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

 

FORM 10-Q

 

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

For the Quarterly Period Ended March 31, 2009

OR

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

For the Transition Period from  to .

Commission File Number: 001-32384

 

MACQUARIE INFRASTRUCTURE COMPANY LLC

(Exact Name of Registrant as Specified in Its Charter)

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

125 West 55th Street
New York, New York 10019

(Address of Principal Executive Offices) (Zip Code)

(212) 231-1000

(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report): N/A

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes o No o

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

Large Accelerated Filer x		Accelerated Filer o		Non-accelerated Filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x

There were 44,948,694 limited liability company interests without par value outstanding at May 6, 2009.

TABLE OF CONTENTS

MACQUARIE INFRASTRUCTURE COMPANY LLC

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			1
Consolidated Condensed Balance Sheets as of March 31, 2009 (Unaudited) and December 31, 2008			1
Consolidated Condensed Statements of Operations for the Quarters Ended March 31, 2009 and 2008 (Unaudited)			3
Consolidated Condensed Statements of Cash Flows for the Quarters Ended March 31, 2009 and 2008 (Unaudited)			4
Notes to Consolidated Condensed Financial Statements (Unaudited)			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosure About Market Risk			55
Item 4. Controls and Procedures			55
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			56
Item 1A. Risk Factors			56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			56
Item 3. Defaults Upon Senior Securities			56
Item 4. Submission of Matters to a Vote of Security Holders			56
Item 5. Other Information			56
Item 6. Exhibits			56

 

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

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PART I
  
FINANCIAL INFORMATION

Item 1. Financial Statements

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

		March 31, 2009				December 31, 2008
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	37,340			$	68,231
Restricted cash			2,644				1,063
Accounts receivable, less allowance for doubtful accounts of $4,287 and $2,230, respectively			55,406				62,240
Dividends receivable			—				7,000
Other receivables			139				132
Inventories			15,515				15,968
Prepaid expenses			10,076				9,156
Deferred income taxes			3,774				3,774
Land – available for sale			11,931				11,931
Income tax receivable			—				489
Other			10,244				13,440
Total current assets			147,069				193,424
Property, equipment, land and leasehold improvements, net			659,893				673,981
Restricted cash			16,011				19,939
Equipment lease receivables			35,461				36,127
Investment in unconsolidated business			190,379				184,930
Goodwill			569,382				586,249
Intangible assets, net			781,707				812,184
Deferred financing costs, net of accumulated amortization			21,774				23,383
Other			3,836				4,033
Total assets		$	2,425,512			$	2,534,250

 
 
See accompanying notes to the consolidated condensed financial statements.

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

		March 31, 2009				December 31, 2008
		(Unaudited)
LIABILITIES AND MEMBERS’/STOCKHOLDERS’ EQUITY
Current liabilities:
Due to manager – related party		$	571			$	3,521
Accounts payable			45,809				47,886
Accrued expenses			26,544				29,448
Current portion of notes payable and capital leases			4,360				2,724
Current portion of long-term debt			312,059				201,344
Fair value of derivative instruments			48,486				51,441
Customer deposits			5,564				5,457
Other			9,814				10,785
Total current liabilities			453,207				352,606
Notes payable and capital leases, net of current portion			2,231				2,274
Long-term debt, net of current portion			1,171,822				1,327,800
Deferred income taxes			46,955				65,042
Fair value of derivative instruments			95,495				105,970
Other			47,060				46,297
Total liabilities			1,816,770				1,899,989
Members’/stockholders’ equity:
LLC interests, no par value; 500,000,000 authorized; 44,948,694 LLC interests issued and outstanding at March 31, 2009 and December 31, 2008			956,956				956,956
Accumulated other comprehensive loss			(69,702	)			(97,190	)
Accumulated deficit			(283,954	)			(230,928	)
Total members’/stockholders’ equity			603,300				628,838
Noncontrolling interests			5,442				5,423
Total equity			608,742				634,261
Total liabilities and equity		$	2,425,512			$	2,534,250

 
 
See accompanying notes to the consolidated condensed financial statements.

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

		Quarter Ended March 31, 2009				Quarter Ended March 31, 2008
Revenue
Revenue from product sales		$	89,192			$	159,325
Revenue from product sales – utility			20,167				29,399
Service revenue			73,552				88,785
Financing and equipment lease income			1,192				1,194
Total revenue			184,103				278,703
Costs and expenses
Cost of product sales			49,267				108,517
Cost of product sales – utility			14,817				24,335
Cost of services			31,457				33,256
Selling, general and administrative			59,479				63,857
Fees to manager – related party			462				4,626
Goodwill impairment			18,000				—
Depreciation			13,150				6,723
Amortization of intangibles			30,265				10,739
Total operating expenses			216,897				252,053
Operating income			(32,794	)			26,650
Other income (expense)
Interest income			74				473
Interest expense			(30,603	)			(25,826	)
Equity in earnings (losses) and amortization charges of investees			5,449				(2,089	)
Loss on derivative instruments			(32,225	)			(305	)
Other income, net			1,581				192
Net loss before income taxes and noncontrolling interests			(88,518	)			(905	)
Benefit (provision) for income taxes			35,659				(1,364	)
Net loss before noncontrolling interests			(52,859	)			(2,269	)
Net income (loss) attributable to noncontrolling interest			167				(279	)
Net loss		$	(53,026	)		$	(1,990	)
Basic loss per share:		$	(1.18	)		$	(0.04	)
Weighted average number of shares outstanding: basic			44,948,694				44,938,380
Diluted loss per share:		$	(1.18	)		$	(0.04	)
Weighted average number of shares outstanding: diluted			44,948,694				44,938,380
Cash distributions declared per share		$	—			$	0.635

 
 
See accompanying notes to the consolidated condensed financial statements.

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

		Quarter Ended March 31, 2009				Quarter Ended March 31, 2008
Operating activities
Net loss		$	(53,026	)		$	(1,990	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-cash goodwill impairment			18,000				—
Depreciation and amortization of property and equipment			21,864				9,469
Amortization of intangible assets			30,265				10,739
Equity in (earnings) losses and amortization charges of investees			(5,449	)			2,089
Equity distributions from investees			5,449				—
Amortization of debt financing costs			1,609				1,760
Non-cash derivative loss, net of non-cash interest expense			32,225				382
Equipment lease receivable, net			766				508
Deferred rent			430				572
Deferred taxes			(36,184	)			(2,590	)
Other non-cash (income) expenses, net			(294	)			73
Changes in other assets and liabilities, net of acquisitions:
Restricted cash			(99	)			23
Accounts receivable			6,833				(12,191	)
Inventories			453				(800	)
Prepaid expenses and other current assets			2,837				1,272
Due to manager – related party			(2,950	)			(1,033	)
Accounts payable and accrued expenses			(5,452	)			2,444
Income taxes payable			694				3,577
Other, net			(1,112	)			(207	)
Net cash provided by operating activities			16,859				14,097
Investing activities
Acquisitions of businesses and investments, net of cash acquired			—				(41,864	)
Purchases of property and equipment			(6,932	)			(13,708	)
Return of investment in unconsolidated business			1,551				7,000
Other			(40	)			137
Net cash used in investing activities			(5,421	)			(48,435	)

 
 
See accompanying notes to the consolidated condensed financial statements.

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

		Quarter Ended March 31, 2009				Quarter Ended March 31, 2008
Financing activities
Proceeds from long-term debt			—				2,000
Proceeds from line of credit facilities			400				67,850
Offering and equity raise costs paid			—				(65	)
Distributions paid to holders of LLC interests			—				(28,536	)
Distributions paid to noncontrolling shareholders			(148	)			(167	)
Payment of long-term debt			(44,662	)			(40	)
Debt financing costs paid			—				(1,788	)
Change in restricted cash			2,446				(617	)
Payment of notes and capital lease obligations			(365	)			(468	)
Net cash (used in) provided by financing activities			(42,329	)			38,169
Net change in cash and cash equivalents			(30,891	)			3,831
Cash and cash equivalents, beginning of period			68,231				57,473
Cash and cash equivalents, end of period		$	37,340			$	61,304
Supplemental disclosures of cash flow information:
Non-cash investing and financing activities:
Accrued acquisition and equity offering costs		$	—			$	343
Accrued purchases of property and equipment		$	808			$	742
Acquisition of equipment through capital leases		$	129			$	—
Taxes paid		$	10			$	489
Interest paid		$	29,473			$	23,859

 
 
See accompanying notes to the consolidated condensed financial statements.

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

1. Organization and Description of Business

Macquarie Infrastructure Company LLC, a Delaware limited liability company, was formed on April 13, 2004. Macquarie Infrastructure Company LLC, both on an individual entity basis and together with its consolidated subsidiaries, is referred to in these financial statements as the Company. 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 subsidiary of the Macquarie Group of companies, which is comprised of Macquarie Group Limited and its subsidiaries and affiliates worldwide. Macquarie Group Limited is headquartered in Australia and is listed on the Australian Stock Exchange.

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

The Company owns 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 comprise the following:

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

2. Basis of Presentation

The unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United

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

2. Basis of Presentation  – (continued)

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 judgments on an ongoing basis. Actual results may differ from the estimates and assumptions used in the financial statements and notes. Operating results for the quarter ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

The consolidated balance sheet at December 31, 2008 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.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51”, or SFAS No. 160, which requires noncontrolling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. SFAS No. 160 is effective for periods beginning on or after December 15, 2008 and will be applied prospectively to all noncontrolling interests with comparative period information reclassified. The Company adopted SFAS No. 160 on January 1, 2009. While the Company’s district energy and airport parking businesses each have noncontrolling interests, the adoption of SFAS No. 160 did not have a material impact on the Company’s financial results of operations and financial conditions.

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, 2008 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on February 27, 2009.

3. New Accounting Pronouncements

In April 2009, the FASB issued FASB Staff Position 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”, or FSP SFAS No. 141(R)-1. FSP SFAS No. 141(R)-1 amends the provisions for SFAS No. 141(R) and rescinds the distinction between contractual and noncontractual contingencies arising from business combinations. It requires a contingency acquired in a business combination be initially recognized and measured at fair value on the acquisition date if the fair value can be determined during the measurement period. Acquired contingencies whose fair value cannot be determined during the measurement period would be recognized if it is probable that an asset existed or liability had been incurred at the acquisition date and the amount for the asset or liability can be reasonably estimated. FSP SFAS No. 141(R)-1 is effective for the reporting periods beginning after December 15, 2008. The Company does not believe FSP SFAS No. 141(R)-1 will have a material impact on its financial statements.

In December 2008, the FASB issued FASB Staff Position 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”, or FSP SFAS No. 132(R)-1. FSP SFAS No. 132(R)-1 requires additional disclosures surrounding how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies, the fair value of each major categories of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets, and the significant concentration of risks in plan assets. The disclosure requirement under FSP SFAS No. 132(R)-1 is effective for fiscal years ending after December 15, 2009. The Company does not believe FSP SFAS No. 132(R)-1 will have a significant impact on its financial statements.

In November 2008, the FASB ratified Emerging Issues Task Force 08-7, “Accounting for Defensive Intangible Assets”, or EITF 08-7. EITF 08-7 applies to acquired intangible asset that the acquirer does not

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

3. New Accounting Pronouncements  – (continued)

intend to actively use, but intends to hold to prevent its competitors from obtaining access to the asset. EITF 08-7 clarifies that defensive intangible assets are separately identifiable and requires an acquirer in a business combination to account for a defensive intangible asset as a separate unit of accounting, which should be amortized over the period the asset diminishes in value. Defensive intangibles must be recognized at fair value in accordance with Statement of Financial Accounting Standards No. 141(R), “Business Combinations”, or SFAS No. 141(R), and Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”, or SFAS No. 157. EITF 08-7 is effective for fiscal years beginning on or after December 15, 2008, with early adoption prohibited. The Company adopted EITF 08-7 on January 1, 2009. The impact of the adoption did not have a material impact on the Company’s financial results of operations and financial condition.

In November 2008, the FASB ratified Emerging Issues Task Force Issue No. 08-6, “Equity Method Investment Accounting Considerations”, or EITF 08-6. EITF 08-6 concludes that the cost basis of a new equity-method investment would be determined using a cost-accumulation model, which would continue the practice of including transaction costs in the cost of investment and would exclude the value of contingent consideration unless it is required to be recognized under other literature, such as Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies”. Equity-method investment should be subject to other-than-temporary impairment analysis. It also requires that a gain or loss to be recognized on the portion of the investor’s ownership sold. EITF 08-6 is effective for fiscal years beginning on or after December 15, 2008, with early adoption prohibited. The Company adopted EITF 08-6 on January 1, 2009. The impact of the adoption did not have a material impact on the Company’s financial results of operations and financial condition.

In April 2008, the FASB issued FASB Staff Position 142-3, “Determination of the Useful Life of Intangible Assets”, or FSP SFAS No. 142-3. FSP SFAS No. 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”, or SFAS No. 142. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension as adjusted for SFAS No. 142’s entity-specific factors. FSP SFAS No. 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The Company adopted FSP SFAS No. 142-3 on January 1, 2009. The impact of the adoption did not have a material impact on the Company’s financial results of operations and financial condition.

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

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

3. New Accounting Pronouncements  – (continued)

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

In December 2007, the FASB issued SFAS No. 160, which requires noncontrolling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. SFAS No. 160 is effective for periods beginning on or after December 15, 2008 and will be applied prospectively to all noncontrolling interests with comparative period information reclassified. The Company adopted SFAS No. 160 on January 1, 2009. While the Company’s district energy and airport parking businesses each have noncontrolling interests, the adoption of SFAS No. 160 did not have a material impact on the Company’s financial results of operations and financial conditions.

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

On January 1, 2009, the Company adopted SFAS No. 141(R). Although there was no new acquisition during the first quarter of 2009, the Company used the fair value guidance from SFAS No. 141(R) to perform the Company’s goodwill impairment analysis in accordance with SFAS No. 142. In performing the step two analysis at the Company’s airport services business and determining an “implied fair value” for goodwill, the Company allocated the estimated fair value of the airport services business’ assets and liabilities to its balance sheet. Any unallocated fair value, which represented the “implied fair value” of goodwill, was compared to its corresponding carrying value. The corresponding carrying value was higher than the “implied fair value” and as a result, goodwill at our airport services business was written down to its implied fair value resulting in a non-cash impairment charge for the quarter ended March 31, 2009. See Note 7, “Nonfinancial Assets Measured at Fair Value”, for further discussions.

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

4. Loss Per Share

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

		Quarter Ended March 31, 2009				Quarter Ended March 31, 2008
Weighted average number of shares outstanding: basic			44,948,694				44,938,380
Dilutive effect of restricted stock unit grants			—				—
Weighted average number of shares outstanding: diluted			44,948,694				44,938,380

The 14,115 and 10,314 restricted stock unit grants provided to the Company’s independent directors on May 27, 2008 and May 24, 2007, respectively, were anti-dilutive for the quarters ended March 31, 2009 and 2008, due to the Company’s net loss for those periods.

5. Property, Equipment, Land and Leasehold Improvements

Property, equipment, land and leasehold improvements at March 31, 2009 and December 31, 2008 consist of the following ($ in thousands):

		March 31, 2009				December 31, 2008
Land(1)		$	59,968			$	56,039
Easements			5,624				5,624
Buildings			29,686				34,128
Leasehold and land improvements			317,544				301,623
Machinery and equipment			322,286				321,240
Furniture and fixtures			10,264				9,952
Construction in progress			29,447				48,520
Property held for future use			1,540				1,540
			776,359				778,666
Less: accumulated depreciation			(116,466	)			(104,685	)
Property, equipment, land and leasehold improvements, net(2)		$	659,893			$	673,981

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, or SFAS No. 144, the Company recognized non-cash impairment charges of $11.7 million and $32.9 million, respectively, primarily relating to leasehold and land improvements, buildings, machinery and equipment and furniture and fixtures during the first quarter of 2009 and the fourth quarter of 2008, respectively. The Company reported non-cash impairment charges of $5.3 million and $13.8 million for the first quarter of 2009 and the fourth quarter of 2008, respectively, in depreciation expense for the airport services business and $6.4 million and $19.1 million for the first quarter of 2009 and the fourth quarter of 2008, respectively, in cost of services for the airport parking business in the consolidated condensed statement of operations.

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

6. Intangible Assets

Intangible assets at March 31, 2009 and December 31, 2008 consist of the following ($ in thousands):

		Weighted Average Life (Years)				March 31, 2009				December 31, 2008
Contractual arrangements			31.0			$	778,630			$	802,419
Non-compete agreements			2.5				9,515				9,515
Customer relationships			10.7				78,596				78,596
Leasehold rights			12.5				3,330				3,542
Trade names			Indefinite				15,401				15,401
Technology			5.0				460				460
							885,932				909,933
Less: Accumulated amortization							(104,225	)			(97,749	)
Intangible assets, net						$	781,707			$	812,184

As a result of declines in the performance of certain asset groups during the first quarter of 2009 and fourth quarter of 2008, the Company evaluated such asset groups for impairment under SFAS No. 144 and determined that the asset groups were impaired. The Company estimated the fair value of each of the impaired asset groups using either discounted cash flows or third party appraisals. Accordingly, the Company recognized $20.4 million and $29.8 million of non-cash impairment charges during the first quarter of 2009 and fourth quarter of 2008, respectively. This consists of $20.4 million and $21.7 million of non-cash impairment charges related to contractual arrangements at the airport services business during the first quarter of 2009 and fourth quarter of 2008, respectively, and $8.1 million during the fourth quarter of 2008 related to customer relationships, leasehold rights and trademarks at the airport parking business. These charges are recorded in amortization of intangibles in the consolidated condensed statement of operations.

The change in goodwill from December 31, 2008 to March 31, 2009 is as follows ($ in thousands):

Balance at December 31, 2008		$	586,249
Impairment of airport services business			(18,000	)
Prior period acquisition purchase price adjustments			31
Other			1,102
Balance at March 31, 2009		$	569,382

The Company tests for goodwill impairment at the reporting unit level on an annual basis and between annual tests if a triggering event indicates impairment. The decline in the Company’s stock price, particularly over the latter part of 2008 and the first quarter of 2009 has caused the book value of the Company to exceed its market capitalization. In accordance with SFAS No. 142, the Company performed goodwill impairment tests during the first quarter of 2009 and fourth quarter of 2008. The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the test. The first step of the process consists of estimating the fair value of each reporting unit based on a discounted cash flow model using cash flow forecasts and comparing those estimated fair values with the carrying values, which includes the allocated goodwill. If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an implied fair value of goodwill. The determination of a reporting unit’s “implied fair value” of goodwill requires the allocation of the estimated fair value of the reporting unit to the assets and liabilities of the reporting unit in accordance with SFAS No. 141(R). Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying value. If the corresponding carrying value is higher than the “implied fair value”, goodwill is written down to reflect the impairment. Based on the testing performed, the Company recorded

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6. Intangible Assets  – (continued)

goodwill impairment charges totalling $18.0 million at the airport services business during the first quarter of 2009 and $190.8 million during the fourth quarter of 2008, of which $138.8 million was recorded at the airport parking business to write off all of its goodwill and $52.0 million at the airport services business.

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

7. Nonfinancial Assets Measured at Fair Value

On January 1, 2009, the Company adopted SFAS No. 157 for nonfinancial assets measured at fair value on a nonrecurring basis. The following major categories of nonfinancial assets were measured at fair value at March 31, 2009:

						Fair Value Measurements Using
Description		March 31, 2009				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total Gains (Losses)
		($ in Thousands)
Property, Equipment, Land and Leasehold Improvements		$	58,342			$	—			$	55,433			$	2,909			$	(11,706	)
Intangible Assets			11,451				—				—				11,451				(20,364	)
Goodwill			430,543				—				—				430,543				(18,000	)
Total		$	500,336			$	—			$	55,433			$	444,903			$	(50,070	)

The Company estimated the fair value of each of the impaired asset groups using either discounted cash flows or third party appraisals. In accordance with SFAS No. 144, property, equipment, land and leasehold improvements and intangible assets with carrying amounts of $70.0 million and $31.9 million, were written down to their fair values of $58.3 million and $11.5 million, respectively. This resulted in impairment charges of $11.7 million and $20.4 million, which were included in depreciation expense and amortization expense, respectively, for the quarter ended March 31, 2009.

In accordance with SFAS No. 142 and as discussed in Note 6, “Intangible Assets”, the Company performed goodwill impairment analysis during the first quarter of 2009. As a result of the analysis, goodwill with a carrying amount of $448.5 million was written down to its implied fair value of $430.5 million, resulting in a non-cash impairment charge of $18.0 million, which was included in goodwill impairment for the quarter ended March 31, 2009.

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(Unaudited)

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

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

Model inputs included:

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

8. Long-Term Debt

At March 31, 2009 and December 31, 2008, the Company’s long-term debt consists of the following ($ in thousands):

		March 31, 2009				December 31, 2008
MIC Inc. revolving credit facility		$	66,400			$	69,000
Airport services			897,179				939,800
Gas production and distribution			169,000				169,000
District energy			150,000				150,000
Airport parking			201,302				201,344
Total			1,483,881				1,529,144
Less: current portion			(312,059	)			(201,344	)
Long-term portion		$	1,171,822			$	1,327,800

Effective April 14, 2009, MIC Inc. elected to reduce the available principal on its revolving credit facility from $300.0 million to $97.0 million. As of March 31, 2009, MIC Inc. reclassified its revolving credit facility from long-term debt to current portion of long-term debt on the consolidated condensed balance sheet, due to its maturity on March 31, 2010. The Company believes that, at or before the maturity date, it will be able to pay down any outstanding balance from cash on hand, or refinance or extend the facility on terms that can be supported by the performance of the Company and the cash distributed by its businesses.

On February 25, 2009, the airport services business amended its credit facility to reduce the principal amount due under that facility and provide the business additional financial flexibility over the near and medium term. The business used $50.0 million in cash contributed by the Company to pay down $44.6 million of the outstanding term loan debt under the facility and $5.2 million of interest rate swap breakage fees, of which $1.1 million was paid to Macquarie Bank Limited, a related party. Additionally, under the amended terms, the business will apply all excess cash flow from the business to prepay additional debt whenever the leverage ratio (debt to adjusted EBITDA) is equal to or greater than 6.0x to 1.0 for the trailing twelve months and will use 50% of excess cash flow to prepay debt whenever the leverage ratio is equal to or

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8. Long-Term Debt  – (continued)

greater than 5.5x to 1.0 and below 6.0x to 1.0. On May 5, 2009, per the revised terms of the loan agreement, the business used approximately $8.8 million of excess cash flow generated in the first quarter of 2009 to prepay $8.0 million of the outstanding principal balance of the term loan and $789,000 in interest rate swap breakage fees.

At March 31, 2009, the airport parking business has $201.3 million of total debt, including $6.3 million of fixed rate debt due on or before September 9, 2009. This debt is secured by assets and collateral of the airport parking business. Creditors of this business do not have recourse to any assets of the Company or any assets of the other businesses, other than approximately $9.0 million in guarantees and interest rate swap liabilities as of May 7, 2009.

The airport parking business is currently in default under the liquidity covenant in their credit facility and may not be in compliance with its other financial covenants as of March 31, 2009. The business is precluded from making payments to the Company due to non-compliance under the restricted payment test. In addition, the airport parking business does not have sufficient liquidity or capital resources to pay its maturing debt obligations and, based on current results and market conditions, the Company does not expect that the airport parking business will be able to refinance its debt as it matures. The Company has no intention of contributing any further capital to this business other than potentially for obligations that the Company has guaranteed. As a result, there is doubt regarding the ability of the airport parking business to continue as a going concern. Accordingly, all of the Company’s long term assets have been written down to estimated fair value, resulting in impairment of goodwill, property, equipment, land and leasehold improvements and intangible assets of $166.0 million in the fourth quarter of 2008 and $6.4 million for property, equipment, land and leasehold improvements for the first quarter of 2009. The Company is in discussion with lenders and is pursuing strategic alternatives for this business, including asset sales, restructuring plans, filing for protection under bankruptcy laws or liquidating the business.

9. Derivative Instruments

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 its 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. In accordance with SFAS No. 133, the Company has concluded that all of its interest rate swaps qualify as cash flow hedges, and the Company applies hedge accounting for these instruments, except for the airport services business’ interest rate swaps. The airport services business’ interest rate swaps qualified as cash flow hedges and the Company applied hedge accounting for these instruments through February 25, 2009. The Company discontinued hedge accounting for these instruments after February 25, 2009, due to the amendment to the related credit facility discussed in Note 8, “Long-Term Debt”. Changes in the fair value of interest rate derivatives designated as hedging instruments that effectively offset the variability of cash flows associated with variable-rate debt obligations are reported in accumulated other comprehensive loss. Any ineffective portion on the change in the valuation of derivatives is taken through earnings, and reported in the loss on derivative instruments line in the consolidated condensed statements of operations.

At March 31, 2009, the Company had $1.5 billion of debt, $1.4 billion of which was economically hedged with interest rate swaps, $117.2 million of which was unhedged and $6.3 million of which incurred interest at fixed rates. Of the $1.4 billion in debt hedged with interest rate swaps, the Company applied hedge accounting to $505.0 million of such swaps.

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(Unaudited)

9. Derivative Instruments  – (continued)

On February 25, 2009, the airport services business paid down $44.6 million of debt and reduced the notional amount of interest rate swaps used to hedge the interest payments on that debt by a corresponding amount. This resulted in the payment of $5.2 million of interest rate swap breakage fees to counterparties which were recorded as interest expense in the consolidated condensed statement of operations. This reduction also resulted in reclassification of $22.7 million of accumulated other comprehensive loss in the consolidated condensed balance sheet related to derivatives to loss on derivative instruments in the consolidated condensed statement of operations. Additionally, the airport services business discontinued hedge accounting as of February 25, 2009 and incurred $6.3 million in non-cash derivative loss in earnings due to the change in the fair value of these interest rate swaps. The business expects to record interest rate swap breakage fees and corresponding reclassifications from accumulated other comprehensive loss to loss on derivative instruments as the airport services business continues to pay down its debt.

In March 2009, the airport services business, gas production and distribution business, and district energy business entered into interest rate basis swap contracts with their existing counterparties. These contracts effectively changed the interest rate index on the Company’s existing swap contracts for the next 12 months from the 90-day LIBOR rate to the 30-day LIBOR rate plus a margin of a 19.50 basis point spread for the airport services business and a margin of a 24.75 basis point spread for the gas production and distribution and district energy businesses.

The Company estimates that $38.1 million of net derivative losses included in accumulated other comprehensive loss will be reclassified into earnings over the next 12 months.

In accordance with SFAS No. 133, the Company’s derivative instruments are recorded on the balance sheet at fair value. The Company measures derivative instruments at fair value using the income approach, which converts future amounts (being the future net cash settlements expected under the derivative contracts) to a discounted present value. These valuations primarily utilize observable (“level 2”) inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals.

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(Unaudited)

9. Derivative Instruments  – (continued)

The Company’s fair value measurements of its derivative instruments and the related location of the liabilities associated with the hedging instruments within the consolidated condensed balance sheet at March 31, 2009 and December 31, 2008 were as follow:

		March 31, 2009
		Liability Derivatives								Fair Value Measurements at Reporting Date Using
		Balance Sheet Location				Fair Value				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
						($ in Thousands)
Derivatives Designated as Hedging Instruments Under SFAS No. 133
Interest rate swap contracts			Fair value of derivative instruments – current liabilities			$	(16,023	)		$	—			$	(16,023	)		$	—
Interest rate swap contracts			Fair value of derivative instruments – non- current liabilities				(29,823	)			—				(29,823	)			—
Total derivatives designated as hedging instruments under SFAS No. 133							(45,846	)			—				(45,846	)			—
Derivatives Not Designated as Hedging Instruments Under SFAS No. 133(1)
Interest rate swap contracts			Fair value of derivative instruments – current liabilities				(32,463	)			—				(32,463	)			—
Interest rate swap contracts			Fair value of derivative instruments – non- current liabilities				(65,672	)			—				(65,672	)			—
Total derivatives not designated as hedging instruments under SFAS No. 133							(98,135	)			—				(98,135	)			—
Total						$	(143,981	)		$	—			$	(143,981	)		$	—

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

9. Derivative Instruments  – (continued)

		December 31, 2008
		Liability Derivatives								Fair Value Measurements at Reporting Date Using
		Balance Sheet Location				Fair Value				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
						($ in Thousands)
Derivatives Designated as Hedging Instruments Under SFAS No. 133
Interest rate swap contracts			Fair value of derivative instruments – current liabilities			$	(51,441	)		$	—			$	(51,441	)		$	—
Interest rate swap contracts			Fair value of derivative instruments – non- current liabilities				(105,970	)			—				(105,970	)			—
Total derivatives designated as hedging instruments under SFAS No. 133						$	(157,411	)		$	—			$	(157,411	)		$	—

The Company’s hedging activities and the related location within the consolidated condensed financial statements were as follows:

		Derivatives Designated as Hedging Instruments Under SFAS No. 133(1)																								Derivatives Not Designated as Hedging Instruments Under SFAS No. 133(1)
		Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion) for the Quarter Ended March 31,								Amount of Gain (Loss) Reclassified from OCI into Income (Effective Portion) for the Quarter Ended March 31,								Amount of Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion) for the Quarter Ended March 31,								Amount of Gain (Loss) Recognized in Income on Derivatives for the Quarter Ended March 31,
Financial Statement Account		2009				2008				2009(2)				2008				2009				2008				2009(3)				2008
		($ in Thousands)
Interest Expense		$	—			$	—			$	(17,953	)		$	(1,713	)		$	—			$	—			$	—			$	—
Loss on Derivative Instruments			—				—				(25,154	)			(155	)			(84	)			(150	)			(6,987	)			—
Accumulated Other Comprehensive Loss			2,549				(53,830	)			—				—				—				—				—				—
Total		$	2,549			$	(53,830	)		$	(43,107	)		$	(1,868	)		$	(84	)		$	(150	)		$	(6,987	)		$	—

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

9. Derivative Instruments  – (continued)

With the exception of the interest rates swap at the Company’s airport parking business, all of theCompany’s derivative instruments were individually collateralized by all of the assets of the respective businesses. The interest rate swap at the Company’s airport parking business was not secured by any such collateral.

10. Comprehensive Loss

Comprehensive loss includes primarily change in fair value of derivative instruments, which qualify for hedge accounting. The difference between net loss and comprehensive loss for the quarter ended March 31, 2009 and 2008 were as follow ($ in thousands):

		Quarter Ended March 31,
		2009				2008
Net loss		$	(53,026	)		$	(1,990	)
Unrealized gain (loss) in fair value of derivatives, net of taxes			1,498				(32,512	)
Reclassification of derivative losses into earnings, net of taxes			25,990				1,237
Comprehensive loss		$	(25,538	)		$	(33,265	)

For further discussions on derivative instruments and hedging activities, see Note 9, “Derivative Instruments”.

11. Members’/Stockholders’ Equity

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

12. Reportable Segments

The Company’s operations are classified into four reportable business segments: airport services business, gas production and distribution business, district energy business and airport parking business. All of the business segments are managed separately and management has chosen to organize the Company around the distinct products and services offered.

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12. Reportable Segments  – (continued)

The Company also has a 50% investment in a bulk liquid storage terminal business, or IMTT, which is accounted for under the equity method. Financial information for IMTT is presented below ($ in thousands) (unaudited):

		Quarter Ended March 31, 2009				Quarter Ended March 31, 2008
Revenue		$	86,803			$	78,394
EBITDA			42,087				12,285
Interest expense, net			7,061				4,719
Depreciation and amortization expense			12,824				10,334
Capital expenditures paid			39,942				58,506
Property, equipment, land and leasehold improvements, net			935,348				776,886
Total assets balance			1,020,564				890,707

The airport services business reportable segment principally derives income from fuel sales and from other airport services. Airport services revenue includes fuel-related services, de-icing, aircraft hangarage, airport management and other aviation services. All of the revenue of the airport services business is generated in the United States. The airport services business operated 72 FBOs as of March 31, 2009.

The revenue from the gas production and distribution business reportable segment is included in revenue from product sales and includes distribution and sales of synthetic natural gas, or SNG, and liquefied petroleum gas, or LPG. Revenue is primarily a function of the volume of SNG and LPG consumed by customers and the price per thermal unit or gallon charged to customers. Because both SNG and LPG are derived from petroleum, revenue levels, without organic operating growth, will generally track global oil prices. The utility revenue of the gas production and distribution business includes fuel adjustment charges, or FACs, through which changes in fuel costs are passed through to customers.

The revenue from the district energy business reportable segment is included in service revenue and financing and equipment lease income. Included in service revenue is capacity charge revenue, which relates to monthly fixed contract charges, and consumption revenue, which relates to contractual rates applied to actual usage. Financing and equipment lease income relates to direct financing lease transactions and equipment leases to the business’ various customers. The district energy business provides its services to buildings throughout the downtown Chicago area and to a casino and shopping mall located in Las Vegas, Nevada.

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

Selected information by reportable segment is presented in the following tables. The tables do not include financial data for equity and cost investments.

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12. Reportable Segments  – (continued)

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

		Quarter Ended March 31, 2009
		Airport Services				Gas Production and Distribution				District Energy				Airport Parking				Total
Revenue from Product Sales
Product sales		$	68,117			$	21,075			$	—			$	—			$	89,192
Product sales – utility			—				20,167				—				—				20,167
			68,117				41,242				—				—				109,359
Service Revenue
Other services			49,064				—				756				—				49,820
Cooling capacity revenue			—				—				4,897				—				4,897
Cooling consumption revenue			—				—				2,228				—				2,228
Parking services			—				—				—				16,607				16,607
			49,064				—				7,881				16,607				73,552
Financing and Lease Income
Financing and equipment lease			—				—				1,192				—				1,192
			—				—				1,192				—				1,192
Total Revenue		$	117,181			$	41,242			$	9,073			$	16,607			$	184,103

		Quarter Ended March 31, 2008
		Airport Services				Gas Production and Distribution				District Energy				Airport Parking				Total
Revenue from Product Sales
Product sales		$	136,366			$	22,959			$	—			$	—			$	159,325
Product sales – utility			—				29,399				—				—				29,399
			136,366				52,358				—				—				188,724
Service Revenue
Other services			62,584				—				732				—				63,316
Cooling capacity revenue			—				—				4,806				—				4,806
Cooling consumption revenue			—				—				1,768				—				1,768
Parking services			—				—				—				18,895				18,895
			62,584				—				7,306				18,895				88,785
Financing and Lease Income
Financing and equipment lease			—				—				1,194				—				1,194
			—				—				1,194				—				1,194
Total Revenue		$	198,950			$	52,358			$	8,500			$	18,895			$	278,703

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(Unaudited)

12. Reportable Segments  – (continued)

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

		Quarter Ended March 31, 2009
		Airport Services				Gas Production and Distribution				District Energy				Airport Parking				Total Reportable Segments
Net (loss) income(1)		$	(50,300	)		$	3,115			$	(1,646	)		$	(5,444	)		$	(54,275	)
Interest income			(47	)			(11	)			(3	)			(7	)			(68	)
Interest expense			20,278				2,305				2,567				4,024				29,174
Income tax (benefit) provision			(33,954	)			2,005				(1,075	)			(4,073	)			(37,097	)
Depreciation			11,674				1,476				1,463				7,251				21,864
Amortization of intangibles			29,714				214				337				—				30,265
EBITDA		$	(22,635	)		$	9,104			$	1,643			$	1,751			$	(10,137	)

		Quarter Ended March 31, 2008
		Airport Services				Gas Production and Distribution				District Energy				Airport Parking				Total Reportable Segments
Net income (loss)		$	5,942			$	1,854			$	(1,013	)		$	(2,005	)		$	4,778
Interest income			(178	)			(16	)			(20	)			(36	)			(250	)
Interest expense			16,016				2,327				2,564				3,923				24,830
Income tax provision (benefit)			4,011				1,192				(354	)			(1,501	)			3,348
Depreciation			5,269				1,454				1,476				1,270				9,469
Amortization of intangibles			9,368				214				341				816				10,739
EBITDA		$	40,428			$	7,025			$	2,994			$	2,467			$	52,914

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(Unaudited)

12. Reportable Segments  – (continued)

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

		Quarter Ended March 31,
		2009				2008
Total reportable segments EBITDA		$	(10,137	)		$	52,914
Interest income			74				473
Interest expense			(30,603	)			(25,826	)
Depreciation(1)			(21,864	)			(9,469	)
Amortization of intangibles(2)			(30,265	)			(10,739	)
Selling, general and administrative – corporate			(1,769	)			(1,133	)
Fees to manager			(462	)			(4,626	)
Equity in earnings (losses) and amortization charges of investees			5,449				(2,089	)
Other income (expense), net			1,059				(410	)
Total consolidated net loss before income taxes and noncontrolling interests		$	(88,518	)		$	(905	)

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

		Quarter Ended March 31,
		2009				2008
Airport services		$	3,245			$	10,201
Gas production and distribution			1,865				1,754
District energy			1,619				1,516
Airport parking			203				237
Total		$	6,932			$	13,708

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

12. Reportable Segments  – (continued)

Property, equipment, land and leasehold improvements, goodwill and total assets for the Company’s reportable segments as of March 31 were as follows ($ in thousands) (unaudited):

		Property, Equipment, Land and Leasehold Improvements								Goodwill								Total Assets
		2009(1)				2008				2009(2)				2008				2009				2008
Airport services		$	295,166			$	310,245			$	430,542			$	504,055			$	1,590,116			$	1,810,925
Gas production and distribution			143,233				137,724				120,193				120,193				333,105				319,581
District energy			146,656				145,766				18,647				18,647				226,088				229,823
Airport parking			74,838				96,486				—				133,772				193,597				279,223
Total		$	659,893			$	690,221			$	569,382			$	776,667			$	2,342,906			$	2,639,552

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

		As of March 31,
		2009				2008
Total assets of reportable segments		$	2,342,906			$	2,639,552
Investment in IMTT			190,379				202,518
Corporate and other			(107,773	)			16,123
Total consolidated assets		$	2,425,512			$	2,858,193

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

		As of March 31,
		2009				2008
Goodwill of reportable segments		$	569,382			$	776,667
Corporate and other			—				(1,102	)
Total consolidated goodwill		$	569,382			$	775,565

13. Related Party Transactions

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

As of March 31, 2009, the Manager held 3,173,123 LLC interests of the Company, which were acquired concurrently with the closing of the initial public offering in December 2004 and also by reinvesting 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

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

13. Related Party Transactions  – (continued)

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

In accordance with the Management Agreement, the Manager is entitled to a quarterly base management fee based primarily on the Company’s market capitalization, and a performance fee, based on the performance of the Company’s stock relative to the U.S. utilities index. For the quarters ended March 31, 2009 and March 31, 2008, the Company accrued base management fees of $462,000 and $4.6 million, respectively. The unpaid portion of the fees at the end of each reporting period is included in due to manager-related party in the consolidated condensed balance sheets. The base management fees were paid in cash after the period end.

During the third quarter of 2008, the Manager had offered to reinvest its base fee for the third quarter of 2008 in additional LLC interests of the Company. However, in the fourth quarter of 2008, the Board of Directors requested that the Manager reverse its decision to reinvest its base management fees in stock under the terms of the management services agreement due to the significant decline in the market price of the LLC interests between the end of the third quarter of 2008 and the time at which the Company would have issued those LLC interests and the resulting potential substantial dilution of existing shareholders. The Manager agreed to this request and both the third and fourth quarter 2008 base fees were paid in cash during the first quarter of 2009.

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 quarters ended March 31, 2009 and March 31, 2008, the Manager charged the Company $109,000 and $78,000, respectively, for reimbursement of out-of-pocket expenses. The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in due to manager-related party in the consolidated condensed balance sheet.

Advisory and Other Services from the Macquarie Group

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

As of March 31, 2009

Airport services business debt amendment — debt arranging services from MCUSA		$	970

On February 25, 2009, the airport services business amended its credit facility to reduce the principal amount due under that facility and provide the business additional operating flexibility over the near and medium term. The business used $50.0 million in cash contributed by the Company to pay down $44.6 million of the outstanding term loan debt under the facility and $5.2 million of interest rate swap breakage fees, including a $1.1 million payment to MBL. MCUSA acted as the financial advisor in connection with this amendment and earned advisory fees of approximately $970,000, as noted above.

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

13. Related Party Transactions  – (continued)

Long-Term Debt

At March 31, 2009, MIC Inc. has a $300.0 million revolving credit facility with various financial institutions, including MBL. Amounts paid to or received from the Macquarie Group that relate to this facility comprise the following ($ in thousands):

Quarter Ended March 31, 2009

Revolving credit facility commitment provided by Macquarie Group during the period January 1, 2009 through March 31, 2009		$	66,667
Portion of credit facility commitment from Macquarie Group drawn down, as of March 31, 2009			14,755
Principal payments to Macquarie Group for the quarter ended March 31, 2009			578
Interest expense on Macquarie Group portion of the drawn down commitment, for the quarter ended March 31, 2009			207
Commitment fees to the Macquarie Group, for the quarter ended March 31, 2009			64

On April 14, 2009, the Company elected to reduce the available principal on its revolving credit facility from $300.0 million to $97.0 million. This resulted in a decrease in the Macquarie Group’s total commitment under the revolving credit facility from $66.7 million to $21.6 million. See Note 16, “Subsequent Events”, for further discussions.

Derivative Instruments and Hedging Activities

The Company has derivative instruments in place to fix the interest rate on outstanding term loan facilities. MBL has provided interest rate swaps for the airport services business and the gas production and distribution business. At March 31, 2009, the airport services business had $855.4 million of its term loans hedged, of which MBL was providing the interest rate swaps for a notional amount of $326.1 million. The remainder of the swaps are from an external party. During the quarter ended March 31, 2009, the airport services business made net payments to MBL of $3.1 million in relation to these swaps. As noted above, on February 25, 2009, in connection with a partial repayment of loans under this facility, the airport services business paid $5.2 million of interest rate swap breakage fees of which $1.1 million was paid to MBL.

At March 31, 2009, the gas production and distribution business had $160.0 million of its term loans hedged, of which MBL was providing the interest rate swaps for a notional amount of $48.0 million. The remainder of the swaps are from an external party. During the quarter ended March 31, 2009, the gas production and distribution business made net payments to MBL of $345,000 in relation to these swaps.

Other Transactions

On March 30, 2009, the gas production and distribution business had entered into licensing agreements with Utility Service Partners, Inc. and America’s Water Heater Rentals, LLC, both indirect subsidiaries of Macquarie Group Limited, to enable these entities to offer products and services to the gas production and distribution business customer base. No payments were made under these arrangements during the first quarter ended March 31, 2009.

On August 29, 2008, Macquarie Global Opportunities Partners 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 is an existing customer of the Company’s airport services business. For the quarter ended March 31, 2009, the airport services business recorded $1.8 million in revenue from Sentient. As of March 31, 2009, the airport services business had a $72,000 receivable from Sentient, which is included in accounts receivable in the consolidated condensed balance sheets.

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

13. Related Party Transactions  – (continued)

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

14. Income Taxes

The Company expects to incur a net operating loss for federal consolidated tax return purposes for the year ending December 31, 2009. The Company believes that it will be able to utilize the projected federal and certain state consolidated 2009 and prior year losses. Accordingly, the Company has not provided a valuation allowance against any deferred tax assets generated in 2009, except as noted below.

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

As discussed in Note 7, “Nonfinancial Assets Measured at Fair Value”, during the quarter ended March 31, 2009, the Company incurred a charge to earnings of approximately $50.1 million for the write down to implied value of certain fixed assets and intangibles. For purposes of determining its effective income tax rate for the quarter ended March 31, 2009, the Company does not consider the write down to implied fair value to be part of ordinary income. Of this amount, approximately $13.5 million is attributable to goodwill and represents a permanent book-tax difference. As a result, no tax benefit has been recognized for this charge.

Uncertain Tax Positions

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

15. Legal Proceedings and Contingencies

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

16. Subsequent Events

Airport Services Business Credit Facility

On May 5, 2009, per the revised terms of the loan agreement, as described in Note 8, “Long-Term Debt”, the airport services business used approximately $8.8 million of excess cash flow generated in the first quarter of 2009 to prepay $8.0 million of the outstanding principal balance of the term loan and $789,000 in interest rate swap breakage fees.

MIC Inc. Revolving Credit Facility

On April 14, 2009, MIC Inc. elected to reduce the available principal on its revolving credit facility from $300.0 million to $97.0 million. See Note 8, “Long-Term Debt”, for further discussions.

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

16. Subsequent Events  – (continued)

Discontinuance of Hedge Accounting

Effective February 25, 2009 for airport services business and April 1, 2009 for the other businesses, the Company elected to discontinue hedge accounting. As a result, the Company will reclassify into earnings the $117.3 million of net derivative losses included in accumulated other comprehensive loss based on expected future cash flows, over the remaining life of the existing interest rate swaps. The Company will also record all future movements in the fair value of these swaps directly through earnings.

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

General

We own, operate and invest in a diversified group of infrastructure businesses that provide basic, everyday services, such as chilled water for building cooling and gas utility services to businesses and individuals primarily in the U.S. The businesses we own and operate are an airport services business, a bulk liquid storage terminal business, a gas production and distribution business, a district energy business and an airport parking business. These infrastructure businesses generally operate in sectors with limited competition and barriers to entry resulting from a variety of factors including high initial development and construction costs, the existence of long-term contracts or the requirement to obtain government approvals and lack of immediate cost-efficient alternatives to the services provided. Overall they tend to generate sustainable and growing long-term cash flows. We operate and finance our businesses in a manner that maximizes these cash flows.

We are dependent upon cash distributions from our businesses to meet our corporate overhead, to pay management fees and to pay distributions to shareholders, if any. Distributions received from our businesses, net of taxes, are available typically to meet management fees and corporate overhead expenses, then to address any capital structure needs and then to fund distribution payments to our shareholders. Base and performance management fees payable to our Manager are allocated among the Company and its operating company subsidiaries based on the Company’s internal allocation policy.

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

In the latter half of 2008 and continuing into 2009, our economy has seen major financial institutions and multinational corporations face liquidity shortfalls, seek government financial support and declare bankruptcy. These and other macroeconomic factors have resulted in decreased business activity levels generally and have adversely affected all of our businesses to some extent. Our bulk liquid storage, gas production and distribution and district energy businesses have proven, to date, largely resistant to the economic downturn, primarily due to the contracted or utility-like nature of their revenues combined with the essential services they provide.

Our airport services business’ results have been affected by lower overall economic activity and decreased use of general aviation jets. However, we believe the fundamental strength of our airport services business, based on the important role of general aviation in the air transportation industry, will be sustained over the long term.

The current economic climate and our inability to accurately forecast when these conditions will improve have led us to focus even more intently on managing our businesses, to prudently reduce costs and operating expenditures, to selectively reduce debt levels, to anticipate and mitigate potential refinancing risk and to conservatively approach growth expenditures. We have taken a number of steps to retain cash, reduce debt levels in our airport services business and manage all of our businesses through the current environment. These measures are discussed in more detail directly below and under the discussion regarding each business in “Results of Operations” and “Liquidity and Capital Resources.”

With the exception of our airport parking business, we believe that our active management of our businesses, along with the essential services nature of our businesses overall, will enable them to continue to operate and generate cash, if at somewhat reduced levels, until economic conditions improve.

Distributions

Our Board of Directors has decided to suspend payment of quarterly cash distributions to shareholders in order to reduce both holding company debt and operating company debt at certain businesses where the underlying fundamentals are strong. The suspension is likely to remain in effect until such time as the credit markets and consumer spending patterns regain a level of stability and predictability that enables us to confidently estimate long term cash flows and refinancing capability.

Airport Services Business

In our airport services business, we are aggressively managing operations, debt levels and liquidity positions in response to the current economic climate. We have implemented a number of measures that have

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successfully reduced operating expenses. The savings have partially offset the decline in volume and margins on fuel sales that we believe have resulted from lower utilization of general aviation aircraft. As of March 2009, we have reduced our ongoing operating costs to approximately $15.5 million per month, compared to $18.2 million per month in the first quarter of 2008, primarily through synergies realized in the integration of acquired sites and rationalization of staffing levels in response to the decline in general aviation activity. A substantial portion of the savings was realized at the end of the third quarter of 2008. This annualized savings are expected to be approximately $24.0 million.

On February 25, 2009, we amended our airport services business’ credit facility to reduce the principal amount due under that facility and provide us additional financial flexibility over the near and medium term. We used $50.0 million in cash on hand to pay down $44.6 million of the outstanding term loan debt under the facility and $5.2 million of interest rate swap breakage fees. Our airport services business also paid $1.2 million, primarily in advisory fees and other amendment costs in connection with the debt amendment. Additionally, under the amended terms, we 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 less than 6.0x to 1.0. On May 5, 2009, per the revised terms of the loan agreement, we used approximately $8.8 million of excess cash flow generated by our airport services business in the first quarter of 2009 to prepay $8.0 million of the outstanding principal balance of the term loan and $789,000 in interest rate swap breakage fees.

Bulk Liquid Storage Business, Gas Production and Distribution Business and District Energy Business

The macroeconomic factors and market conditions discussed above have affected our bulk liquid storage business, our gas production and distribution business and our district energy business to a much lesser extent than our airport related businesses. Although affected by economic conditions both locally and globally, we believe these businesses are able to sustain cash flows throughout the business cycle. This is primarily a result of the contracted nature of the revenue streams of the businesses and the contractual or regulatory ability to pass through most cost variances to customers.

Non-Cash Impairment Charge

The decline in our stock price, particularly over the latter part of 2008 and continuing during the first quarter of 2009, has caused our book value to exceed our market capitalization. As a result, we have booked a non-cash impairment charge of $50.1 million and $253.5 million in the first quarter of 2009 and fourth quarter of 2008, respectively, in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”, or SFAS No. 142, and Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, or SFAS No. 144.

During the first quarter of 2009, the airport services business reported $43.7 million of non-cash impairment charges, consisting of $20.4 million related to intangible assets, $18.0 million related to goodwill and $5.3 million related to property, equipment, land and leasehold improvements. In addition, a non-cash impairment charge of $6.4 million was reported at our airport parking business related to property, equipment, land and leasehold improvements.

In the fourth quarter of 2008, the airport services business reported $87.5 million of non-cash impairment charges, consisting of $52.0 million related to goodwill, $21.7 million related to intangible assets and $13.8 million related to property, equipment, land and leasehold improvements. The airport parking business reported $166.0 million of non-cash impairment charges consisting of $138.8 million related to goodwill, $19.1 million related to property, equipment, land and leasehold improvements and $8.1 million related to intangible assets.

See “Critical Accounting Estimates” and Notes to Consolidated Condensed Financial Statements included in this quarterly report on 10-Q for further discussions.

Acquisitions

During the first quarter of 2008, we acquired three fixed base operations, or FBOs. With these acquisitions, our airport services business owns and operates a network of 72 FBOs in the United States, the largest such network in the industry. In the third quarter of 2008, we acquired an off-airport parking facility at

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Newark Liberty International Airport in New Jersey. Results of operations for acquisitions are included in our consolidated results from the respective dates of each acquisition.

Results of Operations

Key Factors Affecting Operating Results

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

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2009				2008				$				%
Revenue
Revenue from product sales		$	89,192			$	159,325				(70,133	)			(44.0	)
Revenue from product sales – utility			20,167				29,399				(9,232	)			(31.4	)
Service revenue			73,552				88,785				(15,233	)			(17.2	)
Financing and equipment lease income			1,192				1,194				(2	)			(0.2	)
Total revenue			184,103				278,703				(94,600	)			(33.9	)
Costs and expenses
Cost of product sales			49,267				108,517				59,250				54.6
Cost of product sales – utility			14,817				24,335				9,518				39.1
Cost of services			31,457				33,256				1,799				5.4
Gross profit			88,562				112,595				(24,033	)			(21.3	)
Selling, general and administrative			59,479				63,857				4,378				6.9
Fees to manager – related party			462				4,626				4,164				90.0
Goodwill impairment			18,000				—				(18,000	)			NM
Depreciation			13,150				6,723				(6,427	)			(95.6	)
Amortization of intangibles			30,265				10,739				(19,526	)			(181.8	)
Total operating expenses			121,356				85,945				(35,411	)			(41.2	)
Operating (loss) income			(32,794	)			26,650				(59,444	)			NM
Other income (expense)
Interest income			74				473				(399	)			(84.4	)
Interest expense			(30,603	)			(25,826	)			(4,777	)			(18.5	)
Equity in earnings (losses) and amortization charges of investees			5,449				(2,089	)			7,538				NM
Loss on derivative instruments			(32,225	)			(305	)			(31,920	)			NM
Other income, net			1,581				192				1,389				NM
Net loss before income taxes and noncontrolling interests			(88,518	)			(905	)			(87,613	)			NM
Benefit (provision) for income taxes			35,659				(1,364	)			37,023				NM
Net loss before noncontrolling interests			(52,859	)			(2,269	)			(50,590	)			NM
Net income (loss) attributable to noncontrolling interests			167				(279	)			446				159.9
Net loss		$	(53,026	)		$	(1,990	)			(51,036	)			NM

NM — Not meaningful

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Gross Profit

The decrease in our consolidated gross profit was primarily due to a decline in performance at our airport services business.

Selling, General and Administrative Expenses

The decrease in our selling, general and administrative expenses was primarily a result of substantial cost reduction efforts, particularly at our airport services business.

Fees to Manager

Base fees paid to our Manager in 2009 decreased by $4.2 million due to our lower market capitalization.

Goodwill Impairment

In accordance with SFAS No. 142, we performed our impairment test at the reporting unit level during the first quarter of 2009. Goodwill is considered impaired when the carrying amount of a reporting unit’s goodwill exceeds its implied fair value, as determined under a two-step approach. Based on the testing performed, we recognized goodwill impairment charge of $18.0 million at our airport services business.

Depreciation

The increase in depreciation was primarily due to a non-cash impairment charge of $5.3 million at our airport services business for the quarter ended March 31, 2009. Depreciation expense also increased as a result of capital expenditures by businesses that created higher asset balances.

Amortization of Intangibles

Amortization expense increased due to a non-cash impairment charge of $20.4 million for contractual arrangements at our airport services business for the quarter ended March 31, 2009.

Interest Expense and Loss on Derivative Instruments

Our airport services, gas production and distribution and district energy businesses each entered into LIBOR-based basis swaps during the quarter. These transactions lower the effective cash interest rate on these businesses’ debt for the twelve months through March 2010 and will reduce our cash interest expense by approximately $2.4 million on an annualized basis. These transactions also result in reclassification of a portion of accumulated other comprehensive loss in our consolidated condensed balance sheet related to derivatives to loss on derivative instruments in our consolidated condensed statement of operations.

Our airport services business paid down $44.6 million of debt during the quarter, and reduced the notional amount of interest rate swaps used to hedge the interest payments on that debt by a corresponding amount. This resulted in the payment of $5.2 million of breakage fees to the swap counterparties which were recorded as interest expense. This reduction also resulted in reclassification of $22.7 million of accumulated other comprehensive loss in our consolidated condensed balance sheet related to derivatives to loss on derivative instruments in our consolidated condensed statement of operations. Additionally, we discontinued hedge accounting at the airport services business as of February 25, 2009 and incurred $6.3 million of non-cash derivative loss in earnings due to the change in the fair value of these interest rate swaps. We expect to record interest rate swap breakage fees as our airport services business continues to pay down its debt, and we expect to reclassify accumulated non-cash derivative losses from accumulated other comprehensive loss into loss on derivative instruments on the consolidated condensed statement of operations.

Our district energy business novated part of its existing interest rate swap with their existing counterparty during the quarter, with no change in terms. This novation resulted in reclassification of a portion of accumulated other comprehensive loss in our consolidated condensed balance sheet related to derivatives to loss on derivative instruments in our consolidated condensed statement of operations.

The above transactions increased our non-cash loss on derivative instruments by $31.3 million and increased interest expense by $5.2 million during the quarter. The increase in interest expense was due solely to the breakage fees paid to the swap counterparties as discussed above, and was partially offset by lower interest paid on the reduced term loan balance.

Effective February 25, 2009 for the airport services business and April 1, 2009 for the other businesses, the Company elected to discontinue hedge accounting. As a result, the Company will reclassify into earnings

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the $117.3 million of net derivative losses included in accumulated other comprehensive loss based on expected future cash flows, over the remaining life of the existing interest rate swaps. The Company will also record all future movements in the fair value of these swaps directly through earnings.

Equity in Earnings (Losses) and Amortization Charges of Investees

Our equity in the earnings of IMTT increased due to improved operating results from that business and our share of the non-cash derivative-related gains of $1.7 million in 2009 compared with losses of $8.9 million in 2008.

Dividends received from IMTT are not recorded in earnings, but are recorded against our investment in the business in our consolidated condensed balance sheet and are shown as cash provided by operating activities in our consolidated condensed statement of cash flows for the portion up to our 50% share of IMTT’s positive earnings. Distributions when IMTT records a loss, or the amount of the distribution in excess of our share of its earnings, are reflected in our consolidated condensed cash flows from investing activities. In the first quarter of 2009, $5.4 million of the $7.0 million dividend received, with respect to the quarter ending December 31, 2008, was included in cash from operations, and the balance of $1.6 million was recorded as cash from investing activities. In the first quarter of 2008, the entire $7.0 million dividend was included in cash from investing activities. IMTT’s cash from operating activities with respect to the quarter ended March 31, 2009 has been retained to fund IMTT’s growth capital expenditure program, which is further discussed under “Liquidity and Capital Resources,” and which is expected to contribute significantly to IMTT’s gross profit and EBITDA progressively over the next fifteen months.

Income Taxes

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

For the year ending December 31, 2009, we expect to have consolidated taxable loss for federal and for certain state income tax purposes. We expect to utilize the projected federal and state tax losses, except as noted below, and any prior year losses.

In calculating our consolidated projected effective state tax rate for 2009, we have 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, we expect to incur certain expenses that will not be deductible in determining state taxable income. Accordingly, these expenses have also been excluded in projecting our effective state tax rate.

In determining the effective tax rate for the quarter ended March 31, 2009, the Company excluded the write down to fair value of certain assets from ordinary income in determining its effective tax rate. Further, approximately $13.5 million of the write down is attributable to goodwill and is a permanent book-tax difference, for which no tax benefit has been recognized.

Earnings Before Interest, Taxes, Depreciation and Amortization, or EBITDA

We have included EBITDA, a non-GAAP financial measure, on a consolidated basis as well as for each of our businesses as we consider it to be an important measure of our overall performance. We believe our presentation of EBITDA provides additional insight into the performance of our operating companies and our ability to service our obligations and to pay distributions.

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A reconciliation of net loss to EBITDA, on a consolidated basis, is provided below ($ in thousands):

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2009				2008				$				%
Net loss		$	(53,026	)		$	(1,990	)
Interest expense, net			30,529				25,353
(Benefit) provision for income taxes			(35,659	)			1,364
Depreciation(1)			13,150				6,723
Depreciation – cost of services(1)			8,714				2,746
Amortization(2)			30,265				10,739
EBITDA		$	(6,027	)		$	44,935				(50,962	)			(113.4	)

Net loss includes various non-cash items which have not been reversed in calculating EBITDA above. These non-cash items, which are described below, totalled ($ in thousands):

		Quarter Ended March 31,
		2009				2008
Non-cash expense items, net		$	48,572			$	9,165

Non-cash items include:

Excluding the above non-cash items, EBITDA for 2009 would have decreased by approximately 21.4%.

Airport Services Business

The following section summarizes the consolidated financial performance of our airport services business for the three months ended March 31, 2009 and 2008.

Key Factors Affecting Operating Results

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		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2009				2008
		$				$				$				%
		($ in Thousands) (Unaudited)
Revenue
Fuel revenue			68,117				136,366				(68,249	)			(50.0	)
Non-fuel revenue			49,064				62,584				(13,520	)			(21.6	)
Total revenue			117,181				198,950				(81,769	)			(41.1	)
Cost of revenue
Cost of revenue-fuel			37,467				91,882				54,415				59.2
Cost of revenue-non-fuel			4,703				11,800				7,097				60.1
Total cost of revenue			42,170				103,682				61,512				59.3
Fuel gross profit			30,650				44,484				(13,834	)			(31.1	)
Non-fuel gross profit			44,361				50,784				(6,423	)			(12.6	)
Gross profit			75,011				95,268				(20,257	)			(21.3	)
Selling, general and administrative expenses(1)			49,914				54,625				4,711				8.6
Goodwill impairment			18,000				—				(18,000	)			NM
Depreciation and amortization			41,388				14,637				(26,751	)			(182.8	)
Operating (loss) income			(34,291	)			26,006				(60,297	)			NM
Interest expense, net			(20,231	)			(15,838	)			(4,393	)			(27.7	)
Other expense			(128	)			(16	)			(112	)			NM
Unrealized losses on derivative instruments			(29,604	)			(199	)			(29,405	)			NM
Benefit (provision) for income taxes			33,954				(4,011	)			37,965				NM
Net (loss) income(2)			(50,300	)			5,942				(56,242	)			NM
Reconciliation of net (loss) income to EBITDA:
Net (loss) income(2)			(50,300	)			5,942
Interest expense, net			20,231				15,838
(Benefit) provision for income taxes			(33,954	)			4,011
Depreciation and amortization			41,388				14,637
EBITDA			(22,635	)			40,428				(63,063	)			(156.0	)

NM — Not meaningful

Results for 2008 include SevenBar FBOs from March 4, 2008 (acquisition date) to March 31, 2008. 2009 results include SevenBar FBOs for the three months ended March 31, 2009. Results for the two months ended February 28, 2009 have not been presented separately as they are immaterial.

Revenue and Gross Profit

The majority of the revenue and gross profit in our airport services business is generated through fueling general aviation aircraft at our 72 FBOs around the United States. This revenue is categorized according to who owns the fuel we use to service these aircrafts. If we own the fuel, we record our cost to purchase that fuel as cost of revenue – fuel. Our corresponding fuel revenue is our cost to purchase that fuel plus a margin. We generally pursue a strategy of maintaining, and where appropriate, increasing dollar-based margins thereby passing any increase in fuel prices to the customer. We also have into-plane arrangements whereby we fuel aircraft with fuel owned by another party. We collect a fee for this service that is recorded as non-fuel revenue. Cost of revenue – non-fuel includes our cost, if any, to provide these services. Other non-fuel revenue includes various services such as hangar rentals, de-icing and airport services.

Our revenue and gross profit are driven by fuel volume and the dollar-based margin per gallon. This applies to both fuel and into-plane revenue. Our customers will occasionally move from one category to the other. Therefore, we believe discussing our fuel and non-fuel revenue and gross profit and the related key metrics on a combined basis provides a more meaningful analysis of our airport services business.

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Consistent with recent quarters, gross profit decreased, mainly due to lower general aviation volume and lower weighted average general aviation fuel margins. General aviation fuel volumes declined 23.2% as compared to the first quarter of 2008. Total average margins, including into-plane sales, decreased by 5.4%. The decline reflects, in part, an increase in the proportion of fuel sales to base tenants who typically have agreements to buy fuel at a discount compared with transient aircraft. Gross profit from other services (including hangar rentals, de-icing and miscellaneous services) decreased by 11% for the quarter, primarily due to lower hangar rent resulting from lower transient traffic. Excluding de-icing revenue, our average daily gross profit for the quarter ended March 31, 2009 was essentially flat versus the fourth quarter of 2008.

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

Selling, General and Administrative Expenses

The decrease in selling, general and administrative expenses is due primarily to cost savings resulting from integration of recently acquired businesses and management’s actions to streamline our cost structure in response to the decline in gross profit resulting from the overall slowing economy. These cost savings were partially offset by a $2.4 million increase in the bad debt reserve due to deterioration of the accounts receivable aging and $1.2 million in debt advisory fees and other amendment costs incurred in connection with the amendment to the debt agreement in February 2009.

Goodwill Impairment

In accordance with SFAS No. 142, we performed an impairment test at the reporting unit level during the first quarter of 2009. Goodwill is considered impaired when the carrying amount of a reporting unit’s goodwill exceeds its implied fair value, as determined under a two step approach. Based on the testing performed, we recognized a goodwill impairment charge of $18.0 million during the first quarter of 2009.

Depreciation and Amortization

The increase in depreciation and amortization expense was due to a non-cash impairment charge of $25.7 million, consisting of $20.4 million related to contractual arrangements and $5.3 million related to property, equipment, land and leasehold improvements during the first quarter of 2009.

Interest Expense and Unrealized Losses on Derivative Instruments

During the quarter, we paid down $44.6 million of our debt and reduced the notional amount of interest rate swaps used to hedge the interest payments on that debt by a corresponding amount. This resulted in the payment of $5.2 million of breakage fees to the swap counterparties which were recorded as interest expense. This reduction also resulted in reclassification of $22.7 million of accumulated other comprehensive loss in our consolidated condensed balance sheet related to derivatives to loss on derivative instruments in our consolidated condensed statement of operations.

Additionally, as of February 25, 2009, we discontinued hedge accounting. This resulted in $6.3 million non-cash derivative loss in earnings due to the change in fair value of these interest rate swaps. We expect to record interest rate swap breakage fees as we continue to pay down our debt, and we expect to reclassify accumulated non-cash derivative losses from accumulated other comprehensive loss into loss on derivative instruments on the consolidated condensed statement of operations. As of April 2009, we entered into a basis swap and we expect cash interest paid over the next twelve months to be further reduced by approximately $1.6 million on an annualized basis.

EBITDA

Excluding goodwill impairment charge and non-cash losses from derivative instruments, EBITDA would have decreased by 38.5% for the first quarter, driven by a decrease in gross profit partially offset by cost savings.

Bulk Liquid Storage Terminal Business

We account for our 50% interest in this business under the equity method. We recognized income of $5.4 million in our consolidated results for the quarter ended March 31, 2009. This includes our 50% share of IMTT’s net income for the quarter, offset by $1.2 million of additional depreciation and amortization expense

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(net of taxes). For the quarter ended March 31, 2008, we recognized a loss of $2.1 million in our consolidated results. IMTT recorded a $17.7 million non-cash loss on derivatives in the first quarter of 2008 offsetting a strong increase in operating income.

Distributions from IMTT, to the degree classified as taxable dividends and not a return of capital for income tax purposes, qualify for the federal dividends received deduction. Therefore, 80% of the dividend is excluded in calculating our consolidated federal taxable income. Any distributions classified as a return of capital for income tax purposes will reduce our tax basis in IMTT. IMTT declared a dividend of $14.0 million in December 2008 with $7.0 million received by us in January 2009. IMTT’s cash from operating activities for the quarter ended March 31, 2009 has been retained to fund IMTT’s existing committed growth capital expenditures and is expected to contribute significantly to IMTT’s gross profit and EBITDA progressively over the next fifteen months. See “Liquidity and Capital Resources” for further discussion.

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

Key Factors Affecting Operating Results

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2009				2008
		$				$				$				%
		($ in Thousands) (Unaudited)
Revenue
Terminal revenue			83,810				74,224				9,586				12.9
Environmental response revenue			2,993				4,170				(1,177	)			(28.2	)
Total revenue			86,803				78,394				8,409				10.7
Costs and expenses
Terminal operating costs			38,449				38,542				93				0.2
Environmental response operating costs			3,800				3,729				(71	)			(1.9	)
Total operating costs			42,249				42,271				22				0.1
Terminal gross profit			45,361				35,682				9,679				27.1
Environmental response gross profit			(807	)			441				(1,248	)			NM
Gross profit			44,554				36,123				8,431				23.3
General and administrative expenses			5,984				6,830				846				12.4
Depreciation and amortization			12,824				10,334				(2,490	)			(24.1	)
Operating income			25,746				18,959				6,787				35.8
Interest expense, net			(7,061	)			(4,719	)			(2,342	)			(49.6	)
Other (loss) income			(158	)			557				(715	)			(128.4	)
Unrealized gains (losses) on derivative instruments			3,306				(17,720	)			21,026				118.7
(Provision) benefit for income taxes			(8,939	)			956				(9,895	)			NM
Noncontrolling interest			369				155				214				138.1
Net income (loss)			13,263				(1,812	)			15,075				NM
Reconciliation of net income (loss) to EBITDA:
Net income (loss)			13,263				(1,812	)
Interest expense, net			7,061				4,719
Provision (benefit) for income taxes			8,939				(956	)
Depreciation and amortization			12,824				10,334
EBITDA			42,087				12,285				29,802				NM

NM — Not meaningful

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Revenue and Gross Profit

The increase in terminal revenue primarily reflects growth in storage and other services revenues, partially offset by declines in throughput and heating revenues. Storage revenue grew as the average rental rates increased by 8.7% during the quarter. The increase in storage revenue also reflected a 2.9% increase in storage capacity rented to customers for the quarter, as the business completed certain expansion projects at its Bayonne, NJ and Louisiana facilities. The commencement of storage and related logistics services for our principal customer at the new Geismar, LA terminal contributed to an overall $7.6 million increase in other services revenues during the quarter and an expected level of gross profit and EBITDA. Throughput and heating revenues declined by $1.2 million and $2.5 million, respectively, reflecting lower activity levels at IMTT’s facilities and lower heating costs passed through to customers. Storage capacity utilization, defined as storage capacity rented divided by total capacity available, remained relatively constant at 94% during the quarter.

Terminal operating costs remained relatively stable during the quarter. Increases in operating costs primarily relating to health insurance claims and the commencement of operations at Geismar, LA were offset by a reduction in tank inspection and repairs outsourced to third parties and heating costs.

Revenue from environmental response services is generated from services provided to third parties and to IMTT. The decrease in gross profit from environmental response services primarily reflects an elimination in the consolidated results for the tank inspection and repair services provided to IMTT mentioned above. A decrease in spill response services also contributed to the decrease in environmental response gross profit.

General and Administrative Expenses

Decreased general and administrative costs resulted primarily from collection of receivables previously reserved under bad debt expense.

Depreciation and Amortization

Depreciation and amortization expense increased by $2.5 million as IMTT completed several major expansion projects.

Interest Expense, Net

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

Unrealized Gains (Losses) on Derivative Instruments

IMTT adopted hedge accounting during the fourth quarter of 2008 which resulted in non-cash derivative gains in the current year, primarily due to a $2.8 million decrease in the interest rate swap liability on GO Zone bonds.

EBITDA

EBITDA for the quarter ended March 31, 2009 increased, primarily due to the increase in gross profit and the changes in unrealized gains (losses) on derivative instruments. Excluding unrealized gains and losses on derivative instruments, EBITDA for the quarter ended March 31, 2009 would have increased by 29.2%.

Gas Production and Distribution Business

Key Factors Affecting Operating Results

Management presents and analyzes contribution margin for TGC because it believes that contribution margin, although a non-GAAP measure, is useful and meaningful to understanding the performance of TGC utility operations under its regulated rate structure and of its non-utility operations under a competitive pricing structure. Primarily feedstock costs are passed through to utility customers automatically, while non-utility pricing must be adjusted in a competitive environment to recover changes in feedstock costs.

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

		Quarter Ended March 31,								Change Favorable/(Unfavorable)
		2009				2008
		$				$				$				%
		($ in Thousands) (Unaudited)
Contribution margin
Revenue – utility			20,167				29,399				(9,232	)			(31.4	)
Cost of revenue – utility			12,285				21,724				9,439				43.4
Contribution margin – utility			7,882				7,675				207				2.7
Revenue – non-utility			21,075				22,959				(1,884	)			(8.2	)
Cost of revenue – non-utility			9,486				14,424				4,938				34.2
Contribution margin – non-utility			11,589				8,535				3,054				35.8
Total contribution margin			19,471				16,210				3,261				20.1
Production			1,236				1,217				(19	)			(1.6	)
Transmission and distribution			3,611				3,605				(6	)			(0.2	)
Selling, general and administrative expenses			4,934				4,413				(521	)			(11.8	)
Depreciation and amortization			1,690				1,668				(22	)			(1.3	)
Operating income			8,000				5,307				2,693				50.7
Interest expense, net			(2,294	)			(2,311	)			17				0.7
Other income			64				71				(7	)			(9.9	)
Unrealized losses on derivative instruments			(650	)			(21	)			(629	)			NM
Provision for income taxes			(2,005	)			(1,192	)			(813	)			(68.2	)
Net income(1)			3,115				1,854				1,261				68.0
Reconciliation of net income to EBITDA:
Net income(1)			3,115				1,854
Interest expense, net			2,294				2,311
Provision for income taxes			2,005				1,192
Depreciation and amortization			1,690				1,668
EBITDA			9,104				7,025				2,079				29.6