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EX-32.2 - EX-32.2 - TransMontaigne Partners LLCtlp-20170331ex3221385bd.htm
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EX-31.1 - EX-31.1 - TransMontaigne Partners LLCtlp-20170331ex31114c32f.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10‑Q

 

 

(Mark One)

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2017

OR

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission File Number: 001‑32505

TRANSMONTAIGNE PARTNERS L.P.

(Exact name of registrant as specified in its charter)

 

 

Delaware
(State or other jurisdiction of
incorporation or organization)

34‑2037221
(I.R.S. Employer
Identification No.)

 

1670 Broadway

Suite 3100

Denver, Colorado 80202

(Address, including zip code, of principal executive offices)

(303) 626‑8200

(Telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large accelerated filer ☐

Accelerated filer ☒

Non‑accelerated filer ☐
(Do not check if a
smaller reporting company)

Smaller reporting company ☐

                                                                                                                                                                                                                                                                                                                                                                                

  Emerging growth company   ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐  No ☒

As of April 28, 2017, there were 16,161,262 units of the registrant’s Common Limited Partner Units outstanding.

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

    

Page No.

 

Part I. Financial Information

 

Item 1. 

 

Unaudited Consolidated Financial Statements

 

 

 

 

Consolidated balance sheets as of March 31, 2017 and December 31, 2016

 

 

 

 

Consolidated statements of operations for the three months ended March 31, 2017 and 2016

 

 

 

 

Consolidated statements of partners’ equity for the year ended December 31, 2016 and three months ended March 31, 2017

 

 

 

 

Consolidated statements of cash flows for the three months ended March 31, 2017 and 2016

 

 

 

 

Notes to consolidated financial statements

 

 

Item 2. 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27 

 

Item 3. 

 

Quantitative and Qualitative Disclosures about Market Risk

 

36 

 

Item 4. 

 

Controls and Procedures

 

36 

 

Part II. Other Information

 

Item 1. 

 

Legal Proceedings

 

36 

 

Item 1A. 

 

Risk Factors

 

37 

 

Item 6. 

 

Exhibits

 

40 

 

 

 

2


 

CAUTIONARY STATEMENT REGARDING FORWARD‑LOOKING STATEMENTS

This Quarterly Report contains forward‑looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including the following:

·

certain statements, including possible or assumed future results of operations, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”

·

any statements contained herein regarding the prospects for our business or any of our services or our ability to pay distributions;

·

any statements preceded by, followed by or that include the words “may,” “seeks,” “believes,” “expects,” “anticipates,” “intends,” “continues,” “estimates,” “plans,” “targets,” “predicts,” “attempts,” “is scheduled,” or similar expressions; and

·

other statements contained herein regarding matters that are not historical facts.

Our business and results of operations are subject to risks and uncertainties, many of which are beyond our ability to control or predict. Because of these risks and uncertainties, actual results may differ materially from those expressed or implied by forward‑looking statements, and investors are cautioned not to place undue reliance on such statements, which speak only as of the date thereof. Important factors that could cause actual results to differ materially from our expectations and may adversely affect our business and results of operations, include, but are not limited to those risk factors set forth in this report in Part II. Other Information under the heading “Item 1A. Risk Factors.”

Part I. Financial Information

ITEM 1.  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The interim unaudited consolidated financial statements of TransMontaigne Partners L.P. as of and for the three months ended March 31, 2017 are included herein beginning on the following page. The accompanying unaudited interim consolidated financial statements should be read in conjunction with our consolidated financial statements and related notes for the year ended December 31, 2016, together with our discussion and analysis of financial condition and results of operations, included in our Annual Report on Form 10‑K, filed on March 14, 2017 with the Securities and Exchange Commission (File No. 001‑32505).

TransMontaigne Partners L.P. is a holding company with the following 100% owned operating subsidiaries during the three months ended March 31, 2017:

·

TransMontaigne Operating GP L.L.C.

·

TransMontaigne Operating Company L.P.

·

TransMontaigne Terminals L.L.C.

·

Razorback L.L.C. (d/b/a Diamondback Pipeline L.L.C.)

·

TPSI Terminals L.L.C.

·

TLP Finance Corp.

·

TLP Operating Finance Corp.

·

TPME L.L.C.

We do not have off‑balance‑sheet arrangements (other than operating leases) or special‑purpose entities.

 

3


 

TransMontaigne Partners L.P. and subsidiaries

Consolidated balance sheets (unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2017

 

2016

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

641

 

$

593

 

Trade accounts receivable, net

 

 

9,088

 

 

9,297

 

Due from affiliates

 

 

963

 

 

653

 

Other current assets

 

 

8,190

 

 

9,903

 

Total current assets

 

 

18,882

 

 

20,446

 

Property, plant and equipment, net

 

 

419,995

 

 

416,748

 

Goodwill

 

 

8,485

 

 

8,485

 

Investments in unconsolidated affiliates

 

 

241,304

 

 

241,093

 

Other assets, net

 

 

7,864

 

 

2,922

 

 

 

$

696,530

 

$

689,694

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Trade accounts payable

 

$

11,194

 

$

7,928

 

Accrued liabilities

 

 

16,665

 

 

13,998

 

Total current liabilities

 

 

27,859

 

 

21,926

 

Other liabilities

 

 

3,113

 

 

3,234

 

Long-term debt

 

 

292,500

 

 

291,800

 

Total liabilities

 

 

323,472

 

 

316,960

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

Partners’ equity:

 

 

 

 

 

 

 

Common unitholders (16,161,262 units issued and outstanding at March 31, 2017 and 16,137,650 units issued and outstanding at December 31, 2016)

 

 

320,130

 

 

320,042

 

General partner interest (2% interest with 329,821 equivalent units outstanding at March 31, 2017 and 329,339 equivalent units outstanding at December 31, 2016)

 

 

52,928

 

 

52,692

 

Total partners’ equity

 

 

373,058

 

 

372,734

 

 

 

$

696,530

 

$

689,694

 

 

See accompanying notes to consolidated financial statements.

4


 

 

TransMontaigne Partners L.P. and subsidiaries

Consolidated statements of operations (unaudited)

(In thousands, except per unit amounts)

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

 

March 31,

 

 

 

2017

 

2016

 

Revenue:

 

 

 

 

 

 

 

External customers

 

$

43,080

 

$

36,272

 

Affiliates

 

 

1,770

 

 

4,354

 

Total revenue

 

 

44,850

 

 

40,626

 

Operating costs and expenses and other:

 

 

 

 

 

 

 

Direct operating costs and expenses

 

 

(16,511)

 

 

(15,906)

 

General and administrative expenses

 

 

(3,971)

 

 

(3,878)

 

Insurance expenses

 

 

(1,006)

 

 

(895)

 

Equity-based compensation expense

 

 

(1,817)

 

 

(2,155)

 

Depreciation and amortization

 

 

(8,705)

 

 

(7,935)

 

Earnings from unconsolidated affiliates

 

 

2,560

 

 

1,850

 

Total operating costs and expenses and other

 

 

(29,450)

 

 

(28,919)

 

Operating income

 

 

15,400

 

 

11,707

 

Other expenses:

 

 

 

 

 

 

 

Interest expense

 

 

(2,152)

 

 

(2,792)

 

Amortization of deferred financing costs

 

 

(294)

 

 

(205)

 

Total other expenses

 

 

(2,446)

 

 

(2,997)

 

Net earnings

 

 

12,954

 

 

8,710

 

Less—earnings allocable to general partner interest including incentive distribution rights

 

 

(2,843)

 

 

(2,056)

 

Net earnings allocable to limited partners

 

$

10,111

 

$

6,654

 

Net earnings per limited partner unit—basic

 

$

0.62

 

$

0.41

 

Net earnings per limited partner unit—diluted

 

$

0.62

 

$

0.41

 

 

See accompanying notes to consolidated financial statements.

5


 

TransMontaigne Partners L.P. and subsidiaries

Consolidated statements of partners’ equity (unaudited)

Year ended December 31, 2016 and three months ended March 31, 2017

(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

 

 

 —

 

 

 —

 

 

 —

 

TransMontaigne GP to maintain its 2% general partner interest

 

 

 —

 

 

 9

 

 

 9

 

Excess of $12.0 million purchase price of hydrant system from TransMontaigne LLC 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

 

 

(11,458)

 

 

(2,629)

 

 

(14,087)

 

Equity-based compensation

 

 

1,817

 

 

 

 

1,817

 

Settlement of tax withholdings on equity-based compensation

 

 

(382)

 

 

 

 

(382)

 

Issuance of 23,612 common units pursuant to our savings and retention program

 

 

 —

 

 

 —

 

 

 —

 

TransMontaigne GP to maintain its 2% general partner interest

 

 

 —

 

 

22

 

 

22

 

Net earnings for three months ended March 31, 2017

 

 

10,111

 

 

2,843

 

 

12,954

 

Balance March 31, 2017

 

$

320,130

 

$

52,928

 

$

373,058

 

 

See accompanying notes to consolidated financial statements.

6


 

TransMontaigne Partners L.P. and subsidiaries

Consolidated statements of cash flows (unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

 

March 31,

 

 

 

2017

 

2016

 

Cash flows from operating activities:

    

 

 

    

 

 

 

Net earnings

 

$

12,954

 

$

8,710

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

8,705

 

 

7,935

 

Earnings from unconsolidated affiliates

 

 

(2,560)

 

 

(1,850)

 

Distributions from unconsolidated affiliates

 

 

4,349

 

 

4,135

 

Equity-based compensation

 

 

1,817

 

 

2,155

 

Amortization of deferred financing costs

 

 

294

 

 

205

 

Amortization of deferred revenue

 

 

(51)

 

 

(198)

 

Unrealized (gain) loss on derivative instruments

 

 

(258)

 

 

794

 

Changes in operating assets and liabilities, net of effects from acquisitions and dispositions:

 

 

 

 

 

 

 

Trade accounts receivable, net

 

 

220

 

 

(1,235)

 

Due from affiliates

 

 

(310)

 

 

400

 

Other current assets

 

 

1,716

 

 

13

 

Amounts due under long-term terminaling services agreements, net

 

 

(98)

 

 

(47)

 

Deposits

 

 

54

 

 

 —

 

Trade accounts payable

 

 

864

 

 

(974)

 

Accrued liabilities

 

 

2,667

 

 

200

 

Net cash provided by operating activities

 

 

30,363

 

 

20,243

 

Cash flows from investing activities:

 

 

 

 

 

 

 

  Acquisition of terminal assets

 

 

 —

 

 

(12,000)

 

Investments in unconsolidated affiliates

 

 

(2,000)

 

 

(2,225)

 

Capital expenditures

 

 

(9,500)

 

 

(9,483)

 

Net cash used in investing activities

 

 

(11,500)

 

 

(23,708)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Borrowings of debt under credit facility

 

 

46,000

 

 

58,400

 

Repayments of debt under credit facility

 

 

(45,300)

 

 

(42,300)

 

Deferred financing costs

 

 

(5,065)

 

 

(395)

 

Deferred shelf registration costs

 

 

(3)

 

 

 —

 

Settlement of tax withholdings on equity-based compensation

 

 

(382)

 

 

 —

 

Distributions paid to unitholders

 

 

(14,087)

 

 

(12,792)

 

Contribution of cash by TransMontaigne GP

 

 

22

 

 

 5

 

Net cash provided by (used in) financing activities

 

 

(18,815)

 

 

2,918

 

Increase (decrease) in cash and cash equivalents

 

 

48

 

 

(547)

 

Cash and cash equivalents at beginning of period

 

 

593

 

 

681

 

Cash and cash equivalents at end of period

 

$

641

 

$

134

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

 

$

2,217

 

$

2,127

 

Property, plant and equipment acquired with accounts payable

 

$

7,515

 

$

3,570

 

 

See accompanying notes to consolidated financial statements.

 

7


 

Table of Contents

TransMontaigne Partners L.P. and subsidiaries

Notes to consolidated financial statements (unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Nature of business

TransMontaigne Partners L.P. (“we,” “us,” “our,” “the Partnership”) was formed in February 2005 as a Delaware limited partnership. We provide integrated terminaling, storage, transportation and related services for companies engaged in the trading, distribution and marketing of light refined petroleum products, heavy refined petroleum products, crude oil, chemicals, fertilizers and other liquid products. We conduct our operations in the United States along the Gulf Coast, in the Midwest, in Houston and Brownsville, Texas, along the Mississippi and Ohio rivers, and in the Southeast.

We are controlled by our general partner, TransMontaigne GP L.L.C. (“TransMontaigne GP”), which as of February 1, 2016 is a wholly‑owned indirect subsidiary of ArcLight Energy Partners Fund VI, L.P. (“ArcLight”). Prior to February 1, 2016, TransMontaigne LLC, a wholly-owned subsidiary of NGL Energy Partners LP (“NGL”), owned all the issued and outstanding ownership interests of TransMontaigne GP.

(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. The accompanying consolidated financial statements include all adjustments (consisting of normal and recurring accruals) considered necessary to present fairly our financial position as of March 31, 2017 and December 31, 2016 and our results of operations for the three months ended March 31, 2017 and 2016. Certain reclassifications of previously reported amounts have been made to conform to the current year presentation.

The preparation of financial statements in conformity with “GAAP” requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. The following estimates, in management’s opinion, are subjective in nature, require the exercise of judgment, and/or involve complex analyses: useful lives of our plant and equipment and accrued environmental obligations. Changes in these estimates and assumptions will occur as a result of the passage of time and the occurrence of future events. Actual results could differ from these estimates.

(c) Accounting for terminal and pipeline operations

In connection with our terminal and pipeline operations, we utilize the accrual method of accounting for revenue and expenses. We generate revenue from terminaling services fees, transportation fees, management fees and cost reimbursements, fees from other ancillary services and gains from the sale of refined products. Terminaling services revenue is recognized ratably over the term of the agreement for storage fees and minimum revenue commitments that are fixed at the inception of the agreement and when product is delivered to the customer for fees based on a rate per barrel of throughput; transportation revenue is recognized when the product has been delivered to the customer at the specified delivery location; management fee revenue and cost reimbursements are recognized as the services are performed or as the costs are incurred; ancillary service revenue is recognized as the services are performed; and gains from the sale of refined products are recognized when the title to the product is transferred.

Pursuant to terminaling services agreements with certain of our throughput customers, we are entitled to the volume of product gained resulting from differences in the measurement of product volumes received and distributed at our terminaling facilities. Consistent with recognized industry practices, measurement differentials occur as the result of the inherent variances in measurement devices and methodology. We recognize as revenue the net proceeds from the sale of the product gained. For the three months ended March 31, 2017 and 2016, we recognized revenue of approximately

8


 

Table of Contents

TransMontaigne Partners L.P. and subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

$2.7 million and $1.4 million, respectively, for net product gained. Within these amounts, approximately $nil and $0.3 million for the three months ended March 31, 2017 and 2016, respectively, were pursuant to terminaling services agreements with affiliate customers.

(d) Cash and cash equivalents

We consider all short‑term investments with a remaining maturity of three months or less at the date of purchase to be cash equivalents.

(e) Property, plant and equipment

Depreciation is computed using the straight‑line method. Estimated useful lives are 15 to 25 years for terminals and pipelines and 3 to 25 years for furniture, fixtures and equipment. All items of property, plant and equipment are carried at cost. Expenditures that increase capacity or extend useful lives are capitalized. Repairs and maintenance are expensed as incurred.

We evaluate long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable based on expected undiscounted future cash flows attributable to that asset group. If an asset group is impaired, the impairment loss to be recognized is the excess of the carrying amount of the asset group over its estimated fair value.

(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 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 (i.e., likely to occur).

9


 

Table of Contents

TransMontaigne Partners L.P. and subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

In connection with our previous acquisitions of certain terminals from TransMontaigne LLC, TransMontaigne LLC has agreed to indemnify us against certain potential environmental claims, losses and expenses at those terminals (see Note 2 of Notes to consolidated financial statements).

(h) Asset retirement obligations

Asset retirement obligations are legal obligations associated with the retirement of long‑lived assets that result from the acquisition, construction, development or normal use of the asset. Generally accepted accounting principles require that the fair value of a liability related to the retirement of long‑lived assets be recorded at the time a legal obligation is incurred. Once an asset retirement obligation is identified and a liability is recorded, a corresponding asset is recorded, which is depreciated over the remaining useful life of the asset. After the initial measurement, the liability is adjusted to reflect changes in the asset retirement obligation. If and when it is determined that a legal obligation has been incurred, the fair value of any liability is determined based on estimates and assumptions related to retirement costs, 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

Generally accepted accounting principles require 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

Generally accepted accounting principles require us to recognize all derivative instruments at fair value in the consolidated balance sheets as assets or liabilities (see Note 9 of Notes to consolidated financial statements). Changes in the fair value of our derivative instruments are recognized in earnings.

At both March 31, 2017 and December 31, 2016, our derivative instruments were limited to interest rate swap agreements with an aggregate notional amount of $125.0 million. Our derivative instruments expire between March 25, 2018 and March 11, 2019. Pursuant to the terms of the interest rate swap agreements, we pay a blended fixed rate of approximately 1.01% and receive interest payments based on the one-month LIBOR. The net difference to be paid or received under the interest rate swap agreements is settled monthly and is recognized as an adjustment to interest expense. The fair value of our interest rate swap agreements 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

10


 

Table of Contents

TransMontaigne Partners L.P. and subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

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

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The objective of this update is to clarify the principles for recognizing revenue and to develop a common revenue standard. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and allows for both retrospective and modified retrospective methods of adoption. We are currently evaluating the impact of ASU 2014-09 and all related ASU’s on a representative sample of individual customer contracts. Additionally, we are in the process of evaluating and designing the necessary changes to our business processes, systems and controls to support recognition and disclosure under the new standard. We are continuing our evaluation to determine the impact on our consolidated financial condition and results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases. The objective of this update is to improve financial reporting about leasing transactions. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. We are currently evaluating the potential impact that the adoption will have on our disclosures and financial statements.   

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipt and Cash Payments, to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. We are currently evaluating the potential impact that the adoption will have on our disclosures and financial statements. 

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 impairments 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.

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Notes to consolidated financial statements (unaudited) (continued)

(2) TRANSACTIONS WITH AFFILIATES

Omnibus agreement.  On May 27, 2005 we entered into an omnibus agreement with TransMontaigne LLC and our general partner, which agreement has been subsequently amended from time to time. In connection with the ArcLight acquisition of our general partner, effective February 1, 2016, we entered into the second amended and restated omnibus agreement to consent to the assignment of the omnibus agreement from TransMontaigne LLC to Gulf TLP Holdings LLC, an ArcLight subsidiary, to waive the automatic termination that would have occurred at such time as TransMontaigne LLC ceased to control our general partner and to remove certain legacy provisions that were no longer applicable to the Partnership. The omnibus agreement will continue in effect until the earlier of (i) ArcLight ceasing to control our general partner or (ii) the election of either us or the owner, following at least 24 months’ prior written notice to the other parties.

Under the omnibus agreement we pay Gulf TLP Holdings, the owner of TransMontaigne GP, an administrative fee for the provision of various general and administrative services for our benefit. The administrative fee paid for the three months ended March 31, 2017 and 2016 was approximately $2.9 million and $2.8 million, respectively. The administrative fee is recognized as a component of general and administrative expense and encompasses services to perform centralized corporate functions, such as legal, accounting, treasury, insurance administration and claims processing, health, safety and environmental, information technology, human resources, credit, payroll, taxes, engineering and other corporate services.

If we acquire or construct additional facilities, the owner of TransMontaigne GP may propose a revised administrative fee covering the provision of services for such additional facilities, subject to approval by the conflicts committee of our general partner. Effective May 3, 2017 the board of TransMontaigne GP, with the concurrence of the conflicts committee, approved a $1.8 million annual increase (or $150,000 monthly) to the administrative fee related to the construction of approximately 2.0 million barrels of new storage capacity at our Collins, Mississippi bulk storage terminal. The increase will be ratably applied monthly beginning May 3, 2017 based on the percentage of the 2.0 million barrels of new storage capacity that has been placed in service.

The omnibus agreement further provides that we pay the owner of TransMontaigne GP for insurance policies purchased on our behalf to cover our facilities and operations. For the three months ended March 31, 2017 and 2016, the insurance reimbursement paid was approximately $nil and $0.9 million, respectively. Beginning October 31, 2016, we contracted directly with insurance carriers for the majority of our insurance requirements. For the three months ended March 31, 2017 and 2016, the expense associated with insurance contracted directly by us was approximately $1.0 million and $nil, respectively. We also pay the owner of TransMontaigne GP for direct operating costs and expenses, such as salaries of operational personnel performing services on‑site at our terminals and pipelines and the cost of their employee benefits, including 401(k) and health insurance benefits.

Under the omnibus agreement we have agreed to reimburse the owner of TransMontaigne GP for bonus awards made to key employees under the owner’s savings and retention program, provided the compensation committee and the conflicts committee of our general partner approve the annual awards granted under the program. We have the option to provide the reimbursement in either a cash payment or the delivery of our common units to the owner of TransMontaigne GP or directly to the award recipients, with the reimbursement made in accordance with the underlying vesting and payment schedule of the savings and retention program (see Note 14 of Notes to the consolidated financial statements).

Environmental indemnification.  In connection with our acquisition of the Florida and Midwest terminals on May 27, 2005, TransMontaigne LLC agreed to indemnify us against certain potential environmental claims, losses and expenses that were identified on or before May 27, 2010, and that were associated with the ownership or operation of the Florida and Midwest terminals prior to May 27, 2005. TransMontaigne LLC’s maximum liability for this indemnification obligation is $15.0 million. TransMontaigne LLC has no obligation to indemnify us for losses until such aggregate losses exceed $250,000. TransMontaigne LLC has no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after May 27, 2005.

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TransMontaigne Partners L.P. and subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

In connection with our acquisition of the Brownsville, Texas and River terminals on December 31, 2006, TransMontaigne LLC agreed to indemnify us against potential environmental claims, losses and expenses that were identified on or before December 31, 2011, and that were associated with the ownership or operation of the Brownsville and River facilities prior to December 31, 2006. TransMontaigne LLC’s maximum liability for this indemnification obligation is $15.0 million. TransMontaigne LLC has no obligation to indemnify us for losses until such aggregate losses exceed $250,000. The deductible amount, cap amount and limitation of time for indemnification do not apply to any environmental liabilities known to exist as of December 31, 2006. TransMontaigne LLC has no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after December 31, 2006.

In connection with our acquisition of the Southeast terminals on December 31, 2007, TransMontaigne LLC agreed to indemnify us against potential environmental claims, losses and expenses that were identified on or before December 31, 2012, and that were associated with the ownership or operation of the Southeast terminals prior to December 31, 2007. TransMontaigne LLC’s maximum liability for this indemnification obligation is $15.0 million. TransMontaigne LLC has no obligation to indemnify us for losses until such aggregate losses exceed $250,000. The deductible amount, cap amount and limitation of time for indemnification do not apply to any environmental liabilities known to exist as of December 31, 2007. TransMontaigne LLC has no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after December 31, 2007.

In connection with our acquisition of the Pensacola terminal on March 1, 2011, TransMontaigne LLC agreed to indemnify us against potential environmental claims, losses and expenses that were identified on or before March 1, 2016, and that were associated with the ownership or operation of the Pensacola terminal prior to March 1, 2011. TransMontaigne LLC’s maximum liability for this indemnification obligation is $2.5 million. TransMontaigne LLC has no obligation to indemnify us for losses until such aggregate losses exceed $200,000. The deductible amount, cap amount and limitation of time for indemnification do not apply to any environmental liabilities known to exist as of March 1, 2011. TransMontaigne LLC has no indemnification obligations with respect to environmental claims made as a result of additions to or modifications of environmental laws promulgated after March 1, 2011.

The forgoing environmental indemnification obligations of TransMontaigne LLC to us remain in place and were not affected by ArcLight’s acquisition of our general partner.

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. We recognized revenue related to this operations and reimbursement agreement of approximately $1.4 million for both the three months ended March 31, 2017 and 2016, respectively.

Terminaling services agreement—Brownsville terminals.  In September 2016, we entered into a terminaling services agreement with Frontera relating to our Brownsville, Texas facility that will expire in June 2019, subject to a two-year automatic renewal unless terminated by either party upon 180 days’ prior notice. In exchange for its minimum throughput commitment, we have agreed to provide Frontera with approximately 151,000 barrels of storage capacity.

For the three months ended March 31, 2017 and 2016 we recognized approximately $0.3 million and $nil, respectively, of revenue related to this agreement.

Terminaling services agreement—Southeast terminals.  In connection with the ArcLight acquisition of our general partner, our Southeast terminaling services agreement with NGL was amended to extend the term of the agreement through July 31, 2040 at the prevailing contract rate terms contained within the agreement. Subsequent to January 31, 2023, NGL has the ability to terminate the agreement at any time upon at least 24 months’ prior notice of its

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Notes to consolidated financial statements (unaudited) (continued)

intent to terminate the agreement. Subsequent to the ArcLight acquisition, effective February 1, 2016, revenue associated with the Southeast terminaling services agreement is recorded as revenue from external customers as opposed to revenue from affiliates.

Under this agreement, NGL is obligated to throughput a volume of refined product that, at the fee schedule contained in the agreement, resulted in minimum throughput payments to us of approximately $6.8 million and $6.7 million for the three months ended March 31, 2017 and 2016, respectively. The agreement contains stipulated annual increases in throughput payments based on increases in the United States Consumer Price Index. The minimum annual throughput payment is reduced proportionately for any decrease in storage capacity due to out‑of‑service tank capacity. 

If a force majeure event occurs that renders us unable to perform our obligations with respect to an asset, the obligations would be temporarily suspended with respect to that asset. If a force majeure event continues for 30 consecutive days or more and results in a diminution in the storage capacity we make available, the counterparty may terminate its obligations with respect to the asset affected by the force majeure event and their minimum revenue commitment would be reduced proportionately for the duration of the agreement. 

(3) ACQUISITION OF TERMINAL ASSETS FROM AFFILIATE

Effective January 28, 2016, we acquired from TransMontaigne LLC its Port Everglades, Florida hydrant system for a cash payment of $12.0 million. The hydrant system encompasses a system for fueling cruise ships. The acquisition of the hydrant system from TransMontaigne LLC has been recorded at the carryover basis 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 interest. TransMontaigne LLC controlled our general partner on the acquisition date, the difference between the consideration we paid to TransMontaigne LLC and the carryover basis of the net assets purchased has been reflected in the accompanying consolidated balance sheets and statements of partners’ equity as a decrease to the general partner interest. The accompanying consolidated financial statements include the assets, liabilities and results of operations of the hydrant system from January 28, 2016. As this transaction is not considered material to our consolidated financial statements we did not recast prior period consolidated financial statements.

(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, and in the Midwest. 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. We maintain allowances for potentially uncollectible accounts receivable.

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

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2017

 

2016

 

Trade accounts receivable

 

$

9,207

 

$

9,416

 

Less allowance for doubtful accounts

 

 

(119)

 

 

(119)

 

 

 

$

9,088

 

$

9,297

 

 

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Notes to consolidated financial statements (unaudited) (continued)

The following customers accounted for at least 10% of our consolidated revenue in at least one of the periods presented in the accompanying consolidated statements of operations:

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

 

March 31,

 

 

 

2017

 

2016

 

NGL Energy Partners LP

 

26

%  

21

%

Castleton Commodities International LLC

 

13

%  

14

%

RaceTrac Petroleum Inc.

 

12

%  

12

%

 

 

 

 

 

 

 

 

 

 

 

(5) OTHER CURRENT ASSETS

Other current assets are as follows (in thousands):

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2017

 

2016

 

Amounts due from insurance companies

 

$

2,248

 

$

1,810

 

Additive detergent

 

 

1,292

 

 

1,364

 

Prepaid insurance

 

 

4,073

 

 

4,684

 

Deposits and other assets

 

 

577

 

 

2,045

 

 

 

$

8,190

 

$

9,903

 

 

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 March 31, 2017 and December 31, 2016, we have recognized amounts due from insurance companies of approximately $2.2 million and $1.8 million, respectively, representing our best estimate of our probable insurance recoveries. During the three months ended March 31, 2017, we received reimbursements from insurance companies of approximately $0.5 million. During the three months ended March 31, 2017, we increased our estimate of probable future insurance recoveries by approximately $0.9 million.

(6) PROPERTY, PLANT AND EQUIPMENT, NET

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

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2017

 

2016

 

Land

 

$

53,079

 

$

53,079

 

Terminals, pipelines and equipment

 

 

664,347

 

 

651,783

 

Furniture, fixtures and equipment

 

 

4,123

 

 

4,100

 

Construction in progress

 

 

11,032

 

 

11,715

 

 

 

 

732,581

 

 

720,677

 

Less accumulated depreciation

 

 

(312,586)

 

 

(303,929)

 

 

 

$

419,995

 

$

416,748

 

 

 

 

 

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Notes to consolidated financial statements (unaudited) (continued)

(7) GOODWILL

Goodwill is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2017

 

2016

 

Brownsville terminals

 

$

8,485

 

$

8,485

 

 

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 18 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 March 31, 2017 and December 31, 2016, our only reporting unit that contained goodwill was our Brownsville terminals. We did not recognize any goodwill impairment charges during the three months ended March 31, 2017 or during the year ended December 31, 2016 for this reporting unit. However, a significant decline in the price of our common units with a resulting 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 terminals could result in the recognition of an impairment charge in the future.

(8) INVESTMENTS IN UNCONSOLIDATED AFFILIATES

At March 31, 2017 and December 31, 2016, 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 1.5 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)

 

 

 

March 31,

 

December 31,

 

 

March 31,

 

December 31,

 

 

    

2017

    

2016

    

 

2017

    

2016

 

BOSTCO

 

42.5

%  

42.5

%  

 

$

216,568

 

$

217,941

 

Frontera

 

50

%  

50

%  

 

 

24,736

 

 

23,152

 

Total investments in unconsolidated affiliates

 

 

 

 

 

 

$

241,304

 

$

241,093

 

 

At March 31, 2017 and December 31, 2016, our investment in BOSTCO includes approximately $7.2 million and $7.2 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.

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Notes to consolidated financial statements (unaudited) (continued)

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

 

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

March 31,

 

 

2017

 

2016

BOSTCO

 

$

1,706

 

$

1,392

Frontera

    

 

854

    

 

458

Total earnings from investments in unconsolidated affiliates

 

$

2,560

 

$

1,850

 

Additional capital investments in unconsolidated affiliates were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

 

March 31,

 

 

 

2017

    

2016

 

BOSTCO

 

$

 —

 

$

2,125

 

Frontera

 

 

2,000

 

 

100

 

Additional capital investments in unconsolidated affiliates

 

$

2,000

 

$

2,225

 

 

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

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

 

March 31,

 

 

 

2017

 

2016

 

BOSTCO

 

$

3,079

 

$

3,634

 

Frontera

    

 

1,270

    

 

501

 

Cash distributions received from unconsolidated affiliates

 

$

4,349

 

$

4,135

 

 

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

Balance sheets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BOSTCO

 

Frontera

 

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

 

    

2017

    

2016

    

2017

    

2016

 

Current assets

    

$

23,234

 

$

23,237

 

$

9,441

 

$

5,779

 

Long-term assets

 

 

480,604

 

 

485,331

 

 

41,865

 

 

41,966

 

Current liabilities

 

 

(11,183)

 

 

(12,799)

 

 

(1,588)

 

 

(1,172)

 

Long-term liabilities

 

 

 —

 

 

 —

 

 

(246)

 

 

(269)

 

Net assets

 

$

492,655

 

$

495,769

 

$

49,472

 

$

46,304

 

 

Statements of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BOSTCO

 

Frontera

 

 

 

 

Three months ended 

 

Three months ended 

 

 

 

 

March 31,

 

March 31,

 

 

 

 

2017

 

2016

 

2017

 

2016

 

Revenue

    

 

$

16,630

    

$

16,681

    

$

5,393

    

$

4,142

 

Expenses

 

 

 

(12,238)

 

 

(12,250)

 

 

(3,685)

 

 

(3,226)

 

Net earnings

 

 

$

4,392

 

$

4,431

 

$

1,708

 

$

916

 

 

 

 

 

 

 

 

 

 

 

 

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Notes to consolidated financial statements (unaudited) (continued)

(9) OTHER ASSETS, NET

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

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2017

 

2016

 

Deferred financing costs, net of accumulated amortization of $5,057 and $4,763, respectively

 

$

6,069

 

$

1,298

 

Amounts due under long-term terminaling services agreements

 

 

673

 

 

656

 

Customer relationships, net of accumulated amortization of $2,143 and $2,092, respectively

 

 

287

 

 

338

 

Unrealized gain on derivative instruments

 

 

602

 

 

344

 

Deposits and other assets

 

 

233

 

 

286

 

 

 

$

7,864

 

$

2,922

 

 

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 both March 31, 2017 and December 31, 2016, we have recognized revenue in excess of the minimum payments that was due through those respective dates under the long‑term terminaling services agreements resulting in an asset of approximately $0.7 million.

Customer relationships.  Other assets, net include certain customer relationships at our River terminals. These customer relationships are being amortized on a straight‑line basis over twelve years.

(10) ACCRUED LIABILITIES

Accrued liabilities are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2017

 

2016

 

Customer advances and deposits:

 

 

 

 

 

 

 

External customers

 

$

9,921

 

$

8,602

 

Affiliates

 

 

108

 

 

108

 

 

 

 

10,029

 

 

8,710

 

Accrued property taxes

 

 

1,630

 

 

1,061

 

Accrued environmental obligations

 

 

2,115

 

 

2,107

 

Interest payable

 

 

488

 

 

232

 

Accrued expenses and other

 

 

2,403

 

 

1,888

 

 

 

$

16,665

 

$

13,998

 

 

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 March 31, 2017 and December 31, 2016, we have billed and collected from certain of our customers approximately $10.0 million and $8.7 million, respectively, in advance of the terminaling services being provided.

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Notes to consolidated financial statements (unaudited) (continued)

Accrued environmental obligations.  At both March 31, 2017 and December 31, 2016, we have accrued environmental obligations of approximately $2.1 million, representing our best estimate of our remediation obligations. During the three months ended March 31, 2017, we made payments of approximately $0.5 million towards our environmental remediation obligations. During the three months ended March 31, 2017, we increased our estimate of our future environmental remediation costs by approximately $0.5 million. Changes in our estimates of our future environmental remediation obligations may occur as a result of the passage of time and the occurrence of future events.

(11) OTHER LIABILITIES

Other liabilities are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

 

2017

 

2016

 

Advance payments received under long-term terminaling services agreements

 

$

913

 

$

994

 

Deferred revenue—ethanol blending fees and other projects

 

 

2,200

 

 

2,240

 

 

 

$

3,113

 

$

3,234

 

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 March 31, 2017 and December 31, 2016, we have received advance minimum payments in excess of revenue recognized under these long‑term terminaling services agreements resulting in a liability of approximately $0.9 million and $1.0 million, respectively.

Deferred revenue—ethanol blending fees and other projects.  Pursuant to agreements with our customers, we agreed to undertake certain capital projects that primarily pertain to providing ethanol blending functionality at certain of our Southeast terminals. Upon completion of the projects, our customers have paid us lump‑sum amounts that will be recognized as revenue on a straight‑line basis over the remaining term of the agreements. At both March 31, 2017 and December 31, 2016, we have unamortized deferred revenue of approximately $2.2 million, for completed projects. During the three months ended March 31, 2017 and 2016, we recognized revenue on a straight‑line basis of approximately $0.1 million and $0.2 million, respectively, for completed projects.

(12) LONG‑TERM DEBT

On March 13, 2017, we entered into the third amended and restated senior secured credit facility, or the “credit facility”, that provides for a maximum borrowing line of credit equal to $600 million. At our request, the maximum borrowing line of credit may be increased by an additional $250 million, subject to the approval of the administrative agent and the receipt of additional commitments from one or more lenders. The terms of the 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 principal balance of loans and any accrued and unpaid interest are due and payable in full on the maturity date in March 2022. 

We may elect to have loans under the 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 the 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 three months ended March 31, 2017 and 2016, the weighted average interest rate on borrowings under the credit facility was approximately 3.3% and

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Notes to consolidated financial statements (unaudited) (continued)

3.1%, respectively. At March 31, 2017 and December 31, 2016, our outstanding borrowings under the credit facility were $292.5 million and $291.8 million, respectively. At both March 31, 2017 and December 31, 2016 our outstanding letters of credit were $0.4 million.

We have an effective universal shelf‑registration statement and prospectus on Form S‑3 with the Securities and Exchange Commission that expires in September 2019. TLP Finance Corp., our 100% owned subsidiary, may act as a co‑issuer of any debt securities issued pursuant to that registration statement. TransMontaigne Partners L.P. has no independent assets or operations. TLP Finance Corp. has no assets or operations. Our operations are conducted by subsidiaries of TransMontaigne Partners L.P. through our 100% owned operating company subsidiary, TransMontaigne Operating Company L.P. Each of TransMontaigne Operating Company L.P.s’ and our other 100% owned subsidiaries (other than TLP Finance Corp., whose sole purpose is to act as co‑issuer of any debt securities) may guarantee the debt securities. We expect that any guarantees will be full and unconditional and joint and several, subject to certain automatic customary releases, including sale, disposition, or transfer of the capital stock or substantially all of the assets of a subsidiary guarantor, exercise of legal defeasance option or covenant defeasance option, and designation of a subsidiary guarantor as unrestricted in accordance with the indenture. There are no significant restrictions on the ability of TransMontaigne Partners L.P. or any guarantor to obtain funds from its subsidiaries by dividend or loan. None of the assets of TransMontaigne Partners L.P. or a guarantor represent restricted net assets pursuant to the guidelines established by the Securities and Exchange Commission.

(13) PARTNERS’ EQUITY

The number of units outstanding is as follows:

 

 

 

 

 

 

 

 

    

    

    

General

 

 

 

Common

 

partner

 

 

 

units

 

equivalent units

 

Units outstanding at December 31, 2016

 

16,137,650

 

329,339

 

Issuance of common units pursuant to our savings and retention program

 

23,612

 

 —

 

TransMontaigne GP to maintain its 2% general partner interest

 

 —

 

482

 

Units outstanding at March 31, 2017

 

16,161,262

 

329,821

 

 

 

(14) EQUITY BASED COMPENSATION

TransMontaigne GP is our general partner and manages our operations and activities. Prior to February 1, 2016, TransMontaigne GP was a wholly owned subsidiary of TransMontaigne LLC, which is a wholly owned subsidiary of NGL. TransMontaigne Services LLC, which is a wholly owned subsidiary of TransMontaigne LLC, had a long‑term incentive plan and a savings and retention program to compensate through bonus awards certain employees and independent directors of our general partner who provided services with respect to the business of our general partner.

Long-term incentive plan.  On February 26, 2016, the board of our general partner approved, subject to the approval of our common unitholders, the TLP Management Services 2016 long-term incentive plan and the TLP Management Services savings and retention program (discussed further below) which constitutes a program under, and is subject to, the TLP Management Services long-term incentive plan, which replaced the TransMontaigne Services LLC long-term incentive plan and the TransMontaigne Services LLC savings and retention program. TLP Management Services is a wholly owned indirect subsidiary of ArcLight and employs all the officers and employees who provide services to our partnership and such entity provides payroll and maintains all employee benefits programs on behalf of our partnership. On July 12, 2016, we held a special meeting of our common unitholders at which time the TLP Management Services long-term incentive plan and savings and retention program were approved by the Partnership’s unitholders.

The TLP Management Services long-term incentive plan operates in a manner similar to the TransMontaigne Services LLC long-term incentive plan used previously. The TLP Management Services long-term incentive plan

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Notes to consolidated financial statements (unaudited) (continued)

reserves 750,000 common units to be granted as awards under the plan, with such amount subject to adjustment as provided for under the terms of the plan if there is a change in our common units, such as a unit split or other reorganization. The common units authorized to be granted under the TLP Management Services long-term incentive plan are registered pursuant to a registration statement on Form S-8.

The TLP Management Services long‑term incentive plan is administered by the compensation committee of the board of directors of our general partner and is used for grants of units to the independent directors of our general partner. The grants to the independent directors of our general partner under the TransMontaigne Services LLC long-term incentive plan had historically vested and were payable annually in equal tranches over a four-year period, subject to accelerated vesting upon a change in control of TransMontaigne GP. Ownership in the awards was subject to forfeiture until the vesting date, but recipients had distribution and voting rights from the date of the grant. The grants to the independent directors of our general partner under the TLP Management Services long-term incentive plan are immediately vested and not subject to forfeiture. Accordingly there are no long-term incentive plan grants outstanding as of March 31, 2017.

Generally accepted accounting principles require us to measure the cost of board member services received in exchange for an award of equity instruments based on the grant‑date fair value of the award. That cost is recognized over the vesting period on a straight line basis during which a board member is required to provide services in exchange for the award with the costs being accelerated upon the occurrence of accelerated vesting events, such as a change in control of our general partner. In connection with the ArcLight acquisition of our general partner, effective February 1, 2016, 15,750 restricted phantom units previously granted to the independent directors vested and were satisfied via the delivery of our common units.

Effective as of October 18, 2016, the board of directors of our general partner, with the concurrence of the compensation committee, adopted a revised independent director annual compensation program, which includes the grant of common units valued at $90,000 annually and issued pursuant to the TLP Management Services long-term incentive plan, which common units are immediately vested and are not subject to forfeiture. On October 21, 2016, we granted and issued an additional 3,258 common units to our independent directors under the TLP Management Services long‑term incentive plan. The annual common unit award for 2016 was prorated for Mr. Wiese and Mr. Welch, who were each appointed to the board in July 2016, based on their length of service on the board of our general partner. 

For awards to the independent directors of our general partner, equity-based compensation of approximately $68,000 and $520,000 is included in equity-based compensation expense for the three months ended March 31, 2017 and 2016, respectively.

Savings and retention program.  On February 26, 2016, the board of our general partner unanimously approved the TLP Management Services savings and retention program, subject to the approval of our common unitholders, for employees who provide services with respect to our business. This plan is intended to constitute a program under, and be subject to, the TLP Management Services 2016 long-term incentive plan described above. The savings and retention program is used for awards to employees of TLP Management Services who provide services to the Partnership. The savings and retention program operates in a manner substantially similar to the TransMontaigne Services LLC savings and retention program used previously. 

The restricted phantom units awarded and accrued under the savings and retention program are subject to forfeiture until the vesting date. Recipients have distribution equivalent rights from the date of grant that accrue additional restricted phantom units equivalent to the value of quarterly distributions paid by us on each of our outstanding common units. Recipients of restricted phantom units under the savings and retention program do not have voting rights.

The purpose of the savings and retention program is to provide for the reward and retention of participants by providing them with bonus awards that vest over future service periods. Awards under the program 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

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Notes to consolidated financial statements (unaudited) (continued)

anniversary of the grant date, subject to earlier vesting upon a participant’s attainment of the age and length of service thresholds, retirement, death or disability, involuntary termination without cause, or termination of a participant’s employment following a change in control of the Partnership, our general partner or TLP Management Services, as specified in the program.  For certain senior level employees, including the executive officers of our general partner, all prior grants under the TransMontaigne Services LLC savings and retention program vested upon the change in control of our general partner as a result of the ArcLight acquisition that occurred on February 1, 2016.

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.

Under the omnibus agreement we have agreed to reimburse the owner of TransMontaigne GP for bonus awards made to key employees under the owner’s savings and retention program, provided the compensation committee and the conflicts committee of our general partner approve the annual awards granted under the program (see Note 2 of the Notes to consolidated financial statements). We have the option to provide the reimbursement in either a cash payment or the delivery of our common units to the savings and retention program or alternatively directly to the award recipients, with the reimbursement made in accordance with the underlying vesting and payment schedule of the savings and retention program. Our reimbursement for the bonus awards is reduced for forfeitures and is increased for the value of quarterly distributions accrued under the distribution equivalent rights. We have the intent and ability to settle our reimbursement for the bonus awards in our common units, and accordingly, we account for the bonus awards as an equity award.

Given that we do not have any employees to provide corporate and support services and instead we contract for such services under the omnibus agreement, generally accepted accounting principles require us to classify the savings and retention program awards as a non-employee award and measure the cost of services received in exchange for an award of equity instruments based on the vesting‑date fair value of the award. That cost, or an estimate of that cost in the case of unvested restricted phantom units, is recognized over the period during which services are provided in exchange for the award. As of March 31, 2017, there was approximately $2.1 million of total unrecognized equity-based compensation expense related to unvested restricted phantom units, which is expected to be amortized over the remaining weighted average period of 1.91 years

For bonus awards to employees of TLP Management Services, equity-based compensation of approximately $1,749,000 and $1,635,000 is included in equity-based compensation expense for the three months ended March 31, 2017 and 2016, respectively.

Activity related to our equity based awards granted under the savings and retention program for services performed under the omnibus agreement for the three months ended March 31, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

Weighted

    

 

    

Weighted

 

 

 

 

average

 

 

 

average

 

 

Vested

 

price

 

Unvested

 

price

Restricted phantom units outstanding at December 31, 2016

 

88,118

 

$

35.82

 

38,438

 

$

34.90

Issuance of units

 

(23,612)

 

$

44.70

 

 —

 

$

 —

Units withheld for settlement of withholding taxes

 

(8,618)

 

$

44.33

 

 —

 

$

 —

Unit accrual for distributions paid

 

974

 

$

44.42

 

534

 

$

44.42

Vesting of units

 

6,358

 

$

44.56

 

(6,358)

 

$

44.56

Grant of units

 

34,978

 

$

44.70

 

21,875

 

$

44.70

Restricted phantom units outstanding at March 31, 2017

 

98,198

 

$

38.70

 

54,489

 

$

38.64

Vested and expected to vest at March 31, 2017

 

152,687

 

$

38.68

 

 

 

 

 

 

 

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Notes to consolidated financial statements (unaudited) (continued)

(15) NET EARNINGS PER LIMITED PARTNER UNIT

The following table reconciles net earnings to net earnings allocable to limited partners and sets forth the computation of basic and diluted net earnings per limited partner unit (in thousands, except per unit amounts):

 

 

 

 

 

 

 

 

 

 

    

Three months ended 

 

 

 

March 31,

 

 

 

2017

 

2016

 

Net earnings

 

$

12,954

 

$

8,710

 

Less:

 

 

 

 

 

 

 

Distributions payable on behalf of incentive distribution rights

 

 

(2,636)

 

 

(1,920)

 

Distributions payable on behalf of general partner interest

 

 

(239)

 

 

(224)

 

Earnings allocable to general partner interest less than distributions payable to general partner interest

 

 

32

 

 

88

 

Earnings allocable to general partner interest including incentive distribution rights

 

 

(2,843)

 

 

(2,056)

 

Net earnings allocable to limited partners per the consolidated statements of operations

 

$

10,111

 

$

6,654

 

Basic weighted average units

 

 

16,245

 

 

16,181

 

Diluted weighted average units

 

 

16,266

 

 

16,188

 

Net earnings per limited partner unit—basic

 

$

0.62

 

$

0.41

 

Net earnings per limited partner unit—diluted

 

$

0.62

 

$

0.41

 

 

Pursuant to our partnership agreement we are 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 period end. 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

 

 

 

 

 

 

(16) COMMITMENTS AND CONTINGENCIES

Contract commitments.  At March 31, 2017, we have contractual commitments of approximately $23.8 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 within the next twelve months.

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Notes to consolidated financial statements (unaudited) (continued)

Operating leases.  We lease property and equipment under non‑cancelable operating leases that extend through August 2030. At March 31, 2017, future minimum lease payments under these non‑cancelable operating leases are as follows (in thousands):

 

 

 

 

 

Years ending December 31:

    

    

 

 

2017 (remainder of the year)

 

$

2,949

 

2018

 

 

1,650

 

2019

 

 

1,636

 

2020

 

 

1,483

 

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