**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,DC 20549**

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**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 September 30,  2006**                                             |
| ** **     |   | **OR**                                                                                                  |
| **o**          |   | **Transition Report Pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934** |

 

**CommissionFile Number 001-32505**

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**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)

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Indicate by check markwhether the Registrant (1) has filed all reports required to be filed by Section 13of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the Registrant was required to file such report),and (2) has been 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 markwhether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes  o  No  x

Asof October 31, 2006, there were 3,972,500 units of the Registrant’s CommonLimited Partner Units outstanding.

 

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**TABLEOF CONTENTS**
|          | ** ** | ** **                                                                                                                                                                      | ** ** | **Page No.** | ** ** |
|----------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
|     | ** ** | **Part I.  Financial Information**                                                                                                                                         |       |              |       |
| Item 1.  |       | Unaudited Consolidated Financial Statements                                                                                                                                     |       | 4                 |       |
|     |       | Consolidated balance sheets as of September 30,  2006 and December 31, 2005                                                                                           |       | 5                 |       |
|     |       | Consolidated statements of operations for the three  and nine months ended September 30, 2006 and 2005                                                                     |       | 6                 |       |
|     |       | Consolidated statements of partners’ equity for the  year ended June 30, 2005, six months ended December 31, 2005 and  nine months ended September 30, 2006 |       | 7                 |       |
|     |       | Consolidated statements of cash flows for the three  and nine months ended September 30, 2006 and 2005                                                                     |       | 8                 |       |
|     |       | Notes to consolidated financial statements                                                                                                                                      |       | 9                 |       |
| Item 2.  |       | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                       |       | 22                |       |
| Item 3.  |       | Quantitative and Qualitative Disclosures about Market  Risk                                                                                                                     |       | 32                |       |
| Item 4.  |       | Controls and Procedures                                                                                                                                                         |       | 32                |       |
|     | ** ** | **Part II.  Other Information**                                                                                                                                            |       |              |       |
| Item 1A. |       | Risk Factors                                                                                                                                                                    |       | 33                |       |
| Item 2.  |       | Unregistered Sales of Equity Securities and Use of  Proceeds                                                                                                                    |       | 34                |       |
| Item 6.  |       | Exhibits                                                                                                                                                                        |       | 34                |       |

 

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**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:

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

·       any statements containedherein or therein regarding the prospects for our business or any of ourservices;

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

·       other statements containedherein or therein regarding matters that are not historical 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 in Part II. Other Informationunder the heading “Item 1A. Risk Factors.”

3

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**Part I.Financial Information**

**ITEM 1.**   UNAUDITEDCONSOLIDATED FINANCIAL STATEMENTS

The interim unaudited consolidated financialstatements of TransMontaigne Partners L.P. as of and for the three andnine months ended September 30, 2006, are included herein beginning on thefollowing page. The accompanying unaudited interim consolidated financialstatements should be read in conjunction with our 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.

TransMontaigne PartnersL.P. is a holding company with the following active wholly-ownedsubsidiaries during the three and nine months ended September 30, 2006.

·       TransMontaigne Operating GPL.L.C.

·       TransMontaigne OperatingCompany L.P.

·       Coastal Terminals L.L.C.

·       Razorback L.L.C.

·       TPSI Terminals L.L.C.

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

4

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

| ** **                          | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| **ASSETS**                          | ** ** |                         | ** ** | ** **                  |       |   | ** ** | ** ** |   |
| Current assets:                     |       |                         |       | ** **                  |       |   |   | ** ** |   |
| Cash and cash equivalents           |       |                         | $          | 299                         | ** ** |   |   | $ | 698 | ** ** |   |
| Trade accounts receivable, net      |       |                         | 2,305      | ** **                  |       |   | 1,003 | ** ** |   |
| Due from TransMontaigne Inc., net   |       |                         | 3,715      | ** **                  |       |   | 1,212 | ** ** |   |
| Prepaid expenses and other          |       |                         | 1,050      | ** **                  |       |   | 338 | ** ** |   |
|                                |       |                         | 7,369      | ** **                  |       |   | 3,251 | ** ** |   |
| Property, plant  and equipment, net |       |                         | 122,484    | ** **                  |       |   | 125,884 | ** ** |   |
| Other assets, net                   |       |                         | 1,389      | ** **                  |       |   | 1,901 | ** ** |   |
|                                |       |                         | $          | 131,242                     | ** ** |   |   | $ | 131,036 | ** ** |   |
| **LIABILITIES AND EQUITY**          | ** ** |                         | ** ** | ** **                  |       |   | ** ** | ** ** |   |
| Current  liabilities:               |       |                         |       | ** **                  |       |   |   | ** ** |   |
| Trade accounts payable              |       |                         | $          | 1,280                       | ** ** |   |   | $ | 1,784 | ** ** |   |
| Other accrued liabilities           |       |                         | 2,874      | ** **                  |       |   | 1,239 | ** ** |   |
|                                |       |                         | 4,154      | ** **                  |       |   | 3,023 | ** ** |   |
| Long-term  debt                     |       |                         | 49,997     | ** **                  |       |   | 28,000 | ** ** |   |
| Total liabilities                   |       |                         | 54,151     | ** **                  |       |   | 31,023 | ** ** |   |
| Partners’ equity:              |       |                         |       | ** **                  |       |   |   | ** ** |   |
| Predecessor equity                  |       |                         | —     | ** **                  |       |   | 9,625 | ** ** |   |
| Common unitholders                  |       |                         | 74,310     | ** **                  |       |   | 75,474 | ** ** |   |
| Subordinated unitholders            |       |                         | 2,580      | ** **                  |       |   | 14,581 | ** ** |   |
| General partner interest            |       |                         | 201        | ** **                  |       |   | 333 | ** ** |   |
|                                |       |                         | 77,091     | ** **                  |       |   | 100,013 | ** ** |   |
|                                |       |                         | $          | 131,242                     | ** ** |   |   | $ | 131,036 | ** ** |   |

 

See accompanying notes to consolidated financial statements.

5

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**TransMontaigne PartnersL.P. and subsidiaries**

**Consolidatedstatements of operations**

**(Inthousands, except per unit amounts)**

| ** **                                                              | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|-------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                              | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| Revenues                                                                |       | $                                                    | 11,420     |                                                | $          | 10,967 |   | $ | 35,073 |   | $ | 30,368 |   |
| Costs and expenses:                                                     |       |                                                 |       |                                                |       |   |   |   |   |
| Direct operating costs and expenses                                     |       | (5,442                                               | )          | (3,974                                              | )          | (15,960 | ) | (11,743 | ) |
| Direct general and administrative expenses                              |       | (3,761                                               | )          | (595                                                | )          | (5,533 | ) | (674 | ) |
| Allocated general and administrative expenses                           |       | (843                                                 | )          | (775                                                | )          | (2,477 | ) | (2,175 | ) |
| Allocated insurance expense                                             |       | (91                                                  | )          | (67                                                 | )          | (247 | ) | (233 | ) |
| Depreciation and amortization                                           |       | (1,806                                               | )          | (1,674                                              | )          | (5,538 | ) | (4,784 | ) |
| Total costs and expenses                                                |       | (11,943                                              | )          | (7,085                                              | )          | (29,755 | ) | (19,609 | ) |
| Operating income (loss)                                                 |       | (523                                                 | )          | 3,882                                               |       | 5,318 |   | 10,759 |   |
| Other income (expenses):                                                |       |                                                 |       |                                                |       |   |   |   |   |
| Interest income                                                         |       | 10                                                   |       | 1                                                   |       | 18 |   | 1 |   |
| Interest expense                                                        |       | (901                                                 | )          | (464                                                | )          | (2,402 | ) | (631 | ) |
| Amortization of deferred debt issuance costs                            |       | (46                                                  | )          | (46                                                 | )          | (138 | ) | (61 | ) |
| Total other expenses                                                    |       | (937                                                 | )          | (509                                                | )          | (2,522 | ) | (691 | ) |
| Net earnings (loss)                                                     |       | (1,460                                               | )          | 3,373                                               |       | 2,796 |   | 10,068 |   |
| Less (earnings) loss  allocable to:                                     |       |                                                 |       |                                                |       |   |   |   |   |
| Predecessor                                                             |       | —                                               |       | (247                                                | )          | — |   | (5,969 | ) |
| General partner interest                                                |       | 29                                                   |       | (63                                                 | )          | (56 | ) | (82 | ) |
| Net earnings (loss) allocable to limited partners                       |       | $                                                    | (1,431     | )                                                   | $          | 3,063 |   | $ | 2,740 |   | $ | 4,017 |   |
| Net earnings  (loss) per limited partners’ unit—basic         |       | $                                                    | (0.20      | )                                                   | $          | 0.42 |   | $ | 0.38 |   | $ | 0.55 |   |
| Net earnings  (loss) per limited partners’ unit—diluted       |       | $                                                    | (0.20      | )                                                   | $          | 0.42 |   | $ | 0.38 |   | $ | 0.55 |   |
| Weighted average  limited partners’ units outstanding—basic   |       | 7,273                                                |       | 7,295                                               |       | 7,279 |   | 7,295 |   |
| Weighted average limited  partners’ units outstanding—diluted |       | 7,273                                                |       | 7,295                                               |       | 7,284 |   | 7,295 |   |

 

See accompanying notes to consolidated financial statements.

6

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**TransMontaigne PartnersL.P. and subsidiaries**

**Consolidatedstatements of partners’ equity**

**Yearended June 30, 2005, six months ended December 31, 2005**

**andnine months ended September 30, 2006**

**(Inthousands)**
|                                                                                                                                                                         | ** ** | **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                                                                                                                           |       |            | 9,153      |              |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 9,153 |   |
| Net earnings from July 1, 2005 through  December 31, 2005                                                                                                     |       |            | 472        |              |       |                    | 3,559      |                           |       |                                     | 2,975      |      |       |   | 133 |   |   |   | — |   |   | 7,139 |   |
| **Balance December 31, 2005**                                                                                                                                      |       |            | 9,625      |              |       |                    | 75,474     |                           |       |                                     | 14,581     |      |       |   | 333 |   |   |   | — |   |   | 100,013 |   |
| Distributions and repayments, net                                                                                                                                       |       |            | (756       | )                 |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (756 | ) |
| Contribution of Mobile terminal in exchange for $17.9  million                                                                                                          |       |            | (8,869     | )                 |       |                    | —     |                           |       |                                     | (9,066     | )         |       |   | — |   |   |   | — |   |   | (17,935 | ) |
| Distributions to unitholders                                                                                                                                            |       |            | —     |              |       |                    | (4,843     | )                              |       |                                     | (4,186     | )         |       |   | (188 | ) |   |   | — |   |   | (9,217 | ) |
| Amortization of deferred equity-based  compensation related to restricted common units                                                                                  |       |            | —     |              |       |                    | 610        |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 610 |   |
| Acceleration of vesting of all outstanding restricted  phantom units and restricted common units                                                                        |       |            | —     |              |       |                    | 3,258      |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 3,258 |   |
| Common units repurchased from TransMontaigne  Services Inc.’s employees for withholding taxes                                                                 |       |            | —     |              |       |                    | (538       | )                              |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (538 | ) |
| Repurchase of 38,400 common units by our long-term  incentive plan                                                                                                      |       |            | —     |              |       |                    | (1,140     | )                              |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (1,140 | ) |
| Net earnings from January 1, 2006 through  September 30, 2006                                                                                                 |       |            | —     |              |       |                    | 1,489      |                           |       |                                     | 1,251      |      |       |   | 56 |   |   |   | — |   |   | 2,796 |   |
| **Balance  September 30, 2006**                                                                                                                                    |       |            | $          | —            |       |                    |       | $                              | 74,310     |                                     |       |      | $          | 2,580 |   |   |   | $ | 201 |   |   |   | $ | — |   |   | $ | 77,091 |   |
|                                                                                                                                                                         |            |                 |            |                   |            |                         |            |                                |            |                                          |            |           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

See accompanying notes to consolidated financial statements.

7

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**TransMontaigne PartnersL.P. and subsidiaries**

**Consolidatedstatements of cash flows**

**(Inthousands)**

| ** **                                                                                                  | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                  | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Cash flows from operating activities:**                                                                   |       |                                                 |       |                                                |       |   |   |   |   |
| Net earnings (loss)                                                                                         |       | $                                                    | (1,460     | )                                                   | $          | 3,373 |   | $ | 2,796 |   | $ | 10,068 |   |
| Adjustments to reconcile net earnings to net cash  provided by (used in) operating activities:              |       |                                                 |       |                                                |       |   |   |   |   |
| Depreciation and  amortization                                                                              |       | 1,806                                                |       | 1,674                                               |       | 5,538 |   | 4,784 |   |
| Amortization of deferred  equity-based compensation                                                         |       | 180                                                  |       | 168                                                 |       | 610 |   | 216 |   |
| Acceleration of vesting  of all outstanding restricted phantom units and restricted common units            |       | 3,258                                                |       | —                                              |       | 3,258 |   | — |   |
| Amortization of deferred  debt issuance costs                                                               |       | 46                                                   |       | 46                                                  |       | 138 |   | 61 |   |
| Changes in operating assets and liabilities, net of  effects from acquisitions:                             |       |                                                 |       |                                                |       |   |   |   |   |
| Trade accounts  receivable, net                                                                             |       | (558                                                 | )          | (520                                                | )          | (1,302 | ) | (606 | ) |
| Due from TransMontaigne  Inc., net                                                                          |       | (5,029                                               | )          | (4,328                                              | )          | (2,503 | ) | (4,342 | ) |
| Prepaid expenses and  other                                                                                 |       | 115                                                  |       | 22                                                  |       | (712 | ) | 124 |   |
| Trade accounts payable                                                                                      |       | 39                                                   |       | (1,214                                              | )          | (504 | ) | (830 | ) |
| Other accrued  liabilities                                                                                  |       | 321                                                  |       | 287                                                 |       | 1,635 |   | 1,168 |   |
| Net cash (used in)  provided by operating activities                                                        |       | (1,282                                               | )          | (492                                                | )          | 8,954 |   | 10,643 |   |
| **Cash flows from investing activities:**                                                                   |       |                                                 |       |                                                |       |   |   |   |   |
| Acquisition of Mobile  terminal                                                                             |       | —                                               |       | —                                              |       | (17,935 | ) | — |   |
| Additions to property,  plant and equipment—expansion of facilities                                    |       | (207                                                 | )          | (441                                                | )          | (1,212 | ) | (1,893 | ) |
| Additions to property,  plant and equipment—maintain existing facilities                               |       | (344                                                 | )          | (127                                                | )          | (841 | ) | (979 | ) |
| Reimbursement of costs  incurred to maintain certain tank capacity at our Port Everglades (South)  terminal |       | 289                                                  |       | —                                              |       | 289 |   | — |   |
| Net cash (used in)  investing activities                                                                    |       | (262                                                 | )          | (568                                                | )          | (19,699 | ) | (2,872 | ) |
| **Cash flows from financing activities:**                                                                   |       |                                                 |       |                                                |       |   |   |   |   |
| Net borrowings of debt                                                                                      |       | 3,997                                                |       | 2,693                                               |       | 21,997 |   | 31,000 |   |
| Deferred debt issuance  costs                                                                               |       | —                                               |       | —                                              |       | — |   | (916 | ) |
| Net proceeds from  issuance of common units                                                                 |       | —                                               |       |                                                |       | — |   | 72,932 |   |
| Net proceeds from  issuance of subordinated units                                                           |       | —                                               |       |                                                |       | — |   | 7,945 |   |
| Distributions paid to  unitholders                                                                          |       | (3,148                                               | )          | (1,099                                              | )          | (9,217 | ) | (1,099 | ) |
| Common units repurchased  from TransMontaigne Services Inc.’s employees for withholding taxes     |       | (442                                                 | )          | —                                              |       | (538 | ) | — |   |
| Repurchase of common  units for long-term incentive plan                                                    |       | (202                                                 | )          | —                                              |       | (1,140 | ) | — |   |
| Net distributions and  repayments to TransMontaigne Inc.                                                    |       | —                                               |       | —                                              |       | (756 | ) | (116,860 | ) |
| Net cash provided by  (used in) financing activities                                                        |       | 205                                                  |       | 1,594                                               |       | 10,346 |   | (6,998 | ) |
| Increase (decrease) in  cash and cash equivalents                                                           |       | (1,339                                               | )          | 534                                                 |       | (399 | ) | 773 |   |
| Cash and cash  equivalents at beginning of period                                                           |       | 1,638                                                |       | 241                                                 |       | 698 |   | 2 |   |
| Cash and cash  equivalents at end of period                                                                 |       | $                                                    | 299        |                                                | $          | 775 |   | $ | 299 |   | $ | 775 |   |
| **Supplemental disclosures of cash flow  information:**                                                     |       |                                                 |       |                                                |       |   |   |   |   |
| Cash paid for interest                                                                                      |       | $                                                    | 719        |                                                | $          | 430 |   | $ | 2,164 |   | $ | 597 |   |

 

See accompanying notes to consolidated financial statements.

8

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**TransMontaignePartners L.P. and subsidiaries**

**Notesto consolidated financial statements**

**(1) SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

**(a) Principles ofConsolidation 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 in our opinion, are 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 TransMontaigne Inc. terminal and pipelineoperations prior to their contribution by TransMontaigne Inc. to us. Thecontributed assets and liabilities have been recorded at TransMontaigne Inc.’scarryover basis. At the closing of our initial public offering on May 27,2005, TransMontaigne Inc. contributed to us seven Florida terminals,including terminals located in Tampa, Port Manatee, Fisher Island, PortEverglades (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 January 1, 2006, TransMontaigneInc. contributed to us the Mobile, Alabama terminal (see Note 3 of Notes toconsolidated financial statements). These contributions of terminal andpipeline operations by TransMontaigne Inc. to us have been accounted for astransactions among entities under common control and, accordingly, priorperiods include the activity of the contributed terminal and pipelineoperations since the date they originally were acquired by TransMontaigne Inc.On August 1, 2005, TransMontaigne Inc. acquired the Mobile terminaloperations from Radcliff/Economy Marine Services, Inc. All significantinter-company accounts and transactions have been eliminated in thepreparation of the accompanying 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.

**(b) Nature ofbusiness**

Partners was formed in2005 as a Delaware master limited partnership initially to own and operaterefined petroleum products terminaling and pipeline assets. We conduct ouroperations in the United States primarily along the U.S. Gulf Coast and in theMidwest. We provide integrated terminaling, storage, 

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pipelineand related services for companies engaged in the distribution and marketing ofrefined petroleum products and crude oil, including TransMontaigne Inc.

**(c) Change in yearend**

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

**(d) Basis ofpresentation**

Theaccompanying consolidated financial statements include allocated general andadministrative charges from TransMontaigne Inc. for indirect corporateoverhead to cover costs of functions such as legal, accounting, treasury,engineering, environmental safety, information technology, and other corporateservices (see Note 2 of Notes to consolidated financial statements). The allocatedgeneral and administrative charges were $0.8 million and $0.8 millionfor the three months ended September 30, 2006 and 2005, respectively, and$2.5 million and $2.2 million for the nine months ended September 30,2006 and 2005, respectively. The accompanying consolidated financial statementsalso include allocated insurance charges from TransMontaigne Inc. forinsurance premiums to cover costs of insuring activities such as propertycasualty, pollution, automobile, directors and officers’ liability, and otherinsurable risks. The allocated insurance charges were $0.3 million and$0.3 million for the three months ended September 30, 2006 and 2005,respectively, and $0.8 million and $0.8 million for the nine monthsended September 30, 2006 and 2005, respectively. Management believes thatthe allocated general and administrative charges and insurance charges arerepresentative of the costs and expenses incurred by TransMontaigne Inc.for managing Partners’ operations.

**(e) Accounting forterminal and pipeline operations**

Inconnection with our terminal and pipeline operations, we utilize the accrualmethod of accounting for revenue and expenses. We generate revenues in ourterminal and pipeline operations from throughput fees, storage fees,transportation fees, and fees from other ancillary services. Throughput revenueis recognized when the product is delivered to the customer; storage revenue isrecognized ratably over the term of the storage contract; transportationrevenue is recognized when the product has been delivered to the customer atthe specified delivery location; and ancillary service revenue is recognized asthe services are performed.

**(f) Environmentalobligations**

At September 30, 2006 and December 31, 2005,we have accrued environmental obligations of approximately $745,000 and$625,000, respectively, representing our best estimate of our remediationobligations (see Note 8 of Notes to consolidated financial statements).During the nine months ended September 30, 2006 we made payments ofapproximately $330,000 towards our environmental remediation obligations. Duringthe nine months ended September 30, 2006 we charged to incomeapproximately $450,000 to increase our estimate of our future environmentalremediation obligations due to product that was released at our Mobile terminalfacility. The accrued environmental obligations at December 31, 2005represent 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.

On October 3, 2006, we incurred a release ofapproximately 1,600 barrels of gasoline at our Rogers, Arkansas terminalfacility due to human error. We currently estimate that we will incur anuninsured loss and future environmental remediation costs of less than $0.7million to remediate this matter. During the three months ending December 31,2006 we will charge to income approximately $0.7 million to increase 

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our estimate of our futureenvironmental remediation obligations due to the product that was released atour Rogers terminal facility.

TransMontaigne Inc.has indemnified us through May 2010 against certain potential environmentalclaims, losses and expenses occurring before May 27, 2005, and associatedwith the operation of the assets contributed to us on May 27, 2005, up toa maximum liability not to exceed $15 million for this indemnificationobligation (see Note 2 of Notes to consolidated financial statements).

**(g) Assetretirement obligations**

At September 30, 2006 and December 31, 2005,we have accrued asset retirement obligations of approximately $330,000 and$237,000, 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 representcosts we would incur in the future if we were to close certain terminals andpipelines due to certain state-imposed obligations to close aboveground storagetanks upon abandoning the operations of the related tanks and regulations tosafely abandon Federally regulated pipelines. Changes in our estimates andassumptions may occur as a result of the passage of time and the occurrence offuture events.

In March 2005,the FASB issued FASB Interpretation No. 47 (“FIN 47”), “Accountingfor Conditional Asset Retirement Obligations—an interpretation ofSFAS 143,” which requires companies to recognize a liability for the fairvalue of a legal obligation to perform asset-retirement activities thatare conditional on a future event, if the amount can be reasonably estimated.We adopted the requirements of FIN 47 on January 1, 2006. Theadoption of FIN 47 did not have a significant impact on our consolidatedfinancial 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. On September 1,2006, TransMontaigne Inc. was acquired by Morgan Stanley Capital Group Inc. (“MorganStanley Capital Group”), resulting in the acceleration of vesting of alloutstanding restricted phantom units and restricted common units.

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**(i) Income taxes**

Noprovision for income taxes has been reflected in the accompanying consolidatedfinancial statements because Partners is treated as a partnership for federaland state income taxes. As a partnership, all income, gains, losses, expenses,deductions and tax credits generated by Partners flow through to theunitholders of the partnership.

**(j) Net earnings(loss) per limited partners’ unit**

Basicearnings (loss) per limited partners’ unit is computed by dividing net earnings(loss) allocable to limited partners by the weighted average number of limitedpartnership units outstanding during the period, excluding restricted phantomunits. Diluted earnings (loss) per limited partners’ unit is computed bydividing net earnings (loss) allocable to limited partners by the weightedaverage number of limited partnership units outstanding during the period and,when dilutive, restricted phantom units. Net earnings (loss) allocable tolimited partners are net of two percent of the earnings (loss) allocable to thegeneral partner.

**(2) TRANSACTIONSWITH TRANSMONTAIGNE 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 September 30, 2006, the annual administrativefee payable to TransMontaigne Inc. was approximately $3.4 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 September 30, 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 operational personnelperforming services on-site at our terminals and pipeline and the cost of theiremployee benefits, including 401(k) and health insurance benefits.

Under the omnibus agreement, TransMontaigne Inc.has agreed to indemnify us through May 27, 2010 against certain potentialenvironmental claims, losses and expenses occurring before May 27, 2005,and associated with the operation of the assets contributed to us on 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 ofenvironmental laws promulgated after May 27, 2005. We have agreed toindemnify TransMontaigne Inc. against environmental liabilities related toour assets, 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 

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$5 million percalendar quarter. If TransMontaigne Inc. fails to meet its minimum revenuecommitment in any quarter, it must pay us the amount of any shortfall within15 days following receipt of an invoice from us. A shortfall payment maybe applied as a credit in the following four quarters afterTransMontaigne Inc.’s minimum obligations are met. In exchange forTransMontaigne Inc.’s minimum revenue commitment, we agreed to provideTransMontaigne Inc. approximately 2.0 million barrels of light oilstorage capacity and approximately 1.4 million barrels of heavy oilstorage capacity at certain of 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.

Effective September 1, 2006, we are responsiblefor all refined product losses and we are entitled to all product gains at ourFlorida terminals. Prior to September 1, 2006, we were responsible for allrefined product losses in excess of 0.10% of the refined product we receivedfrom TransMontaigne Inc. at our Florida terminals; we were entitled to allproduct gains, including 0.10% of the refined product we received from TransMontaigne Inc.at our Florida 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 that will expire no earlier than November 1,2012. The terminaling services agreement will provide that TransMontaigne Inc.agrees to throughput such volume of refined product as may be required toguarantee minimum revenues of $0.8 million per year. IfTransMontaigne Inc. fails to meet its minimum revenue commitment in anyyear, it must pay us the amount of any shortfall within 15 days followingreceipt of an invoice from us. In exchange for TransMontaigne Inc.’sminimum revenue commitment, we agreed to provide TransMontaigne Inc.approximately 152,000 barrels of light oil storage capacity at our OklahomaCity terminal. TransMontaigne Inc.’s minimum revenue commitment currently isnot in effect because a major oil company is under contract for the utilizationof the light oil storage capacity at the terminal.

*Terminaling ServicesAgreement—Mobile Terminal.**  *We have a terminaling and transportation servicesagreement with TransMontaigne Inc. that will expire on December 31,2012. Under this agreement, TransMontaigne Inc. agreed to throughput atour Mobile terminal a volume of refined products that will, at the fee andtariff schedule contained in the agreement, result in minimum revenues to us of$2.1 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. A shortfallpayment 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.

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**(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 include the assets, liabilities, and results of operations of theMobile terminal from August 1, 2005, the date of acquisition byTransMontaigne Inc. from Radcliff/Economy Marine Services, Inc. Theresults of operations of the Mobile terminal for periods prior to its actualcontribution to us have been allocated to our predecessor entity TransMontaignePartners (Predecessor). The consideration we paid to TransMontaigne Inc. in excessof the carryover basis of the net assets contributed has been reflected in theaccompanying consolidated balance sheet and changes in partners’ equity as areduction of partners’ equity—subordinated units.

Thebasis of the assets and liabilities of the Mobile terminal are as follows:

| ** **                          | ** ** | **December 31,  2005** | ** ** | **August 1,  2005** | ** ** |
|-------------------------------------|------------|-----------------------------|------------|--------------------------|------------|
| Trade accounts  receivable          |       |                        | $          | 81                       |       |   |   | $ | 72 |   |   |
| Due from  TransMontaigne Inc.       |       |                        | 748        |                     |       |   | — |   |   |
| Property, plant  and equipment, net |       |                        | 8,869      |                     |       |   | 9,137 |   |   |
| Trade accounts  payable             |       |                        | (73        | )                        |       |   | (56 | ) |   |
| Predecessor  equity                 |       |                        | $          | 9,625                    |       |   |   | $ | 9,153 |   |   |

 

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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 asfollows:

| ** **                                  | ** ** | **Six months ended  December 31, 2005** | ** ** |
|---------------------------------------------|------------|-------------------------------------------------------------|------------|
| Revenues:                                   |       |                                                        |       |   |   |
| TransMontaigne Partners                     |       |                                                        | $          | 21,502 |   |   |
| Mobile terminal (since August 1, 2005) |       |                                                        | 1,406      |   |   |
| Combined                                    |       |                                                        | $          | 22,908 |   |   |
| Net earnings:                               |       |                                                        |       |   |   |
| TransMontaigne Partners                     |       |                                                        | $          | 6,667 |   |   |
| Mobile terminal (since August 1, 2005) |       |                                                        | 472        |   |   |
| Combined                                    |       |                                                        | $          | 7,139 |   |   |

 

**(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. During the three months ended September 30, 2006, we increasedthe allowance for doubtful accounts through a charge to income of approximately$75,000.

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

| ** **                            | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Trade accounts  receivable            |       |                         | $          | 2,380                       |       |   |   | $ | 1,003 |   |   |
| Less allowance  for doubtful accounts |       |                         | (75        | )                           |       |   | — |   |   |
|                                  |       |                         | $          | 2,305                       |       |   |   | $ | 1,003 |   |   |

 

TransMontaigne Inc.accounted for approximately 66% and 68% of our total revenues for the threemonths ended September 30, 2006 and 2005, respectively, and approximately67% and 66% of our total revenues for the nine months ended September 30,2006 and 2005, respectively. Marathon Petroleum Company LLC (“Marathon”) andthe previous asphalt storage customers accounted for 20% and 20% of our totalrevenues for the three months ended September 30, 2006 and 2005,respectively, and approximately 19% and 23% of our total revenues for the ninemonths ended September 30, 2006 and 2005, respectively. During February 2006,Marathon entered into a new five-year terminaling services agreement for asphaltstorage capacity that replaces our previous customer, Gulf Atlantic Refining &Marketing, LP.

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**(5)**          PREPAIDEXPENSES AND OTHER

Prepaidexpenses and other are as follows (in thousands):

| ** **                                      | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Reimbursements  due from the Federal government |       |                         | $          | 558                         |       |   |   | $ | — |   |   |
| Additive  detergent                             |       |                         | 452        |                        |       |   | 307 |   |   |
| Deposits and  other assets                      |       |                         | 40         |                        |       |   | 31 |   |   |
|                                            |       |                         | $          | 1,050                       |       |   |   | $ | 338 |   |   |

 

Reimbursements due fromthe Federal government represent costs we have incurred for the development andinstallation of terminal security plans and enhancements at our U.S. Gulf Coastterminals.

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

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

| ** **                          | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Land                                |       |                         | $          | 27,303                      |       |   |   | $ | 27,303 |   |   |
| Terminals,  pipelines and equipment |       |                         | 129,030    |                        |       |   | 128,830 |   |   |
| Furniture,  fixtures and equipment  |       |                         | 649        |                        |       |   | 480 |   |   |
| Construction in  progress           |       |                         | 1,657      |                        |       |   | 263 |   |   |
|                                |       |                         | 158,639    |                        |       |   | 156,876 |   |   |
| Less accumulated  depreciation      |       |                         | (36,155    | )                           |       |   | (30,992 | ) |   |
|                                |       |                         | $          | 122,484                     |       |   |   | $ | 125,884 |   |   |

 

**(7)**          OTHERASSETS

Otherassets, net are as follows (in thousands):

| ** **                                                                      | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Acquired  intangible, net of accumulated amortization of $1,792 and $1,417      |       |                         | $          | 708                         |       |   |   | $ | 1,083 |   |   |
| Deferred debt  issuance costs, net of accumulated amortization of $244 and $107 |       |                         | 672        |                        |       |   | 809 |   |   |
| Deposits and  other assets                                                      |       |                         | 9          |                        |       |   | 9 |   |   |
|                                                                            |       |                         | $          | 1,389                       |       |   |   | $ | 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 effective interest method over the term of thecredit facility (see Note 9 of Notes to consolidated financialstatements).

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**(8)**          OTHERACCRUED LIABILITIES

Otheraccrued liabilities are as follows (in thousands):

| ** **                         | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Accrued property  taxes            |       |                         | $          | 1,398                       |       |   |   | $ | 58 |   |   |
| Accrued  environmental obligations |       |                         | 745        |                        |       |   | 625 |   |   |
| Customer advances  and deposits    |       |                         | 134        |                        |       |   | 233 |   |   |
| Asset retirement  obligations      |       |                         | 330        |                        |       |   | 237 |   |   |
| Interest payable                   |       |                         | 264        |                        |       |   | 26 |   |   |
| Accrued expenses  and other        |       |                         | 3          |                        |       |   | 60 |   |   |
|                               |       |                         | $          | 2,874                       |       |   |   | $ | 1,239 |   |   |

 

**(9)**          LONG-TERMDEBT

On May 9, 2005, we entered into a$75 million senior secured credit facility. At September 30, 2006 andDecember 31, 2005, our outstanding borrowings under the credit facilitywere approximately $50.0 million and $28.0 million, respectively. Thecredit facility provides for a maximum borrowing line of credit equal to thelesser of (i) $75 million and (ii) four times ConsolidatedEBITDA (as defined; $84.7 million at September 30, 2006). At September 30,2006, we had outstanding letters of credit of approximately $230,000.Borrowings under the credit facility bear interest (at our option) based on a baserate plus an applicable margin, or LIBOR plus an applicable margin; theapplicable margins are a function of the total leverage ratio (as defined).Interest on loans under the credit facility is due and payable periodically,based on the applicable interest rate and related interest period, generallyone, two or three months. The weighted average interest rate on borrowingsunder our credit facility was 7.0% and 6.5% during the three and nine monthsended September 30, 2006, respectively. 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, investmentproperty, contract rights and real property, except for our real propertylocated in Florida. The terms of the credit facility include covenants thatrestrict our ability to make cash distributions and acquisitions. The principalbalance of loans and any accrued and unpaid interest will be due and payable infull 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 agreementsand litigation) 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 September 30, 2006, we were incompliance with the financial covenants contained in the credit facility.

On June 22, 2006,TransMontaigne Inc. announced that it had entered into a definitive mergeragreement with Morgan Stanley Capital Group, pursuant to which all the issuedand outstanding shares of common stock of TransMontaigne Inc., would beacquired. We were not a party to that merger agreement. The merger betweenTransMontaigne Inc. and Morgan Stanley Capital Group closed on September 1,2006, and constituted a “change in control” under our credit facility requiringa waiver from the lenders. On July 28, 2006 the lenders granted a consentand waiver to permit the proposed merger between TransMontaigne Inc. and MorganStanley Capital Group.

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**(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. As of September 30, 2006, 170,395units are available for future grant under the long-term incentive plan.Ownership in the awards is subject to forfeiture until the vesting date, butrecipients have distribution and voting rights from the date of grant. The planis administered by the compensation committee of the board of directors of ourgeneral partner. On January 19, 2006, we announced a program for therepurchase of outstanding common units for purposes of making subsequent grantsof restricted units to key employees and non-employee directors of our generalpartner. As of September 30, 2006, we have repurchased approximately38,400 common units pursuant to the program. As a result of the merger betweenTransMontaigne Inc. and Morgan Stanley Capital Group, repurchases ofoutstanding common units under the program were discontinued.

On March 31, 2006, TransMontaigne Services Inc.granted 58,000 restricted phantom units to its key employees and executive officers,and non-employee directors of our general partner. On May 27, 2005,TransMontaigne Services Inc. granted 120,000 restricted common units toits 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.

Pursuant to the terms of the long-term incentive plan,all restricted phantom units and restricted common units granted to employeesand executive officers, and non-employee directors of our general partner vestupon a change in control of TransMontaigne Inc. On September 1, 2006,TransMontaigne Inc. was acquired by Morgan Stanley Capital Group resulting inthe acceleration of vesting of all outstanding restricted phantom units andrestricted common units. Amortization of deferred equity-basedcompensation of approximately $3.4 million and $168,000 is included in directgeneral and administrative expense for the three months ended September 30,2006 and 2005, respectively. Amortization of deferred equity-basedcompensation of approximately $3.9 million and $216,000 is included in directgeneral and administrative expense for the nine months ended September 30,2006 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 September 30,2006 and 2005, is approximately $63,000 and $18,000, respectively, ofcompensation expense related to distributions paid to holders of restrictedunits. Included in direct general and administrative expenses for the ninemonths ended September 30, 2006 and 2005, is approximately $188,000 and$18,000, respectively, of compensation expense related to distributions paid toholders of restricted units.

18

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**(11)**   COMMITMENTSAND CONTINGENCIES

*Operating Leases.**  *We lease property and equipment undernon-cancelable operating leases that extend through April 2021. At September 30,2006, 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)                |       |       | $          | 52                               |       |   |
| 2007                                         |       |       | 208        |                             |       |
| 2008                                         |       |       | 196        |                             |       |
| 2009                                         |       |       | 153        |                             |       |
| 2010                                         |       |       | 111        |                             |       |
| Thereafter                                   |       |       | 1,137      |                             |       |
|                                         |       |       | $          | 1,857                            |       |   |

 

Rental expense underoperating leases was approximately $80,000 and $70,000 for the three monthsended September 30, 2006 and 2005, respectively. Rental expense underoperating leases was approximately $235,000 and $186,000 for the nine monthsended September 30, 2006 and 2005, respectively.

**(12)**   NETEARNINGS (LOSS) PER LIMITED PARTNERS’ UNIT

Thefollowing table reconciles the computation of basic and diluted weightedaverage units (in thousands):

| ** **                                   | ** ** | **Three months  ended  September 30,** | ** ** | **Nine months  ended  September 30,** | ** ** |
|----------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                         | ** ** | **2005**                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Basic weighted  average units                |       | 7,273                                            |       | 7,295                                           |       | 7,279 |   | 7,295 |   |
| Dilutive effect  of restricted phantom units |       | —                                           |       | —                                          |       | 5 |   | — |   |
| Diluted weighted average  units              |       | 7,273                                            |       | 7,295                                           |       | 7,284 |   | 7,295 |   |

 

For the nine months ended September 30, 2006, weincluded the dilutive effect of 58,000 restricted phantom units, prior to theirvesting on September 1, 2006, in the computation of diluted net earningsper limited partners’ unit because the average quoted market price of ourcommon units for the period exceeded the related unamortized deferredcompensation.

We exclude potentiallydilutive securities from our computation of diluted earnings per limitedpartners’ unit when their effect would be anti-dilutive. There were noanti-dilutive securities for the three months ended September 30, 2006 andthree and nine months ended September 30, 2005.

**(13)**   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.

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

| ** **                                    | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|-----------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| **U.S. Gulf Coast Terminals:**                | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Throughput and  additive injection fees, net  |       | $                                                    | 4,695      |                                                | $          | 5,039 |   | $ | 14,889 |   | $ | 10,618 |   |
| Terminaling  storage fees                     |       | 2,755                                                |       | 2,610                                               |       | 8,028 |   | 11,611 |   |
| Pipeline  transportation fees                 |       | —                                               |       | —                                              |       | — |   | — |   |
| Other                                         |       | 2,278                                                |       | 1,835                                               |       | 6,756 |   | 4,271 |   |
| Revenues                                      |       | 9,728                                                |       | 9,484                                               |       | 29,673 |   | 26,500 |   |
| Direct operating costs and expenses           |       | (4,982                                               | )          | (3,563                                              | )          | (14,728 | ) | (10,829 | ) |
| Margins                                       |       | 4,746                                                |       | 5,921                                               |       | 14,945 |   | 15,671 |   |
| **Midwest Terminals and Pipeline:**           | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Throughput and  additive injection fees, net  |       | 736                                                  |       | 520                                                 |       | 2,349 |   | 1,459 |   |
| Terminaling  storage fees                     |       | —                                               |       | —                                              |       | — |   | — |   |
| Pipeline  transportation fees                 |       | 580                                                  |       | 633                                                 |       | 1,835 |   | 1,777 |   |
| Other                                         |       | 376                                                  |       | 330                                                 |       | 1,216 |   | 632 |   |
| Revenues                                      |       | 1,692                                                |       | 1,483                                               |       | 5,400 |   | 3,868 |   |
| Direct operating costs and expenses           |       | (460                                                 | )          | (411                                                | )          | (1,232 | ) | (914 | ) |
| Margins                                       |       | 1,232                                                |       | 1,072                                               |       | 4,168 |   | 2,954 |   |
| Total margins                                 |       | 5,978                                                |       | 6,993                                               |       | 19,113 |   | 18,625 |   |
| Direct general and administrative expenses    |       | (3,761                                               | )          | (595                                                | )          | (5,533 | ) | (674 | ) |
| Allocated general and administrative expenses |       | (843                                                 | )          | (775                                                | )          | (2,477 | ) | (2,175 | ) |
| Allocated insurance expense                   |       | (91                                                  | )          | (67                                                 | )          | (247 | ) | (233 | ) |
| Depreciation and amortization                 |       | (1,806                                               | )          | (1,674                                              | )          | (5,538 | ) | (4,784 | ) |
| Operating income (loss)                       |       | (523                                                 | )          | 3,882                                               |       | 5,318 |   | 10,759 |   |
| Other income (expense), net                   |       | (937                                                 | )          | (509                                                | )          | (2,522 | ) | (691 | ) |
| Net earnings  (loss)                          |       | $                                                    | (1,460     | )                                                   | $          | 3,373 |   | $ | 2,796 |   | $ | 10,068 |   |

 

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

| ** **                         | ** ** | **Three months ended September 30, 2006** | ** ** |
|------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                               | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from  external customers  |       | $                                                                  | 3,617      |   |   | $ | 293 |   |   | $ | 3,910 |   |
| Revenues from  TransMontaigne Inc. |       | 6,111                                                              |       |   | 1,399 |   |   | 7,510 |   |
| Revenues                           |       | $                                                                  | 9,728      |   |   | $ | 1,692 |   |   | $ | 11,420 |   |
| Identifiable  assets               |       | $                                                                  | 113,546    |   |   | $ | 17,696 |   |   | $ | 131,242 |   |
| Capital expenditures               |       | $                                                                  | 531        |   |   | $ | 20 |   |   | $ | 551 |   |

 

| ** **                         | ** ** | **Three months ended September 30, 2005** | ** ** |
|------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                               | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from  external customers  |       | $                                                                  | 3,513      |   |   | $ | — |   |   | $ | 3,513 |   |
| Revenues from  TransMontaigne Inc. |       | 5,971                                                              |       |   | 1,483 |   |   | 7,454 |   |
| Revenues                           |       | $                                                                  | 9,484      |   |   | $ | 1,483 |   |   | $ | 10,967 |   |
| Identifiable  assets               |       | $                                                                  | 121,530    |   |   | $ | 11,223 |   |   | $ | 132,753 |   |
| Capital expenditures               |       | $                                                                  | 568        |   |   | $ | — |   |   | $ | 568 |   |

 

20

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| ** **                         | ** ** | **Nine months ended September 30, 2006** | ** ** |
|------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                              | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from  external customers  |       | $                                                                 | 10,714     |   |   | $ | 884 |   |   | $ | 11,598 |   |
| Revenues from  TransMontaigne Inc. |       | 18,959                                                            |       |   | 4,516 |   |   | 23,475 |   |
| Revenues                           |       | $                                                                 | 29,673     |   |   | $ | 5,400 |   |   | $ | 35,073 |   |
| Identifiable  assets               |       | $                                                                 | 113,546    |   |   | $ | 17,696 |   |   | $ | 131,242 |   |
| Capital expenditures               |       | $                                                                 | 1,984      |   |   | $ | 69 |   |   | $ | 2,053 |   |

 

| ** **                         | ** ** | **Nine months ended September 30, 2005** | ** ** |
|------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                              | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from external  customers  |       | $                                                                 | 10,437     |   |   | $ | — |   |   | $ | 10,437 |   |
| Revenues from  TransMontaigne Inc. |       | 16,063                                                            |       |   | 3,868 |   |   | 19,931 |   |
| Revenues                           |       | $                                                                 | 26,500     |   |   | $ | 3,868 |   |   | $ | 30,368 |   |
| Identifiable  assets               |       | $                                                                 | 121,530    |   |   | $ | 11,223 |   |   | $ | 132,753 |   |
| Capital expenditures               |       | $                                                                 | 2,872      |   |   | $ | — |   |   | $ | 2,872 |   |

 

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**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 NINE MONTHS ENDED SEPTEMBER 30, 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. On September 1, 2006 TransMontaigne Inc. was acquired byMorgan Stanley Capital Group resulting in the acceleration of vesting of allrestricted phantom units and restricted common stock. As a result of the mergerbetween TransMontaigne Inc. and Morgan Stanley Capital Group, repurchases ofoutstanding common units under the program were discontinued.

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 did not have amaterial impact on our results of operations or cash flows.

On April 19, 2006, we announced a distribution of$0.43 per unit payable on May 9, 2006 to unitholders of record on April 28,2006.

On June 22, 2006, TransMontaigne Inc. announcedthat it had entered into a definitive merger agreement with Morgan StanleyCapital Group, pursuant to which all the issued and outstanding shares ofcommon stock of TransMontaigne Inc., would be acquired. We were not a party tothat merger agreement. The merger between TransMontaigne Inc. and MorganStanley Capital Group was completed on September 1, 2006, and MorganStanley Capital Group now controls our operations. We currently cannot 

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predict whether or in whatmanner Morgan Stanley Capital Group’s control of our general partner willchange our operations.

On July 21, 2006, we announced a distribution of$0.43 per unit payable on August 8, 2006 to unitholders of record on July 31,2006.

Effective September 1,2006, we amended our Terminaling Services Agreement with TransMontaigne Inc. Theamendment eliminated the retention by us of a loss allowance on productreceipts at our Florida terminals and the collection by us of a management feefor managing and operating on behalf of TransMontaigne Inc. certain tankcapacity owned by a utility. In exchange, the amendment provides for anincrease in throughput fees charged on light and heavy oil volumes at ourFlorida terminals. The impact on the statement of operations and cash flows isnot expected to be significant. We will continue to retain a loss allowance onproduct receipts at our Mobile and Midwest terminals.

**SUBSEQUENT EVENTS**

On October 19, 2006, we announced a distributionof $0.43 per unit payable on November 7, 2006 to unitholders of record on October 31,2006.

On October 3, 2006,we incurred a release of approximately 1,600 barrels of gasoline at our Rogers,Arkansas terminal facility due to human error. We currently estimate that wewill incur an uninsured loss and future environmental remediation costs of lessthan $0.7 million to remediate this matter.

**RESULTS OFOPERATIONS—THREE MONTHS ENDED SEPTEMBER 30, 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 certain TransMontaigne Inc.terminal and pipeline operations to us was recorded for financial reportingpurposes at carryover basis in a manner similar to a reorganization of entitiesunder common control.

Thefollowing selected historical financial statement measures are derived from ourunaudited interim financial statements for the three months ended September 30,2006 and 2005 (in thousands):

| ** **                                 | ** ** | **Three months ended  September 30,** | ** ** |
|--------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                 | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Revenues                                   |       | $                                                    | 11,420     |   | $ | 10,967 |   |
| Direct operating  costs and expenses       |       | $                                                    | (5,442     | ) | $ | (3,974 | ) |
| Operating income  (loss)                   |       | $                                                    | (523       | ) | $ | 3,882 |   |
| Net earnings  (loss)                       |       | $                                                    | (1,460     | ) | $ | 3,373 |   |
| Net cash (used  in) operating activities   |       | $                                                    | (1,282     | ) | $ | (492 | ) |
| Net cash (used  in) investing activities   |       | $                                                    | (262       | ) | $ | (568 | ) |
| Net cash provided by financing  activities |       | $                                                    | 205        |   | $ | 1,594 |   |

 

***Revenues.******  ***For the three months ended September 30,2006 and 2005, revenues were approximately $11.4 million and $11.0 million,respectively. Effective October 31, 2005, we acquired the Oklahoma Cityterminal 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. TransMontaigne Inc.acquired the Mobile terminal from Radcliff on August 1, 2005. For thethree months ended September 30, 2006, the Oklahoma City terminalcontributed approximately $0.3 million in revenues. For the three months ended September 30,2006 and 2005, the Mobile terminal contributed 

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revenues of approximately $1.0 million and $0.6million, respectively. Our revenues are as follows (in thousands):

| ** **                                   | ** ** | **Three months ended  September 30,** | ** ** |
|----------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Throughput and  additive injection fees, net |       | $                                                    | 5,431      |   | $ | 5,559 |   |
| Terminaling  storage fees                    |       | 2,755                                                |       | 2,610 |   |
| Pipeline  transportation fees                |       | 580                                                  |       | 633 |   |
| Management fees  and reimbursed costs        |       | 263                                                  |       | 312 |   |
| Other                                        |       | 2,391                                                |       | 1,853 |   |
| Revenues                                     |       | $                                                    | 11,420     |   | $ | 10,967 |   |

 

***Throughput andadditive injection fees, net.******  ***Terminalthroughput and additive injection fees, net were approximately$5.4 million and $5.6 million for the three months ended September 30,2006 and 2005, respectively. The decrease of approximately $0.2 million inthroughput and additive injection fees, net for 2006 as compared to 2005 wasdue principally to a reduction in revenues of approximately $0.5 millionresulting from a decline in light and heavy oil volumes offset by an increaseof approximately $0.3 million from the acquisition of the Oklahoma Cityterminal. For the three months ended September 30, 2006 and 2005, wedelivered approximately 92,600 barrels and 97,600 barrels per day,respectively, of light oil throughput volumes for TransMontaigne Inc. at ourterminals.

For the three months ended September 30, 2006 and2005, we delivered approximately 22,200 barrels and 32,900 barrels per day,respectively, of heavy oil volumes for TransMontaigne Inc. at ourterminals.

Included in the throughput and additive injectionfees, net for the three months ended September 30, 2006 and 2005, are feescharged to TransMontaigne Inc. of approximately $5.0 million and$5.4 million, respectively.

***Terminaling storagefees.******  ***Terminaling storage fees wereapproximately $2.8 million and $2.6 million for the three monthsended September 30, 2006 and 2005, respectively. The increase ofapproximately $0.2 million in terminaling storage fees for 2006 as compared to2005 was due primarily to contract escalations with existing storage customersand addition of a new storage customer during October 2005.

***Pipelinetransportation fees.******  ***For the three months ended September 30,2006 and 2005, we earned pipeline transportation fees of approximately$0.6 million and $0.6 million, respectively. For the three monthsended September 30, 2006 and 2005, we averaged approximately 12,600barrels and 13,800 barrels per day, respectively, of transported product on theRazorback Pipeline for TransMontaigne Inc.

Included in pipeline transportation fees for the threemonths ended September 30, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $0.6 million and$0.6 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. From May 27, 2005 through August 31,2006, we managed and operated on behalf of TransMontaigne Inc. certain tankcapacity owned by a utility and received a management fee from TransMontaigneInc. Effective September 1, 2006, our agreement with TransMontaigne Inc.to manage and operate certain tank capacity owned by a utility was terminated.For the three months ended September 30, 2006 and 2005, management feesand reimbursed costs were approximately $263,000 and $312,000, respectively.

Included in management fees and reimbursed costs forthe three months ended September 30, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $202,000 and $275,000,respectively.

***Other revenue.******  ***For the threemonths ended September 30, 2006 and 2005, other revenue was approximately$2.4 million and $1.9 million, respectively. The increase ofapproximately $0.5 million in 

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other revenue for 2006 ascompared to 2005 was due principally to an increase at the Florida facilitiesof approximately $0.1 million and approximately $0.4 million from theacquisition of the Mobile terminal.

Included in other revenuefor the three months ended September 30, 2006 and 2005, are fees chargedto TransMontaigne Inc. of approximately $1.7 million and $1.1million, respectively.

***Direct operating costs and expenses.******  ***For the threemonths ended September 30, 2006 and 2005, the direct operating costs andexpenses of our operations were approximately $5.4 million and$4.0 million, respectively. For the three months ended September 30,2006, the Oklahoma City terminal contributed approximately $0.1 million indirect operating costs and expenses. For the three months ended September 30,2006 and 2005, the Mobile terminal contributed direct operating costs andexpenses of approximately $0.3 million and $0.1 million, respectively. Thedirect operating costs and expenses of our operations are as follows (inthousands):

| ** **                                       | ** ** | **Three months  ended  September 30,** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Wages and  employee benefits                     |       | $                                                | 1,254      |   | $ | 1,347 |   |
| Utilities and  communication charges             |       | 473                                              |       | 343 |   |
| Repairs and  maintenance                         |       | 1,981                                            |       | 867 |   |
| Allocated  property and casualty insurance costs |       | 159                                              |       | 183 |   |
| Office, rentals  and property taxes              |       | 612                                              |       | 556 |   |
| Vehicles and fuel  costs                         |       | 474                                              |       | 355 |   |
| Environmental  compliance costs                  |       | 292                                              |       | 202 |   |
| Other                                            |       | 197                                              |       | 121 |   |
| Direct operating  costs and expenses             |       | $                                                | 5,442      |   | $ | 3,974 |   |

 

The increase ofapproximately $1.5 million in direct operating costs and expenses for 2006 ascompared to 2005 was due principally to an increase of approximately $1.2million at the Florida facilities and approximately $0.3 million associatedwith the acquisition of the Oklahoma City and Mobile terminals.

***Costs and expenses.******  ***For the threemonths ended September 30, 2006 and 2005, direct general andadministrative expenses were approximately $3.8 million and $0.6 million,respectively. Direct general and administrative expenses are as follows (inthousands):

| ** **                                                                                        | ** ** | **Three months  ended  September 30,** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                        | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Accounting  expenses                                                                              |       | $                                                | 34         |   | $ | 165 |   |
| Legal expenses                                                                                    |       | 66                                               |       | 201 |   |
| Independent  director fees and investor relations expenses                                        |       | 67                                               |       | 30 |   |
| Amortization of  deferred equity-based compensation                                               |       | 180                                              |       | 168 |   |
| Acceleration of  vesting of all outstanding restricted phantom units and restricted common  units |       | 3,258                                            |       | — |   |
| Compensation  expense on distributions paid to holders of restricted units                        |       | 63                                               |       | 18 |   |
| Provision for  potentially uncollectible accounts receivable                                      |       | 75                                               |       | — |   |
| Other                                                                                             |       | 18                                               |       | 13 |   |
| Direct general  and administrative expenses                                                       |       | $                                                | 3,761      |   | $ | 595 |   |

 

On September 1, 2006,TransMontaigne Inc. was acquired by Morgan Stanley Capital Group resulting inthe acceleration of vesting of all outstanding restricted phantom units andrestricted common units.

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The accompanying consolidated financial statementsinclude allocated general and administrative charges fromTransMontaigne Inc. for allocations of indirect corporate overhead tocover costs of centralized corporate functions such as legal, accounting,treasury, insurance administration and claims processing, health, safety andenvironmental, information technology, human resources, credit, payroll, taxes,engineering and other corporate services. The allocated general andadministrative expenses were approximately $0.8 million and$0.8 million for the three months ended September 30, 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 allocatedinsurance expenses are presented in the accompanying consolidated statements ofoperations as follows (in thousands):

| ** **                           | ** ** | **Three months  ended  September 30,** | ** ** |
|--------------------------------------|------------|--------------------------------------------------|------------|
| ** **                           | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Direct operating  costs and expenses |       | $                                                | 159        |   | $ | 183 |   |
| General and  administrative expenses |       | 91                                               |       | 67 |   |
| Total allocated  insurance costs     |       | $                                                | 250        |   | $ | 250 |   |

 

Depreciation and amortization expense for the threemonths ended September 30, 2006 and 2005, was $1.8 million and$1.7 million, respectively. The increase of approximately$0.1 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 $0.9 million and $0.5 million for the three months ended September 30,2006 and 2005, respectively, related to borrowings and commitment fees underour senior secured credit facility.

**RESULTS OFOPERATIONS—NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**

Thefollowing selected historical financial statement measures are derived from ourunaudited interim financial statements for the nine months ended September 30,2006 and 2005 (in thousands):

| ** **                                           | ** ** | **Nine months ended  September 30,** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                           | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| Revenues                                             |       | $                                                   | 35,073     |   | $ | 30,368 |   |
| Direct operating  costs and expenses                 |       | $                                                   | (15,960    | ) | $ | (11,743 | ) |
| Operating income                                     |       | $                                                   | 5,318      |   | $ | 10,759 |   |
| Net earnings                                         |       | $                                                   | 2,796      |   | $ | 10,068 |   |
| Net cash provided  by operating activities           |       | $                                                   | 8,954      |   | $ | 10,643 |   |
| Net cash (used  in) investing activities             |       | $                                                   | (19,699    | ) | $ | (2,872 | ) |
| Net cash provided by  (used in) financing activities |       | $                                                   | 10,346     |   | $ | (6,998 | ) |

 

***Revenues.******  ***For the nine months ended September 30, 2006and 2005, revenues were approximately $35.1 million and $30.4 million,respectively. Effective October 31, 2005, we acquired the Oklahoma Cityterminal from Magellan Pipeline Company, L.P. for approximately $1.9 millionand, on January 1, 2006, we acquired the Mobile terminal fromTransMontaigne Inc. for approximately $17.9 million. TransMontaigne Inc.acquired the Mobile terminal from Radcliff on August 1, 2005. For the ninemonths 

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ended September 30, 2006, the Oklahoma Cityterminal contributed approximately $0.9 million in revenues. For the ninemonths ended September 30, 2006 and 2005, the Mobile terminal contributedrevenues of approximately $2.8 million and $0.6 million, respectively. Ourrevenues are as follows (in thousands):

| ** **                                   | ** ** | **Nine months ended  September 30,** | ** ** |
|----------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| Throughput and  additive injection fees, net |       | $                                                   | 17,238     |   | $ | 12,077 |   |
| Terminaling  storage fees                    |       | 8,028                                               |       | 11,611 |   |
| Pipeline  transportation fees                |       | 1,835                                               |       | 1,777 |   |
| Management fees  and reimbursed costs        |       | 894                                                 |       | 468 |   |
| Other                                        |       | 7,078                                               |       | 4,435 |   |
| Revenues                                     |       | $                                                   | 35,073     |   | $ | 30,368 |   |

 

***Throughput andadditive injection fees, net.******  ***Terminalthroughput and additive injection fees, net were approximately$17.2 million and $12.1 million for the nine months ended September 30,2006 and 2005, respectively. The increase of approximately $5.1 million inthroughput and additive injection fees, net for 2006 as compared to 2005 wasdue principally to approximately $2.7 million from the conversion of the feescharged on heavy oil volumes to a throughput agreement and approximately $2.1million from the acquisition of the Oklahoma City and Mobile terminals. For thenine months ended September 30, 2006 and 2005, we delivered approximately99,500 barrels and 96,100 barrels per day, respectively, of light oilthroughput volumes for TransMontaigne Inc. at our terminals.

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$5.1 million and $2.4 million for the nine months ended September 30,2006 and 2005, respectively. For the nine months ended September 30, 2006and 2005, we delivered approximately 28,900 barrels and 30,800 barrels per day,respectively, of heavy oil volumes for TransMontaigne Inc. at our terminals.

Included in the throughput and additive injectionfees, net for the nine months ended September 30, 2006 and 2005, are feescharged to TransMontaigne Inc. of approximately $15.9 million and$11.8 million, respectively.

***Terminaling storagefees.******  ***Terminaling storage fees wereapproximately $8.0 million and $11.6 million for the nine monthsended September 30, 2006 and 2005, respectively. The decrease ofapproximately $3.6 million in terminaling storage fees for 2006 ascompared to 2005 was due principally to the conversion of the fees charged onheavy oil volumes from a storage agreement to a throughput agreement.

Included in the terminaling storage fees for the ninemonths ended September 30, 2006 and 2005 are fees charged toTransMontaigne Inc. of approximately $nil and $4.0 million,respectively, for the storage of heavy oil volumes.

***Pipelinetransportation fees.******  ***For the nine months ended September 30,2006 and 2005, we earned pipeline transportation fees of approximately$1.8 million and $1.8 million, respectively. For the nine monthsended September 30, 2006 and 2005, we averaged approximately 13,400barrels and 13,000 barrels per day, respectively, of transported product on theRazorback Pipeline for TransMontaigne Inc.

Included in pipeline transportation fees for the ninemonths ended September 30, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $1.8 million and$1.8 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. From May 27, 2005 

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through August 31,2006, we managed and operated on behalf of TransMontaigne Inc. certain tankcapacity owned by a utility and received a management fee from TransMontaigneInc. Effective September 1, 2006, our agreement with TransMontaigne Inc.to manage and operate certain tank capacity owned by a utility was terminated.For the nine months ended September 30, 2006 and 2005, management fees andreimbursed costs were approximately $894,000 and $468,000, respectively.

Included in management fees and reimbursed costs forthe nine months ended September 30, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $756,000 and $367,000, respectively.

***Other revenue.******  ***For the ninemonths ended September 30, 2006 and 2005, other revenue was approximately$7.1 million and $4.4 million, respectively. The increase ofapproximately $2.7 million in other revenue for 2006 as compared to 2005 wasdue principally to an increase at the Florida facilities of approximately $1.6million and approximately $1.1 million from the acquisition of the Mobileterminal.

Included in other revenue for the nine months ended September 30,2006 and 2005, are fees charged to TransMontaigne Inc. of approximately$5.0 million and $2.1 million, respectively.

***Direct operating costs and expenses.******  ***For the ninemonths ended September 30, 2006 and 2005, the direct operating costs andexpenses of our operations were approximately $16.0 million and$11.7 million, respectively. For the nine months ended September 30,2006, the Oklahoma City terminal contributed approximately $0.3 million indirect operating costs and expenses. For the nine months ended September 30,2006 and 2005, the Mobile terminal contributed direct operating costs andexpenses of approximately $1.3 million and $0.1 million, respectively. Thedirect operating costs and expenses of our operations are as follows (inthousands):

| ** **                                       | ** ** | **Nine months ended  September 30,** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| Wages and  employee benefits                     |       | $                                                   | 3,913      |   | $ | 3,791 |   |
| Utilities and  communication charges             |       | 1,318                                               |       | 918 |   |
| Repairs and  maintenance                         |       | 5,423                                               |       | 2,918 |   |
| Allocated  property and casualty insurance costs |       | 513                                                 |       | 525 |   |
| Office, rentals  and property taxes              |       | 1,877                                               |       | 1,652 |   |
| Vehicles and fuel  costs                         |       | 1,427                                               |       | 964 |   |
| Environmental  compliance costs                  |       | 1,012                                               |       | 466 |   |
| Other                                            |       | 477                                                 |       | 509 |   |
| Direct operating  costs and expenses             |       | $                                                   | 15,960     |   | $ | 11,743 |   |

 

The increase of approximately $4.2 million in directoperating costs and expenses for 2006 as compared to 2005 was due principallyto an increase of approximately $2.7 million at the Florida facilities andapproximately $1.5 million associated with the acquisition of the Oklahoma Cityand Mobile terminals.

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***Costs and expenses.******  ***For the ninemonths ended September 30, 2006 and 2005, direct general andadministrative expenses were approximately $5.5 million and $0.7 million,respectively. Direct general and administrative expenses are as follows (inthousands):

| ** **                                                                                        | ** ** | **Nine months  ended  September 30,** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                                        | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
| Accounting  expenses                                                                              |       | $                                               | 724        |   | $ | 165 |   |
| Legal expenses                                                                                    |       | 416                                             |       | 201 |   |
| Independent  director fees and investor relations expenses                                        |       | 182                                             |       | 40 |   |
| Amortization of  deferred equity-based compensation                                               |       | 610                                             |       | 216 |   |
| Acceleration of  vesting of all outstanding restricted phantom units and restricted common  units |       | 3,258                                           |       | — |   |
| Compensation  expense on distributions paid to holders of restricted units                        |       | 188                                             |       | 18 |   |
| Provision for  potentially uncollectible accounts receivable                                      |       | 75                                              |       | — |   |
| Other                                                                                             |       | 80                                              |       | 34 |   |
| Direct general  and administrative expenses                                                       |       | $                                               | 5,533      |   | $ | 674 |   |

 

On September 1, 2006, TransMontaigne Inc. wasacquired by Morgan Stanley Capital Group resulting in the acceleration ofvesting of all outstanding restricted phantom units and restricted commonunits.

The accompanying consolidated financial statementsinclude allocated general and administrative charges fromTransMontaigne Inc. for allocations of indirect corporate overhead tocover costs of centralized corporate functions such as legal, accounting,treasury, insurance administration and claims processing, health, safety andenvironmental, information technology, human resources, credit, payroll, taxes,engineering and other corporate services. The allocated general and administrativeexpenses were approximately $2.5 million and $2.2 million for thenine months ended September 30, 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 allocatedinsurance expenses are presented in the accompanying consolidated statements ofoperations as follows (in thousands):

| ** **                           | ** ** | **Nine months  ended  September 30,** | ** ** |
|--------------------------------------|------------|-------------------------------------------------|------------|
| ** **                           | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
| Direct operating  costs and expenses |       | $                                               | 503        |   | $ | 517 |   |
| General and  administrative expenses |       | 247                                             |       | 233 |   |
| Total allocated  insurance costs     |       | $                                               | 750        |   | $ | 750 |   |

 

Depreciation and amortization expense for the ninemonths ended September 30, 2006 and 2005, was $5.5 million and $4.8million, respectively. The increase of approximately $0.7 million indepreciation and amortization expense for 2006 as compared to 2005 was dueprincipally to depreciation and amortization expense on current year additionsto property, plant, and equipment and the acquisition of the Oklahoma City andMobile terminals.

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Interest expense wasapproximately $2.4 million and $0.6 million for the nine months ended September 30,2006 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 and nine months ended September 30, 2006, were approximately$0.6 million and $2.1 million, respectively, for terminal and pipelinefacilities and assets to support these facilities. Future capital expenditureswill depend on numerous factors, including the availability, economics and costof appropriate acquisitions which we identify and evaluate; the economics, costand required regulatory approvals with respect to the expansion and enhancementof existing systems and facilities; customer demand for the services weprovide; local, state and federal governmental regulations; environmentalcompliance requirements; and the availability of debt financing and equitycapital 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; $84.7 million atSeptember 30, 2006). Borrowings under the credit facility bear interest(at our option) based on a base rate plus an applicable margin, or LIBOR plusan applicable margin; the applicable margins are a function of the totalleverage ratio (as defined). Interest on loans under the credit facility willbe due and payable periodically, based on the applicable interest rate andrelated interest period, generally either one, two or three months. Inaddition, we will pay a commitment fee ranging from 0.375% to 0.50% per annumon the total amount of the unused commitments. Borrowings under the creditfacility are secured by a lien on our assets, including cash, accountsreceivable, inventory, general intangibles, investment property, contractrights and real property, except for our real property located in Florida. Theterms of the credit facility include covenants that restrict our ability tomake cash distributions and acquisitions. We may make distributions of cash tothe extent of our “available cash” as defined in our partnership agreement. Wemay make acquisitions meeting the definition of “permitted acquisitions” whichinclude: acquisitions in which the consideration paid for such acquisition,together with the consideration paid for other acquisitions in the same fiscalyear, 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 compliance with all financial and othercovenants contained herein after giving effect to such acquisition and (2) satisfiedall other conditions precedent to such acquisition which the agent mayreasonably require in connection therewith. The principal balance of loans andany accrued and unpaid interest will be due and payable in full on the maturitydate, 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.”

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On June 22, 2006, TransMontaigne Inc. announcedthat it had entered into a definitive merger agreement with Morgan StanleyCapital Group, pursuant to which all the issued and outstanding shares ofcommon stock of TransMontaigne Inc., would be acquired. We were not a party tothat merger agreement. The merger between TransMontaigne Inc. and MorganStanley Capital Group closed on September 1, 2006, and constituted a “changein control” under the credit facility requiring a waiver from the lenders. On July 28,2006 the lenders granted a consent and waiver to permit the proposed mergerbetween TransMontaigne Inc. and Morgan Stanley Capital Group.

Thecalculation of the “total leverage ratio” and “interest coverage ratio”contained in the credit facility is as follows (amounts in thousands).

| ** **                                                                                           | ** ** | **Three Months Ended** | ** ** | **Twelve Months  Ended** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|-------------------------------|------------|
| ** **                                                                                           | ** ** | **December 31,  2005**      | ** ** | **March 31,  2006**      | ** ** | **June 30,  2006** | ** ** | **September 30,  2006** | ** ** | **September 30,  2006** | ** ** |
| **Financial performance debt  covenant test:**                                                       |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated  EBITDA for total leverage ratio, as stipulated in the credit facility                  |       |                             | $          | 6,435                         |       |   |   | $ | 5,566 |   |   |   | $ | 4,445 |   |   |   | $ | 4,731 |   |   |   | $ | 21,177 |   |   |
| Consolidated  funded indebtedness                                                                    |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 49,997 |   |   |
| Total leverage  ratio                                                                                |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   | 2.36 | x |   |
| Consolidated  EBITDA for interest coverage ratio, as stipulated in the credit facility               |       |                             | $          | 5,873                         |       |   |   | $ | 5,566 |   |   |   | $ | 4,445 |   |   |   | $ | 4,731 |   |   |   | $ | 20,615 |   |   |
| Consolidated  interest expense                                                                       |       |                             | $          | 505                           |       |   |   | $ | 697 |   |   |   | $ | 804 |   |   |   | $ | 901 |   |   |   | $ | 2,907 |   |   |
| Interest coverage  ratio                                                                             |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   | 7.09 | x |   |
| **Reconciliation of Consolidated  EBITDA to cash flows provided by (used in) operating activities:** |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated  EBITDA for total leverage ratio                                                        |       |                             | $          | 6,435                         |       |   |   | $ | 5,566 |   |   |   | $ | 4,445 |   |   |   | $ | 4,731 |   |   |   |   |   |   |
| Less pro forma  adjustments related to acquisitions                                                  |       |                             | (562       | )                             |       |   | — |   |   |   | — |   |   |   | — |   |   |   |   |   |   |
| Consolidated EBITDA  for interest coverage ratio                                                     |       |                             | 5,873      |                          |       |   | 5,566 |   |   |   | 4,445 |   |   |   | 4,731 |   |   |   |   |   |   |
| Interest expense                                                                                     |       |                             | (505       | )                             |       |   | (697 | ) |   |   | (804 | ) |   |   | (901 | ) |   |   |   |   |   |
| Changes in  operating assets and liabilities                                                         |       |                             | 2,957      |                          |       |   | 203 |   |   |   | 1,523 |   |   |   | (5,112 | ) |   |   |   |   |   |
| Cash flows provided by  (used in) operating activities                                               |       |                             | $          | 8,325                         |       |   |   | $ | 5,072 |   |   |   | $ | 5,164 |   |   |   | $ | (1,282 | ) |   |   |   |   |   |

 

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 and payable.

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).

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**ITEM 3.   QUANTITATIVEAND QUALITATIVE 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 seniorsecured credit facility. Borrowings under our senior secured credit facilitybear interest 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 September 30, 2006, we had outstanding borrowings of $50.0million under our senior secured credit facility. Based on the outstandingbalance of our variable-interest-rate debt at September 30, 2006,and assuming market interest rates increase or decrease by 100 basis points,the potential annual increase or decrease in interest expense is approximately$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.   CONTROLSAND PROCEDURES**

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 officer (whom werefer to as our Certifying Officer), as appropriate to allow timely decisionsregarding required disclosure. Our management evaluated, with the participationof our Certifying Officer, the effectiveness of our disclosure controls andprocedures as of September 30, 2006, pursuant to Rule 13a-15(b) underthe Exchange Act. Based upon that evaluation, our Certifying Officer concludedthat, as of September 30, 2006, our disclosure controls and procedureswere effective.

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**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:

·       a reduction in revenuesfrom TransMontaigne Inc., upon which we rely for a substantial majority ofour revenues;

·       the continuedcreditworthiness of, and performance by, contract parties, includingTransMontaigne Inc.;

·       a reduction or suspensionof TransMontaigne Inc.’s obligations under the terminaling servicesagreement;

·       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;

·       the impact on ourfacilities or operations of extreme weather conditions, such as hurricanes, andother operational hazards;

·       the availability ofacquisition opportunities and successful integration and future performance ofacquired assets;

·       the failure to purchaseadditional refined product terminals from TransMontaigne Inc.;

·       timing, cost and othereconomic uncertainties related to the construction of new assets;

·       debt levels andrestrictions in our debt agreements that may limit our operational flexibility;

·       the threat of terroristattacks or war;

·       the impact of current andfuture laws and governmental regulations;

·       liability for environmentalclaims;

·       conflicts of interest andthe limited fiduciary duties of our general partner, which is controlled byTransMontaigne Inc.;

·       our failure to avoidfederal income taxation as a corporation or the imposition of state leveltaxation; and

·       generaleconomic, market or business conditions;

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

***Purchases of Securities.******  ***The followingtable covers the purchases of our common units by, or on behalf of, thePartnership during the three months ended September 30, 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** | ** ** |
|------------|------------|------------|------------|-----------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| July       |       |       | —     |                                                |       |                                                    | $          | —                                                                                                                                      |       |                                                                                                                                                          |       | — |   |   |   | $ | 261,691 |   |   |
| August     |       |       | 4,800      |                                                |       |                                                    | $          | 31.03                                                                                                                                       |       |                                                                                                                                                          |       | 4,800 |   |   |   | $ | 112,343 |   |   |
| September  |       |       | 16,161     | (1)                                                 |       |                                                    | $          | 30.61                                                                                                                                       |       |                                                                                                                                                          |       | 1,700 |   |   |   | $ | 59,506 |   |   |
|       |       |       | 20,961     |                                                |       |                                                    | $          | 30.70                                                                                                                                       |       |                                                                                                                                                          |       | 6,500 |   |   |   |   |   |   |

 

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(1)          14,461 common units wererepurchased from employees for withholding taxes as a result of vesting ofcommon units under our Long-Term Incentive Plan (see Note 10 of Notes toconsolidated financial statements).

Except where indicated,all repurchases were made in the open market pursuant to a program announced onJanuary 19, 2006 for the repurchase, from time to time, of our outstandingcommon units for purposes of making subsequent grants of restricted units underour Long-Term Incentive Plan to key employees and officers of TransMontaigneServices Inc. and the non-employee directors of our general partner. As of September 30,2006, we have repurchased approximately $1.1 million of aggregate market valueof our outstanding common units for this purpose, exclusive of approximately$0.5 million for common units repurchased from employees for withholding taxes.As a result of the merger between TransMontaigne Inc. and Morgan StanleyCapital Group, repurchases of outstanding common units under the program were discontinuedand we do not anticipate any repurchases through the remainder of the yearended December 31, 2006. We have made no determination with respect torepurchases of outstanding common units for periods thereafter.

**ITEM 6.**                EXHIBITS

Exhibits:

| 31.1 |   | Certification of Chief Executive Officer and Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                     |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 32.1 |   | Certification of Chief Executive Officer and Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

 

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**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 November 8, 2006 |       | Transmontaigne Partners L.P. |
|-----------------------------|------------|------------------------------|
|                        |       | (Registrant)                 |
|                        |       |                         |
|                        |       | By:                          |   | /s/ RANDALL J.  LARSON |
|                        | ** ** | ** **                   | ** ** | **Randall J. Larson** |
|                        | ** ** | ** **                   | ** ** | **Chief Executive Officer, Chief Financial** |
|                        | ** ** | ** **                   | ** ** | **Officer, and Chief Accounting Officer** |

 

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**EXHIBITINDEX**
| Exhibit  Number | ** ** | **Description of Exhibits**                                                                                                                                                       |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1*           |       | Certification of Chief Executive Officer and Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                      |
| 32.1*           |       | Certification of Chief  Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002. |

 

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*                    Filedherewith.

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