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EX-32.2 - EX-32.2 - TransMontaigne Partners LLCtlp-20210331ex322d3a4f9.htm
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EX-31.2 - EX-31.2 - TransMontaigne Partners LLCtlp-20210331ex312c03a73.htm
EX-31.1 - EX-31.1 - TransMontaigne Partners LLCtlp-20210331ex3118a2435.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, 2021

OR

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

Commission File Number: 001-32505

TRANSMONTAIGNE PARTNERS LLC

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

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

1670 Broadway

Suite 3100

Denver, Colorado 80202

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

(303) 626-8200

(Telephone number, including area code)


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

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

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

Large accelerated filer

Non-accelerated filer

Accelerated filer

Smaller reporting company

Emerging growth company

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

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

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

As of March 31, 2021, the registrant has no common units outstanding.

* The registrant is a voluntary filer of reports required to be filed by certain companies under Section 13 or 15(d) of the Securities Exchange Act of 1934 and has filed all reports that would have been required to have been filed by the registrant during the preceding 12 months had it been subject to such filing requirements during the entirety of such period.

DOCUMENTS INCORPORATED BY REFERENCE

None.


TABLE OF CONTENTS

    

Page No.

Part I. Financial Information

Item 1.

Unaudited Consolidated Financial Statements

4

Consolidated balance sheets as of March 31, 2021 and December 31, 2020

5

Consolidated statements of operations for the three months ended March 31, 2021 and 2020

6

Consolidated statements of equity for the three months ended March 31, 2021 and 2020

7

Consolidated statements of cash flows for the three months ended March 31, 2021 and 2020

8

Notes to consolidated financial statements (unaudited)

9

Item 2.

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

29

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

37

Item 4.

Controls and Procedures

38

Part II. Other Information

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

38

Item 6.

Exhibits

39

Signatures

40

2


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of federal securities laws. Forward-looking statements give our current expectations, contain projections of results of operations or of financial condition, or forecasts of future events. When used in this Quarterly Report, the words “could,” “may,” “should,” “will,” “seek,” “believe,” “expect,” “anticipate,” “intend,” “continue,” “estimate,” “plan,” “target,” “predict,” “project,” “attempt,” “is scheduled,” “likely,” “forecast,” the negatives thereof and other similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. You are cautioned not to place undue reliance on any forward-looking statements.

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described in this Quarterly Report under the heading “Item 1A. Risk Factors”, and under the heading “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2020 and the risk factors and other cautionary statements contained in our other filings with the United States Securities and Exchange Commission.

You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

our ability to successfully implement our business strategy;
competitive conditions in our industry;
actions taken by third-party customers, producers, operators, processors and transporters;
pending legal or environmental matters;
costs of conducting our operations;
our ability to complete internal growth projects on time and on budget;
general economic conditions;
the price of oil, natural gas, natural gas liquids and other commodities in the energy industry;
the price and availability of financing;
large customer defaults;
interest rates;
operating hazards, global health epidemics, natural disasters, weather-related delays, casualty losses and other matters beyond our control;
uncertainty regarding our future operating results;
effects of existing and future laws and governmental regulations;
the effects of future litigation;
plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical; and
the ongoing pandemic involving COVID-19.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

3


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

Part I. Financial Information

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The interim unaudited consolidated financial statements of TransMontaigne Partners LLC as of and for the three months ended March 31, 2021 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, 2020, 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 5, 2021 with the Securities and Exchange Commission (File No. 001-32505).

TransMontaigne Partners LLC is a holding company with the following 100% owned operating subsidiaries during the three months ended March 31, 2021:

TransMontaigne Operating GP L.L.C.
TransMontaigne Operating Company L.P.
TransMontaigne Terminals L.L.C.
Razorback L.L.C. (d/b/a Diamondback Pipeline L.L.C.)
TPSI Terminals L.L.C.
TLP Finance Corp.
TLP Operating Finance Corp.
TPME L.L.C.
TLP Management Services LLC

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

4


TransMontaigne Partners LLC and subsidiaries

Consolidated balance sheets (unaudited)

(In thousands)

    

March 31,

    

December 31,

 

2021

2020

 

ASSETS

Current assets:

Cash and cash equivalents

$

3,334

$

595

Trade accounts receivable, net

 

9,328

 

9,203

Due from affiliates

 

3,718

 

2,986

Other current assets

 

10,661

 

5,623

Total current assets

 

27,041

 

18,407

Property, plant and equipment, net

 

731,194

 

737,501

Goodwill

 

9,428

 

9,428

Investments in unconsolidated affiliates

 

227,187

 

225,948

Right-of-use assets, operating leases

33,203

33,880

Other assets, net

 

41,803

 

44,042

$

1,069,856

$

1,069,206

LIABILITIES AND EQUITY

Current liabilities:

Trade accounts payable

$

8,071

$

14,000

Operating lease liabilities

3,330

3,284

Accrued liabilities

 

30,275

 

34,732

Short-term debt

361,400

Total current liabilities

 

403,076

 

52,016

Other liabilities

 

4,354

 

4,820

Long-term operating lease liabilities

`

31,647

32,418

Long-term debt

 

294,494

 

644,659

Total liabilities

 

733,571

 

733,913

Commitments and contingencies (Note 13)

Equity:

Member interest

336,285

335,293

Total equity

 

336,285

 

335,293

$

1,069,856

$

1,069,206

See accompanying notes to consolidated financial statements (unaudited).

5


TransMontaigne Partners LLC and subsidiaries

Consolidated statements of operations (unaudited)

(In thousands)

Three months ended 

March 31,

    

2021

    

2020

Revenue:

External customers

$

60,877

$

61,669

Affiliates

 

8,055

 

7,172

Total revenue

 

68,932

 

68,841

Costs and expenses:

Operating

 

(28,003)

 

(26,637)

General and administrative expenses

 

(5,179)

 

(6,317)

Insurance expenses

 

(1,328)

 

(1,208)

Deferred compensation expense

 

(764)

 

(911)

Depreciation and amortization

 

(14,764)

 

(13,641)

Total costs and expenses

 

(50,038)

 

(48,714)

Earnings from unconsolidated affiliates

 

2,192

 

2,153

Operating income

 

21,086

22,280

Other expenses:

Interest expense

 

(7,356)

 

(9,214)

Amortization of deferred debt issuance costs

 

(659)

 

(643)

Total other expenses

 

(8,015)

 

(9,857)

Net earnings

$

13,071

$

12,423

See accompanying notes to consolidated financial statements (unaudited).

.

6


TransMontaigne Partners LLC and subsidiaries

Consolidated statements of equity (unaudited)

(In thousands)

    

    

Member

interest

Total

Balance December 31, 2019

$

324,087

$

324,087

Contribution from TLP Holdings

112

112

Distributions to TLP Finance

(13,685)

(13,685)

Net earnings for the three months ended March 31, 2020

 

12,423

 

12,423

Balance March 31, 2020

$

322,937

$

322,937

Balance December 31, 2020

$

335,293

$

335,293

Distributions to TLP Finance

(12,079)

(12,079)

Net earnings for the three months ended March 31, 2021

 

13,071

 

13,071

Balance March 31, 2021

$

336,285

$

336,285

See accompanying notes to consolidated financial statements (unaudited).

7


TransMontaigne Partners LLC and subsidiaries

Consolidated statements of cash flows (unaudited)

(In thousands)

    

Three months ended 

March 31,

    

2021

    

2020

Cash flows from operating activities:

Net earnings

$

13,071

$

12,423

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

Depreciation and amortization

 

14,764

 

13,641

Earnings from unconsolidated affiliates

 

(2,192)

 

(2,153)

Distributions from unconsolidated affiliates

 

3,333

 

1,891

Amortization of deferred debt issuance costs

 

659

 

643

Amortization of deferred revenue

 

(197)

 

(33)

Unrealized loss on derivative instruments

272

Changes in operating assets and liabilities:

Trade accounts receivable, net

 

(125)

 

5,209

Due from affiliates

 

(732)

 

128

Other current assets

 

(3,345)

 

(3,492)

Amounts due under long-term terminaling services agreements, net

 

(702)

 

473

Right-of-use assets, operating leases

732

639

Other assets, net

(33)

(35)

Trade accounts payable

 

(92)

 

460

Accrued liabilities

 

(4,457)

 

(10,588)

Operating lease liabilities

(780)

(666)

Net cash provided by operating activities

 

19,904

 

18,812

Cash flows from investing activities:

Investments in unconsolidated affiliates

 

(2,380)

 

Capital expenditures

 

(13,706)

 

(13,889)

Net cash used in investing activities

 

(16,086)

 

(13,889)

Cash flows from financing activities:

Borrowings under revolving credit facility

 

51,300

 

52,700

Repayments under revolving credit facility

 

(40,300)

 

(41,700)

Distributions to TLP Finance

(12,079)

(13,685)

Contributions from TLP Holdings

112

Net cash used in financing activities

 

(1,079)

 

(2,573)

Increase in cash and cash equivalents

 

2,739

 

2,350

Cash and cash equivalents at beginning of period

 

595

 

1,090

Cash and cash equivalents at end of period

$

3,334

$

3,440

Supplemental disclosures of cash flow information:

Cash paid for interest

$

11,950

$

13,588

Property, plant and equipment acquired with accounts payable

$

3,626

$

16,105

Non-cash investments in unconsolidated affiliates

$

$

2,665

See accompanying notes to consolidated financial statements (unaudited).

8


Table of Contents

TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Nature of business

TransMontaigne Partners LLC (“we,” “us,” “our,” “the Company”) provides integrated terminaling, storage, transportation and related services for companies engaged in the trading, distribution and marketing of light refined petroleum products, heavy refined petroleum products, renewables 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.

(b) Basis of presentation and use of estimates

Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the accounts of TransMontaigne Partners LLC and its controlled subsidiaries. Investments where we do not have the ability to exercise control, but do have the ability to exercise significant influence, are accounted for using the equity method of accounting. All 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, 2021 and December 31, 2020 and our results of operations for the three months ended March 31, 2021 and 2020.

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

Effective January 1, 2019, we adopted Accounting Standards Codification (“ASC”) Topic 842, Leases and the series of related Accounting Standards Updates that followed (collectively referred to as “ASC 842”). The most significant changes under the new guidance include clarification of the definition of a lease, and the requirements for lessees to recognize a right-of-use asset and a lease liability for all qualifying leases in the consolidated balance sheets. Further, under ASC 842, additional disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. We used the modified retrospective transition method applied at the effective date of the standard. By electing this optional transition method, information prior to January 1, 2019 has not been restated and continues to be reported under the accounting standards in effect for the period (“ASC 840”) (See Note 13 of Notes to consolidated financial statements).

Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), applying the modified retrospective transition method, which required us to apply the new standard to (i) all new revenue contracts entered into after January 1, 2018, and (ii) revenue contracts which were not completed as of January 1, 2018. ASC 606 replaces existing revenue recognition requirements in GAAP and requires entities to recognize revenue at an amount that reflects the consideration to which we expect to be entitled in exchange for transferring goods or services to a customer. ASC 606 also requires certain disclosures regarding qualitative and quantitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of ASC 606 did not result in a transition adjustment nor did it have

9


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

an impact on the timing or amount of our revenue recognition (See Note 15 of Notes to consolidated financial statements).

The adoption of ASC 606 did not result in changes to our accounting for trade accounts receivable (see Note 3 of Notes to consolidated financial statements), contract assets or contract liabilities. We recognize contract assets in situations where revenue recognition under ASC 606 occurs prior to billing the customer based on our rights under the contract. Contract assets are transferred to accounts receivable when the rights become unconditional. At both March 31, 2021 and December 31, 2020, we had contract assets related to ASC 606 of approximately $0.1 million.

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 9 of Notes to consolidated financial statements). Long-term contract liabilities include deferred revenue (See Note 10 of Notes to consolidated financial statements).

We generate revenue from terminaling services fees, pipeline transportation fees and management fees. Under ASC 606 and ASC 842, we recognize revenue over time or at a point in time, depending on the nature of the performance obligations contained in the respective contract with our customer. The contract transaction price is allocated to each performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our revenue is recognized pursuant to ASC 842. The following is an overview of our significant revenue streams, including a description of the respective performance obligations and related method of revenue recognition.

Terminaling services fees. Our terminaling services agreements are structured as either throughput agreements or storage agreements. Our throughput agreements contain provisions that require our customers to make minimum payments, which are based on contractually established minimum volumes of throughput of the customer’s product at our facilities, over a stipulated period of time. Due to this minimum payment arrangement, we recognize a fixed amount of revenue from the customer over a certain period of time, even if the customer throughputs less than the minimum volume of product during that period. In addition, if a customer throughputs a volume of product exceeding the minimum volume, we would recognize additional revenue on this incremental volume. Our storage agreements require our customers to make minimum payments based on the volume of storage capacity available to the customer under the agreement, which results in a fixed amount of recognized revenue. We refer to the fixed amount of revenue recognized pursuant to our terminaling services agreements as being “firm commitments.”

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

Revenue recognized in excess of firm commitments and revenue recognized based solely on the volume of product distributed or injected are referred to as ancillary. The ancillary revenue associated with terminaling services

10


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

include volumes of product throughput that exceed the contractually established minimum volumes, injection fees based on the volume of product injected with additive compounds, heating and mixing of stored products, product transfer, railcar handling, butane blending, proceeds from the sale of product gains, wharfage and vapor recovery. The revenue generated by these services is required to be estimated under ASC 606 for any uncertainty that is not resolved in the period of the service. We account for the majority of ancillary revenue at individual points in time when the services are delivered to the customer. The majority of our ancillary revenue is recognized in accordance with ASC 606 (See Note 15 of Notes to consolidated financial statements).

Pipeline transportation fees. We earn pipeline transportation fees at our Diamondback pipeline under a capacity reservation agreement. Revenue associated with the capacity reservation agreement is recognized ratably over the respective term, regardless of whether the capacity is actually utilized. We earned pipeline transportation fees at our Razorback pipeline based on an allocation of the aggregate fees charged under the capacity agreement with our customer who was contracted for 100% of our Razorback system through December 31, 2020. Effective January 1, 2021, our customer has leased 100% of our Razorback system and assumed operatorship of the Razorback pipeline and the terminals in Mount Vernon, Missouri and in Rogers, Arkansas. Beginning in 2021, the fees associated with this lease agreement are recognized as terminaling services fees. Pipeline transportation revenue is primarily accounted for in accordance with ASC 842.

Management fees. We manage and operate certain tank capacity at our Port Everglades South terminal for a major oil company and receive a reimbursement of its proportionate share of operating and maintenance costs. We manage and operate the Frontera joint venture and receive a management fee based on our costs incurred. We lease land under operating leases as the lessor or sublessor with third parties and affiliates. We manage and operate rail sites at certain Southeast terminals on behalf of a major oil company and receive reimbursement for operating and maintenance costs. We manage and operate terminals that are owned by affiliates of ArcLight, including for SeaPort Midstream Partners, LLC in Seattle, Washington and Portland, Oregon and another terminal for SeaPort Sound Terminal, LLC (“SeaPort Sound”) in Tacoma, Washington and receive a management fee based on our costs incurred. We also manage additional terminal facilities that are owned by affiliates of ArcLight, including Lucknow-Highspire Terminals, LLC, which operates terminals throughout Pennsylvania encompassing approximately 9.9 million barrels of storage capacity and receive a management fee based on our costs incurred.

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

(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

11


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

of the asset group over its estimated fair value. We did not recognize any impairment charges during the three months ended March 31, 2021 and 2020.

(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. We did not recognize any impairment charges during the three months ended March 31, 2021 and 2020.

(g) Environmental obligations

We accrue for environmental costs that relate to existing conditions caused by past operations when probable and reasonably estimable (see Note 9 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 4 of Notes to consolidated financial statements).

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

(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

12


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

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) Deferred compensation expense

We have a savings and retention plan to compensate certain employees who provide services to the Company. We index the savings and retention plan awards to other forms of investments and have the intent and ability to settle the awards in cash, and accordingly, we account for the awards as liability awards (see Note 12 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. Changes in the fair value of our derivative instruments are recognized in the consolidated statements of operations.

At March 31, 2021 and December 31, 2020 we do not have derivative instruments. Our interest rate swap agreements expired in June 2020. Pursuant to the terms of the interest rate swap agreements, we paid a blended fixed rate of approximately 2.04% and received interest payments based on the one-month LIBOR. The net difference to be paid or received under the interest rate swap agreements was settled monthly and was recognized as an adjustment to interest expense. The fair value of our interest rate swap agreements was 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 up to our owners.

(l) Comprehensive income

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

(m) Recent accounting pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate ReformFacilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by this reference rate reform, if certain criteria are met. An entity that makes this election would not have to re-measure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. The guidance is effective upon issuance and generally can be applied through December 31, 2022. We are currently reviewing the effect of this ASU on our financial statements.

13


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

(n) Going concern assessment and management’s plan

Pursuant to FASB ASC 205-40, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern, we are required to assess our ability to continue as a going concern for a period of one year from the date of the issuance of these consolidated financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. As discussed in Note 11 of Notes to consolidated financial statements, our revolving credit facility matures on March 13, 2022, and has not been renewed as of the date of the issuance of these consolidated financial statements. While the Company intends to renew or extend the terms of our revolving credit facility, until such time as we have an executed agreement to refinance or extend the maturity, we cannot conclude that it is probable we will do so, and accordingly, this raises substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

(2) TRANSACTIONS WITH AFFILIATES

Operations and reimbursement agreement—Frontera. We have a 50% ownership interest in the Frontera Brownsville LLC joint venture (“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 $1.3 million and $1.5 million for the three months ended March 31, 2021 and 2020, respectively.

Terminaling services agreements—Brownsville terminals. We have two terminaling services agreements with Frontera relating to our Brownsville, Texas facility that will expire in June 2022 and 2023, subject to automatic renewals unless terminated by either party upon 90 days’ to 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. We recognized revenue related to these agreements of approximately $0.6 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively.

Terminaling services agreement—Gulf Coast terminals. We have a terminaling services agreement with Associated Asphalt Marketing, LLC, a wholly-owned indirect subsidiary of ArcLight relating to our Gulf Coast terminals. The agreement will expire in April 2026, subject to a five-year automatic renewal unless terminated by either party upon 180 days’ prior notice, after which the agreement is subject to two-year automatic renewals unless terminated by either party upon 180 days’ prior notice. In exchange for its minimum throughput commitment, we have agreed to provide Associated Asphalt Marketing, LLC with approximately 750,000 barrels of storage capacity. We recognized revenue related to this agreement of approximately $2.2 million and $2.1 million for the three months ended March 31, 2021 and 2020, respectively.

Operating and administrative agreement—SeaPort Midstream Partners, LLC —Central services. We operate two products terminals in Seattle, Washington and Portland, Oregon, on behalf of SeaPort Midstream Partners, LLC, in accordance with an operating and administrative agreement executed between us and SeaPort Midstream Partners, LLC. SeaPort Midstream Partners, LLC is a joint venture between SeaPort Midstream Holdings LLC, an ArcLight subsidiary, and BP West Coast Products LLC. SeaPort Midstream Holdings LLC owns 51% of SeaPort Midstream Partners, LLC. The operating and administrative agreement will expire in November 2023, subject to two-year automatic renewals unless terminated by either party upon no less than twelve months’ notice prior to the end of the initial term or any successive term. Our agreement with SeaPort Midstream Partners, LLC stipulates that we may resign

14


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

as the operator at any time with the prior written consent of SeaPort Midstream Partners, LLC, or that we may be removed as the operator for good cause, which includes material noncompliance with laws and material failure to adhere to good industry practice regarding health, safety or environmental matters. We recognized revenue related to this operating and administrative agreement of approximately $1.0 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively.

Services agreement—SeaPort Sound Terminal, LLC (“SeaPort Sound”)—Central services. Our subsidiary, TMS, operates a products terminal in Tacoma, Washington on behalf of SeaPort Sound Terminal, LLC, an ArcLight subsidiary. We recognized revenue related to this services agreement of approximately $2.2 million and $1.9 million for the three months ended March 31, 2021 and 2020, respectively.

Other affiliates—Central services. We manage additional terminal facilities that are owned by affiliates of ArcLight, including Lucknow-Highspire Terminals, LLC. We recognized revenue related to reimbursements from these affiliates of approximately $0.7 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

Services agreementTMC. Our executive officers who provide services to the Company are employed by TMC, a wholly owned subsidiary of ArcLight, which also provides services to certain other ArcLight affiliates. Pursuant to a services agreement between TMS and TMC, TMS continues to provide certain payroll functions and maintains all employee benefits programs on behalf of TMC. TMC is reimbursed for the payroll and benefits expenses related to the executive officers, plus a 1% administration fee. Aggregate fees paid by us to TMC with respect to the services agreement was approximately $0.6 million and $1.2 million for the three months ended March 31, 2021 and 2020, respectively.

(3) CONCENTRATION OF CREDIT RISK AND TRADE ACCOUNTS RECEIVABLE

Our primary market areas are located in the United States along the Gulf Coast, in the Southeast, in Brownsville, Texas, along the Mississippi and Ohio Rivers, in the Midwest and along the West Coast. We have a concentration of trade receivable balances due from companies engaged in the trading, distribution and marketing of refined products and crude oil. These concentrations of customers may affect our overall credit risk in that the customers may be similarly affected by changes in economic, regulatory or other factors. Our customers’ historical financial and operating information is analyzed prior to extending credit. We manage our exposure to credit risk through credit analysis, credit approvals, credit limits and monitoring procedures, and for certain transactions we may request letters of credit, prepayments or guarantees. Amounts included in trade accounts receivable that are accounted for as revenue in accordance with ASC 606 approximate $2.8 million and $2.4 million at March 31, 2021 and December 31, 2020, respectively. We maintain allowances for potentially uncollectible accounts receivable.

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

    

March 31,

    

December 31,

 

2021

2020

 

Trade accounts receivable

$

9,328

$

9,203

Less allowance for credit losses

 

 

$

9,328

$

9,203

15


TransMontaigne Partners LLC and Subsidiaries

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,

    

2021

    

2020

 

Pilot Flying J

20

%  

14

%

Freepoint Commodities LLC

9

%  

11

%

RaceTrac Petroleum Inc.

8

%  

10

%

(4) OTHER CURRENT ASSETS

Other current assets were as follows (in thousands):

    

March 31,

    

December 31,

 

2021

2020

 

Prepaid insurance

$

5,972

$

2,123

Revolving credit facility unamortized deferred debt issuance costs, net of accumulated amortization of $11,478 at March 31, 2021

1,693

Additive detergent

 

1,266

 

1,585

Amounts due from insurance companies

604

668

Deposits and other assets

 

1,126

 

1,247

$

10,661

$

5,623

Revolving credit facility unamortized deferred debt issuance costs. Deferred debt issuance costs are amortized using the effective interest method over the term of the related revolving credit facility. Our revolving credit facility matures on March 13, 2022, and therefore the unamortized deferred debt issuance costs are presented as a current asset in our consolidated balance sheets as of March 31, 2021.

Amounts due from insurance companies. We periodically file claims for recovery of environmental remediation costs and property claims with our insurance carriers under our comprehensive liability policies. We recognize our insurance recoveries in the period that we assess the likelihood of recovery as being probable. At March 31, 2021 and December 31, 2020, we have recognized amounts due from insurance companies of approximately $0.6 million and $0.7 million, respectively, representing our best estimate of our probable insurance recoveries. During the three months ended March 31, 2021, we received reimbursements from insurance companies of approximately $0.1 million.

(5) PROPERTY, PLANT AND EQUIPMENT, NET

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

    

March 31,

    

December 31,

2021

2020

Land

$

83,657

$

83,657

Terminals, pipelines and equipment

 

1,130,030

 

1,108,410

Furniture, fixtures and equipment

 

11,137

 

11,104

Construction in progress

 

9,040

 

22,824

 

1,233,864

 

1,225,995

Less accumulated depreciation

 

(502,670)

 

(488,494)

$

731,194

$

737,501

16


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

At March 31, 2021 and December 31, 2020, property, plant and equipment, net utilized by our customers in operating lease arrangements consisted of approximately $585.5 million and $582.6 million, respectively, of terminals, pipelines and equipment. The terminals, pipelines and equipment primarily relates to our storage tanks and associated internal piping.

(6) GOODWILL

Goodwill was as follows (in thousands):

    

March 31,

    

December 31,

 

2021

2020

 

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 business segments (see Note 16 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, 2021 and December 31, 2020, our Brownsville and West Coast terminals contained goodwill. We did not recognize any goodwill impairment charges during the three months ended March 31, 2021 or during the year ended December 31, 2020 for these reporting units. However, an increase in the assumed market participants’ weighted average cost of capital, the loss of a significant customer, the disposition of significant assets, or an unforeseen increase in the costs to operate and maintain the Brownsville or West Coast terminals could result in the recognition of an impairment charge in the future.

(7) INVESTMENTS IN UNCONSOLIDATED AFFILIATES

At March 31, 2021 and December 31, 2020, 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)

March 31,

December 31,

March 31,

December 31,

    

2021

    

2020

    

2021

    

2020

 

BOSTCO

42.5

%  

42.5

%  

$

203,486

$

201,912

Frontera

50

%  

50

%  

 

23,701

 

24,036

Total investments in unconsolidated affiliates

$

227,187

$

225,948

17


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

At both March 31, 2021 and December 31, 2020, our investment in BOSTCO includes approximately $6.4 million 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 was as follows (in thousands):

Three months ended 

March 31,

    

2021

    

2020

BOSTCO

$

1,490

$

1,508

Frontera

 

702

 

645

Total earnings from investments in unconsolidated affiliates

$

2,192

$

2,153

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

    

Three months ended 

March 31,

    

2021

    

2020

BOSTCO

$

2,380

$

2,665

Frontera

 

 

Additional capital investments in unconsolidated affiliates

$

2,380

$

2,665

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

    

Three months ended 

March 31,

    

2021

    

2020

BOSTCO

$

2,296

$

1,417

Frontera

 

1,037

 

474

Cash distributions received from unconsolidated affiliates

$

3,333

$

1,891

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,

    

2021

    

2020

    

2021

    

2020

Current assets

$

17,709

$

15,822

$

5,393

$

5,352

Long-term assets

 

463,678

 

464,971

 

42,978

 

43,939

Current liabilities

 

(13,760)

 

(17,543)

 

(969)

 

(1,219)

Long-term liabilities

(5,335)

(5,476)

Net assets

$

462,292

$

457,774

$

47,402

$

48,072

18


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

Statements of income:

BOSTCO

Frontera

Three months ended 

Three months ended 

    

March 31,

March 31,

2021

2020

2021

    

2020

Revenue

$

18,800

$

16,436

    

$

4,869

$

5,036

Expenses

 

(14,985)

 

(12,651)

 

(3,465)

 

(3,746)

Net income

$

3,815

$

3,785

$

1,404

$

1,290

(8) OTHER ASSETS, NET

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

    

March 31,

    

December 31,

 

2021

2020

 

Customer relationships, net of accumulated amortization of $10,175 and $9,587, respectively

$

39,255

$

39,843

Revolving credit facility unamortized deferred debt issuance costs, net of accumulated amortization of $11,054 at December 31, 2020

2,117

Amounts due under long-term terminaling services agreements

1,780

1,347

Deposits and other assets

 

768

 

735

$

41,803

$

44,042

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

Revolving credit facility unamortized deferred debt issuance costs. Deferred debt issuance costs are amortized using the effective interest method over the term of the related revolving credit facility. Our revolving credit facility matures on March 13, 2022, and therefore the unamortized deferred debt issuance costs are presented as a current asset in our consolidated balance sheets as of March 31, 2021.

Amounts due under long-term terminaling services agreements. We have long-term terminaling services agreements with certain of our customers that provide for minimum payments that increase at stated amounts over the terms of the respective agreements. We recognize as revenue under ASC 842 and ASC 606 the minimum payments under the long-term terminaling services agreements on a straight-line basis over the terms of the respective agreements. At March 31, 2021 and December 31, 2020, 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 $1.8 million and $1.3 million, respectively.

19


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

(9) ACCRUED LIABILITIES

Accrued liabilities were as follows (in thousands):

    

March 31,

    

December 31,

 

2021

2020

 

Accrued compensation expense

$

10,677

$

12,283

Customer advances and deposits

10,653

10,689

Interest payable

 

3,026

 

7,619

Accrued property taxes

 

3,785

 

3,018

Accrued environmental obligations

 

1,957

 

983

Accrued expenses and other

 

177

 

140

$

30,275

$

34,732

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

Customer advances and deposits. We bill certain of our customers one month in advance for terminaling services to be provided in the following month. At both March 31, 2021 and December 31, 2020, approximately $9.6 million of the customer advances and deposits balance is related to terminaling services agreements accounted for as operating leases under ASC 842. At both March 31, 2021 and December 31, 2020, approximately $1.1 million of the customer advances and deposits balance is considered contract liabilities under ASC 606. Revenue recognized during both of the three months ended March 31, 2021 and 2020 from amounts included in contract liabilities at the beginning of the period was approximately $1.1 million. At both March 31, 2021 and December 31, 2020, we have billed and collected from certain of our customers approximately $10.7 million in advance of the terminaling services being provided.

Accrued environmental obligations. At March 31, 2021 and December 31, 2020, we have accrued environmental obligations of approximately $2.0 million and $1.0 million, respectively, representing our best estimate of our remediation obligations. During the three months ended March 31, 2021, we made payments of approximately $0.1 million towards our environmental remediation obligations. During the three months ended March 31, 2021, we increased our estimate of our future environmental remediation costs by approximately $1.1 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.

(10) OTHER LIABILITIES

Other liabilities were as follows (in thousands):

    

March 31,

    

December 31,

 

2021

2020

 

Advance payments received under long-term terminaling services agreements

$

2,300

$

2,569

Deferred revenue

2,054

2,251

$

4,354

$

4,820

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 under ASC 842 on a straight-line basis over the term of the respective agreements. At March 31, 2021 and December 31, 2020, we have received advance minimum payments in excess of revenue recognized under these long-term terminaling services agreements resulting in a liability of approximately $2.3 million and $2.6 million, respectively.

20


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

Deferred revenue. Pursuant to agreements with our customers, we agreed to undertake certain capital projects. Upon completion of the projects, our customers have paid us amounts that will be recognized as revenue on a straight-line basis over the remaining term of the agreements. At March 31, 2021 and December 31, 2020, we have unamortized deferred revenue for completed projects of approximately $2.1 million and $2.3 million, respectively. During the three months ended March 31, 2021, we billed customers $nil for completed projects and recognized revenue for completed projects on a straight-line basis of approximately $0.2 million. At both March 31, 2021 and December 31, 2020, $nil of the deferred revenue balance is considered contract liabilities under ASC 606. Revenue recognized during both the three months ended March 31, 2021 and 2020, from amounts included in contract liabilities under ASC 606 at the beginning of the period, was approximately $nil.

(11) DEBT

Debt was as follows (in thousands):

    

March 31,

    

December 31,

2021

2020

Revolving credit facility due in 2022

$

361,400

$

Short-term debt

$

361,400

$

Revolving credit facility due in 2022

$

$

350,400

6.125% senior notes due in 2026

299,900

299,900

Senior notes unamortized deferred debt issuance costs, net of accumulated amortization of $2,676 and $2,441, respectively

(5,406)

(5,641)

Long-term debt

$

294,494

$

644,659

Our revolving credit facility provides for a maximum borrowing line of credit equal to $850 million. 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 LLC agreement. We may make acquisitions and investments that meet the definition of “permitted acquisitions”; “other investments” which may not exceed 5% of “consolidated net tangible assets”; and additional future “permitted JV investments” up to $175 million, which may include additional investments in BOSTCO. The primary financial covenants contained in our revolving credit facility are (i) a total leverage ratio test (not to exceed 5.25 to 1.0), (ii) a senior secured leverage ratio test (not to exceed 3.75 to 1.0), and (iii) a minimum interest coverage ratio test (not less than 2.75 to 1.0). The principal balance of loans and any accrued and unpaid interest are due and payable in full on the maturity date, March 13, 2022, and is therefore presented as a current liability in our consolidated balance sheets as of March 31, 2021. We expect to renew or extend our revolving credit facility prior to the maturity date. We were in compliance with all financial covenants as of and during the three months ended March 31, 2021 and the year ended December 31, 2020.  

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 three months ended March 31, 2021 and 2020, the weighted average interest rate on borrowings under our revolving credit facility was approximately 3.4% and 5.4%, respectively. At March 31, 2021 and December 31, 2020, our outstanding borrowings under our revolving credit facility were $361.4 million and $350.4 million, respectively. At both March 31, 2021 and December 31, 2020 our outstanding letters of credit were $1.3 million.

On February 12, 2018, the Company and TLP Finance Corp., our wholly owned subsidiary, issued at par $300 million of 6.125% senior notes. Net proceeds, after $8.1 million of issuance costs, were used to repay indebtedness under

21


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

our revolving credit facility. The senior notes are due in 2026 and are guaranteed on a senior unsecured basis by each of our 100% owned domestic subsidiaries that guarantee obligations under our revolving credit facility. TransMontaigne Partners LLC has no independent assets or operations unrelated to its investments in its consolidated subsidiaries. TLP Finance Corp. has no assets or operations. 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.

(12) DEFERRED COMPENSATION EXPENSE

We have a savings and retention plan to compensate certain employees who provide services to the Company. The purpose of the savings and retention plan is to provide for the reward and retention of participants by providing them with awards that vest over future service periods. Awards under the plan with respect to individuals providing services to the Company generally become vested as to 50% of a participant’s annual award as of the first day of the month that falls closest to the second anniversary of the grant date, and the remaining 50% as of the first day of the month that falls closest to the third anniversary of the grant date, subject to earlier vesting upon a participant’s attainment of the age and length of service thresholds, retirement, death or disability, involuntary termination without cause, or termination of a participant’s employment following a change in control of the Company as specified in the plan. The awards are increased for the value of any accrued growth based on underlying investments deemed made with respect to the awards. The awards (including any accrued growth relating thereto) are subject to forfeiture until the vesting date. A person will satisfy the age and length of service thresholds of the plan upon the attainment of the earliest of (a) age sixty, (b) age fifty-five and ten years of service as an officer of the Company or any of its affiliates or predecessors, or (c) age fifty and twenty years of service as an employee of the Company or any of its affiliates or predecessors.

We index the savings and retention plan awards to other forms of investments and have the intent and ability to settle the awards in cash, and accordingly, we account for the awards as accrued liabilities. For awards to employees, approximately $0.8 million and $0.9 million is included in deferred compensation expense for the three months ended March 31, 2021 and 2020, respectively.

(13) COMMITMENTS AND CONTINGENCIES

Lease commitments. We lease property including corporate offices, vehicles and land. We determine if an arrangement is a lease at inception and evaluate identified leases for operating or finance lease treatment at lease commencement. Operating or finance lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Our leases have remaining lease terms of less than one year to 40 years, some of which have options to extend or terminate the lease. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Operating right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We determined our incremental borrowing rate using the borrowing rate of our revolving credit facility. The terms of our corporate offices, vehicles and land leases are in line with our revolving credit facility, our primary finance mechanism. We have certain land and vehicle lease agreements with lease and non-lease components, which are accounted for separately. Non-lease components include payments for taxes and other operating and maintenance expenses incurred by the lessor but payable by us in connection with the leasing arrangement. During the three months ended March 31, 2021 and 2020, the Company was party to certain subleasing arrangements whereby the Company, as the primary obligor on the lease, has recognized sublease income for lease payments made by affiliates to the lessor.

22


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

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

Three months ended 

March 31,

    

2021

    

2020

Operating leases

$

1,180

$

1,182

Variable lease costs (including insignificant short-term leases)

234

991

Sublease income as primary obligor

(249)

(246)

Total lease costs

$

1,165

$

1,927

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

Three months ended 

March 31,

    

2021

    

2020

Cash outflows for operating leases

$

1,228

$

1,209

Weighted average remaining lease term (years)

18.28

18.66

Weighted average discount rate

5.2%

5.2%

Undiscounted cash flows owed by the Company to lessors pursuant to contractual agreements in effect as of March 31, 2021 and related imputed interest was as follows (in thousands):

Years ending December 31:

2021 (remainder of the year)

$

3,545

2022

 

4,763

2023

 

4,163

2024

 

3,707

2025

 

3,286

Thereafter

 

36,546

Total lease payments

56,010

Less imputed interest

(21,033)

Present value of operating lease liabilities

$

34,977

Contract commitments. At March 31, 2021, we have contractual commitments of approximately $17.8 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 primarily be paid within a year.

Legal proceedings. We are party to various legal, regulatory and other matters arising from the day-to-day operations of our business that may result in claims against us. While the ultimate impact of any proceedings cannot be predicted with certainty, our management believes that the resolution of any of our pending legal proceedings will not have a material adverse effect on our business, financial position, results of operations or cash flows.

23


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

(14) DISCLOSURES ABOUT FAIR VALUE

GAAP defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. GAAP also establishes a fair value hierarchy that prioritizes the use of higher-level inputs for valuation techniques used to measure fair value. The three levels of the fair value hierarchy are: (1) Level 1 inputs, which are quoted prices (unadjusted) in active markets for identical assets or liabilities; (2) Level 2 inputs, which are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and (3) Level 3 inputs, which are unobservable inputs for the asset or liability.

The fair values of the following financial instruments represent our best estimate of the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Our fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects our judgments about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. There were no transfers into or out of Levels 1, 2, and 3 during the three months ended March 31, 2021 and 2020. The following methods and assumptions were used to estimate the fair value of financial instruments at March 31, 2021 and December 31, 2020.

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.

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 $299.9 million publicly traded senior notes at March 31, 2021 was approximately $301.4 million based on observable market trades. The fair value of our debt is categorized in Level 2 of the fair value hierarchy.

24


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

(15) REVENUE FROM CONTRACTS WITH CUSTOMERS

The majority of our terminaling services agreements contain minimum payment arrangements, resulting in a fixed amount of revenue recognized, which we refer to as “firm commitments” and are accounted for in accordance with ASC 842, Leases (“ASC 842 revenue”). The remainder is recognized in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606 revenue”).

The following table provides details of our revenue disaggregated by category of revenue (in thousands):

Three months ended 

March 31,

    

2021

    

2020

Terminaling services fees:

Firm commitments (ASC 842 revenue)

$

47,009

$

46,811

Firm commitments (ASC 606 revenue)

4,394

3,707

Total firm commitments revenue

51,403

50,518

Ancillary revenue (ASC 606 revenue)

 

11,002

 

11,829

Ancillary revenue (ASC 842 revenue)

 

592

 

997

Total ancillary revenue

 

11,594

 

12,826

Total terminaling services fees

 

62,997

 

63,344

Pipeline transportation fees (ASC 842 revenue)

 

396

 

872

Management fees (ASC 606 revenue)

 

5,218

 

4,327

Management fees (ASC 842 revenue)

 

321

 

298

Total management fees

 

5,539

 

4,625

Total revenue

$

68,932

$

68,841

The following table includes our estimated future revenue associated with our firm commitments under terminaling services fees which is expected to be recognized as ASC 606 revenue in the specified period related to our future performance obligations as of the end of the reporting period (in thousands):

Estimated Future ASC 606 Revenue by Segment

Gulf Coast

Midwest

Brownsville

River

Southeast

West Coast

Central

Terminals

    

Terminals

    

Terminals

    

Terminals

    

Terminals

    

Terminals

    

Services

    

Total

2021 (remainder of the year)

$

3,625

$

414

$

1,634

$

878

$

$

3,835

$

$

10,386

2022

1,785

457

2,178

1,063

1,638

7,121

2023

236

32

2,178

531

2,977

2024

410

410

2025

Thereafter

Total estimated future ASC 606 revenue

$

5,646

$

903

$

6,400

$

2,472

$

$

5,473

$

$

20,894

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 March 31, 2021 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.

25


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

Estimated future ASC 606 revenue in the table above excludes revenue arrangements accounted for in accordance with ASC 842. The following table includes our estimated future revenue associated with our firm commitments under terminaling services fees which is expected to be recognized as ASC 842 revenue in the specified period (in thousands):

Years ending December 31:

2021 (remainder of the year)

$

138,002

2022

 

142,295

2023

 

115,165

2024

 

67,755

2025

 

49,085

Thereafter

488,797

Total estimated future ASC 842 revenue

$

1,001,099

(16) BUSINESS SEGMENTS

We provide integrated terminaling, storage, transportation and related services to companies engaged in the trading, distribution and marketing of refined petroleum products, renewable products, crude oil, chemicals, fertilizers and other liquid products. Our chief operating decision maker is the Company’s chief executive officer. The Company’s chief executive officer reviews the financial performance of our business segments using disaggregated financial information about “net margins” for purposes of making operating decisions and assessing financial performance. “Net margins” is composed of revenue less operating costs and expenses. Accordingly, we present “net margins” for each of our business segments: (i) Gulf Coast terminals, (ii) Midwest terminals, (iii) Brownsville terminals including management of the Frontera joint venture, (iv) River terminals, (v) Southeast terminals, (vi) West Coast terminals and (vii) Central services. Our Central services segment primarily represents the costs of employees performing operating oversight functions, engineering, health, safety and environmental services to our terminals and terminals that we operate or manage, including for affiliate terminals owned by ArcLight. In addition, Central services represent the cost of employees at affiliate terminals owned by ArcLight that we operate. We receive a fee from these affiliates based on our costs incurred.

26


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

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

Three months ended 

March 31,

    

2021

    

2020

Gulf Coast Terminals:

Terminaling services fees

$

19,158

$

20,653

Management fees

 

14

 

5

Revenue

 

19,172

 

20,658

Operating costs and expenses

 

(5,638)

 

(6,123)

Net margins

 

13,534

 

14,535

Midwest Terminals:

Terminaling services fees

 

3,007

 

1,443

Pipeline transportation fees

 

 

472

Revenue

 

3,007

 

1,915

Operating costs and expenses

 

(664)

 

(515)

Net margins

 

2,343

 

1,400

Brownsville Terminals:

Terminaling services fees

 

3,910

 

4,007

Pipeline transportation fees

 

396

 

400

Management fees

 

1,311

 

1,500

Revenue

 

5,617

 

5,907

Operating costs and expenses

 

(2,461)

 

(2,683)

Net margins

 

3,156

 

3,224

River Terminals:

Terminaling services fees

 

3,426

 

2,694

Revenue

 

3,426

 

2,694

Operating costs and expenses

 

(1,635)

 

(1,244)

Net margins

 

1,791

 

1,450

Southeast Terminals:

Terminaling services fees

 

19,840

 

21,510

Management fees

 

261

 

240

Revenue

 

20,101

 

21,750

Operating costs and expenses

 

(6,126)

 

(5,573)

Net margins

 

13,975

 

16,177

West Coast Terminals:

Terminaling services fees

 

13,656

 

13,037

Management fees

 

10

 

9

Revenue

 

13,666

 

13,046

Operating costs and expenses

 

(5,372)

 

(5,044)

Net margins

 

8,294

 

8,002

Central Services:

Management fees

 

3,943

 

2,871

Revenue

3,943

2,871

Operating costs and expenses

 

(6,107)

 

(5,455)

Net margins

 

(2,164)

 

(2,584)

Total net margins

 

40,929

42,204

General and administrative expenses

 

(5,179)

 

(6,317)

Insurance expenses

 

(1,328)

 

(1,208)

Deferred compensation expense

 

(764)

 

(911)

Depreciation and amortization

(14,764)

(13,641)

Earnings from unconsolidated affiliates

 

2,192

 

2,153

Operating income

 

21,086

 

22,280

Other expenses

 

(8,015)

 

(9,857)

Net earnings

$

13,071

$

12,423

27


TransMontaigne Partners LLC and Subsidiaries

Notes to consolidated financial statements (unaudited) (continued)

Supplemental information about our business segments is summarized below (in thousands):

Three months ended March 31, 2021

 

Gulf Coast

Midwest

Brownsville

River

Southeast

West Coast

Central

 

Terminals

Terminals 

Terminals

Terminals

Terminals

Terminals

Services

Total

 

Revenue:

External customers

    

$

16,997

$

3,007

$

3,680

$

3,426

$

20,101

$

13,666

$

$

60,877

Affiliate customers

 

2,175

 

 

1,937

 

 

 

 

3,943

 

8,055

Revenue

$

19,172

$

3,007

$

5,617

$

3,426

$

20,101

$

13,666

$

3,943

$

68,932

Capital expenditures

$

1,696

$

25

$

4,101

$

2,773

$

2,753

$

2,296

$

62

$

13,706

Identifiable assets

$

120,424

$

17,780

$

111,203

$

51,057

$

249,314

$

267,947

$

13,151

$

830,876

Cash and cash equivalents

 

3,334

Investments in unconsolidated affiliates

 

227,187

Revolving credit facility unamortized deferred debt issuance costs, net

 

1,693

Other

 

6,766

Total assets

$

1,069,856

Three months ended March 31, 2020

 

Gulf Coast

Midwest

Brownsville

River

Southeast

West Coast

Central

 

Terminals

Terminals 

Terminals

Terminals

Terminals

Terminals

Services

Total

 

Revenue:

    

External customers

$

18,527

$

1,915

$

3,737

$

2,694

$

21,750

$

13,046

$

$

61,669

Affiliate customers

 

2,131

 

 

2,170

 

 

 

 

2,871

 

7,172

Revenue