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Our investments in unconsolidated affiliates include a 42.5% Class A ownership interest in BOSTCO, a 30% ownership interest in Olympic Pipeline Company, a 51% ownership interest in SeaPort Midstream 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 in BOSTCO 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. Olympic Pipeline Company is a 400-mile interstate refined petroleum products pipeline system running from Blaine, Washington to Portland, Oregon and a refined and renewable products terminal in Bayview, Washington. SeaPort Midstream is two terminal facilities located in Seattle, Washington and Portland, Oregon that encompasses approximately 1.3 million barrels of refined and renewable product storage. Frontera is a terminal facility located in Brownsville, Texas that encompasses approximately 1.7 million barrels of light petroleum product storage, as well as related ancillary facilities.

Earnings from investments in unconsolidated affiliates was as follows (in thousands):


	Nine months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
BOSTCO	$	4,936	$	4,156	$	854	$	802
Olympic Pipeline Company		2,951		5,516		715		2,183
SeaPort Midstream		1,084		571		395		162
Frontera		808		1,592		(15)		81
Total earnings from investments in unconsolidated affiliates	$	9,779	$	11,835	$	1,949	$	3,228

The decrease in earnings from our investment in Olympic Pipeline Company for the three months ended March 31, 2023 is attributable to decreased tariff rates and volumes shipped on the pipeline.

Additional capital investments in unconsolidated affiliates for the funding of growth projects was as follows (in thousands):


	Nine months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
BOSTCO	$	—	$	3,349	$	—	$	—
Olympic Pipeline Company		—		—		—		—
SeaPort Midstream		—		—		—		—
Frontera		—		—		500		—
Additional capital investments in unconsolidated affiliates	$	—	$	3,349	$	500	$	—

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Cash distributions received from unconsolidated affiliates was as follows (in thousands):


	Nine months ended September 30,				Three months ended March 31,
	2022		2021		2023		2022
BOSTCO	$	7,154	$	8,090	$	3,018	$	2,049
Olympic Pipeline Company		6,103		3,222		—		2,467
SeaPort Midstream		—		—		—		—
Frontera		1,332		3,164		—		—
Cash distributions received from unconsolidated affiliates	$	14,589	$	14,476	$	3,018	$	4,516

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LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs are to fund our debt service obligations, working capital requirements and capital projects, including additional investments and expansion, development and acquisition opportunities. We expect to fund any additional investments, capital projects and future expansion, development and acquisition opportunities with cash flows from operations and additional borrowings under our revolving 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,				Three months ended March 31,
	2022		2021		2023		2022
Net cash provided by operating activities	$	59,871	$	97,509	$	20,210	$	3,490
Net cash used in investing activities	$	(62,080)	$	(50,337)	$	(12,102)	$	(38,797)
Net cash used in financing activities	$	(37)	$	(42,552)
Net cash provided by (used in) financing activities					$	(16,088)	$	21,232

The approximately ~~$37.6~~$16.7 million ~~decrease~~increase in net cash provided by operating activities is primarily attributable to the timing of working capital ~~requirements related to the Pacific Northwest Contribution on November 17, 2021.~~requirements.

The approximately ~~$11.7~~$26.7 million ~~increase~~decrease in net cash used in investing activities is primarily related to a $25 million affiliate loan to our indirect parent, Pike Petroleum Holdings, LLC, on March 30, ~~2022, offset by less construction spend during~~ 2022.

Additional investments and expansion capital projects at our terminals have been approved and currently are, or will be, under construction with estimated completion dates through ~~2024.~~2025. At ~~September 30, 2022,~~March 31, 2023, the remaining expenditures to complete the approved projects are estimated to be approximately ~~$45~~$30 million. These expenditures primarily relate to the construction costs associated with the expansion of our Southeast and West Coast operations.

The approximately ~~$42.5~~$37.3 million ~~decrease~~change in net cash ~~used~~provided by (used) in financing activities is primarily related to an ~~increase of~~ approximately ~~$35.4~~$40 million increase in net borrowings under our revolving credit facility ~~the majority of which was used~~ to fund ~~the $25~~a $75 million ~~affiliate loan~~distribution to ~~our indirect parent, Pike Petroleum~~TLP Finance Holdings, LLC ~~on March 30, 2022.~~for debt service in February 2023.

Credit agreement. On November 17, 2021, the Company and TransMontaigne Operating Company L.P., our wholly owned subsidiary, entered into the Credit Agreement (“Credit Agreement”) for a $1 billion senior secured term loan and a $150 million revolving credit facility, with a letter of credit subfacility of $35 million. The senior secured term loan will mature on November 17, 2028 and the revolving credit facility will terminate (a) on November 14, 2025 in the event our 6.125% senior notes due in 2026 are not refinanced on or prior to such date or (b) in the event the senior notes have been refinanced on or prior to November 14, 2025, the earlier of (i) the new maturity date of the refinanced senior notes and (ii) November 17, 2026. Our obligations under the Credit Agreement are guaranteed by the Company, TransMontaigne Operating Company L.P. and all of its subsidiaries, and secured by a first priority security interest in favor of the lenders in substantially all of the Company’s, TransMontaigne Operating Company L.P.’s and all of its subsidiaries’ assets, including our investments in unconsolidated affiliates.

~~Proceeds from the $1 billion senior secured term loan were used as follows (in thousands):~~

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annum. We are also required to pay (i) a letter of credit fee of 3.50% per annum on the aggregate face amount of all

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outstanding letters of credit, (ii) to the issuing lender of each letter of credit, a fronting fee of no less than 0.125% per annum on the outstanding amount of each such letter of credit and (iii) commitment fees of 0.50% per annum on the daily unused amount of the revolving credit facility, in each case quarterly in arrears.

The Credit Agreement contains various covenants, including, but not limited to, limitations on the incurrence of indebtedness, permitted investments, liens on assets, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Credit Agreement requires compliance, beginning with the first full fiscal quarter of 2022, with (a) a debt service coverage ratio of no less than 1.1 to 1.0 and (b) if the aggregate outstanding amount of all revolving loans and drawn letters of credit exceeds an amount equal to 35% of the aggregate revolving commitments, a consolidated senior secured net leverage ratio of no greater than 6.75 to 1.00. We were in compliance with all financial covenants as of and during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and the year ended December 31, ~~2021.~~2022.

If we were to fail a financial performance covenant, or any other covenant contained in the Credit Agreement, 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 the Credit Agreement, and the lenders would be entitled to declare all outstanding borrowings immediately due and payable.


									Nine			Twelve										Twelve
	Three months ended								months ending			months ending		Three months ended								months ended
	December 31,		March 31,		June 30,		September 30,		September 30,			September 30,		June 30,		September 30,		December 31,		March 31,		March 31,
	2021		2022		2022		2022		2022			2022		2022		2022		2022		2023		2023
Financial performance covenant tests:
Net earnings (loss)	$	(8,220)	$	5,871	$	11,059	$	22,242	$	39,172		$	30,952	$	11,059	$	22,242	$	2,777	$	(11,030)	$	25,048
Interest expense		11,947		14,573		14,347		2,599		31,519			43,466		14,347		2,599		20,731		31,154		68,831
Deferred debt issuance costs		7,721		1,008		1,039		3,712		5,759			13,480		1,039		3,712		994		1,072		6,817
State franchise taxes (income taxes)		371		415		625		578		1,618			1,989		625		578		488		384		2,075
Depreciation and amortization		17,252		17,500		17,629		17,886		53,015			70,267		17,629		17,886		18,091		17,953		71,559
Deferred compensation		14,191		1,444		776		786		3,006			17,197		776		786		772		1,635		3,969
One-time acquisition expenses		54		—		193		—		193			247		193		—		—		—		193
Proportionate share of unconsolidated affiliates' depreciation and amortization		4,028		4,076		4,050		4,735		12,861			16,889		4,050		4,735		4,975		5,095		18,855
Consolidated EBITDA⁽¹⁾	$	47,344	$	44,887	$	49,718	$	52,538	$	147,143		$	194,487	$	49,718	$	52,538	$	48,828	$	46,263	$	197,347
Maintenance capital				(3,255)		(4,107)		(6,364)		(13,726)					(4,107)		(6,364)		(10,567)		(4,889)		(25,927)
Total			$	41,632	$	45,611	$	46,174	$	133,417				$	45,611	$	46,174	$	38,261	$	41,374	$	171,420

Debt service:
Interest expense			$	14,573	$	14,347	$	2,599	$	31,519				$	14,347	$	2,599	$	20,731	$	31,154	$	68,831
Unrealized gain on derivative instruments				—		—		15,763		15,763
Unrealized gain (loss) on interest rate swap agreements															—		15,763		188		(7,626)		8,325
Scheduled principal payments				2,500		2,500		2,500		7,500					2,500		2,500		2,500		2,500		10,000
Total			$	17,073	$	16,847	$	20,862	$	54,782				$	16,847	$	20,862	$	23,419	$	26,028	$	87,156

Credit Agreement debt service coverage ratio (>1.1x)										2.44	x												1.97

Consolidated senior secured net leverage ratio test:
Senior secured term loan outstanding																						$	987,500
Revolving credit facility outstanding																							72,000
Less cash and cash equivalents																							(5,036)
Senior secured debt																						$	1,054,464

Consolidated senior secured net leverage ratio (<6.75x)																							5.34

(1)

Reflects the calculation of Consolidated EBITDA in accordance with the definition in the Credit Agreement.

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Senior notes. On February 12, 2018, the Company and TLP Finance Corp., our wholly owned subsidiary, issued at par $300 million of 6.125% senior notes, due in 2026. The senior notes remain outstanding and the Company is voluntarily filing with the Securities and Exchange Commission pursuant to the covenants contained in the senior notes. The senior notes contain customary covenants (including those relating to our voluntary filing of this report and certain restrictions and obligations with respect to types of payments we may make, indebtedness we may incur, transactions we may pursue, or changes in our control) and customary events of default (including those relating to monetary defaults, covenant defaults, cross defaults and bankruptcy events). We may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases, open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on

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prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

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 ~~31, 2022~~10, 2023 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, ~~2021.~~2022.

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 the Credit Agreement. Borrowings under the Credit Agreement bear interest at either an adjusted LIBOR rate (subject to a 0.50% floor) plus an applicable margin of 3.50% or an alternate base rate plus an applicable margin of 2.50% per annum. 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 ~~September 30, 2022, we are party~~March 31, 2023, $500 million of our outstanding borrowings under the Credit Agreement was converted from variable interest rates to fixed interest rates with interest rate swap agreements ~~with an aggregate notional amount of $500 million~~ that expire on August 18, ~~2025.~~2026. Pursuant to the terms of the interest rate swap agreements, we pay a blended fixed rate of approximately ~~2.87%~~3% and receive interest payments based on the one-month LIBOR through July 17, 2023. Thereafter, we will receive interest payments based on the one-month CME Term SOFR or OIS compound SOFR. The net difference to be paid or received under the interest rate swap agreements will be settled monthly and recognized as an adjustment to interest expense. At ~~September 30, 2022,~~March 31, 2023, we had outstanding borrowings of ~~$1,022.5~~$1,059.5 million under the Credit Agreement. Based on the outstanding balance of our variable-interest-rate debt, assuming market interest rates increase or decrease by 100 basis points, the potential annual increase or decrease in interest expense is approximately ~~$5.2~~$5.6 million.

We sell refined and renewable products to major fuel producers and marketers in the Pacific Northwest at our terminal ~~operations~~ in Tacoma, ~~and Seattle,~~ Washington. Our direct exposure to changes in commodity prices is limited to these product sales and the value of product gains and losses arising from terminaling services agreements with certain customers, which accounts for a small portion of our revenue. We do not use derivative commodity instruments to manage the commodity risk associated with the product we may own at any given time.

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 the Company, including the 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 the Company evaluated, with the participation of the Certifying Officers, the effectiveness of our disclosure controls and procedures as of ~~September 30, 2022,~~March 31, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, the Certifying Officers concluded that, as of ~~September 30, 2022,~~March 31, 2023, 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

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quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

ITEM 1. LEGAL PROCEEDINGS

See Part I, Item 1, Note 1312 to our unaudited consolidated financial statements entitled “Legal proceedings” which is incorporated into this item by reference.

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ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our Annual Report on Form 10-K filed on March ~~31, 2022,~~10, 2023, which could materially affect our business, financial condition, or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or future results.

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, ~~2021,~~2022, filed on March ~~31, 2022.~~10, 2023.

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ITEM 6. EXHIBITS


Exhibit number		Description of exhibits
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		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		The following financial information from the Quarterly Report on Form 10-Q of TransMontaigne Partners LLC and subsidiaries for the quarter ended ~~September 30, 2022,~~March 31, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of equity, (iv) consolidated statements of cash flows and (v) notes to consolidated financial statements.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

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.

		Chief Executive Officer
Date: ~~November 10, 2022~~May 15, 2023	TransMontaigne Partners LLC




	By:	/s/ Frederick W. Boutin Frederick W. Boutin Chief Executive Officer


	By:	/s/ Robert T. Fuller Robert T. Fuller Chief Financial Officer

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Cash	$	19,078
Trade accounts receivable		8,174
Inventory		3,145
Other current assets		671
Property, plant and equipment, net		120,215
Investment in unconsolidated affiliates		108,691
Goodwill		9,158
Other assets, net		14,689
Trade accounts payable		(6,062)
Senior secured term loan		(191,510)
Accrued and other liabilities		(1,552)
Equity	$	84,697



Repayment of revolving credit facility	$	351,700
Payment for Pacific Northwest Contribution		256,300
Repayment of SeaPort Financing term loan		198,200
Distribution to TLP Finance Holdings, LLC for debt service		174,200
Deferred debt issuance costs		19,600
Proceeds from senior secured term loan	$	1,000,000