**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 June 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 BroadwaySuite 3100Denver, Colorado 80202**

(Address, including zipcode, of principal executive offices)

**(303) 626-8200**

(Telephone number,including area code)

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

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act. (Check one):

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

 

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

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

 

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**TABLE OF CONTENTS**

|          | ** ** | ** **                                                                                                                                                                | ** ** | **Page No.** | ** ** |
|----------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
|     | ** ** | **Part I.  Financial Information**                                                                                                                                   |       |              |       |
| Item 1.  |       | Unaudited Consolidated Financial Statements                                                                                                                               |       | 4                 |       |
|     |       | Consolidated balance sheets as of June 30, 2006  and December 31, 2005                                                                                          |       | 5                 |       |
|     |       | Consolidated statements of operations for the three and  six months ended June 30, 2006 and 2005                                                                     |       | 6                 |       |
|     |       | Consolidated statements of partners’ equity for the  year ended June 30, 2005, six months ended December 31, 2005 and  six months ended June 30, 2006 |       | 7                 |       |
|     |       | Consolidated statements of cash flows for the three  and six months ended June 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:

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

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

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

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

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

3

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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 and sixmonths ended June 30, 2006, are included herein beginning on the followingpage. The accompanying unaudited interim consolidated financial statementsshould be read in conjunction with our consolidated financial statements andrelated notes for the six months ended December 31, 2005, together withour discussion and analysis of financial condition and results of operations,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 six months ended June 30, 2006.

·       TransMontaigneOperating GP L.L.C.

·       TransMontaigneOperating Company L.P.

·       CoastalTerminals L.L.C.

·       RazorbackL.L.C.

·       TPSITerminals L.L.C.

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

4

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

| ** **                          | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| **ASSETS**                          | ** ** | ** **              | ** ** |                        | ** ** | ** ** |   |
| Current assets:                     |       |                    |       |                        |       | ** ** |   |
| Cash and cash equivalents           |       | $                       | 1,638      |                        |       | $ | 698 | ** ** |   |
| Trade accounts receivable, net      |       | 1,748                   |       |                        | 1,003      | ** ** |   |
| Due from TransMontaigne Inc., net   |       | —                  |       |                        | 1,212      | ** ** |   |
| Prepaid expenses and other          |       | 1,165                   |       |                        | 338        | ** ** |   |
|                                |       | 4,551                   |       |                        | 3,251      | ** ** |   |
| Property, plant  and equipment, net |       | 123,901                 |       |                        | 125,884    | ** ** |   |
| Other assets, net                   |       | 1,560                   |       |                        | 1,901      | ** ** |   |
|                                |       | $                       | 130,012    |                        |       | $ | 131,036 | ** ** |   |
| **LIABILITIES AND EQUITY**          | ** ** | ** **              | ** ** |                        | ** ** | ** ** |   |
| Current liabilities:                |       |                    |       |                        |       | ** ** |   |
| Trade accounts payable              |       | $                       | 1,240      |                        |       | $ | 1,784 | ** ** |   |
| Due to TransMontaigne Inc., net     |       | 1,314                   |       |                        | —     | ** ** |   |
| Other accrued liabilities           |       | 2,553                   |       |                        | 1,239      | ** ** |   |
|                                |       | 5,107                   |       |                        | 3,023      | ** ** |   |
| Long-term  debt                     |       | 46,000                  |       |                        | 28,000     | ** ** |   |
| Total liabilities                   |       | 51,107                  |       |                        | 31,023     | ** ** |   |
| Partners’ equity:              |       |                    |       |                        |       | ** ** |   |
| Predecessor equity                  |       | —                  |       |                        | 9,625      | ** ** |   |
| Common unitholders                  |       | 73,949                  |       |                        | 75,474     | ** ** |   |
| Subordinated unitholders            |       | 4,662                   |       |                        | 14,581     | ** ** |   |
| General partner interest            |       | 294                     |       |                        | 333        | ** ** |   |
|                                |       | 78,905                  |       |                        | 100,013    | ** ** |   |
|                                |       | $                       | 130,012    |                        |       | $ | 131,036 | ** ** |   |

 

See accompanying notes to consolidated financial statements.

5

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

| ** **                                                              | ** ** | **Three months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|-------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                              | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Revenues                                                                |       | $                                               | 11,563     |                                          | $          | 9,687 |   | $ | 23,653 |   | $ | 19,401 |   |
| Costs and  expenses:                                                    |       |                                            |       |                                          |       |   |   |   |   |
| Direct operating costs and expenses                                     |       | (5,823                                          | )          | (3,710                                        | )          | (10,518 | ) | (7,769 | ) |
| Direct general and administrative expenses                              |       | (672                                            | )          | (79                                           | )          | (1,772 | ) | (79 | ) |
| Allocated general and administrative expenses                           |       | (822                                            | )          | (700                                          | )          | (1,634 | ) | (1,400 | ) |
| Allocated insurance expense                                             |       | (74                                             | )          | (83                                           | )          | (156 | ) | (166 | ) |
| Depreciation and amortization                                           |       | (1,790                                          | )          | (1,601                                        | )          | (3,732 | ) | (3,110 | ) |
| Total costs and expenses                                                |       | (9,181                                          | )          | (6,173                                        | )          | (17,812 | ) | (12,524 | ) |
| Operating income                                                        |       | 2,382                                           |       | 3,514                                         |       | 5,841 |   | 6,877 |   |
| Other income  (expenses):                                               |       |                                            |       |                                          |       |   |   |   |   |
| Interest income                                                         |       | 5                                               |       | —                                        |       | 8 |   | — |   |
| Interest expense                                                        |       | (804                                            | )          | (167                                          | )          | (1,501 | ) | (167 | ) |
| Amortization of deferred debt issuance costs                            |       | (46                                             | )          | (15                                           | )          | (92 | ) | (15 | ) |
| Total other expenses                                                    |       | (845                                            | )          | (182                                          | )          | (1,585 | ) | (182 | ) |
| Net earnings                                                            |       | 1,537                                           |       | 3,332                                         |       | 4,256 |   | 6,695 |   |
| Less earnings  allocable to:                                            |       |                                            |       |                                          |       |   |   |   |   |
| Predecessor                                                             |       | —                                          |       | (2,359                                        | )          | — |   | (5,722 | ) |
| General partner interest                                                |       | (31                                             | )          | (19                                           | )          | (85 | ) | (19 | ) |
| Net earnings allocable to limited partners                              |       | $                                               | 1,506      |                                          | $          | 954 |   | $ | 4,171 |   | $ | 954 |   |
| Net earnings per  limited partners’ unit—basic                |       | $                                               | 0.21       |                                          | $          | 0.13 |   | $ | 0.57 |   | $ | 0.13 |   |
| Net earnings per  limited partners’ unit—diluted              |       | $                                               | 0.21       |                                          | $          | 0.13 |   | $ | 0.57 |   | $ | 0.13 |   |
| Weighted average  limited partners’ units outstanding—basic   |       | 7,272                                           |       | 7,295                                         |       | 7,282 |   | 7,295 |   |
| Weighted average limited  partners’ units outstanding—diluted |       | 7,279                                           |       | 7,295                                         |       | 7,283 |   | 7,295 |   |

 

See accompanying notes to consolidated financial statements.

6

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

| ** **                                                                                                                                                               | ** ** | **Predecessor** | ** ** | **Common  Units** | ** ** | **Subordinated  Units** | ** ** | **General  Partner  Interest** | ** ** | **Deferred  Equity-Based  Compensation** | ** ** | **Total** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|------------|-------------------|------------|-------------------------|------------|--------------------------------|------------|------------------------------------------|------------|-----------|------------|
| **Balance  June 30, 2004**                                                                                                                                          |       |            | $          | 118,657           |       |                    |       | $                              | —     |                                     |       |      | $          | — |   |   |   | $ | — |   |   |   | $ | — |   |   | $ | 118,657 |   |
| Net earnings  through May 26, 2005                                                                                                                                  |       |            | 9,730      |              |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 9,730 |   |
| Distributions and  repayments, net                                                                                                                                       |       |            | (11,399    | )                 |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (11,399 | ) |
| Proceeds from  initial public offering of 3,852,500 common units, net of underwriters’  discount and offering expenses of $9,512                                    |       |            | —     |              |       |                    | 72,932     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 72,932 |   |
| Proceeds from  private placement of 450,000 subordinated units                                                                                                           |       |            | —     |              |       |                    | —     |                           |       |                                     | 7,945      |      |       |   | — |   |   |   | — |   |   | 7,945 |   |
| Distribution to  TransMontaigne Inc.                                                                                                                                     |       |            | (111,461   | )                 |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (111,461 | ) |
| Allocation of  predecessor equity in exchange for 120,000 common units, 2,872,266  subordinated units, and a 2% general partner interest (represented by 148,873  units) |       |            | (5,527     | )                 |       |                    | 211        |                           |       |                                     | 5,054      |      |       |   | 262 |   |   |   | — |   |   | — |   |
| Grant of 120,000  restricted common units under the long-term incentive plan                                                                                             |       |            | —     |              |       |                    | 2,592      |                           |       |                                     | —     |      |       |   | — |   |   |   | (2,592 | ) |   | — |   |
| Amortization of  deferred equity-based compensation related to restricted common units                                                                                   |       |            | —     |              |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | 48 |   |   | 48 |   |
| Net earnings from  May 27, 2005 through June 30, 2005                                                                                                          |       |            | —     |              |       |                    | 520        |                           |       |                                     | 434        |      |       |   | 19 |   |   |   | — |   |   | 973 |   |
| **Balance  June 30, 2005**                                                                                                                                          |       |            | —     |              |       |                    | 76,255     |                           |       |                                     | 13,433     |      |       |   | 281 |   |   |   | (2,544 | ) |   | 87,425 |   |
| Elimination of  deferred equity-based compensation due to adoption of SFAS 123(R)                                                                                   |       |            | —     |              |       |                    | (2,544     | )                              |       |                                     | —     |      |       |   | — |   |   |   | 2,544 |   |   | — |   |
| Distributions to  unitholders                                                                                                                                            |       |            | —     |              |       |                    | (2,119     | )                              |       |                                     | (1,827     | )         |       |   | (81 | ) |   |   | — |   |   | (4,027 | ) |
| Amortization of  deferred equity-based compensation related to restricted common units                                                                                   |       |            | —     |              |       |                    | 323        |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 323 |   |
| Acquisition of  Mobile terminal by Predecessor                                                                                                                           |       |            | 9,153      |              |       |                    | —     |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 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                                                                                                                                            |       |            | —     |              |       |                    | (3,189     | )                              |       |                                     | (2,756     | )         |       |   | (124 | ) |   |   | — |   |   | (6,069 | ) |
| Amortization of  deferred equity-based compensation related to restricted common units                                                                                   |       |            | —     |              |       |                    | 430        |                           |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | 430 |   |
| Common units  repurchased from TransMontaigne Services Inc.’s employees for  withholding taxes                                                                 |       |            | —     |              |       |                    | (96        | )                              |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (96 | ) |
| Repurchase of  31,900 common units by our long-term incentive plan                                                                                                       |       |            | —     |              |       |                    | (938       | )                              |       |                                     | —     |      |       |   | — |   |   |   | — |   |   | (938 | ) |
| Net earnings from  January 1, 2006 through June 30, 2006                                                                                                       |       |            | —     |              |       |                    | 2,268      |                           |       |                                     | 1,903      |      |       |   | 85 |   |   |   | — |   |   | 4,256 |   |
| **Balance  June 30, 2006**                                                                                                                                          |       |            | $          | —            |       |                    |       | $                              | 73,949     |                                     |       |      | $          | 4,662 |   |   |   | $ | 294 |   |   |   | $ | — |   |   | $ | 78,905 |   |

 

See accompanying notes to consolidated financial statements.

7

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

| ** **                                                                                              | ** ** | **Three months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                              | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Cash flows from operating  activities:**                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Net earnings                                                                                            |       | $                                               | 1,537      |                                          | $          | 3,332 |   | $ | 4,256 |   | $ | 6,695 |   |
| Adjustments to  reconcile net earnings to net cash used in operating activities:                        |       |                                            |       |                                          |       |   |   |   |   |
| Depreciation and amortization                                                                           |       | 1,790                                           |       | 1,601                                         |       | 3,732 |   | 3,110 |   |
| Amortization of deferred equity-based  compensation                                                     |       | 268                                             |       | 48                                            |       | 430 |   | 48 |   |
| Amortization of deferred debt issuance costs                                                            |       | 46                                              |       | 15                                            |       | 92 |   | 15 |   |
| Changes in  operating assets and liabilities, net of effects from acquisitions:                         |       |                                            |       |                                          |       |   |   |   |   |
| Trade accounts receivable, net                                                                          |       | (225                                            | )          | 125                                           |       | (746 | ) | (86 | ) |
| Due from TransMontaigne Inc., net                                                                       |       | 1,218                                           |       | (14                                           | )          | 2,526 |   | (14 | ) |
| Prepaid expenses and other                                                                              |       | (471                                            | )          | (4                                            | )          | (826 | ) | 102 |   |
| Trade accounts payable                                                                                  |       | 383                                             |       | 1,100                                         |       | (544 | ) | 384 |   |
| Other accrued liabilities                                                                               |       | 618                                             |       | 582                                           |       | 1,316 |   | 881 |   |
| Net cash provided by operating activities                                                               |       | 5,164                                           |       | 6,785                                         |       | 10,236 |   | 11,135 |   |
| **Cash flows from investing  activities:**                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Acquisition of Mobile terminal                                                                          |       | —                                          |       | —                                        |       | (17,935 | ) | — |   |
| Additions to property, plant and equipment—expansion  of facilities                                |       | (371                                            | )          | (952                                          | )          | (1,005 | ) | (1,452 | ) |
| Additions to property, plant and equipment—maintain  existing facilities                           |       | (297                                            | )          | (615                                          | )          | (497 | ) | (852 | ) |
| Net cash (used in) investing activities                                                                 |       | (668                                            | )          | (1,567                                        | )          | (19,437 | ) | (2,304 | ) |
| **Cash flows from financing  activities:**                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Net borrowings of debt                                                                                  |       | 492                                             |       | 28,307                                        |       | 18,000 |   | 28,307 |   |
| Deferred debt issuance costs                                                                            |       | —                                          |       | (916                                          | )          | — |   | (916 | ) |
| Net proceeds from issuance of common units                                                              |       | —                                          |       | 72,932                                        |       | — |   | 72,932 |   |
| Net proceeds from issuance of subordinated units                                                        |       | —                                          |       | 7,945                                         |       | — |   | 7,945 |   |
| Distributions paid to unitholders                                                                       |       | (3,139                                          | )          | —                                        |       | (6,069 | ) | — |   |
| Common units repurchased from TransMontaigne  Services Inc.’s employees for withholding taxes |       | (96                                             | )          | —                                        |       | (96 | ) | — |   |
| Repurchase of common units for long-term incentive  plan                                                |       | (727                                            | )          | —                                        |       | (938 | ) | — |   |
| Distributions and repayments to TransMontaigne Inc.                                                     |       | —                                          |       | (113,259                                      | )          | (756 | ) | (116,860 | ) |
| Net cash provided by (used in) financing activities                                                     |       | (3,470                                          | )          | (4,991                                        | )          | 10,141 |   | (8,592 | ) |
| Increase in cash and cash equivalents                                                                   |       | 1,026                                           |       | 227                                           |       | 940 |   | 239 |   |
| Cash and cash  equivalents at beginning of period                                                       |       | 612                                             |       | 14                                            |       | 698 |   | 2 |   |
| Cash and cash  equivalents at end of period                                                             |       | $                                               | 1,638      |                                          | $          | 241 |   | $ | 1,638 |   | $ | 241 |   |
| **Supplemental disclosures of  cash flow information:**                                                 |       |                                            |       |                                          |       |   |   |   |   |
| Cash paid for interest                                                                                  |       | $                                               | 810        |                                          | $          | 167 |   | $ | 1,445 |   | $ | 167 |   |

 

See accompanying notes to consolidated financial statements.

8

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

**(1) SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

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

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

Our accounting and financial reporting policiesconform to accounting principles and practices generally accepted in the UnitedStates of America. The accompanying unaudited consolidated financial statementsinclude the accounts of TransMontaigne Partners L.P., a Delaware limitedpartnership (“Partners”), and its majority-owned subsidiaries. Theaccompanying consolidated financial statements include the assets, liabilitiesand results of operations of certain 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. OnOctober 30, 1998, TransMontaigne Inc. acquired the Port Everglades (South)and Tampa terminal operations from Louis Dreyfus Energy Corporation. On February 28,2003, TransMontaigne Inc. acquired the Port Manatee, Fisher Island, PortEverglades (North), Cape Canaveral and Jacksonville terminal operations from anaffiliate of El Paso Corporation. On August 1, 2005, TransMontaigne Inc. acquiredthe Mobile terminal operations from Radcliff/Economy Marine Services, Inc.All significant inter-company accounts and transactions have beeneliminated in the preparation of the accompanying consolidated financialstatements.

The preparation of financialstatements in conformity with generally accepted accounting principles requiresus to make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at the dateof the financial statements and the reported amounts of revenues and expensesduring the reporting periods. The following estimates, in our opinion, aresubjective in nature, require the exercise of judgment, and involve complexanalysis: allowance for doubtful accounts; accrued asset retirementobligations; and accrued environmental obligations. Changes in these estimatesand assumptions will occur as a result of the passage of time and theoccurrence of future events. Actual results could differ from these estimates.

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**(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, pipeline and relatedservices for companies engaged in the distribution and marketing of refinedpetroleum products and crude oil, including TransMontaigne Inc.

**(c) Change inyear end**

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

**(d) Basis ofpresentation**

The accompanyingconsolidated financial statements include allocated general and administrativecharges from TransMontaigne Inc. for indirect corporate overhead to covercosts of functions such as legal, accounting, treasury, engineering,environmental safety, information technology, and other corporate services (seeNote 2 of Notes to consolidated financial statements). The allocatedgeneral and administrative charges were $0.8 million and $0.7 millionfor the three months ended June 30, 2006 and 2005, respectively, and$1.6 million and $1.4 million for the six months ended June 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 June 30, 2006 and 2005,respectively, and $0.5 million and $0.5 million for the six monthsended June 30, 2006 and 2005, respectively. Management believes that theallocated general and administrative charges and insurance charges arerepresentative of the costs and expenses incurred by TransMontaigne Inc.for managing Partners’ operations.

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

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

**(f) Environmentalobligations**

At June 30, 2006 and December 31, 2005, wehave accrued environmental obligations of approximately $1.1 million and$625,000, respectively, representing our best estimate of our remediationobligations (see Note 8 of Notes to consolidated financial statements).During the three months ended June 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.

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TransMontaigne Inc.has indemnified us through May 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, up to a maximum liability not to exceed $15 million for thisindemnification obligation (see Note 2 of Notes to consolidated financialstatements).

**(g) Assetretirement obligations**

At June 30, 2006 and December 31, 2005, wehave accrued asset retirement obligations of approximately $237,000 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 at June 30,2006 and December 31, 2005 represent costs we would incur in the future ifwe were to close certain terminals and pipelines due to certain state-imposedobligations to close aboveground storage tanks upon abandoning the operationsof the related tanks and regulations to safely abandon Federally regulatedpipelines. Changes in our estimates and assumptions may occur as a result ofthe passage of time and the occurrence of future events.

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

**(h) Equity-basedcompensation**

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

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

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

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

**(i) Incometaxes**

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

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

Basic earnings per limitedpartners’ unit is computed by dividing net earnings allocable to limitedpartners by the weighted average number of limited partnership unitsoutstanding during the period, excluding restricted phantom units. Dilutedearnings per limited partners’ unit is computed by dividing net earningsallocable to limited partners by the weighted average number of limitedpartnership units outstanding during the period and, when dilutive, restrictedphantom units. Net earnings allocable to limited partners are net of twopercent of the earnings allocable to the general partner.

**(k) Reclassifications**

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

**(2) 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 June 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 insurance policiescovering our assets. At June 30, 2006 the annual insurance reimbursementpayable to TransMontaigne Inc. was approximately $1.0 million. We alsoreimburse TransMontaigne Inc. for direct operating costs and expenses thatTransMontaigne Inc. incurs on our behalf, such as salaries of operationalpersonnel performing services on-site at our terminals and pipeline and thecost of their employee benefits, including 401(k) and health insurancebenefits.

Under the omnibus agreement, TransMontaigne Inc.has agreed to indemnify us through May 27, 2010 against certain potentialenvironmental claims, losses and expenses 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 to environmentalclaims made as a result of additions to or modifications of environmental lawspromulgated after May 27, 2005. We have agreed to indemnifyTransMontaigne Inc. against environmental liabilities related to ourassets, to the extent these liabilities are not subject toTransMontaigne Inc.’s indemnification obligations.

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

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TransMontaigne Inc.’sminimum obligations are met. In exchange for TransMontaigne Inc.’s minimumrevenue commitment, we agreed to provide TransMontaigne Inc. approximately2.0 million barrels of light oil storage capacity and approximately1.4 million barrels of heavy oil storage capacity at certain of our Floridaterminals.

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

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

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

*TerminalingServices Agreement—Oklahoma City Terminal.**  *We have a revenue support agreementwith TransMontaigne Inc. that provides that in the event any currentthird-party terminaling agreement should expire, TransMontaigne Inc. agrees toenter into a terminaling services agreement 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. approximately152,000 barrels of light oil storage capacity at our Oklahoma City terminal.TransMontaigne Inc.’s minimum revenue commitment currently is not in effectbecause a major oil company is under contract for the utilization of the lightoil storage capacity at the terminal.

*TerminalingServices Agreement—Mobile Terminal.**  *We have a terminaling andtransportation services agreement with TransMontaigne Inc. that willexpire on December 31, 2012. Under this agreement,TransMontaigne Inc. agreed to throughput at our Mobile terminal a volumeof refined products that will, at the fee and tariff schedule contained in theagreement, result in minimum revenues to us of $2.1 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. A shortfall payment may be applied as a creditin the following year after TransMontaigne Inc.’s minimum obligations aremet. In exchange for TransMontaigne Inc.’s minimum revenue commitment, weagreed to provide TransMontaigne Inc. approximately 46,000 barrels oflight oil storage capacity and approximately 65,000 barrels of heavy oilstorage capacity at the terminal.

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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. inexcess of the carryover basis of the net assets contributed has been reflectedin the accompanying consolidated balance sheet and changes in partners’ equityas a reduction 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. 

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

| ** **                            | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Trade accounts  receivable            |       |                    | $          | 1,748                       |       |   |   | $ | 1,003 |   |   |
| Less allowance  for doubtful accounts |       |                    | —     |                        |       |   | — |   |   |
|                                  |       |                    | $          | 1,748                       |       |   |   | $ | 1,003 |   |   |

 

TransMontaigne Inc.accounted for approximately 65% and 61% of our total revenues for the threemonths ended June 30, 2006 and 2005, respectively, and approximately 68%and 64% of our total revenues for the six months ended June 30, 2006 and2005, respectively. Marathon Petroleum Company LLC (“Marathon”) and theprevious asphalt storage customers accounted for 21% and 24% of our totalrevenues for the three months ended June 30, 2006 and 2005, respectively,and approximately 19% and 24% of our total revenues for the six months ended June 30,2006 and 2005, respectively. During February 2006, Marathon entered into anew five-year terminaling services agreement for asphalt storage capacity thatreplaces our previous customer, Gulf Atlantic Refining & Marketing,LP. In April 2005, Trigeant EP, Ltd. assigned its terminalingservices contract with us to Gulf Atlantic Refining & Marketing, LP.

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**(5) PREPAIDEXPENSES AND OTHER**

Prepaidexpenses and other are as follows (in thousands):

| ** **                                      | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Reimbursements  due from the Federal government |       |                    | $          | 743                         |       |   |   | $ | — |   |   |
| Additive  detergent                             |       |                    | 403        |                        |       |   | 307 |   |   |
| Deposits and  other assets                      |       |                    | 19         |                        |       |   | 31 |   |   |
|                                            |       |                    | $          | 1,165                       |       |   |   | $ | 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):

| ** **                          | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Land                                |       | $                       | 27,303     |                        |       | $ | 27,303 |   |   |
| Terminals,  pipelines and equipment |       | 129,161                 |       |                        | 128,830    |   |   |
| Furniture,  fixtures and equipment  |       | 640                     |       |                        | 480        |   |   |
| Construction in  progress           |       | 1,272                   |       |                        | 263        |   |   |
|                                |       | 158,376                 |       |                        | 156,876    |   |   |
| Less accumulated  depreciation      |       | (34,475                 | )          |                        | (30,992    | ) |   |
|                                |       | $                       | 123,901    |                        |       | $ | 125,884 |   |   |

 

**(7) OTHERASSETS**

Otherassets, net are as follows (in thousands):

| ** **                                                                      | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Acquired  intangible, net of accumulated amortization of $1,667 and $1,417      |       |                    | $          | 833                         |       |   |   | $ | 1,083 |   |   |
| Deferred debt  issuance costs, net of accumulated amortization of $198 and $107 |       |                    | 718        |                        |       |   | 809 |   |   |
| Deposits and  other assets                                                      |       |                    | 9          |                        |       |   | 9 |   |   |
|                                                                            |       |                    | $          | 1,560                       |       |   |   | $ | 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 issuance costs are amortized using theeffective interest method over the term of the credit facility (see Note 9of Notes to consolidated financial statements).

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**(8) OTHER ACCRUEDLIABILITIES**

Otheraccrued liabilities are as follows (in thousands):

| ** **                         | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Accrued property  taxes            |       |                    | $          | 962                         |       |   |   | $ | 58 |   |   |
| Accrued  environmental obligations |       |                    | 1,075      |                        |       |   | 625 |   |   |
| Customer advances  and deposits    |       |                    | 171        |                        |       |   | 233 |   |   |
| Asset retirement  obligations      |       |                    | 237        |                        |       |   | 237 |   |   |
| Accrued expenses  and other        |       |                    | 108        |                        |       |   | 86 |   |   |
|                               |       |                    | $          | 2,553                       |       |   |   | $ | 1,239 |   |   |

 

**(9) LONG-TERMDEBT**

On May 9, 2005, we entered into a$75 million senior secured credit facility. At June 30, 2006 and December 31,2005, our outstanding borrowings under the credit facility were approximately$46.0 million and $28.0 million, respectively. 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; $89.8 million atJune 30, 2006). At June 30, 2006, we had outstanding letters ofcredit of approximately $250,000. Borrowings under the credit facility bearinterest (at our option) based on a base rate plus an applicable margin, orLIBOR plus an applicable margin; the applicable margins are a function of thetotal leverage ratio (as defined). Interest on loans under the credit facilityis due and payable periodically, based on the applicable interest rate andrelated interest period, generally one, two or three months. The weightedaverage interest rate on borrowings under our credit facility was 6.6% and 6.3%during the three and six months ended June 30, 2006, respectively. Inaddition, we pay a commitment fee ranging from 0.375% to 0.50% per annum on thetotal amount of the unused commitments. Borrowings under the credit facilityare secured by a lien on our assets, including cash, accounts receivable,inventory, general intangibles, investment property, contract rights and realproperty, except for our real property located in Florida. The terms of thecredit facility include covenants that restrict our ability to make cashdistributions and acquisitions. The principal balance of loans and any accruedand unpaid interest will be due and payable in full on the maturity date, May 9,2010.

The credit facility also contains customaryrepresentations and warranties (including those relating to organization andauthorization, compliance with laws, absence of defaults, material 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 June 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 Inc. (“Morgan Stanley Capital Group”),pursuant to which all the issued and outstanding shares of common stock ofTransMontaigne Inc., would be acquired. We are not a party to that mergeragreement. If completed, the merger between TransMontaigne Inc. and MorganStanley Capital Group will constitute a “change in control” under the creditfacility and, therefore, would require a waiver from the lenders. In the mergeragreement with TransMontaigne Inc., Morgan Stanley Capital Group agreed thatthe parties will not close the transaction unless either a waiver has beenreceived from the lenders or comparable financing has been made available tous. On July 28, 2006 the lenders granted a consent and waiver to permitthe proposed merger between TransMontaigne Inc. and Morgan Stanley CapitalGroup.

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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 at theend of the preceding fiscal year. Ownership in the awards is subject toforfeiture until the vesting date, but recipients have distribution and votingrights from the date of grant. The plan is administered by the compensationcommittee of the board of directors of our general partner. On January 19,2006, we announced a program for the repurchase of outstanding common units forpurposes of making subsequent grants of restricted units to key employees andnon-employee directors of our general partner. As of June 30, 2006, wehave repurchased approximately 31,900 common units pursuant to the program.

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

Amortization of deferred equity-basedcompensation of approximately $0.3 million and $48,000 is included in directgeneral and administrative expense for the three months ended June 30,2006 and 2005, respectively. Amortization of deferred equity-basedcompensation of approximately $0.4 million and $48,000 is included in directgeneral and administrative expense for the six months ended June 30, 2006and 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 June 30,2006 and 2005, is approximately $77,000 and $nil, respectively, of compensationexpense related to distributions paid to holders of restricted units. Includedin direct general and administrative expenses for the six months ended June 30,2006 and 2005, is approximately $125,000 and $nil, respectively, ofcompensation expense related to distributions paid to holders of restrictedunits.

**(11) COMMITMENTSAND CONTINGENCIES**

*Operating Leases.**  *We lease property and equipment undernon-cancelable operating leases that extend through April 2021. At June 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)                |       |       | $          | 105                              |       |   |
| 2007                                         |       |       | 208        |                             |       |
| 2008                                         |       |       | 196        |                             |       |
| 2009                                         |       |       | 153        |                             |       |
| 2010                                         |       |       | 111        |                             |       |
| Thereafter                                   |       |       | 1,137      |                             |       |
|                                         |       |       | $          | 1,910                            |       |   |

 

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Rental expense underoperating leases was approximately $55,000 and $46,000 for the three monthsended June 30, 2006 and 2005, respectively. Rental expense under operatingleases was approximately $135,000 and $116,000 for the six months ended June 30,2006 and 2005, respectively.

**(12) NET EARNINGSPER LIMITED PARTNERS’ UNIT**

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

| ** **                                   | ** ** | **Three months  ended  June 30,** | ** ** | **Six months  ended  June 30,** | ** ** |
|----------------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                    | ** ** | **2005**                                  | ** ** | **2006** | ** ** | **2005** | ** ** |
| Basic weighted  average units                |       | 7,272                                       |       | 7,295                                     |       | 7,282 |   | 7,295 |   |
| Dilutive effect  of restricted phantom units |       | 7                                           |       | —                                    |       | 1 |   | — |   |
| Diluted weighted average  units              |       | 7,279                                       |       | 7,295                                     |       | 7,283 |   | 7,295 |   |

 

For the three months ended June 30, 2006, weincluded the dilutive effect of 58,000 restricted phantom units in thecomputation of diluted net earnings per limited partners’ unit because theaverage quoted market price of our common units for the period exceeded therelated unamortized deferred compensation.

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 and six months ended June 30, 2006and 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  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                    | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| **U.S. Gulf Coast Terminals:**                |       |                                            |       |                                          |       |   |   |   |   |
| Throughput and  additive injection fees, net  |       | $                                               | 4,581      |                                          | $          | 3,076 |   | $ | 10,170 |   | $ | 5,579 |   |
| Terminaling  storage fees                     |       | 2,724                                           |       | 4,214                                         |       | 5,273 |   | 9,001 |   |
| Pipeline  transportation fees                 |       | —                                          |       | —                                        |       | — |   | — |   |
| Other                                         |       | 2,293                                           |       | 1,093                                         |       | 4,502 |   | 2,436 |   |
| Revenues                                      |       | 9,598                                           |       | 8,383                                         |       | 19,945 |   | 17,016 |   |
| Direct operating costs and expenses           |       | (5,373                                          | )          | (3,440                                        | )          | (9,746 | ) | (7,266 | ) |
| Margins                                       |       | 4,225                                           |       | 4,943                                         |       | 10,199 |   | 9,750 |   |
| **Midwest Terminals and Pipeline:**           |       |                                            |       |                                          |       |   |   |   |   |
| Throughput and  additive injection fees, net  |       | 844                                             |       | 498                                           |       | 1,613 |   | 939 |   |
| Terminaling  storage fees                     |       | —                                          |       | —                                        |       | — |   | — |   |
| Pipeline  transportation fees                 |       | 661                                             |       | 610                                           |       | 1,255 |   | 1,144 |   |
| Other                                         |       | 460                                             |       | 196                                           |       | 840 |   | 302 |   |
| Revenues                                      |       | 1,965                                           |       | 1,304                                         |       | 3,708 |   | 2,385 |   |
| Direct operating costs and expenses           |       | (450                                            | )          | (270                                          | )          | (772 | ) | (503 | ) |
| Margins                                       |       | 1,515                                           |       | 1,034                                         |       | 2,936 |   | 1,882 |   |
| Total margins                                 |       | 5,740                                           |       | 5,977                                         |       | 13,135 |   | 11,632 |   |
| Direct general and administrative expenses    |       | (672                                            | )          | (79                                           | )          | (1,772 | ) | (79 | ) |
| Allocated general and administrative expenses |       | (822                                            | )          | (700                                          | )          | (1,634 | ) | (1,400 | ) |
| Allocated insurance expense                   |       | (74                                             | )          | (83                                           | )          | (156 | ) | (166 | ) |
| Depreciation and amortization                 |       | (1,790                                          | )          | (1,601                                        | )          | (3,732 | ) | (3,110 | ) |
| Operating income                              |       | 2,382                                           |       | 3,514                                         |       | 5,841 |   | 6,877 |   |
| Other income (expense), net                   |       | (845                                            | )          | (182                                          | )          | (1,585 | ) | (182 | ) |
| Net earnings                                  |       | $                                               | 1,537      |                                          | $          | 3,332 |   | $ | 4,256 |   | $ | 6,695 |   |

 

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

| ** **                         | ** ** | **Three months ended June 30, 2006** | ** ** |
|------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                          | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from  external customers  |       | $                                                             | 3,784      |   |   | $ | 290 |   |   | $ | 4,074 |   |
| Revenues from  TransMontaigne Inc. |       | 5,814                                                         |       |   | 1,675 |   |   | 7,489 |   |
| Revenues                           |       | $                                                             | 9,598      |   |   | $ | 1,965 |   |   | $ | 11,563 |   |
| Identifiable  assets               |       | $                                                             | 114,325    |   |   | $ | 15,687 |   |   | $ | 130,012 |   |
| Capital expenditures               |       | $                                                             | 657        |   |   | $ | 11 |   |   | $ | 668 |   |

 

| ** **                         | ** ** | **Three months ended June 30, 2005** | ** ** |
|------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                          | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from  external customers  |       | $                                                             | 3,752      |   |   | $ | — |   |   | $ | 3,752 |   |
| Revenues from  TransMontaigne Inc. |       | 4,631                                                         |       |   | 1,304 |   |   | 5,935 |   |
| Revenues                           |       | $                                                             | 8,383      |   |   | $ | 1,304 |   |   | $ | 9,687 |   |
| Identifiable  assets               |       | $                                                             | 113,074    |   |   | $ | 9,786 |   |   | $ | 122,860 |   |
| Capital expenditures               |       | $                                                             | 1,567      |   |   | $ | — |   |   | $ | 1,567 |   |

 

20

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| ** **                         | ** ** | **Six months ended June 30, 2006** | ** ** |
|------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                        | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from  external customers  |       | $                                                           | 7,060      |   |   | $ | 591 |   |   | $ | 7,651 |   |
| Revenues from  TransMontaigne Inc. |       | 12,885                                                      |       |   | 3,117 |   |   | 16,002 |   |
| Revenues                           |       | $                                                           | 19,945     |   |   | $ | 3,708 |   |   | $ | 23,653 |   |
| Identifiable  assets               |       | $                                                           | 114,325    |   |   | $ | 15,687 |   |   | $ | 130,012 |   |
| Capital expenditures               |       | $                                                           | 1,453      |   |   | $ | 49 |   |   | $ | 1,502 |   |

 

| ** **                         | ** ** | **Six months ended June 30, 2005** | ** ** |
|------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                         | ** ** | **U.S. Gulf  Coast  Terminals**                        | ** ** | **Midwest  Terminals and  Pipeline** | ** ** | **Total** | ** ** |
| Revenues from  external customers  |       | $                                                           | 6,924      |   |   | $ | — |   |   | $ | 6,924 |   |
| Revenues from  TransMontaigne Inc. |       | 10,092                                                      |       |   | 2,385 |   |   | 12,477 |   |
| Revenues                           |       | $                                                           | 17,016     |   |   | $ | 2,385 |   |   | $ | 19,401 |   |
| Identifiable  assets               |       | $                                                           | 113,074    |   |   | $ | 9,786 |   |   | $ | 122,860 |   |
| Capital expenditures               |       | $                                                           | 2,304      |   |   | $ | — |   |   | $ | 2,304 |   |

 

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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 SIX MONTHS ENDED JUNE 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. The Partnership anticipates repurchasing annually up toapproximately $1.2 million of aggregate market value of its outstanding commonunits for this purpose. However, there is no guarantee as to the exact number ofunits or dollar amount that will be repurchased, and the purchases may bediscontinued at any time.

On February 20, 2006, we entered into a newfive-year terminaling services agreement with Marathon Petroleum Company LLC (“Marathon”)regarding approximately 1.0 million barrels of asphalt storage capacitythroughout our Florida facilities. The terminaling services agreement with GulfAtlantic Operations LLC (“Gulf Atlantic”) for the utilization of this asphaltstorage capacity has been amended to allow for cancellations coinciding withthe effective dates within the terminaling services agreement with Marathon.Effective May 1, 2006, our terminaling services agreement with GulfAtlantic expired. The change from Gulf Atlantic to Marathon is not expected to havea material 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. 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 are not a party to that merger agreement and cannot be certainwhen such transaction will close, or if it will close at all. If the mergerbetween TransMontaigne Inc. and Morgan Stanley Capital Group is completed,Morgan Stanley Capital Group will 

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alsocontrol our operations. We currently cannot predict whether or in what mannerMorgan Stanley Capital Group’s control of our general partner will change ouroperations.

**SUBSEQUENT EVENTS**

On July 21, 2006, weannounced a distribution of $0.43 per unit payable on August 8, 2006 tounitholders of record on July 31, 2006.

**RESULTS OFOPERATIONS—THREE MONTHS ENDED JUNE 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 certainTransMontaigne Inc. terminal and pipeline operations to us was recordedfor financial reporting purposes at carryover basis in a manner similar to areorganization of entities under common control.

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

| ** **                                 | ** ** | **Three months ended  June 30,** | ** ** |
|--------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                 | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
| Revenues                                   |       | $                                               | 11,563     |   | $ | 9,687 |   |
| Direct operating  costs and expenses       |       | $                                               | (5,823     | ) | $ | (3,710 | ) |
| Operating income                           |       | $                                               | 2,382      |   | $ | 3,514 |   |
| Net earnings                               |       | $                                               | 1,537      |   | $ | 3,332 |   |
| Net cash provided  by operating activities |       | $                                               | 5,164      |   | $ | 6,785 |   |
| Net cash (used  in) investing activities   |       | $                                               | (668       | ) | $ | (1,567 | ) |
| Net cash (used in)  financing activities   |       | $                                               | (3,470     | ) | $ | (4,991 | ) |

 

***Revenues.******  ***The revenues for thethree months ended June 30, 2006 and 2005, were approximately $11.6million and $9.7 million, respectively. Effective October 31, 2005, weacquired the Oklahoma City terminal from Magellan Pipeline Company, L.P. forapproximately $1.9 million and on January 1, 2006 we acquired the Mobileterminal from TransMontaigne Inc. for approximately $17.9 million. For thethree months ended June 30, 2006, the Oklahoma City terminal contributedapproximately $0.3 million in revenues and the Mobile terminal contributedapproximately $0.9 million in revenues. Our revenues are as follows (inthousands):

| ** **                                   | ** ** | **Three months ended  June 30,** | ** ** |
|----------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
| Throughput and  additive injection fees, net |       | $                                               | 5,425      |   | $ | 3,574 |   |
| Terminaling  storage fees                    |       | 2,724                                           |       | 4,214 |   |
| Pipeline  transportation fees                |       | 661                                             |       | 610 |   |
| Management fees  and reimbursed costs        |       | 322                                             |       | 126 |   |
| Other                                        |       | 2,431                                           |       | 1,163 |   |
| Revenues                                     |       | $                                               | 11,563     |   | $ | 9,687 |   |

 

***Throughput andadditive injection fees, net.******  ***Terminalthroughput and additive injection fees, net were approximately$5.4 million and $3.6 million for the three months ended June 30,2006 and 2005, respectively. The increase of approximately $1.8 million inthroughput and additive injection fees, net for 2006 as compared to 2005 wasdue principally to approximately $0.9 million from the conversion of the 

23

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fees charged on heavy oilvolumes to a throughput agreement and approximately $0.9 million from theacquisition of the Oklahoma City and Mobile terminals. For the three monthsended June 30, 2006 and 2005, we delivered approximately 99,200 barrelsand 96,100 barrels per day of light oil throughput volumes, respectively, atour 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$1.4 million and $0.5 million for the three months ended June 30, 2006and 2005, respectively. For the three months ended June 30, 2006 and 2005,we delivered approximately 25,100 barrels and 31,500 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 June 30, 2006 and 2005, are feescharged to TransMontaigne Inc. of approximately $5.0 million and$3.5 million, respectively.

***Terminaling storagefees.******  ***Terminaling storage fees wereapproximately $2.7 million and $4.2 million for the three monthsended June 30, 2006 and 2005, respectively. The decrease of approximately$1.5 million in terminaling storage fees for 2006 as compared to 2005 wasdue principally to the conversion of the fees charged on heavy oil volumes froma storage agreement to a throughput agreement.

Included in the terminaling storage fees for the threemonths ended June 30, 2006 and 2005 are fees charged toTransMontaigne Inc. of approximately $nil and $1.4 million,respectively, for the storage of heavy oil volumes.

***Pipelinetransportation fees.******  ***For the three months ended June 30,2006 and 2005, we earned pipeline transportation fees of approximately$0.7 million and $0.6 million, respectively. For the three monthsended June 30, 2006 and 2005, we averaged approximately 14,500 barrels and13,400 barrels per day of transported product on the Razorback Pipeline.

Included in pipeline transportation fees for the threemonths ended June 30, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $0.7 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. Effective May 27, 2005, we manage andoperate on behalf of TransMontaigne Inc. certain tank capacity owned by autility and receive a management fee from TransMontaigne Inc. For the threemonths ended June 30, 2006 and 2005, management fees and reimbursed costswere approximately $322,000 and $126,000, respectively.

Included in management fees and reimbursed costs forthe three months ended June 30, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $0.3 million and $91,000,respectively.

***Other revenue.******  ***For the threemonths ended June 30, 2006 and 2005, other revenue was approximately$2.4 million and $1.2 million, respectively. The increase ofapproximately $1.2 million in other revenue for 2006 as compared to 2005was due principally to an increase at the Florida facilities of approximately$0.9 million and approximately $0.3 million from the acquisition of the Mobileterminal.

Included in other revenue for the three months ended June 30,2006 and 2005, are fees charged to TransMontaigne Inc. of approximately$1.5 million and $0.3 million, respectively.

***Direct operating costs and expenses.******  ***For the threemonths ended June 30, 2006 and 2005, the direct operating costs andexpenses of our operations were approximately $5.8 million and$3.7 million, respectively. For the three months ended June 30, 2006,the Oklahoma City terminal contributed approximately $0.1 million in directoperating costs and expenses and the Mobile terminal contributed 

24

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approximately $0.7 million in direct operating costsand expenses. The direct operating costs and expenses of our operations are asfollows (in thousands):

| ** **                                       | ** ** | **Three months  ended  June 30,** | ** ** |
|--------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                    | ** ** | **2005** | ** ** |
| Wages and  employee benefits                     |       | $                                           | 1,382      |   | $ | 1,195 |   |
| Utilities and  communication charges             |       | 426                                         |       | 237 |   |
| Repairs and  maintenance                         |       | 1,995                                       |       | 914 |   |
| Allocated  property and casualty insurance costs |       | 186                                         |       | 175 |   |
| Office, rentals  and property taxes              |       | 620                                         |       | 490 |   |
| Vehicles and fuel  costs                         |       | 519                                         |       | 289 |   |
| Environmental  compliance costs                  |       | 588                                         |       | 117 |   |
| Other                                            |       | 107                                         |       | 293 |   |
| Direct operating  costs and expenses             |       | $                                           | 5,823      |   | $ | 3,710 |   |

 

The increase of approximately $2.1 million indirect operating costs and expenses for 2006 as compared to 2005 was dueprincipally to an increase at the Florida facilities and the acquisition of theOklahoma City and Mobile terminals.

***Costs and expenses.******  ***Direct generaland administrative expenses for the three months ended June 30, 2006, wereapproximately $0.7 million, compared to approximately $79,000 for the threemonths ended June 30, 2005. Direct general and administrative expenses areas follows (in thousands):

| ** **                                                                 | ** ** | **Three months  ended  June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                 | ** ** | **2006**                                    | ** ** | **2005** | ** ** |
| Accounting  expenses                                                       |       | $                                           | 91         |   |   | $ | — |   |   |
| Legal expenses                                                             |       | 145                                         |       |   | — |   |   |
| Independent  director fees                                                 |       | 85                                          |       |   | 10 |   |   |
| Amortization of  deferred equity-based compensation                        |       | 268                                         |       |   | 48 |   |   |
| Compensation  expense on distributions paid to holders of restricted units |       | 77                                          |       |   | — |   |   |
| Other                                                                      |       | 6                                           |       |   | 21 |   |   |
| Direct general  and administrative expenses                                |       | $                                           | 672        |   |   | $ | 79 |   |   |

 

The accompanying consolidated financial statementsinclude allocated general and administrative charges from TransMontaigne Inc.for allocations of indirect corporate overhead to cover costs of centralizedcorporate functions such as legal, accounting, treasury, insuranceadministration and claims processing, health, safety and environmental,information technology, human resources, credit, payroll, taxes, engineeringand other corporate services. The allocated general and administrative expenseswere approximately $0.8 million and $0.7 million for the three monthsended June 30, 2006 and 2005, respectively.

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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  June 30,** | ** ** |
|--------------------------------------|------------|---------------------------------------------|------------|
| ** **                           | ** ** | **2006**                                    | ** ** | **2005** | ** ** |
| Direct operating  costs and expenses |       | $                                           | 176        |   | $ | 167 |   |
| General and  administrative expenses |       | 74                                          |       | 83 |   |
| Total allocated  insurance costs     |       | $                                           | 250        |   | $ | 250 |   |

 

Depreciation and amortization expense for the threemonths ended June 30, 2006 and 2005, was $1.8 million and$1.6 million, respectively. The increase of approximately$0.2 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 $0.8 million and $0.2 million for the three months ended June 30,2006 and 2005, respectively, related to borrowings and commitment fees underour senior secured credit facility.

**RESULTS OFOPERATIONS—SIX MONTHS ENDED JUNE 30, 2006 AND 2005**

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

| ** **                                           | ** ** | **Six months ended  June 30,** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                           | ** ** | **2006**                                      | ** ** | **2005** | ** ** |
| Revenues                                             |       | $                                             | 23,653     |   | $ | 19,401 |   |
| Direct operating  costs and expenses                 |       | $                                             | (10,518    | ) | $ | (7,769 | ) |
| Operating income                                     |       | $                                             | 5,841      |   | $ | 6,877 |   |
| Net earnings                                         |       | $                                             | 4,256      |   | $ | 6,695 |   |
| Net cash provided  by operating activities           |       | $                                             | 10,236     |   | $ | 11,135 |   |
| Net cash (used  in) investing activities             |       | $                                             | (19,437    | ) | $ | (2,304 | ) |
| Net cash provided by  (used in) financing activities |       | $                                             | 10,141     |   | $ | (8,592 | ) |

 

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***Revenues.******  ***The revenues for thesix months ended June 30, 2006 and 2005, were approximately $23.7 millionand $19.4 million, respectively. Effective October 31, 2005, we acquiredthe Oklahoma City terminal from Magellan Pipeline Company, L.P. for approximately$1.9 million and on January 1, 2006 we acquired the Mobile terminal fromTransMontaigne Inc. for approximately $17.9 million. For the six months endedJune 30, 2006, the Oklahoma City terminal contributed approximately $0.6million in revenues and the Mobile terminal contributed approximately $1.7million in revenues. Our revenues are as follows (in thousands):

| ** **                                   | ** ** | **Six months ended  June 30,** | ** ** |
|----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                      | ** ** | **2005** | ** ** |
| Throughput and  additive injection fees, net |       | $                                             | 11,783     |   | $ | 6,518 |   |
| Terminaling  storage fees                    |       | 5,273                                         |       | 9,001 |   |
| Pipeline  transportation fees                |       | 1,255                                         |       | 1,144 |   |
| Management fees  and reimbursed costs        |       | 631                                           |       | 156 |   |
| Other                                        |       | 4,711                                         |       | 2,582 |   |
| Revenues                                     |       | $                                             | 23,653     |   | $ | 19,401 |   |

 

***Throughput andadditive injection fees, net.******  ***Terminalthroughput and additive injection fees, net were approximately$11.8 million and $6.5 million for the six months ended June 30,2006 and 2005, respectively. The increase of approximately $5.3 million inthroughput and additive injection fees, net for 2006 as compared to 2005 wasdue principally to approximately $2.9 million from the conversion of the feescharged on heavy oil volumes to a throughput agreement and approximately $1.7million from the acquisition of the Oklahoma City and Mobile terminals. For thesix months ended June 30, 2006 and 2005, we delivered approximately103,700 barrels and 95,300 barrels per day of light oil throughput volumes,respectively, 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$3.4 million and $0.5 million for the six months ended June 30, 2006and 2005, respectively. For the six months ended June 30, 2006 and 2005,we delivered approximately 32,300 barrels and 36,400 barrels per day,respectively, of heavy oil volumes for TransMontaigne Inc. at ourterminals.

Included in the throughput and additive injectionfees, net for the six months ended June 30, 2006 and 2005, are feescharged to TransMontaigne Inc. of approximately $10.9 million and$6.4 million, respectively.

***Terminaling storagefees.******  ***Terminaling storage fees wereapproximately $5.3 million and $9.0 million for the six months endedJune 30, 2006 and 2005, respectively. The decrease of approximately$3.7 million in terminaling storage fees for 2006 as compared to 2005 wasdue principally to the conversion of the fees charged on heavy oil volumes froma storage agreement to a throughput agreement.

Included in the terminaling storage fees for the sixmonths ended June 30, 2006 and 2005 are fees charged toTransMontaigne Inc. of approximately $nil and $3.9 million,respectively, for the storage of heavy oil volumes.

***Pipelinetransportation fees.******  ***For the six months endedJune 30, 2006 and 2005, we earned pipeline transportation fees ofapproximately $1.3 million and $1.1 million, respectively. For thesix months ended June 30, 2006 and 2005, we averaged approximately 13,900barrels and 12,600 barrels per day of transported product on the RazorbackPipeline.

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Included in pipeline transportation fees for the sixmonths ended June 30, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $1.3 million and$1.1 million, respectively.

***Management fees andreimbursed costs.******  ***We manage and operate for a majoroil company certain tank capacity at our Port Everglades (South) terminal andreceive a reimbursement of costs. Effective May 27, 2005, we manage andoperate on behalf of TransMontaigne Inc. certain tank capacity owned by autility and receive a management fee from TransMontaigne Inc. For the sixmonths ended June 30, 2006 and 2005, management fees and reimbursed costswere approximately $631,000 and $156,000, respectively.

Included in management fees and reimbursed costs forthe six months ended June 30, 2006 and 2005, are fees charged toTransMontaigne Inc. of approximately $0.6 million and $91,000,respectively.

***Other revenue.******  ***For the sixmonths ended June 30, 2006 and 2005, other revenue was approximately$4.7 million and $2.6 million, respectively. The increase ofapproximately $2.1 million in other revenue for 2006 as compared to 2005 wasdue principally to an increase at the Florida facilities of approximately $1.5million and approximately $0.6 million from the acquisition of the Mobile terminal.

Included in other revenue for the six months ended June 30,2006 and 2005, are fees charged to TransMontaigne Inc. of approximately$3.2 million and $1.0 million, respectively.

***Direct operating costs and expenses.******  ***For the sixmonths ended June 30, 2006 and 2005, the direct operating costs andexpenses of our operations were approximately $10.5 million and$7.8 million, respectively. For the six months ended June 30, 2006,the Oklahoma City terminal contributed approximately $0.2 million in directoperating costs and expenses and the Mobile terminal contributed approximately$1.0 million in direct operating costs and expenses. The direct operating costsand expenses of our operations are as follows (in thousands):

| ** **                                       | ** ** | **Six months ended  June 30,** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                       | ** ** | **2006**                                      | ** ** | **2005** | ** ** |
| Wages and  employee benefits                     |       | $                                             | 2,659      |   | $ | 2,444 |   |
| Utilities and  communication charges             |       | 845                                           |       | 575 |   |
| Repairs and  maintenance                         |       | 3,442                                         |       | 2,051 |   |
| Allocated  property and casualty insurance costs |       | 354                                           |       | 342 |   |
| Office, rentals  and property taxes              |       | 1,265                                         |       | 1,096 |   |
| Vehicles and fuel  costs                         |       | 953                                           |       | 609 |   |
| Environmental  compliance costs                  |       | 720                                           |       | 264 |   |
| Other                                            |       | 280                                           |       | 388 |   |
| Direct operating  costs and expenses             |       | $                                             | 10,518     |   | $ | 7,769 |   |

 

The increase of approximately $2.7 million indirect operating costs and expenses for 2006 as compared to 2005 was dueprincipally to an increase at the Florida facilities and the acquisition of theOklahoma City and Mobile terminals.

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***Costs and expenses.******  ***Direct generaland administrative expenses for the six months ended June 30, 2006, wereapproximately $1.8 million, compared to approximately $79,000 for the sixmonths ended June 30, 2005. Direct general and administrative expenses areas follows (in thousands):

| ** **                                                                 | ** ** | **Six months  ended  June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                 | ** ** | **2006**                                  | ** ** | **2005** | ** ** |
| Accounting  expenses                                                       |       | $                                         | 690        |   |   | $ | — |   |   |
| Legal expenses                                                             |       | 350                                       |       |   | — |   |   |
| Independent  director fees                                                 |       | 115                                       |       |   | 10 |   |   |
| Amortization of  deferred equity-based compensation                        |       | 430                                       |       |   | 48 |   |   |
| Compensation  expense on distributions paid to holders of restricted units |       | 125                                       |       |   | — |   |   |
| Other                                                                      |       | 62                                        |       |   | 21 |   |   |
| Direct general  and administrative expenses                                |       | $                                         | 1,772      |   |   | $ | 79 |   |   |

 

The accompanying consolidated financial statementsinclude allocated general and administrative charges from TransMontaigne Inc.for allocations of indirect corporate overhead to cover costs of centralizedcorporate functions such as legal, accounting, treasury, insuranceadministration and claims processing, health, safety and environmental,information technology, human resources, credit, payroll, taxes, engineeringand other corporate services. The allocated general and administrative expenseswere approximately $1.6 million and $1.4 million for the six monthsended June 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):

| ** **                           | ** ** | **Six months  ended  June 30,** | ** ** |
|--------------------------------------|------------|-------------------------------------------|------------|
| ** **                           | ** ** | **2006**                                  | ** ** | **2005** | ** ** |
| Direct operating  costs and expenses |       | $                                         | 344        |   | $ | 334 |   |
| General and  administrative expenses |       | 156                                       |       | 166 |   |
| Total allocated  insurance costs     |       | $                                         | 500        |   | $ | 500 |   |

 

Depreciation and amortization expense for the sixmonths ended June 30, 2006 and 2005, was $3.7 million and$3.1 million, respectively. The increase of approximately$0.6 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 $1.5 million and $0.2 million for the six months ended June 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.

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Capital expenditures, excluding acquisitions, for thethree and six months ended June 30, 2006, were approximately$0.7 million and $1.5 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; $89.8 million atJune 30, 2006). Borrowings under the credit facility bear interest (at ouroption) based on a base rate plus an applicable margin, or LIBOR plus anapplicable margin; the applicable margins are a function of the total leverageratio (as defined). Interest on loans under the credit facility will be due andpayable periodically, based on the applicable interest rate and relatedinterest period, generally either one, two or three months. In addition, wewill pay a commitment fee ranging from 0.375% to 0.50% per annum on the totalamount of the unused commitments. Borrowings under the credit facility aresecured by a lien on our assets, including cash, accounts receivable,inventory, general intangibles, investment property, contract rights and realproperty, except for our real property located in Florida. The terms of thecredit facility include covenants that restrict our ability to make cashdistributions and acquisitions. We may make distributions of cash to the extentof our “available cash” as defined in our partnership agreement. We may makeacquisitions meeting the definition of “permitted acquisitions” which include:acquisitions in which the consideration paid for such acquisition, togetherwith the consideration paid for other acquisitions in the same fiscal year,does not exceed $15,000,000; acquisitions that arise from the exercise ofoptions under the omnibus agreement with TransMontaigne Inc. provided thatany cash consideration is not obtained from borrowings under the creditfacility; and acquisitions in which we have (1) provided the agent priorwritten documentation in form and substance reasonably satisfactory to theagent demonstrating our pro forma 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.”

On June 22, 2006, TransMontaigne Inc. announcedthat it had entered into a definitive merger agreement with Morgan StanleyCapital Group Inc. (“Morgan Stanley Capital Group”), pursuant to which all theissued and outstanding shares of common stock of TransMontaigne Inc., would beacquired. We are not a party to that merger agreement. If completed, the mergerbetween TransMontaigne Inc. and Morgan Stanley Capital Group will constitute a “changein control” under the credit facility and, therefore, would require a waiverfrom the lenders. In the merger agreement with TransMontaigne Inc., MorganStanley Capital Group agreed that the parties will not close the transactionunless either a waiver has been received from the lenders or comparablefinancing has been made available to us. On July 28, 2006 the lendersgranted a consent and waiver to permit the proposed merger betweenTransMontaigne Inc. and Morgan Stanley Capital Group.

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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** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|-------------------------------|------------|
| ** **                                                                                           | ** ** | **September 30,  2005**     | ** ** | **December 31,  2005**   | ** ** | **March 31,  2006** | ** ** | **June 30,  2006** | ** ** | **June 30,  2006** | ** ** |
| **Financial performance debt  covenant test:**                                                       |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated  EBITDA, as stipulated in the credit facility                                           |       |                             | $          | 6,002                         |       |   |   | $ | 6,435 |   |   |   | $ | 5,566 |   |   |   | $ | 4,445 |   |   |   | $ | 22,448 |   |   |
| Consolidated  funded indebtedness                                                                    |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 46,000 |   |   |
| Total leverage  ratio                                                                                |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   | 2.05 | x |   |
| Consolidated  EBITDA, as stipulated in the credit facility                                           |       |                             | $          | 5,371                         |       |   |   | $ | 5,873 |   |   |   | $ | 5,566 |   |   |   | $ | 4,445 |   |   |   | $ | 21,255 |   |   |
| Consolidated  interest expense                                                                       |       |                             | $          | 464                           |       |   |   | $ | 505 |   |   |   | $ | 697 |   |   |   | $ | 804 |   |   |   | $ | 2,470 |   |   |
| Interest coverage  ratio                                                                             |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   | 8.61 | x |   |
| **Reconciliation of Consolidated  EBITDA to cash flows provided by (used in) operating activities:** |       |                             |       |                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated  EBITDA for total leverage ratio                                                        |       |                             | $          | 6,002                         |       |   |   | $ | 6,435 |   |   |   | $ | 5,566 |   |   |   | $ | 4,445 |   |   |   |   |   |   |
| Less pro forma  adjustments related to acquisitions                                                  |       |                             | (631)      |                          |       |   | (562) |   |   |   | — |   |   |   | — |   |   |   |   |   |   |
| Consolidated  EBITDA for interest coverage ratio                                                     |       |                             | 5,371      |                          |       |   | 5,873 |   |   |   | 5,566 |   |   |   | 4,445 |   |   |   |   |   |   |
| Interest expense                                                                                     |       |                             | (464)      |                          |       |   | (505) |   |   |   | (697) |   |   |   | (804) |   |   |   |   |   |   |
| Changes in  operating assets and liabilities                                                         |       |                             | (5,399)    |                          |       |   | 2,957 |   |   |   | 203 |   |   |   | 1,523 |   |   |   |   |   |   |
| Cash flows provided by  (used in) operating activities                                               |       |                             | $          | (492)                         |       |   |   | $ | 8,325 |   |   |   | $ | 5,072 |   |   |   | $ | 5,164 |   |   |   |   |   |   |

 

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

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

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**ITEM 3.**                QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The informationcontained in Item 3 updates, and should be read in conjunction with,information set forth in Part II, Item 7A in our Transition Report on Form 10-Kfor the six months ended December 31, 2005, in addition to the interimunaudited consolidated financial statements, accompanying notes and management’sdiscussion and analysis of financial condition and results of operationspresented in Items 1 and 2 of this Quarterly Report on Form 10-Q.There are no material changes in the market risks faced by us from thosereported in our Transition Report on Form 10-K for the six monthsended 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 facilitywill bear interest at a variable rate based on LIBOR or the lender’s base rate.We currently do not manage our exposure to interest rates, but we may in thefuture. At June 30, 2006, we had outstanding borrowings of$46.0 million under our senior secured credit facility. Based on theoutstanding balance of our variable-interest-rate debt at June 30,2006, and assuming market interest rates increase or decrease by 100 basispoints, the potential annual increase or decrease in interest expense isapproximately $0.5 million.

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

**ITEM 4.**                CONTROLS ANDPROCEDURES

We maintain disclosure controls and procedures thatare designed to ensure that information required to be disclosed by us in thereports that we file or submit to the Securities and Exchange Commission underthe Securities Exchange Act of 1934, as amended, is recorded, processed, summarizedand reported within the time periods specified by the Commission’s rules andforms, and that information is accumulated and communicated to our management,including our principal executive and principal financial officers (whom werefer to as our Certifying Officers), as appropriate to allow timely decisionsregarding required disclosure. Our management evaluated, with the participationof our Certifying Officers, the effectiveness of our disclosure controls andprocedures as of June 30, 2006, pursuant to Rule 13a-15(b) underthe Exchange Act. Based upon that evaluation, our Certifying Officers concludedthat, as of June 30, 2006, our disclosure controls and procedures wereeffective.

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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 revenues fromTransMontaigne Inc., upon which we rely for a substantial majority of ourrevenues;

·  the continued creditworthiness of, andperformance by, contract parties, including TransMontaigne Inc.;

·  a reduction or suspension of TransMontaigne Inc.’sobligations under the terminaling services agreement;

·  TransMontaigne Inc.’s failure to continueto engage us to provide services after the expiration of the terminalingservices agreement, or our failure to secure comparable alternative arrangements;

·  the impact on our facilities or operations ofextreme weather conditions, such as hurricanes, and other operational hazards;

·  the availability of acquisition opportunitiesand successful integration and future performance of acquired assets;

·  the failure to purchase additional refinedproduct terminals from TransMontaigne Inc.;

·  timing, cost and other economic uncertaintiesrelated to the construction of new assets;

·  debt levels and restrictions in our debtagreements that may limit our operational flexibility;

·  the threat of terrorist attacks or war;

·  the impact of current and future laws andgovernmental regulations;

·  liability for environmental claims;

·  conflicts of interest and the limitedfiduciary duties of our general partner, which is controlled byTransMontaigne Inc.;

·  our failure to avoid federal income taxationas a corporation or the imposition of state level taxation; and

·  general economic, market or businessconditions;

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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 June 30, 2006 covered by thisreport.

| **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** | ** ** | ** ** |
|------------|------------|------------|------------|-----------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| April      |       |       | 9,300      |                                                |       |                                                    | $          | 29.36                                                                                                                                       |       |                                                                                                                                                          |       | 9,300      |   |   |   | $ | 715,442 |   |   |   |
| May        |       |       | 8,900      |                                                |       |                                                    | $          | 31.88                                                                                                                                       |       |                                                                                                                                                          |       | 8,900      |   |   |   | $ | 431,751 |   |   |   |
| June       |       |       | 8,598      | (1)                                                 |       |                                                    | $          | 30.92                                                                                                                                       |       |                                                                                                                                                          |       | 5,500      |   |   |   | $ | 261,691 |   |   |   |
|       |       |       | 26,798     |                                                |       |                                                    | $          | 30.70                                                                                                                                       |       |                                                                                                                                                          |       | 23,700     |   |   |   |   |   |   |   |

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(1)   3,098common units were repurchased from employees for withholding taxes as a resultof vesting of common units under our Long-Term Incentive Plan (see Note 10of Notes to consolidated 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. Weanticipate repurchasing annually up to approximately $1.2 million of aggregatemarket value of our outstanding common units for this purpose. However, thereis no guarantee as to the exact number of units or dollar amount that will berepurchased, and the repurchases may be discontinued at any time.

**ITEM 6.**                EXHIBITS

Exhibits:

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

 

 

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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 August 8, 2006 |       |       |       | TRANSMONTAIGNE PARTNERS L.P.                  |
|---------------------------|------------|------------|------------|-----------------------------------------------|
|                      |       |       |       | (Registrant)                                  |
|                      |       | By:        |       | /s/ DONALD H. ANDERSON                        |
|                      | ** ** | ** ** | ** ** | **Donald H. Anderson**                        |
|                      | ** ** | ** ** | ** ** | **Chief Executive Officer**                   |
|                      |       |       |       | /s/  RANDALL J. LARSON                        |
|                      | ** ** | ** ** | ** ** | **Randall J. Larson**                         |
|                      | ** ** | ** ** | ** ** | **Executive Vice President, Chief Financial** |
|                      | ** ** | ** ** | ** ** | **Officer, and Chief Accounting Officer**     |

 

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**EXHIBITINDEX**

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

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*                    Filed herewith.

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