TransMontaigne Partners' CEO Discusses Q2 2012 Results - Earnings Call Transcript

| About: Transmontaigne Partners (TLP)

TransMontaigne Partners L.P. (NYSE:TLP)

Q2 2012 Earnings Call

August 7, 2012 11:00 AM ET

Executives

Fred Boutin – EVP and CFO

Greg Pound – President and COO

Analysts

Stephen Patti (ph) – Investor

Matt Neblack (ph)

Eric Nich (ph) – Barclays

Good day ladies and gentlemen and welcome to your TransMontaigne Partners earnings call. At this time all participants will be in a listen only mode but later we will conduct a question-and-answer-session which instructions will be given at that time.

(Operator Instructions)

And now I would like to introduce your host for today, Fred Boutin.

Fred Boutin

Good morning everyone. Chuck Dunlap is unavailable for today’s call. Greg Pound, our Chief Operating Officer is joining me on today’s call. And we’ll start with a review of the results of our operations for the quarter ended June 30th and Greg and I will field any questions you may have.

This quarter’s distributable cash flow was $16.5 million compared to $11 million for the year ago quarter. While at the same time, this quarter’s operating income was $12.5 million compared to $17.7 million for the year ago quarter. You might ask how our distributable cash flow could increase so much while our operating income was actually lower. The significant items impacting these comparisons include the following.

During Q2 of last year, operating income included the $9.6 million gain we realized upon the formation of the Frontera joint venture. While this gain was included in our operating income, it was not included in our computation of distributable cash flow. Second, we had revenue increases in our Gulf Coast, Midwest, River and Southeast terminals that were reduced by a small revenue decrease at our Brownsville terminal. Overall, our revenue increased from $36.8 million to $38.4 million. Approximately $800,000 of this increase is attributable to the new tanks at our Collins facility. While product gain income actually decreased by approximately $600,000.

Third, direct operating costs and expenses were $16.2 million compared to $17.6 million in the year ago quarter, primarily as a result of the timing of repairs and maintenance. We try to perform our repairs and maintenance as (ratably) throughout the year as possible but it is common for us to spend more in the second half of the year primarily because the weather is better in the second half of the year.

The fourth item, during Q2 of this year, we had decreased direct general and administrative expenses as a result of a $2.2 million settlement with our predecessor auditor KPMG related to our change in auditor and re-audits of prior periods as previously disclosed. This is a onetime take up that offsets onetime expenses incurred during the first quarter of this year.

In the fifth item, our maintenance capital expenditure were $1.7 million compared to $1.5 million for the year ago quarter. I’d like to call your attention to the disclosure we have in our press release regarding our firmly committed revenue. Year to date, approximately 74% of our total revenue was firmly committed and approximately 86% of that firmly committed revenue was attributable to contracts with the remaining terms of one year or more.

We move now to a brief discussion of our liquidity. Our credit facility which matures March 9th 2016 provides for a maximum borrowing line of credit equal to $250 million. At June 30th, we had an outstanding balance of $106.5 million and a leverage ratio of 1.5 times our consolidated EBITDA. At June 30th we had approved expansion projects with the remaining capital expenditures of approximately $68 million. Most of this was expended in July in the construction of the crude oil tanks in Cushing, Oklahoma. Those tanks were completed and they went online August 1, 2012.

Attachment B to the press release includes our computation of the distributable cash flow that we generated during the quarter. We use this as a measure of how we are performing relative to our quarterly distribution. During the second quarter, we generated $16.5 million of distributable cash flow which was an increase to $5.5 million when you compare to the second quarter of last year. We paid a distribution for the quarter of $0.64 per LP unit. This was an increase of $0.02 over the distribution we paid for the second quarter of last year and $0.01 over the distribution we paid for the previous quarter. So we raised the distribution this quarter.

Together with the distribution paid to our general partner, we distributed approximately $10.6 million for the quarter. We generated distributable cash flow in excess of our distribution of approximately $5.9 million or 56%.

John at this point we are ready for any questions that folks may have.

Question-and-Answer-Session

Operator

Okay. (Operator Instructions)

Okay at the moment I’m showing no questions, however I would like to give everyone another opportunity. (Operator Instructions)

Okay and I’m actually showing one question or a couple of questions now, our first coming from Stephen Patti (ph) who is an investor.

Stephen Patti – Investor

Well thank you for taking my call. I’ve been following you for some time and I’m interested in your business, I’m local in Colorado. I’m concerned about how much Morgan Stanley has a say of what you do. Are you comfortable with that whole situation or are you being held back?

Fred Boutin

Well we had a lot of disclosure about our relationship with Morgan Stanley in all of our filings so, and I would encourage you to read those disclosures they’ve been well thought out and the fact is that Morgan Stanley owns TransMontaigne Inc. and TransMontaigne Inc. owns the general partner of PLP so they are able to appoint the directors or the general partner and have effective control. That’s the situation that we’ve had since Morgan Stanley bought TransMontaigne in 2006.

Stephen Patti – Investor

Okay, I’ve read them and they are really not clear to me while – how Morgan Stanley’s commodities business is telling you what you can and cannot invest in, even if they are the board and everything else.

Fred Boutin

It’s a fact that Morgan Stanley’s a bank and as a bank there are certain restrictions that they have and those restrictions flow down to TransMontaigne Partners and that is the reality of the situation.

Stephen Patti – Investor

Okay. I own some other things. They are very tightly held and controlled. You probably can’t comment on it but do you foresee Morgan Stanley pulling you out of that commodities business?

Fred Boutin

Yes I can’t comment. I don’t know anything about Morgan Stanley’s plans and so I can’t comment on that.

Stephen Patti – Investor

Thank you very much for your time today.

Fred Boutin

Sure. Thank you for the question.

Operator

Okay thank you sir. (Operator Instructions)

And we’ll take our final question at the moment coming from Matt Neblack (ph) from (inaudible).

Matt Neblack

Hi, thanks for the great courier, we’re ambassadors as well. Just a sort of follow up question on the Morgan Stanley thing, sorry to bother you so much on this topic but have they communicated at all where your GPE would stand were they to continue selling their commodities unit because they certainly have taken some steps in that direction. So what communication have they had in your direction regarding all that?

Fred Boutin

No they haven’t so I’m not aware of the steps that you are referring to but they haven’t communicated anything to us about any plan that they have or don’t have for the General partner.

Matt Neblack

Okay. The step I was referring to is selling a stake in the commodities business to the Qatar Investment Authority which was announced in July and maybe some of us in the market place thought that was indication that they could be planning to divest the business entirely.

Fred Boutin

Yes I read that article, I read it. It’s more of a, just a rumor out there but regardless there’s been no – they’ve communicated nothing to us about any impact that could possibly have on their ownership of the GP.

Matt Neblack

Okay, thank you.

Fred Boutin

Thank you.

Operator

Okay. And I’m showing no further questions in the queue at this time – actually we do have one final question now coming from Eric Nich (ph) from Barclays.

Eric Nich – Barclays

Hi thanks for taking the question.

Fred Boutin

Sure.

Eric Nich – Barclays

I just was wondering, you haven’t issued any capital in the past couple of years and I was wondering if you foresaw a need to do so.

Fred Boutin

We don’t see any need to do that right now. Our debt is only approximately 1.5 times our EBITDA and so we are, if anything somewhat under levered and so I do not foresee us going to the equity markets anytime soon short of significant capital expenditures on our part if we were able to put some things together where we expended significant amounts of capital on borrowed – on a credit facility then we would be looking to either go to the equity or debt capital markets. But right now we are under levered.

Eric Nich – Barclays

I think on the last call you spoke a little bit about the BOSCO project. And so are there any projects where you do currently perceive the need for capital?

Fred Boutin

Greg do you want to jump in on that one?

Greg Pound

Well BOSCO certainly has the size, that would be a consideration but currently there are no other projects being considered that would be of that magnitude although there’s several projects in the works right now. We have projects that we are considering in the crude oil space and in the gasoline, butane blending space but the determinations of capital or how to support those your financials haven’t been addressed yet.

Eric Nich – Barclays

Great. Thank you for taking the questions.

Operator

Okay, thank you ladies and gentlemen. And that does conclude our Q&A session, also concludes our conference for today. I did want to remind you that this call will be available for replay after 1pm Eastern today through August 15th. You may access the AT&T teleconference replay system at any time by dialing 1-800-475-6701 and entering the access code 255-927. International participants dial 320-365-3844. Those numbers again are 1-800-475-6701 and 320-365-3844. The access code 255-927. That does conclude our conference for today, thank you for your participation and using AT&T executive teleconference. You may now disconnect.

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