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(Mark One) | ||
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Delaware | 43-2052503 | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
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Smaller Reporting Companyo |
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PART II. OTHER INFORMATION | ||||
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50 | ||||
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June 30, 2010 | December 31, 2009 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 29,274 | $ | 27,455 | ||||
Accounts receivable, less allowance for doubtful accounts of $1,481 and $1,629, respectively | 50,508 | 47,256 | ||||||
Inventories | 16,606 | 14,305 | ||||||
Prepaid expenses | 6,218 | 6,688 | ||||||
Deferred income taxes | 21,908 | 23,323 | ||||||
Other | 9,559 | 10,839 | ||||||
Assets of discontinued operations held for sale | — | 86,695 | ||||||
Total current assets | 134,073 | 216,561 | ||||||
Property, equipment, land and leasehold improvements, net | 569,193 | 580,087 | ||||||
Restricted cash | 13,780 | 16,016 | ||||||
Equipment lease receivables | 34,574 | 33,266 | ||||||
Investment in unconsolidated business | 213,858 | 207,491 | ||||||
Goodwill | 516,182 | 516,182 | ||||||
Intangible assets, net | 733,670 | 751,081 | ||||||
Deferred financing costs, net of accumulated amortization | 14,931 | 17,088 | ||||||
Other | 1,915 | 1,449 | ||||||
Total assets | $ | 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.
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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 |
See accompanying notes to the consolidated condensed financial statements.
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Six Months Ended | ||||||||
June 30, 2010 | June 30, 2009(1) | |||||||
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 | ||||||
Depreciation and amortization of property and equipment | 18,195 | 25,385 | ||||||
Amortization of intangible assets | 17,411 | 42,797 | ||||||
Equity in earnings and amortization charges of investees | (11,367 | ) | (15,477 | ) | ||||
Equity distributions from investees | 5,000 | 7,000 | ||||||
Amortization of debt financing costs | 2,256 | 2,514 | ||||||
Non-cash derivative loss | 31,674 | 12,173 | ||||||
Base management fees settled in LLC interests | 2,189 | 851 | ||||||
Equipment lease receivable, net | 1,451 | 1,407 | ||||||
Deferred rent | 145 | 87 | ||||||
Deferred taxes | (16,046 | ) | (38,131 | ) | ||||
Other non-cash expenses (income), net | 2,112 | (350 | ) | |||||
Changes in other assets and liabilities, net of acquisitions: | ||||||||
Restricted cash | 50 | — | ||||||
Accounts receivable | (4,718 | ) | 6,881 | |||||
Inventories | (2,376 | ) | 1,598 | |||||
Prepaid expenses and other current assets | 1,299 | 5,394 | ||||||
Due to manager – related party | 2,263 | (3,493 | ) | |||||
Accounts payable and accrued expenses | (1,281 | ) | (5,213 | ) | ||||
Income taxes payable | (406 | ) | 40 | |||||
Other, net | (1,140 | ) | (1,628 | ) | ||||
Net cash provided by operating activities from continuing operations | 41,646 | 39,762 | ||||||
Investing activities | ||||||||
Purchases of property and equipment | (7,315 | ) | (11,864 | ) | ||||
Investment in capital leased assets | (2,400 | ) | — | |||||
Other | 658 | 92 | ||||||
Net cash used in investing activities from continuing operations | (9,057 | ) | (11,772 | ) |
See accompanying notes to the consolidated condensed financial statements.
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Six Months Ended | ||||||||
June 30, 2010 | June 30, 2009 | |||||||
Financing activities | ||||||||
Net proceeds on line of credit facilities | $ | — | $ | 3,600 | ||||
Contributions received from noncontrolling interests | 300 | — | ||||||
Distributions paid to noncontrolling interests | (1,261 | ) | (314 | ) | ||||
Payment of long-term debt | (31,736 | ) | (60,620 | ) | ||||
Change in restricted cash | 2,236 | (33 | ) | |||||
Payment of notes and capital lease obligations | (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 | (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 | 1,819 | (31,124 | ) | |||||
Cash and cash equivalents, beginning of period | 27,455 | 66,054 | ||||||
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 | $ | 1,092 | $ | 1,238 | ||||
Issuance of LLC interests to manager for base management fees | $ | 4,083 | $ | 851 | ||||
Issuance of LLC interests to independent directors | $ | 446 | $ | 450 | ||||
Taxes paid | $ | 1,508 | $ | 508 | ||||
Interest paid | $ | 40,015 | $ | 46,946 |
See accompanying notes to the consolidated condensed financial statements.
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” 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 within 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.
The Company is an operating entity with a Board of Directors and other corporate governance responsibilities generally consistent with those 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 consist of the following:
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.
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 assumptions on an ongoing basis. Actual results may differ from the estimates and assumptions used in the financial statements and notes. Operating results for the quarter and six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.
The consolidated balance sheet at December 31, 2009 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, 2009 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 25, 2010.
In April 2009, the Financial Accounting Standards Board, or FASB, issued ASC 825-10-65Financial 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 methods 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.
Following is a reconciliation of the basic and diluted number of shares used in computing income (loss) per share:
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Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Weighted average number of shares outstanding: basic | 45,467,413 | 44,951,176 | 45,381,413 | 44,949,942 | ||||||||||||
Dilutive effect of restricted stock unit grants | 136,651 | — | 132,451 | — | ||||||||||||
Weighted average number of shares outstanding: diluted | 45,604,064 | 44,951,176 | 45,513,864 | 44,949,942 |
The effect of potentially dilutive shares for the quarter and six months ended June 30, 2010 is calculated assuming that the 31,989 restricted stock unit grants provided to the independent directors on June 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 six months ended June 30, 2009, due to the Company’s net loss for those periods.
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 $10.0 million.
The results of operations from this business, for all periods presented, and the gain from the bankruptcy sale are separately reported as a discontinued operations in the Company’s consolidated condensed financial statements. This business is no longer a reportable segment. The assets and liabilities of the business being sold are included in assets of discontinued operations held for sale and liabilities of discontinued operations held for sale on the Company’s consolidated condensed balance sheet at December 31, 2009.
The following is a summary of the assets and liabilities of discontinued operations held for sale related to PCAA at December 31, 2009:
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December 31, 2009 | ||||
($ 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 |
Summarized financial information for discontinued operations related to PCAA for the quarters and six months ended June 30, 2010 and 2009 are as follows:
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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 |
Property, equipment, land and leasehold improvements at June 30, 2010 and December 31, 2009 consist of the following ($ in thousands):
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June 30, 2010 | December 31, 2009 | |||||||
Land | $ | 4,618 | $ | 4,618 | ||||
Easements | 5,624 | 5,624 | ||||||
Buildings | 24,796 | 24,789 | ||||||
Leasehold and land improvements | 317,512 | 312,881 | ||||||
Machinery and equipment | 332,064 | 330,226 | ||||||
Furniture and fixtures | 9,441 | 9,395 | ||||||
Construction in progress | 16,394 | 16,519 | ||||||
Property held for future use | 1,561 | 1,561 | ||||||
712,010 | 705,613 | |||||||
Less: accumulated depreciation | (142,817 | ) | (125,526 | ) | ||||
Property, equipment, land and leasehold improvements, net(1) | $ | 569,193 | $ | 580,087 |
The Company recognized non-cash impairment charges of $2.2 million and $7.5 million during the quarter and six months ended June 30, 2009, respectively, primarily relating to leasehold and land improvements; buildings; machinery and equipment; and furniture and fixtures at Atlantic Aviation. These charges are recorded in depreciation expense in the consolidated condensed statements of operations. There was no impairment charge in the first six months of 2010.
Intangible assets at June 30, 2010 and December 31, 2009 consist of the following ($ in thousands):
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Weighted Average Life (Years) | June 30, 2010 | December 31, 2009 | ||||||||||
Contractual arrangements | 31.1 | $ | 774,309 | $ | 774,309 | |||||||
Non-compete agreements | 2.5 | 9,515 | 9,515 | |||||||||
Customer relationships | 10.6 | 78,596 | 78,596 | |||||||||
Leasehold rights | 12.5 | 3,331 | 3,331 | |||||||||
Trade names | Indefinite | 15,401 | 15,401 | |||||||||
Technology | 5.0 | 460 | 460 | |||||||||
881,612 | 881,612 | |||||||||||
Less: accumulated amortization | (147,942 | ) | (130,531 | ) | ||||||||
Intangible assets, net | $ | 733,670 | $ | 751,081 |
As a result of a decline in the performance of certain asset groups during the quarter and six months ended June 30, 2009, the Company evaluated such asset groups for impairment and determined that the asset groups were impaired. The Company estimated the fair value of each of the impaired asset groups using the discounted cash flow model. Accordingly, the Company recognized non-cash impairment charges of $2.9 million and $23.3 million related to contractual arrangements at Atlantic Aviation during the quarter and six months ended June 30, 2009, respectively. These charges are recorded in amortization of intangibles in the consolidated condensed statement of operations. There was no impairment charge in the first six months of 2010.
The goodwill balance as of June 30, 2010 and December 31, 2009 is comprised of the following ($ in thousands):
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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 over the latter part of 2008 and the first half of 2009 caused the book value of the Company to exceed its market capitalization. In addition to its annual goodwill impairment testing conducted routinely on October 1st of each year, the Company performed goodwill impairment testing during the quarter and six months ended June 30, 2009 due to the triggering event of the Company’s stock price decline. Based on the testing performed, the Company recorded goodwill impairment charges of $53.2 million and $71.2 million at Atlantic Aviation during the quarter and six months ended June 30, 2009, respectively, which is included in the accumulated impairment charges in the above table. There was no goodwill impairment charge in the first six months of 2010.
The following major categories of nonfinancial assets at the impaired asset groups were written down to fair value during the quarter and six months ended June 30, 2009 at Atlantic Aviation ($ in thousands):
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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 |
The Company estimated the fair value of each of the impaired asset groups using discounted cash flows. Property, equipment, land and leasehold improvements for Atlantic Aviation with a carrying value of $12.6 million were written down to fair value of $5.1 million during the six months ended June 30, 2009. The non-cash impairment charge of $7.5 million was recorded in depreciation expense in the consolidated condensed statement of 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 value of $37.7 million were written down to their fair value of $14.4 million during the six months ended June 30, 2009. The non-cash impairment charge of $23.3 million was 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 7, “Intangible Assets”, the Company performed goodwill impairment analyses during the quarter and six months ended June 30, 2009. As a result of these analyses, goodwill at Atlantic Aviation with a carrying value of $448.5 million was written down to its implied fair value of $377.3 million resulting in a non-cash impairment charge of $71.2 million. This non-cash impairment charge was included in goodwill impairment in the consolidated condensed statement of operations. There was no goodwill impairment charge in the first six months of 2010.
The significant unobservable inputs (“level 3”) used for all fair value measurements in the above table included forecasted cash flows of Atlantic Aviation and its asset groups, the discount rate and, in the case of goodwill, the terminal value. The forecasted cash flows for this business were developed using actual cash flows from 2009, forecasted jet fuel volumes from the Federal Aviation Administration, forecasted consumer price indices and forecasted LIBOR rates based on proprietary models using various published sources. The discount rate was developed using a capital asset pricing model.
Model inputs included:
The terminal value was based on observed earnings before interest, taxes, depreciation and amortization, or EBITDA, and multiples historically paid in transactions for comparable businesses.
At June 30, 2010 and December 31, 2009, the Company’s consolidated long-term debt consisted of the following ($ in thousands):
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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 |
Until March 31, 2010, MIC Inc. had a revolving credit facility with various financial institutions. The facility was repaid in full in December 2009 and no amounts were outstanding under the revolving credit facility as of December 31, 2009 or at the facility’s maturity on March 31, 2010.
On February 25, 2009, Atlantic Aviation amended its credit facility to provide the business additional financial flexibility over the near and medium term. Under the amended terms, the business will apply all excess cash flow from the business to prepay additional debt whenever the leverage ratio (debt to adjusted EBITDA) is equal to or greater than 6.0x to 1.0 for the 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 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. 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.
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 under this facility and incurred $935,000 in interest rate swap breakage fees.
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 the 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 June 30, 2010, the Company had $1.2 billion of current and long-term debt, $1.1 billion of which was economically hedged with interest rate swaps and $83.9 million of which was unhedged.
As discussed in Note 9, “Long-Term Debt”, Atlantic Aviation applies its excess cash flow to prepay debt. As a result, $4.9 million and $11.1 million of accumulated other comprehensive loss in the consolidated condensed balance sheet related to Atlantic Aviation’s derivative instruments were reclassified to interest expense in the consolidated condensed statement of operations for the quarter and six months ended June 30, 2010, respectively. Atlantic Aviation expects to record further reclassifications from accumulated other comprehensive loss to interest expense as the business continues to pay down its debt.
In March 2009, Atlantic Aviation, The Gas Company and District Energy entered into interest rate basis swap contracts that expired on March 31, 2010. These contracts effectively changed the interest rate index on each business’ existing swap contracts from the 90-day LIBOR rate to the 30-day LIBOR rate plus a margin of 19.50 basis points for Atlantic Aviation and 24.75 basis points for The Gas Company and District Energy. This transaction, adjusted for the prepayments of outstanding principal on the term loan debt at Atlantic Aviation, resulted in $580,000 and $1.8 million lower interest expense for these businesses for the quarter ended March 31, 2010 and the year ended December 31, 2009, respectively.
Effective February 25, 2009 for 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 portion of the other comprehensive loss recorded under hedge accounting is also reclassified into earnings. The Company will reclassify into earnings $56.9 million of net derivative losses, included in accumulated other comprehensive loss as of June 30, 2010 over the remaining life of the existing interest rate swaps, of which approximately $24.1 million will be reclassified over the next 12 months.
The Company measures derivative instruments at fair value using the income approach which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations utilize primarily observable (“level 2”) inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals.
The Company’s fair value measurements of its derivative instruments and the related location of the liabilities associated with the hedging instruments within the consolidated condensed balance sheets at June 30, 2010 and December 31, 2009 were as follows:
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Liabilities at Fair Value(1) | ||||||||
Interest Rate Swap Contracts Not Designated as Hedging Instruments | ||||||||
Balance Sheet Location | June 30, 2010 | December 31, 2009 | ||||||
($ In Thousands) | ||||||||
Fair value of derivative instruments – current liabilities | $ | (45,792 | ) | $ | (49,573 | ) | ||
Fair value of derivative instruments – non-current liabilities | (72,268 | ) | (54,794 | ) | ||||
Total interest rate derivative contracts | $ | (118,060 | ) | $ | (104,367 | ) |
The Company’s hedging activities for the quarter and six months ended June 30, 2010 and 2009 and the related location within the consolidated condensed financial statements were as follows:
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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 |
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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 | ) |
All of the Company’s derivative instruments are collateralized by all of the assets of the respective businesses.
Other comprehensive income (loss) 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 10, “Derivative Instruments and Hedging Activities”.
The difference between net income (loss) and comprehensive income (loss) for the quarter and six months ended June 30, 2010 and 2009 was as follows ($ in thousands):
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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 10, “Derivative Instruments and Hedging Activities”.
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.
The Company’s operations are broadly classified into the energy-related businesses and Atlantic Aviation. The energy-related businesses consist of two reportable segments: The Gas Company and District Energy. The energy-related businesses also include a 50% investment in IMTT, which is accounted for under the equity method. Financial information for IMTT’s business as a whole is presented below ($ in thousands) (unaudited):
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Quarter Ended, and as of, June 30, | Six Months Ended, and as of, June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenue | $ | 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) | $ | 65,674 | $ | 33,322 | $ | 115,499 | $ | 71,277 | ||||||||
Capital expenditures paid | $ | 17,741 | $ | 41,482 | $ | 37,171 | $ | 81,424 | ||||||||
Property, equipment, land and leasehold improvements, net | 993,427 | 953,907 | 993,427 | 953,907 | ||||||||||||
Total assets balance | 1,127,169 | 1,041,219 | 1,127,169 | 1,041,219 |
All of the business segments are managed separately and management has chosen to organize the Company around the distinct products and services offered.
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 Company segment is included in revenue from product sales. 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 growth, will generally track global oil prices. The utility revenue of The 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 segment is included in service revenue and financing and equipment lease income. Included in service revenue is capacity 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. District Energy provides its services to buildings primarily in the downtown Chicago, Illinois area and to a casino and a shopping mall located in Las Vegas, Nevada.
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 Atlantic Aviation is generated in the United States at 68 airports and one heliport.
Selected information by 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):
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Quarter Ended June 30, 2010 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total | |||||||||||||
Revenue from Product Sales | ||||||||||||||||
Product sales | $ | 24,236 | $ | — | $ | 100,941 | $ | 125,177 | ||||||||
Product sales – utility | 28,450 | — | — | 28,450 | ||||||||||||
52,686 | — | 100,941 | 153,627 | |||||||||||||
Service Revenue | ||||||||||||||||
Other services | — | 803 | 36,552 | 37,355 | ||||||||||||
Cooling capacity revenue | — | 5,295 | — | 5,295 | ||||||||||||
Cooling consumption revenue | — | 7,144 | — | 7,144 | ||||||||||||
— | 13,242 | 36,552 | 49,794 | |||||||||||||
Financing and Lease Income | ||||||||||||||||
Financing and equipment lease | — | 1,271 | — | 1,271 | ||||||||||||
— | 1,271 | — | 1,271 | |||||||||||||
Total Revenue | $ | 52,686 | $ | 14,513 | $ | 137,493 | $ | 204,692 |
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Quarter Ended June 30, 2009 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total | |||||||||||||
Revenue from Product Sales | ||||||||||||||||
Product sales | $ | 18,390 | $ | — | $ | 71,040 | $ | 89,430 | ||||||||
Product sales – utility | 21,414 | — | — | 21,414 | ||||||||||||
39,804 | — | 71,040 | 110,844 | |||||||||||||
Service Revenue | ||||||||||||||||
Other services | — | 743 | 40,004 | 40,747 | ||||||||||||
Cooling capacity revenue | — | 5,110 | — | 5,110 | ||||||||||||
Cooling consumption revenue | — | 5,502 | — | 5,502 | ||||||||||||
— | 11,355 | 40,004 | 51,359 | |||||||||||||
Financing and Lease Income | ||||||||||||||||
Financing and equipment lease | — | 1,205 | — | 1,205 | ||||||||||||
— | 1,205 | — | 1,205 | |||||||||||||
Total Revenue | $ | 39,804 | $ | 12,560 | $ | 111,044 | $ | 163,408 |
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Six Months Ended June 30, 2010 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total | |||||||||||||
Revenue from Product Sales | ||||||||||||||||
Product sales | $ | 49,546 | $ | — | $ | 195,649 | $ | 245,195 | ||||||||
Product sales – utility | 55,285 | — | — | 55,285 | ||||||||||||
104,831 | — | 195,649 | 300,480 | |||||||||||||
Service Revenue | ||||||||||||||||
Other services | — | 1,667 | 81,893 | 83,560 | ||||||||||||
Cooling capacity revenue | — | 10,533 | — | 10,533 | ||||||||||||
Cooling consumption revenue | — | 8,907 | — | 8,907 | ||||||||||||
— | 21,107 | 81,893 | 103,000 | |||||||||||||
Financing and Lease Income | ||||||||||||||||
Financing and equipment lease | — | 2,516 | — | 2,516 | ||||||||||||
— | 2,516 | — | 2,516 | |||||||||||||
Total Revenue | $ | 104,831 | $ | 23,623 | $ | 277,542 | $ | 405,996 |
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Six Months Ended June 30, 2009 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total | |||||||||||||
Revenue from Product Sales | ||||||||||||||||
Product sales | $ | 39,465 | $ | — | $ | 139,157 | $ | 178,622 | ||||||||
Product sales – utility | 41,581 | — | — | 41,581 | ||||||||||||
81,046 | — | 139,157 | 220,203 | |||||||||||||
Service Revenue | ||||||||||||||||
Other services | — | 1,499 | 89,068 | 90,567 | ||||||||||||
Cooling capacity revenue | — | 10,007 | — | 10,007 | ||||||||||||
Cooling consumption revenue | — | 7,730 | — | 7,730 | ||||||||||||
— | 19,236 | 89,068 | 108,304 | |||||||||||||
Financing and Lease Income | ||||||||||||||||
Financing and equipment lease | — | 2,397 | — | 2,397 | ||||||||||||
— | 2,397 | — | 2,397 | |||||||||||||
Total Revenue | $ | 81,046 | $ | 21,633 | $ | 228,225 | $ | 330,904 |
In accordance with FASB ASC 280Segment Reporting, the Company has disclosed earnings before interest, taxes, depreciation and amortization (EBITDA) excluding non-cash items as a key performance metric relied on by management in the evaluation of the Company’s performance. Non-cash items include impairments, derivative gains and losses and adjustments for other non-cash items reflected in the statements of operations. The Company believes EBITDA excluding non-cash items provides additional insight into the performance of the operating businesses relative to each other and similar businesses without regard to their capital structure, and their ability to service or reduce debt, fund capital expenditures and/or support distributions to the holding company. EBITDA excluding non-cash items is reconciled to net 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.
EBITDA excluding non-cash items for the Company’s consolidated reportable segments is shown in the tables below ($ in thousands) (unaudited). Allocation of corporate expense and the federal tax effect have been excluded as they are eliminated on consolidation.
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Quarter Ended June 30, 2010 | ||||||||||||||||
Energy-related Businesses | Atlantic Aviation | Total Reportable Segments | ||||||||||||||
The Gas Company | District Energy | |||||||||||||||
Net income (loss) | $ | 1,212 | $ | (2,705 | ) | $ | (8,538 | ) | $ | (10,031 | ) | |||||
Interest expense, net | 5,926 | 7,976 | 26,688 | 40,590 | ||||||||||||
Benefit (provision) for income taxes | 780 | (1,767 | ) | (5,764 | ) | (6,751 | ) | |||||||||
Depreciation | 1,511 | 1,636 | 5,691 | 8,838 | ||||||||||||
Amortization of intangibles | 205 | 341 | 8,194 | 8,740 | ||||||||||||
Other non-cash expense | 531 | 232 | 558 | 1,321 | ||||||||||||
EBITDA excluding non-cash items | $ | 10,165 | $ | 5,713 | $ | 26,829 | $ | 42,707 |
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Quarter Ended June 30, 2009 | ||||||||||||||||
Energy-related Businesses | Atlantic Aviation(1) | Total Reportable Segments | ||||||||||||||
The Gas Company | District Energy | |||||||||||||||
Net income (loss) | $ | 4,518 | $ | 3,514 | $ | (30,876 | ) | $ | (22,844 | ) | ||||||
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 | 1,520 | 1,502 | 7,750 | 10,772 | ||||||||||||
Amortization of intangibles | 212 | 341 | 11,979 | 12,532 | ||||||||||||
Goodwill impairment | — | — | 53,200 | 53,200 | ||||||||||||
Other non-cash expense (income) | 564 | 172 | (430 | ) | 306 | |||||||||||
EBITDA excluding non-cash items | $ | 8,473 | $ | 5,097 | $ | 25,715 | $ | 39,285 |
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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 |
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Six Months Ended June 30, 2009 | ||||||||||||||||
Energy-related Businesses | Atlantic Aviation(1) | Total Reportable Segments | ||||||||||||||
The Gas Company | District Energy | |||||||||||||||
Net income (loss) | $ | 7,633 | $ | 1,868 | $ | (80,482 | ) | $ | (70,981 | ) | ||||||
Interest expense, net | 1,368 | 227 | 31,440 | 33,035 | ||||||||||||
Benefit (provision) for income taxes | 4,913 | 1,221 | (54,330 | ) | (48,196 | ) | ||||||||||
Depreciation | 2,996 | 2,965 | 19,424 | 25,385 | ||||||||||||
Amortization of intangibles | 426 | 678 | 41,693 | 42,797 | ||||||||||||
Goodwill impairment | — | — | 71,200 | 71,200 | ||||||||||||
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 | $ | 18,678 | $ | 8,613 | $ | 51,909 | $ | 79,200 |
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):
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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 | ) |
Capital expenditures for the Company’s reportable segments were as follows ($ in thousands) (unaudited):
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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 |
Property, equipment, land and leasehold improvements, goodwill and total assets for the Company’s reportable segments as of June 30 were as follows ($ in thousands) (unaudited):
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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 |
Reconciliation of reportable segments’ total assets to consolidated total assets ($ in thousands) (unaudited):
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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 |
As of June 30, 2010, the Manager held 3,797,557 LLC interests of the Company, which were acquired concurrently with the closing of the initial public offering in December 2004 and by reinvesting base management and performance fees in the Company. In addition, the Macquarie Group held LLC interests acquired in open market purchases.
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
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 six months ended June 30, 2010 and 2009, the Company incurred base management fees of $4.5 million and $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 Manager elected to reinvest the base management fee of $2.2 million for the first quarter of 2010 in LLC interests and the Company issued 155,375 LLC interests to the Manager during the second quarter of 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 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 six months ended June 30, 2010 and 2009, the Manager charged the Company $169,000 and $136,000, respectively, for reimbursement of out-of-pocket expenses. The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in due to manager-related party in the consolidated condensed balance sheet.
The Macquarie Group, and wholly-owned subsidiaries within the Macquarie Group, including Macquarie Bank Limited, or MBL, and Macquarie Capital (USA) Inc., or MCUSA, have provided various advisory and other services and incurred expenses in connection with the Company’s equity raising activities, acquisitions and debt structuring for the Company and its businesses. Underwriting fees are recorded in members’ equity as a direct cost of equity offerings. Advisory fees and out-of-pocket expenses relating to acquisitions are expensed as incurred. Debt arranging fees are deferred and amortized over the term of the credit facility. Amounts relating to these transactions comprise the following ($ in thousands):
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Strategic review of alternatives available to the Company – advisory services from MCUSA | $ | 500 |
Until March 31, 2010, the Company had a revolving credit facility provided by various financial institutions, including entities within the Macquarie Group. The facility was repaid in full during 2009 and no amounts were outstanding under the revolving credit facility as of December 31, 2009 or at the facility’s
maturity on March 31, 2010. Amounts relating to the Macquarie Group’s portion of this revolving credit facility comprised of the following ($ in thousands):
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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 |
The Company has derivative instruments in place to fix the interest rate on certain outstanding variable-rate term loan facilities. MBL has provided interest rate swaps for Atlantic Aviation and The Gas Company. At June 30, 2010, Atlantic Aviation had $786.6 million of its variable-rate term loans hedged, of which MBL provided the interest rate swaps for a notional amount of $278.8 million. The remainder of the swaps are from an unrelated third party. During the six months ended June 30, 2010, Atlantic Aviation made net payments to MBL of $7.0 million in relation to these swaps.
As discussed in Note 9, “Long-Term Debt”, for the six months ended June 30, 2010, Atlantic Aviation paid $3.2 million in interest rate swap breakage fees, of which $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 June 30, 2010, The Gas Company had $160.0 million of its term loans hedged, of which MBL provided 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 six months ended June 30, 2010, The Gas Company made net payments to MBL of $1.1 million in relation to these swaps.
On March 30, 2009, The Gas Company entered into licensing agreements with Utility Service Partners, Inc. and America’s Water Heater Rentals, LLC, both indirect subsidiaries of Macquarie Group Limited, to enable these entities to offer products and services to The Gas Company’s customer base. No payments were made under these arrangements during the six months ended June 30, 2010.
On August 29, 2008, Macquarie Global Opportunities Partners, or MGOP, a private equity fund managed by the Macquarie Group, completed the acquisition of the jet membership, retail charter and fuel management business units previously owned by Sentient Jet Holdings, LLC. The new company is called Sentient Flight Group (referred to hereafter as “Sentient”). Sentient was an existing customer of Atlantic Aviation. For the six
months ended June 30, 2010, Atlantic Aviation recorded $8.4 million in revenue from Sentient. As of June 30, 2010, Atlantic Aviation had $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 several 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.
The Company expects to incur a net operating loss for federal consolidated income tax purposes for the year ending December 31, 2010. The Company believes that it will be able to utilize the projected federal and certain state consolidated 2010 and prior year net operating losses. Accordingly, the Company has not provided a valuation allowance against any deferred tax assets generated in 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 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.
At December 31, 2009, the Company and its subsidiaries had a reserve of approximately $336,000 for benefits taken during 2009 and prior tax periods attributable to tax positions for which the probability of recognition is considered to be less than more likely than not. There was no material change in that reserve as of June 30, 2010, and no material change is expected for the year ended December 31, 2010.
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, 2009, filed with the SEC on February 25, 2010.
Our infrastructure businesses generally operate
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 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 Atlantic Aviation have been negatively affected since mid-2008be paid by the slower economy and declining general aviation activity levels through mid-2009. However, general aviation activity levels stabilized inCompany over three years, of which $930,000 will be reimbursed by the second half of 2009 and showed year on year growth in December 2009 and through the second quarter of 2010. This stabilization, combined with expense reduction efforts, results in an improving outlook for the business.
We will continue to apply excess cash flow generated by Atlantic Aviation to the reduction of that business’ term loan principal, consistent with the amendments to the debt facility that we agreed 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 when 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 the next several months with respect to deploymentnew owners of the potentially excess cash. First, we will engage with lenders with the objective of pre-paying a portion of our long-term debt on favorable terms. Second, we will explore alternatives to return the excess cash to shareholders, including an undertaking analysis of an appropriate share repurchase program. We are neutral as to whether the cash is used to pre-pay debt or repurchase shares, assuming the benefit to shareholders is comparable.
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Quarter Ended June 30, | Change (from 2009 to 2010) Favorable/(Unfavorable) | Six Months Ended June 30, | Change (from 2009 to 2010) Favorable/(Unfavorable) | |||||||||||||||||||||||||||||
2010 | 2009 (1) | $ | % | 2010 | 2009 (1) | $ | % | |||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||
Revenue from product sales | $ | 125,177 | $ | 89,430 | 35,747 | 40.0 | $ | 245,195 | $ | 178,622 | 66,573 | 37.3 | ||||||||||||||||||||
Revenue from product sales – utility | 28,450 | 21,414 | 7,036 | 32.9 | 55,285 | 41,581 | 13,704 | 33.0 | ||||||||||||||||||||||||
Service revenue | 49,794 | 51,359 | (1,565 | ) | (3.0 | ) | 103,000 | 108,304 | (5,304 | ) | (4.9 | ) | ||||||||||||||||||||
Financing and equipment lease income | 1,271 | 1,205 | 66 | 5.5 | 2,516 | 2,397 | 119 | 5.0 | ||||||||||||||||||||||||
Total revenue | 204,692 | 163,408 | 41,284 | 25.3 | 405,996 | 330,904 | 75,092 | 22.7 | ||||||||||||||||||||||||
Costs and expenses | ||||||||||||||||||||||||||||||||
Cost of product sales | 79,887 | 50,645 | (29,242 | ) | (57.7 | ) | 156,941 | 100,411 | (56,530 | ) | (56.3 | ) | ||||||||||||||||||||
Cost of product sales – utility | 23,151 | 16,549 | (6,602 | ) | (39.9 | ) | 44,464 | 31,936 | (12,528 | ) | (39.2 | ) | ||||||||||||||||||||
Cost of services | 13,318 | 11,069 | (2,249 | ) | (20.3 | ) | 24,463 | 22,140 | (2,323 | ) | (10.5 | ) | ||||||||||||||||||||
Gross profit | 88,336 | 85,145 | 3,191 | 3.7 | 180,128 | 176,417 | 3,711 | 2.1 | ||||||||||||||||||||||||
Selling, general and administrative | 49,522 | 48,725 | (797 | ) | (1.6 | ) | 100,256 | 104,868 | 4,612 | 4.4 | ||||||||||||||||||||||
Fees to manager – related party | 2,268 | 851 | (1,417 | ) | (166.5 | ) | 4,457 | 1,313 | (3,144 | ) | NM | |||||||||||||||||||||
Goodwill impairment | — | 53,200 | 53,200 | NM | — | 71,200 | 71,200 | NM | ||||||||||||||||||||||||
Depreciation | 7,202 | 9,270 | 2,068 | 22.3 | 14,924 | 22,420 | 7,496 | 33.4 | ||||||||||||||||||||||||
Amortization of intangibles | 8,740 | 12,532 | 3,792 | 30.3 | 17,411 | 42,797 | 25,386 | 59.3 | ||||||||||||||||||||||||
Total operating expenses | 67,732 | 124,578 | 56,846 | 45.6 | 137,048 | 242,598 | 105,550 | 43.5 | ||||||||||||||||||||||||
Operating income (loss) | 20,604 | (39,433 | ) | 60,037 | 152.3 | 43,080 | (66,181 | ) | 109,261 | 165.1 | ||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||
Interest income | 4 | 34 | (30 | ) | (88.2 | ) | 20 | 101 | (81 | ) | (80.2 | ) | ||||||||||||||||||||
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 | 5,774 | 10,028 | (4,254 | ) | (42.4 | ) | 11,367 | 15,477 | (4,110 | ) | (26.6 | ) | ||||||||||||||||||||
Loss on derivative instruments | — | — | — | — | — | (25,238 | ) | 25,238 | 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
Quarter Ended September 30, | Change (from 2009 to 2010) Favorable/(Unfavorable) | Nine Months Ended September 30, | Change (from 2009 to 2010) Favorable/(Unfavorable) | ||||||||||||||||||||
2010 | 2009 (1) | $ | % | 2010 | 2009(1) | $ | % | ||||||||||||||||
($ in Thousands) (Unaudited) | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||
Revenue from product sales | $ | 129,217 | $ | 103,017 | 26,200 | 25.4 | $ | 374,412 | $ | 281,639 | 92,773 | 32.9 | |||||||||||
Revenue from product sales - utility | 28,232 | 26,056 | 2,176 | 8.4 | 83,517 | 67,637 | 15,880 | 23.5 | |||||||||||||||
Service revenue | 54,598 | 55,299 | (701 | ) | (1.3 | ) | 157,598 | 163,603 | (6,005 | ) | (3.7 | ) | |||||||||||
Financing and equipment lease income | 1,251 | 1,190 | 61 | 5.1 | 3,767 | 3,587 | 180 | 5.0 | |||||||||||||||
Total revenue | 213,298 | 185,562 | 27,736 | 14.9 | 619,294 | 516,466 | 102,828 | 19.9 | |||||||||||||||
Costs and expenses | |||||||||||||||||||||||
Cost of product sales | 78,843 | 61,923 | (16,920 | ) | (27.3 | ) | 235,784 | 162,334 | (73,450 | ) | (45.2 | ) | |||||||||||
Cost of product sales - utility | 22,467 | 20,088 | (2,379 | ) | (11.8 | ) | 66,931 | 52,024 | (14,907 | ) | (28.7 | ) | |||||||||||
Cost of services | 16,625 | 13,460 | (3,165 | ) | (23.5 | ) | 41,088 | 35,600 | (5,488 | ) | (15.4 | ) | |||||||||||
Gross profit | 95,363 | 90,091 | 5,272 | 5.9 | 275,491 | 266,508 | 8,983 | 3.4 | |||||||||||||||
Selling, general and administrative | 50,486 | 50,054 | (432 | ) | (0.9 | ) | 150,742 | 154,922 | 4,180 | 2.7 | |||||||||||||
Fees to manager - related party | 2,380 | 1,639 | (741 | ) | (45.2 | ) | 6,837 | 2,952 | (3,885 | ) | (131.6 | ) | |||||||||||
Goodwill impairment | - | - | - | - | - | 71,200 | 71,200 | NM | |||||||||||||||
Depreciation | 6,973 | 7,177 | 204 | 2.8 | 21,897 | 29,597 | 7,700 | 26.0 | |||||||||||||||
Amortization of intangibles | 8,743 | 9,126 | 383 | 4.2 | 26,154 | 51,923 | 25,769 | 49.6 | |||||||||||||||
Total operating expenses | 68,582 | 67,996 | (586 | ) | (0.9 | ) | 205,630 | 310,594 | 104,964 | 33.8 | |||||||||||||
Operating income (loss) | 26,781 | 22,095 | 4,686 | 21.2 | 69,861 | (44,086 | ) | 113,947 | NM | ||||||||||||||
Other income (expense) | |||||||||||||||||||||||
Interest income | 2 | 7 | (5 | ) | (71.4 | ) | 22 | 108 | (86 | ) | (79.6 | ) | |||||||||||
Interest expense (2) | (24,844 | ) | (39,308 | ) | 14,464 | 36.8 | (98,505 | ) | (74,977 | ) | (23,528 | ) | (31.4 | ) | |||||||||
Equity in earnings and amortization | |||||||||||||||||||||||
charges of investees | 7,804 | 1,178 | 6,626 | NM | 19,171 | 16,655 | 2,516 | 15.1 | |||||||||||||||
Loss on derivative instruments | - | - | - | - | - | (25,238 | ) | 25,238 | NM | ||||||||||||||
Other income, net | 1,269 | 296 | 973 | NM | 821 | 1,146 | (325 | ) | (28.4 | ) | |||||||||||||
Net income (loss) from continuing operations before income taxes | 11,012 | (15,732 | ) | 26,744 | 170.0 | (8,630 | ) | (126,392 | ) | 117,762 | 93.2 | ||||||||||||
(Provision) benefit for income taxes | (2,036 | ) | (984 | ) | (1,052 | ) | (106.9 | ) | 12,541 | 36,403 | (23,862 | ) | (65.5 | ) | |||||||||
Net income (loss) from continuing operations | $ | 8,976 | $ | (16,716 | ) | 25,692 | 153.7 | $ | 3,911 | $ | (89,989 | ) | 93,900 | 104.3 | |||||||||
Net (loss) income from discontinued operations, net of taxes | - | (1,680 | ) | 1,680 | NM | 81,199 | (11,263 | ) | 92,462 | NM | |||||||||||||
Net income (loss) | $ | 8,976 | $ | (18,396 | ) | 27,372 | 148.8 | $ | 85,110 | $ | (101,252 | ) | 186,362 | 184.1 | |||||||||
Less: net income (loss) attributable to noncontrolling interests | 34 | (48 | ) | (82 | ) | (170.8 | ) | (1,317 | ) | (920 | ) | 397 | 43.2 | ||||||||||
Net income (loss) attributable to MIC LLC | $ | 8,942 | $ | (18,348 | ) | 27,290 | 148.7 | $ | 86,427 | $ | (100,332 | ) | 186,759 | 186.1 |
___________________ | |||||||||||||||||||||||||||||||
NM - Not meaningful | |||||||||||||||||||||||||||||||
(1) Reclassified to conform to current period presentation. |
(2) | Interest expense includes non-cash losses on derivative instruments of |
Tax provision on continuing operations:
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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):
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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 |
Net loss from continuing operations before income taxes and noncontrolling interests | $ | (8.6 | ) | |
Adjustments for less than 80% owned businesses | (17.2 | ) | ||
State income taxes | 1.3 | |||
Other adjustments | (0.4 | ) | ||
Taxable loss for the nine months ended September 30, 2010 | $ | (24.9 | ) | |
Accordingly, our tax benefit for the nine months ended September 30, 2010 is as follows ($ in millions): | ||||
Federal tax benefit at 35% on the tax loss for the nine months ended September 30, 2010 | $ | 8.7 | ||
Reduction in valuation allowance (discussed below) | 2.6 | |||
State income tax benefit | 1.2 | |||
Total tax benefit | $ | 12.5 |
A reconciliation of net income (loss) attributable to MIC LLC from continuing operations to free cash flow from continuing operations, on a consolidated basis, is provided below:
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Quarter Ended June 30, | Change (from 2009 to 2010) Favorable/(Unfavorable) | Six Months Ended June 30, | Change (from 2009 to 2010) Favorable/(Unfavorable) | |||||||||||||||||||||||||||||
2010 | 2009(1) | $ | % | 2010 | 2009(1) | $ | % | |||||||||||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||||||||||
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(4) | 7,202 | 9,270 | 14,924 | 22,420 | ||||||||||||||||||||||||||||
Depreciation – cost of services(4) | 1,636 | 1,502 | 3,271 | 2,965 | ||||||||||||||||||||||||||||
Amortization of intangibles(5) | 8,740 | 12,532 | 17,411 | 42,797 | ||||||||||||||||||||||||||||
Goodwill impairment | — | 53,200 | — | 71,200 | ||||||||||||||||||||||||||||
Loss on derivative instruments | — | — | — | 25,238 | ||||||||||||||||||||||||||||
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 |
Quarter Ended September 30, | Change (from 2009 to 2010) Favorable/(Unfavorable) | Nine Months Ended September 30, | Change (from 2009 to 2010) Favorable/(Unfavorable) | |||||||||||||||||||||
2010 | 2009 (1) | $ | % | 2010 | 2009(1) | $ | % | |||||||||||||||||
($ in Thousands) (Unaudited) | ||||||||||||||||||||||||
Net income (loss) attributable to MIC LLC from continuing operations (2) | $ | 8,942 | $ | (16,890 | ) | $ | 5,364 | $ | (90,504 | ) | ||||||||||||||
Interest expense, net (3) | 24,842 | 39,301 | 98,483 | 74,869 | ||||||||||||||||||||
Provision (benefit) for income taxes | 2,036 | 984 | (12,541 | ) | (36,403 | ) | ||||||||||||||||||
Depreciation (4) | 6,973 | 7,177 | 21,897 | 29,597 | ||||||||||||||||||||
Depreciation - cost of services (4) | 1,639 | 1,541 | 4,910 | 4,506 | ||||||||||||||||||||
Amortization of intangibles (5) | 8,743 | 9,126 | 26,154 | 51,923 | ||||||||||||||||||||
Goodwill impairment | - | - | - | 71,200 | ||||||||||||||||||||
Loss on derivative instruments | - | - | - | 25,238 | ||||||||||||||||||||
Equity in earnings and amortization | ||||||||||||||||||||||||
charges of investees (6) | 2,196 | (1,178 | ) | (4,171 | ) | (9,655 | ) | |||||||||||||||||
Base management fees settled in LLC interests | - | 1,639 | 2,189 | 2,490 | ||||||||||||||||||||
Other non-cash expense, net | 902 | 991 | 1,672 | 1,069 | ||||||||||||||||||||
EBITDA excluding non-cash items from continuing operations | $ | 56,273 | $ | 42,691 | 13,582 | 31.8 | $ | 143,957 | $ | 124,330 | 19,627 | 15.8 | ||||||||||||
EBITDA excluding non-cash items from continuing operations | $ | 56,273 | $ | 42,691 | $ | 143,957 | $ | 124,330 | ||||||||||||||||
Interest expense, net (3) | (24,842 | ) | (39,301 | ) | (98,483 | ) | (74,869 | ) | ||||||||||||||||
Interest rate swap breakage fees (3) | (1,484 | ) | (1,185 | ) | (4,689 | ) | (7,862 | ) | ||||||||||||||||
Non-cash derivative losses recorded in interest expense (3) | 5,307 | 19,047 | 40,186 | 12,659 | ||||||||||||||||||||
Amortization of debt financing costs (3) | 1,043 | 1,310 | 3,299 | 3,824 | ||||||||||||||||||||
Equipment lease receivables, net | 751 | 651 | 2,202 | 2,058 | ||||||||||||||||||||
Provision/benefit for income taxes, net of changes in deferred taxes | 325 | (126 | ) | (1,144 | ) | (870 | ) | |||||||||||||||||
Changes in working capital | 963 | 1,295 | (5,346 | ) | 4,874 | |||||||||||||||||||
Cash provided by operating activities | 38,336 | 24,382 | 79,982 | 64,144 | ||||||||||||||||||||
Changes in working capital | (963 | ) | (1,295 | ) | 5,346 | (4,874 | ) | |||||||||||||||||
Maintenance capital expenditures | (3,053 | ) | (2,749 | ) | (6,802 | ) | (5,984 | ) | ||||||||||||||||
Free cash flow from continuing operations | $ | 34,320 | $ | 20,338 | 13,982 | 68.7 | $ | 78,526 | $ | 53,286 | 25,240 | 47.4 | ||||||||||||
___________________ | ||||||||||||||||||||||||
(1) | Reclassified to conform to current period presentation. |
(2) | Net income (loss) attributable to MIC LLC from continuing operations excludes net income attributable to noncontrolling interests of $34,000 and net loss attributable to noncontrolling interests of |
(3) | Interest expense, net, includes non-cash losses on derivative instruments, non-cash amortization of |
(4) | Depreciation |
(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. | ||||||||||||||||||||||||
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||||||||||||||
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
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||
2010 | 2009 (1) | Change Favorable/(Unfavorable) | 2010 | 2009 (1) | Change Favorable/(Unfavorable) | ||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||
($ In Thousands) (Unaudited) | |||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||
Terminal revenue | 91,825 | 80,962 | 10,863 | 13.4 | 278,122 | 242,524 | 35,598 | 14.7 | |||||||||||||||||
Environmental response revenue | 90,377 | 4,206 | 86,171 | NM | 169,353 | 11,421 | 157,932 | NM | |||||||||||||||||
Total revenue | 182,202 | 85,168 | 97,034 | 113.9 | 447,475 | 253,945 | 193,530 | 76.2 | |||||||||||||||||
Costs and expenses | |||||||||||||||||||||||||
Terminal operating costs | 42,300 | 38,114 | (4,186 | ) | (11.0 | ) | 124,846 | 114,577 | (10,269 | ) | (9.0 | ) | |||||||||||||
Environmental response operating costs | 58,728 | 3,829 | (54,899 | ) | NM | 108,199 | 11,759 | (96,440 | ) | NM | |||||||||||||||
Total operating costs | 101,028 | 41,943 | (59,085 | ) | (140.9 | ) | 233,045 | 126,336 | (106,709 | ) | (84.5 | ) | |||||||||||||
Terminal gross profit | 49,525 | 42,848 | 6,677 | 15.6 | 153,276 | 127,947 | 25,329 | 19.8 | |||||||||||||||||
Environmental response gross profit | 31,649 | 377 | 31,272 | NM | 61,154 | (338 | ) | 61,492 | NM | ||||||||||||||||
Gross profit | 81,174 | 43,225 | 37,949 | 87.8 | 214,430 | 127,609 | 86,821 | 68.0 | |||||||||||||||||
General and administrative expenses | 10,839 | 6,653 | (4,186 | ) | (62.9 | ) | 29,802 | 19,220 | (10,582 | ) | (55.1 | ) | |||||||||||||
Depreciation and amortization | 16,602 | 13,457 | (3,145 | ) | (23.4 | ) | 46,136 | 39,735 | (6,401 | ) | (16.1 | ) | |||||||||||||
Operating income | 53,733 | 23,115 | 30,618 | 132.5 | 138,492 | 68,654 | 69,838 | 101.7 | |||||||||||||||||
Interest expense, net (2) | (20,586 | ) | (15,452 | ) | (5,134 | ) | (33.2 | ) | (58,485 | ) | (4,842 | ) | (53,643 | ) | NM | ||||||||||
Other income | 220 | 340 | (120 | ) | (35.3 | ) | 1,581 | 172 | 1,409 | NM | |||||||||||||||
Unrealized gains on derivative instruments | - | - | - | - | - | 3,306 | (3,306 | ) | NM | ||||||||||||||||
Provision for income taxes | (15,546 | ) | (3,137 | ) | (12,409 | ) | NM | (35,902 | ) | (27,035 | ) | (8,867 | ) | (32.8 | ) | ||||||||||
Noncontrolling interests | 153 | (145 | ) | 298 | NM | (247 | ) | 152 | (399 | ) | NM | ||||||||||||||
Net income | 17,974 | 4,721 | 13,253 | NM | 45,439 | 40,407 | 5,032 | 12.5 | |||||||||||||||||
Reconciliation of net income to EBITDA excluding non-cash items: | |||||||||||||||||||||||||
Net income | 17,974 | 4,721 | 45,439 | 40,407 | |||||||||||||||||||||
Interest expense, net (2) | 20,586 | 15,452 | 58,485 | 4,842 | |||||||||||||||||||||
Provision for income taxes | 15,546 | 3,137 | 35,902 | 27,035 | |||||||||||||||||||||
Depreciation and amortization | 16,602 | 13,457 | 46,136 | 39,735 | |||||||||||||||||||||
Unrealized gains on derivative instruments | - | - | - | (3,306 | ) | ||||||||||||||||||||
Other non-cash (income) expenses | (518 | ) | 378 | (273 | ) | (291 | ) | ||||||||||||||||||
EBITDA excluding non-cash items | 70,190 | 37,145 | 33,045 | 89.0 | 185,689 | 108,422 | 77,267 | 71.3 | |||||||||||||||||
EBITDA excluding non-cash items | 70,190 | 37,145 | 185,689 | 108,422 | |||||||||||||||||||||
Interest expense, net (2) | (20,586 | ) | (15,452 | ) | (58,485 | ) | (4,842 | ) | |||||||||||||||||
Non-cash derivative losses (gains) recorded in interest expense(2) | 11,041 | 8,074 | 33,094 | (17,148 | ) | ||||||||||||||||||||
Amortization of debt financing costs (2) | 618 | 118 | 1,328 | 353 | |||||||||||||||||||||
Provision for income taxes, net of changes in deferred taxes | (6,580 | ) | (1,020 | ) | (10,812 | ) | (2,567 | ) | |||||||||||||||||
Changes in working capital | 7,761 | (3,030 | ) | (19,693 | ) | 8,453 | |||||||||||||||||||
Cash provided by operating activities | 62,444 | 25,835 | 131,121 | 92,671 | |||||||||||||||||||||
Changes in working capital | (7,761 | ) | 3,030 | 19,693 | (8,453 | ) | |||||||||||||||||||
Maintenance capital expenditures | (10,138 | ) | (10,183 | ) | (29,169 | ) | (26,864 | ) | |||||||||||||||||
Free cash flow | 44,545 | 18,682 | 25,863 | 138.4 | 121,645 | 57,354 | 64,291 | 112.1 |
___________________ | ||||||||||||||||
NM - Not meaningful | ||||||||||||||||
(1) Reclassified to conform to current period presentation. |
(2) | Interest |
IMTT expects utilization rates to return to the somewhat higher historical levels in early 2011.
wages and higher repairs and maintenance.
Cash interest paid was $8.5 million and $15.9 million for the quarter and six months ended June 30, 2010, respectively, and $6.4 million and $14.2 million for the quarter and six months ended June 30, 2009, respectively.
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||||||||||||||
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
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2010 | 2009 (1) | Change Favorable/(Unfavorable) | 2010 | 2009 (1) | Change Favorable/(Unfavorable) | ||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | ||||||||||||||||||||
($ In Thousands) (Unaudited) | |||||||||||||||||||||||||||
Contribution margin | |||||||||||||||||||||||||||
Revenue - utility | 28,232 | 26,056 | 2,176 | 8.4 | 83,517 | 67,637 | 15,880 | 23.5 | |||||||||||||||||||
Cost of revenue - utility | 18,904 | 16,535 | (2,369 | ) | (14.3 | ) | 56,178 | 41,865 | (14,313 | ) | (34.2 | ) | |||||||||||||||
Contribution margin - utility | 9,328 | 9,521 | (193 | ) | (2.0 | ) | 27,339 | 25,772 | 1,567 | 6.1 | |||||||||||||||||
Revenue - non-utility | 23,214 | 18,680 | 4,534 | 24.3 | 72,760 | 58,145 | 14,615 | 25.1 | |||||||||||||||||||
Cost of revenue - non-utility | 11,179 | 8,952 | (2,227 | ) | (24.9 | ) | 37,024 | 26,569 | (10,455 | ) | (39.4 | ) | |||||||||||||||
Contribution margin - non-utility | 12,035 | 9,728 | 2,307 | 23.7 | 35,736 | 31,576 | 4,160 | 13.2 | |||||||||||||||||||
Total contribution margin | 21,363 | 19,249 | 2,114 | 11.0 | 63,075 | 57,348 | 5,727 | 10.0 | |||||||||||||||||||
Production | 1,718 | 1,684 | (34 | ) | (2.0 | ) | 5,126 | 4,778 | (348 | ) | (7.3 | ) | |||||||||||||||
Transmission and distribution | 4,919 | 5,003 | 84 | 1.7 | 15,050 | 14,375 | (675 | ) | (4.7 | ) | |||||||||||||||||
Gross profit | 14,726 | 12,562 | 2,164 | 17.2 | 42,899 | 38,195 | 4,704 | 12.3 | |||||||||||||||||||
Selling, general and administrative expenses | 4,259 | 4,212 | (47 | ) | (1.1 | ) | 12,557 | 12,057 | (500 | ) | (4.1 | ) | |||||||||||||||
Depreciation and amortization | 1,492 | 1,713 | 221 | 12.9 | 4,926 | 5,135 | 209 | 4.1 | |||||||||||||||||||
Operating income | 8,975 | 6,637 | 2,338 | 35.2 | 25,416 | 21,003 | 4,413 | 21.0 | |||||||||||||||||||
Interest expense, net (2) | (5,047 | ) | (5,406 | ) | 359 | 6.6 | (15,780 | ) | (6,774 | ) | (9,006 | ) | (132.9 | ) | |||||||||||||
Other income (expense) | 1 | (91 | ) | 92 | 101.1 | (10 | ) | (216 | ) | 206 | 95.4 | ||||||||||||||||
Unrealized losses on derivative instruments | - | - | - | - | - | (327 | ) | 327 | NM | ||||||||||||||||||
Provision for income taxes | (1,538 | ) | (446 | ) | (1,092 | ) | NM | (3,769 | ) | (5,359 | ) | 1,590 | 29.7 | ||||||||||||||
Net income (3) | 2,391 | 694 | 1,697 | NM | 5,857 | 8,327 | (2,470 | ) | (29.7 | ) | |||||||||||||||||
Reconciliation of net income to EBITDA excluding non-cash items: | |||||||||||||||||||||||||||
Net income (3) | 2,391 | 694 | 5,857 | 8,327 | |||||||||||||||||||||||
Interest expense, net (2) | 5,047 | 5,406 | 15,780 | 6,774 | |||||||||||||||||||||||
Provision for income taxes | 1,538 | 446 | 3,769 | 5,359 | |||||||||||||||||||||||
Depreciation and amortization | 1,492 | 1,713 | 4,926 | 5,135 | |||||||||||||||||||||||
Unrealized losses on derivative instruments | - | - | - | 327 | |||||||||||||||||||||||
Other non-cash expenses | 534 | 510 | 1,599 | 1,525 | |||||||||||||||||||||||
EBITDA excluding non-cash items | 11,002 | 8,769 | 2,233 | 25.5 | 31,931 | 27,447 | 4,484 | 16.3 | |||||||||||||||||||
EBITDA excluding non-cash items | 11,002 | 8,769 | 31,931 | 27,447 | |||||||||||||||||||||||
Interest expense, net (2) | (5,047 | ) | (5,406 | ) | (15,780 | ) | (6,774 | ) | |||||||||||||||||||
Non-cash derivative losses recorded in interest expense(2) | 2,734 | 3,194 | 8,945 | 65 | |||||||||||||||||||||||
Amortization of debt financing costs (2) | 120 | 119 | 359 | 358 | |||||||||||||||||||||||
Provision for income taxes, net of changes in deferred taxes | 1,478 | (579 | ) | (1,276 | ) | (2,697 | ) | ||||||||||||||||||||
Changes in working capital | 1,483 | (1,451 | ) | (1,320 | ) | (1,922 | ) | ||||||||||||||||||||
Cash provided by operating activities | 11,770 | 4,646 | 22,859 | 16,477 | |||||||||||||||||||||||
Changes in working capital | (1,483 | ) | 1,451 | 1,320 | 1,922 | ||||||||||||||||||||||
Maintenance capital expenditures | (1,030 | ) | (676 | ) | (2,008 | ) | (1,757 | ) | |||||||||||||||||||
Free cash flow | 9,257 | 5,421 | 3,836 | 70.8 | 22,171 | 16,642 | 5,529 | 33.2 | |||||||||||||||||||
___________________ | ||||||||||||||||||||||||||||||||
NM - Not meaningful | ||||||||||||||||||||||||||||||||
(1) Reclassified to conform to current period presentation. For the quarter and |
(2) | Interest |
(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. | |||||||||||||||||||||||||||||||||
On April 20, 2010,approval by the Hawaii Public Utilities Commission (HPUC) issued its Final Decision. The changes in cost of feedstock are passed through to consumers via the fuel adjustment charge mechanism and Orderhave no impact 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.
margin.
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) | ||||||||||||||||||||||||||||||||
Cooling capacity revenue | 5,295 | 5,110 | 185 | 3.6 | 10,533 | 10,007 | 526 | 5.3 | ||||||||||||||||||||||||
Cooling consumption revenue | 7,144 | 5,502 | 1,642 | 29.8 | 8,907 | 7,730 | 1,177 | 15.2 | ||||||||||||||||||||||||
Other revenue | 803 | 743 | 60 | 8.1 | 1,667 | 1,499 | 168 | 11.2 | ||||||||||||||||||||||||
Finance lease revenue | 1,271 | 1,205 | 66 | 5.5 | 2,516 | 2,397 | 119 | 5.0 | ||||||||||||||||||||||||
Total revenue | 14,513 | 12,560 | 1,953 | 15.5 | 23,623 | 21,633 | 1,990 | 9.2 | ||||||||||||||||||||||||
Direct expenses – electricity | 4,664 | 3,784 | (880 | ) | (23.3 | ) | 5,987 | 5,388 | (599 | ) | (11.1 | ) | ||||||||||||||||||||
Direct expenses – other(2) | 5,066 | 4,508 | (558 | ) | (12.4 | ) | 9,937 | 9,272 | (665 | ) | (7.2 | ) | ||||||||||||||||||||
Direct expenses – total | 9,730 | 8,292 | (1,438 | ) | (17.3 | ) | 15,924 | 14,660 | (1,264 | ) | (8.6 | ) | ||||||||||||||||||||
Gross profit | 4,783 | 4,268 | 515 | 12.1 | 7,699 | 6,973 | 726 | 10.4 | ||||||||||||||||||||||||
Selling, general and administrative expenses | 799 | 716 | (83 | ) | (11.6 | ) | 1,557 | 1,354 | (203 | ) | (15.0 | ) | ||||||||||||||||||||
Amortization of intangibles | 341 | 341 | — | — | 678 | 678 | — | — | ||||||||||||||||||||||||
Operating income | 3,643 | 3,211 | 432 | 13.5 | 5,464 | 4,941 | 523 | 10.6 | ||||||||||||||||||||||||
Interest (expense) income, net(3) | (7,976 | ) | 2,728 | (10,704 | ) | NM | (14,004 | ) | (227 | ) | (13,777 | ) | NM | |||||||||||||||||||
Other income | 59 | 45 | 14 | 31.1 | 109 | 94 | 15 | 16.0 | ||||||||||||||||||||||||
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(4) | (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(4) | (2,705 | ) | 3,514 | (5,336 | ) | 1,868 | ||||||||||||||||||||||||||
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) | 1,636 | 1,502 | 3,271 | 2,965 | ||||||||||||||||||||||||||||
Amortization of intangibles | 341 | 341 | 678 | 678 | ||||||||||||||||||||||||||||
Unrealized losses on derivative instruments | — | — | — | 1,378 | ||||||||||||||||||||||||||||
Other non-cash expenses | 232 | 172 | 387 | 276 | ||||||||||||||||||||||||||||
EBITDA excluding non-cash items | 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
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
2010 | 2009 (1) | Change Favorable/(Unfavorable) | 2010 | 2009 (1) | Change Favorable/(Unfavorable) | |||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | |||||||||||||||||||
($ In Thousands) (Unaudited) | ||||||||||||||||||||||||||
Cooling capacity revenue | 5,302 | 5,224 | 78 | 1.5 | 15,835 | 15,231 | 604 | 4.0 | ||||||||||||||||||
Cooling consumption revenue | 12,596 | 9,400 | 3,196 | 34.0 | 21,503 | 17,130 | 4,373 | 25.5 | ||||||||||||||||||
Other revenue | 823 | 832 | (9 | ) | (1.1 | ) | 2,490 | 2,331 | 159 | 6.8 | ||||||||||||||||
Finance lease revenue | 1,251 | 1,190 | 61 | 5.1 | 3,767 | 3,587 | 180 | 5.0 | ||||||||||||||||||
Total revenue | 19,972 | 16,646 | 3,326 | 20.0 | 43,595 | 38,279 | 5,316 | 13.9 | ||||||||||||||||||
Direct expenses — electricity | 8,202 | 5,715 | (2,487 | ) | (43.5 | ) | 14,189 | 11,103 | (3,086 | ) | (27.8 | ) | ||||||||||||||
Direct expenses — other (2) | 4,941 | 4,803 | (138 | ) | (2.9 | ) | 14,878 | 14,075 | (803 | ) | (5.7 | ) | ||||||||||||||
Direct expenses — total | 13,143 | 10,518 | (2,625 | ) | (25.0 | ) | 29,067 | 25,178 | (3,889 | ) | (15.4 | ) | ||||||||||||||
Gross profit | 6,829 | 6,128 | 701 | 11.4 | 14,528 | 13,101 | 1,427 | 10.9 | ||||||||||||||||||
Selling, general and administrative expenses | 793 | 697 | (96 | ) | (13.8 | ) | 2,350 | 2,051 | (299 | ) | (14.6 | ) | ||||||||||||||
Amortization of intangibles | 345 | 345 | - | - | 1,023 | 1,023 | - | - | ||||||||||||||||||
Operating income | 5,691 | 5,086 | 605 | 11.9 | 11,155 | 10,027 | 1,128 | 11.2 | ||||||||||||||||||
Interest expense, net (3) | (6,862 | ) | (6,623 | ) | (239 | ) | (3.6 | ) | (20,866 | ) | (6,850 | ) | (14,016 | ) | NM | |||||||||||
Other income | 1,427 | 447 | 980 | NM | 1,536 | 541 | 995 | 183.9 | ||||||||||||||||||
Unrealized losses on derivative instruments | - | - | - | - | - | (1,378 | ) | 1,378 | NM | |||||||||||||||||
(Provision) benefit for income taxes | (23 | ) | 500 | (523 | ) | (104.6 | ) | 3,464 | (721 | ) | 4,185 | NM | ||||||||||||||
Noncontrolling interests | (198 | ) | (174 | ) | (24 | ) | (13.8 | ) | (590 | ) | (515 | ) | (75 | ) | (14.6 | ) | ||||||||||
Net income (loss) (4) | 35 | (764 | ) | 799 | 104.6 | (5,301 | ) | 1,104 | (6,405 | ) | NM | |||||||||||||||
Reconciliation of net income (loss) to EBITDA excluding non-cash items: | ||||||||||||||||||||||||||
Net income (loss) (4) | 35 | (764 | ) | (5,301 | ) | 1,104 | ||||||||||||||||||||
Interest expense, net (3) | 6,862 | 6,623 | 20,866 | 6,850 | ||||||||||||||||||||||
Provision (benefit) for income taxes | 23 | (500 | ) | (3,464 | ) | 721 | ||||||||||||||||||||
Depreciation (2) | 1,639 | 1,541 | 4,910 | 4,506 | ||||||||||||||||||||||
Amortization of intangibles | 345 | 345 | 1,023 | 1,023 | ||||||||||||||||||||||
Unrealized losses on derivative instruments | - | - | - | 1,378 | ||||||||||||||||||||||
Other non-cash expenses | 265 | 179 | 652 | 455 | ||||||||||||||||||||||
EBITDA excluding non-cash items | 9,169 | 7,424 | 1,745 | 23.5 | 18,686 | 16,037 | 2,649 | 16.5 | ||||||||||||||||||
EBITDA excluding non-cash items | 9,169 | 7,424 | 18,686 | 16,037 | ||||||||||||||||||||||
Interest expense, net (3) | (6,862 | ) | (6,623 | ) | (20,866 | ) | (6,850 | ) | ||||||||||||||||||
Non-cash derivative losses (gains) recorded in interest expense (3) | 4,180 | 4,069 | 13,006 | (739 | ) | |||||||||||||||||||||
Amortization of debt financing costs (3) | 171 | 171 | 511 | 511 | ||||||||||||||||||||||
Equipment lease receivable, net | 751 | 651 | 2,202 | 2,058 | ||||||||||||||||||||||
Changes in working capital | (92 | ) | (970 | ) | (3,661 | ) | (1,454 | ) | ||||||||||||||||||
Cash provided by operating activities | 7,317 | 4,722 | 9,878 | 9,563 | ||||||||||||||||||||||
Changes in working capital | 92 | 970 | 3,661 | 1,454 | ||||||||||||||||||||||
Maintenance capital expenditures | (249 | ) | (305 | ) | (813 | ) | (664 | ) | ||||||||||||||||||
Free cash flow | 7,160 | 5,387 | 1,773 | 32.9 | 12,726 | 10,353 | 2,373 | 22.9 |
___________________ | |||||||||||||||||
NM - Not meaningful | |||||||||||||||||
(1) Reclassified to conform to current period presentation. |
(2) | Includes depreciation expense of $1.6 million and |
(3) | Interest |
(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. |
Cash interest paid was $2.6$2.4 million and $4.9$7.3 million for the quarter and sixnine months ended JuneSeptember 30, 2010, respectively, and $2.4 million and $4.8$7.2 million for the quarter and sixnine months ended JuneSeptember 30, 2009, respectively.
The business has approximately $26.0 million in federal and state NOL carryforwards available to offset positive taxable income. The business expects to have federal and state taxable income in 2011 and 2012, which will be wholly offset by NOL carryforwards.
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
Fuel revenue | 100,941 | 71,040 | 29,901 | 42.1 | 195,649 | 139,157 | 56,492 | 40.6 | ||||||||||||||||||||||||
Non-fuel revenue | 36,552 | 40,004 | (3,452 | ) | (8.6 | ) | 81,893 | 89,068 | (7,175 | ) | (8.1 | ) | ||||||||||||||||||||
Total revenue | 137,493 | 111,044 | 26,449 | 23.8 | 277,542 | 228,225 | 49,317 | 21.6 | ||||||||||||||||||||||||
Cost of revenue | ||||||||||||||||||||||||||||||||
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 | 68,136 | 42,245 | (25,891 | ) | (61.3 | ) | 133,286 | 84,415 | (48,871 | ) | (57.9 | ) | ||||||||||||||||||||
Fuel gross profit | 36,392 | 31,572 | 4,820 | 15.3 | 70,902 | 62,222 | 8,680 | 14.0 | ||||||||||||||||||||||||
Non-fuel gross profit | 32,965 | 37,227 | (4,262 | ) | (11.4 | ) | 73,354 | 81,588 | (8,234 | ) | (10.1 | ) | ||||||||||||||||||||
Gross profit | 69,357 | 68,799 | 558 | 0.8 | 144,256 | 143,810 | 446 | 0.3 | ||||||||||||||||||||||||
Selling, general and administrative expenses(2) | 42,558 | 42,569 | 11 | — | 86,793 | 91,321 | 4,528 | 5.0 | ||||||||||||||||||||||||
Goodwill impairment | — | 53,200 | 53,200 | NM | — | 71,200 | 71,200 | NM | ||||||||||||||||||||||||
Depreciation and amortization | 13,885 | 19,729 | 5,844 | 29.6 | 28,223 | 61,117 | 32,894 | 53.8 | ||||||||||||||||||||||||
Operating income (loss) | 12,914 | (46,699 | ) | 59,613 | 127.7 | 29,240 | (79,828 | ) | 109,068 | 136.6 | ||||||||||||||||||||||
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 | — | — | — | — | — | (23,331 | ) | 23,331 | NM | |||||||||||||||||||||||
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 | 13,885 | 19,729 | 28,223 | 61,117 | ||||||||||||||||||||||||||||
Goodwill impairment | — | 53,200 | — | 71,200 | ||||||||||||||||||||||||||||
Unrealized losses on derivative instruments | — | — | — | 23,331 | ||||||||||||||||||||||||||||
Other non-cash expenses (income) | 558 | (430 | ) | 605 | (367 | ) | ||||||||||||||||||||||||||
EBITDA excluding non-cash items | 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
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
2010 | 2009 (1) | Change Favorable/(Unfavorable) | 2010 | 2009 (1) | Change Favorable/(Unfavorable) | |||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | |||||||||||||||||||
($ In Thousands) (Unaudited) | ||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||
Fuel revenue | 106,003 | 84,337 | 21,666 | 25.7 | 301,652 | 223,494 | 78,158 | 35.0 | ||||||||||||||||||
Non-fuel revenue | 35,877 | 39,843 | (3,966 | ) | (10.0 | ) | 117,770 | 128,911 | (11,141 | ) | (8.6 | ) | ||||||||||||||
Total revenue | 141,880 | 124,180 | 17,700 | 14.3 | 419,422 | 352,405 | 67,017 | 19.0 | ||||||||||||||||||
Cost of revenue | ||||||||||||||||||||||||||
Cost of revenue-fuel | 64,590 | 49,837 | (14,753 | ) | (29.6 | ) | 189,337 | 126,772 | (62,565 | ) | (49.4 | ) | ||||||||||||||
Cost of revenue-non-fuel | 3,482 | 2,943 | (539 | ) | (18.3 | ) | 12,021 | 10,423 | (1,598 | ) | (15.3 | ) | ||||||||||||||
Total cost of revenue | 68,072 | 52,780 | (15,292 | ) | (29.0 | ) | 201,358 | 137,195 | (64,163 | ) | (46.8 | ) | ||||||||||||||
Fuel gross profit | 41,413 | 34,500 | 6,913 | 20.0 | 112,315 | 96,722 | 15,593 | 16.1 | ||||||||||||||||||
Non-fuel gross profit | 32,395 | 36,900 | (4,505 | ) | (12.2 | ) | 105,749 | 118,488 | (12,739 | ) | (10.8 | ) | ||||||||||||||
Gross profit | 73,808 | 71,400 | 2,408 | 3.4 | 218,064 | 215,210 | 2,854 | 1.3 | ||||||||||||||||||
Selling, general and administrative expenses (2) | 42,969 | 43,413 | 444 | 1.0 | 129,762 | 134,734 | 4,972 | 3.7 | ||||||||||||||||||
Goodwill impairment | - | - | - | - | - | 71,200 | 71,200 | NM | ||||||||||||||||||
Depreciation and amortization | 13,879 | 14,245 | 366 | 2.6 | 42,102 | 75,362 | 33,260 | 44.1 | ||||||||||||||||||
Operating income (loss) | 16,960 | 13,742 | 3,218 | 23.4 | 46,200 | (66,086 | ) | 112,286 | 169.9 | |||||||||||||||||
Interest expense, net (3) | (12,938 | ) | (26,382 | ) | 13,444 | 51.0 | (61,612 | ) | (57,822 | ) | (3,790 | ) | (6.6 | ) | ||||||||||||
Other expense | (101 | ) | (109 | ) | 8 | 7.3 | (645 | ) | (322 | ) | (323 | ) | (100.3 | ) | ||||||||||||
Unrealized losses on derivative instruments | - | - | - | - | - | (23,331 | ) | 23,331 | NM | |||||||||||||||||
(Provision) benefit for income taxes | (1,580 | ) | 5,137 | (6,717 | ) | (130.8 | ) | 6,471 | 59,467 | (52,996 | ) | (89.1 | ) | |||||||||||||
Net income (loss) (4) | 2,341 | (7,612 | ) | 9,953 | 130.8 | (9,586 | ) | (88,094 | ) | 78,508 | 89.1 | |||||||||||||||
Reconciliation of net income (loss) to EBITDA excluding non-cash items: | ||||||||||||||||||||||||||
Net income (loss) (4) | 2,341 | (7,612 | ) | (9,586 | ) | (88,094 | ) | |||||||||||||||||||
Interest expense, net (3) | 12,938 | 26,382 | 61,612 | 57,822 | ||||||||||||||||||||||
Provision (benefit) for income taxes | 1,580 | (5,137 | ) | (6,471 | ) | (59,467 | ) | |||||||||||||||||||
Depreciation and amortization | 13,879 | 14,245 | 42,102 | 75,362 | ||||||||||||||||||||||
Goodwill impairment | - | - | - | 71,200 | ||||||||||||||||||||||
Unrealized losses on derivative instruments | - | - | - | 23,331 | ||||||||||||||||||||||
Other non-cash expenses (income) | 149 | 43 | 754 | (324 | ) | |||||||||||||||||||||
EBITDA excluding non-cash items | 30,887 | 27,921 | 2,966 | 10.6 | 88,411 | 79,830 | 8,581 | 10.7 | ||||||||||||||||||
EBITDA excluding non-cash items | 30,887 | 27,921 | 88,411 | 79,830 | ||||||||||||||||||||||
Interest expense, net (3) | (12,938 | ) | (26,382 | ) | (61,612 | ) | (57,822 | ) | ||||||||||||||||||
Interest rate swap breakage fees (3) | (1,484 | ) | (1,185 | ) | (4,689 | ) | (7,862 | ) | ||||||||||||||||||
Non-cash derivative (gains) losses recorded in interest expense (3) | (1,602 | ) | 11,702 | 18,237 | 13,132 | |||||||||||||||||||||
Amortization of debt financing costs (3) | 753 | 815 | 2,225 | 2,341 | ||||||||||||||||||||||
Provision/benefit for income taxes, net of changes in deferred taxes | (11 | ) | 9 | (298 | ) | (253 | ) | |||||||||||||||||||
Changes in working capital | (2,526 | ) | 4,407 | 136 | 14,659 | |||||||||||||||||||||
Cash provided by operating activities | 13,079 | 17,287 | 42,410 | 44,025 | ||||||||||||||||||||||
Changes in working capital | 2,526 | (4,407 | ) | (136 | ) | (14,659 | ) | |||||||||||||||||||
Maintenance capital expenditures | (1,774 | ) | (1,768 | ) | (3,981 | ) | (3,563 | ) | ||||||||||||||||||
Free cash flow | 13,831 | 11,112 | 2,719 | 24.5 | 38,293 | 25,803 | 12,490 | 48.4 | ||||||||||||||||||
___________________ | ||||||||||||||||||||||||||
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. | ||||||||||||||||||||||||||
(3) Interest expense, net, includes non-cash gains (losses) on derivative instruments, non-cash amortization of deferred financing fees and interest rate swap breakage fees. | ||||||||||||||||||||||||||
(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. | ||||||||||||||||||||||||||
We believe
The decrease is also due to a $2.4 million increase in bad debt reserves in the first quarter of 2009 due to the deterioration of the accounts receivable aging related to acquisitions. Acquisition-related receivables have improved and ongoing accounts receivable have not deteriorated, and as a result the business has recorded no further significant bad debt reserve adjustments.
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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
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
2010 | 2009 | Change Favorable/(Unfavorable) | 2010 | 2009 | Change Favorable/(Unfavorable) | |||||||||||||||||||||||||||
$ | $ | $ | % | $ | $ | $ | % | |||||||||||||||||||||||||
($ In Thousands) | ||||||||||||||||||||||||||||||||
Interest income | - | (5 | ) | (5 | ) | NM | (14 | ) | (83 | ) | (69 | ) | (83.1 | ) | ||||||||||||||||||
Interest paid on debt facility | 13,594 | 14,026 | 432 | 3.1 | 41,169 | 43,353 | 2,184 | 5.0 | ||||||||||||||||||||||||
Amortization of deferred financing costs | 753 | 815 | 62 | 7.6 | 2,225 | 2,341 | 116 | 5.0 | ||||||||||||||||||||||||
Non-cash (gains) losses on derivative instruments | (1,602 | ) | 11,702 | 13,304 | 113.7 | 18,237 | 13,132 | (5,105 | ) | (38.9 | ) | |||||||||||||||||||||
Less: capitalized interest | 193 | (156 | ) | (349 | ) | NM | (5 | ) | (921 | ) | (916 | ) | (99.5 | ) | ||||||||||||||||||
Total interest expense, net | 12,938 | 26,382 | 13,444 | 51.0 | 61,612 | 57,822 | (3,790 | ) | (6.6 | ) | ||||||||||||||||||||||
___________________ | ||||||||||||||||||||||||||||||||
NM - Not meaningful |
Until March 31, 2010,
time of any authorization. Management believes that any distribution would be characterized as a dividend for tax purposes rather than as a return of capital.
• | 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. |
the facility’s maturity on March 31, 2010.
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Six Months Ended June 30, | Change Favorable/(Unfavorable) | |||||||||||||||
2010 | 2009 | |||||||||||||||
$ | $ | $ | % | |||||||||||||
($ In Thousands) | ||||||||||||||||
Cash provided by operating activities | 41,646 | 39,762 | 1,884 | 4.7 | ||||||||||||
Cash used in investing activities | (9,057 | ) | (11,772 | ) | 2,715 | 23.1 | ||||||||||
Cash used in financing activities | (30,625 | ) | (57,461 | ) | 26,836 | 46.7 |
Nine Months Ended September 30, | ||||||||||||||||
2010 | 2009 | Change Favorable/(Unfavorable) | ||||||||||||||
$ | $ | $ | % | |||||||||||||
($ In Thousands) | ||||||||||||||||
Cash provided by operating activities | 79,982 | 64,144 | 15,838 | 24.7 | ||||||||||||
Cash used in investing activities | (14,232 | ) | (19,494 | ) | 5,262 | 27.0 | ||||||||||
Cash used in financing activities | (56,023 | ) | (53,911 | ) | (2,112 | ) | (3.9 | ) |
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 2010, $5.0$15.0 million in distributions were included in cash from operating activities compared with $7.0 million in dividends received in 2009.
to 2009.
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Six Months Ended June 30, | Change Favorable/(Unfavorable) | |||||||||||||||
2010 | 2009 | |||||||||||||||
$ | $ | $ | % | |||||||||||||
($ In Thousands) | ||||||||||||||||
Cash provided by operating activities | 68,677 | 66,836 | 1,841 | 2.8 | ||||||||||||
Cash used in investing activities | (37,171 | ) | (83,119 | ) | 45,948 | 55.3 | ||||||||||
Cash (used in) provided by financing activities | (28,018 | ) | 29,960 | (57,978 | ) | (193.5 | ) |
Nine Months Ended September 30, | ||||||||||||||||
2010 | 2009 | Change Favorable/(Unfavorable) | ||||||||||||||
$ | $ | $ | % | |||||||||||||
($ In Thousands) | ||||||||||||||||
Cash provided by operating activities | 131,121 | 92,671 | 38,450 | 41.5 | ||||||||||||
Cash used in investing activities | (57,550 | ) | (109,772 | ) | 52,222 | 47.6 | ||||||||||
Cash (used in) provided by financing activities | (71,581 | ) | 15,260 | (86,841 | ) | NM | ||||||||||
___________________ | ||||||||||||||||
NM - Not meaningful |
2010 as compared to a decrease in 2009. Working capital declined in 2009 as we received payments from previously executedcompleted 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.
$4.3 million on an annualized basis.
closed on $85.0 million of additional GO Zone Bonds. Proceeds from this issuance were used to partially repay the revolving credit facility. IMTT was awarded an additional $100.0 million and $27.4 million of GO Zone Bonds on August 19, 2010 and October 21, 2010, respectively. These will be issued in the fourth quarter of 2010 and proceeds will be used to partially repay the revolving credit facility and/or fund future projects. IMTT will continue to pursue additional opportunities to issue GO Zone Bonds.
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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 forin the changes discussed above, the termstable below.
Facility Term | ||
Amount Outstanding | $85.0 million | |
Term | August 1, 2046 | |
Amortization | N/A. Repayable in full at maturity. | |
Interest Rate | Floating at tax-exempt weekly tender rate. | |
Security | Unsecured. Required to be supported at all times by | |
bank letter of credit. | ||
Financial Covenants | None. | |
Restrictions on Payments of Dividends | None. |
The financial covenant requirements under IMTT’s credit facilities, and the calculation of these measures at June 30, 2010, were as follows:
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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 | — | — | — | — |
Nine Months Ended September 30, | ||||||||||||||||
2010 | 2009 | Change Favorable/(Unfavorable) | ||||||||||||||
$ | $ | $ | % | |||||||||||||
($ In Thousands) | ||||||||||||||||
Cash provided by operating activities | 22,859 | 16,477 | 6,382 | 38.7 | ||||||||||||
Cash used in investing activities | (5,680 | ) | (4,816 | ) | (864 | ) | (17.9 | ) | ||||||||
Cash (used in) provided by financing activities | (10,000 | ) | 10,000 | (20,000 | ) | NM | ||||||||||
___________________ | ||||||||||||||||
NM - Not meaningful |
The following table sets forth information about capital expenditures in The Gas Company:
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Maintenance | Growth | |||||||
$1.8 million | $ | |||||||
Nine months ended September 30, 2010 | $1.8 million | $ | ||||||
2010 full year projected | $5.5 million | $ | ||||||
Commitments at | $302,000 | $ |
The business expects to fund its total 2010 capital expenditures from cash from operating activities and available debt facilities. Capital expenditures for 2010 are expected to be higher than previous years due to required pipeline maintenance and inspection involving the relocation and upgrade of two sections of the transmission pipeline near the SNG plant as part of an integrity management program due by 2012 and a pilot project at the SNG plant to create gas from renewable feedstock sources. The full year growth capital expenditure projection has been revised downward primarily due to a deferral of equipment for the renewable feedstock project. Commitments at JuneSeptember 30, 2010 primarily relate to the renewable feedstock project.
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 JuneSeptember 30, 2010 is 4.85%was 5.09%. The business paid approximately $4.3$6.4 million in interest expense related to its debt facilities in 2010 and 2009.
The main drivers for cash from financing activities are debt financings for capital expenditures and the repayment of outstanding credit facilities. There were no borrowings or repayments during the quarter.
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Six Months Ended June 30, | Change Favorable/(Unfavorable) | |||||||||||||||
2010 | 2009 | |||||||||||||||
$ | $ | $ | % | |||||||||||||
($ In Thousands) | ||||||||||||||||
Cash provided by operating activities | 2,561 | 4,841 | (2,280 | ) | (47.1 | ) | ||||||||||
Cash used in investing activities | (3,246 | ) | (3,403 | ) | 157 | 4.6 | ||||||||||
Cash (used in) provided by financing activities | (172 | ) | 2,686 | (2,858 | ) | (106.4 | ) |
Nine Months Ended September 30, | ||||||||||||||||
2010 | 2009 | Change Favorable/(Unfavorable) | ||||||||||||||
$ | $ | $ | % | |||||||||||||
($ In Thousands) | ||||||||||||||||
Cash provided by operating activities | 9,878 | 9,563 | 315 | 3.3 | ||||||||||||
Cash used in investing activities | (3,642 | ) | (5,447 | ) | 1,805 | 33.1 | ||||||||||
Cash (used in) provided by financing activities | (406 | ) | 6,619 | (7,025 | ) | (106.1 | ) |
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Capital Expenditure Cost | Gross Profit/EBITDA(1) | Expected Date for Gross Profit/EBITDA | ||||||||||
($ in Millions) | ||||||||||||
Chicago Plant and Distribution System Expansion | $ | 7.7 | ||||||||||
New Chicago Customer Connections and Minor System Modifications | 6.6 | |||||||||||
$ | 14.3 | $ | 4.9 | 2007 – 2013 | ||||||||
Chicago Plant Renovation and Expansion | 10.7 | 1.3 | 2009 – 2011 | |||||||||
Total | $ | 25.0 | $ | 6.2 |
Capital Expenditure Cost ($ In Millions) | Gross Profit/EBITDA ($ In Millions) (1) | Expected Date for Gross Profit/EBITDA | ||||||||||
Chicago Plant and Distribution System Expansion | $ | 7.7 | ||||||||||
New Chicago Customer Connections and | ||||||||||||
Minor System Modifications | 6.6 | |||||||||||
$ | 14.3 | $ | 4.9 | 2007 - 2013 | ||||||||
Chicago Plant Renovation and Expansion | 10.7 | 1.3 | 2009 - 2012 | |||||||||
Total | $ | 25.0 | $ | 6.2 | ||||||||
___________________ | ||||||||||||
(1) Represents projected increases in annualized Gross profit/EBITDA in the first year following completion of the project. |
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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 |
Maintenance | Growth | ||
Nine months ended September 30, 2009 | $738,000 | $4.7 million | |
Nine months ended September 30, 2010 | $1.1 million | $174,000 | |
2010 full year projected | $1.2 million | $1.1 million | |
Commitments at September 30, 2010 | - | $831,000 |
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).
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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 |
Nine Months Ended September 30, | ||||||||||||||||
2010 | 2009 | Change Favorable/(Unfavorable) | ||||||||||||||
$ | $ | $ | % | |||||||||||||
($ In Thousands) | ||||||||||||||||
Cash provided by operating activities | 42,410 | 44,025 | (1,615 | ) | (3.7 | ) | ||||||||||
Cash used in investing activities | (5,511 | ) | (9,232 | ) | 3,721 | 40.3 | ||||||||||
Cash used in financing activities (1) | (44,330 | ) | (67,932 | ) | 23,602 | 34.7 | ||||||||||
___________________ | ||||||||||||||||
(1) During the first quarter of 2009, we provided Atlantic Aviation with a capital contribution of $50.0 million to pay down $44.6 million of debt. The remainder of the capital contribution was used to pay interest rate swap breakage fees and expenses. This contribution has been excluded from the above table as it is eliminated on consolidation. |
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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 |
Maintenance | Growth | ||
Nine months ended September 30, 2009 | $3.5 million | $5.7 million | |
Nine months ended September 30, 2010 | $3.9 million | $1.7 million | |
2010 full year projected | $7.6 million | $6.1 million | |
Commitments at September 30, 2010 | $58,000 | $228,000 |
The decrease in cash used in financing activities is primarily due to a larger debt prepayment in the first half of 2009. In the sixnine months ended JuneSeptember 30, 2010 and 2009, the business pre-paid $31.7$46.3 million and $60.6$72.6 million, respectively, of debt principal and $3.2$4.7 million and $6.7$7.9 million, respectively, of interest rate swap breakage fees.
• | Debt Service Coverage Ratio > 1.2x (default threshold). The ratio at |
In addition, at JuneSeptember 30, 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.
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 Atlantic Aviation business, we take into consideration the history of contract right renewals in determining our assessment of useful life and the corresponding amortization period.
September 30, 2010 | December 31, 2009 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 37,037 | $ | 27,455 | ||||
Accounts receivable, less allowance for doubtful accounts | ||||||||
of $411 and $1,629, respectively | 51,045 | 47,256 | ||||||
Inventories | 15,125 | 14,305 | ||||||
Prepaid expenses | 7,171 | 6,688 | ||||||
Income tax receivable | 1,019 | - | ||||||
Deferred income taxes | 21,600 | 23,323 | ||||||
Other | 9,120 | 10,839 | ||||||
Assets of discontinued operations held for sale | - | 86,695 | ||||||
Total current assets | 142,117 | 216,561 | ||||||
Property, equipment, land and leasehold improvements, net | 565,761 | 580,087 | ||||||
Restricted cash | 13,780 | 16,016 | ||||||
Equipment lease receivables | 33,729 | 33,266 | ||||||
Investment in unconsolidated business | 211,662 | 207,491 | ||||||
Goodwill | 516,182 | 516,182 | ||||||
Intangible assets, net | 724,927 | 751,081 | ||||||
Deferred financing costs, net of accumulated amortization | 13,975 | 17,088 | ||||||
Other | 1,820 | 1,449 | ||||||
Total assets | $ | 2,223,953 | $ | 2,339,221 | ||||
LIABILITIES AND MEMBERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Due to manager - related party | $ | 2,466 | $ | 1,977 | ||||
Accounts payable | 40,591 | 44,575 | ||||||
Accrued expenses | 20,919 | 17,432 | ||||||
Current portion of notes payable and capital leases | 235 | 235 | ||||||
Current portion of long-term debt | 52,745 | 45,900 | ||||||
Fair value of derivative instruments | 44,546 | 49,573 | ||||||
Customer deposits | 4,593 | 5,617 | ||||||
Other | 8,935 | 9,338 | ||||||
Liabilities of discontinued operations held for sale | - | 220,549 | ||||||
Total current liabilities | 175,030 | 395,196 | ||||||
Notes payable and capital leases, net of current portion | 1,232 | 1,498 | ||||||
Long-term debt, net of current portion | 1,103,199 | 1,166,379 | ||||||
Deferred income taxes | 154,163 | 107,840 | ||||||
Fair value of derivative instruments | 69,757 | 54,794 | ||||||
Other | 40,727 | 38,746 | ||||||
Total liabilities | 1,544,108 | 1,764,453 | ||||||
Commitments and contingencies | - | - | ||||||
Members’ equity: | ||||||||
LLC interests, no par value; 500,000,000 authorized; 45,715,448 LLC | ||||||||
interests issued and outstanding at September 30, 2010 and 45,292,913 LLC interests issued and outstanding at December 31, 2009 | 964,430 | 959,897 | ||||||
Additional paid in capital | 20,727 | 21,956 | ||||||
Accumulated other comprehensive loss | (29,422 | ) | (43,232 | ) | ||||
Accumulated deficit | (273,668 | ) | (360,095 | ) | ||||
Total members’ equity | 682,067 | 578,526 | ||||||
Noncontrolling interests | (2,222 | ) | (3,758 | ) | ||||
Total equity | 679,845 | 574,768 | ||||||
Total liabilities and equity | $ | 2,223,953 | $ | 2,339,221 | ||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
($ In Thousands, Except Share and Per Share Data) | ||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
September 30, 2010 | September 30, 2009 (1) | September 30, 2010 | September 30, 2009 (1) | |||||||||||||
Revenue | ||||||||||||||||
Revenue from product sales | $ | 129,217 | $ | 103,017 | $ | 374,412 | $ | 281,639 | ||||||||
Revenue from product sales - utility | 28,232 | 26,056 | 83,517 | 67,637 | ||||||||||||
Service revenue | 54,598 | 55,299 | 157,598 | 163,603 | ||||||||||||
Financing and equipment lease income | 1,251 | 1,190 | 3,767 | 3,587 | ||||||||||||
Total revenue | 213,298 | 185,562 | 619,294 | 516,466 | ||||||||||||
Costs and expenses | ||||||||||||||||
Cost of product sales | 78,843 | 61,923 | 235,784 | 162,334 | ||||||||||||
Cost of product sales - utility | 22,467 | 20,088 | 66,931 | 52,024 | ||||||||||||
Cost of services | 16,625 | 13,460 | 41,088 | 35,600 | ||||||||||||
Selling, general and administrative | 50,486 | 50,054 | 150,742 | 154,922 | ||||||||||||
Fees to manager - related party | 2,380 | 1,639 | 6,837 | 2,952 | ||||||||||||
Goodwill impairment | - | - | - | 71,200 | ||||||||||||
Depreciation | 6,973 | 7,177 | 21,897 | 29,597 | ||||||||||||
Amortization of intangibles | 8,743 | 9,126 | 26,154 | 51,923 | ||||||||||||
Total operating expenses | 186,517 | 163,467 | 549,433 | 560,552 | ||||||||||||
Operating income (loss) | 26,781 | 22,095 | 69,861 | (44,086 | ) | |||||||||||
Other income (expense) | ||||||||||||||||
Interest income | 2 | 7 | 22 | 108 | ||||||||||||
Interest expense (2) | (24,844 | ) | (39,308 | ) | (98,505 | ) | (74,977 | ) | ||||||||
Equity in earnings and amortization charges | ||||||||||||||||
of investee | 7,804 | 1,178 | 19,171 | 16,655 | ||||||||||||
Loss on derivative instruments | - | - | - | (25,238 | ) | |||||||||||
Other income, net | 1,269 | 296 | 821 | 1,146 | ||||||||||||
Net income (loss) from continuing operations before | ||||||||||||||||
income taxes | 11,012 | (15,732 | ) | (8,630 | ) | (126,392 | ) | |||||||||
(Provision) benefit for income taxes | (2,036 | ) | (984 | ) | 12,541 | 36,403 | ||||||||||
Net income (loss) from continuing operations | $ | 8,976 | $ | (16,716 | ) | $ | 3,911 | $ | (89,989 | ) | ||||||
Net (loss) income from discontinued operations, net of taxes | - | (1,680 | ) | 81,199 | (11,263 | ) | ||||||||||
Net income (loss) | $ | 8,976 | $ | (18,396 | ) | $ | 85,110 | $ | (101,252 | ) | ||||||
Less: net income (loss) attributable to noncontrolling interests | 34 | (48 | ) | (1,317 | ) | (920 | ) | |||||||||
Net income (loss) attributable to MIC LLC | $ | 8,942 | $ | (18,348 | ) | $ | 86,427 | $ | (100,332 | ) | ||||||
Basic income (loss) per share from continuing operations attributable | ||||||||||||||||
to MIC LLC interest holders | $ | 0.20 | $ | (0.38 | ) | $ | 0.12 | $ | (2.01 | ) | ||||||
Basic (loss) income per share from discontinued operations | ||||||||||||||||
attributable to MIC LLC interest holders | - | (0.03 | ) | 1.78 | (0.22 | ) | ||||||||||
Basic income (loss) per share attributable to MIC LLC interest holders | $ | 0.20 | $ | (0.41 | ) | $ | 1.90 | $ | (2.23 | ) | ||||||
Weighted average number of shares outstanding: basic | 45,715,448 | 45,006,771 | 45,493,982 | 44,969,093 | ||||||||||||
Diluted income (loss) per share from continuing operations attributable | ||||||||||||||||
to MIC LLC interest holders | $ | 0.20 | $ | (0.38 | ) | $ | 0.12 | $ | (2.01 | ) | ||||||
Diluted (loss) income per share from discontinued operations | ||||||||||||||||
attributable to MIC LLC interest holders | - | (0.03 | ) | 1.78 | (0.22 | ) | ||||||||||
Diluted income (loss) per share attributable to MIC LLC interest holders | $ | 0.20 | $ | (0.41 | ) | $ | 1.90 | $ | (2.23 | ) | ||||||
Weighted average number of shares outstanding: diluted | 45,747,437 | 45,006,771 | 45,592,577 | 44,969,093 |
___________________ | |||||||||||
(1) Reclassified to conform to current period presentation. | |||||||||||
(2) Interest expense includes non-cash losses on derivative instruments of $3.8 million and $35.5 million for the quarter and nine months ended September 30, 2010, respectively, and non-cash losses of $17.9 million and $4.8 million for the quarter and nine months ended September 30, 2009, respectively. |
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
($ In Thousands) | ||||||||
Nine Months Ended | ||||||||
September 30, 2010 | September 30, 2009 (1) | |||||||
Operating activities | ||||||||
Net income (loss) | $ | 85,110 | $ | (101,252 | ) | |||
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 | ) | 11,263 | |||||
Non-cash goodwill impairment | - | 71,200 | ||||||
Depreciation and amortization of property and equipment | 26,807 | 34,103 | ||||||
Amortization of intangible assets | 26,154 | 51,923 | ||||||
Equity in earnings and amortization charges of investees | (19,171 | ) | (16,655 | ) | ||||
Equity distributions from investees | 15,000 | 7,000 | ||||||
Amortization of debt financing costs | 3,299 | 3,824 | ||||||
Non-cash derivative loss | 35,497 | 30,035 | ||||||
Base management fees settled in LLC interests | 2,189 | 2,490 | ||||||
Equipment lease receivable, net | 2,202 | 2,058 | ||||||
Deferred rent | 217 | 131 | ||||||
Deferred taxes | (13,685 | ) | (37,273 | ) | ||||
Other non-cash expenses, net | 2,908 | 423 | ||||||
Changes in other assets and liabilities, net of acquisitions: | ||||||||
Restricted cash | 50 | - | ||||||
Accounts receivable | (5,254 | ) | 6,913 | |||||
Inventories | (895 | ) | 776 | |||||
Prepaid expenses and other current assets | 878 | 3,259 | ||||||
Due to manager - related party | 2,383 | (3,464 | ) | |||||
Accounts payable and accrued expenses | (221 | ) | 357 | |||||
Income taxes payable | (1,281 | ) | (606 | ) | ||||
Other, net | (1,006 | ) | (2,361 | ) | ||||
Net cash provided by operating activities from continuing operations | 79,982 | 64,144 | ||||||
Investing activities | ||||||||
Purchases of property and equipment | (12,462 | ) | (19,608 | ) | ||||
Investment in capital leased assets | (2,400 | ) | - | |||||
Other | 630 | 114 | ||||||
Net cash used in investing activities from continuing operations | (14,232 | ) | (19,494 | ) | ||||
Financing activities | ||||||||
Proceeds from long-term debt | - | 10,000 | ||||||
Net proceeds on line of credit facilities | - | 9,250 | ||||||
Contributions received from noncontrolling interests | 300 | - | ||||||
Distributions paid to noncontrolling interests | (1,935 | ) | (381 | ) | ||||
Payment of long-term debt | (56,336 | ) | (72,620 | ) | ||||
Debt financing costs paid | (186 | ) | - | |||||
Change in restricted cash | 2,236 | (33 | ) | |||||
Payment of notes and capital lease obligations | (102 | ) | (127 | ) | ||||
Net cash used in financing activities from continuing operations | (56,023 | ) | (53,911 | ) | ||||
Net change in cash and cash equivalents from continuing operations | 9,727 | (9,261 | ) |
Nine Months Ended | ||||||
September 30, 2010 | September 30, 2009 (1) |
Cash flows provided by (used in) discontinued operations: | ||||||||
Net cash used in operating activities | $ | (12,703 | ) | $ | (4,735 | ) | ||
Net cash provided by (used in) investing activities | 134,356 | (372 | ) | |||||
Net cash (used in) provided by financing activities | (124,183 | ) | 2,354 | |||||
Cash used in discontinued operations (2) | (2,530 | ) | (2,753 | ) | ||||
Change in cash of discontinued operations held for sale (2) | 2,385 | (704 | ) | |||||
Net change in cash and cash equivalents | 9,582 | (12,718 | ) | |||||
Cash and cash equivalents, beginning of period | 27,455 | 66,054 | ||||||
Cash and cash equivalents, end of period - continuing operations | $ | 37,037 | $ | 53,336 | ||||
Supplemental disclosures of cash flow information for continuing operations: | ||||||||
Non-cash investing and financing activities: | ||||||||
Accrued purchases of property and equipment | $ | 1,208 | $ | 209 | ||||
Issuance of LLC interests to manager for base management fees | $ | 4,083 | $ | 2,490 | ||||
Issuance of LLC interests to independent directors | $ | 450 | $ | 450 | ||||
Taxes paid | $ | 2,059 | $ | 1,129 | ||||
Interest paid | $ | 59,737 | $ | 67,417 |
___________________ | ||||||
(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 sheet. 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. |
(i) | a 50% interest in a bulk liquid storage terminal business (‘‘International Matex Tank Terminals’’ or ‘‘IMTT’’), which provides bulk liquid storage and handling services at ten marine terminals in the United States and two in Canada and is one of the largest participants in this industry in the U.S., based on storage capacity; |
(ii) | a gas production and distribution business (‘‘The Gas Company’’), which is a full-service gas energy company, making gas products and services available in Hawaii; and |
(iii) | a 50.01% controlling interest in a district energy business (‘‘District Energy’’), which operates the largest district cooling system in the U.S., serving various customers in Chicago, Illinois and Las Vegas, Nevada. |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Weighted average number of shares outstanding: basic | 45,715,448 | 45,006,771 | 45,493,982 | 44,969,093 | ||||||||||||
Dilutive effect of restricted stock unit grants | 31,989 | - | 98,595 | - | ||||||||||||
Weighted average number of shares outstanding: diluted | 45,747,437 | 45,006,771 | 45,592,577 | 44,969,093 |
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 |
For the Quarter Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
($ in Thousands, Except Share and Per Share Data) | ||||||||||||||||
Service revenue | $ | - | $ | 16,965 | $ | 28,826 | $ | 51,011 | ||||||||
Gain on sale of assets through bankruptcy (pre-tax) | - | - | 130,260 | - | ||||||||||||
Net (loss) income from discontinued operations before income taxes | $ | - | $ | (2,337 | ) | $ | 132,709 | $ | (15,881 | ) | ||||||
Benefit (provision) for income taxes | - | 657 | (51,510 | ) | 4,618 | |||||||||||
Net (loss) income from discontinued operations | - | (1,680 | ) | 81,199 | (11,263 | ) | ||||||||||
Less: net (loss) income attributable to noncontrolling interests | - | (222 | ) | 136 | (1,435 | ) | ||||||||||
Net (loss) income from discontinued operations attributable to MIC LLC | $ | - | $ | (1,458 | ) | $ | 81,063 | $ | (9,828 | ) | ||||||
Basic (loss) income per share from discontinued operations attributable to MIC LLC interest holders | $ | - | $ | (0.03 | ) | $ | 1.78 | $ | (0.22 | ) | ||||||
Weighted average number of shares outstanding at the Company level: basic | 45,715,448 | 45,006,771 | 45,493,982 | 44,969,093 | ||||||||||||
Diluted (loss) income per share from discontinued operations attributable to MIC LLC interest holders | $ | - | $ | (0.03 | ) | $ | 1.78 | $ | (0.22 | ) | ||||||
Weighted average number of shares outstanding at the Company level: diluted | 45,747,437 | 45,006,771 | 45,592,577 | 44,969,093 | ||||||||||||
September 30, 2010 | December 31, 2009 | |||||||
Land | $ | 4,618 | $ | 4,618 | ||||
Easements | 5,624 | 5,624 | ||||||
Buildings | 24,796 | 24,789 | ||||||
Leasehold and land improvements | 318,017 | 312,881 | ||||||
Machinery and equipment | 335,689 | 330,226 | ||||||
Furniture and fixtures | 9,546 | 9,395 | ||||||
Construction in progress | 16,790 | 16,519 | ||||||
Property held for future use | 1,561 | 1,561 | ||||||
716,641 | 705,613 | |||||||
Less: accumulated depreciation | (150,880 | ) | (125,526 | ) | ||||
Property, equipment, land and leasehold improvements, net (1) | $ | 565,761 | $ | 580,087 | ||||
___________________ | ||||||||
(1) Includes $166,000 of capitalized interest for the nine months ended September 30, 2010 and $1.3 million for the year ended December 31, 2009. |
Weighted Average Life (Years) | September 30, 2010 | December 31, 2009 | |||||||||
Contractual arrangements | 31.1 | $ | 774,309 | $ | 774,309 | ||||||
Non-compete agreements | 2.5 | 9,515 | 9,515 | ||||||||
Customer relationships | 10.6 | 78,596 | 78,596 | ||||||||
Leasehold rights | 12.5 | 3,331 | 3,331 | ||||||||
Trade names | Indefinite | 15,401 | 15,401 | ||||||||
Technology | 5.0 | 460 | 460 | ||||||||
881,612 | 881,612 | ||||||||||
Less: accumulated amortization | (156,685 | ) | (130,531 | ) | |||||||
Intangible assets, net | $ | 724,927 | $ | 751,081 | |||||||
Goodwill acquired in business combinations, net of disposals | $ | 639,382 | ||
Less: accumulated impairment charges | (123,200 | ) | ||
Balance at September 30, 2010 and December 31, 2009 | $ | 516,182 |
September 30, 2010 | December 31, 2009 | |||||||
The Gas Company | $ | 169,000 | $ | 179,000 | ||||
District Energy | 170,000 | 170,000 | ||||||
Atlantic Aviation | 816,944 | 863,279 | ||||||
Total | 1,155,944 | 1,212,279 | ||||||
Less: current portion | (52,745 | ) | (45,900 | ) | ||||
Long-term portion | $ | 1,103,199 | $ | 1,166,379 | ||||
Liabilities at Fair Value (1) | ||||||||
Interest Rate Swap Contracts Not Designated as Hedging Instruments | ||||||||
Balance Sheet Location | September 30, 2010 | December 31, 2009 | ||||||
($ In Thousands) | ||||||||
Fair value of derivative instruments - current liabilities | $ | (44,546 | ) | $ | (49,573 | ) | ||
Fair value of derivative instruments - non-current liabilities | (69,757 | ) | (54,794 | ) | ||||
Total interest rate derivative contracts | $ | (114,303 | ) | $ | (104,367 | ) | ||
___________________ | ||||||||
(1) Fair value measurements at reporting date were made using significant other observable inputs ("level 2"). | ||||||||
Derivatives Not Designated as Hedging Instruments (1) | ||||||||
Amount of Loss Recognized in Interest Expense for the Quarter Ended September 30, | ||||||||
Financial Statement Account | 2010 (2) | 2009 (3) | ||||||
($ In Thousands) | ||||||||
Interest expense | $ | (19,049 | ) | $ | (32,675 | ) | ||
Total | $ | (19,049 | ) | $ | (32,675 | ) | ||
___________________ |
(1) All derivatives are interest rate swap contracts. | ||||||||
(2) Loss recognized in interest expense for the quarter ended September 30, 2010 includes $13.7 million in interest rate swap payments and $5.3 million in unrealized derivative losses arising from: | ||||||||
• the change in fair value of interest rate swaps from the discontinuation of hedge accounting; | ||||||||
• interest rate swap break fees related to the pay down of debt at Atlantic Aviation; and | ||||||||
• the reclassification of amounts from accumulated other comprehensive loss into earnings, as Atlantic Aviation pays down its debt more quickly than anticipated. | ||||||||
(3) Loss recognized in interest expense for the quarter ended September 30, 2009 includes $19.1 million in unrealized derivative losses and $13.6 million in interest rate swap payments. |
Derivatives Designated as Hedging Instruments (1) | Derivatives Not Designated as Hedging Instruments (1) | |||||||||||||||||||||||||||||||
Amount of Gain Recognized in OCI on Derivatives (Effective Portion) for the Nine Months Ended September 30, | Amount of Loss Reclassified from OCI into Income (Effective Portion) for the Nine Months Ended September 30, | Amount of Loss Recognized in Loss on Derivative Instruments (Ineffective Portion) for the Nine Months Ended September 30, | Amount of Loss Recognized in Interest Expense for the Nine Months Ended September 30, | |||||||||||||||||||||||||||||
Financial Statement Account | 2010 | 2009 | 2010 | 2009 (2) | 2010 | 2009 | 2010 (3) | 2009 (4) | ||||||||||||||||||||||||
($ In Thousands) | ||||||||||||||||||||||||||||||||
Interest expense | $ | - | $ | - | $ | - | $ | (15,691 | ) | $ | - | $ | - | $ | (82,191 | ) | $ | (34,267 | ) | |||||||||||||
Loss on derivative instruments | - | - | - | (25,154 | ) | - | (84 | ) | - | - | ||||||||||||||||||||||
Accumulated other comprehensive loss | - | 2,848 | - | - | - | - | - | - | ||||||||||||||||||||||||
Total | $ | - | $ | 2,848 | $ | - | $ | (40,845 | ) | $ | - | $ | (84 | ) | $ | (82,191 | ) | $ | (34,267 | ) | ||||||||||||
___________________ |
(1) | All derivatives are interest rate swap contracts. |
(2) | Includes $22.7 million of accumulated other comprehensive losses reclassified into earnings (loss on derivative instruments) resulting from the $44.6 million repayment of debt principal at Atlantic Aviation in the first quarter of 2009. Interest expense represents cash interest paid on derivative instruments, of which $5.2 million is related to the payment of interest rate swap breakage fees in the first quarter of 2009. | |
(3) | Loss recognized in interest expense for the nine months ended September 30, 2010 includes $42.0 million in interest rate swap payments and $40.2 million in unrealized derivative losses arising from: | |
• the change in fair value of interest rate swaps from the discontinuation of hedge accounting; | ||
• interest rate swap break fees related to the pay down of debt at Atlantic Aviation; 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 nine months ended September 30, 2009 includes $26.7 million in interest rate swap payments and $7.6 million in unrealized derivative losses. |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income (loss) attributable to MIC LLC | $ | 8,942 | $ | (18,348 | ) | $ | 86,427 | $ | (100,332 | ) | ||||||
Unrealized gain in fair value of derivatives, net of taxes | - | - | - | 1,498 | ||||||||||||
Reclassification of realized losses into earnings, net of taxes | 4,072 | 7,399 | 13,810 | 42,062 | ||||||||||||
Comprehensive income (loss) | $ | 13,014 | $ | (10,949 | ) | $ | 100,237 | $ | (56,772 | ) |
Quarter Ended, and as of, September 30, | Nine Months Ended, and as of, September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenue | $ | 182,202 | $ | 85,168 | $ | 447,475 | $ | 253,945 | ||||||||
Net income | $ | 17,974 | $ | 4,721 | $ | 45,439 | $ | 40,407 | ||||||||
Interest expense, net | 20,586 | 15,452 | 58,485 | 4,842 | ||||||||||||
Provision for income taxes | 15,546 | 3,137 | 35,902 | 27,035 | ||||||||||||
Depreciation and amortization expense | 16,602 | 13,457 | 46,136 | 39,735 | ||||||||||||
Unrealized gains on derivative instruments | - | - | - | (3,306 | ) | |||||||||||
Other non-cash (income) expense | (518 | ) | 378 | (273 | ) | (291 | ) | |||||||||
EBITDA excluding non-cash items (1) | $ | 70,190 | $ | 37,145 | $ | 185,689 | $ | 108,422 | ||||||||
Capital expenditures paid | $ | 20,487 | $ | 24,638 | $ | 57,658 | $ | 106,062 | ||||||||
Property, equipment, land and leasehold improvements, net | 998,715 | 967,323 | 998,715 | 967,323 | ||||||||||||
Total assets balance | 1,133,760 | 1,040,796 | 1,133,760 | 1,040,796 |
___________________ | ||
(1) | EBITDA consists of earnings before interest, taxes, depreciation and amortization. Non-cash items that are excluded consist of impairments, derivative gains and losses and all other non-cash income and expense items. |
Quarter Ended September 30, 2010 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total | |||||||||||||
Revenue from Product Sales | ||||||||||||||||
Product sales | $ | 23,214 | $ | - | $ | 106,003 | $ | 129,217 | ||||||||
Product sales - utility | 28,232 | - | - | 28,232 | ||||||||||||
51,446 | - | 106,003 | 157,449 | |||||||||||||
Service Revenue | ||||||||||||||||
Other services | - | 823 | 35,877 | 36,700 | ||||||||||||
Cooling capacity revenue | - | 5,302 | - | 5,302 | ||||||||||||
Cooling consumption revenue | - | 12,596 | - | 12,596 | ||||||||||||
- | 18,721 | 35,877 | 54,598 | |||||||||||||
Financing and Lease Income | ||||||||||||||||
Financing and equipment lease | - | 1,251 | - | 1,251 | ||||||||||||
- | 1,251 | - | 1,251 | |||||||||||||
Total Revenue | $ | 51,446 | $ | 19,972 | $ | 141,880 | $ | 213,298 | ||||||||
Quarter Ended September 30, 2009 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total | |||||||||||||
Revenue from Product Sales | ||||||||||||||||
Product sales | $ | 18,680 | $ | - | $ | 84,337 | $ | 103,017 | ||||||||
Product sales - utility | 26,056 | - | - | 26,056 | ||||||||||||
44,736 | - | 84,337 | 129,073 | |||||||||||||
Service Revenue | ||||||||||||||||
Other services | - | 832 | 39,843 | 40,675 | ||||||||||||
Cooling capacity revenue | - | 5,224 | - | 5,224 | ||||||||||||
Cooling consumption revenue | - | 9,400 | - | 9,400 | ||||||||||||
- | 15,456 | 39,843 | 55,299 | |||||||||||||
Financing and Lease Income | ||||||||||||||||
Financing and equipment lease | - | 1,190 | - | 1,190 | ||||||||||||
- | 1,190 | - | 1,190 | |||||||||||||
Total Revenue | $ | 44,736 | $ | 16,646 | $ | 124,180 | $ | 185,562 | ||||||||
Nine Months Ended September 30, 2010 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total | |||||||||||||
Revenue from Product Sales | ||||||||||||||||
Product sales | $ | 72,760 | $ | - | $ | 301,652 | $ | 374,412 | ||||||||
Product sales - utility | 83,517 | - | - | 83,517 | ||||||||||||
156,277 | - | 301,652 | 457,929 | |||||||||||||
Service Revenue | ||||||||||||||||
Other services | - | 2,490 | 117,770 | 120,260 | ||||||||||||
Cooling capacity revenue | - | 15,835 | - | 15,835 | ||||||||||||
Cooling consumption revenue | - | 21,503 | - | 21,503 | ||||||||||||
- | 39,828 | 117,770 | 157,598 | |||||||||||||
Financing and Lease Income | ||||||||||||||||
Financing and equipment lease | - | 3,767 | - | 3,767 | ||||||||||||
- | 3,767 | - | 3,767 | |||||||||||||
Total Revenue | $ | 156,277 | $ | 43,595 | $ | 419,422 | $ | 619,294 | ||||||||
Nine Months Ended September 30, 2009 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total | |||||||||||||
Revenue from Product Sales | ||||||||||||||||
Product sales | $ | 58,145 | $ | - | $ | 223,494 | $ | 281,639 | ||||||||
Product sales - utility | 67,637 | - | - | 67,637 | ||||||||||||
125,782 | - | 223,494 | 349,276 | |||||||||||||
Service Revenue | ||||||||||||||||
Other services | - | 2,331 | 128,911 | 131,242 | ||||||||||||
Cooling capacity revenue | - | 15,231 | - | 15,231 | ||||||||||||
Cooling consumption revenue | - | 17,130 | - | 17,130 | ||||||||||||
- | 34,692 | 128,911 | 163,603 | |||||||||||||
Financing and Lease Income | ||||||||||||||||
Financing and equipment lease | - | 3,587 | - | 3,587 | ||||||||||||
- | 3,587 | - | 3,587 | |||||||||||||
Total Revenue | $ | 125,782 | $ | 38,279 | $ | 352,405 | $ | 516,466 |
Quarter Ended September 30, 2010 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total Reportable Segments | |||||||||||||
Net income | $ | 2,391 | $ | 35 | $ | 2,341 | $ | 4,767 | ||||||||
Interest expense, net | 5,047 | 6,862 | 12,938 | 24,847 | ||||||||||||
Benefit for income taxes | 1,538 | 23 | 1,580 | 3,141 | ||||||||||||
Depreciation | 1,286 | 1,639 | 5,687 | 8,612 | ||||||||||||
Amortization of intangibles | 206 | 345 | 8,192 | 8,743 | ||||||||||||
Other non-cash expense | 534 | 265 | 149 | 948 | ||||||||||||
EBITDA excluding non-cash items | $ | 11,002 | $ | 9,169 | $ | 30,887 | $ | 51,058 |
Quarter Ended September 30, 2009 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total Reportable Segments | |||||||||||||
Net income (loss) | $ | 694 | $ | (764 | ) | $ | (7,612 | ) | $ | (7,682 | ) | |||||
Interest expense, net | 5,406 | 6,623 | 26,382 | 38,411 | ||||||||||||
Benefit (provision) for income taxes | 446 | (500 | ) | (5,137 | ) | (5,191 | ) | |||||||||
Depreciation | 1,508 | 1,541 | 5,669 | 8,718 | ||||||||||||
Amortization of intangibles | 205 | 345 | 8,576 | 9,126 | ||||||||||||
Other non-cash expense | 510 | 179 | 43 | 732 | ||||||||||||
EBITDA excluding non-cash items | $ | 8,769 | $ | 7,424 | $ | 27,921 | $ | 44,114 | ||||||||
Nine Months Ended September 30, 2010 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation | Total Reportable Segments | |||||||||||||
Net income (loss) | $ | 5,857 | $ | (5,301 | ) | $ | (9,586 | ) | $ | (9,030 | ) | |||||
Interest expense, net | 15,780 | 20,866 | 61,612 | 98,258 | ||||||||||||
Benefit (provision) for income taxes | 3,769 | (3,464 | ) | (6,471 | ) | (6,166 | ) | |||||||||
Depreciation | 4,309 | 4,910 | 17,588 | 26,807 | ||||||||||||
Amortization of intangibles | 617 | 1,023 | 24,514 | 26,154 | ||||||||||||
Other non-cash expense | 1,599 | 652 | 754 | 3,005 | ||||||||||||
EBITDA excluding non-cash items | $ | 31,931 | $ | 18,686 | $ | 88,411 | $ | 139,028 | ||||||||
Nine Months Ended September 30, 2009 | ||||||||||||||||
Energy-related Businesses | ||||||||||||||||
The Gas Company | District Energy | Atlantic Aviation (1) | Total Reportable Segments | |||||||||||||
Net income (loss) | $ | 8,327 | $ | 1,104 | $ | (88,094 | ) | $ | (78,663 | ) | ||||||
Interest expense, net | 6,774 | 6,850 | 57,822 | 71,446 | ||||||||||||
Benefit (provision) for income taxes | 5,359 | 721 | (59,467 | ) | (53,387 | ) | ||||||||||
Depreciation | 4,504 | 4,506 | 25,093 | 34,103 | ||||||||||||
Amortization of intangibles | 631 | 1,023 | 50,269 | 51,923 | ||||||||||||
Goodwill impairment | - | - | 71,200 | 71,200 | ||||||||||||
Loss on derivative instruments | 327 | 1,378 | 23,331 | 25,036 | ||||||||||||
Other non-cash expense (income) | 1,525 | 455 | (324 | ) | 1,656 | |||||||||||
EBITDA excluding non-cash items | $ | 27,447 | $ | 16,037 | $ | 79,830 | $ | 123,314 | ||||||||
___________________ | ||||||||||||||||
(1) Includes non-cash impairment charges of $102.0 million recorded during the first six months of 2009, consisting of $71.2 million related to goodwill, $23.3 million related to intangible assets (in amortization of intangibles) and $7.5 million related to property, equipment, land and leasehold improvements (in depreciation). |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Total reportable segments EBITDA excluding non-cash items | $ | 51,058 | $ | 44,114 | $ | 139,028 | $ | 123,314 | ||||||||
Interest income | 2 | 7 | 22 | 108 | ||||||||||||
Interest expense | (24,844 | ) | (39,308 | ) | (98,505 | ) | (74,977 | ) | ||||||||
Depreciation (1) | (8,612 | ) | (8,718 | ) | (26,807 | ) | (34,103 | ) | ||||||||
Amortization of intangibles (2) | (8,743 | ) | (9,126 | ) | (26,154 | ) | (51,923 | ) | ||||||||
Selling, general and administrative - corporate | (2,465 | ) | (1,732 | ) | (6,073 | ) | (6,080 | ) | ||||||||
Fees to manager | (2,380 | ) | (1,639 | ) | (6,837 | ) | (2,952 | ) | ||||||||
Equity in earnings and amortization charges of investees | 7,804 | 1,178 | 19,171 | 16,655 | ||||||||||||
Goodwill impairment | - | - | - | (71,200 | ) | |||||||||||
Loss on derivative instruments | - | - | - | (25,238 | ) | |||||||||||
Other (expense) income, net | (808 | ) | (508 | ) | (2,475 | ) | 4 | |||||||||
Total consolidated net income (loss) from continuing operations before income taxes | $ | 11,012 | $ | (15,732 | ) | $ | (8,630 | ) | $ | (126,392 | ) | |||||
___________________ | ||||||||||||||||
(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 non-cash impairment charges of $7.5 million recorded by Atlantic Aviation during the first six months of 2009. | ||||||||||||||||
(2) Amortization expense includes non-cash impairment charges of $23.3 million for contractual arrangements recorded by Atlantic Aviation during the first six months of 2009. |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
The Gas Company | $ | 1,739 | $ | 1,334 | $ | 5,625 | $ | 4,915 | ||||||||
District Energy | 396 | 2,044 | 1,242 | 5,447 | ||||||||||||
Atlantic Aviation | 3,012 | 4,366 | 5,595 | 9,246 | ||||||||||||
Total | $ | 5,147 | $ | 7,744 | $ | 12,462 | $ | 19,608 | ||||||||
Property, Equipment, Land and Leasehold Improvements | Goodwill | Total Assets | ||||||||||||||||||||||
2010 | 2009 (1) | 2010 | 2009 (2) | 2010 | 2009 | |||||||||||||||||||
The Gas Company | $ | 144,400 | $ | 143,269 | $ | 120,193 | $ | 120,193 | $ | 352,474 | $ | 347,269 | ||||||||||||
District Energy | 147,630 | 146,063 | 18,646 | 18,646 | 234,333 | 230,544 | ||||||||||||||||||
Atlantic Aviation | 273,731 | 289,157 | 377,343 | 377,343 | 1,437,767 | 1,497,028 | ||||||||||||||||||
Total | $ | 565,761 | $ | 578,489 | $ | 516,182 | $ | 516,182 | $ | 2,024,574 | $ | 2,074,841 | ||||||||||||
___________________ | ||||||||||||||||||||||||
(1) Includes a non-cash impairment charge of $7.5 million recorded during the first six months of 2009 at Atlantic Aviation. | ||||||||||||||||||||||||
(2) Includes a non-cash goodwill impairment charge of $71.2 million recorded during the first six months of 2009 at Atlantic Aviation. | ||||||||||||||||||||||||
As of September 30, | ||||||||
2010 | 2009 | |||||||
Total assets of reportable segments | $ | 2,024,574 | $ | 2,074,841 | ||||
Investment in IMTT | 211,662 | 201,585 | ||||||
Assets of discontinued operations held for sale | - | 94,942 | ||||||
Corporate and other | (12,283 | ) | (6,493 | ) | ||||
Total consolidated assets | $ | 2,223,953 | $ | 2,364,875 |
− Holding company debt restructuring advice provided by MCUSA in 2009 | $500 |
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 December 31, 2009, the Company elected to reduce the available principal on its revolving credit facility from $97.0 million to $20.0 million. This resulted in a decrease in the Macquarie Group’s total commitment under its revolving credit facility from $21.6 million to $4.4 million. |
(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. |
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MACQUARIE INFRASTRUCTURE COMPANY LLC | ||||
Dated: | By: |
/s/ James Hooke | ||
Name: James Hooke | ||||
Title: Chief Executive Officer | ||||
Dated: | By: |
/s/ Todd Weintraub | |
Name: Todd Weintraub Title: Chief Financial Officer |
![]() | ![]() | |
Exhibit Number | Description | |
31.1* | Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer | |
31.2* | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer | |
32.1* | Section 1350 Certification of Chief Executive Officer | |
32.2* | Section 1350 Certification of Chief Financial Officer |
________________________ | |||
* | Filed herewith. |