UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


______________

FORM 10-K



______________

ý
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2009

OR

 
For the fiscal year ended: December 31, 2006
OR
¨
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 001-32385

For the Transition Period from to .

Commission File Number: 001-32384

______________

Macquarie Infrastructure Company Trust

MACQUARIE INFRASTRUCTURE COMPANY LLC

(Exact Name of Registrant as Specified in Its Charter)

Delaware
 
20-6196808
Delaware 43-2052503
(Jurisdiction of Incorporation
or Organization)
 (IRS Employer
Identification No.)
Commission file number: 001-32384
Macquarie Infrastructure Company LLC
(Exact Name of Registrant as Specified in Its Charter)
Delaware
43-2052503
(Jurisdiction of Incorporation
or Organization)
(IRS Employer
Identification No.)

125 West 55th55th Street
New York, New York 10019

(Address of Principal Executive Offices)(Zip (Zip Code)

Registrant’s Telephone Number, Including Area Code:(212) 231-1000

______________

Securities registered pursuantRegistered Pursuant to Section 12(b) of the Act:



Title of Each Class:
 
Name of Exchange on
Which Registered:
Shares representing beneficial interests in Limited Liability Company Interests of
Macquarie
Infrastructure Company TrustLLC (“trust stock”LLC Interests”)
 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:None



Indicate by check mark if the registrants are collectivelyregistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesýo No¨x

Indicate by check mark if the registrants are collectivelyregistrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨o Noýx

Indicate by check mark whether the registrantsregistrant (1) havehas filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants wereregistrant was required to file such reports), and (2) havehas been subject to such filing requirements for the past 90 days. Yesýx No¨o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨o

Indicate by check mark whether the registrants are collectivelyregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a non-accelerated filer.smaller reporting company. See definitionthe definitions of “large accelerated filer,” “accelerated filerfiler” and large accelerated filer”“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨o
Accelerated Filer ýx
Non-Accelerated
Non-accelerated Filer ¨oSmaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Nox

The aggregate market value of the outstanding shares of trust stock held by non-affiliates of Macquarie Infrastructure Company TrustLLC at June 30, 20062009 was $674,150,614$170,868,634 based on the closing price on the New York Stock Exchange on that date. This calculation does not reflect a determination that persons are affiliates for any other purposes.

There were 37,562,16545,292,913 shares of trust stock without par value outstanding at February 28, 2007.

25, 2010.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to Macquarie Infrastructure Company Trust’sLLC’s Annual Meeting of Shareholders for fiscal year ended December 31, 2009, to be held May 24, 2007,June 3, 2010, is incorporated by reference in Part III to the extent described therein.








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MACQUARIE INFRASTRUCTURE COMPANY LLC

TABLE OF CONTENTS

 
Page
PART I
Item 1. BusinessPage
PART I
 3
Item 1A.  Risk Factors

Item 1.

Business

 323

Item 1B.1A.

Risk Factors

 23

Item 1B.

Unresolved Staff Comments

 4837

Item 2.

Properties

 Properties37

Item 3.

Legal Proceedings

 4839
Item 3.Legal Proceedings50

Item 4.

Submission of Matters to a Vote of Security Holders

 5039
PART II
     
PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 5140

Item 6.

Selected Financial Data

 Selected Financial Data42 52

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 5445

Item 7A.

Quantitative and Qualitative Disclosures aboutAbout Market Risk

 10394

Item 8.

Financial Statements and Supplementary Data

 10697

Item 9.

Changes in and Disagreements withWith Accountants on Accounting and Financial Disclosure

 108153

Item 9A.

Controls and Procedures

 Controls and Procedures153

Item 9B.

Other Information

 108155
Item 9B.Other Information112
PART III
     
PART III

Item 10.

Directors and Executive Officers of the Registrant

 113156

Item 11.

Executive Compensation

 Executive Compensation156 113

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 113156

Item 13.

Certain Relationships and Related Transactions

 113156

Item 14.

Principal Accountant Fees and Services

 Principal Accounting Fees and Services156 113
PART IV
     
PART IV

Item 15.

Exhibits, Financial Statement Schedules

 114156

i








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FORWARD-LOOKING STATEMENTS

We have included or incorporated by reference into this report, and from time to time may make in our public filings, press releases or other public statements, certain statements that may constitute forward-looking statements. These include without limitation those under “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A. In addition, our management may make forward-looking statements to analysts, investors, representatives of the media and others. These forward-looking statements are not historical facts and represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. We may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” or “may” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results to differ materially from those contained in any forward-looking statements made by us. Any such forward-looking statements are qualified by reference to the following cautionary statements.

Forward-looking statements in this report are subject to a number of risks and uncertainties, some of which are beyond our control, including, among other things:

·
our limited ability to remove our Manager for underperformance and our Manager’s right to resign;
·
our holding company structure, which may limit our ability to meet our dividend policy;
·
our ability to service, comply with the terms of and refinance at maturity our substantial indebtedness;
·
decisions made by persons who control the businesses in which we hold less than majority control, including decisions regarding dividend policies;
·
our ability to make, finance and integrate acquisitions;
·
our ability to implement our operating and internal growth strategies;
·
the regulatory environment in which our businesses and the businesses in which we hold investments operate and our ability to comply with any changes thereto, rates implemented by regulators of our businesses and the businesses in which we hold investments, and our relationships and rights under and contracts with governmental agencies and authorities;
·
changes in patterns of commercial or general aviation air travel, or automobile usage, including the effects of changes in airplane fuel and gas prices, and seasonal variations in customer demand for our businesses;
·
changes in electricity or other energy costs;
·
the competitive environment for attractive acquisition opportunities facing our businesses and the businesses in which we hold investments;
·

changes in general economic, business or demographic conditions or trends in the United States or changes in the political environment, level of travel or construction or transportation costs where we operate, including changes in interest rates and inflation;price levels;
·changes in patterns of commercial or general aviation air travel, including variations in customer demand for our businesses;
our Manager’s affiliation with the Macquarie Group, which may affect the market price of our LLC interests;
our limited ability to remove our Manager for underperformance and our Manager’s right to resign;
our holding company structure, which may limit our ability to pay or increase a dividend;
our ability to service, comply with the terms of and refinance at maturity our substantial indebtedness;
our ability to make, finance and integrate acquisitions;
our ability to implement our operating and internal growth strategies;
the regulatory environment in which our businesses and the businesses in which we hold investments operate and our ability to estimate compliance costs, comply with any changes thereto, rates implemented by regulators of our businesses and the businesses in which we hold investments, and our relationships and rights under and contracts with governmental agencies and authorities;
changes in electricity or other energy costs;
the competitive environment for attractive acquisition opportunities facing our businesses and the businesses in which we hold investments;
environmental risks pertaining to our businesses and the businesses in which we hold investments;
·
our ability to retain or replace qualified employees;
·
work interruptions or other labor stoppages at our businesses or the businesses in which we hold investments;
·
changes in the current treatment of qualified dividend income and long-term capital gains under current U.S. federal income tax law and the qualification of our income and gains for such treatment;





·

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disruptions or other extraordinary or force majeure events affecting the facilities or operations of our businesses and the businesses in which we hold investments and our ability to insure against any losses resulting from such events or disruptions;
·
fluctuations in fuel costs, or the costs of supplies upon which our gas production and distribution business is dependent, and our ability to recover increases in these costs from customers;
·
our ability to make alternate arrangements to account for any disruptions or shutdowns that may affect the facilities of the suppliers or the operation of the barges upon which our gas production and distribution business is dependent; and
·
changes in U.S. domestic demand for chemical, petroleum and vegetable and animal oil products, the relative availability of tank storage capacity and the extent to which such products are imported.

Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. A description of risks that could cause our actual results to differ appears under the caption “Risk Factors” in Part I, Item 1A and elsewhere in this report. It is not possible to predict or identify all risk factors and you should not consider that description to be a complete discussion of all potential risks or uncertainties that could cause our actual results to differ.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. The forward-looking events discussed in this report may not occur. These forward-looking statements are made as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should, however, consult further disclosures we may make in future filings with the Securities and Exchange Commission, or the SEC.

Exchange Rates
In this report, we have converted foreign currency amounts into U.S. dollars using the Federal Reserve Bank noon buying rate at December 29, 2006 for our financial information and the Federal Reserve Bank noon buying rate at February 13, 2007 for all other information. At December 29, 2006, the noon buying rate of the Australian dollar was USD $0.7884 and the noon buying rate of the Pound Sterling was USD $1.9586. At February 13, 2007, the noon buying rate of the Australian dollar was USD $0.7774 and the noon buying rate of the Pound Sterling was USD $1.9443. The table below sets forth the high, low and average exchange rates for the Australian dollar and the Pound Sterling for the years indicated:
  
U.S. Dollar/Australian Dollar
 
U.S. Dollar/Pound Sterling
Time Period
 
High
 
Low
 
Average
 
High
 
Low
 
Average
             
2001                                                                                                              0.5552     0.5016     0.5169     1.4773     1.4019     1.4397
2002 0.5682 0.5128 0.5437 1.5863 1.4227 1.5024
2003 0.7391 0.5829 0.6520 1.7516 1.5738 1.6340
2004 0.7715 0.7083 0.7329 1.8950 1.7860 1.8252
2005 0.7974 0.7261 0.7627 1.9292 1.7138 1.8198
2006 0.7914 0.7056 0.7535 1.9794 1.7256 1.8294
Australian banking regulations that govern the operations of Macquarie Bank Limited and all of its subsidiaries, including our Manager, require the following statements: Investments in

Macquarie Infrastructure Company Trust areLLC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and its obligations do not represent deposits with or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or of any Macquarie Group company and are subject to investment risk, including possible delaysotherwise provide assurance in repayment and loss of income and principal invested. Neither Macquarie Bank Limited nor any other member companyrespect of the Macquarie Group guarantees the performanceobligations of Macquarie Infrastructure Company Trust or the repayment of capital from Macquarie Infrastructure Company Trust.



2LLC.



Item

ITEM 1. Business

MacquarieBUSINESS

Except as otherwise specified, “Macquarie Infrastructure Company Trust, a Delaware statutory trust that weCompany”, “MIC,” “the Company”, “we,” “us,” and “our” refer to as the trust, owns its businesses and investments through Macquarie Infrastructure Company LLC, a Delaware limited liability company, that we refer to as the company. Except as otherwise specified, “Macquarie Infrastructure Company,” “we,” “us,” and “our” refer to both the trust and the company and its subsidiaries together. References to our “shareholders” herein means holders of LLC interests. The company ownsholders of LLC interests are also the businesses located in the United States through a Delaware corporation, Macquarie Infrastructure Company Inc., or MIC Inc., and, during 2006, owned its businesses and investments located outsidemembers of the United States through Delaware limited liability companies.our company. Macquarie Infrastructure Management (USA) Inc., the company that we refer to as our Manager, is part of the Macquarie Group of companies. References to the Macquarie Group includemeans Macquarie BankGroup Limited and its respective subsidiaries and affiliates worldwide.

GENERAL
The trust and the company were each formed on April 13, 2004. On December 21, 2004, we completed our initial public offering and concurrent private placement of shares of trust stock representing beneficial interests in the trust. Each share of trust stock corresponds to one LLC interest of the company. We used the majority of the proceeds of the offering and private placement to acquire our initial businesses and investments and to pay related expenses. Our initial businesses and investments consisted of our airport services business, our airport parking business, our district energy business, our toll road business through our 50% ownership of the Yorkshire Link shadow toll road, and our investments in South East Water (SEW) and Macquarie Communications Infrastructure Group (MCG). During 2006, we sold our toll road business and our investments in SEW and MCG.

General

We own, operate and invest in a diversified group of infrastructure businesses primarily in the United States. We believe our infrastructure businesses, which provide basic services, have a sustainable and stable cash flow profile and offer the potential for capital growth. We offer investors an opportunity to participate directly in the ownership of infrastructure businesses, which traditionally have been owned by governments or private investors, or have formed part of vertically integrated companies. Our businesses which also constitute our operating segments and consist of the following:

·

The Energy-Related Businesses:

(i)a 50% interest in a bulk liquid storage terminal business (“International Matex Tank Terminals” or “IMTT”), which provides bulk liquid storage and handling services at ten marine terminals in the United States and two in Canada and is one of the largest participants in this industry in the U.S., based on capacity;
(ii)a gas production and distribution business (“The Gas Company”), which is a full-service gas energy company, making gas products and services available in Hawaii; and
(iii)a 50.01% controlling interest in a district cooling business (“District Energy”), which operates the largest such system in the U.S. and serves various customers in Chicago, Illinois and Las Vegas, Nevada.

The Aviation-Related Business:an airport services business conducted through (“Atlantic Aviation;

·
50% interestAviation”), which comprises a network of 72 fixed base operations, or FBOs, providing products and services including fuel and aircraft hangaring/parking to owners and operators of private jets at 68 airports and one heliport in IMTT, the owner/operator of a bulk liquid storage terminal business;
·
retail gas production and distribution business, conducted through The Gas Company;
·
district energy business, conducted through Thermal Chicago and a 75% controlling interest in Northwind Aladdin; and
·
anU.S.

On January 28, 2010, our airport parking business conducted through(“Parking Company of America Airports” or “PCAA”) entered into an asset purchase agreement and filed for protection under Chapter 11 of the Bankruptcy Code. We expect to complete the sale of the assets in the first half of 2010. This business is now a discontinued operation and is therefore separately reported in our consolidated financial statements and is no longer a reportable segment of the Company.

In 2007, we made an election to treat MIC as a corporation for federal income tax purposes. As a result, all investor tax reporting with respect to distributions made after December 31, 2006, and in all subsequent years, is based on our being a corporation for U.S. federal tax purposes and such reporting will be provided on Form 1099.

Our Manager

Our Manager is a member of the Macquarie Parking.

Our Manager
Group, a diversified international provider of financial, advisory and investment services. The Macquarie Group is headquartered in Sydney, Australia and is a global leader in advising on the acquisition, disposition and financing of infrastructure assets and the management of infrastructure investment vehicles on behalf of third-party investors.

We have entered into a management services agreement with our Manager. Our Manager is responsible for our day-to-day operations and affairs and oversees the management teams of our operating businesses. Neither the trustThe Company neither has, nor the company have or will have, any employees. Our Manager has assigned, or seconded, to the company,Company, on a permanent and wholly dedicated basis, two of its employees to assume the offices of chief executive


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officer and chief financial officer and seconds or makes other personnel available as required. The services performed for the companyCompany are provided at our Manager’s expense, includingand includes the compensation of our seconded personnel.

Our Manager is a member of the Macquarie Group, which provides specialist investment, advisory, trading and financial services in select markets around the world. The Macquarie Group is headquartered in Sydney, Australia and as of December 31, 2006 employed almost 9,400 people in 24 countries. The Macquarie Group is a global leader in advising on the acquisition, disposition and financing of infrastructure assets and the management of infrastructure investment vehicles on behalf of third-party investors.
We believe that the Macquarie Group’s demonstrated expertise and experience in the management, acquisition and funding of infrastructure businesses will provide us with a significant advantage in pursuing our strategy. Our Manager is part of the Macquarie Group’s IB Funds division, or IBF, which as of December 31, 2006, had equity under management of over $37 billion on behalf of retail and institutional investors. The IBF division manages a global portfolio of 102 assets across 25 countries including toll roads, airports and airport-related infrastructure,


3


communications, media, electricity and gas distribution networks, water utilities, aged care, rail and ferry assets. Operating since 1996, the IBF division currently has over 500 staff worldwide, with more than 50 executives based in the US and Canada.
We expect that the Macquarie Group’s infrastructure advisory division, with over 400 executives internationally, including more than 90 executives in North America, will be an important source of acquisition opportunities and advice for us. The Macquarie Group’s infrastructure advisory division is separate from the IBF division. Historically the Macquarie Group’s advisory group has presented the various infrastructure investment vehicles in IBF with a significant number of high quality infrastructure acquisition opportunities.
Although it has no contractual obligation to do so, we expect that the Macquarie Group’s infrastructure advisory division will present our Manager with similar opportunities. Under the terms of the management services agreement, our Manager is obliged to present to us, on a priority basis, acquisition opportunities in the United States that are consistent with our strategy, as discussed below, and the Macquarie Group is our preferred financial advisor.
We also believe that our relationship with the Macquarie Group will enable us to take advantage of its expertise and experience in debt financing for infrastructure assets. As the typically strong, stable cash flows of infrastructure assets are usually able to support high levels of debt relative to equity, we believe that the ability of our Manager and the Macquarie Group to source and structure low-cost project and other debt financing provides us with a significant advantage when acquiring assets. We believe that relatively lower costs will help us to maximize returns to shareholders from those assets.

We pay our Manager a quarterly management fee based primarily on our market capitalization. In addition, to incentivize our Manager to maximize shareholder returns, we may pay performance fees. Our Manager can also earn a performance fee equal to 20% ofif the outperformance, if any, of quarterly total returnsreturn to our shareholders above(capital appreciation plus dividends) exceeds the quarterly total return of a weighted average of two benchmark indices, a U.S. utilities index and a European utilities index, weighted in proportion to our U.S. and non-U.S. equity investments. Currently, weWe currently do not have noany non-U.S. equity investments. The performance fee is equal to 20% of the difference between the benchmark return and the return for our shareholders. To be eligible for the performance fee, our Manager must deliver quarterly total shareholder returns for the quarter that are positive and in excess of any prior underperformance. Please see the management services agreement filed as an exhibit to this Annual Report on Form 10-K for the full terms of this agreement.

We believe that Macquarie Group’s demonstrated expertise and experience in the management, acquisition and funding of infrastructure businesses will provide us with a significant advantage in pursuing our strategy. Our Manager is part of Macquarie Group’s Capital Funds division. The Macquarie Capital Funds division manages a global portfolio of 110 businesses including toll roads, airports and airport-related infrastructure, ports, communications, media, electricity and gas distribution networks, water utilities, aged care, rail and ferry assets across 22 countries.

Industry

Infrastructure businesses provide basic, everydaytend to generate sustainable and growing long-term cash flows resulting from relatively inelastic customer demand and strong competitive positions of the businesses. Characteristics of infrastructure businesses include:

ownership of long-lived, high-value physical assets that are difficult to replicate or substitute around;
predictable maintenance capital expenditure requirements;
consistent, relatively inelastic demand for their services, such as parking, roadsat our energy-related businesses;
strong competitive positions, largely due to high barriers to entry, including:
high initial development and water. construction costs, such as at our energy-related businesses;
difficulty in obtaining suitable land, such as the waterfront land owned by IMTT;
long-term, exclusive concessions or leases and customer contracts, such as those held by Atlantic Aviation and District Energy; and
lack of cost-effective alternatives to customers in the foreseeable future, such as the cooling services provided by District Energy;
scalability, such that relatively small amounts of growth can generate significant increases in earnings before interest, taxes, depreciation and amortization, or EBITDA; and
the provision of basic, often essential services.

In addition to the benefits related to these characteristics, the revenues generated by our infrastructure businesses generally can be expected to keep pace with inflation. The price escalators built into the agreements with customers of contracted businesses, and the inflation and cost pass-through adjustments typically a part of pricing terms in user pays businesses or provided for by the regulatory process to regulated businesses, serve to insulate infrastructure businesses to a significant degree from the negative effects of inflation and commodity price risk. We also employ interest rate swaps in connection with our businesses’ floating rate debt to effectively fix our cash flows for the interest costs and hedge variability from interest rate changes.


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We focus on the ownership and operation of infrastructure businesses in the following categories:

·
User Pays” Business. These businesses are generally transportation-related infrastructure that depend on a per-use system for their main revenue source. Demand for use of these businesses is relatively unaffected by macroeconomic conditions because people use these types of businesses on an everyday basis. “User pays” Business,contracted,” such as airports,IMTT, the revenues of which are generally owned by government entitiesderived from per-use or rental charges in medium-term contracts, and District Energy, a majority of the United States. Other typesrevenues of “user pays” business, such as airport and rail-related infrastructure, off-airport parking and bulk liquid storage terminals,which are typically owned by the private sector. Where the private sector owner has been granted a lease or concession by a government entity to operate the business, the business will be subject to any restrictions or provisions contained in the lease or concession.
·
Contracted Business. These businesses provide services throughderived from long-term contracts with other businesses or governments. These contracts typically can be renewed on comparable terms when they expire because there are no or a limited number of providers of similar services. Contracted businesses, such as district energy systems and contracted power generation plants, are generally owned by the private sector in the United States. Where the private sector owner has been granted a lease or concession by a government entity to operate the business, the business will be subject to any restrictions or provisions contained in the lease or concession.governments;
·
Regulated Business. Businesses that own these assets are the sole or predominant providers of essential services in their service areas and, as a result, are typically regulated, by government entities with respect to the level of revenue earned or charges imposed. Government regulated revenues typically enable the service provider to cover operating costs, depreciation and taxes and achieve an adequate return on debt and equity capital invested. Electric transmission and gas production and distribution networks are examples of regulated businesses. In the United States, regulated businesses are generally owned by publicly listed utilities, although some are owned by government entities.


4


By their nature, businesses in these categories generally have sustainable and growing long-term cash flows due to consistent customer demand and the businesses’ strong competitive positions. Consistent customer demand is driven by the basic, everyday nature of the services provided. The strong competitive position results from high barriers to entry, including:
·
high initial development and construction costs, such as the costutility operations of cooling equipmentThe Gas Company; and distribution pipes for district energy systems and the distribution network for our gas production and distribution business;
·
difficulty in obtaining suitable land,“user pays,” such as land near orAtlantic Aviation.

Strategy

The challenges posed by the economic conditions of the past 18 to 24 months have caused us to adopt a near-term strategy focused on reducing debt, improving operational performance and effectively deploying available growth capital. We believe that our focus on these elements is appropriate to ensuring that our businesses are well positioned to survive and grow regardless of the broader economic backdrop. This strategy included our decisions to sell a non-controlling interest in District Energy, repay our holding company level debt and reduce indebtedness at airports for parking facilities or fixed base operations (FBOs) or waterfront land near key portsAtlantic Aviation.

Over the medium term, subject to having access to external sources of entry for bulk liquid storage terminals;

·
long-term concessions and customer contracts, such as FBO leases and contracts for cooling services tocapital at a building.
·
required government approvals, whichreasonable cost, we may resume growth through acquisition of additional infrastructure businesses. Such acquisitions may be difficult or time-consumingbolt-ons to obtain, such as approvals to lay pipes under city streets; and
·
lack of cost-effective alternatives to the services provided by these businesses in the foreseeable future, as is the case with district energy.
These barriers to entry have the effect of protecting the cash flows generated by these infrastructure businesses. These barriers to entry largely arise because services provided by infrastructure businesses, such as parking, gas production and distribution and bulk liquid storage, can generally only be delivered by relatively large and costly physical businesses in close proximity to customers. These services cannot be delivered over the internet, and cannot be outsourced to other countries, and are therefore not susceptible to the competitive pressures that other industries, including manufacturing industries, typically face. We do not expect to acquire infrastructure businesses that face significant competition, such as merchant electricity generation facilities.
The prices charged for the use of infrastructure businesses can generally be expected to keep pace with inflation. “User pays” Business typically enjoy pricing power in their market due to consistent demand and limited competition, the contractual terms of contracted businesses typically allow for price increases, and the regulatory process that determines revenue for regulated businesses typically provides for inflation and cost pass-through  adjustments.
Infrastructure assets, especially newly constructed assets, tend to be long-lived, require minimal and predictable maintenance capital expenditures and are generally not subject to major technological change or physical deterioration. This generally means that significant cash flow is often available from infrastructure businesses to service debt, make distributions to shareholders, expand the businesses, or all three. Exceptions exist in relation to much older infrastructure businesses.
The sustainable and growing long-term cash flows of infrastructure businesses mean their capital structures can typically support more debt than other businesses. Our ability to optimize the capital structure of our businesses is a key component in maximizing returns to investors.
Strategy
existing business platforms.

Debt Reduction

We have two primary strategic objectives. First, we intend to grow our existing businesses. We intend to accomplish this by:

·
pursuing revenue growth and gross operating income improvement;
·
optimizingreduced long-term debt balances through the financing structureapplication of our businesses; and
·
improving the performance and the competitive position of our controlled businesses through complementary acquisitions.
Second, we intend to acquire businesses we believe will provide yield accretive returns in infrastructure sectors other than those in which our businesses currently operate. We believe our association with the Macquarie Group is key to the successful execution of our strategy.


5


Operational Strategy
We will rely on the Macquarie Group’s demonstrated expertise and experience in the management of infrastructure businesses to execute our operational strategy. In managing infrastructure businesses, the Macquarie Group endeavors to (1) recruit and incentivize talented operational management teams, (2) instill disciplined financial management consistently across the businesses, (3) source and execute acquisitions, and (4) structure and arrange debt financing for the businesses to maximize returns to shareholders.
We plan to increase theaccumulated cash generated by our businesses through initiatives(which was historically distributed to increase revenueshareholders) and improve gross operating income.proceeds from the sale of the non-controlling stake in District Energy. We have eliminated all debt at the MIC holding company level and reduced the balance outstanding on the primary facility at Atlantic Aviation. We expect to continue to reduce the debt of Atlantic Aviation through the application of cash generated by that business. This component of our strategy has strengthened our balance sheet and is expected to reduce the risk of violating financial covenants on the debt at Atlantic Aviation, where financial results have been negatively affected by declines in place seasoned management teamsoverall economic activity. Lowering debt levels may also reduce the risks associated with refinancing our debt facilities in the event that credit markets tighten again.

Operational Improvement

We intend to continue to seek opportunities to reduce expenses through rationalization of staffing and business process improvements. In addition, we are actively seeking opportunities to improve the marketing and organic growth of our businesses. We are prudently managing reinvestment in our businesses in the form of maintenance capital expenditures without compromising service levels or operational capabilities of these businesses. Executing this component of our strategy is expected to improve the generation of free cash flow by our businesses.

Growth Capital Expenditures

We have reinvested substantially all of the cash flows generated at IMTT in economically attractive growth opportunities, primarily additional storage capacity. We will continue to reinvest cash flow generated by this business in additional growth projects that we expect will also generate appropriate returns.

We have also reinvested a portion of the cash generated by each of District Energy and The Gas Company into projects that support customer acquisition. We will continue to reinvest in such opportunities in the future.

We intend to meet our contractual obligations with respect to the deployment of growth capital, such as our leasehold improvement obligations at Atlantic Aviation. We have sufficient committed financing to meet these expenditures. We expect that these projects will increase the amount of free cash flow generated by this business.


TABLE OF CONTENTS

Our Businesses and Investments

We provide below information about our businesses and investments, including key financial information for each business. In previous filings, we disclosed operating income for each of our businesses who will be supportedas a measure of business segment profit or loss calculated in accordance with GAAP. Effective this reporting period, we are disclosing earnings before interest, taxes, depreciation and amortization (EBITDA) excluding non-cash items as defined by us. We believe EBITDA excluding non-cash items provides additional insight into the demonstrated infrastructure management expertise and experience of the Macquarie Group in the execution of this strategy.

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Making selective capital expenditures. We intend to expand capacityperformance of our existing locations and improve their facilities through selective capital expenditures. Specifically, we will make expenditures that we believe will generate additional revenue in the short-term. Such opportunities exist, notably, in relation to our bulk liquid storage terminal business, gas production and distribution business and our district energy business. We generally strive to manage maintenance capital expenditures to keep our assets well-maintained and to avoid any significant unanticipated maintenance costs over the life of the assets.
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Strengthening our competitive position through complementary acquisitions. We intend to selectively acquire and integrate additionaloperating businesses into our existing platforms in our airport services, bulk liquid storage terminal and airport parking businesses. We believe that complementary acquisitions will improve our overall performance by: (1) leveraging our brand and marketing programs; (2) taking advantage of the size and diversification of our businesses to achieve lower financing costs; and (3) allowing us to realize synergies and implement improved management practices across a larger number of operations. Our acquisitions of Trajen and the Las Vegas FBO are examples of this component of our strategy.
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Improving and expanding our existing marketing programs. We expect to enhance the client services and marketing programs of our businesses. Sophisticated marketing programs relative to those of mosteach other industry participants exist within our airport parking and airport services businesses. We intendsimilar businesses without regard to expand these programs and extend them to any facilities that we acquire within those businesses in the future.
Acquisition Strategy
We expect our acquisition strategy to benefit from the Macquarie Group’s deep knowledge and ability to identify acquisition opportunities in the infrastructure area. We believe it is often the case that infrastructure opportunities are not widely offered, well-understood or properly valued. The Macquarie Group has significant expertise in the execution of such acquisitions, which can be time-consuming and complex.
We intend to acquire infrastructure businesses and investments in sectors other than those sectors in which our businesses currently operate, provided we believe we can achieve yield accretive returns. Our acquisitions of The Gas Company and IMTT are examples of this strategy. While our focus is on acquiring businesses in the United States, we will also consider opportunities in other developed countries. Generally, we will seek to acquire controlling interests, but we may acquire minority positions in attractive sectors where those acquisitions generate immediate dividends and where our partners have objectives similar to our own.
Acquisition Opportunities
Infrastructure sectors that may present attractive acquisition candidates include, in addition to our existing businesses, electricity transmission and gas distribution networks, water and sewerage networks, contracted power generation and communications infrastructure. We expect that acquisition opportunities will arise from both the private sector and the public (government) sector.
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Private sector opportunities. Private sector owners of infrastructure assets are choosing to divest these assets for competitive, financial or regulatory reasons. For instance, companies may dispose of infrastructure assets because a) they wish to concentrate on their core business rather than the infrastructure supporting it, b) they are over-leveraged and wish to pay down debt, c) their capital structure, and shareholder expectationstheir ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company. Additionally, EBITDA excluding non-cash items is a key performance metric relied on by management in evaluating the performance of the Company and our operating segments. Therefore, this Annual Report on Form 10-K discloses EBITDA excluding non-cash items in addition to the other financial information provided in accordance with GAAP.

Energy-Related Businesses

IMTT

Business Overview

We own 50% of International-Matex Tank Terminals, or IMTT. The 50% we do not allow them to finance these assets as efficiently as possible, d) regulatory pressures are causing an unbundling of vertically integrated product offerings, or e) they are seeking liquidity and redeployment of capital resources.



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Public (government) sector opportunities. Traditionally, governments around the world have financed the provision of infrastructure with tax revenue and government borrowing. Over the last few decades, many governments have pursued an alternate model for the provision of infrastructure as a result of budgetary pressures. This trend towards increasing private sector participation in the provision of infrastructureown is well established in Australia, Europe and Canada, and it is just beginning in the United States. We believe private sector participation in the provision of infrastructure in the United States will increase over time, as a result of growing budgetary pressures, exacerbated by baby boomers reaching retirement age, and the significant under-investment (historically) in critical infrastructure systems in the United States.
U.S. Acquisition Priorities
Under the terms of the management services agreement, the company has first priority ahead of all current and future entities managed by our Manager orowned by members of the Macquarie Group within the IBF division among the following infrastructure acquisition opportunities within the United States:
Sector
Airport fixed base operations
District energy
Airport parking
User pays assets, contracted assets and regulated assets (as defined above) that represent an investment of greater than AUD $40.0 million (USD $31.1 million), subject to the following qualifications:
Roads:The company has second priority after Macquarie Infrastructure Group, any successor thereto or spin-off managed entity thereof or any one managed entity, or a “MIG Transferee”, to which Macquarie Infrastructure Group has transferred a substantial interest in its U.S. Assets; provided that, in the case of such MIG Transferee, both Macquarie Infrastructure Group and such entity are co-investing in the proposed investment.
Airport ownership:                                      The company has second priority after Macquarie Airports (consisting of Macquarie Airports Group and Macquarie Airports), any successor thereto or spin-off managed entity thereof or any one managed entity, or a “MAp Transferee”, to which Macquarie Airports has transferred a substantial interest in its U.S. Assets; provided that, in the case of such MAp Transferee, both Macquarie Airports and such entity are co-investing in the proposed investment.
Communications:The company has second priority after Macquarie Communications Infrastructure Group, any successor thereto or spin-off managed entity thereof or any one managed entity, or a “MCG Transferee”, to which Macquarie Communications Infrastructure Group has transferred a substantial interest in its U.S. Assets; provided that, in the case of such MCG Transferee, both Macquarie Infrastructure Group and such entity are co-investing in the proposed investment.
Regulated Assets (including, but not limited to, electricity and gas transmission and distribution and water services):The company has second priority after Macquarie Essential Assets Partnership, or MEAP, until such time as MEAP has invested a further CAD $45.0 million (USD $38.5 million as of February 13, 2007) in the United States. Thereafter the company will have first priority.


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The company has first priority ahead of all current and future entities managed by our Manager or any Manager affiliate in all investment opportunities originated by a party other than our Manager or any Manager affiliate where such party offers the opportunity exclusively to the company and not to any other entity managed by our Manager or any Manager affiliate within the IB Funds division of the Macquarie Group.
Financing
We expect to fund any acquisitions with a combination of new debt at the holding company level, subsidiary non-recourse debt and issuance of additional shares of trust stock. We expect that a significant amount of our cash from operations will be used to support our distributions policy. We therefore expect that in order to fund significant acquisitions, in addition to new debt financing, we will also need to either offer more equity or offer our shares to the sellers of businesses that we wish to acquire.
Our businesses have generally been partially financed with subsidiary-level non-recourse debt that is repaid solely from the businesses’ revenue. The debt is generally secured by the physical assets, major contracts and agreements, and when appropriate, cash accounts. In certain cases, the debt is secured by our ownership interest in that business.
These project finance type structures are designed to prevent lenders from looking through the operating businesses to us or to our other businesses for repayment. These non-recourse arrangements effectively result in each of our businesses being isolated from the risk of default by any other business we own or in which we have invested.
We do not currently have any debt at the company level. However, we have entered into a revolving credit facility at the MIC Inc. level, currently undrawn, that provides for borrowings up to $300.0 million primarily to finance acquisitions and capital expenditures pending refinancing through equity offerings at an appropriate time.
OUR BUSINESSES AND INVESTMENTS
Airport Services Business
Business Overview
Our airport services business, Atlantic Aviation, operates fixed-based operations, or FBOs, at 41 airports and one heliport throughout the United States. FBOs primarily provide fuelling and fuel-related services, aircraft parking and hangarage to owner/operators of jet aircraft in the general aviation sector of the air transportation industry. The business also operates six regional and general aviation airports under management contracts, although airport management constitutes a small portion of our airport services business. Previously, the airport services business consisted of two operating companies, Atlantic Aviation and AvPorts. These businesses have been integrated and are now managed as one business, together with Trajen Holdings, Inc., our most recent acquisition.
Financial information for this business is as follows ($ in millions):
  
2006
 
2005
 
2004
 
           
Revenue     $312.9     $201.5     $142.1 
Operating income                                                        47.9  28.3  15.3 
Total assets  932.6  553.3  410.3 
% of our consolidated revenue  60.1% 66.2% 52.1%
Our Acquisitions
On the day following our initial public offering, we purchased 100% of the ordinary shares in Atlantic Aviation FBO Inc, or Atlantic Aviation, from Macquarie Investment Holdings Inc. for a purchase price of $118.2 million (including transaction costs) plus $130.0 million of assumed senior debt pursuant to a stock purchase agreement. Prior to our acquisition of Atlantic, it acquired 100% of the shares of Executive Air Support Inc., or EAS, the parent company of the Atlantic Aviation business, and assumed $500,000 of debt pursuant to a stock purchase agreement.


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On the day following our initial public offering, we also acquired AvPorts from Macquarie Global Infrastructure Funds for cash consideration of $42.4 million (including transaction costs) and assumption of existing debt.
On January 14, 2005, we acquired all of the membership interests in General Aviation Holdings, LLC, or GAH, which operates two FBOs in California for $53.5 million (including a working capital adjustment, transaction costs, and funding of the debt service reserve). $32.0 million of the purchase price was funded by an increase in the senior debt facility of the business which was in place at that time, with the balance funded by proceeds from our initial public offering.
On August 12, 2005, we acquired 100% of the membership interests in Eagle Aviation Resources, Ltd., or EAR, a Nevada limited liability company doing business as Las Vegas Executive Air Terminal, or LVE, from Mr. Gene H. Yamagata for $59.8 million. LVE is an established FBO operating out of McCarran International Airport in Las Vegas, Nevada under the terms of a 30-year lease granted in 1996.
On July 11, 2006, we completed the acquisition of 100% of the shares of Trajen Holdings, Inc. for $363.1 million, including transaction costs, debt financing costs, pre funded capital expenditures and integration costs. Trajen is the holding company for a group of companies, limited liability companies and limited partnerships that own and operate 23 FBOs at airports in 11 states.
Industry Overview
FBOs predominantly service the general aviation industry. General aviation, which includes corporate and leisure flying, pilot training, helicopter, medivac and certain air freight operations, is the largest segment of U.S. civil aviation and represents the largest percentage of the active civil aircraft fleet. General aviation does not include commercial air carriers or military operations. Local airport authorities grant FBO operators the right to sell fuel and provide certain services. Fuel sales provide most of an FBO’s revenue.
FBOs generally operate in a limited competitive environment with high barriers to entry. Airports have limited physical space for additional FBOs. Airport authorities generally do not have the incentive to add additional FBOs unless there is a significant demand for capacity, as profit-making FBOs are more likely to reinvest in the airport and provide a broad range of services, which attracts increased airport traffic. The increased traffic generally generates additional revenue for the airport authority in the form of landing and fuel flowage fees. Government approvals and design and construction of a new FBO can also take significant time.
Demand for FBO services is driven by the number of general aviation aircraft in operation and average flight hours per aircraft. Both factors have recently experienced strong growth. According to the Federal Aviation Administration, or the FAA, from 1995 to 2005, the fleet of fixed-wing turbine aircraft, which includes turbojet and turboprop aircraft, increased at an average rate of 5.4% per year. Fixed-wing turbine aircraft are the major consumers of FBO services, especially fuel. Over the same period, the general aviation hours flown by fixed-wing turbine aircraft have increased at an average rate of 5.4% per year. This growth is and has been driven by a number of factors, in addition to general economic growth over the period, that include the following:
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passage of the General Aviation Revitalization Act in 1994, which significantly reduced the product liability facing general aviation aircraft manufacturers;
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dissatisfaction with the increased inconvenience of commercial airlines and major airports as a result of security-related delays;
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growth in programs for the fractional ownership of general aviation aircraft (programs for the time share of aircraft), including NetJets, FlexJet and Flight Options; and
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tax package passed by Congress in May 2003, which allows companies to depreciate 50% of the value of new business jets in the first year of ownership if the jets were purchased and owned by the end of 2004.
We believe generally that the events of September 11, 2001 have increased the level of general aviation activity. We also believe that safety concerns for corporate staff combined with increased check-in and security clearance times at many airports in the United States have increased the demand for private and corporate jet travel.
As a result of these factors, the FAA is forecasting the turbine jet fleet (primarily FBO customers), to double in size over the 12-year period ending in 2017.


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The growth in the general aviation market has driven demand for the services provided by FBOs, especially fuel sales. The general aviation market is serviced by FBOs located throughout the United States at various major and regional airports. There are approximately 4,500 FBOs throughout North America, with generally one to five operators per airport. Most of the FBOs are privately owned by operators with only one or two locations. There are, however, a number of larger industry participants.
Strategy
We believe that our FBO business will continue to benefit from the overall growth in the corporate jet market and the demand for the services that our business offers. However, we believe that our airport services business is in a position to grow at rates in excess of the industry as a result of our organic growth, marketing and acquisition strategies.
Internal Growth
We plan to grow revenue and profits by continuing to focus on attracting pilots and passengers who desire full service and quality amenities. We will continue to develop our staff so as to provide a level of service higher than that provided by discount fuel suppliers. In addition, we will make selective capital expenditures that will increase revenue and reinforce our reputation for service and high quality facilities, potentially allowing us to increase profits on fuel sales and other services over time.
Marketing
We plan to improve, expand and capitalize on our existing marketing programs, including our proprietary point-of-sale system and associated customer information database, and our “Atlantic Awards” loyalty program. Through our marketing programs, we expect to improve revenue and margins by generating greater customer loyalty, encouraging “upselling” of fuel, cross-selling of services at additional locations to existing customers, and attracting new customers.
Acquisitions
We will focus on acquisitions at major airports and locations where there is likely to be growth in the general aviation market. We believe we can grow through acquisitions and derive increasing economies of scale, as well as marketing, head office and other cost synergies. We also believe the highly fragmented nature of the industry and the desire of certain owners for liquidity provide attractive acquisition candidates, including both individual facilities and portfolios of facilities. In considering potential acquisitions, we will analyze factors such as capital requirements, the terms and conditions of the lease for the FBO facility, the condition and nature of the physical facilities, the location of the FBO, the size and competitive conditions of the airport and the forecasted operating results of the FBO.
Business
Operations
We believe our airport services business has high-quality facilities and focuses on attracting customers who desire high-quality service and amenities. Fuel and fuel-related revenue represented approximately 82.6% of our airport services business revenue for 2006. Other services provided to these customers include de-icing, aircraft parking, hangar rental and catering. Fuel is stored in fuel farms and each FBO operates refueling vehicles owned or leased by the FBO. The FBO either maintains or has access to the fuel storage tanks to support its fueling activities. At some of our locations, services are also provided to commercial carriers and include refueling from the carrier’s own fuel supplies stored in the carrier’s fuel farm, de-icing and ground and ramp handling services.
Our cost of fuel is dependent on the wholesale market price. Our airport services business sells fuel to customers at a contracted price, or at a price negotiated directly with the customer. While fuel costs can be volatile, we generally pass fuel cost changes through to customers and attempt to maintain a dollar-based margin per gallon of fuel sold.


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Locations
Our FBO facilities operate pursuant to long-term leases from airport authorities or local government agencies. Our airport services business and its predecessors have a strong history of successfully renewing leases, and have held some leases for over 40 years. The existing leases have an average remaining length of approximately 18 years. The leases at two of our 42 locations will expire within the next five years. We are the sole FBO operating at 18 of our locations.
The airport authorities have termination rights in each lease. Standard terms allow for termination if the tenant defaults on the terms and conditions of the lease or abandons the property or is insolvent or bankrupt. Less than 10 of our 42 leases  may be terminated with notice by the airport authority for convenience or other similar reasons. In each case, there are compensation agreements or obligations of the authority to make best efforts to relocate the FBO. Most of the leases allow for termination if liens are filed against the property.
Marketing
We believe our airport services business has an experienced marketing team and marketing programs that are sophisticated relative to those of other industry participants. Our airport services business’ marketing activities support its focus on high-quality service and amenities.
Atlantic Aviation has established two key marketing programs. Each utilizes an internally-developed point-of-sale system that tracks all aircraft utilizing the airport and records which FBO the aircraft uses. To the extent that the aircraft is a customer of another Atlantic Aviation FBO but did not use the Atlantic Aviation FBO at the current location, a member of Atlantic Aviation’s customer service team will send a letter alerting the pilot or flight department of Atlantic Aviation’s presence at that site and inviting them to visit next time they are at that location.
The second key program is the “Atlantic Awards” point-of-sale system program. For each 100 gallons of fuel purchased, the pilot is given a voucher for five “Atlantic Points.” Once 100 Atlantic Aviation Awards have been accumulated, the pilot is sent a pre-funded American Express card, branded with Atlantic Aviation’s logo. This program has rapidly gained acceptance by pilots and is encouraging “upselling” of fuel, where pilots purchase a larger portion of their overall fuel requirement at our locations. These awards are recorded as a reduction in revenue in our consolidated financial statements.
Competition
Competition in the FBO business exists on a local basis at most of the airports at which our airport services business operates. 18 of our FBOs (including the heliport) are the only FBO at their respective airports, either because of the lack of suitable space at the airfield, or because the level of demand for FBO services at the airport does not support more than one FBO. The remaining 24 FBOs have one or more competitors located at the airport. FBO operators at a particular airport compete based on a number of factors, including location of the facility relative to runways and street access, service, value-added features, reliability and price. Our airport services business positions itself at these airports as a provider of superior service to general aviation pilots and passengers. Employees are provided with comprehensive training on an ongoing basis to ensure high and consistent quality of service. Our airport services business markets to high net worth individuals and corporate flight departments for whom fuel price is of less importance than service and facilities. While each airport is different, generally there are significant barriers to entry.
We believe there are fewer than 10 competitors with operations at five or more U.S. airports, including Signature Flight Support, Landmark Aviation, Million Air Interlink and Mercury Air. These competitors tend to be privately held or owned by much larger companies and private equity firms, such as BBA Group plc, The Carlyle Group and Allied Capital Corporation. Some present and potential competitors have or may obtain greater financial and marketing resources than we do, which may negatively impact our ability to compete at each airport or to compete for acquisitions. We believe that the airport authorities from which our airport services business leases space are satisfied with the performance of their FBOs and are therefore not seeking to solicit additional service providers.
Regulation
The aviation industry is overseen by a number of regulatory bodies, the primary one being the FAA. Our airport services business is also regulated by the local airport authorities through lease contracts with those authorities. Our airport services business must comply with federal, state and local environmental statutes and regulations associated


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in part with numerous underground fuel storage tanks. These requirements include, among other things, tank and pipe testing for tightness, soil sampling for evidence of leaking and remediation of detected leaks and spills. Our FBO operations are subject to regular inspection by federal and local environmental agencies and local fire and airline quality control departments. We do not expect that compliance and related remediation work will have a material negative impact on earnings or the competitive position of our airport services business. Our airport services business has not received notice of any cease and abatement proceeding by any government agency as a result of failure to comply with applicable environmental laws and regulations.
Management
The day-to-day operations of our airport services business is managed by individual site managers. Local managers are responsible for all aspects of the operations at their site. Responsibilities include ensuring that customer requirements are met by the staff employed at their sites and that revenue from the sites is collected, and expenses incurred, in accordance with internal guidelines. Local managers are, within the specified guidelines, empowered to make decisions as to fuel pricing and other services, improving responsive and customer service.
Atlantic Aviation’s operations are overseen by a group of senior personnel who average over 20 years experience in the aviation industry. Most of the business management team members have been employed at our airport services business (or its predecessors) for over 11 years and have established close and effective working relationships with local authorities, customers, service providers and subcontractors. These teams are responsible for overseeing the FBO operations, setting strategic direction and ensuring compliance with all contractual and regulatory obligations.
Atlantic Aviation’s head office is in Plano, Texas. The head office provides the business with central management and performs overhead functions, such as accounting, information technology, human resources, payroll and insurance arrangements. We believe our facilities are adequate to meet our present and foreseeable operational needs.
Employees
As of December 31, 2006, our airport services business employed over 1,339 employees at its various sites. Approximately 21% of employees are covered by collective bargaining agreements. We believe that employee relations at our airport services business are good.
Bulk Liquid Storage Terminal Business
Our Acquisition
We completed the acquisition of a 50% economic and voting interest in IMTT Holdings Inc. (formerly known as Loving Enterprises, Inc.) on May 1, 2006 at a cost of $250.0 million plus transaction costs of approximately $7.1 million. The shares we acquired were newly issued by IMTT Holdings Inc., the ultimate holding company for International-Matex Tank Terminals (IMTT). The balance of the shares in IMTT Holdings Inc. are beneficially held by a number of related individuals.
Business Overview
IMTT provides bulk liquid storage and handling services in North America through eight marine terminals located on the East, West and Gulf coasts and the Great Lakes region of the United States and a partially owned terminal in each of Quebec and Newfoundland, Canada. The largest terminals are located on the New York Harbor and on the Mississippi River near the Gulf of Mexico.founding family. IMTT stores and handles petroleum products, various chemicals, renewable fuels and vegetable and animal oils. IMTT is one of the largest companies in theproviders of bulk liquid storage terminal industryservices in the United States,U.S., based on capacity. Financial information for this business is as follows ($ in millions):
  
2006
 
2005
 
2004
          
Revenue     $239.3     $250.6     $210.7
Operating income                                                                                          51.0  44.5  33.5
Total assets  630.4  549.2  510.6 


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In

For the year endingended December 31, 2006,2009, IMTT generated approximately 52%43% of its terminal revenue and 50%approximately 42% of its terminal gross profit at its Bayonne, New Jersey facility which servicesin New York Harbor, and 34%Harbor. Approximately 41% of itsIMTT’s total terminal revenue and 42%approximately 48% of its terminal gross profit atwas generated by its St. Rose, Gretna, Avondale and Avondale, LouisianaGeismar facilities, which together service the lower Mississippi River region (with St. Rose as the largest contributor).

The table below summarizes the proportion of the terminal revenue generated from the commodities stored at IMTT’s terminal at Bayonne, IMTT’s terminals in Louisiana and IMTT’s other U.S. terminals for the year ended December 31, 2006:
Proportion of Terminal Revenue from Major Commodities Stored
Bayonne Terminal
Louisiana Terminals
Other US Terminals
Black Oil: 32%                                         Black Oil: 47%Chemical: 36%
Gasoline: 23%Chemical: 18%Black Oil: 16%
Chemical: 22%Vegetable and Animal Oil: 17%Other Commodities: 48%
Other Commodities: 23%Other Commodities: 18%
Black Oil includes #6 oil which is a heavy fuel used in electricity generation, as bunker oil fuel for ships and for other industrial uses. Black Oil also includes vacuum gas oil, which is used as a feedstock for tertiary stages in oil refining, where it is further broken down into other petroleum products.

IMTT also owns two additional businesses: Oil Mop, an environmental response and spill clean-up business, and St. Rose Nursery, a nursery business.

Oil Mop has a network of facilities along the U.S. Gulf coastCoast between Houston and New Orleans. These facilities service predominantly the Gulf region, but also respond to spill events as needed throughout the United States and internationally.

The business generates approximately one halftable below summarizes the proportion of its revenue from spill clean-up, one quarter from tank cleaning and the balance from other activities including vacuum truck services, waste disposal and material sales to the spill clean-up sector. The underlying drivers of demand for spill clean-up services include shipping and oil and gas industry activity levels in the Gulf region, the aging of pipeline and other mid-stream petroleum infrastructure, the frequency of natural disasters and regulations regarding the standards of spill clean-up. Revenue generated by Oil Mop from spill clean-up tends to be highly variable depending on the frequency and magnitude of spills in any particular period.

St. Rose Nursery is located adjacent to IMTT’s St. Rose terminal and acts as a “green” buffer between the terminal and neighboring residential properties. St. Rose Nursery grows plants and repackages cut flowersrevenue generated from the commodities stored at IMTT’s U.S. terminals for sale through retail outlets throughout Louisiana and historically has not contributed significantly to IMTT’s gross profit.the year ended December 31, 2009:

   
Proportion of Terminal Revenue from Major Commodities Stored
Petroleum/Asphalt Chemical Renewables/Vegetable
& Animal Oil
 Other
58%
 29% 9% 4%

Financial information for 100% of this business is as follows ($ in millions):

   
 As of, and for the
Year Ended, December 31,
   2009 2008 2007
Revenue $346.2  $352.6  $275.2 
EBITDA excluding non-cash items  147.7   136.6   89.0 
Total assets  1,064.8   1,006.3   862.5 

TABLE OF CONTENTS

Energy-Related Business: IMTT – (continued)

Industry Overview

Bulk liquid storage terminals areprovide an essential link in the supply chain for most major liquid commodities that are transported in bulk. The ability of anysuch as crude oil, refined petroleum products and basic and specialized chemicals. In addition to renting storage tanks, bulk liquid storage terminal to increase itsterminals generate revenues by offering ancillary services including product transfer (throughput), heating and blending. Pricing for storage rates is principally driven by the balance between theand other services typically reflects local supply and demand for storage inas well as the locale that the terminal serves and thespecific attributes of theeach terminal in terms of dock water depth andincluding access to land baseddeepwater berths and connections to land-based infrastructure such as a pipeline, railroads, pipelines and road.

Therail.

Both domestic and international factors influence demand for bulk liquid storage in the United States is fundamentally driven byStates. Demand for storage rises and falls according to local and regional consumption, which largely reflects the level of product inventories, which isunderlying economic activity over the medium term. In addition to these domestic forces, import and export activity also accounts for a functionmaterial portion of the volume of the stored products consumed and which in turn is largely driven by economic activity. Import and export levels of bulk liquid products are also important drivers of demand for domestic bulk liquid storage as imports and exportsbusiness. Shippers require storage for the staging, aggregation and/or break-updistribution of the products before and after shipment. An exampleThe extent of this is basic or commodity chemicals which are usedimport/export activity depends on macroeconomic trends such as feedstockcurrency fluctuations as well as industry-specific conditions, such as supply and demand balances in the productiondifferent geographic regions. The medium-term length of specialty chemical products. As a result of high natural gas pricesstorage contracts tends to offset short-term fluctuations in the United States, the cost of producing commodity chemicals that use natural gas as a feedstock (such as methanol) is now higher in the United States than the cost of importing such chemicals from countries with low cost natural gas. As a result domestic production of such chemicals has declined while imports have increased substantially, generating increased demand for bulk commodity chemical storage in both the United States.

Tighteningdomestic and import/export markets.

Potential entrants into the bulk liquid storage terminal business face several substantial barriers. Strict environmental regulations, limited availability of waterfront land with the necessary access to land-based infrastructure, local community resistance to new fuel/chemical sites, and high capitalinitial investment costs represent substantial barriers toimpede the construction of



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new bulk liquid storage facilities, particularly in storage markets locatedfacilities. These deterrents are most formidable around New York Harbor and other waterways near major urban populations such as New York Harbor.centers. As a consequence, new supply is generally created by the addition of tankage to existing terminals where existing infrastructure can be leveraged, resulting in higher returns on invested capital. However, restrictions on land use, difficulties in securing environmental permits, and the potential for operational bottlenecks due to infrastructure constraints may limit the ability of an existing terminalterminals to add to itsexpand the storage capacity is limited not only by available land but also by the ability of the terminal’s dock infrastructure (which can be expensive to upgrade) to service the higher levels of ship traffic that results from tankage expansion.
Based on these industry factors, we believe that a supportive supply/demand balance for bulk liquid storage at well-located, capable terminals will continue long term. IMTT generated approximately 92% of their 2006 total gross profit from its facilities in New York Harbor and on the lower Mississippi River. Allfacilities.

Strategy

The key components of these facilitiesIMTT’s strategy are well-located in key distribution centers for bulk liquid products, have deep water berths allowing large ships to dock without lightering and have access to road, rail and, in the case of Bayonne and St. Rose, pipeline infrastructure for onward distribution of stored product.

Strategy
We believe that IMTT will continue to benefit from overalldrive growth in the demand forrevenue and cash flows by attracting and retaining customers who place a premium on flexibility, speed and efficiency in bulk liquid storage and constraints on increases in supply of such storage in the key markets in which it operates. We believe that the positive impact of such factors on IMTT’s revenue and profits will be maximized by IMTT continuing to follow its existing internal growth and expansion and acquisitions strategies.
Internal Growth. IMTT will continue to maximize revenue and profitability growth through optimizing the mix of commodities stored at IMTT’s terminals so that tankage is rented at the most favorable storage rates. IMTT also plans to continue to invest in improvingadditional storage capacity. IMTT believes that the capabilitiessuccessful execution of this strategy will be aided by its size, technology and service capability.

Flexibility:  Operational flexibility is essential to make IMTT an attractive supplier of bulk liquid storage services in its key markets. Its facilities operate 24/7 providing shippers, refiners, manufacturers, traders and distributors with prompt access to a wide range of storage services. In each of its facilitiestwo key markets, IMTT’s scale ensures availability of sophisticated product handling and storage capabilities along with ancillary services such as heating and blending. IMTT continues to receiveimprove its facilities’ speed and distribute stored product from and to multiple modesflexibility of transportation at high speed. This includes continuing to investoperations by investing in dock, pipelineupgrades of its docks, pipelines and pumping infrastructure, and dredging to ensure that large ships and barges which represent the cheapest transport options, can deliver and receive stored product from IMTT’s facilities with fast turnaround to minimize shipping costs. As such investments create immediate value for customersfacility management systems.

Investment in the form of lower supply chain costs and increased logistical flexibility, the costs of such investments can usually be recovered quickly through storage rate increases. This is attractive given that such infrastructure investments have a long useful life and therefore result in a near permanent improvement in the capabilities of IMTT’s facilities and their long-term competitive position. Finally, IMTT intends to maintain its current high level of customer service.

Expansions and Acquisitions.Growth:  IMTT plans to continueseeks to increase its share of available storage capacity, and thereby continue to improve its competitive positionespecially in the key storage markets of New York Harbor and the lower Mississippi River. IMTT intends to do thisRiver, and thereby improve its competitive position through a combination of:


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the construction ofbuilding new tankage at existing facilities in these markets when supported by existing customer demand;
·
the completion of the construction of thecommissioning new chemical storage facility at Geismar, Louisiana, which will establish IMTT as a significant participant in the market for specialty chemical storage in the lower Mississippi River and also providefacilities where it believes it can develop a strong base from which to expand this initial presence;for future expansion; and
·acquiring terminals that offer the potential for improved profitability under IMTT.
the acquisition of smaller terminals in these markets where capacity utilization, storage rates and therefore terminal gross profit can be increased under IMTT’s ownership.

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Energy-Related Business: IMTT will also consider– (continued)

Locations

The following table summarizes the acquisition of storage facilities in markets outside of the key markets in which it currently operates and where IMTT believes that over the long term a favorable supply/demand balance will exist for bulk liquid storage or where IMTT believes that the performance of the facilities can be improved under its ownership.

Locations
The location of each of IMTT’s facilities, its storage capacity, as measured byIMTT facility and the corresponding number of tanks in service, and their aggregatestorage capacity in service, and its marine capabilities, as measured by the number of ship and barge docks available for the loading and unloading of stored product are summarized in the table below.transfer. This information isreflects the site assets as of December 31, 20062009 and reflects capacity available for rent, excluding recovery tanks anddoes not include tanks used in packaging.packaging, recovery tanks, and/or other storage capacity not typically available for rent.

    
Facility Land Number of
Storage
Tanks in
Service
 Aggregate Capacity
of Storage Tanks in
Service
 Number of
Ship & Barge
Berths in
Service
         (Millions of Barrels)   
Facilities in the United States:
                    
Bayonne, NJ  Owned   600   16.0   18 
St. Rose, LA*  Owned   205   13.4   16 
Gretna, LA*  Owned   56   2.0   5 
Avondale, LA*  Owned   82   1.1   4 
Geismar, LA*  Owned   34   0.9   3 
Lemont, IL  Owned/Leased   155   1.1   3 
Joliet, IL  Owned   71   0.7   2 
Richmond, CA  Owned   46   0.6   1 
Chesapeake, VA  Owned   23   1.0   1 
Richmond, VA  Owned   12   0.4   1 
Facilities in Canada:
                    
Quebec City, Quebec(1)  Leased   53   1.9   2 
Placentia Bay, Newfoundland(2)  Leased   6   3.0   2 
Total     1,343   42.1   58 



Facility
 
Land
 
Number of
Storage Tanks
in Service
 
Aggregate Capacity
of Storage Tanks
in Service
 
Number of Ship
and Barge Docks
in Service
                                                                          (millions of barrels)  
Facilities in the United States:
        
Bayonne, NJ     Owned     478     15.4     18
St. Rose, LA Owned 174 11.7 16
Gretna, LA Owned 85 1.7 5
Avondale, LA Owned 86 1.0 4
Geismar, LA(1) Owned   
Chesapeake, VA Owned 24 1.0 1
Lemont, IL Owned/Leased 145 0.9 3
Richmond, CA Owned 46 0.7 1
Richmond, VA Owned 12 0.4 1
Facilities in Canada:
        
Quebec City, Quebec(2) Leased 46 1.2 2
Placentia Bay, Newfoundland(3) Owned 6 3.0 2
——————

(1)
Currently under construction
(2)
Indirectly 66.6% owned and managed by IMTT
(3)
Indirectly 20.1% owned and managed by IMTT
IMTT’s operations are conducted on predominantly owned land. In addition to

*Collectively the “Louisiana” facilities.
(1)Indirectly 66.7% owned and managed by IMTT.
(2)Indirectly 20.1% owned and managed by IMTT.

All facilities have marine access, all facilities have road access and, except for Richmond, Virginia and Placentia Bay, Newfoundland, all sites have rail access.

Bayonne, New Jersey. IMTT’sJersey

The 16 million barrel storage terminal at Bayonne, New Jersey has its largestthe most storage capacity with 15.4 million barrels. It is locatedof any IMTT site. Located on the Kill Van Kull between New Jersey and Staten Island, and provides storage services tothe terminal occupies a strategically advantageous position in New York Harbor, or NYH. IMTT-Bayonne has a substantial share of the market for third-party petroleum and liquid chemical storage in NYH and isAs the largest third-partyindependent bulk liquid storage facility in NYH, by capacity. IMTT-Bayonne has expanded over a numbersubstantial market share for third-party storage of years by IMTT through progressive acquisitions of neighboring facilities.

refined petroleum products and chemicals.

NYH isserves as the main petroleum trading hub in the U.S. northeast. NYH isnortheast United States and the physical delivery point for the gasoline and heating oil futures contracts traded on NYMEX.New York Mercantile Exchange (NYMEX). In addition to waterborne shipments, products reach NYH is also the endpoint for thethrough major refined petroleum product pipelines from the U.S. gulfGulf region, where approximately half of U.S. domestic refining capacity is located. It isresides. NYH also serves as the starting point for refined petroleum product pipelines from the East coastlinked to the inland markets and theas a key port for U.S. refined petroleum product imports from outside of the United States.imports. IMTT-Bayonne has connections to the Colonial, Buckeye and Harbor refined petroleum product pipelines. It also haspipelines as well as rail and road connections. As a result, IMTT-Bayonne provides its customers with substantial logistical flexibility that is at least comparable with its competitors.flexibility.

Due

TABLE OF CONTENTS

Energy-Related Business: IMTT – (continued)

IMTT-Bayonne has the capability to aquickly load and unload the largest bulk liquid transport ships entering NYH. The U.S. Army Corp of Engineers or USACE, dredging program for(USACE) has dredged the Kill Van Kull and Newark Bay, the water depth in the channel passing IMTT-Bayonne’sthe IMTT-Bayonne docks isto 45 feet (IMTT has dredged some but not all of its docks to that depth) and we understand that the USACE is currently undertaking a project that will deepen this channel to 50 feet. Almost all of IMTT’s. Most competitors in NYH arehave facilities located on the southern reachesportion of the Arthur Kill (water depth of approximately 35 feet) and there are no plansforce large ships to transfer product through lightering (transferring cargo to barges at anchorage) before docking. This technique substantially increases the cost of which we are awareloading and unloading vessels. This competitive advantage for Bayonne may improve as the USACE has announced plans to dredge this bodythe Kill Van Kull to 50 feet (with no planned increase in the depth of water beyond its current depth. As a result, the water depth atsouthern portion of the docks of all of IMTT-Bayonne’s major competitors is substantially less than 45 feet. Thus, IMTT can handle large ships at full load without the needArthur Kill).

Demand for lightering which delays ships and is expensive. IMTT-Bayonne’s facility also has a large waterfront with a large number of generally uncongested docks, which reduces ship turnaround times and demurrage costs.

We believe the current favorable supply/demand balance forthird-party bulk liquid storage in NYH is evident inhas remained strong during the highpast several years, as illustrated by the capacity utilization experienced by IMTT-Bayonne.at the Bayonne facility. For the three years ended December 31, 2006,2009, IMTT-Bayonne on average approximately 95%rented over 94% of IMTT-Bayonne’sits available storage capacity was rented.
capacity.

St. Rose/Gretna/Avondale/Gretna/Geismar Louisiana. IMTT’s St.

On the lower Mississippi River, IMTT currently operates four bulk liquid storage terminals (St. Rose, Gretna, Avondale Gretna and Geismar terminalsGeismar). With combined storage capacity of 17.4 million barrels, the four sites give IMTT substantial market share in storage for black oil, bulk liquid chemicals, and vegetable oils on the lower Mississippi RiverRiver.

The Louisiana facilities give IMTT a substantial presence in Louisiana have a combined storage capacity of 14.4 million barrels, with St. Rose as the largest with capacity of 11.7 million barrels. IMTT-St. Rose, individually and in combination with IMTT’s other



15


terminals on thekey domestic transport hub. The lower Mississippi River hasserves as a substantial share of the market for third-party bulk liquid storage on the lower Mississippi River and St. Rose is the largest third-party bulk liquid storage facility on the lower Mississippi River.
The Mississippi River is a key transport route in the United States and the bulk liquid storage terminals near the mouth of the Mississippi River perform two major functions. First, the terminals provide a transshipment point between the central United States and the rest of the world for the importexported agricultural products (such as vegetable oils) and export of liquid agricultural products. Second, the terminalsimported chemicals (such as methanol). The region also servicehas substantial domestic traffic related to the petroleum and chemical industries along the U.S. gulf coast, lower Mississippi River and the midwest.industry. The U.S. gulf coastGulf Coast region hosts approximately half of U.S. domestic petroleum refining capacity and is the access pointyet accounts for the majorityonly one-quarter of crude oil imports into the United States. All of IMTT’s facilities in Louisiana are located on the lower portionits consumption. As a result, Gulf Coast refiners send their products to other regions of the Mississippi River, which is navigable by large ships.U.S. and overseas and require storage capacity and ancillary services to facilitate distribution. Thus, IMTT’s Louisiana facilities, with their deep water ship and barge docks andas well as access to rail and road infrastructure, access are highly capable of performing the functions discussed above.
We believe the current favorable supply/demand balancethese functions.

Demand for third-party bulk liquid storage inon the lower Mississippi isRiver has remained strong during the past several years, as illustrated by the level of capacity utilization at IMTT’sthe IMTT Louisiana facilities. For the three years ended December 31, 2006, on average2009, IMTT rented approximately 94%96% of the aggregate available storage capacity of IMTT’s Louisiana terminals was rented. Due to strong demand for storage capacity, IMTT has recently completed the construction of seven new storage tanksat St. Rose, Gretna, Avondale and is currently in the process of constructing a further eight new storage tanks with a total capacity of approximately 1.5 million barrels at its Louisiana facilities at a total estimated cost of approximately $39.0 million. It is anticipated that construction of these tanks will be completed in 2007. Rental contracts with initial terms of at least three years have been executed in relation to 11 of these tanks with the balance of the tanks to be used to service customers while their existing tanks are undergoing maintenance over the next five years. We anticipate that the new tanks will contribute approximately $6.4 million to IMTT’s terminal gross profit and EBITDA annually. At Geismar, a 570,000 barrel bulk liquid chemical storage and handling facility is under construction with capital committed to date of $160.0 million. Based on the current project scope and subject to certain minimum volumes of chemical products being handled by the facility, existing customer contracts are anticipated to generate terminal gross profit and EBITDA of at least $18.8 million per year. Completion of construction of the initial $160.0 million phase of the Geismar project is targeted for the first quarter of 2008. In the aftermath of Hurricane Katrina, construction costs in the region have increased and labor shortages have been experienced. Although a significant amount of the impact of Hurricane Katrina on construction costs has already been incorporated into the capital commitment plan, there could be further negative impacts on the cost of constructing the project (which may not be offset by an increase in its gross profit and EBITDA contribution) and/or the project construction schedule.

Other Terminals. IMTT’s smaller operations in the United States consist of terminals at Chesapeake and Richmond, Virginia, located in the mid-Atlantic region on the Elizabeth and James Rivers, respectively, Lemont, located on the upper Mississippi near the Great Lakes, and Richmond, California, located in the San Francisco Bay. In Canada, IMTT owns 66.6% of a terminal located at the Port of Quebec on the St. Lawrence River and 20.1% of a facility located on Placentia Bay, Newfoundland which is a specialized facility used for the transshipment of crude oil from fields off the East coast of Canada. As a group, these facilities have a total storage capacity of 7.2 million barrels and generate less than 10% of IMTT’s terminal gross profit. IMTT is currently in the process of constructing four new storage tanks at Quebec with total capacity of 269,000 barrels. All of these tanks are already under customer contract with a minimum term of three years. Total construction costs are projected at approximately $7.2 million. Construction of these tanks is anticipated to be completed during 2007 and their operation is anticipated to contribute approximately $1.6 million to the Quebec terminal’s gross profit and EBITDA annually.
Geismar.

Competition

The competitive environment in which IMTT operates varies by terminal location. The principal competition for each of IMTT’s facilities comes from other third-party bulk liquid storage facilities located in the same regional market. Kinder Morgan, which owns three bulk liquid storage market.facilities in New Jersey and Staten Island, New York, represents IMTT’s major competitor in the New York Harbor storage market isNYH market. Kinder Morgan which has three storagealso owns facilities in the area. Kinder Morgan is also IMTT’s main competitor inalong the lower Mississippi River storage market.near New Orleans. In both the New York HarborNYH and Lowerlower Mississippi River markets, IMTT operates the largest third-party terminal by capacity. We believe that IMTT’s large share of the market for third-party bulk liquid storage in the New York Harbor and lower Mississippi regions,capacity which, combined with the capabilities of IMTT’s facilities, provides IMTT with a strong competitive position in both of these key bulk liquid storage markets.



16


markets.

IMTT’s minor facilities in Illinois, California and Virginia represent only a small proportion of available bulk liquid storage capacity in their respective markets and have numerous competitors with facilities of similar or larger size and with similar capabilities.

Secondary competition for IMTT’s facilities comes from bulk liquid storage facilities located in the same broad geographic region as IMTT’s terminals. For example, bulk liquid storage facilities located on the Houston Ship Channel provide a moderate level ofindirect competition for IMTT’s Louisiana facilities.

Customers

IMTT provides bulk liquid storage services principally to vertically integrated petroleum product producers petroleum productand refiners, chemical manufacturers, food processors and traders of bulk liquid petroleum, chemical and agricultural products. No single customer represented greater than 10% of IMTT’s total revenue for the year ended December 31, 2006.2009.


TABLE OF CONTENTS

Energy-Related Business: IMTT – (continued)

Customer Contracts

Storage

IMTT generally rents storage tanks are generally rented to customers under contracts with terms of onethree to five years. Pursuant to these contracts, customers generally pay for the capacity of the tank irrespective of whether they actually store product in the tank is actually used. Tank rentals areand the contracts generally payablehave no early termination provisions. Customers generally pay rental charges monthly andat rates are stated in terms of cents per barrel of storage capacity per month. Tank rental rates vary by commodity stored and by location. IMTT’s standard form of customer contract generally permits a certain number of free product movements into and out of the storage tank with charges for throughput aboveexceeding the prescribed levels. Where a customer is renting a tank that requiresIn cases where stored liquids require heating to prevent the stored product from becoming excessively viscous,keep viscosity at acceptable levels, IMTT generally charges the customer for the heating with such charges essentially reflecting a pass-through of IMTT’s cost. Heating charges are principally cover the cost of fuel used to produce steam. Pursuant to IMTT’s standard form of customer contract, tank rental rates, throughput rates and the rates for some other services are generally subject toincrease based on annual inflation increases. The productindices. Customers retain title to products stored in the tanks remains the property of the customer at all times and thereforehave responsibility for securing insurance against loss. As a result, IMTT takeshas no commodity price risk. The customerrisk related to the liquids stored in its tanks and has limited liability from product loss. IMTT is also responsible for ensuring appropriate care of products stored at its facilities and maintains adequate insurance against loss of the stored product.

with respect to its exposure.

Regulation

The rates that IMTT charges for theits services that it provides are not subject to regulation. However, IMTT’s operations are overseen by a number of regulatory bodies andoversee IMTT’s operations. IMTT must comply with numerous federal, state and local environmental, occupational health and safety, security, tax and planning statutes and regulations. These regulations require IMTT to obtain and maintain permits to operate its facilities and impose standards that govern the way IMTT operates its business. If IMTT does not comply with the relevant regulations, it could lose its operating permits andand/or incur fines and increased liability in the event of an accident.liability. As a result, IMTT has developed environmental and health and safety compliance functions which are overseen by the terminal managers at the terminal level and IMTT’s Director of Environmental, Health and Safety, Chief Operating Officer and Chief Executive Officer. While changes in environmental, health and safety regulations pose a risk to IMTT’s operations, such changes are generally phased in over time to manage the impact on industry.

The Bayonne New Jersey terminal, which has beenwas acquired and expanded over a 2226 year period, contains pervasive remediation requirements that were partially assumed at the time of purchase from the various former owners. One former owner retained environmental remediation responsibilities for a purchased site as well as sharing other remediation costs. These remediation requirements are documented in two memoranda of agreement and an administrative consent order with the State of New Jersey. Remediation efforts entail removal of the free product, soil treatment, repair/replacement of sewer systems, and the implementation of containment and monitoring systems. These remediation activities are estimatedexpected to span a period of ten to twenty years or more.

The Lemont terminal has entered into a consent order with the State of Illinois to remediate contamination at the site that pre-dated IMTT’s ownership. Remediation is also required as a result of the renewal of a lease with a government agency for a portion of the terminal. This remediation effort, including the implementation of extraction and monitoring wells and soil treatment, is estimated to span a period of ten to twenty years.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —  Liquidity and Capital Resources” in Part II, Item 7 for discussion of the expected future capitalized cost of environmental remediation.



17


Management

The day-to-day operationoperations of IMTT’s terminals isare overseen by individual terminal managers who are responsible for all aspects of the operations at their respective sites. IMTT’s terminal managers have on average 2931 years experience in the bulk liquid storage industry and 1718 years service with IMTT.

IMTT’s

TABLE OF CONTENTS

Energy-Related Business: IMTT – (continued)

The IMTT head office is in New Orleans. The head officeOrleans provides the business with central management, performs support functions such as accounting, tax, finance, human resources, insurance, information technology and legal services and provides support for functions that have been partially de-centralized to the terminal level such as engineering and environmental and occupational health and safety regulatory compliance. IMTT’s senior management team, other than the terminal managers, have on average 2136 years experience in the bulk liquid storage industry and 2128 years service with IMTT.

The Board of IMTT Holdings consists of six members with three appointees each from Macquarie Terminal Holdings, LLC, our wholly owned subsidiary, and our co-shareholder. All decisions of the Board require majority approval, including the approval of at least one member appointed by Macquarie Terminal Holdings, LLC and one member appointed by our co-shareholder. The shareholders’ agreement to which we became a party at the time of our investment in IMTT contains a customary list of items that must be referred to the Board for approval.

The shareholders’ agreement is filed as an exhibit to this Annual Report on Form 10-K.

Employees

As atof December 31, 2006,2009, IMTT (excluding non-consolidated sites) had a total of 9541,022 employees, with 710 employed at the bulk liquid storage terminals, 106including 133 employed by Oil Mop, 64 employed by St. Rose Nursery and 74 employed at the head office in New Orleans.Mop. At the Bayonne terminal, 132 staff members142 employees are unionized, and52 of the employees are unionized at the Lemont terminal, 48 ofand Joliet terminals and 33 employees are unionized at the staff members are unionized.Quebec terminal. We believe employee relations at IMTT are good.

Shareholders’ Agreement
Upon acquisition of our interest in IMTT we became a party to a shareholders’ agreement relating to IMTT Holdings Inc. The other parties to the shareholders’ agreement are IMTT Holdings Inc. and the other shareholders of IMTT Holdings. A summary of the key terms of the IMTT Holdings’ Inc. shareholders’ agreement is provided below:
Term
Detail and Comment
PartiesIMTT Holdings Inc, Then-Current Shareholders and Macquarie Terminal Holdings LLC
Section 3 –Board of Directors and
Investor Representative
·
Board of IMTT Holdings of six members with three appointees from Macquarie Terminal Holdings.
·
All decisions of the Board require majority approval, including the approval of at least one member appointed by Macquarie Terminal Holdings LLC and one member appointed by the Then-Current Shareholders.
·
Customary list of items that must be referred to Board for approval.
·
MIC will appoint an Investor Representative, or IR, and may, at its election, delegate some decision making authority with respect to IMTT to the IR.
Section 4 –Dividend Policy
·
Fixed quarterly distributions to us of $7.0 million per quarter through December 31, 2008 subject only to (i) compliance with financial covenants and law and (ii) retention of adequate cash reserves and committed and unutilized credit facilities as required for IMTT to meet the normal requirements of its business and to fund capital expenditures commitments approved by the Board.
·
Commencing March 2009, required quarterly distributions of 100% of cash from operations and cash from investing activities less maintenance capital expenditures, subject only to (i) compliance with financial covenants and law and (ii) retention of adequate cash reserves and committed and unutilized credit facilities as required for IMTT to meet the normal requirements of its business and to fund capital expenditures commitments approved by the Board.



Term
Detail and Comment
·
Commencing March 2009, if debt: EBITDA (ex-shareholder loans) at the end of the quarter is greater than 4.25x then the payment of dividends is not mandatory.
·
Then-Current Shareholders will lend all dividends received for quarters through December 31, 2007 back to IMTT Holdings. Such shareholder loans will be repaid over 15 years commencing March 2008 and earn a fixed interest rate of 5.5%.
Section 5 –Capital Structure Policy
·
Commencing March 2009, minimum gearing requirement of debt: EBITDA (ex-shareholder loans) of 3.75x with proceeds of regearing paid out as dividends.
Section 6 –Corporate Opportunities
·
All shareholders are required to offer investment opportunities in bulk liquid terminal sector to IMTT.
Section 7 –Non-Compete
·
Shareholders will not invest or engage in businesses that compete directly with IMTT’s business.
Section 8 –CEO and CFO Succession
·
Pre-agreed successor to current chief executive officer is identified. Thereafter, Then-Current Shareholders are entitled to nominate chief executive officer whose appointment will be subject to Board approval.
·
After the current chief financial officer, we are entitled to nominate all subsequent chief financial officers whose appointment will be subject to Board approval.
Gas Production and Distribution Business
Our Acquisition
On June 7, 2006, we completed the acquisition of HGC Holdings LLC and

The Gas Company LLC, from k1 Ventures Limited. The cost of the acquisition, including working capital adjustments and transaction costs, was approximately $262.7 million. In addition, we incurred financing costs of approximately $3.3 million.

Business Overview

Founded in 1904, TGC

The Gas Company is Hawaii’s only government franchised full-service gas energy company, makingmanufacturing and distributing gas products and services available in Hawaii. The Hawaii market includes Hawaii’s approximateapproximately 1.3 million resident population and approximate 7.5 million annual visitors. TGC provides both regulated and unregulated gas distribution services on the state’s six primary islands.

TGC believes it has all of the regulated marketresidents and approximately 75% of the non-regulated gas market constituting approximately 90% of the state’s overall gas market. TGC has two products:6.5 million visitors in 2009. The Gas Company manufactures synthetic natural gas, or SNG, for its utility customers on Oahu, and liquefied petroleum gas,distributes Liquefied Petroleum Gas, or LPG. Both products are relatively clean-burning fuels that produce lower levels of harmful emissions than other carbon based fuels such as coal or oil. This is particularly important in Hawaii where environmental regulations generally exceed Federal Environmental Protection Agency standardsLPG, to utility and lower emissions make our products attractive to customers.
SNG and LPG have a wide number of commercial and residential applications, including electricity generation, water heating, drying, cooking, and gas lighting. LPG is also used as a fuel for some automobiles, specialty vehicles and forklifts.non-utility customers throughout the state’s six primary islands.

The Gas customers range from residential customers, for which TGC has nearly all of the market, to a wide variety of commercial and wholesale customers.

TGC sales are stable and have demonstrated resilience even during downturns in the tourism industry and fluctuations in the general economic environment. Although the Hawaii Public Utilities Commission, or HPUC, sets


19


the base price for the SNG and LPG sold by our regulated business, TGC is permitted to charge customers a fuel adjustment charge that can be adjusted monthly. Therefore, the profitability of the business has some protection from feedstock price changes due to its ability to recover increasing feedstock costs by adjusting the rates charged to its regulated customers.
TGCCompany has two primary businesses, utility (or regulated) and non-utility (or unregulated):

·
The utility business serves approximately 35,500 customers through localized pipeline distribution systems located on the islands of Oahu, Hawaii, Maui, Kauai, Molokai and Lanai. The utility business includes the manufacture, distribution and sale of SNG on the island of Oahu and distribution and sale of LPG to approximately 36,000 customers through localized distribution systems located on the islands of Oahu, Hawaii, Maui, Kauai, Molokai and Lanai (listed by size of market with Oahu being the largest).LPG. Utility revenue consists principally of sales of thermal units, or therms, of SNG and LPG. One gallon of LPG is the equivalent of 0.913 therms. The operating costs for the utility business include the cost of locally purchased feedstock, the cost of manufacturing SNG from the feedstock, LPG purchase costs and the cost of distributing SNG and LPG to customers. Sales to regulated accounts comprises 60%Utility sales comprised approximately 45% of TGC’sThe Gas Company’s total revenue and therm sales.
·contribution margin in 2009.
The non-utility business comprises the sale ofsells and distributes LPG to approximately 32,000 customers, through33,000 customers. LPG is delivered by truck deliveries to individual tanks located on customer sites on Oahu, Hawaii, Maui, Kauai, Molokai and Lanai. Non-utility revenue consistsis generated primarily from the sale of sales of gallons of LPG.LPG delivered to customers. The operating costs for the non-utility business include the cost of purchased LPG and the cost of distributing the LPG to customers. Non-utility sales comprised approximately 55% of The Gas Company’s total contribution margin in 2009.

The Gas Company’s two products, SNG and LPG, are relatively clean-burning fuels that produce lower levels of carbon emissions than other hydrocarbon fuels such as coal or oil. This is particularly important in Hawaii where heightened public awareness of environmental impact makes lower emission products attractive to customers.

SNG and LPG have a wide number of commercial and residential applications including water heating, drying, cooking, emergency power generation and tiki torches. LPG is also used as a fuel for specialty vehicles such as forklifts. Gas customers include residential customers and a wide variety of commercial, hospitality, military, public sector and wholesale customers.


TABLE OF CONTENTS

Energy-Related Business: The Gas Company – (continued)

Financial information for this business is as follows ($ in millions):

   
 As of, and for the
Year Ended, December 31,
   2009 2008 2007
Revenue $175.4  $213.0  $170.4 
EBITDA excluding non-cash items  37.6   27.9   25.6 
Total assets  344.9   330.2   313.1 
% of our consolidated revenue  24.7  21.8  22.6
  
2006
 
2005
       
Revenue     $160.9     $147.5
Operating income                                                               16.6  20.5
Total assets(1)  308.5  175.1
% of our consolidated revenue  16.9% N/A
——————
(1)
Total assets for 2005

Strategy

The Gas Company’s long-term strategy is as at June 30, the financial year endto increase and diversify its customer base. The business intends to increase penetration of the residential, the expanding government (primarily military) and the tourism-related markets. The business prioralso intends to our acquisition.

Strategy
We believe that TGC will continue to generate stable cash flowsinvest in and revenue due to its established customer base, its locally well-known and respected brand and its strong competitive position in Hawaii. Additionally, we believe that TGC can increase its customer base, and accordingly, its revenue and generated cash by (1) focusing on new opportunities arising from growth in Hawaii’s population, economy and tourism industry, and (2) increasingpromote the value of TGC’sThe Gas Company’s products and services and its attractiveness as ana cleaner alternative to other energy sources such as other LPG suppliers and Hawaii’s electric utilities.
Focus on growth opportunities arising from growth in Hawaii’s population, economy and tourism industry. We consider growthHawaii.

As a second component of Hawaii’s population and economy to present opportunities for increasing TGC’s base of residential and commercial customers of both SNG and LPG. TGCits strategy, The Gas Company intends to take advantagediversify its sources of growthfeedstock and LPG to ensure reliable supply and to mitigate any potential cost increases to its customers. The Gas Company is exploring other clean and renewable energy alternatives that may be distributed using its existing infrastructure.

The Gas Company also recognizes the important role it plays in Hawaii’s tourismthe local community and real estate industries by pursuing new customeras a component of its strategy will focus on maintaining good relationships with hotel, restaurantregulators, governments and condominium developers and other similar commercial customers, as well as the growing residential market.

Increase TGC’s attractiveness as an alternative to other LPG suppliers and Hawaii’s electric utilities. Overcommunities it serves.

Products

While the long-term, we expect to invest in selected capital expenditures, such as those for improvements to TGC’s distribution system and increases in TGC’s LPG storage capacity. We believe that these capital expenditures will increase the reliability of TGC’s distribution system and will enhance TGC’s attractiveness as an alternative to Hawaii’s regulated electric utilities and other non-regulated LPG suppliers. Additionally, we intend to market TGC as an environmentally friendly alternative to electricity generation and as an established, reliable and cost-effective distributor of LPG.

Products
Naturalcontiguous U.S. obtains natural gas is comprised of a mixture of hydrocarbons, mostly methane, that is generally derived from wells drilled into underground reservoirs of porous rock.rock, Hawaii relies solely on manufactured and imported alternatives because the state does not have anyalternatives. Hawaii has no natural gas resources.


20


reserves.

Synthetic Natural Gas.  TGC catalyticallyThe business converts a light hydrocarbon feedstock (currently naphtha) to SNG. The product is chemically similar in most respects to natural gas and has a similar heating value on a per cubic foot basis. TGCThe Gas Company has the only SNG manufacturing capability in Hawaii at its plant located on the island of Oahu.

TGC is the only distributor of SNG in Hawaii, and provides SNG to regulated customers through its transmission and distribution system on Oahu. SNG is delivered from a centralized plantby underground piping systems to customers via underground pipelines.
on Oahu.

Liquefied Petroleum Gas.  LPG is a generic name for a mixture of hydrocarbon gases, typically propane and butane. Owing to chemical properties whichLPG liquefies at a relatively low pressure under normal temperature conditions. As a result, in LPG becoming liquid at atmospheric temperature and elevated pressure, LPG maycan be stored or transported more easily than natural or synthetic natural gas. LPG is typically transported usingin cylinders or tanks. Domestic and commercial applications of LPG are similar to those of natural gas and synthetic natural gas.

Utility Regulation

TGC’s

The Gas Company’s utility operations arebusiness is regulated by the Hawaii Public Utilities Commission, or HPUC, while TGC’sthe business’ non-utility operations are not regulated.business is not. The HPUC exercises broad regulatory oversight and investigative authority over all public utility companies doing business in the state of Hawaii.

Rate Regulation.  The HPUC currently regulatesestablishes the rates that TGCThe Gas Company can charge its utility customers via cost of service regulation. The rate approval process is intended to ensure that a public utility has a reasonable opportunity to recover costs that are prudently incurred and earn a fair return on its investments, while protecting consumer interests.

Although the HPUC sets the base rate for the SNG and LPG sold by The Gas Company’s utility business, the business is permitted to pass through changes in its raw materials cost by means of a monthly fuel adjustment charge, or FAC. The adjustment protects the business’ earnings from volatility in feedstock commodity costs.

TGC’s

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Energy-Related Business: The Gas Company – (continued)

The business’ utility rates are established by the HPUC in periodic rate cases typically initiated by TGC when it has the need to do so, which historically has occurred approximately every five years. TGCThe Gas Company. The business initiates a rate case by submitting a request to the HPUC for an increase in the rates based, for example, upon materially higher costs related to providing the service. Following initiation of the rate increase request by The HPUCGas Company and submission by the Hawaii Division of Consumer Advocacy or DCA, may also initiate a rate case, although such proceedings have been relatively rare in Hawaii and will generally only occur if the HPUC or DCA receive numerous complaints about the rates being charged or if there is a concern that TGC’s regulated operations may be earning a greater than authorized rate of return on investment for an extended period of time.

During the rate approval process, TGC must demonstrate that, at its current rates and using a forward projected test year, its revenue will not provide a reasonable opportunity to recover costs and obtain a fair return on its investment. Following submission by the DCA and other interestedintervening parties of their positions on the rate request, and potentially an evidentiary hearing, the HPUC issues a decision establishing the revenue requirements and the resulting rates that TGCThe Gas Company will be allowed to charge. This decision relies on statutes, rules, regulations, prior precedent and well-recognized ratemaking principles.

Other Regulations.  The HPUC is statutorily requiredregulates all franchised or certificated public service companies operating in Hawaii; prescribes rates, tariffs, charges and fees; determines the allowable rate of earnings in establishing rates; issues guidelines concerning the general management of franchised or certificated utility businesses; and acts on requests for the acquisition, sale, disposition or other exchange of utility properties, including mergers and consolidations. When we acquired The Gas Company, we agreed to issue an interim decision on a rate case application within a certain time period, generally within 10 months following application, depending on the circumstances and subject to TGC’s compliance14 regulatory conditions with procedural requirements. In addition to formal rate cases, tariff changes and capital additions are also approved by the HPUC.

The most recent TGC rate case, resulting in a 9.9% increase, was approved by the HPUC that address a variety of matters including: a requirement that the ratio of consolidated debt to total capital for The Gas Company, LLC and HGC Holdings LLC, or HGC, does not exceed 65%; and a requirement to maintain $20.0 million in May 2002.readily-available cash resources at The next rate case using a 2009 test year could be initiatedGas Company, HGC or MIC.

Competition

Depending upon the end-use, the business competes with electricity, diesel, solar energy, geo-thermal, wind, other gas providers and alternative energy sources. Hawaii’s electricity is generated by TGC as early as the third quarter of 2008four electric utilities and new rates, if approved, could be implemented as early as the second quarter of 2009. As permitted by the HPUC, increases in TGC’s gas feedstock costs since the last rate case have been passed through to customers via a monthly fuel adjustment charge.

various non-utility generators.

Competition

RegulatedUtility Business.  TGC currentlyThe Gas Company holds the only government franchise for regulated gas services in Hawaii. This enables it to utilize public easements for its pipeline distribution systems. This franchise also provides some protection from competition within the same gas-energy sector since TGCthe business has developed and owns extensive below-ground distribution infrastructure. The costs associated with developing distribution infrastructure are significant. However, gas products can be stored in LPG tanks, and TGC’s regulated customers, in most instances, the business’ utility customers also have the ability to move to unregulateduse non-utility gas with TGCsupplied by The Gas Company or its competitors by using LPG tanks.
Since electricity has similar markets and uses, TGC’s regulated business also competes with electric utilities in Hawaii. Hawaii’s electricity is generated by electric utilities and various non-utility generators. Non-utility


21


generators, such as agricultural producers, can enter into power purchase agreements with electric utilities or others to sell excess power that is generated but not used by the non-utility business.

UnregulatedNon-Utility Business.  TGCThe Gas Company also sells LPG in an unregulated market inon the six primary islands of Hawaii. Of the largest 250 non-utility customers, over 90% have multi-year supply contacts with a weighted average life of almost three years expiring various years through 2013. There are two other wholesale companies and several small retail distributors that share the LPG market. The largest of these is AmeriGas. We believe TGCThe Gas Company believes it has a competitive advantage due tobecause of its established accountcustomer base, storage facilities, distribution network and reputation for reliable cost-effective service. Depending upon the end-use, the unregulated business also competes with electricity, diesel and solar energy providers. For example, both solar energy and gas are used for water heating in Hawaii. Historically, TGC’s sales have been stable and somewhat insulated from downturns in the economic environment and tourism activity. This business contributes approximately 40% of TGC’s revenue.

Fuel Supply, SNG Plant and Distribution System

TGC

Fuel Supply

The business obtains its LPG from foreign sources and raw feedstock for SNG production from twoeach of the Chevron and Tesoro oil refineries located on the island of Oahu andOahu. The Gas Company has LPG supply agreements with each refinery. The business purchases its LPG from foreign imports. TGC ownssources under foreign supply agreements and through spot-market purchases, if needed.

In January 2010, Chevron announced that it plans to reduce the dedicated pipelines, storagesize of its global oil refining business, although it has not made any decisions regarding its refinery in Hawaii. Chevron could decide to continue operating in Hawaii, cease operations entirely or convert a portion of its operations into a terminal for importation of energy products. Chevron’s Hawaii refinery supplies The Gas Company with over half of its total LPG purchases. The refinery also supplies the business’ competitors in the non-utility market.


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Energy-Related Business: The Gas Company – (continued)

Any decision by Chevron regarding its operations in Hawaii could affect the business’ cost of LPG and infrastructuremay adversely impact its non-utility contribution margin and profitability. In an effort to handle thismitigate the risk of supply disruption and/or a potential increase in costs, the business is evaluating a number of alternatives, including additional shipments of foreign sourced product.

The business also obtains its feedstock and the resulting volumes of gas. LPG is supplied to TGC’s non-Oahu customers by barge.

TGC’s total storage capacity, as of December 31, 2006, excluding product contained in transmission lines, barges and tanks that are on customer premises is approximately 2.1 million gallons.
Regulated Business
TGC manufacturesfuel for SNG by convertingproduction, naphtha, purchased from the Tesoro refinery on Oahu. The Gas Company has an agreement with Tesoro that expires April 30, 2010 and both parties have the desire to renegotiate and extend the contract. Under the rate structures in place in Hawaii, The Gas Company’s utility business has the ability to pass fluctuations in the cost of feedstock through to its customers.

SNG Plant and Distribution System (Utility Business)

The Gas Company manufactures SNG at its plant located west of the Honolulu business district. The SNG plant configuration is effectively two production units, for most major pieces of equipment, thereby providing redundancy and ensuring continuous and adequate supply. A propane air unit provides backup in the event of a SNG plant shutdown. The SNG plant operates continuously with only a 15% seasonal variation in production and operates well within its design capacity of 150,000 therms per day. We believe that as of December 31, 2006 the SNG plant has with an appropriate level of maintenance capital investment, an estimated remaining economic life of approximately 20 years and that theyears. The economic life of the plant is further extendablemay be extended with additional capital investment.

The SNG plant receives feedstock and fuel from the Tesoro refinery under a ten-year Petroleum Feedstock Agreement, or PFA, dated October 31, 1997. The PFA includes a ten-year automatic renewal provision, unless the contract is cancelled by either party 90 days prior to the end of the initial term. TGC expects that the PFA will be renewed in the normal course of business. The contract provides that TGC has a right of first refusal on up to 3.3 million therms per month. When adjusted for the thermal efficiency of the plant, it equates to up to approximately 35 million therms per year of SNG production. The PFA is more than adequate to meet the needs of the SNG plant.

A 22-mile transmission linepipeline links the SNG plant to a distribution system that ends at Pier 38 in south Oahu. The pipeline is predominately sixteen-inch transmission piping and is utilized only on Oahu to move SNG from the plant toFrom Pier 38 near the financial district in Honolulu. This line also provides short-term storage for 45-thousand therms. Thereafter, a pipeline distribution system consisting of approximately 900 miles of transmission, distribution and service pipelines takes the gas to customers. Additionally, LPG is trucked and shipped by barge to holding tanks on Oahu and shipped by barge to the neighboring islands to bewhere it is distributed via pipelines to utility customers that are not connected to the Oahu SNG pipeline system. Approximately 90% of TGC’sthe business’ pipeline system is on Oahu.

Unregulated Business

Distribution System (Non-Utility Business)

The non-utility business serves gas on all six primary islands to customers that are not connected to the TGCbusiness’ utility pipeline system. The LPG, acquired frommajority of The Gas Company’s non-utility customers are on the two Oahu refineries and from foreign suppliers,neighboring islands. LPG is distributed to the neighboring islandislands by direct deliveries from overseas suppliers and by barge delivery. The business also owns the infrastructure to distribute LPG to its customers, utilizing two LPG-dedicated barges exclusively time-chartered by a third-party,such as harbor pipelines, trucks, several holding facilities and storage base-yards on Kauai, Maui and Hawaii.

TGC is the only unregulated LPG provider in Hawaii that has three sources of LPG supply; two petroleum refineries on the island of Oahu and foreign sources.


22


The Jones Act
The barges transporting LPG between Oahu and its neighbor islands must comply with the requirements of the Jones Act (Section 27 of the Merchant Marine Act of 1920). TGC currently has the use of two Jones Act-qualified barges, having the capability of transporting 424,000 gallons and 500,000 gallons of LPG, respectively, under a time charter arrangement with a third-party.
Because there are no Jones Act-qualified ships transporting LPG in the Pacific, foreign tankers are permitted to carry LPG that originates outside Hawaii to one or more ports within the state.

Employees and Management

As of December 31, 2006, TGC2009, The Gas Company had 311306 employees, of which 209 were union employees.206 are unionized. The unionized employees are subject to a collective bargaining agreement became effective May 1, 2004 and endsthat expires on April 30, 2008. TGC and the Union have had2013. The business believes it has a good relationship with the union and there have been no major disruptions in operations due to labor matters for over thirty30 years. Management of TGCthe business is headquartered in Honolulu, Oahu with branch managersoffice management at operating locations.

Environmental Matters

Environmental Matters and Legal Proceedings

Environmental Permits.Permits:  The nature of a gas distribution system means that relatively fewGas manufacturing requires environmental operating permits are required.permits. The most significant are air and wastewater permits that are required for the SNG plant. These permits contain restrictions and requirements that are typical for an operation of this type. To date, TGC has beenThe Gas Company is in compliance in all material respects with all materialapplicable provisions of these permits and has implemented environmental policies and procedures in an effort to ensure continued compliance.
permits.

Environmental Compliance.Compliance:  We believeThe business believes that TGCit is in compliance in all material respects with applicable state and federal environmental laws and regulations. With regard to hazardous waste, all TGC facilities are generally classified as conditionally exempt small quantity generators, which means they generate between zero and one hundred kilograms of hazardous waste in a calendar month. Under normal operating conditions, theits facilities do not generate hazardous waste. Hazardous waste, ifwhen produced, should poseposes little or no ongoing risk to the facilities from a regulatory standpoint because SNG and LPG dissipate quickly whenif released.

Other Environmental Matters. Pier 38 and Parcels 8 and 9, which are owned by the State of Hawaii Department of Transportation – Harbors Division, or DOT, and which are currently used or have been used previously by TGC or its predecessors, have known environmental contamination and have undergone remediation work. Prior operations on these parcels included a parking lot, propane loading and unloading facilities, a propane air system and a propane tank storage and maintenance facility. In 2005, Parcel 8 and a portion of Parcel 9 were returned to DOT under an agreement that did not require remediation by TGC. We believe that any contamination on the portion of Parcel 9 that TGC continues to use resulted from sources other than TGC’s operations because the contamination is not consistent with TGC’s past uses of the property.

District Energy

Business Overview

Through December 22, 2009, District Energy Business

Overview
Our district energy business consistsconsisted of a 100% ownership of Thermal Chicago and a 75% interest in Northwind Aladdin. We also ownAladdin and all of the senior debt of Northwind Aladdin. The remaining 25% equity interest in Northwind Aladdin is owned by Nevada Electric Investment Company, or NEICO, an indirect subsidiary of Sierra Pacific Resources. Financial information forNV Energy, Inc. On December 23, 2009, we sold 49.99% of our membership interests in this business is as follows ($ in millions):to John Hancock Life Insurance Company and John Hancock Life Insurance Company (U.S.A.) (collectively “John Hancock”) for $29.5 million. The financial results discussed below reflect 100% of District Energy’s full year performance.

  
2006
 
2005
 
2004
 
Revenue      $43.6      $43.4      $35.0 
Operating income                                9.0  9.4  7.9 
Total assets  236.1  245.4  254.0 
% of our consolidated revenue  8.4% 14.2% 14.3%

Thermal Chicago

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Energy-Related Business: District Energy – (continued)

District Energy operates the largest district cooling system in the United States. The system currently serves approximatelyover 100 customers in downtown Chicago under long-term contracts in downtown Chicago and one customer outside the downtown area. Thermal Chicago has signed contracts with three additional customers that are expected to start



23


service between 2007 – 2009. Our district energy business providesDistrict Energy produces chilled water fromat five modern plants located in downtown Chicago and distributes it through a closed loop of underground piping for use in the air conditioning systems of large commercial, retail and residential buildings in the central business district. The first of the plants became operational in 1995, and the most recent came on line in June 2002. OurWith modifications made in 2009, the downtown system currently has systemthe capacity ofto produce approximately 80,00092,000 tons of chilled water, which we expectalthough it has approximately 102,000 tons of cooling under contract. The business is able to increase to 87,000 tonssell continuous service capacity in 2007. The downtown system’s deliverable capacity is approximately 3,900 tons more thanexcess of the total system capacity due tobecause not all customers use their full capacity at the reduced rate arrangements with interruptible customers who, when called upon, could meet their own cooling needs during periods of peak demand.
Thermal Chicagosame time.

District Energy also owns a site-specific heating and cooling plant that serves a single customer in Chicago outside of the downtown area. This plant has the capacity to produce 4,900 tons of cooling and 58.258 million British Thermal Units, or BTUs, of heating per hour.

Northwind Aladdin

District Energy’s Las Vegas operation owns and operates a stand-alone facility that provides cold and hot water (for chilling and heating, respectively) and emergency electricity generation to several customers in Las Vegas, Nevada. The Las Vegas operation represented approximately 25% of the cash flows of District Energy in 2009. Approximately 65% of cash flows generated by the Las Vegas operation in 2009 were from a long-term contract to service a resort and casino including a hotel, convention and conference facility and an adjacent shopping complex. In early 2009, the operation began providing service to a shopping mallnew customer building that was constructed on the same property. This new customer began receiving full service in February 2010. All three Las Vegas Nevada. Services are provided to both customers under long-term contracts that expire in 2020 with 90% of cash flows generated from the contract with the resort and casino.

The Northwind Aladdin plant has been in operation since 2000 and has the capacity to produce 9,270 tons of chilled water, 40 million BTUs of heating per hour and to generate approximately 5 megawatts of electricity in emergencies.
Our Acquisition
On the day following our initial public offering, we acquiredFebruary 2020.

Financial information for 100% of the membership intereststhis business is as follows ($ in Macquarie District Energy Holdings, LLC, the holding company of our district energy business, from the Macquarie Group, for $67.0 million (including transaction costs) and assumed $120.0 million of senior debt that was used partially to finance the acquisition of Thermal Chicago and our interest in Northwind Aladdin.millions):

   
 As of, and for the
Year Ended, December 31,
   2009 2008 2007
Revenue $48.6  $48.0  $49.5 
EBITDA excluding non-cash items  20.8   21.1   5.5 
Total assets  234.8   227.1   232.6 
% of our consolidated revenue  6.8  4.9  6.6
Prior to our initial public offering, the Macquarie Group acquired 100% of the shares in Thermal Chicago Corporation, the holding company for Thermal Chicago, from Exelon Thermal Holdings, Inc., a subsidiary of Exelon Corporation, or Exelon, for $135.0 million plus a working capital adjustment of $2.7 million, with no assumption of debt pursuant to a stock purchase agreement. Prior to our initial public offering, the Macquarie Group also acquired all of the shares of ETT Nevada, Inc., which owns a 75% equity interest in Northwind Aladdin, and separately all of the senior debt in Northwind Aladdin from a wholly owned subsidiary of Exelon. The acquisition price for the shares and senior debt was $26.1 million plus a working capital adjustment of $2.0 million. In addition to the purchase prices under the purchase agreements, the business incurred fees and other expenses of approximately $9.0 million in connection with the completion of the acquisition of Thermal Chicago and ETT Nevada, Inc. and required cash for debt service reserves of approximately $4.0 million.

Industry Overview

District energy is the provision ofsystems provide chilled water, steam and/or hot water to customers from a centralized plant through underground piping for cooling and heating purposes. A typical district energy customer is the owner/manager of a large office or residential building or facilities such as hospitals, universities or municipal buildings. District energy systems exist in most major North American and European cities and some have been in operation for over 100 years.

Strategy

District energyEnergy’s strategy is not, however, anto position the business in the market as the most efficient option for suburban areas whereand effective method of providing building cooling such that it attracts and connects new customers are widely dispersed.

Revenue from providing district energy services under contract are usually fixed capacity paymentsto the system and variable usage payments. Capacity payments are made regardless of the actual volume of hot or cold water used. Usage payments are based on the volume of hot or cold water used.
Strategy
can invest in further expansion. We believe that we can grow our district energy business internally via capital expenditures thatDistrict Energy will expand the capacitycontinue to generate consistent revenue and stable cash flows as a result of the Thermal Chicago systemlong-term contractual relationships with its customers and interconnectionthe management team’s proven ability to improve the operating performance of new customers to use this additional capacity under long term contracts.


24the business.



Internal Growth
We plan

TABLE OF CONTENTS

Energy-Related Business: District Energy – (continued)

Growth:  This business intends to grow revenue and profits by increasingmarketing its services to developers in the output capacity of Thermal Chicago’s plants in downtown Chicago market. Its value proposition is centered on high reliability, efficiency and adding new customersease of maintenance. The management team develops and maintains relationships with property developers, engineers, architects and city planners as a means of keeping District Energy and these attributes “top of mind” when they select among building cooling systems and services.

Business Management:  The business focuses on minimizing the cost of electricity consumed per unit of chilled water produced by operating its plants to the system.maximize efficient use of electricity. These cost savings are passed through to its customers.

System Expansion:  Since our acquisition in 2004, minor system modifications and expansion at the business’ plants have been made that increased total cooling capacity by approximately 3,00015,000 tons or 3%15%. We have also begun the expansion of one of our cooling plants and expect the project to be completed in 2007. We anticipate spending up to $8.1 million for system expansion over the next two years. This expansion, in conjunction with operational strategies and increases noted above,Projects currently under development will add approximately 16,000 tons of saleable capacity to the downtown cooling system. Approximately 6,700 tons of saleable capacity has been used in 2006 to accommodate four customers that converted from interruptible to continuous service.

The balance of saleable capacity, 9,300 tons, is in the process of being sold to new or existing customers. As of January 31, 2007, we have signed contracts with four customers representing approximately 70% of the remaining additional saleable capacity. One customer began service in late 2006 and the other three customers will begin service between 2007 and 2009. We have identified the likely purchasers of the remaining saleable capacity and expect to have contracts signed by the end of 2007.
Acquisitions
If attractive opportunities arise, we will consider growing our district energy business through acquisitions of other district energy systems where these acquisitions can be made on favorable economic terms. We anticipate that these systems, if acquired, will continue to be operated under the direct control of local management.
Business – Thermal Chicago
Operations
Each chilling plant is staffed when in operation and has a central control room from which the plant can be operated and customer site parameters can be monitored and controlled. The plant operators can monitor, and in some cases control, the functions of other plants allowing them to cross-monitor critical functions at the other plants.
Since the commencement of operations, there have been no unplanned interruptions of service to any customer. Occasionally, we have experienced plant or equipment outages due to electricity loss or equipment failure; however, in these cases we had sufficient idle capacity to maintain customer loads. When maintenance work performed onfurther expand the system has required customer interruption, we have been able to coordinate our operationscapability and accommodate an expected increase in demand for periods of time to meet customer needs. The effect of major electric outages is generally mitigated since the plants affected by the outages cannot producedistrict cooling and affected customers are unable to use the cooling service.
in Chicago.

Operations

Corrective maintenance is typically performed by qualified contract personnel and off-season maintenance is performed by a combination of plant staff and contract personnel.

Electricity Costs
The largest and most variable direct expense of the operation is electricity, comprised of three major components: generation, transmission and distribution. Illinois’ electricity generation market deregulated as scheduled in January 2007. The two other components, transmission and distribution, will remain regulated by the Illinois Commerce Commission (ICC) and the Federal Energy Regulatory Committee (FERC), respectively. Our district energy business has entered into a contract with a retail energy supplier to provide for the supply of the majority of our 2007 electricity generation and transmission at a fixed price. We estimate our 2007 electricity costs will increase by 15-20% over 2006 based on our energy contracts as well as the ICC’s Final Order on ComEd’s distribution rate case. The Final Orderpreventive maintenance is subject to judicial review as well as rehearing by the ICC and ComEd will likely file future rate cases, both of which may cause the distribution component of our electricity costs to increase. We will need to enter into supply contracts for 2008 and subsequent years which may result in further increases in our electricity costs. In addition, from time to time, the ICC and FERC can change the rates for distribution and transmission costs, respectively. We believe that the terms of our customer contracts permit us to fully pass through our electricity cost increases or decreases.


25


Additionally, operating personnel historically manage this cost taking into account system hydraulic requirements and the costs and efficiencies of each plant. The efficient use of electricity at each plant will vary based on its design, operation and its electricity rate plan.
conducted off-season.

Customers

We

District Energy currently serveserves approximately 100 customers in downtown Chicago and one outside the downtown area, and have signed contracts with three additional customers expected to begin service between 2007 – 2009. These constitute a diversearea. Its customer base consistingis diverse and consists of retail stores, office buildings, residential buildings, theaters and government facilities. Office and commercial buildings constitute approximately 70% of the customers.its customer base. No one customer accounts for more than eight percent10% of total contracted capacity and only three customers account for more than five percent of total contracted capacity each. capacity.

The top 20% of customers account for approximately 60% of contracted capacity.

Our downtown district energy system sells approximately 96,000 tons of cooling capacity with an additional 5,000 tons of cooling capacity expected to commence service in the first half of 2007. Service to interruptible customers may be discontinued at any time and in return interruptible customers pay lower prices for the service. We are able to sell continual service capacity in excess of the capacity of our system because customers do not all use their full capacity at the same time. Because of this diversity in customer usage patterns, we have not had to discontinue service to interruptible customers since the initial phases of system construction. Approximately 6,700 tons of saleable capacity was used in 2006 to accommodate four customers that converted from interruptible to continuous service.
Webusiness typically enterenters into contracts with the owners of the buildings to which the chillingchilled water service is provided. The terms of customer contracts vary. Approximately half of our contracts expire in the period from 2016 to 2020. The weighted average life of customer contracts as of December 31, 20062009 is approximately 13 years.
The majority require a termination payment if a customer wishes to terminate a contract early or if the business terminates the contract for customer default. The termination payment allows the business to recover the remaining capital that it invested to provide service to the customer.

Customers pay two charges to receive chilled water services: a fixed charge, or capacity charge, and a variable charge, or consumption charge. The capacity charge is a fixed monthly chargeamount based on the maximum amountnumber of tons of chilled water that we havethe business has contracted to make available to the customer at any point in time. The consumption charge is a variable chargeamount based on the volume of chilled water actually used during a billing period.

Adjustments

Contractual adjustments to the capacity charge and consumption charge occur periodically, typically annually, either based on changes in certain economic indices or, under some contracts, at a flat rate.annually. Capacity charges generally increase at a fixed rate or are indexed to the Consumer Price Index, or CPI, as a broad measure of inflation. Consumption charges arepayments generally indexed to changesincrease in line with a number of economic indices. These economic indices measure changes inthat reflect the costscost of electricity, labor and chemicals inother input costs relevant to the region in which we operate. Whileoperations of the indices used vary, consumption charges in 90%business. The largest and most variable direct expense of our contracts (by capacity) are indexedthe operation is electricity. District Energy passes through to indices weighted at least 50% to CPI, costs of labor and chemicals with the balance reflectingits customers changes in electricity costs. Upon evaluationThe business focuses on minimizing the cost of our contractual price adjustment options, we have implemented a methodologyelectricity consumed per unit of chilled water produced by operating its plants to fully recover the increase in electricity expenses caused by the deregulationmaximize efficient use of the Illinois power market. We believe that the terms of our customer contracts permit us to fully pass through the increase or decreases in our electricity costs.

electricity.

Seasonality

Consumption revenue is higher in the summer months when the demand for chilled water is at its highest and approximatelyhighest. Approximately 80% of consumption revenue is received in the second and third quarters ofcombined each year.

Competition
Thermal Chicago

TABLE OF CONTENTS

Energy-Related Business: District Energy – (continued)

Competition

District Energy is not subject to substantial competitive pressures. Pursuant to customer contracts, customersCustomers are generally not allowed to cool their premises by means other than the chilled water service provided by our district energy business.

the business provides. In addition, the majorprimary alternative cooling system available to building owners is the installation of a stand-alone water chilling system (self-cooling). While competition from self-cooling exists, we expectthe business expects that the vast majority of ourits current contracts will be renewed at maturity. Installation of a water chilling system requirescan require significant building reconfiguration andas well as space for reconfiguration, and capital expenditure, whereas our district energy businessDistrict Energy has the advantage of economies of scale in terms of plant efficiency, staff and power sourcing.


26


We believeelectricity procurement.

District Energy believes competition from an alternative district energy system in the Chicago downtown market is unlikely. There are significant barriers to entry including the considerable capital investment required, the need to obtain City of Chicago consent and the difficulty in obtaining sufficient customers given the number of buildings in downtown Chicago already committed under long-term contracts to the use of the system owned by us.

its system.

City of Chicago Use Agreement

We are

The business is not subject to specific government regulation, but ourits downtown Chicago operations are operated subject tosystem operates under the terms of a Use Agreement with the City of Chicago. The Use Agreement establishes the rights and obligations of our district energy businessDistrict Energy and the City of Chicago for the utilization of certain public wayswith respect to its use of the City of Chicago for the operation of our district cooling system.public ways. Under the Use Agreement, we havethe business has a non-exclusive right to construct, install, repair, operate and maintain the plants, facilities and facilitiespiping essential in providing district cooling chilled water and related air conditioning service to customers.

The During 2008, the Chicago City Council extended the term of the Use Agreement expires onfor an additional 20 years until December 31, 2020.2040. Any proposed renewal, extension or modification of the Use Agreement will be subject to the approval by the City Council of Chicago.

Management

The day-to-day operations of our district energy businessDistrict Energy are managed by an operating managementa team located in Chicago, Illinois. OurThe management team has a broad range of experience that includes engineering, construction and project management, business development, operations and maintenance, project consulting, energy performance contracting, and retail electricity sales. The team also has significant financial and accounting experience.

Business – Northwind Aladdin
Approximately 90%

The business is governed by a Board of Northwind Aladdin’s cash flows are generated fromdirectors on which we have three representatives and our co-shareholder has two. Although we control decisions that require a long-term contract with the resort and casino, with the balance from a contract with a shopping mall. The resort and casino in Las Vegas includes a hotel with over 2,500 rooms, a 100,000 square foot casino and a 75,000 square foot convention and conference facility. Additional buildings are being constructed on the property and the Northwind Aladdin plant has the capability to serve the buildings.

The existing customer contracts with the resort and casino and the shopping mall both expire in February 2020. At expirysimple majority, certain issues require super majority approval including sale or other disposal of all or substantially all of the contracts, the plant will either be abandoned by usCompany’s property or assets, entry into a new line of business, modifications of constituent or governing document and ownership will pass to the resort and casino for no compensation, or the plant will be removed by us at a cost to the resort and casino.
The Northwind Aladdin plant has been in operation since 2000 and has the capacity to produce approximately 9,300 tonspursuit of chilled water, 40 million BTUsan initial public offering of heating per hour and to generate approximately 5 megawattsany membership interests.

Employees

As of electricity. The plant is staffed 24 hours a day. The plant supplies district energy services to its customers via an underground pipe system.

Employees
Our district energy business hasDecember 31, 2009, District Energy had 42 full-time employees and one part-time employee. There are 35In Chicago, 28 plant staff members are employed under the terms of contracts with the International Union of Operating Engineers. On December 19, 2005, contracts covering unionized employees in Chicago were renewed for another three years effectivea three-year collective bargaining agreement expiring on January 15, 2006.14, 2012. In Las Vegas, the contract term is currently four years and expires7 plant staff members are employed under a four-year labor agreement expiring on March 31, 2009.
Airport Parking2013. We believe employee relations at District Energy are good.

Aviation-Related Business

Atlantic Aviation

Business Overview

Our airport

The business, Atlantic Aviation FBO Inc., operates 72 fixed-based operations, or FBOs, at 68 airports and one heliport throughout the United States. Atlantic Aviation’s FBOs primarily provide fueling and fuel-related services, aircraft parking business is the largest providerand hangar services to owners/operators of off-airport parking servicesjet aircraft in the United States, measured by number of facilities, with 30 facilities comprising over 40,000 parking spaces and over 360 acres at 20 major airports across the United States, including sixgeneral aviation sector of the busiest commercial U.S. airports for 2006. Our airport parking business provides customers with 24-hour secure parking close to airport terminals, as well asair transportation via shuttle bus to and from their vehicles and the terminal. Operations are carried out on either owned or leased land



27industry.



at locations near airports. Operations on owned land or land on which our airport parking business has leases longer in term than 20 years (including extension options) account for a majority of operating income.

TABLE OF CONTENTS

Aviation-Related Business: Atlantic Aviation – (continued)

Financial information for this business is as follows ($ in millions):

   
 As of and for the
Year Ended, December 31,
   2009 2008 2007
Revenue $486.1  $716.3  $534.3 
EBITDA excluding non-cash items  106.5   137.1   119.9 
Total assets  1,473.2   1,660.8   1,763.7 
% of our consolidated revenue  68.5  73.3  70.8
  
2006
 
2005
 
2004
 
           
Revenue     $76.1     $59.9     $51.4 
Operating income (loss)(1)                                                 (10.1) 6.5  7.1 
Total assets  283.5  288.8  205.2 
% of our consolidated revenue  14.6% 19.6% 33.6%
——————
(1)
Includes a non-cash impairment charge

Industry Overview

FBOs predominantly service the general aviation segment of $23.5 million for existing trademarksthe air transportation industry. General aviation includes corporate and domain names dueleisure flying and does not include commercial air carriers or military operations. Local airport authorities, the owners of the airport property, grant FBO operators the right to provide fueling and other services pursuant to a re-branding initiative.long-term ground lease. Fuel sales provide the majority of an FBO’s revenue and gross profit.

FBOs generally operate in environments with high barriers to entry. Airports often have limited physical space for additional FBOs. Airport authorities generally do not have an incentive to add additional FBOs unless there is a significant demand for additional capacity, as profit-making FBOs are more likely to reinvest in the airport and provide a broad range of services, thus attracting increased airport traffic. The increased traffic tends to generate additional revenue for the airport authority in the form of landing and fuel flowage fees. Government approvals and design and construction of a new FBO can also take significant time.

Demand for FBO services is driven by the level of general aviation aircraft activity and the number of take-offs and landings specifically. General aviation business jet take-offs and landings, declined by 17.3% in 2009 compared with 2008. According to flight data reported by the Federal Aviation Administration, or “FAA”, fourth quarter take-offs and landings were flat year-over-year and increased 1.9% over the third quarter of 2009. The number of aircraft operations is typically lower in the fourth quarter compared to the third quarter as a result of reduced business-related aircraft traffic in November and December.

Our Acquisition
On

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Aviation-Related Business: Atlantic Aviation – (continued)

Despite improved access to general aviation resulting from an expansion of fractional and charter offerings and the challenges facing commercial aviation including potential mainline carrier consolidation and security-related delays, all of which strengthened the general aviation industry, FBO gross profit has been negatively affected by the economic downturn which resulted in a reduction in the volume of fuel sold. See “Risk Factors” in Part I, Item 1A.

Strategy

Atlantic Aviation is pursuing a strategy that has four principal components. The first component is to delever the business. The second day following our initial public offering, we acquired 100%component encompasses an overarching commitment to provide superior service to its customers. The third is to aggressively manage the business so as to minimize, to the extent possible, its operating expenses. The fourth component addresses organic growth of the ordinary sharesbusiness and focuses on leveraging the size of the Atlantic Aviation network and its information technology capabilities to identify marketing leads and implement cross-selling initiatives. These components are discussed in Macquarie Americas Parking Corporation,greater detail in the Operations andMarketingsections below.

Operations

The business has high-quality facilities and focuses on attracting customers who desire a high level of personal service. Fuel and fuel-related services generated 75% of Atlantic Aviation’s revenue and accounted for 63% of Atlantic Aviation’s gross profit in 2009. Other services, including de-icing, aircraft parking, hangar rental and catering, provided the balance. Fuel is stored in fuel tank farms and each FBO operates refueling vehicles owned or MAPC,leased by the FBO. The FBO either owns or has access to the fuel storage tanks to support its fueling activities. At some of Atlantic Aviation’s locations, services are also provided to commercial carriers. These may include refueling from the Macquarie Global Infrastructure Fund for cash considerationcarrier’s own fuel supplies stored in the carrier’s fuel farm, de-icing and/or ground and ramp handling services.

Atlantic Aviation buys fuel at the wholesale price and sells fuel to customers at a contracted price, or at a price negotiated at the point of $33.8 million (including transaction costs). At that time MAPCpurchase. While fuel costs can be volatile, Atlantic Aviation generally passes fuel cost changes through to customers and attempts to maintain and, when possible, grow a dollar-based margin per gallon of fuel sold. Atlantic Aviation also fuels aircraft with fuel owned approximately 83%by other parties and charges customers a service fee.

Atlantic Aviation has limited exposure to commodity price risk as it generally carries a limited inventory of jet fuel on its books and passes fluctuations in the wholesale cost of fuel through to its customers.

Atlantic Aviation is particularly focused on managing costs effectively. In light of the outstanding ordinary membership unitsrecent slowdown in Parking Companygeneral aviation activity, initiatives have been implemented that have reduced operating costs by more than $27.0 million per year. Atlantic Aviation will continue to evaluate opportunities to reduce expenses through, for example, more efficient purchasing and capturing synergies resulting from recent acquisitions.

Locations

Atlantic Aviation’s FBO facilities operate pursuant to long-term leases from airport authorities or local government agencies. The business and its predecessors have a strong history of America Airports Holdings LLC, or PCAA Holdings. In turn, PCAA Holdings owned approximately 51.9%successfully renewing leases, and have held some leases for over 40 years.

The existing leases have a weighted average remaining length of 17.6 years including extension options. The leases at 12 of Atlantic Aviation’s 72 FBOs will expire within the next five years and one currently operates on a month-to-month lease. No individual FBO generates more than 10% of the outstanding membership unitsgross profit of the business.

The airport authorities have termination rights in PCAA Parent LLC,each of Atlantic Aviation’s leases. Standard terms allow for termination if Atlantic Aviation defaults on the terms and conditions of the lease, abandons the property or PCAA Parent. PCAA Parent isbecomes insolvent or bankrupt. Less than ten leases may be terminated with notice by the 100% ownerairport authority for convenience or other similar reasons. In each of these cases, there are compensation agreements or obligations of the authority to make best efforts to relocate the FBO. Most of the leases allow for termination if liens are filed against the property.


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Aviation-Related Business: Atlantic Aviation – (continued)

Marketing

Atlantic Aviation has a number of subsidiariesmarketing programs, each utilizing an internally-developed point-of-sale system that collectively owntracks all aircraft flight movements. One program supports flight tracking and operate Macquarie Parking.

On the same day, we also acquired allprovides customer relationship management data that facilitates upselling of the minority interests in PCAA Holdings for $6.7 millionfuel and 34.3%optimization of the outstanding membership units in PCAA Parent for $23.3 million (in each case, including transaction costs). Asrevenue per customer.

Another program is a result of these transactions, we acquired in aggregate 100% of PCAA Holdings and 87.2% of PCAA Parent, and thereby acquired Macquarie Parking. The affairs of PCAA Parent are governed by its LLC agreement.

On October 3, 2005, our airport parking business acquired real property, and personal and intangible assets related to six off-airport parking facilities. These facilities are collectively referred tocustomer loyalty program known as “SunPark” and are located at airports in St. Louis, Philadelphia, Houston, Oklahoma City, Buffalo and Columbus. Our airport parking business also acquired two stand-alone facilities and consolidated our presence in certain markets. We initially contributed $17.8 million of the equity required to finance these transactions, part of which was subsequently refinanced so our final contribution was $14.4 million. As a result, our ownership interest in the airport parking business increased from 87.1% to 88.0%.
Industry Overview
Airport parking can be classified as either on-airport (generally owned by the airport and located on airport land) or off-airport (generally owned by private operators)“Atlantic Awards”. The off-airport parking industryAtlantic Awards program is relatively new, with the first privately owned parking facilities servicing airports generally only appearinga pilot loyalty program, which has gained wide acceptance among pilots and is encouraging “upselling” of fuel, where pilots purchase a larger portion of their overall fuel requirement at Atlantic Aviation’s locations. These awards are recorded as a reduction in the last few decades. Industry participants include numerous small, privately held companies as well as on-airport parking owned by airports.
Airports are generally owned by local governments althoughrevenue in many cases, airport parking operations are managed by large parking facility management companies pursuantAtlantic Aviation’s consolidated financial statements.

In 2009, in response to cost-plus contracts. Most airports have historically increased parking rates rapidly with increases incustomer demand, creating a favorable pricing environment for off-airport competitors.

Airport parking facilities operate as “self-park” or “valet” parking facilities. Valet parking facilities often utilize “deep-stack” parking methods that allow for a higher number of cars to be parked within the same area than at a self-parking facility of the same size by minimizing space between parked cars. In addition, valet parking provides the customer with superior service, often allowing the parking rates to be higher than at self-park facilities. However, the cost of providing valet parking is generally higher, due to higher labor costs, so self-parking can be more profitable per car, depending upon land availability at an affordable cost, labor costs and the premium that can be charged for valet service.


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The substantial increase in use of the internet to purchase air travel through companies such as Expedia, Orbitz and Travelocity, as well as through airlines’ own websites, provides a strong co-marketing opportunity for larger off-airport parking operators that provide broad nationwide coverage at the busiest airports. In addition, we believe the highly fragmented nature of the industry may provide consolidation opportunities that provide economies of scale such as national marketing programs, distribution networks and information systems.
Strategy
We believe that we can grow our airport parking business by focusing on achieving operating efficiencies and internal growth, expanding marketing efforts and complementary acquisitions.
Internal Growth
Our internal growth strategy includes ongoing development of pricing strategies designed to maximize revenue, increasing customer volumes through our service and marketing strategies, and capacity expansions where possible. Our pricing strategy involves our ongoing review of list prices and discounting policies on a market-by-market basis to optimize parking revenue and the provision of added or premium services (such as valet parking and oil change service) in select markets to increase revenue generated per car. Our service strategy involves tailoring service offerings to specific markets to increase our customer base and encourage repeat business. We intend to continue to expand capacity at capacity constrained locations through more efficient utilization of space, additional leases at adjacent or nearby properties to existing locations, valet parking and utilizing “deep-stack” parking and installation of vertical stackers.
Operating Efficiencies
Our business was enlarged with the acquisition of SunPark in October 2005. We intend to pursue economies of scale that can be realized due to the increased size, in areas such as combined marketing programs, vehicles and equipment purchases and employee benefits. For example, in 2006 we negotiated a national fuel program.
Marketing
We intend to continue to expand the scope of our marketing programs by pursuing promotional arrangements and other co-marketing opportunities with third parties, such as airlines and travel agencies. We also intend to drive additional revenue by developing and refining our internet reservation capability, opening new marketing and selling channels, and improving the product offering for corporate accounts and loyalty programs.
In 2007, we have commenced a re-branding of our business to FastTrack Airport Parking, including a re-design of our website platform and other marketing materials. We intend to focus our marketing and promotional efforts to building brand awareness nationally, which we believe will enable us to grow our customer base, increase the percentage of higher margin direct sales and encourage customer loyalty.
Acquisitions
We believe the highly fragmented nature of the industry may provide consolidation opportunities. Acquiring facilities at major airports where we do not currently have a facility may allow us to expand our nationwide presence, while opportunities in markets where we already have a presence may provide increased operating efficiencies and expanded capacity.
Business
Operations
We believe our size and nationwide coverage and sophisticated marketing programs provide us with a competitive advantage over other airport parking operators. We have centralized our marketing activities and the manner in which we sell our services to customers. Individual location operations can focus on service delivery as diverse reservation services and customer and distribution channel relations are managed centrally. Our size and the diversity of our operations enable us to mitigate the risk of a downturn or competitive impact in particular locations or markets. In addition, our size provides us withAtlantic Aviation introduced the ability to take advantage of incremental growth opportunities


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inpay for fuel and services through third party fuel brokers. While there are no binding, long term agreements with any of the markets we servebrokers, Atlantic Aviation will continue to offer this payment channel so long as we generally have more capital resourcesit remains popular with customers. This program allows Atlantic Aviation to apply toward those opportunities than single facility operators.
Our nationwide presence also allows us to provide “one stop shopping” to internet travel agencies, airlines and major corporations that seek to deal with as few suppliers as possible. Our marketing programs and relationships with national distribution channels are generally more extensive than those of our industry peers. We market and provide discounts to numerous affinity groups, tour companies, airlines and online travel agencies. We believe most air travelers have never tried off-airport parking facilities, and we use these relationships to attract these travelers as new customers.
Most of our customers fall into two categories: business travelers and leisure travelers. Business travelers are typically much less price sensitive and tend to patronize those locations that emphasize service, particularly prompt, consistent and quick shuttle service to and fromoffer additional flexibility, while allowing the airport. Shuttle service is generally provided within a few minutes of the customer’s arrival at the parking facility, or the airport, as the case may be. Leisure travelers often seek the least expensive parking, and in certain markets we offer substantial discounts and coupon programs to attract leisure travelers. In addition to reserved parking and shuttle services, we provide ancillary services at some parking facilities to attract customers to the facility and/or to earn additional revenue at the facility. Such services include car washes or auto repairs in certain markets, either at no cost to the customer or for a fee.
Locations
Our off-airport parking business has 30 facilities at 20 airports across the United States including six of the ten busiest commercial airports. We have multiple facilities at Phoenix, Newark, Philadelphia, Oakland and Hartford airports.
The majority of our facilities provide a self park service with twelve facilities exclusively valet. Our portfolio covers approximately 369 acres of land of which 209 acres are owned.
Marketing
Our marketing platform consists of direct mail campaigns, our website platform, cross-selling through and with third parties, notably Expedia, Orbitz and Airport Discount Parking. We also promote our business through promotional campaigns, such as our loyalty program, selective discount programs and companion airline ticket offers. We also maintain a corporate account program providing discounted or membership rates and added services to corporate customers. We also have cross-marketing arrangements with travel agents and travel providers such as JetBlue.
Our facilities currently operate under various trade names. In 2007, we commenced a re-branding of our business to FastTrack Airport Parking. The re-branding includes replacement of signage, uniformsmaintain first hand contact with its customers and reduce credit card fees.

Competition

Competition in the graphics on our shuttle buses. The brand will be incorporated into a new website and rolled out through our other marketing channels.

Competition
CompetitionFBO business exists on a local basis at eachmost of the airports at which we operate. Generally, onAtlantic Aviation operates. The FBO at the East 34th Street Heliport in New York and off airport parking facilities32 of the other FBOs in the network are the only FBOs at their respective airports. The remaining 39 FBOs have one or more competitors at the airport. The FBOs compete on the basis of location (relativeof the facility relative to runways and street access, service, value-added features, reliability and price. To a lesser extent, each FBO also faces competitive pressure from the airportfact that aircraft may take on sufficient fuel at one location and major access roads), quality of facilities (including whether the facilities are covered), type of service provided (self-park or valet), security, service (especially relatingnot need to shuttle bus transportation and frequency and convenience of drop-off), price and marketing. Werefuel at a specific destination. FBO operators also face directindirect competition from the on-airport parking facilities operated by each airport, many of whichlocated at other nearby airports.

Atlantic Aviation believes there are located closer to passenger terminalsfewer than our locations. Airports generally have significantly more parking spaces than we do and provide different parking alternatives, including self-park short-term and long-term, off-airport lots and valet parking options.

We also face competition from existing off-airport10 competitors at each airport. While each airport is different, there generally are significant barriers to entry, including limited availability of suitable land of adequate size near the airport and major access roads, and zoning restrictions. While competition is local in each market, we face strong competition from several large off-airport competitors, including companies such as The Parking Spot, ParkNFly, Airport Fast Park and PreFlight Airport Parking (owned by General Electric) that havewith operations at five or more U.S. airports. In each market, we also face competition from smaller, locally owned independent parking operators,


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These include Signature Flight Support, Encore (formerly known as well as from hotels or rental car companiesLandmark Aviation) and Million Air Interlink. Other than Signature, these competitors are privately owned. Some of Atlantic Aviation’s competitors are pursuing more aggressive pricing strategies that have their own parking facilities. Some present and potential competitors have or may obtain greater financial and marketing resources than we do, which may negatively impact our abilitycontributed to competeincreased margin pressure at each airport or to compete for acquisitions.
Indirectly, we face competition from other modes of transportation tosome locations, although Atlantic Aviation’s aggregate market share at the airports aton which we operate, including public transportation, airport rail links, taxis, limousines and drop-offsit operates increased in 2009.

Regulation

The aviation industry is overseen by friends and family. We face competition from other large off-airport parking providers in gaining access to marketing and distribution channels, including internet travel agencies, airlines and direct mail.

Regulation
Our airport parkinga number of regulatory bodies, but primarily the FAA. The business is subject toalso regulated by the local airport authorities through lease contracts with those authorities. The business must comply with federal, state and local regulation relatingenvironmental statutes and regulations associated in part with the operation of underground fuel storage tanks. These requirements include, among other things, tank and pipe testing for tightness, soil sampling for evidence of leaking and remediation of detected leaks and spills. Atlantic Aviation’s FBO operations are subject to regular inspection by federal and local environmental protection. We ownagencies and local fire and airline quality control departments. The business does not expect that compliance and related remediation work will have a parcelmaterial negative impact on earnings or the competitive position of real estate that includes land that the Environmental Protection Agency,Atlantic Aviation. The business has not received notice requiring it to cease operations at any location or EPA, has determined to be contaminated. A third-party operating in the vicinity has been identifiedof any abatement proceeding by any government agency as a potentially responsible party by the EPA. We do not believe our parking business contributedresult of failure to this contamination and we have not been named as a potentially responsible party. Nevertheless, we have purchased ancomply with applicable environmental insurance policy for the property as an added precaution against any future claims. The policy expires in July 2007 and is renewable.
We transport customers by shuttle bus between the airport terminals and its parking facilities, subject to the rules and policies of the local airport. The airports are able to regulate or control the flow of shuttle buses. Some airport authorities require permits and/or levy fees on off-airport parking operators for every shuttle trip to the terminals. In most cases we seek to pass increases in these fees on to our customers through higher parking rates. Significant increases in these fees could result in a loss of customers.
The FAA and Transportation Safety Administration, or the TSA, generally have the authority to restrict access to airports as well as to impose parking and other restrictions near the airport sites.
In addition, municipal and state authorities sometimes directly regulate parking facilities. We also may be affected periodically by government condemnation of our properties, in which case we will generally be compensated. We are also affected periodically by changes in traffic patterns and roadway systems near our properties and by laws and regulations (such as zoning ordinances) that are common to any business that deals with real estate.regulations.

Management

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Aviation-Related Business: Atlantic Aviation – (continued)

Management

The day-to-day operations of our airport parking businessAtlantic Aviation are managed by a team primarily located at head offices in Downey, California. Eachindividual site is operated by local managers who are responsible for all aspects of the operations at their site. Responsibilities include ensuring that customer requirements are met by the staff employed at the site and that revenue from the sites is collected, and expenses incurred, in accordance with internal guidelines.

Local managers are, within the specified guidelines, empowered to make decisions as to fuel pricing and other services, thereby improving responsiveness and customer service. Local managers within a geographic region are supervised by one of five regional managers covering the United States.

Atlantic Aviation’s operations are overseen by senior personnel with an average of approximately 20 years experience each in the aviation industry. The business management team has established close and effective working relationships with local authorities, customers, service providers and subcontractors. The team is responsible for overseeing the FBO operations, setting strategic direction and ensuring compliance with all contractual and regulatory obligations.

Atlantic Aviation’s head office is in Plano, Texas. The head office provides the business with overall management and performs centralized functions including accounting, information technology, risk management, human resources, payroll and insurance arrangements. We believe Atlantic Aviation’s head office facilities are adequate to meet its present and foreseeable operational needs.

Employees

As of December 31, 2006, our parking2009, the business employed approximately 1,034 individuals. Approximately 21.5%1,751 people across all of its employees aresites. Approximately 8.5% of the employee population is covered by collective bargaining agreements. We believe that employee relations at this businessAtlantic Aviation are good.

Our Employees

 — Consolidated Group

As of December 31, 2006,2009, we had a total of 2,728 employees inemployed approximately 2,100 people across our three ongoing, consolidated businesses (excluding IMTT) of which 27.2% areapproximately 18% were subject to collective bargaining agreements. The company and the trust doCompany itself does not have any employees.



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AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for information on the operations of the public reference room. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including Macquarie Infrastructure Company)Company LLC) file electronically with the SEC. The SEC’s website iswww.sec.gov.

Our website iswww.macquarie.com/mic. You can access our Investor Center through this website. We make available free of charge, on or through our Investor Center, our proxy statements, annual reports to shareholders, annual reportreports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reportsthese filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as amended, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available through our Investor Center statements of beneficial ownership of the trust stockLLC interests filed by our Manager, our directors and officers, any holders of 10% or greater shareholdersmore of our LLC interests outstanding and others under Section 16 of the Exchange Act.

You can also access our Governance webpage through our Investor Center. We post the following on our Governance webpage:

·
Trust Agreement of Macquarie Infrastructure Company Trust
·
Third Amended and Restated Operating Agreement of Macquarie Infrastructure Company LLC
·
Amended and Restated Management Services Agreement, as further amended
·
Corporate Governance Guidelines
·
Code of Ethics and Conduct
·
Charters for our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee
·
Policy for Shareholder Nomination of Candidates to Become Directors of Macquarie Infrastructure Company
·
Information for Shareholder Communication with our Board of Directors, our Audit Committee and our Lead Independent Director

Our Code of Ethics and Conduct applies to all of our directors, officers and employees as well as all directors, officers and employees of our Manager involved in the management of the companyCompany and its businesses. We will post any amendments to the Code of Ethics and Business Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange or NYSE,(“NYSE”), on our website. The information on our website is not incorporated by reference into this report.

You can request a copy of these documents at no cost, excluding exhibits, by contacting Investor Relations at 125 West 55th55th Street, New York, NY 10019 (212-231-1000).

Item

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ITEM 1A. Risk Factors

RISK FACTORS

An investment in shares of trust stockour LLC interests involves a number of risks. Any of these risks could result in a significant or material adverse effect on our results of operations or financial condition and a corresponding decline in the market price of the shares.

LLC interests.

Risks Related to Our Business

Our holding company structure Operations

The current economic recession and adverse equity and credit market conditions may limithave a material adverse effect on our results of operations, our liquidity or our ability to make regular distributionsobtain credit on acceptable terms.

The equity and credit markets have been experiencing volatility and disruption. In some cases, the markets have exerted downward pressure on the availability of liquidity and credit capacity. Should credit and financial market conditions experience further disruption, our ability to raise equity or obtain capital, to repay or refinance credit facilities at maturity, pay significant capital expenditures or fund growth, is likely to be costly and/or impaired. Our access to debt financing in particular will depend on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to our shareholders because we will rely on distributions both fromindustry, our subsidiariescredit history and credit capacity, as well as the companies in which we hold investments.

The company is a holding company with no operations. Therefore, it is dependent upon the abilityhistorical performance of our businesses and investments to generate earnings and cash flows and distribute them to the company in the form of


32


dividends and upstream debt payments to enable the company to meet its expenses and to make distributions to shareholders. The ability of our operating subsidiaries and the businesses in which we will hold investments to make distributions to the company is subject to limitations under the termslender perceptions of their debt agreements and our financial prospects. In the applicable laws of their respective jurisdictions. If, as a consequence of these various limitations and restrictions,event we are unable to generate sufficient distributions fromobtain debt financing, particularly as significant credit facilities mature, our businesses and investments, the companyinternal sources of liquidity may not be ablesufficient.

The current economic recession also increases our counterparty risk, particularly in those businesses whose revenues are determined under multi-year contracts, such as IMTT and District Energy. In this environment, we would expect to declare see increases in counterparty defaults and/or bankruptcies, which could result in an increase in bad debt expense and may cause our operating results to decline.

The volatility in the financial markets makes projections regarding future obligations under pension plans difficult. Two of our businesses, The Gas Company and IMTT, have to delaydefined benefit retirement plans. Future funding obligations under those plans depend in large part on the future performance of plan assets and the mix of investment assets. Our defined benefit plans hold a significant amount of equity securities as well as fixed income securities. If the market values of these securities decline further or cancel payment of distributions on its shares.

if interest rates decline, our pension expense and cash funding requirements would increase and, as a result, could materially adversely affect our results and liquidity.

Our businesses have substantial indebtedness, which could inhibit their operating flexibility.

As of December 31, 2006,2009, on a consolidated basis, wecontinuing operations had total long-term debt outstanding of $963.7 million, all of which is at the operating business level,$1.2 billion, plus a significant amount of additional availability under existing credit facilities, primarily $300.0facilities. In addition, IMTT had total long-term debt outstanding of $632.2 million under the MIC Inc. acquisition facility. IMTT also has a significant level of debt.at December 31, 2009. The terms of these debt arrangements generally require compliance with significant operating and financial covenants. The ability of each of our businesses or investments to meet their respective debt service obligations and to refinance or repay their outstanding indebtedness will depend primarily upon cash produced by that business.

This indebtedness could have important consequences, including:

·
limiting the payment of dividends and distributions to us;
·

increasing the risk that our subsidiaries might not generate sufficient cash to service their indebtedness;
·
limiting our ability to use operating cash flow in other areas of our businesses or to pay dividends and make distributions to us because our subsidiaries must dedicate a substantial portion of their operating cash flow to service their debt;
·
limiting our andholding company’s, our subsidiaries’ and IMTT’s ability to borrow additional amounts for working capital, capital expenditures, debt servicesservice requirements, execution of our internal growth strategy, acquisitions or other purposes; and
·
limiting our ability to capitalize on business opportunities and to react to competitive pressures or adverse changes in government regulation.

If weour businesses are unable to comply with the terms of any of ourtheir various debt agreements, wethey may be required to refinance a portion or all of the related debt or obtain additional financing. WeAs discussed further


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herein, our businesses may not be unableable to refinance or obtain additional financing because of ourtheir high levels of debt and debt incurrence restrictions under ourtheir debt agreements. Weagreements or because of adverse conditions in credit markets generally. Our businesses also may be forced to default on any of our various debt obligations if cash flow from the relevant operating business is insufficient and refinancing or additional financing is unavailable, and, as a result, the relevant debt holdersproviders may accelerate the maturity of their obligations.

Our ability to successfully implement our growth strategy and to sustain and grow our distributions depends on our ability to successfully implement our acquisition strategy and manage the growth If any of our business.
A major componentbusinesses or investments are unable to repay their debts when due, they would become insolvent.

Our total assets include a substantial amount of goodwill and intangible assets. The write-off of a significant portion of intangible assets would negatively affect our reported earnings.

Our total assets reflect a substantial amount of goodwill and other intangible assets. At December 31, 2009, goodwill and other intangible assets, net, represented approximately 56.3% of total assets from continuing operations. Goodwill and other intangible assets were primarily recognized as a result of the acquisitions of our strategy is to acquire additional infrastructure businesses both withinand investments. Other intangible assets consist primarily of airport operating rights, trade names and customer relationships. On at least an annual basis, we assess whether there has been an impairment in the sectors in which we currently operatevalue of goodwill and in sectors where we currently have no presence. Acquisitions involve a numberassess for impairment of special risks, including failure to successfully integrate acquired businesses in a timely manner, failureother intangible assets with indefinite lives when there are triggering events or circumstances. If the carrying value of the acquired businesstested asset exceeds its estimated fair value, impairment is deemed to implement strategic initiatives we set for it and/or achieve expected results, failurehave occurred. In this event, the amount is written down to identify material risks or liabilities associated with the acquired business prior to its acquisition, diversion of management’s attention and internal resources away from the management of existing businesses and operations, and the failure to retain key personnel of the acquired business. We expect to face competition for acquisition opportunities, and some of our competitors may have greater financial resources or access to financing on more favorable terms than we will. This competition may limit our acquisition opportunities, may lead to higher acquisition prices or both. While we expect that our relationship with the Macquarie Group will help us in making acquisitions, we cannot assure you that the benefits we anticipate will be realized. The successful implementation of our acquisition strategy may result in the rapid growth of our business which may place significant demands on management, administrative, operational and financial resources. Furthermore, other than our Chief Executive Officer and Chief Financial Officer, the personnel of IBF performing services for us under the management services agreement are not wholly dedicated to us, which mayfair value. Under current accounting rules, this would result in a further diversion of management time and resources. Our abilitycharge to manage our growth will depend on our maintaining and allocating an appropriate level of internal resources, information systems and controls throughout our business. Our inability to successfully implement our growth strategy or successfully manage growth could have a material adverse effect on our business, cash flow and ability to pay distributions on our shares.



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Since our initial public offering, we have devoted significant resources to integrating our initial and newly acquired businesses, thereby diverting attention from strategic operating initiatives.
We completed our initial public offering and the acquisition of our initial businesses and investments in December 2004 and since that time have completed numerous additional acquisitions. Prior to our acquisition, most of our businesses were privately owned and not subject to financial and disclosure requirements and controls applicable to U.S. public companies.reported earnings. We have expendedrecognized significant timeimpairments in the past, and resources to develop and implement effective systems and procedures, including accounting and financial reporting systems, in order to manage our operations onany future determination requiring the write-off of a combined basis as a consolidated U.S. public company. As a result, these businesses have been limited, and may continue to be limited, in their ability to pursue strategic operating initiatives and achieve our internal growth expectations.
We may not be able to successfully fund future acquisitions of new infrastructure businesses due to the unavailability of debt or equity financing on acceptable terms, which could impede the implementation of our acquisition strategy and negatively impact our business.
In order to make acquisitions, we will generally require funding from external sources. Since the timing and size of acquisitions cannot be readily predicted, we may need to be able to obtain funding on short notice to benefit fully from attractive opportunities. Sufficient funding for an acquisition may not be available on short notice or may not be available on terms acceptable to us. Although we have a revolving credit facility at the MIC Inc. level primarily to fund acquisitions and capital expenditures, we may require more funding than is available under this facility. Furthermore, the level of our subsidiary indebtedness may limit our ability to expand this facility if needed or incur additional borrowings at the holding company level. This facility matures in 2008 and we may be unable to refinance any borrowing that is outstanding under this facility at that time or enter into a replacement facility, which could impede our ability to pursue our acquisition strategy.
In addition to debt financing, we will likely fund or refinance asignificant portion of the consideration for future acquisitions through the issuance of additional shares. goodwill or other intangible assets would negatively affect our reported earnings and total capitalization, and could be material.

If our shares do not maintain a sufficient market value, issuance of new shares may result in dilution of our then-existing shareholders. In addition, issuances of new shares, either privatelyborrowing costs increase or publicly, may occur at a discount to our stock price at the time. Our equity financing activities may cause the market price of our stock to decline. Alternatively, we may not be able to complete the issuance of the required amount of shares on short notice or at all due to a lack of investor demand for the shares at prices that we find acceptable. As a result, we may not be able to pursue our acquisition strategy successfully.

If interest rates or margins increase,if debt terms become more restrictive, the cost of refinancing debt and servicing our acquisition facilitydebt will increase, reducing our profitability and ability to pay dividends.
We have substantialfreely deploy free cash flow.

The majority of indebtedness with maturities ranging from 3 yearsat our businesses mature within three to 19five years. Refinancing this debt may result in substantially higher interest rates or margins or substantially more restrictive covenants. Either event may limit operational flexibility or reduce upstream dividends andand/or distributions from our operating businesses to us.us, which would have an adverse impact on our ability to freely deploy free cash flow. We also cannot assure youprovide assurance that we or the other owners of any of our businesses or investments will be able to make capital contributions to repay some or all of the debt if required.

The debt facilities at our businesses contain terms that become more restrictive over time, with stricter covenants and increased amortization schedules. Those terms will limit our ability to freely deploy free cash flow.

Our holding company structure may limit our ability to make regular distributions in the future to our shareholders because we will rely on the cash flows and distributions from our businesses. If anythe lack of distributions from our businesses prevents us from paying our management fees to our Manager, our Manager may resign, which would trigger a change-in-control default provision in the credit facilities of our businesses.

The Company is a holding company with no operations. Therefore, it is dependent upon the ability of our businesses orand investments were unable to repay its debts when due, it would become insolvent. Increased interest rates or margins would reduce the profitability of the relevant business or investment and, consequently, would have an adverse impact on its ability to pay dividends and make distributions to usthe Company to enable it to meet its expenses, reduce any outstanding debt at the holding company level and to make distributions to shareholders in the future. The ability of our operating subsidiaries and the businesses in which we will hold investments to make distributions to the Company is subject to limitations based on their operating performance, the terms of their debt agreements and the applicable laws of their respective jurisdictions. In addition, the ability of each business to reduce its outstanding debt will be similarly limited by its operating performance, as discussed below and in Part 1, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If, as a consequence of these various limitations and restrictions, we are unable to receive sufficient dividends and/or distributions from our businesses, we may be limited in our ability to pay dividends to shareholders.

reduce the level of any outstanding debt and declare distributions on our LLC interests. In addition, we do not currently have any interest rate hedges in placemay be unable to cover any borrowingspay our management fees to our Manager. If our Manager resigned, it would trigger a change-in-control default provision under the credit facilities of some of our MIC Inc. revolving credit facility. If we draw down on our MIC Inc. revolving credit facility, an increase in interest ratesbusinesses, which would directly reduce our profitability and cash available for distributionpermit the relevant lenders to shareholders. Our MIC Inc. revolving credit facility matures in 2008 and we expect to repay or refinance any borrowing outstanding at that time and enter into a similar facility. An increase in interest rates or margins at that time may significantly increaseaccelerate the cost of any repayment or the terms associated with any refinancing.


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We own, and may acquire in the future, investments in which we share voting control with third parties and, consequently, our ability to exercise significant influence over the business or level of their distributions to us depends on our maintaining good relationships with these third parties.

may be limited.

We own 50% of IMTT and 50.01% of District Energy and may acquire less than majority ownership in other investmentsbusinesses in the future. Our ability to influence the management of jointly controlled investments,owned businesses, and the ability of these investmentsbusinesses to continue operating without disruption, depends on our maintaining a good working relationshipreaching agreement with our co-investors and having similarreconciling investment and performance objectives for these investments.businesses. To the extent that we are unable to agree with co-investors regarding the business and operations of the relevant investment, the performance of the investment and level of dividends to us are likely tothe operations may suffer, whichand could have a material adverse effect on our results and our ability to pay distributions on our shares.results. Furthermore, we may, from time to time, own non-controlling interests in investments. Management and controlling shareholders of these investments may develop different objectives than we have and may not make distributions to us at levels that we had anticipated. Our inability to exercise significant influence over the operations, strategies and policies of non-controlled investments means that decisions could be made that could adversely affect our results and our ability to generate cash and pay distributions on our shares.

LLC interests.

Our business isbusinesses are dependent on our relationships, on a contractual and regulatory level, with government entities that may have significant leverage over us. Government entities may be influenced by political considerations to take actions adverse to us.

Our businessbusinesses generally is,are, and will continue to be, subject to substantial regulation by governmental agencies. In addition, our business reliesbusinesses rely on obtaining and maintaining government permits, licenses, concessions, leases or contracts. Government entities, due to the wide-ranging scope of their authority, have significant leverage over us in their contractual and regulatory relationships with us that they may exercise in a manner that causes us delays in the operation of our businessbusinesses or pursuit of our strategy, or increased administrative expense. Furthermore, government permits, licenses, concessions, leases and contracts are generally very complex, which may result in periods of non-compliance, or disputes over interpretation or enforceability. If we fail to comply with these regulations or contractual obligations, we could be subject to monetary penalties or we may lose our rights to operate the affected business, or both. Where our ability to operate an infrastructure business is subject to a concession or lease from the government, the concession or lease may restrict our ability to operate the business in a way that maximizes cash flows and profitability. Further, our ability to grow our current and future businesses will often require consent of numerous government regulators. Increased regulation restricting the ownership or management of U.S. assets, particularly infrastructure assets, by non-U.S. persons, given the non-U.S. ultimate ownership of our Manager, may limit our ability to pursue acquisitions. Any such regulation may also limit our Manager’s ability to continue to manage our operations, which could cause disruption to our businessbusinesses and a decline in our performance. In addition, any required government consents may be costly to seek and we may not be able to obtain them. Failure to obtain any required consents could limit our ability to achieve our growth strategy.

Our contracts with government entities may also contain clauses more favorable to the government counterparty than a typical commercial contract. For instance, a lease, concession or general service contract may enable the government to terminate the agreement without requiring them to pay adequate compensation. In addition, government counterparties also may have the discretion to change or increase regulation of our operations, or implement laws or regulations affecting our operations, separate from any contractual rights they may have. Governments have considerable discretion in implementing regulations that could impact these businesses. Because our businesses provide basic everyday services, and face limited competition, governments may be influenced by political considerations to take actions that may hinder the efficient and profitable operation of our businesses and investments.

Governmental agencies may determine the prices we charge and may be able to restrict our ability to operate our businessbusinesses to maximize profitability.

Where our businesses or investments are sole or predominant service providers in their respective service areas and provide services that are essential to the community, they are likely to be subject to rate regulation by governmental agencies that will determine the prices they may charge. We may also face fees or other charges imposed by government agencies that increase our costs and over which we have no control. We may


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be subject to increases in fees or unfavorable price determinations that may be final with no right of appeal or that, despite a right of appeal, could result in our profits being negatively affected. In addition, we may have very little negotiating



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leverage in establishing contracts with government entities, which may decrease the prices that we otherwise might be able to charge or the terms upon which we provide products or services. Businesses and investments we acquire in the future may also be subject to rate regulation or similar negotiating limitations.
A significant and sustained increase in the price of oil could have a negative impact on the revenue of a number of our businesses.
A significant and sustained increase in the price of oil could have a negative impact on the profitability of a number of our business. Higher prices for jet fuel could result in less use of aircraft by general aviation customers, which would have a negative impact on the profitability of our airport services business. Higher prices for jet fuel will increase the cost of traveling by commercial aviation, which could result in lower enplanements at the airports where our airport parking business operates and therefore less patronage of our parking facilities and lower revenue. Higher fuel prices would increase the cost of power to our district energy business which it may not be able to fully pass on to customers pursuant to the terms of our contracts with them.

Our businesses are subject to environmental risks that may impact our future profitability.

Our businesses (including businesses in which we invest) are subject to numerous statutes, rules and regulations relating to environmental protection. Our airport services and airport parking businesses areAtlantic Aviation is subject to environmental protection requirements relating to the storage, transport, pumping and transfer of fuel, and our district energy businessDistrict Energy is subject to requirements relating mainly to its handling of significant amounts of hazardous materials. TGCThe Gas Company is subject to risks and hazards associated with the refining, handling, storage and transportation of combustible products. These risks could result in substantial losses due to personal injury, loss of life, damage or destruction of property and equipment, and environmental damage. Any losses we face could be greater than insurance levels maintained by our businesses, which could have an adverse effect on their and our financial results. In addition, disruptions to physical assets could reduce our ability to serve customers and adversely affect sales and cash flows.

IMTT’s operations in particular are subject to complex, stringent and expensive environmental regulation. Although we believe that our businesses comply in all material respectsregulation and future compliance costs are difficult to estimate with environmental, healthcertainty. IMTT also faces risks relating to the handling and safety regulations, failuretransportation of significant amounts of hazardous materials. Failure to comply in the futurewith regulations or other claims may give rise to interruptions in operations and civil or criminal penalties and liabilities that could adversely affect ourthe profitability of this business and financial condition.the distributions it makes to us, as could significant unexpected compliance costs. Further, these rules and regulations are subject to change and compliance with suchany changes could result in a restriction of the activities of our businesses, significant capital expenditures and/or increased ongoing operating costs.

A number of the properties owned by IMTT have been subject to environmental contamination in the past and require remediation for which IMTT is liable. These remediation obligations exist principally at IMTT’s Bayonne and Lemont facilities and could cost more than anticipated or could be incurred earlier than anticipated or both. In addition, IMTT may discover additional environmental contamination at its Bayonne, Lemont or other facilities that may require remediation at significant cost to IMTT. Further, the past contamination of the properties owned by IMTT, including by former owners or operators of such properties, could also result in remediation obligations, personal injury, or property damage, environmental damage or similar claims by third parties.

We may also be required to address other prior or future environmental contamination, including soil and groundwater contamination that results from the spillage of fuel, hazardous materials or other pollutants. Under various federal, state, local and foreign environmental statutes, rules and regulations, a current or previous owner or operator of real property may be liable for noncompliance with applicable environmental and health and safety requirements and for the costs of investigation, monitoring, removal or remediation of hazardous materials. These laws often impose liability, whether or not the owner or operator knew of, or was responsible for, the presence of hazardous materials. The presence of these hazardous materials on a property could also result in personal injury or property damage or similar claims by private parties that could have a material adverse effect on our financial condition or operating income. Persons who arrange for the disposal or treatment of hazardous materials may also be liable for the costs of removal or remediation of those materials at the disposal or treatment facility, whether or not that facility is or ever was owned or operated by that person.



36person and whether or not the original disposal or treatment activity accorded with all regulatory requirements. The presence of hazardous materials on a property could result in personal injury, loss of life, damage or destruction of property and equipment, environmental damage and similar claims by third parties that could have a material adverse effect on our financial condition or operating results.



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We may face a greater exposure to terrorism than other companies because of the nature of our businesses and investments.

We believe that infrastructure businesses face a greater risk of terrorist attack than other businesses, particularly those businesses that have operations within the immediate vicinity of metropolitan and suburban areas. Specifically, because of the combustible nature of TGC’sthe products of The Gas Company and consumer reliance on these products for basic services, TGC’sthe business’ SNG plant, transmission pipelines, barges and storage facilities may be at greater risk for terrorism attacks than other businesses, which could affect TGC’sits operations significantly. Any terrorist attacks that occur at or near our business locations would likely cause significant harm to our employees and assets. As a result of the terrorist attacks in New York on September 11, 2001, insurers significantly reduced the amount of insurance coverage available for liability to persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events. A terrorist attack that makes use of our property, or property under our control, may result in liability far in excess of available insurance coverage. In addition, any further terrorist attack, regardless of location, could cause a disruption to our business and a decline in earnings. Furthermore, it is likely to result in an increase in insurance premiums and a reduction in coverage, which could cause our profitability to suffer.

We are dependent on certain key personnel, and the loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our business,businesses, financial condition and results of operations.

We operate our businesses on a stand-alone basis, relying on existing management teams for day-to-day operations. Consequently, our operational success, as well as the success of our internal growth strategy, will be dependent on the continued efforts of the management teams of our businesses, who have extensive experience in the day-to-day operations of these businesses. Furthermore, we will likely be dependent on the operating management teams of businesses that we may acquire in the future. The loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our business, financial condition and results of operations.

Our income may be affected adversely if additional compliance costs are required as a result of new safety, health or environmental regulation.

Our businesses and investments are subject to federal, state and local safety, health and environmental laws and regulations. These laws and regulations affect all aspects of their operations and are frequently modified. There is a risk that any one of our businesses or investments may not be able to comply with some aspect of these laws and regulations, resulting in fines or penalties. Additionally, if new laws and regulations are adopted or if interpretations of existing laws and regulations change, we could be required to increase capital spending and incur increased operating expenses in order to comply. Because the regulatory environment frequently changes, we cannot predict when or how we may be affected by such changes.

Any adverse development

A significant and sustained increase in the general aviation industry that results in less air traffic at airports we service wouldprice of oil could have a material adversenegative impact on our airport services business.

A large part of the revenue at our airport services business is generated from fuel sales and other services provided to general aviation customers. Air travel and air traffic volume of general aviation customers can be affected by airport-specific occurrences as well as events that have nationwide and industry-wide implications. The events of September 11, 2001 had a significant adverse impact on the aviation industry, particularly in terms of traffic volume due to forced closures. Immediately following September 11, 2001, thousands of general aviation aircraft were grounded for weeks due to the FAA’s “no-fly zone” restrictions imposed on the operation of aircraft. Airport specific circumstances include situations in which our major customers relocate their home base or preferred fueling stop to alternative locations. Additionally, the general economic conditions of the area where the airport is located will impact the ability of our FBOs to attract general aviation customers or generate fuel sales, or both. Significant increases in fuel prices may also decrease the demand for our services, including refueling services, or result in lower fuel sales margins, or both, leading to lower operating income.
Changes in the general aviation market as a whole may adversely affect our airport services business. General aviation travel is more expensive than alternative modes of travel. Consequently, during periods of economic downturn, FBO customers may choose to travel by less expensive means, which could impact the earnings of our airport services business. In addition, changes to regulations governing the tax treatment relating to general aviation travel, either for businesses or individuals may cause a reduction in general aviation travel. Increased environmental


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regulation restricting or increasing the cost of general aviation activities could also cause revenue in our airport services business to decline. Travel by commercial airlines may also become more attractive for general aviation travelers if service levels improve. Under these circumstances, our FBOs may lose customers to the commercial air travel market, which may decrease our earnings.
Our airport services business is subject to a variety of competitive pressures, and the actions of competitors may have a material adverse effect on the revenue of a number of our airport services business.businesses.

A significant and sustained increase in the price of oil could have a negative impact on the profitability of a number of our businesses. Higher prices for jet fuel could result in less use of aircraft by general aviation customers, which would have a negative impact on the profitability of Atlantic Aviation. Higher fuel prices could increase the cost of power to our businesses generally which they may not be able to fully pass on to customers.

FBO operators at

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Risks Related to IMTT

IMTT’s business is dependent on the demand for bulk liquid storage capacity in the locations where it operates.

Demand for IMTT’s bulk liquid storage is largely a particular airport compete based onfunction of U.S. domestic demand for chemical, petroleum and vegetable and animal oil products and, less significantly, the extent to which such products are imported into and/or exported out of the United States. U.S. domestic demand for chemical, petroleum and vegetable and animal oil products is influenced by a number of factors, including locationeconomic conditions, growth in the U.S. economy, the pricing of chemical, petroleum and vegetable and animal oil products and their substitutes. Import and export volumes of these products to and from the facility relativeUnited States are influenced by demand and supply imbalances in the United States and overseas, the cost of producing chemical, petroleum and vegetable and animal oil products domestically vis-à-vis overseas and the cost of transporting the products between the United States and overseas destinations. In addition, changes in government regulations that affect imports and exports of bulk chemical, petroleum and vegetable and animal oil products, including the imposition of surcharges or taxes on imported or exported products, could adversely affect import and export volumes to runways and street access, service, value added features, reliabilityfrom the United States. A reduction in demand for bulk liquid storage, particularly in the New York Harbor or the lower Mississippi River, as a consequence of lower U.S. domestic demand for, or imports/exports of, chemical, petroleum or vegetable and price. Many of our FBOs compete with one or more FBOs at their respective airports, and,animal oil products, could lead to a lesser extent, with FBOs at nearby airports. We cannot predictdecline in storage rates and tankage volumes rented out by IMTT and adversely affect IMTT’s revenue and profitability and the actions of competitors who may seekdistributions it makes to increase market share. Some present and potential competitors have or may obtain greater financial and marketing resources than we do, which may negatively impact our ability to compete at each airport.

Our FBOs (including the heliport) do not have the right to be the sole provider of FBO services at any of our FBO locations. The authority responsible for each airport has the ability to grant other FBO leases at the airport and new competitorsus.

IMTT’s business could be established at those FBO locations. The additionadversely affected by a substantial increase in bulk liquid storage capacity in the locations where it operates.

An increase in available bulk liquid storage capacity in excess of new competitors is particularly likely if we are seengrowth in demand for such storage in the key locations in which IMTT operates, such as New York Harbor and the lower Mississippi River, could result in overcapacity and a decline in storage rates and tankage volumes rented out by IMTT and could adversely affect IMTT’s revenue and profitability and the distributions it makes to us.

IMTT’s business could be earning significant profits from these FBO operations. Any such actions, if successful, may reduce, or impair our ability to increase,adversely affected by the revenue of the FBO business.

The termination for cause or convenienceinsolvency of one or more large customers.

IMTT has a number of customers that together generate a material proportion of IMTT’s revenue and gross profit. In 2009, IMTT’s ten largest customers by revenue generated approximately 50.2% of total revenue. The insolvency of any of these large customers could result in an increase in unutilized storage capacity in the absence of such capacity being rented to other customers and adversely affect IMTT’s revenue and profitability and the distributions it makes to us.

IMTT’s business involves hazardous activities and is partly located in a region with a history of significant adverse weather events and is potentially a target for terrorist attacks. We cannot assure you that IMTT is, or will be in the future, adequately insured against all such risks.

The transportation, handling and storage of petroleum, chemical and vegetable and animal oil products are subject to the risk of spills, leakage, contamination, fires and explosions. Any of these events may result in loss of revenue, loss of reputation or goodwill, fines, penalties and other liabilities. In certain circumstances, such events could also require IMTT to halt or significantly alter operations at all or part of the FBO leases would damage our airport services business significantly.

Our airport services revenue is derived from long-term FBO leasesfacility at airports and one heliport. If we default onwhich the terms and conditions of our leases, the relevant authority may terminate the lease without compensation, and we would then lose the income from that location, and would be in default under the loan agreements of our airport services business and be obligedevent occurred. Consistent with industry practice, IMTT carries insurance to repay our lenders a portion or all of our outstanding loan amount. Our leases at Chicago Midway, Philadelphia, North East Philadelphia, New Orleans International and Orange County, and the Metroport 34th Street Heliport in New York City allow the relevant authority to terminate the lease at their convenience. If the relevant authority were to terminate any of those leases, we would then lose the income from that location and be obliged to repay our lenders a portion or allprotect against most of the then outstanding loan amount.
TGC relies on its synthetic natural gas, or SNG, plant, including its transmission pipeline, for a significant portion of its sales. Disruptions at that facility could adversely affect TGC’s ability to serve customers.
Disruptions ataccident-related risks involved in the SNG plant resulting from mechanical or operational problems could affect TGC’s ability to produce SNG. Mostconduct of the regulated sales on Oahubusiness; however, the limits of IMTT’s coverage mean IMTT cannot insure against all risks. In addition, because IMTT’s facilities are not insured against loss from terrorism or acts of SNG and are produced at this plant. Disruptions to the primary and redundant production systemswar, such an attack that significantly damages one or more of IMTT’s major facilities would have a significant adverse effectnegative impact on salesIMTT’s future cash flow and cash flows.profitability and the distributions it makes to us. Further, future losses sustained by insurers during hurricanes in the U.S. Gulf region may result in lower insurance coverage and/or increased insurance premiums for IMTT’s properties in Louisiana.

TGC depends heavily on

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Risks Related to The Gas Company

Disruptions or shutdowns at either of the two Oahu oil refineries for liquefied petroleum gason Oahu from which The Gas Company obtains both LPG and the primary feedstock for its SNG plant. Disruptions at eitherplant may have an adverse effect on the operations of those refineries may adversely affect TGC’s operations.

TGC’s business comprises the manufacture ofbusiness.

The Gas Company manufactures SNG and the distribution ofdistributes SNG and liquefied petroleum gas, or LPG. AnySNG feedstock SNG or LPG supply disruptions or refinery shutdowns that limit itsthe business’ ability to manufacture andand/or deliver gas forto customers would adversely affect its ability to carry out its operating activities. These could include:increase costs as a result of an inability to renewsource feedstock purchase arrangements, including our current SNG feedstock agreement which is due for renewal in 2007;at acceptable rates. The extended unavailability of one or both of the Oahu refineries; arefineries or disruption to crude oil supplies or feedstocksfeedstock to Hawaii; orHawaii could also result in an increased reliance on imported sources. Due to lack of Jones Act-qualified vessels, the business is unable to purchase LPG from the mainland U.S. An inability to purchase LPG from foreign sources. Specifically, TGCsources would adversely affect operations. The business is also limited in its ability to store both foreign-sourced LPG, and domestic LPG at the same location at the same time and, therefore, any disruption in supply may cause a short-term depletion of LPG.LPG stocks. Currently, the business has only one contracted source of feedstock for SNG, the Tesoro refinery, and if Tesoro chooses to discontinue the production or sale of feedstock to the business, which they could do with little notice, The Gas Company’s utility business would suffer a significant disruption and potentially significant operating cost increases and/or capital expenditures until alternative supplies of feedstock could be developed. All supply disruptions of SNG or LPG, if occurring for an extended period, could materially adversely impact TGC’s salesthe business’ contribution margin and cash flows.



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TGC’s

In January 2010, Chevron announced that it plans to reduce the size of its global oil refining business, although it has not made any decisions regarding its refinery in Hawaii. Chevron could decide to continue operating in Hawaii, cease operations entirely or convert a portion of its operations into a terminal for importation of energy products. Chevron’s Hawaii refinery supplies The Gas Company with over half of its total LPG purchases. Any decision by Chevron regarding its operations in Hawaii could affect the business’ cost of LPG and may adversely impact its non-utility contribution margin and profitability.

The most significant costs for The Gas Company are locally-sourced LPG, LPG imports and feedstock for the SNG plant, the costs of which are directly related to petroleum prices. To the extent that these costs cannot be passed on to customers, TGC’s salesthe business’ contribution margin and cash flows will be adversely affected.

The profitability of TGCThe Gas Company is based on the margin of sales prices over costs. Since LPG and feedstock for the SNG plant are commodities, changes in the marketglobal supply of and demand for these products can have a significant impact on costs. In addition, increased reliance on higher-priced foreign sources of LPG, whether dueas a result of disruptions to disruptions or shortages in local sources or otherwise, could also have a significant impact on costs. TGCThe Gas Company has no control over these costs, and, to the extent that these costs cannot be passed on to customers, TGC’sthe business’ financial condition and the results of operations would be adversely affected. Higher prices could result in reduced customer demand or could result in customer conversion to alternative energy sources. Thissources, or both, that would reduce salesthe volume of gas sold and adversely affect profits.the profitability of The Gas Company.

The Gas Company relies on its SNG plant, including its transmission pipeline, for a significant portion of its sales. Disruptions at that facility could adversely affect the business’ ability to serve customers.

Disruptions at the SNG plant resulting from mechanical or operational problems or power failures could affect the ability of The Gas Company to produce SNG. Most of the utility sales on Oahu are of SNG and all SNG is produced at the Oahu plant. Disruptions to the primary and redundant production systems would have a significant adverse effect on The Gas Company’s sales and cash flows.

The operations of The Gas Company are subject to a variety of competitive pressures and the actions of competitors, particularly those involved in other energy sources, could have a materially adverse effect on operating results.

Other fuel sources such as electricity, diesel, solar energy, geo-thermal, wind, other gas providers and alternative energy sources may be substituted for certain gas end-use applications, particularly if the price of gas increases relative to other fuel sources, whether due to higher commodity supply costs or otherwise. Customers could, for a number of reasons, including increased gas prices, lower costs of alternative energy or convenience, meet their energy needs through alternative sources. This could have an adverse effect on the business’ revenue and cash flows.

TGC’s

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The Gas Company’s utility business is subject to regulation by the Hawaii Public Utilities Commission, or HPUC, and actions by the HPUC or changes to the regulatory environment may constrain the operation or profitability of the business.

If the business fails to comply with certain HPUC regulatory conditions, the profitability of The Gas Company could be adversely impacted. The business agreed to 14 regulatory conditions with the HPUC that address a variety of matters including: a requirement that The Gas Company and HGC’s ratio of consolidated debt to total capital does not exceed 65%; and a requirement to maintain $20.0 million in readily-available cash resources at The Gas Company, HGC or MIC. The HPUC regulates all franchised or certificated public service companies operating in Hawaii; prescribes rates, tariffs, charges and fees; determines the allowable rate of earnings in establishing rates; issues guidelines concerning the general management of franchised or certificated utility businesses; and acts on requests for the acquisition, sale, disposition or other exchange of utility properties, including mergers and consolidations. Any adverse decision by the HPUC concerning the level or method of determining utility rates, the items and amounts that may be included in the rate base, the returns on equity or rate base found to be reasonable, the potential consequences of exceeding or not meeting such returns, or any prolonged delay in rendering a decision in a rate or other proceeding, could have an adverse effect on the business.

The Gas Company’s operations on the islands of Hawaii, Maui and Kauai rely on LPG that is transported to those islands by Jones Act qualified barges from Oahu and from non-Jones Act vessels from foreign ports. Disruptions to service by those vessels could adversely affect TGC’sthe business’ results of operations.

TGC

The Jones Act requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships and that they meet certain other requirements. The business has time charter agreements allowing the use of two barges that currently have the capabilitya cargo capacity of transporting 424,000approximately 420,000 gallons and 500,000550,000 gallons of LPG respectively. The Jones Act requires that vessels carrying cargo between two U.S. ports meet certain requirements.each. The barges used by TGCthe business are the only two Jones Act qualified barges available in the Hawaiian Islands capable of carrying large volumes of LPG that are available in the Hawaiian Islands.LPG. They are near the end of their useful economic lives, and the barge owner intends to replacerefurbish one or both of them in the near future. ToIf the extent that the barge owner is unable to replace these barges, or alternatively, these barges are unable to transport LPG from Oahu and TGCthe business is not able to secure foreign-source LPG or obtain an exemption to the Jones Act, the storage capacity on those islands could be depleted and sales and cash flowsprofitability of the business could be adversely affected.

impacted.

The recovery of amounts expended for capital projects and operating expenses in the regulated operationsGas Company is subject to approval byrisks associated with volatility in the Hawaii Public Utilities Commission, or HPUC, which exposes TGC toeconomy.

Tourism and government activities (including the risk of incurring costs that may not be recoverable from regulated customers.

In the past, TGC has requested rate increases from the HPUC approximately every five years as its operating costs increased and as capital investments were committed. When the HPUC approved our purchase of TGC, it stipulated that no rate increase may be implemented until 2009. Should TGC seek a rate increase, there is a risk that TGC will not be granted such increase or that it will be permitted only partmilitary) are two of the increase, which may have a material adverse effect on TGC’s financial condition and resultslargest components of operations.
The non-regulated operations of TGC are subject to a variety of competitive pressures and the actions of competitors, particularly from other energy sources, could have a materially adverse effect on operating results.
In Hawaii, gas is largely used by commercial and residential customers for water heating and cooking. TGC also has wholesale customers that resell product to other end-users. Gas end-use applications may be substituted by other fuel sources such as electricity, diesel, solar and wind. Customers could, for a number of reasons, including increased gas prices, lower costs of alternative energy or convenience, meet their energy needs through alternative sources. This could have an adverse effect on TGC’s sales, revenue and cash flows.
Approximately two-thirds of TGC’s employees are members of a labor union. A work interruption may adversely affect TGC’s business.
Approximately two-thirds of TGC’s employees are covered under a collective bargaining agreement that expires on April 30, 2008. Labor disruptions related to that contract or to other disputes could affect the SNG plant, distributions systems and customer services. We are unable to predict how work stoppages would affect the business.
TGC’s operating results are affected by Hawaii’s economy.
The primary driver of Hawaii’s economy is tourism.heavily influenced by economic conditions in the U.S. and Asia and their impact on tourism, as well as by government spending. As a result of the economic downturn, Hawaii has experienced significant declines in levels of tourism which have affected the local economy generally. A significantlarge portion of TGC’sThe Gas Company’s sales isare generated fromby businesses that rely on tourism as their primary sourcetourism. If the local economy fails to improve or declines, the volume of revenue. These businesses include hotels and resorts, restaurants and laundries, comprising approximately 40% of sales. Should tourism decline significantly, TGC’s commercial salesgas sold could be negatively affected adversely.


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In addition,by business closures and/or lower usage and adversely impact the business’ financial performance. Additionally, a lack of growth in the Hawaii economy could reduce the level of new residential construction, and adversely impact growth in volume from new residential customers. A reduction in new housing starts and commercial development would limit growth opportunities for TGC’s business.
government activity, particularly military activity, or a shift by either away from the use of gas products, could also have a negative impact on The Gas Company’s results.

Because of its geographic location, Hawaii, and in turn TGC,The Gas Company, is subject to earthquakes and certain weather risks that could materially disrupt operations.

Hawaii is subject to earthquakes and certain weather risks, such as hurricanes, floods, heavy and sustained rains and tidal waves. Because TGC’sthe business’ SNG plant, SNG transmission line and several storage facilities are close to the ocean, weather-related disruptions to operations are possible. In addition, earthquakes may cause disruptions. These events could damage TGC’sthe business’ assets or could result in wide-spread damage to TGC’sits customers, thereby reducing sales volumes and, to the extent such damages are not covered by insurance, TGC’sthe business’ revenue and cash flows.

Occupancy of our airport parking business’ facilities is dependent on the level of passenger traffic at the airports at which we operate and reductions in passenger traffic could negatively impact our results of operations.
Our airport parking business’ parking facilities are dependent upon parking traffic primarily generated by commercial airline passengers and are therefore susceptible to competition from other airports and to disruptions in passenger traffic at the airports at which we operate. For example, the events of September 11, 2001 had a significant impact on the aviation industry and, as a result, negatively impacted occupancy levels at parking facilities. In the first few days following September 11, 2001, revenue from our parking facilities was negligible and did not fully recover until some months after the event. Other events such as wars, outbreaks of disease, such as SARS, and terrorist activities in the United States or overseas may reduce airport traffic and therefore occupancy rates. In addition, traffic at an airport at which we have facilities may be reduced if airlines reduce the number of flights at that airport.
Our airport parking business is exposed to competition from both on-airport and off-airport parking, which could slow our growth or harm our business.
At each of the locations at which our airport parking business operates, it competes with both on-airport parking facilities, many of which are located closer to passenger terminals, and other off-airport parking facilities. If an airport expands its parking facilities or if new off-airport parking facilities are opened or existing facilities expanded, customers may be drawn away from our sites or we may have to reduce our parking rates, or both.
Parking rates charged by us at each of our locations are set with reference to a number of factors, including prices charged by competitors and quality of service by on-airport and off-airport competitors, the location and quality of the facility and the level of service provided. Additional sources of competition to our parking operations may come from new or improved transportation to the airports where our parking facilities are located. Improved rail, bus or other services may encourage our customers not to drive to the airport and therefore negatively impact revenue.
Changes in regulation by airport authorities or other governmental bodies governing the transportation of customers to and from the airports at which our airport parking business operates may negatively affect our operating results.
Our airport parking business’ shuttle operations transport customers between the airport terminals and its parking facilities and are regulated by, and are subject to, the rules and policies of the relevant local airport authority, which may be changed at their discretion. Some airport authorities levy fees on off-airport parking operators for the right to transport customers to the terminals. There is a risk that airport authorities may deny or restrict our access to terminals, impede our ability to manage our shuttle operations efficiently, impose new fees or increase the fees currently levied.
Further, the FAA and the Transportation Security Administration, or TSA, regulate the operations of all the airports at which our airport parking business has locations. The TSA has the authority to restrict access to airports as well as to impose parking and other restrictions around the airports. The TSA could impose more stringent restrictions in the future that would inhibit the ability of customers to use our parking facilities.


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Risks Related to District Energy

Pursuant to the terms of a use agreement with the City of Chicago, the City of Chicago has rights that, if exercised, could have a significant negative impact on our district energy business.

District Energy.

In order to operate ourthe district cooling system in downtown Chicago, we havethe business has obtained the right to use certain public ways of the City of Chicago under a use agreement, which we refer to as the Use Agreement. Under the terms of the Use Agreement, the City of Chicago retains the right to use the public ways for a public purpose and has the right in the interest of public safety or convenience to cause usthe business to remove, modify, replace or relocate ourits facilities at our own expense.the expense of the business. If the City of Chicago exercises these rights, weDistrict Energy could incur significant costs and ourits ability to provide service to ourits customers could be disrupted, which would have an adverse effect on our business,the business’ financial condition and results of operations. In addition, the Use Agreement is non-exclusive, and the City of Chicago is entitled to enter into use agreements with ourthe business’ potential competitors.

The Use Agreement expires on December 31, 20202040 and may be terminated by the City of Chicago for any uncured material breach of its terms and conditions. The City of Chicago also may require usDistrict Energy to pay liquidated damages of $6,000 a day if we failthe business fails to remove, modify, replace or relocate ourits facilities when required to do so, if we installit installs any facilities that are not properly authorized under the Use Agreement or if ourthe district cooling system does not conform to the City of Chicago’s standards. Each of these non-compliance penalties could result in substantial financial loss or effectively shut down ourthe district cooling system in downtown Chicago.

Any proposed renewal, extension or modification of the Use Agreement requires approval by the City Council of Chicago. Extensions and modifications subject to the City of Chicago’s approval include those to enable the expansion of chilling capacity and the connection of new customers to the district cooling system. The City of Chicago’s approval is contingent upon the timely filing of an Economic Disclosure Statement, or EDS, by us and certain of the beneficial owners of our stock. If any of these investors fails to file a completed EDS form within 30 days of the City of Chicago’s request or files an incomplete or inaccurate EDS, the City of Chicago has the right to refuse to provide the necessary approval for any extension or modification of the Use Agreement or to rescind the Use Agreement altogether. If the City of Chicago declines to approve extensions or modifications to the Use Agreement, weDistrict Energy may not be able to increase the capacity of ourits district cooling system and pursue ourits growth strategy for our district energy business.strategy. Furthermore, if the City of Chicago rescinds or voids the Use Agreement, ourthe district cooling system in downtown Chicago would be effectively shut down and our business,the business’ financial condition and results of operations would be materially and adversely affected as a result.

Certain number of our investors may be required to comply with certain disclosure requirements of the City of Chicago and non-compliance may result in the City of Chicago’s rescission or voidance of the Use Agreement and any other arrangements our district energy businessDistrict Energy may have with the City of Chicago at the time of the non-compliance.

In order to secure any amendment to the Use Agreement with the City of Chicago to pursue expansion plans or otherwise, or to enter into other contracts with the City of Chicago, the City of Chicago may require any person who owns or acquires 7.5% or more of our sharesLLC interests to make a number of representations to the City of Chicago by filing a completed EDS. Our LLC agreement and our trust agreement requirerequires that in the event that we need to obtain approval from the City of Chicago in the future for any specific matter, including to expand the district cooling system or to amend the Use Agreement, we and each of our then 10%7.5% investors would need to submit an EDS to the City of Chicago within 30 days of the City of Chicago’s request. In addition, our LLC agreement and our trust agreement requirerequires each 10%7.5% investor to provide any supplemental information needed to update any EDS filed with the City of Chicago as required by the City of Chicago and as requested by us from time to time. However, in 2005, the City of Chicago passed an ordinance lowering the ownership percentage for which an EDS is required from 10% to 7.5%.

Although based on our discussions with the City of Chicago, we believe that the City of Chicago will allow us to satisfy this requirement through providing publicly available information, we cannot assure that this will remain the case in the future. As a result, we may at some point need to extend the requirements in our LLC agreement and trust agreement to 7.5% owners.

Any EDS filed by an investor may become publicly available. By completing and signing an EDS, an investor will have waived and released any possible rights or claims which it may have against the City of Chicago in connection with the public release of information contained in the EDS and also will have authorized the City of Chicago to verify the accuracy of information submitted in the EDS. The requirements and consequences of filing



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an EDS with the City of Chicago will make compliance with the EDS requirements difficult for our investors. If an investor fails to provide us and the City of Chicago with the information required by an EDS, our LLC and trust agreements provide us with the right to seek specific performance by such investor. However, we currently do not have this right with respect to investors that own less than ten percent of our shares. In addition, any action for specific performance we bring may not be successful in securing timely compliance of every investor with the EDS requirements.


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If any investor fails to comply with the EDS requirements on time or the City of Chicago determines that any information provided in any EDS is false, incomplete or inaccurate, the City of Chicago may rescind or void the Use Agreement or any other arrangements Thermal Chicago has with the City of Chicago, and pursue any other remedies available to them. If the City of Chicago rescinds or voids the Use Agreement, ourthe business’ district cooling system in downtown Chicago would be effectively shut down and our business,the business’ financial condition and results of operations would be adversely affected as a result.

The deregulation of electricity markets in Illinois and future rate case rulings may result in higher and more volatile electricity costs, which our district energy business may not be able to fully pass through to its customers.
The Illinois electricity market was deregulated as scheduled in January 2007. Our district energy business has entered into a contract with a retail energy supplier to provide for the supply of the majority of our 2007 electricity at a fixed price and we estimate our 2007 electricity costs will increase by 15-20% over 2006 based on our energy contracts as well as the ICC’s Final Order on ComEd’s rate case. We will need to enter into energy supply contracts for 2008 and subsequent years which may result in further increases in our electricity costs. In addition, the Final Order is subject to judicial review as well as rehearing by the ICC and ComEd will likely file future rate cases, both of which may cause the distribution component of our electricity costs to increase.
We believe that the terms of our customer contracts permit us to fully pass through our electricity cost increases or decreases. However, we have only recently implemented these contract pricing adjustments and cannot fully assess customer reaction at this time. Adverse customer response, including non-renewal of contracts, could have an adverse effect on our operating income.

If certain events within or beyond the control of our district energy businessDistrict Energy occur, our district energy businessDistrict Energy may be unable to perform its contractual obligations to provide chilling and heating services to its customers. If, as a result, its customers elect to terminate their contracts, our district energy businessDistrict Energy may suffer loss of revenue. In addition, our district energy businessDistrict Energy may be required to make payments to such customers for damages.

In the event of a shutdown of one or more of our district energy business’District Energy’s plants due to operational breakdown, strikes, the inability to retain or replace key technical personnel or events outside its control, such as an electricity blackout, or unprecedented weather conditions in Chicago, our district energy businessDistrict Energy may be unable to continue to provide chilling and heating services to all of its customers. As a result, our district energy businessDistrict Energy may be in breach of the terms of some or all of its customer contracts. In the event that such customers elect to terminate their contracts with our district energy businessDistrict Energy as a consequence of their loss of service, its revenue may be materially adversely affected. In addition, under a number of contracts, our district energy businessDistrict Energy may be required to pay damages to a customer in the event that a cessation of service results in loss to that customer.

Northwind Aladdin currently derives mosta majority of its operating cash flows from a contract with a single customer, the AladdinPlanet Hollywood Resort and Casino, which recently emerged from bankruptcy.bankruptcy several years ago. If this customer were to enter into bankruptcy again, ourNorthwind’s Aladdin’s contract may be amended or terminated and wethe business may receive no compensation, which could result in the loss of our investment in Northwind Aladdin.

Northwind Aladdin derives mosta majority of its cash flows from a contract with the Planet Hollywood resort and casino (formerly known as the Aladdin resort and casinocasino) in Las Vegas to supply cold and hot water and back-up electricity. The Aladdin resort and casino emerged from bankruptcy immediately prior to MDE’sDistrict Energy’s acquisition of Northwind Aladdin in September 2004, and, during the course of those proceedings, the contract with Northwind Aladdin was amended to reduce the payment obligations of the Aladdin resort and casino. If the AladdinPlanet Hollywood resort and casino were to enter into bankruptcy again and a cheaper source of the services that Northwind Aladdin provides can be found, ourthis contract may be terminated or amended. This could result in a total loss or significant reduction in ourDistrict Energy’s income from Northwind Aladdin, for which wethe business may receive no compensation.



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Risks Related to Atlantic Aviation

Further deterioration of business jet traffic at airports where Atlantic Aviation operates would cause Atlantic Aviation to default on its debt obligations.

Atlantic Aviation’s current debt-to-EBITDA ratio as defined under its loan agreement is 7.97x. This compares to a maximum permitted debt-to-EBITDA ratio of 8.25x. The maximum permitted debt-to-EBITDA ratio drops to 8.00x from March 31, 2010. A further decline in business jet take-offs and landings at airports where Atlantic Aviation operates FBOs could result in a reduction of Atlantic Aviation’s EBITDA as defined under its loan agreement. Consequently, Atlantic Aviation could exceed the maximum permitted debt-to-EBITDA ratio under its loan agreement and default on its debt obligations. If the default remains uncured, the lenders under the loan agreement may accelerate the repayment of the outstanding balance of the borrowings under the agreement. If Atlantic Aviation is unable to repay or refinance this debt, it may be rendered insolvent. A default on the debt obligations leading to bankruptcy or insolvency would cause Atlantic Aviation to default on its FBO leases and would allow the local airport authorities to terminate the leases.

Further deterioration in the economy in general or in the aviation industry that results in less air traffic at airports that Atlantic Aviation services would have a material adverse impact on our business.

A large part of the business’ revenue is derived from fuel sales and other services provided to general aviation customers and, to a lesser extent, commercial air travelers. A further economic downturn could reduce



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the level of air travel, adversely affecting Atlantic Aviation. General aviation travel is dependentprimarily a function of economic activity. Consequently, during periods of economic downturn, FBO customers are more likely to curtail air travel.

The economic downturn of 2008 and 2009 had a significant impact on the demand for bulk liquid storage capacityactivity levels of many FBO customers, which resulted in significant declines in the locationsgross profit of this business. If the economy does not continue to improve or negative sentiment regarding corporate jet usage persists or increases, we may see future declines in volumes of fuel sold, which could materially adversely affect the results of this business and which could cause it to fail to meet the financial covenants of its debt arrangements and allow its lenders to declare its entire indebtedness immediately due and payable.

Air travel and air traffic volume can also be affected by events that have nationwide and industry-wide implications, such as the events of September 11, 2001, as well as local circumstances. Events such as wars, outbreaks of disease such as SARS, and terrorist activities in the United States or overseas may reduce air travel. Local circumstances include downturns in the general economic conditions of the area where an airport is located or other situations in which our major FBO customers relocate their home base or preferred fueling stop to alternative locations.

In addition, changes to regulations governing the tax treatment relating to general aviation travel, either for businesses or individuals may cause a reduction in general aviation travel. Increased environmental regulation restricting or increasing the cost of aviation activities could also cause the business’ revenue to decline.

Current economic conditions and increased pricing competition at Atlantic Aviation may have an adverse effect on market share and fuel margins, causing a decline in the profitability of that business.

Some of Atlantic Aviation’s competitors are pursuing more aggressive pricing strategies. These competitors operate FBOs at a number of airports where Atlantic Aviation operates or at airports near where it operates.

Demand for IMTT’s bulk liquid storage is largely a function This competition, combined with the continuation or worsening of U.S. domestic demand for chemical, petroleum and vegetable and animal oil products and, less significantly, the extent to which such products are imported into the United States rather than produced domestically. U.S. domestic demand for chemical, petroleum and V&A products is influenced by a number of factors, includingcurrent economic conditions, growthhas in the U.S. economyrecent periods and the pricing of chemical, petroleummay continue to result in increased focus on cost among customers and, V&A products and their substitutes. Import volumes of these products to the United States are influenced by the cost of producing chemical, petroleum and V&A products domestically vis-à-vis overseas and the cost of transporting the products from overseas. In addition, changes in government regulations that affect imports of bulk chemical, petroleum and V&A products, including the imposition of surcharges or taxes on imported products, could adversely affect import volumes. A reduction in demand for bulk liquid storage, particularly in the New York Harbor or the lower Mississippi River, as a consequence of lower U.S. domestic demand for, or imports of, chemical, petroleum or V&A products, could lead toconsequently, a decline in storage ratescorporate jet usage and tankageincreased price sensitivity. These factors may cause volumes rented by IMTTof fuel sales and market share to decline and may result in increased margin pressure, adversely affect IMTT’s revenue and profitability.
IMTT’s business could be adversely affected byaffecting the profitability of this business.

Atlantic Aviation is subject to a substantial increase in bulk liquid storage capacity in the locations where it operates.

An increase in available bulk liquid storage capacity in excessvariety of growth in demand for such storage in the key locations in which IMTT operates, such as New York Harborcompetitive pressures, and the lower Mississippi River, could result in overcapacity and a decline in storage rates and tankage volumes rented by IMTT and could adversely affect IMTT’s revenue and profitability.
IMTT’s current debt facilities will need to be refinanced on amended terms and increased in size during 2007 to provide the funding necessary for IMTT to fully pursue its expansion plans. The inability to refinance this debt on acceptable terms and to borrow additional amounts wouldactions of competitors may have a material adverse effect on the business.
IMTT’s current debt facilities will need to be refinancedits revenue.

FBO operators at a particular airport compete based on amended terms and increased in size during 2007 to provide the funding necessary for IMTT to fully pursue its expansion plans. We cannot assure you that IMTT will be able to refinance its debt facilities on acceptable terms,a number of factors, including the loosening of certain restrictive covenants, or that IMTT will be able to expand the size of its debt facilities by an amount sufficient to cover the funding requirements of its expansion plans. If IMTT is unable to obtain sufficient additional financing, it will be unable to fully pursue its current expansion plans, its growth prospects and results of operations would be adversely affected and its distributions to us would decline from current levels. This would adversely affect our ability to make distributions to shareholders. Additionally, even if available, replacement debt facilities may only be available at substantially higher interest rates or margins or with substantially more restrictive covenants. Either event may limit the operational flexibility of IMTT and its ability to upstream dividends and distributions to us. If interest rates or margins increase, IMTT will pay higher rates of interest on any debt that it raises to refinance existing debt, thereby reducing its profitability and having an adverse impact on its ability to pay dividends to us and our ability to make distributions to shareholders.

IMTT’s business involves hazardous activities, is partly located in a region with a history of significant adverse weather events and is potentially a target for terrorist attacks. We cannot assure you that IMTT is, or will be in the future, adequately insured against all such risks.
The transportation, handling and storage of petroleum, chemical and V&A products are subject to the risk of spills, leakage, contamination, fires and explosions. Any of these events may result in loss of revenue, loss of reputation or goodwill, fines, penalties and other liabilities. In certain circumstances, such events could also require IMTT to halt or significantly alter operations at all or partlocation of the facility relative to runways and street access, service, value added features, reliability and price. Many of Atlantic Aviation’s FBOs compete with one or more FBOs at their respective airports, and, to a lesser extent, with FBOs at nearby airports. Furthermore, leases related to FBO operations may be subject to competitive bidding at the end of their term. Some present and potential competitors have or may obtain greater financial and marketing resources than Atlantic Aviation, which may negatively impact Atlantic’s Aviation ability to compete at each airport or for lease renewal.

Atlantic Aviation’s FBOs do not have the event occurred. Consistent with industry practice, IMTT carries insuranceright to protect against mostbe the sole provider of FBO services at any of its FBO locations. The authority responsible for each airport has the ability to grant other FBO leases at the airport and new competitors could be established at those FBO locations. The addition of new competitors may reduce, or impair Atlantic Aviation’s ability to increase, the revenue of the accident-related risks involved in the conductFBO business.

The termination for cause or convenience of the business; however, the limits of IMTT’s coverage mean IMTT cannot insure against all risks. In addition, because IMTT’s facilities are not insured against loss from terrorism, a terrorist attack that significantly damages one or more of IMTT’s major facilitiesthe FBO leases would havedamage Atlantic Aviation’s operations significantly.

Atlantic Aviation’s revenue is derived from long-term leases at 68 airports and one heliport. If Atlantic Aviation defaults on the terms and conditions of its leases, including upon insolvency, the relevant authority may terminate the lease without compensation. Additionally, leases at Chicago Midway, Philadelphia, North East Philadelphia, New Orleans International and Orange County airports and the Metroport 34th Street Heliport in New York City, representing approximately 12% of Atlantic Aviation’s gross profit in 2009, allow


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the relevant authority to terminate the lease at their convenience. In each case, Atlantic Aviation would then lose the income from that location and potentially the expected returns from prior capital expenditures. Atlantic Aviation would also likely be in default under the loan agreements and be obliged to repay its lenders a negativeportion or the entire outstanding loan amount.

The Transportation Security Administration, or TSA, is considering new regulations which could impair the relative convenience of general aviation and adversely affect demand for Atlantic Aviation’s services.

The TSA has proposed new regulations known as the Large Aircraft Security Program (LASP), which would require all U.S. operators of general aviation aircraft exceeding 12,500 pounds maximum take-off weight to implement security programs that are subject to TSA audit. In addition, the proposed regulations would require airports servicing these aircraft to implement security programs involving additional security measures, including passenger and baggage screening. We believe these new regulations, if implemented, will affect many of Atlantic Aviation’s customers and all of the airports at which it operates. These rules, if adopted, could decrease the convenience and attractiveness of general aviation travel relative to commercial air travel and, therefore, may adversely impact on IMTT’s future cash flow and profitability. Further, losses sustained by insurers during future hurricanesdemand for Atlantic Aviation’s services.

Risk Related to PCAA

The creditors of PCAA may seek recourse to the Company regardless of the legal merits.

PCAA is in the U.S. gulf regionprocess of completing a sale of its assets through a Chapter 11 bankruptcy. Creditors of the business may result in lower insurance coveragealso attempt to seek recovery from the Company and, increased insurance premiums for IMTT’s properties in Louisiana.



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Hurricane Katrina resulted in labor and materials shortages inthrough the regions affected. This may haveCompany, seek recourse to the assets of our other businesses, regardless of the merits of such a negative impact on the cost and construction timeline of IMTT’s new storage facility in Louisiana,claim or lack thereof, which could result in a losssubstantial legal costs and significant disruption of customer contractsmanagement time and reduced revenue andresources, thereby adversely affecting our profitability.
In the aftermath of Hurricane Katrina, construction costs in the region affected by the hurricane have increased and labor shortages have been experienced. This could have a significant negative impact on the cost and construction schedule of IMTT’s new storage facility at Geismar in Louisiana. IMTT may not be fully compensated by customers for any such increase in construction costs. In addition, substantial construction delays could result in a loss of customer contracts with no compensation or inadequate compensation, which would have a material adverse effect on IMTT’s future cash flows and profitability.

Risks Related to Ownership of TrustOur Stock

Our Manager’s affiliation with Macquarie BankGroup Limited and the Macquarie Group may result in conflicts of interest.

interest or a decline in our stock price.

Our Manager is an affiliate of Macquarie BankGroup Limited and a member of the Macquarie Group. From time to time, we have entered into, and in the future we may enter into, transactions and relationships involving Macquarie BankGroup Limited, its affiliates, or other members of the Macquarie Group. Such transactions have included and may include, among other things, the acquisition of businesses and investments from Macquarie Group members, the entry into debt facilities and derivative instruments with members of the Macquarie Bank LimitedGroup serving as lender or counterparty, and financial advisory services provided to us by the Macquarie Securities (USA) Inc. and other affiliates of Macquarie Bank Limited.

Group.

Although our audit committee, all of the members of which are independent directors, is required to approve of any related party transactions, including those involving Macquarie Bank Limited, its affiliates, or members of the Macquarie Group or its affiliates, the relationship of our Manager to Macquarie Bank Limited and the Macquarie Group may result in conflicts of interest.

In addition, as a result of our Manager’s being a member of the Macquarie Group, negative market perceptions of Macquarie Group Limited generally or of Macquarie’s infrastructure management model, or Macquarie Group statements or actions with respect to other managed vehicles, may affect market perceptions of our company and cause a decline in the price of our LLC interests unrelated to our financial performance and prospects.

Our Manager can resign with 90 days notice and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations which could adversely affect our financial results and negatively impact the market price of our LLC interests.

Our Manager has the right, under the management services agreement, to resign at any time with 90 days notice, whether we have found a replacement or not. The resignation of our Manager will trigger mandatory repayment obligations under debt facilities at all of our operating companies other than IMTT. If our Manager resigns, we may not be able to find a new external manager or hire internal management with similar expertise within 90 days to provide the same or equivalent services on acceptable terms, or at all. If we are


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unable to do so quickly, our operations are likely to experience a disruption, our financial results could be adversely affected, perhaps materially, and the market price of our LLC interests may decline substantially. In addition, the coordination of our internal management, acquisition activities and supervision of our businesses and investments are likely to suffer if we were unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Manager and its affiliates.

Furthermore, if our Manager resigns, the Company and its subsidiaries will be required to cease use of the Macquarie brand entirely, and change their names to remove any reference to “Macquarie.” This may cause the value of the Company and the market price of our LLC interests to decline.

In the event of the underperformance of our Manager, we may be unable to remove our Manager, which could limit our ability to improve our performance and could adversely affect the market price of our shares.

LLC interests.

Under the terms of the management services agreement, our Manager must significantly underperform in order for the management services agreement to be terminated. The company’s boardCompany’s Board of directorsDirectors cannot remove our Manager unless:

·

our sharesLLC interests underperform a weighted average of two benchmark indices by more than 30% in relative terms and more than 2.5% in absolute terms in 16 out of 20 consecutive quarters prior to and including the most recent full quarter, and the holders of a minimum of 66.67% of the outstanding trust stockLLC interests (excluding any shares of trust stockLLC interests owned by our Manager or any affiliate of the Manager) vote to remove our Manager;
·
our Manager materially breaches the terms of the management services agreement and such breach continues unremedied for 60 days after notice;
·
our Manager acts with gross negligence, willful misconduct, bad faith or reckless disregard of its duties in carrying out its obligations under the management services agreement, or engages in fraudulent or dishonest acts; or
·
our Manager experiences certain bankruptcy events.
Our

Because our Manager’s performance is measured by the market performance of our sharesLLC interests relative to a weighted average of two benchmark indices, a U.S. utilities index and a European utilities index, weighted in proportion to our U.S. and non-U.S. equity investments. As a result, even if the absolute market performance of our sharesLLC interests does not meet expectations, the company’s boardCompany’s Board of directorsDirectors cannot remove our Manager unless the market performance of our sharesLLC interests also significantly underperforms the weighted average of the benchmark indices. If we were unable to remove our Manager in circumstances where the absolute market performance of our sharesLLC interests does not meet expectations, the market price of our sharesLLC interests could be negatively affected.



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Our Manager can resign on 90 days’ notice and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations which could adversely affect our financial results and negatively impact the market price of our shares.
Our Manager has the right, under the management services agreement, to resign at any time on 90 days’ notice, whether we have found a replacement or not. If our Manager resigns, we may not be able to find a new external manager or hire internal management with similar expertise within 90 days to provide the same or equivalent services on acceptable terms, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial results could be adversely affected, perhaps materially, and the market price of our shares may decline. In addition, the coordination of our internal management, acquisition activities and supervision of our businesses and investments are likely to suffer if we were unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Manager and its affiliates.
Furthermore, if our Manager resigns, the trust, the company and its subsidiaries will be required to cease using the Macquarie brand entirely, including changing their names to remove any reference to “Macquarie.” This may cause the value of the company and the market price of our shares to decline.

Certain provisions of the management services agreement and the operating agreement of the company and the trust agreementCompany make it difficult for third parties to acquire control of the trust and the companyCompany and could deprive you of the opportunity to obtain a takeover premium for your shares.

LLC interests.

In addition to the limited circumstances in which our Manager can be terminated under the terms of the management services agreement, the management services agreement provides that in circumstances where the trust stock ceases to be listed on a recognized U.S. exchange or on the Nasdaq National Market as a result of the acquisition of trust stock by third parties in an amount that results in the trust stock ceasing to meet the distribution and trading criteria on such exchange or market, the Manager has the option to either propose an alternate fee structure and remain our Manager or resign, terminate the management services agreement upon 30 days’days written notice and be paid a substantial termination fee. The termination fee payable on the Manager’s exercise of its right to resign as our Manager subsequent to a delisting of our sharesLLC interests could delay or prevent a change in control that may favor our shareholders. Furthermore, in the event of such a delisting, any proceeds from the sale, lease or exchange of a significant amount of assets must be reinvested in new assets of our company.company, subject to debt repayment obligations. We would also be prohibited from incurring any new indebtedness or engaging in any transactions with the shareholders of the companyCompany or its affiliates without the prior written approval of the Manager. These provisions could deprive the shareholders of the trust of opportunities to realize a premium on the shares of trust stockLLC interests owned by them.


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The operating agreement of the company,Company, which we refer to as the LLC agreement, and the trust agreement containcontains a number of provisions that could have the effect of making it more difficult for a third-party to acquire, or discouraging a third-party from acquiring, control of the trust and the company. These provisions include:

·

restrictions on the company’sCompany’s ability to enter into certain transactions with our major shareholders, with the exception of our Manager, modeled on the limitation contained in Section 203 of the Delaware General Corporation Law;
·
allowing only the company’s boardCompany’s Board of directorsDirectors to fill vacancies, including newly created directorships and requiring that directors may be removed only for cause and by a shareholder vote of 66 2 /3%2/3%;
·
requiring that only the company’sCompany’s chairman or boardBoard of directorsDirectors may call a special meeting of our shareholders;
·
prohibiting shareholders from taking any action by written consent;
·
establishing advance notice requirements for nominations of candidates for election to the company’s boardCompany’s Board of directorsDirectors or for proposing matters that can be acted upon by our shareholders at a shareholdersshareholders’ meeting;
·
having a substantial number of additional shares ofLLC interests authorized but unissued trust stock;
·unissued;
providing the company’s boardCompany’s Board of directorsDirectors with broad authority to amend the LLC agreement and the trust agreement; and
·
requiring that any person who is the beneficial owner of ten percent7.5% or more of our sharesLLC interests make a number of representations to the City of Chicago in its standard form of Economic Disclosure Statement, or EDS, the current form of which is included in our LLC agreement, which is incorporated by reference as an exhibit to this report.


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The market price and marketability of our sharesLLC interests may from time to time be significantly affected by numerous factors beyond our control, which may adversely affect our ability to raise capital through future equity financings.

The market price of our sharesLLC interests may fluctuate significantly. Many factors that are beyond our control may significantly affect the market price and marketability of our sharesLLC interests and may adversely affect our ability to raise capital through equity financings. These factors include the following:

·

price and volume fluctuations in the stock markets generally;
·significant volatility in the market price and trading volume of securities of Macquarie Group Limited and/or vehicles managed by the Macquarie Group or branded under the Macquarie name or logo;
significant volatility in the market price and trading volume of securities of registered investment companies, business development companies or companies in our sectors, which may not be related to the operating performance of these companies;
·
changes in our earnings or variations in operating results;
·
any shortfall in revenue or net income or any increase in losses from levels expected by securities analysts;
·
changes in regulatory policies or tax law;
·
operating performance of companies comparable to us; and
·
loss of a major funding source.sources.

TABLE OF CONTENTS

Risks Related to Taxation

Shareholders and the trust could be adversely affected if the IRS were to successfully contend that the trust is not a grantor trust for federal

We have significant income tax purposes.

At the time of our initial public offering we determined that the trust would be classified as a grantor trust for U.S. federal income tax purposes and not as an association taxable as a corporation. Although the matter was not at that time free from doubt, we based this determination on an opinion of Shearman & Sterling LLP provided at that time and under then current law and assuming full compliance with the terms of the trust agreement (and other relevant documents). As a result of this determination, we have stated that, for U.S. federal income tax purposes, investors generally are treated as the beneficial owner of a pro rata portion of the interests in the company held by the trust. A recent pronouncement by the IRS questions the characterization of entities with structures like ours as grantor trusts and could change how we comply with our tax information reporting obligations. Depending on the resolution of these matters, we may be required to report allocable income, expense and credit items to the IRS and to shareholders on Schedule K-1, in addition to or instead of the letter we send to investors each year. A change in the characterization of the trust would not change shareholders’ distributive share of items of income, gain, loss and expense of the trust or the company, nor would it change the income tax liability of the trust or the company.
Under the trust agreement and the LLC agreement, if we determine that the trust is, or is reasonably likely to be, required to issue Schedule K-1s to shareholders, we must exchange all shares of outstanding trust stock for an equal number of LLC interests. We would also intend to take all necessary steps to elect to be treated as a corporation for U.S. federal income tax purposes. In that case, we would have the same tax reporting obligations of a corporation (rather than a partnership) and would not be required to issue Schedule K-1s to shareholders. We may not be able to make such an election without soliciting shareholder approval,Net Operating Losses which may not be obtained and, regardless, is likely to be a time-consuming and costly process. Should we be treated as a partnership for USrealized before they expire.

We have accumulated over $116.0 million in federal income tax purposes and required to deliver a Schedule K-1 to shareholders for any extended length of time, it may negatively impact the liquidity of trading in our trust stock.

Furthermore, if the trust is found not to constitute a grantor trust for U.S. federal income tax purposes, the IRS could assess significant penalties for failure to file a partnership return and deliver Schedule K-1s to shareholders in prior years. Although, we believe thatNet Operating Loss (NOL) carryforwards. While we have metconcluded that all but $15.2 million of the appropriate standards that would enable us to successfully challenge any such penalties,NOLs will more likely than not be realized, there can be no assurance that suchwe will utilize the NOLs generated to date or any NOLs we might generate in the future. In addition, we have incurred state NOLs and have provided a challenge would be successful orvaluation allowance against a portion of those state NOLs. As with our federal NOLs, there is also no assurance that we would not incur significant costs in the process. In light of the recent uncertainty in this area, we may choose to report shareholders’ distributive share of items of income, gain, loss and expense to the IRS and to shareholders on Schedule K-1s for the 2006 and 2007 tax year.


46


Shareholders may be subject to taxation on their share of our taxable income, whetherwill utilize those state losses or not they receive cash distributions from us.
Shareholders may be subject to U.S. federal income taxation and, in some cases, state, local, and foreign income taxation on their share of our taxable income, whether or not they receive cash distributions from us. Shareholders may not receive cash distributions equal to their share of our taxable income or even the tax liability that results from that income. In addition, if we invest in the stock of a controlled foreign corporation (or if one of the corporations in which we invest becomes a controlled foreign corporation, an event which we cannot control), we may recognize taxable income, which shareholders will be required to take into account in determining their taxable income, without a corresponding receipt of cash to distribute to them.
If the company fails to satisfy the “qualifying income” exception, all of its income, including income derived from its non-U.S. assets, will be subject to an entity-level tax in the United States, which could result in a material reduction in our shareholders’ cash flow and after-tax return and thus could result in a substantial reduction in the value of the shares.
A publicly traded partnership will not be characterized as a corporation for U.S. federal income tax purposes so long as 90% or more of its gross income for each taxable year constitutes “qualifying income” within the meaning of Section 7704(d) of the Code. We refer to this exception as the qualifying income exception. The company has concluded that it is classified as a partnership for U.S. federal income tax purposes. This conclusion is based upon the fact that: (a) the company has not elected and will not elect to be treated as a corporation for U.S. federal income tax purposes; and (b) for each taxable year, the company expects that more than 90% of its gross income is and will be income that constitutes qualifying income within the meaning of Section 7704(d) of the Code. Qualifying income includes dividends, interest and capital gains from the sale or other disposition of stocks and bonds. If the company fails to satisfy the “qualifying income” exception described above, items of income and deduction would not pass through to shareholders and shareholders would be treated for U.S. federal (and certain state and local) income tax purposes as shareholders in a corporation. In such case, the company would be required to pay income tax at regular corporate rates on all of its income, including income derived from its non-U.S. assets. In addition, the company would likely be liable for state and local income and/or franchise taxes on all of such income. Distributions to shareholders would constitute ordinary dividend income taxable to such shareholders to the extent of the company’s earnings and profits, and the payment of these dividends would not be deductible by the company. Taxation of the company as a corporation could result in a material reduction in our shareholders’ cash flow and after-tax return and thus could result in a substantial reduction of the value of the shares.
future losses.

The current treatment of qualified dividend income and long-term capital gains under current U.S. federal income tax law may be adversely affected, changed or repealed in the future.

Under current law, qualified dividend income and long-term capital gains are taxed to non-corporate investors at a maximum U.S. federal income tax rate of 15%. This tax treatment may be adversely affected, changed or repealed by future changes in tax laws at any time and is currently scheduled to expire for tax years beginning after December 31, 2008.



47


Item2010.

ITEM 1B. Unresolved Staff Comments

UNRESOLVED STAFF COMMENTS

None.

Item

ITEM 2. Properties

Generally all ofPROPERTIES

In general, the assets of our businesses, including real property, isare pledged to secure the financing arrangements at these businesses.of each business on a stand-alone basis. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in Part II, Item 7 for a further discussion of these financing arrangements.

Airport Services Business
Our airport services business does not own any real property. Its operations are carried out under various long term leases. Our airport services business leases office space for its head office in Plano, Texas, and satellite offices in Baltimore, Maryland and at Teterboro Airport. For more information regarding our FBO locations see “Our

Energy-Related Businesses and Investments — Airport Services Business — Business — Locations” in Part I, Item 1. The lease in Plano expires in 2008 and we extended the lease in Baltimore in May 2006 for 90 days, with automatic renewal until termination by either party. We believe that these facilities are adequate to meet current and foreseeable future needs.

At its FBO sites, our airport services business owns or leases a number of vehicles, including fuel trucks, as well as other equipment needed to service customers. Some phased replacement and routine maintenance is performed on this equipment. We believe that the equipment is generally well maintained and adequate for present operations.
Bulk Liquid Storage Terminal Business

IMTT

IMTT owns and operates eightten wholly-owned bulk liquid storage facilities in the United States and has part ownership in two companies that each own bulk liquid storage facilities in Canada. The land on which the facilities are located is either owned or leased by IMTT with leased land comprising a small proportion of the aggregate amount oftotal land on which the facilities are located.in use. IMTT also owns the storage tanks, piping and transportation infrastructure such as docks and truck and rail loading equipment located at allthe facilities and related ship docks, except forin Quebec and Geismar, where the docks are leased. We believe that the aforementioned equipment that is in service is generally well maintained and adequate for the present operations. For further details, see “Our Businesses and Investments  — Bulk Liquid Storage Terminal Business — BusinessIMTT — Locations” in Part I, Item 1.

The Gas Production and Distribution Business

Company

The Gas Company or TGC, has facilities and equipment on all major Hawaiian Islands providing support for our regulated and non-regulated operations. Property used in the regulated operations includesincluding: land beneath the SNG Plant and underground distribution piping. Regulated operations also includeplant; several LPG holding tanks for LPG for distribution via underground piping located on each major island and by trucks used to transport LPG to these holding tanks. TGC hascylinders; approximately 1,000 miles of underground piping, used in regulated operations, of which approximately 900 miles are on Oahu.Oahu; and a 22-mile transmission pipeline from the SNG plant to Pier 38 in Honolulu.

Non-regulated operations include tanks and cylinders used to store LPG as well as trucks used to transport LPG. TGC also maintains a fleet of service vehicles and other heavy equipment necessary to provide installation, and perform repairs and maintenance to our distribution systems.

TABLE OF CONTENTS

A summary of property, by island, follows. For more information regarding TGC’sThe Gas Company’s operations, see “Business — Our“Our Businesses and Investments — The Gas Production and Distribution BusinessCompany — Fuel Supply, SNG Plant and Distribution System” in Part 1,I, Item 1.



48

Island
 
Description
 
Use
 
Own / Lease
Island Description Use Own/Lease
Oahu SNG Plant Production of SNG Lease
   Kamakee Street Buildings and
Maintenance yard
 Engineering, Maintenance
Facility, Warehouse
 Own
   LPG Baseyard Storage facility for tanks
and cylinders
 Lease
   Topa Fort Street Tower Executive Offices Lease
   Various Holding Tanks Store and supply LPG to
utility customers
 Lease
Maui Office, tank storage facilities and
baseyard
 Island-wide operations Lease
Kauai Office tank storage facility and
baseyard
 Island-wide operations Own
KauaiTank storage facility and baseyardIsland-wide operationsLease
Hawaii Office, tank storage facilities and
baseyard
 Island-wide operations Own

District Energy Business

Thermal Chicago

District Energy owns or leases six plants in Chicago as follows:

Plant Number
 
Plant NumberOwnership or Lease Information
P-1 Thermal ChicagoThe building and equipment are owned by District Energy and the business has a long-term groundproperty lease until 2043 with an option to renew for 49 years. The plant is owned by Thermal Chicago.
P-2 Property, building and plantequipment are owned by Thermal Chicago.
District Energy.
P-3 Thermal ChicagoDistrict Energy has a groundproperty lease that expires in 20172033 with a right to renew for ten years. The plantequipment is owned by Thermal ChicagoDistrict Energy but the landlord has a purchase option over one-thirdapproximately one-fourth of the plant. 
equipment.
P-4 Thermal ChicagoDistrict Energy has a groundproperty lease that expires in 2016 and wethe business may renew the lease for another 10 years for the P-4B plantproperty unilaterally, and for P-4A, with the consent of the landlord. Thermal Chicago acquired the existingThe equipment at P-4A plant and completed the building of the P-4B plant in 2000.is owned by District Energy. The landlord can terminate the service agreement and the plant A premisesP-4A property lease upon transfer of the property, on which the AP-4A and B plantsP-4B are located, to a third-party.
P-5 Thermal ChicagoDistrict Energy has an exclusive perpetual easement for the use of the basement where the plantequipment is located.
The equipment is owned by District Energy.
Stand-Alone Thermal ChicagoDistrict Energy has a contractual right to use the property pursuant to a service agreement. Thermal Chicagoagreement and will own the plantequipment until the earliest of 2025 when the plantequipment reverts to the customer or untilif the customer exercises an early purchase option. Early in 2005, the customer indicated its intent to exercise the early purchase option but has not pursued the matter to date.
These six plants have sufficient capacity to currently serve existing customers. For new customers, a system expansion will be needed as discussed in the specific capital expenditure section. Please see “Our Businesses and Investments —

District Energy Business — Business — Thermal Chicago — Overview”also owns approximately 14 miles of underground piping from which it distributes chilled water from its facilities to the customers in Item 1. Business for a discussion of individual plant capacities.

Northwind Aladdin’s plantdowntown Chicago.

The equipment at District Energy’s Las Vegas facility is housed in its own building on a parcel of leased landproperty within the perimeter of the AladdinPlanet Hollywood resort and casino.casino, which expires in 2020. The property lease is co-terminus with the supply contract with the AladdinPlanet Hollywood resort and casino. The plant isbuilding and equipment are owned by Northwind AladdinDistrict Energy and upon terminationexpiration of the lease the plantbusiness is required to either be abandonedabandon the building and equipment or removedremove them at the landlord’s expense. The plant has sufficient capacity to serve its customers and has room for expansion if needed.



49



Airport Parking Business
Our airport parking business has 30 off-airport parking facilities located at 20 airports throughout the United States.

TABLE OF CONTENTS

Aviation-Related Business

Atlantic Aviation

Atlantic Aviation does not own any real property. Its operations are carried out under various long-term leases. The land on which the facilities are located is either owned or leased by us. The material leases are generally long-term in nature. Please see the description under “Business — Our Businesses and Investments — Airport Parking Business — Locations” in Part I, Item 1 for a fuller description of the nature of the properties where these facilities are located.

Our airport parking business leases office space for its head office in Downey, California.Plano, Texas. For more information regarding Atlantic Aviation’s FBO locations, see “Our Businesses and Investments — Atlantic Aviation — Business —  Locations” in Part I, Item 1. The lease in Plano expires in 2010.2012. We believe that the leased facility isthese facilities are adequate to meet current and foreseeable future needs.
Our airport parking business operates

Atlantic Aviation owns or leases a fleetnumber of shuttle busesvehicles, including fuel trucks and other equipment needed to transport customersprovide service to and from the airports at which it operates. The buses are either owned or leased. The total size of the fleet is approximately 192 shuttle buses. Some routinecustomers. Routine maintenance is performed by its own mechanics, while we outsource more significant maintenance. We believeon this equipment and a portion is replaced in accordance with a pre-determined schedule. Atlantic Aviation believes that these vehicles arethe equipment is generally well maintained and adequate for present operations. Our airport parking business replaces

ITEM 3. LEGAL PROCEEDINGS

Section 185 of the shuttle fleet approximately every threeClean Air Act (CAA) requires states (or in the absence of state action, the EPA) in severe and extreme non-attainment areas to five years.

Item 3. Legal Proceedings
adopt a penalty for major stationary sources of volatile organic compounds and nitrogen oxides if the area fails to attain the one-hour ozone National Ambient Air Quality Standard (NAAQS) set by the EPA. IMTT’s Bayonne facility is a major stationary source of volatile organic compounds and nitrogen oxides in the New Jersey-Connecticut severe non-attainment area. Although we believe IMTT’s Bayonne facility is in substantial compliance with CAA obligations, the subject area failed to meet the required NAAQS by the attainment date in 2007 and as a consequence IMTT-Bayonne believes it is likely to be assessed a penalty linked to its 2008 and 2009 emissions that were in excess of baseline levels. IMTT expects that the penalty related to these matters will be less than $500,000 in the aggregate and that it will not be payable until 2011 or later. IMTT is currently reviewing its operations with the intent of reducing, to the extent feasible, its emissions in order to avoid or reduce potential future penalties.

There are no legal proceedings pending that we believe will have a material adverse effect on us other than ordinary course litigation incidental to our businesses. We are involved in ordinary course legal, regulatory, administrative and environmental proceedings. Typically, expenses associated with these proceedings periodically that are typically covered by insurance.

During 2006, IMTT incurred a fine of $110,000 resulting from self reported air permit violations at its Bayonne terminal. We believe that IMTT is, and at all times seek to remain, substantially in compliance with the many environmental laws and regulations to which it is subject. However changing regulations combined with increasingly stringent and complex monitoring and reporting requirements particularly with respect to emissions on occasions does result in incidences of unintended non-compliance (as occurred at the Bayonne terminal).
Item

ITEM 4. Submission of Matters to a Vote of Securityholders

SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

None.



50



Item

ITEM 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock isLLC interests are traded on the NYSE under the symbol “MIC.” Our common stock began trading on the NYSE on December 16, 2004. The following table sets forth, for the fiscal periods indicated, the high and low sale prices per share of our common stockLLC interest on the NYSE:

  
 High Low
Fiscal 2008
          
First Quarter $39.01  $29.13 
Second Quarter  33.24   25.29 
Third Quarter  25.00   12.63 
Fourth Quarter  12.90   2.32 
Fiscal 2009
          
First Quarter $5.74  $0.79 
Second Quarter  4.36   1.50 
Third Quarter  9.38   3.10 
Fourth Quarter  12.60   7.38 
Fiscal 2010
          
First Quarter (through February 18, 2010) $13.96  $12.20 
  
High
 
Low
 
        
Fiscal 2005
       
First Quarter     $30.08     $27.91 
Second Quarter  29.82  27.21 
Third Quarter  28.80  27.92 
Fourth Quarter  31.00  28.44 
        
Fiscal 2006
       
First Quarter $35.23 $30.64 
Second Quarter  32.27  26.06 
Third Quarter  32.68  23.84 
Fourth Quarter  35.79  29.20 
        
Fiscal 2007
       
First Quarter (through February 23, 2007)                                                     $39.91 $34.65 

As of January 31, 2007February 25, 2010, we had 37,562,165 shares of trust stock45,292,913 LLC interests outstanding that were held by 4690 holders of record and approximately 25,000representing over 16,000 beneficial owners.

holders.

Disclosure of NYSE-Required Certifications

Because our trust stock isLLC interests are listed on the NYSE, our Chief Executive Officer is required to make, and on November 7, 2006July 6, 2009 did make, an annual certification to the NYSE stating that he was not aware of any violation by the companyCompany of the corporate governance listing standards of the NYSE. In addition, we have filed, as exhibits to this annual report on Form 10-K, the certifications of the Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002 to be filed with the SEC regarding the quality of our public disclosure.

Distribution Policy

We intend to declare and pay regular

In February 2009, we suspended payment of quarterly cash distributions on all outstanding shares. Our policy is based on the predictable and stable cash flows of our businesses and investments and our intention to pay out as distributions to our shareholders the majority of our cash available for distributions and not to retain significant cash balances in excess of prudent reserves in our operating subsidiaries. We intend to finance our internal growth strategy primarily with selective operating cash flow and using existing debt and other resources at the company level. We intend to finance our acquisition strategy primarily through a combination of issuing new equity and incurring debt and not through operating cash flow. If our strategy is successful, we expect to maintain and increase the level of our distributions to shareholders in favor of applying the future.cash generated by our operating businesses to the reduction of holding company debt and operating company debt, principally at Atlantic Aviation. This policy is likely to remain in effect until such time as, a) we have achieved a prudent level of cash reserves at both our holding company and operating company entities, and b) the credit markets and customer spending patterns at the “user-pay” businesses regain a level of stability and predictability that enables us to confidently estimate refinancing terms relating to our long-term debt.


TABLE OF CONTENTS

Since January 1, 2005,2008, we have made or declared the following per share distributions:

    
Declared Period Covered $ per LLC
Interest
 Record Date Payable Date
February 25, 2008
  Fourth quarter 2007  $0.635   March 5, 2008   March 10, 2008 
May 5, 2008  First quarter 2008  $0.645   June 4, 2008   June 10, 2008 
August 4, 2008  Second quarter 2008  $0.645   September 4, 2008   September 11, 2008 
November 4, 2008
  Third quarter 2008  $0.20   December 3, 2008   December 10, 2008 
Declared
 
Period Covered
 
$ Per Share
 
Record Date
 
Payable Date
 
           
May 14, 2005     Dec 15 - Dec 31, 2004     $0.0877     June 2, 2005     June 7, 2005 
May 14, 2005 First quarter 2005 $0.50 June 2, 2005 June 7, 2005 
August 8, 2005 Second quarter 2005 $0.50 September 6, 2005 September 9, 2005 
November 7, 2005 Third quarter 2005 $0.50 December 6, 2005 December 9, 2005 
March 14, 2006 Fourth quarter 2005 $0.50 April 5, 2006 April 10, 2006 
May 4, 2006 First quarter 2006 $0.50 June 5, 2006 June 9, 2006 
August 7, 2006 Second quarter 2006 $0.525 September 6, 2006 September 11, 2006 
November 8, 2006 Third quarter 2006 $0.55 December 5, 2006 December 8, 2006 
February 27, 2007 Fourth quarter 2006 $0.57 April 4, 2007 April 9, 2007 


51

The declaration and payment of any future distribution will be subject to a decision of the company’s boardCompany’s Board of directors,Directors, which includes a majority of independent directors. The company’s boardCompany’s Board of directorsDirectors will take into account such matters as the state of the capital markets and general business conditions, our financial condition, results of operations, capital requirements and any contractual, legal and regulatory restrictions on the payment of distributions by us to our shareholders or by our subsidiaries to us, and any other factors that the boardBoard of directorsDirectors deems relevant. In particular, each of our businesses and investments have substantial debt commitments and restrictive covenants, which must be satisfied before any of them can distributepay dividends or make distributions to us. TheseAny or all of these factors could affect our ability to continue to makeboth the timing and amount, if any, of future distributions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in Part II, Item 7.

Securities Authorized for Issuance Under Equity Compensation Plans

The table below sets forth information with respect to shares of trust stockLLC interests authorized for issuance as of December 31, 2006:

Plan Category
 
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights(a)
 
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights(b)
 
Number of Securities
Remaining Available
for Future Issuance
under Equity
Compensation Plans
(Excluding Securities
Under Column (a))(c)
 
         
Equity compensation plans approved by
securityholders(1)
     16,869     $     (1)
Equity compensation plans not approved by
securityholders
     
Total 16,869   (1)
——————
(1)
Information represents number of shares of trust stock issuable upon the vesting of director stock units pursuant to our independent directors’ equity plan, which was approved and became effective in December 2004. Under the plan, each independent director elected at our annual meeting of shareholders is entitled to receive a number of director stock units equal to $150,000 divided by the average closing sale price of the trust stock during the 10-day period immediately preceding our annual meeting. The units vest on the day prior to the following year’s annual meeting. We granted 5,623 director stock units to each of our independent directors elected at our 2006 annual shareholders’ meeting based on the average 10-day closing price of $26.68. Currently, we have 44,127 shares of trust stock reserved for future issuance under the plan.

2009:

Plan CategoryNumber of Securities
to Be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(a)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Under Column (a))
(c)
Equity compensation plans approved by securityholders(1)128,205$(1)
Equity compensation plans not approved by securityholders
Total128,205(1) 
Item 6. Selected Financial Data

(1)Information represents number of LLC interests issuable upon the vesting of director stock units pursuant to our independent directors’ equity plan, which was approved and became effective in December 2004. Under the plan, each independent director elected at our annual meeting of shareholders is entitled to receive a number of director stock units equal to $150,000 divided by the average closing sale price of the stock during the 10-day period immediately preceding our annual meeting. The units vest on the day prior to the following year’s annual meeting. We granted 42,735 director stock units to each of our independent directors elected at our 2009 annual shareholders’ meeting based on the average closing price per share over a 10 trading day period of $3.51. We have 488,739 LLC interests reserved for future issuance under the plan.

TABLE OF CONTENTS

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data includes the results of operations, cash flow and balance sheet data of North America Capital Holding Company, or NACH (now known as Atlantic Aviation FBO Inc., or Atlantic Aviation), which was deemed to be our predecessor. We have included the results of operations and cash flow data of NACH for the years ended, and as of, December 31, 2002 and December 31, 2003, for the period from January 1, 2004 through July 29, 2004 and for the period July 30, 2004 through December 22, 2004. The period from December 23, 2004 through December 31, 2004 includes the results of operations and cash flow data for our businesses and investments from December 23 through December 31, 2004 and the results of the company from April 13, 2004 through December 31, 2004. The years ended December 31,2009, 2008, 2007, 2006 and 2005 include the full year of results for our consolidated group, with the results of businesses acquired during 2006 and 2005those years being included from the date of each acquisition. We have included the balance sheet data of NACH at December 31, 2003, and our consolidated balance sheet data at December 31, 2004, 2005 and 2006.



52
     
 Macquarie Infrastructure Company
   Year Ended Dec 31,
2009
 Year Ended Dec 31,
2008(1)
 Year Ended Dec 31,
2007(1)
 Year Ended Dec 31,
2006(1)
 Year Ended
Dec 31,
2005(1)
   ($ In Thousands, Except Per LLC Interest/Trust Stock Data)
Statement of operations data:
     
Revenue
     
Revenue from product sales $394,200  $586,054  $445,852  $262,432  $142,785 
Revenue from product sales – utility  95,769   121,770   95,770   50,866    
Service revenue  215,349   264,851   207,680   125,773   96,800 
Financing and equipment lease income  4,758   4,686   4,912   5,118   5,303 
Total revenue  710,076   977,361   754,214   444,189   244,888 
Cost of revenue:
     
Cost of product sales  231,139   406,997   302,283   192,399   84,480 
Cost of product sales – utility  71,252   103,216   64,371   14,403    
Cost of services(2)  46,317   63,850   53,387   37,905   37,085 
Gross profit  361,368   403,298   334,173   199,482   123,323 
Selling, general and administrative expenses  214,865   231,273   185,370   114,333   78,127 
Fees to manager - related party  4,846   12,568   65,639   18,631   9,294 
Goodwill impairment(3)  71,200   52,000          
Depreciation(4)  36,813   40,140   20,502   12,102   6,007 
Amortization of intangibles(5)  60,892   61,874   32,356   18,283   11,013 
Operating (loss) income  (27,248  5,443   30,306   36,133   18,882 
Dividend income           8,395   12,361 
Interest income  119   1,090   5,705   4,670   4,034 
Interest expense  (91,154  (88,652  (65,356  (60,484  (23,449
Loss on extinguishment of debt        (27,512      
Equity in earnings (losses) and amortization of charges of investees
  22,561   1,324   (32  12,558   3,685 
Loss on derivative instruments  (29,540  (2,843  (1,362  (822   
Gain on sale of equity investment           3,412    
Gain on sale of investment           49,933    
Gain on sale of marketable securities           6,737    
Other income (expense), net  760   (19  (1,088  92   136 
Net (loss) income from continuing operations before income taxes and noncontrolling interests  (124,502  (83,657  (59,339  60,624   15,649 
Benefit for income taxes  15,818   14,061   16,764   4,287   3,615 
Net (loss) income from continuing operations before noncontrolling interests  (108,684  (69,596  (42,575  64,911   19,264 
Noncontrolling interests  486   585   554   528   719 
Net (loss) income from continuing operations $(109,170 $(70,181 $(43,129 $64,383  $18,545 
Discontinued operations
     
Net loss from discontinued operations before income taxes and noncontrolling interests $(23,647  (180,104 $(9,679 $(27,150 $(3,865
Benefit (provision) for income taxes  1,787   70,059   (281  12,134    

  
Successor
Year
Ended
Dec 31,
2006
 
Successor
Year
Ended
Dec 31,
2005
 
Successor
Dec 23
through
Dec 31,
2004
 
Predecessor
July 30
through
Dec 29,
2004
 
Predecessor
Jan 1
through
July 29,
2004
 
Predecessor
Year
Ended
December 31,
2003
 
Predecessor
Year
Ended
December 31,
2002
 
  ($ in thousands, except per share data) 
Statement of Operations Data:
                      
Revenue
                      
Revenue from fuel sales     $313,298     $142,785     $1,681     $29,465     $41,146     $57,129     $49,893 
Service revenue  201,835  156,655  3,257  9,839  14,616  20,720  18,698 
Lease Income  5,118  5,303  126         
Total Revenue  520,251  304,743  5,064  39,304  55,762  77,849  68,591 
Cost of revenue:
                      
Cost of product sales  (206,802) (84,480) (912) (16,599) (21,068) (27,003) (22,186)
Cost of services(1)  (92,542) (82,160) (1,633) (849) (1,428) (1,961) (1,907)
Gross profit
  220,907  138,103  2,519  21,856  33,266  48,885  44,498 
Selling, general and administrative expenses(2)  (120,252) (82,636) (7,953) (13,942) (22,378) (29,159) (27,795)
Fees to manager  (18,631) (9,294) (12,360)        
Depreciation  (12,102) (6,007) (175) (1,287) (1,377) (2,126) (1,852)
Amortization of intangibles(3)  (43,846) (14,815) (281) (2,329) (849) (1,395) (1,471)
Operating income (loss)
  26,076  25,351  (18,250) 4,298  8,662  16,205  13,380 
Interest income  4,887  4,064  69  28  17  71  63 
Dividend income  8,395  12,361  1,704         
Finance Fees        (6,650)      
Interest expense  (77,746) (33,800) (756) (2,907) (4,655) (4,820) (5,351)
Equity in earnings (loss) and amortization charges of investees  12,558  3,685  (389)        
Unrealized losses on derivative instruments  (1,373)            
Gain on sale of equity investment  3,412             
Gain on sale of investment  49,933             
Gain on sale of marketable securities  6,738             
Other income (expense), net  594  123  50  (39) (5,135) (1,219)  
Income (loss) from continuing operations before income tax  33,474  11,784  (17,572) (5,270) (1,111) 10,237  8,092 
Income tax benefit (expense)  16,421  3,615    (286) 597  (4,192) (3,150)
Minority interests  23  (203) (16)        
Income (loss) from continuing operations  49,918  15,196  (17,588) (5,556) (514) 6,045  4,942 
Discontinued operations:                      
Income from operations of discontinued operations        116  159  121  197 
Loss on disposal of discontinued operations            (435) (11,620)
Income (loss) on disposal of discontinued operations (net of applicable income tax provisions)        116  159  (314) (11,423)
Net income (loss)
  49,918  15,196  (17,588) (5,440) (355) 5,731  (6,481)
Basic and diluted earnings (loss) per share(4)  1.73  0.56  (17.38)        
Cash dividends declared per common share  2.075  1.5877           
Cash Flow Data:
                      
Cash provided by (used in) operating activities  46,365  43,547  (4,045) (577) 7,757  9,811  9,608 
Cash (used in) provided by investing activities  (686,196) (201,950) (467,477) (228,145) 3,011  (4,648) (2,787)
Cash provided by (used in) financing activities  562,328  133,847  611,765  231,843  (5,741) (5,956) (5,012)
Effect of exchange rate  (272) (331) (193)        
Net (decrease) increase in cash  (77,775) (24,887) 140,050  3,121  5,027  (793) 1,809 
——————

TABLE OF CONTENTS

     
 Macquarie Infrastructure Company
   Year Ended Dec 31,
2009
 Year Ended Dec 31,
2008(1)
 Year Ended Dec 31,
2007(1)
 Year Ended Dec 31,
2006(1)
 Year Ended
Dec 31,
2005(1)
   ($ In Thousands, Except Per LLC Interest/Trust Stock Data)
Net loss from discontinued operations before noncontrolling interests  (21,860  (110,045  (9,960  (15,016  (3,865
Noncontrolling interests  (1,863  (1,753  (1,035  (551  (516
Net loss from discontinued operations $(19,997 $(108,292 $(8,925 $(14,465 $(3,349
Net loss $(129,167 $(178,473 $(52,054 $49,918  $15,196 
Basic and diluted (loss) earnings per LLC interest/trust stock from continuing operations $(2.43 $(1.56 $(1.05 $2.23  $0.69 
Basic and diluted loss per LLC interest/trust stock from discontinued operations  (0.44  (2.41  (0.22  (0.50  (0.13
Weighted average number of shares outstanding: basic  45,020,085   44,944,326   40,882,067   28,895,522   26,919,608 
Weighted average number of shares outstanding: diluted  45,020,085   44,944,326   40,882,067   28,912,346   26,929,219 
Cash dividends declared per LLC interest/trust stock $  $2.125  $2.385  $2.0750  $1.5877 
Statement of cash flows data:
                         
Cash flow from continuing operations
     
Cash provided by operating activities $82,976  $95,579  $93,499  $38,979  $39,033 
Cash used in investing activities  (516  (56,716  (638,853  (681,994  (126,262
Cash (used in) provided by financing activities  (117,818  1,698   570,618   556,259   77,945 
Effect of exchange rate        (1  (272  (331
Net (decrease) increase in cash $(35,358 $40,561  $25,263  $(87,028 $(9,615
Cash flow from discontinuing operations
     
Cash (used in) provided by operating activities $(4,732 $(1,904 $3,051  $7,386  $4,514 
Cash used in investing activities  (445  (26,684  (5,157  (4,202  (75,688
Cash provided by (used in) financing activities  2,144   (1,215  (3,072  6,069   55,902 
Net (decrease) increase in cash(6)  (3,033  (29,803  (5,178  9,253   (15,272
Change in cash of discontinued operations held for sale(6) $(208 $2,459  $5,902  $(2,740 $(5,931

(1)Reclassified to conform to current period presentation.
(2)Includes depreciation expense of $6.1 million, $5.8 million, $5.8 million, $5.7 million and $5.7 million for the years ended December 31, 2009, 2008, 2007, 2006 and 2005, respectively, relating to District Energy.
(3)Reflects non-cash impairment charge of $71.2 million and $52.0 million recorded during the first six months of 2009 and the fourth quarter of 2008, respectively, at Atlantic Aviation.
(4)Includes a non-cash impairment charge of $7.5 million and $13.8 million recorded during the first six months of 2009 and the fourth quarter of 2008, respectively, at Atlantic Aviation.
(5)Includes a non-cash impairment charge of $23.3 million and $21.7 million for contractual arrangements recorded in the first six months of 2009 and the fourth quarter of 2008, respectively, at Atlantic Aviation and a $1.3 million non-cash impairment charge on the airport management contracts at Atlantic Aviation in 2007.
(6)Cash of discontinued operations held for sale is reported in assets of discontinued operations held for sale in our consolidated balance sheets. The net (decrease) increase in cash is different than the change in cash of discontinued operations held for sale due to intercompany transactions that are eliminated in consolidation.

TABLE OF CONTENTS

     
 Macquarie Infrastructure Company
   Year Ended Dec 31,
2009
 Year Ended Dec 31,
2008(1)
 Year Ended Dec 31,
2007(1)
 Year Ended Dec 31,
2006(1)
 Year Ended
Dec 31,
2005(1)
   ($ In Thousands)
Balance sheet data:
     
Assets of discontinued operations held for sale $86,695  $105,725  $258,899  $268,327  $288,846 
Total current assets from continuing operations  129,866   193,890   201,604   216,620   144,856 
Property, equipment, land and leasehold improvements, net(2)  580,087   592,435   577,498   425,045   240,260 
Intangible assets, net(3)  751,081   811,973   846,941   513,466   260,849 
Goodwill(4)  516,182   586,249   636,336   352,213   148,122 
Total assets  2,339,221   2,552,436   2,813,029   2,097,531   1,363,300 
Liabilities of discontinued operations held for sale $220,549  $224,888  $225,042  $220,452  $207,321 
Total current liabilities from continuing operations  174,647   135,311   121,892   62,981   26,322 
Deferred income taxes  107,840   83,228   202,683   163,923   113,794 
Long-term debt, including related party, net of current portion  1,166,379   1,327,800   1,225,150   758,400   438,247 
Total liabilities  1,764,453   1,918,175   1,841,159   1,227,946   790,632 
Members' equity $578,526  $628,838  $966,552  $864,425  $567,665 

(1)Reclassified to conform to current period presentation.
(2)Includes a non-cash impairment charge of $7.5 million and $13.8 million recorded during the first six months of 2009 and the fourth quarter of 2008, respectively, at Atlantic Aviation.
(3)Includes a non-cash impairment charge of $23.3 million and $21.7 million for contractual arrangements recorded in the first six months of 2009 and the fourth quarter of 2008, respectively, at Atlantic Aviation and a $1.3 million non-cash impairment charge on the airport management contracts at Atlantic Aviation in 2007.
(4)Reflects non-cash impairment charge of $71.2 million and $52.0 million recorded during the first six months of 2009 and the fourth quarter of 2008, respectively, at Atlantic Aviation.
(1)
Includes depreciation expense of $9.3 million and $8.1 million for the years ended December 31, 2006 and 2005, respectively, relating to our airport parking and district energy businesses.
(2)
The company incurred $6.0 million of non-recurring acquisition and formation costs that have been included in the December 23, 2004 to December 31, 2004 consolidated results of operations.
(3)
Includes a non-cash impairment charge of $23.5 million for existing trademarks and domain names due to a re-branding initiative, in the year ended December 31, 2006.
(4)
Basic and diluted earnings (loss) per share was computed on a weighted average basis for the years ended December 31, 2006 and 2005 and for the period April 13, 2004 (inception) through December 31, 2004. The basic


53


weighted average computation of 28,895,522 shares of trust stock outstanding for 2006 was computed based on 27,050,745 shares outstanding from January 1, 2006 through June 1, 2006, 27,066,618 shares outstanding from June 2, 2006 through June 26, 2006, 27,212,165 shares outstanding from June 27, 2006 through October 29, 2006, 36,212,165 shares outstanding from October 30, 2006 through November 5, 2006 and 37,562,165 shares outstanding from November 6, 2006 through December 31, 2006. The diluted weighted average computation of 28,912,346 shares of trust stock outstanding for 2006 was computed by assuming that all of the stock unit grants provided to the independent directors on May 25, 2006 and May 25, 2005 had been converted to shares on those dates. The basic weighted average computation of 26,919,608 shares of trust stock outstanding for 2005 was computed based on 26,610,100 shares outstanding from January 1, 2005 through April 18, 2005, 27,043,101 shares outstanding from April 19, 2005 through May 24, 2005 and 27,050,745 shares outstanding from May 25, 2005 through December 31, 2005. The diluted weighted average computation of 26,929,219 shares of trust stock outstanding for 2005 was computed by assuming that all of the stock grants provided to the independent directors on May 25, 2005 and December 21, 2004 had been converted to shares on those dates. The basic weighted average computation of 1,011,887 shares of trust stock outstanding for 2004 was computed based on 100 shares outstanding from April 13, 2004 through December 21, 2004 and 26,610,100 shares outstanding from December 22, 2004 through December 31, 2004. The stock grants provided to the independent directors on December 21, 2004 were anti-dilutive in 2004 due to the Company’s net loss for that period.
  
Successor at
December 31,
2006
 
Successor at
December 31,
2005
 
Successor at
December 31,
2004
 
Predecessor at
December 31,
2003
 
     ($ in thousands)    
Balance Sheet Data:             
Total current assets     $230,966     $156,676     $167,769     $10,108 
Property, equipment, land and leasehold improvements, net  522,759  335,119  284,744  36,963 
Contract rights and other intangibles, net  526,759  299,487  254,530  52,524 
Goodwill  485,986  281,776  217,576  33,222 
Total assets  2,097,533  1,363,298  1,208,487  135,210 
Current liabilities  72,139  34,598  39,525  15,271 
Deferred tax liabilities  163,923  113,794  123,429  22,866 
Long-term debt, including related party, net
of current portion
  959,906  629,095  434,352  32,777 
Total liabilities  1,224,927  786,693  603,676  75,369 
Redeemable convertible preferred stock        64,099 
Stockholders’ equity (deficit)  864,425  567,665  596,296  (4,258)
Item

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of the companyCompany should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere herein. This discussion contains forward-looking statements that involve risks and uncertainties and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions identify such forward-looking statements. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A. Unless required by law, we undertake no obligation to update forward-looking statements. Readers should also carefully review the risk factors set forth in other reports and documents filed from time to time with the SEC.



54


GENERAL
The trust is a Delaware statutory trust that was formed on April 13, 2004. The company is a Delaware limited liability company that was also formed on April 13, 2004. The trust is the sole holder of 100% of the LLC interests of the company. Prior to December 21, 2004, the trust was a wholly-owned subsidiary of our Manager, a member of the Macquarie Group.

General

We own, operate and invest in a diversified group of infrastructure businesses that are providingprovide basic everyday services, such as parking, roadschilled water for building cooling and water,gas utility services to businesses and individuals primarily in the U.S. The businesses we own and operate are energy-related businesses consisting of IMTT, The Gas Company, and our controlling interest in District Energy, and an aviation-related business consisting of Atlantic Aviation.

On January 28, 2010, we agreed to sell the assets of PCAA through long-life physical assets. Thesea bankruptcy process, which we expect to complete in the first half of 2010. This business is now a discontinued operation and is therefore separately reported in our consolidated financial statements and is no longer a reportable segment.

Our infrastructure businesses generally operate in sectors with limited competition and high barriers to entry. Asentry resulting from a result,variety of factors including high initial development and construction costs, the existence of long-term contracts or the requirement to obtain government approvals and a lack of immediate cost-efficient alternatives to the services provided. Overall they havetend to generate sustainable and growing long-term cash flows.

Our energy-related businesses have proven, to date, largely resistant to the economic downturn of the past 18 to 24 months, primarily due to the contracted or utility-like nature of their revenues combined with the essential services they provide and the contractual or regulatory ability to pass through most cost increases to customers. We operatebelieve these businesses are generally able to generate consistent cash flows throughout the business cycle.

The results of Atlantic Aviation have been negatively affected since mid-2008 by lower overall economic and financedeclining general aviation activity levels through mid-2009. However, general activity levels stabilized in the second half of 2009 and finally showed some year on year growth in December. This stabilization, combined with expense reduction efforts, resulted in an improving outlook for the business.

The uncertainty and instability in the credit markets appears to be subsiding. This is evident in the increase in the volume of lending activity and the price at which such lending is occurring compared with levels during the height of the global financial crisis. We believe that this improvement in the credit market has had a beneficial impact on the outlook for our businesses, given the significant amount of long-term debt those businesses have outstanding.

Despite the improvement in the credit markets, we expect to continue to strengthen our consolidated balance sheet and those of our operating entities through prudent reduction in the amount of long-term debt outstanding, further increasing the likelihood that we will be able to successfully refinance this debt as it matures over approximately the next four years. In 2009, we accomplished a manner that maximizes these cash flows.

The company is dependent upon cash distributions from its businesses to meet its corporate overhead and to pay management fee expenses and to pay dividends. We receive distributions throughportion of this objective by repaying in full our directly owned holding company MIC Inc. for alldebt and by reaching an agreement to sell the assets of PCAA, as discussed below. To the extent that our businesses based ingenerate excess cash, we expect to retain such cash over the United States. During 2006,near term.

PCAA Asset Purchase Agreement

On January 28, 2010, we also received interest and principal on our subordinated loansannounced that PCAA had entered into an asset purchase agreement with Bainbridge ZKS — Corinthian Holdings, LLC. This agreement, which is subject to and dividends from, our toll road business and dividends from Macquarie Communications Infrastructure Group, or MCG, and South East Water, or SEW, through directly owned holding companies that we formed to hold our interest in each business and investment. We sold our toll road business in December 2006 and our interests in MCG and SEW in August and October of 2006, respectively.

Distributions received from our businesses and investments net of taxes, are available first to meet management fees and corporate overhead expenses then to fund distribution paymentsapproval by the company to the trust for payment to holders of trust stock. Base and performance management fees payable to our Manager are allocated among the company and the directly owned subsidiaries based on the company’s internal allocation policy.
On May 4, 2006, the company’s board of directors declared a distribution of $0.50 per share for the quarter ended March 31, 2006 which was paid on June 9, 2006 to holders of record on June 5, 2006. On August 7, 2006, the company’s board of directors declared a distribution of $0.525 per share for the quarter ended June 30, 2006 which was paid on September 11, 2006 to holders of record on September 6, 2006. On November 8, 2006, the company’s board of directors declared a distribution of $0.55 per share for the quarter ended September 30, 2006 which was paid on December 8, 2006 to holders of record on December 5, 2006. On February 27, 2007, the company’s board of directors declared a dividend of $0.57 per share payable on April 9, 2007 to holders of record on April 4, 2007.
Tax Treatment of Distributions
Each holder of trust stockbankruptcy court, will be required to includeresult in US federal taxable income its allocable share of trust income, gain, loss deductions and other items. The amounts shareholders include in taxable income may not equal the cash distributions to shareholders.
Some of the distributions received by the trust on its investment in the Company may be a return of capital for US federal income tax purposes. Therefore, the amount we distribute to our shareholders may exceed their allocable share of the items of income and expense. The extent to which the distributions from the Company will be characterized as dividend income cannot be estimated at this time. In some cases, distributions to holders of trust stock may be less than the items of income.
If cash distributions exceed the allocable items of income and deductions, the shareholder’s tax basis in its investment will generally be decreased by the excess, increasing the potential capital gain on the sale of the stock. Correspondingly, ifassets of PCAA for $111.5 million, subject to certain adjustments and will result in the cash distributions are less thanelimination of $201.0 million of current debt from liabilities of discontinued operations held for sale in the allocable itemsconsolidated balance sheet. The cancelled debt in excess of the sale proceeds used to repay such debt would result in cancellation of debt income and deductions, there willthe proceeds in excess of the business’ net assets as a gain on sale. As a part of the bankruptcy sale process, all cash proceeds would be an increasecourt. If approved, we expect to complete the sale of the assets in the shareholders basisfirst half of 2010.


TABLE OF CONTENTS

As part of the bankruptcy filing, we have no obligation to and reductionhave no intention of committing additional capital to this business and our ongoing liabilities are expected to be no more than $5.3 million in the potential capital gain.

Asguarantees of a resultsingle parking facility lease. Creditors of this business do not have recourse to any assets of our dispositions during 2006, we recorded accounting gains of approximately $60.1 million. Capital gains approximating these amounts are allocated to shareholders who held sharesholding company or any assets of our stock on the last dayother businesses, other than approximately $5.3 million in a lease guarantee as of February 25, 2010.

Sale of Non-controlling Stake in District Energy

On December 23, 2009, we sold 49.99% of the month preceding the respective closing datesnon-controlling interest of eachDistrict Energy to John Hancock Life Insurance Company and John Hancock Life Insurance Company (U.S.A.) (collectively “John Hancock”) for $29.5 million. The proceeds of the dispositions.

Beyond 2006, the portion of our distributions that will be treated as dividends, interest or return of capital for US federal income tax purposes is subject to a number of uncertainties. We currently anticipate that substantially all of the portion of our regular distributions that are treated as dividends for US federal income tax purposes should be characterized as qualified dividend income.


55


Other Tax Matters
A recent pronouncement by the IRS questions the characterization of entitiessale, along with structures like ours as grantor trusts and could change how we comply with our tax information reporting obligations. Depending on the resolution of these matters, we may be required to report allocable income, expense and credit items to the IRS and to shareholders on Schedule K-1, in addition to or instead of the letter we send to investors each year. A change in the characterization of the trust would not change shareholders’ distributive share of items of income, gain, loss and expense of the trust or the company, nor would it change the income tax liability of the trust or the company.
If we are required, or reasonably likely to be required, to issue Schedule K-1s to shareholders, we would exchange all shares of outstanding trust stock for an equal number of LLC interests and, further, we intend to take all necessary steps to elect to be treated as a corporation for U.S. federal income tax purposes. In that case, we would have the same tax reporting obligations of a corporation (rather than a partnership) and would not be required to issue Schedule K-1s to shareholders.

Acquisitions and Dispositions

On December 21, 2004, we completed our IPO and concurrent private placement, issuing a total of 26,610,000 shares of trust stock at a price of $25.00 per share. Total gross proceeds were $665.3 million before offering costs and underwriting fees of $51.6 million. The majority of the proceedsother cash resources, were used to acquirefully repay the $66.4 million balance on our airports services business, airport parking business, district energy business, toll road business and investments in MCG and SEW in December 2004. In 2005 and 2006, we completed additional acquisitions in our existing business segments and in new segments and disposed of our toll road business and our investments in MCG and SEW, as follows.

Airport Services Business

On July 11, 2006, our airport services business acquired 100% of the shares of Trajen Holdings, Inc., or Trajen, the holding company for 23 fixed base operations, or FBOs, at airports in 11 states. In addition, on August 12, 2005, our airport services business acquired all ofrevolving credit facility as described below.

MIC Inc. Revolving Credit Facility

At March 31, 2009, we reclassified the membership interests in Eagle Aviation Resources, or EAR, operating an FBO in Las Vegas. On January 14, 2005, our airport services business acquired General Aviation Holdings, LLC, or GAH, with two FBOs in California. With these acquisitions, our airport services business owned and operated, at year end, a network of 41 FBOs and one heliport in the United States, the second largest such network in the industry.

Airport Parking Business
In October 2005, our airport parking business acquired real property, and personal and intangible assets related to six off-airport parking facilities collectively referred to as “SunPark” as well as a leasehold facility in Cleveland. Our airport parking business also acquired a facility in Philadelphia in July 2005. Following these acquisitions and consolidations, as discussed further below, our airport parking business has become the largest provider of off-airport parking services in the United States with 30 facilities at 20 airports across the United States.
Gas Production and Distribution Business
We acquired TGC on June 7, 2006. TGC owns and operates the sole regulated synthetic natural gas production and distribution business in Hawaii and distributes and sells liquefied petroleum gas through unregulated operations.

Bulk Liquid Storage Terminal Business
On May 1, 2006, we completed the purchase of newly issued common stock of IMTT Holdings Inc., the holding company for a group of companies and partnerships that operate IMTT. As a result of this transaction, we own 50% of IMTT Holdings’ issued and outstanding common stock. We have entered into a shareholders’ agreement which provides, with some exceptions, for minimum aggregate quarterly distributions of $14.0 million to be paid by IMTT Holdings, or $7.0 million to us, beginning with the quarter ended June 30, 2006 and through the quarter ending December 31, 2008.


56


Dispositions
On August 17, 2006, we sold our 16,517,413 stapled securities of Macquarie Communications Infrastructure Group (ASX: MCG) for $76.4 million. On October 2, 2006, we sold our 17.5% minority interest in the holding company for South East Water to HDF (UK) Holdings Limited and received net proceedsbalance drawn on the sale of approximately $89.5 million. On December 29, 2006 we disposed of our toll road business through the sale of our 50% interest in Connect M1-A1 Holdings Limited (“CHL”), for net proceeds of approximately $83.0 million.

See Note 4, Acquisitions, to the consolidated financial statements in Part II, Item 8 of this Form 10-K for further information on recent acquisitions and the related financings. See Note 5, Dispositions, to the consolidated financial statements in Part II, Item 8 of this Form 10-K for further information on recent dispositions.

Equity Offering
During the fourth quarter of 2006, we completed an offering of an aggregate of 10,350,000 shares of trust stock at a price per share of $29.50 for which we received net proceeds of $290.9 million. The net cash proceeds from the equity offering and the sales of our interests in MCG and SEW were primarily used to repay in full indebtedness under the MIC Inc. acquisition credit facility.
Pending Acquisitions
On December 21, 2006, we entered into a business purchase agreement and a membership interest purchase agreement to acquire 100% of the interests in entities that own and operate two fixed base operations, or FBOs. The total purchase price is a cash consideration of $85.0 million (subject to working capital adjustments). In addition to the purchase price, it is anticipated that a further $4.5 million will be incurred to cover transaction costs, integration costs and reserve funding. The FBOs are located at Stewart International Airport in New York and Santa Monica Airport in California.
We expect to close the transaction through our airport services business. We expect to finance the purchase price and the associated transaction and other costs, in part, with $32.5 million of additional term loan borrowings under an expansion of therevolving credit facility at our airport services business. We expectnon-operating holding company from long-term debt to paycurrent portion of long-term debt on our consolidated balance sheet due to its scheduled maturity on March 31, 2010. During the remainderyear, we were in discussions with our lenders to convert the facility to a term loan and extend the maturity date of the purchase price$66.4 million outstanding balance.

By December 2009, we had received unanimous approval from the lenders to extend the term of the facility. However, using the net cash proceeds we received from the sale of the 49.99% non-controlling interest in District Energy, and associated costs with cash on hand. Thehand, we paid off the outstanding principal balance on December 28, 2009 and avoided the substantial costs that would have been incurred had the terms of the facility been amended. Shortly thereafter we elected to reduce the amount available on the revolving credit facility will continuefrom $97.0 million to be secured by all$20.0 million through to the maturity of the assetsfacility at March 31, 2010.

Income Taxes

We file a consolidated federal income tax return that includes the taxable income of all our businesses, except IMTT and, stock of companies within the airport services business.

IMPACT OF ACQUISITIONS ON OUR RESULTS OF OPERATIONS
Results of the operations of each of the acquisitionsgoing forward, District Energy. IMTT and District Energy will file separate income tax returns and we will include in our airport services and airport parking businesses andtaxable income the acquisition of TGC are included in our consolidated results from the respective date of acquisition. These acquisitions resulted in significant increases in the recorded value of our property, plant and equipment, our intangible assets, including goodwill, our airport contract rights, customer relationships and technology, and in depreciation and amortization expense. Our 2006 and 2005 annual depreciation and amortization expense increased as this additional expense was fully reflected in our results. These acquisitions also resulted in a significant amount of goodwill. Our acquisition of 50% of IMTT Holdings is reflected in our equity in earnings and amortization charges of investee line in our financial statements from May 1, 2006.
We have financed a significanttaxable portion of our acquisition purchase prices with debt incurred at the business segment level, other than our investment in IMTT. The increased levels of debt have resulted in significant increases in interest expenseany distributions from the respective date of acquisition. Simultaneous with our acquisition of our parking business’ holding company, the holding company increased its economic ownership in the underlying Macquarie Parking business from 43.1% to 87.1%. Minority shareholders did not contribute their full pro rata share of capital raised for acquisitions in 2005. As a result, we increased our ownership in the business from 87.1% to 88.0%. The historical results of the parking business discussed in this section include a larger allocation of net losses to the minority investors in 2004 and 2005.


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OPERATING SEGMENTS AND BUSINESSES
Airport Services Business
Our airport services business depends upon the level of general aviation activity, and jet fuel consumption,those businesses, which taxable distributions should qualify for the largest portion of its revenue. General aviation activity is in turn a function of economic80% dividends received deduction.

Operating Segments and demographic growth in the regions serviced by a particular airport and the general rate of economic growth in the United States. A number of our airports are located near key business centers, for example, New York – Teterboro, Chicago – Midway and Philadelphia. We believe the traffic generated by the businesses at these locations could help our FBOs at these locations grow at a faster rate than the industry average nationwide.

Fuel revenue is a function of the volume sold at each location and the average per gallon sale price. The average per gallon sale price is a function of our cost of fuel plus, where applicable, fees and taxes paid to airports or other local authorities for each gallon sold (Cost of revenue – fuel), plus our margin. Our fuel gross profit (Fuel revenue less Cost of revenue – fuel) depends on the volume of fuel sold and the average dollar-based margin earned per gallon. The dollar-based margin charged to customers varies based on business considerations. Dollar-based margins per gallon are relatively insensitive to the wholesale price of fuel with both increases and decreases in the wholesale price of fuel generally passed through to customers, subject to the level of price competition that exists at the various FBOs.
Our airport services business also earns revenue from activities other than fuel sales (Non-fuel revenue). For example, our airport services business earns revenue from refueling some general aviation customers and some commercial airlines on a “pass-through basis,” where we act as a fueling agent for fuel suppliers and for commercial airlines, receiving a fee, generally on a per gallon basis. In addition, our airport services business earns revenue from aircraft landing and parking fees and by providing general aviation customers with other services, such as de-icing and hangar rental. At some facilities we also provide de-icing services to commercial airlines. Our airport services business also earns management fees for its operation of six regional airports under management contracts.
In generating non-fuel revenue, our airport services business incurs supply expenses (Cost of revenue – non-fuel), such as de-icing fluid costs and payments to airport authorities, which vary from site to site. Cost of revenue – non-fuel is directly related to the volume of services provided and therefore generally increases in line with non-fuel revenue in dollar terms.
Our airport services business incurs expenses in operating and maintaining each FBO, such as rent and insurance, which are generally fixed in nature. Other expenses incurred in operating each FBO, such as salaries, generally increase with the level of activity. In addition, our airport services business incurs general and administrative expenses at the head office that include senior management expenses as well as accounting, information technology, human resources, environmental compliance and other corporate costs.
Bulk Liquid Storage Terminal Business
Businesses

Energy-Related Businesses

IMTT

IMTT provides bulk liquid storage and handling services in North America through a total of eightten terminals located on the East, West and Gulf coasts andCoasts, the Great Lakes region of the United States and a partially owned terminalterminals in each of Quebec and Newfoundland, Canada, with theCanada. IMTT has its largest terminals located onin the strategic locations of New York Harbor and on the lower Mississippi River near the Gulf of Mexico.New Orleans. IMTT stores and handles petroleum products, various chemicals, renewable fuels, and vegetable and animal oils. IMTT isoils and, based on storage capacity, operates one of the largest companies in the bulk liquid storage terminal industrybusinesses in the United States, based on storage capacity.

States.

The key drivers of IMTT’s revenue and gross profit areinclude the amount of tank capacity rented to customers and the rates at which such capacity is rented.rental rates. Customers generally rent tanks under contracts with terms of between onethree and five years. Under these contracts, customers generally payyears that require payment regardless of actual tank usage. Demand for thestorage capacity ofwithin a particular region (e.g. New York Harbor) serves as the tank irrespective of whether the tank is actually used. The key driver of storage capacity utilization and tank rental rates is therates. This demand for capacity relative to the supply of capacity in a particular region (e.g., New York Harbor, Lower Mississippi River). Demand for capacity is primarily a function ofreflects both the level of consumption of the bulk liquid products stored by the terminals as well as import and the level of importation and exportationexport activity of such products. Demand for petroleum and liquid chemical products, the main products stored by IMTT, historically has generally been driven by the level of economic activity. We believe major constraints on increases in the supply of new bulk liquid storage capacity in IMTT’s key markets hashave been and will continue to be limited by the availability of waterfront land with access to the infrastructure necessary for land based receipt and distribution of stored product (road, rail and pipelines), lengthy environmental permitting processes and



58


high capital costs. We believe a favorable supply/demand balance for bulk liquid storage currently exists


TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

in the markets serviced by IMTT’s major facilities. This factor,condition, when combined with the attributes of IMTT’s facilities such as deep water drafts and access to land based infrastructure, have resulted in availableallowed IMTT to increase prices while maintaining very high storage capacity at IMTT’s major facilities for both petroleum and chemical products being consistently fully or near fully rented to customers.

utilization rates.

IMTT earns revenue at its terminals from a number of sources including storage ofcharges for bulk liquids (per barrel, per month rental), throughput of liquids (handling charges), heating (a pass through of the cost associated with heating liquids to prevent excessive viscosity) and other (revenue from blending, packaging and warehousing, etc.). Most customer contracts include provisions for example). The key elements of revenue generally increase annuallyannual price increases based on the basis of inflation escalation provisions in customer contracts.

inflation.

In operating its terminals, IMTT incurs labor costs, fuel costs, repair and maintenance costs, real and personal property taxes and other costs (which include insurance and other operating costs such as utilities and inventory used in packaging and drumming activities).

In 2006,2009, IMTT generated approximately 52%43% of its total terminal revenue and 50%approximately 42% of its terminal gross profit at its Bayonne NJ facility, which services New York Harbor, and 34%approximately 41% of its total terminal revenue and 42%approximately 48% of its terminal gross profit at its St. Rose, LA, Gretna, LAAvondale and Avondale, LAGeismar facilities, which together service the lower Mississippi River region (with St. Rose being the largest contributor).

There are two

Two key factors that arewill likely to materiallyhave a material impact on IMTT’s total terminal revenue and terminal gross profit in the future. First, IMTT has achieved substantial increases in storage rates at its Bayonne and St. RoseLouisiana facilities and some customers of IMTT have already agreed to extend contracts that do not expire until 2007 and 2008 at rates aboveover the existing rates under such contracts.past few years. Based on the current level of demand for bulk liquid storage in New York Harbor and the lower Mississippi River, we anticipate that IMTT will achieve annual increases in average storage revenuerates in excess of inflation at least through 2008.

2010. Second, IMTT intends to undertakehas invested in significant growth capital expenditure which is expected toexpenditures over the past year that we expect should contribute to terminal gross profit to a lesser extent in 2007 and a greater extent in 2008 and beyond as discussed in Liquidity and Capital Resources.
As prescribed in theafter 2009.

The shareholders’ agreement between MIC,us, IMTT Holdings and its other shareholders until December 31, 2008, subject to compliance with law,specifies a default distribution policy for IMTT. Although the debt covenants applicable to its subsidiaries and retention of appropriate levels of reserves, IMTT Holdingsdefault under the shareholders’ agreement is required to distribute $7.0 million per quarterexcess cash, shareholders have indicated that they are prepared to us. At December 31, 2006, we recorded a $7.0 million receivablereinvest excess cash generated during 2010 in connection with the expected receipt of our share of the cash distribution for the fourth quarter of 2006 which was received on January 25, 2007. Subsequent to December 31, 2008, subject to the same limitations applicable prior to December 31, 2008 and subject to IMTT Holdings’ consolidated net debt to EBITDA ratio not exceeding 4.25:1 as at each quarter end, IMTT Holdings is required to distribute, quarterly, all of its consolidated cash flow from operations and cash flows from (but not used in) investing activities less maintenance and environmental remediation capital expenditure to its shareholders.

Based on current market conditions and assuming that the construction of the new facility at Geismar is completed in early 2008 and a number of the expansiongrowth opportunities currently being considered by IMTT are pursued and completed during 2007 and 2008, it is anticipated that IMTT’s total terminal revenue, terminal gross profit and cash flow provided by operating activities will increase significantly through 2009, enabling the current level of annual distributions from IMTT to MIC to be maintained beyond 2008.
rather than pay distributions.

Our interest in IMTT Holdings, from the date of closing our acquisition, May 1, 2006, is reflected in our equity in earnings and amortization charges of investee line in our consolidated statements of operations. Cash distributions received by us in excess of our equity in IMTT’s earnings and amortization charges are reflected in our consolidated statements of cash flows in net cash used infrom investing activities under return on investment in unconsolidated business.

The Gas ProductionCompany

The Gas Company is Hawaii’s only government franchised full-service gas company, manufacturing and Distribution Business

TGC is a Hawaii limited liability company that ownsdistributing gas products and operates the regulatedservices in Hawaii. The market includes Hawaii’s approximately 1.3 million residents and approximately 6.5 million visitors in 2009. The Gas Company manufactures synthetic natural gas, production and distribution business in Hawaiior SNG, for its utility customers on Oahu, and distributes Liquefied Petroleum Gas, or LPG, to utility and sells liquefied petroleum gas through unregulated operations. TGC operates in both regulated and unregulated markets onnon-utility customers throughout the islands of Oahu, Hawaii, Maui, Kauai, Molokai and Lanai. state’s six primary islands.

The Hawaii market includes Hawaii’s approximate 1.3 million resident population and approximate 7.5 million annual visitors.



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TGCGas Company has two primary businesses,businesses: utility (or regulated) and non-utility (or unregulated):

·
.

The utility business includes distribution and sales of SNG on the island of Oahu and distribution and sale of LPG toserves approximately 36,00035,500 customers through localized distribution systems located on the islands of Oahu, Hawaii, Maui, Kauai, Molokai and Lanai (listed by size of market)market with Oahu being the largest). The utility business includes the manufacture, distribution and sale of SNG on the island of Oahu and distribution and sale of LPG. Utility revenue consists principally of sales of thermal units, or therms, of SNG and gallons of LPG. One gallon of LPG is the equivalent of 0.913 therms. The operating costs for the utility business include the cost of locally purchased feedstock, the cost of manufacturing SNG from the feedstock, LPG purchase costs and the cost of distributing SNG and LPG to customers. Utility sales comprised approximately 45% of The Gas Company’s total contribution margin in 2009.

·

TABLE OF CONTENTS

Energy-Related Businesses: The Gas Company – (continued)

The non-utility business comprises the sale ofsells and distributes LPG to approximately 32,000 customers, through truck deliveries33,000 customers. Trucks deliver LPG to individual tanks located on customer sites on Oahu, Hawaii, Maui, Kauai, Molokai and Lanai. Non-utility revenue consistsis generated primarily from the sale of sales of gallons of LPG.LPG delivered to customers. The operating costs for the non-utility business include the cost of purchased LPG and the cost of distributing the LPG to customers. Non-utility sales comprised approximately 55% of The Gas Company’s total contribution margin in 2009.

SNG and LPG have a wide number of commercial and residential applications, including electricity generation, water heating, drying, cooking, emergency power generation and gas lighting.tiki torches. LPG is also used as a fuel for some automobiles, specialty vehicles andsuch as forklifts. Gas customers range frominclude residential customers for which TGC has nearly all of the market, toand a wide variety of commercial, hospitality, military, public sector and wholesale customers.

Revenue is primarily a function of the volume of SNG and LPG consumed by customers and the price per thermal unit or gallon charged to customers. Because both SNG and LPG are derived from petroleum,crude oil, revenue levels, without volume changes, will generally track global oil prices. Utility revenue includes fuel adjustment charges through which the changes in fuelfeedstock costs are passed through to utility customers. As a result,Evaluating the key measureperformance of performance for this business isbased on contribution margin.

Volume is primarily driven by demographic and economic growthmargin removes the volatility associated with fluctuations in the stateprice of Hawaii and by shifts of end users between gas and other energy sources and competitors. The Hawaii Department of Business, Economic Development, and Tourism has forecast population growth for the state of 1.1% per year through 2010. There are approximately 250 regulated utilities operating in Hawaii. These comprise one gas utility, four electric utilities, 34 water and sewage utilities and 211 telecommunications utilities. The four electric utility operators, combined, serve approximately 450,000 customers. Since all businesses and residences have electrical connections, this provides an estimate of the total gas market potential. TGC’s regulated customer base is approximately 36,000 and its non-regulated customer base is approximately 32,000. Accordingly, TGC’s overall market penetration, as a percentage of total electric utility customers in Hawaii, is approximately 15% of Hawaii businesses and residences. TGC has 100% of Hawaii’s regulated gas business and approximately 75% of Hawaii’s unregulated gas business.
feedstock.

Prices charged by TGCThe Gas Company to its customers for the utility gas business are based on Hawaii Public Utilities Commission, or HPUC, regulatedHPUC-utility rates that allow TGCthe business the opportunity to recover its costs of providing utility gas service, including operating expenses and taxes, a return ofand capital investments through recovery of depreciation and a return on the capital invested. TGC’sThe Gas Company’s rate structure generally allows it to maintain a relatively consistent dollar-based margin per thermal unit by passing increases or decreases in fuel costs through to customers through thevia fuel adjustment charges without filing a general rate case.

TGC

The rates that are charged to non-utility customers are based on the cost of LPG plus delivery costs, and on the cost of alternative fuels and competitive factors.

The Gas Company incurs expenses in operating and maintaining its facilities and distribution network, comprising a SNG plant, a 22-mile transmission line, 1,000900 miles of distribution and service pipelines, several tank storage facilities and a fleet of vehicles. These costs are generally fixed in nature. Other operating expenses incurred, such as for LPG, feedstock for the SNG plant and revenue-based taxes, are generally sensitive tofluctuate with the volume of product sold. In addition, TGCthe business incurs general and administrative expenses at its executive office that include expenses for senior management, accounting, information technology, human resources, environmental compliance, regulatory compliance, employee benefits, rents, utilities, insurance and other normal business costs.

The rates that are charged to non-utility customers are set based on LPG and delivery costs, and on the cost of fuel and competitive factors.
As part of the regulatory approval process of our acquisition of TGC, we agreed to 14 regulatory conditions addressing a variety of matters. The more significant conditions include:

·
the non-recoverability of goodwill, transaction or transition costs in future rate cases;
·
a limitation on TGC’s ability to file for a new rate case with a prospective test year commencing prior to 2009;


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·
a requirement to limit TGC and HGC’s ratio of consolidated debt to total capital to 65%;
·
a requirement to maintain $20.0 million in readily available cash resources at TGC, HGC or the company;
·
a requirement that TGC revise its fuel adjustment clause to reconcile monthly charges to corresponding actually incurred fuel expenses; and
·
a requirement that TGC provide a $4.1 million customer appreciation credit from a vendor funded escrow account, to its gas customers.

District Energy

District Energy Business

Our district energy business is comprisedconsists of Thermal Chicago and Northwind Aladdin, which are 100%50.01% and 75%37.51% indirectly owned by us. Thermal Chicago sells chilled water under long-term contracts to approximately 100 customers in thedowntown Chicago downtown area and one customer outside of the downtown area underarea. Under the long-term contracts. Pursuant to these contracts, Thermal Chicago receives both capacity and consumption payments. Capacity payments (cooling capacity revenue) are received irrespectiveregardless of the volume of chilled water used by a customer and these payments generally increase in line with inflation.

Consumption payments (cooling consumption revenue) are a per unit chargecharges for the volume of chilled water used. Such payments are higher in the second and third quarters of each year when the demand for chilled waterbuilding cooling is at its highest. Consumption payments also fluctuate moderately from year to year depending on weather conditions. By contract, consumption payments generally increase in line with a number of economic indices that reflect the cost of electricity, labor and other input costs relevant to the operations of Thermal Chicago. The weighting of the individual economic indices broadly reflects the composition of Thermal Chicago’s direct expenses.


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Energy-Related Businesses: District Energy – (continued)

Thermal Chicago’s principal direct expense is electricity. Other direct expenses in 2006 were electricity (40%),are labor, (14%), operations and maintenance (14%),and depreciation and accretion (23%) and other (9%).accretion. Electricity usage fluctuates in line with the volume of chilled water produced. Thermal Chicago particularly focuses on minimizing the amountcost of electricity consumed per unit of chilled water produced by operating its plants to maximize efficient use of electricity. Other direct expenses including labor, operations and maintenance, depreciation, and general and administrative are largely fixed irrespectiveregardless of the volumes of chilled water produced.

In 2007, the Illinois electricity generation market was deregulated as discussed under “Our Businesses and Investments — District Energy Business — Business —

Thermal Chicago — Electricity Costs” in Item 1. Business. Thermal has entered into a contract with a retail energy supplier to provide for the supply of the majority of our 2007the business’ electricity in 2010 at a fixed priceprice. Electricity for one of the plants is purchased by the landlord/customer and the remaindercost is a cost passed through to us from a customer. We estimate our 2007the business. Based on Thermal Chicago’s retail contract, its 2010 electricity costs will increase on a per unit basis by 15-20%approximately 10% over 2006. We2009 and the business will pass the increase through to its customers. The business will need to enter into supply contracts for 20082011 and subsequent years which may result in further increases in our electricity costs. Future rate cases or rehearing’s with the ICC may also increase our electricity costs.

About 45% or $7.2 million of our 2006 consumption revenue for Thermal Chicago was linked to the Midwest producer price index. The producer price index escalation was intended to reflect the increases in the cost of electricity over time but because it isand prices will fluctuate based on costs across a broad geographic region in the Midwest, it does not fully reflect changes in electricity costs that occur locally or from deregulation. Beginning January 2, 2007, and based on provisions of their contracts, the escalation for the electricity cost changes in consumption revenue will reflect actual increases or decreases in Thermal Chicago’s electricity cost.
underlying power costs.

Northwind Aladdin provides coldservices customers (a hotel/casino complex and hot water and back-up electricity under two long-term contracts that expirea shopping mall) in February 2020. Pursuant to theseLas Vegas, Nevada. Under its customer contracts, Northwind Aladdin receives monthly fixed payments oftotaling approximately $5.4$6.4 million per annum through March 2016 and monthly fixed payments oftotaling approximately $2.0$3.0 million per year thereafter through February 2020. In addition, Northwind Aladdin receives

Aviation-Related Business

Atlantic Aviation

The performance of Atlantic Aviation depends upon the level of general aviation activity, and jet fuel consumption, and other variable payments from its customers that allow it to recover substantially allfor the largest portion of its operating costs. Approximately 90%gross profit. General aviation activity is in turn a function of total contract payments are received fromeconomic activity and demographic trends in the Aladdin resort and casino and the balance from the Desert Passage shopping mall.

Airport Parking Business
The revenue of our airport parking business include both parking and non-parking components. Parking revenue, which accounts for the substantial majority of total revenue is drivenregions serviced by the volume of passengers using the airportsairport at which the business operates its market share at each location and its parking rates. We aim to grow our


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parking revenue by increasing our market share at each location and optimizing parking rates taking into consideration local demand and competition. Our airport parking business seeks to increase market share through marketing initiatives to attract both returning customers and air travelers who have not previously used off-airport parking and through improved services. Our ability to successfully execute marketing, pricing and service initiatives is key to maintaining and growing revenue. Non-parking revenue includes primarily transportation services.
Our parking business’ customers pay a fee for parking at its locations. The parking fees collected constitute revenue earned. The prices charged are a functionthe general level of demand, quality of service and competition. Parking rate increases are often led by on-airport parking lots and changeseconomic activity in the competitive environment. MostUnited States. A number of these airports have historically increased parking rates rapidly with increases in demand, creating a favorable pricing environment for off-airport competitors. However, in certain markets, the airport may not raise rates in line with general economic trends. Further, our airport parkingare located near key business seeks to increase parking rates through the value-added servicescenters such as valet parking, car washesNew York, New York; Chicago, Illinois and covered parking.
TurnoverPhiladelphia, Pennsylvania as well as recreational destinations such as Aspen, Colorado and intra-day activity are captured in the “cars out” or total number of customers exiting during the period. This measure, in combination with average parking revenue per car out and average overnight occupancy, are primary indicators of our customer mix and reflect our ongoing revenue management efforts. Average parking revenueSun Valley, Idaho.

Fuel gross profit is a function of the volume (gallons) sold and the average dollar margin per gallon. The average price per gallon is based on our cost of fuel plus, where applicable, fees and taxes paid to airports or other local authorities (cost of revenue — fuel), plus Atlantic Aviation’s margin. Dollar-based margins per gallon have been relatively insensitive to the wholesale price of fuel with both increases and decreases in the wholesale price of fuel generally passed through to customers, subject to the level of price competition that exists at the various FBOs. The average dollar-based margin varies based on business considerations and customer mix. Base tenants generally benefit from price discounts based on a higher utilization of Atlantic Aviation’s networks. Transient customers typically pay a higher price.

Atlantic Aviation also earns revenue from activities other than fuel sales (non-fuel revenue). For example, Atlantic Aviation earns revenue from refueling some general aviation customers on a “pass-through basis,” where it acts as a fueling agent for fuel suppliers. Atlantic Aviation receives a fee for this service, generally calculated on a per gallon basis. In addition, the business earns revenue from aircraft parking and hangar rental fees and by providing general aviation customers with other services, such as de-icing. At some sites where Atlantic Aviation operates an FBO business, Atlantic Aviation also earns revenue from refueling and de-icing some commercial airlines on a fee for service basis.

Expenses associated with non-fuel revenue (cost of revenue — non-fuel) include de-icing fluid costs and payments to airport authorities which vary from site to site. Cost of revenue — non-fuel is directly related to the discount applied, if any, and the numbervolume of days the customer is parked at the facility. For example, an increase in average parking revenue over time can be a result of increased pricing, reduced discounting or an increase in the average length of stay.

In the discussion of our airport parking business’ results of operations, we disclose the average overnight occupancy for each period. Our airport parking business measures occupancy by counting the number of cars at the “lowest point of the day” between 12 a.m. and 2 a.m. every night. At this time, customer activity is low, and thus an accurate measure of the car count may be taken at each location. This method means that turnover and intra-day activity are not taken into accountservices provided and therefore occupancy during the day is likely to be much higher than when the countsgenerally increases in line with non-fuel revenue in dollar terms.

Atlantic Aviation incurs expenses in operating and maintaining each FBO. Operating expenses include rent and insurance, which are undertaken.

In providing parking services, our airport parking business incursgenerally fixed in nature and other expenses, such as personnel costs, real estate related costs and the costs of leasing, operating and maintaining its shuttle buses. These costs are incurred in providing customerssalaries, that generally increase with service at each parking lot as well as in transporting them to and from the airport terminal. Generally, as the level of occupancy, or usage, at each of the business’ locations increases, labor and the other costs related to the operation of each facility increase. We also incur costs related to damaged cars either as a result of the actions of our employees or criminal activity. The business is continually reviewing security and safety measures to minimize these costs.
Other costs incurred by Macquarie Parking relate to the provision of the head office function that the business requires to operate. These costs include marketing and advertising, rents and otherIn addition, Atlantic Aviation incurs general and administrative expenses associated withat the head office function.that include senior management expenses as well as accounting, information technology, human resources, environmental compliance and other corporate costs.

RESULTS
We acquired our initial businesses and investments on December 22 and December 23, 2004 using the majorityCONTENTS

Results of the proceeds of our initial public offering. As a consequence, our consolidated operating results for the year ended December 31, 2004 only reflect the results of operations of our businesses and investments for a nine day period between December 22, 2004 and December 31, 2004. Any comparisons between our consolidated results of operations or cash flows in 2005 to 2004 would not be meaningful. We have therefore included a comparison of the historical results of operations and cash flows for these periods each of our consolidated businesses that we owned at the end of 2004, which we believe is a more appropriate approach to explaining the historical financial performance of the company. We have also provided a comparison of the historical results of operations and cashflows of TGC and IMTT from periods prior to our ownership to provide a better understanding of the performance of these businesses.

Operations

Consolidated

Key Factors Affecting Operating Results

strong performance in our energy-related businesses reflecting:
·increases in average storage rates and storage capacity at IMTT;
positive contributions frominterim rate case increase in the utility sector and new business processes which improved our acquisitions including:
·
acquisition ofability to acquire and price our non-utility LPG at the Trajen network of 23 FBO’s and the acquisition of a Las Vegas FBO (Eagle Aviation Resources, or EAR) by our airport services business; 


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·
the acquisition of 50% of IMTT, the earnings of which are reflected in equity in earnings and amortization charges of investee;
·
the TGC acquisition;non-utility sector at The Gas Company; and
·an increase in contracted capacity as new customers began service at District Energy.
eight new locationsoperating results from Atlantic Aviation reflecting:
a year on year decline in our airport parking business.
·
increased consolidated gross profit driven by improved performance at our airport services and airport parking businesses;
·
dividend and interest income from investments totaling $36.6 million in 2006;
·
higher management fees, including the $4.1 million performance fee earned by the manager in the first quarter, which it has reinvested in shares of trust stock, and higher base management fees due to our increased market capitalization;
·fuel volumes;
an increase in interest expense due to payments of interest rate swap breakage fees as a result of the overall increase in our debt toamendment and the early repayment of the outstanding term loan debt; partially fund our acquisitions;offset by
·cost reductions.
gains on the sale of our non-U.S. investments of $60.1 million; and
·
non-cash impairment charge on intangible assets at our airport parking business totaling $23.5 million related to a re-branding initiative.
During 2006, we received $14.0 million in distributions from IMTT Holdings, which reduced our investments in unconsolidated businesses on our balance sheet but was not included in our consolidated statements of operations. We received a further $7.0 million from IMTT Holdings in January 2007. During 2005 and 2006, we also received dividends from our toll road business amounting to $5.5 million and $5.2 million, respectively, which were not included in our consolidated statements of operations.


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Our consolidated results of operations are summarized belowas follows ($ in thousands):

       
       
 Year Ended December 31 Change
(From 2008 to 2009)
Favorable/(Unfavorable)
 Change
(From 2007 to 2008)
Favorable/(Unfavorable)
   2009 2008(1) 2007(1) $ % $ %
   ($ In Thousands)
Revenue
     
Revenue from product sales $394,200  $586,054  $445,852   (191,854  (32.7  140,202   31.4 
Revenue from product sales — utility  95,769   121,770   95,770   (26,001  (21.4  26,000   27.1 
Service revenue  215,349   264,851   207,680   (49,502  (18.7  57,171   27.5 
Financing and equipment lease income  4,758   4,686   4,912   72   1.5   (226  (4.6
Total revenue  710,076   977,361   754,214   (267,285  (27.3  223,147   29.6 
Costs and expenses
     
Cost of product sales  231,139   406,997   302,283   175,858   43.2   (104,714  (34.6
Cost of product sales – utility  71,252   103,216   64,371   31,964   31.0   (38,845  (60.3
Cost of services  46,317   63,850   53,387   17,533   27.5   (10,463  (19.6
Gross profit  361,368   403,298   334,173   (41,930  (10.4  69,125   20.7 
Selling, general and administrative  214,865   231,273   185,370   16,408   7.1   (45,903  (24.8
Fees to manager – related party  4,846   12,568   65,639   7,722   61.4   53,071   80.9 
Goodwill impairment  71,200   52,000      (19,200  (36.9  (52,000  NM 
Depreciation  36,813   40,140   20,502   3,327   8.3   (19,638  (95.8
Amortization of intangibles  60,892   61,874   32,356   982   1.6   (29,518  (91.2
Total operating expenses  388,616   397,855   303,867   9,239   2.3   (93,988  (30.9
Operating (loss) income  (27,248  5,443   30,306   (32,691  NM   (24,863  (82.0
Other income (expense)
     
Interest income  119   1,090   5,705   (971  (89.1  (4,615  (80.9
Interest expense  (91,154  (88,652  (65,356  (2,502  (2.8  (23,296  (35.6
Loss on extinguishment of debt        (27,512     NM   27,512   NM 
Equity in earnings (losses) and amortization charges of investees  22,561   1,324   (32  21,237   NM   1,356   NM 
Loss on derivative instruments  (29,540  (2,843  (1,362  (26,697  NM   (1,481  (108.7
Other income (expense), net  760   (19  (1,088  779   NM   1,069   98.3 
Net loss from continuing operations before noncontrolling interests  (124,502  (83,657  (59,339  (40,845  (48.8  (24,318  (41.0
Benefit for income taxes  15,818   14,061   16,764   1,757   12.5   (2,703  (16.1
Net loss from continuing operations before noncontrolling interests  (108,684  (69,596  (42,575  (39,088  (56.2  (27,021  (63.5
Net income attributable to noncontrolling interests  486   585   554   99   16.9   (31  (5.6
Net loss from continuing operations $(109,170 $(70,181 $(43,129  (38,989  (55.6  (27,052  (62.7
Discontinued operations
     
Net loss from discontinued operations before income taxes and noncontrolling interests  (23,647  (180,104  (9,679  156,457   86.9   (170,425  NM 
Benefit (provision) for income taxes  1,787   70,059   (281  (68,272  (97.4  70,340   NM 
Net loss from discontinued operations before noncontrolling interests  (21,860  (110,045  (9,960  88,185   80.1   (100,085  NM 
Net loss attributable to noncontrolling interests  (1,863  (1,753  (1,035  110   6.3   718   69.3 
Net loss from discontinued operations $(19,997 $(108,292 $(8,925  88,295   81.5   (99,367  NM 
Net loss $(129,167 $(178,473 $(52,054  49,306   27.6   (126,419  NM 
  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
Change
 
April 13, 2004
(inception) to
December 31,
2004
 
        
$
 
%
    
                
Revenue
               
Revenue from product sales     $313,298     $142,785      170,513     119.4     $1,681 
Service revenue  201,835  156,655  45,180 28.8  3,257 
Financing and equipment lease income  5,118  5,303  (185)(3.5) 126 
Total revenue  520,251  304,743  215,508 70.7  5,064 
Cost of revenue
               
Cost of product sales  206,802  84,480  122,322 144.8  912 
Cost of services  92,542  82,160  10,382 12.6  1,633 
Gross profit
  220,907  138,103  82,804 60.0  2,519 
Selling, general and administrative  120,252  82,636  37,616 45.5  7,953 
Fees to manager  18,631  9,294  9,337 100.5  12,360 
Depreciation  12,102  6,007  6,095 101.5  175 
Amortization of intangibles(1)  43,846  14,815  29,031 196.0  281 
 Operating income (loss)
  26,076  25,351  725 2.9  (18,250)
Other income (expense)
               
Dividend income  8,395  12,361  (3,966)(32.1) 1,704 
Interest income  4,887  4,064  823 20.3  69 
Interest expense  (77,746) (33,800) (43,946)130.0  (756)
Equity in earnings (loss) and amortization
charges of investees
  12,558  3,685  8,873 NM  (389)
Unrealized losses on derivative instruments  (1,373)   (1,373)NM   
Gain on sale of equity investment  3,412    3,412 NM   
Gain on sale of investment  49,933    49,933 NM   
Gain on sale of marketable securities  6,738    6,738 NM   
Other income, net  594  123  471 NM  50 
Net income (loss) before income taxes and
minority interests
  33,474  11,784  21,690 184.1  (17,572)
Income tax benefit  16,421  3,615  12,806 NM   
Net income (loss) before minority interests  49,895  15,399  34,496 NM  (17,572)
Minority interests  (23) 203  (226)(111.3) 16 
Net income
 $49,918 $15,196 $34,722 NM $(17,588)
——————

NM  Not meaningful

(1)Reclassified to conform to current period presentation.
(1)
Includes a non-cash impairment charge

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Results of $23.5 million for existing trademarks and domain namesOperations: Consolidated – (continued)

Gross Profit

The decrease in our consolidated gross profit in 2009 was due to a re-branding initiative.

Gross Profit
decline in fuel volumes at Atlantic Aviation, partially offset by improved results at our consolidated energy-related businesses. The increase in our consolidated gross profit in 2008 was primarily due primarily to acquisitions made by Atlantic Aviation in 2007 and the acquisitions of Trajen on July 11, 2006, TGC on June 7, 2006, a Las Vegas FBO in the thirdfirst quarter of 2005 and six off-airport parking facilities (collectively referred to as “SunPark”) during the second half of 2005. Additionally, higher average dollar-based margin per gallon combined with stable fuel volumes2008, partially offset by a decline in performance at existing locations in our airport services business and higher average revenue per car out in our airport parking business contributed to increases in gross profit.


64


locations.

Selling, General and Administrative Expenses

The most significant factorsdecrease in our selling, general and administrative expenses in 2009 was primarily a result of cost reduction efforts at Atlantic Aviation, partially offset by higher costs at the holding company mainly attributable to the sale of the non-controlling stake in District Energy and increased incentive compensation, pension expense and professional services at our consolidated energy-related businesses. The increase in selling, general and administrative expenses were:

·
$13.3in 2008 was primarily a result of acquisitions made by Atlantic Aviation in 2007 and 2008.

Fees to Manager

Base fees to our Manager decreased in 2009 due to our lower market capitalization. Our Manager elected to reinvest the second, third and fourth quarter of 2009 base management fees in additional LLC interests. LLC interests for the second and third quarters of 2009 were issued to our Manager during the second half of 2009. LLC interests for the fourth quarter of 2009 will be issued to our Manager during the first quarter of 2010.

The fees payable to our Manager in 2008 were lower primarily due to performance fees of $44.0 million in 2007 that did not recur in 2008. Our Manager elected to reinvest these performance fees in additional costs from the addition of TGC and Trajen not reflected in 2005 results;

·
additional costs at our parking businesses’s corporate office primarily to support a larger organization resulting from growth in number of locations and reorganization of the finance structure; and
·
additional compensation expense related to stock appreciation rights issued during 2006.

Additionally, the management feeLLC interests. Base fees paid to our Manager increasedin 2008 also decreased due to $4.1 million in performance fees in 2006 which were reinvested in stock, compared to none in 2005, as well asour lower market capitalization.

Goodwill Impairment

Goodwill is considered impaired when the carrying amount of a $5.2 million increase inreporting unit’s goodwill exceeds its implied fair value. Based on the base fee due primarily to our increased asset base.

Other Income (Expense)

Our dividend income in 2006 consists of dividends declared by and received from SEWtesting performed, we recognized goodwill impairment charges at Atlantic Aviation in the first six months of 2009 and third quartersthe fourth quarter of 2008.

Depreciation

Depreciation includes non-cash asset impairment charges of $7.5 million and a dividend declared by MCG$13.8 million recorded in the second quarter2009 and received in the third quarter. The comparable SEW dividends from 2005, were both declared and received in the second quarter and fourth quarter.

Interest income2008, respectively, at Atlantic Aviation. Excluding these impairment charges, depreciation expense increased primarilyeach year as a result of capital expenditures by our businesses resulting in higher interest rates on invested cashasset balances.

Amortization of Intangibles

Amortization of intangibles expense includes non-cash asset impairment charges of $23.3 million, $21.7 million and $1.3 million recorded by Atlantic Aviation in 2006. 2009, 2008 and 2007, respectively. Excluding these impairment charges, amortization of intangibles expense increased in 2008 due to acquisitions made by Atlantic Aviation in 2007 and 2008. Amortization of intangibles expense for 2009 decreased due to the impairments previously discussed reducing the balance of intangible assets being amortized.

Interest Expense

Interest expense at Atlantic Aviation increased in 2009 primarily due mostlyto payments of interest rate swap breakage fees. This business expects to pay further interest rate swap breakage fees as it continues to pay down its term loan debt. This increase was partially offset by the favorable LIBOR movements on unhedged debt during the year, primarily from the MIC Inc. revolving credit facility, which was repaid in December 2009. The increase in interest expense in 2008 was due to a higher average level of debt outstanding, resulting from additional debt drawn to fund acquisitions and refinancings in 2006.
the second half of 2007.


TABLE OF CONTENTS

Results of Operations: Consolidated – (continued)

Loss on Extinguishment of Debt

We recognized a loss on extinguishment of debt of $27.5 million in 2007, related to refinancings at Atlantic Aviation and District Energy. This loss included a $14.7 million make-whole payment for District Energy. The remainder was a non-cash write-off of previously deferred financing costs.

Equity in Earnings (Losses) and Amortization Charges of Investees

Our equity in the earnings on our 50%-owned investmentsof IMTT increased primarilyin 2009 due to higher operating results of the additionbusiness for that period, together with our share of IMTTthe non-cash derivative gains of $15.3 million compared with our share of non-cash derivative losses of $23.1 million in 20062008.

Loss on Derivative Instruments

We discontinued hedge accounting at Atlantic Aviation as of February 25, 2009 and a gain from changesApril 1, 2009 for our other businesses. In addition, in the first quarter of 2009, The Gas Company, District Energy and Atlantic Aviation each entered into LIBOR-based basis swaps. These basis swaps have lowered the effective cash interest rate on these businesses’ debt through March 2010.

For the year ended December 31, 2009, loss on derivative instruments represents the change in fair value of interest rate swaps from the dates that Yorkshire records inhedge accounting was discontinued. In addition, loss on derivative instruments includes the income statement, compared with areclassification of amounts from accumulated other comprehensive loss recorded in the second quarter of 2005.

into earnings, as Atlantic Aviation pays down its debt more quickly than anticipated.

Income Taxes

The

For the 2007 and 2008 years, we reported a consolidated net loss before income tax benefit in 2006 results primarily fromtaxes, for which we recorded a deferred tax benefit, recorded on the write-down of intangible assets at our parking business. The pre-tax gain in 2006 is due largely to gains on the sales of investments that are not taxable.

For the period from April 13, 2004 to December 31, 2004, we incurred a consolidated net loss of $17.6 million as we had only nine days of operating results from our businesses and because of the $12.1 million performance fee earned by our Manager from the closing of our initial public offering until December 31, 2004. We incurred $6.0 million of expenses related to the acquisitions of our businesses and organizational expenses. We also earned $1.7 million in dividend income from our investment in MCG, which was subsequently received in February 2005.
For the year ended December 31, 2005, we earned consolidated net income of $15.2 million. Our consolidated results included net income of $5.8 million from our airport services business, $452,000 from our district energy business, and a loss of $3.4 million from our airport parking business. Our 50% share of net income from the toll road business was $3.7 million, net of non-cash amortization expense of $3.8 million and we also recognized $429,000 in other income. We earned $8.5 million (including $390,000 of other income) in dividend income from our investment in SEW and $4.2 million in dividend income from our investment in MCG. We incurred selling, general and administrative expenses of $9.5 million at the corporate level. Included in selling, general and administrative expenses are $2.9 million related to complying with the requirements under Sarbanes Oxley and $1.8 million related to an unsuccessful acquisition bid. We recorded $9.3 million in base fees paid to our Manager, pursuant to the terms of the management service agreement.
Companies acquired in 2004 by MIC, Inc. completed their 2004 tax returns during 2005 for the period prior to their acquisition. An analysis of thecertain state net operating losses and othera portion of our impairment attributable to non-deductible goodwill.

For 2009, we expect to have consolidated current federal taxable income of approximately $16.7 million, which will be offset by a portion of our consolidated federal net operating loss (NOL) carryforward. Our federal taxable income includes a taxable gain from the sale of the non-controlling interest of District Energy. We expect to pay a $334,000 federal Alternative Minimum Tax for 2009.

We include dividends received from IMTT in our consolidated income tax attributesreturn. Of the $7.0 million in distributions we received from that business in 2009, we expect that all of those distributions will carryforward to the US federal consolidated taxbe treated as a return of MIC, Inc.capital for income tax purposes, and its subsidiaries from those returns,not included in current taxable income.

Due to our NOL carryforwards, we do not expect to have regular taxable income or pay regular federal income tax payments through at least 2012. The cash state and an analysislocal taxes paid by our businesses is discussed below in the sections entitledIncome Taxes for each of our individual businesses.

As discussed in Note 18, “Income Taxes” in our consolidated financial statements, in Part II, Item 8 of this Form 10-K, we now evaluate the need for a valuation allowance on the realizability of the company’sagainst our deferred tax assets resulted in a decreasewithout taking into consideration the deferred tax liabilities of District Energy. We have concluded that the scheduled reversal of deferred tax liabilities will more likely than not result in the consolidatedrealization of all our federal deferred tax assets, except for approximately $15.3 million. Accordingly, we have provided a valuation allowance of approximatelyagainst our deferred tax assets for this amount. Of this valuation allowance, $5.9 million $4.4 millionis recorded on the books of PCAA, which is reported in our discontinued operations.

In calculating our consolidated state income tax provision, we have provided a valuation allowance for certain state income tax net operating loss carryforwards, the utilization of which is included as annot assured beyond a reasonable doubt. In addition, we expect to netincur certain expenses that will not be deductible in determining state taxable income.



65 Accordingly, these expenses have also been excluded in determining our state income tax expense.

Further, approximately $53.4 million of the write-down of intangibles is attributable to goodwill and is a permanent book-tax difference, for which no tax benefit has been recognized.



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Results of Operations: Consolidated – (continued)

Discontinued Operations

On January 28, 2010, we agreed to sell the assets of PCAA through a bankruptcy process, which we expect to complete in the first half of 2010. This results of this business have been reported as a discontinued operation and prior comparable periods have been re-stated to conform to the current period presentation. See Note 4, “Discontinued Operations”, in our consolidated financial statements in Part II, Item 8 of this Form 10-K for financial information and further discussions.

Corporate allocation and other intercompany fees charged to PCAA have been reported in earnings from discontinued operations in our consolidated continuing results of operations.

Earnings Before Interest, Taxes, Depreciation and Amortization or(EBITDA) excluding non-cash items and Free Cash Flow

In accordance with GAAP, we have disclosed EBITDA

We have included EBITDA, a non-GAAP financial measure, on both a consolidated basis as well as excluding non-cash items for our Company and each segment as we consider it to be an important measure of our overalloperating segments in Note 16, “Reportable Segments”, in our consolidated financial statements, as a key performance metric relied on by management in evaluating our performance. EBITDA excluding non-cash items is defined as earnings before interest, taxes, depreciation and amortization and non-cash items, which includes impairments, derivative gains and losses and adjustments for other non-cash items reflected in the statements of operations. We believe EBITDA excluding non-cash items provides additional insight into the performance of our operating companiesbusinesses relative to each other and similar businesses without regard to their capital structure, and their ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company.

Effective this reporting period, we are also disclosing Free Cash Flow, as defined by us, as a means of assessing the amount of cash generated by our businesses and supplementing other information provided in accordance with GAAP. We believe that reporting Free Cash Flow will provide our investors with additional insight into our future ability to deploy cash, as GAAP metrics such as net income and cash from operating activities do not reflect all of the items that our management considers in estimating the amount of cash generated by our operating entities. In this Annual Report on Form 10-K, we have disclosed Free Cash Flow for our consolidated results and for each of our operating segments.

We define Free Cash Flow as cash from operating activities, less maintenance capital expenditures and changes in working capital. Working capital movements are excluded on the basis that these are largely timing differences in payables and receivables, and are therefore not reflective of our ability to servicegenerate cash.

We note that Free Cash Flow does not fully reflect our ability to freely deploy generated cash, as it does not reflect required payments to be made on our indebtedness, pay dividends and other fixed obligations or the other cash items excluded when calculating Free Cash Flow. We also note that Free Cash Flow may be calculated in a different manner by other companies, which limits its usefulness as a comparative measure. Therefore, our Free Cash Flow should be used as a supplemental measure and supportnot in lieu of our ongoing dividend policy.financial results reported under GAAP.

In 2008 and 2007, we disclosed EBITDA includes non-cash unrealized gains and losses on derivative instruments.

  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
Change
 
April 13, 2004
(inception) to
December 31,
2004
 
        
$
 
%
    
  ($ in thousands) 
Net income (loss)     $49,918     $15,196     34,722     NM     $(17,588)
Interest expense, net                                      72,859  29,736 43,123 145.0  687 
Income taxes  (16,421) (3,615)(12,806)NM   
Depreciation(1)  21,366  14,098 7,268 51.6  370 
Amortization(2)  43,846  14,815 29,031 196.0  281 
EBITDA $171,568 $70,230 101,338 144.3 $(16,250)
——————

NM – Not meaningful
(1)
Includes depreciation expenseonly. The following tables, reflecting results of $3.6 million, $2.4 million and $55,000operations for the airport parking businessconsolidated group and for our businesses for the years ended December 31, 2006, December 31, 20052008 and the period December 23, 2004 (our acquisition date) through December 31, 2004, respectively. Also includes depreciation expense2007, have been conformed to current periods’ presentation reflecting EBITDA excluding non-cash items and Free Cash Flow.


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Results of $5.7 million, $5.7 million and $140,000 for the district energy business for the years ended December 31, 2006, December 31, 2005 and the period December 22, 2004 (our acquisition date) through December 31, 2004, respectively. We include depreciation expense for the airport parking business and district energy business withinOperations: Consolidated – (continued)

A reconciliation of net loss from continuing operations to free cash flow from continuing operations, on a consolidated basis, is provided below:

       
       
 Year Ended December 31, Change
(From 2008 to 2009)
Favorable/(Unfavorable)
 Change
(From 2007 to 2008)
Favorable/(Unfavorable)
   2009 2008 2007 $ % $ %
   ($ In Thousands) (Unaudited)
Net loss from continuing operations $(109,170 $(70,181 $(43,129                    
Interest expense, net  91,035   87,562   59,651                     
Benefit for income taxes  (15,818  (14,061  (16,764                    
Depreciation (1)  36,813   40,140   20,502                     
Depreciation - cost of services (1)  6,086   5,813   5,792                     
Amortization of intangibles (2)  60,892   61,874   32,356                     
Goodwill impairment  71,200   52,000    —                      
Non-cash loss on extinguishment of debt   —     —    12,817                     
Loss on derivative instruments  29,540   2,843   1,362                     
Equity in (earnings) losses and amortization charges of investees(3)  (15,561   —    32                     
Base management and performance fees settled/to be settled in LLC interests  4,384    —    43,962                     
Other non-cash expense  2,784   4,883   7,858                 
EBITDA excluding non-cash items from continuing operations $162,185  $170,873  $124,439   (8,688  (5.1  46,434   37.3 
EBITDA excluding non-cash items from continuing operations $162,185  $170,873  $124,439                     
Interest expense, net  (91,035  (87,562  (59,651                    
Amounts relating to foreign currency contracts   —     —    (4,055                    
Amortization of debt financing costs  5,121   4,762   4,429                     
Make-whole payment on debt financing   —     —    14,695                     
Equipment lease receivables, net  2,610   2,372   2,531                     
Benefit for income taxes, net of changes in deferred taxes  (2,105  (1,976  (5,772                    
Changes in working capital  6,200   7,110   16,883             
Cash provided by operating activities from continuing operations  82,976   95,579   93,499                     
Changes in working capital  (6,200  (7,110  (16,883                    
Maintenance capital expenditures  (9,453  (14,846  (14,834                
Free cash flow from continuing operations $67,323  $73,623  $61,782   (6,300  (8.6  11,841   19.2 

(1)Depreciation - cost of services includes depreciation expense for District Energy which is reported in cost of services in our consolidated statements of operations. Depreciation and Depreciation - cost of services do not include step-up depreciation expense of $6.9 million for each year in connection with our investment in IMTT, which is reported in equity in earnings (losses) and amortization charges of investees in our consolidated statements of operations.
(2)Amortization of intangibles does not include step-up amortization expense of $1.1 million for each year related to intangible assets in connection with our investment in IMTT, which is reported in equity in earnings (losses) and amortization charges of investees in our consolidated statements of operations.
(3)Equity in (earnings) losses and amortization charges of investees in the above table includes our 50% share of IMTT's earnings offset by distributions we received only up to our share of the earnings recorded.

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Energy-Related Businesses

IMTT

We account for our 50% interest in this business under the equity method. We recognized income of $22.6 million in our consolidated statementsresults for 2009. This includes our 50% share of operations. Does not include depreciation expense in connection with our investment in IMTT of $4.6IMTT’s net income, equal to $27.3 million for the period, May 1, 2006 (our acquisition date) throughoffset by $4.7 million of additional depreciation and amortization expense (net of taxes). For the year ended December 31, 2006.2008, we recognized income of $1.3 million in our consolidated results. This included our 50% share of IMTT’s net income, equal to $6.0 million for the period, offset by $4.7 million of additional depreciation and amortization expense (net of taxes).

Distributions from IMTT, to the degree classified as taxable dividends and not a return of capital for income tax purposes, qualify for the federal dividends received deduction. Therefore, 80% of any dividend is excluded in calculating our consolidated federal taxable income. Any distributions classified as a return of capital for income tax purposes will reduce our tax basis in IMTT. IMTT’s cash from operating activities for 2009 has been retained to fund IMTT’s growth capital expenditures and is expected to contribute significantly to IMTT’s future gross profit. See — “Liquidity and Capital Resources” for further discussion.

To enable meaningful analysis of IMTT’s performance across periods, IMTT’s overall performance is discussed below, rather than IMTT’s contribution to our consolidated results.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Key Factors Affecting Operating Results

terminal revenue and terminal gross profit increased principally due to:
(2)increases in average tank rental rates and volume of storage under contract; and
Doesincreases in revenue from the provision of storage and other services with the full year of operations at IMTT’s Geismar storage facility.
lower environmental response gross profit due to reduced spill activity in 2009.

TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

        
        
 Year Ended December 31,
   2009 2008 Change Favorable/(Unfavorable) 2008 2007 Change Favorable/(Unfavorable)
   $ $ $ % $ $ $ %
   ($ In Thousands) (Unaudited)
Revenue
                                        
Terminal revenue  330,380   306,103   24,277   7.9   306,103   250,733   55,370   22.1 
Environmental response revenue  15,795   46,480   (30,685  (66.0  46,480   24,464   22,016   90.0 
Total revenue  346,175   352,583   (6,408  (1.8  352,583   275,197   77,386   28.1 
Costs and expenses
                                        
Terminal operating costs  156,552   155,000   (1,552  (1.0  155,000   135,726   (19,274  (14.2
Environmental response operating costs  14,792   34,658   19,866   57.3   34,658   19,339   (15,319  (79.2
Total operating costs  171,344   189,658   18,314   9.7   189,658   155,065   (34,593  (22.3
Terminal gross profit  173,828   151,103   22,725   15.0   151,103   115,007   36,096   31.4 
Environmental response gross profit  1,003   11,822   (10,819  (91.5  11,822   5,125   6,697   130.7 
Gross profit  174,831   162,925   11,906   7.3   162,925   120,132   42,793   35.6 
General and administrative expenses  27,437   30,076   2,639   8.8   30,076   24,435   (5,641  (23.1
Depreciation and amortization  55,998   44,615   (11,383  (25.5  44,615   36,025   (8,590  (23.8
Operating income  91,396   88,234   3,162   3.6   88,234   59,672   28,562   47.9 
Interest expense, net  (29,510  (23,540  (5,970  (25.4  (23,540  (14,349  (9,191  (64.1
Loss on extinguishment of debt           NM      (12,337  12,337   NM 
Other income  522   2,141   (1,619  (75.6  2,141   4,595   (2,454  (53.4
Unrealized gains (losses) on derivative instruments  30,686   (46,277  76,963   166.3   (46,277  (21,022  (25,255  (120.1
Provision for income taxes  (38,842  (9,452  (29,390  NM   (9,452  (7,076  (2,376  (33.6
Noncontrolling interest  332   1,003   (671  (66.9  1,003   143   860   NM 
Net income  54,584   12,109   42,475   NM   12,109   9,626   2,483   25.8 
Reconciliation of net income to EBITDA excluding non-cash items:
                                        
Net income  54,584   12,109             12,109   9,626           
Interest expense, net  29,510   23,540             23,540   14,349           
Provision for income taxes  38,842   9,452             9,452   7,076           
Depreciation and amortization  55,998   44,615             44,615   36,025           
Unrealized (gains) losses on derivative instruments  (30,686  46,277             46,277   21,022           
Other non-cash (income) expenses  (590  601           601   860         
EBITDA excluding non-cash items  147,658   136,594   11,064   8.1   136,594   88,958   47,636   53.5 
EBITDA excluding non-cash items  147,658   136,594             136,594   88,958           
Interest expense, net  (29,510  (23,540            (23,540  (14,349          
Amortization of debt financing costs  543   473             473              
Make-whole payment on debt financing                     12,337           
Provision for income taxes, net of changes in deferred taxes  (1,593  (4,053            (4,053  (1,434          
Changes in working capital  16,284   (15,387        (15,387  5,919       
Cash provided by operating activities  133,382   94,087             94,087   91,431           
Changes in working capital  (16,284  15,387             15,387   (5,919          
Maintenance capital expenditures  (39,977  (42,690          (42,690  (32,746        
Free cash flow  77,121   66,784   10,337   15.5   66,784   52,766   14,018   26.6 

NM — Not meaningful


TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

Revenue and Gross Profit

The increase in terminal revenue primarily reflects growth in storage and other services revenues, partially offset by declines in throughput and heating revenues. Storage revenue grew primarily as average rental rates increased by 9.7% during the year. The increase in storage revenue also reflected an increase in storage capacity mainly attributable to certain expansion projects at IMTT’s Louisiana facilities. Demand for bulk liquid storage generally remains strong.

Gross profit increased primarily due to an increase in storage revenues and $15.2 million of additional revenue as a result of a full year of storage and related logistics services at IMTT’s Geismar terminal, which was partially offset by a customer reimbursement for capital projects completed at Bayonne in 2008 which did not includerecur. Throughput and heating revenues declined reflecting lower activity levels at IMTT’s facilities and lower heating costs due to the decline in fuel prices passed through to customers. Storage capacity utilization, defined as storage capacity rented divided by total capacity available, remained relatively constant at 94% during 2009 and 2008.

The terminal operating costs increased primarily as a result of increased health insurance claims, pension costs, salaries and wages, pipeline related work and a full year of operations at Geismar, partially offset by a $2.0 million excise tax settlement in the first half of 2008 that did not recur in 2009.

Gross profit from environmental services decreased from 2008 to 2009 primarily due to higher spill response activity in 2008 relating to IMTT’s central role in response activities following the July 23, 2008 fuel oil spill on the Mississippi River near New Orleans.

General and Administrative Expenses

Lower general and administrative costs during 2009 resulted primarily from the recovery of receivables that had been fully provisioned for in prior periods and reserves under bad debt expense in 2008 that did not recur in 2009.

Depreciation and Amortization

Depreciation and amortization expense increased as IMTT completed several major expansion projects, resulting in higher asset balances.

Interest Expense, Net

Interest costs during 2009 increased primarily due to higher borrowings incurred to fund growth capital expenditures along with the discontinuation of the capitalization of construction period interest upon the commencement of operations at Geismar, partially offset by a decrease in interest rates on unhedged debt balances.

Income Taxes

For the year ended December 31, 2009, IMTT expects to generate a loss for federal income tax purposes that can be carried forward and utilized to reduce current taxable income in 2010.

The business files separate state income tax returns in five states. For the year ended December 31, 2009, the business expects to pay state income taxes of approximately $1.5 million.

A significant difference between the IMTT’s book and federal taxable income relates to depreciation of fixed assets. For book purposes, fixed assets are depreciated primarily over 15 to 30 years using the straight-line method of depreciation. For federal income tax purposes, fixed assets are depreciated primarily over 5 to 15 years using accelerated methods. In addition, a significant portion of the fixed assets placed in service in 2009 qualify for the 50% federal bonus depreciation. Most of the states in which the business operates allow the use of the federal depreciation calculation methods. Louisiana is the only state where the business operates that allows the bonus depreciation deduction.


TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Key Factors Affecting Operating Results

terminal revenue and terminal gross profit increased principally due to:
increases in average tank rental rates;
increases in storage capacity rented to customers; and
increases in revenue from the provision of other services due to the commencement of operations of a new storage facility at Geismar.
revenue and gross profit from environmental response services increased principally due to spill response work and other activities related to a July 2008 fuel oil spill on the Mississippi River.

Revenue and Gross Profit

The increase in terminal revenue reflects growth in all major service segments. Storage revenue grew as the average rental rates charged to customers increased by 14.8% during 2008. The increase in storage revenue also reflected a 5.3% increase in storage capacity rented to customers for 2008, as the business completed certain expansion projects and reported contributions from a facility acquired in November 2007. In addition, the commencement of storage and related logistics services for our principal customer at the new Geismar terminal contributed $12.2 million to terminal revenue in 2008.

Storage capacity utilization, defined as storage capacity rented divided by total capacity available, remained relatively constant at 94% during 2008 and 2007.

Increases in terminal revenue were offset by higher operating costs relating to the commencement of operations at Geismar, the increase in storage capacity and throughput associated with the expansion of existing facilities, the acquisition of a new facility at Joliet in November 2007 and IMTT’s extensive tank inspection and repair program being undertaken in Louisiana. Also operating costs in 2008 were increased by a $2.0 million excise tax settlement related to IMTT’s handling of alcohol during 2005 and a $1.0 million accrual for a potential air emission fee at Bayonne. Please see “Legal Proceedings” in Part I, Item 3 for discussion on the air emission fee.

Revenue and gross profit from environmental response services increased substantially during 2008 due to the central role played by Oil Mop in the response activities following the July 2008 fuel oil spill on the Mississippi River near New Orleans. Oil Mop generated $27.3 million in revenue from spill response work and ancillary services in 2008.

General and Administrative Expenses

Increased general and administrative costs during 2008 resulted from a bad debt reserve for customers under bankruptcy protection and increased overhead costs due to the significant increase in environmental response activity.

Depreciation and Amortization

Depreciation and amortization expense increased by $8.6 million as IMTT completed several major expansion projects.

Interest Expense, Net

Interest costs increased during 2008 primarily due to higher borrowings incurred to fund growth capital expenditures.

Loss on Extinguishment of Debt

Loss on extinguishment of debt in 2007 comprised a $12.3 million make-whole payment associated with the repayment of the two tranches of senior notes in conjunction with the establishment of a new $625.0 million revolving credit facility.


TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

Other Income

Other income for 2008 declined primarily due to gains from insurance settlements in 2007, which did not recur in 2008.

The Gas Company

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Key Factors Affecting Operating Results

increased utility contribution margin due to an interim rate increase implemented from June 11, 2009;
increased non-utility contribution margin resulting from new business processes that improved the business’ ability to acquire and price the non-utility LPG; partially offset by
a marginal reduction in volumes.

TABLE OF CONTENTS

Energy-Related Businesses: The Gas Company – (continued)

        
        
 Year Ended December 31,
   2009 2008 Change Favorable/(Unfavorable) 2008 2007 Change Favorable/(Unfavorable)
   $ $ $ % $ $ $ %
   ($ In Thousands) (Unaudited)
Contribution margin
                                        
Revenue – utility  95,769   121,770   (26,001  (21.4  121,770   95,770   26,000   27.1 
Cost of revenue – utility  60,227   91,978   31,751   34.5   91,978   64,371   (27,607  (42.9
Contribution margin – utility  35,542   29,792   5,750   19.3   29,792   31,399   (1,607  (5.1
Revenue – non-utility  79,597   91,244   (11,647  (12.8  91,244   74,602   16,642   22.3 
Cost of revenue – non-utility
  36,580   55,504   18,924   34.1   55,504   44,908   (10,596  (23.6
Contribution margin – non-utility  43,017   35,740   7,277   20.4   35,740   29,694   6,046   20.4 
Total contribution margin  78,559   65,532   13,027   19.9   65,532   61,093   4,439   7.3 
Production  5,467   5,717   250   4.4   5,717   4,913   (804  (16.4
Transmission and distribution  15,264   14,912   (352  (2.4  14,912   15,350   438   2.9 
Gross profit  57,828   44,903   12,925   28.8   44,903   40,830   4,073   10.0 
Selling, general and administrative expenses  21,802   18,374   (3,428  (18.7  18,374   16,350   (2,024  (12.4
Depreciation and amortization  6,829   6,739   (90  (1.3  6,739   6,737   (2  NM 
Operating income  29,197   19,790   9,407   47.5   19,790   17,743   2,047   11.5 
Interest expense, net  (8,941  (9,390  449   4.8   (9,390  (9,195  (195  (2.1
Other (expense) income  (165  148   (313  NM   148   (162  310   191.4 
Unrealized losses on derivative instruments  (636  (221  (415  (187.8  (221  (431  210   48.7 
Provision for income taxes(1)  (7,619  (4,044  (3,575  (88.4  (4,044  (3,115  (929  (29.8
Net income(2)  11,836   6,283   5,553   88.4   6,283   4,840   1,443   29.8 
Reconciliation of net income to EBITDA excluding non-cash items:
                                        
Net income(2)  11,836   6,283             6,283   4,840                
Interest expense, net  8,941   9,390             9,390   9,195           
Provision for income taxes(1)  7,619   4,044             4,044   3,115           
Depreciation and amortization  6,829   6,739             6,739   6,737           
Unrealized losses on derivative instruments  636   221             221   431           
Other non-cash expenses  1,771   1,180           1,180   1,290         
EBITDA excluding non-cash items  37,632   27,857   9,775   35.1   27,857   25,608   2,249   8.8 
EBITDA excluding non-cash items  37,632   27,857             27,857   25,608           
Interest expense, net  (8,941  (9,390            (9,390  (9,195          
Amortization of debt financing costs  478   478             478   478           
Provision for income taxes, net of changes in deferred taxes  (4,936   —               —     —            
Changes in working capital  1,327   8,133         8,133   (886      
Cash provided by operating activities  25,560   27,078             27,078   16,005           
Changes in working capital  (1,327  (8,133        (8,133  886           
Maintenance capital expenditures  (3,939  (6,202          (6,202  (5,257        
Free cash flow  20,294   12,743   7,551   59.3   12,743   11,634   1,109   9.5 

NM — Not meaningful

(1)Income tax provision for 2007 has been calculated based on 2008 tax rate for comparability.
(2)Corporate allocation expense, other intercompany fees and the federal tax effect have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.

TABLE OF CONTENTS

Energy-Related Businesses: The Gas Company – (continued)

Although the presentation and analysis of contribution margin is a non-GAAP performance measure, management believes that it is meaningful to understanding the business’ performance under both a utility rate structure and a non-utility competitive pricing structure. Under a utility environment, feedstock costs are automatically passed through to utility customers, while non-utility pricing may be adjusted, subject to the competitive environment, to recover changes in raw material costs.

Contribution margin should not be considered an alternative to revenue, operating income, or net income, determined in accordance with U.S. GAAP. The business calculates contribution margin as revenue less direct costs of revenue other than production and transmission and distribution costs. Other companies may calculate contribution margin differently or may use different metrics and, therefore, the contribution margin presented for The Gas Company is not necessarily comparable with metrics of other companies.

Contribution Margin and Operating Income

Utility contribution margin was higher, primarily due to implementation of the interim rate increase from June 11, 2009, partially offset by volume declines related almost entirely to commercial customers, who are more exposed to the variability of the economic cycle. Sales volume in 2009 was approximately 3% lower than 2008.

Non-utility contribution margin was higher, primarily due to lower input costs, partially offset by a 0.6% volume decline from 2008. Local suppliers reduced their production of propane. To the extent that local suppliers are unable to supply The Gas Company with a sufficient amount of propane, the business believes it can supplement its supply from foreign sources. Foreign sourced propane is likely to cost more than locally produced propane, although a portion of any increased cost may be offset by improved efficiency in distribution.

Selling, general and administrative costs increased due to an approximate $930,000 increase in pension expense, higher incentive compensation based upon strong 2009 performance, and professional service costs primarily related to the implementation of a profit center structure in 2009.

Income Taxes

Income from The Gas Company is included in our consolidated federal income tax return, and its income is subject to Hawaii state income taxes. The tax expense in the table above includes both state taxes and the portion of the consolidated federal tax liability attributable to the business.

The business’ federal taxable income differs from book income primarily as a result of differences in the depreciation of fixed assets. Net book income before taxes includes depreciation based on asset values and lives that differ from those used in determining taxable income. For 2009, the business expects to have a current state income tax liability of approximately $863,000.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Key Factors Affecting Operating Results

decreased utility contribution margin due principally to lower volume of gas sold; and
increased non-utility contribution margin primarily due to price increases during 2008, partially offset by higher cost of fuel and increased costs to deliver LPG to Oahu’s neighboring islands.

Contribution Margin and Operating Income

Utility contribution margin decreased primarily due to lower volume of gas sold. Sales volume in 2008 was approximately 4% lower than 2007. Prior to the third quarter of 2008, a portion of utility customer fuel cost adjustments was offset by withdrawals from an acquisition funded escrow account that was fully exhausted in the second quarter of 2008. For 2008 and 2007, withdrawals of $1.6 million and $1.9 million, respectively, were recorded in cash flows from operating activities.

Non-utility contribution margin increased due to customer price increases, partially offset by higher costs of LPG and increases in the cost to transport LPG between islands. The volume of gas products sold in 2008 was approximately 2% lower than 2007.


TABLE OF CONTENTS

Energy-Related Businesses: The Gas Company – (continued)

Production costs increased primarily due to higher electricity, material and personnel costs. Transmission and distribution costs were lower due principally to lower costs related to the completion of the government required pipeline inspection, and lower adjustment to reserves for asset retirement costs, partially offset by higher personnel and rent costs. Selling, general and administrative costs were higher due to an increase in bad debt expense reserves, higher personnel costs, including overtime and fewer vacancies, higher employee benefit costs, including pension expense, and higher professional services costs.

Interest Expense, Net

Interest expense increased due to higher outstanding borrowings for utility capital expenditures during 2008.

District Energy

The financial results discussed below reflect 100% of District Energy’s full year performance.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Key Factors Affecting Operating Results

cooler average temperatures through the summer of 2009 compared with 2008, resulting in decreased cooling consumption revenue and decreased electricity costs due to lower ton-hour sales, partially offset by
increase in contracted capacity as new customers began service and annual inflation-linked increases in contract capacity rates.

TABLE OF CONTENTS

Energy-Related Businesses: District Energy – (continued)

        
        
 Year Ended December 31,
   2009 2008 Change Favorable/(Unfavorable) 2008 2007 Change Favorable/(Unfavorable)
   $ $ $ % $ $ $ %
   ($ In Thousands) (Unaudited)
Cooling capacity revenue  20,430   19,350   1,080   5.6   19,350   18,854   496   2.6 
Cooling consumption revenue  20,236   20,894   (658  (3.1  20,894   22,876   (1,982  (8.7
Other revenue  3,137   3,115   22   0.7   3,115   2,864   251   8.8 
Finance lease revenue  4,758   4,686   72   1.5   4,686   4,912   (226  (4.6
Total revenue  48,561   48,045   516   1.1   48,045   49,506   (1,461  (3.0
Direct expenses – electricity  13,356   13,842   486   3.5   13,842   15,424   1,582   10.3 
Direct expenses – other(1)  18,647   17,809   (838  (4.7  17,809   17,696   (113  (0.6
Direct expenses – total  32,003   31,651   (352  (1.1  31,651   33,120   1,469   4.4 
Gross profit  16,558   16,394   164   1.0   16,394   16,386   8   NM 
Selling, general and administrative expenses  3,407   3,390   (17  (0.5  3,390   3,208   (182  (5.7
Amortization of intangibles  1,368   1,372   4   0.3   1,372   1,368   (4  (0.3
Operating income  11,783   11,632   151   1.3   11,632   11,810   (178  (1.5
Interest expense, net  (10,153  (10,341  188   1.8   (10,341  (9,009  (1,332  (14.8
Loss on extinguishment of debt                 (17,708  17,708   NM 
Other income  1,235   201   1,034   NM   201   740   (539  (72.8
Unrealized (losses) gains on derivative instruments  (220  26   (246  NM   26   (28  54   192.9 
(Provision) benefit for income taxes  (773  (242  (531  NM   (242  5,490   (5,732  (104.4
Noncontrolling interest  (690  (585  (105  (17.9  (585  (554  (31  (5.6
Net income (loss)(2)  1,182   691   491   71.1   691   (9,259  9,950   107.5 
Reconciliation of net income (loss) to EBITDA excluding non-cash items:
                                        
Net income (loss)(2)  1,182   691             691   (9,259          
Interest expense, net  10,153   10,341             10,341   9,009           
Provision (benefit) for income taxes  773   242             242   (5,490          
Depreciation(1)  6,086   5,813             5,813   5,792           
Amortization of intangibles  1,368   1,372             1,372   1,368           
Unrealized losses (gains) on derivative instruments  220   (26            (26  28           
Non-cash loss on extinguishment of debt                     3,013           
Other non-cash expenses  1,009   2,654           2,654   1,086         
EBITDA excluding non-cash items  20,791   21,087   (296  (1.4  21,087   5,547   15,540   NM 
EBITDA excluding non-cash items  20,791   21,087             21,087   5,547           
Interest expense, net  (10,153  (10,341            (10,341  (9,009          
Make-whole payment on debt financing                     14,695           
Amortization of debt financing costs  681   682             682   309           
Equipment lease receivable, net  2,610   2,372             2,372   2,531           
Changes in working capital  519   3,966         3,966   12       
Cash provided by operating activities  14,448   17,766             17,766   14,085           
Changes in working capital  (519  (3,966          (3,966  (12        
Maintenance capital expenditures  (1,001  (989          (989  (949        
Free cash flow  12,928   12,811   117   0.9   12,811   13,124   (313  (2.4

NM — Not meaningful

(1)Includes depreciation expense of $6.1 million, $5.8 million and $5.8 million for the years ended December 31, 2009, 2008 and 2007, respectively.
(2)Corporate allocation expense and the federal tax effect have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.

TABLE OF CONTENTS

Energy-Related Businesses: District Energy – (continued)

Gross Profit

Gross profit increased primarily due to a net increase in contract capacity as six new customers began service and annual inflation-related increases of contract capacity rates in accordance with customer contract terms. This was partially offset by reduced cooling consumption revenue related to lower ton-hour sales resulting from cooler average temperatures through the summer of 2009 compared with 2008, and an adjustment for electricity costs passed through in 2008. A cooler summer in the Chicago area, compared with 2008, contributed to a significant decrease in chilled water demand.

Other Income

Other income increased due to payments received under agreements to review and manage the business’ energy demand during periods of peak demand in 2008 and 2009 and a one-time termination payment received from a customer.

Income Taxes

For the period preceding the sale of a 49.99% non-controlling interest in the business, the income from District Energy is included in our consolidated federal income tax return, and its income is subject to Illinois state income taxes. The tax expense in the table above includes both state taxes and the portion of the consolidated federal tax liability attributable to the business.

Subsequent to the sale of the 49.99% non-controlling interest, District Energy is expected to file a separate consolidated federal income tax return, and continue to file a combined Illinois state income tax return. The business is expected to have approximately $26.0 million in federal and state NOL carryforwards available to offset positive taxable income. The business does not expect to have positive taxable income in 2010 or 2011.

Due to differences in determining book and tax deductible depreciation and amortization, the business’ state taxable income is expected to exceed book income in 2009. However, as of December 31, 2009 the business had more than $20.0 million of state income tax net operating loss carryforwards that are expected to offset any state tax liability through 2011.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Key Factors Affecting Operating Results

annual inflation-linked increases in contract capacity rates, resulting in higher capacity revenue;
cooler average temperatures resulting in decreased cooling consumption revenue and overall electricity costs due to lower ton-hour sales; and
higher borrowings associated with the refinanced debt facility established in September 2007, resulting in increased interest expense.

Gross Profit

Gross profit was relatively flat primarily due to annual inflation-related increases of contract capacity rates in accordance with customer contract terms offset by lower cooling consumption revenue and overall electricity costs due to lower ton-hour sales resulting from cooler than average temperatures in 2008 compared with 2007. Other revenue increased due to the business’ pass-through to customers of the higher cost of natural gas consumables, which is offset in other direct expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased primarily due to the timing of audit fees in 2008 and the collection in 2007 of amounts which were previously written-off in relation to a customer bankruptcy filed in 2004.

Interest Expense, Net

Interest expense increased as a result of higher debt levels associated with the 2007 refinancing and higher non-cash amortization of deferred financing costs.


TABLE OF CONTENTS

Energy-Related Businesses: District Energy – (continued)

Loss on Extinguishment of Debt

Loss on extinguishment of debt comprised a $14.7 million make-whole payment and a $3.0 million deferred financing costs write-off associated with the refinance of the business’ senior notes in 2007, which did not recur in 2008.

Aviation-Related Business

Atlantic Aviation

The rapidly changing conditions affecting this business warrants a discussion of current and comparable prior period performance as well as a quarter on quarter sequential analysis in order to facilitate an understanding of the stabilization of the general aviation market in recent months and its effect on the business’ financial results.

The soft economic conditions caused a lower utilization of business jets by both corporations and individuals. This lower utilization was exacerbated by the negative publicity of the general aviation sector. According to flight data reported by the FAA, the level of U.S. business jet flight activity (as measured by take-offs and landings) declined 17.3% in 2009. Quarterly activity level has increased sequentially since the second quarter of 2009. In the fourth quarter of 2009, business jet take-offs and landings were flat year-on-year but increased sequentially versus the third quarter of 2009 despite the typical seasonal business jet traffic slowdown in the fourth quarter versus the third quarter.

The leverage covenant for Atlantic Aviation steps down on March 31, 2010 from 8.25x to 8.00x trailing twelve month EBIDTA, as defined by the terms of the debt facility. Given the performance of the business of the last three quarters of 2009, the business needs to achieve an EBITDA of approximately $24.0 million to remain covenant compliant in the first quarter of 2010. In the first quarter of 2009, EBITDA was $25.0 million. Since that time, take-offs and landings have sequentially improved by 14.4% and we have reduced our costs by 9.4%. The fourth quarter EBITDA was $26.6 million. Accordingly, we remain confident of being covenant compliant when the covenant steps down on March 31, 2010 unless there is some external shock to the industry or sudden decline in general aviation activity.

After March 31, 2010, the covenant then steps down every subsequent March until and including March 2014. Volatility in the general aviation sector in the last 18 months makes it difficult to project future take-off and landings with any degree of confidence. However, given the recent business jet traffic trajectory, and assuming no external shock to the industry, we believe that cash generation from the business will be sufficient to meet debt service obligations and the business will remain in compliance with financial covenants through the maturity of the business’ debt without any further equity contribution from MIC. Additionally, we anticipate further cost reductions which will be accelerated in an event of a decline in business activity.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Key Factors Affecting Operating Results

lower general aviation fuel volumes and essentially flat weighted average fuel margins;
higher interest expense related to intangible assets in connectioninterest rate swap break fee costs associated with our investment in the toll road business,prepayment of $3.9 million, $3.8 milliondebt during 2009; partially offset by
lower compensation expense resulting from staff rationalization and $95,000decreased credit card fees stemming from lower jet fuel prices and lower activity levels.

TABLE OF CONTENTS

Aviation-Related Business: Atlantic Aviation – (continued)

    
 Year Ended December 31,
   2009 2008 Change
Favorable/(Unfavorable)
   $ $ $ %
   ($ In Thousands) (Unaudited)
Revenue
                    
Fuel revenue  314,603   494,810   (180,207  (36.4
Non-fuel revenue  171,546   221,492   (49,946  (22.5
Total revenue  486,149   716,302   (230,153  (32.1
Cost of revenue
                    
Cost of revenue – fuel  184,853   342,102   157,249   46.0 
Cost of revenue – non-fuel  14,314   32,198   17,884   55.5 
Total cost of revenue  199,167   374,300   175,133   46.8 
Fuel gross profit  129,750   152,708   (22,958  (15.0
Non-fuel gross profit  157,232   189,294   (32,062  (16.9
Gross profit  286,982   342,002   (55,020  (16.1
Selling, general and administrative expenses(1)  179,949   205,304   25,355   12.3 
Goodwill impairment  71,200   52,000   (19,200  (36.9
Depreciation and amortization  89,508   93,903   4,395   4.7 
Operating loss  (53,675  (9,205  (44,470  NM 
Interest expense, net  (67,983  (62,967  (5,016  (8.0
Other expense  (1,451  (241  (1,210  NM 
Unrealized losses on derivative instruments  (28,277  (1,871  (26,406  NM 
Benefit for income taxes  61,009   29,936   31,073   103.8 
Net loss(2)  (90,377  (44,348  (46,029  (103.8
Reconciliation of net loss to EBITDA excluding non-cash items:
                    
Net loss(2)  (90,377  (44,348          
Interest expense, net  67,983   62,967           
Benefit for income taxes  (61,009  (29,936          
Depreciation and amortization  89,508   93,903           
Goodwill impairment  71,200   52,000           
Unrealized losses on derivative instruments  28,277   1,871           
Other non-cash expenses  903   624         
EBITDA excluding non-cash items  106,485   137,081   (30,596  (22.3
EBITDA excluding non-cash items  106,485   137,081           
Interest expense, net  (67,983  (62,967          
Amortization of debt financing costs  3,144   2,613           
Benefit for income taxes, net of changes in deferred taxes  (190  (7,950          
Changes in working capital  9,474   4,351       
Cash provided by operating activities  50,930   73,128           
Changes in working capital  (9,474  (4,351          
Maintenance capital expenditures  (4,513  (7,655        
Free cash flow  36,943   61,122   (24,179  (39.6

NM — Not meaningful

(1)Includes $2.4 million increase in the bad debt reserve in the first quarter of 2009 due to the deterioration of accounts receivable aging.
(2)Corporate allocation expense and the federal tax effect have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.

Results for the years ended2008 include SevenBar FBOs from March 4, 2008 (acquisition date) to December 31, 2006, December 31, 2005 and the period December 22, 2004 (our acquisition date) through December 31, 2004, respectively. Also does not2008. Results for 2009 include amortization expense related to intangible assets in connection with our investment in IMTT of $756,000 for the period May 1, 2006 (our acquisition date) through December 31, 2006. Included in amortization expenseSevenBar FBOs for the year ended December 31, 2006 is a $23.5 million impairment charge relating to trade names and domain names at our airport parking business.

Airport Services Business
Atlantic Aviation and AvPorts have been integrated and combined into a single reportable segment labeled “existing locations.”2009. Results for 2004the two months ended February 28, 2009 have not been restated to reflect the new combined segment. In August 2005 and July 2006, the company acquired a FBO in Las Vegas (“EAR”) and a portfolio of 23 FBOs from Trajen Holdings. Results from these entities are labeled “Acquisitions”.
The following section summarizes the historical consolidated financial performance of our airport services business for the year ended December 31, 2006. The acquisition column in the table below includes the operating results of Trajen from the acquisition date of July 11, 2006. The acquisition column also includes the results of EAR from January 1, 2006 through August 11, 2006. The results of EAR from August 12 through December 31 for both 2006 and 2005 are included in the existing locations columns.
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Key Factors Affecting Operating Results
·
contribution of positive operating results from EAR since our acquisition in August 2005;
·
contribution of positive operating results from 23 Trajen FBOs acquired in July 2006;


66


·
higher dollar per gallon fuel margins and higher volumes at existing locations;
·
increased fuel prices resulting in higher fuel sales revenue and costs of goods sold;
·
higher selling, general and administrative costs at existing locations primarily relating to increased non-cash compensation expense, office rent and utility costs and increased credit card fees resulting from higher revenue;
·
costs incurred for the re-branding and integration of the Trajen locations, and
·
higher interest costs from higher debt levels resulting from the refinancing in December 2005 and the increased borrowings related to the Trajen acquisition.
  
Existing Locations
   
Total
 
  
Year Ended
December 31,
       
Year Ended
December 31,
   
  
2006
 
2005
 
Change
 
Acquisitions
 
2006
 
2005
 
Change
 
  
$
 
$
 
$
 
%
 
(1)
 
$
 
$
 
$
 
%
 
                                    ($ in thousands) (unaudited) 
Revenue
                   
Fuel revenue     161,198     142,785     18,413     12.9     64,372      225,570     142,785     82,785     58.0 
Non-fuel revenue 62,915 58,701 4,214 7.2 24,391 87,306 58,701 28,605 48.7 
Total revenue 224,113 201,486 22,627 11.2 88,763 312,876 201,486 111,390 55.3 
                    
Cost of revenue
                   
Cost of revenue-fuel 95,259 84,480 10,779 12.8 42,625 137,884 84,480 53,404 63.2 
Cost of revenue-non-fuel 6,883 7,906 (1,023)(12.9)1,616 8,499 7,906 593 7.5 
Total cost of revenue 102,142 92,386 9,756 10.6 44,241 146,383 92,386 53,997 58.4 
                    
Fuel gross profit 65,939 58,305 7,634 13.1 21,747 87,686 58,305 29,381 50.4 
Non-fuel gross profit 56,032 50,795 5,237 10.3 22,775 78,807 50,795 28,012 55.1 
Gross Profit 121,971 109,100 12,871 11.8 44,522 166,493 109,100 57,393 52.6 
                    
Selling, general and
administrative expenses
 69,717 65,140 4,577 7.0 23,576 93,293 65,140 28,153 43.2 
Depreciation and amortization 15,997 15,652 345 2.2 9,285 25,282 15,652 9,630 61.5 
Operating income 36,257 28,308 7,949 28.1 11,661 47,918 28,308 19,610 69.3 
                    
Other expense (129)(1,035)906 (87.5)119 (10)(1,035)1,025 (99.0)
Unrealized (loss) gain on derivative instruments (2,417)1,990 (4,407)NM  (2,417)1,990 (4,407)NM 
Interest expense, net (16,801)(18,313)1,512 (8.3)(8,861)(25,662)(18,313)(7,349)40.1 
Provision for income taxes (5,271)(5,134)(137)2.7 (1,031)(6,302)(5,134)(1,168)22.8 
Net income(2)
 11,639 5,816 5,823 100.1 1,888 13,527 5,816 7,711 132.6 



  
Existing Locations
   
Total
 
  
Year Ended
December 31,
       
Year Ended
December 31,
   
  
2006
 
2005
 
Change
 
Acquisitions
 
2006
 
2005
 
Change
 
  
$
 
$
 
$
 
%
 
(1)
 
$
 
$
 
$
 
%
 
                                    ($ in thousands) (unaudited) 
Reconciliation of net income to  EBITDA:
         
Net income(2) 11,639 5,816 5,823 100.1 1,888 13,527 5,816 7,711 132.6 
Interest expense, net 16,801 18,313 (1,512)(8.3)8,861 25,662 18,313 7,349 40.1 
Provision for income taxes 5,271 5,134 137 2.7 1,031 6,302 5,134 1,168 22.8 
Depreciation and amortization 15,997 15,652 345 2.2 9,285 25,282 15,652 9,630 61.5 
EBITDA 49,708 44,915 4,793 10.7 21,065 70,773 44,915 25,858 57.6 
——————
NM – Not meaningful
(1)
Trajen contributed $16.5 million of gross profit and $7.8 million of EBITDA for the year ended December 31, 2006.
(2)
Corporate allocation expense of $3.4 million, with federal tax effect of $1.1 million, has been excluded from the above table for the year ended December 31, 2006presented separately as they are eliminated on consolidation at the MIC Inc. level.not significant.


TABLE OF CONTENTS

Aviation-Related Business: Atlantic Aviation – (continued)

Revenue and Gross Profit

Most

The majority of the revenue and gross profit in our airport services businessAtlantic Aviation is generated through fueling general aviation aircraft at our 42 FBOs.the business’ 72 FBOs around the United States. This revenue is categorized according to who owns the fuel that we useused to service these aircraft. If we ownour business owns the fuel, wethey record ourthe cost to purchase that fuel as cost of revenue-fuel. OurThe business’ corresponding fuel revenue is ourits cost to purchase that fuel plus a margin. WeThe business generally pursuepursues a strategy of maintaining, and where appropriate increasing, dollardollar-based margins, thereby passing any increase in fuel prices to the customer. WeThe business also havehas into-plane arrangements whereby we fuelit fuels aircraft with fuel owned by another party. We collectThe business collects a fee for this service that is recorded as non-fuel revenue. Other non-fuel revenue includes various services such as hangar rentals, de-icing and airport services. Cost of revenue–non-fuel includes our cost, if any, to provide these services.

The key factors for ourbusiness’ revenue and gross profit are driven by fuel volume and dollardollar-based margin per gallon. This applies to both fuel and into-plane revenue. Customers will occasionally change categories.move from one category to the other. Therefore, we believe discussing our fuel and non-fuel revenue and gross profit and the related key metrics on a combined basis provides the mosta more meaningful analysis of our airport services business.
Our total revenueAtlantic Aviation.

Gross profit for 2009 declined compared to 2008 mainly due to lower volume of general aviation fuel sold. Fuel volumes declined 15.6% as compared with 2008. Weighted average margins, including into-plane sales, were essentially flat. Excluding the results from the Charter operations and Management Contracts business, which were sold in the second half of 2008, gross profit growth wasfrom other services (including hangar rentals, de-icing and miscellaneous services) decreased by 7.0% for the year, primarily due to several factors:

·
inclusion of the results of EARlower hangar rent resulting from lower transient traffic.

Gross profit for the full yearquarter ended December 31, 2009 decreased by 6.5% compared to the fourth quarter of 2006;

·
inclusion2008 as a result of lower fuel volume, decreased weighted average fuel margin and weaker de-icing activities. Gross profit for the resultsfourth quarter of Trajen from July 11, 2006;
·
rising cost2009 is sequentially flat compared to the third quarter of 2009 as de-icing revenue, higher fuel at existing locations, which we generally pass on to customers;volume and
·
an increase in fuel volumes and higher average dollar per gallon fuel margins at existing locations, resulting largely from a higher proportion of transient customers, which generally pay higher margins, partially miscellaneous FBO services were offset by lower de-icing activity in the firstweighted average fuel margins resulting from customer mix. General aviation fuel volume increased 5.4% as compared to third quarter of 2006 due to milder weather in the northeast U.S.
Our operations2009 as business jet traffic at New Orleans, LAAtlantic Aviation’s locations improved.

Selling, General and Gulfport, MS were impacted by Hurricane Katrina. Some of our hangar and terminal facilities were damaged. However, our 2006 results were not significantly affected by other storms. We believe that we have an appropriate level of insurance coverage to repair or rebuild our facilities and protect us from business interruption losses that we may experience due to future hurricanes or similar events.

OperatingAdministrative Expenses

The increasedecrease in selling, general and administrative expenses is due to:

·
increased non-cash compensation expense largely dueprimarily to integration synergies and the issuanceimplementation of Stock Appreciation Rightscost reduction initiatives. These cost savings were offset by a $2.4 million increase in the bad debt reserve in the first quarter of 2006;


68


·
additional credit card fees2009 due to the deterioration of the accounts receivables aging. Account receivables aging improved significantly since the first quarter of 2009.

Selling, general and administrative expenses for the quarter ended December 31, 2009 declined 6.5% compared to the fourth quarter of 2008 as a result of cost reduction initiatives. Operating cost sequentially increased by 4.2% reflecting typical seasonality of the business driven by increase utilities expense, repairs and maintenance expense and overtime expense related to increased fuel revenue;snow removal.

Goodwill Impairment

In addition to its annual impairment test in the fourth quarter, the business performed an impairment test at the reporting unit level during the first six months of 2009. Goodwill is considered impaired when the carrying amount of a reporting unit’s goodwill exceeds its implied fair value, as determined under a two step approach. Based on the testing performed, the business recognized goodwill impairment charges of $71.2 million in the first six months of 2009 and

·
additional office costs resulting from higher rent $52.0 million in the fourth quarter of 2008, respectively.

Depreciation and utility costs.

Amortization

The increasedecrease in depreciation and amortization expense is primarilywas due to non-cash impairment charges of $30.8 million incurred in the first half of 2009 as compared to a non-cash cash impairment charge of $35.5 million in the fourth quarter of 2008.


TABLE OF CONTENTS

Aviation-Related Business: Atlantic Aviation – (continued)

Interest Expense, Net

Interest expense increased despite a reduction of $81.6 million of debt due to the additionpayment of $8.8 million of swap termination fees paid during 2009.

Income Taxes

Income generated by Atlantic Aviation is included in our consolidated federal income tax return. The business files separate state income returns in more than 30 states in which it operates. The tax expense in the table above includes both state taxes and the portion of the Las Vegas FBOconsolidated federal tax liability attributable to the business.

For purposes of determining book and Trajen.

Interest Expense, Net
Excludingtaxable income, depreciation of fixed assets and amortization of intangibles are calculated differently, with additional differences between federal and state taxable income.

While the business as a $4.9 million impact of deferred financing costs that were chargedwhole expects to generate a current year federal income tax loss, certain entities within the business will generate state taxable income. The current state income tax expense in connection with a December 2005 refinancing, interest expense increased in 2006 due2009 was approximately $574,000.

The business has approximately $45.0 million of state NOL carryforwards. State NOL carryforwards are specific to the increased debt level associated withstate in which the debt refinancingNOL was generated and various states impose limitations on the acquisitionutilization of Trajen and higher non-cash amortization of deferred financing costs. In December 2005, we refinanced two existing debt facilities with a single debt facility, increasing outstanding borrowings by $103.5NOL carryforwards. Therefore, the business may incur state income tax liabilities in the near future, even if consolidated state taxable income is less than $45.0 million. In July 2006, we increased borrowings under this facility again by $180.0 million to finance our acquisition of Trajen. The debt facility provides an aggregate term loan borrowing of $480.0 million and includes a $5.0 million working capital facility.

EBITDA
The increase in EBITDA from existing locations, excluding the non-cash lossfrom derivative instruments, is due to:
·
increased fuel volumes and higher average dollar per gallon fuel margins;
·
lower other expense due to transaction costs incurred in 2005 relating to our acquisition of two FBOs in California, partially offset by lower de-icing revenue in 2006; and
·
higher selling, general and administrative costs.

Year Ended December 31, 20052008 Compared to Year Ended December 31, 2004

2007

The following section summarizes the historical consolidated financial performance of Atlantic Aviation for the years ended December 31, 2008 and 2007.

The acquisition column and the total 2008 results in the table below include the operating results for:

Supermarine for the period January 1, 2008 to May 31, 2008;
Mercury for the period January 1, 2008 to August 8, 2008;
San Jose for the period January 1, 2008 to August 16, 2008;
Rifle for the period January 1, 2008 to November 30, 2008; and
SevenBar for the period March 4, 2008 to December 31, 2008.

Key Factors Affecting Operating Results

non-cash impairment charges of $52.0 million related to goodwill, $21.7 million related to intangible assets and $13.8 million related to property, equipment, land and leasehold improvements;
positive contribution from acquisitions completed in 2007 and 2008;
lower fuel volumes and lower weighted average fuel margins at existing locations;
higher interest expense related to acquisition funding and increased borrowings associated with the refinancing of the business’ primary debt facility in October 2007; and
lower compensation expense resulting from cost efficiencies.

TABLE OF CONTENTS

Aviation-Related Business: Atlantic Aviation – (continued)

         
         
 Year Ended December 31,
   Existing Locations(2)  Total
   2008 2007 Change
Favorable/
(Unfavorable)
 Acquisitions(3) 2008 2007 Change
Favorable/
(Unfavorable)
   $ $ $ % $ $ $ $ %
   ($ In Thousands) (Unaudited)
Revenue
                                             
Fuel revenue  365,262   371,250   (5,988  (1.6  129,548   494,810   371,250   123,560   33.3 
Non-fuel revenue  157,923   163,086   (5,163  (3.2  63,569   221,492   163,086   58,406   35.8 
Total revenue  523,185   534,336   (11,151  (2.1  193,117   716,302   534,336   181,966   34.1 
Cost of revenue
 
Cost of revenue-fuel  251,084   237,112   (13,972  (5.9  91,018   342,102   237,112   (104,990  (44.3
Cost of revenue-non-fuel  16,420   20,568   4,148   20.2   15,778   32,198   20,568   (11,630  (56.5
Total cost of revenue  267,504   257,680   (9,824  (3.8  106,796   374,300   257,680   (116,620  (45.3
Fuel gross profit  114,178   134,138   (19,960  (14.9  38,530   152,708   134,138   18,570   13.8 
Non-fuel gross profit  141,503   142,518   (1,015  (0.7 ��47,791   189,294   142,518   46,776   32.8 
Gross profit  255,681   276,656   (20,975  (7.6  86,321   342,002   276,656   65,346   23.6 
Selling, general and administrative expenses  148,546   155,474   6,928   4.5   56,758   205,304   155,474   (49,830  (32.1
Goodwill impairment  51,473    —    (51,473  NM   527   52,000    —    (52,000  NM 
Depreciation and amortization  77,271   44,753   (32,518  (72.7  16,632   93,903   44,753   (49,150  (109.8
Operating (loss) income  (21,609  76,429   (98,038  (128.3  12,404   (9,205  76,429   (85,634  (112.0
Interest expense, net  (45,847  (42,559  (3,288  (7.7  (17,120  (62,967  (42,559  (20,408  (48.0
Loss on extinguishment of debt  -   (9,804  9,804   NM   -   -   (9,804  9,804   NM 
Other (expense) income  (323  (775  452   58.3   82   (241  (775  534   68.9 
Unrealized losses on derivative instruments  (1,709  (1,659  (50  (3.0  (162  (1,871  (1,659  (212  (12.8
Benefit (provision) for income taxes  28,003   (8,575  36,578   NM   1,933   29,936   (8,575  38,511   NM 
Net (loss) income(1)  (41,485  13,057   (54,542  NM   (2,863  (44,348  13,057   (57,405  NM 
Reconciliation of net (loss) income to EBITDA excluding non-cash items:
                                             
Net (loss) income(1)  (41,485  13,057             (2,863  (44,348  13,057           
Interest expense, net  45,847   42,559             17,120   62,967   42,559           
(Benefit) provision for income taxes  (28,003  8,575             (1,933  (29,936  8,575           
Depreciation and amortization  77,271   44,753             16,632   93,903   44,753           
Goodwill impairment  51,473    —              527   52,000    —            
Non-cash loss on extinguishment of debt   —    9,804              —     —    9,804           
Unrealized losses on derivative instruments  1,709   1,659             162   1,871   1,659           
Other non-cash expenses (income)  722   (556          (98  624   (556        
EBITDA excluding non-cash items  107,534   119,851   (12,317  (10.3  29,547   137,081   119,851   17,230   14.4 
EBITDA excluding non-cash items  107,534   119,851             29,547   137,081   119,851           
Interest expense, net  (45,847  (42,559            (17,120  (62,967  (42,559          
Amortization of debt financing costs  2,444   2,554             169   2,613   2,554           
Benefit/provision for income taxes, net of changes in deferred taxes  (7,437  (8,435            (513  (7,950  (8,435          
Changes in working capital  4,070   13,912         281   4,351   13,912       
Cash provided by operating activities  60,764   85,323             12,364   73,128   85,323           
Changes in working capital  (4,070  (13,912            (281  (4,351  (13,912          
Maintenance capital expenditures  (7,161  (8,628          (494  (7,655  (8,628        
Free cash flow  49,533   62,783   (13,250  (21.1  11,589   61,122   62,783   (1,661  (2.6

NM — Not meaningful

(1)Corporate allocation expense and the federal tax effect have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.
(2)Results for the existing locations columns include Supermarine FBOs from May 30, 2007 (following our acquisition) to December 31, 2007 and June 1, 2008 to December 31, 2008; Mercury FBOs from August 9, 2007 (following our acquisition) to December 31, 2007 and August 9, 2008 to December 31, 2008; San Jose FBOs from August 17, 2007 (following our acquisition) to December 31, 2007 and August 17, 2008 to December 31, 2008; and Rifle FBO from November 30, 2007 (following our acquisition) to December 31, 2007 and December 1, 2008 to December 31, 2008. Also included are all locations owned since January 1, 2007 for the full year.
(3)Acquisitions include the results of Supermarine FBOs (acquired May 30, 2007) for the period January 1, 2008 to May 31, 2008; Mercury FBOs (acquired August 9, 2007) for the period January 1, 2008 to August 8, 2008; San Jose FBOs (acquired August 17, 2007) for the period January 1, 2008 to August 16, 2008; Rifle FBOs (acquired November 30, 2007) for the period January 1, 2008 to November 30, 2008 and SevenBar FBOs (acquired March 4, 2008).

TABLE OF CONTENTS

Aviation-Related Business: Atlantic Aviation – (continued)

Revenue and Gross Profit

The growth in gross profit at all sites was primarily due to the inclusion of the results of sites acquired in 2007 and 2008. Gross profit at existing locations decreased mainly due to lower fuel volume resulting from lower general aviation activity (declines of 17.8% and 8.7% for the quarter and the year, respectively) and lower average general aviation fuel margins. Gross profit from other services at existing locations increased by 2.8% in 2008 as a result of higher de-icing revenue and hangar rentals in the first half of the year. For the quarter ended December 31, 2008, gross profit from other services declined as a result of lower general aviation traffic.

We attribute the volume decline primarily to a decrease in general aviation transient traffic. We believe the decline in transient traffic is due primarily to overall soft economic conditions. The slowing economy has contributed to a general decrease in corporate activity and reduction in business-related general aviation activity.

While the business seeks to maintain or increase a dollar-based margin per gallon backed by a premium services offering, increased fuel prices that peaked in mid-2008 led to an increased focus on cost by some of our airport services businesscustomers. These customers negotiated more aggressively on fuel purchases and contributed to a decrease in our average margins through the third quarter. Declining fuel price in the fourth quarter had a favorable impact on average fuel margins. In addition, some competitors are pursuing more aggressive pricing strategies that have also contributed to increased margin pressure.

Selling, General and Administrative Expenses

The decrease in selling, general and administrative expenses at existing locations for the year ended December 31, 2005. Information relating2008 is due primarily to existing locationscost efficiencies resulting from integration of recently acquired businesses and management’s actions to streamline our cost structure in 2005 representsresponse to the results of our airport services business excluding the results of EAR, an FBOdecline in Las Vegas and GAH, which comprises two California FBOs. The acquisition column below includes the operating results of EAR and GAHgross profit resulting from the acquisition datesoverall slowing of August 12, 2005 and January 15, 2005, respectively.

The financial performance for the yeareconomy. For the quarter ended December 31, 2004, was obtained by combining the following results:
·
Executive Air Support, Inc., or EAS, from January 1, 2004 through July 29, 2004, on which date EAS was acquired by our airport services business;
·
Our airport services business from January 1, 2004 through December 22, 2004, prior to our ownership2008, selling, general and when it was operated as two separate businesses under separate ownership; and
·
Our airport services business during the period of our ownership from December 22, 2004 to December 31, 2004.
Key Factors Affecting Operating Results
·
contribution of positive operating results from new locations in California and Las Vegas;
·
higher average dollar per gallon fuel marginsadministrative expenses decreased at existing locations;
·
continued increases inlocations by $6.8 million or, 12.7%, primarily as a result of the cost reduction initiatives. Declining fuel prices resulting in higher fuel sales revenue and cost of sales;
·
higher rental income from new hangars and increased tenant occupancy;
·
no significant effect on results from hurricanes; and
·
higher 2005 first quarter de-icing revenue at our northeast locations.


69

  
Year Ended
December 31,
     
GAH
& EAR
 
Year Ended
December 31,
     
  
2005
 
2004
 
Change
 
Acquisitions
 
2005
 
2004
 
Change
 
                                                      
 
$
 
$
 
$
 
%
 
$
 
$
 
$
 
$
 
%
 
  ($ in thousands) (unaudited) 
Revenue
                   
Fuel revenue     115,270     100,363     14,907     14.9     27,515     142,785     100,363     42,422     42.3 
Non-fuel revenue 49,165 41,714 7,451 17.9 9,536 58,701 41,714 16,987 40.7 
Total revenue 164,435 142,077 22,358 15.7 37,051 201,486 142,077 59,409 41.8 
                    
Cost of revenue
                   
Cost of revenue-fuel 67,914 53,572 14,342 26.8 16,566 84,480 53,572 30,908 57.7 
Cost of revenue-non-fuel 7,044 6,036 1,008 16.7 862 7,906 6,036 1,870 31.0 
Total cost of revenue 74,958 59,608 15,350 25.8 17,428 92,386 59,608 32,778 55.0 
                    
Fuel gross profit 47,356 46,791 565 1.2 10,949 58,305 46,791 11,514 24.6 
Non-fuel gross profit 42,121 35,678 6,443 18.1 8,674 50,795 35,678 15,117 42.4 
Gross Profit 89,477 82,469 7,008 8.5 19,623 109,100 82,469 26,631 32.3 
                    
Selling, general and administrative expenses 54,472 55,041 (569)(1.0)10,668 65,140 55,041 10,099 18.3 
Depreciation and amortization 12,187 12,142 45 0.4 3,465 15,652 12,142 3,510 28.9 
Operating income 22,818 15,286 7,532 49.3 5,490 28,308 15,286 13,022 85.2 
                    
Other expense (122)(11,814)11,692 (99.0)(913)(1,035)(11,814)10,779 (91.2)
Unrealized gain on derivative instruments 1,990  1,990 NM  1,990  1,990 NM 
Interest expense, net (14,714)(11,423)(3,291)28.8 (3,599)(18,313)(11,423)(6,890)60.3 
Provision for income taxes (4,591)326 (4,917)NM (543)(5,134)326 (5,460)NM 
Income from continuing
operations
 5,381 (7,625)13,006 (170.6)435 5,816 (7,625)13,441 (176.3)
                    
Reconciliation of income from continuing operations to EBITDA from continuing operations:
       
Income from continuing operations 5,381 (7,625)13,006 (170.6)435 5,816 (7,625)13,441 (176.3)
Interest expense, net 14,714 11,423 3,291 28.8 3,599 18,313 11,423 6,890 60.3 
Provision for income taxes 4,591 (326)4,917 NM 543 5,134 (326)5,460 NM 
Depreciation and
amortization
 12,187 12,142 45 0.4 3,465 15,652 12,142 3,510 28.9 
EBITDA from continuing
operations
 36,873 15,614 21,259 136.2 8,042 44,915 15,614 29,301 187.7 
——————
NM – Not meaningful
Revenue and Gross Profit
Our total revenue and gross profit growth was duecontributed approximately $842,000 to several factors:
·
inclusion of the GAH and EAR from the respective dates of their acquisitions;
·
rising costs of fuel, which we pass on to customers;
·
an increase in dollar per gallon fuel margins at our existing locations, resulting largely from a higher proportion of higher margin customers;
·
higher rental income due to new hangars that opened in 2004 and 2005 at our Chicago and Burlington locations, respectively, and higher occupancy of our existing locations; and
·
an increase in de-icing revenue in the northeastern locations during the first quarter of 2005 due to colder weather conditions.


70


Operating Expenses
The decrease in operating expenses at existing locations iscosts in the fourth quarter due to non-recurring transaction costs incurred by EAS associated with the salea reduction in credit card fees. The majority of the companyongoing savings were fully realized during the third quarter and therefore are not completely reflected in July 2004. This decrease was partially offset by increased professional fees and the implementationfull year results.

Goodwill Impairment

Atlantic Aviation performed an annual impairment test during the fourth quarter of 2008. Goodwill is considered impaired when the carrying amount of a stock appreciation rights plan for certain employees atreporting unit’s goodwill exceeds its implied fair value, as determined under a parttwo-step approach. Based on the testing performed, the business recognized a goodwill impairment charge of our airport services business. $52.0 million during 2008.

Depreciation and Amortization

The increase in depreciation and amortization expense was due to the recordingnon-cash impairment charges of the business’s net assets$21.7 million related to fair value upon their acquisitions, partially offset by the expiration in November 2004 of a two-year non-compete agreement.

Other Expense
The decrease in other expense in 2005 is primarily duecontractual arrangements and $13.8 million related to the recognition of expense attributable to outstanding warrants valued at approximately $5.2 million that were subsequently cancelled in connection with the acquisition of Atlantic Aviation by the Macquarie Group in July 2004, prior to our acquisition. Also included in 2004 results are $981,000 of costs associated with debt financing required to partially fund the Macquarie Group’s acquisition of Atlantic Aviationproperty, equipment, land and $5.6 million of bridge costs associated with our acquisition of Atlantic Aviation. In 2005, Atlantic Aviations incurred underwriting fees of $913,000 in relation to the acquisition of GAH that were funded with proceeds from our IPO.
Interest Expense
Interest expense increased by $6.9 million in 2005 over 2004 largely as a result of an increase in the level of debt, which was incurred at the time of our acquisition of GAH, and as a result of the refinancing described below. Interest expense in 2005 includes the following items:
·
$5.7 million of amortization of deferred financing costs, including $4.9 million of deferred financing costs relating to the previously refinanced debt that was written off at the time of the 2005 refinancing; and
·
$579,000 of interest expense on subordinated debt, which we owned, that was converted to equity in June 2005.
EBITDA
The substantial increase in EBITDA from existing locations, excluding the unrealized gain on derivative instruments, is due to increased dollar fuel margins combined with a reduction in other expenses associated with the sale and financing of the acquisition of Atlantic Aviation by the Macquarie Group of approximately $13.4 million in July 2004. Excluding these expenses EBITDA at existing locations would have increased 20.2%.
Bulk Liquid Storage Terminal Business
We completed our acquisition of a 50% interest in IMTT on May 1, 2006. Therefore, IMTT only contributed to our consolidated results from this date. We included $5.6 million of net income in our consolidated results for the period May 1, 2006 through December 31, 2006, consisting of $6.7 million equity in the earnings of IMTT less $3.2 million depreciation and amortization expense (net of $2.2 million tax effect amortization) and a $2.1 million tax benefit. We received $14.0 million in dividends from IMTTleasehold improvements recorded during 2006. IMTT declared a dividend of $14.0 million in December 2006 with $7.0 million payable to MIC Inc. that we have recorded as a receivable at December 31, 2006. The dividend was received on January 25, 2007.
To enable meaningful analysis of IMTT’s performance across periods, IMTT’s performance for the 3 years ended December 31, 2006 is discussed below.
Key Factors Affecting Operating Results
·
Terminal revenue and terminal gross profit increased in 2006 principally due to increases in average tank rental rates; and
·
Hurricane Katrina caused increased spill clean-up activity and higher environmental spill clean-up revenue in 2005 that did not recur in 2006.



  
Year Ended December 31,
 
Year Ended December 31,
 
  
2006
 
2005
 
Change
 
2005
 
2004
 
Change
 
  
$
 
$
 
$
 
%
 
$
 
$
 
$
 
%
 
                                                   
 ($ in thousands) (unaudited) 
Revenue
                 
Terminal revenue     193,712     182,518     11,194     6.1     182,518     168,384     14,134     8.4 
Terminal revenue - heating 17,268 20,595 (3,327)(16.2)20,595 15,252 5,343 35.0 
Environmental response revenue 18,599 37,107 (18,508)(49.9)37,107 16,124 20,983 130.1 
Nursery revenue 9,700 10,404 (704)(6.8)10,404 10,907 (503)(4.6)
Total revenue
 239,279 250,624 (11,345)(4.5)250,624 210,667 39,957 19.0)
                  
Costs
                 
Terminal operating costs 99,182 97,746 1,436 1.5 97,746 87,755 9,991 11.4 
Terminal operating costs – fuel 12,911 20,969 (8,058)(38.4)20,969 17,712 3,257 18.4 
Environmental response operating
costs
 11,941 24,774 (12,833)(51.8)24,774 9,720 15,054 154.9 
Nursery operating costs 10,837 10,268 569 5.5 10,268 11,136 (868)(7.8)
Total costs
 134,871 153,757 (18,886)(12.3)153,757 126,323 27,434 21.7)
                  
Terminal gross profit 98,887 84,398 14,489 17.2 84,398 78,169 6,229 8.0 
Environmental response gross profit 6,658 12,333 (5,675)(46.0)12,333 6,404 5,929 92.6 
Nursery gross profit (1,137)136 (1,273)NM 136 (229)365 (159.4)
Gross profit
 104,408 96,867 7,541 7.8 96,867 84,344 12,523 14.8 
                  
Operating expenses
                 
General and administrative expenses 22,348 22,834 (486)(2.1)22,834 20,911 1,923 9.2 
Depreciation and amortization 31,056 29,524 1,532 5.2 29,524 29,929 (405)(1.4)
Operating income
 51,004 44,509 6,495 14.6 44,509 33,504 11,005 32.8 
——————
NM – Not meaningful
Year Ended December 31, 2006 as Compared to Year Ended December 31, 2005
Revenue and Gross Profit
Terminal revenue increased primarily due to an increase in storage revenue caused by a 1.5% increase in aggregate rented storage capacity and a 7.1% increase in average storage rates in 2006. Overall rented storage capacity increased slightly from 94% to 96% of available storage capacity in 2006. The increase in storage revenue was offset by reduced packaging revenue due to the closure of packaging operations at Bayonne in the first quarter of 2006. In 2006, IMTT also achieved a $4.7 million improvement in the differential between terminal revenue – heating and terminal operating costs – fuel due to a one-time refund of $2.8 million for fuel metering discrepancies received in the fourth quarter of 2006 and implementation of cost-saving measures.
The increase2008. Amortization expense in terminal revenue was partially offset by an increase in terminal operating costs other than terminal generating costs-fuel. This increase was principally due to increases in direct labor, health benefit and repair and maintenance costs offset partially by a non-cash natural resource damage settlement accrual of $3.2 million in the second quarter of 2005 that did not recur in 2006.
Environmental response gross profit decreased in 2006 due to a large contribution in 2005 from spill clean-up activities resulting from Hurricane Katrina.
The nursery gross profit decreased due to a reduction in demand for plants in the aftermath of Hurricane Katrina and higher delivery costs due to increases in fuel costs.


72


Operating Expenses
General and administrative expenses decreased slightly reflecting $921,000 of costs incurred by IMTT during 2005 when it temporarily relocated its head office from New Orleans to Bayonne in the immediate aftermath of Hurricane Katrina, which did not recur in 2006.
Depreciation and amortization expense increased due to increased growth capital expenditure.
Year Ended December 31, 2005 as Compared to Year Ended December 31, 2004
Revenue and Gross Profit
Terminal revenue increased primarily due to an increase in storage revenue caused by a 3.2% increase in aggregate rented storage capacity and a 4.7% increase in average storage rates in 2005. Overall rented storage capacity increased slightly from 92% to 94% of available storage capacity in 2005. In 2005 IMTT also achieved a $2.1 million improvement in the differential between terminal revenue – heating and terminal operating costs – fuel due to improved customer contract terms and efficiency gains in the use of fuel.
The increase in terminal revenue was partially offset by an increase in terminal operating costs other than terminal operating costs-fuel. Of this increase, $3.2 million related to the cost of a natural resource damages settlement reached with the State of New Jersey which is not expected to recur. The balance of the increase was due to general increases in direct labor and health benefit costs, property taxes, power costs and environmental compliance costs.
Environmental response gross profit increased principally due to spill clean-up activities resulting from Hurricane Katrina.
Operating Expenses
General and administrative expenses increased partially as a result of $921,000 of costs incurred by IMTT when it temporarily relocated its head office from New Orleans to Bayonne in the immediate aftermath of Hurricane Katrina. Other than a $325,000 insurance deductible expensed during 2005, IMTT incurred no other material costs related to Hurricane Katrina.
Gas Production and Distribution Business
We completed our acquisition of TGC on June 7, 2006. Therefore, TGC only contributed to our consolidated operating results from that date. We included $87.7 million of revenue and $29.5 million of contribution margin for the period from June 7, 2006 through December 31, 2006.
Because TGC’s results of operations are only included in our consolidated financial results for less than seven months of 2006, the following analysis compares the historical results of operations for TGC under its current and prior owner. We believe that this is the most appropriate approach to analyzing the historical financial performance and trends of TGC.
Key Factors Affecting Operating Results
·
Utility revenue was reduced by $5.1 million for two billing adjustments required by Hawaii regulators as a condition to our acquisition, $4.1 million of which is non-recurring. This resulted in an 11.2% decrease in utility contribution margin. We received cash reimbursement for the full amount through two escrow accounts that were established as purchase price adjustments when we acquired TGC;
·
Utility therm sales slightly increased due primarily to increased usage by a single interruptible customer;
·
Non-utility contribution margin increased primarily due to price increases partially offset by a customer’s closing of a propane cogeneration unit and lower overall sales volumes;
·
Operating and overhead costs increased due to an increase in personnel and associated benefit costs, increased repair costs for distribution systems and transmission line inspections and higher utility costs; and
·
Non-cash unrealized losses on derivatives that resulted from changes in value of these instruments.


73


Management analyzes contribution margin for TGC because it believes that contribution margin, although a non-GAAP measure, is useful and meaningful to understanding the performance of TGC utility operations under its regulated rate structure and of its non-utility operations under a competitive pricing structure, both of which include an ability to change rates when the underlying fuel costs change. Contribution margin should not be considered an alternative to operating income, or net income, which are determined in accordance with U.S. GAAP. Other companies may calculate contribution margin differently and, therefore, the contribution margin presented for TGC is not necessarily comparable with other companies.
  
Year Ended
December 31,
 
Year Ended
December 31,
   
  
2006
 
2005
 
Change
 
  
$
 
$
 
$
 
%
 
  ($ in thousands) (unaudited) 
Contribution margin
         
Revenue – utility     93,602     85,866     7,736     9.0 
Cost of revenue – utility 63,222 51,648 11,574 22.4 
Contribution margin – utility 30,380 34,218 (3,838)(11.2)
          
Revenue – non-utility 67,260 61,592 5,668 9.2 
Cost of revenue – non-utility 40,028 36,414 3,614 9.9 
Contribution margin – non-utility 27,232 25,178 2,054 8.2 
          
Total contribution margin
 57,612 59,396 (1,784)(3.0)
          
Production 4,718 4,458 260 5.8 
Transmission and distribution 14,110 13,091 1,019 7.8 
Selling, general and administrative expenses 16,116 16,107 9  
Depreciation and amortization 6,089 5,236 853 16.3 
Operating income
 16,579 20,504 (3,925)(19.1)
Interest expense, net (8,666)(4,123)(4,543)110.2 
Other (expense) income (1,605)2,325 (3,930)(169.0)
Unrealized loss on derivatives (3,717) (3,717)NM 
Income before taxes(1)
 2,591 18,706 (16,115)(86.1)
          
Reconciliation of income before taxes to EBITDA:
         
Income before taxes(1) 2,591 18,706 (16,115)(86.1)
Interest expense, net 8,666 4,123 4,543 110.2 
Depreciation and amortization 6,089 5,236 853 16.3 
EBITDA
 17,346 28,065 (10,719)(38.2)
——————
NM – Not meaningful
(1)
Corporate allocation expense of $1.8 million for the period June 7, 2006 (our acquisition date) through December 31, 2006 has been excluded from the above table, as it is eliminated on consolidation at the MIC Inc. level.
Contribution Margin and Operating Income
TGC’s total contribution margin declined 3.0% and operating income declined by 19.1% primarily due to a $4.1 million customer rebate. This rebate was required by Hawaii state regulators as a condition of our purchase of TGC. Although utility revenue and contribution margin were reduced by this rebate, the cash effect was offset by reimbursement of the full amount from a restricted cash fund established under our TGC purchase agreement. In addition, Hawaii state regulators required TGC to modify its calculation of cost of fuel increases that are passed through to utility customers. For the year ended December 31, 2006, this provision reduced the utility revenue and contribution margin by approximately $1.0 million. This cash effect was offset by withdrawals from our $4.5 million escrow account established and funded at acquisition by the seller. TGC can draw upon the escrow account to be reimbursed for these reductions. These escrowed funds are available until the date that is one month subsequent to when new rates are made effective at TGC’s next rate case. TGC believes that these escrowed funds will be fully drawn upon within the next three years; thereafter escrowed funds would not be available. The cash reimbursements of the customer rebate and any fuel cost adjustment amounts are not reflected in revenue but rather


74


are reflected as releases of restricted cash and other assets. Excluding the effects of both the customer rebate and fuel cost calculation change, operating income would have increased by 5.7%
Therms sold in the non-utility sector decreased 2.7% for the year principally due to the customer’s closing of a propane-powered cogeneration unit at its resort, as well as customer renovations and energy conservation measures. Lower therms sold were more than offset by an 8.2% increase in non-utility contribution margin primarily reflecting rate increases implemented since late 2005.
Production and transmission and distribution costs were higher than in 2005 due primarily to increased personnel and associated benefits costs, increased pipeline and plant repair costs, additional costs related to a U.S. Department of Transportation mandated transmission pipeline inspection program and higher utility costs.
Selling, general and administrative expenses were comparable between 2006 and 2005. The absence of the prior owner’s overhead allocations since our acquisition was partially offset by increased personnel and associated employee benefit costs, purchase transaction costs, and increased consulting costs.
Depreciation and amortization was higher for the year due to equipment additions and the higher asset basis following our purchase of TGC in June 2006.
Interest Expense
Interest expense increased primarily as a result of the increase in total debt resulting from our acquisition funding and prepayment fees of approximately $1.0 million expensed by TGC’s previous owner following early retirement of certain debt.
Other (Expense) Income
Other expense for 2006 included $2.3 million of costs incurred by the prior owners for their sale of TGC to us. Other income for 20052007 included a $1.3 million payment from an electric utility companynon-cash impairment charge relating to reimburse TGC under a cost sharing arrangement, for entry into an energy corridor fuel pipeline right-of-way. Both amounts are non-recurring.
Unrealized Loss on Derivatives
During 2006, TGC recognized a non-cash expense of $3.7 million as a result of a decreaseairport management contracts business, which was subsequently sold in the carrying value of the derivative instruments. These derivatives were designated as cash flow hedges as of January 1, 2007, and we expect most of the future changes in fair value to be reflected in other comprehensive income (loss) on the balance sheet.
EBITDA
The decline in EBITDA is due in large part to the customer rebate and the change in fuel adjustment calculations that were discussed above for which we have been reimbursed, as well as non-cash unrealized losses on derivatives reflecting the decrease in fair value of the interest rate swaps. Excluding these amounts and the non-recurring items noted under the selling, general and administrative and other (expense) income, EBITDA would have been 7.4% higher compared to 2005.
District Energy Business
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Key Factors Affecting Operating Results
·
lower average temperatures during peak cooling season (May to September) resulted in 6% lower ton-hour sales, partially offset by contracted rate increases;
·
capacity revenue increased due to four interruptible customers converting to continuous service over June through September and due to general increases in-line with inflation; and
·
higher electricity costs related to signing new energy supply contracts at three of our plants.



  
Consolidated
 
  
2006
 
2005
 
Change
 
  
$
 
$
 
$
 
%
 
  ($ in thousands) (unaudited) 
Cooling capacity revenue    17,407    16,524    883    5.3 
Cooling consumption revenue 17,897 18,719 (822)(4.4)
Other revenue 3,163 2,855 308 10.8 
Finance lease revenue 5,118 5,303 (185)(3.5)
Total revenue 43,585 43,401 184 0.4 
Direct expenses — electricity 12,245 12,080 165 1.4 
Direct expenses — other(1) 17,161 17,098 63 0.4 
Direct expenses — total 29,406 29,178 228 0.8 
Gross profit 14,179 14,223 (44)(0.3)
Selling, general and administrative expenses 3,811 3,480 331 9.5 
Amortization of intangibles 1,368 1,368   
Operating income 9,000 9,375 (375)(4.0)
Interest expense, net (8,331)(8,271)(60)0.7 
Other (expense) income (139)369 (508)(137.7)
Benefit (provision) for income taxes 1,102 (302)1,404 NM 
Minority interest (528)(719)191 (26.6)
Net income(2) 1,104 452 652 144.2 
          
Reconciliation of net income to EBITDA
         
Net income(2) 1,104 452 652 144.2 
Interest expense, net 8,331 8,271 60 0.7 
(Benefit) provision for income taxes (1,102)302 (1,404)NM 
Depreciation 5,709 5,694 15 0.2 
Amortization of intangibles 1,368 1,368   
EBITDA 15,410 16,087 (677)(4.2)
——————
NM – Not meaningful
(1)
Includes depreciation expense of $5.7 million for each of the years ended December 31, 2006 and 2005.
(2)
Corporate allocation expense of $2.4 million, with federal tax effect of $781,000 has been excluded from the above table for the year ended December 31, 2006, as they are eliminated in consolidation at the MIC level.
Gross Profit
Gross profit for 2006 decreased slightly primarily due to lower ton-hour sales from cooler weather and higher electric costs related to required changes to market based energy supply contracts at three of our plants, which commenced in May 2006. These increased costs were partially offset by the conversion of several interruptible customers to firm, annual inflation-related increases of contract capacity rates and scheduled increases in contract consumption rates in accordance with the terms of existing customer contracts. Additionally, electric cost increases were mitigated by efficient operation of the downtown system’s chilled water plants. Other revenue increased due to our pass-through to customers of the higher cost of natural gas consumables, which are included in other direct expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expense increased primarily due to higher legal and third-party consulting fees related to strategy work in preparation for the 2007 deregulation of Illinois’ electricity market offset by the effects of adopting a new long-term incentive plan for management employees in the first quarter of 2006 that required a net reduction in the liability previously accrued under the former plan.
2008.

Interest Expense, Net

The increase in net interest expense was due to additional credit line draws necessary to fund scheduled capital expenditures and new customer connections during the year. Our interest rate on our senior debt is a fixed rate.



76


Other Income (Expense)
The decrease in other income was due to a gain recognized in the second quarter of 2005 related to a minority investor’s share of a settlement providing for the early release of escrow established with the Aladdin bankruptcy and a loss on disposal of assets recognized in the fourth quarter of 2006 related to a customer termination due to bankruptcy.
EBITDA
EBITDA decreased primarily due to the lower ton-hour sales from cooler weather and higher electric costs related to signing new energy supply contracts at three of our plants.
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
The table below Key Factors Affecting Operating Results compares the historical consolidated financial performance of the district energy business for the year ended December 31, 2005 to the year ended December 31, 2004. This table combines the following results of operations:
·
the predecessor Thermal Chicago Corporation from January 1, 2004 through June 30, 2004, prior to its acquisition by the Macquarie Group;
·
the district energy business from January 1, 2004 through December 22, 2004, when it was part of the Macquarie Group;
·
the district energy business from December 23, 2004 through December 31, 2004, the period of our ownership; and
·
ETT Nevada, the holding company for our 75% interest in Northwind Aladdin, from September 29, 2004 through December 22, 2004, when it was part of the Macquarie Group.
At the time at which the business acquired a 75% interest in Northwind Aladdin, it also acquired all of the senior debt of Northwind Aladdin. As a consequence, interest expense included in the statement of operations below from September 29, 2004 through December 31, 2004 on such senior debt was eliminated in our consolidated financial statements for 2004 and all subsequent periods.
Key Factors Affecting Operating Results
·
full year of results for ETT Nevada in 2005;
·
capacity revenue generally increased in-line with inflation;
·
consumption ton-hours sold were higher primarily due to above average temperature in Chicago from June to September; and
·
EBITDA was higher due to the incremental margin from additional consumption ton-hours sold and the inclusion of ETT Nevada.


77

  
MDEH Excluding ETT Nevada
 
ETT Nevada
 
Consolidated
 
  
2005
 
2004
 
Change
 
2005
 
2004
 
2005
 
2004
 
Change
 
  
$
 
$
 
$
 
%
 
$
 
$
 
$
 
$
 
$
 
%
 
                                          ($ in thousands) 
Cooling capacity revenue     16,524     16,224     300     1.8               16,524     16,224     300     1.8 
Cooling consumption revenue 16,894 14,359 2,535 17.7 1,825 289 18,719 14,648 4,071 27.8 
Other revenue 1,090 1,285 (195)(15.2)1,765 436 2,855 1,721 1,134 65.9 
Finance lease revenue 1,287 1,387 (100)(7.2)4,016 1,036 5,303 2,423 2,880 118.9 
 Total revenue 35,795 33,255 2,540 7.6 7,606 1,761 43,401 35,016 8,385 23.9 
Direct expenses – electricity 10,270 8,767 1,503 17.1 1,810 231 12,080 8,998 3,082 34.3 
Direct expenses – other(1) 15,590 13,410 2,180 16.3 1,508 369 17,098 13,779 3,319 24.1 
Direct expenses – total 25,860 22,177 3,683 16.6 3,318 600 29,178 22,777 6,401 28.1 
Gross profit 9,935 11,078 (1,143)(10.3)4,288 1,161 14,223 12,239 1,984 16.2 
Selling, general and administrative expenses 3,161 3,555 (394)(11.1)319 74 3,480 3,629 (149)(4.1)
Amortization of intangibles 1,321 704 617 87.6 47 12 1,368 716 652 91.1 
Operating income 5,453 6,819 (1,366)(20.0)3,922 1,075 9,375 7,894 1,481 18.8 
Interest expense, net (6,255)(20,736)14,481 (69.8)(2,016)(585)(8,271)(21,321)13,050 (61.2)
Other income 138 1,529 (1,391)(91.0)231  369 1,529 (1,160)(75.9)
Provision for income taxes (302)(1,103)801 (72.6)  (116)(302)(1,219)917 (75.2)
Minority interest     (719)(118)(719)(118)(601)509.3 
Net income (loss) (966)(13,491)12,525 (92.8)1,418 256 452 (13,235)13,687 (103.4)
                      
Reconciliation of net income (loss) to EBITDA
               
Net income (loss) (966)(13,491)12,525 (92.8)1,418 256 452 (13,235)13,687 (103.4)
Interest expense, net 6,255 20,736 (14,481)(69.8)2,016 585 8,271 21,321 (13,050)(61.2)
Provision for income taxes 302 1,103 (801)(72.6) 116 302 1,219 (917)(75.2)
Depreciation 5,694 4,202 1,492 35.5   5,694 4,202 1,492 35.5 
Amortization of intangibles 1,321 704 617 87.6 47 12 1,368 716 652 91.1 
EBITDA 12,606 13,254 (648)(4.9)3,481 969 16,087 14,223 1,864 13.1 
——————
(1)
Includes depreciation expense of $5.7 million and $4.2 million for the years ended December 31, 2005 and 2004, respectively.
Certain 2004 amounts shown above have been reclassified to conform to the current year presentation. Additionally, a tax adjustment relating to 2004 that was recorded subsequent to our filing of Form 10-K last year has been reflected in the 2004 amounts shown above.
Gross Profit
Gross profit decreased at Thermal Chicago primarily due to increased acquisition-related depreciation expense of $1.5 million. The higher (non-cash) expense offset the 13% increase in consumption ton-hours sold resulting from above-average temperatures in Chicago from June to September 2005. Annual inflation-related increases of contract capacity rates and scheduled increases in contract consumption rates in accordance with the terms of existing customer contracts accounted for the remaining increase in revenue. Electricity expenses increased in line with consumption revenue. Operating efficiencies mitigated some of the impact of higher electricity costs. Higher direct labor costs from scheduled increases in wages and benefits for union workers and scheduled increases in maintenance contracts also contributed to the decrease in gross margin.
Selling, General and Administrative Expenses
Selling, general and administrative expenses at Thermal Chicago decreased from 2004 primarily due to the absence of expenses and local taxes related to the sale of Thermal Chicago by Exelon in 2004 of approximately $0.5 million.


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Interest Expense, Net
The substantial decrease in net interest expense was due to a make-whole payment of $10.3 million to redeem outstanding bonds prior to the acquisition of Thermal Chicago by the Macquarie Group on June 30, 2004 and other payments related to financing the acquisition. The other payments included $2.2 million related to the termination of an interest rate swap used to hedge long term interest rate risk pending issuance of notes in the private placement, and $3.4 million related to a bridge loan financing. As of December 31, 2005, the business had $120.0 million in long term debt, consisting of $100.0 million and $20.0 million at fixed annual rates of 6.82% and 6.40%, respectively, and $850,000 drawn on its credit facility at fixed interest of LIBOR plus 2.5%.
EBITDA
EBITDA excluding ETT Nevada decreased $600,000 due to a $1.3 million financial restructuring gain in 2004. But for the gain, EBITDA would have been $600,000 or 5.5% higher, primarily due to the incremental consumption revenue from additional ton-hours sold.
Airport Parking Business
In the following discussion, new locations refer to locations in operation during 2006, but not in operation throughout the comparable period in 2005. Comparable locations refer to locations in operation throughout the respective twelve-month periods in both 2006 and 2005.
We added nine new locations in 2006:
·
the SunPark facilities located in Houston, Oklahoma City, St. Louis, Buffalo, Philadelphia and Columbus, acquired in October 2005;
·
the First Choice facility located in Cleveland, acquired in October 2005; 
·
the Priority facility located in Philadelphia, acquired in July 2005, and
·
the Avistar Economy (self-park) facility located in Philadelphia, commenced operations in November 2006.
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
During the first quarter of 2006, we consolidated two adjacent facilities in Philadelphia. As part of this consolidation, the Avistar Philadelphia facility was effectively closed and its capacity made available to the SunPark Philadelphia facility. During the third quarter of 2006, we ceased operating the Avistar St. Louis location and consolidated the facility into our SunPark St. Louis facility. We consider these consolidated operations to be new locations for 2006. Accordingly, the stand alone results for Avistar Philadelphia and Avistar St. Louis for 2006 have been excluded from comparable locations and included in new locations. The financial and operating results reported for new locations in 2005 include Philadelphia Avistar and Avistar St. Louis. There were 21 comparable locations for 2006.

Key Factors Affecting Operating Results
·
contribution from new locations;
·
price increases and reduced discounting in selected markets contributed to the 10.0% increase in average revenue per car out for comparable locations during the year;
·
marketing efforts targeted at customers with a longer average stay increased average overnight occupancy by 3.5% for comparable locations during the year;
·
improved operating margins at comparable locations;
·
a cash settlement received and included in other income;
·
non-cash unrealized gains and losses in derivatives; and
·
a non-cash impairment charge of $23.5 million for existing trademarks and domain names due to a re-branding initiative.



  
Year Ended December 31,
 
Change
 
  
2006
 
2005
 
$
 
%
 
  ($ in thousands) (unaudited) 
Revenue     $76,062     $59,856     $16,206      27.1 
Direct expenses(1)  54,637  45,076  9,561  21.2 
Gross profit  21,425  14,780  6,645  45.0 
Selling, general and administrative expenses  5,918  4,509  1,409  31.2 
Amortization of intangibles(2)  25,563  3,802  21,761  NM 
Operating (loss) income  (10,056) 6,469  (16,525) NM 
Interest expense, net  (17,267) (10,320) (6,947) 67.3 
Other income (expense)  502  (14) 516  NM 
Unrealized (loss) gain on derivative instruments  (720) 170  (890) NM 
Income tax benefit (expense)  12,364  (60) 12,424  NM 
Minority interest in loss (income) of consolidated
subsidiaries
  572  538  34  6.3 
Net loss(3) $(14,605)$(3,217)$(11,388) NM 
Reconciliation of net loss to EBITDA
             
Net loss(3) $(14,605)$(3,217)$(11,388) NM 
Interest expense, net  17,267  10,320  6,947  67.3 
Income tax (expense) benefit  (12,364) 60  (12,424) NM 
Depreciation  3,555  2,397  1,158  48.3 
Amortization of intangibles(2)  25,563  3,802  21,761  NM 
EBITDA $19,416 $13,362 $6,054  45.3 
——————
NM – Not meaningful
(1)
Includes depreciation expense of $3.6 million and $2.4 million for the years ended December 31, 2006 and 2005, respectively.
(2)
Includes a non-cash impairment charges of $23.5 million, for the year ended December 31, 2006, for existing trademarks and domain names due to a re-branding initiative.
(3)
Corporate allocation expense of $3.3 million, with federal tax effect of $1.1 million, has been excluded from the above table for the year ended December 31, 2006, as they are eliminated on consolidation at the MIC Inc. level.



  
Year Ended December 31,
 
  
2006
 
2005
 
        
Operating Data:                                                                                                             
       
Total Revenue ($ in thousands)(1):
       
New locations     $17,892     $5,616 
Comparable locations $58,170 $54,240 
Comparable locations increase  7.2%   
Parking Revenue ($ in thousands)(2):
       
New locations $17,751 $5,485 
Comparable locations $56,045 $52,330 
Comparable locations increase  7.1%   
Cars Out(3):
       
New locations  671,521  213,436 
Comparable locations  1,415,561  1,453,925 
Comparable locations (decrease)  -2.6%   
Average Revenue per Car Out:       
New locations $26.43 $25.70 
Comparable locations $39.59 $35.99 
Comparable locations increase  10.0%   
Average Overnight Occupancy(4):
       
New locations  6,638  5,768 
Comparable locations  15,452  14,925 
Comparable locations increase  3.5%   
Gross Profit Percentage:       
New locations  29.10% 21.63%
Comparable locations  27.91% 25.44%
Locations:       
New locations  9    
Comparable locations  21    
——————
(1)
Total Revenue includes revenue from all sources, including parking revenue, and non-parking revenue such as that derived from transportation services and rental of premises.
(2)
Parking Revenue include all receipts from parking related revenue streams, which includes monthly, membership, and third-party distribution companies.
(3)
Cars Out refers to the total number of customers existing during the period.
(4)
Average Overnight Occupancy refers to aggregate average daily occupancy measured for all locations at the lowest point of the day and does not reflect turnover and intra-day activity.
Revenue
Revenue increased due to the addition of nine new locations during 2006 and an increase in average revenue per car out at comparable locations. In 2006, new locations represent 30% of our portfolio by number of locations and contributed 24% of total revenue. We believe the contribution from these facilities will continue to grow as customers continue to be exposed to our branding, marketing and service.
Average revenue per car out increased at our comparable locations primarily due to implementation of our yield management strategy, including price increases and reduced discounting in selected markets and a new marketing program. A focus on improving the level of customer service in certain locations has supported these price increases.
The decrease in cars out at comparable locations was attributed to a continued strategic shift away from daily parkers and a greater marketing emphasis on leisure travelers throughout 2006. Daily parkers, typically airport employees, contribute to a higher number of cars out, but pay discounted rates. Leisure travelers tend to have longer average stays.


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The lower average revenue per car out at new locations, relative to comparable locations, in 2006 reflects the acquisition of new locations in lower priced markets.
Average overnight occupancies at comparable locations were up slightly as capacity expansions in select markets were fully utilized. We believe average length of stay came under pressure during the second half of 2006 as some leisure travelers chose shorter vacations due to higher costs for air fares, hotel and rental cars.
Our airport parking business as a whole has sufficient capacity to accommodate further growth. At locations where we are operating at peak capacity intra-day, we continue to evaluate and implement strategies to expand capacity of these locations. For example, during 2006 we recovered additional capacity from a sub-tenant, installed additional vehicle lifts and, during peak periods, offered customers valet service at self park facilities.
Operating Expenses
Direct expenses for 2006 increased primarily due to additional costs associated with operating nine new locations. Direct expenses at comparable locations were also affected by higher real estate, fuel and labor costs offset by lower claims from damaged cars, advertising and insurance premiums.
We intend to continue pursuing costs savings through standardization of staff scheduling to minimize overtime and a new bulk fuel purchase program that was implemented in August 2006.
Direct expenses include rent in excess of lease, a non-cash item, in the amount of $2.3 million and $2.0 million for 2006 and 2005, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased due primarily to higher payroll costs associated with the expansion of the management team to support additional locations, health insurance and professional fees. Non-recurring costs in 2006 include the retirement of two members of senior management from the business, costs associated with a restructure of the finance function and higher legal expenses associated with scheduled union negotiations.
Amortization of Intangibles
Amortization increased largely as a result of impairment charges in the amount of $23.5 million related to the trademarks and domain names previously acquired, partially offset by the elimination of amortization of non-compete agreements that expired in December 2005. As a result of our re-branding initiative, we wrote down almost all of the value of our acquired trademarks and, as a result, amortization expense will decline significantly beginning in 2007.
Interest Expense, Net
Interest expense increased due to the additional interest and finance cost amortization associated with the new debt issued in October 2005 to finance acquisitions. On September 1, 2006 this debt and our other primary borrowing were refinanced with more favorable terms and $647,000 of finance costs related to the October 2005 financing were expensed. Interest expense also increased as a result of higher LIBOR rates.
Our two primary borrowings were subject to two interest rate hedges which effectively capped our interest rate when the 30-day LIBOR rate was 4.5%. In March 2006 the LIBOR rate exceeded the cap rate. As part of the refinance on September 1, 2006 one of these interest rate hedges was replaced with an interest rate swap at 5.17%. Interest cap and swap payments totaling $824,000 were realized in 2006. This amount was recorded as a reduction in interest expense.
EBITDA
EBITDA increased largely as a result of the 2005 acquisitions and improved profit margins at our comparable locations. EBITDA was also increased by the proceeds from a settlement related to a 2003 acquisition. Net proceeds from the settlement totaled $417,000 and were recorded in other income.


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The increase in gross profit margins at our new locations in 2006 reflects the acquisition of locations predominantly on owned land compared to the leased locations at Avistar Philadelphia and Avistar St. Louis.
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Key Factors Affecting Operating Results
·
an increase in cars out at comparable locations and the revenue contributed by the new locations resulted in a 16.2% increase in revenue during 2005;
·
reduced discounting and yield management of, for example, daily airport employee customers contributed to the slight increase in average parking revenue per car out for comparable locations. The impact of these initiatives was stronger in the second half of 2005; and
·
higher operating costs at comparable locations lowered operating margins while margins at new locations reflected less impact from start up costs than experienced in the prior year period and the positive contribution from the SunPark facilities acquired in the fourth quarter of 2005.
  
2005
 
2004
 
Change
 
  
$
 
$
 
$
 
%
 
  ($ in thousands) (unaudited) 
Revenue     59,856     51,444     8,412     16.4 
Direct expenses(1) 45,076 36,872 8,204 22.2 
Gross profit 14,780 14,572 208 1.4 
Selling, general and administrative expenses 4,509 4,670 (161)(3.4)
Amortization of intangibles 3,802 2,850 952 33.4 
Operating income 6,469 7,052 (583)(8.3)
Interest expense, net (10,320)(8,392)(1,928)23.0 
Other expense (14)(47)33 (70.2)
Unrealized gain on derivative instruments 170  170 NM 
Income tax expense (60) (60)NM 
Minority interest in loss of consolidated subsidiaries 538 629 (91)(14.5)
Net loss (3,217)(758)(2,459)NM 
Reconciliation of net loss to EBITDA:
         
Net loss (3,217)(758)(2,459)NM 
Interest expense, net 10,320 8,392 1,928 23.0 
Income tax expense 60  60 NM 
Depreciation 2,397 2,164 233 10.8 
Amortization of intangibles 3,802 2,850 952 33.4 
EBITDA 13,362 12,648 714 5.6 
——————
NM – Not meaningful
(1)
Includes depreciation expense of $2.4 million and $2.2 million for the years ended December 31, 2005 and 2004, respectively.
Revenue
Revenue increased with the addition of 11 new locations and growth at comparable locations. Revenue for 2004 included a cash settlement of $686,000 from an early contract termination. The 21.6% increase in cars out was primarily due to the 11 new locations with cars out at comparable locations increasing by 3.5%. The increase in average parking revenue per car out was due to reduced levels of discounting, and price increases at certain locations, including those with daily airport employee customers.
Parking revenue at comparable locations grew at a higher rate (3.8%) than total revenue (2.8%). This2008 is due to the exclusionincreased debt levels used to finance a portion of contract revenue from parking revenueour 2007 acquisitions and growth capital expenditures, as well as the impactrefinancing of the business’ debt facilities in October 2007. The refinancing consolidated all borrowings outstanding at the time.


TABLE OF CONTENTS

Liquidity and Capital Resources

Consolidated

Our primary cash settlementrequirements include normal operating expenses, debt service, maintenance capital expenditures and debt principal payments. Our primary source of cash is operating activities, although we could borrow against existing credit facilities, issue additional LLC interests or sell assets.

At March 31, 2009, we reclassified the outstanding balance drawn on the revolving credit facility at our non-operating holding company from an early contract terminationlong-term debt to current portion of long-term debt on our consolidated balance sheet due to its scheduled maturity on March 31, 2010. During the year, we were in discussions with our lenders to convert the facility to a term loan and extend the maturity date of the $66.4 million outstanding balance.

By December 2009, we had received in 2004. Total revenue growth of $8.4 million included $3.2 millionunanimous approval from the six SunPark facilities acquired in the fourth quarter.



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Certain discounting and pricing strategies that had resulted in lower parking revenue per car out during the first half of the year were adjusted during the second half of 2005. These lower levels of discounting and higher prices in certain markets resulted in improved revenue per car out during the second half of 2005 and resulted in revenue per car out being slightly higher. The business has experienced increased competition in several locations which may put short term pressure on pricing. In 2006, promotional and service efforts will be focused on these marketslenders to address this increased competition.
Operating Expenses
Direct expenses for 2005 increased $8.0 million mainly by the additional costs associated with operating 11 new locations. Direct expenses include non-cash rent in excess of lease in the amount of $2.0 million and $901,000 for the years 2005 and 2004, respectively. In accordance with U.S. generally accepted accounting principles, we recognize the total rent expense to be paid over the life of a lease on a straight-line basis. This generally results in rent expense higher than actual cash paid early in the lease and rent expense lower than actual cash paid later in the lease. Other factors affecting direct expenses at comparable locations are:
·
higher shuttle operating costs in the second half of 2005 due to the increased cost of fuel;
·
higher rents related to new long term lease agreements that were secured in the fourth quarter 2004 and rental payments resulting from use of overflow lots in locations with capacity constraints;
·
higher damaged car claims and, in response, higher security costs;
·
higher advertising expenses reflecting a radio campaign during the fourth quarter; and
·
lower selling, general and administrative expenses resulting from lower severance costs and performance bonuses, offset in part by higher professional fees and strategic planning initiatives.
On February 27, 2006, the board of MAPC approved the implementation and issuance of a stock appreciation rights program, or SARs, to reward certain key employees of the airport parking business and to incentivize those employees to increase the long term value of that business. The SARs will vest over a five-year period, with the majority of the vesting to occur by July 2009. The SARs will be valued based upon the estimated fair market value of the airport services business as calculated by us. The estimated value of the SARs is $488,000 based on the December 31, 2005 valuation, assuming 100% vesting at that date.
Amortization of Intangibles
Amortization increased largely as a result of the increase in the fair value of the assets acquired when MAPC was purchased by us on December 23, 2004 and the fair value of assets acquired in the fourth quarter of 2005, partially offset by the accelerated amortization of customer contracts that expired in 2004.
Interest Expense
Interest expense increased due to higher LIBOR rates, partially offset by the elimination of deferred finance cost amortization resulting from our initial acquisition, and increases in our overall level of debt as a result of the acquisition the SunPark facilities and a facility in Philadelphia.
We have an interest rate cap agreement at a base rate of LIBOR equal to 4.5% for a notional amount of $126.0 million forextend the term of the loanfacility. However, using the net cash proceeds we received from the sale of the 49.99% non-controlling interest in District Energy, and a second interest rate cap agreement at a base rate of LIBOR equal to 4.48% for a notional amount of $58.7 million. Both interest rate caps were reached incash on hand, we paid off the first quarter of 2006.
EBITDA
Excludingoutstanding principal balance on December 28, 2009 and avoided the aforementioned non-cash deferred rent, the contract settlement in 2004 and unrealized losses on derivative instruments, EBITDAsubstantial costs that would have increased by 17% in 2005.
New locations generated a gross profit margin of 0.75% in 2005 compared to (26.7) % forbeen incurred had the nine months ended September 30, 2005. This reflects the positive impactterms of the SunPark acquisition infacility been amended. Shortly thereafter we elected to reduce the fourth quarter.


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LIQUIDITY AND CAPITAL RESOURCES
We do not intendamount available on the revolving credit facility from $97.0 million to retain significant cash balances in excess$20.0 million through to the maturity of what are prudent reserves. the facility at March 31, 2010.

We believe that weour operating businesses will have sufficient liquidity and capital resources to meet our future liquidity requirements, including in relation to our acquisition strategy and our dividend policy.servicing long-term debt obligations. We base our assessment of the sufficiency of our liquidity and capital resources on the following assumptions:

·
all of our businesses and investments overall generate, and are expected towill continue to generate, significant operating cash flow;
·
the ongoing maintenance capital expenditures associated with our businesses are modest and readily funded from their respective operating cash flow or borrowing facilities;
·available financing;
all significant short-term growth capital expenditureexpenditures will be funded with cash on hand or from committed undrawn debtcredit facilities;
·
IMTT will be able to refinance and increase the size of its existing debt facilities on amended terms during 2007;
·
that payments on thermal Chicago/ Northwind Aladdin’s debt that will begin to amortize in 2007 from operating cash flow;
·
MIC Inc. maintains a $300.0 million acquisition credit facility (maturing in 2008) with which to finance acquisitions and capital expenditures, including $30.0 million available for general corporate purposes; and
·
we will be able to raise equityrefinance, extend and/or repay the principal amount of maturing long-term debt on terms that can be supported by our businesses.

Typically, we have capitalized our businesses, in part, using project finance style debt. Project finance style debt is limited-recourse, floating rate, non-amortizing debt with a medium term maturity of between five and seven years, although the principal balance on the term loan debt at Atlantic Aviation is being prepaid using the excess cash generated by the business. At December 31, 2009, the average remaining maturity of the debt facilities across all of our businesses, including our proportional interest in the debt of IMTT, was approximately 4.4 years. In light of the improvement in the functioning of the credit markets generally, and the leverage ratios and interest coverage we expect each of these businesses to produce at the maturity of their respective debt facilities, we believe that we will be able to successfully refinance any amounts borrowed under our revolving credit facility.

the long-term debt of these businesses on economically sensible terms.

The section below discusses the sources and uses of cash on a consolidated basis and for each of our businesses and investments. All inter-company activities such as corporate allocations, capital contributions to our businesses and distributions from our businesses have been excluded from the tables as these transactions are eliminated in consolidation. Prior period comparatives have been updated to also remove these inter-company activities.

Our Consolidated Cash Flow

TABLE OF CONTENTS

COMMITMENTS AND CONTINGENCIES

The following tables summarize our future obligations, due by period, as of December 31, 2009, under our various contractual obligations and commitments. We had no off-balance sheet arrangement at that date or currently. The following information detailsdoes not include IMTT, which is not consolidated.

     
 Payments Due by Period
   Total Less than
One Year
 1 – 3 Years 3 – 5 Years More than
5 Years
   ($ In Thousands)
Long-term debt(1) $1,212,279  $45,900  $111,878  $1,054,501  $ 
Interest obligations  296,180   68,677   138,051   89,452    
Capital lease obligations(2)  101   59   42       
Notes payable  1,632   176   266   226   964 
Operating lease obligations(3)  425,301   33,238   60,362   56,828   274,873 
Time charter obligations(4)  1,386   973   413       
Pension benefit obligations  23,063   1,980   4,359   4,666   12,058 
Post-retirement benefit obligations  2,054   187   444   405   1,018 
Other  478   478          
Total contractual cash obligations(5) $1,962,474  $151,668  $315,815  $1,206,078  $288,913 

(1)The long-term debt represents the consolidated principal obligations to various lenders. The debt facilities, which are obligations of the operating businesses and have maturities between 2013 and 2014, are subject to certain covenants, the violation of which could result in acceleration of the maturity dates.
(2)Capital lease obligations are for the lease of certain transportation equipment. Such equipment could be subject to repossession upon violation of the terms of the lease agreements.
(3)This represents the minimum annual rentals required to be paid under non-cancelable operating leases with terms in excess of one year.
(4)The Gas Company currently has a time charter arrangement for the use of two barges for transporting liquefied petroleum gas between Oahu and its neighbor islands.
(5)The above table does not reflect certain long-term obligations, such as deferred taxes, for which we are unable to estimate the period in which the obligation will be incurred.

In addition to these commitments and contingencies, we typically incur capital expenditures on a regular basis to:

maintain our existing revenue-producing assets in good working order (“maintenance capital expenditures”); and
expand our existing revenue-producing assets or acquire new ones (“growth capital expenditures”).

See “Investing Activities” below for further discussion of capital expenditures.

We also have other contingencies, including pending threatened legal and administrative proceedings that are not reflected above as amounts at this time are not ascertainable. See “Legal Proceedings” in Part I, Item 3.

Our sources of cash to meet these obligations are as follows:

cash generated from our operations (see “Operating Activities” below);
sale of all or part of any of our businesses (see “Investing Activities” below);
refinancing our current credit facilities on or before maturity (see “Financing Activities” below); and
cash available from our undrawn credit facilities (see “Financing Activities” below).

We have also incurred performance fees from time to time paid to our Manager. Our Manager has historically elected to reinvest these fees in our LLC interests (previously trust stock). While these fees do not directly affect cash flows when paid in equity, they do result in more outstanding LLC interests.


TABLE OF CONTENTS

Analysis of Consolidated Historical Cash Flows from Continuing Operations

       
 Year Ended December 31, Change
(From 2008 to 2009)
Favorable/(Unfavorable)
 Change
(From 2007 to 2008)
Favorable/(Unfavorable)
   2009 2008 2007
($ In Thousands) $ $ $ $ % $ %
Cash provided by operating activities  82,976   95,579   93,499   (12,603  (13.2  2,080   2.2 
Cash used in investing activities  (516  (56,716  (638,853  56,200   99.1   582,137   91.1 
Cash (used in) provided by financing activities  (117,818  1,698   570,618   (119,516  NM   (568,920  (99.7

NM — Not meaningful

Operating Activities

Consolidated cash provided by operating activities mainly comprises the cash from operations of the businesses we own, as described in each of the business discussions below. The cash flow from our consolidated business’ operations is partially offset by expenses paid at the corporate level, such as base management fees paid in cash, professional fees and interest on any amounts drawn on our revolving credit facility.

The decrease in consolidated cash provided by operating activities was due primarily to:

lower operating performance at Atlantic Aviation; and
payment of interest rate swap breakage fees relating to the prepayment of the outstanding principal balance on Atlantic Aviation’s term loan debt; partially offset by
lower interest paid on the reduced term loan balance for Atlantic Aviation;
reduced levels of working capital, reflecting decreased activities combined with receivable collection efforts at Atlantic Aviation; and
improved operating results at The Gas Company.

We believe our operating activities overall provide a source of sustainable and stable cash flows over the long-term with the opportunity for future growth due to:

consistent customer demand driven by the basic nature of the services provided;
our strong competitive position due to factors including:
high initial development and construction costs;
difficulty in obtaining suitable land near many of our operations (for example, airports, waterfront near ports);
long-term concessions/contracts;
required government approvals, which may be difficult or time-consuming to obtain;
lack of cost-efficient alternatives to the services we provide in the foreseeable future; and
product/service pricing that we expect to generally keep pace with price changes due to factors including:
consistent demand;
limited alternatives;
contractual terms; and
regulatory rate setting.

TABLE OF CONTENTS

Investing Activities

The decrease in consolidated cash used in investing activities was primarily due to:

the absence of acquisition activity in 2009; and
the increase in cash inflow from the sale of the non-controlling stake in District Energy compared to the sale of two small, non-core businesses at Atlantic Aviation in 2008;
lower capital expenditures at Atlantic Aviation and The Gas Company; partially offset by
cash retained by IMTT to fund growth capital expenditures during 2009, which is expected to contribute significantly to IMTT’s future gross profit; and
increase in capital expenditures at District Energy for the expansion of a new plant.

Distributions from IMTT are reflected in our consolidated cash provided by operating activities only up to our 50% share of IMTT’s positive earnings. Amounts in excess of this, and any distributions when IMTT records a net loss, are reflected in our consolidated cash from investing activities. For 2009, $7.0 million in equity distributions were included in cash from operations. In 2008, $1.3 million of the $28.0 million dividends received were included in cash from operating activities and $26.7 million were included in investing activities.

The primary driver of cash used in investing activities in our consolidated cash flows from operating, financinghas been acquisitions of businesses in new and investing activities forexisting segments, the periods ended December 31, 2006, 2005 and 2004. We acquired our initial businesses and investments on December 22 and December 23, 2004 using proceeds from our initial public offering and concurrent private placement. Consequently, our consolidated cash flows from operating, financing and investing activities in 2004 largely reflects the nine-day period between December 22, 2004 and December 31, 2004. Any comparisonsdispositions of our consolidated cash flows from operating, investing and financing activities for this short period in 2004 to any future periods would not be meaningful. Therefore we have included a comparison of the cash flows from operating, financing and investing activities for each of our consolidated businesses for each of the full years 2006, 2005 and 2004. We believe this is a more appropriate approach to explaining our historical financial performance.

As of December 31, 2006, our consolidated cash and cash equivalent balances totaled $37.4 million.
  
 
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
April 13, 2004 (inception) -
December 31, 2004
 
                                                                                                     ($ in thousands) 
Cash provided by (used in) operations $46,365     $43,547     $(4,045)
Cash used in investing activities $(686,196)$(201,950)$(467,477)
Cash provided by financing activities $562,328 $133,847 $611,765 
On a consolidated basis, cash flow provided by operating activities totaled $46.4 million for the year ended December 31, 2006. Cash flow from operations increased 6.5% over 2005. The increase is primarily the result of the positive contribution from acquisitions made by our airport services business and continued organic growth in our consolidatednon-U.S. businesses and acquisition of TGC. Offsetting these increases were higher interest expenses resulting from increased debt levels.
On a consolidated basis, cash flow used in investing activities totaled $686.2 million for the year ended December 31, 2006 reflecting our acquisitions during the year offset by the sales of our investments as well as cash distributions from IMTT in excess of our equity in its earnings and amortization charges. This was a significant increase over 2005.
In the second quarter of 2006, the Company acquired IMTT for $257.1 million. In addition, our gas production and distribution business was purchased for $262.7 million, less $7.8 million cash acquired, in the second quarter of 2006. In the third quarter of 2006, the Company acquired Trajen for $347.3 million. Actual cash outflow during the


85


year ended December 31, 2006 was reduced by acquisition related expenses and deposits paid for in 2005. The Company received $89.5 million and $76.4 million in proceeds for the sale of the non-controlling stake in District Energy. The other main driver is capital expenditures. Maintenance capital expenditures are generally funded by cash from operating activities and growth capital expenditures generally have been funded by drawing on our investmentsavailable credit facilities or by equity capital. We may fund maintenance capital expenditures from credit facilities or equity capital and growth capital expenditures from operating activities from time to time. We expect that our growth capital expenditures will generally be yield accretive once placed in South East Waterservice. Acquisitions of businesses are generally funded on a long-term basis through raising additional equity capital and/or project-financing style credit facilities. We have drawn on our MIC Inc. revolving credit facility to temporarily fund some acquisitions. In the past, we have repaid this facility with proceeds from raising additional equity and/or obtaining long-term project-financing style facilities. In December 28, 2009, with the cash proceeds we received from the sale of the 49.99% non-controlling interest in District Energy, and MCG securities, respectively,cash on hand, we paid off the outstanding principal balance of the facility.

Financing Activities

The increase in 2006.consolidated cash used in financing activities was primarily due to:

debt repayment during 2009 at Atlantic Aviation;
On a consolidated basis,debt draw downs in 2008, primarily against the MIC Inc. revolving credit facility, to fund acquisitions; and
full repayment of the MIC Inc. revolving credit facility; partially offset by
the suspension of distributions to shareholders in 2009; and
the increase in debt draw downs at District Energy to fund capital expenditures.

The primary drivers of cash flow provided by financing activities totaled $562.3 million 2006. Cashare equity offerings, debt financing of acquisitions and capital expenditures, the subsequent refinancing of our businesses and the repayment of the outstanding principal balance on maturing debt. A smaller portion of cash provided by financing activities relates to principal payments on capital leases.

For 2010, we expect to apply all excess cash flows from Atlantic Aviation to prepay the debt principal under the amended terms of the credit facility. Actual prepayment amounts through the maturity of the facility will depend on the operating performance of the business.

Our businesses are capitalized with a mix of equity and project-financing style long-term debt. We believe we can prudently maintain relatively high levels of leverage due to the generally sustainable and stable


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long-term cash flows our businesses have provided in the past and we expect to continue in the future as discussed above. Our long-term debt is non-amortizing and we expect to be able to refinance the outstanding balances at maturity, except at Atlantic Aviation, where all excess cash flow from financing activities increased significantly over 2005. We received proceedsthe business is used to prepay the outstanding principal balance of $305.3 millionthe term loan, and the last two years before maturity at District Energy. Most of our businesses’ debt is term debt, while some of our businesses also maintain capital expenditure and/or working capital facilities.

MIC Inc. Revolving Credit Facility

Effective April 14, 2009, we elected to reduce the available principal on its revolving credit facility from issuance of shares of trust stock. Our gas production and distribution business borrowed $160.0$300.0 million to finance$97.0 million and on December 31, 2009, further reduced the equity component of the TGC acquisition. Our airport services business borrowed an additional $180.0 million under its facilityavailable principal to finance the Trajen acquisition. The airport parking business refinanced its debt facilities paying out $185.0 million of existing debt and receiving $195.0 million from the new facility.

MIC Inc. Acquisition Credit Facility
We have a $300.0 million$20.0 million. This revolving credit facility is with Citicorp North America IncInc. (as lender and administrative agent), Citibank NA, Merrill Lynch Capital Corporation,Wachovia Bank National Association, Credit Suisse, Cayman Islands Branch, WestLB AG, New York Branch, and Macquarie Bank Limited. We intendThe original maturity of the facility was March 2008; however, in February 2008, we amended and restated the facility, extending the maturity to March 2010. The main use of the revolving facility is to fund acquisitions, capital expenditures and to a limited extent, working capital, pending refinancing through equity offeringscapital. The facility terminates on March 31, 2010 and currently bears interest at the rate of LIBOR plus 2.75%. Base rate borrowings would be at the base rate plus 1.75%.

On February 20, 2008, we drew $56.0 million on this facility, part of which was used to fund the acquisition of SevenBar FBOs which was completed in the first quarter of 2008, and part of which was used for other projects. On July 31, 2008, MIC Inc. drew an appropriate time.additional $13.0 million on this facility to fund the acquisition of SkyPark, which was completed in the third quarter of 2008. On February 25, 2009, we repaid $2.6 million of the outstanding balance on the revolving credit facility.

At March 31, 2009, we reclassified the outstanding balance drawn on the revolving credit facility at the non-operating holding company from long-term debt to current portion of long-term debt on our consolidated balance sheet due to its scheduled maturity on March 31, 2010. During 2006,the year, we expandedwere in discussions with our lenders to convert the facility to increasea term loan and extend the maturity date of the $66.4 million outstanding balance.

By December 2009, we had received unanimous approval from our lenders to extend the term of the facility. However, using the net cash proceeds it received from the sale of the 49.99% non-controlling interest in District Energy, and cash on hand, we paid off the outstanding principal balance on December 28, 2009 and avoided the substantial costs that would have been incurred had the terms of the facility been amended. Shortly thereafter we elected to reduce the amount available on the revolving portioncredit facility from $250.0$97.0 million to $300.0$20.0 million andthrough to provide for $180.0 millionthe maturity of term loans to fund specific acquisitions. In connection with the increase, we agreed to higher interest margins and a more restrictive leverage ratio while the term loans remained outstanding. We borrowed a total of $454.0 million under this facility in 2006 and repaid the facility in full withat March 31, 2010. We expect to retain excess cash generated by the proceeds fromconsolidated businesses over the sales of our interests in SEW and MCG and most of the proceeds of our 2006 equity offering.

near term.

The borrower under the facility is MIC Inc., a direct subsidiary of the company,Company, and the obligations under the facility are guaranteed by the companyCompany and secured by a pledge of the equity of all current and future direct subsidiaries of MIC Inc. and the company.Company. The terms and conditions for the revolving facility include events of default, and representations and warranties and covenants that are generally customary for a facility of this type. In addition, the revolving facility includes a restriction on cross guarantees and an event of default should the Manager or another affiliatemember of the Macquarie Bank Limited ceasesGroup cease to act as manager.

manage our business and operations.

The following is a summary of the material terms of the facility:

Facility size:Facilities $300.020.0 million for loans and/or letters of credit
Termination date:date March 31, 20082010
Interest and principal repayments:repayments Interest only during the term of the loan
   Repayment of principal at termination, upon voluntary prepayment, or upon an event requiring mandatory prepayment.prepayment
Eurodollar rate:rate LIBOR plus 1.25%2.75% per annum

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Base rate:rate Base rate plus 0.25%1.75% per annum
Annual commitment fee:fee 20% of the applicable LIBOR margin0.50% per annum on the average daily undrawn balance
Financial Covenantscovenants (calculations include
MIC Inc. and the company):Company)
 
·

  •  

Ratio of Debt to Consolidated Adjusted Cash from Operations <6.8

·
5.6x (at December 31, 2009: 0.00x)

  •  

Ratio of Consolidated Adjusted Cash from Operations to Interest Expense >2

> 2.0x (at December 31, 2009: 9.49x)

  Financial Covenants
as of

  •  

Minimum EBITDA (as defined in the facility) > $100.0 million (at December 31, 2006

·
Ratio of Debt to Consolidated Adjusted Cash from
Operations of 0.0x
·
Ratio of Consolidated Adjusted Cash from Operations to Interest Expense of 5.15x
2009: $165.4 million)




86


Airport Services Business Cash Flow
  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 

Change
    
$
 
%
  ($ in thousands)   
Cash provided by operations                                                              $35,853 $21,783     14,070     64.6
Cash used in investing activities $(353,620)     $(112,466)241,154 NM
Cash provided by financing activities $318,102 $93,121 224,981 NM
——————
NM – Not

See below for further description of the cash flows related to our businesses.

Energy-Related Businesses

IMTT

The following analysis represents 100% of the cash flows of IMTT, which we believe is the most appropriate and meaningful

Key factors influencing approach to discussing the historical cash flow fromtrends of IMTT, rather than just the composition of cash flows that are included in our airport servicesconsolidated cash flows. We account for our 50% ownership of this business were as follows:
·
using the acquisitionsequity method. When IMTT records a net loss, or pays distributions in excess of EAR and Trajenour share of its earnings, distributions we receive in August 2005 and July 2006, respectively, that have increasedexcess of IMTT’s earnings are reflected in the consolidated cash flow used in investing activities. Cash from operationsoperating activities for 2009 has been retained to fund IMTT’s growth capital expenditures and is expected to contribute to IMTT’s future gross profit.

       
 Year Ended December 31, Change
(From 2008 to 2009)
Favorable/(Unfavorable)
 Change
(From 2007 to 2008)
Favorable/(Unfavorable)
   2009 2008 2007
($ In Thousands) $ $ $ $ % $ %
Cash provided by operating activities  133,382   94,087   91,431   39,295   41.8   2,656   2.9 
Cash used in investing activities  (141,216  (166,640  (264,457  25,424   15.3   97,817   37.0 
Cash provided by financing activities  6,262   71,815   142,228   (65,553  (91.3  (70,413  (49.5

Operating Activities

Cash provided by operating activities at IMTT is generated primarily from storage rentals and ancillary services that are billed monthly and paid on various terms. Cash used in 2006 comparedoperating activities is mainly for payroll costs, maintenance and repair of fixed assets, utilities and professional services, interest payments and payments to 2005;

·
tax jurisdictions. Cash provided by operating activities in 2009 increased primarily due to the collection of accounts receivable outstanding at 2008 and improved performance at existing locations resulting in increased cash flow from operationsoperating results, partially offset by an increase in cash interest expense reflectingpaid.

The increase in 2008 was primarily due to higher debt levels;

·
gross profit offset by increases in deferred revenue, working capital and increases in interest expense.

Investing Activities

Cash used in investing activities relates primarily to capital expenditures includeddiscussed below. Capital expenditures decreased from $221.7 million in 2008 to $137.0 million in 2009, reflecting a reduction in growth capital expenditures as projects have been completed. Maintenance capital expenditures also decreased resulting from reduced levels of tank inspections and repairs and remediation work at the Bayonne facility. However, cash used in investing activities were $7.1in 2008 was offset by $55.5 million in 2006 compared to $4.0 million in 2005, and included $3.2 for maintenance and $3.9 for expansion;

·
distributions to MIC Inc., included in cash provided by financing activities, of $33.6 million in 2006 compared to $19.4 million in 2005;
·
the acquisition of GAH and EAR in the first and third quarter of 2005, respectively, and related proceeds received from the issuancesale of long term debtGulf Opportunity Zone (“GO Zone”) bond investments, which did not recur in 2009. Aggregate capital expenditures were $209.1 million in 2007, $221.7 million in 2008 and $137.0 million in 2009.


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Energy-Related Businesses: IMTT – (continued)

Maintenance Capital Expenditure

IMTT incurs maintenance capital expenditures to prolong the useful lives and increase the service capacity of existing revenue producing assets. Maintenance capital expenditures include the refurbishment of storage tanks, piping, dock facilities, and environmental capital expenditures, principally in relation to improvements in containment measures and remediation.

During 2009, IMTT spent $40.0 million on maintenance capital expenditures, including $36.1 million principally in relation to tank refurbishments and repairs to docks and other infrastructure and $3.9 million on environmental capital expenditures, principally in relation to improvements in containment measures and remediation.

In 2010, IMTT expects to spend a total of $55.0 million to $65.0 million on maintenance capital contributionexpenditures. The increase in maintenance capital expenditure from MIC Inc; and

·
the acquisition in the third quarter of 2006 of Trajen and related proceeds received from the issuance of long term debt and a capital contribution from MIC Inc, in July 2006.
  
Year Ended
December 31,
2005
 
Year Ended
December 31,
2004
 

Change
 
    
$
 
%
 
  ($ in thousands)    
Cash provided by operations                                                               $21,783     $9,803    11,980     122.2 
Cash used in investing activities $(112,466)$(229,839117,373 (51.1)
Cash  provided by financing activities $93,121 $228,357 135,236 59.2 
Key factors influencing cash flow from our airport services business were as follows:
·
the acquisitions of GAH and EAR in January 2005 and August  2005, respectively, that have increased cash flow from operations in 2005 as compared to 2004;
·
improved performance at existing locations resulting in increased cash flow from operations and the non-recurrence of acquisition related costs incurred in 2004;
·
2009 reflects primarily (i) an increase in interest expensethe number and size of tanks to be inspected and repaired pursuant to IMTT’s extensive tank cleaning and inspection program in 2005 as comparedLouisiana and (ii) the need to 2004 reflecting higher debt levels;
·
an increase in working capital usage in 2005 primarily dueundertake repairs and upgrades to accounts receivable related to system conversions;
·
capital expenditures, included in cash used in investing activities, were $4.0 million in 2005 compared to $11.0 million in 2004, and included $3.3 million for maintenance and $733,000 for expansion;
·
distributions to MIC Inc., included in cash provided by financing activities, of $19.4 million in 2005 compared to $1.5 million in 2004; and
·
the acquisition of GAH and EAR in the first and third quarter of 2005, respectively, and related proceeds received from the issuance of long term debt and a capital contribution from MIC Inc.
On December 12, 2005, our airport services business entered into a loan agreement with Mizuho Corporate Bank Limited, as administrative agent, and other lenders party thereto, providing for $300.0 million of term loan borrowing and a $5.0 million revolving credit facility. On December 14, 2005, the business drew down $300.0 million in term loans and repaid the existing term loans of $198.6 million (including accrued interest and fees), increased its debt service reserve by $3.4 million and paid $6.4 million in fees and expenses. The remaining amountsome of the draw down was distributed to us


87


and was used to partially fund the acquisition of The Gas Company. Our airport services business also utilized $2.0 million of the revolving credit facility to issue letters of credit. In connection with the acquisition of Trajen, our airport services business amendedinfrastructure at its loan agreement to provide for an additional $180.0 million of term loans.
The obligations under the credit facility are secured by the assets of our airport services business as well as the equity interests of the holding company for our airport services business and its subsidiaries. The terms and conditions for the facility includes events of default and representations and warrantiesLouisiana terminals. IMTT anticipates that are customary for facilities of this type. In addition, the facility includes an event of default should the Macquarie Group, or any fund or entity managed by the Macquarie Group, fail to control Atlantic Aviation.
Material terms of the facility are as follows:
Amount outstanding as of December 31, 2006$480.0 million term loan
$5.0 million revolver with established letters of credit in place for $2.0 million
Term5 years (matures December 12, 2010)
AmortizationPayable at maturity
Interest rate typeFloating
Interest rate baseLIBOR
Interest rate margin
1.75% until December 2008
2.00% until December 2010
Interest rate hedgingWe have novated pre-existing swaps and entered into new interest rate swaps (fixed vs. LIBOR), fixing 100% of the term loan at the following average rates (not including interest margin):
Notional AmountStart DateEnd DateFixed Rate
$300.0 millionDecember 14, 2005September 28, 20074.27%
September 28, 2007November 7, 20074.73%
November 7, 2007October  21, 20094.85%
October 21, 2009December 14, 20104.98%
$180.0 millionSeptember 29, 2006December 12, 20105.515%
Debt service reserveSix months of debt service
Distributions Lock-Up Tests12 month forward and 12 month backward debt service cover ratio < 1.5x
Minimum adjusted EBITDA:
YearMinimum adjusted EBITDA
2005$40.1 million
2006$66.9 million
2007$71.9 million
2008$77.5 million
Maximum debt/ adjusted EBITDA calculated quarterly:
StartingEndingMaximum debt/ adjusted EBITDA
December 31, 2008September 30, 20095.5x
December 31, 2009March 31, 20105.0x
June 30, 2010September 30, 20104.5x
Mandatory PrepaymentsIf any distribution lock-up test is not met for two consecutive quarters.
Events of Default Financial TriggersIf backward debt service cover ratio < 1.2x
Financial Covenants
as of December 31, 2006
·
backward debt service coverage ratio of 2.90x
·
Adjusted EBITDA of $82.2 million
·
Debt/Adjusted EBITDA of 5.84x


88

In connection with our pending acquisition of the Stewart and Santa Monica FBOs, we have received commitment letters providing for the $32.5 million expansion of the airport services business debt facility to finance the acquisition. The term loan facility, currently $480.0 million due in December, 2010, will be increased to $512.5 million on terms that are substantially similar to those in place on the existing term loan facility, with the following exceptions: the trailing 12 month minimum EBITDA will increase to $78.2 million in 2007 and $84.1 million in 2008. We have entered into a forward starting interest rate swap with Macquarie Bank Limited, effectively fixing the interest rate for all or most of the increase in debt at 5.2185%. The swap has an effective date of March 30, 2007 and a termination date of December 12, 2010.
Gas Production and Distribution Business Cash Flow
  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 

Change
 
$
 
%
  ($ in thousands) 
              
Cash provided by operations      $14,534      $19,296       (4,762)       (24.7)
Cash used in investing activities $(265,007)$(6,923) (258,084) NM 
Cash provided by (used in) financing activities $251,149 $(5,535) 256,684  NM 
——————
NM – Not meaningful
Key factors influencing cash flow from our gas production and distribution business were as follows:
·
The decrease in operating cash flow between 2006 and 2005 was the result of transaction costs and normal working capital fluctuations. The key factors that drive operating cash flows include customer receipts and amounts withdrawn from restricted cash accounts, the timing of payments for fuel, materials, vendor services and supplies, the payments of payroll and benefit costs, payments of revenue-based taxes and the payment of administrative costs.
·
Cash used in investing activities for 2006 comprised $254.9 million for our purchase of TGC’s net assets plus $10.1 million of capital expenditures. Of the total capital expenditures, $4.6 million were paid prior to our purchase of the business. The cash used in investing activities for 2005 was for capital additions.
·
Cash provided by financing activities for 2006 comprised $160.0 million of new term debt incurred to finance the purchase of TGC and $106.1 million of equity capital invested by us to purchase TGC less the sum of $3.3 million of MIC financing costs, dividends from TGC to us of $3.7 million and dividends from TGC to its prior owner of $9.9 million. TGC also borrowed $2.0 million of long term debt to finance capital projects. The $5.5 million of cash used in financing activities for 2005 were for TGC distributions to its then parent company.
TGC generally intends to utilize the $20.0 million revolving credit facility to finance its working capital and to finance or refinance its capital expenditures for regulated assets, and had drawn down $2.0 million as of December 31, 2006. In addition, as of December 31, 2006, TGC had $350,000 letters of credit issued under its facility. During 2006 $3.7 million in cash dividends were paid on our equity.
Pursuant to TGC’s purchase agreement and regulatory requirements, TGC established two escrow accounts totaling $8.6 million on June 7, 2006. Of this amount, $5.1 million has been withdrawn as reimbursement for the previously described customer rebate and fuel cost adjustments. The remaining $3.5 million may be released to TGC to reimburse it for future fuel cost formula adjustments.


89


The obligations under the credit agreements are secured by security interests in all of the assets of TGC as well as by the equity interests that we have in HGC and TGC. The terms and conditions for the facilities include events of default and representations and warranties that are generally customary for facilities of this type. The HPUC, in approving the purchase by us, requires that consolidated debt to total capital for HGC Holdings not exceed 65%. The ratio was 60% at December 31, 2006. Material terms of the credit facilities are summarized below:
Holding Company Debt
Operating Company Debt
HGC Holdings LLCThe Gas Company, LLC
Borrowings:$80.0 million Term Loan$80.0 million Term Loan$20.0 million Revolver
Security:First priority security interest on HGC assets and equity interestsFirst priority security interest on TGC assets and equity interests
Term:7 years7 years7 years
Amortization:Payable at maturityPayable at maturityPayable at the earlier of 12 months or maturity
Interest: Years 1-5:LIBOR plus 0.60%LIBOR plus 0.40%LIBOR plus 0.40%
Interest: Years 6-7:LIBOR plus 0.70%LIBOR plus 0.50%LIBOR plus 0.50%
Hedging:Interest rate swaps (fixed v. LIBOR) fixing funding costs at 4.84% for 7 years on a notional value of $160.0 million
Distributions Lock-Up Test:12 mo. look-forward and 12 mo. look-backward adjusted EBITDA/interest < 3.5x
Mandatory Prepayments:12 mo. look-forward and 12 mo. look-backward adjusted EBITDA/interest < 3.5x for 3 consecutive quarters
Events of Default Financial Triggers:12 mo. look-backward adjusted EBITDA/interest < 2.5x12 mo. look-backward adjusted EBITDA/interest < 2.5x
District Energy Business Cash Flow
  
Year Ended December 31,
2006
 
Year Ended December 31,
2005
 

Change
 
$
 
%
  ($ in thousands) 
Cash provided by operations                                                           $9,074     $12,106      (3,032)    (25.0)
Cash used in investing activities $(1,618)$(332) (1,286) NM 
Cash used in financing activities $(8,094)$(15,235) 7,141  46.9 
——————
NM – Not meaningful
Key factors influencing cash flow from our district energy business were as follows:
·
deferred tax adjustment related to the allocation of MIC’s expenses to the business units;


90


·
working capital usage reflecting timing of trade receivables and payment of accrued expenses;
·
increase in cash used due to the timing of on-going maintenance capital expenditures for system reliability,will remain at elevated levels through 2012 before moderating somewhat in 2013.

Growth Capital Expenditure

During 2009, IMTT spent $82.6 million on growth capital expenditures for new customer connections and the 2005 goodwill adjustment of $694,000 related to our share of a settlement providingprojects, including $43.9 million for the early release of escrow established with the Aladdin bankruptcy;

·
dividend distributions of $9.5 million in 2006 compared to $15.5 million in 2005; and
·
additional borrowings in 2006 of $1.7 million to finance capital expenditures.
·
drawdown of revolving credit facility as of December 31, 2006: $2.6 million
The indirect acquisition of Thermal Chicago by the Macquarie Group was initially partially financed with a $76.0 million bridge loan facility provided by the Macquarie Group. This bridge loan facility was refinanced in September 2004 with part of the proceeds from the issuance of $120.0 million of fixed rate secured notes due 2023 in a private placement. The notes, together with the revolving credit facility discussed below, are secured by the assets of the business, excluding the assets of Northwind Aladdin, and stock and are recourse only to the business. The notes include customary covenants, events of default and representations and warranties. In addition, the notes include an event of default if the Macquarie Group ceases to actively manage the district energy business.
Material terms of the senior secured notes are as follows:
Amount outstanding as of December 31, 2006$120.0 million
TermMatures December 31, 2023
AmortizationVariable quarterly amortization commencing December 31, 2007
Interest rate typeFixed
Interest rate6.82% on $100.0 million and 6.4% on $20.0 million
Debt service reserveSix-month debt service reserve
Dividend payment restrictionNo distributions to be made to shareholders of MDE if debt service coverage ratio is less than 1.25 times for previous and next 12 months, tested quarterly.
Make whole paymentDifference between the outstanding principal balance and the value of the senior secured notes discounting remaining payments at a discount rate of 50 basis points over the U.S. treasury security with a maturity closest to the weighted average maturity of the senior secured notes.
Debt Service Coverage Ratio at December 31, 20062.00:1
In addition to the senior secured notes, MDE has also entered into a $20.0 million, three-year revolving credit facility with La Salle Bank National Association that may be used to fund capital expenditures or working capital or to provide letters of credit. This facility ranks equally with the senior secured notes. Interest on the revolving credit facility is LIBOR plus 2.5%. As of December 31, 2006, $7.1 million of this facility has been utilized to provide letters of credit to the City of Chicago pursuant to the Use Agreement and in relation to a single customer contract and another $2.6 million was drawn to fund maintenance and growth capital expenditures.


91


Airport Parking Business Cash Flow
  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 

Change
 
    
$
 
%
 
  ($ in thousands)     
Cash provided by operations                                                          $7,473     $4,893     2,580     52.7 
Cash used in investing activities $(4,202)$(75,688)71,486 (94.4)
Cash (used in) provided by financing activities $(529)$76,720 (77,249)(100.7)
The key factors influencing cash flow were:
·
an increase in interest expense of $6.9 million, due to higher interest rates and higher overall debt levels;
·
an increase in direct costs of $9.5 million, due to operating a greater number of lots;
·
an increase of revenue of $16.2 million;
·
$4.2 million and $1.7 million in maintenance capital expenditures in 2006 and 2005, respectively;
·
the acquisitions of the SunPark, Cleveland, Priority and Phoenix properties for a combined $74.0 million in 2005;
·
$10.7 million in additional debt generated by the 2006 refinance;
·
$5.3 million in deferred financing costs, $1.8 million repayment of capital leases, and $4.0 million repayment of borrowings;
·
$58.7 million in additional debt used to fund the acquisition of the SunPark properties in October, 2005; and
·
$20.8 million that we provided to the business in the form of equity contributions to fund acquisitions.
On September 1, 2006, the airport parking business, through a number of its majority-owned airport parking subsidiaries, entered into a loan agreement providing for $195.0 million of term loan borrowings. On September 1, 2006, the airport parking business drew down $195.0 million and repaid two of its existing term loans totaling $184.0 million, paid interest expense of $1.9 million, and paid fees and expenses of $4.9 million. The airport parking business also released approximately $400,000 from reserves in excess of minimum liquidity and reserve requirements. The remaining amount of the drawdown, approximately $4.6 million, will be used to fund maintenance and specific capital expenditures of the airport parking business.
The counterparty to the agreement is Capmark Finance Inc. The obligations under the credit agreement are secured by the assets of borrowing entities. The terms and conditions for the facility include events of default and representations and warranties that are customary for facilities of this type. In addition, the agreement includes a provision restricting transfers that would result in a change of control, which may prohibit a transfer to a person who is not affiliated with the Macquarie Group.
Material terms of the credit facility are presented below:
Borrower:Parking Company of America Airports, LLC
Parking Company of America Airports Phoenix, LLC
PCAA SP, LLC
PCA Airports, Ltd.
Borrowings:$195.0 million term loan
Security:Borrower assets
Term:3 years (September 2009) plus 2 one-year optional extensions subject to meeting certain covenants
Amortization:Payable at maturity
Interest rate:1 month LIBOR plus
Years 1-3:1.90%


92


Year 4:2.10%
Year 5:2.30%
Debt reserves:Various reserves totaling $1.4 million, together with minimum liquidity requirement, represents a decrease of $400,000 over the total reserves associated with the prior loans.
Minimum Liquidity:$3.0 million of PCAA Parent, LLC
Minimum Net Worth:$40.0 million of PCAA Parent, LLC
Lock Up Tests:At three month intervals, the Borrower is required to achieve a Debt Service Coverage Constant Ratio of 1.00 to 1.00 with respect to the immediately preceding 12 month period.
The Debt Service Coverage Constant Ratio is a ratio obtained by dividing the Cash Flow Available for Debt Service by a debt service payment obtained using the Loan Constant of 10.09%.
If the Debt Service Coverage Constant Ratio test is not met, PCAA is required to remit Excess Cash to an Excess Cash Flow Reserve Account until the Debt Service Coverage Constant Ratio test is met at a test interval.
The Excess Cash may be held, as determined by the Lender, as collateral for the Loan or applied against the principal amount until such time as Borrower satisfies the test.
An event of default is triggered if the Borrower fails to make a payment of Excess Cash or fails to provide the Excess Cash calculation after receipt of notice that PCAA failed to satisfy the above test.
Financial Covenants
at December 31, 2006
Debt Service Coverage Constant Ratio: 1.28x


An existing rate cap at LIBOR equal to 4.48% will remain in effect through October 15, 2008 with respect to a notional amount of the loan of $58.7 million. We have entered into an interest rate swap agreement for the $136.3 million balance at 5.17% through October 16, 2008 and for the full $195.0 million through the maturity of the loan on September 1, 2009. PCAA’s obligations under the interest rate swap have been guaranteed by MIC Inc.
Cash Flow from Our Unconsolidated Business
Bulk Liquid Storage Terminal Business
  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
Year Ended
December 31,
2004
 
  ($ in thousands) 
Cash provided by operations                                                       $66,791     $51,706     $40,713 
Cash used in investing activities $(90,540)$(37,090)$(51,033)
Cash provided by (used in) financing activities $57,526 $(13,460)$10,174 
Key factors influencing cash flow at IMTT were as follows:
·
cash provided by operations increased by 27.0% from 2004 to 2005 and 29.2% from 2005 to 2006 primarily due to an increase in EBITDA, in each respective year, and a decrease in interest paid in 2006, as discussed in Results of Operations;
·
cash used in investing activities increased from 2005 to 2006 principally due to high levels of specific capital expenditure relating to the construction of the new facility at Geismar, LA and theon-going construction of new storage tanks at IMTT’s existing facility atits St. Rose LAfacility, $26.1 million for on-going tank construction and refurbishment as discussed in Capital Expenditure. Cash


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used in investing activities declined by $13.9well as improved infrastructure at its Bayonne facility and $7.9 million from 2004 to 2005 dueat Geismar. The balance of the expenditure was spent on specific expansion projects related to a decline in expansion capital expenditure which was partially offset by an increase in maintenance capital expenditure. Expansion capital expenditure in 2004 related primarilynumber of smaller projects to improve the acquisition and refurbishmentcapabilities of a terminal adjoining IMTT’s Bayonne terminal and new boilers and pier modifications at Bayonne; and
·
substantial cash was provided to IMTT from financing activities as a result offacilities.

Since our investment in IMTT, during 2006the business has undertaken or committed to a total of approximately $534.9 million in expansion projects and acquired the Joliet facility for $18.5 million. Through December 31, 2009, these projects added and/or refurbished approximately 6.1 million barrels of storage capacity and are contributing $49.6 million to gross profit and EBITDA on an annualized basis.

In addition, IMTT currently has ongoing growth projects for the construction or refurbishment of 2.2 million barrels of new storage capacity comprised primarily of 1.8 million barrels at IMTT’s St. Rose facility, of which 1.1 million barrels were on line at December 31, 2009 with the remainder expected to be fully placed into service by early 2010. Other smaller growth projects are also being pursued. On a combined basis, the projects under construction are expected to have a total cost of $129.4 million and will contribute approximately $19.2 million to gross profit and EBITDA on an annualized basis. Of the $129.4 million of IMTT’s current growth projects, $54.8 million remained to be spent as of December 31, 2009. IMTT expects to fund these committed projects with its existing credit facilities and cash generated from operations. Contracts with a term of between 4 and 12 years have been signed with customers for substantially all of the tanks being constructed/converted in Louisiana and New Jersey.

IMTT continues to review numerous additional attractive growth opportunities. IMTT anticipates funding new growth capital expenditures with a combination of its cash flow from operating activities, existing and additional credit facilities.

It is anticipated that the existing growth capital expenditure commitments will be funded from a combination of IMTT’s existing and new debt facilities and cash from operations. In 2010, IMTT is seeking to raise additional debt financing to fund its growth capital expenditure program.

Financing Activities

At December 31, 2009, the outstanding balance on IMTT’s debt facilities consisted of $250.9 million in revolving credit facilities, $251.3 million in bonds and $130.0 million in term loan facilities, including shareholder loans. The weighted average interest rate of the outstanding debt facilities including any interest rate swaps and fees associated with outstanding letters of credit at December 31, 2009 is 4.8%. During 2009, IMTT paid approximately $29.0 million, net of capitalized interest, in interest related to its debt facilities.


TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

Cash flows from financing activities decreased from 2008 to 2009 primarily due to decreases in debt draw downs on the revolving credit facility offset by dividends paidthe Regions term loan used to usfund growth capital expenditures, and to the existing shareholders of IMTT (netby lower dividend payments and repayment of shareholder loans as discussed below) and repaymentsin 2009.

The decrease in cash flows from financing activities from 2007 to 2008 was primarily due to the issuance of borrowings. In 2005, expansion capital expendituresall of the GO Zone bonds during July 2007 while $55.5 million of the proceeds raised were lower than in prior years and the excess of cash provided by operations over capital expenditures was used to reducenot utilized until 2008 reducing debt and to make distributions to shareholders of IMTT at that time and advances to their affiliates.

raising requirements.

The following tables summarize the key terms of IMTT’s senior debt facilities as atof December 31, 2006. All2009.

On June 7, 2007, IMTT entered into a Revolving Credit Agreement with Suntrust Bank, Citibank N.A., Regions Bank, Rabobank Nederland, Branch Banking & Trust Co., DNB NOR Bank ASA, Bank of these senior debt facilities rank equallyAmerica N.A., BNP Paribas, Bank of Montreal, The Royal Bank of Scotland PLC, Mizuho Corporate Bank Ltd. and areeight other banks establishing a $600.0 million U.S. dollar denominated revolving credit facility and a $25.0 million equivalent Canadian dollar revolving credit facility. The Agreement also allows for an increase in the U.S. dollar denominated revolving credit facility of up to $300.0 million on the same terms at the election of IMTT. No commitments have been sought from lenders to provide this increase at this time. The facility is guaranteed by IMTT’s key operating subsidiaries.

The revolving credit facilities have been used primarily to fund IMTT’s growth capital expenditures in the U.S. and Canada. The terms of the IMTT’s U.S. dollar and Canadian dollar denominated revolving credit facilities are summarized in the table below.

 
Senior Notes
 
Senior Notes
Facility Term 
USD Revolving Credit Facility
 CAD Revolving Credit Facility
Amount Outstanding as of cash drawn at December 31, 20062009 $50.0230.1 million $60.020.8 million
Amount utilized for Letters of Credit at December 31, 2009$264.9 million $38.9 million letters of credit outstanding — 
Amount undrawn at December 31, 2009 $105.0 million $4.2 million
Uncommitted Expansion Amounts 
Undrawn Amount$300.0 million 
Maturity $101.1 million available for cash draw or letter of credit.
June, 2012 
TermNovember, 2016November, 2016November, 2007
June, 2012
Amortization $7.1 million per annum commencing November, 2010 through November 2015 with balance payable at maturity.$8.6 million per annum commencing November, 2010 through November 2015 with balance payableRevolving. Payable at maturity. Revolving. Payable at maturity.
maturity
Interest Rate FixedFloating at 8%.Fixed at 7.15%.LIBOR plus a margin based on the ratio of Debt to EBITDA of IMTT’s operating subsidiaries as follows:
<2.00 – 0.55%
2.00>2.50 – 0.70%
2.50>3.00 – 0.85%
3.00>3.75 – 1.00%
3.75>4.00 – 1.25%
4.00> – 1.50%
 Floating at Canadian LIBOR + 1.075% to 1.7%plus a margin based on the ratio of Debt to EBITDA ratio grid.of IMTT’s operating subsidiaries as follows:
<2.00 – 0.55%
2.00>2.50 – 0.70%
2.50>3.00 – 0.85%
3.00>3.75 – 1.00%
3.75>4.00 – 1.25%
4.00> – 1.50%

TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

  
Facility Term 
Makewhole on Early RepaymentUSD Revolving Credit Facility Makewhole equals difference between the outstanding principal balance and the value of the senior notes discounting the remaining payments at a discount rate of 0.5% over the U.S. treasury security with a maturity equal to the remaining weighted average maturity of senior notes.CAD Revolving Credit Facility
Commitment Fees Makewhole equals difference betweenA percentage of undrawn committed amounts based on the outstanding principal balance and the valueratio of the senior notes discounting the remaining payments at a discount rateDebt to EBITDA of 0.5% over the U.S. treasury security with a maturity equal to the remaining weighted average maturity of senior notes.IMTT’s operating subsidiaries as follows:
<2.00 – 0.125%
2.00>2.50 – 0.15%
2.50>3.00 – 0.175%
3.00>3.75 – 0.20%
3.75>4.00 – 0.25%
4.00> – 0.25%
 None.
A percentage of undrawn committed amounts based on the ratio of Debt Service Reserves RequiredNone.None.None.
to EBITDA of IMTT’s operating subsidiaries as follows:
<2.00 – 0.125%
2.00>2.50 – 0.15%
2.50>3.00 – 0.175%
3.00>3.75 – 0.20%
3.75>4.00 – 0.25%
4.00> – 0.25%
Security UnsecuredUnsecured except for pledge of 65% of shares in IMTT’s two Canadian subsidiaries. Unsecured Debt to EBITDA: Max 4.0x



94

Senior Notes
Senior Notes
Revolving Credit Facility
except for pledge of 65% of shares in IMTT’s two Canadian subsidiaries.
Financial Covenants
(applicable (applicable to IMTT’s key operating subsidiaries on a combined basis).
Debt to EBITDA: Max 4.0x
EBITDA to Interest: Min 3.25x
Min Tangible Net Worth: $161.6 million
Debt to EBITDA: Max 4.0x
EBITDA to Interest: Min 3.25x
Min Tangible Net Worth: $161.6 million
EBITDA to Interest: Min 3.25x
Min Tangible Net Worth: $161.6 million
Financial Covenant Ratios as at December 31, 2006. (IMTT’s key operating subsidiaries on a combined basis). Debt to EBITDA Ratio: 2.8xMax 4.75x
(at December 31, 2009: 3.82x) EBITDA to Interest Ratio: 8.4x
Tangible Net Worth: $293.2 millionMin 3.00x (at December 31, 2009: 6.83x)
 Debt to EBITDA Ratio: 2.8x
Max 4.75x (at December 31, 2009: 3.82x) EBITDA to Interest Ratio: 8.4x
Tangible Net Worth: $293.2 million
Debt to EBITDA Ratio: 2.8x
EBITDA to Interest Ratio: 8.4x
Tangible Net Worth: $293.2 million
Min 3.00x (at December 31, 2009: 6.83x)
Restrictions on paymentsPayments of dividendsDividends None, provided no default as a result of paymentpayment.None, provided no default as a result of payment.

Of the $495.0 million outstanding balance against the U.S. dollar denominated revolving credit facility, IMTT had drawn $230.1 million in cash and issued $264.9 million in letters of credit backing tax-exempt GO Zone bonds and NJEDA bonds on issue by IMTT and commercial activities.

To partially hedge the interest rate risk associated with IMTT’s current floating rate borrowings under the U.S. dollar denominated revolving credit agreement, IMTT entered into a 10 year fixed to quarterly LIBOR swap, maturing in March 2017, with a notional amount $115.0 million as of December 31, 2009 increasing to $200.0 million by December 31, 2012, at a fixed rate of 5.507%.

The key terms of the GO Zone bonds and the NJEDA bonds on issue by IMTT are summarized below.

Facility TermNew Jersey Economic Development Authority Dock Facility Revenue Refund BondsNew Jersey Economic Development Authority Variable Rate Demand
Revenue Refunding Bond
Amount Outstanding as of December 31, 2009$30.0 million$6.3 million
Undrawn Amount
MaturityDecember, 2027December, 2021
AmortizationPayable at maturityPayable at maturity
Interest RateFloating at tax exempt bond daily tender ratesFloating at tax exempt bond daily tender rates
Make-whole on Early RepaymentNoneNone
Debt Service Reserves RequiredNoneNone
SecurityUnsecured (required to be supported at all times by bank letter of credit issued under the revolving credit facility)Unsecured (required to be supported at all times by bank letter of credit issued under the revolving credit facility)

TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

Facility TermNew Jersey Economic Development Authority Dock Facility Revenue Refund BondsNew Jersey Economic Development Authority Variable Rate Demand
Revenue Refunding Bond
Financial Covenants (applicable to IMTT’s key operating subsidiaries on a combined basis)NoneNone
Restrictions on Payments of Dividends None, provided no default as a result of payment None, provided no default as a result of payment
Interest Rate Hedging Hedged from October, 2007 through November, 2012 with $30.0 million 3.41% fixed vs. 67% of LIBOR interest rate swap Hedged when drawnfrom October, 2007 through November, 2012 with the balance$6.3 million 3.41% fixed vs. 67% of $50m, 6.4% fixed v LIBOR interest rate swap expiring October 2007 not used to hedge IMTT’s tax exempt debt.

The key terms of the GO Zone Bonds issued are summarized in the table below.

 
Facility Term 
CAD Revolving Credit Facility
New Jersey Economic Development Authority Dock Facility Revenue RefundGulf Opportunity Zone Bonds
New Jersey Economic Development Authority Variable Rate Demand Revenue Refunding Bond
Amount Outstanding as of December 31, 20062009 $6.4215.0 million$30.0 million$6.3 million
Undrawn Amount $8.6 million
Maturity 
TermNovember, 2007December, 2027December, 2021
July, 2043
Amortization Revolving. Payable at maturity.Payable at maturity.Payable at maturity.
maturity
Interest Rate Floating at CAD Bankers Acceptance Rate + 1.075% to 1.7% based on Debt to EBITDA ratio gridFloating at tax exempt bond daily tender ratesFloating at tax exempt bond dailyweekly tender rates
MakewholeMake-whole on Early Repayment None.None.None.
None
Debt Service Reserves Required None.None.None.
None
Security UnsecuredUnsecuredSecured (required to be supported at all times by bank letter of credit issued under the revolving credit facility).Unsecured (required to be supported at all times by bank letter of credit issued under the revolving credit facility).


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CAD Revolving Credit Facility
New Jersey Economic Development Authority Dock Facility Revenue Refund Bonds
New Jersey Economic Development Authority Variable Rate Demand Revenue Refunding Bond
Financial Covenants (applicable to IMTT’s key operating subsidiaries on a combined basis). Debt to EBITDA: Max 4.0x
EBITDA to Interest: Min 3.25x
Min Tangible Net Worth: $161.6 million
None.None.
Financial Covenant
Ratios as at December 31, 2006 (IMTT’s key operating subsidiaries on a combined basis)
Debt to EBITDA Ratio: 2.8x
EBITDA to Interest Ratio: 8.4x
Tangible Net Worth: $293.2 million
None
Restrictions on paymentsPayments of dividendsNone provided no default as a result of paymentNone provided no default as a result of paymentDividends None, provided no default as a result of payment

For federal income tax purposes, interest on the GO Zone Bonds is excluded from gross income and is not an item of tax preference for purposes of federal alternative minimum tax imposed on individuals and corporations that are investors in the Go Zone Bonds; however, for purposes of computing the federal alternative minimum tax imposed on certain corporations, such interest is taken into account in determining adjusted current earnings. As a consequence of this and the credit support provided by the letters of credit issued under the U.S dollar denominated revolving credit facility, the floating interest rate applicable to similar bonds has historically averaged approximately 67% of LIBOR. Interest on the GO Zone Bonds is deductible to IMTT as incurred except to the extent capitalized and amortized as part of project costs as required, for federal income tax purposes.

To hedge the interest rate risk associated with IMTT’s GO Zone Bond borrowings, IMTT has entered into a 10 year fixed to monthly 67% of LIBOR swap, maturing in June 2017, with a notional amount of $215.0 million as of December 31, 2009, at a fixed rate of 3.662%.

On August 28, 2009, IMTT entered into a loan agreement with Regions Bank, as Administrative Agent, to provide unsecured term loan financing of $30.0 million. IMTT drew down $30.0 million on the same day and applied the funds to repay its current U.S. dollar denominated revolving credit facility.


TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

 
 Regions Term Loan Facility
Amount Outstanding as of December 31, 2009 $30.0 million
Undrawn Amount
MaturityJune, 2012
AmortizationPayable at maturity
Interest RateFloating at LIBOR plus a margin based on the ratio of Debt to EBITDA of IMTT’s operating subsidiaries as follows:
<2.00 – 3.00%
2.00>2.50 – 3.50%
2.50>3.00 – 3.75%
3.00>3.75 – 4.00%
3.75>4.00 – 4.25%
4.00> – 5.00%
Subordination Rate10.00% per annum applied in the event that (i) any other indebtedness is secured by the assets or equity and (ii) Regions term loan is not pari passu with such indebtedness
SecurityUnsecured
Financial CovenantsDebt to EBITDA Ratio: Max 4.75x (at December 31, 2009: 3.82x) EBITDA to Interest Ratio: Min 3.00x (at December 31, 2009: 6.83x)
Restrictions on Payments of DividendsNone
Interest Rate Hedging Hedged with part of $50.0 million, 6.4% fixed v LIBOR interest rate swap expiring October, 2007. Hedged from October, 2007 through November 2012 with $30.0 million 3.41% fixed v 67% of LIBOR interest rate swap.Hedged with part of $50.0 million, 6.4% fixed v LIBOR interest rate swap expiring October, 2007. Hedged from October, 2007 through November 2012 with $6.3 million 3.41% fixed v 67% of LIBOR interest rate swap.None

As discussed above, IMTT intends to seek to raise additional U.S dollar denominated debt facilities at the operating company level in 2010 to fund IMTT’s growth capital expenditure program. Due to current financial market conditions, it is anticipated that the interest rate margins payable on new debt facilities raised will be in excess of the margins payable on the existing U.S dollar denominated revolving credit facility.

In addition to the senior debt facilities discussed above, subsidiaries of IMTT Holdings IncInc. that are the parent entities of IMTT’s key operating subsidiaries are the borrowers and guarantors under a debt facility with the following key terms:

 
Term Loan Facility
Amount Outstanding as of December 31, 20062009 $104.065.0 million
Undrawn Amount 
TermMaturity December, 2012
Amortization $13.0 million per annum fromon December 2007 through December31, 2010 with balance payable at maturity.
Interest Rate Floating at LIBOR +plus 1.0%
MakewholeMake-whole on Early Repayment None.
Debt Service Reserves Required None.
Security Unsecured.


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Term Loan Facility
Guarantees The facilityIMTT’s key operating subsidiaries guarantee $65.0 million of the outstanding balance as of December 31, 2009 and the full outstanding amount is required to be progressively guaranteed by IMTT’s key operating subsidiaries. These subsidiaries currently guarantee $26.0 million of the outstanding balance and the guarantee requirement increases by $13.0 million per annum from December, 2007 through December, 2009 at which time the full outstanding amount will be guaranteed by IMTT’s key operating subsidiaries. Further, if the Debt to EBITDA ratio of IMTT’s key operating subsidiaries on a combined basis exceeds 4.5x as at December 31, 2009, IMTT’s key operating subsidiaries will assume the obligations under the term loan facility.

TABLE OF CONTENTS

Energy-Related Businesses: IMTT – (continued)

 
 As a result of a previous transaction, $39.0 million of the outstanding balance is currently guaranteed by Royal Vopak. In the event that Royal Vopak defaults under its guarantee obligations, the lender has no right of acceleration against IMTT. The Royal Vopak guarantee decreases by $26.0 million in December 2007 and terminates entirely in December 2008.
Term Loan Facility
Financial Covenants None.
Financial Covenant Ratios as of December 31, 2006Not applicable.
Restrictions on paymentsPayments of dividendsDividends None.
Interest Rate Hedging Fully hedged with $104.0$65.0 million amortizing, 6.29% fixed vs. LIBOR interest rate swap expiring December, 2012.
Pursuant

In addition to the terms of the shareholders’ agreement between ourselves and the otherdebt facilities discussed above, IMTT Holdings Inc. received loans from its shareholders in IMTT, all shareholders in IMTT other than MIC Inc. are requiredfrom 2006 to loan all dividends received by them (excluding the $100.0 million dividend paid to prior existing shareholders at the closing of our investment in IMTT), net of tax payable in relation to such dividends, through the quarter ending December 31, 2007 back to IMTT Holdings Inc.2008. The shareholder loan willloans have at a fixed interest rate of 5.5% and will be repaid over 15 years by IMTT Holdings Inc. with equal quarterly amortization commencingthat commenced March 31, 2008. Shareholder loans of $11.2$34.5 million were outstanding as atof December 31, 2006.2009.

The Gas Company

       
 Year Ended December 31, Change
(From 2008 to 2009)
Favorable/(Unfavorable)
 Change
(From 2007 to 2008)
Favorable/(Unfavorable
   2009 2008 2007
($ In Thousands) $ $ $ $ % $ %
Cash provided by operating activities  25,560   27,078   16,005   (1,518  (5.6  11,073   69.2 
Cash used in investing activities  (7,105  (9,424  (7,870  2,319   24.6   (1,554  (19.7
Cash provided by financing activities  10,000   2,000   5,000   8,000   NM   (3,000  (60.0

NM — Not meaningful

Operating Activities

The main driver for cash provided by operating activities is customer receipts. These are offset in part by the timing of payments for fuel, materials, pipeline repairs, vendor services and supplies, payroll and benefit costs, revenue-based taxes and payment of administrative costs. Customers are generally billed monthly and make payments on account. Vendors and suppliers generally bill the business when services are rendered or when products are shipped.

The decrease from 2008 to 2009 was primarily due to higher cash pension payments and the exhaustion in 2008 of the escrow account established at acquisition partially offset by improved operating results. The increase from 2007 to 2008 was primarily due to higher operating income driven by higher margins.

Investing Activities

Cash used in investing activities primarily comprises capital expenditures. Capital Expenditures

All maintenanceexpenditures for the non-utility business are funded by cash from operating activities and specific capital expenditure will be incurred atexpenditures for the utility business are funded by drawing on credit facilities as well as cash from operating company level. We have detailed our capital expenditure on a segment-by-segment basis, which we believe is the most appropriate approach to explaining our capital expenditure requirements on a consolidated basis.
Airport Services Business
activities.

Maintenance Capital Expenditure

Maintenance capital expenditures include replacement of pipeline sections, improvements to the business’ transmission system and SNG plant, improvements to buildings and other property and the purchases of vehicles and equipment.

Growth Capital Expenditure

Growth capital expenditures include the purchases of meters, regulators and propane tanks for new customers, the cost of installing pipelines for new residential and commercial construction and the costs of new projects.

We expect

TABLE OF CONTENTS

Energy-Related Businesses: The Gas Company – (continued)

The following table sets forth information about capital expenditures in The Gas Company:

MaintenanceGrowth
2007$4.7 million$4.0 million
2008$5.8 million$3.9 million
2009$3.3 million$4.1 million
2010 projected$5.5 million$6.5 million
Commitments at December 31, 2009$1.0 million$   439,000

The business expects to spend approximately $3.8 million, or $200,000 per FBO, per year on maintenancefund its total 2010 capital expenditure at Atlantic Aviation’s existing FBO’s. At our newly acquired Trajen FBO’s we expect to spend approximately $3.3 million or $140,000 per FBO, per year on maintenance capital expenditure. The amounts will be spent on items such as repainting, replacing equipment as necessary and any ongoing environmental or required regulatory expenditure, such as installing safety equipment. This expenditure is fundedexpenditures primarily from cash flow from operations.

Specificoperating activities. Capital Expenditure
Weexpenditures for 2010 are undertaking capital projects at some of our locations. One of these projects was started in 2006 and is expected to be completed in 2007. Expenditures relatedhigher than previous years due to these specific projects are expectedrequired pipeline maintenance and inspection involving the relocation and upgrade of two sections of the transmission pipeline near the SNG plant as part of an integrity management program due by 2012 and due to total approximately $12.4 million at Atlantic Aviation’s existing FBO’s and $2.9 milliona pilot project at the Trajen FBO’s. We intendSNG plant to fund thesecreate gas from renewable feedstock sources. Capital expenditures from cash on hand.


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Bulk Liquid Storage Terminal Business
Maintenance Capital Expenditure
During the year ended December 31, 2006, IMTT spent $21.0 million on maintenance capital expenditure, including $17.3 million principally in relation to storage tank refurbishments and $3.7 million on environmental capital expenditure, principally in relation to improvements in containment measures and remediation. Looking forward it is anticipated that total maintenance capital expenditure (maintenance and environmental) is unlikely to exceed a range of between $30.0 million and $40.0 million per year. Maintenance capital expenditure in 2006 was2009 were lower than this levelprevious years primarily due to the deferral of environmentalseveral large projects primarily related to the repair and upgrade of the transmission pipeline near the SNG plant. Capital expenditures in 2008 were higher than 2007 due to improvements made to a backup utility propane system.

The change in capital expenditure into subsequent periods. from 2008 to 2009 was primarily due to:

improvements to the backup utility propane system completed in 2008.

The expected level of future maintenancechange in capital expenditure from 2007 to 2008 was primarily due to:

improvements to a backup utility propane system to improve reliability; and
new customer related projects.

Commitments at December 31, 2009 include renewal work on pipelines, acquisition of tanks and other equipment for 2010 projects as well as a paving project at the Kamakee facility.

Financing Activities

At December 31, 2009, the outstanding balance on the business’ debt facilities consisted of $160.0 million in term loan facility borrowings and $19.0 million in capital expenditure facility borrowings. The weighted average interest rate of the outstanding debt facilities including any interest rate swaps at December 31, 2009 is 4.6%. For the year, the business paid approximately $8.5 million in interest expense related to its debt facilities.

The Gas Company has interest rate swaps hedging 100% of the interest rate exposure under the two $80.0 million term loan facilities that effectively fix the interest rate at 4.8375% (excluding the margin).

The Gas Company also has an uncommitted unsecured short-term borrowing facility of $7.5 million that was renewed during the second quarter of 2009. This credit line bears interest at the lending bank’s quoted rate or prime rate. The facility is available for working capital needs. No amounts were outstanding as of December 31, 2009.

The main drivers for cash from financing activities are debt financings for capital expenditures and the repayment of outstanding credit facilities.

The change from 2008 to 2009 was due primarily to the timing of borrowings to fund capital expenditures.

The change from 2007 to 2008 was primarily due to:

$5.0 million of long-term borrowing for utility assets in 2008; and
$3.0 million payment of short-term working capital borrowings outstanding at the end of 2007.

TABLE OF CONTENTS

Energy-Related Businesses: The Gas Company – (continued)

The facilities include events of default, representations and warranties and other covenants that are customary for facilities of this type. A change of control will occur if the Macquarie Group, or any fund or entity managed by the Macquarie Group, fails to control majority of the respective borrowers. Material terms of the credit facilities are summarized below:

Holding Company DebtOperating Company Debt
BorrowersHGCThe Gas Company, LLC
Facilities$80.0 million Term Loan$80.0 million Term Loan$20.0 million Revolver ($19.0 million drawn at December 31, 2009)
CollateralFirst priority security interest on HGC’s assets and equity interestsFirst priority security interest on The Gas Company’s assets and equity interests
MaturityJune, 2013June, 2013June, 2013
AmortizationPayable at maturityPayable at maturityPayable at maturity for utility capital expenditures
Interest Rate: Years 1 – 5LIBOR plus 0.60%LIBOR plus 0.40%LIBOR plus 0.40%
Commitment Fees: Years 1 – 50.14% on undrawn portion
Interest Rate: Years 6 – 7LIBOR plus 0.70%LIBOR plus 0.50%LIBOR plus 0.50%
Commitment Fees: Years 6 – 70.18% on undrawn portion
Distributions Lock-Up Test12 mo. look-forward and 12 mo. look-backward adjusted EBITDA/interest <3.5x (at December 31, 2009: 7.9x and 7.7x, respectively)
Mandatory Prepayments12 mo. look-forward and 12 mo. look-backward adjusted EBITDA/interest <3.5x for 3 consecutive quarters
Events of Default Financial Triggers12 mo. look-backward adjusted EBITDA/interest <2.5x12 mo. look-backward adjusted EBITDA/ interest <2.5x

As part of the regulatory approval process of our acquisition of The Gas Company, we agreed to 14 regulatory conditions from the HPUC that address a variety of matters. The more significant conditions include:

the non-recoverability of goodwill, transaction or transition costs in future rate cases;
a requirement that The Gas Company and HGC’s ratio of consolidated debt to total capital does not exceed 65%; and,
a requirement to maintain $20.0 million in readily available cash resources at The Gas Company, HGC or the Company.

At December 31, 2009, the consolidated debt to total capital ratio was 63.2%.


TABLE OF CONTENTS

Energy-Related Businesses – (continued)

District Energy

       
 Year Ended December 31, Change
(From 2008 to 2009)
Favorable/(Unfavorable)
 Change
(From 2007 to 2008)
Favorable/(Unfavorable)
   2009 2008 2007
($ In Thousands) $ $ $ $ % $ %
Cash provided by operating activities  14,448   17,766   14,085   (3,318  (18.7  3,681   26.1 
Cash used in investing activities  (12,095  (5,378  (9,421  (6,717  (124.9  4,043   42.9 
Cash provided by financing activities  17,917   986   11,637   16,931   NM   (10,651  (91.5

NM — Not meaningful

Operating Activities

Cash provided by operating activities is primarily driven by customer receipts for services provided and for leased equipment (including non-revenue lease principal), the timing of payments for electricity and vendor services or supplies and the payment of payroll and benefit costs. The decline in cash provided by operating activities was primarily due to new customer reimbursements in 2008 for costs to connect to the business’ system, the timing of payments to vendors in 2009 compared to 2008 and a one-time capacity paydown from a customer in 2008. These items are also primarily responsible for the increase in cash provided by operating activities from 2007 to 2008. Excluding these payments, the cash contribution from ongoing operations was relatively flat period over period.

As provided in the longer term primarily reflectsagreement between MIC and John Hancock, the need for increased environmental expenditure going forward bothowners of the non-controlling interest of District Energy (collectively, the “members”), all “available cash” will be distributed pro rata to remediate existing sitesthe members on a quarterly basis. “Available cash” is calculated as cash from operating activities plus cash from investing activities (excluding debt funded capital expenditures, and acquisitions net of cash) plus net debt proceeds minus distributions paid to upgrade waste water treatment and spill containment infrastructureminority shareholders of the Nevada district energy business. The distribution of available cash may be reduced to comply with existing,any contractual or legal limitations, including restrictions on distributions contained in the business’ credit facility, and currently foreseeable changes to environmental regulations. Future maintenanceprovide for reserves for working capital expenditure is expected to berequirements.

Investing Activities

Cash used in investing activities mainly comprises capital expenditures, which are generally funded from IMTT’s cash flow from operations.

Specific Capital Expenditure
IMTT is currently constructing a bulk liquid chemical storageby drawing on available facilities. Cash used in investing activities in 2008 and handling facility on the Mississippi River at Geismar, LA. To date, IMTT has committed approximately $160.0 million of2009 funded growth capital expenditure to the project. Based on the current project scope and subject to certain minimum volumes of chemical products being handled by the facility, existing customer contracts are anticipated to generate terminal gross profit and EBITDA of at least approximately $18.8 million per year. Completion of construction of the initial $160.0 million phase of the Geismar project is targeted for the first quarter of 2008. In the aftermath of Hurricane Katrina, construction costs in the region affected by the hurricane have increased and labor shortages have been experienced. Although a significant amount of the impact of Hurricane Katrina on construction costs has already been incorporated into the capital commitment plan, there could be further negative impacts on the cost of constructing the Geismar, LA project (which may not be offset by an increase in gross profit and EBITDA contribution) and/or the project construction schedule. In addition to the Geismar project, IMTT has recently completed the construction of seven new storage tanks and is currently in the process of constructing a further eight new storage tanks with a total capacity of approximately 1.5 million barrels at its Louisiana facilities at a total estimated cost of $39.0 million. It is anticipated that construction will be completed during 2007. Rental contracts with initial terms of at least three years have already been executed in relation to 11 of these tanks with the balance to be used to service customers while their existing tanks are undergoing scheduled maintenance over the next five years. Overall, it is anticipated that the operation of the new tanks will contribute approximately $6.4 million to IMTT’s terminal gross profit and EBITDA annually. At the Quebec facility, IMTT is currently in the process of constructing four new storage tanks with total capacity of 269,000 barrels. All of these tanks are already under customer contract with a minimum term of three years. Total construction costs are projected at approximately $7.2 million. Construction of these tanks is anticipated to be completed during 2007 and their operation is anticipated to contribute approximately $1.6 million to the Quebec terminal’s gross profit and EBITDA annually.
During the year ended December 31, 2006, IMTT spent $69.2 million on specific expansion projects including $35.4 million in relation to the construction the new bulk liquid chemical storage facility at Geismar and $21.2 million at St Rose principally in relation to the construction of new storage tanks. The balance of the specific capital expenditure related to a number of smaller projects to improve the capabilities of IMTT’s facilities.
It is anticipated that the proposed specific capital expenditure will be fully funded using a combination of IMTT’s cash flow from operations, IMTT’s debt facilities, the proceeds from our investment in IMTT and future loans from the IMTT shareholders other than us. IMTT’s current debt facilities will need to be refinanced on amended terms and increased in size during 2007 to provide the funding necessary for IMTT to fully pursue its expansion plans.
Gas Production and Distribution Business
Capital Expenditure
During 2007, TGC expects to spend approximately $9.5 million for maintenance, routine replacements of current facilities and equipment, and to support business growth in 2007. Approximately $2.2 million of the


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expected total year capital expenditures are for new business. The remaining $7.3 million comprises approximately $1.8 million for vehiclescustomer connections and $5.5 million for other renewals and upgrades.plant expansion. A portionsimilar expansion of this expenditure will be funded from available debt facilities.
District Energy Business
another downtown Chicago plant resulted in higher cash used in investing activities in 2007, when compared to 2008.

Maintenance Capital Expenditure

Our district energy

The business expects to spend approximatelyup to $1.0 million per year on capital expenditures relating to the replacement of parts, system reliability, customer service improvements and minor system modifications. Since 2004, minor system modifications have been made that increased system capacity by approximately 3,000 tons. Maintenance capital expenditures for the next year will be funded from available debt facilities.

Specificfacilities and cash from operating activities.

Growth Capital Expenditure

The following table summarizes growth capital expenditures committed by District Energy as well as the gross profit and EBITDA expected to be generated by those expenditures. Of the $27.7 million total, approximately $24.1 million, or 87%, has been spent as of December 31, 2009.

We anticipate spending up to approximately $8.1 million for system expansion over the next two years. This expansion, in conjunction with operational strategies, and efficiencies we have achieved at our plants and throughout our system, will increase saleable capacity in the downtown cooling system by a total of 16,000 tons. Approximately 6,700 tons of saleable capacity was used in 2006 to accommodate four customers that converted from interruptible to continuous service. The balance of saleable capacity (approximately 9,300 tons) is in the process of being sold to new or existing customers.
As of January 31, 2007, we have signed contracts with four customers representing approximately 70% of the remaining additional saleable capacity. One customer began service in late 2006 and the other three

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Energy-Related Businesses: District Energy – (continued)

   
 Capital
Expenditure Cost
($ Millions)
 Gross Profit/
EBITDA
($ Millions)(1)
 Expected Date
for Gross Profit/
EBITDA
Chicago Plant and Distribution System Expansion  7.7           
New Chicago Customer Connections and Minor System Modifications  6.6       
    14.3   4.9   2007 – 2012 
Chicago Plant Renovation and Expansion  10.7   1.3   2009 – 2011 
Las Vegas System Expansion  2.7   0.3   2010 
Total  27.7   6.5    

(1)Represents projected increases in annualized EBITDA in the first year following completion of the project.

New customers will begin service between 2007 and 2009. We have identifiedtypically reimburse the likely purchasersbusiness for a substantial portion of the remaining saleable capacity and expectexpenditures related to have contracts signed by the end of 2007.

We estimate that we will incur additional capital expenditure of $5.5 million connecting new customersthem to the business’ system, over the next two years. Typically, new customers will reimburse our district energy business for some, if not all, of these connection expenditures effectivelythereby reducing the impact of this element of capital expenditure. We anticipateIn addition, new customers generally have up to two years after their initial service date to increase capacity up to their final contracted tons which may defer a small portion of the expected gross profit and EBITDA. The business anticipates that the expanded capacity sold to new or existing customers will be under contract or subject to letters of intent prior to Thermalthe business committing to the capital expenditure. Approval fromAs of January 26, 2010, the Citybusiness has signed contracts with eleven new customers representing approximately 80% of expected additional gross profit and EBITDA relating to the Chicago has been obtained where required to accommodate expansion of the underground distribution piping necessary to connect the above referenced anticipated new customers.
Based on recent contract experience, each new ton of capacity sold will add approximately $425 to annual revenueprojects in the first year of service.
We expecttable above.

The business expects to fund the capital expenditureexpenditures for system expansion and interconnection by drawing on available debt facilities. The following table sets forth information about capital expenditures in District Energy:

  
 Maintenance Growth
2007 $906,000  $8.5 million 
2008 $987,000  $4.4 million 
2009 $875,000  $11.2 million 
2010 projected $1.0 million  $4.1 million 
Commitments at December 31, 2009 $257,000  $2.9 million 

Financing Activities

At December 31, 2009, the outstanding balance on the business’ debt facilities consisted of $170.0 million in long-term loan facilities. The weighted average interest rate of the outstanding debt facilities including any interest rate swaps and fees associated with outstanding letters of credit at December 31, 2009 is 5.3%. For the year ended December 31, 2009, the business paid approximately $9.5 million in interest expense related to its debt facilities.

The increase in cash provided by financing activities is primarily due to $18.5 million of borrowings on the business’ credit facility in 2009 to finance growth capital expenditures.

The change from 2007 to 2008 was primarily due to the 2007 refinancing in which $150.0 million of new long-term borrowing was used to repay outstanding senior notes of $120.0 million and an $11.6 million revolver facility ($9.0 million of which was drawn in 2007), partially offset by a make-whole payment of $14.7 million.

Airport Parking

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Energy-Related Businesses: District Energy – (continued)

Material terms of the facility are presented below:

BorrowerMacquarie District Energy LLC, or MDE
Facilities

  •  

$150.0 million term loan facility (fully drawn at December 31, 2009)

  •  

$20.0 million capital expenditure loan facility (fully drawn at December 31, 2009)

  •  

$18.5 million revolving loan facility ($7.1 million utilized at December 31, 2009 for letters of credit)

AmortizationPayable at maturity
Interest typeFloating
Interest rate and fees

  •  

Interest rate:

    •  

LIBOR plus 1.175% or

    •  

Base Rate (for capital expenditure loan and revolving loan facilities only): 0.5% above the greater of the prime rate or the federal funds rate

  •  

Commitment fee: 0.35% on the undrawn portion.

MaturitySeptember, 2014; September, 2012 for the revolving loan facility
Mandatory prepayment

  •  

With net proceeds that exceed $1.0 million from the sale of assets not used for replacement assets;

  •  

With insurance proceeds that exceed $1.0 million not used to repair, restore or replace assets;

  •  

In the event of a change of control;

  •  

In years 6 and 7, with 100% of excess cash flow applied to repay the term loan and capital expenditure loan facilities;

  •  

With net proceeds from equity and certain debt issuances; and

  •  

With net proceeds that exceed $1.0 million in a fiscal year from contract terminations that are not reinvested.

Distribution covenantDistributions permitted if the following conditions are met:

  •  

Backward interest coverage ratio greater than 1.5x (at December 31, 2009: 2.8x);

  •  

Leverage ratio (funds from operations to net debt) for the previous 12 months equal to or greater than 6.0% (at December 31, 2009: 8.6%);

  •  

No termination, non-renewal or reduction in payment terms under the service agreement with the Planet Hollywood (formerly Aladdin) hotel, casino and the shopping mall, unless MDE meets certain financial conditions on a projected basis, including through prepayment; and

  •  

No default or event of default.

CollateralFirst lien on the following (with limited exceptions):

  •  

Project revenues;

  •  

Equity of the Borrower and its subsidiaries;

  •  

Substantially all assets of the business; and

  •  

Insurance policies and claims or proceeds.


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Energy-Related Businesses: District Energy – (continued)

The facility includes events of default, representations and warranties and other covenants that are customary for facilities of this type. A change of control will occur if the Macquarie Group, or any fund or entity managed by the Macquarie Group, fails to control a majority of MDE.

To hedge the interest commitments under the new term loan, District Energy entered into interest rate swaps fixing 100% of the term loan at 5.074% (excluding the margin).

Aviation-Related Business

Atlantic Aviation

       
 Year Ended December 31, Change
(From 2008 to 2009) Favorable/(Unfavorable)
 Change
(From 2007 to 2008) Favorable/(Unfavorable)
   2009 2008 2007
($ In Thousands) $ $ $ $ % $ %
Cash provided by operating activities  50,930   73,128   85,323   (22,198  (30.4  (12,195  (14.3
Cash used in investing activities  (10,817  (68,002  (704,259  57,185   84.1   636,257   90.3 
Cash (used in) provided by financing activities (1)  (76,736  27,069   411,191   (103,805  NM   (384,122  (93.4

NM - Not meaningful

(1)During the first quarter of 2009, we provided Atlantic Aviation with a capital contribution of $50.0 million to pay down $44.6 million of debt. The remainder of the capital contribution was used to pay interest rate swap breakage fees and expenses. In the first quarter of 2008, we provided Atlantic Aviation with $41.9 million of funding, which was used to pay for the acquisition of SevenBar FBOs (reflected above in cash used in investing activities) and to pre-fund integration costs. These contributions have been excluded from the above table as they are eliminated on consolidation.

In response to the slowing of the overall economy and the recent decline in general aviation activity, we continue to reduce the indebtedness of Atlantic Aviation. In cooperation with the business’ lenders, the terms of the loan agreement were amended by Atlantic Aviation. The amendment was executed on February 25, 2009. The revised terms are outlined under “Financing Activities” below.

Operating Activities

Operating cash at Atlantic Aviation is generated from sales transactions primarily paid by credit cards. Some customers are extended payment terms and billed accordingly. Cash is used in operating activities mainly for payments to vendors of fuel, aircraft services and professional services, as well as payroll costs and payments to tax jurisdictions. Cash provided by operating activities decreased mainly due to:

a decline in gross profit resulting from the decrease in volume of fuel sold; and
payment of interest rate swap breakage fees associated with the prepayment of the term loan debt; partially offset by
reduced interest expense, other than swap breakage fees, from lower debt levels; and
collection of aged accounts receivable.

Investing Activities

Cash used in investing activities relates primarily to acquisitions and capital expenditures. The decrease in cash used in investing activity is primarily due to the SevenBar acquisition in March 2008 and lower capital expenditures by the business.

Maintenance expenditures are generally funded by cash from operating activities and growth capital expenditures are generally funded with drawdowns on capital expenditure facilities.


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Aviation-Related Business: Atlantic Aviation – (continued)

Maintenance Capital Expenditure

Maintenance capital projects include regular replacement of shuttle busesexpenditures encompass repainting, replacing equipment as necessary and IT equipment, some of whichany ongoing environmental or required regulatory expenditure, such as installing safety equipment. These expenditures are generally funded from cash flow from operating activities.

Growth Capital Expenditure

Growth capital expenditures are incurred primarily in connection with lease extensions and only where the business expects to receive an appropriate return relative to its cost of capital. Historically these expenditures have included development of hangars, terminal buildings and ramp upgrades. The business has generally funded these projects through its growth capital expenditure facilities.

The following table sets forth information about capital expenditures in Atlantic Aviation:

  
 Maintenance Growth
2007 $8.6 million  $19.0 million 
2008 $7.7 million  $26.8 million 
2009 $4.5 million  $6.3 million 
2010 projected $7.6 million  $1.8 million 
Commitments at December 31, 2009 $24,000  $203,000 

Growth capital expenditures declined in 2009 since various major projects were completed in 2008, these include the construction of a new hangar at the San Jose FBO and a ramp repair and extension at the Teterboro location that were completed in 2008. The business expects growth capital expenditures to be $1.8 million in 2010 and $4.5 million in 2011. This expected decrease in growth capital expenditures reflects the completion of all major projects undertaken last year as well as obligations under our various FBO lease agreements.

The decreases in maintenance capital expenditures were primarily due to the deferral of maintenance capital expenditures in response to the overall soft economy.

Financing Activities

At December 31, 2009, the outstanding balance on the business’ debt facilities consisted of $818.4 million in term loan facility borrowings, which is 100% hedged with interest rate swaps, and $44.9 million in capital expenditure facility borrowings. The weighted average interest rate of the outstanding debt facilities including any interest rate swaps at December 31, 2009 is 6.37%. In 2009, the business paid approximately $57.3 million in interest expense, excluding interest rate swap breakage fees, related to its debt facilities.

In addition, for the year ended December 31, 2009, cash interest expense included $8.8 million in interest rate swap breakage fees. The business expects to pay further interest rate swap breakage fees to its swap counterparties as it continues to pay down its term loan debt and somereduce its corresponding interest rate swaps.

During the first quarter of which are financed, including2009, the Company provided the business with a capital leases.contribution of $50.0 million. The business paid down $44.6 million of debt and used the remainder of the capital contribution to pay interest rate swap breakage and debt amendment fees. In addition, during 2009 the business used $40.6 million of its excess cash flow to prepay $37.0 million of the outstanding principal balance of the term loan and $3.6 million in interest rate swap breakage fees.

In February, 2010, Atlantic Aviation used $17.1 million of cash generated by Atlantic Aviation to repay $15.5 million of the outstanding principal balance of the term loan debt and $1.6 million of interest rate swap breakage fees. As a result of this prepayment, the refinance and sale of surplus land, Parking hadleverage ratio would decrease to 7.82x based upon the trailing twelve months December 2009 EBITDA, as calculated under the facility. We expect to apply all excess cash flow from the business to prepay additional funds availabledebt principal for capital expenditure. These funds were usedthe foreseeable future.

The decrease in cash provided by financing activities is primarily due to accelerate capital expenditure previously scheduled for 2007.

During 2006, our airport parking business committed to maintenance related capital projects totaling $5.1 million of which $2.3 million was funded throughthe debt and other financing activities. The balance of $2.8 million was paidprepayment made in cash.
Specific Capital Expenditure
In 2006, our airport parking business committed to $423,000 of specific capital projects, all of which was funded through debt and other financing activities. In addition, the airport parking business spent $520,000 in 2006 on capital expenditures related to our SunPark facilities, all of which were prefunded at the time of our acquisition in 2005.


992009.



COMMITMENTS AND CONTINGENCIES

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Aviation-Related Business: Atlantic Aviation – (continued)

The following tables summarize our future obligations, due by period, asfinancial covenant requirements under Atlantic Aviation’s credit facility, and the calculation of these measures at December 31, 2006, under our various contractual obligations and commitments. We had no off-balance sheet arrangement at that date or currently. The following information does not include information for IMTT, which is not consolidated.

2009, were as follows:

Debt Service Coverage Ratio >1.2x (default threshold). The ratio at December 31, 2009 was 1.85x.
  
Payments Due by Period 
 
  
Total
 
Less Than
One Year
 
1-3 Years
 
3-5 Years
 
More Than
5 years
 
  ($ in thousands) 
Long-term debt(1)     $963,660     $3,754     $212,005     $489,180     $258,721 
Capital lease obligations(2)  4,492  2,018  2,123  351   
Notes payable  3,326  2,665  539  122   
Operating lease obligations(3)  471,833  28,199  55,582  50,613  337,439 
Time charter obligations(4)  4,170  912  1,879  1,379   
Pension benefit obligations  20,965  1,705  3,677  4,096  11,487 
Post-retirement benefit obligations  1,857  257  385  358  857 
Purchase obligations(5)  56,980  56,980       
Total contractual cash obligations(6) $1,527,283 $96,490 $276,190 $546,099 $608,504 
——————
(1)
The long-termLeverage Ratio debt represents the consolidated principal obligations to various lenders. The debt facilities, which are obligations of the operating businesses and have maturities between 2007 and 2020, are subject to certain covenants, the violation of which could result in acceleration. Refer to the “Liquidity and Capital Resources” section for details on interest rates and interest rate hedges on our long-term debt.
(2)
Capital lease obligations areEBITDA for the lease of certain transportation equipment. Such equipment could be subject to repossession upon violation of thetrailing twelve months 8.25x (default threshold). The ratio at December 31, 2009 was 7.97x.

The terms of the lease agreements.

(3)
The companyloan agreement of Atlantic Aviation have been revised in accordance with the amendment completed and effective on February 25, 2009. A comparative summary of key terms is obligated under non-cancelable operating leases for various parking facilities at the airport parking business and for real estate leases at the district energy business. This represents the minimum annual rentals required to be paid under such non-cancelable operating leases with terms in excess of one year.presented below.

BorrowerAtlantic Aviation
Facilities$900.0 million term loan facility (outstanding balance of $818.4 million at December 31, 2009)
$50.0 million capital expenditure facility ($44.9 million drawn at December 31, 2009)
$18.0 million revolving working capital and letter of credit facility ($6.5 million utilized to back letter of credit at December 31, 2009)
AmortizationPayable at maturity
Years 1 to 5, amortization per leverage grid below:
100% excess cash flow when Leverage Ratio is 6.0x or above
50% excess cash flow when Leverage Ratio is between 6.0x and 5.5x 100% of excess cash flow in years 6 and 7 (unchanged)
Interest typeFloating
Interest rate and feesYears 1 – 5:
LIBOR plus 1.6% or
Base Rate (for revolving credit facility only): 0.6% above the greater of: (i) the prime rate or (ii) the federal funds rate plus 0.5%
Years 6 – 7:
LIBOR plus 1.725% or
Base Rate (for revolving credit facility only): 0.725% above the greater of: (i) the prime rate or (ii) the federal funds rate plus 0.5%
MaturityOctober, 2014
Mandatory prepaymentWith net proceeds that exceed $1.0 million from the sale of assets not used for replacement assets;
With net proceeds of any debt other than permitted debt;
With net insurance proceeds that exceed $1.0 million not used to repair, restore or replace assets;
In the event of a change of control;
Additional mandatory prepayment based on leverage grid (see distribution covenant below)
With any FBO lease termination payments received;
With excess cash flows in years 6 and 7.
Financial covenantsDebt service coverage ratio >1.2x (at December 31, 2009: 1.85x)
Maximum leverage ratio for subsequent periods modified as follows: 2009: 8.25x 2012: 6.75x
2010: 8.00x 2013: 6.00x
2011: 7.50x 2014: 5.00x (unchanged)
(4)
TGC currently has a time charter arrangement for the use of two barges for transporting liquefied petroleum gas between Oahu and its neighbor islands.
(5)
Purchase obligations include the commitment of the company (through a wholly-owned subsidiary) to acquire 100% of the membership interests in two FBOs, located at Stewart International Airport in New York and Santa Monica Airport in California, for $85.0 million plus expected transaction costs, integration costs and reserves of $4.5 million, net of expected debt of $32.5 million. The transaction is expected to close late in the first quarter or second quarter of 2007.
(6)
This table does not reflect certain long-term obligations, such as deferred taxes, for which we are unable to estimate the period in which the obligation will be incurred.


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Aviation-Related Business: Atlantic Aviation – (continued)

Distribution covenantDistributions permitted if the following conditions are met:
Backward and forward debt service coverage ratio equal to or greater than 1.6x;
No default;
All mandatory prepayments have been made;
Replaced by a test based on the Leverage Ratio:
100% of excess cash flow permitted to be distributed when leverage ratio is below 5.5x
50% of excess cash to be distributed when leverage ratio is equal to or greater than 5.5x and less than 6.0x
No distribution permitted when leverage ratio is 6.0x or above
No revolving loans outstanding.
CollateralFirst lien on the following (with limited exceptions):
Project revenues;
Equity of the borrower and its subsidiaries; and
Insurance policies and claims or proceeds.
Adjusted EBITDA definitionExcludes (i) all extraordinary or non-recurring non-cash income or losses during relevant the period (including losses resulting from write-off of goodwill or other assets); and (ii) any non-cash income or losses due to change in market value of the hedging agreements

CRITICAL ACCOUNTING POLICIES

ESTIMATES

The preparation of our financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions and judgments and uncertainties, and potentially could result in materially different results under different conditions. Our critical accounting estimates and policies are discussed below. These estimates and policies are consistent with the estimates and accounting policies followed by the businesses we own.

Business Combinations

Our acquisitions of businesses that we control are accounted for under the purchase method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions are based on estimated fair values as of the date of the acquisition, with the remainder, if any, recorded as goodwill. The fair values are determined by our management, taking into consideration information supplied by the management of acquired entities and other relevant information. Such information includes valuations supplied by independent appraisal experts for significant business combinations. The valuations are generally based upon future cash flow projections for the acquired assets, discounted to present value. The determination of fair values require significant judgment both by management and outside experts engaged to assist in this process.

Goodwill, intangible assetsIntangible Assets and property, plantProperty, Plant and equipment

Equipment

Significant assets acquired in connection with our acquisition of the airport services business, airport parking business, district energy businessThe Gas Company, District Energy and gas production and distribution businessAtlantic Aviation include contract rights, customer relationships, non-compete agreements, trademarks, domain names, property and equipment and goodwill.

Trademarks and domain names are generally considered to be indefinite life intangibles. Trademarks, domain names and goodwill are not amortized in most circumstances. It may be appropriate to amortize some trademarks and domain names. However, for unamortized intangible assets, we are required to perform annual impairment reviews and more frequently in certain circumstances.

The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the


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fair value of each reporting unit based on a discounted cash flow model using revenue and profit forecasts and comparing those estimated fair values with the carrying values, which included the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying value. The airport services business, airport parking business, district energy businessGas Company, District Energy and gas production and distribution businessAtlantic Aviation are separate reporting units for purposes of this analysis. The impairment test for trademarks and domain names, which are not amortized, requires the determination of the fair value of such assets. If the fair value of the trademarks and domain names is less than their carrying value, an impairment loss is recognized in an amount equal to the difference. We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and/or intangible assets. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base, or material negative change in relationship with significant customers.

Property and equipment areis initially stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the property and equipment after consideration of historical results and anticipated results based on our current plans. Our estimated useful lives represent the period the asset remains in servicesservice assuming normal routine maintenance. We review the estimated useful lives assigned to property and equipment when our business experience suggests that they do not properly reflect the consumption of economic benefits embodied in the property and equipment nor result in the appropriate matching of cost against revenue. Factors that lead to such a conclusion may include physical observation of asset usage, examination of realized gains and losses on asset disposals and consideration of market trends such as technological obsolescence or change in market demand.



101


Significant intangibles, including contract rights, customer relationships, non-compete agreements and technology are amortized using the straight-line method over the estimated useful lives of the intangible asset after consideration of historical results and anticipated results based on our current plans. With respect to contract rights in our airport services business,Atlantic Aviation, we take into consideration the history of contract right renewals in determining our assessment of useful life and the corresponding amortization period.

We perform impairment reviews of property and equipment and intangibles subject to amortization, when events or circumstances indicate that assets are less than their carrying amount and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In this circumstance, the impairment charge is determined based upon the amount of the net book value of the assets exceeds their fair market value. Any impairment is measured by comparing the fair value of the asset to its carrying value.

The “implied fair value” of reporting units and fair value of property and equipment and intangible assets is determined by our management and is generally based upon future cash flow projections for the acquired assets, discounted to present value. We use outside valuation experts when management considers that it is appropriate to do so.

We test for goodwill for impairment as of October 1 each year. There was no goodwill impairment as of October 1, 2006. We test our long-livedand indefinite-lived intangible assets when there is an indicator of impairment. Impairments of long-livedgoodwill, property, equipment, land and leasehold improvements and intangible assets during 20062009, 2008 and 2007 relating to Atlantic Aviation, are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Airport Parking Business”Operations” in Part II, Item 7.

Revenue recognition

FuelRecognition

The Gas Company recognizes revenue from our airport services business is recorded when fuel is provided or whenthe services are rendered. Our airport services business also records hangar rental fees, whichprovided. Sales of gas to customers are recognized during the month for which servicebilled on a monthly cycle basis. Most revenue is provided.

Our airport parking business records parking lot revenue, as services are performed, net of allowances and local taxes. Revenue for services performed, but not collected as of a reporting date, are recorded based upon the estimated value of uncollected parking revenue for customer vehicles at each location. Our airport parking business also offers various membership programs for which customers pay an annual membership fee. Suchconsumption; however, certain revenue is recognized ratably over the one-year life of the membership. Revenue from prepaid parking vouchers that can be redeemed in the future is recognized when such vouchers are redeemed.
Our district energy businessbased upon a flat rate.

District Energy recognizes revenue from cooling capacity and consumption at the time of performance of service. Cash received from customers for services to be provided in the future are recorded as unearned revenue and recognized over the expected services period on a straight-line basis.

Our gas production and distribution business recognizes

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Fuel revenue from Atlantic Aviation is recorded when thefuel is provided or when services are rendered. Atlantic Aviation also records hangar rental fees, which are recognized during the month for which service is provided. Sales

Hedging

We have in place variable-rate debt. Management believes that it is prudent to limit the variability of gasa portion of its interest payments. To meet this objective, the Company enters into interest rate swap agreements to customers are billedmanage fluctuations in cash flows resulting from interest rate risk on a monthly cycle basis. Most revenue is based upon consumption, however, certain revenue is based uponmajority of its debt with a flat rate.

Hedging
With respectvariable-rate component.

As of February 25, 2009 for Atlantic Aviation and effective April 1, 2009 for our other businesses, we elected to our debt facilities anddiscontinue hedge accounting. From the expected cash flows from our previously held non-U.S. investments, we have entered into a seriesdates that hedge accounting was discontinued, all movements in the fair value of the interest rate and foreign exchange derivatives to provide an economicswaps are recorded directly through earnings. As a result of the discontinuance of hedge accounting, we will reclassify into earnings net derivative losses included in accumulated other comprehensive loss over the remaining life of ourthe existing interest rate and foreign exchange exposure. We originally classified each hedge as a cash flow hedge at inception for accounting purposes. As discussed in Note 11 to our consolidated financial statements, we subsequently determined that none of ourswaps.

Our derivative instruments qualified for hedge accounting. SFAS No. 133, Accounting for Derivative Instruments and Certain Hedging Activities, as amended, requires that all derivative instruments beare recorded on the balance sheet at their respective fair values and, for derivatives that do not qualify for hedge accounting, thatvalue with changes in the fair value of interest rate swaps recorded directly through earnings. We measure derivative instruments at fair value using the income approach, which discounts the future net cash settlements expected under the derivative be recognizedcontracts to a present value. See Note 13, “Derivative Instruments and Hedging Activities” in earnings. The determination of fair value of these instruments involves estimates and assumptions and actual value may differ from the fair value reflectedour consolidated financial statements in the financial statements. We commenced hedge accounting in January 2007 and have classified each derivative instrument as a cash flow hedge as of January 1, 2007. Changes in the value of the hedges, to the extent effective, will be recorded in other comprehensive income (loss). Changes in the value that represent the ineffective portion of the hedge will be recorded in earnings as a gain or loss.



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Part II, Item 8, for further discussion.

Income Taxes

We account for income taxes using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Accounting Policies, Accounting Changes and Future Application of Accounting Standards

See Note 2, “Summary of Significant Accounting Policies” in our consolidated financial statements for a summary of the Company’s significant accounting policies, including a discussion of recently adopted and issued accounting pronouncements.

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ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The discussion that follows describes our exposure to market risks and the use of derivatives to address those risks. See “Critical Accounting PoliciesEstimates — Hedging” for a discussion of the related accounting.

Interest Rate Risk

We are exposed to interest rate risk in relation to the borrowings of our businesses. Our current policy is to enter into derivative financial instruments to fix variable rate interest payments covering at least half of the interest rate risk associated with the borrowings of our businesses, subject to the requirements of our lenders. As of December 31, 2006,2009, we have totalhad $1.2 billion of current and long-term debt outstanding atfor our consolidated businessescontinuing operations, $1.1 billion of $963.7 million. Of this total debt outstanding, $126.7 million is fixed rate and $837.0 million is floating. Of the $837.0 million of floating rate debt, $776.3 million iswhich was economically hedged with interest rate swaps $58.7and $83.9 million is hedged with an interest rate cap and $2.0 million isof which was unhedged.

Airport Services Business
The senior debt for our airport services business comprises a non-amortizing $480.0 million floating rate facility maturing in 2010. A 1% increase in the interest rate on the airport services business debt would result in a $4.8 million increase in the interest cost per year. A corresponding 1% decrease would result in a $4.8 million decrease in interest cost per year.
Our airport services business’ exposure to interest rate changes has been 100% hedged until December 14, 2010 through the use of interest rate swaps. These hedging arrangements will offset any additional interest rate expense incurred as a result of increases in interest rates during that period. However, if interest rates decrease, the value of our hedge instruments will also decrease. A 10% relative decrease in interest rates would result in a decrease in the fair market value of the hedge instruments of $8.8 million. A corresponding 10% relative increase would result in a $8.7 million increase in the fair market value.
Bulk Liquid Storage Terminal Business

IMTT at

At December 31, 2006,2009, IMTT had two issues of New Jersey Economic Development Authority tax exempt revenue bonds outstanding with a total balance of $36.3 million where the interest rate is reset daily by tender. A 1% increase in interest rates on this tax exempt debt would result in a $363,000 increase in interest cost per year and a corresponding 1% decrease would result in a $363,000 decrease in interest cost per year. IMTT’s exposure to interest rate changes through the tax exempt debt has been largely hedged through October 2007 through the use of a $50.0 million notional value interest rate swap. As the interest rate swap is fixed against 90-day LIBOR and not the daily tax exempt tender rate, it does not result in a perfect hedge for short term rates on tax exempt debt although it will largely offset any additional interest rate expense incurred as a result of increases in interest rates. The face value of the interest rate swap currently exceeds IMTT’s total outstanding floating rate debt as a consequence of repayment of debt subsequent to our investment in IMTT. If interest rates decrease, the value of the interest rate swap will also decrease. A 10% relative decrease in interest rates would result in a decrease in the fair market value of the interest rate swap of $199,000 and a corresponding 10% relative increase would result in a $198,000 increase in the fair market value. IMTT’s exposure to interest rate changes through thethis tax exempt debt has been hedged from October 2007 through November 2012 through the use of a $36.3 million face value 67% of LIBOR swap. As this interest rate swap is fixed against 67% of 30-day LIBOR and not the daily tax exempt tender rate, it does not result in a perfect hedge for short termshort-term rates on tax exempt debt although it will largely offset any additional interest rate expense incurred as a result of increases in interest rates. If interest rates decrease, the fair market value of this interest rate swap will also decrease. A 10% relative decrease in interest rates would result in a decrease in the fair market value of the interest rate swap of $612,000$137,000 and a corresponding 10% relative increase would result in a $415,000$136,000 increase in the fair market value.



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IMTT, at

At December 31, 2006, had $6.4 million outstanding under its Canadian Dollar denominated revolving credit facility. A 1% increase in interest rates on this revolver would result in a $64,000 increase in interest cost per year. A corresponding 1% decrease would result in a $64,000 decrease in interest cost per year.

2009, IMTT at December 31, 2006, had a $104.0$65.0 million floating rate term loan outstanding. A 1% increase in interest rates on the term loan would result in a $1.0 million$650,000 increase in interest cost per year. A corresponding 1% decrease would result in a $1.0 million$650,000 decrease in interest cost per year. IMTT’s exposure to interest rate changes through the term loan has been fully hedged through the use of an amortizing interest rate swap. These hedging arrangements will fully offset any additional interest rate expense incurred as a result of increases in interest rates. However, if interest rates decrease, the fair market value of the interest rate swap will also decrease. A 10% relative decrease in interest rates would result in a decrease in the fair market value of the interest rate swap of $2.0 million.$333,000. A corresponding 10% relative increase in interest rates would result in a $2.0 million$331,000 increase in the fair market value of the interest rate swap.

At December 31, 2009, IMTT had issued $215.0 million in Gulf Opportunity Zone Bonds (GO Zone Bonds) to fund qualified project costs at its St. Rose and Geismar storage facilities. The interest rate on the GO Zone Bonds is reset daily or weekly at IMTT’s option by tender. A 1% increase in interest rates on the outstanding GO Zone Bonds would result in a $2.2 million increase in interest cost per year and a corresponding 1% decrease would result in a $2.2 million decrease in interest cost per year. IMTT’s exposure to interest rate changes through the GO Zone Bonds has been largely hedged until June 2017 through the use of an interest rate swap which has a notional value of $215.0 million. As the interest rate swap is fixed against 67% of the 30-day LIBOR rate and not the tax exempt tender rate, it does not result in a perfect hedge for short-term rates on tax exempt debt although it will largely offset any additional interest rate expense incurred as a result of increases in interest rates. If interest rates decrease, the fair market value of the interest rate swap will also decrease. A 10% relative decrease in interest rates would result in a decrease in the fair market value of the interest rate swap of $171,000 and a corresponding 10% relative increase would result in a $170,000 increase in the fair market value.

On December 31, 2009, IMTT had $230.1 million outstanding under its U.S. revolving credit facility. A 1% increase in interest rates on this debt would result in a $2.3 million increase in interest cost per year and a corresponding 1% decrease would result in a $2.3 million decrease in interest cost per year. IMTT’s exposure to interest rate changes on its U.S. revolving credit facility has been partially hedged against 90-day LIBOR from October 2007 through March 2017 through the use of an interest rate swap which has a notional value of $115.0 million as of December 31, 2009 which increases to $200.0 million through December 31, 2012. If


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interest rates decrease, the fair market value of the interest rate swap will also decrease. A 10% relative decrease in interest rates would result in a decrease in the fair market value of the interest rate swap of $3.7 million and a corresponding 10% relative increase would result in a $3.6 million increase in the fair market value.

On December 31, 2009, IMTT had $20.8 million outstanding under its Canadian revolving credit facility. A 1% increase in interest rates on this debt would result in a $208,000 increase in interest cost per year and a corresponding 1% decrease would result in a $208,000 decrease in interest cost per year.

On December 31, 2009, IMTT had $30.0 million outstanding under its Regions term loan facility. A 1% increase in interest rates on this debt would result in a $300,000 increase in interest cost per year and a corresponding 1% decrease would result in a $300,000 decrease in interest cost per year.

The Gas Production and Distribution Business

Company

The senior term-debt for TGCThe Gas Company and HGC comprise two non-amortizing term facilities totaling $160.0 million and a senior secured revolving credit facility totaling $20.0 million. At December 31, 2006,2009, the entire $160.0 million in term debt and $2.0$19.0 million of the revolving credit line had been drawn. These variable rate facilities mature on August 31,June 7, 2013.

A 1% increase in the interest rate on TGCThe Gas Company and HGC’s term debt would result in a $1.6 million increase in interest cost per year. A corresponding 1% decrease would result in a $1.6 million decrease in annual interest cost. TGCThe Gas Company and HGC’s exposure to interest rate changes for the term facilities has, however, been fully hedged from September 1, 2006 until maturity through interest rate swaps. These derivative hedging arrangements will offset any interest rate increases or decreases during the term of the notes, resulting in stable interest rates of 5.24% for TGCThe Gas Company (rising to 5.34% in years 6 and 7 of the facility) and 5.44% for HGC (rising to 5.55%5.54% in years 6 and 7 of the facility). TGC’s and HGC’s swaps were entered into on August 17 and 18, 2005, but became effective on August 31, 2006. A 10% relative decrease in market interest rates from December 31, 20062009 levels would decrease the fair market value of the hedge instruments by $3.0$1.3 million. A corresponding 10% relative increase would increase their fair market value by $2.9$1.3 million.

District Energy Business
Our district energy business

The Gas Company also has issued $120a $20.0 million revolver of aggregate principal amount of fixed rate senior secured notes maturingwhich $19.0 million was drawn at December 31, 2023, with variable quarterly amortization commencing in the fourth quarter of 2007. We have a fixed rate exposure on these notes. A 10% relative increase in interest rates will result in a $5.4 million decrease in the fair market value of the notes. A 10% relative decrease in interest rates will result in a $5.8 million increase in the fair market value of the notes.

Airport Parking Business
Our airport parking business has three senior debt facilities: a $195.0 million non-amortizing floating rate facility maturing in 2009 if the options to extend are not exercised, a partially amortizing $4.5 million fixed rate facility maturing in 2009 and a partially amortizing $2.2 million fixed rated facility maturing in 2009. A 1% increase in the interest rate on The Gas Company’s revolver would result in a $190,000 increase in interest cost per year. A corresponding 1% decrease would result in a $190,000 decrease in annual interest cost.

District Energy

District Energy has a $150.0 million floating rate term loan facility maturing in 2014. A 1% increase in the $195.0interest rate on the $150.0 million facility willDistrict Energy debt would result in a $1.5 million increase in the interest cost by $2.0 million per year. A corresponding 1% decrease in interest rates willwould result in a $2.0$1.5 million decrease in interest cost per year. A 10% relative increase

District Energy’s exposure to interest rate changes through the term loan facility has been fully hedged to maturity through the use of interest rate swaps. These hedging arrangements will offset any additional interest rate expense incurred as a result of increases in interest rates. However, if interest rates will decrease, the fair market value of the $4.5 million facility by $61,000.District Energy’s hedge instruments will also decrease. A 10% relative decrease in interest rates willwould result in a $61,000 increase in the fair market value. A 10% relative increase in interest rates will increase the fair market value of the $2.2 million facility by $25,000. A 10% relative decrease in interest rates will result in a $26,000 decrease in the fair market value. We purchased an interest rate cap agreement at a base rate of LIBOR equal to 4.48% for a notional amount of $58.7 million. We have also entered into an interest rate swap agreement for the $136.3 million balance of our floating rate facility at 5.17% through October 16, 2008 and for the full $195.0 million once our interest rate cap expires through the maturity of the loan on September 1, 2009. PCAA’s obligations under the interest rate swap have been guaranteed by MIC Inc. A 10% relative decrease in market interest rates from December 31, 2006 levels would decrease the fair market value of the hedge instruments byof $2.0 million. A corresponding 10% relative increase would result in a $2.0 million increase theirin the fair market value.

District Energy also has a $20.0 million capital expenditure loan facility which was fully drawn at December 31, 2009. A 1% increase in the interest rate on District Energy’s capital expenditure loan facility would result in a $200,000 increase in interest cost per year. A corresponding 1% decrease would result in a $200,000 decrease in annual interest cost.

Atlantic Aviation

As of December 31, 2009, the outstanding balance of the floating rate senior debt for Atlantic Aviation was $863.3 million. A 1% increase in the interest rate on Atlantic Aviation’s debt would result in an $8.6 million increase in the interest cost per year. A corresponding 1% decrease would result in an $8.6 million decrease in interest cost per year.


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The exposure of the term loan portion of the senior debt (which at December 31, 2009 was $818.4 million) to interest rate changes has been 100% hedged until October 2012 through the use of interest rate swaps. These hedging arrangements will offset any additional interest rate expense incurred as a result of increases in interest rates during that period. However, if interest rates decrease, the value of our hedge instruments will also decrease. A 10% relative decrease in interest rates would result in a decrease in the fair market value by $2.0of the hedge instruments of $3.8 million.



104 A corresponding 10% relative increase would result in a $3.8 million increase in the fair market value.



In relation to the interest rate cap instruments, the 30-day LIBOR rate as at December 31, 2006 was 5.32%, compared to our interest rate cap of a LIBOR rate of 4.48%. We reached the interest rate caps in the first quarter of 2006.
Commodity Risk
Our district energy business is exposed to the risk of fluctuating electricity prices which is not fully offset by escalation provisions in our contracts with customers. In light of the current uncertainty surrounding electricity pricing, particularly given the upcoming deregulation of the Illinois electricity markets and pending rate cases, and the resulting potential changes in our contract pricing provisions, we are unable at this time to reasonably perform a sensitivity analysis regarding changes in electricity prices. Please see “Our Businesses and Investments — District Energy Business — Business-Thermal Chicago — Electricity Costs” and “— Contract Pricing” in Item 1. Business for a further discussion of these matters.


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ITEM 8. Financial Statements and Supplementary Data

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MACQUARIE INFRASTRUCTURE COMPANY LLC

INDEX TO FINANCIAL STATEMENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUST
NORTH AMERICA CAPITAL HOLDING COMPANY
(Predecessor to Macquarie Infrastructure Company Trust)
Consolidated Statements of Operations for the Period July 30, 2004 to December 22, 2004 and the Period January 1, 2004 to July 29, 2004F-49
105 
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income (Loss) for the Period July 30, 2004 to December 22, 2004 and the Period January 1, 2004 to July 29, 2004F-50
Consolidated Statements of Cash Flows for the Period July 30, 2004 to December 22, 2004 and the Period January 1, 2004 to July 29, 2004F-51
Notes to Consolidated Financial StatementsF-52
Schedule – II Valuation and Qualifying Accounts F-59
 152 



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Stockholders of Macquarie Infrastructure Company Trust:

The Board of Directors of and Stockholders
Macquarie Infrastructure Company LLC:

We have audited the accompanying consolidated balance sheets of Macquarie Infrastructure Company Trust (the Trust)LLC and subsidiaries as of December 31, 20062009 and 2005,2008, and the related consolidated statements of operations, stockholders’members’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2006 and 2005, and the period April 13, 2004 (inception) to December 31, 2004.2009. In connection with theour audits of the consolidated financial statements, we also have audited the related financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Trust’sCompany’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Macquarie Infrastructure Company TrustLLC and subsidiaries as of December 31, 20062009 and 2005,2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006 and 2005, and the period April 13, 2004 (inception) to December 31, 2004,2009, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Macquarie Infrastructure Company Trust’sLLC’s internal control over financial reporting as of December 31, 2006,2009, based on criteria established inInternal Control-IntegratedControl — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 200725, 2010 expressed an unqualified opinion on management’s assessmentthe effectiveness of and the effective operation of,Company’s internal control over financial reporting.

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for noncontrolling interests due to the adoption of ASC 810-10Consolidation (formerly Statement on Financial Accounting Standards No. 160,Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51) in 2009.

/s/KPMG LLP
Dallas, Texas
February 28, 2007



10725, 2010



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MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

CONSOLIDATED BALANCE SHEETS

  
 December 31,
2009
 December 31,
2008(1)
   ($ in Thousands, Except Share Data)
ASSETS
          
Current assets:
          
Cash and cash equivalents $27,455  $66,054 
Accounts receivable, less allowance for doubtful accounts of $1,629 and $2,141, respectively  47,256   60,874 
Dividends receivable     7,000 
Inventories  14,305   15,968 
Prepaid expenses  6,688   7,954 
Deferred income taxes  23,323   21,960 
Income tax receivable     489 
Other  10,839   13,591 
Assets of discontinued operations held for sale  86,695   105,725 
Total current assets  216,561   299,615 
Property, equipment, land and leasehold improvements, net  580,087   592,435 
Restricted cash  16,016   15,982 
Equipment lease receivables  33,266   36,127 
Investment in unconsolidated business  207,491   184,930 
Goodwill  516,182   586,249 
Intangible assets, net  751,081   811,973 
Deferred financing costs, net of accumulated amortization  17,088   22,209 
Other  1,449   2,916 
Total assets $2,339,221  $2,552,436 
LIABILITIES AND MEMBERS’ EQUITY
          
Current liabilities:
          
Due to manager – related party $1,977  $3,521 
Accounts payable  44,575   45,565 
Accrued expenses  17,432   23,189 
Current portion of notes payable and capital leases  235   1,914 
Current portion of long-term debt  45,900    
Fair value of derivative instruments  49,573   45,464 
Customer deposits  5,617   5,457 
Other  9,338   10,201 
Liabilities of discontinued operations held for sale  220,549   224,888 
Total current liabilities  395,196   360,199 
Notes payable and capital leases, net of current portion  1,498   1,622 
Long-term debt, net of current portion  1,166,379   1,327,800 
Deferred income taxes  107,840   83,228 
Fair value of derivative instruments  54,794   105,970 
Other  38,746   39,356 
Total liabilities  1,764,453   1,918,175 
Commitments and contingencies      
Members’ equity:
          
LLC interests, no par value; 500,000,000 authorized; 45,292,913 LLC interests issued and outstanding at December 31, 2009 and 44,948,694 LLC interests issued and outstanding at December 31, 2008  959,897   956,956 
Additional paid in capital  21,956    
Accumulated other comprehensive loss  (43,232  (97,190
Accumulated deficit  (360,095  (230,928
Total members’ equity  578,526   628,838 
Noncontrolling interests  (3,758  5,423 
Total equity  574,768   634,261 
Total liabilities and equity $2,339,221  $2,552,436 
  
December 31,
2006
 
December 31,
2005
 
  ($ in thousands, except share amounts) 
ASSETS
             
Current assets:     
Cash and cash equivalents $37,388 $115,163 
Restricted cash  1,216  1,332 
Accounts receivable, less allowance for doubtful accounts of $1,435 and $839, respectively  56,785  21,150 
Dividends receivable  7,000  2,365 
Other receivables  87,973   
Inventories  12,793  1,981 
Prepaid expenses  6,887  4,701 
Deferred income taxes  2,411  2,101 
Income tax receivable  2,913  3,489 
Other  15,600  4,394 
Total current assets  230,966  156,676 
Property, equipment, land and leasehold improvements, net  522,759  335,119 
Restricted cash  23,666  19,437 
Equipment lease receivables  41,305  43,546 
Investments in unconsolidated businesses  239,632  69,358 
Investment, cost    35,295 
Securities, available for sale    68,882 
Related party subordinated loan    19,866 
Goodwill  485,986  281,776 
Intangible assets, net  526,759  299,487 
Deposits and deferred costs on acquisitions  579  14,746 
Deferred financing costs, net of accumulated amortization  20,875  12,830 
Fair value of derivative instruments  2,252  4,660 
Other  2,754  1,620 
Total assets $2,097,533 $1,363,298 
        
LIABILITIES AND STOCKHOLDERS’ EQUITY
       
Current liabilities:       
Due to manager $4,284 $2,637 
Accounts payable  29,819  11,535 
Accrued expenses  19,780  13,994 
Current portion of notes payable and capital leases  4,683  2,647 
Current portion of long-term debt  3,754  146 
Fair value of derivative instruments  3,286   
Other  6,533  3,639 
Total current liabilities  72,139  34,598 
Capital leases and notes payable, net of current portion  3,135  2,864 
Long-term debt, net of current portion  959,906  610,848 
Related party long-term debt    18,247 
Deferred income taxes  163,923  113,794 
Fair value of derivative instruments  453   
Other  25,371  6,342 
Total liabilities  1,224,927  786,693 
Minority interests  8,181  8,940 
Stockholders’ equity:       
Trust stock, no par value; 500,000,000 authorized; 37,562,165 shares issued and outstanding at December 31, 2006 and 27,050,745 shares issued and outstanding at December 31, 2005  864,233  583,023 
Accumulated other comprehensive income (loss)  192  (12,966)
Accumulated deficit    (2,392)
Total stockholders’ equity  864,425  567,665 
Total liabilities and stockholders’ equity $2,097,533 $1,363,298 

(1)Reclassified to conform to current period presentation.



See accompanying notes to the consolidated financial statements.
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MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

   
 Year Ended
December 31,
2009
 Year Ended
December 31,
2008(1)
 Year Ended
December 31,
2007(1)
   ($ in Thousands, Except Share and Per Share Data)
Revenue
     
Revenue from product sales $394,200  $586,054  $445,852 
Revenue from product sales – utility  95,769   121,770   95,770 
Service revenue  215,349   264,851   207,680 
Financing and equipment lease income  4,758   4,686   4,912 
Total revenue  710,076   977,361   754,214 
Costs and expenses
     
Cost of product sales  231,139   406,997   302,283 
Cost of product sales – utility  71,252   103,216   64,371 
Cost of services  46,317   63,850   53,387 
Selling, general and administrative  214,865   231,273   185,370 
Fees to manager – related party  4,846   12,568   65,639 
Goodwill impairment  71,200   52,000    
Depreciation  36,813   40,140   20,502 
Amortization of intangibles  60,892   61,874   32,356 
Total operating expenses  737,324   971,918   723,908 
Operating (loss) income  (27,248  5,443   30,306 
Other income (expense)
     
Interest income  119   1,090   5,705 
Interest expense  (91,154  (88,652  (65,356
Loss on extinguishment of debt        (27,512
Equity in earnings (losses) and amortization charges of investee  22,561   1,324   (32
Loss on derivative instruments  (29,540  (2,843  (1,362
Other income (expense), net  760   (19  (1,088
Net loss from continuing operations before income taxes and noncontrolling interests  (124,502  (83,657  (59,339
Benefit for income taxes  15,818   14,061   16,764 
Net loss from continuing operations before noncontrolling interests  (108,684  (69,596  (42,575
Net income attributable to noncontrolling interests  486   585   554 
Net loss from continuing operations $(109,170 $(70,181 $(43,129
Discontinued operations
     
Net loss from discontinued operations before income taxes and noncontrolling interests  (23,647  (180,104  (9,679
Benefit (provision) for income taxes  1,787   70,059   (281
Net loss from discontinued operations before noncontrolling interests  (21,860  (110,045  (9,960
Net loss attributable to noncontrolling interests  (1,863  (1,753  (1,035
Net loss from discontinued operations $(19,997 $(108,292 $(8,925
Net loss $(129,167 $(178,473 $(52,054
Basic and diluted loss per share from continuing operations $(2.43 $(1.56 $(1.05
Basic and diluted loss per share from discontinued operations  (0.44  (2.41  (0.22
Basic and diluted loss per share $(2.87 $(3.97 $(1.27
Weighted average number of shares outstanding: basic and diluted  45,020,085   44,944,326   40,882,067 
Cash distributions declared per share $  $2.125  $2.385      
  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
April 13, 2004
(inception) to
December 31, 2004
 
  ($ in thousands, except share and per share data) 
Revenue
                   
Revenue from product sales $313,298 $142,785 $1,681 
Service revenue  201,835  156,655  3,257 
Financing and equipment lease income  5,118  5,303  126 
           
Total revenue   520,251  304,743  5,064 
           
Costs and expenses
          
Cost of product sales  206,802  84,480  912 
Cost of services  92,542  82,160  1,633 
Selling, general and administrative  120,252  82,636  7,953 
Fees to manager  18,631  9,294  12,360 
Depreciation  12,102  6,007  175 
Amortization of intangibles  43,846  14,815  281 
           
Total operating expenses   494,175  279,392  23,314 
           
Operating income (loss)
  26,076  25,351  (18,250)
           
Other income (expense)
          
Dividend income  8,395  12,361  1,704 
Interest income  4,887  4,064  69 
Interest expense  (77,746) (33,800) (756)
Equity in earnings (loss) and amortization charges of investees  12,558  3,685  (389)
Unrealized losses on derivative instruments  (1,373)    
Gain on sale of equity investment  3,412     
Gain on sale of investment  49,933     
Gain on sale of marketable securities  6,738     
Other income, net  594  123  50 
           
Net income (loss) before income taxes and minority interests  33,474  11,784  (17,572)
Income tax benefit  16,421  3,615   
           
Net income (loss) before minority interests  49,895  15,399  (17,572)
           
Minority interests  (23) 203  16 
           
Net income (loss)
 $49,918 $15,196 $(17,588)
           
Basic earnings (loss) per share: $1.73 $0.56 $(17.38)
Weighted average number of shares of trust stock outstanding: basic  28,895,522  26,919,608  1,011,887 
Diluted earnings (loss) per share: $1.73 $0.56 $(17.38)
Weighted average number of shares of trust stock outstanding: diluted  28,912,346  26,929,219  1,011,887 
Cash dividends declared per share $2.075 $1.5877 $ 

(1)Reclassified to conform to current period presentation.




See accompanying notes to the consolidated financial statements.
F-2



TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ MEMBERS’
EQUITY AND COMPREHENSIVE INCOME
(LOSS)

        
        
 Macquarie Infrastructure Company LLC Member’s Equity  
   Trust stock and
LLC interests
 Additional
Paid in
Capital
 Accumulated
Deficit
 Accumulated
Other
Comprehensive
Income (Loss)
 Total
Members’
Equity
 Noncontrolling
Interests(1)
 Total
Equity
   Number of
Shares
 Amount
   ($ in Thousands, Except Share and Per Share Data)
Balance at December 31, 2006  37,562,165  $864,233  $  $  $192  $864,425  $8,181  $872,606 
Issuance of LLC interests, net of offering costs  6,165,871   241,330            241,330      241,330 
Issuance of LLC interests to manager  1,193,475   43,962            43,962      43,962 
Issuance of LLC interests to independent directors  16,869   450            450      450 
Distributions to holders of LLC interests (comprising $0.57 per share paid on 37,562,165 shares, $0.59 per share paid on 37,562,165 shares, $0.605 per share paid on 43,766,877 shares and $0.62 per share paid on 44,938,380 shares)     (97,913           (97,913     (97,913
Distributions to noncontrolling interest members                    (528  (528
Other comprehensive loss:
                                        
Net loss for the year ended December 31, 2007           (52,054     (52,054  (481  (52,535
Retained earnings adjustment relating to income taxes (FIN 48)           (401     (401     (401
Change in fair value of derivatives, net of taxes of $21,702              (30,731  (30,731     (30,731
Reclassification of realized gains of derivatives into earnings, net of taxes of $1,905              (2,855  (2,855     (2,855
Change in post-retirement benefit plans, net of taxes of $218              339   339      339 
Total comprehensive loss for the year ended December 31, 2007                         �� (85,702  (481  (86,183
Balance at December 31, 2007  44,938,380  $1,052,062  $  $(52,455 $(33,055 $966,552  $7,172  $973,724 
Offering costs related to prior period issuance of LLC interests     (47           (47     (47
Issuance of LLC interests to independent directors  10,314   450            450      450 
Distributions to holders of LLC interests (comprising $0.635 per share paid on 44,938,380 shares, $0.645 per share paid on 44,948,694 shares, $0.645 per share paid on 44,948,694 shares and $0.20 per share paid on 44,948,694 shares)     (95,509           (95,509     (95,509
Distributions to noncontrolling interest members                    (481  (481
Purchase of subsidiary interest from noncontrolling interest                    (100  (100
Other comprehensive loss:
                                        
Net loss for the year ended December 31, 2008           (178,473     (178,473  (1,168  (179,641
Translation adjustment              (4  (4     (4
  

Trust Stock
 
Accumulated
Gain
(Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders'
Equity
 
Number of
Shares
 
Amount
  ($ in thousands, except number of shares and per share amounts) 
Issuance of trust stock, net of offering costs      26,610,100     $613,265     $     $     $613,265 
Other comprehensive income (loss):                                                                   
Net loss for the period ended December 31, 2004      (17,588)   (17,588)
Translation adjustment        855  855 
Unrealized loss on marketable securities        (237) (237)
Change in fair value of derivatives        1  1 
Total comprehensive loss for the period ended December 31, 2004              (16,969)
Balance at December 31, 2004  26,610,100 $613,265 $(17,588)$619 $596,296 
Issuance of trust stock to manager  433,001  12,088      12,088 
Issuance of trust stock to independent directors  7,644  191      191 
Adjustment to offering costs    427      427 
Distributions to trust stockholders (comprising $1.5877 per share paid on 27,050,745 shares)    (42,948)     (42,948)
Other comprehensive income (loss):                
Net income for the year ended December 31, 2005      15,196    15,196 
Translation adjustment        (16,160) (16,160)
Unrealized gain on marketable securities           2,106  2,106 
Change in fair value of derivatives, net of taxes of $1,707        469  469 
Total comprehensive income for the year ended December 31, 2005              1,611 
Balance at December 31, 2005  27,050,745 $583,023 $(2,392)$(12,966)$567,665 
Issuance of trust stock, net of offering costs  10,350,000  291,104      291,104 
Issuance of trust stock to manager  145,547  4,134      4,134 
Issuance of trust stock to independent directors  15,873  450      450 
Distributions to trust stockholders (comprising $0.50 per share paid on 27,050,745 and 27,066,618 shares, $0.525 per share paid on 27,212,165 shares and $0.55 per share paid on 37,562,165 shares)    (14,478) (47,526)   (62,004)
Change in post-retirement benefit plans, net of taxes
of $118
        187  187 
Other comprehensive income (loss):                
Net income for the year ended December 31, 2006      49,918    49,918 
Translation adjustment        13,597  13,597 
Translation adjustment reversed upon sale of foreign investments        1,708  1,708 
Change in fair value of derivatives, net of taxes of $832        1,462  1,462 
Change in fair value of derivatives reversed upon sale of foreign investments        (1,927) (1,927)
Unrealized gain on marketable securities        7,416  7,416 
Gain on marketable securities, realized        (9,285) (9,285)
Total comprehensive income for the year ended December 31, 2006              62,889 
Balance at December 31, 2006  37,562,165 $864,233 $ $192 $864,425 



See accompanying notes to the consolidated financial statements.
F-3



TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS
MEMBERS’
EQUITY AND COMPREHENSIVE INCOME (LOSS) – (continued)

        
        
 Macquarie Infrastructure Company LLC Member’s Equity  
   Trust stock and
LLC interests
 Additional
Paid in
Capital
 Accumulated
Deficit
 Accumulated
Other
Comprehensive
Income (Loss)
 Total
Members’
Equity
 Noncontrolling
Interests(1)
 Total
Equity
   Number of
Shares
 Amount
   ($ in Thousands, Except Share and Per Share Data)
Change in fair value of derivatives, net of taxes of $49,188              (74,267  (74,267     (74,267
Reclassification of realized losses of derivatives into earnings, net of taxes of $10,255              15,639   15,639      15,639 
Unrealized loss on marketable securities              (1  (1     (1
Change in post-retirement benefit plans, net of taxes of $3,539              (5,502  (5,502     (5,502
Total comprehensive loss for the year ended December 31, 2008                           (242,608  (1,168  (243,776
Balance at December 31, 2008  44,948,694  $956,956  $  $(230,928 $(97,190 $628,838  $5,423  $634,261 
Issuance of LLC interests to manager  330,104   2,491            2,491      2,491 
Issuance of LLC interests to independent directors  14,115   450            450      450 
Distributions to noncontrolling interest members                    (583  (583
Sale of subsidiary interest to noncontrolling interest        21,956      4,685   26,641   (7,352  19,289 
Other comprehensive loss:
                                        
Net loss for the year ended December 31, 2009           (129,167     (129,167  (1,377  (130,544
Change in fair value of derivatives, net of taxes of $1,050              1,498   1,498      1,498 
Reclassification of realized losses of derivatives into earnings, net of taxes of $31,885              47,857   47,857   131   47,988 
Change in post-retirement benefit plans, net of taxes of $53              (82  (82     (82
Total comprehensive loss for the year ended December 31, 2009                           (79,894  (1,246  (81,140
Balance at December 31, 2009  45,292,913  $959,897  $21,956  $(360,095 $(43,232 $578,526  $(3,758 $574,768 
  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
April 13, 2004
(inception) to
December 31,
2004
 
  ($ in thousands) 
Operating activities
                   
Net income (loss) $49,918 $15,196 $(17,588)
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization of property and equipment  21,366  14,098  370 
Amortization of intangible assets  43,846  14,815  281 
Loss on disposal of equipment  140  674   
Equity in (earnings) loss and amortization charges of investee  (4,293) 1,803  389 
Gain on sale of unconsolidated business  (3,412)    
Gain on sale of investments  (49,933)    
Gain on sale of marketable securities  (6,738)    
Amortization of finance charges  6,178  6,290   
Noncash derivative loss  1,373     
Noncash interest expense  4,506  (4,166)  
Noncash performance fees expense  4,134     
Noncash directors fees expense  181     
Accretion of asset retirement obligation  224  222   
Deferred rent  2,475  2,308  80 
Deferred revenue  109  (130) (62)
Deferred taxes  (14,725) (5,695)  
Minority interests  (23) 203  16 
Noncash compensation  706  209   
Post retirement obligations  557  (116)  
Other noncash income  (80)    
Accrued interest expense on subordinated debt – related party  1,087  1,003  26 
Accrued interest income on subordinated debt – related party  (430) (399) (50)
Changes in operating assets and liabilities:          
Restricted cash  4,216  (462)  
Accounts receivable  (5,330) (7,683) (420)
Equipment lease receivable, net  1,880  1,677  (121)
Dividend receivable  2,356  (651) (1,704)
Inventories  352  (178) 686 
Prepaid expenses and other current assets  (4,601) (39) (439)
Due to subsidiaries      1,398 
Accounts payable and accrued expenses  (9,954) 1,882  798 
Income taxes payable  (3,213)    
Due to manager  1,647  2,419  12,306 
Other  1,846  267  (11)
Net cash provided by (used in) operating activities $46,365 $43,547 $(4,045)
Investing activities
          
Acquisition of businesses and investments, net of cash acquired $(845,063)$(182,367)$(467,413)
Additional costs of acquisitions  (22) (60)  
Deposits and deferred costs on future acquisitions  (279) (14,746)  
Goodwill adjustment – cash received    694   
Proceeds from sale of investment  89,519     
Proceeds from sale of marketable securities  76,737     
Collection on notes receivable    358   
Purchases of property and equipment  (18,409) (6,743) (81)
Return on investment in unconsolidated business  10,471     
Proceeds received on subordinated loan  850  914   
Other      17 
Net cash used in investing activities $(686,196)$(201,950)$(467,477)

(1)Reclassified to conform to current period presentation.



See accompanying notes to the consolidated financial statements.
F-4



TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)

   
 Year Ended
December 31,
2009
 Year Ended
December 31,
2008(1)
 Year Ended
December 31,
2007(1)
   ($ In Thousands)
Operating activities
     
Net loss $(129,167 $(178,473 $(52,054
Adjustments to reconcile net loss to net cash provided by operating activities:
     
Net loss from discontinued operations  19,997   108,292   8,925 
Non-cash goodwill impairment  71,200   52,000    
Depreciation and amortization of property and equipment  42,899   45,953   26,294 
Amortization of intangible assets  60,892   61,874   32,356 
Equity in (earnings) losses and amortization charges of investees  (22,561  (1,324  32 
Equity distributions from investees  7,000   1,324    
Amortization of debt financing costs  5,121   4,762   4,429 
Non-cash derivative loss (gain), net of non-cash interest expense (income)  29,540   2,843   (2,693
Base management and performance fees settled/to be settled in LLC interests  4,384      43,962 
Equipment lease receivable, net  2,610   2,372   2,531 
Deferred rent  183   183   178 
Deferred taxes  (17,923  (16,037  (22,536
Other non-cash expenses, net  2,601   4,700   4,243 
Non-operating losses relating to foreign investments        3,437 
Loss on extinguishment of debt        27,512 
Changes in other assets and liabilities, net of acquisitions:
     
Restricted cash        264 
Accounts receivable  13,020   16,392   (12,244
Inventories  1,233   2,698   (3,291
Prepaid expenses and other current assets  3,086   6,928   605 
Due to manager – related party  (3,438  (2,216  1,453 
Accounts payable and accrued expenses  (4,670  (17,132  22,923 
Income taxes payable  535   (1,108  4,981 
Other, net  (3,566  1,548   2,192 
Net cash provided by operating activities from continuing operations  82,976   95,579   93,499 
Investing activities
     
Acquisitions of businesses and investments, net of cash acquired     (41,804  (704,171
Proceeds from sale of equity investment        84,904 
Proceeds from sale of investment  29,500   7,557   160 
Settlements of non-hedging derivative instruments        (2,530
Purchases of property and equipment  (30,320  (49,560  (45,721
Return of investment in unconsolidated business     26,676   28,000 
Other  304   415   505 
Net cash used in investing activities from continuing operations  (516  (56,716  (638,853
  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
April 13, 2004
(inception) to
December 31,
2004
 
  ($ in thousands) 
Financing activities
             
Proceeds from issuance of shares of trust stock $305,325 $ $665,250 
Proceeds from long-term debt  537,000  390,742  (1,500)
Proceeds from line-credit facility  455,957  850   
Contributions received from minority shareholders    1,442   
Distributions paid to trust shareholders  (62,004) (42,948)  
Debt financing costs  (14,217) (11,350)  
Distributions paid to minority shareholders  (736) (1,219)  
Payment of long-term debt  (638,356) (197,170)  
Offering and equity raise costs  (14,220) (1,844) (51,985)
Restricted cash   (4,228) (2,362)  
Payment of notes and capital lease obligations  (2,193) (1,605)  
Acquisition of swap contract    (689)  
Net cash provided by financing activities  562,328  133,847  611,765 
Effect of exchange rate changes on cash  (272) (331) (193)
Net change in cash and cash equivalents  (77,775) (24,887) 140,050 
Cash and cash equivalents, beginning of period  115,163  140,050   
Cash and cash equivalents, end of period $37,388 $115,163 $140,050 
           
Supplemental disclosures of cash flow information:
          
Noncash investing and financing activities:          
Accrued deposits and deferred costs on acquisition, and equity offering costs $3 $ $2,270 
Accrued purchases of property and equipment $1,438 $384 $810 
Acquisition of property through capital leases $2,331 $3,270 $ 
Issuance of trust stock to manager for payment of December 2004 performance fees $ $12,088 $ 
Issuance of trust stock to independent directors $269 $191 $ 
Taxes paid $1,835 $2,610 $ 
Interest paid $65,967 $30,902 $2,056 




See accompanying notes to the consolidated financial statements.
F-5



TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUSTLLC

CONSOLIDATED STATEMENTS OF CASH FLOWS – (continued)

   
 Year Ended
December 31,
2009
 Year Ended
December 31,
2008(1)
 Year Ended
December 31,
2007(1)
   ($ In Thousands)
Financing activities
     
Proceeds from issuance of LLC interests        252,739 
Proceeds from long-term debt  10,000   5,000   1,356,625 
Net (payments) proceeds on line of credit facilities  (45,400  96,150   11,560 
Offering and equity raise costs paid     (65  (11,392
Distributions paid to holders of LLC interests     (95,509  (97,913
Distributions paid to noncontrolling interests  (583  (481  (395
Payment of long-term debt  (81,621     (904,500
Debt financing costs paid     (1,879  (26,234
Make — whole payment on debt refinancing        (14,695
Change in restricted cash  (33  (865  5,367 
Payment of notes and capital lease obligations  (181  (653  (544
Net cash (used in) provided by financing activities from continuing operations  (117,818  1,698   570,618 
Net change in cash and cash equivalents from continuing operations  (35,358  40,561   25,264 
Cash flows (used in) provided by discontinued operations:
     
Net cash (used in) provided by operating activities  (4,732  (1,904  3,051 
Net cash used in investing activities  (445  (26,684  (5,157
Net cash provided by (used in) financing activities  2,144   (1,215  (3,072
Cash used in discontinued operations(2)  (3,033  (29,803  (5,178
Change in cash of discontinued operations held for sale(2)  (208  2,459   5,902 
Effect of exchange rate changes on cash        (1
Net change in cash and cash equivalent  (38,599  13,217   25,987 
Cash and cash equivalents, beginning of period  66,054   52,837   26,850 
Cash and cash equivalents, end of period $27,455  $66,054  $52,837 
Supplemental disclosures of cash flow information for continuing operations:
     
Non-cash investing and financing activities:
 
Accrued acquisition and equity offering costs $  $  $1,208 
Accrued purchases of property and equipment $1,277  $883  $1,647 
Acquisition of equipment through capital leases $  $  $30 
Issuance of LLC interests to manager for base management and performance fees $2,490  $  $43,962 
Issuance of LLC interests to independent directors $450  $450  $450 
Taxes paid $1,231  $3,048  $3,632 
Interest paid $87,308  $84,235  $77,914 

(1)Reclassified to conform to current period presentation.
(2)Cash of discontinued operations held for sale is reported in assets of discontinued operations held for sale in the accompanying consolidated balance sheets. The cash used in discontinued operations is different than the change in cash of discontinued operations held for sale due to intercompany transactions that are eliminated in consolidation.



See accompanying notes to the consolidated financial statements.


TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

Macquarie Infrastructure Company Trust, or the Trust,LLC, a Delaware statutory trust,limited liability company, was formed on April 13, 2004. Macquarie Infrastructure Company LLC, orboth on an individual entity basis and together with its consolidated subsidiaries, is referred to in these financial statements as “the Company”. The Company owns, operates and invests in a diversified group of infrastructure businesses in the Company, a Delaware limited liability company, was also formed on April 13, 2004. Prior to December 21, 2004, the Trust was a wholly owned subsidiary ofUnited States. Macquarie Infrastructure Management (USA) Inc., or MIMUSA. MIMUSA, is the Company’s manager and is referred to in these financial statements as the Manager. The Manager is a subsidiary of the Macquarie Group of companies, which is comprised of Macquarie BankGroup Limited and its subsidiaries and affiliates worldwide. Macquarie BankGroup Limited is headquartered in Australia and is listed on the Australian Stock Exchange.

The

Macquarie Infrastructure Company Trust, or the Trust, a Delaware statutory trust, was also formed on April 13, 2004. Prior to December 21, 2004 and the completion of the initial public offering, the Trust was a wholly-owned subsidiary of the Manager. On June 25, 2007, all of the outstanding shares of trust stock issued by the Trust were exchanged for an equal number of limited liability company, or LLC, interests in the Company, and the Trust was dissolved. Prior to this exchange of trust stock for LLC interests and the dissolution of the Trust, all interests in the Company were formed to own, operate and invest in a diversified group of infrastructure businesses inheld by the United States and other developed countries.Trust. The Company is thecontinues to be an operating entity with a Board of Directors and other corporate governance responsibilities generally consistent with that of a Delaware corporation.

The Company owns airport services, airport parking, district energy and gas production and distributionits businesses and an interest in a bulk liquid storage terminal business, through the Company’sits wholly-owned subsidiary Macquarie Infrastructure Company Inc., or MIC Inc.

During The Company’s businesses operate predominantly in the year ended December 31, 2005, the Company’s major acquisitions were as follows:
·
On January 14, 2005, the Company acquired allUnited States, and consist of the membership interests in General Aviation Holdings, LLC, or GAH,following:

The Energy-Related Businesses:

(i)a 50% interest in a bulk liquid storage terminal business (“International Matex Tank Terminals” or “IMTT”), which provides bulk liquid storage and handling services at ten marine terminals in the United States and two in Canada and is one of the largest participants in this industry in the U.S., based on capacity;
(ii)a gas production and distribution business (“The Gas Company”), which is a full-service gas energy company, making gas products and services available in Hawaii; and,
(iii)a 50.01% controlling interest in a district energy business (“Thermal Chicago” or “District Energy”), which operates the largest district cooling system in the U.S., serving various customers in Chicago, Illinois and Las Vegas, Nevada.

The Aviation-Related Business — an entity that operates twoairport services business (“Atlantic Aviation”), comprising a network of 72 fixed basedbase operations, or FBOs, providing products and services including fuel and aircraft hangaring/parking to owners and operators of private jets at 68 airports and one heliport in California.

·
the U.S.

On August 12, 2005,January 28, 2010, the Company acquired allagreed to sell the assets in its airport parking business (“Parking Company of the membership interests in Eagle Aviation Resources, Ltd.,America Airports” or EAR, an FBO company doing business as Las Vegas Executive Air Terminal.

·
On October 3, 2005,“PCAA”) through a bankruptcy process which the Company completedexpects to complete in the acquisitionfirst half of real property2010. This business is now a discontinued operation and personal and intangible assets related to six off-airport parking facilities (collectively referred to as “SunPark”).
During the year ended December 31, 2006,is therefore separately reported in the Company’s major acquisitions were as follows:
·
On May 1, 2006, the Company completed its acquisition of 50% of the shares in IMTT Holdings Inc., the holding company forconsolidated financial statements and is no longer a bulk liquid storage terminal business operating as International-Matex Tank Terminals, or IMTT.
·
On June 7, 2006, the Company acquired The Gas Company, or TGC, a Hawaii limited liability company that owns and operates the sole regulated synthetic natural gas, or SNG, production and distribution business in Hawaii and distributes and sells liquefied petroleum gas, or LPG, through unregulated operations.
·
On July 11, 2006, the Company completed the acquisition of 100% of the shares of Trajen Holdings, Inc., or Trajen. Trajen is the holding company for a group of companies, limited liability companies and limited partnerships that own and operate 23 FBOs at airports in 11 states.
During the year ended December 31, 2006, the Company, through its wholly-owned Delaware limited liability companies, sold its interests in non U.S. businesses. On August 17, 2006, the Company completed the sale of all of its 16.5 million stapled securities of the Macquarie Communications Infrastructure Group (ASX:MCG). On October 2, 2006, the Company sold its 17.5% minority interest in the holding company for South East Water, or SEW, a regulated clean water utility located in the U.K. On December 29, 2006, the Company sold Macquarie Yorkshire Limited, the holding company for its 50% interest in Connect M1-A1 Holdings Limited, or CHL, which is the indirect holder of the Yorkshire Link toll road concession in the U.K.


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reportable segment.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly ownedwholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Except as otherwise specified, we refer to Macquarie Infrastructure Company LLC and its subsidiaries collectively as the “Company”. The Company consolidates investments where it has a controlling financial interest. The usual condition for a controlling financial interest is ownership of a majority of the voting interest and, therefore, as a general rule, ownership, directly or indirectly, of over 50% of the outstanding


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voting shares is a condition for consolidation. For investments in variable interest entities, as defined by Financial Accounting Standards Board (FASB) Interpretation No. 46R, Consolidation of Variable Interest Entities, the Company consolidates when it is determined to be the primary beneficiary of the variable interest entity. As of December 31, 2006,2009, the Company was not the primary beneficiary of any variable interest entity in which it did not own a majority of the outstanding voting stock.

Investments

The Company accounts for 50% or less owned companies over which it has the ability to exercise significant influence using the equity method of accounting, otherwise the cost method is used. The Company’s share of net income or losses of equity investments is included in equity in earnings (loss) and amortization charges of investee in the consolidated statementstatements of operations. Losses are recognized in other income (expense) when a decline in the value of the investment is deemed to be other than temporary. In making this determination, the Company considers Accounting Principles Board (APB) Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock and related interpretations, which set forth factors to be evaluated in determining whether a loss in value should be recognized, including the Company’s ability to hold its investment and inability of the investee to sustain an earnings capacity, which would justify the carrying amount of the investment.

Use of Estimates

The preparation of our consolidated financial statements in conformity with generally accepted accounting principles, or GAAP, requires usthe Company to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. We evaluateThe Company evaluates these estimates and judgments on an ongoing basis and base ourthe estimates are based on experience, current and expected future conditions, third-party evaluations and various other assumptions that we believethe Company believes are reasonable under the circumstances. Significant items subject to such estimates and assumptions include the carrying amount of property, equipment and leasehold improvements, intangibles, asset retirement obligations and goodwill; valuation allowances for receivables, inventories and deferred income tax assets; assets and obligations related to employee benefits; environmental liabilities; and valuation of derivative instruments. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from the estimates and assumptions used in the financial statements and related notes.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Included in cash and cash equivalents at December 31, 2005 is $87.02008 was $15.0 million of commercial paper. There was no commercial paper, held asissued by a counterparty with a Standard & Poor rating of December 31, 2006.

A1+, which matured in January 2009.

Restricted Cash

The Company classifies all cash pledged as collateral on the outstanding senior debt as restricted cash in the consolidated balance sheets. At December 31, 2006 and December 31, 2005, thesheets relating to Atlantic Aviation. The Company has recorded $23.7



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2. Summary of Significant Accounting Policies – (continued)
$16.0 million and $19.4 million, respectively, of cash pledged as collateral in the accompanying consolidated balance sheets. In addition,sheets at December 31, 20062009 and at December 31, 2005,2008. In addition, the Company has classified $1.2 million and $1.3 million, respectively,$52,000 as restricted cash in other current assets relating to our airport services businessat December 31, 2009 and to a credit facility requirement of our airport parking business.
at December 31, 2008.

Allowance for Doubtful Accounts

The Company uses estimates to determine the amount of the allowance for doubtful accounts necessary to reduce billed and unbilled accounts receivable to their net realizable value. The Company estimates the amount of the required allowance by reviewing the status of past-due receivables and analyzing historical bad debt trends. Actual collection experience has not varied significantly from estimates due primarily to credit policies and a lack of concentration of accounts receivable. The Company writes off receivables deemed to be uncollectible to the allowance for doubtful accounts. Accounts receivable balances are not collateralized.

Inventory

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Inventory

Inventory consists principally of fuel purchased from various third-party vendors and materials and supplies.supplies at Atlantic Aviation and The Gas Company. Fuel inventory is stated at the lower of cost or market. Materials and supplies inventory is valued at the lower of average cost or market cost.market. Inventory sold is recorded using the first-in-first-out method at Atlantic Aviation and an average cost method at The Gas Company. Cash flows related to the sale of inventory are classified in net cash provided by operating activities in ourthe consolidated statementstatements of cash flows. The Company’s inventory balance at December 31, 20062009 comprised $8.7$10.1 million of fuel and $4.1$4.2 million of materials and supplies. InventoryThe Company’s inventory balance at December 31, 20052008 comprised $2.0$11.7 million of fuel.

Marketable Securities
Marketable securities are initially recorded at cost, with movements in fair value recorded in other comprehensive income (loss).
fuel and $4.3 million of materials and supplies.

Property, Equipment, Land and Leasehold Improvements

Property, equipment and land are initially recorded at cost less accumulated depreciation.cost. Leasehold improvements are recorded at the initial present value of the minimum lease payments less accumulated amortization. Major renewals and improvements are capitalized while maintenance and repair expenditures are expensed when incurred. We depreciate ourInterest expense relating to construction in progress is capitalized as an additional cost of the asset. The Company depreciates property, equipment and leasehold improvements over their estimated useful lives on a straight-line basis. Depreciation expense for our district energy and airport parking businesses areDistrict Energy is included within cost of services in ourthe consolidated statements of operations. The estimated economic useful lives range according to the table below:

Buildings 910 to 68 years
Leasehold and land improvements 3 to 40 years
Machinery and equipment 1 to 62 years
Furniture and fixturesFixtures 3 to 25 years

Goodwill and Intangible Assets

Goodwill consists of costs in excess of the aggregate purchase price over the fair value of tangible and identifiable intangible net assets acquired in the purchase business combinations as described in Note 4. Intangible assets acquired in the purchase business combinations include contractual rights, customer relationships, non-compete agreements, trade names, leasehold rights, domain names, and technology.5, “Acquisitions”. The cost of intangible assets with determinable useful lives are amortized over their estimated useful lives ranging from 1 to 40 years.as follows:

Customer relationships5 to 10 years
Contract rights5 to 40 years
Non-compete agreements2 to 5 years
Leasehold interests3 to 15 years
Trade namesIndefinite
Technology5 years

Impairment of Long-lived Assets, Excluding Goodwill

In accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, long-lived

Long-lived assets, including amortizable intangible assets, are reviewed for impairment whenever events or changes in



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2. Summary of Significant Accounting Policies – (continued)
circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans, or changes in anticipated future cash flows. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. Fair value is generally determined by estimates of discounted cash flows.flows or value expected to be realized in a third party sale. The discount rate used in any estimate of discounted cash flows would be the rate required for a similar investment of like risk.


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Impairment of Goodwill

In accordance with SFAS No. 142,

Goodwill and Other Intangible Assets, goodwill is tested for impairment annually.at least annually or when there is a triggering event that indicates impairment. Goodwill is considered impaired when the carrying amount of a reporting unit’s goodwill exceeds its implied fair value, as determined under a two-step approach. The first step is to determine the estimated fair value of each reporting unit with goodwill. The reporting units of the Company, for purposes of the impairment test, are those components of operating segments for which discrete financial information is available and segment management regularly reviews the operating results of that component. Components are combined when determining reporting units if they have similar economic characteristics.

The Company estimates the fair value of each reporting unit by estimating the present value of the reporting unit’s future discounted cash flows.flows or value expected to be realized in a third party sale. If the recorded net assets of the reporting unit are less than the reporting unit’s estimated fair value, then no impairment is indicated. Alternatively, if the recorded net assets of the reporting unit exceed its estimated fair value, then goodwill is assumed to be impaired and a second step is performed. In the second step, the implied fair value of goodwill is determined by deducting the estimated fair value of all tangible and identifiable intangible net assets of the reporting unit from the estimated fair value of the reporting unit. If the recorded amount of goodwill exceeds this implied fair value, an impairment charge is recorded for the excess.

Impairment of Indefinite-lived Intangibles, Excluding Goodwill

In accordance with SFAS No. 142, indefinite-lived

Indefinite-lived intangibles, primarily trademarks and domain names, are considered impaired when the carrying amount of the asset exceeds its implied fair value.

The Company estimates the fair value of each trademark using the relief-from-royalty method that discounts the estimated net cash flows the Company would have to pay to license the trademark under an arm’s length licensing agreement. The Company estimates the fair value of each domain name using a method that discounts the estimated net cash flows attributable to the domain name.

If the recorded indefinite-liveindefinite-lived intangible is less than its estimated fair value, then no impairment is indicated. Alternatively, if the recorded intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Debt Issuance Costs

The Company capitalizes all direct costs incurred in connection with the issuance of debt as debt issuance costs. These costs are amortized over the contractual term of the debt instrument, which ranges from 3 to 197 years, using the effective interest method.

Derivative Instruments

The Company accounts for derivatives and hedging activities in accordance with ASC 815Derivatives and Hedging(formerly SFAS No. 133, Accounting for Derivative Instruments and Certain Hedging Activities, as amended,amended), which requires that all derivative instruments be recorded on the balance sheet at their respective fair values.



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2. Summary of Significant Accounting Policies – (continued)

Previously, the Company applied hedge accounting to its derivative instruments. On the date a derivative contract iswas entered into, the Company designatesdesignated the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge), or a foreign-currency fair-value or cash-flow hedge (foreign currency hedge). For all hedging relationships the


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The Company formally documentsdocumented the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk willwould be assessed prospectively and retrospectively, and a description of the method of measuring ineffectiveness. This process includesincluded linking all derivatives that arewere designated as fair-value, cash-flow, or foreign-currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses,assessed, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions arewere highly effective in offsetting changes in fair values or cash flows of hedged items. Changes in the fair value of a derivative that iswere highly effective and that iswere designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability or unrecognized firm commitment of the hedged item that is attributable to the hedged risk, are recorded in earnings. Changes in the fair value of a derivative that is highly effective and that is designated and qualifiesqualified as a cash-flow hedge arewere recorded in other comprehensive income to the extent that the derivative iswas effective as a hedge, until earnings arewere affected by the variability in cash flows of the designated hedged item. Changes in the fair value of derivatives that are highly effective as hedges and that are designated and qualify as foreign-currency hedges are recorded in either earnings or other comprehensive income, depending on whether the hedge transaction is a fair-value hedge or a cash-flow hedge. The ineffective portion of the change in fair value of a derivative instrument that qualifiesqualified as either a fair-value hedge or a cash-flow hedge iswas reported in earnings.

The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item,item; the derivative expires or is sold, terminated, or exercised,exercised; the derivative is no longer designated as a hedging instrument because it is unlikely that a forecasted transaction will occur,occur; a hedged firm commitment no longer meets the definition of a firm commitment,commitment; or management determines that designation of the derivative as a hedging instrument is no longer appropriate.

In all situations in which hedge accounting is discontinued, the Company continues to carry the derivative at its fair value on the balance sheet and recognizes any subsequent changes in its fair value in earnings. When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair-value hedge, the Company no longer adjusts the hedged asset or liability for changes in fair value. The adjustment of the carrying amount of the hedged asset or liability is accounted for in the same manner as other components of the carrying amount of that asset or liability. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Company removes any asset or liability that was recorded pursuant to recognition of the firm commitment from the balance sheet, and recognizes any gain or loss in earnings. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the Company recognizes immediately in earnings gains and losses that were accumulated in other comprehensive income.

As of February 25, 2009 for Atlantic Aviation and effective April 1, 2009 for the other businesses, the Company elected to discontinue hedge accounting. From the dates that hedge accounting was discontinued, all movements in the fair value of the interest rate swaps are recorded directly through earnings. As a result of the discontinuance of hedge accounting, the Company will reclassify into earnings net derivative losses included in accumulated other comprehensive loss over the remaining life of the existing interest rate swaps. See Note 13, “Derivative Instruments and Hedging Activities”, for further discussion.

Financial Instruments

The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and variable rate senior debt, are carried at cost, which approximates their fair value because of either the short-term maturity, or variable or competitive interest rates assigned to these financial instruments.

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with financial institutions and its balances may exceed federally insured limits. The Company’s accounts receivable are mainly derived from fuel and gas sales and services rendered under contract terms with commercial and private customers located primarily in the United States. At December 31, 2009 and December 31, 2008, there were no outstanding accounts receivable due from a single customer that accounted for more than 10% of the total accounts receivable. Additionally, no single customer accounted for more than 10% of the Company’s revenue during the years ended December 31, 2009, 2008 and 2007.


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2. Summary of Significant Accounting Policies  – (continued)

(Loss) Earnings per Share

The Company calculates (loss) earnings per share using the weighted average number of common shares outstanding during the period. Diluted (loss) earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of shares issuable upon the exercise of stock options (using the treasury stock method) and stock units granted to the Company’s independent directors; common equivalent shares are excluded from the calculation if their effect is anti-dilutive.

Comprehensive (Loss) Income

The Company follows the requirements of ASC 220Comprehensive Income(formerly SFAS No. 130, “Reporting Comprehensive Income”), for the reporting and presentation of comprehensive (loss) income and its components. This guidance requires unrealized gains or losses on the Company’s available for sale securities, foreign currency translation adjustments, minimum pension liability adjustments and changes in fair value of derivatives, where hedge accounting is applied, to be included in other comprehensive (loss) income.

Advertising

Advertising costs are expensed as incurred. Costs associated with direct response advertising programs may be prepaid and are expensed once the printed materials are distributed to the public.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed and determinable, and collectability is probable.

The Gas Company

The Gas Company recognizes revenue when the services are provided. Sales of gas to customers are billed on a monthly-cycle basis. Earned but unbilled revenue is accrued and included in accounts receivable and revenue based on the amount of gas that is delivered but not billed to customers from the latest meter reading or billed delivery date to the end of an accounting period, and the related costs are charged to expense. Most revenue is based upon consumption; however, certain revenue is based upon a flat rate.

District Energy

Revenue from cooling capacity and consumption are recognized at the time of performance of service. Cash received from customers for services to be provided in the future are recorded as unearned revenue and recognized over the expected service period on a straight-line basis.

Atlantic Aviation

Revenue on fuel sales is recognized when the fuel has been delivered to the customer, collection of the resulting receivable is probable, persuasive evidence of an arrangement exists and the fee is fixed or determinable. Fuel sales are recorded net of volume discounts and rebates.

Service revenue includes certain fuelling fees. The Company receives a fuelling fee for fuelling certain carriers with fuel owned by such carriers. Revenue from these transactions is recorded based on the service fee earned and does not include the cost of the carriers’ fuel.

Other FBO revenue consists principally of de-icing services, landing and fuel distribution fees as well as rental income for hangar and terminal use. Other FBO revenue is recognized as the services are rendered to the customer.


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2. Summary of Significant Accounting Policies  – (continued)

Previously, Atlantic Aviation also had management contracts to operate regional airports or aviation-related facilities. Management fees were recognized pro rata over the service period based on negotiated contractual terms. All costs incurred under these contracts were reimbursed entirely by the customer and were generally invoiced with the related management fee. As the business was acting as an agent in these contracts, the amount invoiced was recorded as revenue net of the reimbursable costs. In December 2008, Atlantic Aviation sold its management contracts business.

Regulatory Assets and Liabilities

The regulated utility operations of The Gas Company are subject to regulations with respect to rates, service, maintenance of accounting records, and various other matters by the Hawaii Public Utilities Commission, or HPUC. The established accounting policies recognize the financial effects of the rate-making and accounting practices and policies of the HPUC. Regulated utility operations are subject to the provisions of ASC 980,Regulated Operations(formerly SFAS No. 92, “Regulated Enterprise — Accounting For Phase in Plans” — an amendment of SFAS No. 71, “Accounting for the Effects of Certain Type of Regulations”). This guidance requires regulated entities to disclose in their financial statements the authorized recovery of costs associated with regulatory decisions. Accordingly, certain costs that otherwise would normally be charged to expense may, in certain instances, be recorded as an asset in a regulatory entity’s balance sheet. The Gas Company records regulatory assets for costs that have been deferred for which future recovery through customer rates has been approved by the HPUC. Regulatory liabilities represent amounts included in rates and collected from customers for costs expected to be incurred in the future.

ASC 980 may, at some future date, be deemed inapplicable because of changes in the regulatory and competitive environments or other factors. If the Company were to discontinue the application of this guidance, the Company would be required to write off its regulatory assets and regulatory liabilities and would be required to adjust the carrying amount of any other assets, including property, plant and equipment, that would be deemed not recoverable related to these affected operations. The Company believes its regulated operations in The Gas Company continue to meet the criteria of ASC 980 and that the carrying value of its regulated property, plant and equipment is recoverable in accordance with established HPUC rate-making practices.

Income Taxes

The Company uses the liability method in accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Commencing in 2007, the Company and its subsidiaries file a consolidated U.S. federal income tax return. The Company’s consolidated income tax return does not include the taxable income of IMTT and, subsequent to the sale of 49.99% of the business, the taxable income of District Energy. Those businesses file separate income tax returns.

Reclassifications

Certain reclassifications were made to the financial statements for the prior period to conform to current year presentation.

Recently Issued Accounting Standards

In April 2009, the Financial Accounting Standards Board, or FASB, issued ASC 825-10-65Financial Instruments

The Company’s (formerly FSP SFAS No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”), which is effective for interim reporting periods ending after June 15, 2009. This guidance requires disclosures about the fair value of financial instruments including cashfor interim reporting periods in addition to the current requirement to make disclosure in annual financial statements. This guidance also requires disclosure of the methods and cash equivalents, accounts receivable, accounts payable, subordinated debt and variable rate senior debt, are carried at cost, which approximates theirsignificant assumptions used to estimate the fair value because of either the short-term maturity, or variable or competitive interest rates assigned to these financial instruments.
Concentrations of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with financial


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2. Summary of Significant Accounting Policies  – (continued)

institutions and its balances may exceed federally insured limits. The Company’s accounts receivable are mainly derived from fuel sales and services rendered under contract terms with commercial and private customers located primarily

of changes in the United States. At December 31, 2006method and December 31, 2005, there were no outstanding accounts receivable due fromsignificant assumptions. The Company adopted this guidance during the second quarter of 2009. Since this guidance requires only additional disclosures, the adoption did not have a single customer that accounted for more than 10% of the total accounts receivable. Additionally, no single customer accounted for more than 10% ofmaterial impact on the Company’s revenue duringfinancial results of operations and financial condition.

In February 2008, the years ended December 31, 2006FASB issued ASC 820Fair Value Measurements and 2005Disclosures (formerly FSP SFAS No. 157-1, “Application of SFAS No. 157 to SFAS No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under SFAS No. 13”, and FSP SFAS No. 157-2, “Effective Date of FASB Statement No. 157”) affecting the implementation of SFAS No. 157. This guidance excludes ASC 840-10 Leases (formerly SFAS No. 13, “Accounting for Leases”), and other accounting pronouncements that address fair value measurements under SFAS No. 13 from the period April 13, 2004 through December 31, 2004.

Foreign Currency Translation
The Company’s foreign investmentsscope of SFAS No. 157. However, the scope of this exception does apply to assets acquired and unconsolidated businesses have been translated into U.S. dollarsliabilities assumed in a business combination that are required to be measured at fair value in accordance with ASC 805-10Business Combinations (formerly SFAS No. 52, 141(R), “Foreign Currency TranslationBusiness Combinations. All”) regardless of whether those assets and liabilities have been translated usingare related to leases. This guidance delayed the exchange rate in effect at the balance sheet dates. Statement of operations amounts have been translated using the average exchange rate for the period. Adjustments from such translation have been reported separately as a component of other comprehensive income in stockholders’ equity.
Earnings (Loss) Per Share
The Company calculates earnings (loss) per share in accordance with SFAS No. 128, Earnings PerShare. Accordingly, basic earnings (loss) per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of shares issuable upon the exercise of stock options (using the treasury stock method) and stock units granted to our independent directors; common equivalent shares are excluded from the calculation if their effect is anti-dilutive.
Comprehensive Income (Loss)
The Company follows the requirementseffective date of SFAS No. 130, Reporting Comprehensive Income157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008. On January 1, 2009, the Company adopted SFAS No. 157 for all nonfinancial assets and liabilities. Major categories of nonfinancial assets and liabilities to which this accounting standard applies include, but are not limited to, the Company’s property, equipment, land and leasehold improvements, intangible assets and goodwill. See Note 10, “Nonfinancial Assets Measured at Fair Value”, for further discussion.

In March 2008, the reportingFASB issued ASC 815-10Derivatives and presentation of comprehensive income (loss) and its components.Hedging (formerly SFAS No. 130161, “Disclosure about Derivative Instruments and Hedging Activities — an amendment of SFAS No. 133”), which requires unrealizedcompanies with derivative instruments to disclose information about how and why a company uses derivative instruments; how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. The required disclosures include the fair value of derivative instruments and their gains or losses in tabular format, information about credit-risk-related contingent features in derivative agreements, counterparty credit risk, and the company’s strategies and objectives for using derivative instruments. This guidance is effective for periods beginning after November 15, 2008. The Company adopted this guidance on January 1, 2009. Since this guidance requires only additional disclosures concerning derivatives and hedging activities, the adoption did not have a material impact on the Company’s availablefinancial results of operations and financial condition. See Note 13, “Derivative Instruments and Hedging Activities”, for sale securities, foreign currency translation adjustmentsfurther discussion.

In December 2008, the FASB issued ASC 715-20Compensation — Retirement Benefits (formerly FSP SFAS No. 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”). This guidance requires additional disclosures surrounding how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and change instrategies, the fair value of derivatives, where hedge accounting is applied, to be included in other comprehensive income (loss).

Advertising
Advertising costs are expensed as incurred. Costs associated with direct response advertising programs may be prepaid and will be expensed once the printed materials are distributed to the public.
Revenue Recognition
In accordance with Staff Accounting Bulletin 104, Revenue Recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed and determinable, and collectibility is probable.
Airport Services Business
Revenue on fuel sales is recognized when the fuel has been delivered to the customer, collectioneach of the resulting receivable is probable, persuasive evidencemajor categories of an arrangement exists,plan assets, the inputs and valuation techniques used to measure the fair value of plan assets, and the feesignificant concentration of risks in plan assets. The disclosure requirement is fixed or determinable. Fuel sales are recorded net of volume discounts and rebates.
Service revenue include certain fueling fees.effective for fiscal years ending after December 15, 2009. The Company receivesadopted this guidance for the year-ended December 31, 2009 and it did not have a fueling fee for fueling certain carriers with fuel owned by such carriers. In accordance with Emerging Issues Task Force, or EITF, Issue 99-19, ReportingRevenue Gross as a Principal versus Net as an Agent, revenue from these transactions is recorded basedmaterial impact on the service fee earnedfinancial statements.

In November 2008, the FASB ratified ASC 323Investments — Equity Method and does not includeJoint Ventures (formerly EITF 08-6, “Equity Method Investment Accounting Considerations''). This guidance concludes that the cost basis of a new equity-method investment would be determined using a cost-accumulation model, which would continue the practice of including transaction costs in the cost of investment and would exclude the carriers’ fuel.



F-11value of contingent consideration unless it is required to be recognized under other literature, such as ASC 450-20Contingencies (formerly SFAS No. 5, “Accounting for Contingencies ”). Equity-method investment should be subject to other-than-temporary impairment analysis. It also requires a gain or loss to be recognized on the portion of the investor’s ownership sold. This guidance is effective for fiscal years beginning on or



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Other FBO revenue consists principally

after December 15, 2008, with early adoption prohibited. The Company adopted this guidance on January 1, 2009 and the impact of de-icing services, landingthe adoption did not have a material impact on the Company’s financial results of operations and fuel distribution feesfinancial condition.

In April 2008, the FASB issued ASC 350-30Intangibles — Goodwill and Other (formerly FSP SFAS No. 142-3, “Determination of the Useful Life of Intangible Assets”). This guidance amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension as welladjusted for entity-specific factors. This guidance is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The Company adopted this guidance and the impact of the adoption did not have a material impact on the Company’s financial results of operations and financial condition.

In December 2007, the FASB issued ASC 810-10Consolidation (formerly SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB NO. 51”), which requires noncontrolling interests (previously referred to as rental incomeminority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. This guidance is effective for hangarperiods beginning on or after December 15, 2008 and terminal use. Other FBO revenue is recognized aswill be applied prospectively to all noncontrolling interests with comparative period information reclassified. The Company adopted this guidance on January 1, 2009 and adoption did not have a material impact on the services are renderedCompany’s financial results of operations and financial condition.

In December 2007, the FASB revised ASC 805-10Business Combinations (formerly SFAS No. 141(R)). The revised standard includes various changes to the customer.

Thebusiness combination rules. Some of the changes include immediate expensing of acquisition-related costs rather than capitalization, and 100% of the fair value of assets and liabilities acquired being recorded, even if less than 100% of a controlled business is acquired. This guidance is effective for business combinations consummated in periods beginning on or after December 15, 2008. For any business combinations completed after January 1, 2009, the Company also enters into management contractsexpects the revised standard to operate regional airports or aviation-related facilities. Management fees are recognized pro rata overhave the service period basedfollowing material impacts on negotiated contractual terms. Allits financial statements compared with previously applicable business combination rules: (1) increased selling, general and administrative costs incurreddue to immediate expensing of acquisition costs, resulting in lower net income; (2) lower cash provided by operating activities and lower cash used in investing activities in the statements of cash flows due to the immediate expensing of acquisition costs, which under previous rules were included as cash out flows in investing activities as part of the purchase price of the business; and (3) 100% of fair values recorded for assets and liabilities including noncontrolling interests of a controlled business on the balance sheet resulting in larger assets, liability and equity balances compared with previous business combination rules. On January 1, 2009, the Company adopted this guidance. Although the Company did not complete any new business combinations during 2009, the Company used the guidance from this pronouncement to perform under contracts are reimbursed entirely by the customer and are generally invoiced with the related management fee. As the Company is acting as an agent in these contracts, the amount invoiced is recorded as revenue net of the reimbursable costs.
Airport Parking Business
Parking lot revenue is recorded as services are performed, net of appropriate allowances and local taxes. For customer vehicles remaininggoodwill impairment analysis. See Note 10, “Nonfinancial Assets Measured at our facilities at year end, revenueFair Value”, for services performed are recorded in other accounts receivable in the accompanying consolidated balance sheet based upon the value of unpaid parking revenue for customer vehicles.
The Company offers various membership programs for which customers pay an annual membership fee. The Company accounts for membership fee revenue on a “deferral basis” whereby membership fee revenue is recognized ratably over the one-year life of the membership. In addition, the Company also sells prepaid parking vouchers which can be redeemed for future parking services. These sales of prepaid vouchers are recorded as “deferred revenue” and recognized as parking revenue when redeemed. Unearned membership revenue and prepaid vouchers are included in deferred revenue (other current liability) in the accompanying consolidated balance sheet.
District Energy Business
Revenue from cooling capacity and consumption are recognized at the time of performance of service. Cash received from customers for services to be provided in the future are recorded as unearned revenue and recognized over the expected service period on a straight-line basis.
Gas Production and Distribution Business
TGC recognizes revenue when the services are provided. Sales of gas to customers are billed on a monthly-cycle basis. Earned but unbilled revenue is accrued and included in accounts receivable and revenue, based on the amount of gas that is delivered but not billed to customers from the latest meter reading or billed delivery date to the end of an accounting period, and the related costs are charged to expense. Most revenue is based upon consumption; however, certain revenue is based upon a flat rate.
Regulatory Assets and Liabilities
The regulated utility operations of TGC are subject to regulations with respect to rates, service, maintenance of accounting records, and various other matters by the Hawaii Public Utilities Commission, or HPUC. The established accounting policies recognize the financial effects of the ratemaking and accounting practices and policies of the HPUC. Regulated utility operations are subject to the provisions of SFAS No. 71, Accounting for the Effects of Certain Types of Regulation. SFAS No. 71 requires regulated entities to disclose in their financial statements the authorized recovery of costs associated with regulatory decisions. Accordingly, certain costs that otherwise would normally be charged to expense may, in certain instances, be recorded as an asset in a regulatory entity’s balance sheet. TGC records regulatory assets for costs that have been deferred for which future recovery through customer rates has been approved by the HPUC. Regulatory liabilities represent amounts included in rates and collected from customers for costs expected to be incurred in the future.
SFAS No. 71 may, at some future date, be deemed inapplicable because of changes in the regulatory and competitive environments and/or decision by TGC to accelerate deployment of new technologies. If TGC were to


F-12further discussion.



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LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
discontinue the application of SFAS No. 71, TGC would be required to write off its regulatory assets and regulatory liabilities and would be required to adjust the carrying amount of any other assets, including property, plant and equipment, that would be deemed not recoverable related to these affected operations. TGC believes its regulated operations continue to meet the criteria of SFAS No. 71 and that the carrying value of its regulated property, plant and equipment is recoverable in accordance with established HPUC ratemaking practices.
Income Taxes
MIC Inc., which is the holding company of the wholly owned U.S. businesses, files a consolidated U.S. federal income tax return. As a consequence, all of its direct and indirect U.S. subsidiaries pay no U.S. federal income taxes, and all tax obligations are incurred by MIC Inc. based on the consolidated U.S. federal income tax position of the U.S. businesses after taking into account deductions for management fees and corporate overhead expenses allocated to MIC Inc.
The Company uses the liability method in accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company does not expect that the U.S. companies that held its interests in the toll road business, MCG or SEW will have any liability for U.S. federal income taxes, as each of these entities has elected to be disregarded as an entity separate from the Company for U.S. federal income tax purposes.
Reclassifications
Certain reclassifications were made to the financial statements for the prior period to conform to current year presentation.
Recently Issued Accounting Standards
On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. Under this Standard, the Company may elect to report financial instruments and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This election is irrevocable. SFAS No. 159 provides an opportunity to mitigate volatility in reported earnings that is caused by measuring hedged assets and liabilities that were previously required to use a different accounting method than the related hedging contracts when the complex provisions of SFAS No. 133 hedge accounting are not met.
SFAS No. 159 is effective for years beginning after November 15, 2007. Early adoption within 120 days of the beginning of the Company’s 2007 fiscal year is permissible, provided the Company has not yet issued interim financial statements for 2007 and has adopted SFAS No. 157. The Company does not believe this Standard will have a significant impact on its financial statements.
In September 2006, the FASB issued SFAS No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans— an amendment of FASB Statements No. 87, 88, 106, and 132(R). In accordance with this Statement, the Company recognized the underfunded status of its pension and retiree medical plans as a liability in its 2006 year-end balance sheet, with changes in the funded status recognized through comprehensive income in the year in which they occur. The Company adopted this Statement for its balance sheet as of December 31, 2006. SFAS No. 158 also requires the Company to measure the funded status of its pension and retiree medical plans as of the Company’s year-end balance sheet date no later than December 31, 2008.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective as of the beginning of the Company’s 2008 fiscal year. The Company is currently evaluating the impact this adoption will have on the consolidated financial statements.


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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, or SAB 108, to address diversity in practice in quantifying financial statement misstatements. SAB 108 requires companies to quantify misstatements based on their impact on each of their financial statements and related disclosures. SAB 108 is effective as of the end of the Company’s 2006 fiscal year, allowing a one-time transitional cumulative effect adjustment to retained earnings as of January 1, 2006 for errors that were not previously deemed material but are material under the guidance in SAB 108. The Company believes the impact of this adoption is not material to the consolidated financial statements.
In July 2006, the FASB issued Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109, or FIN 48. FIN 48 requires that realization of an uncertain income tax position must be “more likely than not” (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. Further, FIN 48 prescribes the benefit to be recorded in the financial statements as the amount most likely to be realized assuming a review by tax authorities having all relevant information and applying current conventions. FIN 48 also clarifies the financial statement classification of tax-related penalties and interest and sets forth new disclosures regarding unrecognized tax benefits. FIN 48 is effective in the first quarter 2007 and the Company adopted FIN 48 effective January 1, 2007, and the impact was not material.
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim FinancialStatements, and provides guidance on the accounting for and reporting of accounting changes and error corrections. SFAS No. 154 applies to all voluntary changes in accounting principles and requires retrospective application (a term defined by the statement) to prior periods’ financial statements, unless it is impracticable to determine the effect of a change. It also applies to changes required by an accounting pronouncement that does not include specific transition provisions. In addition, SFAS No. 154 redefines restatement as the revising of previously issued financial statements to reflect the correction of an error. The statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company adopted SFAS No. 154 as of January 1, 2006.
In March 2005, the FASB issued FIN No. 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of SFAS No. 143, or FIN 47. FIN 47 clarifies the manner in which uncertainties concerning the timing and the method of settlement of an asset retirement obligation should be accounted for. In addition, the Interpretation clarifies the circumstances under which fair value of an asset retirement obligation is considered subject to reasonable estimation. The Interpretation is effective no later than the end of fiscal years ending after December 15, 2005. The Company adopted this statement during the 2005 year. The Company evaluated the impact of applying FIN 47 and concluded that there is no impact on the financial statements.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. This Statement is a revision to Statement 123 and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company adopted this Statement as of April 1, 2005.
In December 2004, the FASB issued SFAS No. 151, Inventory Costs, which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Under this Statement, such items will be recognized as current-period charges. In addition, the Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The Company adopted the Statement on January 1, 2006.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-Monetary Assets, which eliminates an exception in APB 29 for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The Company adopted the Statement on January 1, 2006.


F-14


MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Earnings (Loss) PerLoss per Share

Following is a reconciliation of the basic and diluted number of shares used in computing earnings (loss)loss per share:

   
 Year Ended December 31,
   2009 2008 2007
Weighted average number of shares outstanding: basic  45,020,085   44,944,326   40,882,067 
Dilutive effect of restricted stock unit grants         
Weighted average number of shares outstanding: diluted  45,020,085   44,944,326   40,882,067 
  
Year Ended
December 31, 2006
 
Year Ended
December 31, 2005
 
Period from
April 13, 2004
(inception) to
December 31, 2004
                   
Weighted average number of shares of trust stock outstanding: basic 28,895,522 26,919,608 1,011,887
Dilutive effect of restricted stock unit grants 16,824 9,611 
       
Weighted average number of shares of trust stock outstanding: diluted 28,912,346 26,929,219 1,011,887

The effect of potentially dilutive shares for the year ended December 31, 2006 is calculated by assuming that the10,314 restricted stock unit grants issuedprovided to ourthe Company’s independent directors on May 25, 2006, which vest in24, 2007, had been fully converted to shares on that date. The effect of potentially dilutive shares for the year ended December 31, 2005 is calculated by assuming that the14,115 restricted stock unit grants issued to our independent directors on May 25, 2005, which vested in 2006, had been fully converted to shares on that date. The effect of potentially dilutive shares for the period from April 13, 2004 through December 31, 2004 is calculated by assuming that the restricted stock unit grants issued to our independent directors on December 21, 2004, which vested in 2005, had been fully converted to shares on that date. The stock grants provided to our independent directors on December 21, 2004May 27, 2008 and the 128,205 restricted stock unit grants provided to our independent directors on June 4, 2009 were anti-dilutive in 20042007, 2008 and 2009 due to the Company’s net loss for those years.

4. Discontinued Operations

PCAA operates 31 facilities comprising over 40,000 parking spaces near 20 major airports across the period.

4. Acquisitions
WeUnited States. PCAA provides customers with 24-hour secure parking close to airport terminals, as well as transportation via shuttle bus to and from their vehicles and the terminal. Operations are carried out on either owned or leased land at locations near the airports.

On January 28, 2010, the Company announced that PCAA had entered into an asset purchase agreement with Bainbridge ZKS — Corinthian Holdings, LLC. This agreement, which is subject to approval by the bankruptcy court, will result in the sale of the assets of PCAA for $111.5 million, subject to certain adjustments and will result in the elimination of $201.0 million of current debt from the liabilities of discontinued operations held for sale in the consolidated balance sheet. The cancelled debt in excess of the sale proceeds used to repay such debt would result in cancellation of debt income and the proceeds from our initial public offering,in excess of the business’ assets as a gain on sale. As a part of the bankruptcy sale process, all cash proceeds would be paid to creditors of the business. PCAA also commenced a voluntary Chapter 11 case with the bankruptcy court. If approved, the Company expects to complete the sale of the business in the first half of 2010.

As part of the bankruptcy filing, the Company has no obligation to and has no intention of committing additional capital to this business. Creditors of this business do not have recourse to any assets of the holding company or IPO,any assets of the other Company’s businesses, other than approximately $5.3 million relating to acquire our initiala guarantee of a single parking facility lease.

Results for PCAA are reported separately as discontinued operations for all periods presented. The assets and liabilities of the business being sold are included in assets of discontinued operations held for sale and liabilities of discontinued operations held for sale on the Company’s consolidated businessesbalance sheet.


TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Discontinued Operations  – (continued)

The following is a summary of the assets and liabilities of discontinued operations held for cash fromsale related to PCAA as of December 31, 2009 and December 31, 2008:

  
 December 31,
2009
 December 31,
2008
   ($ in Thousands)
Assets
          
Total current assets $7,676  $5,789 
Property, equipment, land and leasehold improvements, net  77,524   93,476 
Other non-current assets  1,495   6,460 
Total assets $86,695  $105,725 
Liabilities
          
Current portion of long-term debt $200,999  $201,344 
Other current liabilities  10,761   15,951 
Total current liabilities  211,760   217,295 
Other non-current liabilities  8,789   7,593 
Total liabilities  220,549   224,888 
Noncontrolling interest  (1,863   
Total liabilities and noncontrolling interest $218,686  $224,888 

Summarized financial information for discontinued operations related to PCAA for the Macquarie Group or from infrastructure investment vehicles managed by the Macquarie Group during the periodyears ended December 31, 2004.2009, 2008 and 2007 are as follows:

   
 For the Year
Ended
December 31,
2009
 For the Year
Ended
December 31,
2008
 For the Year
Ended
December 31,
2007
   ($ in Thousands, Except Share Data)
Service revenue $68,457  $74,692  $77,180 
Net loss from discontinued operations before income taxes and noncontrolling interest $(23,647 $(180,104 $(9,679
Income tax benefit (provision)  1,787   70,059   (281
Net loss from discontinued operations before noncontrolling interest  (21,860  (110,045  (9,960
Net loss attributable to noncontrolling interests  (1,863  (1,753  (1,035
Net loss from discontinued operations $(19,997 $(108,292 $(8,925
Basic and diluted loss per share from discontinued operations $(0.44 $(2.41 $(0.22
Weighted average number of shares outstanding at the Company level: basic and diluted  45,020,085   44,944,326   40,882,067 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Acquisitions during

SevenBar FBOs

On March 4, 2008, Atlantic Aviation completed the year ended December 31, 2005 were funded byacquisition of 100% of the remaining IPO proceedsinterests in Sun Valley Aviation, Inc., SB Aviation Group, Inc. and additional debt. Acquisitions duringSevenBar Aviation Inc. (collectively referred to as “SevenBar”). SevenBar owns and operates three FBOs located in Farmington and Albuquerque, New Mexico and Sun Valley, Idaho.

The cost of the year ended December 31, 2006 were funded by additional debtacquisition, including transaction costs, was $41.9 million and drawdowns on ourthe Company has pre-funded integration costs of $300,000. The Company financed the acquisition facility atwith borrowings under the MIC Inc. level, some ofrevolving credit facility, which was fully repaid with proceeds from the equity offering.

during 2009. See Note 12, “Long-term Debt” for further discussions.

For a description of certain related party transactions associated with the Company’s acquisitions,acquisition, see Note 15, Related17, “Related Party Transactions.

Transactions”. The businesses described below haveacquisition has been accounted for under the purchase method of accounting, other than our investmentaccounting. Accordingly, the results of operations of SevenBar are included in IMTT which has been accounted for under the equity methodconsolidated statements of accounting. operations and as a component of Atlantic Aviation’s business segment since March 4, 2008.

The initial purchase price allocation may be adjusted within one year of the purchase date for changes in estimates of the fair value of assets acquired and liabilities assumed.

Acquisition of GAH
On January 14, 2005, the Company’s airport services business acquired all of the membership interests in GAH, which, through its subsidiaries, operates two FBOs in California, for $50.3 million (including transaction costs and working capital adjustments). This acquisition strengthened the Company’s presence in the airport services market. The acquisition was paid for in cash through additional long-term debt borrowings of $32.0 million under the then existing debt facility of our airport services business (prior to the refinancing discussed in Note 10), with the remainder funded by proceeds from the IPO.
The acquisition has been accounted for under the purchase method of accounting. The results of operations of GAH are included in the accompanying consolidated statement of operations since January 15, 2005.



F-15


MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Acquisitions – (continued)
The allocation of the purchase price, including transaction costs, was as follows (in($ in thousands):

 
Current assets $1,203 
Property, equipment, land and leasehold improvements  10,353 
Intangible assets:
     
Customer relationships  750 
Contractual arrangements  26,050 
Non-compete agreements  50 
Goodwill(1)  5,125 
Total assets acquired  43,531 
Current liabilities  (1,296
Other liabilities  (370
Net assets acquired $41,865 
Current assets     $1,820 
Property, equipment, land and leasehold improvements  12,680 
Intangible assets:    
Customer relationships  1,100 
Airport contract rights  18,800 
Non-compete agreements  1,100 
Goodwill  15,686 
Total assets acquired  51,186 
Current liabilities  882 
Net assets acquired $50,304 

(1)Included in goodwill is approximately $4.9 million that is expected to be deductible for tax purposes.

The Company paid more than the fair value of the underlying net assets as a result of the expectation of its ability to earn a higher rate of return from the acquired business than would be expected if those net assets had to be acquired or developed separately. The value of the acquired intangible assets was determined by taking into account risks related to the characteristics and applications of the assets, existing and future markets and analysesanalysis of expected future cash flows to be generated by the business. The airport contract rights are being amortized on a straight-line basis over their estimated useful lives ranging from 20 to 30 years.

The Company allocated $1.1 million$750,000 of the purchase price to customer relationships in accordance with EITF 02-17, Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination.relationships. The Company is amortizingwill amortize the amount allocated to customer relationships over a nine-year period.

Acquisition

6. Dispositions

District Energy consists of EAR

Thermal Chicago, which services customers in Chicago, Illinois and a 75% interest in Northwind Aladdin, which services customers in Las Vegas, Nevada. The remaining 25% equity interest in Northwind Aladdin is owned by Nevada Electric Investment Company, or NEICO, an indirect subsidiary of NV Energy, Inc. On August 12, 2005,December 23, 2009, the Company’s airport services business acquired allCompany sold 49.99% of the membership interests in EAR, a Nevada limited liability company doing business as Las Vegas Executive Air Terminal,of District Energy to John Hancock Life Insurance Company and John Hancock Life Insurance Company (U.S.A.) (collectively “John Hancock”) for $59.8 million (including transaction costs and working capital adjustments). This acquisition strengthened the Company’s presence in the airport services market. The acquisition was paid for in cash, funded by proceeds from the IPO.
The acquisition has been accounted for under the purchase method of accounting. The results of operations of EAR are included in the accompanying consolidated statement of operations since August 13, 2005.
The allocation of the purchase price, including transaction costs, was as follows (in thousands):
Current assets     $2,264 
Property, equipment, land and leasehold improvements  17,259 
Intangible assets:    
Airport contract rights  38,286 
Goodwill  3,905 
Total assets acquired  61,714 
Current liabilities  1,934 
Net assets acquired $59,780 
The value of the acquired intangible assets was determined by taking into account risks related to the characteristics and applications of the assets, existing and future markets and analyses of expected future cash flows to be generated by the business. The airport contract rights are being amortized on a straight-line basis over an estimated useful life of 20 years.


F-16$29.5 million.



TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Acquisitions

6. Dispositions  – (continued)

Acquisition of SunPark and Other Parking Facilities
On October 3, 2005, the Company’s airport parking business acquired real property and personal and intangible assets related to six off-airport parking facilities, collectively referred to as “SunPark”. The total cash purchase price for SunPark was $66.9 million (including transaction costs and working capital adjustments). The acquisition has been accounted for under the purchase method of accounting. The results of operations of SunPark are included in the accompanying consolidated statement of operations since October 4, 2005.
The allocation of the purchase price, including transaction costs, was as follows (in thousands):
Current assets     $93 
Property, equipment, land and leasehold improvements  18,859 
Intangible assets:    
Customer relationships  1,020 
Trade name  500 
Leasehold rights  1,750 
Domain names  320 
Goodwill  44,396 
Total assets acquired  66,938 
Current liabilities  60 
Net assets acquired $66,878 
The value of the acquired intangible assets was determined by taking into account risks related to the characteristics and applications of the assets, existing and future markets and analyses of expected future cash flows to be generated by the business.
Additionally,

As the Company acquired a combination of real property, personal propertyhas retained majority ownership and intangible assets during 2005 at four parking facilities for a total purchase price of approximately $9.4 million, including transaction costs.

The SunPark acquisition andcontrol in District Energy, the other parking facility transactions above were financed with $58.8 million of new, non-recourse debt and $2.3 million of assumed debt, with the remainder paid in cash.
The minority shareholders did not contribute their full pro rata share of capital related to these transactions. As a result, the Company’s ownership interest in the off-airport parking business increased from 87.1% to 88.0%.
Acquisition of IMTT
On May 1, 2006, the Company completed its purchase of newly issued common stock of IMTT Holdings, Inc., or IMTT Holdings, formerly known as Loving Enterprises, Inc., for a purchase price of $250.0 million plus approximately $7.1 million in transaction-related costs. As a result of the closing of the transaction, the Company owns 50% of IMTT Holdings’ issued and outstanding common stock. The balance of the common stock of IMTT Holdings continues to be held by the shareholders who held 100%reported as part of IMTT Holdings’ stock prior to the Company’s acquisition.
IMTT Holdings isconsolidated financial statements. The noncontrolling interest portion of the ultimate holding company for a group of companies and partnerships that own International-Matex Tank Terminals, or IMTT. IMTT is the owner and operator of eight bulk liquid storage terminalsbusiness’ results are recorded in the United States and the part owner and operator of two bulk liquid storage terminals in Canada. IMTT is one of the largest companies in the bulk liquid storage terminal industry in the United States, based on capacity.
IMTT Holdings distributed as a dividend $100.0 million of the proceeds from the newly-issued stock, to the shareholders who held 100% of IMTT Holdings’ stock prior to the Company’s acquisition. The remaining $150.0 million, less approximately $5.0 million that was used to pay fees and expenses incurred by IMTT in connection with the transaction, will be used ultimately to finance additional investment in existing and new facilities.


F-17


MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Acquisitions – (continued)
The Company financed the investment and the associated transaction costs with $82.0 million of available cash and $175.0 million of borrowings under the revolving acquisition facility of MIC Inc.
The investment in IMTT Holdings has been accounted for under the equity method of accounting. For the period May 1, 2006 through December 31, 2006, the Company has recorded equity in earnings of investee of $3.5 million. Summarizedconsolidated financial information of IMTT Holdings as at, and for the year ended, December 31, 2006, comprises the following (in thousands):
Current assets                                                                                                                 $78,074 
Non-current assets  552,361 
Current liabilities  (48,267)
Non-current liabilities  (395,321)
Revenue  239,279 
Gross profit  104,407 
Net income  19,814 
Acquisition of TGC
On June 7, 2006, the Company completed its acquisition of K-1 HGC Investment, L.L.C. (subsequently renamed Macquarie HGC Investment LLC), which owns HGC Holdings LLC, or HGC, and The Gas Company, LLC, collectively referred to as “TGC”.
TGC is Hawaii’s only full-service gas-energy company. TGC provides both utility (regulated) and non-utility (unregulated) gas distribution services on the six primary islands in the state of Hawaii. The utility business includes production, distribution and sales of SNG on the island of Oahu and distribution and sale of LPG to customers on all six major Hawaiian islands. This acquisition enabled the Company to enter the gas utility and services business as an established competitor with an existing customer base and corporate infrastructure.
The cost of the acquisition, including working capital adjustments and transaction costs, was $262.7 million. Transaction costs were approximately $6.9 million. In addition, the Company incurred financing costs of approximately $3.3 million. The acquisition was funded with $160.0 million of new subsidiary-level debt, $99.0 million of funds drawn by MIC Inc. under the revolving portion of its acquisition credit facility and the balance was funded with cash.
The acquisition has been accounted for under the purchase method of accounting. Accordingly, the results of operations of TGC are included in the accompanying consolidated statement of operationsstatements since June 7, 2006.
The following table summarizes the estimated fair value of assets acquired and liabilities assumed at the date of acquisition.sale. The Company isdifference between the sale price and the Company’s portion of the investment sold and associated recognition of the non-controlling interests was $22.0 million (net of taxes) which has been recorded in additional paid in capital in the process of obtaining final valuations of certain intangible assets, thus the allocation is subject to refinement.
The preliminary allocation of the purchase price, including transaction costs, was as follows (in thousands):
Current assets $42,297 
Property, equipment, land and leasehold improvements  127,075 
Intangible assets:    
Customer relationships  7,400 
Trade name  8,500 
Real estate leases  100 
Goodwill  119,703 
Other assets  3,108 
Total assets acquired  308,183 
Current liabilities  20,309 
Deferred income taxes  12,202 
Other liabilities  12,931 
Total liabilities assumed  45,442 
Net assets acquired $262,741 


F-18

MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Acquisitions – (continued)
The Company paid more than the fair value of the underlying net assets as a result of the expectation of its ability to earn a higher rate of return from the acquired business than would be expected if those net assets had to be acquired or developed separately. The value of the acquired intangible assets was determined by taking into account risks related to the characteristics and applications of the assets, existing and future markets and analyses of expected future cash flows to be generated by the business.
The Company allocated $7.4 million of the purchase price to customer relationshipsconsolidated balance sheets in accordance with EITF 02-17, Recognitionof Customer Relationship Intangible Assets Acquired in a Business Combination. The Company is amortizing the amount allocated to customer relationships over a nine-year period.
Acquisition of Trajen
On July 11, 2006, the Company’s airport services business completed the acquisition of 100% of the shares of Trajen Holdings, Inc., or Trajen. Trajen is the holding company for a group of companies, limited liability companies and limited partnerships that own and operate 23 FBOs at airports in 11 states.
The cost of the acquisition, including working capital adjustments and transaction costs, was $347.3 million. In addition, the Company incurred debt financing costs of $3.3 million, prefunding of capital expenditures and integration costs of $5.9 million and provided for a debt service reserve of $6.6 million. The Company financed the acquisition primarily with $180.0 million of borrowings under an expansion of the credit facility at Atlantic Aviation, and $180.0 million of additional borrowings under the acquisition credit facility of MIC Inc. Refer to Note 10, Long-Term Debt, for further details of the additional term loan facility and amendment to the revolving acquisition facility.
The acquisition has been accounted for under the purchase method of accounting. Accordingly, the results of operations of Trajen are included in the accompanying consolidated statement of operations as a component of the Company’s airport services business segment since July 11, 2006.
The allocation of the purchase price, including transaction costs, was as follows (in thousands):
Current assets     $19,669 
Property, equipment, land and leasehold improvements               57,966 
Intangible assets:    
Customer relationships  32,800 
Airport contract rights  221,800 
Non-compete agreements  200 
Trade name  100 
Goodwill  84,387 
Other assets  266 
Total assets acquired  417,188 
Current liabilities  17,941 
Deferred income taxes  51,625 
Other liabilities  319 
Total liabilities assumed  69,885 
Net assets acquired $347,303 
The Company paid more than the fair value of the underlying net assets as a result of the expectation of its ability to earn a higher rate of return from the acquired business than would be expected if those net assets had to be acquired or developed separately. The value of the acquired intangible assets was determined by taking into account risks related to the characteristics and applications of the assets, existing and future markets and analyses of expected future cash flows to be generated by the business.


F-19


MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Acquisitions – (continued)
The Company allocated $32.8 million of the purchase price to customer relationships in accordance with EITF 02-17, Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination. The Company is amortizing the amount allocated to customer relationships over a ten-year period.
Pending Acquisitions
On December 21, 2006, the Company entered into a business purchase agreement and a membership interest purchase agreement to acquire 100% of the interests in entities that own and operate two fixed base operations, or FBOs. The total purchase price is a cash consideration of $85.0 million (subject to working capital adjustments). In addition to the purchase price, it is anticipated that a further $4.5 million will be incurred to a cover transaction costs, integration costs and reserve funding. The FBOs are located at Stewart International Airport in New York and Santa Monica Airport in California.
The Company expects to close the transaction through its airport services business. The Company expects to finance the purchase price and the associated transaction and other costs, in part, with $32.5 million of additional term loan borrowings under an expansion of the credit facility at its airport services business. The Company expects to pay the remainder of the purchase price and associated costs with cash on hand. The credit facility will continue to be secured by all of the assets and stock of companies within the airport services business.
Pro Forma Information
The following unaudited pro forma information summarizes the results of operations for the years ended December 31, 2006 and 2005 as if acquisitions of consolidated businesses had been completed as of January 1, 2005. The pro forma data gives effect to actual operating results prior to the acquisitions and adjustments to interest expense, amortization, depreciation and income taxes. No effect has been given to cost reductions or operating synergies in this presentation. These pro forma amounts do not purport to be indicative of the results that would have actually been achieved if the acquisitions had occurred as of the beginning of the periods presented or that may be achieved in the future. The pro forma information shown below only includes the acquisitions of EAR, IMTT and TGC. The pro forma impact of GAH, which was acquired on January 14, 2005, SunPark and the other airport parking facilities and Trajen have not been included as they are not significant to the consolidated pro forma results.
Pro forma consolidated revenue for the years ended December 31, 2006 and 2005, if the acquisitions of EAR, IMTT and TGC had occurred on January 1, 2005, would have been $592.2 million and $474.7 million, respectively. Pro forma consolidated net income for the same periods would have been $56.3 million and $37.4 million, respectively. Basic and diluted earnings per share for the year ended December 31, 2006 would have both been $1.95. Basic and diluted earnings per share for the year ended December 31, 2005 would have both been $1.39. We have not disclosed pro forma results for the period ended December 31, 2004 since the results are not meaningful as we had only nine days of operations for our consolidated group.
5. Dispositions
The dispositions of our interests in non U.S. businesses discussed is consistent with our strategy to focus on the ownership and operation of infrastructure businesses, primarily in the U.S.
ASC 810-10.

For a description of certain related party transactions associated with the Company’s dispositions,relating to this transaction, see Note 15, Related17, “Related Party Transactions.

Macquarie Communications Infrastructure Group
For the years ended December 31, 2006, December 31, 2005 and the period December 22, 2004 (our acquisition date) through December 31, 2004, the Company, through its wholly owned subsidiary, Communications Infrastructure LLC, or CI LLC, recognized AUD $3.2 million (USD $2.4 million), AUD $5.6 million (USD $4.2 million) and AUD $2.2 million (USD $1.7 million), respectively, in dividend income from its investment in Macquarie Communications Infrastructure Group (ASX: MCG), or MCG.


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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Dispositions – (continued)
On August 17, 2006, CI LLC completed the sale of 16,517,413 stapled securities of MCG. The stapled securities were sold into the public market at a price of AUD $6.10 per share generating gross proceeds of AUD $100.8 million. Following settlement of the trade on August 23, 2006, the Company converted the AUD proceeds into USD $76.4 million. Proceeds of the sale were used to reduce the Company’s acquisition-related debt at its MIC Inc. subsidiary. The carrying value of the investment, together with the unrealized gains and losses on the investment recorded in other comprehensive income (loss), was $70.0 million and the Company recognized a gain on sale of $6.7 million and a loss on the conversion of proceeds from AUD into USD of $291,000.
South East Water
For the years ended December 31, 2006 and December 31, 2005, the Company, through its wholly owned subsidiary South East Water LLC, or SEW LLC, recognized £3.3 million (USD $6.0 million) and £4.6 million (USD $8.2 million), respectively, in dividend income from its 17.5% minority interest in Macquarie Luxembourg Water Sarl, the indirect holding company for South East Water, or SEW. SEW is a regulated clean water utility in southeastern portion of the U.K. No dividends were recognized by SEW LLC for the period December 22, 2004 (our acquisition date) through December 31, 2004.
On October 2, 2006, SEW LLC sold its interest in Macquarie Luxembourg Water Sarl to HDF (UK) Holdings Limited. The disposal was made pursuant to the exercise by MEIF Luxembourg Holdings SA, or the MEIF Shareholder, an affiliate of the Company’s Manager, of its drag along rights under the SEW shareholders’ agreement and as a part of a sale by the MEIF Shareholder and the other shareholders of all of their respective interests in SEW.
The Company received net proceeds on the sale of approximately $89.5 million representing its pro rata share of the total consideration less its pro rata share of expenses. The carrying value of the investment prior to the sale, together with the unrealized gains and losses on the investment recorded in other comprehensive income (loss), was $39.6 million, and the Company recognized a gain on the SEW sale of $49.9 million. The Company used the net proceeds to reduce acquisition-related indebtedness at its MIC Inc. subsidiary.
Macquarie Yorkshire Limited
The Company, through its wholly owned subsidiary Macquarie Yorkshire LLC, or MY LLC, accounted for its indirect 50% investment in Connect M1-A1 Holdings Ltd, or CHL, under the equity method of accounting. CHL owns 100% of Connect M1-A1 Limited, which is the holder of the Yorkshire Link concession, a highway of approximately 19 miles located south of Wetherby, England. For the years ended December 31, 2006, December 31, 2005 and the period December 22, 2004 (our acquisition date) through December 31, 2004, the Company has recorded equity in earnings of investee of $9.1 million (net of $3.9 million amortization expense), $3.7 million (net of $3.8 million amortization expense), and $389,000 (net of $95,000 amortization expense), respectively – and net interest income of $621,000, $758,000 and $26,000, respectively.
On December 29, 2006, MY LLC and MIC European Financing SarL, a wholly owned subsidiary of MY LLC, entered into a sale and purchase agreement, and subsequently completed the sale of its interest in Macquarie Yorkshire Limited, the holding company for its 50% interest in CHL, to M1-A1 Investments Limited, a wholly owned indirect subsidiary of Balfour Beatty PLC, for £44.3 million.
MY LLC entered into foreign exchange forward transactions to fix the rate at which substantially all of the proceeds of sale would be converted from pounds sterling to US dollars. Based on the hedged conversion rate, the Company expects to receive approximately $83.0 million in proceeds in 2007, net of hedge and transaction costs, which comprises substantially all of the balance in other receivables on the consolidated balance sheet. Most of the proceeds have been settled in January 2007. MY LLC recorded a gain on sale of $3.4 million in the fourth quarter of 2006, and an unrealized loss of approximately $2.4 million relating to the foreign exchange forward transactions. There may be additional gains or losses in 2007 when the foreign exchange forward transactions are settled, depending on currency fluctuations.


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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6.Transactions”.

7. Direct Financing Lease Transactions

The Company has entered into energy service agreements containing provisions to lease equipment to customers. Under these agreements, title to the leased equipment will transfer to the customer at the end of the lease terms, which range from 5 to 25 years. The lease agreements are accounted for as direct financing leases. The components of the Company’s consolidated net investments in direct financing leases at December 31, 20062009 and December 31, 20052008 are as follows (in($ in thousands):

  
 December 31,
2009
 December 31,
2008
Minimum lease payments receivable $65,116  $69,493 
Less: unearned financing lease income  (28,481  (30,249
Net investment in direct financing leases $36,635  $39,244 
Equipment lease:
          
Current portion $3,369  $3,117 
Long-term portion  33,266   36,127 
   $36,635  $39,244 
  
December 31, 2006
 
 December 31, 2005
 
              
Minimum lease payments receivable $83,919 $90,879 
Less: Unearned financing lease income  (39,771) (44,851)
Net investment in direct financing leases                                                      $44,148 $46,028 
Equipment lease:       
Current portion $2,843 $2,482 
Long-term portion  41,305  43,546 
  $44,148 $46,028 

Unearned financing lease income is recognized over the terms of the leases. Minimum lease payments to be received by the Company total approximately $83.9$65.1 million as follows (in($ in thousands):

 
2010 $7,143 
2011  7,141 
2012  7,141 
2013  7,141 
2014  7,141 
Thereafter  29,409 
Total $65,116 
2007     $7,756 
2008  6,887 
2009  6,881 
2010  6,874 
2011  6,874 
Thereafter  48,647 
Total $83,919 

7.

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Property, Equipment, Land and Leasehold Improvements

Property, equipment, land and leasehold improvements at December 31, 20062009 and December 31, 20052008 consist of the following (in($ in thousands):

  
 December 31,
2009
 December 31,
2008
Land $4,618  $4,651 
Easements  5,624   5,624 
Buildings  24,789   24,752 
Leasehold and land improvements  312,881   284,207 
Machinery and equipment  330,226   307,662 
Furniture and fixtures  9,395   8,228 
Construction in progress  16,519   48,223 
Property held for future use  1,561   1,540 
    705,613   684,887 
Less: accumulated depreciation  (125,526  (92,452
Property, equipment, land and leasehold improvements, net(1) $580,087  $592,435 
  
December 31, 2006
 
 December 31, 2005
 
              
Land $63,275 $62,520 
Easements  5,624  5,624 
Buildings  35,836  32,866 
Leasehold and land improvements  166,490  108,726 
Machinery and equipment  259,897  132,196 
Furniture and fixtures  5,473  1,920 
Construction in progress  20,196  3,486 
Property held for future use  1,316  1,196 
Other  7,566  764 
   565,673  349,298 
Less: Accumulated depreciation  (42,914) (14,179)
Property, equipment, land and leasehold improvements, net $522,759 $335,119 

(1)Includes $1.3 million and $2.1 million of capitalized interest for the years ended December 31, 2009 and 2008, respectively.

During the year ended December 31, 2005, our operations at three FBO sites were impacted by Hurricane Katrina. Thefirst six months of 2009 and the fourth quarter of 2008, the Company recognized lossesnon-cash impairment charges of $7.5 million and $13.8 million, respectively, primarily relating to leasehold and land improvements; buildings; machinery and equipment; and furniture and fixtures at Atlantic Aviation. These charges are recorded in depreciation expense in the valueconsolidated statements of property, equipment and leasehold improvements, but has recovered some of these losses under existing insurance policies in 2006 and early 2007 and expects to recover the remaining losses in the near future. The write-down in property, equipment and leasehold improvements, and the corresponding insurance receivable (including amounts received), were not significant.



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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8.operations.

9. Intangible Assets

Intangible assets at December 31, 20062009 and December 31, 20052008 consist of the following (in($ in thousands):

   
 Weighted
Average Life
(Years)
 December 31,
2009
 December 31,
2008
Contractual arrangements  31.2  $774,309  $802,419 
Non-compete agreements  2.5   9,515   9,515 
Customer relationships  10.7   78,596   78,596 
Leasehold rights  12.5   3,331   3,331 
Trade names  Indefinite   15,401   15,401 
Technology  5.0   460   460 
         881,612   909,722 
Less: accumulated amortization     (130,531  (97,749
Intangible assets, net    $751,081  $811,973 

As a result of a decline in the performance of certain asset groups during the first six months of 2009 and the quarter ended December 31, 2008, the Company evaluated such asset groups for impairment and determined that the asset groups were impaired. The Company estimated the fair value of each of the impaired asset groups using the discounted cash flow model. Accordingly, the Company recognized non-cash impairment charges of $23.3 million and $21.7 million related to contractual arrangements at Atlantic Aviation during the first six months of 2009 and during the quarter ended December 31, 2008, respectively. These charges are recorded in amortization of intangibles in the consolidated statement of operations.

  
Weighted Average Life (Years)
 
December 31, 2006
 
December 31, 2005
 
                    
Contractual arrangements  30.5 $459,373 $237,572 
Non-compete agreements  2.8  5,035  4,835 
Customer relationships  10.1  66,840  26,640 
Leasehold rights  12.2  8,359  8,259 
Trade names  Indefinite(1) 17,499  26,175 
Domain names  Indefinite(2) 2,092  8,307 
Technology  5  460  460 
      559,658  312,248 
Less: Accumulated amortization     (32,899) (12,761)
Intangible assets, net    $526,759 $299,487 

——————
(1)
Trade names of $2.2 million are being amortized over a period within 1.5 years.
(2)
Domain names of $760,000 are being amortized over a period within 4 years.
Aggregate amortization

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Intangible Assets  – (continued)

Amortization expense of intangible assets for the years ended December 31, 20062009, 2008, and 20052007 totaled $43.8$60.9 million, $61.9 million and $14.8$32.4 million, respectively. Included within amortization expense for the year ended December 31, 2006 is a $23.5 million impairment charge relating to trade names and domain names at the Company’s airport parking business. Re-branding initiatives at the airport parking business which are due to take place in 2007 indicated this impairment for the 2006 year.

The estimated future amortization expense for intangible assets to be recognized for the years ending December 31 is as follows: 2007 – $27.5 million; 2008 – $25.0 million; 2009 –$24.5 million; 2010 –$23.6— $35.0 million; 2011 –$23.6— $35.0 million; 2012 — $34.9 million; 2013 — $34.9 million; 2014 — $34.7 million; and thereafter – $385.9—  $561.2 million.

The change in goodwill from December 31, 2008 to December 31, 2009 is as follows ($ in thousands):

 
Balance at December 31, 2007 $636,336 
Acquisition of SevenBar FBOs  5,156 
Prior period acquisition purchase price adjustments  (3,243
Impairment of Atlantic Aviation’s goodwill  (52,000
Balance at December 31, 2008  586,249 
Impairment of Atlantic Aviation’s goodwill  (71,200
Prior period acquisition purchase price adjustments  31 
Other  1,102 
Balance at December 31, 2009 $516,182 

The Company tests for goodwill impairment at the reporting unit level on an annual basis and between annual tests if a triggering event indicates impairment. The decline in the Company’s stock price, particularly over the latter part of 2008 and the first half of 2009, has caused the book value of the Company to exceed its market capitalization. The Company performed goodwill impairment tests during the first six months of 2009 and fourth quarter of 2008. The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the test. The first step of the process consists of estimating the fair value of each reporting unit based on a discounted cash flow model using cash flow forecasts and comparing those estimated fair values with the carrying values, which includes the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an implied fair value of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying value. If the corresponding carrying value is higher than the “implied fair value”, goodwill is written down to reflect the impairment. Based on the testing performed, the Company recorded goodwill impairment charge of $71.2 million and $52.0 million at Atlantic Aviation during the first six months of 2009 and the quarter ended December 31, 2008, respectively. The Company also performed its annual goodwill impairment test in the fourth quarter of 2009, and concluded that no further goodwill impairment was required.

While management has a plan to return the Company’s business fundamentals to levels that support the book value per common share, there is no assurance that the plan will be successful, or that the market price of the common stock will increase to such levels in the foreseeable future. Discount rates used in recent cash flow analyses have increased and projected cash flows relating to the Company’s reporting units generally declined in the latter half of 2008 and first half of 2009 primarily as the result of negative macroeconomic factors. There is no assurance that discount rates will not increase or that the earnings, book values or projected earnings and cash flows of the Company’s individual reporting units will not decline. Management will continue to monitor the relationship of the Company’s market capitalization to its book value, the differences for which management attributes to both negative macroeconomic factors and Company specific factors, and management will continue to evaluate the carrying value of goodwill and other intangible assets. Accordingly, an additional impairment charge to goodwill and other intangible assets may be required in the foreseeable future if the Company’s common stock price continues to trade below book value per common share or the book value exceeds its estimated fair value of an individual reporting unit.

9.

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Nonfinancial Assets Measured at Fair Value

The following major categories of nonfinancial assets at the impaired asset groups were written down to fair value during the first six months of 2009 for Atlantic Aviation:

     
 Fair Value Measurements Using Total Losses
Description Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 Significant
Other
Observable
Inputs (Level 2)
 Significant
Unobservable
Inputs (Level 3)
 Quarter
Ended
December 31,
2009
 Year
Ended
December 31,
2009
   ($ in Thousands)
Property, Equipment, Land and Leasehold Improvements, net $  $  $5,122  $  $(7,521
Intangible Assets        14,430      (23,326
Goodwill        377,343      (71,200
Total $  $  $396,895  $  $(102,047

The Company estimated the fair value of each of the impaired asset groups using discounted cash flows. Property, equipment, land and leasehold improvements with a carrying amount of $12.6 million were written down to fair value of $5.1 million during 2009. This resulted in a non-cash impairment charge of $7.5 million, which is recorded in depreciation expense for Atlantic Aviation during the first six months of 2009 in the consolidated statement of operations.

Additionally, intangible assets with carrying amounts of $37.7 million were written down to their fair value of $14.4 million during the first six months of 2009 at Atlantic Aviation. This resulted in a non-cash impairment charge of $23.3 million, which is recorded in amortization of intangibles expense in the consolidated statement of operations.

As discussed in Note 9, “Intangible Assets”, the Company performed goodwill impairment analyses during the first six months of 2009. As a result of these analyses, goodwill with a carrying amount of $448.5 million was written down to its implied fair value of $377.3 million resulting in a non-cash impairment charge of $71.2 million at Atlantic Aviation. This non-cash impairment charge was included in goodwill impairment in the consolidated statement of operations.

The significant unobservable inputs used for all fair value measurements in the above table included forecasted cash flows of Atlantic Aviation and its asset groups, the discount rate and, in the case of goodwill, the terminal value. The forecasted cash flows for this business were developed using actual cash flows from 2008 and 2009, forecasted jet fuel volumes from the Federal Aviation Administration, forecasted consumer price indices and forecasted LIBOR rates based on proprietary models using various published sources. The discount rate was developed using a capital asset pricing model.

Model inputs included:

a risk free rate equal to the rate on 20 year U.S. treasury securities;
a risk premium based on the risk premium for the U.S. equity market overall;
the observed beta of comparable listed companies;
a small company risk premium based on historical data provided by Ibbotsons; and
a specific company risk premium based on the uncertainty in the current market conditions.

The terminal value was based on observed earnings before interest, taxes, depreciation and amortization, or EBITDA, and multiples historically paid in transactions for comparable businesses.


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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Accrued Expenses

Accrued expenses at December 31, 20062009 and December 31, 20052008 consist of the following (in($ in thousands):

  
 December 31,
2009
 December 31,
2008
Payroll and related liabilities $6,030  $8,462 
Interest  609   1,218 
Insurance  1,770   1,932 
Real estate taxes  887   896 
Other  8,136   10,681 
   $17,432  $23,189 
  
December 31, 2006
 
December 31, 2005
 
              
Payroll and related liabilities $7,624 $3,794 
Interest  1,176  1,082 
Insurance  2,076  1,909 
Real estate taxes  2,550  2,484 
Other  6,354  4,725 
  $19,780 $13,994 
10. Long-term

12. Long-Term Debt

The Company capitalizes its operating businesses separately using non-recourse, project finance style debt. In addition, it has a credit facility at its subsidiary, MIC Inc., primarily to finance acquisitions and capital expenditures, which matures on whichMarch 31, 2010. At December 31, 2009, there was no balance outstanding at December 31, 2006.on this facility. The Company currently has no indebtedness at the MIC LLC level.

All of the term debt facilities described below contain customary financial covenants, including maintaining or Trust level.

exceeding certain financial ratios, and limitations on capital expenditures and additional debt.

For a description of certain related party transactions associated with the Company’s long-term debt, see Note 15, Related17, “Related Party Transactions.



F-23


MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term Debt – (continued)
Transactions”.

At December 31, 20062009 and December 31, 2005, our2008, the Company’s consolidated long-term debt consists ofcomprised the following (in($ in thousands):

  
 December 31,
2009
 December 31,
2008
MIC Inc. $  $69,000 
The Gas Company  179,000   169,000 
District Energy  170,000   150,000 
Atlantic Aviation  863,279   939,800 
Total  1,212,279   1,327,800 
Less: current portion  (45,900   
Long-term portion $1,166,379  $1,327,800 
  
December 31, 2006
 
December 31, 2005
 
              
Airport services debt $480,000 $300,000 
MDE senior notes  120,000  120,000 
PCAA (new facility)  195,000   
PCAA (various) loan payable    125,448 
PCAA Chicago loan payable  4,474  4,574 
PCAA SP loan payable    58,740 
RCL Properties loan payable  2,186  2,232 
TGC loans payable  162,000   
   963,660  610,994 
Less current portion  3,754  146 
Long-term portion $959,906 $610,848 

At December 31, 2006,2009, future maturities of long-term debt are as follows (in($ in thousands):

 
2010 $45,900 
2011  55,906 
2012  55,972 
2013  258,325 
2014  796,176 
Total $1,212,279 
2007      3,754 
2008  6,162 
2009  205,843 
2010  484,800 
2011  4,380 
Thereafter  258,721 
  $963,660 
District Energy Business
The acquisition of Thermal Chicago Corporation by Macquarie District Energy, Inc., or MDE, on June 30, 2004 was partially financed with a $75 million bridge loan facility provided by the Macquarie Group. On September 29, 2004, MDE borrowed $120 million under a series of senior secured notes, or MDE Senior Notes, with various financial institutions. The proceeds of the MDE Senior Notes were used to repay the previously outstanding bridge facility, finance the acquisition by MDE of Northwind Aladdin and pay certain transaction costs associated with these transactions.
The MDE Senior Notes consist of two notes payable:
1) $100 million, with fixed interest at 6.82%.
2) $20 million, with fixed interest at 6.40%.
The MDE Senior Notes are secured by all the assets of MDE and its subsidiaries, excluding the assets of Northwind Aladdin. MDE has further reserved $4.1 million to support its debt services, which is included in restricted cash in the accompanying consolidated balance sheet. The MDE Senior Notes are due in 2023, with principal repayments of the MDE Senior Notes starting in the quarter ending December 31, 2007.
In addition, MDE entered into a $20 million three-year revolving credit facility with a financial institution that may be used to fund capital expenditures, working capital or to provide letters of credit. As of December 31, 2006, MDE has issued three separate letters of credit totaling $7.2 million against this facility in the favor of the City of Chicago, and has drawn $1.7 million for ongoing working capital.


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MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term

12. Long-Term Debt  – (continued)

Debt arranging fees of $600,000 were paid

MIC Inc.

Effective April 14, 2009, MIC Inc. elected to MSUSA, a related party, by MDE prior toreduce the Company’s acquisition ofavailable principal on its parent Macquarie District Energy Holdings LLC, and the remaining unamortized balance of these fees are included in deferred financing costs on the accompanying consolidated balance sheet. These costs are amortized over the life of the long-term debt.

Airport Services Business
Atlantic Aviation FBO Inc. (formerly North America Capital Holding Company, or NACH)
The acquisition of Executive Air Support by NACH on July 29, 2004 was partially financed with a $130 million bridge loan facility provided by the Macquarie Group. On October 21, 2004, NACH refinanced its bridge loan facility by borrowing $130 million under a newrevolving credit facility or Term Facility, originally setfrom $300.0 million to mature on October 21, 2011.
The Term Facility originally consisted of two tranches:
1) Tranche A –$25.0$97.0 million at LIBOR plus 2.25%.
2) Tranche B –$105.0 million at LIBOR plus 3.00%.
Principal repayments with respect to Tranche A were to commence in 2007. However, an early repayment of $1.5 million was madeand on December 31, 2004. Tranche B was payable at maturity. A syndicate of three banks, including Macquarie Bank Limited, granted2009, further reduced the Term Facility. Under the terms of the Term Facility, 100% of available cash flows of NACH and its subsidiaries hadprincipal to be applied to the repayment of the Term Facility during the last two years of the debt. The Term Facility was secured by all of the assets and stock of NACH and its subsidiaries and was non-recourse to the Company and its other subsidiaries. NACH also provided a six-month debt service reserve of $3.9 million as security.$20.0 million. This reserve was included in restricted cash on our accompanying consolidated balance sheet at December 31, 2004.
In addition to the Term Facility, NACH had entered into a $3.0 million, two-year revolving credit facility is with a bank that could be used to fund working capital requirements or to provide letters of credit. This facility ranked equally with the Term Facility. Prior to the refinancing discussed below, $700,000 of this facility had been utilized to provide letters of credit pursuant to certain FBO leases.
On January 14, 2005, NACH borrowed an additional $32.0 million from its original Term Facility to partly fund its acquisition of GAH.
Macquarie AirportsCiticorp North America Inc, or MANA
The acquisition of MANA by the Company included the assumption of a $36.0 million senior debt facility that was issued to a European bank. The debt accrued interest at either the Eurodollar rate or, at the Company’s option, the 30, 60 or 180-day LIBOR plus a margin of 1.875%Inc. (as lender and administrative agent), increasing to a margin of 2.25% in November 2005. Interest-only payments were to be made quarterly with the principal balance due in full in November 2007. Borrowings under the debt facility were secured by all assets as well as pledged stock of MANA and its subsidiaries. This debt was repaid on December 12, 2005 as part of the airport services refinancing.


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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term Debt – (continued)
Airport Services Refinancing
On December 12, 2005, NACH entered into a loan agreement providing for $300.0 million of term loan borrowings and a $5.0 million revolving credit facility. On December 14, 2005, NACH drew down $300.0 million in term loans and repaid the existing NACH and MANA term loans of $198.6 million (including accrued interest and fees), increased the new debt service reserve by $3.4 million to $9.3 million and paid $6.4 million in fees in expenses. The remaining amount of the drawdown was distributed to MIC Inc. NACH also utilized $2.0 million of the revolving credit facility to issue letters of credit.
The obligations under the credit agreements are secured by the assets of Atlantic Aviation (formerly NACH), as well as the equity interests of Atlantic Aviation and its subsidiaries. The term of the loan is 5 years, and the interest rate is LIBOR plus 1.75% for years 1 through 3 and LIBOR plus 2% for years 4 and 5.
To hedge the interest commitments under the new term loan, NACH’s existing interest rate swaps were novated and, in addition, new swaps were entered into, fixing 100% of the term loan at the following average rates (not including interest margins of 1.75% and 2% as discussed above):
Start Date
End Date
Average Rate
December 14, 2005                                                                   September 28, 20074.27%
September 28, 2007November 7, 20074.73%
November 7, 2007October 21, 20094.85%
October 21, 2009December 14, 20104.98%
Mizuho CorporateWachovia Bank Ltd., The Governor and Company Bank of Ireland, Bayerische Landesbank,National Association, Credit Suisse, Cayman Islands Branch, WestLB AG, New York Branch, and Macquarie Bank Limited provided for a $180.0 million expansion of the airport services business debt facility to finance the acquisition of Trajen.
To hedge the interest commitments under the term loan expansion, NACH entered into a swap, fixing 100% of the term loan expansion at the following average rate (not including interest margins of 1.75% and 2% as discussed above):
Start Date
End Date
Average Rate
September 29, 2006                                                                   December 12, 20105.51%
Airport Parking Business
On October 1, 2003, prior to the Company’s acquisition of its airport parking business, the business entered into a loan for $126 million, which was used to refinance debt and to partly fund the acquisition of the Avistar business. This loan was secured by the majority of real estate and other assets of the airport parking business and was recourse only to Macquarie Parking and its subsidiaries. On December 22, 2003, the airport parking business entered into another loan agreement with the same lender for $4.8 million.Limited. The airport parking business used the proceeds of this loan to partly fund the acquisition of land that it formerly leased for operating its Chicago facility. This loan was secured by the land at the Chicago site.
The airport parking business established a non-recourse debt facility on October 3, 2005 under a new credit agreement with GMAC Commercial Mortgage Corporation to fund the SunPark acquisition and additional airport parking facilities. The SunPark debt facility was secured by all of the real property and other assets of SunPark, the LaGuardia facility and the Maricopa facility. In addition, in the third quarter of 2005, the airport parking business assumed a debt facility in connection with the acquisition of an additional facility in Philadelphia.


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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term Debt – (continued)
On September 1, 2006, the airport parking business, through a number of its majority-owned airport parking subsidiaries, entered into a loan agreement providing for $195.0 million of term loan borrowings. On September 1, 2006, the airport parking business drew down $195.0 million and repaid two of its existing term loans totaling $184.0 million, paid interest expense of $1.9 million, and paid fees and expenses of $4.9 million. The airport parking business also released approximately $400,000 from reserves in excess of minimum liquidity and reserve requirements. The remaining amount of the drawdown, approximately $4.6 million, will be used to fund maintenance and specific capital expenditures of the airport parking business.
The counterparty to the agreement is Capmark Finance Inc. The obligations under the credit agreement are secured by the assets of borrowing entities.
Material terms of the credit facility are presented below:
Borrower:Parking Company of America Airports, LLC
Parking Company of America Airports Phoenix, LLC
PCAA SP, LLC
PCA Airports, LTD
Borrowings:$195.0 million term loan
Security:Borrower assets
Term:3 years (September 2009) plus 2 one-year optional extensions subject to meeting certain covenants
Amortization:Payable at maturity
Interest rate:1 month LIBOR plus
Years 1-3:1.90%
Year 4:2.10%
Year 5:2.30%
Debt Reserves:Various reserves totaling $1.4 million, together with minimum liquidity requirement, represents a decrease of $400,000 over the total reserves associated with the prior loans.
An existing rate cap at LIBOR equal to 4.48% will remain in effect through October 15, 2008 with respect to a notional amount of the loan of $58.7 million. The airport parking business has entered into an interest rate swap agreement for the $136.3 million balance of the floating rate facility at 5.17% through October 16, 2008 and for the full $195.0 million once the interest rate cap expires through theoriginal maturity of the loan on September 1, 2009. The obligations of the airport parking business under the interest rate swap have been guaranteed byfacility was March 2008; however, in February 2008, MIC Inc.
Gas Production and Distribution Business
The acquisition of TGC in June 2006 was partially financed with $160.0 million of term loans borrowed under the two amended and restated loan agreements. One of these loan agreements provides for an $80.0 million term loan borrowed by HGC, the parent company of TGC. The other loan agreement provides for an $80.0 million term loan borrowed by TGC and a $20.0 million revolving credit facility, including a $5.0 million letter of credit facility. The counterpartiesextending the maturity to each agreement are Dresdner Bank AG, London Branch, as administrative agent, Dresdner Kleinwort Wasserstein Limited, as lead arranger, and the other lenders party thereto. TGC generally intends to utilize the $20.0 million revolving credit facility to finance its working capital and to finance or refinance its capital expenditures for regulated assets, and had drawn down $2.0 million as of December 31, 2006. In addition, as of December 31, 2006, TGC had $350,000 of letters of credit issued under this facility.


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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term Debt – (continued)
The obligations under the credit agreements are secured by security interests in the assets of TGC as well as the equity interests of TGC and HGC. Material terms of the term and revolving credit facilities are summarized below:
Holding Company Debt
Operating Company Debt
HGC Holdings LLCThe Gas Company, LLC
Borrowings:$80.0 million Term Loan$80.0 million Term Loan$20.0 million Revolver
Security:First priority security interest on HGC assets and equity interestsFirst priority security interest on TGC assets and equity interests
Term:7 years7 years7 years
Amortization:Payable at maturityPayable at maturityPayable at the earlier of 12 months or maturity
Interest: Years 1-5:LIBOR plus 0.60%LIBOR plus 0.40%LIBOR plus 0.40%
Interest: Years 6-7:LIBOR plus 0.70%LIBOR plus 0.50%LIBOR plus 0.50%
Hedging:Interest rate swaps (fixed v. LIBOR) fixing funding costs at 4.84% for 7 years on a notional value of $160.0 million
In addition to customary terms and conditions for secured term loan and revolving credit agreements, the agreements provide that TGC:
(1) may not incur more than $5.0 million of new debt; and
(2) may not sell or dispose of more than $10.0 million of assets per year.
The Hawaii Public Utilities Commission, in approving the purchase of the business by the Company, required that HGC’s consolidated debt to total capital ratio may not exceed 65%. This ratio was 60% at December 31, 2006.
On August 18, 2005, MIC Inc. entered into two interest rate swaps with Macquarie Bank Limited and two interest rate swaps with another bank, to manage its future interest rate exposure on intended drawdowns under the loan facilities, for a notional value of $160.0 million. The interest rate swaps were transferred to TGC and HGC in June 2006 when the loan agreements were amended and restated. No payments by, or receipts to, MIC Inc. arose in relation to these swaps during the years ended December 31, 2006 and 2005. Receipts by TGC from related parties, in relation to these swaps, have been disclosed in Note 15, Related Party Transactions.




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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Long-term Debt – (continued)
MIC Inc.
The Company has a $300.0 million revolving credit facility with Citicorp North America Inc., (as lender and administrative agent), Citibank N.A., Merrill Lynch Capital Corporation, Credit Suisse, Cayman Islands Branch and Macquarie Bank Limited.March 2010. The main use of the facility is to fund acquisitions, capital expenditures and to a limited extent, working capital. The facility terminates on March 31, 20082010 and currently bears interest at the rate of LIBOR plus 1.25%2.75%. Base rate borrowings would be at the base rate plus 0.25%1.75%.
The Company entered into

On February 20, 2008, MIC Inc. drew $56.0 million on this facility, part of which was used to fund the acquisition of SevenBar FBOs which was completed in the first quarter of 2008, and part of which was used for other projects. On July 31, 2008, MIC Inc. drew an additional $13.0 million on this facility to fund the acquisition of SkyPark, which was completed in November 2005 with maximumthe third quarter of 2008. On February 25, 2009, MIC Inc. repaid $2.6 million of the outstanding balance on the revolving borrowing of $250.0 million. During 2006,credit facility.

At March 31, 2009, the Company expandedreclassified the outstanding balance drawn on the revolving credit facility at the non-operating holding company from long-term debt to current portion of long-term debt on the consolidated balance sheet due to its scheduled maturity on March 31, 2010. During the year, the Company was in discussions with its lenders to convert the facility to increasea term loan and extend the maturity date of the $66.4 million outstanding balance.

On December 28, 2009, the Company used the net cash proceeds it received from the sale of the 49.99% non-controlling interest in District Energy, and cash on hand, to pay off the outstanding principal balance on the revolving portioncredit facility. Shortly thereafter the Company elected to reduce the amount available on the revolving credit facility from $250.0$97.0 million to $300.0$20.0 million andthrough to provide for $180.0 millionthe maturity of term loans to fund the Trajen acquisition. In connection with the increase, the interest rate margin increased to LIBOR plus 2.00% until the term loan was repaid in October 2006.facility at March 31, 2010. The Company borrowedexpects to retain excess cash generated by the consolidated businesses over the near term.

See Note 17, “Related Party Transactions” for a totaldiscussion of $454.0 million under this facility in 2006 and repaid the facility in full with the proceeds from the sales of its interests in SEW and MCG and mostMacquarie Group’s portion of the proceeds of its 2006 equity offering.

The borrowercommitments available under the facility is MIC Inc., a direct subsidiary ofand the Company, andpayments made to the Macquarie Group.

The obligations under the facility are guaranteed by the Company and secured by a pledge of the equity of all current and future direct subsidiaries of MIC Inc. and the Company. Among other things, the revolving facility includes an event of default should the Manager or another affiliate ofwithin the Macquarie Bank Limited ceasesGroup cease to act as manager of the Company.

Material terms of the MIC Inc.’s revolving credit facility are presented below:

BorrowerMIC Inc.
Facilities$20.0 million for loans and/or letters of credit
Termination dateMarch 31, 2010
Interest and principal repaymentsInterest only during the term of the loan
Repayment of principal at termination, upon voluntary prepayment, or upon an event requiring mandatory prepayment
Eurodollar rateLIBOR plus 2.75% per annum
Base rateBase rate plus 1.75% per annum
Annual commitment fee0.50% per annum on the average daily undrawn balance
All

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Long-Term Debt  – (continued)

The Gas Company

The acquisition of The Gas Company in June 2006 was partially financed with $160.0 million of term loans borrowed under the two amended and restated loan agreements. One of these loan agreements provides for an $80.0 million term loan borrowed by HGC Holdings LLC, or HGC, the parent company of The Gas Company, LLC, or TGC. The other loan agreement provides for an $80.0 million term loan borrowed by TGC and a $20.0 million revolving credit facility, including a $5.0 million letter of credit facility. TGC generally intends to utilize the $20.0 million revolving credit facility to finance its working capital and to finance or refinance its capital expenditures for regulated assets. At December 31, 2009, $19.0 million was outstanding under the revolving credit facility.

The obligations under the credit agreements are secured by security interests in the assets of TGC as well as the equity interests of TGC and HGC. Material terms of the term and revolving credit facilities are presented below:

Holding Company DebtOperating Company Debt
BorrowersHGCTGC
Facilities$80.0 million
Term Loan (fully drawn at December 31, 2009 and 2008)
$80.0 million
Term Loan (fully drawn at December 31, 2009 and 2008)
$20.0 million
Revolver ($19.0 million and $9.0 million drawn at December 31, 2009 and 2008, respectively)
CollateralFirst priority security interest on HGC’s assets and equity interestsFirst priority security interest on TGC’s assets and equity interests
MaturityJune, 2013June, 2013June, 2013
AmortizationPayable at maturityPayable at maturityPayable at maturity for utility capital expenditures
Interest: Years 1 – 5LIBOR plus 0.60%LIBOR plus 0.40%LIBOR plus 0.40%
Commitment Fees: Years 1 – 50.14% on undrawn portion
Interest: Years 6 – 7LIBOR plus 0.70%LIBOR plus 0.50%LIBOR plus 0.50%
Commitment Fees: Years 6 – 70.18% on undrawn portion

To hedge the interest commitments under the new term loan, The Gas Company entered into interest rate swaps fixing 100% of the term loans at 4.8375% (excluding the margin).

In addition to customary terms and conditions for secured term loan and revolving credit agreements, the agreements provide that TGC:

(1)may not incur more than $7.5 million of new debt; and
(2)may not sell or dispose of more than $10.0 million of assets per year.

The facilities also require mandatory repayment if the Company or another entity managed by the Macquarie Group fails to either own 75% of the respective borrowers or control the management and policies of the respective borrowers.

The Hawaii Public Utilities Commission, in approving the purchase of the business by the Company, required that The Gas Company’s consolidated debt facilities describedto total capital ratio does not exceed 65%. This ratio was 63.2% at December 31, 2009 and 61.7% at December 31, 2008.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Long-Term Debt  – (continued)

The Gas Company also has an uncommitted unsecured short-term borrowing facility of $7.5 million that was renewed during the second quarter of 2009. This credit line bears interest at the lending bank’s quoted rate or prime rate. The facility is available for working capital needs. At December 31, 2009 and December 31, 2008, no amounts were outstanding.

District Energy

District Energy has in place a term loan facility, a capital expenditure loan facility and a revolving loan facility. Proceeds of $150.0 million, drawn under the term loan facility in 2007, were used to repay the previously existing debt outstanding, pay a $14.7 million make-whole payment, and to pay accrued interest, fees and transaction costs.

Material terms of the facility are presented below:

BorrowerMacquarie District Energy LLC, or MDE
Facilities

   •  

$150.0 million term loan facility (fully drawn at December 31, 2009 and 2008)

   •  

$20.0 million capital expenditure loan facility fully drawn at December 31, 2009 and $1.5 million drawn at December 31, 2008)

   •  

$18.5 million revolving loan and letter of credit facility ($7.1 million utilized at December 31, 2009 and 2008 for letters of credit)

AmortizationPayable at maturity
Interest typeFloating
Interest rate and fees

   •  

Interest rate:

     •  

LIBOR plus 1.175% or

     •  

Base Rate (for capital expenditure loan and revolving loan facilities only): 0.5% above the greater of the prime rate or the federal funds rate

   •  

Commitment fee: 0.35% on the undrawn portion

MaturitySeptember, 2014; September, 2012 for the revolving loan facility
Mandatory prepayment

   •  

With net proceeds that exceed $1.0 million from the sale of assets not used for replacement assets;

   •  

With insurance proceeds that exceed $1.0 million not used to repair, restore or replace assets;

   •  

In the event of a change of control;

   •  

In years 6 and 7, with 100% of excess cash flow applied to repay the term loan and capital expenditure loan facilities;

   •  

With net proceeds from equity and certain debt issuances; and

   •  

With net proceeds that exceed $1.0 million in a fiscal year from contract terminations that are not reinvested.

CollateralFirst lien on the following (with limited exceptions):

   •  

Project revenues;

   •  

Equity of the Borrower and its subsidiaries;

   •  

Substantially all assets of the business; and

   •  

Insurance policies and claims or proceeds.


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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Long-Term Debt  – (continued)

To hedge the interest commitments under the term loan facility, District Energy entered into an interest rate swap fixing 100% of the term loan facility at 5.074% (excluding the margin).

Atlantic Aviation

Atlantic Aviation has in place a term loan facility, a capital expenditure facility and a revolving credit facility. On February 25, 2009, Atlantic Aviation amended its credit facility to provide the business additional financial flexibility over the near and medium term. Additionally, under the amended terms, the business will apply all excess cash flow from the business to prepay additional debt whenever the leverage ratio (debt to adjusted EBITDA) is equal to or greater than 6.0x to 1.0 for the district energytrailing twelve months and will use 50% of excess cash flow to prepay debt whenever the leverage ratio is equal to or greater than 5.5x to 1.0 and below 6.0x to 1.0. During the first quarter of 2009, the Company provided the business airport serviceswith a capital contribution of $50.0 million. The business airport parkingpaid down $44.6 million of debt and used the remainder of the capital contribution to pay interest rate swap breakage fees and debt amendment costs. In addition, during 2009 the business gas productionused $40.6 million of its excess cash flow to prepay $37.0 million of the outstanding principal balance of the term loan and distribution business$3.6 million in interest rate swap breakage fees. The Company has classified $45.9 million relating to Atlantic Aviation’s debt in current portion of long-term debt in the consolidated 2009 balance sheet as it expects to repay this amount during 2010.

In February 2010, Atlantic Aviation used $17.1 million of excess cash flow from the fourth quarter of 2010 to prepay $15.5 million of the outstanding principal balance of the term loan debt under this facility and MIC Inc. contain customary financial covenants, including maintaining or exceeding certain financial ratios, and limitationsincurred $1.6 million in interest rate swap breakage fees.

The key terms of the loan agreement of Atlantic Aviation, as revised on capital expenditures and additional debt.February 25, 2009, are presented below:

BorrowerAtlantic Aviation
Facilities$900.0 million term loan facility ($818.4 million outstanding at December 31, 2009 and fully drawn at December 31, 2008)
$50.0 million capital expenditure facility ($44.9 million and $39.8 million drawn at December 31, 2009 and 2008, respectively)
$18.0 million revolving working capital and letter of credit facility ($6.5 million and $6.8 million utilized to back letters of credit at December 31, 2009 and 2008, respectively)
AmortizationPayable at maturity

Years 1 to 5:
100% excess cash flow when Leverage Ratio is 6.0x or above
50% excess cash flow when Leverage Ratio is between 6.0x and 5.5x
100% of excess cash flow in years 6 and 7 (unchanged)
Interest typeFloating
Interest rate and feesYears 1 – 5:
LIBOR plus 1.6% or
Base Rate (for revolving credit facility only): 0.6% above the greater of: (i) the prime rate or (ii) the federal funds rate plus 0.5%
Years 6 – 7:
LIBOR plus 1.725% or
Base Rate (for revolving credit facility only): 0.725% above the greater of: (i) the prime rate or (ii) the federal funds rate plus 0.5%
11.

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Long-Term Debt  – (continued)

MaturityOctober, 2014
Mandatory prepaymentWith net proceeds that exceed $1.0 million from the sale of assets not used for replacement assets;
With net proceeds of any debt other than permitted debt;
With net insurance proceeds that exceed $1.0 million not used to repair, restore or replace assets;
In the event of a change of control;
Additional mandatory prepayment based on leverage grid
With any FBO lease termination payments received;
With excess cash flows in years 6 and 7.
CollateralFirst lien on the following (with limited exceptions):

   •  

Project revenues;

   •  

Equity of the borrower and its subsidiaries; and

   •  

Insurance policies and claims or proceeds.

To hedge the interest risk associated with commitments under Atlantic Aviation’s term loan, Atlantic Aviation entered into a number of interest rate swaps with various maturity dates to hedge 100% of the term loan through October 16, 2012. As of December 31, 2009, six swaps were remaining, five of which will expire on December 14, 2010. The weighted average hedged rate for these swaps was approximately 5.21%. On December 14, 2010, Atlantic will have only one remaining swap hedging 100% of the outstanding balance of the term loan, with a hedge rate of 5.19%.

13. Derivative Instruments and Hedging Activities

The Company has interest-rate related and foreign-exchange relatedinterest rate-related derivative instruments to manage its interest rate exposure on its debt instruments, and to manage its exchange rate exposure on its future cash flows from its non-U.S. investments, including cash flows from the sale of the non-U.S. investments.instruments. The Company does not enter into derivative instruments for any purpose other than economic interest rate hedging or economic cash-flow hedging purposes.hedging. That is, the Company does not speculate using derivative instruments.

By using derivative financial instruments to hedge exposures to changes in interest rates and foreign exchange rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it does not possess credit risk. The Company minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties.

Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates or currency exchange rates. The market risk associated with interest rates is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

We originally classified each hedge as a cash flow hedge at inception for accounting purposes. We subsequently determined that the derivatives did not qualify as hedges for accounting purposes. We have revised our summarized quarterly financial information to eliminate hedge accounting treatment. The effect on the full 2005 year was immaterial and the full year financial information has not been revised.



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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Derivative Instruments and Hedging Activities – (continued)
Anticipated future cash flows

Debt Obligations

The Company entered into foreign exchange forward contracts forand its anticipated cash flows in order to hedge the market risk associated with fluctuations in foreign exchange rates. The forward contracts limit the unfavorable effect that foreign exchange rate changes willbusinesses have on cash flows, including foreign currency distributions and proceeds on the sale of foreign investments. All of the Company’s forward contracts relating to anticipated future cash flows were originally designated as cash flow hedges, however, we subsequently determined that the derivatives did not qualify as hedges for accounting purposes. The maximum term over which the Company was hedging exposures to the variability of foreign exchange rates was 24 months. As the Company sold all of its foreign investments during the year ended December 31, 2006, the Company’s existing foreign exchange forward contracts were closed out by entering equal and offsetting contracts.

For the year ended December 31, 2006, the Company recorded $3.3 million in losses, representing changes in the valuation of foreign exchange forward contracts, in unrealized losses on derivative instruments in the accompanying consolidated statement of operations. In addition, during the year ended December 31, 2006, the Company recorded $392,000 in recognized gains on foreign exchange forward contracts and other foreign exchange gains and losses in other income, in the accompanying consolidated statement of operations.
Debt Obligations
The Company has in place variable-rate debt. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes that it is prudent to limit the variability of a portion of its interest payments. To meet this objective, managementthe Company enters into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk.risk on a majority of its debt with a variable-rate component. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the portion of the debt that is swapped.

During

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Derivative Instruments and Hedging Activities  – (continued)

At December 31, 2009, the Company had $1.2 billion of current and long-term debt, $1.1 billion of which was economically hedged with interest rate swaps and $83.9 million of which was unhedged. At December 31, 2008, the Company had $1.3 billion of debt, $1.2 billion of which was economically hedged with interest rate swaps and $117.8 million of which was unhedged.

For the year ended December 31, 2006, $1.92009, Atlantic Aviation used $90.4 million to prepay $81.6 million of gains, representing changesthe outstanding principal balance of the term loan debt under the facility and $8.8 million in interest rate swap breakage fees. As a result of the future interest payments that are no longer probable of occurring due to the prepayment of debt, $44.0 million of accumulated other comprehensive loss in the valuation of interest rateconsolidated balance sheet related to Atlantic Aviation’s derivatives was recorded in unrealized lossesreclassified to loss on derivative instruments in the accompanying consolidated statement of operations.

From Januaryoperations for the year ended December 31, 2009. Subject to the mandatory debt prepayment conditions, under the amended debt terms, to the extent future cash flows exceed forecast, Atlantic Aviation will repay its debt more quickly than expected, which will result in additional interest rate swap breakage fees and corresponding reclassifications from accumulated other comprehensive loss to loss on derivative instruments. See Note 12 “Long-Term Debt” for further discussion.

In March 2009, Atlantic Aviation, The Gas Company and District Energy entered into interest rate basis swap contracts with their existing counterparties. These contracts effectively changed the interest rate index on the Company’s existing swap contracts through March 2010 from receiving the 90-day LIBOR rate to receiving the 30-day LIBOR rate plus a margin of 19.50 basis points for Atlantic Aviation and 24.75 basis points for The Gas Company and District Energy. This transaction, adjusted for the prepayments of outstanding principal on the term loan debt at Atlantic Aviation, resulted in $1.8 million lower interest expense for these businesses in 2009 and is expected to lower the effective cash interest expense on these businesses’ debt by approximately $581,000 for the first quarter of 2010.

As of February 25, 2009, due to the amendment of the credit facility for Atlantic Aviation discussed above, and effective April 1, 2007,2009 for the Company’s other businesses, the Company elected to discontinue hedge accounting. In prior periods, when the Company applied hedge accounting, changes in the fair value of interest rate swaps designated as hedging instrumentsderivatives that effectively offset the variability of cash flows associated with variable-rate, long-termon the Company’s debt interest obligations will be reportedwere recorded in other comprehensive income. In accordance with SFAS No. 133,From the Company has concludeddates that from this date,hedge accounting was discontinued, all movements in the fair value of itsthe interest rate swaps qualify as cash flow hedges.are recorded directly through earnings. As interest payments are made, a portion of the other comprehensive loss recorded under hedge accounting is also reclassified into earnings. The Company anticipateswill reclassify into earnings the hedges to be effective on an ongoing basis. The term$72.3 million of net derivative losses included in accumulated other comprehensive loss as of December 31, 2009 over the remaining life of the existing interest rate swaps, of which the Company is currently hedging exposures relatingexpects approximately $31.7 million will be reclassified over the next 12 months.

The Company’s derivative instruments are recorded on the balance sheet at fair value with changes in fair value of interest rate swaps recorded directly through earnings since the dates that hedge accounting was discontinued. The Company measures derivative instruments at fair value using the income approach, which discounts the future net cash settlements expected under the derivative contracts to debt is through August 2013.



F-30a present value. These valuations primarily utilize observable (“level 2”) inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Derivative Instruments and Hedging Activities  – (continued)

The Company’s fair value measurements of its derivative instruments and the related location of the liabilities associated with the hedging instruments within the consolidated balance sheets at December 31, 2009 and December 31, 2008 were as follows:

  
 Liabilities at Fair Value(1)
   Interest Rate
Swap Contracts
Not Designated
as Hedging
Instruments(2)
 Interest Rate
Swap Contracts
Designated
as Hedging
Instruments
Balance Sheet Location December 31,
2009
 December 31,
2008
   ($ in Thousands)
Fair value of derivative instruments – current liabilities $(49,573 $(45,464
Fair value of derivative instruments – non-current liabilities  (54,794  (105,970
Total interest rate derivative contracts $(104,367 $(151,434

(1)Fair value measurements at reporting date were made using significant other observable inputs (level 2).
(2)As of February 25, 2009 for Atlantic Aviation and April 1, 2009 for the other businesses, the Company elected to discontinue hedge accounting.

The Company’s hedging activities for the years ended December 31, 2009 and 2008 and the related location within the consolidated financial statements were as follows:

        
 Derivatives Designated as Hedging Instruments(1) Derivatives Not
Designated as Hedging
Instruments(1)
   Amount of Gain/
(Loss) Recognized in
OCI on Derivatives
(Effective Portion)
for the Year Ended
December 31,
 Amount of Loss
Reclassified from OCI
into Income (Effective
Portion) for the
Year Ended
December 31,
 Amount of Loss
Recognized in
Loss on Derivative
Instruments
(Ineffective Portion)
for the Year Ended
December 31,
 Amount of Loss
Recognized in Loss
on Derivative
Instruments for the
Year Ended
December 31,
Financial Statement Account 2009 2008 2009(2) 2008 2009 2008 2009(3) 2008
   ($ in Thousands)
Interest expense $  $  $(15,691 $(19,798 $  $  $(43,937 $ 
Loss on derivative instruments        (25,154  (2,648  (84  (195  (4,302   
Accumulated other comprehensive gain (loss)  2,848   (118,362                  
Total $2,848  $(118,362 $(40,845 $(22,446 $(84 $(195 $(48,239 $ 

(1)Substantially all derivatives are interest rate swap contracts.
(2)Includes $22.7 million of accumulated other comprehensive losses reclassified into earnings (loss or derivative instruments) resulting from the $44.6 million pay down of principal debt at Atlantic Aviation in the first quarter of 2009. Interest expense represents cash interest paid on derivative instruments, of which $5.2 million is related to the payment of interest rate swap breakage fees in the first quarter of 2009.
(3)For the year ended December 31, 2009, loss on derivative instruments primarily represents the change in fair value of interest rate swaps from the discontinuation of hedge accounting as of February 25, 2009 for Atlantic Aviation and April 1, 2009 for the Company’s other businesses. In addition, loss on derivative
12.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Derivative Instruments and Hedging Activities  – (continued)

instruments includes the reclassification of amounts from accumulated other comprehensive loss into earnings, as Atlantic Aviation pays down its debt more quickly than anticipated.

All of the Company’s derivative instruments are collateralized by all of the assets of the respective businesses.

14. Notes Payable and Capital Leases

The Company has existing notes payable with various finance companies for the purchase of equipment. The notes are secured by the equipment and require monthly payments of principal and interest. The Company also leases certain equipment under capital leases. The following is a summary of the maturities of the notes payable and the future minimum lease payments under capital leases, together with the present value of the minimum lease payments, as of December 31, 2006 (in2009 ($ in thousands):

  
 Notes
Payable
 Capital
Leases
2010 $176  $59 
2011  153   42 
2012  113    
2013  113    
2014  113    
Thereafter  964    
Present value of minimum payments  1,632   101 
Less: current portion  (176  (59
Long-term portion $1,456  $42 
  
Notes Payable
 
Capital Leases
 
              
2007 $2,665 $2,018 
2008  460  1,354 
2009  79  769 
2010  73  303 
2011  49  48 
Thereafter     
Total minimum payments $3,326 $4,492 
Less: Amounts representing interest     
Present value of minimum payments  3,326  4,492 
Less current portion  (2,665) (2,018)
Long-term portion $661 $2,474 

The net book value of equipment under capital leaseleases at December 31, 20062009 and December 31, 20052008 was $6.1 million$291,000 and $5.3 million,$429,000, respectively.

13. Stockholders’

15. Members’ Equity

The TrustCompany is authorized to issue 500,000,000 shares of trust stock, and the Company is authorized to issue a corresponding number of LLC interests. Unless the Trust is dissolved, it must remain the sole holder of 100%Each outstanding LLC interest of the Company’s LLC interests and, at all times, the Company will have the identical number of LLC interests outstanding as shares of trust stock. Each share of trust stock represents an undivided beneficial interest in the Trust, and each share of trust stock corresponds to one underlying LLC interest in the Company. Each outstanding share of the trust stock is entitled to one vote for each share on any matter with respect to which membersholders of LLC interests are entitled to vote.

Prior to June 25, 2007, the Company’s publicly traded entity was the Trust. On June 25, 2007, the Trust was dissolved and all of the outstanding shares of beneficial interest in the Trust were exchanged for an equal number of LLC interests in the Company. Prior to this exchange and the dissolution of the Trust, all interests in the Company were held by the Trust. As a result of the mandatory share exchange, each shareholder of the Trust at the time of the exchange became a shareholder of, and with the same percentage interest in, the Company. The LLC interests were listed on the New York Stock Exchange under the symbol “MIC” at the time of the exchange.

Equity Offering

On June 28, 2007, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with the Manager and Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Macquarie Securities (USA) Inc., as representatives of the underwriters named in the Purchase Agreement (the “Underwriters”), whereby the Company and the Manager agreed to sell and the Underwriters agreed to purchase, subject to and upon terms and conditions set forth therein, 5,701,000 LLC interests and 599,000 LLC interests, respectively, of the Company are entitledunder the Company’s existing shelf registration statement (Registration No. 333-138010-01). Additionally, under the Purchase Agreement, the Company granted the Underwriters an option to vote.purchase up to 945,000 additional LLC interests solely to cover overallotments.

On December 15, 2004, our Board

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. Members’ Equity  – (continued)

The offering of Directorsthe LLC interests was priced at $40.99 per LLC interest and stockholders adoptedwas completed in July 2007. In addition, the Company’sUnderwriters exercised their overallotment option for 464,871 LLC interests. The proceeds from the equity offering was $241.3 million, net of underwriting fees and expenses. The Company used the proceeds of the offering to partially finance the acquisitions of additional FBO sites in 2007.

Independent Director Equity Plan

The Company has an independent director equity plan, which provides for automatic, non-discretionary awards of director stock units as an additional fee for the independent directors’ services on the Board. The purpose of this plan is to promote the long-term growth and financial success of the Company by attracting, motivating and retaining independent directors of outstanding ability. Only the Company’s independent directors may participate in the plan.

On the date of each annual meeting, each director will receivereceives a grant of stock units equal to $150,000 divided by the fair market value of one share of trust stock asaverage closing sale price of the date of eachstock during the 10-day period immediately preceding the annual meeting of the trust’sCompany’s stockholders. The stock units vest, assuming continued service by the director, on the date immediately preceding the next annual meeting of the Company’s stockholders.

Upon

The Company has issued the completion of our offering on December 21, 2004, each independent director was granted 2,548following stock units, for a total of 7,644 stock units. These stock units, which equal $150,000 per director divided by the initial public offering price of $25.00 per share and on a pro rata basis relating to the period from the closingBoard of the offering through the anticipated date of our first annual meeting of stockholders, vested on the day immediately preceding our annual meeting of the Company’s stockholders. The compensation expense related toDirectors under this grant for 2004 (in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employers, as interpreted) did not have a significant effect on operations.plan:

   
Date of Grant Stock Units
Granted
 Price of Stock
Units Granted
 Date of
Vesting
December 21, 2004  7,644(1)   $25.00   May 24, 2005 
May 25, 2005  15,873  $28.35   May 25, 2006 
May 25, 2006  16,869  $26.68   May 23, 2007 
May 24, 2007  10,314  $43.63   May 26, 2008 
May 27, 2008  14,115  $31.88   June 3, 2009 
June 4, 2009  128,205  $3.51   (2) 

(1)Pro rata basis relating to the period from the closing of the initial public offering through the anticipated date of the Company’s first annual meeting of stockholders.
(2)Date of vesting will be the day immediately preceding the 2010 annual meeting of the Company’s stockholders.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Stockholders’ Equity – (continued)
On May 24, 2005, the 7,644 outstanding restricted stock units became fully vested and were issued as trust stock to the independent directors. On the same date, each independent director was granted 5,291 stock units, for a total of 15,873 stock units. These stock units, which equal $150,000 per director divided by the average price for the ten business days preceding vesting of the 7,644 stock units, being $28.35 per share, became fully vested on May 25, 2006 and were issued as trust stock to the independent directors on June 2, 2006. On May 25, 2006, each independent director was granted 5,623 stock units, for a total of 16,869 stock units. These stock units, which equal $150,000 per director divided by the average price for the ten business days preceding vesting of the 15,873 stock units, being $26.68 per share, vest on the day immediately preceding our 2007 annual meeting of the Company’s stockholders.
14.

16. Reportable Segments

The Company’s operations are broadly classified into four reportable business segments: airport services business, airport parking business, district energythe energy-related businesses and the gas productionaviation-related business.

The energy-related businesses consist of two reportable segments: The Gas Company and distribution business.District Energy. The gas production and distributionenergy-related businesses also include a 50% investment in IMTT, which is accounted for under the equity method. Financial information for IMTT’s business as a whole is a new segment startingpresented below ($ in the second quarterthousands) (unaudited):

   
 As of, and for the Year Ended December 31,
   2009 2008 2007
Revenue $346,175  $352,583  $275,197 
Net income $54,584  $12,109  $9,626 
Interest expense, net  29,510   23,540   14,349 
Provision for income taxes  38,842   9,452   7,076 
Depreciation and amortization  55,998   44,615   36,025 
Unrealized (gains) losses on derivative instruments  (30,686  46,277   21,022 
Other non-cash income (expenses)  (590  601   860 
EBITDA excluding non-cash items(1) $147,658  $136,594  $88,958 
Capital expenditures paid $137,008  $221,700  $209,124 
Property, equipment, land and leasehold improvements, net  987,075   912,887   724,806 
Total assets balance  1,064,849   1,006,289   862,534 

(1)EBITDA consists of earnings before interest, taxes, depreciation and amortization. Non-cash items that are excluded consist of impairments, derivative gains and losses, and all other non-cash income and expense items.

The aviation-related business consists of 2006, and the results included below are from the date of acquisition on June 7, 2006.Atlantic Aviation. All of the business segments are managed separately. Duringseparately and management has chosen to organize the prior year,Company around the airportdistinct products and services business consisted of two reportable segments. These businesses are currently managed together. Therefore, they are now combined into a single reportable segment. Results for prior periods have been aggregated to reflectoffered.

Energy-Related Businesses:

IMTT provides bulk liquid storage and handling services in North America through ten terminals located on the new combined segment.

The Company completed its acquisition of a 50% interest in IMTT on May 1, 2006. In accordance with SFAS No. 131, Disclosures about Segments of an EnterpriseEast, West and Related Information, IMTT does not meetGulf Coasts, the definition of a reportable segment because it is an equity-method investeeGreat Lakes region of the Company.
The airport services business reportable segment principallyUnited States and partially owned terminals in Quebec and Newfoundland, Canada. IMTT derives incomeits revenue from fuel salesstorage and from airport services. Airport services revenue includes fuel related services, de-icing, aircraft parking, airport managementhandling of petroleum products, various chemicals, renewable fuels, and other aviation services. Allvegetable and animal oils. Based on storage capacity, IMTT operates one of the revenue of the airport services business is derivedlargest third-party bulk liquid storage terminal businesses in the United States. The airport services business operated 41 FBOs and one heliport and managed six airports under management contracts as of December 31, 2006.

The revenue from the airport parking businessThe Gas Company reportable segment is included in service revenue from product sales and includes distribution and sales of synthetic natural gas, or SNG, and liquefied petroleum gas, or LPG. Revenue is primarily consistsa function of fees from off-airport parkingthe volume of SNG and ground transportation to and from the parking facilitiesLPG consumed by customers and the airport terminals. At December 31, 2006, the airport parking business operated 30 off-airport parking facilities located at 20 major airports across the United States.

price per thermal unit or gallon charged to customers. Because both SNG and LPG are derived from petroleum, revenue levels, without organic operating growth, will generally track global oil prices. The utility revenue of The Gas Company includes fuel adjustment charges, or FACs, through which changes in fuel costs are passed through to customers.

The revenue from the district energy businessDistrict Energy reportable segment is included in service revenue and financing and equipment lease income. Included in service revenue is capacity charge revenue, which relates to monthly fixed contract charges, and consumption revenue, which relates to contractual rates applied to actual usage. Financing and equipment lease income relates to direct financing lease transactions and equipment leases to


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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Reportable Segments  – (continued)

the Company’sbusiness’ various customers. The CompanyDistrict Energy provides suchits services to buildings throughout the downtown Chicago area and to the Aladdin Resort and Casinoa casino and shopping mall located in Las Vegas, Nevada.

Aviation-Related Business:

The revenue from the gas production and distribution businessAtlantic Aviation reportable segment is included in revenueprincipally derives income from productfuel sales and from other airport services. Airport services revenue includes distributionfuel-related services, de-icing, aircraft hangarage and sales of SNG and LPG. Revenue is primarily a functionother aviation services. All of the volumerevenue of SNG and LPG consumed by customers andAtlantic Aviation is generated in the price per thermal unit or gallon charged to customers. Because both SNG and LPG are derived from petroleum, revenue levels, without organic operating growth, will generally track global oil prices. TGC’s utility revenue includes fuel adjustment charges, or FACs, through which changes in fuel costs are passed through to customers.

United States. Atlantic Aviation operated 72 FBOs as of December 31, 2009.

Selected information by reportable segment is presented in the following tables. The tables do not include financial data for ourthe Company’s equity and cost investments.




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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Reportable Segments – (continued)
investment in IMTT.

Revenue from external customers for the Company’s consolidated reportable segments for the year ended December 31, 2006 arewas as follows (in($ in thousands) (unaudited):

    
 Year Ended December 31, 2009
   Energy-related Businesses Aviation-related
Business
   The Gas
Company
 District
Energy
 Atlantic
Aviation
 Total
Revenue from Product Sales
                    
Product sales $79,597  $  $314,603  $394,200 
Product sales – utility  95,769         95,769 
    175,366      314,603   489,969 
Service Revenue
                    
Other services     3,137   171,546   174,683 
Cooling capacity revenue     20,430      20,430 
Cooling consumption revenue     20,236      20,236 
       43,803   171,546   215,349 
Financing and Lease Income
                    
Financing and equipment lease     4,758      4,758 
       4,758      4,758 
Total Revenue $175,366  $48,561  $486,149  $710,076 
  
Airport Services
 
Airport Parking
 
District Energy
 
Gas
Production
and
Distribution
 
Total
 
                                
Revenue from Product Sales
           
Fuel sales $225,570 $ $ $87,728 $313,298 
   225,570      87,728  313,298 
Service Revenue
                
Other services  87,306    3,163    90,469 
Cooling capacity revenue      17,407    17,407 
Cooling consumption revenue      17,897    17,897 
Parking services    76,062      76,062 
   87,306  76,062  38,467    201,835 
Financing and Lease Income
                
Financing and equipment lease      5,118    5,118 
       5,118    5,118 
                 
Total Revenue
 $312,876 $76,062 $43,585 $87,728 $520,251 
Financial data by reportable business segments are as follows (in thousands):
  
Year Ended December 31, 2006
 
December 31, 2006 
 
  
Segment
Profit(1)
 
Interest
Expense
 
Depreciation/
Amortization(2) 
 
Capital
Expenditures
 
Property,
Equipment,
Land and
Leasehold
Improvements
 
Total
Assets
 
                                                                           
Airport services $166,493 $30,456 $25,282 $7,101 $149,623 $932,614 
Airport parking  21,425  17,262  29,118  4,181  97,714  283,459 
District energy  14,179  8,683  7,077  1,618  142,787  236,080 
Gas production and distribution  18,810  5,426  3,735  5,509  132,635  308,500 
Total $220,907 $61,827 $65,212 $18,409 $522,759 $1,760,653 
The above table does not include financial data for our equity and cost investments.
——————
(1)
Segment profit includes revenue less cost of sales. For the airport parking and district energy businesses, depreciation of $3.6 million and $5.7 million, respectively, are included in cost of sales.
(2)
Includes depreciation of property, plant and equipment and amortization of intangibles. Amounts also include depreciation charges for the airport parking and district energy businesses.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14.

16. Reportable Segments  – (continued)

    
 Year Ended December 31, 2008
   Energy-related Businesses Aviation-related
Business
   The Gas
Company
 District
Energy
 Atlantic
Aviation
 Total
Revenue from Product Sales
                    
Product sales $91,244  $  $494,810   586,054 
Product sales – utility  121,770         121,770 
    213,014      494,810   707,824 
Service Revenue
                    
Other services     3,115   221,492   224,607 
Cooling capacity revenue     19,350      19,350 
Cooling consumption revenue     20,894      20,894 
       43,359   221,492   264,851 
Financing and Lease Income
                    
Financing and equipment lease     4,686      4,686 
       4,686      4,686 
Total Revenue $213,014  $48,045  $716,302   977,361 

    
 Year Ended December 31, 2007
   Energy-related Businesses Aviation-related
Business
   The Gas
Company
 District
Energy
 Atlantic
Aviation
 Total
Revenue from Product Sales
                    
Product sales $74,602  $  $371,250  $445,852 
Product sales – utility  95,770         95,770 
    170,372      371,250   541,622 
Service Revenue
                    
Other services     2,864   163,086   165,950 
Cooling capacity revenue     18,854      18,854 
Cooling consumption revenue     22,876      22,876 
       44,594   163,086   207,680 
Financing and Lease Income
                    
Financing and equipment lease     4,912      4,912 
       4,912      4,912 
Total Revenue $170,372  $49,506  $534,336  $754,214 

In accordance with FASB ASC 280Segment Reporting (formerly SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information''), the Company has disclosed earnings before interest, taxes, depreciation and amortization (EBITDA) excluding non-cash items. Non-cash items includes impairments, derivative gains and losses and adjustments for other non-cash items reflected in the statements of operations. The Company believes EBITDA excluding non-cash items provides additional insight into the performance of the operating businesses relative to each other and similar businesses without regard to their capital structure, and their ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company. EBITDA excluding non-cash items is reconciled to net loss.


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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Reportable Segments  – (continued)

In 2008 and 2007, the Company disclosed EBITDA only. The following tables, reflecting results of operations for the consolidated group and for each of the businesses for the years ended December 31, 2008 and 2007, have been conformed to current periods’ presentation reflecting EBITDA excluding non-cash items.

EBITDA excluding non-cash items for the Company’s consolidated reportable segments is shown in the below tables ($ in thousands) (unaudited).

    
 Year Ended December 31, 2009
   Energy-related Businesses Aviation-related Business 
   The Gas Company District Energy Atlantic Aviation(1) Total Reportable Segments
Net income (loss) $11,836  $1,182  $(90,377 $(77,359
Interest expense, net  8,941   10,153   67,983   87,077 
Benefit (provision) for income taxes  7,619   773   (61,009  (52,617
Depreciation  5,991   6,086   30,822   42,899 
Amortization of intangibles  838   1,368   58,686   60,892 
Goodwill impairment        71,200   71,200 
Losses on derivative instruments  636   220   28,277   29,133 
Other non-cash expense  1,771   1,009   903   3,683 
EBITDA excluding non-cash items $37,632  $20,791  $106,485  $164,908 
 

(1)Includes non-cash impairment charges of $102.0 million recorded during the first six months of 2009, consisting of $71.2 million related to goodwill, $23.3 million related to intangible assets (in amortization of intangibles) and $7.5 million related to property, equipment, land and leasehold improvements (in depreciation).

    
 Year Ended December 31, 2008
   Energy-related Businesses Aviation-related Business 
   The Gas Company District Energy Atlantic Aviation(1) Total Reportable Segments
Net income (loss) $6,283  $691  $(44,348 $(37,374
Interest expense, net  9,390   10,341   62,967   82,698 
Benefit (provision) for income taxes  4,044   242   (29,936  (25,650
Depreciation  5,883   5,813   34,257   45,953 
Amortization of intangibles  856   1,372   59,646   61,874 
Goodwill impairment        52,000   52,000 
Losses (gains) on derivative instruments  221   (26  1,871   2,066 
Other non-cash expense  1,180   2,654   624   4,458 
EBITDA excluding non-cash items $27,857  $21,087  $137,081  $186,025 

(1)Includes non-cash impairment charges of $87.5 million recorded during the fourth quarter of 2008, consisting of $52.0 million related to goodwill, $21.7 million related to intangible assets (in amortization of intangibles) and $13.8 million related to property, equipment, land and leasehold improvements (in depreciation).

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Reportable Segments  – (continued)

    
 Year Ended December 31, 2007
   Energy-related Businesses Aviation-related Business 
   The Gas Company District Energy Atlantic Aviation(2) Total Reportable Segments
Net income (loss) $4,840  $(9,259 $13,057  $8,638 
Interest expense, net  9,195   9,009   42,559   60,763 
Benefit (provision) for income taxes  3,115   (5,490  8,575   6,200 
Depreciation  5,881   5,792   14,621   26,294 
Amortization of intangibles  856   1,368   30,132   32,356 
Non-cash loss on extinguishment of debt(1)     3,013   9,804   12,817 
Losses on derivative instruments  431   28   1,659   2,118 
Other non-cash expense (income)  1,290   1,086   (556  1,820 
EBITDA excluding non-cash items $25,608  $5,547  $119,851  $151,006 

(1)Consists of non-cash write-offs of deferred financing costs from debt refinancings.
(2)Includes non-cash impairment charges of $1.3 million related to intangible assets (in amortization of intangibles).

Reconciliations of consolidated reportable segments’ EBITDA excluding non-cash items to consolidated net loss from continuing operations before income taxes and noncontrolling interests were as follows ($ in thousands) (unaudited):

   
 Year Ended December 31,
   2009 2008 2007
Total reportable segments EBITDA excluding non-cash items $164,908  $186,025  $151,006 
Interest income  119   1,090   5,705 
Interest expense  (91,154  (88,652  (65,356
Depreciation(1)  (42,899  (45,953  (26,294
Amortization of intangibles(2)  (60,892  (61,874  (32,356
Selling, general and administrative – corporate  (9,707  (4,205  (10,038
Fees to manager  (4,846  (12,568  (65,639
Equity in earnings (losses) and amortization charges of investees  22,561   1,324   (32
Goodwill impairment  (71,200  (52,000   
Non-cash loss on extinguishment of debt        (12,817
Losses on derivative instruments  (29,540  (2,843  (1,362
Other expense, net  (1,852  (4,001  (2,156
Total consolidated net loss from continuing operations before income taxes and noncontrolling interests $(124,502 $(83,657 $(59,339

(1)Depreciation includes depreciation expense for District Energy, which is reported in cost of services in the consolidated statements of operations. Depreciation also includes non-cash impairment charges of $7.5 million and $13.8 million recorded by Atlantic Aviation during the first six months of 2009 and during the fourth quarter of 2008, respectively.
(2)Includes a non-cash impairment charge of $23.3 million and $21.7 million for contractual arrangements

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Reportable Segments  – (continued)

recorded in the first six months of 2009 and the fourth quarter of 2008, respectively, at Atlantic Aviation and a $1.3 million non-cash impairment charge on the airport management contracts at Atlantic Aviation in 2007.

Capital expenditures for the Company’s reportable segments were as follows ($ in thousands) (unaudited):

   
 Year Ended December 31,
   2009 2008 2007
The Gas Company $7,388  $9,720  $8,715 
District Energy  12,095   5,378   9,421 
Atlantic Aviation  10,837   34,462   27,585 
Total $30,320  $49,560  $45,721 

Property, equipment, land and leasehold improvements, goodwill and total assets for the Company’s reportable segments as of December 31 were as follows ($ in thousands) (unaudited):

Property, Equipment,
Land and Leasehold
Improvements
GoodwillTotal Assets
2009(1)2008(2)2009(3)2008(4)20092008
The Gas Company$143,783$143,019$120,193$120,193$344,876$330,180
District Energy151,543145,61618,64718,647234,847227,102
Atlantic Aviation284,761303,800377,342448,5111,473,2281,660,801
Total$580,087$592,435$516,182$587,351$2,052,951$2,218,083

(1)Includes a non-cash impairment charge of $7.5 million recorded during the first six months of 2009 at Atlantic Aviation.
(2)Includes a non-cash impairment charge of $13.8 million recorded during the fourth quarter of 2008 at Atlantic Aviation.
(3)Includes a non-cash goodwill impairment charge of $71.2 million recorded at Atlantic Aviation during the first six months of 2009.
(4)Includes a non-cash goodwill impairment charge of $52.0 million recorded at Atlantic Aviation during the fourth quarter of 2008.

Reconciliation of total reportable segmentsegments’ total assets to consolidated total assets at December 31, 2006 (in($ in thousands) (unaudited):

  
 As of December 31,
   2009 2008
Total assets of reportable segments $2,052,951  $2,218,083 
Investment in IMTT  207,491   184,930 
Assets of discontinued operations held for sale  86,695   105,725 
Corporate and other  (7,916  43,698 
Total consolidated assets $2,339,221  $2,552,436 
Total reportable segments     $1,760,653 
Equity investments    
Investment in IMTT  239,632 
Corporate – Macquarie Infrastructure Company LLC and Macquarie Infrastructure Company Inc.  462,605 
Less: Consolidation entries  (365,357)
Total consolidated assets $2,097,533 
Reconciliation of reportable segment profit to consolidated income before income taxes and minority interests for the year ended December 31, 2006 (in thousands):
Total reportable segments     $220,907 
Selling, general and administrative  (120,252)
Fees to manager  (18,631)
Depreciation and amortization  (55,948)
   26,076 
Other income, net  7,398 
Total consolidated income before income taxes and minority interests $33,474 
Revenue from external customers for the Company’s segments for the year ended December 31, 2005 is as follows (in thousands):
  
Airport Services
 
Airport Parking
 
District Energy
 
Total
 
          
Revenue from Product Sales                    
                         
Fuel sales $142,785 $ $ $142,785 
   142,785      142,785 
Service Revenue
             
Other services  58,701    2,855  61,556 
Capacity revenue      16,524  16,524 
Consumption revenue      18,719  18,719 
Parking services    59,856    59,856 
   58,701  59,856  38,098  156,655 
Financing and Lease Income
             
Financing and equipment lease      5,303  5,303 
       5,303  5,303 
              
Total Revenue
 $201,486 $59,856 $43,401 $304,743 



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MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14.

16. Reportable Segments  – (continued)

Financial data by reportable business segments are as follows (in thousands):
  
From the date of acquisition to December 31, 2005
 
December 31, 2005
 
  
Segment
Profit(1)
 
Interest
Expense
 
Depreciation/
Amortization(2)
 
Capital
Expenditures
 
Property, Equipment, Land and Leasehold Improvements
 
Total
Assets
 
                                      
Airport services $109,100 $18,650 $15,652 $4,038 $92,906 $553,285 
Airport parking  14,780  10,350  6,199  1,679  94,859  288,846 
District energy  14,223  8,543  7,062  1,026  147,354  245,405 
                    
Total $138,103 $37,543 $28,913 $6,743 $335,119 $1,087,536 
The above table does not include financial data for our equity and cost investments.
——————
(1)
Segment profit includes revenue less cost of sales. For the airport parking and district energy businesses, depreciation of $2.4 million and $5.7 million, respectively, are included in cost of sales.
(2)
Includes depreciation of property, plant and equipment and amortization of intangibles. Amounts also include depreciation charges for the airport parking and district energy businesses.
Reconciliation of total reportable segment assets to consolidated total assets at December 31, 2005 (in thousands):
Total reportable segments     $1,087,536 
Equity and cost investments:    
Equity investment in toll road business  69,358 
Investment in SEW  35,295 
Investment in MCG  68,882 
Corporate – Macquarie Infrastructure Company LLC and Macquarie Infrastructure Company Inc.  359,403 
Less: Consolidation entries  (257,176)
Total consolidated assets $1,363,298 

Reconciliation of reportable segment profitsegments’ goodwill to consolidated income before income taxes and minority interests for the year ended December 31, 2005 (ingoodwill ($ in thousands) (unaudited):

  
 As of December 31,
   2009 2008
Goodwill of reportable segments $516,182  $587,351 
Corporate and other     (1,102
Total consolidated goodwill $516,182  $586,249 
Total reportable segments                                                                                                $138,103 
Selling, general and administrative  (82,636)
Fees to manager  (9,294)
Depreciation and amortization  (20,822)
   25,351 
Other expense, net  (13,567)
Total consolidated income before income taxes and minority interests $11,784 
15.

17. Related Party Transactions

Management Services Agreement with Macquarie Infrastructure Management (USA) Inc., or MIMUSA

MIMUSAthe Manager

The Manager acquired 2,000,000 shares of companytrust stock concurrently with the closing of the initial public offering in December 2004, with an aggregate purchase price of $50.0 million, at a purchase price per share equal to the initial public offering price of $25.$25.00, which were exchanged for LLC interests on June 25, 2007. Pursuant to the terms of the Management Agreement (discussed below), MIMUSAthe Manager may sell up to 65% of these shares (now LLC interests) at any timetime. The Manager has also received additional shares of trust stock and may sellLLC interests (the LLC interests replacing the balance at any time from and after December 21, 2007 (beingtrust stock following the third anniversarydissolution of the IPO closing).



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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Related Party Transactions – (continued)
Trust in June 2007) by reinvesting some performance fees and base management fees. As part of the equity offering which closed in July 2007, the Manager sold 599,000 of its LLC interests at a price of $40.99 per LLC interest. At December 31, 2009, the Manager held 3,503,227 LLC interests of the Company.

The Company entered into a management services agreement, or Management Agreement, with MIMUSAthe Manager pursuant to which MIMUSAthe Manager manages the Company’s day-to-day operations and oversees the management teams of the Company’s operating businesses. In addition, MIMUSAthe Manager has the right to appoint the Chairman of the Board of the Company, and an alternate, subject to minimum equity ownership, and to assign, or second, to the Company, on a permanent and wholly-dedicated basis, employees to assume the role of Chief Executive Officer and Chief Financial Officer and second or make other personnel available as required.

In accordance with the Management Agreement, MIMUSAthe Manager is entitled to a quarterly base management fee based primarily on the Trust’sCompany’s market capitalization, and a performance fee, as defined, based on the performance of the trustCompany’s stock relative to a weighted average of two benchmark indices, a U.S. utilities indexindex. Base management and a European utilities index, weighted in proportionperformance fees payable to the Manager, and the Manager’s reinvestment of the base management and performance fees in the Company’s equity investments. ForLLC interests, for the yearyears ended December 31, 2006,2009, 2008 and 2007 were as follows ($ in thousands):

   
 Year Ended December 31,
   2009(1) 2008 2007(2)
Base management fee $4,846  $12,568  $21,677 
Performance fee        43,962 

(1)During 2009, the Manager elected to reinvest the base management fee for the second and third quarters of 2009 in LLC interests and the Company issued 149,795 LLC interests and 180,309 LLC interests, respectively, to the Manager during the third and fourth quarters of 2009, respectively. The base management fee for the fourth quarter of 2009 will be reinvested in LLC interests during the first quarter of 2010.
(2)During 2007, the Manager elected to reinvest the performance fee for the first and second quarters of 2007 in LLC interests and the Company issued 21,972 LLC interests and 1,171,503 LLC interests, respectively, to the Manager during the third and fourth quarters of 2007, respectively.

The unpaid portion of the fees at the end of each reporting period is included in due to manager-related party in the consolidated balance sheets.


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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. Related Party Transactions  – (continued)

During the third quarter of 2008, the Manager had offered to reinvest its base fee for the third quarter of 2008 in additional LLC interests of the Company. However in the fourth quarter of 2008, the Board of Directors requested that the Manager reverse its decision to reinvest its base management fees in stock under the terms of $14.5 million and performance fees of $4.1 million were payable to MIMUSA. Of this amount, $4.5 million is included asthe management services agreement due to managerthe significant decline in the accompanying consolidated balance sheetmarket price of the LLC interests between the end of the third quarter of 2008 and the time at December 31, 2006. On June 27, 2006,which the Company would have issued 145,547 shares of trust stockthose LLC interests and the resulting potential substantial dilution to MIMUSA as consideration forexisting shareholders. The Manager agreed to this request and subsequently, both the $4.1 million performance fee. For the year ended December 31, 2005,third and fourth quarter 2008 base management fees of $9.3 million were payable to MIMUSA. Of this amount, $2.5 million is included as due to manager in the accompanying consolidated balance sheet at December 31, 2005, and washave been paid in 2006. There was no performance fee payable to MIMUSA forcash during the year ended December 31, 2005. For the period ended December 31, 2004, base management feesfirst quarter of $271,000 and performance fees of $12.1 million were payable to MIMUSA. 2009.

The base management fees were paid in 2005 and on April 19, 2005, the Company issued 433,001 shares of trust stock to MIMUSA as consideration for the $12.1 million performance fee due for the fiscal quarter ended December 31, 2004.

MIMUSAManager is not entitled to any other compensation and all costs incurred by MIMUSAthe Manager, including compensation of seconded staff, are paid by the Manager out of its management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries and investments, income taxes, audit and legal fees, and acquisitions and dispositions and its compliance with applicable laws and regulations. During the yearyears ended December 31, 2006, MIMUSA received a tax refund of $377,000 on2009, 2008 and 2007, the Company’s behalf and paid out of pocket expenses of $360,000 on the Company’s behalf. These net amount receivable from MIMUSA of $196,000 is included as a reduction in due to manager in the accompanying consolidated balance sheet at December 31, 2006. During the year ended December 31, 2005, MIMUSAManager charged the Company $402,000$275,000, $274,000 and $303,000, respectively, for reimbursement of out-of-pocket expenses.


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MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Related Party Transactions – (continued)
The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in due to manager-related party in the consolidated balance sheet.

Advisory and Other Services from the Macquarie Group

The Macquarie Group, throughand wholly-owned subsidiaries within the holding company,Macquarie Group, including Macquarie Bank Limited, or MBL, and its wholly owned subsidiaries,Macquarie Capital (USA) Inc., or MCUSA (formerly Macquarie Securities (USA) Inc.), or MSUSA, and Macquarie Securities (Australia) Limited, or MSAL, have provided various advisory and other services and have incurred expenses in connection with the Company’s equity raising activities, acquisitions dispositions and underlying debt associated withstructuring for the businesses, comprisingCompany and its businesses. Underwriting fees are recorded in members’ equity as a direct cost of equity offerings. Advisory fees and out-of-pocket expenses relating to acquisitions are expensed as incurred. Debt arranging fees are deferred and amortized over the term of the credit facility. Amounts relating to these transactions comprise the following (in($ in thousands):

Year Ended December 31, 2009
Sale of 49.99% of non-controlling interest stake of District Energy to John Hancock

advisory services from MCUSA

$1,294

reimbursement of out-of-pocket expenses to MCUSA

15
Strategic review of alternatives available to the Company

advisory services from MCUSA

300

reimbursement of out-of-pocket expenses to MCUSA

2
Atlantic Aviation’s accounts receivable management consulting services

consulting services from Macquarie Business Improvement and Strategy, or MBIS

159

reimbursement of out-of-pocket expenses to MBIS

71
PCAA restructuring advice

advisory services from MCUSA

200

reimbursement of out-of-pocket expenses to MCUSA

3
Atlantic Aviation’s debt amendment

debt arranging services from MCUSA

970
Year Ended December 31, 2008
Acquisition of SevenBar FBOs

advisory services from MCUSA

$  819

reimbursement of out-of-pocket expenses to MCUSA

3
Year Ended December 31, 2006
       
Acquisition of IMTT   
– advisory services from MSUSA $4,232
Acquisition of TGC   
– advisory services from MSUSA  3,750
– debt arranging services from MSUSA  900
– out of pocket expense reimbursement to MSUSA  53
Acquisition of Trajen   
– advisory services from MSUSA  5,260
– debt arranging services from MSUSA  900
Disposition of MCG   
– broker services from MSAL  231
Disposition of SEW   
– advisory services from MBL  933
Disposition of MYL   
– advisory services from MBL (accrued in 2006 and paid in 2007)  867
Airport Parking Business Refinancing   
– advisory services from MSUSA  1,463
MIC Inc. Acquisition Facility increase   
– advisory services from MSUSA  575
                                                                                                                          
Year Ended December 31, 2005
   
Acquisition of GAH   
– advisory services from MSUSA $1,070
– debt arranging services from MSUSA  160
– equity and debt underwriting services from MSUSA  913
– out of pocket expense reimbursement to MSUSA  16
Acquisition of EAR   
– advisory services from MSUSA  1,000
– out of pocket expense reimbursement to MSUSA  9
Acquisition of SunPark   
– advisory services from MSUSA  1,000  
– out of pocket expense reimbursement to MSUSA  1
Airport Services Business Long–term Debt Refinancing   
– advisory services from MSUSA  1,983
– out of pocket expense reimbursement to MSUSA  48
MIC Inc. Acquisition Facility   
– advisory services from MSUSA  625
                                                                                                                          


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TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15.

17. Related Party Transactions  – (continued)

Long-Term Debt

MIC Inc. has a $20.0 million revolving credit facility with various financial institutions, including entities within the Macquarie Group. There was no outstanding balance on the revolving credit facility at December 31, 2009. Amounts relating to the portion of this revolving credit facility from the Macquarie Group comprise the following ($ in thousands):

 
2009
     
Revolving credit facility commitment provided by Macquarie Group during the period January 1, 2009 through April 13, 2009(1) $66,667 
Revolving credit facility commitment provided by Macquarie Group during the period April 14, 2009 through December 30, 2009(2)  21,556 
Revolving credit facility commitment provided by Macquarie Group on December 31, 2009  4,444 
Portion of revolving credit facility commitment from Macquarie Group drawn down, as of December 31, 2009(3)   
Macquarie Group portion of the principal payments made to the revolving credit facility during the year ended December 31, 2009(3)  15,333 
Interest expense on Macquarie Group portion of the drawn down commitment, for the year ended December 31, 2009  599 
Commitment fees to the Macquarie Group, for year ended December 31, 2009  100 
2008
     
Revolving credit facility commitment provided by the Macquarie Group during the period January 1, 2008 through February 11, 2008 $50,000 
Revolving credit facility commitment provided by Macquarie Group during the period February 12, 2008 through December 31, 2008  66,667 
Portion of credit facility commitment from Macquarie Group drawn down, as of December 31, 2008  15,333 
Interest expense on Macquarie Group portion of the drawn down commitment, 2008 year  698 
Commitment fees to the Macquarie Group, year ended December 31, 2008  252 
Upfront fee to Macquarie Group upon renewal of facility in February 2008  333 

(1)On April 14, 2009, the Company elected to reduce the available principal on its revolving credit facility from $300.0 million to $97.0 million. This resulted in a decrease in the Macquarie Group’s total commitment under the revolving credit facility from $66.7 million to $21.6 million. See Note 12, “Long-Term Debt”, for further discussion.
(2)On December 31, 2009, the Company elected to reduce the available principal on its revolving credit facility from $97.0 million to $20.0 million. This resulted in a decrease in the Macquarie Group’s total commitment under the revolving credit facility from $21.6 million to $4.4 million. See Note 12, “Long-Term Debt”, for further discussion.
(3)On December 28, 2009, using the net cash proceeds from the sale of the 49.99% non-controlling interest in District Energy, and cash on hand, the Company repaid the outstanding principal balance on the MIC Inc. revolving credit facility. See Note 12, “Long-Term Debt”, for further discussion.

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. Related Party Transactions  – (continued)

Derivative Instruments and Hedging Activities

The Company has derivative instruments in place to fix the interest rate on certain outstanding variable-rate term loan facilities. MBL has provided interest rate swaps for Atlantic Aviation and The Gas Company. At December 31, 2009 and 2008, Atlantic Aviation had $818.4 million and $900.0 million, respectively, of its variable-rate term loans hedged, of which MBL was providing the interest rate swaps for a notional amount of $307.0 million and $343.3 million, respectively. The remainder of the swaps are from an unrelated third party. During the years ended December 31, 2009 and 2008, Atlantic Aviation made net payments to MBL of $14.1 million and $5.8 million, respectively, in relation to these swaps. During the year ended December 31, 2007, MBL made net payment to Atlantic Aviation of $732,000 in relation to these swaps.

As discussed in Note 12, “Long-Term Debt”, for year ended December 31, 2009, Atlantic Aviation paid $8.8 million in interest rate swap breakage fees, of which $1.8 million was paid to MBL.

In February 2010, per the revised terms of the term loan agreement as described in Note 12, “Long-Term Debt”, Atlantic Aviation used $17.1 million of excess cash flow to prepay $15.5 million of the outstanding principal balance of the term loan debt and incurred $1.6 million in interest rate swap breakage fees, of which $215,000 was paid to MBL.

At December 31, 2009 and 2008, The Gas Company had $160.0 million of its term loans hedged, of which MBL was providing the interest rate swaps for a notional amount of $48.0 million. The remainder of the swaps are from an unrelated third party. During the years ended December 31, 2009 and 2008, The Gas Company made net payments to MBL of $1.9 million and $685,000, respectively, in relation to these swaps. During the year ended December 31, 2007, MBL made net payments to The Gas Company of $328,000 in relation to these swaps.

Other Transactions

On March 30, 2009, The Gas Company entered into licensing agreements with Utility Service Partners, Inc. and America’s Water Heater Rentals, LLC, both indirect subsidiaries of Macquarie Group Limited, to enable these entities to offer products and services to The Gas Company’s customer base. No payments were made under these arrangements during the year ended December 31, 2009.

On August 29, 2008, Macquarie Global Opportunities Partners, or MGOP, a private equity fund managed by the Macquarie Group, completed the acquisition of the jet membership, retail charter and fuel management business units previously owned by Sentient Jet Holdings, LLC. The new company is called Sentient Flight Group (referred to hereafter as “Sentient”). Sentient was an advisory agreement with MSUSA relating toexisting customer of Atlantic Aviation. For the pending FBO acquisition. No fees have been paid asyears ended December 31, 2009 and 2008, Atlantic Aviation recorded $9.6 million and $3.6 million, respectively, in revenue from Sentient. As of December 31, 2006. The2009 and 2008, Atlantic Aviation had $195,000 and $77,000, respectively, in receivables from Sentient, which is included in accounts receivable in the consolidated balance sheets.

In 2008, the Company expects to pay approximately $1.3received a reimbursement of $1.4 million and $163,000 for advisory and debt arranging services, respectively, when the acquisition closes in 2007.

The Company was reimbursed by MSUSA for 50% of all due diligence costsexpenses incurred during 2007 and the first half of 2008 from MGOP in relation to an acquisition that the Company did not complete, but which was not completed. The amount reimbursed foracquired by the year ended December 31, 2006 was $461,000. private equity fund.

In addition, the Company reimbursed an affiliateand various of MBL $1,600 for out-of-pocket expenses incurred in relationits subsidiaries have entered into a licensing agreement with the Macquarie Group related to the same acquisition. This amount was accrued at December 31, 2006use of the Macquarie name and paid in January 2007.

trademark. The Macquarie Group does not charge the Company reimbursed €6,600 ($8,700), of which €3,100 ($4,100) was accrued at December 31, 2006, to affiliates of MBL for professional services and rent expense for premises used in Luxembourg by a wholly owned subsidiary of Macquarie Yorkshire LLC.
The Company and its airport services and airport parking businesses payany fees for employee consulting services to the Detroit and Canada Tunnel Corporation, which is owned by an entity managed by the Macquarie Group. Fees paid for the years ended December 31, 2006 and December 31, 2005 were $19,000 and $173,000, respectively.
During the year ended December 31, 2006, MBL charged the Company $53,000 for reimbursement of out-of-pocket expenses, in relation to work performed on various advisory roles for the Company.
Long-term Debt
MBL, along with other parties, has provided a loan to our airport services business. Amounts relating to the portion of the loan from MBL comprise the following (in thousands):
Year ended December 31, 2006
       
Portion of loan from MBL, as at December 31, 2006 $50,000
Interest expense on MBL portion of loan  3,164
Financing fee to MBL  307
                                                                                                                                        
Year ended December 31, 2005
   
Financing fee to MBL $244
Interest expense on MBL portion of loan prior to refinancing in December 2005  2,230
Portion of loan from MBL from refinancing, as at December 31, 2005  60,000
Underwriting fee to MBL from refinancing  600
Interest expense on MBL portion of loan from refinancing  162
                                                                                                                                            
MIC Inc. has a $300.0 million revolving credit facility with financial institutions, including Macquarie Bank Limited. Amounts relating to this loan comprise the following (in thousands):
Year ended December 31, 2006
   
Portion of loan outstanding from MBL, as at December 31, 2006                           $
Maximum drawdown on the loan from MBL during 2006  100,000
Interest expense on MBL portion of loan  3,540
Fees paid to MBL for increase in facility  250
    
Year ended December 31, 2005
   
Portion of acquisition facility commitment provided by MBL $100,000
Establishment fees paid to MBL  250


F-38license.


TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Related Party Transactions – (continued)
Derivative Instruments and Hedging Activities
MBL is providing approximately one-third of the interest rate swaps for the airport services business’ long-term debt and made payments to the airport services business of $802,000 for the year ended December 31, 2006. In January

18. Income Taxes

As discussed in Note 15, “Members’ Equity”, in June 2007 the airport services business paid MBL $40,000 on an additional interest rate swap. MBL made payments toTrust was dissolved and all outstanding trust stock was exchanged for LLC interests in the airport services business of $35,000 forCompany. In addition, the period December 14, 2005 (the date of the airport services business’s debt re-financing) through December 31, 2005.

MBL isCompany also providing a portion of the interest rate swaps for the gas production and distribution business’ long-term debt and made payments to the gas production and distribution business of $83,000 for the year ended December 31, 2006.
The Company, through its limited liability subsidiaries, entered into foreign-exchange related derivative instruments with Macquarie Bank Limited to manage its exchange rate exposure on its future cash flows from its non-U.S. investments, including cash flowsreceived permission from the dispositions of non-U.S. investments.
During the year ended December 31, 2006, SEW LLC paid £2.4 million and $124.1 millionInternal Revenue Service, or IRS, to MBL and received $4.4 million and £65.6 million which closed out four foreign currency forward contracts between the parties. As of December 31, 2006, SEW LLC had no remaining foreign currency forward contracts with MBL.
During the same period, MY LLC paid £26.1 millionelect to MBL and received $49.2 million which closed out three foreign currency forward contracts between the parties. As of December 31, 2006, MY LLC had no remaining foreign currency forward contracts with MBL.
During the same period, CI LLC paid AUD $50.5 million to MBL and received USD $38.4 million which closed out two foreign currency forward contracts between the parties. As of December 31, 2006, CI LLC had no remaining forward currency contracts with MBL.
During the year ended December 31, 2005, SEW LLC paid £2.6 million to MBL and received $4.9 million which closed out two foreign currency forward contracts between the parties. As part of the settlement of these foreign currency forward contracts, MBL paid SEW LLC $192,000, which has been included in the accompanying consolidated statement of operations. As of December 31, 2005, SEW LLC had two other foreign currency forward contracts with MBL which settled in the year ending December 31, 2006.
During the same period, MY LLC paid £5.5 million to MBL and received $10.4 million which closed out three foreign currency forward contracts between the parties. As of December 31, 2005, MY LLC had two other foreign currency forward contracts with MBL which settled in the year ending December 31, 2006.
16. Income Taxes
Macquarie Infrastructure Company Trust is classified as a grantor trust for U.S. federal income tax purposes and, therefore, is not subject to income taxes. Accordingly, the Trust stockholders should include their pro rata portion of the Trust’s income or loss in their respective federal and state income tax returns. In addition, Macquarie Infrastructure Company LLC will be treated as a partnershipcorporation for U.S. federal income tax purposes and is not subject to income taxes.
MIC Inc.as of January 1, 2007. Accordingly, the Company and its wholly ownedwholly-owned subsidiaries, are subject to federal and state income taxes. The Company files a consolidated U.S. income tax return.

Components of the Company’s income tax benefit related to loss from continuing operations for the years ended December 31 2009, 2008 and 2007 were as follows ($ in thousands):

   
 Year Ended
December 31,
2009
 Year Ended
December 31,
2008
 Year Ended
December 31,
2007
Current taxes:
               
Federal $334  $  $192 
State  1,859   2,536   2,113 
Total current taxes $2,193  $2,536  $2,305 
Deferred tax benefit:
               
Federal $(20,175 $(12,849 $(17,545
State  (7,333  (3,748  (1,524
Total deferred tax benefit  (27,508  (16,597  (19,069
Change in valuation allowance  9,497    —     
Total tax benefit $(15,818 $(14,061 $(16,764


F-39

In connection with the 2009 sale of 49.99% of District Energy, the Company converted a holding company within the District Energy group from an entity disregarded for income tax purposes to a taxable corporation. The change in the tax status of this holding company, combined with the sale of the 49.99% interest, resulted in a taxable transaction. The taxable income was offset by the Company’s other consolidated taxable loss and its NOL carryforwards. The consolidated benefit for income taxes of $15.8 million includes a charge for income taxes of $10.2 million related to the tax on the conversion of the District Energy holding company’s tax status attributable to the 50.01% interest in District Energy retained by the Company. The tax on the conversion of the District Energy holding company’s tax status of approximately $10.2 million attributable to the 49.99% interest in District Energy that was sold has been reflected as a reduction in the $32.2 million gain on the sale and recorded in additional paid in capital in the consolidated 2009 balance sheet.



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MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16.

18. Income Taxes  – (continued)

Components of MIC Inc.’s income tax expense (benefit) are as follows (in thousands):
  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
              
Current taxes:                                                                                    
Federal $176 $ 
State  1,663  2,080 
        
Total current taxes  1,839  2,080 
Deferred tax benefit:       
Federal  (13,322) (463)
State  (4,771) (862)
Change in valuation allowance  (167) (4,370)
        
Total tax expense (benefit) $(16,421)$(3,615)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 20062009 and December 31, 20052008 are presented below (in($ in thousands):

  
 December 31,
2009
 December 31,
2008
Deferred tax assets:
          
Net operating loss carryforwards $58,801  $63,393 
Lease transaction costs  1,638   1,811 
Deferred revenue  1,311   1,192 
Accrued compensation  9,136   9,192 
Accrued expenses  1,503   2,010 
Partnership basis differences  50,466   49,184 
Other  1,403   1,275 
Unrealized losses  41,904   62,969 
Allowance for doubtful accounts  653   859 
Total gross deferred tax assets  166,815   191,885 
Less: valuation allowance  (20,571  (4,159
Net deferred tax assets after valuation allowance $146,244  $187,726 
Deferred tax liabilities:
          
Intangible assets $(148,286 $(164,851
Property and equipment  (81,041  (82,382
Prepaid expenses  (1,434  (1,761
Total deferred tax liabilities  (230,761  (248,994
Net deferred tax liability  (84,517  (61,268
Less: current deferred tax asset  (23,323  (21,960
Noncurrent deferred tax liability $(107,840 $(83,228
  
December 31, 2006
 
December 31, 2005
 
Deferred tax assets:             
Net operating loss carryforwards $23,801 $15,115 
Capital loss carryforwards  4,786  4,885 
Lease transaction costs  1,966  2,131 
Amortization of intangible assets  4,821  4,398 
Deferred revenue  562  515 
Accrued compensation  3,210  717 
Accrued expenses  1,857  1,225 
SFAS No. 143 retirement obligations  1,224  1,135 
Other  1,319  1,569 
Unrealized losses  1,456   
Allowance for doubtful accounts  474   
Total gross deferred tax assets  45,476  31,690 
Less: Valuation allowance  (5,271) (5,451)
Net deferred tax assets after valuation allowance  40,205  26,239 
Deferred tax liabilities:       
Intangible assets  (129,176) (70,259)
Property and equipment  (61,915) (59,133)
Partnership basis differences  (7,727) (6,373)
Prepaid expenses  (1,479) (693)
Other  (1,420) (1,474)
Total deferred tax liabilities  (201,717) (137,932)
Net deferred tax liability  (161,512) (111,693)
Less: current deferred tax asset  2,411  2,101 
Noncurrent deferred tax liability $(163,923)$(113,794)


F-40

MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Income Taxes – (continued)

At December 31, 2006, MIC Inc.2009, the Company had net operating lossNOL carryforwards for federal income tax purposes of approximately $58.0$116.3 million which isare available to offset future taxable income, if any, through 2026.2029. Approximately $9.0$35.0 million of these net operating losses willmay be limited, on an annual basis, due to the change of control for tax purposes of the respective subsidiaries in which such losses were incurred.

In addition, District Energy has NOL carryforwards of approximately $26.0 million, all of which are subject to limitations on realizations due to a change in control for tax purposes in 2009.

In assessing the realizability of deferred tax assets,need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. DueThe sale of a 49.99% interest in District Energy precludes including that business in the Company’s consolidated federal income tax return from the date of sale. Accordingly, the net deferred tax liabilities of that business, approximately $44.3 million, cannot be considered in evaluating the ultimate realization of the Company’s deferred tax assets.

In 2009, the Company’s management concluded that the reversal of deferred tax liabilities should more likely than not result in the ultimate realization of all but approximately $15.3 million of federal deferred tax assets. Accordingly the Company has provided a valuation allowance for this amount, of which approximately $5.9 million has been recorded in the Company’s discontinued operations. In addition, in 2009, PCAA provided a valuation allowance of approximately $1.1 million against the state NOL deferred tax asset generated in that year, which is also included in discontinued operations.

In 2007, due to statutory limitations on the utilization of certain deferred tax assets, primarily at PCAA, the Company has applied a valuation reserveallowance on a portion of the deferred tax assets. As a result of the utilization and expiration of certain state net operating loss carryforwards, a change in the state deferred income tax effective rate, and a settlement of the IRS examination of a portion of Atlantic Aviation for 2003,

The

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Income Taxes  – (continued)

management decreased its valuation allowance for capital loss and operating loss carryforwards, by approximately $5.3 million in 2007. Also in 2007, management determined that it is more likely than not that the deferred tax benefit related to the state income tax net operating loss carryforward of PCAA will not be realized. Accordingly, a valuation allowance of approximately $2.9 million was recorded, which is also included in discontinued operations. This additional valuation allowance was net of the related federal income tax benefit at the statutory rate of 35%.

As of December 31, 2009, the Company hashad approximately $162.0$84.5 million in net deferred tax liabilities. A significant portion of the Company’s deferred tax liabilities relates to tax basis temporary differences of both intangible assets and property and equipment. For financial accounting purposes, we recordedThe Company records the acquisitions of our consolidated businesses under the purchase method of accounting and accordingly recognizedrecognizes a significant increase to the value of the intangible assets and to property and equipment. For tax purposes, we assumedthe Company may assume the existing tax basis of the acquired businesses. Tobusinesses, in which cases the Company records a deferred tax liability to reflect the increase in the financialpurchase accounting basis of the assets acquired over the carryover income tax basis, a deferred tax liability was recorded. Thebasis. This liability will reduce in future periods as these temporary differences reverse.

In 2006, management revised its estimate of the effective stateCompany recognized a deferred tax rate applicable to deferred taxes, primarily resulting from a change in the Texas franchise tax law. This change resulted in a benefit of approximately $754,000.

Due to$2.4 million on the utilizationexcess of certain state net operating loss carryforwards and a changethe Company’s tax basis in IMTT over its carrying value. In 2007, the Company concluded that the excess basis will no longer reverse in the state deferred income tax effective rate, management decreased its valuation allowance for state capital loss and operating loss carryforwards, by approximately $167,000.
foreseeable future. Therefore, the 2007 year provision included a charge to reverse the benefit recorded in 2006.

A reconciliation of the reported income tax expense attributable to continuing operations to the amount that would result by applying the U.S. federal tax rate to the reported net income (loss)loss is as follows (in($ in thousands):

   
 Year Ended
December 31,
2009
 Year Ended
December 31,
2008
 Year Ended
December 31,
2007
Tax benefit at U.S. statutory rate $(43,746 $(29,484 $(20,962
Tax effect of impairment of non-deductible intangibles  18,601   13,684    
Effect of permanent differences and other  1,073   (49  534 
State income taxes, net of federal benefit  (3,559  (788  383 
Tax effect of flow-through entities   —     —     
Tax effect of IMTT taxable dividend income in excess of book income  (7,895  5,425   4,456 
Tax effect of federal dividends received deduction on IMTT dividend   —    (4,710  (3,556
Change in MDEH tax status  10,211       
Reversal of tax benefit recorded in 2006 on the excess of the tax basis over carrying value of IMTT   —     —    2,381 
True-up of deferred tax balances   —    1,861    —  
Change in valuation allowance  9,497       
Total tax benefit $(15,818 $(14,061 $(16,764

Uncertain Tax Positions

The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recorded a $510,000 increase in the liability for unrecognized tax benefits, which was offset by a reduction of the deferred tax liability of $109,000, resulting in a decrease to the January 1, 2007 retained earnings balance of $401,000. At the adoption date of January 1, 2007, the Company had $1.8 million of unrecognized tax benefits, all of which would affect the effective tax rate if recognized.

  
Year Ended
December 31,
2006
 
Year Ended
December 31,
2005
 
              
Tax expense at U.S. statutory rate $11,724 $4,124 
Effect of permanent differences and other  648  168 
State income taxes, net of federal benefit  (2,020) 1,125 
Tax effect of flow-through entities  (23,223) (4,662)
Tax effect of IMTT basis difference and dividends received deduction  (3,383)  
Change in valuation allowance  (167) (4,370)
Total tax benefit $(16,421)$(3,615)

17.

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Income Taxes  – (continued)

It is expected that the amount of unrecognized tax benefits will change in the next 12 months, however, the Company does not expect the change to have a significant impact on the results of operations or the financial position of the Company.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense in the statements of operations, which is consistent with the recognition of these items in prior reporting periods. On January 1, 2007, the Company recorded a liability of approximately $400,000 for the payment of interest and penalties. The liability for the payment of interest and penalties did not materially change subsequent to December 31, 2007.

During the quarter and year ended December 31, 2008, the Company determined that the statute of limitations expired on unrecognized benefits of approximately $782,000. Approximately $690,000 of that amount was an acquired reserve and accordingly, recognition of its benefit was treated as an adjustment of goodwill. The balance of the reversal, approximately $92,000, was included in income as a reduction of state income tax expense.

During the quarter ended June 30, 2007, the IRS completed its audit of the 2003 federal income tax return for a subsidiary of Atlantic Aviation. That audit did not result in a material assessment beyond the related reserve established as of January 1, 2007, upon the adoption of FIN 48. As a result of the audit settlement, the Company no longer has a capital loss carryforward of approximately $11.9 million. The deferred tax benefit related to this carryforward loss was approximately $4.8 million, against which the Company applied a full valuation allowance. Both the carryforward loss and valuation allowance have been reversed. There are no other ongoing tax examinations of returns filed by the Company or any of its subsidiaries. Federal returns for all tax years ending after 2005, and state returns for all tax years ending in 2004 and later are subject to examination by federal and state tax authorities. There was no material change in the Company’s reserve for uncertain tax positions during 2009, except as discussed above.

During the year ended December 31, 2009, the IRS completed its audit of PCAA for 2004 and 2003. The conclusion of the audit did not result in material assessment.

As of December 31, 2009, there were no ongoing federal or state income tax audits of the Company and its subsidiaries.

The following table sets forth a reconciliation of the Company’s unrecognized tax benefits from January 1, 2009 to December 31, 2009. The balance as of January 1, 2009 includes the increase in the liability upon the adoption of FIN 48 treated as a reduction in retained earnings. Amounts are in thousands.

 
Balance as of January 1, 2009 $313 
Current year increases  45 
Decreases due to the lapse of applicable statue of limitations and payments  (22
Balance as of December 31, 2009 $336 

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. Leases

The Company leases land, buildings, office space and certain office equipment under noncancellable operating lease agreements that expire through April 2031.



F-41


MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Leases – (continued)
2057.

Future minimum rental commitments at December 31, 20062009 are as follows (in($ in thousands):

 
2010 $33,238 
2011  30,740 
2012  29,622 
2013  28,820 
2014  28,008 
Thereafter  274,873 
Total $425,301 
2007     $28,199 
2008  28,063 
2009  27,519 
2010  25,656 
2011  24,957 
Thereafter                                                                                                                                337,439 
  $471,833 

Rent expense under all operating leases for the years ended December 31, 20062009, 2008 and December 31, 20052007 was $28.8$34.9 million, $34.2 million and $22.5$26.4 million, respectively.

18.

20. Employee Benefit Plans

The subsidiaries of

401(k) Savings Plan

In 2006, MIC Inc. maintainestablished a defined contribution plansplan under section 401(k) of the Internal Revenue Code, allowing eligible employees of the consolidated businesses to contribute a percentage of their annual compensation up to an annual amount as set by the Internal Revenue Service. IRS. Prior to this, each of the consolidated businesses maintained their own plans. Following the establishment of the MIC Inc. plan, Atlantic Aviation, District Energy and PCAA consolidated their plans under the MIC Inc. plan. The Gas Company also sponsored a 401(k) plan for eligible employees of that business. On January 1, 2008, employees in The Gas Company 401(k) plan were added to the MIC Inc. plan. The Company completed the merger of The Gas Company plan into the MIC Inc. plan in the first quarter of 2008.

The employer contribution to these plans ranges from 0% to 6% of eligible compensation. For the years ended December 31, 20062009, 2008 and 2005 and the period December 23, 2004 through December 31, 2004,2007, contributions were approximately $382,000, $156,000$1.3 million, $1.1 million and $4,000,$1.1 million, respectively.

The airport services business also sponsors a retiree medical and life insurance plan available to certain employees for Atlantic Aviation. Currently, the plan is funded as required to pay benefits, and at December 31, 2006, the plan had no assets. The Company accounts for postretirement healthcare and life insurance benefits in accordance with SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and other Postretirement Plans. This Statement requires the accrual of the cost of providing postretirement benefits during the active service period of the employee. The projected benefit obligation at December 31, 2006, using an assumed discount rate of 5.7%, was approximately $679,000. There have been no changes in plan provisions during 2006. Estimated contributions by Atlantic Aviation in 2006 should approximate $158,000.
A schedule of the benefit obligation is as follows (in thousands):
Opening balance, December 31, 2005                                         $747,857 
Service costs   
Interest costs  37,395 
Participant contributions  35,100 
Actuarial gains/losses  64,231 
Benefits paid  (206,065)
     
Ending balance, December 31, 2006 $678,518 

Union Pension Plan

TGC

The Gas Company has a Defined Benefit Pension Plan for Classified Employees of GASCO, Inc. (the “Plan”“DB Plan”) that accrues benefits pursuant to the terms of a collective bargaining agreement. The DB Plan is non-contributory and covers all bargaining unit employees who have met certain service and age requirements. The benefits are based on a flat rate per year of service andthrough the date of employment termination. TGCtermination or retirement. The Gas Company made contributions to the DB Plan of $2.9 million during 2009 and did not make any contributions to the Plan during 2006.2008. Future contributions will be made to meet ERISA funding requirements. The DB Plan’s trustee, First Hawaiian Bank, handles the DB Plan’s assets and an investment manager invests them in a diversified portfolio of equity and fixed-income securities. The projected benefit obligation for the DB Plan totaled $29.0$35.3 million at December 31, 2009 and $31.2 million at December 31, 2008. The DB Plan has assets of $21.9 million and $16.7 million at December 31, 2009 and 2008, respectively.

The Gas Company expects to make contributions in 2010 and annually for at least five years as it complies with the requirements of the Pension Protection Act of 2006.



F-42 The annual amount of contributions will be dependent upon a number of factors such as market conditions and changes to regulations. However, for the 2010 calendar year, the Company expects to make contributions of approximately $1.9 million.

In May 2008, The Gas Company entered into a new five-year collective bargaining agreement which increased the benefits for participants and that immediately froze the plan to new participants. The benefit increases will occur annually for three years after which there will be no further increase to the flat rate.



TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18.

20. Employee Benefit Plans  – (continued)

Participants will, however, continue to accrue years of service toward their final benefit. The financial effects of the new agreement are included in the tables below as “Plan amendments”.

Other Benefits Plan

TGC

The Gas Company has a post-retirementpostretirement plan. The GASCO, Inc. Hourly Postretirement Medical and Life Insurance Plan (“106(the “PMLI Plan”), which covers all bargaining unit participants who were employed by TGCThe Gas Company on May 1, 1999 and who retire after the attainment of age 62 with 15 years of service. Prior to the establishment of this plan, the participants were covered under a multiemployer plan administered by the Hawaii Teamsters Health and Welfare Trust; the PMLI Plan was formed when the multiemployer plan was dissolved. Under the provisions of the 106PMLI Plan, TGCThe Gas Company pays for medical premiums of the retirees and spouses up until age 65. After age 65, TGCthe Gas Company pays for medical premiums up to a maximum of $150 per month. The retirees are also provided $1,000 of life insurance benefits.

Additional information about the fair value of the benefit plan assets, the components of net periodic cost, and the projected benefit obligation as of December 31, 20062009 and 2008, and for the period from June 7, 2006 toyear ended December 31, 20062009 and 2008 is as follows (in($ in thousands):

    
 DB Plan Benefits PMLI Benefits
   2009 2008 2009 2008
Change in benefit obligation:
                    
Benefit obligation – beginning of period $31,167  $29,022  $1,744  $1,641 
Service cost  629   631   42   39 
Interest cost  1,888   1,832   113   103 
Plan amendments     775       
Participant contributions        60   41 
Actuarial losses  3,251   488   252   32 
Benefits paid  (1,685  (1,581  (116  (112
Benefit obligation – end of year $35,250  $31,167  $2,095  $1,744 
Change in plan assets:
                    
Fair value of plan assets – beginning of period $16,652  $24,358  $  $ 
Actual return (loss) on plan assets  4,170   (6,044      
Employer/participant contributions  2,901      116   112 
Expenses paid  (127  (81      
Benefits paid  (1,685  (1,581  (116  (112
Fair value of plan assets – end of year $21,911  $16,652  $  $ 
  
Pension
Benefits
 
Other
Benefits
 
Change in benefit obligation:             
Benefit obligation – beginning of period                                                    $27,747 $1,495 
Service cost  345  19 
Interest cost  955  51 
Plan amendments     
Participant contributions    12 
Actuarial losses  739  14 
Benefits paid  (763) (39)
Benefit obligation – end of year $29,023 $1,552 
  
Pension
Benefits
 
Other
Benefits
 
Change in plan assets               
Fair value of plan assets – beginning of period                                                    $22,790 $ 
Actual return on plan assets  2,347   
Employer/participant contributions    39 
Expenses paid  (62)  
Benefits paid  (763) (39)
Fair value of plan assets – end of year $24,312 $ 
On December 31, 2006, the Company adopted the recognition and disclosure provisions of SFAS No.158. SFAS No. 158 required the Company to recognize the funded status (the difference between the fair value of plan assets and the projected benefit obligations) of its benefit plans in the accompanying consolidated balance sheet as at December 31, 2006 with a corresponding adjustment to accumulated other comprehensive income, net of tax.


F-43


TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY TRUST

LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18.

20. Employee Benefit Plans  – (continued)

The net adjustment to accumulated other comprehensive income at adoption of approximately $500,000 ($300,000 net of tax) represents the net unrecognized actuarial losses. These effects are relatively small because the Company recorded the net pension obligation at fair value upon its purchasefunded status of the business. The effects of adopting the provisions of SFAS No. 158 in the accompanying consolidatedCompany’s balance sheet as ofat December 31, 2006,2009 and 2008, are presented in the following table (in($ in thousands):

    
 DB Plan Benefits PMLI Benefits
   2009 2008 2009 2008
Funded status
                    
Funded status at end of year $(13,339 $(14,515 $(2,095 $(1,744
Net amount recognized in balance sheet $(13,339 $(14,515 $(2,095 $(1,744
Amounts recognized in balance sheet consists of:
                    
Current liabilities $  $  $(120 $(107
Noncurrent liabilities  (13,339  (14,515  (1,975  (1,637
Net amount recognized in balance sheet $(13,339 $(14,515 $(2,095 $(1,744
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income:
                    
Prior service cost $(465 $(620 $  $ 
Accumulated loss  (7,379  (7,362  (325  (72
Accumulated other comprehensive loss  (7,844  (7,982  (325  (72
Net periodic benefit cost in excess of cumulative employer contributions  (5,495  (6,533  (1,770  (1,672
Net amount recognized in balance sheet $(13,339 $(14,515 $(2,095 $(1,744
  
Pension
Benefits
 
Other
Benefits
 
Funded status:             
Funded status at end of year $(4,710)$(1,552)
Employer contributions between measurement date and year end     
Net amount recognized in balance sheet (after SFAS No. 158) $(4,710)$(1,552)
        
Amounts recognized in balance sheet consists of:       
Non-current assets $ $ 
Current liabilities    (99)
Non-current liabilities  (4,710) (1,453)
Net amount recognized in balance sheet (after SFAS No. 158) $(4,710)$(1,552)
        
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income:       
Transition obligation asset (obligation) $ $ 
Prior service credit (cost)     
Accumulated gain (loss)  518  (14)
Accumulated other comprehensive income  518  (14)
Cumulative employer contributions in excess of net periodic benefit cost  (5,228) (1,538)
Net amount recognized in balance sheet (after SFAS No. 158) $(4,710)$(1,552)
        
Change in accumulated other comprehensive income due to application of SFAS No. 158:       
Additional minimum liability (before SFAS No. 158)     
Intangible asset (before SFAS No. 158)     
Accumulated other comprehensive income (before SFAS No. 158)     
Net increase (decrease) in accumulated other comprehensive income due to SFAS
No. 158
 $518 $(14)
Estimated amounts that will be amortized from accumulated other comprehensive income over the next year:             
Amortization of transition obligation (asset)     
Amortization of prior service cost (credit)     
Amortization of net (gain) loss     
        
Weighted average assumptions:       
Discount rate  6.00% 6.00%
Expected return on plan assets  8.25%  
Rate of compensation increases     
        
Assumed healthcare cost trend rates:       
Initial health care cost trend rate    9.50%
Ultimate rate    5.00%
Year ultimate rate is reached    2015 


F-44

MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Employee Benefit Plans – (continued)

The components of net periodic benefit cost and other changes in other comprehensive income for the plans isare shown below (in($ in thousands):

    
 DB Plan Benefits PML Benefits
   2009 2008 2009 2008
Components of net periodic benefit cost:
                    
Service cost $629  $631  $42  $39 
Interest cost  1,888   1,832   113   103 
Expected return on plan assets  (1,221  (1,820      
Recognized actuarial loss  413          
Amortization of prior service cost  155   155       
Net periodic benefit cost $1,864  $798  $155  $142 
Other changes recognized in other comprehensive income:
                    
Prior service cost arising during period $  $775  $  $ 
Net loss arising during period  429   8,433   253   32 
Amortization of prior service cost  (155  (155      
Amortization of loss  (412         
Total recognized in other comprehensive income $(138 $9,053  $253  $32 
  
Pension
Benefits
 
Other
Benefits
 
Components of net periodic benefit cost:               
Service cost $345 $19 
Interest cost  955  51 
Expected return on plan assets  (1,029)  
Net periodic benefit cost $271 $70 

TGC

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Employee Benefit Plans  – (continued)

    
 DB Plan Benefits PMLI Benefits
   2009 2008 2009 2008
Estimated amounts that will be amortized from accumulated other comprehensive income over the next year:
                    
Amortization of prior service cost $155  $155  $  $ 
Amortization of net loss  395   389   17    
Weighted average assumptions to determine benefit obligations:
                    
Discount rate  5.70  6.20  5.60  6.30
Rate of compensation increase  N/A   N/A   N/A   N/A 
Measurement date  December 31   December 31   December 31   December 31 
Weighted average assumptions to determine net cost:
                    
Discount rate  6.20  6.30  6.30  6.20
Expected long-term rate of return on plan assets during fiscal year  7.25  7.75  N/A   N/A 
Rate of compensation increase  N/A   N/A   N/A   N/A 
Assumed healthcare cost trend rates:
                    
Initial health care cost trend rate            9.00  9.50
Ultimate rate            4.50  5.00
Year ultimate rate is reached            2028   2018 

The Gas Company’s overall investment strategy is to achieve a mix of approximately 65% of investments in equities for long-term growth and 35% in fixed income securities for asset allocation purposes as well as near-term needs. The Gas Company has instructed the trusteeinvestment manager to maintain the allocation of the DB Plan’s assets between equity mutual fund securities and fixed income (debt)mutual fund securities within the pre-approved parameters set by the management of TGC (65% equity securities and 35% fixed income securities). The pension planGas Company. The DB Plan weighted average asset allocation at December 31, 20062009 and 2008 was:

  
 2009 2008
Equity instruments  65  57
Fixed income securities  34  41
Cash  1  2
Total  100  100
Equity instruments66%
Fixed income securities                                                                                                              34%
Total100%

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Employee Benefit Plans  – (continued)

The expected return on plan assets of 8.25%7.25% was estimated based on the allocation of assets and management’s expectations regarding future performance of the investments held in the investment portfolio. The asset allocations of The Gas Company’s pension benefits as of December 31, 2009 measurement dates were as follows ($ in thousands):

    
  Fair Value Measurements at
December 31, 2009
   Pension Benefits – Plan Assets
   Total Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
 Significant
Observable
Inputs
(Level 2)
 Significant
Unobservable
Inputs
(Level 3)
Asset category:
                    
Cash and money market $315  $26  $289  $ 
Equity securities:
                    
U.S. large-cap growth(a)  1,980   1,980       
U.S. large-cap blend(b)  5,663   5,663       
U.S. large-cap value(c)  1,983   1,983       
U.S. mid-cap blend(d)  846   846       
U.S. small-cap growth(e)  849   849       
International large-cap blend(f)  2,801   2,801       
Fixed income securities:
                    
Intermediate term corporate bonds(g)  5,969   5,969       
Short term corporate bonds(h)  1,505   1,505       
Total $21,911  $21,622  $  289  $  — 

(a)This fund seeks to track the performance of the MSCI U.S. Prime Market Growth Index, a broadly diversified index of growth stocks of large U.S. companies.
(b)This fund seeks to track the performance of the MSCI U.S. Broad Market Index, which consists of all the U.S. common stocks traded regularly on the New York Stock Exchange and the Nasdaq over-the-counter market.
(c)This fund seeks long-term capital appreciation and income. The fund invests mainly in mid- and large- capitalization companies whose stocks are considered by an advisor to be undervalued.
(d)This fund seeks long-term capital appreciation. The fund normally invests in small- and mid- capitalization domestic stocks based on an advisor’s assessment of the relative return potential of the securities.
(e)This fund seeks to provide long-term capital appreciation. The fund invests mainly in the stocks of small companies.
(f)This fund seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in Europe, the Pacific region, and emerging markets countries.
(g)These funds seek to provide a moderate and sustainable level of current income by investing in bonds with an average weighted maturity of between five and ten years.
(h)This fund seeks to provide current income. It invests at least 80% of assets in short and intermediate term corporate bonds and other corporate fixed income obligations. It typically maintains an average weighted maturity of between one and four years.

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Employee Benefit Plans  – (continued)

The discount raterates of 6% was5.70% and 5.60% for the DB Plan and PMLI Plan, respectively, were based on high quality corporate bond rates that approximate the expected settlement of obligations.

The estimated future benefit payments for the next ten years are as follows (in($ in thousands):

  
 DB Plans
Benefits
 PMLI
Benefits
2010 $1,980  $120 
2011  2,133   176 
2012  2,227   177 
2013  2,298   187 
2014  2,368   161 
Thereafter  12,058   882 
  
Pension
Benefits
 
Other
Benefits
 
              
2007                                                                                                                                $1,705 $100 
2008  1,782  103 
2009  1,895  94 
2010  1,991  95 
2011  2,105  129 
2012-2016  11,487  703 
401(k) Savings Plan
TGC sponsors an employee retirement savings plan under section 401(k) of the Internal Revenue Code. All full-time non-union employees are eligible to participate in the plan. The plan allows eligible employees to contribute up to 50% of their pre-tax compensation, subject to the limit prescribed by the Internal Revenue Code, which is generally $15,000 for 2006. Under the plan, TGC matches 100% of each employee’s contribution up to a maximum of 3% of base pay. TGC also contributes, without matching, up to 3% of base pay to the plan. TGC incurred approximately $300,000 of charges associated with its employer contributions to the plan for the period from June 7, 2006 to December 31, 2006.



F-45


MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19.

21. Legal Proceedings and Contingencies

The subsidiaries of MIC Inc. are subject to legal proceedings arising in the ordinary course of business. In management’s opinion, the companyCompany has adequate legal defensesdefences and/or insurance coverage with respect to the eventuality of such actions, and does not believe the outcome of any pending legal proceedings will be material to the company’sCompany’s financial position or results of operations.

There are no material legal proceedings pending other than ordinary routine litigation incidental to ourthe Company’s businesses. During 2006, we sold our interests in South East Water and our toll road business.

During 2006, IMTT incurred a fine of $110,000 resulting from self reported air permit violations at its Bayonne terminal. We believe that IMTT is, and at all times seek to remain, substantially in compliance with the many environmental laws and regulations to which it is subject. However changing regulations combined with increasingly stringent and complex monitoring and reporting requirements particularly with respect to emissions on occasions does result in incidences of unintended non-compliance (as occurred at the Bayonne terminal).
20.

22. Dividends

Our

The Company’s Board of Directors have declared the following dividends during 20052007 and 2006:2008:

Date DeclaredQuarter EndedHolders of
Record Date
Payment DateDividend per
LLC Interest
February 27, 2007December 31, 2006April 4, 2007April 9, 20070.57      
May 3, 2007March 31, 2007June 5, 2007June 8, 20070.59      
August 7, 2007June 30, 2007September 6, 2007September 11, 20070.605      
November 6, 2007September 30, 2007December 5, 2007December 10, 20070.62      
February 25, 2008December 31, 2007March 5, 2008March 10, 20080.635      
May 5, 2008March 31, 2008June 4, 2008June 10, 20080.645      
August 4, 2008June 30, 2008September 4, 2008September 11, 20080.645      
November 4, 2008September 30, 2008December 3, 2008December 10, 20080.20      
Date Declared
 
Quarter Ended
 
Holders of Record Date
 
Payment Date
 
Dividend Per Share
 
                          
May 14, 2005  December 31, 2004  June 2, 2005  June 7, 2005 $0.0877 
May 14, 2005  March 31, 2005  June 2, 2005  June 7, 2005  0.50 
August 8, 2005  June 30, 2005  September 6, 2005  September 9, 2005  0.50 
November 7, 2005  September 30, 2005  December 6, 2005  December 9, 2005  0.50 
March 14, 2006  December 31, 2005  April 5, 2006  April 10, 2006  0.50 
May 4, 2006  March 31, 2006  June 5, 2006  June 9, 2006  0.50 
August 7, 2006  June 30, 2006  September 6, 2006  September 11, 2006  0.525 
November 8, 2006  September 30, 2006  December 5, 2006  December 8, 2006  0.55 

The distributions declared have been recorded as a reduction to trust stockLLC interests or accumulated (deficit) gain in the stockholders’members’ equity section or accumulated gain (deficit), of the accompanying consolidated balance sheets at December 31, 2006sheets.

The declaration and 2005.

21. Subsequent Events
On February 27, 2007, ourpayment of any future distribution will be subject to a decision of the Company’s Board of Directors, declaredwhich includes a dividendmajority of $0.57independent directors. The Company’s Board of Directors will take into account such matters as the state of the capital markets and general business conditions, the Company’s financial condition, results of operations, capital requirements and any contractual, legal and regulatory restrictions on the payment of distributions by the Company to its shareholders or by its subsidiaries to the Company, and any other factors that the Board of Directors deems relevant. In particular, each of the Company’s businesses and investments have substantial debt commitments and restrictive covenants, which must be satisfied before any of them can pay dividends or make distributions to the Company. Any or all of these factors could affect both the timing and amount, if any, of future distributions.


TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. Subsequent Events

The Company evaluated and disclosed the following events through February 25, 2010:

Atlantic Aviation’s Credit Facility

In February 2010, per sharethe revised terms of the term loan agreement, as described in Note 12, “Long-Term Debt”, Atlantic Aviation used $17.1 million of excess cash flow to prepay $15.5 million of the outstanding principal balance of its term loan debt and incurred $1.6 million in interest rate swap breakage fees.

PCAA Asset Purchase Agreement

On January 28, 2010, the Company announced that PCAA had entered into an asset purchase agreement with Bainbridge ZKS — Corinthian Holdings, LLC. This agreement, which is subject to approval by the bankruptcy court, will result in the sale of the assets of PCAA for $111.5 million, subject to certain adjustments and will result in the quarter ended December 31, 2006, payableelimination of $201.0 million of current debt from the liabilities of discontinued operations held for sale in the consolidated balance sheet. The cancelled debt in excess of the sale proceeds used to repay such debt would result in cancellation of debt income and the proceeds in excess of the business’ assets as a gain on April 9, 2007sale. As a part of the bankruptcy sale process, all cash proceeds would be paid to holderscreditors of recordthe business. PCAA also commenced a voluntary Chapter 11 case with the bankruptcy court. If approved, the Company expects to complete the sale of the business in the first half of 2010.

As part of the bankruptcy filing, the Company has no obligation to and has no intention of committing additional capital to this business. Creditors of this business do not have recourse to any assets of the holding company or any assets of the other Company’s businesses, other than approximately $5.3 million relating to a guarantee of a single parking facility lease.

Results for PCAA are reported separately as discontinued operations for all periods presented. The assets and liabilities of the business being sold are included in assets of discontinued operations held for sale and liabilities of discontinued operations held for sale on April 4, 2007.

22.the Company’s consolidated balance sheet.

24. Quarterly Data (Unaudited)

The data shown below relates to the Company’s continuing operations and includes all adjustments which the Company considers necessary for a fair presentation of such amounts.

         
 Operating Revenue Operating (Loss) Income Net (Loss) Income
   2009 2008 2007 2009 2008 2007 2009 2008 2007
   ($ in Thousands)
Quarter ended:
                                             
March 31 $167,496  $259,808  $150,171  $(26,792 $26,842  $17,677  $(46,601 $698  $9,624 
June 30  163,408   267,123   157,137   (39,489  24,264   (24,894  (27,013  10,184   (24,207
September 30  185,562   258,312   202,116   22,046   24,569   21,926   (16,890  2,368   (17,013
December 31  193,610   192,118   244,790   16,987   (70,232  15,597   (18,666  (83,431  (11,533
The 2006 and 2005 columns consist of the operations of the Company for the years ended December 31, 2006 and 2005, respectively.




F-46


MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. Quarterly Data (Unaudited) – (continued)
Although the Company’s inception was April 13, 2004, the operations from this date through December 31, 2004 have been presented in the December 31 category for 2004. The Company acquired its initial businesses and investments on December 22 and 23, 2004 and since the Company had no significant operations prior to this, presentation by quarter for 2004 would not be meaningful.
  
Operating Revenue
 
Operating Income (Loss)
 
Net Income (Loss)
 
  
2006
 
2005
 
2004
 
2006
 
2005
 
2004
 
2006
 
2005
 
2004
 
  ($ in thousands) 
Quarter ended:                                                       
March 31 $86,194 $65,735 $ $4,309 $5,867 $ $7,561 $4,238 $ 
June 30  105,933  72,519    13,578  7,513    9,437  3,349   
September 30  163,260  79,935    13,808  6,451    (10,018) 2,575   
December 31  164,644  86,554  5,064  (5,619) 5,520  (18,250) 42,938  5,034  (17,588)



F-47






  
North America
Capital Holding
Company
 
Executive Air
Support, Inc.
 
  
July 30, 2004 to December 22, 2004
 
January 1, 2004 to July 29, 2004
 
  ($ in thousands) 
Fuel revenue     $29,465     $41,146 
Service revenue  9,839  14,616 
Total revenue  39,304  55,762 
Cost of revenue – fuel  16,599  21,068 
Cost of revenue – service  849  1,428 
Gross profit  21,856  33,266 
Selling, general, and administrative expenses  13,942  22,378 
Depreciation  1,287  1,377 
Amortization  2,329  849 
Operating profit  4,298  8,662 
Other income (expense):       
Other expense  (39) (5,135)
Finance fees  (6,650)  
Interest expense  (2,907) (4,655)
Interest income  28  17 
Loss from continuing operations before income taxes  (5,270) (1,111)
Income taxes  286  (597)
Loss from continuing operations  (5,556) (514)
Discontinued operations:       
Net income from operations of discontinued operations (net of applicable tax provision (benefit) of $80 and ($194), respectively)  116  159 
Net loss $(5,440)$(355)
Net loss applicable to common stockholders:       
Net loss $(5,440)$(355)
Less preferred stock dividends    3,102 
Net loss applicable to common stockholders $(5,440)$(3,457)





  
Shares
 
Par Value
 
Paid in Capital
 
Accumulated
Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’
Equity (Deficit)
 
  ($ in thousands) 
Executive Air Support, Inc.                                          
Balance, December 31, 2003 1,895,684  19  195  (3,787) (685) (4,258)
Net loss, period January 1, 2004, through July 29, 2004       (355)   (355)
Interest rate swap agreement, net of tax provision of $189         283  283 
Reclassification adjustment for realized loss on interest rate swap included in net loss, net of tax benefit of $268         402  402 
Comprehensive income                330 
Tax benefit from exercise of stock options     1,781      1,781 
Elimination of stockholders’ equity (deficit) balances upon acquisition of Executive Air Support, Inc. by North America Capital Holding Company (1,895,684) (19) (1,976) 4,142    2,147 
Adjusted balance, July 29, 2004  $ $ $ $ $ 
North America Capital Holding Company                  
Issuance of common stock 544,273 $5 $108,830 $ $ $108,835 
Net loss, period July 30, 2004 through December 22, 2004       (5,440)   (5,440)
Interest rate swap agreement, net of tax provision of $28         41  41 
Comprehensive loss                (5,399)
Balance, December 22, 2004 544,273 $5 $108,830 $(5,440)$41 $103,436 




  
North America
Capital Holding
Company
 
Executive Air
Support, Inc.
 
  
July 30, 2004 to
December 22, 2004
 
January 1, 2004 to
July 29, 2004
 
  ($ in thousands) 
Cash flows from operating activities:             
Net loss $(5,440) (355)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:       
Fair value adjustment for outstanding warrant liability    5,280 
Depreciation and amortization  3,616  2,226 
Noncash interest expense and other  (240) 2,760 
Deferred income taxes  (954) (953)
Changes in assets and liabilities, net of acquisition:       
Accounts receivable  (304) (127)
Inventories  (447) 3 
Prepaid expenses and other  (659) 1,049 
Liabilities from discontinued operations  (177) (131)
Accounts payable  1,575  572 
Accrued payroll, payroll related, environmental, interest, & other  1,007  191 
Customer deposits and deferred hangar rent  20  24 
Receivable from related party  301  (734)
Income taxes  1,125  (2,048)
Net cash (used in) provided by operating activities  (577) 7,757 
Cash flows from investing activities:       
Purchase of Executive Air Support, net of cash acquired  (218,544)  
Funds received on July 29, 2004 for option and warrant payments made on July 30, 2004  (6,015) 6,015 
Capital expenditures  (3,198) (3,049)
Collections on note receivable from sale of division  47  45 
Other  (435)  
Net cash (used in) provided by investing activities  (228,145) 3,011 
Cash flows from financing activities:       
Proceeds from issuance of common stock  108,835   
Proceeds from issuance of redeemable preferred stock  1,023   
Proceeds from debt  130,000   
Deferred financing costs  (4,014)  
Restricted cash  (3,856)  
Repayment of short-term note    (2,354)
Payments on capital lease obligations  (145) (325)
Payments under revolving credit agreement    (1,000)
Repayment on subordinated debt    (17,850)
Repayments of borrowings under bank term loans    (17,753)
Purchase of common stock warrants    (7,525)
Termination of interest rate swap    (670)
Deemed capital contribution from parent company for debt and warrant payments    41,736 
Net cash provided by (used in) financing activities  231,843  (5,741)
Net change in cash and cash equivalents  3,121  5,027 
Cash and cash equivalents at beginning of period    2,438 
Cash and cash equivalents at end of period $3,121  7,465 
Supplemental disclosure of cash flow information:       
Cash paid during the period for:       
Interest $1,447 $2,550 
Income taxes $134 $2,601 
































CONTENTS

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

  
Balance at Beginning of Period
 
Charged to Costs and Expenses
 
Other
 
Deductions
 
Balance at End of Period
 
                                                                                 (in thousands) 
Allowance for Doubtful Accounts                                            
For the Period April 13, 2004 (inception) to December 31, 2004: $ $26 $1,333 $ $1,359 
For the Year Ended December 31, 2005: $1,359 $4 $ $(524)$839 
For the Year Ended December 31, 2006: $839 $635 $64 $(103)$1,435 


F-59
    
 Balance at
Beginning of
Year
 Charged to
Costs and
Expenses
 Deductions Balance at
End of Year
   ($ in Thousands)
Allowance for Doubtful Accounts
                    
For the Year Ended December 31, 2007 $1,319  $593  $(13 $1,899 
For the Year Ended December 31, 2008 $1,899  $1,543  $(1,301 $2,141 
For the Year Ended December 31, 2009 $2,141  $3,401  $(3,913 $1,629 


Item

TABLE OF CONTENTS

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item

ITEM 9A. Controls and Procedures

CONTROLS AND PROCEDURES

(a) Management’s Evaluation of Disclosure Controls and Procedures

We

Under the direction and with the participation of our chief executive officer and chief financial officer, we evaluated our disclosure controls and procedures (as such term is defined under Rule 13a-15(e)13(a)-15(e) of the Exchange Act) as of the end of the period covered by this report under the direction. Based on that evaluation, our chief executive officer and with the participation of our Chief Executive Officer and Chief Financial Officer, and havechief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2006.

2009.

(b) Management’s Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2006.2009. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s boardBoard of directors,Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management used the framework set forth in the report entitled “Internal Control-Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission (referred to as “COSO”) to evaluate the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. As permitted under the guidance of the SEC released October 16, 2004, in Question 3 of its “Frequently Asked Questions” regarding Securities Exchange Act Release No. 34-47986, Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the scope of management’s evaluation excluded the business acquired through the purchase of Macquarie HGC Investment LLC, acquisition date June 7, 2006, and the purchase of Trajen Holdings, Inc., acquisition date July 11, 2006. Accordingly, management’s assessment of the Company’s internal control over financial reporting does not include internal control over financial reporting of Macquarie HGC Investment LLC and Trajen Holdings, Inc. The assets of Macquarie HGC Investment LLC represent 15% of the Company’s total assets at December 31, 2006 and generated 17% of the Company’s total revenue during the year ended December 31, 2006. The assets of Trajen Holdings, Inc. represent 20% of the Company’s total assets at December 31, 2006 and generated 13% of the Company’s total revenue during the year ended December 31, 2006.

2009.

As a result of its evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2006.



108


KPMG LLP, an independent registered public accounting firm that audited2009.

The effectiveness of the financial statements included in this report, has issued an audit report on management’s assessment of our internal control over financial reporting.

(c) Changes in internal controls over financial reporting
As previously disclosed, during the fourth quarter of 2006 we restated our unaudited financial statements for the quarters ended March 31, 2006 and June 30, 2006 as well as certain other unaudited 2005 financial data due to a deficiency in our processes and procedures related to the accounting treatment for derivative instruments. As a result of such financial statement restatement, we identified a material weakness inCompany’s internal control over financial reporting as of December 31, 2005, March 31, 2006 and June 30, 2006. In2009 has been audited by KPMG LLP, the fourth quarter of 2006, we decided to discontinueCompany’s independent registered public accounting firm, as stated in their report appearing on page 154, which expressed an unqualified opinion on the use of hedge accounting through the remainder of 2006. There was no other change in our internal control over financial reporting during the quarter ended December 31, 2006 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
In January 2007, we began applying hedge accounting for derivative instruments. This resulted in the installation and testingeffectiveness of the following procedures and training:
·
We continue to provide appropriate training to our accounting staff regarding hedge accounting for derivative instruments.
·
We have updated our policies and procedures to ensure that, with regard to hedge accounting for derivative instruments:
·
Our procedures require the completion and senior review of a detailed report listing the specific criteria supporting the determination that hedge accounting is appropriate at the inception or acquisition of a derivative instrument and an analysis of any required tests of hedge effectiveness.
·
Our procedures require the completion and senior review of a detailed report stating how we test for effectiveness and measure ineffectiveness on a quarterly basis for each derivative instrument.
·
Our procedures require the completion and senior review of a detailed quarterly report reassessing the initial determination for each derivative instrument and, where applicable, retesting for effectiveness and measuring ineffectiveness.
·
We require that our policies and procedures for accounting for derivative instruments be reviewed periodically by an external consultant to address any changes in law, interpretations, or guidance relating to hedge accounting.
·
An external consultant with hedge accounting expertise may review specific transactions from time to time to provide guidance on our accounting for derivatives instruments with regard to market practice.
·
We installed and utilize hedge accounting software to assist management in maintaining sufficient documentation, perform required effectiveness testing and calculating amounts to record.



109


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors of Macquarie Infrastructure Company LLC
Stockholders of Macquarie Infrastructure Company Trust:
We have audited management’s assessment, included in Item 9A.(b) titled Management’s report on internal control over financial reporting, that Macquarie Infrastructure Company Trust maintained effectiveCompany’s internal control over financial reporting as of December 31, 2006,2009.


TABLE OF CONTENTS

(c) Attestation Report of Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Macquarie Infrastructure Company LLC:

We have audited Macquarie Infrastructure Company LLC’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Macquarie Infrastructure Company Trust’sLLC’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment,assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control andbased on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Macquarie Infrastructure Company Trust, through a wholly owned subsidiary, acquired K-1 HGC Investment, L.L.C. (subsequently renamed Macquarie HGC Investment LLC), which owns HGC Holdings LLC, or HGC, and The Gas Company, LLC, collectively referred to as TGC on June 7, 2006. Additionally, Macquarie Infrastructure Company Trust, through wholly owned subsidiaries, acquired Trajen Holdings, Inc., or Trajen, on July 11, 2006. Management excluded from its assessment of the effectiveness of Macquarie Infrastructure Company Trust’s internal control over financial reporting as of December 31, 2006 both TGC and Trajen’s internal controls over financial reporting. The TGC assets represent 15% of the Company’s total assets at December 31, 2006, and generated 17% of the Company’s total revenues during the year ended December 31, 2006. The Trajen assets represent 20% of the Company’s total assets at December 31, 2006, and generated 13% of the Company’s total revenues during the year ended December 31, 2006. Our audit of internal control over financial reporting of Macquarie Infrastructure Company Trust also excluded an evaluation of the internal control over financial reporting of both TGC and Trajen.

In our opinion, management’s assessment that Macquarie Infrastructure Company Trust maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Macquarie Infrastructure Company TrustLLC maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006,2009, based on criteria established inInternal Control —  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



110


Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Macquarie Infrastructure Company TrustLLC and subsidiaries as of December 31, 20062009 and 2005,2008, and the related consolidated statements of operations, stockholders’members’ equity and comprehensive income (loss), and cash flows andfor each of the related financial statement schedule foryears in the yearsthree-year period ended December 31, 2006 and 2005 and the period April 13, 2004 (inception) to December 31, 2004,2009, and our report dated February 28, 200725, 2010 expressed an unqualified opinion on those consolidated financial statements.

As discussed in Note 2 to the consolidated financial statements, and financial statement schedule.

the Company has changed its method of accounting for noncontrolling interests due to the adoption of ASC 810-10Consolidation(formerly Statement on Financial Accounting Standards No. 160,Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51)in 2009.

/s/KPMG LLP


Dallas, Texas
February 28, 2007


11125, 2010



Item 9B. Other Information
On January 23, 2007, we entered into a letter agreement amending

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(d) Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) was identified in connection with the existing shareholders’ agreement between our wholly-owned subsidiary Macquarie Terminal Holdings LLC, IMTT andevaluation described in (b) above during the other shareholders of IMTT. The amendment provides for the following:

·
an extension of the date through which IMTT is required to pay fixed dividends of $14 million perfiscal quarter ($7 million to us) fromended December 31, 20072009 that materially affected, or is reasonably likely to December 31, 2008. The obligation remains subject to the terms of financing agreements, applicable law and maintenance of sufficient reserves or available credit facilities to meet the normal requirements of the business and to fund approved capital expenditures;
·
a deferral of the requirement that IMTT maintain its net debt to EBITDA ratio at a minimum of 3.75 times from the third quarter of 2006 to the first quarter of 2009; and
·
A deferral of the right of the board of IMTT to reduce dividends paid by IMTT in the event that IMTT’s net debt to EBITDA ratio exceeds 4.25 times from the first quarter of 2008 to the first quarter of 2009.
The amendment was executed to provide for stability of distributions from IMTT while it is undertaking its extensive capital expenditure program which is expected to expand beyond the committed projects discussed in this Form 10-K. The amendment is filed herewith as exhibit 10.10.


112materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.



Item

ITEM 10. Directors and Executive Officers of the Registrants

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The companyCompany will furnish to the Securities and Exchange Commission a definitive proxy statement not later than 120 days after the end of the fiscal year ended December 31, 2006.2009. The information required by this item is incorporated herein by reference to the proxy statement.

Item

ITEM 11. Executive Compensation

EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to the proxy statement.

Item

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference to the proxy statement.

Item

ITEM 13. Certain Relationships and Related Transactions

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference to the proxy statement.

Item

ITEM 14. Principal Accounting Fees and Services

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference to the proxy statement.



113


PART IV

Item

ITEM 15. Exhibits, Financial Statement Schedules

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Financial Statements and Schedules

The consolidated financial statements in Part II, Item 8, and schedule listed in the accompanying exhibit index are filed as part of this report.

Exhibits

The exhibits listed on the accompanying exhibit index are filed as a part of this report.



114



SIGNATURES

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each RegistrantMacquarie Infrastructure Company LLC has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 1, 2007.

February 25, 2010.

 
Macquarie Infrastructure Company TrustMACQUARIE INFRASTRUCTURE COMPANY LLC
(Registrant)
   

By:

/s/ Peter Stokes

Regular Trustee
Macquarie Infrastructure Company LLCJames Hooke
(Registrant)
By:  /s/ Peter Stokes
Chief Executive Officer







We, the undersigned directors and executive officers of Macquarie Infrastructure Company LLC, hereby severally constitute Peter StokesJames Hooke and Francis T. Joyce,Todd Weintraub, and each of them singly, our true and lawful attorneys with full power to them and each of them to sign for us, and in our names in the capacities indicated below, any and all amendments to the Annual Report on Form 10-K filed with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys to any and all amendments to said Annual Report on Form 10-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Macquarie Infrastructure Company LLC and in the capacities indicated on the 1st25th day of March 2007.

February 2010.

Signature
Title
 
SignatureTitle
/s/ Peter StokesJames Hooke
James Hooke
 Chief Executive Officer (Principal
(Principal Executive Officer)
 Peter Stokes
/s/ Francis T. JoyceTodd Weintraub
Todd Weintraub
 Chief Financial Officer
(Principal Financial Officer)
Francis T. Joyce
/s/ Todd WeintraubPrincipal Accounting Officer
 Todd Weintraub
/s/ John Roberts
John Roberts
 Chairman of the Board of Directors
 John Roberts
/s/ Norman H. Brown, Jr.
Norman H. Brown, Jr.
 Director
 Norman H. Brown, Jr.
/s/ George W. Carmany III
George W. Carmany III
 Director
 George W. Carmany III
/s/ William H. Webb
William H. Webb
 Director

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EXHIBIT INDEX

 William H. Webb 
 2.1* Asset Purchase Agreement, dated as of January 28, 2010 between PCAA Parent, LLC, a subsidiary of the holding company for Macquarie Infrastructure Company’s airport parking business, and certain of its subsidiaries, and Corinthian-Bainbridge ZKS Holdings, LLC, a Delaware limited liability company, formed by Corinthian Equity Fund, L.P. and Bainbridge ZKS Funds, LP†
 





Exhibit Index
Exhibit Number
Description
2.12.2* Purchase and Sale Agreement dated April 18, 2006 by and among Trajen Holdings,Macquarie Infrastructure Company Inc., John Hancock Life Insurance Company, and John Hancock Life Insurance Company (U.S.A.), dated as of November 20, 2009 (the “Thermal Chicago Agreement”)
 2.3*Amendment to Purchase Agreement, dated as of December 21, 2009, regarding the stockholders thereofThermal Chicago Agreement
 3.1Third Amended and Restated Operating Agreement of Macquarie FBO Holdings, LLC.Infrastructure Company LLC (incorporated by reference to Exhibit 2.1 to the Registrants’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, filed with the SEC on May 10, 2006 (the “March 2006 Quarterly Report”)
2.2Stock Subscription Agreement dated April 14, 2006 between Macquarie Terminal Holdings LLC, IMTT Holdings Inc. and the Current Owners (incorporated by reference to Exhibit 2.13.1 of the Registrants’Registrant’s Current Report on Form 8-K filed with the SEC on April 17, 2006)
2.3Irrevocable Undertaking and Drag Along Request (incorporated by reference to Exhibit 2.1 of the Registrants’ Current Report on Form 8-K filed with the SEC on October 2, 2006)
2.4*Sale and Purchase Agreement dated December 21, 2006 among Macquarie Yorkshire LLC, MIC European Financing SarL, Macquarie Infrastructure Company LLC and Balfour Beatty PLC, and related Tax Deed
2.5*Business Purchase Agreement (Santa Monica), dated as of December 21, 2006, among David G, Price, individually and as trustee for the David G. Price 2006 Family Trust dated January 13, Dallas P. Price-Van Breda, individually and as trustee for the Dallas Price-Van Breda 2006 Family Trust dated May 3, 2006, Supermarine Aviation, Limited and Macquarie FBO Holdings LLC
2.6*Membership Interest Purchase Agreement (Stewart), dated as of December 21, 2006, between David G. Price and Macquarie FBO Holdings LLC
3.1Second Amended and Restated Trust Agreement dated as of September 1, 2005 of Macquarie Infrastructure Company Trust (incorporated by reference to Exhibit 3.1 of the Registrants’ Current Report on Form 8-K, filed with the SEC on September 7, 2005June 22, 2007 (the “September Current Report”“June 22, 2007 8-K”))
 
3.2Second Amended and Restated Operating Agreement dated as of September 1, 2005 of Macquarie Infrastructure Company LLC (incorporated by reference to Exhibit 3.2 of the September Current Report)
3.3Amended and Restated Certificate of Trust of Macquarie Infrastructure Assets Trust (incorporated by reference to Exhibit 3.7 of Amendment No. 2 to the Registrants’ Registration Statement on Form S-1 (Registration No. 333-116244) (“Amendment No. 2”)
3.4 Amended and Restated Certificate of Formation of Macquarie Infrastructure Assets LLC (incorporated by reference to Exhibit 3.8 of Amendment No. 2)2 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-116244) (“Amendment No. 2”)
 
4.14.1* Specimen certificate evidencing share of trust stockLLC interests of Macquarie Infrastructure Company TrustLLC
10.1Amended and Restated Management Services Agreement, dated as of June 22, 2007, among Macquarie Infrastructure Company LLC, Macquarie Infrastructure Company Inc., Macquarie Yorkshire LLC, South East Water LLC, Communications Infrastructure LLC and Macquarie Infrastructure Management (USA) Inc. (incorporated by reference to Exhibit 4.110.1 of the Registrants’June 22, 2007 8-K)
10.2Amendment No. 1 to the Amended and Restated Management Services Agreement, dated as of February 7, 2008, among Macquarie Infrastructure Company LLC, Macquarie Infrastructure Company Inc., Macquarie Yorkshire LLC, South East Water LLC, Communications Infrastructure LLC and Macquarie Infrastructure Management (USA) Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 20042007 (the “2004“2007 Annual Report”))
4.2Specimen certificate evidencing LLC interest of Macquarie Infrastructure Company LLC (incorporated by reference to Exhibit 4.2 of the 2004 Annual Report)
10.1Management Services Agreement among Macquarie Infrastructure Company LLC, certain of its subsidiaries named therein and Macquarie Infrastructure Management (USA) Inc. dated as of December 21, 2004 (incorporated by reference to Exhibit 99.1 of the Registrants’ Current Report on Form 8-K, filed with the SEC on December 27, 2004)






Exhibit Number
Description
10.2Amendment No. 1 to the Management Services Agreement dated as of August 8, 2006, among Macquarie Infrastructure Management (USA) Inc., Macquarie Infrastructure Company LLC and certain of its subsidiaries named therein (incorporated by reference to Exhibit 10.6 of the Registrants’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, filed with the SEC on August 9, 2006 (the “June 2006 Quarterly Report”))
10.3 Registration Rights Agreement among Macquarie Infrastructure Company Trust, Macquarie Infrastructure Company LLC and Macquarie Infrastructure Management (USA) Inc., dated as of December 21, 2004 (incorporated by reference to Exhibit 99.4 of the Registrants’Registrant’s Current Report on Form 8-K, filed with the SEC on December 27, 2004)
10.4 Macquarie Infrastructure Company LLC — Independent Directors Equity Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008)
10.410.5Second Amended and Restated Credit Agreement, dated as of February 13, 2008, among Macquarie Infrastructure Company Inc., Macquarie Infrastructure Company LLC, the Lenders (as defined therein), the Issuers (as defined therein) and Citicorp North America, Inc., as administrative agent (incorporated by reference to Exhibit 10.5 to the Registrant’s 2007 Annual Report)
10.6 Loan Agreement, dated as of September 1, 2006 between Parking Company of America Airports, LLC, Parking Company of America Airports Phoenix, LLC, PCAA SP, LLC and PCA Airports, Ltd., as borrowers, and Capmark Finance Inc., as lender (incorporated by reference to Exhibit 10.1 of the Registrants’Registrant’s Current Report on Form 8-K filed with the SEC on September 7, 2006)
10.510.7 District Cooling System Use Agreement, dated as of October 1, 1994, between the City of Chicago, Illinois and MDE Thermal Technologies, Inc., as amended on June 1, 1995, July 15, 1995, February 1, 1996, April 1, 1996, October 1, 1996, November 7, 1996, January 15, 1997, May 1, 1997, August 1, 1997, October 1, 1997, March 12, 1998, June 1, 1998, October 8, 1998, April 21, 1999, March 1, 2000, March 15, 2000, June 1, 2000, August 1, 2001, November 1, 2001, June 1, 2002, and June 30, 2004 (incorporated by reference to Exhibit 10.25 of Amendment No. 2)


 
10.610.8 Twenty-Third Amendment to the District Cooling System Use Agreement, dated as of November 1, 2005, by and between the City of Chicago and Thermal Chicago Corporation (incorporated by reference to Exhibit 10.5 ofto the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (the “June 2006 Quarterly Report)Report”))
10.9 Twenty-Fourth Amendment to District Cooling System Use Agreement, dated as of November 1, 2006, by and between the City of Chicago, Illinois and MDE Thermal Technologies, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (the “March 2007 Quarterly Report”))
10.710.10 Note PurchaseTwenty-Fifth Amendment to District Cooling System Use Agreement, dated as of October 1, 2008, by and between the City of Chicago, Illinois and Thermal Chicago Corporation (incorporated by reference to Exhibit 10.16 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 10-K Report”))
10.11Loan Agreement, dated as of September 27, 200421, 2007, among Macquarie District Energy, Inc., John Hancock Life Insurance Company, John Hancock Variable Life Insurance Company, The Manufacturers Life Insurance Company (U.S.A.), Allstate Life Insurance Companythe Lenders defined therein, Dresdner Bank AG New York Branch, as administrative agent and Allstate Insurance CompanyLaSalle Bank National Association, as issuing bank (incorporated by reference to Exhibit 10.26 of Amendment No. 2)10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 27, 2007).
10.12 
10.8Amendment Number One to Loan Agreement, dated as of December 21, 2007, among Macquarie Infrastructure Company LLC – Independent Directors Equity PlanDistrict Energy, Inc., the several banks and other financial institutions signatories hereto, LaSalle Bank National Association, as Issuing Bank and Dresdner Bank AG New York Branch, as Administrative Agent (incorporated by reference to Exhibit 10.25 of10.11 to the 2004Registrant’s 2007 Annual Report)
10.13 Amendment Number Two to Loan Agreement, dated as of February 22, 2008, among Macquarie District Energy, Inc., the several banks and other financial institutions signatories thereto; LaSalle Bank National Association, as Issuing Bank and Dresdner Bank AG New York Branch, as Administrative Agent (incorporated by reference to Exhibit 10.12 to the Registrant’s 2007 Annual Report)
10.910.14 Shareholder’sShareholder's Agreement, dated April 14, 2006, between Macquarie Terminal Holdings LLC, IMTT Holdings Inc., the Current Shareholders and the Current Beneficial Owners named therein (incorporated by reference to Exhibit 10.1 of the Registrants’Registrant’s Current Report on Form 8-K, filed with the SEC on April 17, 2006).
10.10*10.15 Letter Agreement, dated January 23, 2007, between Macquarie Terminal Holdings LLC, IMTT Holdings Inc., the Current Shareholders and the Current Beneficial Owners named therein.therein (incorporated by reference to Exhibit 10.10 to the Registrant’s 2006 Annual Report)
10.16 Letter Agreement entered into as of June 20, 2007 among IMTT Holdings Inc. (IMTT Holdings), Macquarie Terminal Holdings LLC and the Current Beneficial Shareholders of IMTT Holdings, amending the Shareholders Agreement dated April 14, 2006 (as amended) between IMTT Holdings and the Shareholders thereof (incorporated by reference to Exhibit 10.5 to the June 2007 Quarterly Report)
10.1110.17 Amended and Restated CreditLetter Agreement, dated as of May 9, 2006July 30, 2007, among Macquarie Infrastructure CompanyIMTT Holdings Inc. (IMTT), Macquarie Infrastructure CompanyTerminal Holdings LLC and the Lenders and Issuers party thereto and Citicorp North America, Inc., as Administrative Agentother current beneficial shareholders of IMTT amending the Shareholders Agreement dated April 14, 2006 (as amended) between the same parties (incorporated by reference to exhibit 10.2Exhibit 10.6 to the March 2006June 2007 Quarterly Report).
10.18 
10.12Amended and Restated Loan Agreement, dated as of June 28, 2006,September 27, 2007, among North America Capital Holding Company, as Borrower,Atlantic Aviation FBO Inc., the Lenders, as defined therein, and Mizuho CorporateDepfa Bank Ltd.plc, as Administrative Agent, and Amendments No. 1 and No. 2 thereto (incorporated by reference to Exhibit 10.1 of the June 2006September 2007 Quarterly Report)
10.19 Waiver and Amendment Number Three to Loan Agreement, dated as of November 30, 2007, among Atlantic Aviation FBO Inc., the several banks and other financial institutions signatories thereto and Depfa Bank plc, as Administrative Agent (incorporated by reference to Exhibit 10.19 to the Registrant’s 2007 Annual Report)






 

TABLE OF CONTENTS

Exhibit Number
 
Description
10.20 Waiver and Amendment Number Four to Loan Agreement, dated as of December 27, 2007, among Atlantic Aviation FBO INC. and the several banks and other financial institutions signatories thereto (incorporated by reference to Exhibit 10.20 to the Registrant’s 2007 Annual Report)
10.1310.21Consent and Amendment Number Five to Loan Agreement, dated as of January 31, 2008, among Atlantic Aviation FBO INC., Atlantic Aviation FBO Holdings LLC (formerly known as Macquarie FBO Holdings LLC) and the several banks and other financial institutions signatories thereto (incorporated by reference to Exhibit 10.21 to the Registrant’s 2007 Annual Report).
10.22Amendment Number Six to Loan Agreement, dated as of February 25, 2009, among Atlantic Aviation FBO Inc and the bank or banks and other financial institutions signatories thereto (incorporated by reference to Exhibit 10.29 to the 2009 10-K Report)
10.23 Amended and Restated Loan Agreement, dated as of June 7, 2006, among HGC Holdings LLC, Macquarie Gas Holdings LLC, the Lenders named herein and Dresdner Bank AG London Branch (incorporated by reference to Exhibit 10.1 of the Registrant’sRegistrant's Current Report on Form 8-K, filed with the SEC on June 12, 2006)
10.1410.24 Amended and Restated Loan Agreement, dated as of June 7, 2006, among The Gas Company LLC, Macquarie Gas Holdings LLC, the Lenders defined therein and Dresdner Bank AG London Branch (incorporated by reference to Exhibit 10.2 of the Registrant’sRegistrant's Current Report on Form 8-K, filed with the SEC on June 12, 2006)
10.25 
10.15Petroleum FeedstockLetter Amendment, dated August 18, 2006, amending the Amended and Restated Loan Agreement dated as of October 31, 1997, byJune 7, 2006, among HGC Holdings LLC, Macquarie Gas Holdings LLC, the Lenders named herein and between BHP Petroleum Americas Refining Inc.Dresdner Bank AG London Branch and Citizens Utilitiesthe Amended and Restated Loan Agreement, dated as of June 7, 2006, among The Gas Company LLC, Macquarie Gas Holdings LLC, the Lenders defined therein and Dresdner Bank AG London Branch (incorporated by reference to Exhibit 10.410.1 of the June 2006 Quarterly Report)
10.16Membership Interest Purchase Agreement dated May 26, 2005 between Gene H. Yamagata and Macquarie FBO Holdings LLC, relating to the acquisition of Las Vegas Executive Air Terminal (incorporated by reference to the Registrants’ Current Report on Form 8-K filed with the SEC on May 31, 2005)
10.17Purchase Agreement dated August 2, 2005, as amended August 17, 2005, among k1 Ventures Limited, K-1 HGC Investment, L.L.C. and Macquarie Investment Holdings Inc, and related joinder agreement and assignment agreement (incorporated by reference to Exhibits 2.1, 2.2 and 2.3 to the Registrants’ Current Report on Form 8-K filed with the SEC on August 19, 2005)
10.18Second Amendment to Purchase Agreement dated October 21, 2005 among k1 Ventures Limited, K-1 HGC Investment, L.L.C. and Macquarie Gas Holdings LLC (incorporated by reference to Exhibit 2.2 of the Registrants’Registrant's Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2005, filed with the SEC on November 11, 20052008 (the “September 2005“June 2008 Quarterly Report”))
10.26 
10.19JoinderAmendment Number Two to Amended and Restated Loan Agreement, dated Septemberas of July 16, 2005 between Macquarie Infrastructure2008, among The Gas Company, Inc., k1 Ventures Limited, K-1 HGC Investment, L.L.C. andLLC, Macquarie Gas Holdings LLC, the several banks and other financial institutions signatories hereto and Dresdner Bank AG Niederlassung Luxemburg (successor administrative agent to Dresdner Bank AG London Branch) (incorporated by reference to Exhibit 2.310.2 of the Registrants’ September 2005June 2008 Quarterly Report)
10.20Assignment Agreement dated September 16, 2005 between Macquarie Infrastructure Company Inc. and Macquarie Gas Holdings LLC (incorporated by reference to Exhibit 2.4 of the Registrants’ September 2005 Quarterly Report)
10.21Side Letter, dated March 7, 2006, amending the Purchase Agreement dated August 2, 2005, as amended, among k1 Ventures Limited, K-1 HGC Investment, LLC and Macquarie Gas Holdings LLC (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on June 12, 2006)
10.22*Letter Agreement, dated December 21, 2006, among Macquarie FBO Holdings, Mizuho Corporate Bank, Ltd., the Governor and Company of the Bank of Ireland and Bayerische Landesbank, New York Branch.
21.1* Subsidiaries of the Registrants
Registrant
23.1* Consent of KPMG LLP
23.2* Consent of KPMG LLP (IMTT)
24.1* Powers of Attorney (included in signature pages)






Exhibit Number
Description
31.1* Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
31.2* Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
31.3*Rule 13a-14(a)/15d-14(a) Certification of the Principal Accounting Officer
32.1* Section 1350 CertificationsCertification of Chief Executive Officer
32.2* Section 1350 Certification of Chief Financial Officer
99.1* Press ReleaseConsolidated Financial Statements for IMTT Holdings Inc., for the Years Ended December 31, 2009 and December 31, 2008
——————

*Filed herewith.
Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.
*


Filed herewith.