UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

FORM 10-Q



 

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

For the Quarterly Period Ended SeptemberJune 30, 20092010

OR

 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from  to .

Commission File Number: 001-32384



 

MACQUARIE INFRASTRUCTURE COMPANY LLC

(Exact Name of Registrant as Specified in Its Charter)

 
Delaware 43-2052503
(State or Other Jurisdiction of
Incorporation or Organization)		 (IRS Employer
Identification No.)

125 West 55th Street
New York, New York 10019

(Address of Principal Executive Offices) (Zip Code)

(212) 231-1000

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report):N/A



 

Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesdays.Yesx Noo

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

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

   
Large Accelerated Filero Accelerated Filerx Non-accelerated Filero Smaller Reporting Companyo

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

There were 45,112,60445,715,448 limited liability company interests without par value outstanding at November 4, 2009.August 3, 2010.

 

 

 
 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC



TABLE OF CONTENTS

 
 Page
PART I. FINANCIAL INFORMATION
 

Item 1.

Financial Statements

  1 
Consolidated Condensed Balance Sheets as of SeptemberJune 30, 20092010 (Unaudited) and
December 31, 20082009		  1 
Consolidated Condensed Statements of Operations for the Quarters and NineSix Months Ended SeptemberJune 30, 20092010 and 20082009 (Unaudited)  32 
Consolidated Condensed Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20092010 and 20082009 (Unaudited)  43 
Notes to Consolidated Condensed Financial Statements (Unaudited)  65 

Item 2.

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

  2824 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

  5754 

Item 4.

Controls and Procedures

  5755 
PART II. OTHER INFORMATION
 

Item 1.

Legal Proceedings

  5856 

Item 1A.

Risk Factors

  5856 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

  5856 

Item 3.

Defaults Upon Senior Securities

  5856 

Item 4.

Submission of Matters to a Vote of Security Holders [Reserved]

  5856 

Item 5.

Other Information

  5856 

Item 6.

Exhibits

  5856 


Macquarie Infrastructure Company LLC is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia) and its obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of Macquarie Infrastructure Company LLC.

i

 
 

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

MACQUARIE INFRASTRUCTURE COMPANY LLC
  
CONSOLIDATED CONDENSED BALANCE SHEETS
($ In Thousands, Except Share Data)

    
 September 30,
2009		 December 31,
2008		 June 30,
2010		 December 31,
2009
 (Unaudited)    (Unaudited)   
ASSETS
                    
Current assets:
                    
Cash and cash equivalents $56,217  $68,231  $29,274  $27,455 
Restricted cash  2,452   1,063 
Accounts receivable, less allowance for doubtful accounts of $2,167 and $2,230, respectively  54,495   62,240 
Dividends receivable  —   7,000 
Other receivables  20   132 
Accounts receivable, less allowance for doubtful accounts of $1,481 and $1,629,
respectively		  50,508   47,256 
Inventories  14,762   15,968   16,606   14,305 
Prepaid expenses  9,096   9,156   6,218   6,688 
Deferred income taxes  3,774   3,774   21,908   23,323 
Land – available for sale  —   11,931 
Income tax receivable  —   489 
Other  11,203   13,440   9,559   10,839 
Assets of discontinued operations held for sale  —   86,695 
Total current assets  152,019   193,424   134,073   216,561 
Property, equipment, land and leasehold improvements, net  663,555   673,981   569,193   580,087 
Restricted cash  16,016   19,939   13,780   16,016 
Equipment lease receivables  34,031   36,127   34,574   33,266 
Investment in unconsolidated business  201,585   184,930   213,858   207,491 
Goodwill  516,182   586,249   516,182   516,182 
Intangible assets, net  760,050   812,184   733,670   751,081 
Deferred financing costs, net of accumulated amortization  18,385   23,383   14,931   17,088 
Other  3,052   4,033   1,915   1,449 
Total assets $2,364,875  $2,534,250  $2,232,176  $2,339,221 
LIABILITIES AND MEMBERS' EQUITY
          
Current liabilities:
          
Due to manager – related party $2,346  $1,977 
Accounts payable  41,294   44,575 
Accrued expenses  18,920   17,432 
Current portion of notes payable and capital leases  233   235 
Current portion of long-term debt  53,153   45,900 
Fair value of derivative instruments  45,792   49,573 
Customer deposits  4,449   5,617 
Other  8,375   9,338 
Liabilities of discontinued operations held for sale  —   220,549 
Total current liabilities  174,562   395,196 
Notes payable and capital leases, net of current portion  1,267   1,498 
Long-term debt, net of current portion  1,127,391   1,166,379 
Deferred income taxes  149,078   107,840 
Fair value of derivative instruments  72,268   54,794 
Other  40,622   38,746 
Total liabilities  1,565,188   1,764,453 
Commitments and contingencies  —   — 
Members’ equity:
          
LLC interests, no par value; 500,000,000 authorized; 45,714,368 LLC interests issued and outstanding at June 30, 2010 and 45,292,913 LLC interests issued and outstanding at December 31, 2009  964,426   959,897 
Additional paid in capital  21,167   21,956 
Accumulated other comprehensive loss  (33,494)   (43,232) 
Accumulated deficit  (282,610)   (360,095) 
Total members’ equity  669,489   578,526 
Noncontrolling interests  (2,501)   (3,758) 
Total equity  666,988   574,768 
Total liabilities and equity $2,232,176  $2,339,221 

 
 
See accompanying notes to the consolidated condensed financial statements.


 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC
  
CONSOLIDATED CONDENSED BALANCE SHEETS — (continued)STATEMENTS OF OPERATIONS
(Unaudited)
($ In Thousands, Except Share and per Share Data)

  
 September 30,
2009		 December 31,
2008
   (Unaudited)
LIABILITIES AND MEMBERS’/STOCKHOLDERS’ EQUITY
          
Current liabilities:
          
Due to manager – related party $1,696  $3,521 
Accounts payable  49,173   47,886 
Accrued expenses  27,750   29,448 
Current portion of notes payable and capital leases  9,585   2,724 
Current portion of long-term debt  315,549   201,344 
Fair value of derivative instruments  50,228   51,441 
Customer deposits  5,673   5,457 
Other  9,382   10,785 
Total current liabilities  469,036   352,606 
Notes payable and capital leases, net of current portion  1,990   2,274 
Long-term debt, net of current portion  1,152,985   1,327,800 
Deferred income taxes  51,998   65,042 
Fair value of derivative instruments  64,507   105,970 
Other  46,869   46,297 
Total liabilities  1,787,385   1,899,989 
Commitments and contingencies  —   — 
Members’/stockholders’ equity:
          
LLC interests, no par value; 500,000,000 authorized; 45,112,604 LLC interests issued and outstanding at September 30, 2009 and 44,948,694 LLC interests issued and outstanding at December 31, 2008  958,258   956,956 
Accumulated other comprehensive loss  (53,630)   (97,190) 
Accumulated deficit  (331,260)   (230,928) 
Total members’/stockholders’ equity  573,368   628,838 
Noncontrolling interests  4,122   5,423 
Total equity  577,490   634,261 
Total liabilities and equity $2,364,875  $2,534,250 
    
 Quarter Ended Six Months Ended
   June 30, 2010 June 30, 2009(1) June 30, 2010 June 30, 2009(1)
Revenue
                    
Revenue from product sales $125,177  $89,430  $245,195  $178,622 
Revenue from product sales –  utility  28,450   21,414   55,285   41,581 
Service revenue  49,794   51,359   103,000   108,304 
Financing and equipment lease income  1,271   1,205   2,516   2,397 
Total revenue  204,692   163,408   405,996   330,904 
Costs and expenses
                    
Cost of product sales  79,887   50,645   156,941   100,411 
Cost of product sales – utility  23,151   16,549   44,464   31,936 
Cost of services  13,318   11,069   24,463   22,140 
Selling, general and administrative  49,522   48,725   100,256   104,868 
Fees to manager – related party  2,268   851   4,457   1,313 
Goodwill impairment  —   53,200   —   71,200 
Depreciation  7,202   9,270   14,924   22,420 
Amortization of intangibles  8,740   12,532   17,411   42,797 
Total operating expenses  184,088   202,841   362,916   397,085 
Operating income (loss)  20,604   (39,433)   43,080   (66,181) 
Other income (expense)
                    
Interest income  4   34   20   101 
Interest expense(2)  (38,974)   (2,103)   (73,661)   (35,669) 
Equity in earnings and amortization charges of investee  5,774   10,028   11,367   15,477 
Loss on derivative instruments  —   —   —   (25,238) 
Other (expense) income, net  (496)   (186)   (448)   850 
Net loss from continuing operations before income taxes  (13,088)   (31,660)   (19,642)   (110,660) 
Benefit for income taxes  13,488   4,822   14,577   37,387 
Net income (loss) from continuing operations $400  $(26,838)  $(5,065)  $(73,273) 
Net income (loss) from discontinued operations, net of taxes  85,212   (3,159)   81,199   (9,583) 
Net income (loss) $85,612  $(29,997)  $76,134  $(82,856) 
Less: net loss attributable to noncontrolling interests  (238)   (1,039)   (1,351)   (872) 
Net income (loss) attributable to MIC LLC $85,850  $(28,958)  $77,485  $(81,984) 
Basic income (loss) per share from continuing operations attributable to MIC LLC interest holders $0.02  $(0.60)  $(0.08)  $(1.64) 
Basic income (loss) per share from discontinued operations attributable to MIC LLC interest holders  1.87   (0.04)   1.79   (0.18) 
Basic income (loss) per share attributable to MIC LLC interest holders $1.89  $(0.64)  $1.71  $(1.82) 
Weighted average number of shares outstanding: basic  45,467,413   44,951,176   45,381,413   44,949,942 
Diluted income (loss) per share from continuing operations attributable to MIC LLC interest holders $0.02  $(0.60)  $(0.08)  $(1.64) 
Diluted income (loss) per share from discontinued operations attributable to MIC LLC interest holders  1.86   (0.04)   1.78   (0.18) 
Diluted income (loss) per share attributable to MIC LLC interest holders $1.88  $(0.64)  $1.70  $(1.82) 
Weighted average number of shares outstanding: diluted  45,604,064   44,951,176   45,513,864   44,949,942 

(1)Reclassified to conform to current period presentation.
(2)Interest expense includes non-cash losses on derivative instruments of $20.5 million and $31.7 million for the quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, interest expense includes non-cash gains on derivative instruments of $20.1 million and $13.1 million, respectively.

 
 
See accompanying notes to the consolidated condensed financial statements.


 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC
  
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
($ In Thousands, Except Share and per Share Data)

    
 Quarter Ended Nine Months Ended
   September 30,
2009		 September 30,
2008		 September 30,
2009		 September 30,
2008
Revenue
                    
Revenue from product sales $103,017  $152,060  $281,639  $478,219 
Revenue from product sales – utility  26,056   36,060   67,637   97,317 
Service revenue  72,264   87,714   214,614   263,171 
Financing and equipment lease income  1,190   1,164   3,587   3,537 
Total revenue  202,527   276,998   567,477   842,244 
Costs and expenses
                    
Cost of product sales  61,349   109,801   160,624   337,819 
Cost of product sales – utility  19,406   31,161   50,016   82,175 
Cost of services  26,562   33,070   82,701   98,615 
Selling, general and administrative  54,782   57,426   167,468   182,928 
Fees to manager – related party  1,639   2,737   2,952   11,872 
Goodwill impairment  —   —   71,200   — 
Depreciation  7,177   7,101   29,597   20,139 
Amortization of intangibles  9,126   10,563   51,923   32,206 
Total operating expenses  180,041   251,859   616,481   765,754 
Operating income (loss)
  22,486   25,139   (49,004)   76,490 
Other income (expense)
                    
Interest income  8   268   116   1,038 
Interest expense  (24,639)   (26,114)   (81,861)   (77,616) 
Equity in earnings and amortization charges of investees  1,178   4,051   16,655   10,603 
Loss on derivative instruments  (17,371)   (765)   (29,872)   (1,651) 
Other income, net  269   6   1,693   661 
Net (loss) income before income taxes and noncontrolling interests  (18,069)   2,585   (142,273)   9,525 
(Provision) benefit for income taxes  (327)   (2,254)   41,021   (3,254) 
Net (loss) income before noncontrolling interests  (18,396)   331   (101,252)   6,271 
Net loss attributable to noncontrolling interests  (48)   (167)   (920)   (575) 
Net (loss) income
 $(18,348)  $498  $(100,332)  $6,846 
Basic (loss) earnings per share: $(0.41)  $0.01  $(2.23)  $0.15 
Weighted average number of shares outstanding: basic  45,006,771   44,948,694   44,969,093   44,942,859 
Diluted (loss) earnings per share: $(0.41)  $0.01  $(2.23)  $0.15 
Weighted average number of shares outstanding: diluted  45,006,771   44,962,809   44,969,093   44,955,236 
Cash distributions declared per share $—  $0.645  $—  $1.925 



See accompanying notes to the consolidated condensed financial statements.


TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
($ In Thousands)

    
 Nine Months Ended Six Months Ended
 September 30,
2009		 September 30,
2008		 June 30, 2010 June 30, 2009(1)
Operating activities
                    
Net (loss) income before noncontrolling interests $(101,252)  $6,271 
Adjustments to reconcile net (loss) income before noncontrolling interests to net cash provided by operating activities:
          
Net income (loss) before noncontrolling interests $76,134  $(82,856) 
Adjustments to reconcile net income (loss) to net cash provided by operating activities from continuing operations:
          
Net (income) loss from discontinued operations before noncontrolling interests  (81,199)   9,583 
Non-cash goodwill impairment  71,200   —   —   71,200 
Depreciation and amortization of property and equipment  43,227   28,359   18,195   25,385 
Amortization of intangible assets  51,923   32,206   17,411   42,797 
Equity in earnings and amortization charges of investees  (16,655)   (10,603)   (11,367)   (15,477) 
Equity distributions from investees  7,000   10,603   5,000   7,000 
Amortization of debt financing costs  4,998   4,941   2,256   2,514 
Non-cash derivative loss, net of non-cash interest expense  29,872   1,897 
Base management fee to be settled in LLC interests  1,639   — 
Non-cash derivative loss  31,674   12,173 
Base management fees settled in LLC interests  2,189   851 
Equipment lease receivable, net  2,009   1,621   1,451   1,407 
Deferred rent  1,265   1,535   145   87 
Deferred taxes  (41,892)   1,904   (16,046)   (38,131) 
Other non-cash expenses, net  167   658 
Other non-cash expenses (income), net  2,112   (350) 
Changes in other assets and liabilities, net of acquisitions:
                    
Restricted cash  (756)   24   50   — 
Accounts receivable  7,188   (3,436)   (4,718)   6,881 
Inventories  776   (2,027)   (2,376)   1,598 
Prepaid expenses and other current assets  2,830   4,944   1,299   5,394 
Due to manager – related party  (2,613)   (2,958)   2,263   (3,493) 
Accounts payable and accrued expenses  1,655   (110)   (1,281)   (5,213) 
Income taxes payable  (537)   (1,530)   (406)   40 
Other, net  (2,635)   828   (1,140)   (1,628) 
Net cash provided by operating activities  59,409   75,127 
Net cash provided by operating activities from continuing operations  41,646   39,762 
Investing activities
                    
Acquisitions of businesses and investments, net of cash acquired  —   (53,338) 
Proceeds from sale of investment, net of cash divested  —   1,861 
Purchases of property and equipment  (19,981)   (52,587)   (7,315)   (11,864) 
Return of investment in unconsolidated business  —   10,397 
Investment in capital leased assets  (2,400)   — 
Other  115   223   658   92 
Net cash used in investing activities  (19,866)   (93,444) 
Net cash used in investing activities from continuing operations  (9,057)   (11,772) 

 
 
See accompanying notes to the consolidated condensed financial statements.


 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC
  
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS —– (continued)
(Unaudited)
($ In Thousands)

    
 Nine Months Ended Six Months Ended
 September 30,
2009		 September 30,
2008		 June 30, 2010 June 30, 2009
Financing activities
                    
Proceeds from long-term debt  10,000   5,000 
Proceeds from line of credit facilities  9,250   87,800 
Offering and equity raise costs paid  —   (65) 
Distributions paid to holders of LLC interests  —   (86,520) 
Net proceeds on line of credit facilities $—  $3,600 
Contributions received from noncontrolling interests  300   — 
Distributions paid to noncontrolling interests  (381)   (363)   (1,261)   (314) 
Payment of long-term debt  (72,859)   (120)   (31,736)   (60,620) 
Debt financing costs paid  —   (1,874) 
Change in restricted cash  3,292   (501)   2,236   (33) 
Payment of notes and capital lease obligations  (859)   (1,629)   (164)   (94) 
Net cash used in financing activities from continuing operations  (30,625)   (57,461) 
Net change in cash and cash equivalents from continuing operations  1,964   (29,471) 
Cash flows provided by (used in) discontinued operations:
          
Net cash used in operating activities  (12,703)   (2,909) 
Net cash provided by (used in) in investing activities  134,356   (312) 
Net cash (used in) provided by financing activities  (51,557)   1,728   (124,183)   2,513 
Cash used in discontinued operations(2)  (2,530)   (708) 
Change in cash of discontinued operations held for sale(2)  2,385   (945) 
Net change in cash and cash equivalents  (12,014)   (16,589)   1,819   (31,124) 
Cash and cash equivalents, beginning of period  68,231   57,473   27,455   66,054 
Cash and cash equivalents, end of period $56,217  $40,884 
Supplemental disclosures of cash flow information:
          
Cash and cash equivalents, end of period – continuing operations $29,274  $34,930 
Supplemental disclosures of cash flow information for continuing operations:
          
Non-cash investing and financing activities:
                    
Accrued purchases of property and equipment $209  $1,226  $1,092  $1,238 
Acquisition of equipment through capital leases $129  $490 
Issuance of LLC interests to manager for payment of base management fee $851  $— 
Issuance of LLC interests to manager for base management fees $4,083  $851 
Issuance of LLC interests to independent directors $450  $450  $446  $450 
Taxes paid $1,167  $3,044  $1,508  $508 
Interest paid $72,265  $73,148  $40,015  $46,946 

(1)Reclassified to conform to current period presentation.
(2)Cash of discontinued operations held for sale is reported in assets of discontinued operations held for sale in the accompanying consolidated condensed balance sheets. The cash used in discontinued operations is different than the change in cash of discontinued operations held for sale due to intercompany transactions that are eliminated in consolidation.

 
 
See accompanying notes to the consolidated condensed financial statements.


 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Description of Business

Macquarie Infrastructure Company LLC, a Delaware limited liability company, was formed on April 13, 2004. Macquarie Infrastructure Company LLC, both on an individual entity basis and together with its consolidated subsidiaries, is referred to in these financial statements as the Company.“Company” or “MIC”. The Company owns, operates and invests in a diversified group of infrastructure businesses in the United States. Macquarie Infrastructure Management (USA) Inc. is the Company’s manager and is referred to in these financial statements as the Manager. The Manager is a wholly-owned subsidiary ofwithin the Macquarie Group of companies, which is comprised of Macquarie Group Limited and its subsidiaries and affiliates worldwide. Macquarie Group Limited is headquartered in Australia and is listed on the Australian Stock Exchange.

Macquarie Infrastructure Company Trust, or the Trust, a Delaware statutory trust, was also formed on April 13, 2004. Prior to December 21, 2004 and the completion of the initial public offering, the Trust was a wholly-owned subsidiary of the Manager. On June 25, 2007, all of the outstanding shares of trust stock issued by the Trust were exchanged for an equal number of limited liability company, or LLC, interests in the Company, and the Trust was dissolved. Prior to this exchange of trust stock for LLC interests and the dissolution of the Trust, all interests in the Company were held by the Trust. The Company continues to beis an operating entity with a Board of Directors and other corporate governance responsibilities generally consistent with thatthose of a Delaware corporation.

The Company owns its businesses through its wholly-owned subsidiary, Macquarie Infrastructure Company Inc., or MIC Inc. The Company’s businesses operate predominantly in the United States and compriseconsist of the following:

The Energy-Related Businesses:

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

The Aviation-Related Businesses:

(i)an airport services business — operates a network of fixed base operations, or FBOs,

Atlantic Aviation — an airport services business providing products and services, including fuel and aircraft hangaring/parking, to owners and operators of private jets at 68 airports and one heliport in the U.S., which provide products and services like fuel and aircraft parking for owners and operators of private jets; and

(ii)an airport parking business — provides off-airport parking services in the U.S., with 31 facilities in 20 major airport markets.

During the year ended December 31, 2008, the Company completed the following acquisitions:U.S.

On March 4, 2008, the Company completed the acquisition of 100% of the equity in entities that own and operate three FBOs in Farmington and Albuquerque, New Mexico and Sun Valley, Idaho, collectively referred to as “SevenBar.”
On July 31, 2008, the Company completed the acquisition of the Newark SkyPark airport parking facility, an off-airport parking facility at Newark Liberty International Airport in New Jersey.

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MACQUARIE INFRASTRUCTURE COMPANY LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

2. Basis of Presentation

The unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the 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 condensed financial statements in conformity with GAAP requires estimates and assumptions. Management evaluates these estimates and judgmentsassumptions 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 ninesix months ended SeptemberJune 30, 20092010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.2010.


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2. Basis of Presentation  – (continued)

The consolidated balance sheet at December 31, 20082009 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. Certain reclassifications were made to the financial statements for the prior period to conform to current period presentation.

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, 20082009 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 27, 2009.25, 2010.

3. New Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Codification (ASC)ASC 825-10-65Financial Instruments (formerly FSP SFAS No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”)., which is effective for interim reporting periods ending after June 15, 2009. This guidance requires disclosures about the fair value of financial instruments for interim reporting periods in addition to the current requirement to make disclosure in annual financial statements. This guidance also requires disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments and description of changes in the methodmethods and significant assumptions. The Company adopted this guidance during the second quarter of 2009. Since this guidance requires only additional disclosures, the adoption did not have a material impact on the Company’s financial results of operations and financial condition.

The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and variable rate senior debt, are carried at cost, which approximates their fair value because of either the short-term maturity, or variable or competitive interest rates assigned to these financial instruments.

In February 2008, the FASB issued ASC 820Fair Value Measurements and Disclosures(formerly FSP SFAS No. 157-1, “Application of SFAS No. 157 to SFAS No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under SFAS No. 13”, and FSP SFAS No. 157-2, “Effective Date of FASB Statement No. 157”) affecting the implementation of SFAS No. 157. This guidance excludes ASC 840-10Leases(formerly SFAS No. 13, “Accounting for Leases”), and other accounting pronouncements that address fair value measurements under SFAS No. 13 from the scope of SFAS No. 157. However, the scope of this exception does apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value in accordance with ASC 805-10Business Combinations(formerly SFAS No. 141(R), “Business Combinations”) regardless of whether those assets and liabilities are related to leases. This guidance delayed the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008. On January 1, 2009, the Company adopted SFAS No. 157 for all nonfinancial assets and liabilities. Major categories of nonfinancial assets and liabilities to which this accounting standard applies include, but are not limited to, the Company’s property, equipment, land and leasehold improvements, intangible assets and goodwill. See Note 7, “Nonfinancial Assets Measured at Fair Value”, for further discussion.


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3. New Accounting Pronouncements  – (continued)

In March 2008, the FASB issued ASC 815-10Derivatives and Hedging(formerly SFAS No. 161, “Disclosure about Derivative Instruments and Hedging Activities — an amendment of SFAS No. 133”), which requires companies with derivative instruments to disclose information about how and why a company uses derivative instruments; how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. The required disclosures include the fair value of derivative instruments and their gains or losses in tabular format, information about credit-risk-related contingent features in derivative agreements, counterparty credit risk, and the company’s strategies and objectives for using derivative instruments. This guidance is effective for periods beginning after November 15, 2008. The Company adopted this guidance on January 1, 2009. Since this guidance requires only additional disclosures concerning derivatives and hedging activities, the adoption did not have a material impact on the Company’s financial results of operations and financial condition. See Note 9, “Derivative Instruments”, for further discussion.

In December 2007, the FASB revised ASC 805-10Business Combinations (formerly SFAS No. 141(R)). The revised standard includes various changes to the business combination rules. Some of the changes include immediate expensing of acquisition-related costs rather than capitalization, and 100% of the fair value of assets and liabilities acquired being recorded, even if less than 100% of a controlled business is acquired. This guidance is effective for business combinations consummated in periods beginning on or after December 15, 2008. For any business combinations completed after January 1, 2009, the Company expects the revised standard to have the following material impacts on its financial statements compared with previously applicable business combination rules: (1) increased selling, general and administrative costs due to immediate expensing of acquisition costs, resulting in lower net income; (2) lower cash provided by operating activities and lower cash used in investing activities in the statements of cash flows due to the immediate expensing of acquisition costs, which under previous rules were included as cash out flows in investing activities as part of the purchase price of the business; and (3) 100% of fair values recorded for assets and liabilities including noncontrolling interests of a controlled business on the balance sheet resulting in larger assets, liability and equity balances compared with previous business combination rules.

On January 1, 2009, the Company adopted this guidance. Although the Company did not complete any new business combinations during the first nine months of 2009, the Company used the guidance from this pronouncement to perform goodwill impairment analysis. See Note 7, “Nonfinancial Assets Measured at Fair Value”, for further discussion.

4. Income (Loss) Earnings Per Share

Following is a reconciliation of the basic and diluted number of shares used in computing income (loss) earnings per share:

        
 Quarter Ended September 30, Nine Months Ended September 30, Quarter Ended June 30, Six Months Ended June 30,
 2009 2008 2009 2008 2010 2009 2010 2009
Weighted average number of shares outstanding: basic  45,006,771   44,948,694   44,969,093   44,942,859   45,467,413   44,951,176   45,381,413   44,949,942 
Dilutive effect of restricted stock unit grants  —   14,115   —   12,377   136,651   —   132,451   — 
Weighted average number of shares outstanding: diluted  45,006,771   44,962,809   44,969,093   44,955,236   45,604,064   44,951,176   45,513,864   44,949,942 

The effect of potentially dilutive shares for the quarter and ninesix months ended SeptemberJune 30, 20082010 is calculated by assuming that 14,115the 31,989 restricted stock unit grants provided to the independent directors on May 27, 2008 had been fully converted to shares on that date. These stock unit grants, along withJune 3, 2010 and the 128,205 restricted stock unit grants provided to the independent directors on June 4, 2009 had been fully converted to shares on those dates. However, the restricted stock unit grants were anti-dilutive for the quarter and ninesix months ended SeptemberJune 30, 2009, due to the Company’s net loss for those periods.


 

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

5. Discontinued Operations

On June 2, 2010, the Company concluded the sale in bankruptcy of an airport parking business (“Parking Company of America Airports” or “PCAA”) resulting in a pre-tax gain of $130.3 million, of which $76.5 million related to the forgiveness of debt, and the elimination of $201.0 million of current debt from liabilities from the Company’s consolidated condensed balance sheet. As a part of the bankruptcy sale process, substantially all of the cash proceeds were used to pay the creditors of this business and were not paid to the Company. The Company received $602,000 from the PCAA bankruptcy estate for expenses paid on behalf of PCAA during its operations.

As a result of the approval of the sale of PCAA's assets in bankruptcy and the expected dissolution of PCAA during 2010, the Company has reduced its valuation allowance on the realization of a portion of the deferred tax assets attributable to its basis in PCAA and its consolidated federal net operating losses. The change in the valuation allowance recorded in discontinued operations was $10.0 million.

The results of operations from this business, for all periods presented, and the gain from the bankruptcy sale are separately reported as a discontinued operations in the Company’s consolidated condensed financial statements. This business is no longer a reportable segment. The assets and liabilities of the business being sold are included in assets of discontinued operations held for sale and liabilities of discontinued operations held for sale on the Company’s consolidated condensed balance sheet at December 31, 2009.

The following is a summary of the assets and liabilities of discontinued operations held for sale related to PCAA at December 31, 2009:

 
 December 31,
2009
   ($ in Thousands)
Assets
 
Total current assets $7,676 
Property, equipment, land and leasehold improvements, net  77,524 
Other non-current assets  1,495 
Total assets $86,695 
Liabilities
     
Current portion of long-term debt $200,999 
Other current liabilities  10,761 
Total current liabilities  211,760 
Other non-current liabilities  8,789 
Total liabilities  220,549 
Noncontrolling interests  (1,863) 
Total liabilities and noncontrolling interests $218,686 

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5. Discontinued Operations  – (continued)

Summarized financial information for discontinued operations related to PCAA for the quarters and six months ended June 30, 2010 and 2009 are as follows:

    
 For the Quarter Ended June 30, For the Six Months Ended June 30,
   2010 2009 2010 2009
   ($ in Thousands, Except Share Data)
Service revenue $12,319  $17,439  $28,826  $34,046 
Gain on sale of assets through bankruptcy (pre-tax)  130,260   —   130,260   — 
Net income (loss) from discontinued operations before income taxes $135,726  $(4,026)  $132,709  $(13,544) 
(Provision) benefit for income taxes  (50,514)   867   (51,510)   3,961 
Net income (loss) from discontinued operations  85,212   (3,159)   81,199   (9,583) 
Less: net income (loss) attributable to noncontrolling interests  302   (1,213)   136   (1,213) 
Net income (loss) from discontinued operations attributable to MIC LLC $84,910  $(1,946)  $81,063  $(8,370) 
Basic income (loss) per share from discontinued operations attributable to MIC LLC interest holders $1.87  $(0.04)  $1.79  $(0.18) 
Weighted average number of shares outstanding at the Company level: basic  45,467,413   44,951,176   45,381,413   44,949,942 
Diluted income (loss) per share from discontinued operations attributable to MIC LLC interest holders $1.86  $(0.04)  $1.78  $(0.18) 
Weighted average number of shares outstanding at the Company level: diluted  45,604,064   44,951,176   45,513,864   44,949,942 

6. Property, Equipment, Land and Leasehold Improvements

Property, equipment, land and leasehold improvements at SeptemberJune 30, 20092010 and December 31, 20082009 consist of the following ($ in thousands):

    
 September 30,
2009		 December 31,
2008		 June 30,
2010		 December 31, 2009
Land(1) $71,899  $56,039  $4,618  $4,618 
Easements  5,624   5,624   5,624   5,624 
Buildings  29,728   34,128   24,796   24,789 
Leasehold and land improvements  327,441   301,623   317,512   312,881 
Machinery and equipment  335,046   321,240   332,064   330,226 
Furniture and fixtures  10,860   9,952   9,441   9,395 
Construction in progress  16,038   48,520   16,394   16,519 
Property held for future use  1,561   1,540   1,561   1,561 
  798,197   778,666   712,010   705,613 
Less: accumulated depreciation  (134,642)   (104,685)   (142,817)   (125,526) 
Property, equipment, land and leasehold improvements, net(2)(1) $663,555  $673,981  $569,193  $580,087 

(1)The September 30, 2009 Land balance includes $11.9 million previously classified in the consolidated balance sheet as Land-available for sale at the airport parking business. See Note 8, “Long-Term Debt”, for further discussion of the material terms of the forbearance agreement relating to this business’ assets.
(2)Includes $1.1 million and $2.1 million$302,000 of capitalized interest for the ninesix months ended SeptemberJune 30, 20092010 and $1.3 million for the year ended December 31, 2008, respectively.

The Company recognized non-cash impairment charges primarily relating to leasehold and land improvements, buildings, machinery and equipment and furniture and fixtures, which are summarized below for the following businesses ($ in thousands):

  
 Nine Months
Ended
September 30,
2009(1)		 Quarter and Year
Ended
December 31,
2008(1)
Airport Services(2) $7,521  $13,754 
Airport Parking(3)  6,385   19,145 
Total $13,906  $32,899 

(1)There were no impairment charges recorded in the third quarter of 2009 and 2008.
(2)Reported in depreciation expense in the consolidated condensed statement of operations.
(3)Reported in cost of services in the consolidated condensed statement of operations.2009.

 

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6. Property, Equipment, Land and Leasehold Improvements  – (continued)

The Company recognized non-cash impairment charges of $2.2 million and $7.5 million during the quarter and six months ended June 30, 2009, respectively, primarily relating to leasehold and land improvements; buildings; machinery and equipment; and furniture and fixtures at Atlantic Aviation. These charges are recorded in depreciation expense in the consolidated condensed statements of operations. There was no impairment charge in the first six months of 2010.

7. Intangible Assets

Intangible assets at SeptemberJune 30, 20092010 and December 31, 20082009 consist of the following ($ in thousands):

      
 Weighted
Average Life
(Years)		 September 30,
2009		 December 31,
2008		 Weighted
Average
Life
(Years)		 June 30,
2010		 December 31,
2009
Contractual arrangements  31.3  $774,309  $802,419   31.1  $774,309  $774,309 
Non-compete agreements  2.5   9,515   9,515   2.5   9,515   9,515 
Customer relationships  10.7   78,596   78,596   10.6   78,596   78,596 
Leasehold rights  12.5   3,330   3,542   12.5   3,331   3,331 
Trade names  Indefinite   15,401   15,401   Indefinite   15,401   15,401 
Technology  5.0   460   460   5.0   460   460 
       881,611   909,933      881,612   881,612 
Less: Accumulated amortization     (121,561)   (97,749) 
Less: accumulated amortization     (147,942)   (130,531) 
Intangible assets, net    $760,050  $812,184     $733,670  $751,081 

As a result of a decline in the performance of certain asset groups during the firstquarter and six months ofended June 30, 2009, and the quarter ended December 31, 2008, the Company evaluated such asset groups for impairment and determined that the asset groups were impaired. The Company estimated the fair value of each of the impaired asset groups using eitherthe discounted cash flows or third party appraisals.flow model. Accordingly, the Company recognized non-cash impairment charges of $2.9 million and $23.3 million related to contractual arrangements at the airport services business during the first six months of 2009 and customer relationships, leasehold rights and trademarks at the airport parking businessAtlantic Aviation during the quarter and six months ended December 31, 2008.June 30, 2009, respectively. These charges are recorded in amortization of intangibles in the consolidated condensed statement of operations. There was no impairment charge in the first six months of 2010.

The change in goodwill frombalance as of June 30, 2010 and December 31, 2008 to September 30, 2009 is as followscomprised of the following ($ in thousands):

 
Balance at December 31, 2008 $586,249 
Impairment of airport services business' goodwill  (71,200) 
Prior period acquisition purchase price adjustments  31 
Other  1,102 
Balance at September 30, 2009 $516,182 
 
Goodwill acquired in business combinations, net of disposals $639,382 
Less: accumulated impairment charges  (123,200) 
Balance at June 30, 2010 and December 31, 2009 $516,182 

The Company tests for goodwill impairment at the reporting unit level on an annual basis and between annual tests if a triggering event indicates impairment. The decline in the Company’s stock price particularly over the latter part of 2008 and the first half of 2009 has caused the book value of the Company to exceed its market capitalization. TheIn addition to its annual goodwill impairment testing conducted routinely on October 1st of each year, the Company performed goodwill impairment teststesting during the firstquarter and six months ofended June 30, 2009 and fourth quarter of 2008. The goodwill impairment test is a two-step process, which requires managementdue to make judgments in determining what assumptions to use in the test. The first steptriggering event of the process consists of estimating the fair value of each reporting unit based on a discounted cash flow model using cash flow forecasts and comparing those estimated fair values with the carrying values, which includes the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an implied fair value of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying value. If the corresponding carrying value is higher than the “implied fair value”, goodwill is written down to reflect the impairment.Company’s stock price decline. Based on the testing performed, the Company recorded goodwill impairment charges of $53.2 million and $71.2 million at Atlantic Aviation during the airport services business duringquarter and six months ended June 30, 2009, respectively, which is included in the accumulated impairment charges in the above table. There was no goodwill impairment charge in the first six months of 2009 and the quarter ended December 31, 2008 and at the airport parking business to write off all of its goodwill during the quarter ended December 31, 2008.2010.


 

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(Unaudited)

6. Intangible Assets  – (continued)

For the nine months ended September 30, 2009 and the quarter and year ended December 31, 2008, the following non-cash impairment charges were recorded at the following businesses ($ in thousands):

  
 Nine Months
Ended
September 30,
2009(1)		 Quarter and Year
Ended
December 31,
2008(1)
Intangible Assets(2)
          
Airport Services $23,326  $21,712 
Airport Parking  —   8,134 
Total $23,326  $29,846 
Goodwill
          
Airport Services $71,200  $52,000 
Airport Parking  —   138,751 
Total $71,200  $190,751 

(1)There were no impairment charges recorded in the third quarter of 2009 and 2008.
(2)Reported in amortization of intangibles expense in the consolidated condensed statement of operations.

While management has a plan to return the Company’s business fundamentals to levels that support the book value per common share, there is no assurance that the plan will be successful, or that the market price of the common stock will increase to such levels in the foreseeable future. Discount rates used in recent cash flow analyses have increased and projected cash flows relating to the Company’s reporting units generally declined in the latter half of 2008 and first half of 2009 primarily as the result of negative macroeconomic factors. There is no assurance that discount rates will not increase or that the earnings, book values or projected earnings and cash flows of the Company’s individual reporting units will not decline. Management will continue to monitor the relationship of the Company’s market capitalization to its book value, the differences for which management attributes to both negative macroeconomic factors and Company specific factors, and management will continue to evaluate the carrying value of goodwill and other intangible assets. Accordingly, an additional impairment charge to goodwill and other intangible assets may be required in the foreseeable future if the Company’s common stock price continues to trade below book value per common share or the book value exceeds its estimated fair value of an individual reporting unit.

7.8. Nonfinancial Assets Measured at Fair Value

The following major categories of nonfinancial assets at the impaired asset groups were written down to fair value during the firstquarter and six months of 2009:ended June 30, 2009 at Atlantic Aviation ($ in thousands):

     
 Fair Value Measurements Using Total Losses
Description Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)		 Quarter
Ended
September 30,
2009		 Nine Months
Ended
September 30,
2009
   ($ in Thousands)   
Property, Equipment, Land and Leasehold Improvements, net $—  $55,433  $5,122  $—  $(13,906) 
Intangible Assets  —   —   14,430   —   (23,326) 
Goodwill  —   —   377,343   —   (71,200) 
Total $—  $55,433  $396,895  $—  $(108,432) 
   
  Total Losses
   Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)(1)		 Quarter Ended June 30,
2009		 Six Months Ended
June 30,
2009
 
Property, equipment, land and leasehold
improvements, net		 $5,122  $2,200  $7,521 
Intangible assets  14,430   2,962   23,326 
Goodwill  377,343   53,200   71,200 
Total $396,895  $58,362  $102,047 

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(Unaudited)

7. Nonfinancial Assets Measured at Fair Value  – (continued)

(1)At June 30, 2009, there were no nonfinancial assets measured at fair value using quoted prices in active markets for identical assets (“level 1”) or significant other observable inputs (“level 2”).

The Company estimated the fair value of each of the impaired asset groups using either discounted cash flows or third party appraisals.flows. Property, equipment, land and leasehold improvements for Atlantic Aviation with a carrying amountvalue of $74.5$12.6 million were written down to fair value of $60.6$5.1 million during the first six months ofended June 30, 2009. This resulted in aThe non-cash impairment charge of $13.9$7.5 million which iswas recorded in depreciation expense for the airport services business and cost of services for the airport parking business in the consolidated condensed statement of operations.operations for the six months ended June 30, 2009. There was no impairment charge in the first six months of 2010.

Additionally, intangible assets at Atlantic Aviation with a carrying amountsvalue of $37.7 million were written down to their fair value of $14.4 million during the first six months ofended June 30, 2009. This resulted in aThe non-cash impairment charge of $23.3 million which iswas recorded in amortization of intangibles expense in the consolidated condensed statement of operations. There was no impairment charge in the first six months of 2010.

As discussed in Note 6,7, “Intangible Assets”, the Company performed goodwill impairment analyses during the firstquarter and six months ofended June 30, 2009. As a result of these analyses, goodwill at Atlantic Aviation with a carrying amountvalue of $448.5 million was written down to its implied fair value of $377.3 million resulting in a non-cash impairment charge of $71.2 million. This non-cash impairment charge was included in goodwill impairment in the consolidated condensed statement of operations. There was no goodwill impairment charge in the first six months of 2010.

The significant unobservable inputs (“level 3”) used for all fair value measurements in the above table included forecasted cash flows of the airport services businessAtlantic Aviation and its asset groups, the discount rate and, in the case of goodwill, the terminal value. The forecasted cash flows for this business were developed using actual cash flows from 2008 and 2009, forecasted jet fuel volumes from the Federal Aviation Administration, forecasted consumer price indices and forecasted LIBOR rates based on proprietary models using various published sources. The discount rate was developed using a capital asset pricing model.

Model inputs included:

a risk free rate equal to the rate on 20 year U.S. treasury securities;
a risk premium based on the risk premium for the U.S. equity market overall;
the observed beta of comparable listed companies;

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8. Nonfinancial Assets Measured at Fair Value  – (continued)

a small company risk premium based on historical data provided by Ibbotsons; and
a specific company risk premium based on the uncertainty in the current market conditions.conditions during the six months ended June 30, 2009.

The terminal value was based on observed earnings before interest, taxes, depreciation and amortization, or EBITDA, and multiples historically paid in transactions for comparable businesses.


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(Unaudited)

8.9. Long-Term Debt

At SeptemberJune 30, 20092010 and December 31, 2008,2009, the Company’s consolidated long-term debt consistsconsisted of the following ($ in thousands):

  
 September 30,
2009		 December 31,
2008
MIC Inc. revolving credit facility $66,400  $69,000 
Gas production and distribution  179,000   169,000 
District energy  150,000   150,000 
Airport services  872,029   939,800 
Airport parking  201,105   201,344 
Total  1,468,534   1,529,144 
Less: Current portion  (315,549)   (201,344) 
Long-term portion $1,152,985  $1,327,800 
  
 June 30,
2010		 December 31, 2009
The Gas Company $179,000  $179,000 
District Energy  170,000   170,000 
Atlantic Aviation  831,544   863,279 
Total
  1,180,544   1,212,279 
Less: current portion  (53,153)   (45,900) 
Long-term portion $1,127,391  $1,166,379 

Effective April 14, 2009,Until March 31, 2010, MIC Inc. elected to reduce the available principal on itshad a revolving credit facility from $300.0 million to $97.0 million. At March 31,with various financial institutions. The facility was repaid in full in December 2009 MIC Inc. reclassified itsand no amounts were outstanding under the revolving credit facility from long-term debt to current portionas of long-term debt inDecember 31, 2009 or at the consolidated condensed balance sheet, due to itsfacility’s maturity on March 31, 2010. The Company has accumulated the excess cash generated by the gas production and distribution and district energy businesses as a means of repaying a portion of the amount due under the facility.

On February 25, 2009, the airport services businessAtlantic Aviation amended its credit facility to provide the business additional financial flexibility over the near and medium term. Additionally, underUnder the amended terms, the business will apply all excess cash flow from the business to prepay additional debt whenever the leverage ratio (debt to adjusted EBITDA) is equal to or greater than 6.0x to 1.0 for the trailing twelve months and will use 50% of excess cash flow to prepay debt whenever the leverage ratio is equal to or greater than 5.5x to 1.0 and below 6.0x to 1.0. For the quarter and ninesix months ended SeptemberJune 30, 2009, the airport services business2010, Atlantic Aviation used $13.2$7.7 million and $80.5$34.9 million, respectively, of excess cash flow to prepay $12.0$7.0 million and $72.6$31.7 million, respectively, of the outstanding principal balance of the term loan debt under the facility and $1.2 million$695,000 and $7.9$3.2 million, respectively, in interest rate swap breakage fees. The Company has classified $53.2 million relating to Atlantic Aviation’s debt in current portion of long-term debt in the consolidated condensed balance sheet at June 30, 2010, as it expects to repay this amount within one year.

On November 4, 2009, the airport services businessIn August 2010, Atlantic Aviation used $9.9 million of excess cash flow from the third quarter of 2009 to prepay $9.0 million of the outstanding principal balance of the term loan debt under this facility and incurred $914,000$935,000 in interest rate swap breakage fees.

At September 30, 2009, the airport parking business had $201.1 million of total debt that was due on September 9, 2009. This debt is secured by assets

10. Derivative Instruments and collateral of the airport parking business. Creditors of this business do not have recourse to any assets of the Company or any assets of the Company’s other businesses, other than approximately $5.3 million in a lease guarantee as of November 5, 2009. During September 2009, the Company made the final interest rate swap payment that was guaranteed by the Company on behalf of the airport parking business.

The airport parking business is currently in default under its credit facilities. In addition, the airport parking business does not have sufficient liquidity or capital resources to pay its maturing debt obligations and the Company does not expect that the airport parking business will be able to refinance its debt as it matures.


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MACQUARIE INFRASTRUCTURE COMPANY LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

8. Long-Term Debt  – (continued)

The airport parking business signed a forbearance agreement with the lenders under its primary credit facility on June 10, 2009 that was scheduled to expire on August 31, 2009, was extended through October 15, 2009 and was extended again through November 6, 2009. Material terms of the forbearance agreement are that during the forbearance period:

lenders forbear from exercising rights and remedies for certain designated defaults including any breaches of certain financial covenants and the non-payment of interest;
interest will accrue at the current interest rate (LIBOR plus 190 basis points) and will be deferred and capitalized;
payments on the swap rate agreement will not be made by the airport parking business;
the business cannot sell, lease or dispose of assets or properties or incur debt, in each case, other than in the ordinary course of business; and
certain limitations on capital expenditures and other payments, including to the Company.

There is substantial doubt regarding the business’ ability to continue as a going concern. The business has engaged financial advisors to actively solicit a sale of the business. A letter of intent was signed during the quarter with a third party, which is conducting due diligence and with which the business is currently negotiating an asset purchase agreement. The business expects to close a sale transaction in 2010, which will likely occur in connection with a bankruptcy filing and consummation of a Chapter 11 plan. Proceeds generated as a result of the sale would be payable to the lenders of the business and not to the Company. Until an asset purchase agreement is signed and any conditions to closing have been met, including any approval of the sale needed as part of the bankruptcy process, the Company cannot provide assurance regarding the certainty or timing of a sale closing. As previously indicated, the Company has no intention of committing additional capital to this business and the Company’s ongoing liabilities are expected to be no more than $5.3 million in guarantees of a single parking facility lease.

9. Derivative InstrumentsHedging Activities

The Company and its businesses have in place variable-rate debt. Management believes that it is prudent to limit the variability of a portion of itsthe business’ interest payments. To meet this objective, the Company enters into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk on a majority of its debt with a variable-rate component.

At SeptemberJune 30, 2009,2010, the Company had $1.5$1.2 billion of current and long-term debt, $1.1 billion of which was economically hedged with interest rate swaps $325.0and $83.9 million of which was unhedgedunhedged.


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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

10. Derivative Instruments and $6.1 million of which incurred interest at fixed rates.

Hedging Activities  – (continued)

For the quarter and nine months ended September 30, 2009, the airport services business used $13.2 million and $80.5 million, respectively, ofAs discussed in Note 9, “Long-Term Debt”, Atlantic Aviation applies its excess cash flow to prepay $12.0 million and $72.6 million, respectively, of the outstanding principal balance of the term loan debt under the facility and $1.2 million and $7.9 million, respectively, in interest rate swap breakage fees.debt. As a result, of the future interest payments that are no longer probable of occurring due to the prepayment of debt, $6.9$4.9 million and $37.8$11.1 million of accumulated other comprehensive loss in the consolidated condensed balance sheet related to the airport services business’ derivatives wasAtlantic Aviation’s derivative instruments were reclassified to loss on derivative instrumentsinterest expense in the consolidated condensed statement of operations for the quarter and ninesix months ended SeptemberJune 30, 2009,2010, respectively. SubjectAtlantic Aviation expects to the mandatory debt prepayment conditions, under the amended debt terms, to the extent future cash flows exceed forecast, the airport services business will repay its debt more quickly than expected, which will result in additional interest rate swap breakage fees and correspondingrecord further reclassifications from accumulated other comprehensive loss to loss on derivative instruments. See Note 8 “Long-Term Debt” for further discussion.interest expense as the business continues to pay down its debt.


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MACQUARIE INFRASTRUCTURE COMPANY LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

9. Derivative Instruments  – (continued)

In March 2009, the airport services business, gas productionAtlantic Aviation, The Gas Company and distribution business and district energy businessDistrict Energy entered into interest rate basis swap contracts with their existing counterparties.that expired on March 31, 2010. These contracts effectively changed the interest rate index on the Company’seach business’ existing swap contracts through March 2010 from receiving the 90-day LIBOR rate to receiving the 30-day LIBOR rate plus a margin of 19.50 basis points for the airport services businessAtlantic Aviation and 24.75 basis points for the gas productionThe Gas Company and distribution and district energy businesses.District Energy. This transaction, adjusted for the prepayments of outstanding principal balance on the term loan debt at the airport services business, willAtlantic Aviation, resulted in $580,000 and $1.8 million lower the effective cash interest expense onfor these businesses’ debt by approximately $1.2 million from October 1,businesses for the quarter ended March 31, 2010 and the year ended December 31, 2009, through March 2010.respectively.

As ofEffective February 25, 2009 due to the amendment of the credit facility for the airport services business discussed above,Atlantic Aviation and effective April 1, 2009 for the Company’s other businesses, the Company elected to discontinue hedge accounting. In prior periods, when the Company applied hedge accounting, changes in the fair value of derivatives that effectively offset the variability of cash flows on the Company’s debt interest obligations were recorded in other comprehensive income or loss. From the dates that hedge accounting was discontinued, all movements in the fair value of the interest rate swaps are recorded directly through earnings. As interest payments are made, a resultportion of the basis swap contracts discussed above, together with the discontinuance ofother comprehensive loss recorded under hedge accounting theis also reclassified into earnings. The Company will reclassify into earnings the $82.2$56.9 million of net derivative losses, included in accumulated other comprehensive loss as of SeptemberJune 30, 20092010 over the remaining life of the existing interest rate swaps, of which $34.2approximately $24.1 million will be reclassified over the next 12 months.

The Company’s derivative instruments are recorded on the balance sheet at fair value with changes in fair value of interest rate swaps recorded directly through earnings since the dates that hedge accounting was discontinued. The Company measures derivative instruments at fair value using the income approach which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations utilize primarily utilize observable (“level 2”) inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals.

The Company’s fair value measurements of its derivative instruments and the related location of the liabilities associated with the hedging instruments within the consolidated condensed balance sheetsheets at SeptemberJune 30, 20092010 and December 31, 20082009 were as follows:

    
 Liabilities at Fair Value(1) Liabilities at Fair Value(1)
 Interest Rate
Swap Contracts
Not Designated
as Hedging
Instruments(2)		 Interest Rate
Swap Contracts
Designated
as Hedging
Instruments		 Interest Rate Swap Contracts Not
Designated as Hedging Instruments
Balance Sheet Location September 30,
2009		 December 31,
2008		 June 30, 2010 December 31, 2009
 ($ in Thousands) ($ In Thousands)
Fair value of derivative instruments – current liabilities $(50,228)  $(51,441)  $(45,792)  $(49,573) 
Fair value of derivative instruments – non-current liabilities  (64,507)   (105,970)   (72,268)   (54,794) 
Total interest rate derivative contracts $(114,735)  $(157,411)  $(118,060)  $(104,367) 

(1)Fair value measurements at reporting date were made using significant other observable inputs (level 2)(“level 2”).
(2)As of February 25, 2009 for the airport services business and April 1, 2009 for the other businesses, the Company elected to discontinue hedge accounting.

 

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

9.10. Derivative Instruments and Hedging Activities  – (continued)

The Company’s hedging activities for the quarter and ninesix months ended SeptemberJune 30, 20092010 and 20082009 and the related location within the consolidated condensed financial statements were as follows:

        
 Derivatives Designated as Hedging Instruments(1) Derivatives Not
Designated as Hedging
Instruments(1)
   Amount of Loss
Recognized in OCI on
Derivatives (Effective
Portion) for the
Quarter Ended
September 30,		 Amount of Loss
Reclassified from OCI
into Income (Effective
Portion) for the
Quarter Ended
September 30,		 Amount of Loss Recognized in
Loss on Derivative
Instruments
(Ineffective Portion)
for the Quarter Ended
September 30,		 Amount of Loss
Recognized in Loss
on Derivative
Instruments for the
Quarter Ended
September 30,
Financial Statement Account 2009 2008 2009 2008 2009 2008 2009(2) 2008
   ($ in Thousands)
Interest Expense $—  $—  $—  $(7,800)  $—  $—  $(16,456)  $— 
Loss on Derivative Instruments(2)  —   —   —   (701)   —   (64)   (17,371)   — 
Accumulated Other Comprehensive Loss  —   (14,858)   —   —   —   —   —   — 
Total $—  $(14,858)  $—  $(8,501)  $—  $(64)  $(33,827)  $— 
  
 Derivatives Not Designated as Hedging Instruments(1)
   Amount of (Loss) Gain Recognized in Interest Expense for the Quarter Ended June 30,
Financial Statement Account 2010(2) 2009(3)
   ($ In Thousands)
Interest expense $(36,008)  $5,395 
Total $(36,008)  $5,395 

(1)Substantially allAll derivatives are interest rate swap contracts.
(2)ForLoss recognized in interest expense for the quarter ended SeptemberJune 30, 2009, loss on derivative instruments primarily represents the change2010 includes $14.7 million in fair value of interest rate swaps from the discontinuation of hedge accounting as of February 25, 2009 for the airport services businessswap payments, $695,000 in interest rate swap breakage fees and April 1, 2009 for the Company's other businesses. In addition, loss on$20.6 million in unrealized derivative instruments includes the reclassification of amounts from accumulated other comprehensive loss into earnings, as the airport services businesslosses arising from:
the change in fair value of interest rate swaps from the discontinuation of hedge accounting; and
the reclassification of amounts from accumulated other comprehensive loss into earnings, as Atlantic Aviation pays down its debt more quickly than anticipated.
(3)Gain recognized in interest expense for the quarter ended June 30, 2009 includes $20.1 million in unrealized derivative gains, offset by $13.1 million in interest rate swap payments and $1.6 million in interest rate swap breakage fees.

        
 Derivatives Designated as Hedging Instruments(1) Derivatives Not
Designated as Hedging
Instruments(1)
   Amount of Gain/
(Loss) Recognized in
OCI on Derivatives
(Effective Portion)
for the Nine Months
Ended September 30,		 Amount of Loss
Reclassified from OCI
into Income (Effective
Portion) for the
Nine Months Ended
September 30,		 Amount of Loss Recognized in
Loss on Derivative
Instruments
(Ineffective Portion)
for the Nine Months Ended September 30,		 Amount of Loss
Recognized in Loss
on Derivative
Instruments for the
Nine Months Ended
September 30,
Financial Statement Account 2009 2008 2009(2) 2008 2009 2008 2009(3) 2008
   ($ in Thousands)
Interest Expense $—  $—  $(17,953)  $(17,654)  $—  $—  $(33,853)  $— 
Loss on Derivative Instruments(2)  —   —   (25,154)   (1,456)   (84)   (195)   (4,634)   — 
Accumulated Other Comprehensive Gain (Loss)  2,549   (19,930)   —   —   —   —   —   — 
Total $2,549  $(19,930)  $(43,107)  $(19,110)  $(84)  $(195)  $(38,487)  $— 
        
 Derivatives Designated as Hedging Instruments(1) Derivatives Not Designated as Hedging Instruments(1)
   Amount of Gain
Recognized in OCI on
Derivatives (Effective
Portion) for the
Six Months Ended
June 30,		 Amount of Loss
Reclassified from OCI
into Income (Effective
Portion) for the
Six Months Ended
June 30,		 Amount of Loss
Recognized in Loss on
Derivative Instruments
(Ineffective Portion)
for the Six
Months Ended
June 30,		 Amount of Loss
Recognized in Interest Expense for the Six Months Ended
June 30,
Financial Statement Account 2010 2009 2010 2009(2) 2010 2009 2010(3) 2009(4)
   ($ In Thousands)
Interest expense $—  $—  $—  $(15,691)  $—  $—  $(63,142)  $(1,592) 
Loss on derivative instruments  —   —   —   (25,154)   —   (84)   —   — 
Accumulated other comprehensive loss  —   2,848   —   —   —   —   —   — 
Total $—  $2,848  $—  $(40,845)  $—  $(84)  $(63,142)  $(1,592) 

(1)Substantially allAll derivatives are interest rate swap contracts.
(2)In the first quarter of 2009, derivative losses includedIncludes $22.7 million in connection with the $44.6 million pay down of principal debt at the airport services business and the interest rate basis swaps entered by this business and amortization of $1.6 million of accumulated other comprehensive loss balancelosses reclassified into earnings (loss on derivative instruments) resulting from the $44.6 million repayment of debt principal at Atlantic Aviation in connection with the first quarter of 2009. Interest expense represents cash interest paid on derivative instruments, of which $5.2 million is related to the payment of interest rate basis swap contracts entered bybreakage fees in the gas production and distributionfirst quarter of 2009.

 

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

9.10. Derivative Instruments and Hedging Activities  – (continued)

(3)business and district energy business, which are recordedLoss recognized in loss on derivative instrumentsinterest expense for the six months ended June 30, 2010 includes $28.2 million in the consolidated condensed statement of operations. Interest expense represents cash interest paid on derivative instruments, of which $5.2rate swap payments, $3.2 million related to the payment ofin interest rate swap breakage fees.fees and $31.7 million in unrealized derivative losses arising from:
(3)For the nine months ended September 30, 2009, loss on derivative instruments primarily represents the change in fair value of interest rate swaps from the discontinuation of hedge accounting as of February 25, 2009 for the airport services business and April 1, 2009 for the Company's other businesses. In addition, loss on derivative instruments includes the reclassification of amounts from accumulated other comprehensive loss into earnings, as the airport services business
the change in fair value of interest rate swaps from the discontinuation of hedge accounting; and
the reclassification of amounts from accumulated other comprehensive loss into earnings, as Atlantic Aviation pays down its debt more quickly than anticipated.
(4)Loss recognized in interest expense for the six months ended June 30, 2009 includes $13.1 million in interest rate swap payments and $1.6 million in interest swap breakage fees, offset by $13.1 million in unrealized derivative gains.

All of the Company’s derivative instruments are collateralized by all of the assets of the respective businesses. During September 2009, the Company made the final interest rate swap payment that was guaranteed by the Company on behalf of the airport parking business.

10.11. Comprehensive Income (Loss) Income

Other comprehensive income (loss) income includes primarily the change in fair value of derivative instruments which qualified for hedge accounting until the dates that hedge accounting was discontinued, as discussed in Note 9,10, “Derivative Instruments”Instruments and Hedging Activities”.

The difference between net income (loss) income and comprehensive income (loss) income for the quarter and ninesix months ended SeptemberJune 30, 20092010 and 20082009 was as follows ($ in thousands):

    
 Quarter Ended September 30, Nine Months Ended September 30,
   2009 2008 2009 2008
Net (loss) income $(18,348)  $498  $(100,332)  $6,846 
Unrealized (loss) gain in fair value of derivatives, net of taxes  —   (8,821)   1,498   (12,236) 
Reclassification of realized losses into earnings, net of taxes  7,399   5,183   42,062   11,738 
Comprehensive (loss) income $(10,949)  $(3,140)  $(56,772)  $6,348 
    
 Quarter Ended June 30, Six Months Ended June 30,
   2010 2009 2010 2009
 
Net income (loss) attributable to MIC LLC $85,850  $(28,958)  $77,485  $(81,984) 
Unrealized gain in fair value of derivatives, net of taxes  —   —   —   1,498 
Reclassification of realized losses into earnings, net of taxes  4,390   8,673   9,738   34,663 
Comprehensive income (loss) $90,240  $(20,285)  $87,223  $(45,823) 

For further discussion on derivative instruments and hedging activities, see Note 9,10, “Derivative Instruments”Instruments and Hedging Activities”.

11.12. Members’/Stockholders’ Equity

The Company is authorized to issue 500,000,000 LLC interests. Each outstanding LLC interest of the Company is entitled to one vote on any matter with respect to which holders of LLC interests are entitled to vote.


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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

12.13. Reportable Segments

The Company’s operations are broadly classified into the energy-related businesses and the aviation-related businesses.


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MACQUARIE INFRASTRUCTURE COMPANY LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

12. Reportable Segments  – (continued)

Atlantic Aviation. The energy-related businesses consist of two reportable segments: the gas productionThe Gas Company and distribution business and the district energy business.District Energy. The energy-related businesses also include a 50% investment in a bulk liquid storage terminal business, or IMTT, which is accounted for under the equity method. Financial information for IMTT’s business as a whole is presented below ($ in thousands) (unaudited):

        
 As of, and for the
Quarter Ended
September 30,		 As of, and for the
Nine Months Ended
September 30,		 Quarter Ended, and as of, June 30, Six Months Ended, and as of, June 30,
 2009 2008 2009 2008 2010 2009 2010 2009
Revenue $85,168  $104,494  $253,945  $261,118  $158,235  $81,974  $265,273  $168,777 
Net income $14,222  $22,423  $27,465  $35,686 
Interest expense (income), net  25,774   (17,671)   37,899   (10,610) 
Provision for income taxes  10,750   14,959   20,356   23,898 
Depreciation and amortization expense  14,916   13,454   29,534   26,278 
Unrealized gains on derivative instruments  —   —   —   (3,306) 
Other non-cash expense (income)  12   157   245   (669) 
EBITDA excluding non-cash items(1)  36,767   40,882   108,713   100,439  $65,674  $33,322  $115,499  $71,277 
Interest expense, net  7,378   6,909   21,990   16,801 
Depreciation and amortization expense  13,457   11,303   39,735   31,960 
 
Capital expenditures paid  24,638   48,160   106,062   161,340  $17,741  $41,482  $37,171  $81,424 
Property, equipment, land and leasehold improvements, net  967,323   869,474   967,323   869,474   993,427   953,907   993,427   953,907 
Total assets balance  1,040,796   950,889   1,040,796   950,889   1,127,169   1,041,219   1,127,169   1,041,219 

(1)EBITDA excluding non-cash items refers toconsists of earnings before interest, taxes, depreciation amortization and amortization. Non-cash items that are excluded consist of impairments, derivative gains and losses and all other non-cash items, principally goodwill impairmentsincome and unrealized gains (losses) on derivative instruments.expense items.

The aviation-related businesses consist of two reportable segments: the airport services business and the airport parking business. All of the business segments are managed separately and management has chosen to organize the Company around the distinct products and services offered.

Energy-Related Businesses:Businesses

IMTT provides bulk liquid storage and handling services in North America through ten terminals located on the East, West and Gulf Coasts, the Great Lakes region of the United States and partially owned terminals in Quebec and Newfoundland, Canada. IMTT derives the majority of its revenue from storage and handling of petroleum products, various chemicals, renewable fuels, and vegetable and animal oils. Based on storage capacity, IMTT operates one of the largest third-party bulk liquid storage terminal businesses in the United States.

The revenue from the gas production and distribution business reportableThe Gas Company segment is included in revenue from product sales and includessales. Revenue is generated from the distribution and sales of synthetic natural gas, or SNG, and liquefied petroleum gas, or 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. The utility revenue of the gas production and distribution business includesThe Gas Company reflects fuel adjustment charges, or FACs, through which changes in fuel costs are passed through to customers.

The revenue from the district energy business reportableDistrict Energy 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 business’ various customers. The district energy businessDistrict Energy provides its services to buildings throughoutprimarily in the downtown Chicago, Illinois area and to a casino and a shopping mall located in Las Vegas, Nevada.

Aviation-Related Businesses:

The airport services business reportable segment principally derives income from fuel sales and from other airport services. Airport services revenue includes fuel-related services, de-icing, aircraft hangarage and


 

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

12.13. Reportable Segments  – (continued)

Atlantic Aviation

The Atlantic Aviation segment derives the majority of its revenues from fuel sales and from other airport services, including de-icing, aircraft hangarage and other aviation services. All of the revenue of the airport services businessAtlantic Aviation is generated in the United States. The airport services business operated 72 FBOs as of September 30, 2009.

The revenue from the airport parking business reportable segment is included in service revenueStates at 68 airports and primarily consists of fees from off-airport parking and ground transportation to and from the parking facilities and the airport terminals. The airport parking business operates 31 off-airport parking facilities located in 20 major airport markets across the United States.one heliport.

Selected information by reportable segment is presented in the following tables. The tables do not include financial data for the Company’s equity investment in IMTT.

Revenue from external customers for the Company’s consolidated reportable segments was as follows ($
($ in thousands) (unaudited):

         
 Quarter Ended September 30, 2009 Quarter Ended June 30, 2010
 Energy-related Businesses Airport-related Businesses  Energy-related Businesses
 Gas Production
and Distribution		 District
Energy		 Airport
Services		 Airport
Parking		 Total The Gas Company District Energy Atlantic
Aviation		 Total
Revenue from Product Sales
                                             
Product sales $18,680  $—  $84,337  $—  $103,017  $24,236  $—  $100,941  $125,177 
Product sales – utility  26,056   —   —   —   26,056   28,450   —   —   28,450 
  44,736   —   84,337   —   129,073   52,686   —   100,941   153,627 
Service Revenue
                                             
Other services  —   832   39,843   —   40,675   —   803   36,552   37,355 
Cooling capacity revenue  —   5,224   —   —   5,224   —   5,295   —   5,295 
Cooling consumption revenue  —   9,400   —   —   9,400   —   7,144   —   7,144 
Parking services  —   —   —   16,965   16,965 
  —   15,456   39,843   16,965   72,264   —   13,242   36,552   49,794 
Financing and Lease Income
                                             
Financing and equipment lease  —   1,190   —   —   1,190   —   1,271   —   1,271 
  —   1,190   —   —   1,190   —   1,271   —   1,271 
Total Revenue $44,736  $16,646  $124,180  $16,965  $202,527  $52,686  $14,513  $137,493  $204,692 

         
 Quarter Ended September 30, 2008 Quarter Ended June 30, 2009
 Energy-related Businesses Airport-related Businesses  Energy-related Businesses
 Gas Production
and Distribution		 District
Energy		 Airport
Services		 Airport
Parking		 Total The Gas Company District Energy Atlantic
Aviation		 Total
Revenue from Product Sales
                                             
Product sales $23,495  $—  $128,565   —  $152,060  $18,390  $—  $71,040  $89,430 
Product sales – utility  36,060   —   —   —   36,060   21,414   —   —   21,414 
  59,555   —   128,565   —   188,120   39,804   —   71,040   110,844 
Service Revenue
                                             
Other services  —   752   52,772   —   53,524   —   743   40,004   40,747 
Cooling capacity revenue  —   4,850   —   —   4,850   —   5,110   —   5,110 
Cooling consumption revenue  —   10,654   —   —   10,654   —   5,502   —   5,502 
Parking services  —   —   —   18,686   18,686 
  —   16,256   52,772   18,686   87,714   —   11,355   40,004   51,359 
Financing and Lease Income
                                             
Financing and equipment lease  —   1,164   —   —   1,164   —   1,205   —   1,205 
  —   1,164   —   —   1,164   —   1,205   —   1,205 
Total Revenue $59,555  $17,420  $181,337   18,686  $276,998  $39,804  $12,560  $111,044  $163,408 

 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

12.13. Reportable Segments  – (continued)

         
 Nine Months Ended September 30, 2009 Six Months Ended June 30, 2010
 Energy-related Businesses Airport-related Businesses  Energy-related Businesses
 Gas Production
and Distribution		 District
Energy		 Airport
Services		 Airport
Parking		 Total The Gas Company District Energy Atlantic
Aviation		 Total
Revenue from Product Sales
                                             
Product sales $58,145  $—  $223,494  $—  $281,639  $49,546  $—  $195,649  $245,195 
Product sales – utility  67,637   —   —   —   67,637   55,285   —   —   55,285 
  125,782   —   223,494   —   349,276   104,831   —   195,649   300,480 
Service Revenue
                                             
Other services  —   2,331   128,911   —   131,242   —   1,667   81,893   83,560 
Cooling capacity revenue  —   15,231   —   —   15,231   —   10,533   —   10,533 
Cooling consumption revenue  —   17,130   —   —   17,130   —   8,907   —   8,907 
Parking services  —   —   —   51,011   51,011 
  —   34,692   128,911   51,011   214,614   —   21,107   81,893   103,000 
Financing and Lease Income
                                             
Financing and equipment lease  —   3,587   —   —   3,587   —   2,516   —   2,516 
  —   3,587   —   —   3,587   —   2,516   —   2,516 
Total Revenue $125,782  $38,279  $352,405  $51,011  $567,477  $104,831  $23,623  $277,542  $405,996 

         
 Nine Months Ended September 30, 2008 Six Months Ended June 30, 2009
 Energy-related Businesses Airport-related Businesses  Energy-related Businesses
 Gas Production
and Distribution		 District
Energy		 Airport
Services		 Airport
Parking		 Total The Gas Company District Energy Atlantic
Aviation		 Total
Revenue from Product Sales
                                             
Product sales $70,177  $—  $408,042  $—  $478,219  $39,465  $—  $139,157  $178,622 
Product sales – utility  97,317   —   —   —   97,317   41,581   —   —   41,581 
  167,494   —   408,042   —   575,536   81,046   —   139,157   220,203 
Service Revenue
                                             
Other services  —   2,201   170,990   —   173,191   —   1,499   89,068   90,567 
Cooling capacity revenue  —   14,484   —   —   14,484   —   10,007   —   10,007 
Cooling consumption revenue  —   18,495   —   —   18,495   —   7,730   —   7,730 
Parking services  —   —   —   57,001   57,001 
  —   35,180   170,990   57,001   263,171   —   19,236   89,068   108,304 
Financing and Lease Income
                                             
Financing and equipment lease  —   3,537   —   —   3,537   —   2,397   —   2,397 
  —   3,537   —   —   3,537   —   2,397   —   2,397 
Total Revenue $167,494  $38,717  $579,032  $57,001  $842,244  $81,046  $21,633  $228,225  $330,904 

In accordance with FASB ASC 280Segment Reporting(formerly SFAS No. 131 or “Disclosures about Segments of an Enterprise and Related Information”), the Company has disclosed EBITDAearnings before interest, taxes, depreciation and amortization (EBITDA) excluding non-cash items for the Company and each of the reportable segments as a key performance metric relied on by management in evaluating the performanceevaluation of the Company and its segments. EBITDA excluding non-cashCompany’s performance. Non-cash items is defined as earnings before interest, taxes, depreciation and amortization and non-cash items, principally goodwillinclude impairments, and unrealizedderivative gains and losses on derivative instruments. The Company’s management considers EBITDA excludingand adjustments for other non-cash items to be importantreflected in the overall assessmentstatements of the Company’s operating businesses individually and on consolidation.operations. The Company’s managementCompany believes the presentation of EBITDA excluding non-cash items provides additional insight into the performance of the operating businesses relative to each other and similar businesses without regard to their capital structure, and their ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company. EBITDA excluding non-cash items is reconciled to net income or loss.

During the quarter and six months ended June 30, 2009, the Company disclosed EBITDA excluding only non-cash gains (losses) on derivative instruments. The following tables, reflecting results of operations for the consolidated group and for each of the businesses for the quarter and six months ended June 30, 2009, have been conformed to current periods’ presentation reflecting EBITDA excluding all non-cash items.


 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

12.13. Reportable Segments  – (continued)

Company’s operating businesses and their ability to service or reduce debt, to fund growth capital projects and/or support distributions up to the holding company.

In 2008, the Company disclosed EBITDA only. The following tables, for the quarter and nine months ended September 30, 2008, have been conformed to the current periods’ presentation reflecting EBITDA excluding non-cash items.

EBITDA excluding non-cash items for the Company’s consolidated reportable segments is shown in the tables below tables ($ in thousands) (unaudited). Allocation of corporate expense and the federal tax effect have been excluded from the tables as they are eliminated on consolidation.

         
 Quarter Ended September 30, 2009 Quarter Ended June 30, 2010
 Energy-related Businesses Airport-related Businesses Total
Reportable
Segments		 Energy-related Businesses Atlantic
Aviation		 Total
Reportable
Segments
 Gas Production and Distribution District Energy Airport Services Airport Parking The Gas
Company		 District
Energy
Net income (loss) $694  $(764)  $(7,612)  $(1,210)  $(8,892)  $1,212  $(2,705)  $(8,538)  $(10,031) 
Interest income  (1)   —   (5)   (1)   (7) 
Interest expense  2,213   2,554   15,870   3,193   23,830 
Provision (benefit) for income taxes  446   (500)   (5,137)   (907)   (6,098) 
Interest expense, net  5,926   7,976   26,688   40,590 
Benefit (provision) for income taxes  780   (1,767)   (5,764)   (6,751) 
Depreciation  1,508   1,541   5,669   1,011   9,729   1,511   1,636   5,691   8,838 
Amortization of intangibles  205   345   8,576   —   9,126   205   341   8,194   8,740 
Unrealized losses (gains) on derivative instruments  3,194   4,069   10,517   (490)   17,290 
Other non-cash expense  531   232   558   1,321 
EBITDA excluding non-cash items $8,259  $7,245  $27,878  $1,596  $44,978  $10,165  $5,713  $26,829  $42,707 

         
 Quarter Ended September 30, 2008 Quarter Ended June 30, 2009
 Energy-related Businesses Airport-related Businesses Total
Reportable
Segments		 Energy-related Businesses Atlantic
Aviation(1)		 Total
Reportable
Segments
 Gas Production
and Distribution		 District
Energy		 Airport
Services		 Airport
Parking		 The Gas
Company		 District
Energy
Net income (loss) $1,813  $1,782  $253  $(1,583)  $2,265  $4,518  $3,514  $(30,876)  $(22,844) 
Interest income  (9)   (9)   (143)   (28)   (189) 
Interest expense  2,363   2,618   15,894   3,769   24,644 
Provision (benefit) for income taxes  1,166   623   170   (1,185)   774 
Interest (income) expense, net  (1,249)   (2,728)   4,936   959 
Benefit (provision) for income taxes  2,908   2,296   (20,844)   (15,640) 
Depreciation  1,463   1,402   5,638   1,307   9,810   1,520   1,502   7,750   10,772 
Amortization of intangibles  214   345   9,604   400   10,563   212   341   11,979   12,532 
Unrealized losses (gains) on derivative instruments  73   (10)   578   (88)   553 
Goodwill impairment  —   —   53,200   53,200 
Other non-cash expense (income)  564   172   (430)   306 
EBITDA excluding non-cash items $7,083  $6,751  $31,994  $2,592  $48,420  $8,473  $5,097  $25,715  $39,285 

(1)Includes non-cash impairment charges of $58.3 million recorded during the second quarter of 2009, consisting of $53.2 million related to goodwill, $2.9 million related to intangible assets (in amortization of intangibles) and $2.2 million related to property, equipment, land and leasehold improvements (in depreciation).

    
 Six Months Ended June 30, 2010
   Energy-related Businesses Atlantic
Aviation		 Total
Reportable
Segments
   The Gas
Company		 District
Energy
Net income (loss) $3,466  $(5,336)  $(11,927)  $(13,797) 
Interest expense, net  10,733   14,004   48,674   73,411 
Benefit (provision) for income taxes  2,231   (3,487)   (8,051)   (9,307) 
Depreciation  3,023   3,271   11,901   18,195 
Amortization of intangibles  411   678   16,322   17,411 
Other non-cash expense  1,065   387   605   2,057 
EBITDA excluding non-cash items $20,929  $9,517  $57,524  $87,970 

 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

12.13. Reportable Segments  – (continued)

         
 Nine Months Ended September 30, 2009 Six Months Ended June 30, 2009
 Energy-related Businesses Airport-related Businesses Total
Reportable
Segments		 Energy-related Businesses Atlantic
Aviation(1)		 Total
Reportable
Segments
 Gas Production
and Distribution		 District
Energy		 Airport
Services		 Airport
Parking		 The Gas
Company		 District
Energy
Net income (loss)(1) $8,327  $1,104  $(88,094)  $(8,263)  $(86,926)  $7,633  $1,868  $(80,482)  $(70,981) 
Interest income  (14)   (4)   (83)   (8)   (109) 
Interest expense  6,723   7,593   52,635   11,681   78,632 
Provision (benefit) for income taxes  5,359   721   (59,467)   (6,184)   (59,571) 
Interest expense, net  1,368   227   31,440   33,035 
Benefit (provision) for income taxes  4,913   1,221   (54,330)   (48,196) 
Depreciation  4,504   4,506   25,093   9,124   43,227   2,996   2,965   19,424   25,385 
Amortization of intangibles  631   1,023   50,269   —   51,923   426   678   41,693   42,797 
Goodwill impairment  —   —   71,200   —   71,200   —   —   71,200   71,200 
Unrealized losses (gains) losses on derivative instruments  392   639   28,601   (163)   29,469 
Loss on derivative instruments  327   1,378   23,331   25,036 
Other non-cash expense (income)  1,015   276   (367)   924 
EBITDA excluding non-cash items $25,922  $15,582  $80,154  $6,187  $127,845  $18,678  $8,613  $51,909  $79,200 

(1)Includes non-cash impairment charges of $102.0 million atrecorded during the airport services business,first six months of 2009, consisting of $71.2 million related to goodwill, $23.3 million related to intangible assets (in amortization of intangibles) and $7.5 million related to property, equipment, land and leasehold improvements and $6.4 million at airport parking business related to property, equipment, land and leasehold improvements.(in depreciation).

Reconciliations of consolidated reportable segments’ EBITDA excluding non-cash items to consolidated net loss from continuing operations before income taxes are as follows ($ in thousands) (unaudited):

     
 Nine Months Ended September 30, 2008
   Energy-related Businesses Airport-related Businesses Total
Reportable
Segments
   Gas Production
and Distribution		 District
Energy		 Airport
Services		 Airport
Parking
Net income (loss) $5,395  $1,477  $9,595  $(5,287)  $11,180 
Interest income  (33)   (34)   (475)   (91)   (633) 
Interest expense  7,058   7,795   47,507   11,468   73,828 
Provision (benefit) for income taxes  3,471   516   6,476   (3,956)   6,507 
Depreciation  4,367   4,354   15,772   3,866   28,359 
Amortization of intangibles  642   1,027   28,594   1,943   32,206 
Unrealized losses (gains) on derivative instruments  223   (28)   1,133   (246)   1,082 
EBITDA excluding non-cash items $21,123  $15,107  $108,602  $7,697  $152,529 
    
 Quarter Ended June 30, Six Months Ended June 30,
   2010 2009 2010 2009
Total reportable segments EBITDA excluding non-cash items $42,707  $39,285  $87,970  $79,200 
Interest income  4   34   20   101 
Interest expense  (38,974)   (2,103)   (73,661)   (35,669) 
Depreciation(1)  (8,838)   (10,772)   (18,195)   (25,385) 
Amortization of intangibles(2)  (8,740)   (12,532)   (17,411)   (42,797) 
Selling, general and administrative –  corporate  (1,628)   (1,417)   (3,608)   (4,348) 
Fees to manager  (2,268)   (851)   (4,457)   (1,313) 
Equity in earnings and amortization charges of investees  5,774   10,028   11,367   15,477 
Goodwill impairment  —   (53,200)   —   (71,200) 
Loss on derivative instruments  —   —   —   (25,238) 
Other (expense) income, net  (1,125)   (132)   (1,667)   512 
Total consolidated net loss from continuing operations before income taxes $(13,088)  $(31,660)  $(19,642)  $(110,660) 

(1)Depreciation includes depreciation expense for District Energy, which is reported in cost of services in the consolidated condensed statement of operations. Depreciation also includes a non-cash impairment charges of $2.2 million and $7.5 million for the quarter and six months ended June 30, 2009, respectively, recorded by Atlantic Aviation.
(2)Includes a non-cash impairment charges of $2.9 million and $23.3 million for contractual arrangements recorded during the quarter and six months ended June 30, 2009, respectively, at Atlantic Aviation.

 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

12.13. Reportable Segments  – (continued)

Reconciliation of reportable segments EBITDA excluding non-cash items to consolidated net (loss) income before income taxes and noncontrolling interests ($ in thousands) (unaudited):

    
 Quarter Ended
September 30,		 Nine Months Ended
September 30,
   2009 2008 2009 2008
Total reportable segments EBITDA excluding non-cash items $44,978  $48,420  $127,845  $152,529 
Interest income  8   268   116   1,038 
Interest expense  (24,639)   (26,114)   (81,861)   (77,616) 
Depreciation(1)  (9,729)   (9,810)   (43,227)   (28,359) 
Amortization of intangibles(2)  (9,126)   (10,563)   (51,923)   (32,206) 
Selling, general and administrative – corporate  (1,732)   55   (6,080)   (2,314) 
Fees to manager  (1,639)   (2,737)   (2,952)   (11,872) 
Equity in earnings and amortization charges of investees  1,178   4,051   16,655   10,603 
Goodwill impairment  —   —   (71,200)   — 
Unrealized losses on derivative instruments  (17,371)   (765)   (29,872)   (1,651) 
Other income (expense), net  3   (220)   226   (627) 
Total consolidated net (loss) income before income taxes and noncontrolling interests $(18,069)  $2,585  $(142,273)  $9,525 

(1)Depreciation includes depreciation expense for the Company's district energy business and airport parking business, which are reported in cost of services in the consolidated statement of operations. The Company recorded non-cash impairment charges of $7.5 million and $6.4 million at airport services business and airport parking business, respectively, for the first six months of 2009.
(2)The Company recorded a non-cash impairment charge of $23.3 million at the airport services business for the first six months of 2009.

Capital expenditures for the Company’s reportable segments were as follows ($ in thousands) (unaudited):

    
 Quarter Ended
September 30,		 Nine Months Ended
September 30,
   2009 2008 2009 2008
Gas production and distribution $1,334  $2,753  $4,915  $7,182 
District energy  2,044   1,356   5,447   3,323 
Airport services  4,366   7,728   9,246   27,310 
Airport parking  61   775   373   14,772 
Total $7,805  $12,612  $19,981  $52,587 
    
 Quarter Ended June 30, Six Months Ended June 30,
   2010 2009 2010 2009
The Gas Company $1,555  $1,716  $3,886  $3,581 
District Energy  500   1,784   846   3,403 
Atlantic Aviation  1,247   1,635   2,583   4,880 
Total $3,302  $5,135  $7,315  $11,864 

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

12. Reportable Segments  – (continued)

Property, equipment, land and leasehold improvements, goodwill and total assets for the Company’s reportable segments as of SeptemberJune 30 were as followfollows ($ in thousands) (unaudited):

      
 Property, Equipment,
Land and Leasehold
Improvements		 Goodwill Total Assets
   2009(1) 2008 2009(2) 2008 2009 2008
Gas production and distribution $143,269  $140,408  $120,193  $120,193  $347,269  $327,835 
District energy  146,063   145,885   18,646   18,646   230,544   231,382 
Airport services  289,157   315,997   377,343   504,794   1,497,028   1,775,287 
Airport parking  85,066   101,552   —   138,722   191,017   299,828 
Total $663,555  $703,842  $516,182  $782,355  $2,265,858  $2,634,332 
      
 Property, Equipment, Land and Leasehold Improvements Goodwill Total Assets
   2010 2009(1) 2010(2) 2009(2) 2010 2009
The Gas Company $143,641  $143,251  $120,193  $120,193  $352,623  $336,565 
District Energy  148,882   146,837   18,646   18,646   231,081   228,510 
Atlantic Aviation  276,670   289,275   377,343   377,343   1,452,519   1,505,430 
Total $569,193  $579,363  $516,182  $516,182  $2,036,223  $2,070,505 

(1)Includes a non-cash impairment charge of $7.5 million and $6.4 million recorded at the airport services business and airport parking business, respectively, during the first six months of 2009.ended June 30, 2009 at Atlantic Aviation.
(2)Includes a non-cashNon-cash goodwill impairment chargecharges of $71.2 million recorded during the six months ended June 30, 2009 at the airport services business.Atlantic Aviation.

Reconciliation of reportable segmentssegments’ total assets to consolidated total assets ($ in thousands) (unaudited):

  
 As of September 30,
   2009 2008
Total assets of reportable segments $2,265,858  $2,634,332 
Investment in IMTT  201,585   201,209 
Corporate and other  (102,568)   (7,504) 
Total consolidated assets $2,364,875  $2,828,037 

Reconciliation of reportable segments goodwill to consolidated goodwill ($ in thousands) (unaudited):

  
 As of September 30,
   2009 2008
Goodwill of reportable segments $516,182  $782,355 
Corporate and other  —   (1,102) 
Total consolidated goodwill $516,182  $781,253 
  
 As of June 30,
   2010 2009
 
Total assets of reportable segments $2,036,223  $2,070,505 
Investment in IMTT  213,858   200,408 
Assets of discontinued operations held for sale  —   95,148 
Corporate and other  (17,905)   (8,699) 
Total consolidated assets $2,232,176  $2,357,362 

13.14. Related Party Transactions

Management Services Agreement with Macquarie Infrastructure Management (USA) Inc. (The(the Manager)

As of SeptemberJune 30, 2009,2010, the Manager held 3,322,9183,797,557 LLC interests of the Company, which were acquired concurrently with the closing of the initial public offering in December 2004 and also by reinvesting base management and performance fees in the Company. In addition, the Macquarie Group held LLC interests acquired in open market purchases.


TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

13. Related Party Transactions  – (continued)

The Company entered into a management services agreement, or Management Agreement, with the Manager pursuant to which the Manager manages the Company’s day-to-day operations and oversees the management teams of the Company’s operating businesses. In addition, the Manager has the right to appoint the Chairman of the Board of the Company, and an alternate, subject to minimum equity ownership, and to


TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

14. Related Party Transactions  – (continued)

assign, or second, to the Company, on a permanent and wholly-dedicated basis, employees to assume the role of Chief Executive Officer and Chief Financial Officer and second or make other personnel available as required.

In accordance with the Management Agreement, the Manager is entitled to a quarterly base management fee based primarily on the Company’s market capitalization, and a performance fee, based on the performance of the Company’s stock relative to a U.S. utilities index. For the ninesix months ended SeptemberJune 30, 20092010 and September 30, 2008,2009, the Company incurred base management fees of $3.0$4.5 million and $11.9$1.3 million, respectively. The unpaid portion of the fees at the end of each reporting period is included in due to manager-related party in the consolidated condensed balance sheets. The base management fee for the first quarter of 2009 was paid in cash during the second quarter of 2009. The Manager elected to reinvest the base management fee of $2.2 million for the secondfirst quarter of 20092010 in LLC interests and the Company issued 149,795155,375 LLC interests to the Manager during the thirdsecond quarter of 2009.2010. The base management fee of $2.3 million for the second quarter of 2010 will be paid in cash during the third quarter of 2009 will be reinvested in LLC interests during the fourth quarter of 2009.2010.

The Manager is not entitled to any other compensation and all costs incurred by the Manager, including compensation of seconded staff, are paid by the Manager out of its management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries and investments, income taxes, audit and legal fees, acquisitions and dispositions and its compliance with applicable laws and regulations. During the ninesix months ended SeptemberJune 30, 20092010 and September 30, 2008,2009, the Manager charged the Company $192,000$169,000 and $186,000,$136,000, respectively, for reimbursement of out-of-pocket expenses. The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in due to manager-related party in the consolidated condensed balance sheet.

Advisory and Other Services from the Macquarie Group

The Macquarie Group, and wholly-owned subsidiaries within the Macquarie Group, including Macquarie Bank Limited, or MBL, and Macquarie Capital (USA) Inc., or MCUSA, (formerly Macquarie Securities (USA) Inc.), have provided various advisory and other services and incurred expenses in connection with the Company’s equity raising activities, acquisitions and debt structuring for the Company and its businesses. Underwriting fees are recorded in members’/stockholders’ equity as a direct cost of equity offerings. Advisory fees and out-of-pocket expenses relating to acquisitions are expensed as incurred. Debt arranging fees are deferred and amortized over the term of the credit facility. Amounts relating to these transactions comprise the following ($ in thousands):

As of SeptemberSix Months Ended June 30, 20092010

  
Airport parking business restructuring advice  — advisory services from MCUSA  $200 
    — reimbursement of out-of-pocket expenses to MCUSA   3 
Airport services business debt amendment  — debt arranging services from MCUSA   970 
 
Strategic review of alternatives available to the Company
 – advisory services from MCUSA		 $500 

Long-Term Debt

During the third quarter of 2009,Until March 31, 2010, the Company has engagedhad a revolving credit facility provided by various financial institutions, including entities within the Macquarie Group to provide consulting services to improveGroup. The facility was repaid in full during 2009 and no amounts were outstanding under the efficiency on the recoveryrevolving credit facility as of accounts receivableDecember 31, 2009 or at the airport services business. The Company incurred approximately $159,000 in fees and approximately $70,000 in out-of-pocket expenses.facility’s


 

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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

13.14. Related Party Transactions  – (continued)

Long-Term Debt

At September 30, 2009, MIC Inc. has a $97.0 million revolving credit facility with various financial institutions, including MBL.maturity on March 31, 2010. Amounts relating to the Macquarie Group’s portion of this revolving credit facility from MBL comprisecomprised of the following ($ in thousands):

NineSix Months Ended SeptemberJune 30, 20092010

 
Revolving credit facility commitment provided by Macquarie Group during the period January 1, 2009 through April 13, 2009(1) $66,667 
Revolving credit facility commitment provided by Macquarie Group during the period April 14, 2009 through September 30, 2009  21,556 
Portion of revolving credit facility commitment from Macquarie Group drawn down, as of September 30, 2009  14,755 
Macquarie Group portion of the principal payments made to the revolving credit facility during the nine months ended September 30, 2009  578 
Interest expense on Macquarie Group portion of the drawn down commitment, for the nine months ended September 30, 2009  491 
Commitment fees to the Macquarie Group, for the nine months ended September 30, 2009  90 
 
Revolving credit facility commitment provided by Macquarie Group during January 1, 2010 through March 30, 2010(1) $4,444 
Revolving credit facility commitment provided by Macquarie Group at March 31, 2010(2)  — 
Portion of revolving credit facility commitment from Macquarie Group drawn down, as of March 31, 2010(2)(3)  — 
Interest expense on Macquarie Group portion of the drawn down commitment, for the quarter ended March 31, 2010  — 
Commitment fees to the Macquarie Group, for quarter ended March 31, 2010  5      

(1)On April 14,December 31, 2009, the Company elected to reduce the available principal on its revolving credit facility from $300.0$97.0 million to $97.0$20.0 million. This resulted in a decrease in the Macquarie Group’s total commitment under theits revolving credit facility from $66.7$21.6 million to $21.6$4.4 million. See Note 8, “Long-Term Debt”, for further discussion.
(2)The holding company’s revolving credit facility matured on March 31, 2010.
(3)On December 28, 2009, the Company repaid the entire outstanding principal balance on its revolving credit facility.

Derivative Instruments and Hedging Activities

The Company has derivative instruments in place to fix the interest rate on certain outstanding variable-rate term loan facilities. MBL has provided interest rate swaps for the airport services businessAtlantic Aviation and the gas production and distribution business.The Gas Company. At SeptemberJune 30, 2009, the airport services business2010, Atlantic Aviation had $827.4$786.6 million of its variable-rate term loans hedged, of which MBL was providingprovided the interest rate swaps for a notional amount of $317.8$278.8 million. The remainder of the swaps are from an unrelated third party. During the ninesix months ended SeptemberJune 30, 2009, the airport services business2010, Atlantic Aviation made net payments to MBL of $10.7$7.0 million in relation to these swaps.

As discussed in Note 8,9, “Long-Term Debt”, for the ninesix months ended SeptemberJune 30, 2009, the airport services business2010, Atlantic Aviation paid $7.9$3.2 million in interest rate swap breakage fees, of which $1.6$383,000 was paid to MBL.

In August 2010, Atlantic Aviation used $9.9 million of excess cash flow to prepay $9.0 million of the outstanding principal balance of the term loan debt and incurred $935,000 in interest rate swap breakage fees, of which $65,000 was paid to MBL.

At SeptemberJune 30, 2009, the gas production and distribution business2010, The Gas Company had hedged $160.0 million of its term loans hedged, of which MBL was providingprovided the interest rate swaps for a notional amount of $48.0 million. The remainder of the swaps are from an unrelated third party. During the ninesix months ended SeptemberJune 30, 2009, the gas production and distribution business2010, The Gas Company made net payments to MBL of $1.3$1.1 million in relation to these swaps.

Other Transactions

On March 30, 2009, the gas production and distribution businessThe Gas Company entered into licensing agreements with Utility Service Partners, Inc. and America’s Water Heater Rentals, LLC, both indirect subsidiaries of Macquarie Group Limited, to enable these entities to offer products and services to the gas production and distribution businessThe Gas Company’s customer base. No payments were made under these arrangements during the ninesix months ended SeptemberJune 30, 2009.2010.


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MACQUARIE INFRASTRUCTURE COMPANY LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

13. Related Party Transactions  – (continued)

On August 29, 2008, Macquarie Global Opportunities Partners, or MGOP, a private equity fund managed by the Macquarie Group, completed the acquisition of the jet membership, retail charter and fuel management business units previously owned by Sentient Jet Holdings, LLC. The new company is called Sentient Flight Group (referred to hereafter as “Sentient”). Sentient iswas an existing customer of the Company’s airport services business.Atlantic Aviation. For the nine six


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MACQUARIE INFRASTRUCTURE COMPANY LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

14. Related Party Transactions  – (continued)

months ended SeptemberJune 30, 2009, the airport services business2010, Atlantic Aviation recorded $5.9$8.4 million in revenue from Sentient. As of SeptemberJune 30, 2009, the airport services business2010, Atlantic Aviation had a $359,000 receivable$132,000 in receivables from Sentient, which is included in accounts receivable in the consolidated condensed balance sheets. During the quarter ended June 30, 2010, Atlantic Aviation paid $15,000 to Sentient for charter services rendered.

In addition, the Company and variousseveral of its subsidiaries have entered into a licensing agreement with the Macquarie Group related to the use of the Macquarie name and trademark. The Macquarie Group does not charge the Company any fees for this license.

14.15. Income Taxes

The Company expects to incur a net operating loss for federal consolidated income tax return purposes for the year ending December 31, 2009.2010. The Company believes that it will be able to utilize the projected federal and certain state 2009consolidated 2010 and prior year net operating losses. Accordingly, the Company has not provided a valuation allowance against any deferred tax assets generated in 2009,2010, except as noted below. Two of the Company’s businesses, IMTT and District Energy, are less than 80% owned by the Company, and those businesses file separate federal consolidated income tax returns.

In the first six months of 2010, the Company revised the valuation allowance from $20.6 million at December 31, 2009 to $8.0 million, a decrease of $12.6 million. Approximately $2.6 million of this decrease was recorded in benefit for income taxes from continuing operations in the consolidated condensed statements of operations during the six months ended June 30, 2010, and the remaining $10.0 million decrease recorded in discontinued operations.

As discussed in Note 5, “Discontinued Operations”, as a result of the approval of the sale of PCAA's assets in bankruptcy and the expected dissolution of PCAA during 2010, the Company has reduced its valuation allowance on the realization of a portion of the deferred tax assets attributable to its basis in PCAA and its consolidated federal net operating loss.

The Company and its subsidiaries file separate and combined state income tax returns. In calculating its consolidated projected effective state tax rate for 2009,2010, the Company has taken into consideration an expected need to provide a valuation allowance for certain state income tax net operating loss carryforwards, the utilization of which is not assured beyond a reasonable doubt. In addition, the Company and its subsidiaries expect to incur certain expenses that will not be deductible in determining state taxable income. Accordingly, these expenses have also been excluded in projecting the Company’s effective state tax rate.

As discussed in Note 7, “Nonfinancial Assets Measured at Fair Value”, during the nine months ended September 30, 2009, the Company incurred a charge to earnings of approximately $108.4 million for the write down of certain fixed assets and intangibles. For purposes of determining its effective income tax rate for the quarter and nine months ended September 30, 2009, the Company does not consider the write down to be part of ordinary income. Of this amount, approximately $53.4 million is attributable to goodwill and represents a permanent book-tax difference. As a result, no tax benefit has been recognized for this charge.

Uncertain Tax Positions

At December 31, 2008,2009, the Company and its subsidiaries had a reserve of approximately $313,000$336,000 for benefits taken during 20082009 and prior tax periods attributable to tax positions for which the probability of recognition is not considered to be less than more likely than not. There was no material change in that reserve as of SeptemberJune 30, 2009.2010, and no material change is expected for the year ended December 31, 2010.

15.

16. Legal Proceedings and Contingencies

There are no material legal proceedings other than as disclosed in Part I, Item 3 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008,2009, filed with the SEC on February 27, 2009.

16. Subsequent Events

The Company evaluated and disclosed the following events through November 5, 2009:

Airport Services Business Credit Facility

On November 4, 2009, per the revised terms of the term loan agreement, as described in Note 8, “Long-Term Debt”, the airport services business used $9.9 million of excess cash flow to prepay $9.0 million of the outstanding principal balance of the term loan debt and incurred $914,000 in interest rate swap breakage fees.25, 2010.


 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the consolidated condensed financial statements and the notes to those statements included elsewhere herein.

General

We own, operate and invest in a diversified group of infrastructure businesses that provide basic everyday services, such as chilled water for building cooling and gas utility services to businesses and individuals primarily in the U.S. The businesses we own and operate are energy-related businesses consisting of our bulk liquid storage terminal business, orof: IMTT, our gas production and distribution business, or TGC,The Gas Company, and our district energycontrolling interest in District Energy; and Atlantic Aviation.

On June 2, 2010, we concluded the sale in bankruptcy of an airport parking business (“Parking Company of America Airports” or “PCAA”), resulting in a pre-tax gain of $130.3 million, of which $76.5 million related to the forgiveness of debt, and the elimination of $201.0 million of current debt from liabilities from our consolidated condensed balance sheet. The results of operations from this business and aviation-related businesses, consistingthe gain from the bankruptcy sale are separately reported as a discontinued operations in the Company’s consolidated condensed financial statements. This business is no longer a reportable segment. As a part of our airport servicesthe bankruptcy sale process, substantially all of the cash proceeds were used to pay the creditors of this business and were not paid to us. We received $602,000 from the PCAA bankruptcy estate for expenses paid on behalf of PCAA during its operations. See Note 5, “Discontinued Operations”, in our airport parking business. Theseconsolidated condensed financial statements in Part I, Item 1 of this Form 10-Q for financial information and further discussions.

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

The Current Economic Environment and Its Effect on Our Businesses and Strategy

Our energy-related businesses have proven, to date, largely resistant to the recent economic downturn, primarily due to the contracted or utility-like nature of their revenues combined with the essential services they provide. We believe these businesses are generally able to sustain cash flows during negative business cycles. This is primarily a result of the contracted nature of the revenue streams of the businessesprovide and the contractual or regulatory ability to pass through most cost increases to customers. We believe these businesses are generally able to generate consistent cash flows throughout the business cycle.

The results of our airport services businessAtlantic Aviation have been negatively affected since mid-2008 by lower overall economicthe slower economy and declining general aviation activity and perception issues regarding thelevels through mid-2009. However, general aviation sector. However, the results and activity levels at this business have stabilized over the last two quarters.

The uncertainty and instability in the credit markets appears to be subsiding.second half of 2009 and showed year on year growth in December 2009 and through the second quarter of 2010. This is evidentstabilization, combined with expense reduction efforts, results in the increase in the volume of lending activity and the price at which such lending is occurring compared with levels during the height of the global financial crisis. We believe that this improvement in the credit market has had a beneficial impact on thean improving outlook for our businesses, given the significant amount of long-term debt those businesses have outstanding. Despite the improvement, we expect tobusiness.

We will continue to strengthen our consolidated balance sheet and thoseapply excess cash flow generated by Atlantic Aviation to the reduction of our operating entities through prudent reduction inthat business’ term loan principal, consistent with the amount of long-termamendments to the debt outstanding, further increasing the likelihoodfacility that we willagreed to in February 2009. In addition to maintaining compliance with agreed upon covenants, such repayments further enables us to be able to successfully refinance this debt aswhen it matures in 2014. We expect that we will have further excess cash of $30.0 million to $40.0 million prior to the end of 2010. We intend to pursue a two-part strategy over approximately the next five years.

Management Strategy

MIC Inc. Revolving Credit Facility

At March 31, 2009several months with respect to deployment of the potentially excess cash. First, we reclassifiedwill engage with lenders with the revolving credit facility atobjective of pre-paying a portion of our holding company from long-term debt on favorable terms. Second, we will explore alternatives to current portion of long-term debt in our consolidated condensed balance sheet, due to its maturity on March 31, 2010. We have accumulatedreturn the excess cash generated by our gas production and distribution and district energy businesses as a meansto shareholders, including an undertaking analysis of repaying a portion of the amount due under the facility. With this cash repayment and assuming seasonally normal performance by the gas production and distribution and district energy businesses in the fourth quarter of 2009 and first quarter of 2010, we expect to have less than $30.0 million principal amount outstanding under this facility at the maturity date.an appropriate share repurchase program. We are in discussions with our lendersneutral as to convertwhether the facilitycash is used to a term loan and extendpre-pay debt or repurchase shares, assuming the maturity date. Under these revised terms, we would expectbenefit to fully repay the facility over the remainder of 2010. We continue to consider various other options for repayment of the facility including improving business performance, expense reductions, sale of assets sufficient to cover the remaining principal balance at maturity, or other sources of capital. We remain confident that we will be able to refinance or repay the outstanding borrowings under the facility by the current maturity date.shareholders is comparable.


 

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Management Strategy – (continued)

Airport Parking BusinessMIC Inc. Revolving Credit Facility

There is substantial doubt regardingUntil March 31, 2010, the business’ ability to continue asCompany had a going concern.revolving credit facility provided by various financial institutions, including entities within the Macquarie Group. The business has engaged financial advisors to actively solicit a sale offacility was repaid in full in December 2009 and no amounts were outstanding under the business. A letter of intent was signed during the quarter with a third party, which is conducting due diligence and with which the business is currently negotiating an asset purchase agreement. The business expects to close a sale transaction in 2010, which will likely occur in connection with a bankruptcy filing and consummation of a Chapter 11 plan. Proceeds generated as a result of the sale would be payable to the lenders of the business and not to us. Until an asset purchase agreement is signed and any conditions to closing have been met, including any approval of the sale needed as part of the bankruptcy process, we cannot provide assurance regarding the certainty or timing of a sale closing. As previously indicated, we have no intention of committing additional capital to this business and our ongoing liabilities are expected to be no more than $5.3 million in guarantees of a single parkingrevolving credit facility lease. Creditors of this business do not have recourse to any assets of our holding company or any assets of our other businesses, other than approximately $5.3 million in a lease guarantee as of November 5, 2009.

Distributions

In FebruaryDecember 31, 2009 we suspended payment of quarterly cash distributions in order to reduce both holding company debt and operating company debtor at certain businesses where the underlying fundamentals were strong. We intend to resume payment of cash distributions when our debt has been reduced to what we believe are sustainable levels, and when we have an acceptable degree of visibility into the functioning of the debt markets and prudent cash reserves.facility’s maturity on March 31, 2010.

Income Taxes

We file a consolidated federal income tax return that includes the taxable income of all our businesses, except IMTT. For 2009, we expect to haveIMTT and District Energy, which businesses will file separate income tax returns. We will include in our taxable income the taxable portion of any distributions from those businesses, which qualify for the 80% dividends received deduction.

As a result of available federal net operating loss that we can carry forward, along with federal net operating losses from prior years, which we can deduct against future years’ taxable income. Accordingly,carryforwards, we do not expect to have aconsolidated regular federal taxable income tax liability or makeregular federal tax payments at least through 2010.the 2012 tax year. The cash state and local taxes paid by our individual businesses isare discussed below in the sections entitled “Income Taxes” for each of our individual businesses.

Results of Operations

Consolidated

All discussions of our consolidated results and the results for each of our businesses relate to both the quarter and nine month periods presented, unless stated otherwise.

Key Factors Affecting Operating Results

strong performance in our energy-related businesses reflecting:
increases in average storage rates, storage capacity and volume of storage under contractutilization at our bulk liquid storage terminal business;IMTT;
increase in revenue and gross profit from IMTT spill response activity in the Gulf Coast;
rate and price increases, offset by a decline in volumes at The Gas Company; and
the impact of the interim rateat District Energy, an increase in the utility sector, combined with effective margin managementcapacity revenue and consumption revenue driven by a greater number of customers and higher average temperatures, respectively.
contribution from the non-utility sector, at our gas production and distribution business.
operating results from our airport services businessAtlantic Aviation reflecting:
a year on year decline inhigher general aviation fuel volumes, partially offset by lower weighted average fuel margins;
cost reductions and in the third quarter of 2009, an improved average dollar-based margin per gallon on fuel sold;
since May 2009, a sequential stabilization of fuel volumes and operating expenses with a slight increase in dollar-based margin per gallon;reductions; and
an increase inlower interest expense during the nine month period due to payments of interest rate swap breakage fees as a result of the debt amendment and the early repayment of the outstanding term loan debt.debt; partially offset by
a decrease in non-fuel revenue, primarily service fees.

 

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Results of Operations:Consolidated – (continued)

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

        
                
 Quarter Ended
September 30,		 Change Favorable/(Unfavorable) Nine Months Ended
September 30,		 Change Favorable/(Unfavorable) Quarter Ended June 30, Change
(from 2009 to 2010) Favorable/(Unfavorable)		 Six Months Ended June 30, Change
(from 2009 to 2010) Favorable/(Unfavorable)
 2009 2008 $ % 2009 2008 $ % 2010 2009 (1) $ % 2010 2009 (1) $ %
 ($ In Thousands) (Unaudited) ($ in Thousands) (Unaudited)
Revenue
                                                                                
Revenue from product sales $103,017  $152,060   (49,043)   (32.3)  $281,639  $478,219   (196,580)   (41.1)  $125,177  $89,430   35,747   40.0  $245,195  $178,622   66,573   37.3 
Revenue from product sales – utility  26,056   36,060   (10,004)   (27.7)   67,637   97,317   (29,680)   (30.5)   28,450   21,414   7,036   32.9   55,285   41,581   13,704   33.0 
Service revenue  72,264   87,714   (15,450)   (17.6)   214,614   263,171   (48,557)   (18.5)   49,794   51,359   (1,565)   (3.0)   103,000   108,304   (5,304)   (4.9) 
Financing and equipment lease income  1,190   1,164   26   2.2   3,587   3,537   50   1.4   1,271   1,205   66   5.5   2,516   2,397   119   5.0 
Total revenue  202,527   276,998   (74,471)   (26.9)   567,477   842,244   (274,767)   (32.6)   204,692   163,408   41,284   25.3   405,996   330,904   75,092   22.7 
Costs and expenses
                                                                                
Cost of product sales  61,349   109,801   48,452   44.1   160,624   337,819   177,195   52.5   79,887   50,645   (29,242)   (57.7)   156,941   100,411   (56,530)   (56.3) 
Cost of product sales – utility  19,406   31,161   11,755   37.7   50,016   82,175   32,159   39.1   23,151   16,549   (6,602)   (39.9)   44,464   31,936   (12,528)   (39.2) 
Cost of services  26,562   33,070   6,508   19.7   82,701   98,615   15,914   16.1   13,318   11,069   (2,249)   (20.3)   24,463   22,140   (2,323)   (10.5) 
Gross profit  95,210   102,966   (7,756)   (7.5)   274,136   323,635   (49,499)   (15.3)   88,336   85,145   3,191   3.7   180,128   176,417   3,711   2.1 
Selling, general and administrative  54,782   57,426   2,644   4.6   167,468   182,928   15,460   8.5   49,522   48,725   (797)   (1.6)   100,256   104,868   4,612   4.4 
Fees to manager-related party  1,639   2,737   1,098   40.1   2,952   11,872   8,920   75.1 
Fees to manager – related party  2,268   851   (1,417)   (166.5)   4,457   1,313   (3,144)   NM 
Goodwill impairment  —   —   —   —   71,200   —   (71,200)   NM   —   53,200   53,200   NM   —   71,200   71,200   NM 
Depreciation  7,177   7,101   (76)   (1.1)   29,597   20,139   (9,458)   (47.0)   7,202   9,270   2,068   22.3   14,924   22,420   7,496   33.4 
Amortization of intangibles  9,126   10,563   1,437   13.6   51,923   32,206   (19,717)   (61.2)   8,740   12,532   3,792   30.3   17,411   42,797   25,386   59.3 
Total operating expenses  72,724   77,827   5,103   6.6   323,140   247,145   (75,995)   (30.7)   67,732   124,578   56,846   45.6   137,048   242,598   105,550   43.5 
Operating income (loss)  22,486   25,139   (2,653)   (10.6)   (49,004)   76,490   (125,494)   (164.1)   20,604   (39,433)   60,037   152.3   43,080   (66,181)   109,261   165.1 
Other income (expense)
                                                                                
Interest income  8   268   (260)   (97.0)   116   1,038   (922)   (88.8)   4   34   (30)   (88.2)   20   101   (81)   (80.2) 
Interest expense  (24,639)   (26,114)   1,475   5.6   (81,861)   (77,616)   (4,245)   (5.5) 
Interest expense(2)  (38,974)   (2,103)   (36,871)   NM   (73,661)   (35,669)   (37,992)   (106.5) 
Equity in earnings and amortization charges of investees  1,178   4,051   (2,873)   (70.9)   16,655   10,603   6,052   57.1   5,774   10,028   (4,254)   (42.4)   11,367   15,477   (4,110)   (26.6) 
Loss on derivative instruments  (17,371)   (765)   (16,606)   NM   (29,872)   (1,651)   (28,221)   NM   —   —   —   —   —   (25,238)   25,238   NM 
Other income, net  269   6   263   NM   1,693   661   1,032   156.1 
Net (loss) income before income taxes and noncontrolling interests  (18,069)   2,585   (20,654)   NM   (142,273)   9,525   (151,798)   NM 
(Provision) benefit for income taxes  (327)   (2,254)   1,927   85.5   41,021   (3,254)   44,275   NM 
Net (loss) income before noncontrolling interests  (18,396)   331   (18,727)   NM   (101,252)   6,271   (107,523)   NM 
Net (loss) income attributable to noncontrolling interests  (48)   (167)   (119)   (71.3)   (920)   (575)   (345)   (60.0) 
Net (loss) income $(18,348)  $498   (18,846)   NM  $(100,332)  $6,846   (107,178)   NM 
Other (expense) income, net  (496)   (186)   (310)   (166.7)   (448)   850   (1,298)   (152.7) 
Net loss from continuing operations before income taxes  (13,088)   (31,660)   18,572   58.7   (19,642)   (110,660)   91,018   82.3 
Benefit for income taxes  13,488   4,822   8,666   179.7   14,577   37,387   (22,810)   (61.0) 
Net income (loss) from continuing operations $400  $(26,838)   27,238   101.5  $(5,065)  $(73,273)   68,208   93.1 
Net income (loss) from discontinued operations, net of taxes  85,212   (3,159)   88,371   NM   81,199   (9,583)   90,782   NM 
Net income (loss) $85,612  $(29,997)   115,609   NM  $76,134  $(82,856)   158,990   191.9 
Less: net loss attributable to noncontrolling interests  (238)   (1,039)   (801)   (77.1)   (1,351)   (872)   479   54.9 
Net income (loss) attributable to MIC LLC $85,850  $(28,958)   114,808   NM  $77,485  $(81,984)   159,469   194.5 

NM — Not meaningful

(1)Reclassified to conform to current period presentation.
(2)Interest expense includes non-cash losses on derivative instruments of $20.5 million and $31.7 million for the quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, interest expense includes non-cash gains on derivative instruments of $20.1 million and $13.1 million, respectively.

 

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Results of Operations:Consolidated – (continued)

Gross Profit

The decrease in our consolidatedConsolidated gross profit was primarily due to a decline in fuel volumes at our airport services business, partially offset by an improved dollar-based margin per gallon in this business for the third quarter of 2009 andincreased reflecting improved results at our gas productionenergy-related businesses and distribution business.fuel-related services at Atlantic Aviation, offset by a decrease in non-fuel gross profit from Atlantic Aviation.

Selling, General and Administrative Expenses

The decrease in our selling,Selling, general and administrative expenses wasfor the six months ended June 30, 2010 decreased primarily aas result of substantial cost reduction efforts particularlyat Atlantic Aviation, offset by increases for the quarter and six months ended June 30, 2010 at our airport services business.consolidated energy-related businesses.

Fees to Manager

Base fees to our Manager in the first nine months of 2009 decreasedincreased due to our lowerhigher market capitalization. Our Manager elected to reinvest its second and thirdfirst quarter of 20092010 base management feefees in additional LLC interests. LLC interests for the first quarter of 2010 were issued to our Manager during the second quarter of 2009 were issued2010. The base management fee in the amount of $2.3 million for the second quarter of 2010 will be paid in cash to our Manager during the third quarter of 2009. LLC interests for the third quarter of 2009 will be issued to our Manager during the fourth quarter of 2009.2010.

Goodwill Impairment

We performed impairment tests duringDuring the firstquarter and the six months ofended June 30, 2009, andwe recognized non-casha goodwill impairment charges of $53.2 million and $71.2 million, respectively, at our airport services business, primarily related to underperformance at a limited number of fixed base operations, or FBOs.Atlantic Aviation. There were no impairment charges in 2010.

Depreciation

The increasedecrease in depreciation was primarily due toreflects non-cash asset impairment charges of $2.2 million and $7.5 million recorded during the firstquarter and six months ofended June 30, 2009, respectively, at our airport services business, related to underperformance at a limited number of FBOs, and $6.4 million at our airport parking business recorded during the first quarter of 2009. Depreciation expense also increased as a result of capital expenditures by businesses resulting in higher asset balances.Atlantic Aviation.

Amortization of Intangibles

AmortizationThe decrease in amortization of intangibles expense increased due toreflects non-cash asset impairment charges of $2.9 million and $23.3 million recorded by Atlantic Aviation during the firstquarter and six months ended June 30, 2009, respectively. The impairments reduced the amortizable balance and the amount of 2009, which also related to underperformance at a limited number of FBOs at our airport services business.amortization expense in 2010.

Interest Expense and Loss on Derivative Instruments

The followingInterest expense, net, includes non-cash transactions resulted in net losses on derivative instruments of $20.5 million and $31.7 million for the quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, interest expense, net, includes non-cash gains on derivative instruments of $20.1 million and $13.1 million, respectively.

The increase in 2009:

Our airport services business paid down $72.6 million of debtthe non-cash losses on derivatives recorded both in interest expense and reducedin loss on derivative instruments is attributable to the notional amountchange in fair value of interest rate swaps, used to hedgeand includes the interest payments on that debt by a corresponding amount. The accumulated other comprehensive loss in our consolidated condensed balance sheet relating to these interest rate swaps was reclassified to loss on derivative instruments in our consolidated condensed statementreclassification of operations; and
Our airport services, gas production and distribution and district energy businesses each entered into LIBOR-based basis swaps during the first quarter of 2009. The basis swaps will lower the effective cash interest rate on these businesses’ debt through March 2010 and will reduce cash interest expense by approximately $1.2 million from October 1, 2009 through March 2010. In addition, we discontinued hedge accounting at the airport services business as of February 25, 2009 and April 1, 2009 for our other businesses. As a result of these activities, a portion of the accumulated other comprehensive loss relating to our derivative instruments was reclassified to loss on derivative instruments. We will reclassify $82.2 million of derivative lossesamounts from accumulated other comprehensive loss into lossearnings, as Atlantic Aviation pays down its debt more quickly than anticipated.

Excluding the portion related to non-cash losses on derivative instruments, based on expected future cash flows, overderivatives, interest expense decreased due to a $113.4 million reduction of term loan debt at Atlantic Aviation, the remaining liferepayment in the full amount of the existingoutstanding balance of $66.4 million of MIC holding company debt during December 2009 and a decrease in interest rate swaps.

swap break fees associated with the debt prepayments at Atlantic Aviation.

Equity in Earnings and Amortization Charges of Investees

Our equity in the earnings of IMTT decreased reflecting our share of the non-cash derivative losses in 2010 compared with our share of non-cash derivative gains in 2009, offset by improved operating results of the business.


 

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Results of Operations:Consolidated – (continued)

The increase in interest expense for the nine month period was primarily due to interest rate swap breakage fees paid by our airport services business. This business expects to pay further interest rate swap breakage fees as they continue to pay down their term loan debt and reduce the corresponding interest rate swaps.

Interest expense for the quarter decreased primarily due to favorable LIBOR movements on unhedged debt, primarily from the MIC Inc. revolving credit facility, combined with the expiration of the interest rate swap at the airport parking business during September 2009.

Equity in Earnings and Amortization Charges of Investees

Our equity in the earnings of the bulk liquid storage terminal business for the 2009 nine month period increased due to higher operating results of the business for that period, together with our share of the non-cash derivative gains of $10.2 million compared with our share of non-cash derivative losses of $2.3 million in 2008.

Our equity in the earnings of this business was lower for the 2009 quarter due to lower operating results of the business for that period combined with our share of higher non-cash derivative losses compared with 2008.

Income Taxes

Tax provision on continuing operations:

For the 2008 year,2010, we reportedexpect to report a consolidated federal net operating loss, before income taxes, for which we recordedwill record a deferred tax benefit, net of certain state net operating losses from our airport parking business and a portion of our impairment attributable to non-deductible goodwill.

For the year ending December 31, 2009, we expect to havepay a nominal federal Alternative Minimum Tax.

As we own less than 80% of IMTT and District Energy, these businesses are not included in our consolidated taxable loss for federal and for certain statetax return. These businesses file separate consolidated income tax purposes. We expect to utilizereturns, and we include the projected federal and state tax losses, except as noted below, and any prior year losses.

We include our share of any dividends received from the bulk liquid storage terminal businessIMTT and District Energy in our consolidated income tax return. Further, we expect that any dividends from IMTT and District Energy in 2010 will be treated as taxable dividends, which qualify for the 80% Dividends Received Deduction (DRD).

The following table reconciles our net loss from continuing operations before income taxes and noncontrolling interests to our taxable portion, afterloss for the six months ended June 30, 2010 ($ in thousands):

 
Net loss from continuing operations before income taxes and noncontrolling interests $ (19.6) 
Adjustments for less than 80% owned businesses  (11.0) 
State income taxes  1.9 
Other adjustments  (0.2) 
Taxable loss for the six months ended June 30, 2010 $(28.9) 

Accordingly, our tax benefit for the six months ended June 30, 2010 is as follows ($ in thousands):

 
Federal tax benefit at 35% on the tax loss for the six months ended June 30, 2010 $ 10.1 
Reduction in valuation allowance (discussed below)  2.6 
State income tax benefit  1.9 
Total tax benefit $14.6 

In determining the effective tax rate for the six months ended June 30, 2009, we excluded the write-down to fair value of certain assets from ordinary income. Further, approximately $13.5 million of the write-down was attributable to goodwill and was a permanent book-tax difference, for which no tax benefit was recognized.

Valuation allowance:

As discussed in Note 18, “Income Taxes” in our consolidated financial statements, in Part II, Item 8 of Form 10-K for 2009, from the date of sale of the noncontrolling interest in District Energy and onwards, we evaluate the need for a valuation allowance against our deferred tax assets without taking into consideration the federal dividends received deduction, is 20%deferred tax liabilities of District Energy. As of December 31, 2009, our valuation allowance was approximately $20.6 million.

During the six months ended June 30, 2010, we reduced the valuation allowance to approximately $8.0 million, resulting in a decrease of $12.6 million. Of this decrease, $2.6 million has been recorded as part of benefit for income taxes included in continuing operations on the consolidated condensed statements of operations. The remaining balance of the dividend amount received. For 2009, no more than $1.4decrease of $10.0 million of the $7.0 million cash dividend we received in the first quarter is expected to be included in our consolidated taxable income.net income from discontinued operations.

In calculating our consolidated projected effective state income tax rate for 2009,provision, we have taken into consideration an expected need to provideprovided a valuation allowance for certain state income tax net operating lossNOL carryforwards, the utilization of which is not assured beyond a reasonable doubt. In addition, we expect to incur certain expenses that will not be deductible in determining state taxable income. Accordingly, these expenses have also been excluded in projecting our effective state tax rate.

In determining the effective tax rate for the nine months ended September 30, 2009, we excluded the write-down to fair value of certain assets from ordinary income in determining our effectivestate income tax rate. Further, approximately $53.4expense.


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Results of Operations:Consolidated – (continued)

Discontinued Operations

On June 2, 2010, we concluded the sale in bankruptcy of PCAA, resulting in a pre-tax gain of $130.3 million, of which $76.5 million related to the write-down is attributableforgiveness of debt. The results of operations from this business and the gain from the bankruptcy sale are separately reported as a discontinued operations in our consolidated condensed financial statements and prior comparable periods have been restated to goodwillconform to the current period presentation. See Note 5, “Discontinued Operations”, in our consolidated condensed financial statements in Part I, Item 1 of this Form 10-Q for financial information and is a permanent book-tax difference, for which no tax benefit has been recognized.further discussions.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Excluding Non-Cash Itemsexcluding non-cash items and Free Cash Flow

In accordance with GAAP, we have disclosed EBITDA excluding non-cash items for our Company and each of our operating segments in Note 12,13, “Reportable Segments”, to in our consolidated condensed financial statements, as a key performance metric relied on by management in evaluating our performance. EBITDA excluding non-cash items is defined as earnings before interest, taxes, depreciation and amortization and non-cash items, principally goodwillwhich includes impairments, and unrealizedderivative gains and losses on derivative instruments. We consider EBITDA excluding noncashand adjustments for other non-cash items to be importantreflected in the overall assessmentstatements of our operating businesses individually and in consolidation.operations. We believe our presentation of EBITDA excluding non-cash items provides additional insight into the performance of our operating companiesbusinesses relative to each other and similar businesses without regard to their capital structure, and their ability to service or reduce debt, to fund growth capital projectsexpenditures and/or support distributions up to ourthe holding company.


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ResultsWe also disclose Free Cash Flow, as defined by us, as a means of Operations:Consolidated – (continued)

assessing the amount of cash generated by our businesses and supplementing other information provided in accordance with GAAP. We define Free Cash Flow as cash from operating activities, less maintenance capital expenditures and changes in working capital. Working capital movements are excluded on the basis that these are largely timing differences in payables and receivables, and are therefore not reflective of our ability to generate cash.

We believe that reporting Free Cash Flow will provide our investors with additional insight into our future ability to deploy cash, as GAAP metrics such as net income and cash from operating activities do not reflect all of the items that our management considers in estimating the amount of cash generated by our operating entities. In this Quarterly Report on Form 10-Q, we have disclosed Free Cash Flow for our consolidated results and for each of our operating segments.

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

In 2008,the quarter and six months ended June 30, 2009, we disclosed EBITDA only.excluding only non-cash gains (losses) on derivative instruments. The following tables, reflecting results of operations for the consolidated group and for our businesses for the quarter and ninesix months ended SeptemberJune 30, 2008,2009, have been conformed to current periods’ presentation reflecting EBITDA excluding all non-cash items.items and Free Cash Flow.


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Results of Operations:Consolidated – (continued)

A reconciliation of net income (loss) incomeattributable to EBITDA excluding non-cash items,MIC LLC from continuing operations to free cash flow from continuing operations, on a consolidated basis, is provided below:

                
 Quarter Ended
September 30,		 Change
Favorable/(Unfavorable)		 Nine Months Ended
September 30,		 Change
Favorable/(Unfavorable)		 Quarter Ended June 30, Change
(from 2009 to 2010)
Favorable/(Unfavorable)		 Six Months Ended June 30, Change
(from 2009 to 2010)
Favorable/(Unfavorable)
 2009 2008 $ % 2009 2008 $ % 2010 2009(1) $ % 2010 2009(1) $ %
 ($ In Thousands) (Unaudited) ($ in Thousands) (Unaudited)
Net (loss) income $(18,348)  $498            $(100,332)  $6,846           
Interest expense, net  24,631   25,846             81,745   76,578           
Provision (benefit) for income taxes  327   2,254             (41,021)   3,254           
Net income (loss) attributable to MIC LLC from continuing operations(2) $940  $(27,012)            $(3,578)  $(73,614)           
Interest expense, net(3)  38,970   2,069             73,641   35,568           
Benefit for income taxes  (13,488)   (4,822)             (14,577)   (37,387)           
Depreciation(1)(4)  7,177   7,101             29,597   20,139             7,202   9,270             14,924   22,420           
Depreciation – cost of services(1)(4)  2,552   2,709             13,630   8,220             1,636   1,502             3,271   2,965           
Amortization of intangibles(2)(5)  9,126   10,563             51,923   32,206             8,740   12,532             17,411   42,797           
Goodwill impairment  —   —             71,200   —             —   53,200             —   71,200           
Loss on derivative instruments  17,371   765             29,872   1,651             —   —             —   25,238           
50% share of IMTT unrealized losses (gains) on derivative instruments  4,037   2,396           (10,227)   2,251         
EBITDA excluding non-cash items $46,873  $52,132   (5,259)   (10.1)  $126,387  $151,145   (24,758)   (16.4) 
Equity in earnings and amortization charges of investees(6)  (5,774)   (8,477)             (6,367)   (8,477)           
Base management fees settled in LLC interests  —   851             2,189   851           
Other non-cash (income) expense, net  (671)   420           770   78         
EBITDA excluding non-cash items from continuing operations $37,555  $39,533   (1,978)   (5.0)  $87,684  $81,639   6,045   7.4 
EBITDA excluding non-cash items from continuing operations $37,555  $39,533            $87,684  $81,639           
Interest expense, net(3)  (38,970)   (2,069)             (73,641)   (35,568)           
Non-cash derivative losses (gains) recorded in interest expense(3)  20,548   (20,052)             31,674   (13,065)           
Amortization of debt financing costs  955   1,347             2,256   2,514           
Equipment lease receivables, net  739   641             1,451   1,407           
Benefit for income taxes, net of changes in deferred taxes  (591)   (219)             (1,469)   (744)           
Changes in working capital  (9,396)   2,470         (6,309)   3,579       
Cash provided by operating activities  10,840   21,651             41,646   39,762           
Changes in working capital  9,396   (2,470)             6,309   (3,579)           
Maintenance capital expenditures  (2,002)   (1,693)           (3,749)   (3,235)         
Free cash flow from continuing operations $18,234  $17,488   746   4.3  $44,206  $32,948   11,258   34.2 

(1)Reclassified to conform to current period presentation.
(2)Net income (loss) attributable to MIC LLC from continuing operations excludes net loss attributable to noncontrolling interests of $540,000 and $1.487 million for the quarter and six months ended June 30, 2010, respectively, and net income attributable to noncontrolling interests of $174,000 and $341,000 for the quarter and six months ended June 30, 2009, respectively.
(3)Interest expense, net, includes non-cash losses on derivative instruments of $20.5 million and $31.7 million for the quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, interest expense, net, includes non-cash gains on derivative instruments of $20.1 million and $13.1 million, respectively.
(4)Depreciation — cost of services includes depreciation expense for our district energy business and airport parking business,District Energy, which areis reported in cost of services in our consolidated condensed statements of operations. Depreciation and Depreciation — cost of services dodoes not include acquisition-related step-up depreciation expense of $1.7 million for each quarter in connection with our investment in IMTT, which is reported in equity in earnings and amortization charges of investees in our consolidated condensed statements of operations.
(2)(5)Amortization of intangibles does not include acquisition-related step-up amortization expense of $283,000 for each quarter related to intangible assets in connection with our investment in IMTT, which is reported in equity in earnings and amortization charges of investees in our consolidated condensed statements of operations.
(6)Equity in earnings and amortization charges of investees in the above table includes our 50% share of IMTT's earnings, offset by distributions we received only up to our share of the earnings recorded.

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Energy-Related Businesses

Bulk Liquid Storage Terminal BusinessIMTT

We account for our 50% interest in this business under the equity method. We recognized income of $16.7$11.4 million in our consolidated results for the ninesix months ended SeptemberJune 30, 2009.2010. This includes our 50% share of IMTT’s net income, equal to $20.2$13.7 million for the period, offset by $3.5$2.3 million of additionalacquisition-related step-up depreciation and amortization expense (net of taxes). For the ninesix months ended SeptemberJune 30, 2008,2009, we recognized income of $10.6$15.5 million in our consolidated results. This included our 50% share of IMTT’s net income, equal to $14.1$17.8 million for the period, offset by $3.5$2.3 million of additionalacquisition-related step-up depreciation and amortization expense (net of taxes).

Distributions from IMTT, to the degree classified as taxable dividends and not a return of capital for income tax purposes, are expected to qualify for the federal dividends received deduction. Therefore, 80% of any dividend is excluded in calculating our consolidated federal taxable income. Any distributions classified as a return of capital for income tax purposes will reduce our tax basis in IMTT. IMTT’s cash from operating activities for the nine months ended September 30, 2009 has been retained to fund IMTT’s growth capital expenditures and is expected to contribute significantly to IMTT’s future gross profit and EBITDA. See “Liquidity and Capital Resources” for further discussion.


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Energy-Related Business:Bulk Liquid Storage Terminal Business – (continued)

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

Key Factors Affecting Operating Results

Terminalterminal revenue and terminal gross profit increased principally due to:
increases in average tank rental ratesrates;
increase in capacity utilization; and
increase in volume of storage under contract;contract.
environmental response service revenue and
increases in revenue from the provision of storage gross profit increased principally due to spill response work and other services withactivities related to the commencement of operations at a new storage facility at Geismar, LA.
Despite the improvements to terminal gross profit, total gross profit during the quarter declined due to lower environmental response activity levelsBP oil spill in the third quarterGulf of 2009.Mexico.

        
        
 Quarter Ended
September 30,		 Change
Favorable/(Unfavorable)		 Nine Months Ended
September 30,		 Change
Favorable/(Unfavorable)
   2009 2008 $ % 2009 2008 $ %
   ($ In Thousands) (Unaudited)
Revenue
                                        
Terminal revenue $80,962  $76,062   4,900   6.4  $242,524  $223,185   19,339   8.7 
Environmental response revenue  4,206   28,432   (24,226)   (85.2)   11,421   37,933   (26,512)   (69.9) 
Total revenue  85,168   104,494   (19,326)   (18.5)   253,945   261,118   (7,173)   (2.7) 
Costs and expenses
                                        
Terminal operating costs  38,114   36,076   (2,038)   (5.6)   114,577   114,061   (516)   (0.5) 
Environmental response operating costs  3,829   19,564   15,735   80.4   11,759   27,459   15,700   57.2 
Total operating costs  41,943   55,640   13,697   24.6   126,336   141,520   15,184   10.7 
Terminal gross profit  42,848   39,986   2,862   7.2   127,947   109,124   18,823   17.2 
Environmental response gross profit (loss)  377   8,868   (8,491)   (95.7)   (338)   10,474   (10,812)   (103.2) 
Gross profit  43,225   48,854   (5,629)   (11.5)   127,609   119,598   8,011   6.7 
General and administrative expenses  6,653   8,267   1,614   19.5   19,220   21,462   2,242   10.4 
Depreciation and amortization  13,457   11,303   (2,154)   (19.1)   39,735   31,960   (7,775)   (24.3) 
Operating income  23,115   29,284   (6,169)   (21.1)   68,654   66,176   2,478   3.7 
Interest expense, net  (7,378)   (6,909)   (469)   (6.8)   (21,990)   (16,801)   (5,189)   (30.9) 
Other income  340   110   230   NM   172   1,861   (1,689)   (90.8) 
Unrealized (losses) gains on derivative instruments  (8,074)   (4,792)   (3,282)   (68.5)   20,454   (4,502)   24,956   NM 
Provision for income taxes  (3,137)   (7,412)   4,275   57.7   (27,035)   (18,874)   (8,161)   (43.2) 
Noncontrolling interest  (145)   185   (330)   (178.4)   152   442   (290)   (65.6) 
Net income $4,721  $10,466   (5,745)   (54.9)  $40,407  $28,302   12,105   42.8 
Reconciliation of net income to EBITDA excluding non-cash items:
                                        
Net income $4,721  $10,466            $40,407  $28,302           
Interest expense, net  7,378   6,909             21,990   16,801           
Provision for income taxes  3,137   7,412             27,035   18,874           
Depreciation and amortization  13,457   11,303             39,735   31,960           
Unrealized losses (gains) on derivative instruments  8,074   4,792           (20,454)   4,502         
EBITDA excluding non-cash items $36,767  $40,882   (4,115)   (10.1)  $108,713  $100,439   8,274   8.2 

NM — Not meaningful


 

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Energy-Related Business:Bulk Liquid Storage Terminal BusinessIMTT – (continued)

        
 Quarter Ended June 30, Change
Favorable/(Unfavorable)		 Six Months Ended June 30, Change
Favorable/(Unfavorable)
   2010 2009(1) 2010 2009(1)
   $ $ $ % $ $ $ %
   ($ In Thousands) (Unaudited)
Revenue
                                        
Terminal revenue  90,743   77,752   12,991   16.7   186,297   161,562   24,735   15.3 
Environmental response revenue  67,492   4,222   63,270   NM   78,976   7,215   71,761   NM 
Total revenue  158,235   81,974   76,261   93.0   265,273   168,777   96,496   57.2 
Costs and expenses
                                        
Terminal operating costs  39,934   38,014   (1,920)   (5.1)   82,546   76,463   (6,083)   (8.0) 
Environmental response operating costs  41,271   4,130   (37,141)   NM   49,471   7,930   (41,541)   NM 
Total operating costs  81,205   42,144   (39,061)   (92.7)   132,017   84,393   (47,624)   (56.4) 
Terminal gross profit  50,809   39,738   11,071   27.9   103,751   85,099   18,652   21.9 
Environmental response gross profit  26,221   92   26,129   NM   29,505   (715)   30,220   NM 
Gross profit  77,030   39,830   37,200   93.4   133,256   84,384   48,872   57.9 
General and administrative expenses  11,697   6,583   (5,114)   (77.7)   18,963   12,567   (6,396)   (50.9) 
Depreciation and amortization  14,916   13,454   (1,462)   (10.9)   29,534   26,278   (3,256)   (12.4) 
Operating income  50,417   19,793   30,624   154.7   84,759   45,539   39,220   86.1 
Interest (expense) income, net(2)  (25,774)   17,671   (43,445)   NM   (37,899)   10,610   (48,509)   NM 
Other income (expense)  580   (10)   590   NM   1,361   (168)   1,529   NM 
Unrealized gains on derivative instruments  —   —   —   —   —   3,306   (3,306)   NM 
Provision for income taxes  (10,750)   (14,959)   4,209   28.1   (20,356)   (23,898)   3,542   14.8 
Noncontrolling interests  (251)   (72)   (179)   NM   (400)   297   (697)   NM 
Net income  14,222   22,423   (8,201)   (36.6)   27,465   35,686   (8,221)   (23.0) 
Reconciliation of net income to EBITDA excluding non-cash items:
                                        
Net income  14,222   22,423             27,465   35,686           
Interest expense (income), net(2)  25,774   (17,671)             37,899   (10,610)           
Provision for income taxes  10,750   14,959             20,356   23,898           
Depreciation and amortization  14,916   13,454             29,534   26,278           
Unrealized gains on derivative instruments  —   —             —   (3,306)           
Other non-cash expenses (income)  12   157           245   (669)         
EBITDA excluding non-cash items  65,674   33,322   32,352   97.1   115,499   71,277   44,222   62.0 
EBITDA excluding non-cash items  65,674   33,322             115,499   71,277           
Interest (expense) income, net(2)  (25,774)   17,671             (37,899)   10,610           
Non-cash derivative losses (gains) recorded in interest (expense) income(2)  17,380   (25,222)             22,053   (25,222)           
Amortization of debt financing costs  538   117             710   235           
Provision for income taxes, net of changes in deferred taxes  (2,965)   (790)             (4,232)   (1,547)           
Changes in working capital  (24,220)   13,085         (27,454)   11,483       
Cash provided by operating activities  30,633   38,183             68,677   66,836           
Changes in working capital  24,220   (13,085)             27,454   (11,483)           
Maintenance capital expenditures  (11,236)   (8,342)           (19,031)   (16,681)         
Free cash flow  43,617   16,756   26,861   160.3   77,100   38,672   38,428   99.4 

NM — Not meaningful

(1)Reclassified to conform to current period presentation.
(2)Interest (expense) income, net, includes non-cash losses on derivative instruments of $17.4 million and $22.1 million for the quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, interest (expense) income, net, includes non-cash gains on derivative instruments of $25.2 million.

TABLE OF CONTENTS

Energy-Related Business:IMTT – (continued)

Revenue and Gross Profit

The increase in terminal revenue primarily reflects growth in storage and other services revenues, partially offset by declines in throughput and heating revenues.revenue. Storage revenue grew primarily as thedue to an increase in average rental rates increased by 9.1%of 8.1% and 8.6%9.2% during the quarter and ninesix months ended respectively. The increase in storage revenue also reflectedJune 30, 2010, respectively, and an increase in storage capacity as the business completedand capacity utilization mainly attributable to certain expansion projects at itsIMTT’s Louisiana facilities.

Capacity utilization increased from 93.1% to 94.8% and 93.8% to 95.4% during the quarter and six months ended June 30, 2010, respectively. Demand for bulk liquid storage generally remains strong.strong; however, utilization rates are expected to revert to approximately 94.0% over the balance of 2010 as certain tanks are taken out of service for inspection, repairs and maintenance.

The commencementTerminal operating costs increased during the six months ended June 30, 2010 primarily as a result of storagehigher repairs and related logistics services at IMTT’s Geismar, LA terminal was the primary driver ofmaintenance and an overall $2.6 million and $15.1 million increase in salaries and wages.

Revenue and gross profit and EBITDAfrom environmental response services increased substantially during the quarter and nine months ended, respectively. Throughput and heating revenues declined reflecting lower activity levels at IMTT’s facilities and lower heating costs2010 primarily due to the declineincrease in fuel prices passed through to customers. Storage capacity utilization, defined as storage capacity rented divided by total capacity available, remained relatively constant at 94% during the quarter and nine months ended September 30, 2009.

The terminal operating costs increased primarily driven by health insurance claims, pension costs, tank cleaning expenses, pipeline related work and the commencement of operations at Geismar, LA, partially offset by a $2.0 million excise tax settlement in the first half of 2008 that did not recur in 2009.

Gross profit from environmental services decreased from 2008 to 2009 primarily due to higher spill response activity in 2008 relating to IMTT’s central role in response activities following the July 23, 2008April 20, 2010 BP oil spill in the Gulf of Mexico and the January 2010 fuel oil spill on the Mississippi RiverTexas coast near New Orleans.Port Arthur. The business is not aware of any reliable estimate of how long clean-up efforts in the Gulf will continue and the business is unable to estimate the extent to which IMTT/Oil Mop will continue to provide environmental response services for this spill incident.

General and Administrative Expenses

Lower generalGeneral and administrative costs forincreased primarily due to an increase in environmental response services of $5.7 million as compared to the nine months ended September 30, 2009 resulted primarily fromprior comparable periods. The increase reflects cash and accrued bonuses and sales commissions relating to the recovery of receivables that had been fully provisioned for in prior periods.BP oil spill.

Depreciation and Amortization

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

Interest Expense,(Expense) Income, Net

Interest costs in both(expense) income, net, includes non-cash losses on derivative instruments of $17.4 million and $22.1 million for the quarter and ninesix months ended SeptemberJune 30, 2010, respectively. For the quarter and six months ended June 30, 2009, increased primarily due to higher borrowings incurred to fund growth capital expenditures along with the discontinuationinterest (expense) income, net, includes non-cash gains on derivative instruments of the capitalization of construction period$25.2 million.

Cash interest upon the commencement of operations at Geismar, LA, partially offset by a decrease in interest rates on unhedged debt balancespaid was $8.5 million and $15.9 million for the quarter and six months ended SeptemberJune 30, 2009.2010, respectively, and $6.4 million and $14.2 million for the quarter and six months ended June 30, 2009, respectively.

Income Taxes

IMTT expects to pay approximately $12.0 million in federal and state income taxes in 2010. For the yearsix months ended June 30, 2010, IMTT accrued $1.0 million of federal income taxes and $3.2 million of state income taxes. At December 31, 2009, the bulk liquid storage terminal business expects to generate a loss forIMTT had federal income tax purposes that can be carried forward and utilized to reduce current taxable income in 2010. However, the business does expect to pay an Alternative Minimum Taxnet operating losses of approximately $1.0 million, which will$50.0 million. This is expected to be available as a credit against regular federal income taxesfully utilized in the future.

The business files separate state income tax returns in five states. For the year ended December 31, 2009, the business expects to pay state income taxes of approximately $4.0 million.2010.

A significant difference between the bulk liquid storage terminal business’IMTT’s book and federal taxable income relates to depreciation of fixed assets. For book purposes, fixed assets are depreciated primarily over 15 to 30 years using the straight-line method of depreciation. For federal income tax purposes, fixed assets are depreciated primarily over 5 to 15 years using accelerated methods. In addition, a significant portion of the fixed assets placed in service in 2009 qualifyqualified for the 50% federal bonus depreciation. Most of the states in which the business operates allow the use of the federal depreciation calculation methods, but do not allowmethods. Louisiana is the only state where the business operates that allows the bonus depreciation deduction. The 50% federal bonus depreciation is not applicable to assets placed in service in 2010.


TABLE OF CONTENTS

The Gas Company

Key Factors Affecting Operating Results

increased utility contribution margin due to a rate increase effective June 11, 2009, partially offset by a decline in volume sold;
increased non-utility contribution margin due to effective margin management; and
increased salary and employment benefit costs.

        
 Quarter Ended June 30, Change
Favorable/(Unfavorable)		 Six Months Ended June 30, Change
Favorable/(Unfavorable)
   2010 2009(1) 2010 2009(1)
   $ $ $ % $ $ $ %
   ($ In Thousands) (Unaudited)
Contribution margin
                                        
Revenue – utility  28,450   21,414   7,036   32.9   55,285   41,581   13,704   33.0 
Cost of revenue – utility  19,402   13,045   (6,357)   (48.7)   37,274   25,330   (11,944)   (47.2) 
Contribution margin – utility  9,048   8,369   679   8.1   18,011   16,251   1,760   10.8 
Revenue – non-utility  24,236   18,390   5,846   31.8   49,546   39,465   10,081   25.5 
Cost of revenue – non-utility  12,089   8,131   (3,958)   (48.7)   25,845   17,617   (8,228)   (46.7) 
Contribution margin – non-utility  12,147   10,259   1,888   18.4   23,701   21,848   1,853   8.5 
Total contribution margin  21,195   18,628   2,567   13.8   41,712   38,099   3,613   9.5 
Production  1,728   1,647   (81)   (4.9)   3,408   3,094   (314)   (10.1) 
Transmission and distribution  5,270   4,903   (367)   (7.5)   10,131   9,372   (759)   (8.1) 
Gross profit  14,197   12,078   2,119   17.5   28,173   25,633   2,540   9.9 
Selling, general and administrative expenses  4,537   4,023   (514)   (12.8)   8,298   7,845   (453)   (5.8) 
Depreciation and amortization  1,716   1,732   16   0.9   3,434   3,422   (12)   (0.4) 
Operating income  7,944   6,323   1,621   25.6   16,441   14,366   2,075   14.4 
Interest (expense) income, net(2)  (5,926)   1,249   (7,175)   NM   (10,733)   (1,368)   (9,365)   NM 
Other expense  (26)   (146)   120   82.2   (11)   (125)   114   91.2 
Unrealized losses on derivative instruments  —   —   —   —   —   (327)   327   NM 
Provision for income taxes  (780)   (2,908)   2,128   73.2   (2,231)   (4,913)   2,682   54.6 
Net income(3)  1,212   4,518   (3,306)   (73.2)   3,466   7,633   (4,167)   (54.6) 
Reconciliation of net income to EBITDA excluding non-cash items:
                                        
Net income(3)  1,212   4,518             3,466   7,633           
Interest expense (income), net(2)  5,926   (1,249)             10,733   1,368           
Provision for income taxes  780   2,908             2,231   4,913           
Depreciation and amortization  1,716   1,732             3,434   3,422           
Unrealized losses on derivative instruments  —   —             —   327           
Other non-cash expenses  531   564           1,065   1,015         
EBITDA excluding non-cash items  10,165   8,473   1,692   20.0   20,929   18,678   2,251   12.1 
EBITDA excluding non-cash items  10,165   8,473             20,929   18,678           
Interest (expense) income, net(2)  (5,926)   1,249             (10,733)   (1,368)           
Non-cash derivative losses (gains) recorded in interest (expense) income(2)  3,620   (3,452)             6,211   (3,129)           
Amortization of debt financing costs  119   119             239   239           
Provision for income taxes, net of changes in deferred taxes  (1,270)   (1,834)             (2,754)   (2,118)           
Changes in working capital  (3,202)   1,042         (2,803)   (471)       
Cash provided by operating activities  3,506   5,597             11,089   11,831           
Changes in working capital  3,202   (1,042)             2,803   471           
Maintenance capital expenditures  (422)   (483)           (978)   (1,081)         
Free cash flow  6,286   4,072   2,214   54.4   12,914   11,221   1,693   15.1 

NM — Not meaningful

(1)Reclassified to conform to current period presentation. For the quarter and six months ended June 30, 2010, payroll taxes and certain employee welfare and benefit costs that were previously recorded in selling, general and administrative costs were reclassified to production, transmission and distribution and other expense where the costs were incurred. Accordingly, the quarter and six months ended June 30, 2009 were restated to reflect this change.

 

TABLE OF CONTENTS

Energy-Related Business:The Gas Production and Distribution BusinessCompany – (continued)

Key Factors Affecting Operating Results

increased non-utility contribution margin, primarily due to a decline in the cost of bulk liquefied petroleum gas, or LPG; and
increased utility contribution margin due principally to a regulator-approved interim rate increase implemented from June 11, 2009.

        
        
 Quarter Ended
September 30,		 Change
Favorable/(Unfavorable)		 Nine Months Ended
September 30,		 Change
Favorable/(Unfavorable)
   2009 2008 $ % 2009 2008 $ %
   ($ In Thousands) (Unaudited)
Contribution margin
                                        
Revenue – utility $26,056  $36,060   (10,004)   (27.7)  $67,637  $97,317   (29,680)   (30.5) 
Cost of revenue – utility  16,535   28,212   11,677   41.4   41,865   74,014   32,149   43.4 
Contribution margin –  utility  9,521   7,848   1,673   21.3   25,772   23,303   2,469   10.6 
Revenue – non-utility  18,680   23,495   (4,815)   (20.5)   58,145   70,177   (12,032)   (17.1) 
Cost of revenue –  non-utility  8,952   14,613   5,661   38.7   26,569   44,381   17,812   40.1 
Contribution margin –  non-utility  9,728   8,882   846   9.5   31,576   25,796   5,780   22.4 
Total contribution margin  19,249   16,730   2,519   15.1   57,348   49,099   8,249   16.8 
Production  1,428   1,539   111   7.2   4,020   4,051   31   0.8 
Transmission and distribution  4,003   3,705   (298)   (8.0)   11,415   10,858   (557)   (5.1) 
Gross profit  13,818   11,486   2,332   20.3   41,913   34,190   7,723   22.6 
Selling, general and administrative expenses  5,516   4,444   (1,072)   (24.1)   15,923   13,280   (2,643)   (19.9) 
Depreciation and amortization  1,713   1,677   (36)   (2.1)   5,135   5,009   (126)   (2.5) 
Operating income  6,589   5,365   1,224   22.8   20,855   15,901   4,954   31.2 
Interest expense, net  (2,212)   (2,354)   142   6.0   (6,709)   (7,025)   316   4.5 
Other (expense) income  (43)   41   (84)   NM   (68)   213   (281)   (131.9) 
Unrealized losses on derivative instruments  (3,194)   (73)   (3,121)   NM   (392)   (223)   (169)   (75.8) 
Provision for income taxes  (446)   (1,166)   720   61.7   (5,359)   (3,471)   (1,888)   (54.4) 
Net income(1) $694  $1,813   (1,119)   (61.7)  $8,327  $5,395   2,932   54.3 
Reconciliation of net income to EBITDA excluding non-cash items:
                                             
Net income(1) $694  $1,813            $8,327  $5,395           
Interest expense, net  2,212   2,354             6,709   7,025           
Provision for income taxes  446   1,166             5,359   3,471           
Depreciation and amortization  1,713   1,677             5,135   5,009           
Unrealized losses on derivative instruments  3,194   73           392   223         
EBITDA excluding non-cash items $8,259  $7,083   1,176   16.6  $25,922  $21,123   4,799   22.7 

NM — Not meaningful

(1)(2)Interest (expense) income, net, includes non-cash losses on derivative instruments of $3.6 million and $6.2 million for the quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, interest (expense) income, net, includes non-cash gains on derivative instruments of $3.5 million and $3.1 million, respectively.
(3)Corporate allocation expense, other intercompany fees and the federal tax effect have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.

TABLE OF CONTENTS

Energy-Related Business:Gas Production and Distribution Business – (continued)

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

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

Contribution Margin and Operating Income

Regulation of the utility portion of The Gas Company's operations provides for the automatic pass through of increases or decreases in feedstock costs to utility customers. Changes in the cost of propane distributed to non-utility customers can be recovered in pricing, subject to competitive conditions generally.

Utility contribution margin was higher for the quarter and ninesix months was higher,ended June 30, 2010 primarily due to implementation of the interim rate increase from June 11, 2009, partially offset by volume declines related almost entirely to commercial customers, who arewhose demand is more exposedsensitive to the variability of the economic cycle. Similarly, non-utility contribution margincycle than residential customers. Sales volume in 2010 was approximately 3.6% lower than 2009 for both the quarter and nine monthssix month periods.

On April 20, 2010, the Hawaii Public Utilities Commission (HPUC) issued its Final Decision and Order on the rate case filed by The Gas Company in August 2008, authorizing a rate increase of $9.2 million. This is a reduction from the interim rate increase of $9.5 million implemented from June 11, 2009, and therefore, the utility contribution margin was reduced to reflect the retroactive adjustment to June 11, 2009 of $266,000 in 2010.

Non-utility contribution margin was higher primarily due toas a result of effective margin management combinedactivities with lower input costs, partially offset by marginal volume declines.essentially flat compared to 2009. Local suppliers may reduce their productionrefiners supplied The Gas Company with approximately 30% less propane in the first half of propane that TGC distributes through2010 than they did in the unregulated portionfirst half of the business.2009. To the extent that local suppliers arewere unable to supply TGCThe Gas Company with a sufficient amount of propane, the business believes they cansupplemented, and will continue to supplement, theirits supply from foreign sources. Foreign sourcedThe cost per gallon of foreign supply is higher than locally-produced propane. The business believes that the cost differential of delivered foreign and locally-produced propane is likelywill have a minimal impact on non-utility contribution margin.

Increased production costs primarily reflected higher electricity costs. Transmission and distribution costs were higher primarily due to cost more than locally produced propane, although a portion of any increased cost may be offset by improved efficiency in distribution.

wage and benefit costs as well as higher repair and maintenance costs. Selling, general and administrative costs increasedwere higher primarily due to high incentive compensation based upon strongpersonnel costs and insurance costs.

Interest (Expense) Income, Net

Interest (expense) income, net, includes non-cash losses on derivative instruments of $3.6 million and $6.2 million for the quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, performance to date, pension expensesinterest (expense) income, net, includes non-cash gains on derivative instruments of $3.5 million and professional services costs, primarily related to$3.1 million, respectively. Excluding the implementation of a profit center structure. Full yearnon-cash (losses) gains on derivative instruments, interest expense was relatively flat.

Cash interest paid was $2.2 million and $4.3 million for the quarter and six months ended June 30, 2010, respectively, and $2.1 million and $4.3 million for the quarter and six months ended June 30, 2009, pension expense is expected to increase by approximately $1.1 million compared with 2008.respectively.

Income Taxes

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

The business’ federal taxable income differs from book income primarily as a result of differences in the depreciation of fixed assets. Net book income before taxes includes depreciation based on asset values and lives that differ from those used in determining taxable income. For the year endedending December 2009,31, 2010, the business expects to have apay state income tax liabilitytaxes of approximately $845,000.$1.2 million, of which $434,000 was recorded during the six months ended June 30, 2010.


TABLE OF CONTENTS

District Energy Business

Customers of our district energy businessDistrict Energy pay two charges to receive chilled water services: a fixed charge based on contracted capacity, and a variable charge based on the consumption of chilled water. Capacity charges are typically adjusted annually at a fixed rate or are indexed to the Consumer Price Index (CPI). The terms of theour customer contracts provide for the pass-throughpass through of increases or decreases in electricity costs, the largest component of the business’ direct expenses.

The financial results discussed below reflect 100% of District Energy’s performance during the quarter.

Key Factors Affecting Operating Results

an increase in consumption revenue driven by warmer average temperatures during the second quarter of 2010 compared with 2009, resulting in higher ton-hour sales, partially offset by higher electricity costs; and
a net increase in contracted capacity revenue from new customers that began service predominantly in the second quarter of 2009, and annual inflation-linked increases in contract capacity rates.

 

TABLE OF CONTENTS

Energy-Related Business:District Energy Business – (continued)

Key Factors Affecting Operating Results

a decrease in gross profit, driven by:
cooler average temperatures in 2009 compared with 2008, resulting in decreased cooling consumption revenue and decreased electricity costs due to lower ton-hour sales, partially offset by
a net increase in contracted capacity as six new customers began service and annual inflation-linked increases in contract capacity rates.
decreased selling, general and administrative costs due to a reduction in legal expenses, a change in the method of accruing audit fees, and a customer reimbursement in 2009 for project development costs.

                
         Quarter Ended June 30, Change
Favorable/(Unfavorable)		 Six Months Ended June 30, Change
Favorable/(Unfavorable)
 Quarter Ended
September 30,		 Change
Favorable/(Unfavorable)		 Nine Months Ended
September 30,		 Change
Favorable/(Unfavorable)		 2010 2009(1) 2010 2009(1)
 2009 2008 $ % 2009 2008 $ % $ $ $ % $ $ $ %
 ($ In Thousands) (Unaudited) ($ In Thousands) (Unaudited)
Cooling capacity revenue $5,224  $4,850   374   7.7  $15,231  $14,484   747   5.2   5,295   5,110   185   3.6   10,533   10,007   526   5.3 
Cooling consumption revenue  9,400   10,654   (1,254)   (11.8)   17,130   18,495   (1,365)   (7.4)   7,144   5,502   1,642   29.8   8,907   7,730   1,177   15.2 
Other revenue  832   752   80   10.6   2,331   2,201   130   5.9   803   743   60   8.1   1,667   1,499   168   11.2 
Finance lease revenue  1,190   1,164   26   2.2   3,587   3,537   50   1.4   1,271   1,205   66   5.5   2,516   2,397   119   5.0 
Total revenue  16,646   17,420   (774)   (4.4)   38,279   38,717   (438)   (1.1)   14,513   12,560   1,953   15.5   23,623   21,633   1,990   9.2 
Direct expenses – electricity  5,715   6,982   1,267   18.1   11,103   11,984   881   7.4   4,664   3,784   (880)   (23.3)   5,987   5,388   (599)   (11.1) 
Direct expenses – other(1)(2)  4,803   4,247   (556)   (13.1)   14,075   13,200   (875)   (6.6)   5,066   4,508   (558)   (12.4)   9,937   9,272   (665)   (7.2) 
Direct expenses – total  10,518   11,229   711   6.3   25,178   25,184   6   —   9,730   8,292   (1,438)   (17.3)   15,924   14,660   (1,264)   (8.6) 
Gross profit  6,128   6,191   (63)   (1.0)   13,101   13,533   (432)   (3.2)   4,783   4,268   515   12.1   7,699   6,973   726   10.4 
Selling, general and administrative expenses  697   740   43   5.8   2,051   2,498   447   17.9   799   716   (83)   (11.6)   1,557   1,354   (203)   (15.0) 
Amortization of intangibles  345   345   —   —   1,023   1,027   4   0.4   341   341   —   —   678   678   —   — 
Operating income  5,086   5,106   (20)   (0.4)   10,027   10,008   19   0.2   3,643   3,211   432   13.5   5,464   4,941   523   10.6 
Interest expense, net  (2,554)   (2,609)   55   2.1   (7,589)   (7,761)   172   2.2 
Interest (expense) income, net(3)  (7,976)   2,728   (10,704)   NM   (14,004)   (227)   (13,777)   NM 
Other income  447   45   402   NM   541   155   386   NM   59   45   14   31.1   109   94   15   16.0 
Unrealized (losses) gains on derivative instruments  (4,069)   10   (4,079)   NM   (639)   28   (667)   NM 
Income tax benefit (provision)  500   (623)   1,123   180.3   (721)   (516)   (205)   (39.7) 
Noncontrolling interest  (174)   (147)   (27)   (18.4)   (515)   (437)   (78)   (17.8) 
Unrealized losses on derivative instruments  —   —   —   —   —   (1,378)   1,378   NM 
Benefit (provision) for income taxes  1,767   (2,296)   4,063   177.0   3,487   (1,221)   4,708   NM 
Noncontrolling interests  (198)   (174)   (24)   (13.8)   (392)   (341)   (51)   (15.0) 
Net (loss) income(2)(4) $(764)  $1,782   (2,546)   (142.9)  $1,104  $1,477   (373)   (25.3)   (2,705)   3,514   (6,219)   (177.0)   (5,336)   1,868   (7,204)   NM 
Reconciliation of net (loss) income to EBITDA excluding non-cash items:
                                                                                
Net (loss) income(2)(4) $(764)  $1,782            $1,104  $1,477             (2,705)   3,514             (5,336)   1,868           
Interest expense, net  2,554   2,609             7,589   7,761           
Income tax (benefit) provision  (500)   623             721   516           
Interest expense (income), net(3)  7,976   (2,728)             14,004   227           
(Benefit) provision for income taxes  (1,767)   2,296             (3,487)   1,221           
Depreciation(2)  1,541   1,402             4,506   4,354             1,636   1,502             3,271   2,965           
Amortization of intangibles  345   345             1,023   1,027             341   341             678   678           
Unrealized losses (gains) on derivative instruments  4,069   (10)           639   (28)         
Unrealized losses on derivative instruments  —   —             —   1,378           
Other non-cash expenses  232   172           387   276         
EBITDA excluding non-cash items $7,245  $6,751   494   7.3  $15,582  $15,107   475   3.1   5,713   5,097   616   12.1   9,517   8,613   904   10.5 
EBITDA excluding non-cash items  5,713   5,097             9,517   8,613           
Interest (expense) income, net(3)  (7,976)   2,728             (14,004)   (227)           
Non-cash derivative losses (gains) recorded in interest (expense) income(3)  5,328   (5,199)             8,826   (4,808)           
Amortization of debt financing costs  170   170             340   340           
Equipment lease receivable, net  739   641             1,451   1,407           
Changes in working capital  (2,799)   (437)         (3,569)   (484)       
Cash provided by operating activities  1,175   3,000             2,561   4,841           
Changes in working capital  2,799   437             3,569   484           
Maintenance capital expenditures  (400)   (309)           (564)   (359)         
Free cash flow  3,574   3,128   446   14.3   5,566   4,966   600   12.1 

NM —– Not meaningful

(1)Reclassified to conform to current period presentation.
(2)Includes depreciation expense of $1.6 million and $3.3 million for the quarter and six month ended June 30, 2010, respectively, and $1.5 million and $1.4$3.0 million for the quartersquarter and six months ended SeptemberJune 30, 2009, and 2008, respectively, and $4.5 million and $4.4 million for the nine month periods ended September 30, 2009 and September 30, 2008, respectively.
(2)(3)Interest (expense) income, net, includes non-cash losses on derivative instruments of $5.3 million and $8.8 million for the quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, interest (expense) income, net, includes non-cash gains on derivative instruments of $5.2 million and $4.8 million, respectively.
(4)Corporate allocation expense and the federal tax effect have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.

 

TABLE OF CONTENTS

Energy-Related Business:District Energy Business – (continued)

Gross Profit

Gross profit decreasedincreased primarily due to reducedas a result of increased cooling consumption revenue related to lowerhigher ton-hour sales. Ton-hour sales resulting from coolerwere higher as a result of warmer average temperatures in 2009during the second quarter of 2010 compared with 2008 and an adjustment for electricity costs passed through in 2008. Cooler weather conditions in the Chicago area, compared with 2008, have contributed to a significant decrease in chilled water demand.2009. Cooling capacity revenue increased due to a net increase in contractcontracted capacity as sixprovided to new customers that began service predominantly in the second quarter of 2009, and annual inflation-related increases of contract capacity rates in accordance with customer contract terms. Electricity expense decreased due to lower consumption, partially offset by higher market rates in 2009. Other direct expenses increased compared to 2008 due to the timing of the completion of maintenance projects.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased primarily due toin 2009 included a reduction in legal expenses, resulting from lower activity, combined with active expense management. In addition, the decrease also reflects a change in the method of accruing audit fees and a customer reimbursement in 2009.

Other Income

Other income increased by approximately $400,000 due to a one-time termination payment received from a customer who leftfor professional fees related to the business’ system duringLas Vegas plant expansion that did not reoccur in 2010.

Interest (Expense) Income, Net

Interest (expense) income, net, includes non-cash losses on derivative instruments of $5.3 million and $8.8 million for the third quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, interest (expense) income, net, includes non-cash gains on derivative instruments of $5.2 million and $4.8 million, respectively. Excluding the non-cash (losses) gains on derivative instruments, interest expense was higher in 2010 compared with 2009 due to the expiration of an interest rate basis swap agreement, and a higher debt balance at June 30, 2010 compared with June 30, 2009.

Cash interest paid was $2.6 million and $4.9 million for the quarter and six months ended June 30, 2010, respectively, and $2.4 million and $4.8 million for the quarter and six months ended June 30, 2009, respectively.

Income Taxes

IncomeFor the period preceding the sale of a 49.99% noncontrolling interest in the business, the income from the district energy business isDistrict Energy was included in our consolidated federal income tax return, and its income is subject toDistrict Energy filed a separate Illinois state income taxes. The tax expense inreturn.

Subsequent to the table above includes both state taxes and the portionsale of the consolidated49.99% noncontrolling interest, District Energy will file a separate federal income tax liability attributablereturn, and will continue to the business.file a separate Illinois state income tax return.

DueThe business has approximately $26.0 million in federal and state NOL carryforwards available to differences in determining bookoffset positive taxable income. The business expects to have federal and tax deductible depreciation and amortization, the business’ state taxable income is expected to exceed book income in 2009. However, as of December 31, 2008 the business had more than $20.0 million of state income tax net operating loss carryforwards that are expected to2011 and 2012, which will be wholly offset any state tax liability in 2009.by NOL carryforwards.

Aviation-Related BusinessesAtlantic Aviation

Airport Services Business

The rapidly changing business conditions affecting this business warrants a discussion of current and comparable prior period performance as well as a sequential analysis in order to facilitate an understanding of the stabilization of the

Key Factors Affecting Operating Results

higher general aviation marketfuel volumes, partially offset by lower weighted average fuel margins;
lower selling, general and administrative expenses due to ongoing expense reduction initiatives;
lower interest expense driven by reduced debt levels and lower swap breakage fees; and
decrease in recent monthsother non-fuel revenue, including hangar rental, tie-down and its effect on the business’ financial results.

The soft overall economic conditions and the perception issues regarding the general aviation sector caused a lower utilization of business jets by both corporations and individuals. However, the level of U.S. business jet flight activity (as measured by take-offs and landings) has stabilizedmiscellaneous fixed based on flight data reported by the Federal Aviation Administration (FAA). In September 2009, business jet take-offs and landings were approximately 17.0% higher than the low in February 2009. For the quarter ended September 30, 2009, business jet take-offs and landings increased by 5.9% from the second quarter of 2009.

In the absence of further deterioration in the general aviation sector, we believe that, based on the business’ current performance, cash generation from the business will be sufficient to meet debt service obligations and the business will remain in compliance with financial covenants through the maturity of the business’ debt without any further equity contribution from us. Additionally, we anticipate further cost reductions.

operations related-services.

 

TABLE OF CONTENTS

Aviation-Related Business:Airport Services BusinessAtlantic Aviation – (continued)

Key Factors Affecting Operating Results

lower general aviation fuel volumes and flat weighted average margins during the nine month period, although since May 2009, fuel volumes have stabilized on a sequential basis and average dollar-based margin per gallon on fuel sold have increased slightly; and
higher interest expense related to interest rate swap break fee costs associated with prepayment of debt during the first nine months of 2009; partially offset by
lower compensation expense resulting from staff rationalization and decreased credit card fees stemming from lower jet fuel prices and lower activity levels.

                
         Quarter Ended June 30, Change
Favorable/(Unfavorable)		 Six Months Ended June 30, Change
Favorable/(Unfavorable)
 Quarter Ended
September 30,		 Change
Favorable/(Unfavorable)		 Nine Months Ended
September 30,		 Change
Favorable/(Unfavorable)		 2010 2009(1) 2010 2009(1)
 2009 2008 $ % 2009 2008 $ % $ $ $ % $ $ $ %
 ($ In Thousands) (Unaudited) ($ In Thousands) (Unaudited)
Revenue                                        
Fuel revenue $84,337  $128,565   (44,228)   (34.4)  $223,494  $408,042   (184,548)   (45.2)   100,941   71,040   29,901   42.1   195,649   139,157   56,492   40.6 
Non-fuel revenue  39,843   52,772   (12,929)   (24.5)   128,911   170,990   (42,079)   (24.6)   36,552   40,004   (3,452)   (8.6)   81,893   89,068   (7,175)   (8.1) 
Total revenue  124,180   181,337   (57,157)   (31.5)   352,405   579,032   (226,627)   (39.1)   137,493   111,044   26,449   23.8   277,542   228,225   49,317   21.6 
Cost of revenue
                                                                                
Cost of revenue – fuel  49,837   92,894   43,057   46.4   126,772   286,690   159,918   55.8 
Cost of revenue – non-fuel  2,943   6,433   3,490   54.3   10,423   27,101   16,678   61.5 
Cost of revenue-fuel  64,549   39,468   (25,081)   (63.5)   124,747   76,935   (47,812)   (62.1) 
Cost of revenue-non-fuel  3,587   2,777   (810)   (29.2)   8,539   7,480   (1,059)   (14.2) 
Total cost of revenue  52,780   99,327   46,547   46.9   137,195   313,791   176,596   56.3   68,136   42,245   (25,891)   (61.3)   133,286   84,415   (48,871)   (57.9) 
Fuel gross profit  34,500   35,671   (1,171)   (3.3)   96,722   121,352   (24,630)   (20.3)   36,392   31,572   4,820   15.3   70,902   62,222   8,680   14.0 
Non-fuel gross profit  36,900   46,339   (9,439)   (20.4)   118,488   143,889   (25,401)   (17.7)   32,965   37,227   (4,262)   (11.4)   73,354   81,588   (8,234)   (10.1) 
Gross profit  71,400   82,010   (10,610)   (12.9)   215,210   265,241   (50,031)   (18.9)   69,357   68,799   558   0.8   144,256   143,810   446   0.3 
Selling, general and administrative expenses(1)(2)  43,413   49,989   6,576   13.2   134,734   156,922   22,188   14.1   42,558   42,569   11   —   86,793   91,321   4,528   5.0 
Goodwill impairment  —   —   —   —   71,200   —   (71,200)   NM   —   53,200   53,200   NM   —   71,200   71,200   NM 
Depreciation and amortization  14,245   15,242   997   6.5   75,362   44,366   (30,996)   (69.9)   13,885   19,729   5,844   29.6   28,223   61,117   32,894   53.8 
Operating income (loss)  13,742   16,779   (3,037)   (18.1)   (66,086)   63,953   (130,039)   NM   12,914   (46,699)   59,613   127.7   29,240   (79,828)   109,068   136.6 
Interest expense, net  (15,865)   (15,751)   (114)   (0.7)   (52,552)   (47,032)   (5,520)   (11.7) 
Other (expense) income  (109)   (27)   (82)   NM   (322)   283   (605)   NM 
Interest expense, net(3)  (26,688)   (4,936)   (21,752)   NM   (48,674)   (31,440)   (17,234)   (54.8) 
Other expense  (528)   (85)   (443)   NM   (544)   (213)   (331)   (155.4) 
Unrealized losses on derivative instruments  (10,517)   (578)   (9,939)   NM   (28,601)   (1,133)   (27,468)   NM   —   —   —   —   —   (23,331)   23,331   NM 
Benefit (provision) for income taxes  5,137   (170)   5,307   NM   59,467   (6,476)   65,943   NM 
Net (loss) income(2) $(7,612)  $253   (7,865)   NM  $(88,094)  $9,595   (97,689)   NM 
Reconciliation of net (loss) income to EBITDA excluding non-cash items:
                                        
Net (loss) income(2) $(7,612)  $253            $(88,094)  $9,595           
Interest expense, net  15,865   15,751             52,552   47,032           
(Benefit) provision for income taxes  (5,137)   170             (59,467)   6,476           
Benefit for income taxes  5,764   20,844   (15,080)   (72.3)   8,051   54,330   (46,279)   (85.2) 
Net loss(4)  (8,538)   (30,876)   22,338   72.3   (11,927)   (80,482)   68,555   85.2 
Reconciliation of net loss to EBITDA excluding non-cash items:
                                        
Net loss(4)  (8,538)   (30,876)             (11,927)   (80,482)           
Interest expense, net(3)  26,688   4,936             48,674   31,440           
Benefit for income taxes  (5,764)   (20,844)             (8,051)   (54,330)           
Depreciation and amortization  14,245   15,242             75,362   44,366             13,885   19,729             28,223   61,117           
Goodwill impairment  —   —             71,200   —             —   53,200             —   71,200           
Unrealized losses on derivative instruments  10,517   578           28,601   1,133           —   —             —   23,331           
Other non-cash expenses (income)  558   (430)           605   (367)         
EBITDA excluding non-cash items $27,878  $31,994   (4,116)   (12.9)  $80,154  $108,602   (28,448)   (26.2)   26,829   25,715   1,114   4.3   57,524   51,909   5,615   10.8 
EBITDA excluding non-cash items  26,829   25,715             57,524   51,909           
Interest expense, net(3)  (26,688)   (4,936)             (48,674)   (31,440)           
Non-cash derivative losses (gains) recorded in interest expense(3)  11,604   (11,520)             16,634   (5,247)           
Amortization of debt financing costs  665   853             1,472   1,526           
Benefit for income taxes, net of changes in deferred taxes  (144)   (26)             (287)   (262)           
Changes in working capital  (4,724)   3,773         2,662   10,252       
Cash provided by operating activities  7,542   13,859             29,331   26,738           
Changes in working capital  4,724   (3,773)             (2,662)   (10,252)           
Maintenance capital expenditures  (1,180)   (901)           (2,207)   (1,795)         
Free cash flow  11,086   9,185   1,901   20.7   24,462   14,691   9,771   66.5 

NM —–  Not meaningful

(1)Reclassified to conform to current period presentation.
(2)Includes a $2.4 million increase in the bad debt reserve in the first quarter of 2009 due to the deterioration of accounts receivable aging. In the first quarter of 2009, Atlantic Aviation recorded $1.2 million of debt advisory fees. These fees were transferred to MIC Inc. during the third quarter of 2009, and have been excluded above.

TABLE OF CONTENTS

Atlantic Aviation – (continued)

(3)Interest expense, net, includes non-cash losses on derivative instruments of $11.6 million and $16.6 million for the quarter and six months ended June 30, 2010, respectively. For the quarter and six months ended June 30, 2009, interest expense, net, includes non-cash gains on derivative instruments of $11.5 million and $5.2 million, respectively.
(2)(4)Corporate allocation expense and the federal tax effect have been excluded from the above table as they are eliminated on consolidation at the MIC Inc. level.

TABLE OF CONTENTS

Aviation-Related Business:Airport Services Business – (continued)

Results for 2008 include SevenBar FBOs from March 4, 2008 (acquisition date) to September 30, 2008. Results for 2009 include SevenBar FBOs for the three and nine months ended September 30, 2009. Results for the two months ended February 28, 2009 have not been presented separately as they are immaterial.

Revenue and Gross Profit

The majority of the revenue and gross profit in our airport services businessAtlantic Aviation is generated through fueling general aviation aircraft at 68 airports and one heliport in the business’ 72 FBOs around the United States. This revenueU.S. Revenue is categorized according to who owns the fuel used to service these aircraft. If our business owns the fuel, they recordit records the cost to purchase that fuel as cost of revenue-fuel. The business’ corresponding fuel revenue is theirits cost to purchase that fuel plus a margin. The business generally pursues a strategy of maintaining, and where appropriate increasing, dollar-based margins, thereby passing any increase in fuel prices to the customer. The business also

Atlantic Aviation has into-plane arrangements whereby they fuelit fuels aircraft with fuel owned by another party. The businessIt collects a fee for this service that is recorded as non-fuel revenue. Other non-fuel revenue also includes various services such as hangar rentals, de-icing and airportmiscellaneous services.

The business’ fuel-related revenue and gross profit are driven by fuel volume and dollar-based margin per gallon. This applies to both fuel and into-plane revenue. Customers will occasionally move from one category to the other. Therefore, we

We believe discussing fuel and non-fueltotal fuel-related revenue and gross profit, including both fuel sales and into-plane arrangements (as recorded in the non-fuel revenue line) and related key metrics on a combinedan aggregate basis provides a more meaningful analysis of our airport services business.Atlantic Aviation.

Gross profit forin the quarter and nine months ended September 30, 2009 declined compared to the comparable prior periods, mainly due to lower volumefirst half of general aviation fuel sold. General aviation fuel volumes declined 19.2% as2010 was essentially flat compared to the first nine months of 2008. Weighted average margins, including into-plane sales, were flat. Excluding the results from the Charter operations and Management Contracts business, which were sold in the second half of 2008, gross profit from other services (including hangar rentals, de-icing and miscellaneous services) decreased by 17.5% for the year, primarily due to lower hangar rent resulting from lower transient traffic.

Gross profit for the quarter ended September 30, 2009 increased by 3.8% compared to the second quarter of 2009 as a result of an increase in overallaggregate fuel-related gross profit, which was offset by lower gross profit from other services. The increase in aggregate fuel-related gross profit resulted from a 4.7% increase in fuel volume driven by increased business jet traffic and expansiona relatively minor increase in market share. This was partially offset by a 1.9% decrease in weighted average fuel margin driven by change in the relative volumes of dollar-basedcustomer segments, such as charter operators, change in the relative mix of locations and competitive pressure. The year-on-year change in fuel volumes and weighted average fuel margin per gallonalso reflects military-related fuel volume (at two airports) in 2009 which did not re-occur in the first half of 2010. Excluding the impact of the non-recurring military-related volume, fuel sold.volume would have increased 8.7% and weighted average fuel-related margin would have declined 4.2%. Gross profit performancefrom other services (primarily hangar rentals and miscellaneous services) decreased by 3.5% for the six months ended June 30, 2010 compared with the prior year comparable period, primarily driven by lower hangar rental, tie-down fees and miscellaneous revenue that was also positively affected by fuel sales and facility fees generated byattributable to the G-20 meetingchange in Pittsburgh in September 2009.customer mix as noted above.

Selling, General and Administrative Expenses

The decrease in selling, general and administrative expenses is primarily due primarily to integration synergies anda 2.8% reduction in underlying costs as a result of the implementation ofongoing cost reduction initiatives. These cost savings were offset by

The decrease is also due to a $2.4 million increase in the bad debt reservereserves in the first quarter of 2009 due to the deterioration of the accounts receivable aging. Accountaging related to acquisitions. Acquisition-related receivables aging hashave improved significantly in the third quarter of 2009,and ongoing accounts receivable have not deteriorated, and as a result the business has recorded no further significant bad debt reserve adjustment. Our airport services business is further rationalizing its cost structureadjustments.

Atlantic Aviation expects selling, general and administrative expense to amount to approximately $175.0 million for 2010.


TABLE OF CONTENTS

Atlantic Aviation. – (continued)

Goodwill Impairment

The business performed an impairment test at the reporting unit level during the first six monthshalf of 2009. Goodwill is considered impaired when the carrying amount of a reporting unit’s goodwill exceeds its implied fair value, as determined under a two step approach. Based on the testing performed, the business recognized goodwill impairment charges of $53.2 million and $71.2 million principally related to underperformance at a limited number of FBOs.in the quarter and six months ended June 30, 2009, respectively. No impairment charge was recorded during 2010.

Depreciation and Amortization

The increase in depreciationDepreciation and amortization expense was due toincludes non-cash impairment charges of $5.1 million and $30.8 million due to underperformance at a limited number of FBOs in the firstquarter and six months of 2009.ended June 30, 2009, respectively.

Interest Expense, Net

Interest expense, increased despite a reductionnet, includes interest incurred on the business’ debt, amortization of $60.6 milliondeferred financing costs, swap breakage fees associated with debt prepayment and $12.0non-cash losses on derivatives instruments. These items are summarized in the table below.

        
 Quarter Ended June 30, Change
Favorable/(Unfavorable)		 Six Months Ended June 30, Change
Favorable/(Unfavorable)
   2010 2009 2010 2009
   $ $ $ % $ $ $ %
   ($ In Thousands)
Interest income  —   (31)   (31)   NM   (14)   (78)   (64)   (82.1) 
Interest paid on debt facility  13,825   14,279   454   3.2   27,575   29,298   1,723   5.9 
Swap breakage fees associated with debt prepayment  695   1,547   852   55.1   3,205   6,706   3,501   52.2 
Amortization of deferred financing costs  665   853   188   22.0   1,472   1,526   54   3.5 
Non-cash loss (gain) on derivative instruments  11,604   (11,520)   (23,124)   NM   16,634   (5,247)   (21,881)   NM 
Less: capitalized interest  (101)   (192)   (91)   (47.4)   (198)   (765)   (567)   (74.1) 
Total interest expense, net  26,688   4,936   (21,752)   NM   48,674   31,440   (17,234)   (54.8) 

NM – Not meaningful

The decrease in interest paid on debt facility primarily reflects an aggregate $113.4 million of debt inprepayments of the first half and third quarter, respectively, due to the payment of $6.7 million and $1.2 million of swap termination fees during the periods, respectively.term loan principal since February 2009.


TABLE OF CONTENTS

Aviation-Related Business:Airport Services Business – (continued)

Income Taxes

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

For purposes of determining book and taxable income, depreciation of fixed assets and amortization of intangibles are calculated differently, with additional differences between federal and state taxable income.

While the businessAtlantic Aviation as a whole expects to generate a current year federal income tax loss, certain entities within the business will generate state taxable income. For the year ending December 31, 2010, the business expects to pay state income taxes of approximately $574,000, of which $287,000 was recorded in the six months ended June 30, 2010.

The business expects its 2009 currenthas approximately $45.0 million of state NOL carryforwards. State NOL carryforwards are specific to the state in which the NOL was generated and various states impose limitations on the utilization of NOL carryforwards. Therefore, the business may incur state income tax expense will be approximately $1.3 million.

Airport Parking Business

Key Factors Affecting Operating Results

lower revenue due to reduced traffic volumes resulting from airline enplanement declines and the economic slowdown;
lower direct expenses from fuel cost savings, reduced marketing spending and other cost reduction programs initiated by the business, excluding the $6.4 million of non-cash impairment charge to property, equipment, land and leasehold improvementsliabilities in the first quarter of 2009; and
higher selling, general and administrative costs primarily due to increased professional fees associated with the planned disposal of the business.

near future, even if consolidated state taxable income is less than $45.0 million.

        
        
 Quarter Ended
September 30,		 Change
Favorable/(Unfavorable)		 Nine Months Ended
September 30,		 Change
Favorable/(Unfavorable)
   2009 2008 $ % 2009 2008 $ %
   ($ In Thousands) (Unaudited)
Revenue $16,965  $18,686   (1,721)   (9.2)  $51,011  $57,001   (5,990)   (10.5) 
Direct expenses(1)  13,102   15,409   2,307   15.0   47,101   46,330   (771)   (1.7) 
Gross profit  3,863   3,277   586   17.9   3,910   10,671   (6,761)   (63.4) 
Selling, general and administrative expenses  3,424   2,308   (1,116)   (48.4)   8,680   7,914   (766)   (9.7) 
Amortization of intangibles  —   400   400   NM   —   1,943   1,943   NM 
Operating income (loss)  439   569   (130)   (22.8)   (4,770)   814   (5,584)   NM 
Interest expense, net  (3,192)   (3,741)   549   14.7   (11,673)   (11,377)   (296)   (2.6) 
Other (expense) income  (76)   2   (78)   NM   398   62   336   NM 
Unrealized gains on derivative instruments  490   88   402   NM   163   246   (83)   (33.7) 
Benefit for income taxes  907   1,185   (278)   (23.5)   6,184   3,956   2,228   56.3 
Noncontrolling interest  222   314   (92)   (29.3)   1,435   1,012   423   41.8 
Net loss(2) $(1,210)  $(1,583)   373   23.6  $(8,263)  $(5,287)   (2,976)   (56.3) 
Reconciliation of net loss to EBITDA excluding non-cash items:
                                        
Net loss(2) $(1,210)  $(1,583)            $(8,263)  $(5,287)           
Interest expense, net  3,192   3,741             11,673   11,377           
Benefit for income taxes  (907)   (1,185)             (6,184)   (3,956)           
Depreciation(1)  1,011   1,307             9,124   3,866           
Amortization of intangibles  —   400             —   1,943           
Unrealized gains on derivative instruments  (490)   (88)           (163)   (246)         
EBITDA excluding non-cash items $1,596  $2,592   (996)   (38.4)  $6,187  $7,697   (1,510)   (19.6) 

NM — Not meaningful

(1)Includes depreciation expense of $1.1 million and $1.3 million for the quarters ended September 30, 2009 and 2008, respectively, and $9.1 million and $3.9 million for the nine month periods ended September 30, 2009 and 2008, respectively. Depreciation expense for the nine months ended September 30, 2009 includes a non-cash impairment charge of $6.4 million.
(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.

 

TABLE OF CONTENTS

Aviation-Related Business:Airport Parking Business – (continued)

        
        
 Quarter Ended
September 30,		 Change Nine Months Ended
September 30,		 Change
   2009 2008    % 2009 2008    %
Operating Data:
                                        
Cars Out(1)  433,672   460,534   (26,862)   (5.8)   1,299,570   1,470,735   (171,165)   (11.6) 
Average Revenue Per Car Out: $39.77  $37.59  $2.18   5.8  $40.03  $36.71   3.32   9.0 
Average Overnight Occupancy(2)  17,361   19,497   (2,136)   (11.0)   17,031   21,534   (4,503)   (20.9) 

(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.

Liquidity and Capital Resources

Consolidated

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

In the past, we have distributed substantially all cash in excess of our primary requirements to shareholders, subject to maintaining prudent reserves in both our operating companies and our holding company. However, the economic downturn and the dislocation in the capital markets caused us to suspend our quarterly cash distributions and retain all excess cash. The retained cash is expected to bufferUntil March 31, 2010, the Company against potential further deteriorationhad a revolving credit facility provided by various financial institutions, including entities within the Macquarie Group. The facility was repaid in the credit markets, to pay down thefull in December 2009 and no amounts were outstanding debt of our airport services business and to pay downunder the revolving credit facility at our holding company.

At Marchas of December 31, 2009 we reclassifiedor at the revolving credit facility at our holding company from long-term debt to current portion of long-term debt in our consolidated condensed balance sheet, due to itsfacility’s maturity on March 31, 2010. We have accumulated the excess cash generated by our gas production and distribution and district energy businesses as a means of repaying a portion of the amount due under the facility. With this cash repayment and assuming seasonally normal performance by the gas production and distribution and district energy businesses in the fourth quarter of 2009 and first quarter of 2010, we expect to have less than $30.0 million principal amount outstanding under this facility at the maturity date. We are in discussions with our lenders to convert the facility to a term loan and extend the maturity date. Under these revised terms, we would expect to fully repay the facility over the remainder of 2010. We continue to consider various other options for repayment of the facility including improving business performance, expense reductions, sale of assets sufficient to cover the remaining principal balance at maturity, or other sources of capital. We remain confident that we will be able to refinance or repay the outstanding borrowings under the facility by the current maturity date.

With the exception of the airport parking business (discussed below), weWe believe that our operating businesses will have sufficient liquidity and capital resources to meet future requirements, including servicing long-term debt obligations. We base our assessment of the sufficiency of our liquidity and capital resources on the following assumptions:

our businesses and investments overall generate, and will continue to generate, significant operating cash flow;
the ongoing maintenance capital expenditures associated with our businesses are modest and readily funded from their respective operating cash flow or available financing;
all significant short-term growth capital expenditures will be funded with cash on hand or from committed undrawn credit facilities; and
we will be able to refinance, extend and/or repay the principal amount of maturing long-term debt on terms that can be supported by our businesses.

TABLE OF CONTENTS

Liquidity and Capital Resources:Consolidated – (continued)

Typically, weWe have capitalized our businesses, in part, using project finance style debt. Project finance style debt is limited-recourse, floating rate, non-amortizing debt with a medium term maturity of between five and seven years.years, although the principal balance on the term loan debt at Atlantic Aviation is being prepaid using the excess cash generated by the business. At SeptemberJune 30, 2009,2010, the average remaining maturity of the drawn balances of the primary debt facilities across all of our businesses, (excluding the debt of the airport parking business and the holding company facility described above), including our proportional interest in the debtrevolving credit facility of the bulk liquid storage terminal business,IMTT, was approximately 4.44.0 years. In light of the improvement in the functioning of the credit markets generally, and the leverage ratios and interest coverage ratios, we expect each of these businesses to produce at the maturity of their respective debt facilities, we believe that we will be able to successfully refinance thetheir long-term debt of these businesses on economically sensible terms.

As previously discussed, the airport parking business has insufficient capital and liquidity with which to service and/or support the refinancing of its long-term debt. We have no intention of contributing additional capital to this business and are in negotiations with a potential acquirer of the assets of the business. Creditors of this business do not have recourse to any of our assets or the assets of our other businesses, other than approximately $5.3 million in lease payments we have guaranteed.terms at maturity.

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

Analysis of Consolidated Historical Cash Flows from Continuing Operations

        
 Nine Months Ended September 30, Change
Favorable/(Unfavorable)		 Six Months Ended June 30, Change
Favorable/(Unfavorable)
 2009 2008 2010 2009
($ In Thousands) $ $ $ %
 $ $ $ %
 ($ In Thousands)
Cash provided by operating activities  59,409   75,127   (15,718)   (20.9)   41,646   39,762   1,884   4.7 
Cash used in investing activities  (19,866)   (93,444)   73,578   78.7   (9,057)   (11,772)   2,715   23.1 
Cash (used in) provided by financing activities  (51,557)   1,728   (53,285)   NM 
Cash used in financing activities  (30,625)   (57,461)   26,836   46.7 

NM — Not meaningfulTABLE OF CONTENTS

Operating Activities

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

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

lowerimproved operating performance at our airport services;Atlantic Aviation due to stable gross profit and cost savings;
lower interest paid on the reduced term loan balance for Atlantic Aviation and no interest paid on holding company debt;
decreased payment of interest rate swap breakage fees relating to the prepayment of the outstanding principal balance on theAtlantic Aviation’s term loan debt from our airport services business; partially offset by
lower interest paid on the reduced term loan balance for our airport services business;debt; and
reduced levels of working capital, reflecting decreased activities combined with receivable collection effortsimproved operating results at our airport services business.

As a prerequisite to obtaining financing for the airport parking business in 2006, the Company guaranteed the business’ monthly interest rate swap payments, the final payment of which was made by the Company in September 2009.


TABLE OF CONTENTS

Liquidity and Capital Resources:Consolidated – (continued)

Investing Activities

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

the absence of acquisition activity in 2009; and
lower capital expenditures at our airport services and gas production and distributionenergy-related businesses; partially offset by
no return on our investment in IMTT beyond the equity earnings reported in casha smaller dividend received from operating activities.IMTT.

Distributions from IMTT are reflected in our consolidated cash provided by operating activities only up to our 50% share of IMTT’s positive earnings. Amounts in excess of this, and any distributions when IMTT records a net loss, are reflected in our consolidated cash from investing activities. For the nine months of 2009, $7.02010, $5.0 million in equity distributions were included in cash from operations. In the nine months of 2008, $10.6 million of the $21.0 million dividends received were included in cash from operating activities and $10.4compared with $7.0 million were includedin dividends received in 2009.

Investing Activities

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

lower capital expenditures at Atlantic Aviation due to timing of projects;
cash received from the PCAA bankruptcy estate for expenses paid on behalf of PCAA during its operations; partially offset by
an increase in capital expenditures at the energy-related businesses, primarily investment in capital leased assets at District Energy.

Financing Activities

The increasedecrease in consolidated cash used in financing activities was primarily due to:

to larger debt draw downsprincipal repayments in 2008, primarily against2009 following the MIC Inc.amendment of the Atlantic Aviation term loan debt facility on February 25, 2009, compared with the debt principal repayments made in 2010.

Our businesses are capitalized with a mix of equity and project-financing style debt. We believe we can prudently maintain relatively high levels of leverage due to the generally sustainable and stable long-term cash flows our businesses have provided in the past and which we expect to continue in the future as discussed above. Our project finance debt is non-amortizing and we expect to be able to refinance the outstanding balances of the term loan at maturity, except at Atlantic Aviation, where all excess cash flow from the business is being used to prepay the outstanding principal balance of the term loan. Similarly, excess cash flow generated at District Energy will be applied toward the principal balance of the term loan during the last two years before maturity. The majority of our businesses also maintain revolving credit facility, to fund acquisitions; and

debt repayment during 2009 at our airport services business; partially offset by
the suspension of distributions to shareholders in 2009.

MIC Inc. Revolving Credit Facility

capital expenditure and/or working capital facilities.

The financial covenant requirements under our MIC Inc. revolving credit facility, and the calculation of these measures at September 30, 2009, were as follows:

Ratio of Debt to Consolidated Adjusted Cash from Operations <5.60x (at September 30, 2009: 1.65x)
•Ratio of Consolidated Adjusted Cash from Operations to Interest Expense >2.0x (at September 30, 2009: 11.02x)
•Minimum EBITDA (as defined in the facility) >$100.0 million (at September 30, 2009: $174.4 million)

For aSee below for further description of the material terms of the MIC Inc. revolving credit facility, see “Liquidity and Capital Resources” in Part II, Item 7 ofcash flows related to our Annual Report of Form 10-K for the fiscal year ended December 31, 2008. As of March 31, 2009, the Company reclassified its revolving credit facility from long-term debt to current portion of long-term debt in the consolidated condensed balance sheet, due to its maturity on March 31, 2010.businesses.


TABLE OF CONTENTS

Energy-Related Businesses

Bulk Liquid Storage Terminal BusinessIMTT

The following analysis represents 100% of the cash flows of IMTT, which we believe is the most appropriate and meaningful approach to discussing the historical cash flow trends of IMTT, rather than just the composition of cash flows that are included in our consolidated cash flows. We believe this is the most appropriate and meaningful approach to discussing the historical cash flow trends of IMTT. We account for our 50% ownership of this business using the equity method. WhenDistributions from IMTT when IMTT records a net loss, or pays distributions in excess of our share of its earnings, distributions we receive in excess of IMTT’s earnings are reflected in theinvesting activities in our consolidated cash flow used in investing activities. Through December 2008, we received a quarterly dividend of $7.0 million since completing our investment in May 2006. Cash from operating activities for the nine months ended September 30, 2009 has been retained to fund IMTT’s growth capital expenditures and is expected to contribute significantly to IMTT’s future gross profit and EBITDA.flow.


TABLE OF CONTENTS

Energy-Related Business:Bulk Liquid Storage Terminal Business – (continued)

        
 Nine Months Ended September 30, Six Months Ended June 30, Change
Favorable/(Unfavorable)
 2009 2008 Change
Favorable/(Unfavorable)		 Change
Favorable/(Unfavorable)
($ In Thousands) $ $ $ %
 $ $ $ %
 ($ In Thousands)
Cash provided by operating activities  92,671   76,477   16,194   21.2   68,677   66,836   1,841   2.8 
Cash used in investing activities  (109,772)   (106,298)   (3,474)   (3.3)   (37,171)   (83,119)   45,948   55.3 
Cash provided by financing activities  15,260   28,528   (13,268)   (46.5) 
Cash (used in) provided by financing activities  (28,018)   29,960   (57,978)   (193.5) 

Operating Activities

Cash provided by operating activities at IMTT is generated primarily from storage rentals and ancillary services that are billed monthly and paid on various terms. Cash used in operating activities is mainly for payroll and benefits costs, maintenance and repair of fixed assets, utilities and professional services, interest payments and payments to tax jurisdictions. Cash provided by operating activities increased primarily due to improved operating results, an improvement in working capital and lower cash contributions to the IMTT pension plan, partially offset by an increase in cash interest paid.working capital requirements in 2010.

Working capital declined in 2009 as we received payments from previously executed oil spill jobs. Conversely in 2010, working capital has increased significantly due to the work being performed in connection with the BP oil spill in the Gulf of Mexico. Customers are paying as agreed under usual and customary terms.

Investing Activities

Cash used in investing activities primarily relates primarily to capital expenditures discussed below.below, as well as the payment of accrued purchases recorded in prior periods. Capital expenditures decreased from $161.3$66.0 million in 20082009 to $106.1$34.4 million in 20092010 primarily reflecting a reduction in growth capital expenditure as projects have been completed. Maintenance capital expenditures also decreased resulting from reduced levels of tank inspections and repairs and remediation work at the Bayonne, NJ facility. However, cash used in investing activities in 2008 was offset by $55.5 million of proceeds received from the sale of Gulf Opportunity Zone (“GO Zone”) bond investments, which did not recur in 2009.expenditures.

Maintenance Capital Expenditure

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

During the ninesix months ended SeptemberJune 30, 2010 and 2009, IMTT spent $26.9incurred $19.0 million and $16.7 million, respectively, on maintenance capital expenditures, including $24.1(i) $16.6 million and $14.5 million, respectively, principally in relation to tank refurbishments and repairs toof tanks, docks and other infrastructure and $2.8(ii) $2.4 million and $2.2 million, respectively, on environmental capital expenditures, principally in relation to improvements in containment measures and remediation.

In 2009,For the full-year 2010, IMTT expects to spend a total of $35.0approximately $45.0 million to $40.0$50.0 million on maintenance capital expenditures. IMTT anticipates that maintenance capital expenditures will increase to $55.0 million to $65.0 million in 2010 and remain at that levelelevated levels through 2012 before moderating.

Growth Capital Expenditure

During the nine months ended September 30, 2009, IMTT spent $65.7 million on growth projects, including $30.9 million for the on-going construction of new storage tanks at its St. Rose, Gretna and Avondale, LA facilities, $22.6 million for on-going tank construction and refurbishment as well as improved infrastructure at its Bayonne, NJ facility and $6.9 million in relation to the final elements of construction of the new bulk liquid chemical storage facility at Geismar, LA. The balance of the expenditure was spent on specific expansion projects related to a number of smaller projects to improve the capabilities of IMTT’s facilities.

Since our investment in IMTT, the business has undertaken or committed to a total of approximately $525.1 million in expansion projects and acquired the Joliet, IL facility for $18.5 million. Through September 30, 2009, these projects added and/or refurbished approximately 5.6 million barrels of storage capacity and are contributing $45.6 million to gross profit and EBITDA on an annualized basis.2014.


 

TABLE OF CONTENTS

Energy-Related Business:Bulk Liquid Storage Terminal BusinessIMTT – (continued)

Growth Capital Expenditure

In addition,During the first half of 2010, IMTT currentlyfunded $15.4 million of the $54.8 million of previously announced pending growth capital projects and brought on line an additional 700,000 barrels of storage. This compares with growth capital expenditures of $49.3 million in the first half of 2009. The remainder of the announced spending will be largely completed by December 31, 2010.

As of June 30, 2010, IMTT has ongoing growth projects for the construction or refurbishment of 1.8 million385,000 barrels of new storage capacity and associated infrastructure at St. Rose, LA and the conversion of 775,000 barrels of capacity and associated infrastructure at Bayonne, NJ, which are expected to be put into service from the fourth quarter of 2009 through early 2010. Other smaller growth projects are also being pursued. On a combined basis, thestorage. The projects under construction or refurbishment are expected to have a total cost of $138.2$14.4 million and will contribute approximately $19.7$6.2 million to IMTT's gross profit and EBITDA on an annualized basis. Of the $138.2$14.4 million, of IMTT’s current growth projects, $67.5$9.9 million remained to be spent as at Septemberof June 30, 2009.2010.

In addition, IMTT expectsis engaged in the construction or upgrade of storage related infrastructure. These projects are expected to fund these committed projectscost $33.9 million, with its existing credit facilities. Contracts with a term$26.8 million remaining to be spent as of between 4 and 12 years have been signed with customers for substantially all of the tanks being constructed/converted in LA and NJ.June 30, 2010.

IMTT continues to review numerous additional attractive growth opportunities with an aggregate value between $200.0 million and $250.0 million and has been progressing on these opportunities. IMTT anticipates funding new growth capital expenditures with a combinationDiscussions have progressed following the successful upsizing of its credit facility on June 18, 2010 as discussed below. IMTT expects to fund these potential projects with draw downs against the upsized credit facility and cash flow from operating activities, existing and additional credit facilities.operations.

Financing Activities

Cash flows from financing activities decreased primarily due to net debt repayments in 2010 as compared with net borrowings in 2009. In the first six months of 2010, IMTT made a $5.0 million distribution to both of its shareholders, compared with $7.0 million in the first six months of 2009.

At SeptemberJune 30, 2009,2010, the outstanding balance on IMTT’s debt facilities, excluding capitalized leases, consisted of $242.6$338.6 million in revolving credit facilities, $251.3 million in tax exempt bonds and $143.7$32.6 million in term loan facilities, including shareholder loans. The weighted average interest rate of the outstanding debt facilities, including any interest rate swaps and fees associated with outstanding letters of credit at September 30,is 5.53%. Cash interest paid was $15.9 million and $14.2 million for 2010 and 2009, is 4.3%. For the nine months ended September 30, 2009, IMTT paid approximately $22.0 million, net of capitalized interest, in interest expense related to its debt facilities.respectively.

On August 28, 2009,June 18, 2010, IMTT entered into a loan agreement with Regions Bank, as Administrative Agent, to provide unsecured term loan financingamended its revolving credit facility. The amendment increased the size of $30.0 million. IMTT drew down $30.0the facility from $625.0 million on the same day and applied the funds to repay its current($600.0 million U.S. dollar denominated revolving credit facility. Terms of the additional unsecured facility include an interest rate of LIBOR plus an average margin of 4.0% and a maturity of June 2012. All other material terms, including financial covenants, are substantially the same as the business’ existing revolving$25.0 million equivalent Canadian dollar denominated) to $1,100.0 million ($1,070.0 million U.S. dollar denominated revolving credit facility.and $30.0 million equivalent Canadian dollar denominated) and extended the maturity on $970.0 million two years from June 7, 2012 to June 7, 2014 with the remaining $130.0 million maturing on June 7, 2012. The facility was used to fully repay the $30.0 million Regions Term Loan as well as the $65.0 million DNB Term Loan.

Cash flows from financing activities decreased primarily dueIn addition, the amendment removes a limitation on IMTT’s ability to decreasesgrant liens when entering into additional debt agreements. Specifically, IMTT may enter into additional debt agreements and grant liens in relation to such debt draw downsagreements provided that obligations are secured on not less than a pari-passu basis. The increased commitment will be used to fund IMTT’s expansion and is expected to be more than adequate to fully fund existing and reasonably foreseeable growth capital expenditure offset by lower dividend paymentsplans.


TABLE OF CONTENTS

Energy-Related Business:IMTT – (continued)

The key terms of the amended credit facility are summarized below:

    
    
 USD Revolving Credit Facility –  Extended USD Revolving Credit Facility – Non Extended USD DNB Nor Loans CAD Revolving Credit Facility – Extended
Total Committed Amount $875.0 million $130.0 million $65.0 million $30.0 million
Maturity June 7, 2014 June 7, 2012 December 31, 2012 (at which time it converts to USD Revolving Credit Facility —  Extended) June 7, 2014
Uncommitted Expansion Amounts $130.0 million, subject to corresponding reductions in other commitments $0 $0 $0
Amortization Revolving, payable at maturity Revolving, payable at maturity Term loan, payable at maturity Revolving, payable at maturity
Interest Rate Floating at LIBOR
plus a margin based on the ratio of Debt to adjusted EBITDA of IMTT and its affiliates, as follows:		 Floating at LIBOR
plus a margin based on the ratio of Debt to adjusted EBITDA of IMTT and its affiliates, as follows:		 Floating at LIBOR
plus 1.00% through December 2012, thereafter per the terms of the USD Revolving Credit Facility		 Floating at Bankers’ Acceptances (BA) Rate plus a margin based on the ratio of Debt to adjusted EBITDA of IMTT and its affiliates, as follows:
   < 2.0x L+1.50%
< 2.5x L+1.75%
< 3.0x L+2.00%
< 3.75x L+2.25%
< 4.0x L+2.50%
> = 4.0x L+2.75%		 < 2.0x L+0.55%
< 2.5x L+0.70%
< 3.0x L+0.85%
< 3.75x L+1.00%
< 4.0x L+1.25%
> = 4.0x L+1.50%		    < 2.0x BA+1.50%
< 2.5x BA+1.75%
< 3.0x BA+2.00%
< 3.75x BA+2.25%
< 4.0x BA+2.50%
> = 4.0x BA+2.75%
Commitment Fees A percentage of undrawn committed amounts based on the ratio of Debt to adjusted EBITDA of IMTT and its affiliates, as follows: A percentage of undrawn committed amounts based on the ratio of Debt to adjusted EBITDA of IMTT and its affiliates, as follows: N/A A percentage of undrawn committed amounts based on the ratio of Debt to adjusted EBITDA of IMTT and its affiliates, as follows:
   < 2.0x 0.250%
< 2.5x 0.250%
< 3.0x 0.250%
< 3.75x 0.375%
< 4.0x 0.375%
> = 4.0x 0.500%		 < 2.0x 0.125%
< 2.5x 0.150%
< 3.0x 0.175%
< 3.75x 0.200%
< 4.0x 0.250%
> = 4.0x 0.250%		    < 2.0x 0.250%
< 2.5x 0.250%
< 3.0x 0.250%
< 3.75x 0.375%
< 4.0x 0.375%
> = 4.0x 0.500%

Except for the changes discussed above, the terms of the facility, including covenants and repaymentevents of shareholder loans in 2009.default, were not amended. Interest rate swap contracts hedging a portion of the original facility have been maintained.

The financial covenant requirements under IMTT’s credit facilities, and the calculation of these measures at SeptemberJune 30, 2009,2010, were as follows:

USD Revolving Credit FacilityUSD/CAD Revolving Credit Facility
Debt to EBITDA Ratio: Max 4.75xDebt to EBITDA Ratio: Max 4.75x
(at SeptemberJune 30, 2009: 3.70x)(at September 30, 2009: 3.70x)2010: 3.03x)
EBITDA to Interest Ratio: Min 3.00xEBITDA to Interest Ratio: Min 3.00x
(at SeptemberJune 30, 2009: 7.00x)(at September 30, 2009: 7.00x)2010: 8.17x)

For a description of the material terms of IMTT’s 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, 2008. IMTT does not have any material changes to these credit facilities since February 27, 2009, our 10-K filing date.

Gas Production and Distribution Business

    
 Nine Months Ended September 30, Change
Favorable/(Unfavorable)
   2009 2008
($ In Thousands) $ $ $ %
Cash provided by operating activities  16,477   15,262   1,215   8.0 
Cash used in investing activities  (4,816)   (6,959)   2,143   30.8 
Cash provided by financing activities  10,000   2,000   8,000   NM 

NM — Not meaningful


 

TABLE OF CONTENTS

Energy-Related Business:

The Gas Production and Distribution Business – (continued)

Company

    
 Six Months Ended June 30, Change
Favorable/(Unfavorable)
   2010 2009
   $ $ $ %
   ($ In Thousands)
Cash provided by operating activities  11,089   11,831   (742)   (6.3) 
Cash used in investing activities  (3,910)   (3,497)   (413)   (11.8) 
Cash provided by financing activities  —   —   —   — 

Operating Activities

The main driver for cash provided by operating activities is customer receipts. These are offset in part by the timing of payments for fuel, materials, pipeline repairs, vendor services and supplies, payroll and benefit costs, revenue-based taxes and payment of administrative costs. Customers are generally billed monthly and make payments on account. Vendors and suppliers generally bill TGCthe business when services are rendered or when products are shipped.

The increasedecrease from 20082009 to 20092010 was primarily due to higher inventory, lower accounts payable and timing of prepaid insurance payments, offset by improved operating results partially offset by payment of pension contributions.and lower revenue-based taxes.

Investing Activities

Cash used in investing activities is primarily comprisescomprised of capital expenditures. Capital expenditures for the non-utility business are funded by cash from operating activities and capital expenditures for the utility business are funded by drawing on credit facilities as well as cash from operating activities.

Maintenance Capital Expenditure

Maintenance capital expenditures include replacement of pipeline sections, improvements to the business’ transmission system and synthetic natural gas, or SNG plant, improvements to buildings and other property and the purchasespurchase of vehiclesequipment. These expenditures were higher compared to the prior year due to a higher level of pipeline renewals, expenditures for SNG plant components and equipment.facility upgrades.

Growth Capital Expenditure

Growth capital expenditures include the purchasespurchase of meters, regulators and propane tanks for new customers, the cost of installing pipelines for new residential and commercial construction and the costs of new commercial energy projects.renewable feedstock pilot program.

The following table sets forth information about capital expenditures in our gas production and distribution business:The Gas Company:

  
 Maintenance Growth
Nine months ended September 30, 2008 $4.6 million  $3.2 million 
Nine months ended September 30, 2009 $1.8 million  $3.1 million 
2009 full year projected $3.7 million  $4.3 million 
Commitments at September 30, 2009 $209,000  $700,000 
MaintenanceGrowth
Six months ended June 30, 2009$1.3 million$2.3 million
Six months ended June 30, 2010$1.7 million$2.2 million
2010 full year projected$5.5 million$6.5 million
Commitments at June 30, 2010$122,000$1.5 million

The business expects to fully fund its total 20092010 capital expenditures withfrom cash from operating activities and available credit facilities that relate to the utility operations.debt facilities. Capital expenditures for 20092010 are expected to be lowerhigher than previous years due to deferralrequired pipeline maintenance and inspection involving the relocation and upgrade of several large projects untiltwo sections of the economic outlook improves.transmission pipeline near the SNG plant as part of an integrity management program due by 2012 and a pilot project at the SNG plant to create gas from renewable feedstock sources. Commitments at June 30, 2010 primarily relate to the renewable feedstock project.

Financing Activities

At SeptemberJune 30, 2009,2010, the outstanding balance on the business’ debt facilities consisted of $160.0 million in term loan facility borrowings and $19.0 million in capital expenditure facility borrowings. In July 2010, the business repaid $10.0 million of its capital expenditure facility borrowings.


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

The Gas Company has interest rate swaps hedging 100% of the interest rate exposure under the two $80.0 million term loan facilities that effectively fix the interest rate at 4.8375% (excluding the margin). In March 2009, The Gas Company entered into an interest rate basis swap agreement with its existing debt and swap counterparties. The basis swap, which reduced the weighted average annual interest rate on the business’ primary debt facilities by approximately 24.75 basis points, expired in March 2010. The resulting weighted average interest rate of the outstanding debt facilities including any interest rate swaps at SeptemberJune 30, 20092010 is 4.6%4.85%. For the nine months ended September 30, 2009, theThe business paid approximately $6.4$4.3 million in interest expense related to its debt facilities.facilities in 2010 and 2009.

TGCThe Gas Company also has an uncommitted unsecured short-term borrowing facility of $7.5 million that was renewed during the second quarter of 2009.2010. This credit line bears interest at the lending bank’s quoted rate or prime rate. The facility is available for working capital needs and noneeds. No amounts were outstanding as of SeptemberJune 30, 2009.2010.

The main drivers for cash from financing activities are debt financings for capital expenditures and the repayment of outstanding credit facilities. The change from 2008 to 2009 was due primarily toThere were no borrowings or repayments during the timing of borrowings to fund capital expenditures.quarter.

The financial covenants triggering distribution lock-up under the business’ credit facility are as follows:

•
12 mo. look-forward and 12 mo. look-backward adjusted EBITDA/interest >3.5x (distribution lock-up) and >2.5x (debt default threshold). The ratio at September 30, 2009 was 8.64x.

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Energy-Related Business:Gas Production and Distribution Business – (continued)

12 mo. look-backward adjusted EBITDA/interest <3.5x (distribution lock-up) and <2.5x (default). The ratio at June 30, 2010 was 5.7x.

Additionally, the HPUC requires thatthe consolidated debt to total capital for HGC Holdings not to exceed 65%.65.0% and $20.0 million to be readily available in cash resources at The Gas Company, HGC Holdings or MIC. At June 30, 2010, the debt to total capital ratio was 62% at September 30, 2009.62.4% and $20.0 million in cash resources was readily available.

For a description of the material terms of the gas production and distribution business’The Gas Company’s 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, 2008.2009. We have not had any material changes to these credit facilities since February 27, 2009,25, 2010, our 10-K filing date.

District Energy Business

The following analysis represents 100% of the cash flows of District Energy.

        
 Nine Months Ended September 30, Change
Favorable/Unfavorable		 Six Months Ended June 30, Change
Favorable/(Unfavorable)
 2009 2008 2010 2009
($ In Thousands) $ $ $ %
 $ $ $ %
 ($ In Thousands)
Cash provided by operating activities  9,563   11,773   (2,210)   (18.8)   2,561   4,841   (2,280)   (47.1) 
Cash used in investing activities  (5,447)   (3,323)   (2,124)   (63.9)   (3,246)   (3,403)   157   4.6 
Cash provided by (used in) financing activities  6,619   (396)   7,015   NM 
Cash (used in) provided by financing activities  (172)   2,686   (2,858)   (106.4) 

NM — Not meaningful

Operating Activities

Cash provided by operating activities is driven primarily driven by customer receipts for services provided and for leased equipment payments received (including non-revenue lease principal),. Cash used in operating activities is driven by the timing of payments for electricity, and vendor services or supplies and the payment of payroll and benefit costs. The decline in cash provided by operating activities was due primarily due to higher new customer reimbursements for costsa requirement that the business prepay a portion of its 2010 electricity supply contract one month in advance. District Energy accepted these prepayment terms to connectminimize the overall per unit cost of electricity. These cost savings are passed on to the business’ system in 2008 comparedcustomers. The business did not need to prepay its electricity cost under its 2009 andsupply contract nor will it need to prepay under the timingterms of payments to vendors. Excluding these payments, the cash contribution from ongoing operations was relatively flat period over period.its 2011 supply contract.


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Energy-Related Business:District Energy – (continued)

Investing Activities

Cash used in investing activities mainly comprises capital expenditures, which are generally funded by drawing on available credit facilities. Cash used in investing activities in 20082009 and 20092010 primarily funded growth capital expenditures for new customer connections and plant expansion.

Maintenance Capital Expenditure

The business expects to spend up toapproximately $1.0 million per year on capital expenditures relating to the replacement of parts, system reliability, customer service improvements and minor system modifications. Maintenance capital expenditures will be funded from available debt facilities and cash from operating activities. These expenditures were higher in the first six months of 2010 due to the timing of spend on ordinary course maintenance projects.

Growth Capital Expenditure

The following table summarizes growth capital expenditures committed by our district energy businessDistrict Energy, as well as the gross profit and EBITDA expected to be generated by those expenditures. Of the $28.0$25.0 million total, approximately $17.6$24.2 million, or 63%97%, has been spent as of SeptemberJune 30, 2009.2010.

   
    Capital Expenditure Cost Gross Profit/EBITDA(1) Expected Date for Gross Profit/EBITDA
 Capital
Expenditure Cost ($ Millions)		 Gross Profit/ EBITDA ($ Millions)(1) Expected Date
for Gross Profit/EBITDA		 ($ in Millions)   
Chicago Plant and Distribution System Expansion  7.7            $7.7           
New Chicago Customer Connections and Minor System Modifications  6.6         6.6           
  14.3   4.9   2007 – 2012  $    14.3  $    4.9   2007 – 2013 
Chicago Plant Renovation and Expansion  11.0   1.3   2010 – 2011   10.7   1.3   2009 – 2011 
Las Vegas System Expansion  2.7   0.3   2010 
Total  28.0   6.5     $25.0  $6.2    

(1)Represents projected increases in annualized EBITDA in the first year following completion of the project.

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Energy-Related Business:District Energy Business – (continued)

New customers will typically reimburse the business for a substantial portion of expenditures related to connecting them to ourthe business’ system, thereby reducing the impact of this element of capital expenditure. In addition, new customers generally have up to two years after their initial service date to increase capacity up to their final contracted tons, which may defer a small portion of the expected gross profit and EBITDA. The business anticipates that the expanded capacity sold to new or existing customers will be under contract or subject to letters of intent prior to the business committing to the capital expenditure. As of October 15, 2009,August 4, 2010, the business has signed contracts with eleven new customers representing approximately 80% of expected additional gross profit and EBITDA relating to the Chicago projects in the table above. Customers representing approximately 55%, of the $6.2 million of expected additional gross profit and EBITDA, are currently in service.

The business expects to fund the capital expenditures for system expansion and interconnection by drawing on available debt facilities. The following table sets forth information about District Energy’s capital expenditures:

  
 Maintenance Growth
Six months ended June 30, 2009  $175,000   $3.2 million 
Six months ended June 30, 2010  $719,000   $127,000 
2010 full year projected  $1.1 million   $1.4 million 
Commitments at June 30, 2010  $349,000   $702,000 

In 2009, District Energy incurred capital expenditures related to the Chicago plant renovation and expansion in addition to connecting new customers to its district cooling system. This resulted in higher growth capital expenditures in our district energy business:2009 as compared to 2010.


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 Maintenance Growth
Nine months ended September 30, 2008 $615,000  $3.1 million 
Nine months ended September 30, 2009 $738,000  $4.7 million 
2009 full year projected $1.0 million  $13.8 million 
Commitments at September 30, 2009  —   — 

Energy-Related Business:District Energy – (continued)

In early 2009, District Energy’s Las Vegas operation began providing service to a new customer building. This new customer began receiving full service in February 2010 and is expected to contribute approximately $300,000 per year to gross profit and EBITDA. This service required a $3.0 million system expansion of the Las Vegas facility, of which $300,000 was funded through a capital contribution from the noncontrolling shareholder of District Energy’s Las Vegas operation (see “Financing Activities” below).

Financing Activities

At SeptemberJune 30, 2009,2010, the outstanding balance on the business’ debt facilities consisted of $158.5$170.0 million in term loan facilities, offacilities.

In March 2009, District Energy entered into an interest rate basis swap agreement with its existing debt and swap counterparties. The basis swap, which $8.5 million is recordedreduced the weighted average annual interest rate on the business’ primary debt facility by approximately 24.75 basis points, expired in current portion of notes payable and capital leases in the consolidated condensed balance sheets.March 2010. The resulting weighted average interest rate of the outstanding debt facilities, including any interest rate swaps and fees associated with outstanding letters of credit at SeptemberJune 30, 2010, is 5.53%. Cash interest paid was $4.9 million and $4.8 million for 2010 and 2009, is 5.6%. For the nine months ended September 30, 2009, the business paid approximately $7.1 million in interest expense related to its debt facilities.respectively.

The increasedecrease in cash provided by (used in) financing activities iswas primarily due to $7.0 million ofdecreased borrowings onunder the business’ credit facility in 2009 to finance growth and maintenance capital expenditures.expenditure, partially offset by a $300,000 capital contribution from the noncontrolling interest shareholder of District Energy’s Las Vegas operations (as discussed above in “Investing Activities”).

The financial covenants under the business’ credit facility and the calculation of these measures at SeptemberJune 30, 2009,2010 were as follows:

•Backward Interest Coverage Ratio >1.5x> 1.5x (distribution lock-up) and >1.2x> 1.2x (debt default threshold). The ratio at SeptemberJune 30, 20092010 was 2.7x.2.5x.
Leverage Ratio (funds from operations less interest expense to net debt) for the previous 12 months equal to or greater than 6.0% (distribution lock-up) and 4.0% (debt default threshold). The ratio at SeptemberJune 30, 20092010 was 10.2%6.8%.

For a description of the material terms of the district energy business’District Energy’s credit facilities, see “Liquidity and Capital resources”Resources” in Part II, Item 7 of our Annual Report of Form 10-K for the fiscal year ended December 31, 2008.2009. We have not had any material changes to these credit facilities since February 27, 2009,25, 2010, our 10-K filing date.

Aviation-Related BusinessesAtlantic Aviation

Airport Services Business

Nine Months Ended September 30,Change
Favorable/(Unfavorable)
20092008
($ In Thousands)$$$%
Cash provided by operating activities44,02559,114(15,089) (25.5) 
Cash used in investing activities(9,232) (66,666) 57,43486.2
Cash (used in) provided by financing activities(1)(67,932) 20,368(88,300) NM
    
 Six Months Ended June 30, Change
Favorable/(Unfavorable)
   2010 2009
   $ $ $ %
   ($ In Thousands)
Cash provided by operating activities(1)  29,331   26,738   2,593   9.7 
Cash used in investing activities  (2,504)   (4,872)   2,368   48.6 
Cash used in financing activities(2)  (29,605)   (57,548)   27,943   48.6 

NM — Not meaningful


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Aviation-Related Business:Airport Services Business – (continued)

(1)In the first quarter of 2009, Atlantic Aviation recorded $1.2 million of debt advisory fees. These fees were transferred to MIC Inc. during the third quarter of 2009, and have been excluded above.
(2)During the first quarter of 2009, we provided our airport services businessAtlantic Aviation with a capital contribution of $50.0 million to pay down $44.6 million of debt. The remainder of the capital contribution was used to pay interest rate swap breakage fees and expenses. In the first quarter of 2008, we provided our airport services business with $41.9 million of funding, which was used to pay for the acquisition of SevenBar FBOs (reflected above in cash used in investing acitivities) and to pre-fund integration costs. These contributions haveThis contribution has been excluded from the above table as they areit is eliminated on consolidation.

In response to the slowing of the overall economy and the recent decline in general aviation activity, we have undertaken to reduce the indebtedness of our airport services business. In cooperation with the business’ lenders, the terms of the loan agreement were amended by our airport services business. The amendment was executed on February 25, 2009. The revised terms are outlined in “Liquidity and Capital Resources”, Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed on February 27, 2009.TABLE OF CONTENTS

Operating Activities

Atlantic Aviation – (continued)

Operating cash at our airport services businessAtlantic Aviation is generated from sales transactions primarily paid by credit cards. Some customers arehave extended payment terms and are billed accordingly. Cash is used in operating activities mainly for payments to vendors of fuel, aircraft services and professional services, as well as payroll costs and payments to tax jurisdictions. Cash provided by operating activities decreasedincreased mainly due to:

a decline inimproved operating results due to stable gross profit resulting fromand lower selling, general aviation activity; and
payment of interest rate swap breakage fees associated with the prepayment of the term loan debt; partially offset by
reduced levels of working capital, reflecting decreased general aviation activities and receivable collection efforts; andadministrative costs;
reduced interest expense other than swap breakage fees, from lower debt levels.levels; and
lower partial swap termination costs.

Cash flow from operationsWorking capital levels increased by 33.1% in the third quarter of 2009 as compared to the second quarter of 2009 as a result of a higher gross profit andreceivables, partially offset by improved working capital primarily duecollection cycles. The increase in the receivables balance at June 30, 2010 is attributable to timing of payment of fuel purchases.higher general aviation activities as compared with the prior comparable period.

Investing Activities

Cash used in investing activities relates primarily to acquisitions and capital expenditures. The decrease in cash used in investing activity is primarily due to the SevenBar acquisition in March 2008 and lower growth capital expenditures by the business in the first nine months of 2009.business.

Maintenance expenditures are generally funded by cash from operating activities and growth capital expenditures are generally funded with draw downs on capital expenditure facilities.

Maintenance Capital Expenditure

Maintenance capital expenditures encompass repainting, replacing equipment as necessary and any ongoing environmental or required regulatory expenditure, such as installing safety equipment. These expenditures are generally funded from cash flow from operating activities.

Growth Capital Expenditure

Growth capital expenditures are incurred primarily in connection with lease extensions and only where the business expects to receive an appropriate return relative to its cost of capital. Historically these expenditures have included development of hangars, terminal buildings and ramp upgrades. The business has generally funded these projects through its growth capital expenditure facilities.facility or capital contributions from MIC.


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Aviation-Related Business:Airport Services Business – (continued)

The following table sets forth information about capital expenditures in our airport services business:Atlantic Aviation:

  
 Maintenance Growth
Nine months ended September 30, 2008 $6.7 million  $20.1 million 
Nine months ended September 30, 2009 $3.5 million  $5.7 million 
2009 full year projected $4.2 million  $6.4 million 
Commitments at September 30, 2009 $306,000  $206,000 
  
 Maintenance Growth
Six months ended June 30, 2009  $1.5 million   $3.4 million 
Six months ended June 30, 2010  $1.9 million   $676,000 
2010 full year projected  $7.6 million   $6.7 million 
Commitments at June 30, 2010  $300,000   $200,000 

The decreaseddecrease in growth capital expenditures infrom 2009 primarily relates to the constructioncompletion of a new hangar atterminal and ramp project in Nashville, Tennessee. The increase in the San Jose FBO and a ramp repair and extension at the Teterboro location that were completed in 2008. The business expects2010 full year growth capital expenditures to be $6.4 million in 2009 and $2.6 million in 2010.

The decreases in maintenance capital expenditures are primarily due to the elimination of non-essential maintenance capital expenditures in response to the overall soft economy.

The increase in forecast maintenance capital expenditures for 2009 as compared to our previous guidance primarily reflects the timingconstruction costs of expenditures.a greenfield fixed based operation in Oklahoma City.

Financing Activities

At SeptemberJune 30, 2009,2010, the outstanding balance on the business’ debt facilities consisted of $827.4$786.6 million in term loan facility borrowings, which is 100% hedged with interest rate swaps, and $44.6$44.9 million in capital expenditure facility borrowings. In March 2009, Atlantic Aviation entered into an interest rate basis swap agreement with its existing debt and swap counterparties. The basis swap, which reduced the weighted average annual interest rate on the business’ primary debt facility by approximately 19.50 basis points, expired in March 2010. The resulting weighted average interest rate ofon the term loan facility including any interest rate swaps at September 30, 2009 is 6.76%6.81%. The interest rate applicable toon the capital expenditure facility is the three-month U.S. LIBOR rate.US Libor plus a margin of 1.60%. For the ninesix months ended SeptemberJune 30, 2010 and 2009, the business paid approximately $43.2$27.6 million and $29.3 million in interest expense, respectively, excluding interest rate swap breakage fees, related to its debt facilities.


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Atlantic Aviation – (continued)

The decrease in cash used in financing activities is primarily due to a larger debt prepayment in the first half of 2009. In addition, for the ninesix months ended SeptemberJune 30, 2009 cash interest expense included $7.9 million in interest rate swap breakage fees. The business expects to pay further interest rate swap breakage fees to its swap counterparties as it continues to pay down its term loan debt2010 and reduce its corresponding interest rate swaps.

During the first quarter of 2009, the Company provided the business with a capital contribution of $50.0 million. The business paid down $44.6pre-paid $31.7 million and $60.6 million, respectively, of debt principal and used the remainder$3.2 million and $6.7 million, respectively, of the capital contribution to pay interest rate swap breakage fees.

In the second and third quarters of 2009, per the revised terms of the loan agreement,August 2010, the business used approximately $17.5prepaid $9.0 million and $13.2 million, respectively, of its excess cash flow to prepay $16.0 million and $12.0 million, respectively, of the outstanding principal balance of the term loan principal and $1.5 million and $1.2 million, respectively,incurred approximately $935,000 in interest rate swap breakage fees.

We expect As a result of this prepayment, the proforma leverage ratio would decrease to apply all excess cash flow from7.27x based upon the business to prepay additional debt principal fortrailing twelve months June 30, 2010 EBITDA, as calculated under the foreseeable future. We believe that, based on the business’s current performance, cash generation from the business will be sufficient to meet debt service obligations and the business will remain in compliance with financial covenants through the maturity of the debt without any further equity contribution from the Company.facility.

The financial covenant requirements under the airport services business’Atlantic Aviation’s credit facility, and the calculation of these measures at SeptemberJune 30, 2009,2010, were as follows:

•Debt Service Coverage Ratio >1.2x> 1.2x (default threshold). The ratio at SeptemberJune 30, 20092010 was 1.82x.1.97x.
Leverage Ratio debt to adjusted EBITDA for the trailing twelve months <8.25x 8.00x (default threshold). The ratio at SeptemberJune 30, 20092010 was 7.88x.7.35x.

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Aviation-Related Business:Airport Services Business – (continued)

On November 4, 2009, our airport servicesIn cooperation with the business’ lenders, the terms of Atlantic Aviation’s loan agreement were amended on February 25, 2009. The amendments provide that the business used $9.9 million of freeapply all excess cash flow from the third quarter of 2009 to prepay $9.0 million of the outstandingadditional debt principal balance of the term loan debt and incurred $914,000 of interest rate swap breakage fees. As a result of this prepayment,whenever the leverage ratio would decrease(debt to 7.79x based upon the September 2009 adjusted EBITDA, as calculated under the facility,EBITDA) is equal to or greater than 6.0x to 1.0 for the trailing twelve months.

For a descriptionmonths and will use 50% of excess cash flow to prepay debt whenever the materialleverage ratio is equal to or greater than 5.5x to 1.0 and below 6.0x to 1.0. The revised terms of the airport services business’ credit facility, seeare outlined in “Liquidity and Capital resources” in Part II, Item 7 of our Annual Report of Form 10-K for the fiscal year ended December 31, 2008. We have not had any material changes to this credit facility since February 27, 2009, our 10-K filing date.

Airport Parking Business

    
 Nine Months Ended September 30, Change
Favorable/(Unfavorable)
   2009 2008
($ In Thousands) $ $ $ %
Cash used in operating activities  (4,735)   (1,097)   (3,638)   NM 
Cash used in investing activities  (372)   (26,139)   25,767   98.6 
Cash provided by (used in) financing activities  2,354   (875)   3,229   NM 

NM — Not meaningful

The results of operations and financial condition of our airport parking business have suffered in the wake of continuing declines in commercial enplanements and reduced consumer spending. Our airport parking business has $201.1 million of total debt that matured on September 9, 2009, secured by the assets and other collateral of this business. It is in default on its debt and does not have sufficient liquidity or capital resources to repay or refinance this debt.

The business signed a forbearance agreement with the lenders under its primary credit facility on June 10, 2009 that was scheduled to expire on August 31, 2009, was extended through October 15, 2009 and was extended again through November 6, 2009. Material terms of the forbearance agreement are that during the forbearance period:

lenders forbear from exercising rights and remedies for certain designated defaults including any breaches of certain financial covenants and the non-payment of interest;
interest will accrue at the current interest rate (LIBOR plus 190 basis points) and will be deferred and capitalized;
payments on the swap rate agreement will not be made by the airport parking business;
the business cannot sell, lease or dispose of assets or properties or incur debt, in each case, other than in the ordinary course of business; and
certain limitations are imposed on capital expenditures and other payments, including to us.

There is substantial doubt regarding the business’ ability to continue as a going concern. The business has engaged financial advisors to actively solicit a sale of the business. A letter of intent was signed during the quarter with a third party, which is conducting due diligence and with which the business is currently negotiating an asset purchase agreement. The business expects to close a sale transaction in 2010, which will likely occur in connection with a bankruptcy filing and consummation of a Chapter 11 plan. Proceeds generated as a result of the sale would be payable to the lenders of the business and not to us. Until an asset purchase agreement is signed and any conditions to closing have been met, including any approval of the sale needed as part of the bankruptcy process, we cannot provide assurance regarding the certainty or timing of a sale closing. As previously indicated, we have no intention of committing additional capital to this business and our ongoing liabilities are expected to be no more than $5.3 million in guarantees of a single parking facility lease. During September 2009, we made the final interest rate swap payment that was guaranteed by us on behalf of the airport parking business.


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Aviation-Related Business:Airport Parking Business – (continued)

Operating Activities

Cash used in operating activities is driven primarily by customer receipts, timing of payments for interest, occupancy costs, payroll and benefits, repairs and maintenance, shuttle bus fuel and marketing programs.

Through the nine months ended September 30, 2009 the airport parking business used $4.7 million of cash on hand to fund operating activities. At September 30, 2009 the business had $3.0 million in cash on its balance sheet.

Investing Activities

Cash used in investing activities is primarily driven by maintenance capital expenditures which include fleet replacements, site repairs and IT equipment. For the quarter and nine months ended September 30, 2009, the airport parking business spent $61,000 and $373,000, respectively, on maintenance capital expenditures reflecting ongoing deferral of non-essential items and elimination of growth capital expenditures. A higher level of expenditure consistent with historical amounts would likely need to be incurred beginning in 2010 and beyond to maintain the long term performance of the business.

The following table sets forth information about capital expenditures in our airport parking business:

 
 Maintenance
Nine months ended September 30, 2008 $1.8 million 
Nine months ended September 30, 2009 $373,000 
2009 full year projected $750,000 
Commitments at September 30, 2009  — 

Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2009 is comprised primarily of the release of $3.3 million of previously restricted cash during the first two quarters of 2009 offset by payments on smaller debt facilities and capital lease obligations. The cash had been restricted by the lenders in support of the liquidity covenant under the business’ primary credit facility but, in consultation with the lenders, the business released the cash to fund operations.

For a description of the material terms of the airport parking business’ primary credit 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, 2008.2009, filed on February 25, 2010. We have not had any material changes to this credit facility since February 25, 2010, our 10-K filing date.

Commitments and Contingencies

At SeptemberJune 30, 20092010 there were no material changes in our future commitments and contingencies from December 31, 2008,2009, except for the reclassification of the MIC Inc. revolving credit facility and the mandatory prepaymentsprepayment we expect to make under the cash sweep terms of the airport services business’Atlantic Aviation’s credit facility from long-term debt to current portion of long-term debt in our consolidated condensed balance sheet. The current portion of long-term debt at September 30, 2009 is comprised of $201.1 million for the airport parking business, $66.4 million for MIC Inc. and $48.0 million for the airport services business.

On February 25, 2009, we amended our airport services business’ credit facility to provide for additional financial flexibility over the near and medium term. Under the amended terms weof Atlantic Aviation’s credit facility, the business will apply all excess cash flow from the business to prepay the prepayment of debt principal for the foreseeable future. For the quarter and six months ended June 30, 2010, Atlantic Aviation used $7.7 million and $34.9 million, respectively, of excess cash flow to prepay $7.0 million and $31.7 million, respectively, of the outstanding principal balance of the term loan debt under the facility and $695,000 and $3.2 million, respectively, in interest rate swap breakage fees. Actual prepayment amounts in the periods beginning SeptemberJune 30, 20102011 through the maturity of the facility will depend on the performance of the business and therefore the business is not able to accurately estimate future prepayments at this time. business.

In the third quarter of 2009, per the revised terms of the loan agreement, we used approximately $13.2 million of excess cash flow from our airport services business to prepay $12.0 million of the outstanding principal balance of the term loan debt and $1.2 million in interest rate swap breakage fees.

On November 4, 2009, the airport services businessAugust 2010, Atlantic Aviation used $9.9 million of excess cash flow from the third quarter of 2009 to prepay $9.0 million of the outstanding principal balance of the term loan debt and incurred $914,000$935,000 in interest rate swap breakage fees.


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See Note 8,9, “Long-Term Debt”, to our consolidated condensed financial statements in Part I, Item 1 of this Form 10-Q for further discussion.

At SeptemberJune 30, 2009,2010, we did not have any outstanding material purchase obligations. For a discussion of our other future obligations, due by period, under the various contractual obligations, off-balance sheet arrangements and 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, 2008,2009, filed with the SEC on February 27, 2009.25, 2010. We have not had any material changes to our commitments except as discussed above.


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In addition, at SeptemberJune 30, 2009,2010, we did not have any material reserves for contingencies. We have other contingencies, including pending threatened legal and administrative proceedings that are not reflected at this time as they are not ascertainable.

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

cash generated from our operations (see “Operating Activities” in the “Liquidity and Capital Resources”);
refinancing our current credit facilities on or before maturity (see “Financing Activities” in the “Liquidity and Capital Resources”); and
cash available from our undrawn credit facilities (see “Financing Activities” in the “Liquidity and Capital Resources”).

Critical Accounting Estimates

For critical accounting estimates, see “Critical Accounting Estimates” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.2009. Our critical accounting estimates have not changed materially from the description contained in that Annual Report.

Goodwill, Intangible Assets and Property, Plant and Equipment

Significant assets acquired in connection with our acquisition of the gas productionThe Gas Company, District Energy and distribution business, district energy business, airport services business and airport parking businessAtlantic Aviation include contract rights, customer relationships, non-compete agreements, trademarks, domain names, property and equipment and goodwill.

Trademarks and domain names are generally considered to be indefinite life intangibles. Trademarks, domain names and goodwill are not amortized in most circumstances. It may be appropriate to amortize some trademarks and domain names. However, for unamortized intangible assets, we are required to perform annual impairment reviews and more frequently in certain circumstances.

The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of each reporting unit based on a discounted cash flow model using revenue and profit forecasts and comparing those estimated fair values with the carrying values, which included the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying value. The gas productionGas Company, District Energy and distribution business, district energy business, airport services business and airport parking businessAtlantic Aviation are separate reporting units for purposes of this analysis. The impairment test for trademarks and domain names, which are not amortized, requires the determination of the fair value of such assets. If the fair value of the trademarks and domain names is less than their carrying value, an impairment loss is recognized in an amount equal to the difference. We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and/or intangible assets. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base, or material negative change in relationship with significant customers.


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Property and equipment is initially stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the property and equipment after consideration of historical results and anticipated results based on our current plans. Our estimated useful lives represent the period the asset remains in service assuming normal routine maintenance. We review the estimated useful lives assigned to property and equipment when our business experience suggests that they do not properly reflect the consumption of economic benefits embodied in the property and equipment nor result in the appropriate matching of cost against revenue. Factors that lead to such a conclusion may include physical observation of asset usage, examination of realized gains and losses on asset disposals and consideration of market trends such as technological obsolescence or change in market demand.


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Significant intangibles, including contract rights, customer relationships, non-compete agreements and technology are amortized using the straight-line method over the estimated useful lives of the intangible asset after consideration of historical results and anticipated results based on our current plans. With respect to contract rights in our airport servicesAtlantic Aviation business, we take into consideration the history of contract right renewals in determining our assessment of useful life and the corresponding amortization period.

We perform impairment reviews of property and equipment and intangibles subject to amortization, when events or circumstances indicate that assets are less than their carrying amount and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In this circumstance, the impairment charge is determined based upon the amount ofby which the net book value of the assets exceeds their fair market value. Any impairment is measured by comparing the fair value of the asset to its carrying value.

The “implied fair value” of reporting units and fair value of property and equipment and intangible assets is determined by our management and is generally based upon future cash flow projections for the acquired assets, discounted to present value. We use outside valuation experts when management considers that it is appropriate to do so.

We test for goodwill and indefinite-lived intangible assets when there is an indicator of impairment. Impairments of goodwill, property, equipment, land and leasehold improvements and intangible assets during 2009 and 2008 relating to our airport services business and airport parking business, respectively, areAtlantic Aviation is discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in Part I, Item 2 of this quarterly report on Form 10-Q.

New Accounting Pronouncements

See Note 3, “New Accounting Pronouncements”, to our consolidated condensed financial statements in Part I, Item 1I of this Form 10-Q for details on new accounting pronouncements which is incorporated herein by reference.

Other Matters

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, 2008.2009. 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 the Company and its subsidiaries together from June 25, 2007 and, prior to that date, to the Trust, the Company and its subsidiaries. Macquarie Infrastructure Management (USA) Inc., which we refer to as our Manager, is part of the Macquarie Group, comprised of Macquarie Group Limited and its subsidiaries and affiliates worldwide.


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Item 3. Quantitative and Qualitative Disclosure About Market Risk

For quantitative and qualitative disclosures about market risk, see Part II, Item 7A “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.2009. Our exposure to market risk has not changed materially since February 27, 2009,25, 2010, our 10-K filing date.


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Item 4. Controls and Procedures

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 SeptemberJune 30, 2009.2010. 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 ninesix months ended SeptemberJune 30, 20092010 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.


 

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

None, other than as previously disclosed in Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008,2009, filed with the SEC on February 27, 2009.25, 2010.

Item 1A. Risk Factors

See Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008,2009, filed with the SEC on February 27, 2009.25, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None other than as previously disclosed in connection with the airport parking business.None.

Item 4. Submission of Matters to a Vote of Security Holders [Reserved]

None.

Item 5. Other Information

None.

Item 6. Exhibits

An exhibit index has been filed as part of this Report on page E-1.E-1.


 

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SIGNATURES

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 LLC
Dated: November 5, 2009August 4, 2010 

By:

/s/ James Hooke
Name: James Hooke
Title: Chief Executive Officer

Dated: November 5, 2009August 4, 2010 

By:

/s/ Todd Weintraub
Name: Todd Weintraub
Title: Chief Financial Officer


 

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EXHIBIT INDEX

 
Exhibit
Number		 Description
10.1* 2.1*  First Amendment to ForbearanceAsset Purchase Agreement, dated as of August 30, 2009,April 29, 2010, among Parking Company of America Airports, LLC, Parking Company of America Airports Phoenix, LLC, PCAA SP, LLC, PCA Airports, Ltd., PCAA Parent, LLC, Dekabank Deutsche Girozentrale, Deutsche Hypothekenbank AG, ING Real Estateits subsidiaries listed on the signature pages thereto and Commercial Finance (USA) LLC, Capmark Finance,Services 2907 Inc. and Capmark Structured Real Estate, Ltd., with respect to the Loan Agreement dated as of September 1, 2006, as amended.
10.2*10.1*  Second Amendment to ForbearanceRevolving Credit Agreement, dated as of October 15, 2009,June 18, 2010, by and among Parking CompanyInternational-Matex Tank Terminals, IMTT-BAYONNE, IMTT-QUEBEC INC. and IMTT-NTL, LTD., the several banks and other financial institutions from time to time party hereto, Suntrust Bank, in its capacity as administrative agent for the Lenders, as the U.S. issuing bank and as swingline lender, and Royal Bank of America Airports, LLC, Parking Company of America Airports Phoenix, LLC, PCAA SP, LLC, PCA Airports, Ltd., PCAA Parent, LLC, Dekabank Deutsche Girozentrale, Deutsche Hypothekenbank AG, ING Real Estate Finance (USA) LLC, Capmark Finance, Inc.Canada, as Canadian funding agent for the Canadian Lenders and Capmark Structured Real Estate, Ltd., with respect toas the Loan Agreement dated as of September 1, 2006, as amended.Canadian issuing bank.
31.1* Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
31.2* Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
32.1* Section 1350 Certification of Chief Executive Officer
32.2* Section 1350 Certification of Chief Financial Officer

*Filed herewith.

E-1