**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

----

**FORM 10-Q**

| **(Mark One)** | ** **                                                                                              |
|----------------|---------------------------------------------------------------------------------------------------------|
| **x**          | **Quarterly Report Pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934**  |
| ** **     | **For the  quarterly period ended March 31, 2006**                                                 |
| ** **     | **OR**                                                                                                  |
| **o**          | **Transition Report Pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934** |

 

**CommissionFile Number 001-32505**

----

**TRANSMONTAIGNE PARTNERS L.P.**

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

 

**1670 Broadway**

**Suite 3100**

**Denver, Colorado 80202**

(Address, including zipcode, of principal executive offices)

**(303) 626-8200**

(Telephone number,including area code)

----

Indicate by check mark whether the Registrant (1) hasfiled all reports required to be filed by Section 13 of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the Registrant was required to file such report), and (2) hasbeen subject to such filing requirements for the past90 days. Yes  x  No  o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct. (Check one):

| Large accelerated  filer  o |   | Accelerated  filer  o |   | Non-accelerated  filer  x |
|---------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Exchange Act Rule 12b-2) Yes  o  No  x

Asof April 24, 2006, there were 3,972,500 shares of the Registrant’s CommonLimited Partner Units outstanding.

 

----

**TABLEOF CONTENTS**

|          | ** ** |                                                                                                                                                                              | ** ** | **Page No.** | ** ** |
|----------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
|     | ** ** | **Part I.  Financial Information**                                                                                                                                      |       |              |       |   |   |
| Item 1.  |       | Unaudited Consolidated Financial Statements                                                                                                                                  |       |              | 4          |   |   |
|     |       | Consolidated balance sheets as of March 31, 2006  and December 31, 2005                                                                                            |       |              | 5          |   |   |
|     |       | Consolidated statements of operations for the three  months ended March 31, 2006 and 2005                                                                               |       |              | 6          |   |   |
|     |       | Consolidated statements of partners’ equity for the  year ended June 30, 2005, six months ended December 31, 2005 and  three months ended March 31, 2006 |       |              | 7          |   |   |
|     |       | Consolidated statements of cash flows for the three  months ended March 31, 2006 and 2005                                                                               |       |              | 8          |   |   |
|     |       | Notes to consolidated financial statements                                                                                                                                   |       |              | 9          |   |   |
| Item 2.  |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                                                  |       |              | 20         |   |   |
| Item 3.  |       | Qualitative and Quantitative Disclosures about Market  Risk                                                                                                                  |       |              | 27         |   |   |
| Item  4. |       | Controls  and Procedures                                                                                                                                                     |       |              | 27         |   |   |
|     | ** ** | **Part II.  Other Information**                                                                                                                                         |       |              |       |   |   |
| Item 1A. |       | Risk Factors                                                                                                                                                                 |       |              | 28         |   |   |
| Item 2.  |       | Unregistered Sales of Equity Securities and Use of  Proceeds                                                                                                                 |       |              | 29         |   |   |
| Item 6.  |       | Exhibits                                                                                                                                                                     |       |              | 29         |   |   |

 

2

----

**CAUTIONARYSTATEMENT REGARDING FORWARD-LOOKING STATEMENTS**

This QuarterlyReport contains forward-looking statements within the meaning of Section 27Aof the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934, including the following:

·       certainstatements, including possible or assumed future results of operations, in “Management’sDiscussion and Analysis of Financial Condition and Results of Operations;”

·       anystatements contained herein or therein regarding the prospects for our businessor any of our services;

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

·       otherstatements contained herein or therein regarding matters that are nothistorical facts.

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

3

----

 

**Part I.Financial Information**

**ITEM 1.**                UNAUDITEDCONSOLIDATED FINANCIAL STATEMENTS

The interim unaudited consolidated financialstatements of TransMontaigne Partners as of and for the three months endedMarch 31, 2006, are included herein beginning on the following page. Theaccompanying unaudited interim consolidated financial statements should be readin conjunction with our consolidated financial statements and related notes forthe six months ended December 31, 2005, together with our discussion andanalysis of financial condition and results of operations, included in ourTransition Report on Form 10-K filed on March 2, 2006.

TransMontaigne Partnersis a holding company with the following active wholly-owned subsidiariesduring the three months ended March 31, 2006.

·       TransMontaigneOperating GP L.L.C.

·       TransMontaigneOperating Company L.P.

·       CoastalTerminals L.L.C.

·       RazorbackL.L.C.

·       TPSITerminals L.L.C.

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

4

----

**TransMontaigne Partners L.P. and subsidiariesConsolidated balance sheets(In thousands)**

| ** **                          | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **ASSETS**                          | ** ** | ** **               | ** ** |                        | ** ** | ** ** |   |
| Current assets:                     |       |                     |       |                        |       | ** ** |   |
| Cash and cash equivalents           |       | $                        | 611        |                        |       | $ | 698 | ** ** |   |
| Trade accounts receivable, net      |       | 1,524                    |       |                        | 1,003      | ** ** |   |
| Due from TransMontaigne Inc., net   |       | —                   |       |                        | 1,212      | ** ** |   |
| Prepaid expenses and other          |       | 693                      |       |                        | 338        | ** ** |   |
|                                |       | 2,828                    |       |                        | 3,251      | ** ** |   |
| Property, plant  and equipment, net |       | 125,451                  |       |                        | 126,435    | ** ** |   |
| Other assets, net                   |       | 1,731                    |       |                        | 1,901      | ** ** |   |
|                                |       | $                        | 130,010    |                        |       | $ | 131,587 | ** ** |   |
| **LIABILITIES AND EQUITY**          | ** ** | ** **               | ** ** |                        | ** ** | ** ** |   |
| Current liabilities:                |       |                     |       |                        |       | ** ** |   |
| Trade accounts payable              |       | $                        | 857        |                        |       | $ | 1,784 | ** ** |   |
| Due to TransMontaigne Inc., net     |       | 96                       |       |                        | —     | ** ** |   |
| Other accrued liabilities           |       | 1,936                    |       |                        | 1,239      | ** ** |   |
|                                |       | 2,889                    |       |                        | 3,023      | ** ** |   |
| Long-term  debt                     |       | 45,508                   |       |                        | 28,000     | ** ** |   |
| Total liabilities                   |       | 48,397                   |       |                        | 31,023     | ** ** |   |
| Partners’ equity:              |       |                     |       |                        |       | ** ** |   |
| Predecessor equity                  |       | —                   |       |                        | 10,176     | ** ** |   |
| Common unitholders                  |       | 75,335                   |       |                        | 75,474     | ** ** |   |
| Subordinated unitholders            |       | 5,951                    |       |                        | 14,581     | ** ** |   |
| General partner interest            |       | 327                      |       |                        | 333        | ** ** |   |
|                                |       | 81,613                   |       |                        | 100,564    | ** ** |   |
|                                |       | $                        | 130,010    |                        |       | $ | 131,587 | ** ** |   |

 

See accompanying notes to consolidated financial statements.

5

----

**TransMontaigne Partners L.P. and subsidiariesConsolidated statements of operations(In thousands, except per unit amounts)**

| ** **                                                                        | ** ** | **Three months ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                        | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Revenues                                                                          |       | $                                                | 12,090     |   | $ | 9,714 |   |
| Costs and expenses:                                                               |       |                                             |       |   |   |
| Direct operating costs and expenses                                               |       | (4,695                                           | )          | (4,059 | ) |
| Direct general and administrative expenses                                        |       | (1,100                                           | )          | — |   |
| Allocated general and administrative expenses                                     |       | (812                                             | )          | (700 | ) |
| Allocated insurance expense                                                       |       | (82                                              | )          | (83 | ) |
| Depreciation and amortization                                                     |       | (1,942                                           | )          | (1,509 | ) |
| Total costs and expenses                                                          |       | (8,631                                           | )          | (6,351 | ) |
| Operating income                                                                  |       | 3,459                                            |       | 3,363 |   |
| Other income (expenses):                                                          |       |                                             |       |   |   |
| Interest income                                                                   |       | 3                                                |       | — |   |
| Interest expense                                                                  |       | (697                                             | )          | — |   |
| Amortization of deferred debt issuance costs                                      |       | (46                                              | )          | — |   |
| Total other expenses                                                              |       | (740                                             | )          | — |   |
| Net earnings                                                                      |       | 2,719                                            |       | 3,363 |   |
| Less earnings allocable  to:                                                      |       |                                             |       |   |   |
| Predecessor                                                                       |       | —                                           |       | (3,363 | ) |
| General partner interest                                                          |       | (54                                              | )          | — |   |
| Net earnings allocable to limited partners                                        |       | $                                                | 2,665      |   | $ | — |   |
| Net earnings per  limited partners’ unit—basic and diluted              |       | $                                                | 0.37       |   | $ | — |   |
| Weighted average limited  partners’ units outstanding—basic and diluted |       | 7,292                                            |       | — |   |

 

See accompanying notes to consolidated financial statements.

6

----

**TransMontaigne Partners L.P. and subsidiariesConsolidated statements of partners’ equityYear ended June 30, 2005, six months ended December 31, 2005 andthree months ended March 31, 2006(In thousands)**

| ** **                                                                                                                                                              | ** ** | **Predecessor** | ** ** | **Common  Units** | ** ** | **Subordinated  Units** | ** ** | **General  Partner  Interest** | ** ** | **Deferred  Equity-Based  Compensation** | ** ** | **Total** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|------------|-------------------|------------|-------------------------|------------|--------------------------------|------------|------------------------------------------|------------|-----------|------------|
| **Balance June 30, 2004**                                                                                                                                          |       |            | $          | 118,657           |       |                    |       | $                              | —     |                                     |       |      | $          | — |   |   |   | $ | — |   |   |   | $ | — |   |   | $ | 118,657 |   |
| Net earnings through May 26, 2005                                                                                                                                  |       |            | 9,730      |              |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 9,730 |   |
| Distributions and repayments, net                                                                                                                                       |       |            | (11,399    | )                 |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (11,399 | ) |
| Proceeds from initial public offering of 3,852,500  common units, net of underwriters’ discount and offering expenses of $9,512                                    |       |            | —     |              |       |                    | 72,932     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 72,932 |   |
| Proceeds from private placement of 450,000 subordinated  units                                                                                                          |       |            | —     |              |       |                    | —     |                           |       |                                     | 7,945      |      |       |   | — |   |   |   | — |   |   | 7,945 |   |
| Distribution to TransMontaigne Inc.                                                                                                                                     |       |            | (111,461   | )                 |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (111,461 | ) |
| Allocation of predecessor equity in exchange for  120,000 common units, 2,872,266 subordinated units, and a 2% general partner  interest (represented by 148,873 units) |       |            | (5,527     | )                 |       |                    | 211        |                           |       |                                     | 5,054      |      |       |   | 262 |   |   |   | — |   |   | — |   |
| Grant of 120,000 restricted common units under the  long-term incentive plan                                                                                            |       |            | —     |              |       |                    | 2,592      |                           |       |                                     | —     |      |       |   | — |   |   |   | (2,592 | ) |   | — |   |
| Amortization of deferred equity-based  compensation related to restricted common units                                                                                  |       |            | —     |              |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | 48 |   |   | 48 |   |
| Net earnings from May 27, 2005 through  June 30, 2005                                                                                                         |       |            | —     |              |       |                    | 520        |                           |       |                                     | 434        |      |       |   | 19 |   |   |   | — |   |   | 973 |   |
| **Balance June 30, 2005**                                                                                                                                          |       |            | —     |              |       |                    | 76,255     |                           |       |                                     | 13,433     |      |       |   | 281 |   |   |   | (2,544 | ) |   | 87,425 |   |
| Elimination of deferred equity-based  compensation due to adoption of SFAS 123(R)                                                                                       |       |            | —     |              |       |                    | (2,544     | )                              |       |                                     | —     |      |       |   | — |   |   |   | 2,544 |   |   | — |   |
| Distributions to unitholders                                                                                                                                            |       |            | —     |              |       |                    | (2,119     | )                              |       |                                     | (1,827     | )         |       |   | (81 | ) |   |   | — |   |   | (4,027 | ) |
| Amortization of deferred equity-based  compensation related to restricted common units                                                                                  |       |            | —     |              |       |                    | 323        |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 323 |   |
| Acquisition of Mobile terminal by Predecessor                                                                                                                           |       |            | 9,883      |              |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 9,883 |   |
| Net earnings from July 1, 2005 through  December 31, 2005                                                                                                     |       |            | 293        |              |       |                    | 3,559      |                           |       |                                     | 2,975      |      |       |   | 133 |   |   |   | — |   |   | 6,960 |   |
| **Balance December 31, 2005**                                                                                                                                      |       |            | 10,176     |              |       |                    | 75,474     |                           |       |                                     | 14,581     |      |       |   | 333 |   |   |   | — |   |   | 100,564 |   |
| Distributions and repayments, net                                                                                                                                       |       |            | (756       | )                 |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (756 | ) |
| Contribution of Mobile terminal in exchange for $17.9  million                                                                                                          |       |            | (9,420     | )                 |       |                    | —     |                           |       |                                     | (8,515     | )         |       |   | — |   |   |   | — |   |   | (17,935 | ) |
| Distributions to unitholders                                                                                                                                            |       |            | —     |              |       |                    | (1,541     | )                              |       |                                     | (1,329     | )         |       |   | (60 | ) |   |   | — |   |   | (2,930 | ) |
| Amortization of deferred equity-based  compensation related to restricted common units                                                                                  |       |            | —     |              |       |                    | 162        |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 162 |   |
| Repurchase of 8,200 common units by our long-term  incentive plan                                                                                                       |       |            | —     |              |       |                    | (211       | )                              |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (211 | ) |
| Net earnings from January 1, 2006 through  March 31, 2006                                                                                                     |       |            | —     |              |       |                    | 1,451      |                           |       |                                     | 1,214      |      |       |   | 54 |   |   |   | — |   |   | 2,719 |   |
| **Balance  March 31, 2006**                                                                                                                                        |       |            | $          | —            |       |                    |       | $                              | 75,335     |                                     |       |      | $          | 5,951 |   |   |   | $ | 327 |   |   |   | $ | — |   |   | $ | 81,613 |   |

 

See accompanying notes to consolidated financial statements.

7

----

**TransMontaigne Partners L.P. and subsidiariesConsolidated statements of cash flows(In thousands)**

| ** **                                                                       | ** ** | **Three months  ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                       | ** ** | **2006**                                     | ** ** | **2005** | ** ** |
| **Cash flows from operating  activities:**                                       |       |                                         |       |   |   |
| Net earnings                                                                     |       | $                                            | 2,719      |   | $ | 3,363 |   |
| Adjustments to  reconcile net earnings to net cash used in operating activities: |       |                                         |       |   |   |
| Depreciation and amortization                                                    |       | 1,942                                        |       | 1,509 |   |
| Amortization of deferred equity-based  compensation                              |       | 162                                          |       | — |   |
| Amortization of deferred debt issuance costs                                     |       | 46                                           |       | — |   |
| Changes in  operating assets and liabilities, net of effects from acquisitions:  |       |                                         |       |   |   |
| Trade accounts receivable, net                                                   |       | (521                                         | )          | (211 | ) |
| Due from TransMontaigne Inc., net                                                |       | 1,308                                        |       | — |   |
| Prepaid expenses and other                                                       |       | (355                                         | )          | 106 |   |
| Trade accounts payable                                                           |       | (927                                         | )          | (716 | ) |
| Other accrued liabilities                                                        |       | 697                                          |       | 299 |   |
| Net cash provided by operating activities                                        |       | 5,071                                        |       | 4,350 |   |
| **Cash flows from investing  activities:**                                       |       |                                         |       |   |   |
| Acquisition of Mobile terminal                                                   |       | (17,935                                      | )          | — |   |
| Additions to property, plant and equipment—expansion  of facilities         |       | (634                                         | )          | (500 | ) |
| Additions to property, plant and equipment—maintain  existing facilities    |       | (200                                         | )          | (237 | ) |
| Net cash (used in) investing activities                                          |       | (18,769                                      | )          | (737 | ) |
| **Cash flows from financing  activities:**                                       |       |                                         |       |   |   |
| Net borrowings of debt                                                           |       | 17,508                                       |       | — |   |
| Distributions paid to unitholders                                                |       | (2,930                                       | )          | — |   |
| Repurchase of common units by long-term incentive  plan                          |       | (211                                         | )          | — |   |
| Distributions and repayments to TransMontaigne Inc.                              |       | (756                                         | )          | (3,601 | ) |
| Net cash provided by (used in) financing activities                              |       | 13,611                                       |       | (3,601 | ) |
| Increase (decrease) in cash and cash equivalents                                 |       | (87                                          | )          | 12 |   |
| Cash and cash  equivalents at beginning of period                                |       | 698                                          |       | 2 |   |
| Cash and cash  equivalents at end of period                                      |       | $                                            | 611        |   | $ | 14 |   |
| **Supplemental disclosures of  cash flow information:**                          |       |                                         |       |   |   |
| Cash paid for interest                                                           |       | $                                            | 635        |   | $ | — |   |

 

See accompanying notes to consolidated financial statements.

8

----

**TransMontaigne Partners L.P. and subsidiariesNotes to consolidated financial statements**

**(1) SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

**(a) Principlesof Consolidation and Use of Estimates**

The accompanying unaudited consolidated financialstatements in this Quarterly Report on Form 10-Q have been preparedpursuant to the rules and regulations of the Securities and ExchangeCommission. Accordingly, these statements reflect adjustments (consisting onlyof normal recurring entries), which are, in our opinion, necessary for a fairpresentation of the financial results for the interim periods presented.Certain information and notes normally included in annual financial statementshave been condensed in or omitted from these interim financial statementspursuant to such rules and regulations. These consolidated financialstatements should be read in conjunction with the consolidated financialstatements and related notes for the six months ended December 31, 2005,together with our discussion and analysis of financial condition and results ofoperations, included in our Transition Report on Form 10-K filed on March 2,2006.

Our accounting and financial reporting policiesconform to accounting principles and practices generally accepted in the UnitedStates of America. The accompanying unaudited consolidated financial statementsinclude the accounts of TransMontaigne Partners L.P., a Delaware limitedpartnership (“Partners”), and its majority-owned subsidiaries. Theaccompanying consolidated financial statements include the assets, liabilitiesand results of operations of certain terminal and pipeline operations ofTransMontaigne Inc. that were contributed to us at the closing of ourinitial public offering on May 27, 2005. Specifically, theTransMontaigne Inc. terminal and pipeline operations that were contributedto us are composed of seven Florida terminals, including terminals located inTampa, 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.On February 28, 2003, TransMontaigne Inc. acquired the Port Manatee,Fisher Island, Port Everglades (North), Cape Canaveral and Jacksonvilleterminal operations from an affiliate of El Paso Corporation. The consolidatedfinancial statements also include the assets, liabilities and results ofoperations of these terminals and pipelines prior to their contribution byTransMontaigne Inc. to us. The consolidated financial statements alsoinclude the assets, liabilities and results of operations of the Mobileterminal that was contributed to us by TransMontaigne Inc. (see Note 3 of Notesto consolidated financial statements). This acquisition was accounted for as atransaction among entities under common control and, accordingly, prior periodshave been restated to include the activity of the Mobile terminal since thedate it was acquired by TransMontaigne Inc. (August 1, 2005). Thecontribution of the Mobile terminals’ assets and liabilities has been recordedat TransMontaigne Inc.’s carryover basis. All significant inter-companyaccounts and transactions have been eliminated in the preparation of theaccompanying consolidated financial statements.

The preparation offinancial statements in conformity with generally accepted accountingprinciples requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting periods. The followingestimates, in our opinion, are subjective in nature, require the exercise ofjudgment, and involve complex analysis: allowance for doubtful accounts;accrued asset retirement obligations; and accrued environmental obligations.Changes in these estimates and assumptions will occur as a result of thepassage of time and the occurrence of future events. Actual results coulddiffer from these estimates.

9

----

**(b) Nature ofbusiness**

TransMontaigne PartnersL.P. (“Partners”) was formed in 2005 as a Delaware master limited partnershipinitially to own and operate refined petroleum products terminaling andpipeline assets. We conduct our operations in the United States primarily alongthe U.S. Gulf Coast and in the Midwest. We provide integrated terminaling,storage, pipeline and related services for companies engaged in thedistribution and marketing of refined petroleum products and crude oil, includingTransMontaigne Inc.

**(c) Change inyear end**

We adopted a December 31 yearend for financial and tax reporting purposes effective December 31, 2005.We previously maintained a June 30 year end for financial and taxreporting purposes.

**(d) Basis ofpresentation**

The accompanyingconsolidated financial statements include allocated general and administrativecharges from TransMontaigne Inc. for indirect corporate overhead to covercosts of functions such as legal, accounting, treasury, engineering, environmentalsafety, information technology, and other corporate services (see Note 2of Notes to consolidated financial statements). The allocated general andadministrative charges were $0.8 million and $0.7 million for thethree months ended March 31, 2006 and 2005, respectively. The accompanyingconsolidated financial statements also include allocated insurance charges fromTransMontaigne Inc. for insurance premiums to cover costs of insuringactivities such as property casualty, pollution, automobile, directors andofficers’ liability, and other insurable risks. The allocated insurance chargeswere $0.3 million and $0.3 million for the three months ended March 31,2006 and 2005, respectively. Management believes that the allocated general andadministrative charges and insurance charges are representative of the costsand expenses incurred by TransMontaigne Inc. for managing Partners’operations.

**(e) Accountingfor terminal and pipeline operations**

In connection with ourterminal and pipeline operations, we utilize the accrual method of accountingfor revenue and expenses. We generate revenues in our terminal and pipelineoperations from throughput fees, storage fees, transportation fees, and feesfrom other ancillary services. Throughput revenue is recognized when theproduct is delivered to the customer; storage revenue is recognized ratablyover the term of the storage contract; transportation revenue is recognizedwhen the product has been delivered to the customer at the specified deliverylocation; and ancillary service revenue is recognized as the services areperformed.

**(f) Environmentalobligations**

At March 31, 2006 and December 31, 2005, wehave accrued environmental obligations of approximately $625,000, and $625,000,respectively, representing our best estimate of our remediation obligations(see Note 8 of Notes to consolidated financial statements). The accruedenvironmental obligations at March 31, 2006 and December 31, 2005,represent amounts assumed in connection with the acquisition of the OklahomaCity terminal facility (see Note 3 of Notes to consolidated financialstatements). Changes in our estimates and assumptions may occur as a result ofthe passage of time and the occurrence of future events.

TransMontaigne Inc.has indemnified us through May 2010 against certain potentialenvironmental claims, losses and expenses associated with the operation of theinitially-contributed assets and occurring before May 27, 2005, upto a maximum liability not to exceed $15 million for this indemnificationobligation (see Note 2 of Notes to consolidated financial statements).

10

----

**(g)  Assetretirement obligations**

At March 31, 2006 and December 31, 2005, wehave accrued asset retirement obligations of approximately $0.2 million and$0.2 million, respectively, representing our best estimate of our retirementobligations (see Note 8 of Notes to consolidated financial statements). Assetretirement obligations are legal obligations associated with the retirement oflong-lived assets that result from the acquisition, construction, developmentor normal use of the asset. The accrued asset retirement obligations at March 31,2006 and December 31, 2005 represent costs we would incur in the future ifwe were to close certain terminals and pipelines due to certain state-imposedobligations to close aboveground storage tanks upon abandoning the operationsof the related tanks and regulations to safely abandon Federally regulatedpipelines. Changes in our estimates and assumptions may occur as a result ofthe passage of time and the occurrence of future events.

In March 2005, theFASB issued FASB Interpretation No. 47 (“FIN 47”), “Accounting forConditional Asset Retirement Obligations—an interpretation of SFAS 143,”which requires companies to recognize a liability for the fair value of a legalobligation to perform asset-retirement activities that are conditional ona future event, if the amount can be reasonably estimated. We adopted therequirements of FIN 47 on January 1, 2006. The adoption of FIN 47 didnot have a significant impact on our consolidated financial statements.

**(h) Equity-basedcompensation**

For periods ending prior to July 1, 2005, weaccounted for our equity-based compensation awards using the intrinsic valuemethod pursuant to APB Opinion No. 25, *Accountingfor Stock Issued to Employees*.

Effective July 1, 2005, we adopted the provisionsof Statement of Financial Accounting Standards No. 123 (R), *Share-Based Payment*. The adoption of thisStatement did not have an impact on our consolidated financial statements,except for the elimination of deferred equity-based compensation from partners’equity.

This Statement requires us to measure the cost ofemployee services received in exchange for an award of equity instruments basedon the grant-date fair value of the award. That cost will be recognized overthe period during which an employee is required to provide service in exchangefor the award. We are required to estimate the number of equity instrumentsthat are expected to vest in measuring the total compensation cost to berecognized over the related service period. For awards granted prior to July 1,2005, we are required to measure compensation cost for the portion ofoutstanding awards for which the requisite service has not yet been rendered(i.e., the unvested portion of the award as of July 1, 2005). Thecompensation cost for these awards is based on their relative grant-date fairvalues.

Compensation cost isrecognized over the service period on a straight-line basis.

**(i) Incometaxes**

No provision for incometaxes has been reflected in the accompanying consolidated financial statementsbecause Partners is treated as a partnership for federal and state incometaxes. As a partnership, all income, gains, losses, expenses, deductions andtax credits generated by Partners flow through to the unitholders of thepartnership.

**(j) Netearnings per limited partners’ unit**

Net earnings per limited partners’ unit are computedby dividing net earnings allocable to limited partners by the weighted averagenumber of limited partnership units outstanding during the period. Net earningsallocable to limited partners are net of two percent of the earnings allocableto the general 

11

----

partner. Basic and dilutednet earnings per limited partners’ unit are the same because we currently haveno dilutive securities outstanding.

For the three months endedMarch 31, 2006, we excluded 58,000 restricted phantom units from thecomputation of diluted net earnings per limited partners’ unit because theunamortized deferred compensation exceeded the average quoted market price ofour common units for the period.

**(k) Reclassifications**

Certain amounts in theprior period have been reclassified to conform to the current period’spresentation. Net earnings and partners’ equity have not been affected by thesereclassifications.

**(2) TRANSACTIONS WITHTRANSMONTAIGNE INC.**

*OmnibusAgreement.*   Under our omnibus agreement withTransMontaigne Inc., we pay TransMontaigne Inc. an administrative fee forthe provision of various general and administrative services for our benefitwith respect to our assets. At March 31, 2006, the annual administrativefee payable to TransMontaigne Inc. was approximately $3.3 million. If weacquire or construct additional assets, TransMontaigne Inc. will propose arevised administrative fee covering the provision of services for suchadditional assets. If the conflicts committee of our general partner agrees tothe revised administrative fee, TransMontaigne Inc. will provide servicesfor the additional assets pursuant to the agreement. The administrative feeincludes expenses incurred by TransMontaigne Inc. to perform centralizedcorporate functions, such as legal, accounting, treasury, insuranceadministration and claims processing, health, safety and environmental,information technology, human resources, credit, payroll, taxes and engineeringand other corporate services, to the extent such services are not outsourced byTransMontaigne Inc.

The omnibus agreement further provides that we payTransMontaigne Inc. an insurance reimbursement for premiums on insurancepolicies covering our assets. At March 31, 2006 the annual insurancereimbursement payable to TransMontaigne Inc. was approximately $1.0 million. Wealso reimburse TransMontaigne Inc. for direct operating costs and expenses thatTransMontaigne Inc. incurs on our behalf, such as salaries of operationalpersonnel performing services on-site at our terminals and pipeline and thecost of their employee benefits, including 401(k) and health insurancebenefits.

Under the omnibus agreement, TransMontaigne Inc.has agreed to indemnify us through May 27, 2010 against certain potentialenvironmental claims, losses and expenses associated with the operation of theinitially contributed assets and occurring before May 27, 2005.TransMontaigne Inc.’s maximum liability for this indemnificationobligation is $15 million. TransMontaigne Inc. has no obligation toindemnify us for losses until such aggregate losses exceed $250,000.TransMontaigne Inc. has no indemnification obligations with respect toenvironmental claims made as a result of additions to or modifications of environmentallaws promulgated after May 27, 2005. We have agreed to indemnifyTransMontaigne Inc. against environmental liabilities related to ourassets, to the extent these liabilities are not subject toTransMontaigne Inc.’s indemnification obligations.

*TerminalingServices Agreement—Florida Terminals and Razorback Pipeline System.**  *We have a terminaling andtransportation services agreement with TransMontaigne Inc. that willexpire on December 31, 2011. Under this agreement,TransMontaigne Inc. agreed to transport on the Razorback Pipeline andthroughput at our Florida, Missouri and Arkansas terminals a volume of refinedproducts that will, at the fee and tariff schedule contained in the agreement,result in minimum revenues to us of $5 million per calendar quarter. IfTransMontaigne Inc. fails to meet its minimum revenue commitment in anyquarter, it must pay us the amount of any shortfall within 15 daysfollowing receipt of an invoice from us. A shortfall payment may be applied asa credit in the following four quarters after TransMontaigne Inc.’sminimum obligations are met. In exchange for TransMontaigne Inc.’s minimumrevenue commitment, we agreed to provide TransMontaigne Inc. approximately2.0 million barrels of light 

12

----

oil storage capacity andapproximately 1.4 million barrels of heavy oil storage capacity at certainof our Florida terminals.

In the event of a force majeure event that rendersperformance impossible with respect to an asset for at least 30 days,TransMontaigne Inc.’s obligations would be temporarily suspended withrespect to that asset. If a force majeure event continues for 30 days ormore and results in a diminution in the storage capacity we make available toTransMontaigne Inc., TransMontaigne Inc.’s minimum revenue commitmentwould be reduced proportionately for the duration of the force majeure event.If such a force majeure event continues for twelve consecutive months or more,either party has the right to terminate the entire terminaling servicesagreement.

After the initial term, the terminaling servicesagreement will automatically renew for subsequent one-year periods, subject toeither party’s right to terminate with six months’ notice.TransMontaigne Inc.’s obligations under the terminaling services agreementwill not terminate if TransMontaigne Inc. no longer owns our generalpartner. TransMontaigne Inc. may assign the terminaling services agreementonly with the consent of the conflicts committee of our general partner. Upontermination of the agreement, TransMontaigne Inc. has a right of firstrefusal to enter into a new terminaling services agreement with us, provided itpays no less than 105% of the fees offered by the third party.

Under the terminaling services agreement, we areresponsible for all refined product losses in excess of 0.10% of the refinedproduct we receive from TransMontaigne Inc. at our terminals. We areentitled to all product gains, including 0.10% of the refined product wereceive from TransMontaigne Inc. at our terminals.

*TerminalingServices Agreement—Oklahoma City Terminal.**  *We have a revenue support agreementwith TransMontaigne Inc. that provides that in the event any currentthird-party terminaling agreement should expire, TransMontaigne Inc. agrees toenter into a terminaling services agreement for a term commencing one yearafter the effective date of the date of acquisition of the Oklahoma Cityterminal and ending on November 1, 2012. The terminaling servicesagreement will provide that TransMontaigne Inc. agrees to throughput suchvolume of refined product as may be required to guarantee minimum revenues of$0.8 million per year. If TransMontaigne Inc. fails to meet its minimumrevenue commitment in any year, it must pay us the amount of any shortfallwithin 15 days following receipt of an invoice from us. In exchange forTransMontaigne Inc.’s minimum revenue commitment, we agreed to provideTransMontaigne Inc. approximately 152,000 barrels of light oil storagecapacity at our Oklahoma City terminal. TransMontaigne Inc.’s minimum revenuecommitment currently is not in effect because a major oil company currently isunder contract for the utilization of the light oil storage capacity at theterminal.

*TerminalingServices Agreement—Mobile Terminal.**  *We have a terminaling andtransportation services agreement with TransMontaigne Inc. that willexpire on December 31, 2012. Under this agreement,TransMontaigne Inc. agreed to throughput at our Mobile terminal a volumeof refined products that will, at the fee and tariff schedule contained in theagreement, result in minimum revenues to us of $2.6 million per year. If TransMontaigne Inc. fails to meetits minimum revenue commitment in any year, it must pay us the amount of anyshortfall within 15 days following receipt of an invoice from us. Ashortfall payment may be applied as a credit in the following year afterTransMontaigne Inc.’s minimum obligations are met. In exchange forTransMontaigne Inc.’s minimum revenue commitment, we agreed to provideTransMontaigne Inc. approximately 46,000 barrels of light oil storagecapacity and approximately 65,000 barrels of heavy oil storage capacity at theterminal.

13

----

**(3) ACQUISITIONS**

EffectiveOctober 31, 2005, we purchased a refined product terminal withapproximately 160,000 barrels of aggregate storage capacity in Oklahoma City,Oklahoma from Magellan Pipeline Company, L.P. for approximately$1.9 million. The Oklahoma City terminal currently provides integratedterminaling services to a major oil company. The accompanying consolidatedfinancial statements include the results of operations of the Oklahoma Cityterminal from October 31, 2005. The adjusted purchase price was allocatedto the assets and liabilities acquired based upon the estimated fair value ofthe assets and liabilities as of the acquisition date. The adjusted purchaseprice was allocated as follows (in thousands):

| ** **                       | ** ** | **Oklahoma  City  terminal** | ** ** |
|----------------------------------|------------|------------------------------|------------|
| Property, plant  and equipment   |       |                         | $          | 2,493 |   |   |
| Acquisition  related liabilities |       |                         | (635       | ) |   |
| Cash paid                        |       |                         | $          | 1,858 |   |   |

 

Acquisition-related liabilities include assumedenvironmental obligations of approximately $625,000 and accrued property taxesof approximately $10,000.

Effective January 1, 2006, we acquired a refinedproduct terminal with approximately 230,000 barrels of aggregate storagecapacity in Mobile, Alabama from TransMontaigne Inc. for approximately $17.9million. The Mobile terminal currently provides integrated terminaling servicesto TransMontaigne Inc., a major oil company, a crude oil marketing company anda petro-chemical company. The contribution of the Mobile terminal byTransMontaigne Inc. to us has been recorded at carryover basis in a mannersimilar to a reorganization of entities under common control. As such, priorperiods have been restated to include the assets, liabilities, and results ofoperations of the Mobile terminal from August 1, 2005, the date ofacquisition by TransMontaigne Inc. from Radcliff/Economy Marine Services, Inc.The results of operations of the Mobile terminal for periods prior to theiractual contribution to us have been allocated to our predecessor entityTransMontaigne Partners (Predecessor). The consideration we paid to TransMontaigneInc. in excess of the carryover basis of the net assets contributed has beenreflected in the accompanying consolidated balance sheet and changes inpartners’ equity as a reduction of partners’ equity—subordinated units.

At December 31,2005, the basis of the assets and liabilities of the Mobile terminal are asfollows:

| ** **                          | ** ** | **Mobile  terminal** | ** ** |
|-------------------------------------|------------|----------------------|------------|
| Trade accounts  receivable          |       | $                    | 81         |   |
| Due from  TransMontaigne Inc.       |       | 748                  |       |
| Property, plant  and equipment, net |       | 9,420                |       |
| Trade accounts payable              |       | (73                  | )          |
| Predecessor equity                  |       | $                    | 10,176     |   |

 

14

----

Theresults of operations previously reported by us and the combined amounts withthe Mobile terminal as if the Mobile terminal had been contributed to us at thedate of its acquisition (August 1, 2005) by TransMontaigne Inc. are as follows:

| ** **              | ** ** | **Six months ended  December 31, 2005** | ** ** |
|-------------------------|------------|-------------------------------------------------------------|------------|
| Revenues:               |       |                                                        |       |   |   |
| TransMontaigne Partners |       |                                                        | $          | 21,502 |   |   |
| Mobile terminal         |       |                                                        | 1,406      |   |   |
| Combined                |       |                                                        | $          | 22,908 |   |   |
| Net earnings:           |       |                                                        |       |   |   |
| TransMontaigne Partners |       |                                                        | $          | 6,667 |   |   |
| Mobile terminal         |       |                                                        | 293        |   |   |
| Combined                |       |                                                        | $          | 6,960 |   |   |

 

**(4) CONCENTRATIONOF CREDIT RISK AND TRADE ACCOUNTS RECEIVABLE**

Our primary market areas are located along the U.S.Gulf Coast and in the Midwest. We have a concentration of trade receivablebalances due from companies engaged in the distribution and marketing ofrefined products and crude oil, and the United States government. Theseconcentrations of customers may affect our overall credit risk in that thecustomers may be similarly affected by changes in economic, regulatory or otherfactors. Our customers’ historical and future credit positions are analyzedprior to extending credit. We manage our exposure to credit risk through creditanalysis, credit approvals, credit limits and monitoring procedures, and forcertain transactions we may request letters of credit, prepayments orguarantees. We maintain allowances for potentially uncollectible accountsreceivable.

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

| ** **                            | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Trade accounts  receivable            |       |                     | $          | 1,524                       |       |   |   | $ | 1,003 |   |   |
| Less allowance  for doubtful accounts |       |                     | —     |                        |       |   | — |   |   |
|                                  |       |                     | $          | 1,524                       |       |   |   | $ | 1,003 |   |   |

 

TransMontaigne Inc.accounted for approximately 70% and 67% of our total revenues for the threemonths ended March 31, 2006 and 2005, respectively. Marathon PetroleumCompany LLC (“Marathon”) and the previous asphalt storage customers accountedfor 17% and 23% of our total revenues for the three months ended March 31,2006 and 2005, respectively. During February 2006, Marathon entered into anew five-year terminaling services agreement for asphalt storage capacity thatreplaces our previous customer, Gulf Atlantic Refining & Marketing, LP.In April 2005, Trigeant EP, Ltd. assigned its terminaling servicescontract with us to Gulf Atlantic Refining & Marketing, LP.

**(5) PREPAIDEXPENSES AND OTHER**

Prepaidexpenses and other are as follows (in thousands):

| ** **                 | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|----------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Additive  detergent        |       |                     | $          | 334                         |       |   |   | $ | 307 |   |   |
| Deposits and  other assets |       |                     | 359        |                        |       |   | 31 |   |   |
|                       |       |                     | $          | 693                         |       |   |   | $ | 338 |   |   |

 

15

----

**(6) PROPERTY,PLANT AND EQUIPMENT**

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

| ** **                          | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Land                                |       | $                        | 27,303     |                        |       | $ | 27,303 |   |   |
| Terminals,  pipelines and equipment |       | 129,639                  |       |                        | 129,559    |   |   |
| Furniture,  fixtures and equipment  |       | 548                      |       |                        | 480        |   |   |
| Construction in  progress           |       | 949                      |       |                        | 263        |   |   |
|                                |       | 158,439                  |       |                        | 157,605    |   |   |
| Less accumulated  depreciation      |       | (32,988                  | )          |                        | (31,170    | ) |   |
|                                |       | $                        | 125,451    |                        |       | $ | 126,435 |   |   |

 

**(7) OTHERASSETS**

Otherassets, net are as follows (in thousands):

| ** **                                                                      | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Acquired intangible,  net of accumulated amortization of $1,542 and $1,417      |       |                     | $          | 958                         |       |   |   | $ | 1,083 |   |   |
| Deferred debt  issuance costs, net of accumulated amortization of $153 and $107 |       |                     | 763        |                        |       |   | 809 |   |   |
| Deposits and  other assets                                                      |       |                     | 10         |                        |       |   | 9 |   |   |
|                                                                            |       |                     | $          | 1,731                       |       |   |   | $ | 1,901 |   |   |

 

Acquired intangible represents the right to use theCoastal Fuels trade name through February 28, 2008. The cost of theacquired intangible is being amortized on a straight-line basis over fiveyears.

Deferred debt issuancecosts are amortized using the interest method over the term of the creditfacility (see Note 9 of Notes to consolidated financial statements).

**(8) OTHERACCRUED LIABILITIES**

Otheraccrued liabilities are as follows (in thousands):

| ** **                         | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Accrued property  taxes            |       |                     | $          | 510                         |       |   |   | $ | 58 |   |   |
| Accrued  environmental obligations |       |                     | 625        |                        |       |   | 625 |   |   |
| Customer advances  and deposits    |       |                     | 366        |                        |       |   | 233 |   |   |
| Asset retirement  obligations      |       |                     | 237        |                        |       |   | 237 |   |   |
| Accrued expenses  and other        |       |                     | 198        |                        |       |   | 86 |   |   |
|                               |       |                     | $          | 1,936                       |       |   |   | $ | 1,239 |   |   |

 

**(9) LONG-TERMDEBT**

On May 9, 2005, we entered into a$75 million senior secured credit facility. At March 31, 2006 and December 31,2005, our outstanding borrowings under the credit facility were approximately$45.5 million and $28.0 million, respectively. The credit facility providesfor a maximum borrowing line of credit equal to the lesser of (i) $75 millionand (ii) four times Consolidated EBITDA (as defined; $86.9 million atMarch 31, 2006). Borrowings under the credit facility bear interest (atour option) based on a base rate 

16

----

plus an applicable margin,or LIBOR plus an applicable margin; the applicable margins are a function ofthe total leverage ratio (as defined). Interest on loans under the creditfacility is due and payable periodically, based on the applicable interest rateand related interest period, generally one, two or three months. The weightedaverage interest rate on borrowings under our credit facility was 5.9% duringthe three months ended March 31, 2006. In addition, we pay a commitmentfee ranging from 0.375% to 0.50% per annum on the total amount of the unusedcommitments. Borrowings under the credit facility are secured by a lien on ourassets, including cash, accounts receivable, inventory, general intangibles,investment property, contract rights and real property, except for our realproperty located in Florida. The terms of the credit facility include covenantsthat restrict our ability to make cash distributions and acquisitions. Theprincipal balance of loans and any accrued and unpaid interest will be due andpayable in full on the maturity date, May 9, 2010.

The credit facility also contains customaryrepresentations and warranties (including those relating to organization andauthorization, compliance with laws, absence of defaults, material agreements andlitigation) and customary events of default (including those relating tomonetary defaults, covenant defaults, cross defaults and bankruptcy events).The primary financial covenants contained in the credit facility are a totalleverage ratio test (not to exceed four times) and an interest coverage ratiotest (not to be less than three times). At March 31, 2006, we were incompliance with the financial covenants contained in the credit facility.

On March 27, 2006,TransMontaigne Inc. announced that it had entered into a merger agreement withSemGroup, L.P. pursuant to which SemGroup, L.P. would acquire all of theoutstanding capital stock of TransMontaigne Inc. We are not a party to thatmerger agreement. If TransMontaigne Inc. is acquired by a third party, thecompletion of such transaction would constitute a “change in control” under thecredit facility and, therefore, would require a waiver from the lenders. Alternatively,the third party acquirer of TransMontaigne Inc. may elect to provide us with analternative credit facility. In the merger agreement with TransMontaigne Inc.,SemGroup, L.P. has agreed that the parties will not close the transactionunless either a waiver has been received from the lenders or comparablefinancing has been made available to us.

**(10) LONG-TERMINCENTIVE PLAN**

TransMontaigne GP L.L.C. (“TransMontaigne GP”) is ourgeneral partner and manages our operations and activities. TransMontaigneServices Inc. is a wholly-owned subsidiary ofTransMontaigne Inc. and is the sole member of TransMontaigne GP.TransMontaigne Services Inc. adopted a long-term incentive plan for itsemployees and consultants and non-employee directors of our general partner.The long-term incentive plan currently permits the grant of awards covering anaggregate of 345,895 units, which amount will automatically increase on anannual basis by 2% of the total outstanding common and subordinated units atthe end of the preceding fiscal year. Ownership in the awards is subject toforfeiture until the vesting date, but recipients have distribution and votingrights from the date of grant. The plan is administered by the compensationcommittee of the board of directors of our general partner. On January 19,2006, we announced a program for the repurchase of outstanding common units forpurposes of making subsequent grants of restricted units to key employees andnon-employee directors of our general partner. As of March 31, 2006, wehave repurchased approximately 8,200 common units pursuant to the program.

On March 31, 2006, TransMontaigne Services Inc.granted 58,000 restricted phantom units to its key employees and executiveofficers, and non-employee directors of our general partner. On May 27,2005, TransMontaigne Services Inc. granted 120,000 restricted common unitsto its key employees and executive officers, and non-employee directors of ourgeneral partner. We recognized deferred equity-based compensation ofapproximately $1.7 million and $2.6 million associated with the March 2006and May 2005 grants, respectively, which are being amortized to incomeover the four-year vesting period.

17

----

Amortization of deferred equity-basedcompensation of approximately $0.2 million and $nil is included in directgeneral and administrative expense for the three months ended March 31,2006 and 2005, respectively.

Distributions paid toholders of restricted common units and restricted phantom units are treated ascompensation expense for financial reporting purposes. Included in directgeneral and administrative expenses for the three months ended March 31,2006 and 2005, is approximately $48,000 and $nil, respectively, of compensationexpense related to distributions paid to holders of restricted units.

**(11) COMMITMENTSAND CONTINGENCIES**

*Operating Leases.**  *We lease property and equipmentunder non-cancelable operating leases that extend through April 2021. At March 31,2006, future minimum lease payments under these non-cancelable operating leasesare as follows (in thousands):

| **Years ending December 31:** | ** ** | ** ** | ** ** | **Property and  equipment** | ** ** |
|----------------------------------------------|------------|------------|------------|----------------------------------|------------|
| 2006 (remainder  of the year)                |       |       | $          | 173                              |       |   |
| 2007                                         |       |       | 225        |                             |       |
| 2008                                         |       |       | 213        |                             |       |
| 2009                                         |       |       | 169        |                             |       |
| 2010                                         |       |       | 111        |                             |       |
| Thereafter                                   |       |       | 1,137      |                             |       |
|                                         |       |       | $          | 2,028                            |       |   |

 

Rental expense underoperating leases was approximately $80,000 and $70,000 for the three monthsended March 31, 2006 and 2005, respectively.

**(12) BUSINESSSEGMENTS**

We provide integrated terminaling, storage, pipelineand related services to companies engaged in the distribution and marketing ofrefined petroleum products and crude oil. Our chief operating decision maker isTransMontaigne GP’s Chief Executive Officer (“CEO”).TransMontaigne GP’s CEO reviews the financial performance of our businesssegments using disaggregated financial information about “margins” for purposesof making operating decisions and assessing financial performance. “Margins”are composed of revenues less direct operating costs and expenses. Accordingly,we present “margins” for each of our two business segments: (i) U.S. GulfCoast terminals and (ii) Midwest terminals and pipeline.

18

----

Thefinancial performance of our business segments is as follows (in thousands):

| ** **                                    | ** ** | **Three months ended  March 31,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| **U.S. Gulf Coast Terminals:**                |       |                                             |       |   |   |
| Throughput and  additive injection fees, net  |       | $                                                | 5,589      |   | $ | 2,503 |   |
| Terminaling  storage fees                     |       | 2,549                                            |       | 4,787 |   |
| Pipeline  transportation fees                 |       | —                                           |       | — |   |
| Other                                         |       | 2,209                                            |       | 1,343 |   |
| Revenues                                      |       | 10,347                                           |       | 8,633 |   |
| Direct operating costs and expenses           |       | (4,373                                           | )          | (3,826 | ) |
| Margins                                       |       | 5,974                                            |       | 4,807 |   |
| **Midwest Terminals and Pipeline:**           |       |                                             |       |   |   |
| Throughput and  additive injection fees, net  |       | 769                                              |       | 441 |   |
| Terminaling  storage fees                     |       | —                                           |       | — |   |
| Pipeline  transportation fees                 |       | 594                                              |       | 534 |   |
| Other                                         |       | 380                                              |       | 106 |   |
| Revenues                                      |       | 1,743                                            |       | 1,081 |   |
| Direct operating costs and expenses           |       | (322                                             | )          | (233 | ) |
| Margins                                       |       | 1,421                                            |       | 848 |   |
| Total margins                                 |       | 7,395                                            |       | 5,655 |   |
| Direct general and administrative expenses    |       | (1,100                                           | )          | — |   |
| Allocated general and administrative expenses |       | (812                                             | )          | (700 | ) |
| Allocated insurance expense                   |       | (82                                              | )          | (83 | ) |
| Depreciation and amortization                 |       | (1,942                                           | )          | (1,509 | ) |
| Operating income                              |       | 3,459                                            |       | 3,363 |   |
| Other income (expense), net                   |       | (740                                             | )          | — |   |
| Net earnings                                  |       | $                                                | 2,719      |   | $ | 3,363 |   |

 

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

| ** **                         | ** ** | **Three months ended March 31, 2006** | ** ** |
|------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                           | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from  external customers  |       | $                                                              | 3,276      |   |   | $ | 301 |   |   | $ | 3,577 |   |
| Revenues from  TransMontaigne Inc. |       | 7,071                                                          |       |   | 1,442 |   |   | 8,513 |   |
| Revenues                           |       | $                                                              | 10,347     |   |   | $ | 1,743 |   |   | $ | 12,090 |   |
| Identifiable  assets               |       | $                                                              | 115,261    |   |   | $ | 14,749 |   |   | $ | 130,010 |   |
| Capital expenditures               |       | $                                                              | 796        |   |   | $ | 38 |   |   | $ | 834 |   |

 

| ** **                         | ** ** | **Three months ended March 31, 2005** | ** ** |
|------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                           | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from  external customers  |       | $                                                              | 3,172      |   |   | $ | — |   |   | $ | 3,172 |   |
| Revenues from  TransMontaigne Inc. |       | 5,461                                                          |       |   | 1,081 |   |   | 6,542 |   |
| Revenues                           |       | $                                                              | 8,633      |   |   | $ | 1,081 |   |   | $ | 9,714 |   |
| Identifiable  assets               |       | $                                                              | 108,369    |   |   | $ | 9,982 |   |   | $ | 118,351 |   |
| Capital expenditures               |       | $                                                              | 731        |   |   | $ | 6 |   |   | $ | 737 |   |

 

19

----

**ITEM 2.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussionand analysis of the results of operations and financial condition should beread in conjunction with the accompanying unaudited consolidated financialstatements.

**CRITICAL ACCOUNTINGPOLICIES AND ESTIMATES**

A summary of thesignificant accounting policies that we have adopted and followed in thepreparation of our consolidated financial statements is detailed in ourconsolidated financial statements for the six months ended December 31,2005, included in our Transition Report on Form 10-K filed on March 2,2006 (see Note 1 of Notes to the consolidated financial statements).Certain of these accounting policies require the use of estimates. Thefollowing estimates, in our opinion, are subjective in nature, require theexercise of judgment, and involve complex analysis: allowance for doubtfulaccounts; accrued asset retirement obligations; and accrued environmentalobligations. These estimates are based on our knowledge and understanding ofcurrent conditions and actions we may take in the future. Changes in theseestimates will occur as a result of the passage of time and the occurrence offuture events. Subsequent changes in these estimates may have a significantimpact on our financial condition and results of operations.

**SIGNIFICANTDEVELOPMENTS DURING THE THREE MONTHS ENDED MARCH 31, 2006**

Effective January 1, 2006, we acquired a refinedproduct terminal in Mobile, Alabama from TransMontaigne Inc. in exchange forapproximately $17.9 million.

On January 19, 2006, we announced a distributionof $0.40 per unit payable on February 8, 2006 to unitholders of record on January 31,2006.

On January 19, 2006, we announced a program forthe repurchase, from time to time, of outstanding common units of thePartnership for purposes of making subsequent grants of restricted units underthe Partnership’s Long-Term Incentive Plan to key employees and executiveofficers of TransMontaigne Services Inc. and the non-employee directors of ourgeneral partner. The Partnership anticipates repurchasing annually up toapproximately $1.2 million of aggregate market value of its outstanding commonunits for this purpose. However, there is no guarantee as to the exact numberof units or dollar amount that will be repurchased, and the purchases may bediscontinued at any time.

On February 20, 2006, we entered into a newfive-year terminaling services agreement with Marathon Petroleum Company LLC (“Marathon”)regarding approximately 1.0 million barrels of asphalt storage capacitythroughout our Florida facilities. The terminaling services agreement with GulfAtlantic Operations LLC (“Gulf Atlantic”) for the utilization of this asphaltstorage capacity has been amended to allow for cancellations coinciding withthe effective dates within the terminaling services agreement with Marathon.Effective May 1, 2006, our terminaling services agreement with GulfAtlantic expired. The change from Gulf Atlantic to Marathon is not expected tohave a material impact on our results of operations or cash flows.

On March 27, 2006,TransMontaigne Inc. announced that it had entered into a merger agreement withSemGroup, L.P. pursuant to which SemGroup, L.P. would acquire all of theoutstanding capital stock of TransMontaigne Inc. We are not a party to thatmerger agreement and cannot be certain when such transaction, or any othertransaction that might involve the acquisition of TransMontaigne Inc. willclose, or if it will close at all. If TransMontaigne Inc. were acquired by athird party, such third party also would control our operations. We currentlycannot predict whether or in what manner any third party that acquires controlof our general partner would change our operations, if at all.

20

----

**SUBSEQUENT EVENTS**

On April 19, 2006, weannounced a distribution of $0.43 per unit payable on May 9, 2006 tounitholders of record on April 28, 2006.

**RESULTS OFOPERATIONS—THREE MONTHS ENDED MARCH 31, 2006 AND 2005**

In reviewing our historical results of operations, youshould be aware that the historical results of operations of TransMontaigneInc.’s terminals and pipeline prior to being contributed to us are reflected inthe accompanying financial statements as being attributable to our predecessorentity “TransMontaigne Partners (Predecessor).” The contribution of certainTransMontaigne Inc. terminal and pipeline operations to us was recordedfor financial reporting purposes at carryover basis in a manner similar to areorganization of entities under common control.

Thefollowing selected historical financial statement measures are derived from ourunaudited interim financial statements for the three months ended March 31,2006 and 2005 (in thousands):

| ** **                                           | ** ** | **Three months ended  March 31,** | ** ** |
|------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                           | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Revenues                                             |       | $                                                | 12,090     |   | $ | 9,714 |   |
| Direct operating  costs and expenses                 |       | $                                                | (4,695     | ) | $ | (4,059 | ) |
| Operating income                                     |       | $                                                | 3,459      |   | $ | 3,363 |   |
| Net earnings                                         |       | $                                                | 2,719      |   | $ | 3,363 |   |
| Net cash provided  by (used in) operating activities |       | $                                                | 5,071      |   | $ | 4,350 |   |
| Net cash provided  by (used in) investing activities |       | $                                                | (18,769    | ) | $ | (737 | ) |
| Net cash provided by  (used in) financing activities |       | $                                                | 13,611     |   | $ | (3,601 | ) |

 

***Revenues.******  ***The revenues for the threemonths ended March 31, 2006 and 2005, were approximately $12.1 million and$9.7 million, respectively. Effective October 31, 2005, we acquired theOklahoma City terminal from Magellan Pipeline Company, L.P. for approximately$1.9 million and on January 1, 2006 we acquired the Mobile terminal fromTransMontaigne Inc. for approximately $17.9 million. For the three months endedMarch 31, 2006, the Oklahoma City terminal contributed approximately $0.3million in revenues and the Mobile terminal contributed approximately $0.8million in revenues. Our revenues are as follows (in thousands):

| ** **                                   | ** ** | **Three months ended  March 31,** | ** ** |
|----------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Throughput and  additive injection fees, net |       | $                                                | 6,358      |   | $ | 2,944 |   |
| Terminaling  storage fees                    |       | 2,549                                            |       | 4,787 |   |
| Pipeline  transportation fees                |       | 594                                              |       | 534 |   |
| Management fees  and reimbursed costs        |       | 309                                              |       | 30 |   |
| Other                                        |       | 2,280                                            |       | 1,419 |   |
| Revenues                                     |       | $                                                | 12,090     |   | $ | 9,714 |   |

 

***Throughput andadditive injection fees, net.******  ***Terminalthroughput and additive injection fees, net were approximately$6.4 million and $2.9 million for the three months ended March 31,2006 and 2005, respectively. The increase of approximately $3.5 million inthroughput and additive injection fees, net for 2006 as compared to 2005 wasdue principally to the conversion of the fees charged on heavy oil volumes to athroughput agreement and the acquisition of the Oklahoma City and Mobileterminals. For the three months ended March 31, 2006 and 2005, we deliveredapproximately 109,200 barrels and 94,500 barrels per day of light oilthroughput volumes, respectively, at our terminals.

21

----

The terminaling services agreement withTransMontaigne Inc. converted the fees charged on heavy oil volumes from astorage agreement to a throughput agreement effective June 1, 2005. Thethroughput fees charged on heavy oil volumes were approximately$2.0 million for the three months ended March 31, 2006. For the threemonths ended March 31, 2006 and 2005, we delivered approximately 37,400barrels and 41,200 barrels per day, respectively, of heavy oil volumes forTransMontaigne Inc. at our terminals.

Included in the throughput and additive injectionfees, net for the three months ended March 31, 2006 and 2005, are feescharged to TransMontaigne Inc. of approximately $5.9 million and$2.9 million, respectively.

***Terminaling storagefees.******  ***Terminaling storage fees wereapproximately $2.5 million and $4.8 million for the three monthsended March 31, 2006 and 2005, respectively. The decrease of approximately$2.3 million in terminaling storage fees for 2006 as compared to 2005 wasdue principally to the conversion of the fees charged on heavy oil volumes froma storage agreement to a throughput agreement.

Included in the terminaling storage fees for the threemonths ended March 31, 2006 and 2005 are fees charged toTransMontaigne Inc. of approximately $nil and $2.5 million,respectively, for the storage of heavy oil volumes.

***Pipelinetransportation fees.******  ***For the three months ended March 31,2006 and 2005, we earned pipeline transportation fees of approximately$0.6 million and $0.5 million, respectively. For the three monthsended March 31, 2006 and 2005, we averaged approximately 13,200 barrelsand 11,900 barrels per day of transported product on the Razorback Pipeline.

Included in pipeline transportation fees for the threemonths ended March 31, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $0.6 million and$0.5 million, respectively.

***Management fees andreimbursed costs.******  ***We manage and operate for a majoroil company certain tank capacity at our Port Everglades (South) terminal andreceive a reimbursement of costs. Effective May 27, 2005, we manage andoperate on behalf of TransMontaigne Inc. certain tank capacity owned by autility and receive a management fee from TransMontaigne Inc. For the threemonths ended March 31, 2006 and 2005, management fees and reimbursed costswere approximately $309,000 and $30,000, respectively.

Included in management fees and reimbursed costs forthe three months ended March 31, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $0.3 million and $nil,respectively.

***Other revenue.******  ***For the threemonths ended March 31, 2006 and 2005, other revenue was approximately$2.3 million and $1.4 million, respectively. The increase ofapproximately $0.9 million in other revenue for 2006 as compared to 2005was due principally to an increase at the Florida facilities and theacquisition of the Oklahoma City and Mobile terminals.

Included in other revenue for the three months ended March 31,2006 and 2005, are fees charged to TransMontaigne Inc. of approximately$1.7 million and $0.6 million, respectively.

22

----

***Direct operating costs and expenses.******  ***For the threemonths ended March 31, 2006 and 2005, the direct operating costs andexpenses of our operations were approximately $4.7 million and$4.1 million, respectively. For the three months ended March 31,2006, the Oklahoma City terminal contributed approximately $0.1 million indirect operating costs and expenses and the Mobile terminal contributedapproximately $0.3 million in direct operating costs and expenses. The directoperating costs and expenses of our operations are as follows (in thousands):

| ** **                                       | ** ** | **Three months  ended  March 31,** | ** ** |
|--------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                     | ** ** | **2005** | ** ** |
| Wages and  employee benefits                     |       | $                                            | 1,277      |   | $ | 1,249 |   |
| Utilities and  communication charges             |       | 419                                          |       | 338 |   |
| Repairs and  maintenance                         |       | 1,447                                        |       | 1,137 |   |
| Allocated  property and casualty insurance costs |       | 168                                          |       | 167 |   |
| Office, rentals  and property taxes              |       | 645                                          |       | 606 |   |
| Vehicles and fuel  costs                         |       | 434                                          |       | 320 |   |
| Environmental  compliance costs                  |       | 132                                          |       | 147 |   |
| Other                                            |       | 173                                          |       | 95 |   |
| Direct operating  costs and expenses             |       | $                                            | 4,695      |   | $ | 4,059 |   |

 

The increase of approximately $0.6 million indirect operating costs and expenses for 2006 as compared to 2005 was dueprincipally to an increase at the Florida facilities and the acquisition of theOklahoma City and Mobile terminals.

***Costs and expenses.******  ***Direct generaland administrative expenses for the three months ended March 31, 2006,were approximately $1.1 million, compared to approximately $nil for the threemonths ended March 31, 2005. Direct general and administrative expensesare as follows (in thousands):

| ** **                                                                 | ** ** | **Three months  ended  March 31,** | ** ** |
|----------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                 | ** ** | **2006**                                     | ** ** | **2005** | ** ** |
| Accounting  expenses                                                       |       | $                                            | 599        |   |   | $ | — |   |   |
| Legal expenses                                                             |       | 205                                          |       |   | — |   |   |
| Independent  director fees                                                 |       | 30                                           |       |   | — |   |   |
| Amortization of  deferred equity-based compensation                        |       | 162                                          |       |   | — |   |   |
| Compensation  expense on distributions paid to holders of restricted units |       | 48                                           |       |   | — |   |   |
| Other                                                                      |       | 56                                           |       |   | — |   |   |
| Direct general  and administrative expenses                                |       | $                                            | 1,100      |   |   | $ | — |   |   |

 

The accompanying consolidated financial statementsinclude allocated general and administrative charges from TransMontaigne Inc.for allocations of indirect corporate overhead to cover costs of centralizedcorporate functions such as legal, accounting, treasury, insuranceadministration and claims processing, health, safety and environmental,information technology, human resources, credit, payroll, taxes, engineeringand other corporate services. The allocated general and administrative expenseswere approximately $0.8 million and $0.7 million for the three monthsended March 31, 2006 and 2005, respectively.

Theaccompanying consolidated financial statements also include allocated insurancecharges from TransMontaigne Inc. for allocations of insurance premiums tocover costs of insuring activities such as property casualty, pollution,automobile, directors and officers, and other insurable risks. The allocated 

23

----

insurance expenses are presented in the accompanyingconsolidated statements of operations as follows (in thousands):

| ** **                           | ** ** | **Three months  ended  March 31,** | ** ** |
|--------------------------------------|------------|----------------------------------------------|------------|
| ** **                           | ** ** | **2006**                                     | ** ** | **2005** | ** ** |
| Direct operating  costs and expenses |       | $                                            | 168        |   | $ | 167 |   |
| General and  administrative expenses |       | 82                                           |       | 83 |   |
| Total allocated  insurance costs     |       | $                                            | 250        |   | $ | 250 |   |

 

Depreciation and amortization expense for the threemonths ended March 31, 2006 and 2005, was $1.9 million and$1.5 million, respectively. The increase of approximately$0.4 million in depreciation and amortization expense for 2006 as comparedto 2005 was due principally to depreciation and amortization expense on currentyear additions to property, plant, and equipment and the acquisition of theOklahoma City and Mobile terminals.

Interest expense wasapproximately $0.7 million and $nil for the three months ended March 31,2006 and 2005, respectively, related to borrowings and commitment fees underour senior secured credit facility.

**LIQUIDITY ANDCAPITAL RESOURCES**

Our primary liquidity needs are to fund ourdistributions to our unitholders, capital expenditures and our working capitalrequirements. Currently, our principal sources of funds to meet our liquidityneeds are cash generated by operations, borrowings under our credit facilityand debt and equity offerings.

Capital expenditures, excluding acquisitions, for thethree months ended March 31, 2006, were approximately $0.8 millionfor terminal and pipeline facilities and assets to support these facilities.Future capital expenditures will depend on numerous factors, including theavailability, economics and cost of appropriate acquisitions which we identifyand evaluate; the economics, cost and required regulatory approvals withrespect to the expansion and enhancement of existing systems and facilities;customer demand for the services we provide; local, state and federalgovernmental regulations; environmental compliance requirements; and theavailability of debt financing and equity capital on acceptable terms.

***Senior SecuredCredit Facility.******  ***On May 9, 2005, we enteredinto a $75 million senior secured credit facility. The credit facilityprovides for a maximum borrowing line of credit equal to the lesser of (i) $75 millionand (ii) four times Consolidated EBITDA (as defined; $86.9 million atMarch 31, 2006). Borrowings under the credit facility bear interest (atour option) based on a base rate plus an applicable margin, or LIBOR plus anapplicable margin; the applicable margins are a function of the total leverageratio (as defined). Interest on loans under the credit facility will be due andpayable periodically, based on the applicable interest rate and relatedinterest period, generally either one, two or three months. In addition, wewill pay a commitment fee ranging from 0.375% to 0.50% per annum on the totalamount of the unused commitments. Borrowings under the credit facility aresecured by a lien on our assets, including cash, accounts receivable,inventory, general intangibles, investment property, contract rights and realproperty, except for our real property located in Florida. The terms of thecredit facility include covenants that restrict our ability to make cashdistributions and acquisitions. We may make distributions of cash to the extentof our “available cash” as defined in our partnership agreement. We may makeacquisitions meeting the definition of “permitted acquisitions” which include:acquisitions in which the consideration paid for such acquisition, togetherwith the consideration paid for other acquisitions in the same fiscal year,does not exceed $15,000,000; acquisitions that arise from the exercise ofoptions under the omnibus agreement with TransMontaigne Inc. provided thatany cash consideration is not obtained from borrowings under the creditfacility; and acquisitions in which we have (1) provided the agent priorwritten documentation in form and substance reasonably satisfactory to theagent demonstrating our pro forma 

24

----

compliance with allfinancial and other covenants contained herein after giving effect to such acquisitionand (2) satisfied all other conditions precedent to such acquisition whichthe agent may reasonably require in connection therewith. The principal balanceof loans and any accrued and unpaid interest will be due and payable in full onthe maturity date, May 9, 2010.

The credit facility also contains customaryrepresentations and warranties (including those relating to corporateorganization and authorization, compliance with laws, absence of defaults,material agreements and litigation) and customary events of default (includingthose relating to monetary defaults, covenant defaults, cross defaults andbankruptcy events). The primary financial covenants contained in the creditfacility are a total leverage ratio test (not to exceed four times) and aninterest coverage ratio test (not to be less than three times). These financialcovenants are based on a defined financial performance measure within thecredit facility known as “Consolidated EBITDA.”

On March 27, 2006, TransMontaigne Inc. announced thatit had entered into a merger agreement with SemGroup, L.P. pursuant to whichSemGroup, L.P. would acquire all of the outstanding capital stock ofTransMontaigne Inc. We are not a party to that merger agreement. IfTransMontaigne Inc. is acquired by a third party, the completion of suchtransaction would constitute a “change in control” under the credit facilityand, therefore, would require a waiver from the lenders. Alternatively, thethird party acquirer of TransMontaigne Inc. may elect to provide us with analternative credit facility. In the merger agreement with TransMontaigne Inc.,SemGroup, L.P. has agreed that the parties will not close the transactionunless either a waiver has been received from the lenders or comparablefinancing has been made available to us.

25

----

Forthe periods prior to our initial public offering on May 27, 2005, thecredit facility stipulates our Consolidated EBITDA at approximately$3.7 million per quarter and consolidated interest expense atapproximately $0.4 million per quarter. Those assumptions are reflected inthe following calculation of the “total leverage ratio” and “interest coverageratio” contained in the credit facility.

| ** **                                                                                            | ** ** | **Three Months Ended** | ** ** | **Twelve Months  Ended** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|-------------------------------|------------|
| ** **                                                                                            | ** ** | **June 30,**                | ** ** | **September 30,**        | ** ** | **December 31,** | ** ** | **March 31,** | ** ** | **March 31,** | ** ** |
| ** **                                                                                            | ** ** | **2005**                         | ** ** | **2005**                      | ** ** | **2005** | ** ** | **2006** | ** ** | **2006** | ** ** |
| **Financial  performance debt covenant test:**                                                        |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated  EBITDA, as stipulated in the credit facility                                            |       |                             | $          | 4,341                         |       |   |   | $ | 5,371 |   |   |   | $ | 6,216 |   |   |   | $ | 7,390 |   |   |   | $ | 23,318 |   |   |
| Consolidated  funded indebtedness                                                                     |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 45,508 |   |   |
| Total leverage  ratio                                                                                 |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   | 1.95 | x |   |
| Consolidated  EBITDA, as stipulated in the credit facility                                            |       |                             | $          | 4,341                         |       |   |   | $ | 5,371 |   |   |   | $ | 5,873 |   |   |   | $ | 5,566 |   |   |   | $ | 21,151 |   |   |
| Consolidated  interest expense, as stipulated in the credit facility                                  |       |                             | $          | 409                           |       |   |   | $ | 464 |   |   |   | $ | 505 |   |   |   | $ | 697 |   |   |   | $ | 2,075 |   |   |
| Interest coverage  ratio                                                                              |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   | 10.19 | x |   |
| **Reconciliation  of Consolidated EBITDA to cash flows provided by (used in) operating  activities:** |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated  EBITDA for total leverage ratio                                                         |       |                             | $          | 4,341                         |       |   |   | $ | 5,371 |   |   |   | $ | 6,216 |   |   |   | $ | 7,390 |   |   |   |   |   |   |
| Less pro forma  adjustments related to acquisitions                                                   |       |                             |       |                          |       |   | — |   |   |   | (343 | ) |   |   | (1,824 | ) |   |   |   |   |   |
| Consolidated  EBITDA for interest coverage ratio                                                      |       |                             |       |                          |       |   | 5,371 |   |   |   | 5,873 |   |   |   | 5,566 |   |   |   |   |   |   |
| Interest expense                                                                                      |       |                             |       |                          |       |   | (464 | ) |   |   | (505 | ) |   |   | (697 | ) |   |   |   |   |   |
| Changes in  operating assets and liabilities                                                          |       |                             |       |                          |       |   | (5,399 | ) |   |   | 2,957 |   |   |   | 202 |   |   |   |   |   |   |
| Cash flows provided by  (used by) operating activities                                                |       |                             |       |                          |       |   | $ | (492 | ) |   |   | $ | 8,325 |   |   |   | $ | 5,071 |   |   |   |   |   |   |

 

If we were to fail either financial performancecovenant, or any other covenant contained in the credit facility, we would seeka waiver from our lenders under such facility. If we were unable to obtain awaiver from our lenders and the default remained uncured after any applicablegrace period, we would be in breach of the credit facility, and the lenderswould be entitled to declare all outstanding borrowings immediately due andpayable.

We believe that our futurecash expected to be provided by operating activities, available borrowingcapacity under our credit facility, and our relationship with institutionallenders and equity investors should enable us to meet our planned capital andliquidity requirements through at least the maturity date of our creditfacility (May 2010).

26

----

**ITEM 3.**                QUALITATIVEAND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The information contained in Item 3 updates, andshould be read in conjunction with, information set forth in Part II, Item7A in our Transition Report on Form 10-K for the six months ended December 31,2005, in addition to the interim unaudited consolidated financial statements,accompanying notes and management’s discussion and analysis of financialcondition and results of operations presented in Items 1 and 2 of thisQuarterly Report on Form 10-Q. There are no material changes in themarket risks faced by us from those reported in our Transition Report on Form 10-Kfor the six months ended December 31, 2005.

Market risk is the risk of loss arising from adversechanges in market rates and prices. The principal market risk to which we areexposed is interest rate risk associated with borrowings under our senior securedcredit facility. Borrowings under our senior secured credit facility will bearinterest at a variable rate based on LIBOR or the lender’s base rate. Wecurrently do not manage our exposure to interest rates, but we may in thefuture. At March 31, 2006, we had outstanding borrowings of$45.5 million under our senior secured credit facility. Based on theoutstanding balance of our variable-interest-rate debt at March 31,2006, and assuming market interest rates increase or decrease by 100 basispoints, the potential annual increase or decrease in interest expense isapproximately $0.5 million.

We generally do notpurchase or market products that we handle or transport and, therefore, we donot have material direct exposure to changes in commodity prices, except forthe value of product gains and losses arising from our terminaling servicesagreements with our customers. We do not use derivative commodity instrumentsto manage the commodity risk associated with the product we may own at anygiven time. Generally, to the extent we are entitled to retain product pursuantto terminaling services agreements with our customers, we sell the product toTransMontaigne Inc. As a result, we do not have a material direct exposureto commodity price fluctuations.

**ITEM 4.**                CONTROLS ANDPROCEDURES

We maintain disclosure controls and procedures thatare designed to ensure that information required to be disclosed by us in thereports that we file or submit to the Securities and Exchange Commission underthe Securities Exchange Act of 1934, as amended, is recorded, processed,summarized and reported within the time periods specified by the Commission’s rules andforms, and that information is accumulated and communicated to our management,including our principal executive and principal financial officers (whom werefer to as our Certifying Officers), as appropriate to allow timely decisionsregarding required disclosure. Our management evaluated, with the participationof our Certifying Officers, the effectiveness of our disclosure controls andprocedures as of March 31, 2006, pursuant to Rule 13a-15(b) underthe Exchange Act. Based upon that evaluation, our Certifying Officers concludedthat, as of March 31, 2006, our disclosure controls and procedures wereeffective.

There were no changes in our internal control overfinancial reporting that occurred during the fiscal quarter ended March 31,2006 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

27

----

**Part II. OtherInformation**

**ITEM 1A.**        RISKFACTORS

The following riskfactors, discussed in more detail in “Item 1A. Risk Factors,” in our TransitionReport on Form 10-K for the six months ended December 31, 2005,filed on March 2, 2006, which risk factors are expressly incorporated intothis report by reference, are important factors that could cause actual resultsto differ materially from our expectations and may adversely affect ourbusiness and results of operations, include, but are not limited to:

·       areduction in revenues from TransMontaigne Inc., upon which we rely for asubstantial majority of our revenues;

·       thecontinued creditworthiness of, and performance by, contract parties, includingTransMontaigne Inc.;

·       areduction or suspension of TransMontaigne Inc.’s obligations under theterminaling services agreement;

·       TransMontaigne Inc.’sfailure to continue to engage us to provide services after the expiration ofthe terminaling services agreement, or our failure to secure comparablealternative arrangements;

·       theimpact on our facilities or operations of extreme weather conditions, such ashurricanes, and other operational hazards;

·       theavailability of acquisition opportunities and successful integration and futureperformance of acquired assets;

·       thefailure to purchase additional refined product terminals fromTransMontaigne Inc.;

·       timing,cost and other economic uncertainties related to the construction of newassets;

·       debtlevels and restrictions in our debt agreements that may limit our operationalflexibility;

·       thethreat of terrorist attacks or war;

·       theimpact of current and future laws and governmental regulations;

·       liabilityfor environmental claims;

·       conflictsof interest and the limited fiduciary duties of our general partner, which iscontrolled by TransMontaigne Inc.;

·       ourfailure to avoid federal income taxation as a corporation or the imposition ofstate level taxation; and

·       general economic, market orbusiness conditions;

28

----

**ITEM 2.**                UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Thefollowing table covers the purchases of our common units by, or on behalf of,the Partnership during the three months ended March 31, 2006 covered bythis report.

| **Period** | ** ** | ** ** | ** ** | **Total  Number of  Common  Units  Purchased** | ** ** | **Average Price  Paid per  Common Unit** | ** ** | **Total Number of  Common Units  Purchased as Part of  Publicly Announced  Plans or Programs** | ** ** | **Approximate Dollar Value  of Common Units that  May Yet Be Purchased  Under the Plans or  Programs** | ** ** |
|------------|------------|------------|------------|-----------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| January    |       |       | —     |                                                |       |                                                    | —     |                                                                                                                                        |       |                                                                                                                                                          | —     |   |   |   | $ | 1,200,000 |   |   |
| February   |       |       | 1,700      |                                                |       |                                                    | $          | 25.40                                                                                                                                       |       |                                                                                                                                                          |       | 1,700 |   |   |   | $ | 1,156,814 |   |   |
| March      |       |       | 6,500      |                                                |       |                                                    | $          | 25.89                                                                                                                                       |       |                                                                                                                                                          |       | 6,500 |   |   |   | $ | 988,503 |   |   |
|       |       |       | 8,200      |                                                |       |                                                    | $          | 25.79                                                                                                                                       |       |                                                                                                                                                          |       | 8,200 |   |   |   |   |   |   |

 

All repurchases were madein the open market pursuant to a program announced on January 19, 2006 forthe repurchase, from time to time, of our outstanding common units for purposesof making subsequent grants of restricted units under our Long-Term IncentivePlan to key employees and officers of TransMontaigne Services Inc. and the non-employeedirectors of our general partner. We anticipate repurchasing annually up toapproximately $1.2 million of aggregate market value of our outstanding commonunits for this purpose. However, there is no guarantee as to the exact numberof units or dollar amount that will be repurchased, and the purchases may bediscontinued at any time.

**ITEM 6.**                EXHIBITS

Exhibits:

| 2.1  |   | Facilities Sale Agreement, dated January 1,  2006, between Radcliff/Economy Marine Services, Inc. and TransMontaigne  Partners L.P. (incorporated by reference to Exhibit 2.1 of the Current  Report on Form 8-K filed by TransMontaigne Partners L.P. with the  SEC on January 1, 2006). |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1 |   | Form of  TransMontaigne Services Inc. Long-Term Incentive Plan Employee Award  Agreement (incorporated by reference to Exhibit 10.2 of the Current  Report on Form 8-K filed by TransMontaigne Partners L.P. with the  SEC on April 6, 2006).                                                  |
| 10.2 |   | Form of  TransMontaigne Services Inc. Long-Term Incentive Plan Non-Employee Director  Award Agreement (incorporated by reference to Exhibit 10.3 of the  Current Report on Form 8-K filed by TransMontaigne Partners L.P.  with the SEC on April 6, 2006).                                     |
| 10.3 |   | Terminaling Services  Agreement, dated February 20, 2006, between Marathon Petroleum Company  LLC and TransMontaigne Partners L.P.                                                                                                                                                                            |
| 31.1 |   | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                                         |
| 31.2 |   | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                                         |
| 32.1 |   | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                     |
| 32.2 |   | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                     |

 

29

----

**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

| Dated May 9, 2006 | TRANSMONTAIGNE PARTNERS L.P. |
|------------------------|------------------------------|
|                   | (Registrant)                 |
|                   | By:                          | /s/  DONALD H. ANDERSON |
|                   | ** **                   | **Donald H. Anderson** |
|                   | ** **                   | **Chief Executive Officer** |
|                   |                         | /s/  RANDALL J. LARSON |
|                   | ** **                   | **Randall J. Larson** |
|                   | ** **                   | **Executive Vice President, Chief Financial** |
|                   | ** **                   | **Officer, and Chief Accounting Officer** |

 

30

----

**EXHIBITINDEX**

| Exhibit  Number | ** ** | **Description of Exhibits**                                                                                                                                                                                                                                                                                        |
|-----------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1             |       | Facilities Sale Agreement, dated January 1,  2006, between Radcliff/Economy Marine Services, Inc. and TransMontaigne  Partners L.P. (incorporated by reference to Exhibit 2.1 of the Current  Report on Form 8-K filed by TransMontaigne Partners L.P. with the  SEC on January 1, 2006). |
| 10.1            |       | Form of  TransMontaigne Services Inc. Long-Term Incentive Plan Employee Award  Agreement (incorporated by reference to Exhibit 10.2 of the Current  Report on Form 8-K filed by TransMontaigne Partners L.P. with the  SEC on April 6, 2006).                                                  |
| 10.2            |       | Form of  TransMontaigne Services Inc. Long-Term Incentive Plan Non-Employee Director  Award Agreement (incorporated by reference to Exhibit 10.3 of the  Current Report on Form 8-K filed by TransMontaigne Partners L.P.  with the SEC on April 6, 2006).                                     |
| 10.3*           |       | Terminaling Services  Agreement, dated February 20, 2006, between Marathon Petroleum Company  LLC and TransMontaigne Partners L.P.                                                                                                                                                                            |
| 31.1*           |       | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                                         |
| 31.2*           |       | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                                                                                                                                                                         |
| 32.1*           |       | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                     |
| 32.2*           |       | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                     |

----

*                    Filed herewith.

----