REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Management of TransMontaigne Partners LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of TransMontaigne Partners LLC (formerly TransMontaigne Partners L.P.) and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of income, equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2019, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Denver, Colorado
March 15, 2019
We have served as the Company’s auditor since 2012.
TransMontaigne Partners LLC and subsidiaries
Consolidated balance sheets
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
332
|
|
$
|
923
|
|
Trade accounts receivable, net
|
|
|
14,042
|
|
|
11,017
|
|
Due from affiliates
|
|
|
1,402
|
|
|
1,509
|
|
Other current assets
|
|
|
8,193
|
|
|
20,654
|
|
Total current assets
|
|
|
23,969
|
|
|
34,103
|
|
Property, plant and equipment, net
|
|
|
688,179
|
|
|
655,053
|
|
Goodwill
|
|
|
9,428
|
|
|
9,428
|
|
Investments in unconsolidated affiliates
|
|
|
227,031
|
|
|
233,181
|
|
Other assets, net
|
|
|
50,769
|
|
|
55,238
|
|
|
|
$
|
999,376
|
|
$
|
987,003
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
27,007
|
|
$
|
8,527
|
|
Due to affiliates
|
|
|
456
|
|
|
—
|
|
Accrued liabilities
|
|
|
28,921
|
|
|
17,426
|
|
Total current liabilities
|
|
|
56,384
|
|
|
25,953
|
|
Other liabilities
|
|
|
4,643
|
|
|
3,633
|
|
Long-term debt
|
|
|
598,622
|
|
|
593,200
|
|
Total liabilities
|
|
|
659,649
|
|
|
622,786
|
|
Commitments and contingencies (Note 16)
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Common unitholders (16,229,123 units issued and outstanding at December 31, 2018 and 16,177,353 units issued and outstanding at December 31, 2017)
|
|
|
286,237
|
|
|
310,769
|
|
General partner interest (2% interest with 331,206 equivalent units outstanding at December 31, 2018 and 330,150 equivalent units outstanding at December 31, 2017)
|
|
|
53,490
|
|
|
53,448
|
|
Total equity
|
|
|
339,727
|
|
|
364,217
|
|
|
|
$
|
999,376
|
|
$
|
987,003
|
|
See accompanying notes to consolidated financial statements.
TransMontaigne Partners LLC and subsidiaries
Consolidated statements of
operations
(In thousands, except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
211,303
|
|
$
|
176,079
|
|
$
|
156,506
|
|
Affiliates
|
|
|
16,790
|
|
|
7,193
|
|
|
8,418
|
|
Total revenue
|
|
|
228,093
|
|
|
183,272
|
|
|
164,924
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
Direct operating costs and expenses
|
|
|
(82,028)
|
|
|
(67,700)
|
|
|
(68,415)
|
|
General and administrative expenses
|
|
|
(21,615)
|
|
|
(19,433)
|
|
|
(14,100)
|
|
Insurance expenses
|
|
|
(4,976)
|
|
|
(4,064)
|
|
|
(4,081)
|
|
Equity-based compensation expense
|
|
|
(3,478)
|
|
|
(2,999)
|
|
|
(3,263)
|
|
Depreciation and amortization
|
|
|
(49,535)
|
|
|
(35,960)
|
|
|
(32,383)
|
|
Loss on disposition of assets
|
|
|
(901)
|
|
|
—
|
|
|
—
|
|
Total operating costs and expenses
|
|
|
(162,533)
|
|
|
(130,156)
|
|
|
(122,242)
|
|
Earnings from unconsolidated affiliates
|
|
|
8,852
|
|
|
7,071
|
|
|
10,029
|
|
Operating income
|
|
|
74,412
|
|
|
60,187
|
|
|
52,711
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(31,900)
|
|
|
(10,473)
|
|
|
(7,787)
|
|
Amortization of deferred issuance costs
|
|
|
(3,037)
|
|
|
(1,221)
|
|
|
(818)
|
|
Total other expenses
|
|
|
(34,937)
|
|
|
(11,694)
|
|
|
(8,605)
|
|
Net earnings
|
|
|
39,475
|
|
|
48,493
|
|
|
44,106
|
|
Less—earnings allocable to general partner interest including incentive distribution rights
|
|
|
(15,675)
|
|
|
(12,705)
|
|
|
(9,340)
|
|
Net earnings allocable to limited partners
|
|
$
|
23,800
|
|
$
|
35,788
|
|
$
|
34,766
|
|
Net earnings per limited partner unit—basic
|
|
$
|
1.46
|
|
$
|
2.20
|
|
$
|
2.14
|
|
Net earnings per limited partner unit—diluted
|
|
$
|
1.45
|
|
$
|
2.20
|
|
$
|
2.14
|
|
See accompanying notes to consolidated financial statements.
TransMontaigne Partners LLC and subsidiaries
Consolidated statements of equity
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
|
|
|
Common
|
|
partner
|
|
|
|
|
|
units
|
|
interest
|
|
Total
|
|
Balance December 31, 2015
|
|
$
|
326,224
|
|
$
|
57,747
|
|
$
|
383,971
|
|
Distributions to unitholders
|
|
|
(44,211)
|
|
|
(8,898)
|
|
|
(53,109)
|
|
Equity-based compensation
|
|
|
3,128
|
|
|
—
|
|
|
3,128
|
|
Issuance of 19,008 common units pursuant to our long-term incentive plan
|
|
|
135
|
|
|
—
|
|
|
135
|
|
Issuance of 2,094 common units pursuant to our savings and retention program
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Contribution of cash by TransMontaigne GP to maintain its 2% general partner interest
|
|
|
—
|
|
|
9
|
|
|
9
|
|
Excess of $12.0 million purchase price of hydrant system from affiliate over the carryover basis of the net assets
|
|
|
—
|
|
|
(5,506)
|
|
|
(5,506)
|
|
Net earnings for year ended December 31, 2016
|
|
|
34,766
|
|
|
9,340
|
|
|
44,106
|
|
Balance December 31, 2016
|
|
|
320,042
|
|
|
52,692
|
|
|
372,734
|
|
Distributions to unitholders
|
|
|
(47,349)
|
|
|
(11,985)
|
|
|
(59,334)
|
|
Equity-based compensation
|
|
|
2,729
|
|
|
—
|
|
|
2,729
|
|
Issuance of 6,498 common units pursuant to our long-term incentive plan
|
|
|
270
|
|
|
—
|
|
|
270
|
|
Issuance of 33,205 common units pursuant to our savings and retention program
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlement of tax withholdings on equity-based compensation
|
|
|
(711)
|
|
|
—
|
|
|
(711)
|
|
Contribution of cash by TransMontaigne GP to maintain its 2% general partner interest
|
|
|
—
|
|
|
36
|
|
|
36
|
|
Net earnings for year ended December 31, 2017
|
|
|
35,788
|
|
|
12,705
|
|
|
48,493
|
|
Balance December 31, 2017
|
|
|
310,769
|
|
|
53,448
|
|
|
364,217
|
|
Distributions to unitholders
|
|
|
(51,152)
|
|
|
(15,672)
|
|
|
(66,824)
|
|
Equity-based compensation
|
|
|
3,208
|
|
|
—
|
|
|
3,208
|
|
Issuance of 6,972 common units pursuant to our long-term incentive plan
|
|
|
270
|
|
|
—
|
|
|
270
|
|
Issuance of 44,798 common units pursuant to our savings and retention program
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlement of tax withholdings on equity-based compensation
|
|
|
(658)
|
|
|
—
|
|
|
(658)
|
|
Contribution of cash by TransMontaigne GP to maintain its 2% general partner interest
|
|
|
—
|
|
|
39
|
|
|
39
|
|
Net earnings for the year ended December 31, 2018
|
|
|
23,800
|
|
|
15,675
|
|
|
39,475
|
|
Balance December 31, 2018
|
|
$
|
286,237
|
|
$
|
53,490
|
|
$
|
339,727
|
|
See accompanying notes to consolidated financial statements.
TransMontaigne Partners LLC and subsidiaries
Consolidated statements of cash flows
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
39,475
|
|
$
|
48,493
|
|
$
|
44,106
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
49,535
|
|
|
35,960
|
|
|
32,383
|
Loss on disposition of assets
|
|
|
901
|
|
|
—
|
|
|
—
|
Earnings from unconsolidated affiliates
|
|
|
(8,852)
|
|
|
(7,071)
|
|
|
(10,029)
|
Distributions from unconsolidated affiliates
|
|
|
15,565
|
|
|
17,128
|
|
|
17,861
|
Equity-based compensation expense
|
|
|
3,478
|
|
|
2,999
|
|
|
3,263
|
Amortization of deferred issuance costs
|
|
|
3,037
|
|
|
1,221
|
|
|
818
|
Amortization of deferred revenue
|
|
|
(324)
|
|
|
(333)
|
|
|
(248)
|
Unrealized (gain) loss on derivative instruments
|
|
|
433
|
|
|
(232)
|
|
|
(344)
|
Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(2,797)
|
|
|
(1,593)
|
|
|
(2,987)
|
Due from affiliates
|
|
|
107
|
|
|
(856)
|
|
|
427
|
Other current assets
|
|
|
2,579
|
|
|
1,457
|
|
|
(7,082)
|
Amounts due under long-term terminaling services agreements, net
|
|
|
1,160
|
|
|
801
|
|
|
337
|
Deposits
|
|
|
—
|
|
|
—
|
|
|
(193)
|
Trade accounts payable
|
|
|
2,335
|
|
|
2,522
|
|
|
(2,092)
|
Due to affiliates
|
|
|
456
|
|
|
—
|
|
|
—
|
Accrued liabilities
|
|
|
11,495
|
|
|
3,208
|
|
|
2,887
|
Net cash provided by operating activities
|
|
|
118,583
|
|
|
103,704
|
|
|
79,107
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Acquisition of terminal assets
|
|
|
—
|
|
|
(276,760)
|
|
|
(12,000)
|
Investments in unconsolidated affiliates
|
|
|
(1,413)
|
|
|
(2,145)
|
|
|
(2,225)
|
Return of investment in unconsolidated affiliates
|
|
|
850
|
|
|
—
|
|
|
—
|
Capital expenditures
|
|
|
(66,122)
|
|
|
(58,165)
|
|
|
(54,864)
|
Proceeds from sale of assets
|
|
|
10,025
|
|
|
—
|
|
|
—
|
Net cash used in investing activities
|
|
|
(56,660)
|
|
|
(337,070)
|
|
|
(69,089)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from senior notes
|
|
|
300,000
|
|
|
—
|
|
|
—
|
Borrowings under revolving credit facility
|
|
|
166,400
|
|
|
442,100
|
|
|
199,900
|
Repayments under revolving credit facility
|
|
|
(453,600)
|
|
|
(140,700)
|
|
|
(156,100)
|
Deferred issuance costs
|
|
|
(7,871)
|
|
|
(7,695)
|
|
|
(806)
|
Settlement of tax withholdings on equity-based compensation
|
|
|
(658)
|
|
|
(711)
|
|
|
—
|
Distributions paid to unitholders
|
|
|
(66,824)
|
|
|
(59,334)
|
|
|
(53,109)
|
Contribution of cash by TransMontaigne GP
|
|
|
39
|
|
|
36
|
|
|
9
|
Net cash provided by (used in) financing activities
|
|
|
(62,514)
|
|
|
233,696
|
|
|
(10,106)
|
Increase (decrease) in cash and cash equivalents
|
|
|
(591)
|
|
|
330
|
|
|
(88)
|
Cash and cash equivalents at beginning of period
|
|
|
923
|
|
|
593
|
|
|
681
|
Cash and cash equivalents at end of period
|
|
$
|
332
|
|
$
|
923
|
|
$
|
593
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
24,635
|
|
$
|
10,077
|
|
$
|
8,097
|
Property, plant and equipment acquired with accounts payable
|
|
$
|
19,353
|
|
$
|
3,207
|
|
$
|
5,114
|
See accompanying notes to consolidated financial statements.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2018, 2017 and 2016
(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, 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.
We were originally formed as TransMontaigne Partners L.P. (“the Partnership), in February 2005 as a Delaware limited partnership. Through February 26, 2019, the Partnership’s common units were listed and publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “TLP”.
The Partnership was controlled by a general partner, TransMontaigne GP L.L.C. (“TransMontaigne GP”), which was an indirect, controlled subsidiary of ArcLight Energy Partners Fund VI, L.P. (“ArcLight”). TransMontaigne GP also held the Partnership’s incentive distribution rights, which were non
‑
voting limited partner interests with the rights set forth in the First Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of May 27, 2005, as amended from time to time.
On February 26, 2019, an affiliate of ArcLight completed its previously announced acquisition of all of the Partnership’s outstanding publicly traded common units not already held by ArcLight and its affiliates by way of our merger (the “Merger”) with a wholly owned subsidiary of TLP Finance Holdings, LLC (“TLP Finance”), an indirect controlled subsidiary of Arclight. At the effective time of the Merger, each of the Partnership’s general partner units issued and outstanding immediately prior to the acquisition effective time was converted into (i)(a) one Partnership common unit, and (i)(b) in aggregate, a non-economic general partner interest in the Partnership, (ii) each of the Partnership’s incentive distribution rights issued and outstanding immediately prior to the acquisition effective time was converted into 100 Partnership common units, (iii) our general partner distributed its common units in the Partnership (the “Transferred GP Units”) to TLP Acquisition Holdings, LLC, a Delaware limited liability company (“TLP Holdings”), and TLP Holdings contributed the Transferred GP Units to TLP Finance, (iv) the Partnership converted into the Company (a Delaware limited liability company) pursuant to Section 17-219 of the Delaware Limited Partnership Act and changed its name to “TransMontaigne Partners LLC”, and all of our common units owned by TLP Finance were converted into limited liability company interests, (v) the non-economic interest in the Company owned by our general partner was automatically cancelled and ceased to exist and our general partner merged with and into the Company with the Company surviving, and (vi) the Company became 100% owned by TLP Finance (the transactions described in the foregoing clauses (i) through (iv), collectively with the Merger, the “Take-Private Transaction”).
As a result of the Take-Private Transaction, our common units ceased to be publicly traded, and our common units are no longer listed on the New York Stock Exchange (“NYSE”). Our currently outstanding 6.125% senior unsecured notes due in 2026 remain outstanding, and we are voluntary filing with the Securities and Exchange Commission pursuant to the covenants contained in those notes.
(b) Basis of presentation and use of estimates
Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the accounts of TransMontaigne Partners L.P. and its controlled subsidiaries. Investments where we do not have the ability to exercise control, but do have the ability to exercise significant influence, are accounted for using the equity method of accounting. All inter‑company accounts and transactions have been eliminated in the preparation of the accompanying consolidated financial statements. Certain reclassifications of previously reported amounts have been made to conform to the current year presentation.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
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. The following estimates, in management’s opinion, are subjective in nature, require the exercise of judgment, and/or involve complex analyses: business combination estimates and assumptions, useful lives of our plant and equipment and accrued environmental obligations. Changes in these estimates and assumptions will occur as a result of the passage of time and the occurrence of future events. Actual results could differ from these estimates.
(c) Accounting for terminal and pipeline operations
Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606,
Revenue from Contracts with Customers
(“ASC 606”), applying the modified retrospective transition method, which required us to apply the new standard to (i) all new revenue contracts entered into after January 1, 2018, and (ii) revenue contracts which were not completed as of January 1, 2018. ASC 606 replaces existing revenue recognition requirements in GAAP and requires entities to recognize revenue at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer. ASC 606 also requires certain disclosures regarding qualitative and quantitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of ASC 606 did not result in a transition adjustment nor did it have an impact on the timing or amount of our revenue recognition (See Note 18 of Notes to consolidated financial statements).
The adoption of ASC 606 did not result in changes to our accounting for trade accounts receivable (see Note 4 of Notes to consolidated financial statements), contract assets or contract liabilities. We recognize contract assets in situations where revenue recognition under ASC 606 occurs prior to billing the customer based on our rights under the contract. Contract assets are transferred to accounts receivable when the rights become unconditional. At December 31, 2018, we did not have any contract assets related to ASC 606.
Contract liabilities primarily relate to consideration received from customers in advance of completing the performance obligation. A performance obligation is a promise in a contract to transfer goods or services to the customer. We recognize contract liabilities under these arrangements as revenue once all contingencies or potential performance obligations have been satisfied by the (i) performance of services or (ii) expiration of the customer’s rights under the contract. Short-term contract liabilities include customer advances and deposits (see Note 10 of Notes to consolidated financial statements). Long-term contract liabilities include deferred revenue related to ethanol blending fees and other projects (See Note 11 of Notes to consolidated financial statements).
We generate revenue from terminaling services fees, pipeline transportation fees and management fees. Under ASC 606, we recognize revenue over time or at a point in time, depending on the nature of the performance obligations contained in the respective contract with our customer. The contract transaction price is allocated to each performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our revenue is recognized pursuant to ASC guidance other than ASC 606. 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
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
payments based on the volume of storage capacity available to the customer under the agreement, which results in a fixed amount of recognized revenue. We refer to the fixed amount of revenue recognized pursuant to our terminaling services agreements as being “firm commitments.” The majority of our firm commitments under our terminaling services agreements are accounted for in accordance with ASC 840,
Leases
(“ASC 840 revenue”). The remainder is recognized in accordance with ASC 606 (“ASC 606 revenue”) where the minimum payment arrangement in each contract is a single performance obligation that is primarily satisfied over time through the contract term.
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 primarily considered optional purchases to acquire additional services or variable consideration that 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. Our ancillary revenue is recognized in accordance with ASC 606.
Pipeline transportation fees.
We earn pipeline transportation fees at our Diamondback pipeline either based on the volume of product transported or under capacity reservation agreements. Revenue associated with the capacity reservation is recognized ratably over the respective term, regardless of whether the capacity is actually utilized. We earn pipeline transportation fees at our Razorback pipeline based on an allocation of the aggregate fees charged under the capacity agreement with our customer who has contracted for 100% of our Razorback system. Pipeline transportation revenue is accounted for in accordance with ASC 840.
Management fees and reimbursed costs.
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 manage and operate rail sites at certain Southeast terminals on behalf of a major oil company and receive reimbursement for operating and maintenance costs. We lease land under operating leases as the lessor or sublessor with third parties and affiliates. We also managed and operated for an affiliate of PEMEX, Mexico’s state-owned petroleum company, a products pipeline connected to our Brownsville terminal facility and received a management fee through August 23, 2018. Management fee revenue 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 and reimbursed costs related to lease revenue are accounted for in accordance with ASC 840.
(d) Cash and cash equivalents
We consider all short‑term investments with a remaining maturity of three months or less at the date of purchase to be cash equivalents.
(e) Property, plant and equipment
Depreciation is computed using the straight‑line method. Estimated useful lives are 15 to 25 years for terminals and pipelines and 3 to 25 years for furniture, fixtures and equipment. All items of property, plant and equipment are carried at cost. Expenditures that increase capacity or extend useful lives are capitalized. Repairs and maintenance are expensed as incurred.
We evaluate long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable based on expected undiscounted future cash flows attributable
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
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.
(f) Investments in unconsolidated affiliates
We account for our investments in unconsolidated affiliates, which we do not control but do have the ability to exercise significant influence over, using the equity method of accounting. Under this method, the investment is recorded at acquisition cost, increased by our proportionate share of any earnings and additional capital contributions and decreased by our proportionate share of any losses, distributions received and amortization of any excess investment. Excess investment is the amount by which our total investment exceeds our proportionate share of the book value of the net assets of the investment entity. We evaluate our investments in unconsolidated affiliates for impairment whenever events or circumstances indicate there is a loss in value of the investment that is other than temporary. In the event of impairment, we would record a charge to earnings to adjust the carrying amount to estimated fair value.
(g) Environmental obligations
We accrue for environmental costs that relate to existing conditions caused by past operations when probable and reasonably estimable (see Note 10 of Notes to consolidated financial statements). Environmental costs include initial site surveys and environmental studies of potentially contaminated sites, costs for remediation and restoration of sites determined to be contaminated and ongoing monitoring costs, as well as fines, damages and other costs, including direct legal costs. Liabilities for environmental costs at a specific site are initially recorded, on an undiscounted basis, when it is probable that we will be liable for such costs, and a reasonable estimate of the associated costs can be made based on available information. Such an estimate includes our share of the liability for each specific site and the sharing of the amounts related to each site that will not be paid by other potentially responsible parties, based on enacted laws and adopted regulations and policies. Adjustments to initial estimates are recorded, from time to time, to reflect changing circumstances and estimates based upon additional information developed in subsequent periods. Estimates of our ultimate liabilities associated with environmental costs are difficult to make with certainty due to the number of variables involved, including the early stage of investigation at certain sites, the lengthy time frames required to complete remediation, technology changes, alternatives available and the evolving nature of environmental laws and regulations. We periodically file claims for insurance recoveries of certain environmental remediation costs with our insurance carriers under our comprehensive liability policies (see Note 5 of Notes to consolidated financial statements).
We recognize our insurance recoveries as a credit to income in the period that we assess the likelihood of recovery as being probable.
In connection with our previous acquisitions of certain terminals, a wholly owned subsidiary of NGL Energy Partners LP agreed to indemnify us against certain potential environmental claims, losses and expenses at those terminals. Pursuant to the acquisition agreements for each of the Florida (except Pensacola) and Midwest terminals, the Southeast terminals, the Brownsville and River terminals, and the Pensacola, Florida Terminal, a wholly owned subsidiary of NGL Energy Partners LP is obligated to indemnify us against environmental claims, losses and expenses that were associated with the ownership or operation of the terminals prior to our purchase. In each acquisition agreement, the maximum indemnification liability is subject to a specified time period for indemnification, cap on indemnification and satisfaction of a deductible amount before indemnification, in each case subject to certain exceptions, limitations and conditions specified therein. There are no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after certain specified dates. The environmental indemnification obligations of to us remain in place and were not affected by the Take-Private Transaction.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
(h) Asset retirement obligations
Asset retirement obligations are legal obligations associated with the retirement of long‑lived assets that result from the acquisition, construction, development or normal use of the asset. 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.
(i) Equity-based compensation
GAAP requires us to measure the cost of services received in exchange for an award of equity instruments based on the measurement‑date fair value of the award. That cost is recognized during the period services are provided in exchange for the award (see Note 14 of Notes to consolidated financial statements).
(j) Accounting for derivative instruments
GAAP requires 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). Changes in the fair value of our derivative instruments are recognized in earnings.
At December 31, 2018 and 2017, our derivative instruments were limited to interest rate swap agreements with an aggregate notional amount of $50.0 million and $125.0 million, respectively. The remaining derivative instrument outstanding at December 31, 2018 expired March 11, 2019. Pursuant to the terms of the interest rate swap agreements, we paid a blended fixed rate of approximately 0.97% and 1.01% for the years ended December 31, 2018 and 2017, respectively, and received interest payments based on the one-month LIBOR. The net difference to be paid or received under the interest rate swap agreements is settled monthly and is recognized as an adjustment to interest expense. The fair value of our interest rate swap agreements are determined using a pricing model based on the LIBOR swap rate and other observable market data.
(k) Income taxes
No provision for U.S. federal income taxes has been reflected in the accompanying consolidated financial statements because we are treated as a partnership for federal income tax purposes. As a partnership, all income, gains, losses, expenses, deductions and tax credits generated by us flow through to our unitholders.
(l) Net earnings per limited partner unit
Net earnings allocable to the limited partners, for purposes of calculating net earnings per limited partner unit, are calculated under the two-class method and accordingly are net of the earnings allocable to the general partner interest and distributions payable to any restricted phantom units granted under our equity-based compensation plans that participate in our distributions. The earnings allocable to the general partner interest include the distributions of available cash (as defined by our partnership agreement) attributable to the period to the general partner interest, net of
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
adjustments for the general partner’s share of undistributed earnings, and the incentive distribution rights. Undistributed earnings are the difference between the earnings and the distributions attributable to the period. Undistributed earnings are allocated to the limited partners and general partner interest based on their respective sharing of earnings or losses specified in the partnership agreement, which is based on their ownership percentages of 98% and 2%, respectively. The incentive distribution rights are not allocated a portion of the undistributed earnings given they are not entitled to distributions other than from available cash. Further, the incentive distribution rights do not share in losses under our partnership agreement. Basic net earnings per limited partner unit is computed by dividing net earnings allocable to the limited partners by the weighted average number of limited partner units outstanding during the period. Diluted net earnings per limited partner unit is computed by dividing net earnings allocable to the limited partners by the weighted average number of limited partner units outstanding during the period and any potential dilutive securities outstanding during the period.
(m) Comprehensive income
Entities that report items of other comprehensive income have the option to present the components of net earnings and comprehensive income in either one continuous financial statement, or two consecutive financial statements. As the Partnership has no components of comprehensive income other than net earnings, no statement of comprehensive income has been presented.
(n) Recent accounting pronouncements
Effective January 1, 2018 we adopted ASU 2016-15,
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments.
This ASU requires changes in the presentation of certain items, including but not limited to debt prepayment or debt extinguishment costs; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies and distributions received from equity method investees. The adoption of this ASU did not have a material impact on our consolidated financial statements.
In February 2016, the Financial Accounting Standards Board (”FASB”) issued ASU 2016-02,
Leases’
followed by a series of related accounting standard updates (collectively referred to as “Topic 842”). Topic 842 establishes a new accounting model for leases. The most significant changes include the clarification of the definition of a lease, the requirement for lessees to recognize for all leases a right-of-use asset and a lease liability in the consolidated balance sheet, and additional quantitative and qualitative disclosures which are designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. Expenses are recognized in the consolidated statement of operations in a manner similar to current accounting guidance. Lessor accounting under the new standard is substantially unchanged compared to current accounting guidance. The new standard will become effective for us beginning with the first quarter 2019. We adopted the accounting standard using a prospective transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which allows us to 1) carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption, 2) carryforward the existing lease classification, and 3) not reassess initial direct costs associated with existing leases. We have made an accounting policy election to keep leases with an initial term of 12 months or less off of the consolidated balance sheet. We are finalizing our evaluation of the impacts that the adoption of this accounting guidance will have on the consolidated financial statements, and we expect most existing operating lease commitments will be recognized as operating leases and right-of-use assets upon adoption. Based on our ongoing assessment, we expect approximately $35 million of right-of-use assets and lease liabilities will be recognized in our consolidated balance sheet upon adoption.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
In January 2017, the FASB issued ASU 2017-04,
Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment,
to simplify the accounting for goodwill impairment by eliminating step 2 from the goodwill impairment test. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. We are currently evaluating the potential impact that the adoption will have on our disclosures and financial statements.
Effective January 1, 2018 we adopted ASU 2016-15,
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments.
This ASU requires changes in the presentation of certain items, including but not limited to debt prepayment or debt extinguishment costs; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies and distributions received from equity method investees. The adoption of this ASU did not have a material impact on our consolidated financial statements.
(2) TRANSACTIONS WITH AFFILIATES
Omnibus agreement.
Since the inception of the Partnership in 2005 we have been party to an omnibus agreement with the owner of our general partner, which agreement has been amended and restated from time to time. The omnibus agreement provides for the provision of various services for our benefit.
The fees payable under the omnibus agreement are comprised of (i) the reimbursement of the direct operating costs and expenses, such as salaries and benefits of operational personnel performing services on site at our terminals and pipelines, which we refer to as on-site employees, (ii) bonus awards to key employees of TLP Management Services who perform services for the Partnership and (iii) the administrative fee for the provision of various general and administrative services for the Company’s benefit such as legal, accounting, treasury, insurance administration and claims processing, information technology, human resources, credit, payroll, taxes and other corporate services, to the extent such services are not outsourced by the Company. The administrative fee is recognized as a component of general and administrative expenses and
for the years ended December 31, 2018, 2017 and 2016, the administrative fee paid by the Partnership was approximately $10.3 million, $12.8 million and $11.4 million, respectively.
In connection with our Collins Phase II expansion project, the expansion of our Brownsville terminal and pipeline operations and the December 2017 acquisition of the West Coast terminals, on May 7, 2018, the Partnership, with the concurrence of the conflicts committee of our general partner, agreed to an annual increase in the aggregate fees payable under the omnibus agreement of $3.6 million beginning May 13, 2018.
To effectuate this $3.6 million annual increase, on May 7, 2018 the Company, with the concurrence of the conflicts committee of our general partner, entered into the third amended and restated omnibus agreement to allow us to assume the costs and expenses of employees of TLP Management Services performing engineering and environmental safety and occupational health (ESOH) services for and on behalf of the Company and to receive an equal and offsetting decrease in the administrative fee. These costs and expenses are expected to approximate $8.9 million in 2018. We expect that a significant portion of the assumed engineering costs will be capitalized under GAAP.
Prior to the $3.6 million annual increase and the effective date of the third amended and restated omnibus agreement, the annual administrative fee was approximately $13.7 million and included the costs and expenses of the employees of TLP Management Services performing engineering and ESOH services. Subsequent to the $3.6 million annual increase and the effective date of the third amended and restated omnibus agreement, the annual administrative fee was reduced to approximately $8.4 million and the Partnership bore the approximately $8.9 million costs and expenses of the employees of TLP Management Services performing engineering and ESOH services for and on behalf of the Partnership.
We adopted and entered into the fourth amended and restated omnibus agreement in connection with the Take-Private Transaction, primarily to address certain changes in our governance as a result thereof, including the removal of
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
our conflicts committee. The administrative fee under the fourth amended and restated omnibus agreement is subject to an increase each calendar year tied to an increase in the consumer price index, if any, plus two percent. We do not directly employ any of the persons responsible for managing our business. Our officers and the employees who provide services to the Company are employed by TLP Management Services, a wholly owned subsidiary of ArcLight. TLP Management Services provides payroll and maintains all employee benefits programs on our behalf pursuant to the omnibus agreement.
Operations and reimbursement agreement—Frontera.
We have a 50% ownership interest in the Frontera Brownsville LLC joint venture or (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. For the years ended December 31, 2018, 2017 and 2016 we recognized approximately $5.8 million, $5.3 million and $5.0 million, respectively, of revenue related to this operations and reimbursement agreement.
Terminaling services agreements—Brownsville terminals.
We have terminaling services agreements with Frontera relating to our Brownsville, Texas facility that will expire in June 2019 and June 2020, subject to automatic renewals unless terminated by either party upon 90 days’ and 180 days’ prior notice, respectively. In exchange for its minimum throughput commitments, we have agreed to provide Frontera with approximately 301,000 barrels of storage capacity. For the years ended December 31, 2018, 2017 and 2016 we recognized approximately $2.5 million, $1.9 million and $0.5 million, respectively, of revenue related to this agreement.
Terminaling services agreement—Gulf Coast terminals.
Associated Asphalt Marketing, LLC is a wholly-owned indirect subsidiary of ArcLight. Effective January 1, 2018, a third party customer assigned their terminaling services agreement relating to our Gulf Coast terminals to Associated Asphalt Marketing, LLC. The agreement will expire in April 2021, subject to two, two-year automatic 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. For the years ended December 31, 2018, 2017 and 2016 we recognized approximately $8.5 million, $nil and $nil, respectively, of revenue related to this agreement with Associated Asphalt Marketing, LLC.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
|
(3)
|
|
BUSINESS COMBINATION AND TERMINAL ACQUISITION
|
On December 15, 2017, we acquired the West Coast terminals from a third party for a total purchase price of $276.8 million. The West Coast terminals represent two waterborne refined product and crude oil terminals located in the San Francisco Bay Area refining complex with a total of 64 storage tanks with approximately 5.3 million barrels of active storage capacity. The West Coast terminals have access to domestic and international crude oil and refined products markets through marine, pipeline, truck and rail logistics capabilities. The accompanying consolidated financial statements include the assets, liabilities and results of operations of the West Coast terminals from December 15, 2017.
The purchase price and estimated assessment of the fair value of the assets acquired and liabilities assumed in the business combination were as follows (in thousands):
|
|
|
|
Other current assets
|
|
$
|
1,037
|
Property, plant and equipment
|
|
|
228,000
|
Goodwill
|
|
|
943
|
Customer relationships
|
|
|
47,000
|
Total assets acquired
|
|
|
276,980
|
Environmental obligation
|
|
|
220
|
Total liabilities assumed
|
|
|
220
|
Allocated purchase price
|
|
$
|
276,760
|
Goodwill represents the excess of the consideration paid for the acquired business over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill represents the premium we paid to acquire the skilled workforce.
These unaudited pro forma results for the Company as a whole are for comparative purposes only and may not be indicative of the results that would have occurred had this acquisition been completed on January 1, 2016 or the results that will be attained in the future (in thousands):
|
|
|
|
|
|
|
|
|
Pro Forma year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
Revenue
|
|
$
|
226,653
|
|
$
|
205,605
|
Net earnings
|
|
$
|
55,856
|
|
$
|
46,276
|
Significant pro forma adjustments include depreciation expense and interest expense on the incremental borrowings necessary to finance this acquisition as well as adjustments to remove the related party transactions included in the historical financial statements of the West Coast terminals.
On January 28, 2016, we acquired from a subsidiary of NGL Energy Partners LP its Port Everglades, Florida hydrant system for a cash payment of $12.0 million. At the time of the acquisition NGL Energy Partners LP controlled out operations through its ownership interest of our general partner. The hydrant system encompasses a system for fueling cruise ships. The acquisition of the hydrant system has been recorded at the carryover basis in a manner similar to a reorganization of entities under common control. Accordingly, we recorded the assets at their net book value of $6.5 million with the remaining purchase price of $5.5 million recorded as a reduction to the general partner 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 general partner’s interest. The accompanying consolidated financial statements include the assets, liabilities and results of operations of the hydrant system from January 28, 2016. As this transaction is not considered material to our consolidated financial statements we did not recast prior period consolidated financial statements.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
(4) 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 in the West Coast. We have a concentration of trade receivable balances due from companies engaged in the trading, distribution and marketing of refined products and crude oil. These concentrations of customers may affect our overall credit risk in that the customers may be similarly affected by changes in economic, regulatory or other factors. Our customers’ historical financial and operating information is analyzed prior to extending credit. We manage our exposure to credit risk through credit analysis, credit approvals, credit limits and monitoring procedures, and for certain transactions we may request letters of credit, prepayments or guarantees. Amounts included in trade accounts receivable that are accounted for as ASC 606 revenue in accordance with ASC 606 approximate $3.9 million at December 31, 2018. We maintain allowances for potentially uncollectible accounts receivable.
Trade accounts receivable, net consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Trade accounts receivable
|
|
$
|
14,151
|
|
$
|
11,128
|
|
Less allowance for doubtful accounts
|
|
|
(109)
|
|
|
(111)
|
|
|
|
$
|
14,042
|
|
$
|
11,017
|
|
The following table presents a roll forward of our allowance for doubtful accounts (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
beginning
|
|
Charged to
|
|
|
|
|
end of
|
|
|
|
of period
|
|
expenses
|
|
Deductions
|
|
period
|
|
2018
|
|
$
|
111
|
|
$
|
—
|
|
$
|
(2)
|
|
$
|
109
|
|
2017
|
|
$
|
119
|
|
$
|
—
|
|
$
|
(8)
|
|
$
|
111
|
|
2016
|
|
$
|
475
|
|
$
|
298
|
|
$
|
(654)
|
|
$
|
119
|
|
The following customers accounted for at least 10% of our consolidated revenue in at least one of the periods presented in the accompanying consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
NGL Energy Partners LP
|
|
22
|
%
|
26
|
%
|
23
|
%
|
RaceTrac Petroleum Inc.
|
|
11
|
%
|
13
|
%
|
12
|
%
|
Castleton Commodities International LLC
|
|
10
|
%
|
13
|
%
|
14
|
%
|
|
|
|
|
|
|
|
|
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
(5) OTHER CURRENT ASSETS
Other current assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Amounts due from insurance companies
|
|
$
|
2,861
|
|
$
|
1,981
|
|
Prepaid insurance
|
|
|
1,371
|
|
|
4,151
|
|
Additive detergent
|
|
|
1,218
|
|
|
1,715
|
|
Unrealized gain on derivative instrument
|
|
|
143
|
|
|
—
|
|
Deposits and other assets
|
|
|
2,600
|
|
|
12,807
|
|
|
|
$
|
8,193
|
|
$
|
20,654
|
|
Amounts due from insurance companies.
We periodically file claims for recovery of environmental remediation costs 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 (i.e., likely to occur). At December 31, 2018 and 2017, we have recognized amounts due from insurance companies of approximately $2.9 million and $2.0 million, respectively, representing our best estimate of our probable insurance recoveries. During the year ended December 31, 2018, we received reimbursements from insurance companies of approximately $0.7 million. During the year ended December 31, 2018, we increased our estimate of probable future insurance recoveries by approximately $1.6 million.
Deposits and other assets.
Deposits and other assets at December 31, 2017 includes a deposit of approximately $10.2 million paid during the fourth quarter 2017 related to future expansion opportunities that closed in the first quarter of 2018. Concurrently we sold these assets to a third party for cash proceeds equal to our deposit amount of $10.2 million.
(6) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net is as follows (in thousands):
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Land
|
|
$
|
83,451
|
|
$
|
83,310
|
Terminals, pipelines and equipment
|
|
|
918,503
|
|
|
885,429
|
Furniture, fixtures and equipment
|
|
|
6,022
|
|
|
4,430
|
Construction in progress
|
|
|
64,588
|
|
|
21,575
|
|
|
|
1,072,564
|
|
|
994,744
|
Less accumulated depreciation
|
|
|
(384,385)
|
|
|
(339,691)
|
|
|
$
|
688,179
|
|
$
|
655,053
|
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
(7) GOODWILL
Goodwill is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Brownsville terminals
|
|
$
|
8,485
|
|
$
|
8,485
|
|
West Coast terminals
|
|
|
943
|
|
|
943
|
|
|
|
$
|
9,428
|
|
$
|
9,428
|
|
Goodwill is required to be tested for impairment annually unless events or changes in circumstances indicate it is more likely than not that an impairment loss has been incurred at an interim date. Our annual test for the impairment of goodwill is performed as of December 31. The impairment test is performed at the reporting unit level. Our reporting units are our operating segments (see Note 19 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 December 31, 2018 and 2017 our Brownsville terminals and West Coast terminals contained goodwill. Our estimate of the fair value of our Brownsville and West Coast terminals at December 31, 2018 substantially exceeded the carrying amount. The purchase price and estimated assessment of the fair value of the assets acquired and liabilities assumed in our acquisition of the West Coast terminals was performed as of the acquisition date, December 15, 2017, as such the estimated fair value equaled its carrying amount. Accordingly, we did not recognize any goodwill impairment charges during the years ended December 31, 2018 and 2017, respectively. 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 and West Coast terminals, could result in the recognition of an impairment charge in the future.
(8) INVESTMENTS IN UNCONSOLIDATED AFFILIATES
At December 31, 2018 and 2017, our investments in unconsolidated affiliates include a 42.5% Class A ownership interest in Battleground Oil Specialty Terminal Company LLC (“BOSTCO”) and a 50% ownership interest in Frontera Brownsville LLC (“Frontera”). BOSTCO is a terminal facility located on the Houston Ship Channel that encompasses approximately 7.1 million barrels of distillate, residual and other black oil product storage. Class A and Class B ownership interests share in cash distributions on a 96.5% and 3.5% basis, respectively. Class B ownership interests do not have voting rights and are not required to make capital investments. Frontera is a terminal facility located in Brownsville, Texas that encompasses approximately 1.7 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
|
|
|
|
ownership
|
|
(in thousands)
|
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
BOSTCO
|
|
42.5
|
%
|
42.5
|
%
|
$
|
203,005
|
|
$
|
209,373
|
|
Frontera
|
|
50
|
%
|
50
|
%
|
|
24,026
|
|
|
23,808
|
|
Total investments in unconsolidated affiliates
|
|
|
|
|
|
$
|
227,031
|
|
$
|
233,181
|
|
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
At December 31, 2018 and 2017, our investment in BOSTCO includes approximately $6.8 million and $7.0 million, respectively, of excess investment related to a one time buy-in fee to acquire our 42.5% interest and capitalization of interest on our investment during the construction of BOSTCO amortized over the useful life of the assets. Excess investment is the amount by which our investment exceeds our proportionate share of the book value of the net assets of the BOSTCO entity.
Earnings from investments in unconsolidated affiliates were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
BOSTCO
|
|
$
|
5,767
|
|
$
|
3,543
|
|
$
|
6,933
|
Frontera
|
|
|
3,085
|
|
|
3,528
|
|
|
3,096
|
Total earnings from investments in unconsolidated affiliates
|
|
$
|
8,852
|
|
$
|
7,071
|
|
$
|
10,029
|
Additional capital investments in unconsolidated affiliates were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
BOSTCO
|
|
$
|
—
|
|
$
|
145
|
|
$
|
2,125
|
Frontera
|
|
|
1,413
|
|
|
2,000
|
|
|
100
|
Additional capital investments in unconsolidated affiliates
|
|
$
|
1,413
|
|
$
|
2,145
|
|
$
|
2,225
|
Cash distributions received from unconsolidated affiliates were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
BOSTCO
|
|
$
|
12,135
|
|
$
|
12,256
|
|
$
|
14,331
|
Frontera
|
|
|
4,280
|
|
|
4,872
|
|
|
3,530
|
Cash distributions received from unconsolidated affiliates
|
|
$
|
16,415
|
|
$
|
17,128
|
|
$
|
17,861
|
The summarized financial information of our unconsolidated affiliates was as follows (in thousands):
Balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOSTCO
|
|
Frontera
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Current assets
|
|
$
|
19,299
|
|
$
|
24,976
|
|
$
|
5,866
|
|
$
|
5,649
|
Long-term assets
|
|
|
455,984
|
|
|
469,348
|
|
|
45,115
|
|
|
44,292
|
Current liabilities
|
|
|
(12,471)
|
|
|
(17,550)
|
|
|
(2,845)
|
|
|
(2,147)
|
Long-term liabilities
|
|
|
(1,259)
|
|
|
—
|
|
|
(84)
|
|
|
(178)
|
Net assets
|
|
$
|
461,553
|
|
$
|
476,774
|
|
$
|
48,052
|
|
$
|
47,616
|
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
Statements of income
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOSTCO
|
|
Frontera
|
|
|
|
Year ended
|
|
Year ended
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
|
Revenue
|
|
$
|
66,288
|
|
$
|
66,235
|
|
$
|
66,863
|
|
$
|
24,017
|
|
$
|
22,193
|
|
$
|
18,958
|
|
Expenses
|
|
|
(51,993)
|
|
|
(55,687)
|
|
|
(48,149)
|
|
|
(17,847)
|
|
|
(15,137)
|
|
|
(12,766)
|
|
Net earnings
|
|
$
|
14,295
|
|
$
|
10,548
|
|
$
|
18,714
|
|
$
|
6,170
|
|
$
|
7,056
|
|
$
|
6,192
|
|
(9) OTHER ASSETS, NET
Other assets, net are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Customer relationships, net of accumulated amortization of $4,887 and $2,294, respectively
|
|
$
|
44,543
|
|
$
|
47,136
|
|
Revolving credit facility unamortized deferred issuance costs, net of accumulated amortization of $7,656 and $5,984, respectively
|
|
|
5,515
|
|
|
6,778
|
|
Amounts due under long-term terminaling services agreements
|
|
|
422
|
|
|
460
|
|
Unrealized gain on derivative instruments
|
|
|
—
|
|
|
576
|
|
Deposits and other assets
|
|
|
289
|
|
|
288
|
|
|
|
$
|
50,769
|
|
$
|
55,238
|
|
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 twenty years. Expected future amortization expense for the customer relationships as of December 31, 2018 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ending December 31,
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Amortization expense
|
|
$
|
2,350
|
|
$
|
2,350
|
|
$
|
2,350
|
|
$
|
2,350
|
|
$
|
2,350
|
|
$
|
32,793
|
|
Deferred financing costs.
Deferred financing costs are amortized using the effective interest method over the term of the related credit facility.
Amounts due under long‑term terminaling services agreements.
We have long‑term terminaling services agreements with certain of our customers that provide for minimum payments that increase at stated amounts over the terms of the respective agreements. We recognize as revenue the minimum payments under the long‑term terminaling services agreements on a straight‑line basis over the terms of the respective agreements. At December 31, 2018 and 2017, we have recognized revenue in excess of the minimum payments that are due through those respective dates under the long‑term terminaling services agreements resulting in an asset of approximately $0.4 million and $0.5 million, respectively.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
(10) ACCRUED LIABILITIES
Accrued liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Customer advances and deposits
|
|
$
|
11,927
|
|
$
|
10,265
|
|
Accrued property taxes
|
|
|
2,993
|
|
|
1,381
|
|
Accrued environmental obligations
|
|
|
1,556
|
|
|
1,855
|
|
Interest payable
|
|
|
7,814
|
|
|
982
|
|
Accrued expenses and other
|
|
|
4,631
|
|
|
2,943
|
|
|
|
$
|
28,921
|
|
$
|
17,426
|
|
Customer advances and deposits.
We bill certain of our customers one month in advance for terminaling services to be provided in the following month. At December 31, 2018, approximately $0.8 million of the customer advances and deposits balance is considered contract liabilities under ASC 606. Revenue recognized during the year ended December 31, 2018 from amounts included in contract liabilities at the beginning of the period was approximately $0.5 million. At December 31, 2018 and 2017, we have billed and collected from certain of our customers approximately $11.9 million and $10.3 million, respectively, in advance of the terminaling services being provided.
Accrued environmental obligations.
At December 31, 2018 and 2017, we have accrued environmental obligations of approximately $1.6 million and $1.9 million, respectively, representing our best estimate of our remediation obligations. 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.
The following table presents a roll forward of our accrued environmental obligations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
Balance at
|
|
|
|
beginning
|
|
|
|
|
Increase
|
|
end of
|
|
|
|
of period
|
|
Payments
|
|
in estimate
|
|
period
|
|
2018
|
|
$
|
1,855
|
|
$
|
(457)
|
|
$
|
158
|
|
$
|
1,556
|
|
2017
|
|
$
|
2,107
|
|
$
|
(1,204)
|
|
$
|
952
|
|
$
|
1,855
|
|
2016
|
|
$
|
1,047
|
|
$
|
(1,322)
|
|
$
|
2,382
|
|
$
|
2,107
|
|
(11) OTHER LIABILITIES
Other liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Advance payments received under long-term terminaling services agreements
|
|
$
|
2,721
|
|
$
|
1,599
|
|
Deferred revenue
|
|
|
1,922
|
|
|
2,034
|
|
|
|
$
|
4,643
|
|
$
|
3,633
|
|
Advance payments received under long‑term terminaling services agreements.
We have long‑term terminaling services agreements with certain of our customers that provide for advance minimum payments. We recognize the advance minimum payments as revenue either on a straight‑line basis over the term of the respective agreements or when services have been provided based on volumes of product distributed. At December 31, 2018 and
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
2017, we have received advance minimum payments in excess of revenue recognized under these long‑term terminaling services agreements resulting in a liability of approximately $2.7 million and $1.6 million, respectively.
Deferred revenue.
Pursuant to historical agreements with our customers, we agreed to undertake certain capital projects. Upon completion of the projects, our customers have paid us lump‑sum amounts that will be recognized as revenue on a straight‑line basis over the remaining term of the agreements. At December 31, 2018 and 2017, we have unamortized deferred revenue for completed projects of approximately $1.9 million and $2.0 million, respectively. During the years ended December 31, 2018, 2017 and 2016, we billed our customers approximately $1.7 million, $0.5 million and $0.5 million, respectively for completed projects. During the years ended December 31, 2018, 2017 and 2016, we recognized revenue on a straight‑line basis of approximately $1.8 million, $0.7 million and $0.5 million, respectively, for completed projects. At December 31, 2018, approximately $0.2 million of the deferred revenue-ethanol blending fees and other projects balance is considered contract liabilities under ASC 606. Revenue recognized during the year ended December 31, 2018 from amounts included in contract liabilities under ASC 606 at the beginning of the period was approximately $0.2 million.
(12) LONG‑TERM DEBT
Long-term debt is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Revolving credit facility due in 2022
|
|
$
|
306,000
|
|
$
|
593,200
|
|
6.125% senior notes due in 2026
|
|
|
300,000
|
|
|
—
|
|
Senior notes unamortized deferred issuance costs, net of accumulated amortization of $704 and $nil, respectively
|
|
|
(7,378)
|
|
|
—
|
|
|
|
$
|
598,622
|
|
$
|
593,200
|
|
On February 12, 2018, the Partnership and TLP Finance Corp., our wholly owned subsidiary, completed the sale of $300 million of 6.125% senior notes, issued at par and due 2026. The senior notes were guaranteed on a senior unsecured basis by each of our 100% owned domestic subsidiaries that guarantee obligations under our revolving credit facility. Net proceeds, after $8.1 million of issuance costs, were used to repay indebtedness under our revolving credit facility.
Our senior notes are guaranteed on a senior unsecured basis by each of our 100% owned subsidiaries that guarantee obligations under our revolving credit facility. These subsidiary guarantees are full and unconditional and joint and several, and the subsidiaries that did not guarantee our senior notes are minor. TransMontaigne Partners L.P. does not have independent assets or operations unrelated to its investments in its consolidated subsidiaries. There are no significant restrictions on our ability or the ability of any subsidiary guarantor to obtain funds from its subsidiaries by such means as a dividend or loan.
Our senior secured revolving credit facility, or our “revolving credit facility,” provides for a maximum borrowing line of credit equal to $850 million at December 31, 2018. The terms of our revolving credit facility include covenants that restrict our ability to make cash distributions, acquisitions and investments, including investments in joint ventures. We may make distributions of cash to the extent of our “available cash” as defined in our partnership agreement. We may make acquisitions and investments that meet the definition of “permitted acquisitions”; “other investments” which may not exceed 5% of “consolidated net tangible assets”; and additional future “permitted JV investments” up to $175 million, which may include additional investments in BOSTCO. The primary financial covenants contained in our revolving credit facility are (i) a total leverage ratio test (not to exceed 5.25 to 1.0), (ii) a senior secured leverage ratio test (not to exceed 3.75 to 1.0), and (iii) a minimum interest coverage ratio test (not less than 2.75 to 1.0). We were in compliance with all financial covenants as of and during the years ended December 31,
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
2018 and 2017. The principal balance of loans and any accrued and unpaid interest as of December 31, 2018 are due and payable in full on March 13, 2022, the maturity date for our revolving credit facility.
We may elect to have loans under our revolving credit facility bear interest either (i) at a rate of LIBOR plus a margin ranging from 1.75% to 2.75% depending on the total leverage ratio then in effect, or (ii) at the base rate plus a margin ranging from 0.75% to 1.75% depending on the total leverage ratio then in effect. We also pay a commitment fee on the unused amount of commitments, ranging from 0.375% to 0.5% per annum, depending on the total leverage ratio then in effect. Our obligations under our revolving credit facility are secured by a first priority security interest in favor of the lenders in the majority of our assets, including our investments in unconsolidated affiliates. For the years ended December 31, 2018, 2017 and 2016, the weighted average interest rate on borrowings under our revolving credit facility was approximately 5.2%, 3.5% and 3.1%, respectively. At December 31, 2018 and 2017, our outstanding borrowings under our revolving credit facility were $306 million and $593.2 million, respectively. At both December 31, 2018 and 2017, our outstanding letters of credit were $0.4 million.
In February 2018, w
e and TLP Finance Corp., our 100% owned subsidiary, issued senior notes that were 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. 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.
(13) EQUITY
The number of units outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
General
|
|
|
|
Common
|
|
partner
|
|
|
|
units
|
|
equivalent units
|
|
Units outstanding at December 31, 2016
|
|
16,137,650
|
|
329,339
|
|
Issuance of common units by our long-term incentive plan
|
|
6,498
|
|
—
|
|
Issuance of common units pursuant to our savings and retention program
|
|
33,205
|
|
—
|
|
Contribution of cash by TransMontaigne GP to maintain its 2% general partner interest
|
|
—
|
|
811
|
|
Units outstanding at December 31, 2017
|
|
16,177,353
|
|
330,150
|
|
Issuance of common units by our long-term incentive plan
|
|
6,972
|
|
—
|
|
Issuance of common units pursuant to our savings and retention program
|
|
44,798
|
|
—
|
|
Contribution of cash by TransMontaigne GP to maintain its 2% general partner interest
|
|
—
|
|
1,056
|
|
Units outstanding at December 31, 2018
|
|
16,229,123
|
|
331,206
|
|
(14) EQUITY-BASED COMPENSATION
We have a savings and retention program to compensate certain employees of TLP Management Services who provide services to the Company. Prior to the Take-Private Transaction, we also had a long‑term incentive plan to compensate the independent directors of our general partner. Awards under the long-term incentive plan were settled in our common units, and accordingly, we accounted for the awards as an equity award, or “restricted phantom units”. For awards to the independent directors, equity‑based compensation expense was approximately $270,000, $270,000 and $722,000 for the years ended December 31, 2018, 2017 and 2016, respectively.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
Activity under the long-term incentive plan was as follows:
|
|
|
|
|
|
|
|
|
Restricted
|
|
NYSE
|
|
|
|
phantom
|
|
closing
|
|
|
|
units
|
|
price
|
|
Restricted phantom units outstanding at December 31, 2015
|
|
15,750
|
|
|
|
|
Vesting on February 1, 2016
|
|
(15,750)
|
|
$
|
30.41
|
|
Grant on October 21, 2016
|
|
3,258
|
|
$
|
41.45
|
|
Vesting on October 21, 2016
|
|
(3,258)
|
|
$
|
41.45
|
|
Restricted phantom units outstanding at December 31, 2016
|
|
—
|
|
|
|
|
Grant on October 20, 2017
|
|
6,498
|
|
$
|
41.55
|
|
Vesting on October 20, 2017
|
|
(6,498)
|
|
$
|
41.55
|
|
Restricted phantom units outstanding at December 31, 2017
|
|
—
|
|
|
|
|
Grant on October 19, 2018
|
|
6,972
|
|
$
|
38.73
|
|
Vesting on October 19, 2018
|
|
(6,972)
|
|
$
|
38.73
|
|
Restricted phantom units outstanding at December 31, 2018
|
|
—
|
|
|
|
|
Savings and retention program.
The purpose of the savings and retention program is to provide for the reward and retention of participants by providing them with awards that vest over future service periods. Awards under the program with respect to individuals providing services to the Company generally become vested as to 50% of a participant’s annual award as of the first day of the month that falls closest to the second anniversary of the grant date, and the remaining 50% as of the first day of the month that falls closest to the third anniversary of the grant date, subject to earlier vesting upon a participant’s attainment of the age and length of service thresholds, retirement, death or disability, involuntary termination without cause, or termination of a participant’s employment following a change in control of the Company, or TLP Management Services, as specified in the program; however, these terms may be subject to varying terms for future awards. 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. The Take-Private Transaction did not accelerate the vesting of any of the awards.
A person will satisfy the age and length of service thresholds of the program upon the attainment of the earliest of (a) age sixty, (b) age fifty five and ten years of service as an officer of TLP Management Services or any of its affiliates or predecessors, or (c) age fifty and twenty years of service as an employee of TLP Management Services or any of its affiliates or predecessors.
Prior to the Take-Private Transaction, we had the ability to settle the awards in our common units, and accordingly, we accounted for the awards as an equity award, or “restricted phantom units”. Following the Take-Private Transaction, we plan to index the awards to other forms of “investments”, and have the intent and ability to settle the awards in cash, and accordingly, we intend to account for the awards as liability awards.
Given that we do not have any employees to provide corporate and support services and instead we contract for such services under the omnibus agreement, GAAP requires us to classify the savings and retention program awards as a non-employee award and measure the cost of services received based on the vesting‑date fair value of the award. That cost, or an estimate of that cost in the case of unvested awards, is recognized over the period during which services are provided in exchange for the award. As of December 31, 2018, there was approximately $1.5 million of total unrecognized compensation expense related to unvested awards, which is expected to be recognized over the remaining weighted average period of 1.42 years.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
For the years ended December 31, 2018, 2017 and 2016, the expense associated with the savings and retention program’s equity-based compensation was approximately $3.2 million, $2.7 million and $2.5 million, respectively.
Activity related to our equity-based awards granted under the savings and retention program was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
average
|
|
|
|
average
|
|
|
|
Vested
|
|
price
|
|
Unvested
|
|
price
|
|
Restricted phantom units outstanding at December 31, 2017
|
|
91,877
|
|
$
|
38.91
|
|
54,244
|
|
$
|
38.81
|
|
Issuance of units
|
|
(44,798)
|
|
$
|
37.75
|
|
—
|
|
$
|
—
|
|
Units withheld for settlement of withholding taxes
|
|
(16,822)
|
|
$
|
37.59
|
|
—
|
|
$
|
—
|
|
Unit accrual for distributions paid
|
|
7,539
|
|
$
|
38.04
|
|
5,374
|
|
$
|
38.04
|
|
Vesting of units
|
|
20,248
|
|
$
|
36.77
|
|
(20,248)
|
|
$
|
36.77
|
|
Grant of units
|
|
46,362
|
|
$
|
35.23
|
|
33,097
|
|
$
|
35.23
|
|
Forfeiture of units
|
|
—
|
|
$
|
—
|
|
(1,259)
|
|
$
|
34.87
|
|
Restricted phantom units outstanding at December 31, 2018
|
|
104,406
|
|
$
|
38.52
|
|
71,208
|
|
$
|
38.25
|
|
Vested and expected to vest at December 31, 2018
|
|
175,614
|
|
$
|
38.41
|
|
|
|
|
|
|
(15) NET EARNINGS PER LIMITED PARTNER UNIT
The following table reconciles net earnings to earnings allocable to limited partners and sets forth the computation of basic and diluted net earnings per limited partner unit (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
Net earnings
|
|
|
$
|
39,475
|
|
$
|
48,493
|
|
$
|
44,106
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Distributions payable on behalf of incentive distribution rights
|
|
|
|
(15,189)
|
|
|
(11,974)
|
|
|
(8,630)
|
Distributions payable on behalf of general partner interest
|
|
|
|
(1,056)
|
|
|
(986)
|
|
|
(916)
|
Earnings allocable to general partner interest less than distributions payable to general partner interest
|
|
|
|
570
|
|
|
255
|
|
|
206
|
Earnings allocable to general partner interest including incentive distribution rights
|
|
|
|
(15,675)
|
|
|
(12,705)
|
|
|
(9,340)
|
Net earnings allocable to limited partners per the consolidated statements of operations
|
|
|
$
|
23,800
|
|
$
|
35,788
|
|
$
|
34,766
|
Basic weighted average units
|
|
|
|
16,316
|
|
|
16,258
|
|
|
16,210
|
Diluted weighted average units
|
|
|
|
16,360
|
|
|
16,284
|
|
|
16,229
|
Net earnings per limited partner unit—basic
|
|
|
$
|
1.46
|
|
$
|
2.20
|
|
$
|
2.14
|
Net earnings per limited partner unit—diluted
|
|
|
$
|
1.45
|
|
$
|
2.20
|
|
$
|
2.14
|
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
Pursuant to our partnership agreement we were required to distribute available cash (as defined by our partnership agreement) as of the end of the reporting period. Such distributions are declared within 45 days after the end of each quarter. The following table sets forth the distribution declared per common unit attributable to the periods indicated:
|
|
|
|
|
|
Distribution
|
January 1, 2016 through March 31, 2016
|
|
$
|
0.680
|
April 1, 2016 through June 30, 2016
|
|
$
|
0.690
|
July 1, 2016 through September 30, 2016
|
|
$
|
0.700
|
October 1, 2016 through December 31, 2016
|
|
$
|
0.710
|
January 1, 2017 through March 31, 2017
|
|
$
|
0.725
|
April 1, 2017 through June 30, 2017
|
|
$
|
0.740
|
July 1, 2017 through September 30, 2017
|
|
$
|
0.755
|
October 1, 2017 through December 31, 2017
|
|
$
|
0.770
|
January 1, 2018 through March 31, 2018
|
|
$
|
0.785
|
April 1, 2018 through June 30, 2018
|
|
$
|
0.795
|
July 1, 2018 through September 30, 2018
|
|
$
|
0.805
|
October 1, 2018 through December 31, 2018
|
|
$
|
0.805
|
(16) COMMITMENTS AND CONTINGENCIES
Contract commitments.
At December 31, 2018, we have contractual commitments of approximately $35.0 million for the supply of services, labor and materials related to capital projects that currently are under development. We expect that these contractual commitments will be paid during the year ending December 31, 2019.
Operating leases.
We lease property and equipment under non‑cancelable operating leases that extend through August 2030. At December 31, 2018, future minimum lease payments under these non‑cancelable operating leases are as follows (in thousands):
|
|
|
|
|
Years ending December 31:
|
|
|
|
|
2019
|
|
$
|
3,015
|
|
2020
|
|
|
3,374
|
|
2021
|
|
|
3,210
|
|
2022
|
|
|
2,315
|
|
2023
|
|
|
2,263
|
|
Thereafter
|
|
|
6,287
|
|
|
|
$
|
20,464
|
|
Included in the above non‑cancelable operating lease commitments are amounts for property rentals that we have sublet under non‑cancelable sublease agreements or have reimbursement agreements with affiliates, for which we expect to receive minimum rentals of approximately $10.4 million in future periods.
Rental expense under operating leases was approximately $2.0 million, $3.3 million and $3.4 million for the years ended December 31, 2018, 2017 and 2016, respectively.
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 (continued)
Years ended December 31, 2018, 2017 and 2016
(17) 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. The following methods and assumptions were used to estimate the fair value of financial instruments.
Cash and 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 swap agreements was determined using a pricing model based on the LIBOR swap rate and other observable market data. The fair value is categorized in Level 2 of the fair value hierarchy.
Debt.
The carrying amount of our revolving credit facility debt approximates fair value since borrowings under the facility bear interest at current market interest rates. The estimated fair value of our $300 million publicly traded senior notes at December 31, 2018 was approximately $268.5 million based on observable market trades. The fair value of our debt is categorized in Level 2 of the fair value hierarchy.
(18) 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 840,
Leases
(“ASC 840 revenue”). The remainder is recognized in accordance with ASC 606,
Revenue From Contracts With Customers
(“ASC 606 revenue”).
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
The following table provides details of our revenue disaggregated by category of revenue (in thousands):
|
|
|
|
|
|
Year ended
|
|
|
December 31,
|
|
|
2018
|
Terminaling services fees:
|
|
|
|
Firm commitments (ASC 840 revenue)
|
|
$
|
158,055
|
Firm commitments (ASC 606 revenue)
|
|
|
13,719
|
Total firm commitments revenue
|
|
|
171,774
|
Ancillary revenue (ASC 606 revenue)
|
|
|
42,079
|
Ancillary revenue (ASC 840 revenue)
|
|
|
2,378
|
Total ancillary revenue
|
|
|
44,457
|
Total terminaling services fees
|
|
|
216,231
|
Pipeline transportation fees (ASC 840 revenue)
|
|
|
3,295
|
Management fees and reimbursed costs (ASC 840 revenue)
|
|
|
223
|
Management fees and reimbursed costs (ASC 606 revenue)
|
|
|
8,344
|
Total management fees and reimbursed costs
|
|
|
8,567
|
Total revenue
|
|
$
|
228,093
|
The following table includes our estimated future revenue associated with our firm commitments under terminaling services fees which is expected to be recognized as ASC 606 revenue in the specified period related to our future performance obligations as of the end of the reporting period (in thousands):
Estimated Future ASC 606 Revenue by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midwest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminals and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gulf Coast
|
|
Pipeline
|
|
|
Brownsville
|
|
River
|
|
Southeast
|
|
West Coast
|
|
|
|
|
Terminals
|
|
System
|
|
|
Terminals
|
|
Terminals
|
|
Terminals
|
|
Terminals
|
|
Total
|
2019
|
$
|
4,006
|
|
$
|
173
|
|
$
|
—
|
|
$
|
1,100
|
|
$
|
—
|
|
$
|
4,859
|
|
$
|
10,138
|
|
2020
|
|
1,402
|
|
|
19
|
|
|
—
|
|
|
1,039
|
|
|
—
|
|
|
3,590
|
|
|
6,050
|
|
2021
|
|
1,145
|
|
|
—
|
|
|
—
|
|
|
519
|
|
|
—
|
|
|
3,464
|
|
|
5,128
|
|
2022
|
|
811
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
867
|
|
|
1,678
|
|
2023
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Thereafter
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total estimated future ASC 606 revenue
|
$
|
7,364
|
|
$
|
192
|
|
$
|
—
|
|
$
|
2,658
|
|
$
|
—
|
|
$
|
12,780
|
|
$
|
22,994
|
|
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 December 31, 2018 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 (continued)
Years ended December 31, 2018, 2017 and 2016
Estimated future ASC 606 revenue in the table above excludes revenue arrangements accounted for in accordance with ASC 840 in the amount of $141.7 million for 2019, $112.4 million for 2020, $83.5 million for 2021, $53.6 million for 2022, $39.8 million for 2023 and $487.0 million thereafter.
(19) BUSINESS SEGMENTS
We provide integrated terminaling, storage, transportation and related services to companies engaged in the trading, distribution and marketing of refined petroleum products, crude oil, chemicals, fertilizers and other liquid products. Our chief operating decision maker is our chief executive officer. Our chief executive officer reviews the financial performance of our business segments using disaggregated financial information about “net margins” for purposes of making operating decisions and assessing financial performance. “Net margins” is composed of revenue less direct operating costs and expenses. Accordingly, we present “net margins” for each of our business segments: (i) Gulf Coast terminals, (ii) Midwest terminals and pipeline system, (iii) Brownsville terminals, (iv) River terminals, (v) Southeast terminals and (vi) West Coast terminals.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
The financial performance of our business segments is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
Year ended
|
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
Gulf Coast Terminals:
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees
|
|
$
|
64,338
|
|
$
|
61,889
|
|
$
|
54,619
|
|
Management fees and reimbursed costs
|
|
|
284
|
|
|
1,052
|
|
|
1,159
|
|
Other
|
|
|
—
|
|
|
—
|
|
|
932
|
|
Revenue
|
|
|
64,622
|
|
|
62,941
|
|
|
56,710
|
|
Direct operating costs and expenses
|
|
|
(22,817)
|
|
|
(22,829)
|
|
|
(22,952)
|
|
Net margins
|
|
|
41,805
|
|
|
40,112
|
|
|
33,758
|
|
Midwest Terminals and Pipeline System:
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees
|
|
|
10,127
|
|
|
9,265
|
|
|
9,469
|
|
Pipeline transportation fees
|
|
|
1,772
|
|
|
1,732
|
|
|
1,732
|
|
Revenue
|
|
|
11,899
|
|
|
10,997
|
|
|
11,201
|
|
Direct operating costs and expenses
|
|
|
(3,053)
|
|
|
(2,859)
|
|
|
(3,220)
|
|
Net margins
|
|
|
8,846
|
|
|
8,138
|
|
|
7,981
|
|
Brownsville Terminals:
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees
|
|
|
8,339
|
|
|
9,186
|
|
|
11,202
|
|
Pipeline transportation fees
|
|
|
1,523
|
|
|
3,987
|
|
|
5,057
|
|
Management fees and reimbursed costs
|
|
|
7,384
|
|
|
7,472
|
|
|
7,326
|
|
Other
|
|
|
—
|
|
|
—
|
|
|
1,900
|
|
Revenue
|
|
|
17,246
|
|
|
20,645
|
|
|
25,485
|
|
Direct operating costs and expenses
|
|
|
(7,812)
|
|
|
(10,447)
|
|
|
(11,338)
|
|
Net margins
|
|
|
9,434
|
|
|
10,198
|
|
|
14,147
|
|
River Terminals:
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees
|
|
|
10,654
|
|
|
10,883
|
|
|
10,868
|
|
Management fees and reimbursed costs
|
|
|
—
|
|
|
64
|
|
|
10
|
|
Other
|
|
|
—
|
|
|
—
|
|
|
1,700
|
|
Revenue
|
|
|
10,654
|
|
|
10,947
|
|
|
12,578
|
|
Direct operating costs and expenses
|
|
|
(6,832)
|
|
|
(6,624)
|
|
|
(7,957)
|
|
Net margins
|
|
|
3,822
|
|
|
4,323
|
|
|
4,621
|
|
Southeast Terminals:
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees
|
|
|
82,821
|
|
|
75,122
|
|
|
58,410
|
|
Management fees and reimbursed costs
|
|
|
891
|
|
|
882
|
|
|
540
|
|
Revenue
|
|
|
83,712
|
|
|
76,004
|
|
|
58,950
|
|
Direct operating costs and expenses
|
|
|
(26,836)
|
|
|
(24,302)
|
|
|
(22,948)
|
|
Net margins
|
|
|
56,876
|
|
|
51,702
|
|
|
36,002
|
|
West Coast Terminals:
|
|
|
|
|
|
|
|
|
|
|
Terminaling services fees
|
|
|
39,952
|
|
|
1,738
|
|
|
—
|
|
Management fees and reimbursed costs
|
|
|
8
|
|
|
—
|
|
|
—
|
|
Revenue
|
|
|
39,960
|
|
|
1,738
|
|
|
—
|
|
Direct operating costs and expenses
|
|
|
(14,678)
|
|
|
(639)
|
|
|
—
|
|
Net margins
|
|
|
25,282
|
|
|
1,099
|
|
|
—
|
|
Total net margins
|
|
|
146,065
|
|
|
115,572
|
|
|
96,509
|
|
General and administrative expenses
|
|
|
(21,615)
|
|
|
(19,433)
|
|
|
(14,100)
|
|
Insurance expenses
|
|
|
(4,976)
|
|
|
(4,064)
|
|
|
(4,081)
|
|
Equity-based compensation expense
|
|
|
(3,478)
|
|
|
(2,999)
|
|
|
(3,263)
|
|
Depreciation and amortization
|
|
|
(49,535)
|
|
|
(35,960)
|
|
|
(32,383)
|
|
Loss on disposition of assets
|
|
|
(901)
|
|
|
—
|
|
|
—
|
|
Earnings from unconsolidated affiliates
|
|
|
8,852
|
|
|
7,071
|
|
|
10,029
|
|
Operating income
|
|
|
74,412
|
|
|
60,187
|
|
|
52,711
|
|
Other expenses
|
|
|
(34,937)
|
|
|
(11,694)
|
|
|
(8,605)
|
|
Net earnings
|
|
$
|
39,475
|
|
$
|
48,493
|
|
$
|
44,106
|
|
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
Supplemental information about our business segments is summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018
|
|
|
|
|
|
|
Midwest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminals and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gulf Coast
|
|
Pipeline
|
|
Brownsville
|
|
River
|
|
Southeast
|
|
West Coast
|
|
|
|
|
|
|
Terminals
|
|
System
|
|
Terminals
|
|
Terminals
|
|
Terminals
|
|
Terminals
|
|
Total
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
56,144
|
|
$
|
11,899
|
|
$
|
8,934
|
|
$
|
10,654
|
|
$
|
83,712
|
|
$
|
39,960
|
|
$
|
211,303
|
|
Frontera
|
|
|
—
|
|
|
—
|
|
|
8,312
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,312
|
|
Associated Asphalt, LLC
|
|
|
8,478
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,478
|
|
Revenue
|
|
$
|
64,622
|
|
$
|
11,899
|
|
$
|
17,246
|
|
$
|
10,654
|
|
$
|
83,712
|
|
$
|
39,960
|
|
$
|
228,093
|
|
Capital expenditures
|
|
$
|
5,357
|
|
$
|
568
|
|
$
|
15,673
|
|
$
|
1,596
|
|
$
|
35,070
|
|
$
|
7,858
|
|
$
|
66,122
|
|
Identifiable assets
|
|
$
|
119,517
|
|
$
|
19,542
|
|
$
|
59,095
|
|
$
|
45,667
|
|
$
|
244,149
|
|
$
|
276,456
|
|
$
|
764,426
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
332
|
|
Investments in unconsolidated affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
227,031
|
|
Revolving credit facility unamortized deferred issuance costs, net
|
|
|
|
|
|
|
|
|
5,515
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,072
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
999,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
|
|
|
|
Midwest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminals and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gulf Coast
|
|
Pipeline
|
|
Brownsville
|
|
River
|
|
Southeast
|
|
West Coast
|
|
|
|
|
|
|
Terminals
|
|
System
|
|
Terminals
|
|
Terminals
|
|
Terminals
|
|
Terminals
|
|
Total
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
62,941
|
|
$
|
10,997
|
|
$
|
13,452
|
|
$
|
10,947
|
|
$
|
76,004
|
|
$
|
1,738
|
|
$
|
176,079
|
|
Frontera
|
|
|
—
|
|
|
—
|
|
|
7,193
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,193
|
|
Revenue
|
|
$
|
62,941
|
|
$
|
10,997
|
|
$
|
20,645
|
|
$
|
10,947
|
|
$
|
76,004
|
|
$
|
1,738
|
|
$
|
183,272
|
|
Capital expenditures
|
|
$
|
6,233
|
|
$
|
174
|
|
$
|
11,678
|
|
$
|
2,075
|
|
$
|
37,957
|
|
$
|
48
|
|
$
|
58,165
|
|
Identifiable assets
|
|
$
|
123,963
|
|
$
|
20,502
|
|
$
|
52,265
|
|
$
|
49,761
|
|
$
|
215,950
|
|
$
|
276,317
|
|
$
|
738,758
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923
|
|
Investments in unconsolidated affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233,181
|
|
Revolving credit facility unamortized deferred issuance costs, net
|
|
|
|
|
|
|
|
|
6,778
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,363
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
987,003
|
|
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2016
|
|
|
|
|
|
|
Midwest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminals and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gulf Coast
|
|
Pipeline
|
|
Brownsville
|
|
River
|
|
Southeast
|
|
West Coast
|
|
|
|
|
|
|
Terminals
|
|
System
|
|
Terminals
|
|
Terminals
|
|
Terminals
|
|
Terminals
|
|
Total
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
|
$
|
56,586
|
|
$
|
11,201
|
|
$
|
20,028
|
|
$
|
12,578
|
|
$
|
56,113
|
|
$
|
—
|
|
$
|
156,506
|
|
NGL Energy Partners LP
|
|
|
124
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,837
|
|
|
—
|
|
|
2,961
|
|
Frontera
|
|
|
—
|
|
|
—
|
|
|
5,457
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,457
|
|
Revenue
|
|
$
|
56,710
|
|
$
|
11,201
|
|
$
|
25,485
|
|
$
|
12,578
|
|
$
|
58,950
|
|
$
|
—
|
|
$
|
164,924
|
|
Capital expenditures
|
|
$
|
7,675
|
|
$
|
871
|
|
$
|
1,428
|
|
$
|
2,788
|
|
$
|
42,102
|
|
$
|
—
|
|
$
|
54,864
|
|
Identifiable assets
|
|
$
|
126,457
|
|
$
|
21,919
|
|
$
|
43,878
|
|
$
|
53,005
|
|
$
|
195,632
|
|
$
|
—
|
|
$
|
440,891
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
593
|
|
Investments in unconsolidated affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
241,093
|
|
Revolving credit facility unamortized deferred issuance costs, net
|
|
|
|
|
|
|
|
|
1,298
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,819
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
689,694
|
|
(20) FINANCIAL RESULTS BY QUARTER (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
December 31,
|
|
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
|
|
(in thousands except per unit amounts)
|
|
Revenue
|
|
$
|
56,444
|
|
$
|
55,344
|
|
$
|
57,150
|
|
$
|
59,155
|
|
$
|
228,093
|
|
Direct operating costs and expenses
|
|
|
(20,145)
|
|
|
(19,275)
|
|
|
(19,910)
|
|
|
(22,698)
|
|
|
(82,028)
|
|
General and administrative expenses
|
|
|
(4,981)
|
|
|
(4,619)
|
|
|
(4,957)
|
|
|
(7,058)
|
|
|
(21,615)
|
|
Insurance expenses
|
|
|
(1,246)
|
|
|
(1,271)
|
|
|
(1,227)
|
|
|
(1,232)
|
|
|
(4,976)
|
|
Equity-based compensation expense
|
|
|
(2,017)
|
|
|
(441)
|
|
|
(483)
|
|
|
(537)
|
|
|
(3,478)
|
|
Depreciation and amortization
|
|
|
(11,808)
|
|
|
(13,160)
|
|
|
(12,310)
|
|
|
(12,257)
|
|
|
(49,535)
|
|
Loss on disposition of assets
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(901)
|
|
|
(901)
|
|
Earnings from unconsolidated affiliates
|
|
|
2,889
|
|
|
2,444
|
|
|
1,862
|
|
|
1,657
|
|
|
8,852
|
|
Operating income
|
|
|
19,136
|
|
|
19,022
|
|
|
20,125
|
|
|
16,129
|
|
|
74,412
|
|
Interest expense
|
|
|
(6,461)
|
|
|
(8,273)
|
|
|
(8,608)
|
|
|
(8,558)
|
|
|
(31,900)
|
|
Amortization of deferred issuance costs
|
|
|
(501)
|
|
|
(1,289)
|
|
|
(622)
|
|
|
(625)
|
|
|
(3,037)
|
|
Net earnings
|
|
$
|
12,174
|
|
$
|
9,460
|
|
$
|
10,895
|
|
$
|
6,946
|
|
$
|
39,475
|
|
Net earnings per limited partner unit—basic
|
|
$
|
0.52
|
|
$
|
0.34
|
|
$
|
0.42
|
|
$
|
0.18
|
|
$
|
1.46
|
|
Net earnings per limited partner unit—diluted
|
|
$
|
0.52
|
|
$
|
0.34
|
|
$
|
0.42
|
|
$
|
0.17
|
|
$
|
1.45
|
|
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
December 31,
|
|
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
|
|
|
(in thousands except per unit amounts)
|
|
Revenue
|
|
$
|
44,850
|
|
$
|
45,364
|
|
$
|
45,449
|
|
$
|
47,609
|
|
$
|
183,272
|
|
Direct operating costs and expenses
|
|
|
(16,511)
|
|
|
(15,984)
|
|
|
(17,719)
|
|
|
(17,486)
|
|
|
(67,700)
|
|
General and administrative expenses
|
|
|
(3,971)
|
|
|
(4,080)
|
|
|
(5,247)
|
|
|
(6,135)
|
|
|
(19,433)
|
|
Insurance expenses
|
|
|
(1,006)
|
|
|
(1,002)
|
|
|
(999)
|
|
|
(1,057)
|
|
|
(4,064)
|
|
Equity-based compensation expense
|
|
|
(1,817)
|
|
|
(352)
|
|
|
(544)
|
|
|
(286)
|
|
|
(2,999)
|
|
Depreciation and amortization
|
|
|
(8,705)
|
|
|
(8,792)
|
|
|
(8,882)
|
|
|
(9,581)
|
|
|
(35,960)
|
|
Earnings from unconsolidated affiliates
|
|
|
2,560
|
|
|
2,120
|
|
|
1,884
|
|
|
507
|
|
|
7,071
|
|
Operating income
|
|
|
15,400
|
|
|
17,274
|
|
|
13,942
|
|
|
13,571
|
|
|
60,187
|
|
Interest expense
|
|
|
(2,152)
|
|
|
(2,525)
|
|
|
(2,656)
|
|
|
(3,140)
|
|
|
(10,473)
|
|
Amortization of deferred issuance costs
|
|
|
(294)
|
|
|
(271)
|
|
|
(320)
|
|
|
(336)
|
|
|
(1,221)
|
|
Net earnings
|
|
$
|
12,954
|
|
$
|
14,478
|
|
$
|
10,966
|
|
$
|
10,095
|
|
$
|
48,493
|
|
Net earnings per limited partner unit—basic and diluted
|
|
$
|
0.62
|
|
$
|
0.70
|
|
$
|
0.47
|
|
$
|
0.41
|
|
$
|
2.20
|
|
(21) SUBSEQUENT EVENTS
On January 14, 2019, we announced a distribution of $0.805 per unit for the period from October 1, 2018 through December 31, 2018, and we paid the distribution on February 8, 2019 to unitholders of record on January 31, 2019.
On February 26, 2019, an affiliate of ArcLight completed its previously announced acquisition of all of the Partnership’s outstanding publicly traded common units not already held by ArcLight and its affiliates by way of our merger (the “Merger”) with a wholly owned subsidiary of TLP Finance Holdings, LLC (“TLP Finance”), an indirect controlled subsidiary of Arclight. At the effective time of the Merger, each of the Partnership’s general partner units issued and outstanding immediately prior to the acquisition effective time was converted into (i)(a) one Partnership common unit, and (i)(b) in aggregate, a non-economic general partner interest in the Partnership, (ii) each of the Partnership’s incentive distribution rights issued and outstanding immediately prior to the acquisition effective time was converted into 100 Partnership common units, (iii) our general partner distributed its common units in the Partnership (the “Transferred GP Units”) to TLP Acquisition Holdings, LLC, a Delaware limited liability company (“TLP Holdings”), and TLP Holdings contributed the Transferred GP Units to TLP Finance, (iv) the Partnership converted into the Company (a Delaware limited liability company) pursuant to Section 17-219 of the Delaware Limited Partnership Act and changed its name to “TransMontaigne Partners LLC”, and all of our common units owned by TLP Finance were converted into limited liability company interests, (v) the non-economic interest in the Company owned by our general partner was automatically cancelled and ceased to exist and our general partner merged with and into the Company with the Company surviving, and (vi) the Company became 100% owned by TLP Finance (the transactions described in the foregoing clauses (i) through (iv), collectively with the Merger, the “Take-Private Transaction”).
As a result of the Take-Private Transaction, our common units ceased to be publicly traded, and our common units are no longer listed on the New York Stock Exchange (“NYSE”). Our currently outstanding 6.125% senior unsecured notes due in 2026 remain outstanding, and the Company is voluntarily filing with the Securities and Exchange Commission pursuant to the covenants contained in those notes.
In connection with the Take-Private Transaction, the Company prepared and filed a post-effective amendment to its Form S-3 registration statement in effect to deregister all securities unissued but issuable thereunder. The senior notes remain outstanding and the Company is voluntarily filing pursuant to the covenants contained in the senior notes.
Table of Contents
TransMontaigne Partners LLC and subsidiaries
Notes to Consolidated Financial Statements (continued)
Years ended December 31, 2018, 2017 and 2016
Further, in connection with the Take-Private Transaction, (i) effective February 26, 2019, we entered into the fourth amended and restated omnibus agreement and amended our senior secured credit facility, to among other things, address governance changes in connection with our being wholly owned by an indirect controlled subsidiary of ArcLight, and (ii) on February 25, 2019, pursuant to the terms of the TLP Management Services savings and retention program, the plan administrator amended and restated the TLP Management Services savings and retention program, including to separate the program from the TLP Management Services 2016 long-term incentive plan and to remove common units of the partnership as an investment or payment option under the plan.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. 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 our management, including our executive and principal financial officer (whom we refer to as the Certifying Officers), as appropriate to allow timely decisions regarding required disclosure. The management of our sole equity-holder (TLP Finance Holdings, LLC) evaluated, with the participation of the Certifying Officers, the effectiveness of our disclosure controls and procedures as of December 31, 2018, pursuant to Rule 13a‑15(b) under the Exchange Act. Based upon that evaluation, the Certifying Officers concluded that, as of December 31, 2018, our disclosure controls and procedures were effective at the reasonable assurance level. In addition, our Certifying Officers concluded that there were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
The management of our sole equity-holder is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
The management of our sole equity-holder has used the framework set forth in the report entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) to evaluate the effectiveness of our internal control over financial reporting. Based on that evaluation, the management of our sole equity-holder has concluded that our internal control over financial reporting was effective as of December 31, 2018. The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears herein.
March 15, 2019
Report of Independent Registered Public Accounting Firm
To the Management of TransMontaigne Partners LLC
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of TransMontaigne Partners LLC (formerly TransMontaigne Partners L.P.) and subsidiaries (the "Company") as of December 31, 2018, based on criteria established in
Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control – Integrated Framework (2013)
issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) and in accordance with auditing standards generally accepted in the United States of America, the consolidated financial statements as of and for the year ended December 31, 2018, of the Company and our report dated March 15, 2019, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Denver, Colorado
March 15, 2019
ITEM 9B. OTHER INFORMATION
No information was required to be disclosed in a report on Form 8‑K, but not so reported, for the quarter ended December 31, 2018.
Part III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE
TLP Finance Holdings, LLC is our sole equity-holder and manages our operations and activities. Our company’s officers are employees of an affiliate of ArcLight, and we have no employees and all of our management and operational activities (not conducted by TLP Finance Holdings, LLC) are provided by TLP Management Services and such entity provides payroll and maintains all employee benefits programs on behalf of our company. As we are managed by our sole equity- holder, TLP Finance Holdings, LLC, we do not have a board of directors and the decisions of TLP Finance Holdings, LLC are not governed by any specific policies. TLP Finance Holdings, LLC may adopt certain policies governing its decision-making processes with respect to our management in the future.
Corporate Governance Guidelines; Code of Business Conduct and Ethics
To address governance changes in connection with our being wholly owned by an indirect controlled subsidiary of ArcLight following the Take-Private Transaction, the Company adopted a Code of Ethics for Senior Financial Officers, which includes substantially similar terms to the policies in place for our general partner prior to the Take-Private Transaction. The Code of Ethics for Senior Financial Officers applies to the senior financial officers of the Company, including the chief executive officer, the chief financial officer, the chief accounting officer, the chief operating officer and the president or persons performing similar functions.
In addition, to address governance changes in connection with our being wholly owned by an indirect controlled subsidiary of ArcLight following the Take Private Transaction, the Company adopted a Code of Business Conduct and Ethics, which applies to all employees providing services to the Company.
Management of the Company and Officers
TLP Finance Holdings, LLC, our sole equity-holder, manages and oversees our operations. As part of its oversight function, TLP Finance Holdings, LLC monitors how management operates the Partnership. When granting authority to management, approving strategies and receiving management reports, TLP Finance Holdings LLC considers, among other things, the risks and vulnerabilities we face.
As of the date of this report, the Company does not have its own board of directors.
In connection with the Take-Private Transaction, on February 26, 2019, TransMontaigne GP L.L.C., the general partner of the Partnership prior to its conversion to a Delaware limited liability company, merged with and into the Company, with the Company surviving. In addition, as a result of the Take-Private Transaction, and the adoption of our limited liability company agreement on February 26, 2019, management of the Company was vested in TLP Finance Holdings, LLC. Accordingly, the board of directors of TransMontaigne GP L.L.C. was dissolved, and each of our former independent directors,
Jay A. Wiese, Steven A. Blank, and Barry E. Welch resigned from the board of directors of TransMontaigne GP L.L.C. Each of Messrs. Wiese, Blank and Welch resigned without any claims for compensation (or otherwise), or any disagreements with any matter relating to the operations, internal controls, policies, or practices of the Partnership, the general partner, or the board of directors of the general partner, and the resignation of each was solely as a result of the Take-Private Transaction. In addition, as a result of the Take-Private Transaction and our management by TLP Finance Holdings, LLC following the effective-time thereof, none of Daniel R. Revers, Kevin M. Crosby, Lucius H. Taylor, or Theodore D. Burke, each of whom previously sat on the board of directors of TransMontaigne GP L.L.C. and are employees of ArcLight, continue to serve in such capacity.
Executive Officers
The following table sets forth the names, ages and titles of the executive officers of the Company, each of whom is an employee of an ArcLight affiliate, as of March 15, 2019:
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
Frederick W. Boutin
|
|
63
|
|
Chief Executive Officer
|
James F. Dugan
|
|
61
|
|
Executive Vice President and Chief Operating Officer
|
Robert T. Fuller
|
|
49
|
|
Executive Vice President, Chief Financial Officer and Treasurer
|
Michael A. Hammell
|
|
48
|
|
Executive Vice President, General Counsel and Secretary
|
Mark S. Huff
|
|
60
|
|
President
|
Frederick W. Boutin
has served as Chief Executive Officer of the Company, and prior to the Take-Private Transaction, our general partner and its subsidiaries since November of 2014. Prior to then he served as Executive Vice President and Chief Financial Officer beginning in January 2008. Mr. Boutin also managed business development and commercial contracting activities from December 2007 to July 2010 and from August 2013 to January 2015. Prior to February 1, 2016, Mr. Boutin also served in various other capacities at our general partner and its subsidiaries, and TransMontaigne and its predecessors, since 1995. Prior to his affiliation with TransMontaigne, Mr. Boutin was a Vice President at Associated Natural Gas Corporation, and its successor Duke Energy Field Services, and a certified public accountant with Peat Marwick. Mr. Boutin holds a B.S. in Electrical Engineering and an M.S. in Accounting from Colorado State University.
James F. Dugan
has served as Executive Vice President and Chief Operating Officer of the Company, and prior to the Take-Private Transaction, our general partner and its subsidiaries since August 30, 2017. Mr. Dugan previously served as Executive Vice President, Engineering and Operations of our general partner and its subsidiaries from June 30, 2017 to August 30, 2017 and served as the Senior Vice President, Engineering and Operations of our general partner and its subsidiaries from January 2008 to June 30, 2017. Mr. Dugan joined TransMontaigne Inc. as Engineering Manager in 1998. He has over 16 years of experience in senior leadership positions overseeing domestic and international petroleum marine terminals, pipelines and engineering divisions. Mr. Dugan began his career as a Project Engineer for Gulf Interstate Energy in 1983 and in 1993 he joined Louis Dreyfus Energy as a Project Engineer. He has served on the Board of Directors for the International Liquid Terminals Association (ILTA) since 2011, and he holds certification through the American Petroleum Institute.
Robert T. Fuller
has served as Executive Vice President, Chief Financial Officer and Treasurer of the Company, and prior to the Take-Private Transaction, our general partner and its subsidiaries since November of 2014. Prior to November of 2014, Mr. Fuller
served as Vice President and Chief Accounting Officer of our general partner and its subsidiaries since January 2011 and as its Assistant Treasurer since February 2012. Prior to his affiliation with TransMontaigne
, Mr. Fuller spent 13 years as a certified public accountant with KPMG LLP. Mr. Fuller has a B.A. in Political Science from Fort Lewis College and a M.S. in Accounting from the University of Colorado. Mr. Fuller is licensed as a certified public accountant in Colorado and New York.
Michael A. Hammell
has served as Executive Vice President, General Counsel and Secretary of the Company, and prior to the Take-Private Transaction, our general partner and its subsidiaries since October 2012. Mr. Hammell served as the Senior Vice President, Assistant General Counsel and Secretary of each of our general partner and the TransMontaigne entities from July 2011 to October 2012; as Vice President, Assistant General Counsel and Secretary from January 2011 to July 2011; as Vice President, Assistant General Counsel and Assistant Secretary from November 2007 until January 2011 and as Assistant General Counsel from April 2007 to November 2007. Prior to joining TransMontaigne, Mr. Hammell practiced at the law firm of Hogan & Hartson LLP (now Hogan Lovells). Mr. Hammell received a B.S. in Business Administration from the University of Colorado at Boulder and a J.D. from Northwestern University School of Law.
Mark S. Huff
has served as President of the Company, and prior to the Take-Private Transaction, our general partner and its subsidiaries since August 2017. Mr. Huff served as Executive Vice President, Commercial Operations of our general partner and its subsidiaries from September 2016 to August 2017 and prior thereto as Senior Vice President, Commercial Operations since returning to the Partnership in January 2015. Prior thereto he served as Director of Business Development with Colonial Pipeline from November 2012 to January 2015 and as Managing Director of Vecenergy from 2008 to 2012. Mr. Huff was previously employed with a former affiliate of the Partnership from 1996 to 2007 where he was responsible at various times for the business development and product marketing activities of TransMontaigne Partners and its affiliates. Mr. Huff holds a B.S. in Nautical Science from the United States Merchant Marine Academy at Kings Point, NY.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires the executive officers and directors of our general partner, and persons who own more than ten percent of a registered class of our equity securities (collectively, “Reporting Persons”) to file with the SEC and the NYSE initial reports of ownership and reports of changes in ownership of our common units and our other equity securities. Specific due dates for those reports have been established, and we are required to report herein any failure to file reports by those due dates. Reporting Persons are also required by SEC regulations to furnish TransMontaigne Partners with copies of all Section 16(a) reports they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required during the year ended December 31,
2018, all Section 16(a) filing requirements applicable to such Reporting Persons were satisfied. Following the Take-Private Transaction, we do not expect to be required to file future Section 16(a) filings at this time.
Committees of the Board of Directors and Management following the Take-Private Transaction
Prior to the Take-Private Transaction, the board of directors of our general partner had three standing committees: an audit committee, a conflicts committee and a compensation committee. Following the Take-Private Transaction, we no longer have a board of directors and are instead managed by our sole equity-holder. The Company is not required to have, and does not have, a separately designated standing audit committee composed of independent directors, as its securities are not listed on a national securities exchange that requires such independence. The Company has determined that it is not necessary to designate, and has not designated, an “audit committee financial expert” as it is privately held and solely a voluntary filer with the Securities and Exchange Commission following the Take-Private Transaction as required by the covenants contained in the Company’s outstanding senior notes. As we do not have a board of directors, there are no applicable board nomination procedures to report.
ITEM 11. EXECUTIVE COMPENSATIO
N
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
We do not directly employ any of the persons responsible for managing our business. We are managed by ArcLight. Pursuant to our omnibus agreement with ArcLight, all of our officers and the employees who provide services to us are employed by TLP Management Services, a wholly owned subsidiary of ArcLight. TLP Management Services provides payroll and maintains all employee benefits programs on our behalf.
We do not incur any direct compensation charge for our executive officers. Instead, pursuant to our omnibus agreement with ArcLight, we pay ArcLight an annual administrative fee that is intended to compensate ArcLight for providing, through TLP Management Services, certain corporate staff and support services to us, including services provided to us by the executive officers. During the year ended December 31, 2018, we paid ArcLight an administrative fee of approximately $10.3 million. The administrative fee is a lump‑sum payment and does not reflect specific amounts attributable to the compensation of our executive officers.
In addition, under the omnibus agreement, and prior to ArcLight acquiring our general partner on February 1, 2016, we agreed to reimburse a TransMontaigne affiliate for a portion of the incentive bonus awards made to key employees under the TransMontaigne Services LLC savings and retention plan. The value of our incentive bonus award reimbursement for a single grant year may be no less than $1.5 million. Effective April 13, 2015 and beginning with the 2015 incentive bonus award, and ending with the Take-Private Transaction, we had the option to provide the reimbursement in either a cash payment or the delivery of our common units, with the reimbursement made in accordance with the underlying vesting and payment schedule of the savings and retention program. For the 2018 incentive bonus awards, the expense associated with the reimbursement was approximately $3.2 million. Following the Take-Private Transaction, the Company will no longer pay any portion of its incentive bonuses in equity of the Company.
Prior to the Take-Private Transaction, the board of directors and the compensation committee of our general partner performed only a limited advisory role in setting the compensation of the executive officers of our general partner, which for 2018 was determined by the compensation committee of TLP Management Services. The compensation committee of our general partner, however, determined the amount, timing and terms of all equity awards granted to our independent directors.
The primary elements of
the executive compensation program for 2018 were a combination of annual cash and long‑term equity‑based compensation. During
2018, elements of compensation for our executive officers consisted of the following:
|
·
|
|
Discretionary annual cash awards;
|
|
·
|
|
Long‑term equity‑based compensation; and
|
|
·
|
|
Other compensation, including very limited perquisites.
|
The elements of TLP Management Services’ compensation program for 2018
, along with other rewards (for example, benefits, work environment, career development), were intended to provide a total rewards package designed to support the business strategies of the Company and our partnership. During
2018,
the Company did not use any elements of compensation based on specific performance‑based criteria and did not have any other specific performance‑based objectives. Although the board of directors and the compensation committee of our general partner performed only a limited advisory role in setting the compensation of the executive officers of our general partner, we are not aware of any compensation elements of TransMontaigne
LLC’s compensation program which are reasonably likely to have a material adverse effect on us.
TLP Management Services long‑term incentive plan and the savings and retention program was intended to align the long‑term interests of the executive officers of our general partner with those of our unitholders to the extent a portion of the bonus awards under the savings and retention program is deemed invested in our common units. Following the Take-Private Transaction, no portion of bonus awards will be deemed invested in equity of the Company, but the Company will continue to provide certain deferred bonuses pursuant to the terms of the TLP Management Services LLC amended and restated savings and retention program.
Employment and Other Agreements
We have not entered into any employment agreements with any of our officers.
Compensation Committee Report
The compensation committee reviewed and discussed the Compensation Discussion and Analysis with management for 2018. Following the Take-Private Transaction, we do not have a compensation committee.
COMPENSATION OF DIRECTORS
Prior to the Take-Private Transaction, employees of our general partner or its affiliates (including employees of ArcLight and its affiliates) who also served as directors of our general partner did not receive additional compensation. Pursuant to our independent director annual compensation program in place prior to the Take-Private Transaction, the independent directors receive annual compensation consisting of: (i) $60,000 annual cash retainer; paid quarterly in arrears, and (ii) common units valued at $90,000 and issued pursuant to the TLP Management Services long-term incentive plan, which common units were immediately vested and were not subject to forfeiture. For each annual award of common units issued to the independent directors under the TLP Management Services long-term incentive plan, the awards were made on the third Friday of October (or the next trading day if the NYSE is closed), based on the closing sales price during normal trading hours of the common units on the NYSE. In addition, each director was reimbursed for out‑of‑pocket expenses in connection with attending meetings of the board of directors or committees. In addition, each of our independent directors received additional compensation in connection with their review, evaluation, regulation, and approval of the Take-Private Transaction, as duly approved by the board of directors of our general partner on July 27, 2018. For their additional services, Messrs. Blank and Wiese received an additional $54,839, and Mr. Welch received an additional $68,548 in 2018. No additional consideration was paid to the independent directors for service on any committee of the board of directors of our general partner or for service as a committee chairperson unless approved by the board in advance for a specific engagement or transaction.
Each director prior to the Take-Private Transaction will be fully indemnified by us for actions associated with being a director to the extent permitted under Delaware law. The following table provides information concerning the compensation of our general partner’s directors for
2018.
Following the Take-Private Transaction, we are managed by our sole equity-holder, TLP Finance Holdings, LLC, and we do not have a board of directors.
Director Compensation Table for 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees earned or
|
|
Stock
|
|
All other
|
|
|
|
|
|
|
paid in cash ($)
|
|
awards ($)
|
|
compensation ($)
|
|
Total ($)
|
|
Name (a)
|
|
(b)
|
|
(c)
|
|
(g)
|
|
(h)
|
|
Theodore D. Burke(1)
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Kevin M. Crosby(1)
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Daniel R. Revers(1)
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Lucius H. Taylor(1)
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Steven A. Blank
|
|
$
|
114,839
|
|
$
|
90,000
|
|
—
|
|
$
|
204,839
|
|
Barry E. Welch
|
|
$
|
128,548
|
|
$
|
90,000
|
|
—
|
|
$
|
218,548
|
|
Jay A. Wiese
|
|
$
|
114,839
|
|
$
|
90,000
|
|
—
|
|
$
|
204,839
|
|
|
(1)
|
|
Because Messrs.
Burke, Crosby, Revers and Taylor are employees of an affiliate of our general partner prior to the Take-Private Transaction, none of them received compensation for service as a director of our general partner. At December 31,
2018, none of Messrs. Burke, Crosby, Revers and Taylor held any restricted phantom or other limited partner interests in the Partnership.
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31,
2018, Messrs.
Blank, Welch and Wiese each served on the compensation committee of our general partner. During
2018, none of the members of the compensation committee was an officer or employee of our general partner or any of our subsidiaries or served as an officer of any company with respect to which any of the executive officers of our general partner served on such company’s board of directors. Following the Take-Private Transaction, we no longer have a compensation committee.
SAVINGS AND RETENTION PROGRAM
On February 26, 2016, the board of directors approved the savings and retention program, which constituted a “program” under, and be subject to, the TLP Management Services long-term incentive plan in place prior to the Take-Private Transaction, for employees who provide services with respect to our business. In accordance with the savings and retention program, TLP Management Services LLC adopted an amended and restated savings and retention plan on February 25, 2019, which, among other items, accounted for the closing of the Take-Private Transaction. The purpose of the plan is to provide for the reward and retention of certain key employees of TLP Management Services or its affiliates by providing them with awards that vest over future service periods. Awards under the plan generally vested as to 50% of a participant’s annual award on the first day of the month containing the second anniversary of the grant date and the remaining 50% on the first day of the month containing the third anniversary of the grant date, subject to earlier vesting upon a participant’s attainment of certain age or length of service thresholds as specified in the plan. Awards are payable as to 50% of a participant’s annual award in the month containing the second anniversary of the grant date, and the remaining 50% in the month containing the third anniversary of the grant date, subject to earlier payment upon the participant’s retirement after achieving the age or service thresholds, death or disability, involuntary termination without cause or termination of a participant’s employment following a change in control, each 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. The Take-Private Transaction did not accelerate the vesting of any of the awards.
Pursuant to the provisions of the plan, once participating employees of TLP Management Services reach the age and length of service thresholds set forth below, awards are immediately vested and become payable as set forth above, and such vested awards remain subject to forfeiture as specified in the plan. 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 TLP Management Services or its affiliates, or (c) age fifty and twenty years of service as an employee of TLP Management Services or its affiliates. E
ach of Messrs. Boutin, Huff and Dugan have satisfied
the age and length of service thresholds of the plan. Generally, only senior level management of TLP Management Services receive awards under the
savings and retention program.
Although no assets are segregated or otherwise set aside with respect to a participant’s account, the amount ultimately payable to a participant shall be the amount credited to such participant’s account as if such account had been invested in some or all of the investment funds selected by the plan administrator.
Under the fourth amended and restated omnibus agreement entered into on February 26, 2019, we have agreed to satisfy the incentive bonus awards made to key employees under the savings and retention program in cash (or, prior to our Take-Private Transaction, in the Partnership’s common units). Prior to amending and restating the plan and the Take-Private Transaction,
the plan administrator allocated 100% of all 2018, 2017 and 2016 awards to the partnership’s common units fund. For the 2018 incentive bonus awards, the expense associated with the reimbursement was approximately $3.2 million.
Following the Take-Private Transaction, we plan to index our award obligations to other forms of investments.
ITEM 12.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS
As a result of the Take-Private Transaction, TLP Finance Holdings, LLC is the beneficial owner of 100 percent of our outstanding equity interests.
EQUITY COMPENSATION PLAN INFORMATION
Following the Take-Private Transaction, the Company does not have an equity compensation plan. The following table summarizes information about our equity compensation plans as of December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
|
remaining available for
|
|
|
|
|
|
|
|
future issuance under
|
|
|
|
Number of securities to be
|
|
Weighted average
|
|
equity compensation
|
|
|
|
issued upon exercise of
|
|
exercise price of
|
|
plans (excluding
|
|
|
|
outstanding options,
|
|
outstanding options,
|
|
securities reflected
|
|
|
|
warrants and rights(1)
|
|
warrants and rights
|
|
in column (a))(1)
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by security holders
|
|
175,614
|
|
—
|
|
574,386
|
|
Equity compensation plans not approved by security holders
|
|
—
|
|
—
|
|
—
|
|
Total
|
|
175,614
|
|
—
|
|
574,386
|
|
|
(1)
|
|
Includes: (i) a total of 32,010 phantom unit awards outstanding that were granted in 2016 under the savings and retention program, which constitutes a “program” under, and is subject to, the TLP Management Services long-term incentive plan; (ii) a total of 59,899 phantom unit awards outstanding that were granted in 2017 under the savings and retention program; and (iii) a total of 83,705 phantom unit awards outstanding that were granted in 2018 under the savings and retention program.
The TLP Management Services long-term incentive plan reserves 750,000 common units to be granted as awards under the plan, including the savings and retention program, with such amount subject to adjustment as provided for under the terms of the plan.
|
ITEM 13.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
RELATIONSHIP AND AGREEMENTS WITH OUR AFFILIATES
Following the Take-Private Transaction, TLP Finance Holdings, LLC, an indirect controlled subsidiary of ArcLight, has acquired 100 percent of the equity interests in the Company, and the Company is no longer listed on the NYSE and our equity is no longer publicly traded.
Certain related party Agreements with ArcLight are set forth below.
Omnibus Agreement.
Since the inception of the Partnership in 2005 we have been party to an omnibus agreement with the owner of our general partner, which agreement has been amended and restated from time to time.
In connection with the closing of the Take-Private Transaction on February 26, 2019, we entered into the fourth amended and restated omnibus agreement,
to among other things, address governance changes in connection with us being wholly owned by an indirect controlled subsidiary of ArcLight
.
The omnibus agreement provides for the provision of various services for our benefit.
The fees payable under the omnibus agreement to the owner of our general partner prior to the Take-Private Transaction, and ArcLight, following the Take Private Transaction, are comprised of (i) the reimbursement of the direct operating costs and expenses, such as salaries and benefits of operational personnel performing services on site at our terminals and pipelines, which we refer to as on-site employees, (ii) bonus awards to key employees of TLP Management Services who perform services for the Partnership, which, prior to the Take-Private Transaction, were typically paid in the Partnership’s units and were subject to the approval by the compensation committee and the conflicts committee of our general partner, and (iii) the administrative fee for the provision of various general and administrative services for the Company’s benefit such as legal, accounting, treasury, insurance administration and claims processing, information technology, human resources, credit, payroll,
taxes and other corporate services, to the extent such services are not outsourced by the Company. The administrative fee is recognized as a component of general and administrative expenses and
for the years ended December 31, 2018, 2017 and 2016, the administrative fee paid by the Partnership was approximately $10.3 million, $12.8 million and $11.4 million, respectively.
In connection with our previously discussed Phase II buildout at our Collins terminal and the terms of the omnibus agreement, the expansion of our Brownsville terminal and pipeline operations and the December 2017 acquisition of the West Coast terminals, on May 7, 2018, the Partnership, with the concurrence of the conflicts committee of our general partner, agreed to an annual increase in the aggregate fees payable to the owner of the general partner under the omnibus agreement of $3.6 million beginning May 13, 2018.
To effectuate this $3.6 million annual increase in the aggregate fees payable to the owner of the general partner, on May 7, 2018 the Partnership, with the concurrence of the conflicts committee of our general partner, entered into the third amended and restated omnibus agreement by and among the Partnership, our general partner, TransMontaigne Operating GP L.L.C., TransMontaigne Operating Company L.P., TLP Acquisition Holdings, LLC (FKA Gulf TLP Holdings, LLC), and TLP Management Services LLC. The effect of the change to the omnibus agreement is to allow the Partnership to assume the costs and expenses of employees of TLP Management Services performing engineering and environmental safety and occupational health (ESOH) services for and on behalf of the Partnership and to receive an equal and offsetting decrease in the administrative fee. These costs and expenses are expected to approximate $8.9 million in 2018. We expect that a significant portion of the assumed engineering costs will be capitalized under generally accepted accounting principles.
Prior to the $3.6 million annual increase and the effective date of the third amended and restated omnibus agreement, the annual administrative fee was approximately $13.7 million and included the costs and expenses of the employees of TLP Management Services performing engineering and ESOH services. Subsequent to the $3.6 million annual increase and the effective date of the third amended and restated omnibus agreement, the annual administrative fee was reduced to approximately $8.4 million and the Partnership bore the approximately $8.9 million costs and expenses of the employees of TLP Management Services performing engineering and ESOH services for and on behalf of the Partnership.
We adopted and entered into the fourth amended and restated omnibus agreement in connection with the Take-Private Transaction, primarily to address certain changes in our governance as a result thereof, including the removal of our conflicts committee. The administrative fee under the fourth amended and restated omnibus agreement is subject to an increase each calendar year tied to an increase in the consumer price index, if any, plus two percent. If we acquire or construct additional facilities, ArcLight may propose a revised administrative fee covering the provision of services for such additional facilities.
We do not directly employ any of the persons responsible for managing our business. Our officers and the employees who provide services to the Company are employed by TLP Management Services, a wholly owned subsidiary of ArcLight. TLP Management Services provides payroll and maintains all employee benefits programs on our behalf pursuant to the omnibus agreement.
DIRECTOR INDEPENDENCE
We are managed by our sole equity-holder, TLP Finance Holdings, LLC, and we do not have a board of directors.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Deloitte & Touche LLP is our independent auditor. Deloitte & Touche LLP’s accounting fees and services were as follows:
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Audit fees(1)
|
|
$
|
695,000
|
|
$
|
688,000
|
|
Comfort letter and consents
|
|
|
80,000
|
|
|
150,000
|
|
Audit-related fees
|
|
|
—
|
|
|
—
|
|
Tax fees
|
|
|
—
|
|
|
—
|
|
All other fees
|
|
|
—
|
|
|
—
|
|
Total accounting fees and services
|
|
$
|
775,000
|
|
$
|
838,000
|
|
|
(1)
|
|
Represents an estimate of fees for professional services provided in connection with the annual audit of our financial statements and internal control over financial reporting, including Sarbanes‑Oxley 404 attestation, the reviews of our quarterly financial statements, and other services provided by the auditor in connection with statutory and regulatory filings.
|
Part IV
ITEM 15. EXHIBIT
S, FINANCIAL STATEMENT SCHEDULES
|
(A)
|
|
1—The following documents are filed as a part of this Annual Report.
|
|
1.
|
|
Consolidated Financial Statements and Schedules.
See the index to the consolidated financial statements of TransMontaigne Partners L.P. and its subsidiaries that appears under Item 8. “Financial Statements and Supplementary Data” of this Annual Report.
|
|
2.
|
|
Financial Statement Schedules.
Financial statement schedules included in this Item 15 are the financial statements of Battleground Oil Specialty Terminal Company LLC. Other schedules are omitted because they are not required, are inapplicable or the required information is included in the financial statements or notes thereto.
|
|
3.
|
|
Exhibits.
A list of exhibits required by Item 601 of Regulation S‑K to be filed as part of this Annual Report.
|
|
(A)
|
|
2— Battleground Oil Specialty Terminal Company LLC Financial Statements, with a Report of Independent Registered Public Accounting Firm, as of December 31, 2018 and 2017 and for the Years Ended December 31, 2018, 2017 and 2016.
|
Report of Independent Registered Public Accounting Firm
To the
Board of Directors of
Battleground Oil Specialty Terminal Company LLC:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Battleground Oil Specialty Terminal Company LLC (the “Company”) as of December 31, 2018 and 2017, and the related statements of income, of members’ equity, and of cash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the auditing standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Significant Transactions with Related Parties
As discussed in Note 4 to the financial statements, the Company has extensive operations and relationships with its member, Kinder Morgan Battleground Oil, LLC and other affiliated companies.
/s/PricewaterhouseCoopers LLP
Houston, Texas
February 27, 2019
We have served as the Company's auditor since 2013.
BATTLEGROUND OIL SPECIALTY TERMINAL COMPANY LLC
STATEMENTS OF INCOME
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
Revenues
|
$
|
66,288
|
|
|
$
|
66,235
|
|
|
$
|
66,863
|
|
|
|
|
|
|
|
Operating Costs and Expenses
|
|
|
|
|
|
Operations and maintenance
|
13,362
|
|
|
17,407
|
|
|
10,331
|
|
Operations and maintenance-affiliate
|
10,682
|
|
|
10,645
|
|
|
9,774
|
|
Depreciation and amortization
|
18,682
|
|
|
18,543
|
|
|
18,401
|
|
General and administrative-affiliate
|
3,506
|
|
|
3,134
|
|
|
2,963
|
|
General and administrative
|
—
|
|
|
—
|
|
|
731
|
|
Taxes other than income taxes
|
5,695
|
|
|
5,622
|
|
|
5,776
|
|
Total Operating Costs and Expenses
|
51,927
|
|
|
55,351
|
|
|
47,976
|
|
|
|
|
|
|
|
Operating Income
|
14,361
|
|
|
10,884
|
|
|
18,887
|
|
|
|
|
|
|
|
Other Income
|
19
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
Income Before Taxes
|
14,380
|
|
|
10,884
|
|
|
18,888
|
|
|
|
|
|
|
|
Income Tax Expense
|
85
|
|
|
336
|
|
|
174
|
|
|
|
|
|
|
|
Net Income
|
$
|
14,295
|
|
|
$
|
10,548
|
|
|
$
|
18,714
|
|
The accompanying notes are an integral part of these financial statements.
BATTLEGROUND OIL SPECIALTY TERMINAL COMPANY LLC
BALANCE SHEETS
(In Thousands)
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
ASSETS
|
|
|
|
Current assets
|
|
|
|
Cash and cash equivalents
|
$
|
14,058
|
|
|
$
|
18,716
|
|
Accounts receivable, net
|
3,165
|
|
|
672
|
|
Inventories
|
907
|
|
|
1,663
|
|
Other current assets
|
1,169
|
|
|
3,925
|
|
Total current assets
|
19,299
|
|
|
24,976
|
|
|
|
|
|
Property, plant and equipment, net
|
455,984
|
|
|
468,727
|
|
Deferred charges and other assets
|
—
|
|
|
621
|
|
Total Assets
|
$
|
475,283
|
|
|
$
|
494,324
|
|
|
|
|
|
LIABILITIES AND MEMBERS' EQUITY
|
|
|
|
Current liabilities
|
|
|
|
Accounts payable
|
$
|
5,928
|
|
|
$
|
6,871
|
|
Accrued taxes, other than income taxes
|
5,540
|
|
|
5,669
|
|
Accrued dredging service costs
|
—
|
|
|
3,153
|
|
Other current liabilities
|
1,003
|
|
|
1,857
|
|
Total current liabilities
|
12,471
|
|
|
17,550
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
Contract liabilities
|
1,259
|
|
|
—
|
|
Total non-current liabilities
|
1,259
|
|
|
—
|
|
Total liabilities
|
13,730
|
|
|
17,550
|
|
|
|
|
|
Commitments and contingencies (Notes 2 and 6)
|
|
|
|
Members' Equity
|
461,553
|
|
|
476,774
|
|
Total Liabilities and Members' Equity
|
$
|
475,283
|
|
|
$
|
494,324
|
|
The accompanying notes are an integral part of these financial statements.
BATTLEGROUND OIL SPECIALTY TERMINAL COMPANY LLC
STATEMENTS OF CASH FLOWS
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
Cash Flows From Operating Activities
|
|
|
|
|
|
Net income
|
$
|
14,295
|
|
|
$
|
10,548
|
|
|
$
|
18,714
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
18,682
|
|
|
18,543
|
|
|
18,401
|
|
Other non-cash items
|
527
|
|
|
190
|
|
|
50
|
|
Changes in components of working capital:
|
|
|
|
|
|
Accounts receivable
|
(2,318
|
)
|
|
322
|
|
|
138
|
|
Inventories
|
756
|
|
|
(986
|
)
|
|
23
|
|
Accounts payables
|
(3,186
|
)
|
|
2,522
|
|
|
(430
|
)
|
Accrued dredging service costs
|
(3,153
|
)
|
|
—
|
|
|
—
|
|
Other current assets
|
2,756
|
|
|
(421
|
)
|
|
117
|
|
Other current liabilities
|
276
|
|
|
(684
|
)
|
|
(359
|
)
|
Other long-term assets and liabilities
|
624
|
|
|
(65
|
)
|
|
197
|
|
Net Cash Provided by Operating Activities
|
29,259
|
|
|
29,969
|
|
|
36,851
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
Capital expenditures
|
(4,404
|
)
|
|
(3,028
|
)
|
|
(4,633
|
)
|
Other
|
3
|
|
|
250
|
|
|
—
|
|
Net Cash Used in Investing Activities
|
(4,401
|
)
|
|
(2,778
|
)
|
|
(4,633
|
)
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
Contributions from Members
|
—
|
|
|
342
|
|
|
5,000
|
|
Distributions to Members
|
(29,516
|
)
|
|
(29,885
|
)
|
|
(34,942
|
)
|
Net Cash Used in Financing Activities
|
(29,516
|
)
|
|
(29,543
|
)
|
|
(29,942
|
)
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash and Cash Equivalents
|
(4,658
|
)
|
|
(2,352
|
)
|
|
2,276
|
|
Cash and Cash Equivalents, beginning of period
|
18,716
|
|
|
21,068
|
|
|
18,792
|
|
Cash and Cash Equivalents, end of period
|
$
|
14,058
|
|
|
$
|
18,716
|
|
|
$
|
21,068
|
|
|
|
|
|
|
|
Non-cash Investing Activities
|
|
|
|
|
|
Net increases in property, plant and equipment accruals
|
$
|
2,243
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
BATTLEGROUND OIL SPECIALTY TERMINAL COMPANY LLC
STATEMENTS OF MEMBERS' EQUITY
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
unitholders
|
|
Class B
unitholders
|
|
Total
unitholders
|
Balance at December 31, 2015
|
$
|
506,997
|
|
|
$
|
—
|
|
|
$
|
506,997
|
|
Net income
|
17,491
|
|
|
1,223
|
|
|
18,714
|
|
Contributions
|
5,000
|
|
|
—
|
|
|
5,000
|
|
Distributions
|
(33,719
|
)
|
|
(1,223
|
)
|
|
(34,942
|
)
|
Balance at December 31, 2016
|
495,769
|
|
|
—
|
|
|
495,769
|
|
Net income
|
9,502
|
|
|
1,046
|
|
|
10,548
|
|
Contributions
|
342
|
|
|
—
|
|
|
342
|
|
Distributions
|
(28,839
|
)
|
|
(1,046
|
)
|
|
(29,885
|
)
|
Balance at December 31, 2017
|
476,774
|
|
|
—
|
|
|
476,774
|
|
Net income
|
13,332
|
|
|
963
|
|
|
14,295
|
|
Contributions
|
—
|
|
|
—
|
|
|
—
|
|
Distributions
|
(28,553
|
)
|
|
(963
|
)
|
|
(29,516
|
)
|
Balance at December 31, 2018
|
$
|
461,553
|
|
|
$
|
—
|
|
|
$
|
461,553
|
|
The accompanying notes are an integral part of these financial statements.
BATTLEGROUND OIL SPECIALTY TERMINAL COMPANY LLC
NOTES TO FINANCIAL STATEMENTS
1. General
We are a Delaware limited liability company, formed on May 26, 2011. When we refer to “us,” “we,” “our,” “ours,” “the Company”, or “BOSTCO,” we are describing Battleground Oil Specialty Terminal Company LLC.
The member interests in us (collectively referred to as the Class A Members) are as follows:
|
∠
|
|
55.0% - Kinder Morgan Battleground Oil, LLC (KM Battleground Oil), a subsidiary of Kinder Morgan, Inc. (KMI);
|
|
∠
|
|
42.5% - TransMontaigne Operating Company L.P. (TransMontaigne), a wholly owned subsidiary of TransMontaigne Partners L.P.; and
|
|
∠
|
|
2.5% - Tauber Terminals, L.P. (Tauber), a Texas limited partnership.
|
In addition, we have Class B member interests further described in Note 4.
We own and operate a terminal facility that has 7.1 million barrels of distillate, residual fuel and other black oil product storage at a Houston Ship Channel site. The facility also has deep draft docks and high speed pumps.
2. Summary of Significant Accounting Policies
Basis of Presentation
We have prepared our accompanying financial statements in accordance with the accounting principles contained in the Financial Accounting Standards Board's (FASB) Accounting Standards Codification, the single source of United States Generally Accepted Accounting Principles (GAAP) and referred to in this report as the Codification.
Management has evaluated subsequent events through February 27, 2019, the date the financial statements were available to be issued.
Out of Period of Adjustment
A $1,435,000 out of period correction was recorded in 2016 resulting in a decrease in operations and maintenance expense and increase in net income. This adjustment relates to the over accrual of certain dredging service costs in 2014 and 2015. Management evaluated this error taking into account both qualitative and quantitative factors and considered the impact in relation to each period in which they originated. The impact of recognizing this adjustment in prior years was not significant to any individual period. Management believes this adjustment is immaterial to the financial statements presented herein and the previously issued financial statements.
Adoption of New Accounting Pronouncements
On January 1, 2018, we adopted Accounting Standard Update (ASU) No. 2014-09, “Revenue from Contracts with Customers” and the series of related accounting standard updates that followed (collectively referred to as “Topic 606”). We utilized the modified retrospective method to adopt Topic 606, which required us to apply the new revenue standard to (i) all new revenue contracts entered into after January 1, 2018 and (ii) revenue contracts which were not completed as of January 1, 2018. In accordance with this approach, our revenues for periods prior to January 1, 2018 were not revised. There was no cumulative adjustment as of January 1, 2018 resulting from the adoption of Topic 606. For more information, see “—
Revenue Recognition
” below and Note 5.
Use of Estimates
Certain amounts included in or affecting our financial statements and related disclosures must be estimated, requiring us to make certain assumptions with respect to values or conditions which cannot be known with certainty at the time our financial statements are prepared. These estimates and assumptions affect the amounts we report for assets and liabilities, our revenues and expenses during the reporting period, and our disclosures, including as it relates to contingent assets and liabilities at the date of our financial statements. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.
In addition, we believe that certain accounting policies are of more significance in our financial statement preparation process than others, and set out below are the principal accounting policies we apply in the preparation of our financial statements.
Cash and cash Equivalents
We define cash equivalents as all highly liquid short-term investments with original maturities of three months or less.
Accounts Receivable, net
We establish provisions for losses on accounts receivable due from customers if we determine that we will not collect all or part of the outstanding balance. We regularly review collectability and establish or adjust our allowance as necessary using the specific identification method. As of December 31, 2018 and 2017, our allowance for doubtful accounts were $70,000 and $246,000, respectively.
Inventories
Our inventories, which consist of consumable spare parts used in the operations of the facilities, are valued at weighted-average cost, and we periodically review for physical deterioration and obsolescence.
Property, Plant and Equipment, net
Our property, plant and equipment is recorded at its original cost of construction or, upon acquisition, at the fair value of the assets acquired. For constructed assets, we capitalize all construction-related direct labor and material costs, as well as indirect construction costs. The indirect capitalized labor and related costs are based upon estimates of time spent supporting construction projects. We expense costs for routine maintenance and repairs in the period incurred.
We use the straight-line method to depreciate property, plant and equipment over the estimated useful life for each asset. The cost of property, plant and equipment sold or retired and the related depreciation are removed from the balance sheet in the period of sale or disposition. Gains or losses resulting from property sales or dispositions are recognized in the period incurred. We generally include gains or losses in “Operations and maintenance” on our accompanying Statements of Income.
Asset Retirement Obligations (ARO)
We record liabilities for obligations related to the retirement and removal of long-lived assets used in our businesses. We record, as liabilities, the fair value of ARO on a discounted basis when they are incurred and can be reasonably estimated, which is typically at the time the assets are installed or acquired. Amounts recorded for the related assets are increased by the amount of these obligations. Over time, the liabilities increase due to the change in their present value, and the initial capitalized costs
are depreciated over the useful lives of the related assets. The liabilities are eventually extinguished when the asset is taken out of service.
We are required to operate and maintain our assets, and intend to do so as long as supply and demand for such services exists, which we expect for the foreseeable future. Therefore, we believe that we cannot reasonably estimate the ARO for the substantial majority of assets because these assets have indeterminate lives. We continue to evaluate our ARO and future developments could impact the amounts we record. We had no recorded ARO as of December 31, 2018 and 2017.
Asset Impairments
We evaluate our assets for impairment when events or circumstances indicate that their carrying values may not be recovered. These events include changes in the manner in which we intend to use a long-lived asset, decisions to sell an asset and adverse changes in market conditions or in the legal or business environment such as adverse actions by regulators. If an event occurs, which is a determination that involves judgment, we evaluate the recoverability of the carrying value of our long-lived asset based on the long-lived asset's ability to generate future cash flows on an undiscounted basis. If an impairment is indicated, or if we decide to sell a long-lived asset or group of assets, we adjust the carrying value of the asset downward, if necessary, to its estimated fair value.
Our fair value estimates are generally based on assumptions market participants would use, including market data obtained through the sales process or an analysis of expected discounted future cash flows. There were no impairments for the years ended December 31, 2018, 2017 and 2016.
Revenue Recognition
Revenue from Contracts with Customers
The unit of account in Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. Topic 606 requires that a contract’s transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when (point in time) or as (over time) control of the goods or services transfers to the customer and the performance obligation is satisfied.
Our customer services contracts primarily include terminaling service contracts, as described below. Generally, for the majority of these contracts: (i) our promise is to transfer (or stand ready to transfer) a series of distinct integrated services over a period of time, which is a single performance obligation; (ii) the transaction price includes fixed and/or variable consideration, which amount is determinable at contract inception and/or at each month end based on our right to invoice at month end for the value of services provided to the customer that month; and (iii) the transaction price is recognized as revenue over the service period specified in the contract (which can be a day, including each day in a series of promised daily services, a month, a year, or other time increment, including a deficiency makeup period) as the services are rendered using a time-based (passage of time) or units-based (units of service transferred) output method for measuring the transfer of control of the services and satisfaction of our performance obligation over the service period, based on the nature of the promised service (e.g., firm or non-firm) and the terms and conditions of the contract.
Firm Services
Firm services (also called uninterruptible services) are services that are promised to be available to the customer at all times during the period(s) covered by the contract, with limited exceptions. Our firm service contracts are typically structured with take-or-pay provisions. In these arrangements, the customer is obligated to pay for services associated with its take-or-pay
obligation regardless of whether or not the customer chooses to utilize the service in that period. Because we make the service continuously available over the service period, we recognize the take-or-pay amount as revenue ratably over such period based on the passage of time.
Non-Firm Services
Non-firm services (also called interruptible services) are the opposite of firm services in that such services are provided to a customer on an “as available” basis. Generally, we do not have an obligation to perform these services until we accept a customer’s periodic request for service. For the majority of our non-firm service contracts, the customer will pay only for the actual quantities of services it chooses to receive or use, and we typically recognize the transaction price as revenue as those units of service are transferred to the customer in the specified service period (typically a daily or monthly period).
Refer to Note 5 for further information.
Revenue Recognition Policy prior to January 1, 2018
Prior to the implementation of Topic 606, we recognized storage revenues on firm contracted capacity ratably over the contract period regardless of the volume of petroleum products stored. We recorded revenues from throughput movements and ancillary services when performed and earned, subject to possible contractual minimums and maximums.
Operations and Maintenance
Operations and maintenance includes $3,789,000, $3,787,000, and $(370,000) of dredging service costs for the years ended December 31, 2018, 2017 and 2016, respectively. Actual dredging services costs are capitalized and included in “Other current assets” and “Deferred charges and other assets” on our accompanying Balance Sheets. The capitalized dredging costs are amortized until the next dredging operation (an approximate 12 to 24 month period). We use the straight-line method to amortize dredging service costs.
Environmental Matters
We capitalize or expense, as appropriate, environmental expenditures. We capitalize certain environmental expenditures required in obtaining rights-of-way, regulatory approvals or permitting as part of the construction. We accrue and expense environmental costs that relate to an existing condition caused by past operations, which do not contribute to current or future revenue generation. We generally do not discount environmental liabilities to a net present value, and we record environmental liabilities when environmental assessments and/or remedial efforts are probable and we can reasonably estimate the costs. Generally, our recording of these accruals coincides with our completion of a feasibility study or our commitment to a formal plan of action. We recognize receivables for anticipated associated insurance recoveries when such recoveries are deemed to be probable.
We routinely conduct reviews of potential environmental issues and claims that could impact our assets or operations. These reviews assist us in identifying environmental issues and estimating the costs and timing of remediation efforts. We also routinely adjust our environmental liabilities to reflect changes in previous estimates. In making environmental liability estimations, we consider the material effect of environmental compliance, pending legal actions against us, and potential third-party liability claims. Often, as the remediation evaluation and effort progresses, additional information is obtained, requiring revisions to estimated costs. These revisions are reflected in our income in the period in which they are reasonably determinable.
We are subject to environmental cleanup and enforcement actions from time to time. In particular, Comprehensive Environmental Response, Compensation and Liability Act generally imposes joint and several liability for cleanup and enforcement costs on current and predecessor owners and operators of a site, among others, without regard to fault or the legality
of the original conduct, subject to the right of a liable party to establish a “reasonable basis” for apportionment of costs. Our operations are also subject to federal, state and local laws and regulations relating to protection of the environment. Although we believe our operations are in substantial compliance with applicable environmental law and regulations, risks of additional costs and liabilities are inherent in our operations, and there can be no assurance that we will not incur significant costs and liabilities. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies under the terms of authority of those laws, and claims for damages to property or persons resulting from our operations, could result in substantial costs and liabilities to us.
Although it is not possible to predict the ultimate outcomes, we believe that the resolution of the environmental matters, and other matters to which we are a party, will not have a material adverse effect on our business, financial position, results of operations or cash flows. We had no accruals for any outstanding environmental matters as of December 31, 2018 and 2017.
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 the Company. Although no assurance can be given, we believe, based on our experiences to date and taking into account established reserves, that the ultimate resolution of such items will not have a material adverse impact on our business, financial position, results of operations or cash flows. We believe we have meritorious defenses to the matters to which we are a party and intend to vigorously defend the Company. When we determine a loss is probable of occurring and is reasonably estimable, we accrue an undiscounted liability for such contingencies based on our best estimate using information available at that time. If the estimated loss is a range of potential outcomes and there is no better estimate within the range, we accrue the amount at the low end of the range. We disclose contingencies where an adverse outcome may be material, or in the judgment of management, we conclude the matter should otherwise be disclosed.
Vandaven Johnson Personal Injury Claim
Vandaven Johnson, an employee of Petro-Chem Services, filed a lawsuit in the 295th Judicial District for Harris County, Texas against BOSTCO and certain other defendants in which the plaintiff alleges that he incurred personal injuries in connection with an incident which is alleged to have occurred on April 12, 2017 while the plaintiff was walking down a temporary gangway on BOSTCO’s premises to a barge dock. Plaintiff alleges that the gangway was placed at an unreasonably steep angle, had an inadequate handrail, and that a vertical support or stanchion failed, causing his injuries. Plaintiff subsequently amended his complaint to add the manufacturer and distributor of the gangway as defendants. Plaintiff alleges injuries to his neck and back and claims to be permanently disabled. Plaintiff seeks damages of $3 million inclusive of alleged current and future medical expenses, pain and suffering, and lost wages. A jury trial is scheduled to occur on Sept 2, 2019. BOSTCO estimates plaintiff’s damages to be considerably less than those claimed in the lawsuit, and we anticipate a jury will place significant responsibility on both the plaintiff and other defendants at trial. We intend to continue to vigorously defend the lawsuit.
Customer Dispute
As of December 31, 2017, we had a liability of $1,642,000 for a dispute with a customer related to the commencement of our operations. In January 2018, in connection with the execution of an amendment to the original services agreement, the parties settled this dispute. The resolution of the liability is a component of the transaction price for the amended services arrangement. Accordingly, we will recognize the amount as revenues over the 5 year term of the amended services agreement as we fulfill the contractual performance obligations.
Other Contingencies
We recognize liabilities for other contingencies when we have an exposure that indicates it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Where the most likely outcome of a contingency can be reasonably estimated, we accrue an undiscounted liability for that amount. Where the most likely outcome cannot be estimated, a range of potential losses is established and if no one amount in that range is more likely than any other, the low end of the range is accrued.
Income Taxes
We are a limited liability company that is treated as a partnership for income tax purposes and are not subject to federal or state income taxes. Accordingly, no provision for federal or state income taxes has been recorded in our financial statements. The tax effects of our activities accrue to our Members who report on their individual federal income tax returns their share of revenues and expenses. However, we are subject to Texas margin tax (a revenue based calculation), which is presented as “Income Tax Expense” on our accompanying Statements of Income.
3. Property, Plant and Equipment, net
Our property, plant and equipment, net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Useful Life in Years
|
|
2018
|
|
2017
|
Terminal and storage facilities
|
10 - 40
|
|
$
|
440,233
|
|
|
$
|
437,977
|
|
Buildings
|
5 - 30
|
|
12,955
|
|
|
12,955
|
|
Other support equipment
|
1 - 30
|
|
77,047
|
|
|
76,846
|
|
Accumulated depreciation and amortization
|
|
|
(91,986
|
)
|
|
(73,395
|
)
|
|
|
|
438,249
|
|
|
454,383
|
|
Land
|
|
|
13,168
|
|
|
13,168
|
|
Construction work in process
|
|
|
4,567
|
|
|
1,176
|
|
Property, plant and equipment, net
|
|
|
$
|
455,984
|
|
|
$
|
468,727
|
|
4. Related Party Transactions
Limited Liability Company Agreement (LLC Agreement)
Our profits and losses, and cash distributions are allocated, and made within 45 days after the end of each quarter, on a pro-rata basis to our Members in accordance with their equity percentage interests and profit interests, subject to other conditions as defined in the LLC Agreement. The Class A and Class B Members share in our profits and losses on a 96.5% and 3.5% pro-rata basis, respectively. Class B Member interests are not required to make capital contributions in order to maintain their profit interests. Class A units outstanding as of December 31, 2018 and 2017 were 14,914,900. Class B units outstanding as of December 31, 2018 and 2017 were 700.
Changes and amendments to the terms of the LLC Agreement, including its provisions regarding the approval of additional capital contributions, require both KM Battleground Oil and TransMontaigne approvals pursuant to the LLC Agreement. Class A and Class B Members have other rights, preferences, restrictions, obligations, and limitations, including limitations as to the transfer of ownership interests.
Affiliate Agreement
Pursuant to the operations and reimbursement agreement, KM Battleground Oil operates our terminal facility and we pay them a service fee. The service fee for the years ended December 31, 2018, 2017 and 2016 was approximately $1,657,000, $1,609,000 and $1,574,000, respectively, and is reflected in “Operations and maintenance” on our accompanying Statements of Income.
Other Affiliate Balances and Activities
We enter into transactions with our affiliates within the ordinary course of business and the services are based on the same terms as non-affiliates.
We do not have employees. Employees of KMI provide services to us. In accordance with our governance documents,we reimburse KMI at cost.
The following table summarizes our balance sheet affiliate balances (in thousands):
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
Accounts receivable, net
|
$
|
18
|
|
|
$
|
443
|
|
Prepayments(a)
|
—
|
|
|
102
|
|
Accounts payable
|
1,560
|
|
|
1,830
|
|
____________
|
(a)
|
|
Included in “Other current assets” on our accompanying Balance Sheets.
|
The following table shows revenues from our affiliates (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
Revenues
|
$
|
802
|
|
|
$
|
665
|
|
|
$
|
4,751
|
|
Subsequent Event
In February 2019, we made cash distributions to our Class A and B Members totaling $5,870,000.
5. Revenue Recognition
Nature of Revenue
We provide various types of liquid tank services. These services are generally comprised of inbound, storage and outbound handling of customer products.
Our liquids tank storage and handling service contracts that include a promised tank storage capacity provision and prepaid volume throughput of the stored product. The handling services we provide generally include blending and mixing, throughput movements, and ancillary services for residual fuel and diesel. In these firm service contracts, we have a stand-ready obligation to perform this contracted service each day over the life of the contract. The customer pays a transaction price typically in the form of a fixed monthly charge and is obligated to pay whether or not it uses the storage capacity and throughput service (i.e., a take-or-pay payment obligation). These contracts generally include a per-unit rate for any quantities we handle at the request of the customer in excess of the prepaid volume throughput amount and also typically include per-unit rates for additional, ancillary services that may be periodically requested by the customer.
Disaggregation of Revenues
The following table present our revenues disaggregated by revenue source and type of revenue for each revenue source for the year ended December 31, 2018 (in thousands):
|
|
|
|
|
Year Ended
December 31, 2018
|
Revenues from contracts with customers
|
|
Services
|
|
Firm services(a)
|
$
|
55,436
|
|
Fee-based services
|
10,737
|
|
Total services revenues
|
66,173
|
|
Sales
|
|
Product sales
|
89
|
|
Total sales revenues
|
89
|
|
Total revenues from contracts with customers
|
66,262
|
|
Other revenues(b)
|
26
|
|
Total revenues
|
$
|
66,288
|
|
_______
|
(a)
|
|
Includes non-cancellable firm service customer contracts with take-or-pay or minimum volume commitment elements, including those contracts where both the price and quantity amount are fixed. Excludes service contracts with indexed-based pricing, which along with revenues from other customer service contracts are reported as Fee-based services.
|
|
(b)
|
|
Amounts recognized as revenue under guidance prescribed in Topics of the Accounting Standards Codification other than in Topic 606 and primarily include leases.
|
Contract Balances
Contract assets and contract liabilities are the result of timing differences between revenue recognition, billings and cash
collections. We did not have any contract assets in 2018. Our contract liabilities are substantially related to (i) consideration received from customers in connection with the resolution of a customer dispute, see Note 2; and (ii) other items paid for in advance by certain customers generally in our non-regulated businesses, which we subsequently recognize as revenue on a straight-line basis over the initial term of the related customer contracts,
The following table presents the activity in our contract assets and liabilities (in thousands):
|
|
|
|
|
December 31, 2018
|
Contract Liabilities
|
|
|
Balance at January 1, 2018
|
$
|
—
|
|
Additions
|
2,688
|
|
Transfer to Revenues
|
(963
|
)
|
Balance at December 31, 2018(a)
|
$
|
1,725
|
|
_______
|
(a)
|
|
Includes current balances of $466,000 reported within “Other current liabilities” in our accompanying Balance Sheets at December 31, 2018, and includes non-current balances of $1,259,000 reported within “Contract liabilities” in our accompanying Balance Sheets at December 31, 2018.
|
Revenue Allocated to Remaining Performance Obligations
The following table presents our estimated revenue allocated to remaining performance obligations for contracted revenue that has not yet been recognized, representing our “contractually committed” revenue as of December 31, 2018 that we will invoice or transfer from contract liabilities and recognize in future periods (in thousands):
|
|
|
|
Year
|
Estimated Revenue
|
2019
|
$
|
34,364
|
|
2020
|
19,350
|
|
2021
|
18,097
|
|
2022
|
18,007
|
|
2023
|
16,833
|
|
Thereafter
|
4,946
|
|
Total
|
$
|
111,597
|
|
Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to service or commodity sale customer contracts which have fixed pricing and fixed volume terms and conditions, generally including contracts with take-or-pay or minimum volume commitment payment obligations. Our contractually committed revenue amounts generally exclude, based on the following practical expedients that we elected to apply, remaining performance obligations for: (i) contracts with index-based pricing or variable volume attributes in which such variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service that forms part of a series of distinct services; (ii) contracts with an original expected duration of one year or less; and (iii) contracts for which we recognize revenue at the amount for which we have the right to invoice for services performed.
Major Customers
For the year ended December 31, 2018, revenues from our four largest non-affiliate customers were approximately $14,169,000, $12,881,000, $10,452,000, and $9,255,000, respectively, each of which exceeded 10% of our operating revenues. For the year ended December 31, 2017, revenues from our five largest non-affiliate customers were approximately $11,671,000, $11,230,000, $9,648,000, $8,886,000 and $6,994,000, respectively, each of which exceeded 10% of our operating revenues. For the year ended December 31, 2016, revenues from our three largest non-affiliate customers were approximately $12,519,000, $11,003,000 and $9,380,000, respectively, each of which exceeded 10% of our operating revenues.
6. Commitments
We lease property and equipment under various operating leases. Future minimum annual rental commitments under our operating leases as of December 31, 2018, are as follows (in thousands):
|
|
|
|
|
Year
|
|
Total
|
2019
|
|
$
|
367
|
|
2020
|
|
377
|
|
2021
|
|
389
|
|
2022
|
|
400
|
|
2023
|
|
412
|
|
Thereafter
|
|
6,633
|
|
Total
|
|
$
|
8,578
|
|
Rent expense on our lease obligations for the years ended December 31, 2018, 2017 and 2016 was approximately $364,000, $429,000 and $464,000, respectively, and is reflected in “Operations and maintenance” on our accompanying Statements of Income.
7. Recent Accounting Pronouncements
Topic 842
On February 25, 2016, the FASB issued ASU No. 2016-02, “Leases” followed by a series of related accounting standard updates (collectively referred to as “Topic 842”). Topic 842 establishes a new lease accounting model for leases. The most significant changes include the clarification of the definition of a lease, the requirement for lessees to recognize for all leases a right-of-use asset and a lease liability in the balance sheet, and additional quantitative and qualitative disclosures which are designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. Expenses are recognized in the statement of income in a manner similar to current accounting guidance. Lessor accounting under the new standard is substantially unchanged. The new standard will become effective for us beginning with the first quarter 2019. We will adopt the accounting standard using a prospective transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. We have also elected the optional practical expedient permitted under the transition guidance within the new standard related to land easements that allows us to carry forward our historical accounting treatment for land easements on existing agreements upon adoption. We have made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. We are finalizing our evaluation of the impacts that the adoption of this accounting guidance will have on the financial statements, and estimate approximately $5 million of additional assets and liabilities will be recognized on our future Balance Sheet upon adoption.
|
|
|
|
Exhibit
Number
|
|
Description
|
|
2.1
|
|
Facilities Sale Agreement, dated as of December 29, 2006, by and between TransMontaigne Product Services LLC (formerly known as TransMontaigne Product Services Inc.) and TransMontaigne Partners L.P. (incorporated by reference to Exhibit 2.1 of the Current Report on Form 8‑K filed by TransMontaigne Partners L.P. with the SEC on January 5, 2007).
|
|
2.2
|
|
Facilities Sale Agreement, dated as of December 28, 2007, by and between TransMontaigne Product Services LLC and TransMontaigne Partners L.P. (incorporated by reference to Exhibit 2.1 of the Current Report on Form 8‑K filed by TransMontaigne Partners L.P. with the SEC on January 3, 2008).
|
|
2.3
|
|
Agreement and Plan of Merger, dated as of November 25, 2018, by and among TLP Finance Holdings, LLC, TLP Acquisition Holdings, LLC, TLP Equity Holdings, LLC, TLP Merger Sub, LLC, TransMontaigne Partners L.P. and TransMontaigne GP L.L.C. (incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K filed by TransMontaigne Partners L.P. with the SEC on November 26, 2018).
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2.4
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Agreement and Plan of Merger, dated as of February 26, 2019, by and between TransMontaigne Partners LLC and TransMontaigne GP L.L.C. (incorporated by reference to Exhibit 1.1 of the Current Report on Form 8-K filed by TransMontaigne Partners LLC with the SEC on February 28, 2019).
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3.1
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Certificate of Formation of TransMontaigne Partners LLC, dated February 26, 2019 (incorporated by reference to Exhibit 3.3 of the Current Report on Form 8-K filed by TransMontaigne Partners LLC with the SEC on February 28, 2019).
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3.2
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Limited Liability Company Agreement of TransMontaigne Partners LLC, dated February 26, 2019 (incorporated by reference to Exhibit 3.4 of the Current Report on Form 8-K filed by TransMontaigne Partners LLC with the SEC on February 28, 2019).
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4.1
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Indenture, dated February 12, 2018, among TransMontaigne Partners L.P., TLP Finance Corp.
and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed by TransMontaigne Partners L.P. with the SEC on February 12, 2018).
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4.2
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First Supplemental Indenture, dated as of February 12, 2018, among TransMontaigne Partners L.P., TLP Finance Corp., the guarantors named therein and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed by TransMontaigne Partners L.P. with the SEC on February 12, 2018).
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10.1
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Third Amended and Restated Senior Secured Credit Facility, dated March 13, 2017, among TransMontaigne Operating Company L.P., as borrower, Wells Fargo Bank, National Association, as Administrative Agent, US Bank, National Association, as Syndication Agent, Joint Lead Arranger and Joint Book Runner, Bank of America, N.A., Citibank, N.A., MUFG Union Bank N.A. and Royal Bank of Canada, each as Documentation Agents, Wells Fargo Securities, LLC, as Joint Lead Arranger and Joint Lead Book Runner, and the other financial institutions a party thereto (incorporated by reference to Exhibit 10.1 of the Annual Report on Form 10-K filed by TransMontaigne Partners L.P. with the SEC on March 14, 2017).
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10.2
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Contribution, Conveyance and Assumption Agreement, dated May 27, 2005, by and among TransMontaigne LLC, TransMontaigne Partners L.P., TransMontaigne GP L.L.C., TransMontaigne Operating GP L.L.C., TransMontaigne Operating Company L.P., TransMontaigne Product Services LLC and Coastal Fuels Marketing, Inc., Coastal Terminals L.L.C., Razorback L.L.C., TPSI Terminals L.L.C. and TransMontaigne Services LLC. (incorporated by reference to Exhibit 10.2 of the Annual Report on Form 10‑K filed by TransMontaigne Partners L.P. with the SEC on September 13, 2005).
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Exhibit
Number
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Description
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10.3
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Fourth Amended and Restated Omnibus Agreement, dated as of February 26, 2019, by and among TransMontaigne Partners LLC, TransMontaigne Operating GP L.L.C., TransMontaigne Operating Company L.P. and TLP Management Services LLC (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed by TransMontaigne Partners LLC with the SEC on February 28, 2019).
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10.4
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Registration Rights Agreement, dated May 27, 2005, by and between TransMontaigne Partners L.P. and MSDW Morgan Stanley Strategic Investments, Inc. (formerly MSDW Bondbook Ventures Inc.) (incorporated by reference to Exhibit 10.7 of the Annual Report on Form 10‑K filed by TransMontaigne Partners L.P. with the SEC on September 13, 2005).
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10.5
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Terminaling Services Agreement—Southeast and Collins/Purvis, dated January 1, 2008, between TransMontaigne Partners L.P. and Morgan Stanley Capital Group Inc., as amended (assigned in part to NGL Energy Partners LP on July 1, 2014) (incorporated by reference to Exhibit 10.16 of the Annual Report on Form 10 K filed by TransMontaigne Partners L.P. with the SEC on March 10, 2008). Certain portions of this exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment under Rule 24b 2 as promulgated under the Securities Exchange Act of 1934.
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10.6
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Sixth Amendment to Terminaling Services Agreement—Southeast and Collins/Purvis, dated July 16, 2013, between TransMontaigne Partners L.P. and Morgan Stanley Capital Group Inc. (assigned in part to NGL Energy Partners LP on July 1, 2014) (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8 K filed by TransMontaigne Partners L.P. with the SEC on July 17, 2013).
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10.7
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Seventh Amendment to Terminaling Services Agreement—Southeast and Collins/Purvis, dated December 20, 2013, between TransMontaigne Partners L.P. and Morgan Stanley Capital Group Inc. (assigned in part to NGL Energy Partners LP on July 1, 2014) (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8 K filed by TransMontaigne Partners L.P. with the SEC on December 23, 2013).
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10.8
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Eighth Amendment to Terminaling Services Agreement—Southeast and Collins/Purvis, dated November 4, 2014, between TransMontaigne Partners L.P. and NGL Energy Partners LP. (incorporated by reference to Exhibit 10.19 of the Annual Report on Form 10‑K filed by TransMontaigne Partners L.P. with the SEC on March 10, 2016).
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10.9
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Amendment No. 9 to Terminaling Services Agreement—Southeast and Collins/Purvis, dated March 1, 2016, between TransMontaigne Partners L.P. and NGL Energy Partners LP (incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 8‑K filed by TransMontaigne Partners L.P. with the SEC on March 3, 2016).
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10.10
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Indemnification Agreement, dated December 31, 2007, among TransMontaigne LLC, TransMontaigne Partners L.P., TransMontaigne GP L.L.C., TransMontaigne Operating GP L.L.C. and TransMontaigne Operating Company L.P. (incorporated by reference to Exhibit 10.17 of the Annual Report on Form 10‑K filed by TransMontaigne Partners L.P. with the SEC on March 10, 2008)
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10.11
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Amended and Restated Limited Liability Company Agreement of Battleground Oil Specialty Terminal Company LLC Company, dated October 18, 2011, by and among TransMontaigne Operating Company L.P., Kinder Morgan Battleground Oil LLC and Tauber Terminals, LP (incorporated by reference to Exhibit 10.16 of the Annual Report on Form 10‑K filed by TransMontaigne Partners L.P. with the SEC on March 12, 2013). Certain portions of this exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment under Rule 24b‑2 as promulgated under the Securities Exchange Act of 1934.
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Exhibit
Number
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Description
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10.12
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First Amendment to the Amended and Restated Limited Liability Company Agreement of Battleground Oil Specialty Terminal Company LLC, dated December 20, 2012, by and among TransMontaigne Operating Company L.P., Kinder Morgan Battleground Oil LLC and Tauber Terminals, LP (incorporated by reference to Exhibit 10.17 of the Annual Report on Form 10‑K filed by TransMontaigne Partners L.P. with the SEC on March 12, 2013). Certain portions of this exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment under Rule 24b‑2 as promulgated under the Securities Exchange Act of 1934
.
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10.13
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Asset Purchase Agreement, dated November 2, 2017, by and between Plains Products Terminals LLC and TransMontaigne Operating Company L.P. (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8‑K filed by TransMontaigne Partners L.P. with the SEC on November 8, 2017)
.
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10.14
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First Amendment to Third Amended and Restated Senior Secured Credit Facility, dated as of December 14, 2017, by and among TransMontaigne Operating Company L.P., as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by TransMontaigne Partners L.P. with the SEC on December 18, 2017).
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10.15
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Second Amendment to Third Amended and Restated Senior Secured Credit Facility, dated as of February 26, 2019, by and among TransMontaigne Operating Company L.P., as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by TransMontaigne Partners LLC with the SEC on February 28, 2019).
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10.16
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Right of First Offer Agreement dated as of September 12, 2017, by and between Pike West Coast Holdings, LLC and TransMontaigne Partners L.P. (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8‑K filed by TransMontaigne Partners L.P. with the SEC on September 15, 2017).
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10.17
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Right of First Offer Agreement dated as of August 4, 2017, by and between Pike West Coast Holdings, LLC and TransMontaigne Partners L.P. (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8‑K filed by TransMontaigne Partners L.P. with the SEC on August 9, 2017)
.
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10.18*+
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TLP Management Services LLC Amended and Restated Savings and Retention Plan.
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21.1*
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List of Subsidiaries of TransMontaigne Partners L.P.
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31.1*
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
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31.2*
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
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32.1*
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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.
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32.2*
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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.
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101*
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The following financial information from the Annual Report on Form 10‑K of TransMontaigne Partners L.P. and subsidiaries for the year ended December 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of equity, (iv) consolidated statements of cash flows and (v) notes to consolidated financial statements.
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*
Filed with this Annual Report.
+
Identifies each management compensation plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
SIGNATURES
In accordance with 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.
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TransMontaigne Partners LLC
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By:
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TLP FINANCE HOLDINGS, LLC, its Managing Member
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By:
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/s/ Frederick W. Boutin
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Date: March 15, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities with registrant so stated, on the date indicated.
Name and Signature
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Title
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Date
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/s/ Frederick W. Boutin
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Chief Executive Officer
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March 15, 2019
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Frederick W. Boutin
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/s/ Robert T. Fuller
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Executive Vice President, Chief Financial Officer and Treasurer
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March 15, 2019
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Robert T. Fuller
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/s/ Lisa M. Kearney
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Vice President, Chief Accounting Officer
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March 15, 2019
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Lisa M. Kearney
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