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| TLP > SEC Filings for TLP > Form 10-Q on 8-Aug-2008 | All Recent SEC Filings |
8-Aug-2008
Quarterly Report
The following discussion and analysis of the results of operations and financial condition should be read in conjunction with the accompanying unaudited consolidated financial statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
A summary of the significant accounting policies that we have adopted and followed in the preparation of our consolidated financial statements is detailed in our consolidated financial statements for the year ended December 31, 2007, included in our Annual Report on Form 10-K filed on March 10, 2008 (see Note 1 of Notes to the consolidated financial statements). Certain of these accounting policies require the use of estimates. The following estimates, in our opinion, are subjective in nature, require the exercise of judgment, and involve complex analysis: allowance for doubtful accounts and accrued environmental obligations. These estimates are based on our knowledge and understanding of current conditions and actions we may take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequent changes in these estimates may have a significant impact on our financial condition and results of operations.
SIGNIFICANT DEVELOPMENTS DURING THE THREE MONTHS ENDED JUNE 30, 2008
On April 18, 2008, we announced a distribution of $0.57 per unit payable on May 6, 2008 to unitholders of record on April 30, 2008.
SUBSEQUENT EVENTS
On July 8, 2008, we announced that effective July 8, 2008, Charles L. Dunlap has been appointed to serve as a member of the Board of Directors and as a member of the Conflicts Committee of our general partner.
On July 18, 2008, we announced a distribution of $0.58 per unit payable on August 5, 2008 to unitholders of record on July 31, 2008.
On July 23, 2008, Hurricane Dolly struck southern Texas causing damage at our Brownsville, Texas facilities. As a result, we currently estimate that our exposure is approximately $1.3 million related to the damage at our Brownsville, Texas facilities.
RESULTS OF OPERATIONS-THREE MONTHS ENDED JUNE 30, 2008 AND 2007
In reviewing our historical results of operations, you should be aware that the accompanying consolidated financial statements include the assets, liabilities and results of operations of certain TransMontaigne Inc. terminal and pipeline transportation operations prior to their acquisition by us from TransMontaigne Inc. The results of operations of TransMontaigne Inc.'s terminals and pipelines prior to being acquired by us are reflected in the accompanying consolidated financial statements as being attributable to TransMontaigne Inc. ("Predecessor"). The acquired assets and liabilities have been recorded at TransMontaigne Inc.'s carryover basis.
At the closing of our initial public offering on May 27, 2005, we acquired from TransMontaigne Inc. seven Florida terminals, including terminals located in Tampa, Port Manatee, Fisher Island, Port Everglades (North), Port Everglades (South), Cape Canaveral, and Jacksonville; and the Razorback Pipeline system, including the terminals located at Mt. Vernon, Missouri and Rogers, Arkansas in exchange for 120,000 common units, 2,872,266 subordinated units, a 2% general partner interest, and a cash payment of approximately $111.5 million. On January 1, 2006, we acquired from TransMontaigne Inc. the Mobile, Alabama terminal in exchange for a cash payment of approximately $17.9 million. On December 29, 2006, we acquired from TransMontaigne Inc. the Brownsville, Texas
terminal, twelve terminals along the Mississippi and Ohio Rivers ("River terminals"), and the Baton Rouge, Louisiana dock facility in exchange for a cash payment of approximately $135.0 million. On December 31, 2007, we acquired from TransMontaigne Inc. twenty-two terminals along the Colonial and Plantation Pipelines ("Southeast terminals") in exchange for a cash payment of approximately $118.6 million (see Note 3 of Notes to consolidated financial statements). The acquisitions of terminal and pipeline operations from TransMontaigne Inc. have been accounted for as transactions among entities under common control and, accordingly, prior periods include the activity of the acquired terminal and pipeline operations since the date they were purchased by TransMontaigne Inc. for acquisitions made by us prior to September 1, 2006, and since September 1, 2006, (the date of Morgan Stanley Capital Group Inc.'s acquisition of TransMontaigne Inc.) for acquisitions made by us on or after September 1, 2006.
Revenue. We derive revenue from our terminal and pipeline transportation operations by charging fees for providing integrated terminaling, transportation and related services. Our revenue was as follows (in thousands):
Three months ended
June 30,
2008 2007
Throughput and additive injection fees, net $ 19,919 $ 18,614
Terminaling storage fees 7,672 8,883
Pipeline transportation fees 869 557
Management fees and reimbursed costs 502 450
Other 6,130 3,700
Revenue $ 35,092 $ 32,204
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The revenue of our business segments were as follows (in thousands):
Three months ended June 30,
2008 2007
Gulf Coast terminals $ 12,877 $ 10,400
Midwest terminals and pipeline system 1,575 1,479
Brownsville terminals 5,088 4,081
River terminals 4,651 4,947
Southeast terminals 10,901 11,297
Revenue $ 35,092 $ 32,204
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Effective December 31, 2007, we acquired from Rio Vista Energy Partners L.P. ("Rio Vista") a terminal facility in Matamoros, Mexico, two pipelines from Brownsville, Texas to Matamoros, Mexico, with associated rights of way and easements and 47 acres of land, together with a permit to distribute liquefied petroleum gas ("LPG") to Mexico's state-owned petroleum company. The results of operations of the Mexican LPG operations are included in our results of operations from December 31, 2007. For the three months ended June 30, 2008, the Mexican LPG operations generated approximately $0.5 million of revenue attributable to our Brownsville terminals.
Throughput and Additive Injection Fees, Net. We earn throughput fees for each barrel of product that is distributed at our terminals by our customers. Terminal throughput fees are based on the volume of product distributed at the facility's truck loading racks, generally at a standard rate per barrel of product. We provide additive injection services in connection with the delivery of product at our terminals. These fees generally are based on the volume of product injected and delivered over the
rack at our terminals. The throughput and additive injection fees, net by business segments were as follows (in thousands):
Three months
ended
June 30,
2008 2007
Gulf Coast terminals $ 7,827 $ 7,026
Midwest terminals and pipeline system 881 737
Brownsville terminals 2,542 1,516
River terminals 502 1,105
Southeast terminals 8,167 8,230
Throughput and additive injection fees, net $ 19,919 $ 18,614
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Effective December 31, 2007, we acquired the Mexican LPG operations from Rio Vista. In connection with our acquisition we amended the existing LPG terminaling services agreement, resulting in a decrease in the rates charged on volumes throughput at the Brownsville LPG terminal in exchange for an increase in pipeline transportation fees related to the volume of product transported through the Diamondback pipeline. For the three months ended June 30, 2008, the change in the rates charged on volumes throughput at the Brownsville LPG terminal resulted in a reduction of approximately $(0.1) million of throughput and additive injection fees, net.
Included in the terminal throughput fees for the three months ended June 30, 2008 and 2007, are fees charged to Morgan Stanley Capital Group of approximately $15.9 million and $4.4 million, respectively, and TransMontaigne Inc. of approximately $1.4 million and $9.9 million, respectively.
Terminaling Storage Fees. We provide storage capacity at our terminals. Terminaling storage fees generally are based on a rate per barrel of storage capacity per month and vary with the duration of the terminaling services agreement and the type of product. The terminaling storage fees by business segments were as follows (in thousands):
Three months
ended
June 30,
2008 2007
Gulf Coast terminals $ 2,235 $ 2,211
Midwest terminals and pipeline system - -
Brownsville terminals 673 1,578
River terminals 4,022 3,699
Southeast terminals 742 1,395
Terminaling storage fees $ 7,672 $ 8,883
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Included in the terminaling storage fees for the three months ended June 30, 2008 and 2007, are fees charged to Morgan Stanley Capital Group of approximately $nil and $1.0 million, respectively, and TransMontaigne Inc. of approximately $0.1 million and $0.3 million, respectively.
Pipeline Transportation Fees. We earn pipeline transportation fees at our Razorback Pipeline and Diamondback Pipeline based on the volume of product transported and the distance from the origin point to the delivery point. The Federal Energy Regulatory Commission regulates the tariff on the
Razorback Pipeline and the Diamondback Pipeline. The pipeline transportation fees by business segments were as follows (in thousands):
Three months
ended
June 30,
2008 2007
Gulf Coast terminals $ - $ -
Midwest terminals and pipeline system 275 557
Brownsville terminals 594 -
River terminals - -
Southeast terminals - -
Pipeline transportation fees $ 869 $ 557
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Effective December 31, 2007, we acquired the Mexican LPG operations, including the Diamondback Pipeline, from Rio Vista. For the three months ended June 30, 2008, the Mexican LPG operations generated approximately $0.6 million of pipeline transportation fees attributable to our Brownsville terminals.
Included in pipeline transportation fees for the three months ended June 30, 2008 and 2007, are fees charged to Morgan Stanley Capital Group of approximately $0.3 million and $0.2 million, respectively, and TransMontaigne Inc. of approximately $0.6 million and $0.4 million, respectively.
Management Fees and Reimbursed Costs. We manage and operate for a major oil company certain tank capacity at our Port Everglades (South) terminal and receive reimbursement of their proportionate share of operating and maintenance costs. We manage and operate for another major oil company two terminals that are adjacent to our Southeast facilities and receive a reimbursement of their proportionate share of operating and maintenance costs. We also manage and operate for an affiliate of Mexico's state-owned petroleum company a bi-directional products pipeline connected to our Brownsville, Texas terminal facility and receive a management fee and reimbursement of costs. The management fees and reimbursed costs by business segments were as follows (in thousands):
Three months
ended
June 30,
2008 2007
Gulf Coast terminals $ 44 $ 59
Midwest terminals and pipeline system - -
Brownsville terminals 358 285
River terminals - -
Southeast terminals 100 106
Management fees and reimbursed costs $ 502 $ 450
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Other Revenue. We provide ancillary services including heating and mixing of stored products, product transfer services, railcar handling, wharfage fees and vapor recovery fees. We also recognize gains from the sale of product to our affiliates resulting from the excess of product deposited by certain of our customers into our terminals over the amount of product that the customer is contractually
permitted to withdraw from those terminals. Other revenue is composed of the following (in thousands):
Three months
ended
June 30,
2008 2007
Product gains, including product
retained under product gain/loss
allowance provisions in certain
terminaling services agreements $ 3,625 1,928
Steam heating fees 1,420 1,072
Product transfer services 218 165
Railcar storage 181 138
Other 686 397
Other revenue $ 6,130 $ 3,700
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The other revenue by business segments were as follows (in thousands):
Three months
ended
June 30,
2008 2007
Gulf Coast terminals $ 2,771 $ 1,104
Midwest terminals and pipeline system 419 185
Brownsville terminals 921 702
River terminals 127 143
Southeast terminals 1,892 1,566
Other revenue $ 6,130 $ 3,700
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Included in other revenue for the three months ended June 30, 2008 and 2007, are amounts charged to Morgan Stanley Capital Group of approximately $3.8 million and $0.3 million, respectively, and TransMontaigne Inc. of approximately $21,000 and $1.8 million, respectively.
Costs and Expenses. The direct operating costs and expenses of our operations include the directly related wages and employee benefits, utilities, communications, maintenance and repairs, property taxes, rent, vehicle expenses, environmental compliance costs, materials and supplies. The direct operating costs and expenses of our operations were as follows (in thousands):
Three months ended
June 30,
2008 2007
Wages and employee benefits $ 5,313 $ 4,727
Utilities and communication charges 2,320 1,862
Repairs and maintenance 4,749 5,674
Office, rentals and property taxes 1,500 1,519
Vehicles and fuel costs 360 672
Environmental compliance costs 643 521
Other 435 289
Less-property and environmental insurance recoveries - (2 )
Direct operating costs and expenses $ 15,320 $ 15,262
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The direct operating costs and expenses of our business segments were as follows (in thousands):
Three months ended
June 30,
2008 2007
Gulf Coast terminals $ 5,284 $ 4,886
Midwest terminals and pipeline system 429 352
Brownsville terminals 2,749 2,689
River terminals 1,782 1,835
Southeast terminals 5,076 5,500
Direct operating costs and expenses $ 15,320 $ 15,262
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Effective December 31, 2007, we acquired the Mexican LPG operations from Rio Vista. For the three months ended June 30, 2008, the Mexican LPG operations incurred approximately $0.1 million of direct operating costs and expenses attributable to our Brownsville terminals.
The direct general and administrative expenses of our operations include accounting and legal costs associated with annual and quarterly reports and tax return and Schedule K-1 preparation and distribution, independent director fees and amortization of deferred equity-based compensation. Direct general and administrative expenses were as follows (in thousands):
Three months
ended
June 30,
2008 2007
Accounting and tax expenses $ 407 $ 110
Legal expenses 296 90
Independent director fees and investor relations expenses 88 70
Amortization of deferred equity-based compensation 20 22
Provision for potentially uncollectible accounts receivable 255 83
Other 251 86
Direct general and administrative expenses $ 1,317 $ 461
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The accompanying consolidated financial statements include allocated general and administrative charges from TransMontaigne Inc. for allocations of indirect corporate overhead to cover costs of centralized corporate functions such as legal, accounting, treasury, insurance administration and claims processing, health, safety and environmental, information technology, human resources, credit, payroll, taxes, engineering and other corporate services. The allocated general and administrative expenses were approximately $2.5 million and $2.5 million for the three months ended June 30, 2008 and 2007, respectively.
The accompanying consolidated financial statements also include allocated insurance charges from TransMontaigne Inc. for allocations of insurance premiums to cover costs of insuring activities such as property, casualty, pollution, automobile, directors' and officers', and other insurable risks. The allocated insurance expenses were approximately $0.7 million and $0.7 million for the three months ended June 30, 2008 and 2007, respectively.
The accompanying consolidated financial statements also include amounts paid to TransMontaigne Services Inc. as a partial reimbursement of bonus awards granted by TransMontaigne Services Inc. to certain key officers and employees that vest over future service periods. The reimbursement of bonus awards were approximately $0.4 million and $0.4 million for the three months ended June 30, 2008 and 2007, respectively.
For the three months ended June 30, 2008 and 2007, depreciation and amortization expense was approximately $5.8 million and $5.4 million, respectively.
RESULTS OF OPERATIONS-SIX MONTHS ENDED JUNE 30, 2008 AND 2007
Revenue. We derive revenue from our terminal and pipeline transportation
operations by charging fees for providing integrated terminaling, transportation
and related services. Our revenue was as follows (in thousands):
Six months ended
June 30,
2008 2007
Throughput and additive injection fees, net $ 39,069 $ 37,091
Terminaling storage fees 15,355 17,969
Pipeline transportation fees 2,007 1,131
Management fees and reimbursed costs 952 853
Other 11,533 7,860
Revenue $ 68,916 $ 64,904
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The revenue of our business segments were as follows (in thousands):
Six months ended
June 30,
2008 2007
Gulf Coast terminals $ 25,003 $ 21,192
Midwest terminals and pipeline system 2,684 3,230
Brownsville terminals 10,174 8,067
River terminals 9,335 9,614
Southeast terminals 21,720 22,801
Revenue $ 68,916 $ 64,904
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Effective December 31, 2007, we acquired the Mexican LPG operations from Rio Vista Energy Partners L.P. ("Rio Vista"). The results of operations of the Mexican LPG operations are included in our results of operations from December 31, 2007. For the six months ended June 30, 2008, the Mexican LPG operations generated approximately $1.1 million of revenue attributable to our Brownsville terminals.
Throughput and Additive Injection Fees, Net. The throughput and additive injection fees, net by business segments were as follows (in thousands):
Six months ended
June 30,
2008 2007
Gulf Coast terminals $ 15,051 $ 14,059
Midwest terminals and pipeline system 1,669 1,351
Brownsville terminals 4,792 3,016
River terminals 1,170 2,141
Southeast terminals 16,387 16,524
Throughput and additive injection fees, net $ 39,069 $ 37,091
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Effective December 31, 2007, we acquired the Mexican LPG operations from Rio Vista. In connection with our acquisition we amended the existing LPG terminaling services agreement, resulting in a decrease in the rates charged on volumes throughput at the Brownsville LPG terminal in exchange for an increase in pipeline transportation fees related to the volume of product transported through the Diamondback pipeline. For the six months ended June 30, 2008, the change in the rates charged on volumes throughput at the Brownsville LPG terminal resulted in a reduction of approximately $(0.3) million of throughput and additive injection fees, net.
Included in the terminal throughput fees for the six months ended June 30, 2008 and 2007, are fees charged to Morgan Stanley Capital Group of approximately $31.6 million and $6.4 million, respectively, and TransMontaigne Inc. of approximately $2.8 million and $22.6 million, respectively.
Terminaling Storage Fees. The terminaling storage fees by business segments were as follows (in thousands):
Six months ended
June 30,
2008 2007
Gulf Coast terminals $ 4,478 $ 5,033
Midwest terminals and pipeline system - -
Brownsville terminals 1,483 3,025
River terminals 7,922 7,194
Southeast terminals 1,472 2,717
Terminaling storage fees $ 15,355 $ 17,969
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Included in the terminaling storage fees for the six months ended June 30, 2008 and 2007, are fees charged to Morgan Stanley Capital Group of approximately . . .
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