UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Commission File Number
001-32385
001-32384
(Exact Name of Registrant as Specified in its Charter)
Delaware |
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(State or Other Jurisdiction of | (IRS Employer |
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Commission File Number 001-32384
MACQUARIE INFRASTRUCTURE COMPANY LLC
(Exact Name of Registrant as Specified in its Charter)
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(Address of Principal Executive Offices)(Zip (Zip Code)
(Registrant’s Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report):
N/A
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 NO¨o
Indicate by check mark whether the registrants are collectivelyregistrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Yes ¨ No ý
Large Accelerated Filer | Accelerated Filer | Non-accelerated Filer |
Indicate by check mark whether the registrants are collectively a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨o No NOýx
There were 37,562,165 shares of trust stock43,302,006 limited liability company interests without par value outstanding at May 1,July 31, 2007.
LLC
Part I. Financial Information | ||||||
Item 1. Financial Statements | ||||||
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Consolidated Condensed Balance Sheets as |
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1 | ||||||
Consolidated Condensed |
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2 | ||||||
Consolidated Condensed Statements of Cash Flows for the |
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3 | ||||||
Notes to Consolidated Condensed Financial Statements (Unaudited) |
| 5 | ||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of |
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| 21 | |||||
Item 3. Quantitative and Qualitative Disclosure About Market Risk |
| 50 | ||||
Item 4. | Controls and Procedures |
| 52 | |||
Part II. Other Information | ||||||
Item 1. Legal Proceedings | 53 | |||||
Risk Factors | ||||||
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
| 53 | |||
Item 3. | Defaults Upon Senior Securities |
| 53 | |||
Item 4. | Submission of Matters to a Vote of Security Holders |
| 53 | |||
Item 5. | Other Information |
| 53 | |||
Item 6. Exhibits |
| 53 |
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Investments in Macquarie Infrastructure Company TrustLLC are not deposits with or other liabilities of Macquarie Bank Limited or any of Macquarie Group company and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither Macquarie Bank Limited nor any other member company of the Macquarie Group guarantees the performance of Macquarie Infrastructure Company TrustLLC or the repayment of capital from Macquarie Infrastructure Company Trust.LLC.
LLCCONSOLIDATED CONDENSED BALANCE SHEETS
As of March 31,June 30, 2007 and December 31, 2006
($ in thousands, except share amounts)
| March 31, |
| December 31, | June 30, 2007 | December 31, 2006 | |||||||||
(unaudited) | (Unaudited) | |||||||||||||
ASSETS |
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Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 146,404 | $ | 37,388 | $ | 73,000 | $ | 37,388 | ||||||
Restricted cash | 957 | 1,216 | 1,290 | 1,216 | ||||||||||
Accounts receivable, less allowance for doubtful accounts of $1,447 and $1,435, respectively | 62,771 | 56,785 | ||||||||||||
Accounts receivable, less allowance for doubtful accounts of $1,829 and $1,435, respectively | 66,291 | 56,785 | ||||||||||||
Dividends receivable | 7,000 | 7,000 | 7,000 | 7,000 | ||||||||||
Other receivables | 900 | 87,973 | 126 | 87,973 | ||||||||||
Inventories | 13,634 | 12,793 | 12,539 | 12,793 | ||||||||||
Prepaid expenses | 7,813 | 6,887 | 4,564 | 6,887 | ||||||||||
Deferred income taxes | 2,411 | 2,411 | 2,411 | 2,411 | ||||||||||
Income tax receivable | — | 2,913 | — | 2,913 | ||||||||||
Other |
| 12,034 |
| 15,600 | 12,747 | 15,600 | ||||||||
Total current assets | 253,924 | 230,966 | 179,968 | 230,966 | ||||||||||
Property, equipment, land and leasehold improvements, net | 526,262 | 522,759 | 550,165 | 522,759 | ||||||||||
Restricted cash | 22,915 | 23,666 | 25,551 | 23,666 | ||||||||||
Equipment lease receivables | 40,712 | 41,305 | 40,101 | 41,305 | ||||||||||
| 236,103 | 239,632 | 227,958 | 239,632 | ||||||||||
Goodwill | 486,476 | 485,986 | 513,867 | 485,986 | ||||||||||
Intangible assets, net | 519,844 | 526,759 | 553,441 | 526,759 | ||||||||||
Deposits and deferred costs on acquisitions | 1,785 | 579 | 2,717 | 579 | ||||||||||
Deferred financing costs, net of accumulated amortization | 19,472 | 20,875 | 18,908 | 20,875 | ||||||||||
Fair value of derivative instruments | 2,093 | 2,252 | 11,681 | 2,252 | ||||||||||
Other |
| 2,303 |
| 2,754 | 2,933 | 2,754 | ||||||||
Total assets | $ | 2,111,889 | $ | 2,097,533 | $ | 2,127,290 | $ | 2,097,533 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Due to manager | $ | 5,422 | $ | 4,284 | $ | 49,871 | $ | 4,284 | ||||||
Accounts payable | 34,595 | 29,819 | 34,235 | 29,819 | ||||||||||
Accrued expenses | 20,831 | 19,780 | 27,030 | 19,780 | ||||||||||
Current portion of notes payable and capital leases | 7,107 | 4,683 | 11,954 | 4,683 | ||||||||||
Current portion of long-term debt | 3,754 | 3,754 | 6,757 | 3,754 | ||||||||||
Distributions payable | 21,410 | — | ||||||||||||
Fair value of derivative instruments | 1,434 | 3,286 | 1,278 | 3,286 | ||||||||||
Other |
| 8,390 |
| 6,533 | 8,484 | 6,533 | ||||||||
Total current liabilities | 102,943 | 72,139 | 139,609 | 72,139 | ||||||||||
Capital leases and notes payable, net of current portion | 2,320 | 3,135 | ||||||||||||
Long-term debt, net of current portion | 991,326 | 959,906 | ||||||||||||
Deferred income taxes | 149,226 | 163,923 | ||||||||||||
Fair value of derivative instruments | — | 453 | ||||||||||||
Other | 27,959 | 25,371 | ||||||||||||
Total liabilities | 1,310,440 | 1,224,927 | ||||||||||||
Minority interests | 7,677 | 8,181 | ||||||||||||
Stockholders’ equity: | ||||||||||||||
LLC interests, no par value; 500,000,000 authorized; 37,562,165 interests issued and outstanding at June 30, 2007 and Trust Stock, no par value; 500,000,000 authorized; 37,562,165 shares issued and outstanding at December 31, 2006 | 820,700 | 864,233 | ||||||||||||
Accumulated other comprehensive income | 6,044 | 192 | ||||||||||||
Accumulated loss | (17,571 | ) | — | |||||||||||
Total stockholders’ equity | 809,173 | 864,425 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 2,127,290 | $ | 2,097,533 |
See accompanying notes to the consolidated condensed financial statements.
1
LLCCONSOLIDATED CONDENSED
and per share data)BALANCE SHEETS – (continued)STATEMENTS OF OPERATIONSAs of March 31,For the Quarters and Six Months Ended June 30, 2007 and December 31, 2006
(Unaudited)
($ in thousands, except share amounts)
| March 31, |
| December 31, | |||||||||
(unaudited) | ||||||||||||
Capital leases and notes payable, net of current portion |
| 2,727 |
| 3,135 | ||||||||
Long-term debt, net of current portion | 960,867 | 959,906 | ||||||||||
Deferred income taxes | 158,641 | 163,923 | ||||||||||
Fair value of derivative instruments | 3,757 | 453 | ||||||||||
Other |
| 26,202 |
| 25,371 | ||||||||
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Total liabilities |
| 1,255,137 |
| 1,224,927 | ||||||||
Minority interests |
| 7,888 |
| 8,181 | ||||||||
Stockholders’ equity: | ||||||||||||
Trust stock, no par value; 500,000,000 authorized; 37,562,165 shares issued and outstanding at March 31, 2007 and December 31, 2006 | 850,338 | 864,233 | ||||||||||
Accumulated other comprehensive (loss) income | (1,474) | 192 | ||||||||||
Accumulated earnings |
| — |
| — | ||||||||
Total stockholders’ equity |
| 848,864 |
| 864,425 | ||||||||
Total liabilities and stockholders’ equity | $ | 2,111,889 | $ | 2,097,533 |
Quarter Ended | Six Months Ended | |||||||||||||||
June 30, 2007 | June 30, 2006 | June 30, 2007 | June 30, 2006 | |||||||||||||
Revenues | ||||||||||||||||
Revenue from product sales | $ | 114,809 | $ | 56,922 | $ | 225,457 | $ | 98,914 | ||||||||
Service revenue | 61,161 | 47,726 | 118,247 | 90,630 | ||||||||||||
Financing and equipment lease income | 1,235 | 1,285 | 2,483 | 2,583 | ||||||||||||
Total revenue | 177,205 | 105,933 | 346,187 | 192,127 | ||||||||||||
Costs and expenses | ||||||||||||||||
Cost of product sales | 75,121 | 36,010 | 145,605 | 61,279 | ||||||||||||
Cost of services | 26,323 | 22,632 | 49,665 | 43,664 | ||||||||||||
Selling, general and administrative | 38,564 | 24,294 | 77,542 | 48,244 | ||||||||||||
Fees to manager | 48,964 | 3,718 | 54,525 | 10,196 | ||||||||||||
Depreciation | 4,162 | 2,121 | 8,053 | 3,831 | ||||||||||||
Amortization of intangibles | 7,004 | 3,580 | 13,932 | 7,026 | ||||||||||||
Total operating expenses | 200,138 | 92,355 | 349,322 | 174,240 | ||||||||||||
Operating (loss) income | (22,933 | ) | 13,578 | (3,135 | ) | 17,887 | ||||||||||
Other income (expense) | ||||||||||||||||
Dividend income | — | 2,351 | — | 5,002 | ||||||||||||
Interest income | 1,465 | 1,180 | 2,924 | 2,882 | ||||||||||||
Interest expense | (17,705 | ) | (15,604 | ) | (35,271 | ) | (31,267 | ) | ||||||||
Equity in (losses) earnings and amortization charges of investees | (1,145 | ) | 3,115 | 2,320 | 5,568 | |||||||||||
Gain on derivative instruments | 1,138 | 6,487 | 661 | 20,162 | ||||||||||||
Other income (expense), net | 272 | 94 | (644 | ) | (73 | ) | ||||||||||
Net (loss) income before income taxes and minority interests | (38,908 | ) | 11,201 | (33,145 | ) | 20,161 | ||||||||||
Benefit (provision) for income taxes | 13,833 | (1,618 | ) | 15,878 | (3,011 | ) | ||||||||||
Net (loss) income before minority interests | (25,075 | ) | 9,583 | (17,267 | ) | 17,150 | ||||||||||
Minority interests | (28 | ) | 146 | (97 | ) | 152 | ||||||||||
Net (loss) income | $ | (25,047 | ) | $ | 9,437 | $ | (17,170 | ) | $ | 16,998 | ||||||
Basic (loss) earnings per share: | $ | (0.67 | ) | $ | 0.35 | $ | (0.46 | ) | $ | 0.63 | ||||||
Weighted average number of shares outstanding: basic | 37,562,165 | 27,062,201 | 37,562,165 | 27,056,505 | ||||||||||||
Diluted (loss) earnings per share: | $ | (0.67 | ) | $ | 0.35 | $ | (0.46 | ) | $ | 0.63 | ||||||
Weighted average number of shares outstanding: diluted | 37,562,165 | 27,073,016 | 37,562,165 | 27,069,835 | ||||||||||||
Cash dividends declared per share | $ | 0.59 | $ | 0.50 | $ | 1.16 | $ | 1.00 |
See accompanying notes to the consolidated condensed financial statements.
2
LLC
CONSOLIDATED CONDENSED STATEMENTS OF INCOME CASH FLOWS
For the QuartersSix Months Ended March 31,June 30, 2007 and 2006
(Unaudited)
($ in thousands, except share and per share data)Thousands)
Quarter Ended | |||||||
| March 31, |
| March 31, | ||||
Revenues | |||||||
Revenue from product sales | $ | 110,648 | $ | 41,992 | |||
Service revenue | 57,086 | 42,904 | |||||
Financing and equipment lease income |
| 1,248 |
| 1,298 | |||
Total revenue |
| 168,982 |
| 86,194 | |||
Costs and expenses |
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Cost of product sales | 70,484 | 25,269 | |||||
Cost of services | 23,342 | 21,032 | |||||
Selling, general and administrative | 38,978 | 23,950 | |||||
Fees to manager | 5,561 | 6,478 | |||||
Depreciation | 3,891 | 1,710 | |||||
Amortization of intangibles |
| 6,928 |
| 3,446 | |||
Total operating expenses |
| 149,184 |
| 81,885 | |||
Operating income | 19,798 | 4,309 | |||||
Other income (expense) | |||||||
Dividend income | — | 2,651 | |||||
Interest income | 1,459 | 1,702 | |||||
Interest expense | (17,566 | ) | (15,663 | ) | |||
Equity in earnings and amortization charges of investees | 3,465 | 2,453 | |||||
(Loss) gain on derivative instruments | (477 | ) | 13,686 | ||||
Other expense, net |
| (916 | ) |
| (178 | ) | |
Net income before income taxes and minority interests | 5,763 | 8,960 | |||||
Benefit (provision) for income taxes |
| 2,045 |
| (1,393 | ) | ||
Net income before minority interests | 7,808 | 7,567 | |||||
Minority interests |
| (69 | ) |
| 6 | ||
Net income | $ | 7,877 | $ | 7,561 | |||
Basic earnings per share: | $ | 0.21 | $ | 0.28 | |||
Weighted average number of shares of trust stock outstanding: basic | 37,562,165 | 27,050,745 | |||||
Diluted earnings per share: | $ | 0.21 | $ | 0.28 | |||
Weighted average number of shares of trust stock outstanding: diluted | 37,579,034 | 27,066,618 | |||||
Cash dividends declared per share | $ |
| $ | 0.50 |
Six Months Ended | ||||||||
June 30, 2007 | June 30, 2006 | |||||||
Operating activities | ||||||||
Net (loss) income | $ | (17,170 | ) | $ | 16,998 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Depreciation and amortization of property and equipment | 13,029 | 8,290 | ||||||
Amortization of intangible assets | 13,932 | 7,026 | ||||||
Equity in earnings and amortization charges of investee | (2,320 | ) | (5,568 | ) | ||||
Equity distribution from investee | 2,320 | 2,366 | ||||||
Amortization of finance charges | 2,883 | 1,806 | ||||||
Noncash derivative gain, net of noncash interest expense | (2,500 | ) | (15,734 | ) | ||||
Performance fees to be settled in stock | 43,962 | 4,134 | ||||||
Equipment lease receivable, net | 1,381 | 994 | ||||||
Deferred rent | 1,264 | 1,205 | ||||||
Deferred taxes | (16,858 | ) | (2,444 | ) | ||||
Other noncash expenses, net | 1,118 | 1,418 | ||||||
Non-operating transactions relating to foreign investments | 2,799 | — | ||||||
Changes in other assets and liabilities: | ||||||||
Restricted cash | (74 | ) | (177 | ) | ||||
Accounts receivable | (7,013 | ) | (2,222 | ) | ||||
Dividend receivable | — | 145 | ||||||
Inventories | 409 | 1,353 | ||||||
Prepaid expenses and other current assets | 3,963 | 1,930 | ||||||
Accounts payable and accrued expenses | 6,486 | (4,650 | ) | |||||
Income taxes payable | 1,977 | 4,729 | ||||||
Due to manager | 1,624 | 1,192 | ||||||
Other | 1,326 | 610 | ||||||
Net cash provided by operating activities | 52,538 | 23,401 | ||||||
Investing activities | ||||||||
Acquisitions of businesses and investments, net of cash acquired | (85,934 | ) | (501,110 | ) | ||||
Costs of dispositions | (322 | ) | — | |||||
Deposits and deferred costs on future acquisitions | (966 | ) | (1,134 | ) | ||||
Proceeds from sale of investment in unconsolidated business | 84,977 | — | ||||||
Settlements of non-hedging derivative instruments | (1,965 | ) | — | |||||
Purchases of property and equipment | (18,246 | ) | (4,912 | ) | ||||
Return on investment in unconsolidated business | 11,680 | — | ||||||
Proceeds received on subordinated loan | — | 611 | ||||||
Net cash used in investing activities | (10,776 | ) | (506,545) |
See accompanying notes to the consolidated condensed financial statements.
3
LLC
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the QuartersSix Months Ended March 31,June 30, 2007 and 2006
(Unaudited)
($ in thousands)
Six Months Ended | ||||||||
June 30, 2007 | June 30, 2006 | |||||||
Financing activities | ||||||||
Proceeds from long-term debt | 34,500 | 160,000 | ||||||
Proceeds from line-credit facility | 7,130 | 277,901 | ||||||
Distributions paid to shareholders | (43,572 | ) | (27,059 | ) | ||||
Debt financing costs | (687 | ) | (4,756 | ) | ||||
Distributions paid to minority shareholders | (408 | ) | (282 | ) | ||||
Payment of long-term debt | (77 | ) | (72 | ) | ||||
Restricted cash | (1,886 | ) | 715 | |||||
Payment of notes and capital lease obligations | (1,149 | ) | (990 | ) | ||||
Net cash (used in) provided by financing activities | (6,149 | ) | 405,457 | |||||
Effect of exchange rate changes on cash | (1 | ) | 367 | |||||
Net change in cash and cash equivalents | 35,612 | (77,320 | ) | |||||
Cash and cash equivalents, beginning of period | 37,388 | 115,163 | ||||||
Cash and cash equivalents, end of period | $ | 73,000 | $ | 37,843 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Noncash investing and financing activities: | ||||||||
Accrued deposits and deferred costs on acquisition, and equity offering costs | $ | 2,757 | $ | 2,639 | ||||
Accrued purchases of property and equipment | $ | 2,620 | $ | 1,263 | ||||
Acquisition of property through capital leases | $ | 30 | $ | 1,667 | ||||
Issuance of stock to manager for payment of March 2006 performance fees | $ | — | $ | 4,134 | ||||
Issuance of stock to independent directors | $ | — | $ | 450 | ||||
Taxes paid | $ | 1,886 | $ | 492 | ||||
Interest paid | $ | 33,016 | $ | 24,225 |
See accompanying notes to the consolidated condensed financial statements.
4
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS – (continued)LLCFor the Quarters Ended March 31, 2007 and 2006(Unaudited)($ in thousands)
Quarter Ended | ||||||||||||||||
| March 31, |
| March 31, | |||||||||||||
Financing activities |
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Proceeds from long-term debt | 1,000 | — | ||||||||||||||
Proceeds from line-credit facility | 1,750 | 1,275 | ||||||||||||||
Debt financing costs | (54 | ) | (58 | ) | ||||||||||||
Distributions paid to minority shareholders | (224 | ) | (63 | ) | ||||||||||||
Payment of long-term debt | (39 | ) | (37 | ) | ||||||||||||
Restricted cash | 751 | (79 | ) | |||||||||||||
Payment of notes and capital lease obligations |
| (596 | ) |
| (486 | ) | ||||||||||
Net cash provided by financing activities | 2,588 | 552 | ||||||||||||||
Effect of exchange rate changes on cash |
| (1 | ) |
| (30 | ) | ||||||||||
Net change in cash and cash equivalents | 109,016 | 11,320 | ||||||||||||||
Cash and cash equivalents, beginning of period |
| 37,388 |
| 115,163 | ||||||||||||
Cash and cash equivalents, end of period | $ | 146,404 | $ | 126,483 | ||||||||||||
Supplemental disclosures of cash flow information: | ||||||||||||||||
Noncash investing and financing activities: | ||||||||||||||||
Accrued deposits and deferred costs on acquisition, and equity offering costs | $ | 1,078 | $ | 3,695 | ||||||||||||
Accrued purchases of property and equipment | $ | 2,393 | $ | 241 | ||||||||||||
Acquisition of property through capital leases | $ | 30 | $ | 1,669 | ||||||||||||
Taxes paid | $ | 960 | $ | 290 | ||||||||||||
Interest paid | $ | 16,131 | $ | 10,263 |
See accompanying notes to the consolidated condensed financial statements.
MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Macquarie Infrastructure Company LLC, a Delaware limited liability company, was formed on April 13, 2004. Macquarie Infrastructure Company Trust, or the Trust, a Delaware statutory trust, was also formed on April 13, 2004. Macquarie Infrastructure Company LLC, orboth on an individual entity basis and together with its wholly owned subsidiaries, is referred to in these financial statements as the Company, a Delaware limited liability company, was also formed on April 13, 2004.Company. Prior to December 21, 2004, the Trust was a wholly-owned subsidiary of Macquarie Infrastructure Management (USA) Inc., or MIMUSA. MIMUSA, the Company’s Manager, is a subsidiary of the Macquarie Group of companies, which is comprised of Macquarie Bank Limited and its subsidiaries and affiliates worldwide. Macquarie Bank Limited is headquartered in Australia and is listed on the Australian Stock Exchange.
The Trust and the Company were formed to own, operate and invest in a diversified group of infrastructure businesses in the United States and other developed countries. 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 interests in the Company, and the Trust was dissolved. Prior to this exchange of trust stock for limited liability company interests and the dissolution of the Trust, all interests in the Company were held by the 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, gas production and distribution, district energy and airport parking businesses and an interest in a bulk liquid storage terminal business, through the Company’s wholly-owned subsidiary, MIC Inc.
During the year ended December 31, 2006, the Company’s major acquisitions were as follows:
(i)
(i) | On May 1, 2006, the Company completed its acquisition of 50% of the shares in IMTT Holdings Inc., the holding company for a bulk liquid storage terminal business operating as International-Matex Tank Terminals, or IMTT. |
(ii) | 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. |
(iii) | 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 fixed based operations, or FBOs, at airports in 11 states. |
During the Company completed itssix months ended June 30, 2007, the Company’s acquisition of 50% of the shares in IMTT Holdings Inc., the holding company for a bulk liquid storage terminal business operatingwas as International-Matex Tank Terminals, or IMTT.follows:
(ii)
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.
(iii)
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 fixed based operations or FBOs at airports in 11 states.
(iv) | On May 30, 2007, the Company completed the acquisition of 100% of the interests in entities that own and operate two FBOs at Stewart International Airport in New York and Santa Monica Municipal Airport in California, together referred to as “Supermarine”. |
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, which is the indirect holder of the Yorkshire Link toll road concession in the U.K.
There were no acquisitions or dispositions of businesses during the quarter ended March 31, 2007.
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the
5
instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of consolidated financial statements in conformity with GAAP requires estimates and assumptions. Management evaluates these estimates and judgments on an ongoing basis. Actual results may differ from the estimates and assumptions used in the financial statements and notes. Operating results for the quarter and six months ended March 31,June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.
The consolidated balance sheet at December 31, 2006 has been derived from audited financial statements but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements.
MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
2. Basis of Presentation – (continued)
The interim financial information contained herein should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2006 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 1, 2007.
Uncertain Tax Positions
In June 2006, the FASB issued FIN 48,Accounting for Uncertainty in Income Taxes—Taxes — an interpretation of FASB Statement No. 109, Accounting for Income Taxes. This interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increas edincreased disclosures. 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 is 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. Refer to Note 14, Income Taxes, for additional details.
The following is a reconciliation of the basic and diluted number of shares used in computing earnings (loss) per share:
Quarter Ended March 31, | ||||
|
|
|
| |
Weighted average number of shares of trust stock outstanding: basic | 37,562,165 | 27,050,745 | ||
Dilutive effect of restricted stock unit grants | 16,869 | 15,873 | ||
Weighted average number of shares of trust stock outstanding: diluted | 37,579,034 | 27,066,618 |
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Weighted average number of shares outstanding: basic | 37,562,165 | 27,062,201 | 37,562,165 | 27,056,505 | ||||||||||||
Dilutive effect of restricted stock unit grants | — | 10,815 | — | 13,330 | ||||||||||||
Weighted average number of shares outstanding: diluted | 37,562,165 | 27,073,016 | 37,562,165 | 27,069,835 |
The stock grants provided to our independent directors on May 25, 2006 and May 24, 2007 were anti-dilutive for the quarter and six months ended June 30, 2007 due to the Company’s net loss for these periods.
The effect of potentially dilutive shares for the quarter and six months ended June 30, 2006 is calculated by assuming that the restricted stock unit grants issued to the independent directors had been fully converted to shares on the date of grant.
6
On December 21, 2006,May 30, 2007, the Company entered into aCompany’s airport services business, purchase agreement and a membership interest purchase agreement to acquirecompleted the acquisition of 100% of the interests in entities that own and operate two fixed baseFBOs at Santa Monica Municipal Airport in Santa Monica, California and Stewart International Airport in New Windsor, New York (together referred to as “Supermarine”).
The cost of the acquisition, including transaction costs, was $89.6 million. In addition, the Company incurred debt financing costs of $520,000, pre-funding of capital expenditures and integration costs of $300,000 and provided for a debt service reserve of $454,000. The Company financed the acquisition with $32.5 million of borrowings under an expansion of the airport services business credit facility, and the remainder with cash. Refer to Note 8, Long-Term Debt, for further details of the additional term loan facility.
Macquarie Securities (USA) Inc., or MSUSA, a subsidiary of Macquarie Bank Limited, acted as financial advisor to the Company on the acquisition, as well as on the financing of the transaction. Total fees of approximately $1.5 million were paid for these services and are included within transaction costs disclosed above.
The acquisition has been accounted for under the purchase method of accounting. Accordingly, the results of operations or FBOs. of Supermarine are included in the accompanying consolidated condensed statement of income and as a component of the Company’s airport services business segment since May 30, 2007.
The totalpreliminary allocation of the purchase price, including transaction costs, was as follows (in thousands):
Current assets | $ | 3,587 | ||
Property, equipment and leasehold improvements | 19,803 | |||
Intangible assets: | ||||
Customer relationships | 1,600 | |||
Contract rights | 37,900 | |||
Non-compete agreements | 1,100 | |||
Goodwill | 26,869 | |||
Total assets acquired | 90,859 | |||
Current liabilities | 1,233 | |||
Net assets acquired | $ | 89,626 |
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 analysis of expected future cash flows to be generated by the business.
The Company allocated $1.6 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 will amortize the amount allocated to customer relationships over a ten-year period.
The following unaudited pro forma information summarizes the results of operations for the six months ended June 30, 2007 as if the acquisition of Supermarine had been completed as of January 1, 2007. The pro forma data gives effect to actual operating results prior to the acquisitions and adjustments to interest expense,
7
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.
Pro forma consolidated revenues and net loss for the six months ended June 30, 2007, if the acquisition of Supermarine had occurred on January 1, 2007, would have been $357.8 million and a loss of $15.8 million, respectively. Basic and diluted loss per share would have been $0.42 if such acquisitions had occurred on January 1, 2007.
On April 16, 2007, the Company entered into a stock purchase agreement with Mercury Air Centers, Inc., or Mercury, and its equity holders providing for:
On June 12, 2007, the Company entered into an amendment of the stock purchase agreement, to reflect Mercury, through a wholly owned subsidiary, entering into an agreement to purchase 100% of the membership interests in SJJC Aviation Services, LLC, or SJJC, from San Jose Jet Center Inc. and ACM Aviation Inc. The closing of the acquisition of SJJC by Mercury is conditioned on either the Company’s closing of its acquisition of Mercury or the termination of the Company’s acquisition of Mercury. In the event of a cash considerationtermination or failure to close the acquisition of $85.0Mercury by November 1, 2007, Mercury is obligated to assign to the Company all of its rights and obligations under the SJJC agreement. As a result, the Company has effectively entered into an agreement to acquire SJJC.
Mercury owns and operates 24 FBOs in the U.S. and SJJC operates two FBOs at Mineta San Jose International Airport in California. The aggregate purchase price of all the acquisitions described above is $615.0 million, (subjectsubject to working capital adjustments). In addition to the purchase price, it is anticipated that a further $4.5and capital expenditure adjustments, and including approximately $36.9 million will be incurred to coverof transaction costs, integration costs and reserve funding. The FBOs are located at Stewart International AirportCompany intends to fund a portion of the acquisition with $272.0 million two-year term loan borrowings by Mercury and SJJC with the balance funded with the proceeds from the Company’s equity offering in New York and Santa Monica Airport in California.July 2007.
The Company expects to close the transaction through its airport services business. in August 2007. MSUSA is acting as financial advisor on the transaction.
The Company expectshas received commitment letters from The Governor and Company of Bank of Ireland and Bayerische Landesbank, New York Branch to finance the purchase price and the associated transaction and other costs, in part, with $32.5provide credit facilities consisting of $272.0 million of additional term loan borrowingsloans and a $17.5 million capital expenditure facility. 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 tobear interest at an annual rate of LIBOR plus 1.70%. The facilities will be individually secured by all of the assets of Mercury and stockSJJC and a portion of companies withinthe facilities will also be guaranteed by the airport services business.business holding company.
Refer to Note 17, Subsequent Events, for details about agreements in relation to pending acquisitions entered subsequent to our balance sheet date.
8
LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The Company has entered into forward starting interest rate swaps, effectively fixing the interest rate on the $272.0 million two-year debt facility, on the following terms:
Amount: | Start Date: | End Date: | Fixed Rate: | |||||||||
$144.0 million | September 28, 2007 | September 28, 2009 | 4.9925 | % | ||||||||
$48.0 million(1) | September 28, 2007 | September 28, 2009 | 5.0175 | % | ||||||||
$80.0 million | September 28, 2007 | September 30, 2009 | 5.4420 | % |
(1) | This swap was entered with Macquarie Bank Limited. |
Property, equipment, land and leasehold improvements consist of the following (in thousands):
| March 31, |
| December 31, | ||||
Land | $ | 63,275 | $ | 63,275 | |||
Easements | 5,624 | 5,624 | |||||
Buildings | 36,240 | 35,836 | |||||
Leasehold and land improvements | 167,650 | 166,490 | |||||
Machinery and equipment | 263,209 | 259,897 | |||||
Furniture and fixtures | 5,707 | 5,473 | |||||
Construction in progress | 24,476 | 20,196 | |||||
Property held for future use | 1,316 | 1,316 | |||||
Other |
| 7,854 |
| 7,566 | |||
575,351 | 565,673 | ||||||
Less: Accumulated depreciation | (49,089 | ) | (42,914 | ) | |||
Property, equipment, land and leasehold improvements, net | $ | 526,262 | $ | 522,759 |
June 30, 2007 | December 31, 2006 | |||||||
Land | $ | 63,275 | $ | 63,275 | ||||
Easements | 5,624 | 5,624 | ||||||
Buildings | 36,293 | 35,836 | ||||||
Leasehold and land improvements | 186,683 | 166,490 | ||||||
Machinery and equipment | 274,653 | 267,463 | ||||||
Furniture and fixtures | 6,063 | 5,473 | ||||||
Construction in progress | 31,779 | 20,196 | ||||||
Property held for future use | 1,413 | 1,316 | ||||||
605,783 | 565,673 | |||||||
Less: Accumulated depreciation | (55,618 | ) | (42,914 | ) | ||||
Property, equipment, land and leasehold improvements, net | $ | 550,165 | $ | 522,759 |
Intangible assets consist of the following (in thousands):
|
| Weighted Average |
| March 31, |
| December 31, | |||
|
| ||||||||
Contractual arrangements | 30.5 | $ | 459,373 | $ | 459,373 | ||||
Non-compete agreements | 2.8 | 5,035 | 5,035 | ||||||
Customer relationships | 10.1 | 66,840 | 66,840 | ||||||
Leasehold rights | 12.2 | 8,359 | 8,359 | ||||||
Trade names | Indefinite(1) |
| 17,499 | ||||||
Domain names | Indefinite(2) |
| 2,092 | ||||||
Technology | 5 |
| 460 |
| 460 | ||||
| 559,658 | ||||||||
Less: Accumulated amortization |
| ) |
| (32,899 | ) | ||||
Intangible assets, net | $ | 519,844 | $ | 526,759 |
——————
Weighted Average Life (Years) | June 30, 2007 | December 31, 2006 | ||||||||||
Contractual arrangements | 30.4 | $ | 497,273 | $ | 459,373 | |||||||
Non-compete agreements | 2.7 | 6,136 | 5,035 | |||||||||
Customer relationships | 10.1 | 68,440 | 66,840 | |||||||||
Leasehold rights | 12.2 | 8,359 | 8,359 | |||||||||
Trade names | Indefinite(1) | 17,499 | 17,499 | |||||||||
Domain names | Indefinite(2) | 2,105 | 2,092 | |||||||||
Technology | 5 | 460 | 460 | |||||||||
600,272 | 559,658 | |||||||||||
Less: Accumulated amortization | (46,831 | ) | (32,899 | ) | ||||||||
Intangible assets, net | $ | 553,441 | $ | 526,759 |
(1)
(1) | Trade names of $2.2 million are being amortized over a period within 1.5 years. |
(2) | Domain names of $334,000 are being amortized over a period within 4 years. |
Trade names of $2.2 million are being amortized within 1.5 years.9
Domain names of $760,000 are being amortized within 4 years.
Long-term debt consists of the following (in thousands):
| March 31, |
| December 31, | |||
|
|
| ||||
Airport services | $ | 480,000 | $ | 480,000 | ||
Gas production and distribution | 163,000 | 162,000 | ||||
District energy | 120,000 | 120,000 | ||||
Airport parking | 201,621 | 201,660 | ||||
964,621 | 963,660 | |||||
Less current portion | 3,754 | 3,754 | ||||
Long-term portion | $ | 960,867 | $ | 959,906 |
June 30, 2007 | December 31, 2006 | |||||||
Airport services | $ | 512,500 | $ | 480,000 | ||||
Gas production and distribution | 164,000 | 162,000 | ||||||
District energy | 120,000 | 120,000 | ||||||
Airport parking | 201,583 | 201,660 | ||||||
998,083 | 963,660 | |||||||
Less current portion | 6,757 | 3,754 | ||||||
Long-term portion | $ | 991,326 | $ | 959,906 |
MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
8. Long-Term Debt – (continued)
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. At March 31,June 30, 2007, the Company had no indebtedness outstanding at the MIC LLC Trust or MIC Inc. level.
The airport services business amended its credit facility in February 2007 to provide for $32.5 million of additional term loan borrowings to partially finance the acquisition of Supermarine. The airport services business drew on this additional facility on May 30, 2007, when the FBOs located at Stewart International Airport in New York and Santa Monica Airport in California.acquisition closed. The terms of the facility remain the same, including repayment due in 2010, except that the required minimum adjusted EBITDA increased to $78.2 million for 2007 and $84.1 million for 2008. To hedge the interest commitments under the term loan expansion, MIC Inc. entered into a swap with Macquarie Bank Limited, fixing 100% of the term loan expansion at the following rate:
Start Date | End Date | Rate | |||||
March 30, 2007 | December 12, 2010 | ||||||
|
| 5.2185% |
The swap will bewas transferred to the airport services business at the completion of the acquisition.acquisition on May 30, 2007.
The Company has also received commitment letters from various banks to provide credit facilities to fund the upcoming acquisitions of Mercury and SJJC. Further details are provided in Note 5, Acquisitions.
During 2006, the Company determined that its derivatives did not qualify as hedges for accounting purposes. We revised our summarized quarterly financial information to eliminate hedge accounting treatment resulting in all changes in the fair value of our derivative instruments being taken through earnings.
Effective January 2, 2007, changes in the fair value of interest rate derivatives designated as hedging instruments that effectively offset the variability of cash flows associated with variable-rate, long-term debt obligations will beare reported in other comprehensive income. Any ineffective portion on the change in the valuation of our derivatives will beis taken through earnings, and reported in the (loss) gain on derivative instruments line in the accompanying consolidated condensed statements of income. operations.
Total comprehensive incomeloss for the quarter and six months ended March 31,June 30, 2007 was $6.2$17.5 million which isand $11.3 million, respectively. These amounts are included in the accumulated other comprehensive lossincome on the Company’s consolidated condensed balance sheet as of March 31,June 30, 2007. The difference between net incomeloss of $7.9$25.0 million for the quarter ended March 31,June 30, 2007 and comprehensive incomeloss is primarily attributable to an
10
unrealized gain on derivative instruments of $7.5 million. The difference between net loss of $17.2 million for the six months ended June 30, 2007 and comprehensive loss is primarily attributable to an unrealized lossgain on derivative instruments of $1.7$5.9 million.
The TrustCompany is authorized to issue 500,000,000 shares of trust stock, and the Company is authorized to issue a corresponding number oflimited liability company, or 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 the CompanyLLC interests are entitled to vote.
On June 25, 2007, all of the outstanding shares of trust stock issued by the Trust were exchanged for an equal number of LLC interests in the Company and the Trust was dissolved. Prior to this exchange and the dissolution of the Trust, all interests in the Company were held by the Trust.
On June 28, 2007, the Company entered into a Purchase Agreement, dated June 28, 2007 (the “Purchase Agreement”), among the Company, MIMUSA 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 MIMUSA 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 under 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 purchase up to 945,000 additional LLC interests solely to cover overallotments.
The offering of the LLC interests was priced at $40.99 per share. The equity offering was completed in July 2007 and generated $223.8 million in proceeds to the Company, net of underwriting fees and expenses. In addition, the Underwriters exercised their overallotment option for 464,871 limited liability interests, generating $18.2 million in net proceeds, which the Company received in August 2007. The Company plans to use the proceeds of the offering to partially finance the acquisition of Mercury and SJJC discussed in Note 5, Acquisitions.
The Company’s operations are classified into four reportable business segments: airport services business, gas production and distribution business, district energy business and airport parking business. The gas production and distribution business is a new segment starting in the second quarter of 2006. All of the business segments are managed separately.
MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
12. Reportable Segments – (continued)
The Company completed its acquisition of a 50% interest in IMTT on May 1, 2006. For the quarter ended March 31,June 30, 2007, IMTT’s revenue, gross profit, depreciation and amortization, and cash paid for capital expenditures were $73.8 $66.3 million, $30.9 $26.7 million, $8.5$9.0 million and $33.9$44.2 million, respectively. At March 31,June 30, 2007, IMTT’s total property, plant and equipment and total assets were $569.2$606.2 million and $657.3$668.4 million, respectively. In accordance with SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information, IMTT does not meet the definition of a reportable segment because it is an equity-method investee of the Company.
The airport services business reportable segment principally derives income from fuel sales and from airport services. Airport services revenue includes fuel related services, de-icing, aircraft parking, airport management and other aviation services. All of the revenue of the airport services business is derived in the United States. The airport services business operates 4042 FBOs and one heliport and manages six airports under management contracts as of March 31,June 30, 2007.
11
The revenue from the gas production and distribution business reportable segment is included in revenue from product sales and includes distribution and sales of SNG and LPG. 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, 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.
The revenue from the district energy business 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 the Company’s various customers. The Company provides such services to buildings throughout the downtown Chicago area and to the Aladdin Resort and Casinoa casino and shopping mall located in Las Vegas, Nevada.
The revenue from the airport parking business reportable segment is included in service revenue and primarily consists of fees from off-airport parking and ground transportation to and from the parking facilities and the airport terminals. At March 31,June 30, 2007, the airport parking business operated 30 off-airport parking facilities located at 20 major airports across the United States.
Selected information by reportable segment is presented in the following tables. The tables do not include financial data for our equity and cost investments.
Revenue from external customers for the Company’s segments for the quarter ended March 31,June 30, 2007 was as follows (in thousands):
| Airport |
| Gas Production |
| District |
| Airport |
| Total | ||||||
Revenue from Product Sales | |||||||||||||||
Fuel sales | $ | 69,847 | $ | 40,801 |
| $ | — |
|
| — | $ | 110,648 | |||
69,847 | 40,801 | — | — | 110,648 | |||||||||||
Service Revenue | |||||||||||||||
Other services | 31,213 | — | 649 | — | 31,862 | ||||||||||
Cooling capacity revenue | — | — | 4,551 | — | 4,551 | ||||||||||
Cooling consumption revenue | — | — | 1,862 | — | 1,862 | ||||||||||
Parking services |
| — |
| — |
|
| — |
|
| 18,811 |
| 18,811 | |||
31,213 | — | 7,062 | 18,811 | 57,086 | |||||||||||
Financing and Lease Income | |||||||||||||||
Financing and equipment lease |
| — |
| — |
|
| 1,248 |
|
| — |
| 1,248 | |||
— | — | 1,248 | — | 1,248 | |||||||||||
Total Revenue | $ | 101,060 | $ | 40,801 |
| $ | 8,310 |
|
| 18,811 | $ | 168,982 |
Airport Services | Gas Production and Distribution | District Energy | Airport Parking | Total | ||||||||||||||||
Revenue from Product Sales | ||||||||||||||||||||
Fuel sales | $ | 73,689 | $ | 41,120 | $ | — | $ | — | $ | 114,809 | ||||||||||
73,689 | 41,120 | — | — | 114,809 | ||||||||||||||||
Service Revenue | ||||||||||||||||||||
Other services | 28,787 | — | 768 | — | 29,555 | |||||||||||||||
Cooling capacity revenue | — | — | 4,738 | — | 4,738 | |||||||||||||||
Cooling consumption revenue | — | — | 6,800 | — | 6,800 | |||||||||||||||
Parking services | — | — | — | 20,068 | 20,068 | |||||||||||||||
28,787 | — | 12,306 | 20,068 | 61,161 | ||||||||||||||||
Financing and Lease Income | ||||||||||||||||||||
Financing and equipment lease | — | — | 1,235 | — | 1,235 | |||||||||||||||
— | — | 1,235 | — | 1,235 | ||||||||||||||||
Total Revenue | $ | 102,476 | $ | 41,120 | $ | 13,541 | $ | 20,068 | $ | 177,205 |
12
LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Financial data by reportable business segments are as follows (in thousands):
Quarter Ended March 31, 2007 | At March 31, 2007 | |||||||||||||||||
Segment | Interest | Depreciation/ | Capital | Property, | Total | |||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||||
|
|
|
| |||||||||||||||
Airport services | $ | 57,061 | $ | 8,574 | $ | 7,963 | $ | 1,702 | $ | 149,455 | $ | 935,597 | ||||||
Gas production and distribution | 10,895 | 2,282 | 1,731 | 1,956 | 133,096 | 309,321 | ||||||||||||
District energy | 2,678 | 2,180 | 1,768 | 2,315 | 145,461 | 236,921 | ||||||||||||
Airport parking |
| 4,522 |
| 4,045 |
| 1,823 |
| 1,585 |
| 98,250 |
| 283,200 | ||||||
Total | $ | 75,156 | $ | 17,081 | $ | 13,285 | $ | 7,558 | $ | 526,262 |
| 1,765,039 |
——————
Quarter Ended June 30, 2007 (Unaudited) | At June 30, 2007 (Unaudited) | |||||||||||||||||||||||
Segment Profit(1) | Interest Expense | Depreciation/ Amortization(2) | Capital Expenditures | Property, Equipment, Land and Leasehold Improvements | Total Assets | |||||||||||||||||||
Airport services | $ | 55,466 | $ | 8,592 | $ | 8,454 | $ | 3,323 | $ | 169,730 | $ | 1,028,734 | ||||||||||||
Gas production and distribution | 10,337 | 2,325 | 1,666 | 2,266 | 133,968 | 312,864 | ||||||||||||||||||
District energy | 4,513 | 2,252 | 1,781 | 3,846 | 148,114 | 244,077 | ||||||||||||||||||
Airport parking | 5,445 | 4,089 | 1,775 | 1,253 | 98,353 | 284,330 | ||||||||||||||||||
Total | $ | 75,761 | $ | 17,258 | $ | 13,676 | $ | 10,688 | $ | 550,165 | $ | 1,870,005 |
(1)
Segment profit includes revenue less cost of product sales and cost of services. For the district energy and airport parking businesses, depreciation expense of $1.4 million and $1.0 million, respectively, are included in cost of services for the quarter ended March 31, 2007.
(2)
Includes depreciation expense of property, equipment and leasehold improvements and amortization of intangible assets. Includes depreciation expense for the airport parking and district energy businesses which has also been included in segment profit.
(1) | Segment profit includes revenue less cost of product sales and cost of services. For the district energy and airport parking businesses, depreciation expense of $1.4 million and $1.1 million, respectively, are included in cost of services for the quarter ended June 30, 2007. |
(2) | Includes depreciation expense of property, equipment and leasehold improvements and amortization of intangible assets. Includes depreciation expense for the airport parking and district energy businesses which has also been included in segment profit. |
Reconciliation of total reportable segment assets to total consolidated assets at March 31,June 30, 2007 and 2006 (in thousands):
| |||||||
2007 | 2006 | ||||||
|
|
|
|
| |||
Total reportable segments | $ | 1,765,039 | $ | 1,084,317 | |||
Equity and cost investments: | |||||||
Investment in IMTT | 236,103 | — | |||||
Investment in Yorkshire | — | 70,409 | |||||
Investment in SEW | — | 35,716 | |||||
Investment in MCG | — | 69,233 | |||||
Corporate and other | 336,101 | 381,256 | |||||
Less: Consolidation elimination entries | (225,354 | ) | (255,071 | ) | |||
Total consolidated assets | $ | 2,111,889 | $ | 1,385,860 |
June 30, 2007 | ||||
Total reportable segments | $ | 1,870,005 | ||
Equity investments: | ||||
Investment in IMTT | 227,958 | |||
Corporate and other | 29,327 | |||
Total consolidated assets | $ | 2,127,290 |
Reconciliation of total reportable segment profit to total consolidated (loss) income before income taxes and minority interests for the quarters ended March 31,June 30, 2007 and June 30, 2006 (in thousands):
Quarter Ended March 31, | |||||||
2007 | 2006 | ||||||
|
|
|
| ||||
Total reportable segments | $ | 75,156 | $ | 39,893 | |||
Selling, general and administrative | (38,978 | ) | (23,950 | ) | |||
Fees to manager | (5,561 | ) | (6,478 | ) | |||
Depreciation and amortization(1) |
| (10,819 | ) |
| (5,156 | ) | |
19,798 | 4,309 | ||||||
Other (expense) income, net | (14,035 | ) | 4,651 | ||||
Total consolidated income before income taxes and minority interests | $ | 5,763 | $ | 8,960 |
——————
(1)
Does not include depreciation expense for the airport parking and district energy businesses which are included in total reportable segment profit.
Quarter Ended June 30, 2007 | Quarter Ended June 30, 2006 | |||||||
Total reportable segments | $ | 75,761 | $ | 47,291 | ||||
Selling, general and administrative | (38,564 | ) | (24,294 | ) | ||||
Fees to manager | (48,964 | ) | (3,718 | ) | ||||
Depreciation and amortization(1) | (11,166 | ) | (5,701 | ) | ||||
(22,933 | ) | 13,578 | ||||||
Other expense, net | (15,975 | ) | (2,377 | ) | ||||
Total consolidated (loss) income before income taxes and minority interests | $ | (38,908 | ) | $ | 11,201 |
(1) | Does not include depreciation expense for the airport parking and district energy businesses which are included in total reportable segment profit. |
13
LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Revenue from external customers for the Company’s segments for the quarter ended March 31,June 30, 2006 was as follows:follows (in thousands):
| Airport |
| District |
| Airport |
| Total | |||||
Revenue from Product Sales | ||||||||||||
Fuel sales | $ | 41,992 | $ | — | $ | — | $ | 41,992 | ||||
41,992 | — | — | 41,992 | |||||||||
Service Revenue | ||||||||||||
Other services | 18,179 | 845 | — | 19,024 | ||||||||
Capacity revenue | — | 4,189 | — | 4,189 | ||||||||
Consumption revenue | — | 1,475 | — | 1,475 | ||||||||
Parking services |
| — |
| — |
| 18,216 |
| 18,216 | ||||
18,179 | 6,509 | 18,216 | 42,904 | |||||||||
Financing and Lease Income | ||||||||||||
Financing and equipment lease |
| — |
| 1,298 |
| — |
| 1,298 | ||||
— | 1,298 | — | 1,298 | |||||||||
Total Revenue | $ | 60,171 | $ | 7,807 | $ | 18,216 | $ | 86,194 |
Airport Services | Gas Production and Distribution(1) | District Energy | Airport Parking | Total | ||||||||||||||||
Revenue from Product Sales | ||||||||||||||||||||
Fuel sales | $ | 46,298 | $ | 10,624 | $ | — | $ | — | $ | 56,922 | ||||||||||
46,298 | 10,624 | — | — | 56,922 | ||||||||||||||||
Service Revenue | ||||||||||||||||||||
Other services | 17,654 | — | 791 | — | 18,445 | |||||||||||||||
Cooling capacity revenue | — | — | 4,241 | — | 4,241 | |||||||||||||||
Cooling consumption revenue | — | — | 5,258 | — | 5,258 | |||||||||||||||
Parking services | — | — | — | 19,782 | 19,782 | |||||||||||||||
17,654 | — | 10,290 | 19,782 | 47,726 | ||||||||||||||||
Financing and Lease Income | ||||||||||||||||||||
Financing and equipment lease | — | — | 1,285 | — | 1,285 | |||||||||||||||
— | — | 1,285 | — | 1,285 | ||||||||||||||||
Total Revenue | $ | 63,952 | $ | 10,624 | $ | 11,575 | $ | 19,782 | $ | 105,933 |
(1) | Represents revenue from the date of acquisition on June 7, 2006. |
Financial data by reportable business segments are as follows (in thousands):
| At March 31, 2006 | |||||||||||||||||
Segment | Interest | Depreciation/ | Capital | Property, | Total | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||
Airport services | $ | 32,570 | $ | 9,020 | $ | 4,413 | $ | 550 | $ | 91,739 | $ | 553,019 | ||||||
District energy | 2,542 | 2,145 | 1,760 | 493 | 146,281 | 240,879 | ||||||||||||
Airport parking |
| 4,781 |
| 3,901 |
| 1,271 |
| 447 |
| 96,074 |
| 290,419 | ||||||
Total | $ | 39,893 | $ | 15,066 | $ | 7,444 | $ | 1,490 | $ | 334,094 |
| 1,084,317 |
——————
For Quarter Ended June 30, 2006 (Unaudited) | At June 30, 2006 (Unaudited) | |||||||||||||||||||||||
Segment Profit(2) | Interest Expense | Depreciation/ Amortization(3) | Capital Expenditures | Property, Equipment, Land and Leasehold Improvements | Total Assets | |||||||||||||||||||
Airport services | $ | 33,877 | $ | 4,980 | $ | 4,458 | $ | 962 | $ | 90,955 | $ | 523,116 | ||||||||||||
Gas production and distribution(1) | 3,130 | 644 | 430 | 128 | 128,001 | 319,277 | ||||||||||||||||||
District energy | 4,026 | 2,171 | 1,768 | 616 | 145,319 | 242,500 | ||||||||||||||||||
Airport parking | 6,258 | 4,400 | 1,216 | 1,716 | 97,039 | 291,363 | ||||||||||||||||||
Total | $ | 47,291 | $ | 12,195 | $ | 7,872 | $ | 3,422 | $ | 461,314 | $ | 1,376,256 |
(1) | Represents income statement and capital expenditures data from the date of acquisition on June 7, 2006. |
(2) | Segment profit includes revenue less cost of sales. For the district energy and airport parking businesses, depreciation expense of $1.4 million and $744,000, respectively, are included in cost of sales for the quarter ended June 30, 2006. |
(3) | Includes depreciation expense of property, equipment and leasehold improvements and amortization of intangible assets. Includes depreciation expense for the airport parking and district energy businesses which has also been included in segment profit. |
14
Reconciliation of total reportable segment assets to total consolidated assets at June 30, 2006 (in thousands):
(1)
June 30, 2006 | ||||
Total reportable segments | $ | 1,376,256 | ||
Equity investments: | ||||
Investment in IMTT | 353,804 | |||
Investment in Yorkshire Link | 77,960 | |||
Investment in SEW | 37,971 | |||
Investment in MCG | 72,462 | |||
Corporate and other | 49,020 | |||
Total consolidated assets | $ | 1,967,473 |
Segment profit includes revenue less cost of product sales and cost of services. For the district energy and airport parking businesses, depreciation expense of $1.4 million and $865,000, respectively, are included in cost of servicesRevenue from external customers for the quarter ended March 31, 2006.
(2)
Includes depreciation expense of property, equipment and leasehold improvements and amortization of intangible assets. Includes depreciation expenseCompany’s segments for the six months ended June 30, 2007 is as follows (in thousands):
Airport Services | Gas Production and Distribution | District Energy | Airport Parking | Total | ||||||||||||||||
Revenue from Product Sales | ||||||||||||||||||||
Fuel sales | $ | 143,536 | $ | 81,921 | $ | — | $ | — | $ | 225,457 | ||||||||||
143,536 | 81,921 | — | — | 225,457 | ||||||||||||||||
Service Revenue | ||||||||||||||||||||
Other services | 60,000 | — | 1,417 | — | 61,417 | |||||||||||||||
Cooling capacity revenue | — | — | 9,289 | — | 9,289 | |||||||||||||||
Cooling consumption revenue | — | — | 8,662 | — | 8,662 | |||||||||||||||
Parking services | — | — | — | 38,879 | 38,879 | |||||||||||||||
60,000 | — | 19,368 | 38,879 | 118,247 | ||||||||||||||||
Financing and Lease Income | ||||||||||||||||||||
Financing and equipment lease | — | — | 2,483 | — | 2,483 | |||||||||||||||
— | — | 2,483 | — | 2,483 | ||||||||||||||||
Total Revenue | $ | 203,536 | $ | 81,921 | $ | 21,851 | $ | 38,879 | $ | 346,187 |
Financial data by reportable business segments are as follows (in thousands):
Six Months Ended June 30, 2007 (Unaudited) | ||||||||||||||||
Segment Profit(1) | Interest Expense | Depreciation/ Amortization(2) | Capital Expenditures | |||||||||||||
Airport services | $ | 112,527 | $ | 17,166 | $ | 16,417 | $ | 5,025 | ||||||||
Gas production and distribution | 21,232 | 4,607 | 3,397 | 4,222 | ||||||||||||
District energy | 7,191 | 4,432 | 3,549 | 6,161 | ||||||||||||
Airport parking | 9,967 | 8,134 | 3,598 | 2,838 | ||||||||||||
Total | $ | 150,917 | $ | 34,339 | $ | 26,961 | $ | 18,246 |
(1) | Segment profit includes revenue less cost of product sales and cost of services. For the district energy and airport parking businesses, depreciation expense of $2.9 million and $2.1 million, respectively, are included in cost of services for the six months ended June 30, 2007. |
15
(2) | Includes depreciation expense of property, equipment and leasehold improvements and amortization of intangible assets. Includes depreciation expense for the airport parking and district energy businesses which has also been included in segment profit. |
Reconciliation of total reportable segment profit to total consolidated (loss) income before income taxes and district energy businesses which has also been included in segment profit.minority interests for the six months ended June 30, 2007 and June 30, 2006 (in thousands):
Six Months Ended June 30, 2007 | Six Months Ended June 30, 2006 | |||||||
Total reportable segments | $ | 150,917 | $ | 87,184 | ||||
Selling, general and administrative | (77,542 | ) | (48,244 | ) | ||||
Fees to manager | (54,525 | ) | (10,196 | ) | ||||
Depreciation and amortization(1) | (21,985 | ) | (10,857 | ) | ||||
(3,135 | ) | 17,887 | ||||||
Other (expense) income, net | (30,010 | ) | 2,274 | |||||
Total consolidated (loss) income before income taxes and minority interests | $ | (33,145 | ) | $ | 20,161 |
(1) | Does not include depreciation expense for the airport parking and district energy businesses which are included in total reportable segment profit. |
Revenue from external customers for the Company’s segments for the six months ended June 30, 2006 are as follows (in thousands):
Airport Services | Gas Production and Distribution(1) | District Energy | Airport Parking | Total | ||||||||||||||||
Revenue from Product Sales | ||||||||||||||||||||
Fuel sales | $ | 88,290 | $ | 10,624 | $ | — | $ | — | $ | 98,914 | ||||||||||
88,290 | 10,624 | — | — | 98,914 | ||||||||||||||||
Service Revenue | ||||||||||||||||||||
Other services | 35,833 | — | 1,636 | — | 37,469 | |||||||||||||||
Cooling capacity revenue | — | — | 8,430 | — | 8,430 | |||||||||||||||
Cooling consumption revenue | — | — | 6,733 | — | 6,733 | |||||||||||||||
Parking services | — | — | — | 37,998 | 37,998 | |||||||||||||||
35,833 | — | 16,799 | 37,998 | 90,630 | ||||||||||||||||
Financing and Lease Income | ||||||||||||||||||||
Financing and equipment lease | — | — | 2,583 | — | 2,583 | |||||||||||||||
— | — | 2,583 | — | 2,583 | ||||||||||||||||
Total Revenue | $ | 124,123 | $ | 10,624 | $ | 19,382 | $ | 37,998 | $ | 192,127 |
(1) | Represents revenue from the date of acquisition on June 7, 2006. |
16
Financial data by reportable business segments are as follows (in thousands):
For Six Months Ended June 30, 2006 (Unaudited) | ||||||||||||||||
Segment Profit(2) | Interest Expense | Depreciation/ Amortization(3) | Capital Expenditures | |||||||||||||
Airport services | $ | 66,447 | $ | 14,000 | $ | 8,871 | $ | 1,512 | ||||||||
Gas production and distribution(1) | 3,130 | 644 | 430 | 128 | ||||||||||||
District energy | 6,568 | 4,316 | 3,528 | 1,109 | ||||||||||||
Airport parking | 11,039 | 8,301 | 2,487 | 2,163 | ||||||||||||
Total | $ | 87,184 | $ | 27,261 | $ | 15,316 | $ | 4,912 |
(1) | Represents income statement and capital expenditures data from the date of acquisition on June 7, 2006. |
(2) | Segment profit includes revenue less cost of sales. For the district energy and airport parking businesses, depreciation expense of $2.8 million and $1.6 million, respectively, are included in cost of sales for the six months ended June 30, 2006. |
(3) | Includes depreciation expense of property, equipment and leasehold improvements and amortization of intangible assets. Includes depreciation expense for the airport parking and district energy businesses which has also been included in segment profit. |
Management Services Agreement with Macquarie Infrastructure Management (USA) Inc., or MIMUSA
MIMUSA 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, which were exchanged for LLC interests on June 25, 2007. Pursuant to the terms of the Management Agreement (discussed below), MIMUSA may sell up to 65% of these sharesLLC interests at any time and may sell the balance at any time from and after December 21, 2007 (being the third anniversary of the IPO closing).
MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
13. Related Party Transactions – (continued) MIMUSA has also received additional shares of trust stock and LLC interests by reinvesting performance fees. As part of the equity offering which closed in July, 2007, MIMUSA sold 599,000 of its shares at a price of $40.99 per share.
The Company entered into a management services agreement, or Management Agreement, with MIMUSA pursuant to which MIMUSA manages the Company's day-to-day operations and oversees the management teams of the Company's operating businesses. In addition, MIMUSA 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 make other personnel available as required.
In accordance with the Management Agreement, MIMUSA 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 index and a European utilities index, weighted in proportion to the Company’s equity investments. Currently, the Company has no non-U.S. equity investments. For the quarter ended March 31,June 30, 2007, base management fees of $4.6$6.0 million and performance fees of $957,000 $43.0 million were payable to MIMUSA. For the six months ended June 30, 2007, base management and performance fees were $10.6 million and $44.0 million, respectively. These fees are included as due to manager in the accompanying consolidated condensed balance sheet at March 31,June 30, 2007. MIMUSA has elected to reinvest these performance fees in shares of trust stock,LLC interests, which are expected to be issued in Junethe second half of 2007 at a market-based price.
17
MIMUSA is not entitled to any other compensation and all costs incurred by MIMUSA including compensation of seconded staff, are paid 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 quarter and six months ended March 31,June 30, 2007, MIMUSA paid out of pocket expenses of $57,000$89,000 and $146,000, respectively, on the Company’s behalf which the Company has accrued and included in due to manager in the accompanying consolidated condensed balance sheet at March 31,June 30, 2007.
Advisory and Other Services from the Macquarie Group
The Macquarie Group, through the holding company, Macquarie Bank Limited, or MBL, and its wholly owned subsidiary, Macquarie Securities (USA) Inc., or MSUSA, has provided various advisory and other services and have incurred expenses in connection with the Company’s acquisitions, dispositions and underlying debt associated with the businesses.businesses, comprising the following (in thousands):
Acquisition of Supermarine | ||||
– advisory services from MSUSA | $ | 1,329 | ||
– debt arranging services from MSUSA | 163 |
During the quartersix months ended March 31,June 30, 2007, the Company accruedalso paid an additional $119,000 for advisory services provided by MSUSA in 2006 in relation to the acquisition of TGC, due to finalization of the working capital adjustment on the purchase price. This amount was paid in April 2007.
The Company has entered into advisory agreements with MSUSA relating to the pending FBO acquisitions discussed in Note 5, Pending Acquisitions, and Note 17, Subsequent Events.Acquisitions. No fees have been paid as of March 31,June 30, 2007. The Company expects to pay approximately $6.8 million and $3.2$7.8 million for advisory and debt arranging services respectively, when these acquisitions close.
The Company reimbursed nominal amountshas also engaged MSUSA to affiliates of MBL for rent expense for premises usedreceive debt arranging services in Luxembourg by a wholly owned subsidiary of Macquarie Yorkshire LLC, a wholly owned subsidiaryrelation to the potential refinancing of the Company.airport services business’ and district energy business’ debt. The Company expects to pay approximately $6.3 million and $1.6 million for debt arranging services on these two engagements, respectively.
MSUSA was also one of the underwriters for the Company’s equity offering in July 2007 and will receive a portion of the underwriting fees, net of costs, for its services.
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):
| Quarter ended March 31, 2007 |
|
|
|
|
Portion of loan facility commitment provided by MBL | $ | 50,000 | |||
Portion of loan outstanding from MBL, as at March 31, 2007 |
| 50,000 | |||
Interest expense on MBL portion of loan |
|
| 899 |
Portion of loan facility commitment provided by MBL | $ | 50,000 | ||
Portion of loan outstanding from MBL, as at June 30, 2007 | 50,000 | |||
Interest expense on MBL portion of loan | 897 |
MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
13. Related Party Transactions – (continued)
MIC Inc. has a $300.0 million revolving credit facility with various financial institutions, including MBL. Amounts relating to this loanfacility comprise the following (in thousands):
| Quarter ended March 31, 2007 |
|
|
|
|
Portion of revolving credit facility commitment provided by MBL, as at March 31, 2007 | $ | 100,000 | |||
Portion of loan outstanding from MBL, as at March 31, 2007 |
| — |
Portion of revolving credit facility commitment provided by MBL, as at June 30, 2007 | $ | 50,000 | ||
Portion of loan outstanding from MBL, as at June 30, 2007 | — |
18
In April 2007, MBL assigned to a third party all of its rights and obligations under the agreement related to $50.0 million of its aggregate commitment.commitment, which was originally $100.0 million.
The Company also expects to pay MBL approximately $200,000 in relation to the financing commitments provided for the acquisitions of Mercury and SJJC, which are due to close in August 2007.
MBL is providing over one-half of the interest rate swaps for the airport services business’ long-term debt and made net payments to the airport services business of $189,000$274,000 and $463,000, respectively, for the quarter and six months ended March 31,June 30, 2007. In January 2007, the airport services business also paid MBL $40,000 on an interest rate swap relating to 2006.
MBL is also providing a portion of the interest rate swaps relating to the debt on the Mercury and SJJC acquisitions disclosed in Note 5, Acquisitions, for which no payments have been made or received as of June 30, 2007.
MBL is also providing just under one-third 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 $63,000$78,000 and $141,000, respectively, for the quarter and six months ended March 31,June 30, 2007.
Through the year ended December 31, 2006, Macquarie Infrastructure Company Trust iswas classified as a grantor trust for U.S. federal income tax purposes, and therefore iswas not subject to income taxes. The Company iswas treated as a partnership for U.S. federal income tax purposes and iswas also not subject to income taxes. MIC Inc. and its wholly-owned subsidiaries are subject to income taxes.
Consolidated pre-tax In connection with the dissolution of the Trust, the Company has agreed with the Internal Revenue Service, or IRS, that the Company will be treated as a corporation retroactive to January 1, 2007, subject to final documentation. As such, the Company will be subject to income taxes, and expects to file a consolidated federal income tax return with MIC Inc. and its wholly owned subsidiaries. The tax provision for the six months ended June 30, 2007 includes a net benefit of approximately $550,000 attributable to the loss of MIC LLC for the quarter ended March 31, 2007, was $5.8 million. Macquarie Infrastructure Companysince under the terms of the agreement MIC LLC accounted forwill be treated as a $1.9 million pre-tax loss. As a partnership for U.S. federal income tax purposes, this loss is not subjectcorporation retroactive to income taxes.
The remaining $7.7 millionthe beginning of pre-tax income was generated by MIC Inc. and its subsidiaries and is subject to income taxes. The Company records its income taxes in accordance with SFAS 109,Accounting for Income Taxes.2007.
The Company expects to incur a net operating loss for federal consolidated return purposes, as well as certain states that provide for consolidated returns, for the year endedending December 31, 2007. The Company believes that it will be able to utilize the projected federal and state consolidated 2007 and prior year losses. Accordingly, the Company has not provided a valuation allowance against any deferred tax assets generated in 2007.
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 is 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. The amount of unrecognized tax benefits did not materially change as of March 31,June 30, 2007.
It is expected that the amount of unrecognized tax benefits will change in the next twelve12 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.
MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
14. Income Taxes – (continued)
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense in the consolidated condensed statements of income, operations, which is consistent with the recognition of
19
these items in prior reporting periods. As of January 1, 2007, the Company had 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 as of March 31,June 30, 2007.
The Internal Revenue Service, orDuring the quarter ended June 30, 2007, the IRS is concluding ancompleted its audit of the 2003 federal income tax return for a subsidiary of the Company’s airport services business. 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. In addition, the IRS has notified the Company that it will conduct an audit of the airport parking business for 2004. The Company does not expect any material adjustments to result from eitherthat audit. There are no other ongoing tax examinations of returns filed by the Company or any of its subsidiaries, and all returns for all tax years ending in 2003 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 the quarter ended June 30, 2007.
The Company does not expect a material change in its reserve for uncertain tax positions in the next twelve12 months.
There are no material legal proceedings other than as disclosed in Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed with the SEC on March 1, 2007.
On February 27, 2007, the board of directors declared a distribution of $0.57 per share for the quarter ended December 31, 2006, which was paid on April 9, 2007 to holders of record on April 4, 2007. TheOn May 3, 2007, the board of directors declared a distribution declared hasof $0.59 per share for the quarter ended March 31, 2007, which was paid on June 8, 2007 to holders of record on June 5, 2007. These distributions have been recorded partially as a reduction to trust stock and partially as a reduction to accumulated earningsshare capital in the stockholders’ equity section of the accompanying consolidated condensed balance sheet at March 31,June 30, 2007.
Distributions
On May 3, August 7, 2007, the board of directors declared a distribution of $0.59 $0.605 per share for the quarter ended March 31,June 30, 2007, payable on June 8, September 11, 2007 to holders of record on June 5, September 6, 2007.
Pending Acquisitions
On April 16,July 13, 2007, the Company entered into aissued 21,972 limited liability interests to MIMUSA, for the $957,000 performance fee generated in the quarter ended March 31, 2007, following MIMUSA’s election to re-invest the performance fee in Company stock.
On July 13, 2007, the Company issued 5,623 limited liability interests to each of the three independent directors, upon vesting of outstanding restricted stock purchase agreement with Mercury Air Centers, Inc., or Mercury, andunits granted under the Company’s Independent Directors’ Equity Plan.
In addition, the Company completed its equity holders providing for:
·
the Company’s purchase (through its airport services business) on the closing dateoffering in July 2007, further details of 89% of the equity of Mercury (representing 100% of the common stock of Mercury at closing) from Allied Capital Corporation, Directional Aviation Group, LLC and David Moore;
·
the Company’s purchase on the closing date of a call option to acquire the remaining 11% of the equity of Mercury (in the form of voting preferred shares) from Kenneth Ricci, exercisable from October 1, 2007 through October 31, 2007, pursuant to an option agreement to be entered into at closing; and
·
the Company’s grant of a put option under the option agreement to Mr. Ricci to sell the Company his 11% of the equity of Mercury, exercisable from April 1, 2008 to April 30, 2008.
MACQUARIE INFRASTRUCTURE COMPANY TRUST
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
17. Subsequent Events – (continued)
Mercury owns and operates 24 fixed base operations in the U.S. The aggregate purchase price, giving effect to the Company’s exercise of the call option, is $427.0 million, subject to working capital and capital expenditure adjustments. In addition to the purchase price, the Company expects to incur transaction costs (including advisory fees), pre-funded capital expenditures and a debt service reserve totaling $29.2 million for a total cost of $456.2 million. The Company intends to fund a portion of the acquisition with $192.0 million two-year term loan borrowings by Mercury with the balance funded with the MIC Inc. acquisition credit facility and $20.0 million of available cash.
The Company has received commitment letters from The Governor and Company of Bank of Ireland and Bayerische Landesbank, New York Branch to provide Mercury with a credit facility consisting of $192.0 million of term loans and a $17.5 million working capital facility. Borrowings under the facility will bear interest at an annual rate of LIBOR plus 1.70%. The Mercury credit facility will be secured by all project revenue and assets of Mercury and the stock of Mercury and, to the extent permitted, its subsidiaries. The facility will also include the following financial covenants:
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The Company is evaluating entering into forward starting interest rate swaps prior to closing, effectively fixing the interest rate on the $192.0 million two-year debt facility.
The Company expects to close the transaction in the third quarter of 2007. MSUSA is acting as financial advisor on the transaction.
MIC Inc. Revolver Amendments
As discussedwhich are provided in Note 13, Related Party Transactions, in April 2007, MBL assigned to a third party all of its rights and obligations under the revolving credit facility agreement with MIC Inc. related to $50.0 million of its aggregate commitment which was originally $100.0 million.11, Stockholders’ Equity.
20
We own, operate and invest in a diversified group of infrastructure businesses, whichbusinesses. They are businesses that provide basic, everydayan airport services such as airport services,business, a bulk liquid storage terminal business, a gas production and distribution business, a district energy business and an airport parking through long-lifebusiness. Each business provides basic, everyday services to customers in the U.S., such as gas for commercial and residential use and cold water for cooling high-rise buildings. Our businesses are further characterized by their long-lived physical assets. These infrastructure businesses generally operateassets and preferred position in sectors with limited competition and high barriers to entry.their respective markets. As a result they haveof these characteristics our businesses generate sustainable and growing long-term cash flows. We operate and finance our businesses in a manner that maximizes these cash flows.
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 interests in the Company and the Trust was dissolved. Prior to this exchange and the dissolution of the Trust, all interests in the Company were held by the Trust.
We are dependent upon cash distributions from our businesses and investments to meet our corporate overhead and management fee expenses and to pay distributions. We receive distributions through our directly owned holding company Macquarie Infrastructure Company Inc., or MIC Inc., for all of our businesses based in the United States.
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 payments by the Company to the Trust for payment to holders of LLC interests (previously trust stock.stock). Base and performance management fees payable to our Manager are allocated among the Company and its operating company subsidiaries based on the Company’s internal allocation policy.
On February 27, 2007, the board of directors declared a distribution of $0.57 per share for the quarter ended December 31, 2006, which was paid on April 9, 2007 to holders of record on April 4, 2007. On May 3, 2007, the board of directors declared a distribution of $0.59 per share for the quarter ended March 31, 2007, payablewhich was paid on June 8, 2007 to holders of record on June 5, 2007. On August 7, 2007, the board of directors declared a distribution of $0.605 per share for the quarter ended June 30, 2007, payable on September 11, 2007 to holders of record on September 6, 2007.
Refer to “Other Matters” at the end of this Item 2 for discussion of forward looking statements and certain defined terms.
Changes in Fair Value of Derivative Instruments
During 2006, the Company determined that its derivative instruments did not qualify as hedges for accounting purposes. We revised our summarized quarterly financial information to eliminate hedge accounting treatment resulting in all changes in the fair value of our derivative instruments being taken through earnings.
From January 2, 2007, changes in the fair value of interest rate derivatives designeddesignated as hedging instruments that effectively offset the variability of cash flows associated with variable-rate, long-term debt obligations will beare reported in other comprehensive income. Any ineffective portion on the change in the valuation of our derivatives will beis taken through earnings, and reported in the (loss) gain on derivative instruments line in our consolidated condensed statements of income. operations.
Tax Treatment of Distributions
EachThrough the year ended December 31, 2006, each holder of the Trust’s stock will bewas required to include in U.S. federal taxable income its allocable share of the Trust’s income, gain, loss deductions and other items. The amounts shareholders include in taxable income may not equalhave equaled the cash distributions to shareholders.
SomeThe agreement reached with the Internal Revenue Service referred to in Note 14, Income Taxes, to our consolidated condensed financial statements in Part I, Item I of this Form 10-Q, which is incorporated herein by reference, will cause the Company to be treated as a corporation for federal income tax purposes beginning January 1, 2007. For tax year 2007 shareholders will need to include in taxable income the portion of our distributions received by the Trust on its investment in Macquarie Infrastructure Company LLC maythat is characterized as a dividend. It is likely that a portion of our distributions will be acharacterized as return of capital for U.S. federal income tax purposes. Therefore, the amount we distributepurposes and will result in an adjustment to our shareholders may exceed their allocable share of the items of income and expense. The extent to which the distributions from Macquarie Infrastructure Company LLC will be characterized as dividend income cannot be estimated at this time. In some cases, distributions to holders of the Trust’s 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, if the cash distributions are lessrather than the allocable items of income and deductions, there will be an increase in the shareholders basis and reduction in the potential capital gain.taxable income.
21
The portion of our distributions that will be treated as dividends interest or return of capital for U.S. 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 U.S. federal income tax purposes shouldwill be characterizedeligible for treatment as qualified dividend income.
Other Tax Matters
A recent pronouncementincome, subject to the shareholder having met the holding period requirements as defined by the IRS questionsIRS.
Following the characterizationend of entities with structures like ours as grantor trustssecond quarter 2007, we completed an offering of an aggregate of 5,701,000 limited liability interests at a price of $40.99 per interest, for which we received proceeds of $223.8 million net of underwriting fees and could change how we comply with our tax information reporting obligations. Dependingexpenses. In addition, on July 27, 2007, the resolution of these matters, we may be requiredUnderwriters exercised their overallotment option for 464,871 limited liability interests, generating a further approximately $18.2 million in net proceeds. We plan to report allocable income, expense and credit items touse the IRS and to shareholders on Schedule K-1, in addition to or insteadproceeds of the letter we sendoffering to investors each year. A change inpartially finance the characterizationacquisition of the trust would not change shareholders' distributive share of items of income, gain, lossMercury Air Centers 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 interestsSJJC (discussed below under “Acquisitions 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.Dispositions — Pending Acquisitions”).
Acquisitions and Dispositions
Results of the operations of the Trajen acquisition infor acquisitions by the airport services business and theour acquisition of TGC are included in our consolidated results from thetheir respective dates of acquisition. Our interest inThe results of the operations of IMTT Holdings Inc. are not included in our consolidated results, but our share of net income from the investment in the business is reflected in our equity in earnings and amortization charges of investee line in our financial statements from May 1, 2006.
Refer to our Annual Report on Form 10-K, filed with the SEC on March 1, 2007, for further details on thesethe 2006 acquisitions, and also the dispositions of non-U.S. investments as discussed below.
Airport Services Business
On May 30, 2007, the Company completed the acquisition of 100% of the interests in entities that own and operate the FBOs at Stewart International Airport in New York and Santa Monica Airport in California (together referred to as “Supermarine”).
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.
With this acquisition,these acquisitions, our airport services business owns and operates a network of 40 42 FBOs and one heliport in the United States, the second largest such network in the industry.
The Gas Company, or TGC
We acquired TGC on June 7, 2006. TGC owns and operates the sole regulated gas production and distribution business in Hawaii as well as athe largest propane sales and distribution business in Hawaii.
IMTT
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 as International-Matex Tank Terminals, or 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, through the quarter ending December 31, 2008.
Dispositions
On August 17, 2006, we sold our 16,517,413 stapled securities of Macquarie Communications Infrastructure Group (ASX: MCG), or MCG, for $76.4 million. On October 2, 2006, we sold our 17.5% minority interest in the holding company for South East Water, or SEW, to HDF (UK) Holdings Limited and received net proceeds on the sale of approximately $89.5 million. On December 29, 2006, we sold our interest in Macquarie Yorkshire Limited, the holding company for its 50% interest in Connect M1-A1 Holdings Limited (the parent of the holder of the Yorkshire Link Concession in England) and received approximately $83.0 million in January 2007.
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 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.
On April 16, 2007, the Company entered into a stock purchase agreement with Mercury Air Centers, Inc., or Mercury, and its equity holders providing for:
·22
·
·
On June 12, 2007, the Company entered into an amendment of the stock purchase agreement to reflect Mercury, through a wholly-owned subsidiary, entering into an agreement to purchase 100% of the membership interests in SJJC Aviation Services, LLC, or SJJC, from San Jose Jet Center Inc. and ACM Aviation Inc. The closing of the acquisition of SJJC by Mercury is conditioned on either the Company’s closing of its acquisition of Mercury or the termination of the Company’s acquisition of Mercury. In the event of a termination or failure to close the acquisition of Mercury by November 1, 2007, Mercury is obligated to assign to the Company all of its rights and obligations under the SJJC agreement. As a result, the Company has effectively entered into an agreement to acquire SJJC.
Mercury owns and operates 24 fixed base operationsFBOs in the U.S. and SJJC operates two FBOs at Mineta San Jose International Airport in California. The aggregate purchase price giving effect to our exercise offor the call option,whole transaction is $427.0$615.0 million, subject to working capital and capital expenditure adjustments. In addition to the purchase price, the Company expects to incuradjustments and includes $36.9 million of transaction costs, (including advisory fees), pre-funded capital expendituresintegration costs and a debt service reserve totaling $29.2 million for a total cost of $456.2 million.funding. The Company intends to fund a portion of the acquisition with $192.0$272.0 million two-year term loan borrowings by Mercury with the balance funded with proceeds from the MIC Inc. acquisition credit facility and $20.0 million of available cash.Company’s July 2007 equity offering.
Key Factors Affecting Operating Results
·
·
·
FBOs acquired in July 2006;
·
operations;
·
TGC in June 2006;
·
·
therefore have no effect on cash; and
23
Our consolidated results of operations are summarized below:
|
| Quarter Ended March 31, |
| ||||||||||
|
| 2007 |
| 2006 |
| Change |
| ||||||
|
| $ | $ |
| $ |
| % |
| |||||
($ in thousands) (unaudited) | |||||||||||||
Revenues |
|
|
|
|
|
|
|
|
| ||||
Revenue from product sales |
| 110,648 |
| 41,992 |
|
| 68,656 |
|
| 163.5 |
| ||
Service revenue |
|
| 57,086 |
|
| 42,904 |
|
| 14,182 |
|
| 33.1 |
|
Financing and equipment lease income |
|
| 1,248 |
|
| 1,298 |
|
| (50 | ) |
| (3.9 | ) |
Total revenue |
|
| 168,982 |
|
| 86,194 |
|
| 82,788 |
|
| 96.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales |
|
| 70,484 |
|
| 25,269 |
|
| 45,215 |
|
| 178.9 |
|
Cost of services |
|
| 23,342 |
|
| 21,032 |
|
| 2,310 |
|
| 11.0 |
|
Gross profit |
|
| 75,156 |
|
| 39,893 |
|
| 35,263 |
|
| 88.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 38,978 |
|
| 23,950 |
|
| 15,028 |
|
| 62.7 |
|
Fees to manager |
|
| 5,561 |
|
| 6,478 |
|
| (917 | ) |
| (14.2 | ) |
Depreciation |
|
| 3,891 |
|
| 1,710 |
|
| 2,181 |
|
| 127.5 |
|
Amortization of intangibles |
|
| 6,928 |
|
| 3,446 |
|
| 3,482 |
|
| 101.0 |
|
Total operating expenses |
|
| 55,358 |
|
| 35,584 |
|
| 19,774 |
|
| 55.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 19,798 |
|
| 4,309 |
|
| 15,489 |
|
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend income |
|
| — |
|
| 2,651 |
|
| (2,651 | ) |
| (100.0 | ) |
Interest income |
|
| 1,459 |
|
| 1,702 |
|
| (243 | ) |
| (14.3 | ) |
Interest expense |
|
| (17,566 | ) |
| (15,663 | ) |
| (1,903 | ) |
| 12.1 |
|
Equity in earnings and amortization charges of investees |
|
| 3,465 |
|
| 2,453 |
|
| 1,012 |
|
| 41.3 |
|
(Loss) gain on derivative instruments |
|
| (477 | ) |
| 13,686 |
|
| (14,163 | ) |
| (103.5 | ) |
Other expense, net |
|
| (916 | ) |
| (178 | ) |
| (738 | ) |
| NM |
|
Net income before income taxes and minority interests |
|
| 5,763 |
|
| 8,960 |
|
| (3,197 | ) |
| (35.7 | ) |
Benefit (provision) for income taxes |
|
| 2,045 |
|
| (1,393 | ) |
| 3,438 |
|
| NM |
|
Net income before minority interests |
|
| 7,808 |
|
| 7,567 |
|
| 241 |
|
| 3.2 |
|
Minority interests |
|
| (69 | ) |
| 6 |
|
| (75 | ) |
| NM |
|
Net income |
| 7,877 |
| 7,561 |
|
| 316 |
|
| 4.2 |
|
——————
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | |||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||
Revenue from product sales | 114,809 | 56,922 | 57,887 | 101.7 | 225,457 | 98,914 | 126,543 | 127.9 | ||||||||||||||||||||||||
Service revenue | 61,161 | 47,726 | 13,435 | 28.2 | 118,247 | 90,630 | 27,617 | 30.5 | ||||||||||||||||||||||||
Financing and equipment lease income | 1,235 | 1,285 | (50 | ) | (3.9 | ) | 2,483 | 2,583 | (100 | ) | (3.9 | ) | ||||||||||||||||||||
Total revenue | 177,205 | 105,933 | 71,272 | 67.3 | 346,187 | 192,127 | 154,060 | 80.2 | ||||||||||||||||||||||||
Costs and expenses | ||||||||||||||||||||||||||||||||
Cost of product sales | 75,121 | 36,010 | 39,111 | 108.6 | 145,605 | 61,279 | 84,326 | 137.6 | ||||||||||||||||||||||||
Cost of services | 26,323 | 22,632 | 3,691 | 16.3 | 49,665 | 43,664 | 6,001 | 13.7 | ||||||||||||||||||||||||
Gross profit | 75,761 | 47,291 | 28,470 | 60.2 | 150,917 | 87,184 | 63,733 | 73.1 | ||||||||||||||||||||||||
Selling, general and administrative | 38,564 | 24,294 | 14,270 | 58.7 | 77,542 | 48,244 | 29,298 | 60.7 | ||||||||||||||||||||||||
Fees to manager | 48,964 | 3,718 | 45,246 | NM | 54,525 | 10,196 | 44,329 | NM | ||||||||||||||||||||||||
Depreciation | 4,162 | 2,121 | 2,041 | 96.2 | 8,053 | 3,831 | 4,222 | 110.2 | ||||||||||||||||||||||||
Amortization of intangibles | 7,004 | 3,580 | 3,424 | 95.6 | 13,932 | 7,026 | 6,906 | 98.3 | ||||||||||||||||||||||||
Total operating expenses | 98,694 | 33,713 | 64,981 | 192.7 | 154,052 | 69,297 | 84,755 | 122.3 | ||||||||||||||||||||||||
Operating (loss) income | (22,933 | ) | 13,578 | (36,511 | ) | NM | (3,135 | ) | 17,887 | (21,022 | ) | (117.5 | ) | |||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Dividend income | — | 2,351 | (2,351 | ) | (100.0 | ) | — | 5,002 | (5,002 | ) | (100.0 | ) | ||||||||||||||||||||
Interest income | 1,465 | 1,180 | 285 | 24.2 | 2,924 | 2,882 | 42 | 1.5 | ||||||||||||||||||||||||
Interest expense | (17,705 | ) | (15,604 | ) | (2,101 | ) | 13.5 | (35,271 | ) | (31,267 | ) | (4,004 | ) | 12.8 | ||||||||||||||||||
Equity in (losses) earnings and amortization charges of investees | (1,145 | ) | 3,115 | (4,260 | ) | (136.8 | ) | 2,320 | 5,568 | (3,248 | ) | (58.3 | ) | |||||||||||||||||||
Gain on derivative instruments | 1,138 | 6,487 | (5,349 | ) | (82.5 | ) | 661 | 20,162 | (19,501 | ) | (96.7 | ) | ||||||||||||||||||||
Other income (expense), net | 272 | 94 | 178 | 189.4 | (644 | ) | (73 | ) | (571 | ) | NM | |||||||||||||||||||||
Net (loss) income before income taxes and minority interests | (38,908 | ) | 11,201 | (50,109 | ) | NM | (33,145 | ) | 20,161 | (53,306 | ) | NM | ||||||||||||||||||||
Benefit (provision) for income taxes | 13,833 | (1,618 | ) | 15,451 | NM | 15,878 | (3,011 | ) | 18,889 | NM | ||||||||||||||||||||||
Net (loss) income before minority interests | (25,075 | ) | 9,583 | (34,658 | ) | NM | (17,267 | ) | 17,150 | (34,417 | ) | NM | ||||||||||||||||||||
Minority interests | (28 | ) | 146 | (174 | ) | (119.2 | ) | (97 | ) | 152 | (249 | ) | (163.8 | ) | ||||||||||||||||||
Net (loss) income | (25,047 | ) | 9,437 | (34,484 | ) | NM | (17,170 | ) | 16,998 | (34,168 | ) | NM |
NM – Not meaningful
24
The increase in our consolidated gross profit was due primarily to the acquisitions of Trajen on July 11, 2006 and TGC on June 7, 2006.2006 and growth in existing businesses, particularly our airport services business.
Selling, General and Administrative Expenses
The most significant factor in the increase in selling,Selling, general and administrative expenses was $14.9includes approximately $12.6 million additional costsand $27.5 million for the quarter and six months ended June 2007, respectively, from the additionour 2006 acquisitions of TGC and Trajen not reflectedTrajen.
The six months ended June 30, 2007 includes $43.0 million in 2006 results.performance fees earned by our manager, MIMUSA, in the second quarter and $957,000 in the first quarter. MIMUSA has elected to reinvest these performance fees in shares of LLC interests.
Other Income (Expense)
Our dividend income in 2006 consisted of distributions declared by MCG in the second quarter and distributions declared by and received from SEW in the first quarter. We sold our investmentinvestments in MCG and SEW in the third quarterand fourth quarters of 2006.2006, respectively.
Interest expense increased due mostly to a higher level of debt in 2006,2007, primarily from the acquisitions made in the second and third quarters of 2006.
Our equity in earnings and amortization charges of investees comprises our equity in the earnings on our Yorkshire Link investment for the first quarter and six months of 2006 and our equity in the earnings of IMTT for the first quarter and six months of 2007.
The increase We sold our investment in other expense was due primarily to foreign currency forward contracts settled duringYorkshire Link in the firstfourth quarter of 2007, in addition to other foreign currency losses from settlement proceeds on the sale of our foreign investments.2006.
Income Taxes
For the 2006 year, the Company reported a net loss before taxes at the MIC Inc. level, for which it recorded an income tax benefit. The Company also reported net income before taxes outside MIC Inc. that will not be subject to income taxes payable by the Company. The income derived from outside MIC Inc. was partially offset by the pre-tax loss at the MIC Inc. level, resulting in pre-tax income on a consolidated basis.
For the 2007 year, theThe Company projects a consolidated net loss before taxes at the MIC Inc. level,for 2007, for which it expects to record an income tax benefit. TheAs the Company also projectshas agreed with the Internal Revenue Service to be treated as a netcorporation for all of 2007, the portion of the loss outsideattributable to MIC Inc. thatis no longer relevant, as all income of the Company and MIC Inc. will not be subject toincluded in one consolidated federal income taxes payable by the Company.tax return.
Earnings Before Interest, Taxes, Depreciation and Amortization, or EBITDA
We have included EBITDA, a non-GAAP financial measure, on both a consolidated basis as well as for each of our consolidated businesses as we consider it to be an important measure of our overall performance. We believe EBITDA provides additional insight into the performance of our operating companies and our ability to service our obligations and support our ongoing distribution policy.
25
A reconciliation of net (loss) income to EBITDA, on a consolidated basis, is provided below:
Quarter Ended March 31, | ||||||||||
2007 | 2006 | Change | ||||||||
$ |
| $ | $ |
| % | |||||
| ($ in thousands) (unaudited) | |||||||||
Net income | 7,877 | 7,561 | 316 | 4.2 | ||||||
Interest expense, net | 16,107 | 13,961 | 2,146 | 15.4 | ||||||
Income taxes | (2,045 | ) | 1,393 | (3,438 | ) | NM | ||||
Depreciation(1) | 6,357 | 3,998 | 2,359 | 59.0 | ||||||
Amortization(2) |
| 6,928 |
| 3,446 | 3,482 | 101.0 | ||||
EBITDA | 35,224 | 30,359 | 4,865 | 16.0 |
——————
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | |||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||
Net (loss) income(1) | (25,047 | ) | 9,437 | (34,484 | ) | NM | (17,170 | ) | 16,998 | (34,168 | ) | NM | ||||||||||||||||||||
Interest expense, net | 16,240 | 14,424 | 1,816 | 12.6 | 32,347 | 28,385 | 3,962 | 14.0 | ||||||||||||||||||||||||
Income taxes | (13,833 | ) | 1,618 | (15,451 | ) | NM | (15,878 | ) | 3,011 | (18,889 | ) | NM | ||||||||||||||||||||
Depreciation(2) | 6,672 | 4,292 | 2,380 | 55.5 | 13,029 | 8,290 | 4,739 | 57.2 | ||||||||||||||||||||||||
Amortization(3) | 7,004 | 3,580 | 3,424 | 95.6 | 13,932 | 7,026 | 6,906 | 98.3 | ||||||||||||||||||||||||
EBITDA | (8,964 | ) | 33,351 | (42,315 | ) | (126.9 | ) | 26,260 | 63,710 | (37,450 | ) | (58.8 | ) |
NM – Not meaningful
(1)
Includes depreciation expense of $1.4 million for the district energy business for the quarters ended March 31, 2007 and 2006, which is reported in cost of services in our statements of income. Also includes depreciation expense of $1.0 million and $865,000 for the airport parking business for the quarters ended March 31, 2007 and 2006, respectively, which is reported in cost of services. Does not include depreciation expense of $1.7 million in connection with our investment in IMTT for the quarter ended March 31, 2007, which is reported in equity in earnings and amortization charges of investees in our statements of income.
(2)
Does not include amortization expense related to intangible assets in connection with our investment in the toll road business of $933,000 for the quarter ended March 31, 2006 or our investment in IMTT of $283,000 for the quarter ended March 31, 2007, which are reported in equity in earnings and amortization charges of investees in our statements of income.
(1) | Net loss for the six months ended June 30, 2007 includes performance fees earned by our manager, MIMUSA, of $43.0 million in the second quarter and $957,000 in the first quarter. MIMUSA has elected to reinvest these performance fees in shares of LLC interests. |
(2) | Includes depreciation expense of $1.4 million, $1.4 million, $2.9 million and $2.8 million for the district energy business for the quarters ended June 30, 2007 and 2006 and the six month periods ended on the same dates, respectively, which are reported in cost of services in our consolidated condensed statements of operations. Also includes depreciation expense of $1.1 million, $744,000, $2.1 million and $1.6 million for the airport parking business for the quarters ended June 30, 2007 and 2006 and the six month periods ended on the same dates, respectively, which are also reported in cost of services in our consolidated condensed statements of operations. Does not include depreciation expense of $1.7 million and $3.4 million in connection with our investment in IMTT for the quarter and six months ended June 30, 2007, respectively, which is reported in equity in earnings and amortization charges of investees in our statements of operations. |
(3) | Does not include amortization expense related to intangible assets in connection with our investment in the toll road business of $974,000 and $1.9 million for the quarter and six months ended June 30, 2006, respectively, which are reported in equity in earnings and amortization charges of investees in our consolidated condensed statements of operations. Also does not include amortization expense related to intangible assets in connection with our investment in IMTT of $283,000, $189,000, $567,000 and $189,000 for the quarters ended June 30, 2007 and 2006 and the six month periods ended on the same dates, respectively, which are reported in equity in earnings and amortization charges of investees in our statements of operations. |
The following section summarizes the historical consolidated financial performance of our airport services business for the quarter and six months ended March 31,June 30, 2007. Information in the table below relating to existing locations in 2007 represents the results of our airport services business excluding the results of the twenty three23 locations acquired from Trajen Holdings Inc., or Trajen.Trajen and the two locations acquired from Supermarine of Santa Monica and Supermarine of Stewart, collectively Supermarine. The acquisition column and the total 2007 quarter results in the tabletables below include the operating results of Trajen for the quarter and six months ended March 31,June 30, 2007 and Supermarine for period May 30, 2007 to June 30, 2007.
The performance of the business reflects ongoing operations at 41 locations. The business has ceased operations at New Orleans – Lakefront airport as a result of the ongoing impact of hurricane Katrina on that airport. The airport services business continues
Quarter Ended June 30, 2006Key Factors Affecting Operating Results
·
2006 and two FBOs acquired in May 2007; 23 FBOs from Trajen acquired in July 2006;·at existing locations and higher into-planefuel volumes;·lower fuel prices resulting in lower fuel sales revenue and costs of good sold;·higher other services gross profit due to increased de-icing;·acquisitionoperation of Trajen, including labor costs incurred for the re-branding25 acquired FBOs; and integration of the Trajen locations; and·expensecosts from higher debt levels resulting from the increased borrowings related to the acquisition of Trajenacquisitions in July 2006.2006 and May 2007.
26
Quarter Ended March 31, 2007 Compared to Quarter Ended March 31, 2006
Existing Locations | Trajen | Total | ||||||||||||||||||||||||||
2007 | 2006 | Change | Acquisition | 2007 | 2006 | Change | ||||||||||||||||||||||
| $ |
| $ |
| $ |
| % |
| $ |
| $ |
| $ |
| $ |
| % | |||||||||||
($ in thousands) (unaudited) | ||||||||||||||||||||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Fuel revenue |
|
| 41,601 |
|
| 41,992 |
|
| (391 | ) |
| (0.9 | ) |
| 28,246 |
|
| 69,847 |
|
| 41,992 |
|
| 27,855 |
|
| 66.3 |
|
Non-fuel revenue |
|
| 22,922 |
|
| 18,179 |
|
| 4,743 |
|
| 26.1 |
|
| 8,291 |
|
| 31,213 |
|
| 18,179 |
|
| 13,034 |
|
| 71.7 |
|
Total revenue |
|
| 64,523 |
|
| 60,171 |
|
| 4,352 |
|
| 7.2 |
|
| 36,537 |
|
| 101,060 |
|
| 60,171 |
|
| 40,889 |
|
| 68.0 |
|
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue-fuel |
|
| 23,489 |
|
| 25,270 |
|
| (1,781 | ) |
| (7.0 | ) |
| 17,089 |
|
| 40,578 |
|
| 25,270 |
|
| 15,308 |
|
| 60.6 |
|
Cost of revenue – non-fuel |
|
| 2,466 |
|
| 2,331 |
|
| 135 |
|
| 5.8 |
|
| 955 |
|
| 3,421 |
|
| 2,331 |
|
| 1,090 |
|
| 46.8 |
|
Total cost of revenue |
|
| 25,955 |
|
| 27,601 |
|
| (1,646 | ) |
| (6.0 | ) |
| 18,044 |
|
| 43,999 |
|
| 27,601 |
|
| 16,398 |
|
| 59.4 |
|
Fuel gross profit |
|
| 18,112 |
|
| 16,722 |
|
| 1,390 |
|
| 8.3 |
|
| 11,157 |
|
| 29,269 |
|
| 16,722 |
|
| 12,547 |
|
| 75.0 |
|
Non-fuel gross profit |
|
| 20,456 |
|
| 15,848 |
|
| 4,608 |
|
| 29.1 |
|
| 7,336 |
|
| 27,792 |
|
| 15,848 |
|
| 11,944 |
|
| 75.4 |
|
Gross profit |
|
| 38,568 |
|
| 32,570 |
|
| 5,998 |
|
| 18.4 |
|
| 18,493 |
|
| 57,061 |
|
| 32,570 |
|
| 24,491 |
|
| 75.2 |
|
Selling, general and administrative expenses |
|
| 19,735 |
|
| 18,698 |
|
| 1,037 |
|
| 5.5 |
|
| 10,800 |
|
| 30,535 |
|
| 18,698 |
|
| 11,837 |
|
| 63.3 |
|
Depreciation and amortization |
|
| 4,414 |
|
| 4,413 |
|
| 1 |
|
| — |
|
| 3,549 |
|
| 7,963 |
|
| 4,413 |
|
| 3,550 |
|
| 80.4 |
|
Operating income |
|
| 14,419 |
|
| 9,459 |
|
| 4,960 |
|
| 52.4 |
|
| 4,144 |
|
| 18,563 |
|
| 9,459 |
|
| 9,104 |
|
| 96.2 |
|
Interest expense, net |
|
| (5,193 | ) |
| (8,913 | ) |
| 3,720 |
|
| (41.7 | ) |
| (3,068 | ) |
| (8,261 | ) |
| (8,913 | ) |
| 652 |
|
| (7.3 | ) |
Other expense |
|
| (29 | ) |
| (36 | ) |
| 7 |
|
| (19.4 | ) |
| 6 |
|
| (23 | ) |
| (36 | ) |
| 13 |
|
| (36.1 | ) |
Unrealized (loss) gain on derivative instruments |
|
| (949 | ) |
| 7,315 |
|
| (8,264 | ) |
| (113.0 | ) |
| — |
|
| (949 | ) |
| 7,315 |
|
| (8,264 | ) |
| (113.0 | ) |
Provision for income taxes |
|
| (3,270 | ) |
| (3,273 | ) |
| 3 |
|
| (0.1 | ) |
| (429 | ) |
| (3,699 | ) |
| (3,273 | ) |
| (426 | ) |
| 13.0 |
|
Net income (1) |
|
| 4,978 |
|
| 4,552 |
|
| 426 |
|
| 9.4 |
|
| 653 |
|
| 5,631 |
|
| 4,552 |
|
| 1,079 |
|
| 23.7 |
|
Reconciliation of net income to EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (1) |
|
| 4,978 |
|
| 4,552 |
|
| 426 |
|
| 9.4 |
|
| 653 |
|
| 5,631 |
|
| 4,552 |
|
| 1,079 |
|
| 23.7 |
|
Interest expense, net |
|
| 5,193 |
|
| 8,913 |
|
| (3,720 | ) |
| (41.7 | ) |
| 3,068 |
|
| 8,261 |
|
| 8,913 |
|
| (652 | ) |
| (7.3 | ) |
Provision for income taxes |
|
| 3,270 |
|
| 3,273 |
|
| (3 | ) |
| (0.1 | ) |
| 429 |
|
| 3,699 |
|
| 3,273 |
|
| 426 |
|
| 13.0 |
|
Depreciation and amortization |
|
| 4,414 |
|
| 4,413 |
|
| 1 |
|
| — |
|
| 3,549 |
|
| 7,963 |
|
| 4,413 |
|
| 3,550 |
|
| 80.4 |
|
EBITDA |
|
| 17,855 |
|
| 21,151 |
|
| (3,296 | ) |
| (15.6 | ) |
| 7,699 |
|
| 25,554 |
|
| 21,151 |
|
| 4,403 |
|
| 20.8 |
|
——————
(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.
Quarter Ended June 30, 2007 Compared to Quarter Ended June 30, 2006 | ||||||||||||||||||||||||||||||||||||
Existing Locations | Total | |||||||||||||||||||||||||||||||||||
2007 | 2006 | Change | Acquisitions(2) | 2007 | 2006 | Change | ||||||||||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||
Fuel revenue | 44,867 | 46,298 | (1,431 | ) | (3.1 | ) | 28,822 | 73,689 | 46,298 | 27,391 | 59.2 | |||||||||||||||||||||||||
Non-fuel revenue | 20,387 | 17,654 | 2,733 | 15.5 | 8,400 | 28,787 | 17,654 | 11,133 | 63.1 | |||||||||||||||||||||||||||
Total revenue | 65,254 | 63,952 | 1,302 | 2.0 | 37,222 | 102,476 | 63,952 | 38,524 | 60.2 | |||||||||||||||||||||||||||
Cost of revenue | ||||||||||||||||||||||||||||||||||||
Cost of revenue-fuel | 26,283 | 28,517 | (2,234 | ) | (7.8 | ) | 18,055 | 44,338 | 28,517 | 15,821 | 55.5 | |||||||||||||||||||||||||
Cost of revenue-non-fuel | 1,527 | 1,558 | (31 | ) | (2.0 | ) | 1,145 | 2,672 | 1,558 | 1,114 | 71.5 | |||||||||||||||||||||||||
Total cost of revenue | 27,810 | 30,075 | (2,265 | ) | (7.5 | ) | 19,200 | 47,010 | 30,075 | 16,935 | 56.3 | |||||||||||||||||||||||||
Fuel gross profit | 18,584 | 17,781 | 803 | 4.5 | 10,767 | 29,351 | 17,781 | 11,570 | 65.1 | |||||||||||||||||||||||||||
Non-fuel gross profit | 18,860 | 16,096 | 2,764 | 17.2 | 7,255 | 26,115 | 16,096 | 10,019 | 62.2 | |||||||||||||||||||||||||||
Gross profit | 37,444 | 33,877 | 3,567 | 10.5 | 18,022 | 55,466 | 33,877 | 21,589 | 63.7 | |||||||||||||||||||||||||||
Selling, general and administrative expenses | 18,799 | 18,257 | 542 | 3.0 | 10,396 | 29,195 | 18,257 | 10,938 | 59.9 | |||||||||||||||||||||||||||
Depreciation and amortization | 4,395 | 4,458 | (63 | ) | (1.4 | ) | 4,059 | 8,454 | 4,458 | 3,996 | 89.6 | |||||||||||||||||||||||||
Operating income | 14,250 | 11,162 | 3,088 | 27.7 | 3,567 | 17,817 | 11,162 | 6,655 | 59.6 | |||||||||||||||||||||||||||
Interest expense, net | (4,635 | ) | (4,857 | ) | 222 | (4.6 | ) | (3,633 | ) | (8,268 | ) | (4,857 | ) | (3,411 | ) | 70.2 | ||||||||||||||||||||
Other expense | (37 | ) | (29 | ) | (8 | ) | 27.6 | — | (37 | ) | (29 | ) | (8 | ) | 27.6 | |||||||||||||||||||||
Unrealized gains on derivative instruments | 872 | 3,580 | (2,708 | ) | (75.6 | ) | — | 872 | 3,580 | (2,708 | ) | (75.6 | ) | |||||||||||||||||||||||
Income tax (provision) benefit | (4,142 | ) | (3,458 | ) | (684 | ) | 19.8 | 26 | (4,116 | ) | (3,458 | ) | (658 | ) | 19.0 | |||||||||||||||||||||
Net income (loss)(1) | 6,308 | 6,398 | (90 | ) | (1.4 | ) | (40 | ) | 6,268 | 6,398 | (130 | ) | (2.0 | ) | ||||||||||||||||||||||
Reconciliation of net income (loss) to EBITDA: | ||||||||||||||||||||||||||||||||||||
Net income (loss)(1) | 6,308 | 6,398 | (90 | ) | (1.4 | ) | (40 | ) | 6,268 | 6,398 | (130 | ) | (2.0 | ) | ||||||||||||||||||||||
Interest expense, net | 4,635 | 4,857 | (222 | ) | (4.6 | ) | 3,633 | 8,268 | 4,857 | 3,411 | 70.2 | |||||||||||||||||||||||||
Income tax provision (benefit) | 4,142 | 3,458 | 684 | 19.8 | (26 | ) | 4,116 | 3,458 | 658 | 19.0 | ||||||||||||||||||||||||||
Depreciation and amortization | 4,395 | 4,458 | (63 | ) | (1.4 | ) | 4,059 | 8,454 | 4,458 | 3,996 | 89.6 | |||||||||||||||||||||||||
EBITDA | 19,480 | 19,171 | 309 | 1.6 | 7,626 | 27,106 | 19,171 | 7,935 | 41.4 |
(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) Acquisitions include the results of Trajen FBOs (which were acquired on July 11, 2006) for the quarter ended June 30, 2007 and Supermarine FBOs (which were acquired on May 30, 2007) for the period May 30, 2007 through June 30, 2007. Revenue and Gross Profit
Most of the revenue and gross profit in our airport services business is generated through fueling general aviation aircraft at our 43 fixed base operations around the United States. This revenue is categorized according to who owns the fuel we use to service these aircraft. If we own the fuel, we record our cost to purchase that fuel as cost of revenue-fuel. Our corresponding fuel revenue is our cost to purchase that fuel plus a margin. We generally pursue a strategy of maintaining, and where appropriate increasing, dollardollar-based margins, thereby passing on any increase in fuel prices to the customer. We also have into-plane arrangements
27
whereby we fuel aircraft with fuel owned by another party. We collect 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 se rvices.services.
The key factors for ourdrivers of revenue and gross profit results are fuel volume and dollar margin per gallon. This applies to both fuel and into-plane revenue. Our customers will occasionally 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 a more meaningful analysis of our airport services business.
Our total revenue and gross profit growth was due to several factors:
·
·
2006 and May 30, 2007;
·
activity at existing locations; and
·
higher deicing activity in the first quarter of 2007 compared to 2006 due to colder weather in the northeast U.S.
Operating Administrative Expenses
The increase in selling, general and administrative expenses for the existing locations is due to:
·
additional office costs resulting from higher rentprimarily to the addition of expense associated with the integration and utility costs;
·
additional credit card fees related to proportionrebranding of total sales paid by credit card and types of cards used for payment;the acquired locations.
·
additional professional services costs including legal, audit and tax services; and
·
additional salaries and benefits expenses due to higher activity levels.
Interest Expense, Net
Excluding the impact of a non-cashThe increase in total interest expense item in 2006, prioris due to us applying hedge accounting, net interest expense for the quarter ended March 31, 2007 increased as a result of higher debt level associated with the acquisition of Trajenacquisitions and higher non-cash amortization of deferred financing costs. In July 2006, we increased borrowings under our debt facility by $180.0 million to finance our acquisition of Trajen.23 sites. In May 2007, we increased borrowings under our existing debt facility by $32.5 million to finance our acquisition of two sites. The debt facility provides an aggregate term loan borrowing of $480.0$512.5 million and a $5.0 million working capital facility.
EBITDA
The increase in EBITDA from existing locations, excludingExcluding the non cash (loss) gaingains from derivative instruments, is due to:EBITDA at existing locations and total EBITDA would have increased by approximately 19.4% and 68.3%, respectively, primarily driven by:
·
·
28
·
Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006 | ||||||||||||||||||||||||||||||||||||
Existing Locations | Total | |||||||||||||||||||||||||||||||||||
2007 | 2006 | Change | Acquisitions(2) | 2007 | 2006 | Change | ||||||||||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | $ | % | ||||||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||
Fuel revenue | 86,468 | 88,290 | (1,822 | ) | (2.1 | ) | 57,068 | 143,536 | 88,290 | 55,246 | 62.6 | |||||||||||||||||||||||||
Non-fuel revenue | 43,309 | 35,833 | 7,476 | 20.9 | 16,691 | 60,000 | 35,833 | 24,167 | 67.4 | |||||||||||||||||||||||||||
Total revenue | 129,777 | 124,123 | 5,654 | 4.6 | 73,759 | 203,536 | 124,123 | 79,413 | 64.0 | |||||||||||||||||||||||||||
Cost of revenue | ||||||||||||||||||||||||||||||||||||
Cost of revenue-fuel | 49,772 | 53,787 | (4,015 | ) | (7.5 | ) | 35,144 | 84,916 | 53,787 | 31,129 | 57.9 | |||||||||||||||||||||||||
Cost of revenue-non-fuel | 3,993 | 3,889 | 104 | 2.7 | 2,100 | 6,093 | 3,889 | 2,204 | 56.7 | |||||||||||||||||||||||||||
Total cost of revenue | 53,765 | 57,676 | (3,911 | ) | (6.8 | ) | 37,244 | 91,009 | 57,676 | 33,333 | 57.8 | |||||||||||||||||||||||||
Fuel gross profit | 36,696 | 34,503 | 2,193 | 6.4 | 21,924 | 58,620 | 34,503 | 24,117 | 69.9 | |||||||||||||||||||||||||||
Non-fuel gross profit | 39,316 | 31,944 | 7,372 | 23.1 | 14,591 | 53,907 | 31,944 | 21,963 | 68.8 | |||||||||||||||||||||||||||
Gross profit | 76,012 | 66,447 | 9,565 | 14.4 | 36,515 | 112,527 | 66,447 | 46,080 | 69.3 | |||||||||||||||||||||||||||
Selling, general and administrative expenses | 38,534 | 36,955 | 1,579 | 4.3 | 21,196 | 59,730 | 36,955 | 22,775 | 61.6 | |||||||||||||||||||||||||||
Depreciation and amortization | 8,809 | 8,871 | (62 | ) | (0.7 | ) | 7,608 | 16,417 | 8,871 | 7,546 | 85.1 | |||||||||||||||||||||||||
Operating income | 28,669 | 20,621 | 8,048 | 39.0 | 7,711 | 36,380 | 20,621 | 15,759 | 76.4 | |||||||||||||||||||||||||||
Interest expense, net | (9,828 | ) | (13,770 | ) | 3,942 | (28.6 | ) | (6,701 | ) | (16,529 | ) | (13,770 | ) | (2,759 | ) | 20.0 | ||||||||||||||||||||
Other (expense) income | (66 | ) | (65 | ) | (1 | ) | 1.5 | 6 | (60 | ) | (65 | ) | 5 | (7.7 | ) | |||||||||||||||||||||
Unrealized (losses) gains on derivative instruments | (77 | ) | 10,895 | (10,972 | ) | (100.7 | ) | — | (77 | ) | 10,895 | (10,972 | ) | (100.7 | ) | |||||||||||||||||||||
Income tax provision | (7,412 | ) | (6,731 | ) | (681 | ) | 10.1 | (403 | ) | (7,815 | ) | (6,731 | ) | (1,084 | ) | 16.1 | ||||||||||||||||||||
Net income(1) | 11,286 | 10,950 | 336 | 3.1 | 613 | 11,899 | 10,950 | 949 | 8.7 | |||||||||||||||||||||||||||
Reconciliation of net income to EBITDA: | ||||||||||||||||||||||||||||||||||||
Net income(1) | 11,286 | 10,950 | 336 | 3.1 | 613 | 11,899 | 10,950 | 949 | 8.7 | |||||||||||||||||||||||||||
Interest expense, net | 9,828 | 13,770 | (3,942 | ) | (28.6 | ) | 6,701 | 16,529 | 13,770 | 2,759 | 20.0 | |||||||||||||||||||||||||
Income tax provision (benefit) | 7,412 | 6,731 | 681 | 10.1 | 403 | 7,815 | 6,731 | 1,084 | 16.1 | |||||||||||||||||||||||||||
Depreciation and amortization | 8,809 | 8,871 | (62 | ) | (0.7 | ) | 7,608 | 16,417 | 8,871 | 7,546 | 85.1 | |||||||||||||||||||||||||
EBITDA | 37,335 | 40,322 | (2,987 | ) | (7.4 | ) | 15,325 | 52,660 | 40,322 | 12,338 | 30.6 |
(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) | Acquisitions include the results of Trajen FBOs (which were acquired on July 11, 2006) for the six months ended June 30, 2007 and Supermarine FBOs (which were acquired on May 30, 2007) for the period May 30, 2007 through June 30, 2007. |
Our total revenue and gross profit growth was due to several factors:
29
The increase in selling, general and administrative expenses is due to the addition of the 25 additional locations. Selling, general and administrative expenses at these locations are comparable to these expenses at existing locations as a percentage of total revenue.
Excluding the impact of a non-cash interest expense item related to interest rate swaps recorded in 2006, net interest expense increased as a result of higher debt levels associated with the acquisitions of Trajen and Supermarine and higher non-cash amortization of deferred financing costs.
Excluding the non-cash gains and losses from derivative instruments, EBITDA at existing locations and total EBITDA would have increased by approximately 27.1% and 79.2%, respectively, primarily due to:
2007; and
With respect to our bulk liquid storage terminal business, we included $4.6$3.1 million of net income in our consolidated results for the quartersix months ended March 31,June 30, 2007, consisting of $4.8$4.7 million equity in the earnings of IMTT (plus $1.1 million$760,000 tax benefit) less $2.0$4.0 million depreciation and amortization expense (plus $819,000$1.6 million tax benefit). We received $7.0 million in dividends from IMTT in JanuaryApril 2007 relating to the fourthfirst quarter of 2006.2007. IMTT
declared a dividend of $14.0 million in MarchJune 2007 with $7.0 million payable to MIC Inc.us that we have recorded as a receivable at March 31,June 30, 2007, and which we received in July 2007.
To enable meaningful analysis of IMTT’s performance across periods, IMTT’s performance for the full quarter and six months ended March 31,June 30, 2007, compared to the prior corresponding periodperiods which isin part were prior to our investment, is discussed below.
Key Factors Affecting Operating Results
·
·
·
·
·
30
Quarter Ended March
Quarter and Six Months Ended June 30, 2007 Compared to Quarter and Six Months Ended June 30, 2006 | ||||||||||||||||||||||||||||||||
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | |||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||
Terminal revenue | 54,771 | 45,889 | 8,882 | 19.4 | 109,548 | 92,265 | 17,283 | 18.7 | ||||||||||||||||||||||||
Terminal revenue – heating | 4,255 | 3,032 | 1,223 | 40.3 | 11,354 | 10,542 | 812 | 7.7 | ||||||||||||||||||||||||
Environmental response revenue | 4,165 | 5,243 | (1,078 | ) | (20.6 | ) | 12,705 | 10,006 | 2,699 | 27.0 | ||||||||||||||||||||||
Nursery revenue | 3,059 | 3,107 | (48 | ) | (1.5 | ) | 6,491 | 6,057 | 434 | 7.2 | ||||||||||||||||||||||
Total revenue | 66,250 | 57,271 | 8,979 | 15.7 | 140,098 | 118,870 | 21,228 | 17.9 | ||||||||||||||||||||||||
Costs and expenses | ||||||||||||||||||||||||||||||||
Terminal operating costs | 29,650 | 23,921 | 5,729 | 23.9 | 57,527 | 48,731 | 8,796 | 18.1 | ||||||||||||||||||||||||
Terminal operating costs – fuel | 3,775 | 3,292 | 483 | 14.7 | 8,888 | 9,435 | (547 | ) | (5.8 | ) | ||||||||||||||||||||||
Environmental response operating costs | 3,193 | 2,858 | 335 | 11.7 | 10,079 | 5,954 | 4,125 | 69.3 | ||||||||||||||||||||||||
Nursery operating costs | 2,975 | 3,446 | (471 | ) | (13.7 | ) | 6,046 | 6,272 | (226 | ) | (3.6 | ) | ||||||||||||||||||||
Total operating costs | 39,593 | 33,517 | 6,076 | 18.1 | 82,540 | 70,392 | 12,148 | 17.3 | ||||||||||||||||||||||||
Terminal gross profit | 25,601 | 21,708 | 3,893 | 17.9 | 54,487 | 44,641 | 9,846 | 22.1 | ||||||||||||||||||||||||
Environmental response gross profit | 972 | 2,385 | (1,413 | ) | (59.2 | ) | 2,626 | 4,052 | (1,426 | ) | (35.2 | ) | ||||||||||||||||||||
Nursery gross profit (loss) | 84 | (339 | ) | 423 | 124.8 | 445 | (215 | ) | 660 | NM | ||||||||||||||||||||||
Gross profit | 26,657 | 23,754 | 2,903 | 12.2 | 57,558 | 48,478 | 9,080 | 18.7 | ||||||||||||||||||||||||
General and administrative expenses | 6,098 | 5,307 | 791 | 14.9 | 11,667 | 10,866 | 801 | 7.4 | ||||||||||||||||||||||||
Depreciation and amortization | 9,040 | 7,484 | 1,556 | 20.8 | 17,562 | 15,165 | 2,397 | 15.8 | ||||||||||||||||||||||||
Operating income | 11,519 | 10,963 | 556 | 5.1 | 28,329 | 22,447 | 5,882 | 26.2 | ||||||||||||||||||||||||
Interest expense, net | (16,530 | ) | (3,906 | ) | (12,624 | ) | NM | (19,937 | ) | (9,323 | ) | (10,614 | ) | 113.8 | ||||||||||||||||||
Other income | 671 | 680 | (9 | ) | (1.3 | ) | 3,483 | 2,067 | 1,416 | 68.5 | ||||||||||||||||||||||
Unrealized gains on derivatives | 4,669 | 1,464 | 3,205 | NM | 4,427 | 3,505 | 922 | 26.3 | ||||||||||||||||||||||||
Provision for income taxes | (305 | ) | (3,733 | ) | 3,428 | (91.8 | ) | (6,728 | ) | (7,544 | ) | 816 | (10.8 | ) | ||||||||||||||||||
Minority interest | 52 | — | 52 | NM | 25 | — | 25 | NM | ||||||||||||||||||||||||
Net income | 76 | 5,468 | (5,392 | ) | (98.6 | ) | 9,599 | 11,152 | (1,553 | ) | (13.9 | ) | ||||||||||||||||||||
Reconciliation of net income to EBITDA: | ||||||||||||||||||||||||||||||||
Net income | 76 | 5,468 | (5,392 | ) | (98.6 | ) | 9,599 | 11,152 | (1,553 | ) | (13.9 | ) | ||||||||||||||||||||
Interest expense, net | 16,530 | 3,906 | 12,624 | NM | 19,937 | 9,323 | 10,614 | 113.8 | ||||||||||||||||||||||||
Provision for income taxes | 305 | 3,733 | (3,428 | ) | (91.8 | ) | 6,728 | 7,544 | (816 | ) | (10.8 | ) | ||||||||||||||||||||
Depreciation and amortization | 9,040 | 7,484 | 1,556 | 20.8 | 17,562 | 15,165 | 2,397 | 15.8 | ||||||||||||||||||||||||
EBITDA | 25,951 | 20,591 | 5,360 | 26.0 | 53,826 | 43,184 | 10,642 | 24.6 |
NM – Not meaningful
31
As noted earlier, IMTT reported financial results for the Quebec site using equity accounting during 2006 but incorporated 2007 Comparedresults into its financials on a consolidated basis. The following table provides IMTT results in which Quebec 2007 results are consolidated compared to Quarter Ended March 31,where the impact of Quebec has been removed.
Quarter Ended June 30, 2007 | Six Months Ended June 30, 2007 | |||||||||||||||
($ in thousands) | IMTT | IMTT Excl. Quebec | IMTT | IMTT Excl. Quebec | ||||||||||||
$ | $ | $ | $ | |||||||||||||
Total revenue | 66,250 | 64,028 | 140,098 | 135,530 | ||||||||||||
Total operating costs | 39,593 | 38,002 | 82,540 | 79,395 | ||||||||||||
Total gross profit | 26,657 | 26,026 | 57,558 | 56,135 | ||||||||||||
Operating income | 11,519 | 11,490 | 28,329 | 28,244 | ||||||||||||
EBITDA | 25,951 | 25,601 | 53,826 | 53,099 |
To provide a more meaningful comparison of current and previous year results, the following discussion and analysis of financial results will compare the “IMTT Excluding Quebec” 2007 results to the actual 2006 results.
| Quarter Ended March 31 |
|
|
|
|
| |||||||
|
| 2007 |
| 2006 |
| Change |
| ||||||
|
| $ |
| $ |
| $ |
| % |
| ||||
($ in thousands) (unaudited) | |||||||||||||
Revenue |
|
|
|
|
|
|
|
|
| ||||
Terminal revenue |
|
| 54,777 |
|
| 46,376 |
|
| 8,401 |
|
| 18.1 |
|
Terminal revenue – heating |
|
| 7,099 |
|
| 7,510 |
|
| (411 | ) |
| (5.5 | ) |
Environmental response revenue |
|
| 8,540 |
|
| 4,763 |
|
| 3,777 |
|
| 79.3 |
|
Nursery revenue |
|
| 3,432 |
|
| 2,950 |
|
| 482 |
|
| 16.3 |
|
Total revenue |
|
| 73,848 |
|
| 61,599 |
|
| 12,249 |
|
| 19.9 |
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal operating costs |
|
| 27,877 |
|
| 24,810 |
|
| 3,067 |
|
| 12.4 |
|
Terminal operating costs – fuel |
|
| 5,113 |
|
| 6,143 |
|
| (1,030 | ) |
| (16.8 | ) |
Environmental response operating costs |
|
| 6,886 |
|
| 3,096 |
|
| 3,790 |
|
| 122.4 |
|
Nursery operating costs |
|
| 3,071 |
|
| 2,826 |
|
| 245 |
|
| 8.7 |
|
Total operating costs |
|
| 42,947 |
|
| 36,875 |
|
| 6,072 |
|
| 16.5 |
|
Terminal gross profit |
|
| 28,886 |
|
| 22,933 |
|
| 5,953 |
|
|
|
|
Environmental response gross profit |
|
| 1,654 |
|
| 1,667 |
|
| (13 | ) |
| (0.8 | ) |
Nursery gross profit |
|
| 361 |
|
| 124 |
|
| 237 |
|
| 191.1 | |
Gross profit |
|
| 30,901 |
|
| 24,724 |
|
| 6,177 |
|
|
|
|
General and administrative expenses |
|
| 5,569 |
|
| 5,559 |
|
| 10 |
|
| 0.2 |
|
Depreciation and amortization |
|
| 8,522 |
|
| 7,681 |
|
| 841 |
|
| 10.9 |
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue and Gross Profit
Terminal revenue increased primarily due to a $5.1 million increase16.1% and 13.2% for the quarter and six-month period, respectively, reflecting growth in storage revenue, $1.6 million of which represents the consolidation of IMTT-Quebec. Excluding IMTT-Quebec, storageeach major service segment. Storage revenue increased due to a 3.8% increase in$4.4 million and $7.9 million during the quarter and six-month period, respectively, as the business increased the storage capacity rented to customers by 4.8% and a 5.8% increase4.4% and the average rental rates charged to customers by 6.7% and 6.1% during the quarter and six-month period, respectively. Storage capacity utilization, which was 95% during the quarter and six-month period of 2006, increased to 96% for the second quarter 2007 and 97% for the six-month period 2007. Terminal revenue growth during the quarter and six-month period also resulted from increases in average storage ratesthroughput ($1.0 million and $1.8 million, respectively) and other services & fees ($1.3 million and $2.9 million, respectively). The business also increased profitability from heating services.
Gross profit from terminal services increased 15.0% and 18.9% for the quarter ended March 31, 2007. Overall storage capacity rented to customers increased slightly from 96% to 97% of available storage capacity forand six-month period, respectively. During the quarter ended March 31, 2007. Terminal revenue also increased due to a $935,000 increaseand six month period in throughput revenue and a $2.0 million increase in revenue from2007, the provision of other terminal services, of which IMTT-Quebec represents over 10% in each case. In the quarter ended March 31, 2007, IMTT also achieved a $619,000 improvement in the differential between terminal revenue – heating and terminal operating costs – fuel.
The increase in terminal revenuerevenues was partially offset by an increaseincreased costs of direct labor, health benefit, and repair and maintenance costs which were in terminal operating costs. Of the $3.1 million increase in terminal operating costs, $1.4 million resulted from the consolidation of IMTT-Quebec in 2007. The balance of the increase in terminal operating costs correlatedpart related to the increase in revenues.revenues from terminal services.
Of the increase in terminal grossGross profit of $6.0from environmental response services decreased by $1.4 million $785,000 resulted from the consolidation of IMTT-Quebec. Excluding the impact of this change in accounting treatment, terminal gross profit increased by approximately $5.2 million or approximately 23%.
Environmental response gross profit remained relatively constant for both the quarter ended March 31, 2007.and six-month periods, reflecting a decrease in profit margins for spill response activities, the biggest source of revenue for this segment.
The nursery gross profit increased by $423,000 and $660,000 for the quarter and six-month period, respectively, due to animprovements in margins as well as the receipt of a $184,000 insurance settlement of $200,000 resulting from hurricaneduring the first quarter 2007 for damage incurred during Hurricane Katrina.
Depreciation and Amortization
Depreciation and amortization expense increased by $1.2 million and $1.8 million for the quarter and six-month periods, respectively, due to continuing high levels of growth capital expenditure.additions.
Net interest expense increased principally due to a $12.3 million make-whole payment associated with the repayment of the two tranches of senior notes in connection with the establishment of the new $625 million revolving credit facility for IMTT.
While other income during the quarter was comparable to the previous year, other income for the six-month period increased due to non-recurring items during the first quarter of 2007. These items included gains
32
of $2.0 million on insurance settlements received for claims related to Hurricane Katrina and other matters as well as a $333,000 gain on the sale of assets. Other income for the first quarter of 2006 included $424,000 of non-recurring income related to the write-off of a payable.
In addition to the aforementioned Quebec contribution, EBITDA for second quarter 2007 and six-month 2007 includes gains from interest swap agreements and certain non-recurring items including gains on insurance settlements and a gain on an asset sale. Excluding unrealized gains from interest rate swap agreements in both 2006 and 2007 as well as the non-recurring items described earlier, EBITDA for the quarter and six-month period would have increased by 9.4% and 17.7%, respectively.
We completed our acquisition of TGC on June 7, 2006. Therefore, TGC has only contributed to our consolidated operating results from that date.
Because TGC’s results of operations are not included in our consolidated financial results until June 7, 2006, the following analysis compares the historical results of operations for TGC under both its current and prior owners. We believe that this is the most appropriate approach to analyzing the historical financial performance and trends of TGC.
Key Factors Affecting Operating Results
·
decreased
·
·
$766,000 for fuel cost adjustments reimbursed to us through escrow funds.
·
increased calculation.
·
to price increases subsequent to MarchJune 2006; and
·
higher therms sold
Contribution margin for both the utility and non-utility business represents revenue less direct cost of revenue. 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 isare 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.
33
Quarter and Six Months Ended June 30, 2007 Compared to Quarter and Six Months Ended June 30, 2006 | ||||||||||||||||||||||||||||||||
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | |||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||
Contribution margin | ||||||||||||||||||||||||||||||||
Revenue – utility | 22,820 | 23,962 | (1,142 | ) | (4.8 | ) | 45,111 | 48,951 | (3,840 | ) | (7.8 | ) | ||||||||||||||||||||
Cost of revenue – utility | 15,008 | 15,805 | (797 | ) | (5.0 | ) | 29,599 | 30,981 | (1,382 | ) | (4.5 | ) | ||||||||||||||||||||
Contribution margin – utility | 7,812 | 8,157 | (345 | ) | (4.2 | ) | 15,512 | 17,970 | (2,458 | ) | (13.7 | ) | ||||||||||||||||||||
Revenue – non-utility | 18,300 | 18,375 | (75 | ) | (0.4 | ) | 36,810 | 35,026 | 1,784 | 5.1 | ||||||||||||||||||||||
Cost of revenue – non-utility | 10,994 | 10,706 | 288 | 2.7 | 21,805 | 21,168 | 637 | 3.0 | ||||||||||||||||||||||||
Contribution margin – non-utility | 7,306 | 7,669 | (363 | ) | (4.7 | ) | 15,005 | 13,858 | 1,147 | 8.3 | ||||||||||||||||||||||
Total contribution margin | 15,118 | 15,826 | (708 | ) | (4.5 | ) | 30,517 | 31,828 | (1,311 | ) | (4.1 | ) | ||||||||||||||||||||
Production | 1,211 | 994 | 217 | 21.8 | 2,332 | 2,219 | 113 | 5.1 | ||||||||||||||||||||||||
Transmission and distribution | 3,570 | 3,731 | (161 | ) | (4.3 | ) | 6,953 | 7,049 | (96 | ) | (1.4 | ) | ||||||||||||||||||||
Selling, general and administrative expenses | 4,030 | 4,384 | (354 | ) | (8.1 | ) | 8,110 | 8,409 | (299 | ) | (3.6 | ) | ||||||||||||||||||||
Depreciation and amortization | 1,666 | 1,417 | 249 | 17.6 | 3,397 | 2,785 | 612 | 22.0 | ||||||||||||||||||||||||
Operating income | 4,641 | 5,300 | (659 | ) | (12.4 | ) | 9,725 | 11,366 | (1,641 | ) | (14.4 | ) | ||||||||||||||||||||
Interest expense, net | (2,287 | ) | (2,749 | ) | 462 | (16.8 | ) | (4,532 | ) | (3,960 | ) | (572 | ) | 14.4 | ||||||||||||||||||
Other income (expense) | 19 | (2,033 | ) | 2,052 | (100.9 | ) | (34 | ) | (1,844 | ) | 1,810 | (98.2 | ) | |||||||||||||||||||
Unrealized gains (losses) on derivative instruments | 67 | 1,912 | (1,845 | ) | (96.5 | ) | (199 | ) | 1,912 | (2,111 | ) | (110.4 | ) | |||||||||||||||||||
Income before taxes(1) | 2,440 | 2,430 | 10 | 0.4 | 4,960 | 7,474 | (2,514 | ) | (33.6 | ) | ||||||||||||||||||||||
Reconciliation of income before taxes to EBITDA: | ||||||||||||||||||||||||||||||||
Income before taxes(1) | 2,440 | 2,430 | 10 | 0.4 | 4,960 | 7,474 | (2,514 | ) | (33.6 | ) | ||||||||||||||||||||||
Interest expense, net | 2,287 | 2,749 | (462 | ) | (16.8 | ) | 4,532 | 3,960 | 572 | 14.4 | ||||||||||||||||||||||
Depreciation and amortization | 1,666 | 1,417 | 249 | 17.6 | 3,397 | 2,785 | 612 | 22.0 | ||||||||||||||||||||||||
EBITDA | 6,393 | 6,596 | (203 | ) | (3.1 | ) | 12,889 | 14,219 | (1,330 | ) | (9.4 | ) |
Quarter Ended March 31, 2007 Compared to Quarter Ended March 31, 2006
Quarter Ended | Change | ||||||||||||
| 2007 |
| 2006 |
| $ |
| % |
| |||||
($ in thousands) (unaudited) | |||||||||||||
Contribution margin |
|
|
|
|
|
|
|
|
| ||||
Revenue – utility |
|
| 22,291 |
|
| 24,989 |
|
| (2,698 | ) |
| (10.8 | ) |
Cost of revenue – utility |
|
| 14,591 |
|
| 15,176 |
|
| (585 | ) |
| (3.9 | ) |
Contribution margin – utility |
|
| 7,700 |
|
| 9,813 |
|
| (2,113 | ) |
| (21.5 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue – non-utility |
|
| 18,510 |
|
| 16,651 |
|
| 1,859 |
|
| 11.2 |
|
Cost of revenue – non-utility |
|
| 10,811 |
|
| 10,462 |
|
| 349 |
|
| 3.3 |
|
Contribution margin – non-utility |
|
| 7,699 |
|
| 6,189 |
|
| 1,510 |
|
| 24.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contribution margin |
|
| 15,399 |
|
| 16,002 |
|
| (603 | ) |
| (3.8 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
| 1,121 |
|
| 1,225 |
|
| (104 | ) |
| (8.5 | ) |
Transmission and distribution |
|
| 3,383 |
|
| 3,318 |
|
| 65 |
|
| 2.0 |
|
Selling, general and administrative expenses |
|
| 4,080 |
|
| 4,025 |
|
| 55 |
|
| 1.4 |
|
Depreciation and amortization |
|
| 1,731 |
|
| 1,368 |
|
| 363 |
|
| 26.5 |
|
Operating income |
|
| 5,084 |
|
| 6,066 |
|
| (982 | ) |
| (16.2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
| (2,245 | ) |
| (1,211 | ) |
| (1,034 | ) |
| 85.4 |
|
Unrealized loss on derivative instruments |
|
| (267 | ) |
| — |
|
| (267 | ) |
| NM |
|
Other income (expense) |
|
| (53 | ) |
| 189 |
|
| (242 | ) |
| (128.0 | ) |
Income before taxes(1) |
|
| 2,519 |
|
| 5,044 |
|
| (2,525 | ) |
| (50.1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of income before taxes to EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes(1) |
|
| 2,519 |
|
| 5,044 |
|
| (2,525 | ) |
| (50.1 | ) |
Interest expense, net |
|
| 2,245 |
|
| 1,211 |
|
| 1,034 |
|
| 85.4 |
|
Depreciation and amortization |
|
| 1,731 |
|
| 1,368 |
|
| 363 |
|
| 26.5 |
|
EBITDA |
|
| 6,495 |
|
| 7,623 |
|
| (1,128 | ) |
| (14.8 | ) |
——————
NM – Not meaningful
(1)
Corporate allocation expense has been excluded from the above table as it is eliminated on consolidation at the MIC Inc. level.
(1) Corporate allocation expense has been excluded from the above table as it is eliminated on consolidation at the MIC Inc. level. Contribution Margin and Operating Income
Utility contribution margin decreasedwas lower for the quarter and six months primarily as the result of higher therm sales at lower margins and $331,000 and $1.1 million for fuel cost adjustments required by Hawaii state regulators as a condition of our purchase of TGC. The cash effect of the fuel cost adjustments are offset by withdrawals from the escrow account established and funded at acquisition by the seller. TGC believes that these escrowed funds will be fully utilized by mid-2008 and thereafter escrowed funds would not be available. The cash reimbursements of any fuel cost adjustment amounts are not reflected in revenue, but rather are reflected as releases of restricted cash.
34
In addition utility contribution margin was lower as the result of $696,000 of decreased revenue reflecting a lower change in unbilled receivables during the 2007 calculation period versus the 2006 calculation period. This was primarily due primarily to volume and price variances during the respective calculation periods and a change in the frequency of calculation. The March 2006 calculation period under the former owners was nine months. Beginning with the quarter ended June 30, 2006 the calculation has been performed and recorded quarterly. We believe this will eliminate the quarter-over-quarter impact of unbilled receivables on contribution margin going forward. However, the $1.1 million first quarter impact will continue to effect year-over-year comparisons throughout 2007, and all period-over-period comparisons of contribution margin will continue to be impacted by changes in volume and rates.
In addition, contribution margin was lower by approximately $766,000 for fuel cost adjustments required by Hawaii state regulators as a condition of our purchase of TGC. The cash effect of this $766,000 decrease is offset by withdrawals from our $4.5 million escrow account established and funded at acquisition by the seller. TGC believes that these escrowed funds will be fully utilized by mid-2008 and thereafter escrowed funds would not be available. The cash reimbursements of any fuel cost adjustment amounts are not reflected in revenue, but rather are reflected as releases of restricted cash. Contribution margin was also adversely affected by 2.4% fewer therms sold due to increased energy conservation measures, business slowdowns, customer renovations and military deployments.
Non-utility contribution margin decreased for the quarter due to 4% lower therm sales volume as the second quarter 2006 therm sales benefited from pricingdeliveries of LPG that resumed following a state-wide LPG shortage that occurred in first quarter 2006. Non-utility contribution margin for the quarter and six months increased primarily due to price increases subsequent to March 2006, as well as higher therm sales. Therms sold in the non-utility sector increased by 4.3% for the quarter principally due to a statewide LPG shortage from a local supplier that caused therm volumes to decline in MarchJune 2006.
Production costs were lower than inhigher for both the first quarter 2006and six months due primarily to higher personnel costs and rent partially offset by lower repairelectricity costs and, electric utility costsfor the six months, the cost of mechanical inspections at our synthetic natural gas plant in first quarter 2007.SNG plant. Transmission and distribution costs were lower for the quarter and six months due principally to lower outside costs for line repair work, lower rent and higher capitalization of costs in connection with asset additions, partially offset by higher personnel costs and vehicle maintenance costs.
Selling, general and administrative costs were lower in 2007 than in first quarter 2006 principally due to increased maintenance activity.the prior company’s parent overhead charges that were included in 2006 results and lower insurance costs, partially offset by higher personnel and professional service costs.
Depreciation and amortization increased due to the higher asset basis that resulted from our purchase of TGC and for equipment additions.
Interest Expense, Net
Interest expense increased due to our acquisition funding. Interest expense in 2006 also included the prior owner’s write-off of deferred financing costs for the retirement of their debt in connection with its sale of the business.
Other expense for 2006 included $2.3 million of costs incurred prior to our ownership.
Excluding unrealized lossgains and losses on derivatives, and reimbursed fuel adjustment costs and 2006 acquisition-related costs, EBITDA would have remained relatively flat despite elevated revenue in 2006 due2007 compared to significant accruals.2006.
Key Factors Affecting Operating Results
·
·
rates;
·
higher electricity costs
35
Quarter and Six Months Ended June 30, 2007 Compared to Quarter and Six Months Ended June 30, 2006 | ||||||||||||||||||||||||||||||||
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | |||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||
Cooling capacity revenue | 4,738 | 4,241 | 497 | 11.7 | 9,289 | 8,430 | 859 | 10.2 | ||||||||||||||||||||||||
Cooling consumption revenue | 6,800 | 5,258 | 1,542 | 29.3 | 8,662 | 6,733 | 1,929 | 28.6 | ||||||||||||||||||||||||
Other revenue | 768 | 791 | (23 | ) | (2.9 | ) | 1,417 | 1,636 | (219 | ) | (13.4 | ) | ||||||||||||||||||||
Finance lease revenue | 1,235 | 1,285 | (50 | ) | (3.9 | ) | 2,483 | 2,583 | (100 | ) | (3.9 | ) | ||||||||||||||||||||
Total revenue | 13,541 | 11,575 | 1,966 | 17.0 | 21,851 | 19,382 | 2,469 | 12.7 | ||||||||||||||||||||||||
Direct expenses – electricity | 4,301 | 3,341 | 960 | 28.7 | 5,784 | 4,285 | 1,499 | 35.0 | ||||||||||||||||||||||||
Direct expenses – other(1) | 4,727 | 4,208 | 519 | 12.3 | 8,876 | 8,529 | 347 | 4.1 | ||||||||||||||||||||||||
Direct expenses – total | 9,028 | 7,549 | 1,479 | 19.6 | 14,660 | 12,814 | 1,846 | 14.4 | ||||||||||||||||||||||||
Gross profit | 4,513 | 4,026 | 487 | 12.1 | 7,191 | 6,568 | 623 | 9.5 | ||||||||||||||||||||||||
Selling, general and administrative expenses | 822 | 978 | (156 | ) | (16.0 | ) | 1,590 | 1,775 | (185 | ) | (10.4 | ) | ||||||||||||||||||||
Amortization of intangibles | 341 | 341 | — | — | 678 | 678 | — | — | ||||||||||||||||||||||||
Operating income | 3,350 | 2,707 | 643 | 23.8 | 4,923 | 4,115 | 808 | 19.6 | ||||||||||||||||||||||||
Interest expense, net | (2,172 | ) | (2,106 | ) | (66 | ) | 3.1 | (4,259 | ) | (4,176 | ) | (83 | ) | 2.0 | ||||||||||||||||||
Other income (expense) | 120 | 44 | 76 | 172.7 | 194 | (35 | ) | 229 | NM | |||||||||||||||||||||||
Income tax (provision) benefit | (431 | ) | (94 | ) | (337 | ) | NM | (218 | ) | 239 | (457 | ) | (191.2 | ) | ||||||||||||||||||
Minority interest | (140 | ) | (130 | ) | (10 | ) | 7.7 | (272 | ) | (261 | ) | (11 | ) | 4.2 | ||||||||||||||||||
Net income (loss)(2) | 727 | 421 | 306 | 72.7 | 368 | (118 | ) | 486 | NM | |||||||||||||||||||||||
Reconciliation of net income (loss) to EBITDA: | ||||||||||||||||||||||||||||||||
Net income (loss)(2) | 727 | 421 | 306 | 72.7 | 368 | (118 | ) | 486 | NM | |||||||||||||||||||||||
Interest expense, net | 2,172 | 2,106 | 66 | 3.1 | 4,259 | 4,176 | 83 | 2.0 | ||||||||||||||||||||||||
Income tax provision (benefit) | 431 | 94 | 337 | NM | 218 | (239 | ) | 457 | (191.2 | ) | ||||||||||||||||||||||
Depreciation | 1,440 | 1,427 | 13 | 0.9 | 2,871 | 2,850 | 21 | 0.7 | ||||||||||||||||||||||||
Amortization of intangibles | 341 | 341 | — | — | 678 | 678 | — | — | ||||||||||||||||||||||||
EBITDA | 5,111 | 4,389 | 722 | 16.5 | 8,394 | 7,347 | 1,047 | 14.3 |
Quarter Ended March 31, 2007 Compared to Quarter Ended March 31, 2006NM – Not meaningful
|
| Quarter Ended March 31, |
|
|
|
|
| ||||||
| 2007 | 2006 |
| Change |
| ||||||||
|
| $ |
| $ |
| $ |
| % |
| ||||
($ in thousands) (unaudited) | |||||||||||||
Cooling capacity revenue |
|
| 4,551 |
|
| 4,189 |
|
| 362 |
|
| 8.6 |
|
Cooling consumption revenue |
|
| 1,862 |
|
| 1,475 |
|
| 387 |
|
| 26.2 |
|
Other revenue |
|
| 649 |
|
| 845 |
|
| (196 | ) |
| (23.2 | ) |
Finance lease revenue |
|
| 1,248 |
|
| 1,298 |
|
| (50 | ) |
| (3.9 | ) |
Total revenue |
|
| 8,310 |
|
| 7,807 |
|
| 503 |
|
| 6.4 |
|
Direct expenses – electricity |
|
| 1,483 |
|
| 944 |
|
| 539 |
|
| 57.1 |
|
Direct expenses – other(1) |
|
| 4,149 |
|
| 4,321 |
|
| (172 | ) |
| (4.0 | ) |
Direct expenses – total |
|
| 5,632 |
|
| 5,265 |
|
| 367 |
|
| 7.0 |
|
Gross profit |
|
| 2,678 |
|
| 2,542 |
|
| 136 |
|
| 5.4 |
|
Selling, general and administrative expenses |
|
| 768 |
|
| 797 |
|
| (29 | ) |
| (3.6 | ) |
Amortization of intangibles |
|
| 337 |
|
| 337 |
|
| — |
|
| — |
|
Operating income |
|
| 1,573 |
|
| 1,408 |
|
| 165 |
|
| 11.7 |
|
Interest expense, net |
|
| (2,087 | ) |
| (2,070 | ) |
| (17 | ) |
| 0.8 |
|
Other income (expense) |
|
| 74 |
|
| (79 | ) |
| 153 |
|
| (193.7 | ) |
Benefit for income taxes |
|
| 213 |
|
| 333 |
|
| (120 | ) |
| (36.0 | ) |
Minority interest |
|
| (132 | ) |
| (131 | ) |
| (1 | ) |
| 0.8 |
|
Net |
|
| (359 | ) |
| (539 | ) |
| 180 |
|
| (33.4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
|
| (359 | ) |
| (539 | ) |
| 180 |
|
| (33.4 | ) |
Interest expense, net |
|
| 2,087 |
|
| 2,070 |
|
| 17 |
|
| 0.8 |
|
Benefit for income taxes |
|
| (213 | ) |
| (333 | ) |
| 120 |
|
| (36.0 | ) |
Depreciation |
|
| 1,431 |
|
| 1,423 |
|
| 8 |
|
| 0.6 |
|
Amortization of intangibles |
|
| 337 |
|
| 337 |
|
| — |
|
| — |
|
EBITDA |
|
| 3,283 |
|
| 2,958 |
|
| 325 |
|
| 11.0 |
|
——————
(1)
Includes depreciation expense of $1.4 million for each of the quarters ended March 31, 2007 and 2006, 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.
(1) Includes depreciation expense of $1.4 million for each of the quarters ended June 30, 2007 and 2006, respectively, and $2.9 million and $2.8 million for the six month periods ended June 30, 2007 and 2006, 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. Gross Profit
Gross profit, in both the quarter and six-month period, increased primarily due to higher capacity revenue related to four interruptible customers converting to continuous service during the previous year, a net increase in contracted capacity and annual inflation-related increases of contract capacity rates in accordance with the terms of existing customer contracts. Cooling consumption revenue also increased due to higher ton-hour sales from weather related peakswarmer than average temperatures, a net increase in contracted capacity and the pass-through to our
36
customers of the higher electricity costs related to the January 2007 deregulation of Illinois’ electricity generation market, which aremarket. This pass-through is subject to annual reconciliations and true-ups to actual costs. Other revenue decreased due to our pass-through to customers of the lower cost of natural gas consumables and reduction in management headcount, which are included in other direct expenses.
Selling, General and Administrative Expense
Selling, general and administrative expense slightly decreased due to a reduction in management headcount offsetting higherheadcount. Also, the second quarter of 2006 included legal fees and marketing commissionsconsulting fees related to signing new customer contracts and renewing existing customer contracts set to expire during 2007.strategy work in preparation for the 2007 deregulation of Illinois’ electricity generation market.
Interest Expense, Net
The increase in net interest expense was due to additional credit line draws necessary to fund growth capital expenditures for plant expansion, new customer connections and scheduled maintenance capital expenditures during the previous twelve12 months. Our interest rate on our senior debt is a fixed rate.
Other Income (Expense)
The first quartersix months of 2006 included pension benefits expense for union trainees employed from 1999 through 2005. The majority of the expense was incurred in the first quarter of 2006.
EBITDA
EBITDA increased primarily due to the higher capacity revenue associated with four interruptible customers converting to continuous service during the previous year.year, the net increase in contracted capacity and the higher ton-hour sales from warmer weather.
37
Key Factors Affecting Operating Results
·
operating loss at
Quarter and Six Months Ended June 30, 2007 Compared to Quarter and Six Months Ended June 30, 2006 | ||||||||||||||||||||||||||||||||
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | |||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||
Revenue | 20,068 | 19,782 | 286 | 1.4 | 38,879 | 37,998 | 881 | 2.3 | ||||||||||||||||||||||||
Direct expenses(1) | 14,623 | 13,524 | 1,099 | 8.1 | 28,912 | 26,959 | 1,953 | 7.2 | ||||||||||||||||||||||||
Gross profit | 5,445 | 6,258 | (813 | ) | (13.0 | ) | 9,967 | 11,039 | (1,072 | ) | (9.7 | ) | ||||||||||||||||||||
Selling, general and administrative expenses | 2,781 | 1,573 | 1,208 | 76.8 | 4,393 | 3,273 | 1,120 | 34.2 | ||||||||||||||||||||||||
Amortization of intangibles | 705 | 472 | 233 | 49.4 | 1,493 | 878 | 615 | 70.0 | ||||||||||||||||||||||||
Operating income | 1,959 | 4,213 | (2,254 | ) | (53.5 | ) | 4,081 | 6,888 | (2,807 | ) | (40.8 | ) | ||||||||||||||||||||
Interest expense, net | (4,020 | ) | (4,333 | ) | 313 | (7.2 | ) | (7,987 | ) | (8,226 | ) | 239 | (2.9 | ) | ||||||||||||||||||
Other income | 159 | 409 | (250 | ) | (61.1 | ) | 148 | 317 | (169 | ) | (53.3 | ) | ||||||||||||||||||||
Unrealized gains on derivative instruments | 179 | 336 | (157 | ) | (46.7 | ) | 109 | 1,004 | (895 | ) | (89.1 | ) | ||||||||||||||||||||
Income tax benefit (provision) | 688 | (183 | ) | 871 | NM | 1,452 | 43 | 1,409 | NM | |||||||||||||||||||||||
Minority interest | 168 | (15 | ) | 183 | NM | 369 | 109 | 260 | NM | |||||||||||||||||||||||
Net (loss) income(2) | (867 | ) | 427 | (1,294 | ) | NM | (1,828 | ) | 135 | (1,963 | ) | NM | ||||||||||||||||||||
Reconciliation of net (loss) income to EBITDA: | ||||||||||||||||||||||||||||||||
Net (loss) income(2) | (867 | ) | 427 | (1,294 | ) | NM | (1,828 | ) | 135 | (1,963 | ) | NM | ||||||||||||||||||||
Interest expense, net | 4,020 | 4,333 | (313 | ) | (7.2 | ) | 7,987 | 8,226 | (239 | ) | (2.9 | ) | ||||||||||||||||||||
Income tax (benefit) provision | (688 | ) | 183 | (871 | ) | NM | (1,452 | ) | (43 | ) | (1,409 | ) | NM | |||||||||||||||||||
Depreciation | 1,070 | 744 | 326 | 43.8 | 2,105 | 1,609 | 496 | 30.8 | ||||||||||||||||||||||||
Amortization of intangibles | 705 | 472 | 233 | 49.4 | 1,493 | 878 | 615 | 70.0 | ||||||||||||||||||||||||
EBITDA | 4,240 | 6,159 | (1,919 | ) | (31.2 | ) | 8,305 | 10,805 | (2,500 | ) | (23.1 | ) |
·
reduced operating margins due primarily to higher personnel costs and property lease costs;
·
decline in the number of cars using our facilities;
·
targeted pricing strategies contributed to an increase in average revenue per car out;
·
accelerated amortization of intangible asset; and
·
appointment of a new CEO in March 2007.
Quarter Ended March 31, 2007 Compared to Quarter Ended March 31, 2006
|
| Quarter Ended March 31, |
|
|
|
|
| ||||||
| 2007 |
| 2006 |
| Change |
| |||||||
|
| $ |
| $ |
| $ |
| % |
| ||||
($ in thousands) (unaudited) | |||||||||||||
Revenue |
|
| 18,811 |
|
| 18,216 |
|
| 595 |
|
| 3.3 |
|
Direct expenses(1) |
|
| 14,289 |
|
| 13,435 |
|
| 854 |
|
| 6.4 |
|
Gross profit |
|
| 4,522 |
|
| 4,781 |
|
| (259 | ) |
| (5.4 | ) |
Selling, general and administrative expenses |
|
| 1,613 |
|
| 1,700 |
|
| (87 | ) |
| (5.1 | ) |
Amortization of intangibles |
|
| 788 |
|
| 406 |
|
| 382 |
|
| 94.1 |
|
Operating income |
|
| 2,121 |
|
| 2,675 |
|
| (554 | ) |
| (20.7 | ) |
Interest expense, net |
|
| (3,966 | ) |
| (3,893 | ) |
| (73 | ) |
| 1.9 |
|
Other (expense) income |
|
| (10 | ) |
| (92 | ) |
| 82 |
|
| (89.1 | ) |
Unrealized (loss) gain on derivative instruments |
|
| (70 | ) |
| 668 |
|
| (738 | ) |
| (110.5 | ) |
Benefit for income taxes |
|
| 763 |
|
| 226 |
|
| 537 |
|
| NM |
|
Minority interest |
|
| 201 |
|
| 124 |
|
| 77 |
|
| 62.1 |
|
Net loss(2) |
|
| (961 | ) |
| (292 | ) |
| (669 | ) |
| NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net loss to EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss(2) |
|
| (961 | ) |
| (292 | ) |
| (669 | ) |
| NM |
|
Interest expense, net |
|
| 3,966 |
|
| 3,893 |
|
| 73 |
|
| 1.9 |
|
Benefit for income taxes |
|
| (763 | ) |
| (226 | ) |
| (537 | ) |
| NM |
|
Depreciation |
|
| 1,035 |
|
| 865 |
|
| 170 |
|
| 19.7 |
|
Amortization of intangibles |
|
| 788 |
|
| 406 |
|
| 382 |
|
| 94.1 |
|
EBITDA |
|
| 4,065 |
|
| 4,646 |
|
| (581 | ) |
| (12.5 | ) |
——————
NM – Not meaningful
(1) | Includes depreciation expense of $1.1 million and $744,000 for the quarters ended June 30, 2007 and 2006, respectively, and $2.1 million and $1.6 million for the six month periods ended June 30, 2007 and 2006, respectively. |
(2) | Corporate allocation expense and 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. |
(1)38
Includes depreciation expense of $1.0 million and $865,000 for the quarters ended March 31,
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||||||||||
% | % | |||||||||||||||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||||||||||
Cars Out(1): | 531,231 | 543,601 | (12,370 | ) | (2.3 | ) | 1,026,371 | 1,061,436 | (35,065 | ) | (3.3 | ) | ||||||||||||||||||||
Average Revenue per Car Out: | $ | 36.86 | $ | 35.30 | $ | 1.56 | 4.4 | $ | 36.76 | $ | 34.70 | $ | 2.06 | 5.9 | ||||||||||||||||||
Average Overnight Occupancy(2): | 22,478 | 22,335 | 143 | 0.6 | 21,613 | 21,624 | (11 | ) | (0.1 | ) |
(1) | Cars Out refers to the total number of customers exiting during the period. |
(2) | 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 in 2007 and 2006, respectively.
(2)
Corporate allocation expense and 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.
|
| Quarter Ended March 31, |
| Change |
| ||||||||
|
| 2007 |
| 2006 |
|
|
| % |
| ||||
Operating Data: |
|
|
|
|
|
|
|
|
| ||||
Cars Out(1): |
|
| 495,140 |
|
| 517,835 |
|
| (22,695 | ) |
| (4.4 | ) |
Average Revenue per Car Out: |
| $ |
|
| $ | 34.07 |
| $ | 2.57 |
|
| 7.5 |
|
Average Overnight Occupancy(2): |
|
| 20,726 |
|
| 20,981 |
|
| (255 | ) |
| (1.2 | ) |
——————
(1)
Cars Out refers to the total number of customers exiting during the period.
(2)
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 one new location duringlocation. Comparable locations revenue for the quarter and an increase in average revenue per car out. The increase in averagethe six month periods were generally flat.
Average revenue per car out results mainly fromincreased for the continuationquarter and six month period at our comparable locations primarily due to implementation of our yield management strategy, including price increases reduced discounting in selected markets, and the elimination of low margin daily parking programs in selected markets. 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 in both the quarter and average overnight occupancythe six month period was attributed to competitive pressure and underperforming management in selected markets and a continued strategic shift away from daily parkers. Management has taken actionparkers and competitive pressure in underperforming markets through more aggressive pricing and replacement of certain managers. selected markets.
Daily parkers, typically airport employees, contribute to a higher number of cars out, but pay discounted rates. Management have sought to replace daily customers with higher yielding leisure and corporate customers, however the volume is not yet sufficient to fully offset the loss of daily parkers. Management is concentrating sales efforts in these markets to attract additional corporate accounts.
In the first quarter of 2007, management identified a number of underperforming markets, introducing aggressive pricing campaigns and new managers to recapture market share. Management also identified a number of service level issues in these markets and efforts to upgrade standards are continuing. As a result, the decline in cars out over the prior year improved slightly in the second quarter compared to the first quarter of 2007. We anticipate that these service improvements together with our rebranding and internet marketing will build our customer base over time. As a result, we expect to see improved revenues over the medium term.
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 seek opportunities to expand capacity of these locations.capacity.
In the quarter ending March 31, 2007 we re-branded eight locations as FastTrack Airport Parking. The re-branding includes replacement of signage, uniforms and the graphics on our shuttle buses. The brand has also been incorporated into a new website. We believe the new website and brand will drive volume increases and, once the balance of facilities have been re-branded, will stream-line marketing efforts.
Direct Expenses
Direct expenses for the quarter ended March 31, 2007 increased due in part to additional costs associated with operating one new location.
Direct expenses increased at comparable locations for the quarter and six months ended June 30, 2007 due to higher personnel costs and real and increased lease payments.
In certain markets,support service improvement initiatives including additional personnel and security. Increases were concentrated in our North East valet markets where customer experience is driven by the interactions with our staff. We anticipate that these costs were incurredwill stabilize at current levels over the remainder of the year and will support anticipated increases in response to volume increases, weather conditionsrevenue and security concerns. In underperforming markets, personnel costs decreased.accordingly margin growth as the customer base builds in response.
DirectDepreciation increased in the quarter and six months ended June 30, 2007 by $326,000 and $496,000, respectively, primarily as a result of the replacement of buses.
We note that direct expenses include rent in excess of lease, a non-cash item, in the amount of $567,000 $575,000 and $501,000 $561,000 for the quarters ended March 31,June 30, 2007 and 2006, respectively, and $1.2 million and $1.1 million for the six months ended June 30, 2007 and 2006, respectively.
39
On June 27 the airport parking business sub-leased a parcel of land that had been used intermittently as an overflow facility. The sub-lease revenue will offset all of the lease expense, effectively reducing operating costs of the business by $250,000 per quarter through the first quarter of 2009.
Selling, general and administrative expenses increased due primarily to re-branding expenses of $545,000 for the quarter decreased due primarily to the reversal of a 2006 excess bonus reserve in the first quarter ofand six month period associated with consolidating all locations under one brand during 2007. This was partially offset by higher accounting and professional fees.
Amortization of Intangibles
Amortization in 2007 increased due to the accelerated amortization of certain intangible assets (trade and domain names) associated with the re-branding project.
Interest Expense, Net
Interest expense increaseddeclined due to the additionalfavorable interest rates and lower finance cost amortization associated with the debt refinanced on September 1, 2006, that consolidated our primary borrowings, and additionalprovided capital for current and future capital expenditures at a more favorable interest rate, offset by a small reduction to interest expense from receipts on our derivative instruments,rate.
EBITDA decreased due to favorable LIBOR rates which exceeded our interest rate caplower operating income, primarily as a result of increased service related costs and swap rates.re-branding expenses.
EBITDA
Excluding unrealized (loss) gain on derivative instruments, EBITDA increased by 3.9%.
We do not intend to retain significant cash balances in excess of what are prudent reserves. We believe that we will have sufficient liquidity and capital resources to meet our future liquidity requirements, including in relation to our acquisition strategy, our debt obligations and our distribution policy. We base our assessment on the following assumptions that:
·
all of
·
·
·
payments on Thermal Chicago/Northwind Aladdin’s debt that will begin to amortize in 2007 can be paid from operating cash flow;
·
IMTT
·
The section below discusses the sources and uses of cash on a consolidated basis, and our businesses and investments for the quarterssix months ended March 31,June 30, 2007 and March 31, 2006. Cash provided by (used in) operating activities for our businesses excludes the impact of the corporate allocation and other operating inter-company activities, which are eliminated at the MIC Inc. level.
40
|
| Quarter Ended March 31, |
|
|
|
|
| ||||||
|
| 2007 |
| 2006 |
| Change |
| ||||||
| $ |
| $ |
| $ |
| % |
| |||||
($ in thousands) | |||||||||||||
|
|
| |||||||||||
Cash provided by operating activities |
|
|
|
|
| 11,821 |
|
|
|
|
|
|
|
Cash provided by (used in) investing activities |
|
|
|
|
| (1,023 | ) |
|
|
|
| NM |
|
Cash provided by financing activities |
|
| 2,588 |
|
| 552 |
|
| 2,036 |
|
| NM |
|
——————
NM – Not meaningful
Six Months Ended June 30, | ||||||||||||||||
2007 | 2006 | Change | ||||||||||||||
($ in thousands) | $ | $ | $ | % | ||||||||||||
Cash provided by operating activities | 52,538 | 23,401 | 29,137 | 124.5 | ||||||||||||
Cash used in investing activities | (10,776 | ) | (506,545 | ) | 495,769 | (97.9 | ) | |||||||||
Cash (used in) provided by financing activities | (6,149 | ) | 405,457 | (411,606 | ) | (101.5 | ) |
Key factors influencing our consolidated cash flow were as follows:
·
·
the increase in our consolidated
·
the small increase our $263.3 million investment in our consolidatedgas production and distribution business, less $7.8 million cash acquired. There was also an additional cash inflow in 2007 of $11.7 million, comprising the dividend received from IMTT in excess of the equity accounted income recognized, net of $18.2 million in capital expenditures. Capital expenditures were $13.3 million higher than in the first half of 2006 due to businesses acquired since the middle of 2006; and
As of March 31,June 30, 2007, our consolidated cash and cash equivalent balances totaled $146.4$73.0 million.
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. At March 31,June 30, 2007, the Company had no indebtedness outstanding at the MIC LLC Trust or MIC Inc. level. On August 6, 2007, we drew $60.0 million on the MIC Inc. credit facility in anticipation of closing our acquisition of Mercury and SJJC in August 2007. For a description of the MIC Inc. revolving acquisition facility, see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.2006, filed with the SEC on March 1, 2007.
41
|
| Quarter Ended March 31, |
|
|
|
|
| Six Months Ended June 30, | |||||||||||||||||||||
|
| 2007 |
| 2006 |
| Change |
| 2007 | 2006 | Change | |||||||||||||||||||
| $ |
| $ |
| $ |
| % |
| |||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
($ in thousands) | $ | $ | $ | % | |||||||||||||||||||||||||
Cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
| 40,385 | 21,864 | 18,521 | 84.7 | ||||||||||||
Cash used in investing activities |
|
| (1,702 | ) |
| (567 | ) |
| (1,135 | ) |
| 200.2 |
| (92,638 | ) | (1,138 | ) | (91,500 | ) | NM | |||||||||
Cash used in financing activities |
|
| (11,879 | ) |
| (9,153 | ) |
| (2,726 | ) |
| 29.8 |
| ||||||||||||||||
Cash provided by (used in) financing activities | 63,974 | (17,868 | ) | 81,842 | NM |
NM – Not meaningful
Key factors influencing cash flow from our airport services business were as follows:
·
·
·
The airport services business amended its credit facility in February 2007 to provide for $32.5 million of additional term loan borrowings to partially finance the acquisition of Supermarine and drew down on this facility on May 30, 2007 when the FBOs located at Stewart International Airport in New York and Santa Monica Airport in California.acquisition closed. The terms of the facility remain the same except that the required minimum adjusted EBITDA increased to $78.2 million for 2007 and $84.1 million for 2008. To hedge the interest commitments under the term loan expansion, MIC, Inc. entered into a swap with Macquarie Bank Limited, fixing 100% of the term loan expansion at the following base rate:
|
|
| |||||||
Start Date | |||||||||
End Date | Rate | ||||||||
March 30, 2007 | December 12, 2010 |
| 5.2185 | % |
The swap will bewas transferred to the airport services business at the completion of the acquisition.acquisition on May 30, 2007.
We have also received commitment letters from various banks to provide credit facilities to fund the upcoming acquisitions of Mercury and SJJC. Further details are provided in Note 5, Acquisitions, to our consolidated condensed financial statements in Part I, Item I of this Form 10-Q, which is incorporated herein by reference.
For a further description of the airport services business’ debt facilities see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.
The acquisition of our 50% interest in IMTT was completed on May 1, 2006. The following analysis compares the historical cash flows for IMTT under its current and prior owners. We believe that this is the most appropriate approach to explaining the historical cash flow trends of IMTT rather than discussing the composition of cash flows that is included in our consolidated cash flows.
|
| Quarter Ended March 31, |
|
|
|
|
| ||||||
|
| 2007 |
| 2006 |
| Change |
| ||||||
| $ |
| $ |
| $ |
| % |
| |||||
($ in thousands) | |||||||||||||
|
|
|
|
|
|
|
|
|
| ||||
Cash provided by operating activities |
|
| 31,023 |
|
| 20,531 |
|
| 10,492 |
|
| 51.1 |
|
Cash used in investing activities |
|
| (33,809 | ) |
| (14,726 | ) |
| (19,083 | ) |
| 129.6 |
|
Cash (used in) provided by financing activities |
|
| (6,177 | ) |
| 24,572 |
|
| (30,749 | ) |
| (125.1 | ) |
42
Six Months Ended June 30, | ||||||||||||||||
2007 | 2006 | Change | ||||||||||||||
($ in thousands) | $ | $ | $ | % | ||||||||||||
Cash provided by operating activities | 31,497 | 38,799 | (7,302 | ) | (18.8 | ) | ||||||||||
Cash used in investing activities | (77,984 | ) | (33,512 | ) | (44,472 | ) | 132.7 | |||||||||
Cash provided by financing activities | 12,972 | 87,646 | (74,674 | ) | (85.2 | ) |
Key factors influencing cash flow at our bulk liquid storage terminal business, including the consolidation of IMTT-Quebec in 2007, were as follows:
·
·
capital in 2006 which did not recur in 2007;
·
Pursuant to the terms of the shareholders’ agreement between ourselves and the other shareholders in IMTT, all shareholders in IMTT other than MIC Inc. are required to loan all quarterly 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. The shareholder loan has a fixed interest rate of 5.5% and will be repaid over 15 years by IMTT Holdings Inc. with equal quarterly amortization commencing March 31, 2008. Shareholder loans of $16.8$22.3 million were outstanding as at March 31,June 30, 2007.
For a description of the bulk liquid storage terminal business’ debt facilities see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. In addition, the following describes material changes to the business’ debt facilities in 2007.
On June 7, 2007, IMTT entered into a Revolving Credit Agreement (the “Agreement”) with Suntrust Bank, Citibank N.A., Regions Bank, Rabobank Nederland, Branch Banking & Trust Co., DNB NOR Bank ASA, Bank of America N.A., BNP Paribas, Bank of Montreal, The Royal Bank of Scotland PLC, Mizuho Corporate Bank Ltd and eight 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.
At signing, IMTT used $168.5 million under the new U.S. dollar denominated revolving credit facility to fully repay and extinguish the existing two tranches of fixed rate notes issued by IMTT and to replace letters of credit outstanding under the existing U.S. dollar denominated revolving credit facility which has also been terminated. IMTT also borrowed $10.1 million equivalent under the Canadian dollar denominated revolving credit facility to fully repay the existing Canadian dollar denominated revolving credit facility which has been terminated. The material terms of the new revolving credit facilities are summarized in the table below. The new facilities will be used to fund IMTT's expansion program and are expected to be more than adequate to fully fund IMTT’s existing and reasonably foreseeable growth capital expenditure plans.
Facility Term | USD Revolving Credit Facility | CAD Revolving Credit Facility | ||
Amount Utilized at Closing of Facility | $168.5 million | $10.1 million | ||
Undrawn Amount | $431.5 million | $14.9 million | ||
Uncommitted Expansion Amounts | $300.0 million |
43
Facility Term | USD Revolving Credit Facility | CAD Revolving Credit Facility | ||
Maturity | June, 2012 | June, 2012 | ||
Amortization | Revolving. Payable at maturity. | Revolving. Payable at maturity | ||
Interest Rate | Floating at 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 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% | ||
Commitment Fees | A percentage of undrawn committed amounts based on the ratio of Debt 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% | A percentage of undrawn committed amounts based on the ratio of Debt 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 | Unsecured except for pledge of 65% of shares in IMTT’s two Canadian subsidiaries. | Unsecured except for pledge of 65% of shares in IMTT’s two Canadian subsidiaries. | ||
Financial Covenants (applicable to IMTT’s operating subsidiaries on a combined basis) | Debt to EBITDA Ratio: Max 4.75 × EBITDA to Interest Ratio: Min 3.00 × | Debt to EBITDA Ratio: Max 4.75 × EBITDA to Interest Ratio: Min 3.00 × | ||
Financial Covenants as at June 30, 2007 (applicable to IMTT’s operating subsidiaries on a combined basis) | Debt to EBITDA Ratio: 2.70 × EBITDA to Interest Ratio: 4.25 × | Debt to EBITDA Ratio: 2.70 × EBITDA to Interest Ratio: 4.25 × | ||
Restrictions on Payments of Dividends | None provided no default as a result of payment | None provided no default as a result of payment |
As of June 30, 2007, IMTT was utilizing $186.6 million of this revolving credit commitment.
On July 10, 2007, IMTT issued $215.0 million of Gulf Opportunity Zone Bonds (GO Zone Bonds) in two tranches. The proceeds from the issuance of the GO Zone Bonds will be used to fund qualified project costs at its St. Rose and Geismar storage facilities incurred subsequent to August 12, 2005 (in the case of
St. Rose) and April 28, 2005 (in the case of Geismar) and before January 1, 2011. Of the proceeds from the issuance of the GO Zone Bonds, $112.9 million (an amount approximately equivalent to IMTT’s aggregate capital expenditures at St. Rose and Geismar from the aforementioned dates through the date of issuance) were made immediately available to IMTT and used to repay part of the then outstanding balance under IMTT’s revolving credit facility. The balance of the proceeds from the GO Zone Bond issuance
($100.7 million net of transaction costs) are currently held in trust and will be released to IMTT as further
44
capital expenditure at the specified terminals is undertaken. While held in trust, the proceeds will be invested by the trustee in short term debt instruments with high credit rating. It is anticipated that all proceeds from the issuance held by the trustee will be released to IMTT by the end of 2008.
The GO Zone Bonds are fully credit supported by letters of credit drawn under IMTT’s revolving credit agreement.
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, the floating interest rate applicable to similar bonds has historically averaged approximately 67% percent of LIBOR. Interest on the GO Zone Bonds is deductible to IMTT for federal income tax purposes as incurred except to the extent capitalized and amortized as part of project costs as required.
The key terms of the GO Zone Bonds issued are summarized in the table below.
Facility Term | ||
Amount Outstanding | $215.0 million | |
Amount Released to IMTT | $112.9 million | |
Amount Held by Bond Trustee | $100.7 million | |
Term | 30 years from date of issuance | |
Amortization | Nil. Repayable in full at maturity | |
Interest Rate | Floating at tax exempt bond tender rates | |
Security | Unsecured. Required to be supported at all times by bank letter of credit | |
Financial Covenants | Nil | |
Restrictions on Payments of Dividends | Nil |
To hedge the interest rate risk associated with IMTT's current and a substantial portion of its projected floating rate borrowings under the revolving credit agreement and GO Zone Bonds, IMTT has entered into the following interest rate swaps during the quarter:
Because TGC’s cash flows are only included in our financial results from June 7, 2006, the following analysis compares the historical cash flows for TGC under both its current and prior owners for the six months ended June 30, 2007 and 2006. We believe that this is the most appropriate approach to explaining the historical cash flow trends of TGC rather than discussing the composition of cash flows that is included in our consolidated cash flows.
Six Months Ended June 30, | ||||||||||||||||
2007 | 2006 | Change | ||||||||||||||
($ in thousands) | $ | $ | $ | % | ||||||||||||
Cash provided by operating activities | 9,845 | 10,949 | (1,104 | ) | (10.1 | ) | ||||||||||
Cash used in investing activities | (4,223 | ) | (260,207 | ) | 255,984 | (98.4 | ) | |||||||||
Cash (used in) provided by financing activities | (2,726 | ) | 255,450 | (258,176 | ) | (101.1 | ) |
Key factors influencing cash flow from TGC were as follows:
45
At June 30, 2007, TGC had $16.0 million available to borrow under its $20.0 million revolving credit facility. During the second quarter, TGC established a $5.0 million uncommitted unsecured short-term borrowing facility. This credit line is being used for working capital needs, but no amount had been borrowed as of June 30, 2007.
For a description of the gas production and distribution business’ debt facilities see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. We have not had any material changes to our debt and credit facilities since March 1, 2007, our 10-K filing date.
GAS PRODUCTION AND DISTRIBUTION BUSINESS CASH FLOW
Because TGC’s cash flows are only included in our financial results from June 7, 2006 through March 31, 2007, the following analysis compares the historical cash flows for TGC under both its current and prior owners for the quarter ended March 31, 2007 and 2006. We believe that this is the most appropriate approach to explaining the historical cash flow trends of TGC rather than discussing the composition of cash flows that is included in our consolidated cash flows.
|
| Quarter Ended March 31, |
|
|
|
|
| ||||||
|
| 2007 |
| 2006 |
| Change |
| ||||||
| $ |
| $ |
| $ |
| % |
| |||||
($ in thousands) | |||||||||||||
|
|
|
|
|
|
|
|
|
| ||||
Cash provided by operating activities |
|
| 4,456 |
|
| 9,336 |
|
| (4,880 | ) |
| (52.3 | ) |
Cash used in investing activities |
|
| (1,956 | ) |
| (2,102 | ) |
| 146 |
|
| (6.9 | ) |
Cash used in financing activities |
|
| (121 | ) |
| (891 | ) |
| 770 |
|
| (86.4 | ) |
Key factors influencing cash flow from our gas production and distribution business were as follows:
·
the decrease in cash provided by operating activities was the result of normal working capital fluctuations and lower income. Working capital fluctuations were primarily due to $2.0 million higher accounts payable balances in the prior period;
·
cash used in investing activities for both periods was principally for capital additions; and
·
cash used in financing activities for the first quarter of 2007 comprised distributions to us of $1.1 million, offset by $1.0 million of new long-term borrowing that was used to finance the purchase of utility assets. Cash used in financing activities during the first quarter of 2006 was for distributions to the previous owner.
At March 31, 2007, TGC had $17.0 million available to borrow under its $20.0 million revolving credit facility.
Pursuant to our purchase agreement and regulatory requirements related to our purchase, an escrow account of $4.5 million was established on June 7, 2006 to be used to recover utility fuel cost adjustments. Of this amount, $1.7 million was withdrawn as reimbursement for the previously described fuel cost adjustments since the acquisition. The remaining $2.8 million may be released to TGC to reimburse it for future fuel cost adjustments.
For a description of the gas production and distribution business’ debt facilities see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. We
have not had any material changes to our debt facilities since March 1, 2007, our 10-K filing date, except for the additional drawdown of $1.0the revolving credit facility of $2.0 million during the quartersix months ended March 31,June 30, 2007.
|
| Quarter Ended March 31, |
|
|
|
|
| Six Months Ended June 30, | |||||||||||||||||||||
|
| 2007 |
| 2006 |
| Change |
| 2007 | 2006 | Change | |||||||||||||||||||
| $ |
| $ |
| $ |
| % |
| |||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
($ in thousands) | $ | $ | $ | % | |||||||||||||||||||||||||
Cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
| NM |
| 5,998 | 4,474 | 1,524 | 34.1 | ||||||||||||
Cash used in investing activities |
|
| (2,315 | ) |
|
| ) |
|
| ) |
| NM |
| (6,161 | ) | (1,109 | ) | (5,052 | ) | NM | |||||||||
Cash used in financing activities |
|
| (728 | ) |
| (2,839 | ) |
| 2,111 |
|
| (74.4 | ) | ||||||||||||||||
Cash provided by (used in) financing activities | 4,364 | (3,879 | ) | 8,243 | NM |
——————
NM – Not meaningful
Key factors influencing cash flow from our district energy business were as follows:
·
·
electricity charges accrued in 2007;
·
For a description of the district energy business’ debt and credit facilities, see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report of Form 10-K for the fiscal year ended December 31, 2006. We have not had any material changes to our debt and credit facilities since March 1, 2007, our 10-K filing date, except for the additional drawdown of the revolving credit facility of $1.8$7.1 million during the quartersix months ended March 31,June 30, 2007.
46
|
| Quarter Ended March 31, |
|
|
|
|
| ||||||
|
| 2007 |
| 2006 |
| Change |
| ||||||
| $ |
| $ |
| $ |
| % |
| |||||
($ in thousands) | |||||||||||||
|
|
|
|
|
|
|
|
|
| ||||
Cash (used in) provided by operating activities |
|
|
| ) |
|
|
|
|
| ) |
|
| ) |
Cash used in investing activities |
|
| (1,585 | ) |
| (480 | ) |
| (1,105 | ) |
|
|
|
Cash used in financing activities |
|
| (634 | ) |
| (3,606 | ) |
| 2,972 |
|
| (82.4 | ) |
Six Months Ended June 30, | ||||||||||||||||
2007 | 2006 | Change | ||||||||||||||
($ in thousands) | $ | $ | $ | % | ||||||||||||
Cash provided by operating activities | 1,501 | 3,376 | (1,875 | ) | (55.5 | ) | ||||||||||
Cash used in investing activities | (2,838 | ) | (2,168 | ) | (670 | ) | 30.9 | |||||||||
Cash provided by (used in) financing activities | 4,645 | (3,197 | ) | 7,842 | NM |
——————
NM – Not meaningful
Key factors influencing cash flow from our airport parking business were as follows:
·
·
the increase in fluctations;
·
For a description of theour airport parking business’ debt and credit facilities, see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report of Form 10-K for the fiscal year ended December 31, 2006. We have not had any material changes to our debt and credit facilities since March 1, 2007, our 10-K filing date.
We have detailed our capital expenditures on a segment-by-segment basis, which we believe is a more appropriate approach to explaining our capital expenditure requirements on a consolidated basis.
Maintenance Capital Expenditure
We expect to spend approximately $3.8 million, or $200,000 per FBO, per year on maintenance capital expenditure at Atlantic’s existing FBO’s. At our newly acquired Trajen FBO’s we expect to spend approximately $3.3 million or $140,000$170,000 per FBO, per year on maintenance capital expenditure. The amounts will be spent on items such asMaintenance capital expenditures encompass repainting, replacing equipment as necessary and any ongoing environmental or required regulatory expenditure, such as installing safety equipment. This expenditure isThese expenditures are funded from cash flow from operations.
Specific Capital Expenditure
Several specific capitalCapital projects that were started in 2006 areand expected to be completed in 2007. Expenditures related to these specific projects are expected to2007 and 2008 total approximately $12.4 million at Atlantic’s existing FBO’s and $2.7 million at the Trajen FBO’s.$15.1 million. We intend to fund these expenditures from cash on hand.
Maintenance Capital Expenditure
During the threesix months ended March 31,June 30, 2007, IMTT spent $7.0$14.2 million on maintenance capital expenditure, including $5.2$9.5 million principally in relation to the refurbishment of storage tank refurbishmentstanks, piping, and $1.7dock facilities, and $3.6 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
$40.0 million per year. The expected level of future maintenance capital expenditure over the longer term primarily reflects the need for increased environmental expenditure going forward both to remediate existing sites and to upgrade waste water treatment and spill containment infrastructure to comply with environmental regulations.
47
IMTT is currently constructing a bulk liquid chemical storage and handling facility on the Mississippi River at Geismar, LA. To date, IMTT has committed approximately $162.0$164.6 million of 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 $162.0$164.6 million phase of the Geismar project is targeted for the firstsecond 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 negat ivenegative 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 10approximately one million barrels of new storage tanksat its Louisiana facilities for a total cost of $26.9 million and is currently in the process of constructing a further 111.3 million barrels of new storage tanks with a total capacity of approximately 2.0 million barrels at its Louisiana facilities at a total estimated cost of $63.0$41.8 million. It is anticipated that construction at the Louisiana sites will be completed during 2007 and early 2008. Rental contracts with initial terms of at least three years have already been executed in relation to the substantial majority 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 newrecently completed tanks and those under construction will contribute approximately $10.7$11.1 million to IMTT’s terminal gross profit and EBITDA annually.
IMTT has also initiated capital projects to add or convert approximately one million barrels of storage capacity at its Bayonne, NJ site. IMTT anticipates spending $28.7 million on these projects, which will be completed during 2008 and 2009, and which are anticipated to generate approximately $7.1 million in 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 269,000655,000 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$18.3 million. Construction of these tanks is anticipated to be completed during 2007 and 2008 and their operation is anticipated to contribute approximately $1.6$4.5 million to the Quebec terminal’s gross profit and EBITDA annually.
During the threesix months ended March 31,June 30, 2007, IMTT spent $30.7$68.7 million on specific expansion projects including $21.6$43.5 million in relation to the construction of the new bulk liquid chemical storage and handling facility and other tankage at Geismar, LA, and $3.4 million and $1.5$10.9 million at Stits existing Louisiana sites (St. Rose, LAGretna, and Quebec, Canada principallyAvondale), $8.9 million in relation to the construction of new storage tanks.Bayonne, and $4.3 million in Quebec. 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.
Capital Expenditure
During 2007, TGC expects to spend approximately $9.5 million for capitalized maintenance capital expenditure, routine replacements of property, and to support new customer growth in 2007. Approximately $2.0 $1.2 million of the expected total year capital expenditures are for new customer hook-ups. The remaining $7.5 $8.3 million comprises approximately $400,000 $0.4 million for vehicles and $7.1 $7.9 million for other renewals and upgrades. A portion of the utility-related expenditures will be funded from available debt facilities. As of March 31,June 30, 2007, approximately $2.1$4.5 million has been spent for renewals, upgrades and upgrades, as well as new customers.business growth.
Maintenance Capital Expenditure
Our district energy business expects to spend approximately $1.0 million per year on capital expenditures
48
relating to the replacement of parts, system reliability, customer service improvements and minor system modifications of which $281,000$638,000 has been spent in the first quartersix months of 2007. Since 2004, minor system modifications have been made that increased system capacity by approximately 3,000 tons. Maintenance capital expenditures for 2007 will be funded from available debt facilities.
Specific Capital Expenditure
We anticipate spending up to approximately $8.1 million for system expansion in 2007 and 2008. As of March 31,June 30, 2007, $3.1 $6.0 million has been spent or committed. This expansion, in conjunction with operational 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) has been sold or is in the process of being sold to new or existing customers. We anticipate that the expanded capacity sold to new or existing customers will be under contract or subject to letters of intent prior to district energy committing to the capital expenditure.
As of AprilJuly 15, 2007, we have signed contracts with five customers representing approximately 90% of thethis remaining 9,300 tons of additional saleable capacity. One customer began service in late 2006, another began service in May 2007 and the other fourthree 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. Management is currently assessing
In addition to this previously identified capacity, management has assessed additional operational strategies and methods to expand the system to accommodate increased demand for district cooling in Chicago.
approximately 2,000 tons of additional capacity.
We estimate that we will incur additional capital expenditure of $5.5$6.4 million connecting new customers to the system betweenfrom 2007 and 2008.thru 2009. As of June 30, 2007, $1.7 million has been spent or committed. Typically, new customers will reimburse our district energy business for some, if not all, of these connection expenditures effectively reducing the impact of this capital expenditure. We anticipate that the expanded capacity sold to new or existing customers will be under contract or subject to letters of intent prior to Thermal committing to the capital expenditure. Approval from the City of 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 and current year electricity costs, each new ton of capacity sold will add approximately $425$450 to annual revenue in the first year of service.
We expect to fund the capital expenditure for system expansion and interconnection by drawing on available debt facilities.
Management continues to explore additional expansion opportunities to accommodate the increased demand for district cooling in Chicago.
Maintenance Capital Expenditure
Maintenance capital projects include regular replacement of shuttle buses and IT equipment some of which are capital expenditures paid in cash and some of which are financed, including with capital leases.
DuringIn 2007, our airport parking business expects to commit $2.9 million to new maintenance related capital projects totaling $2.9 million of which $1.8 million will be funded through debt and other financing activities. The balance of $1.1 million will be paid in cash.
Debt will also be used to fund an additional $1.3 million of projects committed to in 2006 but payable in 2007.
In 2007, our airport parking business expects to commit to $77,000 of specific capital projects which will be paid in cash.
For a discussion of the future obligations of MIC Inc., the U.S. holding company for our consolidated businesses, due by period, under their various contractual obligations, off-balance sheet arrangements and
49
commitments, please see “Liquidity and Capital Resources — Commitments and Contingencies” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed with the SEC on March 1, 2007. We have not had any material changes to those commitments since March 1, 2007, except as discussed in Note 8, Long-Term Debt and in Note 17, Subsequent Events, to our consolidated condensed financial statements in Part I, Item I of this Form 10-Q.10-Q, which are incorporated herein by reference.
For critical accounting policies, see “Critical Accounting Policies” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Our critical accounting policies have not changed materially from the description contained in that Annual Report.
See Note 3, Adoption of New Accounting Pronouncement, to our consolidated condensed financial statements in Part I, Item I of this Form 10-Q for details on new accounting pronouncements which is incorporated herein by reference.
The discussion of the financial condition and results of operations of the company should be read in conjunction with the consolidated condensed 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 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Unless required by law, we can 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.
Except as otherwise specified, “Macquarie Infrastructure Company,” “we,” “us,” and “our” refer to both the former Trust and the Company and its subsidiaries together. Macquarie Infrastructure Management (USA) Inc., which we refer to as our Manager or MIMUSA, is part of the Macquarie group of companies, which we refer to as the Macquarie Group, which comprises Macquarie Bank Limited and its subsidiaries and affiliates worldwide. Macquarie Bank Limited is headquartered in Australia and is listed on the Australian Stock Exchange.
For quantitative and qualitative disclosures about market risk, see Item 7A “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Our exposure to market risk has not changed materially since March 1, 2007, our 10-K filing date.date, except as discussed below.
The senior debt for our airport services business comprises a non-amortizing $512.5 million floating rate facility maturing in 2010. A 1% increase in the interest rate on the $512.5 million airport services business debt would result in a $5.1 million increase in the interest cost per year. A corresponding 1% decrease would result in a $5.1 million decrease in interest cost per year.
Our airport services business’ exposure to interest rate changes through the senior debt has been hedged through the use of interest rate swaps. The $512.5 million facility is fully hedged until maturity. These hedging arrangements will offset any additional interest rate expense incurred as a result of increases in interest rates. 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 $9.9 million. A corresponding 10% relative increase would result in a $9.7 million increase in the fair market value.
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IMTT, at June 30, 2007, 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 this 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. 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 $69,000 and a corresponding 10% relative increase would result in a $69,000 increase in the fair market value. IMTT’s exposure to interest rate changes through this 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 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 $573,000 and a corresponding 10% relative increase would result in a $557,000 increase in the fair market value.
IMTT, at June 30, 2007, had a $104.0 million floating rate term loan outstanding. A 1% increase in interest rates on the term loan would result in a $1.0 million increase in interest cost per year. A corresponding 1% decrease would result in a $1.0 million 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 $1.9 million. A corresponding 10% relative increase in interest rates would result in a $1.8 million increase in the fair market value of the interest rate swap.
During July 2007, IMTT issued Gulf Opportunity Zone Bonds (GO Zone Bonds) to fund qualified project costs at its St. Rose and Geismar storage facilities. Under this program, IMTT received $112.9 million in July 2007 and used the proceeds to repay part of the outstanding balance under its revolving credit facility. 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 $1.1 million increase in interest cost per year and a corresponding 1% decrease would result in a $1.1 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 that increases to $215.0 million through December 31, 2008. 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 $958,000 and a corresponding 10% relative increase would result in a $936,000 increase in the fair market value.
Subsequent to the issuance of GO Zone bonds in July 2007, IMTT had a total outstanding balance of $25.5 million under its U.S. revolving credit facility. A 1% increase in interest rates on this debt would result in a $255,000 increase in interest cost per year and a corresponding 1% decrease would result in a $255,000 decrease in interest cost per year. IMTT’s exposure to interest rate changes on its U.S. revolving credit facility has been largely hedged against 90-day LIBOR from October 2007 through March 2017 through the use of an interest rate swap which has a notional value that increases to $200.0 million through December 31, 2012. If interest rates decrease, the fair market value of the interest rate swap will also decrease. A 10% relative
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decrease in interest rates would result in a decrease in the fair market value of the interest rate swap of $5.6 million and a corresponding 10% relative increase would result in a $5.2 million increase in the fair market value.
As of July 2007, IMTT had a total outstanding balance of $12.2 million under its Canadian revolving credit facility. A 1% increase in interest rates on this debt would result in a $122,000 increase in interest cost per year and a corresponding 1% decrease would result in a $122,000 decrease in interest cost per year.
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) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31,June 30, 2007.
In January 2007, we began applying hedge accounting for derivative instruments. This resulted in the installation and testing 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.
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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.
Except as described above, there There has been no change in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended March 31,June 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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There are no material legal proceedings other than as disclosed in Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed with the SEC on March 1, 2007.
Please see Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed with the SEC on March 1, 2007.
None.
None.
The annual meeting of stockholders of the trust was held on May 24, 2007.
None.The stockholders voted on proposals to elect three directors to the board of directors of the company and to ratify the appointment of KPMG LLP as independent auditors. The stockholders’ vote ratified the appointment of the independent auditors. All nominees for election to the board of directors were elected to the terms of office set forth in the Proxy Statement dated April 20, 2007. In addition, John Roberts continues to serve as chairman of the board of directors and Shemara Wikramanayake continues to serve as alternate chairman, both having been appointed by MIMUSA under the terms of the management services agreement between the company and the company’s direct subsidiaries. The number of votes cast for, against or withheld, and the number of abstentions with respect to each proposal, is set forth below. The company’s independent inspectors of election reported the vote of the stockholders as follows:
For | Against/ Withheld | Abstain | Broker Non-vote* | |||||||||||||
Election of Directors: | ||||||||||||||||
Nominee: | ||||||||||||||||
Norman H. Brown, Jr. | 31,536,513 | 561,539 | * | * | ||||||||||||
George W. Carmany, III | 31,958,342 | 139,710 | * | * | ||||||||||||
William H. Webb | 31,957,895 | 140,157 | * | * | ||||||||||||
Ratification of Independent Auditors: | 31,974,207 | 77,587 | 46,258 | * |
* | Not applicable. |
None.
An exhibit index has been filed as part of this Report on page E-l.E-1.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MACQUARIE INFRASTRUCTURE COMPANY | ||
Dated: August 9, 2007 | ||
| By: | /s/ Peter Stokes |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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|
Name: Peter Stokes |
MACQUARIE INFRASTRUCTURE COMPANY LLC | ||
Dated: August 9, 2007 | ||
| By: | /s/ Francis T. Joyce |
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Number | Description | |
2.1 | Amendment to Stock Purchase Agreement, dated June 12, 2007, between Macquarie FBO Holdings LLC, Mercury Air Centers, Inc. and Allied Capital Corporation as the Seller Representative (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on June 18, 2007 (the “June 18, 2007 8-K”)) | |
2.2 | Purchase Agreement, dated as of June 12, 2007, among MAC Acquisitions LLC, San Jose Jet Center, Inc., ACM Aviation Inc., certain beneficial owners of Jet Center Inc. and ACM Inc. named therein, SJJC Aviation Services, LLC, SJJC FBO Services, LLC, SJJC Airline Services, LLC, Jet Center Property Services, LLC, ACM Property Services, LLC and ACM Aviation, LLC (incorporated by reference to Exhibit 2.2 of the June 18, 2007 8-K) | |
2.3 | Assignment and Assumption of San Jose Purchase Agreement, dated as of June 12, 2007, between MAC Acquisitions LLC and Macquarie FBO Holdings LLC (incorporated by reference to Exhibit 2.3 of the June 18, 2007 8-K) | |
2.4* | Second Amendment to Stock Purchase Agreement, dated as of | |
| Third Amended and Restated Operating Agreement of Macquarie Infrastructure Company LLC (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on June 22, 2007 (the “June 22, 2007 8-K”)) | |
4.1 | Specimen certificate evidencing LLC interests of | |
10.1 | Amended and Restated Management Services Agreement, | |
| Amended Commitment Letter | |
10.3 | Commitment Letter [San Jose], dated June 12, 2007, between Macquarie Infrastructure Company Inc. and The Governor and Company of the Bank of Ireland | |
10.4* | Amendment No. 1, dated as of June 25, 2007, among Macquarie Infrastructure Company Inc. | |
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10.6* | Letter Agreement dated as of | |
| Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer | |
| Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer | |
| Rule 13a-14(a)/15d-14(a) Certification of Principal Accounting Officer | |
| Section 1350 Certification of the Chief Executive Officer | |
| Section 1350 Certification of the Chief Financial Officer |
* | Filed herewith. |
E-1